Pyrrho Investments Ltd and Another v MWB Property Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Master Matthews |
| Judgment Date | 16 February 2016 |
| Neutral Citation | [2016] EWHC 256 (Ch) |
| Court | Chancery Division |
| Date | 16 February 2016 |
| Docket Number | Case No: HC-2014-000038 |
[2016] EWHC 256 (Ch)
IN THE IDGH COURT OF JUSTICE CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Master Matthews
Case No: HC-2014-000038
James Knott (instructed by Reynolds Porter Chamberlain LLP) for the Claimants Clive Freedman QC (instructed by Simons Muirhead & Burton) for the Second Defendant Andrew George QC (instructed by Taylor Wessing LLP) for the Fourth Defendant
The other parties were represented by their solicitors, but did not address the court
Hearing date: 2 February 2016
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this
Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
On 2 February 2016 I made an order in this claim on an application concerning the parties' obligations regarding electronic disclosure ('e-disclosure'). That order recited the court's approval of the use in the present case of what has here been called 'predictive coding' in the disclosure process. In the circumstances, the parties were quite right to seek the court's approval. Because of the novelty, in this jurisdiction at least, of such use, I said that I would give my reasons later for that approval. These are those reasons. I straight away record my gratitude to counsel and solicitors involved for their assistance.
The claim form was originally issued on 201March 2013. The First Claimant was a significant shareholder in the Second Claimant. However, the First Claimant sued as assignee of the Second Claimant, in respect of payments that had been allegedly made by the Second Claimant as a result of the breach of fiduciary duty by the Second to Fifth Defendants as directors of the Second Claimant. The Second Claimant is joined in case of any issues about the assignment. The value of this part of the claim is said to run into the tens of millions of pounds. The Claimants say that some of the payments enured for the benefit of the First Defendant, which is alleged to be liable to account for them.
In addition to the claims about payments made through breach of fiduciary duty of the Second to Fifth Defendants, there is a specific claim in respect of a dividend that was declared by the Second Claimant on 11th June 2009 in the sum of approximately £9 million. The Second Claimant was formerly listed on AIM. Its ultimate parent company was listed on the main stock exchange, but went into administration in November 2012.
The claim was amended in 2014 so as to include a second group of claims. These complained that the Second to Fifth Defendants caused the Second Claimant to enter into transactions with companies in which they themselves were secretly interested, and thereby extracted some £28.5million from the Second Claimant over a period of five years. The claim form has since been re-amended on one further occasion. The trial in this matter is now fixed for June 2017.
Disclosure
Disclosure, and in particular e-disclosure, can be a problem in any case. It is a particular problem in this case. It is common ground that the bulk of relevant documents are likely to be in the control of the Second Claimant. The Second Claimant controls back-up tapes on which data from email accounts used by the Second to Fifth Defendants are stored. To give an idea of the scale of the exercise, the total number of electronic files restored from the back-up tapes of the Second Claimant was originally more than 17.6 million. This has since been reduced to some 3.1 million by a process of electronic de-duplication. But it is still a large and costly number to search.
Disclosure is governed by CPR Part 31 and its Practice Directions. I set out some of these provisions later. It is also governed by the directions given by the Court in the particular case. In this case, paragraphs 10–15 of the consent order of 7 August 2015 made the following directions concerning disclosure:
"Disclosure
10. The parties shall by 4.30pm on Friday, 26 February 2016 give standard disclosure by simultaneous exchange of documents by lists and categories. Any requests for inspection or copies of disclosed documents shall be made within 14 days of service of the lists and shall be responded to within 7 days of receipt of the request.
Electronic Disclosure
11. The parties shall seek to agree, if possible, the scope of the reasonable search to be carried out by each party for electronic documents. Further:
1. the Defendants shall respond to RPC in relation to electronic disclosure (in particular RPC's letters dated 25 February 2015 and 6 March 2015) by no later than 4.30pm on Friday 13 November 2015;
u. the Claimants shall by no later than 4.30pm on Friday 20 November 2015 provide the Defendants with a reply to the responses received pursuant to paragraph 11.i above.
