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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Constantin Medien AG v Ecclestone & Ors [2013] EWHC 2674 (Ch) (22 July 2013) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2013/2674.html Cite as: [2013] EWHC 2674 (Ch) |
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CHANCERY DIVISION
7 Rolls Buildings Fetter Lane London EC4A 1NL Monday, 22 July 2013 |
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B e f o r e :
____________________
CONSTANTIN MEDIEN AG | Applicant/Claimant | |
- and - | ||
(1) BERNARD ECCLESTONE | ||
(2) STEPHEN MULLENS | ||
(3) BAMBINO HOLDINGS | Defendants | |
(4) ALPHA PREMA UK LIMITED | ||
(5) FORMULA ONE WORLD CHAMPIONSHIP LIMITED | ||
(6) FORMULA ONE ASSET MANAGEMENT LIMITED | ||
(7) FORMULA ONE MANAGEMENT LIMITED | ||
(8) FORMULA ONE ADMINISTRATION LIMITED | ||
(9) CVC CAPITAL PARTNERS LIMITED | Respondents |
____________________
8th Floor, 165 Fleet Street, London, EC4A 2DY
Tel No: 020 7421 4036 Fax No: 020 7404 1424
Web: www.merrillcorp.com/mls Email: [email protected]
(Official Shorthand Writers to the Court)
Mr Robert Miles QC and Mr Richard Hill QC (instructed by Herbert Smith Freehills) appeared for the 1st Defendant, Mr Ecclestone
Mr Tom Smith (instructed by Hogan Lovells) appeared for the 2nd Defendant
Mr Michael Bools QC (instructed by Edwards Wildman) appeared for the 3rd Defendant
Mr Charles Hollander QC and Mr Stephen Midwinter (instructed by Freshfields Bruckhaus Deringer) appeared for the 4th to 9th Respondents
____________________
Crown Copyright ©
MR JUSTICE VOS:
Introduction
"A person who, in a manner contrary to public policy, intentionally inflicts damage on another person is liable to the other person to make compensation for the damage."
Chronological background
"52. The sale of the [BLB] Holding to CVC was not preceded by the process of valuation and marketing that would normally precede the entry by a bank into a transaction of this kind. In particular, the steps that would have been normal for a bank in [BLB's] position to take would have included (a) the obtaining of a professional valuation, (b) the mandating of an investment bank or other professional advisor, and (c) the making of approaches to other potential buyers. None of these steps was taken by Dr Gribkowsky who instead excluded even [BLB's] own legal and mergers and acquisitions departments from the sale process.
53. The proceeds received by [BLB] were substantially lower than prior and subsequent indications as to the price [BLB] could reasonably have been expected to receive upon an arms' length sale after proper analysis and investigation. Moreover, the sale conflicted with [BLB's] previously stated policy of retaining [BLB's] holding at least until 2007. In particular:
53.1. In October 2001, KPMG valued SLEC at DM 7.696 billion, the then equivalent to approximately $4.59 billion, implying a value of $2.11 billion for the [BLB] Holding on a pro rata basis (in other words, ignoring any premium for the level of control conferred by the investment);
53.2. In March 2002, JP Morgan Chase & Co valued SLEC on a discounted cash flow basis at $3.35 billion, implying a value of approximately $1.56 billion for the [BLB] Holding on a pro rata basis;
53.3. As reported in the German Financial Times on 6 May 2002, Mr Werner Schmidt, the then Chief Executive Officer and Chairman of the Board of Management of [BLB] considered that in total Formula One was worth between EUR 4 and 5 billion, implying a value of about $1.7 billion to $2.2 billion for the [BLB] Holding on a pro rata basis; Mr Schmidt also commented that the profit generated by Formula One was $300 million per annum;
53.4. In December 2004, Dr Gribkowsky gave an interview to the news magazine, Der Spiegel, during which he made the following comments regarding [BLB's] intentions with respect to the [BLB] Holding: 'The profit gained from marketing Formula One adds up to around $300 million, not least because Formula One is constantly tapping into new markets ...'
53.5 In 2006 and 2007 refinancing transactions took place, pursuant to which about $3 billion was raised, allowing the complete return of the funds originally invested by Delta Topco, together with a dividend of approximately $1 billion. In addition, SLEC was able to pay a sum in the region of $300 - $350 million to acquire Allsport Management SA, a Swiss registered company that manages Formula One trackside investments and VIP hospitality. The cash return alone from this refinancing was greater than the value implied by the sum received in 2005 for the [BLB] Holding. An approximate valuation based on a multiple of three times revenue would suggest a value of approximately $6 billion for SLEC and $2.8 billion for the [BLB] Holding."
"1. ... the sale [the transaction] was manifestly for full value, was rightly considered an excellent deal by [BLB] at the time, and the appropriateness of the price has been confirmed by a recent external review conducted by that bank ...
7. ... (b) The sale to Alpha Prema [R4] of the [BLB] Holding was at a full and fair value (as [BLB] concluded both at the time and subsequently) and was considered in detail and approved by [BLB's] management board and supervisory board ...
47. Each of JP Morgan and Lehman Brothers waived their rights of pre-emption over Speed. It was open to those banks to have purchased the [BLB] Holding at the price offered by CVC, but each of them chose not to ...
48. Accordingly, although the claimant now contends that the price achieved by [BLB] represented a substantial undervalue: (a) neither JP Morgan nor Lehman Brothers (each of whom, by virtue of their shareholding, had a good understanding of the asset and its value) had any interest in acquiring the [BLB] Holding at that price ...
51. ... Mr Ecclestone had no such wish, as alleged. Moreover: (a) There was nothing abnormal in the marketing, valuation or negotiation process, given the nature of the asset and the circumstances ... (b) The marketing or negotiation process carried out by [BLB] was appropriate and reasonable and resulted in full value being achieved: (i) The price achieved was as much as CVC would offer. It greatly exceeded their original indication and was itself one which banks were unwilling to fund, such that the amount of debt funding that could be obtained was relatively small ... (vii) [BLB] had recently commissioned an external review of the sale by Deloitte, which also found that the price achieved was appropriate (albeit that it had underestimated the impact of both the risks of the Concorde Agreement not being extended and the need for Bambino Holdings and Mr Ecclestone respectively to participate and co-operate in any favourable sale) ...
