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You are here: BAILII >> Databases >> England and Wales High Court (King's Bench Division) Decisions >> Pacini & Anor v Dow Jones & Company Inc. [2024] EWHC 1709 (KB) (03 July 2024) URL: https://www.bailii.org/ew/cases/EWHC/KB/2024/1709.html Cite as: [2024] EWHC 1709 (KB) |
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KING'S BENCH DIVISION
MEDIA AND COMMUNICATIONS LIST
Strand, London, WC2A 2LL |
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B e f o r e :
Sitting as a Judge of the High Court
____________________
(1) JOSEPH PACINI (2) CARSTEN GEYER |
Claimants |
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- and - |
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DOW JONES & COMPANY INCORPORATED |
Defendant |
____________________
Catrin Evans KC and Ben Gallop (instructed by Pinsent Masons LLP) for the Defendant
Hearing date: 12 December 2023
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Crown Copyright ©
This judgment was handed down remotely at 10.00am on 3 July 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
The Claimants and Their Background
The Claim
The Application
The Articles Complained Of
DID XIE ZHIKUN'S NEARLY $1 BILLION GO MISSING? A PRIVATE-EQUITY MYSTERY
Chinese investor says he backed XIO Group big-time; it says he didn't, and now he has filed suit
When Chinese billionaire Xie Zhikun toured Europe in the summer of 2015, his hosts took him to the Aston Martin factory in the English Midlands, to the women's tennis final at Wimbledon and to dinner at London's Connaught Hotel, where he was presented with a portrait of himself painted in tea, according to people who helped organize the visit.
Mr Xie and his chaperones on the trip, executives at London private-equity firm XIO Group, stopped in on companies the firm was buying, according to current and former employees of XIO and an agenda of the trip reviewed by The Wall Street Journal, as well as visiting investment prospects like the sports-car maker they code-named "Project Bond" after its most famous client, the fictional British spy James Bond.
Now, that seemingly friendly relationship is in tatters. The billionaire says it was his money—nearly $1 billion—that seeded XIO and allowed it to buy its first two companies. But XIO wasn't returning his phone calls, he says. In court papers filed in the Cayman Islands, where companies at the center of the dispute are incorporated, Mr Xie is accusing XIO executives of a conspiracy to defraud him out of his cash. XIO says it doesn't have Mr Xie's money and never did. An XIO spokesman didn't respond to questions about whether any entity affiliated with Mr Xie has been an investor and XIO has denied his allegations.
Mr Xie is one of the rising number of wealthy Chinese making overseas investments even as Beijing imposes tighter capital controls. He is spreading across the world billions of dollars of the fortune he made in forestry and finance, according to company filings and people familiar with the matter. XIO, founded in Hong Kong in 2014, has a brief history in private equity but made a splash last year when it bought California-based automotive-research firm J.D. Power for $1.1 billion.
'Xie Zhikun is not an investor with XIO and never has been' —XIO Chief Executive Joseph Pacini
In legal filings and documents reviewed by the Journal, Mr Xie says he invested a substantial sum in XIO in 2014—and he wants it back. XIO Chief Executive Joseph Pacini said in an email that "Xie Zhikun is not an investor with XIO and never has been," and denied his allegations. He declined to discuss the European tour. He said other investors—not Mr Xie—provided $3.2 billion to the firm in 2014.
Mr Xie, 56, couldn't be reached for comment. A Beijing-based spokesman for his company, Zhongzhi Enterprise Group, declined to comment. A spokeswoman for Mr Xie's legal representatives in the Cayman Islands at law firm Maples and Calder declined to comment.
The tussle erupted in December. A representative of Mr Xie sent two letters, which the Journal has reviewed, to XIO's office in the Shard skyscraper in London. One letter says that in 2014 Mr Xie provided 5.8 billion yuan— $940 million at the time—to help set up XIO and to fund the acquisitions of two medium-size companies. The letter demands answers about what happened to what it described as Mr Xie's "very significant" investment following six months of "unanswered requests for information and documents." The second letter asks further questions about what happened to Mr Xie's money.
Apparently unsatisfied, Mr. Xie in February sued in a Cayman Islands court, accusing XIO Chairwoman Athene Li and CEO Mr Pacini of receiving "secret profits" from the alleged fraud. Ms Li declined to comment.
Mr Xie, an imposing figure well over 6 feet tall, is known in China for his wealth and philanthropic support for the arts and sciences. His pop-star wife, Mao Amin, regularly sings at shows and on state television, but Mr Xie keeps a lower profile. In 1995 he founded Beijing-based Zhongzhi, whose website states that it has 1 trillion yuan ($145 billion) of assets. Mr Xie's investments range widely and include electric vehicles and trusts that lend money, according to company filings.
