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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Hard Rock Limited and Anor v HRCKY Limited [2020] JRC 173 (01 September 2020) URL: http://www.bailii.org/je/cases/UR/2020/2020_173.html Cite as: [2020] JRC 173 |
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Civil Procedure - reasons for granting an extension in time in relation to discovery
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Before : |
Advocate Matthew John Thompson, Master of the Royal Court |
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Between |
Hard Rock Limited |
First Plaintiff |
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Hard Rock Café International (STP) Inc |
Second Plaintiff |
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And |
HRCKY Limited (a company incorporated in the British Virgin Islands) |
Defendant |
Advocate R. D. J. Holden for the First Plaintiff.
Advocate E. Moran for the Second Plaintiff.
CONTENTS
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Paras |
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1. |
Introduction |
1 |
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2. |
Background |
2-11 |
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3. |
Submissions |
12-32 |
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4. |
Decision |
33-62 |
judgment
the MASTER:
1. This judgment contains my reasons in respect of an application for an extension of time by the plaintiffs to comply with certain discovery orders made in an Act of Court dated 5th May 2020 as modified by a Consent Order dated 24th June 2020.
2. The present application arises out of my two most recent judgments in this matter dated 16th December 2019 reported at Hard Rock Ltd and Anor v HRKCY Ltd [2019] JRC 243 and 5th May 2020 reported at Hard Rock Ltd and Anor v HRKCY Ltd [2020] JRC 079. Both judgments concerned whether or not the plaintiffs had complied with certain discovery orders.
3. The overall background to the present dispute is set out at paragraphs 5 to 11 of the 16th December 2019 (the "December 2019 judgment").
4. In the judgment dated 5th May 2020 (the "May 2020 judgment") for the reasons set out in paragraphs 14 to 34, I considered that the plaintiffs had not complied with the order of 16th December 2019. I therefore required further searches to be made which were summarised at paragraphs 39 and 40 of the May 2020 judgment as follows:-
5. It is also pertinent to set out at paragraphs 42 to 45 of the May 2020 judgment where I stated:-
6. It is also appropriate to set out paragraphs 2 to 10 of the Act of Court of 5th May 2020 which ordered as follows:-
"2. Notwithstanding paragraph 1 of this order, the Plaintiffs shall carry out further searches for any documents in its possession custody or power containing or referring to the profitability of the corporate cafes of the Hard Rock Group for the all or any part of the period 1997 to 2004 inclusive;
3. the searches to be carried out shall include the following:-
a. any back-up tapes held by or for the Plaintiffs for all or any part of the period to be searched;
b. any email accounts of Mr Leonard or Mr Beaudrault and Mr Goodwin;
c. any email accounts of any individual who acted as an appointed officer of the First Plaintiff at any time during the period to be searched;
d. all files containing records of any communications with auditors of the Plaintiffs during the period to be searched;
4. the Plaintiffs will further search email accounts already searched by the Plaintiffs for any documents containing or referring to the profitability of the corporate cafes of the Hard Rock Group for the period 1997 to 2004;
5. the searches shall be managed and supervised by Carey Olsen on behalf of the Plaintiffs
6. the Plaintiffs acting through Carey Olsen shall appoint an expert eDiscovery provider who shall use such artificial intelligence that provider considers is appropriate to enable the searches required by this order to be carried out as efficiently as possible;
7. by Friday, 26th June, 2020 the Plaintiffs shall provide an affidavit of discovery containing all information required by the schedule to Practice Direction 17/08 and shall further set out the nature of all searches carried out, what data has been made available to the eDiscovery provider to search and the methodology used by the eDiscovery provider in carrying out its searches;
8. the affidavit of discovery shall be sworn by an employee of Carey Olsen with responsibility for ensuring that the terms of this discovery order are complied with;
9. if the terms of this Act of Court are not complied with then judgment in default will be entered on the Defendant's counterclaim and the Plaintiff's answer to the counterclaim will be struck out automatically without further order;
10. if there is any dispute about whether or not there has been compliance with this Act of Court and the accompanying judgment and if the Court finds there has been material non-compliance then the Plaintiff's answer and counterclaim will be struck out."
