PEL (UK) Ltd Orosi (UK) Ltd & Ors v Shaftesbury Plc [2018] EWHC 1661 (Ch)

Case No BL-2018-000748[2018] EWHC 1661 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Venue The Rolls Building, 7 Rolls Buildings, Fetter LaneDate 22/06/2018
London EC4A 1NL
Before
MASTER TEVERSON
Between
PEL (UK) LIMITEDApplicantsOROSI (UK) LIMITEDApplicantOROSI (UK) 2 LIMITEDApplicantSHAFTESBURY PLCRespondent
Jeffrey Gruder QC, Nigel Dougherty, Christopher Knowles (instructed by Stephenson Harwood LLP) for ApplicantsRobert Miles QC and Andrew de Mestre (instructed by Hogan Lovells International LLP) for RespondentHearing date 15 June 2018
JudgmentMASTER TEVERSON:
[1]This is an application for pre-action disclosure made pursuant to section 33(2) of the Senior Courts Act 1981 and CPR r.31.16.[2]The Respondent is a public limited company listed on the Main Market of the London Stock Exchange. It is a real estate investment trust (“REIT”) that invests in property located in London’s West End. Its board consists of 4 executive directors and 6 non-executive directors. Its chief executive is Mr Brian Bickell.[3]The Applicants are private limited companies incorporated in England and Wales which between them currently hold 25.05% of the shares in the Respondent mainly through nominee structures. They are ultimately owned by Mr Samuel Tak Lee.[4]At 7am on 6 December 2017 the Respondent announced a proposed placing of up to 27,885,508 new ordinary shares of 25 pence each at 952 pence per share, representing approximately 9.98% of the then current issued share capital of the Respondent, seeking to raise gross proceeds of up to £265 million.[5]The Applicants and Mr Lee have serious concerns about the placing and the manner in which it was carried out. They are concerned that the placing was carried out by the board for an improper purpose. The Applicants’ concern is that the purpose, or the substantial purpose, of and behind the placing was to change the constitutional balance of the Respondent, by increasing the percentage interest of shares in the Respondent held by other shareholders, particularly Norges Bank, relative to the collective shareholding of the Applicants.[6]The background to the application, viewed from the Applicants’ perspective, is set out in the draft Particulars of Claim that were attached to the evidence filed in support of the application. The following summary is based on the draft Particulars of Claim. It is made solely for the purpose of setting out the background to the application. It is not to be interpreted as the court making any findings of fact.[7]At its AGM held on 10 February 2017 shareholder resolutions were passed giving the Respondent authority (subject to time and percentage limits) to issue new shares as if section 561 of the Companies Act 2006 did not apply to the allotment. The effect of these resolutions was to dis-apply the pre-emption provisions of the Act. The circumstances in which this could be done were set out in the explanatory note accompanying the notice of the 2017 AGM. This stated that the power was intended to be applied in accordance with the Pre-Emption Group’s Statement of Principles published on 12 March 2015. The Pre-Emption Principles included under the heading “Overarching Principles” a statement that:- “Companies, institutional investors and voting advisory services all have an important role to play in ensuring the effective and flexible application of this guidance. Companies should, where possible, signal an intention to undertake a non-pre-emptive issue at the earliest opportunity and to establish a dialogue with the company’s shareholders… …companies should, where possible, consult their main shareholders in a timely manner…” …companies should, where possible, consult their main shareholders in a timely manner…”[8]On 22 November 2017 the Applicants together increased their total interests in shares in the Respondent to 69,815,183 ordinary shares. This represented an interest in 25.02% in the issued share capital of the Respondent. Mr Lee, through the Applicants held or controlled the largest single shareholding interest in the Respondent. The shareholding gave negative control by enabling the Applicants to block the approval of a special resolution or other matters requiring a 75% majority.[9]At 5.40pm on 5 December 2017, after the market had closed, Mr Bickell on behalf of the Respondent, emailed Mr Hardie, the sole director of each of the Claimants seeking to discuss “an imminent potential transaction” with him. This included an invitation to be “wall crossed”.[10]The following morning at 7am on 6 December 2017 the Respondent published an announcement of a proposed placing at a price of 952 pence per share of 27,855,508 new ordinary shares in the Respondent. The shares were offered at a discount of 4.90% to the closing price on the last business day prior to the announcement. The announcement was the Applicants say the first notice they had of the placing.