E-disclosure: Knowing Value and Knowing Costs

September 18, 2014

The Jackson reforms have placed a renewed emphasis on costs budgeting in UK litigation, echoing the need for proceedings to be conducted at a ‘proportionate cost’ in the overriding objective (CPR 1.1(2)). In applicable cases, parties must file and exchange budgets when filing Allocation Questionnaires, or at least seven days before the first case management conference. The consequence of failing to do so, and the subsequent strict application of that consequence, has alarmed litigation professionals and their clients. CPR 3.14 states that the failure to file a budget will mean that the defaulting party will be deemed to have filed a budget comprising only of their court fee. The Court of Appeal sanctioned that punishment in Mitchell v News Group Newspaper [2013] EWCA Civ 1537, where the claimant failed to file his budget in time. This strict interpretation has been followed in a host of post-Mitchell cases including Durrant v Chief Constable of Avon and Somerset Constabulary [2013] EWCA Civ 1624, Singh v Singh [2013] EWHC 4571 (Ch), and Burt v Christie (10/202014).

There has by no means been a blanket approach. The court held the failure to sign a statement of truth in a budget to be nothing more than an ‘irregularity’ in Bank of Ireland v Phillip Pank Partnership [2014] EWHC 284 (TCC), and in Rattan v UBS EWHC 665 (Com) the court punished the claimant for taking a procedural point which only served to damage ‘the relationship of co-operation and trust which ought to exist between the parties’ legal representatives’. Nonetheless, the potential for scathing penalties for a contravention of cost budgeting requirements has put solicitors on alert to file budgets both accurately and in a timely manner.

That accuracy is necessary was underlined by Moore-Bick LJ when he described the agreed budget as providing a ‘prima facie limit’ on the sum of recoverable costs. One of the consequences of the need to be accurate has been the employment of e-disclosure specialists at an earlier stage of litigation. These providers are better positioned to advise on the estimated costs of disclosure – often a large component of litigation costs. Their experience and knowledge of sophisticated e-disclosure technology is making their role in litigation increasingly prominent.

So, how should lawyers budget for e-disclosure costs and what should they consider when selecting an e-disclosure provider? At a rudimentary level, costs must be easily understood by the client, with pricing to suit the nature of the case.  In addition, clients are increasingly looking for more value from providers – in the form of strategic, outcome-based advice.  

Costs – control & certainty

Predictable costs are critical for business decisions.  For too many involved in disputes, the unpredictability of edisclosure costs has long been a serious problem.  However, there are a few methods that can be employed to gain control and certainty.

Scoping requirements

To comply with disclosure duties, parties are required to conduct a ‘reasonable search’ for evidence.  In the early stages of a matter, it is therefore important to identify which individuals and which data sources may be relevant to the dispute.  Parties should also ascertain the availability and accessibility of data sources so that the proportionality of their collection can be considered.  Often, the best way to find out what evidence is available, and how it is stored, is to speak to the individuals involved in the case (known as the custodians of the documents) and the IT managers within the company.  Most e-disclosure providers will offer free advice to help scope where evidence may exist and to satisfy the legal requirement for preservation.  The scoping exercise helps to establish the totality of data under a company’s control and helps to provide an informed basis for what it is then proportionate to consider against the value of the claim. 

i)       Early data assessment

Once data has been collected, technology exists to perform an initial assessment.  Using search and analytics, the process informs case strategy by helping to identify the important documents as early as possible, as well as identifying any gaps in the data.  However, it also provides statistics in order to negotiate search criteria with the other side, which ultimately determines the number of documents that each party will have to review as well as costs.  The process of early data assessment has become more cost effective and widespread in recent years, especially in light of the Jackson reforms.  Whereas once parties would rely on broad assumptions for volumes of data and the rate of filtration that might be achieved, early data assessment now plays a big part in providing a more informed basis for establishing review budgets, in advance of the case management conference. 

ii)      Fees & assumptions

There are a number of aspects to consider in relation to e-disclosure provider fees including (but by no means limited to) strategic consulting, project management, data collection, data processing, early data assessment, data manipulation, data hosting, outsourced document review, data production and data archiving.  Generally, the more data there is, the more work is required.  However, there are so many pricing models that it is often difficult for lawyers, their clients and the courts to assess whether the costs are reasonable.  Some providers charge per hour; others charge per service, gigabyte or custodian, and what defines each unit can vary greatly.  Understanding these models has become especially important post-Jackson.   

