Special report: E-disclosure – Trials and tribulations
28 July 2014 | By Kate Beioley
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24 January 2014
The Jackson reforms have left litigators negotiating the line between over and under-disclosure, while some are using the confusion as a strategic device
It is four years since the launch of the e-disclosure regime that was supposed to speed up the litigation process. But despite efforts to streamline the process and reduce costs, parties are still struggling to digest the requirements, and are still waging war in the courts.
Lord Justice Jackson took aim at the e-disclosure burden as part of his clampdown on the cost of civil litigation. The reforms came into force last year with a bang and parties are struggling to adjust.
To disclose less or more?
One of his raft of recommendations was a new ‘menu’ option, designed to break away from the volumes of data produced under standard disclosure. However, persuading litigators to disclose less from a mushrooming volume of electronic data is proving difficult.
Cautious litigators are only too aware of fights raging in the High Court as a result of disclosure decisions and many feel this is the time to be disclosing more, not less. The option allows parties to disclose only relevant documents they rely on, or to disclose on an issue-by-issue basis. But, according to Damian Murphy, who left Enterprise Chambers to set up e-disclosure set Indicium Chambers, lawyers are playing it safe.
“People are not using the menu option and are going with the old test,” he says. “Lawyers are loath to be faced with the prospect of a judge asking them ‘so where’s this document?’ at trial.”
Litigators are worried about falling foul of judges taking an increasingly tough line on case management following the Jackson reforms.
The bruising punishment doled out to former chief whip Andrew Mitchell last year was an example. Mitchell’s costs in the famous ‘Plebgate’ row were capped at £2,000 after Atkins Thomson failed to stick to a case management timetable.
Now evidence is flowing out of the courts to suggest judges are showing little patience with badly managed disclosure.
Taylor Wessing litigation partner Laurence Lieberman says: “Since Jackson we’re seeing that judges are more willing to intervene in relation to disclosure issues. They’re more willing to be proactive and challenge parties about plans and preparations for disclosure.”
Most recently, Stephenson Harwood clients Toba Trading and Hossein Rahbarian were refused relief from £9.6m in sanctions due to “inadequate” disclosure.
A sense of proportionality
The post-Jackson watchword is ‘proportionality’ and parties are not expected to be punished for breaches classed as trivial, particularly if they have elsewhere complied with court rules.
However, in the High Court case involving Newland Shipping & Forwarding and Toba Trading this year, the defendants were punished for falling down on three counts in relation to disclosure. In the two related actions connected to the shipping disputes, the defendants were alleged to have failed to file separate disclosure lists, give adequate disclosure or serve witness statements by the required date.
Mr Justice Hamblen said: “If the sole default had been a temporary failure to file a separate disclosure list then there might have been a de minimis argument. However, the other defaults are matters of substance and importance, particularly bearing in mind that there was a February trial date. […] The non-compliance cannot be characterised as trivial and there was no good reason for the defaults.”
Until now, the notorious West African Gas Pipeline Company (WAPCo) case has been seen as the seminal e-disclosure warning. In 2012 the court ordered legacy Herbert Smith client WAPCo to pay a £135,000 wasted costs order after an e-disclosure exercise spiralled out of control.
Mr Justice Ramsay said the firm’s failure to harvest a consistent and complete set of electronic data was a “serious mistake” and accused it of causing “significant difficulty” by failing to review documents properly.
Other parties have also come in for heavy criticism from the courts over poor disclosure recently. Earlier this year Mr Justice Eder came down hard on Hogan Lovells client Otkritie International Investment Management and the defendant Georgy Urumov over disclosure. The extraordinary fraud trial was waged by Otkritie against 20 defendants. It went on for six months and dragged in multiple jurisdictions including Geneva, Spain and Latvia. The allegations were wide-ranging, covering dishonesty, deceit, conspiracy and even murder.
Both sides were found to have failed with regard to timely disclosure, submitting schedules filled with gaps beyond the set date. Eder J deemed the claimants’ failures “inadvertent” and deemed them “cured” following an apology from Otkritie.
But he meted out harsh words when it came to the defendants’ failings.
