Gwelhayl Ltd v Midas Construction Ltd & Anor

An application for pre-action disclosure requires the applicant to identify an arguable underlying claim and to satisfy each jurisdictional condition in CPR 31.16. The court must then exercise its discretion by reference to all the circumstances. Pre-action disclosure is not available merely to investigate whether a speculative commercial claim might exist or to enable a claimant to discover whether it has a claim. A professional’s cost overrun does not, without more, establish liability. Documents belonging to a client and held by its agent may be ordered to be delivered up, but the agent’s lien may be protected by payment into court. The agent’s own working papers, calculations and memoranda remain excluded absent agreement.

Gwelhayl sought pre-action disclosure from Midas Construction Ltd and The Bailey Partnership concerning a building project and the alleged settlement of the measured-work element of the final account. The claim against Midas was referred to arbitration, leaving Bailey as the material respondent to the disclosure application.

Gwelhayl also applied to amend its notice to seek delivery up of documents. The central issue was whether Gwelhayl had identified an arguable claim against Bailey, and whether the requested documents fell within the statutory and discretionary requirements for pre-action disclosure.

The court dismissed the application for pre-action disclosure and granted limited relief for delivery up.

1. Pre-action disclosure. Under CPR 31.16, the applicant had to establish the four conditions in rule 31.16(3), including that the respondent’s standard disclosure duty would extend to the requested documents and that early disclosure was desirable. The court also retained an overriding discretion to refuse relief, informed by the nature and clarity of the proposed claim, the documents sought, the pre-action context and the applicant’s ability to formulate its case without disclosure.
2. Gwelhayl had not identified any properly arguable claim against Bailey. Its primary position was that the alleged settlement was not binding, which would leave no claim against Bailey. If the settlement was binding, Gwelhayl still could not identify the loss suffered, explain why the agreed figure was excessive, or identify any item of work said to have been over-valued. The proposed claim was therefore contingent, inchoate and speculative.
3. The court rejected the contention that the documents should be disclosed so that Gwelhayl could discover whether it had a claim. Civil litigation investigates claims that have been made; it is not an investigation for its own sake. The case was a speculative commercial claim, not analogous to a straightforward medical-negligence disclosure application. A cost overrun, without more, did not establish a claim against the professional adviser.
4. Delivery up. Documents created by Bailey or received by it in the course of acting as Gwelhayl’s agent were prima facie deliverable. Bailey had a lien for outstanding fees of £10,555.41. The court ordered that sum to be paid into court, after which Bailey was to release category 2 documents belonging to Gwelhayl.
5. The order excluded Bailey’s own calculations, notes, memoranda and other working documents prepared for its own use. The parties had liberty to apply concerning payment out, with any application to be made by 1 November 2009.