England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
Mr. Justice Burton
[2012] EWHC 3364 (Comm)

		Royal Courts of Justice Strand, London, WC2A 2LL
		9th October 2014

Lord Justice Moore-Bick :

1. This is an appeal by the appellant, Barloworld Handling Ltd, against an order made by Burton J. under CPR 31.16 for pre-action disclosure in favour of the respondents.
2. On 9^th July 2010 a serious fire broke out in a warehouse at Heathrow used as a cargo handling depot. The entire building and its contents were destroyed. Expert investigations into the cause of the fire led to the conclusion that it had started in one of four forklift trucks used to move goods around the warehouse. The respondents were the owners of, or otherwise interested in, the building itself and its contents. The forklift trucks had been leased to the third respondent, Servisair UK Ltd, by Barloworld Fleet Rentals Ltd, an associated company of the appellant. The appellant itself had entered into a maintenance agreement with Servisair in respect of the forklift trucks.
3. On 16^th July 2013 the respondents issued an application under CPR 31.16 for an order that the appellant give disclosure of various documents created during the two years preceding the fire relating to the maintenance of the forklift trucks in use at the warehouse, as well as copies of the manufacturer's instructions for inspection and servicing, complaints received from other users of similar vehicles and internal reports relating to the fire and any other incidents of a similar nature. The appellant opposed the application, principally on the grounds that any suggestion that it was responsible for the fire was nothing more than speculation.
4. The application was heard by Burton J. on 11^th October 2013. He directed himself in accordance with the decision of this court in Black v Sumitomo Corpn [2001] EWCA Civ 1819, [2002] 1 WLR 1562 and that of Flaux J. in Kneale v Barclays Bank Plc [2010] EWHC 1900 (Comm), in which the judge had held that in order for the court to have jurisdiction to make an order of this kind the applicant must be able to show that he has "some sort of prima facie case [sc. against the respondent] which is more than a merely speculative punt". Having considered the evidence, Burton J. held that the respondents in this case were able to satisfy that test. It was common ground before him that the fire had started in one of the forklift trucks and there was evidence that the investigators instructed by the respondents had formed the provisional view that poor maintenance had played a part. The fact that the vehicle had been destroyed in the fire, however, prevented them from reaching a firm conclusion. As the judge said in paragraph 15 of his judgment, without being able to examine the vehicle they were stymied. In those circumstances he was satisfied that disclosure of the documents sought by the respondents would help to eliminate or support the case that the fire had been caused by faulty design or maintenance of the forklift truck. It would thus promote a resolution of the dispute or save costs. Although he did not say so in terms, he was clearly also satisfied that the appellant was likely to be party to any future proceedings. He therefore exercised his discretion in favour of making the order.
5. The law relating to pre-action disclosure was not seriously in dispute before us. The jurisdiction to make an order for pre-action disclosure is derived from section 33(2) of the Senior Courts Act 1981, which is reflected in CPR  31.16. Rule 31.16 provides (so far as material) as follows:

"(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."

6. The leading authority on the interpretation of the rule is Black v Sumitomo, in which the court considered the conditions on which jurisdiction to make such an order depends and the proper approach to the exercise of discretion in a case where there is jurisdiction to do so. As far as the existence of jurisdiction is concerned, the critical words in paragraphs 3(a) and (b) for the purposes of the present appeal are "likely to be a party [to subsequent proceedings]". Rix L.J., with whom Ward and May L.JJ. agreed, held in paragraphs 71-72 that the rule requires no more than that the parties to the application would be likely to be involved in proceedings if any were started, and that in this context "likely" means something less than probable. When considering the exercise of discretion he emphasised the importance of considering all the circumstances of the case, including those which bear on the existence of jurisdiction, when deciding whether it is fair to both parties to make an order of this kind.
7. In Kneale v Barclays Bank Flaux J. considered that in order for the court to have jurisdiction to make an order under rule 31.16(3)(a) and (b) it is necessary for the applicant to show that proceedings may well ensue, and that led him in turn to express the view that the applicant must establish some sort of prima facie case which is "more than a merely speculative punt". Against the background of that decision it is understandable that in the present case Burton J. should have approached the application in that way and it is also understandable that in its grounds of appeal and skeleton argument the appellant should have concentrated on seeking to show that the respondents' claim against it was indeed no more than a speculative punt. However, before the appeal in this case could be heard another case concerning the application of CPR 31.16 came before this court in the form of Smith v Secretary of State for Energy and Climate Change [2013] EWCA Civ 1585, [2014] 1 WLR 2283, in which the county court judge hearing the application had regarded himself as bound by, and had applied, the principle enunciated by Flaux J. in Kneale v Barclays Bank. The court disapproved that decision and allowed the appeal. Underhill L.J., with whom Longmore and Floyd L.JJ. agreed, said:

