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31 July 2017

Disclosure of Documents in Litigation: Extent of Use for Other Purposes

I toyed with the idea of having the article entitled ‘You’re in contempt! Bigwigs point fingers in court’, but that looks more akin to something that would appear in The Sun, so I have restrained myself: But it is not far from the truth as you will see.

The convoluted case involved three sets of parties: the ‘UPL parties’, who were the claimants in the pre-existing main claim, but defendants in the contempt proceedings; the ‘ACA parties’ (defendants only in the main claim who played no part in the contempt proceedings); and the ‘C&W parties’, who were the claimants in the contempt proceedings, joined defendants in the main claim.  Those contempt proceedings are ‘Grosvenor Chemicals Ltd and ors –v- UPL Europe Ltd and ors [2017] EWHC 1893 (Ch)’.   

Look what we’ve found!

In an action for trade mark infringement and (effectively) unfair competition (the ‘main claim’) against the ACA parties, the UPL parties sought a pre-action disclosure order against a potential new defendant, the C&W parties (who were later joined).  That disclosure order contained a specific undertaking from the UPL parties that any discovery documents located could only be used ‘for the purposes of these proceedings (including adding further Respondents) or commencing civil proceedings in relation to the same or related subject matter to these proceedings or obtaining evidence.’  A subsequent consent order agreed between these parties omitted these restrictions. However, CPR r.31.22 contains a specific restriction that disclosure of any document in proceedings may only be used for the purposes of the proceedings for which it was disclosed. This puts into effect procedurally the ‘implied undertaking’ given by solicitors to the court not to use discovery documents for any ‘collateral purpose’.

For many months following disclosure by the C& W parties, the solicitors acting for the UPL parties failed to realise the significance (so they say) of the contents of some of the documents disclosed. One email passing between the C&W parties made reference to an ex-UPL employee (who was aware of the UPL parties’ agrichemical formulation), who appeared to have told the C&W parties about a specific formulation. This is because the email stated:  ‘we [and the ex-employee] went through our formulation and we have been selling it as a direct match.’  According to the UPL parties’ solicitors, this was proof that the C&W parties were selling counterfeit product, and that the ex-employee had divulged confidential information concerning the formulation of their product.

The UPL parties’ solicitors wrote threatening letters to the C&W parties, and to the ex-employee threatening him with ‘new’ proceedings. At the time of writing (late November) there were only a few months left until the April trial date in the main claim. As those letters formed the basis of the application for permission to bring contempt proceedings, the Judge considered them carefully.

Letter of the Law?

First, as is often the case, the solicitors made various accusations concerning the status of the ex-employee, his knowledge and therefore what it was that the UPL parties also knew, or should have known. Next, the solicitors required various information and disclosure, including the chemical formula of the alleged infringing product, which they claimed was a counterfeit. The solicitors’ letter contended that further applications for specific disclosure would be made and ended up reserving all their client’s rights. 

The letter to the ex-employee was similarly forthright and required the ex-employee to ‘cough up’ certain information.  Unfortunately for the solicitors, the letter concluded with the ‘usual’ threats about bringing proceedings, stating the ex-employee should seek independent legal advice, but making clear proceedings would be issued against him; not that he would be joined in the existing proceedings.

This therefore indicated that the disclosure of the documents in the main claim were being used for the possibility of bringing new proceedings against the ex-employee for breach of confidence; a cause of action not in the main claim. 

The C&W parties’ solicitors wrote back robustly, pointing out that such use was a breach of CPR r.31.22. Accordingly, as there were no grounds UPL parties’ solicitors were required to notify the ex-employee as such. That is, absent any court order granting permission for such use. 

The response from the UPL parties’ solicitors was to provide amended pleadings to the main claim, adding the cause of action and adding also the ex-employee to the proceedings. The UPL parties’ solicitor’s letter also pointed out that it was not ‘collateral use’ to seek to add a new cause of action. They acknowledged, however, that if the court considered that separate proceedings were required, then they would need the court’s permission to use the documents. To avoid any of this, the solicitors sought agreement to what they were seeking to achieve, and considered that there would be no ‘prejudice’ in preparation of this part of the claim (despite there being less than 3 months to go to the trial).

Further, increasingly heated correspondence then ensued between the lawyers and only eventually did the UPL parties’ solicitors recognise that an apology might be a good idea in order to quell the escalating threat of contempt proceedings. Needless to say, that apology was considered to be too little, too late and the proceedings were launched, with the UPL parties seeking permission to use the documents, if this was needed.

You scoundrel!

Perhaps somewhat unnecessarily, the C&W parties’ solicitors made two pointed barbs in respect of the UPL parties’ solicitors’ belated apology, saying:

‘… these are all crocodile tears expressed now it is apparent that the correspondence will be put before the court because the 10th January letter has not done the trick.  I therefore dismiss the 26th January letter as a mere exercise in hypocrisy.’

And in respect of the late-seeking of the court’s permission to use the documents, they commented it was:-

‘…surely like putting the money back in the till after one has been caught with one’s hand in it.’

Against that backdrop, the Judge considered the approach to be taken as to whether to give permission to commit a party for contempt.  First, there must be a deliberate or reckless breach of CPR r. 31.22, i.e. knowing the disclosed documents are subject to it, but ignoring that fact.  Secondly, this must be proved by the party seeking committal to be beyond reasonable doubt. The Court also had to consider whether it was in the public interest to order committal proceedings (i.e. because important lessons will be learned) and the relative strengths of the case.

The Judge pointed out that it was often the case after disclosure that an additional cause of action would be sought to be added or an additional party joined in. But as ‘new proceedings’ had been threatened against the ex-employee, use of the disclosed documents was a breach of CPR r.31.22; although the letter to the C&W parties was not.

The Judge concluded that the UPL parties’ solicitor’s breach was not deliberate, because the Partner’s evidence showed he truly believed the use fell within the ambit of CPR r.31.22.  There was also no public interest in allowing contempt proceedings in this case. The application was therefore dismissed.

And the winner is…?

The most likely satisfied party with the outcome, despite seemingly losing, is the C&W parties.  The reason is that their tactic meant that the trial in the main claim took place without the confidential information claim being heard.  True that the UPL parties did not want this added as it stood at the time, but it will have robbed them of the chance to have the ex-employee in the witness box. If, as they would have expected, he was shown to be a ‘bad egg’, that ‘smell’ would have tainted the C&W parties’ defence in the main claim and so success for the UPL parties. Having this put off, therefore, benefitted the C&W parties the most.

The case highlights the importance of the disclosure exercise, but equally that a parties’ openness on disclosure should not, without the court’s express permission, be abused and the documents used for other purposes. 

Equally, it shows the dilemma sometimes faced by judges to do justice to a situation.  Here, the judge considered the UPL parties’ solicitor’s position only from the angle of whether his action was deliberate. Given the test refers to ‘reckless’, the judge also ought to have considered it. The question the judge should have asked, given the lawyer was clearly aware there was a risk of falling foul of CPR r. 31.22 is:  whether, in the circumstances known to him, it was unreasonable to take the risk?  The answer is perhaps a lot less clear.

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