IG Index Plc v Cloete

By notice dated 17 October 2013 the Defendant applies to strike out the Claimant’s entire claim pursuant to CPR r.3.4(2)(b), on the ground that it is an abuse of the process of the court. The action was commenced by a claim form issued on 7 August 2013. The Claimant claimed orders for the delivery up of “all documents that are the property of the Claimant or that contain confidential information belonging to the Claimant”. These included documents recorded on a USB memory stick containing documents (“the Listed Items”) which the Defendant had disclosed in Employment Tribunal Proceedings he had brought against the Claimant (“the Employment Tribunal Proceedings”). The Claimant asked for the destruction of any copies, injunctions to restrain disclosure of confidential information, and damages.

The Defendant submits that, because the proceedings are based on documents disclosed in separate proceedings before the Employment Tribunal, they have been commenced in breach of the rule that a party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed (CPR r31.22(1)). No permission has been sought by the Claimant to use the documents for the purposes of the present action.

On 15 August 2013 there was a hearing of the Claimant’s application for interim relief before the court in the vacation. The Defendant appeared in person. The Judge who heard the application (“the Judge”) made an order for delivery up of the Listed Items, and for the destruction of electronic copies. He also made ancillary orders for disclosure to be made by the Defendant. He granted the interim injunction sought, gave directions for service of statements of case, and ordered the Defendant to pay the costs of the application.

The evidence in support of the application before the Judge was in a witness statement dated 5 August by Jackie Bornor, Head of Human Resources for the Claimant. Although not referred to in the Order of 15 August, there was also a witness statement from the Defendant dated 14 August 2013. The Defendant also responded orally to questions from the Judge, as appears from a transcript of the proceedings.

The Claimant carries on the business of spread betting in currencies, commodities, shares and other securities. Clients access the service online. The Defendant was employed by the Claimant as a network services engineer in the IT department. He had entered into a number of covenants for the protection of the confidential information relating to the business of the Claimant and the dealings of its clients. In June 2011 the Defendant had reported to the head of the Claimant’s legal department concerns he had over the security of certain data of the Claimant. In October 2011 the Claimant took disciplinary action against the Defendant in respect of what Ms Bornor refers to as unauthorised work the Defendant had carried out. Following further disciplinary proceedings, the Defendant was dismissed with effect from 3 July 2012.

In October 2012 the Defendant commenced the Employment Tribunal Proceedings. He made a number of complaints, including that he had been unfairly dismissed. Those proceedings were ongoing at the time of the application to the Judge.

On 10 June 2013 the Employment Tribunal wrote to the parties informing them that the Tribunal had directed that they fix a time and place for the physical exchange of documents.

Pursuant to that direction, on 15 July 2013, the Defendant delivered to the Claimant a USB memory stick containing the Listed Items. The USB stick contained, in Ms Bornor’s words:

“documents, all of which are the property of [the Claimant] and contain confidential information relating to [the Claimant]’s clients…: (i) a client list relating to [the Claimant]’s South African office; (ii) a list of [the Claimant]’s prospective clients; (iii) a list of [the Claimant]’s South African clients’ bank payment details; (iv) a list of [the Claimant]’s broker client list for South Africa”.

Ms Bornor stated that the Defendant had no justifiable reason in the course of his employment for copying or retaining such information. However, she also stated that the Defendant had written to the Information Commissioner on 21 February 2012 to express concerns about security of the Claimant’s data, and that she believed that he enclosed with that letter some or all of the Listed Items. She also stated that there was no evidence as to how the Defendant had obtained the Listed Items. No security alert had been triggered.

Ms Bornor also stated that the Claimant intended to disclose to the Defendant in the course of the Employment Tribunal Proceedings lists similar to the Listed Items, but with the names and client details redacted.

On 24 July 2013 Ms Bornor wrote to the Defendant requiring him immediately to return the originals and copies of the Listed Items, and to provide undertakings in a form attached to the letter. She stated that if he did not return them by 31 July the Claimant would consider legal action. He did not respond.

On 2 August 2013 the Claimant wrote to the Employment Tribunal seeking permission to amend its response to the Defendant’s claims, so as to include a reference to his having copied and retained the Listed Items.

In her witness statement Ms Bornor wrote the following in support of the application for the interim relief sought before the Judge:

“Although I have no evidence that [the Defendant] has used or disclosed these documents, other than to the Information Commissioner, as referred to in paragraph 20 above, and to [the Claimant] as part of the disclosure process in the Employment Tribunal Proceedings, I am concerned that he may do so in further breach of the terms of the Deed of Covenant.”

