Eurasian Natural Resources Corporation Ltd v Judge

This is an application by the defendant, Sir Paul Judge, for summary judgment of, and/or to strike out, a claim made against him by the claimant, Eurasian Natural Resources Corporation Ltd. I heard argument from leading counsel for both parties on 7 October 2014 and reserved judgment which I now deliver.

Until November 2013, when it was de-listed, the claimant, a leading diversified natural resources group, was a public company listed on the London Stock Exchange. On 16 January 2014, it re-registered as a private company. The defendant is a prominent figure who has held a number of senior positions of responsibility in both the public and the private sectors. In particular, he has at various times held directorships of a number of large companies.

The defendant was appointed as a Non-Executive Director of the claimant on 6 December 2007. His terms of employment are set out in a document dated 28 February 2012 (“the Letter of Appointment”). The Letter of Appointment provided that his appointment would continue until the next Annual General Meeting (AGM) when he would be required to retire from office and offer himself for re-election. If re-elected, that process would be repeated each year unless terminated by either party giving six months’ notice or terminated by the claimant with immediate effect for specified reasons.

As a Director, the defendant was subject to certain statutory duties. In particular s170 of the Companies Act 2006 (“the 2006 Act”) provides, insofar as relevant:

(1)

The general duties specified in ss171 to 177 are owed by a director of a company to the company.

(2)

A person who ceases to be a director continues to be subject –

(a)

to the duty in s175 (duty to avoid conflicts of interest) as regards the exploitation of any property, information or opportunity of which he became aware at a time when he was a director, and

(b)

to the duty in s176 (duty not to accept benefits from third parties) as regards things done or omitted by him before he ceased to be a director.

To that extent those duties apply to a former director as to a director, subject to any necessary adaptations.

(3)

The general duties are based on certain common law rules and equitable principles as they apply in relation to directors and have effect in place of those rules and principles as regard the duties owed to a company by a director.

(4)

The general duties shall be interpreted and applied in the same way as common law rules or equitable principles, and regard shall be had to the corresponding common law rules and equitable principles in interpreting and applying the general duties …

The duties set out in ss172 to 177 are: the duty to act within powers (s171); the duty to promote the success of the company for the benefit of its members as a whole (s172); the duty to exercise independent judgment (s173); the duty to exercise reasonable care, skill and diligence (s174); the duty to avoid conflicts of interest (s175); the duty not to accept benefits from third parties (s176); and the duty to declare any interest in any proposed transaction or arrangement (s177).

The duty in s175 of the 2006 Act, which subsists after a director’s office concludes, reads, so far as is material:

(1)

A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company.

(2)

This applies in particular to the exploitation of any property, information or opportunity (and it is immaterial whether the company could take advantage of the property, information or opportunity) …

The civil consequences of breach (or threatened breach) of ss171 to 177 are the same as would apply if the corresponding common law rule or equitable principle applied: s178.

In addition, a non-contractual duty of confidence may be imposed by equity whenever a person receives information he knows or ought to know is fairly and reasonably to be regarded as confidential: Campbell v MGN Ltd [2004] 2 AC 457 at [14] per Lord Nicholls. Only information which is clear and identifiable and has the “necessary quality of confidence about it” will be protected: Amway Corp v Eurway International Ltd [1975] RPC 82, 86-87. A director is fixed by such equitable obligations as part of his fiduciary duties to the company.

As well as these duties, as a Director of the claimant, the defendant was also subject to the express terms set out in the Letter of Appointment. The terms in Clause 3 to a large extent mirrored the provisions of the 2006 Act. Clause 3.2 required him, inter alia, to act in the way he considered, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole; to abide by his statutory, fiduciary or common law duties as a director, to perform his duties diligently and to use his best endeavours to promote, protect, develop and to extend the business of the company and immediately to report any wrongdoing of his own or of any employee or fellow Director of the claimant.

Of most relevance for the purpose of this case was Clause 8.1, which provided:

“8.1

All information acquired during your appointment is confidential to the Company and should not be disclosed to third parties or used for any reason other than in the interests of the Company, either during your appointment or following termination (by whatever means), without prior clearance from the chairman.

8.2

Your attention is also drawn to the requirements under both legislation and regulation as to the disclosure of inside information. Consequently you should avoid making any statements that might risk a breach of these requirements without prior clearance from the chairman or company secretary.”

In the course of their employment, the Directors of the claimant, as no doubt those of any other large company, would receive a large number of documents in hard copy and electronic format. I was told that, during the defendant’s period of appointment, he had received about 7,500 emails and about 500 hard copy documents. Emails would be sent, not only to his personal email address, but also to email addresses used by him in the course of his involvement with other public and privately listed companies. The types of documents varied but included Agendas for and Minutes of Meetings of the Board and other Committees, matters concerned with the finances of the claimant, its place in the market and its governance. Much of the information would inevitably be confidential to the claimant.

It is clear that, in 2010, the claimant became concerned that confidential information about the company was being leaked to third party sources, in particular the press. As a result, steps were taken to remind the Directors (including the defendant) of their duties of confidentiality. In October 2010, they were requested to sign a letter confirming their understanding of the importance of confidentiality and undertaking to abide by their duty not to disclose confidential material to any third party. As a result of further press articles, another reminder was sent in August 2011. At a Board Meeting on 19 December 2011, after sensitive information about a planned project had been ‘leaked’, a decision was taken to confine future information about that project to a few senior persons only in order to maintain confidentiality.

It seems that, by 2011, there were some tensions between the defendant and other senior officers of the claimant. The reasons for those tensions are not clear. During the period from September to November 2011 a somewhat curious incident occurred. The defendant had five private meetings with an individual who introduced himself to the defendant as a ‘journalist’. During those meetings, the defendant discussed various issues relating to the claimant. The defendant has admitted, in his Amended Rejoinder and Reply to the Counterclaim, that some of the information he gave to the ‘journalist’ was confidential to the claimant. It is clear that much of that information would, if published, have been potentially damaging to the claimant. Taken at their face value, some of the defendant’s words during the meetings appeared to be strong encouragement to the ‘journalist’ to persuade the media to publish the material he had provided.

