Discovery Obligations And Company Groups: When Can A Discovery Order Against A Company Be Used Against Related Companies?

Thema International Fund Plc v HSBC Institutional Trust Services 1

The Decision

The context of this decision was a procedural dispute in litigation arising out of the collapse of the Madoff Ponzi scheme. The plaintiff fund sought orders for discovery against the defendant custodian and its related companies within the HSBC group world-wide. These related companies were not party to the proceedings. The Rules of the Superior Courts provide that a party to a case may be subject to a discovery order to make available documents which are or have been "in his possession, power or procurement". The question was: were documents held by related companies in the HSBC group discoverable because they may be capable of being "procured" by the defendant company? The High Court ruled that such documents were discoverable on the basis that "there is no reason to suppose that a request for such documents [to the defendant's related company] would be refused".

The Supreme Court, however, disagreed and set aside the High Court's order. Following a review of authorities in the UK, Australia and New Zealand, it concluded that "a party either has documents in its possession or has the legal entitlement to require possession. In those circumstances the document must be discovered. In all other circumstances, the document does not have to be discovered."

Comment

This judgment clarifies the scope of discovery orders against related companies and is grounded in the principle that companies have separate legal personalities with separate rights and obligations, regardless of whether they exist within...