High Court finds party not in breach of "unless order" for e-disclosure as result of errors in list

In a recent decision the High Court held that a party was not in breach of an "unless order" for e-disclosure as a result of the mistaken omission of certain categories of documents from the list and a failure to identify certain documents in sufficient detail: In the matter of Atrium Training Services Limited [2013] EWHC 2882 (Ch).

As the decision illustrates, establishing that there were omissions from a disclosure list will not be sufficient to establish that an opponent failed to conduct a reasonable search for disclosable documents. Where however the search was not carried out in good faith, or was not fair and proportionate to the case in hand, the court is likely to find that a reasonable search did not take place.

The decision is also of interest for the judge's view that the e-disclosure practice direction (PD 31B) will not ordinarily apply where documents are held in paper form and a party unilaterally decides to have them scanned into an e-disclosure database, and to follow an e-disclosure approach, without prior notice to the other parties. However, where the parties have effectively agreed to that approach, the court is likely to find that PD 31B applies. James Farrell and Maura McIntosh outline the decision below. 

	James Farrell Partner +44 20 7466 2097

Background

The underlying claim was brought by a company's liquidators against its former director and company secretary alleging fraudulent trading. Following complaints by the respondents about the liquidators' disclosure, the court made an “unless order” (see our post on that decision) which required the liquidators to do the following by a specified date, failing which their claim would be struck out without further order:

1. conduct a search for documents falling within CPR 31.6 (the test for standard disclosure), in compliance with CPR 31.7 (which sets out the requirements for a reasonable search); and
2. provide a list of documents identifying the documents located as a result of the search, in compliance with CPR 31.10.

The liquidators' disclosure exercise was completed and its list containing approximately 6,000 documents was served by the specified time. The bulk of the liquidators' documents were held in paper form, but the liquidators used an external provider to scan and upload the hard copy documents into an e-disclosure database for review. In addition certain electronic sources of documents were uploaded into the database.

The respondents alleged that the liquidators were in breach of the unless order in two main respects: (i) certain categories of documents which ought to have been disclosed had been omitted in error; and (ii) the list itself failed, in respect of certain documents, to comply with the requirement in CPR 31.10 to provide a short description of the documents so they could be identified.

The respondents' position was that the action had been struck out automatically as a result of the breach. They applied for judgment against the liquidators on that basis. The liquidators' primary position was that they were not in breach; alternatively they should be granted relief from sanction.

Decision

The court (Birss J) dismissed the application, finding that the liquidators were not in breach of the unless order. The starting point had to be the terms of the order. The liquidators' primary obligation was to conduct a reasonable search and list the relevant documents found in that search. He stated:

"A search not carried out in good faith would not be a reasonable search. However a search which was conducted in good faith and was fair and proportionate to the case in hand, given the number of documents involved, the nature and complexity of the case, the ease and expense of retrieval and the significance of any document likely to be located, would be a reasonable search and would be one which complied with the order."

To establish that the disclosing party was in breach, it was not sufficient to show that there were documents that should have been disclosed but were not. It would be necessary to establish that a reasonable search did not take place.

Here there was no justification for saying the liquidators had not conducted a reasonable search. It was very extensive. It was plainly carried out in good faith. It was based on a methodology explained to the respondents' solicitors and which had been ventilated in court when the unless order was made. The fact that two classes of documents were missed did not support an inference that the exercise was not a reasonable search.

The court also rejected the respondents' argument based on the nature of the list. The list, which was produced by the e-disclosure software, consisted of a table with five principal columns of information: Subject/Filename; From/Author; Email To; Email CC; Document Type. Although certain columns were left blank for a large number of documents in the list, and two documents were completely unidentified, the court held that this was not a breach of the unless order. The liquidators had taken reasonable and proper steps in good faith to identify the relevant documents in the list.

The judge noted that Practice Direction 31B, relating to the disclosure of electronic documents, states that "blank entries are permissible and preferred if there is no relevant Disclosure Data (that is, the field should be left blank rather than state 'Undated')". Although PD 31B applied to documents held in electronic form, and therefore would not ordinarily apply to the bulk of the liquidators' documents as they were held in paper form, the respondents were aware that the liquidators intended to conduct disclosure by scanning the hard copy documents into an e-disclosure database, had not objected to that methodology, and indeed had suggested the use of the particular e-disclosure provider. In fact, the respondents' solicitors had in correspondence described the liquidators working within the terms of PD 31B as something that would benefit all parties in preparing the case for trial. In those circumstances, the court said, it would be absurd to say that PD 31B did not apply, even though the underlying documents were not originally "electronic documents".

The court did however require the liquidators to conduct a review of any documents in the list (of which there were about 200) that had only a single word description (such as "transcript") and use their reasonable endeavours to fill in the blanks in the information.