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Fairstar Heavy Transport Case Study Solution Report

Full case report

Fairstar Heavy Transport NV v Adkins

Reference [2012] EWHC 2952 (TCC)
Court High Court (Technology and Construction Court)

Judge Edwards-Stuart J

Date of Judgment 1 Nov 2012


Summary

Examination of emails – Information as property – property in the content of an email


Facts

C was a Dutch shipping company. D1 was its CEO but was employed by a company registered in Jersey, Cadenza, which he controlled; C contracted with the company for his services. D2, Claranet, hosted Cadenza’s email server. On 14 July 2012, C was taken over by the owners of a competitor in a hostile bid, and D1’s employment was brought to an end.

Prior to the takeover C had been in financial difficulty and D1 had been preoccupied with raising funds to pay for new vessels. On 3 May 2011 C had entered into an agreement with a shipyard for the construction of a vessel, and subsequently became liable to make payments for it. C was in default of its obligation to pay and agreed that the shipyard would put off service of a notice of default. In default, a cancellation charge of about US $37 million was due.

D1 took the position after the takeover that the agreement was unenforceable by the shipyard. C’s case was that D1 never revealed in the period before the takeover that it had incurred the substantial liability to the shipyard. This was disputed by D1.

As a result of D1’s employment arrangements, all incoming emails at his work address were automatically forwarded to his private email address at Cadenza. Cadenza’s email account was hosted by D2, which was aware of but played no part in the proceedings. C said that incoming emails forwarded to D1 were automatically deleted by its server with the result that it had not copies of them. Outgoing emails were sent by D1 from his own computer so that, unless copied to someone at C, no such emails would reach its server.

C’s case was that without the incoming and outgoing emails it could not tell what had been going on  in relation to the agreement with the shipyard; it also required them to respond to an investigation into the extent of existing liabilities detailed in its 2011 accounts. Accordingly it applied for an order that an independent IT expert should be permitted to examine the emails which were held as sealed documents by D1’s solicitors.


Issue

Was the content of the relevant emails to be regarded as property, and did C as a result have a proprietary claim to the content of the emails held by Ds 1 or 2, insofar as they were sent by D1 acting on C’s behalf?


Held

Dismissing C’s application.

That there is no authority or practical basis for holding that there should be property in the content of an email. Protection is provided against misuse of information in emails either by the equitable jurisdiction of breach of confidence, or by the law of copyright, where applicable. Practical considerations in fact militate against finding that a proprietary right exists.

C did not have any proprietary claim to the content of the emails held by D1.


Comment

The classic statement of the law by Lord Upjohn in Boardman v Phipps [1967] 2 AC 46, at 127, to the effect that information is not property at all, holds good in relation to emails. Any proprietary rights claimed in information will continue to be found only on the basis of particular circumstances giving rise to an equitable or contractual breach of confidence, the unusual employment relationship between the parties here meaning that this was not how the claim was framed. The Judge noted the confirmation of the point by more recent authority, much of which will be familiar to media law practitioners.

Although this decision reinforces the current position in law, it is notable for its extensive attention to practical considerations regarding emails and whether their content is capable of being property. Arguments based on ‘internet-exceptionalism’, focused on the proposition that the internet has presented the law with an entirely novel set of circumstances which require a new approach, may, as the Judge observes, be “beguiling”. Here, however, they would have muddied rather than cleared the waters, even if the legal position had allowed them.


Download this Judgment


Instructing Solicitors

Ince and Co LLP, Schillings

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An employer is entitled to an order that a former employee give it access to the content of emails relating to its business affairs held on his personal computer. In Fairstar Heavy Transport NV v Adkins ([2013] EWCA Civ 886) allowed the claimant’s appeal and held that it was entitled to copies of the emails.  The question as to whether the claimant had any proprietary right in the content of the emails did not, on proper analysis, need to be decided.

Background

Mr Adkins was the former chief executive of Fairstar Heavy Transport NV (“Fairstar”). The contract of employment was with Mr Adkins’ service company and was governed by Dutch Law. The claimant wanted to retrieve and read electronic business correspondence stored on the defendant’s personal computer.

