May 22, 2019

An Update On The New Disclosure Pilot Scheme (Practice Direction 51U)

On 1 January 2019, a new two-year disclosure pilot scheme started in the Business and Property Courts across England and Wales. The scheme is ambitious, aiming to address the costs and challenges of the existing disclosure regime, to embrace the use of legal technology and to encourage a more bespoke approach.

Application of the Pilot Scheme

The pilot applies to new and existing proceedings in the Business and Property Courts across England and Wales, including the Commercial Court but with notable exceptions, such as the Admiralty Court.

The scope of its application to cases commenced before 1 January 2019 has recently been clarified in the case of UTB LLC v Sheffield United which confirms that the pilot will apply to all subsisting proceedings in the Business and Property Courts even where the claim was issued and an order for standard disclosure was made prior to 1 January 2019 under the old CPR rules. Upon the Defendant's application for (extended) disclosure in April 2019, the Court held that although the existing order was not to be disturbed, the application was to be governed by the new rules and accordingly the Court applied the relevant paragraphs of PD51U. Practically, this decision demonstrates that even parties currently operating under a pre-pilot disclosure order need to be aware of the new rules and how they may affect any application.

Looking ahead, although the pilot scheme runs for two years, it will apply beyond the end of this period for the duration of the proceedings – unless they transfer out of the Business and Property Courts to a different court that makes a different disclosure order.

Summary of Pilot Scheme

The pilot is being used to test a set of new disclosure rules, set out in Practice Direction 51U, which it is hoped will result in a more efficient and flexible disclosure process, tailored to the individual requirements of each case.

The key changes being introduced by the pilot are:

  • Duties of the parties: The duties of the parties to preserve documents have been codified and apply under the pilot as soon as a party knows that it is or may become a party to proceedings that have been or may be commenced. This is a different test to the current test of preserving documents "as soon as litigation is contemplated" and requires disclosure to be considered at an earlier stage. In particular, the parties must take reasonable document preservation steps, including: suspending document destruction processes, obligations to notify employees and former employees of the requirement to preserve documents and taking reasonable steps to prevent third parties who hold documents on a party's behalf not to destroy documents. Given the prescriptive nature of this duty, parties and their legal representatives should carefully record compliance. Other duties cover acting honestly, undertaking a search for documents in a responsible and conscientious manner and using reasonable efforts to avoid providing irrelevant documents to the other side (i.e. "data dumping"). Legal representatives have separate duties, which include assisting the client to meets its Disclosure Duties and reviewing documents to ensure they are privileged.
  • Disclosure of known adverse documents: Once proceedings have started, parties are under a duty to disclose known adverse documents (unless they are privileged) regardless of any disclosure order made. An adverse document is one which contradicts or materially damages the disclosing party's argument or version of events or supports the other side's. Known adverse documents are the adverse documents within a party's control of which that party is "actually aware" without undertaking any further searches. For companies, it is the awareness of current and former employees with accountability/responsibility for the events that are the subject of the case, or for the conduct of proceedings, which is relevant. Although there has been some suggestion that  this may result in negative behavioural changes - perhaps through  parties who previously may have searched for adverse documents to assess case prospects instead choosing to remain ignorant by not carrying out searches - the reality is that adverse documents have always been disclosable and there have always been litigants who are inclined to move quickly and reactively before carrying out full searches, with the result that adverse documents emerge at a later stage. Equally, it seems unlikely that this change in the rules will change the behaviour of those more cautious parties who like to assess their case prospects before litigating.
  • Initial Disclosure: At the same time as serving their statements of case, parties will be required to provide electronic copies of the key documents they rely on and that are necessary for the other party to understand the case they have to meet and file an Initial Disclosure List of Documents. Initial Disclosure will not be required if it would involve the provision of more than the greater of 1,000 pages or 200 documents by either party. It is likely that many high-value, complex disputes will not require Initial Disclosure due to the volume of documents. It is not clear how these limits are to be calculated, for example do multi-page spreadsheets count by page or as a single document? Is each message in an instant messaging chat a new document or should the relevant conversation be printed and the pages counted? Such questions may be answered by cooperation between parties but that is not always possible in litigation. Alternatively, the parties may agree (which agreement can be overruled), or the court may direct that it is not required. Tactically, parties may be reluctant to incur time and costs disclosing documents at this early stage so this requirement may reduce instances of litigation being deployed to bring the other side to the table or lead to many parties agreeing not to make Initial Disclosure and waiting to request Extended Disclosure.
  • Extended Disclosure: Within 28 days of the final statements of case, each party should state whether or not it is likely to request Extended Disclosure. If this is the case, the parties will need to produce and work to agree the Disclosure Review Document (DRD), which guides the continuing disclosure process. The first section of the DRD requires the parties to identify the list of Issues for Disclosure, i.e. issues in dispute about which the court will need to see contemporaneous documents in order to make a determination (not simply every issue in dispute). It is against this list that the parties and the court consider the five "Models" of Extended Disclosure:
Model A  Disclosure confined to known adverse documents.
Model B Limited disclosure, including the documents falling under Initial Disclosure, where they have not already been provided.
Model C  Request-led search-based disclosure. This is the disclosure of particular documents or narrow classes of documents relating to particular issues for disclosure, resembling Redfern Schedules commonly produced during the document production stage in international arbitration.
Model D Narrow search-based disclosure, with or without narrative documents (being those documents relevant only to the background or context of material facts/events rather than the Issues for Disclosure). The equivalent of standard disclosure under the existing regime.
Model E Wide search-based disclosure. This will only be ordered in exceptional cases and extends Model D disclosure by also requiring parties to disclose documents which may lead to a train of inquiry resulting in the identification of further documents for disclosure, similar to the pre-CPR Peruvian Guano test.

