High Court considers whether third party's documents are in party's practical control for disclosure purposes

The High Court has held that a foreign government body did not have control, for the purposes of its disclosure obligations, of documents held by various other government bodies and professional services providers, as the documents of those third parties were not within its practical control: The Public Institution for Social Security v Al-Wazzan [2024] EWHC 480 (Comm).

It is now well established by first instance authorities that a party will have control over a third party’s documents, for disclosure purposes, not only where there is a legally enforceable right of access, but also where there is a standing arrangement or understanding which means the documents are within the party’s practical control. The present decision is of interest in exploring the boundaries of that concept.

The decision illustrates that the courts will approach this question with a "degree of stringency" so, for example, evidence that the third party has previously provided documents to the disclosing party will not necessarily be sufficient to establish practical control. Nor will the fact that the party and the relevant non-party have engaged a common lawyer.

When it comes to the documents held by professional services providers, the decision suggests that a court will take some persuading before finding that the third party's working papers are in their client's practical control. Significant weight will be attached to the engagement terms, as well as the question of whether the party would be able to comply, in practice, with an order requiring them to search for and disclose relevant documents held by the third party. Where the court cannot see how such an order could realistically be complied with, this will tend to demonstrate that the documents are not under the party's control.

Background

The applications arose in the context of proceedings brought by the Public Institution for Social Security (PIFSS), which operates the State of Kuwait's social security and pension scheme, against the estate of its former director general, Mr Al Rajaan, and numerous financial institutions and intermediaries, in connection with secret commission payments allegedly procured by Mr Al Rajaan from 1984 to 2014.

Certain of the defendants argued that PIFSS should be required to disclose documents in the hands of various third parties on the basis that PIFSS had practical control over those documents.

These third parties fall into the following groups: (i) non-government entities, namely the accountancy/consulting firms KPMG and Ernst and Young (EY), and an investment advisory firm (WAFRA) which is a subsidiary of PIFSS; and (ii) government bodies including the Kuwait Department of Legal Advice and Legislation (DLAL), which is effectively the Kuwaiti government legal department, and the Kuwait Attorney General (KAG), which performs the role of state prosecutor.

By way of further brief factual background, according to the evidence before the court:

1. KPMG was appointed in early 2008 to carry out an investigation, after allegations were made in relation to Mr Al Rajaan. A criminal investigation was subsequently begun by the KAG in 2008.
2. The investigations into Mr Al Rajaan by the Kuwaiti authorities culminated in a request for Mutual Legal Assistance (MLA) being made to the Swiss authorities in 2011 by the State of Kuwait, acting by DLAL.
3. The Swiss authorities provided the State of Kuwait with various documents in January and April 2015. Copies of these documents were given to PIFSS, which disclosed them in the present proceedings.
4. DLAL was appointed to represent PIFSS in March 2015, pursuant to a resolution by the Council of Ministers instructing DLAL to pursue all legal actions in relation to suspicions concerning the conduct of Mr Al Rajaan in his role at PIFSS.
5. PIFSS also sought to intervene as a plaintiff in the criminal investigation which was being carried out by the Swiss authorities into Mr Al Rajaan. The application was made by Swiss lawyers on its behalf in 2015, and PIFSS was joined as plaintiff in May 2016.
6. Also in 2015, EY was appointed to carry out a governance review and WAFRA carried out certain investigatory work.

The core of the defendants' argument on the disclosure application was that documents had been provided to PIFSS in the past, and the court could readily conclude that the arrangement continued – not simply because PIFSS had received documents but because that receipt of documents had to be seen in the context of all that was being done, by PIFSS and other parties, in relation to the investigations into Mr Al Rajaan and the overall purpose for which the various parties were acting.

PIFSS argued, in contrast, each third party had to be looked at separately. There were different entities, including (in the case of the government third parties) different emanations of the state, with different roles and different functions. While some documents had been provided to PIFSS, this was on a limited and ad hoc basis. The inference of control which the defendants invited the court to draw was not just speculative, but also inherently improbable.

Decision

The High Court (Jacobs J) rejected the defendants' application for disclosure of documents in the hands of the various third parties.

The judge initially made a number of overarching observations which he said applied to each of the third parties whose documents were alleged to be under PIFSS's control:

1. The relationship between PIFSS and each third party should be considered separately. There was no obvious reason why the approach to control should be different depending on the number of entities involved in different aspects of an investigation, even if there was a common element to the matters being investigated.
2. The key question was whether PIFSS had "practical" rather than legal control of the third party documents sought.
3. For the government third parties (unlike the non-government entities where the engagements had been time limited), it was appropriate to consider the relationship between the relevant third party and PIFSS over a broad period.
4. In assessing the relationship, it was important to consider the different functions and roles of the third parties, and whether it was inherently probable that such control would exist. The Judge noted in this context that one would not expect PIFSS, as the state entity responsible for administering social security and pensions, to have practical control over the documents of the KAG, the public prosecutor.

