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	England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Phaestos Ltd & Anor v Ho [2012] EWHC 3159 (TCC) (24 August 2012) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2012/3159.html Cite as: [2012] EWHC 3159 (TCC)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		24 August 2012

 


Mr Justice Akenhead:

1. This judgement relates to and arises out of the disclosure exercise carried out by the Claimants and out of various orders, including an "unless" order, requiring the Claimants to provide disclosure at the latest by 4 pm on 10 August 2012. The historical background to these proceedings is set out in previous judgments delivered by me in this case, and in particular the judgement handed down by this Court on 19 July 2012.
2. The Court ordered on 13 July 2012 as follows:

"2. Paragraphs 18 and 19 of the Order of Mr Justice Ramsey of 8 December 2011 and paragraphs 7.2 and 8.4 of the Order of Mr Justice Akenhead of 16 March 2012 are varied such that the Claimants shall disclose by list and provide for inspection (as they are disclosed) that electronic documents (save for the Claimants' Code) and hardcopy documents on a rolling basis by no later than 4 pm on 3 August 2012. This is a Final Order.

3. The Claimants have permission to apply to vary paragraph 2 in the event of any unforeseeable or unforeseen matters or matters beyond the control of the Claimants.

4. Unless paragraph 2 above is complied with by 4pm on 10 August 2012, the Claimants' claims herein and defences to the Defendants' counterclaims are struck out without further Order of the Court and the Defendants will be at liberty to enter judgment in the full amount of their counterclaims."

3. Mr Justice Ramsey's orders of 8 December 2011 so far as material, in the context of a trial date fixed for eight weeks starting on 14 January 2013, were:

"18…The "longstop date" by which the final disclosure stage is to be completed is to be no later than 4 pm on 2 July 2012.

19. The last date by which inspection is to be completed is 4pm on 16 July 2012."

He also gave directions to secure agreement between the parties about the terms and scope of, primarily, electronic disclosure by 5 March 2012.

4. I gave a substantial number of rulings in this case in February and March 2012, largely in the context of actual or impending failures on the part of the Claimants to comply with various orders, not the least of which were related to electronic disclosure. Finally on 16 March 2012, following several contested hearings, I made various orders, in particular about the Claimants' disclosure. This was predicated on the basis that the Claimants' disclosure was to take place in monthly stages commencing on 15 May 2012 (see Paragraph 3). Paragraphs 7 and 8 dealt with the production of lists and inspection:

"7 Production of lists (including e-mail and other electronic documentation)

7.1 The Claimants are to provide a list of their electronic documents for disclosure in a convenient order and manner so far as is reasonably possible on a rolling basis. Where technically possible, each document should be numbered, with the subject and date field being populated for reference.

7.2 The Claimants are to make available for inspection their disclosed electronic documents (including e-mail) in DVD or other suitable electronic format on a rolling basis with a "longstop date" of 16 July 2012. Subject to the Claimants' right (i) to ensure appropriate measures are in place to protect confidentiality and (ii) to redact irrelevant information prior to inspection and where such redactions are proposed they must be considered and expressly approved by the Claimants' solicitors and/or Counsel. Electronic documents are to be provided in native format with meta data present. The Claimant shall take reasonable steps to preserve original attachments, dates, folder and directory structures in so far as is technically possible.

8 Hard copy documents

8.1 The Claimants shall carry out a reasonable search for relevant hardcopy documentation in their control.

8.2 Where an identical version of a relevant hardcopy document is stored electronically electronic disclosure of that document will suffice.

8.3 The Claimants' search for hard copy documents shall include, but not be limited to all those categories of documents referred to in paragraph 3.1 above.

8.4 The Claimants are to disclose the hard copy documents by list on a rolling basis with a "longstop date" of 2 July 2012."

5. On 2 July 2012, the parties agreed an extension of time for completion of the disclosure exercise to 16 July 2012 so that both the disclosure exercise and inspection was to be provided by this date. The Claimants failed to comply even with this latest consent order. From the Court's judgement of 19 July, material parts in relation to disclosure are as follows:

"14. It is unnecessary to review the remainder of the period [after 21 May 2012] up to date because one can only form the view in logic that the lack of activity on the part of the Claimants (or possibly Kroll or HS) can be explained only by gross carelessness or a reckless disregard or deliberate flouting of the Court orders: I can not decide which…

16. The reality is that the problem with disclosure is very largely, if not entirely, of the Claimants' own making (or possibly that of their advisers). The exercise even on the chronology (mostly provided by Mr Constantinides of the Claimants) did not really start for about six weeks after the Disclosure Order was made; this is compounded by the fact that little or no effective preparation was made, apparently, for the exercise well before the 16 March 2012 order…

18. What I remain concerned about is the impact of the continuing and culpable failures of the Claimants to comply with their disclosure obligations under Court orders on the Court's timetable. If a simple or even a final order for disclosure, only, was made until 17 August 2012 and for inspection within 2 weeks thereafter (as sought by the Claimants), that takes matters well into the (Olympics dominated) vacation with the difficulties in terms of judicial availability for the Court then closely controlling the disclosure process. It is wholly foreseeable that there will be issues as to whether there has been compliance or not. The programme for the remaining steps will become concertinaed. In particular, the production of witness statements is most likely to be impacted because, for instance, much of the documentation to be disclosed by the Claimants (a good example being the Defendants' own e-mail accounts and other documents to which they had access whilst employed by the Claimants) will need to be reviewed by solicitors for the Defendants finalising and in some cases drafting parts of those statements.

