England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Rolls Building 7 Rolls Buildings Fetter Lane London EC4A 1NL
		10th December 2015

1. MR JUSTICE MORGAN: This is an appeal and an application for permission to cross appeal against orders made by Deputy Master Cousins on 2 June 2015. The appellants are Personal Management Solutions Limited and Personal Group Benefits Limited and the respondents (who are also cross appealing) are Gee 7 Group Limited and Gee 7 Wealth Management Limited.
2. The application which was before the deputy master on 2 June 2015 was an application issued by the two companies who are now the appellants before me. It is not clear precisely when that application notice was issued. The court has stamped the application notice with the date 30 March 2015. The application notice also bears the handwritten date of 5 March 2015. However, it is common for an application notice to have a manuscript date on it which is prior to the date of formal issue of the application notice. Also, in connection with the point made by the appellants based on CPR 23.5, it is not clear when the application notice was "received" by the court. For the avoidance of doubt, I make no finding as to whether CPR 23.5 is relevant in any way in this case.
3. Although the application was for an order for pre-action disclosure under Section 33 of the Senior Courts Act 1981 and CPR 31.16, the applicants have issued a claim form against the respondents. The claim form appears to have been issued on 5 March 2015; thus it is not clear whether the application notice was issued before the claim form was issued or at the same time, if that is possible, or after the issue of the claim form. What is clear, however, is that when the application notice came to be heard on 2 June 2015, the relevant dispute between the parties was no longer at the pre-action stage because it was the subject of an issued claim form, even though that claim form had not been served.
4. The respondents to the application did not know until minutes before the hearing on 2 June 2015 that a claim form had been issued. The applicants had not earlier told the respondents of this. Indeed the applicants were at all stages informing the respondents that they were seeking pre-action disclosure. When the applicants did choose to reveal the fact that a claim form had been issued, they told the respondents and then the deputy master the wrong facts. They said, wrongly, that the application notice was issued on the 5th or possibly 6 March 2015 and the claim form was issued at the end of March 2015.
5. For the purposes of this appeal, it is not necessary to make any findings as to why the applicants did not disclose and then later misdescribed what was a highly relevant fact, namely that the claim form was issued on 5 March 2015. Accordingly, I will not make any findings on those matters.
6. The order sought by the application notice was in these terms, I quote:

"An order under Section 33 (2) of the Senior Courts Act 1981 and CPR 31.16 that the respondents disclose and permit the applicants to inspect the documents in their control that are within the classes identified in the attached draft order and specify any of those documents that are no longer in their control and what has happened to them and those for which they claim a right or duty to withhold inspection." (quote unchecked)

7. The application notice set out further matters on which the applicants relied in support of their application. It was stated amongst other things that the applicants and the respondents were likely to be parties to a subsequent action in the High Court of Justice.
8. At this point I need to refer to Section 33 (2) of the Senior Courts Act 1981 and Civil Procedural Rule 31.16. Section 33 (2) of the Senior Courts Act 1981 provides:

"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 applicants or, on such conditions as may be specified in the order —

(i) to the applicant's legal advisers; or

(ii) to the applicant's legal advisers and any medical or other professional adviser of the applicant; or

(iii) if the applicants has no legal adviser, to any medical or other professional adviser of the applicant."

9. CPR 31.16 provides:

"(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

(4) An order under this rule must –

(a) specify the documents or the classes of documents which the respondent must disclose; and

(b) require him, when making disclosure, to specify any of those documents –

(i) which are no longer in his control; or

(ii) in respect of which he claims a right or duty to withhold inspection

(5) Such an order may –

(a) require the respondent to indicate what has happened to any documents which are no longer in his control; and

(b) specify the time and place for disclosure and inspection."


