By Virginia Rylatt

First published in New Law Journal Magazine, July 2005

Judges should be more robust and make more train of enquiry disclosures, says Virginia Rylatt, particularly in large litigation cases where the integrity of a defendant may be in dispute.

• the CPR and the problem with pre-action disclosure
• court reluctance to make train of enquiry disclosure orders

A long time ago, a young assistant solicitor colleague was out of the office most of the time. Six months later, he produced a series of photos showing a warehouse full of boxes. Each box held files, and all of the documents in each box had been considered and included in a list of documents. In 1993, the writer was acting for a party in a trial where there were over 100 files of court documents per set.
No doubt there have been many cases with even more voluminous documentation. By the late 1990s, the desirability of reducing documentation was obvious, and the Civil Procedure Rules were brought in to achieve this.

CPR: a new environment

Over the five years since the introduction of the CPR, the courts’ approach to disclosure has fundamentally changed. Perhaps more importantly, the CPR has changed the environment of those advising parties in relation to disclosure. Pre-CPR, ‘discovery’ was a process where solicitors took control and responsibility. Clients’ offices and factories would be visited to gain a practical appreciation of how documentation was physically organised and the filing and administration systems in place. The lawyer would thus be better equipped to enthuse management into producing a full revelation of all and any possible documents (whereby directly, remotely or contingently relevant) to be considered before preparing a list of documents. Solicitors were pro-active in the discovery process.

Since the CPR, the solicitor’s involvement with disclosure has been dramatically curtailed. The emphasis is on the client’s responsibility for disclosure. According to CPR 31.1036, a client (and, if it is a corporate client, all persons within the organisation who may need to know) should be told by his solicitor and made to appreciate promptly, after the claim form is issued, the duty of disclosure and the importance of not destroying document that might have to be disclosed. The solicitor should check that no relevant documents have been omitted. The solicitor’s obligations and duties are a far cry from the pro-active involvement solicitors had in dealing with discovery pre-CPR

Standard disclosure

Perhaps the most significant change of mood is the fact that, almost invariably, disclosure under the CPR is restricted to standard disclosure. The importance of standard disclosure is not just the limitation of the documentation given, but the limitation as to the search that has to be conducted for the documentation: only a reasonable search is necessary (CPR 31.7). When defending Equitable Life recently on its disclosure record, its leading counsel reportedly stated that Equitable’s solicitors had taken a proportionate and reasonable approach to the CPR, and had disclosed all relevant documents in the case. This did not, it would seem, include trawling through the 140 boxes in their possession of documents from Denton Hall, Equitable’s former legal advisers. (See Mathew Swallow and Joanne Harris, “Herbert Smith’s disclosure in Equitable called into question’, The Lawyer, May 2005.)

Unscrupulous defendants

It is bad luck today if a claimant finds he is faced by an unscrupulous defendant. The claimant is dependant on the defendant’s reasonable search for documents that support or adversely affect the claimant’s and defendant’s case. The solicitor’s pro-active stance is a thing of the past. Advice given on disclosure at all levels is now prefaced with the view “do we have to?” rather than “if it could possibly be relevant now, or hereafter, to issues or matters likely to be referred by any witnesses at trail, it should be disclosed”.

This “do we have to?” stance makes it harder when a party who needs additional disclosure for fair trial is faced with an unscrupulous defendant. Obviously, if the claimant can prove that documents exist and are relevant to pleaded issues and have not been disclosed, he can make an application for specific disclosure. But what if he cannot prove that they exist; only that he is deeply suspicious?

Mitsui & Co Ltd: oral agreement dispute

In Mitsui & Co Ltd v Nexen Petroleum UK Ltd [2005] EWHC 625(Ch), [2005] All ER (D) 429 (Apr) the claimant, a Japanese company, spent from August 2004 to the end of October 2004 negotiating its purchase of EnCana UK Ltd from its holding company, with its ultimate parent company (EnCana Corporation). On 29 October 2004, three days prior to the claimant signing legal documentation in London, EnCana UK Ltd’s holding company signed an agreement to sell EnCana UK Ltd to Nexen Energy for £2.1bn. Mitsui had an oral agreement it claimed prevented EnCana Corporation from soliciting offers from third parties (the first limb of the oral agreement), and required it to advise Mitsui of any bona fide offers from a third party and give it a chance to respond (the second limb of the oral agreement). Not surprisingly, in the circumstance, Mitsui was naturally suspicious that EnCana Corporation had tipped of Nexen Energy.

The existence of the oral agreement was denied. But if it did exist, as claimed, one could be sure of at least one thing: that Mitsui was dealing with an unscrupulous defendant in EnCana Corporation. Mitsui’s solicitors applied for Norwich Pharmacal Co v Customs and Excise Comrs [1974] AC 133 disclosure and failed. They knew who to sue-EnCana Corporation-and, according to the judgment of Lightman J, they should be able to get pre-action disclosure from EnCana Corporation to establish whether they had solicited any offers from third parties. Lightman J held that Norwich Pharmacal relief was a remedy of last resort, and would only be available if there is a need for such an order to enable the action to be brought against the ultimate wrong-doer and the claimant cannot obtain the information elsewhere.

