1. Introduction
Montpelier Solicitors recently succeeded in an application pursuant to Part 31.12 for specific disclosure against Shawbrook Bank. The court was persuaded that Shawbrook Bank had failed in its duty to give full and frank disclosure in relation to the personal guarantee it was seeking to enforce.
2. Background
Shawbrook provided asset finance to D1 in the period 2009 – 2018.
In 2013 Shawbrook provided asset finance to D1 on condition that D2 provided a personal guarantee. The parties continued to trade until 2016/17 when D1 repaid all sums due to Shawbrook.
The parties entered into one further transaction in 2018 however no new personal guarantee was executed at the material time.
The asset was misappropriated and Shawbrook sought to enforce the 2013 personal guarantee against D2. D2 disputed the validity of the personal guarantee, on the basis that Shawbrook represented to him that the obligations under the personal guarantee had come to an end when all existing debt had been repaid in 2016/17.
The order for directions required the parties to give standard disclosure.
It became apparent that Shawbrook had:
Not carried out a search of relevant email accounts;
Not carried out a search for any documents created prior to 2018 (notwithstanding seeking to enforce a personal guarantee entered into in 2013); and
Had redacted portions of a key document which had been disclosed on the basis that it was “privileged” or “confidential”.
D2 made an application to the court for specific disclosure.
In granting the application the court agreed with D2 that, amongst other things, Shawbrook:
must carry out a search of all relevant email accounts;
must extend the search period to include the period 2013 – 2018; and
must reproduce the redacted document so that only those portions covered by legal privilege remained redacted.
Shawbrook argued that no documentation relating to the alleged representations existed because no misrepresentations had been made. Accordingly, it argued that no search was necessary. The court was not persuaded by that argument. Nor did the court entertain the argument advanced on behalf of Shawbrook that it was entitled to redact documentation on the basis of confidentiality.
3. Analysis
An application for specific disclosure can be a double-edged sword. The court will not entertain a ‘fishing expedition’. It is therefore important to be circumspect when making the application. The documentation sought should be limited to those which are central to the issues in dispute and where possible, ought to be identified.
The denial on the part of Shawbrook that any representations had been made meant that the question of representations could only be properly described as an issue in dispute. In those circumstances, the disclosure exercise must extend to the email correspondence of Shawbrook exchanged in the material period. The contention on the part of Shawbrook that no representations had been made necessitated the search rather than absolved the bank of its responsibility to carry it out.
The commercial sensitivity of documentation is a factor which the court may consider when seeking to determine the parameters of disclosure. However, confidentiality does not provide an automatic bar to disclosure. It is much better to flesh out commercially sensitive issues at an early stage. Consideration will need to be given to the question of whether the pursuit of litigation is more important than preserving commercially sensitive material.
The wording of a disclosure statement should also be carefully considered when seeking to withhold documentation which would ordinarily fall to be disclosed.
4. Conclusion
Financial institutions often enjoy enhanced protection in legal proceedings. The role of the courts is to ensure that justice is done. The duty of disclosure plays a pivotal role in that exercise, and is founded upon the notion that all parties will produce the documentation in their possession or control which is relevant to the issues in dispute.
The failure of a party to comply with the duty to give full and frank disclosure interferes with the court’s ability to administer justice. Such a failure is unlikely to be well received.
By Kumarlo Menns, Solicitor
Contact: E: kumarlo.menns@montpelier-solicitors.com
T: +44 (0)207 199 3611
Co-Authored by Mikhail Adam, Solicitor Contact: E: mikhail.adam@montpelier-solicitors.com
T: +44 (0)207 199 3612
About Montpelier Solicitors
Montpelier Solicitors Ltd is a law firm whose directors have a track record of successfully supporting their clients. We specialise in dispute resolution, and business immigration. Our commitment, expertise and know-how means our clients rely on us when it matters most. We recognise that success for our clients translates into success for our firm
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