Cross-Border Disputes: Discovery and Evidence from Third Parties

Discovery and PCP

Discovery (also known as disclosure) is the process whereby the parties in Bermuda court proceedings disclose relevant documents to each other so that each party can (a) consider the relevant documents as part of developing their respective case; and (b) rely on particular documents as evidence. For a document to be discoverable, it must be within the possession, custody or power (“PCP”) of the person/entity that is a party to the Bermuda proceedings.

Disputes arise between parties in Bermuda proceedings concerning whether documents are within the PCP of a relevant party, with many disputes focusing on arguments that a party in the Bermuda proceedings has PCP over documents held by an affiliated third party.

In the Court of Appeal’s recent judgment in In the Matter of Jardine Strategic Holdings Limited [2024] CA (Bda) 7 Civ, the Court of Appeal rejected an argument that the parent company had PCP over documents held by certain of its subsidiaries. In doing so, the Court of Appeal confirmed the Bermuda law position relating to PCP in the context of group companies, which can be summarised as follows:

• A company may have PCP over the documents held by its subsidiary if it already has unfettered access to the subsidiary’s documents; the Court of Appeal noted that where the evidence demonstrates some “understanding or arrangement” by which the parent has rights of access to the subsidiary’s documents, that will suffice.
• The word “power” means a presently enforceable legal right to obtain a document from whoever actually holds it without the need to obtain the consent of anyone else.

Whether or not a party’s discovery obligations extend to documents held by third parties pursuant to the above principles is fact sensitive and requires a detailed analysis of intra-group arrangements, agreements, and practices. This assessment becomes particularly complex where the group extends across multiple jurisdictions.

Discovery from third parties

Arguments concerning PCP over intra-group documents aside, the general position under Bermuda law is that discovery does not extend to third parties. Where a party believes that a third party has PCP over relevant documents, there are limited options to obtain those documents if they do not provide the documents voluntarily. One option is to apply for what is called a subpoena duces tecum, which is a Court order requiring the recipient to appear before the court and produce documents or other evidence for use at a trial.

The Bermuda court’s jurisdiction does not extend outside Bermuda, however. Accordingly, applying for a subpoena duces tecum is not an option where the third-party resides outside of Bermuda.

When a party believes that relevant documents are in the PCP of a party overseas, there may be options to obtain discovery of those documents in the relevant jurisdiction.

Third parties based in the United States

While third-party discovery is not a feature of Bermuda law, a litigant in Bermuda proceedings may be able to apply to a United States court for discovery of relevant documents pursuant to section 1782 of Title 28 of the United States Code (“1782 Application”). 1782 Applications allow litigants in proceedings outside the US to apply to a U.S. court to obtain discovery of evidence for use in non-U.S. proceedings.

A recent judgment issued by Bermuda’s Honourable Chief Justice, Larry Mussenden (In the Matter of Jardine Strategic Holdings Limited [2024] SC (Bda) 36 Civ.) concerned an unsuccessful 1782 Application made in Delaware for discovery of documents from a third party where it was intended that any documents obtained would be used in the related Bermuda proceedings. The application before Mussenden CJ sought declarations confirming certain details of an earlier order and judgment made in the Bermuda proceedings concerning directions and discovery.

Mussenden CJ rejected the declaratory relief application for a number of reasons, including that the application “…runs afoul of the principles about a court in one jurisdiction giving its unsolicited advice to a court in another jurisdiction”, which highlights a degree of deference shown to the U.S. court concerning its exercise of its discretion.

While the above referenced 1782 Application was unsuccessful, 1782 Applications remain an avenue in cross-border disputes to pursue discovery from non-Bermuda third parties.

Summary

Discovery/disclosure obligations in Bermuda proceedings involve an increasing number of cross-border issues as a result of the ever evolving complexities of: (i) intra-group structures; (ii) data/document management; and (iii) multi-jurisdiction transactions.

In certain types of actions, the discovery process can be one of (if not) the most expensive elements of Bermuda court proceedings. Where a Bermuda entity is involved and/or there is a potential for a dispute to be heard in Bermuda subject to Bermuda law, the discovery process should be a priority consideration, and obtaining advice at an early stage can assist in navigating the complexities.

First published in Corporate Live Wire, Litigation & Dispute Resolution – Expert Guide, October 2024