High Court has no jurisdiction to order pre-action disclosure in arbitral proceedings

Practical Law UK Legal Update Case Report 4-503-5318 (Approx. 5 pages)

High Court has no jurisdiction to order pre-action disclosure in arbitral proceedings

by PLC Dispute Resolution

Background

The court may order pre-action disclosure in civil proceedings under CPR 31.16. The statutory basis of CPR 31.16 is section 33(2) of the Senior Courts Act 1981 (SCA 1981), as amended, which provides that:

"On the application in accordance with rules of court of a person who appears to the High Court to be likely to be a party to subsequent proceedings in that court the High Court shall, in such circumstances as may be specified in the rules, have power to order a person who appears to the court to be likely to be a party to the proceedings and to be likely to have, or to have had, in his possession, custody or power any documents which are relevant to an issue arising, or likely to arise, out of that claim:

- To disclose whether those documents are in his possession, custody or power; and

- To produce such of those documents as are in his possession, custody or power to the applicant, or on such conditions as may be specified in the order".

Section 37(1) of the SCA 1981 provides that: "The High Court may by order, whether interlocutory or final, grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so".

In EDO Corporation v Ultra Electronics [2009] EWHC 682 (Ch), Bernard Livesy QC (sitting as a deputy judge of the High Court) held that orders for pre-action disclosure were not available if the parties were contractually obliged to arbitrate. (See Legal update, Court has no power to order pre-arbitration disclosure.)

Section 44(3) of the Arbitration Act 1996 (AA 1996) provides that:

"If the case is one of urgency the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets".

For background on the AA 1996 and the role of the courts in arbitration proceedings, see the following practice notes:

Facts

The defendant (D) was a firm of surveyors. The claimant (C) was the lead underwriter on D's professional indemnity insurance policy (Policy). Claims had been brought against D in respect of allegedly fraudulent valuations carried out by three of its former staff. C was considering invoking the relevant exclusion clause (Clause) under the Policy and avoiding the Policy for misrepresentation or non-disclosure (or both). To that end, C sought documents from D regarding the extent to which D knew about the possibility of fraud on the date on which the Policy was taken out (the Dispute). D voluntarily provided many relevant documents. C claimed that further relevant material existed. C applied for pre-action disclosure of that material.

D argued that there was an arbitration agreement in place, so the court did not have jurisdiction to order pre-action disclosure. Alternatively, even if the court had jurisdiction to order pre-action disclosure in principle, as a matter of fact, the requirements of CPR 31.16 had not been satisfied in this case.

C's position was that, as a matter of construction of the Policy, the Dispute would inevitably be litigated. Alternatively, even if there was an arbitration agreement in place, the court nevertheless had statutory jurisdiction to order pre-action disclosure.

Decision

Coulson J found in D's favour, and held that:

The Dispute was subject to a binding arbitration agreement.
Accordingly, as a matter of construction of section 33(2) of the SCA 1981, the court had no jurisdiction to order pre-action disclosure.

In reaching his decision, the judge noted that the Clause contained an arbitration agreement, but that elsewhere in the Policy it was clear that other matters were to be referred to the English court. Separately, he rejected C's attempts to demonstrate that the Dispute fell outside the scope of the arbitration agreement contained within the Clause (paragraphs 8-15).

Could pre-action disclosure be ordered where the underlying dispute was subject to an arbitration agreement?

Coulson's J's primary point was that, as a matter of construction of section 33(2) of the SCA 1981 (as amended), it was plain that the power to order pre-action disclosure could only be invoked by an applicant who appeared to the High Court to be likely to be a party to subsequent proceedings in that court (paragraphs 16-18, judgment). A number of "subsidiary matters" supported that construction, as follows:

The courts have repeatedly held that arbitration under the AA 1996 is an entirely separate dispute resolution process in respect of which the courts have extremely limited powers of intervention and control. Accordingly, in the absence of clear words, it would be contrary to that policy to find that the court had jurisdiction to make an order for potentially wide-ranging pre-action disclosure in an arbitration case.
It would be contrary to the policy of the AA 1996 to allow C to invoke CPR 31.16 for a purpose that was ancillary to the arbitration.
Although EDO v Ultra (also a first instance decision) was not binding, the judge in that case reached the same conclusion as Coulson J had done.

Coulson J also rejected:

C's argument that the court's jurisdiction to order pre-action disclosure, despite the existence of an arbitration agreement, could be based on section 37(1) of the SCA 1981. His view was that section 37(1) could not be invoked where there was otherwise no express jurisdiction (paragraphs 22-24, judgment).
C's argument that section 44(3) of the AA 1996 permitted the court to order pre-action disclosure (paragraphs 26-29, judgment). He stated that that sub-section was to be invoked in exceptional circumstances where, for example, critical evidence was about to be lost forever. There were no such exceptional features in this case.

Comment

It is interesting to note that, although Coulson J held that he had no jurisdiction to order pre-action disclosure in this case, if he had had the necessary jurisdiction, he probably would have done.

He stated that provision of the documents sought would plainly narrow the issues between the parties and reduce costs. There was also the real chance that, were the information provided, it would dispose of the key fraud issue, and that was in both parties' best interests. He expressed the hope that, despite the position on jurisdiction, voluntary disclosure of the relevant documents would be given.

This decision is consistent with one of the aims of the AA 1996, namely, to minimise the amount of court intervention in arbitration. In general, the arbitral tribunal should make any necessary procedural orders, with the court intervening only where the tribunal is unable to act effectively.

Case

Travelers Insurance Company Ltd v Countrywide Surveyors Ltd [2010] EWHC 2455 (TCC) (6 September 2010).

End of Document

Also Found In

Resource ID 4-503-5318

Published on 06-Oct-2010

Resource Type Legal update: case report

Jurisdictions

England
Wales