Whilst the case of Earles v Barclays Bank [2009] EWHC 2500 (QB) does not establish any groundbreaking precedent, it provides an important reminder to civil litigants, and their lawyers, that the way in which they conduct their preparation for a case can significantly affect the financial outcome of that case. It also highlights the benefits to companies of having an adequate document retention policy in place that will provide an efficient mechanism for managing documents. This would not only assist in the event the company has to deal with a disclosure exercise, but may also be useful for commercial purposes as well as other legal obligations, such as requests for data under the Data Protection Act.

In Earles v Barclays Bank, although Barclays successfully defended the claim against it, it was only able to recover 25% of the costs it claimed, mainly because it had failed to carry out full and proper disclosure. It was apparent that had certain documents been disclosed as they should have been, the need for a time-consuming and expensive hearing, whereby the same evidence had to be given by way of oral evidence, would have been avoided. As a result, Barclays found itself footing costs of approximately £115,500 in defence of a £265,000 claim.

The Facts

The claimant, Mr Earles, was a customer of Barclays and had held a personal bank account with it for over 30 years. In 2005, Eden Holding Limited (the Company) was incorporated to sell beauty products. The Company was run by Mr Earles and another businessman. In 2006, Mr Earles arranged a business loan to assist with expenditure on a lease for business premises. He also set up a business account for the Company with Barclays with an overdraft facility and provided a personal guarantee to cover these liabilities.

Throughout 2006, substantial drawings were made from the Company's business account and by July the overdraft exceeded the level of Mr Earles' guarantee. Two days later, a transfer from Mr Earles' personal account to the Company's business account was made to substantially reduce the overdraft to below its limit. This transfer, and four other similar transactions that followed in 2006, were later alleged by Mr Earles to have been made by Barclays without his authorisation.

Barclays disputed that the transfers had been unauthorised. It argued that, each time money had been transferred from Mr Earles' personal account to the Company's business account, Mr Earles had given telephone instructions for it do so. However, in preparing its case, Barclays failed to provide certain crucial pieces of evidence that would have supported its position. As such, the case proceeded to trial and oral evidence was required in order to establish the facts.

The Decision

Simon Brown QC held that the transfers had in fact been authorised and thereby gave judgment in favour of Barclays. However, he heavily criticised Barclays in its failure to provide certain documentary evidence, and for failing to carry out proper disclosure at the initial stages of the proceedings.

Whilst Barclays was successful in defending the claim against it and therefore had a prima facie right under Civil Procedure Rules (CPR) Part 44.3 to recover its costs from Mr Earles, the costs claimed for in Barclays' Schedule of Costs were heavily reduced from around £154,000 to around £38,500; a mere 25% of costs claimed.

The Reasoning

Disclosure

In his judgment, the judge disapproved of Barclays, and its lawyers, for their conduct with regard to disclosure and electronic disclosure: there was no disclosure of a document that was referred to in a witness statement relied upon by Barclays; certain evidence that should have been preserved was not; and, the issue of disclosure was discussed with Mr Earles, a litigant in person for most of the proceedings, only weeks before the hearing. These failures were deemed to be contrary to the Overriding Objective of the CPR.

The judge left no doubt as to the importance of documentary evidence in court stating that the disclosure of key documents in a case is "absolutely essential to a Court if it is to achieve the accurate and efficient fact finding sought by the parties in civil litigation".

Citing Fletcher & Sons v Jubb, Booth & Helliwell [1920] 1 KB 275, the judge stated that a lack of knowledge of the provisions contained in the CPR was no excuse for non-compliance. He considered it a "gross incompetence" for those practising in the civil courts not to know the rules. He emphasised the importance of disclosure citing Woods v Martins Bank Ltd [1959] 1 QB 55 and the judgment of Mr Justice Salmon who said "It cannot be too clearly understood that solicitors owe a duty to the court, as officers of the court to make sure, as far as possible, that no relevant documents have been omitted from their client’s list".

The judge considered that the conduct of Barclays, and its solicitors, had fallen far below the standards expected of those practising in the civil courts. He concluded that had their conduct been to the standard expected, the trial would most likely not have gone ahead (or would have been dealt with by way of summary judgment), and such significant costs would not have been incurred. For Barclays' failures relating to disclosure, the judge deducted 50% from the amount claimed by Barclays when awarding its costs.

Document Preservation

The judge was also critical of Barclays' conduct in failing to preserve certain documentation. Following the receipt of a letter before action sent on behalf of Mr Earles, Barclays failed to take steps to obtain a laptop belonging to one of its representatives and certain emails between that representative and Mr Earles. Although this was prior to the commencement of proceedings and there was therefore no strict duty on Barclays to obtain and preserve these documents, there should have been reference to their non-disclosure in Barclays' disclosure statement. Whilst the judge did not believe that their non-disclosure had been a deliberate attempt to gain a tactical evidential advantage, he noted that it was conduct that could be taken into account when assessing costs.

Disproportionate Costs

The judge further reduced Barclays' costs award by 25% because he considered its costs were disproportionate to the case. The claim had been for £265,000, and the judge determined that the legal costs of £154,000 claimed by Barclays were too high, especially considering that the case had been heard in Birmingham where solicitor's rates tended to be half of those of London solicitors.

Comment

Simon Brown QC's criticism of Barclays and its lawyers, and the fact that Barclays could only recover 25% of the amount set out in its Schedule of Costs demonstrates that the conduct in preparing one's case is of the utmost importance. The decision emphasises the importance the courts place on documentary evidence and their reluctance to reward the 'winner' of a case where its own conduct has resulted in an otherwise needless use of money and court time. Although Barclays successfully defended a £265,000 claim, it was left with outstanding costs of £115,500, primarily because it did not have adequate policies in place to ensure documents were retained and easy to find should the need arise.