Greeno: Genuine but mistaken belief that report was privileged
Leading City litigation firm Quinn Emanuel (QE) has been penalised in costs for not engaging with allegations that a key document it had produced for a case was a forgery.
Mr Justice Calver accepted that QE was “a highly reputable law firm which was motivated by a concern to maintain the privacy of its client’s affairs”, but its actions unnecessarily increased the costs of an application for a Norwich Pharmacal order against it.
We reported earlier this month that Calver J granted the order that QE reveal the business intelligence agency which supplied it with a potentially forged report produced as part of an arbitration dispute between Russian oligarchs.
It was accepted that QE did not know the original source of the so-called Glavstroy report, which was used to found an ultimately discontinued claim under section 68 of the Arbitration Act 1996 that an arbitration award in favour of its clients should have been $300m larger.
Calver J said the evidence indicated the report was a forgery but he was “not willing to make the serious finding that QE ought to have known that they were facilitating arguable wrongdoing at the time when the section 68 proceedings were issued”.
However, once the other side had raised questions about the report, QE failed to make the “urgent enquiries which they ought to have made at that stage to satisfy themselves as to the authenticity of the report”.
Calver J handed down the costs ruling yesterday; the usual order in Norwich Pharmacal proceedings is that the claimant pays the respondent’s costs and that is what QE sought.
But the claimants argued that the court should exercise its discretion to make a different order because of QE’s approach to the claim – indeed, they said QE should pay 70% of their costs instead.
The claimants complained that “far from simply putting them to proof or drawing relevant matters to the court’s attention in a neutral manner, QE have treated this case as full-blown adversarial litigation, defended with signal vigour”.
Calver J said this was not in itself sufficient for QE to lose its costs protection as the innocent party – case law showed that “active opposition, albeit unsuccessful, is not of itself unreasonable behaviour or sufficient to deprive the third party of the benefit of the general principle that the applicant should pay its costs”.
He held it was reasonable for QE to resist disclosure in principle, but had the firm engaged with the allegations of fraud, “they might well have been led to accept that the Glavstroy report was a forgery, and the scope of this application might have been narrowed significantly.
“Instead the claimants had to address this issue in some detail in both their evidence and argument, which plainly increased the scope of the application and its cost.”
The judge dismissed the idea that QE should be deprived of its costs of considering the application, taking instructions and seeking counsel’s advice.
He took into account too that Ted Greeno, QE’s London co-managing partner, held the genuine but “mistaken” belief that the information sought was privileged and confidential, and so needed a court to order disclosure.
He acknowledged too that, if QE was ordered to bear its own costs, “it has no means (unlike the claimants) of recovering those costs from the wrongdoer”.
But it was “only fair” that the claimants should not have to pay a proportion of QE’s costs, which he set at 30%, to reflect “the unnecessary increase in costs caused by QE’s failure to engage with the claimants’ forgery allegations”.
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