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High Court delivers reminder that search orders are intended to preserve documents and not (without specific provision) provide early disclosure

  • United Kingdom
  • Financial services disputes and investigations
  • Litigation and dispute management - Disclosure – Other

25-02-2020

TBD (Owen Holland) Ltd v Simons & Ors [2020] EWHC 30 (Ch)

Background

  • A search order is one of the most draconian orders that the English courts can make, allowing an applicant – where there is a real possibility that a respondent may destroy or dispose of material – to enter the respondent’s premises to search for, copy and remove documents and information. A search order will commonly provide for the imaging (i.e. copying) of a respondent’s computers and digital files, which can include documents that the applicant is not entitled to inspect, for example by reason of privilege. The subsequent use of the imaged files by the applicant will then usually be the subject of a later (on notice) return hearing.

Facts of the case

  • The background to this case concerned alleged infringements of the claimant’s ("C") rights in databases and intellectual property.
    • C applied for and executed a search order against the first and second defendants ("D1" and "D2"), but not against the third defendant ("D3"). That search order provided for the imaging of computers. C then entered into correspondence with the defendants regarding the use of the imaged documents, including adjourning a return hearing. While the response from the Defendants was limited, D1 raised objections to C’s proposed search of the imaged materials and stated that those files may contain privileged documents.
      • C subsequently searched the imaged files using keywords, to produce a sub-set of material (the “Searched Material”). Between the execution of the search order and production of the Searched Material, D3 had the claim against it struck out. C then used the Searched Material for a variety of purposes, including re-joining D3 to the proceedings (together with new defendants, "D4" and "D5") and obtaining evidence from third parties.
        • D3, D4 and D5 argued that the Searched Material was obtained and used by C in breach of the search order, and sought relief including the strike-out of the claims against them. This was on the basis that C may hold privileged material of D1 and D2 that would make a fair trial impossible. C’s arguments in response included that it was not open to D3, D4 or D5 to complain about any breaches, as they were not the subjects of the search orders.

        The decision

        • The High Court found that:

        - The “essential purpose of a search order is not to provide early disclosure, but to preserve documents necessary for the proper conduct of litigation”. While what is permitted under a search order depends on its terms, in this instance the order did not make any provision for disclosure or grant permission for C to make use of the imaged documents.

        - There had been a “significant and unjustifiable breach” by C of the terms of the search order in producing and making use of the Searched Material without court sanction. This breach was compounded by C’s awareness (demonstrated by the inter partes correspondence) of the need for D1/D2’s consent and/or court directions before making use of the imaged materials, and C’s awareness (from D1) that the imaged material may include privileged documents.

        - D3, D4 and D5 did have standing to complain of C’s breaches:it is entirely appropriate that any party to litigation before the court be permitted to raise questions regarding the conduct of the proceedings, even if it concerns an order not made directly against that party”.

        • The court left open the question of whether it would strike out C’s claims. C was ordered to provide a list of the documents comprising the Searched Material, hand over all of the imaged material to a third party firm of solicitors which would check the Searched Material for inter alia privileged documents, and explain the use it had made of the Searched Material to approach third parties. Following this, the question of strike-out could be revisited. C was also ordered to pay for the costs of this exercise.

        Analysis and practical advice

        • The key take-away from this case is straightforward: applicants for a search order should not make use of preserved documents without specific court sanction.
          • The search order precedent in CPR25 envisages an item-by-item review, whereby the respondent facilitates the display of items listed in the search order which can then be read and copied. This however may not be practical for electronic data (as compared to hard copy documents) given the potential volume. While imaging will be a less disruptive and more efficient way to proceed, it is likely to involve the production of material which is not only not listed in the search order, but may also be privileged or incriminatory.
            • In such circumstances, a search order that also provides for disclosure will be exceptional until such time as the respondent and any other interested party has been heard, given that exactly what has been imaged will not be known.

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