Potentially unethical discovery practices

12.23 In Managing Justice, the ALRC commented that: ‘in almost all studies of litigation, discovery is singled out as the procedure most open to abuse, the most costly and the most in need of court supervision and control’.^[29] The ALRC is not aware of evidence of chronic unethical discovery practices, but understands there are concerns that discovery may sometimes be used as a tactical tool—for example, to exhaust the resources of the other party or encourage settlement. In its report, the Victorian Law Reform Commission (VLRC) noted the ‘divergence of opinion about whether there is a significant problem’ with abuse by legal practitioners:

For example, on the one hand Slater & Gordon raised concerns about what it considers to be the widespread and serious abuse of legal professional privilege in connection with discovery. On the other hand, Allens Arthur Robinson argued that practitioners take their discovery obligations seriously and denied abuse was widespread.^[30]

12.24 This section outlines six ways in which discovery has been said to have been misused and how these practices might breach the ethical professional duties discussed earlier in this chapter.^[31] Submissions responding to questions in the Consultation Paper about the nature and extent of discovery abuse in Australia will then be considered.

‘Trolley load litigation’

12.25 Concerns have been expressed about lawyers, when conducting discovery, unnecessarily providing their opponents with vast numbers of documents. This has been called ‘trolley load litigation’ and ‘trial by avalanche’.^[32] Former Chief Justice Black of the Federal Court has spoken of the need to

avoid having trolley loads of documents being wheeled into court when hardly any of them are likely to be referred to and when every page will add to the cost of the litigation.^[33]

12.26 Trolley load litigation has been attributed to several causes. First, computer technology now allows for the storage and more efficient retrieval of vast numbers of documents. Secondly, in an adversarial legal system, lawyers may pursue their clients’ interests aggressively in pursuit of winning the case—including, for example, trying to ‘wear down’ the other party with masses of often irrelevant material. Finally, where the scope of discovery is unclear, too many documents may be discovered defensively, for fear of not fulfilling one’s discovery obligations—and perhaps in fear of disciplinary action for professional misconduct. There may be other explanations for vast volumes of documents being unnecessarily discovered, but a combination of these reasons may well contribute to the problem.

12.27 A trolley load of documents will not, of course, always signal discovery abuse, but excessive and wasteful discovery might conflict with a number of professional and ethical duties, including, for example, a lawyer’s duty to:

• ‘act with competence, honesty and candour’ and be ‘frank in their responses and disclosures to the court’;^[34]

• facilitate the ‘just resolution’ of disputes, ‘according to law’ as ‘quickly, inexpensively and efficiently as possible’;^[35]

• act with fairness, in particular not abuse court processes;

• narrow the issues in dispute and identify relevant material and thereby reduce the volume of potentially discoverable documents;^[36]

• appraise the case and exercise personal judgment about the existence and relevance of documents in the proceedings;^[37]

• exercise reasonable competency and skill in the conduct of a matter—a duty arising from a lawyer’s duty of care to the client;^[38]

• advise—to ‘seek to assist the client to understand the issues in the case and the client’s possible rights and obligations … sufficiently to permit the client to give proper instructions’.^[39]

Destroying and withholding documents

12.28 To avoid discovering some documents, litigants or lawyers might be tempted to withhold or destroy them. If a lawyer were to do this, he or she would likely be in breach of a number of important professional obligations. As Professor Peta Spender has commented,

although a good document management policy may involve the destruction of documents, at some point the routine destruction of corporate documents rises to the level of spoliation of evidence. The trick is to determine at what point this convergence takes place.^[40]

12.29 Professional rules variously provide that lawyers must not knowingly make false or misleading statements to a court or opponent, must correct misleading statements, and must not ‘deceive or knowingly or recklessly mislead the court’.^[41] This duty encompasses an obligation not to mislead the court with respect to the facts of the case or to misinterpret the law, to be aware of the applicable rules and procedure as well as to draw the court’s attention to authorities which support or act against their client’s case.^[42]

12.30 The Model Rules provide that a practitioner must not engage in dishonest conduct.^[43] There is also a duty—in legislation, professional rules, and at common law—to act with candour, which includes not misleading the court.^[44]