[11]In the case of the Applicants, the size of their combined pre-existing interests and the offer price for the shares, required them to find and commit to pay a total of approximately £67 million in order to maintain their combined pre-existing 25.02% interest in the Respondent.[12]The Applicants were able to confirm through their advisors HSBC by at or around 10.30am on 6 December 2017 that they would look to acquire interests in 6,975,000 shares at 952 pence per share at a total cost of £66,402 million in order to preserve their pre-existing interest.[13]At 4.20pm on 6 December 2017 the Applicants were notified that they had in fact been allocated 6,864,368 shares with the result that the Applicants’ combined voting rights in the Respondent were reduced to 24.986%.[14]On 11 December 2017, the Respondent announced that Norges Bank had through the placing increased its shareholding from 8.94% to 12.66%. Norges Bank had in fact been allotted 50% of all the shares issued as a result of the placing.[15]The Applicants question the need for the placing in view of the Respondent’s full year results for the year ended 30 September 2017 which were released on 28 November 2017 8 days prior to the placing.[16]The Applicants point out that in the event they had not been able to participate in the placing, their combined shareholding would have been diluted by approximately 9.08%., to around 22.72%.[17]The Applicants’ intended claim is that the board’s power to issue shares is a fiduciary power. This was not in dispute before me. The skeleton argument filed on behalf of the Applicants refers to Howard Smith Ltd v Ampol [1974] A.C. 821 and Eclairs Group Ltd v JKX Oil & Gas Plc [2016] B.C.C. 79 as successful claims brought by shareholders to challenge a board’s exercise of its powers for an improper purpose. I have found it instructive to read (or re-read) those cases in order to put this application into a broad legal context. Each case will of course turn on its particular facts and circumstances.[18]The breaches of duty alleged or intended to be alleged by the Applicants are that the board voted in favour of the decision to pursue the placing for, or in the alternative, principally for, the improper purposes of(i) reducing or trying to reduce the percentage interest of shares in the Respondent held by the Applicants below the threshold for negative control and/or(ii) enabling or trying to enable the percentage interest of shares in the Respondent held by other shareholders, in particular, Norges Bank, to be increased relative to the interests of the Applicants.[19]It is pleaded in paragraph 52 of the draft Particulars of Claim that “absence [sic] a proper and sufficient explanation for the differential treatment as between the [Applicants] and Norges Bank and/or the failure of the [Respondent] to discuss the placing with the [Applicants] “in a timely manner” and to “establish a dialogue with them” as anticipated by the Pre-Emption Guidelines in contrast to other institutional shareholders” it is to be inferred that the directors undertook the placing in order to achieve or try to achieve an outcome that substantially increased the proportionate share increase of Norges Bank in the Respondent and/or to collectively reduce or try to reduce the Applicant’s collective interest in the Respondent.” It is further pleaded that Norges Bank was on notice of the fact that the directors were acting in breach of their fiduciary duties to the Respondent and that the court should on such terms as it thinks fit, set aside the issue of shares in the placing so far as the shares in the Respondent were issued to or for the benefit of Norges Bank Plc.[20]In relation to the Applicants’ alleged loss, it is pleaded that on 8 December 2017 the Second Applicant made market purchases of a further 105,000 shares at £10 per share at a total cost of £1,050,000, in order to restore the Applicants’ collective proportionate interest in the shares in the Respondent to 25.02% and reacquiring negative control. This purchase was at a price of £0.48 above the placing, amounting in total to £55,650 (including stamp duty of £5,250) more than the Applicants would have had to pay had they been allotted such shares between them in the placing. The Applicants plead as their loss the sum of £1,050,000 and the value of the lost opportunity to acquire further shares in the placing up to the level of 29.99% being the maximum level before a mandatory takeover bid might be triggered for the purposes of The Takeover Code. They also claim that the acquisition by Norges Bank of more than 10% of the issued share capital would diminish the total value of the Applicants’ interests were the Applicants to look to sell their interests in the Respondent by way of private treaty.[21]On this application, it is not appropriate for me to embark on a detailed investigation into the substantive merits of the case. It is right and fair that I record in this judgment a number of the points made in answer to the application on behalf of the Respondent by its leading counsel Mr Robert Miles QC.