England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(Mr Michael Brindle QC, sitting as a Deputy
High Court Judge)

		Royal Courts of Justice Strand, London, WC2A 2LL
		3rd December 2001

LORD JUSTICE RIX:

1. This is an appeal about pre-action disclosure. It arises in the context of heavy prospective litigation in the Commercial Court concerning a possible claim for unlawful conspiracy to manipulate markets and/or breach of articles 81/82 of the Treaty of Rome. The prospective claimants, Mr Herbert Black and his companies ("Mr Black"), say that they have suffered losses amounting to at least $126 million.
2. In the court below Michael Brindle QC, sitting as a deputy high court judge, ordered 9 categories of pre-action disclosure against prospective defendants Sumitomo Corporation and other companies in the Sumitomo group ("Sumitomo"). Sumitomo appeals.
3. The power to order pre-action disclosure arises out of section 33(2) of the Supreme Court Act 1981, as amended in by the Civil Procedure (Modification of Enactments) Order 1998 pursuant to the Civil Procedure Act 1997 so as to extend the power from cases in respect of personal injury or death to all cases. The extension was recommended by Lord Woolf's report on Access to Justice (July 1996, see section III paras 47/52) and came into force at the same time as the CPR regime in general on 24 April 1999. The procedure is now governed by CPR 31.16.

Section 33(2) of the Supreme Court Act 1981

4. Section 33(2) provides as follows:

"On the application, in accordance with rules of court, of a person who appears to the High Court to be likely to be a party to subsequent proceedings in that court, the High Court shall, in such circumstances as may be specified in the rules, have power to order a person who appears to the court to be likely to be a party to the proceedings and to be likely to have or to have had in his possession, custody or power any documents which are relevant to an issue arising or likely to arise out of that claim –

(a) to disclose whether those documents are in his possession, custody or power; and

(b) to produce such of those documents as are in his possession, custody or power to the applicant…"

CPR 31.16

5. CPR 31.16 provides as follows:

"(1) This rule applies where an application is made to the court under any Act for disclosure before 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..."

The Hamanaka affair

6. The background to these proceedings is the Hamanaka affair. On 13 June 1996 Sumitomo, the world's largest copper trader and a major user of copper in its own operations, announced that it had dismissed its chief copper trader, Mr Yasuo Hamanaka, the general manager of its non-ferrous metals division, on the ground of his unauthorised trading activities. Sumitomo said that over the previous ten years such activities had lost it US $1.8 billion. It is not clear whether that figure represented only liquidated losses to date or included an estimate of the cost of unwinding Sumitomo's current copper positions, but probably the latter.
7. Those positions were huge. Mr Hamanaka had in effect attempted to corner the world's copper market. There is evidence that as of that time Sumitomo was "long" (ie was the net purchaser) of about 1 million tonnes (40,000 lots) of copper futures and warrants and had also sold put options for a further 1 million tonnes. The sale of a put option gives its buyer the right but not the obligation to sell copper at the strike price. These totals, albeit they represented obligations running into the future, dwarfed the amount of physical stocks held in the warehouses of the world's leading copper markets such as the LME. A subsequent report by the CFTC (USA's Commodity Futures Trading Commission) dated 11 May 1998 put the matter like this:

"Sumitomo through its agent or agents intentionally acquired and maintained a dominant and controlling position in both the physical supply of deliverable LME warehouse stocks and in maturing LME futures positions. At various times within the period in question Sumitomo owned virtually all deliverable LME copper stocks. These positions were not intended to meet Sumitomo's legitimate commercial needs. The intent motivating the acquisition and control of both the cash market positions and the futures market positions was expressly to create artificially high absolute prices. Sumitomo deliberately exploited its market dominance in order to profit when market prices became artificially high as Sumitomo had foreseen and planned."

8. Although Mr Hamanaka's dismissal was announced on 13 June 1996, the regulatory authorities, the CFTC and in the UK the SIB (Securities and Investment Board), had began to investigate the manipulation of copper prices in October 1995. Those investigations led to Sumitomo's suspension of Mr Hamanaka on 8 or 9 May 1996. In early June he confessed to his ten-year rogue trading scheme and revealed the positions which he had hidden from his management. On 13 June there was a meeting, convened at Sumitomo's request, in Washington DC with representatives of the CFTC and the SIB. Sumitomo's evidence is that at that meeting Sumitomo explained "the three pillars" of its policy: full cooperation with government authorities; the maintenance of orderly markets; and reduction of Sumitomo's positions without severe market disruption. The regulators were equally concerned to maintain orderly markets. The regulators recommended Sumitomo to seek professional guidance about liquidating its positions. The press announcement of that day was agreed. It spoke of Sumitomo's intention to cooperate with the authorities and to help to ensure "a stable and orderly copper market in consultation with the London Metal Exchange". In a further press release made the same day Sumitomo confirmed, at CFTC's request, that it would honour all Mr Hamanaka's dealings, regardless of whether they were authorised. Sumitomo retained Goldman Sachs to assist in the liquidation process, and on 18/20 June transferred the majority of its open positions to a special Goldman Sachs account. At the regulators' further request, an open and direct line of communication was authorised between the regulators and LME on the one hand and Goldman Sachs on the other, so as to permit the former to monitor the liquidation process.
9. On 11 May 1998 Sumitomo and the FSA (the Financial Services Authority, as the SIB had by then become) entered into an agreement under which the FSA agreed not to proceed further against Sumitomo and Sumitomo agreed voluntarily to pay £5 million "towards the FSA's time, effort and expense". The agreement annexed an agreed press statement which contained the following passage:

"In reaching today's agreement, the FSA recognises that Sumitomo has given prompt, valuable and extensive co-operation following Hamanaka's confession in June 1996. Sumitomo agrees to assist the FSA in the finalisation of its investigations.

"The FSA has also received substantial co-operation in investigating and dealing with the Hamanaka affair from relevant authorities on a world-wide basis, in particular from the [CFTC] in the USA and from the Tokyo District Public Prosecutor's Office in Japan; and in the UK from the Securities and Futures Authority ("SFA") and the [LME]."

10. Also on 11 May 1998 the CFTC published its findings in relation to the Hamanaka affair in the form of an order. The order recorded that Sumitomo's conduct had satisfied all the requisite elements of the offence of price manipulation, and while acknowledging Mr Hamanaka's acts of deception and the losses suffered by Sumitomo amounting by then to $2.6 billion, agreed with the Japanese court which had sentenced Mr Hamanaka to eight years imprisonment that Sumitomo's inadequate management control had been one of the causes of the debacle. Sumitomo offered to pay and was ordered to pay a civil monetary penalty of $125 million plus a further $25 million to be available as restitution of damages caused to private claimants prior to 30 June 1996. The order also commended Sumitomo's substantial cooperation and provision of information.
11. In a further order dated 20 May 1999 the CFTC made allegations concerning co-conspirators in the manipulation. They included a company based in New York called Global Minerals and Metals Corp ("Global") and its principal Mr David Campbell. The order charged that the conspirators were knowingly assisted in their scheme by Merrill Lynch. The order set out detailed allegations as to the mechanisms of the manipulation. By an order dated 30 June 1999 Merrill Lynch settled the proceedings against it, without admission or denial, on payment of $15 million.
12. The Hamanaka affair has led to many private suits against Sumitomo, numbering something more than 20. Sumitomo has also been a claimant in still further proceedings, eg in this country in Sumitomo Corporation v. Credit Lyonnais Rouse Ltd [2001] 2 Lloyd's Rep 517. A passage in this court's judgment in that case describes the state of Sumitomo's documentation and thus is relevant to the present appeal:

"6. From late December 1995 to mid-June 1996 PW [Sumitomo's US attorneys] assembled a large amount of documentation to assist Sumitomo and its US subsidiary in responding to the CFTC subpoena. This process continued following Mr Hamanaka's confession. It included what was described in evidence as "a comprehensive document collection exercise" at Sumitomo's offices in Tokyo and at its subsidiaries' offices in New York, Hong Kong and London. This exercise resulted in the assembling of some 6.9 million pages of documentation, mostly in Japanese. The next step was for a team of about 30 lawyers from PW, assisted by translators, to carry out a review of each document in this collection to determine whether and to what extent it was or might become relevant to the current, or any future, investigations and proceedings arising out of Mr Hamanaka's unauthorised activities. Based upon this review, PW lawyers selected certain documents for inclusion in a computerised litigation database ("the PW database"). About 4 per cent of the totality of the documentation was imaged onto the PW database.

