England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		01/11/2013

MR JUSTICE SILBER :

Introduction

1. The issue raised on this application is whether an order for specific disclosure should be made in the judicial review application even before permission has been granted and where permission has been refused on paper. Mr. Rhodri Thompson QC, Counsel for the Claimants, accepts that he does not know of any case in which an order for specific disclosure was made prior to the grant of permission in a judicial review application. Neither Mr. James Goudie QC, Counsel for the Defendant Council, nor nobody involved in this case nor any of my colleagues to whom I have spoken nor I know of any such case. In the light of the novel nature of this application and the fact that I still had a number of cases in my list after I had heard this application, I reserved judgment.
2. In this application, the Claimants seek specific disclosure of certain documents mentioned, and relied upon by the Defendant Council in its Summary Grounds of Resistance ("SGoR") and supporting materials. This application was made after the Claimants' application for permission to pursue their judicial review application was refused on paper by Males J and also after the Claimants had renewed their application for permission, which is due to be heard on 28 November 2012.
3. The basis of the present application is that the disclosure sought is necessary for the determination of the permission application and that the Claimants will be severely prejudiced if they do not have this material.
4. Mr. Goudie contends that disclosure should not be ordered as first the disclosure of the documents is not necessary for the determination of the permission application; second the volume of material filed in these proceedings already far exceeds that ordinarily associated with applications for permission to seek judicial review, and there is a real risk that these proceedings will become excessively expensive and burdensome even before the Court has determined that the claims are arguable; and finally the Claimants delay in making this application until 11 October 2013, which was almost 5 months after the Defendant Council served its SGoR, undermines the credibility of any suggestion of the Claimants that disclosure is necessary in order to resolve the application for permission fairly.

Relevant Legal Principles

5. Mr. Thompson accepts, correctly in my opinion, that it is well established that the general rules governing disclosure of documents in civil litigation in England and Wales do not apply to applications for judicial review: CPR PD54A Paragraph 12.1; Tweed v Parades Commission for Northern Ireland [2007] 1 AC 650, HL, at [2], [29], [44]. A restrictive approach to disclosure has been justified on the basis first that it is undesirable to allow "fishing expeditions"; and second that a public authority is subject to a duty to make candid disclosure to the court of its decision-making process: Tweed at [31], [46], [56]; and see R v Lancs CC, ex parte Huddleston [1986] 2 All ER 941.
6. In Tweed, the application for disclosure was made after permission had been granted and it was pointed out by Lord Brown that:-

"56. … In my judgment disclosure orders are likely to remain exceptional in judicial review proceedings, even in proportionality cases, and the courts should continue to guard against what appear to be merely "fishing expeditions" for adventitious further grounds of challenge. It is not helpful, and is often both expensive and time consuming, to flood the court with needless paper. …"

7. Lord Bingham observed that:-

"… The test will always be whether, in the given case, disclosure appears to be necessary in order to resolve the matter fairly and justly."

8. The issue on this application is whether the disclosure sought by the Claimants is necessary to resolve the Claimants' application for permission and not as in the Tweed case to resolve the substantive application. The Claimants' application in this case is extremely unusual, having been made after the Court has already determined on paper that the Claimants' grounds of review are unarguable. The Claimants are only able to make this application because of the substantial delay between the Court's decision to refuse permission on 31 July 2013, and the first available date for an oral permission hearing which was 28 November 2013.
9. Mr. Thompson reminds me that where a public authority relies on a document as significant to its decision, it is ordinarily good practice to exhibit it as the primary evidence: the document itself is the best evidence of what it says: Tweed at [4].

