This blog discusses the recent judgment by Foxton J in Lakatamia Shipping Company Ltd and others v Su and others, highlighting difficulties for a judgment creditor in enforcing a multi-million dollar judgment against a former billionaire shipping magnate, who was willing to go to prison rather than reveal assets for enforcement. It discusses some wider issues stemming from the judgment, such as electronic tagging, and provides commentary on what it might mean for enforcement of judgments in the future. It queries whether the remedy of allowing access to email accounts interferes too much with the defendant’s privacy rights (notwithstanding the safeguards which were put in place), whilst not necessarily offering any practicable assurances for the claimant. It highlights an underlying concern of the enforceability of judgments as a policy issue.
Foxton J determined some novel applications by a frustrated judgment creditor company, which was seeking to protect itself against the defendant’s continuing refusal to comply with former court orders, including disclosure requirements, which would assist the judgment creditor with enforcement of a substantial judgment in the tens of millions of USD. The judgment permitted the creditor and court to compel the defendant via a mandate to request access to his own email and social media accounts. The defendant claimed to have forgotten the passwords to his accounts, but he agreed subsequently to provide access. In so doing, the court effectively took disclosure out of the defendant’s hands, putting the responsibility into a court-appointed Japanese speaking independent lawyer. The lawyer was tasked with providing non-privileged documents, obtained from the defendant’s emails and social media accounts, to the judgment creditor, for the purpose of searching for assets against which enforcement action could be taken.
Commentary on enforcement aspects
The judgment is interesting for broader enforcement issues:
- It highlights the risks of litigating even against very wealthy defendants, if they are willing to risk contempt of court and get sent to prison.
- Enforcement investigations are paramount prior to litigating, but is not an assurance that recovery will be possible as a matter of course. Costs of enforcement attempts may be substantial.
- It hints that temporary COVID–19 guidance may, longer term, carry little weight in commercial disputes, where existing common law or statutory frameworks exist.
- Electronic tagging of reluctant judgment debtors in commercial disputes is unlikely, unless as a balancing exercise where there is serious flight risk and serious criminal conduct has arisen. In a purely commercial dispute, this appears unlikely.
- The case may support that, in extreme cases, orders granting access to emails and social media accounts for enforcement purposes may be possible, but it suggests that this is only if:
- adequate safeguards are in place to protect against prejudice in privacy and disclosure;
- the prejudice to the claimant is otherwise very substantial (perhaps read valuable) and higher than that of the defendant; or
- the defendant’s obstructive conduct is so “contumelious” and repetitive that there seems little other practical option to bring efficacy to the judgment.
Does the end justify the means?
The judgment is also interesting in relation to balance of safeguards and remedy: are the safeguards adequate in protecting the defendant against future breach of privacy and prejudice, and does the remedy offer sufficient practicable assurance to the claimant here?
Does the end of allowing the satisfaction of a judgment justify the means?
Balance of privacy issues
The judge acknowledged that in allowing access, the defendant’s rights to privacy in his email and social media communications would be interfered with, but that this was “only necessary because Mr Su has failed to comply with the court orders”.
The judge attempted to try and keep interference minimal by providing safeguards, such as appointing an independent lawyer, and treating the applications as being without notice.
Similarly with banking mandates?
The judge allowed access to the defendant’s social media and email accounts, likening the court’s power under section 37(1) of the Senior Courts Act 1981 to compel mandates directing banks to disclose information. The judge says, at paragraph 50:
“I cannot see any difference in principle between an order requiring the defendant to sign a mandate directed to his banks for the production of documents, and an order requiring a defendant to sign a mandate directed to those who provide his social media and email accounts for access. Accordingly I am satisfied that I have jurisdiction to make the order.” (Emphasis added.)
This comparison appears to be one of convenience but not necessarily of substance: a person’s entire life, and personal, geographic and financial records, can be contained in their emails, whereas bank records streamline traceability of assets which can be enforced against. It is much more draconian to allow access to emails, and more invasive and arguably a breach of privacy rights for the defendant, if safeguards are ineffectual.
Effectiveness of remedy?
The claimant’s own legal representatives queried whether the final remedy went far enough to provide any practicable assistance to the claimant.
For example, how would the independent lawyer, who had no background knowledge to the litigation spanning a decade, know what was and wasn’t material for enforcement purposes, in the context where the dispute was historic, the assets dotted globally, and where the defendant remained characteristically “terse” in communication?
The judge accepted that there was “considerable force” in points such as these, but this was necessitated by the defendant’s repeated failures to comply. The judge only had “limited sympathy for the fact that the mechanism which it has been necessary to adopt will involve non-privileged irrelevant documents finding their way to Lakatamia.”
Weaknesses in rationale
There is a circularity within the case of treating a more draconian legal test in relation to search order requirements sought pre-judgment as being strong by virtue of the fact of it already being post-judgment. That seems self-fulfilling. The defendant alleged that the original judgment was likely wrong in amount, if not in substance. That might be mitigated where the defendant admits to owing a large sum, but perhaps not entirely.
It is not clear here whether the third test for pre-judgment search order criteria is strictly satisfied. It is suspected that email and social media accounts are likely to contain incriminating evidence, but it is unknown. It is presumed on the basis that the defendant had intentionally concealed substantial assets previously and on the basis of his evasive conduct.
Are the email and social accounts relevant?
It is not clear whether the claimant was relying on email and social media accounts identified solely by the defendant. If so, the defendant might have revealed only accounts which were not likely to betray assets and may have withheld ones which were damaging. He may have signed the mandate knowing that there was not much to assist therein. They may have been red herrings.
Safeguards may not be sufficient
The appointment of an independent lawyer to sift out privileged documents may appear to be a safeguard. However, where the full context of the dispute and history is unknown, that risks both prejudicing the claimant’s position by failing to disclose things which may be relevant, and prejudicing the defendant by disclosing things which are completely unrelated, and which are genuinely private and confidential. That risk is increased where the defendant’s communication style is terse, and in a foreign language, where some degree of contextual linguistic interpretation is required. Things may get lost in translation.
Where safeguards assist the claimant, that might arguably mitigate the position, but where both claimant and defendant may subsequently be prejudiced by the safeguards, does that lessen the justification?
Limited purpose of disclosure
Disclosure of any documents via email and social media accounts was only permitted to be used for enforcement purposes, and not satellite litigation. However, accidental disclosure which betrays a new cause of action would not stop an eager litigant from seeking to take further issue and at least formulating new claims in their mind, if not actually causing further litigation to arise.
Policy decision to uphold faith in judgments
The novel application of allowing access to emails and social media accounts appears to have been upheld on a wider policy issue: that judgments need to be satisfied where possible (and need to be seen to be satisfied) to uphold the faith in the commercial litigation system. This throws up a potential weakness in debt judgments and their enforcement, where the judgment debtor is so obstructive in paying or permitting enforcement, and where imprisonment and fines, as the harshest punishments the court can mete out, are not enough of a deterrent.
The judge was careful to try and limit prejudice to the defendant, as well as limiting interference with his privacy rights, but it remains arguable and questionable whether that will be achieved here. It remains to be seen whether it will or will not actually assist the claimant practicably.
Does the end justify the means here? Do the means support “the end”?