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One of the major criticisms of the Woolf reforms to the litigation procedure was the front-loading of costs brought about by the pre-action protocols. One part of this new regime is the increasing need for pre-action disclosure. Victoria Russell discusses below what this can mean.
The framework for pre-action disclosure is established by section 33(2) of the Supreme Court Act 1981, and Rule 31.16 of the Civil Procedure Rules.
Rule 31.16 provides:
- This rule applies where an application is made to the court under any Act for disclosure before proceedings have started.
- The application must be supported by evidence.
- The court may make an order under this rule only where:
- the respondent is likely to be a party to subsequent proceedings;
- the applicant is also likely to be a party to those proceedings;
- if proceedings had started, the respondent’s duty by way of standard disclosure, set out in rule 31.6, would extend to the documents or classes of documents of which the applicant seeks disclosure; and
- disclosure before proceedings have started is desirable in order to:
- dispose fairly of the anticipated proceedings;
- assist the dispute to be resolved without proceedings; or
- save costs.
The operation of Rule 31.16(3)(d) was considered by the Court of Appeal in Black v Sumitomo Corporation [2001] EWCA Civ 1819; [2002] 1WLR 1562. At paragraphs 79-83, Rix LJ said this:
“This is a difficult test to interpret, for it is framed both in terms of a jurisdictional threshold (only where) and in terms of the exercise of a discretionary judgment (‘desirable’).
Three considerations are mentioned in paragraph (3)(d): disposing fairly of the anticipated proceedings; assisting the dispute to be resolved without proceedings; and saving costs. The first of this trio obviously contemplates the disposal of proceedings once they have been commenced – in that context the phrase dispose fairly is a familiar one (see e.g. RSC Ord 24, r 8); the second as clearly contemplates the possibility of avoiding the initiation of litigation altogether; the third is neutral between both of these possibilities.
It is plain not only that the test of ‘desirable’ is one that easily merges into an exercise of discretion, but that the test of ‘dispose fairly’ does so too. In the circumstances, it seems to me that it is necessary not to confuse the jurisdictional and the discretionary aspects of the paragraph as a whole. In Bermuda International Securities Ltd v KPMG [2001] Lloyd’s Rep PN 392-397 para 26, Waller LJ contemplated that paragraph (3)(d) may involve a two-stage process. I think that is correct. In my judgment, for jurisdictional purposes the court is only permitted to consider the granting of pre-action disclosure where there is a real prospect in principle of such an order being fair to the parties if litigation is commenced, or of assisting the parties to avoid litigation, or of saving costs in any event. If there is such a real prospect, then the court should go on to consider the question of discretion, which has to be considered on all the facts and not merely in principle but in detail.
Of course, since the questions of principle and of detail can merge into one another, it is not easy to keep the two stages of the process separate. Nor is it perhaps vital to do so, provided however that the court is aware of the need for both stages to be carried out. The danger, however, is that a court may be misled by the ease with which the jurisdictional threshold can be passed into thinking that it has thereby decided the question of discretion, when in truth it has not. This is a real danger because first, in very many if not most cases it will be possible to make a case for achieving one or other of the three purposes, and secondly, each of the three possibilities is in itself inherently desirable.
The point can be illustrated in a number of ways. For instance, suppose the jurisdictional test is met by the prospect that costs will be saved. That may well happen whenever there are reasonable hopes either that litigation can be avoided or that pre-action disclosure will assist in avoiding the need for pleadings to be amended after disclosure in the ordinary way. That alternative will occur in a very large number of cases. However, the crossing of the jurisdictional threshold on that basis tells you practically nothing about the broader and more particular discretionary aspects of the individual case or the ultimate exercise of discretion. For that, you need to know much more: if the case is a personal injury claim and the request is for medical records, it is easy to conclude that pre-action disclosure ought to be made; but if the action is a speculative commercial action and the disclosure sought is broad, a fortiori if it is ill-defined, it might be much harder.”
In XL London Market Ltd v Zenith Syndicate Management Ltd [2004] EWHC 1182 (Comm), Mr Justice Langley made an order for pre-action disclosure in litigation between the managing agents of various Lloyd’s syndicates.
In relation to the test of fairness, Mr Justice Langley said this at paragraph 31:
“In general, where the relevant information is held by the respondent and not otherwise available to the applicant, I think it is likely that if the first two tests are passed so will be the test of fairness. To determine if they have a claim and to formulate it, XL London and Brockbank need access to the second category of documents. I also think that disclosure will save costs. It will enable further investigation of the reserves to be focused rather than random. If a claim is made it can be expected to be presented with particularity.”
In Briggs & Forrester Electrical Ltd v The Governors of Southfield School for Girls [2005] BLR 468, Judge Coulson QC ordered pre-action disclosure of quantum documents (but not the other documents sought) in relation to a claim for asbestos contamination. The judge took the view that such disclosure would assist settlement negotiations and save costs.