“It’s plain that all of the defendants have committed and persisted in deliberate non-disclosure of important documents,” he said.
Phone records, electronic devices and emails were all held back from the court, as well as swathes of other data.
But it is not only angry judges arguing about e-disclosure in the courts. It continues to be a tactical battleground for parties and law firms. At the end of last year Ward Hadaway waged a disclosure battle against Deutsche Bank subsidiary DB (UK) Ltd, as part of the bank’s wider breach of contract case against the firm. The bank claimed the firm had been negligent in advising it on three buy-to-let loans to one borrower. As part of the case, Ward Hadaway argued the bank should disclose a loan policy document – a credit process guide (CPG) – but its application was denied by Deputy Master Lloyd on 28 May 2013.
Mutual exchange of disclosure lists took place on 8 February 2013, but DB refused to include the CPG. Ward Hadaway claimed the DB (UK) policy document was crucial to understanding the bank’s lending policy. The claimant argued that the data was commercially sensitive and refused to submit to the firm’s requests.
In an appeal at the High Court Mr Justice Nugee said: “I am not, of course, concerned with the commercial considerations which have led the claimant to take the view that it does not wish to disclose a document, I am only concerned with the legal question as to whether it should have disclosed it and now should do so.”
Nugee J ruled that the firm had attempted to unearth too great a range of documents in a bid to demonstrate the bank’s appetite for risk.
RPC disputes head Geraldine Elliott says: “E-disclosure is about being clever with the way you do document reviews. It’s about picking the right search terms, using a good provider and having a proper hosting platform.”
Increasingly, third parties are playing a part. Along with the Jackson reforms, the increased availability of technology-assisted review (TAR) and predictive coding has been seen as a key shift in the market and providers have waded in to sell the software and cut the mammoth cost of disclosure.
TAR is a technology that learns from human inputs to analyse and cut the volume of data needing to be looked at by humans. Typically, teams of lawyers are used to review documents in the early stages of the disclosure exercise, but TAR software selects a pool of data to be analysed by people.
“TAR is gradually making a difference,” says Elliott. “The technology is evolving.”
But Murphy says the technology is not being harnessed at all ends of the market.
“In many ways, the technology is advanced compared with the way it’s being used,” he says. “The technology is there and if it was free I imagine everyone would say ‘you’d be mad not to use it’. But in terms of medium-scale litigation, it’s still a fairly untapped market because people don’t think they’ll get a return on investment.”
The method of dividing up the mammoth task of e-disclosure is one all firms are tackling. Some are turning to legal process outsourcing (LPO), while others prefer to use paralegals.
Taylor Wessing uses a horde of paralegals well-versed in e-disclosure issues to make up its mix of technological and human review. The firm divides the process into core and non-core groups of documents to be reviewed by a team of lawyers and paralegals, using technology for targeted chunks of the work.
Lieberman says: “We don’t use LPOs. We never say never – we’re very open-minded. But we’ve looked into it and our view is that using them too heavily means the quality of the product isn’t always going to be what we require.
“In a sense, we achieve what LPOs achieve at a slightly greater cost by having a team of paralegals in-house who know the lawyers well and know the case well. We keep up the quality and avoid risk by having people on our floor – it’s generally at least 10 paralegals, although sometimes a couple might drop off or we might get in a few more for a big exercise. So we supervise their work much more closely.”
Litigators can no longer afford to snooze when it comes to e-disclosure. The Jackson reforms and guidelines handed down at the end of last year have put timely case management under the microscope. Since 2013 parties have been required to serve a disclosure report no later than 14 days before the first case management conference.
Commentators say the key trap lawyers fall into is poor organisation and not getting started early enough.
“In the past, litigants tended to deal with electronic disclosure on the hoof. The courts – and even clients now – are aware it’s just not acceptable anymore,” says Lieberman.
Help is at hand. The Technology and Construction Solicitors’ Association spent most of last year developing an e-disclosure protocol, launched on 1 November. Along with Practice Direction 31B, this provides a roadmap for proper disclosure.
It is time to take e-dislcosure seriously or face the consequences in court.