"7. As part of this review process, which continued until 1998, PW commissioned English translations of some 5,000 selected documents (about 30,000 pages, representing some 0.4 per cent of the totality of the documentation)…"

Mr Black's prospective claim

13. Mr Black is a Canadian metal dealer and copper trader and in this court is the respondent. He controls one of the largest scrap metal recycling businesses in Canada (his co-applicant, American Iron & Metal Company Inc). In 1996 he was an active trader in the LME and Comex copper markets. In early July 1996 he appears to have given an interview which is reported in Toronto's Financial Post for 6 July and Dallas's Morning News for 7 July. He is said there to have sold copper in December 1995 and March 1996 and to have suffered losses as the price continued to rise. Then in May 1996 he sold again with greater success. It will be recalled that Mr Hamanaka was suspended about 8 May. The spot price of copper was then $2840. Mr Black is reported to have made sales about 17 May. After the announcement of 13 June he made further sales. "I just felt copper was heading for a fall. I've closed my positions now and I did well." His profit was "many millions". (A report in The Independent for 29 June 1996 illustrates the volatility at this time, stating that the price had collapsed to a 30 month low of $1745 on 25 June but had recovered to $1943 by 28 June.) He is also reported as saying that his belief was that the bulk of copper's decline was over for the present and that he expected three month copper to trade between $1800 and $2200 through to the end of 1996. In early October Mr Black was in London for its annual "Metals Week", where he addressed a trade lunch, reported in The Guardian for 8 October. The price on 7 October was around $1920. He is said to have claimed to have made $30 million selling copper following the announcement of Mr Hamanaka's unauthorised trading in June and to have predicted that the price of copper would continue to fall to around $1600 in 1997 and $1400 in 1998. I bear in mind that such reporting is not necessarily accurate.
14. If it is true that Mr Black was an unsuccessful short seller of copper in December 1995 and March 1996, he has so far as I am aware brought no claim against Sumitomo for such losses. His evidence is that following the emergence of the Hamanaka affair he offered to buy copper from Sumitomo in June 1996, but that it refused to deal with him. The court has no details of that allegation. At any rate it gave rise to no claim against Sumitomo at that time.
15. Over four years later on 21 December 2000 his solicitors wrote a long letter out of the blue to Sumitomo. It has been referred to as a letter before action. It refers to the Hamanaka affair and then complains that in the period of June to September 1996 ("the relevant period"), by which I think is meant during that period following the appointment of Goldman Sachs in mid June, six named individuals at Sumitomo and a further six named individuals at Goldman Sachs conspired together to devise and implement a "Plan" amounting to a serious manipulation of the copper market. In brief what is said is that Sumitomo and Goldman Sachs continued with the Hamanaka strategy for controlling the market: by taking delivery of Sumitomo's near term purchases so as to keep the market short of supply, and by withholding the vast majority of its positions and being prepared to lend to the market only distantly dated goods, it was able to maintain the market price at artificially high and manipulated levels, to Sumitomo's profit and the loss of others in the market such as Mr Black who had adopted a strategy based on short selling. The letter said that Goldman Sachs itself made $40 million on its own account, plus its fees of $25 million. It was "a conspiracy intentionally to injure the business interests of all market participants who had short positions during the period". The conspiracy was unlawful because it employed unlawful means in breach of section 47(2) of the Financial Services Act 1986 (which makes it a criminal offence to engage in "any course of conduct which creates a false or misleading impression as to the market…for the purpose of creating that impression and of thereby inducing another" to act in the market in some way). In addition there were breaches of articles 81 and 82 of the Treaty of Rome because of abuse of the conspirators' dominant position and collusion to distort competition within the European Union. The letter then stated Mr Black's financial claim to damages in a sum of at least $126 million. This was premised on the allegation that in the absence of manipulation the price of copper would have fallen to at least $1400 by September 1996. The $126 million was made up in the main of the loss of the profits of $130 million which Mr Black would have made if the price had fallen to $1400. In addition there was a claim of nearly $14 million in respect of the losses actually made; but Mr Black was prepared to allow a credit of over $18 million in respect of losses on "option trading" which it is said that Mr Black would have incurred if the price had fallen to $1400.
16. It follows that the claim is essentially for the failure to secure speculative profits rather than for realised losses. The reference to an unmanipulated price of $1400 by September 1996 does not sit very easily with what is reported to have been Mr Black's public predictions as of early July and again as of early October 1996 (see para 13 above).
17. The letter ended with a request for discovery under CPR 31.16 for "all documents" under various headings. One of those headings related to the so-called "China Deal", a reference to an allegedly sham contract between Sumitomo and China for "sale" to China of 90,000 tonnes ex LME warehouses but in reality for storage out of the way in Sumitomo's name in China. The requests in effect covered documentation relating to all Sumitomo's positions and dealings from 1 June to 30 September 1996. I shall have to refer to the China deal in further detail below, because it is put forward as Mr Black's best evidence of the continuation of market manipulation into the post-Hamanaka period.
18. The last paragraph of the letter, headed "Time Limit", requested a response by 31 January 2001 "failing which Mr Black will, without further notice, issue either an application for disclosure under Rule 31.16…or a claim form."
19. The question has arisen as to why it took Mr Black over four years to raise this complaint. It is said on his behalf that it was only in 2000 that he was able to obtain by means of the US Freedom of Information Act documents which have enabled him to formulate his case against Sumitomo. On its part, Sumitomo is concerned lest the timing of Mr Black's complaint has anything to do with the recruitment of Mr Dennis O'Keefe into Mr Black's employment as of about 12 December 2000 as General Counsel of an affiliate of American Iron & Metal. Up to that date Mr O'Keefe had been employed as an attorney by the CFTC, where he had been its lead investigator into the Hamanaka affair. He was the main contact of Sumitomo's US lawyers throughout the period from June 1996 to late November 2000 pursuant to Sumitomo's commitment to cooperate with the regulatory authorities. Sumitomo and its lawyers are concerned about the possibility that Mr O'Keefe has violated US law or his obligations of confidentiality as a lawyer. Mr O'Keefe has stated that he is well aware of his obligations and that the concern raised is absolutely baseless. On the other hand the evidence filed on behalf of Mr Black also confirms that Mr O'Keefe has been assisting in relation to potential claims and that he "is likely to be reliable and well informed".

The China deal

20. The judge said that he had detected a coyness on the part of Sumitomo in giving any worthwhile details about the China deal; and that there were non-fanciful grounds to suspect that the transaction may not have been a genuine sale at the time it was entered into nor when subsequently adopted by Sumitomo and Goldman Sachs. He said it seemed most peculiar and called for explanation.
21. Documentation concerning the China deal put forward on behalf of Mr Black in support of his application before the judge appears to date from the period just before Mr Hamanaka was suspended. A manuscript document contemplates a "Copper Transaction for China". The significance of the proposal is somewhat opaque but appears to be as follows. A total of 90,000 tonnes was to be shipped to Shanghai in May/June 1996, of which 65,200 tonnes were to be supplied initially by Global to Sumitomo. The delivery to China was to be within the period of June to December 1996. The cost price to Sumitomo from Global and the sales price to China would be the LME average price for the relevant month of delivery or the price for a specified day, but China's purchase was to be spread over the period from June to December 1996, and it was to have no obligation to purchase unless the LME price for 3 month futures was $2500 or less. In the meantime the shipment cost was to be at China's expense on Chinese flag vessels, and the cost of warehousing in Shanghai pending the take-up of the copper and the interest on the price were to be at the sellers' risk unless and until China completed the purchase. If the purchase was not completed, then the cost of reshipping the copper to Singapore, the warehousing cost in Shanghai and the burden of interest would all fall on the sellers, Global or Sumitomo, in proportion to the origin of the goods. The total risk of such sums was calculated at $14.7 million to Global and $5.6 million to Sumitomo. In addition there was the risk for the sellers that the price of copper would fall from its present spot price of $2800 to just above $2500 without China being obliged to purchase. It was suggested that the deal was a sham, "an attempt to drive up copper prices by reducing apparently available stocks".
22. It is not clear to me on the basis of this document why it was suggested in the evidence adduced on Mr Black's behalf that the China deal there contemplated had actually gone ahead. Presumably Mr Black had some further information. At any rate, the response of Sumitomo's evidence came from Mr Vigrass, a partner in its London solicitors. He said that that the deal had its origin in March 1996 when China had expressed an interest in purchasing a large volume of refined copper in the form of LME warrants. There were market rumours that in April 1995 China had sold 85,000 tonnes of copper to LME warehouses out of its stockpiles and that China therefore had a real need for copper. A sale had been concluded for 90,000 tonnes and physical delivery had been taken by China for the whole of that quantity.
23. In response to Mr Vigrass's witness statement there was complaint that Sumitomo had not disclosed any documents to support his evidence that physical delivery had been taken by China. It was suggested that disclosure of such documents was desirable to save costs "since, if the Applicants' contentions in relation to the China Deal are incorrect, that issue will not be pursued any further". Moreover, China's need for copper was questioned on the basis of a fax dated 29 May 1996 (obtained through the Freedom of Information Act) written to Global by a senior manager of Sumitomo: this referred to a forthcoming meeting with the Chinese set for 31 May and to the fact that "we do not have a firm commitment from CNIEC [the Chinese entity involved] to take copper". I am not sure that I follow the point being made: perhaps the inference intended was that the sale was a sham, or possibly that there was no sale.
24. Among the documents put into evidence at this stage on behalf of Mr Black was a lengthy note of 22 pages of a meeting of 30 May 1996 held at the offices of the SIB. The note was prepared by representatives of the SIB present at the meeting. Also present was Mr O'Keefe. Among the items discussed was "a projected sale of approximately 90,000 metric tons to China". It is described as "brought to Sumitomo" by Global. The note continues:

"Sumitomo is hoping acquire from Global, for onward sale to the Chinese. However, [Martin London, a partner of Paul Weiss Rifkind Wharton & Garrison, Sumitomo's US attorneys] stressed that Sumitomo was not guaranteeing any part of this deal. Rather, it is purely a purchaser and seller of the copper."