The claimant says that the defendant’s conduct amounted to a clear breach of his contractual and fiduciary duties, in particular his duty of confidentiality. It is said also that the conversations showed that the defendant was anxious to advance his own interests. The defendant’s explanation for his actions in agreeing to meet and in talking to the ‘journalist’ was that he had realised that the individual concerned was not in fact a bone fide journalist at all, but had been commissioned by the claimant, or individuals associated with the claimant, to mislead and entrap the defendant into making statements which could be used against him in some way. The defendant’s case is that he decided to go along with the meetings, secure in the knowledge that none of what he said would be published and that no harm would be done to the claimant’s reputation. He claims that his purpose in communicating material to the ‘journalist’ in this way was to expose wrongdoing by some senior officers of the claimant and that he believed that such exposure would be in the best interest of the claimant’s members as a whole.

It seems that the ‘journalist’ had indeed been commissioned by a third party, presumably connected with the claimant, to encourage the defendant to talk to him. The conversations were recorded on audiotape and clearly came into the claimant’s hands at some point. There is no suggestion that anything said by the defendant during the meetings was ever reported in the press. Nor does it appear that the claimant (assuming that the material came into its hand at the time) took any action against the defendant at that stage.

On 5 October 2012, the claimant was to hold a Board Meeting to consider the proposed appointment of one of its Directors, Mr Mehmet Dalman (“Dalman”), as Executive Chairman (EC); it appears that the position of EC was to be a newly created position. The defendant was going to be unable to attend the Meeting. On the morning of the Meeting, he sent an email to Dalman and the other Directors, expressing his concerns about the proposed appointment. In particular, he expressed concern about the fact that the claimant’s Chief Executive Officer (CEO), who was also a Director, would not be present at the Meeting to give his views on how the respective roles of the new EC and himself as CEO would work in practice. The defendant enquired as to whether it was intended that the CEO would remain in post after Dalman’s appointment; if so, which of them would be “in charge”; and for how long it was envisaged Dalman would remain as EC. He drew attention to what he described as Dalman’s lack of relevant experience. He raised concerns also about the speed with which the appointment was being dealt with and the negative message this might give to the Stock Market. He proposed that the Meeting should be postponed. In the course of the email, the defendant used what might be called “strong language”. He said:

“To go ahead in this way smacks more of a lynch mob than of proper corporate governance.”

He then added, using a phrase apparently taken from the words of another individual associated with the claimant, that it would reinforce his observation that “[the claimant] is ‘more Soviet than City’”.

The email was sent to Board Members and, because the practice of some Members was, like the defendant, to have emails sent to other organisations for which they worked, it was forwarded to approximately 20 separate email addresses and, I was told, about 7 other individuals. In the event, the Meeting went ahead in the absence of the defendant. The Minutes of the Meeting apparently recorded that those present had supported the proposed appointment, as had the CEO, and that the defendant had made “valid observations”. It seems that some steps were subsequently taken to clarify and agree the respective roles to be undertaken by Dalman and the CEO and Dalman’s appointment to an executive role (although not with the title “EC”) was eventually announced on 23 November 2012.

On 9 October 2012, the ‘Daily Telegraph’ published an article under the headline:

“ENRC board is acting like a ‘lynch mob’ to oust chief, says director Sir Paul Judge.”

It is clear from that headline and the contents of the article that its author had had access either to the email of 5 October 2012 or to information about its contents.

The claimant’s case is that the clear inference to be drawn is that it was the defendant who ‘leaked’ the email to the newspaper. It is said that he had been opposed to the appointment of Dalman and was angry at the way it was being done and at the fact that the other Directors supported the appointment. It is also suggested that the defendant might have wanted the position of EC for himself. Given these circumstances, it is suggested that he would have considered it in his own interests to make his concerns public. The defendant denies that it was he who ‘leaked’ the email and contends that there is no adequate basis for drawing the inference that he did. The email had been forwarded to a number of different email addresses and any one of a number of people could have informed the press of its contents. He had no desire to be EC and was not opposed to the appointment of Dalman, but to the way in which it was being done.

Meanwhile, investigations into the claimant’s affairs were being undertaken. It is clear from the transcripts of the meetings with the ‘journalist’ in late 2011 that the Serious Fraud Office (SFO) was already involved in investigating the claimant. The defendant admits that he told the ‘journalist’ that there had been a meeting in early October between the SFO and the claimant at which the SFO had been “very tough” on the claimant. He also informed the ‘journalist’ of an internal investigation into alleged corruption being undertaken by a law firm, Dechert LLP. That investigation had been initiated by the claimant in January 2011 in response to allegations by a ‘whistle blower’.

The SFO investigations continued and, on 25 April 2013, the SFO announced publicly that it had accepted the claimant for criminal investigation into allegations of “fraud, bribery and corruption” relating to its activities or those of its subsidiaries in Kazakhstan and Africa. That criminal investigation still remains in progress.

The next AGM was due to take place on 5 June 2013. In the usual way, the defendant would no doubt have expected to resign, offer himself for re-election and be re-elected in accordance with his Letter of Appointment. However, prior to the AGM, he was informed that he would not be invited to stand for re-election. In addition, on 3 June 2013, two days before the AGM, he was told that the claimant was considering the immediate termination of his appointment on the ground that he had ‘leaked’ confidential information belonging to the claimant. Subsequently that same day, he was informed that, provided that he agreed to give certain undertakings, his employment would not be terminated immediately.

Solicitors became involved later that same evening. In an email sent by the claimant’s solicitor, Grosvenor Law Ltd (GL), to the defendant’s solicitor, Berwin Leighton Paisner LLP (BLP), GL stated that the claimant had obtained evidence that the defendant had provided (unspecified) confidential information to the media. The email required the defendant to give undertakings, including:

“delivery up of confidential information and company property and undertakings not to further disseminate ENRC confidential information.”

The email indicated that if, by 4p.m. on 4 June 2013, the form and content of the undertakings had not been agreed, consideration would be given by the claimant to the termination of the defendant’s appointment with “immediate effect”. It was of course due to terminate on 5 June 2013 in any event.

Later that evening, BLP asked for particulars of the “information” said to have been ‘leaked’ and of the evidence on which the allegation was based. GL declined to provide details and emphasised that, if the defendant wished to avoid the possibility of immediate termination and “appropriate announcements” (by which it presumably meant a press release), he should instruct BLP to engage with GL in the agreement of undertakings before a Board Meeting which was to be held at 4p.m. that same day. The draft undertakings proposed by the claimant required the defendant to (a) undertake not to communicate confidential information to any third party (b) deliver up to GL by 6p.m. on 7 June 2013 all the confidential documents in his possession and (c) to provide details of any documents and confidential information already disclosed to a third party.