In First Gulf Bank v Wachovia Bank National Association [2005] EWHC 2827 (Comm), Mr Justice Christopher Clarke refused to make an order for pre-action disclosure in relation to a prospective claim for fraud concerning letters of credit. The judge was particularly influenced by the fact that the applicant had obtained much relevant information from the pleadings, evidence and skeleton argument in related litigation. In the concluding section of his judgment, Mr Justice Christopher Clarke said this:
“I have reached that conclusion as a result of a combination of reasons. Firstly I remind myself that such an order, even if not exceptional, is unusual. Secondly, as I have said, this is not, in my view, a case in which First Gulf cannot start proceedings without pre-action disclosure and in which the court should, on that account, be disposed to assist them to do so. On the contrary they would, as a result of the previous litigation, appear to enjoy a number of advantages over the ordinary litigant. Thirdly, I take the view that a reconciliation between the concerns that Rix LJ identified and to which I refer in paragraph 18 above, is most appropriately met by requiring First Gulf to plead such case as they can rather than requiring pre-action disclosure without any pleading at all. Such a course would indicate what is alleged without allowing dishonesty “to spread its cloak over the means by which it can be detected and revealed”. Fourthly, I think that I should be tipping the balance unduly in First Gulf’s favour if I were to order pre-action disclosure, in circumstances where FUNB themselves have what appear to be legitimate claims for disclosure, so that the parties will not be on an equal footing…
I am equally not persuaded that it is desirable that I should make an order for pre-action disclosure for the purpose of assisting the dispute to be resolved without proceedings or of saving costs, or that, if there is a prospect of achieving either of those results, so that the jurisdictional threshold is crossed, it is sufficiently enticing to justify making the order sought. The reality of the present case appears to me to be that there is very little prospect of it being disposed of without pleadings and standard disclosure being given by both sides in the ordinary way. There seems to me equally little prospect that the giving of the disclosure sought before an action is brought is likely to produce a significant saving in costs in comparison with the costs that would be involved if discovery was given after the proceedings were commenced. Any saving that might arise because pre-action disclosure might avoid the need to amend the proceedings subsequently appears to me to be of marginal significance in the context of a claim of this nature.”
These cases were all analysed recently in the judgment by Mr Justice Jackson in the case of Birse Construction Ltd v HLC Engenharia e Gestao de Projectos SA [2006] EWHC 1258 (TCC). Mr Justice Jackson said:
“In many TCC cases, disclosure is a labour-intensive exercise and a major head of costs. Therefore, disclosure before the proper time is not something which should be lightly ordered. On the other hand, the court encourages the early and candid exchange of information in the hope that this will promote settlement before excessive costs are incurred. Alternatively, it is hoped that the parties may at least narrow the issues between them. This is part of the philosophy which underlies the Pre-action Protocol for Construction and Engineering Disputes. It should be noted that this is the only pre-action protocol which requires a meeting between the parties before they resort to litigation.
In any given case it must be a matter for close and critical analysis whether the early disclosure by one party of certain categories of documents really does bring the prospect of (1) disposing fairly of the anticipated proceedings; or (2) assisting the dispute to be resolved without proceedings; or (3) saving costs. The answer to this question must be heavily fact sensitive. No rule of thumb can assist. This question is the jurisdictional threshold. If the answer is no, the application fails.
If the answer to the first question is yes, the next matter to consider is whether pre-action disclosure is desirable in order to achieve those of the specified purposes which are achievable. The third question to consider is whether the court should exercise its discretion in favour of making the order. As Rix LJ pointed out in Black, those two questions tend to merge into one another, but the judge must bear in mind each of the separate tests which he is required to perform.
The test of ‘desirable’ and the exercise of discretion are particularly important in this context because of the relative ease with which the jurisdictional threshold can be crossed (see Black at paragraphs 82 and 83). In the TCC context, the judge may be assisted by having regard to any correspondence written pursuant to the Protocol. The judge should also have regard to the importance of limiting (a) pre-action costs and (b) the pre-action expenditure of resources (including management time) to a level which is reasonable and proportionate.
Christopher Clarke J observed in First Gulf Bank that to require pre-action disclosure is an order which, even if not exceptional, is unusual. I agree with that observation. Given the level of cooperation between opposing parties, which is a normal feature of TCC litigation, I would not expect an order for pre-action disclosure to be appropriate in most cases which come before this court.”
The judge examined whether the parties were likely to be the parties to the proposed litigation and then went on to look at whether the documents sought by Birse fell within the ambit of standard disclosure. Birse accepted that their application was too wide, and it was amended accordingly. The judge then came to the next question he had to answer, namely whether pre-action disclosure was “desirable in order to (1) dispose fairly of the anticipated proceedings; (2) assist the dispute to be resolved without proceedings; or (3) save costs”.
He decided that if the documents identified in the amended application were disclosed, then there was “a real possibility that the parties will resolve their present dispute without recourse to litigation”. He said:
“Both HLC SA and Birse are commercial entities. If they are both able to make an informed assessment of their case on the basis of the critical documents, there must be a serious possibility of compromise”.
He also said:
“It also seems to me that pre-action disclosure of categories (a) to (e) will promote the fair disposal of the anticipated proceedings. It is not a level playing field if, at the outset of the litigation, one party is obliged to plead its case in ignorance of certain basic facts. If pre-action disclosure is not ordered, I anticipate that in due course Birse will need to make substantial amendments to its pleadings. Such amendments will be causative of delay and wasteful of costs. I therefore conclude that the jurisdictional threshold set out in rule 31.16(3)(d) has been passed in all three ways that are possible.”
Having considered all the circumstances of the case, he was “quite satisfied that it is desirable and that it is a proper exercise of this Court’s discretion to make an Order for pre-action disclosure… all the various tests set out in rule 31.13(3) are satisfied”. In future cases, it will be important that these principles are given careful consideration.