The High Court recently gave a clear signal that it would hold parties to a high standard when managing electronic disclosure (West African Gas Pipeline Company Limited v Willbros Global Holdings Inc [2012] EWHC 396 (TCC)).

The court ordered West Africa Gas Pipeline Company Limited (WAPCo) to pay Willbros' wasted costs caused by the inadequacy of WAPCo's electronic disclosure. The decision also raises questions about the developing practice of conducting document review offshore.

WAPCo engaged an affiliate of Willbros as the contractor for the onshore works constructing the West African Gas Pipeline. WAPCo subsequently served a notice of termination on the affiliate and completed the pipeline project using other contractors. WAPCo is claiming US$273,748,113 from Willbros, under a guarantee, for the additional costs of completing the pipeline following the termination.

On 12 November 2010, the High Court gave detailed directions leading to a trial of six to eight weeks in June 2012. That order provided for the parties to give standard disclosure by 29 April 2011. Various other orders for disclosure of hard copy and electronic documents were subsequently made (see box "Disclosure").

As with many construction and engineering disputes, disclosure was a significant and complex exercise. Some months after the original deadline for disclosure, Willbros made an application criticising WAPCo's management of its disclosure and seeking various costs orders against WAPCo.

The court accepted that WAPCo's disclosure had been deficient in several respects. In particular, the court criticised:

The court did not accept that WAPCo could be held responsible for other alleged failures, including problems with filenames and the fact that certain documents were not electronically searchable.

The court made a costs order against WAPCo reflecting costs wasted as a result of the deficiencies. It ordered WAPCo to pay £135,000 on account, with the full sum to be assessed. This sum will include 50% of the cost of Willbros reviewing the documents that were not disclosed initially as a result of the inadequate LPO review.

The decision has wider implications for the following:

Collection and de-duplication. In a complex electronic disclosure process, neither the collection of documents or the de-duplication process is likely to be perfect in every respect. The judge recognised this when he spoke of the need for there to be some give and take between the parties.

However, the judgment sends the clear message that the courts will expect certain standards to be met. Even absent bad faith, significant costs sanctions for perceived failure to manage electronic disclosure are now a very real prospect.

LPO reviews. The court's criticism of the review by the LPO is of particular interest at a time when outsourcing document review to other jurisdictions, such as India, is beginning to find favour with both clients and law firms.

Following disclosure of a set of documents, Willbros learnt that WAPCo had not disclosed a particular email in a chain and, therefore, its attachment. WAPCo accepted in correspondence that it should have disclosed the email, and that the LPO had mistakenly marked it as not being disclosable during the review.

WAPCo, seemingly concerned that this omission might suggest a wider issue with the LPO's review work, asked the LPO to re-review the tranche of documents in question. As a result, the LPO identified almost 18,000 extra documents as disclosable.

WAPCo later sought to argue that the fact that the LPO had identified so many extra documents was because Willbros had amended its defence, so increasing the scope of disclosure. The court rejected this argument and held that these extra documents were substantially made up of documents that the LPO should have identified earlier.

The judgment provides only the barest detail of how WAPCo conducted its offshore review. It explains that the LPO was supervised and provided with "initial briefings". Escalation procedures were established and review batches were sampled. Based on this limited information, it is not possible to judge what (if any) extra steps might have improved the quality of the review.

Even so, this decision shows that litigants, and their advisers, will need to be more cautious than ever before when opting to outsource their document review. But parties should not be too quick to dismiss the option outright. Although his conclusions are sobering, the judge did not criticise the principle of offshore document review. Instead, he talked about "a failure of WAPCo's disclosure system".

In the real world, any team working on a large-scale review is likely to miss the occasional document. This is true whether a review is offshore or not. Disclosure is often followed by an exchange of correspondence during which inadequacies and errors of this type are debated and resolved. What concerned the judge in this case is the fact that the LPO review seemed to have systematically missed documents.

Any debate about the quality of an LPO review requires an honest assessment of the benchmark, typically a paralegal team at a UK firm. Although there are obvious cultural and language differences, some elements of the make-up of a UK review team and an LPO review team are not radically different. Both are typically comprised of bright law graduates. On that basis, the key to ensuring the adequacy of any review is how that review is organised and supervised.

It is undoubtedly true that the challenges of ensuring proper organisation and supervision are increased significantly when working with an offshore LPO. But it would be premature to conclude that a properly organised LPO review cannot be made to work. (For a discussion of the practical challenges of running a major disclosure review with a team of lawyers based in India, see Know-how article "Half a world away: outsourcing document review", www.practicallaw.com/5-517-3286.)

In fact, some argue that an LPO team is more committed to document review than a typical paralegal team. In the Indian legal market, working for western clients at an LPO is a good job for talented graduates who could not otherwise enter a restricted profession. In contrast, UK paralegals often use their role as a stepping stone to something else.

The real challenge, in both cases, is to ensure that the reviewers properly understand the pleaded case. West African Gas Pipeline Company Limited underlines the importance of testing this, and resolving any gaps in understanding, before any review begins. Logically, this holds true whether the review is onshore or offshore. However, it is safe to assume that, following this decision, offshore review is going to be the subject of greater scrutiny for some time to come.