The claimant’s requests were met by a letter from BLP written on 4 June 2013, declining to comply with them on the ground that the claimant had failed to provide details of the allegations against the defendant. The letter stated:

“What is obvious, however, is that the raising of such allegations on the eve of our client ceasing to be a non-executive director is part of a misguided and wholly inappropriate strategy to seek to “gag” our client in circumstances where the Company is the subject of a very significant, on-going investigation by the Serious Fraud Office.”

It further stated:

“We furthermore fail to understand why your client believes it is entitled to or requires further undertakings to be executed by our client in circumstances where our client will remain bound by existing obligations of confidentiality even following the expiry or termination of his appointment. We refer to Clause 8 of his letter of appointment.”

GL responded by letter, informing BLP that the Board Meeting had taken a decision not to terminate the defendant’s appointment and confirming that the appointment would expire at the AGM the following day.

On 5 June 2013, the claimant wrote to the defendant to confirm the arrangements for the termination of his appointment. The letter dealt with the continuing obligation for confidentiality and referred to Clause 8 of the Letter of Appointment. The letter also required:

Also on 5 June 2013, the SFO issued the defendant with a Notice pursuant to section 2 of the Criminal Justice Act 1987 (a “Section 2 Notice”), requiring him to attend a meeting with an SFO investigator to answer questions or furnish information relevant to the investigation of the claimant. The role of the defendant was as a person with “relevant information” about the claimant. The Notice stated:

“NOTE: Failure without reasonable excuse to comply with this requirement is a criminal offence. It is also a criminal offence to falsify, destroy or otherwise dispose of, or to cause or permit the falsification, concealment, destruction or disposal of documents which you know or suspect are or would be relevant to the investigation.”

The defendant subsequently attended a meeting with the SFO investigator on 18 June 2013.

On 6 June 2013, the claimant issued its Claim Form “… for damages, injunctive and other relief arising out of the Defendant’s breaches [of] duties [of] confidence, fiduciary and director’s duties (statutory and common law) owed to the Claimant as director and his misuse of its confidential information.” The Claim Form was not served at that stage.

Further correspondence between the parties’ solicitors then followed. GL was contending that its client was entitled to its confidential documents back and was continuing to require delivery up. Meanwhile, following the SFO meeting on 18 June 2013, the defendant’s solicitor emailed the SFO asking, inter alia:

“What should be done with the material held by Sir Paul, which ENRC have asked to be returned?”

The reply was clear:

“This material should not be returned to ENRC. As you suggested, the current notice warns that it is a criminal offence to dispose of relevant documents.”

Subsequently, the defendant was served by the SFO with three further Section 2 Notices. On 21 June 2013, he received a Notice requiring him to produce to the SFO by 2 July 2013:

“All material, both digital and hard copy, relating to [the claimant] and its subsidiaries covering the period from the start of your non-executive directorship to date.”

On the same day, and again on 12 July 2013, he received a Notice requesting further meetings.

On 24 June 2013, BLP responded to GL, again making clear that the defendant accepted that he was subject to continuing obligations of confidentiality. In addition, BLP pointed out that the defendant was obliged to comply with the terms of the Section 2 Notice and that the SFO had explicitly confirmed that he was not permitted to hand over to the claimant any documents he had in connection with his directorship.

GL replied, expressing surprise that it had not been informed earlier of the fact that a Section 2 Notice had been issued and reminding BLP of the provisions of s2(9) of the 1987 Act which provides that:

“A person shall not under this section be required to disclose any information or produce any document which he would be entitled to refuse to disclose or produce on grounds of legal professional privilege in proceedings in the High Court, except that a lawyer may be required to furnish the name and address of his client”.

GL required the defendant to undertake to identify any privileged documents in his possession or control, to refrain from delivering them to the SFO or any other third party and to take steps to preserve them in his possession.

BLP responded, confirming that it was aware of s2(9) and accepting that any privilege in the documents belonged to the claimant and that the defendant was not able unilaterally to waive that privilege. It confirmed that no privileged documents had been or would be disclosed by the defendant to the SFO. It stated that BLP was already in the process of carrying out a full review of the documents in the defendant’s possession that might fall within the terms of the SFO Notice. It made clear that any privileged material would be identified and isolated, although the defendant was not in a position to provide an exhaustive list of those documents at that stage.

GL responded by objecting (a) to the process of identifying the privileged material being carried out exclusively by BLP, who may not be aware of all the relevant issues; (b) to the lack of any timescale for identifying the privileged material and returning it to the claimant; and (c) to the lack of certainty that the defendant would not provide the privileged material to the SFO or some other third party. GL proposed a “formal process” which would have involved, inter alia, an undertaking by the defendant to submit copies of all the documents he intended to disclose to the SFO to the firm of solicitors (not GL) who were representing the claimant in relation to the SFO investigation so that it could identify those documents which were privileged. GL also proposed an undertaking that, once the defendant had complied with the Section 2 Notice, he would forthwith return to the claimant all the confidential documents in his possession.

In a response dated 28 June 2013, BLP indicated that the defendant did not object ‘in principle’ to the proposed process for identifying privileged material which was exempt from disclosure to the SFO. It was suggested that both the claimant and the defendant should liaise with the SFO in an attempt to identify a process and timetable which would meet the requirements and deadlines imposed by the SFO. BLP indicated that the defendant was not prepared to give the specific undertakings requested by the claimant, but confirmed that he had not and would not provide any privileged materials belonging to the claimant to a third party and would do nothing with the documents in his possession other than to provide them to BLP for review and compliance with the Section 2 Notice.

By 4 July 2013, the SFO had extended the deadline for compliance by the defendant with the Section 2 Notice for production of documents to 12 September 2013, in order to allow the parties’ solicitors and the SFO to agree a process for identification of privileged material. On 10 July 2013, BLP confirmed to GL that the defendant was in principle agreeable to the process suggested by the claimant and indicated it would be in touch, in good time before 12 September 2013, once it was in a position to provide copies of the documents the defendant intended to disclose to the SFO.

