Technological advances invariably give rise to new problems and to new questions of law. Sometimes Parliament responds to the perceived problems or provides answers to the questions. Where it does not, each unanswered question, when it arises, is addressed by the courts applying the centuries-old rules and techniques of the common law. The recent decision of the Technology and Construction Court in Fairstar Heavy Transport NV v Philip Jeffrey Adkins and Claranet Limited [2012] EWHC 2952 (TCC) provides an example. The question in that case was who owned certain e-mails, a problem concerning communications not encountered in the days of quills, nibs, typewriters, telexes, faxes, or even early word processors.
Background
Prior to a takeover in July 2012 Mr Adkins was CEO of the Claimant (‘Fairstar’), a Dutch company.
Mr Adkins was not employed by Fairstar, but by a company registered in Jersey, Cadenza Management Ltd (‘Cadenza’), a company which Mr Adkins controlled. Fairstar contracted with Cadenza for the services of Mr Adkins under an agreement containing an exclusive jurisdiction clause, by which all disputes were to be determined by the Dutch courts.
Because Mr Adkins was not a direct employee of Fairstar, there was an arrangement that all incoming e-mails which were addressed to him at his Fairstar e-mail address were automatically forwarded by Fairstar’s server to Mr Adkins’s private e-mail address at Cadenza. Cadenza’s e-mail account was hosted by Claranet, the Second Defendant, who played no part in the proceedings, although it was aware of them.
Fairstar is based in Rotterdam and specialises in the transport by sea of very heavy and valuable cargoes, such as drilling rigs, for which it owns some very large and specially designed vessels.
On 14 July 2012 Fairstar was taken over by the owners of a competitor, Dockwise, in a hostile bid. The services of Mr Adkins, as CEO of Fairstar, were terminated forthwith.
Following the takeover, Dockwise asserted that there was a very substantial liability to a Chinese shipyard arising from an order for a new vessel, which should have been but had not been disclosed in Fairstar’s accounts or otherwise by Mr Adkins. Mr Adkins’s position was that the agreement for the purchase of the ship was unenforceable by the shipyard because there was a collateral agreement by which either the agreement was to be treated as an option or else was not to take effect until certain conditions had been satisfied.
Fairstar sought access to e-mails which would throw some light on the issues. Fairstar alleged that incoming e-mails, when forwarded automatically to Mr Adkins, were automatically deleted from Fairstar’s server, with the result that Fairstar now had no copies of those e-mails. So far as outgoing e-mails were concerned, Mr Adkins sent those directly from his own computer and so, unless copied to someone at Fairstar, no copies of such e-mails would have reached Fairstar’s server. Fairstar asserted that without access to these e-mails, both incoming and outgoing, it could not tell what had been going on in relation to the dealings with the Chinese shipyard and the construction of the vessel. In addition, it said that it was being investigated by the stock exchange authorities in Oslo (its shares being listed on the Norwegian stock exchange) in relation to what was in its 2011 accounts, in particular in relation to its liabilities to the Chinese shipyard, and that it needed to see the e-mails in order to respond properly to that investigation.
Proceedings and the Essence of the Arguments
Following correspondence between the parties, which involved their lawyers, on 7 September 2012 Fairstar made a without notice application for, and obtained, an interim injunction from the court which, amongst other things, restrained Mr Adkins and Claranet, from knowingly deleting or otherwise interfering with e-mails sent or received by Mr Adkins whilst acting on behalf of Fairstar. In addition, the order provided for copies of all the relevant e-mails to be held in electronic form by Mr Adkins’s solicitors, Schillings, in a manner that prevented any tampering with their contents.
At a subsequent hearing attended by both parties, the matter was fully argued before Mr Justice Edwards-Stuart. At this hearing Fairstar pursued a further application, which had formed part of its original application, for an order that an independent IT expert should be permitted to inspect the documents held by Schillings. For his part, Mr Adkins applied to set aside the order (as varied) in its entirety.
