SEEKING FURTHER DISCLOSURE: DON’T GO IMPORTING STONES FROM A NEIGHBOURING QUARRY: DISCLOSURE PILOT PREVAILS

In Maher v Maher & Anor [2019] EWHC 3613 (Ch) HHJ  Hodge (sitting as a High Court Judge) refused an application for disclosure.   There are a number of important points here, including the need for an application for further disclosure to be made promptly; the issue of proportionality in disclosure applications and the emphasis on the specific provisions of the Disclosure Pilot.

 

I acknowledge the importance of the case to the parties, but that does not require every stone to be turned over, still less for a whole pile of more stones to be imported from a neighbouring quarry”

THE CASE

The claimant sought disclosure of the defendants’ personal bank accounts on the grounds that the defendants may have been using company money to fund the litigation.   There was no pleaded allegation of misuse, but it was pleaded as a matter of general concern.

THE JUDGMENT

    1. Mr Harper’s position is that this is a straightforward disclosure application and that fact should not be obscured by the amount of material that the application has generated, he says primarily as a result of the position adopted by the defendants. The application bundle assembled by the claimant extends to some 810 pages, to which the defendants have added a supplemental bundle extending to some 710 pages, making in excess of 1500 pages of documentation in all.
    2. Mr Harper relies, in particular, upon the proposition at para. 5.4 of Practice Direction 31A that:
“If the court concludes that a party from whom specific disclosure is sought has failed adequately to comply with the obligations imposed by an order for disclosure the court will usually make such order as is necessary to ensure that those obligations are properly complied with.”
  1. In my judgment, that statement has now been overtaken by the specific provisions of the Disclosure Pilot, with their emphasis upon culture change and reasonableness and proportionality. In my judgment, this present application should be treated as falling under, and governed by, para. 17 of Practice Direction 51U, relating to failure adequately to comply with an order for extended disclosure. The onus is therefore upon the claimant, as applicant, to satisfy the court that making an order for specific disclosure is reasonable and proportionate, as defined in para. 6.4. That involves having regard to the overriding objective, including the specific factors identified at sub-paras. (1) through to (7). Mr Weisselberg addressed all of those factors orally in his submissions. Mr Weisselberg also made eight specific points at paras 18 through to 25 of his written skeleton. Overall, and looking at matters in the round and by reference to the provisions of Practice Direction 51U, paras. 6.4, 17.1 and 17.2, he submits that there is no basis for the court to order the disclosure sought by the claimant.
  2. Mr Harper submits that on any analysis, the standard disclosure ordered in this case should have included the statements for the defendants’ personal bank accounts because they would show either that the defendants had been making payments to their solicitors for their own legal fees (in which case they are documents supporting the defendants’ case) or any payments made into the bank accounts from the company to finance such payments (in which case, again, they should be disclosed because they are adverse documents supportive of the claimant’s case). They may also show that the defendants have not made payments to their solicitors from their personal bank accounts, in which case again they should be disclosed as documents adverse to the defendants’ case.
  3. I am satisfied that, for the reasons that Mr Harper has given, there may have been a failure adequately to comply with the order for standard disclosure. It does seem to me that perusal of the defendants’ personal bank statements might show either that the defendants have themselves been funding their solicitors or that they have not been doing so; and to the extent that they have been doing so, the bank statements may show whether there are corresponding entries into the bank accounts which, if tied up with the company’s bank statements, may indicate that the company has been making payments to the defendants which have then been used by the defendants in payment of their legal fees. However, a considerable amount of analysis and work will be required to establish whether that is the case.
