SES Contracting Ltd. & Anor v UK Coal Plc& Ors

His Honour Judge Seymour QC:

“I have been summoned to a meeting with UK Coal on Friday to discuss me running their in-house contracting company that they have already incorporated, we need to make sure we’ve got a cut of this action as this takes AMCO and SES out of the frame totally. Resulting in Bill”, which is a reference to Mr Shinkins, “being desperate for cash at the year end, due to his expansion into Network Rail and his redundancy liabilities associated with ex Thyssen staff. Life is definitely getting interesting.”

The reference to AMCO was a reference to what was at that stage the only competitor of the First Applicant in the business which the First Applicant undertook.

‘Dear Gerry, thank you for the opportunity to talk with yourself yesterday. Please find attached information following our discussion I thought it prudent I respond promptly in view of your meeting schedule.

I would appreciate any response through this e-mail address or directly in the present circumstance. The “grapevine” has already reported back on our meeting of yesterday!’

“The size of the mining contracting market is now clearly defined as regards numbers following the recent closure of the Selby Coalfield. The expected reduction in total Contractors numbers has not materialised partially due to the move to flexible working arrangements that has absorbed UK Coal employees. This has allowed a gap in the market that fortuitously has held the core employees. It is essential in the current UK climate to be able to hold a core of key skill sets for the salvage of longwalls, development of roadways, specialist stone work and repair of roadways.

Remuneration packages have to be sufficiently attractive to encourage loyalty, flexibility and output performance. Any economic entity must be totally divorced from traditional restrictive working practices and over-paid, underperforming attitudes.

The NEWCO must operate as a contracting company, being pro-active, aggressive, acquisitive and self-critical.

To my mind two basic options are available to fulfil the given parameters, those of (1) A separate legal entity; (2) A flexible and mobile workforce; (3) A reduction in out-turn costs; (4) A commercially minded and motivated management; (5) Sustainability.

Option One: UK Coal continues with the plan to incorporate and roll-out an in-house contracting company to fulfil the short term needs of winders and artisan specialists to cover maintenance at non-social working times.

In due course the scope of the NEWCO’s works expands and incorporates general contracting with a gradual reduction in contractors’ workloads namely those of AMCO & SES Contracting Ltd.

MWCO takes a 50/50 (for the sake of this scenario) equity share in the NEWCO and builds an operational, administrative and commercial team to run the new company as a separate legal entity. Site costs and administrative costs are included in the costs build up, MW” -- this, of course, refers to Mr Weston -- “remuneration and holding company expenses excluded.

Advantages: (1) Low start up costs and flexibility to grow; (2) Ability to recruit on as needs basis with possible re-allocations from within UK Coal utilising costs savings; (3) A clear break from the TUPE implications in new un-contracted business areas; (4) Perceived as a division of UK Coal from a corporate perspective to the Board.

Disadvantages: (1) Attraction of the correct people to run the NEWCO will be hindered by the current incumbent contractors due to their diversity of business interests and ability to relocate resources internally; (2) Perception from employees that irrespective of the legal entity this is a division of UK Coal and invites union involvement in terms and conditions; (3) Difficulty in maintaining a constant base workload to keep key skill sets in place to meet demand; (4) The growth from embryonic to circa. £12m turnover will require systems and procedures for operations, control and execution that may inhibit response and the focus on deliverables.

Option Two. UK Coal employs MW on a temporary basis as a consultant. On day one after MW leaving SES (NEWCO) approach SES to buy the Assets and Liabilities of SES Contracting Limited. This will include the order book, plant assets, creditors, debtors and employment liabilities. Not the share capital, in this way, any injury/disease claim liability will remain with SES Contracting and formally Specialist Engineering Services. (Reference Company Structure).

Equity share arrangements as in Option One.

SES Contracting has a management structure that is working inclusive of Site Staff: administration, quantity surveyors and estimators. Any additional resource required would be wage roll and accountancy, which can be inter-traded with UK Coal.

Advantages: (1) A ready made business is up and running that achieves the same ends as the generic NEWCO; (2) The company works with the current people and can be added to or reduced easily as workloads demand; (3) The business operates in areas outside UK Coal which can give short term external cash and longer term areas for smoothing resource requirements; (4) Company has works with National Trust, English Heritage, Corus, Tarmac Northern and Store Norske Spitsburgen Grubekompani; (5) 80 potential employees at Tower with possible transfer potential to Dawmill in part; (6) It is a recognisable entity, even with a name change, to the contracting work force employed within UK Coal currently.

Disadvantages: (1) The price to pay for business, in light of the substantial forward order book being unavailable the purchase price should be nominal; (2) The TUPE costs which on the work force of 256 employees would be in the region of £400k. The 80 employees at Tower are covered by a secured trust of £336k held by Williamsons in Hull; (3) One or two immediate redundancies would be required with no accrual possibility.

In short my preference would be Option 2 with the comfort factor in that it is an entity that I am confident that can deliver from Day One and no ramp up.

I enclose, confidentially, up to date accounts for SES Contracting. This gives an indication of my realisation of the medium term projection for NEWCO. The Tower contracting work to reduce in the next 24 months due to natural exhaustion, being more than replaced by take up in the market from existing contract and on going requirement.

Initial savings projections on this basis would be 6.75% saving on insurance wage roll plus 20% mark up on £8.06m wage roll = £652k. Plus 50% of trading profits @ £1.2m = £600k = £1,200,000 annualised saving.

This is obviously a generic projection without getting into the detail of further savings tailoring specific overhead to match requirement.

