Foundations of a New Direction – A History of Electronic Disclosure (Part Four)

By: Dr Tristan Jenkinson

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Introduction

In this series, I am discussing the history and development of electronic disclosure in the courts of England and Wales. Previous parts have covered the Rules of the Supreme Court, the Woolf Reforms and the specific inclusion of electronic documents in disclosure. Here, in part four, I discuss some of the relevant case law that has occurred since the implementation of the Civil Procedure Rules (CPR) that has laid the foundations for how electronic disclosure should be treated.

Nichia Corporation v Argos Limited – Justice Jacob (May 2007)

While the Digicel case (discussed below) is more widely known, the Nichia case was important when it came to the interpretation of the new CPR in relation to disclosure and the concepts of “reasonable search”. It was also illuminating to see the Lord Justices’ views on how the introduction of the CPR was having an impact (or not) in litigation.

Nichia v Argos was a case in the then Patents County Court (now the Intellectual Property Enterprise Court or “IPEC”) which produced an interesting discussion on disclosure between the Lord Justices responding to an appeal in the case. You can see the relevant judgment here.

The background was that Nichia held two patents relating to LEDs which they claimed Argos infringed. Argos claimed that the patents were both invalid, on the basis that they were obvious. Argos said that Nichia should give disclosure (a) about the making of the invention and (b) on experiments that Nichia conducted to demonstrate infringement of the patents. Nichia proposed they should not have to give disclosure.

At the relevant Case Management Conference, Justice Pumfrey refused Argos’ requests for disclosure from Nichia. Argos appealed against the decision, and a judgment on the appeal was provided by Lord Justice Jacob, Lord Justice Rix and Lord Justice Pill.

Lord Justice Jacob made some interesting observations with regard to the reforms and the legal industries approach to disclosure (my emphasis):

Following the Woolf reforms, and notwithstanding its changes, practitioners (and I think not just in patent actions) carried on much as they did before. The cost of patent and large commercial actions did not reduce: if anything it went up.

… It is manifest that this [Discovery under RSC Order 24 as in Peruvian Guano] is a much wider test than that for “standard disclosure.” I have a feeling that the legal profession has been slow to appreciate this. What is now required is that, following only a “reasonable search” (CPR 31.7(1)), the disclosing party should, before making disclosure, consider each document to see whether it adversely affects his own or another party’s case or supports another party’s case. It is wrong just to disclose a mass of background documents which do not really take the case one way or another. And there is a real vice in doing so: it compels the mass reading by the lawyers on the other side, and is followed usually by the importation of the documents into the whole case thereafter – hence trial bundles most of which are never looked at.

Now it might be suggested that it is cheaper to make this sort of mass disclosure than to consider the documents with some care to decide whether they should be disclosed. And at that stage it might be cheaper – just run it all through the photocopier or CD maker – especially since doing so is an allowable cost. But that is not the point. For it is the downstream costs caused by overdisclosure which so often are so substantial and so pointless. It can even be said, in cases of massive overdisclosure, that there is a real risk that the really important documents will get overlooked – where does a wise man hide a leaf?

Lord Justice Jacob also had much to say on the development of disclosure and the concept of proportionality;

There is more to be said about the change to standard disclosure and indeed to the express introduction of proportionality into the rules of procedure. “Perfect justice” in one sense involves a tribunal examining every conceivable aspect of a dispute.

… But a system which sought such “perfect justice” in every case would actually defeat justice. The cost and time involved would make it impossible to decide all but the most vastly funded cases. The cost of nearly every case would be greater than what it is about. Life is too short to investigate everything in that way. So a compromise is made: one makes do with a lesser procedure even though it may result in the justice being rougher. Putting it another way, better justice is achieved by risking a little bit of injustice.

The “standard disclosure” and associated “reasonable search” rules provide examples of this. It is possible for a highly material document to exist which would be outside “standard disclosure” but within the Peruvian Guano test. Or such a document might be one which would not be found by a reasonable search. No doubt such cases are rare. But the rules now sacrifice the “perfect justice” solution for the more pragmatic “standard disclosure” and “reasonable search” rules, even though in the rare instance the “right” result may not be achieved. In the vast majority of instances it will be, and more cheaply so.

The request for disclosure with regard to the experiments conducted by Nichia was resolved between the parties.

In relation to the making of the invention, on the basis of proportionality, and considering that Argos, as a retailer, would not be providing such disclosure, Lord Justice Jacob declined to order disclosure, stating “I think the time has now come to hold that proportionality requires that normally such disclosure should not be ordered.

However, the judgment also includes the views of Lord Justice Rix, and Lord Justice Pill, who disagreed with Jacob’s stance against disclosure.

Lord Justice Rix said the concepts of standard disclosure should apply and that this would result in a proportionate approach being taken, which was the main point of the change from Peruvian Guano, stating (my emphasis added):

The primary documents which are required by standard disclosure are those which adversely affect a party’s own case or support another party’s case. For these purposes a “reasonable search” is required.

… If it be the case that standard disclosure in a straightforward obviousness challenge costs hundreds of thousands of pounds, as Lord Justice Jacob has said, then I fear that litigants and their lawyers are paying mere lip service to the change of regime from Peruvian Guano discovery to standard disclosure.

