BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Strand, London, WC2A 2LL
B e f o r e :
| ZEUS INVESTORS
|- and -
|HSBC BANK PLC
Harry Adamson (instructed by Norton Rose Fullbright) for the respondent
Hearing date: 24th November 2020
Crown Copyright ©
MR JUSTICE BRYAN:
"Whilst the documents that are available indicate a breach has occurred and may well be sufficient in their own right to support the claimant's prospective claims, disclosure of the categories of the documents set out in schedule 1 will, it is believed, provide a more complete picture of the nature and scope of the breach, such that claims for breach may be fully considered with investors, then particularised in detail."
"The parties to the proceedings in the Commercial Court are not required or generally expected to engage in elaborate or expensive pre action procedures and restraint is encouraged."
B. FACTUAL BACKGROUND
"No person who is not a party to this agreement shall be able to enforce this agreement by virtue of the Contracts (Rights of Third Parties) Act 1999."
"The agreement between Zeus and [HSBC] does not on its face permit that conduct. If [HSBC] assumed certain duties under that agreement ... there is a sufficient and justified claim that [HSBC] assumed those duties not just to Zeus, but to the "customers" (investors) to whom frequent reference is made in the contractual context of HSBC's duties."
C. THE CLAIMANTS
"We are instructed by a number of prospective claimants that we believe will eventually exceed 200 in number in a potential claim for substantial damages against HSBC for breaches of the agreement and further tortious breaches of duty."
"Contrary to [the letter of 24 July 2020], NRF did not ask for details of all prospective claimants. The question was who the purported applicants were on this application, i.e. those to whom it was intended disclosure would be made and who would be giving the undertakings set out in paragraphs 1 and 2 of the draft order."
"We have explained to you already the reasons for details of the prospective claimants in this matter not yet having been provided. The same applies to the individual members of the applicant group and there is, in any event, no good reason for your requiring this information at this stage. For the avoidance of doubt, a prospective costs award against the applicant is not a good reason for requiring that information. In the event that your client became entitled to a costs award, as a result of the application, it would be entitled to seek payment of that costs award from the applicant. If, for some reason, the applicant failed to make payment, then it would be open to your client to seek a third party costs order under the provisions of section 51 of the Senior Courts Act 1981 and, as part of any search application, could seek details of the individual members of the applicant group. Until then, your demands are premature and without merit."
"53. Zeus Investors is, as explained in Harvey 1, a representative group analogous to an unincorporated association. An unincorporated association has no separate legal identity and each member's personal liability will usually be limited to the extent of his subscription fee (Wise v Perpetual Trustee Co  AC 139.
"54. It is also not possible to contract with an unincorporated association itself; nor is it possible to contract with the members from time to time. An unincorporated association could become involved in a claim in tort because of something that happens on the association's premises or because of the actions of members.
"55. However, an injunction may be obtained by or against persons belonging to an unincorporated association. Where in proceedings there is a clear conflict of interest between persons belonging to or affiliated with an unincorporated association, it is inappropriate to sue selected individual members as representing all other members. In particular, see London Association for the Protection of Trade & Anor, appellants, v Greenlands Limited, respondents  2 AC 15, where an unincorporated body called the London Association for the Protection of Trade was party to proceedings. Further, in the Oxford University v Webb  EWHC 2490 (QB), despite its efforts to avoid the formal trappings of an organisation, it was held that the Animal Liberation Front was a coherent organisation that was capable of being represented in a legal action and was subsequently joined to the proceedings. There is no reason why the applicant, as a representative body, most clearly analogous to an unincorporated association, cannot obtain NPO relief or relief under CPR part 31.16."
"18.2, a witness statement must indicate (1) which of the statements in it are made from the witness's own knowledge and which are matters of information and belief and (2) the source for any matters of information or belief."
"Both Bermans and Newport Tax Management LLP have been instructed by a small group of investors that have formed an Investor Steering Committee to explore the remit and scope of the claim(s) further."
"(1) "I am duly authorised by the applicants to make this statement on their behalf" (but the identity of the applicants is not given).