[22]Mr Miles QC drew attention to the fact that the placing had successfully raised £265 million pounds. He drew attention to the terms of the announcement set out in paragraph 23 of the draft Particulars of Claim. This makes reference to the net proceeds being required to finance the acquisition of 72 Broadwick Street for £92 million including costs with additional anticipated capital expenditure of approximately £20 million and to financing the acquisition of a long leasehold interest in 90-104 Berwick Street for £41 million announced on 21 August 2017. It refers to funding a further £9 million of other property acquisitions in the preceding 6 months and to the remainder of the proceeds of the placing being used to provide financial capacity for further acquisitions.[23]Mr Miles QC said the placing had been made in accordance with resolutions that had been passed at the 2017 AGM by an overwhelming majority of shareholders under which pre-emption rights had been relaxed. He said the placing had been kept open longer than needed to enable the Applicants to respond. He said the outcome had been to reduce the Applicants only from 25.02% to 24.98%. This was the difference that had been made up over the next day in the market at a cost of around £55,000. That Mr Miles QC submitted was the Applicants only true loss even assuming, which is strongly denied, there was any improper conduct.[24]Mr Miles QC said that Norges Bank Plc was an institutional shareholder, which had in effect been prepared to soft underwrite the placing so avoiding the need for costly underwriting. He said the effect of the placing was to increase the shareholding of Norges Bank from under 8.9% to 12.66%, an increase of less than 4%. Mr Miles QC said the idea that the whole of the £265 million was being raised so that Norges Bank could increase its shareholding to 12.66% was fanciful and he stressed that anyone could increase or decrease their shareholding by trades in the market. He said the subsequent increase by Norges Bank of its shareholding to around 21% took place much later on in February 2018 and had nothing at all to do with the placing, and did not involve the Respondent or the board of the Respondent. In relation to “wall crossing”, Mr Miles QC said this was much more straightforward in the case of institutional investors with compliance officers and departments than it was single purpose vehicles or non-institutional shareholders without compliance officers. He said that previous attempts to communicate with Mr Lee or Langham Estate Management Limited who oversee Mr Lee’s interests in England had been unsuccessful.[25]Mr Miles QC described the losses claimed by the Applicants as wholly speculative. He made the point that in order for the Applicants to have got 29.99% through the placing, they would have to have been allotted around 80% of the shares in the placing.[26]I am aware that many if not all of these points have been referred to in the detailed evidence filed in answer and in reply on this application and in correspondence. I am aware that a number of points have been made in reply on behalf of the Applicants including but not limited to the point that they did not know the placing would be left open for sufficient time in order for them to procure the sums needed and to complete payment.[27]CPR 31.16 is the rule which applies where an application is made to the court under any Act for disclosure before proceedings have started. CPR 31.16(3) provides that 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) to assist the dispute to be resolved without proceedings; or(iii) to save costs.”[28]It was not in dispute before me that a two staged approach is required dealing with the elements of jurisdiction and then discretion. In Black and others v Sumitomo Corpn and others [2002] 1 WLR 1562 (CA) the importance was stressed by Rix L.J. of considering both the jurisdictional thresholds and then separately considering the wider issue of discretion. At the second stage, there is a need to step back and consider whether in all the circumstances it was in accordance with the overriding objective and desirable for the purposes of the rule to order pre-action disclosure as sought on the application either in whole or in part.[29]On behalf of the Applicants, Mr Jeffrey Gruder QC submitted that the jurisdictional thresholds were all crossed and that in the exercise of its discretion this was a case in which the court ought to exercise its discretion in favour of granting pre-action disclosure. He submitted and I accept that requirements (a) and (b) in CPR 31.16(3) do not require the Applicants to show their intended claim has a real prospect of success.