Analysis
This was an application by the claimant for an order for disclosure against a non-party under CPR r.31.17. The underlying action concerned a claim by the assignee of rights from the twin minor children of the first defendant (‘the twins’) concerning a compromise of earlier proceedings (‘the compromise’). The claimant alleged that neither the twins nor their mother was consulted about the compromise, and the compromise did not properly take account of the twins’ interests.
In the late 1990s the first defendant established an employee benefit trust (‘EBT’). The EBT was devised by Paul Baxendale-Walker to shelter the proceeds of sale of the first defendant’s business from CGT and IHT. The first defendant gifted his shares to the EBT. The shares and the proceeds of the shares were held off-shore on a discretionary trust of which the first defendant was the settlor and protector, and the second defendant was the most recent corporate trustee. The first defendant was excluded from benefit from the EBT, but was able to take funds from the EBT by way of discounted loans. His family could benefit after his death. The employees of the business were also discretionary beneficiaries.
The first defendant met the Twins’ parents through Mr Baxendale-Walker. They formed a personal relationship and together had twin children born in 2001. The relationship subsequently broke down. In 2004, the first defendant had two further children by two different women. The Twins and their half-siblings were among the class of beneficiaries of the EBT.
HMRC began to investigate the EBT in 2005, and in 2010 levied assessments on the first defendant. The first defendant appealed these to the FTT. In 2012 the first defendant received advice that HMRC’s case was strong and that the EBT did not work as intended. The first defendant settled on terms with HMRC in April 2013.
The first defendant decided to dissolve the EBT and recover the assets. He commenced proceedings against the trustees of the EBT and five other defendants alleging that the EBT was void. The other defendants were the first defendant’s mother, two sisters, one of his children (the twins’ half-sibling), and one of the employees. By an order in those proceedings, Asplin J appointed the child (‘the representative defendant’) to represent the class of beneficiaries which included the first defendant’s children. These proceedings were settled, and Asplin J approved the terms of the compromise.
By this application the claimant sought disclosure and inspect of six classes of documents from Alison Meek, a solicitor at Harcus Sinclair LLP, which will reveal the background to the Compromise. The following classes of documents were sought:
- a) open inter partes correspondence;
- b) without prejudice inter partes correspondence;
- c) documents disclosed to Ms Meek in relation to the proceedings;
- d) court documents in relation to the proceedings;
- e) communications between Ms Meek, Harcus and counsel; and
- f) the deed of trust approved by Asplin J.
In respect of classes a-d and f, it was said these documents could be disclosed by the Defendant and therefore should not be subject to a third-party disclosure order. In respect of class e, it was said that the documents were subject to legal professional privilege (‘LPP’).
Held (allowing the application in respect of class e):
[1] There are two condition for an order under CPR r.31.17(3); (a) the documents of are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings; and (b) disclosure is necessary in order to dispose fairly of the claim or to save costs.
[2] Documents are ‘likely to support the case of the applicant’ if they ‘may well’ do so, and it is not necessary to show that this is more probable than not: Three Rivers DC v Bank of England (No 4) [2002] EWCA Civ 1182, at [32].
[3] Ordering disclosure against non-parties is the exception rather than the rule (Frankson v Home Office [2003] EWCA Civ 655 at [10]) and the jurisdiction should be exercised with caution (Re Howglen Ltd [2001] 1 All ER 376 at 382).
[4] In respect of classes a-d and f, the Claimant had made the application because it wanted to obtain documents prior the hearing of summary disposal applications made by the Defendants. This was not an appropriate use of the procedure under r31.17. The second condition was not satisfied, and in any event the judge refused to exercise his discretion in respect of those documents (subject to confirmation in evidence that Ms Meek did not have without prejudice correspondence with the other defendants to the earlier proceedings).
[5] In respect of class e, there was a common interest between the twins and the representative defendant, such as to jointly entitle the whole class of children to LPP. Therefore the representative defendant cannot rely upon LPP to deny the twins or their successor in title inspection of the documents, but the twins cannot waive LPP so as to permit inspection of the documents by the defendants without the representative defendant’s consent. The representative defendant’s mother did not consider it would be in the representative defendant’s best interest to waive LPP. LPP would not prevent the claimant from inspecting these documents but would prevent the claimant from deploying the documents as part of its case.
[6] It was not necessary in order for r31.17(3)(a) to be satisfied for the applicant to show that the documents themselves could be deployed as part of its case. this was implicit in the structure of r31.17, which envisaged that an order may be made for disclosure of documents on the basis that that they are likely to support the applicant’s case or adversely affect another party’s case (r31.17(3)(a)) even though the respondent may have a right or duty to withhold inspection of the documents (r31.17(4)(b)(ii)). Once the claimant had inspected the documents, it may be able to prove their contents in other ways, and hence the documents may support its case even though they cannot themselves be deployed as part of that case.
[7] Disclosure and inspection of this class of documents by the claimant was necessary fairly to dispose of the claim or to save costs. The documents were likely to give a strong indication as to the extent to which the twins’ interests were properly taken into account. They may support the claimant’s beliefs or they may contradict those beliefs. Either way, early disclosure and inspection by the claimant was likely to promote the speedy, just and efficient resolution of the dispute, and may avoid the need for a trial.
JUDGMENT ARNOLD J: Introduction [1] This is an application by the Claimant (‘Twin Benefits’) for an order for disclosure against a person who is not party to the proceedings pursuant to CPR r31.17 and for inspection of the documents disclosed. The Respondent (‘Ms Meek’) is a solicitor and a member of Harcus Sinclair LLP (‘Harcus’). …Continue reading "Twin Benefits v Meek [2017] EWHC 177 (Ch)"