Autonomy, Inc (aka HP Autonomy) & Anor v Hussain

This is an appeal by Autonomy Inc and Autonomy Systems Ltd (“the Autonomy Parties”) against paragraph 3 of the order of the Senior Master dated 27 September 2016 refusing their application for an examination of Mr Sushovan Hussain pursuant to the Evidence (Proceedings in Other Jurisdictions) Act 1975 (“the 1975 Act”). The appeal is brought with permission of the Senior Master.

The Autonomy Parties are defendants in proceedings in the US District Court for the Northern District of California (“the US proceedings”) brought by MicroTechnologies LLC (“MicroTech”). The Autonomy Parties have brought a counterclaim in those proceedings. The Autonomy Parties and another have brought a claim in fraud against Mr Hussain, and others, in the Chancery Division in London (“the Chancery proceedings”).

By application dated 18 April 2016 to the Senior Master in this court, the Autonomy Parties sought to give effect to a letter of request issued by the US District Court requesting that Mr Hussain be required to attend an examination to give evidence for the purposes of the trial of the action in California (“the Letter of Request”). The US District Court had rejected Mr Hussain’s objections, made to that Court, to the issue of the Letter of Request. Mr Hussain opposed the Autonomy Parties’ application to the Senior Master.

In her reasoned judgment handed down on 26 July 2016 (“the judgment”) the Senior Master dismissed the Autonomy Parties’ application on two grounds: first that it would be oppressive for Mr Hussain to be required to attend an examination in circumstances where he is also defendant to the Chancery proceedings; and, secondly, that his right, under Article 6 of the European Convention on Human Rights, to a fair trial of the Chancery proceedings would be infringed. In that judgment, the Senior Master rejected a third argument put forward by Mr Hussain, namely that an examination would be pointless because Mr Hussain would invoke the privilege against self-incrimination under the Fifth Amendment to the US Constitution (“the Fifth Amendment”) as a basis for declining to answer any question posed to him at the examination.

The Autonomy Parties now appeal, contending that the Senior Master was wrong on the first and second arguments, but correct to reject the pointlessness argument. Mr Hussain seeks to uphold the Senior Master’s decision both on the grounds underlying her decision, and on alternative grounds, and in particular on the ground that the examination would be pointless.

The following description of the factual background to the application is drawn from the summary in the judgment (paragraphs 9 to 26) with certain modifications and updating.

The Autonomy Parties were, at the material time, subsidiaries of an English company now known as Autonomy Corporation Limited (together with its group, “Autonomy”). Autonomy was founded by Dr Michael Lynch, who became its Managing Director and Chief Executive Officer, with Mr Hussain serving as Chief Financial Officer. It carried on a software business. Its core product provided tools for analysing “unstructured” data (i.e. data that has not already been organised into database entries).

Until November 2011, Autonomy was a publicly listed company, trading on the London Stock Exchange. It regularly issued information to the market about its financial performance, including by way of quarterly reports and annual accounts.

In October 2011, Autonomy was acquired by a subsidiary of Hewlett-Packard Company (together with its group, “HP”) for a total price of about £7.15 billion. It is common ground that Mr Hussain realised about £6 million on the disposal of his shares and share options in Autonomy.

In late 2012, HP announced that it had discovered serious irregularities in the conduct of Autonomy’s business pre-acquisition and, in particular, in its published financial information. One of the irregularities alleged was improper revenue recognition on Value Added Reseller (“VARs”) transactions. VARs are companies that re-sell a manufacturer’s product, while adding value in some way (e.g. by providing an associated service). MicroTech is one of the VARs identified by Autonomy as having entered into contrived transactions with Autonomy, designed to enable the improper recognition of revenue in circumstances where Autonomy had been unable to conclude a sale with the end-user customer within the relevant financial quarter.

As regards these contrived transactions, the Autonomy Parties allege that, in reality, Autonomy would continue negotiating with the real customer and, upon concluding a direct contract of sale with that end-user, would then relieve the VAR by one means or another of its ostensible obligation to pay (for example, by issuing a credit note to the VAR). Where Autonomy was ultimately unsuccessful in achieving a direct contract of sale with the end-user, Autonomy usually bought goods or services from the VAR that Autonomy did not need or use, so as to put the VAR in funds with which to pay Autonomy.

On 30 March 2015, the Autonomy Parties, Autonomy Corporation Limited and Hewlett-Packard Vision BV (“Bidco”) (the HP entity that acquired Autonomy) (together “HP/Autonomy”) issued the Chancery proceedings against Dr Lynch and Mr Hussain seeking damages or equitable compensation of at least £3.2 billion.

