BUDGETS , PROPORTIONALITY AND DISCLOSURE: THE RELEVANT TEST APPLIED WHEN A PARTY "GOES AWRY"
The judgment of Mr Justice Coulson in The Dorchester Group Ltd -v- Kier Construction Limited  EWHC 3051 (TCC) contains much of interest in relation to admissions and procedure. However there are also interesting observations in relation to the way in which disclosure had been given and how the budget had been exceeded for, as far as the judge was concerned, no good reason.
- The claimant was seeking further disclosure from the defendant.
- The case had been cost budgeted and £120,000 allowed for the defendant’s disclosure.
- However the defendant had incurred £500,000 in relation to disclosure.
- The claimant sought further disclosure.
- It was the defendant’s disclosure process that had gone awry and had led to disproportionate costs.
- The fact that the defendant had incurred excessive costs was not a ground for disallowing further disclosure.
- The tests of relevance and proportionality was applied to each of the specific applications. Some were allowed others refused.
THE JUDGE’S COMMENTS ON THE DISCLOSURE PROCESS
Before coming onto the disclosure application, I should set out a little of the background relating to disclosure in this case. That is in part because I have concluded that Kier’s disclosure process has, at least to an extent, gone awry.
When I fixed the budget costs in this case, Kier asked me to fix the budget for disclosure at £146,000. Following debate I identified a lower figure of £120,000. My figure reflected the fact that disclosure was to be on the standard basis, and that the relevant documents related to one sub-contract between Kier and Mitie, relating to one London building project. In my view, disclosure should not be difficult or time-consuming in a case like this.
That it has proved to be both is not due to any change in the underlying nature of the case. On the face of it, these difficulties would appear to be linked to the way in which Kier have gone about the disclosure exercise. That process has included:
(a) The use of Exigent Group Limited, a third party review team, based in South Africa, who employed 17 paralegals and 3 project managers on this case, to review 313,000 documents.
(b) Exigent’s review, which led to some 303,000 of those documents being coded ‘irrelevant’ and some 9,000 odd being coded ‘relevant’. Kier’s solicitors then reviewed every single one of the documents coded ‘relevant’, and decided that just 45% of them were in fact relevant. Thus, just under 5,000 documents were disclosed, under 2% of those reviewed by Exigent. Kier’s solicitors only reviewed a very small proportion of the documents coded ‘irrelevant’.
(c) An entirely separate review of electronic data held by Kier, on a platform called Kierdoc, was also carried out. It appears that the data in that category amounted to over 100,000 documents. Originally, just 20 of those were disclosed. That would suggest, on its face, that something had gone wrong. It now appears that further documents from Kierdoc have been supplied and as I understand it, there are more to come.
(a) The original order required disclosure by list by 24 July. Kier sought an extension of that order in early July and the extended date became 11 September 2015, just two and a half months before trial. Kier supplied their list on 11 September 2015.
(b) After Dorchester’s solicitor’s letter of 23 September 2015 pointed out some alleged deficiencies in the Kier disclosure, Kier’s solicitors accepted that the list was inadequate in their response letter of 2 October. Further documents were promised.
(c) Kier provided some further disclosure on 13 October, a month after the extended date, and only six weeks before trial.
(d) Kier accept that further searches etc are still ongoing. This would appear to include the outstanding Kierdoc data. It also includes all the documents emanating from a Mr Corbishley, who had never been mentioned before as someone who was relevant to this case (let alone a custodian for electronic disclosure purposes), but who has now emerged as a key witness.
In all the circumstances set out in the preceding paragraphs, it is perhaps unsurprising that Kier now say that they have spent something like £500,000 on disclosure. That is more than three times what they originally said it would cost. It is far beyond what I considered, and still consider, to be a reasonable and proportionate figure for Kier’s disclosure in this case.
THE JUDGE’S COMMENTS ON PRINCIPLES RELATING TO DISCLOSURE
4. APPLICATION FOR SPECIFIC DISCLOSURE
1 General Matters
Before going on to look at the categories of documents which are sought by Dorchester by way of specific disclosure, it is necessary to deal with a number of general matters of principle at the outset.
(a) Standard disclosure
Mr Williamson QC rightly pointed out that the court ordered standard disclosure in this case, and not any wider or more generous basis for disclosure. I remind myself that standard disclosure requires a party to disclose only:
“(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.”
He argued that in the circumstances, the court should not now permit the basis of disclosure to change, or that a different or wider basis for disclosure, such as that in the Peruvian Guano case, should be applied.
I accept that submission. As we shall see, that rules out a number of the categories of specific disclosure sought by Dorchester. But that does not mean that a search for other documents, which are within the standard disclosure category, should somehow be avoided. It is still necessary to look at the individual categories sought, item by item.
Mr Williamson QC also argued that any order for specific disclosure had to be proportionate and that the court had to consider:
(a) How burdensome any order would be to comply with;
(b) How much it would cost to comply with; and
(c) The likely benefit to either party.
He also made the additional observation that, if documents were missing in this case, then that was likely to redound to Kier’s disadvantage at trial, since they had the burden of showing what the undisclosed discount was, and missing information might well count against them.
