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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Hard Rock Cafe International (STP) Inc and Anor v HRCKY Limited [2022] JRC 055 (01 March 2022) URL: http://www.bailii.org/je/cases/UR/2022/2022_055.html Cite as: [2022] JRC 55, [2022] JRC 055 |
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Before : | Advocate Matthew John Thompson, Master of the Royal Court. |
Between | Hard Rock Limited | First Plaintiff |
| Hard Rock Café International (STP) Inc | Second Plaintiff |
| HRCKY Limited (a company incorporated in the British Virgin Islands) | Defendant |
Advocate R. Holden for the Plaintiff.
Advocate I. Jones for the Defendant.
CONTENTS
|
| Paras |
1. | Introduction | 1-2 |
2. | Background | 3-23 |
3. | Correspondence leading to the present application | 24-32 |
4. | Submissions for the defendant | 33-55 |
5. | Submissions for the plaintiffs | 56-69 |
6. | Submissions in reply | 70-77 |
7. | Decision | 78-100 |
judgment
the master:
1. This judgment contains my decision in respect of an application by the defendant to strike out the plaintiffs' answer to the defendant's counterclaim ("the strike out summons"). This summons was issued following an earlier summons dated 8th November 2021 seeking specific discovery of a document called a 2006 Strategic Report (the "specific discovery summons").
2. The basis for the strike out summons in summary followed the plaintiffs providing to the defendant a PowerPoint presentation which the plaintiffs contended was the 2006 Strategic Report after issue of the specific discovery summons. Provision of this document and the related correspondence prior to its production led the defendant to argue that an unless order dated 5th May 2020 had been breached requiring the plaintiffs' answer to the defendant's counterclaim to be struck out. In the alternative, the defendants contended that the document the plaintiffs had provided, if I was not willing to strike out the plaintiffs' answer and counterclaim, meant that further discovery should be ordered.
3. This is a very long running dispute which has been ongoing since 2013. It is not necessary to set out the full history of the proceedings in this judgment. Subject to the present application, this case is listed for trial in June of this year.
4. The overall issues in dispute were summarised succinctly by the Court of Appeal in its judgment reported at HRCKY v Hard Rock Limited & Anor [2019] JCA 123. At paragraph 21 the Court of Appeal explained the defendant's counterclaim (which is now the only dispute between the parties) as follows: -
5. The position of the plaintiffs was summarised at paragraph 22 as follows: -
6. The relevant procedural history for the purposes of the defendant' strike out summons commences with my judgment dated 16th December 2019 reported at Hard Rock Ltd and Anor v HRCKY [2019] JRC 243. That application sought an order that the plaintiffs comply with certain earlier discovery orders failing which the plaintiffs' answer to the defendant's counterclaim should be struck out. At paragraphs 5 and 6 of that judgment I explained the previous procedural history as follows: -
7. I then listed the relevant discovery orders made prior to December 2019 at paragraphs 9 to 11 as follows: -
8. In relation to the order of Deputy Bailiff Le Cocq (as he then was) I stated at paragraph 40 the following: -
9. Ultimately, I concluded for the reasons set out in the December judgment that documents existed or were likely to exist in relation to the profitability of the restaurant side of the business which were required to be disclosed by Sir Michael Birt and Deputy Bailiff Le Cocq and which had not been disclosed (see paragraph 55). I also concluded that such documents were clearly relevant to the issues as formulated by the Court of Appeal (see paragraph 56).