25. The note was briefly referred to in Mr Black's evidence. An additional request was made for disclosure of any documents disclosing the China deal to the regulatory authorities.
26. In a second witness statement Mr Vigrass returned to the subject of the China deal. He said that it was entered into before June 1996, I suppose thereby indicating that it fell outside the "relevant period". He also said that, whether profitable or not, it was an important transaction for Sumitomo since it was eager to establish and develop a relationship with China and to gain an insight into its overall trading strategy. He repeated that China had taken physical delivery of all 90,000 tonnes.
27. When the judge came to order pre-trial disclosure from Sumitomo he included three categories of documents specifically related to the China deal, viz (a) documents evidencing it, (b) documents disclosing it to the regulatory authorities and (c) documents evidencing physical delivery to CNIEC.
28. There has been a further round of evidence concerning the China deal, starting on this occasion with Sumitomo, in the period between the judge's decision and the hearing of this appeal. Mr Kameoka, who on 9 May 1996 had replaced Mr Hamanaka as general manager of Sumitomo's non-ferrous products and metals division and who had also been the author of the fax dated 29 May 1996 referred to in para 23 above, made a detailed witness statement. He said that the deal had been under negotiation from March 1996, that although Sumitomo would not make a profit from it, it was a highly coveted opportunity to make a customer of China and to benefit from a broader relationship with it in the future. It was concluded in response to CNIEC's request to purchase copper, to replenish its strategic reserves. It was a legitimate business transaction and not an attempt to manipulate prices. The contract was executed on 22 May 1996 and a copy of it was exhibited. 91,000 tonnes was actually delivered under it. The copper was shipped to Shanghai, where it was stored and called off by CNIEC in ten instalments between August and December 1996. The instalments were priced by reference to the LME price on various settlement dates (plus fixed premiums by reference to the source of the copper) varying between $1959 and $2235. Documents evidencing the calling off of these instalments were exhibited, and also documents evidencing the reconciliation of accounts between Sumitomo and Global.
29. The China deal sales contract exhibited was for a quantity of "approximately" 90,000 tonnes of LME grade and registered brand copper to be delivered in a Shanghai warehouse between 1 June and 31 December 1996 provided that CNIEC had first priced the quantity to be delivered (in quantities of any multiple of 25mt) by reference to the LME cash settlement price (presumably on a specified day) plus the premium and had obtained customs clearance. The contract was subject to the prior receipt of CNIEC's letter of credit. Sumitomo was to bear the warehouse rent until the tenth day after presentation of negotiable documents and CNIEC was to bear such rent from 1 January 1997 in any event. There was an addendum also dated 22 May 1996 dealing with terms which it is not relevant to mention here.
30. Mr Kameoka's evidence led to a further witness statement from Mr Rabinowicz, a partner in Mr Black's London solicitors. The main purpose of this evidence was to annex a further document obtained by Mr Black by means of the US Freedom of Information Act. This was a fax dated 16 June 1996 from CNIEC to Sumitomo headed "Draft Text of Addendum" and annexing the draft in question. The draft, which was headed with the contract number and date (22 May 1996) of the China deal contract exhibited by Mr Kameoka, began with the following clauses:

"(1) Buyer must accept and pay for all tonnage delivered into bonded warehouse Shanghai and/or Bayuquan by no later than December 31, 1996, provided that the LME Grade A copper three month selling price averages US$2500.00m/t or lower for any consecutive thirty (30) days period after August 1, 1996.

"(2) In the event of a major, unforeseen disruption of supply that results in higher LME prices for Grade A copper, Buyer and Seller will discuss in good faith, but without any obligation, an adjustment in the price at which buyer must accept and pay for the actual quantity delivered into bonded warehouse in China by no later than December 31, 1996."

31. The covering fax from CNIEC proposed altered language for the draft, and indicates that critical elements of the contract were still under negotiation. That was also indicated by Mr Kameoka's fax to Global of 29 May 1996 which had pointed out that "we do not have firm commitment from CNIEC to take copper" and from the SIB note of the meeting of 30 May 1996 which had referred to a "projected sale" to China. Mr Rabinowicz made such points in his witness statement, and also referred the $2500 price condition back to the manuscript note about the structure of the deal passing between Sumitomo and Global shortly before Mr Hamanaka's suspension. Mr Rabinowicz complained that Mr Kameoka had not produced "proof" that the copper was in fact paid for by the Chinese, and submitted that it raised "yet further suspicions" and had failed to establish that the China deal had had a legitimate commercial purpose.
32. This further evidence since the hearing below has been admitted in this court by common consent of the parties.
33. I would mention in passing that documents exhibited at various stages in the evidence produced on behalf of Mr Black as having been obtained by means of the Freedom of Information Act bear on them a legend beginning "CFTC-FOIA-DOCS". Examples are the note of the SIB meeting of 30 May 1996 and the CNIEC fax of 16 June 1996. I would infer that such documents have been in the possession of the CFTC.
34. I have referred to the evidence relating to the China deal in some detail because the China deal appears to have been at the root of the judge's decision to order disclosure, because on appeal it has been at the core of Mr Vos QC's submissions on behalf of Mr Black, and because there has been further evidence on the subject since the hearing below.

Mr Black's evidence

35. At the time of the opening of the hearing below Mr Black had not personally submitted any evidence to the court. Evidence had been produced on his behalf by his solicitor, Mr Rabinowicz. At the hearing the judge had required Mr Black to verify the letter before action and a witness statement was produced to which the judge referred in his judgment. In it Mr Black verified both the letter of 21 December 1996 and Mr Rabinowicz's first two witness statements. He also stated that had the market not been manipulated following Mr Hamanaka's dismissal in June 1996 then the price of copper would have fallen significantly: and that at the time everyone had believed that the manipulations of the Hamanaka period were no longer in the system.

The judgment below

36. The judge addressed himself to four questions in turn: (1) Are proceedings (between the parties) likely? (2) Do the documents sought fall within the scope of standard disclosure? (3) Is pre-action disclosure "desirable" for any of the three reasons set out in CPR 31.16(3)(d)? (4) Should the court order disclosure in the exercise of its discretion?
37. Part 31.16(3) begins "The court may make an order under this rule only where…" What follows sets out the jurisdictional thresholds to an order under the rule, and when those thresholds have been crossed, there remains an exercise of discretion: see Bermuda International Securities Limited v. KPMG [2001] EWCA CIV 263, a decision of this court cited by the judge. Thus these four questions were intended to address the three jurisdictional thresholds mentioned (1) in sub-rule (3)(a) and (b), (2) in sub-rule (3)(c), and (3) in sub-rule (3)(d) respectively; and finally to address (4) the ultimate issue of discretion.
38. The judge spent most of his judgment (paras 9/31) addressing the first question. He concluded, on the guidance of authorities on section 33(2) in its pre-amended form, at the time when it was dealing with pre-action disclosure only in the case of personal injury claims, that the test of proceedings being "likely" was that the prospective claimant has a "reasonable basis" for making a claim against the prospective defendant: but that in this context such a claim meant not a prima facie claim nor even one that could resist being struck out, but rather a claim which was not merely based on irresponsible allegation or speculation or hope, which was not a merely fishing claim. This much appears to have been common ground below. He appears to have also accepted, in the light of the earlier authorities, that a claim might have a reasonable basis in the sense required if

"in cases where a prima facie cause of action does not yet exist…there is a reasonable basis for believing that it might do if disclosure could first be ordered" (at para 17).

39. In this context he dealt with conflicting submissions on whether a case of fraud fell to be considered any differently from any other case. For these purposes he was treating a case of fraud as extending to any case in which allegations of dishonest or criminal conduct were being made, such as the case being advanced by Mr Black before him. He concluded that there was no essential difference: a case of fraud might fall foul of the disapproval of speculative or ill-founded allegations or of mere fishing, but if there was a reasonable basis for the allegations, then the court should be cautious about letting possible fraudsters escape down the "black hole" of the absence of documentation which made it impossible for the claimant to plead his case. Indeed, it might be said that "the inhibitions on pleading fraud in English law and practice militate in favour of allowing pre-action disclosure…" (at para 17).
40. He therefore turned to the facts to consider "whether or not there is a reasonable basis for an allegation of…conspiratorial or anti-competitive behaviour" and concluded that there was, but only because of the evidence relating to the China deal. Thus at paras 21/25 he said –

"Plainly Sumitomo were dealing with very large copper positions in futures and options, almost any trading in which was bound to affect the market in some way or another…I think that Mr Vos and his clients face real difficulties in framing an arguable claim against Sumitomo arising out of these activities…Most of the facts and matters relied upon by Mr Vos seem to me at this stage to be at least capable of reasonable explanation by Sumitomo. When, however, the evidence relating to the "China deal" is added, it seems to me that a different picture is suggested."