In his witness statement the Defendant confirmed that he had written to the Information Commissioner, which, he contended, was not a breach of any obligation he owed to the Claimant. He wrote that he had not retained the Listed Items from the time when he was employed, but that they had been sent to him by the Information Commissioner six months after his employment had been terminated. Since then he had had them in his possession for a further period of almost eight months (that is since January 2013). In that period, he states, he had not reproduced them or disclosed them to any third party, and that he had no intention to use them for any purpose other than the ongoing Employment Tribunal proceedings. He expanded on that in his oral responses to the Judge. He also said that he could obtain the Listed Items again from the Information Commissioner by a further application to the Information Commissioner, but that he needed it for the hearing in the Employment Tribunal listed for 9 September.

In his judgment the Judge recited the facts and the contentions of the parties. He then said:

“… I turn briefly to the well-known criteria for the grant of an interim injunction in accordance with the principles laid down by the House of Lords in American Cyanamid. … It is plain, in my judgment, that there is a good arguable case in favour of the applicant, and there is a serious issue to be tried. Secondly, it is clear in my judgment that damages would not afford an adequate remedy to the applicant. Conversely, damages should afford an adequate remedy to the respondent, particularly because the usual cross-undertaking in damages is proffered by the applicant. However, even if that were wrong, I turn to the balance of convenience. In my judgment that balance lies firmly in favour of granting the order sought by the applicant. As I have already said, there is an obvious and pressing interest to retain the confidentiality for example with third party clients. On the other side of the balance the legitimate interest which the respondent has so that he can conduct his proceedings in the Employment Tribunal fairly will be taken care of and is preserved by the proviso to which I have already made reference.”

The proviso referred to by the Judge permitted a disclosure required by a court of law or a regulatory body, and for the purposes of his taking legal advice in connection with the Employment Tribunal Proceedings.

There is no mention in any witness statement, or in the transcript of the hearing before the Judge, of the rule which (as Mr Hirst submits) precluded the Claimant from bringing the present proceedings without the permission of the court.

On 20 August 2013 the Claimant served Particulars of Claim. In para 20 the Claimant pleads that, in copying, retaining and disclosing (to the Information Commissioner) copies of the Listed Items, the Defendant was in breach of the express terms of the covenant and contract he had entered into with the Claimant. In para 25 the Claimant pleads that the Defendant is also in breach of the Copyright and Rights in Databases Regulations 1997.

Although the prayer for relief includes a claim for an injunction, the Particulars of Claim do not include an averment that the Defendant is threatening to commit a further breach. There is a claim for damages which does not include any special damages. What is pleaded is that “full particulars will be provided”.

On 27 August 2013 the Defendant made a witness statement in compliance with the order of the Judge. He said that on 27 February 2012 he printed off and sent the Listed Items to the Information Commissioner, because he did not consider that the Claimant had properly addressed security concerns he had expressed. That hard copy format was the only format in which he had had the Listed Items. They came into his possession again following a subject access request he made to the Information Commissioner’s Office on 17 December 2012. On 16 January 2013 the Listed Items were attached to an e-mail he received in response to that request. However, he stated that he did not appreciate at the time he received the e-mail that the Listed Items were attached. He stated he had complied with the Judge’s order by confirming to the Claimant that he had deleted all the Listed Items and retained no copies. He added that he did intend to defend the proceedings against him.

On 9 September the Employment Tribunal entered judgment dismissing the claims, on the Defendant’s withdrawal of them.

There is nothing of substance which the Claimant is now seeking to achieve by the continuation of this action. All the substantive relief it sought was obtained in the form or the order for delivery up and destruction.

I infer that the real issue that remains in dispute between the parties is costs.

There is little dispute between the parties as to the law. Mr Mayall accepts that what was once a common law implied undertaking, and is now enshrined in CPR r31.22, applies to proceedings in the Employment Tribunal: see Harvey on Industrial Relations and Employment Law para 3:454. So, subject to the exceptions set out in r.31.22(1)(a)-(c), a party to proceedings in the Employment Tribunal to whom a document has been disclosed by another party may use the document only for the purposes of the proceedings in which it is disclosed.

CPR r.31.22 provides:

“(1)

A party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where –

a)

the document has been read to or by the court, or referred to, at a hearing which has been held in public;

b)

the court gives permission;

c)

the party who disclosed the document and the person to whom the document belongs agree.

