High Court extends discovery time for Thema International Fund in Madoff-related litigation due to electronic data complexities.

Neutral Citation Number: [2011] IEHC 496

THE HIGH COURT

COMMERCIAL

2008 10983 P

BETWEEN

THEMA INTERNATIONAL FUND PLC

PLAINTIFF

AND

HSBC INSTITUTIONAL TRUST SERVICES (IRELAND)

DEFENDANT

AND

THEMA ASSET MANAGEMENT LIMITED AND 2020 MEDICI AG

THIRD PARTIES

AND RELATED CASES

JUDGMENT of Mr. Justice Clarke delivered the 17th day of October, 2011

1. Introduction

1.1 In the ordinary way, it would be unnecessary to give a detailed considered judgment in relation to an application to extend the

time for making discovery. However, issues have arisen as to the time frame within which discovery should be made in these

proceedings which have, as their backdrop, the increasing scale of discovery in modern commercial litigation which derives

significantly (but not exclusively) from the production and retention of electronic data. For those reasons, it seemed to me to be

important to set out a number of general observations which are of some relevance in that context.

1.2 These proceedings form part of the Madoff-related litigation which is being case managed together for the reasons set out in Kalix

Fund Ltd & Anor v HSBC Institutional Trust Services [Ireland] Ltd & Anor [2009] IEHC 457. Parties are described and terms are used in

this judgment in the same way as in Kalix. The four relevant proceedings are the Kalix proceedings, the UBI Banca proceedings, the

Thema proceedings and the A.A. proceedings. Orders for discovery were made in each of the proceedings, which are being

collectively case managed, which required all parties to those proceedings to make discovery, in terms which had been agreed, not

later than the 14th September last. When the proceedings were listed for mention in September, it was intimated on behalf of a

number of parties that difficulties had been encountered in meeting the time limit set out in the orders for discovery concerned. While

there was some degree of consensus that additional time ought be permitted, it was not clear as to whether the parties would be

able to agree an alternative timescale within which discovery could be completed. I, therefore, gave the parties liberty to issue

whatever motions they might consider appropriate in relation to the timescale for discovery returnable for the 11th October. Insofar

as the A.A. proceedings are concerned, it became clear that there was no material dispute between the parties to those proceedings

as to how discovery should be dealt with and an order was accordingly made providing for the manner in which the parties to those

proceedings could comply, within an extended period, with the orders for discovery already in being in that case.

1.3 However, so far as the three remaining proceedings (being the Thema proceedings, the Kalix proceedings and the UBI Banca

proceedings, collectively the “Thema related proceedings”) were concerned, there was no agreement. The formal position adopted by

Kalix was that it sought to have the defence of HTIE in the Kalix proceedings struck out for failure to make discovery in accordance

with the court’s order. In fairness, it was conceded by counsel on behalf of Kalix that such an order would not be appropriate. Kalix

accepted that some degree of latitude ought properly be given to HTIE. However, Kalix did not accept that the degree of latitude

which HTIE argued for was appropriate. As might be inferred from the above, HTIE itself brought a motion, referable to each of the

proceedings, seeking an extension of time for making discovery in terms which it will be necessary to set out in due course. Obviously

Kalix opposed that application. The other parties to the Thema related proceedings being Thema, Thema Asset Management (“TAM”)

and UBI Banca adopted a position which did not, in substance, oppose HTIE’s application. Thema itself sought a significant extension

of time (longer than that sought by HTIE) and in those circumstances could not oppose HTIE’s application. TAM did not oppose HTIE’s

application but sought that it be afforded a similar extension of time to any that might be granted to HTIE. UBI Banca also did not

oppose HTIE’s application although UBI Banca in particular proposed that there should be a form of rolling discovery to which

reference will be made in due course. While none of the parties opposed rolling discovery in principle, Thema indicated that it was not

in a position to comply with an obligation to make rolling discovery itself by reason of its (claimed) lack of resources and a dispute

emerged between the parties as to whether the court could or should direct rolling discovery in circumstances where it might not be

fully reciprocal by reason of the difficulties of Thema to which I have referred.

1.4 In summary, therefore, the real issues of controversy were as to whether Kalix was correct in its contention that the extension of

time sought by HTIE was excessive or whether, as HTIE argued, and none of the other parties bar Kalix opposed, an extension of the

type sought by HTIE should be allowed. Second, within the parameters of whatever extra time might be permitted, the question of

rolling discovery to which I have referred arose.