19. In my judgment, the Claimants deserve little sympathy for a problem which is substantially of their or their professional teams' own making. However, having regard to the overriding objective, it is clear, and indeed (albeit reluctantly) accepted by the Defendants, that a final extension should be allowed. Weighing that against the need to give the Claimants a little more time before they are struck out and a final opportunity to avoid being struck out, I will make an order (already indicated to the parties after the argument on 13 July 2012) that the Claimants shall disclose by list and provide for inspection (as they are disclosed) their electronic documents and hard copy documents on a rolling basis but by no later than 4 pm on 3 August 2012 (by way of a final order); further, that if the Claimants have not complied with such order by 4 pm on 10 August 2012 their claims and defences to the Defendants' claims in these proceedings shall be struck out and the Defendants will be at liberty to enter judgment in the full amount of the Counterclaims. I indicated to Counsel that the usual understanding in relation to final orders would apply in that an extension would only be allowed if there were good reasons, such as unforeseeable or unforeseen matters or matters beyond the control of the Claimants and that I would expect any application for an extension to be submitted to be heard no later than the week ending 3 August 2012. There will therefore be permission to apply also."

6. The further chronology in relation to disclosure and inspection was as follows:

30 July 4^th Tranche disclosed (some documents already disclosed, 2,956 automated system error logs and 610 monthly risk reports) – 10.51 am

5^th Tranche disclosed (43,339 code error logs from Eyal Cohen) – 16.33 pm

Inspection was provided by USB stick.

1 August 6^th Tranche disclosed (42 hardcopy documents) – these were delivered by courier

3 August Final Order deadline

Two letters from HS to Wragge & Co suggesting limitations on disclosure, for instance in relation to due diligence reports and questionnaires and financial performance beyond 31 December 2008

6 August 7^th Tranche disclosed (c. 15 documents relating to Cyprus team leader meetings and 5 relating to redundancy/dismissal of the IKOS research team); a zip file delivered.

9 August 8^th Tranche disclosed (copies of documents undertaken on 29 July 2012 to be delivered); these were disclosed at 15.28 pm

9^th Tranche disclosed (IKOS software) – 18.03pm

Both these tranches were delivered by USB stick

10 August This was the "unless" order deadline date (4.00 pm)

The 10^th and 11^th Tranches were disclosed ( these being documents relied upon by Dr Okongwu and documents referred to in the pleadings) – 11.24 am – CD and hard copy delivered.

12^th Tranche disclosed (these being Wiki pages) – 14.20 pm - hardcopy was delivered.

A revised 3^rd Tranche was also disclosed at about this time by way of a USB stick.

13^th Tranche (these being investment committee minutes, payroll documents and accounts information); the list was delivered at 14.43 pm with hardcopy delivered at 15.38 pm.

The 14^th Tranche (documents of Ms Ambrosiadou and Mr Constantinides) were listed at 14.48 pm. A CD was delivered at 15.38pm.

The 15^th Tranche (comprising IKOS LLC documents, financial performance documents, DBFX investment management agreement, intra-group contracts and surveillance documents): the list was delivered at 15.34 pm and a CD delivered at 16.00 pm.

16^th Tranche (comprising mailbox documents from 15 named people) was listed at15.36 pm and a USB stick delivered at 15.38.

18^th Tranche (which were Model Alfas and supporting documentation relating primarily to RFI 41): disclosure at 15.53 pm but inspection was not offered pending agreement to specific confidentiality regime.

The 17^th Tranche (comprising documents, received from the previous solicitors, reviewed by HS) was provided at 16.00 pm with a CD delivered at 16.33 pm.

15 August The 19^th Tranche disclosing (various invoices) 13.24 pm –

Mr Polymenakos' disclosure statement for all three Claimants was served at 13.24 pm

16 August Hearing in court - adjourned to 24 August.

21 August Claimants' application for relief from sanctions

22 August Defendants' application for further orders relating to disclosure

7. The Defendants' position is that there have been material non-compliances with the order and that therefore there should be automatic striking out of the Claimants' claims and of their defences to the counterclaims; they say that there should be no relief from sanctions. In the alternative they say, by way of their application, that, even if there has been no formal, technical or actual breach of the orders made previously, there should be further orders made to overcome some clearly arguable (as they put it) deficiencies in the disclosure proffered to date by the Claimants.
8. The Claimants' position is that they have complied with the orders but, to the extent that they have not, they seek relief from sanctions. The Claimants argue that the Defendants' alternative application should not be dealt with today as they have had insufficient time to deal with it and it is not so urgent.
9. Given the importance of providing finality at this stage, I will not rehearse all the arguments put by both sides. I will however seek to address the primary points.

The Law

10. It is rightly common ground that, given the nature of the "unless order" it is unnecessary for the Defendants to issue an application as such for judgement because, if there has been a failure to comply in any material respect, the sanctions imposed by that order automatically apply subject only to the Court's discretion to grant relief (see the Court of Appeal decision in Marcan Shipping (London) Ltd v Kefalas and another [2007] EWCA Civ 463).
11. There must be a material breach of the particular "unless order". What is material needs to be looked at in the context of the particular case and order and all the circumstances. A failure to disclose one document out of a total of 10 documents to be disclosed in a small case may be material but a failure to disclose one document out of a total of 100,000 documents may not be material, although, if the document not disclosed is a key or pivotal document, there may still be a material breach. A deliberate or intentional non-disclosure may be material. A failure to comply by one minute may or may not in all circumstances be material. It is important to distinguish however between non-compliance and relief from sanctions because the latter exercise only comes into play if there has been a material non-compliance.
12. Mr Tregear QC for the Claimant however raises a number of points of law. He argues as follows (this being borrowed largely from his skeleton submissions):

(a) The "unless" Order must be absolutely and perfectly precise in its terms and must specify in the clearest and most precise language the thing to be done in order to avoid dismissal; he relies upon Abalian v Innous [1936] 2 All ER 834 and he refers to this as the "Precision Point".