61. ... the process adopted by [BLB] was appropriate in all the circumstances, especially having regard to the factors identified in paragraph 43 above, and led to a realisation of the asset for full value. To the extent that the bank did not require further steps of the kind identified in paragraph 52, this was an understandable and reasonable decision on the part of the bank and one that the board was fully cognisant of ... [BLB] were also professionally advised (by Stephenson Harwood) in relation to the transaction. The allegation of exclusion of particular bank departments or personnel is not admitted, nor is there any inference the Claimant seeks to draw from such a course ...
62.: (a) ... the amount realised far exceeded all previous offers. It also exceeded both book value and internal valuations that [BLB] had made. The amount received was considered highly satisfactory at each level within [BLB], and in particular, by the bankers dealing with the asset, by the management board, and by the supervisory board ... (b) ... by April 2005 the strategic view of [BLB] was that it wanted to sell the asset if it could do so at an acceptable price. (c) ... the valuation from KPMG was not based on information from Mr Ecclestone and his executive management team ... (i) ... save that a refinancing took place in November 2006. This refinancing was made possible because of the successful management of key risks in the business. In particular: (i) Beta Topco 1 Ltd, a company incorporated in Jersey, purchased Allsport Management S.A. and the business undertaken by the APM group of companies, being the business handling advertising, sponsorship and hospitality in relation to Formula One. One of the attractions for [BLB] of the sale to Alpha Prema had been that the bank did not have to undertake the financial commitment and risk of committing to the purchase of APM's business. (ii) In the event that the purchase was a success and addressed a key demand from the manufacturer-led teams, leading to them abandoning their break-away plans. Those teams sought an enlarged prize fund which included revenues from the APM and Allsport businesses. (iii) In June 2006, the manufacturer-led teams signed a non-binding MoU whereby they agreed to abandon their preparations for a rival series and to commit to compete in Formula One until the end of 2012. (iv) The resulting increase in stability enabled the refinancing, albeit that significant risks remained in the business, and it was not until August 2009 that the non-binding 2006 MoU was converted to a binding contract (and even then only after further threats from the teams in 2009 to leave Formula One and start their own alternative series)."
"The payments were made pursuant to an arrangement made in May 2005, to the effect that Dr Gribkowsky would be paid in return for exercising his influence on BLB's decision-making bodies, with the effect that BLB would sell its Formula One shareholding, in accordance with Mr Ecclestone's own wishes and interests."
"Formula One's offices: Delta Topco Limited and its subsidiaries together constitute the Formula One Group ('Formula One'). The headquarters of Formula One's main UK operating companies are at 6 Princes Gate, Knightsbridge, London, which is where my office has been located for the past 20 years. Although I keep some personal documents in Formula One's offices at 6 Princes Gate, most of the documents there belong to Formula One. Formula One also has a TV production facility at Biggin Hill in Kent, where some archived files are stored.
I am a director and the Chief Executive Officer of Delta Topco Limited, and also a director of several other companies in Formula One. I understand that in order to carry out my duties as a director I have certain rights to inspect documents held by those companies.
Formula One is aware of these proceedings and has told me, however, that those rights do not extend to a right to inspect documents held by those companies for other purposes. Specifically, I am told that I do not have the right to inspect or take copies of Formula One's documents for the purposes of proceedings to which I am a party in a personal capacity, as is the case in this instance. Consequently, Formula One has told me that it will not allow me to inspect or take copies of the documents for this litigation ...
Formula One has recognised that it would not be possible for me to comply with my disclosure obligations to carry out a search of the documents to which I am entitled, if documents in Formula One's offices could not be searched to ascertain which documents were my own. Formula One therefore agreed to assist me in locating my personal documents, so that they could be reviewed for relevance for the purposes of disclosure. Formula One's position is that I am only allowed to inspect Formula One documents for the sole purpose of ascertaining which documents are my own. I have not been permitted to inspect Formula One documents generally, nor am I permitted to take copies of Formula One documents.
Sacha Woodward-Hill, who is a director of several companies in Formula One and Formula One's chief legal officer, and who is assisting me personally in relation to these proceedings, searched all locations within Formula One's offices where documents potentially relevant to these proceedings might be held ...
Ms Woodward Hill collated all potentially relevant documents from Formula One's files and archives by reference to date range. I understand from Ms Woodward Hill that she did not exercise any discretion or filter the documents which were identified as potentially relevant in any way. Formula One's solicitors, Freshfields Bruckhaus Deringer LLP ... took possession of the results of Ms Woodward Hill's search.
My solicitors, Herbert Smith Freehills LLP ... were permitted to attend Freshfields' offices to examine the documents found by Ms Woodward Hill, to ascertain which documents they considered to be mine personally."
"91. CVCL completed their financial due diligence within around a 10-day period ... Essentially, for the purposes of this financial due diligence, CVCL reviewed the financial models which I had prepared addressing the various possible scenarios ... compared them with the underlying contracts that were in place, and considered the assumptions that underpinned the models ...
92. ... the speed of the due diligence was also assisted by the fact that the Transactions Support Team at EY [Ernst & Young] already had a good understanding of the Group's business, and could quickly access EY's audit files to verify the terms of most of the Group's 50 or so material contracts which underpinned its financial results ...
113. The acquisition of APM and ASM, combined with the commitment of CVCL to support Mr Ecclestone and the Group's management team and in our attempts to reach a deal with the remaining teams and manufacturers, paved the way for a Memorandum of Understanding ('MOU') to be agreed with the GPMA-backed teams in May 2006. Under that MOU, the teams agreed to abandon their plans to establish a breakaway series, and also agreed to press on with the drafting of a new Concorde Agreement based on specific terms that were now settled ...