The Chronology and the Issues

10. The Claimants and their subsidiaries are the owners and operators of Coventry City Football Club ("the Club"). Since the beginning of the 2005/2006 football season, the club has played its home fixtures at the Ricoh Arena in Coventry. Coventry City Council owns the freehold in the Arena. The First Interested Party, Arena Coventry Limited ("ACL") manages the Arena under a 50-year sub-lease. The Council is a 50% shareholder in that company.
11. The Club's use and occupation of the Arena is governed by a lease and a licence granted by ACL to Coventry City Football Club Limited ("CC Limited") which is a subsidiary of Coventry City Football Club (Holdings) Limited, which is a Claimant on this judicial review application.
12. In 2012, the rent and licence fees payable by CC Limited to ACL amounted to £1.3 million per year. The Defendant contends that since April 2012, no rent or licence fee has been paid for the use of the Arena by CC Limited to ACL. The Claimants dispute this and aver that during the relevant period ACL received at least £800,000 for the Club's use of the Arena from the rent deposit account and under the pay-per-play agreement concluded with ACL.
13. On 13 August 2012, ACL obtained default judgment against CC Limited for payment of the outstanding rent and licence fees. On 5 December 2012, ACL served CC Limited with a statutory demand for the sum of £1.1 million. In the previous paragraph, I have set out the respective contentions of the parties in respect of payments to ACL.
14. In December 2012, ACL had an outstanding loan from Clydesdale Bank PLC, trading as Yorkshire Bank, of £15 million. The loan was secured by a legal charge and debenture over all of ACL's assets and ACL also entered into a hedging arrangement with the Bank which had fixed its interest rate payment on the loan. The cost to ACL of coming out of this hedging arrangement was about £4 million.
15. On 11 December 2012, the Bank wrote to ACL pointing out that the security they held was no longer sufficient to cover their exposure in respect of the facility and the Bank required ACL "to provide additional security and/or reduce the balance of the facility to our satisfaction within 7 days of the date of this letter" explaining that a failure to comply with the obligations would constitute an "event of default".
16. In these proceedings, the Defendant Council has contended that CC Limited's actions in refusing to pay any rent or licence fees to ACL exposed the Defendant Council's interest in ACL and in the Arena to a significant risk. More particularly, the value of the Defendant Council's shareholding in ACL was impaired. Further there was a real risk that the Bank or a third party might take control of ACL and the Arena if the Bank sought to enforce its security, sold the debt to a third party or put ACL into administration.
17. On 15 January 2013, the Defendant Council took the decision ("the Decision") to make a loan of £14.4 million to enable ACL to discharge its debt to the Bank. The Decision is the subject of the challenge in these proceedings. Before making the Decision, the Defendant Council had before it a report ("the Report") from a senior officer of the Council. In these proceedings, the Defendant Council contends that it took the Decision in order to protect the public investment in ACL and the Arena project. It has supplied the Report to the Claimants and this provides much information explaining why and how the loan was made.
18. The Claimants are seeking to challenge the Decision to make the loan by way of an application for judicial review on the basis that the Decision was illegal because: first, it constituted a decision to grant State aid which in breach of Article 108(3) TFEU was not notified to the European Commission; and/or second, in taking the Decision to make the loan and its subsequent conduct, the Defendant Council has acted in bad faith and with an improper motive namely to remove the Claimants as the owners of the club. It is also said that the Decision was taken ultra vires because, bearing in mind the circumstances and its improper motive, the Defendant Council exceeded the legitimate scope of a local authority's statutory powers. In the further alternative, it is said that the Defendant Council's conduct was irrational.
19. By the present application, the Claimants seek an order that the Defendant Council discloses and makes available for inspection the following documents:-

(i) The loan agreement, debenture agreement and other documentation (including any side letters) relating to the Loan;

(ii) The documents referred to in the Report detailing the financial implications of the Decision and, in particular, those described in the Report at paragraph 5.1, including:

(a)PricewaterhouseCooper ("PwC")'s analysis of ACL's then current financial position and options for the Bank, which is referred to in SGoR paragraph 134, citing the Report paragraph 3.4.5.2;

(b) the valuation of car park C as being worth £1.5m, which is referred to in SGoR paragraph 123-124; and the Report paragraph 3.5.1.1;

(c) advice from Grant Thornton as external auditors regarding the accounting treatment of the loan to ACL Report paragraph 5.1.4;

(d) the assessment of the financial and reputational risks associated with the Decision Report paragraph 5.1.5; and

(e) ACL's business plan which is referred to in SGoR paragraph 115; and in the Report at paragraph 5.1.6.

20. The Claimant had originally sought disclosure of the Records of the Meeting of 15 January 2013 "at which the Report was presented to, and the rationale for the Loan was discussed by, the Defendant Council's members, including: the transcript of the Meeting; the minutes of the Meeting; and the text of the presentation made by the relevant officers to those present during the Meeting". Mr. Goudie explained that there were no disclosable documents in this category and on the basis of this statement Mr Thompson does not pursue this application for this item.
21. Mr Alexander Carter-Silk, who is a partner in the firm of solicitors acting for the Claimants, has explained in a witness statement why the disclosure sought on the present application is necessary. He sets out the reasons in some detail and in particular he states in respect of:-

(a) The loan documentation, that it is relevant because the Defendant Council contends that a private investor would have entered into the loan agreement on the same terms as the Defendant Council did. Thus the Claimants contend that, for the Court to be able to assess fully and properly the case for the Defendant Council that the Claimants' State aid ground is "unarguable", the Claimants and the Court should have available at the permission hearing the full terms of the loan documentation;

