Disclosure Pilot Scheme applies to transitional proceedings

United Kingdom

The High Court has reaffirmed the position that an application for further disclosure will be governed by the Disclosure Pilot Scheme (“DPS”) even where the original order was for standard disclosure under CPR Part 31 and made before the DPS took effect.


Financial Conduct Authority v Avacade Ltd (in liquidation) (trading as Avacade Investment Options) and Others [2019] EWHC 2779 (Ch)) concerned the FCA’s civil proceedings against Avacade Limited (in liquidation) (“Avacade”) and Alexandra Associates (U.K.) Limited (“Alexandra Associates”) (together, the “Firms”). The FCA alleged that, in providing free pension reports to UK consumer clients, the Firms made misleading statements on pension investments. The reports were marketed as summarising a consumer’s pension information and retirement objective in order to help consumers decide what to do with their retirement savings. The reports were then followed-up with telephone calls from the Firms’ representatives, on which clients were advised to transfer their pensions into self-invested personal pensions (“SIPPs”) and investments in alternative investments. Clients did subsequently transfer their pensions into SIPPs and some invested in what were said to be high-risk investments within their SIPPs.

As a result, the FCA alleged that the Firms had carried out regulated activities and communicated financial promotions without the requisite authorisation. That contravened the general prohibition under section 19 of the Financial Services and Markets Act 2000 (“FSMA”) and the prohibition on financial promotion under section 21. The FCA also alleged that the Firms had made false, misleading or deceptive statements contrary to section 397 of FSMA.

The Third and Fourth Defendants, Craig Lummis and his son Lee Lummis, were previously directors and shareholders in Avacade (now in liquidation) and remain directors and shareholders in Alexandra Associates (still trading). The Fifth Defendant, Raymond Fox, had also been a director and shareholder in Avacade and the FCA alleged that all three individuals had been knowingly concerned in the Firm’s breaches.

As a result of their actions, the FCA claimed that clients of the Firms had transferred more than £86 million into SIPPs, of which more than £70 million was invested in high-risk investments which failed. The FCA therefore sought restitution on behalf of clients affected by the Defendants’ alleged conduct.

Order for standard disclosure

At a Costs and Case Management Conference in August 2018, standard disclosure was ordered to be made by all parties (other than Avacade) by 6 December 2018. That deadline was subsequently extended to 3 January 2019, when the FCA gave disclosure by list. In February 2019, the solicitors for the Second to Fourth Defendants wrote to the FCA stating that they regarded the FCA’s disclosure as incomplete and that they were considering an application for specific disclosure.

In their subsequent application the Second to Fourth Defendants submitted that neither the FCA nor Mr Fox had made proper disclosure as required by the order. Pursuant to CPR r. 3.10(b) and/or r. 31.12, the application sought orders that: (i) the FCA provide disclosure of the documents and classes of document set out in the draft order; and (ii) Mr Fox comply with the Master's order for disclosure.

The Second to Fourth Defendants argued that they were not making a new application against the FCA for specific disclosure. Rather, they said they were seeking enforcement of compliance with the original order. Alternatively, their fall-back position was that the application should be treated as being made under paragraph 18.1 of PD 51U for Extended Disclosure in the form of Model D.

UTB v Sheffield United & Others and the application of the DPS

In considering whether the application should be allowed, Mr Justice Halpern QC reaffirmed that it had to be considered under the DPS, which came into effect in the Business and Property Courts from 1 January 2019. In so doing, the Judge cited the recent case of UTB v Sheffield United Ltd & Others [2019] EWHC 914 (Ch), heard in June 2019.

In that case, Sir Geoffrey Vos was emphatic in his judgment that the DPS would apply to existing proceedings, even where disclosure had already been ordered and produced under CPR Part 31. PD 51U was “deliberately put in place without transitional provisions”, he said, so that it would apply for two years “to existing and new proceedings”. The Chancellor had explained that the confusion as to whether the new DPS would apply to transitional proceedings stemmed from a misunderstanding of paragraph 1.3 of PD 51U. That provision states that the DPS “shall not disturb an order for disclosure made before…[1 January 2019]...unless that order is varied or set aside”. However, that just meant that the DPS would not undo an existing disclosure order, not that the DPS would not apply to those proceedings. The misunderstanding had been compounded by the notes in the White Book which stated that the DPS “does not apply to any proceedings where a disclosure order had been made before it came into force unless that order is set aside or varied” (paragraph 51.2.10). The Chancellor (who is also Editor-In-Chief of the White Book) has subsequently clarified that the relevant note in the White Book was wrong. Mr Justice Halpern QC also referred to the Chancellor’s explanation that reference in the DPS to new concepts like “Extended Disclosure” and “Issues for Disclosure” did not make it any less applicable to cases which straddle the two regimes.


Mr Justice Halpern QC did not agree to recast the application as one to enforce the pre-existing order. On its true construction, the Judge saw the application of the Second to Fourth Defendants as one for specific disclosure against the FCA:

Although there may be some overlap between the two procedures, in my judgment the former is appropriate where there has been wholesale non-compliance…, whilst the latter is the appropriate order where there are specific documents or classes of documents of which the applicant seeks disclosure”.

Given that the Judge viewed the FCA’s list dated 3 January 2019 as “sufficient to constitute disclosure, even if there might be particular deficiencies”, its “only possible remedy” would have been an application for specific disclosure before 2019 or Extended Disclosure thereafter”. The Judge commented that “it would be wrong to permit the application to be amended for the sole purpose of gaining a tactical advance by side-stepping the Pilot.” As such, the application had to be viewed as one for Extended Disclosure under the DPS.

Considering the factors to which the court should have regard when making an application for Extended Disclosure under Part 6 of PD 51U, the Judge noted that the first two - namely, the nature and complexity of the case and its importance - might be in the Defendants' favour. However, the other factors, including the relative importance of the documents, the number of documents involved, the ease and expense of searching for the documents, the financial position of each party and the need to deal with the case expeditiously and proportionately, were not. The Court therefore dismissed the FCA’s application.


The case serves as a useful reminder that the DPS applies as much to transitional proceedings (where disclosure has already been ordered under CPR Part 31) as it does to new proceedings. An application for disclosure made after 1 January 2019 will therefore be viewed through the prism of the DPS, even where a CPR Part 31 disclosure order has been made prior to that date.

Parties who have already complied with their CPR Part 31 obligations may feel hard done by where they are now required to undertake additional work to comply with the DPS. However, parties should give detailed thought as to how the new rules will affect any disclosure application. That includes regard to the framing of an application for specific disclosure. Where the DPS applies, it is a high-risk tactic to present an application as seeking an order for compliance with a disclosure order made under the older rules of standard disclosure. The courts may well deprecate such conduct as an impermissible attempt to circumvent the DPS.