10. Finally, I refer to paragraph 62 which contained my decision to make an unless order requiring the plaintiffs to file an affidavit in compliance with the order of the Deputy Bailiff Le Cocq. Paragraph 1 of the Act of Court of 16th December 2019 therefore stated as follows: -
11. I next turn to the judgment of 5th May 2020 reported at Hard Rock Limited and Anor v HRCKY Limited [2020] JRC 079 because the strike out summons is based on a breach of paragraphs 9 and 10 of the Act of Court of 5th May 2020 which followed on from the May 2020 judgment. The relevant provisions of the Act of Court are as follows: -
12. In terms of the reasoning leading to this Act of Court it is appropriate to refer to the following paragraphs of the May 2020 judgment. Firstly, for the reasons set out in paragraph 14, I concluded that the plaintiffs had not complied with the order of 16th December 2019 for the following reasons: -
13. At paragraph 16 of the said judgment, I reminded the plaintiffs what was required in terms of discovery of any profit summaries and stated the following: -
14. I also rejected the approach taken by the plaintiffs up to that point in time for the reasons set out in paragraph 17 and 20 as follows: -
15. In respect of the theme of disclosing documents relevant to profitability I returned to this in paragraph 22 and 23 when I stated the following: -
16. My final conclusion on the question of profitability was set out at paragraphs 33 and 34 as follows: -
17. Finally, I concluded that there was no good reason for the breach; in determining what was an appropriate sanction I stated the following at paragraph 38: -
18. I also spelt out what steps the plaintiffs were required to take at paragraphs 39 and 40 as follows:-
19. The unless order was maintained at paragraph 42 but subject to the following qualification at paragraph 43 as follows: -
20. The next relevant judgment is that dated 1st September 2020 reported at Hard Rock Limited and Anor v HRCKY Limited [2020] JRC 173 where I granted an application for an extension of time by the plaintiffs to comply with parts of the discovery orders that I had made on 5th May 2020. The material paragraphs are as follows: -
21. In paragraph 39 I summarised whether or not there had been material compliance with the Act of Court of 5th May 2020 and noted the following: -
22. My conclusions were recorded at paragraphs 56 to 59 as follows: -
23. My overall conclusion was found in paragraph 62 as follows: -
24. Subsequent to the September 2020 judgment an affidavit was filed by Advocate Pallot sworn on 30th September 2020. That affidavit runs to 56 paragraphs, and it contains a detailed explanation of the approach taken by the plaintiffs to discovery following on from the order of 5th May 2020. The affidavit also exhibited appendices running to some 14 pages containing information about the tapes searched. For the purposes of this judgment, I refer to the following paragraphs of the affidavit: -
"7. In view of the wide search parameters, the size of the Hard Rock Group itself and the number of corporate cafés that existed during the period 1997 to 2004 inclusive, this was a substantial undertaking, particularly in view of the time frame within which discovery had to be given. Material had to be extracted and reviewed from a number of different sources including Hard Rock's current database, the back-up tapes, an e-room that was in use by Hard Rock back in 2014/2015 and Carey Olsen's document management system ("DMS"). In addition to this a physical search of Hard Rock's offices in Florida had to be conducted during a period in which the much of the world was in lockdown due to the Coronavirus pandemic.
8. Discovery of documents obtained from Hard Rock's current database following the application of 93 search terms to the documents, together with all relevant documents from Carey Olsen's DMS, were provided on 3 July 2020 pursuant to the Act of Court to the best of Hard Rock's ability at the time and as set out in Advocate Garrood's affidavit of 3 July 2020, the contents of which I shall not repeat. However, in short, due to the technical difficulties arising from the restoration of the back-up tapes containing 1.8 to 2.5 million documents, dating back to 1997, which contained documentation created on software that is no longer in use, disclosure of the back-up tape documentation was not possible by 3 July 2020. In addition, a psychical search of Hard Rock's head offices had not been conducted due to Coronavirus restrictions in place at the time preventing access to the building. Despite requests for it to do so and notwithstanding previous confirmations provided for the Defendant, unfortunately and ultimately the Defendant was not prepared to consent to Hard Rock's request for an extension of time and consequently, Hard Rock issued a Summons for an extension of time.
17. Nevertheless, Hard Rock have made extensive efforts in relation to this discovery exercise. It has been a substantial and complex process that they have undertaken and that has been undertaken on their behalf. The scale of the task is apparent from the fact that the total pool of documents from the back up tapes that had search terms applied to them prior to uploading on to Relativity for review was in the region of 1.8m plus 265,333 from Hard Rock's current system. The Schedule 1 Lists run to 1,140 pages and contain 15,705 documents (including not responsive children of disclosed parent documents but excluding all those listed in List 1.2 (see below)). It contains emails from over 481 different .pst files (481 from the back up tapes) plus 5 ZIP files from the Hard Rock's current systems (a list of which can be found at appendix 2 of MLAP1), As set out in paragraph 14 of Julie Keir's affidavit of 23 July 2020, approximately 1,200 .pst files containing mainly emails were uploaded onto Relativity and search terms applied. Of the c.1,200 .pst files only 481 were deemed to contain potentially relevant documentation for review following the application of search terms.
