A warrant of prohibitory injunction is a strong and effective tool to stop someone from taking action which could have prejudicial effects against somebody else.
The law requires two elements for the courts to accept a request to issue a warrant of prohibitory injunction.
Firstly, the applicant requesting a prohibitory injunction must show that prima facie (at face value) he has rights. The Court of Appeal in Grech pro et noe vs. Manfre (July 14, 1988) had said that this element is objective and does not depend on the discretionary element of the judge. The rights claimed either exist prima facie or they don’t.
The second element that the applicant must prove is that, if the court does not accede to a request for the issue of a warrant of the prohibitory injunction, then the applicant's rights would be irremediably prejudiced.
When a person seeks a warrant of prohibitory injunction against the government or an authority established by the Constitution of Malta or against a person in the exercise of his functions as a public official, then the situation is somewhat different.
As a general rule, the law prohibits the court from issuing a warrant of prohibitory injunction against the government or an authority established by the Constitution of Malta or against a person in the exercise of his functions as a public official, unless the government, the aforementioned authority or public official, does not confirm that the thing which the court is being requested to stop from happening is in fact going to take place.
In this case, the court has to be satisfied that, if the request for a warrant of prohibitory injunction is not acceded to, then the prejudice that would result to the applicant would be disproportionate when compared to the same action that the court would be requested to inhibit. These elements are found in Article 873 (1), (2) and (3) of Chapter 12 of the Laws of Malta.
Furthermore, the abovementioned elements are cumulative and if one of them is not satisfied then the court is obliged to reject the application for the issuance of a warrant of prohibitory injuction.
It has to be kept in mind that the court procedure relating to the warrant of prohibitory injunction is a summary procedure (decided in one sitting).
Request to stop MFSA action
The case under examination is LifeStar Holding plc (C 19526); LifeStar Insurance plc (C 29086); GlobalCapital Financial Management Limited (C 30053) vs. The Malta Financial Services Authority; Mazars Consulting Limited et. decided on February 1, 2023 by Mr Justice Ian Spiteri Bailey.
The judge was asked to decide on an application for a warrant of prohibitory injunction filed by LifeStar Holding plc, LifeStar Insurance plc and GlobalCapital Financial Management Limited (hereinafter referred to as ‘applicants or claimants’) against the MFSA and Mazars.
The facts of the case stemmed from an investigation by the MFSA into the applicant companies. The MFSA had extracted data and information from the servers, laptops, and email accounts of the applicant companies. Subsequently, the MFSA asked Mazars to commence analysing and processing the data. Mazars were engaged for this particular task since the authority did not have the appropriate software or resources to carry it out.
The applicant companies asked the court to stop the respondents from accessing, processing, reading, analyzing, using in any way or disclosing any privileged information and/or documentation (electronic and physical) in terms of article 588 of the Code of Organization and Civil Procedure (Chap. 12 of the Laws of Malta) that was exchanged between any of the claimants (applicant companies) and their lawyers and accountants.
From the evidence submitted, the court was not satisfied that the MFSA was not going to pursue the action that the claimants sought to stop through the injunction. Therefore, the court moved on to consider the request.
During the hearing of evidence, it resulted that the MFSA had issued an order to extract data and take control of information and documentation pertaining to the applicant companies. It resulted that such data might have also included privileged documentation.
As a result, the applicant companies instituted separate civil proceedings against the MFSA.
Information filtered by software
Mazars said they had been engaged by the MFSA to analyse the data of the applicant companies. The data had to first be separated from what was relevant and what was not relevant. Following that, another filtering process had to be carried out in order to eliminate all the data that was privileged, so that such data was not processed and analyzed. This process of elimination was to be overseen by an individual who was extraneous to the investigation.
Mazars used a software system that automatically filtered certain domains (such as the email addresses of the lawyers of the applicant companies) and excluded data such as emails and content coming from those domains. Therefore, the data was not physically read by a natural person.
Right to protect privileged information
The court argued that the right to protect privileged documentation was true and real and must be protected at all times.
In this regard, the court had to analyse at face value (prima facie) if this right was impinged by the MFSA and Mazars. The court had to keep in mind the element of proportionality, meaning that the applicants need not prove to the court that as a result of the authority’s action they would suffer irremediable prejudice. It would suffice to prove that the action of the authority was disproportionate.
The court held that it was satisfied on a prima facie level that the protocols that the MFSA had adopted and the process that Mazars had adopted in the course of the processing of data from the claimant companies, were designed to protect the rights of the applicant companies with respect to privileged documentation.
Whilst conceding that systems and software could never provide an infallible guarantee, the court held that the defendants (the MFSA and those assisting in the investigation) were doing all that was reasonably possible in their power to protect the rights of the applicant companies.
The court said that an authority shouldn’t have a free hand to ignore and violate the rights of those being investigated. However, in the same breath, the court argued that it would not allow individuals being investigated to hinder disproportionately the investigative function of an authority.
Referring to the facts of this particular case, the court held that MFSA was carrying out its duty within the parameters of the law and taking all the necessary precautions to protect the rights of the investigated companies. In fact, the court noted that it was solely the fault of the applicant companies' lack of cooperation that the MFSA had to extract all data, including, in all probability, privileged documents.
The court considered that if the application for a warrant of prohibitory injunction had to be rejected, taking the abovementioned reasons into consideration, the prejudice suffered by the applicant companies would not be disproportionate.
The court went on to say that even if, in the remote circumstance, one of the privileged documents was not filtered by the software system, the prejudice would only result if the authority used the information contained therein for their advantage or to the disadvantage of the applicant companies.
The court held that the MFSA had already declared that it was not going to make use of such privileged documentation. In the worst-case scenario that the authority decided to take advantage, the applicant companies would have other ordinary remedies and administrative actions that they could resort to.
In this context, the court made reference to the separate pending civil proceedings that the applicant companies had instituted against MFSA on this particular matter.
The court therefore decided that the applicant companies had satisfied the first element for the warrant of prohibitory injunction, that is the prima facie right to protect privileged documentation not to be processed. However, they had failed to prove the second element that is the prejudicial element. The court held that there were enough safeguards to ensure that the companies' rights were protected.
Dr Clive Gerada is a Senior Associate at Azzopardi, Borg & Associates Advocates.