Holding up the mirror on rulers for unlawfulness?

In-house lawyers for Mirror Group Newspapers have hit the news via Legalfutures for their handling of hacking allegations. Coming many years after the original hacking allegations (many blogs here), the case presents some interesting examples of how long ethical problems can remain dormant before bursting into dangerous life for the accused lawyers but also how difficult it might be to surface and pursue such allegations.

The judgment of Various vs MGN [2020] EWHC 553 (Ch) is given by Mann J as part of a case management conference where a long list of mainly famous claimants seek to pursue claims against MGN. It begins with a bit of schadenfreude: In 2017 MGN pleaded a limitation defence to one of the claims, and this prompted a Reply relying on fraudulent concealment by the defendant. That allegation relied on knowledge and acts of various levels of employee up to the Legal Department and Board level. One working day before the hearing of an application for disclosure relating to Board knowledge the defendant indicated that it would abandon most of its limitation defence, in the presumed expectation that the Reply allegations would no longer be pursued. They were wrong. Tactics, huh: who was in charge and what were they trying to achieve?

This little twist may be an amusing tale about the litigators not being quite as good as they think they are. Or it may hint at a conflict of interest between the interests of the Company and those working within it; a point I will return to below.

Much of the judgment concerns itself with squabbling over whether the claimants should be allowed to amend/expand their particulars of claim around these senior misdeeds, and what might ensue in terms of disclosure. One point of particular importance here; there was an argument that showing the legal department knew about illegal conduct would not make much if any difference to the quantum of the claimants’ aggravated damages, should they succeed. On that basis, the defendant argued, and the judge had some sympathy whilst not agreeing (yet, it was an interim hearing), there may not be much point in allowing such behaviour to be particularised and further evidence disclosed. The sense of the argument can be seen in this passage:

[Counsel for the Defendant] relied on the weakness of the case of aggravated damages and went so far as to describe it as a lawyer’s construct which was put before clients to, in effect, bolster their damages claims.  He said it was highly unlikely that the client would have suffered actionable disappointment, anger or distress sounding in damages as a result of Board concealment before it was pointed out that they might have  a claim.  Concealment by Mirror group in terms of concealment at various levels of journalist was already known, and indeed there was a finding to that effect in my Gulati judgment.  Any distress (or other actionable feeling) would flow from that and concealment at the higher Board level would not add anything, and indeed was a contrivance.  He submitted that the whole aggravated damages claim was a contrivance, and particularly so in relation to the knowledge and activities of the Legal Department.

In other words: it might not matter to the claim that the lawyers were part of a scheme of wrongdoing.

Nevertheless, the defendants mainly lose their arguments before the judge in this hearing on the basis that they are arguments they have conceded or lost before and that concealment at higher levels might make some difference. Adversarial justice is sometimes a god of little things.

Part of the case that is of particular interest to me is the defendant’s application to, “strike out certain specific references to the defendant’s Legal Department”. The judge described the claimant’s case as being,

that the Legal Department and the Board knew of unlawful information gathering …before 2006/2007 when phone hacking came to light in the circumstances referred to in Gulati.  Some of them are instances of claims being intimated followed by settlements of claims, or articles not being published, in circumstances in which it is said it is inevitable that the Legal Department and then the Board (or its members Mr Vickers and Mr Partington) would have acquired knowledge of the circumstances, and the end result was because the defendant did not want the unlawful information gathering to be exposed.

There is also an allegation of deliberate destruction of documents but it is not clear if this involves legal personnel. Other allegations relate to the settlement of cases where it is alleged the lawyers, and therefore the board, or at least a board member (also a lawyer, Paul Vickers, then the Group Legal Secretary), would have known of unlawful conduct. Sometimes, however, the allegations go further, in particular:

It is said that Mr Partington of the claimant’s Legal Department had pressed during the injunction proceedings for Mr Flitcroft’s phone records, and it is now said that he did that because (in essence) he wanted to cover up the fact that he already had them and knew they had been unlawfully obtained.

And:

The claimants say that the evidence in support of the striking out application can now be seen to be carefully crafted to make a case without disclosing all relevant information, and the settlement was brought about by the Legal Department to prevent it coming to light that there was an underpinning of unlawful information gathering.

This is a serious allegation, because it involves an allegation of an attempt to mask the fact that information had been unlawfully obtained, and then an attempt to remove the risk of exposure in the phone hacking litigation, and then a suppression of risk of exposure by settling the case.

Also that:

MGN chose to use private investigators even though (as MGN and in particular the Legal Department, was aware) these investigators had been convicted for illegally obtaining private information

A story on Byline provides more colour to what seems to be the same incident:

Mr Partington claimed that the woman in question (Ms James) had contacted the paper with the story.”

At first, Mr Flitcroft had accused the newspaper of using unlawful methods to find the table dancer.

However, the claimants now allege that it was in fact the nursery nurse’s identity that was discovered illegally, and that Mr Partington knew this from the start.

