Total E & P Soudan SA v Edmonds & Ors

This is an appeal against an order for pre-action disclosure made under CPR 31.16 by Tomlinson J in the Commercial Court. It raises questions as to what the court’s approach should be on such an application where difficult issues of law are raised as a reason for not making the order. In this case those issues include justiciability and the mental element required to establish certain economic torts.

The facts are unusual. The applicant is a Total company. It claimed to be the assignee of another Total company which, together with other oil companies, entered into an agreement on 5 November 1980 with the Government of the Republic of Sudan. Under this agreement the consortium was granted exclusive rights to conduct petroleum resources exploration, development and production in an area designated as Block B. This is an area of about 120,000 square kilometres in southern Sudan which is thought to be rich in oil reserves. An estimate of oil in place of up to 5 billion barrels has been made.

Total as the Operator started exploration but by 1984 further progress became impossible because of the civil war between government forces from the largely muslim north and rebel forces from the christian south. Total claims that it agreed with the Government that exploration would be suspended until it was feasible to resume operations and that the consortium’s rights under the agreement would continue. By 2004 it appeared possible that exploration could be resumed so the 1980 agreement was revised and up-dated by a further agreement made with the Government on 21 December 2004.

So it is that Total claims that the consortium has always had the exclusive right to explore for and produce any oil in Block B. The Respondents have put in issue Total’s present claim to such rights on the basis that they were abandoned after 1984 or that the applicant company has no right to them. But there is nothing in the evidence before us which casts doubt on what Total claims. The question is whether those rights have been lost by the events to which I now turn.

International efforts to bring the war to an end culminated in the signing of a Comprehensive Peace Agreement on 9 January 2005 made between the Government and the Sudan Peoples Liberation Movement (SPLM). We have not seen this agreement but the Judge summarised its effect as follows:

As I understand it the CPA and further instruments prepared pursuant thereto envisage a single federal state wherein the people and Government of Southern Sudan will enjoy autonomy. Six months before the end of an interim period of six years there is to be a referendum affording to the people of southern Sudan the opportunity to vote for independence. In the language of one of the instruments the people of southern Sudan shall either confirm unity of the Sudan by voting to adopt the system of government established under the CPA or vote for secession. From this it follows, as it seems to me, that the Sudan is at present properly to be understood as a single state.

The First and possibly the Second Respondent reside in England. They have interests in Africa and Mr Edmonds has said that:

Anticipating the possibility of peace and recognising the significant potential for oil exploration and extraction in the region, Andrew Groves and I initiated contacts with leading figures in the south with a view to proposing a novel means of funding oil exploration and development projects in their part of the country.

Put shortly the Respondents contend that these contacts led to the conclusion on 25 April 2005 of an agreement (the EPLA) granting the Third Respondent, White Nile Ltd., the exclusive rights to the exploration and development of oil and natural gas resources in an area designated as Block Ba for a period of up to 35 years. Block Ba comprises about two thirds of the area of Total’s Block B. Total’s application for disclosure was designed to discover how this came about.

The statement by Mr Edmonds which I have quoted was contained in a letter of 19 May 2005 and made in his capacity as chairman of White Nile in circumstances which I will explain. I have largely taken what follows from this letter.

The “novel means” which Mr Edmonds and Mr Groves proposed were that the Government of Southern Sudan (GOSS) would transfer oil exploration rights to a shell company which they would create and seek to have admitted to the AIM in exchange for a controlling interest in the company. This would enable GOSS to have access to extensive capital markets in London and elsewhere to raise funds to enable development of the oil fields in southern Sudan whilst retaining long term control and influence over them. The proposed scheme was encapsulated in a draft joint venture agreement with the intention of its implementation if GOSS decided to proceed.

The letter does not say when the initial contact with GOSS (by which I include its predecessors, SPLM and the Civil Administration of New Sudan (CANS)) was made or when the draft joint venture agreement came into existence or who were the parties to it, but it does say that White Nile was not one of them. It also says that on 12 August 2004 GOSS granted its recently incorporated wholly-owned oil company, Nile Petroleum Corporation Limited (Nilepet), certain concessions including the right to develop and explore Block Ba. This is referred to as the Concession Agreement.

The Respondents contend that their first contact with and proposal to GOSS was some time after the Concession Agreement had been made. Total does not accept this. It points to a passage in the letter which says:

GOSS has advised that the Concession Agreement … remains valid and GOSS has authorised Nilepet to enter into the EPLA and has confirmed that the EPLA is the licensing agreement referred to in the Concession Agreement.

