Open book

A significant and fundamental change to the e-disclosure regime has taken effect, in the form of a new practice direction (PD31B) to the CPR, together with the electronic documents questionnaire (the EDQ), introduced on 1 October.

The consequences of failing to comply with the new e-disclosure rules include costs penalties even for successful parties and the draconian measure of striking out a party's case. Such consequences mean legal practitioners should quickly get to grips with the new regime and ensure compliance on the part of clients.

The purpose of PD31B 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. Disclosure is already one of the most expensive stages of litigation, a fact that is often not readily understood by clients. With the onus under the new regime being on the parties to monitor the costs of the e-disclosure exercise on an ongoing basis to keep them to an appropriate and proportionate level, it is inevitable that more thought needs to be put to the disclosure process at an early stage.

Unless the court orders otherwise, the new regime will only apply to proceedings started on or after 1 October 2010 and those which are likely to be allocated to the multi-track. It is anticipated that the new e-disclosure regime will be relevant to certain cases started before the cut-off date but which are still at the pleadings stage, and, as such, parties may wish to use PD31B and the EDQ in agreeing an approach to e-disclosure. The EDQ is appended to PD31B and it deals in some detail with the technical and legal issues arising in e-disclosure.

Although the EDQ is not mandatory, it must be used if the court orders it. Parties may of course agree to its use where appropriate.

PD31B places an obligation on legal representatives, as soon as litigation is contemplated, to notify clients of the need to preserve disclosable documents, which includes electronic documents (PD31B.7). The documents to be preserved include those electronic documents which would otherwise be deleted in accordance with a document retention policy or in the ordinary course of business.

It may be that by the time a new instruction reaches a firm, a large percentage of relevant electronic documents have already been destroyed by the instructing party as part of a retention policy. In such circumstances, it may be possible to recover the data using a forensic computing specialist, but, in any event, it should not put a solicitor or client in breach of his obligations under PD31B.7 as the document destruction took place before instruction. In these circumstances, however, being able to show clear lines of communication and the client demonstrating that it has acted entirely in good faith in the implementation of its retention policy is going to be important.

Early discussions

In terms of agreement between the parties, PD31B imposes a mandatory requirement on parties to communicate before the first case management conference (CMC) in relation to the use of technology in the management of electronic documents and in connection with the disclosure of those documents (PD31B.8 and PD31B.9). PD31B goes on to state that in certain heavy and complex cases it may even be appropriate to begin discussions before proceedings have been commenced.

Before PD31B came into force, the relevant provision in respect of discussions between parties merely stated that parties should discuss e-disclosure issues before the first CMC (practice direction 31.2A.2). The new regime is much more prescriptive in this regard with a list of issues that the parties and their legal representatives must discuss before the first CMC. This list includes, for example, the computer systems, electronic devices and media on which relevant documents may be held, the formats in which electronic documents are to be provided on inspection and the basis of charging or sharing the cost of providing electronic documents.

Digicel (St Lucia) Limited and others v Cabel & Wireless plc and others [2008] EWHC 2522 (Ch) demonstrates how the court has historically considered a failure to conduct early discussions.

Here, the claimants successfully applied for specific disclosure of certain electronic documents, including the restoration and search of certain back-up tapes and extended key word searches. The parties had not met early to discuss potential e-disclosure issues and had failed to agree the key word searches in advance. Consequently, the judge conducted a cost/benefit analysis of each key word which the claimants said should have been used, weighing up the proportionality of whether the defendant should search again using those words. Despite having already expended considerable amounts of time and money on disclosure, they were ordered to carry out key word searches and to restore and search certain back-up tapes.

Question time

Appended to PD31B is the EDQ which deals with technical and legal issues relating to the extent of a reasonable search, including date ranges and custodians of electronic documents. In addition, the EDQ covers the proposed methods of searching using key words and the preservation of electronic documents which includes questions as to whether a party has a document retention policy.

Other points which are covered by the EDQ include disclosing potential problems in relation to the accessibility of electronic documents, how electronic inspection will take place and expectations of the other side's e-disclosure.

