XL London Market Ltd & Anor v Zenith Syndicate Management Ltd & Anor

Pre-action disclosure may be ordered where the parties are likely to litigate, the documents would fall within standard disclosure, and early disclosure is desirable to resolve or fairly prepare the dispute or save costs. The applicant need not identify a concluded cause of action or precise allegations where the uncertainty is itself caused by information held by the respondent. Documents created after the relevant transaction may still fall within standard disclosure if they materially explain a later development and assist in assessing the earlier conduct. The court must address the jurisdictional requirements separately and then exercise its discretion having regard to all the circumstances.

The claimants, managing agents of Lloyd’s syndicates, sought pre-action disclosure concerning the setting and subsequent reduction of reserves for motor business transferred under reinsurance-to-close arrangements. They relied primarily on CPR Part 31.16, alternatively on the Norwich Pharmacal jurisdiction and CPR 31.14.

The defendants argued that post-transaction documents fell outside standard disclosure and that disclosure should await inspection of documents already agreed. The central issue was whether the statutory rule permitted disclosure of documents explaining the substantial reserve reduction and whether disclosure was desirable before proceedings.

1. CPR Part 31.16. The requirements identified in Black v Sumitomo Corporation [2001] EWCA Civ 1919 had to be considered separately. The court had jurisdiction where both sides were likely to be parties to subsequent proceedings, the documents would be subject to standard disclosure, and there was a real prospect that early disclosure would be fair, assist settlement or save costs.
2. The claimants could establish likely-party status through a possible negligence claim concerning the setting of reserves. The defendants owed contractual duties of reasonable care in running off the business, and any resulting loss connected with the reinsurance-to-close premium could fall within the claim.
3. Post-reinsurance documents could satisfy the standard-disclosure requirement. Although the quality of reserving was judged at the time it was undertaken, knowledge of how and why the eventual outcome differed could materially inform that assessment. Documents showing how the reserve release was calculated would therefore support or adversely affect the parties’ respective cases.
4. Disclosure was fair and desirable. The information was held by the defendants, the alleged loss was substantial, no oppressive burden or confidentiality objection was shown, and access to both categories of documents would focus investigation and avoid unnecessary cost. The court therefore exercised its discretion to order disclosure against Acott & Tilley.
5. The alternative Norwich Pharmacal application was unnecessary. Langley J indicated that, had the CPR Part 31.16 application failed, the alternative would probably also have failed because the jurisdiction principally concerns disclosure identifying third-party wrongdoing, rather than wrongdoing by the respondent. The CPR 31.14 application likewise required no separate determination. No order was needed against ZSML because the documents were available from Acott & Tilley.