Executive Summary Managing the cost of litigation to business remains one of the toughest issues confronting any lawyer today. As the challenge of keeping costs proportionate seemingly gets more difficult by the day, we consider the impact of reforms and technology on disclosure – often cited as one of the key causes of the increasing costs in court litigation and arbitration.
Over the last three years, the English Court has started to reform the litigation process, including disclosure, partly with the aim of keeping costs proportionate. In addition, arbitrators, as well as the courts, are gradually recognising that technology can substantially reduce the costs and time burden of disclosure. This client alert addresses the key changes and opportunities following these reforms and technological developments. It concludes with a practical checklist for those involved in the disclosure process.
Introduction Disclosure and document production, whether before the English Court or in international arbitration, have always presented a challenge: how to prove a case and/or disprove there is a hidden ‘smoking gun’, while ensuring the costs remain proportionate.
Today, this challenge is as relevant as ever. The number of communications sent by businesses during a single day can be overwhelming. Emails, text messages, instant messenger messages, WhatsApp messages, tweets, blogs, Facebook posts, website updates, etc. – all of these are ‘documents’ potentially disclosable in legal proceedings.
However, it is not simply a case of being required to disclose an ever-expanding list of documents. Over the last three years, the English Court has started to move away from the wide ‘standard disclosure’ to a tailored ‘menu’ approach, where proportionality is key. In addition, the English Court, and arbitrators, are gradually recognising that technological advancements in this area can substantially reduce costs and time burdens.
In practice, change is likely to take time. Last year, the Master of the Rolls, Lord Dyson, observed that the progress in reducing the cost of disclosure is slow, and that the legal industry must make more effort to embrace the changes.1 The Ministry of Justice’s Single Departmental Plan: 2015 to 20202, which was published in February, recognises the ongoing need for court reforms as the cost of litigation to business continues to “pile up”. At the same time, the English Court recently approved the use of electronic predictive coding for pre-trial disclosure in the Pyrrho v MWB3 judgment, a clear indication of support for the use of technology in addressing disclosure and the substantial costs it can create.
In arbitration, there is the flexibility to move faster towards limited disclosure and for arbitrators to actively and aggressively control costs – but in practice many arbitrators are reluctant to take a firm ‘hands on’ approach to disclosure.
Jackson Reforms – Three Years On
Proportionality and keeping costs under control It is now just over three years since the Jackson Reforms came into force on 1 April 2013. One of the aims of the reforms was to “control costs” as Lord Justice Jackson’s Final Report emphasised that “in some areas of civil litigation costs are disproportionate and impede access to justice”.
Disclosure was identified as one of the key areas for improvement. As a result, the Civil Procedure Rules were amended to reform the disclosure process in English Court proceedings.
‘Standard disclosure’ vs. ‘menu’ disclosure The default position in the English Court was that ‘standard disclosure’ would be given by both parties. Accordingly, each party would disclose documents: (i) on which it relied, (ii) which adversely affected its own case, (iii) which adversely affected another party’s case or (iv) which supported another party’s case.
Following the Jackson Reforms, the significantly revised Part 31.5 of the Civil Procedure Rules now requires a far greater level of co-operation between the parties, for example, in giving proposals for the scope of disclosure and in exchanging information reports relating to each party’s disclosure.
Specific changes include:
- Not less than 14 days before what is typically the first procedural hearing, the Case Management Conference, each party must serve a report describing: a. the likely relevant documents to the dispute b. where and with whom these are located c. its estimate of the range of costs of giving ‘standard disclosure’ d. which of the ‘menu’ disclosure options it will seek.
- Next, the parties should discuss their proposals and try to reach agreement on the scope of the disclosure. The aim of such discussions being to allow more cost-effective options for their disclosure to be agreed.
- The ‘menu’ of disclosure options open to the parties include a variety of approaches: a. dispensing with disclosure completely b. disclosing documents on which the party relies and making a request for any specific disclosure required from another party c. disclosure on a per-issue basis d. broader disclosure, which includes documents enabling a party to advance its own case or damage another party’s case, or that lead to an enquiry with either of those consequences.
- The possibility for standard disclosure remains. This may still be appropriate, for example, in very high level, complex cases or where issues of fraud are involved.
- Under CPR Part 31.5(7), the court is also given open-ended discretion to make any order that it considers appropriate.
To work, the new process will require early preparation and that the litigants and their solicitors have a good understanding of the scope and nature of the documentary evidence. The parties will need to develop a considered strategy for disclosure, taking into account the issues in dispute, the relevant ‘players’ in the dispute and their particular methods of communication.
Resistance to change The anecdotal evidence relied on by Lord Dyson4 (no hard data being available) suggested that, as of last year, most courts and litigants have resisted changing their approach to disclosure. It may be that litigants are therefore missing an opportunity. If implemented, the reforms could bring a new era of focussed disclosure, which should in turn make the costs of disclosure more proportionate.