41. As to that, he thought that Sumitomo was being coy, and that there were "non-fanciful grounds to suspect that the transaction may not have been a genuine sale" (at para 27). "The deal seems most peculiar and calls for explanation" (para 28). He said (at para 29):

"I therefore conclude that it is "likely" that Mr Black and his companies on the one hand and Sumitomo on the other will both become parties to litigation, which litigation will have a reasonable basis along the lines of the authorities cited to me…"

It is to be observed that at this stage the judge had merely answered the first question as to his jurisdiction, and had decided, on a narrow basis, that litigation between the parties was "likely". He had not as yet undertaken an exercise of discretion.

42. The judge then proceeded to the second question, as to standard disclosure (at para 32). That was effectively dealt with by an agreement between the parties that, if disclosure was ordered, it would simply be limited in the order itself to standard disclosure. Therefore there was no consideration of the issues which were likely to arise in any proceedings and whether standard disclosure would extend to the documents demanded. It may be noted that at the end of para 32 the judge stated "The order will be limited accordingly." Of course, he had not yet determined that an order for disclosure would be made.
43. At para 33 the judge considered the third question and concluded that it would be desirable to order disclosure not only in relation to the China deal but also generally. "I have also been persuaded that disclosure should not be limited to the China deal." He appears to have thought that that each of the three limbs of sub-rule 31.16(3)(d) had been met. There was "a real possibility" that early disclosure would dispose fairly of the anticipated proceedings or assist the dispute to be resolved without proceedings; as for the saving of costs, he was "not convinced", but there was a very real prospect that it would occur in one way or another – either by Mr Black withdrawing without commencing proceedings, or by the resolution of such proceedings by agreement, or by Sumitomo being inclined not to contest the claim. This hurdle was dealt with in a single paragraph, without, it was submitted on behalf of Sumitomo, much if anything in the way of reasoning, and without any reasons for extending disclosure beyond the China deal.
44. At para 34 the judge dealt with the fourth and final stage, the ultimate exercise of his discretion. He covered this in a few lines:

"Once the test of desirability is met, it is unlikely (although possible) for an order to be refused altogether. It is clear from what I have said above that an order should be made and I exercise my discretion to do so, subject to issues of oppression."

45. Under the heading of oppression, the judge found that a real case had been made on behalf of Sumitomo, based on the enormous number of documents, not chronologically ordered, which would have to be looked through if an order were granted in the terms sought. He thought, however, that he could overcome this danger by limiting the disclosure that he was prepared to order even beyond concessions that had been made by Mr Vos in the course of the hearing.

The order made

46. Ultimately the judge made an order in the following terms:

"1. Statements showing copper warrants held by or on behalf of the Respondents (or any of them) throughout or at any time during the period 1 June 1996 to 1 October 1996.

2. Daily trading statements showing copper futures positions, copper options, or any other copper positions, held, granted, purchased and/or sold by or on behalf of the Respondents (or any of them) throughout or at any time during the period from 1 June 1996 to 1 October 1996 on or through the LME and/or COMEX.

3. Documents containing or evidencing any agreement between the Respondents or any of them and Goldman Sachs (or any part of Goldman Sachs) relating to the advice given or action taken by Goldman Sachs (or any part of Goldman Sachs) in relation to Sumitomo's copper positions on the LME and/or COMEX during the period 1 June 1996 to 1 October 1996.

4. Documents evidencing the China Deal (referred to in paragraph 19 of Mr Vigrass' first statement) and made between GMMC, CNIEC and/or the Respondents (or any of them).

5. Documents disclosing the China Deal (referred to in paragraph 4 above) to the regulatory authorities.

6. Documents evidencing the physical delivery of Copper to CNIEC as referred to in paragraph 19 of Mr Vigrass' first statement.

7. Judgments or pleadings in civil or regulatory actions brought since June 1996 by or against the Respondents (or any of them) relating to or involving allegations in respect of the China Deal (referred to in paragraph 4 above) and/or to manipulation of the copper market between 1 June 1996 and 1 October 1996.

8. Written communications from the Respondents (or any of them or any person on their behalf) to CFTC, SIB, SFA or LME and/or notes of meetings between the Respondents (or any of them or any person on their behalf) and CFTC, SIB, SFA or LME between 1 June 1996 and 1 October 1996 relating to the disclosure of Sumitomo's intentions and activities in relation to the unwinding of its copper positions.

9. Any transcripts and/or minutes of the meeting of 28 June 1996 referred to in paragraph 15 of Mr London's statement."

The submissions

47. Detailed written and oral submissions were made on all aspects of the evidence, on the pre-CPR authorities which had influenced the judge, on the background to CPR 31.16, on the role of disclosure in the CPR era, and as to the breadth or narrowness of the disclosure ordered. In particular, Mr Vos continued to emphasise the loose ends in the evidence concerning the China deal. As to the circumstances of the case, the position remained what it had been before the judge, with Mr Hollander QC (who appeared for Sumitomo) describing this as an archetypal fishing exercise, and Mr Vos calling it a paradigm case for disclosure. Ultimately, the essential difference between the parties on this appeal was that Mr Hollander submitted that the judge had never really stood back to take account of the circumstances of the case for the purpose of an exercise of discretion, whereas Mr Vos submitted that the judge had taken everything into account and that his decision on what in the end was a matter for his discretion was unassailable.
48. Mr Hollander also drew attention to a feature of the appeal which he submitted was in stark contrast to the position below. As appears from the judge's judgment, Mr Black's case had been regarded primarily as one about a dishonest conspiracy to manipulate markets, a case akin to fraud (with anti-competitive behaviour under articles 81/82 as an alternative). I will also use "fraud" as the handle for such a primary case. Moreover, Mr Black was determined to sue, unless perhaps pre-action disclosure satisfied him that he had no case. The judge said that he had "a clear settled intention to sue" (at para 6), a description of which Mr Vos made some complaint, but in my judgment it reflects the evidence and I have no reason to think that it did not accurately reflect the way in which the matter was put before the judge. On appeal, however, Mr Vos went a long way to suggest a very different scenario. He put anti-competitive behaviour under articles 81/82 rather than fraud at the forefront of his argument. He also suggested that, whatever his client's wishes, Mr Black might find it hard to obtain counsel's signature to a pleading of fraud on the current material available to Mr Black and in the absence of something more revealing emerging out of pre-action disclosure.

Access to Justice

49. In his final report on Access to Justice, in July 1996, Lord Woolf made his proposals on the subject of disclosure of documents. He recommended that the process of disclosure within litigation should be curtailed, save in the exceptional case, to what he called "standard disclosure", a term which has been adopted in the CPR. That recommendation was made because "the process had become disproportionate, especially in larger cases where large numbers of documents may have to be searched for and disclosed, though only a small number turn out to be significant" (at section III, para 37). On the other hand, in the context of pre-action disclosure, he recommended that the court's power to make such orders should no longer be confined to potential claims in respect of personal injury or death but should extend to all cases. He wrote (at section III, paras 49/50):

"49. There may be some apprehension about the unforeseen consequences of such an extension. In relation to claims for injury or death, it was fairly clear against which categories of potential defendants such applications were likely to be made. When the jurisdiction to make pre-action orders was first introduced, applications for medical records tended to be hard-fought and often acrimonious. I understand that it is now rarely necessary even to make such applications, since documents are usually provided directly in response to a reasonable request. I have no doubt that the recent protocol prepared by the Civil Litigation Committee of the Law Society for use in this context will have helped further to simplify the process. This involves the use of standard forms of request and response, and has been approved by the NHS Management Executive.

"50. Opening up the range of cases in which pre-action applications may be made obviously widens the range of potential defendants who might be subject to such applications. But it must be remembered, first, that any such application would have to be in respect of specific documents which will have to be shown to be in the possession of the respondent; secondly, that there is a likelihood that the respondent would indeed be a defendant if proceedings were initiated; and, thirdly, that the documents sought are relevant to a potential claim…[T]he court would apply a rigorous cost-benefit analysis…I believe that its effect would be that the court would invariably not allow disclosure [beyond standard disclosure] at a stage when issues had not been fully elaborated between the parties…"

50. In the event, CPR 31.16 is not limited to applications in respect of "specific documents", because sub-rule (3)(c) speaks of "documents or classes of documents". Otherwise, Lord Woolf's recommendations are reflected in the new rule.

