When are documents held by a third party within a litigant’s “practical control”?

In The Public Institution for Social Security v Al-Wazzan & Ors [2024] EWHC 480 (Comm) the Commercial Court was asked to make an order requiring the claimant to disclose documents held by third parties. The decision is a useful reminder that, in certain circumstances, a litigant can be considered to have control over documents held by a third party even where the litigant has no legal right to those documents; such documents as are within the litigant’s “practical control” may, in principle, fall to be disclosed. However, as illustrated by this case, in practice it may not be easy to establish such circumstances.

Control over documents

A party to litigation is required to disclose relevant documents within the party’s control. Where a party has physical possession of the documents or a legal right to obtain access to documents held by a third party then “control” is often straightforward. However, several cases in recent years have established that even where the litigant has no legal right to the third party’s documents, if the documents are under the “practical control” of the litigant, then that may suffice to trigger disclosure obligations.

For these purposes such “practical control” can arise where there is a standing or continuing practical arrangement between the litigant and the third party whereby the third party allows the litigant access to its documents. This may be via a written arrangement or inferred from the surrounding circumstances. However, a close legal relationship between the litigant and third party, such as between a parent and subsidiary company, is not necessarily sufficient or determinative; this is not a device that will routinely pierce the corporate veil.

Background to case

The issue arose in the context of English proceedings brought by Kuwait’s Public Institution for Social Security (PIFSS), which operates Kuwait’s social security and pension scheme. PIFSS’s claim is for relief in respect of alleged unlawful payments by various financial institutions and intermediaries of unauthorised secret commissions procured by its former Director General, Mr Al Rajaan. Prior to the commencement of these proceedings in 2019, a criminal investigation into Mr Al Rajaan’s actions was conducted by the Kuwait Attorney General (KAG) (the state prosecutor in Kuwait). Separate criminal proceedings were also brought against Mr Al Rajaan in Switzerland by the Swiss Attorney General. The Kuwait Department of Legal Advice and Legislation (DLAL) (the Kuwaiti government legal department) represented the KAG and PIFSS in various aspects of these proceedings. PIFSS also engaged KPMG and EY in 2008 and 2015 respectively to carry out an investigation and a governance review.

Certain of the defendants to the English proceedings made applications under CPR PD57AD.17.1 for PIFSS to disclose documents which were not in its possession but were in the hands of these other governmental entities and accountancy firms.

Decision

The Judge refused the application on the grounds that the documents sought were not in the practical control of PIFSS.

The judgment contains a helpful review of the caselaw on the principles applicable to the issue of practical control. While each case will turn on its own facts and circumstances, the decision also illustrates some key points to keep in mind.

• The Judge emphasised that it was necessary to look separately at each third-party entity whose documents were alleged to be under PIFSS’s control; a globalised approach was not appropriate even though there were many entities involved in related proceedings who had various interactions with each other and PIFSS.
• The Judge also stated that where an argument about practical control is advanced it is relevant to consider whether – given the relationship between the parties – one might sensibly expect the litigating party to have practical control over the documents of the relevant third party. In the present case for example, the Judge considered it would be rather strange to suppose that PIFSS would have practical control over documents held by KAG, DLAL and the accountancy firms given the roles and functions of them.
• The Courts will exercise caution when assessing practical control. The Judge repeated observations from previous cases that a ‘degree of stringency’ is required.

On the facts, the evidence put forward in the current application did not establish practical control by PIFSS. The fact that a limited number of documents had been provided by KAG to PIFSS in 2015-2016 was not enough to establish an inference of practical control. A degree of co-operation could not be translated into practical control. There was no pattern of on-going co-operation or evidence of a free flow of information; on the contrary, only a small number of documents had been provided on a few occasions in a 15-year period. Similarly, the fact that DLAL represented both KAG and PIFSS in relation to various aspects of the proceedings against Mr Al Rajaan again did not mean that PIFSS obtained practical control over documents held by KAG.

The applications against the accountancy firms also failed. The terms of engagement with the accountancy firms made clear the nature of the client/professional adviser relationship between PIFSS and the firms, and which documents remained the property of the firms.

Key takeaways

The issue of practical control over documents held by third parties can arise in various contexts. For example, where there is a corporate group structure and only one, or a limited number, of the companies in the group are involved in the litigation, or where an employee of a party to litigation has documents which are not in the legal control of the party. This judgment follows earlier decisions in showing that it may not be easy to establish practical control, particularly where this is to be inferred from the surrounding circumstances. It is unlikely to be sufficient that limited documents have been provided by the third party to the litigating party on previous occasions. More is needed to demonstrate that the party has an ongoing practical arrangement to access the documents of the third party.

Where an applicant cannot establish that a respondent has practical control over documents held by a third party, what are its options? The Judge agreed with the earlier case of Various Airfinance Leasing Companies v Saudi Arabian Airlines [2021] EWHC 2904 (Comm), which confirmed that the Court has no jurisdiction to make an order requiring a litigant to make requests of third parties for documents. The applicant could however apply for a disclosure order against the third party directly pursuant to CPR 31.17. The party would be required to evidence that such disclosure was necessary to dispose fairly of the claim or to save costs, and it may not be easy to convince a court that a third party should be pulled into the litigation in this way.