In those proceedings, HP/Autonomy contend that, as a result of the alleged improper transactions and false accounting, including in relation to the use of VARs summarised above, Autonomy’s published information for the period from the first quarter of 2009 until the second quarter of 2011 contained false statements or material omissions, to the knowledge of Dr Lynch and Mr Hussain. They further contend that HP and Bidco reasonably relied on that information in deciding to buy Autonomy at the acquisition price; and that Bidco would have paid a much lower price (by approximately £3.2 billion), had it known the truth.

HP/Autonomy claim damages from Dr Lynch and Mr Hussain for breach of fiduciary and other duties, which have caused Autonomy to be exposed to a claim from Bidco under Schedule 10A of the Financial Services and Markets Act 2000. Bidco also makes direct claims for alleged misrepresentations under the Misrepresentation Act 1967 and/or in the tort of deceit. The Autonomy Parties further claim for losses caused to them as a consequence of the breach of duties owed to those companies by Dr Lynch and Mr Hussain.

Mr Hussain has denied all of the claims in a Defence dated 1 October 2015, which is supported by a statement of truth signed by his solicitor.

At a CMC in July 2015, Hildyard J (to whom the proceedings have been assigned by the Chancellor) directed a 23 week trial, which is now due to commence in January 2019. HP/Autonomy are seeking to amend their Particulars of Claim, with an application that is due to be heard in January 2017. A copy of the draft Amended Particulars of Claim has been placed before this Court.

As regards the current Particulars of Claim, paragraphs 73 and 74 set out the general allegations about contrived VAR transactions and how they operated (as described above). Particulars of each of the specific contrived VAR transactions are set out in Schedule 3, containing summary details for each of 37 transactions (or groups of transactions) with the different VARs, including 9 transactions between Autonomy and MicroTech as VAR (including the Vatican Library transaction and the HP transaction – see paragraph 22(1) and (2) below). Those details include the identity of the VAR and the proposed end-user, whether a transaction was concluded with the end-user, the conclusion of the VAR transactions and a cross reference to the allegation of false accounting involved.

Reverting to the body of the pleading, section E of the Particulars of Claim (paragraphs 132 et seq) sets out the case as to Mr Hussain’s involvement in, and knowledge of, the VAR transactions. Dr Lynch and Mr Hussain led the sales process. It is alleged that Mr Hussain, with Dr Lynch, was ultimately responsible for revenue recognition and managed the reporting of gross margin. Paragraph 136.1 of the Particulars contains a shortly expressed allegation that Dr Lynch and Mr Hussain managed Autonomy’s sales and were personally involved in attempts to conclude sales to end-users, which, when unsuccessful, were followed by contrived VAR transactions.

In his detailed Defence, Mr Hussain contends that he was not aware of any understanding that, if there was no end-user agreement, the VAR would not have to pay. MicroTech was on risk to pay. Then at Schedule 3, Mr Hussain responds to Schedule 3 to the Particulars of Claim - in detail over 87 pages - addressing each VAR transaction. The overarching contention is that Autonomy/HP has not set out any particulars of Mr Hussain’s involvement in any of the VAR transactions or his knowledge of false accounting, contending that the claim is inadequately pleaded and liable to be struck out.

As to the Draft Amended Particulars, in paragraph 74A, it is now further alleged that there was an agreement between Autonomy, represented by, inter alia, Mr Hussain, and each VAR that the VAR would not be required to satisfy its liability to Autonomy from its own resources.

As regards involvement and knowledge, paragraph 136.1 is expanded upon over some 18 pages and in numerous sub-paragraphs. It is now positively asserted that Mr Hussain must have been aware of the wrongful practice of introducing VARs to end-user deals that could not be concluded in order to enable Autonomy to recognise revenue for those deals. Then substantial detail is pleaded, in the body of the pleading, in relation to Mr Hussain’s personal involvement in, and knowledge of the purpose of, two of the MicroTech VAR transactions: the Vatican Library transaction (paragraph 136.1A.1) and the HP transaction (paragraph 136.1A.6). Further, in the other new sub-paragraphs of paragraph 136.1A, allegations are sought to be introduced in relation to Mr Hussain’s knowledge of VAR transactions with five other VARs. Then, based on those matters, paragraph 136.1B alleges that Mr Hussain (and Dr Lynch) must have known of those VAR transactions, of their contrived nature and further that it is inconceivable that Mr Hussain did not have similar involvement or knowledge in relation to all other VAR transactions in Schedule 3, including the further 7 MicroTech transactions. At paragraph 144B of the Draft Amended Particulars, it is alleged that Mr Hussain was involved in the active misleading of Deloitte as to the true nature of the VAR transactions. One of the examples given is Mr Hussain’s own involvement, and alleged false statements to Deloitte, in relation to the Vatican Library transaction.