(b) The burden is on the Defendants to prove (i) that the language of the Unless Order is absolutely and perfectly precise and (ii) that the facts or failures which the Unless Order contemplates have occurred; he again relies on the Abalian case and refers to this as the "Burden of Proof Point".

(c) Any doubt as to the true construction of the Unless Order must be resolved in the Claimants' favour; he relies upon Triolacan Ltd v Medway Power Drives 15 October 1991 and he refers to this as the "Construction Point".

(d) The standard to which the Defendants must prove non-compliance with the Unless Order is such that the Court must be sure that there has been a failure to comply; he relies on the Court of Appeal case of Realkredit Danmark A/S v York Montague 28 November 1998, this being his "Standard of Proof Point".

(e) In the case of an "unless" order relating to a list of documents, the test for compliance is whether a list has been served (and inspection provided) (i) in good faith and (ii) which is not illusory. He relies in this context on Reiss v Woolf [1953] 2 QB 557, which he suggests was applied in Realkredit, Scottish v Newcastle Plc v Raguz [2004] EWHC 1835 Ch (a decision of Hart J) and Verjee v Miller [2004] EWHC 2388 (Ch) (a decision of Mann J); he refers to this as the "Test Point".

(f) The sanction embodied in an unless order takes effect without the need for any further order only where the party to whom it is addressed fails to comply with it in any material respect such that the list is not in good faith and is illusory. In this context he refers to the Marcan case and this as his "Materiality Point".

13. Having considered the authorities in some detail but without having the time in this ex tempore judgement to set out a detailed analysis, I have formed the view that, whilst there is much in what Mr Tregear QC put forward in this context, his analysis is not wholly helpful. Of course what the Court must do is first to determine what the "unless" order means; that exercise is primarily simply a matter of interpretation and construction. It means what it says it means or it does not. It is not helpful in this context to talk of a burden of proof in relation to what the language of the order means. I do not consider that his "Construction Point" is helpful. If the order is interpreted as meaning a particular thing, and it is clear that it (as so interpreted) has not been complied with, then the order has not been complied with. If notwithstanding this, there was some ambiguity and the party in default honestly believed that it meant something else, that may be a matter for relief from sanctions. If the language of the order is so imprecise that it can not be determined that there has been any breach of it, no breach will be established. I am not assisted by the "Standard of Proof Point" as I do not believe that the Court of Appeal in the Realkredit case was really laying down any such principle. Obviously, before a Court confirms that there has been a material non-compliance with an "unless" order, it has to be clear and confident that there has been such a non-compliance. In the context of a disclosure "unless order", where a party makes clear that it has disclosed all that it has, the Court can not readily on a procedural application and without cross-examination of witnesses who have produced statements for the purposes of that application go behind such a statement, unless it is obviously wrong or untrue.
14. That said, Mr Tregear's point which I have set out at (e) above in relation to the test for compliance in relation to a list of documents called for by an "unless order" is broadly correct. It is necessary to consider the terms of the order in question.

The Alleged Non-compliances

15. There are eight alleged non-compliances with the "unless order": (a) the late production of a disclosure statement, (b) model alfas, (c) surveillance documents, (d) IKOS financial performance documentation, (e) Ms Ambrosiadou, (f) Wiki meta data, (g) redactions and (h) home drives.
16. Before considering these alleged non-compliances individually, I should set out my views at least generally as to what the "unless order" means. The background is to be found initially in the 8 December 2011 order of Mr Justice Ramsey which left it, initially, to the parties to agree the terms of a disclosure order, failing which the Court would make an appropriate order. There is no doubt that the primary reasons were the encouragement to the parties to agree and the realisation that there was likely to be a substantial amount of electronic documentation. What however Mr Justice Ramsey did was to order the dates by which disclosure and inspection was to be achieved, namely 2 and 16 July 2012 respectively. These dates were doubtless selected as the latest reasonable dates necessary to maintain the trial commencement date of 14 January 2013. Reference to his order shows experts getting underway in great detail in September, with witness statements starting in early October. That leaves a fairly short period of time between completion of disclosure and the next key stages of this case.
17. There was prevarication on the part of the Claimants in seeking to agree disclosure terms and I refer to my several judgements and rulings made on 5, 8 and 16 March 2012, which as far as I recall highlighted the history leading up to the making of the order finally made on 16 March 2012, albeit it was formally issued on 27 March 2012. A deliberate decision was made by the Claimants to change their solicitors at a crucial stage and, as I have indicated in earlier rulings, this change had nothing to do with any actual or alleged incompetence on the part of the previous well-known solicitors, Bird & Bird; there was no good reason for that firm not to have continued to have been retained at least to do the disclosure exercise upon which, I was told by Leading Counsel for the Claimants at the time, they had done a substantial amount of work. In any event, much of what turned into the order made by the Court on 16 March was in fact substantially agreed by Bird & Bird.
18. I turn to the order of 16 March 2012, some of which I have referred to earlier in this judgement. In relation to e-mails, the Claimants were by Paragraph 4.1 required to carry out a reasonable search for e-mail documentation in their possession or control sent from or to or copied to (whether by open copy or blind copy) the custodians set out in Appendix 1 to the Order; there are 20 custodians and these included Ms Ambrosiadou, Mr Coward, the Defendants and Julian and Lucien Gover, who were the brothers of one of the Defendants. Paragraph 4.2 identified that the searches were to include but not be limited to e-mail documentation stored on a number of archives servers and electronic storage devices. Paragraph 4.3 identified that the search was to be subject to specified filters but that the Claimants were to take reasonable steps to remove duplicate documentation. Paragraph 4.4 says:

"The Claimants shall take reasonable steps to ensure so far is technically possible that all metadata is preserved, including but not limited to attachments to e-mails, together with original dates, folder and directory structures."