In the event, copies of the confidential documents were handed over by BLP, which already held the originals, to the claimant’s solicitors (not GL) dealing with the SFO investigation and the process of identifying the privileged material began in earnest in August 2013. That process, I am told, is still ongoing.

On 11 July 2013, the “Financial Times” (FT) published an article which disclosed that the defendant had been issued by the SFO with a Section 2 Notice

On 19 July 2013, GL served on BLP the Claim Form, together with Particulars of Claim. The accompanying letter indicated that:

“These proceedings have been brought to protect our client’s position. Our client has requested delivery up of documents from you, including its privileged materials, on a number of occasions. You have indicated that your client agreed in principle to a number of requests made by our client, including providing a list of materials in his possession which contained material covered by our client’s legal professional privilege, none of which would be subject to the s2 Notice.

Despite this, you have failed to even produce our client with this list and since 10 July 2013, we have not heard further from you. Such privileged documents, which on any analysis fall outside of any disclosure to the SFO, should be easily identifiable by you and your client and the task of listing them should be swift and not complex. We note that your client appears not to have taken any steps in this regard, notwithstanding his indication that he would do so promptly.

The fact that you have failed to provided such documents and coupled with the most recent leak to the Financial Times on 11 July 2013 which concerned your client and which our client infers your client was responsible for leaking, has led our client to the conclusion that your client does not intend to co-operate over the return of its documentation and that, accordingly, it must seek the assistance of the court in these proceedings to recover its property.”

As stated in the letter, the claimant’s case is that the defendant was responsible for ‘leaking’ the information about the Section 2 Notice. The defendant denies that this was the case. His solicitor has reported that the defendant told him on 10 July 2013, that he had been telephoned by a reporter from the FT, seeking confirmation as to whether it was true that a Section 2 Notice had been issued. The defendant responded by referring the reporter to his solicitor. His solicitor spoke to the reporter and did not confirm or deny the fact. The defendant points out also that the information was not confidential.

The Particulars of Claim alleged breach by the defendant of his contractual and fiduciary duties to the claimant. Particular reliance was placed on the duty of confidentiality imposed by Clause 8.1 of his Letter of Appointment. Alternatively, the duty was said to be an implied term of his contract and/or his equitable duty.

The Particulars of Claim also stated that it was an implied term of the defendant’s contract that the defendant would deliver up to the claimant within a reasonable time of termination of his directorship or on demand:

“(a)

all hard copy documents which are the property of ENRC; and

(b)

any document whether hard copy or electronic which contained Confidential Information (as defined herein) and which had been provided to him in the course of his appointment solely for the purpose of performing his duties as director to ENRC.”

The Particulars of Claim alleged one breach of the duty of confidentiality and of the contractual and fiduciary duties, namely the ‘leak’ of the email of 5 October 2012. In support, the claimant relied on an investigation undertaken on its behalf by third party investigators known as K2 Intelligence (K2) who, it was said, “had determined” that the defendant was responsible for at least that one ‘leak’. Subsequently, the claimant has elected not to use K2’s report and now places no reliance on it. Instead, it relies on what it submits is the inference that the defendant ‘leaked’ the email. The Particulars of Claim also included a claim for damages and equitable compensation in respect of the alleged breach of fiduciary duty.

In addition, the Particulars of Claim alleged a failure on the defendant’s part to comply with what was alleged to be his duty to deliver up the confidential documents. It asserted that in particular he had failed or refused:

It was alleged that those failures, coupled with his alleged ‘leak’ of the 5 October 2012 email and of information contained in the FT article of 11 July 2013, gave rise to the inference that, without undertakings by the defendant and/or a concluded agreement with his solicitors, the defendant would not comply with his duty to deliver up or with his future duty of confidentiality. Therefore, the claimant sought:

“… an injunction to prevent any such breaches, in terms that [the defendant] must not, without limit of time, disclose to any third party or use for his own purposes any Confidential Information that he retains and for an affidavit requiring [the defendant] to disclose details of all third parties to whom he has passed any Confidential Information (including any Hard Copy Documents and/or Soft Copy Documents containing Confidential Information and/or material covered by ENRC’s legal professional privilege);

… delivery up of the Hard Copy Documents and the Soft Copy Documents and appropriate orders for irretrievable destruction following that delivery-up (including, for the avoidance of doubt from all electronic devices belonging to [the defendant] on which such Soft Copy Documents were held). For the sake of clarification, until such time as the scope of any Notice is established and/or any such Notice is discharged, the delivery up sought in this claim does not extend to any Hard Copy Documents or Soft Copy Documents not incorporating information which is protected by ENRC’s legal professional privilege.”

On 16 August 2013, the defendant served a Defence and Counterclaim. In it, he admitted that he owed contractual and fiduciary duties to the claimant. He also admitted that he owed a duty:

“… not to disclose or use confidential information provided to him by the Claimant during the course of his directorship save as necessary for the performance of his duties or in accordance with legal or regulatory requirements or in defence of his interests in respect of any issues arising out of his tenure as director and that he was and remained subject to that equitable duty of confidence only so long as confidentiality subsists or subsisted in the information.”

The Defence denied that there was any implied term requiring delivery up of the documents relating to the defendant’s directorship and asserted that the claimant’s confidentiality rights were fully protected by his continuing obligations of confidentiality. It asserted that the defendant was entitled to retain the documents containing confidential information for the purposes of ensuring his ability to comply with the legal and regulatory requirements or for the defence of his own interests in respect of issues arising from his tenure as a Director. It stated that he had transferred possession of all the relevant hard copy documents to BLP, together with copies of all those documents which had been transferred to him electronically. He denied that he had been under any duty to deliver up the documents and further relied on the fact that, from the time the Section 2 Notice was received, he had been under a positive duty not to hand them over to the claimant, save for privileged documents falling within s2(9) of the 1987 Act. He relied on the assurances already given through BLP that he had not and would not in the future disclose any documents containing the confidential information about the claimant to any third party, save for the SFO in compliance with the Section 2 Notice. The Defence denied that the defendant had been responsible for ‘leaking’ the email of 5 October 2012 or for informing the FT of the fact that he had been served with a Section 2 Notice. The defendant denied that, in the circumstances, the claimant was entitled to the relief claimed.

