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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Smailes & Anor v McNally & Ors  EWHC 2882 (Ch) (27 September 2013)
Cite as:  EWHC 2882 (Ch)
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Fetter Lane, London, EC4A 1NL
B e f o r e :
| IN THE MATTER OF ATRIUM TRAINING SERVICES LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
AND IN THE MATTER OF KIMBERLY SCOTT SERVICES LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
(1) ROBERT DEREK SMAILES
(2) STEPHEN BLANDFORD RYMAN
(as Joint Liquidators of ATRIUM TRAINING SERVICES LIMITED)
|(1) JOHN McNALLY
(2) GEORGE MACLEAN
(3) JOHN ALSTON DICK (in respect of 3878 of 2011 only)
|AND IN THE MATTER OF CONNOR WILLIAMS LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
|(1) ROBERT DEREK SMAILES
(2) STEPHEN BLANDFORD RYMAN
(As Joint Liquidators of CONNOR WILLIAMS LIMITED)
(3) CONNOR WILLIAMS LIMITED (in liquidation)
|(1) PAMELLA McNALLY
(2) VERONICA MACLEAN
(3) TARA BIRCH (NEE McNALLY)
(4) PAUL McNALLY
(5) DAVID MACLEAN
(6) CAROLINE MACLEAN
(7) TRACEY WILLIAMS
(8) JOHN ALSTON DICK
Simon Davenport QC and Daniel Lewis (instructed by Isadore Goldman) for the Liquidators
Lucy Frazer QC (instructed by Pinsent Masons) for the First to Sixth Respondents in the CWL action
Hearing dates: 17th, 18th September 2013
Crown Copyright ©
Mr Justice Birss:
"9. Isadore Goldman then set to work, the solicitor with day to day conduct of the matter on behalf of the Liquidators being Mr David Gibbs. As I shall explain in more detail later in this judgment, he contacted Howes Percival in early December, but it was only on 3 January that the lists produced by Howes Percival were received in incomplete form, and it was not until 14 January that the boxes of documents were delivered. On 23 January, Mr Gibbs conducted an initial review of the boxes, and on 25 January a meeting took place with Mishcons at which Isadore Goldman put forward two methodologies for consideration, their preference being for one whereby an e-disclosure provider would be engaged to scan and upload the documents into a database, or "e-disclosure platform". There is a dispute, which I cannot resolve, whether agreement to proceed in this way was reached at the meeting, but it is at least clear that no objection was raised by Mishcons, and it was they who suggested the use of a company called Unified as the e-disclosure provider. Mr Gibbs then obtained quotations from three providers, including Unified, and on about 4 February 2013 Unified were selected.
10. It soon became clear to Mr Gibbs that it would be impossible for Unified (or any of the other providers whom he had approached) to complete the necessary work by 2 April 2013, and he intended to raise the question of an extension of time with Mishcons as early as 7 February. Unfortunately, however, a letter which he drafted on that date was never sent, and it was not until 7 March that Isadore Goldman wrote to Mishcons requesting their agreement to an extension. By that stage, Mr Gibbs had undertaken a spot check of the files with the help of junior counsel, and they had concluded that certain categories of documents should be excluded from disclosure on grounds of irrelevance. On that basis, the total number of boxes of documents for disclosure, including the boxes in the CWL proceedings, had been reduced from 545 to 149. Unified said that they could scan and code this material in not more than three months, so the extension requested was until 30 June 2013."
"61. Mr Davenport submitted that the Liquidators' conduct since November 2012 could not possibly be characterised as inexcusable. They had done all that could reasonably have been expected of them to comply with the November order, and the problem is simply that none of the e-disclosure providers approached by Isadore Goldman were able to complete the exercise of uploading and coding the documents by 2 April 2012.
62. Mr Davenport elaborated these submissions orally, in an attempt to persuade me that the Liquidators and Isadore Goldman had done all they reasonably could to comply with the November order. But I do not agree. Even making every allowance for the difficulties facing the new team, I consider that Isadore Goldman should have displayed more initiative and urgency in getting a grip on the situation, in chasing Howes Percival, in arranging a meeting at the earliest opportunity (and certainly before Christmas) with Mishcons, in selecting and instructing Unified (or some other suitable e-provider) and in winnowing out the huge number of apparently irrelevant documents from the boxes. The need for urgency should have been all the more apparent, given the lamentable history of the disclosure exercise in the Atrium proceedings to date, and the fact that four deadlines for disclosure had already been missed. Mr Gibbs does not say in evidence how many people at Isadore Goldman were working on disclosure apart from himself, and it may well be that insufficient resources were devoted to the task. Further, the unexplained failure to send the letter of 7 February 2013 does not inspire confidence, and the delay in arranging the spot check until the end of February, in order to suit the diaries of Mr Gibbs and Mr Lewis, is again unfortunate. The end result is that the relevant boxes of documents did not actually reach Unified until 12 March 2013, only three weeks before the expiry of the four month extension granted in November.
63. I do not say that, if the matter had been approached with the necessary degree of urgency and initiative, it would have been possible to complete the disclosure exercise by 2 April 2013. I do, however, consider that Unified would have been able to complete a much greater proportion of their work, and that the extension now sought would have been correspondingly shorter."
