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Restricted Use of Disclosed Documents - An update

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17-01-2014

The recent Court of Appeal case of Alphasteel Ltd v Shirkhani and Another [2013] EWCA Civ 1272 has provided an interesting insight into how the courts will construe an application under CPR 31.22 allowing documents, disclosed in previous proceedings, to be used in subsequent proceedings in which the disclosing party is not involved. 

Background

Alphasteel Ltd ran a steel processing plant in South Wales which entered liquidation. The liquidators commenced underlying proceedings against Mr Sharham Shirkhani and a Dubai registered company, Summit Development General Trading LLC (together “the Defendants”) which was controlled by Mr Shirkhani.

These initial proceedings were compromised by a settlement agreement. This agreement provided inter alia that the action was to be stayed, that the parties including the liquidators, agreed that they would not “at any time in the future sue, commence, voluntarily aid in any way, prosecute or cause to be prosecuted and/or otherwise pursue [the Defendants] in respect of any claims or rights or complaints of whatever nature, whether in this jurisdiction or any other.” The agreement also provided for all terms and negotiations in connection with it were to remain confidential to the parties, their advisors and the liquidators.

In 2012 Alphasteel applied to the court for permission to use documents disclosed in the underlying proceedings in new and separate proceedings in Switzerland against a third party.

First Instance

The Defendants submitted that the documents, requested by the claimants, were covered by the settlement agreement as the Swiss proceedings arose from or in connection with the “dispute” or “proceedings” as defined in the settlement agreement. Consequently the claimants’ approach should be rejected.

The judge held firstly, that he did not consider Alphasteel to be making a claim that it was entitled to use the documents. It had requested permission to use the documents, precisely because it recognised that it was not entitled to use them in the manner it wished to. In the judge’s view Alphasteel could not be said to be making a “claim” when asking the court for permission to use the documents in the Swiss proceedings.

Secondly it was decided that, even if Alphasteel was making a “claim”, it could not be considered to be a claim “against” the Defendants, or indeed against anyone else. It was pointed out that there was no relief sought against the Defendants, not even in costs, and that that reflected the nature, and reason, of the permission which Alphasteel sought.

Thirdly, and rather similarly to points one and two above, Alphasteel was concerned with avoiding being in breach of CPR 32.11 (which precludes parties from using disclosed documents for any other purpose that then proceedings in which the were disclosed, unless the court or the party who disclosed it grants permission, or unless the document has been ready by/to the court or been referred to in a hearing open to the public). The Defendants had an interest in the documents and an interest in whether the court permitted the claimant to use the them. But the judge was unwilling/unable to translate Alphasteel’s request into an assertion of a right against the Defendants.

Therefore, the Judge was willing to allow the use of documents, disclosed in the underlying proceedings, in the Swiss proceedings. The Defendants appealed.

Court of Appeal

On appeal the decision at first instance was overturned. Lord Justice Tomlinson provided the lead judgement, with Lady Justice Gloster and Lord Justice Underhill concurring.

The purpose of the application had been to defeat the defendants’ defeasible right to confidentiality and privacy in the documents and to give the claimant an advantage at the expense of the defendants. That had amounted to a claim “against” the defendants. In making its application the claimant ought to be regarded as having, for the purposes of the settlement, pursued the defendants in respect of a claim against them. Looking at the matter realistically, the effect of the application, character and confidentiality of their documents, over and above the limited extent to which they had already been compromised. By settlement, the claimant had agreed voluntarily not to do that.

Accordingly, the order giving the claimant permission to use the documents for the purpose of the Swiss proceedings would be set aside.

Commentary

Although the court did not explicitly acknowledge this, the specific terms of the agreement effectively dictated the court’s discretion. Therefore as a starting point, any settlement agreement should provide for and set out exactly what is to happen or what further use disclosed documents may be put to.

The disclosing party should consider inserting clauses covering the return of documents (i.e. whether or not this should be required), or even the destruction of copies, and they should ask themselves whether there is a risk of such documents coming to other potential claimants. The opposing party could attempt to carve out an exception under a settlement agreement, and a careful balance will have to be struck.

Finally, caution must be advised, as under CPR 31.22 if documents have been read to, or by, the court, or have been referred to in a hearing open to the public, then the court’s permission is not required.

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