The defendant also issued a Counterclaim which alleged defamation in connection with a press release issued by the claimant on 19 July 2013, giving news of the claim being brought by the claimant against the defendant and referring to the “malicious leaks” which had given rise to the claim. He claimed damages for defamation and for monies allegedly owed by the claimant under his contract with it.

In its Reply and Defence to Counterclaim, the claimant for the first time referred to the meetings with the ‘journalist’ as justification for its publication of the press release about the commencement of proceedings against the defendant. It also sought to rely on those meetings as an additional reason for inferring that the defendant had been responsible for ‘leaking’ the email of 5 October 2012. The claimant also asserted that, in an email sent on 3 June 2013, the defendant had lied to a fellow Director about the meetings, telling him that the only time he had sat down and discussed the claimant’s business was with a person from an economic intelligence organisation of British background, that he was careful about what he said and that no harm had been caused to the claimant.

In his Rejoinder and Reply to Defence to Counterclaim, the defendant gave the explanation for holding the meetings to which I have already referred. He averred that he believed that the ‘journalist’ was part of a plan by the claimant to gain material with which to coerce him so that he would in the future have to “toe the party line”. He wanted to bring that fact to the attention of individuals within the claimant so that steps could be taken to stop such practices. In doing so, he believed he was acting in the best interests of the claimant as a whole. It was contended that the conversations with the ‘journalist’ were irrelevant to whether the defendant had ‘leaked’ the email of 5 October 2012. He also claimed that he had made clear to the ‘journalist’ that the material should not be published.

The proceedings progressed with a number of CPR Part 18 Requests for Further Information and subsequent Responses from both sides. On 25 September 2013, Master McCloud made a consent order providing that the claim should be tried by a judge and the defamation Counterclaim by the same judge in the same trial, sitting with a jury.

On 8 September 2014, in a witness statement made by a partner of GL, the claimant announced its intention not to pursue its claim for damages, equitable compensation and interest. The reason given was that the claimant had taken a decision not to rely on the evidence of K2 on the ground that reliance might cause an “inadvertent waiver” of certain privileged documents.

The claim for damages had included the costs of the K2 investigation and of the wasted management time and legal advice required to investigate the defendant’s alleged breaches of duty. In discontinuing the claim for damages, however, GL indicated that K2’s fees would be claimed as part of the costs of the claim, despite the fact that its evidence was not to be relied upon.

On 9 September 2014, BLP received a letter from the Case Controller of the SFO investigation, stating that the SFO required the defendant to:

“… continue to observe his undertaking to preserve all documents relating to ENRC in his possession. Under no circumstances should you or Sir Paul Judge return any documentation to ENRC or their lawyers without the specific prior agreement of the SFO. Satisfactory compliance with the s.2 Notices served Sir Paul Judge is dependent on continuing preservation of these documents.”

On 18 September 2014, the defendant gave Notice of Discontinuance of his counterclaim for monies which he had alleged were owed to him. The reason given was that he considered it disproportionate for further time and costs to be spent on litigating a question that was not central to the key issues in dispute between the parties.

On 19 September 2014, BLP wrote to GL suggesting that, now that the remaining issues at stake had narrowed considerably, a resolution of the claim might be possible. BLP once again confirmed that the defendant accepted that the documents in his possession were and remained protected by obligations of confidence. It also indicated that, notwithstanding his case that he was under no legal obligation to do so, he was willing to deliver up all confidential documents once the Section 2 Notices had been fully complied with. It proposed delivery up, not to the claimant, but to an independent third party escrow agent who would hold the documents to the order of the claimant, but would be instructed to provide copies to the defendant in the event that he required access to them in order to comply with regulatory or legal obligations or other issues arising from his tenure as a Director of the claimant.

On 29 September 2014, GL responded, rejecting the idea of delivery up to a third party escrow agent as flawed and unacceptable and contending that the defendant had no right or further need, after the conclusion of the SFO investigation, to have access to the confidential documents. GL indicated that the claimant was not prepared to accept the assurance of the defendant that he would abide by his contractual and equitable duties of confidence.

The application for summary judgment/strike out was made by the claimant on 24 February 2014. On 4 March 2014, at a Case Management Conference, Master McCloud made an order for a limited stay of the claim to enable the parties to attempt to settle by alternative dispute resolution. The order gave directions for conduct of the summary judgment/strike out application and also dealt with the parties’ costs budgets.

The circumstances in which the court may give summary judgment are set out in CPR 24. CPR 24(2) provides that:

“The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if-

(a)

it considers that-

(i)

that claimant has no real prospect of succeeding on the claim or issue; … and

(b)

there is no other compelling reason why the case or issue should be disposed of at trial.”

The test to be applied is whether the claimant has a “real” prospect of success, i.e. not merely fanciful. In order to defeat an application for summary judgment, the claim must be more than merely arguable: ED & F Man Liquid Products Ltd v Patel [2003] CP Rep 51. It is not necessary for the claimant to show that it is probable that its claim would succeed. The burden of proving that there are grounds to believe that the claimant has no real prospect of success lies with the defendant. If the defendant is able to adduce credible evidence in support of its application, the claimant becomes subject to the evidential burden of proving some real prospect of success or some other reason for a trial.

It is important to remember that the hearing of an application for summary judgment and/or strike out is not a summary trial. Thus, it is not for a court hearing such an application to make findings of fact or other decisions as to the merits of the case save insofar as is necessary to determine whether it has sufficient merit to proceed to trial. As Lord Hobhouse said in Three Rivers DC v Bank of England (No3) [2001] 2 All ER 513:

“The criterion which the judge has to apply under CPR Pt 24 is not one of probability; it is absence of reality.”

And, quoting Lord Wolf MR in Swain v Hillman [2001] 1 All ER 91:

“It is important that a judge in appropriate cases should make use of the powers contained in Part 24. In doing so he or she gives effect to the overriding objectives contained in Part 1. It saves expense; it achieves expedition; it avoids the court’s resources being used up on cases where this serves no purpose, and I would add, generally, that it is in the interest of justice. If a claimant has a case which is bound to fail, then it is in the claimant’s interests to know as soon as possible that this is the position. Likewise, if a claim is bound to succeed, a claimant should know this as soon as possible …”

The power to strike out a claim is to be found at CPR 3.4. The relevant parts of CPR 3.4(2) provide:

“(2)

The court may strike out a statement of case if it appears to the court

(a)

that the statement of case discloses no reasonable grounds for bringing … the claim;

(b)

that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings …

(3)

When the court strikes out a statement of case it may make any consequential order it considers appropriate.”