On this basis I would be interested in taking either proposal forward and would not be averse to UK Coal having the controlling interest in one or two percentile points. Providing suitable protection was provided in the shareholders’ agreement to prevent un-agreed buyout, liquidation and suitable lock-in that reflected the commitment to the arrangement.

I trust this is of interest to yourselves and look forward to your further communication.”

‘Dear Sirs, Our Client: Specialist Engineering Services Limited.

SES is an experienced well-established specialist mining contractor which has been carrying out contracting work for UK Coal for many years and at a number of sites, including from November 2005, and with a further variation in February 2006, the Phase 1 tunnelling work for UK Coal at the Kellingley Colliery.

In March 2006 UK Coal began a tender process for the Phase 2 tunnelling work. Like Phase 1 the work will be highly specialised and it is essential to its performance that the contractor should have available to it managers, supervisors and skilled staff with the necessary knowledge and experience. Without the necessary high level of knowledge and experience the efficient and above all the safe performance of the work cannot be guaranteed. There are very few such personnel in the United Kingdom and indeed, SES is now the principal operator in that field. The Phase 2 work was projected to commence in June 2006.

The Phase 2 Kellingley contract had been carried out by SES in a satisfactory manner. SES tendered for the Phase 2 contract on 24 March 2006. Based on conversations with UK Coal managers, SES Contracting expected to be awarded the Phase 2 contract. At a meeting held on 20 February 2006 at Harworth Park Mr Garner of UK Coal, Commercial Director, chairing the meeting, said words to the effect of “Cards on the table, you are doing the extension works [i.e. Phase 2] and you are going to get the rest at Kellingley”. As a result, SES continued on-going works (Phase 1) and agreed with UK Coal the programme and increased manpower necessary in respect of the Phase 2 works. SES also did not seek out other opportunities to which its workforce could be deployed in the absence of work from UK Coal.

However, on or about 3 May 2006 representatives of UK Coal (Mr Tinsley and Mr Lambert) visited Mr Shinkins of SES to inform him in person that SES had not obtained the Phase 2 contract which was to be awarded instead to Centechnology Ltd (“Cen-Tech”). Cen-Tech is a wholly-owned subsidiary of UK Coal. Its directors include a Mark Weston whom we refer to in more detail below. They also include Gerry Spindler, UK Coal plc’s CEO.

Mr Tinsley requested that SES give Cen-Tech their men in order to perform the contract. Specifically he said that UK Coal would like SES to agree to a smooth transfer of all the SES workforce at Kellingley to Cen-Tech so that Cen-Tech could undertake the Phase 2 work. He said that if SES did so, Mr Lambert would provide unspecified future work to SES, although this could not be guaranteed.

Mr Tinsley also stated that Cen-Tech’s bid had been cheaper than SES’s. Mr Shinkins formed the distinct impression that Mr Tinsley was far from happy about awarding this contract to Cen-Tech given the importance to Kellingley Colliery of completing Phase 2 of the contract thereby ensuring continuous coal production. Cen-Tech had no track record in this field or, indeed, any personnel with which to carry out the works.

Mr Weston was, until July 2005, CEO of SES. In that capacity he of course acquired an intimate knowledge of SES’s operations and prices. In early 2005 he and Brendan White (Commercial Director - SES Holdings) proposed a management buyout of SES for £8 million. Mr Shinkins made it clear that he was not interested. On 28 June 2005 Mr Weston resigned from SES.

SES considers that Mr Weston is intent on damaging its business. As well as the events described below in relation to the Kellingley Phase 2 contract, during a meeting held on 2 November 2005 in order to discuss SES’s tender for conveyancing works for CCL (Continental Conveyors Limited), the Managing Director of CCL, Mr Tony Saunders, stated that he was concerned that SES might not be able to fulfil any contract with CCL. He said this was because he had been told by Mark Weston at Cen-Tech that SES would not be involved in the mining industry by the end of 2005. Cen-Tech put in a tender for this CCL conveyancing work. Subsequently Mr Weston offered to buy SES Contracting for £1.00 and, in June 2006, stated that there was not a role for SES in the UK mining industry.

Following Mr Tinsley and Mr Lambert’s visit to SES concerning the Kellingley Phase 2 contract, on 4 May 2006 Mr Weston contacted Mr Shorthouse, Managing Director of SES Contracting, and informed him that he wanted all the men who were working at Kellingley. On 5 May Mr Weston met Mr Shorthouse. He again stated that he wanted all the men and that he was “desperate for management”. He stated that he wanted the men without a TUPE transfer. His position was that SES should finish the Phase 1 works and then make the men redundant, obviously at significant cost to SES. Cen-Tech would then engage the men on the following day.

It was at this point that Mr Weston proposed to Mr Shorthouse, following conversations he said he had had with “Gerry” (presumably Mr Spindler), that Cen-Tech would be prepared to pay £1.00 plus an assumption of liabilities of SES Contracting Limited.

Thereafter Mr Weston and Cen-Tech have made further repeated attempts to obtain SES staff:-

(i) On 12 May Mr Weston again contacted Mr Shorthouse to ask about his proposal. He was informed that SES was not for sale. He responded that he was disappointed that the situation could not be dealt with easily and that he would not have to advertise. He stated that he required a mining director, commercial manager and several site management teams.

(ii) On 17 May Mr Weston rang Mr Shorthouse at home, informed him that job advertisements were out and asked him to reconsider.

