Clarification of test for obtaining documents from non-parties for use in Bermuda litigation

There are limited options available to litigants who wish to obtain documents from non-parties for the purposes of Bermuda civil litigation. Unlike the United States, where litigants can obtain broad discovery from non-parties (including deposition discovery),  Bermuda’s Courts do not have the power to order discovery from non-parties for use in Bermuda proceedings.

In appropriate circumstances, a Bermuda litigant may obtain production of documents from a non-party present within the jurisdiction of Bermuda by applying to the Court for the issuance of a subpoena duces tecum. However, production of documents from a non-party may not be ordered unless the documents sought  are “necessary for the fair disposal of the issues in dispute in the proceedings”.  In addition, documents sought by way of subpoena must be identified specifically, either individually or compendiously, and not by reference to broad categories or to the issues in the proceedings.

The Supreme Court of Bermuda has recently issued a decision, In the matter of Jardine Strategic Holdings Limited [2024] SC Bda 63 Civ. (5 November 2024), confirming the legal test to be applied when determining whether a non-party may be compelled to produce documents in response to a subpoena duces tecum.

The requirement for the target documents to be “necessary” is often misinterpreted to mean that the documents must be directly relevant to disputed issues and strictly necessary (i.e. essential) for their determination. However, as Martin J’s recent ruling in Jardine makes clear, the Court is able to take a flexible approach and to have regard to all the circumstances of the particular case in deciding what is “necessary” for the fair disposal of the issues in dispute.

The decision concerned subpoenas served by a large number of dissenting shareholders in connection with share appraisal proceedings brought against a Bermuda holding company under Section 106(6) of the Companies Act 1981, which followed the compulsory acquisition of the dissenting shareholders’ shares. The Bermuda holding company did not have any employees and its assets (and value) comprised principally  publicly-traded majority shareholdings in underlying “group” companies, which meant that many documents relevant to valuing the company’s shares were in the possession of the subsidiary companies. As the Bermuda Court had previously found that documents in the possession of the subsidiary companies were not in the possession, custody or power of the holding company (and therefore could not be obtained by way of discovery), it was necessary for the shareholders to seek documents directly from the subsidiary companies as non-parties by way of subpoena.

The non-party subsidiary companies subsequently sought orders setting aside the subpoenas on various grounds, including on the basis that the information sought by the subpoenas was not necessary for the disposal of the issues in dispute in the appraisal proceedings. In support of their position, the subsidiaries adduced extensive evidence from expert valuers who sought to challenge the evidence of the dissenting shareholders’ independent valuation expert, who maintained that the documents sought were necessary to enable him to undertake a valuation that would be “significantly more informed”.

Endorsing the approach advocated in the English authorities, Martin J held in Jardine that the following principles reflect the proper approach to determining “necessity” in the context of a subpoena:

1. The documents must be relevant to some issue in the proceedings and be admissible in evidence in respect of that issue, as well as to be necessary for fairly disposing of the action;
2. The documents must be required as relevant and admissible evidence, or must at least arguably and on reasonable grounds come within that category;
3. The test for production of specific documents requires the Court to consider whether one party would enjoy an unfair advantage over the other in the proceedings were production to be refused; and
4. Necessity is a requirement that must be dictated flexibly in the circumstances of each of case.

Martin J refused the application to set aside the shareholders’ requests and firmly rejected the suggestion that his refusal to set aside the dissenters’ subpoenas amounted to a “change in law” or would lead to a flood of subpoenas in appraisal and other types of proceedings, remarking that the law in this area is “well-settled” and that the Court is armed with sufficient discretion and power to prevent abuse or oppressive use of the subpoena jurisdiction.

A subpoena remains a tool of limited utility for gathering evidence that cannot be obtained from the opposing party through the discovery process. However, as the Jardine decision illustrates, when there is no other means of obtaining important evidence, the Court will uphold an appropriately framed subpoena directed at third party document custodians which demonstrates the relevance, necessity and admissibility of the evidence that is sought from the third party.