The High Court has granted a seller’s application to inspect certain documents of its former subsidiaries pursuant to a contractual term requiring the buyer to grant “reasonable access” to the relevant companies’ books, records and documents: Alfa Finance Holding AD v Quarzwerke GmbH [2015] EWHC 243 (Ch).

The court rejected an argument that it should look at the seller’s reasons for seeking access in order to determine whether access was reasonable. In the court’s judgment, the reference to reasonable access extended only to the method and timing of access, not its purpose. It did not matter if that purpose was to conduct a “fishing expedition” for information that may not have been disclosed by the buyer in an ongoing arbitration between the parties.

The meaning of a term allowing access to documents will depend, like any other contractual term, on the words used in the context of the contract as a whole and the relevant background. However, the practical message for those negotiating contracts is that, if the intention is to permit access to documents only for a particular purpose, that should be stated expressly.

Background

The claimant had sold to the defendant a shareholding in a Bulgarian company, Kaolin AD, and its subsidiaries (the Group Companies). Under the agreement, the buyer had an obligation to procure that the relevant Group Companies allow the seller “reasonable access” to their books, records and documents.

The seller notified the buyer of a request for access to documents, which was not complied with. The seller therefore brought an action for specific performance of the contractual obligation, seeking an order that the buyer “use its best endeavours to ensure” that the specified documents were made available for inspection.

Decision

The court (HHJ Purle QC sitting as a High Court judge) granted the application, saying it was self-evident that damages would not be a suitable remedy because it would be impossible to quantify the damage.

The judge rejected the buyer’s objection that the seller had not said why it wanted to see the documents, and that it might be seeking to circumvent the disclosure process in an ongoing arbitration between the parties. The seller had a clear contractual entitlement to access to the documents, and the purpose for which access was sought was irrelevant. The reference in the contract to “reasonable access” meant that access needed to be sought at a reasonable time and by a process which it was reasonable and practicable to meet. It did not mean that it was appropriate for the court to look at the claimant’s reasons for seeking access.