Fanmailuk.Com Ltd & Anor v Cooper & Ors [2010] EWHC 2647 (Ch)

[2010] EWHC 2647 (Ch)Case No HC06C04445
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 21/10/2010
Before
MR JUSTICE MORGAN
Between
FANMAILUK.COM LIMITEDClaimantsPAUL BURTENSHAWClaimantDIALTIME PLUS LIMITEDClaimantROBERT COOPERDefendantsDAVID COOPERDefendantAHMED ZGHARIDefendantMCASHBACK LIMITEDDefendant[DELETED]DefendantYVONNE WAYNEDefendant
Christopher R Parker QC (instructed by Walker Morris) for Dialtime Plus LimitedSonia Tolaney (instructed by Slaughter and May) for Standard Chartered BankHearing Hearing dates: 6 th and 7 th October 2010
Judgment

The application

[1]This is an application under CPR 31.17. The Applicant is the Third Claimant Dialtime Plus Limited (“Dialtime”). The application is made against Standard Chartered Bank (“SCB”), who is not a party to these proceedings, for an order that SCB provide disclosure of certain documents.[2]Dialtime initially sought disclosure of three categories of documents. I will use the term “category” of documents without prejudging an issue that I have later to determine, whether the first category relates to a single document or, instead, a collection of, or a class of, documents. At the beginning of the hearing of this application, Dialtime stated that it no longer sought disclosure of the third of these categories.[3]Paragraph 1 of the draft order attached to the application notice identified the three categories of documents of which disclosure was sought. The first category is:
“a copy of the Disclosure Letter referred to in the Subscription Agreement dated 8 February 2007 between SCB and the Fourth Defendant with all the attachments and enclosures referred to in the document and in the disclosure bundle schedule”
. The second category is:
“all valuations prepared for the purchase by SCB of shares in the Fourth Defendant”
. The third category, which is no longer pursued, was:
“SCB’s file on its purchase of shares in the Fourth Defendant”
. Paragraph 1 of the draft order was drafted so that SCB was obliged to give disclosure of these documents at its own expense.[4]Paragraph 2 of the draft order required SCB to state, in respect of documents which were no longer in SCB’s control, what had happened to the documents and in respect of documents where SCB claimed a right or duty to withhold inspection, the basis on which the documents were withheld. By paragraph 3 of the draft order, SCB was required to specify which documents were no longer in its control and which documents involved a claim to withhold inspection. By paragraph 4 of the draft order, SCB was to be required, at its own expense, to permit Dialtime to inspect and take copies of the documents. Finally, by paragraph 5 of the draft order, SCB was to pay Dialtime’s costs of and occasioned by the application in any event.[5]Mr Parker QC appeared on behalf of Dialtime and Ms Tolaney appeared on behalf of SCB.

