Hadaway v DB (UK) Bank

Factual and Procedural Background

This opinion concerns an appeal against a decision of a Deputy Master who dismissed an application by the Defendant for disclosure of a document known as the Credit Process Guide ("CPG"). The underlying claim is brought by Company A, part of a major banking group, against a firm of solicitors who acted for it in relation to three buy-to-let loans made in or about April 2007 to the same borrower concerning residential properties in The City. The Defendant admitted liability in part, including breach of contract and negligence for failing to report certain facts relating to the nature of the property purchases. The Defendant also pleaded defences including causation and contributory negligence. The Defendant sought disclosure of the CPG, which was referenced in a disclosed lending policy document but withheld by Company A on grounds of commercial sensitivity. The Deputy Master refused disclosure, and the Defendant appealed that decision.

Legal Issues Presented

1. Whether the Credit Process Guide ("CPG") should have been disclosed as part of standard disclosure under CPR 31.6.
2. Whether there was a sufficient evidential basis to order specific disclosure of the CPG under CPR 31.12.
3. The appropriate approach to disclosure decisions made as case management decisions and the scope of appellate review.
4. The interpretation and application of CPR 31.6 concerning the categories of documents subject to standard disclosure.

Arguments of the Parties

Appellant's Arguments

• The CPG is a key document referenced repeatedly in the disclosed Business Underwriting Guidelines ("BUG") and is necessary to understand Company A’s lending policies fully.
• The CPG is relevant to the causation defence, as it may show how loan applications would have been processed had the Defendant made the proper report.
• The refusal to disclose the CPG impedes the Defendant’s ability to plead fully and fairly on the issue of causation.
• The evidence from Company A’s witness left an evidential gap by focusing on the actual processing of the loans rather than the hypothetical processing had the report been made.

Respondent's Arguments

• The CPG is a high-level business modelling document not intended for day-to-day underwriting use and is not relied upon by Company A in this litigation.
• The loans in question were automated loans processed under the BUG, not manually underwritten using the CPG.
• The references to the CPG in the BUG do not make it relevant to the issues of causation or contributory negligence.
• The CPG does not contain information that would affect the outcome of the case or assist the Defendant's defence.
• The CPG is commercially sensitive and disclosure is refused unless legally obliged.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed review of the evidence and submissions concerning the CPG’s relevance and disclosure obligations under CPR 31.6. It noted that although the CPG was referenced as a key credit policy document in the disclosed Business Underwriting Guidelines, the Claimant’s evidence demonstrated that the CPG was a high-level framework document not used in the underwriting of the loans at issue, which were automated loans processed under the BUG.

The court accepted the Claimant’s witness statement that the CPG did not contain material relevant to the causation defence or contributory negligence pleaded by the Defendant, particularly that it did not address sub-sales or what constituted ‘good business’ despite non-compliance with criteria. This was corroborated by the Defendant’s acceptance of this evidence at face value.

The court applied the test in CPR 31.6, which limits standard disclosure to documents that adversely affect a party’s case or support another party’s case. It rejected the broader relevance test proposed by the Defendant, emphasizing that disclosure obligations are deliberately narrow to avoid disproportionate discovery burdens.

The court also considered the nature of the decision as a case management decision but distinguished that disclosure under CPR 31.6 is not a pure exercise of discretion and requires an independent assessment of the document’s relevance under the rule. The court admitted new evidence on appeal and conducted a fresh evaluation accordingly.

On the issue of specific disclosure under CPR 31.12, the court found no good reason to depart from the Deputy Master’s discretionary refusal, as the Defendant had not demonstrated that the CPG was relevant or necessary beyond standard disclosure.

The court further analyzed procedural rules governing disclosure and inspection, noting complexities and gaps in the CPR provisions concerning inspection rights once a document’s existence is disclosed in witness statements. It concluded that the court retains inherent jurisdiction to control disclosure and inspection to ensure fair case management.

Holding and Implications

The court DISMISSED THE APPEAL, upholding the Deputy Master’s decision that the Credit Process Guide did not fall within the scope of documents required to be disclosed under standard disclosure rules (CPR 31.6) and that specific disclosure under CPR 31.12 was not warranted at this stage.

The direct effect of this decision is that the Defendant will not be entitled to inspect or rely on the CPG in the course of this litigation unless future expert directions justify revisiting the issue. The court left open the possibility of renewed applications if expert evidence demonstrates the necessity of the document. No new precedent was established beyond the application of existing disclosure principles to the facts of this case.