Ixis Corporate & Investment Bank (Formerly CDC Ixis Capital Markets) v Westlb AG & Ors

The claimant in these proceedings (“IXIS”) applies under CPR Part 31.17 for an order against Calyon, London Branch (“Calyon”), a non-party in these proceedings. The application is that Calyon should search for and disclose all documents “in connection with the Box Clever Securitisation” which are or have been in its control and which fall within the classes of documents listed in Annex 1 to the draft order appended to the application notice. This application is opposed by Calyon. I heard argument on it from counsel for IXIS and Calyon in the morning of 18 July 2007. None of the three defendant companies in the proceedings was represented or made any written submissions on this application. As the application was only a part of a two day CMC in the case involving the claimant and three defendants (held over two days on 18^th and 19^th July 2007), I reserved judgment.

In this action, the trial of which is due to start in January 2008 for 26 weeks, IXIS makes claims against WestLB AG (“WestLB”), CIBC World Markets PLC (“CIBC”) and Terra Firma Capital Partners Limited (“Terra Firma”). The claim relates to the purchase by IXIS (in October 2002) of Class A Notes issued by Home Technology Receivables No. 1 PLC (“HTR”) for the price of £200 million. HTR was a company within a group known as the “Box Clever group”. The Notes were issued following the Securitisation of various assets of the Box Clever group in June 2002.

How the present application arises

The background to the present application is as follows: The Box Clever group was created in 2000, following a merger of the UK rental businesses of the Granada Group and a group of companies trading as “Radio Rentals”. The latter group was ultimately owned by Nomura International PLC (“Nomura”). In March 2002 the personnel and management of Nomura’s Principal Finance Group were transferred to Terra Firma. The share of the Box Clever business that had been held by Nomura was transferred to Terra Firma Partners I, which is an entity related to but not the same as Terra Firma.

The merger of the two rental businesses in 2000 had been financed by WestLB. The total debt resulting from the merger and the finance of it was over £900 million. The subsequent Securitisation of part of this debt was arranged by WestLB. Both WestLB and CIBC were the joint lead managers of the Securitisation. This subject of the Securitisation was the cashflow of the rental business of Home Technology Finance Limited, a company within the Box Clever group. The Securitisation was closed in June 2002, when HTR issued £660,173,000 worth of class A Secured Floating Rate Notes and £88,070,000 of class B Secured Floating Rate Notes.

Details of the Securitisation were set out in an Offering Circular issued on 17 June 2002. That was a public document. In the claim against WestLB and CIBC, IXIS alleges that the former two companies were heavily involved in drafting the Offering Circular by virtue of their position as arranger and /or joint lead managers of the Securitisation. The Offering Circular set out a figure for the “Net Present Value of Equity Cashflows”. This has become known in the litigation as the “NPV”. This figure was intended to represent the present value of the income of the Box Clever Group that would be securitised. The NPV was calculated by a complex computer created model which projected future cashflows through an analysis of data relating to the past rate of termination of contracts. That data had been originally supplied by Box Clever.

CIBC and WestLB subscribed for all the Notes of both types in June 2002. In October 2002, IXIS purchased £200 million worth of A Notes from CIBC. However, on 30^th April 2003, WestLB informed IXIS that the Box Clever group was experiencing serious financial difficulties and WestLB was considering a restructuring of the group and the Securitisation transaction. On 24^th September 2003, Administrative Receivers were appointed over certain companies within the Box Clever group. On 15^th January 2005, the Box Clever business and all the Notes (of both types) were sold to a US Investment Group called Fortress. IXIS sold its Notes for some £26 million. In the present action it alleges that its loss is the difference between the price paid for the Notes in June 2002 (ie. £200 million) and the sum obtained on the resale of the Notes to Fortress, plus other receipts for which Ixis says it will give credit. The claim is therefore for about £120 million including interest.

Well before IXIS sold the Notes to Fortress it had learned that the implementation of one of the key assumptions in the model used to calculate the NPV was flawed. This assumption related to the termination of contracts as a result of customers changing the model of TV (or radio or other equipment) that had been rented. There is no need to describe this assumption in detail. It has been called “the 40% COM Assumption”, the initials COM standing for Change of Model. IXIS alleges that the effect of the flawed implementation of the 40% COM Assumption is that the NPV figure given in the Offering Circular was overstated by at least £290 million.

