COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, FAMILY DIVISION
MR JUSTICE COLERIDGE
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LLOYD
LORD JUSTICE WILSON
| JOHN ROBERT CHARMAN
|- and -
|BEVERLEY ANNE CHARMAN
Martin Pointer QC, Daniel Hochberg and James Ewins (instructed by Manches) for the Respondent
Hearing date : 2 December 2005.
Crown Copyright ©
Lord Justice Wilson :
(a) an order (under Order 39, rr. 1 and 2 of the Rules of the Supreme Court 1965, "the Rules of 1965", superseded for other civil proceedings but presently still applied to family proceedings by Rule 1.3 of the Family Proceedings Rules 1991, "the Rules of 1991") for the issue of a letter of request to the authorities of a foreign country to take a person's evidence; and
(b) an order (under Rule 2.62(7) of the Rules of 1991) that a person should attend before the court at an inspection appointment and there produce documents.
"You may find it helpful to know my wishes regarding the exercise of your powers and discretions over the funds of the Settlement. I realise of course that these wishes cannot be binding on you.
My real intentions in establishing the Settlement are to protect and conserve certain assets for the benefit of myself and my Family.
During my lifetime it is my wish that you consult me with regard to all matters relating to the investment or administration of the Fund and thereafter you should consult my wife in like manner. If my wife survives me, it is my wish that the fund should be administered primarily for her benefit and that she should have access to capital, if necessary. If both of us are dead, my children are to be treated as the primary beneficiaries and I hope you will consult my executors and their guardians. Should anything happen to the entire family, then the funds subject to the Settlement should follow my estate.
Insofar as is consistent with the terms of the Settlement I wish to have the fullest possible access to the capital and income of the Settlement including the possibility of investing the entire Fund in business ventures undertaken by me.
If circumstances should change in any way I will write you a further letter."
" throughout the whole of our trusteeship of the Trust, we held the income of the Trust for [the husband] absolutely and regarded the Trust as an interest-in-possession trust. The capital and income were held in segregated accounts and accumulated income either distributed to [the husband] or left in the accumulated income account to be distributed to him at a later date."
The husband states that distributions to him out of the accumulated income account ceased in 1997. There has been no distribution to any other beneficiary at any time.
"During my lifetime, I would like you to treat me as the primary beneficiary, although I expect that you will consider the interests of the other immediate family beneficiaries as appropriate from time to time. I acknowledge that you have appointed the annual income to myself as a life interest disposition, as had the previous trustees.
After my death, and if they survive me, I would wish you to treat my children as primary equal beneficiaries per stirpes.
I may amend these wishes from time to time to take account of changing circumstances."
(a) Under cover of his solicitors' letter dated 27 August 2004 the husband made his first presentation of assets in the proceedings. In what was entitled a "Schedule of Matrimonial Assets" he included three categories, namely his own assets, jointly held assets and trust assets, and he estimated the total value of assets in all three categories at £83,000,000. He appended a note that the schedule included neither his "Children's Settlement" nor another trust "as neither party has financial interest in these trusts". It is agreed that the "trust assets" which he included in the total either comprised, or at least included, the assets of Dragon. It seems to me highly arguable that, by that schedule, the husband was conceding that the capital assets of Dragon would be likely to be made fully available to him upon request. But, if such was an unintended misrepresentation, he is entitled to say so. And, by letter dated 20 September 2004, his solicitors wrote that the assets of Dragon had been included in the schedule only for convenience and that he neither controlled them nor regarded them as his.
(b) In January 2005, when he gave oral evidence in support of his application for a stay of the English divorce proceedings, the husband's case in relation to Dragon began more clearly to emerge. His case has now been encapsulated by the description of Dragon as a "dynastic" trust. In relation to its creation he said:"I deeply wanted to establish a legacy for my future generations because I felt it was the most wonderful thing that I could ever do to ensure not only the longevity of my name but also my reputation and my standing in the future generations of offspring."