"64. I accept that an unless order should normally be regarded as one of last resort, or perhaps more accurately as one of penultimate resort, since even after an unless order has taken effect it is always open to the party in default to seek relief from sanctions under CPR 3.9: see generally Marcan Shipping (London) Limited v Kefalas  EWCA Civ 463,  1 WLR 1864. I also accept that, before making an unless order, the court should always carefully consider whether the sanction imposed for non-compliance is appropriate in all the circumstances of the case. I consider, however, that the stage has been reached in the present case where it is appropriate to make such an order in the Atrium proceedings, and that the sanction for non-compliance should be for the claims in those proceedings to be struck out, subject to the right of the Liquidators to apply (if they can) for relief from sanctions. The main factors which have weighed with me in coming to this conclusion are: (a) the long and unsatisfactory history of disclosure in the Atrium proceedings before November 2012; (b) the deficiencies to which I have drawn attention in the Liquidators' attempts, through Isadore Goldman, to comply with the November order; and (c) the increased emphasis which the court is now obliged to accord to compliance with court orders under the amended overriding objective."
"(1) unless the Liquidators comply with paragraph (2) below, the Liquidators claims against the Respondents in proceedings No 3878 of 2011 and No 3879 of 2011 ("the Atrium proceedings") shall be struck out without further order of this Court and the Respondents shall be at liberty to enter judgment for their costs, such costs to be subject of a detailed assessment if not agreed.
(2) In the Atrium Proceedings, the Liquidators shall by 4.00pm on 28 June 2013:
i) conduct a search for documents falling within CPR 31.6, in compliance with the requirements set out in CPR 31.7; and
ii) provide Mr McNally and Mr MacLean and Mr Dick with a list of documents identifying the documents located as a result of the search described above, in compliance with the requirements set out in CPR 31.10
(3) Requests for inspection (or copies) of documents shall be made by 4:00pm on 5 July 2013 and complied with by 4.00pm on 12 July 2013".
The parties' positions
Missing documents the unless order
"I do not think that the conclusion I have reached will mean that unless orders for discovery are worthless. In many cases where they are made no list is served at all. Both counsel conceded, rightly in my judgment, that a court could infer lack of good faith where it was obvious from patent deficiencies in the list that it had been prepared in apparent but not real compliance with the obligation to give discovery."
"Standard disclosure what documents are to be disclosed
31.6 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; and
(c) the documents which he is required to disclose by a relevant practice direction.
Duty of search
31.7 -(1) When giving standard disclosure, a party is required to make a reasonable search for documents falling within rule 31.6(b) or (c).
(2) The factors relevant in deciding the reasonableness of a search include the following
(a) the number of documents involved;
(b) the nature and complexity of the proceedings;
(c) the ease and expense of retrieval of any particular document; and
(d) the significance of any document which is likely to be located during the search.
(3) Where a party has not searched for a category or class of document on the grounds that to do so would be unreasonable, he must state this in his disclosure statement and identify the category or class of document.
(Rule 31.10 makes provision for a disclosure statement)"
The nature of the list
"Procedure for standard disclosure
31.10 (1) The procedure for standard disclosure is as follows.
(2) Each party must make and serve on every other party, a list of documents in the relevant practice form.
(3) The list must identify the documents in a convenient order and manner and as concisely as possible".
"3.2 In order to comply with rule 31.10(3) it will normally be necessary to list the documents in date order, to number them consecutively and to give each a concise description (e.g. letter, claimant to defendant). Where there is a large number of documents all falling into a particular category the disclosing party may list those documents as a category rather than individually e.g. 50 bank statements relating to account number _ at _ Bank, _20_ to _20_; or, 35 letters passing between _ and _ between _20_ and _20_".
"Provision of Disclosure Data in electronic form
31 Where a party provides another party with Disclosure Data in electronic form, the following provisions will apply unless the parties agree or the court directs otherwise
(1) Disclosure Data should be set out in a single, continuous table or spreadsheet, each separate column containing exclusively one of the following types of Disclosure Data
(a) disclosure list number (sequential)
(c) document type
(f) disclosure list number of any parent or covering document;
(2) other than for disclosure list numbers, blank entries are permissible and preferred if there is no relevant Disclosure Data (that is, the field should be left blank rather than state 'Undated');
(3) dates should be set out in the alphanumeric form '01 Jan 2010'; and
(4) Disclosure Data should be set out in a consistent manner".
"(3) 'Electronic Document' means any document held in electronic form. It includes, for example, e-mail and 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 back-up systems and documents that have been deleted. It also includes Metadata and other embedded data which is not typically visible on screen or a print out;"
Other points in the CWL case
i) I am minded to require the liquidators to conduct a review of any documents in both Atrium lists and the CWL list which have only a single word description and use their reasonable endeavours to fill in the blanks in the information. There is nothing inherently wrong with a single word description if it is accompanied by other data. The fact a document is called "email" is not unhelpful if one is told the subject, date, to whom and by whom it was sent. However as the evidence shows there are a number of documents in the lists in respect of which the only information present is a single word such as the "transcript" example above. Mr Frazer's transcript example shows that for at least one of those, it would in fact have been possible to include more information, at least a date, which would help considerably. From Mr Shobbrook's evidence the number of documents in the main Atrium list in this class is about 200. This is something which could be got on with irrespective of the strike out application and is not a reason to delay the legal teams for the former directors or the family members using the e-disclosure platform to get on with looking at the documents.
ii) The documents in the CWL list which the family members contend are irrelevant to them merit some consideration. I have rejected the family members' argument that the presence of these documents amounts to a breach of the disclosure order. Given that neither side has, so far as I am aware, taken the trouble to look at the underlying documents, as a practical matter I think it would probably be more cost effective and proportionate for the liquidators' side to do that exercise first. They only need to review the documents alleged to be irrelevant in Ms Frazer's skeleton argument. If any documents do turn out on further consideration by the liquidators' advisers to be documents which need not be listed, the documents can be identified as such at minimal further cost and the family members need not be concerned with those.