Watch out! Costs About!

By | 20th October 2009

A Salutary Tale of Disclosure Obligations

Not everything in this blog is intended to be light hearted, as I found myself saying the other day. A kindly soul who had expressed approval of and interest in the blog had caused me to explain that there was intended to be a partly serious side to my musings as well as a bit of fun. So for those of you who only want to be mildly entertained, you should not read any further!

Actually, I rather hope you will read on, because litigation lawyers might have missed a recent decision which is relevant to everyone who conducts litigation in this jurisdiction.

I have to admit that I am a new convert to the webpages of the British and Irish Legal and Information Institute  The website is a veritable mine of information about recent cases, and what I like is that, at a click of not very many buttons, you can find a table of recent cases with very fast hyperlinks to judgments in cases which may be of interest.

I had been looking for the judgment in a recent case with a very different subject matter (and nothing to do with e-disclosure!) which had been reported in the newspapers last week, when my eye alighted on a case several places up the list of latest cases. I had stumbled across a judgment of His Honour Judge Simon Brown QC dated 8th October 2009 in the case of Earles v Barclays Bank PLC .

As many of you will know, Judge Simon Brown is prominent in his support for proper use of such electronic means of search and review as will make for a proportionate and efficient and appropriate disclosure of documents in electronic form. The fact that this was one of his judgments caused me to read further and I am glad I did, not least because the case contains a useful reminder to litigation lawyers of the consequences of failing to abide by the provisions of the CPR.

At the end of 2008, before which there had been no reported cases on the interpretation of Part 31 and the treatment of electronic documents, there were suddenly three cases which attracted much comment.  By way of reminder, those cases were Digicel v Cable and Wireless (St Lucia), Abela v Hammonds and Hedrich v Standard Bank London.

Now, in October 2009, there is another!

The facts of the case do not matter particularly for my present purpose but in broad terms the case concerned claims by a former customer of the Bank (and indeed a former manager) in relation to certain allegedly unauthorised transfers from his personal to his (property developer) business accounts at the bank.

The case is interesting in that the judge had to deal with a number of questions relating to how the costs of the action should fall to be dealt with. A large proportion of the costs arose from the way the parties had handled their obligations under CPR Part 31 and the Practice Direction.

Those of you who wish to read the judgment in full have the reference above. It is relatively short (86 paragraphs) and is easy to read. However, those of you who just need an executive summary should read on.

As is usual in these cases, there was a conflict of witness evidence about what had actually happened between Mr Earles and the Bank’s staff over a number of years prior to the proceedings. In dealing with this aspect, the judge had a number of comments on how to assess the reliability of witnesses and went on to say about contemporaneous documents at para 21:

It is not realistic to expect any human beings to recall with any reliability what they said 3 years ago about run of the mill business transactions. Therefore it is crucial to follow the guidance of these very eminent jurists and in particular those emphasized regarding the analysis of contemporaneous documents; objective facts and documents; witnesses motives and overall probabilities. Since 2000 most key contemporaneous commercial documents are contained in Electronically Stored Information [“ESI”] – today over 90% of communications are recorded in that form – phone records, texts, e-mail, bank records etc. ESI are “documents” under the Civil Procedure Rules: CPR 31.4 and 31PD.2A. Accordingly, the rules for “Standard  Disclosure ” apply: CPR 31.6. i.e. “only” those documents that are “supportive” or “adverse” to each party’s cases. The abundance of this ESI in cyberspace means that potential litigants, in particular organisations such as Banks at the current time, need to anticipate having to give  disclosure  of specifically relevant electronic documentation and the means of doing so efficiently and effectively.

While the subject of how banks, companies and other organisations, and indeed individual litigants, retain and store documents which may be required at a later date will keep lawyers busy for ages, the judge addressed the fact that there was no litigation hold in this case and conceded that prior to proceedings there was no duty to preserve documents although the position is entirely different once proceedings are issued or contemplated. He also dealt with the issue of what adverse inferences might be drawn by the court and when, if documents relevant to the issues before the court had not been preserved and disclosed.

He noted that there had been a failure to comply with the rules and obligations relating to disclosure and said at para 31:

Contrary to CPR 31PD.2A, there were no pre-Case Management Conference discussions about the  disclosure  of any of this key Electronically Stored Information (‘ESI’). There was no apparent discussion about it at the Case Management Conference on 12th June, no  Costs  Management of the  disclosure  process despite the  Costs  Management Pilot Scheme in operation at the Birmingham Mercantile Court for the Jackson Review on  Costs  and no order made in respect of it. Order 4 provided without any particularity “the parties shall give standard  disclosure  by list (confined to Liability Issues) pursuant to CPR 31.6 no later than 4pm on 6 July 2009 with inspection by provision of copy documents 7 days notice”.

There were also issues arising from the disclosure/non-disclosure given in the case and the judge was critical of the disclosure produced by both parties but declined to draw any adverse inferences against either of them.

Having found for the Bank and dismissed the Claimant’s claim, the judge turned to the issue of costs, and this is where the case gets interesting! The bank, as the “winning party” could normally expect to be awarded its costs against the “unsuccessful claimant”.

But that was not quite what happened!

