Glidepath BV & Ors v Thompson & Ors

This is an application under CPR 5.4(5) for copies of certain documents on the court file in these proceedings. The applicant is not a party to these proceedings and he therefore falls within the “any other person” category under CPR 5.4(5).

The present proceedings involve allegations of fraud against six defendants who were involved in a joint venture which set up the first claimant, Glidepath BV. The second and third claimants were the shareholders. It is alleged that the first, second, third and fourth defendants, the management team, and the other two defendants received secret profits in fraud of the claimants. The agreement between the claimants and the defendants in relation to the joint venture contained an English arbitration clause. Its scope was apparently wide enough to cover the issues in these proceedings with the result that there was an application under section 9 of the Arbitration Act 1996 for these proceedings to be stayed. All parties eventually consented to such an order which was made in private on 30 July 2004.

However, before the making of that order, not only had these proceedings been commenced by the service of a claim form and particulars of claim, but there had also been applications by the claimants for freezing injunctions and Norwich Pharmacol disclosure orders. These orders were made in the course of hearings in private. There were further applications to discharge those orders – also made in private – and they were unsuccessful.

The allegations in the proceedings started by Glidepath which were stayed in favour of arbitration partly involved a transaction whereby part of the business of a company called Spherion (UK) Ltd was transferred to a company called STA/Rel Q.

The Applicant, Mr Onwuka, was employed by Spherion (UK). He resigned in about February 2003, after the transfer to STA/Rel Q. He was in dispute with his employers on two main grounds: (i) he was unlawfully excluded from the transfer in October 2002 of the undertaking and employment whereby other employees of Spherion were transferred to STA/Rel Q; (ii) he was the victim of adverse treatment on grounds of race leading to constructive dismissal. He commenced proceedings in the Employment Tribunal in which he claimed damages for wrongful treatment and dismissal against the First Defendant in those proceedings who was managing director and against Spherion (UK) and others. There has been substantial disclosure of documents in those proceedings.

After he left Spherion UK, the latter obtained an interlocutory injunction against the Applicant requiring him to deliver up certain confidential documents said to have been unlawfully obtained and retained by him. He duly complied. Those documents related to the sale of Spherion assets to STA/Rel Q. Statements were served in those proceedings relating to the relationship between Spherion and Mr Thompson, the First Defendant.

The Applicant wishes to have access to the particulars of claim, notices of application in respect of the freezing injunction and the Norwich Pharmacol application, as well as the respective orders. He also seeks access to other applications made before the proceedings were stayed and to any witness statements filed with the court.

CPR 5.4 provides for access to documents on the court files in different ways according to whether the applicant is a party to the target proceedings or a non-party. If the latter, CPR 5.4(5) and (6) apply.

These provide as follows:

“(5)

Any other person may –

(a)

unless the court orders otherwise, obtain from the records of the court of copy of –

(i)

a claim form, subject to paragraph (6) and to any order of the court under paragraph (7);

(ii)

a judgment or order given or made in public (whether made at a hearing or without a hearing), subject to paragraph (6); and

(b)

if the court gives permission, obtain from the records of the court a copy of any other document filed by a party, or communication between the court and a party or another person.

(6)

A person may obtain a copy of a claim form or a judgment or order under paragraph 5(a) only if –

(a)

where there is one defendant, the defendant has filed an acknowledgment of service or a defence;

(b)

where there is more than one defendant, either –

(i)

all the defendants have filed an acknowledgment of service or a defence;

(ii)

at least one defendant has filed an acknowledgment of service or a defence, and the court gives permission;

(c)

the claim has been listed for a hearing; or

(d)

judgment has been entered in the claim.”

As regards witness statements, the position is governed by CPR 32.13.

This provides:

“(1)

A witness statement which stands as evidence in chief is open to inspection during the course of the trial unless the court otherwise directs.

(2)

Any person may ask for a direction that a witness statement is not open to inspection.

(3)

The court will not make a direction under paragraph (2) unless it is satisfied that a witness statement should not be open to inspection because of –

(a)

the interests of justice;

(b)

the public interest;

(c)

the nature of any expert medical evidence in the statement;

(d)

the nature of any confidential information (including information relating to personal financial matters) in the statement; or

(e)

the need to protect the interests of any child or patient.

(4)

The court may exclude from inspection words or passages in the statement.”

