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18th Sep 2013
The applicant former company directors (D) applied for actions brought against them by the respondent liquidators in respect of alleged fraudulent trading and trading whilst insolvent to be struck out pursuant to an unless order made regarding disclosure.
There had been many documents potentially relevant for disclosure. The liquidators proposed an e-disclosure method; D did not object. An e-disclosure provider (U) scanned and uploaded hard copy documents into a database. That was searched for relevant documents. A list of relevant documents was then produced by U's paralegals including information such as a document description, subject and date where that information was available. The court made an unless order requiring disclosure by a certain date. Disclosure lists were served on time. Two categories of relevant documents were missing, the liquidators having mistakenly thought those documents had been sent to their solicitors and uploaded and that they had merely retained copies. After the disclosure date, a supplementary list was produced including those documents.
D argued that (1) the liquidators had not complied with the unless order, as shown by the missing categories of documents having been found by their search but not disclosed; (2) the list had not complied with CPR r.31.10 as the information provided was inadequate, and the liquidators could not rely on CPR PD 31B to justify having left some data fields blank.
1) The primary obligation imposed on the liquidators by the order had been to conduct a reasonable search and list the relevant documents, namely those complying with CPR r.31.6, found in that search. That was to be done in a reasonable manner, reasonableness depending on the factors in r.31.7(2). A search not carried out in good faith would not be reasonable. However, a search conducted in good faith which was fair and proportionate given the number of documents, the nature and complexity of the case, the ease and expense of retrieval and the significance of any document likely to be located, would be reasonable and compliant. The task of deciding what was reasonable was one for the court, Digicel (St Lucia) Ltd v Cable & Wireless Plc  EWHC 2522 (Ch),  2 All E.R. 1094 applied. To show that a disclosing party was in breach, it was not enough merely to show that it had within its control relevant documents which were not mentioned in the list. It would have to be established that no reasonable search had taken place. The deficiencies relied on had to be so significant that it could be said that a reasonable search simply had not happened. The fact that documents which had been found and not disclosed did not mean there had been a breach: there was no basis for saying that the liquidators' view that they had anything other than copies of documents held elsewhere had been unreasonable at the time. Further, the obligation to disclose copies did not apply to copies made for the purposes of the dispute. There was no justification for saying that the search had not been reasonable. It had been extensive and made in good faith. It had been explained in detail to D and based on a methodology ventilated in court when the unless order was made. It had been completed within the time specified. Although relevant documents had been missed, there was no suggestion that that was a result of bad faith, and it did not support an inference that the search had not been reasonable (see paras 37-43 of judgment). (2) Practice Direction 31B was concerned with electronic documents; a document held in the control of a party as a piece of paper was not an electronic document. If the liquidators had unilaterally decided to use an electronic disclosure approach and then used PD 31B as a means of covering up a serious inadequacy in their disclosure, they could expect little sympathy from the court, but that had not happened. D had been aware that the liquidators proposed to conduct the disclosure exercise in the manner they had, and had not objected to a methodology involving e-disclosure. In those circumstances it would be absurd to say that PD 31B did not apply (paras 56-59). For some of the documents in the list, the information provided in some fields was sparse. The liquidators had given evidence that that was because the information available to U's paralegals had been limited; there was no basis for saying that that was wrong. The requirement to identify a document within r.31.10(3) was not intended to require a party to create information which did not exist or could not reasonably be ascertained. The liquidators had taken reasonable and proper steps in good faith to identify the relevant documents in the list (paras 59-60).
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