18. As a guide to the size of the task, and the way in which it has devoured time and resources, since 1 September 2020, Consilio has had a team of 40 reviewers at first level working full time, including weekends and overtime, together with a team of 7 quality control reviewers (with further quality control reviewers being drafted in on or about 17 September) also working weekends and overtime in order to review the volume of documents in the extremely short time frame within which the exercise has had to be completed. This has equated to 3,706 review hours at a cost of £345,221.25 and I note these costs exclude the costs associated with the production of the documents and corresponding lists. In addition to this, Carey Olsen had had a team of 9 reviewers (including myself and my colleague Julie Keir) who have also worked weekends and overtime to complete the discovery exercise. Carey Olsen has incurred more than 510 of fee earner hours during September at a cost of a little in excess of £155,000."
25. Finally, it is appropriate to refer to certain correspondence that led to the present application. This correspondence started after issue of the specific discovery summons on 8th November 2021.
26. On 11th November 2021 Carey Olsen therefore wrote to Advocate Jones. Paragraph 2 contained the following statement: -
"2. For the reasons addressed below, we do not consider that the Strategic Report is relevant to any of the issues in dispute between the parties. Nevertheless, in order to avoid unnecessary costs and delay, we propose below a method by which our client is prepared to give discovery of the Strategic Report."
27. Paragraph 6 of the letter contained the following: -
"The Strategic Report, created seven years after the conclusion of the franchise agreement, is not a contemporaneous document and we do not see how it can be relevant to the state of mind of the negotiating parties at the material time."
28. At paragraph 10 the letter also set out that the strategic report was highly confidential and therefore enclosed a proposed confidentiality agreement for the report to be provided to Advocate Jones on a lawyer only basis.
29. Advocate Jones responded by a letter dated 10th December 2021 observing firstly that if the plaintiffs conceded that the strategic report was relevant and that would place them in breach of existing discovery obligations. Advocate Jones suggested this breach "would seem to be the sixth time since 2017".
30. He then set out why the strategic report was relevant having referred to the decision of Commissioner Birt reported at Hard Rock Limited and Anor v HRCKY [2017] JRC 048 (referred to in the December 2019 judgment). Advocate Jones therefore stated in his letter as follows: -
"By contrast the Report is but one document and its disclosure could never be described as an onerous exercise. For the same reasons as set out by Commissioner Birt the Report should be disclosed. Indeed, it should have been disclosed many years ago. In light of the analysis performed by Commissioner Birt it is astonishing that your clients have made the positive decision not to disclose the Report."
31. On 15th December 2021 Carey Olsen replied maintaining that the strategic report was not relevant but enclosing a copy on the basis of the implied undertaking as a matter of pragmatism while reserving the right to make submissions at trial as to the irrelevance of the strategic report.
32. In response to this letter, Advocate Jones issued the strike out summons. In his email to the court seeking a date fix (but not in his summons) as an alternative he also sought the following: -
"... in the event that the Court is not prepared to grant that relief my client seeks a further order that the Plaintiffs disclose the source material along with other related documentation (such as correspondence, board minutes etc.) in relation to the Report in so far as such material relates to the profitability (or lack thereof) of the restaurant side of the business for the period 1997-2004 and was relied on in the production and finalisation of the Report."
33. In support of the strike out summons Advocate Jones for the defendant made the following written and oral submissions.
34. Paragraph 2 of the Act of Court of 5th May 2020 was wide and meant that, if profitability of the corporate cafes for the relevant period was referred to in any document, that document had to be disclosed because it at least gave rise to a train of enquiry and therefore met the relevant test for discovery.
35. Paragraph 2 of the order was clear on its face and was not ambiguous.
36. Paragraph 9 of the order was the sanction for non-compliance with paragraph 2.
37. The decision in May 2020 was giving the plaintiffs a very final chance to remain in the litigation. They were allowed that final chance by the 'skin of their teeth'. A failure to provide discovery in breach of the 5th May order therefore meant that the strike out would follow as an automatic consequence.