(b) The documents relevant to the underlying assertions in the Report, that the Defendant Council in their SGoR refer extensively to the Report in support of both the contention that the loan was made on commercial terms and the argument that it was made for proper purposes. The Claimants' case is that the Report amounts to assertions without giving any proper analysis within the Report or producing the other documents relied on in the Report. So it is said that it is necessary to inspect the documents underlying the assertions in the report. By way of example, the Claimants' case is that the Defendant Council seeks to justify the contention that the loan was made at a commercial rate of interest without providing documents evidencing the source of its valuation of the Arena (which source is unclear but appears to be the PwC report referred to in the Report) and notwithstanding that this valuation is an important part of the Defendant Council's case in resisting the Claimants' State aid ground since that valuation is used by the Defendant Council to calculate the "loss given default ratio" for the loan and the commerciality of the rate of interest on the loan;

(c) The valuation of Car Park C, that it has been used to justify the consequences of the Decision that it confers a significant financial advantage on the Second Interested Party which holds the other 50% of ACL's shares but has made no contribution to the loan of £14.4million to ACL. Car Park C is said to be valued at £1.5 million in the Report but the source of the valuation is unclear;

(d) The Report's statement of the financial implications of the loan, that it contains nothing more than assertions without background documentation relating to the discussions with the Defendant Council's external auditors Grant Thornton and unspecified analysis of the financial and reputational risks associated with different options and ACL's business plans; and

(e) The Defendant Council's contention that the loan was one which a private investor would have made, as it is necessary that the Defendant Council discloses the underlying material on which the assessments of the financial implications of the loan were based.

22. Mr Goudie contends that it is not necessary for there to be disclosure of any of the documents requested by the Claimants in order to resolve the permission application fairly and justly and in particular in relation to the requests for:-

(a) the loan documentation, the case for the Defendant Council depends not on its own analysis of the terms of the loan documentation but on the application of the formula in the EU Commission's "Communication on reference and discount rates" in order to determine whether the loan is at a commercial rate of interest. This, he says, means it is necessary for the Court to consider the interest rate payable under the loan agreement and the value of any security which have been set out accurately in paragraphs 117 and 120-125 of the SGoR. So the case for the Defendant Council is that sufficient information is available;

(b) the documents underlying assertions in the report, the only reason put forward by the Claimants for seeking disclosure of PwC's analysis of ACL's financial position is to challenge the Defendant Council's "worst case scenario" valuation of the Ricoh Arena at £6.4 million on the apparent basis that this value "far exceeds a realistic estimate of the Arena's value". Mr Goudie says that the Claimants can argue this without any further disclosure from the Defendant Council and certainly without disclosure of any such PwC report. The Defendant Council refer to part of the witness statement of Ms Laura Deering of the Claimants and contends that she appears to agree with the Defendant Council's valuation when she says that "in Q4 2012 … we believed that the value of the stadium had collapsed… to around £6 million". When I circulated the draft judgment, Mr. Thompson for the Claimants noted that Ms Deering also went on to state that the value of the stadium in early 2013 was "certainly less than £5m and arguably closer to zero";

(c) the valuation of Car Park C, there is adequate material for the Claimants to argue that the Defendant Council's valuation is excessive without any further disclosure;

(d) the financial implications of the loan it is quite open to the Claimants to argue that those assertions are incorrect without any further disclosure from the Defendant Council; and

(e) the assessment of the financial and reputational risks associated with the Defendant Council's decision to make the loan. The basis of this request is the statement in paragraph 5.1.5 of the Report that "there are financial and reputational risks associated not only with the recommended option, but the alternative options". Some of those risks are referred to earlier in the Report and there is nothing to suggest that the Defendant Council is in possession of other documents which set out the financial and reputational risk associated with various options.

Discussion

23. It is important to bear in mind that the critical issue on this application is whether in Lord Bingham's words the disclosure sought is "necessary in order to resolve the matter fairly and justly" (emphasis added). The matter is the renewed application for permission and not the substantive application. This issue has to be considered against the background as explained by the Defendant Council that much highly relevant information is already in the possession of the Claimants so that they have been able to file a Statement of Facts running to 25 pages, a witness statement of 15 pages and a 20-page Statement of Grounds as well as submitting 5 lever arch files totalling over 1300 pages. In addition, the Defendant Council has filed a SGoR running to 45 pages as well as the Report which led to the Decision even though Mr. Goudie says that the Council was not obliged to disclose this document. Thus the Claimants have much material open to them to put forward to support their contention at the renewed permission hearing that permission should be granted. Some of this material might well counter the points which led Males J to refuse permission and to which I refer in greater detail in paragraph 29 below.
24. It is important not to lose sight of the fact that this application also has to be considered in the context that it is said that disclosure is necessary in order to obtain permission to pursue a judicial review application and not for the purposes of the substantive hearing. This is important as the functions of the Court are very different on a permission application than on a substantive application when the issues are being considered in great detail. In contrast at the permission stage, in the words of Civil Practice (2013) paragraph 54.4:-

"Permission will be granted only where the court is satisfied that the papers disclose that there is an arguable case that a ground for seeking judicial review exits which merits full investigation at a full oral hearing with all the parties and all the relevant evidence (R v Legal Aid Board Ex p. Hughes (1992) 5 Admin L. Rep. 623; R v Secretary of State for the Home Department Ex p. Rukshanda Begum and Angur Begum [1990] C.O.D. 107 and Sharma v Brown-Antoine [2007] 1 WLR 780 at para. 14.4)".