It is to be inferred that Fairstar had concluded that it could not, in this country, avail itself of any express or implied contractual term because there was no contract of employment, nor any contract to provide services, between Fairstar and Mr Adkins, and because the contract between Cadenza and Fairstar was subject to the exclusive jurisdiction of the Dutch courts. Fairstar, asserted however, that it had an enforceable proprietary claim to the content of the e-mails sent or received by Mr Adkins when acting on its behalf.
Mr Adkins’s position was that the application should never have been made without notice for procedural reasons (see [2012] EWHC 3284 (TCC)), and, more fundamentally, on the ground that Fairstar had no proprietary claim in relation to the content of the e-mails. Since this proprietary claim was the only basis on which Fairstar sought relief, it was claimed that the application was misconceived from the outset.
No reliance was placed upon any Database Right, presumably because a store of e-mails would seldom fall within the definition of ‘database’ within the terms of Regulation 12 of the Copyright and Rights in Database Regulations 1997[1], and because any database right would have been vested in Mr Adkins or Cadenza. Again, Fairstar could not have claimed any right of access, based on ownership, to computers or servers which it did not own or lease. Nor was the law of copyright relevant because, although one can envisage circumstances in which a court would order delivery up to an owner of material governed by copyright, Fairstar was not the author of any of the e-mails and hence could not have any copyright in them.
Had the court been concerned with letters, it would have been relevant, amongst other things, to consider who owned the paper on which the letters were written, and whether there was any ownership separate from the ownership of the paper in the information conveyed in the letters. Here, of course, the information was held electronically.
In the circumstances, the principal issue, agreed by the parties, was whether Fairstar had ‘an enforceable proprietary claim to the content of the e-mails held by Mr Adkins (and/or Claranet) insofar as they were received or sent by Mr Adkins acting on behalf of Fairstar?’
There being no decided case directly in point, counsel for both parties combed the books for analogous cases from which it might be argued that a principle could be extracted which should apply to the facts of the present case, and they cited a number of cases, dating from as early as 1893.
Over the years, there have been many cases in which the court has restrained employees or agents from using information held by an employer or principal (eg customer lists, trade ‘secrets’) for purposes other than the business of the employer or principal. In granting that relief the courts sometimes made reference to the employer’s or principal’s ‘property’, and these were relied upon by Fairstar.
The Judge reviewed these cases and concluded that, except for the most recent (Penwell Publishing v Overstein [2007] EWHC 1570 (QB), decision of Mr Justice Fenwick QC, sitting as a Deputy Judge of the High Court), all of them were decided on the basis of breaches of confidence in contract or equity.
In Penwell an employee (D3), in concert with other fellow employees, set up a business intended to compete with that of their employers, and then left their employment and worked in their new business. Before leaving his employment D3 downloaded an address list onto a memory stick in Excel spreadsheet format, for use in the new business. The address list was one which D3 himself had compiled from material brought with him at the outset of his employment and from other contacts which he had developed during the course of, and for the purposes of, his employment. In the course of his judgment Mr Fenwick stated:-
‘127. I am satisfied that where an address list is contained on Outlook or some similar programme which is part of the employer’s e-mail system and backed up by the employer or by arrangement made with the employer, the database or list of information (depending on whether one is applying the Database Regulations or the general law) will belong to the employer. I do not consider that the position will change where the database is accessed not from the employer’s computer but from the employee’s home computer by “dialling up” or otherwise “logging on” to the employer’s e-mail system by some form of remote access.
128. In all those circumstances, I find that such lists will be the property of the employer and may not be copied or moved in their entirety by employees use outside their employment or after their employment comes to an end.’
The judge noted that it appeared that in Penwell it was not disputed that an address list stored on a computer was ‘property’, and that he was not ‘prepared to assume that Mr Fenwick would have reached the same conclusion’ if the arguments canvassed before him had been addressed to Mr Fenwick. He therefore felt unable to place any reliance on the decision in Penwell, which, in the event, not being that of a superior court, was not binding upon him.
