Pineway Ltd v London Mining Plc

The court is concerned with an adjourned application for pre-action disclosure. The original claimant was Tecsbaco International Company Limited (“Tecsbaco”), a Sierra Leone Company. On 15 September 2006 Tecsbaco entered into a Deed of Assignment with London Mining Company Limited (another Sierra Leone company) and London Mining Plc (an English company) being the first and second defendants in the original claim and the first and second respondents to this application.

This application concerns only the second respondents. As regards the first respondents there is an issue between the parties as to the legitimacy of an order for service of any proceedings outside the jurisdiction. This is because the respondents contend that the underlying claim itself is wholly unmeritorious. In the circumstances the parties have agreed that in the event of the court granting the application for pre-action disclosure that would also involve determination of the issue of service-out in Pineway’s favour.

The Deed of Assignment was in respect of a mining lease and land associated with it. The first respondent is the wholly owned subsidiary of the second respondent and was incorporated for the purpose of taking the assignment. The assignment was entered into with the encouragement of the Government of the Republic of Sierra Leone. For present purposes it is convenient to refer to the respondents as London Mining.

The lease concerned a mine called Marampa. This is situated some 84 kilometres from the nearest port of Pepel. Both the port and the existing railway line from Marampa to Pepel had fallen into disuse when the mine had previously been closed and were in need of substantial refurbishment. The Government of Sierra Leone and the respondents agreed that if mining was to be reactivated at Marampa, it would be necessary to refurbish both the port and the railway.

Under the terms of the assignment, London Mining agreed to make payments to Tecsbaco pursuant to Clause 4.2 in the total sum of US$7.8 million in three staged payments namely:

US$3.5 million on or before 15 November 2006.

US$1.4 million on or before 31 December 2007.

US$2.9 million on or before 31 July 2009.

It is to be noted that the latter two payments were conditional on various matters, including the granting by the government to London Mining of a priority right to use Pepel Port and the Marampa Pepel railway. In this regard London Mining undertook to use “all reasonable commercial endeavours” to ensure that those conditions were met.

In fact London Mining defaulted on the first payment. In the result Tecsbaco and London Mining entered into a side agreement whereby Tecsbaco agreed to accept payment of the first tranche in three instalments. London Mining duly made those three payments. However, subsequently, London Mining failed to make payment of the second instalment. In the result Tecsbaco issued proceedings against London Mining which were in due course settled by way of a Tomlin order dated 2 June 2008. The terms of the schedule to the Tomlin order were briefly as follows:-

London Mining to pay Tecsbaco US$700,000 by 23 May 2008.

A further sum of US$700,000 within 14 days of the conditions of the Deed of Assignment being satisfied.

(Without prejudice to the conditions in the Deed) the provision in regard to the third instalment (US$2.9 million) to remain in full force and effect.

That the agreement constituted full and final settlement in respect of any claims which Tecsbaco might have against London Mining in regard to the first two instalments.

The present application is instituted on the basis of two purported Deeds of Assignment made in December 2008 between Tecsbaco and Pineway Limited (“Pineway”). The authenticity of the two assignments is at the heart of the dispute between Pineway and London Mining. Further, London Mining contends that there is no merit in any claim brought under the assignments even assuming them to be valid.

Pineway puts its case in regard to the need for pre-action disclosure as follows. Mr Mahoney’s initial witness statement dated 13 November 2009 filed on behalf of Pineway says this:-

The witness statement goes on later to say:-

Indeed the application notice had been issued on 13 November 2009 expressly for the purpose of allowing the applicants “to determine if it has a cause of action for breach of the defendant’s obligation to fulfil the contractual conditions under the Deed of Assignment”.

The application itself was divided into two categories, firstly what was described as general disclosure, and secondly specific disclosure. The main focus of the debate before me has been on the application for general disclosure of the following documents:

The application went on to deal with various other documents said to be within the scope of specific disclosure although most them also in categories pretty general in character. They were as follows:-

The application initially came on before me on 12 March 2010. This date had been fixed since 11 January 2010. However, at the last minute, Pineway sought an adjournment. The corner stone of that application for an adjournment was the contention that there had been inadequate time for Pineway to investigate a document which had been produced by London Mining on 9 March.