19. Paragraph 5 of the Order requires the Claimants to search for "the following electronic documentation subject to the date limitation indicated". There were then set out some 20 areas of documents to be searched for. These included:

"(b) The Claimants' E library/intranet blog/wiki up to 23 December 2008…

(j) Documents relating to the financial performance of the IKOS entities including, audited accounts, partnership accounts, details of revenue generated by all IKOS's funds, details of all dividends paid to or declared by the Felix and Hestia Trusts."

Again, by Paragraph 5.3 the Claimants were to take "reasonable steps to ensure so far as is technically possible that all meta data is preserved", including but not limited to attachments to documents, original dates and folders and directory structures.

20. The Court made a specific order in relation to the e-mail accounts of Ms Ambrosiadou because it was being suggested that her e-mails, or some of them, could not be provided as they were within the possession of another IKOS entity. That order required the service within 10 days of a witness statement from her "explaining precisely what the position is and why disclosure cannot be provided". In the result, no issue was ultimately taken and no later statement was provided. It was therefore accepted that the point being made was that documents not in the possession of CIF were discloseable at least in relation to her emails.
21. Paragraph 15 of the order gave the parties permission to apply at any time to vary or discharge the Disclosure Orders made herein but required them first to inform the other party's legal representatives in writing at least 48 hours notice before making such an application. Provision was also made for evidence to be filed in relation to any such application.
22. I set out earlier in this judgement the terms of the "unless order", which it is unnecessary to repeat now. I will now turn to the eight heads of alleged non-compliance.

The late production of a disclosure statement

23. The sole issue on analysis is whether or not the "unless order" properly interpreted clearly provided for the service of a disclosure statement. CPR Rule 31.10 sets out broadly what the procedure for standard disclosure is such that each party must make and serve a list of documents in the relevant practice form, such lists identifying the documents in a convenient order and manner and as concisely as possible. Rule 31.10(5) states unequivocally that: "the list must include a disclosure statement". Importance is attached to this disclosure statement and, for instance, Rule 31.10 (6) to (9) contains requirements in relation to this statement and Paragraphs 4.1 to 4.7 of Practice Direction 31 A. The rules make it clear that the disclosure statement is to be made by the party disclosing the documents and that a disclosure statement may be made by a person who is not a party where this is permitted by the relevant practice direction. There is nothing in the Practice Direction which suggests that someone other than a person who holds an office or position in the disclosing party is the person who should be making the statement.
24. The disclosure statement was served five days after the "unless order" date and was signed by Mr Polymenakos who is not an employee, director or officer of IKOS CIF but is a consultant to that company. He has no connection with the other two Claimants. That said, there is a statement from Mr Dillon who is a director of a company called Panglobe Nominees Limited Company which is a corporate director of two companies who are the LLP members of Mindimaxnox. Panglobe is a corporate director of Violine Ltd which is a corporate director of Phaestos. He says that he was authorised by those two companies to make the statement which he produces. He goes on to say that Mr Polymenakos was authorised by Phaestos and Mindimaxnox to make the disclosure statement. He says that all electronic data, he understands, has been provided to the Claimants' electronic document provider Kroll and that he provided or provided access to other electronic material and hardcopy documents to Mr Polymenakos, Kroll or Herbert Smith.
25. I have no doubt that the Claimants were in breach of the "unless order" in relation to the late provision of the disclosure statement from Mr Polymenakos. It is clear from the rules that the disclosure statement is part of the list. The Claimants were unequivocally ordered to provide a list of documents and that list as part of it needed to have a disclosure statement. It is clear from the rules and from the case of Arrow Trading v Edwardian Group Ltd [2004] EWHC 1319 (Ch) that the production of such a list is not a mere or simple technicality. The reason for that is obvious, namely that disclosure is a very important part of the adversarial process in English litigation but it is dependent, at least initially, on an honest, informed and considered exercise carried out by the party whose documents are to be disclosed.
26. I also consider that Mr Polymenakos was not an appropriate person to have made the disclosure statement. It should have been made by relevant officers of the three Claimants. The statement itself does not even say that he was authorised by the Claimants to make the statement: all he says is that he is part of the team "which has been assigned the responsibility on the part of the Claimants". He wrongly suggests that Mr Dillon or Panglobe is a corporate director of Phaestos. He says that he has been assisted by Mr Constantinides, a director of IKOS CIF in relation to the search for and retrieval of hardcopy documents and by six named individuals in relation to the search for and retrieval of data from the Claimants' network servers.
27. It is no excuse for the Claimants to say as they do that it was impossible or very difficult for the Claimants to produce the disclosure statement by the "unless order" deadline. There should have been no real difficulty as the draft document could have been prepared on a rolling basis. The reality is that the Claimants left themselves in a position in which right up to the 12^th hour they were disclosing documents with the large majority being provided over the last few days and hours before the deadline. Again it is no excuse that the Defendants themselves were late in producing their disclosure statement, albeit that in their case they were not subject to any "unless order".