Protocols and fraud

51. In the passage quoted above from Access to Justice, Lord Woolf referred to the protocol then recently prepared for use in personal injury litigation. The existence of a protocol is not without relevance to the question of pre-action disclosure: it may indicate that documents of a certain class, such as the paradigm case of medical records in clinical disputes, should as a matter of course be disclosed before service of a claim form. But protocols have, at any rate so far, been developed in areas of litigation, such as personal injury claims, clinical disputes, construction and engineering disputes, and professional negligence disputes, where familiarity with the nature of such disputes and/or the inter-relationship of the parties indicate the way forward: see the discussion of such protocols in Bermuda v. KPMG, since when the professional negligence protocol has been formally published in September 2001. Outside those areas and CPR 31.16 itself the guiding principle of practice is that set out in the Practice Direction – Protocols (Civil Procedure at C1-001ff) para 4 of which reads as follows:

"In cases not covered by any approved protocol, the court will expect the parties, in accordance with the overriding objective and the matters referred to in CPR 1.1(2)(a), (b) and (c), to act reasonably in exchanging information and documents relevant to the claim and generally in trying to avoid the necessity for the start of proceedings."

52. In this context it is necessary to stand back for a moment and ask oneself what, if anything, the nature of the current dispute and the inter-relationship of its parties indicate as to the proper role of pre-action exchange of information and documents. Mr Black's claim does not arise out of any contractual dispute or any professional relationship. It does not arise out of the relationship inherent in a situation where one party owes a duty of care to another (his "neighbour", in Lord Atkin's formula) breach of which has resulted in personal injury or death. If there has been any fraud or manipulation, it has not been between parties to a contract but affects Mr Black only in as much as he was part of a world-wide market. I would accept Mr Hollander's submission that in terms of the current dispute Mr Black and Sumitomo are in essence strangers. Mr Vos's response is that they are not total strangers in that Mr Black is well-known in the world of copper trading; and he also relies on the unparticularised allegation that Sumitomo refused to sell to Mr Black in the aftermath of the Hamanaka affair. Nevertheless, for over four years Mr Black remained silent. His public utterances spoke only of his gains and of anticipated price levels which are inconsistent with his present claim. Thus unlike a personal injury claimant who has suffered some undoubted misfortune, but needs disclosure to investigate the mechanism of his misfortune, Mr Black's losses are themselves a matter of uncertainty and dispute. No complaint was made to the regulatory authorities which he knew were investigating the situation.
53. Mr Black says that until his recent acquisition of documents by means of the Freedom of Information Act, he was unable to proceed. That raises the question of the extent of material in or potentially in the public domain and available to Mr Black. Mr Vos has submitted that pre-action disclosure is necessary in this case to ensure that dishonesty is brought to light. But Mr Black's case is based on documents which he has himself obtained from public sources. Mr Black, perhaps for understandable tactical reasons, has not disclosed in one go all such documents as he currently possesses. Thus he has responded to Sumitomo's first round of evidence on the China deal by putting forward the fax dated 29 May 1996 from Sumitomo to Global and the note of the SIB meeting of 30 May 1996; and he has responded to Sumitomo's post-judgment disclosure by putting in evidence the fax dated 16 June 1996 from CNIEC to Sumitomo. The judge thought that Sumitomo was being coy about the China deal; but this is not a case in which Mr Black has started by putting all his cards on the table either. In this connection Mr O'Keefe's role is uncertain: on the one hand he has been faithful to his obligations, but on the other hand that has not prevented him from assisting in relation to potential claims in respect of information where he is "likely to be reliable and well informed".
54. Mr Vos has sought to play down the case of fraud raised in Mr Black's letter before action and in his evidence and to emphasise instead the case of anti-competitive behaviour under articles 81 and 82. On the other hand the judge below and this court were pressed by him with the problems which an allegation of fraud presents at the pre-action stage. At a general level, there are clearly concerns that allegations of dishonesty are not lightly made, that a defendant to an allegation of dishonesty knows plainly what it is that is alleged against him, and also that dishonesty does not spread its cloak over the means by which it can be detected and revealed. It is not plain how these concerns are to be reconciled in any particular case in the context of pre-action disclosure, but it would seem to me that a court which is asked to grant such disclosure should be careful to pay proper regard to each of them. In any event it cannot be right that an allegation of fraud should assist the potential claimant to obtain pre-action disclosure, unless his allegations carry both some specificity and some conviction and his request for disclosure is appropriately focused.
55. Traditionally at any rate, English law has been cautious about the allegation of dishonesty. Thus Mr Hollander relied in this context on Hytrac Conveyors Ltd v. Conveyors International Ltd [1982] 3 All ER 415, where the plaintiffs, who wished to advance a case of conspiracy to infringe their copyright, applied for an extension of time to serve their statement of claim pending the obtaining of interlocutory injunctions. This court, in refusing the application, said this, per Lawton LJ, at 418d:

"It has to be remembered by all concerned that we do not have in this country an inquisitorial procedure for civil litigation. Our procedure is accusatorial. Those who make charges must state right at the beginning what they are and what facts they are based on. They must not use Anton Piller orders as a means of finding out what sort of charges they can make."

56. In RHM Foods v. Bovril Ltd [1982] 1 WLR 661 the plaintiffs, in a passing off action, sought disclosure in advance of pleading their statement of claim. They alleged a deliberate intent to deceive the public. The judge acceded to the application. This court acknowledged the jurisdiction to make such an order, but considered that the exercise of that jurisdiction would require an exceptional case and that it would be unfair to the defendants to order disclosure against them before the plaintiffs had pleaded their serious allegations. Oliver LJ said (at 668H/669A):

"I do not say that there cannot be such a case, for the court has a wide power to order discovery where the justice of the case demands it, but it must be very rare. Like Lawton L.J., I remain, despite Mr. Hoffmann's powerful advocacy, wholly unconvinced that this case, on the unparticularised allegations of his deponents' individual beliefs, is a case where the discovery sought at this stage is necessary for fairly disposing of the matter and I too, therefore, would allow the appeal."

57. Those cases were decided under the former regime of the RSC and I do not consider them to be formally binding in the context of the CPR, a new code with its overriding objective, its greater flexibility, its statements of truth, and its new principles of disclosure, favouring both more limited disclosure and earlier disclosure. Nevertheless, in my judgment it is not to be supposed that in the modern context allegations of fraud have become just like any other allegations. There is still the obligation on counsel pleading fraud to satisfy himself that he can properly do so: Mr Vos has himself relied on that obligation, to hint that without the pre-action disclosure which his client seeks, he might find himself unable to sign a statement of case which pleads fraud. There is still the obligation (see 16PD at 9.2) to "specifically set out" any allegation of fraud.
58. Moreover, if the opportunity provided by CPR 31.16 is set against the background of the prospective parties' obligation in any case not covered by a protocol "to act reasonably in exchanging information and documents relevant to the claim" and if consideration is given to the question of what the extent of that obligation is in a case of alleged fraud, it is hard to think that a prospective claimant could easily say that his allegedly fraudulent prospective defendant had failed to cooperate by refusing widespread disclosure in response to unspecific and unverified (because unpleaded) allegations.

The previous authorities on section 33(2)

59. Although the judge did not regard those authorities as binding, he did nevertheless derive assistance from them on the question of the application of the jurisdictional test that the applicant and the respondent were "likely" to be parties to subsequent litigation. Mr Vos, who had relied on them before the judge (without, it may be said, much opposition) to support his submissions as to the meaning of "likely", in the end himself accepted that they were of doubtful value since they turned on the meaning of a phrase ("likely to be made") which has now dropped out of the sub-section.
60. In the circumstances it is unnecessary to consider those authorities on the basis that they are binding precedents: but, since they provided support for the judge's approach and also because they illustrate a point of real difficulty about the way in which the opportunity for pre-action disclosure is to be applied, I will deal with them to see what if any value they have in the present circumstances.
61. Section 33(2) was originally enacted as section 31 of the Administration of Justice Act 1970, and used to read as follows:

"On the application, in accordance with rules of court, of a person who appears to the High Court to be likely to be a party to subsequent proceedings in that court in which a claim in respect of personal injuries to a person or in respect of a person's death is likely to be made, the High Court shall…"

The words in italics were removed by the amendment. It will be observed that the deleted phrase ends with the words "likely to be made". Those are the words which the previous authorities had to construe.