Total also relies on a report from the respected International Crisis Group which quotes a GOSS spokesman as saying that the White Nile deal had been signed in August 2004, a statement reportedly confirmed by a spokesman for White Nile. Another statement made by a senior GOSS official in February 2005 suggested that the deal had been negotiated “a couple of years ago”. No deal could have been signed with White Nile in August 2004 because it was not incorporated until 17 December 2004 but these are indications that Mr Edmonds’ and Mr Groves’ proposals and the draft joint venture agreement may have been made at or even before the time of the Concession Agreement.

Following incorporation of White Nile in Guernsey it was admitted to the AIM on 10 February 2005 having apparently raised sufficient funds to carry out initial exploration. Its admission documents stated that it was negotiating with GOSS and that the directors were optimistic that the negotiations would come to fruition shortly. Mr Edmonds’ letter says that on 14 February 2005 GOSS confirmed that it wished to enter into an agreement on the terms set out in the draft joint venture agreement, although GOSS and Nilepet have said that they had actually entered into a joint venture agreement by this time. White Nile requested suspension of its shares, the price of which had risen dramatically in the few days they had been traded. The stock exchange rules required the terms of the acquisition to be approved by shareholders. Mr Edmonds’ letter formed part of the circular produced for this purpose. Of the acquisition it said:

The company has now concluded a number of agreements which together set out the terms of the acquisition described below. These comprise a lock-in agreement dated 17 February 2005, a letter confirming certain information dated 25 March 2005, an agreement dated 26 March 2005 (transferring interests in Block Ba subject to obtaining shareholders approval) and the EPLA dated 25 April 2005.

The letter went on to say that the EPLA was made with Nilepet and to describe the mechanism for issuing it with 50% of the enlarged share capital of the company. Trading in White Nile shares resumed on 23 May 2005.

It had been a condition of the admission of White Nile’s enlarged share capital to trading that the documents which it relied on to show that it had acquired an interest in Block Ba should be made available for public inspection. Five of the documents the subject of the judge’s order were made available pursuant to this condition but they did not include any draft or actual joint venture agreement, the Concession Agreement or the GOSS confirmation of 14 February 2005. Those who inspected the documents were not allowed to copy them.

By the time the circular was issued on 19 May 2005 Total had made it clear both in a press release and through its solicitors that the consortium claimed exclusive rights over Block Ba. Mr Edmonds’ letter referred to this but said that GOSS had assured the directors that any contract allegedly entered into by Total with the government of the north of Sudan was ineffective. The letter does not say when he and Mr Groves first learnt of the rights asserted by Total, but before the judge it was accepted by the Respondents that in November 2004 they were aware that Total had in the past been involved in some way in Block B.

Soon after 14 February 2005 White Nile commissioned consultants and has ever since been exercising the rights it claims under the EPLA with the consent of GOSS.

Total’s solicitors’ efforts to obtain further information and documents from the Respondents between April and July 2005 met with no success and so it was that they issued the CPR 31.16 application in August 2005. Eleven documents or classes of documents were sought. Total contended that there were a number of issues relating to the dispute between itself and the Respondents which required clarification which the documents would help to resolve. These issues were:

1.

When did the directors of White Nile first make contact with the southern Sudanese regime and/or Nilepet in relation to negotiating the Block Ba concession? (Issue 1)

2.

With whom did the directors of White Nile have contact? (Issue 2)

3.

What were the precise scope and nature of the discussions of the directors of White Nile with the southern Sudanese regime and/or Nilepet relating to Block Ba? (Issue 3 )

4.

What was the precise proposal which the directors of White Nile made to the southern Sudanese regime and when was this made? (Issue 4)

5.

What was the precise level of knowledge which the directors of White Nile had of Total’s rights to Block Ba at the time of their discussions with the southern Sudanese regime and/or Nilepet? From what point in time did White Nile and its directors have such knowledge? (Issue 5)

6.

What is the precise nature of the rights purportedly awarded to White Nile by the southern Sudanese regime and/or Nilepet? (Issue 6)

The documents sought and the issues to which they related were identified as follows:

There has been some uncertainty about the cause or causes of action which Total might rely on. When this court granted the Respondents permission to appeal Total was ordered to make its position clear. It has now done so. Put shortly it claims that before the 17 December 2005 Mr Edmonds and Mr Groves and thereafter White Nile, having knowledge of Total’s interests and rights in Block Ba:

a.

unlawfully interfered with Total’s economic interests and rights by encouraging and/or persuading GOSS to enter into agreements with them and/or

b.

induced GOSS to breach the terms of Total’s contracts.

