Important new case on disclosure, but has anyone noticed?

Not long before the lockdown, the Commercial Court handed down judgment in a case dealing with a key aspect of English law on disclosure, the concept of “control”: The specific point at issue was whether, on the facts of the case, a parent company had control over the documents held by two of its subsidiaries.

Facts of the case

In Pipia v BGEO Group Limited [2020] EWHC 402 the defendant, BGEO Group Limited (the “Parent”), applied for a declaration that, for the purposes of disclosure, it did not control documents held by two of its subsidiaries, JSC BGEO Group and JSC Bank of Georgia (the “Subsidiaries”). The underlying claim concerned a company incorporated in Georgia that the Claimant alleged that he beneficially owned. The Claimant's case was that the Subsidiaries (which had been, but were no longer, parties to the litigation) held more important evidence than the Parent relating to the issues in the case. 

The claim was issued in January 2018, and in March 2018 the Parent wrote letters to the Subsidiaries requesting that they both provide the Parent with “all the documents pertaining to [the Claim] as requested by us or our advisors”. The letters were countersigned by the Subsidiaries (the “March Letters”).

The disclosure requirements

CPR 31.8 provides:

"(1) A party's duty to disclose documents is limited to documents which are or have been in his control.

(2) For this purpose a party has or has had a document in his control if –

(a) it is or was in his physical possession;

(b) he has or has had a right to possession of it; or

(c) he has had a right to inspect or take copies of it."

The Disclosure Pilot in the Business & Property Courts (PD 51U) defines “control” in similar terms.

Companies in the same group

It is established law that a parent company does not exercise control over the documents held by its subsidiaries merely by virtue of its shareholding in those companies.  However, a parent would have control over documents held by a subsidiary in two distinct circumstances:

• where there is an existing arrangement or understanding, whether or not legally enforceable as a contract, that in practice provides the parent with a right of access to documents held by its subsidiary (variously described as a “control arrangement” or “standing consent”); and

• where the parent company has a presently enforceable legal right to obtain the documents from its subsidiary.

In Schlumberger Holdings Ltd v Electromagnetic Geoservices AS [2008] EWHC 56 (Pat), the court held that where the claimant enjoyed, and continued to enjoy, the co-operation and consent of a third party (in that case, other companies within the corporate group), and there was no reason to suppose that the position would change, the arrangement was sufficient to constitute control over the third party’s documents for the purposes of disclosure.

Decision

In its discussion in Pipia, the court considered that a standing consent did not have to grant unrestricted access to all the third party’s documents: there could be “control” that extended to a single document only.  There was no need for there to be free and unfettered access to all documents.  The court gave an example of a standing consent provided by a subsidiary to its parent to provide, upon request, any written resolution of the subsidiary’s Board relating to some defined subject matter.  This would give the parent control for disclosure purposes over such Board resolutions.

On the facts, the court held that the March Letters were a standing consent to provide documents on request and were sufficient to give the Parent control over the documents held by the Subsidiaries, within the scope of relevance to the claim.

Comment

Disclosure is a basic concept in English litigation, but the application of the law to a party’s obligations in any given situation can be a complex exercise.  Control is one facet of disclosure that can be more complicated than it might first appear.  There is no reason why this decision could not apply to any company within a group, not just direct subsidiaries.  Companies should also carefully consider the potential consequences of making document requests from their subsidiaries or other connected companies.  With its careful analysis of the law touching on disclosure and group company relationships, Pipia will be an important case on this aspect of the law.