In the meantime, on 18 May 2015 MicroTech issued the US proceedings; the defendants are now the Autonomy Parties. MicroTech claims that, in respect of two particular transactions, MicroTech paid Autonomy for the software, but because the transactions with the expected end-users never materialised, it was never repaid or given an allegedly agreed 10% profit. The two transactions in issue are:

MicroTech claims repayment of the sums paid (but not the 10% uplift), in a total amount of about $16.55 million (about £11.27 million).

The Autonomy Parties contend that the arrangement between Autonomy and MicroTech, as described and relied upon by MicroTech in the US proceedings, appears to have no legitimate benefit accruing to Autonomy, and thus that the case made by MicroTech in the US proceedings is entirely consistent with the allegation in the Chancery proceedings that sales to the VARs were merely contrived arrangements designed to create the false appearance of a sale for revenue recognition purposes.

The Autonomy Parties dispute the claim on various grounds, including that the monies used by MicroTech to pay Autonomy represented funds that had previously been funnelled to MicroTech by Autonomy for that purpose. MicroTech was effectively paying Autonomy with Autonomy’s own money. However, the Autonomy Parties also allege that these two transactions, and at least seven others, were part of a fraudulent scheme whereby MicroTech knowingly assisted Dr Lynch and Mr Hussain to cause Autonomy improperly to recognise revenue. The Autonomy Parties therefore counterclaim damages against MicroTech for aiding and abetting alleged breaches by Dr Lynch and Mr Hussain of the fiduciary duties that they owed to the Autonomy Parties, and also advance a claim in unjust enrichment.

The breach of fiduciary duty argument is not only central to the Autonomy Parties’ counterclaim, but also to its defence to MicroTech’s claim. They contend that they needed to advance the breach of fiduciary duty argument in order to defend themselves fully against MicroTech’s claim. Further they point out that, as the US Magistrate Judge observed (see paragraph 37 below), it is a rule of US procedure that all counterclaims arising from the same transaction or set of transactions must be advanced in those proceedings, failing which the counterclaims may be treated as waived. They had no choice but to bring their counterclaim in the US proceedings or risk losing it forever.

The trial of the US proceedings was listed to take place in January 2017, but the latest information is that it now appears unlikely that it will commence at that time.

On 11 September 2015, Judge Whyte made a Protective Order for the purposes of the US proceedings. In summary, this enables documents or witness evidence to be designated as confidential by the party or non-party producing it.

On 4 December 2015, the Autonomy Parties applied for the Letter of Request to be issued by the US Court. MicroTech did not oppose the application.

The Letter of Request specifies, in some considerable detail, the “subjects” upon which Mr Hussain is requested to give evidence. These include:

“1.

His educational background, employment history, professional qualifications, and personal preparation for the deposition

2.

His knowledge of any agreements or understandings, formal or informal, written or oral, or manifested by the conduct of the parties to the Autonomy Government Reseller Agreement between MicroTech and Autonomy, Inc, entered into on or about June 30, 2006… that supplemented or varied the terms of the MicroTech Reseller Agreement, and if so the nature of such supplemental or varied terms or conduct, how they came to be agreed between Autonomy and MicroTech, and all communications of which Mr Hussain is aware regarding such supplemental or varied terms or conduct that involved members of Autonomy management, including without limitation himself, Michael Lynch, Stephen Chamberlain, Christopher “Stouffer” Egan, Joel Scott, and Andrew Kanter.”

Then, at subject 3, there are a series of nine numbered questions, each to be asked in relation to each of ten specific transactions between Autonomy and MicroTech, relating to ten different end-users, including the Vatican Library transaction and the HP transaction. Subjects 4 to 10 all relate to the dealings between Autonomy and MicroTech.

On 11 December 2015, Mr Hussain’s US attorneys issued a motion for a protective order forbidding the issuance of the Letter of Request on the basis that it was “both improper and unduly burdensome”. It was contended that the letter of request would cause “significant oppression and undue burden and expense”, and further that most of the information which Autonomy sought related to the case in London and not the claims in the US, and therefore the application was a “transparent” and “brazen” attempt to evade English discovery limits.

By an Order dated 14 March 2016, Magistrate Judge Howard R. Lloyd ruled on the application, deciding it in the Autonomy Parties’ favour. I address the Magistrate Judge’s reasoning in the next section. On 28 March 2016, Mr Hussain issued a motion for relief from that Order (in effect, an appeal), contending that the Magistrate Judge’s decision was “clearly erroneous and/or contrary to law” on various grounds. It turned out that, before receiving Mr Hussain’s motion for relief, the US District Judge, Ronald M. Whyte, had already issued the Letter of Request. Judge Whyte nevertheless explained, by an Order dated 6 April 2016, that he would have rejected the motion in any event on substantive grounds.