(2) "I make this statement in support of my client's application" ("client" being in the singular).
(3) "The applicants are circa 200 plus perspective claimants ... the applicants make this application in a representative capacity on behalf of the other prospective claimants" (which suggests that there are circa 200 applicants party to the application notice).
(4) "The applicants and I believe, having obtained sight of and/or having been made aware, by contemporaneous records between key staff members within [HSBC], that a serious breach of contract and/or tortious duty has been committed by [HSBC]" (which appears to be stating a belief held by circa 200 individuals or at least a belief held by whoever the applicants (who are unidentified) actually are).
(5) "Both Bermans and Newport Tax Management LLP have been instructed by a small group of investors that have formed an Investor Steering Committee to explore the merit and scope of the claims further" (who is in that group of investors is not identified and it is not clear if they are the applicants).
(6) "It is the applicants' position therefore" (without identifying the applicants).
(7) "Once this information is made available the applicants and other investors should have sufficient information to take further legal or seek other redress against [HSBC]" (drawing a distinction between the "applicants" and "other investors").
(8) "I am duly authorised by the claimants to sign this statement and confirm that full and frank disclosure of all relevant matters has, as far as I am aware, been given" (the reference on this occasion being to the "claimants" who are not identified)"
(1) The applications by their very nature are seeking information which has the potential to be confidential and which is sought for, and then can only be used for, a specific purpose. It needs to be clear who is applying for and is receiving such information, so that it can be assessed whether they have any entitlement to such information and whether it is appropriate to give them such information.
(2) The applicants by their counsel are giving binding undertakings, as reflected in the draft order. They need to be identified so that if necessary the undertakings can be fully enforced. In addition, by virtue of the wording of the draft order at paragraph 2(a), the information cannot be shared to anyone other than the applicants. Therefore it is also important to identify who those applicants are.
(3) The application is one for Norwich Pharmacal relief and, as such, HSBC are entitled to their costs, not only in complying with the order (as provided for in the draft order), but also in coming to court to deal with any queries. It follows that the applicants are (and indeed are agreeing to be) under a liability to pay costs if their application is successful (and a fortiori given that costs will follow the event if they are not) and so the identity of each applicant/claimant is required. There will, on any view, be costs orders against the applicants, and their identity should therefore be stated at the time of the application. This is nothing to do with third party costs orders and any possible application of section 51 of the Senior Courts Act.
(4) An undertaking in damages is being offered but (somewhat confusingly) it is now stated in the skeleton argument that "the applicant" in the singular is" a solvent, well funded entity" (emphasis added), this being the first reference to an entity as the applicant, and it is stated that:
"The applicant can provide an undertaking in damages that carries substance to support it and the applicant has third party funding which has been procured for both this application and the substantive prospective claim(s) and is in place to a value as required in excess of 5 million."
This is a different statement to what is given at paragraph 34 of Mr Harvey's first statement, which provides:
"I confirm that the applicants can provide an undertaking in damages that carries substance to support them and the application of third party funding has procured for both this application and the substantive prospective claim(s) and is in place to a value if required in excess of 5 million."
Thus, whilst the parties to the application must have been known at the time of the issue of the application notice and Mr Harvey's witness statement (and they are stated as "applicants" specifically in the plural), they have gone from the plural to the singular in the Skeleton Argument which appears to correspond with the latest suggestion that the "applicant" is a representative body. This vividly illustrates why the identity of the parties to the application notice should have been given. If this did not suffice, paragraph 76 of the skeleton argument provides:
"There is no other evidence that casts doubt over the ability of the applicant to pay out under the cross undertaking, should this application be unsuccessful."
Yet the court is not in a position to assess this, as the applicant is not identified and the applicant's financial worth is not evidenced, nor is there evidence behind the suggestion that there is funding in place in relation to any action and in relation to costs, other than what is said by Mr Harvey.
(5) If the reality is that it is not the "investors" who have brought the application but some other entity, that entity needs to be identified.
