NEWS – “without comment”
Private Investigation Firm Sued by Client for Breach of Contract and Negligence
26 May 2021 – Addleshaw Goddard LLP
This case is one of a growing number of examples where the clients or subjects of private investigators have made claims against private investigation firms in relation to the way in which information has been gathered.
FACTUAL BACKGROUND
Private intelligence agency Black Cube has recently found itself being the subject of a claim pursued in the London Commercial Court by one of its former clients, relating to its conduct and investigative techniques.
Black Cube is no stranger to controversy and attention. In the past, it has worked for a number of high profile individuals and companies, notably including Harvey Weinstein. However, this recent claim serves to highlight that the previously shaded world of investigations is becoming ever more under the spotlight and open to scrutiny.
The former client in question is Catalyst Capital Group Inc. (Catalyst), a Canadian private investment company. Catalyst is currently being sued by its competitor West Face Capital Inc. (West Face) in connection with activity relating to a bid for a telecommunications company in 2014. West Face won the bid but Catalyst appealed the decision, hiring Black Cube to gather information while the appeal was pending.
News reports suggest that Catalyst engaged Black Cube to obtain material to discredit both West Face and the Canadian judge that made the original ruling. For these services, Catalyst agreed to pay a base fee of $1.5 million and a maximum of $11 million under a bonus system.
The techniques used by Black Cube are said to have included an employee impersonating a businessman and inviting the judge to dinner, where the judge was probed to make racial remarks that would paint him in a negative light. The conversation was secretly recorded. Similar tactics are said to have been used in relation to current and past employees of West Face.
When it learned of Black Cube’s involvement, West Face filed a counterclaim against Catalyst, alleging that the information collected by Black Cube was defamatory. Recent news reports commenting on a ruling in connection with this counterclaim note that the judge described Black Cube’s investigative techniques as being to ‘deceive West Face or the Canadian judge’. However, the ruling said that Catalyst was not aware of and did not approve of Black Cube’s techniques.
Catalyst has since filed a claim against Black Cube at the Commercial Court in London, asserting that West Face’s counterclaim results from the negligence and breach of contract of Black Cube.
KEY LEGAL POINTS
Catalyst claims that Black Cube violated its obligation to ensure that all information it collected was legal and admissible in the Canadian court, and failed to ensure its investigative methods were ‘beyond reproach’, and ‘would not expose the claimants to any claims on the part of any of the person or entities investigated by Black Cube’.
Catalyst has asked the court for an indemnity for any legal costs and damages it is forced to pay in connection with West Face’s counterclaim, and for Black Cube to repay the fee it received from Catalyst.
COMMENTARY
For customers of private investigators, the case highlights the need to be aware of how material and information is being collected. If information is obtained in an inappropriate or unlawful manner, the material could be deemed inadmissible in court but could also lead to more serious consequences, such as exposure to a civil claim, or even potential criminal charges. In this instance, the sum being sought by West Face from Catalyst as a result of Black Cube’s activities is reported to be CA$450 million (over £260 million).
For private investigation firms themselves, the case is another cautionary tale of the need to review and carefully consider the techniques being used to obtain information, and whether these are appropriate having considered the legal landscape and potential reputational risks. Private investigators should be conscious as to whether their activities leave themselves and their clients exposed to legal action, and should be mindful that one day those actions may be scrutinised in court…and in the court of public opinion.
Full Article at:
Users of Professional Investigative Services including members of the public, legal profession, business and corporate clients, are able to select a credible Professional Investigator who is recognized as a “professional” and as such is a member of an established and approved professional association such as The World Association of Professional Investigators (WAPI).