Some news from Australia is surprising: such as the England cricket team salvaging some honour from the Ashes series. Some is not so surprising: like the Court of Appeal of the Supreme Court of Victoria reversing a first instance decision to strike out a tobacco company’s defence of a personal injury claim.

The judge in Melbourne, Justice Eames, had done this because, in his view, a document retention policy had been implemented too enthusiastically and with the involvement of too many litigation lawyers (see article on McCabe v BAT in Law, May 7, 2002). BAT subsequently appealed and three Court of Appeal judges last month decided that the judge had been wrong.

Rolah McCabe had unfortunately died while the appeal was pending and her estate will thus not benefit from the free kick at goal granted by the original judgment. Rather the case will need to continue with the benefit of such documents as are available.

The Court of Appeal’s judgment is notable for the sympathetic interpretation of the purpose of BAT’s document retention policy. “Retention” in this context is, of course, a euphemism for “destruction”, which was the most significant manifestation of the policy. This was not challenged by the Court of Appeal. The appeal judges, however, found that the primary motivation was not the sinister one of hobbling future claimants but the more benign one of making life more convenient for the company in the event that disclosure obligations arose in any future litigation. The cynic may well question the validity of this distinction.

Central to Justice Eames’s suspicion of the motivation and effect of the legal advice received over the years by BAT was the reliance on carefully drafted wording that set out an innocent intention and was intended to assist in interpretation of the entire policy.

He seemed to take the view that, if you pay lawyers to be involved, their drafting or approval of drafting must be intended to have some effect. The Court of Appeal was more sympathetic to the lawyers and could not find evidence that the assertions of innocence had actually been “inserted” by them.

The Court of Appeal also found that sanctions beyond the drawing of adverse inferences were appropriate for destruction of documents only if the relevant conduct amounted either to an attempt to pervert the course of justice or a contempt of court.

Given the rather muddled and metamorphosing nature of the procedural application that led to the decision under review, the Court of Appeal judges understandably felt that the ultimate sanction had ambushed BAT without appropriate warning. This was certainly a factor that distinguished this particular case and it may be that future respondents will be less lucky. It is not entirely clear why future judges, or indeed English judges, should have to apply criminal concepts (that is, contempt or perverting the course of justice) to procedural defaults in civil cases, even with the civil burden of proof.

The third factor that influenced the Court of Appeal was the effect of the judge having received access to BAT’s lawyers’ confidential letters and notes after a “waiver of privilege”. One of those documents was an internal lawyer’s attendance note, never intended to see the light of a courtroom day, where a junior assistant to the law firm partner involved had gone rather further than would have been wise in a document intended for public consumption. The judge had seized on this and had used it to support his conclusions — or, in the opinion of the Court of Appeal, to colour his judgment. The Court of Appeal decided that the judge should not have ordered disclosure of these documents. It was also of the opinion that the contents of the documents should not have made any difference anyway, since the document retention policy had been properly formulated and managed.

Possibly as a result of this refusal to rely on privileged documents, the Court of Appeal did not take into account the evidence of heavy cross-jurisdictional and US-led involvement of lawyers in the case. Nor did it review in any detail the judge’s finding that there had been warehousing of documents in the hands of an American legal firm.

In summary, the court decided that the conduct of BAT and its lawyers was not so bad and Mrs McCabe had not suffered such prejudice as to justify the extreme remedy of striking out the defence. The court also held that, even were the criticisms justified, a strike-out would have been disproportionate. Given our own Court of Appeal’s well-known desire to give case- managing judges unimpeachable discretion in procedural matters, it is interesting to speculate just when this decision might be applied or how little circumstances would need to change for a draconian remedy to be upheld.

It would certainly be wrong for companies to treat this judgment as a green light to disregard sources of documentary evidence under the guise of good document management practice. Litigation lawyers have always sought to ensure that evidence emerges in the best possible form and this will not change. Equally, courts will be assiduous to ensure a level playing field. A corporate defendant survived this particular challenge but shortcomings in the game of document management will always risk sanctions in some form.

The author is a litigation partner at Laytons.

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