(2)

The court may make an order restricting or prohibiting the use of a document which has been disclosed, even where the document has been read to or by the court, or referred to, at a hearing which has been held in public.”

None of the exceptions to r.31.22(1) are said to apply in the present case.

In McBride v The Body Shop International Plc [2007] EWHC 1658 (QB) the claimant in defamation proceedings asked the High Court for an order that she be permitted to use in those proceedings a document which had been disclosed in employment tribunal proceedings. As explained in para [21] of the judgment of Eady J,

“This was because the e-mail, which now forms the subject-matter of the libel action, had only been obtained by the Claimant as a result of the compulsory disclosure process in the employment tribunal proceedings”.

The Defendant applied for an order under CPR r.31.22(2) prohibiting the Claimant from suing upon the e-mail obtained by way of disclosure, and that the claim be struck out in consequence: paras [22] and [26]. At para [41] Eady J said:

“where a discretion falls to be exercised in accordance with these provisions, the court will naturally have regard to the same public policy considerations which originally underlay the implied undertaking. My attention was drawn, in this respect, to Matthews and Malek (3^rd Ed), para 13.05 [now Matthews and Malek on Disclosure 4^th ed para 19.04]. As the learned editors point out, it is appropriate still to bear in mind that compulsory disclosure involves an infringement of privacy, that public policy requires the encouragement of full disclosure in litigation, and that there is always a need to treat litigants justly.”

At para [52] he recorded that the Employment Tribunal had declined to exercise any discretion that it might have had in the matter on the ground that it was

"… quite simply not our place to make [an] order restricting/prohibiting litigation in a higher court. Any application should be made to the High Court".

Eady J went on to decide as follows:

“I have concluded that the balance of justice lies very much in favour of prohibiting the use of this disclosed document for the extraneous purpose of claiming damages for defamation in respect of what appears to be a limited publication. That is sufficient to dispose of the applications now before me in the Defendant's favour.”

Further, the rule applies to protect not only the documents themselves, but also the contents of those documents, that is to say, the information derived from the disclosed documents the documents themselves, but also the contents of those documents, that is to say, the information derived from the disclosed documents. See Malek and Matthews para 19.14 citing Crest Homes plc v Marks [1987] 1 AC 829. Lord Oliver said at p854:

“It has recently been held by Scott J. in Sybron Corporation v. Barclays Bank Plc [1985] Ch 299 — and this must, in my judgment, clearly be right — that the implied undertaking applies not merely to the documents discovered themselves but also to information derived from those documents whether it be embodied in a copy or stored in the mind.”

Mr Mayall submits that the Claimant has not used any document disclosed for the purposes of the claim in this court. The only relevance of the disclosure to the claim in this court is that the Claimant became aware from the disclosure that the Defendant had, or at least had had, the Claimant’s documents and information in his possession. What the Defendant disclosed were not documents private or confidential to himself, but documents which the Claimant already had, and which were private or confidential to the Claimant and its clients. Properly construed CPR r31.22 prohibits the use of documents and the information contained therein. It does not prohibit the use of the knowledge that the other party has the documents and information which he discloses. He submits that what the Claimant has used is its own property, which is not prohibited: Process Development v Hogg [1996] FSR 45.

Mr Mayall further submits that if the Claimant has a good claim, it would be unjust not only to the Claimant but also to their clients if the action could be blocked on the basis that the Defendant had disclosed his own wrongdoing. Further, the Judge was fully aware of the circumstances, but it did not occur to the Judge that the claim might be an abuse of process, and no application has been made to the Judge to vary the order, or for permission to appeal.

Mr Hirst submits that it is clear from the Claimant’s letters and Particulars of Claim that they have used the Listed Items in the present proceedings, and not just for the purposes of the Employment Tribunal Proceedings. Those proceedings have in any event been concluded since 9 September when the Employment Tribunal entered judgment dismissing the claims on the Defendant’s withdrawal of them. So the continuation of the present proceedings cannot be for the purpose of the Employment Tribunal Proceedings.

Mr Hirst refers to the contents of the Particulars of Claim in so far as they refer to the Listed Items. He submits that the claim is clearly caught by the prohibition in CPR r.31.22(1). As to the Process case, Mr Hirst submits that related to a search order, where the considerations are different. In a search order the respondent is not given the opportunity of considering whether or not he shall make any disclosure at all: see Crest Homes plc v Marks [1987] 1 AC p858B.