The Magistrate Judge held that an examination of Mr Hussain would be proportionate to the needs of the US proceedings, giving six reasons:- (1) Autonomy has raised serious counterclaims against MicroTech; (2) the counterclaims put several million dollars in controversy; (3) Mr Hussain was likely to have the best access to probative information that establishes whether Mr Hussain breached fiduciary duties owed to Autonomy; (4) the parties to the US litigation were willing to spend the money necessary to conduct the examination, and Mr Hussain did not contend that the expense of preparing for and sitting through the examination would be significant relative to his personal wealth; (5) Mr Hussain’s evidence is “important to the accurate resolution” of the counterclaims; and (6) the likely benefit of Mr Hussain’s evidence outweighs the burden and expense of the proposed deposition.

As regards the specific question of oppression, the Magistrate Judge found that there was no authority to support the proposition that the taking of evidence would be unduly oppressive when it related to a separate civil case against the proposed deponent. Under US law an enquiry into oppression depended, instead, on whether a party seeks “marginally” useful information in order to inflict a “hardship” on the person who possesses that information. That was not the position in the present case. Rather, Autonomy was seeking highly probative evidence of counterclaims against MicroTech.

In relation to oppression and the risk of criminal charges, the Magistrate Judge specifically referred to Article 11 of the Hague Evidence Convention and the ability of Mr Hussain to invoke his Fifth Amendment right against self-incrimination, which right was expressly specified in the proposed letter of request. The Magistrate Judge concluded that “the proposed deposition would not unduly oppress or burden [Mr] Hussain by requiring him “to be a witness against himself” with respect to possible criminal culpability”.

The Magistrate Judge rejected the argument that adequate substitute evidence could be obtained from MicroTech’s employees, finding that Mr Hussain is likely to possess unique and highly probative knowledge in relation to the issue of whether he had breached his fiduciary duty to Autonomy.

The Magistrate Judge went on to reject Mr Hussain’s argument that Autonomy was seeking improperly to circumvent English procedures, and in particular as part of a scheme to evade English discovery limits. He pointed out that it was MicroTech, and not Autonomy, who had begun the proceedings in the US; the counterclaims brought by Autonomy arose from the same underlying business deals, and had they not been brought, under US procedure, they may have been waived. Autonomy did not seek discovery broadly but rather sought information about the specific deals between Autonomy and MicroTech, the subject of the counterclaims. The fact that Autonomy had not chosen the US forum tended to show that Autonomy was not seeking evidence as part of a scheme to misuse the legal process. Rather, Autonomy was merely litigating the present case to the best of its abilities.

Finally the Magistrate Judge indicated that whether it would be consistent with English law to provide the judicial support requested in the proposed letter was not a question for the US Court.

At paragraphs 30 to 53 of her judgment, the Senior Master identified, and set out the parties’ rival contentions in relation to, the three reasons relied upon by Mr Hussain as to why the Court should not give effect to the Letter of Request; those reasons being, in shorthand: (1) oppression; (2) privilege (or “pointlessness”); and (3) Article 6 ECHR.

As the basis for Mr Hussain’s argument that the examination would be pointless, a witness statement from Mr Hussain’s solicitor, Mr Ian Hammond, stated, at various points, that Mr Hussain would invoke his rights under the Fifth Amendment in response to all questions. In particular, at paragraph 41, Mr Hammond stated:

“I am instructed that it is my client’s intention to rely on his rights afforded to him under the Fifth Amendment to the United States Constitution in response to all questions on the subject matter identified in the Letter of Request.”

At paragraphs 54 to 61, the Senior Master set out the governing legal principles to be applied, recording that it was not disputed that the jurisdictional requirements under the 1975 Act were satisfied in the present case, and that what was in issue was the exercise of the Court’s discretion. The relevant case law established that the English court will generally defer to the view of the foreign court on the question of whether the evidence sought is relevant, but that the English court would not accede to a letter of request where the burden imposed upon the intended witness would be oppressive. She observed, at paragraph 60, that in the present case it is not disputed that the evidence sought would be relevant to the US proceedings. She then turned to deal with each of the three “reasons” in turn.

As regards oppression, in her analysis at paragraphs 62 to 74 of her judgment, she began by referring to First American Corp v Al Nahyan [1999] 1 WLR 1154 in which the Court of Appeal refused to order an examination of certain accountants who were said to have been complicit in the fraud but who had not been joined as defendants to an action, citing certain passages of the judgment of Sir Richard Scott VC. (Relevant passages from that judgment are set out below). The Autonomy Parties had contended that the First American case was distinguishable for two reasons: first, because in the present case the Autonomy Parties had already pleaded a claim in fraud against Mr Hussain in the Chancery proceedings; and secondly because Mr Hussain would be able to avail himself in the examination of his right to silence under the Fifth Amendment and that that would negate any possible oppression.