Whilst accepting that contrary views had been expressed, the judge concluded (at [58]) that it was clear that:
‘the preponderance of authority points strongly against there being any proprietary right in the content of information, and this must apply to the content of an e-mail, although I would not go so far as to say that this is now settled law’.
Perhaps the clearest statement that ‘information is not property’ is to be found in the speech of Lord Upjohn in the decision of the House of Lords in Boardman v Phipps [1967] AC 46, where he said (at p 427):
‘In general, information is not property at all. It is normally open to all who have eyes to read and ears to hear. The true test is to determine in what circumstances the information has been acquired. If it has been acquired in such circumstances that it would be a breach of confidence to disclose it to another then courts of equity will restrain the recipient from communicating it to another. In such cases such confidential information is often and for many years has been described as the property of the donor, the books of authority are full of such references; knowledge of secret processes, “know-how”, confidential information as to the prospects of a company or of someone’s intention or the expected results of some horse race based on stable or other confidential information. But in the end the real truth is that it is not property in any normal sense but equity will restrain its transmission to another if in breach of some confidential relationship.’
In his judgment in Fairstar, Mr Justice Edwards-Stuart referred to similar judicial expressions in Fraser v Evans [1969] 1 QB 349 in the Court of Appeal, in Australia and Canadian cases, in Douglas v Hello! Ltd [2008] 1 AC 1., in the House of Lords, by the Court of Appeal in Coogan News Group Newspapers Ltd [2012] EWCA Civ 48, and Force India Formula One Team v 1 Malaysian Racing Team [2012] EWHC 717 (Ch). He also referred to the support provided for Mr Adkins contentions in Gurry on Breach of Confidence (2nd Edn), at paragraph 4.101:
‘It is submitted that none of the arguments discussed above support ‘property’ as the jurisdictional basis of the law of confidentiality. Moreover, there is a wealth of dicta denying the existence of a proprietary right in confidential information and confining rights in such information to circumstances in which there was a breach of confidence in contract or equity.’
On behalf of Fairstar, Mr Peter Susman QC submitted that logic and the circumstances of the modern world should encourage the court to hold that the content of an e-mail was a form of property. In effect he submitted that it would be unrealistic for the courts not to recognise the proprietary right of an employer or principal in electronic materials that were created by or came into the possession of his employee or agent in the course of his employment or agency.
The judge considered how this might operate in practice, assuming that the content of an e-mail was capable in law of being ‘property’, on the basis that there are five possible options in relation to the ownership of the content of any particular e-mail:
(1) that title to the content remains throughout with the creator (or his principal);
(2) that, when an e-mail is sent, title to the content passes to the recipient (or his principal) – this being by analogy with the transfer of property in a letter when one person sends it to another;[2]
(3) as for (1), but that the recipient of the e-mail has a licence to use the content for any legitimate purpose consistent with the circumstances in which it was sent;
(4) as for (2), but that the sender of the e-mail has a licence to retain the content and to use it for any legitimate purpose; and
(5) that title to the content of the message, once sent, is shared between the sender and the recipient and, as a logical consequence of this, is shared not only between them but also with all others to whom subsequently the message may be forwarded.
He considered that:
· Options (1) and (2) were, by definition, mutually inconsistent.
· The implication of adopting option (1) is that, in principle, the creator of an e-mail would be able to assert his title to its contents against all the world, in which case the creator of an e-mail could require any recipient of it, however far down the chain, to delete it (this would have to be the remedy because the content of an e-mail is not something that one can simply return), and, if he could not, there would be no use in having the proprietary right.
· The implication of adopting option (2) would be that the creator of the e-mail would cease to have any right in its contents from the moment he sent it, it would seem to follow from this that the recipient would be entitled to ask the sender (in this case the creator) of the e-mail to delete it: logically, the same would apply down the line so that the only person entitled to the contents of a particular e-mail would be the last recipient: if the initial e-mail was sent to several recipients, some of whom forwarded it to others, the question of who had the title in its contents at any one time would become hopelessly confused.