1.5 However, as the backdrop to all of the issues which have arisen can be found in the increasing scale of discovery in cases

involving a very large amount of hard and soft copy documentation, it seems to me to be appropriate to take this opportunity to make

a number of general observations on discovery in cases of this type before going on to apply the consequences of those observations

to the facts of this case.

2. Some General Observations

2.1 Much concern has been expressed in recent times about the cost of discovery in complex litigation (most commonly but not

exclusively commercial litigation) which, it would appear, can nowadays typically amount to 50% of the total cost of litigation. Also,

as the issues which arise in this case demonstrate, the length of time which may need to be taken in complying with discovery

obligations can, in some cases, be very lengthy, thus prolonging the period until a trial can be expected to commence. On the

evidence presented to me, it would appear that there is every likelihood that the costs for HTIE of making discovery in this case may

amount to as much as €7m. Given that there are, between the various cases under case management, six other parties (even though

the burden of discovery on many of those other parties may not be anything like that which lies on HTIE) it is, nonetheless, easy to

see how the total costs of discovery in these cases might well exceed €10m. Likewise, despite the fact that the parties agreed to a

period of six months for making discovery, I am now faced with applications which, if allowed in full, would extend the period, within

which discovery is to be made in full by all parties, for an additional period of over five months. When taken in conjunction with the

fact that there was a lengthy period during which the parties attempted to reach agreement on the scope of discovery (an issue in

respect of which a large measure of success was achieved) and the modalities of making discovery (an issue on which the parties

were a lot less successful), it can be seen that discovery has the potential to take up a great deal of time and postpone the

commencement of a trial for quite a prolonged period.

2.2 Without being exhaustive, a number of factors may be said to contribute to the difficulties which those observations identify. In

an electronic age, it seems that the amount of materials produced has increased enormously. People communicate in emails and other

forms of electronic communication in a way which leads to a record being kept in writing of those communications in circumstances

where, perhaps, in the past a telephone call or face to face conversation with no permanent record might have sufficed. The way in

which people communicate often leads to significant duplication of documents and the creation of complex strings of documents.

Likewise, many aspects of the way in which modern financial business is conducted leads to the creation of a very large amount of

data.

2.3 In addition to the creation of a large amount of extra materials, it seems that modern methods make it much more likely that

materials will be retained in one form or another. Handwritten drafts, in the past, rarely survived the completion of a typed document.

Nowadays, there may be an exchange of emails retained on a company’s server (or on individual devices operated by company

employees) recording various iterations of the document. Where the document is amended, the relevant server or device may contain

relevant records as to when and by whom the amendment took place. These, and doubtless many other, factors have led to the

volume of potentially relevant information in respect of significant commercial litigation expanding in an almost exponential way. The

term “universe” appears to be applied by those involved in attempting to manage discovery to describe the total volume of

documentation (whether in hard or soft copy form) which has at least some potential to be relevant to the case. It is certainly true

that, in modern times, in the context of discovery, whatever about the context of the Big Bang theory, we live in a rapidly expanding

universe.

2.4 In addition, as this case demonstrates, there are increasing problems deriving from the multinational nature of the holding of

potentially relevant information. Different countries operate their own regimes both for data protection and for data retention. The

fact that there is an obligation on a party to make discovery in Ireland does not necessarily mean that that party, or connected

companies or entities, is free from having to comply with the laws of other countries in which data may be retained. The problem can

obviously extend to subsidiaries within the same group of companies who may have carried out certain functions relevant to the

issues which arise in the litigation and which may well have retained documents or data with relevance to the case. However, as

again demonstrated by the facts of this case, administrative tasks are frequently outsourced to third party entities, located in other

jurisdictions, where even greater difficulties may be encountered in attempting to secure the release of relevant data. Doubtless

other cases will throw up yet further problems.

2.5 Against that general background, it seems to me to be important for the court to at least attempt to set out some general

principles by reference to which the obligations of parties to make discovery in complex cases need to be addressed. Those general

principles relate to the operation of the law as it currently is. Clearly, some consideration may have to be given to ways in which it

might be possible to tame the monster that discovery can now become whether by means of changes in rules or practices so as to

refine the scope of discovery and/or the modalities by which parties may be required to comply with their obligations. However, those

issues are not for me to determine. Nonetheless, within the parameters of existing procedural law, it seems to me that a number of

matters can usefully be observed.

