Litigation Trending: Failure to preserve can leave you in a pickle

Document preservation may not be the most exciting topic we have covered in our Litigation Trending series, but two recent judgments highlight the importance of getting it right, and the robust response the courts will take to a failure to comply with these obligations. We examine these below. We also take a look at recent, and very welcome, changes to the Disclosure Pilot Scheme that have made document preservation less onerous for parties to litigation.

Ocado Group PLC & Anr v McKeeve 

The Court of Appeal has overturned a decision by the High Court not to allow an application for contempt of court following the "remarkable" deliberate destruction of relevant documents by a partner at a law firm.

Ocado brought a claim for conspiracy to misuse confidential information against its founder and former COO, Mr Faiman, as well as a business belonging to Mr Faiman, Today Development Partners (TDP).    

Ocado took the view (correctly, given the events that followed), that there was a real possibility that the Defendants would destroy relevant evidence and applied for a preservation and search order.

Mr McKeeve, the Defendants' friend and legal adviser, immediately contacted an IT manager at TDP and gave the instruction to "burn it" (according to Mr McKeeve) or "burn all" (according to the IT manager) who permanently deleted messages sent through a private messaging system called 3CX.

Ocado issued a contempt of court application against Mr McKeeve who argued that he wanted the messages destroyed to protect his wife (Brexit Party MEP Belinda de Lucy) from damaging publicity because her name was used as his username on 3CX.

The application was refused by the High Court because Marcus Smith J was unwilling to draw adverse inferences about the content of the messages destroyed and the fact that their destruction was ordered by Mr McKeeve. 

On appeal, Lord Justice Davis held that the High Court had been "plainly wrong" to reach this conclusion and ruled that Mr McKeeve should stand trial for contempt because no court should tolerate the deliberate destruction of documents once litigation is under way.

Active Media Services Inc v Burmester, Duncker & Joly GmbH & Co Kg and others 

In this case, the Claimant's deliberate destruction of documents, and its failure to call key witnesses who might have been able to fill in the "critical gaps" in disclosure, led the Court to draw adverse inferences as to the contents of those documents. 

Active, the Claimant and investor in a Christmas animated film produced by the Defendants, brought a claim under a completion guarantee when the film was not completed in time for the 2017 Christmas season. The Defendants argued that they were not liable under the guarantee because Active was aware that the film would not be completed on time and had therefore become estopped from claiming under the guarantee or had waived the right to do so.

Two days before the trial, in what was described as a "moment of madness", Active permanently deleted emails sent from a personal Gmail account when the Defendants queried that two business emails had been sent from this account but had not been disclosed. Active only called one witness to give evidence, the owner of the Gmail account, and not his relevant contacts from Active's agents.

The Court dismissed Active's claim and held that it was entitled to draw inferences against Active as to what the destroyed emails were likely to have shown and the evidence that relevant witnesses were likely to have given on the issues before the Court, without the need for the Defendants to provide other supporting evidence on this issue.

Amendments to the Disclosure Pilot Scheme

While those judgments may be extreme, they highlight the importance of document preservation. This was also apparent in new rules regarding document preservation that were introduced in the Disclosure Pilot Scheme. However, the considerable work required was perceived as excessive by many clients and lawyers, particularly in the initial stages of litigation.

In Autumn last year the Civil Procedure Rules Committee therefore approved a series of proposed amendments to the Disclosure Pilot. 

One of the changes concerns the duty of parties to inform employees and former employees of the need to preserve relevant documents. Feedback indicated that this was proving to be a time-consuming and onerous obligation, and was often unnecessary. That feedback has been taken on board and, from 6 April 2021, the requirement to send these notifications to employees and former employees is limited to where there are "reasonable grounds for believing that the employee or former employee may be in possession of disclosable documents which are not also in the party's possession".

However, while this requirement may have been relaxed, the courts' approach in Ocado and Active shows that the importance of ensuring document preservation remains and failure to comply with the duty to preserve is taken very seriously. Adverse inferences are likely to be drawn and, in appropriate cases, proceedings for contempt brought. 

Author: Robert Anderegg (Solicitor)

Cases referred to: 

Ocado Group PLC & Anr v McKeeve [2021] EWCA Civ

Active Media Services Inc v Burmester, Duncker & Joly GmbH & Co Kg and others [2021] EWHC 232

Read our previous Litigation Trending Update here.