Are you entitled to your expenses for a “dawn raid”, if you don’t raise a subsequent claim for damages?

Often a party will have good grounds to suspect that their confidential information is being misused by a third party. However, in order to prove this they need to recover the evidence from them or from someone else. There is usually also a concern that the person who has misused the information will take steps to destroy or conceal evidence, if they are made aware of a potential claim.  In these circumstances, it is possible to apply to the court and obtain permission to conduct what is commonly referred to as a “dawn raid” or “search and seize order” to recover evidence.

The legal test to obtain such an order differs slightly between the jurisdictions of Scotland and England & Wales. But a discussion of the specifics of a “dawn raid” and the legal tests to be met are beyond the scope of this post. However, assuming you are successful in obtaining your order, the question for the court is where should the liability for expenses lie? Particularly, if you decide not to raise a subsequent claim for damages.

This question was recently considered by Edinburgh Sheriff Court in Jet Logic Limited v The Private Jet Boutique Limited and Others – judgement available here.

Expenses: the usual rule

The usual rule in a court action is that expenses follow success. Therefore the starting point is that the cost of a litigation falls upon the person who has caused it. But an application for these types of orders is a pre-action application. To obtain an order, the applicant has to satisfy the court (amongst other things) that any proceedings are “likely to be brought”. If these proceedings are not ultimately brought, should the applicant bear their own expenses and the expenses of the “dawn raid” procedure?

What was outcome and why?

In the Jet Logic case, the Sheriff (judge) said, “I was not referred to any specific authority about how expenses in this type of situation should be dealt with and I have been unable to find any directly in point from my own researches. Therefore, I proceed on the basis that the matter is one for my discretion.”

Even though the damages claim was ongoing, the Sheriff granted the expenses to the applicant on the basis that the defenders didn’t put forward a substantive defence to the action:

“The defenders made an unsuccessful attempt to have the order recalled. But it would have been open to the defenders, in the normal way, to lodge defences and put in issue the averments on which the present action proceeded. If necessary, evidence could have been heard. The defenders have not sought to resist the action in that way and are content that it should be dismissed. The only battleground is expenses.

That leads me to the conclusion that the defenders are to be held as accepting that the action was justified.”

However, the Sheriff and the parties in this case must have been unaware of the 2016 case of Capital Document Solutions Limited v Highland Copiers Ltd and Michael Rae – first instance judgment available here and the appeal court’s judgment available here. This is a case in which our firm acted for the successful party.

Capital Documents

The Lord President, the senior judge in Scotland and the head of the judiciary, said that these types of applications tend to be adversarial in nature but are not always so. Despite this, he said that, “it will be a matter for the court of first instance to determine whether the party, against whom the orders are sought, has “caused the litigation” and if so, whether there is any reason from departing from the [general rule]…The decision will ultimately turn on questions of fact and degree.” There was no reason for interfering with the decision of the lower court to award the expenses to the party who sought and obtained the “dawn raid”.

Conclusion

Cases involving the misuse of your confidential information are often time sensitive and can be fast-moving. We understand that you will want to take urgent action to protect yourself from any further damage and mitigate your potential losses. But it is worth taking the time to consider all of your potential remedies and to think through the consequences of raising a court action so that the “questions of fact and degree” are answered in your favour.

Having been involved in one of the leading cases, we have expertise in this area. We also regularly advise clients more generally about confidential information, including what qualifies as confidential, how to protect it and action that can be taken when it has been misused. If you wish any additional information or to speak to us, don’t hesitate to get in touch.

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