Gray Construction Ltd v Harley Haddow LLP [2012] CSOH 92  

Gray claimed sums from Haddow arising from an arbitration with the NHBC about defective foundations. Haddow sought the disclosure of documents relating to the arbitration, including the pleadings and the terms on which the arbitration settled. It was not disputed that, in order to make out its claim for damages, Gray had to show not merely that it had acted reasonably in compromising the arbitration on the agreed terms but also that the settlement was, objectively, a reasonable one. Gray explained that to do this, they intended to produce a statement from the solicitor who had acted for them in the arbitration. That would be sufficient as the evidence could then be tested on crossexamination.  

Haddow disagreed arguing that to prepare for cross-examination, it needed to see documents from the arbitration which were relevant to assessing the reasonableness of the settlement. Haddow needed to know the legal and factual basis of the NHBC’s claims and also the circumstances in which Gray settled the claim on the terms that it did. The court proceeded on the basis that confidentiality extended to all documents produced or created by or on behalf of the parties in connection with the arbitration proceedings. As Lord Hodge said, one of the attractions of arbitration is its privacy and this benefit would be negated if a party to the arbitration were not bound to respect confidentiality.

Such an obligation should be implied unless the terms of the parties’ agreement exclude such implication. However there must be exceptions to those obligations, for example, where a party needs to use such documents to enforce its award or otherwise to protect its legitimate interests or where the disclosure is in the public interest.  

In what circumstances can the court override the obligation of confidentiality to require disclosure of documents or information in some other form? The basic answer is that the public interest in the administration of justice can override a private obligation of confi dentiality. Lord Hodge noted that it was arguable that in an arbitration, the private obligation of confidentiality may be supported by the public interest in enabling people to resolve their disputes privately if they so wish. But the court must be able to override what remains a private obligation if that is in the interests of justice.  

In the Judge’s view the court should seek to strike a balance between respect for the honouring of the obligation of confi dentiality and the public interest in the fair administration of justice. Where it is necessary to disclose documents in order to achieve the fair disposal of an action, the court may well order their production. The test is not one of absolute necessity; the court, in deciding how to achieve a fair disposal of the action, may take into account how a party can reasonably prepare to present its case. If the documents are not essential to the action or if the information can be recovered elsewhere without breaching a confi dence, the court may refuse to order recovery.  

Here, to enable Haddow to prepare it was necessary that it had access to the relevant documents. It would not be consistent with the fair disposal of the action to require it simply to accept the solicitor’s evidence in chief and then only be able to review the facts about the arbitration and settlement for the fi rst time on cross- examination. As the documents were not commercially sensitive, they could be used, but only, as is standard, for the purposes of the case at hand. This was, of course, an unusual case decided entirely on its facts, but it is a useful reminder of the basic principle that documents created as part of arbitration proceedings will, in the usual course of things, be treated as confi dential. That is, after all, as the Judge made clear, one of the key reasons why parties enter into arbitration agreements in the first place.