A parent company does not exercise control over the documents of, or held by, its subsidiaries merely by virtue of its shareholdings in those subsidiaries.(1) The situation is different when there is standing consent. In Roman Pipia v BGEO Group Limited (formerly known as BGEO Group Plc), the High Court found that a parent company may have control by virtue of a standing consent and provided useful guidance on the circumstances in which documents held by subsidiaries would be within the parent company's 'control' for the purposes of disclosure.(2)
At the heart of this dispute were allegations that the parent (a bank) had improperly sold the claimant's assets when enforcing its security. The parent applied for a court declaration that, for the purposes of disclosure, it did not have control over relevant documents held by its subsidiaries and that, therefore, those documents could not be subject to disclosure. The claimant argued that the subsidiaries (which had initially been defendants to the proceedings) may have held documents relevant to the underlying dispute.
'Control' in the context of disclosure is defined sufficiently broadly (in both CPR 31.8 and CPR PD 51U (the disclosure pilot)) to require a party to disclose a document even if, at the time that disclosure is being given, that party no longer has any such right of access to it.
In coming to its decision, the High Court distinguished earlier decisions which had held that there was control in the context of arrangements for general unfettered access to documents.(3) The High Court took the view that there may be control even if there is no arrangement for wholesale access to such documents; documents could be in a party's control if there is a contractual right to documents, however specific or limited, upon request.
The High Court found that such control was conferred on the parent by way of two letters to each of the subsidiaries which contained standing consents and were countersigned by those subsidiaries. They requested all of the documents relating to the underlying claim when requested by the parent or its advisers.
A standing consent does not have to grant unrestricted access to a third party's documents so that the litigating party may go through them to identify whether they should be disclosed. Indeed, there could be control which extends only to a single document.
In the context of a standing consent, there were three elements to the question of whether a third party's (eg, the subsidiaries') documents were within another party's (eg, the parent's) control:
- The scope of the consent – this defines the documents over which the party (eg, the parent) has control.
- The type of consent – this defines what the third party (eg, the subsidiaries) is expected and required to do to meet its disclosure obligations imposed by the standing consent.
- The quality of the consent – if the party (eg, the parent) has free and unfettered access to the documents covered by the consent, there is control.
The High Court analysed the express written standing consent and found that the type of consent given by the subsidiaries to the parent was to provide documents on request, and that the scope of that consent was to cover documents held by the subsidiaries pertaining to the underlying claim. Given that the standing consent conferred the parent with a present right to access such documents, those documents were within the parent's control.
Parent companies and subsidiaries should be aware of the arrangements that are in place between them to provide access to documents and the impact that such arrangements may have on their respective disclosure obligations. This decision highlights the courts' willingness to give a broad interpretation to the term 'control' for the purposes of disclosure. As such, parties should consider seeking advice before giving unwittingly broad consent.
Endnotes
(1) Lonrho Ltd v Shell Petroleum Co Ltd (No 1) [1980] 1 WLR 627.
(3) In Schlumberg Holdings Ltd v Electronmagnetic Geoservices AS [2008] EWHC 56 (Pat), the judge found that an arrangement granting general access to inspect and take copies of documents (subject to certain caveats) meant that those documents were within a party's control. Similarly, in Ardila Investments v ENRC [2015] EWHC 3761 (Comm), the judge found that an existing arrangement or understanding is required and that the effect of that arrangement or understanding must be that the party to the litigation from whom disclosure is sought has, in practice, free access to the documents of the third party.
