COURT OF APPEAL
DOLLING-BAKER v. MERRETT and Another
See Law Reports version at  1 W.L.R. 1205
COUNSEL: Anthony Temple Q.C. and John Rowland for the first defendant.
Timothy Walker Q.C. and Jonathan Gaisman for the plaintiff.
Richard Aikens Q.C. and Stephen Ruttle for the second defendants.
SOLICITORS: Davies Arnold Cooper; Cameron Markby Hewitt; Ince & Co.
JUDGES: Fox, Parker and Ralph Gibson L.JJ.
DATES: 1990 March 15, 16, 21
[*1206] Interlocutory appeals from Phillips J.
PARKER L.J. There are two appeals before the court for determination. The principal appeal is an appeal by the first defendant from an order for specific discovery, under R.S.C., Ord. 24, r. 7, made by Phillips J. on 28 February 1990. The second appeal is also an appeal by the first defendant, in this case from the refusal of the same judge on 9 March 1990 of an application for an injunction restraining the second defendants from, in effect, disclosing the documents ordered to be disclosed by the first defendant in the first application. It is common ground that all of the documents concerned are in the possession, physically, of the first defendant and of the second defendants, but not of the plaintiff.
The trial of the action, in which the appeals arise, is fixed to begin on 24 April 1990. The plaintiff is a representative underwriter suing on behalf of himself and all members of Lloyds Syndicate No. 544. The first defendant is also a representative underwriter and is sued on behalf of himself and all other members of Lloyds Syndicates Nos. 417 and 421. The second defendants are insurance brokers and were the placing brokers in respect of an aggregate excess of loss reinsurance, dated 24 May 1982, between Syndicate No. 544 as the reinsured, and Syndicates Nos. 417 and 421 as reinsurers. The action is brought by the plaintiff against the first defendant to recover moneys due under that reinsurance. The first defendants defence is that he was entitled to avoid the reinsurance for non-disclosure. If that defence succeeds, the plaintiff claims, alternatively, against the second defendants.
The first defendant and/or a Mr. Emney on his behalf wrote further reinsurances of a similar kind; one of them involved Lloyds Syndicate [*1207] No. 418 as reinsurer and Lloyds Syndicates Nos. 333, 334, 335, 426 and 427 as reinsured. (I refer to them as the Verrall Syndicates.) That reinsurance was dated 18 September 1981. The first defendant, on behalf of Syndicate No. 418, sought to avoid that reinsurance, also for non-disclosure. This resulted in a representative arbitration between the first defendant for Syndicate No. 418 and a Mr. Turner for the Verrall Syndicates (the Turner arbitration). The second defendants were also placing brokers in that case. The first defendant succeeded, and by an award dated 2 February 1990, the arbitrator declared that reinsurance to be invalid. Mr. Turner seeks to appeal against that award and has issued a summons for leave to appeal and lodged a notice of motion dated 23 February, pursuant to R.S.C., Ord. 73. The notice of motion is, but the summons and any affidavit on the question of whether this was a one-off transaction is not, before the court. Both of the appeals before us concern the documents in the Turner arbitration, which include, amongst other things, nine days of transcript of evidence and the award itself.
On 9 January 1990 the plaintiff issued a summons seeking specific discovery under Ord. 24, r. 7 of a number of classes of documents, and inspection of such documents under Ord. 24, r. 11(2). One of the classes of documents sought by the summons (class 6) was:
All pleadings, documents, witness statements, experts reports and any other relevant documents produced and/or disclosed in the arbitrations between Merrett and Verrall and between the Wrightson Syndicate and Outhwaite.
It should be noted that the description Merrett at the outset of the schedule which was annexed to the summons reads:
Merrett refers to the first defendant himself, J. C. Emney, Syndicates 417 and 421, any present or former syndicate within the Merrett group or managed by any company within the Merrett group, and all companies within the Merrett group.
The application, therefore, was of a somewhat unusual width, to say the least.