Along with J.D. Power, XIO owns German and Israeli assets, according to its website. XIO brought in U.S. investment firm BlackRock Inc. to invest alongside it for the J.D. Power deal, according to people familiar with the transaction. BlackRock declined to comment. In December, XIO said it agreed to buy Meitav Dash, a publicly traded Israeli fund company that manages about $33 billion.
XIO was founded in Hong Kong in 2014 by Ms Li, a Chinese executive, Mr Pacini, an American former BlackRock executive, and two other partners. Ms Li is based in China and Mr. Pacini in London.
Mr Pacini moved to Asia in 2007 with J.P. Morgan Chase & Co. and joined BlackRock there in 2012 before setting up his own firm with Ms Li. He said working at J.P. Morgan and BlackRock brought him into contact with the chairmen of big Asian companies eager to invest in new places. "These organizations are massively flush with cash," Mr Pacini said in an interview in September. "They are very hungry for stable investments."
Mr Xie says in a court filing in the Cayman Islands that in April 2014 he entrusted Ms Li and Mr Pacini to handle his investments in XIO and Dorsey Ventures Ltd., a Cayman corporation.
According to another filing from Mr Xie in the same court, Ms Li is the legal owner of Dorsey, and he and Ms Li have a "share entrustment agreement" that specifies that he is the actual owner. Such agreements are commonly used by wealthy people who want to put money into shell companies without being identified in corporate records. The filing demands that Dorsey make no transfer of shares or payment of dividends without "the order of Xie Zhikun." The letters Mr Xie sent to XIO in December also mention Dorsey, saying Ms Li was supposed to manage its daily operations as well as "deal with the investments of XIO."
XIO made its first acquisitions in 2015 when it paid more than $300 million, according to people familiar with the deal, for Compo Expert, a German fertilizer company, and $510 million for Lumenis, an Israeli medical-laser company.
That summer, XIO chaperoned Mr Xie on the tour of Europe and Israel by private jet, according to people familiar with the visit. The trip's agenda refers to Mr Xie as an "LP," which is private-equity parlance for an investor in a fund. XIO staff also accompanied Mr Xie on shopping trips to stores including Harrods in London, where he spent thousands of dollars, the people say.
During the visit, Mr Xie was described as "Chairman of XIO Fund Advisory Board" in an email reviewed by the Journal that XIO co-founder Carsten Geyer sent to arrange a meeting with a banker. Mr Geyer declined to comment.
HOW J.D. POWER WAS ACQUIRED BY A CHINESE COMPANY SHROUDED IN MYSTERY
Hong Kong's XIO Group, which acquired the U.S. auto-rating firm in 2016, is now embroiled in a dispute about the source of XIO's funding
A plan for the sale of the car-rating business J.D. Power was a month old when the seller, New York-based information giant S&P Global Inc., grew uneasy. It wasn't quite sure to whom it had agreed to sell the company.
"I wanted to raise a point with you that is causing our team here some concern," S&P Global executive Jason Gibson wrote on May 19, 2016, to the purchaser, a firm called XIO Group that had been set up in Hong Kong and was planning to do the deal through an offshore private-equity fund. Mr Gibson emailed that he hadn't received information he expected about who owned XIO and where it was getting the money for the purchase.
The sale went through. XIO acquired J.D. Power four months later for $1.1 billion. The deal left a U.S. company famed for enhancing transparency—shining a light on the automotive and other industries—owned by a private company that was soon embroiled in a largely hidden dispute in China over its funding. Most XIO employees knew little about where its funding came from. Some advisers to XIO received differing accounts.
The J.D. Power deal was completed amid a wave of overseas acquisitions by cash-rich, privately owned Chinese companies. Some of them have unclear ownership structures that bankers and lawyers say can be a source of confusion. XIO provided full details of its investors to everyone involved in the U.S. regulatory approval process for J.D. Power, a spokesman for XIO said.
Purchases of foreign assets by Chinese companies exploded in 2016 to a record $217 billion. Though China's government has sought to rein these in, the buying continues, at a slower pace.
XIO was among the new buyers Western bankers and lawyers started hearing about. A year after it was founded in Hong Kong, XIO opened its headquarters office in London's Shard skyscraper in 2015. A Shanghai-based fund company called Shanghai Li Hong Investment Center invested hundreds of millions of dollars from mainland China in one of XIO's acquisitions, according to a public document at China's Ministry of Commerce. XIO controls Shanghai Li Hong, the XIO spokesman said.