Having made this discovery about the inaccuracy of the assumption, IXIS issued proceedings against WestLB and CIBC in February 2004. Initially IXIS’ claims were in negligence and for negligent mis-statement. In particular, it is asserted that CIBC and WestLB failed to notice and/or correct the flawed implementation of the 40% COM Assumption.

Subsequently, in 2006, IXIS amended its pleadings in two important respects. First it joined a new defendant, Terra Firma, which had taken over the personnel and work on the model from Nomura in March 2002. IXIS alleged deceit against Terra Firma. As already mentioned, part of Nomura’s business, including personnel working on the Box Clever model, were transferred to Terra Firma in March 2002. IXIS asserts that key employees within Terra Firma and WestLB knew that the NPV figure, which was included in the Offering Circular, was based on inaccurate or wrong assumptions. Alternatively, it is asserted that these employees were reckless as to the truth or falsity of the NPV figure. Secondly, IXIS amended its statement of case to allege deceit against WestLB.

The allegations of deceit and the amended negligence claim are based on a number of events, in particular communications between employees of WestLB and Nomura (on the one side) and the predecessor companies of Calyon on the other. Before Calyon was formed in May 2004, one of its constituent parts was Crédit Agricole Indosuez (“CAI”).

It is the involvement of CAI in the proposed securitisation, in January and February 2002, that has led IXIS to make the present application.

Within CAI was a team that has been referred to in this application as “the Deal Team”. Its full title is the “Securitisation, Conduits and Transitional Debt Financing Group”. The head of the team was Mr Peter Kappel. The man who did the detailed analysis for the team was Mr Henrik Kristensen, who was called “the Senior Structurer”. Mr Kristensen’s assistant was Mr Ludovic Nobili. From about 19^th December 2001 this team began considering whether CAI should participate in the proposed Securitisation of the Box Clever debt. CAI’s proposed role was that of joint lead manager. To consider this proposal the Deal Team had to liaise with representatives of Nomura, who were then working on the model. The Deal Team also had to liaise with employees of WestLB, which was the arranger and joint lead manager of the Securitisation.

Substantive work by CAI personnel on the proposed Securitisation started around 7^th January 2002. Mr Kristensen received a copy of an earlier version of the model on 8^th January 2002. Thereafter he did much detailed analysis on the model. During the course of this he had many discussions and email exchanges with employees at both Nomura and WestLB.
In the present proceedings, IXIS has alleged that, from 22^nd January 2002 at the latest, Mr Kristensen began to express concerns to Mr Paul Spinks, then an employee of Nomura, about the basis upon which the NPV was calculated. In particular, Mr Kristensen raised concerns about the element of the NPV produced based on the assumed income from older rental contracts. Mr Kristensen and Mr Spinks had several discussions in the period from 22^nd January 2002 about data relating to older contracts. Mr Kristensen met Mr Spinks on or before 28^th January 2002 to discuss this point.

On 28^th January 2002, Mr Kristensen met representatives of CAI’s credit committee to discuss the proposed participation on the Securitisation. Mr Kristensen was asked to explore the issue of the termination of older contracts more closely.

On 4^th February 2002 Mr Kristensen emailed Mr Spinks with some analysis Mr Kristensen had done regarding the implementation of the 40% COM Assumption. Mr Kristensen asked Mr Spinks to call him to discuss this. It would appear (from the transcripts of a telephone conversation between Mr Kristensen and Mr Gardner of WestLB on 5^th February 2002) that Mr Spinks then ran a number of different possible options regarding the implementation of the 40% COM Assumption. Mr Kristensen participated in this exercise.

On 5^th February 2002, Mr Kristensen spoke to Mr Gardner of WestLB. Mr Kristensen explained that, in his view, the Model gave some unexpected results in relation to older contracts and that the cause of such unexpected results was the presence of the 40% COM Assumption.

On 6^th February 2002, Mr Kristensen and Mr Spinks had a conversation. At 19.43 hours that day, Mr Kristensen sent an email to Mr Spinks attaching a document in which Mr Kristensen set out to “illustrate with numerical examples the problems we have with the termination curves in the scenario where change of model terminations are reduced by 40%”. Mr Kristensen’s email note identifies a number of respects in which the implementation of the 40% COM Assumption produced results which Mr Kristensen could not understand. He asked Mr Spinks to explain them. At the end of the email, Mr Kristensen wrote:

“I know that we have been through the above a number of times but I thought it would be useful to put it in writing. I have attached a spreadsheet in support of the above calculations.”

