On 26 March 2012, significant changes were made to the discovery process in the Equity Division of the NSW Supreme Court as a result of the introduction of a new Practice Note, Disclosure in the Equity Division SC Eq 11 (Practice Note). It is expected that the changes will have a marked effect on the conduct of litigation in the Equity Division.
The Practice Note
The Practice Note applies to all new and existing proceedings in the Equity Division (except the Commercial Arbitration List), which includes both the Commercial and the Construction and Technology Lists, among others. It provides that the parties are now required to serve their evidence before the Court will make an order for disclosure (previously known as discovery), unless there are "exceptional circumstances". Furthermore, even after evidence is served, there will be no automatic right to disclosure unless it is necessary for the resolution of real issues in dispute in the proceedings.
As such, the common practice where discovery occurs prior to the parties preparing their evidence (usually based on those documents discovered) has now been reversed, and any (incorrectly held) preconceptions that a party is entitled to discovery as of "right" have been firmly quashed.
By forcing the parties to serve their evidence prior to seeking disclosure, the Practice Note seeks to ensure the parties focus on identifying the real issues in dispute, and thus narrow the ambit of later disclosure (if it is to be undertaken) and the proceedings generally. The aim is to seek a just, quick and cheap resolution of the real issues in the proceedings.
Where a party seeks disclosure prior to the service of evidence, an interlocutory application must now be made, supported by an affidavit that identifies:
- why disclosure is necessary for the resolution of the real issues in dispute in the proceedings;
- the classes of documents in respect of which disclosure is sought; and
- the likely costs of disclosure.
Exceptional circumstances and necessity
There has been discussion, and a fair degree of confusion, as to whether the Practice Note creates a new test for discovery of documents pursuant to the Uniform Civil Procedure Rules 2005 (UCPR). However, in a forum held at the Supreme Court on 30 April 2012, Justice Brereton stated that the Practice Note has not established a new test for discovery.
Nevertheless, UCPR 21.2 only provides that documents to be discovered must be "relevant", whereas the Practice Note states that disclosure prior to the service of evidence will only be provided in "exceptional circumstances", and at any time only where "necessary". Whether the use of the terms "exceptional" and "necessary" require a higher or additional threshold than simply that the documents be relevant remains to be seen, and will likely be the subject of further case law as practitioners get a feel for the boundaries and application of the new Practice Note. Our view is that the better position probably is that, while a document may be relevant to the proceedings, it does not automatically follow that its disclosure will be necessary for the resolution of the real issues in dispute.
Subpoenas and Notices to Produce
Parties may attempt to circumvent the Practice Note by using Subpoenas and/or Notices to Produce. However, in the April forum, the Equity Division judges confirmed that Subpoenas and/or Notices to Produce were encapsulated by the term "disclosure" in the Practice Note, and that Subpoenas and Notices to Produce issued in an attempt to obtain documents prior to evidence being served might be liable to be set aside as an abuse of process.
Our view is that there is nothing particularly new or controversial with this position, and we consider it merely reflects current practice. For example, Notices to Produce seeking broad categories of documents, and thereby replicating the discovery process, were always likely to be challenged as an abuse of process. Furthermore, there appears to be nothing in the Practice Note that would prevent Subpoenas from being issued for a proper purpose, such as a forensic investigation in an interlocutory application, or Notices to Produce being used to seek a specific document referred to in an affidavit or pleading.
Anecdotally, we are aware that the introduction of the Practice Note was met with an initial feeling of disquiet among practitioners. This is more so for those involved in construction disputes, which invariably require the assistance of expert witnesses. In order to form a proper and truly reasoned opinion, expert witnesses rely heavily on the material documentation being provided to them. Nevertheless, the nature of a construction project may often mean that these relevant documents (for example, plans, designs, drawings, results of testing and the like) might not be held by all the parties. In these circumstances, there are likely to be valid arguments that there are exceptional circumstances justifying disclosure of the necessary and relevant documents.
It presently remains too early to tell how the Practice Note will ultimately affect the practical conduct of proceedings. Initially at least, we suspect there will be a raft of applications for disclosure.
As parties will have to prepare their lay and expert evidence much earlier and without having reviewed their opponents' or other parties' documents, it is likely that the Practice Note will see more focus placed on the pleadings, as the pleadings will now essentially guide the parties' evidence. This may force plaintiffs to more carefully consider the breadth of their allegations and ensure that they have a sufficient basis for all of their claims.
Furthermore, it is possible that the result of having evidence exchanged earlier will result in the earlier assessment of exposure, and in turn, earlier attempts at settlement. If so, then the Practice Note will have achieved its aim of reducing the costs of litigation and preparing cases for trial more quickly.
Finally, we suspect that the more vigorously contested applications will be those that occur, not prior to, but after the evidence has been served. This is because, as a generalisation, once the evidence has been served, it will likely be in one party's interests to oppose any application for disclosure so as to limit the case against it. Accordingly, it is likely that a thorough critique of the admissibility and relevance of the evidence served will be made.
Over the next 12 to 18 months when the profession comes to grips with the new Practice Note, it is likely that the Practice Note will ultimately achieve its aim of reducing the large costs of litigation and for matters being resolved more quickly.
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.