In my judgment the Claimant has used information obtained from the disclosure of the Listed Items, namely, to use Mr Mayall’s words “that the Defendant had, or at least had had, the Claimant’s documents and information in his possession”. And that information is information the use of which is prohibited by CPR r.31.22(1), unless one of the exceptions applies. That interpretation of the rule is consistent with the policy considerations which have given rise to the prohibition, and with the words of Lord Oliver in Crest. It is only because of the Employment Tribunal Proceedings that the Defendant has had to disclose the fact that he was in possession of the Listed Items.

The use of the information in the present proceedings cannot be said to be for the purposes of the Employment Tribunal Proceedings. As the Judge put it, there was a:

“pressing interest to retain the confidentiality for example with third party clients”

Nor is the relevant information in this case the property of the Claimant. And I accept the submission of Mr Hirst that the position is different in the case of search orders.

Further, in my judgment the use of this information for the purpose of advancing a claim for damages is plainly and obviously a breach of the prohibition: see eg McBride and Riddick v Thames Board Mills [1977] 1 QB 881. I note that it is hard to see what damage the Claimant might have suffered, but that is immaterial.

I accept Mr Mayall’s submission that, if a good claim were barred in circumstances such as these, then there could well be an injustice, not only to the claimant, but any third party to whom any duty of confidentiality be also be owed. But that is not a reason for limiting the scope of CPR r.31.22(1). The risk of any injustice can be addressed by a grant of permission under sub-rule (b).

I see no significance in the fact that the Judge knew the circumstances and did not himself suggest that permission was required. While judges seek to apply their own knowledge of the law, they can mistakenly overlook relevant rules. Inferences cannot simply be drawn from a judge’s silence. It is for that reason that the Bar Standards Board Code of Conduct, which regulates the conduct of barristers in court, provides at para 708(c)

“that a barrister must ensure that the Court is informed of all relevant decisions and legislative provisions of which he is aware whether the effect is favourable or unfavourable towards the contention for which he argues”.

Fulfilment of that duty is of particular importance to judges where a defendant is not represented. Mr Mayall submits that CPR r.31.22 does not apply, and so was irrelevant. While I take a different view on that, I accept that he is not at fault.

And if permission was required, but not sought, an application to strike out the proceedings is in my judgment the correct course. It seems to me that the prohibition under r.31.22(1) is effective by itself (where it applies) and that unless sub-rule (a) applies (which is not the case here) there is no need for an order to be made under r.31.22(2). To give effect to the prohibition the court should simply exercise its discretion strike out the action, if the justice of the case so requires. The Judge made no order which requires to be varied, whether by the High Court or by the Court of Appeal.

However, Mr Mayall submits that striking out what is otherwise a valid claim should be the last option, and if (contrary to his primary case) permission was required to bring this action, then the proper and proportionate course would be to grant permission now.

Mr Hirst submits that there is no evidence that the Claimant has deliberately attempted to abuse the process of the court or to commit a contempt of court. Rather, he submits, the Claimant has overlooked the requirement not to use what the Defendant disclosed in the Employment Tribunal Proceedings otherwise than for the purpose of those proceedings. However, he submits that there has been a breach by the Claimant of that prohibition, and the Claimant has persisted in denying the breach. It has not sought retrospective permission, at least until the service of Mr Mayall’s skeleton argument.

Mr Hirst submits that these separate proceedings in the High Court were unnecessary. The correct course would have been for the Claimant to have made an application to the Employment Tribunal for an order preserving the confidentiality of the information in the Listed Items.

He further submits that the present proceedings were a form of harassment against the Defendant which distracted him from his Employment Tribunal Proceedings, with the effect that he had to withdraw his claims. I cannot make any finding of fact as to that submission on this application.

In so far as the Claimant sought delivery up of the Listed Items, it seems to me that it was doing so for the purposes of protecting not only its own commercial or trade secrets, but also the personal and private information of its clients. It was not just using what it had learnt from the Defendant’s disclosure for the purposes of the Employment Tribunal Proceedings. On that footing if the Claimant had to commence any proceedings, then they had to be in the High Court. An application to that Tribunal could not have given the Claimant the remedy to which the Judge held they were entitled. I reject Mr Hirst’s submission to the contrary.

