Receipt of documents before legal action can be vital to understand the strength of a prospective claimant’s position, how to ultimately plead its case and to explore the likelihood of whether a settlement can be reached to ultimately reduce the litigation costs. It is also intended to assist prospective claimants who need the disclosure to determine whether to litigate at all.
Although a request could be made to the relevant party for the documents in question, it may be unlikely to result in voluntary surrender of the material sought, including for example because of confidentiality obligations owed or an unwillingness to incur costs associated with such disclosure. It is also of course a certain degree of an invasion of privacy.
Disclosure generally takes place after proceedings have commenced and the parties have filed directions questionnaires, this usually occurs during the case management stage. However, in some instances you may consider it necessary to obtain disclosure prior to the commencement of proceedings, eg, where:
- there is a risk that a prospective defendant will destroy documents or materials before proceedings start
- documents are required under pre-action protocols
- a third party has documents which may be relevant to the dispute (a principle enunciated from the well-known case of Norwich Pharmacal Co. v Commissioners of Customs and Excise, generally known as Norwich Pharmacal orders)
- you suspect fraudulent activity. Note: the court will only order pre-action disclosure in ‘exceptional’ cases where allegations of fraud are involved
Key authorities including Black v Sumitomo and Bermuda International, the court takes a two-stage approach when deciding whether to make such an order under Civil Procedure Rule 31.16(3):
(1) does it have jurisdiction i.e. the four conditions under CPR 31.16(3)(a), CPR 31.16(3)(b), CPR 31.16(3)(c) and CPR 31.16(3)(d) have been met and, if so;
(2) should it exercise its discretion to make the order.
The courts’ power to order disclosure before proceedings have started arises out of Section 33(2) of the Senior Courts Act 1981 or Section 52 of the County Courts Act 1984.
The conditions and relevant tests to be met are:
- CPR 31.16(3)(a) & (b) — The relevant test is that it is likely that the applicant and respondent will be parties to the proceedings if proceedings are issued. An applicant must also demonstrate that it has an arguable case.
Where there is a possible limitation issue with a prospective claim, there is no particular rule of law or practice as to how a court should deal with the question of limitation in an application for pre-action disclosure (Loches Capital Ltd v Goldman Sachs at para ). The court adopted the approach that where a claim is time-barred with no prospect of overcoming the limitation issue, this would be ‘a powerful, if not conclusive reason’ not to order pre-action disclosure. Where a potential limitation argument is not so strong that it is bound to succeed, it is unlikely to be a basis for the court to refuse an application for pre-action disclosure.
- CPR 31.16(3)(c) provides that an order for pre-action disclosure may only be made where, if proceedings had started, the documents or classes of documents sought from the respondent would fall within the requirements of standard disclosure under CPR 31.6. It limits the scope of documents covered by pre-action disclosure to those documents which fall within the standard disclosure obligations of CPR 31.6. The court has excluded background documents or ‘train of enquiry’ documents from the scope of this section.
- CPR 31.16(3)(d) provides that an order for pre-action disclosure may only be made where disclosure before proceedings is desirable to (i) dispose fairly of the anticipated proceedings, (ii) assist the dispute to be resolved without proceedings, or (iii) save costs.
There are several factors to consider, namely the extent of the documents sought; the necessity of the disclosure to establish whether the applicant has a claim; whether the possible claims are speculative in nature, whether the applicant already possesses sufficient material to strategize and plead a claim; whether the early disclosure will result in significant saving in costs; whether the disclosure sought would be extraordinarily burdensome; whether the parties are engaged in such hostility that it is unlikely any disclosure would assist the dispute from being resolved without proceedings; the extent to which information is known to only one of the parties ; and whether the disclosure of quantum documents are desirable to assist the dispute to be resolved without proceedings and to save costs.
Even if the jurisdictional threshold is met, pre-action disclosure will only be granted if the court then exercises its discretion in favour of the applicant. In exercising its discretion, the court will look at the facts of each case.
Several factors the court may take into account when exercising its discretion include the nature of the loss complained of; the clarity of the issues raised; the nature of the documents requested; the nature of the applicable pre-action protocol and the stage reached in that protocol process; the availability of the documents from other sources and the opportunity for making the claim without the disclosure being given pre-action; what special need for urgency there is in obtaining the documents at this pre-action stage.
Pre-action disclosure is the exception and it is generally not easy to obtain an order. Applicant should produce a narrow and tightly drawn list of documents. The more determinative the documents are of the dispute in issues, the easier it will be for the court to grant the request.
Parties should try to agree before the hearing that some of the conditions are satisfied, this will save costs as it will limit the contentious issues before the court.
Lastly, consider whether you should redact any commercially sensitive information when responding to an application or complying with an order.
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