UK: Pre-Action Disclosure In Fraud Claims

Last Updated: 8 January 2002
Article by Simon Bushell

The Civil Procedure Rules (CPR) introduced a new procedure for pre-action disclosure of documents. CPR 31.16 provides that disclosure can be ordered prior to the commencement of proceedings where the Court is satisfied that it may dispose fairly of the anticipated proceedings, assist in the dispute being resolved without proceedings, and save costs. The procedure is available in all mainstream commercial disputes, including those alleging fraud.

The applicant must satisfy the Court that both he and the respondent "are likely to be parties to subsequent proceedings". This requires the Court to embark on at least some assessment of the nature and the strength of the applicant’s case, and it is not sufficient for the applicant for pre-action disclosure merely to state an intention to commence proceedings. There must be an adequate basis for the claim he intends to bring, although the claim need not be a prima facie claim.

Recent cases have shed some light on how a Court might assess an applicant’s case when deciding whether to grant pre-action disclosure. In Bermuda International Securities Limited v. KPMG (a firm) [2001] EWCA CIV 263 it was held that the appropriate test was that the applicant has enough evidence to plead a prima facie case but seeks pre-action disclosure in order to particularise it.

This formula was expanded slightly in the first instance decision in Herbert Black and others v. Sumitomo Corporation and Others (Unreported, 26 July 2001), a decision of Michael Brindle QC sitting as a Deputy Judge of the Commercial Court. In that case it was held that disclosure could be appropriate where there was not necessarily enough evidence to make out a prima facie case but there was a reasonable basis for making an intended claim.

During the course of argument in the Black case, leading counsel for the respondent sought to argue that the Court should be particularly wary of permitting disclosure before statements of case were filed where serious allegations of fraudulent or similar behaviour were involved. The thrust of the argument appeared to be that the English procedural rule that imposes restrictions on the pleading of fraud (in the absence of particulars) should militate against allowing pre-action disclosure. Such an argument, if accepted, could have put claimants in fraud cases at a distinct disadvantage – in effect requiring the victims of fraud to particularise their misfortune in advance of pre-action disclosure – exactly the opposite of what CPR 31.16 intended.

The Deputy Judge saw dangers in adopting an approach denying pre-action disclosure in cases of alleged fraud, and was concerned to avoid a situation:

"allowing defendants to escape in cases where a prima facie cause of action does not yet exist but there is a reasonable basis for believing that it might do if disclosure could first be ordered."

The Black case has very recently been reviewed by the Court of Appeal ([2001] EWCA Civ 1819) which overturned the original order permitting pre-action disclosure. The Court of Appeal’s decision was concerned essentially with issues relating to the exercise of discretion, rather than any point of principle as to whether pre-action disclosure in fraud cases should, or should not, be preferred. However, Rix LJ passed comment on the consideration of fraud cases generally:

"At a general level, there are clearly concerns that allegations of dishonesty are not lightly made, that a defendant to an allegation of dishonesty knows plainly what it is that is alleged against him, and also that dishonesty does not spread its cloak over the means by which it can be detected and revealed. It is not plain how these concerns are to be reconciled in any particular case in the context of pre-action disclosure, but it would seem to me that a court which is asked to grant such disclosure should be careful to pay proper regard to each of them. In any event it cannot be right that an allegation of fraud should assist the potential claimant to obtain pre-action disclosure, unless his allegations carry both some specificity and some conviction and his request for disclosure is appropriately focused."

The opportunity to obtain pre-action disclosure against an intended defendant therefore continues to represent an important weapon in the fraud litigator’s armoury, in addition to the already extensive forms of third party disclosure remedies available in equity and common law. However, the Court of Appeal’s comments in the Black case highlight the need for applicants who seek pre-action disclosure in support of allegations of fraud to frame their application in such a way which is specific, cogent and focused.


"© Herbert Smith 2002

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

For more information on this or other Herbert Smith publications, please email us."

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