It Will Never Happen to Me

December 13, 2010

Most sensible people believe that only fools think ‘it will never happen to me’. In this context, ‘it’ can be anything from a burglary to a heart attack – and nasty judicial sanctions for a failure to disclose evidence efficiently. Unlike most sensible people, I think ‘it will never happen to me’ is a defensible philosophy in many situations. So there was something of a clash of views when I had the opportunity to speak to Martin Carey and Tracey Stretton of Kroll last week as part of an exploration of their report on the recent survey Kroll had commissioned on Electronically Stored Information (ESI).

I was quick to recognise that I was out of my depth when it came to the intricacies of e-disclosure and ESI so I focused on something that I did understand. The report expressed some surprise about the fact that only 9% of UK respondents were worried about judicial sanctions in view of the strong reaction there had been in some recent cases. But my own view was that most people may have got it just about right. After all, add together every judicial sanction over the last few years, multiply the cost by fourteen and add the number you first thought of – and you still don’t come up with more than a fraction of the cost of implementing a strong ESI strategy across the corporate sector as a whole. I suggested that these people are making a calculation and that they don’t see disaster as all that likely.

Of course I speak as a sceptic when it comes to precautions, and insurance in particular. I blame my father for this; his attitude to risk is exemplified by the fact that he took his children out on stormy nights to run through the spray along the sea-wall, wearing macs and wellies as buoyancy aids, and advocated the abolition of the fire service (‘cheaper to let buildings burn down’). It has certainly affected me and, if I had my way, I would be free of life insurance and all forms of home insurance, but the combination of domestic nagging and the overwhelming civic duty (which seems to be almost universally endorsed) to keep the financial services industry in the lap of luxury has led me to waste vast slices of income protecting against events that have never happened. I am so disturbed about the wasted expenditure that I am seriously contemplating suicide on the eve of my 65th birthday so as to get my money’s worth from all those payments for life insurance.

So, when I challenged Martin and Tracey by suggesting that their industry rather overstated the risk, it was with real conviction. {i}Earles v Barclays{/i} is wheeled out with such frequency that it is hardly surprising that I have started to wonder: is that all there is? OK, there is {i}Goodale v MoJ{/i} and the Digicel case but still, over the period in question, that does not add up to much. If making a serious assessment of the balance between the cost of implementing a rigorous ESI strategy and the potential cost of judicial sanctions, a company might well be justified in saying ‘it will never happen to me’.

I was pretty much convinced by the Kroll team’s reaction. Tracey quite rightly pointed out that the current climate pointed towards a likelihood of a dramatic increase in the implementation of judicial sanctions. The environment in the USA has changed, with 39% of disclosure opinions addressing sanctions, and lawyers over there (and more and more of their clients too) are coming to realise that they really do need to be able to have policies in place or they will lose cases. Judicial sanction in the USA is frequent and widespread – perhaps more so in some states than others, but it amounts to a real hurdle nevertheless.

Moreover, and crucially, both Martin and Tracey emphasise the level of regulation in the corporate environment as a major factor that requires strategies so closely allied to those required for litigation readiness that what is actually required is just an extra step, not a whole journey. In that context, the additional cost is a marginal cost and the ‘sanction’ of damage to the reputation of the company, allied to the potential for enormous financial penalties, is a more intimidating one than any judicial comment or costs order. In any case, they report that the mood of many UK judges, some of whom are very tech savvy and very vocal about e-disclosure practices, points to personal costs orders against negligent lawyers becoming more common. I wish no ill on the unlucky recipient of such orders but suspect that a bit of nastiness really has to come before appropriate strategies are put in place almost universally. Judges, and others, may have to be cruel to be kind.

Indeed, Martin and Tracey were so convincing, especially about the need for relatively small companies to use technology to protect against high level risk in data protection and regulatory terms, that I seriously considered my own document strategy. But it was Friday, and I decided a better strategy was just to open the wine early. It’ll never happen to me.