115. The signing of the MOU was a significant development. Although it was not a new Concorde Agreement and was expressed to be non-binding, for the first time the remaining teams and manufacturers had put pen to paper expressing a willingness to race and abandoning the idea of a breakaway. When taken with the binding agreements reached with Ferrari, Jordan and Red Bull in early 2005 (and subsequently with Williams, Super Aguri and Minardi), it meant that there was now some form of a commitment on paper on the part of all of the teams to race post 2007.
116. Once the MOU was signed, when combined with the positive developments which had followed CVC's involvement ... the dynamics became different. The direction of travel was now towards a new Concorde Agreement, and talk of a breakaway faded away for the moment ...
119. By November 2006 when the refinancing took place, the Group had also signed a new deal for a future race in Abu Dhabi, and was in the process of exploring and discussing several potentially lucrative new races in locations such as Korea, Valencia and Singapore. Review of the financial models show that, even with the core race promotion and TV contracts in place by mid-2006, the Group had some $3.2 billion of future 2007-12 revenue under contract, an amount of 40% higher than equivalent figures from August 2005. I am sure CVC would have flagged these developments to RBS."
"... On further reflection, we consider that it is feasible for the trial of all issues to proceed notwithstanding the further steps that are necessary in regard to disclosure."
"The building is owned by Pentbridge Properties Limited, which is wholly owned by our client. The ground floor to the fifth floor of the building comprises commercial office space. Pentbridge Properties Limited leases those floors to Pentbridge Services Limited (another company wholly owned by our client). Formula One Management Limited [R7] in turn sub-leases those floors from Pentbridge Services Limited and has exclusive occupation of them. Accordingly, our client is only entitled to enter the commercial premises because he is CEO of the Formula 1 Group. There is a residential property above the commercial premises, which is leased to our client. The residential property and the commercial premises have separate entrances, lifts and security arrangements."
"We have reviewed your client's application with our clients to identify such requests (or parts of requests). Consequently, our clients would not press their opposition to the disclosure of the specifically identified documents set out below (where copies of them are now able to be located), subject to the following terms: (i) the Court finding (or the Respondents agreeing) that each of those documents falls within the requirement of CPR 31.17(3)(a) and (b) and; (ii) the confidentiality of the documents being protected in the following manner: (I) these documents and any documents generated in the litigation that refer to their contents (such as expert reports), are subject to the existing 'confidentiality club' in place in this litigation, and the extension of that confidentiality club beyond the parties' lawyers and experts would require further order of the Court (if not consented to by our clients); and (II) appropriate steps are taken, in consultation with our clients, to protect the confidentiality of these documents, and any documents generated in the litigation that refer to their contents, if and when these are to be included in hearing bundles and/or referred to in open court."
I shall continue with this judgment at 2.00pm.
[short adjournment]
The Civil Procedure Rules
"(1) This rule applies where an application is made to the court under any Act for disclosure by a person who is not a party to the proceedings.
(2) The application must be supported by evidence.
(3) The court may make an order under this rule only where–
(a) the documents of which disclosure is sought are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings; and
(b) disclosure is necessary in order to dispose fairly of the claim or to save costs.
(4) An order under this rule must –
(a) specify the documents or the classes of documents which the respondent must disclose; and
(b) require the respondent, when making disclosure, to specify any of those documents –
(i) which are no longer in his control; or
(ii) in respect of which he claims a right or duty to withhold inspection.
(5) Such an order may –
(a) require the respondent to indicate what has happened to any documents which are no longer in his control; and
(b) specify the time and place for disclosure and inspection ..."
"Before requiring a non-party who had no access to the pleadings or to such evidence as there might be to disclose a class of documents the court had to be satisfied (i) that there were documents falling within the specified class, and (ii) that those documents were—not might be—documents whose disclosure would support the case of the applicant or adversely affect the case of another party to the proceedings, Re Howglen Ltd [2001] 1 All E.R. 376. See further paras 25 ... 'The court has a clear obligation to ensure, if necessary of its own motion, that this intrusive jurisdiction is not used inappropriately even by consent. In exercising its responsibility, the court may well be assisted by submissions made on behalf of any third party the protection of whose interests requires to be considered.' per Eady J. at [29] Gary Flood v Times Newspapers Limited [2009] EWHC 411 (QB) ..."
"(1) Where a party –
(a) proposes to rely on hearsay evidence; and
(b) does not propose to call the person who made the original statement to give oral evidence,
the court may, on the application of any other party, permit that party to call the maker of the statement to be cross-examined on the contents of the statement.
(2) An application for permission to cross-examine under this rule must be made not more than 14 days after the day on which a notice of intention to rely on the hearsay evidence was served on the applicant."
"In Tsavliris Russ (Worldwide Salvage & Towage) Ltd v RL Baron Shipping Co SA (The Green Opal) [2003] 1 Lloyd's Rep. 523, witness statements signed by a witness (Y) were served by the defendants (D) on the claimants (C). The statements contained opinion evidence and were accompanied by notices under r.33.2 indicating that D (1) intended to rely on the hearsay evidence contained in the statements but (2) did not intend to call Y to testify at the trial. However, after discussions between C and D, the trial began on the understanding that Y would be called by D to give evidence. Nevertheless, shortly afterwards D announced that they did not propose to call Y. C then applied under r.33.4 for permission to call and to cross-examine Y on his witness statements. Thereupon, D withdrew the witness statement from evidence. The Judge (Tomlinson J.) refused C's application holding that r.33.4 does not permit, because s.3 of the 1995 Act does not permit, the cross-examination by one party of a person upon whom the other party had indicated they proposed to rely where that person's statement is not in the event adduced in evidence. Although it was made clear at the outset of the trial that D intended to rely on Y's witness statements, they had not at that stage irrevocably adduced it or put it in evidence and adopted it as part of their case."
