High Court considers applications under the disclosure pilot (Vannin Capital v RBoS)

High Court considers applications under the disclosure pilot (Vannin Capital v RBoS)

The decision in Vannin Capital v RBoS provides welcome clarification on more detailed aspects of the disclosure pilot, including when guidance should be sought from the court, the test for varying disclosure orders, and how the cost of legal advice feeds into proportionality. James McKean, barrister at New Square Chambers considers the judgment and its practical implications for practitioners involved in cases progressing under the disclosure pilot.

Vannin Capital PCC (a Jersey Protected Cell Company incorporated in accordance with the Companies (Jersey) Law 1991) v RBoS Shareholders Action Group Ltd and others [2019] EWHC 1617 (Ch)

What are the practical implications of this case?

The ‘new’ disclosure pilot in CPR PD 51U may now be six months old, but there is no shortage of issues to be ironed out. This case provides some clarity as to its operation, including (i) when guidance should be sought from the court under CPR PD 51U, para 11, (ii) the test for varying orders under CPR PD 51U, para 18.1, and (iii) when the cost of legal advice may be taken into account on the issue of proportionality.

What was the background?

This decision is the latest episode in long–running litigation arising from the Royal Bank of Scotland (RBS) rights issue in 2008.

Joanna Smith QC (the judge) made an order for extended disclosure under the disclosure pilot in February 2019 (the order). Two applications were now made:

1. The second defendants applied to vary the order. The order listed individual second defendants who were to provide the necessary disclosure, among them the so–called ‘corporate defendants’ and ‘retail defendants’. The second defendants’ application was for one of the corporate defendants (the company) to be excluded from that list.
 2. The claimant applied for further searches to be made by the second defendants under the order pursuant to CPR PD 51U, para 17.

What did the court decide?

A failure to seek guidance

The judge’s preliminary complaint was that there had been no attempt by either party to seek guidance from the court under CPR PD 51U, para 11. Instead, there had been a half–day hearing with formal applications made and contested. This was ‘undesirable and contrary to the spirit of the disclosure pilot’ (para [4]). Once it had become clear to the parties that consensus could not be reached, they should have consulted the court under CPR PD 51 U, para 11 as to whether the claimant’s application fell within the terms of the order, which could have streamlined the hearing and saved time and costs.

Varying orders for extended disclosure

The second defendant’s application to vary the order raised a point of law as to the applicable test for varying orders made under the disclosure pilot under CPR PD 51U, paras 18.1 and 18.2. The claimant attempted to draw a comparison with CPR 3.1(7) and the ‘out of the ordinary’ test set out in Tibbles v SIG plc [2012] EWCA Civ 518. The judge disagreed—the draftsmen of the disclosure pilot clearly anticipated a different (and more accessible) test. The question was whether, under paragraph 18.2, ‘the existing order is disproportionate such that it is reasonable and proportionate to reduce its scope’ (para [11]).

The second defendants raised a number of reasons why it was disproportionate for the company to be included. One was that the company transpired not to have 200,000 or more shares in RBS, which had been a threshold for inclusion of the retail defendants. However, the company was in fact a corporate defendant. Moreover, this mistake should have been spotted and raised before. In fact, the corporate defendants were more likely to have relevant documents due to their special relationship with the first defendant. The company in particular, as an institutional investor, could be expected to have particularly good record–keeping.

The second defendant further complained costs would be disproportionate. The company wished to seek legal advice on its disclosure from an unnamed Magic Circle firm, the costs of which would likely extinguish the company’s recovery under RBS rights issue litigation. The judge was unconvinced. The court ‘would need to have a very clear understanding as to precisely why that advice is necessary and why it cannot be obtained from their existing legal team before it could take the cost of such advice into account on the issue of proportionality’ (para [14(ii)]). Merely the fact that the company was a pension scheme did not answer this question.

The court further considered the exclusion unnecessary for the just disposal of the proceedings, noting that a reduction in the numbers of entities giving relevant disclosure would prejudice the claimant (para [14 c.]).

On the facts, the order was not disproportionate and the company did not need to be excluded.

Further searches

The claimant’s application was for further searches to be made by the second defendants for minutes of their board meetings (or equivalent) and documents created thereby which related to particular disclosure issues (in relation in part to litigation funding agreements). The judge agreed that this was a ‘reasonably straightforward’ request that fell within the scope of the disclosure review document.

The second defendants had proposed instead that relevant individuals would be identified as custodians of the necessary documents. These relevant individuals would either be board members or responsible for the ‘flow of information to the board’ (para [19]).

The judge rejected this. The selection of custodians had to be ‘determined by reference to the scope of the disclosure ordered’ (para [22]). Conducting a search for board minutes through custodians who were not on the board would likely be unreliable. The second defendants had not complied with their disclosure obligations and now had to do so.

A separate application was also made by the claimant to widen the disclosure order to include the minutes/papers of certain committees involved in decision-making processes in the second defendants. It was rejected by the judge as an attempt to re-open arguments in circumstances where the court had already made the very order the claimant sought (paras [26]–[27])).

Case details

Court: High Court, Business and Property Courts, Business List (ChD)

Judge: Joanna Smith QC (sitting as a Deputy Judge of the High Court)

Date of judgment: 24 June 2019

James McKean is a barrister at New Square Chambers. 

This analysis was first published on Lexis®PSL Dispute Resolution on 2 July 2019. For a free trial, click here.

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