It is submitted by Mr David Brook, on behalf of the first defendant and Spherion, that all the classes of documents covered by this application are confidential to the parties to the arbitration. The claimant wrongly resorted to the courts instead of referring the disputes to arbitration and accordingly, as regards a non-party, the court should protect the confidentiality of the arbitral procedure by declining to permit any of these documents to be disclosed. Further, the applicant’s interest in gaining access to the documents is in reality to obtain cross-examination material for use in the Employment Tribunal proceedings. He also draws attention to the Arbitration Practice Direction at CPR 62.4.5.1 which provides:

“An arbitration claim form may only be inspected with the permission of the court.”

He submits that applications for ancillary remedies which precede an application for a stay should be treated as regards the exercise of the court’s discretion as if they were internal to the arbitration and not as if they were made in ordinary court proceedings. Accordingly, the court’s discretion should be exercised so as to protect the confidential nature of arbitration proceedings and all proceedings ancillary to those proceedings.

On behalf of the applicant, Mr Francis Davey argues that this is wrong and that the court should not decline to permit access on the grounds of confidentiality of the documents. He relies for this general approach on Science Research Council v. Nasse [1980] AC 1028 and submits in effect that the confidentiality which would otherwise attach to such documents were they engendered in the course of an arbitration must yield to the public interest in access to them in so far as they were engendered prior to the stay.

There can be no doubt that arbitration proceedings and materials produced in the course of them are treated as confidential to the parties and the arbitrator subject to certain exceptions. The result of the most recent Court of Appeal authority, Ali Shipping Corporation v. Shipyard Trogir [1999] 1 WLR 316, is that the exceptions to the general rule of arbitral confidentiality include disclosure by leave or order of the court which may be given when and to the extent that it is reasonably necessary to protect or establish the legal rights of a party to the arbitration by a third party or otherwise in the interests of justice. There appears to be no authority for the proposition that a third party can outside the ambit of disclosure by a party to an arbitration obtain an order from the court for access to materials in an arbitration to which he is not a party so that he can deploy them as evidence in other proceedings in which he is a party.

The character of confidentiality relating to arbitration proceedings is reflected in CPR 62.4.5.1 set out in paragraph 12 above. Because the intervention of the court in relation to arbitration is a judicial facility ancillary to the arbitral process, the criteria by reference to which the court should exercise its discretion with regard to the granting of such permission must clearly give substantial and normally overriding weight to the principles upon which the courts preserve the confidentiality of that process. In particular, a stranger to the arbitration proceedings should not in general be given access to claim forms unless he brings himself within an exception to the protection of confidentiality exemplified in Ali Shipping Corporation v. Shipyard Trogir, supra.

The character of confidentiality is further reflected in CPR 62.10. This provides that subject to the power of the court to order that “an arbitration claim” may be heard either in public or in private, all arbitration claims will be heard in private except the hearing of a preliminary point of law under section 45 or an appeal on a question of law arising out of an award under section 69, which will be held in public. As is clear from CPR 62.2(1) “an arbitration claim” means any application to the court under the 1996 Act. This clearly includes an application for a stay of existing court proceedings under section 9 of the 1996 Act.

In Department of Economics, Policy and Development of the City of Moscow v. Bankers Trust Co [2004] 3 WLR 533, relied upon by Mr Davey on behalf of the Applicant, the issue was whether there should be publication of the judgment upon an application by two of the parties to an arbitration for the award to be set aside for serious irregularity under section 68 of the 1996 Act. Mance LJ. made a number of observations relevant to the approach to arbitral confidentiality to be adopted by the courts in exercising their supervisory and ancillary jurisdiction in respect of arbitrations. The following paragraphs are thus pertinent.

“34.

