Third party disclosure and service out of the jurisdiction: Gorbachev v Guriev
In Gorbachev v Guriev  EWCA Civ 1270; the Court of Appeal confirmed that the English courts have the power to make an order for disclosure of documents against a third party outside of England and Wales under s.34 of the Senior Courts Act 1981 and CPR 31.17. In this update, we consider the facts of the case and highlight the key implications for those seeking disclosure from those who are outside of this jurisdiction.
Mr Gorbachev (the "Claimant") commenced proceedings against Mr Guriev (the "Defendant") in relation to the ownership of a Russian business. The Defendant is alleged to have been financially supported by two Cyprus-based trusts, whose trustees were: (i) T.U. Reflections Limited; and (ii) First Link Management Services Limited (the "Trustees").
The Claimant sought disclosure of documentation belonging to the Trustees but held, electronically, by their English solicitors in this jurisdiction. Initially, the Claimant applied for third party disclosure under CPR 31.17 and section 34 of the Senior Courts Act 1981 (the Senior Courts Act) directly against the Trustees' solicitors. However, the solicitors contended that as the documents were held on behalf of the Trustees, the application should properly be made only against the Trustees. The Trustees were therefore joined to the application. Permission was granted to the Claimant to serve the disclosure application out of the jurisdiction on the Trustees and also, by alternative means, on their English solicitors. The application for disclosure against the solicitors directly remains to be determined.
The Trustees' application to set aside the order granting permission was refused at first instance. The Trustees' appeal against that decision has now also been rejected.
The jurisdictional gateways
The jurisdictional gateway relied on by the Claimant was "Gateway 20" (the 'enactment' gateway),1 which provides that permission for service out of the jurisdiction may be granted where "a claim is made under an enactment which allows proceedings to be brought". In exercising its discretion to grant the Claimant permission to serve the application out of the jurisdiction, the court (at first instance) considered:
- whether an application for non-party disclosure pursuant to CPR 31.17 was a 'claim' or 'proceedings' as defined in Gateway 20; and
- whether the 'enactment' relied upon (the Senior Courts Act) permitted proceedings to be brought against persons outside of the jurisdiction.
The High Court decision
The High Court held that an application for disclosure against a non-party was in fact a 'claim' for the purposes of Gateway 20, as the gateway should be interpreted expansively. The court applied the same expansive approach to its interpretation of s.34 Senior Courts Act, finding that an application for non-party disclosure fell within the definition of a claim which allowed proceedings to be brought. Finally, it also held that while legislation is not generally intended to have extra-territorial effect (the principle of 'territoriality'), there was nothing in s.34 Senior Courts Act which expressly or impliedly limited an application to persons within the jurisdiction.
In relation to discretion, the court held there were a number of factors justifying the departure from the normal rule that applications against overseas third parties should be made via the letter of request regime (as per Nix v Emerdata  EWHC 718 (Comm)). Principally, these were: i) the documents sought were held in England by English solicitors; ii) the documents related to transactions taking place in the jurisdiction; and iii) there were unresolved proceedings (i.e. the disclosure application) against the Trustees' solicitors. The latter point was also relied upon as justifying the granting of permission for alternative service on the Trustees' solicitors.
The court therefore found that the Claimant's application for non-party disclosure fell within Gateway 20 and permitted service out of the jurisdiction.
The Court of Appeal decision
On appeal, the court considered the following three questions:
1.Does the court have jurisdiction to make an order for disclosure against a third party outside of the jurisdiction?
2. If that jurisdiction exists, was the court wrong to exercise its discretion to use it?
3. Was the court wrong to permit alternative service on the Trustees, via their solicitors?
On the first question, the Court of Appeal affirmed that the English courts can make an order for disclosure of documents against an overseas third party. While the principle of territoriality is an important limitation on the scope of s34 Senior Courts Act, it does not prevent the English court from ever ordering disclosure of documents by a third party outside the jurisdiction. The crucial point in this case was that the documents sought were located within the jurisdiction and the principle of territoriality therefore had little or no application. Indeed, the Court of Appeal doubted whether, given the location of the documents, they could be obtained by means of a letter of request to the courts of a foreign state in any event.
In relation to the exercise of the court's discretion, the Court of Appeal was satisfied that the judge at first instance had exercised his discretion properly. Sufficient reasons for departing from the letter of request regime were given.
Finally, the Court of Appeal determined that there had been a 'good reason' justifying alternative service, despite the fact that service should, ordinarily, have taken place pursuant to the Hague Service Convention. The existing disclosure application against the Trustees' solicitors needed to be heard quickly, in view of the trial date and the court had ordered (with good reason) the disclosure application against the Trustees to be heard at the same time. Where a delay in effecting service of an application to join a new party to existing proceedings might interfere with directions to trial, this has been identified as a situation in which alternative service may be permitted2. The Court of Appeal therefore saw no reason to interfere with the discretion exercised by the lower court to permit alternative service.
This decision contrasts with that of the Commercial Court in Nix v Emerdata, where the Court held that Gateway 20 was not available for service of a non-party disclosure application and that, even if it were, the court should not exercise its discretion to permit it because the appropriate route was the letter of request regime. The Court of Appeal has now made it clear that there is no blanket prohibition on the English courts ordering non-parties outside of the jurisdiction to disclose documents. However, there is an important limitation. The critical factor in this case was that the documents themselves were located within this jurisdiction. In the words of Lord Justice Males: "By sending the documents to England, the Trustees have made the documents subject to the jurisdiction of the English court and, to the extent necessary, can be regarded as having accepted the risk that, like any other documents within the jurisdiction, they may be subject to production in the courts of England and Wales."
The key point for parties (and their legal advisors) to bear in mind is that whenever documents are located (even if only on email) in this jurisdiction, they may be liable to be disclosed in proceedings here, whether or not the 'owner' of the documents is within the jurisdiction and whether or not they are a party to existing proceedings. That applies even if a party gives documents to its solicitors within the jurisdiction.
It is also worth noting that in tandem with this expansive interpretation of the English courts' jurisdiction, there is now a new Gateway 253 for service out of the jurisdiction of Norwich Pharmacal (non-party, pre-action disclosure) applications.
While subject to certain limitations, overall these developments represent a significant step forward for litigants in the English courts seeking disclosure of documents.
1 PD 6B para 3.1 (20).
2 M v N  EWHC 360 (Comm)
3 PD 6B paragraph 3.1(25)