Model Alfas

28. As set out earlier in this judgement in the chronology, 7 minutes before the deadline for the expiry of the "unless" order, on 10 August HS served a list referring to the Claimants' 18^th Tranche of Disclosure (being the "model alfas" and supporting documentation), together with a letter which required the Defendants to submit to a previously unheralded confidentiality regime. This, amongst other things, would have allowed only the Defendants' experts and members of Wragge & Co (but not Counsel) and not the Defendants themselves to inspect and discuss the contents of the documents being disclosed. There had been no application to vary or discharge the Disclosure Order made on 16 March 2012 in this regard or indeed the "unless order". Relying upon this, the Claimants failed (indeed, deliberately refused) to provide these electronic documents for inspection "as they were disclosed" by 4 pm on 10 August 2012. This was a failure to comply with paragraph 2 of the Order made on 13 July 2012. This should not be confused with the question of whether, if raised at an earlier stage, the Claimants would or would not have had good grounds for seeking an order for a different confidentiality regime for these model alfas. That was not what happened. The Claimants left this until the very last minute. Having done so, they cannot justify the failure to provide these documents for inspection by reference to an attempt to impose this new confidentiality regime, agreement on which (even if it had been acceptable in principle to the Defendants) would have introduced yet further delay into the disclosure process. As I have said at the beginning of this list, they said:

"The claimants have control of the documents numbered and listed here and do not object to you inspecting them/producing copies subject to the terms of the confidentiality regime proposed by the claimants on 10 August 2012."

29. It must be borne in mind that the "unless order" required not only the provision of lists of documents but also inspection and, sensibly in this latter regard, what HS were doing was providing hard copy, CDs or USB sticks.
30. It is said by Mr Tregear QC for the Claimants that in effect the Claimants, doubtless provided they did it in good faith, had a right, and I quote from paragraph 7.2 of the 16 March 2012 order:

"... to ensure appropriate measures are in place to protect confidentiality."

This phrase appeared after the earlier part of paragraph 7.2, requiring the Claimants to make available for inspection their disclosed electronic documents including email in DVD or other suitable electronic format on a rolling basis with a long stop date of 16 July 2012. Now, in reality what happened in other contexts was there was discussion between solicitors and, for instance, a confidentiality regime was agreed to in relation to the electronic documentation on 30 July 2012. It seems to me that, on any sensible analysis of the order, what was required was either seeking agreement and, if agreement was not possible, coming to the court to ensure that appropriate measures could be put in place to protect the confidentiality. The Claimants did not do that. What they decided to do, and it must have been consciously, was to disclose in general terms the documents but to limit inspection. Generally, the requirement was to provide inspection by the 10th August and, as I said, that would usually be done by way of hard copy CDs or USB sticks. However, what they purported to do was materially to qualify their obligation to grant inspection by in effect refusing inspection, save to a limited number of people.

31. Alfas have been described as showing the forecast for a particular model, being a matrix of numbers indexed by date on one hand, and equities on the other. It is said that they show the output of a particular model and can be used to decide what trades to make and to generate the performance statistics for a particular model, showing for example how one should alter weighting going forward. It is said that essentially they show the output of the Code which generates the alfas. The proprietary software comprising some 20 models which make up the Code produces output data which are known as model alfas or "signals" and are in effect "the instructions on what equities to buy and sell and how long they should be held".
32. It is said by the Claimants that the reason that they tried to impose the confidentiality regime was because they were very concerned, in particular, that the Defendants should not get their hands on them, because the Defendants are effectively now competitors and because of concerns that they have had that in the past the defendants have, as they put it, misused confidential information belonging to the Claimants. There was some correspondence in May and Mr Polymenakos gives some evidence about this. There was a letter of 31 May 2012 from Wragge, in which it was identified, dealing with expert matters, that the experts would need to look at the alfas. The Claimants say, in effect, that they translated this as meaning that the alfas were only required for the experts. It is clear that the letter of 31 May was nothing to do with confidentiality but unsurprisingly the experts would want to look at these documents. There was no hint or suggestion that other people could not look at them.
33. There is no doubt that these documents are commercially sensitive but I suspect, without making any finding that they are, at this stage largely historical because they involved predictions in effect as to what might happen whereas now up to 6-7 years on the parties and the markets know what actually happened. It is at least odd that, whilst the Claimants were willing subject to certain confidentiality arrangements, to disclose the Code, they sought to impose more restrictive requirements about confidentiality in relation to the Alfas which are the product of the Code.
34. Be that as it may, the Claimants were clearly and obviously in breach of the "unless order" in failing to provide for inspection of the alfas. Effectively, they were refusing to allow inspection and were seeking to impose a condition which was not contained in or encompassed by the earlier orders. What the Claimants should have done, but failed to do, was to apply to the Court (in the absence of agreement) well ahead of the final deadline. Mr Polymenakos himself makes it clear that the Claimants were well aware as early as May 2012 and probably before that these documents might well be very commercially sensitive. There is no obvious excuse as to why confidentiality arrangements relating to them were not sought more than seven minutes before the "unless order" deadline.

