We looked earlier at the decision in  Cabo Concepts Ltd v MGA Entertainment (UK) Ltd & Anor [2022] EWHC 2024 (Pat) Mrs Justice Joanna Smith, on the issue of costs.  That costs decision arose because of major failings by the defendants in relation to disclosure.  These failings in themselves led to the order for costs on an indemnity basis.  They are an object lesson as to the mistakes that can be made.

There is no suggestion that the deficiencies in disclosure were deliberate, but there is no question that they were serious.”



The judge explained the nature of the case and the defendants’ failure in relation to disclosure.

    1. In this matter, Cabo, a UK toy start-up, claims damages and declaratory relief against MGA, a leading supplier of toys around the world, in respect of alleged breaches of statutory duty (including abuse of a dominant position and unjustified threats of patent infringement proceedings) which are said to have caused the failure of Cabo’s business.
    1. The nature of the claim and, in particular, the nature of the conduct of which Cabo complains, is of importance in understanding the significance of the disclosure failures that emerged shortly before trial. In a nutshell, Cabo alleges a secret anti-competitive campaign on the part of MGA to stifle the launch by Cabo of collectable toys marketed under the “Worldeez” brand which were likely to compete with one of MGA’s own blockbuster brands. Cabo only became aware of the conduct of MGA when certain emails dating back to May 2017 between Mr Laughton (senior vice president of MGA UK) and The Entertainer, a leading toy retailer in the UK, were passed to Cabo by representatives of The Entertainer.
    1. Key disclosure custodians, including Mr Laughton and Mr Larian (MGA’s Chief Executive Officer), are said to have been the main protagonists in the collusive and unlawful conduct alleged against MGA, which unlawful conduct was principally implemented and/or recorded in emails sent by MGA and telephone calls made to leading toy retailers. It therefore appears to be no exaggeration to say that competition law infringements and unlawful threats under IP law are capable of being evidenced by individual emails. It is also no exaggeration to say that, with the exception of the emails that were passed to them by The Entertainer, Cabo had no visibility around the conduct of MGA. In the circumstances, it was inevitable that the proper conduct of the disclosure process by MGA would be of the utmost importance.
    1. Against that background, the revelation shortly before trial that MGA’s disclosure exercise was defective was of the utmost concern to Cabo. As Mr Spector explains in his sixth statement dated 8 June 2022, Cabo reluctantly concluded that despite the passage of 5 years since the events with which its claim was concerned, there was now no prospect of a fair trial and an application to vacate the trial was necessary. Although MGA was initially ‘neutral’ in the face of this application, it ultimately consented, acknowledging that the trial had to be vacated because (as Fieldfisher explained in a letter to the court of 8 June 2022): “…it appears that, pending further explanation [as to the deficiencies in the disclosure exercise], the parties and the Court cannot have full confidence in the exercise conducted by [MGA]”.
    1. Further to the June Order, a substantial volume of evidence has been served by MGA designed to identify and explain the deficiencies in its disclosure. I shall return to some of the detail in a moment, but for present purposes I note that it now appears to be common ground that approximately 40% of documents were missed by MGA at the harvesting stage (just over 1 million documents were harvested with something in the region of 800,000 documents having been missed), that nearly half of all potentially relevant documents were never even reviewed and that a number of warning signs were (inadvertently) overlooked. MGA presently believes that a major cause of the deficiencies was an indexing error in Microsoft Outlook when harvesting former employees’ emails, meaning that larger data sets, in particular, failed to filter correctly. MGA has also identified issues with the harvesting of current employee’s emails, albeit that the lack of any audit trail means that it has not been able to explain why the data was incomplete.
    1. There is no suggestion that the deficiencies in disclosure were deliberate, but there is no question that they were serious. By way of example, the original document harvest for Mr Laughton produced 204,950 documents whereas a recently conducted re-harvest has produced 657,996, an increase of over 200%. The deficiencies led, at the eleventh hour, to the collapse of the trial and to Cabo finding itself in the unenviable position of having another two years to wait for determination of its claim.
  1. Pursuant to the July Order, the harvesting exercise and application of keyword searches will be repeated by an independent e-disclosure provider engaged by MGA for that purpose. Any additional documents which the independent provider identifies as responsive to keyword searches (i.e. documents not already reviewed) will then be reviewed by Fieldfisher and disclosed to Cabo. Once the exercise has been completed, reports will then be filed by the independent provider and by Fieldfisher identifying the documents harvested and confirming compliance with the terms of the July Order. No doubt very substantial further costs will be expended on all sides.