Discovery is a key phase in most litigation and often one of the most important.
It is a process ordered by the Court that requires parties to a proceeding to disclose relevant documents to each other to promote efficient conduct of the matter. In addition to avoiding situations where key documents are revealed by surprise or ambush at a final hearing, discovery assists the parties in narrowing the issues between them and can provide a party with a better sense of the strengths and weaknesses of their own case and promoting a settlement of the issues in dispute.
However, in some circumstances, one party to proceedings may seek to limit who can view the documents that it discloses on the basis that they are confidential or commercially sensitive. This article will provide a brief overview of discovery and what happens when a claim for confidentiality is made.
What is discovery?
Discovery (also known as disclosure in New South Wales and other jurisdictions in Australia), is a process where parties in litigation are able to obtain from each other documents relevant to the issues in dispute (subject to any claims for privilege). Discovery can even be ordered before substantive proceedings have been commenced as a way of aiding a prospective plaintiff in assessing the merits of their claim (known as "Preliminary Discovery"). Discovery will usually be ordered before the preparation of evidence after the commencement of proceedings, or after evidence has closed depending on the nature of the dispute and the needs of the parties to obtain discovery.
The process of discovery is subject to the discretion of the Court, and as such, the 'rules' for discovery will be dependent on the jurisdiction in which the dispute is litigated:
- In the Supreme Court of New South Wales, orders for discovery are made in the form of specified 'classes' of documents, and their rules are governed by Part 21 of the Uniform Civil Procedure Rules 2005 (NSW) and Practice Note SC Eq 11. Those orders are only made when it is "necessary" for the resolution of the real issues in dispute.
- By contrast, in the Federal Court, the Federal Court Rules 2011 (Cth) orders may be made for parties to give 'standard discovery' of documents that are directly relevant to the issues raised by the pleadings or affidavits.
But I don't want you to see it! Confidential or commercially sensitive materials
In some cases, an order for discovery requires that materials claimed by one party to be confidential or commercially sensitive be made available to each other party in the proceedings. This can be concerning for the party giving discovery, especially where the parties are competitors.
Parties to litigation are bound by an implied undertaking not to deploy or use any of the materials obtained by them during discovery (or any other compulsory processes of the Court) for any "collateral or ulterior purpose" in what is commonly known as the "Harman" undertaking – named after Harman v Secretary of State for the Home Department [1983] 1 AC 280, and affirmed by the High Court in Hearne v Street (2008) 235 CLR 125.
However, where parties to litigation are in competition with each other, and certain documents to be discovered are directly relevant to their rivalry, parties and the courts are more likely to accept that the additional layer or obligation is appropriate in relation to those certain documents.
In Skyscanner Limited v Hotels Combined Pty Ltd (No. 2) [2016] NSWSC 326, Slattery J observed that "the Court seeks to balance the public interest to ensure open justice against the public interest in the maintenance of confidentiality of a party's private documents". While the compulsion of discovery may be an invasion of the private right to keep documents private, parties are entitled to seek discovery and inspection of relevant documents, even if those documents are claimed to be confidential. As a result, in these circumstances, the court will seek to strike a fair balance between "the needs of the party wishing to litigate and the legitimate concerns of a trade rival to retain the secrecy of its commercially sensitive information".
Key to these claims are that the documents claimed to be confidential must not only have been confidential at some point in time, but that this confidentiality is ongoing and continuing. Examples of documents that will likely not be protected include:
- business plans which have since been replaced;
- confidential materials which have been published; or
- pricing details which have since become stale or out of date.
It is ultimately for the party seeking to limit the order for inspection to establish that the nature and contents of each document should attract protections additional to the usual obligations imposed on the other parties to the litigation and the party seeking to enforce that limitation will be required to prove their claims. Of course, that may be an easier task to prove in circumstances where the proceedings allege a misuse of previously disclosed confidential materials, but again this will be another part of the Court's balancing exercise.
Key takeaways
The Court expects that the parties will attempt to resolve any disputes regarding confidentiality between themselves and enter into agreements to give effect to that resolution. In practical terms, parties may enter into a 'confidentiality regime' where certain documents or types of documents are restricted to lawyers and experts only, but a mechanism will be included which allows those documents to be disclosed directly to the parties or other persons involved in the litigation by agreement or upon the expiry of a specified notice period.
Discovery is an important part of evidence gathering in civil litigation. In particularly hard-fought litigation between rivals those discovery processes may result in the required disclosure of commercially sensitive materials. If a party wishes to maintain their confidentiality, they must satisfy the Court that the materials are, and will continue to be, confidential, and that on balance an order should be made to restrict their disclosure. The burden for maintaining that claim is high and, without appropriate consideration of the actual nature of each document, may result in an unsatisfactory outcome for the party claiming confidence.
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.