7. The Act of Court was varied by a Consent Order dated 24th June, 2020. The pertinent variations are found in paragraphs 2 to 3 as follows:-
"2. The Plaintiffs should provide an affidavit of discovery containing all information required by Practice Direction 17/07 setting out the nature of all searches carried out in respect of documents not contained in the backup tapes referred to in paragraph 3(a) of the Act of Court dated 5 May 2020 dealing with discovery, by 3 July, 2020.
3. The Plaintiffs shall provide a further affidavit of discovery containing all information required by Practice Direction 18/08 in respect of the backup tapes referred to in the said paragraph 3(a), setting out the nature of all searches carried out, what data has been made available to the eDiscovery provider to search and the methodology used by the eDiscovery provider in carrying out its searches, by 24 July 2020. The Plaintiffs have leave to apply to the Master's Judicial Secretary to fix a date for a hearing for any further application to extend time to comply with or vary this paragraph 3 by 23 July, 2020."
8. The other variations concerned the timetable for the filing of amended pleadings and certain directions in relation to updating witness statements and expert evidence.
9. The present application was supported by an affidavit from Julie Katherine Keir sworn on 23rd July 2020. Exhibited to her affidavit were two affidavits sworn by Advocate Jeremy Garrood both dated 3rd July 2020. The first affidavit in summary explained what steps had been taken by the plaintiffs to comply with the Act of Court of 5th May 2020 and exhibited a sixth supplemental list of documents. The second affidavit dealt with unidentified categories of documents that used to exist or no longer existed. The sixth supplemental list of documents contained 49 hard copy documents and an eDisclosure list of 11,446 electronic documents.
10. The plaintiffs' summons sought an extension of time to comply with providing discovery of any material contained in the back-up tapes held by the plaintiffs referred to at paragraph 3a of the Act of Court dated 5th May 2020. This summons was first provided to the court on 14th July 2020 requesting a date fix appointment which took place on 17th July 2020.
11. Accordingly the summons was issued and a date fix arranged over a week before the expiry of the time limit for the provision of any discovery from the back-up tapes even though the summons was only heard after expiry of the time limit. I refer to the significance of this later in this judgment.
12. Advocate Holden, who had to step into the breach in the absence of Advocate Pallot on holiday for this urgent application for which I am grateful, made the following submissions.
13. The application was made within time. This was not therefore a case based on a party seeking relief from sanctions. This was so even though by the time the summons came to be heard the time limit for compliance with paragraph 3 of the Act of Court dated 5th May 2020 had passed.
14. The starting point in deciding whether or not to extend time was to consider what the plaintiffs had been asked to do and whether they had complied with those requirements.
15. He emphasised that the order of 5th May was very broad and required the plaintiffs to search for any documents relating to the profitability of the corporate cafés. This order went further than the previous orders made by Deputy Bailiff Le Cocq (as he then was) and Commissioner Birt.
16. In seeking to comply with the 5th May order his clients had taken a cautious approach given the breadth of paragraph 2 in particular. They had also taken on board the court's criticisms in the December 2019 judgment and the May 2020 judgment, in particular the latter, of the narrow approach previously taken. The process that the plaintiffs had followed had been set out both in correspondence between the parties' advocates in particular Carey Olsen's letter of 12th June 2020 and in the first affidavit of Advocate Garrood and the affidavit of Mrs Keir.
17. Advocate Holden also emphasised that an affidavit of discovery had been provided by Advocate Garrood. This affidavit complied with the Practice Direction RC17/07 because it addressed the following:-
(i) Advocate Garrood had deposed that he was satisfied that the plaintiffs' discovery obligations had been met.
(ii) The affidavit filed also explained the processes followed as required by Practice Direction RC17/08 including identifying who had assisted in the provision of discovery.
(iii) The retainer of an eDiscovery provider.
(iv) Who had been approached for any documents.
(v) Details of the Hard Rock Group business structure.
