Smailes v McNally again: relief from sanctions refused after serial eDisclosure failures

Just before Christmas, I wrote an article called Smailes v McNally: eDisclosure consequences of failure to comply with Unless Order. It followed the delayed publication of the Court of Appeal’s judgment Smailes & Anor v McNally & Anor [2014] EWCA Civ 1296 (30 July 2014) which had overturned the judgment (which I called “kind to the claimants”) of Birss J. Smailes & Anor v McNally & Ors [2013] EWHC 2882 (Ch) (27 September 2013).

I won’t recite the facts again. My article says this:

I suggest you read both judgments, the original one for its analysis of almost every point which can arise in an argument about electronic disclosure, and the appeal judgment for the point which actually mattered. I use Birss J’s judgment as a training aid, because it amply illustrates my continuing theme of RTFR (Read the F* Rules).

In summary, the “kind” Birss J. allowed the defaulting party to live to fight again following a long history of disclosure failures. The Court of Appeal overturned the judgment and I said this:

This is why we have a Court of Appeal. When I read the original judgment, I thought the judge had been kind to the claimants but could not fault his analysis. Once Lewison LJ had juxtaposed the duty of reasonable search and the bare fact that there was no searching to be done because the documents were already right there, it became clear that no amount of reasonableness could qualify the clear terms of the order.

You might think that the Court of Appeal’s judgment was the end of the story. My article, however, made a couple of references to the possibility of an application for relief from sanctions – the last door open to the liquidators to undo a judgment in which procedural defects had killed a claim for £50 million without consideration of the merits. I did not think such an application likely, mainly because I could not see that it stood any chance of succeeding, but it was prudent on my part to make it clear that we were not necessarily yet at the end of the procedural road.

As it turned out, there was an application for relief from sanctions and, as usual, the excellent Gordon Exall was on the case on the day the judgment was delivered, 22 June. His Civil Litigation Brief article Relief from sanctions refused following inadequate disclosure gives you a summary of the highlights. The judgment itself is here, adding another 101 paragraphs to the already vast collection of judicial opinion on the matter. The title of Gordon’s article saves you having to read to the end.

If you don’t feel up to reading everything to which I have linked in this article, just focus on the simple message that a very large claim was struck out, without consideration of the merits, because electronic disclosure was not done properly.

Do note, however, that it was the multiplicity of failures, and the costs and court time which they took up, which led to this conclusion. It is not licence to take every point against an opponent which falls short of its disclosure obligations by missing a deadline or by omitting documents which should have been disclosed. We know from Denton (and if you don’t, then perhaps you might refresh your memory) that the Court of Appeal emphasised that parties who take bad points may be penalised in costs for doing so, particularly where timetables are derailed as a result. The defects in Smailes v McNally. were cumulative, iterative and expensive.

If you want a clue as to how expensive, my article reported this:

Interim costs of £95,000 paid following the original hearing were to be repaid. The costs of the appeal were to fall on the liquidators. The sum of £2.5 million was claimed in costs but this figure was not supported by any details and were to be assessed by a costs judge. These are not trivial sums for a procedural application – but the case turned on its outcome.

It is possible, I suppose, that this judgment will be appealed. For now, I will continue to use Smailes as an illustration of the importance of RTFR.

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About Chris Dale

I have been an English solicitor since 1980. I run the e-Disclosure Information Project which collects and comments on information about electronic disclosure / eDiscovery and related subjects in the UK, the US, AsiaPac and elsewhere
This entry was posted in Court Rules, eDisclosure, Electronic disclosure, Litigation. Bookmark the permalink.

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