Sir Geoffrey Vos clarifies aspects of the Disclosure Pilot, which commenced on 1st January 2019 and in progress in the Business and Property Courts for two years, under the provision of Practice Direction 51U in the second supplement of the White Book 2018.
The first Claimant, McParland & Partners Limited, is a company that provided financial planning and advisory services. The Defendant, Mr Stuart Whitehead, is an Independent Financial Adviser, who was employed by the first Claimant from 20th August 2008. Whilst the Defendant worked for the first Claimant, he delivered financial planning and advisory services to their clients.
On 18th June 2014 the first Claimant allegedly entered into an Enterprise Firm Agreement with the second Claimant, Fairstone Financial Management Limited. On the same date, the second Claimant entered into an adviser contract with the Defendant. The Claimants alleged that the Defendant breached the non-compete and confidentiality terms in his contract of employment.
A disclosure guidance hearing took place as, in compliance with paragraph 11(1) of PD51U, the parties had made real efforts to resolve disputes between them and the absence of guidance from the court before a case management conference (“CMC”) is likely to have a material effect on the court’s ability to hold an effective CMC. Sir Vos reserved judgment in order to clarify some aspects of the way in which the Disclosure Pilot is intended to work.
Under the Disclosure Pilot, there is a two-part test: first, Initial Disclosure, then the parties may request for Extended Disclosure.
Initial Disclosure, under PD51.5, requires each party to provide to all other parties at the same time as its statement of case an Initial Disclosure List of Documents that lists and is accompanied by copies of—
(1) the key documents on which it has relied (expressly or otherwise) in support of the claims or defences advanced in its statement of case (and including the documents referred to in that statement of case); and
(2) the key documents that are necessary to enable the other parties to understand the claim or defence they have to meet.
In addition, or alternatively to Initial Disclosure, the parties may request for Extended Disclosure of documents. In all cases, Extended Disclosure must be reasonable and proportionate having regard to the overriding objective, including the factors mentioned under paragraph 6.4 of PD51U.
The parties must provide a list of Issues of Disclosure as well as which of the five Models of Extended Disclosure under paragraph 8 of PD51U is sought for each issue. “Issues for Disclosure” means for the purposes of disclosure, under paragraph 7.3 of PD51U, 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. It does not extend to every issue which is disputed in the statements of case by denial or non-admission.
The Models of Extended Disclosure refer to the way in which a party is requested to consider what documents to disclose to the court in relation to an issue.
Model A requires disclosure of known adverse documents only. No new search is needed.
Model B requires the similar disclosure as Initial Disclosure, except, unlike Initial Disclosure, there is no page or document limitation in Model B. Similar to Model A, a new search is also not needed.
Model C is request-led search-based disclosure, which requires the disclosure of particular documents or narrow classes of documents relating to particular issues for disclosure. This model is similar to the approach adopted in international arbitration under the Redfern Schedules.
Model D is narrow search-based disclosure, with or without narrative documents, which requires documents which are likely to support or adversely affect a party’s claim or defence or that of another party in relation to one or more of the Issues for Disclosure. This is equivalent to the standard disclosure under the non-pilot regime and includes documents which provide background or context to material facts or events.
Model E is wide search-based disclosure, requiring documents that fall within Model D or documents which may lead to a train of inquiry which may then result in the identification of other documents for disclosure. Model E is only to be ordered in exceptional cases.
Paragraph 8.2 of PD51U states that there is no presumption that a party is entitled to Extended Disclosure and no Model will apply without the approval of the court.
Sir Vos chose this case to provide general guidance and clarity on how the Disclosure Pilot should be implemented. The focus was on three categories, which were
1) The identification of Issues for Disclosure;
2) The approach to choosing between disclosure models; and
3) Cooperation between the parties.
