Shuldham, Re

By this Part 8 claim, Mr Shuldham seeks orders (a) that a claim which he and others intend to bring seeking rectification of an instrument made between himself and others (“the rectification claim”) be heard in private and (b) that the identity of the parties to and other persons named in the rectification claim be protected by an order for anonymity of those parties and persons and of the trusts and properties the subject of the rectification claim.

The proposed rectification claim concerns an instrument (“the Instrument”) by which Mr Shuldham and two other family members purported to grant an interest in land. It is alleged that the Instrument failed to create such an interest by reason of the operation of section 149(3) of the Law of Property Act 1925. That subsection renders void a lease “at a rent or granted in consideration of a fine” limited to take effect more than twenty-one years from the date of the instrument purporting to create it. The Instrument purported to grant a lease of various properties for a term of 999 years commencing in the year 2040, a date more than 21 years from the date of the Instrument. The Instrument also provided for a rent to be payable, but it is alleged that this was in error. The rectification claim seeks to eliminate references to rent from the Instrument, and thus render the Instrument effective to create the interest in land.

The Instrument was part of a larger scheme. It is sufficient for present purposes to say that the scheme involved the estate of a deceased person, SSS, who was survived by his widow, a daughter XH and XH’s husband KH, and two minor children of XH and KH, one of whom is XB. I use letters of identification, as did the evidence on the application. The object of the scheme was that the freehold of the properties to be subject to the Instrument would be held by XH and the lease would be held for XB. By granting a future lease in this way, and appointing it to one of the children, it was hoped to ensure that the value of the freehold interest in XH’s estate would diminish over time. The purpose was to mitigate the effect of inheritance tax.

The rectification claim is not contentious litigation, in that there are no parties who are likely to oppose it. Nevertheless the matter is one where, as Mr Waterworth who appears for Mr Shuldham accepts, notice of the claim would have to be given to Her Majesty’s Revenue and Customs, so that they can decide whether they wish to oppose it in the interests of protecting the public purse. It would be wrong at this stage to proceed upon the basis that the matter is one which will necessarily proceed without any form of contest.

A large part of the concern of Mr Shuldham, and the other members of the family interested in the rectification claim, arises out of the fact that KH is involved in litigation with a relative, and there is a risk that KH’s assets might become vulnerable if there is an outcome adverse to KH in that litigation. For understandable reasons I am not provided with details of that litigation, beyond the fact that it is serious litigation and that KH will be exposed to a substantial costs liability, possibly sufficient to bankrupt him, if he is unsuccessful. There is a risk that, if the outcome of that litigation is unfavourable to KH, his creditors will look to KH’s share of the matrimonial assets of KH and XH in order to satisfy any liability.

The property the subject of the Instrument is said not to be an asset of KH, and so, Mr Waterworth, who appears for Mr Shuldham submits, the purpose of the application is not to hide assets from creditors, an activity to which the court would not lend assistance. Likewise, the solicitor acting on behalf of Mr Shuldham, says in his witness statement that the purpose of the scheme was not to deprive KH’s creditors of the opportunity to pursue assets belonging to him, but to prevent those assets from coming into his hands in the first place.

In approaching any request by a party to litigation for the proceedings to be held in private or anonymised, it is helpful to have in mind what Viscount Haldane said in Scott v Scott [1913] 417 at 434 as being the general underlying principle:

“...the administration of justice must, so far as the trial of the case is concerned with certain narrowly defined exceptions to which I will refer later on, be conducted in open Court.”

One of the exceptions to which Viscount Haldane later referred was the case of litigation about a secret process, where the effect of publicity would be to destroy the subject matter. As to that he said:

“... the effect of publicity would be to destroy the subject matter. There it may well be that justice cannot be done at all if it had to be done in public. As the paramount object must always be to do justice, the general rule as to publicity, after all only the means to an end, must accordingly yield. But the burden lies on those seeking to displace its application in the particular case to make out that the ordinary rule must as of necessity be superseded by this paramount consideration. The question is by no means one which, consistently with the spirit of our jurisprudence, can be dealt with by the judge as resting in his mere discretion as to what is expedient. The latter must treat it as one of principle, and as turning, not on convenience, but on necessity.”