It is clear from the authorities that statements of case which are suitable for striking out on ground 2 (a) include those which raise an unwinnable case where continuance of the proceedings is without any possible benefit to the claimant and would waste resources on both sides: Harris v Bolt Burdon [2000] CP Rep 70.

In Schellenberg v BBC [2000] EMLR 296,Eady J held that, in deciding whether defamation proceedings should be struck out pursuant to ground 2(b), i.e. as an abuse of the process of the court, the relevant question was whether “the game was worth the candle”. In that case, he could not accept that there was “any realistic prospect of a trial yielding any tangible or legitimate advantage such as to outweigh the disadvantages for the parties in terms of expense, and the wider public in terms of court resources”. The decision of Eady J was approved by the Court of Appeal in the case of Cammish v Hughes [2012] EWCA Civ 1655, where Arden LJ said at paragraph 56:

“He [i.e. Eady J] captured the point that, while the court must provide a remedy in a case that requires one, the process of the court should not be used in a case where the need has gone away.”

Once again, it must be noted that, when considering an application for strike out, the court must not enter into the territory of making findings of fact.

The claimant, having abandoned its claim for damages and equitable compensation, is now left only with its claims for delivery up and injunctive relief. It is necessary to consider those two claims and to apply to them the principles which I have already set out.

The claimant accepts that there was no express term in the defendant’s contract requiring him to deliver up confidential documents on termination of his appointment. It contends, however, that it was an implied term of the contract that such a duty existed. It is argued that such a term was plainly required to give business efficacy to the contract and/or to reflect the obvious, although unexpressed, intentions of the parties. For the claimant, Mr Ritchie QC submitted that it was necessary for the court to consider what the contract, read as a whole, against the relevant background, would reasonably be understood to mean: see Lord Hoffmann in Attorney General of Belize and Others v Belize Telecom Ltd and Another [2009] 1 WLR 1988 at paragraph 21. He argued that, given the duty of confidentiality explicitly set out at Clause 8.1 of the Letter of Appointment, coupled with what was plainly a heightened sensitivity about confidentiality in 2010 and 2011, the intentions of the parties would clearly have been that the risk of misuse of confidential information should be reduced as far as possible. The only way that could be done, he suggested, was for a Director to be required on termination of his appointment to deliver up hard copies and delete soft copies of the confidential documents with which he had been provided.

Mr Ritchie pointed out that the defendant had been provided with confidential information solely so as to be able to carry out his duties as a Director, fiduciary and quasi-trustee of the claimant. He had no need to hold onto the information after termination of his directorship and, he suggested, no right to do so. He suggested that this would be particularly undesirable if the information was stored on servers belonging to third parties. He questioned what would happen if the claimant lost all its papers in a fire and the defendant declined to provide it with his copies. He suggested that the defendant’s assertion that he required the documents in order to deal with any enquiries or challenges of him that might be made in any future legal or regulatory proceedings was unjustified. In support of that contention, he relied upon observations made by Jack J in Brandeaux Advisers (UK) Limited and Others v Ruth Chadwick [2010] EWHC 3241 (QB) at paragraph 23:

“I am doubtful if the possibility of litigation with an employer should ever justify an employee in transferring or copying specific confidential documents for his own retention, which might be relevant to such a dispute. If such a dispute arises, in the ordinary course the employee must rely on the court’s disclosure process to provide the relevant documents: even if the employee is distrustful whether the employer will willingly meet its disclosure obligations, he must rely on the court to ensure that the employer does. But on any view there can be no justification for the exercise which Ms Chadwick carried out here. Nor, in the absence of a specific issue, was Ms Chadwick entitled to transfer documents to protect her own position in case a regulatory dispute might arise. If she wished to use confidential information to make a report to the regulator, a situation which has not arisen, she would not be prevented from using confidential information for that purpose: but whether that would entitle her to copy documents onto her private computer would be doubtful.”

In that case, Jack J ordered delivery up of the documents subject to certain conditions.

For the defendant, Mr Tomlinson QC referred to the terms of Clause 8.1 of the defendant’s Letter of Appointment. He pointed out that the provision that all information acquired during his appointment was confidential to the claimant and should not be disclosed to third parties or used for any reason other than in the interests of the claimant was said to apply both during the defendant’s appointment and following termination. He suggested that Clause 8.1 made clear that it was envisaged that documentary information might be retained, giving rise to the risk that it might be disclosed. Mr Ritchie disagreed, suggesting that the requirement not to disclose information following termination should be construed as relating only to information held in the defendant’s own memory, rather than in documents.

Mr Tomlinson argued that there was no reason to conclude that such an implied term represented the intention of the parties. He suggested that it would give rise to onerous duties for many directors who, following termination, would have to carry out wide-ranging searches through hard copy and electronic sources, sometimes covering many years’ worth of documents and, in the case of electronic sources, necessitating searches in a number of different email addresses. The duty would be particularly onerous for someone like the defendant, who is a director of a number of different companies. Mr Ritchie’s response was to suggest that the duty to deliver up on termination would not be onerous if the director concerned maintained his documents in proper order.

Mr Tomlinson pointed out also that there was no evidence before the Court of a practice whereby directors of companies are required to deliver up documents on termination of their appointments. The defendant’s evidence was that he had never previously been required to do so and he knew of no colleagues who had. In relation to the claimant’s reliance on Brandeaux, Mr Tomlinson pointed out the distinction between the facts of that and the present case. In Brandeaux, the defendant was an employee, not a director, of the claimant company. She had been provided with a large number of documents relating to her work which, prior to the termination of her employment and in order to arm herself for any future dispute she might have with the company, she clandestinely transferred from her work to her private email address. Jack J found that her conduct amounted to an important breach of trust which entitled the claimant to dismiss her for gross misconduct. Her employment contract included a provision in these terms:

“All notes, memoranda, documents and Confidential Information, whether on paper or other media in any form, concerning the business of the Company or … which shall be acquired, received or made by you in the course of your employment shall remain the property of the Company and shall be surrendered by you to the Company at the termination of your employment or at the request of the Company at any time during the course of your employment.”