There is a similarity between the reinsurance, the subject of the Turner arbitration, and the reinsurance, the subject of the present action. I need say no more than this, that the risks included risks concerning latent diseases, the principal one of which was asbestosis. It had transpired that the long-term effects of the disease were causing concern in the market. I will revert to that hereafter. In addition to the two reinsurances already mentioned, further reinsurances were written. The placing brokers in the other cases were not the second defendants, and it is unnecessary to refer further to those other reinsurances.
Before going further, it is now necessary to refer to the rules in Order 24, pursuant to two of which the summons for discovery was launched. Rule 1 provides the general obligation to give mutual discovery of documents. Rule 2 provides for automatic discovery in certain cases. Rule 3 is the first of the rules which provide for an order being made. It provides:
(1) Subject to the provisions of this rule and of rules 4 and 8, the court may order any party to a cause or matter (whether begun by writ, originating summons or otherwise) to make and serve on any other party a list of the documents which are or have been in his possession, custody or power relating to any matter in question in [*1208] the cause or matter, and may at the same time or subsequently also order him to make and file an affidavit verifying such a list and to serve a copy thereof on the other party.
It is to be noted that that is subject to rule 8. There is then provision for the determination of issues before discovery, and the form of the list of documents. One then comes to rule 7, under which the first part of the summons was launched. That provides:
(1) Subject to rule 8, the court may at any time, on the application of any party to a cause or matter, make an order requiring any other party to make an affidavit stating whether any document specified or described in the application or any class of document so specified or described is, or has at any time been, in his possession, custody or power . . . (2) An order may be made against a party under this rule notwithstanding that he may already have made or been required to make a list of documents or affidavits under rule 2 or rule 3. (3) An application for an order under this rule must be supported by an affidavit stating the belief of the deponent that the party from whom discovery is sought under this rule has, or at some time had, in his possession, custody or power the document, or class of document, specified or described in the application and that it relates to one or more of the matters in question in the cause or matter.
Rule 8, to which both rules 3 and 7 are subject, provides:
On the hearing of an application for an order under rule 3, 7 or 7A the court, if satisfied that discovery is not necessary, or not necessary at that stage of the cause or matter, may dismiss or, as the case may be, adjourn the application and shall in any case refuse to make such an order if and so far as it is of opinion that discovery is not necessary either for disposing fairly of the cause or matter or for saving costs.
It is to be noted that rule 8 imposes a bar only if the court is of the opinion that the discovery is not necessary either for disposing fairly of the cause or matter or for saving costs.
So far the rules are dealing with discovery in the sense of listing by affidavit, or by lists unverified or verified by affidavit. They are not dealing with production or inspection. The rules which deal with production and inspection begin at rule 9. I need not read that rule, nor indeed rule 10. I come straight to rule 11, under which the second part of the summons was launched. Rule 11(1), which was not the rule relied upon in the summons, relates to cases where there has already been a list of documents under the previous rules. Rule 11(2) provides:
Without prejudice to paragraph (1) but subject to rule 13(1) the court may, on the application of any party to a cause or matter, order any other party to permit the party applying to inspect any documents in the possession, custody or power of that other party relating to any matter in question in the cause or matter. (3) An application for an order under paragraph (2) must be supported by an affidavit specifying or describing the documents of which inspection is sought and stating the belief of the deponent that they are in the possession, custody or power of the other party and that they relate to a matter in question in the cause or matter. [*1209]
Rule 12 provides:
At any stage of the proceedings in any cause or matter the court may, subject to rule 13(1) order any party to produce to the court any document in his possession, custody or power relating to any matter in question in the cause or matter and the court may deal with the document when produced in such manner as it thinks fit.
Finally, rule 13 provides:
(1) No order for the production of any documents for inspection or to the court shall be made under any of the foregoing rules unless the court is of opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs. (2) Where on an application under this Order for production of any document for inspection or to the court privilege from such production is claimed or objection is made to such production on any other ground, the court may inspect the document for the purpose of deciding whether the claim or objection is valid.
