Wednesday, October 9, 2013

"Minimising the costs of e-disclosure in commercial litigation"

Minimising the costs of e-disclosure in commercial litigation

In a lecture delivered in November 20111 as background to his reforms, Lord Justice Jackson criticised the often disproportionate costs associated with electronic disclosure exercises in large-scale actions. The accentuating factor he went on to cite was, in his view, that “relatively few solicitors and even fewer barristers really understand how to undertake e-disclosure in an effective way”. It is an accepted truth that large construction and engineering cases tend to be document heavy. Furthermore, this burden is exponentially growing as the prevalence of electronic communication on even small projects continually increases. As Sana Mahmud explains, when faced with disputes on larger projects, where vast quantities of documentation and correspondence are often produced over the course of years, controlling the costs of an e-disclosure exercise from the outset is paramount.

At the time of the initial Costs Review there was no practice direction in force governing the disclosure of electronic documents. Practice Direction 31B, entitled Disclosure of Electronic Documents (“PD31B”), was eventually introduced in October 2010. In cases where documents are stored electronically, PD31B placed the onus firmly on the parties to consider and discuss at an early stage how disclosure should be carried out.

In his Final Report,2 in respect of large commercial claims (including actions brought in the TCC) Jackson LJ recommended that the default position of the court should not be to simply order standard disclosure as had been the case under the Civil Procedure Rules. As part of the Final Report, and as discussed in his November 2011 lecture, he went on to recommend that in such cases, where the cost of standard disclosure is likely to be disproportionate, the court should consider making alternative orders (“the Menu Option”). This Menu Option now forms part of new CPR 31.5 which has, from 1 April 2013, operated in conjunction with PD31B.

Under new CPR 31.5, at the first (or any subsequent) Case Management Conference the court can, “having regard to the overriding objective and the need to limit disclosure to that which is necessary to deal with the case justly”, make the following orders3:

(i) an order dispensing with disclosure;

(ii) an order that a party disclose the documents on which it relies, and at the same time request any specific disclosure it requires from any other party;

(iii) an order that directs, where practicable, the disclosure to be given by each party on an issue by issue basis;

(iv) an order that each party disclose any documents which it is reasonable to suppose may contain information which enables that party to advance its own case or to damage that of any other party, or which leads to an enquiry which has either of those consequences;

(v) an order that a party give standard disclosure; and

(vi) any other order in relation to disclosure that the court considers appropriate.

Under CPR 31.5(8), the Court may also at any stage direct how disclosure is to be given including:

(i) what searches are to be undertaken, of where, for what, in respect of which time periods and by whom and the extent of any search for electronically stored documents;

(ii) whether lists of documents are required;

(iii) how and when the disclosure statement is to be given;

(iv) in what format documents are to be disclosed;

(v) what is required in relation to documents that once existed but no longer exist; and

(vi) whether disclosure shall take place in stages.

The above provisions allow judges to limit the scope of the exercise to an extent that is reasonable in the circumstances. Senior Master Whitaker, who chaired the working party responsible for drafting PD31, makes clear in an article in the 2012 New Law Journal4 that the courts must “espouse the principle that turning over every stone is no longer possible” and that parties must be reminded that limitations on disclosure for the sake of proportionality “may leave the so-called ‘smoking gun’ and more undiscovered”.5 The new approach encapsulated by CPR 31.5A is designed to focus the attention of the court and parties as early as possible in the proceedings on the appropriate extent of disclosure required, something which is key to controlling costs in commercial disputes.

Additionally, under the new rules forming part of a package of case management reforms which are now in effect, parties are obliged to provide a budget for disclosure costs two weeks prior to the first Case Management Conference as well as a report which sets out details of any relevant documents identified and their location(s). In cases where standard disclosure is ordered, under CPR 31.6 a party is obliged to disclose the following:

(i) the documents on which he relies; and

(ii) the documents which:

• adversely affect his own case;

• adversely affect another party’s case; or

• support another party’s case.