Again I respectfully agree with both the test and the additional observation. But I do not accept that the mere fact that Kier have spent so much more on disclosure than they originally intended means, of itself, that no further order should be made on the grounds of proportionality. As I have said, I have formed the view that the disproportionate costs of the Kier disclosure exercise are due to the way in which the exercise itself has been carried out.
Neither do I accept the proposition that proportionality has to be considered against the background that the only disputes in this case go to quantum. As I have said, that may ultimately end up being what happens but, at the moment, on the face of the pleadings, there is more in issue than simply quantification. Furthermore, I think one or two of the categories with which I am concerned relate directly to quantum, even if (as I also accept), the amount in dispute in this case may be modest in TCC terms.
Mr Williams QC complains that the application for specific disclosure was premature because it was made on 7 October, when Dorchester’s solicitors knew that further disclosure had been promised.
Whilst in some circumstances that would make the application premature, the difficulty in the present case is that, because of the delay to the disclosure exercise, which led to the order of 7 July, there was always going to be a relatively short period between the exchange of the list of documents and the trial. In those circumstances, it seems to me that Dorchester were entitled to make this application, if they considered (as they obviously did) that the disclosure was inadequate. I therefore reject the submission that the application was made prematurely
THE APPLICATION OF THOSE TESTS TO THE FACTS OF THE CASE
“1. All documents evidencing the agreement between Kier and Mitie in respect of discount arrangements recorded by Mr Fullex in the “Main Financial Procurement Schedule” dated 9 October 2009.
2. All documents evidencing the terms of the “side agreement” between Kier and Mitie.
3. All reports and drafts of reports prepared and issued by Mr Dathan in respect of the undisclosed discounts obtained by Kier in connection with the 45 Park Lane Project.
4. Documents relating to the “Account” to which Mr Fitzjohn referred in his email of 21 February 2014 in which an undeclared discount of 10% for the M&E Works on the 45 Park Lane Project was recorded.”
It is fairly conceded by Mr Hopkins (Kier’s solicitor) that these documents are of a type which would be anticipated by the parameters of standard disclosure. I agree with that. Further, I have been shown contemporaneous documents which expressly refer to an agreement (or a ‘side agreement’) between Kier and Mitie; a ‘latest report’ from Mr Dathan, which clearly presupposes the existence of earlier reports, and ‘the account’ of Mitie. Thus, all of the documents sought in categories 1 to 4 would appear to exist (or have existed).
On that basis, subject to the test of proportionality, an order for specific disclosure of the documents in Categories 1-4, or a statement revealing the searches that have been made for them and the failure of those searches, is made out. In my view, such an order is proportionate. That is because the documents are, or may be, important. They go not only to Kier’s detailed knowledge of the undisclosed discount at the relevant time, but they also go to the accuracy or otherwise of the figure of £686,000 odd, on which Kier’s case rests. The documents that I have seen indicate that the figure may have been known to be higher than that, even at the time. So that is plainly a relevant matter, even if (which I do not accept) the only issue in this case is quantum. Furthermore, it seems to me to be proportionate to require the exercise to extend to those four categories of documents, since disclosure is ongoing (as Mr Hopkins fairly concedes), and further documents are currently being sought and searched for.
Accordingly, Kier’s application in relation to the first four Categories of documents succeeds.
3 Categories 5, 6, 7, 8 and 9
Categories 5, 6 and 7 are no longer pursued. Categories 8 and 9 are described as follows:
“8. All correspondence and documents passing between (a) Kier or Kier’s representatives (legal or otherwise) and (b) Mitie or Mitie’s representatives (legal or otherwise) concerning the negotiation of the final M&E sub-contract sum and leading to the execution of Mitie’s Sub-Contractor’s Final Account Statement on 25 September 2015.
9. All documents referred to in paragraph 8.2 of Pinsent Masons’ letter of 2 October 2015 concerning an agreement reached between Mitie and Kier in respect of the “M&E measured works and variation account on 12 October 2015″.”
However, Mr Selby made clear in his oral submissions that the documents in these two categories were sought only insofar as they related to the retention monies of £19,000 which may have been retained by Kier as another kind of undisclosed discount.
In relation to these documents, I am satisfied that the proportionality test has not been made out. Documents have been disclosed which show that this money may not have been returned by Kier to Mitie: that may indicate an undisclosed discount. That is where the matter rests. It would not be proportionate to require Kier to look for other documents which may go to the same point, particularly given the relatively modest sum involved. I therefore decline to make any order in relation to those two Categories.
4 Category 10
Category 10 is described as:
“10. All trading agreements entered into between Kier and its key manufacturers and suppliers which are relevant to the M&E Works on the 45 Park Lane Project and provide for the payment of discounts.”
I make no order in respect of this Category. First, it is not clear whether or not there are in fact any relevant trading agreements between Kier and their suppliers. Secondly, I do not believe that Dorchester is claiming any undisclosed discounts by reference to such trading agreements in their pleading. Thirdly, I do not consider that these documents fall within standard disclosure. Fourthly, I consider that it would not be proportionate to require searches to be undertaken in respect of these documents. Accordingly, the application in respect of this Category fails.
