Destruction of documents and adverse inferences
Adverse inferences were a common warning in my time as a criminal solicitor. The shield of silence and withholding information could seriously harm and even destroy a case at trial. The decision in Active Media Services Inc v Burmester, Duncker & Joly GmbH & Co Kg and others  EWHC 232 (Comm) has shown the damning effect similar action is likely to have in the Commercial Court.
The decision relates to an ongoing dispute regarding the production of a pleasantly named film – “Elliot: The Littlest Reindeer”. The film was supposed to be released in November 2017, in time for the holiday season (November – a bit early for Christmas jolliness in my mind – bah humbug). However, the film was not ready for release until 2018.
Active Media Services Inc, an investor in the film entered a completion guarantee with the other parties to protect against various risks. The guarantee was for the completion and delivery of the film to the Double Dutch International Inc (“DDI”) (sales agent) for the purpose of commercial exploitation. The acceptance of the film by DDI was a crucial step in this process as a sales agent cannot exploit a film until it is accepted. The film had to meet certain technical requirements. If it was not completed and delivered for the purposes of the guarantee, the guarantors (Burmester and AXA) would be liable to pay US$2.4 million plus interest to Active for the initial investment.
The Defendants’ defences were (i) waiver by election, (ii) waiver by estoppel, (iii) estoppel by convention and (iv) acquiescence as they stated Active knew the film had not been completed by 28 August 2017, consented to the delay and chose to exploit the film when it was ready.
The Defendants had asserted that Active had been made aware of the delays on two fronts – by M3 LLC, their agents on production, and by Active knowing directly and consenting to the delays. Active did not make a request about the guarantee prior to 2018. Emails were sent internally regarding this information. During the process of disclosure – the Defendants had queried the relevance of the Claimant’s sole witness’ personal email address as the Defendants had disclosed two emails which Active had not. Upon finding this out, Active’s sole witness “double-deleted” the emails. This was at the very least a questionable action and suggested there was something to hide.
In his judgment, Carter J drew an adverse inference in relation to Active’s conduct because of the following:
- The double deletion of several emails just prior to the start of the trial;
- A number of gaps in Active’s disclosure which would have shed light on the matters; and
- Active’s failure to call several witnesses which would have helped verify their account.
Applying The Ophelia  2 AC 206, the Judge inferred the emails had been deleted as they would have proved detrimental to Active’s case and the witnesses were not called. Similarly, by applying Wisniewski v Central Manchester Health Authority  PIQR P324, Carter J inferred no witnesses were called from M3 LLC because it was likely they would have confirmed in court that they were acting as agents, received the relevant material documents and agreed to the delay on behalf of Active. Therefore, Active could not revert on its stance of not calling on the guarantee. The destruction of the documents and the adverse inferences was effectively a kibosh to the Claimant’s claim.
Perspective on the decision
The decision taken by the Judge in this case is not surprising. The destruction of the emails and the decision to avoid calling certain witnesses was a calculated effort to hide information which was germane to the case. The Claimant was effectively trying to pull the wool over the courts eyes with a blanket that had huge holes in it.
If you are concerned about a situation relating to destruction of documents, please do not hesitate to contact Raphael Steele at [email protected] who will assist you.