(iii) On 18 May Mr Sabin of Cen-Tech contacted Mr Stretton, an SES electrical engineer to offer opportunities at Cen-Tech. Mr Sabin did so again on 26 May and told Mr Stretton that if he applied, he would get a job.

(iv) On 19 May Mr Weston contacted Dave Hyland, SES’s Commercial Manager, and on 22 May invited him to apply for a job at Cen-Tech.

(v) On 23 May Mr Weston rang from Kellingley seeking permission to talk to SES’s personnel there.

(vi) Mr Weston also contacted John McMurdo, SES’s Site Manager at Welbeck, to offer a job.

(vii) On 31 May Mr Weston telephoned Mr Shorthouse to suggest there had to be give and take and stated that “off the record” he could get UK Coal to “roll over” and accept TUPE liabilities.

On 16 June 2006 Mr Shinkins met with Mr Spindler at Harworth Park. The meeting had been requested by Mr Shinkins, following Mr Weston informing SES staff the previous day that there was not a role for SES in UK mining, and reiterating that he (Mr Weston) was directly answerable to Mr Spindler.

Mr Shinkins expressed his dismay that after years of service throughout the troubled and changing fortunes of the industry, SES had been dismissed in a most unprofessional manner. Mr Spindler stated that Cen-Tech were awarded the Kellingley Phase 2 contract, albeit that the tendering process was biased towards Cen-Tech, as he would expect it to be. Mr Spindler also asked if Mr Shinkins would be interested in the sale of other contracts outside UK Coal. Mr Shinkins assumed that this followed from the unsuccessful previous attempts to acquire SES and its contracts. Mr Spindler stated that he would not justify using SES when making his own people redundant, who possessed the same skills. Our client cannot accept this explanation given that Cen-Tech has made repeated attempts to acquire SES personnel.

Accordingly:-

1. Cen-Tech and SES Contracting made competing bids to UK Coal for the Kellingley Phase 2 contract. SES has obviously not seen Cen-Tech’s bid but it is highly likely that it will have contained representations about how Cen-Tech intended to perform the contract. Both on Kellingley and other contracts, SES has been specifically asked by UK Coal to confirm that it has the necessary personnel for the work to be undertaken.

2. Such representations may have been made in bid documentation, or orally, in meetings with UK Coal.

3. UK Coal (as SES is aware from its long experience of dealing with it) has detailed internal procedures for assessment and scrutiny of bids, from both a commercial and an operational and safety perspective. These internal procedures generate written records, which UK Coal will have retained.

4. It is highly unlikely that UK Coal would have accepted a bid which stated that the bidder lacked the necessary specialised personnel, or which was silent on that topic. To do so would have been wholly irresponsible and inconsistent with UK Coal’s duties to ensure the safe operation of its collieries.

5. Any bid, including the bid from Cen-Tech, is therefore highly likely to have involved representations to UK Coal explaining the manner in which the bidder was actually to perform the contract and in particular the availability of the necessary specialised personnel and management resources.

6. As the events summarised earlier in this letter make plain, Cen-Tech in fact did not have available to it the personnel nor management resources required to perform the Phase 2 contract.

7. Instead, Cen-Tech through in particular Mr Weston engaged in repeated and in Mr Weston’s own words “desperate” attempts to obtain SES Contracting’s workforce and managerial resources, by seeking to put pressure on SES and then by advertising and even direct approaches to a number of senior personnel.

8. It therefore appears highly likely that Cen-Tech made knowingly false representations to UK Coal about its ability actually to perform the Phase 2 contract.

9. Without such representations being made (and even though operational managers in UK Coal were far from happy about the outcome), the contract could never have been awarded to Cen-Tech and its bid would have been eliminated at the outset.

10. The award of the contract to Cen-Tech necessarily would involve damage to SES Contracting, the only other bidder. The only credible conclusion is that Cen-Tech and Mr Weston intended such damage. There is moreover direct evidence to that effect.

11. In those circumstances:-

(a) It appears likely that Cen-Tech and Mr Weston have acted wrongfully and tortiously by misrepresenting Cen-Tech’s position to UK Coal. Such misrepresentation inevitably damaged SES by causing it to lose the Phase 2 contract which it had been expecting to receive, and must have been intended to do so.

(b) SES is therefore likely to have claims against at least Cen-Tech and Mr Weston. Moreover it will be the best if not the only record of what impact such statements had on UK Coal’s decision-making process.

(c) UK Coal is highly likely to hold vital documentation relating to such claims. UK Coal’s documentation is likely to be the fullest record of what was said by Cen-Tech and Mr Weston. Moreover it will be the best if not the only record of what impact such statements had on UK Coal’s decision-making process.

(d) Without this information SES will not be able to decide whether to bring claims.

(e) UK Coal is not a mere witness to wrongdoing by Cen-Tech and Mr Weston but has become mixed up in such wrongdoing. It decided to accept Cen-Tech’s bid and subsequently through Mr Tinsley sought to induce SES to provide the staff necessary for its competitor to perform the very bid SES had lost. Mr Spindler, UK Coal’s CEO, is also a director of Cen-Tech and there is evidence to suggest that he was influential in overruling the wishes of UK Coal’s operational staff, in favour of Cen-Tech’s bid. Finally Cen-Tech is a wholly-owed UK Coal subsidiary and the remaining two of its four directors are UK Coal appointees and executives.

