MKG Convenience Ltd, Re

An unless order for disclosure takes effect where serious and significant breaches are established and there is no good reason for them. Compliance requires production of documents within the party’s possession or control, including relevant electronic records and documents formerly held where the order requires them to be listed and explained. A court deciding relief from sanctions may reject evidence as incredible without oral evidence where appropriate, but it should not determine that an entire factual case is false and infer a disclosure breach from documents which would exist only if that case were untrue. Relief is assessed under the three-stage approach in Denton v White [2014] EWCA Civ 906.

The applicants were the liquidators of MKG Convenience Ltd. They alleged that the respondents, including a de facto or shadow director, had diverted MKG’s business, assets and funds before its liquidation. The respondents relied on an account that the shops had been transferred to an independent third party and that payments between the companies were legitimate.

The respondents had consented to an extended disclosure order and subsequently to an unless order. The applicants alleged continuing failures, including the withholding of bank accounts, bank statements, accounting records and utility invoices. They sought declarations that the sanctions had taken effect. The respondents sought relief from sanctions.

1. Sanctions and compliance. The applicants established, to the ordinary civil standard, that the respondents had breached the unless order. The breaches included failing to disclose all bank accounts, complete bank statements, relevant accounting records and utility invoices, and failing to provide or explain the absence of documents required by the order.
2. Scope of disclosure. The obligation to deliver purchase invoices required delivery of the documents actually in the respondents’ possession or obtainable by them, including copies where originals were unavailable. Extended Disclosure required an appropriate list of documents presently or formerly within possession or control and extended to documents held electronically.
3. Limits on determining factual disputes. Following JSC BTA Bank v Ablyazov [2012] EWCA Civ 564, the court could evaluate evidence relied on for relief and reject it as incredible or demonstrably false without oral evidence where appropriate. That principle did not permit the court, without a summary judgment application, to decide that the respondents’ entire factual case was false and infer a disclosure breach from documents which would have existed only if that case were untrue.
4. Relief from sanctions. Applying the three stages in Denton v White [2014] EWCA Civ 906, the breaches were serious and significant. Disclosure was central because the liquidators lacked the company’s records and needed a full picture to test the respondents’ explanation. There was no good reason for the failures, which included deliberate concealment of plainly relevant accounts and an incredible explanation for the absence of accounting records.
5. The sanction was severe but proportionate. The respondents had consented to both orders, the undisclosed material could bear on the claims against all respondents, and the defence faced substantial evidential difficulties. Relief from sanctions was refused. The applicants were entitled to judgment in accordance with the unless order, with the form of order to be determined at hand-down.