[30]Mr Gruder QC stressed that his clients were in the position of outsiders who had been left to investigate the placing of the shares after the event having been required to respond to the placing within a matter of hours. He said his clients had initially been “stone-walled” by the Respondent and its solicitors in correspondence. Mr Gruder QC referred me to the list of questions in the Appendix to Stephenson Harwood’s letter of 5 January 2018 to the Respondent which he said had not been answered. Mr Gruder QC said that because of this “stone-walling” it had been necessary for subject access requests to be submitted to the Respondent on behalf of Mr Samuel Tak Lee and Mr Philip Hardie. Answers were received to these requests on 18 April 2018 from the Respondents’ solicitors in the form of a table headed “Disclosable Information” containing extracts from documents.[31]Subject access requests were also made on behalf of Mr Lee and Mr Hardie to others including Norges Bank and to JP Morgan Cazenove on 25 April 2018 about a month after the pre-action disclosure application was issued. The response from Norges Bank was in the form of personal data extracts. The response from JP Morgan Cazenove was in the form of redacted documents. I was taken to some of these responses and documents by Mr Gruder QC. These included an email sent on 30 November 2017 at 18.24. The subject was “draft email Urban issues”. This document contains bullet point headings which included:
“To date STL [presumably Mr Lee] has been treated entirely fairly, this would be the first instance in which as the Company’s largest shareholder he could feel he is not being treated fairly” “It may become evident that the Company has taken this action to attempt to provide greater defence in the event of STL undertaking a corporate action.”
[32]Mr Gruder QC referred to the answers to the SAR requests variously as providing “tantalising glimpses” a “tantalising amuse bouche” “snippets” and “chinks of light” into the thinking that lay behind the placing.[33]Mr Gruder QC stressed that his client had invested £700 million in the Respondent and that it was very important for him to establish whether the Respondent was properly managed. He said the market was entitled to know. In relation to Norges Bank, Mr Gruder QC said it had become known to the Applicants for the first time from reading the evidence of Mr Parish filed in answer to the application on 18 May 2018 that the Respondent had been in discussions with Norges Bank in the planning stage to the placing since late October 2017. That had led to the date range of the documents being sought in the application being extended back to October 2017.[34]Mr Gruder QC left it to the end of his submissions to refer me to the form of order being sought on the application.[35]The draft order requires the Respondent to carry out a reasonable search to locate “all the documents (including electronic documents such as email or audio recordings) in the classes listed in the Schedule thereto. The Schedule divides the classes into five categories as follows:-

SCHEDULE

[1]“Category 1” All notes of individual directors and all board papers, minutes and draft minutes of board meetings of the Company, in the period 15 October 2017 to 31 December 2017 that relate to: 1.1 the decision by the Company to look to issue shares on a non-pre-emptive basis with a view to raising capital for the Company (a placing); 1.2 the decision by the Company to raise a total amount of some £265 million by way of such a placing; 1.3 the manner in which such a placing should be carried out, including the making of contact with persons already interested in shares of the Company; and 1.4 the manner in which shares might or should be allocated to persons who had applied to acquire shares, but provided that the Company may redact any such documents before production to the extent only that such documents do not bear upon any of the above matters.[2]“Category 2” All documents evidencing communications by, on behalf of, or with, directors or senior management of the Company in the period 15 October 2017 to 15 December 2017 and containing any of the following words: “Ahsan”, “BlackRock”, “dilute”, “Ellahi”, “Hardie”, “Invesco”, “Langham”, “Lee”, “Li”, “Norges”, “NWIM”, “Orosi”, “PEL”, “place”, “placing”, “Prudential”, “Pugh”, “Sam”, “Sammy”, “Samuel” and/or “Tak” (and whether or not such words contain capital letters or not);[3]“Category 3” All documents evidencing communications between the Company and Norges Bank in the period 15 October 2017 to 31 December 2017 that(a) relate to Norges Bank’s position as a person interested in shares of the Company and(b) contain any of the following words: “Ahsan”, “BlackRock”, “dilute”, “Ellahi”, “Hardie”, “Invesco”, “Langham”, “Lee”, “Li”, “Norges”, “NWIM”, “Orosi”, “PEL”, “place”, “placing”, “Prudential”, “Pugh”, “Sam”, “Sammy”, “Samuel” and/or “Tak” (and whether or not such words contain capital letters or not);[4]“Category 4” All documents evidencing communications between the Company and Liberum Capital Limited and/or JP Morgan Cazenove in the period 15 October 2017 to 15 December 2017 that(a) relate to the actual or proposed placing of shares in the Company and(b) contain any of the following words: “Ahsan”, “BlackRock”, “dilute”, “Ellahi”, “Hardie”, “Invesco”, “Langham”, “Lee”, “Li“, “Norges”, “NWIM”, “Orosi”, “PEL”, “place”, “placing”, “Prudential”, “Pugh”, “Sam”, “Sammy”, “Samuel” and/or “Tak” (and whether such words contain capital letters or not).