38. Advocate Jones described paragraph 10 of the 5th May order as a curious provision but accepted that omission of one single document might not lead out to a strike out. In this case however the plaintiffs' decision not to disclose until December 2021 what it described as the strategic report was a deliberate decision not to produce a clearly relevant document. There was no affidavit explaining why the document produced has not been disclosed in compliance with the 5th May order or indeed much earlier.
39. In relation to what was provided, Advocate Jones complained that he still did not have the complete document or the full story. There was no explanation about how this PowerPoint became to be produced. The information in the PowerPoint must also have drawn on other material or raw data but that had not been disclosed. The plaintiffs had not explained what documentation was used to feed into this document.
40. The raw data was relevant to both what the plaintiffs knew in 1998 in relation to the fraudulent misrepresentation argument and also in relation to the argument based on breach of an implied term of good faith.
41. What was described in Advocate Pallot's affidavit and the affidavits referred to in the September 2020 judgment was no answer to the present application or the failure to explain why what had now been produced had not been produced much earlier.
42. If the court concluded that the strategic report was disclosable, then everything that referred to profitability which flowed into that report was also disclosable. The onus was on the plaintiffs to explain the position, but they had not done so.
43. The argument that no weight should be attached to what had been produced because it was only created or produced in 2006 and therefore was inadmissible was a matter for trial. The document clearly met the test of relevance for discovery purposes.
44. The document disclosed by Carey Olsen was a PowerPoint presentation. Advocate Jones described this document as an incomplete strategic report. He also went through the report in detail highlighting where it referred to the profitability of corporate cafés. There appeared to be about around 18 separate references in one way another to the profitability of corporate cafés between 1997 and 2004. What had been disclosed was therefore obviously relevant irrespective of any discovery orders focusing on particular topics.
45. An earlier draft report contained a slide headed Hard Rock Profit Trends which showed losses from the period 2003; 2004 to 2006 and 2007 as well as figures showing the total trading profit when restaurant trading losses were combined with merchandise trading profit. A later draft slide at page 60 included this statement: -
""average unit restaurant sales must be moved beyond the breakeven point and achieve stand-alone profitability""
46. This earlier draft had been found by Mr Doyle who had disclosed the same. However, neither this draft nor the final version of the strategic report or the PowerPoint slides produced by Carey Olsen had been disclosed previously.
47. Advocate Jones then contended that what he described as the strategic report had not been disclosed. He contended that this document was different from the PowerPoint version that had been disclosed. In support of this submission, he relied on the material contained in the 18th affidavit of Mr. Doyle which in summary contended that Mr. Dodds had referred to such a strategic report both in his witness statement for the present proceedings and in an earlier deposition in certain proceedings in the United States.
48. The existence of a strategic report was also supported by reference in a memorandum issued by Merrill Lynch in 2006 to prospective purchasers of the Hard Rock business which contained references to the strategic report which memorandum stated at paragraph 7.1.1 : -
"The financial projections have been extracted from Hard Rock's strategic plan. Financial information as of 2006 reflects actual results through to June 30 and projections for the balance of year."
49. Mr Michael Kneidinger who oversaw Hard Rock Cafés and franchise in the early 1990s to 2013 in his deposition in the United States also confirmed that there was a strategic planning document.
50. Advocate Jones therefore argued that the suggestion that the strategic report was the PowerPoint that had been disclosed did not make sense. The disclosure of the PowerPoint presentation had also not been explained on affidavit and therefore there was no confirmation which the court could rely on that the PowerPoint presentation was the strategic plan.
51. In relation to the relevant legal principles where an order had been breached the approach to take had been determined by me in Newman v De Lima [2018] JRC 155 which had been approved by the Royal Court in Sheyko v Consolidated Minerals Limited [2021] JRC 267 at paragraphs 104 to 108.
52. Advocate Jones also emphasized the decision in Huda v Minister for Health & Social Services [2021] JRC 196 where Bailiff Le Cocq struck out on an appeal the defendant's answer because the defendant had been in breach of an unless order. At paragraph 26 of Huda the Bailiff cited the words of Commissioner Birt in Leeds United Football Club v Admatch [2011] JRC 016A as follows: -
53. This led to the Bailiff's conclusions at paragraphs 51 to 53 as follows: -
54. As he had in Huda, Advocate Jones therefore posed the question what was the point of an unless order if the court subsequently gave relief from sanction where that unless order had not been complied with.