2.6 The backdrop has to be the methods which are now adopted by many involved in assisting and advising parties on how to comply

with their discovery obligations in cases involving a large amount of material. The evidence in this case suggests that the method

adopted on behalf of HTIE involved four stages viz.:-

A. retrieval;

B. uploading and de-duplication;

C. search; and

D. review.

2.7 A little needs to be said about each stage. So far as retrieval is concerned, it is necessary to identify the so-called “universe” of

documents which might conceivably have some relevance to the case. The process of identification seems to involve questionnaires

to relevant personnel for the purposes of identifying the location of documents (whether in hard copy or soft copy) and the potential

identification of other persons who might have information relevant to other sources or locations of documentation. The process also

involves the assembly of those materials.

2.8 Uploading requires the information to be either transferred in electronic form and in a way in which it can be searched

electronically or, if in hard copy form, scanned and uploaded where possible. As it happens, on the facts of this case, it would appear

that there were some materials that were not capable of being uploaded in that fashion and which had to be the subject of a manual

review in any event. De-duplication is required because modern methods often create many copies of the same thing. Even those

with a cursory knowledge of the exchange of emails will be aware that a reply with history may, depending on the system used,

recreate any attachment. Such a process will also recreate any previous emails in the relevant string. An email sent to ten people

followed by two of those persons “replying to all” may create 30 copies of any attachment and 30 copies of the original email. While

there may be occasions when the fact that an individual had a copy of a particular version document at a particular time may be

relevant, there can be little doubt that simply reproducing a huge number of copies of the same material does not add anything to the

sum of human knowledge about the case. There can, in that context, it would appear, sometimes also be difficulties about what are

said to be near copies. Sometimes it is the very fact of a change made in a document by a particular person at a particular time

which may be relevant. In any event, de-duplication is designed to exclude multiple copies of the same document.

2.9 The third stage involves the use of key words and the like to search through the materials that have been assembled for the

purposes of attempting to narrow down the range of documents that are to be subjected to physical review by trained lawyers. A

little needs to be said about this aspect of the process. Obviously, any search by key words has the potential for getting things

wrong. It may be that the selection of key words results in a failure to throw up a document which may turn out to be relevant to the

case (a so called false negative). No matter what key words are chosen there must be some risk that this will happen. However, it

would seem that many relevant professionals have now acquired some expertise in the selection of key words such as ought to

minimise the risk of that happening.

2.10 It is important to recall that the obligation on a party making discovery is to disclose, insofar as it may be reasonably possible, all

documents which come within the categories agreed or directed by the court. However, the courts have always accepted that there

is some risk, particularly in large discovery, that there will be an innocent failure to disclose documents which may be relevant.

Clearly, where documents emerge which should have been, but were not, disclosed, the court needs to assess the reason for the

failure to disclose. It seems to me that where a party adopts a reasonable approach to the search of a large universe of documents

by means of key words and the like, then it is unlikely that that party would suffer any adverse consequences if it were to transpire

that, notwithstanding its best efforts, some documents fell through the net. It should, of course, be noted that the assumption in

that last statement is that the party acted reasonably and used its best efforts. A clever use of key words which might raise a

suspicion that same were deliberately designed to minimise the risk of damaging documents being selected might, of course, lead to

the court reaching entirely different conclusions.

2.11 Likewise, it is important to note that, while it was not possible in this case, parties sometimes reach agreement on key words.

Such an agreement must give an added degree of comfort to parties so that any failure to throw up a relevant document by means of

the use of agreed key words is much more likely to be viewed as an unfortunate but unavoidable accident rather than a deliberate

act. However, even in that context it is important to note that a party who, having a better knowledge of its own documentation,

might create a suspicion that it had manoeuvred the other side into accepting key words which were not best designed to meet the

reasonable requirements of the discovery process, might be the subject of legitimate criticism and adverse consequences.