Surveillance documents

35. The issues relating to the "surveillance" counterclaim have been canvassed in some detail in earlier judgements and in particular in the judgment handed down in March 2012 relating to the Claimants' unsuccessful application to strike out this part of Mr Gover's counterclaim. Suffice it to say, the counterclaim in this context relates to surveillance carried out initially in Cyprus and in London by a Laura Merts. One must consider these pleaded claims and assertions by the Defendants in the context not only of the Merts claims which are not specifically challenged by the Claimants or indeed by Ms Ambrosiadou in earlier proceedings against her personally by Dr Gover but also the unequivocal admission by the Claimants in their Reply that they had authorised surveillance involving observing Dr Ho and Dr Gover.
36. Paragraph 5.1(r) of the Disclosure Order required the Claimants to disclose "documents obtained by, created during the course of or relating to the targeted and incidental covert surveillance of Mr Ho and/or Mr Gover by or on behalf of the Claimants". It is worth recording that on 11 January 2011, Mr Nicolas Alun-Jones, then Ms Ambrosiadou's solicitor, made a statement on her behalf in which he effectively admitted and asserted that Ms Merts had been used by the Inkerman Group to conduct covert surveillance operations on Mr and Mrs Gover, that the Inkerman Group had been retained for this purpose by the IKOS Group, acting by IKOS CIF Limited, that Ms Ambrosiadou's involvement in these activities was in her capacity as Chief Executive Officer of IKOS CIF, that she instructed the Inkerman Group as CEO of IKOS CIF to carry out surveillance operations in relation to Mr Gover and that reports had been made by Ms Merts which had been disseminated to Ms Ambrosiadou in her capacity as CEO of IKOS CIF. It is also clear that the Claimants after much pressure, revealed that the surveillance exercise carried out on the Defendants was given the project names "Red Kite" and "Apollo"
37. However, the Claimants have disclosed just four documents in relation to covert surveillance, almost all of which seem to relate to surveillance of Mr Coward. They make no mention of Ms Merts. There are no instructions or other communications to or from Inkerman concerning the surveillance of the defendants which is admitted to have been carried out, no reports, despite Mr Alun-Jones' evidence that reports were made by Ms Merts and provided to Ms Ambrosiadou, no references at all to the activities of Laura Merts, no invoices from Inkerman and no documents at all which can be linked to "Red Kite", or containing those words.
38. Notwithstanding that this has been a live issue before and since the striking out application, the Claimants are still apparently actively considering whether the admission in the Reply and Defence to Counterclaim that IKOS CIF authorised and instructed Inkerman to carry out covert surveillance is correct. Indeed, but only on instructions when pressed, Mr Tregear QC confirmed on instructions that there was to be an application to be issued to withdraw the admission in the Reply and Defence to Counterclaim. It would perhaps be an understatement to say that I am extremely surprised that such consideration is being given. What I am also surprised about is the fact that there is not one hint in the evidence filed by the Claimants to suggest an explanation as to why virtually no documents have been provided on disclosure by the Claimants in this context. Whether that is attributable to the fact that the documents are not in the possession but are only within the control of the claimants, I know not. The Claimants simply say that they have carried out all the relevant electronic searches and they only reveal the four somewhat anodyne and uninformative documents which have been disclosed. They say therefore that they have complied with the order.
39. In my judgment, the only inference which I can draw is and I am sure that the Claimants have simply not complied with the "unless order". It is inconceivable in the light of the facts that surveillance has been admitted both by Ms Ambrosiadou and in the Reply and Defence to Counterclaim and that there clearly was some e-mail traffic between the surveillance organisation or organisations and the Claimants that there is not further extensive documentation. Mr Polymenakos has not been very forthcoming in his witness statement about this. There has been plenty of time to seek to withdraw the admission and explain why Ms Ambrosiadou for and on behalf of IKOS CIF got it completely wrong through her solicitor and in a pleading from the Claimants supported by a Statement of Truth.

IKOS financial performance documentation

40. As indicated earlier the Disclosure Order including the "unless" order required the Claimants to search for documents relating to the financial performance of IKOS. They made a decision on the grounds of what is said to be relevance that they would not take or disclose documentation beyond 2008 immediately after both Defendants were dismissed from their jobs with the claimants. Everything beyond that is said to be irrelevant. Now, in a letter dated 3 August 2012 Herbert Smith wrote to Wragge & Co saying, amongst other things:

"The financial performance of the IKOS entities can only be relevant up to 31 December 2008. The claimants therefore ask that the defendants agree that this category ends at that date."

41. They go on to say that if the Defendants are not willing to agree then it was their intention to apply to the court for an appropriate order. That would have been the proper course to take but in fact they did not take that course. They simply did not provide documentation beyond 2008. It seems to me, however, that it is obvious that documentation in this category will be material from any consideration of what remains of the Amended Consolidated Particulars of Claim. The story primarily in relation to Mr Gover goes through to mid-2010 (see Paragraphs 27.2 and 28.6 of the Amended Consolidated Particulars of Claim). It is obvious, if alleged distortions in the material, if I can call it that loosely, put into these computers was wrong and inadequate and was not corrected until 2010, it is necessary to look at the IKOS financial performance to see whether it continued to be affected by deficiencies in the work done by these Defendants; if it had no effect, then that is a point which is clearly contrary to the Claimants' position. If it continued to have an effect then, of course, that would support them but, either way, it does seem to me that it is absolutely clear that there was no justification for limiting the documentation in this context to 2008.
42. That is one part of the complaint relating to the IKOS financial performance documentation. The other relates to dividends paid to or by Felix and Hestia. These appear to be the ultimate trusts involved, again I say loosely, in the IKOS Group arrangements and what the order of 16 March talked about was dividends paid to or declared by the Felix and Hestia Trust. It seems to me, first of all, completely irrelevant what dividends were declared by the Felix and Hestia Trust. What they did with their profits, if any, would be entirely a matter for them. The use of the words "dividends" is rather unfortunate because it has a connotation like a share dividend and I am not satisfied that there has been any breach of the order in relation to any alleged failure to provide details of dividends paid to the Felix and Hestia Trusts. That is not to say that there could not be a further application for specific disclosure identifying or seeking to secure documents which might assist but I am satisfied that there was otherwise a breach of the order in relation to the restriction of the documentation up to the end of 2008. I make that point also in the context that in relation to the order of 16 March, the terms of it were substantially agreed and certainly were not opposed in anyway; they had no date restriction and, therefore, it does seem to me that, although there is a limitation of relevance, nonetheless it was and should have been obvious to all concerned that there was no justification for restricting disclosure in that way.

