(Promontoria (Oak) Ltd v Emanuel; Emanuel v Promontoria (Oak) Ltd; Promontoria (Henrico) Ltd v Samra; Promontoria (Chestnut) Ltd v Simpson & Anor; Bibby Invoice Discounting Ltd v Thompson Facilities and Project Management Services Ltd & Anor)

Introduction

This morning, the Court of Appeal has handed down landmark guidance on how far a defendant in litigation can look under the bonnet of their pursuer's commercial transactional documents and check out the mechanical parts of a deal to which the defendant is not party.

The guidance comes out of five appeals in cases led by Addleshaw Goddard for various Promontoria Group portfolios and a further case with similar points of principle in which AG were acting for Bibby Invoice Discounting Limited.

In all appeals, the issues before the Court of Appeal arose in disputes in which claimants had taken assignments of a portfolio of debts from an original lender or creditor, and sought payment from individual debtors.  The claimants had each tried to make their claims without disclosing the commercial terms of agreement with the original lenders, pursuant to which the debts were then assigned to them.

All claimants put before the court documents which redacted (or blanked out) information they claimed was confidential, or declined to provide the commercial agreements themselves, arguing that they were irrelevant to the debts owed by the defendants and were commercially sensitive to the claimants.  The debtors in each appeal argued that if the claimants were to prove they were entitled to sue for the debts, they had to reveal all of their commercial documents and terms.

A point of principle

The Promontoria company claimants had acquired large portfolios of non-performing loans, the terms of which are regarded as commercially sensitive and that led the Promontoria companies to cover up or redact, to various degrees, commercial documents on which they rely.  As the Court of Appeal noted this morning, this practice has given rise to a number of questions which have troubled judges up and down the country. 

In the Bibby case, the claim was somewhat different, being a claim brought by an invoice discounter on invoices due.  But it shared similar features with the Promontoria cases, in that the claimant acquired title to debts on terms it regarded as equally commercially sensitive, and therefore relied on documents in a redacted form. 

Lord Justice Nugee, late in 2020, therefore granted permission to appeal in each case and directed them all to be heard together on the basis that they raised a common point of principle, namely how a trial judge should deal with a document which 

(a) is a document the claimant relies on to prove its title to sue; 

(b) is presented to the Court in a redacted form on claimed grounds of relevance and confidentiality.  

Guidance from the Court of Appeal

In dismissing all of the appeals of the debtors, the Court of Appeal gave landmark guidance on the 'point of principle' in five key points:

1) in all normal cases, the entire document should be placed before the Court

2) but it may be some parts are so obvious that they may be redacted, such as third party details and transactions;

3) if, exceptionally, any redactions are made, they should be fully explained and justified by the party making the redaction, with sufficient particularity for the Court to be able to rule on the need for redaction if it is challenged;

4) mere confidentially will rarely, if ever, alone be sufficient justification – there must be additional features such as privacy or confidentiality

5) redactions on the ground of irrelevance if permitted at all should be convincingly justified and kept to an absolute minimum.

Their Lordships also noted that it is "in general unsatisfactory for questions as to the extent of redactions to be first raised at trial", indicating that challenges by parties should be raised in earlier stages of procedure.

What does this mean for you

• These cases show that redacting material can lead to costly and lengthy satellite litigation over commercial privacy.  The Court of Appeal has given us helpful guidance for the steps to follow to preserve such privacy, which can provide a useful set of tools to help those drafting the commercial agreement to ensure commercial privacy is protected and the scope for challenges reduced.
• For those pursuing claims, if there is commercial sensitive and confidential material involved, it is vital to think very carefully to ensure it is only withheld if a full justification can be given showing both irrelevance to the issues in the case and privacy or commercial sensitivity and confidence would be broken if disclosed.
• Where faced with defending claims brought on blanked out documents, parties need to react quickly and not leave it to trial.  If in any doubt as to the right of a party claiming as an assignee, then check with the assignor – failure to do so could be fatal at trial!