Party successful obtains Pre-Action Disclosure Order in fraud claim

25/03/2007

The applicants were specialist mining and tunnelling contractors. The first two respondents were the successors to British Coal, and the parent company of a group of companies operating the British coal industry. The respondents were the applicants's principal source of custom.

The dispute arose out of the applicants unsuccessful tender to undertake the construction of a drivage at a colliery operated by the respondents. The successful tenderer was a subsidiary of the first respondent, and was joined as the third respondent in the application, and its CEO was the fourth respondent (R4). The CEO had previously been a CEO and/or director of the applicants. The applicants suspect that teh CEO had deliberately colluded with the first two respondents to create the third respondent as a means of eliminating the applicants from the market. The applicants had, amongst other things, obtained copies of e-mails from the CEO in which the creation of the third respondent, and the diversion of business from the applicants, was discussed at length. One of these e-mails had been sent to the first respondent, and attached detailed confidential financial documents and accounts of the applicants. The e-mails also referred to the possibility of purchasing the applicants' substantial goodwill and assets at a substantial discount.

After the creation of the third defendant, and the successful tender for the drivage contract, there was evidence that the third defendant had set about attempting to engage the applicants' employees in order to perform the drivage contract.

The applicants alleged that the CEO was liable on the basis of breach of confidence and duty and that the first three respondents had induced or participated in the CEOs breaches, or were liable as an accessory to breach of fiduciary duty. The applicants applied pursuant to CPR 31.16 for pre-action disclosure of various classes of documents, consisting principally of communications between the respondents, internal business plans, emails, notes, memoranda, board minutes, bid documents and bid comparisons. The respondents conceded that the requirements of CPR 31.16(3)(a) and (b) were met. The argument focused on whether sub-paragraphs (c) or (d) were satisfied. The respondents also argued that the court should refuse the application as a matter of discretion.

Judge Seymour QC granted the application in relation to all documents sought. He held that it was appropriate to exercise caution where pre-action disclosure is sought in relation to causes of action based on fraud, dishonesty or wrongful conduct. "In particular, the Court should be astute to avoid making an order the effect of which is to grant the applicant a "roving inquisition" through the respondents' documents". However, the court must also have regard to the fact that an application pursuant to CPR 31.16 will often be made at a time when the applicant is unsure of the specific nature of any case he may have. One of the aims of the provision is to resolve claims without proceedings by requiring the early disclosure of documents.

([i]SES Contracting Ltd v UK Coal Plc (QBD) [2007] EWHC 161 31 January 2007)

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