Parallel Proceedings: July 2020 update

The post-COVID landscape sees regulators assessing new threats, a rise in insolvency proceedings, disruption in employment relations and an expectation that more fraud will surface. There is every prospect of multiple legal proceedings arising from some of these scenarios.

Consistent with that, the courts have continued to be kept busy in the first half of 2020 with issues resulting from parallel proceedings. Below is a brief summary of some of these developments.

Director's disqualification proceedings

In Official Receiver v Skeene [2020] EWHC 1252 (Ch) proceedings were brought for the disqualification of Mr Skeene as a company director, following the compulsory liquidation of a company, GFI Consultants Ltd, of which he had been a director. Those proceedings were resolved by Mr Skeene giving undertakings not to act as a director for 10 years, but not before he had made an affidavit. Criminal proceedings were later commenced by the SFO relating to the activities of GFI, which was suspected of being a Ponzi scheme, and they requested the affidavit from the Official Receiver.

The use of witness statements in proceedings other than those for which they were created is governed by CPR 32.12, but that does not cover affidavits. The court found that a pre-CPR rule still applied, meaning that an affidavit produced under compulsion for litigation was subject to an implied undertaking by the other party not to disclose it. However, the affidavit here was not produced under compulsion, as it would not have been a contempt of court not to produce it. The affidavit could therefore be provided to the SFO by the Official Receiver.

As the judge here noted, the director was not able to cite any case in which a judge had refused permission for a document from any form of civil proceedings to be used in criminal proceedings. Wherever alleged wrongdoing leads to director's disqualification proceedings, any director in question needs to consider the possibility of later criminal proceedings when volunteering evidence.

Employment Tribunal proceedings

In Notting Hill Genesis v Ali [2020] EWHC 1194 (QB) a housing association brought proceedings against a former employee for wrongfully retaining thousands of emails containing personal data relating to its tenants.  It had become aware that Mr Ali had these in the course of previous Employment Tribunal case he had brought for constructive dismissal.  When NHG applied for an injunction preventing the misuse of the information, the court questioned whether it was entitled to rely upon documents produced as disclosure in the Employment Tribunal Proceedings.  No application to do so had been made.

This oversight meant that the injunction application was delayed and heard on notice, with Mr Ali able to make submissions.  An application for retrospective permission to use the documents was made under CPR 31.22 and was granted.  The court noted that there was "no doubt" that the application would have been granted had it been made at the proper time and that the documents properly belonged to the housing association in any event.  Mr Ali had been under an obligation to return them when he left.  NHG also owed public duties under the DGPR to protect the data in the documents and could not get the injunction required to comply with those without referring to the documents it had seen in the Employment Tribunal proceedings.

The case is a good illustration that, where justice clearly demands it, a party will be allowed to refer to documents disclosed to it in other proceedings.  However, an application for permission to do so is always required and must be supported with strong reasons.

For a fuller analysis of this case, see here.

Multi-jurisdictional proceedings

In Nigeria v Shell[2020] EWHC 1315 (Comm) the Federal Republic of Nigeria brought proceedings in the English Commercial Court alleging that Shell, Eni and others had procured Nigerian oil rights through a fraudulent and corrupt scheme. The Defendants challenged the jurisdiction of the English court pursuant to Article 29 of the Brussels Recast Regulation, on the basis that Nigeria was already pursuing the same claims as a civil claimant joined to criminal proceedings against the Defendants in Italy. In the alternative, the Defendants sought a stay of the English proceedings pending final determination of the Italian claims.

The Commercial Court declined jurisdiction pursuant to Article 29 of Brussels Recast on the basis that the Italian proceedings, which had been initiated first, involved the same: (i) parties, even though not all the parties were the same; (ii) cause of action, even though not all elements of the relevant causes of action were the same; and (iii) objet (or "end in view"), even though rescission, as well as damages, was sought in the English proceedings but not in Italy. It was therefore unnecessary for the Commercial Court to consider the Defendants' alternative application for a stay of the English proceedings.

The case is a helpful reminder that Article 29 applies where concurrent proceedings in multiple EU jurisdictions are "effectively a 'mirror image'" of each other, even if they are not identical. The Commercial Court also confirmed that the rule applies even where the foreign civil proceedings are brought as an adjunct to a criminal process. The position is complicated by Brexit, which will see the UK revoke Brussels Recast following the end of the Brexit transition period. But for the time being at least, Claimants with multi-jurisdictional claims need carefully to consider the most advantageous forum for their action.

Case management

The ongoing litigation involving ENRC, Dechert LLP and the SFO has seen further procedural clashes in 2020.  Following the commencement of an SFO investigation into alleged fraud, bribery and corruption by ENRC, the company has brought a claim against its former solicitors for negligence, alleging that Neil Gerrard, a partner it instructed to conduct an internal investigation, secretly disclosed confidential and privileged material to the SFO and the media. ENRC has also brought a parallel civil claim for £70m against the SFO for inducing Dechert and Gerrard to act in breach of their 'fiduciary duty' towards ENRC and for conducting an 'unlawful' investigation. In turn, Mr Gerrard, together with his wife, has brought civil proceedings against ENRC for harassment, alleging intrusive surveillance. Meanwhile, the SFO's investigation has continued.

In February a judge agreed to ENRC's claims against the SFO and Dechert LLP being case managed and heard together in the Commercial Court, having accepted that there was very substantial overlap between the two cases, including in respect of the losses claimed. The judge recognised the need to avoid the risk of inconsistent decisions and inefficiencies that would arise from calling the same witnesses to appear in two separate trials.

By contrast, however, in April a judge rejected an application by the Gerrards to stay their harassment claim pending the outcome of ENRC's claims against Dechert LLP and the SFO.  While the actions were clearly interlinked, the question of whether ENRC harassed the Gerrards was not affected by the success or failure of ENRC's claims. The judge noted that a stay would mean the harassment proceedings would not be heard until towards the end of 2021.  She concluded that ENRC's reputation would be damaged by the allegations hanging over it and there was no good reason for such a delay. These decisions show that when case managing related proceedings the Courts will carefully scrutinise the substance of allegations made, and will make orders about how and when such cases should be heard that are informed by pragmatism, efficiency and fairness.

We understand that in May the SFO applied to court for permission to use in its criminal investigation privileged documents disclosed by ENRC in the civil litigation.  ENRC was prepared to waive privilege and disclose the documents for the purposes of the civil proceedings, but only if the SFO was not then able to share them with the prosecutors investigating ENRC. The SFO, which had previously been provided with the documents under conditions of confidentiality, argued that those conditions should no longer apply now that the same documents had been disclosed in the civil litigation. While the judgment is not yet available, we understand that the judge rejected this argument, holding that as long as the documents remained privileged, it was not open to the SFO to seek to use the Civil Procedure Rules to extend the scope of the waiver under which ENRC had provided the documents.

Deferred Prosecution Agreements

Following the approval of a DPA between the SFO and Airbus in January, the risk of parallel proceedings undermining the value to a company of a DPA was discussed by Alexandra Webster and Stephen Gentle in an article for Global Investigations Review, which can be read here.

Private prosecutions and civil proceedings

Against the backdrop of an increasing number of private prosecutions, Alexandra Webster, together with Richard Lissack QC and Gareth Minty, shared some thoughts in a webinar for the Private Prosecutors' Association available here on the particular risks and challenges that may arise where such actions are pursued in conjunction with civil proceedings. These issues are particularly pertinent given the scope for misuse of private prosecutions in that context, and in light of an ongoing Justice Committee inquiry into whether there are sufficient safeguards in place to prevent miscarriages of justice where private prosecutions are brought by large organisations.