The consideration that parties have elected to arbitrate confidentially and privately cannot dictate the position in respect of arbitration claims brought to Court under CPR 62.10. CPR 62.10 therefore only represents a starting point. Such proceedings are no longer consensual. The possibility of pursuing them exists in the public interest. The Courts, when called upon to exercise the supervisory role assigned to them under the Arbitration Act, 1996, are acting as a branch of the state, not as a mere extension of the consensual arbitral process. Nevertheless, they are acting in the public interest to facilitate the fairness and well-being of a consensual method of dispute resolution, and both the Rule Committee and the Courts can still take into account the parties' expectations regarding privacy and confidentiality when agreeing to arbitrate.
36. Under CPR 62.10, the Rule Committee considered that, in cases where permission to appeal is appropriate (e.g. because an award raises some point of general legal importance or is clearly wrong), the starting point was to treat the public interest in a public hearing as outweighing any wish on the parties' part for continuing privacy and confidentiality. In the case of other arbitration claims, the Committee saw the starting point as reversed. As required by art. 6(1) (cf. par. 27(iii) above) and as stressed in Pelling, Clibbery v. Allan and P. v. B.W. in the family context, the matter remained under the Court's control in any particular case.
38. The range of arbitration claims within the definition in CPR 62.10 is very wide. Adapting words of the President, there "cannot properly be a blanket protection of non-publication in all cases" which fall initially to be heard in private under CPR 62.10. It may be possible to some extent to group cases arising out of the same type of circumstances. I find it difficult, as at present advised, to see why a judgment determining that there was no valid or applicable arbitration agreement or (probably) that arbitrators issued an award without jurisdiction, or dismissing an application for a stay of current proceedings in favour of arbitration should be private. There are arbitrations about factual circumstances and issues which appear unlikely to involve any significant confidential information at all. The main motive to arbitrate may be different considerations, such as the expertise or informality of the arbitrators - many shipping and commodity arbitrations must fall into this category. In arbitration claims relating to such arbitrations, the starting point may easily give way to a public hearing. In every case, while it will be appropriate to start the hearing in private as contemplated by CPR 62.10, the Court should be ready to hear representations from one or other party that the hearing should be continued in public, and should anyway if appropriate raise this possibility with the parties, as Lord Woolf stressed in ex parte Kaim Todner [1999] QB 966.

That case was concerned with the publication of judgments in respect of applications for ancillary relief. The judgment does, however, recognise that the confidentiality of the arbitral process should in general be protected unless in the public interest it is appropriate that a judgment should be published. However, it is definitely not authority for the proposition that arbitration claims except those covered by CPR 62.10(3)(a) should be heard in public unless the court otherwise orders.

Whereas it is true that an application notice issued under Section 9 of the 1996 Act is not an arbitration claim form and that by CPR 62.8 it has to be served on all other parties to the court proceedings, it is certainly an arbitration claim which has to be heard in private unless the court decides otherwise. That is at least some indication that, even at the stage before the court was ordered a stay, the private and confidential character of proceedings ancillary to the arbitral process ought to be protected.

Further, applications for a stay are made to enforce agreements to arbitrate. Such agreements imposed by implication a duty of confidentiality. To conclude that the confidentiality of documentation directed to enforce such an agreement was less appropriately protected than documentation engendered in the course of the arbitration would be somewhat illogical and therefore hard to sustain except to the extent necessary to give notice to other parties to the court proceedings or for some special public interest consideration.

Moreover, even where there is no dispute as to the applicability of an agreement to arbitrate, applications may be made to the courts for ancillary relief under section 44 of the 1996 Act. The most prevalent type of application in the Commercial Court is for a freezing injunction. Section 44(3) provides:

“If the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets.”

This makes it clear that such orders can be applied for and given before arbitration proceedings have commenced. They are made by an arbitration application claim form which cannot be inspected without the permission of the court (CPR 62.4.5.1).

I therefore conclude that the permission of the court to a stranger to an arbitration and to proceedings in which a section 9 stay has been applied for to inspect either an application notice under section 9 and any evidence on the court file or arbitration claim forms for ancillary relief under section 44 and evidence appended on the court file should not be granted unless all the parties to the arbitration consent or there is an overriding “interest of justice” as envisaged in Ali Shipping Corporation v. Shipyard Trogir, supra. Further, in a case where, as in the present case, the application under section 9 is preceded by an application for a freezing injunction or for a Norwich Pharmacol disclosure order in the face of a binding arbitration agreement, the exercise of the court’s discretion upon an application by a stranger to the arbitration agreement or the proceedings to inspect those applications or the evidence supporting them on the court file should similarly be exercised by reference to the principles of confidentiality attaching to arbitral proceedings.

Accordingly, in the present case the Applicant, not being a party to the agreement to arbitrate, must establish that access to the documents in question, namely the application notice under section 9 and the applications for a freezing injunction and a Norwich Pharmacol disclosure order and evidence incorporated in them, is reasonably necessary to protect or establish the legal rights which he seeks to enforce in the proceedings before the Employment Tribunals or otherwise in the interests of justice.

The Applicant has, in my judgment, failed to bring himself within either of these threshold exceptions to the confidentiality rule.