Ms Ambrosiadou Documents and Wiki

43. In the light of the evidence, it would not be appropriate to find that there was a breach in relation to Ms Ambrosiadou' documents. Indeed the Defendants accept that they cannot actively prove a breach in this regard. However as they say, and I accept, there is reason to believe that there must be more of relevance given the importance of Ms Ambrosiadou within the IKOS organisation.
44. So far as wiki meta data is concerned, initially it was made clear in the first witness statement of Mr Chamberlain, filed on 15 August 2012, that documents including a blog were sought. It is now accepted that there is a blog and I am satisfied that there was a breach of the order in relation to the blog. It was highlighted in Mr Chamberlain's witness statement and it would not and should not have been beyond the wit of anyone with any knowledge within the Claimants' organisation to search for it and find it. Another breach that is alleged relates to what is said to be the failure to provide the wiki material in anything other than the hard copy form. The Claimants say that there is no breach because they were entitled to restrict by redaction documents which were irrelevant, irrespective of whether they were commercially sensitive or not, although I think they say that the documents may well be commercially sensitive. I am not satisfied that it has been established that there was a breach of the "unless" order in relation to that and I do not think that it is possible in those circumstances to go behind Mr Polymenakos' statement. This is because what has been provided is hard copy documentation but it would be more appropriate if there are genuine difficulties here for the solicitors to discuss matters and if they can not agree an application can be made to the court for some form of disclosure electronically but I cannot say that other than in relation to a blog there is a breach.

Redactions

45. So far as the next class is concerned, although there are a large number of redactions in this case, I am satisfied that it is has not been proved that there has or has necessarily been a breach of the order. Certainly some good examples have been provided by the Defendants which very strongly suggest that an unduly restrictive approach has been adopted by the Claimants in relation to redactions and it does seem to me in those circumstances that it may be more appropriate to make a further order if need be.

Home drives

46. In relation, finally, to home drives, I am not satisfied on the available evidence that there has been a breach. It is said, perhaps surprisingly given that litigation was pending, that the hard drives of Mr Gover's twin brothers were not retained but that is said and it would not be appropriate for me to go behind that. So no breach has been proved in relation to that.

Conclusion on Breaches of the "Unless Order"

47. In relation to the breaches, I have found that there were breaches with regard to the late production of disclosure statements. I have also found that there were breaches in relation to the provision of model alfas, surveillance documents, in part in relation to IKOS financial performance documentation beyond 1 January 2009 and the blog.

Relief from Sanctions

48. CPR 3.9 provides:

"(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order the court will consider all the circumstances including –

(a) the interests of the administration of justice;

(b) whether the application for relief has been made promptly;

(c) whether the failure to comply was intentional;

(d) whether there is a good explanation for the failure;

(e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol;

(f) whether the failure to comply was caused by the party or his legal representative;

(g) whether the trial date or the likely trial date can still be met if relief is granted;

(h) the effect which the failure to comply had on each party; and

(i) the effect which the granting of relief would have on each party."

49. It has been suggested that the Court will want to look at each of these factors, but that it is not a "tick box" exercise (see Fred Perry v. Brands Plaza [2012] EWCA Civ 224 at [18]). Recent cases (such as Fred Perry) have stressed that indulgence should not usually be granted to litigants who breach "unless" orders and that to do so might involve "a denial of justice to the [other party] and a denial of justice to other litigants whose cases await resolution by the court" (per Jackson LJ at paragraphs 2-4).
50. It is clear from the authorities that the court must exercise its discretion, having regard to all the circumstances including the ones listed, and I will look briefly at the various matters set out.

The interests of the administration of justice

51. Of course, the Claimants have an important claim to bring and as importantly their defence to the Counterclaim. There are substantial sums involved and it is said that to strike them out would be unfair, in the circumstances that they have carried out clearly a very substantial amount of work in relation to the disclosure exercise. Against that, the Defendants say that it is in the interests of the administration of justice that the claim is struck out because the orders are there to be complied with and they have not been. Secondly, the application for relief has not been made quite as promptly as it might have been but I cannot criticise the Claimants for the timing of the application. It was made within six working days of the failure and it was clearly intimated that it would be made at the hearing on Thursday of last week.

Whether the failure to comply was intentional

52. There has been an argument before me as to what "intentional" means. "Intentional" in my view clearly is something short of but would include what used to be called "contumelious behaviour" but I am satisfied from the wording used in CPR3.9 that intentional is used in the context of it not being accidental. In a very substantial disclosure exercise there is room for error to be made and oversight and here, so far as the four breaches which I have found, it does seem to me that, other than possibly in relation to the blog, they were intentional, in the sense that a conscious decision was made not to provide disclosure or inspection, as the case may be, as required by the order. This is a case in which the claimants are a sophisticated group of companies with highly intelligent people behind them. They use one of the best, most commercial litigation practices in the country, let alone the City of London, and it is not credible that these decisions were taken anything other than intentionally.

Is there a good explanation for the failure?