10. This application was supported by a witness statement of a Mr Rooney, who was a director of and the deputy chairman of a holding company holding the shares in the applicants. His witness statement is dated 5 March 2015. Mr Rooney referred to the nature of the application, in particular, at paragraphs 36, 72 and 73 of his witness statement. He made it clear that the application was based upon the rules as to pre-action disclosure and he referred to the likelihood that both the applicants and the respondents would be parties "to subsequent proceedings". There was no suggestion anywhere in the witness statement of any other basis for an order for disclosure being made on this application.
11. The deputy master was also given a witness statement by a Miss Cooke who was a solicitor acting for the respondents. In her witness statement she sought to address the application which had been made and pointed out various matters which she said were relevant to an application under Rule 31.16.
12. As it happened, the deputy master ruled that he would not admit the witness statement of Miss Cooke into evidence on the application before him. He dealt with this in paragraph 5 of his judgment, a transcript of which was provided to me. He stated that he had heard submissions made by counsel. He thought that the witness statement was far too late. He added that the material contained in the statement did not appear to be particularly in point so far as the application was concerned. He therefore took a fairly strict line ruling inadmissible this witness statement on account of the time at which the respondents had provided the same to the applicants.
13. At an early point in the hearing on 2 June 2015, the respondents, not surprisingly, took a point as to the court's jurisdiction to make an order for per-action disclosure. The respondents submitted that now that they had been told for the first time that a claim form relating to the relevant dispute had been issued on 5 March 2015, the dispute was no longer at the pre-action stage and, so, at the hearing of 2 June 2015, the court did not have jurisdiction to make an order for pre-action disclosure. The applicants submitted to the contrary. The deputy master accepted the respondents' submission as to his jurisdiction. He said this:

"Although I am obviously loath to abandon this application for pre-action disclosure, the fundamental point is that I consider I no longer have jurisdiction. It seems to me that one therefore has to go through the normal process of disclosure and indeed specific disclosure under CPR 31.12. There is no application before me specifically to engage that process. In the circumstances, Mr Kulkarni [counsel for the respondents] submits that I cannot use the current proceedings to deal with the application when in fact I no longer have jurisdiction unless and until presumably a fresh application for specific disclosure is commenced in the new proceedings. It is obviously a highly unsatisfactory state of affairs. I am loath to be technical about this, but I agree with Mr Kulkarni that I do not have jurisdiction. However, I may be wrong in reaching the conclusion that I have no jurisdiction in this case, so, although I am not going to proceed with the hearing of the application today because I believe that I cannot, I do not have jurisdiction, I will give permission to appeal so that this can be possibly referred to the judge. Before him the parties by that stage may have found authority enabling some form of transitional provision to apply so that the existing application can be converted into an application for specific disclosure under CPR 32.12." (quote unchecked)