2.12 It needs to be recalled that there is, in reality, a balancing exercise involved here. The whole reason for a search, of the type

with which I am concerned, is that the most time consuming and costly part of the process is the physical review of the remaining

documents (that is those remaining after the selection process) by trained lawyers on a document by document basis. Clearly, the

selection process will not have achieved its end if it does not significantly reduce the number of documents that need to be subjected

to that costly direct review. If too many documents remain for review which turn out not to need to be discovered (so called false

positives), then the cost and time of discovery will unnecessarily be lengthened. The whole point of narrowing the universe by means

of key word searches is to reduce the number of documents that require direct personal review. If the key words are too wide, then

the selection process will not do that job. If the key words are too narrow (or, perhaps, deliberately or inappropriately skewed), then

same is likely to enhance the risk of false negatives. Some reasonable balance has to be achieved between those two ends. Provided

that a party acts bona fide, and that the approach to the use of search tools is along the lines which I have described, it does not

seem to me that a party should face criticism or adverse consequences if it should transpire that, despite those best efforts, some

documents slipped through the net. In addition, I should note, in that context, that if truly key documents were to slip through the

net that might, of itself, lead to real questions as to whether anyone could reasonably have believed that the methodology was right

in the first place.

2.13 Finally, it is necessary to comment briefly on the fourth part of the process, that is to say, the review. On the facts of this

case, it would appear HTIE utilised up to 50 trained lawyers over a prolonged period in going through those documents which had

been selected as a result of the third part of the process, in order to determine whether those documents fell into any of the relevant

categories of discovery, to label the document by reference to any category so arising and to form some view as to whether there

might be a basis for claiming privilege or the like. It would seem that, on the facts of this case (and in this regard it is my

understanding that the practice adopted conforms with international best practice in this area), the process involved a second layer

of review by more senior lawyers designed to ensure consistency of approach between the respective first reviewers and to apply a

more skilled judgment to any difficult questions concerning relevance or privilege.

2.14 At the level of principle, I have little doubt but that the overall procedure described above, which was followed by HTIE in this

case, is an entirely appropriate means for approaching the question of making discovery in a case such as this. That is not to say

that the court should be prescriptive as to the method to be followed or that the above is necessarily the only way in which complex

discovery should be approached. Nevertheless, some similar rigorous and effective method is mandated if discovery is not to get out

of hand. In the light of those general observations it is appropriate next to turn to the consequences which those observations might

have for the obligation on those who are required to make discovery in cases such as this.

3. The Obligations on those making Discovery

3.1 It seems to me to be important to start by addressing the obligations which rest on a party to litigation which is required to make

discovery or where it may be reasonable to anticipate that a requirement to make discovery will arise.

3.2 Obviously, the basic obligation on any party is to comply, to the best of its ability, with any order for discovery made. However, it

seems to me that a number of ancillary obligations also arise.

3.3 First, where it is likely that the scale of discovery which will be required to be made is significant and, thus, likely to be lengthy

and costly, there is, it seems to me, an obligation on a party to consider how best it can meet any likely obligation to make discovery

in a way which does not unduly delay the trial of the proceedings and which does not add unnecessarily to the costs likely to be

incurred. While it is true that the specific and formal legal obligations of parties are those which are defined in court orders (or

agreements between parties concerning discovery which have the same status as a court order) nonetheless, it seems to me that

parties have general obligations which go beyond formal compliance with the orders of the court. In the context of the questions

which arise in these proceedings it is, therefore, important to note some aspects of those obligations.

3.4 Since the decision of the Supreme Court in Framus Ltd v CRH Plc [2004] 2 I.R. 20, it has been clear that the court must pay

attention to the principle of proportionality in deciding on the breadth of discovery to be ordered. It is also clear from Telefonica O2

Ireland Ltd v Commission for Communications Regulation [2011] IEHC 265 (and the cases cited therein) that proportionality can also

play a role in relation to the disclosure of confidential information, at least in circumstances where documents are sought to be

disclosed which are highly confidential (and, in particular, where the confidence of third parties is involved) and where the relevance

of the documents concerned to the case may be at best marginal. It remains, of course, the case that, as Kelly J. pointed out in

Cooper Flynn v RTE [2000] 3 I.R. 344, the requirement that justice be administered fairly will trump any obligation of confidence in

ordinary circumstances so that confidentiality will not, ordinarily, provide a basis for the non-disclosure of materials which are of real

relevance to the proceedings.