In Mr Spinks’ witness statement which has been served in the current proceedings, he says that he did not open Mr Kristensen’s email until 8^th February 2002 and that he did not read the whole of the Note. However, on 8^th February 2002 Mr Spinks emailed a colleague in Nomura, Mr Quentin Stewart, and said:

“Henrik [Kristensen] wants to send a note similar to the one attached to WestLB to explain their imminent departure from the process. Having read this note – I think this is both inappropriate and potentially damaging and intend to propose that they give a much higher level, less detailed reason. If they are sticky on this point it may be useful if you have a conversation with HK’s boss Peter [Kappel]. I believe that they are intending to progress this today.”

Later that day Mr Kristensen spoke to Mr Gardner of WestLB. This telephone conversation was recorded. In it Mr Kristensen said that he was “uncomfortable about the way change of model terminations work.” He also stated:

“We basically ran an interesting scenario where we said – you know there’s a 40% haircut in change of model termination?.... and when we run that scenario it shaves off a huge amount of the proceeds level ….. in fact I think that the AA proceeds level goes from £780 million down to £480 million or something”.

In the same conversation Mr Kristensen indicated that CAI had decided, the previous evening, not to take any further part in the proposed Securitisation.

IXIS has pleaded, in its cases against Terra Firma and WestLB, that the involvement of Mr Kristensen was of crucial importance. IXIS alleges that, as a result of the email and/or correspondence between Mr Kristensen and Mr Spinks and Mr Gardner, then Messrs Spinks and Stewart (of Nomura – subsequently Terra Firma) and Mr Justice and Mr Gardner (of WestLB) knew that the implementation of the 40% COM Assumption was flawed, alternatively they knew that there was a serious risk that the implementation of the 40% COM Assumption was flawed. IXIS asserts that those four gentlemen turned a “blind eye” to that risk. Accordingly, they knew or were reckless as to whether NPV figure in the Offering Circular was accurate.

An alternative case in negligence is put as against WestLB, based on Mr Gardner and Mr Justice’s knowledge of the concern of Mr Kristensen.

The nature of the analysis performed by Mr Kristensen, together with the frequency and the content of his communications with representatives of WestLB and Nomura are all contested issues in the present proceedings.

There are a number of important documents created or sent by CAI on which IXIS and other parties in the proceedings already rely. Prime examples are: Mr Kristensen’s emails of 4^th February 2002 to Mr Spinks of Nomura; the transcript of Mr Kristensen’s conversation with Mr Gardner (of WestLB) on 5^th February 2002; Mr Kristensen’s email of 6^th February 2002 to Mr Spinks; and the transcript of Mr Kristensen’s conversation with Mr Gardner of 8^th February 2002. IXIS submits that any documents held by Calyon which record or describe Mr Kristensen’s conversations with Messrs Spinks, Stewart, Gardner or Justice are likely to help provide a fuller picture of the conversations that Mr Kristensen had with these people and may also illuminate CAI’s understanding of the problems with the 40% COM Assumption.

The reasons for the present application

IXIS makes the application because, it alleges, there are a number of important documents which were created or sent by CAI which have not been contained in the disclosure of the parties to the current proceedings. The first area concerns telephone conversations. In his witness statement of 14^th May 2007, Mr Edward Davis of Stephenson Harwood (solicitors for IXIS) states that Terra Firma has not disclosed any recordings of telephone calls between Mr Kristensen and Mr Spinks (then of Nomura, subsequently of Terra Firma) or any notes of such calls.

It is clear from the witness statement of Miss Claire Walter, Legal Counsel for Calyon, that there were no telephone recordings by CAI for the relevant period. However, Mr Davis suggests that there may be notes or other documents recording the content of such telephone conversations between Mr Kristensen and Mr Spinks in the period from 22^nd January 2002.

Secondly, Mr Davis says that there has been no disclosure of any of the analyses run by Mr Kristensen on the model, which he discussed with Mr Spinks in the period from 22 January to about 8 February 2002. Such documents would be likely to show Mr Kristensen’s understanding of the implementation of the 40% COM Assumption.

Thirdly, Mr Davis says that (not surprisingly) there has been no disclosure of any internal documents created by CAI (e.g. internal emails and Memos regarding Mr Kristensen’s analyses and his conversations with individuals at WestLB and CIBC). However, he says that such documents would be likely to demonstrate what Mr Kristensen told individuals about the nature of the analysis he performed on the model. Notes by individuals within CAI other than Mr Kristensen would be likely to demonstrate their understanding of Mr Kristensen’s analysis.

