Recent case law in relation to Legal Holds

Legal Hold

A “legal hold” (also known as a “litigation hold”) is a communication to relevant personnel within an entity involved in actual or threatened proceedings informing them of their obligation to preserve data which may be relevant to those actual or threatened proceedings.

The Appeal

In its judgment in Orla McNulty -v- The Governor and Company of the Bank of Ireland, t/a Bank of Ireland Group (“the Bank”) [2021] IECA 182, the Court, in hearing an appeal relating to discovery where certain documentation was no longer available, gave clarity in relation to the obligations on the part of litigants to preserve documents, in particular ESI and the corresponding obligation on those parties’ legal advisors to advise of this obligation.

The Court was considering an appeal against Orders made by the High Court dismissing various reliefs which the Plaintiff had sought, arising out of the discovery process. Concerns were raised relating to the non-availability of documentation. The Bank filed an Affidavit setting out, in detail, why it was that certain categories of documentation were no longer available, principally due to the fact that in accordance with its own internal policies, certain classes of documentation were automatically destroyed after certain periods of time. In short, the Bank argued that by the time it came to comply with an Order for Discovery, certain categories of documents were no longer available as they had, by then, been destroyed or deleted in accordance with the Bank’s own automated procedures.

Case law

The Court noted that Counsel for the Bank had indicated that there was no Irish authority on whether or in what circumstances a party may be required to put in place a “legal hold”. The Court cited with approval the English decision of Rockwell Machine Tool Co Limited -v- EP Barrus (Concessionaries) Ltd [1968] 1 WLR 693, in which it was stated that Solicitors must take “positive steps” to ensure that their clients appreciate at an early stage of the litigation not only the duty of discovery but the importance of not destroying documents which may have to be disclosed and that this “burden” extends to taking steps to ensure, in any corporate organisation, that knowledge of the burden is passed to anyone who may be affected by it.

The Court went on to refer to the English decision of Earles -v- Barclays Bank plc [2009] EWHC 2500 which found that while there was no general duty to preserve documents prior to the commencement of the proceedings, after the commencement of the proceedings the position was different. In that case, Barclays was criticised for the failure to preserve documents and ESI, albeit the court in that case declined to draw any inferences from such failure

Discovery Guide

The Court went on to quote with approval from the “Good Practice Discovery Guide (V2, November 2015)” (“the Guide”) published by the Commercial Litigation Association of Ireland and specifically referred to one of the overarching principles being “[p]arties should take all steps necessary to preserve sources of data, as soon as they become aware of a matter which is likely to require discovery”.  The Guide, in dealing with the issue of preservation of documentation/data, states that “One of the first steps in the discovery process is to inform relevant parties of their duty to preserve data which may be of relevance to the matter and to suspend routine/automatic data destruction processes. This is vital to helping ensure that relevant data is not lost or destroyed, whether deliberately or accidentally. This is best achieved by putting in place a ‘legal hold’, i.e., informing all of the relevant personnel, in writing, of their obligation to preserve all data that may be relevant to the actual or threatened proceedings”. The Guide goes on to state that periodic reminders should be issued, and the hold modified as the scope of the proceedings expands or narrows (albeit any narrowing should be approached with extreme caution).

Decision

Having reviewed the position in other jurisdictions and having noted the commentary in the Guide, the Court concluded that “….litigants are obliged to take reasonable steps to preserve relevant documentation (including ESI) so as to ensure its availability on discovery and their legal advisors – whether internal or external - have a duty to advise their clients of this obligation”.

As to when such a duty first arises and noting the differing approaches from quoted case law and English Court Rules, the Court concluded that “The better view would appear to be that there will be some circumstances at least in which a duty to preserve arises before the formal commencement of proceedings but where the cut-off is to be drawn is likely to involve a case-by-case assessment”.

In particular, the Court indicated that it was not sufficient to address issues of preservation only at the point that discovery is requested or ordered, the reason being that frequently, gaps arise between the commencement of proceedings and addressing discovery.

The Court emphasised that what is required are “reasonable” steps.  What is reasonable depends on all the circumstances such as the nature and scope of the proceedings, the extent of the universe of potentially relevant documents, the number of potential custodians, the experience and resources of the parties and whether they are legally represented or not.

The Court also noted that it is open to any party or their legal advisors, at an early stage in the litigation or indeed before its commencement, to write to the other side identifying documents likely to be the subject of discovery with a request that such documentation be preserved.

The Court went on to state that where documentation is lost because a litigant failed to take reasonable steps to preserve it then, at a minimum, that litigant will be subject to criticism. In refusing the reliefs sought by the Plaintiff, the Court however directed that the Bank explain on oath, the steps taken to preserve documentation, to alert others within the Bank as to the need to do so and whether there are any policies or protocols in respect of document preservation.

Key Points

The judgment clarifies circumstances in which both litigants and their advisors must address their minds to the preservation of documents.

While there is no definitive point at which the duty begins, it is likely to arise before proceedings formally issue, perhaps starting when such proceedings are contemplated and/or threatened.

The legal hold should be communicated to all relevant personnel in the entity, the subject of the litigation. It should identify what the issues in the litigation may be and as such, what are the likely categories of documents to be preserved. The documentation to be preserved should not be drawn “narrowly”. In any proceedings, issues may only come into sharp focus as the litigation unfolds and at an early stage, may not be capable of being identified with precision. That being so, the legal hold should be drawn relatively widely and modified as the proceedings unfold, although any “narrowing” of the potentially affected documents should be done cautiously.

Legal advisors (both external and inhouse) have a duty to advise clients of their obligation to put in place the legal hold. Accordingly, all advisors, when first instructed, must address their mind to the possibility of discovery being required, the possible categories of documentation/data and advise their clients accordingly to take steps to preserve such data/documentation. This is particularly so in organisations which run automated destruction processes which are engaged after the expiry of certain time periods to ensure that those automated processes are stopped in respect of the relevant documentation/data.

Legal advisors should also consider writing to their counterparties at an early stage in the proceedings (or before their issue) outlining the types of documentation/data which it is believed may be relevant to the matters in issue and call on their counterparties to take appropriate steps to preserve such documentation/data. 

Cómhnall Tuohy, Partner
E:  ctuohy@kanetuohy.ie