Costs, terabytes and efficiency
When Justice Ronald Sackville was faced in Seven Network Limited v News Limited (C7)with an estimated cost of discovery of $200 million, compared with a damages estimate of between $195–$212 million, he commented that it ‘borders on the scandalous’. Mega-litigation can have mega-costs—with an attendant shock reaction. It prompted Justice Ray Finkelstein to remark that:
The key to discovery reform lies in active and aggressive judicial case management of the process. The most effective cure for spiralling costs and voluminous productions of documents is increased judicial willingness to just say no.
The sheer volume of data available today—running into ‘terabytes’—tests the historical rationale of discovery as being to facilitate fact-finding, save time, and reduce expense. The commercial realities of discovery in the context of possibly ‘too much information’ may represent a significant barrier to justice for many litigants as well as amounting to a huge public cost. As noted in a submission to this Inquiry, ‘[t]he cost of litigation is borne not by those who choose to litigate but by the broader community, and may impede access to justice’.
Discovery is often the single largest cost in any corporate litigation, giving rise to concern about the scale of costs. Nonetheless, discovery remains an important feature of common law litigation in appropriate cases—ensuring that parties ‘can proceed on an equal footing and without ambush, and that relevant materials are before the court’.
A significant landmark in reforming practice and procedure in the Federal Court of Australia was the introduction, on 1 January 2010, of the ‘overarching purpose’ provision in s 37M of the Federal Court of Australia Act 1976 (Cth):
(1) The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
The docket system; the specialist lists, like the ‘Fast Track’ and Tax Lists; active case management, reflected in practice notes—all contribute significantly to responding to issues of high costs, large caseloads and other exigencies of litigation.
Inquiry in context
This Inquiry was initiated following a recommendation in the report of the Australian Government Attorney-General’s Department’s Access to Justice Taskforce, A Strategic Framework for Access to Justice in the Federal Civil Justice System (September 2009).On 10 May 2010, the Attorney-General, the Hon Robert McClelland MP, asked the Australian Law Reform Commission (ALRC) to identify law reform options to improve the practical operation and effectiveness of discovery of documents in proceedings in federal courts. The underlying premise for this Inquiry was that the costs of discovery, which can be very high, may inhibit access to justice and generate, in addition, an undue public cost.
Concerns about the potentially high costs of discovery had been identified in a number of reviews, summarised in Chapter 1 of this Report, including the prior work of the ALRC in its major inquiry into the federal civil justice system in the 1990s culminating in the report, Managing Justice: A Review of the Federal Civil Justice System, Report 89 (2000) (Managing Justice). The ALRC noted in Managing Justice 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’.
The law reform brief
The Terms of Reference, included at the front of this Report, set out the extent of the law reform brief in this Inquiry. The ALRC was directed to consider four main issues:
the law, practice and management of the discovery of documents in litigation before federal courts;
ensuring that cost and time required for discovery of documents is proportionate to the matters in dispute;
how to limit the overuse of discovery, reduce the expense of discovery and ensure key documents relevant to the real issues in dispute are identified as early as possible; and
the impact of technology on the discovery of documents.
In identifying law reform options to improve the practical operation and effectiveness of discovery of documents, the ALRC was also to have regard to:
alternatives to discovery;
the role of courts in managing discovery, including the courts’ case management;
powers and mechanisms to enable courts to better exercise those powers in the context of discovery;
implications of the cost of discovery on the conduct of litigation, including means to limit the extent to which discovery gives rise to satellite litigation and the use of discovery for strategic purposes;
costs issues, for example cost capping, security for discovery costs, and upfront payment; and
the sufficiency, clarity and enforceability of obligations on practitioners and parties to identify relevant material as early as possible.
Discovery is only one aspect of practice in the federal courts. However, in advancing law reform recommendations in relation to discovery, the ALRC was mindful of the need to consider the doctrine in its litigation context, and not in isolation. In a submission to this Inquiry, the Australian Taxation Office emphasised that:
It is both important to the cultural change necessary for a change to discovery, but also to litigation generally, that discovery reform be an element of overall efficient case management, rather than a discrete aspect of litigation.
A number of key themes emerged during consultations and submissions in this Inquiry, specifically with respect to the Federal Court:
while the reform trajectory in the Court was applauded, there were inconsistencies in practice across the bench;
robust judicial case management is critical in facilitating the resolution of disputes in the Court;
rigid rules of general application impose unwanted restrictions on judicial discretion;
expectations of parties in the Court are not always clear—uncertainties that lead to inconsistency of practice and potentially an increase in costs; and
there is an uneasy tension between the time and money that discovery can involve and the right of parties for a reasonable opportunity to present their case.
A principal challenge in this Inquiry was, therefore, to recognise the important role that discovery can play in facilitating the resolution of disputes, while reviewing its operation in the context of the reality of modern information creation and retention and the development of active case management practices.
Seven Network Limited v News Limited  FCA 1062, .
 R Sackville, ‘Mega-Lit: Tangible Consequences Flow from Complex Case Management’ (2010) 48(5) Law Society Journal 47.
 R Finkelstein, Discovery Reform: Options and Implementation (2008), prepared for the Federal Court of Australia, 12.
 One terabyte is 1 million megabytes.
 Contributors from the Large Law Firm Group, Submission DR 21, 25 January 2011.
 Australian Government Solicitor, Submission DR 27, 11 February 2011.
 Australian Law Reform Commission, Managing Justice: A Review of the Civil Justice System, Report 89 (2000), [6.67].
 Australian Taxation Office, Submission DR 14, 20 January 2011.