(c) In March 2005 the husband complied with his duty under Rule 2.61B(7)(a) of the Rules of 1991 to file a concise statement of the issues between him and the wife. Echoing almost word for word the statement of issues already filed on her behalf, he identified the following issue:"To what extent, if any, are the assets of [Dragon] to be regarded as matrimonial assets to which the court should have regard?"In an affidavit sworn in August 2005 he amplified this case and added:"I have no need or desire for future distributions"
(d) The wife's solicitor considered, in my view reasonably, that the husband was sitting on the fence. By letter dated 15 September 2005 she asked his solicitor to state whether the husband conceded for the purpose of the application for ancillary relief that the assets of Dragon were resources which were and would be available to him. By letter dated 19 October his solicitor replied:"In 1987 my client wished to create a structure whereby the wealth that he had generated and expected to generate for the future was perpetuated and would benefit future generations. For this purpose he established the Trust.My client has explained how the first Letter of Wishes came to be signed. Of course at that stage in my client's career, although he might have been confident of success, he could not actually know that he would succeed to the extent that he has, and particularly that things would not go wrong with the result that he would need to ask that the trustees consider making provision for the immediate family. Nevertheless his confidence proved to be well-founded.You write that my client 'has exercised and continues to exercise control over the trust'. I accept that in the circumstances that have arisen, namely the change in treatment to an interest in possession trust, my client can be said to 'control' the income. However, I suspect that you are trying to elevate the fact that the trustees have been willing to invest the trust assets into ventures in which my client was involved into an argument that this means that he controls the TrustThe very reason that the Trust was established was to hold an interest in Charman Underwriting. It is neither surprising nor unusual for trustees to accede to a settlor's request to invest in an enterprise in which he is involved. It is certainly not evidence of control. Furthermore the Trust has made a great deal of money from my client's requests that the trustees invest in his business activities, far more, I believe, than it might have made by a more conventional investment approach.My client has explained that he does not really understand the background to the change in treatment of the trust from a discretionary trust to an interest in possession trust.The fortunate result for your client of this practical change in treatment is that my client's ability to call for income from the Trust will be taken into account in these proceedings. Nevertheless he will ask the Court also to have regard to the fact that he has never actually received income, except in the very particular circumstances outlined above, and in his evidence, that there have not been any payments out of income since 1997 and that his treatment of the Trust, as against the decision that appears to have been taken in this regard by the trustees, has been consistent with his initial intention that this fund, as to both income and capital, should not be for him or his immediate family.He does not accept that the capital should be taken into account in these proceedings."By that letter, written on the day prior to the hearing before the judge, the husband appeared to climb down from the fence. On the central question, namely as to the availability to him of the capital of Dragon, he definitely adopted a negative stance. I confess that perhaps too quickly - I had read his stance in relation to the contingent subsidiary question, namely as to the availability to him of its income, as an affirmative concession. But Mr Singleton Q.C. on his behalf asserts that a careful reading of the letter shows the opposite; and I proceed on that basis.
(a) the applications are in aid of a "fishing" expedition and thus impermissible;
(b) insofar as the applications are for the production of documents the very existence of which the wife cannot prove, they are impermissible;
(c) the orders are unnecessary and thus impermissible;
(d) the orders are disproportionate and so should in the exercise of discretion be refused;
(e) the orders are oppressive, particularly in relation to Mr Anderson, and so should in the exercise of discretion be refused;and
(f) at least in part the orders go too wide and should be cut down.
"The point is made by Mr Singleton that surely the wife has enough to advance this case in argument. That is to say, surely there are enough documents and answers to questionnaires so far in existence, which support [her] case
But I remain uneasy about it, and ultimately it is for me to decide whether or not, as the trial judge, there is sufficient evidence before me at the moment to enable me to come to a clear conclusion on this centrally important, if not pivotal, issue as matters currently stand. I do not wish to be reduced to conjecture based on inadequate evidence if there is more which could be of real assistance.
If this had not been a central issue in the case and if the sum of money involved had not been of the order that it is, or the proportion that it is of the overall total, I would tend to agree with Mr Singleton, that there was enough already and this was perhaps a disproportionate procedural step to take. But the resolution of this issue could impact on the result to the extent of millions, or even tens of millions, of pounds. The court should make a decision that is determinative of an issue of that gravity on the basis of the best possible evidence It may be that there is nothing else. If so, that too may be relevant. It may be that there are documents and communications between the husband and the trustees that deal with his intentions, past present or future. If so, I need to see them."
