De Molestina & Ors v Noboa & Ors

Permission to appeal a case-management decision on specific disclosure should ordinarily be granted only where there is a real prospect of an error of law or principle, or that the decision was plainly wrong or perverse. The Court of Appeal is especially reluctant to interfere because reasonable disagreement is wider in case management. A party’s wish for fuller information to support a company valuation does not justify disclosure of every potentially relevant document. The reviewing court must respect the lower court’s assessment of practicalities, expedition and competing considerations. In a single-business trading group, an earnings-based valuation focused on maintainable earnings and an appropriate multiplier may make detailed internal marketing and competitor material unnecessary, absent exceptional circumstances.

De Molestina & Ors v Noboa & Ors concerned claims for rescission and damages arising from alleged fraudulent representations about the redistribution of shares in Fruit Shippers Ltd. The claimants sought specific disclosure to enable valuation of the company and its shares. On 26 February 2002, David Steel J in the Commercial Court ordered disclosure of seven categories but refused seven others. The claimants applied for permission to appeal, with the appeal to follow if permission were granted. The central issue was whether the refusals involved an error of principle or were plainly wrong.

Application dismissed. The Court of Appeal unanimously refused permission to appeal and ordered costs subject to detailed assessment.

1. Appellate threshold. Sir Martin Nourse, giving the first judgment, held that an applicant challenging a case-management decision must show an error or errors in principle, alternatively that the decision was plainly wrong. Permission would only rarely be granted where there was a real prospect of demonstrating an error of law or a perverse decision. Lord Justice Longmore and Lord Justice Pill agreed with those reasons.
2. Disclosure assessment. The appellate court considered the refused categories individually. The judge was entitled to refuse management accounts and reports because their value to the valuation exercise was uncertain. The reporting packs were not shown to contain material beyond the consolidated accounts. Earlier budgets and forecasts had been overtaken by subsequent accounts. Marketing and competitor material was not shown to assist in assessing maintainable earnings or the valuation multiplier. Operational organisational diagrams were not needed in addition to the legal-structure diagrams and audited accounts already ordered to be disclosed.
3. Valuation context. The court observed that a trading group operating one business would ordinarily be valued on an earnings basis, involving maintainable earnings and a multiplier, save in exceptional circumstances. That observation supported the refusal of the marketing and competitor-information categories.
4. Case management. The judge was required to deal with the practicalities of preparing the case for trial as expeditiously as possible and to balance competing considerations. A conscientious valuer’s wish for extensive information in an ideal world did not justify appellate interference. The claimants had not shown any qualifying error or plainly wrong decision.

1. Court of Appeal (Civil Division): application for permission to appeal dismissed with costs subject to detailed assessment, in [2002] EWCA Civ 677.
2. High Court of Justice, Queen’s Bench Division, Commercial Court: David Steel J partially allowed the specific-disclosure application on 26 February 2002, ordering disclosure of seven categories and refusing seven others.