3.5 It also seems to me that proportionality is a relevant consideration when the court has to determine the way in which a party is

to comply with its discovery obligations. There is, potentially, an interaction between the speed at which a discovery obligation has

to be met, on the one hand, and the costs of complying with discovery obligations, on the other hand. While there may be some

absolute limits to the speed at which aspects of the identification and analysis of materials which might potentially be included in a

discovery affidavit can be achieved, nonetheless it is likely that the application of additional resources (whether they be human or

technological) can speed up the process although sometimes at a not inconsiderable cost. In the ordinary way, it seems to me that a

court, in considering the length of time which a party should be given to comply with a discovery obligation, should have regard to

what might be considered an acceptable length of time having regard for the need for the case to come to trial with reasonable

expedition, but also to the costs that might have to be incurred by greater expedition and to then strike an appropriate or

proportionate balance.

3.6 It is in that context that the obligation which I have earlier identified which requires parties to consider, even before an order for

discovery is made, how best to put themselves in a position to be able to comply in a timely fashion with any order for discovery that

might reasonably be anticipated, comes into play. A party which has failed to take reasonable steps to put itself into a position to

comply, once an order is made, with its discovery obligations, may find the court less sympathetic to any plea which it might make

concerning the burden of having to meet an onerous discovery obligation in a short period of time. The court is entitled to assume

and expect that a party will have taken reasonable steps, in advance of the terms of discovery being fixed either by agreement or by

court order, to put itself in a position where it can comply with the obligations arising in an expeditious way. In the context of

following a process analogous to the four stage discovery process discussed earlier, there seems to me to be no reason why stages

one and two cannot be carried out in advance of the finalisation of the terms of discovery for the assembly of the “universe” of

materials and the uploading of those materials where possible (together with the assembly of any documents that must be kept in

hard copy form) can go ahead on the basis of a reasonable assumption as to the broad parameters of discovery which is likely to be

ordered. It seems to me, therefore, to be reasonable for the court to expect that parties will put themselves in a position to be able

to comply with their discovery obligations, post order or agreement, by taking all appropriate preparatory steps so as to minimise the

period that is likely to elapse between agreeing or having determined the scope of discovery and compliance with the obligations so

determined. Where it is reasonable to assume, as here, that the proceedings will progress at least to the discovery stage and that

that discovery will be extremely substantial, and where, therefore, something along the lines of the four stage approach adopted by

HTIE in this case is anticipated as being necessary, it follows that a party has an obligation to use its best endeavours to progress

stages one and two before the terms of discovery are finally determined.

3.7 Where, therefore, a party unreasonably fails to progress matters in that way, in advance of order or agreement, a court is likely

to be less sympathetic to a plea on the part of the party concerned that it would be difficult, unfair, unreasonable or unduly

expensive or resource consuming, to require the party to comply with its obligations post agreement or order in a very short period of

time. If, for example, a party who might reasonably have been expected to have completed stages one and two prior to the making of

an order by the court could have complied with discovery in (say) eight weeks had it taken those steps in a timely fashion, then a

court is likely to be reluctant to afford a significantly longer period for compliance to such a party simply because the relevant party

had failed to comply with its obligation to take appropriate preparatory steps. It remains, of course, the case that the court cannot

order a party to do the impossible. It is also true that it is only in extreme cases that the court could dismiss a claim or defence for

discovery failures. However, within the range of what may be possible, a party may find the court unsympathetic to pleas of expense

or difficulty if the party has not acted reasonably in preparing itself to be able to comply with discovery in an expeditious way.

3.8 The other aspect of compliance which I feel is worthy of some note is cost. It is clear from the evidence tendered in this

application that the methods used for complying with an obligation to make discovery can themselves significantly impact on the

costs of the discovery process. Two points seem to me to arise. First, it seems to me that a party is obliged to give significant

consideration to adopting the cheapest method for complying with its discovery obligations unless there is good reason for adopting a

more expensive method by reason, for example, of a greater likelihood of accuracy or some other factor of like weight. It should, of

course, be noted that aspects of the method used to progress discovery can have advantages for other elements of the trial

process. For example the creation of searchable versions of relevant documents (even at some expense) can have beneficial

consequences for both the party making discovery and any parties receiving same. Cost must, therefore, be viewed not just from the

