Derby & Company Ltd v Weldon (No. 9)

JurisdictionEngland & Wales
Judgment Date1988
Date1988
Year1988
CourtChancery Division
[CHANCERY DIVISION] DERBY & CO. LTD. AND OTHERS v. WELDON AND OTHERS (No. 9) [1987 D. No. 3804] 1990 March 12, 13, 14, 15; July 25 Vinelott J.

Practice - Discovery - Inspection - Computer database - Whether “document” - Extent to which inspection to be ordered - R.S.C., Ord. 24

In an action in which the plaintiffs sought substantial damages for breach of contract, negligence, breach of fiduciary duty, deceit and conspiracy to defraud, arising out of and following the sale of the second plaintiff to the fourth plaintiff, the plaintiffs claimed, inter alia, that the first and second defendants had, while they were managing directors of the first and second plaintiffs, caused each to enter into transactions with other companies (“the related parties”) in which those defendants had interests without disclosing such interests to the seventh plaintiff, and that the defendants were therefore liable to account to the plaintiffs for any profit made by such transactions. On discovery, the plaintiffs provided to the defendants printouts of certain information, relevant to those transactions, stored in the second plaintiff's computer. The third to eleventh defendants further claimed to be entitled to access to that computer in order to be able to establish, inter alia, the precise terms of transactions carried out between the second plaintiff, on the one hand, and both the related parties and other parties on the other; and whether there had been any difference in the pattern of trading during the nine months prior to the sale of the second plaintiff to the fourth plaintiff, and that during the succeeding nine months.

On the third to eleventh defendants' motion for further discovery by way of such access: —

Held, that the database of a computer, in so far as it contained information capable of being retrieved and converted into readable form, and whether stored in the computer itself or recorded in backup files, was a “document” within the meaning of R.S.C., Ord. 24, and that the court accordingly had power to order discovery of what was in that database; but that the discretion to order production for inspection and copying would not be exercised so as to give unrestricted access to the other party's computer, and inspection would be ordered only to the extent that the party seeking it could satisfy the court that it was necessary for disposing fairly of the cause or matter or for saving costs, in the light of any evidence as to what information could be made available, how far inspection or copying of the database was necessary or whether provision of printouts would suffice, and what safeguards were required to avoid damage to the database and minimise interference with its everyday use; and that inspection would be ordered to the extent agreed between the parties (post, pp. 654B–E, 657H–658C, 659C–F).

Grant v. Southwestern and County Properties Ltd. [1975] Ch. 185 applied.

The following cases are referred to in the judgment:

Beneficial Finance Corporation Co. Ltd. v. Conway [1970] V.R. 321

Dolling-Baker v. Merrett [1990] 1 W.L.R. 1205; [1991] 2 All E.R. 890, C.A.

Grant v. Southwestern and County Properties Ltd. [1975] Ch. 185; [1974] 3 W.L.R. 221; [1974] 2 All E.R. 465

No additional cases were cited in argument.

MOTION

By a writ issued on 25 June 1987 and amended, the plaintiffs, Derby & Co. Ltd., Cocoa Merchants Ltd., Phibro-Salomon Finance A.G., Phibro-Salomon Ltd., Philipp Brothers Inc., Philipp Brothers Ltd., and Salomon Inc., claimed against the defendants, Anthony Henry David Weldon, Ian Jay, Milco Corporation, C.M.L. Holding S.A. Luxembourg, Wollstein Stiftung, Tim Schneider, Ernst Aeschbacher, Peter Ritter, Steelburg Management Inc., Pilgrim Enterprises Inc. and Dr. Louis Rohner, damages for breach of contract, negligence, breach of fiduciary duty, deceit and conspiracy to defraud in connection with dealings on the cocoa market and in foreign exchange.

By notice of motion dated 22 February 1990 the third to eleventh defendants moved for (1) an order that the plaintiffs allow inspection of all the first and second plaintiff's computer records and make facilities available to enable those defendants (or their solicitors and accountants) to inspect records therein relating to the matters set out in the schedule, to peruse the same, make notes of their contents, and to be supplied with copies thereof on payment of the proper charges; (2) an order that the plaintiffs file an affidavit as to similar records no longer in their possession stating what had become of them; and (3) an order that the plaintiffs produce for inspection certain specified “difference accounts.”

In the schedule were specified: (a) in relation to each contract entered into by the second plaintiff between 1 January 1980 and 31 December 1985 all records identifying or relating to (1) the type of contract entered into, (2) the commodity or currency involved, (3) the counterparty, (4) the date, (5) the number assigned to the contract by the second plaintiff and any number assigned to it by the particular market, (6) the maturity and/or prompt date of the contract, (7) the quantity, (8) the price per unit, (9) the total contract price (10) the contract currency, (11) if the contract was backed, details of the backing contract or contracts and the price and currency of the backing contracts, (12) the commission rate, amount, currency and place where paid or received, together with any similar information relating to any fee paid and/or jobbing profit or loss, (13) the executing broker, (14) the relevant difference accounts or invoices, (15) the dates and amounts of payment or receipt of cash, (16) all other details not previously referred to; (b) the like, so far as applicable, in relation to foreign exchange contracts entered into by the first plaintiff between 1 August 1983 and 31 December 1985; and (c) all records which contained summaries of the matters in (a) or (b) for the period 1 January 1980 to 31 December 1985 or period within that period.

On 15 March, at the conclusion of argument, Vinelott J. stated his conclusion and said that he would give his reasons later.

The facts are stated in the judgment.

Michael Lyndon-Stanford Q.C. and J. Stephen Smith for the plaintiffs.

David Hunt...

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