Factual and Procedural Background
This action involves the Plaintiff claiming that the Defendant Bank was induced by a bribe of approximately US$44 million allegedly paid by the First Defendant and the Third Defendant to a director of the Defendant Bank, who was responsible for selling the Bank's 46.65% stake in a group of companies (FOG) in late 2005 for an undervalue. The transaction was completed through an intermediary company on 31 March 2006. The Plaintiff alleges that had the Bank's stake been sold at full value, it would have been entitled to payments under certain sell-on rights.
The claims are brought under the German Civil Code, specifically section 826, concerning intentional infliction of damage contrary to public policy. The Defendants deny the bribe allegation, claiming payments were made due to threats related to tax matters, and assert the sale was at market value, supported by subsequent business developments including the Concorde Agreement.
The Plaintiff has made multiple applications for disclosure against the First Defendant and non-parties related to the transaction, as well as applications concerning expert evidence exchange and cross-examination of a witness. The trial was scheduled for October 2013, with pre-trial hearings addressing these applications.
Procedurally, the court considered the scope and timing of disclosure applications, the physical possession of documents by the First Defendant, and the necessity and specificity of the documents sought from non-parties. The court also examined the impact of disclosure on the trial timetable and the appropriateness of cross-examining a witness on hearsay statements.
Legal Issues Presented
- Does the First Defendant have physical possession of the documents of the FOG companies such that he ought to be ordered to disclose them?
- If not, must a class of documents ordered to be disclosed under Part 31.17 of the Civil Procedure Rules (CPR) be specifically identified so that no exercise of judgment is required by the non-party as to what documents fall within the class?
- Are the documents and classes of documents sought against (i) the CVC respondents and (ii) the FOG respondents sufficiently specified to be permissible under Part 31.17?
- Are the documents sought against (i) the CVC respondents and (ii) the FOG respondents likely to support the Plaintiff's case or adversely affect the Defendants' case?
- Is disclosure necessary to dispose fairly of the claim or to save costs, and should it be ordered as a matter of discretion?
- If disclosure would otherwise be ordered, should it now be denied because ordering it would inevitably delay the trial date?
- Should the witness referred to as Mr McKenzie be ordered to attend for cross-examination under CPR Part 33.4?
Arguments of the Parties
Plaintiff's Arguments
- The Plaintiff contends that the documents sought are necessary to fairly determine the issue of quantum, as the experts require further disclosure to assess the true value of the Bank's holding if the alleged bribery had not occurred.
- The Plaintiff relies on witness statements indicating significant changes in the value of the FOG companies before and after the transaction, including refinancing events that imply a much higher valuation.
- The Plaintiff argues that disclosure of specific documents, such as due diligence reports, investment committee minutes, loan applications, agreements, and correspondence, will support its case or undermine the Defendants' case.
- The Plaintiff submits that the First Defendant has physical possession or control of the relevant documents due to his long-term occupation of the offices where the FOG companies operate.
- Regarding cross-examination, the Plaintiff seeks to cross-examine Mr McKenzie on hearsay statements relied upon by the Defendants in related proceedings.
Defendants' Arguments
- The Defendants deny the bribery allegations and assert that the transaction was conducted at full and fair value, supported by internal approvals and external reviews.
- They argue that many of the documents sought are commercially sensitive, confidential, and unduly burdensome to produce, especially given the broad and changing nature of the requests.
- The Defendants submit that the First Defendant does not have physical possession or control of the FOG companies’ documents, as those belong to the companies and are managed by their boards, who oppose disclosure.
- They contend that some categories of documents sought are too broad, insufficiently specified, or irrelevant to the issues in the litigation.
- The Defendants emphasize the impact of disclosure on the trial timetable, asserting that producing the documents would require significant time and resources, likely necessitating trial adjournment.
