After considerable delay, the new Practice Direction 31B on e-disclosure finally comes into effect on 1 October 2010. Its stated purpose is to encourage and assist the parties to reach agreement in relation to the disclosure of electronic documents in a proportionate and cost-effective manner. Annexed to the Practice Direction is the Electronic Documents Questionnaire, a slightly amended version of the questionnaire scheduled to Master Whitaker’s judgment in Goodale v Ministry of Justice.
Reflecting concern on the part of some of the Civil Procedure Rules Committee about increasing costs in smaller cases, the Practice Direction only applies to multi-track cases begun on or after 1 October 2010. However, the court can order it to apply in other cases and it seems inevitable that it will be used as the starting point wherever e-disclosure is going to be required. Particular points of interest are discussed below.
The Practice Direction requires the parties to discuss e-disclosure before the first case management conference. This reflects what was required in Earles v Barclays Bank although there the judge said that the discussion should have been “well” before the CMC. The Practice Direction reflects this to some extent by continuing: “in some cases (for example heavy and complex cases) it may be appropriate to begin discussions before proceedings are commenced”. In practice e-disclosure will have to be considered at an early point where it is clear that documents relevant to the dispute are held in electronic format.
Statement of truth
One question which arises when a party completes (to the extent it can) the Electronic Documents Questionnaire is who should sign the statement of truth. The Practice Direction requires the person signing to attend the first CMC and any subsequent hearing at which disclosure is likely to be considered. Given that the person signing is going to need to be able to justify proposals in the Questionnaire, they are going to have to be sophisticated users of e-disclosure technology. A corporate party may have this expertise in-house and a few firms of solicitors will employ litigation support experts. For most litigants and their solicitors, however, it seems likely that the presence of e-disclosure consultants will become common at CMCs so that they can explain matters such as particular search techniques to the judge and give estimates of how much various options will cost. It is not surprising that the Civil Procedure Rules Committee was concerned at the potential consequential increase in costs.
Abela v Hammond Suddards is an example of the involvement of experts. Hammonds, like most firms of solicitors, kept hard copy files of all documents created electronically and limited their e-disclosure to a search for fee earner emails. The judge ordered them to disclose the electronic documents files of all fee earners and their secretaries who had worked for them so that they could check that important documents had not been missed out of the physical files already disclosed. Both sides relied upon evidence from their forensic IT analysts to support their position. Hammonds, relying on their experience in another case, said that the process could cost £150,000. The claimants’ expert suggested that they were overstating the difficulties, time and expense. The judge concluded that some sort of search was required given the size of the claim and the seriousness of the allegations being made but not one that would cost anything approaching £150,000. He suggested various ways in which the search could be limited and required the defendants to go away and provide more details about their data and systems.
One potential battleground will be the format in which electronic documents are made available to the other side for inspection. The Practice Direction assumes that documents will be provided in what is known as native format, that is in the original form in which it was created. This enables the receiving party to review them easily but there are problems. Steps need to be taken to preserve metadata when documents are disclosed in native format and it is not possible to redact or paginate the documents. There is also a risk of disclosing hidden data. The alternative, which is to provide searchable TIFF images, does avoid the problems associated with native format but creates some of its own. In particular, a TIFF image costs about 3p per page which could significantly increase the costs of giving disclosure.
Rules specifically dealing with e-disclosure were first introduced in 2005 but these have been widely ignored with the tacit consent of parties, their lawyers and the judiciary. There has been good reason for this. Until recently, in many cases hard copy documents were available allowing a dispute to be resolved without incurring the considerable costs of retrieving and processing electronic documents. This has now changed. There will increasingly be few disputes in which email does not play a significant role. Also the costs of retrieving, processing and reviewing electronic documents have reduced greatly. As Jackson LJ pointed out in his preliminary report, although the costs of e-disclosure can be enormous, the technology can also be used to reduce the costs of providing disclosure.
The new Practice Direction is therefore to be welcomed. However, costs are only going to be kept in check if judges are given sufficient training to enable them to manage e-disclosure. Many will be unwilling to get to grips with the technology and this will hamper their ability to prevent parties (or more probably their lawyers) from using e-disclosure and the associated costs as a tactical weapon. One way to avoid tactical manoeuvring will be to require the parties to use the same e-disclosure consultants. This is envisaged by the Practice Direction which requires the parties to consider sharing the cost and using a neutral electronic repository to store electronic documents. An unreasonable refusal to agree to share e-disclosure consultants could become the equivalent of an unreasonable refusal to agree to mediate, with costs sanctions being imposed by the court at the end of an action.