This was a document headed “A Clarification on the Deed of Assignment” dated 23 February 2010. It was on Tecsbaco notepaper and signed by the Chairman, a director and the company secretary of Tecsbaco. It made reference to a board resolution of 16 February and declared that Tecsbaco had “in no way relinquished/sold its Deed of Rights to Pineway or any other firm/entity”. The document went on assert that “This clarification is unanimously made by the board of directors of Tecsbaco International.”

As appears from the terms of my judgment granting the application, I did so reluctantly against the background of extreme concern with regard to the manner of presentation of Pineway’s case. In particular there were the following points:

The tone of correspondence emanating from the applicant’s solicitors had been unduly, if not wildly, aggressive.

The applicants failed to make any realistic attempt to grapple with the legitimate queries that the respondents were raising.

The initial statements furnished by the applicants were prolix and discursive.

The applicant’s conduct was in flagrant disregard to the Commercial Court Guide.

The applicant’s performance with regard to the adjourned hearing has been equally abysmal in almost all similar respects. But more importantly a feature has emerged as a result of the additional documentation which has now been provided which undermines the whole basis upon which the original adjournment was obtained. The correspondence produced by the applicants now reveals that the letter or “Clarification” which had been provided to Pineway by London Mining only two or three days before the earlier hearing and which the legal representatives of Pineway claimed never to have seen before had in fact already been in the possession of Pineway and their solicitors for at least two weeks. Indeed the document had been the subject of correspondence with Tecsbaco.

In short, the whole premise for the application for an adjournment was simply untrue. The court has been seriously misled in regard to the position. In the result I approach this application and the material in support of it with an even longer spoon than previously.

The application is made pursuant to Section 33 of the Senior Courts Act 1981 and CPR 31.16. The relevant jurisdiction for the exercise of the court’s discretion to order pre-action disclosure is contained in CPR 31.16(3):-

the respondent is likely to be a party to subsequent proceedings;

the applicant is also likely to be a party to those proceedings;

if proceedings had started, the respondent’s duty by way of standard disclosure, set out in rule 31.6 would extend to the documents or classes of documents of which the applicant seeks disclosure; and

disclosure before proceedings have started is desirable in order to –

dispose fairly of the anticipated proceedings;

assist the dispute to be resolved without proceedings; or

save costs.”

It is convenient to take sub-paragraphs (a) and (b) together and to consider the question whether the respondent on the one hand, and the applicant on the other are “likely” to be parties to subsequent proceedings. The initial question that arises here is whether the pre-condition requires it to be likely that proceedings are issued or only likely that the respondent and the applicant will be parties if subsequent proceedings are issued. This point has been decided in Black v Sumitomo Corporation [2001] EWCA Civ 1819 to the effect that the provision means no more than “the persons concerned are likely to be parties in those proceedings if those proceedings are issued”: see paragraph 71.

But although the likelihood of proceedings as such is not material, it does not follow in my judgment that the existence of a prima face claim upon which such proceedings could be instituted does not remain a necessary requirement. This point is touched on in the decision in Rose v Lynx Express Ltd [2004] EWCA Civ 447:-

London Mining contends that Pineway has failed to establish any properly arguable claim let alone one which has a real prospect of success. To the contrary, London Mining point to the fact that it is Pineway’s position that it has no idea whether it has a claim or not. The suggestion by Pineway (if it be maintained) that there must be an arguable claim because any failure to pay the monies under the assignment must constitute a breach of the assignment either because the conditions have been satisfied and there are no good grounds for withholding payment or the conditions have not been satisfied because of a failure to exercise best endeavours is in my judgment unsustainable.

In any event London Mining go much further and say first that there is no realistic prospect of Pineway establishing that they are parties to an authentic and valid assignment and second even if they are parties there is no realistic prospect of establishing that London Mining failed to exercise reasonable endeavours to satisfy the conditions.

Like so many of the matters that arise under the jurisdictional requirements of CPR 31 the topics re-emerge at the discretionary stage but it is appropriate to consider the broad merits of Pineway’s position at the outset.