The problem with pre-action disclosure

The problem with the suggested route of pre-action disclosure is its very limitation: it is standard disclosure (not Peruvian Guano (see below), or as it is referred to in CPR 31.6, a “train of enquiry” disclosure) where the applicant and the respondent are likely to be parties in subsequent proceedings-and it has to be desirable to give such pre-action disclosure (see CPR 31.16(3)(d).

In Mitsui, the claimant complained that it had insuperable difficulties in obtaining the necessary documents from pre-action disclosure. This was because pre-action disclosure is limited to standard disclosure, which would be given if the action had started: documents on which a party relies or that support another party’s case, and documents that adversely affect that party’s case or another party’s case. In other words, standard disclosure relates to the pleaded issues. One cannot plead (eg the breach by EnCana Corporation of the oral agreement not to solicit offers from third parties) if the4se facts are not known to the claimant because, in such circumstances, the claimant is not in a position to sign the statement of truth.

This difficulty was placed fairly before Lightman J (at para 33 of his judgment), who was robust in expressing his view as to how to deal with the problem: “I cannot see how or why the claimant cannot draft a pleading in the prospective litigation sufficient for the purpose of the application under CPR 31.16 [for pre-action disclosure] (even if not for the actual commencement of proceedings) alleging breach of first limb [ie of soliciting offers from third parties in breach of the oral agreement claimed], which is such as to bring the documents sought within the reach of standard disclosure, as required by the rule.”

This puts the cart before the horse. The writer’s sympathies are with Mitsui, whose executives may not feel able to sign a statement of truth that would include the allegation of the breach of the oral agreement by soliciting offers from third parties, when they were not in possession of the facts to support such a claim.

With the benefit of hindsight, an order for train of enquiry disclosure after proceedings had been issued, simply alleging breach of the second limb of the oral agreement (that EnCana Corporation had to advise Mitsui of any bona fide offers made from third parties and allow it appropriate time to respond to each offer), should produce all the documents sought by Mitsui.

Unpopular with judges

There appears to be judicial unpopularity in making orders for train of enquiry disclosure. Brett LJ in The Compagnie Financiere et Commerciale du Pacifique v The Peruvian Guano Company (1882) 11 QBD 55 tackled the question of disclosure of documents within the definition of “relating to any matters in question of the action”. He stated the principle as follows: “It seems to me that every document relates to the matters in question in the action which not only would be 3evidence upon any issue, but also which it is reasonable to suppose, contains information which may-not which must-either directly or indirectly enable the party requiring the affidavit [to verify documents in his possession or under his control] either to advance his own case or to damage the case of his adversary. I have put in the words ‘either directly or indirectly’ because, it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or damage the case of his adversary, if it is a document which may fairly lead him to a train of enquiry.”

Most significantly, there is no requirement to limit the extent of searches for train of enquiry disclosure.

The lack of judicial inclination to order train of enquiry disclosure is foreshadowed in the CPR, for while the courts’ discretion to give train of enquiry disclosure remains, there is no indication within the CPR or in the notes to the CPR as to when train of enquiry disclosure is appropriate. Only the Commercial Court guide, but not the Queen’s Bench or Chancery guides, includes a reference to disclosure that may lead to a train of enquiry.

More robust courts needed

Over the past five years, the writer has acted in Queen’s Bench and Chancery Division cases where wrongful misappropriation of sums, fiduciary breaches of director’s duties and conspiracy have been issues, but in no instance were orders given for train of enquiry disclosure. There were a number of applications for the specific disclosure, and applications for amendments to pleadings. Would train of enquiry disclosure have helped?

The courts, in particular the Queen’s Bench and Chancery Division, need to be more robust in exercising their discretion on disclosure issues, so as to deal justly between the parties to litigation and to ensure that a claimant gets disclosure-not just of such breaches of fiduciary duties or directions duties and agreements or contract that the claimant knows about, but also those the claimant does not know about (although he or she may have suspicions). Orders for train of enquiry disclosure would be a step to try and achieve that, and would help to put the parties on an even footing in cases involving fraud and deceit. The costs saved by a party having to deal with standard disclosure only, rather than train of enquiry disclosure, should not be allowed to impede a claimant’s ability to ascertain the scope and extent of wrongs done to it. If necessary, the courts can exercise their very wide powers that they have in relation to costs. They could provide for a party to be compensated for the additional cost of train of enquiry disclosure if they thought it necessary, and they could decide when such compensation should be considered and dealt with-at the time of the train of enquiry disclosure order itself, or later (eg at trial).

Perhaps most importantly, there should be wide judicial recognition that standard disclosure may well not be best suited for very large litigation or where the integrity or honesty of one party is in dispute.