XIO quickly developed the capacity to do billion-dollar deals. Yet its executives and a billionaire Chinese tycoon are fighting over its assets in lawsuits in two jurisdictions, with details hidden from public view.
"Beneficial ownership of companies is difficult to understand in China," said Bruno Raschle, vice chairman of Zurich-based private-equity firm Schroder Adveq. "You never know who is really behind a company—an individual or the government—or sometimes the government using individuals or making use of individuals."
Chinese acquirers around which ownership questions have swirled include the conglomerate HNA Group Co. The Swiss Takeover Board found in November that when HNA bought a Swiss airline-catering firm called Gategroup in 2016, HNA failed to disclose that two of its owners held their stakes on behalf of HNA's co-founders. HNA said it respected the Swiss board's authority.
"Many companies in China mistakenly believe that extreme secrecy is a form of discretion," said Abel Halpern, a former partner of U.S. private-equity firm TPG who is setting up a business to advise Chinese companies investing outside China. "Such activity can put a black mark on Chinese capital as an asset class," Mr. Halpern said. "If people believe Chinese capital is tainted by deliberately opaque structures, then such capital is viewed with suspicion and mistrust."
In China, tracing ownership of companies can be complicated by a practice called guanxi, the cultivation of relationships and unwritten favors. This can come into play when wealthy Chinese purchase international assets as a way to move money overseas without their government's knowledge, said lawyers and bankers familiar with the practice.
Because of the risk that acquisitive companies with unclear ownership could be conduits for money laundering and tax evasion, the U.K. in 2016 published an open register of companies' beneficial ownership. European Union countries agreed in December to create public registries listing such information. Three bills in the U.S. Congress would require companies to disclose their beneficial owners.
Nine of 10 senior executives said it was important to know the ultimate owner of companies they do business with, in a 2016 survey of 2,800 executives in 62 countries by EY (formerly Ernst & Young). "If legitimate companies like J.D. Power are being bought up or interacting with anonymous companies, it opens the door to increased liabilities about which we have no idea," said Gary Kalman, executive director of the Financial Accountability & Corporate Transparency Coalition, a Washington-based nonprofit that campaigns against corruption. Goldman Sachs Group Inc. won't advise XIO because of concerns about how it is funding deals, according to a person familiar with Goldman's decision-making.
The spokesman for XIO said it works with "the most reputable global investment banks" and hasn't asked Goldman to advise on an acquisition. It is common practice for private-equity firms not to publicly disclose their investors, the spokesman said. "Honoring nondisclosure agreements and client confidentiality is a basic tenet in following international standards accepted by leading global alternative investment firms," he said. Addressing criticisms made of anonymous companies, the XIO spokesman added: "Private equity funds have made an incontestable contribution to the global economy."
When XIO sought to buy J.D. Power in early 2016, it had competition from better-known companies. XIO faced pressure to convince owner S&P Global that XIO was a credible bidder for the auto-research company, according to people involved in the acquisition process.
XIO Chairwoman Athene Li and Chief Executive Joseph Pacini enlisted Thomas Borer, a well-connected former Swiss diplomat. To vouch for XIO to S&P Global, Mr. Borer introduced XIO to John Negroponte, who had worked for S&P Global when it was called McGraw-Hill and later was U.S. director of national intelligence under President George W. Bush. Mr Borer, Mr Negroponte and S&P Global declined to comment.
In April 2016 S&P Global announced it had agreed to sell J.D. Power to XIO, "a global alternative investments firm." XIO would make the purchase using a fund based in the Cayman Islands, which doesn't require firms to publicly disclose their investors. It was during the following month that S&P Global's Mr. Gibson asked XIO for its ownership and funding details as the seller prepared to seek U.S. government approval for the deal, according to emails reviewed by The Wall Street Journal.
An XIO executive responded that Mr. Gibson should have received the information from XIO's legal adviser, Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Gibson wrote back that he had received an email from Skadden, but "the part they did not share are the missing financials and ownership pieces." "We will not hold up the filing on this matter, but as it's a joint filing we would expect to be able to review," he wrote. That email was forwarded within XIO to its general counsel. She emailed colleagues she was "not sure why MG has not shared these with the team but will chase up now." MG is Michael Gisser, then head of Skadden's Asian operations and an adviser to the XIO founders. Mr. Gisser said he is retired from Skadden and declined to comment, as did Skadden.
XIO wouldn't comment on the correspondence. "In the context of the acquisition of J.D. Power, all of the parties (including law firms, advisers and government agencies) who were part of the U.S. regulatory approval process were provided full details of XIO Group's diversified institutional investor base," the XIO spokesman said.