The Senior Master rejected the first argument. Her principal reason for doing so (at paragraphs 67 to 68) was that the claims of the Autonomy Parties in the Chancery proceedings were not adequately particularised. No allegations were made against Mr Hussain or particulars given as to what is alleged against him in relation to each of the transactions identified in Schedule 3. She concluded that, at least in relation to eight of the nine MicroTech transactions, the allegations of fraud had not been particularised in the Chancery proceedings and that Mr Hussain was in the same position as the accountants in First American. At paragraphs 69 and 70, the Senior Master referred to other factors which she considered to be suggestive of oppression, in particular (1) the potential availability of other witnesses, (2) a “suggestion” of “a tactical approach by the Autonomy Parties… to embark upon a train of enquiry to obtain evidence… before they have particularised their case against him”; and (3) the fact that the Autonomy Parties/HP are not prepared to give undertakings (a) not to use the evidence from the examination in the Chancery proceedings and (b) not to bring civil proceedings against Mr Hussain in the US concerning these or other VAR transactions.

She then addressed the Autonomy Parties’ second argument - that any oppression would be countered by Mr Hussain’s Fifth Amendment rights - in the following terms:

“72.

I have to consider whether the oppressive nature of the examination is countered by the ability and intention of Mr Hussain to rely on his Fifth Amendment privilege. Insofar as his concerns about any potential regulatory and criminal proceedings in the US are concerned, I do consider that this is the case and that this was the view reached by the US court … to which I must accord due respect. In respect of any regulatory/criminal proceedings in this jurisdiction, Mr Hussain would also be entitled to rely on the privilege against self-incrimination. This issue, therefore, on its own would not be sufficient to constitute oppression such that the request should be refused.

73.

However, from the evidence provided to me it does not appear that the same consideration was given [i.e. by the US Court] in relation to the Chancery proceedings nor to any potential civil proceedings in the US. The US Court considered only the more limited issue of whether the proposed deposition request was an attempt “to evade English discovery limits”.

It thus appears, and the Autonomy Parties certainly submit, that in paragraph 73, the Senior Master was, expressly or at least implicitly, concluding that invoking the Fifth Amendment rights to silence would not protect Mr Hussain from oppression in relation to use of the evidence obtained on the examination in the Chancery proceedings or in any potential civil proceedings in the US. In this way Mr Hussain’s ability to invoke the Fifth Amendment did not neutralise any oppression arising in the context of civil proceedings in England or in the US.

The Senior Master then concluded, in relation to oppression, that the burden upon Mr Hussain outweighed the disadvantage to the Autonomy Parties, and the US court, in not having available to them Mr Hussain’s evidence and the disadvantage to the wish of the English court to comply with a request from a sovereign state.

As regards the second “reason” – the privilege argument – at paragraphs 75 to 77, the Senior Master rejected Mr Hussain’s contention that the examination would be pointless because Mr Hussain would rely on his Fifth Amendment rights in answer to every question. The US Court had been well aware of this as a possibility but it did not prevent it from issuing the letter of request. Relying upon the reasoning of Moore-Bick J at first instance and of Brooke LJ in the Court of Appeal in US v Philip Morris Inc ([2003] EWHC 3028 (Comm) and [2004] EWCA Civ 330), she could not conclude that Mr Hussain would be advised to rely on those rights in answer to every question. She continued, at paragraph 77:

“For example, there may be areas of questioning where the answer has already been given in the defence in the Chancery proceedings so that the privilege would not attach to such evidence. It is of course likely that the examination may be very limited in its usefulness but I cannot conclude that it would be entirely pointless such that this would persuade me not to make an order. It is clear from USA v Philip Morris… that as a reason not to make an order this is a high threshold to cross. That must be particularly so when the foreign court has already considered at issue.”

Thirdly as regards Article 6(1) ECHR, at paragraph 79 she concluded that it would be a breach of Mr Hussain’s right to a fair trial for him to have to submit to examination in respect of the nine MicroTech transactions well ahead of disclosure, and written and oral evidence in the Chancery proceedings. This was a second reason not to give effect to the Letter of Request.

Since the hearing of oral argument on this appeal, I have been informed that on 10 November 2016 the US Department of Justice filed an indictment against Mr Hussain charging him with wire fraud offences in relation to the acquisition of Autonomy by HP. The DOJ has made broad factual allegations against Mr Hussain which include but are not limited to the MicroTech transactions, the subject matter of the request. No further details of these allegations are known. However neither party before me has sought to make any further particular submissions arising from this development.

