Sheyko v Consolidated Minerals Limited – Royal Court clarifies its approach to parties seeking to limit their discovery obligations based on foreign law.

In its latest judgment in Sheyko v Consolidated Minerals Limited the Royal Court has provided important guidance to parties seeking to limit their discovery obligations on the basis that to disclose certain material would occasion a risk of prosecution in a foreign jurisdiction (in this case the People’s Republic of China)[1]. The Defendant (“CML”) was also punished by way of an indemnity costs order having failed to comply with a commitment it made at a hearing in November 2019 as to how it would conduct its discovery exercise. This was the second occasion upon which CML has misled the Court; in 2018 it received similar judicial admonishment for applying to vary an injunction on the basis of financial hardship while concealing a letter of comfort from its Chinese ultimate parent company, Ningxia Tianyuan Manganese Industry Co Ltd (“TMI”)[2]. The Master of the Royal Court has now made it clear that, should this conduct continue, he is prepared to consider a strike out application.

 

Background

The proceedings were issued in July 2018. At a directions hearing on 4 June 2019 CML was given 4 months to complete its discovery exercise. No issue of Chinese law was raised and, as set out in the judgment, the Plaintiff had written to CML as early as September 2018 reminding it of its discovery obligations and had received an assurance from CML’s counsel that “My client is aware of its disclosure obligations, and shall provide disclosure in accordance with the court’s procedure, at the proper time”[3]. The Master also wrote to the parties in January 2019 reminding them to consider their discovery obligations in accordance with the relevant practice directions[4].

In November 2019 CML sought an extension of time to complete its discovery exercise. This was the first time the issue of Chinese law had been raised (although no relief was sought on that basis). An extension was granted but, due to its conduct[5], CML was ordered to pay Mr Sheyko’s costs. The Court gave further directions, including that discovery could be provided in tranches, and listed a further hearing for 15 January 2020 to consider any further extension application CML might seek based on Chinese law. CML duly sought such an extension.

 

Decision

In respect of material from China that CML claimed that it may be unable to disclose (or would need state permission to do so) the Court ordered that the documents must be listed in the ordinary way, and CML must describe as far as possible each document individually and explain why inspection was being withheld by reference to any applicable secrecy laws in China. The purpose of this order was to enable Mr Sheyko to understand why documents were being withheld and take advice on CML’s approach[6]. CML was further ordered to provide an affidavit from a suitably qualified lawyer from its Chinese legal representatives to set out, with as much detail as possible, all of the legal explanations relied upon[7]. The present evidence of Chinese law was described as follows[8]:

“At present, the opinion from Ning Ren was simply a statement of the relevant statutes without an analysis as to why and how those statutes applied to the present case, or applied to categories of documents that would otherwise be disclosable.  The plaintiff was entitled to know why documents were being withheld so that ultimately, if advised to do so, the court could be invited to rule on whether the defendant had made out any grounds relied upon to withhold documents.”

The Court made clear that this further evidence must be from a named lawyer and comply with the relevant practice direction on expert evidence. It also made the following general observation in respect of the effect of Chinese law[9]:

“In reaching this conclusion, I wish to emphasise that no discourtesy is intended to the PRC or its laws.  However, this is a case before the Royal Court of Jersey where both parties have accepted the Royal Court has jurisdiction.  The Royal Court is therefore entitled to determine, having regard to appropriate opinions from Chinese lawyers about whether or not grounds exist which might override the normal discovery rules, which grounds the Royal Court should recognise. It is therefore important that what the defendant intends to produce or withhold and the reasons why are made clear.”

The Court went on to order that further breach of its orders would leave CML liable to be struck out[10]:

“I further made it clear that, if the orders I issued were not complied with, then the defendant was at risk of having its sanctions imposed including its answer struck out.  While a strike out of an answer with judgment being entered is a serious step, if that is the only means by which the Royal Court can enforce compliance with its orders, then such a sanction may be an appropriate step for the Court to take.  Whether such a sanction is ordered in this case is of course a matter for another day, but I made it clear to the defendant’s advocates that they should be under no illusion that any non-compliance with orders I issued would be a very serious matter and could well attract significant sanction.”

The conduct of CML was further examined in respect of costs[11], with the Court concluding that its unsatisfactory approach had led to further delay. In particular the Court referred to the following paragraph from an affidavit sworn by one of CML’s Advocates in advance of the November hearing[12]:

“CML proposes thereafter to provide further tranches of 5,000 or 10,000 documents when ready, the first of which it is anticipated will be ready by 15th November, 2019.  This will ensure that the pool of documents for the Plaintiff and his legal team to review will be regularly replenished and that the Plaintiff’s review of CML’s documents will be uninterrupted.  As a result the Plaintiff will suffer no prejudice by virtue of the extension of time being granted.”

Following this commitment CML provided the first tranche of material but nothing further, and no explanation was provided to Mr Sheyko. The Court considered that this justified an indemnity costs order.

 

Conclusion

This decision makes clear that parties seeking to limit discovery on the basis that it would offend against foreign law must set out their position in detail, both in terms of the documents affected and the legal reasoning. And even if this threshold is met, the decision remains one for the Royal Court, to be determined in accordance with Jersey law. It is also a reminder that parties who mislead the court, and are responsible for inexcusable delay, will not continue to receive the benefit of the doubt and lawyers should be slow to make commitments on oath on behalf of clients who may be unwilling to fulfil them.

 

William Redgrave, Charlie Sorensen and Phillip Brown of Baker & Partners act for Mr Sheyko in the above proceedings.

 

[1] [2020] JRC061

[2] [2018] JRC236

[3] [2020] JRC061 paragraphs 5 & 6

[4] [2020] JRC061 paragraph 7

[5] [2020] JRC061 paragraph 21

[6] [2020] JRC061 paragraph 43

[7] [2020] JRC061 paragraph 46

[8] [2020] JRC061 paragraph 43

[9] [2020] JRC061 paragraph 44

[10] [2020] JRC061 paragraph 49

[11] [2020] JRC061 paragraph 50

[12] [2020] JRC061 paragraph 40

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