Crawford mpany : Disclosure pilot - Extended disclosure and costs budgeting

The Disclosure Pilot Scheme in the UK was introduced to address concerns at the perceived excessive costs, scale and complexity of disclosure. The aim was to simplify the disclosure process and make it less expensive.

Under the Scheme the parties are required to agree on issues for disclosure and agree following initial disclosure whether extended disclosure should apply. Additional procedural steps are then required including agreeing on a model for disclosure and completing the Disclosure Review Document.

The Disclosure Pilot Scheme has been in force since 1 January 2019 and was originally intended to finish at the end of December 2020. The Disclosure Pilot has now been extended for another year until the end of 2021.

In this article we consider the costs budgeting issues that can arise following the requirements of the Disclosure Pilot as well as a party's ability to vary their budgets after approval.

The Disclosure Pilot separates the process of disclosure into two separate stages:

• Initial Disclosure takes place at the stage that a party files and serves its Particulars of Claim or Defence. Initial disclosure captures the key documents a party has relied upon in preparing its statement of case, and the key documents required to enable the other party to understand the claim or defence they have to meet. A list of the documents must be served with copies of the documents in electronic format.

• Extended Disclosure must be considered after the Initial Disclosure stage. After reviewing the documents already disclosed, within 28 days the parties must state if they believe further disclosure is required. Extended Disclosure will only be ordered where it is appropriate to fairly resolve an issue in the case. Extended Disclosure will usually take the form of one of the Disclosure Models.

In the event either party seeks extended disclosure then they should identify the particular 'Model' that they wish to apply to each particular issue. This is where an issue in respect of costs can arise. Briefly there are five 'models' for extended disclosure:

• Model A: Disclosure of known adverse documents only.
• Model B: Limited disclosure. This requires the disclosure of documents that meet the test of Initial Disclosure (this time with no limit on quantity), plus known adverse documents. Parties are under no obligation to undertake a search beyond any already conducted. But where a search does take place, the continuing duty to disclose applicable documents applies.
• Model C: Request-led, search-based disclosure. Parties may make requests in the Disclosure Review Document 'DRD' for the disclosure of particular documents or a narrow class of documents relating to a particular Issue for disclosure.
• Model D: Narrow search-based disclosure, with or without 'Narrative Documents'. Under this model, each party must undertake a reasonable and proportionate search in relation to the applicable issues for disclosure (similar to standard disclosure).
• Model E: Wide search-based disclosure. This is the widest model. Parties must disclose documents which are likely to support or adversely affect their claim/defence, or that of another party, in relation to one or more Issues for disclosure, or which may lead to a train of enquiry which may result in the identification of other documents for disclosure. Narrative documents must also be disclosed. Model E will only be ordered in an exceptional case.

The Budgeting Problem

The models themselves impose wide-ranging requirements upon the parties in terms of what disclosure is required and certainly in terms of time and costs to comply with a particular model.

This can pose a significant issue when it comes to cost budgeting for the disclosure phase of a case. The parties may or may not reach an agreement on which model applies, however it remains for the Court at the Costs and Case Management hearing stage to consider the models sought by the respective parties and make a determination on which disclosure model should apply.

This issue is a party may by this stage have included disclosure phase costs in their budget for a model which is subsequently found by the Court to not be the appropriate model for the case/issues in dispute. By way of example if a party has sought to have disclosure Model E apply, that being wide search-based disclosure, then their costs of complying which such model are going to be significantly higher than disclosure Model B which is limited disclosure.

The Courts have recently shown a reluctance for the disclosure phase costs to be amended after budgets are approved by the Court.

(1)Persimmon Homes Ltd & (2) Taylor Wimpey UK Limited v Osborne Clark LLP & Anor [2021] EWHC

This matter concerned the hearing of an application by Persimmon Homes Limited and Taylor Wimpey (UK) Limited ('the Developers') to vary their costs budget. The application was heard by Master Kaye.

The two claims came before Deputy Master Linwood on 18 November 2019 for a combined costs and case management conference ('CCMC'). Prior to the first CCMC of the 18 November 2019, the parties had been unable to agree on the approach and models for disclosure. The Developers sought to limit their disclosure to non-search-based models A and B, while Osborn Clark sought broader model C and D search-based disclosure. Little had been agreed by 18 November. DM Linwood sent the parties away to do better, encouraging them to focus on Model C request-led search-based disclosure and relisting the CCMC for 3 December 2019.

On 3 December 2019, he gave case management directions including in respect of disclosure and cost budgeting. The parties' costs budgets and the disclosure review document ('DRD') were finalised following the CCMC to reflect the Deputy Master's decisions. The CCMC Order was eventually sealed on 24 December 2019.

The Developer submitted costs budgets based on Model A and B whilst Osborn Clark submitted budgets based on Model C and D.

Upon undertaking disclosure pursuant to model C, the Developer realised the costs that they had apportioned within the budget were inadequate and subsequently applied to vary their budget on the grounds that there had been a wider order in relation to disclosure than that provided for in their original budget.

The Developers application to vary the budget was dismissed. Whilst there were a number of issues raised by the Court in dismissal of the application, the Court pointed out that Practice Direction 51U expressly allows the parties to defer budgeting of the disclosure phase until after the court has determined which disclosure model is to be used. The claimant's failure to consider this was an element in the Master's refusal to vary the budget.

The Practice Direction and Practical Steps

Paragraphs 22.1 and 22.2 of PD 51U deal with the issue of costs:

22.1 The parties are required to provide an estimate of what they consider to be the likely costs of giving the disclosure proposed by them in the Disclosure Review Document, and the likely volume of documents involved, in order that a court may consider whether such proposals on disclosure are reasonable and proportionate (as defined in paragraph 6.4). These estimated costs may be used by the court in the cost budgeting process.

22.2 In cases where the cost budgeting scheme applies, if it is not practical to complete the disclosure section of Form H in relation to disclosure prior to the court making an order in relation to disclosure at the case management conference, the parties may notify the court that they have agreed to postpone completion of that section of Form H until after the case management conference. If they have agreed to postpone, they must complete the disclosure section within such period as is ordered by the court after an order for disclosure has been made at the case management conference. Where possible the court will then consider (and if appropriate, approve) that part of the cost budget without an oral hearing.

In practical terms where there is a dispute in regards to which disclosure models the respective parties believe should apply, it appears prudent to rely upon PD51U 22.2 and seek the other parties agreement to postpone costs budgeting of the disclosure phase until after the Court has determined which model should apply.

Key Contacts:

Chris Landa
Solicitor, Crawford Legal Services UK
P: 0151 452 0395
E: [e-mail]

Sarah Cartwright
Partner & Head of Insurance Risks, Crawford Legal Services UK
P: 0747 199 6697
E: [e-mail]

Nick Basi
Partner, Crawford Legal Services UK
P: [e-mail]