Court of Appeal found settlement precluded application to use disclosed documents in separate action

The Court of Appeal overturned an order granting the claimants permission to use, in intended Swiss proceedings, certain documents that had been disclosed by the defendants, where the proceedings had been settled before trial, the documents had not been read to or by the court or referred to at a public hearing, and the defendants did not agree to their use: Alphasteel Limited (in liquidation) v Shirkhani and another [2013] EWCA Civ 1272.

Under the terms of settlement, the claimants had agreed not to pursue any claims or rights against the defendants. On the proper construction of the settlement agreement, this precluded the claimants' application. The defendants continued to have a limited or defeasible right of confidence in their documents, despite their disclosure in the proceedings. In seeking the court's permission to use the documents for separate proceedings, in the face of the defendants' refusal, the claimants were seeking to defeat that right. This amounted to a claim against the defendants.

Although this decision turned on the interpretation of the particular settlement agreement in question, the terms of settlement were not out of the ordinary. The decision therefore suggests that in many cases where the parties have agreed a wide-ranging release and covenant not to sue, this may be taken to preclude an application to use disclosed documents for a collateral purpose.

Background

CPR 31.22(1) provides that a party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where –

• (a) the document has been read to or by the court, or referred to, at a public hearing;
• (b) the court gives permission; or
• (c) the party who disclosed the document and the person to whom the document belongs agree.

Here the parties had entered into a settlement agreement which was said to be "in full and final settlement of all or any claims or rights or complaints of whatever nature" between the parties. The key clause, for present purposes, stated:

"[The claimants] hereby covenant that they will not at any time in the future sue, commence, voluntarily aid in any way, prosecute or cause to be prosecuted and/or otherwise pursue [the defendants] in respect of all or any claims or rights or complaints of whatever nature, whether in this jurisdiction or any other, whether known or unknown to the Parties or to law which they or either of them presently have or may have against [the Defendants] or which may hereafter arise out of anything done or omitted to be done prior to the date hereof insofar as the same arise from or in connection with the Dispute and/or the Proceedings..." [emphasis added]

The claimants applied for permission to use the documents in separate Swiss proceedings against a third party, alleging a fraudulent scheme between that third party and one of the defendants.

At first instance, the judge held that the terms of settlement did not preclude the claimants' application: first, he did not consider that the claimants were making a "claim" to be entitled to use the documents - they requested permission precisely because they recognised that they were not entitled to use them; secondly, even if they were making a claim, the judge did not consider that it was a claim "against" the defendants (or anyone else).

Decision

The Court of Appeal (Tomlinson, Gloster and Underhill LJJ) overturned the first instance decision. The court accepted that the obligation imposed by CPR 31.22 was owed to the court rather than the opponent who had given disclosure (as established by previous Court of Appeal authority). Nonetheless the CPR 31.22 regime recognised that the disclosing party still had an interest in the confidentiality of his documents to protect, even after a limited inroad into that confidentiality had been made by compulsory disclosure.

In circumstances where the settlement agreement was obviously aimed at wiping the slate clean between the parties, it was appropriate to regard the claimants' application as seeking a right at the expense of the defendants. Tomlinson LJ, who gave the leading judgment, stated:

"There is I consider great force in Mr Kitchener's submission that what [the claimant] has done is to involve [the defendants] in further litigation related to the underlying proceedings and that that is precisely what the Settlement Agreement was intended to prevent."

It was unrealistic to say, as the claimants argued, that the application did not constitute pursuit of a claim or right, still less a claim or right against the defendants, but was simply a request to be released from an obligation imposed by court rules.