Issues
(1) Issue 1: Does Mr Ecclestone have physical possession of the documents of FOG such that he ought to be ordered to disclose them?
(2) Issue 2: If not, must a class of documents ordered to be disclosed under Part 31.17 be specifically identified in such a way that no exercise of judgment is required by the non-party as to what documents are or are not within the class of documents?
(3) Issue 3: Are the documents and classes of documents sought against (i) the CVC respondents and (ii) the FOG respondents sufficiently specified to be permissible under part 31.17?
(4) Issue 4: Are the documents sought against (i) CVC respondents and (ii) the FOG respondents likely to support Constantin's case or adversely affect the defendant's case?
(5) Issue 5: Is disclosure necessary to dispose fairly of the claim, or to save costs and should it be ordered as a matter of discretion?
(6) Issue 6: If disclosure would otherwise be ordered should it now be denied because to order it would inevitably involve a delay in the trial date?
Once I have dealt with the disclosure issues I shall turn to the other issues concerning the cross-examination of Mr McKenzie and his service of evidence.
Evidence in relation to disclosure
"15. This application is principally concerned with the issue of quantum. Constantin believes, for reasons explained, below that it has not yet been provided with sufficient disclosure to enable a fair trial on that issue. Constantin's experts have identified a large number of further documents that they need to see before they can produce a proper opinion as to the price likely to have been achieved for the [BLB] Holding if a proper sales process had been followed. Furthermore, because of the Respondent's resistance to the provision of such documents and the time that will be required to analyse them and produce a report (followed by one or more reports from the Defendant's experts and meetings of experts) once the documents are disclosed, it is not practicable for the issue of quantum to be addressed at the forthcoming trial in October.
18. ... the witness statements filed for Mr Ecclestone include a statement from the Chief Financial Officer of the Formula One group of companies ('FOG') ... [Mr Llowarch] which contains a number of detailed factual allegations relevant to the value of FOG both before and after the date of the Transaction ... [Mr Ecclestone was employed for a period of time as the chief executive officer at FOG and as such has access to all documents held by the FOG]
25. I believe that the documents sought by this application are likely to support the Claimant's case or adversely affect the Defendants' case, and are necessary in order to dispose fairly of the action. In particular I believe that they are necessary for the following purposes:
a. To enable the experts to conduct a full and proper assessment of the value that could have been achieved for the [BLB] Holding if Dr Gribkowsky had not been bribed; and
(b) To enable the factual allegations made by the Defendants in relation to value, in particular in the witness statements of Mr Llowarch and Mr Ecclestone, to be placed in the context of the relevant documentary evidence and properly tested in cross examination.
39. The difference between the value implied by the Transaction and that implied by the Refinancing is striking ... Constantin estimated in its Particulars of Claim that the Refinancing implied a value of the business ... of about $6 billion ... Given the magnitude of the Refinancing ... it is reasonable to infer that the value underpinning the Refinancing received considerable scrutiny, both within the FOG and in communications between FOG, CVC and third parties.
40. ... (a) Bambino Holdings denies that the circumstances of the Refinancing 'provides any relevant indication of the value of the [BLB] Holding at the time of the sale to CVC' but without particularising in any alleged basis for this denial.
(b) Mr Ecclestone's Defence denies that the Refinancing provides a guide to the value of the [BLB] Holding at the time of the Transaction, but this denial is specifically made on the basis of changes that Mr Ecclestone alleges took place between the date of the Transaction and that of the Refinancing ... He pleads that the refinancing was 'made possible because of the successful management of key risks in the business' ... referring in particular to:
i. The acquisition by the FOG of APM and ASM;
ii. An increase in the stability of the business associated with the reduction of the threat by the participating motor racing teams to break away from Formula One and form a rival series to it.
45. It is clear from the matters set out above that it is not possible for a fair trial on the issue of quantum to take place without the further disclosure that is sought.
46. It will inevitably take some time for the Respondent to provide that disclosure, and it is obviously important that that exercise be conducted with care to ensure that relevant documents are not overlooked ... There is (by a very considerable margin) insufficient time for all these steps to be taken in time for the issue of quantum to be addressed at the scheduled trial in October ..."
"It should be apparent from what I have said above that the information sought is fundamental to my assessment of value. If I were to produce a report on the information currently available to me, it would necessarily have to be based on unverifiable assumptions regarding the matters that could be more reliably assessed with the information requested, and consequently it would have to express a wide range of possible values. The supplemental report produced after the requested further disclosure had been provided would substantially replace the original report, and would involve a considerable duplication of effort by myself and my firm with the consequent impact on the level of the costs ..."
"19. ... I should address Mr Oliver's assertion that 'Mr Ecclestone has no difficulty obtaining access to confidential information relating to FOG when it suits him' ... If it is being suggested that, if the First Defendant were advancing the present application, the [FOG] would not object, then that suggestion is false. The [FOG's] position does not depend on the identity of the party making the application but rather on the fact that the application is intrusive, enormously burdensome and unjustified, and is not an appropriate application to make against a non-party to the litigation.
20. Leading up to Constantin's current application for non-party disclosure, the Respondents have had to deal with constantly changing requests from Constantin, all of them seeking broadly described categories of documents, disclosure of which would have imposed a very heavy burden on the Respondents ...
29. The Respondents' position in summary is that, whilst they have no interest or involvement in the litigation, they are willing to provide documents to the parties to the litigation, provided the requests are specific, not unduly burdensome, can be justified on the basis of their relevance to the litigation, and that the proper account is taken from the fact that many of the requested documents are commercially sensitive and confidential. (The fact that Constantin and the [FOG] are competitors, and other matters referred to in Mr Clarry's witness statement ... make the disclosure of commercially sensitive material to them a matter of particular concern.)
