Australia: Legal process outsourcing - a cost-saving scheme which might end up costing more

Last Updated: 17 March 2012
Article by Victor Lau and Vanja Bulut

Key Points:

Litigants are increasingly using legal process outsourcing as a way of reducing legal costs, but unless proper checks and balances are put in place, these services could end up costing you more, warn Victor Lau and Vanja Bulut.

Litigants are increasingly prepared to consider utilising legal process outsourcing as a way of reducing legal costs. A recent UK case of West African Gas Pipeline Company Ltd v Willbros Global Holdings Inc [2012] EWHC 396 (TCC) provides a timely reminder that unless proper checks and balances are put in place, the use of these services could end up costing more.

Lessons from England

In the West African Gas Pipeline case, the England and Wales High Court found that West African Gas Pipeline Company Ltd (the claimant) had failed to undertake proper discovery and ordered it to pay the defendant's wasted costs of Ł135,000 (approximately A$200,000).

In this case, the claimant engaged two external litigation support providers, one of which was based in India, to fulfil its discovery obligations. Over 70,000 documents were discovered initially, with over 72,000 more being discovered over a number of months.

During the review of the initial 70,000 discovered documents, Willbros Global Holdings Inc. (the defendant) noticed that an email from a chain had not been discovered. This then led to an extensive enquiry which brought to light the inadequacy of the review of the documents carried out by the external litigation support providers, which included:

  • problems with the de-duplication procedures used by the external litigation support providers, leading to a large number of duplicated documents which had not been properly identified and removed;
  • failure to deal with redactions consistently; and
  • failure to gather together all the documents required to be discovered, and then carry out a proper review process.

The High Court noted that while there must be "some give and take" between parties in relation to difficulties which arise out of discovery, the court may properly exercise its discretion to make costs orders where there had been "a mistake or error which has had significant consequences in terms of time and cost".

As a result, Justice Ramsey found that the defendant was entitled to have the costs wasted as it resulted in the defendant having to:

  • consider, a number of times, duplicated copies of the same document;
  • analyse inconsistent redactions; and
  • review documents over a prolonged period which inevitably increased costs for the defendant as the discovery process became disrupted.

Managing your litigation support providers

If external litigation support providers are utilised, care must be taken to retain control of the process in order for the party to avoid incurring additional costs due to inadequate discovery.

Parties who engage an external litigation support provider should consider implementing a process that ensures effective management of document review. Steps that could be implemented include:

  • undertaking a sufficient and thorough briefing process to ensure that the team fully understands the issues and the tasks;
  • providing supervision of the process, where reviewers can raise questions in respect of particular documents;
  • introducing a quality assurance process such as conducting a sample of reviewed documents to ensure the review is undertaken correctly and is consistent; and
  • providing regular briefings and feedback sessions.

Effective management of the document review would aim to minimise the need to carry out unnecessary additional work.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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