Our clients therefore wish to inspect and be provided with copies of UK Coal’s key documentation relating to Cen-Tech and Mr Weston’s apparent wrongdoing. They of course appreciate that in normal circumstances such documents could be commercially confidential. These are, however, not normal circumstances. UK Coal has become mixed up in the apparent tortious conduct of others. Accordingly, our clients would, if necessary, be entitled under the principles deriving from Norwich Pharmacal v Commissioners of Customs & Excise [1974] AC and subsequent case law to seek an order of the Court requiring UK Coal to disclose appropriate relevant documentation to enable them to decide whether to bring claims.

The documents which our client seeks at this stage are the following, relating in each case to the Kellingley Phase 2 tunnelling works:

(i) Cen-Tech’s bid document(s) including letters, e-mails or other correspondence passing between UK Coal and Cen-Tech.

(ii) UK Coal’s notes and reports of meetings with Cen-Tech or Mr Weston concerning the bid.

(iii) UK Coal’s comparative assessment of SES’s and Cen-Tech’s bids.

(iv) Any emails or other correspondence passing between Mr Spindler and Mr Weston and relating to the bid.

We look forward to hearing from you or your solicitors as a matter of urgency. Failing an adequate response within 14 days our clients will make the necessary application to the High Court without further reference to you.’

‘Our client, UK Coal, has supplied to us a copy of your letter to them dated 21st July 2006 requesting documents relating to the tender for contract works at Kellingley Colliery (Drivage of Beeston - Phase 2).

We note from paragraph 11 of your letter that whilst you allege that Cen-tech and Mr Weston appear to have acted “wrongfully and tortiously” by misrepresenting Cen-tech’s position to UK Coal, no allegations are made against UK Coal such as to form the basis of a cause of action against the company. Your client therefore bases its request for documents on the Norwich Pharmacal principle, presumably by reason of the fact that Part 31.16 of the Civil Procedure Rules would not be applicable, given that UK Coal is not likely to be a party to any subsequent proceedings.

We have a number of observations to make in relation to the legal basis for your client’s request under the Norwich Pharmacal principle.’

It is not necessary for the purposes of this judgment to read that part of the letter. I pick the letter up at the third bullet point, making legal submissions:-

‘The principal purpose of the Norwich Pharmacal relief is to facilitate the production of “information” necessary to enable the ultimate wrongdoer to be sued. Whilst the principle can, in certain circumstances, be extended to include documents (as opposed to information, such as names and addresses) the relief is not to facilitate the pursuit of the applicant of documents that it hopes will amount to evidence. This is particularly so in circumstances where the identity of the alleged wrongdoers is already known. That said, we reiterate that UK Coal is satisfied that, notwithstanding your allegations against Centech and Mark Weston, there is no merit in such claims.

In summary, we do not believe that your clients’ request for documentation is justified and we are therefore instructed to decline the request.’

That position has essentially remained unchanged from that time to the hearing of the applications before me.

“provided with our tender details”, that is the tender details of the First Applicant, “and told that this was what he had to beat. Mr Maskill previously worked for SES and transferred over to Centech as part of site management. Mr Beaumont is Centech’s site manager at Kellingley Colliery.”

I need not for present purposes read on in paragraph 14 of Mr Jenkins’s witness statement.

“UKC knew that MW was still employed by and a director of SES. If SES’s inferences are correct it appears to have engaged with him in developing plans for Centech, which led to the actual development of Centech as it has occurred and the consequent severe damage to SES. UKC is therefore potentially liable for the tort of inducing or participating in MW’s breaches of duty. In addition UKC is potentially liable in equity as a knowing accessory to the breach of fiduciary duty. Accordingly, pre-action disclosure is in principle available under CPR 31.16.”

“At no stage before his departure did MW warn SES about UKC’s plans and MW’s planned involvement in them. The duty to warn and protect an employer in respect of threats to its business is a fundamental feature both of a director’s fiduciary duty and of an employee’s implied contractual obligation of fidelity.”

“MW, while SES’s chief executive, disclosed confidential SES information to UKC in the course of discussing how to benefit UKC’s business.”

“It is a tort for A to injure B’s business by unlawful means. The elements of the tort are (i) an intention to injure the business of B, (ii) the use of unlawful means and (iii) damage. On the current law as set out by the Court of Appeal in Douglas v Hello (No. 3) [2006] QB 125, intention requires some element of purpose albeit falling short of predominant purpose or motive. Intention is not established by proof of knowledge of consequences but such knowledge may justify an inference.”

‘There is moreover a further basis of unlawful means. The courts have recently acknowledged an implied contract created by the invitation and submission of competitive tenders. The customer impliedly undertakes to consider tenders equally and genuinely, and not in bad faith: see most recently the Privy Council decision in Pratt Contracting v Transit New Zealand [2004] Build LR 143. The Court of Appeal has previously held that the customer inviting tenders owes an implied contractual obligation to “consider” and “honestly consider” all tenders. Although the legal labels are relatively new, it is submitted that there is nothing surprising in principle in allowing a claim by a tenderer who is asked to submit a bona fide bid and then loses out as the result of a collusive process between the customer and a rival bidder.’

‘(2) The categories referred to in (1)(a) above,’ which was a general provision requiring the location of the documents and the giving of disclosure in relation to them, ‘are:-

(1) Documents passing between Mark Weston and employees or officers of UK Coal Plc, UK Coal Mining and/or Centech (including but not limited to Gerald Spindler, Phil Garner and Phil Denson) created on or before 8 July 2005.

(2) Any documents referring to, or continuing exchanges begun in, documents within item (1) above.

(3) Notes of (including e-mail references to) any meetings or conversations occurring on or before 8 July 2005 between Mark Weston and employees or officers of UK Coal Plc, UK Coal Mining and/or Centech (including but not limited to Gerald Spindler, Phil Garner and Phil Denson).

