The Chancellor has taken the opportunity to clarify aspects of the disclosure pilot which is currently underway in the Business and Property Courts under practice direction (PD) 51U, and to emphasise that disclosure under the pilot should not become a disproportionately costly exercise: McParland & Partners Ltd v Whitehead [2020] EWHC 298 (Ch).

The disclosure pilot requires the parties, in most cases, to identify and seek to agree a list of Issues for Disclosure, and which of five disclosure “models” should be adopted for each issue. These range from model A disclosure, which is limited to known adverse documents, through to model E, which is essentially pre-CPR “train of enquiry” disclosure. According to the minutes of a November 2019 Commercial Court Users’ Group meeting, the model most commonly adopted in commercial cases is model C, “request-led search-based disclosure”, which is similar to the approach often adopted in international arbitration. Model D, “narrow search-based disclosure” is the equivalent of “standard disclosure” in non-pilot cases, ie documents likely to support or adversely affect any party’s case in relation to the issue(s) identified.

The Chancellor’s main message appears to be that parties should avoid over-complicating their approach to identifying the Issues for Disclosure and choosing between the disclosure models. In particular:

  • The Issues for Disclosure are not the same as the issues to be determined at trial; they should be limited to those issues the court will need to determine with reference to contemporaneous documents. So for example they should not generally include legal issues, and in many cases they need not be numerous, detailed or complicated. In the present case the parties had agreed 16 Issues for Disclosure when, in the simplest terms, there were really only three.
  • The parties had also over-complicated the process by proposing a variety of models C and D for the five breach issues they had identified. The simplest and most appropriate course was to agree model D for questions of breach and loss since these were the central issues in dispute. Much time and expense would have been saved if the parties had adopted that approach.

The Chancellor also emphasised the need for a high level of cooperation, saying that some parties had sought to use the pilot as a “stick with which to beat their opponents” (though he did not make that criticism of the parties and their solicitors in the present case). Such conduct, he said, is entirely unacceptable and will be met with immediately payable adverse costs orders.

The operation of the disclosure pilot is more fully described in this article by Julian Copeman and Maura McIntosh, first published in the September 2018 issue of PLC Magazine.

Background

The defendant was an Independent Financial Adviser who had been employed by the first and/or second claimant (the second claimant having taken over the first claimant’s business). The claimants brought proceedings alleging that the defendant had breached non-compete and confidentiality clauses in his service agreement. The defendant filed a defence asserting the unenforceability of those clauses and denying the alleged breaches and any loss to the claimants.

The parties provided Initial Disclosure under PD51U, ie they disclosed the documents on which they had relied and the key documents necessary to enable the other parties to understand the claims or defences advanced in their statements of case.

They agreed 16 Issues for Disclosure, and agreed the appropriate models for disclosure to be given in relation to nine of those issues. They could not, however, agree the appropriate models for the remainder.

A Disclosure Guidance Hearing was listed before the Chancellor. PD51U provides that a Disclosure Guidance Hearing can take place where (i) the parties have made real efforts to resolve disputes between them, and (ii) the absence of guidance from the court is likely to have a material effect on the court’s ability to hold an effective case management conference (CMC) or the parties’ ability to carry out the court’s case management directions effectively. The maximum hearing length is stated to be 30 minutes, but in this case it was listed for one hour.

Decision

The Chancellor said he hoped it would help parties in other cases if he explained certain misunderstandings that had arisen in the present case in relation to:

  1. The identification of Issues for Disclosure
  2. The approach to choosing between disclosure models
  3. Cooperation between the parties

1. The identification of issues for disclosure

Identifying the Issues for Disclosure should not be a mechanical exercise of going through the pleadings to identify issues that will arise for determination at trial: Issues for Disclosure are very different from issues for trial. Paragraph 7.3 of PD51U provides that Issues for Disclosure are “only those key issues in dispute, which the parties consider will need to be determined by the court with some reference to contemporaneous documents in order for there to be a fair resolution of the proceedings” (the Chancellor’s emphasis). They do “not extend to every issue which is disputed in the statements of case by denial or non-admission”.

In this case, the parties had included certain issues which were, when properly analysed, issues of law or construction of agreed actions. The only documents that would be relevant to those issues were the documents already produced on initial disclosure (ie the contracts and the pleaded letters and emails). While such issues would properly appear in the list of issues for trial, there was no reason they should appear in the list of Issues for Disclosure.

In this case, the Chancellor said, there were really only three Issues for Disclosure: (1) what was the commercial relationship between the first and second claimant and how and when did the second succeed the first as the trading entity engaging the defendant; (2) what did the defendant do that was in breach of his obligations to the claimants; and (3) what losses did one or other of the claimants suffer as a result of those breaches?

The Chancellor commented that, in many cases, the Issues for Disclosure need not be numerous, detailed or complicated. They will almost never include legal issues, or factual issues that are already capable of being fairly resolved from the documents available on initial disclosure. They also have an important function beyond the CMC, as they enable the document review to be conducted in an orderly and principled manner:

“Under standard disclosure, the test was whether a document supported or adversely affected a party’s ‘case’. This was far too general. Under the Disclosure Pilot the reviewer has defined issues against which documents can be considered. The review should be a far more clinical exercise.”

2. The approach to choosing between disclosure models

The Chancellor demonstrated how the process of choosing between disclosure models should be approached using examples from the present case. On the first issue identified above, ie how and when the second claimant succeeded the first claimant as the trading entity engaging the defendant, the Chancellor commented that the takeover of the first claimant had plainly been a complex and longwinded affair which no doubt generated much documentation, most of which would be irrelevant to the present dispute. That issue was, he said, a classic one for model C (ie request-led search-based disclosure).

In relation to questions of breach, the parties had proposed a variety of model C and model D (ie narrow search-based disclosure) for the five breach issues they had identified. That approach, the Chancellor said, over-complicated the process. The simplest and most appropriate course was to agree model D disclosure for the breach issue(s), since that made up the central nub of the dispute. The same went for the loss issue. Much time and expense would have been saved if the parties had approached their task in this way.

3. Cooperation between the parties

The Chancellor said he had no intention of criticising the parties in this case, but wished to emphasise the need for a high level of cooperation between the parties and their representatives in agreeing the Issues for Disclosure and completing the DRD. The Disclosure Pilot is built on cooperation as its terms make clear. He added:

“It is clear that some parties to litigation in all areas of the Business and Property Courts have sought to use the Disclosure Pilot as a stick with which to beat their opponents. Such conduct is entirely unacceptable, and parties can expect to be met with immediately payable adverse costs orders if that is what has happened. No advantage can be gained by being difficult about the agreement of Issues for Disclosure or of a DRD, and I would expect judges at all levels to be astute to call out any parties that fail properly to cooperate as the Disclosure Pilot requires.”

Anna Pertoldi
Anna Pertoldi
Partner
+44 20 7466 2399
Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608