Fourthly, Mr Davis says that (again unsurprisingly) there has been no disclosure of documents prepared for or by CAI’s Credit Department or Committee which would summarise or report on analyses and conversations of Mr Kristensen for the CAI Credit Committee in January and February 2002. Again, such documents would show Mr Kristensen’s understanding of the effect of the implementation of the 40% COM Assumption.

IXIS submits that all these classes of documents are important and relevant to the current proceedings and that their disclosure is necessary for the fair disposal of the claim.

The jurisdiction of the court to order “third party disclosure”: Supreme Court Act 1981 s.34 and CPR Part 31.17

The jurisdiction of the court to order a third party to give disclosure of documents is set out in section 34 of the Supreme Court Act 1981 (“SCA”). The relevant provisions are:

It is clear from this provision, therefore, that the court only has jurisdiction to make an order for third party disclosure if it is satisfied that the third party is “likely to have in his possession, custody or power” relevant documents. Such documents must be relevant to an issue in the proceedings concerned. It is also obvious from the wording of the section that an order can only be made where any pre-requisites laid down in the Rules of Court have also been fulfilled.

In the House of Lords’ decision in O’Sullivan v Herdmans Ltd, (Footnote: ¹) Lord Mackay said that such an “unfettered” power was to be construed as a power to be exercised when its exercise would help to achieve the purpose of the Act, ie. the proper administration of justice. Therefore, the court could decline to make an order if it regards it as unnecessary, or oppressive or against the interests of justice or the public interest. (Footnote: ²)

CPR Part 31.17(3) sets out the further requirements that must be fulfilled before the court will consider making an order for disclosure by a person who is not a party to the relevant proceedings. That paragraph provides:

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

(a)

the documents of which disclosure is sought are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings; and

(b)

disclosure is necessary in order to dispose fairly of the claim or to save costs.”

CPR 31.17(4) sets out the form of order that a court can make under that provision. Part 31.17(4) states:

“An order under this rule must –

(a)

specify the documents or the classes of documents which the respondent must disclose; and

(b)

require the respondent, when making disclosure, to specify any of those documents –

(i)

which are no longer in his control; or

(ii)

in respect of which he claims a right or duty to withhold inspection.”

In Three Rivers District Council v Governor & Company of the Bank of England (No. 4) (Footnote: ³), the Court of Appeal analysed what threshold conditions are created by Pt 31.17(3), which have to be fulfilled before the court has jurisdiction to make an order under CPR Part 31.17. The judgment of the court was given by Chadwick LJ. This establishes a number of important points. First, the judgment pointed out (at paragraph 17) that an application for an order for disclosure under Rule 31.17 must be supported by evidence. Secondly, the evidence, and any draft order served with the application, must identify the individual documents or the classes of documents sought to be disclosed. This is implicit in the whole of the analysis of Chadwick LJ in paragraphs 34 – 38 of the judgment.

Thirdly, the court held that the threshold test set out in CPR Part 31.17(3)(a) that “the documents of which disclosure is sought are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings” means that the disclosure “may well have that effect” (see paragraph 32 of the judgment). Fourthly, for a court to decide whether or not an individual document or a class of document is one that “may well” support the case of the applicant or adversely affect the case of one of the other parties in the proceedings, the court must be satisfied, on the evidence before it, that the document or the class of document is likely to exist. Fifthly, if disclosure of a class of documents is sought, then the court must be satisfied that all the documents within the class will (when considered in context) meet the threshold condition that they “may well” support the case of the applicant or adversely affect the case of one or other parties to the proceedings (see paragraph 38 of the judgment).

However, sixthly, if the court is satisfied that all the documents in the class, viewed individually and as members of the class do meet that condition, then it is immaterial that some of the documents in the class will turn out, in the event, not to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings.

The issues in the action in respect of which the possible Calyon documents “may well” support the case of IXIS or adversely affect the case of Terra Firma or West LB

Mr Twigger, on behalf of IXIS, reminds me that all the parties in the present proceedings now accept that there was a defect in the model used to calculate the net present value of rental income of the Box Clever group. It is effectively common ground that the defect is contained in the assumptions used to calculate the rates at which customers would be expected to terminate their rental contracts, based on the rates at which terminations had occurred in the past. The defect, in particular, concerns the way in which an assumption of a reduction of 40% in the “change of model” (or “COM”) Terminations, was implemented.