It is to be noted that in contrast with rule 8, which provides that the order is not to be made if and so far as the court is of opinion that it is not necessary either for disposing fairly of the cause or matter or for saving costs, under rule 13(1) the provision is that no order is to be made unless the court is of opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.
It is submitted on behalf of the first defendant that the effect of rule 13(1) is that the burden of satisfying the court that production and inspection is necessary is squarely upon the party applying, whereas under rule 8 it is for the party who is objecting to any such order to satisfy the court that discovery by list or affidavit is not necessary. It appears to me that that approach and submission are correct, and there is a perfectly sensible reason for it. If one is merely at the stage of discovery, it does no harm in most cases for the party against whom discovery is sought merely to list his documents. That discloses that he has them or has power over them. But he can object to produce them on the ground of privilege or, indeed, on any other ground. At that stage not very much has occurred except that the applying party will be enabled to know what documents the objecting party has, and it is right that the burden should be upon the objector in such a case. When, however, one gets to the stage of production and the document is to be produced to the court or the other side, the position is different, and it should be, and the rules appear to me to state with complete clarity that it is for the party seeking production to satisfy the court that such production is necessary for the purposes specified in rule 13(1), namely, for disposing fairly of the cause or matter or for saving costs.
The order made by the judge did not follow the summons. There was an order made for a further list in the following form:
1. The first defendant do within seven days of the date of this order make and serve upon the plaintiff an affidavit stating whether he has, or at any time has had in his possession, custody or power any contemporaneous underwriting records relating to the offer and acceptance of the reinsurance contract the subject matter of these proceedings; and if the said documents have been, but are not now in his possession, custody or power, stating when he parted with the same and what has become of them. [*1210]
That is a perfectly straightforward order for discovery, and has nothing to do with inspection or production at all, or indeed with the documents now in question. The second paragraph of the order provided:
The first defendant do within 14 days of the date of this order make a further list of documents, listing therein all the documents in the arbitration between Michael Turner (on his own behalf and on behalf of the members of Lloyds Syndicates Nos. 333, 334, 335, 426 and 427) and the first defendant (on his own behalf and on behalf of the members of Lloyds Syndicate No. 418) (being the pleadings and statements of evidence exchanged on both sides, the documents disclosed by the first defendant, the transcripts of evidence and the award of the arbitrators), save for documents disclosed upon discovery in the arbitration by Michael Turner.
It is with this paragraph that we are concerned. Again, it has nothing to do with production or inspection. The third paragraphg provided: There be no order on paragraph 2 of the plaintiffs summons dated 9 January 1990. That was the paragraph which sought production under Ord. 24, r. 11(2). The plaintiff thus failed to sustain the order sought.
On reading the order made by the judge, it appeared to me that he had probably rejected an order under rule 11(2) because he was not satisfied, at that stage, that it was necessary for the specific purposes which are set out in the rules. It is, however, as I understand it, common ground between the parties that there was no argument before the judge of any difference between listing and production, and that the parties and the judge proceeded throughout on the basis that what was really being discussed was production of these documents, and that if a list was ordered, production would automatically follow.
The judge delivered a short, ex tempore judgment, almost all of which it is necessary to read from an agreed note approved by the judge. He said:
This raises an issue of principle which has happily already been considered by Webster J. in Shearson Lehman Hutton Inc. v. Maclaine Watson & Co. Ltd.  1 W.L.R. 946. This action concerns a run-off contract of reinsurance written by Mr. Merrett in his capacity as managing agent of the defendant syndicates. The evidence has been that this contract was not the only such run-off contract written by Mr. Merrett nor the only such contract in dispute. Reference has been made to the Verrall v. Merrett arbitration which recently culminated in an award. On the basis of the affidavit of Mr. Hill, whose clients were involved, and the notice of appeal, this was an arbitration which involved issues very similar to the issues in the present action. It is plain to me that the documents that were adduced in evidence and that were otherwise relevant to that arbitration are relevant documents which are disclosable in this action unless protected by some form of immunity.