- Regarding cross-examination of Mr McKenzie, the Defendants note that the Plaintiff has withdrawn reliance on parts of his evidence and that it remains the Defendants’ choice whether to call him as a witness.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Burchard v. McFarlane [1891] 2 QB 241 |
Limits on burden imposed by subpoena duces tecum; a witness cannot be required to search documents for relevance. |
The court applied the principle that non-parties should not be burdened with excessive search and judgment obligations in disclosure. |
| Wakefield v Outhwaite [1990] 2 Lloyd's Rep 157 |
Distinction between production of documents and pre-trial discovery; relevance of documents in subpoena. |
The court emphasized that orders must not require non-parties to perform discovery-like exercises. |
| Panayiotou and others v. Sony Music Entertainment (UK) Ltd [1994] ChD 142 |
Specification of documents in subpoenas must be clear; broad or vague categories are invalid. |
The court held that classes of documents must be described with sufficient particularity to avoid unfair burden. |
| Re Asbestos Insurance Coverage Cases [1985] 1 WLR 331 |
Orders for production must specify documents with sufficient clarity; general requests are inadmissible. |
The court reiterated the need for precise identification of documents in disclosure orders. |
| American Home Products Corp v. Novartis Pharmaceuticals UK Ltd [2001] FSR 784 |
Threshold test for non-party disclosure under CPR 31.17; documents must likely support or adversely affect a case. |
The court confirmed that orders for classes of documents are permissible if all documents meet the threshold relevance test. |
| Three Rivers District Council v. The Governor and Company of the Bank of England (No. 4) [2003] 1 WLR 210 |
Clarification of CPR 31.17 threshold test; distinction between likely relevance and actual relevance of documents. |
The court applied the test that documents must be likely to support or adversely affect a case, allowing some documents to turn out irrelevant. |
| Black v. Sumitomo [2002] 1 WLR 1562 |
Interpretation of "likely" in disclosure rules as "may well". |
The court supported a liberal interpretation of the likelihood threshold for disclosure. |
| Tajik Aluminium v. Hydro Aluminium AS [2006] 1 WLR 767 |
Distinction between disclosure orders and witness summonses; necessity for precise identification of documents in summons. |
The court emphasized fairness to witnesses and the differing procedural requirements for disclosure and production. |
| Oxford Legal Group Limited v. Sibbasbridge Services plc [2008] EWCA Civ 387 |
Limits on directors' rights to inspect company documents; inspection must be for proper purpose. |
The court held that a director’s right to inspect is limited to carrying out duties and cannot be used for improper purposes. |
| Conway v Petronius Clothing Co Ltd [1977] 1 WLR 72 |
Director's inspection rights are personal and for the benefit of the company; improper use is not supported by courts. |
Reinforced the principle that inspection rights are limited to legitimate company interests. |
| Tsavliris Russ (Worldwide Salvage & Towage) Ltd v RL Baron Shipping Co SA (The Green Opal) [2003] 1 Lloyd's Rep. 523 |
Rules on cross-examination under CPR 33.4; limitation on cross-examining on hearsay statements not adduced in evidence. |
The court held that cross-examination on hearsay statements is limited if the statements are not formally relied upon. |
Court's Reasoning and Analysis
The court undertook a detailed analysis of the disclosure applications under CPR Part 31.17 and the cross-examination application under Part 33.4. It first addressed whether the First Defendant had physical possession of the FOG companies’ documents. Applying principles from company law and disclosure authorities, the court found that the First Defendant’s occupation of offices and managerial role did not amount to physical possession or control of the documents, which belonged to separate corporate entities managed by their boards. The court declined to override the boards’ opposition to disclosure.
On the specificity of document classes under Part 31.17, the court held that while some exercise of judgment by the non-party is inevitable, the order must clearly specify what documents are to be disclosed without reference to the issues in the case. The court emphasized that the threshold test under Part 31.17 requires that each document in the class be likely to support the applicant’s case or adversely affect another party’s case.
Applying this test, the court reviewed the categories of documents sought. It allowed disclosure of several narrowly defined categories, including transaction agreements and amendments, due diligence reports, investment committee minutes, loan application documents, certain agreements and correspondence relating to business developments, and specific financial models. The court rejected categories that were overly broad, insufficiently specific, or unlikely to meet the threshold relevance test.
The court acknowledged the burden and time required for disclosure and recognized that compliance with the orders would likely delay the trial. However, it concluded that the disclosure was necessary for the fair disposal of the claim and refused to deny disclosure solely on the basis of trial delay.
Regarding the application for cross-examination of Mr McKenzie under CPR Part 33.4, the court noted that the Plaintiff had withdrawn reliance on parts of his hearsay evidence but that the Defendant had served a Civil Evidence Act notice relying on significant parts of Mr McKenzie's statements. The court exercised its discretion to order that if the Defendant wished to rely on that evidence, Mr McKenzie should attend for cross-examination, leaving the scope of cross-examination to the trial judge.
Holding and Implications
The court DISMISSED the application for disclosure against the First Defendant personally, finding no sufficient basis to order him to disclose documents not in his physical possession or control.
The court ORDERED disclosure of specific documents and classes of documents against the CVC respondents and the FOG companies, subject to appropriate narrowing and specification to meet the CPR 31.17 threshold and to protect confidentiality.
The court granted the Plaintiff’s application to permit cross-examination of Mr McKenzie if the Defendant elects to rely on his hearsay evidence under CPR Part 33.4.
While acknowledging that the disclosure orders would likely necessitate an adjournment of the trial, the court found that the need for disclosure to ensure a fair trial outweighed the prejudice of delay. The court reserved further directions on the timing of disclosure and expert evidence service, as well as on the trial schedule.
No new legal precedent was established; the decision applied established principles on non-party disclosure, directors’ rights to company documents, and cross-examination of hearsay evidence.