A spokesman for S&P Global wouldn't discuss Mr. Gibson's email. S&P Global is "comfortable that the level of due diligence that we performed in connection with our sale of J.D. Power to XIO Group was appropriate," said spokesman David Guarino.
In June 2016, as XIO was working on getting U.S. government approval for the deal, its general counsel resigned. She left in part because she didn't believe she had sufficient information about XIO's investors to do her job properly, according to former employees, some of whom were employed at XIO at the time. XIO's spokesman said the general counsel left to pursue a master's degree in business administration and continued to support XIO. The former counsel now works at a U.S. private equity firm. An XIO executive working on the J.D. Power deal departed not long after. The two were among at least 14 investment professionals who have left XIO since the firm started in 2014, according to the professionals and to websites including LinkedIn. The spokesman for XIO called its staff turnover "lower than average."
Within XIO, only its four founding partners know who the investors are, and no other current or former employees have any knowledge about them, the spokesman said. He said XIO is "legally bound by Cayman confidentiality law" not to disclose its investors without their permission. He added this is normal for private-equity funds based on the Caribbean island, where "many private equity vehicles are domiciled."
Nine of the former XIO employees who left said they were skeptical that XIO had a fund containing money from many separate institutions, which is what they said they were led to believe when they joined. The former employees, at least three of whom worked on the J.D. Power deal, said XIO was more secretive about its investors than other firms where they have worked.
XIO staff appeared on one occasion to give differing accounts of who funds its deals. When a Moody's Investors Service credit officer met with XIO staff after the deal announcement to discuss debt ratings for J.D. Power, he was told XIO's investors were Chinese, according to the Moody's officer, Edmond DeForest. A Deloitte accountant got a different response weeks later when he referred to XIO's "China resident investors" in an email to XIO that was reviewed by the Journal. "There may be a misconception. The investors into the XIO fund are not primarily Chinese," XIO partner Carsten Geyer replied. The Deloitte accountant, Anthony Passalaqua, declined to comment.
As the summer of 2016 progressed, XIO contacted financial firms to ask if they would also invest in J.D. Power. On Aug. 8, XIO's Mr Pacini emailed British pension fund Hermes Investment Management about a "co-Investment opportunity with J.D. Power," saying investors could make as much as 2.9 times their money through a resale within three years. Hermes was interested but decided not to invest, in part because it couldn't get comfortable with the lack of information it received about XIO, a person familiar with the talks said.
BlackRock Inc., the world's largest asset manager and a former employer of XIO CEO Mr Pacini, did invest with XIO, people familiar with the acquisition said. So did Beijing-based China Life Insurance Group, according to an investment manager at the insurer.
The deal for J.D. Power gained approval by the Committee on Foreign Investment in the United States. XIO said the agency's review finished in 30 days. The committee declined to comment.
XIO completed the acquisition on Sept. 7, 2016, but mystery over its funding didn't end.
A New York investment banker who had advised XIO on the acquisition met later that year with a Chinese businesswoman named Carol Xie, who shocked the banker by saying her father's investment group had bought J.D. Power—a notion the banker hadn't heard before— according to a person familiar with the meeting. Her father is Xie Zhikun, a prominent Beijing tycoon.
Within months, Mr Xie was in full warfare with XIO. As the Journal reported in March 2017, Mr Xie insisted he had given the firm almost $1 billion to do deals. XIO said he had not, and demanded he stop telling people he was affiliated with the firm.
In a message reviewed by the Journal, XIO's Ms Li wrote to her lawyers saying Mr Xie had repeatedly tried "illegally" to sell a company XIO owned. The company was Lumenis Ltd, a medical-equipment maker XIO bought in 2015. Mr Xie has asserted that his money funded the acquisition.
A representative of Mr Xie wrote to XIO on Dec. 30, 2016, demanding an explanation of how XIO's investments were performing and how the J.D. Power deal was funded. "We have never received the level of information which we should have," said the letter, which the Journal reviewed. "This is a very unsatisfactory situation and not one that we can allow to continue."
In February 2017, Mr. Xie sued in a Cayman Islands court, accusing XIO's Ms Li and Mr Pacini of agreeing to take his money and then receiving "secret profits" in an alleged fraud. He also sued Ms Li in Hong Kong. A spokesman for Mr Xie declined to comment, as did a lawyer for Ms Xie.
At a meeting in 2017, which was not attended by Mr Xie, Ms Li likened Mr. Xie's contention that he had entrusted money to XIO to a man unexpectedly claiming paternity of a child, said a person who was present.