55. Advocate Jones accepted I had a discretion which included striking out part of a claim rather than the whole claim, but he re-emphasised that this was a deliberate non-disclosure that had occurred for many years which justified the answer to the defendant's counterclaim being struck out on liability.
56. Advocate Holden made the following submissions.
57. His client's position was that they were not in breach of the unless order granted in May 2020 which was the application made by the defendant in their strike out summons.
58. In support of this position, he took me through my decision of 1st September 2020 including the submission by the defendant at paragraph 23 that a wider search period should be applied. Advocate Holden therefore argued that this submission was implicitly rejected in my conclusions at paragraph 62 because I had granted the extension of time.
59. In respect of the order 5th May 2020 he argued that this only covered documents in respect of the period 1997 to 2004 and emphasised the various reference to periods to be searched in paragraph 3 and 4 of that order.
60. Why this was relevant was that the PowerPoint disclosed was outside this period, and as a consequence the unless order could not apply to a document that did not fall within the terms of the order of the 5th May 2020. At the very least the order 5th May 2020 was ambiguous and therefore an unless order should not take effect in respect of an ambiguous order.
61. Advocate Holden accepted that the PowerPoint that had been disclosed was a relevant document but that did not affect his submission that there had been no breach of the unless order granted by the Act of Court of the 5th May 2020.
62. He also criticised the application because initially the defendant had applied for discovery of the strategic report which had been provided. Despite the report having been disclosed, the defendant still sought to issue its strike out summons.
63. He also observed that the defendant had not brought any other application for specific discovery and had not otherwise challenged the affidavits filed for the September hearing 2020 and the affidavit of Advocate Pallot. This was notwithstanding paragraph 5 of the Act of Court 4th October 2021 requiring any application for specific discovery by any party to be issued supported by an affidavit within 28 days of that order. The only application issued was the specific discovery summons seeking disclosure of the strategic report. This meant that the plaintiffs' approach to discovery following the May 2020 order had not otherwise been challenged and it was now too late to do so.
64. In relation to the PowerPoint itself, Advocate Holden's position was that the PowerPoint was the strategic report. He accepted that a further supplemental affidavit had not been produced which confirmed the plaintiffs' position. He argued this was because the specific discovery summons had been overtaken by the strike out summons.
65. The defendant's contentions that there was a report over and above the PowerPoint presentation were a matter of inference or submission only.
66. While neither the discovery summons nor the strike out summons sought any other discovery, Advocate Holden accepted that in exercising the discretion under Newman v De Lima, I could order further documents or an affidavit to be provided.
67. In relation to what had been disclosed, Advocate Holden emphasised that this had occurred voluntarily following the issue of the initial summons. The plaintiffs had therefore responded quickly to the specific discovery summons.
68. In relation to the depositions relied on by the defendant Advocate Holden contended that what had been put Mr Dodds and Mr Kneidinger was the PowerPoint that had been disclosed. He accepted however that paragraph 55 of Mr Dodds' witness statement for these proceedings which stated "the ISR is a draft. Once in final form, portions of the ISR became incorporated into hard rock's 2006 strategic plan" was not clear.
69. If I was minded to order more searches, Advocate Holden requested that any such searches were proportionate. The context of ordering any further searches was the very extensive discovery exercise carried out between May and September 2020 as described ultimately in the affidavit of Advocate Pallot. He emphasised the number of documents that had been searched as set out at paragraph 17 and 18 of Advocate Pallot's affidavit.
70. Advocate Jones in reply contended that the plaintiffs' approach was artificial because what the plaintiffs were contending was that they had complied with the letter of the unless order contained in the Act of Court of 5th May 2020 but they had clearly not met the spirit of that order because the strategic report as was now accepted was relevant to the issues in dispute.
71. The 5th May order followed on from a cascade of discovery orders which had not been met.
72. What had occurred here was a positive decision not to disclose the document that had finally been disclosed. That document would have been disclosed if the plaintiffs had followed the terms of the order in particular paragraph 2 which was clear. Profitability was a core issue and until the hearing itself the plaintiffs had maintained that the strategic report was not relevant, albeit they had provided a copy.
