High Court decision highlights exceptional nature of Model E or “train of inquiry” disclosure and considers questions of “control” over server data

In a recent decision, the High Court has declined to order Model E disclosure under the disclosure pilot, and has also held that data and documents on a server held by a company were not within the control of a director and a former director of that company (who were defendants to the action) so as to fall within their disclosure obligations: Kelly v Baker [2021] EWHC 964 (Comm).

Model E or “wide search-based” disclosure, under the disclosure pilot at PD 51U, requires a party to disclose documents which are likely to support or adversely affect any party’s case in relation to one or more of the Issues for Disclosure, or which may lead to a train of inquiry which may then result in the identification of other documents for disclosure. This equates to old-style Peruvian Guano or “train of inquiry” disclosure, which was replaced by “standard disclosure” when the Civil Procedure Rules were introduced in 1999. The court has retained a discretion to order this form of disclosure, and it was one of the “menu” of disclosure options introduced in place of standard disclosure under the Jackson reforms in 2013, but it has long been understood to be available only in exceptional cases (see for example Berezovsky v Abramovich [2010] EWHC 2010, considered here). This requirement of exceptionality is stated expressly in PD 51U.

Against that background, the present decision underlines that exceptional really means exceptional. A party seeking Model E disclosure will, it seems, have to do more than show that it is an important, high value case, or that it involves allegations of fraud. Further, the disclosure sought must be linked with specific issues and some explanation provided as to the nature of the enquiry envisaged.

The decision also illustrates the fact-sensitive nature of the question of whether documents are in a party’s “control” for the purposes of disclosure. It suggests, perhaps unsurprisingly, that a company’s documents are unlikely to be considered to be in the control of a director, in their personal capacity – at least where it is not a one-man company. It is also of interest in taking a relatively strict view of whether documents held by a third party are in a litigant’s control, picking up on comments in Pipia v BGEO Group Ltd [2020] EWHC 402 (Comm) (considered here) that a relevant factor is whether the party has “free and unfettered access” to the documents in question. This may be seen as at odds with the view expressed in Berkeley Square Holdings Ltd v Lancer Property Asset Management Ltd [2021] EWHC 849 (Ch) (considered here) (which is not referred to in the present decision) that the references in Pipia to free or unfettered access were “unhelpful” and could cause confusion as to the need for a party to be able to access the documents by whatever means they see fit, which is not a prerequisite for control in the relevant sense. Continue reading

Parent companies’ documents found to be in subsidiaries’ control for disclosure purposes

The High Court has found that documents held by the claimants’ parent companies, and individuals connected with those entities, were within the claimants’ “control” for the purposes of their disclosure obligations in the litigation: Berkeley Square Holdings Ltd v Lancer Property Asset Management Ltd [2021] EWHC 849 (Ch).

This is the latest in a line of first instance decisions which have held a party will have the requisite degree of control over a third party’s documents, for disclosure purposes, if there is an arrangement or understanding which means the documents are within the party’s practical control, even though the party does not have a presently enforceable legal right to obtain the documents.

The present case is particularly interesting in finding that this principle applies regardless of the nature of the relationship with the third party – so in this case, it meant that a party had control over its parent companies’ documents, whereas in the previous cases which have considered the issue the relationship was generally the opposite way around.

The decision emphasises that whether or not there is such an arrangement is a question of fact, and the existence of such an arrangement may be inferred from the surrounding circumstances. Where there is evidence that a third party has previously permitted access to their documents for the purposes of the proceedings, this will be a highly relevant factor – though compliance with a particular request for assistance will not, of itself, be sufficient.

As a practical matter, parties to litigation should bear in mind the risk of the court inferring the existence of a control arrangement of this sort where they have previously had access to a third party’s documents for the purposes of the proceedings, but wish to argue that the documents are not in their control. While it seems a control arrangement can be terminated, a court might infer that the reason for termination was because the third party’s documents (or remaining documents) are unhelpful to the party’s case (see our post on Pipia v BGEO Group Ltd [2020] 1 WLR 2582, here). Continue reading

Court of Appeal orders defendants to request their employees and ex-employees to produce personal devices for inspection to identify documents in defendants’ control

The Court of Appeal has upheld a decision that, where personal devices belonging to the defendants’ employees and ex-employees potentially contained relevant documents within the defendants’ “control” for the purposes of disclosure, the court had jurisdiction to order the defendants to request the employees and ex-employees to deliver up those devices for inspection by the defendants’ IT consultants: Phones 4U Limited v EE Limited [2021] EWCA Civ 116.

