Marlton v Tectronix UK Holdings

MR JUSTICE PUMFREY: This is an application on behalf of the defendants, Tectronix UK Holdings PLC, who are the defendants in an action brought by Mr Antony Marlton. The action itself was started by claim form on 19 December 2001 and is now accordingly approximately 13 months old and is due for trial in March of this year. The claim is a claim for £590,000-odd and represents the balance of the consideration payable under a share sale agreement entered into between Mr Marlton, the claimant, and the defendant in respect of a company called Adherence Systems Limited.

There is nothing particularly unusual about the nature of the transaction. The claim arises out of the provision in the agreement which relates to the adjustment of the consideration payable upon certain conditions. The claimant contends that a certain part of the consideration, which is referred to in the agreement as the deferred consideration, is payable to him. The defendant contends that it is not. It appears to be common ground between the parties that the payability or otherwise of the deferred consideration is or may be contingent upon compliance with clause 4 of the agreement by the defendant.

The parties' contentions upon the construction of clause 4 are extensive and it is not part of my function on this application to come to a conclusion as to which of them is correct. Clause 4.2 provides that:

"The buyer shall procure and the seller shall not take any action to prevent or delay as soon as practicable after completion, and in any event within 180 days of the completion date, that the completion accounts are prepared by the company accountants in accordance with the agreed accounting principles, the cost of such preparation being borne by the buyer. The buyer shall deliver a draft of the completion accounts together with the working papers of the company accountants, including tax computations, to the seller within 180 days of the completion date. If the buyer fails to procure the preparation of draft completion accounts, other than due to any delay arising as a result of any acts or omissions of the seller, within 180 days of the completion date the buyer shall be deemed to have accepted that the net asset value is not less than the minimum net asset value."

The clause proceeds with the power to substitute accountants in certain events. Now, the importance of clause 4.2 is that the manner in which the agreement works is that an adjustment may be only appropriate to the consideration in the event that completion accounts are provided in accordance with this clause and thus within 180 days of the completion date.

It was the intention of the defendants to invoke the provisions of clause 4.2 and thereby reduce the amount of consideration which they were liable to pay. It will be observed that clause 4.2 refers to the delivery of the completion accounts. The agreement, as one would expect, provides, by clause 11.11, for notices, but also perhaps, I do not know, for delivery of documents as well. This is a matter which will have to be resolved at a later stage. Clause 11.11.1 provides that:

"Any notice or other communication given in connection with this agreement shall be in writing and may be delivered by hand or sent by facsimile with a copy in the post to follow or by first-class recorded delivery post within the United Kingdom or by reputable international courier outside the United Kingdom to the address of the relevant party set out below, or to any other address or facsimile number as any party may notify in writing for the purposes of this clause."

The dispute arises out of an attempt by the defendant, Tectronix, to give completion accounts within the 180 days' limit to Mr Marlton, the seller, by means of e-mail. The factual position is far from straightforward. It is outlined in the witness statement of Trevor Coward, who is a partner in the firm of solicitors on the record for the defendant. He sets out in paragraphs 4 and the succeeding paragraphs of his witness statement the details of the e-mail communications which took place.

The order that was sought by Mr Coward on behalf of his client was an order for inspection of the contents of the hard disks of the claimant's computers, without limit, together with, as I read it, any backups which may be available and also any mail server over which the claimant has power or control.

As a result of an order which I made first time around on this application, Mr Marlton provided certain information, obtained largely from the records of his internet service provider in Belgium and from the internal records of the Microsoft exchange server which he used for his mail serving in his own domain, Marlton.co.uk. It appeared first that the mail server for Marlton.co.uk was indeed arranged shortly after the receipt of the first e-mail to which Mr Coward refers, but before the receipt of the second e-mail with the completion accounts, so as to what is colloquially known as bounce the incoming e-mail.

This may well be a matter for comment hereafter, I do not know, but the records of the Belgian internet service provider reveal that if Mr Marlton had obtained his copy of the completion accounts on the day on which he says he did, which is outside the 180 days' limit, then the relevant connection for the purpose of obtaining those accounts was not through his Belgian internet service provider, and thus the information which I hoped would be adequate when I made my last order to resolve the question of when and where the various copies of the e-mail were first seen by Mr Marlton was not available.

I am bound to say that in these circumstances it does seem to me that, on the face of it, the disclosure which has been carried on, on behalf of the claimant, is inadequate. The standard disclosure, as is by now well-known, requires the disclosure by a party of the documents on which he relies and the documents which adversely affect his own case or adversely affect another party's case or support another party's case.

The question of practice direction does not arise here and it should be noted that the definition of 'document' is a very wide one. It means anything in which information of any description is recorded. The position in law, so far as computer databases are concerned, is set out accurately in node 31.4.1 in the White Book:

"A computer database which forms part of the business records of a company is, in so far as it contains information capable of being received and converted into readable form, a document for the purposes of CPR 31.4 and is therefore susceptible to disclosure -- and attention in that notice is drawn also to the proposition that -- word-processing files in computers are within the definition of documents for the purpose of an order preserving documents in connection with the proceedings."

It seems to me once that the dispute between the parties centres, among other things, upon the date of receipt of the e-mails in question, all documents which tend to show the date of receipt or non-receipt of the e-mails become potentially disclosable. That disclosure has not taken place. The order which was sought was a wide-ranging order but was resisted principally upon the ground of convenience.

The evidence before me, as it now appears, does not satisfy me that a degree of disclosure in relation to material upon Mr Marlton's own computers to show the date of actual receipt of these e-mails can conceivably not be disclosable within the scope of standard disclosure. Now, two problems arise. The first is that the relevant machines are in Belgium. The second is that the defendants contend that Mr Marlton's evidence in relation to this application has been far from satisfactory.

It is absolutely correct that the story in relation to the e-mails has changed very substantially over time and it is also apparent that Mr Marlton lays claim to substantial expertise in the field of computers. It is well-known that the courts find it difficult, except in comparatively elementary cases, to act upon what they are told about the complexities of computer systems without the full guidance of experts.

The conclusion to which I have come, having regard to the failure of my original attempt by means of comparatively easily obtained records to try and sort out what has happened, is that disclosure of the relevant materials in the possession, custody and control of Mr Marlton, but only in relation to his Belgian e-mail address, is appropriate.

I had originally intended to advance a proposal to the parties for a suitable form of order, but on Friday further submissions were received by fax from the defendants which appeared to me, and still appear to me, to seek a wider order, including an order for inspection by an expert, than the order which I originally contemplated. The order which I originally contemplated might well have included an element of expert involvement, but what is now sought is, as I understand it, the imaging of the hard disks in any machine used by Mr Marlton to read the e-mails obtained by Mr Marlton in respect of his Belgian e-mail address.

The question now becomes a much wider one. Essentially, whether there should be expert involvement in this at all, who should be the expert and whether the imaging of the hard disk is appropriate and what protection should be put in place for Mr Marlton.

At the conclusion of the evidence that was before me on the last occasion, the defendant offered the services of an independent expert for this purpose and I am satisfied that any inspection has to be by an independent expert. It would be quite inappropriate for any person who is associated with the defendants to have access to the contents of Mr Marlton's hard disk, which on the face of the material I have seen includes a substantial amount of privileged matter.

At the same time, I am satisfied, as I have indicated, that disclosure, possibly by inspection, is appropriate and I will now hear counsel on the best way forward, having regard to the further submissions that were addressed to me after the hearing on the last occasion, in writing, last Friday.