Lonestar Communications Corporation LLC v Daniel Kaye & Anor

Under Liberian law, the action of damages for wrong remains available for residual tortious claims outside nominate torts. A breach of a Liberian statute may constitute the required wrongful act where the statute protects the claimant’s legally recognised interest.

Section 80 of the Liberian Telecommunications Act 2007 did not preclude such a claim where the defendants had engaged in, directed, authorised, consented to or participated in the unlawful conduct. Intentional wrongdoing attracts vicarious liability where it is sufficiently connected with the employee’s functions. Employment status is functional and may exist against more than one principal.

Loss caused by cyber-attacks was assessed by separating subscriber loss, data revenue loss and voice revenue loss. Punitive damages depended on personal responsibility, benefit and the sufficiency of compensatory damages.

Lonestar, a Liberian telecommunications operator, claimed damages for a prolonged campaign of distributed denial-of-service attacks against its data network. It alleged that Daniel Kaye carried out the attacks at the instigation of Avishai Marziano, with assistance from Ran Polani, and that Orange Liberia and Cellcom Telecommunications Limited were vicariously liable.

The claim relied principally on Liberian law, including the action of damages for wrong and section 76 of the Liberian Telecommunications Act 2007. Issues included direct liability, vicarious liability, the effect of section 80, limitation, causation, loss, mitigation, unnecessary expenditure, punitive damages and contribution.

The central questions were whether the defendants’ conduct was actionable under Liberian law, whether the individual defendants acted within the scope of employment, and what loss and contribution orders followed.

1. Liability of the individual defendants. The defendants’ participation in planning, funding, carrying out and supporting the attacks breached section 76 of the Liberian Telecommunications Act 2007. Each was liable under the Liberian action of damages for wrong for loss caused by the attacks.
2. Action of damages for wrong. The action remained a substantive residual cause of action. It was not confined to an exhaustive list of nominate torts. Interference with the claimant’s telecommunications network contrary to section 76 constituted a wrongful act. Breach of the UK Computer Misuse Act 1990 did not supply the wrongful act because Liberia had enacted its own legislation addressing the relevant conduct.
3. Section 80. Section 80 did not displace the claim. Its language was broad and covered persons who engaged in, directed, authorised, consented to or participated in the relevant acts. The pleaded conduct fell within that language, and no conflict between section 80 and the action of damages for wrong had been established.
4. Vicarious liability. There was no general intentional-tort exception under Liberian law. Deliberate wrongdoing could fall within the scope of employment where sufficiently connected with the employee’s role. Employment was a functional question, and seconded employees could be employees of more than one principal. Both individual defendants were functionally employees of Orange Liberia and Cellcom BVI. Their conduct fell within the scope of employment, so both companies were vicariously liable.
5. Attribution. The court rejected the alternative submission that Mr Marziano’s conduct was attributable to Orange Liberia as its directing mind and will. No such principle was established under Liberian law.
6. Loss. The attacks caused loss of 90,000 subscribers, 50% of the data ARPU loss and 2 cents of the relevant voice ARPU swing. The resulting lost-profit award was US$3,602,349. Recoverable unnecessary expenditure totalled US$707,738.36. Lonestar’s mitigation claim failed.
7. Punitive damages. Mr Kaye’s criminal sentence made punitive damages inappropriate. Mr Marziano was ordered to pay US$170,000 because he was the principal mover, acted for personal benefit and had not undergone criminal punishment. Punitive damages were refused against Mr Polani, Orange Liberia and Cellcom BVI.
8. Contribution. The individual defendants were responsible for 100% of the relevant damage. Cellcom BVI was ordered to contribute 50%, having no personal fault but being vicariously liable. Judgment was entered for Lonestar against all defendants for the compensatory sums, with punitive damages against Mr Marziano.