Ireland: Legal Ethics: Keeping A Level Playing Field

Sport can teach us many lessons about ethics. The recent publication of the Wells Report into the alleged activities of the US NFL team, the New England Patriots, has highlighted "sharp practice", which has also been an issue the courts have had to consider in recent times.

The Wells Report (the "Report") was ordered by the NFL into the alleged conduct of the New England Patriots. The alleged conduct related to the deflating of the match balls used by the Patriots with the advantage being that under-inflated balls are easier to catch in wet conditions.

The findings of the Report were quite negative for the Patriots and their quarterback, Tom Brady. The Report found it most likely that Mr. Brady had a general awareness of the practice of underinflating match balls. Relatively punitive sanctions were imposed on the Patriots.

One interesting aspect of the Report is the content of the texts between the two most relevant staff members which were examined in the Report. The texts, while incriminatory, also refer at times to Mr Brady in quite derogatory terms.

Cut and Thrust of Negotiations

Issues arising from the cut and thrust of legal negotiations were the subject of the Irish case of Slattery -v- Friends First Life Assurance Company Limited¹. The case related to an unsuccessful investment in the St Regis Hotel in Washington by an entity connected with the plaintiff.

As part of the deal, a deed of pledge was negotiated for the purposes of giving additional collateral in favour of the defendant over shareholdings in certain projects in which the plaintiff had an interest. The negotiation of the deed of pledge took place mainly between the general counsel of Claret Capital - an entity the plaintiff had an interest in - and a law firm who acted for the defendant.

At quite a late stage of the drafting process, a clause 2.2 was inserted in the document by the general counsel which had the effect of limiting the liability of the plaintiff under existing guarantee arrangements.  

The law firm acting for the defendant did not notice the proposed clause in their subsequent review of the draft and had not sought to amend it. It ultimately appeared that the defendant made what was a unilateral mistake in that it understood that the original guarantee was still fully enforceable against the plaintiff.

The difficulty the plaintiff had in this case was that the limitation of the plaintiff's liability under the existing guarantee arrangements had never arisen in negotiations. The Court felt it was unlikely that if the defendant had seen the proposed clause, it would not have approved it without further discussion. The Court concluded this was a case of unilateral mistake rather than common mistake and ordered the deletion of clause 2.2 by way of rectification of the deed of pledge.

In the course of the judgment, the Court looked at the correspondence between the management of the plaintiff and the general counsel, including a mail from one member of management to the counsel.  When commenting on clause 2.2 and its possible insertion he stated:-

"Any way to make it a bit more inconspicuous?"

When sending the document to the lawyers to the defendant, the general counsel plaintiff did not provide a marked up document showing changes to the previous circulated draft. The lawyer to the defendant stated when giving evidence that it was "inconceivable and unprecedented" that another commercial lawyer would depart from this established practice. In addition, the change was not flagged in an e-mail exchange between the general counsel and the lawyer to the defendant.

Similarly to the Wells Report, correspondence of an informal nature between the senior management of Claret Capital was not helpful to the case of the plaintiff, with the following e-mail exchange taking place between the management team of the plaintiff when the insertion of clause 2.2 was missed:

On 17th July, 2009, the general counsel responded to the plaintiff, "don't hold your breath yet but they have NOT amended the Guarantee wording I added". The plaintiff, on the same evening, replied saying, "let's get it signed ASAP!!"

Perpetuating a Mistake in Fact

Allowing a mistake to be perpetuated, can also have serious ramifications as demonstrated by a recent case involving a US law firm which was instructed by the government of Djibouti in its long-running feud with opposition leader Abdourahman Boreh.

The case resolved around a grenade attack which took place on 5 March 2009 and an intercepted call allegedly made after the grenade attack whereby the claim was that they made reference to the attack. This call was a vital part of evidence in the claim against Mr Boreh and also a successful claim to freeze his assets. It ultimately turned out the call was not made after the attack.

The High Court later heard the lead partner in the US firm soon discovered the phone conversation could not have referred to the attack as it had been recorded before the event took place. Instead of informing the Court of the issue, the lead lawyer asked the law firm Kroll, who were also advising the government of Djibouti, if other evidence could be linked to the phone conversation. In a recording, the lawyer stated he would "fudge the error of the date".

In the judgment, Mr Justice Flaux, the High Court judge handling the case, concluded the lawyer "engaged in a strategy of equivocation and evasion which was not one that any reputable and honest solicitor could ever have adopted"  and, separately stated, that the lawyer had fallen "a long way short of the standard of professional integrity and candour which the court is entitled to expect of an English solicitor".

Conclusion

• There is a fine line between a competitive and an unfair advantage.
• Courts will step in to rectify errors. There is still a high level of evidential proof required.
• Adopt usual practice when highlighting changes to documents.
• Do not lapse into congratulatory or derogatory correspondence about the other side or your colleagues.  Mails and texts can (in certain cases) be capable of discovery and then read in open court.
• 'Fess up – if mistakes occur then admit it at the earliest possible opportunity. Professional reputation will long outlive a short–term commercial gain.

Footnote

^{1 [2013] IEHC 136}

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