73. Any other documents upon which the report was based relating to profitability therefore also had to be disclosed.
74. The acceptance that the document disclosed was relevant meant that the plaintiffs were also in breach of the 5th May order or earlier orders because of the failure to disclose any underlying relevant material. The court could not be satisfied that the terms of the 5th May order had been complied with because the non-disclosure of the strategic report, until a summons was issued, was not accidental. In view of this approach, it was open to the court to strike out the plaintiffs' answer to the counterclaim as a sanction.
75. The defendant's primary position was therefore that the plaintiffs' answer should be struck out because of this deliberate non-compliance. As a fall-back the position in respect of the strategic report should be clarified and whether this was the PowerPoint or some other document as well as an order requiring discovery of any underlying documents referring to profitability. It was not for the defendant to identify what those documents might be because the plaintiffs should know what the supporting materials were and it was for the plaintiffs to discharge their discovery obligations.
76. It was wrong to give the plaintiffs the benefit of the doubt when there was no basis to have refused disclosure of the PowerPoint. The plaintiffs were not entitled to any further indulgence because the decision not to produce the report was deliberate and there was no explanation as to why it had not been disclosed earlier. The plaintiffs had not come close to getting discovery right.
77. The failure to provide this report was also a breach of the Deputy Bailiff's order and the December 2019 order.
78. The starting point for my decision is that the PowerPoint disclosed by the plaintiffs on 15th December 2021 is clearly a relevant document having regard to the summary of issues as described by the Court of Appeal referred to above. This is because the document refers to the profitability of the corporate cafés between 1997 and 2004 in numerous places as referred to by Advocate Jones. Advocate Holden was therefore entirely correct not to seek to persuade me that the PowerPoint presentation was not a relevant document. As I put to him in argument it was plain as a pikestaff that it was relevant.
79. The argument that the PowerPoint was only created in 2006 was not a reason not to disclose the document. The PowerPoint presentation was always at least a train of enquiry document as to whether what was expressed in 2006 was known to the directing minds of Hard Rock and those granting franchises or dealing with requests to vary franchise terms between 1997 and 2004. The train of enquiry would lead to whether there was any underlying data created prior to 2006 which had led to the conclusions in the PowerPoint.
80. The argument that the PowerPoint presentation in 2006 did not show the knowledge of key individuals who were in Hard Rock Group in 1998 was also a matter for trial but was not determinative of whether or not a document was relevant.
81. The plaintiffs' approach until releasing the PowerPoint in December 2021 was effectively the same argument that I had rejected in my judgment in 16th December 2019. At paragraph 43 I stated the following: -
82. The same argument was also rejected at paragraphs 16 and 17 of my 5th May 2020 judgment. Paragraph 16 is set out above but I then went on at paragraph 17 as follows: -
83. It was therefore clear from my decisions in December 2019 and May 2020 that the PowerPoint and, if that is the strategic plan/report, was a disclosable document.
84. I also do not therefore accept the submission of Advocate Holden that paragraph 2 of the 5th May 2020 judgment was unclear. Paragraph 40 of the December 2019 judgment repeated at paragraph 16 of the May 2020 judgment made it clear that any document containing any profit summary about profitability of corporate cafés within the period 1997 and 2004 was disclosable.
85. I should add that the plaintiffs were themselves of the same view because in making enquiries of various individuals as to whether they might have relevant documents in May 2020 Carey Olsen's letters contained the following "The Royal Court also ordered our clients to undertake searches of email accounts of all the appointed officers of the Hard Rock Limited for documents in its possession, custody or power containing or referring to the profitability of the corporate cafés of the Hard Rock Group or with any part of the period of 1997 and 2004 inclusive". The letters also enquired whether individuals had any documents that related to "the profitability of the corporate cafés between 1997 and 2004 inclusive."
86. I accept in relation to paragraph 3 of the Act of Court of 5th May 2020 that the plaintiffs have interpreted the references to period in that order to mean 1997 to 2004. That approach is entirely understandable in respect of the searches listed in paragraph 3 because defined periods were required. It does not however in my judgment mean that paragraph 2 is ambiguous.