The decision illustrates the breadth of the court’s powers aimed at ensuring that relevant documents within the parties’ control are before the court so as to enable it fairly to decide the issues in dispute. The court cannot order a party to disclose documents that are not within the party’s control, but it can make orders directing how disclosure is to be given, including what searches are to be undertaken to locate documents within the party’s control. That can include requiring a party to make requests of third parties – though the third party cannot be compelled to disclose documents (unless the court exercises its powers to order non-party disclosure).

The court recognised the need to safeguard the privacy rights of the non-parties, but noted that they were not being compelled to deliver up the devices, and the searches were to be carried out by independent IT consultants subject to comprehensive undertakings as to the use of the documents. It was also significant that the case involved allegations of collusive behaviour, and in such cases the individuals involved may sometimes deliberately avoid using their work email or work devices so as to conceal their dealings.

While this decision was reached in a competition case, which fell outside the Disclosure Pilot and was therefore governed by CPR 31, similarly broad powers are likely to apply under the pilot rules at CPR PD 51U.

The Court of Appeal accepted that it would have been open to the claimant to seek disclosure via the alternatives of an application for specific disclosure against the defendants (who would then be required to take steps to obtain the documents from the third parties if they did not provide them voluntarily) or an application for third party disclosure, but commented that it was not necessary for the claimant to navigate that “obstacle course” if there was a simpler way. Those routes would however still be available to the claimant if the non-parties refused to hand over their personal devices voluntarily.

The court said it was not necessary to decide whether the devices themselves fell within the defendants’ control, since the work-related documents on them were within the defendants’ control. However, in the recent decision in Pipia v BGEO Group Ltd [2021] EWHC 86 (Comm), the High Court ordered the defendant to disclose WhatsApp and text messages on a mobile phone belonging to an ex-employee on the grounds that the phone fell within the defendant’s control. In that case, the employment contract expressly authorised the defendant to access “any program or data held on any computer” used by the employee in performing his duties, regardless of whether the program or data was itself related to his duties of employment. The court found that the clause survived termination of employment and the mobile phone was a “computer” for these purposes. Continue reading

High Court finds “control” for the purposes of disclosure includes third party documents that the litigating party can access under a standing consent short of an enforceable right

In a recent decision, the High Court found that the documents of two of the defendant’s subsidiary companies were within its “control” for the purposes of disclosure: Pipia v BG Group Ltd [2020] EWHC 402 (Comm).

The decision shows that a party can have control over the documents of its direct or indirect subsidiaries (or some other third party) even if it does not have a presently enforceable legal right to obtain the documents. It is sufficient that there is an arrangement or understanding, whether or not legally enforceable as a contract, that in practice provides the parent with a right of access. This is consistent with previous cases that have taken a broad view of control for the purposes of disclosure (see for example this blog post).

The decision is of particular interest in finding that, to fall within this principle, there is no need for the litigating party to have wholesale access to the third party’s documents; the arrangement or understanding may relate to a more restricted class of documents, in which case only those documents will be within the party’s control. This is, however, distinct from a mere finding that the third party would probably provide documents if asked to do so. That does not, in itself, justify a finding of control.

Although the decision was reached under the rules for the disclosure pilot currently progressing in the Business and Property Courts, the decision is clear that the same principles apply in non-pilot cases.

The judgment contains a number of interesting comments as to the circumstances in which the court may draw adverse inferences, either regarding the existence of a control arrangement over documents or as to the underlying merits of the case. The decision suggests that:

  • In some circumstances, it may be appropriate to draw adverse inferences to the effect that a litigating party has control over a third party’s documents due to its failure to make “sensible requests” for documents from that party. The reasoning is that the reluctance may stem from the knowledge that the third party would respond in a way that demonstrated the existence of an arrangement or understanding amounting to control.
  • If a third party’s documents are not within the control of a litigating party, there is no obligation on the litigating party to ask the third party to provide documents for disclosure, even if the third party would probably provide the documents. However, depending on all the circumstances of the case, a failure to request the documents may mean the court is justified in drawing an adverse inference going to the merits of the case, either generally or on some particular issue.
  • Where the court finds that a control arrangement existed but has been terminated, and again depending on all the circumstances, the party which has terminated the arrangement may be at risk of an inference being drawn that the reason for termination was because the third party held documents that would be unhelpful to the party’s position.

Finally, the decision contains interesting commentary on one of the disclosure models under the pilot, “Model C”, which is defined as “disclosure of particular documents or narrow classes of documents relating to a particular Issue for Disclosure”, by reference to requests set out in the parties’ Disclosure Review Document or otherwise defined by the court. The judge expressed the provisional view that, where Model C disclosure is ordered, any documents a party locates which fall within the scope of the requests must be disclosed, whether or not they are relevant to the issues in the case. If that approach is followed in future cases, it will be crucial for parties to take care in seeking to formulate and agree any Model C requests.

Continue reading