Introduction from Tim Norman
Welcome to the Spring 2012 edition of Commercial Litigation Write. Our litigation newsletter explores the key issues of the day affecting commercial litigation and dispute resolution. In this, our inaugural edition, we consider the changing face of litigation in light of advances in technology and communication. In our first article we consider how the courts have readily accepted social media, such as Facebook as a means of serving documents on parties to litigation.
In our second article, we consider issues that may arise upon disclosure when dealing with the reams of information that can be held on servers and computers and the obligation on parties to litigation to search them. Finally, Adam Maher, a partner in our litigation department considers how a party to litigation can preserve or safeguard electronic evidence where there is a threat that it could be destroyed.
I do hope you find this issue of Commercial Litigation Write useful and informative.
If you require any further information on the items featured in this newsletter or indeed advice on any other commercial litigation matter, please contact one of our commercial litigation solicitors.
Serving proceedings via social media
Proceedings have to be started by issuing the necessary documents at court. The initial document is almost always a claim form but in some cases the document starting the claim is simply given another name because of the particular court in which the claim is started. For example, insolvency litigation claims for winding-up and bankruptcy are started by issuing a petition.
In all cases, however, it is a fundamental requirement that the proceedings are served on the other party, known as the defendant or respondent. In the past those proceedings had to be served personally on an individual defendant. In certain circumstances, that led to injustice for a claimant and an advantage to a defendant, who could avoid service. Rules were therefore introduced many years ago allowing service by post. Those rules have constantly been updated and amended over the years so that there are now a considerable number of ways in which a claim form can be served. For some time now the courts have allowed service of the claim form by fax or “other electronic means”.
There are, however, limits on service by electronic means. The party who is to be served, or their solicitor, must have previously “indicated in writing” that he or she, or their solicitor, is willing to accept service by fax or e-mail. “Indicating in writing” is not limited to a written letter of consent but includes the solicitor simply having a fax number or email address set out on their letterhead. Note that it is only such information on a solicitor’s letterhead which will be an “indication in writing”. Information on a defendant’s business letterhead is not sufficient.
Service on Companies, Limited Liability Partnerships and Directors
In addition to the court rules, there are differing methods of service on companies, LLP’s and directors which are provided for in legislation such as the Companies Act 2006 and the Limited Liability Partnerships Act 2000. Service of proceedings against company directors will be at the service address for the director, which is filed with Companies House.
Serving proceedings via social media
Despite the many methods already provided by a combination of court rules and legislation, the High Court has now recognised the social changes which have come about in society as a result of the widespread use of social media by allowing service of a claim form on a defendant via Facebook. In this case, the claimant had been unable to locate the defendant at his last known address and wanted to serve the proceedings by Facebook. It was ascertained that the Facebook account in question was active and that it belonged to the defendant. The Judge therefore allowed service of the Claim Form on the defendant by Facebook. That particular case involved a £1.3M claim brought by investment managers against their broker, one of their employees and one of the broker’s employees.
The courts have previously approved the service of court orders via Facebook and even allowed an injunction to be served on a defendant via Twitter because there was no easy way to identify him. The progress made in these areas demonstrates that the courts will recognise the increasing power of social networking sites and are willing to agree that there seems no reason why, if other methods of service have failed, service via social media would not be perfectly acceptable.
The volume of electronic documentation held by individuals and companies is increasing rapidly and the majority (over 90%) of all information is now created electronically. This has meant that in order to ensure that parties have access to all of the relevant documents in a dispute the rules on disclosure of electronic documents have been amended. The rules on edisclosure apply primarily to more high value cases expected to be allocated to the multi-track (claims of £50k or more). However, where e-disclosure is an important aspect of other cases, the court has discretion to order that these rules should apply.
Whilst it remains to be seen how strictly the courts will enforce these rules, the attitude of the courts in recent cases demonstrates that parties will face sanctions for non-compliance with the requirements of e-disclosure.
1. What does a party need to do to comply with the requirements of disclosure?
A party involved in litigation must comply with the requirements of standard disclosure (CPR 31.6) in that it must disclose all of:
a) the documents on which he relies and
b) the documents which –
i) adversely affect his own case
ii) adversely affect another party’s case or
iii) support another party’s case
2. What is a ‘document’ for the purposes of disclosure?
‘Document’ is defined at rule 31.4 of the Civil Procedure Rules as anything in which information of any description is recorded.