12.31 Some jurisdictions deal explicitly with the destruction of documents. Under reg 177 of the Legal Profession Regulations (NSW)—a breach of which is professional misconduct—a legal practitioner is prohibited from destroying or wrongfully moving documents, and from advising a client to do the same, if legal proceedings are likely.^[45] The wrongful destruction of documents is also an offence under the Crimes Act 1958 (Vic).^[46]

12.32 In the United States (US), the duty to preserve documents of potential relevance to anticipated litigation—particularly in the context of electronically-stored information—has led to the development of what is referred to as a ‘legal hold’. Legal holds are implemented by interrupting a company’s ordinary document management system—which, for example, might delete emails after 30 days—to ensure relevant material is preserved.^[47] The expectation of US courts is that lawyers should be actively involved in the implementation of a legal hold, including taking ‘affirmative steps’ to ensure the hold is being correctly implemented.^[48]

Delay

12.33 As outlined above, there is increasing legislative articulation of the duty owed by lawyers to facilitate the just, quick, efficient and inexpensive resolution of proceedings.^[49] This reflects judicial criticism of practitioner conduct causing unreasonable expense or delay. For example, in White Industries (Qld) Pty Ltd v Flower & Hart, Goldberg J of the Federal Court commented that:

It is not proper … to adopt a positive or assertive obstructionist or delaying strategy which is not in the interests of justice and inhibits the court from achieving an expeditious and timely resolution of a dispute. Court resources are finite and so are the resources of most litigants and the court should not countenance a deliberate strategy of obstruction and delay. If a party instructs its legal advisers to adopt such a strategy the legal adviser should inform the party that it is not proper to do so and if the party insists, then the legal adviser should withdraw from acting for that party.^[50]

12.34 With respect to delay, the Model Rules provide that:

A practitioner will not have breached the practitioner’s duty to the client … simply by choosing … to exercise the forensic judgments called for during the case so as to … present the client’s case as quickly and simply as may be consistent with its robust advancement.^[51]

12.35 The Draft National Laws impose an obligation on law practices to ‘act reasonably to avoid unnecessary delay resulting in increased legal costs’.^[52] Under the National Barristers’ Rules, barristers are required to complete work in sufficient time to comply with orders, directions, rules or practice notes of the court.^[53]

12.36 In Victoria, Western Australia and Tasmania, the professional rules make specific reference to the duty of practitioners to use their best endeavours to: ‘complete legal work as soon as reasonably possible’;^[54] provide their services ‘in a timely manner’;^[55] and ‘complete a clients business within a reasonable time’.^[56] In NSW, both the Professional Conduct and Practice Rules and the Barristers’ Rules require lawyers to complete work in sufficient time to comply with court rules and orders.^[57] The Civil Procedure Act 2010 (Vic) contains overarching obligations, including the specific obligation to ‘disclose the existence of documents which the person reasonably considers are critical to the proceedings, at the earliest possible time after becoming aware of their existence’.^[58]

12.37 Under legal rules there is a duty to complete work in sufficient time to comply with court timetables and to act consistently with the overarching purpose of specific legislation. Accordingly, where the conduct of lawyers or other parties unduly delays discovery, or the progress of litigation more broadly, such conduct may be in breach of legal rules and lawyers may be subject to personal costs orders.^[59]

12.38 Delay may arise in part as a result of other forms of alleged discovery abuse, for example, where ‘trolley load litigation’ delays proceedings while parties examine large volumes of discovered documents. However, delay itself may also constitute a form of discovery abuse. The primary causes and means of delay in the context of discovery in Australia include:

• the failure to disclose the existence of documents at the earliest possible time;

• delay in responding to requests or orders for discovery;

• delay arising as a result of parties questioning the scope of discovery requests or orders; and

• other forms of satellite litigation about matters such as the assertion of legal professional privilege over documents.^[60]

Delegating to junior lawyers and paralegals

12.39 The ALRC understands that there are concerns about the practice of delegating responsibility for reviewing and categorising documents for discovery to junior lawyers and paralegals. This may mean that more senior lawyers only check a small sample of documents and might not provide adequate supervision. While such practice may be regarded as a sensible management of a large and challenging task where there are vast numbers of documents, the practice might also cause unnecessary and costly duplication of work.

