High Court confirms permission not needed for "Technology Assisted Review" to facilitate discovery in litigation

Introduction   

China Metal Recycling (Holdings) Ltd (in liquidation) v Deloitte Touche Tohmatsu,(1) is a recent decision of the Court of First Instance of the High Court that confirms that court approval is not needed for the use of technology assisted review (TAR) to facilitate the discovery process pursuant to an agreed protocol between the parties, although the court has power to order the manner in which discovery of documents is undertaken between the parties if they apply to court.  While the court approved the party-agreed protocol, that provided for limited discovery, of equal interest is the court's encouragement of constructive engagement between parties and their legal representatives including the use of technology to assist with the management of cases.

Background

The case involves a substantial piece of litigation between the parties, in which the liquidators brought a claim for alleged professional negligence against the company's former auditors (the defendant).  The documents in the defendant's possession were stated to date back over ten years ago and constitute hundreds of hard copy files and over five million electronic documents.

The parties had agreed in principle to a protocol providing for limited discovery and permitting the defendant to use TAR software technology. In brief, TAR helps identify whether documents in digital form are likely to be relevant to issues in the dispute by using machine learning algorithms – this generally relies on an initial period 'training' the software what is and is not relevant. The purpose of TAR is not to replace manual review but to help identify documents more likely to be relevant and to prioritise those for review.  

The defendant's legal representatives applied to the court for an order that the defendant be permitted to give limited discovery (as set out in the annex to the application) and, possibly out of an abundance of caution, also sought an order that the defendant be permitted to use a TAR software technology "to reduce the time and costs of the discovery exercise".(2)  

The plaintiff appears to have agreed in principle to the defendant's use of TAR but there was a dispute how long the defendant could take for its review.  There was no dispute that the court had power to make an order regarding the manner of discovery between the parties, including limiting the scope of such discovery.(3)

Decision

The court noted that this was not the first time it had considered the use of TAR (although in the prior case(4) there was no dispute between the parties about using TAR). Now, the court has noted that it is not necessary for parties to seek the court's permission to use TAR. – the parties have an obligation to search for relevant documents (electronic and hard copy) and how the discovery process was conducted was primarily a matter for parties and their legal representatives. 

The court usefully observed:

The Court does not direct how a party is to conduct traditional discovery so as to ensure compliance with a party’s discovery obligation. In my view there is no particular reason why it should be necessary for the Court to approve the use of TAR or any other technology, which a party’s lawyers believe will facilitate discovery, although it is sensible for the parties to agree in advance how TAR is to be used. This is what has happened in the present case.(5)

The court also made two cautionary observations about court involving itself out the outset in "the determination of the detailed methodology for the use of TAR or similar technology" to facilitate the discovery process:

• the court did not share the parties' familiarity with the background facts of the case or the relevant documents, so the parties were usually in as good a position to decide how to approach discovery; and
• the court might not have the parties' and their legal representatives' "understanding of the technology available and the ways in which it can be used".(6) 

Therefore, it would often be more practical for the parties to agree as much of the methodology between them by means of protocols and only involve the court in the event of disputes "over the adequacy of [a party's] discovery". 

In arriving at its observations and giving the directions sought (subject to a court ordered deadline), the court helpfully:

• reiterated the starting point for discovery being the "Peruvian Guano" test, which was maintained as part of the civil procedure reforms in Hong Kong in April 2009, while a new rule was adopted to give the court the power to limit discovery and provide for the manner in which it was given with an emphasis on making use of technology;(7)
• referred to case law in other common law jurisdictions, such as England and Wales,(8) Australia and New Zealand(9) and in the United States(10), that had considered the use of analytical tools to facilitate the discovery process.  In a clear nod to the use of technology, the Hong Kong court stated:

In my view the issue is not whether TAR can be used. Clearly in 2022 the use of analytic tools of this sort is to be expected in the conduct of litigation whether to research the law or to order and analyse data. I can see no reason why the default position should be assumed to be that a person with some legal qualification personally checks data on a screen. Increasingly all data will be stored and accessed through electronic means;(11) and

• summarised the nature of the TAR and machine learning tools that the defendant proposed to use.(12)

Comment 

Protocols concerning the discovery process are not new in large scale commercial litigation in Hong Kong and are often the subject of correspondence and agreement between the parties' legal representatives. TAR or computer assisted review is also regularly used in document heavy litigation.  

China Metal Recycling (Holdings) Ltd (in liquidation) v DTT serves as useful clarification that the use of such technology does not, in principle, require the courts' permission and is first and foremost a matter for agreement between the parties and their legal representatives. The existing procedural framework requires the court and the parties to manage cases cost-effectively and with reasonable proportion and procedural economy,(13)  and gives a power for the court and the parties to limit the scope of discovery (14) – the courts' primary role in this context is to determine disputes as to the adequacy of a party's discovery.  As the court notes, in this case although the defendant's application was understandable on the facts there was actually little for the court to decide beyond the time within which discovery was to be completed.(15)  

The Hong Kong courts have addressed discovery of Electronically Stored Information (ESI) in the past, confirming that parties do not need "to turn over the contents of their filing cabinets (in this context electronic ones)".(16) However, in the context of cautionary judgments both in Hong Kong(17) and abroad(18) when parties have failed to cooperate on e-discovery, the court's decision in China Metal Recycling is a welcome reminder that the parties are expected to cooperate on the methodology of electronic discovery without needing to run to court for approval when they can agree. It is also a welcome update to the landmark decision of the English court that first allowed TAR (under the name 'predictive coding') in the discovery of ESI but indicated that the parties "were quite right to seek the court's approval".(19)

Finally, the court's decision should be viewed in the wider context of the courts in Hong Kong trying to embrace IT in civil proceedings with (for example) greater use of remote hearings and orders for service (or substituted service) of court documents using modern technology (such as sending a link to an online data room containing those documents to the defendant's online messenger account). The court has showed it is prepared to embrace the use of technology for procedural efficiency without the judge necessarily needing to understand the technical intricacies of how that technology might work.

This article was published on ILO on 29 August 2022.

(1) [2022] HKCFI 2344, 3 August 2022.

(2) Supra note 1, at paragraph 2. Given the circumstances, the court describes the application as having been taken out for "sensible reasons" (Supra note 1, at paragraph 17).  

(3) Rules of the High Court, Order 24, rule 15A ("Order for limiting discovery").

(4) Elliott International LP v Bank of East Asia Ltd (No 1), [2018] 4 HKLRD 396.

(5) Supra note 1, at paragraph 7.

(6) Supra note 1, at paragraph 8.

(7) Supra note 1, at paragraphs 5 and 6. 

(8) Supra note 1, at paragraph 9.

(9) Supra note 1, at paragraph 13.

(10) Supra note 1, at paragraphs 12 and 13.

(11) Supra note 1, at paragraph 14. 

(12) Supra note 1, at paragraphs 3(2) and 10.

(13) Rules of the High Court, Order 1A.

(14) Supra note 2.

(15) Supra note 1, at paragraphs 7 and 15. 

(16) E.g. Moulin Global Eyecare Holdings Ltd v KPMG [2010] HKCU 1251.

(17) E.g. Liquidators of Moulin Global Eyecare v Ernst & Young [2008] HKCU 981.

(18) E.g. Digicel (St Lucia) Ltd v Cable v Wireless [2008] EWHC 2522 (Ch).

(19) Pyrrho Investments Limited v MWB Property Limited [2016] EWHC 256 (Ch) (in which RPC acted for the Claimants), at paragraph 1.