The power of the English court to give effect to a letter of request is derived from the 1975 Act and is now regulated by section II of CPR Part 34. The court must first decide whether it has jurisdiction to give effect to the request, and then secondly whether, as a matter of discretion, the examination should be ordered. It is common ground that in the present case the jurisdictional requirements (in s.1 (a) and (b) of the 1975 Act) are satisfied. It is also common ground that Mr Hussain’s evidence, if given, will likely be relevant to the matters in issue in the US proceedings.

As regards the exercise of discretion, a number of general principles apply. First, the proper starting point is the well known dictum of Lord Denning MR (endorsed by Viscount Dilhorne on appeal) in Rio Tinto Zinc Corporation Inc v Westinghouse Electric Corp [1978] AC 547 at page 560, where he said of a request by a US court:

“it is our duty and our pleasure to do all we can to assist that court, just as we would expect the United States court to help us in like circumstances. ‘Do unto others as you would be done by’.”

Lord Diplock, to similar effect, stated that the English court should hesitate long before exercising its discretion in favour of refusing to make an order.

Secondly, however, it is also well established that the Court should not order an examination where it would be oppressive to the proposed witness. The court must hold a fair balance between the interests of the requesting court and the interests of the witness: see US v Philip Morris Inc (CA) at paragraph 17 per Brooke LJ.

In this regard, and for present purposes the decision of the Court of Appeal in First American Corp, supra is important. That case concerned an attempt to examine various partners of Price Waterhouse, the auditors of BCCI, in litigation relevant to the collapse of BCCI and where allegations of wrongful conduct had been made by the plaintiff against those partners themselves. Sir Richard Scott VC said at 1160 F-G.

“This is not a case in which the letters of request merely seek an opportunity to examine third-party witnesses with relevant knowledge of the facts in issue in the action. They seek the opportunity to examine third parties who are alleged to have been knowing participants in the dishonest conduct in which the action is based”

At page 1168F-G; Sir Richard Scott VC continued:

“First American have given no undertaking that they will not join Price Waterhouse in a civil action, whether the existing action or a new action, in an attempt to recover damages for Price Waterhouse’s alleged knowing complicity in the fraud. First American’s lawyers plainly believe that they already have material that justifies them in making public allegations to that effect. It is, it seems to me, inherently oppressive to hold over the head of two witnesses serious allegations of complicity in fraud and the real possibility of being joined as defendant in a civil action based on that alleged complicity, while at the same time requesting an opportunity for a wide examination of the two witnesses on the very topics that would be relevant in an action against them. For the reasons I have endeavoured to give, I would not refuse to give effect to these letters of request on the ground that the main purpose underlying them was not to obtain evidence for the existing action but was to obtain evidence for a contemplated action against Price Waterhouse. In In re Westinghouse Electric Corporation Uranium Contract Litigation And DL Dockets Number 235 (No 2) [1978] A C547, Lord Wilberforce commented that, at p611:

“the fact, if it be so, that evidence obtained may be used in other proceedings and indeed may be central in those proceedings is no reason for refusing to allow it to be requested.”

I accept that, in general, that would be so. But allegations of fraud raise special considerations and so long as First American hold themselves free to use any information they may obtain from these two witnesses in a civil action for fraud in which the witnesses, or their firm, are defendants, the requests are, in my judgment, oppressive.” (emphasis added)

This passage was substantially quoted and relied upon by the Senior Master at paragraphs 64 to 65 of her judgment, and, she concluded, gave substantial support to Mr Hussain’s case (paragraph 66). On this appeal Mr Hussain again relies heavily on this passage.

Sir Richard Scott VC then continued (at 1169 D-G) as follows:

“In my judgment First American must come off the fence. Let them, if they so wish join Price Waterhouse as defendant in an action based on Price Waterhouse’s alleged complicity in the fraudulent conduct on which the present action is based. In that case, any request to take evidence from these witnesses can be assessed in the light of the particular pleaded allegations made against them. And, I repeat, the allegations of knowing complicity in the fraud that have already been publicly made by First American preclude them in my opinion, from protesting that they do not yet know enough to plead a case. Alternatively let First American undertake that civil proceedings based on the alleged complicity will not be brought against Price Waterhouse or its partners. In that case the only problem about the request would, in my opinion, be relatively minor ones relating to the excessive width of some of the paragraphs of the schedule. As to these, I do not doubt that First American and its lawyers could reformulate a request that, by limiting the excessive width of some of the paragraphs, would be one to which the courts of this country could properly give effect… For the reason I have given, we should in my view, do so if we properly can. As matters stand, however I agree with Popplewell J that the requests are oppressive and ought not to be acceded to.” (emphasis added)

This passage in the judgment of Sir Richard Scott (referred to, although not set out in full in the Senior Master’s judgment) was, and is, relied upon by the Autonomy Parties as providing the basis for distinguishing the present case from the First American case. Here, it is said, the Autonomy Parties have “come off the fence” and have brought proceedings, and have pleaded allegations, against “the witness”.