(vi) What searches had been carried out in respect of electronic material already recovered.
(vii) How the plaintiffs had also sought to exclude irrelevant custodians and irrelevant material.
(viii) The tapes most likely to contain relevant material had had be restored. It took until the end of June for restoration to be completed.
(ix) Only on completion of the restoration could a process of using artificial intelligence be applied to narrow down the scope of what was discoverable.
18. The approach taken so far had led to the plaintiffs identifying that there were potentially between 1.8 and 2.5 million documents on the back-up tapes. However the process of artificial intelligence was still to be applied to much of the material restored.
19. Insofar as the plaintiffs were criticised for not focusing on Hard Rock International USA and the finance department, this was partly because of the breadth of the order of 5th May but also because it was felt that such material was most likely to be found by a review of the back-up tapes.
20. In relation to physical searches at the head office of the Hard Rock Group in Florida, there were difficulties with this due to the coronavirus pandemic and the office said to be being closed. It was also not clear if physical searches were required by the 5th May order.
21. Advocate Moran in opposing the application was critical of the approach taken to-date for a number of reasons. In relation to the sixth supplemental list of documents produced she contended this list contained significant amounts of irrelevant material. It also did not describe documents accurately in accordance with Practice Direction RC17/08 because the plaintiffs had failed to use appropriate search terms and had had failed to conduct a review in order to remove irrelevant documents.
22. She suggested this was a tactic intended to wear out the defendant's more limited resources by providing the defendant with significant quantities of irrelevant documentation.
23. Advocate Moran also suggested that the searches had been for too narrow a period because they simply focused on the period 1997 to 2004 whereas the order required discovery of any documents relating to this period and therefore the actual timeframes searched should have been wider in particular to catch documents created after 2004 relating to profitability of the corporate cafés in 2004.
24. In relation to the application for an extension of time, because this was made only in relation to providing discovery from the back-up tapes, if I was satisfied that there had been material non-compliance with other parts of the order of 5th May, then I should not give an extension of time. This was because I was clear in May that the plaintiffs were in the last chance saloon. This was the effect of paragraph 10 of the Act of Court of 5th May, 2020.
25. In relation to physical searches at the head offices of the Hard Rock Group in Florida, the order of 5th May was clear that it required discovery of any document whether stored physically or electronically; therefore such physical searches were required. Advocate Moran was accordingly particularly critical of the explanation offered by Advocate Garrood at paragraph 17 of his first affidavit of 3rd July 2020 and his reliance on the conversation with Mr Burden who had carried out searches in 2014 and 2015. This was because in the May 2020 judgment, I had concluded that Mr Burden had not searched for documents relating to the profitability of corporate cafés. The affidavit of Advocate Garrood did not contain any explanation as to why such documents had in fact been searched for contrary to the conclusion I had reached.
26. Advocate Moran also indicated that the focus should have been on Head Office and documents held by Hard Rock International USA and its executive officers along with the finance and audit departments of the Hard Rock Group for the benefit of the plaintiffs. The other enquiries that had been made of subsidiaries relating to individual cafés were irrelevant.
27. She also contended there was no reason not to disclose the documents provided by Mr Goodwin because they clearly had to be relevant as he had referred to them in correspondence with the plaintiffs.
28. She also criticised the plaintiffs for not liaising with the defendant and for stating in correspondence that in respect of the order of 5th May 2020 that the terms of Practice Direction RC17/08 did not apply to this order.
29. She further criticised the search terms used by the plaintiffs in reviewing the existing email accounts as being too broad and producing too many documents.
30. The combination of all these failings meant that the application for extra time to search the back-up tapes should not be granted because other material breaches of the 5th May 2020 order had occurred.
31. In the alternative if I was willing to grant an extension of time, this should be subject to stringent conditions.
32. Advocate Holden in response made the following points:-
(i) The scope of the order made on 5th May was far wider than Hard Rock International USA.
(ii) He accepted that there was some irrelevant material in the latest list, but this problem could be corrected by a further review.
