The cost of non-compliance

The courts are taking an increasingly dim view of failures during the disclosure process writes Chris Dale.

The case of Earles v Barclays Bank was reported in The Times last month with the heading 'Disclosing electronic data'.

This case is significant at several levels: it is a fairly ordinary case; it is firmly grounded in authorities about evidence and not merely about disclosure or electronic disclosure; it covers the use of disproportionately expensive lawyers as well as procedural defects; perhaps most importantly, it is a case where documentary evidence would have proved immediately what it took much oral evidence to show, possibly allowing the case to be dealt with on a summary basis. The disclosure defects did actually cost time,  money and court time.

It sends messages to clients as well as to lawyers. There is, as the opening paragraph of the Times report says, no duty under English law to preserve documents before proceedings commence. After that point, potentially disclosable documents must be preserved and the lawyers must consider whether any category of documents falls within Rule 31.6 CPR (that is, whether they are disclosable at all) and then to consider the separate question whether it is proportionate to search within the sources which have been found and preserved and/or to look more widely.

This does NOT mean that every document must be dug out and disclosed, nor that electronic disclosure is right for every case. What is required is that the court gets the opportunity to consider (and to see that the parties have considered) the balance of potential usefulness against estimated cost for those categories of documents which warrant the discussion. Airy assertions that “it would cost too much to look for the documents” will not wash when they are (as in this case) central to the issues.

The cost of a company-wide litigation readiness policy on top of an adequate document retention policy, together with the applications and processes to manage them, may not be insignificant. When companies are weighing up that investment, however, they must consider the alternative – that they may have to concede litigation, risk losing it, or settle it on disadvantageous terms if they cannot find the documents they need. That need is not just about formal compliance with the rules but about the strength of the evidence.

This judgment reminds us that you can win a case and yet be penalised in costs for the manner in which you prepared for it. You do not need the formal disclosure rules to find authority for that – the overriding objective is enough.

It is worth bearing in mind that the investment in document retention and litigation readiness is not a one-trick pony. As well as making a company ready to comply with its disclosure / discovery obligations for court or regulator, it makes it practical to comply with subject access requests under the Data Protection Act and to identify fraud and other internal matters. As a bonus almost, it also makes for a more efficient business. It is not a subject to let slip off the bottom of the agenda, even before this judgment.

Chris Dale is a legal IT consultant specialising in litigation support and e-disclosure.

His blog can be reached at http://www.chrisdalelawyersupport.co.uk/index.htm.