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Company must disclose documents held by subsidiaries

Andrew Baker J: Unusual application

A company must disclose documents held by its subsidiaries and which it controls, the High Court has ruled, in a case handled under the disclosure pilot.

Mr Justice Andrew Baker said that, although ownership of subsidiaries did not always mean control over documents, in this case the subsidiaries provided the parent company with “standing consent” to provide documents.

He said “those arrangements have not been terminated, there is no reason to suppose they will be terminated and there is good reason to suppose they will not be terminated” since it was the “common cause” of the companies to contest the claim.

The judge said “control” was defined in paragraph 1.1 of appendix 1 to the CPR Practice Direction 51U, and it included documents “in respect of which a party has or has had a right to possession”.

BGEO Group Limited (BG UK), the defendant, applied to the High Court for a declaration that for disclosure purposes it did not control documents held by either by JSC BGEO Group (BG Georgia) or JSC Bank of Georgia (BoG).

Andrew Baker J said the claimant, Roman Pipia, issued his claim against BG UK and seven other defendants in January 2018, but discontinued his claims against the others.

In the run-up to a second case management conference in July 2019, a “difference arose between the parties” as to which extended disclosure model should be used under the disclosure pilot.

“That difference, it was realised, reflected an issue as to the extent to which BG UK has control over documents held by the subsidiaries for the purpose of disclosure in the claim.”

The High Court heard in Pipia v BGEO Group [2020] EWHC 402 (Comm) [1] that Mr Pipia’s underlying claim concerned a company incorporated in Georgia, which he alleged he owned beneficially. BoG extended $100m in credit to the company, but later forced a sale of its assets.

Mr Pipia argued that the purchase of those assets by another company was only possible because of a loan provided to it by BG Georgia.

Andrew Baker J went on: “The application is unusual in that against that background Mr Pipia is more naturally the applicant, for directions for extended disclosure that depend upon BG UK having control over documents held by BG Georgia or BoG.

“Instead, the application was a pre-emptive application by BG UK for negative declaratory relief.”

The judge said the starting point was that a parent company did not exercise control over the documents of or held by its subsidiaries merely by virtue of its shareholding in those companies.

However, in this case, by letters signed in March 2018, BG UK set up with BG Georgia and BoG “control arrangements, that is to say agreements (whether or not legally enforceable as contracts) under which BG Georgia and BoG gave their standing consent to provide to BG UK (or its advisors) upon request documents held by them that pertain to this claim”.

Andrew Baker J said that accordingly documents held by BG Georgia and BoG within the scope of these arrangements are within BG UK’s control for the purpose of CPR PD 51U, and had been since March 2018.

“Interpreted reasonably, those arrangements in my judgment require BG UK (or its advisors on its behalf – in practice, presumably that will mean Freshfields) to formulate requests for particular documents or classes of documents so that BG Georgia, respectively BoG, can sensibly and reasonably readily comply.

“I do not interpret them as agreements entitling BG UK in effect to impose on BG Georgia or BoG all extended disclosure obligations such as they may have owed had they been party to the claim.

“Obvious examples would be obligations, such as extended disclosure by a litigant in English proceedings can entail, to retrieve or restore deleted files, or to conduct wide-ranging keyword searches across huge email or other electronic documentary records.”