(4) Documents created by or at the direction of, or sent to, Gerald Spindler after 1 January 2005 and referring to plans for and/or the development of

(a) in-house contracting within the UK Coal group’s mining business, and/or

(b) Centech (whether referred to by the name “Centech”, as Newco or otherwise).

(5) Business plans, budgets, management accounts or similar documents (by whoever prepared) for Centech or other in-house mining contracting company of the UK Coal group (however described) from 1 January 2005 to date.

(6) E-mails, notes, memoranda and other documents created by or at the direction of Mark Weston and/or Gerald Spindler on or after 1 January 2005 and -

(a) referring to SES (including any subsidiary of SES Holdings plc) and/or Mr Shinkins and/or rail contracting business and/or any customers of SES (other than the UK Coal group) referred to in Mark Weston’s “Options” document of 7 June 2005; and/or

(b) appraising or modifying the proposals in Mark Weston’s “Options” document of 7 June 2005; and/or

(c) referring to the engagement of Mark Weston to work for one or more companies within the UK Coal group; and/or

(d) referring to the ownership of Centech (or other in-house UK Coal group mining contracting company however described).

(7) Documents (a) containing, (b) referring to, and/or (c) making use of any of the information contained in or attached to an e-mail sent by Mark Weston to Gerald Spindler on 7 June 2005 (including but not limited to the “Options” document and the copy of SES’s management accounts sent by Mark Weston to Mr Spindler).

(8) Board minutes of Centech from 1 January 2005 to date.

(9) Minutes of the boards of UK Coal Plc and UK Coal Mining Limited and of the Executive Management Committee of the UK Coal group from 1 January 2005 where referring to any of the following: in-house mining contracting, Centech, Mark Weston, SES and/or Kellingley Colliery Phase 2 extension works or contract.

(10) Centech’s bid document(s) relating to the Kellingley Colliery Phase 2 extension works, including the Form of Tender provided to Centech and all correspondence subsequent to it.

(11) Notes/memoranda/emails made by or on behalf of those representing the UK Coal group at the site visit on 16 March 2006 by the First Applicant and Centech and relating to that site visit.

(12) Notes and reports of meetings with Centech or Mr Weston concerning Centech’s bid for the Kellingley Phase 2 contract.

(13) Memoranda/emails between Mr Spindler and Mr Tinsley concerning the award of the Kellingley Phase 2 contract prior to its award to Centech.

(14) Appraisals or other comparative documents concerning the First Applicant’s and Centech’s bids for the Kellingley Phase 2 works, and meeting notes, memoranda or other records containing the reasons for decision.

(15) Notes or minutes of meetings and/or correspondence with Centech regarding the rate of progress achieved in the Kellingley Phase 2 works.’

‘36. Whilst reference is made to a meeting on 3 June 2005, I have no recollection of this. I can only assume that the meeting was reorganised to 6 June 2005. It is not true, as Mr Shinkins suggests (paragraph 14) that the meeting I had with UK Coal on 3 June 2005 was intended to take SES totally out of the frame. This is a clear misconstruction of the email quoted at paragraph 13 of his witness statement. As the meeting was to discuss a possible job option, I naturally did not inform my then employers that it was taking place but I do not think that the meeting can fairly be labelled “clandestine”. By meeting UK Coal, I do not believe that I thereby breached any obligation owed to SES. Prior to my commencing consultancy work for UK Coal on 10 July 2005, my first and only meeting with Mr Spindler was on 6 June 2005.

37. In addition, Mr Shinkins is incorrect in his supposed interpretation of the quotation from the 3 June email (paragraph 15) when he says that it was my strategy to leave SES desperate for cash at the year end and therefore vulnerable to a renewed offer to buy it. Rather, my comments in the email recognised that:

(1) I felt that an eventual consequence of UK Coal deciding to take the contracting work in-house would be to remove the need for UK Coal to use outside contractors.

(2) SES was in a poor financial state.

38. Mr Shinkins’ suggestion that I advocated SES diversifying into Network Rail is also untrue. Although this was one of the very few rail-related decisions I agreed with, the decision was that of the SES’s Board which wished to move away from the problems with Jarvis. Mr Shinkins’s suggestion that any of this was linked to the management buyout not proceeding is nonsense.’

‘41. Mr Shinkins refers to an email which I sent to Nicholas Bradley on 6 June 2006 ... I knew Mr Bradley as he had provided computer and printing and marketing services to the SES group, we had become friendly and, as set out further below, from time to time we discussed various business opportunities together. The email I sent Mr Bradley attached a memorandum entitled “Options Regarding UK Coal In-House Contracting”.

42. Mr Shinkins misinterprets (in paragraph 19) an attachment to that email where he refers to a comment about Contracting being available for purchase for a nominal amount “in the light of the substantial forward order book being unavailable”. This order book was likely to be unavailable due to work being likely to dry up at Tower Colliery (which at that stage was contributing 30% of Contracting’s income) and the financial pressure on the business surrounding and the difficulties in obtaining payment in respect of the work for Jarvis. Mr Shinkins is wholly wrong, therefore, to suggest that I evolved a plan to put financial pressure on SES so as to provoke a fire sale. The financial pressure was already there due to what I have explained above.