The underlying litigation

[6]It is necessary to describe, as concisely as possible, the nature of the complex underlying litigation in which the present application is made. Dialtime is the third of three Claimants. It is not necessary for present purposes to refer to the First and Second Claimants. As regards the Defendants, the first three Defendants were Mr Robert Cooper, Mr David Cooper and Mr Ahmed Zghari. These three had been, at the relevant time, directors of Dialtime. The Fourth Defendant is MCashback Limited, currently in administration (“MCashback”). It is not necessary to refer to any other Defendant.[7]The Particulars which have been served by Dialtime take the form of Re-Re Amended Particulars of Claim extending to some 50 pages. The central allegation made by Dialtime is that the First to Third Defendants, as directors of Dialtime, acted in breach of fiduciary and other duties owed to Dialtime by using MCashback, a company controlled by the First to Third Defendants, to appropriate a business opportunity belonging to Dialtime. The business opportunity consisted of the development and exploitation of a system whereby free airtime for mobile phones could be earned at the checkout in shops through automated barcodes. It was contemplated that the relevant system might have other uses as well. On 6th September 2002, the first three Defendants acting as three of the four directors of Dialtime caused Dialtime to transfer this technology to MCashback at (it is said) a gross undervalue.[8]In the Re-Re-Amended Particulars of Claim, there is a definition of Corporate Opportunity which refers, in summary, to the development and exploitation of the system I have described, including certain intellectual property vested in Dialtime or MCashback. This intellectual property included an international patent application filed by MCashback on 16th September 2002, which was referred to as the MCashback Patent Application.[9]The Re-Re-Amended Particulars of Claim make detailed allegations of breach of duty by the first three Defendants. It is then alleged that MCashback received the Corporate Opportunity and that the transfer to it involved a breach of duty by the directors of Dialtime. It is alleged that the Corporate Opportunity was held by MCashback on trust for Dialtime as were, specifically, the Intellectual Property previously vested in Dialtime and the MCashback Patent Application. It is pleaded that MCashback is liable to account to Dialtime for all profits derived from the Corporate Opportunity. It is further pleaded that MCashback dishonestly assisted in the breaches of fiduciary duty by the first three Defendants. It is then pleaded that in consequence MCashback is liable to account to Dialtime for all profits derived from the Corporate Opportunity.[10]In terms of the profits made by MCashback as a result of the wrongful actions of the Defendants, it is pleaded that MCashback’s entire business has been derived from the Corporate Opportunity. It is specifically pleaded that MCashback must account for all capital profits, benefits and gains and not just for profits etc. in the form of income. In the alternative to Dialtime’s claim to an account of profits, Dialtime claims equitable compensation against all Defendants.[11]In relation to Dialtime’s claims against Mr Robert Cooper and Mr Zghari, reference is made to the fact that Mr Robert Cooper and Mr Zghari sold shares in MCashback to SCB on 8th February 2007.[12]The pleading then refers in more detail to the involvement of SCB in MCashback. It is alleged that on 8th February 2007 SCB subscribed for some 854,951 ordinary shares in MCashback at a total price of £16,090,177.92. These shares were in addition to the shares bought by SCB directly from Mr Robert Cooper and Mr Zghari, which cost SCB £2,239,580. It is pleaded that for this combined investment of over £18.3million, SCB acquired a stake of 31.7% in MCashback at a price per share of £18.82, thereby valuing MCashback at £57.8million. It is pleaded that the investment by SCB was a profit for which the first three Defendants and MCashback are liable to account to Dialtime. Further, in relation to MCashback, it is pleaded that an account should be taken at a date immediately following the investment by SCB and that the value of the Corporate Opportunity to MCashback at that date was £57.8million.[13]The allegations in the Re-Re-Amended Particulars of Claim are reflected in the prayer for relief. Until Dialtime abandoned this stance on 6th October 2010, it sought a declaration that MCashback held the Corporate Opportunity and the MCashback Patent Application on trust for Dialtime. Further, Dialtime sought, and continues to seek, against MCashback and the first three Defendants, an account of profits and equitable compensation for breach of fiduciary duty and/or for dishonest assistance in a breach of fiduciary duty.

