Pyrrho Investments Ltd v MWB Property Ltd & Ors

Factual and Procedural Background

The claim was initiated on 20 March 2013 by Plaintiff 1, a significant shareholder in Plaintiff 2, suing as assignee of Plaintiff 2 regarding payments allegedly made by Plaintiff 2 due to breaches of fiduciary duty by Defendants 2 to 5, directors of Plaintiff 2. The claim includes allegations that some payments benefited Defendant 1, who is alleged liable to account for them. The claim also involves a specific dispute over a dividend declared by Plaintiff 2 in June 2009 for approximately £9 million. Plaintiff 2 was formerly listed on AIM, with its ultimate parent company entering administration in November 2012.

In 2014, the claim was amended to include further allegations that Defendants 2 to 5 caused Plaintiff 2 to enter into transactions with companies in which they had secret interests, extracting approximately £28.5 million over five years. The trial is scheduled for June 2017.

Disclosure, particularly electronic disclosure ("e-disclosure"), is a significant issue due to the large volume of electronic documents controlled by Plaintiff 2, including over 17.6 million files initially restored from backup tapes, later reduced to about 3.1 million after de-duplication. The parties agreed on directions for disclosure and electronic disclosure, including timelines and procedures, with disputes to be resolved at a Case Management Conference ("CMC").

On 2 February 2016, the court made an order approving the use of "predictive coding" technology in the e-disclosure process, a novel approach in this jurisdiction, with reasons for approval provided in this judgment.

Legal Issues Presented

1. Whether the use of predictive coding software for electronic disclosure in civil proceedings is permissible and appropriate under the Civil Procedure Rules and Practice Directions.
2. Whether predictive coding provides a proportionate, cost-effective, and reliable method of conducting electronic disclosure compared to manual review or keyword searches.
3. Whether the court should approve the parties’ agreed use of predictive coding software in the present case.

Arguments of the Parties

Appellants' Arguments

• This information was not available in the provided opinion.

Appellees' Arguments

• This information was not available in the provided opinion.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by outlining the legal framework governing disclosure under CPR Part 31 and Practice Direction B, focusing on the obligation to conduct a reasonable search for relevant documents, including electronic documents. The overriding objective to deal with cases justly and proportionately was emphasized.

The court noted the novelty of predictive coding in this jurisdiction but referenced foreign and Irish authorities endorsing its use as a reliable, cost-effective method of e-disclosure. The process involves training proprietary software with a sample of documents reviewed by a senior lawyer, after which the software scores and categorizes the larger document set for relevance. This is supplemented by iterative quality assurance involving human review and adjustment to ensure accuracy within agreed confidence levels and error margins.

The court observed that manual review of millions of documents would be prohibitively expensive and time-consuming, making predictive coding a proportionate alternative. It found no rule prohibiting the use of such software and noted the parties’ agreement on its use and the search scope. The court also considered the value of the claims and the timeline for trial, concluding there was sufficient time to consider alternatives if needed.

Accordingly, the court approved the use of predictive coding software, considering it consistent with the CPR’s overriding objective, proportionate, and likely to produce disclosure at least as accurate as manual methods.

Holding and Implications

The court APPROVED THE USE OF PREDICTIVE CODING SOFTWARE for electronic disclosure in this case.

The decision directly enables the parties to employ predictive coding technology to manage the large volume of electronic documents efficiently and cost-effectively. It sets a procedural precedent within this jurisdiction for the court’s openness to approving such technology-assisted review methods, although the court noted that approval in other cases will depend on their specific circumstances. No binding legal precedent was established beyond this case’s context.