"23. I accept Mr Huckle's submission that there is no jurisdictional "arguability threshold", and I think I can fairly say that Mr Kinnier was not by the end of his oral submissions seeking to persuade us that there was. The jurisdictional requirements for the making of an order under CPR 31.16 are expressly set out at heads (a)-(d) in para. (3) of the rule, and they say nothing about the applicant having to establish some minimum level of arguability. If such a requirement exists it can only be implicit, and I see no basis for making any such implication. If heads (a)-(b) required an applicant to show that it was likely that proceedings would be commenced I could see an argument that that necessarily involved showing that the putative proceedings had some chance of success (because people are not likely to start hopeless cases). But it is clear from Black v Sumitomo that there is no such requirement: all that has to be shown is that it is likely that the respondent would be a party to such proceedings if commenced (see para. 71 of Rix LJ's judgment – para. 10 (4) above). I accept of course that it cannot have been the intention of the rule-maker that a party should be entitled to pre-action disclosure in circumstances where there was no prospect of his being able to establish a viable claim; but in such a case disclosure could and no doubt would be refused in the exercise of the discretion which arises at the second stage of the enquiry."

8. The decision in Smith was a body blow to the appellant's case insofar as it turned on a lack of jurisdiction, but left it unscathed insofar as it involved a challenge to the judge's exercise of discretion. It was not surprising, therefore, that Mr. David Allen Q.C. for the appellant continued to argue vigorously that any claim against the appellant was entirely speculative. In doing so he emphasised the fact that there were a number of possible causes of the fire, including faulty design and negligence of Servisair's own employees, for which his client could not be held responsible. He also relied heavily on the judge's finding that the experts were "stymied" as a result of the destruction of the forklift truck, which he took to mean that it was impossible for them to reach a conclusion of any kind about the cause of the fire.
9. In paragraph 28 of his judgment in Smith Underhill L.J. had suggested that rather than consider whether the applicant had an arguable claim against the respondent it would be better to ask whether he had shown some reason to believe that he might have suffered a compensatable injury and, if so, with what degree of likelihood. Mr. Allen sought to rely on that observation as relevant to the existence of the court's jurisdiction to order pre-action disclosure and submitted that the uncertainty over the cause of the fire made it impossible for the respondents even to show that they might have suffered a loss that was compensatable by the appellant. In addition, he submitted that the scope of the disclosure sought was excessive and was not justified by the strength of the respondents' claims.
10. Mr. David Turner Q.C. for the respondents submitted that in the light of the decisions in Black v Sumitomo and Smith v Secretary of State for Energy and Climate Change it would not be fatal to the application that the respondents' claim was speculative, although in fact there was in this case a body of evidence which tended to support the conclusion that faulty maintenance, for which the appellant was responsible, had been a cause of the fire. The judge therefore had jurisdiction to make an order for disclosure and his exercise of discretion was not open to challenge.
11. The judge himself was satisfied that the case was more than a merely speculative punt and in my view he was right to do so. In her first witness statement made in support of the application the respondents' solicitor, Miss Insall, on the basis of what she had been told by the fire investigators, said

(i) that there appeared to have been an electrical short circuit between the cables supplying the power from the truck's battery and the hydraulic hose following mechanical abrasion caused by poor routing of the cable and hose;

(ii) that the engine breather cap was out of its original position, causing a release of oil residue into the engine space, increasing the local fire load; and

(iii) that both burned and unburned oily debris in the form of a paper towel had been found adjacent to the truck's oil cooler radiator, the ignition of which could have generated the fire.