The procedural history

[14]The proceedings which began in 2006 have had a long procedural history. It is not necessary for present purposes to recount much of that history. However, I will refer to one or two matters and principally to recent events including events which took place on the first day of the hearing of this application.[15]On 19th March 2008, Mr Justice Floyd made a series of orders in this case which included an order that MCashback, amongst others, should give certain specific disclosure by 29th April 2008. MCashback did not comply with that order.[16]On 29th January 2010, the directors of MCashback appointed administrators of the company. On 22nd February 2010, following a contested hearing, Mr Justice Sales gave Dialtime permission under paragraph 43(6) of schedule B1 to the Insolvency Act 1986 to continue these proceedings against MCashback, in administration.[17]On 19th April 2010, Mr Justice Sales restated a part of the order of 19th March 2008 requiring MCashback to give disclosure and directed that disclosure be given by 30th June 2010. MCashback did not comply with that order.[18]On 10th June 2010 there was a mediation attended by representatives of Dialtime and the first three Defendants. As a result of that mediation, those parties settled the claim. Mr Zghari entered into a settlement agreement on 15th June 2010 and Mr Robert Cooper and Mr David Cooper entered into a settlement agreement on 22nd June 2010.[19]At the hearing on 6th October 2010, I dealt with three applications including the present application under CPR 31.17. In one of the other applications, I made an unless order against MCashback arising out of its failure to comply with the order of 19th March 2008. In summary, I ordered that unless MCashback complied with the order of 19th March 2008 by 4.00 pm on 13th October 2010, the defence of MCashback would be struck out and MCashback would be debarred from defending the claim against it and judgment should be entered for Dialtime for an amount to be assessed by way of profits or equitable compensation. At the hearing on 6th October 2010, in the course of its application for this unless order, Dialtime abandoned the claim made in the proceedings for a declaration that MCashback held the Corporate Opportunity on trust for Dialtime. Thus, Dialtime abandoned the proprietary claim it had made and confined itself to a claim to an account of profits or equitable compensation.[20]When I made an unless order against MCashback on 6th October 2010, both Dialtime and the administrators of MCashback indicated to the Court that it was virtually certain that MCashback would fail to comply with the unless order so that on 13th October 2010, Dialtime would be entitled to a default judgment for account of profits or equitable compensation to be assessed against MCashback. It was subsequently confirmed that MCashback had not complied with the unless order so that Dialtime could obtain a default judgment in accordance with the order of 6th October 2010.[21]On 6th October 2010 I also heard an application by the administrators of MCashback for directions from the Court. The administrators applied for directions on the basis that the administrators then thought that the purpose of administration could not be achieved in relation to MCashback and that the Court should direct the administrators to present a compulsory winding up petition in relation to MCashback. The application was made pursuant to paragraph 79(2) of schedule B1 of the Insolvency Act 1986. I was satisfied that the purpose of administration could not be achieved and I directed the administrators to present a compulsory winding up petition in relation to MCashback. However, in view of a development which had occurred in relation to the litigation at the hearing on 6th October 2010, namely, that Dialtime was abandoning its claim to proprietary relief in this litigation, the order as made on the administrators’ application kept the door ajar to give them a brief opportunity to ascertain whether, after all, the underlying business of MCashback or some of its assets might be saleable in the absence of the proprietary claim that had earlier been made. At the time of preparing this judgment, a petition to wind up MCashback has not yet been presented.[22]In the course of the administrators’ application to the Court for directions, I was given certain information about the financial position of MCashback. SCB holds an all monies debenture conferring a floating charge over the whole of the assets of MCashback. The debenture was created on 20th March 2009 and registered on 23rd March 2009. The indebtedness of MCashback to SCB is approximately £3.6 million excluding interest and charges which have continued to accrue. The administrators have received unsecured creditors’ claims of some £41,000 although a statement of affairs has detailed a total for unsecured creditors of some £212,000. If MCashback is unable to achieve any further realisations as a result of a sale of its business or of its assets then the value of MCashback’s assets is very modest indeed. The administrators have not been able to ascertain the value of any “net property” for the purposes of Section 176A of the Insolvency Act 1986 and are unable to say whether there will be any worthwhile fund for unsecured creditors pursuant to that section.[23]At the hearing on 6th October 2010, on the information then available, it seemed likely that any money judgment obtained by Dialtime against MCashback would not result in Dialtime, as an unsecured creditor of MCashback, obtaining any substantial dividend whether under Section 176A of the Insolvency Act 1986, or otherwise.