XIO has said it raised a $3.2 billion investment fund in 2014 with a diversified group of investors it didn't name that included fund managers and insurance companies, including some from Asia. XIO says Mr Xie isn't one of its investors and never was.
After buying J.D. Power, XIO hired new executives for the California-based company and expanded its operations with the purchase of National Appraisal Guides Inc., a U.S. publisher of vehicle pricing data. XIO is "tremendously proud of the success of J.D. Power and its premier position of 'voice of the consumer,' " the XIO spokesman said.
In July, XIO had J.D. Power borrow $180 million more, in part to fund the acquisition. This made J.D. Power's debt "very high," Moody's said. In July it downgraded J.D. Power's credit deeper into non-investment-grade territory, to B3 from B2. Another purpose of the borrowing was to enable J.D. Power to pay dividends of about $100 million, according to Moody's. XIO declined to name the investors who would receive these dividends.
Pre-Action Correspondence
The Issue of Proceedings
'(11) The First Article contains personal data and Criminal Offences Data of which Mr Pacini is the data subject as follows:
That there were reasonable grounds to suspect that Mr Pacini was party to a conspiracy to defraud Xie Zhikun of nearly $1billion, and had received 'secret profits' as a result;
(12) The First Article contains personal data and Criminal Offences Data of which Mr Geyer is the data subject as follows:
That there were reasonable grounds to suspect that Mr Geyer was party to a conspiracy to defraud Xie Zhikun of nearly $1billion;
(13) The Second Article contains personal data of which each of the Claimants is the data subject as follows:
That there were reasonable grounds to suspect that each Claimant had deliberately failed to provide proper disclosure of the true identity of investors in JD Power to the vendor and the US authorities and had concealed the fact that XIO was an investment vehicle for Xie Zhikun;
(14) The Second Article contains personal data of which Mr Geyer is the data subject as follows:
That Mr Geyer falsely informed a Deloitte accountant that the investors into the XIO entity purchasing JD power were not primarily Chinese.'
'(1) The Claimants were not party to any conspiracy to defraud Xie Zhikun and Mr Pacini did not make any "secret profit" from any such conspiracy;
(2) There were no reasonable grounds to suspect that the Claimants were party to any conspiracy to defraud Xie Zhikun or that Mr Pacini had made any secret profit;
(3) The allegations of wrongdoing made against the Claimants by Xie Zhikun were made in various legal proceedings – all of which were, by a settlement deed dated 4 August 2020, discontinued. There was no admission or finding of liability for conspiracy to defraud on the part of the Claimants;
(4) The Claimants had not failed to provide proper disclosure of the true identity of investors in J D Power to the vendor or to the US Authorities;
(5) The Claimants had made full disclosure to the Committee on Foreign Investment in the United States, including providing a list of all XIO's partners and investors and potential investors;
(6) XIO was not an investment vehicle for Xie Zhikun;
(7) The investors into the XIO entity which was purchasing J D Power were not from mainland China were not affiliated with the Chinese government and they were not introduced by or affiliated with Xie Zhikun.'
'(1) In breach of Article 5(1)(a), the Defendant has failed to process the Personal Datalawfully orfairly. In this respect the Claimants will rely in particular on the following facts and matters:
(a) The First Article refers to allegations of a serious nature and includes Criminal Offences Data.
(b) The First Article relates to allegations which never resulted in a criminal charge or arrest.
(c) The Second Article makes serious and damaging allegations of impropriety against the Claimants including, in particular of suspected failure to provide proper disclosure to the Committee on Foreign Investment in the United States.
(d) The Articles are both defamatory of each of the Claimants.
(2) In breach of Article 5(1)(d), the Defendant failed to ensure that the
Personal Data was accurate or to erase or rectify inaccuracies in the Personal Data without delay after becoming aware of them. Paragraph 16 above is repeated. The true factual position has been known to the Defendant since (at the latest) its receipt of the PAP Letter.
(3) In breach of Article 5(1)(d), the Personal Data was kept in a form which permitted identification of the Claimants for longer than was necessary for the purposes for which the Personal Data was processed. Insofar as the First Article was reporting on legal proceedings brought by Xie Zhikun in the Grand Court of the Cayman Islands (Cause No FSD 25 of 2017), it was no longer necessary to process the Personal Data in the First Article after
those proceedings were discontinued on 27 November 2020.
(4) In breach of Article 10, the Defendant published the Criminal Offences Data in the Article without justification under any of the conditions in Parts 1 to 3 of Schedule 1 to the DPA 2018.