(6) In relation to the application notice, Practice Direction 23(a) paragraph 2.1 requires the full name of the applicant to be stated as must be done in the case of a Part 7 claim form. And in that context Practice Direction 16, paragraph 2.6, specifies that the full name of each party should be stated and what amounts to a full name is identified. None of the permutations would appear to be apt for "Zeus Investors". By Practice Direction 8(a), paragraph 4.1, the rules and directions in relation to Part 7 claim forms are to be applied, where appropriate, to Part 8 claim forms, as is apt in the present case. There are also many reasons why the full name of each party is to be used in a claim form (for example, to stop time running for limitation purposes). If a claim form had been used, as it should have been used, the need to identify each claimant would have been all the more apparent.
(7) In the context of costs (which will normally be summarily assessed at the end of the hearing) it is necessary to know at that time who is liable to pay those costs. That will also distinguish between who may be the subject of a costs order and also facilitate investigation of who else may have funded the application or be subject to a possible third party costs application.
D. APPLICABLE PRINCIPLES - NORWICH PHARMACAL
"(i) The application has demonstrated a good arguable case that form of legally recognised wrong has been committed against them by a person ("the arguable wrong condition").
(ii) The respondent to the application must be mixed up in, so as to have facilitated the wrongdoing (the "mixed up in condition").
(iii) The respondent to the application must be able or likely to be able to provide the information or documents necessary to enable the ultimate wrongdoer to be pursued (the "possession condition").
(iv) Requiring disclosure from the respondents is an appropriate and proportionate response in all the circumstances of the case, bearing in mind the exceptional but flexible nature of the jurisdiction (the "overall justice condition")."
"The court has to be vigilant in guarding against 'fishing exercises' in what is regarded as an exceptional jurisdiction."
(1) At its inception the jurisdiction was limited to the provision of the identity of and information about the wrongdoer.
(2) Subsequently it was extended to situations in which "the identity of the claimant is known, but where the claimant requires disclosure of crucial information in order to be able to bring its claim or where the claimant requires a missing piece of the jigsaw" (Mitsui, at , cited with approval in Ramilos at  and ).
(3) In P v T  1 WLR 1309, the court ordered disclosure when the claimant knew neither the identity of the wrongdoer nor even whether a tort had been committed. And in Mohamed the Divisional Court accepted that disclosure could in that "truly exceptional" case (because it was information required to exculpate an individual facing a possible death penalty) go beyond "merely the identity of the individual or a certain specific fact". (Paragraph 132, cited in Ramilos at paragraph 45).
(4) In Axa Equity v National Westminster Bank Plc  PNLR 433, the plaintiffs sought discovery in the nature of documentary evidence which would enable them to assess whether they had a claim in tort. Rimer J held at page 443 that:
"Norwich Pharmacal provides no authority for the making of any such order."
(5) Flaux J concluded at :
"The Norwich Pharmacal jurisdiction remains an exceptional jurisdiction with a narrow scope. The court will not permit the jurisdiction to be used for wide ranging disclosure or gathering of evidence, as opposed to focussed disclosure of necessary information: see the judgment of Mr Justice Rimer in Axa and the Divisional Court in Mohamed at paragraph 133 ... Furthermore, it is impermissible to use the jurisdiction as a fishing expedition to establish whether or not the claimant has a good arguable case or not [sic]."
"In the circumstances of a particular case justice requires from the facilitator the particular cooperation demanded of him by the claimant with a view to righting facilitated wrongdoing." (per Andrew Baker J in Burford Capital v London Stock Exchange  EWHC 1183 (Comm) at paragraph 40).
"The questions are whether such information is vital to a decision to sue or an inability to plead and whether or not, even if it is, it can be obtained from other sources. The purpose of an order is to enable an applicant to take action which could not otherwise be taken."
"Relief can be ordered where the identity of the claimant [sic] is known but where the claimant requires disclosure of crucial information in order to be able to bring its claim or where the claim requires a missing piece of the jigsaw".
"... to assist those who need the disclosure as a vital step in deciding whether to litigate at all or to provide a vital ingredient in the pleading of their case."