An essential consideration is to ensure that you are comparing ‘apples with apples’.  Savvy law firms and companies are developing long-term partnerships with providers in order to ensure they have simplified pricing agreed up-front.  There is a move towards bundled, fixed price or subscription models and it is important to know what is included.  Using reliable assumptions from scoping and early data assessment will help form a basis for reliable fees.  The assumptions also provide valid reasoning for justifying additions to the budget should the scope of the dispute expand. 

Value – through strategic partners

At a deeper level, lawyers should distinguish between providers who ‘tick the boxes’ and those who can be a source of strategic value in proceedings.  Lawyers will be familiar with such language – their own clients will look to them to provide client-specific, commercial advice, in a cost-efficient manner.  Some examples of what to look for in this regard are provided below:

Size, experience & capabilities

There are now over 70 e-disclosure providers (services and/or software) operating in the UK.  Choosing between them can be difficult.  The decision will depend on a number of factors, such as the complexity of the legal issues, the locations in which the data resides, what technology and resources already exist internally, the experience of the lawyers or the in-house legal team, the timescales and deadlines involved, the technical work that needs to be performed and, of course, the cost.  Often different providers will have different aspects of the process that they are better at than others.  Ultimately, a panel of providers may, therefore, be most appropriate to cover different types of cases or work. 

i)                 End-to-end services

You should consider whether or not a provider can provide you with a full service – ie collect your client’s data, process (index, filter and de-duplicate) it, upload it onto their proprietary review platform, provide document review lawyers to categorise the documents, and produce the documents in the desired format.  In respect of the review platform in particular, it may be useful to consider whether all functionality is included.  If it does not, this could cause delays and add to the costs in addition to frustrating lawyers who may need to do something unexpectedly and have not signed up to the requisite package.  

ii)                A case-specific approach

Each case will have its own challenges, and e-disclosure providers should not simply provide a generic solution but one which takes into account the objectives of a case and the particularities of a data set.  Lawyers should observe whether or not prospective providers are making proactive suggestions based on the end client’s specific priorities. 

iii)               People are important

Aside from the technology, it is important to have confidence in good people.  By meeting your e-disclosure provider before a case arises, you will quickly be able to establish whether they will be the right fit to work with you.  Look for experts from a diverse mix of backgrounds who can offer advice from different perspectives in order to help you decide on the best strategy.  They can also highlight the benefits and efficiencies to be gained from using technology in order to win over stakeholders and justify any expenditure. 

iv)               Predictive coding

Otherwise known as automated review, technology-assisted review, or computer-assisted review, this new technology enables a computer to predict how to categorise documents based on how a lawyer has categorised a sample of the document set. This can increase both speed and accuracy, thereby reducing costs and enabling lawyers to review the most important documents first. This can be of huge strategic advantage, particularly in respect of assessing merits.  Statistics about the effectiveness and reliability of predictive coding are available and should be considered. 

v)                Consulting
Technology works best when it is combined with consulting.  Consultants will work in partnership with lawyers leveraging technology to ensure the most efficient results.  A lot of value can be achieved when the two groups get together.  Examples include scoping data requirements with the IT manager at a client site, conducting custodian interviews, performing early data assessment in front of a screen, designing workflows, exploiting predictive coding and designing disclosure templates.  Not only does consulting maximise value and provide a strategic advantage, it also allows lawyers to focus on the legal aspects of the case.   

It’s All About Partnership

Strategic partnerships are allowing lawyers to find new ways of using technology as part of their case strategy in disputes and the net effect is efficiency and cost control in litigation.  In the early stages of a case, early data assessment is now regularly used to find key documents, negotiate search criteria and inform review budgets.  During the review exercise, predictive coding is prioritising the review of documents, helping experienced lawyers to focus on the most pertinent documents first and leading to cost saving initiatives.  Perhaps one of the most interesting developments is when the two are combined and predictive coding is used as part of a full early data assessment.  The possibility of using this technology in collaboration with investment from third party funding is an exciting prospect that could provide an assertive and pre-emptive strike in the art of war. 

Hitesh Chowdhry is an Electronic Evidence Consultant at Kroll Ontrack

Tom Alexander is a Legal Consultant at Kroll Ontrack