The Supreme Court in the case of Thema International Fund Plc v HSBC Institutional Trust Services (Ireland) Ltd & Or [2013] IESC 5, has clarified the scope of discovery.

The Court considered the extent, if any, of the additional discovery obligation which is placed on a party, by the inclusion of the word "procurement" in Order 31, r.12 of the Rules of the Superior Courts (RSC), as brought about by the 2009 amendment. The issue arose in the context of a dispute between Thema and HTIE (part of the HSBC group) as to the precise obligations of HTIE to make discovery in respect of documents held by other companies within the HSBC group, located outside the jurisdiction.

The Facts

The plaintiff (Thema) operated a fund established in Ireland under the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003. The defendant (HTIE), which is part of the HSBC group, had entered into a custodian agreement with the plaintiff on 30 May 1996. Thema alleged that HTIE was negligent in carrying out its obligations as custodian by entering into a “ponzi” scheme. Thema sought to recover the notional value of its funds being €483,144,279.24 and US$498,799,662.15, together with interest. In the course of proceedings, the issue of HTIE’s discovery obligations arose.

The original application for discovery sought an order requiring HTIE to make discovery of all documents falling within any of the agreed categories held by any entity within the HSBC group worldwide. Charleton J., at the High Court, was of the opinion that the deliberate addition of the word "procurement" meant that the word had to be given a meaning separate to either "possession or power". As a result he ordered HTIE to make further discovery of documents held by HSBC entities in New York and Hong Kong. It was against this judgment that HTIE appealed to the Supreme Court.

HTIE argued that Charleton J's interpretation of Order 31, r. 12 RSC was incorrect, and that the rule, in its amended form, did not place an obligation on a company to request documents of a non-specific nature from another company, even where the companies were part of the same business group.

The Decision

Allowing the appeal, the Supreme Court held that the amendment to Order 31, r.12 RSC, by the inclusion of the word "procurement", did not extend the scope of the documents to be discovered. There was no obligation on HTIE to make discovery of documents held by other companies within the HSBC group in the manner ordered. Clarke J. stated that the scope of discovery ordered by the High Court in this case went "far beyond anything that had been previously required in this jurisdiction."

In regard to existing case-law, the only two cases (Northern Bank Finance Corporation v Charlton, High Court, unreported, 26 May 1977; and Yates v Ciba Geigy Agro Ltd, High Court, unreported, 29 April 1986) in which the court had gone beyond requiring discovery of documents in respect of which a legal entitlement existed in the party required to make discovery, were cases in which a single or small number of specified documents were known to exist and, were in circumstances where the court was satisfied that there was no reason to believe that any difficulty would be incurred in securing the documents concerned. The present case was significantly different, as what was ordered by the High Court was that a connected company, not within the jurisdiction of the Irish courts, was being required to search through its own documents for the purposes of making documents available to HTIE so that, in turn, those documents could be included in HTIE's discovery.

It was held that the word "procurement" was intended to come within the definition of "power or possession" as opposed to extending it. This was evident from the fact that the three words "power, possession or procurement" were usually cited together in various judgments prior to the amendment being made. The Rules Committee, by including the word "procurement" in Order 31, r.12 RSC, was merely bringing the phraseology into conformity with existing usage. Clarke J. stated that: "If the far-reaching and radical changes to the rules, which are urged by Thema in this case, were truly intended to be brought about by the 2009 amendment, then it is highly surprising that the changes were not made at each point where the phrase "power or possession" appeared in the rule".

Clarke J. concluded that: "Whatever may be the case in the sort of situation where there is a single or small number of readily identifiable documents in respect of which there is good reason to believe that production can be procured, I am satisfied that the court does not have jurisdiction to order discovery which would require a third party (even where that third party is a related company of a party to the proceedings) to itself engage in what would be a form of delegated discovery."

Comment

In his judgment, Clarke J. confirmed that the law remains as described by the Supreme Court in Johnson v Church of Scientology [2001] 1 I.R. 682. In that case, the Court held that where documents were relevant and necessary, they must be discovered only if they are in the possession, custody or power of a party to the proceedings. A document is in the power of a party when that party has an enforceable legal right to obtain the document.

Clarke J. noted that in Johnson v Church of Scientology, Denham J. had distinguished the High Court decisions in Northern Bank Finance Corporation v Charlton and Yates v Ciba Geigy Agro Ltd, as being "rare exceptions" to the rule that a party need only discover documents in his possession or power. In those cases an order for discovery was granted in circumstances where documentation was held by a separate legal entity. However Denham J. had stated that "these rare exceptions are examples of the judge, in his or her discretion in the circumstances of a particular case, making a determination on the facts".

It is noteworthy that Clarke J. went onto to make a number of additional observations, including:

  1. Third party discovery is available against any company (including a company within the same group as a party to the proceedings) which is amenable to the jurisdiction of the Irish courts. Whilst a party is entitled to require its opponent to bring an application for third party discovery in the event that its opponent wishes to obtain disclosure of documents held by a related (non-party) company, a party which imposes such a cumbersome procedure on its opponent, without good reason, could find the court unsympathetic to applying the usual costs regime.
  2. It would be an abuse of process for a party to decline to make discovery of documents held by another party within the same group on the basis of not having a power to obtain the documents concerned, and then seek, without having given prior disclosure of the relevant documents, to place reliance on those documents at the trial.
  3. It will always be open to a trial judge to take whatever steps are appropriate to deal with a situation where the trial judge feels that a selective view of the documentary record is being placed before the court by virtue of the fact that a party has chosen to secure some but not all of a relevant set of documents from associated corporate entities. In such circumstances, the trial judge may either decline to admit in evidence a selective part of a relevant documentary record or, while admitting such documents in evidence, may draw any appropriate inference from the absence of the remainder of the same set of documents.
  4. It will also be open to a trial judge to draw any inference which may be appropriate from any unexplained failure to make documents, which it is established are likely to exist and are of significant relevance to the case, available for consideration at the trial. Parent companies and related companies are not required to make documents available to connected companies involved in litigation in this jurisdiction. However, if they do so without good cause, they may place the related company which is involved in litigation in Ireland in a difficult position, if as a consequence the trial judge is of the view that there are pieces of the jigsaw missing and no legitimate explanation as to why that may be so.

Further Information

Case: Thema International Fund Plc v HSBC Institutional Trust Services (Ireland) Ltd & Ors [2013] IECS 5