Electronic Disclosure: The new Practice Directions and Financial Services Industry
The advice that professional advisors provide is always dependent on the quality of the information made available to them. Given that the vast majority of this information is now Electronically Stored Information (ESI), the manner in which ESI is collected, filtered, reviewed, produced and presented is now a strategic component of the majority of litigation, competition and regulatory cases.
The volumes of ESI are now so significant that the focus on how to determine a ‘reasonable and proportionate’ approach in dealing with them correctly, have been emphasised by Lord Justice Jackson following his review of civil litigation costs and is now reflected in the new Practice Directions.
The new Practice Direction came into effect on 1 October 2010 and significantly broadens the scope of information that is now subject to disclosure. It also defines the manner in which Electronically Stored Information (ESI) must now be considered.
With so much current political and regulatory focus on the financial services industry, consider the challenge of responding to the following request.
Please provide...
‘All information relating to 15 named individuals and ‘all employees involved in discussions with........’ — this includes EMails, Word documents, Spreadsheets, Power Points, hard-copy files, expense accounts, digital tapes, diary entries;
- All information relating to 12 identified companies — this includes all ledgers and SAP systems;
- All information relating to 70 identified keywords from a period between January 1995 and August 2002;
- Delivery in a specified electronic file format on specific electronic media;
- In 90 days.’
Failure to provide such information in a timely fashion has seen numerous recent examples of multi-million pound fines levied by the regulators against various Banks who have not adequately implemented their records management programs, and have not effectively conducted their email collection and production to a satisfactory level.
Historically the types of data referred to above may have been difficult, slow and expensive to retrieve and analyse, but constant advancements in technology make this process significantly more timely, accurate and cost effective.
Clearly the above information request is seeking answers to questions such as:
the chronology and relationships between events, people, places, within the structured and non-structured data;
- who created and sent what emails to who, where and when;
- how these were communicated, to who, where and when;
- what the recipient(s) did with that information;
- looking at potential links between emails, individuals and transactions and vice versa;
- looking at individual bank accounts and movements of monies;
- looking at any anomalies and/or patterns in payments on particular periods to particular individuals and/or companies;
- re-creating IT and data environments to look at who did what with what during specific periods.
Solicitors have historically dealt with documents in their traditional category i.e. hard copy documents, and latterly emails with their attachments. In computer terms this is unstructured data.
The CPR defines a document as including deleted information, metadata, databases, phone records, texts, accounts information, business records, SAP, email, financial records, word documents, instant messaging. In computer terms this is a mixture of structured and unstructured data, and at the outset of a case, some or all of it may be relevant.
Having to deal with this increased volume and range of ESI introduces other areas such as how and where the data is stored; how accessible it is - data protection and data privacy being key concerns; the key word strategies that are being applied to filter the ESI; how does the structured and unstructured data inter-relate; what review methodologies are being implemented across the various professional teams; and how will the case be presented in Court.
Consequently it is essential to plan what the appropriate e-disclosure strategy should be at as early a stage as is possible, as failure to do so can have very significant legal and costs implications, as recent cases including the Cable & Wireless v Digicel have illustrated.
Digicel v Cable & Wireless (in which the argument and costs arising from a lack of agreement between the parties on electronic disclosure were clearly highlighted) highlighted the lack of co-operation between parties involved in disclosure exercises which clearly encompassed a requirement to search and produce electronic documents.
In order to assist the parties, the new Practice Direction identifies a number of key areas requiring consideration. These include:
- Creation of lists of disclosure documents;
- Giving disclosure by providing documents and metadata;
- Presenting documents and other digital media in Court.
The new PD also provides a questionnaire that requires consideration when scoping an electronic disclosure exercise. Its completion is not a mandatory requirement but can be used if the parties believe it will be beneficial, or where the Court orders its use due to a failure on the part of the parties to agree the issues associated with electronic disclosure.
The questionnaire envisages detailed discussions between the parties as to:
- the categories of documents within their control;
- the extent of their proposed searches for documents (including a summary of the various computer systems which are/are not to be searched);
- the document preservation policies and any particular issues that may arise in accessing some/all of the relevant documents (e.g. the use of encryption, legacy computer systems etc.);
- the tools and techniques that they propose to use in order to reduce the costs and burden of electronic disclosure. These include limitation of disclosure to certain categories, date-ranges, types or custodians of documents; the use of agreed keyword searches and software tools; methodologies to be used to identify duplicate documents; the use of data sampling; methods for identifying potentially-privileged documents (and the redaction thereof where appropriate) as well as a protocol for dealing with any such documents which are inadvertently disclosed;
- set out their proposals as to the format in which inspection / production of documents will be made (and the agreed metadata fields to be exchanged);
- discuss/agree whether staged disclosure would be appropriate / beneficial;
- the basis for charging / sharing the costs of providing and reviewing electronic documents (and whether such arrangements are final, or subject to reallocation when an order for costs is made);
- consideration is to be given as to the potential use of a neutral electronic repository for the hosting of the parties’ electronic documents.
The questionnaire includes a statement of truth and this will likely need to be signed in most cases by in-house counsel. It should be noted that whoever signs the statement of truth will be expected to attend the first Case Management Conference and any subsequent hearing at which disclosure is likely to be considered.
For many clients and their advisors, the completion of this type of questionnaire will take them into new areas and their knowledge of the practical aspects of how Information Technology functions may well be tested. Many may request assistance from their own IT staff or seek external specialists.
Some practitioners and IT service providers have expressed concern regards the additional time and costs that could arise from implementing the questionnaire. In reality, the questionnaire is likely to be predominantly used in those cases where the accurate assessment of large volumes or complexities of electronic documents is vital to ensuring that the parties are able to navigate the electronic disclosure process in the most efficient and cost-effective manner possible.
The increasing complexity of cases and the categories of what the CPR defines as a ‘document’ make it impractical to consider printing out all of the information to present in Court. Whilst document (traditional) display systems are increasingly common place, they can only go so far in presenting multiple complex data formats.
In financial services related cases, the evidence tends to be highly complex and the need to develop formats for the effective presentation of the varied materials and complex evidential interrelationships and chronologies that such cases present, is fast becoming a key component in the effective presentation of today’s increasingly broader range of ESI.
The benefits of explaining (and being able to prove) the following areas with the correct technological consultancy, expertise and presentation support can be directly measured by the clarity of complex evidence and the speed the case progresses:
Flows of funds through various bank accounts at various times on various days;
- Key roles and responsibilities individuals played;
- Emails and documents that supported the processes of authorisation;
- How the records were transmitted through the organisation, where we they stored, by whom;
- Where a particular file was secreted in a computer, and how;
- Who sent what to who, when and how.
The new PD provides a structure of how the Courts currently wish to deal with ESI, from its collection to Courtroom.
Today’s businesses, especially those in the financial services industry, are entirely dependent of the effective use of technology. The PD provides an effective guide as to how ESI, must be secured and copied, to be reviewed, produced and potentially presented in the Courtroom.
Those still coming to terms with the latest PD may wish to consider a number of factors such as:
Businesses creating increasing amounts of structured and unstructured data;
- The manner and locations in which this information is stored and retained;
- Cases becoming ever larger and more complex;
- Fraud becoming ever more sophisticated;
- The speed and power of technology rapidly progressing with the size and cost decreasing.
In doing so they may well conclude that the CPR may soon need further and regular amendment.
Jarrod Haggerty is a partner and Kelvin McGregor-Alcorn is a director in Deloitte’s analytic and forensic technology team.