[5]“Category 5” All documents evidencing communications between directors or managers of the Company and Liberum Capital Limited (including but not limited to documents evidencing conversations) and/or JP Morgan Cazenove that (a) occurred between 5 and 7 December 2017 and (b) relate to the actual or proposed placing of shares in the Company.[36]Categories 2, 3 and 4 each require the Respondent to search for documents by reference to a list of key words. In the course of his submissions, Mr Gruder QC volunteered that the list of key words in each of these three categories was too long and needed to be reduced down so as to refer only to key words which by different names either referred to his client, Mr Lee, or to Norges Bank.[37]It was accepted by Mr Miles QC on behalf of the Respondent that the jurisdictional requirements contained in rule (3) (a) and (b) were satisfied but not those in (c) and (d).[38]In relation to (c) it was submitted on behalf of the Respondent that the categories or classes of documents sought were too wide and were not limited to documents that would in due course be subject to standard disclosure. I was referred to paragraph 38 of the judgment of Mr Justice David Steel in Hutchinson 3G UK Ltd v O2 (UK) Limited & Others [2008] EWHC 55 (Comm) in which it is stated:- “Although CPR 31.16 extends to both documents and classes of documents, it is well established that it is inappropriate for any applicant to obtain pre-action disclosure of documents which would not in due course be subject to standard disclosure by simply calling for classes or categories of documents in which some documents would be disclosable[39]In the same paragraph, Mr Justice David Steel said that by the same token, it was inappropriate to require a respondent to identify which documents are within the scope of standard disclosure. In paragraph 44, Mr Justice David Steel said that it was for the applicants to show that it is more probable than not that the documents are within the scope of standard disclosure in regard to the issues that are likely to arise. This requires the court to consider the likely scope of standard disclosure and the factors relevant to deciding the scope of a reasonable search. It also involves looking separately at each class of documents sought.[40]The requirements of standard disclosure are set out in CPR 31.6. R. 31.7(2) sets out the factors relevant to deciding the reasonableness of a search. Paragraphs 25 to 27 of Practice Direction 31B refer to and provide guidance as to the use of key word and other automated searches. They state:- “25. It may be reasonable to search for Electronic Documents by means of Keyword Searches or other automated methods of searching if a full review of each and every document would be unreasonable. 26. However, it will often be insufficient to use simple Keyword Searches or other automated methods of searching alone. The injudicious use of Keyword Searches and other automated search techniques-(1) may result in failure to find important documents which ought to be disclosed, and/or(2) may find excessive quantities of irrelevant documents, which if disclosed would place an excessive burden in time and cost on the party to whom disclosure is given. 27. The parties should consider supplementing Keyword Searches and other automated searches with additional techniques such as individually reviewing certain documents or categories of documents (for example important documents generated by key personnel) and taking such other steps as may be required in order to justify the selection to the court.”[41]Categories 2 to 4 as contained in the Schedule to the application each contained some 21 different keywords that the Respondent would be required to search. The search terms were in my view ill-defined and would be expected to produce a large number of falsely positive returns. Mr Gruder QC implicitly accepted this by volunteering their reduction.[42]Mr Parish, a partner at Hogan Lovells, the Respondent’s solicitors, says in his witness statement that the aggregate number of the documents responsive to the searches was found to be over 15,000 on an application by the Respondent of the search terms to its email systems. Mr Hardie says he has been told by the Applicants’ solicitors a normal rate of review for relevance would be 300 documents per day per person carrying out the review. On that basis, it might take a team of 5 people 10 days to carry out the review.[43]In framing an application of this type, there is an obligation on the Applicant to proceed with caution when framing the scope and reasonableness of the search required. This is because on an application of this type there is likely to have been no prior discussion to the use of agreed Keyword searches or to particular custodians of documents.