In an important ruling, the Court of Appeal has held that in certain circumstances, third-party disclosure orders can be made against persons outside the jurisdiction pursuant to s.34 of the Senior Courts Act 1981 (SCA) and CPR 31.17.
An application for third-party disclosure arose in underlying proceedings between Mr Gorbachev and Mr Guriev concerning their interests in a valuable fertiliser business. One of the issues in those proceedings was how and why Mr Gorbachev was financially supported by two Cyprus trusts.
From 2006 onwards, the trustees of the Cyprus trusts were advised by a partner at Lawrence Graham LLP, who subsequently joined Forsters LLP. It was Mr Gorbachev’s case that Forsters had possession, within the jurisdiction of the English courts, of documents which were likely to be relevant to the main proceedings.
In August 2021, Mr Gorbachev issued an application seeking third-party disclosure from Forsters under CPR 31.17 and s.34 of the SCA. At the hearing of that application, Forsters argued that no order could be made against them because they held the documents on behalf of the trustees. Mr Gorbachev applied orally and without notice for an order joining the trustees to the application giving him permission to serve them out of the jurisdiction and by alternative means. That oral application was granted.
The trustees applied to set aside the order for service on three bases:
- That there was no jurisdiction to allow a CPR 31.17 application to be served out of the jurisdiction under gateway (20) - which deals with claims brought under an enactment not covered elsewhere in the relevant practice direction - not least because there was no power to make a CPR 31.17 order against someone outside the jurisdiction
- That even if the jurisdiction existed, the court was wrong to exercise its discretion in favour of permitting service outside England and Wales and should instead have required Mr Gorbachev to obtain documents from the trustees by using the letter of request regime under the Hague Evidence Convention
- That the court should not have made an order permitting alternative service and should instead have required Mr Gorbachev to serve the trustees via the Hague Service Convention.
Jacobs J dismissed the set-aside application, finding that the court had jurisdiction to make the order it did and was right to do so.
The trustees appealed. The issues before the Court of Appeal were as follows:
- Does the court have jurisdiction to make an order for disclosure of documents against a third party outside England and Wales?
- If such jurisdiction exists, was the judge wrong to exercise his discretion to permit service out of the jurisdiction?
- Was the judge wrong to permit alternative service on the trustees?
In considering the trustees’ set-aside application, Jacobs J acknowledged that there was no previous authority which suggested that a combination of gateway (20) and s.34 SCA could be used to enable proceedings to be brought directly against an overseas party for the purposes of obtaining an order under CPR 31.17. This was because, as Jacobs J acknowledged, the usual route for obtaining third-party disclosure from overseas parties is for the English court to make a letter of request to the relevant overseas court.
The issue for the Court of Appeal to determine was whether or not an application under s.34 of the SCA and CPR 31.17 fell within Practice Direction 6B, para.3.1, gateway (20). In order for this to be the case, Mr Gorbachev had to persuade the court that a CPR 31.17 application under s.34 SCA:
- is a claim;
- is an application which constitutes “proceedings”; and
- can be brought against persons other than those within England and Wales.
The Court of Appeal agreed with Jacobs J’s reasoning that the word “claim” is broadly defined in CPR 6.2 and includes any application made before commencement of proceedings, and that the term “proceedings” in gateway (20) must be given a neutral construction. The Court of Appeal therefore held that the term “claim” in Practice Direction 6B, para.3.1 is not restrictive and can include both an application for pre-action disclosure and an application for third-party disclosure. An application for third-party disclosure therefore constitutes “proceedings” for the purpose of gateway (20).
Much consideration was given to the principle of territoriality and its application to s.34 SCA. The court acknowledged that there is a presumption in domestic law that legislation is not generally intended to have extra-territorial effect. The Court of Appeal had to consider whether s.34 should be construed as confined to persons in England and Wales.
The Court noted that there is a well-established letter of request regime, governed by the Hague Evidence Convention, for obtaining documents and evidence from persons outside the jurisdiction and that this regime would be circumvented if wide-ranging disclosure of documents held by third parties abroad could be too readily obtained by means of an application under s.34 and CPR 31.17.
However, the Court considered that the critical fact in the present case was that the documents whose production was sought were located in England, even though the trustees are outside the jurisdiction. It was also an important factor that it is not clear whether documents located within the jurisdiction could be obtained by means of a letter of request to the court of a foreign state.
The Court of Appeal held that in these circumstances, the principle of territoriality has little or no application and that s.34 of the SCA allows an application to be brought against a third party out of the jurisdiction for an order to produce documents which are located within England and Wales.
Jacobs J considered it relevant that the documents sought were held within the jurisdiction, that they concerned transactions in respect of which the trustees had engaged English solicitors for advice, and that some of those transactions had taken place within the jurisdiction. He found that those factors justified the exercise of the court’s discretion to permit service out.
The existence of as yet unresolved proceedings pursuant to s.34 of the SCA and CPR 31.17 against Forsters, which it would be convenient to determine with the trustees before the court, was also considered to be an important factor.
The Court of Appeal agreed with Jacobs J’s reasoning and held that, in the circumstances, the exercise of discretion was correct in this case.
CPR 6.15 enables a court to make an order for alternative service where it appears that there is “a good reason” to do so. At first instance, Jacobs J considered that the existing and outstanding application for third-party disclosure against Forsters, and the need to determine this application quickly in light of the imminent trial date, were good reasons to allow alternative service in the present case. The Court of Appeal agreed with Jacobs J’s conclusion and dismissed the trustees’ appeal on all three grounds.
Prior to this case, there had been conflicting first instance cases in which service out of the jurisdiction of applications for pre-action disclosure and third-party disclosure has been considered, with the key areas of disagreement being the role of the Hague regime and whether or not applications for pre-action disclosure constituted a “claim” and the bringing of “proceedings”.
The Court of Appeal’s decision that both terms should be broadly defined is a welcome contribution to resolving this issue and will save time and expense for applicants.
It is encouraging that the English courts have recognised that the letter of request regime is not an exclusive route for obtaining third party disclosure, although much will turn upon the circumstances of the particular case. The location of the documents sought under the application will likely be an important factor, and arguably more important than the location of the third party.
This is particularly helpful in cases of international fraud or asset tracing where time is of the essence for obtaining documents from overseas third parties, and where following the letter of request regime may lead to delay.
Co-authored by Chloe Day, associate in CMS London.