High Court finds party has practical control over documents of sub-contractor and sub-sub-contractor for disclosure purposes

The High Court has held that the documents of a party's sub-contractor and sub-sub-contractor were within that party's control for the purposes of discharging its disclosure obligations in the litigation:  Mornington 2000 LLP (t/a Sterilab Services) and Anor v The Secretary of State for Health and Social Care [2024] EWHC 1708 (TCC).

It is well established that parties may be found to have control of documents for the purposes of disclosure not only where there is an enforceable legal right to access the documents, but also where there is an arrangement or understanding which provides an ability to access documents, known as "practical control".

The present decision illustrates that, in determining the question of whether documents are within a party's practical control, the court will focus on the factual context, including the degree of cooperation and assistance given to the litigant prior to and during the litigation. An agreement to provide assistance to a party in the event of a dispute, combined with a history of having provided documents on request, may be significant factors weighing in favour of a finding of practical control.     

It is of course common for contracting parties to agree to provide assistance to a counterparty in the event of a dispute, and these clauses can be helpful in enabling a litigating party to obtain access to the evidence needed to support their claim or defence. As this decision shows, however, the courts may be reluctant to allow a contracting party to take the benefit of such a clause to obtain helpful information from the third party while denying any obligation to seek access to documents held by that third party which may be unhelpful to the case.

Background

The application was made in the context of claims arising out of the termination of a contract for the claimants to supply COVID-19 lateral flow test kits to the defendant. The second claimant ("Santé") had a sub-contract with a supplier of the kits, MP Biomedicals Germany GmbH (“Bio”), and Bio in turn had a sub-contract with the manufacturer of the kits in China, Xiamen Boson Biotech Co Ltd (“Boson”).

The defendant contended that it was entitled to terminate due to violations of labour law, health and safety and worker payment obligations in Boson’s factory in China. The claimants disputed that there was any breach of contract on their part and, as a result, claimed damages for wrongful termination.

The defendant sought a declaration that documents in the possession of Bio and Boson were within the control of Santé for the purpose of their disclosure obligations. The declaration sought originally extended to third-party auditors who had been instructed by Santé, Bio and Boson, but this was adjourned for further consideration as disclosure regarding one of the auditing firms had been provided on the eve of the hearing.

The defendant argued that Santé should be treated as having practical control of the documents held by Bio and Boson because:

1. Bio had agreed to provide, and procure that Boson provide, Santé with "all reasonable assistance" requested by Santé in connection with "any dispute" between Santé and the defendant in relation to a claim that goods supplied to the defendant were defective or not in accordance with the contract. There was also a similar clause in which Boson committed to assist Bio and Santé (together, the "Contractual Assistance Clauses"). The claimants did not dispute that the wording of these clauses covered the current dispute. The defendant did not argue that these clauses established an enforceable legal right to documents but relied on them as providing a firm foundation for a finding of practical control.
2. Boson and/or Bio had provided "extensive" documentation prior to and during the proceedings, including documents provided in Santé's initial disclosure. Moreover, Boson had presented a "united front" with Santé in opposing the defendant's allegations at the outset of the claim and provided it with other forms of assistance including making its employees available to give evidence at trial.
3. Although there was said to be no contract between Santé and Boson, Santé had "significant power" in its relationship with Boson, which was evidenced for example by the fact it had previously commissioned audits of Boson's premises for compliance.
4. If Santé were found not to have practical control, it would be unfair to enable Santé to use the Contractual Assistance Clauses to their advantage in requesting the production of helpful documents, without it having any equivalent obligation to review and disclose potentially unhelpful documents held by Bio and Boson.