14. I consider that the deputy master was right to hold that he did not have power on 2 June 2015 to make an order under CPR 31.16 for "disclosure before proceedings have started" when proceedings had already started on 5 March 2015. My reasons are as follows. I remind myself of the general rules as to disclosure in CPR 31 in a case where proceedings have been brought. I refer to CPR 31.5 which identifies the usual time for disclosure and to CPR 31.12 which allows the court to make an order for specific disclosure.
15. These general rules only apply in the context of proceedings which have been brought. It was obviously thought desirable to provide for the possibility of disclosure before proceedings were commenced. That is plainly the reason for the enactment of the present Section 33 (2).
16. Section 33 (2) is expressly limited to orders for disclosure being made before the commencement of the relevant proceedings. The reason for that is that the powers conferred by Section 33 (2) were simply not needed in relation to applications made after the commencement of proceedings. The intention appears to have been that Section 33 and CPR 31.16 would apply at the pre-action stage and the other provisions of CPR Part 31 would apply in the course of any action brought.
17. It was not necessary for CPR 31.16 to overlap with the remainder of Part 31. To avoid inconsistency between overlapping provisions, it was positively desirable that the two schemes did not overlap. There are clear jurisdictional limits on the operation of Section 33 and Rule 31.16. I refer to the discussion in Black v Sumitomo Corp [2002] 1 WLR 1562 as to the distinction which exists between issues which go to jurisdiction and issues which go to the discretionary powers of the court.
18. I consider that the question as to whether there are relevant proceedings in existence goes to the jurisdiction of the court to make an order which can only be made pre-action; that is before the relevant proceedings are commenced. On the facts of this case, the court did not have jurisdiction on 2 June 2015 to make an order for disclosure before proceedings under section 33, given that proceedings had already been brought.
19. In the course of argument, various possibilities were considered and I will now refer to some of those matters. What if the application is made under Rule 31.16 before the proceedings are commenced, but then the applicants commence proceedings before the hearing of the application? I consider that in such a case the court would have jurisdiction under section 33 and rule 31.16 at the time the application is made but does not have jurisdiction to make an order for disclosure under section 33 and rule 31.16 at the time of the hearing. The court would retain jurisdiction to deal with the costs of the application. The court would have power under other provisions in Rule 31 to make appropriate orders for disclosure at the times which the court considers to be appropriate.
20. What if there is an application under Rule 31.16 at a time when there are proceedings on foot and the applicants undertake to discontinue those proceedings and wishes to have disclosure in relation to a second set of proceedings, assuming they do not give rise to an abuse of process? In that case the court would have power to make an order under section 33 and rule 31.16 for disclosure in relation to the issues to be raised in the second set of the proceedings before the commencement of the second set of proceedings.
21. What if proceedings are brought but the claimant contemplates the bringing of a second set of proceedings without discontinuing the first set of proceedings and not involving any abuse of process? There again, an application can be made under section 33 and Rule 31.16 in relation to the issues to be raised by the prospective second set of proceedings.
22. Although all of the foregoing seems tolerably clear from the wording of Section 33 and Rule 31.16, the appellants submitted to me that the contrary had been held in a number of previous cases which I must therefore consider. The appellants rely in particular on Arsenal Football Club Plc & others v Elite Sports Distribution Ltd [2002] EWHC 3057(Ch) and Alstom Transport v Eurostar International Ltd [2010] EWHC B32(Ch).
23. In the Arsenal case the claimants sued the defendant for various alleged infringements and acts of wrongdoing. The defendant applied to strike out the claim. The claimants also sought an order that the defendant provide them with certain specified information. In his judgment, Mr Vos QC, sitting as a judge of the High Court, commented at paragraph 2 that the order sought for the provision of information could have been sought under Rule 31.12. The judge then decided that he would not strike out the statement of claim.
24. At paragraph 35 of his judgment, he added a further reason for his conclusion and he referred in that context to Rule 31.16. It is clear from his discussion in paragraph 35 that the judge was not considering an actual application which had been made to him to order disclosure under Rule 31.16, rather the judge was considering what the position would have been if there had been an application for pre-action disclosure.
25. He considered that the court's reaction to that hypothetical application would be a factor to be taken into account in considering how to respond to the applications which were actually before him, namely to strike out the statement of claim and to make an order for the provision of information.
26. It was in that way that the judge considered the case of Black v Sumitomo Corp dealing with how one should approach an application under Rule 31.16. The judge made it clear in paragraph 37 that these matters were to be "taken into account when considering this strike-out application". In other words, he was not dealing with an application under Rule 31.16, he was taking that matter into account when dealing with a strike-out application.
27. The matter is made yet more clear when the judge explains his conclusion at paragraph 40 of his judgment. He indicated that he would make an order for disclosure of the material sought by the claimant and he added, "but under part 31.12 within the action". This makes it clear the judge's order was not an order made under 31.16 at a time when there was a pending action between the parties. The judge explained that his order was being made under Rule 31.12 in three other places, in paragraphs 47, 48 and 49 of his judgment.
28. Accordingly, the decision in Arsenal does not provide any support to the appellants' contention that the court has power to make an order under Rule 31.16 in relation to the issues raised in proceedings which have been commenced and are pending. Arsenal is referred to in a note to Section 33 in Volume 2 of the White Book at paragraph 9A-113. What is said in the note referring to the relevant sub-section is as follows, "powers referred to in sub-section 2 may be exercised by the High Court after proceedings have been commenced" and the note refers to the Arsenal case. I do not agree with that note. It seems to me it involves a misreading of the Arsenal decision.
29. Arsenal was considered by the same judge, by then Vos J, in the Alstom case. In Alstom the claimant had sued the defendant in respect of the defendant's conduct of a tendering process in which the claimant was not awarded the contract. The claimant sought disclosure from the defendant of various documents. The judge referred to CPR Rules 3.6, 3.12 and also 3.16. He then cited certain paragraphs from his own decision in Arsenal, but as it happened he did not cite the passages to which I have earlier referred which made it clear that the order he had made in Arsenal was an order made under Rule 31.12 and not under Rule 31.16.
30. In Alstom at 32 the judge stated that he could order discloser under Rule 31.16 and he added, "as I did in the Arsenal Football Club case". He repeated that comment at paragraph 37. However, with respect to the judge, he misdescribed his own decision in Arsenal when he said in Alstom that the order had been made under Rule 31.16. If he had cited further paragraphs of his decision in Arsenal, then he would have reminded himself of the correct position which was that the order had been made under Rule 31.12.
31. As it happens, the decisions in Arsenal and Alstom have subsequently been correctly understood as cases where orders for disclosure were made at an early stage of proceedings under Rule 31.12. That appears from the decision of Coulson J in Roche Diagnostics Limited v The Mid Yorkshire Hospitals NHS Trust [2013] EWHC 933 (TCC) where it was said at paragraph 16, and I quote:

"An order for specific disclosure can be made in advance of the standard disclosure of documents, if the court is persuaded that the documents sought are important and should be provided early on in the proceedings. That is often necessary in procurement disputes. In Alstom Transport v Eurostar International Limited [2010] EWHC B32(Ch), Vos J made an order for specific disclosure in a procurement case because of the potential importance of the information relating to the tender evaluation, known only to the defendant. In reaching that conclusion, he relied on his earlier decision in Arsenal Football Club v Elite Sports Distribution Limited [2002] EWHC 3057 (Ch), in which he had set out the principles governing pre-action disclosure, and explained the overlap between that process and the ordering of specific disclosure at an early stage in the proceedings."

32. If one reads the judgment in Roche Diagnostics Limited as a whole, it is clear that Coulson J was referring to a jurisdiction to order specific disclosure under Rule 31.12. There is nothing in Roche Diagnostics Limited which supports the idea that there is a concurrent power to order specific disclosure during the course of proceedings under Rule 31.16.
33. The decision in Roche Diagnostics Limited has been followed in a number of later cases in a similar context but it is not necessary to refer to them. I was also referred to Dellal v Dellal and Others [2015] EWHC 907 (Fam) at paragraphs 29 to 30 where Mostyn J referred to the Arsenal case in a way which is consistent with my reading of that decision. Accordingly, the authorities relied upon by the appellants do not make good their submission that the deputy master had, after all, jurisdiction on 2 June 2015 to make an order for pre-action disclosure under Rule 31.16.
34. The appellants next submit that the deputy master should have treated their application as if it had been an application for disclosure under 31.12. I have already quoted paragraphs 11 and 12 of the deputy master's judgment where he referred twice to Rule 31.12. I noted in paragraph 11 of his judgment that the deputy master said, and I quote: "There is no application before me specifically to engage that process". In the course of today's hearing I was informed by counsel for the appellants and by counsel for the respondents, both of whom appeared before the deputy master, of what happened in this respect at the hearing on 2 June 2015.
35. Mr Kulkarni, counsel for the respondents, told me that he drew the deputy master's attention to Rule 31.12. He drew the deputy master's attention to that Rule to make good his submission that the only thing that the applicants could do, now that proceedings had been started, was to apply under Rule 31.12 and not under Rule 31.16. Mr Kulkarni pointed out that the applicants had not applied under Rule 31.12 and it would not be right to treat the application made under an entirely different rule, turning on different issues, as an application made under Rule 31.12. Mr Kulkarni said that the respondents had not addressed the possibility of an application under Rule 31.12.
36. Mr St Quinton, counsel for the appellants, told me that on 2 June 2015 he replied to this submission stating that the deputy master could and should proceed with the hearing as if the application had been made under Rule 31.12. From hearing both counsel describe what happened, it did not seem to me that Mr St Quinton had pressed the application of Rule 31.12, and for reasons I will give in a moment, I think it is entirely understandable why he did not press such an application.
37. Mr Kulkarni also reminded me that on 2 June 2015 the deputy master had taken a fairly strict line in preventing his clients relying on the witness statement of Miss Cooke on the grounds that the witness statement was late. It was submitted that the deputy master was only being consistent when he took a similar fairly strict line to an unheralded application by the applicants to transform the hearing from one dealing with Rule 31.16 to one concerned with Rule 31.12.
38. I accept that the deputy master could have proceeded on 2 June 2015 to treat the application before him as an application for disclosure under Rule 31.12. For myself, I would have been very surprised if he had allowed that to happen. The tests to be applied under Rule 31.16 and Rule 31.12 are different tests. The respondents had not been given any opportunity to address an application under Rule 31.12. Prima facie the respondents would have been able to make reasonable, possibly even powerful, submissions as to why disclosure should follow the ordinary course and not be the subject of an order under Rule 31.12 before the claim form had even been served and certainly before the parties had served their pleadings identifying the issues which would properly be the subject of subsequent disclosure.
39. It is true that the deputy master dealt very succinctly with the suggestion that he might proceed under Rule 31.12. He seems to have regarded that suggestion as a non-starter. That was a view he was entitled to take. He did not make any error of principle in relation to what was essentially a case management matter.
40. I have now dealt with the substantive points raised on the appeal. It follows from what I have said that I will dismiss the appeal.
41. I next turn to consider the respondents' application for permission to cross-appeal. Having dismissed the application before him, the deputy master reserved the costs of that application. The deputy master gave his reasons for doing so in the course of his judgment. In paragraph 13 he said this:

"Therefore I grant permission to appeal but I am not going to deal with the question of costs today. I do not think it would be right for me to make an order for costs, so I shall reserve them." (quote unchecked)

42. Having made that statement, which had apparently not been the subject of earlier submissions from counsel, the deputy master was then plainly requested to hear legal argument as to costs and he did so. I do not have a transcript of the legal argument, but following the legal argument, the deputy master said this in paragraph 14 of his judgment:

"Having heard argument as to the question of costs, I am not going to change my mind on the matter. Further, I do not think it is right for Mr Kulkarni to have permission to appeal on this. He may make whatever representations he wants to subsequently, but I am going to refuse permission to appeal on the question of costs. I do not think it is reasonable in the present circumstances, not having gone through the merits of the case on pre-action disclosure to order costs. The application is in a state of limbo at the moment and therefore I make the order that I do." (quote unchecked)

43. At one stage in the course of argument today I was troubled by the deputy master's reference to the application being "in limbo". It was suggested to me that this meant that the deputy master was referring to the prospect of an appeal against his decision, leading him to the conclusion that he ought not to deal with the costs of the application in advance of knowing the outcome of the appeal.
44. That would be a very odd thing for a master to think or to say. I do not think that can be what the deputy master meant. I think that his remark is to be taken, not as a separate reason, but together with his earlier remark that he had not decided on the merits of the application but only on the question of jurisdiction. He seemed to have considered that the question of disclosure generally and in particular the respondents' various arguments resisting disclosure on which they had incurred costs had not gone away entirely and might need to be revisited at a later stage in the proceedings which had been commenced.
45. As it happens, the deputy master has proved to be right about that given that the applicants has now served their claim form and have served detailed particulars of claim and for good measure have issued an application under Rule 31.12 in those proceedings.
46. What the respondents say on this proposed cross-appeal is that the deputy master should have ordered the applicants to pay the respondents' costs of the application. The respondents rely on the fact that the application was dismissed for want of jurisdiction. They also rely on the starting point, but I interpose not necessarily the finishing point, as to costs under Rule 46.1(2) if the application had proceeded and an order for disclosure had been made.
47. I am not persuaded, however, that an order in favour of the respondents that they do recover all of their costs was the only possible order which could be made. There were other possible orders. I do not want to make a finding myself as to what order was or might become appropriate, but I think I can refer to the possibility that an order for costs which is ultimately made may not give the respondents all of their costs but only a part of their costs.
48. I do not decide today that that is the appropriate order, but it is a candidate which would have to be considered by any court finally deciding this matter. Such an order might be the more readily arrived at following a detailed assessment of the many points taken by the respondents, in particular in the skeleton argument prepared for the hearing on 2 June 2015.
49. I recognise that many judges might have been prepared to deal with the costs of the application finally on 2 June 2015 to promote finality and certainty, however, there was no error of legal principle in what the deputy master did. I stress that by reserving the costs he left all options as to costs open.
50. Accordingly, I do not consider that the respondents have a real prospect of successfully appealing the deputy master's orders as to costs and I will refuse permission to cross-appeal.