The future of the litigation

[24]Based on the above state of affairs, I have considered the steps that might be taken in this litigation and the likely result of those steps. Although Dialtime will now obtain default judgment against MCashback, it is not obvious that there is any advantage to Dialtime in continuing the claim against MCashback and incurring whatever costs might be involved in obtaining a quantified judgment by way of an account of profits or by way of equitable compensation. On the information at present available, my assessment is that in the absence of any extraneous circumstance, it would not be worth Dialtime’s while to incur any substantial costs to obtain such a judgment. Mr Parker QC, who appeared on behalf of Dialtime, suggested that Dialtime might wish to incur the expense of obtaining a quantified judgment to enable it to advance a case against SCB that SCB should pay all or part of Dialtime’s costs pursuant to an order to be made under CPR CPR 48.2. I will refer later in this judgment to the possibility of an application by Dialtime against SCB under CPR 48.2 but, assuming that such an application were to be made and to go forward to a hearing on the merits, I question whether it would be of much relevance that Dialtime had obtained a quantified judgment at an unopposed hearing, as distinct from a judgment for an account of profits or equitable compensation, to be assessed.[25]If Dialtime does proceed to a detailed assessment of an account of profits or equitable compensation, then it is worth considering the course that such an assessment would take. On the information at present available, it seems highly probable that such an application will not be opposed by MCashback. It has not been suggested that MCashback, having allowed judgment to be entered against it by default, would contest the detailed assessment stage. Further, in the absence of a proprietary claim against the assets of MCashback and probably in any event, there is no suggestion that SCB or anyone else would fund MCashback to contest a detailed assessment. That means that Dialtime will be able to present its case on the detailed assessment without any effective opposition.[26]As I indicated when I referred to the Re-Re-Amended Particulars of Claim served by Dialtime, Dialtime’s case on the detailed assessment (if any) of an account of profits or equitable compensation will be that the transactions in February 2007, involving SCB, showed that the value of 31.7 % of the issued share capital of MCashback was some £18.3 million, the price paid by SCB and Dialtime will contend that the value of all of the share capital of MCashback was then £57.8 million. Dialtime will contend, as a matter of law, that MCashback is obliged to pay equitable compensation in the sum of £57.8 million accordingly.[27]Dialtime has already obtained possession of a number of relevant documents which would enable it to advance its case based on the transactions involving SCB in February 2007. I was told that Dialtime had obtained a copy of the Subscription Agreement with SCB. Dialtime has also a copy of the Disclosure Letter of 8th February 2007 which is referred to in the Subscription Agreement (although Dialtime does not have a copy of the bundle of documents referred to in the Disclosure Letter as the Disclosure Bundle). However, in the absence of a party opposing the detailed assessment sought by Dialtime, which party is able to point to deficiencies in the disclosure and suggesting that the price paid by SCB for the shares was inappropriately high, I think it most likely that the Court would proceed on the basis that SCB had adequately investigated the transaction and all appropriate disclosure had duly take place.[28]Dialtime also has a copy of an e-mail (with its enclosure) sent on 17th August 2006 by the First Defendant, a director of MCashback, and copied to a Mr Bullock of Standard Chartered Plc, acting for SCB. The subject of the e-mail is stated to be the valuation of MCashback. The enclosure to the e-mail states that it is a valuation of MCashback and that it uses the same figures as were earlier submitted to another representative of SCB. The enclosure refers to a discussion with Mr Bullock on the basis of a valuation of £50 million which was said to be well supported by the valuation carried out as shown in the enclosure. It is pointed out that a 30% stake in MCashback is thereby valued at £15 million. Dialtime has already pointed out that the shares which were acquired pursuant to the Subscription Agreement represented a 32% holding in the company at a purchase price of more than £16 million which again supports the contention that the value of the company was at least £50 million. Further, the solicitors for Dialtime have stated in their letter of 24th May 2010 to solicitors for the administrators of MCashback that two former directors of MCashback have confirmed to Dialtime that prior to SCB’s acquisition of shares in MCashback a valuation was produced by an independent source which indicated that the value of MCashback was £48million and that SCB relied on this valuation to determine the purchase value of the shares it acquired.[29]Based on the material referred to above, at a hearing of the detailed assessment of equitable compensation payable by MCashback, if that hearing were ever to take place, Dialtime could point to a considerable body of material to support its pleaded case as to the value of the business of MCashback in February 2007.[30]Dialtime draws attention to a witness statement of Mr Bullock of Standard Chartered Plc dated 16th May 2008. That witness statement was prepared at a time when the Court was being asked to consider whether to permit a minority shareholder in Dialtime to continue a derivative claim on behalf of Dialtime. One argument that was put against the grant of that permission was that the claim in question was essentially worthless, as the business opportunity allegedly diverted was itself worthless. Mr Bullock’s statement appears to have been prepared to be shown to the Court in support of that argument. In his statement, Mr Bullock considered the proposition that the purchase of shares by SCB was predicated purely on the basis of the amount of money that was required to develop and market a part of the business opportunity rather than being based upon an accurate valuation of the shares in MCashback. Mr Bullock said that SCB’s interest in investing in MCashback was purely in respect of the potential that it saw in that part of the business opportunity and not merely for the benefits this would confer on MCashback itself but also for the benefits it would independently confer on the Bank. If and in so far as the present application under CPR 31.17 is based upon an asserted need to call evidence at the detailed assessment hearing to rebut the evidence of Mr Bullock, in my judgment, there is no such need. In the absence of opposition to Dialtime at the detailed assessment hearing, the evidence contained in that witness statement will simply not be before the Court and need not therefore be rebutted by further evidence.