Different Models may be ordered for different Issues for Disclosure and different Models can be used for each party on the same Issues. There is no longer a 'default form' of disclosure, previously standard disclosure/Model D. There is also no presumption that either party is entitled to Extended Disclosure. The value of this new approach is that any disclosure order can be tailored to the demands of the particular case. Further, any order must be reasonable and proportionate, with regard to the nature and complexity of the issues, the importance of the case, the likelihood of documents existing with probative value, the number of documents, the cost of searches and the financial position of each party. It seems likely that Models A and B will only be suitable for the most straightforward of cases, and extensive Model E disclosure will be rare.  In most cases, the question will be whether the courts are willing to order Model C rather than Model D disclosure which presents little change from the current position. 

  • Technology: The use of legal technology is a striking feature of the pilot, which places express duties on parties to consider the use of technology to conduct cost effective disclosure and discuss the use of technology-assisted review software and techniques. The DRD requires parties to consider which analytics tools/methods they intend to use and whether technology or computer assisted review tools (TAR) will be used. Analytics includes techniques such as email threading, de-duplication, language identification, clustering and concept searching. TAR makes use of more complex technological tools, recognising that jurisdictions around the world, including the English Courts in the landmark decision of Pyrrho Investments v MWB Property, have started sanctioning the use of predictive coding in disclosure in order to avoid the huge expense incurred from manual searches of millions of documents. While embracing such advances, the DRD also makes clear that such tools are still reliant on the input of senior lawyers. We should not overestimate the cost savings legal technology will bring, especially while the tools are still developing in sophistication and  the guidance and direction of experienced lawyers will be required to manage the process and risks. However, active participation in the use of legal technology as envisaged by the pilot should provide a useful indication of the value of such systems in reducing the cost and time burden of the disclosure process at the end of the two year period.
  • Cost budgeting: As is clear from the factors the court is required to consider and the motivations for introducing a new disclosure regime, the costs of disclosure are an important feature and parties will be required to provide an estimate of the likely costs of disclosure in the DRD so the court can make the appropriate order.

Wholesale Cultural Change

The intention behind the Jackson Reforms introduced in 2013 was to reform and deal with disclosure more proportionately; however, in practice, this did not happen, with standard disclosure remaining the norm. The intention now is for the new scheme to bring about a wholesale cultural change leading to a disclosure process that is more efficient and flexible, able to adapt to individual cases and reflect developments in technology. In UTB LLC v Sheffield United, the Chancellor took the opportunity to comment on the pilot generally emphasising that it was intended to effect a cultural change "driven by reasonableness and proportionality".

Although the intention is clear, there are a number of areas where the rules themselves lack clarity and where the new regime appears more complex than the current one. It will be necessary to see what approach the Courts take in practice with some of these issues and litigants should be prepared for some level of uncertainty as the scheme is implemented. However, the benefit of a pilot scheme is that the experience of and feedback from parties and their legal representatives, should be taken into account in the development of the final version.

The greatest cultural shift for litigants will be the practical effects of the introduction of Initial Disclosure and the ongoing duty to disclose known adverse documents. Parties will have to think about disclosure earlier and may be required to disclose documents not referred to in their submissions at a stage when the issues are still developing during pleadings. The separation between the duty to disclose known adverse documents and any disclosure order made means these documents may not be produced in context, which in turn may encourage parties to gravitate towards the more extensive Models of Extended Disclosure.  If this means that the vast majority of cases follow Model C or D disclosure, it may turn out that the overall impact of the pilot will be smaller than hoped.

Whatever the eventual outcome of this initiative, we are likely to see continuing large-scale changes to litigation processes in the coming years as the English Courts adapt to the challenges presented by ever-increasing volumes of digital data and by artificial intelligence in order to ensure the provision of world-class litigation services.