  4. In my judgment, it would not be reasonable and proportionate, given the imminence of the commencement of the trial, to be requiring disclosure of bank statements at this late stage, which may lead to further inquiries which may, or may not, support the pleaded complaint at para. 23(b) that the defendants have used company funds to meet their costs of the proceedings herein, whether directly or indirectly. In my judgment, it would not be reasonable and proportionate, having regard to the factors in para. 6.4, to order specific disclosure of those bank statements, going back five years to November 2014, at the present point in time given the start of the trial on 13 January, and with the Christmas and New Year holiday intervening. It was made clear in a letter from the defendants’ solicitors, written on 30 January 2019, that the bank statements would not be disclosed. Despite that, the claimant waited until 3 June before issuing the present application. Its timing would appear to suggest that it may have been motivated by the imminent hearing of a specific disclosure application issued by the defendants themselves on 29 April 2019. But, be that as it may, if the claimant wanted to pursue the issue of specific disclosure of the bank statements, he should have done so promptly after 30 January 2019.
  5. I accept Mr Harper’s submission that the claimant cannot be held responsible for the delay in this matter being heard between 3 June and today. That is, in large part, down to the attitude taken by the defendants. But nevertheless, this matter would have come before the court four months ago if the claimant had acted promptly in response to DAC Beachcroft’s letter of 30 January.
  6. Given the various factors identified by Mr Weisselberg in his oral submissions addressing the para. 6.4 factors, it would not be reasonable and proportionate, having regard to the overriding objective, to require the disclosure of the bank statements at this late stage. This is a claim involving a dispute over the administration of a trust, and not a claim for breaches of fiduciary duty owed by the defendants as directors of the family company. I accept Mr Weisselberg’s submission that the court should be wary of setting further hares running so soon before the trial; the proceedings are already sufficiently complex and the court should be wary of making them even more so.
  7. I acknowledge the importance of the case to the parties, but that does not require every stone to be turned over, still less for a whole pile of more stones to be imported from a neighbouring quarry. The parties should not be diverted down side tracks to see what use may have been made of company monies. The bank statements certainly exist, although some at least will have to be obtained directly from the defendants’ bank. But it seems to me that they are likely to be of limited probative value in supporting, or undermining, the respective cases of the parties. It would be necessary to subject the bank statements to detailed analysis. The fourth witness statement of Mr Taylor indicates that there is likely to have to be an analysis of cash payments, and enquiries as to the purpose for those payments. It may be necessary to obtain bank statements from the company, which the claimant apparently does not have after about February 2017, in order to attempt to match up any payments into the defendants’ bank accounts with payments out of the company’s bank account. Five years of bank statements would need to be reviewed. They will then need to be appropriately redacted. The extent of the redactions will have to be determined in accordance with para. 16 of the Practice Direction, and then there will be scope for challenge to those redactions. All of that will have to be done in the immediate run-up to trial over the forthcoming seven weeks, interrupted by the Christmas and New Year holiday period.
  8. I must bear in mind that the parties are private individuals and that the defendants say that they have been squeezed financially by the claimant’s failure to authorise what they say is the proper remuneration that they should have been receiving as company directors. The defendants have also expressed concern about the ability of the claimant to pay any legal costs.
  9. Finally, I have to bear in mind that there was a four-month delay before the present application was issued; and, although the claimant cannot be held responsible for the delay since 3 June, he was entirely responsible for the delay from 30 January to 3 June; and the court cannot ignore the fact that we are now about seven weeks away from the trial. I also cannot ignore the degree of detailed challenge that the claimant was minded to bring to bear in the form of the Scott Schedule that was prepared for the purposes of the now concluded loan litigation. The detailed level of challenge in that litigation augurs ill for the extent of any challenge that may be brought to cash payments into the defendants’ bank accounts. It is also relevant to have regard to the fact that, in the case of the second defendant, his bank account is held in the joint names of himself and his wife and, therefore, there is the respect for her private life that also has to be borne in mind.
  10. For all of those reasons, therefore, and in the exercise of the court’s discretionary case management powers, and in furtherance of the overriding objective, and bearing in mind the factors indicated in para. 6.4 of Practice Direction 51U, and the need for reasonableness and proportionality so shortly before the commencement of the trial, I would dismiss the application.