HP-2020-000016 - [2025] EWHC 1451 (Ch)

Cabo’s claim was issued on 15 May 2020, and (as noted above) the case was originally set down for a four-week trial listed to commence on 27 June 2022. Disclosure was provided in October 2021, and factual and expert evidence was exchanged in early 2022. Unfortunately, MGA then discovered that there had been flaws in its disclosure process, such that a large number of potentially relevant documents had not been harvested. The trial was therefore adjourned by consent on 9 June 2022, and following a further hearing before Joanna Smith J on 20 July 2022 MGA was ordered to pay the costs of the adjourned trial on the indemnity basis, albeit that the failures on the part of MGA were not found to be deliberate: Cabo v MGA [2022] EWHC 2024 (Pat).

MGA then re-ran its disclosure exercise and provided additional disclosure during January and March 2023.Both parties made consequential amendments to their case, and there was a further round of factual and expert evidence.

On 22 March 2024, MGA issued an application for sanctions against Cabo on the basis of Cabo’s own breaches of its disclosure obligations, which MGA and the court were not aware of in July 2022 when the court was considering the adjournment of the trial and the costs consequences of that adjournment. Cabo’s disclosure failings did not come to light until correspondence between the parties in April and June 2023, as a result of which Cabo produced a large number of further documents in August and November 2023. MGA contends that if Cabo’s own disclosure failings had been known at that time, they would in themselves have likely necessitated the adjournment of the trial, such that a different order as to the costs of adjournment would have been made. The relief sought therefore includes varying the indemnity costs order of Joanna Smith J.

By consent, MGA’s sanctions application was adjourned to be heard after the trial (and judgment following the trial). The application nevertheless remains potentially relevant to the issues in the trial in one respect, namely the credibility of the Cabo witnesses. That point arose because the documents not initially disclosed by Cabo included a large number of WhatsApp chats between the Michaelson and Cohen couples, including a chat entitled “Top Secret” containing 583 pages of material, which appears to have been the main channel of communication between the Cabo founders during the period of time relevant to the claim. Cabo’s explanation for the omission, given in correspondence in February 2024, was that by the time the disclosure exercise was conducted, the Cabo founders had forgotten about the existence of this and other relevant WhatApp chats.

MGA contended that this was not credible given that it was clear that the Cabo founders were continuing to use the “Top Secret” WhatsApp chat for their communications with each other at the time of the disclosure exercise, and the fact that they were also, while preparing for these proceedings, evidently searching WhatsApp chats that were not included in the original Cabo disclosure. At the trial, it was put to both Mr Michaelson and Mr Cohen that they had in fact deliberately decided not to disclose those chats because they were known to contain adverse material; and that this was a matter which went to their credibility. (Both Mrs Michaelson and Mrs Cohen said that their husbands did the disclosure exercise and that they were not involved in that; MGA did not take issue with that evidence.) Mr Michaelson and Mr Cohen both said that they had thought that the chat was a personal family discussion and not disclosable.

Had Mr Michaelson and Mr Cohen carried out a thorough search for relevant material to disclose, that should have captured the “Top Secret” chat as well as other messages. There is no doubt, therefore, that the failure to disclose the “Top Secret” WhatsApp chat and other relevant WhatsApp communications was careless. I do not, however, consider that Mr Michaelson and Mr Cohen deliberately sought to avoid disclosing it in order to hide adverse material. By the time the disclosure order was made (in October 2021) over three years had passed since the demise of the Cabo business, and the Cabo founders had since then moved on to using their group WhatsApp chat for personal communications between their families. That appears to have led to their assumption that it did not contain relevant disclosure. While that indicates a lack of diligence on their part, I do not consider that it indicates dishonesty or otherwise undermines the credibility of Mr Michaelson and Mr Cohen’s evidence.