At a recent disclosure hearing in Quartz Assets LLC and another v Kestrel Coal Midco Pty Ltd [2021] EWHC 2675 (Comm), the claimant sought an order that the defendant extend its disclosure searches for pre-contractual negotiations and correspondence to include documents held by a third party (TP). The defendant agreed that the documents would be relevant but resisted disclosure as the documents were not in its control. 

Background

The second claimant and the defendant entered into a mezzanine subscription agreement in 2018. In the lead up to the agreement, TP was communicating with potential senior and mezzanine investors (including the second claimant) about possible financing and negotiating the terms of the agreement on behalf of the defendant pursuant to a retainer (to which the defendant was not a party).  

There was a 'no agency' clause in the retainer, which provided that TP did not have authority to take action or sign any document on behalf of the defendant or otherwise bind it in any respect. 

The disclosure order

The Judge found that:

• the 'no agency' clause did not prevent TP from potentially altering the defendant's legal relations by making representations during negotiations
• there was therefore an agency relationship between TP and the defendant, even though the defendant was not a party to the retainer and was not paying TP's fees
• the defendant therefore had a legal right to access documents held by TP which were created during the agency relationship, in particular whilst TP was negotiating with the second claimant and other potential investors
• consequently, the documents held by TP were deemed to be within defendant's 'control' within the meaning of CPR 31.8 (where a party's documents are in the hands of a servant or agent).

The judgment provides useful guidance on agency in the context of disclosure and is a helpful reminder that parties should consider at an early stage whether any third parties might hold relevant documents which could be deemed within either party's control.

The judgment also gives insight of how the court will approach applications under the disclosure pilot scheme. Central to the decisions are the usual principles of reasonableness and proportionality, but close attention will be paid to the agreed issues for disclosure, which is one of the key new requirements introduced by the disclosure pilot.

Find out more 

To discuss the issues raised in this article in more detail, please reach out to a member of our Disputes & Investigations team.