(5) In breach of Article 17, the Defendant has failed to give effect to the Claimants' exercise of their rights of erasure (by way of the PAP Letter) by removing the Articles from WSJ.com. The Claimants rely on the following:
(a) Even if (contrary to the Claimants' primary case) the Defendant's initial decisions to publish each of the Articles was justified, their continued publication is no longer justified once the Defendant had received the PAP Letter.
(b) Further and in the alternative, by the PAP Letter, the Claimants objected to the processing of the Personal Data in the Articles. There were no overriding legitimate grounds for continuing the processing.
(6) In breach of Article 21 the Defendant has failed to give effect to the Claimants' exercise of their right to object to the processing involved in the publication of the Articles as set out in the PAP Letter. There are no compelling legitimate grounds for the continuing publication of the Articles.
(7) If and insofar as the Defendant contends that the processing of the Claimants' personal data in the Articles is for "special purpose of journalism" set out in paragraph 26 of Schedule 2 to the DPA 2018, and without prejudice to the burden of proof (which lies on the Defendant) the Defendant is not entitled to rely on any exemption from the listed UK GDPR provisions in that it is not reasonable for the Defendant to believe that:
(a) Application of the listed UK GDPR provisions would be incompatible with the purposes of journalism;
(b) The continuing processing of the Personal Data by publication is in the public interest. In particular, it is not reasonable to believe that the continuing processing of inaccurate and/or out of date personal data is in the public interest.
If and insofar as the Defendant had such reasonable beliefs when (it) published each of the Articles, it could no longer hold such beliefs once it became clear that the Personal Data was (sic) inaccurate and out of date.'
'(20) By reason of the Defendant's wrongful processing of the Personal Data as pleaded above, the Claimants have suffered damage to their reputations, and have been caused anxiety, humiliation and distress for which the Defendant is liable to pay compensation to the Claimant'.
(21) In support of their claims for compensation under s168 of the DPA 2018 the Claimants will rely on the following:
(1)The loss of control of and autonomy over the Personal Data occasionedby the continuing publication of the Articles.
(2) the fact that the Defendant has continued to publish and maintain the Articles despite being put on notice of the Claimants' objections in the PAP Letter.
(3) The fact that the Articles have been repeatedly mentioned by prospective investors in XIO and SGT as requiring further due diligence and therefore being an obstacle to investment. This has caused additional work and distress for the Claimants.'
Evidence
Mr Barker
Mr Pacini
The Issues
The Power to Strike out for Abuse of Process
"where there has been no unlawful conduct, no breach of relevant procedural rules, no collateral attack on a previous decision and no dishonesty or other reprehensible conduct. Indeed, the power exists precisely to prevent the court's process being abused through the lawful and literal application of the rules, and most likely would not be needed or engaged where a party was acting unlawfully or in breach of procedural rules, where established rules of law or procedural sanctions would usually suffice to protect the court process" (JSC VTB Bank v Skurikhin [2020] EWCA Civ 1337; [2021] 1 WLR 434 at [51], per Phillips LJ).
'Only in the most clear and obvious case will it be appropriate upon preliminary application to strike out proceedings as an abuse of process so as to prevent a plaintiff from bringing an apparently proper cause of action to trial' (Broxton v McClelland [1995] EMLR 485, 498, per Simon Brown LJ).
Choice of Cause of Action
'When more than one cause of action is available to him, a plaintiff may choose which he will pursue. Usually he pursues all available causes of action, but he is not obliged to do so. He may pursue one to the exclusion of another, even though a defence available in one cause of action is not available in another. Indeed, the availability of a defence in one cause of action but not another may be the very reason why a plaintiff eschews the one and prefers the other. Limitation is an example of such a defence. I have never heard it suggested before that a plaintiff is not entitled to proceed in this way, and take full advantage of the various remedies English law provides for the wrong of which he complains. I have never heard it suggested that he must pursue the most appropriate remedy, and if he does not do so he is at risk of having his proceedings struck out as a misuse of the court's procedures. In my view those suggestions are as unfounded as they are novel' (at pp342-3).
"As a general rule, it is legitimate for a claimant to rely on any cause of action that arises or may arise from a given set of facts. That is not ordinarily considered to be an abuse just because one or more other causes of action might arise or be pursued instead of, or in addition to, the claim that is relied on".
Secondly, the Jameel dictum, often quoted though it is, surely amounts to no more than a colourful re-statement of the principle that the court will not allow its resources to be taken up with applications or litigation that amount to an abuse of process, which would hardly have been a startling proposition to the court in Joyce v Sengupta.
Is the Claim in reality a Claim in Defamation, dressed up as a Claim in Data Protection?
