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Disclosure - Parent companies’ documents are in the “control” of a subsidiary

The latest in a line of first instance decisions has once again held that a party will have control over a third party’s documents for the purpose of disclosure, if there is an arrangement or understanding between them which results in the documents being in the party’s control in a practical sense, even if the party does not have a legally enforceable right to obtain those documents.

The usual starting point for any disclosure task is that a party will not be expected to have control over documents held by a third party unless it has a legal right to access those documents.  Previous decisions have made it clear that a parent company does not automatically have control of documents held by a subsidiary.

In Berkeley Square Holdings Ltd v Lancer Property Asset Management Ltd [2021] EWHC 849 (Ch) the High Court found that documents held by the claimants’ parent companies were within the subsidiary claimants’ control for the purpose of their disclosure obligations.  In reaching this decision the court took into account evidence as to whether the parent had previously permitted access to its documents for the purposes of the proceedings.

This case is particularly interesting given that the principle has been previously applied to a subsidiary’s ability to access documents in the control of its parent, whereas previous cases had only considered the position where a parent was being asked to disclose documents held by a subsidiary.  In this case the defendants submitted that, even if the documents were not under the claimants’ legal control, they were under their practical control as a matter of “factual reality”.  The judge expressed the view that there was no reason why, in principle, there couldn’t be a relationship amounting to sufficient control for the purposes of disclosure whatever the relationship between the respective parties and determination of this point was a question of fact in each case.

The case demonstrates the risk that the court might infer the existence of an ability to have control over documents held by a third party where previous access existed and, as such, parties should be mindful of this should they wish to argue that such documents are not in their control for the purposes of their complying with disclosure obligations.  Similarly, although any previous arrangement can, technically, be terminated, there might be a risk that the court infers the reason for termination was to avoid disclosure of potentially damaging documents in the physical possession of the third party and as such any termination might be extremely damaging to a party’s case.

Posted on 6 May, 2021 by Ortolan

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