One further pervasive point was that, in considering the application, the judge followed the decision in Various Airfinance Leasing Companies v Saudi Arabian Airlines Corpn [2021] EWHC 2904 (Comm) (considered here) which held that the court did not have jurisdiction to make an order requiring a party to exercise best endeavours to obtain or request a third party to produce documents for disclosure which are not already in the party's control.

The judge then went on to consider the position of each of the relevant third parties in turn in more detail. This was necessary due to the "degree of stringency" required in determining whether documents held by a third party will be in the practical control of the relevant party to the litigation (as recently noted in Loreley Financing (Jersey) No. 30 Ltd v Credit Suisse Securities (Europe) Ltd [2023] EWHC 548 (Comm), considered here).

KAG

The judge considered that, while there had been a degree of co-operation between PIFSS and the KAG in the past, this did not amount to practical control and there had been no pattern of ongoing co-operation or evidence of a "free flow of information", as the defendants submitted. The co-operation was limited to certain documents being passed to PIFSS in 2015-2016, with no clear evidence of documents being provided in the seven years before or subsequent.

The defendants' submissions had sought to make much of the fact that there was dual representation where lawyers, namely DLAL and a Swiss lawyer, were acting for both the KAG and PIFSS. The judge noted, however, that the mere fact that two parties have engaged a common lawyer does not mean that one of the parties thereby obtains practical control over the documents of the other. In any event, due to the differing timing and nature of the lawyers' engagements for KAG and PIFSS, respectively, it was not a case where there was anything of the nature of a joint retainer.

The argument that PIFSS had practical control of relevant KAG documents therefore had no firm foundation and was contrary to both the evidence and the inherent probabilities.

DLAL

DLAL was appointed to represent PIFSS (in March 2015) and PIFSS accepted that it had control of the documents exchanged or received pursuant to that mandate. The issues concerning DLAL's documents were: (1) did PIFSS have practical control of documents beyond those exchanged or received pursuant to the mandate; and (2) had PIFSS carried out appropriate searches of DLAL's documents which were acknowledged to be within its control?

As to the first, the judge noted that the applicants were essentially seeking to obtain the KAG's documents which were held by DLAL pursuant to its retainer for the KAG. However, as the court had already determined that PIFSS did not have control over the KAG's documents (as explained above), there were no stronger arguments in relation to DLAL's documents held for the KAG than there were in relation to documents held by the KAG itself. The answer to (1) was therefore no.

As to (2), having reviewed PIFSS's evidence as to the steps taken by its English lawyers to review DLAL's documents, the judge was satisfied that a reasonable and proportionate search had been taken. The vast majority of the documents exchanged or received pursuant to a mandate with overseas lawyers was likely to be privileged. In some cases it might nevertheless be reasonable and proportionate to require a litigating party to take further steps in relation to the documents of its foreign lawyers, but that was not the case here. There was no suggestion that the defendants' lawyers had undertaken any more extensive search in relation to documents held by their clients' own overseas lawyers.

KPMG and EY

The defendants had sought an order which required PIFSS to search for and disclose relevant documents held by KPMG and EY. PIFSS's position was that it was impossible to see how such an order could be complied with, and the judge agreed that this tended to demonstrate that the documents sought were not under the control of PIFSS.

The judge noted that, if the court were to order PIFSS to search for and disclose such documents, he did not understand what, in practice, PIFSS could do. The terms of PIFSS's engagement letters with both KPMG and EY made it clear that the relationship was one of client and professional adviser, rather than agent and principal, and there was nothing in those terms that gave PIFSS practical control of KPMG or EY's documents. The engagement letter with KPMG expressly stated that KPMG would retain ownership of their working papers during the course of the engagement.

It was well established (for example in Leicestershire CC v Michael Faraday [1941] 2 KB 205) that the working papers of a professional services firm belong to the professional and not the client. However, the defendants submitted that the notes of interviews conducted by KPMG during the course of their investigation would not form part of their working papers. The judge rejected this submission, stating that if KPMG decided, as part of their work, to interview certain individuals and take notes or transcripts of the interviews, these would seem to be part of KPMG's working papers.

WAFRA

Again, the judge concluded that the relationship between PIFSS and WAFRA was one of client and professional adviser/service provider. There was no reason why such a relationship could not exist between a parent and its subsidiary.

The judge also rejected the defendants' submission that the fact that WAFRA had recently provided certain documents to PIFSS, in response to a specific request made in the context of the litigation, provided evidence of a relevant practice which demonstrated control.