62. The first case on the meaning of those words was Dunning v. United Liverpool Hospitals' Board of Governors [1973] 1 WLR 586. Mrs Dunning was admitted to hospital with a cough for investigation but otherwise in good health, but while there became gravely ill. The hospital refused to release the hospital case notes. Mrs Dunning obtained legal aid to bring proceedings against the hospital, despite her medical expert's report to the effect that, while assessment had been hampered by the absence of the notes, the hospital was probably not at fault. However, he also said that the failure to release the notes had unreasonably prolonged the litigation and he urged their release so that he could determine whether or not they confirmed his opinion. The difficulty in the case was that because more than six years had passed since Mrs Dunning's stay in hospital, leave was needed to bring the proceedings for which legal aid had been granted. The application for leave was adjourned, for in the light of the expert's opinion and the hospital's continuing refusal to disclose the notes there was no basis for an action at a time when there was no provision for pre-action disclosure. Section 31 then came into force and Mrs Dunning applied under it for pre-action disclosure of the notes. The question was whether a claim was "likely to be made": if it was, then of course Mrs Dunning and the hospital were likely to be parties. Stamp LJ dissented on the ground that in the light of the expert's opinion proceedings were unlikely, since disclosure was unlikely to produce anything to justify it (591F, 592C). Lord Denning MR, however, thought that "likely" merely meant "may" or "may well be made" dependent on the outcome of the disclosure. The object of the statute would be defeated if the applicant had to show in advance that he already had a good cause of action (590F). James LJ thought that a claim was "likely" if there was a "reasonable prospect" of one: and on the facts he pointed out the evidence of the sudden dramatic change in Mrs Dunning's health and the expert's report with its express need to see the hospital records (at 593G/594A).
63. In the next case, Shaw v. Vauxhall Motors Ltd [1974] 2 All ER 1185, the applicant was injured driving a truck at work. There was a dispute with his employers about whether the truck was defective. The applicant wanted disclosure of the maintenance records of the truck to see whether the braking system was defective. The application was made on the advice of counsel to enable him to advise the legal aid committee: it was made clear that if the records supported the complaint that the system was defective, litigation would ensue, otherwise it would not. The judge refused disclosure, but it was ordered by this court. The judgments make it clear that it was common ground that there was jurisdiction under section 31 to make the order sought, and the argument was whether it should be made as a matter of discretion. All three judgments were agreed that it should be. The rule of court in question was RSC Ord 24, r 8, which put on the respondent the burden of showing that discovery was "not necessary either for disposing fairly of the cause or matter or for saving costs". Lord Denning MR thought that in such a case it should be the general practice to order disclosure as it enabled each side to know the strength or weakness of the case before embarking on litigation: "It is particularly useful in a legal aid case…" (1188c). Buckley LJ said that the power to order pre-trial disclosure "is certainly not one which should be used to encourage fishing expeditions to enable a prospective plaintiff to discover whether he has got a case at all" (at 1188h), but that there were two special grounds in favour of the order in that case: one was that it was in the public interest that advisers of legally aided parties should have early information on matters which may affect the parties' position in the litigation; and the other was that the applicant had conceded that if the records showed that the truck was not defective, the claim would be dropped (at 1189a/d). Ormrod LJ agreed with both those factors, and also stressed the importance of a letter before action in which the applicant should commit himself as to how the accident happened or else state that he did not know (1189j, 1190b).
64. Although Shaw was a case on discretion, Lord Denning repeated his view in Dunning that the words "likely to be made" mean "may" or "may well be made" dependent on the outcome of the discovery and said that that was what Dunning had decided (at 1187g).
65. The third case considered below and cited to this court was Burns v. Shuttlehurst [1999] 1 WLR 1449. This was still concerned with the unamended section 33(2). The underlying facts were similar to those in Shaw, that is to say the applicant had been injured while driving his employers' vehicle. He had already obtained judgment against his employers, but now wanted to recover against their insurers under the Third Parties (Rights against Insurers) Act 1930: he therefore sought pre-action disclosure against the insurers of the employers' insurance policies. It was held that a claim under the 1930 Act against insurers was not a claim for personal injuries within section 33(2); but also that in any event the applicant had no cause of action until his claim against the employers had been quantified and therefore a claim against the insurers was both premature and not "likely". The only reasoned judgment was given by Stuart-Smith LJ. He interpreted Dunning somewhat differently. Having pointed out that Lord Denning had interpreted "likely to be made" as meaning " may" or "may well be made" dependent on the outcome of the discovery, he went on to say that both James LJ and Stamp LJ had formulated the same test "namely, at the time of the application there must be shown to be a worthwhile action or a reasonable basis for the intended action", albeit they had differed on what the facts had shown (at 1457F/H). He then said that in Burns there was probably just enough to show a reasonable basis for an intended action, if the applicant otherwise had a complete cause of action (at 1458A); but he did not. He went on to accept that, once the applicant's judgment against the employers had been quantified the documents would clearly be discoverable (at 1459H), but that in the meantime there was no cause of action and thus "I do not see how it can be said that a claim is likely" (at 1459D). It would seem, therefore, that the temporary absence of any legal basis for a claim (Post Office v. Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363 had made that established law) prevented it being said that a claim was "likely".
66. The phrase "a claim…is likely to be made" is no longer part of the amended section 33(2) and therefore on any view these authorities are no longer binding. If, however, it matters, my own interpretation of these authorities is as follows. In Dunning both Lord Denning and James LJ agreed that the word "likely" in that phrase did not mean "more likely on the balance of probability than not" in the absence of disclosure but meant "may" or "may well" or "reasonable prospect" if disclosure was granted. It is harder to say what Stamp LJ thought "likely" meant, for he did not gloss its meaning: but he too agreed that in deciding whether a claim was likely it was permissible for the court to consider, on the evidence before it, whether disclosure was likely to produce "a worthwhile and catchable fish" (at 591G). He added that "The word "likely" must in my view be read as connoting that the respondent to the application is likely to be a party to a worthwhile action by a litigant not acting irresponsibly" (at 591F). I do not myself believe that Stamp LJ was there construing the section – and certainly not the word "likely" which is repeated in that sentence without being glossed – so much as laying down a principle as to the exercise of discretion. If, however, he was construing the section, then in my respectful opinion, he was alone in doing so in this way. James LJ, in a passage picked up and cited by Stuart-Smith LJ in Burns, said (at 593G):

"In order to take advantage of the section the applicant for relief must disclose the nature of the claim he intends to make and show not only the intention of making it but also that there is a reasonable basis for making it. Ill-founded, irresponsible and speculative allegations or allegations based merely on hope would not provide a reasonable basis for an intended claim in subsequent proceedings."

That, however, as it seems to me, is clearly not an attempt to construe the section but a statement of principle as to the exercise of its discretion. That is shown by a similar discussion in Shaw, which was a case entirely about discretion, for jurisdiction was there common ground. As to construction, which was therefore not in issue, Lord Denning there stated his view that in Dunning this court had held that the phrase meant "may" or "may well be made" dependent on the outcome of the disclosure. That was an obiter dictum, but it seems to me that it was entirely correct.

67. As for Burns, it is possible that Stuart-Smith LJ (with the approval of the other members of the court) did intend to adopt, on his reading of Dunning, the test of "a worthwhile action or a reasonable basis for the intended action" as having been laid down by James and Stamp LJJ as the test for deciding whether a claim was "likely to be made": but if so, it follows from what I have said above that I would respectfully disagree with that interpretation. If that was his intention, the question might arise, although the amendment to section 33(2) makes the possibility a theoretical one, whether the interpretation of Dunning found in Burns is part of the ratio of the latter case and binding on this court, whatever Dunning said. Happily, however, that question need not trouble the determination of the present appeal.
68. What, however, these authorities on the unamended section in my judgment reveal, and usefully so, is as follows. First, that at any rate in its origin the power to grant pre-trial disclosure was not intended to assist only those who could already plead a cause of action to improve their pleadings, but also those who needed disclosure as a vital step in deciding whether to litigate at all or as a vital ingredient in the pleading of their case. Secondly, however, that (as what I would call a matter of discretion) it was highly relevant in those cases that the injury was clear and called for examination of the documents in question, the disclosure requested was narrowly focused and bore directly on the injury complained of and responsibility for it, and the documents would be decisive on the conduct or even the existence of the litigation. Thirdly, that on the question of discretion, it was material that a prospective claimant in need of legal aid might be unable even to commence proceedings without the help of pre-action disclosure.

The amended section 33(2) and the current rule of court.

69. I now turn to the amended section 33(2) and the current rule of court, and will consider first of all the jurisdictional thresholds which have to be passed ("only where") in order to vest a court with discretion to make an order for pre-trial disclosure.

CPR 31.16(3)(a) and (b): "likely to be a party".