I pause at that point to observe that although the judge refers to the notice of appeal, he must, I think, have intended to refer to the notice of motion. The judge continued:
Webster J. in Sheason Lehman Hutton Inc. v. Maclaine Watson & Co. Ltd. considered if any such protection attached to documents in an arbitration for disclosure in an action and ruled that no such [*1211] protection attached. [Counsel] has reserved the right to challenge this decision but has not sought to dissuade me with any vigour from following Webster J.s decision. I therefore propose to follow Webster J.s ruling. No disclosure is sought of any documents disclosed by any other party nor was it in Shearson Lehman Hutton Inc. v. Maclaine Watson & Co. Ltd. Subject to that limitation I order that the documents in the Verrall arbitration be disclosed.
The judge then rejected disclosure in regard to a further arbitration with which we are not concerned. He continued:
It will be apparent from my ruling that the duty of disclosure is one which potentially applies to all other arbitrations irrespective of whether they have reached the stage of an award or not. If it be the case that the first defendants solicitors have failed to give such discovery of those arbitrations because they were under the mistaken apprehension that they were protected, then they now have a duty to say they acted under a mistake and to disclose the relevant documents.
From the judges judgment it would appear, on the face of it, that he considered two matters only: (1) were the documents sought relevant, and (2) if so, were they absolutely protected from disclosure and/or inspection? He answered the first question Yes so far as the Turner arbitration was concerned, and the second No. Although those are the only two issues which appear to have been considered by the judge, it is to be noted that, in the affidavit of a Mr. Dobias in opposition to the application for specific discovery, a number of points were taken, including (1) that the documents were of negligible probative value, (2) that the documents were of no or negligible relevance, (3) that their disclosure (and I take it also inspection) was unnecessary for the fair determination of any of the issues in the present action, (4) that to comply with the order would be onerous because it would involve extensive editing of a great deal of the material if it was relevant, and (5) that the documents were confidential as having had their genesis in a private arbitration. None of these matters was mentioned by the judge.
Based on the decision in Science Research Council v. Nasse  A.C. 1028, it is submitted on behalf of the first defendant that the judge erred in the way in which he treated the matter. In that case, which was not cited to either Webster J. in the Shearson case or Phillips J., the House of Lords, in relation to discovery sought in proceedings before an industrial tribunal, held that relevance alone, although a necessary ingredient, did not provide an automatic test for ordering discovery, the ultimate test being whether discovery was necessary for disposing fairly of the proceedings. The fact that documents were confidential was, however, a factor to which regard should be had. The House of Lords further held that in order to decide whether it was necessary, for the purpose of disposing fairly of the proceedings in that case, to disclose the documents, the tribunal should have inspected them. Although the case concerned industrial tribunals, it is plain from the speeches that their Lordships considered the decision as applicable also in litigation. That must clearly be the case, for the decision rests largely on the provisions of Order 24.
The first defendant submits that quite apart from the judges error in not proceeding as laid down in Nasses case, he erred in his conclusion [*1212] that the documents sought were of relevance. If the first defendant succeeds on that head, none of the other grounds arise. I will consider that first. It is, I think, clear that, as framed, the order is too wide. It is simply not possible to say that all what I shall call the Turner documents are even prima facie relevant in the wide meaning of that term laid down by Brett L.J. in Compagnie Financiere du Pacifique v. Peruvian Guano Co. (1882) 11 Q.B.D. 55, 61-63, and constantly applied since. Brett L.J. held that relevant documents were not limited to those admissible in evidence or which would tend to prove or disprove any matters in question, but also included any documents which it would be reasonable to suppose contained information which might enable the party applying for discovery either to advance his own case or damage that of his adversary; or if it was a document which might lead him to a train of inquiry which might have either of those two consequences.