Short trials and flexible trials pilot schemes As we reported last year (please read our client alert here), the English High Court is presently running new Shorter Trials and Flexible Trials Pilot Schemes, both of which move away from the ‘standard disclosure’ regime and permit more limited disclosure. These pilot schemes will run until October 2017.
Recently, the English Court clarified in the Family Mosaic v Peer Real Estate5 judgment that it had the power to transfer an existing matter into the Shorter Trials Scheme, at least upon the parties’ application by consent. The court highlighted the aims behind the scheme: (1) to ensure that courts have “tight control” of the litigation process in order to resolve the dispute on a “commercial timescale”, and (2) to “foster a change in litigation culture: a recognition that comprehensive disclosure” is often “unnecessary for justice to be achieved”.
Technology As far as technological advancements go, litigation support is evolving at a rapid pace. The last few years have seen major developments in the tools to assist disclosure. For example, litigation support databases and software can quickly remove thousands or even millions of duplicate documents and filter emails belonging to the same chain leaving only the single composite file. All this can be done automatically, before any solicitors start their review work.
Predictive coding, or Computer/Technology Assisted Review (CAR/TAR), can also help save costs and time. CAR/TAR is a process by which a lawyer, who is familiar with the issues in the case, reviews a representative sample of documents, marking the relevance, irrelevance or highlighting issues within the documents. This ‘trains’ the software to recognise certain patterns, enabling it to complete the review of the remaining documents. The software is able to identify irrelevant and relevant documents. The solicitor can then manually review the documents deemed relevant with quality assurance samples being used to validate the software’s selections.
The use of database software for removing duplicates and combining email chains is relatively uncontroversial and already met with courts’ approval a few years ago6. Courts in other jurisdictions, such as the United States (please read our client alert here) or Ireland7 went even further and gave their seals of approval to the use of CAR/TAR. However, until recently, the status of predictive coding in the English courts was unclear. This changed when Master Matthews delivered his judgment in Pyrrho v MWB.
The judgment, which followed the parties’ joint application for the court’s approval of the use of predictive coding, recognised for the first time the legitimacy of using CAR/TAR during the disclosure process in appropriate cases. Whether a case is appropriate will likely depend on the facts such as the scope of the disclosure and the costs of the different review methods. Master Matthews highlighted that, while the English Civil Procedure Rules neither expressly prohibit nor allow the use of predictive coding, using CAR/TAR may present significant advantages:
- There is no evidence to show that the use of predictive coding software leads to less accurate disclosure than traditional (e.g. manual) review methods. In fact, there is some evidence that it is more accurate.
- Predictive coding offers greater consistency than traditional methods, which rely on review by a number of different lawyers.
- Where dealing with large quantities of documents, predictive coding allows significant savings of time and costs. In Pyrrho v MWB, where the number of documents for review reached 3.1 million (after already being reduced from 17.6 million through simple electronic de-duplication), the use of CAR/TAR was expected to reduce the costs of disclosure from at least several million pounds to a cost in the hundreds of thousands of pounds. As the value of the claim was in the tens of millions of pounds, the estimated cost of the traditional review process was “unreasonable”, while predictive coding remained a proportionate alternative.
Conclusion In conclusion, disclosure should no longer automatically follow the default ‘standard’ disclosure mechanism. The scope of the dispute, the amount in issue and technology should all be considered carefully, well in advance, so that a cost-effective strategy can be developed to address disclosure in a proportionate manner.
The checklist below provides a list of key points which should keep in mind when considering disclosure:
- Any and all communications are potentially relevant – don’t discount any form of oral or written communications
- Make sure staff are aware of the potential for disclosure so that they take care in communications, including internal ones.
- Act early – collect, maintain and preserve documents as soon as issues arise. Beware of employees leaving and electronic devices or data getting lost.
- Know your IT – the days of hard copy documents are almost over. Gain an understanding of the systems holding the data and the volumes of data involved.
- Know your documents and your case – the better you know what documents you have and what issues are relevant, the more tailored and cost efficient your disclosure can be.
- Talk to your solicitors early about limited disclosure and proportionality of cost. Ask them for options beyond the ‘usual’ lengthy review by a team of lawyers.
- Don’t be afraid of limited disclosure. If you know your case well, it is easier to discount irrelevant documents.
- Communicate with the other side – put proposals to the other side early and try to agree a plan.
- If agreement is difficult, ask the arbitrators or court for directions.
- Don’t insist on overly wide disclosure from the other side – the more documents you receive, the more time your solicitors will need to spend reviewing those documents. Hidden ‘smoking guns’ are rare.
- Continue to monitor and review your own and the other side’s disclosure – remember there is an ongoing duty of disclosure.
- Consider using technology including CAR/TAR to reduce the costs and time of the disclosure process – if appropriate, seek the other party’s agreement to the use of predictive coding, recording all details in an agreed protocol.