The first of these economic torts assumes that the EPLA is invalid but contends that there has been a breach of Total’s contract because White Nile, with the consent of GOSS who are in control of the relevant area, has been engaging in exploration activities in Block Ba that breach Total’s exclusive rights. In other words Total has been physically displaced. The alternative way of putting the case assumes that the EPLA is valid but contends that Total has been legally displaced by GOSS granting rights inconsistent with Total’s exclusive rights.

The relevant parts of CPR 31.16 are as follows:

(1)

This rule applies where an application is made to the court under any Act for disclosure before proceedings have started.

(2)

The application must be supported by evidence.

(3)

The court may make an order under this rule only where –

(a)

the respondent is likely to be a party to subsequent proceedings;

(b)

the applicant is also likely to be a party to those proceedings;

(c)

if proceedings had started, the respondent’s duty by way of standard disclosure, set out in rule 31.6 would extend to the documents or classes of documents of which the applicant seeks disclosure; and

(d)

disclosure before proceedings have started is desirable in order to –

(i)

dispose fairly of the anticipated proceedings;

(ii)

assist the dispute to be resolved without proceedings; or

(iii)

save costs.

The origins of this rule and its proper construction were considered in detail by Rix LJ (with whom Ward and May LJJ agreed) in Black & ors v Sumitomo Corporation and others [2001] EWCA Civ 1819; [2002] 1 WLR 1502; (paras 49-83). It is now common ground in this case that the jurisdictional requirements of rule 31.16 (3) (a) and (b) are met; so is (c) apart from the documents in category 11. The argument has focused on (d). As Rix LJ said this is a difficult test to interpret because it is framed both in terms of a jurisdictional threshold (“only where”) and the exercise of discretion (“desirable”); the test of what is desirable easily merges into an exercise of discretion but so does the test of “dispose fairly” (paras. 79 and 81). He concluded:

[81]…. In my judgment for jurisdictional purposes the court is only permitted to consider the granting of pre-action disclosure where there is a real prospect in principle of such an order being fair to the parties if litigation is commenced, or of assisting the parties to avoid litigation, or of saving costs in any event. If there is such a real prospect, the courts should go on to consider the question of discretion which has to be considered on all the facts and not merely in principle but in detail.

82.

Of course since the questions of principle and of detail can merge into one another, it is not easy to keep the two stages of the process separate. Nor is it perhaps vital to do so, provided however that the court is aware of the need for both stages to be carried out. The danger however is that a court may be misled by the ease with which the jurisdiction threshold can be passed into thinking that it has thereby decided the question of discretion when in truth it has not. This is a real danger because first, in very many if not most cases it will be possible to make a case for achieving one or other of the three purposes, and secondly, each of the three possibilities is in itself inherently desirable.

The Judge summarised the Respondents’ arguments as:

These arguments were directed both to jurisdiction and discretion although it is clear that much greater emphasis was placed on the latter. After referring to Black v Sumitomo the Judge said that he had no doubt that the court had jurisdiction to make the order sought and that the Respondents’ objections had to be considered principally under the “rubric of discretion”. Nevertheless he did consider jurisdiction in para. 23 of his judgment. Having dealt with the requirements of rule 31.16 (3) (a), (b) and (c)) he said:

I also consider that looked at simply as a jurisdictional requirement, there can again be no sensible doubt that the injury to Total’s interests is clear, that it calls for examination of the documents sought so as to clarify the role played by the Respondents and that Total needs the disclosure sought as an essential step in deciding whether to litigate at all and/or as an essential tool to assist in the proper formulation and pleading of its case. The documentation sought can be expected to cast light upon the two key issues which I have already identified, viz, the date of commencement of the First and Second Respondents’ activities in Sudan with respect to Block Ba and the date of acquisition of their knowledge as to Total’s rights in Block Ba and the extent of such knowledge. To use the language of Rix LJ at paragraph 81 of his judgment in Black v Sumitomo there can in my view be no real doubt that there is a real prospect in principle of an order for disclosure of the documents sought being fair to the parties if litigation is commenced or of assisting the parties to avoid litigation or of saving costs in any event. The real question therefore is whether the court’s discretion should be exercised in the manner sought.

In the following paragraphs of his judgment the Judge proceeded to deal with the Respondents’ other arguments. He concluded (and I summarise) that it had not been shown that the potential claim was non-justiciable since it would not necessarily involve an examination of the constitutionality of anything done by the authorities in southern Sudan. It was too early to determine any question of forum conveniens. If the Respondents had induced those authorities to make agreements with them which were inconsistent with Total’s agreement, knowing of that agreement, the necessary intention would be established. In exercising his discretion he took account of the fact that documents 1-10 had been referred to in public documents, some of them had been made available to be inspected by the public and it was not suggested that any of them were politically sensitive or affected by considerations of sovereign confidentiality.

