Document Control within Group Companies

Recent High Court guidance on circumstances when documents held by a subsidiary may have to be disclosed by a holding company in litigation.

In Roman Pipia v BGEO Group Limited CL-2018-000026 the defendant applied for a declaration that, for the purpose of disclosure, it did not control documents held by two of its subsidiaries. The claimant was concerned that the defendant has or may have few documents of its own, and that important evidence could be contained in the subsidiaries’ documents.

Relevant facts

By two letters dated 30 March 2018 (the ‘30 March Letters‘) the defendant had sought and obtained the subsidiaries’ agreement to provide it with all documents pertaining to the claim such as the defendant (or its advisors) might request. At that time, the subsidiaries had also been defendants to the claim. The claim against the subsidiaries was discontinued at the end of April 2018.

The control arrangement under the 30 March Letters was not terminated when the claim was discontinued against the subsidiaries, nor had the arrangement been terminated when the defendant sought (but was not granted) the subsidiaries’ agreement to new control arrangements in June 2019.

The court’s decision

The court noted the subsidiaries’ documents were not within the defendant’s control (and therefore potentially disclosable) purely by virtue of the defendant’s shareholdings in the subsidiaries. The court held that control would potentially apply if:

1. 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; or
2. where the parent company has a presently enforceable legal right to obtain the documents from its subsidiary.

The court split its analysis, of whether the subsidiaries’ documents are within the defendant’s ‘control’ by virtue of the 30 March Letters, into three parts ((i) the scope of consent; (ii) the type of consent and (iii) the quality of the consent) and found that there was ‘control’ for disclosure purposes (under CPR 31.8 or paragraph 1.1 of Appendix 1 to CPR PD 51U) as regards the documents covered by the 30 March Letters. In particular, the scope of the consent was made clear in the 30 March Letters, and the consent had the required quality, being standing consent giving the defendant unfettered access to documents held by the subsidiaries relevant to the claim, for which the defendant could formulate a request with which the subsidiaries could comply.

Even if the control arrangement had been terminated, documents belonging to the subsidiaries would have been within the defendant’s control prior to that termination, and therefore would have fallen within the scope of the defendant’s disclosure obligations.

The 30 March Letters were not, however, agreements entitling the defendant to impose disclosure obligations on the subsidiaries such as they might have owed had the subsidiaries remained parties to the claim.

Comment

The issue of whether or not a subsidiary’s documents are within a parent company’s ‘control’ for the purpose of disclosure has to be analysed in the individual circumstances of each case, and may apply even if there is not a legally enforceable right to the documents.

It seems that the courts are therefore interpreting the meaning of ‘control’ broadly in these circumstances. Group companies should therefore take careful advice before recording in writing arrangements between holding companies and subsidiaries regarding access to documents, whether for the purposes of litigation or otherwise.

The decision also serves as a helpful reminder to parties that disclosure obligations apply to documents that have been within a party’s control, even if such control no longer exists.