Santé contended that the nature of the relationship between Santé, Bio and Boson and/or the Contractual Assistance Clauses were not sufficient to ground a finding that Santé had practical control of Bio and/or Boson's documents. In particular, it submitted that:

1. There was nothing more than an "ad hoc commercial relationship" with Bio and Boson. The authorities required there to be "something more" than even a close commercial relationship.
2. The Contractual Assistance Clauses did not mention provision of documents and did not suggest the "free and unfettered right of access" necessary for practical control. Such clauses were common in contractor/sub-contractor agreements, and so if they were sufficient to give control there would be "an astonishing floodgates problem".
3. While Boson had responded to a limited number of specific, ad hoc requests for documents from Santé, this did not amount to a general standing arrangement which was needed for a finding of practical control.
4. There was nothing in the Contractual Assistance Clauses to suggest that Boson's documents could be searched by Santé, which it would be required to do if the declaration were granted.

Decision

The High Court granted the declaration, holding that Santé did have practical control over the documents of Bio and Boson.

The court applied the six principles from Berkeley Square Holdings Ltd and others v Lancer Property Asset Management Ltd and others [2021] EWHC 849 (Ch) (as modified by Jacobs J in Public Institution for Social Security v Al Wazzan [2024] EWHC 480 (Comm), considered here):

1. The nature of the relationship is relevant but not determinative: The judge recognised that this was an "unusual" case for there to be practical control but said there was no reason in principle why a contractor could not have practical control over documents held by a sub-contractor or a sub-sub-contractor. There was a "close" relationship between Santé, Bio and Boson, which the court found was akin to participating in a joint venture for the supply of lateral flow tests. The relationship went "beyond a standard, arm’s length contractor/sub-contractor/sub-sub-contractor relationship".
2. There must be an arrangement or understanding that the holder of the documents will search for relevant documents or make documents available to be searched: The balance of the evidence established the existence of such an arrangement or understanding in this case. This conclusion was largely based on Boson and Bio's ongoing commitments in the Contractual Assistance Clauses. The judge commented that he had little doubt that, if Santé needed documents that were favourable to the claims, it would consider that Boson was obliged to conduct that search and the search would take place. However, the clauses were not confined to making available helpful documents.
3. The arrangement may be general or limited to a particular category of documents: The arrangement in this case applied only to those documents responsive to categories in the Disclosure Review Document, which had been found to be necessary to the fair disposal of the claims, not all documents in the control of Boson.
4. The existence of the arrangement may be inferred from surrounding circumstances, and evidence of past access to documents in the same proceedings is a highly relevant factor: While the starting point was the Contractual Assistance Clauses, the arrangement in this case could be inferred from other conduct like the pattern of Boson and Bio previously providing access to documents. There was no evidence Boson having refused to provide access, and it seemed very likely that Boson would comply with any future requests, which was "highly relevant". The judge was careful to emphasise that the close commercial relationship between the contractors and the litigant was not alone sufficient to establish practical control, but the presence of other factors, including Boson's ongoing cooperation, grounded the finding of practical control.
5. There need not be an understanding as to how the documents will be accessed, so long as there is an understanding that the third party will co-operate in providing access: The judge explained that it was not necessary to establish that Santé, or Bio, had free and unfettered access to Boson’s documents (see Pipia v BG Group Ltd [2020] EWHC 402 (Comm), considered here). The fact that documents may have been provided previously on request, rather than Santé being provided with direct access to the documents, did not mean that Boson would not make its documents available for searching when requested by Santé or Bio as part of its obligation to provide assistance in connection with the claim.
6. The arrangement or understanding must not be limited to a specific request: The court found that the arrangement in this case was not limited to a specific request but was more general in its nature.

The court recognised that most of the defendant’s submissions were directed at Boson, not Bio, but held that it was appropriate make the declaration in respect of Bio as well for two reasons: (a) the evidence supported there being a similar arrangement or understanding with Bio; and (b) practically, the requests made to Boson to provide documents to comply with Santé's disclosure obligations might need to go through Bio. If documents were provided by Boson to Bio, the broader form of the declaration would ensure there was no doubt that these would remain within the scope of Santé's disclosure obligations.

Note: Permission to appeal was refused on 21 August 2024.