A possible application for a non-party costs order

[31]Before considering the requirements of CPR 31.17 and whether they are satisfied in this case, I ought to identify another dispute which is waiting in the wings as between Dialtime and SCB. Dialtime has indicated in correspondence that it is minded to issue an application pursuant to section 51 of the Senior Courts Act 1981 and CPR 48.2, seeking an order that SCB do pay all or part of Dialtime’s costs of this litigation.[32]Dialtime’s solicitors have written to SCB or its solicitors on the 7th June 2010 and on the 16th July 2010 setting out the nature of the case which Dialtime is minded to put in this regard. As no such application has yet been made and as the matter was not developed in argument before me, it is obviously right that I should say nothing one way or the other as to the merits of any such application. Nothing in this judgment should be taken as a comment directly or indirectly on that matter.[33]On behalf of Dialtime, Mr Parker indicated that the documents which Dialtime seeks under CPR 31.17 would be, or might be, helpful to Dialtime in connection with a possible application against SCB under CPR 48.2. In particular, Mr Parker submitted that the documents being sought under CPR 31.17 would contradict the evidence given by Mr Bullock in his witness statement of 16th May 2008 and, that being so, Dialtime’s application under CPR 48.2 would be materially advanced. The letters from Dialtime’s solicitors of 7th June and 16th July 2010, to which I have referred, put the matter even more emphatically.[34]As before, I make no comment on the likelihood of the documents being sought contradicting Mr Bullock’s witness statement and, further, I make no comment as to whether Dialtime’s application under CPR 48.2 would be assisted in such circumstances. However, I do note that Dialtime has revealed that its motive in requesting disclosure under CPR 31.17 includes, at least, a desire to obtain documents which it believes will help it with its application under CPR 48.2. Indeed, in view of my earlier comments as to whether it is worth Dailtime’s while to incur the expense of a detailed assessment and as to the form of any such detailed assessment, I think it is most likely that this desire to advance its case under CPR 48.2 is now the primary motive for continuing with the application under CPR 31.17. As will be seen, when I refer to CPR 31.17 in more detail below, that rule is concerned with the claim by Dialtime against MCashback (in relation to which claim SCB is a non-party) and not the potential claim by Dialtime against SCB under CPR 48.2.[35]It is also worth making a brief comment on the jurisdiction under CPR 48.2. If an application under that CPR is made by Dialtime, then the first stage of the relevant procedure is for the Court to consider whether to add SCB as a party to the proceedings for the purposes of considering an application for costs against it. On such an application the Court will consider the broad nature of the grounds in support of the application and whether the application should go forward to a second stage or, conversely, whether the Court should refuse to join SCB as a party, because it is so clear that an application under CPR 48.2 could not succeed against it, or in some other way the application is an abuse of process: see the discussion as to the nature of the inquiry at this stage in PR Records Ltd v Vinyl 2000 Ltd [2007] EWHC 1721 (Ch). If the Court were to join SCB as a party under CPR 48.2, then the Court might wish to give directions as to the nature of the ensuing inquiry under that rule. It was stated in Symphony Group Plc v Hodgson [1994] QB 179 at 193 E-F, per Balcombe LJ, that the procedure at the second stage is a summary procedure not necessarily subject to all the rules that would apply in an independent action. It is not appropriate in this judgment to make any prediction as to whether a court, when giving directions at that stage of an application under CPR 48.2 would, or would not, make an order for disclosure against SCB and in particular whether the court would make an order for disclosure of the documents which are now sought from SCB under CPR 31.17. It is sufficient for present purposes to record my view that it would not automatically be the case that the court would make such an order.

The relevant rules

[36]Having set out the relevant background, I can now describe the statutory provisions and the provisions of the CPR which apply to the present application.[37]By section 34 of the Senior Courts Act 1981, the court has power, in accordance with rules of court, to make an order for disclosure of documents against a person who is not a party to the proceedings in which the order is sought. Section 35 of the 1981 Act contains supplementary provisions. By section 35(3), it is directed that rules of court shall be made that the costs of and incidental to proceedings for an order under section 34, incurred by the person against whom the order is sought shall be awarded to that person, unless the court otherwise directs.[38]CPR 31.17 and CPR 48.1 have been made pursuant to sections 34 and 35 of the 1981 Act.[39]CPR 31.17 provides: 31.17. Orders for disclosure against a person not a party(1) This CPR applies where an application is made to the court under any Act for disclosure by a person who is not a party to the proceedings.(2) The application must be supported by evidence.(3) The court may make an order under this CPR only where-- (a) the documents of which disclosure is sought are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings; and (b) disclosure is necessary in order to dispose fairly of the claim or to save costs.(4) An order under this CPR must-- (a) specify the documents or the classes of documents which the respondent must disclose; and (b) require the respondent, 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.[40]By CPR 48.1 (2), the general rule is that the court will award the person against whom the order is sought his costs:(a) of the application; and(b) of complying with any order made on the application. By CPR 48.1(3), the court may however make a different order, having regard to all the circumstances, including: (a) the extent to which it was reasonable for the person against whom the order was sought to oppose the application; and (b) whether the parties to the application have complied with any relevant pre-action protocols. CPR 48.1(3)(b) is not relevant in the present case.

