The Federal Court has once more affirmed the position that documents of a wholly-owned subsidiary are not in the ‘control’ of its parent (at least for discovery purposes). However, as with the other cases, it is clear that the decision was based on the particular facts and evidence that was before the Court.

Justice Besanko’s decision, delivered on 19 August 2015, is the latest interlocutory decision in the ACCC’s long-running prosecution of alleged cartel conduct in the high voltage cable industry.

During the final hearing of the ACCC’s case against the second respondent (Nexans), the ACCC applied for further and better discovery of documents which it said were in the control of a wholly owned French subsidiary (Nexans France).

The documents sought were:

  1. Referred to by Nexans’ senior corporate vice president and general counsel during the course of his cross-examination. Relevantly, Nexans’ general counsel had given evidence that there were more than 10,000 documents seized by the European Commission in the course of its investigation. Those documents were located at the offices of US lawyers acting for both Nexans and Nexans France and had not been produced as part of Nexans’ standard discovery in the Federal Court proceedings. Nexans’ general counsel’s evidence revealed that he had access and permission to inspect the documents at the offices of the US lawyers, and had in fact inspected about 100 of them.
  2. Described in a letter written to Nexans by its Australian lawyers in the context of describing Nexans’ discovery obligations. Privilege had been waived over the letter (and associated communications) during the trial. See Justice Besanko’s recent interlocutory decision on associated waiver here.

 In dismissing the application, Justice Besanko observed that ‘the mere relationship of holding company and subsidiary’ was insufficient to prove that the documents were in Nexans’ control. Having regard to the facts, his Honour found that there was no reasonable basis to conclude that the documents were in Nexans’ control:

  • Nexans did not have the authority to store or keep the French subsidiary’s records, or to access those records without the French subsidiary’s authority;
  • Nexans did not necessarily have an actual or immediate ability to inspect the documents in the possession of the US lawyers;
  • while the general counsel of Nexans SA did have authority from Nexans France to inspect the documents, that authority was limited. He did not have the authority to generally access the French subsidiary’s documents, deal with those documents, or provide them to a third party; and
  • even if the corporate group shared a computer server, it does not necessarily follow that all documents stored on the server were in Nexans’ control.

 In a mid-2014 judgment in the same proceedings, Justice Besanko dismissed an application by the ACCC for further and better discovery of documents that were in the possession of another respondent’s ‘sibling company’ (that is, they shared a common parent company), with whom that respondent shared common corporate premises.

In that judgment, Justice Besanko noted that documents in the possession of a subsidiary cannot be taken, on their face, to be in the power of the controlling company. To find otherwise would ‘involve a substantial exception to the doctrine of the separate legal identity of a company’.

In considering the ACCC’s most recent application, His Honour rejected the ACCC’s submission that the Court should infer the documents sought were stored electronically on the same computer system as the first respondent and, therefore, anyone with appropriate authority within the corporate group could access those documents. Justice Besanko observed that ‘there is no evidence that a company in the group has unrestricted access to the documents of another company in the group’.

Implications

This judgment is the latest decision affirming the position that documents of a wholly-owned subsidiary are not necessarily in the ‘control’ of its parent for discovery purposes. It is the second such decision in the ACCC’s high-voltage cable case.

In both decisions, the Court had specific regard to the relevant evidence and facts before the Court in reaching the conclusion that the documents were not in the control of the respondent in question, reflecting the fact that there is no ‘hard and fast’ rule that one corporate entity’s documents cannot be in another’s control.

Companies should always be mindful of how information is shared across the group, and in particular who, within which companies, has access to which documents, and for what purposes. Where one company in the group has general authority and access to another member’s documents, that member may still be taken as being in control of those documents and as a result, be required to produce those documents.

In this case, the fact that the documents were located at the offices of lawyers acting for both Nexans and Nexans France was not sufficient to establish Nexans’ control over those documents. While it does not appear that the ACCC submitted that the joint retainer in and of itself gave rise to control, the decision gives some assurance to companies that documents at the premises of their lawyers are not automatically taken to be in the control of other group members that have engaged that same firm – even on the same or a related matter – notwithstanding the fact that a senior employee of the other group member may inspect the documents.