Will new discovery rules in the Federal Court reduce the
excessive costs of discovery in commercial disputes?
The principle of discovery
The right to discovery and inspection of your opponent's
documents is a cornerstone of our system of justice, particularly
in commercial disputes. When it was first introduced in England in
the 19th century, it was intended to reduce time and expense by
forcing the disclosure of documents containing relevant evidence,
particularly admissions by the opponent. The overriding purpose was
to facilitate access to justice.
But there is no doubt that in the 21st century that
noble goal has long been lost in the deluge of documents that
comprise the modern litigation process.
The problem with modern discovery
Justice Sackville, the judge in the C7 case recently remarked in
an article in the Law Society Journal (NSW) last year:
It is [in carrying out discovery] that extraordinary and
disproportionate costs are frequently incurred by parties to
litigation. Far too often the search for the illusory 'smoking
gun' leads to squadrons of solicitors, paralegals and clerks
compiling vast libraries of materials, much of which is of no
significance to the issues in the proceedings. The problem has been
compounded, not alleviated, by the exponential growth of electronic
communications which can be tracked and often reconstructed after
This will no doubt resonate with anyone unfortunate enough to
have been party to a commercial dispute before the courts. But some
may also know that large and complex disputes are sometimes won and
lost upon one or a handful of emails turned up during
This has created a mindset amongst commercial litigants that an
opponent must be put to extensive discovery no matter the cost. Is
$1 million and a year of wasted management time excessive if it
turns up a handful of emails that resolve a $100 million
The (lack of) appetite for change
In its recent report running to 380 pages "Managing
Discovery – Discovery in Federal Courts", the
Australian Law Reform Commission (ALRC) tackled this vexed issue.
The ALRC consulted widely and proposed a list of recommendations as
to how discovery in Federal Courts can be changed to reduce cost
and increase effectiveness and efficiency.
In response to the ALRC report, the Federal Court had a golden
opportunity to implement reforms to its discovery processes with
its recent complete rewrite of its procedural rules.
It decided not to do so but has nevertheless, simplified and
streamlined the process and has introduced a requirement that
discovery can only be ordered by a court if it will facilitate the
just resolution of the proceedings as quickly, inexpensively and
efficiently as possible.
That sounds helpful, but a similar requirement has governed the
overall conduct of NSW civil proceedings generally for some years
without effecting any substantial change. So it remains to be seen
whether it will make a difference to discovery in Federal
How can parties reduce their litigation costs?
Early this century, document retention/destruction policies were
seen as the way out of the discovery quagmire. But drafting and
implementing such policies can introduce more risks than they
Lawyers have often been seen as the cause of the problems with
the discovery process. That is partly right. So changes in
lawyers' conduct is rightly seen as critical to resolving the
1. Limiting the scope of documents to be discovered and
limiting the scope of document sources to be searched.
Lawyers can play a critical role in achieving these ends. The
legal tools are often available in court procedural rules if
parties are prepared to incur cost and risk up front, by
proactively seeking to set reasonable and proportionate limits on
discovery, rather than submitting to the inevitable as too often
The new Federal Court rules will assist for those motivated to
Ultimately, whether that approach provides benefits will depend
upon the skill of the lawyer advocating for a limitation on
discovery, the attitude of the judge and the position taken by the
2. Limiting document identification, inspection and
In a speech on the opening of the law term on 31 January 2011,
the former Chief Justice of New South Wales, Jim Spigelman
I repeat what I said a few years ago when I was informed that
for a significant commercial dispute the flagfall for the discovery
process was something in the order of $2 million. That level of
expenditure is not sustainable. Outsourcing through the use of
Indian based support services – such as digital dictation
transcription and document management for discovery and due
diligence, is an available way of containing such costs.
Outsourcing discovery processing is common place in US and UK
legal markets but is in its infancy in Australia. That will
inevitably change in light of the increasing push for legal spend
reductions by company counsel and boards.
In the limited cases in which outsourcing is appropriate, it
will also provide the opportunity for non-top tier firms without
armies of junior lawyers to compete for large litigation. That will
bring with it increased competition between firms and consequent
benefits for clients.
What does this mean for you
The new Federal Court rules serve as a reminder that there are
things that your lawyer can do to assist in reducing your discovery
costs and burden if they are motivated to do so. If your lawyer is
not explaining your options to reduce your discovery costs, then
perhaps asking about it now, could save you thousands of dollars in
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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