If a snapshot of the biggest-ticket litigation of the last 12 months is anything to go by, lawyers are awful at disclosure.
It has become commonplace in the UK’s highest courts for cases to be disrupted and delayed due to failings in the disclosure process, and judges have become less than sympathetic to the plight of major organisations and their lawyers facing the often mammoth task.
The issue reached a crux last November, when Mr Justice Hildyard publicly flayed both the Royal Bank of Scotland (RBS) and Herbert Smith Freehills (HSF) for delays in the disclosure process on the bank’s £4bn battle with shareholders, sure to be one of the biggest banking disputes of the decade.
The case was adjourned to 2017 as RBS struggled to cope with reviewing around 25 million documents in time for the deadline. Its approach so far, Hildyard J said, had been “unfocused”, “unsettling” and “less than compelling”.
HSF has already submitted its cost estimate for the case at a whopping £90m, despite its team of a reported 160 lawyers and paralegals handling the disclosure tsunami from its low-cost legal services hub in Belfast.
The ruling was embarrassing to say the least, though it followed a number of strikingly similar judgments. Just three weeks before, Mr Justice Coulson slammed Kier Construction for a “cumbersome and inadequate” disclosure process that ended up costing three times its original budget. Pinsent Masons is acting for Kier, but the disclosure exercise was carried out by external providers.
No firm is immune to the problem. Slaughter and May and the Serious Fraud Office (SFO) notably spent most of 2013 knee-deep in disclosure on the £200m damages claim brought by Vincent and Robert Tchenguiz.
Fees for the disclosure exercise rocketed from around £120,000 to over £1m in the course of the year and the agency was lambasted for managing to produce just 300 of the 1 million expected documents at a pre-trial hearing.
And it is not just the civil courts mired in a bog of missed deadlines and flagrantly underestimated costs budgets. The latest Libor criminal trial by the SFO of six former Barclays traders was pushed back in February after it emerged Barclays had provided the prosecutor with an extra 500,000 documents just weeks before the trial was due to begin.
“In January Clifford Chance wrote to the SFO on behalf of Barclays saying the bank had unearthed 490,000 documents after an error in the search process,” said a source close to the case. Insiders claimed the mistake had been a human error as a result of a junior member of staff entering a wrong search term during the document review.
Clifford Chance was quick to distance itself from the delay, stating the bank had farmed out the bulk of the disclosure process to a cheaper processing firm.
Nonetheless, the document dump resulted in the case being pushed back by two months while a number of paralegals presumably pored over the new data under the watchful eye of the SFO, and the case became the latest in a pattern of late or incomplete disclosure by large organisations and their lawyers, despite vast regulatory investigations on the same issues previously.
Tactical play
A slew of banking cases in particular have seen claimants accuse financial institutions of giving them the “run around” on disclosure, and when the allegation is not of incompetence, it is of tactical game playing.
Parties bringing claims against the banks have in the past accused the defence of purposefully and wrongly labelling documents as privileged, wilfully destroying old data, or even hiding behind information privacy law in countries where they have assets, such as Switzerland.
At the most basic level, there is of course nothing wrong with approaching disclosure as a litigation tactic, whether you’re representing the claimant or defendant. One litigator said it was common for him to sit down with clients early on in a case and talk about “how we want disclosure to go” and “how we can put pressure on our opponents”, particularly if they think the other side will fall at the first hurdle in disclosing documents.
For all the flaws in the process, disclosure is still held up as one of the great qualities of the English justice system and a key measure of neutrality and sophistication that keeps international litigation flooding to London.
There is a general view that “our procedural rules strike the right balance between providing sufficient access to documents, information and witnesses, giving far more than you get in most other civil law systems,” Scott & Scott London head Belinda Holloway told The Lawyer.
It’s clear something needs to change to keep the disclosure regime an attractive asset for the London courts. But what can be done to stop the endless rows surrounding disclosure exercises in major litigation from getting worse?
The amount of data stored by major organisations grows by the day, and though storage systems continue to get more advanced, the task is only getting more complicated. Will financial penalties for delayed or incomplete disclosure change behaviour, or is further action necessary?