The EDQ specifically asks whether an instruction to preserve documents has been given. Although the question seems somewhat ambiguously drafted, in particular in regard to who should be giving the instruction and to whom, it seems that it is directed at the client having instructed those within its organisation to preserve documents. However, in the event that a document retention policy has resulted in relevant documents being destroyed before litigation being contemplated, it may be prudent to disclose this in the EDQ. In these circumstances, it will be necessary for the client to be able to demonstrate a clear document retention policy and its practice of adherence. Any inconsistencies will give rise to suspicion that documents have been delayed intentionally which at the least could lead to an expensive and time-consuming distraction.

In practice, input from a client will be required to complete the EDQ as issues such as custodians and document retention policies will likely be answerable only by them. However, the solicitor's role will be to advise the client on what is a proportionate approach to e-disclosure. The EDQ must, when exchanged with the other side, be verified by a statement of truth which makes it all the more important for parties to have a firm grasp on their obligations under PD31B.

Whoever signs the EDQ will be expected to attend the first CMC and any subsequent hearing at which disclosure is likely to be considered. They will be expected to answer questions in relation to the contents of the EDQ and as such a solicitor with limited knowledge of such technical matters may not be suited to deal with this aspect. This does, though, bring into play the necessity to persuade a third party to sign off documents in proceeding to which they are not a party.

If a client who has signed the EDQ is based abroad, there is the obvious problem of the seemingly disproportionate cost of attending a CMC. If, in those circumstances, an e-disclosure consultant has already been appointed to host and manage the e-disclosure process, it may be possible to have that consultant sign the EDQ, placing the obligation on that person to attend the CMC.

A revised form of allocation questionnaire was introduced on 1 October to take account of the changes to the e-disclosure regime. Section D of the allocation questionnaire now concludes by asking if, in circumstances where the multi-track is being proposed, agreement has been reached as to the scope and extent of e-disclosure. If no such agreement has been reached, it goes on to ask whether such agreement is likely and what the issues are in respect of e-disclosure.

Although the new e-disclosure regime only applies to proceedings started on or after 1 October, it is unclear whether proceedings started before that date, but which have not reached the allocation questionnaire stage, should use the new or old form. Best practice would be to use the new form and, if the new regime does not apply, the answer to the e-disclosure questions should be 'not applicable'.

In advance of the first CMC, parties should submit to the court a summary of matters on which the parties are agreed/disagree in relation to e-disclosure (PD31B.14). If the summary indicates a level of disagreement that is unlikely to be resolved, the court will either give written directions or order a separate hearing in relation to disclosure. When doing so, the court may make an order compelling the parties to complete and exchange an EDQ.

Serious consequences

The consequences of failing to comply with the new e-disclosure regime should not be underestimated. Adverse inferences of fact may be drawn by the court in respect of a failure to disclose relevant documents. A court order may be made compelling a party to forensically recover data.

While an extreme example, it may not be long before the English courts follow the lead of our Australian cousins, as in the first instance case of McCabe v BAT [2002] VSCA 197 (which was overturned on appeal), and strike out a party's case for a failure to preserve electronic documents. Cost sanctions will also likely be a common feature where there has been a failure to comply. Solicitors should also be wary of wasted costs orders where they are complicit in a failure to comply.

The court has already shown a willingness to be critical of legal advisers as regard disclosure. In Earles v Barclays Bank Plc [2009] EWHC 1 (Mercantile), the lack of e-disclosure of key documents resulted in Justice Simon Brown QC concluding that the failures rested on the part of the defendant's legal team. Although the case was decided in the defendant's favour, he concluded that it was gross incompetence for anyone practising in the civil courts not to know the rules on e-disclosure, or to practise them. The judge penalised the defendants by awarding them only 25 per cent of their costs; however, this was in part because the case did not merit the top class City rates which the defendant had incurred.

Although some may perceive the new regime as unduly onerous, in circumstances where the use of technology in the office environment has become so dominant, it is logical and indeed essential that the disclosure of such materials is regularly reviewed so that it keeps up with development.

However, the costs associated with e-disclosure will not now just be in respect of harvesting and preserving metadata and forensics, but also with the potentially exponential increase in the volumes of documents returned by electronic searches which will fall to be analysed and considered for disclosure. On this basis, it is essential that legal practitioners and clients monitor the costs to keep them appropriate and proportionate.

Although the decision in Earles predates PD31B, it serves as a warning to litigators and clients to think about e-disclosure at an early stage given the serious and costly consequences of failing to do so.