Privilege and in-house lawyers
Akzo Nobel Chemicals Ltd & Akcros Chemicals Ltd v European Commission
CoJ Case C-550/07 P 14 September 2010
A seven year battle to give legal advice from in-house lawyers the protection of legal professional privilege in European competition investigations has failed. The Court of Justice of the European Union (CoJ – previously known as the ECJ)
has confirmed that nothing significant has changed since its last ruling on the point in AM&S Europe v Commission in 1982.
Akzo’s appeal was supported by Ireland, the Netherlands and the UK as well as by a number of bodies including the Council of the Bars and Law Societies of the EU, the International Bar Association and the American Corporate Counsel Association.
The court confirmed that under EU law legal professional privilege applies only where:
- the exchange with the lawyer is connected to the client's rights of defence; and
- the exchange emanates from independent lawyers, that is to say lawyers who are not bound to the client by a relationship of employment.
Although Akzo’s in-house lawyer was a member of the Netherlands Bar and subject to the regulations of a professional organisation, in many of the 27 EC member states in-house lawyers are not allowed to be admitted to a Bar or Law Society. Even though the court recognised that the protection of correspondence with in-house lawyers has increased since the AM&S case, the majority of the member states still exclude such correspondence from the protection of privilege and there is no predominant trend towards extending privilege to communications with in-house lawyers.
Under English law, legal advice given by an in-house lawyer to his employer is privileged in the same way as legal advice given by an external lawyer to a client. This decision does not affect the position under English law. Within the EU, only Ireland, the Netherlands, Greece, Portugal and Poland take the same approach as the UK to this issue, which is why, although disappointing, the outcome of the Akzo appeal was a foregone conclusion.
In the UK, therefore, companies have the headache of dealing with two conflicting regimes. Where a competition investigation (known as a dawn raid) is carried out by a UK competition authority such as the Office of Fair Trading (OFT), the company is able to refuse to hand over documents containing relevant legal advice from its in-house lawyers since this advice is protected by privilege under English law. By contrast, where the investigation is carried out by the European Commission, communications with in-house lawyers must be handed over. To avoid this risk, companies need to route legal advice through their EEA qualified external lawyers to protect its confidentiality or ensure that internal sensitive advice from their in-house lawyers is not committed to paper.
It’s important to note here that lawyers, whether private practitioners or in-house lawyers, who are not qualified in an EEA country are not entitled to claim privilege. This has been the case since the AM&S decision and companies taking advice from lawyers in, for example, the US, need to be aware of this problem. US law firms may be able to avoid the problem by ensuring that advice intended for European clients is signed off by a colleague who is qualified in the EEA but this will not always be feasible.
It is worth noting the different national approaches to privilege in general as this will be relevant to companies operating in several jurisdictions and to litigation involving foreign parties and/or courts. Very broadly, under a civil law system only legislative enactments are considered legally binding and judges interpret rather than make the law. Civil law legal systems are found in the majority of countries in the world, for example Belgium, France, Germany, Italy, Japan, Luxembourg, The Netherlands, Portugal, Romania, Russia, Slovakia, Spain, Sweden and Switzerland. Most civil law countries do not impose an obligation to disclose documents harmful to a party's case, which in turn affects the role privilege plays.
In many of these civil law jurisdictions, privilege only covers documents in the hands of a lawyer and documents even including advice from a lawyer, will not necessarily be privileged in the client's hands. And as Akzo demonstrates, most civil law jurisdictions distinguish between legal advice given by external and in-house lawyers. By contrast, most countries with common law legal systems (which give great weight to the precedence of case law and trace their legal heritage back to England) such as the United States, India, Canada, New Zealand and Australia, take broadly the same approach to privilege as we do under English law.
Substitution of parties outside limitation period
Standard Life Assurance Ltd v Metsec plc
(2010) EWHC 2003 (Ch)
The claimants were the trustees of the Metal Sections pensions scheme and decided to bring a professional negligence claim against Standard Life Assurance Company (SLAC) which had provided administrative, actuarial and investment services to the scheme until 1999. In negotiations over a standstill agreement, Standard Life Assurance Ltd (SLAL) replied to the claimants since the liabilities of SLAC had been transferred to it in 2006. The claim form was issued in 2009 with both SLAC and SLAL as defendants and alleged a negligent failure to advise as to how to effect amendments to a final salary pension scheme in order to equalize the normal retirement age for men and women. The claimants subsequently removed SLAL as a defendant on the basis that it was clear that SLAC had been acting at all material times up to 2006.