(iii) The search terms suggested by the defendant were considered but early indications showed that they would have produced more documents than the terms used by the plaintiffs.
(iv) Advocate Garrood had offered to recreate profit summaries for the years in question.
(v) The documents provided by Mr Goodwin were not discoverable because they did not refer to profitability summaries and accordingly a view had been reached that they were not relevant.
(vi) The plaintiffs had tried to assist the defendant in gaining access to the eDiscovery platform which was inconsistent with trying to wear the defendant's resources out.
(vii) In terms of physical searches the order had not been ignored and appropriate enquiries had been made of Mr Burden.
33. As a starting point I agree with Advocate Holden that it is appropriate to look at the Act of Court of 5th May 2020. The key part of that is paragraph 2 which requires disclosure of any documents containing or referring to the profitability of the corporate cafés of the Hard Rock Group as a whole.
34. I accept that this order was wider than the orders previously made by Deputy Bailiff Le Cocq and Sir Michael Birt but that was as a result of the narrow approach to construction of those orders taken by the plaintiffs which I found was in error and because I was invited to set out what the plaintiffs should look for.
35. What the focus of that order was trying to capture was any analysis or consideration by the directing minds of the plaintiffs of the profitability of corporate cafés being run by the Hard Rock Group and therefore to ascertain what information was known to the first plaintiff when entering into franchise agreements.
36. I did not envisage in making the order that it was necessary to look at the profitability of individual corporate cafés. Rather the focus was on the profitability of the restaurant side of the business as a whole of the Hard Rock Group.
37. What has happened since 5th May 2020 however, is that the plaintiffs have taken on board the spirit of the criticisms made and have now taken a much more cautious approach from that taken previously. In my judgment they have now been overly cautious because the focus of the order was intended to be knowledge within the Hard Rock Group of the profitability of the restaurant side of the business as a whole not individual corporate cafes per se. I accept that documents referring to the profitability of the restaurant side of the business as a whole may reveal the profitability of individual cafes but the latter do not need to be searched for. The focus should have been on what the directing minds of the Hard Rock Group knew, whose knowledge might be attributable to the first plaintiff. Their email accounts, what board packs contained and what information was provided by or held by the finance department or sent to auditors should have been the primary focus.
38. In that regard I observe that it is now accepted by the plaintiffs that documents about profitability of the corporate cafes used to exist because in paragraph 4(1) of Mr Garrood's second affidavit of 3rd July, 2020 he referred to documents referred to by Mr Peter Beaudrault, Gregory Leonard and Steve Goodwin as being records of financial information relevant to the profitability of the corporate cafés the whereabouts of which are now unknown.
39. In considering whether or not there has been non-material compliance of the Act of Court of 5th May, 2020 the following has occurred
(i) Email accounts already searched have been searched again (paragraph 4)
(ii) The searches have been managed and supervised by Carey Olsen (paragraph 5).
(iii) An eDiscovery provider has been appointed
(iv) The eDiscovery provider intends to use artificial intelligence (paragraph 6).
(v) The first affidavit of Advocate Garrood also complies with paragraph 7 and 8.
(vi) More detailed enquiries of auditors and Rank have been made as have enquiries of former officers.
40. That is not to say that there are certain parts of the steps taken by the plaintiffs since 5th May 2020 that are not free from criticism. The most serious in my judgment is that no physical searches have been carried out at the Head Office in Florida of the Hard Rock Group. As noted in the May 2020 judgment at paragraph 8 what was offered in advance of the hearing that led to the May 2020 judgment was a physical search. That submission was repeated by Advocate Garrood when judgment was handed down on 5th May when he again stated there was no data and that only a physical search would be carried out.
41. There was no evidence before me for the present hearing that the Hard Rock Group offices were not open in Florida (although I accept it is possible they may not have been open due to the serious levels of COVID in the USA and in Florida). Nor was I told at the May 2020 hearing that the offices were closed. In that regard I have specifically re-listened to the recording of the hearing to confirm what Advocate Garrood said to me, which was consistent with my own private note of that hearing.