perspective of discovery but also from the perspective of the likely cost of the litigation as a whole. However it should not be

assumed that a party who adopts an unnecessarily expensive means of complying with its discovery obligations can recover the

additional costs of making discovery (should it win the case and have costs awarded to it) which go beyond the amount that would

have to have been paid had a less expensive but equally effective means of complying with its obligations been utilised. In cases

involving a great deal of materials, and in particular where much of the relevant materials are held electronically or can be readily

converted to being held in electronic form, those observations apply with even greater force. If a party fails to use reasonably

available IT methods which would have had the effect of reducing the overall costs of the litigation, such a party may well find itself

unable to recover the extra costs incurred by reason of a failure to employ the relevant methods.

3.9 Finally, it is necessary to make some general comments about the difficulties, which I have earlier noted, which may be

encountered in attempting to secure the release of materials held abroad. It seems to me that the same general comments which I

have made in relation to carrying out preparation for anticipated discovery in complex cases apply equally to steps necessary to

secure the release of documents held abroad. Where it can reasonably be anticipated that documents held abroad are likely to be

within the scope of discovery, then it seems to me to be incumbent on a party who may have an obligation to make discovery of such

documents to take any necessary and appropriate preparatory steps which it can (in advance of discovery being agreed or ordered)

to ensure that any procedures or applications necessary to permit the lawful release of the relevant materials can be put in place in a

timely fashion. Again, a court may be unsympathetic to a plea of inability to complete discovery on time based on the necessity to

comply with a foreign regulatory regime, where reasonable steps to put in place the procedures necessary to comply with that foreign

regime were not commenced in a timely fashion. There may, of course, be limits as to what a court can do in those circumstances.

However, there may be consequences as to costs or as to other aspects of pre-trial steps which may be used to prevent a delay in

proceedings, caused by a failure on the part of a party to take appropriate preparatory steps to ensure that it can secure the release

of foreign held materials. For example, a party who significantly delays the completion of the pre-trial process by reason of such a

failure may find itself having more stringent time limits placed on it in respect of the preparation of witness statements, legal

submissions or the like so as to enable as much lost time to be made up as possible.

3.10 Against the background of those general observations, I now turn to the application of same to the facts of this case.

4. Application to the Facts of this Case

4.1 For reasons which I hope will become clear, I propose starting with a consideration of the timescale which HTIE says is now

required in order to complete the discovery process. One criticism made on behalf of Kalix is that HTIE is, it is said, insufficiently

specific about how much longer it needs. I am not satisfied that that is a reasonable criticism of HTIE’s position. HTIE seems clear

that it will (barring accidents) be able to comply with its discovery obligations by the end of February of next year. Given the scale of

the discovery which HTIE has to meet and given the work that remains to be done, it seems to me to be prudent on the part of HTIE

to qualify its position by noting that there might be unforeseen difficulties which might lead it to come back to the court to seek some

further accommodation. It does need to be noted that it would only be in circumstances where any such difficulties could not

reasonably have been foreseen at this stage and, thus, factored into HTIE’s current estimate, that any such application would be

likely to be successful.

4.2 Having reviewed the detailed account set out by HTIE in its affidavit evidence in relation to the work which remains to be done, I

am satisfied that the estimate of how long HTIE needs is reasonable. It would, it seems to me, be possible for HTIE to complete its

obligations in a shorter timescale but only by the application of a level of resources that would, in my view, be disproportionately

expensive. It seems to me that I could only, therefore, require HTIE to comply with its obligations in a significantly shorter timescale

(and thus incur that disproportionate expense) if I was satisfied that HTIE had failed in some material and significant way to comply

with its obligations to date.

4.3 So far as the situation which has pertained since the making by the court of the relevant orders for discovery is concerned, I am

satisfied that HTIE has, so far as the search and de-duplication process and the lawyer review process to date, dealt with same in a

reasonable and expeditious manner. The only matter, so far as HTIE’s actions to date are concerned, on which there is, in my view, a

lack of clarity is as to whether HTIE acted reasonably, before discovery was ordered, in identifying the universe of documents, of

loading same insofar as that was possible and assembling hardcopies in all other cases, together with identifying and taking steps

towards insuring that any foreign held documents could be released. In the light of the way in which this application was presented, I

do not think HTIE can be blamed because some relevant information was not before the court. However, having regard to the general

observations made earlier in this judgment, it seems to me that I do need to be satisfied that HTIE did act reasonably in respect of

those matters for, if there was a significant and culpable failure on the part of HTIE to have acted reasonably and expeditiously in

that regard, it might well be the case that it would be legitimate to impose a correspondingly larger burden on HTIE to complete the

process in a shorter timescale than might otherwise ordinarily be appropriate.