(a) produce trust accounts for the two most recent completed years;
(b) produce any trust deeds, written resolutions and letters of wishes, other than identified documents of each class already disclosed by the husband;
(c) state whether it was the practice of the trustee to consult the husband, and/or to be guided by him, about prospective policy decisions, whether as to investment, distribution or otherwise, and, if so, give full details and produce all relevant documents;
(d) state whether the trustee and the husband had discussed the possible collapse of the trust or change in the expression of his wishes and, if so, give full details and produce all relevant documents; and
(e) state whether there had been any communications between Mr Clay and the trustee "regarding the trusts" and, if so, give full details and produce all relevant documents.
The letter also requested that the wife's representative be permitted orally to ask and impliedly that Mr Anderson should be required to answer supplementary questions in order to elicit the clearest possible account of the above matters.
"any documents containing evidence of any advice given to, discussions with or communications from, [the husband], relating to the past, present and future treatment of the trust funds or which bear upon the conception, creation and possible ultimate dissolution of [Dragon] "
PREFACE TO THE ARGUMENTS
(a) The appropriate form of order, as was made (rightly or wrongly) in the present case, is that the person should attend an inspection appointment. By virtue of Rule 2.62(7) of the Rules of 1991, the order can require him to produce "any documents to be specified or described in the order, the inspection of which appears to the court to be necessary for disposing fairly of the application for ancillary relief or for saving costs". By virtue however of paragraph (8) of the rule, no person can be compelled under (7) to produce a document which he could not be compelled to produce at the substantive hearing. It is clear, therefore, that, while the court has to be satisfied that inspection of the document is necessary for disposing fairly of the application or for saving costs, the court should nevertheless exercise its discretion to refuse production if application of the general principles for setting aside a writ of subpoena to produce documents (as unfortunately the continuing link with the Rules of 1965 requires such a summons to be described) leads to that result.
(b) The order for an inspection appointment is not an order for the person to give oral evidence. Nevertheless it has become the practice for the person attending it to be asked any question necessary to enable the inspection to proceed effectively, for example, if it is not clear from the face of a document produced, to identify its source or how it relates to another document or whether a document is missing and, if so, why. I consider that it is permissible to require answers to such questions. In Frary v. Frary and Another  2 FLR 696 at 703B Ralph Gibson L.J. thought so too.
Although it is usually desirable that a person should produce documents in advance of the substantive hearing, it is usually undesirable that he should give oral evidence in advance of it. At that stage the parties and the judge are likely to lack the requisite overview necessary for their focussed questioning and his focussed listening. So, if a person is in England and Wales, the procedure of choice will be to seek authority, pursuant to Order 38 r.14 of the Rules of 1965, to issue a writ of subpoena to attend the substantive hearing and give oral evidence. Nevertheless there are exceptional cases in which it will be appropriate for such a person to be required to give oral evidence in advance of the substantive hearing. It may well be that a subpoena to attend and give oral evidence can lawfully be made returnable prior to the substantive hearing. In Khanna v. Lovell White Durrant  1 WLR 121 at 127C Sir Donald Nicholls V.-C., as he then was, left the point open; but the logic behind his decision tends that way. Alternatively an order can be made under Order 39 r. 1 of the Rules of 1965 for a deposition to be taken of a person's oral testimony before an examiner, with a view to its reception into evidence under Order 38 r. 9.
The appropriate form of order, as was made (rightly or wrongly) in the present case, is for the issue pursuant to Order 39 r.r. 1 and 2 of the Rules of 1965 of a letter of request to the relevant judicial authorities to cause the person to be required to produce the documents.
Since such a person cannot be compelled by subpoena to attend the hearing and give oral evidence, the appropriate form of order, as was made (rightly or wrongly) in the present case, is for the issue, pursuant to the same rules, of a letter of request to cause the person to be required to answer written questions under Order 39 r. 3(3) and/or oral questions.