70. The application has to be made by "a person…likely to be a party to subsequent proceedings" against "a person…likely to be a party to the proceedings" (section 33(2)) and those requirements are reflected (in reverse order) in CPR 31.16(3)(a) and (b). There is no longer any statutory requirement that "a claim…is likely to be made".
71. Of course, in one sense it might be said that a person is hardly likely to be a party to subsequent proceedings whether as a claimant or otherwise unless some form of proceedings is itself likely to be issued. Two questions, however, arise. One is whether the statute requires that it be likely that proceedings are issued, or only that the persons concerned are likely to be parties if subsequent proceedings are issued. The other is whether "likely" means "more probably than not" or "may well". As to the first question, in my judgment the amended statute means no more than that the persons concerned are likely to be parties in proceedings if those proceedings are issued. That was what Lord Woolf had in mind when he wrote of the requirement that "there is a likelihood that the respondent would indeed be a defendant if proceedings were initiated" (in section III, para 50, of his final Access to Justice report, quoted in para 46 above). The omission of any language which expressly requires that the initiation of proceedings itself be likely, which could have been included in the amended section, appears to me to reflect the difficulties which the earlier authorities had explored in the sort of circumstances found in Dunning. What the current language of the section appears to me to emphasise, as does the rule of court, is that the parties concerned in an application are parties who would be likely to be involved if proceedings ensued. The concern is that pre-action disclosure would be sought against a stranger to any possible proceedings, or by a party who would himself be unlikely to be involved. If the statute and rule are understood in this sense, then all difficulties, which might arise where the issue of proceedings might depend crucially on the nature of the disclosure sought and where it is impossible at the time of making the application to say whether the disclosure would critically support or undermine the prospective claim, disappear.
72. As to the second question, it is not uncommon for "likely" to mean something less than probable in its strict sense. It seems to me that if I am wrong about the first question, then it is plain that "likely" must be given its more extended and open meaning (see Lord Denning in Dunning), because otherwise one of the fundamental purposes of the statute will have been undermined. If, however, I am right about the first question, the second question is of less moment. Even so, however, I am inclined to answer it by saying that "likely" here means no more than "may well". Where the future has to be predicted, but on an application which is not merely pre-trial but pre-action, a high test requiring proof on the balance of probability will be both undesirable and unnecessary: undesirable, because it does not respond to the nature and timing of the application; and unnecessary, because the court has all the power it needs in the overall exercise of its discretion to balance the possible uncertainties of the situation against the specificity or otherwise of the disclosure requested. Clearly, the narrower the disclosure requested and the more determinative it may be of the dispute in issue between the parties to the application, the easier it is for the court to find the request well-founded; and vice versa.
73. On this basis, I think that the judge was led into error by the fact that before him there had been a large degree of common ground about seeking to derive from the earlier cases a complicated formula as to the meaning of "likely". In my view, apart from the two issues of principle which present themselves and which I have sought to answer in this section of my judgment, the word itself presents no difficulties. Temptations to gloss the statutory language should be resisted. The jurisdictional threshold is not, I think, intended to be a high one. The real question is likely to be one of discretion, and answering the jurisdictional question in the affirmative is unlikely in itself to give the judge much of a steer as to the correct exercise of his power.

CPR 31.16(3)(c): "duty by way of standard disclosure…would extend to the documents"

74. Any dispute before the judge as to whether the duty of standard disclosure in any proceedings between Mr Black and Sumitomo would extend to the documents which ultimately might become the subject matter of the judge's order was surmounted by the agreement that disclosure of such documents would be limited to standard disclosure. That agreement tended to obscure and perhaps to obliterate any argument as to whether any of the categories of documents requested were inherently outside the regime of standard disclosure.
75. In the circumstances it seems to me that no question of jurisdiction or principle can arise on this threshold in this case.
76. In general, however, it should in my judgment be remembered that the extent of standard disclosure can not easily be discerned without clarity as to the issues which would arise once pleadings in the prospective litigation had been formulated. This court touched on the question in Bermuda v. KPMG when Waller LJ there said (at para 26) that –

"The circumstances spelt out by the rule show that it will "only" be ordered where the court can say that the documents asked for will be documents that will have to be produced at the standard disclosure stage. It follows from that, that the court must be clear what the issues in the litigation are likely to be i.e. what case the claimant is likely to be making and what defence is likely to be being run so as to make sure the documents being asked for are ones which will adversely affect the case of one side or the other, or support the case of one side or the other."

77. It also seems to me to follow that if there would be considerable doubt as to whether the disclosure stage would ever be reached, that is a matter which the court can and should take into account as a matter of its discretion.
78. In any event, all issues of discretion remain. The fact that the jurisdictional threshold under sub-rule (3)(c) was dealt with by agreement tended, in my judgment, to obscure the necessity for clarity as to the issues in the prospective litigation. The importance of such clarity was illustrated in this appeal when the focus of submissions were turned from fraud onto anti-competitive conduct.

CPR 31.16(3)(d): "desirable"

79. 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").
80. Three considerations are mentioned in sub-rule (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 eg 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.
81. 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 sub-rule as a whole. In Bermuda v. KPMG Waller LJ contemplated (at para 26) that sub-rule (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.
82. 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.
83. 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.
84. In the present case, I think with respect that the judge fell into this error. Thus he dealt with sub-rule (d) in a single paragraph (para 33) in which he decided that disclosure relating to the China deal and generally was desirable and should be made. He said that his reasoning or much of it was already dealt with under the heading of the "likelihood of proceedings". There, however, he had in turn applied the wrong test; and even though in doing so he had considered matters which properly belonged to the question of discretion, by dealing with them for the different purpose of asking himself whether proceedings were likely, he was led into thinking that having decided that proceedings were likely, therefore pre-action disclosure should be made. That is demonstrated by his very next paragraph (headed "Discretion", para 34) where he simply says that "It is clear from what I have said above that an order should be made…"
85. In effect, the judge never stood back, having dealt with the jurisdictional thresholds, and asked himself whether this was a case where his discretion should be exercised in favour of disclosure. It cannot be right to think that, wherever proceedings are likely between the parties to such an application and there is a real prospect of one of the purposes under sub-rule (d) being met, an order for disclosure should be made of documents which would in due course fall within standard disclosure. Otherwise an order for pre-action disclosure should be made in almost every dispute of any seriousness, irrespective of its context and detail. Whereas outside obvious examples such as medical records or their equivalent (as indicated by pre-action protocols) in certain other kinds of disputes, by and large the concept of disclosure being ordered at other than the normal time is presented as something differing from the normal, at any rate where the parties at the pre-action stage have been acting reasonably.
86. It is to be observed that because of the way in which he proceeded, the judge decided the question of discretion even before considering the breadth of the discovery requested or the allegation of oppression.