· Options (3) and (4), which would seem perfectly workable, would have the result that the proprietary interest in the content of any e-mail would in reality be deprived of any value: in practice, the right to control another’s use of the content of an e-mail would depend on the extent to which that other person was or was not making a legitimate use of it. This would amount to applying much the same test as that which applies under the existing equitable jurisdiction (or contractual right if it exists) to restrain the misuse of confidential information: the only difference being that it would not be necessary to show that the information (ie the content of the e-mail) was confidential in order to exercise a proprietary right of control: if the information was not confidential, then the situations would be few in which a person would need or want to restrain another’s use of it. Mr Justice Edwards-Stuart considered that there was no compelling need in logic for adopting either of options (3) or (4) and so in relation to these options he would reject a plea that the law is out of line with the state of technology in the 21st century.
· Option (5) also seemed to the judge to be unrealistic. He said (at [68]):
‘It could have all sorts of repercussions. For example, suppose that a supplier of components loses his database of e-mails when his server unexpectedly crashes. If he had a proprietary right in the content of all e-mails sent to and received by him from each of his customers, would he have the right to demand access to the copies of those e-mails on those customers’ servers in order to enable him to reconstitute his database? In a different situation would parties who had formerly communicated with each other on a regular basis by e-mail but had since fallen out have the right to demand access to each other’s servers in order to see to whom e-mails that they had sent had been forwarded? If the answer to questions such as these is No, then I have difficulty in seeing what advantage there might be if it were to be held that there was a shared proprietary right in the content of e-mails: it would be of little or no value. But if the answer was Yes, the ramifications would be considerable and, I would have thought, by no means beneficial.’
The judge concluded that for all these reasons he could find no practical basis for holding that there should be property in the content of an e-mail, even if he thought that it was otherwise open to him to do so, saying (at [69]):
‘To the extent that people require protection against the misuse of information contained in e-mails, in my judgment satisfactory protection is provided under English law either by the equitable jurisdiction to which I have referred in relation to confidential information (or by contract, where there is one) or, where applicable, the law of copyright. There are no compelling practical reasons that support the existence of a proprietary right – indeed, practical considerations militate against it’.
Accordingly, he determined the agreed issue against Fairstar, and the injunction was discharged.
Implications
As the judge himself emphasised, the result of the case might have been different if Fairstar had been able to rely upon causes of action which were not affected by the jurisdictional disability under which it laboured.
The decision, therefore, may be of only limited practical consequence, and the rights of the senders of e-mails, the rights (eg in terms of onward transmission and other use) of the recipients of e-mails, and the rights of third parties (e.g. principals or employers) to access information contained in e-mails sent to someone else, remain to be spelled-out. It is likely that these issues will be resolved by reference to the common law[3] as already applied to documentary correspondence, the rights in and over the contents of a letter generally being dependent upon, firstly, the express or implied intention of the sender[4] (objectively construed),[5]. and the relationships (contractual or otherwise), if any, between the sender, the recipient, the relevant service provider, and any such third party.
David Blunt QC is a barrister at 4 Pump Court: www.4pumpcourt.com
[1] A database is defined as a collection of independent works, data, or other materials, assigned in a systematic or methodical way and individually accessible by electronic or other means, but database rights only arises where the maker has made a substantial investment in either the activities of obtaining, verifying, or presenting the contents of the database.
[2] The assumption, made for the purposes of the discussion, is not in fact correct. The recipient of a letter may obtain title to the paper on which a letter is written – see Pope v Curl [1774] 26 ER 608 – but not the content.
[3] But note the Telecommunications (Lawful Business Practice) (Interception of Communications Regulations 2000 authorises the interception by employers of e-mails in certain circumstances.
[4] Cadell v Stewart (1804) cited in Gurry, para 2.49 – ‘the communication in letters is always made under the implied confidence that they shall not be published without the consent of the writer’. Hence, publication or transmission to someone other than the addressee is a matter for the sender to decide.
[5] Force India etc. v 1 Malaysia Racing Team SDN BHD [2012] EWHC 616 (Ch) at [224].
