Understanding and controlling disclosure costs

The opinion of Master Matthews in Pyrrho Investments Ltd v MWB Property Ltd and others [2016] EWHC 256, approving predictive coding for the disclosure of documents in civil litigation, highlights the judiciary's continued focus on 'the overriding objective of enabling the court to deal with cases justly and at a proportionate cost' under Civil Procedure Rules (CPR) 1.1.

Long before predictive coding made headlines, two judicial reforms attempted to address and remedy the growing costs of litigation. The Peruvian Guano discovery test led to the Woolf reforms, and by Lord Justice Jackson's estimation, the persistent culture of following the old rules and disclosing everything led to the Jackson reforms.

Today we find ourselves in a legal landscape that is markedly different than it was pre-Jackson, and the Pyrrho decision shows the judiciary's recognition of the realities of modern litigation, where millions upon millions of documents may need to 'be considered for relevance and possible disclosure'. Pyrrho provides one method for helping lawyers keep costs proportionate and within the case budget. That is not to say that predictive coding is the be-all and end-all strategy for a cost-effective disclosure.

Disclosure/discovery conundrum

CPR 31.5 continues to offer the court a menu of disclosure options, from standard disclosure to 'an order dispensing with disclosure' altogether. Three years on from the last major CPR reforms, however, standard disclosure remains the norm, despite alternative forms having received positive feedback from the Technology and Construction Court and specific guidance from the Chancery Division emphasising that standard disclosure should
not be seen as the default.

Even in cases where more limited disclosure occurs, this does not necessarily reduce the amount of time or expense a lawyer incurs in discovering
the important facts, claims, or defences in a particular case. A lawyer, equipped with the latest tools and assisted by ediscovery professionals, is best positioned to find the key facts faster, leading to both earlier settlement possibilities and a greater likelihood of recovering all costs.

Disclosure costs versus modern realities

According to Nicholas M. Pace and Laura Zakaras
in Where the Money Goes: Understanding Litigant Expenditures for Producing Electronic Discovery, the review of documents for disclosure amounts to approximately 70 per cent of total disclosure costs. With the ubiquity of electronic document creation and storage, lawyers have an ever-increasing costs burden to fulfil their disclosure obligations under the CPR.

When evaluating costs, the court will 'only allow those which are proportionate to the matters in issue, potentially disallowing or reducing costs even if they were reasonable or necessarily incurred'
(CPR 44.3(2)(a)). This incentivises lawyers to reach
a consensus with the opposing side on procedural matters (as was one of the deciding factors for allowing predictive coding in Pyrrho) and determine the substantive matters at issue with as little expense as possible.

The incentive may become more enticing an offer if Jackson’s next proposed reform is enacted, placing a cap on civil claims up to a value of £250,000, irrespective of complexity. Regardless of this potential cap, lawyers should not play fast and loose with their fact-finding. Time and again the court has shown its unwillingness to order for a party when they have failed to prove their damages with evidence (see, for example, Goldsmith Williams v E.Surv Ltd [2015] EWCA Civ 1147, Saint Gobain Building Distribution Ltd v Hillmead Joinery (Swindon) Ltd [2015] EWHC B7 (TCC), and Fairhurst Developments Ltd v Collins [2016] EWHC 199 (TCC)).

Reducing disclosure costs

As the amount of data generated has grown, so too have the methods to examine, review, and make sense of it all. A vital component of an effective investigation and disclosure is early data assessment (EDA). EDA allows a lawyer to cull out irrelevant
data and hopefully highlight the most important documents sooner. To assist with EDA, lawyers have tools such as email threading, topic grouping, and 'fuzzy' searching among the more advanced analytic timeline and communication analysis.

If a fully fledged document review needs to begin, predictive coding often allows for a more accurate, faster, and less costly review than traditional manual methods. The premise behind predictive coding is that a senior lawyer trains a software algorithm, which then learns from that lawyer and is therefore able to make predictions as to the relevance of all the documents that potentially need to be reviewed. This is not unlike many of the websites and mobile apps we use today where we 'thumbs-up' songs and then the song algorithm learns what music we would like to hear next.

Not all cases call for predictive coding, and even in cases where predictive coding is appropriate, some manual review beyond the senior lawyer training the algorithm may be necessary. In those cases, document review legal process outsourcing (LPO)
is now a robust option, with the most proficient LPO providers able to offer scalable solutions for review management, team size, qualifications, language abilities, subject matter expertise, and ediscovery review experience.

Relief from sanctions

When selecting an LPO review partner or an ediscovery vendor for other stages of the electronic discovery reference model (EDRM), lawyers should be mindful that not all are created equal. In some cases, it will be the technical features of a vendor's ediscovery review platform which may prove most important. At other times, it will be the ediscovery professionals using and consulting on the tools who make the difference.

There are many recent cases in which a party received a sanction or could not recover costs
due to avoidable circumstances in which consultation by an ediscovery professional could have helped the legal team in the eyes of the court. In Property Alliance Group v Royal Bank of Scotland plc
[2015] EWHC 3341 (Ch), Royal Bank of Scotland inadvertently received a privileged document from Property Alliance Group. The court ruled that the bank could not use the privileged document because it had not sought permission under CPR 31.20. The privileged document contained a lawyer's name and email address. A proactive ediscovery professional could have highlighted all of the law firm names involved across all of the documents in the review, thus clearly bringing the privileged nature of the document in question to the bank's immediate attention.

Iliffe and another v Feltham Construction Ltd and others [2015] EWCA Civ 715 saw no costs recovered on the creation and maintenance of a 2,500-page appeal bundle. The bundle included numerous duplicate and irrelevant documents and otherwise was organised 'chaotically'. A knowledgeable ediscovery professional could have complied the appeal bundle straight out of a review database in a chronological, unduplicated, and cross-referenced manner. Better yet, the review database itself could have been used during trial with segregated and secure work product for claimants, defendant, court, and jury.

Finally, in the case of Smailes v McNally [2015] EWHC 1755 (Ch), a £50m claim was struck out due
to an improper disclosure. The claimant determined its review population for disclosure based solely on keyword searches. Unfortunately, the majority of
the data was originally in a hard copy, which was scanned into electronic form, resulting in garbled text, much of which did not hit upon the keywords. As with the above cases, an ediscovery professional, aware of the technical challenges with scanned hard copy documents, could have helped the claimants with other searching methodologies, potentially leading to a proper disclosure and allowing the court to hear the claim on its merits.

Now more than ever, lawyers are required to understand technology – or at least know who they should turn to for their ediscovery needs – to navigate today’s litigation waters. No matter what a lawyer’s practice is, it is likely they will have clients who use email and online messaging, and in those situations, understanding how ediscovery works can both help find the important evidence and keep costs proportionate, which would surely help the lawyer, their client, and the court. SJ

Jeffrey Shapiro is a managed services consultant at Kroll Ontrack