This broad definition of ‘document’ extends to electronic documents. It includes, for example, not only emails but other electronic communications such as text messages and voicemail, word processed documents and databases, and documents stored on portable devices such as memory sticks and mobile phones. In addition to documents that are readily accessible from computer systems and other electronic devices and media, it includes documents that are stored on servers and backup systems and deleted documents.
Metadata which is essentially data about a particular electronic document is also caught by this definition and will include, for example, the date and time of creation or modification of a word processing file, or the author and the date and time of transmission of an email. A party may have to incur costs in employing an IT specialist to recover and provide this type of data within the disclosure process.
3. What is the significance of electronic documentation to a party involved in a dispute?
Many documents only exist in electronic form and therefore will only come before the court if electronic searches are carried out. Electronic documents are also difficult to destroy. An email sent to a number of recipients will be recorded in the sender’s outbox, in all of the recipients inboxes and is likely to be backed up and stored by the recipient’s and sender’s company storage.
It is also relatively easy to search through electronic documents and to demonstrate to a court and other parties that a full search has been undertaken. Parties to a dispute often find that electronic methods of communication are used in a markedly different way to other correspondence. People will use text messaging,
instant messaging, twitter and facebook in a very different way to written correspondence and are usually more informal and unguarded in what they will say in using these mediums. Ensuring that such evidence is properly located and disclosed can therefore be of paramount importance.
4. What is a party required to do to comply with the rules on e-disclosure?
i) Preserve documents
As soon as litigation is contemplated, the parties should take reasonable steps to preserve all disclosable documents. This includes electronic documentation which would otherwise be deleted in accordance with a document retention policy or otherwise deleted in the ordinary course of business.
ii) Discuss and agree with the other parties an approach to e-disclosure
The parties are now required to engage in early and continued communication regarding the approach to e-disclosure. The parties are required to discuss any issues that may arise regarding searches for and the preservation of electronic documents before the first Case Management Conference. The Civil Procedure Rules now contain an Electronic Documents Questionnaire which is likely to assist the parties in fulfilling their obligations to agree the approach of the parties to e-disclosure. There is no obligation to complete the questionnaire but the court can order the parties to complete it under its general case management powers.
iii) Carry out a reasonable search for electronic documents
The primary source for disclosure of electronic documents is normally that data which is reasonably accessible to the parties. There are no strict rules as to the extent of the search which must be made and this will generally depend on the circumstances of the case. Parties should consider the following factors when seeking to agree the extent of a reasonable search:
(1) the number of documents involved
(2) the nature and complexity of the proceedings
(3) the ease and expense of retrieval of any particular document. This includes:
a) the accessibility and location of electronic documentation including email communications on computer systems, servers, back-up systems and other electronic devices or media that may contain such documents taking into account alterations or developments in hardware or software systems used by and/or available to enable access to such documents
b) the likelihood of locating relevant data
c) the cost of recovering any electronic documentation
d) the cost of disclosing and providing inspection of any relevant Electronic Documents and
e) the likelihood that electronic documentation will be materially altered in the course of recovery, disclosure and inspection
(4) the availability of documents or contents of documents from other sources and
(5) the significance of any document which is likely to be located during the search
5. What are the risks to a party who fails to comply with the obligations of e-disclosure?
It will not be an excuse to point to a document retention/deletion policy as a reason for nondisclosure. The court may draw adverse inferences if relevant documents are destroyed after litigation has been contemplated by the parties and this is more likely where proceedings have been commenced.
If a party gives disclosure of electronic documentation without first discussing with other parties how to plan and manage such disclosure, the court may require that party to carry out further searches for documents or to repeat other steps which that party has already carried out. This is likely to have the effect of increasing costs to that party and will also cause delay to the proceedings.
It is now more likely that the court will impose costs sanctions on parties who fail to comply at an early stage with the requirements to discuss and agree a joint approach to e-disclosure with other parties.
Due to the increased use of electronic data, a party to litigation must be aware of its duties to comply with the preservation of electronic documentation and to communicate with the other parties with a view to agreeing a joint approach to the disclosure of electronic documents from the outset of and throughout proceedings. The court’s attitude to this area is hardening and a defaulting party is likely to face a costs sanction for non-compliance.