Lord Loreburn described the rule that justice shall be administered in open court as the “inveterate rule” (page 445). He described the case of secret processes in the following terms;

“An aggrieved person, entitled to protection against one man who had stolen his secret, would not ask for it on terms that the secret was to be communicated to the world. There would in effect be a denial of justice.”

Lord Shaw included in his speech citations from Jeremy Bentham on the importance of publicity to the proper administration of justice, including “publicity is the very soul of justice”. Having also recognised the exception where trade secrets are involved, he went on to consider how far it went. At pages 484-485 he considered the argument that fear of giving evidence in nullity proceedings might likewise deter “witnesses of delicate feeling from giving testimony, and rather induce the abandonment of their just right by sensitive suitors.” He rejected this extension of the exception:

“My Lords, this ground is very dangerous ground. One’s experience shows that the reluctance to intrude one’s private affairs into public notice induces many citizens to forgo their just claims. It is no doubt true that many of such cases might have been brought before tribunals if only the tribunals were secret. But the concession to these feelings would, in my opinion, tend to bring about those very dangers to liberty in general, and to society at large, against which publicity tends to keep us secure.”

Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms guarantees everyone a fair and public hearing in the determination of his civil rights and responsibilities. Article 6, second sentence provides:

“Judgment shall be pronounced publicly, but the press and public may be excluded from all or part of the trial in the interest of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice.”

For present purposes, Mr Waterworth relies on the exceptions in favour of juveniles, as well as the general exception for cases where publicity would prejudice the interests of justice.

Article 8 of the Convention, as is well known, provides that everyone has the right to respect for his private and family life, his home and his correspondence.

These authorities and other sources make a number of things plain. Firstly, they recognise that the criterion for the open justice principle to give way is one of necessity, and not of convenience or expedience. Secondly, the court will not automatically sit in private merely because private matters may be made public. The publication of private matters frequently occurs in litigation. The publicity in question must be shown to be sufficiently damaging that to require publication would amount to a significant denial of access to justice. Thirdly, the burden is on those who seek an order that the court should sit in private to establish that the case is a suitably exceptional one.

In terms of domestic law, Mr Waterworth draws attention to and support from CPR Part 39.2:

“(1)

The general rule is that a hearing is to be in public.

(3)

A hearing, or any part of it, may be in private if -

(a)

publicity would defeat the object of the hearing;

(b)

it involves matters relating to national security;

(c)

it involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality;

(d)

a private hearing is necessary to protect the interests of any child or protected party;

(e)

it is a hearing of an application made without notice and it would be unjust to any respondent for there to be a public hearing;

(f)

it involves uncontentious matters arising in the administration of trusts or in the administration of a deceased person’s estate; or

(g)

the court considers this to be necessary, in the interests of justice.

(4)

The court may order that the identity of any party or witness must not be disclosed if it considers non-disclosure necessary in order to protect the interests of that party or witness.

Mr Waterworth says that CPR 39.2(3) (a), (c), (d) and (f) are all relevant here. He also draws attention to CPR PD 39A at 1.5 which lists matters which “shall in the first instance be listed by the court as hearings in private under rule 39.2(3)(c).” That list is as follows:

“The hearings set out below shall in the first instance be listed by the court as hearings in private under rule 39.2(3)(c), namely:

“(1)

a claim by a mortgagee against one or more individuals for an order for possession of land,

(2)

a claim by a landlord against one or more tenants or former tenants for the repossession of a dwelling house based on the non-payment of rent,

(3)

an application to suspend a warrant of execution or a warrant of possession or to stay execution where the court is being invited to consider the ability of a party to make payments to another party,