She also said that, following initial investigations, the experts were of the opinion that poor maintenance was a causal factor in the incident, but could not provide conclusive opinions on the basis of the materials currently available to them. The documents of which disclosure was sought were necessary to enable the experts to ascertain precisely how the fire had been caused. The judge noted the distinction being drawn in her statement between what was clearly the experts' provisional opinion and the more precise or conclusive opinion which they hoped to be able to reach with the assistance of the documents. When he referred to their being "stymied", therefore, I do not think he can have meant that they were unable to form any opinion either way.

12. In her second witness statement Miss Insall referred to conversations between the respondents' experts and the appellant's employees who had mentioned that the trucks had suffered overheating problems in the past, probably caused by abrasion of the wiring below the steering wheel and the failure in the form of an abrasion of the hydraulic hoses at the front articulated section. According to Mr. Benwell, Servisair's general manager, the manufacturers of the forklift trucks had attributed the problems to inadequate maintenance.
13. Although it is fair to say that the evidence pointing to failures in maintenance of one kind or another is far from conclusive, there was sufficient evidence before the judge to justify his conclusion that the case was not merely speculative. For obvious reasons he was not asked to consider whether the respondents had shown that there was some reason to believe that they might have suffered a compensatable injury, but in my view that would not have been relevant to the existence of the court's jurisdiction. When using that expression Underhill L.J. was not dealing with the question of jurisdiction. He had already made it clear in paragraph 27 of his judgment that rule 31.16(3) imposes no arguability threshold on the existence of the court's jurisdiction and I think it is clear from the opening words of paragraph 28 that he was merely seeking to describe one of the factors (albeit an important one) to be to be taken into account in the exercise of the court's discretion.
14. Each of the respondents in this case has suffered a loss as a result of the fire that is potentially compensatable by those who designed, manufactured or maintained the forklift truck which caused it and each of them could properly bring proceedings in respect of it. Since the appellant had undertaken some, if not all, routine maintenance of the vehicle, it seems to me very likely that, if the respondents were to commence proceedings, the appellant would be a party to them, even if only on an alternative basis. In that case the documents which the respondents are seeking to obtain would fall within the scope of standard disclosure. As the judge observed, disclosure at this stage may assist in identifying with greater certainty the true cause of the fire; if so, disclosure may thus help to resolve the dispute one way or the other without the need for proceedings or at any rate may save costs. I am satisfied, therefore, that the judge had jurisdiction to make an order of the kind sought. The critical question is whether he was right in all the circumstances to do so.
15. The central plank of Mr. Allen's submissions was that the respondents' case against the appellant was highly speculative and that it was unlikely that after an interval of over three years disclosure would shed any real light on the cause of the fire. Accordingly, the judge should not have imposed on the appellant the burden of giving disclosure. The judge himself was satisfied that the case was more than merely speculative and for the reasons I have given I think he was right to do so. Whether the strength of the case, the nature of the particular issues to which a claim would give rise, the contribution likely to be made by disclosure at this stage or the burden which an order for disclosure would impose on the appellant justified making the order sought called for an assessment of the kind with which this court should be slow to interfere. In fact, (subject to one matter to which I refer below) Mr. Allen did not identify any factors, apart from the speculative nature of the case, which he submitted the judge had failed properly to take into account when making his decision. In my view there are no grounds for saying that he erred in the exercise of his discretion to make an order for disclosure.
16. The appellant submitted, however, that the order made by the judge was too broad and ought not to have extended to documents created in a period as long as two years preceding the fire. In my view that was very much a matter for the judge. Mr. Allen did not identify any specific respects in which the judge was said to have erred when deciding the scope of the order and I see no grounds on which this court could properly interfere with the exercise of his discretion.
17. In those circumstances I would dismiss the appeal.

Lord Justice Ryder :

18. I agree.

Mr. Justice David Richards :

19. I also agree.