England and Wales High Court (Commercial Court) Decisions

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

		Royal Courts of Justice Strand, London, WC2A 2LL
		6 August 2010

Mrs Justice Gloster:

1. This is my judgment in relation to Mr. Berezovky's ("the Claimant") application for an order for enhanced disclosure, pursuant to CPR 31.5(1). Mr. Rabinowitz QC, on behalf of the Claimant, applies for an order that, in relation to, effectively, all the factual issues in dispute set out in the agreed List of Issues, both parties should search for and disclose any

"… documents which it is reasonable to suppose may enable the other party either to advance his own case or to damage that of the party giving disclosure, or lead to a train of enquiry which has either of these consequences."

2. The making of such an order (commonly referred to as a "Peruvian Guano" order, and which I shall refer to as an "enhanced order") is resisted by Mr Brindle QC (on behalf of Mr. Abramovich ("the Defendant")), certainly at this stage of the proceedings.
3. There was no formal application for such an order by Mr. Rabinowitz, the matter having been raised recently in correspondence between the parties, in Mr. Rabinowitz's skeleton argument and in the draft order for directions attached to that skeleton. More importantly, there was no evidence filed in support of such an application, and consequently none served in answer. The consequence of the absence of any evidence was that the court had no information before it from either side as to:

i) what documents or categories of documents might be regarded as liable to be searched for, or discloseable, in accordance with standard disclosure procedures;

ii) what wider or different categories of document would have to be searched for if an order for enhanced disclosure were to be made;

iii) any indication as to the nature of the searches that would have to be carried out, or the extent of the relevant universe of documents, if an enhanced order were made, or the difficulties, if any, that the conduct of such a search would impose on the parties; and

iv) any indication of what inquiries, in relation to which issues, such an order for disclosure would require.

Mr. Rabinowitz's submissions

4. Mr. Rabinowitz submitted that this was clearly a case where it was appropriate to order enhanced disclosure. He pointed to:

i) the enormous sums at stake (in excess of USD 3.5 billion), large even by the standards of the Commercial Court; and

ii) the serious nature of the allegations being made against the Defendant and the allegations made against the Claimant by way of defence: thus there were allegations of intimidation in relation to the sale of the Sibneft assets at an alleged under-value; and allegations that the Defendant had wrongly denied the Claimant's alleged proprietary interests and had acted in breach of trust in relation to the Rusal assets.

5. Mr. Rabinowitz submitted that, although dishonesty was not an essential constituent element of the claims made against the Defendant, necessarily, as the evidence on the strike-out showed, both parties were making, and could be expected to make, allegations of dishonesty and impropriety against the other. The proceedings, therefore, should effectively be characterised as similar to cases involving fraud, dishonesty, misrepresentation, non-disclosure etc, where traditionally it was accepted that train of enquiry disclosure might be appropriate.
6. In this context, Mr. Rabinowitz referred to Lord Justice Jackson's Review of Civil Litigation Costs. He pointed out that the terms of the Claimant's proposed order reflected the terms of an enhanced disclosure order, as set out at paragraphs 3.11-3.13 of the review, where a draft new CPR Rule 31.5A was proposed in relation to disclosure in a "substantial case". The proposed rule defined such a case as follows:

"37.1. A 'substantial case' would be defined in this new rule as:

(a) a case before the Commercial Court or the Admiralty Court; or

(b) a case in which the total of the sums in issue exceeds £1 million; or

(c) a case in which the total value of any assets in issue exceeds £1 million; or

(d) a case agreed by the parties to be a substantial case; …"

On any basis, submitted Mr. Rabinowitz, the present case fell within that definition.

7. Next, he pointed to the unavailability of key witnesses (e.g. Mr. Patarkatsishvili and Mr. Curtis who have died), and the relative lack of direct contemporaneous records (such as solicitor attendance notes, inter-party correspondence, etc) of some key events. He submitted that the passage of time since the relevant events, make it more difficult to rely upon the evidence of the witnesses who remain available. He relied upon the significance of the parties' states of mind on key issues, including in respect of the 1995 and 1996 Agreements and intimidation. He pointed to the complexity of the business structures employed by both parties, which made the identification of proceeds (which had been paid out of various companies) difficult.
8. Thus he submitted that not only was there clear jurisdiction to make such an order under the current provisions of CPR 31.5 at this stage of the proceedings, but also that this was a paradigm case where an enhanced order for disclosure should be made. On any basis, this was a substantial case, as defined in Lord Justice Jackson's Review.
9. Mr. Rabinowitz submitted that despite the absence of any evidence of the type which I have described above, it was appropriate to make an order at this stage. That was essentially so for two reasons.

