Company refused permission by English court to comply with U.S. document subpoena
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06 March 2019
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The English court refused permission for claimants in English civil proceedings to disclose documents and witness statements (provided by the defendants) to the FBI for a separate U.S. criminal investigation into the defendants, despite the claimants (companies in the Hewlett Packard Group) arguing that the disclosure was required to comply with a U.S. Grand Jury Subpoena. The decision follows a number of recent cases highlighting the care required by a party seeking to use or pass on, voluntarily or under compulsion, documents disclosed or witness statements provided by an opposing litigant: ACL Netherlands BV (as successor to Autonomy Corporation Ltd) & Hewlett-Packard The Hague BV (as successor to Hewlett Packard Vision BV) & ors v Michael Lynch and Sushovan Tareque Hussain [2019] EWHC 249 (Ch)
Both the English civil proceedings and the U.S. criminal investigation relate to the acquisition of Autonomy Corporation Limited (Autonomy) by Hewlett Packard Vision BV. The claimants in the English civil case are various Hewlett Packard group companies and Autonomy. The defendants are two individuals alleged to have fraudulently misrepresented Autonomy’s financial position prior to the acquisition. During the English litigation the defendants disclosed documents to the claimants and served witness statements (the Documents).
In the U.S., the second defendant had already been convicted of wire fraud, although he was awaiting sentencing. There was an on going investigation into the first defendant for wire fraud. A Grand Jury Subpoena (Subpoena), issued at the request of the U.S. Attorney’s Office (USAO), sought the Documents. The claimants applied to the English court for permission to disclose the Documents to the FBI, stating that this was necessary to comply with the Subpoena.
Restrictions on collateral use
Disclosed documents and witness statements may only be used for the “purpose of the proceedings in which they are disclosed” (CPR 31.22 and 31.12) except in certain circumstances, including where the English court’s permission is granted.
In deciding whether the court should grant permission for the Documents to be disclosed, Hildyard J summarised the test that the court must apply:1
– whether, having regard to any element of compulsion, the applicants (here the claimants) have discharged the burden of satisfying the court that there are sufficient “cogent and persuasive reasons” for permitting the collateral use sought; and
– whether permission could result in injustice.
Permission refused – no compulsion and no necessity
The court found that the claimants had failed to demonstrate any sufficient necessity or urgency to outweigh the UK’s public policy and interest which the restrictions against collateral use are intended to promote, and the claimants had also failed to show any compulsion. The following factors were taken into account:
– there was no evidence as to why the material was needed by the USAO or the Grand Jury;
‒ the Subpoena cannot have been necessary to inform the decision to charge the defendants – the first defendant’s indictment was issued before the date due for production of the documents, and the second defendant had already been convicted;
‒ there was no evidence that the Subpoena had received any material U.S. judicial input – there was no evidence of any involvement of the Grand Jury/U.S. Court in deciding whether to pursue the Subpoena or in the formulation of its scope – the USAO completed the form;
‒ there was nothing to suggest that the USAO had been directed to or had considered protections afforded under English law;
‒ the Subpoena was in very broad terms. There was no attempt to tie the request to any issues or areas of further investigation – “the firm impression is of a trawl”. Hildyard J remarked that “some confirmation of due consideration and some explanation of perceived need surely could have been offered”;
‒ the Subpoena was not in fact addressed to any of the claimants, but instead to “The Custodian of Records, Hewlett Packard Enterprises (HPE)”, the wholly owning parent company of each of the claimants. There was no suggestion that it was to be served overseas. Hildyard J stated that it seemed very likely that it was only HPE which was subject to a legal obligation under the Subpoena; and
‒ HPE did not have legal control of the Documents because the permission of the English court is required to enable their collateral use.
Hildyard J concluded that the evidence failed to show that the claimants were under a compulsion to provide the Documents, and it was also unclear whether there was any real need for the Documents to be provided for the investigation and prosecution of fraud in the U.S.
Given that the claimants had failed to satisfy this limb of the test, Hildyard J refused permission for disclosure, however, obiter, he went on to consider whether, if permission had been granted, it might give rise to injustice in the U.S. or UK proceedings.
Risk of injustice should permission be granted
The judge regarded as a “fair point” that the disclosure of the witness statements could give rise to injustice in the US proceedings as the USAO would know the people prepared to give evidence for the first defendant. The release of disclosed documents was less objectionable unless third parties were implicated and thereby exposed to investigation, speculation or prosecution where otherwise they might not have been so – but there was little or no evidence for this.
As regards prejudice in the UK proceedings, Hildyard J thought there was some force in the first defendant’s argument that some witnesses might withdraw their witness statements if they were concerned about them being provided to the USAO. Also, the giving of permission might unsettle the imminent trial – the required focus on consulting witnesses, collating documents and seeking advice on confidentiality would be distractions.
Comment
Much is written about what a litigant may and may not do with its own discloseable documents both before and during litigation. Less is written about what a litigant may and may not do with documents and witness statements provided by the other side. Can/should they be disclosed to investigators overseas to aid a criminal investigation? What if the documents have been disclosed in confidence by an investigating authority, which itself obtained them from third parties using its document compulsion powers? Can the information in the documents be used to instruct foreign lawyers to advise on possible proceedings abroad or help in on going related foreign proceedings in which there is no disclosure?
This ruling shows the English court being willing to go behind a US Subpoena to examine its scope, purpose and the circumstances in which it was given in deciding whether or not to allow the Subpoena to trump English court restrictions on the collateral use of disclosed documents and witness statements. It also emphasises the importance of a party, on the receiving end of such a Subpoena, not assuming that it automatically takes priority over obligations owed by that party under English law.
Another recent case,2 in which the interplay between English civil procedure disclosure rules and powers to compel the production of documents in criminal investigations was considered, found that documents obtained from individuals using the SFO’s compulsory powers, and provided by the SFO in confidence to a company previously under investigation, can be disclosed by that company in later English civil proceedings with unrelated parties.
A number of recent cases on the restrictions on collateral use also highlight the need for caution when considering whether to send, or use information from, such documents to lawyers or authorities abroad in connection with possible or on going related proceedings.
Footnote:
1 Crest Home Plc v Marks [1987] AC 829.
Further information
This case summary is part of the Allen & Overy Litigation and Dispute Resolution Review, a monthly publication. If you wish to receive this publication, please contact Amy Edwards, amy.edwards@allenovery.com.