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The new frontiers of discovery

28 March 2013

Litigation Partner, David Cadin, recently obtained orders from the Master of the Royal Court which extended the boundaries of discovery in Jersey.  Proceedings were started by Order of Justice in 2010 for breach of trust against Bedell Cristin's clients and others.

The litigation concerned loans that had been made out of the trust structure. The Plaintiffs and Bedell Cristin's clients wanted to take steps to recover those loans but in order to do so effectively, needed to see documents (in particular electronic documents such as emails and letters) which they thought were likely to be in the possession of one of the other parties ("Defendant A"). Unfortunately Defendant A was not willing to cooperate and was of the view that documents should only be provided by way of mutual exchange on discovery in the usual way. The proceedings were in a state of flux; only one party ("Defendant B") had filed an Answer; the Plaintiffs had indicated that they were going to amend the Order of Justice but no application had been made nor had any final, draft, amended pleading been circulated; formal mutual discovery was a very long way off as was the possibility of the parties being in a position to pursue loan recoveries properly.

Accordingly, at a directions hearing before the Master in 2012, Bedell Cristin made applications for:

  • an order against Defendant A requiring it to deliver up copies of any electronic documents which might assist in recovering the loans; and
  • a discovery order against Defendant B.

Defendant A
Bedell Cristin sought an order for early discovery against Defendant A in such a way that it did not require Bedell Cristin's clients to give reciprocal discovery.

Defendant A was vehemently opposed to the application stating that such an order was not contemplated under the RCR and was not within the Master's power.

In response to the suggestion that early discovery was an impermissible extension of the Court's powers, the Court considered Al Rawi and others v Security Service and others [2011] UKSC 34 where a distinction was made between the court (i) exercising its inherent power to control its own procedure and (ii) exercising its general power to develop the substantive common law incrementally. There are "many examples of the court in the exercise of its inherent power introducing procedural innovations in the interests of justice. Thus it invented the power to grant Mareva injunctions and make Anton Piller orders. These orders were devised to prevent misuse of the court's procedure and to ensure that its procedure is effective." Further, disclosure was developed in order to aid the administration of justice and, though now contained in rules, the scope of disclosure has long been seen as a matter on which the court has jurisdiction to decide:
"if the court is satisfied that it is necessary to order certain documents to be disclosed and inspected in order fairly to dispose of the proceedings, then… the law requires that such an order should be made".

In this case, there was an expectation that any documents obtained as a result of an early discovery order would expedite the proceedings, and potentially narrow the scope of the claims in keeping with some of the previous decisions (such as Eckman v. Sidem International Limited and Michault [2009 JLR Note 59] and Sheikh Mohamed Ali M. Alhamrani and Four Others v. Sheikh Abdullah Ali M. Alhamrani, JP Morgan Trust Company (Jersey) Limited and Russa Management Limited [2009 JLR Note 50]) which stated that disclosure would:
"facilitate the orderly and cost-effective resolution of disputes, balancing the interests of the litigants in a particular case against the wider interests of the public in obtaining proper access to the courts and in the efficient use of judicial resources."

The Court also looked at the law relating to pre-action disclosure in England under CPR 31.16 (3)(d) and in particular, Bermuda International Securities Ltd v KPMG (a firm) [2001] All ER (D) 337 (Feb). Pre-action disclosure is a discretionary case management power but it would only be ordered where the court could say that the documents asked for would be documents that would have to be produced at the standard disclosure stage. The Court also had to consider whether (i) the order would help in the disposal of the proceedings fairly (ii) it would assist in resolving the dispute without proceedings; and (iii) it would save costs.

In this case:

  • the documents requested would be disclosable on discovery in the usual manner albeit that such discovery would not be for some time;
  • the request made was proportionate and appropriate safeguards had been included to ensure that it remained proportionate;
  • the documents produced as a result of the order were to be utilised for the sake of loan recoveries, which would be for the benefit of all the parties to the litigation;
  • all parties were hampered by a lack of documents which continued to cause problems in progressing the proceedings;
  • the production of these documents could streamline the proceedings.

The Court held that:

  • RCR 6/17 empowered the Court to make an order for discovery against "any party"; 
  • the fact that the Court usually orders all parties to give mutual discovery did not prevent it (in appropriate cases) from ordering one party to give (unilateral) discovery;
  • there is no specific time in the Rules setting out when discovery is to occur;
  • pursuant to its case management powers the Court can order discovery to take place at such time, by such party or parties, and in regard to such class or classes of documents, as it thinks fit.

The Master therefore granted an order requiring Defendant A to give unilateral, early discovery of a certain class of documents relevant to the loan recoveries. 

Defendant B
As Defendant B had filed an Answer to the Order of Justice, the Master had no hesitation in making an order requiring him to give discovery. Defendant B failed to comply with that Order.

Bedell Cristin's clients could have applied to commit Defendant B to prison for failure to comply with the Order; the Plaintiffs could have tried to debar him from defending the proceedings; unfortunately neither of these courses were guaranteed to produce the documents that Defendant B should have disclosed.

However, Bedell Cristin were aware that Defendant B's documents were also in the possession of an unrelated third party and that Defendant B was entitled to be given copies of those documents. These were therefore documents within the "power" of Defendant B. Bedell Cristin engaged with the third party and it agreed to provide discovery if so ordered.  Bedell Cristin therefore successfully sought and obtained an order from the Master against the third party requiring it to disclose the documents "on behalf of Defendant B" and "in respect of his discovery obligation". These were documents which would fall to be disclosed in any event by Defendant B; as part of that disclosure process, the third party would have to provide them to Defendant B, and so although novel, it was within the power of the Court to require the third party to disclose the documents on behalf of Defendant B.

Both of these decisions highlight the inherent flexibility of the procedure before the Royal Court.

Broadly framed rules allowed Bedell Cristin to secure tangible benefits for its clients and assisted with the conduct of the litigation and related loan recoveries.

In the case of Defendant B, the extension of discovery obligations to de facto agents is a useful weapon in the Court's armoury and in this case, prevented the obstinance of one defendant from impacting adversely on the proceedings.

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