The assignments relied upon by Pineway are unquestionably strange and little light has been shed upon them by the wealth of material that has been served by Pineway since, whether in compliance with court’s orders or not. Pineway’s letter before action sent by their solicitors on 9 July 2009 referred to a Deed of Assignment “dated 5 December 2008” pursuant to which Pineway “were the assignee of all rights to the claim issued against London Mining Company Limited Sierra Leone and London Mining Plc in the Commercial Court in London under claim 2008 – 230 on 6 March 2008”

The solicitors for London Mining immediately asked for a copy of the assignment. This was eventually furnished on 4 August 2009. It was not dated 5 December but was purportedly signed by the parties on 18 and 20 December respectively. Nonetheless, as the letter before action had foreshadowed, the assignment was indeed of a cause of action in the form of a claim against London Mining although this was now recited to be “in relation to commercial assistance from the assignor [i.e. Tecsbaco] made available to London Mining in respect of the exploitation, extraction and shipping of iron ore from Sierra Leone”. The terms of the agreement provided for payment of $50,000 to the assignor and also the payment of 50 % of any monies recovered by the assignee. There was a non-exclusive English jurisdiction clause.

As regards Pineway, the deed was purportedly signed on 18 December 2008, Pineway was extremely coy about the identity of the signatory but it would now appear to have been signed by Mr. Damien Calderbank. He is apparently a director of Pineway. His address is simply given as PO Box 500462 at an unidentified place. There is no signature by second director or company secretary as provided for in the document. The witness appears to be a Mr. Pialle with an address in the Philippines.

As regards Tecsbaco, the name of the signatory is spelt out as Abdul Bah, However, the signature does not remotely resemble that of Mr. Bah but, as Pineway accepted, would appear to be of someone with the same initials namely a Miss Admira Brown. It is witnessed by someone called Shaw of the same address in Freetown.

In London Mining’s response to the letter before action and the subsequent delayed provision of the purported assignment, the point was taken that the assignment, even if genuine, was nonetheless clearly void on the basis that Tecsbaco were purporting to sell a bare right to litigate which was champertous. That is a view which does not now appear to be seriously challenged by Pineway.

The response letter went on to deal with the background facts and in particular recorded that, despite some preparatory work undertaken by London Mining by way of a feasibility study in regard to the refurbishment of the port and the railway, the Government of Sierra Leone in the event entered into an agreement with a company called African Minerals on 6 September 2008 granting to it a lease to build, develop and operate the railway and the facilities at Pepel for a 99 year term. Reports of a memorandum of understanding as regards this arrangement were published in May 2008. News of the lease itself was published in November 2008.

The government had apparently justified the engagement of African Minerals on the basis that African Minerals had rights over part of the lease area supposedly assigned by Tecsbaco to London Mining. Indeed the government had made an allegation that Tecsbaco had fraudulently tampered with the plan of the mining lease. In any event, as a result of the substitution of African Minerals, the conditions to be satisfied under Clause 5.2 of the original assignment contract had not been and could not be fulfilled.

The next stage was that on 5 November 2009 Pineway’s solicitors stated that they had now received instructions that the assignment previously forwarded “is merely part of, and ancillary to, an overarching Commercial Agreement between Tecsbaco and our client which evidences a genuine commercial interest in the 15 September 2006 Deed”. As before no copy of the assignment was enclosed. In due course what was described as the second deed of assignment was provided on 12 November 2009. This was purportedly dated 20 December 2008 on its front page. The terms of the agreement contained an assignment of all Tecsbaco’s “commercial rights and obligations pursuant to 15 September 2006 Deed”. It required the payment of US$100,000 by Pineway. It again made provision for payment of 50% of any monies recovered. It also had a non-exclusive English jurisdiction clause.

The signatories to this agreement were significantly different from those on the other assignment. So far as Pineway is concerned, Mr. Calderbank again signed it but on 20 December 2008 not 18 December. He also gave a different address, namely 2804 AC Merchant Tower in Dubai. His signature was this time witnessed by a Mr. R. F. Calderbank who may be a relation and who gave an address in Birkenhead.

As regards Tecsbaco, again the signatory was Mrs Brown. This time she was identified as such by name but at a different address in Freetown. The date was however 21 December 2008 not 20 December. Her signature was witnessed this time by a Mr. Ronnie Decker who had an address in Dubai. It may be of some note that Mr. Ronnie Decker is not only Mrs Brown’s son-in-law but is also a nominated representative of Pineway in Sierra Leone.