43. The sending of the options document has to be considered in the context of my interest at the opportunity with UK Coal. Whilst I was looking at the Mastertons’ deal nothing was certain and I wanted to maximise my opportunities. Very simply, I got carried away and in drafting the options documents I accept that I referred to confidential information which I should not have done and neither should I have forwarded this information to UK Coal. Fortunately, I do not believe that either Mr Spindler or UK Coal ever read these documents. I believe this as when I subsequently met Richard Cole, UK Coal’s Company Secretary, on or about 14 June 2005, he returned the documents to me and stated “we cannot accept these; no one has read them or seen them.” I apologised.’

“15. I have been shown a copy of an e-mail from Mark Weston to me timed at 15:53 on 7 June 2005 and referred to … and with its attachments, I can understand why it has caused Mr Shinkins concern. Whilst I do not specifically recall reading this e-mail (as opposed to the attachments), that is not to say that I did not receive it. It is just that I generally prefer to read hard copies of e-mails and will often ask my secretary to print them off for me. This is particularly the case where an e-mail contains a number of attachments as with this e-mail.

16. Whilst I do not specifically recall reading the e-mail in question I do remember seeing a hard copy of the documents attached to it. I can only assume, therefore, that my secretary printed off the e-mail and attachments for me.

17. When I saw the accounting information of SES and registered what it was, I recall thinking that this was information that we perhaps shouldn’t have been sent. I did not read the documents further but took them with me when I went to speak with Richard Cole. I showed the documents to him, and he agreed with me that Mr Weston should not have sent them. He informed me that he would give the information back to Mr Weston, who he was due to have a meeting with. I understand that Richard handed the documents to Mr Weston at a subsequent meeting.

18. As for the e-mail itself, I do not recall exactly what I did with it and when. My usual policy is to clear my inbox on a sporadic basis (approximately weekly). I have sub-folders within my inbox for certain issues that I deal with on a regular basis, within which I store things I may need to refer back to. Any e-mails that do not fall within a particular sub-folder, I will delete during one of my cleaning up exercises. As the e-mail was not one that would fall within one of my sub-folders, I would, no doubt, have deleted this during one of my cleaning up exercises a week or so after receipt. I do not, however, specifically recall deleting that particular email.

19. I am fairly certain that I did not forward the e-mail of 7 June 2005 to anyone, but if I did, the only person I might conceivably have sent it to would have been Richard Cole. I understand that he does not recall ever receiving the e-mail, but only the documents I took into his room with me, which suggests to me that I did not forward it. I did not examine the documents, and I could not (at least until they were exhibited to Mr Shinkins’s statement) recall what they showed, and I have not used any information contained in them. These were unsolicited documents, and, whilst I clearly saw them to register what they were, I was sufficiently aware of the potential sensitivity attached to such documents to know that I probably ought not to have them, and that the best thing would be to return them to where they had come from.

20. I understand that UK Coal’s IT manager, Dave Woods, has searched the computer system at UK Coal to establish whether or not a copy of the e-mail or the responses to it remains on the system. I understand, however, that there are no such records which indicate the e-mail has been deleted.”

‘22. Having set up Centech to provide a cost effective service to UK Coal, I would obviously prefer it if the contracts could be awarded to it. I did not, however, inform those responsible for deciding to whom to award the Kellingley Phase 2 contract that they must award the contract to Centech, come what may. Centech had to be competitive, and that was the point. There were certain instances in which it may not have been sensible or appropriate to award a contract to Centech. For example, I believe that SES was willing to undertake particular contracts on a “turn key” basis and thus effectively take on all the risk on time for completing the works, it may be that Centech could not or would not take such a risk in which case SES may have been awarded the contract even if the price was more. In most tenders, I fully expected Centech to be cheaper than SES, in part because of the favourable insurance position.

23. As it happens, I understand that Centech’s tender on Kellingley Phase 2 was considerably less than that of SES. Whilst I am aware that some of the colliery team may have preferred to continue with SES, perhaps to avoid the unnecessary disruption that a change in contractor inevitably causes, this, for my mind, did not outweigh the commercial benefits to UK Coal in awarding the contract to Centech. Ultimately, the decision to award the contract to Centech was one made by the contracts team. It was not a decision made by me, and it was not a case of me overruling the wishes of UK Coal’s operating staff, as alleged by Mr Shinkins in paragraph 92.2 of his statement.

24. Mr Shinkins makes a number of complaints about Centech being awarded the contract. I do not tend to get involved with the management of contract works, but I have spoken with David Lambert, UK Coal’s contracts manager, who advises me that, whilst there have been complications with the works at Kellingley Phase 2, these are because of geological difficulties and are problems that any contractor would have faced and are not complications that could have been foreseen at the tender stage. I am not aware of any issues that would lead me to think that UK Coal was misled in the manner suggested by Mr Shinkins.

25. In particular, in relation to this contract, Mr Shinkins and Mr Jenkins suggest that they have heard that Mr Weston was shown the SES bid, and given a price to beat by Centech. As Mr Lambert has indicated, there is a strict tender process that is adopted by UK Coal and I am not aware of anything that would suggest that that was not complied with here. I do not share Mr Shinkins’s view, therefore, that Centech made knowingly false representations to UK Coal, or that the tender bid represented “the ongoing process of the plans developed by Mr Weston and me in 2005” as alleged in paragraph 88 of Mr Shinkins’s statement.’

“If allowed access at this stage to the limited documents which we seek, proceedings may be avoided altogether (because our suspicions will either be borne out or removed by disclosure of the documents), or will be less costly.”