In other words, contrary to the position in the present case, there was an explicit duty to deliver up. Furthermore, in Brandeaux,there were no regulatory or other proceedings in train and, as Jack J put it: “there was no reason to anticipate any specific problem”. Mr Tomlinson contrasts that with the position here, where a SFO criminal investigation has been underway since April 2013 and there must be a possibility of other proceedings arising from that.

I can see no grounds for finding that the defendant was subject to an implied term requiring delivery up of the confidential documents after termination of his appointment. Had it been the “obvious but unexpressed intention of the parties”, one would have expected it to be incorporated into the defendant’s contract, as was done in Brandeaux. Moreover, I have been shown no legal authority, Code of Practice, Guidance or other evidence that would suggest that such a requirement is the norm for directorships. I can well understand that there would be difficulties in complying with such a duty, especially for those individuals who take on multiple directorships. The difficulty is particularly acute where, as here, company documents are sent to a number of email addresses, some personal to the director and others maintained by other private and publicly listed companies with which the director is associated. It is difficult to see how “business efficacy” would be achieved by an implied term to deliver up. It would potentially involve a considerable amount of work for those subject to it - to very little purpose.

The claimant made provision in the defendant’s contract for the safeguarding of confidential information, including provision for the period after termination of his appointment. I do not accept that the protection set out at Clause 8.1 of the Letter of Appointment was solely intended to relate to information stored within the defendant’s own memory. It appears to me that it must also have been intended to cover documentary information and to ensure that it was not disclosed to third parties before or after termination without prior clearance with the claimant.

In the circumstances, it does not seem to me that there can be any reasonable prospect of the claim for relief based on an implied term requiring delivery up succeeding.

Mr Ritchie sought to persuade me that there was a wider obligation of confidence (embracing delivery-up) arising from the defendant’s fiduciary duties. I do not accept that submission. I note the observations of Sales J (as he then was) in Vercoe and Others v Rutland Fund Management and Others [2010] EWHC 424 (Ch) at paragraph 329:

“Where parties to a contract have negotiated and agreed the terms governing how confidential information may be used, their respective rights and obligations are then governed by the contract and in the ordinary case there is no wider set of obligations imposed by the general law of confidence: see e.g. Coco v Clark at 419.”

It would, however, be open to the court trying this case to make an order for delivery up in its discretion, in addition to or as part of a permanent injunction to protect the claimant’s confidentiality.

There is no dispute that the defendant was under an obligation to the claimant not to disclose confidential information obtained by him in connection with his directorship. The damages and equitable compensation claim for breach of that obligation having been withdrawn, the sole remaining heads of relief to be sought by the claimant at trial are an injunction prohibiting future breach of his obligation of confidence, together with delivery up of the confidential documents in his possession. In order for such relief to be justified, the judge must be satisfied that, without such relief, there would be a real or arguable risk of disclosure of the claimant’s confidential information by the defendant.

The claimant contends that such a risk plainly exists. It relies primarily upon the ‘leak’ of the email of 5 October 2012, claiming that a clear inference can be drawn from the available facts that the defendant was responsible for the ‘leak’. Mr Ritchie relied in particular on the fact that the defendant was the author of the email and plainly had strong feelings about the proposed appointment of Dalman. Mr Ritchie accepted that it was possible that one of the other people who had access to the email might have ‘leaked’ it, but argued that there was at least a reasonable prospect that the claimant would succeed in establishing that the defendant had been responsible.

In further support of its contention about the email of 5 October 2012, the claimant relied upon the meetings with the ‘journalist’ in late 2011. Mr Ritchie argued that the comments made by the defendant were plainly in breach of his statutory and contractual duties, in particular his duty of confidence. He suggested that the defendant’s comments on those occasions supported the claimant’s contention that, at that time, the defendant had his own ‘agenda’ and was seeking to gain an advantage for himself by publication of confidential information about the claimant. It was that ‘agenda’, it was argued, that gave rise to the ‘leak’ of the 5 October 2012 email.

The claimant also argued that the court could draw the inference, which it suggests is clear, that the defendant was responsible for ‘leaking’ the news of the issuing of the Section 2 Notice to the FT in July 2013. It is suggested that that incident, if proved, would demonstrate that, even at that time, the defendant was seeking to cause harm to the claimant.

Mr Ritchie submitted that there was nothing unwinnable, unreal or fanciful about the claim that the defendant had ‘leaked’ confidential information and thus committed a serious breach of confidence. The question of whether he had done so was, he said, one of fact which should be determined at trial and was not susceptible to strike out or summary judgment. If, at trial, the judge accepted that the defendant had breached confidence in the manner alleged, that breach would, he said, plainly give rise to a risk that he might do so once again in the future. The only way in which the claimant could be protected against that risk would be for the court to grant an injunction and an order for delivery up of the relevant documents.

Mr Ritchie also relied on the history of exchanges between the parties’ solicitors concerning the delivery up of documents and undertakings of confidentiality since June 2013. He argued that the many assurances given by the defendant, including the latest offer made in September 2014 to deliver the documents to an escrow agent, would not offer the claimant sufficient protection against future breaches of confidentiality. He submitted that, if the court at trial were to find that the defendant had ‘leaked’ information in the manner alleged and had subsequently lied about having done so, neither the judge nor the claimant could have confidence that he would not do so again without an injunction and/or delivery up order in place. In any event, at least the judge would have been able to assess the risk having heard the evidence.

As to whether “the game was worth the candle”, Mr Ritchie pointed out that the factual issues in the claim and the counterclaim are virtually identical so that little additional expenditure of time or money would result from the claim being allowed to proceed.

The defendant’s case was that the evidence that he was responsible for the ‘leak’ of 5 October 2012 was flimsy and speculative. It may have been any one of several people. As to the meetings with the ‘journalist’, he had believed that he was speaking to someone employed by the claimant and, in any event, he was seeking to carry out his duty to look after the claimant’s wider interests. Mr Tomlinson suggested that, even if the defendant had been in breach of his duty of confidence at the time of his meetings with the ‘journalist’, that would not assist in determining whether or not he was responsible for the “leaked” email.