4.4 At this stage, it seems to me that I should confine myself to holding that, in the event that HTIE file affidavit evidence which

satisfies me that appropriate steps were taken in a timely fashion to comply with stages one and two of the process referred to

earlier and to put itself in a position where any process necessary to secure the release of foreign held documents was commenced in

a timely way, then I am disposed to allow HTIE the extension of time sought. I will discuss with counsel an appropriate timescale

within which such an affidavit should be filed and arrange to have the matter re-listed to consider same in early course.

4.5 Having regard to the fact that Thema sought an extension to the end of March while HTIE seemed confident that it could comply

with all its obligations by the end of February, it seems to me that the orderly conduct of the pre-trial process would best be met by

giving all parties the same extension of time. In that regard, I propose to fix Friday, the 16th March, as the date by which all parties

are to complete the discovery process. In so doing, I have imposed a slightly more onerous burden on Thema than it urged but it

seems to me that it is appropriate to impose such an obligation not least because fixing that date (rather than the end of March)

seems to me to significantly increase the chance that all pre-trial matters (including any disputes arising out of discovery) can be

concluded and pre-trial directions given and a provisional date for the trial fixed before the summer vacation of 2012. Allowing to the

end of March would, in my view, significantly increase the risk that that timescale would not be achieved, particularly if there were

any significant disputes between the parties as to the adequacy of discovery, claims to privilege or the like. In summary, therefore,

and subject to the filing by HTIE of an affidavit dealing with the issues to which I have drawn attention, it is my intention to make an

order extending the time for all parties in the Thema related proceedings for making discovery until the 16th March, 2012. It remains

to consider the issues which arise in respect of “rolling discovery”.

5. Rolling Discovery

5.1 When the possibility of it being necessary for parties to seek an extension of time for making discovery was first mooted, counsel

for UBI Banca suggested that any adverse consequence for the timeline to trial of such an extension might, at least in part, be

ameliorated if rolling discovery were to be made. While the term rolling discovery can have a number of meanings all parties to this

case were agreed that the form of rolling discovery under consideration was one where each party would provide some of the

documents in respect of which discovery was to be made and in relation to which no claim for privilege was to be advanced, on a

staged basis. In that model, no interim affidavits as to discovery are sworn but one composite discovery affidavit is provided at the

end of the process. The advantage of rolling discovery is that it gives the parties an opportunity to begin the process of considering

the documents disclosed in advance of the finalisation of the discovery process. At least to some extent that may facilitate parties in

being able to give an early answer to the question as to whether any issues arise in respect of the adequacy of discovery and also

may assist in speeding up the time between the completion of discovery and the taking of necessary pre-trial steps such as the filing

of witness statements and the preparation of books of documents for the trial.

5.2 Where, as here, the length of time that is necessarily likely to be taken in making discovery is very long, it seems to me that it is

appropriate to give some consideration to whether rolling discovery is reasonable in all the circumstances. Obviously, the downside of

rolling discovery is that parties may be obliged to divert at least some resources towards compiling schedules of documents to be

made available on a rolling basis although that work would almost certainly have to be done in the context of producing the final

affidavit as to discovery in any event.

5.3 HTIE did not oppose rolling discovery in principle although it is fair to say that counsel questioned whether it would be of as much

advantage to the receiving parties as was suggested. However, HTIE did suggest that it would only be appropriate to make an order

for rolling discovery in the event that all parties were to be subject to the same regime on a reciprocal basis. I did not understand

counsel for UBI Banca, Kalix, or TAM to have any difficulty in principle with what was proposed. The difficulty rested with Thema.