(4)

a redetermination under rule 14.13 or an application to vary or suspend the payment of a judgment debt by instalments,

(5)

an application for a charging order (including an application to enforce a charging order), third party debt order, attachment of earnings order, administration order, or the appointment of a receiver,

(6)

an order to attend court for questioning,

(7)

the determination of the liability of an LSC funded client under regulations 9 and 10 of the Community Legal Service (Costs) Regulations 2000, or of an assisted person’s liability for costs under regulation 127 of the Civil Legal Aid (General)

Regulations 1989,

(8)

an application for security for costs to be provided by a claimant who is a company or a limited liability partnership in the circumstances set out in rule 25.13(2)(c),

(9)

proceedings brought under the Consumer Credit Act 1974, the Inheritance (Provision for Family and Dependants) Act 1975 or the Protection from Harassment Act 1997,

(10)

an application by a trustee or personal representative for directions as to bringing or defending legal proceedings.”

It needs to be kept firmly in mind that neither CPR 39.2(3) itself, nor the Practice Direction give any party to litigation a right to a hearing in private, merely by establishing that his case falls within one of the classes of case identified. This is clear from the word “may” in the preamble to 39.2(3), and from the words “shall in the first instance be listed by the court” in the Practice Direction. The rules must be applied with the provisions of the Convention, and the common law principles of open justice at the forefront of one’s mind.

Nowhere is this clearer than in CPR 39.2(3)(c). Many cases involve some confidential information, and publicity will always damage the confidentiality of the information. A mechanistic application of the rule might lead to a hearing in private wherever confidential information is involved. This is clearly not what is meant. The court will have to form a view as the nature of the confidential information, its importance to the party, and the damage he will suffer by its disclosure before deciding whether it is necessary to hold a hearing in private. The secret process cases are an example of the type of case where the court may need to hear a case in private for the reasons given in the judgments in Scott. Experience shows that cases involving secret processes can in fact be conducted without the trial being in private, provided that steps are taken to avoid particularly sensitive facts from being read out in open court. The court has a wide armoury of measures it can take to protect truly confidential information, even in the context of a trial in open court: see for example CPR 31.22(2) which allows the court to make an order maintaining confidentiality notwithstanding the fact that a document is one referred to in open court, and CPR 5.4C(4) to (6) which enables the court to make orders restricting access to the court file by non-parties, subject to the rights of non-parties to apply.

I consider first of all the case based on protection of confidential financial information under sub-paragraph (c). I have read the material relied on in support of the rectification claim. It discloses in broad terms the nature of the transactions involved in the scheme. It is true that it mentions a figure for the value of the estate, but this is a fact which could be kept confidential if the trial judge thought it appropriate, assuming that it is not a figure which could be ascertained independently. Beyond that, the transactions are described at a high level, and do not involve much in the way of financial detail.

I do not think that the fact that the case involves information of this character justifies an order at this stage (that is before proceedings on the rectification claim are commenced) that the hearing of the rectification claim be conducted in private. It is true that, but for the need to commence the rectification claims, the arrangements made by the scheme would be confidential. I do not regard that as sufficient justification on its own for holding the hearing in private. Steps can be taken in the proceeding to protect the confidential character of the information short of holding the trial in private. The open justice principle cannot be expected to give way quite so readily in every case in which confidential material is involved.

However, Mr Waterworth submitted that there were further factors here which did justify the making of an order under paragraph (c). Firstly, he submitted that the existence of the litigation between KH and the relative meant that publicity would be harmful to the interests of the family. The counterparty in the litigation, if he got to know of the arrangements being made, might pursue the family, albeit unjustly, to attempt to recover sums representing the subject of the scheme. Secondly, the drafting error, if such it was, was not the fault of the family themselves, but of their advisers. So it cannot be said that they have brought the risk of exposure upon themselves.