53. To some extent there are good explanations for the failure. In relation to the disclosure statement, by allowing themselves to be pushed into the last day and indeed the last minutes and seconds of the deadline on the 10^th August 2012 the Claimants put themselves in the position in which it would be difficult to have completed a disclosure statement exactly by 1600 hours. On the other hand, it is an important exercise to be done and doubtless, in the light of what had happened and the timing of the different tranches, it was important that the statement was carefully prepared, which although it was not by the right person, it is clear that it was carefully prepared. I am not convinced that there is a good explanation for the surveillance documents. So far as the model alfa documents are concerned, again, there is no good explanation for the failure in that case because this could all have been resolved earlier than it was and Herbert Smith and indeed the claimants had, I am told, over 100 people working on this and I have no reason to believe other than these could have been provided earlier or appropriate reservations made.

The extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol

54. I can disregard the pre-action protocol but it is clear that the party in default here, the Claimants, whilst it has in a number of instances complied with other orders, and so on, particularly in relation to the provision of information relating to its own loss and damage claim, it has been in default and it has constantly been seeking to push back the timetable and I am not satisfied that the party in default has complied in a number of important instances.

Whether the failure to comply was caused by the party or its legal representatives

55. In previous judgments, I have indicated that in many respects the Claimants are the authors of their own misfortunes but there is nothing which has been put before me which suggests that the fault in this case was that of Herbert Smith.

Whether the trial date or the likely trial date can still be met if relief is granted

56. I do attach some importance to whether the trial date, in this case the 14 January 2013, can still be met if relief is granted. It is accepted by Mr Arben, solicitor for the Defendants, that the trial date can still be met if relief is granted. That is important when one comes on to consider (h), the effect which the failure to comply had on each party, and (i), the effect which the granting of relief would have on each party. What seems to be the position is that the granting of relief would preserve the Claimants' claims and defences to the Counterclaims but, other than that for which costs order could compensate them for, it would not impact or prejudice the Defendants at all.
57. I have to conduct a discretionary exercise, having regard to all the factors, and I have formed the view that, I have to say, it is only just, that relief from sanctions should be granted. I am unimpressed, and that may be an understatement, with the way in which the Claimants have sought to conduct this litigation over the last six months and it was suggested on earlier occasions that what the Claimants were trying to do was to ensure that the trial date would go off, and indeed they sought to appeal from Mr Justice Ramsey's order of 8 December fixing 14 January 2013 as the start date for this trial. But that said, the application for permission to appeal was either turned down or it was not pursued or not pursued further and I was told that by Mr Goulding QC. As far as I am aware, no other judgments have been appealed by the Claimants but in forming the view just that relief from sanctions should be granted in this case that can only be on terms that, promptly, the claimants provide, first of all, fresh disclosure statements signed by officers of each of Phaestos, Mindimaxnox and either by Ms Ambrosiadou or Mr Constantinides on behalf of IKOS CIF. It can be exactly the same one that has been prepared by Mr Polymenakos, provided that those officers are themselves satisfied with the contents.
58. Secondly, there should be inspection of the Claimants' Tranche 18, which are the model alfas, but this should be on terms comparable with those ordered by consent on 30 July 2012 but I would propose to add an additional term, which I will hear the parties on, which is that Mr Ho and Mr Gover should only observe those documents at the solicitor's offices and should not take copies with them. I will hear the parties on that but it does seem to me that there is an undue restriction on them if they cannot have a look at them. But I will hear the parties on that point because I haven't heard argument.
59. I will just deal with the other matters. I would call for a witness statement from Ms Ambrosiadou, and I will hear about the time, setting out with exactitude what the position is and this must be an affidavit on oath, not just a simple witness statement, explaining why no further surveillance documents exist. There should be disclosure and inspection of documents relating to the financial performance of the IKOS entities until the end of 2010. I will not order any documents relating to dividends relating to the Felix and Hestia Trusts but disclosure and inspection of the blog should be provided. Finally, there should be an affidavit from a partner of Grosvenor Law LLP involved in the search exercise to explain with precision what they did and subject to what constraints. Again, I will hear the parties on the timing of that. That concludes this part of the judgment.

(After further argument)

60. There are further two issues. One relates to Tranche 18. I have made clear, subject to argument, that some further conditions might be imposed with regards to restrictions on the Defendants viewing these documents. I am told that they are prepared to give undertakings to the court, which are enforceable by contempt proceedings, not to copy or transmit in any way any documents within Tranche 18 that they see and they are prepared to submit to a term that these documents are viewed only at the solicitors' offices. It seems to me that that is adequate protection and it would be incumbent upon the solicitors, if it came to their notice that there was any breach of that undertaking, as officers of the court, to report that to the court, even though it would be against their clients' interests and, as in the case of both sets of solicitors in this case, their integrity is not in question. So that seems to me to be adequate protection in the circumstances. So far as the financial documentation is concerned, I do not think it is appropriate at 5.15 pm on the penultimate working Monday in August to change what had been substantially agreed in relation to documents in 2009 and 2010. They should broadly fall within the category set out in paragraph 5.1(j) of the 16 March 2012 order. Obviously I have made comments about dividends paid to or declared by the Felix and Hestia Trust, which effectively do not apply, but those documents should be provided.
61. It has not been suggested there was any difficulty at all in the Claimants' producing documents within that description for the period up to the end of 2008 and I am afraid I cannot see any difficulty particular involved in them producing the documents up to the end of 2010 within those categories. I can see that they could be highly germane to the issues in this case, both in the claim and the counterclaim.