30. For the reasons explained below, the Respondents object to Constantin's current requests because (i) they are not properly formulated for the purposes of the request for non-party disclosure ... (ii) they would require the Respondents to undertake an enormous disclosure exercise at great expense, which would take significantly longer to complete in the wholly unrealistic time provided for in the Revised Draft Order; (iii) such production would require the disclosure of a significant volume of commercially sensitive and confidential documents; and (iv) many of the requested documents appear ... to be of minimal, if any, importance to the issues in the litigation ...
36. ... I am instructed that, as regards hard copy documents of the [FOG] there are boxes of files and other loose lever arch files at the [FOG] Princes Gate offices. Just taking those of the legal department and of the First Defendant (excluding his personal files), these comprise over 130 boxes and 380 lever arch files. Further, at the Biggin Hill facility where many of the [FOG's] hard copy documents are archived in boxes, there are approximately 5,800 boxes of files, including 1,120 boxes filed by the Group's finance department. The boxes are indexed by their date of filing rather than the date of the contents, so a document may well be in a box carrying a date long after the date of the document. The descriptions on the boxes are often very general, and would often not be a comprehensive description of the contents. Therefore, locating all of the documents from a specific date period would be challenging, even before the exercise of reviewing those documents for responsive documents.
37. As regards electronic documents, I am instructed that both the [FOG] companies and CVC have changed their email systems between 2006 and now (the [FOG] Companies in 2008 and CVC in 2009). This means that there are emails from before the change which would now only be retained on back-up tapes. I am further instructed that the process of restoring a back-up tape to a live environment, and then locating within it the email box of the relevant person, could itself take up to two weeks ...
46. A similar exercise to what I have described here ... would be necessary for most of the categories of documents. It is clear that together this would be a very significant exercise. It would lead to substantial legal costs, some (though not necessarily all) of which would eventually be recouped from Constantin. It would also involve significant management time which would be at the expense of time spent on the Respondent's respective business activities. As discussed below, the judgements required to identify certain of the requested documents are ones which could often be made by the business people involved at the time (assuming they are still with the business), rather than by an external lawyer or paralegal. …
68. Our clients' view was that the confidentiality club provided adequate protection given the nature and the comparatively small number of affected documents. The confidentiality club also did not deal with what would happen if the parties wished to refer to the affected documents in witness statements or expert reports, or to use them in open court. …
238. In conclusion, it is perhaps understandable that Constantin's expert valuer would like to have access to as much information as possible in performing her valuation. However, all the information that is sought through these applications cannot be essential in order to undertake a valuation for the purposes of this litigation, since that amount of information must very rarely (if ever) be available to an expert undertaking such a valuation ...
240. It is clear from the above that providing the requested non-party disclosure would place an extremely heavy burden on the Respondents, requiring them to undertake an exercise that would be very time-consuming and costly (including management time and internal resources) ..."
"19. The Applicant's case is that because of the alleged conspiracy, BLB received a price for its Formula 1 stake which was at an undervalue compared to what BLB would otherwise have required and obtained. This will require the Applicant to overcome several steps:
a. First, there will be issues as to whether, but for the alleged conspiracy, there would ever have been any different process of sale and marketing as the Applicant has suggested ...
b. Next, the question of whether there was an undervalue compared to the price BLB would otherwise have required and obtained involves considering the perspective of BLB as the seller ...
c. Accordingly, the value of BLB's shareholding has to be assessed from the perspective of BLB ...
20. It is important to keep the above context in mind when considering the Applicant's disclosure requests ... all of which are made very late and risk serious disruption to the trial date ...
25. What will be of far more assistance to the Court than CVC's internal deliberations are the deliberations of the BLB Supervisory and Management Boards with regard to the proposed sale to CVC and the information provided to those boards at the time of their deliberations. In this regard, as noted in paragraph 21 above, the parties have already disclosed a substantial quantity of material as a result of German proceedings.
26. Documents that post-date the 15 November 2005 fall into the second category ... the price that BLB was ultimately willing to sell its shareholding for was first proposed on 19 September 2005 ... BLB contractually committed to and agreed to this price on 15 November 2005 ... Documents which post-date the time when BLB agreed the price at which to sell its shares to CVC are not relevant to the question of whether, acting on its own commercial interests and having regard to the position it was in and the information provided to it, the price received by BLB fell within an appropriate range of values ...
32. [Mr Ecclestone's] position is that the Refinancing is a red herring when considering the question of value in these proceedings. To the extent that there is any benefit to be derived from considering transactions subsequent to the 15 November 2005 (which is not accepted), the transactions closest in time are the sales by JP Morgan and Lehman Brothers of their shares in Speed. Both banks agreed in December 2005 to sell their shares at a materially lower price than that agreed between BLB and CVC."
"7. The applications for disclosure made by Constantin are only applications for non-party disclosure if and to the extent that the documents sought are outside Mr Ecclestone's physical possession.
8. Although it is stated in paragraph 14 of WS/Lewis that Mr Ecclestone does not have the right to inspect or take copies of any documents belonging to the FOG, 'and he does not otherwise have physical control or possession of such documents' there is no indication as to the basis on which it is alleged that Mr Ecclestone does not have physical control or possession of the documents, and Constantin contests that allegation. The FOG is managed from offices at 6 Princes Gate, Knightsbridge. According to an interview given by Mr Ecclestone on 23 September 2011 to the regular Formula 1 reporters ... Mr Ecclestone bought the building at 6 Princes Gate in 1985 and he lives in the penthouse above the offices. Mr Ecclestone has occupied those offices for more than 20 years with a handpicked team of staff and personal assistants. Constantin will invite the court to conclude that Mr Ecclestone has physical control of those offices and physical possession of all the documents held there, irrespective of the identity and ownership from time to time of the companies whose affairs he conducts from that location."
Authorities on disclosure
"If there were a subpoena duces tecum to the same effect it would have been bad upon this view of the matter, and for the reason that it would be putting upon a witness who had no interest in the matter a burden that there was no right to put upon him, that is, that he should look through his documents or books, and come to the conclusion as to what was relevant to the inquiry."
