Continuing Obligation To Disclose Adverse Documents

Castle Water Ltd v Thames Water Utilities Ltd [2020] EWHC 1374 (TCC)

On 1st January 2019, a pilot scheme for disclosure was introduced in the Business and Property Courts.

This case explores an interesting question, namely the continuing duty to disclose adverse documents pursuant to CPR PD51U and the situations where further checks and searches are required.

Background

Castle Water Ltd (Claimant) purchased the non-household division of Thames Water Utilities (Defendant) in 2017.

Upon the handover, the Claimant found that a substantial amount of the information provided by the Defendant about its customers, debts and performance was inaccurate and/or incomplete. This led to a claim by the Claimant against the Defendant.

In order to evidence its case, the Claimant needed to find out more about the market standards and practices at the time of the contract so that they could compare the Defendant’s performance accordingly.

During the Costs and Case Management Conference certain disputes arose surrounding disclosure. The parties could come to no agreement in this respect, which resulted in the Court having to intervene.

Legal principles

A party is under an obligation once proceedings are commenced to disclose known adverse documents unless they are privileged as set out in Paragraph 3.1(2) of Practice Direction 51U. This is a continuing obligation.

Paragraphs 2.7, 2.8 and 2.9 of Practice Direction 51U set out that a document is adverse if:

“it or any information it contains contradicts or materially damages the disclosing party’s contention or version of events on an issue in dispute, or supports the contention or version of events of an opposing party on an issue in dispute”.

Known adverse documents are documents that a party is:

“actually aware without undertaking any further search for documents than it has already undertaken or caused to be undertaken”.

It was the Claimant’s position in this case that the Defendant needed to perform searches for known adverse documents and disclose the same.

What was decided?

Stuart-Smith J decided that after initial disclosure a party must conduct further searches if there are any material changes to its opponent’s case:

“to review whether it has documents that were not previously known adverse documents but now are”.

He further went on to clarify that Practice Direction 51U ought to be interpreted to mean that reasonable and proportionate searches are required to locate known adverse documents.

Comment

This case provides some helpful guidance to practitioners when preparing for disclosure, especially in cases involving revised pleadings.

This case clarifies that continuing obligation does not mean on-going searches throughout, but rather the need to undertake further checks where there is a change of circumstances or pleadings.

The judgment also provides helpful examples of what is good practice in regards disclosure requests.