Mr Tomlinson argued also that, in any event, even if the defendant were found to have breached confidence in 2011 and/or October 2012 as alleged, that did not mean that, at the time of the termination of his directorship or since, there was a real risk of further breach, such as would justify the imposition of an injunction and/or an order for delivery up. He pointed out that the defendant had repeatedly made clear since early June 2013 that he understood his duties of confidentiality and would comply with them. In those circumstances, there would be nothing to be gained by the imposition of an injunction requiring confidentiality. So far as delivery up is concerned, the defendant is at present precluded from giving up the documents by reason of the requirements of the SFO. He argued that, even after the investigation is completed, an order for delivery up of all the confidential documents would not be justified, since the defendant would require those documents for use, if necessary, in connection with any future legal or regulatory proceedings involving the claimant. He pointed out that this was a very different case from Brandeaux. In this case, there is a criminal investigation currently in action, with an obvious risk of further proceedings to come and, as a former Director, the defendant may need the documents to deal with those proceedings.

Mr Tomlinson pointed out that at no time had the claimant sought interim relief which, in the ordinary way, might have been expected if it had perceived a real risk of disclosure to a third party. He suggested that, in reality, the object of the claim had been to obtain delivery-up of documents in order to prevent them being disclosed to the SFO for the purposes of its investigation.

As I have already made clear, it is not my function to make decisions as to the factual issues. I must consider the merits only insofar as it is necessary to assess whether or not there is a real prospect of success. Having done that exercise, I do not accept that the evidence relating to the claimant’s allegation that the defendant was responsible for the ‘leak’ of 5 October 2012 and therefore acted in breach of confidence is so speculative that I can conclude that it has no reasonable prospect of succeeding at trial. It is clear from the email itself that he felt strongly about the way the proposed appointment was being managed and it could be inferred from his previous conversations with the ‘journalist’ that he did not favour the proposed candidate and possibly even that he was not adverse to letting the press know his views about company affairs.

As to those conversations, it is not for me to decide whether the defendant’s intentions in holding the meetings with the ‘journalist’ were, as he claimed, to attempt to draw attention within the claimant organisation to the undesirable practices that he believed were going on, or whether he was tricked into disclosing his views about the claimant to an individual who he believed was a genuine journalist and who he hoped would publish those views in the press. In either event, it is plain from his admissions (and the transcripts of the conversations) that he disclosed a considerable amount of confidential material, some of it potentially harmful to the claimant if published. He claims in his Rejoinder and Reply to Defence to Counterclaim that the conversations took place on a “not for publication” basis but it is in my view arguable that this claim is inconsistent with some of the words in the transcript: e.g. “What access do you have to news channels, media, etc, that could break such a story?” Furthermore, I consider it arguable also that, having heard the evidence, a judge might conclude that the defendant had not been candid in his email to a fellow Director about the conversations he had had in 2011.

The defendant’s case is that, even if I were to find that the claim that he acted in breach of his duty of confidentiality was arguable, his application for summary judgment/strike out could still succeed on the ground that a judge would be bound to find at trial that no risk of a future breach of confidentiality, whether by words or sharing of documents, is likely to exist. I recognise that it is possible that such a finding might be made. However, it seems to me that the decision on the point is likely to be dependent on the evidence. That evidence will be called in any event in the defamation counterclaim; the claimant is right to point out that the factual issues in the claim and the counterclaim are virtually identical. In the event that there were to be findings that the defendant had believed that the individual he spoke to in 2011 was indeed a journalist and had sought to use him to publish his views which were potentially damaging to the claimant’s reputation and position in the market; and that he had lied about his encounter with the journalist to a fellow Director; and/or that he had sent the email of 5 October 2012, then those would potentially be serious breaches of duty and may cause the judge to conclude that the defendant cannot be relied upon not to commit further breaches of his duties in the future.

It is true that the incidents complained of occurred in 2011 and 2012, during the currency of the defendant’s directorship, in circumstances when there were tensions between him and other officers of the claimant and when he was actively involved in the claimant’s affairs. The position is very different now and, in normal circumstances, one would have expected the defendant to have little interest in the claimant. Nevertheless, there is the ongoing investigation by the SFO to consider. The likely outcome of that is unknown but it may in due course attract the interest of the press, who may be anxious to obtain information from someone like the defendant who has previous involvement with the claimant. It may lead to disputes as between officials and former officials of the claimant, giving rise to a temptation to those officials to defend themselves by disclosing confidential material. Bearing these matters in mind and depending on his/her findings of fact, it seems to me that the judge at trial may conclude that there is a risk of confidential information and/or documents being disclosed if there is no injunction in place and/or if the confidential documents are not delivered up.

In reaching that conclusion, I do not ignore the circumstances in which the proceedings were commenced. After the ‘leak’ of the 5 October 2012 email, it does not appear that the claimant took any significant steps to find out who was to blame. The Particulars of Claim stated that it had reached the conclusion that the defendant was responsible only after the fact had been determined by the third party investigators, K2. They were instructed on or about 26 April 2013, the day after the SFO announced its investigation of the claimant. A few weeks later, the defendant was told he would not be re-elected as a Director and demands were made for undertakings and delivery up of confidential documents. The timetable strongly suggests that the primary concern of the claimant at this time was the SFO investigation and, once it was aware of the Section 2 Notice, the risk that the defendant might hand over privileged documents to the SFO.

The Claim Form and Particulars of Claim were issued on 19 July 2013. No application for interim relief was made then or thereafter. As the defendant has pointed out, if the claimant had considered that there was a real risk that the defendant might disclose any of its confidential information to a third party, one might have expected it to seek interim relief by way of protection. However, by that time, the claimant was aware of the existence of the Section 2 Notice and of the fact that the defendant was not at liberty to hand over the documents to it. An application for interim relief by way of delivery up of documents would not have succeeded and, at that time, it is plain that the documents were the claimant’s primary concern. The defendant has the original documents and will still retain them when the SFO investigation is completed. I do not consider that the claimant can be said to have no real prospect of persuading the judge that there is a real risk of disclosure of confidential information thereafter. It is true that the defendant has given repeated assurances that he will abide by his duties in the future. It will be for the judge, having heard the evidence, to determine whether those assurances can be relied upon. In dealing with an application that delivery up of documents should form part of any injunctive relief granted, the judge would no doubt consider whether the defendant may require copies of those documents for his own purposes in the future and, if an order is made, whether appropriate conditions can be put in place to permit this.

I therefore dismiss the defendant’s applications for summary judgment and strike out, save in respect of the claim for delivery up based on an implied term in the parties’ contract or the defendant’s fiduciary duties.