‘As far as I can recall, Mr Weston did not ever inform me that he had been given information about SES’s tender and told that it was “what you have to beat”, as Mr Jenkins suggests at paragraph 13 of his second witness statement. I do not recall ever indicating this to Mr Maskill either. I have spoken with David Maskill and he does not recall me saying this to him, nor indicating that to Mr Jenkins.’

“(1) This rule applies where an application is made to the court under any Act for disclosure before proceedings have started.

(2) The application must be supported by evidence.

(3) The court may make an order under this rule only where -

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

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

(c) 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

(d) disclosure before proceedings have started is desirable in order to -

(i) dispose fairly of the anticipated proceedings;

(ii) assist the dispute to be resolved without proceedings; or

(iii) save costs.”

“Thus unlike a personal injury claimant who has suffered some undoubted misfortune, but needs disclosure to investigate the mechanism of his misfortune, Mr Black’s losses are themselves a matter of uncertainty and dispute. No complaint was made to the regulatory authorities which he knew were investigating the situation.”

‘56. In RHM Foods v Bovril Ltd [1982] 1 WLR 661 the plaintiffs, in a passing off action, sought disclosure in advance of pleading their statement of claim. They alleged a deliberate intent to deceive the public. The judge acceded to the application. This court acknowledged the jurisdiction to make such an order, but considered that the exercise of that jurisdiction would require an exceptional case and that it would be unfair to the defendants to order disclosure against them before the plaintiffs had pleaded their serious allegations. Oliver LJ said (at 668H/669A):-

“I do not say that there cannot be such a case, for the court has a wide power to order discovery where the justice of the case demands it, but it must be very rare. Like Lawton L.J., I remain, despite counsel for the plaintiff’s powerful advocacy, wholly unconvinced that this case, on the unparticularised allegations of his deponents’ individual beliefs, is a case where the discovery sought at this stage is necessary for fairly disposing of the matter and I too, therefore, would allow the appeal.”

57. Those cases were decided under the former regime of the Rules of the Supreme Court and I do not consider them to be formally binding in the context of the Civil Procedure Rules, a new code with its overriding objective, its greater flexibility, its statements of truth, and its new principles of disclosure, favouring both more limited disclosure and earlier disclosure. Nevertheless, in my judgment it is not to be supposed that in the modern context allegations of fraud have become just like any other allegations. There is still the obligation on counsel pleading fraud to satisfy himself that he can properly do so: Mr Vos has himself relied on that obligation, to hint that without the pre-action disclosure which his client seeks, he might find himself unable to sign a statement of case which pleads fraud. There is still the obligation (see 16PD at 9.2 [regarding statements of case]) to “specifically set out” any allegation of fraud.

58. Moreover, if the opportunity provided by CPR 31.16 is set against the background of the prospective parties’ obligation in any case not covered by a protocol “to act reasonably in exchanging information and documents relevant to the claim” and if consideration is given to the question of what the extent of that obligation is in a case of alleged fraud, it is hard to think that a prospective claimant could easily say that his allegedly fraudulent prospective defendant had failed to cooperate by refusing widespread disclosure in response to unspecific and unverified (because unpleaded) allegations.’

“What, however, these authorities on the unamended section in my judgment reveal, and usefully so, is as follows. First, that at any rate in its origin the power to grant pre-trial disclosure was not intended to assist only those who could already plead a cause of action to improve their pleadings, but also those who needed disclosure as a vital step in deciding whether to litigate at all or as a vital ingredient in the pleading of their case. Secondly, however, that (as what I would call a matter of discretion) it was highly relevant in those cases that the injury was clear and called for examination of the documents in question, the disclosure requested was narrowly focused and bore directly on the injury complained of and responsibility for it, and the documents would be decisive on the conduct or even the existence of the litigation. Thirdly, that on the question of discretion, it was material that a prospective claimant in need of legal aid might be unable even to commence proceedings without the help of pre-action disclosure.”

Obviously legal aid is not in issue in the present case.

“Of course, in one sense it might be said that a person is hardly likely to be a party to subsequent proceedings whether as a claimant or otherwise unless some form of proceedings is itself likely to be issued. Two questions, however, arise. One is whether the statute requires that it be likely that proceedings are issued, or only that the persons concerned are likely to be parties if subsequent proceedings are issued.”

I can summarise the remainder of that paragraph by saying that the conclusion to which the learned Lord Justice came was that the second was the appropriate construction, that the persons concerned are likely to be parties if subsequent proceedings are issued.

‘As to the second question, it is not uncommon for “likely” to mean something less than probable in its strict sense. It seems to me that if I am wrong about the first question, then it is plain that “likely” must be given its more extended and open meaning … because otherwise one of the fundamental purposes of the statute will have been undermined. If, however, I am right about the first question, the second question is of less moment. Even so, however, I am inclined to answer it by saying that “likely” here means no more than “may well”. Where the future has to be predicted, but on an application which is not merely pre-trial but pre-action, a high test requiring proof on the balance of probability will be both undesirable and unnecessary: undesirable, because it does not respond to the nature and timing of the application; and unnecessary, because the court has all the power it needs in the overall exercise of its discretion to balance the possible uncertainties of the situation against the specificity or otherwise of the disclosure requested. Clearly, the narrower the disclosure requested and the more determinative it may be of the dispute in issue between the parties to the application, the easier it is for the court to find the request well-founded; and vice versa.’

It was in the light of that indication that Miss Lucas and Mr Samek accepted that the first two requirements in CPR Part 31.16(3) were met in the present case.

