Discovery Costs Questionnaire

3.36 In the course of this Inquiry, the ALRC published a questionnaire which sought to gauge practitioners’ impressions—based on practical experience—of the degrees to which discovery costs weighed against: the overall expenses of litigation; the complexity of the issues in dispute; the stakes in the litigation; and the value of the documents sought in the context of the litigation. The questionnaire is included in Appendix 4 of this Report.

3.37 This was not intended to be an empirical method of data collection. The purpose of the questionnaire was to serve as an exploratory or qualitative resource—rather than quantitative or empirical research—to contextualise discovery costs in terms of the nature of the proceedings in which documents are sought and the value of the documents in the context of the litigation.

3.38 The questionnaire expressed an interest in a wide range of cases involving discovery in the federal courts—irrespective of the size or complexity of the proceedings or what is potentially at stake for the litigants. While noting that concerns about disproportionate discovery costs may be most evident in large and complex proceedings, the questionnaire was not limited to such cases or to practitioners acting only in these matters.

3.39 However, the ALRC received only two responses to its questionnaire on discovery costs. The first was from Mr Denis Farrar, a family law practitioner with experience of discovery in financial cases—particularly property settlement matters—in the Canberra registries of the Family Court of Australia and the Federal Magistrates Court of Australia.^[23] The second was from Griffith Hack Lawyers, a firm experienced in discovery in intellectual property cases in the Federal Court of Australia—including the Court’s Fast Track List—as well as the Federal Magistrates Court and the Supreme Courts of Victoria and New South Wales.^[24] These responses are discussed further below.

3.40 The ALRC appreciates the assistance of those who responded to the questionnaire and considers that the lack of further responses may be attributed, in part, to the difficulties involved in making qualitative assessments of the proportionality of discovery costs in litigation. The ALRC also notes that it sought information about discovery costs from a litigation funder but was unable to obtain usable information due to the considerable difficulties that arise in the provision of accurate and meaningful data on discovery costs.

Discovery costs in proportion to litigation costs

3.41 Griffith Hack Lawyers responded that discovery costs are ‘routinely in the order of 10–20 per cent of the total cost of the litigation’.^[25] The firm gave an example of litigation in the Federal Court, in which it received and reviewed discovered documents, where discovery costs were approximately $375,000—comprising of $274,000 professional fees and $101,000 disbursements, mostly counsels’ fees—and the total cost of the litigation was approximately $2.7 million. In another example, where the firm provided discovered documents to the other side, discovery costs were approximately $180,000 and the total litigation expense was approximately $1.7 million.

3.42 Denis Farrar responded that, in general, discovery costs are not substantial in family law matters.^[26] However, he distinguished between formal discovery of documents and the informal provision of information or documents pursuant to the general duty of disclosure in Family Court proceedings.

Discovery costs in proportion to the issues in dispute

3.43 Farrar noted that, in family law matters:

Where the property pool involves business assets or complex company/trust structures, discovery plays an important role … [and] the cost of inspection, collation and interpretation of disclosed documents can be substantial, often involving reference to experienced and expensive accountants or other experts.^[27]

3.44 On the other hand, Griffith Hack Lawyers responded that, in intellectual property cases, ‘the cost of discovery is generally not affected by the range and/or complexity of issues in dispute’.^[28] The firm observed that documents are often discovered ‘en masse’ with little correlation between the volume of documents and the critical points of dispute. However, the firm gave an example of a matter with a large range of issues in dispute concerning the validity of a patent where the cost of discovery was high, with over one million pages discovered by the patentee.

Discovery costs in proportion to the stakes in litigation

3.45 Griffith Hack Lawyers responded that ‘[d]iscovery is usually more vast/expensive when the stakes are high as distinct from being a fair barometer of the complexity of the issues in play’.^[29] The firm gave an example of a case in which the size of the market protected by a patentee’s monopoly was in excess of $100 million annually, and the cost of discovery was high.

