The age of big data has led to a steep rise in the volume of potentially discoverable material. Trends in caselaw suggest that the courts are cognisant that the exercise of making discovery has moved to exponentially larger amounts of information.
A decision of the Commercial Court in Betty Martin Financial Services Limited v EBS DAC puts a litigant’s ability to seek security for costs before embarking on discovery back in the spotlight.
Betty Martin Financial Services Limited (Betty Martin) operated three EBS branches on a tied agency basis. EBS was entitled to terminate the agency giving 12 months’ notice to Betty Martin.
EBS served termination notices on Betty Martin which prompted it to issue an injunction preventing the termination. Betty Martin’s case revolved around two key points:
- EBS represented that the tied agency agreements would not be terminated except for good cause such as insolvency or gross misconduct. This representation amounted to a collateral agreement.
- The regional manager of EBS pressurised Betty Martin to engage in conduct amounting to financial mis-selling.
EBS denied both allegations.
Having obtained the injunction, both parties then issued motions seeking discovery. EBS agreed to provide some modified categories of discovery, but refused to provide certain other categories unless Betty Martin provided security for costs in discovering those documents. Granting security for costs would require Betty Martin to lodge monies in court to cover EBS’s costs of making discovery.
EBS put evidence before the court demonstrating that the requested categories comprised 7.25 million files. A report from Grant Thornton advised that the cost of discovering those categories would be €266,670. Financial statements were also produced demonstrating that Betty Martin’s profit after tax in 2018 was €19,625 with net assets of €120,625.
The court considered the earlier decisions in 'Framus Limited v CRH' and 'Quinn v IBRC' which produced a non-exhaustive list of considerations when granting security for costs in discovery:
The apparent strength of the case of the party seeking discovery by reference to the pleadings and affidavits.
Evidence detailing the burden of time/expense imposed on the party making discovery.
The detriment likely to be suffered by the party seeking discovery should they be genuinely unable to provide security for costs.
Any evidence that the inability to provide security for costs is due to actions being complained of in the proceedings.
The proportion of the likely discovery costs in the context of the proceedings as a whole.
The strength of the case for discovery and the stage of the proceedings of which discovery is sought.
Whether the case raises an issue of major public importance.
Whether an order granting for security of costs has been made generally.
The criteria set out in Framus/Quinn cases were applied to the facts of the case.
Justice Quinn granted security for costs to EBS for the following reasons:
- A prima facia defence had been made out.
- There was uncontested evidence that Betty Martin would be unable to meet an order for costs of the discovery.
- There was no evidence suggesting Betty Martin’s inability to meet any costs order was caused by the actions of EBS complained of in the proceedings.
- There were no other special circumstances justifying the refusal of an order.
- There was no evidence to demonstrate whether the making of an order would preclude the plaintiff from pursuing the action to trial.
- The amount of security to be provided was deferred by the court to a later date.
As discovery costs have disproportionately increased against the overall costs of litigation over time, parties have increasingly used the discovery process as a tactical tool to force settlement. This decision is a further welcome reminder that there are options available to litigants to resist overly expansive and expensive discovery requests.
For more information contact a member of our Dispute Resolution team.
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