Discretion

87. Therefore it seems to me that this court is entitled to exercise its discretion anew.
88. That discretion is not confined and will depend on all the facts of the case. Among the important considerations, however, as it seems to me, are the nature of the injury or loss complained of; the clarity and identification of the issues raised by the complaint; the nature of the documents requested; the relevance of any protocol or pre-action inquiries; and the opportunity which the complainant has to make his case without pre-action disclosure.
89. In the present case, the loss complained of is a speculative market loss of $126 million. Apart from one element in the claim which is put as costs of $14 million actually incurred, almost the entire claim is made up of a lost opportunity for gain calculated at $130 million. As a claim, it was unknown for four years during which Mr Black made no complaint about Sumitomo. When the letter before action of 21 December 2000 was written, it came out of the blue. This was despite the fact that throughout those years it was well known that Sumitomo was having to deal with its on-going responsibility for Mr Hamanaka's market manipulation. Indeed the publicity regarding the Hamanaka affair was the very catalyst for Mr Black's copper speculations. The quantification of the loss is entirely dependent on Mr Black and his own documents. Prima facie its calculation is inconsistent with public expressions of Mr Black's own market predictions back in 1996.
90. That is the injury or loss for which Mr Black seeks a remedy. I am far from saying that there is no basis for a complaint that Mr Black has suffered such a loss, which remains to be seen. That, however, is not the question save in the sense that if it could be said that there was no real prospect of such a loss having been suffered then this application would fail at the very outset. This, therefore, is not a case where the prospective claimant has suffered some reasonably plain injury or loss, at any rate on the face of things – such as following medical treatment, or following an accident at work or on the roads, or because of the sale of unfit goods, or non-delivery, or some other breach of contract.
91. The loss complained of is one thing; the cause or causes of action by which Mr Black seeks a remedy and the clarity with which the legal issues are raised by such a cause of action are the next matters for consideration. The complaint is one of dishonest market manipulation and/or anti-competitive behaviour in breach of articles 81/82. Again, the question is not whether such causes of action exist in the legal repertoire, for they do, nor whether there is a reasonable basis for the complaint, for the judge found that there was and I am prepared to assume for present purposes that he is right. Mr Black can point to the established and admitted background of the Hamanaka affair and to the possibility that in its immediate aftermath Sumitomo, although newly advised by Goldman Sachs, was unable or perhaps even unwilling to avoid doing things with its inherited market positions which might call for censure. That, however, with the possible exception of the China deal to which I will come below, is the essential limit of the complaint. The matter can be tested by considering the recitation of the issues allegedly "made clear" in Mr Black's letter before action and application: see para 10 of Mr Vos's skeleton argument before the judge. Eight questions are there raised, the essence of which is whether there was any legitimate commercial motivation for Sumitomo's market dealings in the relevant period, whether there was a conspiracy between Sumitomo and Goldman Sachs to injure market participants, whether that conspiracy used unlawful means, and whether such market dealings were in breach of articles 81 or 82. There is no draft pleading. That is, it seems to me, an utterly jejune identification of the issues which might arise in any litigation. Again with the possible exception of the China deal, an exception if only because it is a specific transaction which has been identified and condemned by Mr Black, it seems to me that the complaint, its factual and legal basis, and the issues which it raises, are speculative in the extreme.
92. In such circumstances, unless there is some real evidence of dishonesty or abuse which only early disclosure can properly reveal and which may, in the absence of such disclosure, escape the probing eye of the litigation process and thus possibly all detection, I think that the court should be slow to allow a merely prospective litigant to conduct a review of the documents of another party, replacing focused allegation by a roving inquisition.
93. This then is the importance of the China deal, for it is Mr Black's attempt to make a focused attack on Sumitomo's honesty or anti-competitive conduct during the relevant period. Moreover the China deal appears to have been in very large part the sole basis of the judge's decision to order any disclosure at all. To a certain extent the position has moved on from what it was below, since in the meantime Sumitomo has given disclosure of the contract with CNIEC and of the delivery orders which CNIEC gave to Sumitomo pursuant to that contract. Those delivery orders appear prima facie to show that the contract was not a sham, and that the copper was delivered to CNIEC in the six months during which the contract allowed CNIEC to call the copper off. Further evidence on behalf of Mr Black and Mr Vos's submissions have since been devoted to raising further questions about this disclosure in the light of new material which Mr Black has obtained by means of the US Freedom of Information Act: but I am not particularly impressed by this. If Mr Black had such information or could obtain such information, it throws into doubt his need for disclosure from Sumitomo. It is wholly unclear to me to what extent Mr Black already has documentation, or could obtain documentation, or could legitimately obtain information from Mr O'Keefe, which would enable him either to plead his case that the China deal was dishonest manipulation or to recognise that the contract was genuine. Mr Black now complains that he has no Sumitomo documentation to prove that CNIEC paid for the copper: but he did not request and the judge did not order such disclosure. What the judge ordered was "5. Documents evidencing the physical delivery of Copper to CNIEC…"; and that is what Sumitomo has disclosed. In any event, documents disclosed by Sumitomo relating to the reconciliation of payments as between Global and itself would seem to evidence the payment by CNIEC for the copper delivered.
94. I come next to the nature of the documents requested. Mr Black's request for disclosure went extremely wide. It was not confined to documents, such as medical reports, or the maintenance reports of an item of equipment, or some other category of internal reports, which could be said at one and the same time to be reasonably narrowly focused and to relate directly to a loss or injury plainly sustained. It was not confined, as in Bermuda v. KPMG, to documents which were directly related to professional work alleged to have been negligently performed by a prospective defendant for a prospective claimant. It was not confined to documents which a protocol had identified as the sort of material one party should be disclosing at an early stage to another. Even after the judge had limited the disclosure which he was willing to entertain, the categories stated in his order indicate the width of the disclosure required. Thus he ordered "Statements showing copper warrants held" by Sumitomo throughout the relevant period, as well as "Daily trading statements showing copper future positions, copper options or any other copper positions" throughout the same period. He also ordered disclosure of any documents containing or evidencing any agreement between Sumitomo and Goldman Sachs relating to the advice given or action taken by Goldman Sachs during the relevant period; any judgments or pleadings in any civil litigation brought against Sumitomo relating to or involving any allegations in respect of the China deal or to manipulation of the copper market during the relevant period; and any documents relating to the disclosure to the regulatory authorities of Sumitomo's intentions and activities in relation to the unwinding of its copper positions. Mr Vos submitted that such disclosure was not wide and represented the least that was necessary to police the allegations made. In my judgment, however, such disclosure was very wide indeed. I am sceptical that the disclosure of daily trading statements throughout the period fell within standard disclosure in any event: they seem to me to be in effect "train of enquiry" or at any rate merely background documents. It would in any event be difficult to assess this question without a pleaded statement of case. Or, to put the matter another way: if such documents were to fall within standard disclosure, that fact would itself indicate the width of the allegations made.
95. In my judgment, the more focused the complaint and the more limited the disclosure sought in that connection, the easier it is for the court to exercise its discretion in favour of pre-action disclosure, even where the complaint might seem somewhat speculative or the request might be argued to constitute a mere fishing exercise. In appropriate circumstances, where the jurisdictional thresholds have been crossed, the court might be entitled to take the view that transparency was what the interests of justice and proportionality most required. The more diffuse the allegations, however, and the wider the disclosure sought, the more sceptical the court is entitled to be about the merit of the exercise.
96. In this connection, the difficulties which the retrieval of the documentation requested would cause to Sumitomo is also a relevant factor. The judge accepted that a "real case" of oppression had been made on Sumitomo's evidence (at para 35). However, he thought that the tailoring of his order would avoid the danger of anything oppressive or unreasonable. It is of course relevant that the cost of such disclosure falls, as a general rule, upon the party requesting it (CPR 48.1(2)). Even so, it is evident that it is only because the judge had already determined that in principle he would order disclosure that he was not deterred from doing so, at any rate to the extent that he did so, by the difficulties of the exercise. I can understand that conclusion. If, however, the court is yet to be persuaded of the justice of disclosure, a "real case" of oppression hardly makes it any easier to order it. It is after all the applicant who bears the burden of persuasion, even if, once he has shouldered that successfully, he must also bear the burden of the costs of disclosure. The burden of disclosure still rests on the respondent.
97. In the present circumstances, the expressed determination of Mr Black to commence proceedings, and the avenues open to him to obtain documentation or (as it seems) information from other sources, militate against him.
98. In this connection, as this case demonstrates, there is considerable danger of a request for pre-action disclosure leading to what must be expensive satellite litigation in connection with proceedings which have not yet been initiated.
99. It is possible that Sumitomo's reaction to Mr Black's request for disclosure could be criticised. In effect, having indicated in answer to the 21 December 2000 letter before action (which demanded a response by 31 January 2001) that a considered answer would be forthcoming by 16 March 2001, it failed to meet that date. A letter dated 21 March 2001 from Mr Black's solicitors indicates that in a telephone conversation with Sumitomo's London solicitors it was said that Sumitomo was very busily involved in litigation in the United States and that Mr Black's request had not yet made it on to an agenda for discussion. The result was Mr Black's almost immediate issue of this application, which is dated 30 March 2001. In subsequent evidence on behalf of Sumitomo, Mr London, a partner of Paul Weiss, Sumitomo's US attorneys, explains that an additional difficulty is Sumitomo's concern over the role of Mr O'Keefe. It is difficult to evaluate these matters and this court has yet to be addressed on them in relation to a question of costs. In the circumstances I would revert to the underlying situation: which is that Mr Black's claim emerged out of the blue after a period of four years; that he claimed damages of at least $126 million based on lost opportunities for speculative profits; that Mr Black and Sumitomo are essentially "strangers", not contract partners, nor "neighbours"; that the claim was originally premised on a dishonest conspiracy with Goldman Sachs, who had not previously been involved with Sumitomo during the Hamanaka affair; that the alleged conspiracy occurred in a period when Sumitomo was cooperating with the regulatory authorities in the full glare of the exposure and admission of Mr Hamanaka's manipulations; that in this court the focus on fraud has switched to a focus on anti-competitive behaviour, despite Mr Black's evidence verifying the complaint of fraud and despite the complete baldness (and width) of the anti-competitive behaviour alleged; and that I am not persuaded that Mr Black will be deterred by the absence of pre-action disclosure from putting his claim to the test of the courts.
100. If the matter had stood where it did before the judge, it is possible that a pre-action disclosure order limited to the China deal alone would have been justified. That would have been to take the China deal as representing Mr Black's "best case" for testing the theory of unlawful market manipulation. The judge in fact ordered documents evidencing the China deal, documents evidencing physical delivery of copper to CNIEC pursuant to it, and documents disclosing it to the regulatory authorities. Of course, the judge also went well beyond that point in his overall order for disclosure. In the light of Sumitomo's disclosure of at any rate part of what the judge ordered in respect of the China deal, and in the light of Mr Black's evident ability to obtain documents relating to the China deal for himself without Sumitomo's assistance, I can see no virtue in maintaining a small part of the judge's original order. Mr Black's evidence was that if disclosure showed that his contentions about the China deal being a sham were incorrect, the issue "will not be pursued any further" (see para 23 above). Disclosure has shown, prima facie, that the copper under the China deal was sold and delivered to the Chinese and was not a sham. It may well be that the documents at present before the court raise new questions which have yet to be answered. I suspect that more documents would raise more questions. I would prefer at this stage to know clearly what Mr Black is saying about the China deal: whether it was a sham; whether delivery never took place; or whether, despite being a genuine transaction (as it appears prima facie to be), it was nevertheless used in some way dishonestly or anti-competitively or otherwise unlawfully to manipulate the market, and if so, how.
101. In the circumstances, I would allow this appeal and set aside the judge's order for pre-action disclosure.

Lord Justice May:

102. I agree that this appeal should be allowed for the reasons given by Rix LJ.

Lord Justice Ward:

103. I also agree.
Order: Appeal allowed with costs in the appeal and below, those cost to include such costs as were incurred in part compliance with the order; detailed assessment; interim payment in the sum of £60,000 to be paid within 14 days. (Order not part of approved judgment)