42. I have set out the above because in Carey Olsen's letter of 20th July, 2020 it stated "As you are well aware from discussions with the Master on 4th May, 2020 COVID 19 restrictions meant Hard Rock's offices were closed. No physical search could be made. Advocate Garrood confirms this in his affidavit." That is not my recollection.
43. The same letter also explained that Advocate Garrood had spoken with Mr Burden after the hearing on 5th May about the searches Mr Burden and Ms Roby had previously made. These statements led Advocate Garrood at paragraph 17 of his first affidavit of 3rd July to state as follows:-
"17. Having regard to the current global pandemic, I have not been able to visit Hard Rock's Florida premises to conduct any form of physical searches. I have spoken to Christian Burden who conducted a physical search of records with Ms Rebecca Roby in 2014/15. I am told by Mr Burden that the searches carried out by him and Ms Roby included documents relating to profitability of the corporate cafes but none were discovered."
44. However, at paragraph 33 of the May 2020 judgment I had already reached the following conclusion about Mr Burden's previous affidavit:-
45. The response referred to was contained in an affidavit sworn by Mr Burden for the hearing leading to the May 2020 judgment.
46. What I therefore expected following the Act of Court of 5th May 2020 and the May 2020 judgment was that searches for physical documents at the Head Offices of the Hard Rock Group in Florida would take place. At no time was I told that such searches were not possible. I was only told by Advocate Garrood that he would not be travelling to Florida for reasons I understood. It is therefore clear that the plaintiffs have not carried out physical searches at the Head Offices of the Hard Rock Group in Florida despite the offer to do so prior to the hearing. This is a clear breach of paragraph 2 of the order of 5th May.
47. The question for me is whether the failure to carry out physical searches in the round is a material breach of the order of 5th May, 2020 so that an extension of time to search back-up tapes should be refused.
48. In evaluating this question, it is right to weigh in the balance that there may be information about the profitability of corporate cafés in the back-up tapes which process has not yet been completed. It is also right to weigh in the balance that physical searches may not reveal any relevant documentation because of the passage of time.
49. In deciding whether or not the breaches that occurred are material, it is also relevant to consider other matters that have been criticized in relation to the steps taken by or for the plaintiffs since 5th May. As noted above, the sixth supplemental list of documents does not appear to be to have been reviewed for relevance. Many of the documents have also not been described correctly in the list to comply with Practice Directions RC 17/07 and 17/08. What appears to have happened is that the plaintiffs ran out of time because they were trying to both search the back-up tapes and identify relevant custodians whose names should be used in searching email accounts previously reviewed.
50. I also consider that the plaintiffs have now taken an unduly cautious approach with the pendulum swinging too far the other way compared to the narrow approach adopted previously. This caution led to enquiries and searches in respect of individual corporate cafés rather than looking at documents analysing the profitability of corporate cafés as a whole as noted above.
51. I also consider that the plaintiffs fell into error in relation to one of the documents produced by Mr Goodwin. These were produced at the hearing to demonstrate that they did not refer to profitability which was why they had not been listed. However one of the documents is a presentation to the Rank Group regarding the Hard Rock Café business dated 17th September, 1999. While as a document it does not of itself contain any information in relation to the profitability of corporate cafés, it does in a page headed "Themed Dining Competitors - 1998 results", differentiate between turnover for the restaurant business and the merchandise business. This is clearly a train of enquiry document because it can be said that, if there was a separate analysis of turnover, such a separation supports there also being a separate analysis of profit. Accordingly, this document should have been disclosed as part of the plaintiffs' general discovery obligations albeit not because of the order of 5th May. It has now been produced but it should be listed.
52. The plaintiffs also fell into error in correspondence in suggesting that Practice Direction RC17/08 did not apply to the order of 5th May 2020. It is not clear to me why this conclusion was reached and there is no justification for such a view.