Outsourcing discovery work overseas

12.40 A related question, also raised in the Consultation Paper, is how outsourcing parts of the discovery process overseas affects discovery.^[61] In January 2011, the Hon Chief Justice James Spigelman of the New South Wales Supreme Court spoke of ‘dozens of websites offering various forms of legal services by electronic means’:

Many of them are in India, a low cost jurisdiction—with hourly billing rates about one tenth of those in the USA—and with a high level of legal expertise and high level English language capacity. …

I repeat what I said a few years ago when I was informed that for any significant commercial dispute the flagfall for the discovery process was something of 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.^[62]

12.41 Among the potential issues such outsourcing might raise include the security of documents sent overseas and the application to persons working on discovery outside Australia of Australian lawyers’ professional and ethical duties.

Submissions and consultations

12.42 In the Consultation Paper, the ALRC asked a series of questions about the nature and extent of any discovery abuse in Australian federal litigation. The ALRC asked about: the wrongful destruction of documents;^[63] the use of discovery as a delaying strategy;^[64] and the use of discovery to increase legal costs (for example for the profit of law firms or to exhaust the resources of opposing parties).^[65] Relatively few submissions addressed these questions, but most of those that did considered the rarity of misconduct; the importance to lawyers and legal practices of maintaining their professional reputations; and the issues of delegation and outsourcing.

Misconduct is rare

12.43 A number of submissions stressed that lawyers generally act ethically in relation to discovery discovery, and that abuse was rare and that there was no convincing evidence of discovery abuse.^[66] A group of large law firms submitted:

In general, our experience is that lawyers are diligent and conscientious in ensuring that they, and their clients, do not abuse the discovery process. Instances of parties or lawyers deliberately abusing the process for improper purposes are extremely rare … It is our view that concerns about deliberate abuse of the discovery process are overstated and, in large part, unsupported by evidence.^[67]

12.44 The Law Council said ‘there is no evidence of systemic problems across discovery generally’:

[L]egal practitioners ordinarily act ethically and professionally in discharging their obligations in relation to discovery. Legal practitioners that engage in discovery abuse risk exposing themselves, depending in each case on the severity of the conduct to civil, criminal and disciplinary sanctions.^[68]

12.45 The Queensland Law Society considered that ‘the vast majority of its members act ethically in relation to discovery and the conduct of litigation generally’.^[69] The Department of Immigration and Citizenship was ‘not aware of widespread misuse of the discovery process by legal practitioners’:

While there may be some instances where the conduct of the discovery process by lawyers could be characterised as an abuse of process, in our experience such instances are rare. Disproportionate discovery requests, onerous discovery orders, and inefficiencies in the discovery process, are usually the result of inadequate pleadings, rather than misuse of the process itself.^[70]

12.46 Others argued more specifically that the deliberate destruction of discoverable documents in anticipation of, or during, litigation was rare,^[71] and that destroying data without a trace was difficult and, in any event, fear of detection minimised such abuse.^[72]

12.47 Concerning costs, NSW Young Lawyers submitted that ‘it is often not a practitioner’s intention to increase legal costs unnecessarily,’ but ‘more often than not little regard is had to the financial burdens imposed on another party by discovery’.^[73]

12.48 Very few submissions argued that discovery abuse was common. However, one barrister submitted that he had ‘little doubt that all the kinds of abuses by lawyers referred to in these questions occur not infrequently in litigation’:

There is no doubt that lawyers engage in conduct that blurs the ethics/money boundary. Discovery is wide open for abuse and is abused.^[74]

Professional reputations

12.49 Some submissions stressed the importance of a lawyer’s professional reputation. A group of large law firms submitted that, in a highly competitive legal market:

good reputations of individual lawyers and law firms with substantial litigation practices are a valuable asset … and operate as an added incentive to comply with best practice, and so maintain the confidence of the Court, other law firms and of current and potential clients.^[75]

12.50 This sentiment was echoed by the Law Council:

Given the extent of judicial oversight, case management and court procedures, the scrutiny of other parties involved in the litigation as well as that of clients themselves, the opportunity for undetected discovery abuse to occur is minimal. Practitioners involved in impropriety whether or not such conduct is detected, suffer damage to reputation that in highly competitive legal services market would have a deleterious impact on career prospects and lead to loss of professional regard from colleagues and opponents.^[76]

