In the case of Lowry Trading Limited and anor v Musicalize and ors [2024] EWHC 773 (Comm),[1] the Commercial Court demonstrated its willingness to use the various tools at its disposal to compel disclosure and/or the provision of information, particularly where there is a subtext of fraud.
Background
The Claimants operate investment businesses. They claim that Mr and Mrs Anderson (the Second and Third Defendants), acting through various limited companies (the other Defendants), made various false representations as purported concert promoters in order to obtain investment from them. In pursuing recovery of their investments, the Claimants allege claims in: deceit; unlawful means conspiracy; breach of contract; inducement of breach of contract; and breach of trust, as well as claims pursuant to certain guarantees.
On 21 October 2021, the Court granted freezing injunctions against the First, Fourth and Fifth Defendants preventing them from dealing with or disposing of assets outside of the ordinary and proper course of business (the Injunctions). The Injunctions further required the Defendants to notify the Claimants before dealing with or disposing of assets purportedly inside the ordinary and proper course of business, which notice requirements form the basis of the Claim ants’ present application.
On 29 January 2024, the Claimants obtained summary judgment in respect of certain of the monies they had advanced to the Defendants, which it was found had been induced by particular fraudulent representations (please see that judgment here). The proceedings are ongoing in respect of the balance of the Claimant’s claim that was not determined by way of summary judgment.
The Claimant’s Application
The Claimants became aware through social media that the Defendant companies generated revenue by leasing private hospitality boxes at the O2 Arena and Wembley Stadium in London (the Boxes). Disclosure given by the Defendants in accordance with the Injunctions revealed that certain income from the Boxes had not been accounted for, which caused the Claimant’s to suspect that the Injunctions were not being complied with.
On 11 September 2023, the Claimants submitted a formal request for information under the Court rules[2] seeking information regarding income and other payments associated with the Boxes (the RFI). With the Defendants failing to provide a response to the RFI, the Claimants sought an order for specific disclosure pursuant to CPR 31.5 and/or an order compelling a response to the RFI.
Decision
As to the request for specific disclosure under CPR 31.5, the Court identified that as the case was proceeding in the Business and Property Courts, CPR 31 had been largely displaced by Practice Direction 57AD (PD 57AD), but that PD 57AD does confer “wide powers to the court to order extended disclosure”. Notwithstanding that the Claimants had proceeded under CPR 31.5, and that the case had not reached the stage of extended disclosure, HHJ Pearce could not, in principle, see anything in part 6 of PD 57AD preventing him from making the disclosure order sought.
As to the alternative relief requested by the Claimants, through their RFI they had sought disclosure of details of the Defendants’ bank statements, which statements they argued constituted “further information” required to clarify matters in dispute. As with PD 57AD, the Court determined that, in principle the court’s powers were wide enough under CPR Part 18 to compel the Defendants to provide the bank statements in response to the RFI.
In determining whether to actually make the orders sought, the Court noted that summary judgment had already been awarded against the Defendants on the basis that they had no real prospect of successfully defending allegations of fraud. Accordingly, the Court would have a “low threshold for suspicion” that the Defendants may not be complying with the Injunctions. Whilst the Court was sympathetic to the Defendants’ lack of legal representation, this did not outweigh the fact that there was “no realistic answer to the orders sought”.
Finally, the Court did note that the Defendants may be able to invoke privilege against self-incrimination, which provides that a party may claim privilege over documents and/or information in respect of which there is a real and appreciable risk (i.e., more than a mere possibility) such material could expose them to criminal proceedings for an offence or the recovery of a penalty. Whether the defendants choose to take such a position is not presently known.
Comment
This judgment serves as a reminder of the broad range of tools at the court’s disposal to order disclosure and/or the provision of information and that the Court is willing to take a flexible approach to deploying them where they consider it appropriate to do so. In particular, whilst PD 57AD does not expressly provide for specific disclosure in advance of any order for extended disclosure, the Court’s powers are wide enough to make relevant orders to allow this to happen.
Of course, that the Defendants had already been found liable in fraud was a significant factor in the Court’s determination of the Claimant’s application. Practitioners will know that the evidential burden to prosecute a claim in deceit is necessarily high, and so they are generally (and rightly) cautious of advancing such a claim. However, this case shows that a finding of fraud (in this case, by way of summary judgment on only part of a claim) can create a subtext of “suspicion” that may play out favourably to a claimant as the balance of proceedings unfolds.
[1] Please access the judgment here.
[2] Part 18 of the Civil Procedure Rules
