Can’t see the wood for the trees? Will the future of document disclosure in commercial disputes change this?
A mandatory pilot scheme for disclosure, part of the wider court modernisation process, has commenced in the Business and Property Courts, requiring a change to how a party discloses documents in commercial disputes.
Whilst the scheme is to be welcomed, in the hope that it will ensure reasonable and proportionate disclosure in disputes, we do remain cautious that it may only address issues relevant to the higher value disputes and therefore could unnecessarily frontload costs in lower value disputes.
The process of disclosure has become cumbersome for everyone involved and existing disclosure rules do not take into account the vast amount of electronic data available to parties in litigation.
An unintended consequence of this has seen smaller businesses ‘priced’ out of litigation by large organisations, or at best, they are forced to drop certain parts of their claim because of the prohibitive costs involved. This is best exemplified with the series of cases against banks known as the ‘Libor scandal’, which saw a series of fraudulent actions connected to the London Interbank Offered Rate. In these cases, claimants were swamped with millions of peripheral documents in electronic form, often with no method of properly reviewing them, all but ensuring the inability to extract vital documents and diminish their ability to pursue their claim.
Following this, and earlier attempts at reforming disclosure, the Disclosure Working Group was set up in 2016, tasked to propose a practical solution to increase co-operation between the parties and to ensure disclosure is reasonable and proportionate. This led to the introduction of the disclosure pilot, in September 2018.
The pilot will run for two years from 1 January 2019 and is the new way to disclose key documents and evidence used to support any commercial dispute.
The new rules mean that disclosure will be at the start of proceedings and will be limited to documents relevant to the issues in dispute. This will ensure your opponent can clearly assess, at an early stage, the strength of your case, without being bombarded with unnecessary documents and should aid settlement and the narrowing of issues.
This ‘initial disclosure’ should see parties work together, which it is hoped will reduce the need for further disclosure later on in proceedings, and should therefore reduce the overall amount of time and money spent.
Key elements of initial disclosure:
- The documents should be in electronic form, unless otherwise agreed or ordered by the court
- You must preserve all documents in your control that could be relevant to the dispute.
- You must disclose all documents that may have an unfavourable effect on your case, unless they are privileged.
It is possible for this stage to be dispensed with, either by the parties agreeing, the court ordering it, or because of the high volume of documents or pages involved. Dispensing with this stage will reduce upfront costs, but it is only likely to be of benefit for low-value and non-complex matters that are not document heavy.
If a party wishes to seek disclosure of additional documents, or as an alternative to the initial disclosure, they can make a request to the court. The court however will only make such an order, if it persuaded that it is appropriate to do so, in order to fairly resolve one or more of the issues in dispute.
Before this request is made, however, parties are expected to have exhausted all attempts to narrow the issues in dispute, based on the documentation they already have, so that requests for additional evidence is limited to the remaining areas of dispute.
The benefits of the pilot are that a business will be able to review documents that the other side is seeking to rely on at a much earlier stage. This should aid in narrowing the issues in dispute and promoting early settlement. Unfortunately, this will also see the frontloading of costs, although costs overall should be reduced.
Whilst there are clearly benefits to the pilot, we are concerned that the issues it is seeking to address are only relevant to high-value litigation. Whilst we wait to see how it plays out in practice, we would suggest the possibility that should the pilot be expanded, that it is limited to cases above a certain threshold. There is of course the built in ‘opt-out’ of initial disclosure already contained within the rules.
A key focus to ensuring compliance with this scheme will be the practicalities of disclosure at the earliest stage of a dispute, both in the collection and retention of documents. It would be therefore be useful for you to review your document retention policies to ensure they comply with the requirements of the new disclosure pilots ‘initial disclosure’, whilst at the same time ensuring GDPR compliance.