Discussion

[41]In accordance with CPR 31.17, I potentially need to consider three questions: i) whether the documents of which disclosure is sought are likely to support the case of Dialtime against MCashback, or adversely affect the case of MCashback; ii) whether disclosure is necessary to dispose fairly of the claim against MCashback or to save costs; and iii) whether (if both of the above questions are answered in the affirmative) I should exercise the power given by the rules in the circumstances of this case.[42]As appears below, I have formed a clear view in relation to the second of these questions. My view is that the disclosure sought is not necessary to dispose fairly of the claim against MCashback or to save costs. This means that I will not order the disclosure sought. Nonetheless, I will deal with the first question, albeit more briefly than might otherwise have been appropriate, but I will confine myself to a brief comment on the third question.[43]I have described above the documents within categories 1 and 2, as set out in the draft order. For the purposes of the first question, I have to ask whether documents in category 1 and/or category 2 are likely to support the case of Dialtime against MCashback or adversely affect the case of MCashback. On the facts of this case, no distinction was made between the alternatives of supporting the case of Dialtime and adversely affecting the case of MCashback and it is sufficient if I consider whether the documents in category 1 and/or category 2 are likely to support the case of Dialtime against MCashback.[44]It is established that the words “likely to” in CPR 31.17 mean “may well” rather than “more probable than not”: see Three Rivers DC v Bank of England (No. 4) [2003] 1 WLR 210. By way of shorthand, I will refer to documents which may well support the case of Dialtime against MCashback as “relevant” documents.[45]I next need to consider what approach to adopt where what is sought is a single document and, alternatively, where what is sought is a collection of, or a class of, documents. In the case of a single document, if all or part of that document is relevant, then the court can order its disclosure under CPR 31.17. I need not discuss whether it is open to the party, ordered to give disclosure, to redact a part of such a document on the ground that the part is a severable part which is irrelevant and/or privileged.[46]In the case of a collection of documents or a class of documents, it is established by Three Rivers (No. 4), at [38], that all the documents in the collection must meet the threshold test that such document may well support the case of the applicant for disclosure. This rule is mitigated by two considerations. The first of these is that when one is concerned with a document which, considered in isolation, might appear not to satisfy the threshold test, one must also consider that document in the context of the class as a whole, whereupon a different answer might emerge. The second consideration is that (as already explained) the test is whether the document might well support the case of the applicant for disclosure. This test will often have to be applied without the applicant or the court having seen the document in question. The fact that when the document is available, following an order for disclosure, it is seen that the document did not after all support the case of the applicant for disclosure, does not invalidate the reasoning which led to the order which was made. If the court is considering these questions in relation to a class of documents without having seen the documents in question, it may be useful for the court to consider whether the class is too broadly defined and whether a narrower definition is possible and more appropriate.[47]The first category of documents sought refers to “a copy of the Disclosure Letter referred to in the Subscription Agreement dated 8 February 2007 between SCB and [MCashback] with all the attachments and enclosures referred to in the document and in the disclosure bundle schedule”. In fact, Dialtime already has a copy of the Disclosure Letter so that what are outstanding are the other items referred to in the first category of documents.[48]There was an issue between the parties as to whether what is described in the first category is a single document or a collection of, or a class of, documents. This issue was relevant to the approach I should adopt for the purpose of ascertaining the relevance of the document or documents. If the first category is a single document, then I ask whether all or any part of that single document is relevant. If the first category describes a collection of, or a class of documents, then I ask whether each individual document, or a part of that individual document, is relevant.[49]Paragraph 3 of the Disclosure Letter states that the warranties given in the Subscription Agreement are subject to the matters fairly disclosed in the Disclosure Letter. Paragraph 8.3 of the Disclosure Letter states that the disclosure documents in the Disclosure Bundle and listed in the attached schedule are disclosed. The Disclosure Letter continues by cross-referring in detail to the Disclosure Bundle in connection with a series of warranties that are referred to. The Disclosure Bundle Schedule is an 18 page list of documents dealing with a wide range of subject matters. For the most part the documents are individually listed although on occasion the list refers to a class of documents.