In no sense are any of these documents reasonably necessary to establish his claim in the Employment Tribunal. A major purpose in seeking them is to obtain access to an unredacted copy of the sale agreement in respect of the disposal by Spherion of part of the its business to STA/RelQ. The Applicant believes that the contents of this document may provide evidence which can be deployed in order to strengthen evidence which he already has to establish his case of wrongful dismissal in the Employment Tribunal. He wishes to use this additional evidence in order to prove against Mr Thompson in relation to the Spherion contract that Thompson was acting in fraud of Spherion and to establish the nature of the fraud alleged against him. It is also submitted that if the documents relating to the freezing injunction and the Norwich Pharmacol order are accessed it will be easier for the Applicant to ascertain whether there has been proper disclosure by Mr Thompson in the Employment Tribunal proceedings. However, in no sense can it be said that access to such documents is reasonably necessary for the Applicant to establish his case against Mr Thompson and Spherion in the Employment Tribunal. For a document on the court file to be reasonably necessary to establish a right or a defence in this context, it must be clearly shown to the court that the document will play an essential part in establishing the right or the defence in question such that the applicant for access will be seriously prejudiced if access is denied. To set the reasonable necessity threshold no higher than a requirement of evidential relevance would represent a most undesirable invasion by the courts of the confidentiality of arbitration in this country. It is true that in Ali Shipping Corporation v. Shipyard Togir, supra, the Court of Appeal preferred the “reasonably necessary” formulation to that which I had previously adopted in Insurance Co v. Lloyd’s Syndicate [1995] 1 Lloyd’s Rep 272 at p275-276. Nevertheless at p327 Potter LJ. explained the application of the exception as follows:

“While I would endorse the observations of Mr. Justice Colman in the Insurance Co. case that it is not enough that an award or reasons might have a commercially persuasive impact on the third party to whom they are disclosed, nor that their disclosure would be 'merely helpful, as distinct from necessary, for the protection of such rights,' I would not detach the word 'reasonably' from the word 'necessary', as the passage just quoted appears to do. When the concept of 'reasonable necessity' comes into play in relation to the enforcement or protection of a party's legal rights, it seems to me to require a degree of flexibility in the Court's approach. For instance, in reaching its decision, the Court should not require the parties seeking disclosure to prove necessity regardless of difficulty or expense. It should approach the matter in the round, taking account of the nature and purpose of the proceedings for which the material is required, the powers and procedures of the tribunal in which the proceedings are being conducted, the issues to which the evidence or information sought is directed and the practicality and expense of obtaining such evidence or information elsewhere.”

It is important that the courts do not allow vague principles of open justice to cause them to pay mere lip service to the confidentiality of arbitration proceedings, while permitting inroads into that regime, unless it is really necessary to give access in the interests of justice.

In the present case the purposes for which access is sought fall well short of the threshold for accessibility. Above all, it is not established that they will play an essential part in establishing the Applicant’s case before the Employment tribunal. I am told that there has been substantial disclosure of documents by Spherion and Mr Thompson in those proceedings, albeit disclosure of the unredacted text of the sale agreement has been disallowed by the Tribunal. This application is thus in reality an attempt to circumvent the normal disclosure procedure in that case. As such, it falls a long way short of the required threshold for access to the court file.

A further consideration is that this application is made by a stranger to the arbitral proceedings. The court is not called upon to exercise its jurisdiction with regard to permitting a party to an arbitration to release documents engendered in its course to a stranger. This is the court itself being asked to give access to documents to a stranger. The criteria should, in my judgment, be similar in both cases, for in both cases the court is being asked to sanction a breach of the confidentiality of the arbitral proceedings. Just as a party to the arbitration is permitted to invoke the court’s intervention in the interests of justice to release him from the constraints of the confidentiality terms of his agreement to arbitrate so, in the case of an application of the present kind a stranger is invoking the court’s jurisdiction in the interests of justice to invade the confidentiality of the arbitration. Whereas the two types of situation may throw up different factual backgrounds which may lead to differences in emphasis in the way in which the court’s discretion is exercised, the underlying concepts must be substantially the same in both cases.

Finally, all the documents the subject of this application were engendered in the course of the applications made in private and not in public. They therefore could not come into the view of strangers to the applications unless, access were specifically permitted by court order. Whereas that consideration would not necessarily be of determinative weight against permitting access, it would certainly be correct to take it into account in addition to the confidentiality of the arbitral proceedings to which those applications were ancillary?.

Accordingly, on the facts of this application neither the specific interest of the Applicant in establishing his alleged rights before the Employment Tribunal nor the interests of justice generally can justify the granting of access to any of the list of documents the subject of this application.

As to witness statements, information as to the documents engendered in the course of the main proceedings indicates that there are no witness statements, as such. I assume, however, that the various applications incorporated evidence verified by statements of truth. Those statements would be a composite part of the applications and no different considerations should apply to them as distinct from the arbitration claim forms. Even if there had been separate witness statements, these would not have been open to inspection because the hearings of the applications were conducted in private.

Consequently, the evidence in the witness statements never became public hearing evidence.

This application is accordingly refused.