Guidance on disclosure requirements under the Disclosure Pilot Scheme (TCC) Case summary: Castle Water Ltd v Thames Water Utilities Ltd

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In this May 2020 case, the Technology and Construction Court has provided some useful guidelines as to the type of documents that must be disclosed in order to comply with the Disclosure Pilot Scheme. In particular, the case has shed some light on the appropriate process that should be followed in disclosing ‘adverse’ and ‘known adverse documents’ as required under Practice Direction 51U (PD51U) of the Civil Procedure Rules (“CPR”).

Background

On 18 July 2016, Castle Water Ltd (“Castle Water”) and Thames Water Utilities Ltd (Thames Water) entered into two agreements whereby Caste Water purchased Thames Water’s non-household water and sewerage retail business for a sum of £100 million. As part of the arrangement, the parties agreed for the information about the workings and customer basis of the business to be migrated from Thames Water to Castle Water.

The case before Mr Justice Stuart-Smith related entirely to disputes regarding the List of Issues for Disclosure. The parties had collaborated regarding the content of the List. However, they had been unable to reach full agreement on the wording of some of the issues. In general terms, Castle Water had taken a broader view towards the disclosure obligations as required by the practice direction.

Judgment

Mr Justice Stuart-Smith confirmed the principles set out in two previous judgments of the Chancellor – UTB LLC v Sheffield United Ltd [2019] EWHC 914 and McParland & Partners Ltd v Whitehead [2020] EWHC 298. In particular, he made specific reference to the following quote from the judgment in McParland which made clear that disclosure must follow the issues under dispute:

“it is the relevance of the categories of documents in the parties’ possession to the contested issues before the court that should drive the identification of the Issues for Disclosure”

1. ‘Reasonable and proportionate’ disclosure

There is an obligation on a party to disclose ‘known adverse documents’ within its possession (except when they are privileged documents). However, Mr Justice Stuart-Smith acknowledged that ‘there is as yet an absence of authoritative clarification’ concerning ‘adverse’ and ‘known adverse’ documents. In particular, there is a question as to parameters of the requirement for a party to discover whether there are any adverse documents within its possession that need to be disclosed.

Mr Justice Stuart-Smith made clear in his judgment that the scope of disclosure is no wider than what is ‘reasonable and proportionate’ to resolve the issues in question. In practical terms, this means a party should undertake reasonable and proportional checks to see if it has, or has possessed in the past, any known adverse documents. There is no guidance in the practice direction as to what practical steps this duty requires – the specific steps to be taken will depend upon the facts of the case.

The requirement to disclose known adverse documents is accompanied by a requirement to locate any adverse documents of which the party may be aware. The judgment made clear that this requires ‘reasonable and proportionate checks to see if it has or has had known adverse documents and that…it must undertake reasonable and proportionate steps to locate them’ [paragraph 12]. There should be grounds for believing that the ‘most significant adverse documents’ are likely to be disclosed as ‘a matter of routine’ and should not require an order for Extended Disclosure.

2. Phrasing of questions in the List of Issues

This judgment has also provided much needed clarity on the phrasing used by the parties in drawing up the List of Issues for Disclosure.

Taking each issue in turn, Mr Justice Stuart-Smith evaluated the wording used by the parties on the list of issues. He made clear that the requests for disclosure needed to make specific reference to the issue to which the question and the requested materials related. A generalised request or a broad request for documents ‘referring to’ was not likely to be accepted by the Court.

On the other hand, the judge emphasised that a party could not be ‘too granular’ in its approach. On some issues, Thames Water had argued that the requests were for issues that were not pleaded by Castle Water. In these cases, the Judge ruled that the disclosure may assist the Court and/or be highly material to the resolution of the disputed issue.

In this way, the Court is keen to strike a balance between these factors. The Court is unlikely to allow either a generalised request for disclosure with no reference to the issues or to condone an overtly technical approach that unduly restricts the request for disclosure in a way that misunderstands the nature of the dispute and would hinder the Court’s understanding of the matters at issue.

3. Continuing obligation?

The judgment also provided some clarity on the ‘continuing obligation’ of the parties to disclose ‘known adverse’ documents. The obligation requires a party to disclose ‘adverse documents’ which it become aware of after its initial checks. However, continuous scrutiny of the data available to a party is not required to comply with this obligation. A party will be considered to have complied with this obligation if it had disclosed that it possessed ‘known adverse’ documents and had taken reasonable steps to locate them (unless a separate search exercise is required due to subsequent developments in the Claimant’s case or the Defendant becoming aware of additional adverse documentation in the course of carrying out Model D searches or otherwise).

Points to Note for future

  • The question raised and materials mentioned in the List of Issues for Disclosure must be related to the issues in the proceedings.
  • A party must make reasonable and proportionate checks to ascertain whether they have any ‘adverse’ or ‘known adverse’ documents in their possession.
  • Whilst the requirement to disclose ‘known adverse’ documents is a continuous obligation, this does not generally require constant scrutiny of the documentation, and will usually have been complied with if reasonable and proportionate searches have been undertaken for these documents (unless circumstances have changed or additional documents have come to the attention of the parties).

This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any of the issues raised in this article, please contact us today by telephone or email  enquiries@sharpepritchard.co.uk.

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