Application of new discovery rules

The new High Court Rules (requiring electronic discovery and changing the relevance test, inter alia) came into force in February this year. Somewhat unusually, though presumably by design, they contained no transitional provisions. This has led to contention in some proceedings instigated prior to February 2012 over which rules apply.

The position appears to be as follows:

  • The previous rules apply to discovery being undertaken pursuant to orders in place prior to 1 February 2012: Premier Events Group Limited v Beattie [2012] NZHC 1025.
  • Unless the Court orders otherwise, the new rules applies to discovery ordered after the commencement of the new rules on 1 February 2012, regardless of when the proceeding was commenced: Karam v Fairfax New Zealand Ltd [2012] NZHC 887, paragraphs 135-136.
  • Where discovery has been completed but no inspection has occurred, the new rules relating to inspection, including the requirement of electronic exchange, will apply: McGechan on Procedure, HRPt8Subpt1.03.

Tailored discovery under the new High Court Rules

A recent High Court judgment of Justice Asher includes some useful comments on tailored discovery and proportionality under the 2012 High Court Rules. While the decisions in Commerce Commission v Cathay Pacific Airways Ltd [2012] NZHC 726 is relatively straightforward, the comments carry weight because Justice Asher was on the Rules Committee that forumulated the new requirements.

The starting point in such a consideration of appropriate tailored discovery orders must be an analysis of the issues. Discovery categories will reflect the issues and will only be ordered for the discovery of documents that are relevant to those issues. Except in exceptional circumstances, these issues will be discernible from a review of the pleadings. Discovery orders that are essentially of a “fishing” nature are not part of tailored discovery. Orders will not be granted where the categories do not relate to a pleaded relevant issue, but rather a non-pleaded issue which might be pleaded should discovery reveal documents that support such a pleading.

Which highlights the importance of getting the pleadings right. It is surprising how much issues can “shift” from those pleaded, especially if insufficient analysis of available documents (usually only your client’s documents, pre-discovery) is carried out before pleading.

Of course, pleadings can be amended, and such amendment is commonplace (in Cathay the Commission was on the 5th version of its statement of claim).

On proportionality, His Honour says:

To determine the proportionality arguments in relation to tailored discovery of particular categories it is necessary to consider the chances of finding relevant documents in the discovery exercise and their degree of relevance. This should then be balanced against the cost of carrying out that discovery process. Broader considerations such as the amount at issue, the resources of the parties, and delay to the proceedings may also be relevant…

It is notable that it is not so much the amount at issue or the resources of the parties that are of primary relevance (though they are still factors), but balancing of the chances of finding relevant documents verus the cost of doing so. As His Honour clearly summarises:

In a decision whether to order discovery under the particular category it is necessary to measure the likely return of relevant documents against the cost of the exercise. If highly relevant documents may be revealed, then a greater cost can be justified.

Handling discovery documents – Physical vs Scanning vs Native

Discovery documents traditionally came in one simple form – paper – and production was a matter of physically copying those documents.

Today, the majority of original documents in most commercial cases are electronic – emails, Word documents, images – and there are a lot more of them. This has prompted a change in how documents can be most efficiently discovered.

There are 3 main ways (in terms of format) to exchange documents in a modern discovery:

  1. Printing all documents to paper
  2. Scanning / converting documents to PDF
  3. Providing documents in native format.

The new High Court Rules, in effect since February 2012, mandate electronic discovery as the default process. This requires the use of either or a combination of options 2 (scanning) and 3 (native format).

While the new rules remove any “argument” over whether discovery should still carried out physically, there are good reasons anyway for providing discovery electronically (which are the rationale for the new rules, as well as the reason why many firms have elected to provide documents electronically for some years), including:

  • Most modern documents originate in electronic format.
  • A printed version of an electronic document is not the same as the original document, which is what must be discovered.
  • A number of electronic documents cannot be printed anyway, e.g. audio/video files.
  • It can incur considerable unnecessary effort and cost to print documents.
  • The sheer volume of documents can result in a “paper war” if multiple copies of vast amouts of documents are printed, collated and bound.
  • It is more environmentally friendly.

In addition:

  • A printed version of an electronic document loses information about the document (e.g. hidden comments, document properties, cell formulas, etc) that may be properly discoverable.
  • Printed documents can no longer be searched.
  • Electronic documents can be handled in an e-discovery system such as LawFlow.

Some firms are currently in the practice of essentially carrying out discovery manually (i.e. on paper) and then scanning (or re-scanning) documents back into electronic versions. Unfortunately this can be a very inefficient way to go about the task.

As electronic documents continue to proliferate, a solution designed for New Zealand requirements such as LawFlow can enable discovery to be undertaken efficiently and effectively.