3.46 Denis Farrar noted that, in property disputes—which might be complex even when the asset pool is small—discovery can be an important issue to drive settlement:

In all litigation the cost of the proceeding, including the cost of discovery, is balanced against the likely outcome and practitioner’s advise clients as to the cost of and benefit in what they are hoping to achieve.^[30]

Discovered documents used to narrow the issues in dispute

3.47 Responses were that discovery is often a valuable means of clarifying the issues in dispute between the parties to litigation. In the experience of Griffith Hack Lawyers, ‘[d]iscovery rarely resolves issues entirely between the parties [but] it may crystallise some parameters of the dispute or refine the emphasis of a party’s case’.^[31]

3.48 In Denis Farrar’s experience, ‘the issues in dispute are almost always narrowed through the discovery process’.^[32] Farrar acknowledged that ‘many documents are produced on discovery which do not aid the other party in working out the nature of the assets in the property pool, and what is a reasonable outcome’ but argued that a variety of documents dating back a number of years are often necessary to understand the assets and their value.^[33]

3.49 Similarly, Griffith Hack Lawyers observed that, usually, ‘critical documents number less than 10 regardless of the number of documents discovered’.^[34] The firm gave an example of a case in which ‘[o]ne key issue was clarified, relying on approximately 5 (out of over 200,000) documents discovered’.^[35]

Discovered documents used to settle disputes

3.50 In the experience of Griffith Hack Lawyers, discovered documents have been found to assist in mediation—however, in general, matters did not often settle due essentially to discovery.^[36]

3.51 Denis Farrar suggested that, in family law matters, clarifying issues concerning the assets, liabilities and financial structures of the parties through disclosure of documents enables the parties to understand those issues at an early stage—thereby enhancing the prospects of settlement.^[37]

Discovered documents used to determine disputes

3.52 Responses to this question expressed the view that only a small proportion of discovered documents are ever admitted into evidence at trial but a larger volume of documents is often used to inform the background of the matters determined by way of judgement. For example, Farrar submitted that:

Whilst there is no doubt that very few discovered documents are tendered into evidence, inspection of discovered documents enhances an understanding of the value of the pool, and other matters relevant to the Court’s determination of the dispute … Discovery can serve to alleviate lines of argument or enquiry which would be fruitless, as well as illuminate those which have merit.^[38]

3.53 Griffith Hack Lawyers gave an example of a case in which around 50—out of 200,000—of the discovered documents were admitted into evidence and referred to in the judgement by way of background, but were not determinative in the Court’s decision.^[39]

ALRC’s views

3.54 The anecdotal evidence of practitioners’ experiences of discovered documents being utilised in litigation—and practitioners’ impressions of the proportionality of discovery costs—are important measures of the concerns associated with discovery in federal courts. Such qualitative assessment should be supported by empirical data.^[40] However, a ‘facilitative’ justice system—one that is not comprised entirely of matters capable of precise measurement but also involves values-based decision-making—should be evaluated, in part, against the legal profession’s views. In addition, assessments of the proportionality of discovery costs should also take into account the views of litigants, the judiciary and others involved in civil litigation.

3.55 Within the limits of this Inquiry, the ALRC has not been able to obtain a sufficiently broad range of experience from legal practitioners to be able to draw conclusions about the proportionality of discovery costs—in terms of the value of discovered documents in the context of the litigation, in federal court proceedings. Nevertheless, the ALRC understands, based on comments made in response to its questionnaire and in various consultations, that discovery in Federal Court proceedings generally represents approximately 20% of total litigation costs. The ALRC also understands, based on the views generally expressed in various submissions and consultations, that the number and probative value of documents discovered in Federal Court proceedings that are admitted into evidence at trial is an unfair representation of the utility of the discovery process in litigation.

3.56 These issues and others concerning the proportionality of discovery costs may be explored further through qualitative assessments, as part of the collection of data recommended in Recommendation 3–1.