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Fruit from a poisoned tree?: Ras Al Khaimah Investment Authority v Azima [2021] EWCA Civ 349 and unlawfully obtained evidence

17.03.21

Summary

On 12 March, the Court of Appeal (Lewison, Asplin and Males LJJ) handed down their decision in Ras Al Khaimah Investment Authority v Azima [2021] EWCA Civ 349, in which the Court emphasised English law’s traditional refusal to exclude evidence on the ground that it had been unlawfully obtained, and suggested that it would be highly unlikely that a party could successfully allege that reliance on illegality obtained material to support a genuine claim could amount to an abuse of process justifying the claim being struck out.

The facts

Azima concerned a claim by RAKIA, the state investment entity of Ras Al Khaimah, one of the emirates that makes up the UAE, against the businessman Mr Azima. RAKIA contended that Mr Azima had induced it to enter into a settlement agreement under which RAKIA had paid him $2.6m by making fraudulent misrepresentations that he had acted in good faith throughout his dealings with RAKIA. Instead, RAKIA now contended that Mr Azima had in fact misappropriated funds from RAKIA obtained by paying bribes to its former CEO, Dr Massad, who had since been convicted (in absentia) of fraud, bribery and embezzlement.

In seeking to make out its case, RAKIA relied heavily on emails which had been hacked from Mr Azima’s account. Mr Azima contended that such hacking had been directed by RAKIA and as such they should not be permitted to rely on the illegally obtained emails, and their claim should be struck out as an abuse of process. The judge at first instance found that Mr Azima had committed fraud, that the hacking could not be shown on the balance of probabilities to have been procured by RAKIA and that, even if it had, he would not necessarily have excluded the emails or struck out the claim. Accordingly, the judge gave judgment for RAKIA and dismissed Mr Azima’s counterclaim based on the hacking.

The Court of Appeal decision

Mr Azima appealed on multiple points of fact and sought to introduce a variety of new evidence to show that (i) he had not committed the fraud; and (ii) RAKIA had procured the hacking. He further appealed on the basis that since RAKIA had procured the hacking, the emails should have been excluded and/or the claim should have been struck out as an abuse of process.

The CA considered this final point first, assessing what the position would be if it were in fact shown that RAKIA had procured the hacking. In relation to this the CA noted that “the general rule of English law is that evidence is admissible if it is relevant to the matters in issue. If it is, it is admissible and the court is not concerned with how the evidence was obtained” and that “Relevant evidence is admissible even if it has been stolen”. [41]

The CA noted that court does have a discretion under CPR 32.1 to exclude otherwise admissible evidence, however in determining whether that should be exercised in any particular case, the CA noted (citing Jones v University of Warwick [2003] EWCA Civ 151) that the court must balance “two potentially conflicting public policies..: the achieving of justice in a particular case on the one hand; and promoting the observance of the law on the other”. [44]

The CA noted that two factors counted against Mr Azima in the present case:

  • the emails were disclosable documents, such that RAKIA ought to have had the relevant emails at trial from Mr Azima in any event; and
  • the emails “revealed serious fraud on the part of Mr Azima,” which was a “very serious bar” to the grant of the equitable relief of excluding evidence which he sought. [47]

Consequently, the Court held that the evidence would not have been excluded had Mr Azima applied to do so in advance, and that the same approach should be adopted to his application to exclude post-trial. [48]

In relation to his assertion that the claim should have been struck out, the CA drew a distinction between “a claim which is itself fraudulent or fraudulently exaggerated on the one hand, and a claim which, although well-founded, is supported by collateral lies.” [57] In the present case, any unlawful activity and related dishonesty was not the basis of RAKIA’s claim, but rather done to support a genuine and well-founded claim. The CA noted that “No case has been brought to our attention in which a claim was struck out solely because of the manner in which evidence was obtained, even though the underlying claim was both genuine and well-founded; let alone a case in which the unlawfully obtained evidence has demonstrated fraud on the part of the defendant.” [56] The CA again relied on the facts that the emails would have been disclosable in any event and that to strike out the claim would be to leave Mr Azima the benefit of his fraud, and further noted that the Court could express disapproval of a party’s conduct in other ways, such as in its awards of costs or interest. Consequently, striking out the claim would have been disproportionate and contrary to the public interest, even if RAKIA had been responsible for the hacking. [64-65]

The CA refused Mr Azima’s appeals in relation to the factual points and new evidence concerning his fraud, although held that new evidence in relation to hacking was sufficient for the case to be remitted to a different judge to determine the question of responsibility for the hacking for the purposes of Mr Azima’s counterclaim (although that decision could not affect RAKIA’s main claim, for the reasons which the CA gave).

Conclusion

This case demonstrates the courts’ unwillingness to close their eyes to the substantive merits of cases on the basis of fraudulent or unlawful conduct by the parties – it seems that where the general policy of seeking to promote compliance with the law conflicts with doing justice in a particular case, the courts will almost invariably side with the latter, particularly where the alternative would be to allow the other party to retain the benefit (or escape the consequences) of their underlying wrong. The CA cited Summers v Fairclough Homes Ltd [2012] UKSC 26, in this regard, in which the Supreme Court noted that “It is very difficult indeed to think of circumstances in which such a conclusion would be proportionate. Such circumstances might, however, include a case where there had been a massive attempt to deceive the court but the award of damages would be very small.”

 

Commentary by Stuart Sanders

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