The original class 6 in the schedule to the summons went to all documents in two arbitrations, with no savings for documents disclosed on discovery by Michael Turner. The judges order covered all documents in one arbitration only and with a saving for those disclosed by Michael Turner which it is common ground should not be produced. It was, therefore, a much more limited order than had been sought. His conclusion on relevance was clearly based on the notice of motion and the affidavit of Mr. Hill. He does not mention an affidavit of a Mr. Elborne which was originally filed in support of the summons—rightly so, in my view, for that affidavit was quite inadequate to justify any order. I therefore say no more about it. Mr. Hills affidavit, when read with the notice of motion, goes further, but in my judgment it is abundantly clear that there is a mass of documents covered by the order which cannot conceivably be relevant to the issues in the present action. For example, the order covers transcripts covering nine days of evidence, much of which cannot conceivably be concerned with or be in any way related to the issues raised in the present action. Although not expressly conceding this, Mr. Walker, for the plaintiff, eventually stated in argument that what he really wanted were (1) the statements of Mr. Emney, Mr. Merrett and their experts which were exchanged in the arbitration, as I understand, pursuant to an order in that behalf; (2) the transcripts of the evidence of the above; and (3) the award of the arbitrators.
I accept that there is good reason to suppose that some parts of the above are, or might be, relevant within the meaning of that word in the Peruvian Guano case, 11 Q.B.D. 55 and that, other considerations apart, some form of limited order for discovery might be made. But the plaintiff has not in my view made out a case sufficient to enable me to frame any acceptable order. I would therefore allow the appeal on that ground.
Lest I be wrong about this, I turn now to the position on the assumption that my conclusion as to relevance is incorrect. The judge, as I have already pointed out, proceeded wholly on the basis of the Shearson Lehman decision  1 W.L.R. 946, and did not have the benefit of having the Nasse decision  A.C. 1028 cited to him. I accept, of course, that an ex tempore judgment, such as that given by the judge, need not and cannot be expected to deal specifically with every point raised, but I find it quite impossible to infer, in the light of the way the judgment was expressed, that the judge did consider the other matters, in particular, whether production and inspection, which [*1213] was the real issue between the parties, could be regarded as necessary for the fair disposal of the action. I therefore consider that it is open to this court to form its own conclusion. The submission made on behalf of the first defendant, that what the judge did was precisely what the House of Lords held should not be done, seems to me to be an acceptable submission, and I accordingly accept it.
The matter which has then to be considered is what ought to be done? On one view, if I were wrong as to relevance, the matter could be left on the basis that the list must be prepared; the order for inspection not having been made, it would then be open to the plaintiff if, as would undoubtedly occur, the first defendant were to object to producing the documents, to make a further application under rule 11, or, indeed, under rule 12 for production to the court. Then the issue would arise under rule 13. That, however, appears to me to be wholly unsatisfactory. Everybody has known from first to last that the first defendant has the documents which are sought, in particular the documents which Mr. Walker now says that he wants, and it would be of no service to anybody to leave the matter in the uncertain position which would then result.
We were invited, therefore, to consider whether this was a case where there ought to be production. It is not contended on behalf of the first defendant that the fact that the documens were prepared for or used in an arbitration, or consist of transcripts or notes of evidence given, or the award, confers immunity. It could not, in my judgment, successfully be so contended. Nor is it contended that the documents constitute confidential documents in the sense that confidentiality and confidential documents have been used in the court. What is relied upon is, in effect, the essentially private nature of an arbitration, coupled with the implied obligation of a party who obtains documents on discovery not to use them for any purpose other than the dispute in which they were obtained. As between parties to an arbitration, although the proceedings are consensual and may thus be regarded as wholly voluntary, their very nature is such that there must, in my judgment, be some implied obligation on both parties not to disclose or use for any other purpose any documents prepared for and used in the arbitration, or disclosed or produced in the course of the arbitration, or transcripts or notes of the evidence in the arbitration or the award, and indeed not to disclose in any other way what evidence had been given by any witness in the arbitration, save with the consent of the other party, or pursuant to an order or leave of the court. That qualification is necessary, just as it is in the case of the implied obligation of secrecy between banker and customer.
