Use of predictive coding for e-disclosure endorsed by English High Court

A decision of the English High Court handed down on 16 February 2016 has expressly approved the use of predictive coding (also known as technology assisted review) for a large disclosure exercise: Pyrrho Investments Limited & Anr v MWB Property Limited and Others [2016] EWHC 256 (Ch).

Based on the US's experience, this case will likely mark a turning point for the use of predictive coding in England and Wales, and will be highly persuasive in similar cases in Hong Kong. It took the US less than three years from the date of its first judicial approval to reach the point that "it is now black letter law that where the producing party wants to utilize [technology assisted review] for document review, courts will permit it.” Rio Tinto Plc v Vale SA, 1:14-cv-3042 (S.D.N.Y. Mar. 2, 2015).

As noted in Master Matthews's decision, predictive coding has been used relatively infrequently in English litigation. However, Herbert Smith Freehills is among a small number of firms that have already employed the technology in large-scale disclosure exercises in England. While judicial endorsement is not a pre-requisite for a party's use of predictive coding software, Master Matthews's decision is welcome in confirming the benefits of the technology in appropriate cases in England and Wales. 

In Hong Kong, we are still in the early stages of development. There is currently a pilot scheme, documented as Practice Direction SL 1.2, in place since 1 September 2014 for the discovery and provision of electronically stored documents and this pilot scheme is limited to cases on the commercial list.  Practice Direction SL 1.2 is largely based on Practice Direction 31B under CPR Part 31 with a few modifications from Australia and Singapore's practice.

What is predictive coding?

Predictive coding uses a combination of technology and manual document review. The document review software applies algorithms to human reviewers’ coding decisions to suggest similar documents for review. In doing so, the system prioritises those documents which it believes are most likely to be relevant, which are then reviewed by human reviewers. The purpose of the process is to identify the documents relevant to the case while reducing the time and cost of the review by reducing the number of irrelevant documents. Predictive coding is seen as potentially beneficial in large-scale disclosure exercises where linear review of documents, using only keyword searches to limit the volume, may not be feasible or proportionate.

A copy of our article providing practical guidance on the use of predictive coding, which is cited at paragraph 25 of the court's decision in Pyrrho, is available here. 

Decision

In his decision, Master Matthews considered the use of predictive coding appropriate because:

• The experience of other jurisdictions, namely the US and Ireland, has been that predictive coding can be useful in appropriate cases.
• There is no evidence that predictive coding is a less accurate tool for conducting a review than manual review / keyword searches, and some evidence that it may be more accurate and result in more consistent decisions about relevance.
• There is nothing in the CPR or Practice Directions to prohibit its use and CPR PD 31B (and the Hong Kong Practice Direction SL 1.2) specifically refers to the use of "other automated searches" as potentially appropriate. Master Matthews also noted that the Technology and Construction Court judges support an eDisclosure Protocol that specifically refers to the use of predictive coding (which is not the case in Hong Kong). 
• In this instance (where the number of electronic documents to be considered for relevance and possible disclosure was over three million) the use of predictive coding would result in a substantial cost-saving and the costs of using the technology were proportionate to the value of the claim.
• The parties had already agreed on the use of predictive coding for the purpose of the review.

Comment

Overall, the case is a welcome decision for those wishing to use predictive coding software.  Since Practice Direction SL 1.2 in Hong Kong is largely based on the UK model, Master Matthews's decision is important and one which practitioners and companies should take note in Hong Kong.   However, it should not be used as a prescriptive or comprehensive guide to predictive coding. In particular:

• It is important to understand that Master Matthews's description of predictive coding software (at paragraphs 19 to 24) is only one type of predictive coding workflow. There are a number of other options available to parties when considering the use of this technology, each with their own benefits and drawbacks in terms of time, costs, accuracy and ability to deal with changes to the issues in dispute. As the High Court's decision is based on a particular workflow, a number of the comments made by Master Matthews about best practice and the court's expectation of the technology are particular to the type software used, but not generally applicable.
• In the present case, it appears that little further human review will be conducted of the documents produced after the predictive coding exercise is checked and stabilised. This may not be appropriate in all cases, in particular, where the resulting documents are likely to include privileged material, irrelevant documents, confidential material, or a non-party's personal/sensitive information. Further, while there may be an immediate cost-saving of not reviewing certain documents, disclosing such material may amplify the other parties' costs and risk an adverse cost order.
• Particularly in this sort of case, parties may wish to consider the use of a clawback agreement to minimise concerns about the disclosure of privileged or irrelevant documents. In the US, clawback agreements set out the terms on which the parties will return disclosed documents. The status and enforceability of these agreements is uncertain under English law, but there is scope for argument that CPR 31.B(3)(f) envisages this type of arrangement. In Hong Kong, the courts also envisage this type of an arrangement as Practice Direction SL 1.2 states that …parties should endeavour to agree that a party that makes discovery of electronic documents does so without prejudice to the entitlement to subsequently claim privilege over any information contained in any electronic document that has inadvertently been discovered". For further consideration of these issues see our article for PLC Magazine here.

For further information, please contact Julian Copeman, Greater China Managing Partner, or your usual Herbert Smith Freehills contact.