It was the most exciting scandal in the world of sport this year, but behind the battle that was played out in the press were the legal processes that propelled the case. For anyone with an interest in the law, this was the perfect example of how search orders and without notice applications work in practice.
In late June, the sporting director at Ferrari received an email from an employee of a copy shop in England. The employee became concerned after a woman visited the shop asking for a large number of Ferrari documents and designs to be scanned on to a disc for her husband. When the employee, a Formula 1 and Ferrari fan, asked the customer whether her husband worked for Ferrari, she replied: “He used to.” The employee was suspicious and searched the customer’s name, Coughlan, to find that it matched that of the chief designer at Ferrari’s rival McLaren. The 780 pages of documents included emails printed by Nigel Stepney, an engineer at Ferrari, who had recently been dismissed. On receipt of the email from the copy shop, Ferrari, which is based in Italy, contacted solicitors in England for advice.
Search orders: an overview
Ferrari’s first thought was to report what it had learned to the police. But the civil law could do better than that: if the evidence stacked up, Ferrari would be able to seize back its documents. Ferrari needed to act quickly. It needed to prove that Mike Coughlan actually had the Ferrari documents and that it was essential they were returned. The obvious route in English law is to obtain an injunction known as a search order. But the court does not make it easy to obtain an injunction for the delivery of documents and a search of private property. This is because the application to the judge is made ‘without notice’ to the other side and because the effect on the defendant can be seriously damaging (to reputation, for example). So a claimant is under the onerous obligation to the court to give ‘full and frank’ disclosure of all relevant details when applying for a search order. In practice this means that claimants have to present all the facts they know that go against their case, as well as those that suit them. To pass the court’s stiff test and succeed in an application for a search order, the claimant has to show:
• that loss would be suffered as a result of the
defendant having the documents in their possession;
• that the injunction is essential because damages
would not be enough to compensate the claimant for its loss; and
• that there is a real risk that, if the defendant were put on notice of the application, the documents
would be destroyed.
It is essential that the claimant moves fast as any delay can result in the court questioning whether such a draconian measure will be likely to achieve any useful result. In this case, the whole process – from receiving instructions from the client, collating evidence, writing witness statements and applying to court to actually carrying out the search – took only a few days.
The work involved
The first thing that the lawyers on a case like this have to do when they receive instructions is assess whether the court is likely to make an order. There is very little point in incurring the significant costs involved (because orders of this kind are so work intensive) if the court is likely to throw out the application. Failing to make this initial assessment could be expensive and embarrassing, and you could have a very angry client on your hands.
The initial assessment involves a fast-moving gathering and analysis of all the evidence. In the Ferrari case, this meant meeting with, interviewing and drafting affidavits for both the employee who had originally reported his suspicions to Ferrari, who could give evidence about the documents he saw and the circumstances in which he saw them, and interviewing and preparing an affidavit for a Ferrari technical engineer, who could give evidence as to why the documents were confidential, why their urgent return was necessary and the potential loss for Ferrari if the documents were not returned.
A claim form also had to be drafted and proceedings issued in the normal way. Injunctive relief such as search orders are not available as standalone applications – there must be an underlying action to which the application can attach itself. As this application was without notice, the claim form was not actually served on the other side until during the search itself.
The initial hearing was held in private to prevent the defendants knowing about the application before the search was carried out. The judge heard the evidence put forward by Ferrari and asked for several undertakings from Ferrari, its solicitors and the independent and supervising solicitors before making the order. The undertakings are another layer of protection for the defendants who are not there to present their case at the hearing.
The undertakings given by Ferrari included an undertaking to pay damages to the defendants if it turned out the court order should not have been made and it caused them loss, to keep the matter confidential, and not to use any information found as a result of the search for any purpose other than for those proceedings. The supervising solicitor (there to see fair play as part of the court’s standard procedure) undertook to explain the order to the defendants in everyday language and to inform them of their rights to legal advice, and to provide the court with a report on the search within 48 hours. The independent solicitors gave similar undertakings, including retaining in safe keeping all items taken as a result of the search. In this unusual case, the independent solicitors were there to do the searchings so that Ferrari’s own lawyers did not become tainted by seeing any confidential McLaren material. There were also computer experts involved who had to attend the search because it was known that the documents were copied on to CD-ROM and therefore may have been saved onto PCs or laptops. The computer experts gave undertakings to return any computer equipment to the defendants within two days of the search and to retain any ‘images’ taken of the computers until the court directed otherwise.
At 7.30am on 3 July, the Coughlans’ home was searched and the claim form and note of the hearing the day before were served on the defendants. The supervising solicitor’s job was to try to gain access to the premises and then explain to the defendants what the order allowed and to ensure that the defendants understood that they were entitled to have their own legal representation. The order outlines what items the claimant is searching for (in this case, what the independent solicitors were searching for on behalf of the claimant). The defendants handed over computer discs and the computer experts took computers from the premises to allow them to make images of them which could later be presented at court if necessary.
Supervising solicitors (who are independent of both sides) are always required at searches to ensure that the search is carried out properly and the defendants are advised of their rights and obligations. In this case, there were also independent solicitors present and, as is usual when there is likely to be a female present on the premises, the search team included a female lawyer.
Later on the day of the search itself, a further hearing took place at the High Court. The effect of this hearing was to allow Ferrari to communicate the outcome of the search to McLaren and to the Federation Internationale de l’Automobile (the FIA, the governing body of Formula 1 racing) so it could conduct its own investigation (which eventually resulted in the exclusion of McLaren from the 2007 constructor’s Championship and a fine of $100m (£48.53m)).
A week later, another hearing involving both sides took place. The hearing was in effect a full hearing of the application for the search order, but with the benefit of the results of the search order. Both sides gave their evidence and it was held that the search had been justified and therefore Ferrari was released from the undertaking it had given to pay the defendant damages in the event that it caused it loss. The court also ordered that information seized at the search and held by the independent solicitors should be handed over to Ferrari’s solicitors, and the computer specialists were ordered to agree a time and place with the defendants to view images of the computers taken during the search and to prepare a list of all relevant documents found on the computer images. The defendants were also ordered to inform Ferrari by 4pm that day if they intended to contest any of Ferrari’s applications and whether they intended to claim privilege against self-incrimination (see jargon-buster).
The following day, a consent order (see jargonbuster)was agreed by the parties that stated that Ferrari would make it clear to the FIA and McLaren that any information passed to them which was discovered as a result of the search was to remain confidential. This attracted huge press interest.
Ferrari sent over its head of press relations and the legal team had to take great care over what could be said without breaching the court’s rules.
The case continues…
Once the search order and all relevant hearings related directly to the order have taken place, the urgency subsides and the normal processes and procedures of litigation take over. At time of writing, the parties were continuing with the proceedings. If this case proceeds to trial (ie the parties do not settle the dispute beforehand), it will take place during 2008, so watch this space.
Vanessa Whitman is a trainee at CMS Cameron McKenna