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England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Bray v Deutsche Bank AG  EWHC 1263 (QB) (12 June 2008)
Cite as:  EWHC 1263 (QB),  EMLR 12
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QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
| Stuart Bray
|- and -
|Deutsche Bank AG
Mr Andrew Caldecott QC & Catrin Evans (instructed by Clifford Chance LLP) for the Defendant
Hearing dates: 19th, 20th May
Crown Copyright ©
Mr Justice Tugendhat :
"[The Bank] today announced that the Management Board in finalising the Bank's 2005 accounts reviewed a number of recent developments and as a result increased legal provisions.
Significant new information relating to certain legal exposures has emerged since the disclosure of the bank's preliminary unaudited 2005 earnings on 2 February 2006. As a result of the new information, Deutsche Bank is obliged to change its estimate of contingent liabilities in order to comply with US GAAP, which requires that contingent liabilities be reflected in the financial statements when those liabilities are probable and estimable (Financial Accounting Standards Number 5). Any developments affecting such estimates must be reflected if they become known before the financial statements are finalized.
This adjustment mainly relates to certain tax-oriented transactions with US counterparties executed from approximately 1997 through 2001, which include transactions executed by a subsidiary of the former Bankers Trust acquired by Deutsche Bank in 1999. The new information includes, among other things, the entry by another financial institution into a deferred prosecution agreement with the US Department of Justice in respect of that financial institution's involvement in similar transactions.
The net increase in legal provisions will reduce the previously announced net income by EUR 250 million. Most of this adjustment is treated as not deductible for income tax purposes…
As a result of these changes, net income for 2005 will be EUR 3,529 million and the adjusted diluted earnings per share will be EUR 6.95. …"
"Deutsche Bank AG, along with certain affiliates and employees (collectively referred to as "Deutsche Bank"), have collectively been named as defendants in more than 75 legal proceedings brought by investors in various tax oriented transactions. Deutsche Bank provided financial products and services these investors … The investors claimed tax benefits as a result of these transactions, and the United States Internal Revenue Service has rejected those claims. In these legal proceedings, the investors allege that, together with Deutsche Bank, the[ir] professional advisers improperly misled the investors into believing that the claimed tax benefits would be upheld by the Internal Revenue Service…
The United States Department of Justice ("DOJ") is also conducting a criminal investigation of tax-oriented transactions that were executed from approximately 1997 through 2001… In connection with that investigation, DOJ has sought various documents and other information from Deutsche Bank and has been investigating the actions of various individuals and entities, including Deutsche Bank, in such transactions. In the latter half of 2005, DOJ brought criminal charges against numerous individuals… other than Deutsche Bank. In the latter half of 2005, DOJ also entered into a Deferred Prosecution Agreement with an accounting firm… On February 14, 2006, DOJ announced that it had entered into a Deferred Prosecution Agreement with a financial institution [identified in the Defence as Bayerische Hypo-und Vereinsbank]… Deutsche Bank provided similar financial products and services in certain tax-oriented transactions that are the same or similar to the tax-oriented transactions that are the subject of the above-referenced criminal charges. … DOJ's criminal investigation is on-going".
THE ISSUES IN THE CASE
"… was responsible for allowing illegal tax-oriented transactions to be executed from 1997 through 2001, including transactions executed by a subsidiary of the former Bankers Trust, acquired by [the Bank] in 1999 as a result of which [the Bank] was obliged to lower its estimated earnings for 2005 by 250 million Euros".
"The Defendant published the allegations set out above knowing they were false and/or with reckless disregard for their truth or falsity and/or with the dominant improper motive of injuring the Claimant, making no contact with the Claimant himself, but choosing instead to publish a wholly misleading account of events which improperly sought to lay the blame for the adjustments to its 2005 results at the Claimant's door (who had left the company in 2001) in order to deflect attention away from the Defendant, and in the knowledge that, as a result of confidentiality undertakings in the Claimant's compromise agreement with the Defendant upon leaving he Defendant's employment, the Claimant was unable publicly to answer the seriously defamatory allegations against him".
i) The occasion was one of qualified privilege
ii) The case on X and Y's involvement in the publication is defective
iii) The case on A and B's malice is defective.
THE LEGAL PRINCIPLES TO BE APPLIED TO THE APPLICATION
"94 … the point which is of crucial importance lies in the answer to the further question that then needs to be asked, which is—what is to be the scope of that inquiry?
95 I would approach that further question in this way. The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman [ 1 All ER 91], at p 95, that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all."
"The criterion which the judge has to apply under Part 24 is not one of probability; it is absence of reality."
"160 … Where an allegation of dishonesty is being made … the [claimant] must have a proper basis for making an allegation of dishonesty in his pleading. The hope that something may turn up during the cross-examination of a witness at the trial does not suffice.
161 … The law quite rightly requires that questions of dishonesty be approached more rigorously than other questions of fault. The burden of proof remains the civil burden—the balance of probabilities—but the assessment of the evidence has to take account of the seriousness of the allegations and, if that be the case, any unlikelihood that the person accused of dishonesty would have acted in that way. Dishonesty is not to be inferred from evidence which is equally consistent with mere negligence. At the pleading stage the party making the allegation of dishonesty has to be prepared to particularise it and, if he is unable to do so, his allegation will be struck out. The allegation must be made upon the basis of evidence which will be admissible at the trial."
"There are various acts that can give rise to legal responsibility, for example, encouraging the primary author, supplying him with information intending or knowing that it will be re-published, or, if one is in a position to do so, instructing or authorising him to publish it."
THE RESPONSIBILITY OF X AND Y FOR PUBLICATION.
"The Bank said it was taking the charge after uncovering "significant new information related to certain legal exposures" concerning "tax-oriented transactions" from 1997 to 2001 by a unit of Bankers Trust, which it bought in 1999…
The documents appear to suggest that Deutsche Bank's involvement in a variety of shelters was not limited to the Bankers Trust Unit. Deutsche Bank declined to comment".
MALICE OF THE MANAGEMENT BOARD
"Unfavorable news should be reported as promptly and candidly as favorable news… This necessitates careful adherence to the facts".
"… [there is a] public interest in permitting men to communicate frankly and freely with one another about matters in respect of which the law recognises that they have a duty to perform or an interest to protect in doing so. What is published in good faith on matters of these kinds is published on a privileged occasion. It is not actionable even though it be defamatory and turns out to be inaccurate".
"A privileged occasion is … an occasion where the person who makes a communication has an interest, or a duty, legal or moral, to make to the person to whom it is made, and the person to whom it is so made has a corresponding interest or duty to receive it. This reciprocity is essential."
" The decision of the House in Reynolds v Times Newspapers Ltd  2 AC 127 built on the traditional foundations of qualified privilege but carried the law forward in a way which gave much greater weight than the earlier law had done to the value of informed public debate of significant public issues. Both these aspects are, I think, important in understanding the decision.
Underlying the development of qualified privilege was the requirement of a reciprocal duty and interest between the publisher and the recipient of the statement in question: see, for example, …; Adam v Ward  AC 309, 334; …. Thus where a publication related to a matter of public interest, it was accepted that the reciprocal duty and interest could be found even where publication was by a newspaper to a section of the public or the public at large."
CONCLUSION ON THE SUMMARY JUDGMENT APPLICATION
MODE OF TRIAL