In paragraph 13 of his witness statement, the family’s solicitor says this:

“...the complex scheme undertaken by the executors formed a key part of the rationale for it. It is therefore of the utmost importance to the executors and the family’s perspective that confidentiality in relation to the Rectification Claim can be assured if it is to proceed. Failure to pursue the Rectification Claim will result in XB, a minor, being deprived of a substantial asset in a very large area of land.”

I do not think these are convincing reasons for making an order at this stage that the hearing of the rectification claim be held in private. Firstly, what the paragraph quoted immediately above does not say is that the rectification claim will not proceed if confidentiality cannot be assured. There is accordingly no question of a denial of access to justice, or anything approaching it. Secondly, there is no evidential basis for supposing that the counterparty in the litigation would take any steps which he is not entitled to take against KH or any assets of the family. Mr Kempster merely states that “There is a serious risk that publicity ... would be used in that other litigation in a manner which might ultimately cause damage to the interests of the family”. Given that the assets in question are said not to be assets of KH, I view with some suspicion the suggestion that the counterparty might be prompted by disclosure of the arrangements which are being made to bring proceedings against other family members. Moreover, the right time to deal with unjustified attempts to obtain relief against other members of the family is when those attempts are made. It would be wrong in my view to hold proceedings in private because of an unsubstantiated fear that such unjustified proceedings might be taken.

I appreciate that the family are not directly to blame for the error, if such it was, in the Instrument. However I do not think the open justice principle is really affected by considerations of where fault or blame may lie. Ultimately I do not think it is established that such disclosure as may occur of confidential information in the present case makes it necessary to make an order at this stage that the hearing be held in private.

Next I consider the reliance which was placed on sub-paragraph (d) - a hearing in private is necessary for the protection of the interests of a child. It is true that XB is currently a minor. The evidence does not disclose how old XB presently is. However the transaction in question does not confer any interest on XB until 2040, by which time he will be 28 years older, and definitely no longer a child.

Normally, when one speaks of protecting the interests of a child, one is speaking of the welfare of the child, and protecting the child from harm. There is simply nothing in the evidence to persuade me that a hearing in private is necessary to protect XB from harm, or to assist me in determining what that harm might conceivably be. I do not think that the application derives any support from this sub-paragraph.

Next I turn to sub-paragraph (a) - defeating the object of the hearing. The object of the hearing in the present case is to obtain rectification of the Instrument. Plainly, that object can be achieved whether the hearing is in private or in public. The sub- paragraph is of most relevance to applications for freezing injunctions and the like, where publicity may alert a defendant to dissipate his assets. Sub-paragraph (a) may also be apt to cover those cases where the property which it is sought to protect in or by the action is destroyed by publicity. I am not persuaded that the there is any basis for supposing that the property the subject of the scheme will be put at risk if the action is heard in public.

Finally, I consider sub-paragraph (f). As I have already indicated, I am not persuaded that the case will be uncontested, at least by HMRC, so the sub-paragraph is not applicable. The right time to consider whether a trial should be held in private because it involves an uncontested matter within paragraph (f) is when one knows what the hearing will involve, and whether it is indeed uncontested.

In the end I am not persuaded that it would be right to make an order that the proposed claim be heard in private. I think it would be wrong to fetter the court’s discretion in such a serious matter at this stage. It will be for the trial judge in the rectification claim to decide whether it is appropriate to impose any measures for the protection of confidential information.

For similar reasons, I do not think that there is adequate justification for any anonymity order. To use the words of CPR 39.2(4), I am not satisfied that anonymity is “necessary to protect the interests of any party”. Mr Waterworth accepted that this part of his application turned on the fear of the effects of publicity on the actions of the counterparty in KH’s litigation. The evidence does not persuade me that it would be right for the court to shield the rectification claim in this way. To do so would open the door to applications for anonymisation in any case where a party feared that publicity would expose his family’s financial arrangements to his creditors. I do not think that such an extension is either supported by authority or justified in this case.

I would accordingly dismiss the application.