ACL Netherlands BV (as successor to Autonomy Corporation Ltd) v Michael Richard Lynch
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hildyard |
| Judgment Date | 12 February 2019 |
| Neutral Citation | [2019] EWHC 249 (Ch) |
| Docket Number | Case No: HC-2015-001324 |
| Court | Chancery Division |
| Date | 12 February 2019 |
[2019] EWHC 249 (Ch)
Mr Justice Hildyard
Case No: HC-2015-001324
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Patrick Goodall QC and Conall Patton (instructed by Travers Smith) for the Claimants
Robert Miles QC and Sharif Shivji (instructed by Clifford Chance) for the First Defendant
Andrew McIntyre (instructed by Simmons & Simmons) for the Second Defendant
Hearing dates: 23–24 January 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
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Introduction
This judgment concerns an application by the First, Second and Fourth Claimants (“the Applicants”) 1 for permission to provide to the United States Federal Bureau of Investigation (“the FBI”) copies of the documents disclosed by the Defendants and the witness statements served in these proceedings (in which a nine-month trial is imminent). They submit this is in order to comply with a subpoena (“the US Subpoena”) issued in the name of a Grand Jury of the US District Court for the Northern District of California (the “Grand Jury”) dated 30 October 2018.
The US Subpoena is not in fact addressed to any of the Claimants but rather to “The Custodian of Records, Hewlett Packard Enterprise (“HPE”)”. HPE is incorporated and operates in the United States of America (“the US”) and it is not a party in these proceedings. It is, however, the wholly-owning parent company (directly or indirectly) of each of the Applicants, and as such, if and to the extent that US corporate law is applicable, it would ordinarily be treated as having in its control all documents in their possession, custody or control. Further, and as later elaborated, the US Subpoena names all Hewlett Packard group companies as persons required to produce “all responsive documents” in their possession, custody or control. These include documents disclosed and witness statements exchanged in the present proceedings.
The permission of this Court is required because the material concerned is held subject to the provisions of CPR 31.22 (in the case of disclosed documents) and CPR 32.12 (in the case of witness statements). Those provisions stipulate that a party who receives such material by way of disclosure in proceedings here may use it only for the purpose of such proceedings unless and until (a) the material becomes public by being read or referred to in open Court (or in the case of a witness statement, it is put in evidence at a hearing held in public), or (b) the person who discloses the material and the person to whom the material belongs both agree (or, in the case of a witness statement, the witness gives consent in writing to some other use of it), or (c) the Court gives permission. The material concerned has all been disclosed (or, in the case of witness statements, served) in these proceedings, and CPR 31.22 and 32.12 apply to their release.
Put summarily, the Applicants contend that the Court should give its permission in this case because they should not be put in the position of being unable to comply with the US Subpoena, which they contend would put them in potential contempt of the US Court. They submit that any countervailing prejudice to the Defendants is of less severity and consequence.
On the other hand, the First Defendant contends that such permission should be refused, because the burden is on the Applicants to show both (a) special circumstances constituting “cogent and persuasive reasons” for giving permission and that (b) the release of the material will not occasion injustice or the risk of it, and, on
the evidence before the Court, they have not discharged it. The Second Defendant has left the decision to the Court; but he has referred to authorities said to be supportive of the First Defendant's contentionsThe argument has ranged over a number of cases, in both this jurisdiction (as to the principles relevant in determining whether to give permission) and in the US (as to the role of the Grand Jury and the process and effect of a Grand Jury Subpoena). It is the Applicants submission that no case can be found where permission has been refused if its refusal would put the relevant applicant in the kind of jeopardy here asserted.
Accordingly, whilst they would accept that I have a discretion, they (at least implicitly) regarded its exercise as in substance pre-determined or mechanistic. Conversely, the First Defendant's position is that, even if there is no such case, that does not affect the principles set out in authority, and that, when such principles are applied, the rules and the balance of justice support refusal of permission.
I must therefore consider the relevant case law, as well as the evidence both as to the reality of the jeopardy which the Applicants assert, and as to the prejudice which the First Defendant submits might result, some of it (in each case) rather equivocal or vague. Before doing so, however, it is convenient to set the matter in its overall factual context, since the circumstances of the US Subpoena are also relevant to the exercise of my discretion.
Factual context
Both these proceedings, and the US criminal investigation which has given rise now to the US Subpoena, relate to the acquisition of the First Claimant, Autonomy Corporation Limited (“Autonomy”), by the Second Claimant, Hewlett-Packard Vision BV, a wholly owned subsidiary of HPE.
For reasons which are substantially in dispute, the acquisition and integration of Autonomy into the Hewlett-Packard group business (“HP”) did not go smoothly, and it seems that HP soon reached the conclusion that Autonomy was not as its acquirer had perceived it to be. In the event, shortly after the acquisition on 20 November 2012, HP announced that it was having to write down the value of Autonomy by US$8.8 billion. This occasioned proceedings by HP's shareholders against HP in the US, or rather against its directors, for their failures in relation to the acquisition (which I understand were ultimately settled). The Claimants then brought the present proceedings.
The allegations made by the Claimants are of a serious nature. In essence, they are that the Defendants were the architects of the fraudulent manipulation of Autonomy's accounting information on a massive scale, across hundreds of transactions. The Claimants allege that this led to the Second Claimant paying approximately US$5 billion more for Autonomy than they would have paid had they known the true position. These allegations are denied in full by the Defendants. They contend that the asserted losses derived, not from any alleged fraudulent conduct by them, but from HP's own decision to pay over the odds for Autonomy in anticipation of synergies which were not really practicable, and from its own mismanagement of Autonomy's integration into the wider HP group, which further undermined the prospects of any material gain from any synergies.
The dispute has been accompanied by high-volume press reporting with some encouragement from both sides. It has generated interest and proceedings on both sides of the Atlantic over an extended period.
The US criminal investigation into the matters surrounding HP's acquisition of Autonomy commenced in late 2012. After a lengthy investigation, an indictment was issued against the Second Defendant, Mr Hussain, in late 2016. The trial commenced in February 2018 and the Second Defendant was convicted at the end of that trial in April 2018. There have been several postponements to the sentencing hearing and the Second Defendant is still awaiting sentencing. In the meantime, he has indicated the intention of appealing against his conviction, although I am told that the appeal has not yet been lodged as the time to appeal only arises upon sentencing.
Turning to the US Subpoena itself, it appears from the correspondence that there was an earlier subpoena issued, in or around mid-October 2018, by the Grand Jury against HPE at the request of the United States Attorney's Office (“USAO”), the US criminal prosecutor. The precise terms of that first subpoena are unclear (as the document has not been produced by the Applicants) but it appears to have sought from HPE “ all documents produced by any party” in the present civil proceedings and did not request any witness statements. This first subpoena was served on HPE's lawyers, Morgan Lewis & Bockius LLP (“Morgan Lewis”), who did not accept service. This first subpoena does not appear to have been pursued further by the USAO.
The present and extant US Subpoena was issued on 30 October 2018 and served on HPE on 6 November 2018. The date for compliance stated within it was 15 November 2018. There is no dispute that the US Subpoena was validly issued, and under US law compels both attendance on the part of the ‘Subpoena Recipient’ for the purpose of giving evidence and disclosure by that person of “all responsive documents” in its “possession, custody or control.” It is, however, in dispute whether persons other than the named addressee, HPE, on which the US Subpoena was served, are also under compulsion to attend and produce documents. I address this dispute later.
HPE appears to have explained to the USAO that, as a matter of English law,...
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