A reasonable search should be tailor-made to the value and significance of the likely product of such a search… Above all, it would be against the interests of justice if documents known to exist, or easily revealed, which would harm a party’s own case or assist another party’s case need not be disclosed because of a blanket prima facie rule against any standard disclosure. Once such a principle of disclosure were known to hold sway, dishonest or cavalier litigants would reap an unmerited advantage, contrary to the interests of justice.

In my judgment, rather than move directly, and in principle, to a blanket, albeit prima facie, rule of no disclosure, it would be preferable to explore, in a way which these parties have not done at all so far, how the concerns… might be met by a rigorous application of the rationale of standard disclosure.

Lord Justice Pill agreed with Lord Justice Rix’ assessment and the appeal was ultimately successful, with disclosure being ordered with a strict application of standard disclosure in a proportional manner.

Digicel v Cable & Wireless (October 2008)

The Digicel case (Digicel (St Lucia) Ltd and Others v Cable & Wireless Plc and Others [2008] EWHC 2522) is well documented and I only summarise the content here. In the case, Digicel claimed that Cable and Wireless had conspired to delay their access to the mobile telecommunications infrastructure required for them to service customers throughout the Caribbean.

There were numerous complaints during the case, amongst them that Cable & Wireless did not restore any data backups and that the keywords used (essentially ten keywords, from just six unique stems) were not adequate, therefore Cable & Wireless had not performed a “reasonable search”. In addition, it was found that many employees email data which could have contained key information was not searched by the defendants.

Interestingly, Justice Morgan, in his judgment (which can be found here) refers to the Nichia case, and repeats the importance of “reasonable search”, stating;

… in litigation involving allegations of conspiracy or similar allegations, it may only take one revealing statement in a document, perhaps in an e-mail, to show clearly what people really thought or what people really were intending to achieve, a matter that might not have been revealed in many tens of thousands of other documents in the trial bundles. As against that, it must be remembered that what is generally required by an order for standard disclosure is “a reasonable search” for relevant documents. Thus, the rules do not require that no stone should be left unturned. This may mean that a relevant document, even “a smoking gun” is not found. This attitude is justified by considerations of proportionality. This point is well made by Jacob LJ in Nichia Corporation v Argos Limited

The Court decided that Cable & Wireless had not completed a reasonable search, because the data that they had searched was not wide enough – excluding relevant employees’ emails and excluding backup tapes – and that the keywords that were used to filter that data were too narrow.

Cable & Wireless were ordered to complete further more extensive searches, at their own expense – estimated to be £2 million (according to Senior Master Whittaker commenting in the Goodale judgment at paragraph 3).

The case is well known for clarifying what does not meet the “reasonable search” threshold, and demonstrated that the courts would not hold with those litigants looking to avoid their disclosure obligations.

Earles v Barclays Bank (October 2009)

This was a case in which the claimant, Mr Earles, alleged that Barclays Bank had made a number of unauthorised transfers which resulted in consequential loss and damage. The bank claim that the transfers were authorised over the phone by the claimant.

Mr Earles also claimed that the transfers were queried a number of times with a representative from the bank – Mr Leech. The judgment of Simon Brown QC (which you can find here) summarised: “[t]he issues had crystallised and the likely resolution to them lay in the disclosure of respective e-mails and phone records of Mr Earles and Mr Leech (i.e. the Bank).”

There were a number of issues in the approach that Barclays took to disclosure, both electronically and for physical documents:

  • No preservation was made by the bank of phone or email records with Mr Earles (or his legal representatives)
  • No copies of the relevant “Transfer Sheets” which recorded client instructions provided over the phone were preserved.
  • Mr Leech’s email was not searched – with an explanation provided that he was no longer with the bank. Simon Brown QC does note that “during closing submissions I was told by Counsel for the Bank that she was instructed that Mr Leech had been asked in 2007 if he had any relevant e-mails on his laptop and he had said no”, though this was not recorded on the disclosure statement.

The defendants ultimately won the case, but “the ‘conduct’ of electronic disclosure by the Bank and its lawyers fell far below the standards to be expected of those practicing in the civil courts”, and therefore they were only awarded 50% of their costs.

Of particular note is the following remark from Simon Brown QC in his judgment (his emphasis);

“It might be contended that CPR 31PD 2A and electronic disclosure are little known or practised outside the Admiralty and Commercial Court. If so, such myth needs to be swiftly dispelled when over 90% of business documentation is electronic in form. The Practice Direction is in the Civil Procedure Rules and those practising in civil courts are expected to know the rules and practice them; it is gross incompetence not to.”

The case demonstrated again that disclosure obligations were to be taken seriously and penalties would be applied to those who did not follow the rules.

Coming Up

A further important point with regard to the Earles case is that the judgment remarks that “there is no duty to preserve documents prior to the commencement of proceedings”. While this was true at the time of the case (the judgment being dated 8 October 2009) this would change with the implementation of Practice Direction 31B (Specifically paragraph 7) a year later, which, together with the Goodale judgment also referenced above, I will discuss in Part Five.

 

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