For present purposes the key issue in the proceedings concerns the knowledge of Mr Spinks and Mr Stewart of Nomura, (subsequently Terra Firma), and Mr Justice and Mr Gardner of WestLB about the defects in the assumptions. If any of these knew that there was a defect but said nothing about it, then, IXIS alleges, it will greatly assist IXIS’ claim in deceit against Terra Firma/WestLB. Alternatively, if Mr Gardner or Mr Justice of WestLB were put on notice that there appeared to be problems with these assumptions, so that they ought to have been investigated, then that would assist IXIS in its case for saying that WestLB was negligent in failing to spot the defect and put it right before finalising the Offer Circular.

But Mr Twigger also submitted that the investigations and knowledge of Mr Kristensen about the defect is relevant to IXIS’ claim, even if that knowledge and the details were not passed to Nomura or West LB personnel. Mr Twigger submitted that the ability of Mr Kristensen to spot a possible defect in the model and to do work to identify it and see what the consequences of the defect were “may well” assist IXIS’ case that the defect in the assumptions could and should have been spotted by those working on the model at Nomura/Terra Firma and also WestLB.

Mr Slade, for Calyon, accepted that for the purposes of the present application, the knowledge of Messrs Spinks, Stewart, Gardner and Justice about possible defects in the model was a relevant issue in the action. He therefore accepted that if the court was satisfied that it was likely that Calyon had in its possession, custody or power classes of documents that might well support IXIS’ case on this issue, then the court would have jurisdiction to make an order under Pt 31.17. But he also submitted that the possible relevant classes of documents were limited to those that crossed the line between CAI and Nomura/WestLB, because only in that way could the knowledge of Messrs Spinks, Stewart, Gardner and Justice be affected by anything that took place in CAI.

I do not accept Mr Slade’s submission. In my view internal documents of CAI on the question of the defect in the assumption, as investigated by Mr Kristensen, may well assist IXIS in two respects. First, it will put in context any conversations with or emails/other communications sent to Nomura/West LB personnel. Secondly, they may well assist IXIS on the question of what West LB ought to have spotted about the defect and what they could have investigated.

The classes of possible relevant documents

The ambit of the classes of documents sought in this application has been much reduced before and during the hearing. Mr Twigger now submits that there are, broadly, two classes of document which may well support the case of IXIS or adversely affect the case of WestLB or Terra Firma in relation to IXIS’ claims in deceit (Terra Firma and WestLB) and negligence (WestLB only) in the manner outlined above. The first class of documents comprises Memoranda or communications within CAI concerning the effect of a 40% reduction in COM Terminations on the number of contracts predicted by the Model to remain alive and the consequent effect on NPV. The second class of documents comprises those that evidence communications between Mr Kristensen, his superior – Mr Kappel – and his assistant – Mr Nobili, and Mr Spinks (of Nomura) and Mr Gardner (of WestLB), or those into which they were copied. Mr Twigger accepted that the relevant period to be covered by any order is to be limited to that between 20 January 2002 to 22 February 2002.

Mr Twigger submits that those classes of documents do exist or are likely to exist. He further submits that those classes of documents, viewed individually and as members of the class may well support the case of IXIS or adversely affect the case of Terra Firma or WestLB.

For Calyon, Mr Richard Slade submits that, on the evidence, the court cannot be satisfied that it is likely that the classes of documents sought do exist. If it is not so satisfied, then the court has no jurisdiction to entertain an order under section 34 of the SCA 1981 and Pt 31.17 of the CPR. Mr Slade referred me to the witness statement of Miss Claire Walter for Calyon. That states that Miss Walter has conducted “limited searches of Calyon, London’s electronic records” and also “some searches of Calyon, London’s archives” to establish the extent of the documentation held by Calyon, London. (Footnote: ⁴)

The following has been discovered:

So far as communications between CAI and Nomura/WestLB are concerned, Mr Slade submits that any hard copy or electronic communication from CAI would have been produced on discovery by Terra Firma and/or WestLB. He submits that there was no evidence to suggest that the defendants have withheld discovery. Mr Twigger accepted that, but pointed out that there were some documents which would have fallen within discovery by Terra Firma, which had not been found by Terra Firma. (Footnote: ⁶)