Despite the exchange of voluminous material, including a witness statement from Mrs Brown and the outrageously late production of a statement from Mr. Calderbank no explanation is furnished in regard to any of the difficulties about the forms of these assignments including:

the fact that with legal assistance two assignments were prepared as part of an “overarching” agreement yet were signed on different days and witnessed by different people all in different jurisdictions;

the fact that the second assignment was only produced three months after the first and two months after the complaint that the initial assignment was champertous;

the fact that neither assignment was consistent with the letter before action.

These difficulties were enhanced by further documentation that emerged. First there is a document dated 17 February 2010 on Tecsbaco notepaper, and signed by Mrs. Admira Brown declaring herself to be a director of Tecsbaco and addressed to London Mining. It reads as follows:-

In her statement produced following the earlier adjournment, Miss Brown confirms that she is a director and indeed has been a substantial shareholder in Tecsbaco since early 2005. But although she records that she had signed the original Deed of Assignment as she calls it, she does not make any attempt to deal with any of the difficulties identified above. The bulk of the statement was directed to responding to the “Clarification” dated 23 February 2008 referred to earlier. She made the complaint that she was not present at any meeting on 16 February 2010, that she did not accordingly vote on the same and that thus the board was not unanimous. She suggested that the reason why the signatories to the clarification were prepared to put their name to it was because of “some financial sum that is to be paid or has been paid”.

Although there is little dispute that she signed the assignments, there obvious difficulties about her having any authority to enter into any form of assignment. Indeed she annexed an agreement to her statement between herself and Tecsbaco dated 24 January 2005 and correctly records that the effect of that agreement was that she had the right to approve and countersign all cheques from the Tecsbaco bank account. However, no document is produced relating any general authority to execute agreements on behalf of the company, let alone authorisation in respect of this particular assignment.

Mrs Brown’s letter is also contradicted by the “clarification”. This was signed by Mr Jalloh, the chairman of Tecsbaco, by Mr Sow a director and by Mr Thomas the company secretary. The reliability of the document is supported by the minutes of a board meeting held on 4 August 2003. They record the following resolution:-

The only other identified director of Tecsbaco is Mr Bah. In an e-mail dated 10 March 2010 responding to the letter before action, he stated in terms that there had been no assignment to Pineway or any other party.

It is also to be noted that Messrs. Turay & Associates, lawyers in Freetown were retained by Tecsbaco. In their letter dated 11 March 2010 (surprisingly not produced by Pineway at the earlier hearing) they stated:-

Put at its lowest the material furnished by the applicants with regard to the authenticity of the assignments or either of them is strikingly thin. Taking, as I think is appropriate, a broad view of the merits I am doubtful that the applicants have yet to establish a properly arguable case which has a real prospect of success for the purposes of supporting the jurisdiction of pre- action disclosure.

Even if I were wrong about that, it seems to me that there is the gravest difficulty in the applicants being able to establish that there was any failure on the part of London Mining to use their best endeavours to obtain compliance with the conditions for payment. It was obviously in Tecsbaco’s interest, and for that matter the interests of London Mining, to promote the refurbishment of the port and the railway line. They had no motive to fail to seek that outcome. On the face of it, the reason why the conditions were not satisfied is because the government decided to allocate the entitlement to use the railway and the port to another party provoked it is said by suspicions that Tecsbaco had fraudulently altered the mining lease map.

Pineway have adduced no evidence that London Mining’s account of the substitution of African Minerals is in any way inaccurate. Pineway have identified no particular step which they say ought to have been taken by London Mining or any step that was taken that should not have been. They simply ask to see the entirety of the documentation in order to form a view as to whether any such complaint could be made.

Once again I doubt whether the applicants have established an arguable claim with a realistic prospect of success on this aspect as well. When taken in conjunction with the difficulties on the assignments, I am not persuaded that there is any jurisdiction to make the order sought.

This leads on to the third jurisdictional requirement namely that the documents sought must be documents which would fall within London Mining’s duty to produce by way of standard disclosure. The scope of standard disclosure is described by CPR 31.6. In brief it encompasses documents upon which a party relies and documents which adversely affect his case or support another party’s case. It follows that there is a need for caution in this context when considering an order for pre-action disclosure.

