The Gerrard litigation:  the death-knell for litigation surveillance?

The recent decision of the High Court (Richard Spearman QC, sitting as a Judge of the Queen’s Bench Division) in David Neil Gerrard and Elizabeth Ann Gerrard v Eurasian Natural Resources Corporation Limited and Diligence International LLC [2020] EWHC 3241 (QB), relates to one aspect of the complex litigation between Mr. Gerrard (currently a partner at Dechert LLP, a law firm) and ENRC (his former client).   The decision deals with various interlocutory applications in a claim that is itself ancillary to the main proceedings.  Nevertheless, even though it relates to a skirmish in a much more extensive battle, the decision is of considerable interest in its own right, in particular as to the use of covert surveillance in the context of litigation.

Mr. Gerrard was ENRC’s solicitor between December 2010 and March 2013, acting for ENRC in relation to a SFO investigation.  In 2017, ENRC brought proceedings against Mr. Gerrard in the Commercial Court alleging that Mr. Gerrard had acted negligently and in breach of fiduciary duty by seeking to extend the scope of the SFO’s investigation into ENRC, and by leaking information about ENRC to the media and the SFO.  In 2019, ENRC brought further proceedings in the Chancery Division against the Director of the SFO, for (among other matters) inducing Dechert LLP and/or Mr. Gerrard to breach their fiduciary duty to ENRC.

In September 2019 Mr. Gerrard and his wife brought proceedings against Diligence International LLC (“Diligence”), a firm of private investigators; ENRC was subsequently added as a Defendant.  The Claimants alleged that ENRC had instructed Diligence to carry out surveillance of Mr. and Mrs. Gerrard; they brought claims for breaches of data protection law, misuse of private information, harassment, and trespass.  ENRC and Diligence defended the claim on the basis that the surveillance was part of an investigation into Mr. Gerrard’s wrongdoing for the purpose of the litigation, and was reasonable and lawful.

Various interlocutory applications came before Richard Spearman QC.  There were two main issues:  whether the claim in relation to harassment should be struck out; and whether certain parts of the Claimants’ pleadings, denying that ENRC and Diligence were entitled to rely on litigation privilege, should also be struck out.  Both strike out applications were unsuccessful.

Strike out in relation to harassment

The harassment claim was brought under section 3 of the Protection from Harassment Act 1997 (“PHA”).  The Defendants argued that this claim had no reasonable prospect of success, since the Claimants’ own pleaded case was that the activities were covert and intended to be so.  The activities would cause distress only if they were discovered: and given that they were intended not to be discovered, they cannot have been calculated to cause distress.

The Judge’s primary conclusion was that the points which ENRC and Diligence asked him to decide in their favour were not suitable for conclusive determination on a strike out; but if necessary, he would hold that those points were wrong.  He considered that the action element of harassment consisted of carrying out a particular type of conduct, namely genuinely offensive and unacceptable behaviour of an order of gravity which would sustain criminal liability, and including (but not limited to) causing alarm or distress to another person.  The mental element was made out if the perpetrator knew that the course of conduct amounted to harassment, or if a reasonable person in possession of the same information as the perpetrator would think that it did.  Statements in the authorities that conduct must be “calculated” to have a particular effect in order to constitute harassment, should be read in the objective sense of “likely to produce a particular result” rather than “intended to bring about a particular result”; and “likely” in this regard probably meant something less than “more likely than not”.  Hence even if all of the activities relied upon were in fact covert, the claim ought not be struck out; but the Judge also considered that some of those activities were discovered by the Claimants, in some cases at or about the time when they took place.

ENRC and Diligence argued that an approach of this kind would sound the death knell for the use of surveillance in civil litigation.  The Judge rejected this:  whether surveillance was or was not unlawful in any particular case would depend on a close analysis of the specific facts, and it could not be said that litigation surveillance would always fall on the wrong side of the line.

Strike out in relation to litigation privilege

This issue arose from the way in which the Defence and the Reply were pleaded.  ENRC’s Defence alleged that the investigation of Mr. Gerrard was for the dominant purpose of the litigation, and that all documents created in the course of that investigation were subject to litigation privilege.  In their Reply, the Claimants asserted that privilege was not available:  because the documents were generated by iniquitous conduct; and because the documents generated by surveillance could not be confidential vis-à-vis the Claimants.  The Judge considered that it was premature to determine these issues:  they should be addressed either at trial, or after the parties had given disclosure by list.  In any event, the Judge’s view on the merits was that the conduct alleged by the Claimants went beyond “mere civil wrongdoing”, and consequently it was arguable that the iniquity exemption applied in relation to the Defendants’ reliance on litigation privilege.

Implications of the decision

The decision will cause concern both to firms that conduct covert surveillance in the context of civil litigation, and to lawyers that engage them to do so.  If there is a significant risk that such conduct may be tortious or criminal under the PHA, the fact that such liability is not inevitable may be of little comfort.  The Judge considered that the Defendants’ concerns in this respect were overstated:  it remains to be seen whether those concerns will be borne out in practice.

Timothy Pitt-Payne QC