12. In the event that the parties have not reached agreement in relation to the scope of the reasonable search for electronic documents to be carried out by any party by 4.30pm on Friday 27 November 2015 any outstanding issues shall be considered and determined at the Disclosure CMC referred to below.
Disclosure CMC
13. The Parties shall within 7 days of the date of this order seek to fix a further CMC (the "Disclosure CMC") for the first mutually convenient date after 27 November 2015 with a time estimate of 2.5 hours.
14. The purpose of the Disclosure CMC shall be to determine:
1. any issues remaining in relation to electronic disclosure, in accordance with paragraphs 11 and 12 above; and
u. (as between the Claimants and the Third Defendant) the appropriate mechanism to be adopted in relation to documents current!y held in quarantine by Stroz Friedberg which have been the subject of conespondence between the Third Defendant and the Second Claimant.
15. Any issues referred to in paragraph 14.i shall be dealt with first in time at the Disclosure CMC and the First, Second, Fourth and Fifth Defendants need not attend the remaining part of the Disclosure CMC (which shall be given over to dealing with the issue refe1Ted to in paragraph 14.ii). In the event that there are no issues arising under paragraph 14.i for determination at the Disclosure CMC the First, Second, Fourth and Fifth Defendants need not attend the Disclosure CMC."
(The Disclosure CMC contemplated by those directions was in part held on 2 February 2016 and the order referred to in paragraph 1 above was made. The hearing contemplated by paragraph 14.ii has yet to be held.)
Under the Civil Procedure Rules, where the obligation of a party to Part 7 proceedings is to give standard disclosure (see CPR rule 31.6), that party is obliged to make a search for disclosable documents other than those on which the party relies. "Disclosable documents" means those in the party's control and falling within certain categories. For this purpose, "document" clearly includes a computer file. The search obligation is set out in rule 31.7:
"(1) When giving standard disclosure, a party is required to make a reasonable search for documents falling within rule 31.6(b) or (c).
(2) The factors relevant in deciding the reasonableness of a search include the following—
(a) the number of documents involved;
(b) the nature and complexity of the proceedings;
(c) the ease and expense of retrieval of any particular document; and
(d) the significance of any document which is likely to be located during the search.
(3) Where a party has not searched for a category or class of document on the grounds that to do so would be umeasonable, he must state this in his disclosure statement and identify the category or class of document."
The rules in Part 31 are supplemented by two Practice Directions. One of them Practice Direction B, deals withe-disclosure. A number of its provisions deal with the "reasonable search" under rule 31.7. Two in particular are relevant here:
"20 The extent of the reasonable search required by rule 31.7 for the purposes of standard disclosure is affected by the existence of Electronic Documents. The extent of the search which must be made will depend on the circumstances of the case including, in particular, the factors referred to in rule 31. 7(2). The parties should bear in mind that the overriding objective includes dealing with the case in ways which are proportionate.
21 The factors that may be relevant in deciding the reasonableness of a search for Electronic Documents include (but are not limited to) the following —
(1) the number of documents involved;
(2) the nature and complexity of the proceedings;
(3) the ease and expense of retrieval of any particular document. This includes:
(a) the accessibility of Electronic Documents including e-mail communications on computer systems, servers, back-up systems and other electronic devices or media that may contain such documents taking into account alterations or developments in hardware or software systems used by the disclosing party and/or available to enable access to such documents;
(b) the location of relevant Electronic Documents, data, computer systems, servers, back-up systems and other electronic devices or media that may contain such documents;
(c) the likelihood of locating relevant data;
(d) the cost of recovering any Electronic Documents;
(e) the cost of disclosing and providing inspection of any relevant Electronic Documents; and
(f) the likelihood that Electronic Documents will be materially altered in the course of recovery, disclosure or inspection;
(4) the availability of documents or contents of documents from other sources;
and
(5) the significance of any document which is...
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