Welcome to this second edition of Getting The Deal Through – Complex Commercial Litigation, focusing exclusively on the intricacies and challenges of high-stakes commercial litigation practised internationally.
When comparing the varying approaches to dispute resolution and the contrast between common law and civil law systems, disclosure (or discovery) of documents is often rightly identified as a major differentiating feature. Disclosure is at the heart of the common law system, but is largely absent from the civil law process. This brief editorial introduction looks at some imminent changes to the disclosure regime in the English High Court.
In the UK litigation market, the virtue (or otherwise) of the disclosure regime is a perpetual hot topic. It is no exaggeration to say that for at least 20 years disclosure has been under attack because it is perceived to be hugely expensive and of questionable value or relevance in the process of getting to the truth.
However, a certain degree of caution is required here because, arguably, some of the voices of discontent are those representing the interests of banks and other large financial institutions that have most to gain from narrowing the scope of disclosure. LIBOR rigging and mis-selling cases are classic examples of situations that cry out for extensive disclosure. Similarly, several banks in the UK have been heavily criticised for their roles in the artificial distressing of small and medium-sized enterprises, and subsequent exploitation through the insolvency process.
Nonetheless, if a message is repeated often enough it might eventually be believed. The former head of the UK’s Supreme Court, Lord Neuberger, said very recently:
If you look at the benefits of disclosure, there will be the odd case where there is a smoking gun. But in the great majority, all the disclosure exercise has done is increase costs enormously while benefiting nobody. It would be worth investigating whether the whole exercise should be abandoned. The few cases where it has a benefit are completely disproportionate compared with the large number where it has no benefit.
While there can be no argument that the costs of the disclosure exercise can be onerous, Lord Neuberger’s remarks are somewhat surprising. The English courts have for centuries placed considerable emphasis on whether witness evidence at trial is consistent with whatever contemporaneous documents were created at the time the events in dispute actually unfolded. Thus, the need to unearth such documents is paramount. The complication stems largely from the evolution of email traffic and other electronic messaging, which encapsulates a mass of ‘conversation’ that needs to be sifted through.
It is worth noting that in the US, where the same disclosure regime exists (and has done for a very long time), there is not the same clamour for reform, save for recent focus on reasonableness and proportionality, and limiting obviously unnecessary or unduly expensive disclosure (themes that have been echoed in the UK). The strong ‘plaintiff’ bar in the US no doubt makes any serious erosion of the disclosure process virtually inconceivable.
The English courts rightly value their key position as the forum of choice for many global financial institutions that can dictate their preferred forum via their contractual terms. It is therefore understandable that the English courts take careful note when their heaviest users lobby for change. But how far can such change be taken without tipping the balance?
Under the present system, the Civil Procedure Rules (CPR) require solicitors to engage with each other in exploring and agreeing disclosure methodology at an early stage. There is a realism around what is expected and a high degree of understanding around what is achievable. Traditionally, the collation and review of potentially relevant documents provides a vital opportunity for the parties’ solicitors to fully evaluate the merits of their clients’ positions and to enable them to predict the likely result of the litigation (especially once all the parties have exchanged their disclosed documents). Under the current regime, the parties to litigation are required to give ‘standard disclosure’ once the parties have completed their exchange of pleadings. This obliges the parties to disclose documents relevant to the dispute that are in a party’s control and that it relies upon, or that adversely affect its own case, or that support or adversely affect another party’s case. The test excludes background documents and documents that indirectly advance or damage a party’s case. But, critically, standard disclosure requires a reasonable search for documents to be undertaken.
Whilst standard disclosure is the default position, deeper, more rigorous requirements are often imposed in appropriate cases, for example to search for documents (i) by relevance to each issue in dispute; or (ii) which it is reasonable to suppose may contain information that enables the party applying for disclosure to advance its own case or to damage that of any other party, or that leads to an enquiry which has either of these consequences.
Following a further recent period of lobbying, largely by those representing the interests of the banks and financial institutions, a further refinement of the disclosure process is now to be introduced from 1 January 2019, known as the Disclosure Pilot Scheme (DPS), which will operate in the Business and Property Courts for a period of two years. The new scheme removes ‘standard’ disclosure as a default and replaces it with ‘initial disclosure’, followed by five forms of ‘extended disclosure’, to be ordered by the Court as appropriate. The initial disclosure will be severely limited to either 1,000 pages or 200 documents, and it will not require a search for documents to be undertaken. However, initial disclosure comes far earlier than would have been the case for standard disclosure.
The initial disclosure involves each party providing to all the parties at the time its statement of case is filed:
- the key documents relied on in support of its case; and
- the key documents necessary to enable the other parties to understand the claim or defence they have to meet.
However, notably, any party can stipulate that giving initial disclosure would involve it providing more than 1,000 pages or 200 documents, in which case initial disclosure will cease to apply to all parties. This is plainly a loophole that may well be eagerly deployed by cynical defendants wishing to keep claimants in the dark for as long as possible.
One of the important features of extended disclosure is the attempt to further limit the extent to which the background or ‘narrative’ documents are required to be disclosed. A ‘narrative document’ is defined as a ‘document which is relevant only to the background or context of material facts or events’ and not directly to the issues. It is notable that in only one of the five categories of extended disclosure are narrative documents required to be disclosed.
It should not be assumed that disclosure of narrative documents should be exceptional, but there is clearly a concern that in cases where the fullest picture is likely to be helpful to the claimant, vital background material may not now see the light of day. However, the counterbalance remains that in most of the categories of extended disclosure searches are required to be undertaken, and adverse documents must be disclosed regardless of whether they are categorised as narrative documents. This rightly continues to place the onus on the parties and their advisers to ensure that searches that are either agreed or ordered to be made are conducted thoroughly. Equally, the claimant’s solicitors will need to be alert to any attempt by the defendant parties to manoeuvre themselves clear from the rigours of an all-too-revealing search. To this extent, the new DPS should be ‘business as usual’. At a time when the English courts are working to preserve their pre-eminent position as the forum of choice, it would be an ‘own goal’ for the DPS to be perceived as a ‘lite’ form of disclosure as opposed to the ‘gold standard’ that it needs to be.