The test under CPR 31.6 is not one for relevance. It is narrower, and if applied strictly may go some way to reduce the amount of documents finally disclosed. In Shah v HSBC Private Bank (UK) Ltd6 Lewison LJ pointed out that:

“it is noticeable that the word relevant does not appear in the rules. Moreover the obligation to make standard disclosure is confined ‘only’ to the listed categories of document. While it may be convenient to use ‘relevant’ as a shorthand for documents that must be disclosed, in cases of dispute it is important to stick with the carefully chosen wording of the rules.”

As soon as litigation is contemplated the client must be made aware of the requirement under PD31B to preserve disclosable documents. Clients will need to scrutinise their document retention policies to ensure that any such material is not deleted. This is particularly important in cases where the client is an international business and may be subject to differing laws in relation to the preservation or retention of personal data.7

Historically, costs are prone to spiral because it often transpires that parties and their advisors are not fully aware at the outset of the process how much data needs to be reviewed and/or where it is stored. Even where a party might know the location of documents that need to be extracted, it is inherently difficult to determine with any degree of accuracy the total volume of data that will need to be eventually processed.

A reasonable search is defined by PD31B8 as one that is proportionate depending on the circumstances of the case. The nature and complexity of the proceedings, cost of retrieval of documents, and volume and accessibility of data are all relevant factors in gauging proportionality.9 Annexed to PD31B is an Electronic Disclosure Questionnaire which can be used effectively to investigate, categorise and agree the nature of documents that the parties must potentially disclose. The earlier this is done, the easier it becomes to retain a proper handle on the costs of the process. Master Whitaker chaired the working party that formulated PD31, and in his 2012 article echoed this view10. He stated that:

“parties to litigation will only begin to reduce the scope and cost of disclosure if they discuss and agree the extent of a reasonable search for documents before they undertake the search and if they cannot agree, involve a knowledgeable court in the process.”

Following the search and processing of responsive documents, the lack of proper de-duplication is a further common pitfall and was recently the subject of a TCC case in which a party was granted a wasted costs order as a result of inadequate de-duplication in its opponent’s dataset11. Generally, e-disclosure service providers will offer a de-duplication process with their package that is designed to weed out exact duplicates of documents. This is usually a standard de-duplication process and does not pick up documents that are identical in terms of content but have slightly different metadata (for example, in instances where the same document has been saved in multiple locations). At the time of writing there is no provider offering technology that can pick up such documents which are on their face identical, save for differences in metadata, and automatically remove them before they are presented for review. However, providers do offer alternative solutions (at additional cost), that group near-duplicate documents which can then be reviewed in one place and manually removed from the dataset.

Conclusion

Given that data volumes on large projects are perpetually increasing, there is a fear that we will sooner or later get to a point where the exercise becomes potentially unmanageable from both a time and cost perspective. Providers are seeking to pre-empt this problem with the development of predictive coding which uses sophisticated technology to identify relevant documents and code them by issue. A new CPR 31.5 is also likely to address the issue of manageability by allowing the court to restrict the overall scope of a potentially huge disclosure exercise. Parties should at all times bear in mind that PD31B advocates an important practical principle: that opposing parties should at the earliest opportunity aim to set and agree their parameters in respect of how their disclosure exercise is to be conducted in order to minimise costs at the outset.

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  • 1. Lord Justice Jackson, Controlling the Costs of Disclosure, Seventh Lecture in the Implementation Programme, LexisNexis Conference on Avoiding and Resolving Construction Disputes, 24 November 2011.
  • 2. Review of Civil Litigation Costs: Final Report, December 2009, Chapter 27, paragraphs 2.1 to 2.8
  • 3. CPR 31.5(7)
  • 4. Steven Whitaker, A Brighter Future, New Law Journal, Vol. 162, Issue 7507 (2012)
  • 5. Nichia Corp v Argos Ltd [2007] EWCA Civ 741 and Digicel (St Lucia) Ltd v Cable and Wireless plc [2008] EWHC 2522 (Ch)
  • 6. [2011] EWCA Civ 1154
  • 7. Steven Whitaker, A Brighter Future, New Law Journal, Vol. 162, Issue 7507 (2012)
  • 8. Paragraphs 20-25
  • 9. Paragraph 21
  • 10. See footnote 4
  • 11. West African Gas Pipeline Company Ltd v Willbros Global Holdings Inc [2012] EWHC 396 (TCC)