At first instance Fairstar argued that it had an enforceable proprietary claim to the content of emails held by Mr Adkins insofar as they were sent or received by him whilst acting on its behalf.

Edwards-Stuart J held that the content of the emails was information which was not capable of being property ([2012] EWHC 3294 (TCC)). He rejected the submission that the content of an email was a form of property. There are comments on the first instance decision on the 5RB website and on the Data Governance blog.

Judgment

Mummery LJ gave the leading judgment.  Patten and Black LJJ agreed.  Mummery LJ made it clear at the outset what the case was not about ([16]).  Fairstar made no claim:

  • to ownership of the computer in which the emails are stored, or to the server, or to a USB stick, or to any electronic medium, or to any sheets of paper, original or photocopy, or, indeed, to any other physical thing or material relating to the form or storage of the emails;
  • to ownership of confidential information in the emails, it not even being alleged that the content is confidential, or is being misused by Mr Adkins in breach of confidence;
  • to ownership of copyright or other intellectual property right in the content of emails; or
  • to any breach of contract or breach of fiduciary duty in respect of or arising out of the content of the emails or the withholding of them by Mr Adkins.

After setting out the background and the rival submissions, Mummery LJ commented that it was

“unfortunate that the agreed wording of the preliminary issue introduced an unnecessary complication into the dispute. The reference to a “proprietary right” was a distraction from the centrality of the agency relationship and its legal incidents. No competing claims of third parties are involved. Fairstar’s claim is against Mr Adkins. The assertion of a right to inspect and copy the content of the emails on his computer relating to its business affairs arises from the legal incidents of an agency relationship that survive its termination. That question can be decided, as between those parties, without a jurisprudential debate about the legal characteristics of “property”, or whether the content of the emails was “information” in which property existed in this case or could exist at all” [46].

He noted that a claim to property in intangible information presented obvious definitional difficulties and that the Court should decline to enter into this kind of controversy when it was unnecessary to decide the case

“It would be unwise, for example, for this court to endorse the proposition that there can never be property in information without knowing more about the nature of the information in dispute and the circumstances in which a property right was being asserted” [48].

It was not necessary to explore this question because the emails were documents and the absence of a proprietary right did not affect the legal right of the principal to inspect and copy documents held by a former agent [50].

The claimant was entitled to the relief claimed for the following reasons ([52] to [55]):

  • their former relationship had been that of principal and agent.
  • as a general rule, it is a legal incident of that relationship that a principal is entitled to require production by the agent of documents relating to the affairs of the principal.
  • “documents” may, depending on context, include information recorded, held or stored by other means than paper, as is recognised by CPR 31.4
  • materials held and stored on a computer, which may be displayed in readable form on a screen or printed out on paper, are in principle covered by the same incidents of agency as apply to paper documents. The form of recording or storage does not detract from the substantive right of the principal as against the agent to have access to their content.

The question as to whether there is property in the content of a letter, as distinct from the paper on which it is written did not need to be decided. The defendant was under a duty, as a former agent of the claimant, to allow the claimant to inspect emails sent to or received by him and relating to its business. The termination of the agency did not terminate the duty binding on Mr Adkins as a result of the agency relationship [56].

As a result, the appeal was allowed.

Comment

The decision of the Court of Appeal is plainly correct.  It would be remarkable if a principal was not entitled to see business communications by an agent after the termination of the agency.  As was pointed out by Daniel Stilitz on the Panopticon blog, the case would probably have been much more straightforward Mr Adkins been an employee, since contracts of employment and IT policies usually state expressly that all work-related emails belong to the employer.

The argument on appeal was, however, somewhat different from that at first instance where the focus was entirely on the issue of “property in emails”.  The Court of Appeal refused to deal with the interesting and  potentially important issue as to whether non-confidential “information”, which does not amount to intellectual property, is “property”.  As the IP Draughts blog points out, this issue has practical implications for the wording of IP contracts, including licences and assignments.

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