[50]In my judgment, the Disclosure Letter, the Disclosure Bundle Schedule and the documents in the Disclosure Bundle are separate documents. I do not accept Mr Parker’s submission that they all constitute a single document. In support of his submission, he gave the example of the books in the Bible. He said that the Bible is a single document and not a collection of documents. He said that the Disclosure Letter with all its attachments was a commercial form of bible, and in practice is often referred to as such, and like the Bible should also be considered as a single document. I do not intend to offer an opinion as to the legal analysis appropriate for the Bible. It seems quite clear to me that the fair and legally accurate description of the material in category 1 is that it is a collection of documents rather than a single document. As a guide to the language which should fairly be used to describe the material, I note that the language of category 1 itself and the language used in the Disclosure Letter, and the attachments, is language which is appropriate to that material comprising a collection of documents rather than a single document. In my judgment, it would involve a strained use of language or the adoption of a special legal meaning to say that the material in category 1 comprised a single document.[51]My conclusion that the material in category 1 comprised a collection of documents means that I next need to consider whether each document in that collection is a relevant document within CPR 31.17.[52]Mr Parker submits that each document in the Disclosure Bundle meets the test as to relevance for the purposes of CPR 31.17. He says that in order to have a valuation of the business of MCashback as at 8th February 2007, it is relevant to know precisely what that business consisted of. If SCB saw it as relevant at the time it acquired its shares in MCashback to do due diligence, and to require disclosure of a large number of matters, in order to ascertain what it was acquiring, then it is similarly relevant in the litigation where the question arises as to the value of the business at that time. By this process of reasoning, it is said that each and every document in the Disclosure Bundle meets the test of relevance. In response to the submissions of Ms Tolaney, which singled out incorporation and constitutional documents and employee’s contracts as documents which, she submitted, could not possibly be relevant, Mr Parker submitted that these documents were all relevant as they would show what SCB was acquiring. He further submitted that, following such disclosure, it could not be said at the quantum hearing pursuant to the default judgment that any evidence of value put forward by Dialtime was unreliable because Dialtime had not considered such matters.[53]Whilst there is some force in Mr Parker’s point, I think that his submission goes too far. If there were going to be an issue at the quantum hearing as to whether the price paid for shares was inappropriate because SCB had been misled as to the incorporation documents or as to the constitutional position or had reached inappropriate conclusions as to the employee’s contracts then an investigation of those matters, involving a study of the documents relating to them, might then become relevant to the quantum hearing. However, no points of that kind are at present in play. Accordingly, in relation to the first question as to the relevance of all of the documents referred to in the Disclosure Bundle, I am not persuaded that they are all relevant for the purposes of CPR 31.17.[54]Mr Parker did not put forward an alternative case which sought to identify a narrower group of those documents. In view of the fact that he did not take that course and did not invite me to take that course, I do not see that I should attempt to go through an 18 page list of documents and make an assessment of that kind. Further, in view of my later conclusion that none of the documents in this category are necessary for the fair disposal of the claim or to save costs, it is pointless to carry out this exercise just to provide what will be an academic answer to the first question in relation to the category 1 documents.[55]The second category of documents refers to “all valuations prepared for the purchase by SCB of shares in [MCashback]”. This category is clearly a class of documents. However, each member of the class is essentially the same thing, namely, a valuation prepared for the purchase by SCB of the shares in question. Therefore, the question is: does such a valuation meet the test that it may well support the case of Dialtime against MCashback. In my judgment, the answer to that question is in the affirmative.[56]If the documents of which disclosure is sought are likely to support the case of Dialtime against MCashback, then the next question is whether disclosure of the documents is necessary in order to dispose fairly of the claim or to save costs. The primary way in which Dialtime puts its case is that disclosure is necessary to dispose fairly of the claim.