[44]The Applicants cannot in my view show that it is more probable than not that standard disclosure will extend to the classes of documents sought in Category 2. The search would go beyond standard disclosure. It would place an excessive burden on the Respondent in time and cost. Category 2 is not in any way limited by subject matter. Its only limitation is by date. In my view it does not cross the jurisdictional threshold even if the number of keywords is reduced as volunteered by Mr Gruder QC.[45]I take the same view in relation to categories 3 and 4. Category 3 seeks all documents evidencing communications between the Company and Norges Bank in the period 15 October 2017 to 31 December 2017 that “relate to Norges Bank’s position as a person interested in shares of the Company”. This category is framed to cover any communication between anyone in the Company and Norges Bank. It would cover any communication in the period that has anything to do with Norges Bank’s shareholding or position as a shareholder. It would require the Respondent to identify documents within the scope of standard disclosure.[46]Category 4 seeks all documents evidencing communications between the Company and either of the two joint book runners “that relate to the actual or proposed placing of shares in the Company”. This would cover any communication between anyone in the Company and either of the two joint book runners in the period that relate in any way to the placing.[47]Category 5 is limited to between 5 and 7 December 2017 but covers all documents evidencing communications between directors or managers of the Company and the joint book runners that relate to the placing. Although the date range is narrow, there is likely to be a substantial volume of material relating to communications with the joint book runners in this period about the placing. This is not restricted to documents linked to any particular shareholder.[48]In my view, categories 2 to 5 inclusive do not cross the jurisdictional threshold even if in the case of categories 2, 3 and 4 the number of keywords is reduced as proposed by Mr Gruder QC. In each case it is clear the Respondent would be required to identify which documents fell within the scope of standard disclosure.[49]Even if they did, as a matter of discretion, and standing back, I do not consider that it would be appropriate or in accordance with the overriding objective to order disclosure of the classes of documents sought in categories 2 to 5 inclusive pre-action because of their considerable width. In any event, they should not be ordered or sought without prior discussions having taken place between the parties as to(a) limiting documents or classes of documents to agreed Keyword searches;(b) limiting disclosure to particular custodians or(c) to particular types of documents. The Respondent is a public company with both executive and non-executive directors. The scope of disclosure is potentially heavy and burdensome. It is far preferable that it take place after detailed discussions between the parties and their solicitors.[50]Instead of the procedures referred to in paragraphs 8 and 9 of Practice Direction 31B having been followed, the scope of the electronic disclosure sought has been framed entirely by the Applicant’s solicitors. I do not suggest this has been done without any thought or consideration but it has not followed the type of detailed discussions contemplated by paragraphs 8 and 9 of Practice Direction 31B. This is illustrated by the long list of proposed Keywords. It has resulted in five broad categories without reference to custodians or the number of electronic sources.[51]I agree with the observation of Mr Parish in his witness statement that taken together the categories of documents sought on this application would amount to a requirement that the Respondent produce “virtually every document it has ever generated in relation to the Placing”.[52]Category 1 is in my view the only category in the Schedule which passes the jurisdictional threshold in r31.16(c). It includes electronic documents but does not require a search involving the use of keywords. It identifies documents by reference to four sub-categories. Mr Parish says in paragraph 62 of his witness statement that this will require “an extensive review process” to ensure that the documents are responsive to those four sub-categories as well as being relevant. I will consider the exercise of my discretion in relation to this category below.[53]There is a separate jurisdictional requirement in (3)(d) that 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.[54]At the jurisdictional stage it is only necessary that there is a real prospect in principle of an order for pre-action disclosure achieving one of the three purposes referred to in (3) (d). This has been said to be a low threshold.[55]The Applicants’ point to their position as outsiders to the placing process. They say this is one of those cases where there is an asymmetry of information between the parties so that pre-action disclosure is desirable in order to enable the anticipated proceedings to be disposed of fairly. They also say that there is a potential saving in costs because pre-action disclosure may enable them to avoid the need at a later stage to amend their statement of case.