It will be appreciated that I do not intend in the foregoing to give a precise definition of the extent of the obligation. It is unnecessary to do so in the present case. It must be perfectly apparent that, for example, the fact that a document is used in an arbitration does not confer on it any confidentiality or privilege which can be availed of in subsequent proceedings. If it is a relevant document, its relevance remains. But that the obligation exists in some form appears to me to be abundantly apparent. It is not a question of immunity or public interest. It is a question of an implied obligation arising out of the nature of arbitration itself. When a question arises as to production of documents or indeed discovery by list or affidavit, the court must, it appears to me, have regard to the existence of the implied obligation, whatever its precise [*1214] limits may be. If it is satisfied that despite the implied obligation, disclosure and inspection is necessary for the fair disposal of the action, that consideration must prevail. But in reaching a conclusion, the court should consider, amongst other things, whether there are other and possibly less costly ways of obtaining the information which is sought which do not involve any breach of the implied undertaking.
In the present case, for example, in the plaintiffs skeleton argument before us reliance is placed on certain findings of fact made by the arbitrators in the Turner arbitration which are quoted in the notice of motion to set it aside. Two of them are: the reinsurer knew the reinsured would have an I.B.N.R. [loss incurred but not reported to insurer] and the reinsurer knew that [asbestosis] experience was causing concern in the market at the time. Mr. Temple, for the first defendant, stated specifically that his clients were prepared to, and did admit that the first defendant knew that the plaintiff would have an I.B.N.R. in the present case, and that the first defendant also knew that asbestosis experience was causing concern in the market at the time of the present reinsurance. In the light of those admissions, it is clearly not necessary for there to be any discovery or production of documents relating to such matters, for there is no longer any issue upon them. They are admitted. Those matters could, it is clear, have been dealt with under Order 26 by way of interrogatories or by notice to admit. Other matters could, as it seems to me, also have been so dealt with. Even if, therefore, the documents (or some of them or some parts of them) are relevant, I could not be satisfied, on the material before us, that disclosure in the sense of producing the documents or any of them for inspection, is in the least necessary for disposing fairly of the issues in the action. I think, therefore, whether the judge dealt with the matters separately or not, he was entirely correct to make no order for inspection under rule 11(2).
In the course of the hearing, however, it may well be that the plaintiff will consider that he can sustain a case for production of a particular document or documents or parts thereof, on the ground that it can by then be shown that its production is necessary for the fair disposal of the case, or at least that there is a sufficient likelihood that that is so, to warrant the document being produced to the court under rule 12, so that the judge may make his own assessment whether its production is necessary for the fair disposal of the action.
In the light of the above I find it unnecessary to consider the other authorities cited to us, or the contention that, as to the statements of witnesses and any other documents prima facie privileged but used in the arbitration, privilege was waived only for the purposes of the arbitration. As to the decision of Webster J., I say only that whilst I agree that there is no immunity, it appears to me to follow from the Nasse case and the rules themselves, that he was wrong in considering that the existence of a discretion was doubtful. From the Nasse case and those rules it is plain that, notwithstanding immunity, inspection cannot be ordered unless it is necessary for disposing fairly of the proceedings.
As to the injunction appeal, it appears to me to follow that, in the light of what I have already said, the second defendants should not be permitted, without the consent of the first defendant, or leave or order of the court, to disclose, produce or otherwise make use of, any of the documents which are referred to in the order. However, it is equally clear that the first defendant himself must not, without the consent or [*1215] order of the court, disclose or produce, or make use of, any such documents. The implied obligation must apply equally to both sides in the arbitration. I would therefore, if necessary, grant an injunction against the second defendants, against a cross-undertaking by the first defendant. The second defendants attitude, however, has been very properly that they seek the guidance of the court, and it may well be that they would not wish to be subject to an injunction. If that is so, it appears to me that the best way of dealing with that appeal would be by cross-undertakings, which can no doubt be agreed, to be given by both sides, and it will then be open for both of them to apply to the court thereafter, if they wish, to be released from the undertakings.
I would therefore allow the appeals and set aside the judges order under paragraph (2).
RALPH GIBSON L.J. I agree.
FOX L.J. I also agree.
Appeals allowed with costs.
Costs order below to stand.