Disclosure does not mean “no stone left unturned”

The latest judgment in Invest Bank v El-Husseini [2024] EWHC 996 (Comm), where Debenhams Ottaway represents two of the defendants, saw a win for the firm in the substantial dismissal of the bank’s application. It also raised important questions on disclosure. The judgment serves as a reminder for parties to be specific and measured in their requests for disclosure and that it is not a “no stone left unturned” exercise.

In support of the claimant bank’s claims under s423 of the Insolvency Act 1986 to reverse various transfers of value from the first defendant or companies owned by him to his family members or their companies, it issued an extensive disclosure application that the judge described as “overblown and unfocussed”.

The claimant’s application sought under paragraphs 17 and 18 of the PD57AD:

• Findings that documents held by various third parties were within the control of the defendants
• Orders for the production of classes of documents
• A privilege schedule identifying all non-privileged information contained in documents in which privilege is asserted.

The judgment shows the discussion of the interaction between paragraphs 17 and 18, and raised these points of general interest:

1. The onus of establishing that documents held by a third party are in the ‘control’ of the litigating party is on the applicant seeking disclosure.
2. The control relationship must be established by reference to each individual third party entity and not via a blanket approach.
3.  An applicant cannot access the paragraph 17 power by establishing a failure to comply with the existing order for Extended Disclosure in one respect, if what the applicant is seeking to revisit under paragraph 17 is a different aspect of that order.
4. The Chanel principle of abuse of process is not a hard precondition to the applicant’s ability to access the paragraph 18 power, but it “will no doubt often be relevant, and perhaps in any given case determinative” to explore whether the variation now sought under paragraph 18 could and should have been sought earlier.
5. The requirement in paragraph 18.3 that an application for a variation ‘must’ be supported by a witness statement is a mandatory requirement and, if it is not complied with, “the court has no power to make any order at all”.
6. Paragraph 18 provides that the order made must not only be reasonable and proportionate but also ‘necessary for the just disposal of the proceedings’. Although paragraph 17 does not contain such a requirement in terms, this requirement applies if the order sought (even under paragraph 17) would increase the burden on the parties in the lead up to trial.
7. There is no rule that a party may not use search parameters (e.g. keywords or date ranges) to limit its searches without the agreement of the other party or the approval of the court.

The judge, Mr Adrian Beltrami KC, was unimpressed by the bank’s excessive bundles and unrealistic time estimates for hearings, and called for “restraint, focus and efficiency”. In particular, on disclosure, its draft order against one of our clients included ‘Corporate Vehicles’, ‘Connected Entities’ and all entities in which he has a ‘financial interest’, which was described as “both uncertain in its application and almost limitless in its reach”’.