The identification of Issues for Disclosure
Issues for Disclosure are very different from Issues for Trial. Issues for Trial are all factual or legal issues which are disputed in the statements of case. Issues for Disclosure are issues to which undisclosed documentation in the hands of one or more of the parties is likely to be relevant and important for the fair resolution of the claim [para 46]. The relevance is on the documentation to assist the court with the main claims rather than mentioning all elements of dispute.
The identification of Issues of Disclosure should not be a mechanical exercise of going through the pleadings to identify issues that will arise at trial for determination. Rather it is the relevance of the categories of documents in the parties’ possession to the contested issues before the court that should drive the identification of the Issues for Disclosure [para 44].
Sir Vos highlights at paragraph 46 that Issues of 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” (Sir Vos’s emphasis). The Chancellor also pointed out that Issues for Disclosure do “not extend to every issue which is disputed in the statements of case by denial or non-admission”. They will almost never be legal issues, and they will not include factual issues that are already capable of being fairly resolved from the documents available on Initial Disclosure [para 47]. Additionally, they do not need to be detailed, numerous or complicated [para 48].
Originally the parties in McParland requested 16 Issues of Disclosure, when Sir Vos stated there were really only 3 Issues of Disclosure. These were: (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 (“takeover issue”); (2) what did the Defendant do that was in breach of his obligations to the Claimants (“breach issue”); and (3) what losses did one or other of the Claimants suffer as a result of those breaches (“loss issue”)?
The important function of the Issues of Disclosure List is to enable the review of documents to be conducted in an orderly and principled manner. Therefore, the review should be a far more clinical exercise than standard disclosure [para 49].
The approach to choosing between disclosure models
In relation to the takeover issue, this was plainly a complex and longwinded affair, generating much documentation, most of which would have no relevance to this dispute. Thus, this issue was a classic one for Model C disclosure [para 50].
In relation to the breach and loss issue, Sir Vos noted that the parties proposed a variety of Models C and D for some of the proposed issues, which over-complicated the process. Considering the mistrust between the parties, the simplest and most appropriate course was to agree Model D disclosure, since that makes up the central nub of the dispute.
“The Disclosure Pilot does not require compliance to be time-consuming or costly. It just requires the parties to consider what documents they are likely to hold and to what issues those documents are relevant” [para 51].
Cooperation between the parties
Whilst Sir Vos had no intention of criticising the parties in this case, it was nonetheless stressed that there is a need for a “high level of cooperation between the parties and their representatives in agreeing the Issues for Disclosure” [para 53]. The Disclosure Pilot is built on cooperation, but some parties 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.
Sir Vos offered affirmation at paragraph 54 to other members of the judiciary by stating that “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.”
The Disclosure Pilot is intended to operate proportionately for all kinds of cases in the Business and Property Court; compliance need not be costly or time-consuming. Thus, it is imperative for parties to recognise the difference between Issues of Disclosure and issues for determination at trial. Unduly granular or complex lists of Issues for Disclosure should be avoided [para 57].
It is interesting to note at paragraph 6.5 of PD51U it states that where Model D or E is proposed, the parties should be ready to explain to the court why Model C is not sufficient. This indicates a clear shift towards international arbitration-style disclosure of request-led search-based disclosure. The potential value of this is the cost benefit, as there may be a smaller number of pages and documents to search for and review.
Nonetheless, whilst the clinical exercise of review should encourage a decrease in the amount of unnecessary workload involved in litigation, parties should still choose the models carefully and rationally, in order to simplify the process rather than complicate it. For example, in McParland, Model C was appropriate for an issue where vast documentation was likely to exist, most of which was irrelevant to the actual dispute, and Model D was appropriate to the two central issues, in which there was significant mistrust between the parties.
Furthermore, an important message in McParland was that the Disclosure Pilot should not be used as a litigation tool or tactic between legal advisers, but rather a timely and cost-effective procedure to assist the courts in the pursuit of justice. Should the parties attempt to use it as a litigation advantage, they “will face serious adverse costs consequences” [para 58].