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02 April 2019
In Hewlett-Packard Enterprise's (HPE's) high-profile claim against Mike Lynch in relation to its acquisition of Autonomy, the High Court has held that the implied undertaking against collateral use of documents received in the course of litigation prevented disclosure of those documents to the Federal Bureau of Investigation (FBI).(1)
In October 2011 Autonomy Corporation Limited was acquired by Hewlett-Packard Vision BV (HP Vision), a wholly owned subsidiary of Hewlett Packard Enterprise.
The acquisition, and subsequent integration of Autonomy into the HP group was not a smooth process and on 20 November 2012 HPE announced that it would write down the value of Autonomy by $8.8 billion. Autonomy and HP Vision then commenced proceedings in the United Kingdom alleging that Lynch, Autonomy's founder and former CEO, and Hussain, Autonomy's former chief financial officer, were the "architects of fraudulent manipulation of Autonomy's accounting information on a massive scale". The claimants claim that the alleged manipulation caused HP Vision to pay $5 billion more for Autonomy than they would have had they known the true position. The trial in these proceedings, one of the most eagerly anticipated of 2019, recently began.
Separately from the civil proceedings, a criminal investigation into the acquisition of Autonomy by the HP group was launched in the United States in late 2012. As part of this investigation, a subpoena was issued and served on HPE at the request of the US Attorney's Office on 30 October 2018. The subpoena demanded the production of all documents produced by any party to the English proceedings which were in HPE's possession, custody or control.
The subsidiaries of HPE believed that they could face criminal penalties in the United States if they did not comply with the subpoena. They applied to the English court for permission to produce the FBI documents disclosed by Lynch and Hussain during the English proceedings, as well as witness statements served by the parties.
The claimants' application was refused. In rejecting the application, the court re-emphasised that the prohibition against collateral use of disclosed documents and witness statements set out in Civil Procedure Rule (CPR) 31.22 and CPR 32.12 gave effect to important public policy considerations which required careful control to be exercised over the use of any documentation exchanged during proceedings. Utmost consideration should be given to the need to preserve, as far as possible, a litigant's right to privacy and confidentiality, and sufficiently cogent and persuasive reasons in favour of the collateral use had not been established to outweigh this interest.
Crest Homes Plc v Marks(2) established that the court will release or modify the restrictions on collateral use only:
On the first limb, the burden of showing sufficiently cogent and persuasive reasons for permitting collateral use was such that it would "usually be difficult, if not impossible", except where the court was persuaded of some public interest in favour of collateral use, which was stronger than the public interest and policy underlying the restrictions that the rules reflected. Tchenguiz v Grant Thornton UK LLP,(3) and subsequent obiter comments in The Libyan Investment Authority v Société Générale SA,(4) further developed guidance on what may constitute a special circumstance for these purposes.
HPE's reasons for disclosure
In the present case, the court held that the existence of the US subpoena was not, in and of itself, a cogent and persuasive reason for giving permission for the collateral use.
The argument that there was both compulsion and necessity for the documents to be divulged was not sufficiently established for several reasons:
The document request in the subpoena was enormously broad, seeking all documents produced by either party. While this language was entirely regular for the purposes of a US subpoena, the request was not sufficiently tied to any issues or areas of investigation which might have enabled the court to strike a balance between competing public interests.
While the application had been found to fail on the first limb of the test, the court considered (obiter) whether granting permission would also give rise to injustice against the defendants. The court considered that it might, suggesting that there was the potential for prejudice in making available documents and statements to a claimant in the United States that would not be available "but for the happenstance of parallel process in the UK". The judgment notes that this prejudice is particularly visible in the context of witness statements, citing the real possibility that witnesses might be moved to withdraw their evidence if their statements were made public in advance of the trial.
This is another judgment in a spate of recent decisions which illustrates the high threshold that needs to be met to obtain the court's permission to make collateral use of documents disclosed in English proceedings. Perhaps most interestingly, the court's comments show clearly the level of scrutiny which will be given to requests or demands made by third parties for the disclosure of documents obtained through ongoing proceedings, no matter the standing of the person or authority which makes it.
For further information on this topic please contact Davina Given or Joseph Cresswell at RPC by telephone (+44 20 3060 6000) or email ( email@example.com or firstname.lastname@example.org). The RPC website can be accessed at www.rpc.co.uk.
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