First Subsea Ltd v Balltec Ltd & Ors

This is an application for specific disclosure made in the course of the trial, in accordance with the practice recommended by the Court of Appeal in Favor Easy Management v Wu.

Mr Emmett was a former employee of the claimant, BSW. After leaving their employment, he established a company offering competing services. One of the suppliers to that company and one of the shareholders in the new company was a Mr Halstead.

Mr Emmett and Mr Halstead fell out, and there were proceedings in Manchester between them. In those proceedings, it was in Mr Emmett's interests to say that Mr Halstead's engagement and participation in the new venture had come late in the process and it was in Mr Halstead's interest to say that his engagement and participation had come at an early stage in the process.

There are now proceedings forthwith Mr Emmett's former Employers (BSW) and Mr Emmett, his new company and others. In the course of their pleadings, BSW make allegations against Mr Emmett, founded upon admissions which he made in the course of the Manchester proceedings. So, for example, in paragraph 11 of the Particulars of Claim, they claim that whilst he was a serving employee and director he acted in breach of fiduciary duty; and in paragraph 12 they say they will rely upon admissions made by Mr Emmett in the course of his evidence in the Manchester proceedings.

In paragraph 15 of the Particulars of Claim, BSW complain of the preparation of designs for products of the new company which they say used their design documents. Again, they say that they will be relying on evidence tendered in the Manchester proceedings in support of that allegation.

In paragraph 31, they mount their case against another participant, Mr Bacon. Amongst the facts they rely on are those derived from what is said to be “the effect of Mr Bacon's evidence in the Manchester proceedings.”

As a final example, in paragraph 39, BSW mount a case in relation to a judgment said to have been obtained by fraud relating to pre-action disclosure. Amongst the material on which they will rely are admissions made by Mr Emmett in the course of his evidence in the Manchester proceedings.

Very shortly before this present action came on for trial, BSW's solicitors disclosed in a letter dated 1 March 2013 that the Manchester proceedings had been conducted with the benefit of a commercial loan of £80,000 made by an associated company of BSW, through its owner and chairman, Mr Suttie, to Mr Halstead's company. The loan was made very shortly before the hearing of the Manchester proceedings, and was said to have been repaid in April 2010.

Mr Suttie has been questioned on this matter, as has Mr Halstead. The present application now seeks the disclosure of documents. On the fifth day of the trial, the loan document and the charge which supported the loan document were provided to the defendants. When the defendants sought (a) the documents which evidenced the genesis of the loan arrangement contained in the loan agreement and (b) the documents surrounding the repayment of the loan, production of these documents was resisted. That has led to the present application under CPR 31.12 for an order for disclosure of documents and correspondence giving rise to the loan documents referred to in BSW’s solicitor's letter of 1 March 2013 or provided under cover of their letter dated 11 March 2013, and documents and correspondence recording the alleged discharge of the loan documents, agreements and transactions associated with them.

The principal ground upon which disclosure of those documents is sought is that a central issue in this present action is the weight that should be attached to the evidence given by Mr Emmett and others in the Manchester proceedings on which BSW relies in these proceedings. There is a suggestion that, in the Manchester proceedings, areas were explored which were not germane to the real issues between Mr Emmett and Mr Halstead but which are germane to the proceedings which BSW has now launched. Although words such as "collusion" are used in the course of argument, in essence what is said is that the Manchester proceedings were used as an opportunity to conduct what was a form of “interview without caution” or “pre-action oral disclosure” so that a case could be built against Balltec and Mr Emmett and the other defendants in these present proceedings.

The position of BSW is three-fold: first, it is said that there is no jurisdiction for me to make an order under CPR 31.12; secondly, it is said that there is no factual basis for any such application, because an email from leading counsel engaged in the Manchester proceedings confirms that she asked no questions at the behest of anyone else; thirdly, it is said that to make a disclosure order now would be disproportionate.

I should say that I do not intend to make an order for the disclosure of further documents.

