The Court of Appeal has condemned an email sent by DAC Beachcroft lawyers, which it says amounted to a blackmail attempt.

DACB acted for two brothers, Stuart and Warren Ferster, in a High Court action brought against a third brother, Jonathan Ferster. They accused him of breaching his fiduciary duty as a director of ITC Ltd, an online gaming company that they owned together.

Jonathan, represented by Herbert Smith Freehills, maintained that the brothers had threatened to ruin him and his partner if he did not buy their shares in ITC at an inflated price. And he claimed that he had proof, in the form of an extraordinary email which Herbies has claimed was sent by DACB lawyers. 

High Court judge Mrs Justice Rose agreed that Jonathan could refer to the email in proceedings, but Stuart and Warren appealed, with DACB arguing that it formed part of a privileged mediation and should remain confidential. The Court of Appeal dismissed the appeal, choosing instead to reveal the email in full.

The Ferster brothers then

In it, DACB stated baldly that its clients were increasing the price of their shares because they had "become aware of further wrongdoings by Jonathan". It continued, "Jonathan knows the extent of his wrongdoings and our client believes that Jonathan is in very serious trouble which will also have serious implications for Jonathan's partner (Jonathan Seeds)". 

And it got more threatening from there:

• "It is for Jonathan to assess the reasonableness of the offer we are making. Jonathan ought to realise that the offer is beneficial to him and Jonathan Seeds and HSF should take his instructions". 

• "It is clearly in everyone's (and particularly Jonathan's) interest to wrap this up speedily and quietly. If it is not settled within 48 hours there is a real risk that such a settlement may no longer be possible – the concern being that others will become aware of it."

• "If Jonathan has misled HSF and sworn false evidence Alan Watts [the HSF partner acting for Jonathan] will be aware that Jonathan will face charges of perjury, perverting the course of justice and contempt of court and is likely to be imprisoned. If Jonathan Seeds is implicated he will likewise be investigated and/or charged."

• "In the above circumstances, Jonathan's credibility and reputation will be destroyed".

The Ferster brothers now

In his withering judgment, Lord Justice Floyd said, "This is not an instance where a party is trying to pick up exaggerated or colourful verbal statements made during a long, heated meeting between lay clients. This email appears to have been drafted by lawyers." Calling it "a thinly-veiled threat", in which the price rise was "tied, and tied only, to the threats affecting Jonathan's liberty, family and reputation, " he concluded that it should be assumed "that the threats were blackmail".
A spokesman for DAC Beachcroft said, "As you will appreciate, we will not be making any further comment at this point in order to protect the rights of the various individuals involved".