"An examination as to documents means as to the possession of documents, as to what documents are in the custody and power of the person examined, and as to the description of them. That seems to me to be the natural meaning of the order. When I refer to the specifications, to which the order also refers, I find that conclusion confirmed, because the specification does not by date or partiers or other simple method of identifying, indicate the instrument, but requires the witness to determine whether documents relate to a particular vessel, and taking the two specifications together it is apparent that the intention is that Lloyd's Register shall go through all the documents in their custody or power, that have passed between themselves and their agents and certain persons named, and ascertain whether or no [sic] they have anything whatever to do with this vessel ...
In the same manner with regard to a subpoena duces tecum. You never could call on a witness to ascertain whether documents related to a particular matter in controversy. That case came before the Court of Chancery in Lee v. Angas (1), where a subpoena duces tecum was served upon a witness which described the particular documents, and then went on to direct him to produce all documents relating to certain matters in question. It was held that as a subpoena duces tecum it was bad, because it was in fact a bill of discovery against the witness."
"However, that may be, Mr Rokison relies on the authority of Fairchild v MacFarlane and the other cases which turned on the view that the applications heard amounted to an order for pre-trial discovery as demonstrating that the vice against which the third party is to be protected is the task of going through the documents in his possession with a view to forming a conclusion as to their relevance and/or seeing whether or not they fall within the terms specified in the subpoena, rather than simply being able to place his hands on the required documents or files from the very description given. If he can do the latter, submits Mr Rokison, then the 'no discovery' objection disappears and the ruling of Vice Chancellor Page-Wood in the decision of Lee v Angas is explained, namely that since the solicitor had by the time of his application to set aside (a) performed the task of discovery under the terms of the subpoena, and (b) admitted possession of the very documents requested, there could be no good purpose in setting aside the subpoena or doing other than require the witness to appear with his documents ... I accept Mr Rokison's broad submission of principle that the form of the subpoena in this case is not one which on the face of it calls on Winchester Bowring to perform an exercise of discovery such as that referred to in the cases relied on by Mr Tomlinson, in which it appears that the terms of the subpoenas sought were so framed as to be patently applications for pre-trial discovery of documents by the persons to whom they were addressed. I also accept that, broadly speaking, the purpose and intention of this subpoena may be characterised as requiring the production of documents in aid of the testimony of a witness, which is the original and proper purpose of a subpoena duces tecum ... I see nothing in the authorities which suggests that it is a legitimate excuse to call for files of documents when it is not asserted that the contents, or at least the bulk of the contents, consist of individually relevant documents ..."
"Nor is the witness to be required to undertake an unfairly burdensome search through his records to find this or that document or to see if he has any documents relating to a particular subject matter. All this is well established in relation to a subpoena to produce documents at a trial ... in re Westinghouse Electric Corporation Uranium Contract Litigation MDL Docket No 235 1978 Appeal Case 5117, the House of Lords was concerned with the incoming letters rogatory and accordingly with the interpretation of section 4(b) of the Act of 1975. The House of Lords made … a distinction between the subpoenas and the requirements of the Act at page 635, 'Classes of documents provided the description is classed as sufficiently clear may be required to be produced on the subpoenas duces tecum. The requirements of sub-section 4(e) however, are not in my view satisfied by the specification of classes of documents. What is called for is the specification of particular documents which I would construe as meaning individual documents separately described."
"If I may borrow (and slightly amplify) the apt illustration given by Slade L.J. in the present case, an order for the production of the respondent's 'monthly bank statement for the year 1984 relating to his current account' in a named bank would satisfy the requirements of the paragraph, provided that the evidence showed that regular monthly statements have been sent to the respondent during the year and were still likely to be in his possession. But a general request for 'all the respondent's bank statements for 1984' would in my view refer to a class of documents and would not be admissible."
"36. [In Novartis] Aldous LJ, with whose judgment the other members of this Court (Robert Walker LJ and Sir Anthony Evans) agreed, accepted that the court had no power to make an order under CPR 31.17 in respect of a class of documents if it were established that there were documents within the class that were not relevant to any issue in the proceedings – in the sense that they did not satisfy the threshold condition of "documents ... likely to support the case for the applicant or adversely affect the case of one of the other parties ...". That, if we may say so, must be right. The rule gives no power to order a non-party to disclose documents which do not meet the threshold condition in paragraph (a) of sub-rule (3); and that cannot be circumvented by including documents which do not meet that threshold condition in a class which also includes documents which do meet that condition. In particular, the threshold condition cannot be circumvented by an order which puts upon the non-party the task of identifying those documents within a composite class which do, and those which do not, meet the condition [see Wakefield v Outhwaite [1990] 2 Lloyd's Rep 157, 163-164, Panayiotou and others v Sony Music Entertainment (UK) Ltd [1994] Ch 142, 151f].
37. Aldous LJ then turned to consider whether the documents sought by the applicant were relevant "in the sense that they meet the criteria laid down by CPR 31.17" ... He concluded, at paragraph [33], that the evidence established that 'the box contains relevant documents which the court has power to require to be disclosed'. He then addressed, and rejected, the submission that the box also contained documents that were not relevant. That submission was based, of course, on paragraph (3) of the passage in Dr Wright's evidence ... Aldous LJ said this, at page 794, paragraph 34:
'Dr Wright's view of 'relevance' cannot be determinative particularly when clearly he was considering the stature of individual documents, rather than the class. To decide what weight to place on any particular document, it will be necessary to consider it in a context. If so, a selection limited to documents Dr Wright thought were individually relevant or even those Fisons thought were relevant could provide a false picture. No doubt particular documents may turn out to be more relevant than others; some individual documents may not be 'relevant' at all.'