i) First, what mattered here, irrespective of whether a train of enquiry search would involve searching a wider universe of documents, was the process of consideration of the documents by a solicitor having the conduct of disclosure in the case. The disclosure exercise would have to be approached with a much keener eye if, in relation to every document, the solicitor concerned had to ask the question whether it should be disclosed because it was reasonable to suppose it might lead to a train of enquiry; that, of itself, might lead to the disclosure of many more documents within the universe of documents that would, in any event, have be to searched for the purposes of standard disclosure.

ii) For that reason, there would be a huge, and wasted, duplication of effort, if the court adopted a two stage approach of only making an order for enhanced disclosure at a later stage after standard disclosure had taken place. That would involve the solicitors on both sides having to revisit all the documents for the purpose of the wider consideration as to whether the documents gave rise to a train of enquiry.

iii) In any event, given the constraints of the proposed timetable with disclosure in November 2010 and a trial in October 2011 (and an intervening seven-day appeal to the Court of Appeal in January 2011) there was no sufficient time to do the exercise twice.

10. For all these, and other, reasons, Mr. Rabinowitz submitted that an order for enhanced disclosure should be made at this stage.

Mr. Brindle's submissions

11. Mr. Brindle, on behalf of the Defendant, submitted in summary that:

i) This was not the type of case where it was appropriate to make an enhanced order for disclosure. Although he did not in argument go so far as to say that there was no jurisdiction in the court to do so at the present time, he submitted that, even accepting that the case raised serious allegations on both sides, this was not fundamentally a case based on fraud, misrepresentation, dishonesty or non-disclosure such as to come within the well-recognised category of cases which attract an order for enhanced disclosure. That was so notwithstanding that both sides would be calling the other liars.

ii) He submitted that, whilst it was accepted that the Court had jurisdiction to provide for the duty of standard disclosure to be enhanced by means of an order made under CPR 31.12, nonetheless, consistently with the general approach of the CPR and the Access to Justice Report, such jurisdiction should only be exercised in a narrow class of case where it had been demonstrated that such enhanced disclosure was both necessary and proportionate.

iii) He contended that the absence of any evidence as to what categories of documents were required to be searched with a train of enquiry eye, and the absence of any specific provision in the proposed order as to what documents should be searched, made it difficult for his solicitors and client to be sure as to what documents needed to be looked for as potentially leading to a train of enquiry. This was underlined or exacerbated by the long period of time to which the exercise would relate, namely 1994 – 2007, when the proceedings started.

iv) He pointed to the requirements of CPR 41.12, and the Practice Direction at paragraph 5.5 at page 872 of the White Book, to the effect that any application for specific disclosure should be made by a formal application supported by evidence. He submitted that the Practice Direction envisaged that an application for enhanced, train of enquiry disclosure, would be made by way of an application for specific disclosure.

v) He submitted that none of the matters put forward on behalf of the Claimant in paragraph 36 of his Skeleton justified such an enhanced disclosure exercise, let alone one which applied to all issues arising in the case without limitation. In particular, whilst the amounts claimed are very large, that in and of itself cannot point to the conclusion that the costs of the disclosure exercise should be wholly and inappropriately expanded; the allegations made (although significant to the parties) are no more serious or complex than in many cases in this Court; and the passage of time and the death of two individuals who would otherwise have been witnesses also did not justify the wholesale expansion of the disclosure process. Indeed, if anything, the passage of time points in the opposite direction, as it underlines the existing difficulties of the disclosure process in this case, given the need to search for documents principally dating back to 1995 to 2004. Those difficulties should not be compounded by the imposition of a requirement for enhanced disclosure.

vi) Moreover, any order for enhanced disclosure should be limited to those particular issues or classes of documents in respect of which it could clearly be demonstrated that an enhanced disclosure obligation was necessary:

"In general, the Peruvian Guano order should be limited to particular issues of classes of documents. The burden will be squarely on the person seeking the order to show it is justified by the particular circumstances, not disproportionate, and does not extend over too many classes of documents. The person seeking the order should remember that the rules were intended to cut down the amount of documents disclosed.^[1]"

vii) He further submitted that there was plenty of opportunity under the contemplated timetable for a further application to be made for specific disclosure on an enhanced basis, referable to specific issues, once standard disclosure had been completed.

viii) Finally, he submitted that it was not proportionate in all the circumstances to make such an order.