The Judge said that his only real doubt was whether to include category 11 in his order. He thought however that the arguments in favour of disclosure of documents 1 – 10 militated equally in favour of those in category 11. The Respondents’ arguments were of “insufficient weight to persuade the court to allow a less than complete picture to be revealed”.

The Respondents’ notice of appeal does not challenge the Judge’s conclusion about jurisdiction other than for category 11. At the outset of his submissions Mr Selwyn Bloch Q.C. said that jurisdiction was not challenged because in the passage which I have quoted in para.19 above Rix LJ had set a low threshold. With some encouragement from the court however, Mr Bloch did in the end deploy some of what were to have been his arguments attacking the judge’s exercise of discretion in support of a submission that there was no jurisdiction. Mr Greenwood Q.C. for Total objected, but I think it would be unfair to the Respondents to prevent them from putting their case in this way because the arguments in support of it form part of those which already appear in their notice of appeal.

I therefore deal first with the challenge to the judge’s finding that there was jurisdiction to order disclosure of documents 1 – 10. It is necessary to extract those parts of Mr Bloch’s submissions which go directly to this question since they were not structured to deal with this point but as I understood it he submitted that the judge was wrong to conclude that pre-action disclosure would assist the dispute to be resolved or save costs (rule 31.16 (3) (d),(ii) and (iii)) and it would do nothing to aid fair disposal of the anticipated proceedings ((i)) because the documents sought would not help Total. This was simply a fishing expedition with a view to obtaining evidence to support serious allegations which Total is unable at present to make.

I do not accept these submissions. There are obvious gaps in what is known about the history of the Respondents’ dealings with GOSS and its predecessors which culminated in the EPLA in April 2005. Each of documents 1 – 10 is likely to fill these gaps and shed light on the two key issues identified by the Judge. I have in mind in particular the Concession Agreement (1), the draft and actual joint venture agreements (3 and 9) and the EPLA itself (6) on the issue of first contact and the documents in category 10 on the issue of knowledge. The other documents may be less important but I do not accept that they would not help Total at all. I will deal separately with category 11 at the end of this judgment.

I think that Total would be able to plead a case along the lines which have been indicated on the material it now has. But I have little doubt that with the documents it seeks it would be able to plead a more focussed case. In what is potentially a large and complex claim it is obviously preferable from the point of view of both parties to have a properly pleaded case from the outset. It seems to me therefore that disclosure of these documents in advance of proceedings is desirable in order to dispose fairly of any future proceedings (rule 31.16 (3) d), (i)) and that the judge was right so to find. I am not sure that his decision could be supported on the other two grounds ((ii) and (iii)) although there is obviously some argument for saying that costs will be saved. But for present purposes this does not matter: the Judge did have jurisdiction to make the order.

So I turn to discretion. It was here that the Respondents deployed their arguments about justiciability and the mental element required to establish the economic torts which Total rely on. We made it clear from the outset of the appeal that we were not proposing to decide any of the difficult legal issues which these arguments raised. Mr Bloch accepted this, but said that the Judge failed to give sufficient weight to these arguments because his assessment of their merits was wrong. Mr Bloch therefore addressed us on the mental element of the economic torts and why he said the judge was wrong to say that the tort of inducing a breach of contract does not require a desire to injure. We were then addressed by Mr Mendelson Q.C. as to why the judge was wrong to say that issues of justiciability would not necessarily arise and other interesting issues of international law touched on in the judgment.

I do not think such arguments are relevant to this application or appeal. Generally when considering an application under CPR 31.16 the court does not need to and therefore should not embark upon a consideration of arguments of this kind. Such applications are in the nature of case management decisions requiring the judge to take a “big picture” view of the application in question. This obviously involves the judge taking a broad view of the merits of the potential claim, but should not necessitate an investigation of legally complex and debateable potential defences or grounds for stay. That is what the Respondents’ arguments are in this case and I need say no more about them than that. Mr Greenwood conceded that the situation would be different if a respondent could show beyond argument that the claim was hopeless or non-justiciable or if disclosure of the documents themselves raised non-justiciable issues such as sovereign confidentiality. I agree, but that is not this case.

For the same reasons I do not think the court should consider arguments about appropriate forum on an application under CPR 31.16.

Of course arguments about justiciability and forum can be raised after proceedings have been started. This is preferable because the issues are then better defined. Non-justiciability is highly fact specific and has to be determined on an issue by issue basis. It may not be possible to decide such issues until after disclosure or even until trial. Arguments about forum are also issue dependent.

