There is a reasonably well known English court rule that a party to whom a document has been disclosed in proceedings may use the document only for the purpose of those proceedings and not in any other proceedings. An exception to that rule is where the document has been read to or by the court, or referred to, at a hearing which has been held in public. In that case, the document can be used in other proceedings.
The English Commercial Court recently considered the application of this exception in the context of multiple proceedings in different jurisdictions (Chodiev v Stein [2016] EWHC 1210). The background to this case is complicated:
- The claimants were wealthy individuals who, among other business activities, control a group of minerals and mining companies based in Kazakhstan.
- The defendant, Mr Stein, is a US citizen and financial adviser to the claimants. He helped the claimants to raise finance and did so on a commission basis.
- In 2012, as part of a claim brought by the claimants, Mr Stein sued for his fee in the English Commercial Court; he succeeded and was awarded $28.4 million including interest (Proceedings 1).
- Having failed in their defence of Proceedings 1, the claimants made an application to the court in Cyprus for the disclosure of documents (Proceedings 2) with the aim of showing in further English proceedings that Mr Stein obtained his judgment by fraud (Proceedings 3).
- Proceedings 3 failed, but in the course of them Mr Justice Burton had read and referred to the documents disclosed by order of the Cypriot court.
- Mr Stein started further proceedings in Cyprus for the return of the documents (Proceedings 4). The claimants started proceedings in New York alleging negligent advice by Mr Stein/his Cypriot company (Proceedings 5).
Mr Stein understandably feared that the documents obtained from Cyprus would be used against him in New York in Proceedings 5, as they had been in Proceedings 3, themselves “an attack” on the judgment of Proceedings 1. He therefore asked the English court to restrict the use of those documents that had been read by and referred to in Proceedings 3.
The English court refused to do so. It held that the principle of open justice outweighed the risk that the documents would be misused by the claimants. The principle of open justice is a fundamental principle of the common law that the legal process should be conducted in public and should be accessible to the public. That includes access not only to what is said and read out in open court, but also to evidence that is referred to in open court or read by the judge outside court as part of the process. In principle, all the material that has or may have affected the decision-making process should be open to public scrutiny.
“Very good reasons” are required to depart from the open justice principle notwithstanding some “unattractive” features of the claimants’ case: the claimants failed in their defence of Proceedings 1; so went off to Cyprus and got hold of documents which they then used to attack the judgment; failed in Proceedings 3, but during the course of them put the relevant documents in the public domain; and then relied on the fact that the documents were in the public domain so that they can use them in Proceedings 5.
The key to understanding the judgment is perhaps that the principle of open justice does not exist for the benefit of the parties to the litigation; it exists in the public interest. In the normal course, the documents would now be in the public domain and the court was evidently reluctant to exercise its discretion to make an order restricting their use. The one exception was that the court did allow certain bank account details to remain private.
Gibson & Co.
June 2016