UK: High Court Underlines Need To Consider Scope Of Agency In Considering Whether Documents To Which Agent Has Access Are In Principal's Control

In a recent decision, the High Court has held that the documents of a claimant's creditor were not in the claimant's control for the purposes of disclosure. Although two employees of the creditor acted as the claimant's agent in conducting the litigation, that did not mean that all the documents to which they had access in their capacity as the creditor's employees were in the claimant's control: Loreley Financing (Jersey) No 30 Ltd v Credit Suisse Securities (Europe) Ltd [2023] EWHC 548 (Comm).

This adds to a line of judgments in recent years considering the question of when a third party's documents are in a litigant's control and therefore subject to its disclosure obligations. The courts have taken a relatively broad view, finding that there is no need for an enforceable legal right to obtain the documents; it is sufficient that there is a continuing arrangement or understanding that in practice provides the litigant with a right of access.

However, there are limits. The present decision shows the court's approach where it is argued that a principal has control over documents on the basis that its agent can access those documents. The question comes down to the scope of the agency. While a litigating party will have control over the documents of its agents, acting in that capacity, it will not have control over documents which the agents can access in a separate capacity (here, as employees of a creditor).

In some cases, the more appropriate route for parties seeking documents held by a third party may be an application for non-party disclosure under CPR 31.17. That allows the court to order disclosure of documents that are likely to support or adversely affect the case of any party, if such disclosure is necessary to dispose fairly of the claim or to save costs. However, such orders are generally seen as "exceptional, or at least not normal", as the court commented in the present case.

Background

The claimant brought claims against the defendants in relation to certain CDO transactions the defendants had arranged. The defendants deny the claims and also raise a limitation defence.

An issue relating to limitation is when the claimant could, with reasonable diligence, have discovered the alleged misconduct which forms the basis of its claims. Because the claimant is a special purpose vehicle, there are issues as to whose knowledge is to be attributed to it. The defendants' case is that the knowledge of (inter alia) a German bank, "KfW", which was the claimant's investment adviser and is its main creditor, should count as the claimant's knowledge for these purposes.

In a previous application, the court held that the claimant could not withhold disclosure of the identity of those instructing the claimant's lawyers on its behalf on the grounds of litigation privilege (see our post on that decision here). The claimant therefore disclosed sections of its engagement letter with its lawyers (which had previously been redacted) which revealed that the lawyers' "main day-to-day points of contact" for the matter were two employees of KfW ("TB" and "MC").

In the present application, the defendants sought an order that the claimant disclose the KfW documents to which TB and MC had access, on the basis that such documents were to be regarded as within the claimant's control. The defendants pointed to KfW's role in investigating claims that the claimant might have in relation to the CDOs, including obtaining advice from the claimant's lawyers several month before those lawyers were instructed by the claimant in relation to the claim. The defendants also pointed to the fact that the claimant's directors had no input into the draft particulars of claim, which must therefore have been produced on the instructions of TB and MC, using documents to which they had access at KfW.

Decision

The High Court (Cockerill J) held that the body of KfW documents to which TB and MC had access were not in the claimant's control.

Cockerill J started by reviewing the authorities in relation to when a third party's documents are in the control of a litigant for the purposes of disclosure, in particular the following three decisions which she said were of most assistance in relation to the principles: Ardila Investments v ENRC [2015] EWHC 3761, Various Airfinance Leasing Companies v Saudi Arabian Airlines [2021] EWHC 2904 (considered here) and Berkeley Square Holdings v Lancer Property Asset Management [2021] EWHC 849 (Ch) (considered here).

These authorities justified the conclusion that there is a "degree of stringency" required before finding that there is the requisite control. It is not sufficient to show a close legal or commercial relationship, or that the third party could be expected to comply with a request. Further, there is a need to show that there is not simply a specific request but a more general right to ask for documents, in the nature of a standing or continuing practical understanding or arrangement which allows access. A key factor may be whether access has been permitted in the past.

Applying those principles to the present case, the judge concluded that the evidence did not show the requisite hallmarks of control. The defendants' focus on the role of TB and MC did not assist. What was sought was access to KfW's documents. They were not documents to which TB and MC had access as agents of the claimant; they had access as employees of KfW. That meant control could not be established, quite apart from the evidence TB had given that there had been a request for the documents and KfW had refused.

As the judge put it, it was "essentially a question of hats". Just because TB had one hat (as a KfW employee) which entitled him to access these documents, that did not mean he could access those same documents wearing his other hat (as an agent for the claimant).

In relation to the conduct of the claim, where TB and MC did act as the claimant's agents, they would have had control over documents created in relation to the claim which were lodged on KfW's files. However, the fact that they had control over certain documents as agents of the claimant did not mean they had control, in that same capacity, over all the KfW documents relating to that same subject matter going back several years.

The judge commented:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.