E. THE APPLICATION AND HSBC'S RESPONSE THERETO
(1) The applicants do not have a good arguable case against HSBC;
(2) The applicants seek evidence and not information, which cannot be ordered under the Norwich Pharmacal jurisdiction;
(3) The applicants have refused to reveal their identities, which is not only a breach of the CPR but also gives rise to insuperable difficulties of substance; and
(4) The overall justice condition is not met in circumstances where (amongst other matters) the information sought is not vital to a decision to sue or an ability to plead.
F.1: THE ARGUABLE WRONG CONDITION
Claim in Contract/Tort
"The suggestion that the investors and third party beneficiaries of your clients' assumed contractual duties under the agreement cannot claim the benefit of them and pursue your client for losses arising from their breaches is naive/disingenuous. We suggest you take the allegations more seriously and provide a more considered response than your letter suggests has thus far been given to them."
"I contend that what is clear ... is that ... [HSBC] assumed both contractual and tortious duty to investors under the agreement and this was an ongoing duty ... yet despite receiving substantial funds for their purported delivery of 'services', failed to notify the investors of their concerns in breach of duty and, as such, there exists a good arguable case of wrongdoing against the respondent." (Harvey 1, paragraph 32) (emphasis added)
"It cannot, I submit, be objectively disputed that ... the investors can demonstrate clearly that HSBC assumed contractual duties to them, pursuant to the ... agreement." (Harvey 2, paragraph 10) (emphasis added).
"The assumption of a clear duty to the investors, I believe, cannot be credibly challenged by HSBCPM/the respondent."
"No person who is not a party to this agreement shall be able to enforce this agreement by virtue of the Contracts (Rights of Third Parties) Act 1999." (Clause 26).
(1) Whilst recital B, provides "Zeus has agreed to appoint HSBC to provide financial planning and ongoing tax and financial advice in relation to the agreed arrangements for customers" (which is quoted by Mr Harvey), recital D makes clear that such services are being provided to Zeus:
"Zeus has agreed to appoint HSBC, and HSBC has agreed to provide such services to Zeus" (emphasis added)
(2) "Customers" are defined as "customers of Zeus from time to time" (emphasis added) (which Mr Harvey does refer to and says that these are the investors).
(3) "Services" are defined as:
"The services carried out by HSBC for Zeus as described in schedule 1 of this agreement" (emphasis added).
(4) Clause 3.1 provides (in relation to "obligations of HSBC") that:
"HSBC will supply the services to Zeus and perform its other obligations under this agreement in accordance with the terms of this agreement." (emphasis added)
(5) Clause 3.3 provides that:
"Zeus acknowledges that it will be responsible for making its own decisions in relation to any advice, financial structure or other information provided by pursuant to this agreement ... however HSBC acknowledges that Zeus will use and rely on advice and information provided by HSBC in connection with the provision of the services." (emphasis added)
(6) Clause 4.1 provides:
"HSBC hereby covenants with and undertakes to Zeus without prejudice to any of its specific obligations under this agreement it will: (1) act with all due skill, care and diligence in the provision of the services provided pursuant to this agreement" (emphasis added)
(7) Schedule 1 is referred to by Mr Harvey, but he omits the words that I have emboldened:
"HSBCPB will provide the following services related to plans to Zeus ... advice on legislative and financial issues which arise from time to time with recommendations and advice on impact for Zeus and/or customers."
(Mr Harvey himself emboldening the separate word "customers", albeit that he does in the next paragraph (11) refer to the definition of "services" to be provided to Zeus).
"The prospective claim in respect of which this disclosure is sought concerns approximately 200 claimants in a potential claim for damages believed to be in the region of a collective minimum sum of £50 million against the respondents for breach of contract and/or negligence." (emphasis added)
"[HSBC] assumed certain duties under the agreement ... recitals B and D ... clause 3.3 .../schedule 1 definition of "services" ... there is a sufficient justified claim that the respondent assumes those duties not just to Zeus but to 'customers' (investors) to whom frequent reference is made in the contractual context of [HSBC]'s duties."
