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Disclosure failures lead to trial being delayed by two years

Posted on 5 August 2022

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In the case of CABO CONCEPTS LIMITED v (1) MGA ENTERTAINMENT (UK) LIMITED (2) MGA ENTERTAINMENT INC [2022] EWHC 2024 (Pat), just three weeks before a four-week trial was due to commence, the Defendants ("MGA") informed the High Court that they had missed approximately 84,000 documents during the data collection process underlying their disclosure. In fact, it subsequently transpired that approximately 40% of the documents that should have been collected by MGA were missed (800,000 out of a total 1.8 million documents) and that "nearly half of all potentially relevant documents were never even reviewed."

Although there was no suggestion that the deficiencies in disclosure were deliberate, the Judge acknowledged that they were serious. As a result of the disclosure failures: (1) the trial was pushed back by over two years; (2) the harvesting and application of keyword searches was ordered to be repeated and carried out by an independent e-disclosure provider; and (3) MGA was ordered to pay the costs thrown away as a result of the adjournment on an indemnity basis (with an order for a payment on account of over £500,000).

The Court's jurisdiction to award indemnity costs in such instances arises from CPR 44.3(1)(b) and will be justified where the conduct of the parties or “other particular circumstances” of the litigation take the situation “out of the norm” (Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879). Mrs Justice Joanna Smith was persuaded by the Claimant's arguments that in this instance there were an "aggregation of factors" which justified an order for indemnity costs, including:

  1. MGA’s insistence on e-disclosure being conducted by their in-house IT team and their apparent decision to ignore expert e-disclosure advice from a member of Condor (the in-house document review provider of MGA's solicitors);
  2. Inadequate supervision of the e-disclosure process by MGA's solicitors, despite assurances provided to the Court that they would do so (together with Condor);
  3. A series of technical failures that occurred during the e-disclosure process (including some described by Cabo's counsel as "rooky errors");
  4. The failure to react to and investigate certain “red flags”, including the discovery that a key email referred to in the particulars of claim had not been harvested (described by Cabo's counsel as “turning a blind eye” to the deficiencies); and
  5. The defective nature of the re-harvesting process once the deficiencies had come to light (conducted again by MGA's in-house legal team rather than an independent e-disclosure provider, with insufficient supervision).

The Claimant also applied for an Unless Order that, unless MGA complied with the terms of the disclosure order, their defence would be struck out and the Claimant entitled to judgment. However, the Judge refused to make such an order, emphasising that the purpose of unless orders is to enable the court to exercise a degree of control over the future conduct of the litigation (rather than to reflect previous (mis)conduct). She did not consider that MGA's past failures in relation to disclosure justified an unless order when seen in the context of the order now made. An independent e-disclosure provider would be undertaking all technical aspects of a re-harvesting exercise and there was no reason to suppose that they would fail to carry out that exercise properly. In addition, the previous disclosure failures were not deliberate and there was no reason to believe that they would occur again. The Judge did not consider any of MGA's conduct to be consistent with an intention to flout the current order.   

When looking at the issue of costs, the Judge explained that "costs thrown away" is limited to the cost of "work that has been done and which will have to be repeated for the relisted trial". As such, the full £1.28 million claimed did not all amount to "costs thrown away". However, "doing the best I can in all the circumstances" and acknowledging that "any sum I identify will have to be an estimate", the Judge ordered a payment on account of 45% of the £1.28 million claimed.

This case serves as a useful reminder of the significant obligations owed both by lawyers and litigants in the disclosure process, and the importance of conducting a well-planned disclosure exercise, with an appropriate audit trail. Where clients are using their own in-house teams to conduct data collection processes, solicitors will need to assess whether supervision or guidance from a specialist e-disclosure provider is needed. As this case illustrates, deficiencies in the disclosure exercise can lead to serious and costly consequences. 

The Judgment is available to view

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