Read KPMG’s new survey on corporate readiness for litigation and then read the judgment in Earles v Barclays Bank. You may spot a connection.
KPMG have published the results of the survey which Alex Dunstan-Lee previewed for us at IQPC’s Brussels conference in October. One of my reports of that event summarised what Alex said. Another of my articles ended thus:
Perhaps the biggest paradox, however, lies in the disparity between the number of people who accept that information management is important and the number who are actually doing anything about it. Coming to a conference like this would be a good start.
That is more or less the theme of KPMG’s report. It is called Is the legal department ready? Managing electronic data for litigation and regulatory readiness.
Although KPMG are charitable enough to call the results “mixed”, the reality is that the majority of companies are not ready to manage electronic data for those purposes or any other. The two primary conclusions which KPMG pick out read as follows:
There is a discord between high perceived levels of general readiness and considerable practical concerns, showing perhaps a lack of understanding of the concept of ‘readiness’, or a willingness to accept the concerns in the absence of obvious solutions.
Many respondents believe that records management policies and processes are unclear and unworkable. Only 19 percent mentioned the existence of policies or procedures for collecting and processing the data.
I see no point in adding my summary to KPMG’s own commentary and to the report itself which is linked from it. KPMG do these things rather well; the report is clearly laid out and with the primary conclusions easily accessible at the top, and no summary of mine will improve on how they put it.
Alex Dunstan-Lee made two points in his speech in Brussels which bear repeating. One is that when a company says that it has other priorities, it may well be right. He did not intend by that to mean that document retention and litigation readiness could ever be considered unimportant. He meant that a company which has weighed the risks against the costs, and the benefits of one course against the drawbacks of another, and considered all these things in the context of the other demands on resources, might reasonably conclude that something else takes priority. It is perfectly proper to reach the conclusion advisedly that the company will take the downsides on the chin if and when they arise. The key word here is “advisedly”, with its implication that a risk assessment has actually been made and that the competing priorities have been weighed.
That, however, is not what the survey appears to show. The alarming part is the passage I have quoted above to the effect that companies feel that they are generally ready but do not in fact have a grasp of the practical issues which will arise.
The judgment in Earles v Barclays Bank Plc  EWHC 2500 (Mercantile) (08 October 2009) perhaps provides a model scenario. Defending a claim, the bank was unable to produce the documents which went to the central issue of fact. They did not, as I understand it from the judgment, say that the documents had been destroyed, simply that it was disproportionately expensive to look for them. They won their case, thanks to the quality and credibility of their witnesses. The documents would not only have reduced the reliance on memory and credibility, but would have shortened the trial and may have made it unnecessary to have a trial at all. For all we know, that was the product of a careful assessment that such an outcome, including the loss of half their costs, was a risk worth running relative to the task of being ready for all eventualities.
It may equally have been the product of the kind of disconnect to which the KPMG report refers – insufficient communication between those who handled the transaction, the legal department and the IT department, with no one of them, still less all of them together, applying their minds to how such cases were to be proved. Barclays are in fact known to be taking document retention seriously, so perhaps they had not quite got to this department yet.
That is, as it were, their problem. Where it becomes a wider problem is where companies blame the law, their lawyers or the courts for things which they could have remedied for themselves. There is no suggestion that Barclays takes this line, but one gets tired of hearing complaints about the expense of litigation generally when companies are simply not ready to engage in it. No doubt lawyers and judges could sharpen up their act – you will find plenty to that effect on this site. If, however, (as I have put it before) a company delivers pigs-ear data to their lawyers and expects them to make a silk purse of evidence out of it in a hurry, then they must expect bills commensurate with the task.
What is new, and what will be the biggest single pressure on such companies, is that judges will no longer treat such costs as automatically allowable against a defeated opponent. Earles was primarily about a simple failure to find documents. It contained warning shots, however, about costs generally and about the requirement that they be proportionate to the objective. It is increasingly likely that a lawyer who seeks to explain that he had to wade through a mass of his own client’s documentation will meet the judicial question “Why?”.
Alex Dunstan-Lee’s second point was that whilst we may have much more data now than we did in the days of paper, that data is much easier to filter, sort and search through. The technology exists to do this, whether as part of a litigation readiness exercise or when the problem arises. Earles shows a judge (HHJ Simon Brown QC sitting as a High Court Judge) taking judicial notice of the fact that the technology exists:
The abundance of this ESI in cyberspace means that potential litigants, in particular organisations such as Banks at the current time, need to anticipate having to give disclosure of specifically relevant electronic documentation and the means of doing so efficiently and effectively.
One expects a major high street Bank in this day and age of electronic records and communication with an in house litigation department to have an efficient and effective information management system in place to provide identification, preservation, collection, processing, review analysis and production of its ESI in the disclosure process in litigation and regulation.
This earlier non disclosure of the e-mail records should have featured in the disclosure statement. It is accepted that [the defendant] was strictly under no procedural duty to do so in civil procedure law. However, “conduct’ before proceedings can be taken into account in dealing with costs under CPR 44.3 (5).
If you find yourself against an opponent who wants to screw you for the costs of his own client’s document management failures, these are the passages to point to.