"42. The current juridical basis for the claim is a Hedley Byrne assumption of responsibility by the respondent to the applicants and investors, see Barclays Bank Plc v Fairclough Building Limited No. 2  IRLR 605, Riyad Bank v Ahli United Bank (UK)  EWCA Civ 780, HOW Engineering Services Limited v Southern Insulation (Medway) Limited  EWHC 1878 (TCC) especially per Mr Justice Aikenhead . There may be a number of objections to the claim of a voluntary assumption of responsibility in opposition to a fully formulated claim, but for the purposes of this application the fact that the applicants are identified "as customers" of the "services" defined in schedule 1 to the agreement is highly persuasive.
43. The respondents' involvement cannot be disputed and the basis upon which there are suspicions of wrongdoing are clear. The provision of further information by way of this disclosure order is necessary and proportionate, in order to understand more about the alleged wrongdoing already identified and to understand if further wrongdoing has been committed."
"If the applicants can establish an assumption of responsibility, they accept it must be co extensive and concurrent with the agreement following the consistent ratio of cases since Henderson v Merrett Syndicates."
"A concurrent duty of care in tort can exist as between the two parties to a contract for services or for the supply of goods and services; that duty of care will be definable by reference to the contractual responsibilities and liabilities assumed by the parties to the contract ..."
"A Limitation Act 1980 defence is not available to your clients as the investors have only (in part) been recently made aware of the existence of the agreement and its terms. Most investors are, as yet, unaware of the agreement, let alone the express contractual duties assumed in their favour" (emphasis added)
F.2. THE MIXED UP CONDITION AND POSSESSION CONDITION
"... the order for discovery must not offend against the 'mere witness' rule which prevents a party from obtaining discovery against a person who will in due course be compellable to give that information either by oral testimony as a witness or on a subpoena duces tecum (now under the CPR a witness summons) to give oral evidence or to produce documents."
F.3. OVERALL JUSTICE CONDITION / ORDER NECESSARY IN THE INTERESTS OF JUSTICE
"The documents that are available indicate breach has occurred and may well be sufficient in their own right to support the claimants' prospective claims."
"Disclosure of the categories of documents set out in schedule 1 will, it is believed, provide a more complete picture of the nature and scope of the breach, such that claims for breach may be fully considered with investors and then particularised in detail."
"Given that all three principal criteria are satisfied, in my respectful submission, the overall justice in ordering focussed disclosure of key documents, subject to keyword search criteria, as is suggested below, is both appropriate and proportionate in the interests of justice."
"Disclosure of all documents within [HSBC's] control that contains information, relating to, including but not limited to ... all attendance notes, memoranda, advices and email exchanges between any and all of:
Neil Bowman, Guy Surtees, Mark P Williams, Olivia Emmerton, Tim Levy of Future Capital, Marie Earnest and Group Tax (and members thereof), Steve Bold, Dominic Ryder or Richard Hughes between January 2007 and December 2010 and making reference to any or all of the following keywords…" (emphasis added).
"The applicants seek disclosure of all documents within the respondents' control that contain ..."
And then deleting the words that followed, and then going on:
"All attendance notes, memoranda, advice and email exchanges."
And including the words:
"Relevant to the arrangements in schedule 4 to the agreement dated 21 November 2007, between any and all of ..." (emphasis added)
And then he maintained all the bullet points that follow.
G. PRE-ACTION DISCLOSURE CPR 31.16
"Your assertion that an application under CPR 31.16 is more appropriate ... is also misplaced and has no substantive value ... CPR 31.18 expressly preserves the court's common law power to award a pre action disclosure and disclosure against non parties."
"Pre action disclosure applications in the Commercial Court are rare and no recent examples of successful applications have been identified."
"(1) This rule applies where an application is made to the court under any Act for disclosure before the proceedings have started.
(2) The application must be supported by evidence.
(3) The court may make an order under this rule only where:
(a) the respondent is likely to be a party to subsequent proceedings.
(b) the applicant is also likely to be a party to those proceedings.
(c) 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:
(d) disclosure before proceedings have started is desirable in order to:
(i) dispose fairly of the anticipated proceedings;
(ii) assist the dispute to be resolved without proceedings; or
(iii) save costs."