English High Court’s Berkeley Square Ruling Expands Possible Scope of Disclosure

Overview

The matter of Berkeley Square Holdings Ltd v Lancer Property Asset Management Ltd [2021] EWHC 849 (Ch) is the latest in a recent series of decisions that are gradually expanding the scope of “control” of documents for disclosure purposes.

In this case, the defendants sought disclosure of documents held by a number of parent entities of the claimant and individuals associated with those entities. The defendants argued that even if the documents were not under the claimants’ legal control (as might be the case if the documents were held by the subsidiary of a party) they were under the practical control of the claimants “as a matter of factual reality”, and this amounted to control for disclosure purposes.

The court agreed, and found there was an arrangement or understanding in place which meant the documents were within the practical control of the claimants. The court held that if this were the case as a factual matter, such documents would be in a party’s control no matter the nature of the relationship with the other party.

The decision is of interest as there are no previous cases where a subsidiary has been held to have control of documents in the custody of a parent. Together with the recent decision of the Court of Appeal in Phones 4U Limited v EE Limited [2021] EWCA Civ 116, which confirmed the court’s jurisdiction to order a party to request a third party to assist in the search for relevant documents, it is apparent that the courts are taking a broader view of the meaning of control for disclosure purposes.

Facts

The claimants are BVI companies that own properties in the UK. The defendants are the company appointed to manage the claimants’ property portfolio in the UK and the directors of that company.

The companies sitting above the claimants which were said to hold relevant documents exist in the following structure:

• The ultimate beneficial owner of the claimants is the President of the UAE.
  
  
• The majority of the claimant companies have a UAE company referred to in the decision as Overseas as their sole shareholder.
  
  
• Overseas is owned by another UAE company referred to as Circle.
  
  
• Circle is in turn owned by the Private Department of the President (PDP), an office which manages the personal assets of the President.
  
  
• The corporate director of the claimant companies (Craft) is also owned by Circle.
  
  
• The individual head of the PDP, Dr Al Mazrouei, is responsible for the management of Circle, Craft and Overseas.

The claimants did not disclose documents that were held by the PDP and Circle and certain individuals connected with those entities on the basis that they were not in the control of the claimants.

Decision

The court began from the starting point, that a party will not normally have control over documents held by a third party unless it has a legal right to access those documents, even if there is a close relationship between those parties. For example, a parent company does not automatically have control over documents held by its subsidiary (as held by the House of Lords in Lonrho v Shell [1980] 1 WLR 627).

However, the court referred to previous authorities where disclosure had been ordered in respect of documents held by a subsidiary company when it was clear from the facts that an arrangement or understanding between the companies gave the parent control over those documents, even if that arrangement was not legally enforceable. The court found that evidence of such arrangements or understandings could be implied from the surrounding circumstances; for example, if the company had previously enjoyed the ability to access the third party’s documents with its cooperation and consent.

The court extended these principles to find that the nature of “the relationship between the two is irrelevant” if the arrangement or understanding exists as a matter of fact. A party might have control over the documents of another entity even if it did not have control in the wider sense, as might be the case with a parent/subsidiary relationship. Therefore, there was no reason why the existing principles could not be applicable to the question of whether a subsidiary had control over a parent’s documents, or indeed any other entity or individual.

The arrangement or understanding might be general in the sense that it applies to all documents held by the third party, or it could be limited to a particular class of documents. In addition, there is no requirement that there be an understanding as to how the documents will be accessed. The key point is that whether or not there is such an arrangement is a factual question, and in this case, the court concluded that there was such an arrangement or understanding between the claimants and the third parties holding documents such that the claimants had control over those documents for disclosure purposes.

Therefore, when determining control, the courts will now undertake a more fact-focused analysis centered on determining the practical reality of the relevant arrangement or understanding between the party and the other entity or individual who holds documents. For example, if there is evidence or if it can be inferred that the party in fact exercised the ability to access certain documents with the third party’s cooperation or consent, the court may well find that those documents are within the party’s control and required to be disclosed — even if they are held by a third party that is not under the legal control of the party required to provide disclosure.