Loches Capital Ltd v Goldman Sachs International

Pre-action disclosure requires a two-stage analysis. The applicant must satisfy the jurisdictional conditions in CPR r. 31.16, including that disclosure is desirable to dispose fairly of anticipated proceedings, assist resolution without proceedings or save costs. If those conditions are met, the court exercises a broad discretion having regard to all the circumstances.

The court should be cautious about finally determining substantive issues, including limitation, at the pre-action stage. A limitation objection will ordinarily justify refusal only where the claim is clearly hopelessly time-barred. Targeted documents may be ordered where they could materially test focused allegations, narrow issues or encourage settlement. Requests should be confined to what is strictly necessary.

Loches Capital Ltd sought pre-action disclosure from Goldman Sachs International under section 33(2) of the Senior Courts Act 1981 and CPR r. 31.16. It intended to bring an unlawful means conspiracy claim arising from the 2006 takeover and 2007 merger of Arcelor and Mittal, alleging that the share exchange ratio was dishonestly reduced and that Goldman Sachs participated in the scheme.

Goldman Sachs opposed the application on limitation, utility, discretion, standing and overbreadth grounds. The central issues were whether the proposed claim was unarguably time-barred, whether the statutory conditions for pre-action disclosure were met, and whether disclosure should be ordered in the exercise of the court’s discretion.

1. Application granted. Loches satisfied the jurisdictional requirements in CPR r. 31.16(3). The court must separately consider the jurisdictional threshold and the subsequent discretion.
2. The merits threshold is not whether the claim is likely to succeed. The court should ordinarily proceed on the basis that the proposed claim is properly arguable and has a real prospect of success. It should be hesitant to determine substantive issues because the factual assumptions made at this stage may prove incomplete or wrong.
3. Goldman Sachs had not shown that the claim was unarguably time-barred. Under section 32 of the Limitation Act 1980, the relevant question was whether Loches or its assignor had discovered, or could with reasonable diligence have discovered, the precise fraud alleged. Awareness of a loss, a lower exchange ratio, or general concerns about the transaction did not necessarily constitute a trigger. Whether a trigger existed was fact-specific.
4. Disclosure was desirable under all three alternatives in rule 31.16(3)(d). The requested financial documents and communications could materially confirm or undermine the allegations, alter the parties’ assessment of the claim, narrow the issues, assist settlement or save costs. The fact that draft pleadings had been prepared did not itself defeat the application.
5. The circumstances were outside the usual run of cases. The requests were focused and targeted at specific documents capable of testing the pleaded inferences. They were not excessive. Goldman Sachs should have engaged in dialogue about custodians, keywords and date ranges, as contemplated by the Commercial Court Guide and Practice Direction 51U.
6. Although there were discrepancies concerning the assignor’s shareholding and standing, the SPA and related evidence provided a cogent basis for concluding that Loches could establish standing. The discrepancies could be resolved later and did not justify refusing disclosure.
7. The documents were to be disclosed in accordance with the order. The claim was not finally determined and the limitation issue remained open for trial.