"(1) the High Court shall have power by order to make such provision for obtaining evidence as may appear to the court to be appropriate for the purpose of giving effect to the request in pursuance of which the application is made;
(2) an order under this section may, in particular, make provision
(a) for the examination of witnesses, either orally or in writing;
(b) for the production of documents;
(3) An order under this section shall not require any particular steps to be taken unless they are steps which can be required to be taken by way of obtaining evidence for the purposes of civil proceedings in the court making the order
(4) An order under this section shall not require a person
(a) to state what documents relevant to the proceedings to which the application for the order relates are or have been in his possession, custody or power; or
(b) to produce any documents other than particular documents specified in the order as being documents appearing to the court making the order to be, or to be likely to be, in his possession, custody or power."
" although "fishing" has become a term of art for the purposes of many of our procedural rules dealing with applications for particulars of pleadings, interrogatories and discovery, illustrations of the concept are more easily recognised than defined. It arises in cases where what is sought is not evidence as such, but information which may lead to a line of inquiry which would disclose evidence. It is the search for material in the hope of being able to raise allegations of fact, as opposed to the elicitation of evidence to support allegations of fact, which have been raised bona fide with adequate particularisation It is perhaps best described as a roving inquiry, by means of the examination and cross-examination of witnesses, which is not designed to establish by means of their evidence allegations of fact which have been raised bona fide with adequate particulars, but to obtain information which may lead to obtaining evidence in general support of a party's case."
At 482H 483B Kerr LJ gave an example of what he meant: namely that, if raised with adequate particularisation, a question whether X was the settlor of a trust would be legitimate but that, if the answer was negative, a supplementary question as to "who, then, was it?" would be "fishing".
(a) in relation to a request for oral evidence there was no jurisdictional limitation in respect of "fishing" (1164b);
(b) the first Norway case, properly regarded, demonstrated that, as a matter of discretion, a request for oral evidence should be refused if the intention was to obtain information rather than evidence for use at trial (1164d);
(c) if, however, the intention was to obtain evidence for use at trial and there was reason to believe that the person had knowledge of matters relevant to issues at trial, the request should not be refused on the ground of "fishing" (1164f); and
(d) the request satisfied those tests but should nevertheless be refused as being oppressive because the claimants had alleged that the accountants had been complicit in the fraud and might well use their proposed evidence in later proceedings against them (1168f).
"Typically, perhaps, oral examination relates almost exclusively to the requested documents, so, if the documents are not properly sought, oral examination falls away."
In that, in the case of Netbank, the request was only for oral evidence Kawaley J., choosing to adopt the approach commended in Zayed, held that he had a discretion, which he proceeded to exercise.
(a) insofar as they seek production of documents, the orders for the letter of request and for the inspection appointment could not lawfully have been made if they represent an attempt to go "fishing"; and
(b) insofar as the letter of request seeks the taking of oral evidence, it may be preferable to conduct its initial appraisal not by reference to "fishing" but by asking, perhaps in effect only slightly differently, whether the intention is to obtain Mr Anderson's evidence for use at trial and there is reason to believe that he has knowledge of matters relevant to issues at trial.
Furthermore, whether or not it was apt to the particular case before him, the analysis of "fishing" made by Kerr L.J. in the first Norway case cannot in my view be bettered and should at any rate be applied to the court's appraisal of the request for production of documents.
"It is another feature of such proceedings that one party, usually the wife, is in a situation quite different from that of ordinary litigants. In general terms, she may know more than anyone else about the husband's financial position She may know, from conversations with the husband in the privacy of the matrimonial home, the general sources of his wealth and how he is able to maintain the standard of living that he does. But she is unlikely to know the details of such sources or precise figures, and it is for this reason that discovery now plays such an important part in financial proceedings in the Family Division.
Applications for such discovery cannot be described as "fishing" for information, as they might be in other divisions. The wife is entitled to go "fishing" in the Family Division within the limits of the law and practice."