The point was dealt with in Black v Sumitomo Corporation supra. At paragraph 76 Lord Justice Rix said:

Although CPR 31.16 extends to both documents and classes of documents, it is well established that it is inappropriate for any applicant to obtain pre-action disclosure of documents which would not in due course be subject to standard disclosure by simply calling for classes or categories of documents in which some documents would be disclosable. By the same token it is inappropriate to require a respondent to identify which documents are within the scope of standard disclosure: see Wakefield v Outhwaite [1996] 2 Lloyds Reports 157.

In short all documents within a class or category must be subject to standard disclosure. This emphasises in my judgment the need for a highly focussed application which clearly does not encompass categories of documents which will simply prove to be relevant, if at all, as part of the background (let alone of course documents which merely lead to a train of enquiry).

This immediately brings into focus the wide scope of the request for pre-action disclosure made in this case. This was not a targeted request for specific documents which could be readily disclosed at little cost or inconvenience to the respondents. To the contrary it was an admitted fishing expedition by way of a request for a great range of documents in the hope of advancing an entirely speculative commercial claim. I am not persuaded that there is jurisdiction under this sub-heading either.

Finally on jurisdiction there is the question of desirability. By desirable I apprehend is meant “to be wished for as reasonably necessary or at least useful.” In one sense this jurisdictional hurdle is a low one: see Black v. Sumitomo supra:-

It must be that in almost every dispute a case could be made out that pre-action disclosure would be useful in achieving a settlement or otherwise saving costs. It follows in my judgment that in order to obtain pre-action disclosure, circumstances must be outside “the usual run” to allow the hurdle to be surmounted: Trouw UK Limited v Mitsui & Company UK Plc [2006] EWHC 863 (Comm) para. 43. (In any event the absence of any convincing grounds for distinguishing the case from the normal run would be telling grounds for not exercising the court’s discretion.) For my part I am unable to identify the features of the present case which take it out of the normal run save in the adverse sense of being speculative. I am un-persuaded that this jurisdictional hurdle was surmounted either.

I turn now to the issue of discretion. In this respect many of the matters that pertain to jurisdiction re-emerge. As regards the merits I have already expressed my views as regards the lack of merit in the applicant’s asserted claim against the respondents. Secondly I have already touched on the fact that embarking upon the considerable disclosure exercise that is sought would be costly. Even allowing for the fact that the applicants must in due bear the cost of the exercise, it has to be borne in mind that the applicant is a Belize company of no known asset value. Although it was tentatively suggested during the course of argument on behalf of the applicant that the court was in a position to impose appropriate terms for security for the costs of the exercise, the fact remains that there would be no full reimbursement of the management time and expense incurred in dealing with the request.

Thirdly, I have already made observations about the manner in which these proceedings have been conducted by the applicant. I must be careful not to visit the inappropriate conduct of the legal advisors on their clients, but I am struck by the fact that the applicants and their witnesses have failed to face up to any of the difficulties in their case and have employed a lack of frankness in responding to the respondent’s expressions of concern about the legitimacy of the assignments, or indeed the basis for pursuing the claim.

There remains another feature which seems to me to be of some importance in the exercise of discretion. Tecsbaco have now issued proceedings in Sierra Leone against London Mining. The basis of the claim appears to be that London Mining have wrongly refused to pay the balance of US$3.6 million. No doubt this will raise all the same issues which the applicants wish to raise together with all the same disclosure. It is clear that Pineway can be joined to those proceedings or can make its own application so to do. On any view the centre of gravity of these disputes is Sierra Leone. Sierra Leone is an agreed non-exclusive jurisdiction under the terms of the original assignment. All the documents are in Sierra Leone and most of the witnesses are in Sierra Leone. On the face of it, the claim which it is suggested be apparently pursued in the event that the pre-action disclosure is ordered is a claim which is to be pursued in an inconvenient forum.

These applications raise issues which are in the nature of case management decisions requiring the judge to take “a big picture view of the application in question” see Total v Edmonds [2007] EWCA Civ 50. Given my views on both jurisdiction and on discretion, I have no hesitation in refusing this application.