If this is true it suggests a clear integrity breach of professional conduct rules. It is a story redolent of Alistair Brett’s downfall. Get information illegally and then stand it up legally by alternative means, pretending the story was obtained legally when it was in-fact obtained illegally first. I’ve blogged on that case a number of times, see here for instance.

There are reasons for the defendant lawyers to rest a little easier here. Although the judge did not agree to strike out the claimants’ requests to particularise allegations, he deliberately limits ones which they can seek to have tried (but gives them the significant prize of allowing wider disclosure, so they can have a better evidence base on which to decide). A lot will depend on which allegations the claimants believe best support their case and have the best evidence.

There are a range of professional ethics reasons one might see the lawyers as culpable for, “deliberately settling claims to avoid exposure.” If, as alleged, they were, “aware of the habitual or widespread use [of unlawful information-gathering techniques].” And if “the Board and Legal Department took steps to conceal the activities, gave false statements to the Leveson Inquiry, and could have stopped the practices,” then there are clearly issues to be explored as to whether the lawyers have breached their obligation to protect the rule of law administration of justice and behaved with integrity. It would not be enough to say they were simply following instructions. A light shone here would be further grist to the debate about NDAs too. But it is the difficulty in proving such claims that goes to the main reason the defendants say they sought to have the legal Department struck out of the particulars of claim.

The stated basis for this striking out (in the application notice) is that the legal advisers were at all times subject to confidentiality and privilege obligations, and the knowledge gained from their role was and remains the subject of legal professional privilege.  The claimants were not entitled to seek aggravated damages on the basis that the legal advisers should have broken their obligations to maintain privilege.  Accordingly those parts of the claim should be struck out as disclosing no reasonable grounds for bringing a claim and/or as an abuse of process and likely to obstruct the just and proportionate disposal of these proceedings.

The judge is wary of, but not persuaded, that this prevents evidence of the lawyer’ knowledge being inferred from non-privileged information:

The law of privilege protects communications.  It does not, as a doctrine, protect an inquiry as to what a solicitor knows at any particular point of time.  The question of what a solicitor knows is not, per se, a no-go area in litigation.  By and large privilege will create a formidable obstacle to trying to prove it, because the communications (and resulting documents) will be privileged and the inquiring party will not be able to penetrate that privilege to get proof.  However, if the knowledge can be proved another way then I cannot see a reason in principle why the inquiring party should not be able to seek to do that.  In the present case the claimants seek to draw an inference from the likelihood of the involvement of the Legal Department and the likelihood of its passing knowledge on to the Board.  Whether it can succeed on that basis will be a matter for trial.  There may have to be further argument, in the proper trial context, as to how privilege operates.  It may well not be an easy road for the claimants.  It may be that fuller argument in the context of actual evidence will throw up additional difficulties (or conceivably make the route easier) but at this stage it is not possible to stop the inquiry on the basis that it is bound to fail (which is not how Mr Spearman actually put it) or on the basis that the inquiry is impermissibly going into privileged territory (which is not wholly accurate).

There is also a more direct but as yet unmade attack (and one might think unmade but implicit in some of the allegations made) that the lawyers have been complicit in attempts to conceal, mislead, or take advantage of others in their handling of hacking information. As:

Mr Sherborne sought to say that the privilege argument could be met by the “iniquity principle”, which can be summarised by saying: 

“ … that if a person consults a solicitor in the furtherance of a criminal purpose then, whether or not the solicitor knowingly assisted in the furtherance of such purpose, the communications between the client (or his agent) and the solicitor do not attract legal professional privilege.” (per Longmore LJ in Kuwait Airways Corporation v Iraqi Airways Company (No 6) [2005] 1 WLR 2734)

To which the judge replies, with a most interesting first word to pass from his pen to his lips:

Curiously, Mr Spearman seemed keen that I should resolve that point (in favour of his client) at the hearing before me.  That is simply inappropriate.  The application of the iniquity principle is not straightforward and, at least in the present case, would require some evidence (I am not sure there was technically any evidence at all) and a proper analysis of exactly what the iniquity was in each instance and whether it fell within the principle.  As I understand it, it is unlikely to be sufficient that the solicitor was advising in a matter said historically to involve a fraud or illegal conduct.

But there is again some comfort, in what might be described as a judicial challenge to put up or shut up:

  If the principle is to be invoked the acts said to give rise to it must be clearly identified, and they must be acts which amount to a furtherance of the iniquity, not just advising about historic aspects of it.  Nobody even began to embark on that exercise.  So the iniquity principle, if it arises at all, must await another day.  I would add that if Mr Sherborne were right about its application in the present matter it would enable him to get disclosure of all sorts of solicitor/client documents, and despite his enthusiasm for wide-ranging disclosure applications he has never sought those.

