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'Control' of documents

In the recent case of North Shore Ventures Limited v Anstead Holdings Inc [2012] EWCA Civ 11 the Court of Appeal considered the concept of 'control' of documents under Civil Procedure Rules 71.2 and 31.

The rules
Under CPR 71.2 the court may order a judgment debtor to attend court to provide information about his means or any other matter about which ­information is needed to enforce a judgment. CPR 71.2(6) (b) provides that when a judgment debtor attends court he must 'produce at court ­documents in his control which are described in the order'.

Although there is no definition of 'control' in CPR 71.2, the same term is used in CPR 31, which deals more ­generally with disclosure and inspection of documents. CPR 31.8 provides: '(1) A party's duty to disclose documents is limited to documents which are or have been in his control. (2) For this purpose a party has or has had a ­document in his control if (a) it is or was in his physical possession; (b) he has or has had a right to possession of it; or (c) he has or has had a right to inspect or take copies of it.'

North Shore Ventures
North Shore was owed a sum in the region of $35m by the appellants under a judgment debt. The appeal was against an order of Floyd J requiring the appellants to produce documents to North Shore pursuant to CPR 71.2(6). The documents in dispute related to trusts which the appellants established and under which they were discretionary beneficiaries. The appellants argued that they did not have possession or control of the ­documents.

On appeal, counsel for the appellants submitted that Floyd J erred in law because he wrongly took the view that an order could properly be made in respect of documents that were ­outside the appellants' control, provided that they were in a position to obtain them; or he misdirected himself as to the meaning of control, wrongly ­equating the ability to obtain ­documents with having the documents in their control. As to the meaning of 'control', counsel for the appellants submitted that a document which is not in the physical possession of a party is not within his control unless he has a currently enforceable legal right to its possession (or to take copies of it). He relied on the words of CPR 31.8, the decision of the House of Lords in Lonrho v Shell [1980] 1 WLR 627 and the judgments of Tomlinson J and the Court of Appeal in Three Rivers DC v Bank of England [2003] 1 WLR 210.

He further argued that a beneficiary under a discretionary trust has no immediately enforceable right to ­possession or to take copies of trust documents. He had, counsel argued, a right to ask the court to order the trustees to allow him to take copies of trust documents, but that was a ­matter for the discretion of the court: Schmidt v Rosewood Trust Limited [2003] AC 709. Counsel for North Shore, on the other hand, contended that the judge was entitled to conclude that the appellants were in fact in control of the relevant documents, and that the trustees had not acted as independent trustees but rather to fulfil the ­appellants' wishes, and as beneficiaries or former beneficiaries under the trusts the appellants had sufficient legal rights to give the court jurisdiction to make the order which it did.

Toulson LJ noted that the issue in Lonrho v Shell was whether documents in the possession of a company's ­foreign subsidiary were within the 'power' of the parent company for the purposes of order 24, rule 2(1) of the Rules of the Supreme Court. Lord Diplock held that 'in the context of the phrase "possession, custody or power" the expression "power" must, in my view, mean a presently enforceable legal right to obtain from whoever actually holds the document inspection of it without the need to obtain the consent of anyone else'.

In respect of one-man companies (that is, where the shareholder is also the sole director), Lord Denning was of the view that, in such circumstances, the 'power' of the 'one man' would be greater as ­compared with companies with ­subsidiaries. Also, Floyd J in Schlumberger made an order in favour of the defendant against the claimant which was a holding company. The order required the claimant to search for documents within the group of companies but which were not parties to the action. In that case Floyd J held: 'But what happens where the evidence reveals that the party has already enjoyed, and continues to enjoy, the cooperation and consent of the third party to inspect his documents and take copies, and has already ­produced a list of documents based on the consent that has been given and where there is no reason to ­suppose that that position may change? Because that is the factual situation with which I am ­confronted here. In my judgment, the evidence in this case sufficiently establishes that ­relevant documents are and have been within the control of the claimant.'

Toulson LJ then considered the ­factors which could be taken into account when assessing whether the appellant had 'control' of the relevant documents. Toulson LJ analysed the particular relationship between the appellant and the trust, and said: 'Family trusts are a well-known possible device for trying to place assets ­ostensibly beyond the reach of ­creditors, and the timing of the ­simultaneous creation of the trusts fits such a pattern. The circumstantial ­evidence gave reasonable ground to infer that there was, in truth, some understanding or arrangement between the appellants and the trustees by which they were to shelter the appellants' assets, consistent with the appellants' real aim, and that the nature of that understanding and arrangement was such that the trustees would take whatever steps the appellants wished in the administration of the trusts.'

The close relationship between the trustees and appellants meant that Floyd J was entitled to make the order which he made.

Toulson LJ then set out the approach the courts should adopt when ­considering whether documents in the physical possession of a third party are in a litigant's control: 'In determining whether documents in the physical possession of a third party are in a litigant's control for the ­purposes of CPR 31.8, the court must have regard to the true nature of the relationship between the third party and the litigant. The concept of "right to possession" in CPR 31.8(2)(b) covers a situation where a third party is in possession of documents as agent for a litigant. The same would apply in my view if the true nature of the ­relationship was that the litigant was to be the puppet master in the ­handling of money entrusted to him for the specific ­purpose of defeating the claim of a creditor. The situation would be akin to agency. But even if there were, on a strict legal view, no "right to possession", for example, because the parties to the arrangement caused the documents to be held in a jurisdiction whose laws would preclude the physical possessor from handing them over to the party at whose behest he was truly acting, it would be open to the English court in such ­circumstances to find that, as a matter of fact, the documents were nevertheless within the control of that party within the meaning of CPR 31.8(1). CPR 31.8(2) states that, for the purpose of CPR 31.8(1), a party has or has had a document in his control if the case falls within paragraphs (a) to (c). It does not state that a party has or has had a document in his control if, but only if, the case falls within one of those paragraphs.'

North Shore Ventures provides ­valuable guidance upon the issue of what constitutes 'control' of relevant documents. Where documents are in the possession of a third party who is connected to one of the parties to proceedings, then the courts will be required to analyse the true nature of the relationship between the third party and the litigant. If the third party is found to possess the documents as an 'agent' of the litigant, then a court will not hesitate to make an order for disclosure of those documents. Toulson LJ's wide interpretation of the rules has also extended the powers of the English courts to find that ­documents were in the control of a ­litigant even where the documents are held outside the jurisdiction.

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