Case Study
CBL Insurance Liquidation
Anthony Harper worked for the liquidators of CBL Insurance Ltd, in respect of losses of over $320 million involving nine causes of action.
Discovery involved:
13 King’s Counsel
12 law firms
Discovery of 6,500,000 documents
Team of up to 30 reviewers
Work spanning 18 months
Background
Anthony Harper acted for the liquidators of CBL Insurance Limited (in Liquidation) (CBLI), in a claim against the directors and advisors of the company in respect of losses claimed at no less than NZ$320 million.
The Serious Fraud Office filed criminal charges in relation to CBLI and the Financial Markets Authority filed civil charges in relation to its parent company, CBL Corporation (previously listed on the NZX and ASX).
The liquidators for CBL Corporation also filed proceedings against the directors of CBL Corporation. Additionally, two class actions were filed by different groups of shareholders, relating to CBL Corporation and, in particular, its IPO.
The value of those class action claims was approximately NZ$270 million. The total value of the civil/regulatory claims was at least NZ$600 million.
Significant public interest
The unprecedented collapse of the CBL Group (with trading arms across the world) has been widely publicised with an estimated loss of NZ$747 million arising as a result of the collapse of parent company, CBL Corporation.
There was significant public interest in the case given this was the first collapse of this nature in New Zealand, leaving shareholders and creditors significantly out of pocket.
The collapse of CBL in New Zealand has also led to an inquiry into the regulatory processes in respect of insurers in the market.
Proceedings
There were six proceedings in respect of the affairs of CBLI and CBL Corporation, including two CBL Corporation shareholder class actions, two actions by the FMA and the actions by each of the liquidators of CBLI and CBL Corporation.
All of these proceedings were being managed concurrently in the High Court given the extensive overlap in factual background between the proceedings.
This overlap of cases inevitably created novel and complex issues for the Court, including difficult questions around consolidation in the context of multi-party proceedings involving civil/regulatory/criminal issues.
The Court considered whether it could practically case manage all the proceedings together, including how discovery would occur across all the claims, and in what specific order, in circumstances where there were multiple parties with potential claims of privilege and potentially conflicting claims as to the privileged status of documents.
The litigation involved multiple disciplines including insurance, restructuring and insolvency, general civil and criminal. The nature of the liquidators' actions also required the consideration of novel duties of care in the context of the regulatory framework set by the Insurance (Prudential Supervision) Act 2010 in New Zealand.
The Anthony Harper team was led by litigation Head of Practice and Partner Dan Hughes and Partner Joey James. The complexity of the litigation and the overlap of criminal, regulatory and civil jurisdictions is evidenced by the number of highly experienced and accomplished counsel instructed in the matter, including 13 King's Counsel and barristers, and at least 12 other law firms.
International jurisdictions
There was a considerable international element to both the liquidation and the subsequent litigation as CBLI had engaged, primarily via re-insurance arrangements, with entities in Ireland, Gibraltar, France, and Denmark. Consequently, the decisions made by regulators in each of those jurisdictions impacted heavily on the actions of CBLI, RBNZ as the New Zealand regulator, and the course of the liquidation and following litigation.
Civil claims
The civil claims brought by CBLI and the liquidators, and the class actions, have been resolved by way of a confidential settlement. There were significant complexities involved in reaching this settlement given the multiple jurisdictions in which CBLI operated and the multiple plaintiffs involved in the settlement process.
Discovery steps
6,500,000
Initial discovery documents provided
An external technology support provider processed/sourced documents from CBL servers and advisers and fulfilled the document forensics function.
1,300,000
Initial key word and de-duplication filtering
Technology (non-AI) used to digitally screen the complete document pool using key word / key phrase searches. Documents with images, diagrams and suchlike that cannot be digitally word searched are separated for First Level Review.
300,000
Technology Assisted Review (TAR)
Senior lawyers with a strong knowledge of the CBL statement of claim review sample sets of documents trained a TARbot to recognise and prioritise relevant documents. The TARbot required 40 training rounds, each involving 1000 documents, to reach an acceptable level.
125,000
First Level Review (FLR)
Second Level Review (SLR)
FLR: human review of TAR selected documents. Documents with images, diagrams etc. receive their initial review.
SLR: review by legal professional with a knowledge of the statement of claim testing for relevance and privilege of document.
Handover
Discovery process
In the course of the litigation, Anthony Harper employed Technology Assisted Review (TAR) to expedite the process of discovery. TAR reduces the need for human review of documents, utilising AI to reduce document numbers by prioritising documents determined to be more likely to be relevant.
The document pool for discovery was initially very sizeable. TAR helped significantly reduce this number to a volume that was much more manageable.
Award recognition
Following its success in the CBL case, Anthony Harper has been recognised as an award winner in the NZ Law Awards 2023 for Insolvency Deal of the Year.