Safeguarding electronic evidence
Enter any office or business environment these days and you are likely to find numerous computers and portable hand held devices containing many gigabytes of information. In this age of information and communication, the amount of data contained by e-mails on just one computer can be enormous.
In our article on e-disclosure in this edition of Litigation Write, we have considered the difficulties that this overload of information can cause in the disclosure process during litigation. Such a detailed record of business correspondence can obviously be vital in commercial litigation and this may lead an unscrupulous party to litigation to try to cover his or her tracks by destroying records. This raises the question, how can a claimant go about preserving evidence in electronic form held by another party where there is a risk that the evidence may well be deleted or disposed of?
One very effective tool available to a claimant is a search order (also known as a search and seizure order). In very limited circumstances, before litigation is commenced, a claimant may apply to court, without notifying the proposed defendant, to seek an order that they be allowed to attend the defendant’s business or residential premises, conduct a search of those premises and retain or copy any evidence which would be relevant to the dispute in order to preserve that evidence from the threat of destruction.
Clearly, this type of order is very draconian and has been described as being one of only two “nuclear weapons” available to a litigator (the other being an order to freeze assets).
A search order was formerly known as an “Anton Pillar” order pursuant to the case of the same name. In this case the court held that to obtain a search order, certain pre-conditions must be met:
- there has to be an extremely strong case;
- the defendant’s actions must have resulted in very serious potential or actual damage to the claimant’s interests;
- there is clear evidence that the incriminating evidence is in the defendant’s possession and that there is a “real possibility” that the defendant may destroy the same unless an order is given.
- in addition, an applicant must also establish that any harm that is likely to be caused to the defendant by the execution of a search order will not be excessive or out of proportion to the legitimate object of the order.
Clearly, given the draconian nature of the order and the potential for harm to be caused to the defendant by the execution of the order and the fact that a defendant (given the without notice element of the order) is unable to make representations to the court, an order will only be given in exceptional circumstances and safeguards are put in place. Further, the claimant will have to give what is known as a “cross-undertaking as to damages” to the court. In practical terms, this means that the person seeking an order must demonstrate that it has sufficient funds at its disposal to compensate the subject of the search if it is found at a later date that a search order should not have been given.
In the days before electronic communication, implementing a search order was a relatively straightforward affair. However, now that iPhones, Blackberries and laptops, in addition to traditional desktop computers and servers are ubiquitous, the process of implementing a search order is fraught with difficulty.
In addition to the traditional paper search of a business or residential premises, it is now necessary for a concurrent electronic search to take place. Careful thought, therefore, needs to be given to the likely documents that the claimant will hope to find and whether those documents are likely to be held electronically or in hard copy.
Given the size of hard drives on electronic devices these days, it is not practical for a search to be concluded of electronic items during the day of the search. However, the court will generally allow the defendant’s hard drives to be “imaged” by a suitable professional so that the mirror image of the electronic data can be taken away by the professional to be searched at a later date.
Even the process of imaging hard drives can be very time consuming and therefore the forensic computer analyst may well need to remove the hardware from the property to complete the imaging process.
Once the mirror images have been taken, any evidence within the electronic devices will have been successfully preserved. However, the claimant is not given carte blanche to simply search the imaged hard drives at his or her leisure. At the time of requesting the search order from the court, a claimant is required to detail the documents that he or she expects to recover. If it is anticipated that a search of electronic items will be necessary, a claimant should be prepared to provide a list of search terms which can subsequently be used for the actual search of the imaged devices.
Careful consideration should be given to those search terms so that the volume of documents retrieved pursuant to the search is not overwhelming but that any vital evidence is caught by the terms.
The use of search orders to preserve evidence is a vital tool for litigators. However, it is imperative that careful consideration is given before taking this route. Not only can the claimant face a large damages claim if it is later found that an order for a search should not have been given, but the costs can in some cases be prohibitive, given the requirement to instruct an independent supervising solicitor to oversee the implementation of the search order, in addition to the client’s legal representatives and forensic computer analysts.
Adam Maher and Tim Norman of Neil Myerson LLP were recently instructed to obtain a search order in a complicated case against a former employee of a client for conspiracy, theft, breach of restrictive covenants and misuse of confidential information. Our team successfully obtained the order and thereafter simultaneously searched residential, office and laboratory premises (including all electronic devices) and preserved and recovered overwhelming evidence for the client. The case settled successfully shortly thereafter.