Another way of looking at it is the judges giving the claimants one more opportunity for significant disclosure, and then they must proceed with their case on whatever basis they think fit. It is to be noted that to get to this point has required claimants committed to trying, not settling, their cases when many others have, if reports are to be believed, been bought off sometimes with over par office making their claims uneconomic (See Dominic Regan’s evidence to the Women and Equalities Select Committee on NDA’s, for instance).

Another story from Byline which I happened across whilst researching this post is of interest and it returns to my conflicts point. This is what they say:

After this week’s allegations, the position of Marcus Partington, the chief legal officer of the Mirror papers, is especially astonishing.

The complainants in the case are saying that he knew about hacking and other forms of illegal information-gathering at the Mirror newspapers while they were going on, and long before the company dropped its policy of blanket denial. He denies this.

Yet, even today, Partington is the in-house lawyer managing the company’s defence in the civil litigation. In other words, Mirror shareholders and directors have entrusted him with handling the company’s interests in a case where he is accused of complicity in law-breaking.

Even if there is some contorted interpretation of the idea of conflict of interests which can present this as acceptable, how wise can it be? Implicit in Partington’s denial is the assertion that he was the main in-house lawyer in a company that, on his watch, probably published thousands of articles on the basis of illegal methods – and yet he never noticed.

According to the logic of his position, he remained completely in the dark and missed every single clue. Now, would you pay a lawyer like that to handle your business?

Vividly expressed, it poses a really interesting question. It may be that Mr Partington is shielded from the conduct of the litigation by some kind of internal Chinese wall and so conflicts fall away (although then there would be a question still about whether this is effective). And in many ways MGN’s tactics are not particularly surprising, but they do have the added benefit (and quite likely a primary purpose) of shielding key corporate offices and their lawyers from scrutiny. There is no doubt that there is at least a potential conflict of interest worthy of attention. The scrabbling around to make admissions and withdraw limitation defences might be part of this picture. What the defendant looks more afraid of than losing is evidence. And now that evidence may call into question their lawyers’ ethicality.

For the reasons given above, it seems to me incredibly important that the SRA investigate this case, if they are not already doing so. If one reads the Gulati judgement, and this case, one gets a sense of how lawyers must have been at the heart of what, on the evidence currently before us, looks like an concerted and long-running cover-up. Certainly cases were investigated and settled, evidence was prepared, lines were taken. How much this involved the lawyers identified, remains to be seen. The defendants may be able to shelter behind privilege in the litigation, but professional investigation will not allow them that.

The difficulty for the SRA is that the way the case has been defended so far by the Mirror group, would mean that it would be an expensive and difficult case. Nonetheless, the public interest questions seem clear. Take this passage from the Gulati judgement. It is restrained but telling:

 I find that on the evidence I heard (which I accept did not include evidence from the individuals concerned) wrong, not just disingenuous, statements were made to the Leveson inquiry by at least 2 deponents, and that the newspaper group was indeed putting up what was in effect a strong denial, from which it has had to resile.  I also find it likely that some of the witnesses were aware of Mr Brown’s allegations by the time of the Leveson inquiry if not before – it is inconceivable that in the face of that inquiry, with senior journalists and executives giving evidence, that some of them did not know about it.  However, the extent of that knowledge is not something that was investigated at this trial, and there are limits to the proper findings that can be made about it.  It is sufficient for the claimants’ aggravated damages cases that the newspapers were adopting a posture of denial, and apparent denial of the existence of evidence.  That is capable of being an aggravating factor.  Whether it was in any particular case is something that I will consider later.

A high proportion of the legal work on this case (and its tactics) appears to have been geared towards reputation management arising out of significant and protracted illegality: illegalities which have been admitted but in ways which protect the guiding mind of the corporation. The Gulati judgment shows judicial doubts about some of the players making up that guiding mind. The question for the lawyers and their regulators is has this been done by proper means and without aiding or abetting unlawful conduct.  It is a case, if properly scrutinised, that promises to shed important light on in-house lawyers in corporate governance. It is not just a cause celebre, it is a cause if much importance. Are lawyers there to defend the rule of law or rulers that behave unlawfully?

 

 

 

One thought on “Holding up the mirror on rulers for unlawfulness?

  1. Answering your question Richard; without a doubt to defend the rule of law. In-house lawyers may find themselves in a unique position having only one client but that does not change their responsibilities to defend the rule of law. It is critical for in-house lawyers to ensure they practice in a structure which supports good corporate governance; a direct reporting relationship to the CEO and the right (obligation) to report to the Board anything illegal or unethical. If the CEO is on the Board and maybe even Chairman then the correct reporting relationship should be to the lead independent director. Without these mechanisms in place it is very difficult for an in-house lawyer to satisfactorily perform their role. Equally as important, the in-house lawyer must have a seat at the management (not board) table for without which they would not be able to effectively meet their professional responsibilities as well as their function to provide legal services to the corporation. In addition, in-house lawyers need to recognise when they are being employed to simply provide a window dressing of respectability for the corporation. In these circumstances not only will they be ineffective as lawyers but more importantly they will be incapable of meeting their professional obligations.

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