The new regime
It has been six years since changes to the civil procedure rules made it abundantly clear organisations and their lawyers must get their houses in order well in advance of a disclosure deadline.
The new regime was supposed to speed up the litigation process and reduce costs for all parties. Even if it didn’t immediately change the behaviour of in-house counsel and their lawyers, it meant a change in attitude towards the disclosure process was unavoidable, says Consilio managing partner Adrian Palmer.
“The changes started to crystallise in people’s minds the importance of the disclosure exercise,” Palmer says.
Consilio is an e-disclosure and document review business that counts international businesses and financial services institutions among its clients, and is typically engaged at the start of a regulatory investigation or if litigation is on the horizon.
“One of the reasons we’re so popular now is because in-house lawyers feel disclosure is pervasive in their minds,” says Palmer.
In-house lawyers tend to take it more seriously now than ever before, Palmer says, a reflection of the attitudes of the courts going the same way. “There’s lots of rules now, for example in terms of proportionality and budgets. The courts have been very clear, particularly the Technology and Construction Court (TCC), that they are going to ask questions about how you put in a budget for disclosure, they want you to show your working.”
The financial penalties for non-disclosure are also now more significant than ever before, though Palmer says he still regularly sees lawyers leaving it until the last minute or taking a more relaxed attitude to the process than they should.
“The average litigator is still doing a terrible job. Part of my practice is criticising our opponents’ disclosure processes and I see electronic disclosure questionnaires (EDQs) every week that my 15-year-old son could have had a better stab at,” Palmer says.
Typically he sees varying approaches from lawyers, with some approaches or attitudes often veering into dangerous territory.
“A lawyer called me recently and said I have 100GB of data I need to have reviewed and I want you to give me a quote for what it will cost. Immediately I’m thinking: who decided that 100GB was the exhaustive search? Who at the client has made sure we’re not missing something? It’s the blind leading the blind,” he adds.
Filing cabinets
Navigating complex IT systems that have been updated a number of times in the last two decades are usually where disclosure falls apart. Older files are often stored offline in a storage facility, meaning document reviewers will first need to go through a lengthy restoration process, which can add complexity and cost.
Even if old data has been effectively catalogued and stored, it is still not uncommon for swathes of files to go missing or conveniently end up destroyed.
“I’ve been in a CMC where we have written to the opponent saying you need to make sure you’re preserving documents, and later we found out they had destroyed the data,” Palmer says. “I expected the court to come down on them like a ton of bricks but they didn’t.”
The UK takes a comparatively soft line on the preservation of documents. In the US, spoliation of evidence can lead to a hefty fine and criminal liability. Likewise in Australia, whole cases have been lost on the issue. In the landmark dispute McCabe v British American Tobacco in 2001, the tobacco giant’s defence was thrown out by the court after it was found to have shredded evidence.
Manipulating data files or getting rid of them completely, while still staying within the law in the UK, is increasingly common. It means some organisations are getting creative with document retention policies, allowing them to vastly reduce the volume of data it stores on a day-to-day basis.
The Lawyer understands one unnamed UK-based insurance giant routinely goes through a due diligence process when acquiring companies that sees it review and then destroy older sources of data related to its new partner. The act removes the liability of having to look at it again if there is ever litigation on the horizon.
“We have a company on our books that has a policy where they don’t keep any data older than 30 days unless there is a particular requirement to do so,” says Palmer. All documents, including every single email sent by an employee, are deleted after 30 days, unless there a dispute coming up that requires a duty to preserve order.
This is an “unusual situation”, Palmer adds, though policies such as this could become more widely embraced. Regulatory rules mean banks are unlikely to ever introduce such policies, however.
Such drastic measures are not necessarily the solution. In fact, Palmer says, just a little extra planning can make the difference between winning a case and angering a judge.
“Everything goes much more smoothly when I get a call saying they have a disclosure exercise coming up, there’s a CMC in a month, and I’d like you to call our IT guy and talk about what are the first steps.
“What is required is having someone who understands both the civil procedure rules and the complex IT systems that are individual to that company,” Palmer adds. “If you get it right at the very start, there’s a much smaller chance things will go wrong later down the line.”
