Permavent Ltd & Anor v Makin

An application for specific disclosure made after the case management conference under the Shorter Trials Scheme requires good reason. Where a settlement agreement provides an audit mechanism enabling an accountant to inspect records needed to verify payments, that contractual mechanism should ordinarily be used. The accountant must have access to the reasonably necessary unredacted records. Confidential information may be redacted from copies shown to the beneficiary, provided the accountant can disclose information necessary to report any payment discrepancy and its basis. The court will refuse additional disclosure that gives unnecessary access to confidential information, causes disproportionate cost, or provides no further entitlement.

The claimants sought relief concerning patents assigned under a 2017 settlement agreement. The agreement required payments to the defendant calculated by reference to sales of specified roofing products and gave him a contractual right to have an independent accountant inspect the claimants’ books to verify those payments.

The defendant counterclaimed for alleged underpayment and applied for specific disclosure of 14 categories of documents. The claimants relied on the contractual audit procedure and opposed disclosure on grounds including confidentiality, relevance and cost. The central issue was whether the defendant had shown good reason for post-case-management disclosure beyond the agreed disclosure order and contractual audit mechanism.

1. The application for specific disclosure was dismissed. No order was made as to costs.
2. Under paragraph 2.43 of Practice Direction 57AB – Shorter and Flexible Trial Schemes, post-case-management applications for specific disclosure are discouraged and require good reason. The defendant had been represented at the case management conference, and the disclosure order made there was treated as agreed except for a possible issue concerning documents referred to in witness statements.
3. Clause 2.8 of the Settlement Agreement supplied the appropriate means of checking the claimants’ sales and related records. The defendant was entitled to have his accountant inspect documents which the accountant reasonably believed were needed to verify payments. The accountant was not to be denied access to relevant unredacted records.
4. If the accountant wished to show documents to the defendant, the claimants could redact confidential information from those copies. The accountant remained entitled to disclose information necessary to report a discrepancy in the records or payments and the basis for it. This arrangement adequately protected the defendant’s contractual verification right.
5. Additional disclosure was refused because it could expose the defendant to unnecessary confidential information and, insofar as it exceeded the contractual audit process, would impose unnecessary cost without giving him further information to which he was entitled.
6. The dispute had been caused by a misunderstanding about the proposed confidentiality undertaking. Because the defendant was acting in person, the claimants’ legal team should have clarified their position when that misunderstanding became apparent. That justified making no order as to costs.