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Disclosure and the costs implications

Why is e-disclosure so important, asks Davenport Lyons lawyer Theo Solley.

The judiciary are enforcing e-disclosure requirements under the Jackson reforms

It’s common knowledge that the key objective of disclosure is to capture the precise state of affairs between the parties to the litigation. Electronic documents and emails in particular are often the most revealing, something that was obvious during the fraud investigation into Goldman Sachs that was conducted by the United States Securities and Exchange Commission in the aftermath of the sub-prime market collapse.

Even on this side of the Atlantic internal emails sent between employees of Goldman Sachs, which seemed to demonstrate their awareness the market would soon collapse whilst joking about the “widows and orphans” who would suffer, hit the headlines. In Earles v Barclays Bank plc [2010] Bus. L.R. 566, Judge Simon Brown QC demonstrated our judiciary’s increased awareness of the importance of e-disclosure:

It might be contended that ... electronic disclosure [is] little known or practised outside the Admiralty and Commercial Court. If so, such myth needs to be swiftly dispelled when over 90 per cent of business documentation is electronic in form. The practice direction is in the CPR and those practising in civil courts are expected to know the rules and practice them; it is gross incompetence not to.

Here, the parties had failed to take any steps towards preserving contemporaneous telephone or email records, and, contrary to PD 31.2A (now PD 31.B4), had similarly failed to discuss e-disclosure prior to the case management conference, or, indeed, at the case management conference itself. The attitude of the bank’s “first class legal team” towards e-disclosure was, according to Judge Simon Brown QC, “surprising and to be deplored”, leading to his decision to reduce their costs entitlement to 50 per cent.

Obligations relating to e-disclosure begin as soon as litigation is contemplated, and, in particularly heavy and complex cases, the parties may even need to discuss the precise manner in which they intend to conduct e-disclosure before proceedings are commenced.  It is therefore clear that, firstly, there are severe consequences for failing to adhere to electronic disclosure obligations; and, secondly, that many of these obligations arise early in the course of proceedings. 

What should I do?

Early preparation is crucial.  It is important for solicitors to work closely with their clients and conduct a detailed review of their electronic systems and the working practices of their personnel.  This could include interviewing key members of staff, instructing technology specialists and undertaking site visits.  By conducting such a review, not only will parties be in a better position to comply with their e-disclosure obligations, they should also be able to avoid problems after proceedings have commenced.
The case of West Africa Gas Pipeline v Willbros Global Holdings Inc [2012] EWHC 396 (TCC) provides a stark example of the myriad difficulties that can arise from the failure to conduct an adequate initial review.  Here, there appears to have been little initial communication between the Respondent and their solicitors, which led to the Respondent failing to identify all the relevant custodians of information, and failing to identify relevant repositories of e-documents in certain folders and sub-folders. 

This proved an embarrassment for the respondent, when, on numerous occasions, their failure to provide specific documents only came to light when relevant emails were paraded before them which clearly ought to have been disclosed.  At an application almost two years after proceedings had commenced, the respondent had disclosed an additional 47,197 documents, with additional documents yet to be disclosed.  The failure to provide a “consistent and complete set of electronic data for the purposes of electronic disclosure” was, according to Mr Justice Ramsey, a “serious mistake” which “resulted from an inadequate initial review”.  As a result, the Respondent was ordered to pay 50 per cent  of the Applicant’s costs in reviewing these additional documents.   

The cost implications

The judiciary has demonstrated that it is fully aware of the significance of e-disclosure and is willing to punish parties who have not complied with their obligations.Clearly, with the change of culture following the Jackson Reforms, it is more important than ever that solicitors are aware of the cost consequences that will arise from any such failures.  As solicitors well know, there is always the danger of a professional negligence claim should they fail to comply with their obligations. We have been warned. 


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16 December 2013

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