What a whopper!

By | 8th March 2012

In the context of a claim for $274m, it might be argued that an order that the claimant pay £135,000 in wasted costs is of no great account.

I suspect that if you are Herbert Smith client West African Gas Pipeline Company Limited (known throughout the case as WAPCo) you might take a different view.

In short, WAPCo are claiming damages in respect of the additional costs to finish construction of a pipeline from Nigeria to Benin, Togo and Ghana after WAPCo terminated the original contract with Willbros West Africa Inc (WWAI) and used other contractors to finish the job. The defendant Willbros Global Holdings Inc, guaranteed the contract between WWAI and WAPCo.

Willbros are represented by Pinsent Masons and had claimed a total of £1.8 million following a series of alleged disclosure failures.

In his judgment at Mr Justice Ramsey said at paragraph 40 that failures in the disclosure process fell to be considered under seven headings:

“In doing so, it seems to me that the allegations of failure by WAPCo fall into the following categories:

(1) The failure….. properly to review the documents which were provided for disclosure;
(2) The failure by the WAPCo disclosure team properly to assemble the relevant documents from WAPCo;
(3) The failure properly to de-duplicate the documents provided on disclosure;
(4) The failure to deal with redactions in a satisfactory manner;
(5) The failure to gather together and deal with disclosure of custodians;
(6) The failure to provide searchable OCR copies;
(7) The failure to provide appropriate searchable fields within the database.”

After dealing with each of these supposed failures in turn, the judge concluded that the errors and omissions in disclosure which sounded in wasted costs stemmed from three problems:

  1. Failure properly to deduplicate. (paragraph 68)
  2. Failure by WAPCo to gather together a consistent and complete set of electronic data for the purposes of electronic disclosure.(paragraph 69)
  3. Failure properly to review the documents which were located as a result of the searches of the electronic database. (paragraph 70)

The judge concluded:

92. Wasted costs caused by deficiencies in WAPCo’s disclosure.

93. As set out above, because of the failures in WAPCo’s disclosure process there are a number of aspects where WGH is entitled to have the costs wasted by certain failures. First there is the failure to carry out proper de-duplication. The process of e-disclosure does not always allow for perfect de-duplication of electronic documents. However, in this case I consider that there is a substantial element of unnecessary duplication which resulted in WGH having to consider, a number of times, duplicate copies of the same document. That I consider should be reflected in a costs by WAPCo having to pay 80% of WGH’s costs of dealing with the duplicate copies identified in Herbert Smiths’ letter of 21 December 2011.

94. Secondly, mainly as a result of the failure to de-duplicate the documents properly WGH had to analyse inconsistent redactions in documents. That again is an area where WAPCo should bear WGH’s costs. I consider that the best way of reflecting the wasted costs element in dealing with inconsistent redactions made by WAPCo is by ordering WAPCo to pay 80% of WGH’s costs of dealing with redacted documents disclosed by WAPCo.

95. Thirdly there is the failure to gather together documents and then carry out a proper review process. This has led to the need for WGH to carry out a more prolonged disclosure exercise than would otherwise have been the case. I accept, though, that if complete disclosure had been given at the appropriate time and in the tranches ordered, WGH would have had to review those documents, in any event. However, there are inevitably increased costs when the disclosure process becomes disrupted and it becomes necessary to review documents over a prolonged period. In this case, because disclosure of many documents was only given in October, November and December 2011 there has been an element of increased cost. People have had to carry out extra reviews and searches of disclosed documents and have had to return on a number of occasions to deal with disclosure of further documents. In order to reflect the disruptive effect on the whole disclosure process, it is convenient to make an order which relates only to the additional tranches of documents rather than the whole disclosure process. In such circumstances, I consider that this should be dealt with by an order for WAPCo to pay 50% of the costs of dealing with and reviewing the following documents……

But what makes this case particularly noteworthy is that Ramsey J decided it was an appropriate case to make a wasted costs order. Having been through the method of assessment of costs and making another five orders in relation to costs generally, he decided that WAPCo should pay £135,000 on account of the costs claimed by Willbros.

There may well be further submissions and/or appeals by the parties as the litigation is ongoing, but for the time being the decision amounts to a resounding, not to say “whopping” penalty for failures in the e-disclosure exercise.

 Case Note: West African Gas Pipeline Company Limited v Willbros Global Holdings Inc