I have concluded, on the evidence, that there exist or it is likely that there exist in the possession, custody or power of Calyon the three classes of communications, notes or memoranda (hard copy or electronic) noted below. These classes of document relate to the issue of Mr Kristensen’s work on the model, in particular his work in relation to the model’s projection of terminations of rental contracts which were more than 9 years old and the “40% COM assumption”. I have also concluded that, taken as classes of “document”, (Footnote: ⁷) these three different classes of document may well assist IXIS or adversely affect the case of Terra Firma or West LB in issues relevant in this action:

I am not satisfied, on the evidence, that it is likely that Calyon has in its possession, custody or power any relevant communications between itself and WestLB that have not already been disclosed by WestLB. As Terra Firma itself was not, at that stage, involved in work on the model, it seems to me that any documents or communications directly between CAI and Terra Firma in the period 20 January to 22 February 2002 will not be relevant for present purposes.

Is an order for discovery by Calyon necessary in order to dispose fairly with the claim of IXIS or to save costs?

An order under Pt 31.17 will only be made if it is necessary in order to dispose fairly with “the claim” or to save costs. “The claim” must mean, I think, the claim of the party seeking an order. I have already identified the issues to which documents which are or are likely to be in the possession of Calyon, within the categories I have just set out, would be relevant. Calyon is the only entity that will have those documents. (For this purpose I assume that the documents and emails which might have been found in Terra Firma’s discovery will not now be found). I have therefore concluded that disclosure of those classes of documents will be necessary in order fairly to dispose of the claim of IXIS.

Other matters affecting the discretion of the court to order disclosure under CPR Pt 31.17

Mr Slade submitted that the court must be cautious in making any order under Pt 31.17. He submitted that this was necessary because any such order against a third party is an intrusion on a party not involved in litigation and so not generally subject to the court’s powers to order disclosure of private or confidential documents. I accept that this approach is correct.

Mr Slade submitted that Calyon should not be forced to disclose documents (particularly those prepared for the Credit Department) which would show CAI’s attitude, in 2002, to other parties; its commercial strategy in general and its internal credit processes. Any such comments would have been made in the expectation that they would remain private. He submits that this privacy should be protected.

I accept that comments in documents or emails that concern those matters identified in the previous paragraph will not themselves be relevant to the issues in the action. The concerns of Calyon can be met by suitable “redactions” on any documents/emails disclosed.

Mr Slade (and Miss Walters) also raised questions about the costs of the discovery exercise. IXIS will have to pay the reasonable costs of any discovery ordered by the court. If there is any dispute about the reasonableness of the rates of personnel who will do the exercise on behalf of Calyon, then I shall have to resolve them.

Conclusions: Should the court exercise its discretion to make an order; if so in what form?

I have concluded that the court not only has jurisdiction, but should exercise its discretion to make an order for discovery by Calyon in this case. To recap: first, I am satisfied, on the evidence before me, that three classes of relevant document exist or are likely to exist in the possession, custody or power of Calyon: see paragraph 48 above. Secondly, I am satisfied that those classes of document may well assist IXIS or be adverse to the case of Terra Firma/West LB in relevant issues in the claim of IXIS. Thirdly, I am satisfied that it is necessary in order to dispose fairly of the claim that an order under CPR Pt 31.17 be made. Fourthly, I am satisfied that any concerns of Calyon as to privacy and confidentiality regarding its attitude (in 2002) towards other parties, its commercial strategy and its internal credit processes which do not have anything to do with the issues in this case, can be dealt with by proper “redaction” of any documents disclosed.

Fifthly, Calyon will be able to recover the reasonable costs of the disclosure exercise. As I indicated at the hearing, it is reasonable to employ a 5 year associate and a trainee on this discovery exercise. I would hope to deal summarily with any assessment of the costs of that exercise. In preparing any schedule of costs I would expect Calyon and its legal advisers to follow the current guidelines on hourly rates, taking account of the nature of the exercise, its importance to Calyon and the urgency involved.

I will, if necessary, discuss with counsel the precise form of order. However, I think that it should be broadly in the form of the draft order that accompanied IXIS’ application notice dated 14 May 2007, with an annex in the terms set out in the next paragraph. (I appreciate that there may be purely drafting points that counsel may wish to raise).

The three classes of documents (in hard copy or electronic form) to be disclosed (subject to the safeguards set out in body of the order) are:

I am grateful to counsel for their helpful submissions.