After the claim form was served, the claimants discovered that, unusually, the transfer of business was effective to transfer SLAC's historic liabilities, thereby releasing SLAC from liability. The claimants applied to substitute SLAL as a defendant in place of SLAC on the basis that they did not have a claim against SLAC.
The master granted the application and this decision was upheld on appeal. Under CPR 19.5(3)(a), which applies where the new party is to be substituted for a party who was named in the claim form in mistake for the new party, there has to be a mistake as to the name of the party rather than the identity of the party. Applying the Sardinia Sulcis test, the claimants had intended to sue the entity which had breached the duties in question. That included an entity to whom those liabilities had been transferred to the exclusion of the continuing liability of the transferor, even though the claimants were unaware that such a transfer had happened. The judge rejected the argument that the mistake had to be a mistake in the original claim form since there is no reason to limit the rule in this way.
This is clearly the correct decision on the facts, given that the claimants had originally joined both Standard Life companies and had been provided with what was described by the judge as “scanty information” about the transfer of business from SLAC to SLAL. This is a very different situation from that where the relevant information is available to the claimants were they to have looked for it and where the substituted defendant is unaware of the claim or the identity of the correct claimants.
On a related note, the Court of Appeal has reviewed the decision of Beatson J in Lockheed Martin Corporation v Willis Group Limited on a renewed application for permission to appeal (www.bailii.org/ew/cases/EWCA/Civ/2010/927.html). The claimant brought an action against the wrong company in the Willis Group, alleging that their brokers were negligent in the conduct of their business in failing to maintain proper records of those subscribing to the policies. The judge had set aside an order for substitution of a party for the original defendant, holding that there had been a mistake as to name and not identity but that it had been misleading. Several other discretionary factors affected this decision – for example, the claim form was issued at the end of the limitation period without communication with Willis, a Companies
House search would have revealed the correct Willis company without difficulty and the correct company was unaware of the claim until after the limitation period had expired. The Court of Appeal agreed with the result and refused to grant Lockheed permission to appeal but they differed from the judge in relation to the test to be applied. There is no requirement under CPR 19.5(3)(a) that the mistake was not misleading to the other party. This consideration is merely one to be taken into account as a matter of discretion.
Detailed assessment pilot
One of the Jackson proposals is to be piloted in the Leeds, York and Scarborough County Courts. It applies to detailed assessment proceedings begun on or after 1 October 2010 where the costs claimed are £25,000 or less. The bills will be provisionally assessed within six weeks. Subject to a potential costs sanction, either party can request an oral hearing. For details, see http://www.justice.gov.uk/civil/procrules_fin/pdf/preview/PD_Making_Document_53.pdf.
Disclosure of pleadings in European proceedings
Although there is a presumption that third parties will not be given access to pleadings filed by the European Commission in cases pending before the European courts, this does not exclude the right of an interested party to demonstrate that a given document is not covered by that presumption (Cases C-514/07P - Sweden v API and Commission, C-528/07P - API v Commission and C-532/07P - Commission v API ECJ 21 September 2010).
Privilege and tax advice
The Court of Appeal heard an appeal in July 2010 against the decision that privilege protects legal advice given by a lawyer and not to legal advice given by a non-lawyer such as an accountant. Those who obtain tax advice from accountants need to be aware that the advice they receive is vulnerable to disclosure even though the same advice would be privileged had it been given by a lawyer. The judgment is expected in October 2010 (R (Prudential plc) v Special Commissioner of Income Tax).
Matters such as a rate of interest deliberately included by the parties in an order drawn up and sealed by the court do not constitute accidental slips or omissions within the slip rule under CPR 40.12. It was entirely within the scope of the court's intention for the parties to agree the precise terms of the order as to interest. The court should be very cautious before going behind an apparent agreement between counsel. The rule will only apply in such circumstances where the order had an unexpected and unintended effect inconsistent with the court's intention (Leo Pharma A/S v Sandoz Ltd www.bailii.org/ew/cases/EWHC/Patents/2010/1911.html).
A revised edition of the Technology and Construction Court Guide is due to come into effect on 1 October 2010. The new edition will reflect some of the recommendations made in the Jackson Report and deals with topics such as the assignment of cases to TCC judges, pre-action access to the TCC and electronic working.
The increase in VAT from 17.5% to 20% which will take effect in January 2011 is of tactical importance to litigators. Claimants may be able to press defendants into settling now in order to avoid the increase in VAT and defendants may want to protect their position by settling or making a payment on account.