[56]A party who is on the outside of a transaction may well be in a strong position to satisfy this jurisdictional threshold where the disclosure of basic or core documentation is needed in order to see what has happened. Public procurement cases are an illustration of this type of case. In my view the present case falls into a different type of category. The width of the pre-action disclosure sought on this application indicates that.[57]This is unlikely to be a case which turns on core documents. If pursued, it is likely to involve the hearing of oral testimony and cross-examination based on a range of documents coming from different sources. The disclosure sought by the Applicants reflects this. It is on a broad front seeking classes of documents rather than individual documents and requiring, in three categories, the making of a large number of key word searches. This suggests that the Applicants do not think that a limited range of documents disclosed at the pre-action stage will assist the claim to be resolved without proceedings. I do not regard pre-action disclosure in this case without prior discussion over its scope as realistically being likely to save costs or achieve settlement. If anything, it has the potential to increase costs significantly. That would be likely to outweigh by some margin any potential saving in costs to the Applicants in not needing to amend their Statement of Case after disclosure.[58]I do not therefore think that the Applicants in this case cross the jurisdictional threshold under 3(d). I am however aware that this threshold has been set low in a number of cases. For that reason, I must stand back assuming there is jurisdiction and look at the matter in a wider compass to consider the broader and more discretionary aspects of this case.[59]It is clear from the evidence before me that the Applicants and Mr Lee are deeply dissatisfied with aspects of the corporate governance of the Respondent. They are concerned about the non pre-emptive share issues announced by the Respondent. They are extremely unhappy at being left within a matter of hours in which to produce the substantial capital sum required to avoid or seek to avoid dilution of their shareholdings. They believe the Respondent favours its institutional shareholders.[60]On the Respondent’s side, it has been said in correspondence that attempts have been made to provide reassurance to the Applicants and to make contact with Mr Lee. The correspondence suggests that Mr Lee and his team have not been ready to meet the board and their advisors.[61]Standing back and looking at the matter overall, I have reached the clear conclusion that this is not an appropriate case to order pre-action disclosure even if limited to category 1. I am not to be taken thereby as expressing a view on the merits of the dispute or the events surrounding the placing. I have separately considered whether in the exercise of my discretion if I were satisfied as to jurisdiction both under (3)(c) and 3(d) it would be appropriate to order pre-action disclosure limited to category 1. Even limited to category 1, the disclosure sought will involve a significant disclosure exercise on the part of the Respondent. If ordered on its own, it is likely to result in disclosure taking place in different stages. In a case that is likely to involve a significant amount of electronic disclosure it is highly desirable and far preferable that the disclosure exercise takes place after discussion between the parties as contemplated by Practice Direction 31B concerning custodians, keywords, methods of redaction, confidentiality rings and privilege. The draft order in each category also seeks all meta data where appropriate. This is indicative of the width and nature of the application.[62]For those reasons, I would not in any event, as a matter of discretion, have ordered pre-action disclosure as sought on this application with or without the reduction in the number of keywords volunteered by Mr Gruder QC. The width of the disclosure sought on this application suggests that this is not the type of case in which pre-action disclosure is likely to further the overriding objective. It asks the court to order pre-action disclosure involving five potentially wide classes of documents and without prior discussion having taken place between the parties over electronic disclosure. I think it fairer and far more likely to be in accordance with the overriding objective to leave the parties to follow PD31B before ordering the type of disclosure sought by the Applicants on this application. Without that prior process of discussion and refinement, the disclosure exercise has the potential to take up very significant amount of management time and to be excessively burdensome.[63]I am grateful to both leading counsel for the succinctness of their oral submissions and to leading and junior counsel for their detailed written submissions.