25. Lord Diplock said famously that permission would be granted where "on a quick perusal of the material then available, the court thinks that it discloses what might on further consideration turn out to be an arguable case" (R v Inland Revenue Commissioners, ex p National Federation of Self-Employed and Small Businesses Ltd [1982] AC617, 644 A (emphasis added)). On a permission hearing, the Court will, and does, consider not only "the material then available" but also what further relevant material might become available before the substantive hearing in order to decide if the application reaches the threshold for obtaining permission. I do not know enough about this case to give any definite view; the existence of such potentially critical material might conceivably be a good reason for granting permission.
26. Indeed, if the Claimants are unsuccessful in the present disclosure application, there is no reason why they cannot point to the fact that they have not had this disclosure so as to fortify their contention that they should be granted permission. In other words, the Claimants would be contending that this is a case which in the words of Civil Practice which I have just quoted "merits full investigation at a full oral hearing with all the parties and all the relevant evidence". Indeed, in my experience and the experience of my colleagues, such submissions are treated very seriously and they are very often successful. This could well be a persuasive or a decisive argument on the permission hearing and this fact of life undermines the Claimant's case that the disclosure sought is "necessary" at this stage.
27. Another point of importance is the brief nature of permission hearings and this explains why permission hearings are many times shorter than substantive hearing. Indeed, the renewed permission application in this case is listed for an hour, while the substantive hearing will on the information now available to me almost certainly go on for very much longer and quite possibly longer than a day. It is important to stress that permission hearings should not be regarded as full-scale rehearsals for the substantive hearing. This has never been what they were intended to be or the function that they fulfil and, as I have explained, Lord Diplock referred to the ingredient of the permission hearing as entailing "a quick perusal of the material then available". That explains why there is no evidence of any specific disclosure order having previously been made for the purpose of a permission hearing. The Tweed case related to a substantive hearing while the comment of Mitting J in R. (on the application of AA) v Secretary of State for Foreign and Commonwealth Affairs [2008] EWHC 2292 at [8] that an application for disclosure in a judicial review is "relatively unusual" has to be considered against the background that, as I understood it, nobody involved in this case nor any of my colleagues to whom I have spoken nor I know of a successful application having been made for disclosure before permission had been granted. A renewed permission application is a different animal from a substantive hearing.

Conclusion

28. Pulling those threads together, I have no doubt that Mr. Thompson has at present enough material to put forward a respectable case (if not their very best case) on most of the issues to be raised on the renewed permission application. He has, for example, sufficient material to deal with issues which Males J considered important when dealing with the permission application on paper, such as the Claimants' delay in applying for permission, the hostility and strong animosity of Councillor Mutton of the Defendant Council to the Claimants, and the terms of the loan. The disclosure sought is not necessary for the Claimants for the renewed permission application.
29. Insofar as the Claimants have not obtained on the present application further material which I will assume will be relevant to showing that they should succeed on the permission application, the judge deciding the renewed application will, as I have explained, take that into account when determining whether to grant permission. Of course, the Claimants have, as I have said, much material with which to seek to obtain permission but of course, as I have not heard submissions, I cannot predict the outcome of their renewed application.
30. What I have set out means that the Claimants have failed to show that, at this stage, it is necessary to order disclosure. I must now mention two other matters which might well have also led me to dismiss the application if, which is not the case, I had had any doubts about the conclusion to which I have just referred.
31. First, until now, I have been assuming that all the documents sought by the Claimants were highly relevant to the issue on the judicial review application but I am certainly not sure that this assumption is correct and, if so, that would mean that the application would have to be refused. It is unnecessary for me to decide on this point at this stage.
32. Second, I also suspect that if I had acceded to the application of the Claimants, it would have meant that the date for the renewed hearing would have to be adjourned because of the late application for disclosure on 11 October 2013 which was almost 5 months after the Defendant Council had served its SGoR. This delay might constitute serious prejudice to the Defendant Council and other parties and accordingly might constitute an additional ground for dismissing this application, but again I need not decide on this point at this stage.
33. For all those reasons, this application is refused.