A number of points emerge from these passages. First, it is clear that in cases where fraud is not alleged, it is not oppressive to give effect to a letter of request, even where the main purpose of the request is not to obtain evidence for the existing action in the requesting court, but is for use in other proceedings.

Secondly, in a case where fraud is alleged, a letter of request is oppressive where allegations of fraud are made against the witnesses sought to be examined but where those witnesses have not been sued as defendants in respect of those allegations, and where those allegations are being held over the head of the witness with the possibility of being made a party to a claim, whilst at the same time seeking a wide examination of the witness on the very topics that will be relevant in such an action, if brought. This was the situation in the First American case.

Thirdly, as regards the position where the party seeking the examination has already brought proceedings against the “witness”, alleging fraud, Mr Lissack QC for Mr Hussain sought to argue that the last sentence of the passage at 1168F-G in the judgment of Sir Richard Scott VC cited in paragraph 52 above, is authority for the proposition that even where a civil action for fraud has been commenced, it would be oppressive to use evidence obtained pursuant to the letter of request. In my judgment this is not a correct reading of that passage, in the context of the entire judgment. First, it is plain that the factual context there was a case where there was no existing fraud action against the witnesses. Secondly, such an interpretation is inconsistent with what Sir Richard Scott goes on to say at 1169D-E, where he accepts that if the claimant comes off the fence and brings proceedings, the court can assess the request “in the light of the particular pleaded allegations”, thereby admitting of the possibility that the request might well not be oppressive. (The words “in that case” are to be read as “in that event” and not as “on the facts of the First American case”). The reference to First American “holding themselves free to use” the information obtained from the witness must be a reference to their position in that case of “sitting on the fence” and not that of having commenced proceedings against the witnesses. Where the applicant has already commenced proceedings against the witness making allegations of fraud, then the mere fact that such fraud allegations have been made does not render the letter of request as oppressive. Whether it is oppressive or not will depend upon the particular evidence sought in the context of the particular allegations pleaded against the witness.

Finally, it follows that I do not accept the submission of Mr Lissack QC that the underlying “rationale for the rule laid down” in First American is that if an applicant wishes to bring a criminal or civil claim against the witness, then such a direct claim is the proper forum in which the person’s evidence should be given, and that, where such a direct claim is brought, the evidence cannot be obtained through the letter of request procedure. This cannot be correct either generally or in a case where allegations of fraud are made; such a submission is contrary to the views of Lord Wilberforce and Sir Richard Scott.

As regards the privilege against self-incrimination, and in particular rights under the Fifth Amendment, s.3 of the 1975 Act provides that a person cannot be compelled to give any evidence which he could not be compelled to give either in civil proceedings in the UK or in civil proceedings in the country of the requesting court. The privilege against self-incrimination provided for by the Fifth Amendment is a privilege covered by s.3(1)(b). The validity of any such claim has to be determined as if it had been made in civil proceedings in the USA: see Rio Tinto Zinc, supra, at 612G-H. Here it is common ground that as a matter of US law, Mr Hussain has the right to remain silent at the examination, pursuant to the Fifth Amendment.

As a matter of US law, the Fifth Amendment can be invoked where a witness “reasonably believes that his disclosures could be used in a criminal prosecution, or could lead to other evidence that could be used in that manner” (Doe v Glanzer 232 F 3b 1258 (9^th Circuit, 2000). In this way, where invoked, the Fifth Amendment enables the witness to “withhold testimony” altogether.

The procedure which applies where a witness is examined in the UK pursuant to a letter of request and wishes to rely upon the US privilege against self-incrimination is that, where the claim to privilege is supported by a statement contained in the request itself or conceded by the applicant, then the witness will not be required to answer any question in respect of which the privilege is invoked. If, on the other hand the claim is neither supported in the request itself nor conceded, the person conducting the examination or indeed this court in the UK may require the witness to give the evidence. However even in that case the answers in fact given will only ever be transmitted to the foreign court, if the foreign court itself rules that the privilege does not apply: see s.3(2) of the 1975 Act and the detailed procedure in CPR 34.20. In the present case, it is common ground, first, that the availability of the Fifth Amendment privilege is supported by a statement contained in the Letter of Request, and secondly and in any event, that Mr Hussain will be entitled, should he so wish, to remain silent in response to any question he is asked at the examination and in respect of which he wishes to rely upon his US privilege against self-incrimination. If he remains silent in response to questions the answers to which the privilege against self-incrimination could not apply, then the matter would ultimately be resolved by the US Court. In that case if the US court found that the privilege did not apply and he was required to answer, then those answers would be admissible in the US proceedings. However in that case it is hard to see how those answers could be regarded as oppressive.