It may well be that if the Claimant had asked for permission to use the Listed Items for the limited purpose of seeking an order for delivery up and destruction of any copies retained by the Defendant, then the Judge would have given permission. I infer from his judgment that he would have done. The claim for delivery up was a strong claim.

It does not follow that the Judge would have given permission for a claim for an injunction and damages. The evidence was not strong in relation to the claim for an injunction (see para 13 above), albeit the Judge held that it passed the Cyanamid threshold. And in relation to any claim for damage in the proceedings the evidence was non-existent.

Further, Mr Hirst drew my attention to the approach of Rimer J (as he then was) in Miller v Scorey [1996] 1 WLR 112. In that case the plaintiffs had used documents obtained on discovery in the first action to start a second action (“the 1995 action”) for a closely related, but nevertheless different cause of action. Rimer J held (at p1132H) that arguments directed to showing that the plaintiffs had a good case against the defendants:

“may be relevant in the exercise of any discretion I may have as to whether or not to allow the 1995 action to remain in being, but I do not regard them as providing an answer to [the defendant]'s complaint that it has been prosecuted in circumstances amounting to an abuse of the process of the court.”

The judge held that there had been a breach of the implied undertaking which was the law before the CPR. He then said (at p113C-H):

“I do not find it necessary to decide whether I have a jurisdiction to grant the plaintiffs a retrospective leave. It may be that the court does have some such jurisdiction but, if so, it seems to me that the circumstances in which it would be proper to exercise it would be rare. It is one thing to release a party from an undertaking to the court so as to permit him to do in the future that which he has been prevented from doing in the past. It is another thing for the court to find, as I have, that a party has abused the process of the court by his breaches of an undertaking to it and for it then to give that party a retrospective release from the undertaking so as to wipe away the abuse of the process which he has committed.

     If I do have the jurisdiction, I can anyway see no good reason to grant any such retrospective leave. Undertakings of the present sort are important ones. They have been the subject of considerable discussion in the reported cases over recent years and their nature and effect are, or should be, well known to practitioners. It seems to me that if, as I have found, the prosecution of the 1995 action to date has involved an abuse of the process then, in a sense, that finding by itself suggests that the action should be struck out.

     I do not, however, consider that that result must inevitably follow. If, in principle, I considered it just to allow the plaintiffs to use the discovered documents for the purposes of a separate action raising the same claims as the 1995 action, then, absent any special considerations pointing in a different direction, there would in my view be much to be said for declining to strike out that action and for giving leave to the plaintiffs to make use of the documents for its further prosecution. Such an order would, no doubt, amount to a de facto validation of what had happened to date, although the court could perhaps reflect its disapproval of that by the making of appropriate costs orders. The alternative course would be to strike the action out, with the usual orders as to costs, but to give leave to the plaintiffs to start a new like action. The latter course is one which would no doubt visit a greater penalty on them and it may be that, in appropriate cases, it would be the right type of order to make. In the circumstances of the present case, however, I would, in principle, subject to the special consideration to which I shall come, favour the former alternative, which would be likely to achieve both an overall saving of costs and the prospect of an earlier trial of a proper claim.” (emphasis added)

I would respectfully adopt the approach suggested by Rimer J in the words italicised above (“If in principle … appropriate costs order”).

In my judgment there is nothing of value to it that the Claimant can now achieve in the present action. It has obtained delivery up and destruction in accordance with the order of the Judge. If the action is struck out, what has been done in that regard will not be undone. There is no counterclaim for the return of the Listed Items. The claim for damages is unparticularised, and appears to be without substance. The claim for an injunction was never supported by evidence of a real risk that the Defendant would use the Listed Items or any confidential information otherwise than by retaining copies for the purposes of the Employment Tribunal Proceedings, or for disclosure to a regulatory body. There has been no suggestion before me that there is any continuing need for an injunction.

It follows in my judgment that no injustice would be done to the Claimant by an order striking out the present action, There is no good reason for giving permission to the Claimant to use information obtained from the Listed Items for the further pursuit of this action against the Defendant.

It is true that if the action is struck out, then the Defendant will have a strong argument for payment of his costs. Any application for his costs will no doubt be further supported by the words of Rimer J “the court could perhaps reflect its disapproval of [the claimant’s breach of CPR r.32.11] by the making of appropriate costs orders”. But that is a question on which I have not yet heard submissions.

In my judgment the Claimant has acted in breach of CPR r.31.22(1), and the justice of the case requires that I order the claim to be struck out. I will hear arguments of costs and the form of the order, if invited to do so.