It is, we think, plain that Aldous LJ placed the word 'relevant' between quotation marks in paragraph 34 to emphasise that he was using the word in a different sense from that in which he had used the same word (without the quotation marks) in paragraphs 32 and 33. In paragraphs 32 and 33 relevant is synonymous with "likely to support . . . or adversely affect". In paragraph 34 'relevant' documents are those which will, in the event, turn out to support the case for the applicant or adversely affect the case of one of the other parties. Unless the word 'relevant' is understood in that sense in the context of paragraph 34 it is impossible to reconcile his readiness to contemplate the possibility that an order under CPR 31.17 may lead to disclosure of 'individual documents [which] may not be 'relevant' at all" with his acceptance, in paragraph 32 of the proposition that an order for disclosure is not to be made unless "the documents ... to be disclosed are relevant in the sense that they meet the criteria laid down by CPR 31.17.' The distinction is between documents which are likely to support the case of the applicant or adversely affect the case of one of the other parties - which can be the subject of an order for disclosure - and documents which, in the event, turn out not to support the case for the applicant or adversely affect the case of one of the other parties - the presence of which within a class does not lead to the conclusion that the class ought not to have been the subject of an order for disclosure.
38. The judgments of this court in the Novartis case may be taken as authority for the following propositions. First, as we have said, (i) CPR 31.17 gives no power to order a non-party to disclose documents which do not meet the threshold condition in paragraph (a) of sub-rule (3); and (ii) that cannot be circumvented by including documents which do not meet that threshold condition in a class which also includes documents which do meet that condition. Second, the test under the threshold condition is whether the document is likely to support the case for the applicant or adversely affect the case of one of the other parties. Third, when applying that test it has to be accepted (and is not material) that some documents which may then appear likely to support the case of the applicant or adversely affect the case of one of the other parties will turn out, in the event, not do so. Fourth, in applying the test to individual documents, it is necessary to have in mind that each document has to be read in context; so that a document which, considered in isolation, might appear not to satisfy the test, may do so if viewed as one of a class. Fifth, there is no objection to an order for disclosure of a class of documents provided that the court is satisfied that all the documents in the class do meet the threshold condition. In particular, if the court is satisfied that all the documents in the class (viewed individually and as members of the class) do meet that condition - in the sense that there are no documents within the class which cannot be said to be "likely to support ... or adversely affect" - then it is immaterial that some of the documents in the class will turn out, in the event, not to support the case of the applicant or adversely affect the case of one of the other parties."
"A witness summons issued under CPR r.34.2 requires the person to whom it is addressed to attend court on a specified occasion and to produce to the court the documents to which it refers. It is a requirement reinforced by the penal sanction. Justice demands, therefore, that the person to whom it is addressed should be told clearly when and where he must attend and what he must bring with him. Anything less is unfair to the witness; it also makes supervision and enforcement by the court extremely difficult. Ideally each document to be produced should be individually identified. If not, the documents should be identified with sufficient certainty to leave no real doubt in the mind of the person to whom the summons is addressed about what he is required to do. In general, doubts about the adequacy of the description should be resolved in favour of the witness."
"Whatever may be the origin of the present rules, there are in my view clear distinctions to be drawn between an order for disclosure made against a third party and a witness summons to produce documents. An order for disclosure normally directs the person to whom it is addressed to carry out a reasonable search for documents in his possession falling within classes which are often broadly described and to list them for the information of the parties to the proceedings. Often the documents are described in terms which call for the exercise of a degree of judgment in determining whether a particular document does or does not fall within the scope of the order. Any order of that kind, being an order of the court, is one that must be strictly obeyed, but it would be extremely unusual for a penal sanction to be attached to it or for a failure to comply in some material respect to be treated as a contempt of court, save in the case of a contumacious refusal to obey. Moreover, although disclosure is usually a prelude to production for inspection, the person giving disclosure may resist production, if he has grounds for doing so, and in any event has no obligation to do more than make the documents available to the party who has obtained the order. A witness summons to produce documents, by contrast, involves the exercise of the court's coercive powers. The person to whom it is addressed is at risk of being in contempt of court if he fails to comply in any material respect, as the summons itself makes clear. He is obliged to bring the documents to which the summons refers to court, not simply to list them or make them available for inspection. In substance a witness summons to produce documents is no different from a subpoena duces tecum and the differences between such a summons and an order for disclosure are reflected in the different procedures provided by rules 31.17 and 34.2."
"3-09 ... Lord Woolf had in mind in Access to Justice four types of documents which might be discoverable: (1) the parties' own documents; (2) documents which adversely affect his own case or support that of another; (3) documents which are part of 'story' or background which though relevant may not be necessary for the fair disposal of the case; and (4) train of inquiry documents. The wording of these categories is tailored to an obligation to disclose as between the parties, rather than non-party disclosure, and thus needs modification when dealing with non-parties, but it is apparent from the wording of r.31.17(3)(a) that it is derived from (2) and is intended to exclude (3) and (4)."
"... Moreover, consideration of the four categories of documents to which Lord Woolf referred makes clear beyond any possible doubt that the documents the subject of the order were to be limited to category (2) documents ... Yet the conclusion that the Court of Appeal reached both in Novartis and Three Rivers (No. 4) is that an order may properly be made in respect of a large volume of material where the evidence merely shows that some part of it may assist one side or the other ... This looks at first blush like a limited principle, and that is how Laddie J. Treaded it at the first instance in Novatis. But in practice it would be hard to find better evidence as why an order should not have been on this ground than in Novatis. There the only evidence before the court as to relevance was that of the patent agent. He was the only person who had seen the documents. His evidence was that 'all the documents, and not just those I considered to be of relevance, were put into a box and separated ...' And in Three Rivers (No.4), in respect of each of 54 witnesses the application was for: '(1) documents provided by the witness to the Inquiry; (2) submissions and observations of the witness; (3) witness statements and proofs of evidence of the witness; (4) transcripts of that witness' evidence; (5) witness bundle used when Lord Justice Bingham interviewed the witness; and (6) post-interview correspondence in respect of the witness.' The application which succeeded was thus of some width.