It seems to me that there are three separate issues to be addressed.

First,the significance of the loan agreement to the admissions that were made in the course of the Manchester proceedings. It seems to me that why the questions were asked in the Manchester proceedings is not really material to an assessment of the weight of the answers given. The weight to be accorded to the answers given seems to me -- and I remind myself that I have heard no submissions on the matter and I am only at a relatively early stage of this trial -- to arise (a) out of the nature of the issues (both pleaded and practical) that lay at the heart of the Manchester action (b) the extent of the disclosure that had taken place between Balltec and Mr Emmett on the one hand, and Mr Halstead on the other, and therefore the extent to which each party's recollection was assisted by documents, and (c) the centrality of the answers given to the real issues in the Manchester action.

I do not think that that process is assisted by knowing whether Mr Halstead was funded by his ally, Mr Suttie, and BSW, or whether he was paying for the questions himself. So I do not think I would be assisted by disclosure of additional documents of the sort being sought in conducting that exercise.

Secondly, it seems to me that the nature of the loan agreement, the understanding out of which it grew, and the question of whether there has indeed been a repayment or a release in whole or in part, go to Mr Halstead's credibility in this action. Is his evidence in this action driven or influenced in any way by the arrangements which he has had the benefit of with BSW?

As Favor Easy Management v Wu demonstrates, disclosure relating to credibility will not, in the ordinary way, be ordered for the reasons which are given in the judgment of Lord Neuberger at paragraphs 18 and 19. That is because documents going to credibility will not ordinarily fall within the scope of standard disclosure according to the usual practice of the court.

Mr Marshall submitted that that being so, there was simply no jurisdiction for me to grant the relief sought in this application notice. I reject that submission. In the course of giving judgment, Lord Neuberger said that whatever was the position under CPR 31.6, he could see a real argument for saying that CPR 31.12 would, in an appropriate case, enable the court to order disclosure of documents going to credit, though he found it unnecessary to decide the point for the purposes of disposing the application in Favor Easy Management.

For my own part, I think there is jurisdiction to order documents going to credit under CPR 31.12 in an exceptional case. That is because CPR 31.5 quite plainly gives the court jurisdiction to order disclosure to whatever extent it thinks necessary for the achievement of justice in a particular case. But I do not regard the instant case as an appropriate case in which to exercise that exceptional jurisdiction.

Mr Halstead's credibility, his evidence in this action, can be assessed on the basis of the material which has already been elicited in cross-examination, including material relating to the loan arrangement between himself and BSW. I have available the answers which he gave, and I have noted the manner in which he gave those answers. I do not think it necessary to order disclosure of documents also going to his credit on that issue.

The third point, having dealt with the importance of the admissions, and with Mr Halstead's credit, is a general point about fairness. The position in which the defendants find themselves is that BSW has got the advantage of minimal voluntary disclosure, so that they cannot be criticised for having concealed the funding arrangement that underlay the Manchester proceedings, but they are unwilling to suffer the attendant disadvantage of full disclosure of all documents relevant to the loan transaction. They wish to cherry-pick and to do so on a voluntary basis. I had thought that an appropriate analogy would be the waiver of privilege, where a party is not permitted to waive privilege only in a particular document without also being obliged to waive privilege in associated relevant documents. I still think, despite Mr Marshall's criticism of that analogy, that it is a useful one. If general considerations of fairness had impelled me to the view that disclosure ought to be ordered, I would have ordered it. But I am satisfied that, as matters stand, the defendants will be in a position to draw to my attention in closing the extent of my knowledge about the loan arrangements and the willingness of the claimant to disclose the full reality loan arrangements when I come to consider what effect the existence of the commercial loan arrangement might have on the reliability of the admissions that were made in the Manchester proceedings.

In the light of that, I do not think it necessary, in the interests of fairness, to interfere with the smooth course of this trial by ordering disclosure even of a relatively limited sort during the trial itself. For those reasons, I will refuse the application.