What is the "Nub" of a Complaint?
'This claim is essentially a business matter for LNS.... My present view is that the real basis for the concern of LNS is likely to be the impact of any adverse publicity upon the business of earning sponsorship and similar income'.
On that basis and others, he refused an interim injunction.
Damages for Harm to Reputation
"The protection of reputation is the primary function of the law of defamation. But although the ambit of the right of privacy is wider, it provides an alternative means of protecting reputation which is available even when the matters published are true."
He added at [34] that a party was entitled to invoke the right of privacy to protect his reputation. But he did not say (because it was not in issue: the appeal was from refusal of an interim injunction) that a party could recover compensation for reputational harm (as opposed to distress) in a privacy claim.
'It is therefore quite plain that the protection of reputation is part of the function of the law of privacy as well the function of the law of defamation. That is entirely rational. As is obvious to anyone acquainted with the ways of the world, reputational harm can arise from matters of fact which are true but within the scope of a privacy right. In Khuja v Times Newspapers Ltd [2019] AC 161 the effect of knowledge of police investigations which did not give rise to a charge, in terms of damage to reputation, was acknowledged. It is not difficult to think of others – for example, knowledge of certain medical conditions. If the protection of reputation is part of the function of privacy law then that must be reflected in the right of the court to give damages which relate to loss of reputation. That loss of reputation has an impact on the feelings of the wronged individual (which can be reflected in damages), and will inevitably come in to that extent in any event. The facts of the present case are a very good example of that, in my opinion. Mr Millar submitted that the facts of the present case "vividly" demonstrate why damage to reputation must be excluded from a claim in privacy, because the facts (that Sir Cliff was being investigated for historic sexual abuse involving a minor) were true and the freedom of the press to report those true facts should not be undermined by the award of damages for misuse of private information. I think the exact opposite is the case. The facts of this case (on the footing that the public interest in reporting does not outweigh Sir Cliff's privacy rights) vividly demonstrate why damages should be available for an invasion of privacy resulting (inter alia) in damage to reputation.'
[149] In my judgment there is some force in Mr Millar QC's (counsel for the defendant's) submissions, and care must be taken when assessing damages in misuse of private information cases.
i) There is no dispute that reputation is an aspect of the art.8 right. The difficulty arises because English law accommodates the art.8 right in different ways; the torts of defamation and misuse of private information (together with data protection laws) being the principal private law remedies. These causes of action cannot be neatly divided into their own compartments; they overlap. A particular publication may give rise to a claim for defamation, or misuse of private information, or both.
ii) Damages awarded in defamation claims serve three purposes: (a) compensation for the damage to reputation; (b) vindication of the falsity of the defamatory allegation; and (c) compensation for the distress, hurt and humiliation which the defamatory publication has caused (the so called 'solatium'): John v MGN Ltd [1997] QB 586, 607-608 per Sir Thomas Bingham MR.
iii) The truth or falsity of the information that forms the basis of a complaint of misuse of private information is generally irrelevant: McKennitt v Ash [2008] QB 73 [86]. It may become an issue if it is raised by a defendant on the issue of public interest defence/art.10.
iv) It is a fundamental principle in the law of defamation that damages and vindication of reputation should not be awarded on a false basis: i.e. where the defamatory allegation can be proved to be substantially or partially true: e.g. Mackenzie v Business Magazine (UK) Ltd unreported 18 January 1996 CA; McPhilemy v Times Newspapers Ltd [1999] 3 All ER 775, 789c-d; Burstein v Times Newspapers Ltd [2001] WLR 579 [47], [60]. This principle is important in balancing the art.8 and art.10 rights. Looked at through this prism, the imposition of an award of damages for damage to reputation is an interference with the art.10 right which cannot be said to be necessary to protect the art.8 rights of another if the defamatory allegation is true.
[150] It seems to me to follow from these principles that:
i) damages awards in misuse of private information claims cannot ordinarily include elements for compensation for damage to reputation and/or vindication of reputation (elements (a) and (b) from John);
ii) to award damages for these elements whilst at the same time holding that the truth or falsity of the information is irrelevant is wrong in principle; insofar as any damages award were to be increased to reflect these aspects, the additional element is an unjustifiable interference with the art.10 right of the defendant;
iii) if a claimant wishes to seek an award of damages that reflect elements (a) and (b), then a defendant would have to be permitted to defend as true any underlying defamatory allegations that fall within the claim for misuse of private information (or advance any other defence that would have been available had the claim been brought in defamation: cf. Rudd v Bridle & Another [2019] EWHC 893 (QB) [60(5)] per Warby J); and
iv) the element of solatium is an element common to damages awards in both defamation and misuse of private information. In support of his/her claim for damages in a misuse of private information claim, it is at least arguable a claimant is entitled to rely upon the element of distress and upset caused by his/her belief that the allegations are false and have damaged his/her reputation. The basis for this is that, true or false, it was a misuse of private information for the relevant information to have been published.