Delegation to junior lawyers and paralegals

12.51 In the Consultation Paper, the ALRC asked how the delegation of responsibility for reviewing and categorising documents relevant to the discovery process affected the practice of discovery in litigation before federal courts.^[77]

12.52 NSW Young Lawyers submitted that this was ‘standard practice’ and was done to save time, minimise cost, and ‘because the majority of discoveries do not require special experience or expertise for the majority of documents’.^[78] A group of large law firms submitted that ‘exceptional’, very large discoveries

are usually conducted by deploying more junior lawyers to perform the initial review of potentially discoverable documents, with appropriate oversight and supervision by more experienced lawyers, who also conduct reviews of documents which might involve more difficult decisions, for example about the existence of legal professional or other privilege.^[79]

12.53 Though such delegation was usually effective, NSW Young Lawyers submitted, the junior lawyers and paralegals may only have ‘a shallow understanding of the matters in dispute’, particularly in ‘very large commercial discoveries, where many extra reviewers must be used, and contract lawyers may even be engaged’.^[80] However, most junior lawyers in the large law firms that contributed to one submission were said to be given ‘carefully designed, internally conducted training to ensure that they are familiar with the relevant discovery obligations and duties’ and are

properly inducted into matters to ensure that they have a good appreciation of the issues in the proceedings, and so can make informed judgments about the relevance of issues and documents. These measures ultimately make the discovery process more efficient and cost-effective.^[81]

12.54 The group of large law firms submitted that a balance must be struck between the overall costs of the process and the need for senior lawyers to make judgements about certain things:

The more senior and experienced the lawyer, the greater the cost. On the other hand, the use of non-lawyers or lawyers who are unfamiliar with the issues in any given matter may give rise to a false economy which diminishes the effectiveness of the discovery process by necessitating a degree of double handling by lawyers required to review and correct decisions taken on an initial review. …

In our view, provided the persons conducting the initial review are familiar with the issues in the proceedings and are familiar with the rules and principles that govern discovery, the approach described above and currently in use represents an appropriately cost-effective and responsible model of conducting large-scale discovery reviews.^[82]

12.55 The Law Council submitted that, while delegating and outsourcing ‘would involve some measure of duplication of effort, logistically it may be impossible to otherwise perform a large discovery within time allocated to do so and may offer a commercial advantage’.^[83]

Outsourcing

12.56 In the Consultation Paper, the ALRC also asked how outsourcing discovery overseas affects the practice, including the cost and efficiency, of discovery.^[84] Two submissions suggested the practice was not widespread in Australia,^[85] but one of these, a group of large law firms, submitted that concerns about whether ‘outsourcing discovery processes to a service provider is consistent with the obligations owed to the Court by the Legal practitioner on the record’ should be monitored.^[86] The Office of the Legal Services Commissioner (NSW) (OLSC) suggested to the ALRC that in fact legal outsourcing was becoming more widespread and that they were developing research around this issue.^[87]

ALRC’s views

12.57 The nature and extent of discovery abuse in Australia remains unclear. The ALRC agrees with the Law Council, when it says that information about ‘the prevalence of improper conducts and of the associated risk factors … is required to inform any decision governments might make about whether or not further regulation is necessary or desirable’.^[88]

12.58 A few preliminary points may, however, be made. The ALRC recognises that it may not be possible for senior lawyers to review and categorise all documents in a large-scale discovery. The cost might in any event be prohibitive. In many discovery processes, therefore, this would neither be efficient nor cost-effective. Delegating some of the discovery work to more junior lawyers and trained paralegals, particularly in large scale litigation, appears inevitable and a sensible way to manage the task, so long as the process is carefully managed and the junior lawyers and paralegals are properly trained and supervised.

12.59 Though outsourcing discovery work overseas may bring some advantages and opportunities, professional and ethical responsibilities will need to be maintained. Suitably trained and experienced senior lawyers, accountable to Australian courts and regulators, will need to continue to make key decisions about how a discovery process is managed.

12.60 That the existence or extent of discovery abuse is unclear need not, in the ALRC’s view, preclude discussion of how ethical discovery practices might best be fostered and improved. This is the topic of the following section.