Getting to grips with disclosure

Concerns about the excessive costs, scale and complexity of disclosure in litigation have been ongoing for some time, driven mainly by the increase in electronic communications so that the volume of data that may fail to be disclosed in a litigated matter has vastly increased, often to unmanageable proportions. Two recent developments go some way to addressing these concerns:

Bank Mellat -v- Her Majesty’s Treasury [2017] EWHC 2409 (Comm)

In this case, Her Majesty’s Treasury (the Treasury) applied for the disclosure of documents relating to 2,500 banking transactions relied upon by Bank Mellat in its claim for damages arising from the Treasury’s introduction of the Financial Restrictions (Iran) Order 2009. The Treasury’s position was that that disclosure should be ordered in respect of 2,500 transactions relied on by the bank in order to properly test its claim. The bank submitted that disclosure on such a scale would be an extremely onerous and expensive task, was likely to take over one year at a cost of over £2 million, and that there should instead be disclosure of only 10% of the transactions in issue as a sample.

The court took a very pragmatic and reasonable approach to the matter and indicated that although the claim was a very substantial one, disclosure of all the transactions relied upon by Bank Mellat would be appropriate unless some fair sampling method could be devised. The court agreed with Bank Mellat’s proposal and ordered the disclosure of documents relating to only 10% of the transactions, selected at random to allow forensic accounting experts to review and consider whether such a sample size was sufficient for a valid extrapolation to be carried out.

It was accepted that after the forensic accounting experts’ review that a larger sample may need to be looked at and further disclosure given but the onerous nature of the disclosure exercise was appreciated and a logical approach taken to resolve it.

The case is a good example of the court using its existing powers to take a proactive and practical approach to dealing with what can be one of the most expensive and time-consuming aspects in any litigation.

Pilot scheme on disclosure

In late 2017, a new proposed disclosure pilot scheme was announced which is due to run for two years in the Business and Property Courts throughout England and Wales. The pilot came about after extensive consultation with court users including GC100 members. The changes to be implemented in the pilot are significant and recognise that the existing rules on disclosure which are based on paper disclosure are not generally fit for purpose in dealing with electronic data. The changes can be briefly summarised as follows:

1. Standard disclosure will no longer be the norm. Instead there will be a move to a more ‘reliance’-based system with ‘basic disclosure’ of key/limited documents (up to 500 pages) which are relied on by the disclosing party and are necessary for other parties to understand the case they have to meet, will be given with statements of case
2. There will be a new menu for disclosure from which the court may order:

• no order for disclosure
• limited disclosure (reliance-based plus any adverse documents aware of without the need for further search)
• request-led search-based disclosure (reliance-based disclosure plus specific disclosure)
• search-based disclosure excluding narrative documents (effectively standard disclosure)
• search-based disclosure including narrative documents (PeruvianGuano test-based disclosure)

3. The duties of the parties, and of their lawyers, in relation to disclosure will be expressly set out in the pilot scheme. These include a duty to cooperate with each other and assist the court over disclosure. They also include a duty to act honestly and to disclose known adverse documents
4. A new disclosure review document will replace the existing electronic disclosure questionnaire
5. Reasonableness and proportionality will be the overriding factors and the court will be much more probing and expect greater engagement from the parties at an earlier stage. The information that will be required to provide the court regarding the location and amount of data and documents at the case management conference will be much more extensive than at present
6. It is envisaged that the court will give directions to reduce the burden and cost of disclosure which may include:

• limiting searches (custodians, dates, locations etc)
• requiring the use of data sampling, de-duplication techniques
• directing the use of technology assisted review tools
• orders for phased disclosure
• cost shifting orders

The proposed scheme has not yet been reviewed and approved by the Civil Procedure Rules Committee and may still be subject to change. That review will take place after a general consultation and is due in April 2018. The pilot will not start until after that review has taken place and if successful, the existing rules on disclosure will be replaced.

The changes are wide-ranging and will hopefully go some way to reducing parties’ legitimate complaints regarding disclosure whilst retaining the positive benefits of disclosure in this jurisdiction.