[57]In the unusual circumstances of this case, it is relevant to identify the steps which remain to be taken to dispose of the claim against MCashback, assuming for the moment that Dialtime will actually take those steps to dispose of all matters outstanding. I have already described the position of the parties in relation to this claim. I will proceed on the basis that Dialtime will now obtain a default judgment in accordance with the unless order of 6th October 2010. In that event, all that remains is to have a detailed assessment of the account of profits or the equitable compensation. On the information before me, if Dialtime proceeds with that assessment, if will not face opposition from MCashback. Insofar as Dialtime pursues its claim to recover the value of the business of MCashback as at February 2007 based on the value of the shares in the company at that date, Dialtime already has the essential information it needs to put forward for that purpose. It will not have to rebut the evidence in the witness statement of Mr Bullock which will not be before the court on the detailed assessment. In those circumstances, I do not think that it will be necessary for Dialtime to have disclosure of the further documents in order for the remainder of the claim against MCashback to be disposed of fairly.[58]Further, I do not see how it can be said that disclosure is necessary to save costs. If anything, disclosure will increase the costs for Dialtime. That will certainly be so if I made the usual order that Dialtime pay SCB’s cost of providing disclosure. Even if, unusually, I ordered SCB to bear its own expense of the disclosure, Dialtime would still incur costs of its own in considering the documents obtained upon disclosure.[59]For the above reasons, I am not satisfied that disclosure of the documents sought is necessary for the purpose of disposing fairly of the claim against MCashback or of saving costs. In that event, I will not order disclosure pursuant to CPR 31.17.[60]SCB also had a further point. It submitted that disclosure by SCB was not necessary within the meaning of the CPR because some of the documents were available from the administrators of MCashback if Dialtime paid the administrators’ costs of providing them. In view of the fact that I have already decided that no order under CPR 31.17 should be made, I need only deal with this briefly.[61]First of all, this point only goes to the first head of documents; the second head of documents are not available from the administrators. As regards the first head of documents, the point has considerable force. Although it is submitted that the administrators wish to be paid their costs of taking advice on what should be disclosed as well as their costs of actually making the disclosure, there is no real evidence that the administrators’ costs will be significantly greater than the costs for which SCB would be entitled to be reimbursed if I made the usual order (in accordance with CPR 48.1(2)) that Dialtime should pay SCB’s costs of complying with the order. There would only be a saving to Dialtime if I made the order which they seek that SCB provide disclosure at its own expense. If this point had arisen for decision, I think that it is unlikely that I would have been prepared to order SCB to provide disclosure at its own expense. If a court in due course were to hold that this was a proper case in which to make a non-party costs order under CPR 48.2, the costs which Dialtime would pay to SCB in respect of any disclosure obtained from SCB would then form part of Dialtime’s costs and would be potentially recoverable from SCB (depending of course on the precise terms of the order under CPR 48.2). That would be the way to deal with any potential finding that SCB should pay the costs of all or part of these proceedings rather than my deciding at this stage that SCB should bear its own expense of providing disclosure under CPR 31.17. Although Dialtime has made a number of serious allegations against SCB in the context of the present application, those allegations are contested. I will give one example. Dialtime alleges that SCB effectively controlled the administration of MCashback. I have been given a detailed witness statement from Mr Mather, one of the administrators, and a witness statement from Mr Graham of SCB which seek to show that this allegation is unfounded. It is completely unrealistic to think that the court could form any final view as to the rights and wrongs of such a matter on this occasion which would enable it to make any order other than the usual order (under CPR 48.1(2)) requiring Dialtime to pay SCB’s costs of complying with an order under CPR 31.17.[62]In the circumstances, no question of exercising my discretion arises. It is not useful to discuss how I would have approached the question of discretion if I had been satisfied that the requirements of CPR 31.17 had been met. However, I will comment that if I had held that I had power under CPR 31.17 to order disclosure I would have imposed the condition that any documents disclosed by SCB pursuant to such an order could only be used by Dialtime for the purposes of its claim against MCashback and that the documents were not to be used for the purposes of a CPR 48.2 application against SCB, without the subsequent permission of the court to that effect.

The result

[63]For the reasons set out above, I dismiss Dialtime’s application under CPR 31.17.

Cited in 1 later judgment