Counsel for Thema indicated that Thema did not have the resources to make rolling discovery and would not, either, have the

resources to benefit from rolling discovery being made in its favour for, it was said, all of the resources available to Thema were

presently being deployed in ensuring that Thema could comply with its own discovery obligations. As noted earlier in the course of this

judgment, Thema sought an extension to the end of March but, for the reasons already set out, I have now directed that Thema

comply with its obligations by the 16th March, or some two weeks earlier than it had sought.

5.4 It seems to me that this issue comes down to one of deciding whether what might otherwise be considered to be a sensible

proposal (i.e. rolling discovery) should be abandoned because Thema is not in a position to avail of it. On balance, I have come to the

view that it would be inappropriate to deprive the other parties of the advantage of rolling discovery simply because of Thema’s

difficulties. In order that there be some certainty as to the matter, it seems to me that the order should require all parties, with the

exception of Thema, to make available to all other relevant parties (again with the exception of Thema) in each tranche not less than

25% of the total number of documents which are considered likely to be required to be discovered, on a staged basis, so as to ensure

that complete discovery is made by all of those parties no later than the 16th March, 2012. Thema will, of course, be obliged to

provide its full discovery and will become entitled to receive full discovery from all of the other parties as of that date.

5.5 While that timescale is somewhat slower, potentially, than the phasing suggested by HTIE, it should not necessarily prevent the

parties from agreeing any faster mutual exchange of appropriate percentage tranches of the discovery that they may consider they

can meet. I will again hear counsel further on the precise timescale in the light of those observations.

5.6 While there may be some minor litigation disadvantage to the other parties by the non-inclusion of Thema in that process, it

seems to me that any such disadvantage is more than outweighed by the potential advantage to the timely trial of this litigation as a

whole which stems from directing rolling discovery. In that context I should make one further comment.

5.7 While appreciating the potential resources difficulty that some of the parties to these proceedings have and while understanding

the scale of the discovery and other procedural obligations which arise in the context of extremely complex proceedings such as

these, it nonetheless does need to be recorded that these proceedings cannot be permitted to advance solely at the pace of the

slowest party. I have not, for the reasons already noted, imposed like obligations on Thema as are to be imposed on all other parties.

However, that does not mean that Thema will be permitted to unduly delay these proceedings coming on for hearing. In that regard,

it is important to note that discovery by Thema is an important part of the disclosure process in this case. It is difficult to see how at

least certain aspects of the issues likely to arise in these proceedings could realistically be tried in a full and fair way without

disclosure on Thema’s part. However, once Thema has completed its disclosure, the need to assess discovery, both for the purposes

of identifying any apparent failure of discovery or wrongful claim to privilege and for the purposes of preparing for trial, will commence.

5.8 The fact that Thema may be starting from a somewhat disadvantageous position in that regard (because it has not participated in

rolling discovery) will not, in my view, afford a reason for Thema not having to meet whatever timescale may legitimately be imposed

on other parties both in respect of identifying any problems with discovery or in preparing for trial. If that creates some difficulties for

Thema then same are, I am afraid, difficulties largely of its own making. While all parties are entitled to reasonable accommodation in

getting themselves ready for trial, it is also necessary for the court to keep in mind the need for a timely hearing of the case. Even a

significant resources problem cannot entitle a party to create a situation where there are unacceptable delays in litigation coming to

trial. It must be recalled that any undue delay in this case coming to trial has the potential to cause prejudice for all parties. If the

individual shareholders are found to have a good cause of action then they are deprived of their money for a prolonged period of time

during a period of significant financial turmoil where the absence of funds could have very significant effects. Likewise, in the event

that HTIE is absolved from any liability, HTIE will have had very significant proceedings indeed (the claim is for a sum not too far short

of €1 billion) hanging over it for an unnecessary period of time. Justice requires that these proceedings come on for hearing as soon

as may be practicable. The proceedings cannot therefore be delayed to meet the pace of the slowest party.

6. Conclusions

6.1 In summary, therefore, subject to the filing of an appropriate affidavit as referred to earlier, I propose in general terms to accede

to HTIE’s application and to extend the time for all parties to the Thema related proceedings to make discovery until the 16th March,

2012, with rolling discovery to apply on a reciprocal basis in respect of all parties with the exception of Thema.

6.2 The rolling discovery is to be, at a minimum, on the basis of a commitment to four tranches of at least 25% of the anticipated

volume of discovery within a timescale, ending on the 16th March, on which I will hear counsel further.