87. In addition, the PowerPoint was disclosable in any event because it was referred to in Mr Dodds' witness statement exchanged in 2017. The whole thrust of that statement was to contend that no inferences could be drawn from the PowerPoint. However, the fact that it had been referred to in the witness statement meant that it was disclosable for this reason alone, and the plaintiffs must have known this prior to the date Mr Dodd's witness statement was produced i.e. for at least 4 years. Otherwise, what was the point of a witness statement contending that a document was not relevant if that document was not going to be produced?
88. Applying the test in Newman v De Lima which both counsel agreed was the appropriate test, I am therefore satisfied that the first question I have to ask, namely whether previous orders for discovery in particular paragraph 2 of the 5th May 2020 order have been breached, is to be answered in the affirmative for the reasons set out above.
89. The second question is whether those breaches are serious. No evidence has been adduced by the plaintiffs in relation to this part of the test (or indeed at all) and no supplemental affidavit of discovery has been filed disclosing the PowerPoint report or explaining why it was only disclosed at the end of December 2021. The only correspondence produced is that referred to above which asserts that the report was not relevant, which Advocate Holden did not maintain (rightly) and which I have not accepted for the reasons set out above. I also do not see how a report that is referred to in a witness statement to be relied upon at trial has not been disclosed due to some form of accidental mistake or some oversight. The judgments in December 2019 and May 2020 were also clear. The plaintiffs must therefore have known by reading those judgments that the PowerPoint was discoverable. I have therefore concluded that the failure not to produce the PowerPoint that has now been disclosed was not accidental or an oversight but was a conscious or deliberate decision. The failure to disclose is therefore clearly a serious breach.
90. Turning now to the third limb of Newman v De Lima I have to consider what sanction should be applied in light of my conclusions on the first two limbs above including whether the unless order should take effect. Returning to Admatch and the quotation at paragraph 26 of Huda, not to disclose a document for four years referred to in a witness statement, for a party not to produce a document until two years after the December 2019 judgment making clear what was relevant and eighteen months after the May 2020 judgment which confirmed the December judgment, is an abuse of process. It is also flouting or ignoring orders of the court.
91. The question I have to ask myself however looking at the full quotation from Admatch is whether this abuse of process and a flouting of court orders renders further proceedings unsatisfactory or prevents the court from doing justice or whether the plaintiffs have conducted themselves in such a way that evidences an unwillingness to engage in the litigation process on an equal footing with other parties.
92. This requires what has occurred to be put in context. The focus of the order made in May 2020 was to set out how the plaintiffs should discharge their discovery obligations having failed to do so previously (see paragraph 40). As I noted in the September 2020 judgment the plaintiffs had carried out the steps, I required them to carry out. It is clear from the affidavits filed subsequent to May 2020, in particular the affidavit of Advocate Pallot, that a very significant exercise was carried out in respect of the searches that I required. In the September 2020 judgment I described the plaintiffs as having undergone something of a 'sea change' in approach. The approach I described in that judgment, and as set out in Advocate Pallot's affidavit, does show a willingness to engage in the litigation process on an equal footing. The plaintiffs have spent significant sums on reviewing back-up tapes, engaging an e-discovery provider and searching or researching for documents in the manner I had required, which were steps they had not previously carried out. Other than the application for one document, namely the strategic report, the defendant has also not otherwise challenged the approach taken by the plaintiffs. In light of the acceptance of the process followed, I do not need to determine whether the September judgment impliedly accepted the approach taken by the plaintiffs because I did not accede to Advocate Moran's submission to widen the scope of the searches to be carried out.
93. The other relevant matter to evaluate the context of the defendant's application and what has now been produced is that the PowerPoint is a development and expansion of an earlier document that was already in the defendant's possession. What has now been produced has not also advanced matters significantly compared to the earlier draft of the PowerPoint the defendant already had obtained. Battlelines have already been drawn in Mr Dodd's and Mr Kevin Doyle's witness statements about what inferences should be drawn from any strategic report created in 2006 about the knowledge of key executives between 1997 and 2004, and in particular in 1998. I also refer to my previous judgments where I have described other evidence which Mr Doyle relies upon about the knowledge of key executives in 1998. Prior to the present application what conclusions might be reached on this key question and this evidence was an issue that was only ever going to be resolved at trial. Although the PowerPoint disclosed contains more references to the profitability of the corporate cafes, it does not fundamentally alter the question of what inferences can be drawn about knowledge of key executives between 1997 and 2004 based on an analysis carried out in 2006.