The judge's first paragraph is, if I may say so, important; and I will return to it at . But his reference to an entitlement to go "fishing" might have caused confusion. I believe that he meant to convey only that, by a request for an order for disclosure, a wife is entitled to seek to ensure that a husband complies with his duty to make full and frank disclosure of all his resources. The passage does not, and could not, confer upon a spouse a licence to go "fishing" for documents against a non-party.
" the documents requested for production in this case are narrowly confined to the single issue they are aimed to support. The documents are more than likely in the possession of the applicant and are readily identifiable. Of course, it is impossible for the petitioner to know the specific identity of individual documents. But the applicant is being asked a specific question and is being asked to produce the documents to prove his answers. That is not a fishing expedition in the sense of casting a line in the hope that something will be caught: the fish has been identified and the court is endeavouring to spear it."
The vivid development of the metaphor applies neatly to the present case.
DOCUMENTS NOT PROVED TO EXIST
"(1) It shall be the duty of the court in deciding whether to exercise its powers and, if so, in what manner, to have regard to all the circumstances of the case
(2) the court shall in particular have regard to the following matters
(a) the financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future "
"The quasi-inquisitorial role of the judge in ancillary relief litigation obliges him to investigate issues which he considers relevant to outcome even if not advanced by either party. Equally, he is not bound to adopt a conclusion upon which the parties have agreed."
The court's "quasi-inquisitorial role" stems from s. 25 of the Act of 1973. Insofar as it is its independent duty to have regard to a spouse's resources, the court cannot be disabled from discharging it by any substantial fetter upon its ability to extract relevant documents from a non-party not expressly mandated by the words of s. 2(4) of the Act of 1975. Thus in D v. D (Production Appointment)  2 FLR 497 Thorpe J., as he then was, in deciding to set a wide boundary around the scope of the documents which he was ordering the wife's accountant to produce at (as it is now called) an inspection appointment, said, as 500 A B:
"If the boundary is set narrow, there is the risk that information as to the nature and extent of the [wife's] financial circumstances may be lost to the detriment of the husband and to the obstruction of the court in its duty to carry out the s.25 exercise as between the husband and the wife."
"Dealing with a case justly includes, so far as is practicable
(c) dealing with the case in ways which are proportionate - (i) to the amount of money involved; (ii) to the importance of the case; (iii) to the complexity of the issues; and (iv) to the financial position of each party; "
In that the power to order an inspection appointment arises under such rules, the court must therefore seek to exercise it in a way which is proportionate to the four specified factors. By analogy, the same requirement applies to the power to order the issue of a letter of request for the production of documents in such proceedings. A clear failure to observe such proportionality will vitiate the resultant exercise of discretion whether to make either such order.
Lord Justice Lloyd:
"They responded that they are not willing to produce these documents from their files as neither the Respondent nor the Petitioner has a right to these documents and they do not consider it to be in the interests of the trust for the trust to participate in a discovery procedure in the English court."
Sir Mark Potter, P :
"I approach this application, therefore, on the footing that the plaintiffs are not entitled to seek what is in substance discovery. The letter for request must be confined to particular documents, although these may be described compendiously, as with the letters in Lee v Angas L.R.2 Eq. 59, 63
I preface consideration of the documents sought by noting that particularity of identification or description is a matter of degree. The description used, moreover, may be important in another way: it may throw light on the purpose for which the documents in question are sought. The court should be astute to see that what is essentially a discovery exercise, whereby the applicant is seeking production of documents with a view to ascertaining whether they may be useful rather than with a view to adducing them in evidence as proof of some fact, is not disguised as an application to produce particular documents. Where an applicant has not seen the documents sought and does not know what they contain, the application can the more readily be characterised as a discovery exercise. Further, to be the subject of a letter of request the document must be admissible in evidence; it must be directly material to an issue in the action "
" and the court must be satisfied that it does exist or did exist, and that it is likely to be in the possession of the person of whom production is being sought. Actual documents are to be contrasted with conjectural documents, which may or may not exist; see Lord Fraser in the Asbestos case  1 WLR 331, 338."
"Paragraph (a) excludes discovery. Paragraph (b) narrows the ambit of the order even further."