In US v Philip Morris Inc, supra, the court had to consider an argument that the matters the subject of the letter of request were all covered by legal professional privilege and that, since the client did not intend to waive that privilege, it would be a waste of time and money to make any order for examination of the witness at all. Such an order would be “pointless” because the witness could not be required to answer any question of substance put to him.

At paragraph 21 of his judgment, Moore-Bick J considered that it would be rare for such a submission to have any basis, but that:

“nonetheless if the court were satisfied on the evidence before it that the exercise would indeed be pointless because the witness could and would refuse to answer any questions of substance put to him, I can see no reason why in the exercise of its discretion it should not refuse to make an order for his examination. No doubt such a course would only be justified in the clearest case.” (emphasis added)

Moore-Bick J went on to hold that many of the relevant communications were probably covered by privilege, but unless the client could show that its assertion of privilege would prevent the witness from answering any question of substance the court would not be justified in refusing to make an order for examination, since issues of privilege could be dealt with as they arose during the questioning. On the facts in that case it could not be shown that the assertion of the relevant privilege would prevent the witness from answering any questions of substance: see paragraphs 39 and 48. This analysis was approved by the Court of Appeal: see Brooke LJ at paragraphs 46 and 88; and in the latter paragraph commenting that there was “no good reason why the whole enterprise should be called off now. It must be remembered that it is the duty and pleasure of the English court to respond positively to a letter of request if it can.”

This is an appeal against the exercise of a discretion by the Senior Master. It is not a de novo rehearing of the matters placed before her. In this regard, before interfering with the Senior Master’s decision, it must be shown that she has either erred in principle in her approach or has left out of account or has taken into account some feature that she should, or should not, have considered or that her decision was wholly wrong because the court is forced to the conclusion that she had not balanced the various factors fairly in the scale: see Lord Woolf MR in Phonographic Performance Ltd v AEI Rediffusion Music Ltd [1999] 1 WLR 1507 at 1523.

Whilst it is the case that the Senior Master has particular jurisdiction in relation to letters of request proceedings and is highly experienced in these matters, it was common ground that this is not one of those cases where the appeal court is required to show particular deference to the decision below by reason of the lower court’s specialist expertise.

I approach this appeal on the basis that, first, the Senior Master’s decision was clearly one of the exercise of discretion; secondly that that discretion is to be exercised in line with certain established principles, applicable to the approach of the English courts to letters of request (including those principles which I have discussed in the previous paragraphs), and thirdly that, if it can be seen that those principles have been erroneously identified or applied, this court might interfere and exercise the discretion afresh.

The court is bound, as a public authority, to respect Mr Hussain’s rights under article 6(1) ECHR when exercising any discretionary power, such as that which it is granted under the 1975 Act. Article 6(1) ECHR provides, inter alia:

“in the determination of his civil rights obligations… everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law…”

In Dombo Beheer v Netherlands (1994) 18 EHRR 213 at paragraph 33 to 35, the European Court of Human Rights held that the requirement of Article 6 of “equality of arms” “implies thateach party must be afforded a reasonable opportunity to present his case - including his evidence - under conditions that do not place him at a substantial disadvantage vis-a-vis his opponent”. Further, in defending a claim, a party “should be entitled to seek and produce evidence “under the same conditions” as the prosecution”: Mirislasvili v Russia ECtHR 11 December 2008 at §225. Thus, it has been held that a national rule which prohibits a party to proceedings appearing as a witness may violate Article 6 in circumstances where one party is able to offer evidence on a particular issue but the other could not, since that person was himself the party to the proceedings.

The Autonomy Parties essentially raise three grounds of appeal:

Mr Hussain seeks to uphold the Senior Master’s order for the reasons set out in her judgment, and also for further reasons. In particular he challenges the Senior Master’s conclusion at paragraph 77 of her judgment on the issue of “pointlessness” and contends that, in the event that Mr Hussain could and would invoke the Fifth Amendment in relation to every question, the examination would be pointless and therefore should not be ordered.

In summary, therefore, the issues on this appeal can be considered under the following heads:

Whilst logically the first question is whether the examination will or might be oppressive, in view of the grounds of appeal and the way in which the argument has proceeded, I consider first the issues arising in respect of the privilege against self-incrimination.

Privilege against Self-Incrimination and (b) “Pointlessness”

I address these two aspects together, not least because Mr Hussain’s arguments on each are closely intertwined.