‘81. It is plain not only that the test of “desirable” is one that easily merges into an exercise of discretion, but that the test of “dispose fairly” does so too. In the circumstances, it seems to me that it is necessary not to confuse the jurisdictional and the discretionary aspects of the paragraph as a whole. In Bermuda International Securities Limited v KPMG [2001] Lloyd’s Law Reports: Professional Negligence 392 to 397, para 26, Waller LJ contemplated that paragraph (3)(d) may involve a two-stage process. I think that is correct. In my judgment, for jurisdictional purposes the court is only permitted to consider the granting of pre-action disclosure where there is a real prospect in principle of such an order being fair to the parties if litigation is commenced, or of assisting the parties to avoid litigation, or of saving costs in any event. If there is such a real prospect, then the court should go on to consider the question of discretion, which has to be considered on all the facts and not merely in principle but in detail.

82. Of course, since the questions of principle and of detail can merge into one another, it is not easy to keep the two stages of the process separate. Nor is it perhaps vital to do so, provided however that the court is aware of the need for both stages to be carried out. The danger, however, is that a court may be misled by the ease with which the jurisdictional threshold can be passed into thinking that it has thereby decided the question of discretion, when in truth it has not. This is a real danger because first, in very many if not most cases it will be possible to make a case for achieving one or other of the three purposes, and secondly, each of the three possibilities is in itself inherently desirable.’

“That discretion is not confined and will depend on all the facts of the case. Among the important considerations, however, as it seems to me, are the nature of the injury or loss complained of; the clarity and identification of the issues raised by the complaint; the nature of the documents requested; the relevance of any protocol or pre-action inquiries; and the opportunity which the complainant has to make his case without pre-action disclosure.”

“In such circumstances, unless there is some real evidence of dishonesty or abuse which only early disclosure can properly reveal and which may, in the absence of such disclosure, escape the probing eye of the litigation process and thus possibly all detection, I think that the court should be slow to allow a merely prospective litigant to conduct a review of the documents of another party, replacing focused allegation by a roving inquisition.”

“In my judgment, the more focused the complaint and the more limited the disclosure sought in that connection, the easier it is for the court to exercise its discretion in favour of pre-action disclosure, even where the complaint might seem somewhat speculative or the request might be argued to constitute a mere fishing exercise. In appropriate circumstances, where the jurisdictional thresholds have been crossed, the court might be entitled to take the view that transparency was what the interests of justice and proportionality most required. The more diffuse the allegations, however, and the wider the disclosure sought, the more sceptical the court is entitled to be about the merit of that exercise.”

‘22. To establish jurisdiction to make an order the applicant must show that:

i) Both applicant and respondent are likely to be parties to subsequent proceedings in the sense that if proceedings are subsequently brought they may or may well be parties to those proceedings.

ii) The documents in question must be such as would be subject to standard disclosure in such proceedings and so must be documents on which the respondent would rely or which would support the applicant’s case or which would adversely affect the case of either party. It follows that the issues in any subsequent proceedings must be sufficiently clear to enable this requirement to be addressed. There is a particular need for caution and focus when an allegation or possibility of fraud is involved. Whilst some of the evidence might be said to hint at the possibility of such an allegation in this case it is not suggested that a cause of action in fraud is or might be available and I propose to address the issues without regard to that possibility.

iii) There is a real prospect of an order being fair to the parties if proceedings are started, or that it will assist them to avoid proceedings or will save costs.

23. If the jurisdiction tests are satisfied it remains a matter for the court’s discretion whether an order should be made which will depend on “all the facts of the case” but “important considerations” will be “the nature of the injury or loss complained of; the clarity and identification of the issues raised … the nature of the documents requested; …; and the opportunity which the complainant has to make his case without pre-action disclosure”.

It has, of course, to be kept in mind, as Ms Blanchard submitted, that, by definition, this is a jurisdiction which typically will involve some element of speculation and may not lend itself to precision. It is a powerful argument against an order that the applicant can well make a case without disclosure. It follows that an applicant will often, if not usually, be unsure of the specific nature of any case he may have and indeed one of the salutary objectives of the rule is to resolve claims without proceedings. In this case, Ms Blanchard was entirely straightforward in saying that XL London and Brockbank did not know what had gone wrong, were not able to make specific allegations of negligence, and had not determined to sue come what may. But I agree with her that such a picture far from being necessarily fatal or even damaging to the applicant will often be a proper context for addressing the provisions of the rule. In this case, the substance of the application (which is not factually in issue) can be put shortly …”’

I do not, however, need to put it for the purposes of this judgment.

‘As I see it the judge directed himself impeccably in this case. He identified the issues between the parties. He formed the view that KPMG had no “knock out” answer to BISL’s case, and Mr Knowles did not challenge that view of the judge. He considered whether KPMG’s duty of standard disclosure would apply to the documents being sought and on that basis excluded the 1991 and 1992 years of the audit files and commenced the tax agent files as from 1st April 1992. He then considered whether the pre-action disclosure was desirable and formed the view it was on the following bases. (i) There would be a saving of costs, since those pleading BISL’s case would with the documents be likely to be able to plead their case with more particularity and without the need for later amendment and/or reamendment. (ii) KPMG had already reviewed the documents and thus it was no burden to hand them over. (iii) He further thought that the production might assist in the disposal of the case without the commencement of proceedings either because BISL’s advisers would be able to see that no criticism could be made of KPMG and/or that the causation arguments of KPMG were sound, or because a document demonstrated some support for BISL’s case which might persuade KPMG to shoulder some part of the burden.’

For proceedings after judgment, please see separate transcript

For further legal argument, please see

transcript of proceedings after judgment

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