Pre-Action Disclosure: Not A Tactical First Step

Article by Miranda Karali and Helena Biggs

If you are a claimant, in the vast majority of cases, you will know precisely the facts giving rise to your claim and against whom you have to proceed. However, occasionally, you may not know the details of what went wrong or, even, who precisely is responsible for your losses. You are then faced with choosing between not recovering your losses or starting proceedings against the party you think is responsible and risking the fact that the evidence may ultimately not support your claim. If this happens and you decide to discontinue the proceedings, you are faced with paying the defendant's costs. It is therefore obviously preferable to establish some basic facts which would give rise to a claim before issuing any proceedings, but what can you do if the information which you need is contained in documents held by the prospective defendant and they refuse to give you access to the material?

This problem has been addressed in the court rules which enable a party to obtain disclosure from a prospective defendant before litigation is even commenced. Recent cases such as XL London Market and others v Zenith Syndicate Management Ltd and others [2004] EWHC 1182 (Comm) ("XL London Market") and Rose v Lynx Express Ltd [2004] 1 B.C.L.C. 455 provide examples of when the court will make an order for pre-action disclosure. To obtain pre-action disclosure from a prospective defendant, an applicant must show that (a) both they and the respondent are likely to be a party if proceedings were subsequently commenced, (b) the documents sought would fall within the scope of standard disclosure if proceedings had started, and (c) disclosure of the documents before proceedings started is desirable because it would either (i) dispose fairly of the anticipated proceedings or (ii) assist the dispute to be resolved without proceedings or (iii) save costs.

The Court of Appeal laid down in the leading case of Black and others v Sumitomo Corporation [2001] EWCA Civ 1819 that it was not a high standard of proof which the applicant had to meet to establish that the respondent was likely to be a party to subsequent proceedings. In the case of XL London Market, the applicant and respondent were clearly likely to be parties to any subsequent litigation because the claim arose under a contract. Although it is unlikely this would be hard to establish, BLG were involved in a case last year where the court refused to make an order for preaction disclosure in a ship sale and purchase dispute on the basis that the purchaser was defined as a company "to be nominated". Therefore, although the applicant sought pre-action disclosure from the company with whom they were actually negotiating the sale, they were unable to prove that the same company was likely to be a party to any subsequent litigation and the application was unsuccessful.

Standard disclosure requires parties to litigation to disclose documents which either support or adversely affect either party's case. However, this does not mean that the applicant is entitled to pre-action disclosure of all the documents which would comprise standard disclosure and it is clear that the narrower the scope of the documents sought, the more likely the court will be to grant the application. The courts have stressed that the purpose is not to give standard disclosure at an early stage. In XL London Market, the court thought that if the applicant could plead their case properly without pre-action disclosure, this would weigh heavily against such an order being made.

BLG were involved in another case last year where the court adopted this approach and considered that the applicant had sufficient information to plead its case and was simply trying to obtain early disclosure. There is also a risk that if an applicant seeks disclosure which is too wide, the court will consider the application to be a fishing expedition and refuse to make the order sought. Therefore, although the documents sought must fall within standard disclosure, applicants should be as specific as possible about which documents or categories of documents they are seeking.

The court rules provide that an order for pre-action disclosure will be desirable if it would (i) dispose fairly of the anticipated proceeding or (ii) assist the dispute to be resolved without proceeding or (iii) save costs. Provided the court is satisfied of one of the three elements, it will be able to proceed to consider the matter more generally. For example, if an applicant is "hell-bent" on starting proceedings (as in Black v Sumitomo), then it is unlikely that any of these grounds would be satisfied. However, in XL London Market, the court was satisfied that the applicant was not determined "come what may" to commence proceedings. They had asked the respondent for an explanation for their substantial over reserving (approximately £23.5m) which would be the subject of any litigation commenced. No explanation had been forthcoming and there was no other means for the applicant to find out what had happened. They were therefore entitled to the pre-action disclosure sought which would enable them to assess what had gone wrong.

Provided an applicant can meet all the above criteria, the court will then exercise its discretion. Matters of discretion are notoriously fact specific and it is therefore difficult to predict with certainty when a court will be prepared to make an order for pre-action disclosure. However, a few broad principles may be drawn from the recent cases on pre-action disclosure.

It appears to be accepted that such an application will involve an element of speculation as acknowledged in XL London Market. In Rose v Lynx Express Ltd, the Court of Appeal considered that pre-action disclosure may be ordered provided an applicant has a properly arguable case. Any pre-action determination necessarily had to be based on assumptions about the factual circumstances which may subsequently prove to be incomplete or inaccurate. In Black v Sumitomo, the Court of Appeal considered that the claim raised by the applicant was speculative in the extreme and that the application amounted to a fishing expedition. The court also made clear that an order for pre-action disclosure should not be made where there are alternative avenues through which the applicant can obtain the documents and information sought. This is to be contrasted with the decision in XL London Market where the applicant had no means of access to the information without an order for pre-action disclosure.

The courts are unlikely to make an order for pre-action disclosure where an applicant can plead its case properly without pre-action disclosure or obtain the information from another source or where an applicant is determined to sue regardless of the information which may be contained in the documents sought. The courts will be more inclined to make an order in the exceptional cases where the applicant is unable to obtain the information from other sources and requires pre-action disclosure to decide whether it has a claim or is unable to plead its claim properly without such information.

The early cases on pre-action disclosure made many wonder whether anything had changed from the pre-CPR regime, as the courts were very reluctant to order such disclosure. More recently, however, the courts have shown that they are prepared to order such disclosure but still in limited circumstances. In practice, only rarely should a claimant exercise this option and only when it genuinely is trying to ascertain whether it has a claim as opposed to as a first tactical move in proceedings it is determined to bring.