53. Firstly, Practice Direction RC17/08 at paragraph 2 states as follows:-
54. Secondly, in the Act of Court of 5th May at paragraph 7, I required the affidavit of discovery to contain all the information required by the Schedule to Practice Direction RC17/08. If I required that information I do not follow how it could be suggested that Practice Direction RC17/08 would not otherwise apply. In my view unless expressly excluded by a court order, Practice Direction RC17/08 applies to any discovery required whether pursuant to a general discovery order or an order following a specific discovery application.
55. In deciding whether or not the failure to carry out physical searches is a material breach, it is also right to weigh in the balance that I required the plaintiffs to go much further than previously ordered to do so. They are also searching for data created between 15 and nearly 25 years ago. The task of analysing who were the relevant employees likely to hold such material will not therefore be straightforward. It should also be remembered that documents may no longer exist due to the passage of time.
56. The conclusion I have reached is that although physical searches should have been carried out, unless prevented by COVID, and the failure to do so on the evidence before me is a breach of the order of 5th May, I do not regard this alone as a material breach having regard to the intended focus of the order of 5th May. The aim of that order as set out above was to get the plaintiff to focus on looking for documents relating to the profitability of corporate cafés as a whole. In my judgment the order of 5th May has produced a change in approach since previous applications. What is now described is a focus which did not exist previously.
57. Some of the defendant's criticisms of the plaintiffs are that the plaintiffs have gone too far and, while there is some force to that criticism, it is not a basis to conclude that a material breach has occurred justifying judgment being entered and the answer to the defendant's counterclaim being struck out.
58. Mistakes have also been made in particular in relation to disclosing irrelevant material, but this is again not a basis to strike out an answer to a counterclaim. Rather the just way to proceed is to require the plaintiffs to revisit the sixth supplemental list of documents to ensure that the correct date for the creation of each document is inserted (not when they were uploaded onto the discovery platform), and to ensure relevant meta data is attached and to review the documents listed so far for relevance.
59. Even taking all these matters together I do not consider they amount to a material breach when set against what has occurred and how far there has been compliance. In particular, the plaintiffs are now looking through significant quantities data when in May I was told that such data did not exist. This is a sea change in approach which means that entering judgment is not justified. The mistakes are also all capable of correction or compensation by appropriate costs orders.
60. In relation to the granting of an extension, I also accept Advocate Holden's submission that there is a distinction between an application for an extension of time made before the expiry of a relevant time limit and an application made where a party is in breach. In Robert v Momentum Services Ltd [2003] EWCA Civ 299 Dyson L.J. (as he then was) drew a distinction between applications in time and those out of time as follows:-
This was followed in Everwarm v BN Rendering Ltd [2019] 4 WLR 107.
61. I consider that generally the same analysis should apply to such applications made in this jurisdiction. That is not to say that an application for an extension of time made right at the last minute would not attract close judicial scrutiny, in particular if little had been done prior to expiry of the time limit to ensure compliance, other than making an application as the time limit expired. In this case the application was made ten days before expiry of the time limit and after correspondence with the defendant and so, on any view, is not late.
62. The plaintiffs are carrying out significant tasks, they have obtained tapes, analysed the most relevant of those tapes and have started the process of using artificial intelligence to identify relevant documents coupled with search terms. A manual review is also proposed. The work to-date and the proposed steps to be taken justify an extension of time being granted. The plaintiffs have not breached the order in respect of searching back-up tapes. The criticisms I have made in respect of not carrying out physical searches are not a justification to refuse an extension of time to continue to search back-up tapes given the approach now being taken. The plaintiffs are now doing what they should have done many years ago. I therefore have concluded that the plaintiffs should be permitted to continue their current approach and it is important that they do so.
63. For the reasons set out in this judgment the application for an extension of time is therefore granted. This is however subject to the plaintiffs:
(i) reviewing the sixth supplemental list of documents to remove irrelevant documents and file a replacement list describing relevant documents in compliance with Practice Direction RC17/08; and
(ii) carrying out a physical search for records relating to the profitability of corporate cafés as a whole at Head Office.
64. I will be addressed on timeframes for completion of these tasks when judgment is handed down. However in respect of the requirement to review the sixth supplemental list this should be at the plaintiffs own expense.