On each occasion the Court of Appeal held that CPR r.31.17(3)(a) only permits an application for a class of document where each document in the class is within the rule. Leaving aside the gloss placed by the Court of Appeal on the need to show that the documents may support the applicant, the Court of Appeal accepted that it must be shown that each document is likely to be 'relevant' and appear to have accepted that meant that it must be shown that is likely to be something which would be disclosable on standard disclosure if held by one of the parties. How can it possibly be the case that every document in the box in Novartis fell within that test? And how can it be the case that every one of what ultimately amounted to almost 10,000 pages of documents in Three Rivers (No. 4) fell within that test?"
"The principle that a non-party must be able to determine mechanistically whether any particular document falls within or outside the order means that the non-party must assume that he will be obliged to disclose every document within the terms of the order. It means that any order for a class of documents which contemplates otherwise is bad. No order can be made for 'documents relevant to the issue of ...' It also means that the non-party will, in determining whether to object, need to consider the burden placed on him in disclosing all the documents within the defined classes.
The recent decision of the Court of Appeal on witness summonses ... [Tajik] surprisingly suggests a rather different view as to the role of the non-party ...
It is suggested on this issue the law is correctly set out by Chadwick L.J. and Moore-Bick L.J.'s summary is not an accurate analysis of r.31.17."
" ... As the CPR provides for more limited disclosure than before as between the parties for litigation, it would surely be anonymous if there was different disclosure against non-parties? Equally, it would be anonymous for anon-party to be under an obligation to give a disclosure which is more extensive than that required to be given by the parties to the litigation. But the effect of these decisions does seem to be the burden is, at least on occasion, likely to be wider."
"The court is wary of categories which are loosely or broadly defined and alert to requests which appear to be of a fishing nature. It is not appropriate to leave the non-party with the view to making up its mind, whether they do or not ... (4.62)."
Issue 1: Does Mr Ecclestone have physical possession of the documents of FOG, such that he ought to be ordered to disclose them?
"The person to be considered is therefore the husband, the party to the suit; and the next and vital question in the case is: are these documents which were ordered to be produced documents which are or have been in the possession, custody or power of the husband? For this purpose 'possession' means 'the right to the possession of a document.' 'Custody' means ' the actual physical or corporeal holding of a document regardless of the right to its possession,' for example, a holding of a document by a party as servant or agent of the true owner. 'Power' means 'an enforcement right to inspect document or to obtain possession or control of the document from the person ordinarily has it in fact'."
"How do these general principles apply to the director of a company in relation to company documents, that is, to documents which are in the possession of the company in the sense that the company has the sole legal right to their possession? If they are or have been in the custody or physical possession of the director, even if he only held them or holds them as servant or agent of the company, or in his capacity as an officer of the company, then they must be disclosed. Whether such documents are or have been in his custody is a question of fact in each case. It is a matter for the discretion of the court whether they should be produced ..."
12. The judge reminded himself ... of the principles which ... should govern the approach of a court when deciding whether to order that books and records of a company should be produced for inspection by a director. They may be summarised as follows: (i) the right of a director to inspect the books and records of the company is a right conferred by the general law rather than by any provision of the Companies Acts; (ii) the right is conferred by the general law in order to enable the director to carry out his duties as such; (iii) accordingly the right determines when the director ceases to hold office; (iv) under the general law the court is left with a residue of discretion whether or not to order inspection; and (v), in particular, special considerations are likely to apply to the exercise of that discretion in a case where the director seeking to assert the right is about to be removed from office.
13. ... Slade J's observations in Conway v Petronius Clothing Co Ltd and others [1977] 1 WLR 72, 89G-91A...:
'(34) ... It is a personal right only in the sense that it may be invoked to enable the director to discharge his personal obligations to the company and his statutory obligations ...' In general a director will not be called upon to give reasons before being allowed to exercise his right of inspection because the court will assume he is acting for the benefit of the company. But if it is clearly shown that a director is not using the right for the purposes for which it is conferred but rather to injure the company or for other and improper purposes then the court may not intervene to assist him. Each case must depend upon its own facts.'
23. ... To my mind the proposition that the right to inspect the company's books of account is conferred 'in order to enable the director to carry out his duties as a director' is not in doubt. Nor is it in doubt, as it seems to me, that a right which is conferred for one purpose is not intended for use for some other purpose: for a director to invoke the right to inspect for some purpose other than that of carrying out his duties as a director is to seek to use the right for an improper purpose.
24. ... But the better view, as it seems to me, is that the judge recognised, correctly, that if it were clearly shown that a director was using the right to inspect for an improper purpose then the court had no power to assist him. The court could not aid the use of the right for a purpose for which it was not conferred ..."
Issue 2: If not, must a class of documents ordered to be disclosed under Part 31.17 be specifically identified in such a way that no exercise of judgment is required by the non-party as to what documents are or are not within the class of documents?
Issue 3: Are the documents and classes of documents sought against (i) the CVC respondents and (ii) the FOG respondents sufficiently specified to be permissible under part 31.17?
Issue 4: Are the documents sought against (i) CVC respondents and (ii) the FOG respondents likely to support Constantin's case or adversely affect the defendant's case?
Issue 5: Is disclosure necessary to dispose fairly of the claim, or to save costs and should it be ordered as a matter of discretion?
"If the submission is accepted that the strikingly higher value implied by the Refinancing, as compared with the sale price, is indeed relevant (and highly persuasive) evidence of the true value of the Formula One business at the date of the Transaction, it follows that sufficient disclosure should be ordered to enable proper consideration of whether, as Mr Ecclestone alleges, this is increase in value is explicable on the basis of intervening changes in the circumstances of the business."
Specific Documents
Issue 6: If disclosure would otherwise be ordered should it now be denied because to order it would inevitably involve a delay in the trial date?
Issue under Part 33.4 concerning the cross-examination of Mr McKenzie
Conclusions