[151] The tort of misuse of private information "focuses upon the protection of human autonomy and dignity — the right to control the dissemination of information about one's private life and the right to the esteem and respect of other people": Campbell v MGN Ltd [2004] 2 AC 457 [51]. Of course, "esteem" is often bound up with aspects of reputation. It might be better to use the phrase "damage to the standing of the claimant" rather than "reputation" when referring to this element of privacy damages. But whatever it is called, in a misuse of private information claim a person cannot be awarded any element of compensation for harm to/vindication of reputation caused by the publication of defamatory statements if the defendant is not given the opportunity to defend the statements as true. That would be to award at least some element of damages on a false basis and be contrary to the principles that I have set out above.
[152] In this case, the Claimant made an express concession that the truth or falsity of the underlying information in the LoR [Letter of Request] is not a relevant issue. In my judgment, the consequence of that is, whilst he can legitimately rely upon the distress and embarrassment that he has felt as a result of the publication of the Information, he cannot be awarded any element of purely reputational damages.
'I see no principled justification for allowing any such claim to be maintained in the newly discovered tort of misuse of private information. The facts that the information is private, and that its publication represents a misuse of the information, do not appear to me to be relevant, or sufficient, reasons for doing so. Nor does the fact that the rationale for protecting the information is the reputational harm that disclosure might cause'.
"there would ... be merit in a general rule that a claimant who seeks to clear his name of a defamatory imputation arising from a wrongful disclosure of private information, and to recover damages for reputational harm, should be required to bring a claim in defamation" (at [158]).
'To allow the same loss to be claimed by reliance on a different tort would remove any such obstacles, and so far from being necessary in a democratic society would seem to be inconsistent with the manifest intention of Parliament" [162].
'The applicable principles as to damages formulated in this case and in Sicri v Associated Newspapers Ltd [2021] 4 WLR 9 may merit consideration in a case in which the issues arise for determination. We have reservations about the extent to which quantification of damages for the tort of misuse of private information should be affected by the approach adopted in cases of defamation, but it is not appropriate to address this in this judgment.'
Jameel Abuse
'[38] It is not appropriate to carry out a detailed assessment of the merits of the claim. Unless obvious that it has very little prospect of success, the claim should be taken at face value ...
[44] At the heart of any assessment of whether a claim is Jameel abusive is an assessment of two things: (1) what is the value of what is legitimately sought to be obtained by the proceedings; and (2) what is the likely cost of achieving it?
[45] But it is clear from Sullivan (Sullivan v Bristol Film Studios Ltd [2012] EMLR 27) that this cannot be a mechanical assessment. The Court cannot strike out a claim for £50 debt simply because, assessed against the costs of the claim, it is not 'worth' pursuing. Inherent in the value of any legitimate claim is the right to have a legal wrong redressed. The value of vindicating legal rights—as part of the rule of law—goes beyond the worth of the claim. The fair resolution of legal disputes benefits not only the individual litigants but society as a whole.'
(a) what she describes as the 'nugatory reputational impact' on the Claimants, demonstrated by their own evidence and their failure to sue much earlier;
(b) the 'very low' levels of publication within the jurisdiction;
(c) the fact that the relief sought under s167 DPA 2018 is limited to processing in this jurisdiction, so that any order could not have extra-territorial effect, and the Articles would continue to be available in other jurisdictions, thus rendering futile the relief which is sought;
(d) the fact that the substance of the allegations complained of by the Claimants (APOC paras 11-14) is a matter of public record, as shown by (eg) the rehearsal of the allegations in Boettcher v XIO UK, Geyer, Pacini and others [2023] EWHC 801 (Comm);
(e) the likely high cost of the litigation, which will at least need to determine the truth of the Articles as well as Dow Jones' reliance on the journalism exemption, which in practical terms amounts to a substantial defamation action which even effective case management is unlikely to be able to constrain within reasonable bounds;
(f) The delay in bringing the proceedings, which is not consistent with a genuine desire to obtain the relief sought.
Trial of Preliminary Issue
(a) The meaning of any personal data of which the Claimants are the data subjects;
(b) Whether that meaning was defamatory of the Claimants (presumably at common law);
(c) Whether any such data were criminal offence data within the meaning of Art.10 GDPR.
Conclusion