Again for those of you who want to read the whole judgment, something I heartily recommend, you have the reference above, but for those of you who want a potted summary, the section on costs begins at para 63 and continues to the end at para 86.

The most striking sections seem to me to be paragraphs 67 to 76 and these are reproduced in full below:

67. I have been critical of the ‘conduct’ by the Bank of its  disclosure  and its electronic  disclosure .
68. As regards  disclosure, the Bank failed to give  disclosure  of the Transfer Sheets referred to in paragraph 53 of the witness statement of Katharine Shelley. They were clearly relevant under the narrow test of CPR 31.6 to the primary issue in the case. The very fact that they were referred to in the carefully crafted witness statement proves that and it ought to have been obvious to the Defendants lawyers. Their absence made the task of the Court immeasurably harder to the extent that it considered lengthy submission as to whether or to draw adverse inferences against the Bank itself. I am satisfied that it was a decision of the legal team on the erroneous grounds of disproportionality.
69. As regards electronic  disclosure , the Bank, through its in-house counsel, Elizabeth Freeman, should have procured and retained Mr Leech’s e-mail account and phone records for the period covered by the three transactions questioned in the letter before action from Lodders dated 18th October 2007. In house Counsel should not have simply accepted Mr Leech’s word that there were no relevant e-mails. His lap top should have been retained in 2007 and certainly ascertained upon his leaving the Bank in November 2008. This earlier non  disclosure  of the e-mail records should have featured in the  disclosure  statement. It is accepted that it was strictly under no procedural duty to do so in civil procedure law. However, “conduct’ before proceedings can be taken into account in dealing with  costs  under CPR 44.3 (5).
70. Secondly, the Bank’s litigation lawyers should have “discussed” with the Claimant well “prior to the case management conference” the electronic  disclosure  of both Mr Earles and Mr Leech’s phone and e-mail records as expressly provided by CPR 31PD.2A2 . It did neither but did rehearse the issue of  disclosure  with the Claimant two years later in August 2009 shortly before trial. This was far too late with the result that the witnesses and the court have had to deal with a case with critical contemporaneous documents missing. This is contrary to the Overriding Objective of “ensuring” that the case is “dealt with expeditiously and fairly.”
71. It might be contended that CPR 31PD 2A and electronic  disclosure  are little known or practised outside the Admiralty and Commercial Court. If so, such myth needs to be swiftly dispelled when over 90% of business documentation is electronic in form. The Practice Direction is in the Civil Procedure Rules and those practising in civil courts are expected to know the rules and practice them; it is gross incompetence not to.
72. This is long established. In Fletcher & Son v. Jubb, Booth & Helliwell [1920] 1 K.B. 275 at page 280, Scrutton LJ approved a passage from a judgment of Tindal CJ in Godefroy v. Dalton (1830) 6 Bing. 460:
“It would be extremely difficult to define the exact limit by which the skill and diligence which an attorney undertakes to furnish in the conduct of a cause is bounded or to trace precisely the dividing line between the reasonable skill and diligence which appears to satisfy his undertaking, and the crass negligentia or lata culpa mentioned in some of the cases, for which he is undoubtedly responsible. The cases, however, which have been cited and commented on at the bar, appear to establish, in general, that he is liable for the consequences of ignorance or non-observance of the rules of practice of this court; for the want of care in the preparation of the cause for trial; or of the attendance thereon with his witnesses and for the mismanagement of so much of the conduct of a cause as is usually and ordinarily allotted to his department of the profession [emphasis added]
73. As regards ” disclosure ” (and this includes electronic  disclosure ), it is worth repeating here what was said in Woods v. Martins Bank Ltd [1959] 1 Q.B. 55 at 60, where Salmon J. 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”.
74. The  disclosure  of only the 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 to civil litigation.
75. In my judgment, the ‘conduct’ of electronic  disclosure  by the Bank and its lawyers fell far below the standards to be expected of those practicing in the civil courts and I am going to take that into account under CPR 44.3 in the award of  costs  to the successful party.
76. In my judgment, if  disclosure  of these records had taken place two years ago on August 2007, there was a reasonable prospect that this matter would not have proceeded to trial and so incurred the legal  costs  it has. The Bank’s case, on my judgment, would have been unanswerable but of course the Claimant’s attitude may have been to ignore that. However, if the documents had been disclosed then a Summary Judgment application might well have been successful.

I have argued for some time that if only the courts would use the powers they already have in the CPR to ensure that parties comply with their obligations of disclosure, the costs of litigation would fall. The imposition of sanctions for failure to comply with the rules seems to me to be pretty basic stuff and yet the courts have appeared so reluctant to use their powers that parties to litigation have become used to the familiar cosy way of agreeing between themselves how the case shall be run in defiance or ignorance of the actual rules. By using the powers they have, the judges can make a real difference to the cost of litigation here and now, as this case demonstrates, and without waiting for the publication of the Jackson Report, the new Technology Questionnaire or the new Practice Direction under Part 31.

His Honour Simon Brown QC clearly agrees.

Two matters struck me forcibly on reading this judgment:

  1. The words contained in paragraph 71 particularly the use of the phrase “gross incompetence”; and
  2.  The level of costs allowed in Birmingham as opposed to London. Something to ponder, and perhaps the subject of another post in due course!

Litigation lawyers take note!