94. The final relevant aspect to take into account is that ultimately the plaintiffs did produce the PowerPoint, they did not resist the discovery summons and disclosed the PowerPoint voluntarily without a court hearing.
95. While therefore failure to produce the document until December 2021 in my judgment was an abuse of process and was a flouting of a court order, I have concluded, now that the PowerPoint has been produced and subject to the remaining parts of this judgment, that this breach of the December 2019 and May 2020 orders do not render further proceedings unsatisfactory, in particular the trial listed for June this year, or prevent the court from doing justice at that trial. I am also satisfied that the plaintiffs are now evidencing a willingness to engage in the litigation process because of the other steps that they have taken in respect of discovery which have not been challenged and because ultimately they produced the PowerPoint without a court hearing.
96. In reaching this conclusion the focus of the May 2020 order was to carry out the searches I directed the plaintiffs to carry out. The plaintiffs complied with what I expected other than in respect of the PowerPoint.
97. This is also not a case like Huda or Sheyko where significant number of documents, for different reasons, had not been disclosed.
98. In relation to the question of what was intended by paragraph 10 of the Act of Court of 5th May 2020, in my judgment the intention behind paragraph 10 was to recognise the discretion that a court always possesses to whether or not to give effect to an unless order. I regard this as consistent with Admatch which recognises the seriousness of striking out a case and what evaluation was required before doing so. Had that focus not occurred and had the plaintiffs not taken the steps they did to search for documents in the manner I required, then I have no doubt that their answer and counterclaim would have been struck out as the "natural consequence" (taking the Bailiff's words in Huda) of such a breach. The context I however faced in deciding the present application is that the plaintiffs have otherwise complied with the May 2020 order and judgment and have, save in respect of the PowerPoint, changed their approach. In my judgment these are both relevant and sufficient circumstances, as required by Huda, when set against a failure to produce one document, even though deliberate, not to strike out the plaintiffs' answer to the counterclaim.
99. This decision is however subject to the following conditions: -
(i) Within 14 days the plaintiffs shall file an affidavit disclosing the PowerPoint and also disclosing any other strategic plan or strategic report or draft of the same created in 2006 which refers to the profitability of the corporate cafes, insofar as not already disclosed.
(ii) If there is no other strategic report or plan created in 2006 the affidavit must make this clear.
(iii) The plaintiffs also use their best endeavours to file a supplemental witness statement to clarify the ambiguity in Mr Dodds' witness statement at paragraph 55 and whether Mr Dodds is referring to the PowerPoint or to some other document within 14 days;
(iv) The plaintiffs shall further disclose any source material relied upon in relation to producing the PowerPoint or any strategic plans/reports for 2006 which refer to the profitability of the corporate cafés for 1997 to 2004, whenever any document forming part of that source material was created. Although neither summons asked for this discovery, I consider I can require discovery of the same as a condition of not striking out the plaintiffs' answer to the counterclaim. I am satisfied that such discovery should be searched for as part of a train of enquiry as any material relied upon to produce the strategic plan/PowerPoint referring to the profitability of the corporate cafes between 1997 and 204 would clearly be relevant. As the focus is on what source material was relied upon in 2006, I do not regard making such enquiries as disproportionate;
(v) This order does not require the plaintiffs to disclose any raw data held by the plaintiffs but only any source material relied upon to produce the PowerPoint/strategic plan/report;
(vi) The above steps shall be at the plaintiffs' own cost.
100. Finally, given that the failure to produce the PowerPoint was not accidental was an abuse of process and the flouting of a court order, the plaintiffs have brought this application upon themselves and it is fully understandable why the defendant asked for the answer to the counterclaim to be struck out. Although the application to strike out has been refused, the justice of the case requires the court to express its displeasure about conduct that was a deliberate breach of court orders without any explanation or justification. The plaintiffs will therefore also to pay the costs of this application on an indemnity basis; the defendant should not be out of pocket for raising with the court a serious breach and for asking that I determine that the unless order had taken effect. Any other costs order would not be a fair reflection of what has occurred.