So I turn to the remainder of Mr Bloch’s arguments in support of his attack on the Judge’s exercise of discretion. He acknowledged that here he has a high hurdle to surmount. But he submitted that the Judge had failed to give sufficient weight to the fact that such orders are unusual, the parties were strangers to one another, Total’s case was weak because there was no evidence of knowledge, the issues were not sufficiently defined to merit disclosure, Total had vacillated in the way it put its case and that the order would prejudice the Respondents by requiring them to disclose commercially sensitive documents without any reciprocal offer from Total. Mr Bloch also complained that the judge impermissibly took into account his view that the AIM rules required White Nile to make more documents available for inspection than it did. Cumulatively, Mr Bloch submitted, these arguments meant that the judge’s exercise of discretion was flawed and so we could and should exercise it afresh and dismiss the application.

I do not agree. The fact that the parties were strangers to one another is irrelevant and is not supported by Black v Sumitomo as Mr Bloch argued. The relevant facts are that Total had a commercial contract with which it alleges the Respondents have unlawfully interfered. Total has undoubtedly suffered substantial loss as a result of what has happened. The extent to which the Respondents knew of Total’s interest and whether, and if so how, they interfered with it is a matter of inference at the moment but may well be elucidated by the disclosure ordered. The fact that Total has put its claim in the alternative is not surprising given the continuing uncertainties about the ingredients of these economic torts. The judge’s order allowed for redaction of commercially sensitive information and Total has undertaken to reciprocate by disclosing the two agreements it relies on to establish its rights. It does not seem to me that the judge took his view of the requirements of the AIM rules into account when exercising his discretion.

So I do not think the judge’s exercise of discretion was flawed for any of the reasons submitted by Mr Bloch. The judge was entitled to and did take into account the fact that documents 1 – 10 were identified in the circular, that 5 of them had been made available for inspection by the public and that none of them was claimed to be politically sensitive etc. This was not therefore a fishing expedition but a targeted request for specific documents which could readily be disclosed at little cost or inconvenience to the Respondents. At the outset of the hearing we asked Mr Bloch why, simply as a matter of practicality, the documents had not been or could not now be handed over. I found his response based on commercial confidentiality and lack of reciprocity unconvincing.

All in all for the reasons I have given I can see no grounds for interfering with the judge’s exercise of discretion in relation to documents 1 – 10. Orders for pre-action disclosure are unusual but the Judge was justified in making the order for disclosure of these documents in this case.

But, as the judge recognised, different considerations applied to category 11 and his order in relation to these documents was as I understand it the main reason why Waller and Longmore LJJ granted the Respondents permission to appeal.

As it stood Total’s application referred only to White Nile’s documents and therefore only related to the period from 17 December 2004. Before the judge Mr Greenwood limited the application to documents which would have to be disclosed by way of standard disclosure although this does not appear in the Judge’s order. Before us Mr Greenwood further limited the period to up to 25 April 2005 and said that Total no longer sought the operational documents which clearly did form part of the original application.

All this demonstrates that the application for documents in category 11 was anything but honed. As originally formulated the judge had no jurisdiction to grant it because the requirement of rule 31.16 (3) (c) was not met. It should not be for White Nile to decide which documents it would have to disclose by way of standard disclosure. As now formulated category 11 is still defined in broad terms (“all other agreements, correspondence or notes of meetings”), so unless it is established on the evidence that all correspondence between White Nile and third parties and all notes of meetings during the period in question would be discloseable, the problem of determining what documents fall within standard disclosure remains, even if one provides a cut-off date and excludes operational documents. I am not sure that the evidence goes that far and so I doubt even now whether there is jurisdiction to order disclosure of these documents. However assuming, (without deciding) that there is jurisdiction to make the order I do not think we should do so. These documents were not referred to in the circular and, unlike the Judge, I do not think that the case for their disclosure at this stage was equally as strong as that for the other documents. Nor do I think that disclosure was justified simply because to do otherwise would allow a less than complete picture to be revealed.

The Respondents also appeal the Judge’s order that there should no order for the costs of the application. The general rule is that the court should award a person against whom such an order is sought his costs of the application (CPR 48.2 (a)) but the Judge declined to make such an order because he thought that the Respondents’ resistance to the application for documents 1 – 10 had been unreasonable. If I had upheld the judge’s order completely I would not have considered interfering with his order for costs. But as I think the appeal should be allowed, albeit it to a limited extent, I am prepared to consider whether we should vary the judge’s order together with the inevitable argument which there will be about the costs of the appeal.