Conclusion

12. I do not consider it appropriate at this stage to make the order for enhanced disclosure which the Claimant seeks, and accordingly I refuse the application. My reasons, shortly stated, are as follows:

i) I accept Mr. Rabinowitz's submission that, given the seriousness and the nature of the allegations involved, the amount at stake, the reputational issues on both sides, and the allegations of dishonesty that are being made (even though not currently pleaded, or necessary elements of the claims made), this is the type of case where it might well be appropriate at some future stage to make an order for enhanced disclosure. The case certainly falls within the definition of "substantial case", as set out in Jackson LJ's proposed draft Practice Direction.

ii) However, given the current state of play, I consider that it would be wholly inappropriate to make such an order at the present time. As of today, standard disclosure has not yet taken place. The parties do not know what documents will be disclosed as a result of that process. The court has no material before it adequately to inform it what searches would have to be made, of what categories or classes of document, to enable documents to be disclosed which might lead to a train of enquiry. In particular, there is no workable mechanism for how such a search could be linked to particular issues or classes of documents.

iii) To take an example that was raised in the course of argument: if such an order were made, would the Defendant and his solicitors have to search and disclose every note of meetings between the Defendant and senior Russian politicians, even though they do not refer to the Claimant or to any of the other relevant participants in the litigation, and do not otherwise fall within the criteria of standard disclosure, simply on the grounds that they might reasonably lead to a train of enquiry as to the closeness of the Defendant's relationship with senior Russian politicians or his role in the Russian political scene during some part of the relevant period? There might be a vast quantity of such documents, which, theoretically might fall within the "train of enquiry" catchment.

iv) In my judgment, if any order for enhanced disclosure is to be applied for, the applications should be focussed, directed at an identifiable category or class of document and linked to specific issues, not broadly aimed at the whole gamut of issues as presently is the case with the Claimant's application. Moreover some explanation should be provided as to the nature of the enquiry envisaged.

v) The burden imposed on a party to conduct wide-ranging searches for documents which might reasonably be expected to lead to an enquiry does not simply have the consequence of imposing an increased costs burden on that party. The task is an onerous one not only because of the difficulty which may exist in identifying or defining the categories of document that may come within the ambit of such an order, and thus will have to be reviewed, but also because the decision-maker has to apply the relevant test to each document "Is it reasonable to suppose that this particular documents might lead to or might advance a train of enquiry?"

vi) Moreover, if a document is not searched for or disclosed when it should have been, the consequences for a party may be serious, as he may be accused of deliberately withholding it. I take the view that if such an order is to be made in this case, then the relevant party who is being asked to conduct disclosure on such a basis, and the court before whom the application is being made, should have an appropriately clear idea as to: what documents are likely to fall within the scope of the order; to what specific issues the relevant documents to be searched on the enhanced basis relate; and what the relevant "trains of inquiry" might be. On the basis of the information presently before me, I have no way whatsoever of making an informed decision as to such matters.

vii) Moreover, I see no reason why the current timetable would not permit a further application to be made for enhanced disclosure at a later stage, once standard disclosure has taken place. By then, the parties will have a far better picture of what categories of document have been disclosed and what documents have not, and what remaining categories of documents (if any) they respectively contend should be searched and disclosed on the enhanced basis.

viii) Nor am I persuaded by Mr. Rabinowitz's argument that this will give rise to a duplication of effort on the ground that the same documents will have to be revisited. That may be so to a certain extent, but I suspect the more likely consequence, if any order were to be made at a future date, is that further categories of documents would have to be searched before further disclosure could be made.

13. Accordingly, I decline to make any such order at the present time without ruling out the possibility that it may be appropriate for such an order to be made at a later stage.
14. I will hear argument from the parties as to whether a date should be written into the timetable by which any further application for enhanced and/or specific disclosure should be made, after standard disclosure has taken place.

Note 1    Hollander on Documentary Evidence, Tenth Edition at paragraph 8.15.    [Back]