SES Contracting Ltd & Ors v UK Coal Plc & Ors

On an application for pre-action disclosure, the general rule is that the respondent receives its costs. The rule recognises that a person outside existing litigation may preserve the privacy of its documents until sufficient grounds for disclosure are shown.

The court may depart from that starting point where opposition, or the manner of opposition, is unreasonable. An order requiring the respondent to pay all the applicant’s costs is justified only where the opposition was clearly unreasonable or its manner was so unreasonable that the respondent should bear both parties’ costs. Reliance on witness statements without contemporaneous documents does not itself constitute unreasonable conduct.

The defendants appealed against the High Court’s costs order following a successful application by SES Contracting Ltd and its parent company for pre-action disclosure. SES suspected that its former chief executive and companies associated with UK Coal had colluded to divert its business and had used confidential information in connection with a mining contract.

The High Court found the requirements of rule 31.16(3) satisfied and ordered disclosure. That order was not appealed. The judge nevertheless required the defendants to pay all the applicants’ costs because they had opposed the application through extensive witness statements without producing contemporaneous documents capable of supporting their evidence.

The issue was whether that conduct justified so extensive a departure from the general costs rule in rule 48.1(2) of the Civil Procedure Rules.

1. Appeal allowed. Moore-Bick LJ held that the High Court had not given sufficient weight to the general rule governing the costs of pre-action disclosure applications. Moses and Waller LJJ agreed.

2. Rule 48.1 establishes as the starting point that the respondent to a pre-action disclosure application should receive its costs. That rule recognises that a person who is not yet subject to the disclosure obligations arising in existing litigation is entitled to maintain the privacy of its documents until the applicant establishes sufficient grounds for overriding it. It will therefore usually be reasonable for the respondent to require the applicant to justify the requested relief.

3. The contemplated claim alleged participation in a dishonest conspiracy and did not fall within a category in which pre-action disclosure had become routine. Applying the approach in Black v Sumitomo Corporation [2001] EWCA Civ 1819, it could not readily be said that UK Coal acted unreasonably by resisting disclosure in response to allegations which had not yet been pleaded. The High Court had not treated the fact of opposition itself as unreasonable.

4. A respondent which reasonably opposes an application is ordinarily entitled to choose the basis and evidence on which it does so, provided it does not adopt a wholly unreasonable course that unnecessarily increases costs. Unsupported witness statements may receive less weight, but the absence of contemporaneous documents does not itself make the respondent’s conduct unreasonable.

5. The High Court was nevertheless entitled to find that the volume and manner of the defendants’ evidence had increased preparation costs and prolonged the hearing without supplying objective material. That finding provided ample grounds for departing from the general rule. It did not justify the strongest ordinary costs order available, namely requiring the defendants to pay all the applicants’ costs. Such an order would normally require clearly unreasonable opposition or a manner of opposition so unreasonable that the respondent should bear the whole of both parties’ costs.

6. The High Court’s exercise of discretion was flawed. Its order was set aside and replaced with no order as to costs.

1. Court of Appeal (Civil Division): The appeal was allowed. The order requiring the defendants to pay the applicants’ costs was set aside and replaced with no order as to costs: [2007] EWCA Civ 791.
2. High Court, Queen’s Bench Division: His Honour Judge Richard Seymour QC granted pre-action disclosure under rule 31.16(3) of the Civil Procedure Rules and ordered the defendants to pay all the applicants’ costs of the application. The disclosure order was not appealed.