5 Category 11
Category 11 is described as follows:
“11. Minutes of Board Meetings, agendas and documents issued for Board Meetings of Kier or Kier Group relating to the undisclosed discounts obtained by Kier in connection with the 45 Park Lane Project.”
In his oral submissions Mr Selby said that, although Kier’s solicitors had searched the minutes Kier London, Kier Construction and Kier Group, they had not searched the records of Kier Southern, Kier South Eastern (who may be the parent company of Kier Wallis, who Mr Selby described as ‘the rogue entity’) and Kier Regional. He also said that this search had been limited to undisclosed discounts, not wider matters such as unethical conduct.
In my view, this is one of the categories of documents that is caught by the principle that I have outlined above, namely that the order for disclosure in this case was standard disclosure and nothing wider. The application for Category 11 is, I think, speculative. It is based on a Peruvian Guanotype test. Moreover, the Board meeting minutes which have been disclosed have revealed nothing of any relevance at all, so it seems to me to be disproportionate to require searches to be carried out on the basis that something may turn up in the Board meeting minutes of another related company. That seems highly improbable so no further costs should be incurred on this aspect of the case.
6 Category 12
Category 12 is described as follows:
“12. All documents contained in the HR records of Mr Peter Kitchener insofar as they relate to discounts obtained by Kier on the 45 Park Lane Project.”
Mr Hopkins deals with this at paragraph 10 of his witness statement. In essence, he says that all the documents within this Category relating to undisclosed discounts have been provided.
Mr Selby suggested that it was not appropriate in the circumstances of this case for the court to take this at face value because of the other examples of Kier’s double dealing, not least the admitted failure to pass on the discounts in the first place. He also said that the solicitors might well have adopted too literal a view of what was being searched for.
I do not think that those criticisms are relevant or fair. It seems to me that a proper distinction must be drawn between Kier (who are obviously in difficulties on certain aspects of this litigation, because of what the documents reveal) and their solicitor, who is an experienced officer of the court. If Mr Hopkins says that something has been searched for, and nothing relevant has been identified beyond that which has been disclosed, then the court is obliged necessarily to take that at face value. There is simply no reason for the court to take a contrary view. Furthermore, it does not seem to me to be proportionate to require any further searches in this Category.
7 Categories 13 and 14
Category 13 is not pursued. Category 14 is in these terms:
“13. All emails and other documents sent to from or copied to Mr Steve Bowcott regarding (a) the undeclared discounts or (b) the “confession” document provided by Mr Bowcott to the Claimant on 30 March 2012.”
Mr Hopkins has provided some documents in this category and he has said that there is at least one further document to come. It seems to me, therefore, that his evidence properly accepts that this is a relevant Category. Moreover, since Mr Hopkins will have to look at Categories 1, 2, 3 and 4 for search and further disclosure purposes, it seems to me that (even though this element of disclosure is still ongoing) it is appropriate to require him to deal in his witness statement with this Category as well. It may be that the one further document which he has promised will be the end of the matter, but it seems to me that it adds very little by way of cost or effort for the matter to be finally resolved in his further statement. Accordingly, to that limited extent, I allow the application in respect of Category 14.
8 Witness Statement
Accordingly, a witness statement is required to deal with Categories 1 to 4 of the specific disclosure application, together with the short commentary in respect of Category 14. Mr Williamson QC is obviously right to say that the court cannot require the disclosure of documents which simply cannot be found, although, in relation to Categories 1 to 4, it would seem to me that some further documents would certainly appear to have existed at the relevant time. But whether they exist now or not, Mr Hopkins needs to deal with those Categories (but only those Categories) in his witness statement.
That is not the end of the application because, not only do Dorchester seek disclosure in the various Categories that I have now been through, but they also seek a witness statement which requires four further, separate elements. Those are identified as follows:
“1. Identify the members of “Kier’s review team” (as identified in paragraph 1.3 of Pinsent Masons letter of 18 September 2015 and 1.7 of Pinsent Masons letter of 2 October 2015), their employer, role and level of qualification.
2. Provide details of any “briefing that was given to “Kier’s review team”, including the briefing referred to in paragraph 1.7 of Pinsent Masons letter of 2 October 2015.
3. Identify how many of the 313,041 documents reviewed by Kier’s review team were marked as relevant by that team (as identified in paragraph 1.7 of Pinsent Masons letter of 2 October 2015).
4. Identify the total number of “non-relevant” documents reviewed by “Kier’s core legal team” (as identified in paragraph 1.8 of Pinsent Masons letter of 2 October 2015).”
It does not seem to me appropriate to make any order in relation to those four requirements. Item 1 has been dealt with by the evidence on this application: Kier’s review team was Exigent. Item 2 (the briefing) seems to me to be privileged, and I did not understand Mr Selby to take a different view. In addition, requiring Kier to provide the information under Items 3 and 4 would be wholly disproportionate and would not add to the material or information which is likely to lead to a resolution of this dispute between the parties. I agree with Mr Williamson QC that to require Kier’s solicitors to answer items 3 and 4 is to set them a kind of examination paper, and they were entitled to decline to complete such a paper.