PMD Business Finance Holdings Limited v Lee Schofield & Anor

An order for pre-action disclosure under Civil Procedure Rules 1998, rule 31.16, may be made where the anticipated parties and the documents falling within standard disclosure are sufficiently identifiable, and disclosure is desirable to dispose fairly of the anticipated proceedings, assist settlement or save costs.

The court must assess the requirements in the round and in furtherance of the overriding objective. The application is not an occasion to determine the substantive claim. Disclosure must be proportionate and sufficiently focused to avoid a fishing expedition, but it need not be confined to documents already proving the claim.

PMD Business Finance Holdings Limited sought pre-action disclosure from Lee Schofield and One Funding Limited. The anticipated claims concerned alleged breaches of restrictive covenants and related contractual obligations, together with alleged inducement by One Funding.

The respondents accepted that the parties were likely to be parties to subsequent proceedings, but disputed that the requested documents would fall within standard disclosure or that pre-action disclosure was desirable. PMD relied on evidence of dealings with restricted customers, suppliers and introducers, while the respondents had provided limited and partly redacted documentation.

The central issue was whether the statutory and procedural conditions for pre-action disclosure were satisfied and, if so, what scope of disclosure was proportionate.

1. The application was granted, subject to limitations on the scope of the documents to be disclosed. The court ordered disclosure of emails, letters, electronic messages, purchase orders, invoices, telephone logs, calendar entries and notes of calls and meetings involving restricted customers, suppliers or introducers during the relevant period. The respondents were also required to identify documents no longer under their control and documents over which inspection was withheld.

2. Under rule 31.16, the court first had to be satisfied that the applicant and respondent were likely to be parties to subsequent proceedings. That requirement was uncontroversially met. The court then had to determine whether the documents would fall within standard disclosure and whether pre-action disclosure was desirable to dispose fairly of the anticipated proceedings, assist resolution without proceedings or save costs.

3. Applying the principles summarised in Assetco Plc v Grant Thornton UK LLP [2013] EWHC 1215, relevant considerations included the nature of the alleged loss, the clarity of the issues, the nature of the documents sought, relevant pre-action inquiries and the applicant’s opportunity to make its case without disclosure.

4. The court had to assess the requirements in the round and in furtherance of the overriding objective, as explained in Hands v Morrison Construction Services Ltd [2006] EWHC 2018. The existence of enough evidence to bring a claim did not make disclosure unnecessary, because disclosure could narrow or resolve issues without costly litigation.

5. The substantive claim was properly arguable, but the court would not determine the merits on a pre-action disclosure application, following the approach in Rose v Lynx Express Ltd [2004] EWCA 447. PMD had sufficient evidence to raise a proper concern about contractual breaches, although no finding of wrongdoing was made.

6. The order was proportionate. It was directed to identified categories of restricted entities and relevant forms of communication and transaction documentation. The narrowed wording avoided an impermissibly wide request based merely on documents being related to the dispute. There were no further orders beyond the order already made, including costs directions.