Brown v BCA Trading Ltd & Ors

The court dealt with procedural case management issues in a section 994 Companies Act 2006 petition, principally whether electronic disclosure should proceed by predictive coding or by traditional keyword/manual review, and the approval of costs budgets under CPR 3.15. The judge directed the parties to identify and narrow the issues and their relevant document categories, endorsed the Technology and Construction Court protocol and CPR PD 31B compliance, and ordered disclosure by predictive coding on a standard basis as proportionate in the circumstances. The court accepted the respondents' cost estimates for predictive coding (circa £132,000) as materially lower than keyword/manual alternatives (at least £250,000 and possibly £338,000) and held that predictive coding was likely to be effective and proportionate, subject to the parties' agreed process and ability to return for further directions. On costs budgeting under CPR 3.15 the court approved most agreed budgets but refused to approve the petitioner's proposed trial counsel fees as disproportionate and directed the petitioner to reformulate its disclosure estimate (previously £124,000) and reduced the petitioner's estimated paralegal pre-trial hours from 250 to 180.

Background and parties: This was a first-instance case management hearing in a section 994 Companies Act 2006 petition brought by the petitioner, David Brown, against BCA Trading Limited, Robert Feltham and Tradeouts Limited. The petition seeks relief in relation to alleged unfairly prejudicial conduct; the petitioner seeks recovery in excess of £20 million. The majority of likely relevant documents were in the hands of the first respondent.

Relief sought and procedural posture: The contested issues at this hearing were (i) the method of electronic disclosure (predictive coding versus keyword/manual review) and (ii) approval and revision of the parties' costs budgets under CPR 3.15. The court also gave directions to narrow disclosure issues and required compliance with relevant practice directions and protocols.

Issues framed by the court:

• Whether predictive coding is an appropriate and proportionate method of electronic disclosure in this case;
• The need for issue-identification directions to narrow the scope of disclosure in light of proportionality and the overriding objective;
• Whether the parties' costs budgets, including counsel fees and disclosure/paralegal estimates, are reasonable and proportionate under CPR 3.15.

Court's reasoning: The court accepted that most relevant documents were held by the first respondent and that the respondents' professional advice supported predictive coding. The anticipated costs for predictive coding (£132,000) were materially lower than keyword/manual alternatives (at least £250,000 and possibly up to £338,000). The judge considered the factors set out in Pyrrho Investments Ltd [2016] EWHC 256 (Ch) and concluded that predictive coding would be effective and proportionate in this case, particularly if the parties first narrow the issues and agree criteria for searches. Directions were given for the parties to identify issues and relevant document categories and to follow the Technology and Construction Court protocol and CPR PD 31B (paragraphs 8 and 9).

The court made an order for predictive coding disclosure on a standard basis but left open the ability for the parties to return for further directions and noted the matter should be sent to a judge for trial allocation because the trial was estimated to exceed ten days. On costs, while most budgets were agreed and reflected the seriousness of the litigation, the court refused to approve the petitioner's proposed total counsel fees for a ten day trial (£445,000) as disproportionate relative to the respondents' estimate (£287,000) and directed the petitioner to reconsider. The petitioner was also directed to reformulate its disclosure budget (previously £124,000) in light of agreed disclosures and the court fixed paralegal pre-trial hours for the petitioner at 180 (reduced from 250).

Wider context: The court observed that predictive coding may assist in proportionate electronic disclosure where volumes and prospective costs are large, but stressed the importance of narrowing issues and cooperative protocols. The parties may return to the court if the predictive coding process proves unsatisfactory.

At first instance the court made case management orders: it directed that disclosure by the respondents proceed by predictive coding on a standard basis, ordered directions to identify and narrow the issues and document categories, required compliance with the Technology and Construction Court protocol and CPR PD 31B, and made costs management rulings under CPR 3.15. The court refused to approve the petitioner's proposed trial counsel fees as disproportionate and directed the petitioner to reformulate its disclosure budget and reduced the petitioner's paralegal pre-trial hours to 180. The matter was to be sent to a judge for trial allocation given the estimated length of trial, but the parties were permitted to return to the Registrar for further directions to avoid unnecessary judge involvement.