Discovery in the Federal Courts
Consultation Paper – November 2010
SUBMISSION OF THE COMMERCIAL BAR ASSOCIATION OF VICTORIA  JANUARY 2011

Introduction and purpose
1.	This is a submission prepared by the Commercial Bar Association of Victoria (CommBar) to the Australian Law Reform Commission (ALRC) in response to the ALRC’s Consultation Paper, dated November 2010, on discovery in the Federal Courts (Consultation Paper).
2.	This submission sets out CommBar’s view in relation to a limited number of the questions and proposals set out in the Consultation Paper.  Not all the questions and proposals in the Consultation paper are addressed in this submission.
Executive summary
3.	CommBar submits that the Federal Court Rules be amended:
(a)	to only permit discovery, by leave, where good cause is shown;
(b)	to introduce US-style depositions, subject to conditions; and
(c)	to facilitate special masters to deal with discovery issues (including the taking of depositions), subject to certain concerns.
4.	Each of these issues is expanded upon below.
Significant reform is required
5.	The high cost of discovery is well known to litigation lawyers and to those who use the civil justice system.Further, discovery is not only costly but it does not provide value for money.  As explained in the Consultation Paper:
“…it is not just the amount of money spent on discovery that causes concern. Rather, it is the low value for money that prompts criticism of the discovery process—in terms of the cost of discovery relative to the utility of discovered documents in the context of the litigation.”
6.	CommBar agrees with these comments, and with the points made at paragraphs 3.52 to 3.54 of the Consultation Paper, including that (in summary):
(a)	discovery is a significant litigation expense, and that it’s not unusual for the costs of discovery in large commercial matters to exceed $2m (and in mega litigation, the costs will be orders of magnitude higher);
(b)	discovery, as presently provided for under the rules of court, delivers low value for money in terms of cost versus reward – the “smoking gun” is, for the most part, illusory;
(c)	the objectives of discovery – all the cards face up on the table – are either not being achieved or are being achieved at great cost; and
(d)	the high costs of discovery are pricing litigants out of the court system.
7.	In CommBar’s view, significant reform of the discovery process is required to reduce cost and improve access to justice.
Discovery only by leave – where good cause is shown
8.	Questions 2-2 and 2-3 of the Consultation Paper provide:
(a)	Question 2-2: Does the requirement for leave of the court effectively regulate the use of discovery in civil proceedings in the Federal Court?
(b)	Question 2-3: Is the law sufficiently clear on when the Federal Court should grant leave for discovery of documents in civil proceedings?
9.	Order 15 rule 1 of the Federal Court Rules presently provides that a party needs to obtain leave before discovery will be granted.  However, as noted by Finkelstein J:
“Although leave is nominally required and general discovery is theoretically frowned upon, the reality is that the leave requirement is a formality rather than a substantive limitation on a party’s ability to obtain discovery.”
10.	CommBar submits that, contrary to the present operation of the Rules, a party seeking discovery should be obliged to show “good cause” before any order for discovery is made.  That is, the starting point should be that unless otherwise ordered discovery is not permitted. The onus then falls on the applicant for a discovery order to establish that discovery is required in the circumstances of the case.  CommBar, with respect,  agrees with Justice Hayne and Finkelstein J on this point:
“The preferred model is to restrict the scope and availability of discovery to cases where good cause is shown.  Such a reform would have the virtue of requiring the parties and the court, as Hayne J suggested in his recent remarks to the Supreme and Federal Court Judges Conference, to isolate beforehand precisely what it is the parties want discovery of and why.  If a litigant cannot clarify and justify a request, then it should not be granted.”
11.	In some cases a party ought to be able to show good cause for discovery on the basis of submissions from the bar table.  However, in other cases the applicant for an order for discovery would need to prepare affidavit material to establish good cause.  Despite this additional cost, avoiding the need for discovery in some cases and significantly limiting it in others would substantially outweigh any added expense.   
12.	Order 15 Rule 3 already provides the court with a discretion to order that discovery will not be required, or will be limited as determined by the Court.  Order 15 can be easily amended to ensure that discovery is only granted where the benefits, or likely benefits, which will flow from discovery, will outweigh the costs involved.  
13.	Attached at Annexure A are Proposed Amended Order 15 Rules 3 and 5, prepared by Finkelstein J (which his Honour based on the US Federal Court Rules at FCRP Rule 26(b)(2)(c)).These proposed amendments provide that leave for discovery will only be granted where “good cause” is shown.  In determining whether good cause exists the court shall consider the following:
(a)	whether the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source or by some other means that is more convenient, less burdensome, or less expensive;
(b)	whether the party seeking discovery has already had ample opportunity by disclosure or discovery in the action to obtain the information sought; 
(c)	whether the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues in the litigation, and the importance of the proposed discovery in resolving the issues; and
(d)	whether or not the documents sought are admissible in evidence and likely to have a material effect on the disposition of the proceeding.
14.	In addition to requiring that good cause be shown before any order for discovery is made, the proposed Amended Order 15 Rule 3 also allows (as Order 15 Rule 3 presently does) the court to limit the ambit of discovery to particular documents, or classes of documents, or matters in question, as specified in the order.
15.	Finally, proposed Amended Order 15 Rule 3 also expressly empowers the court to limit the kind of search that is to be undertaken to locate documents.  This power, not presently contained in Rule 3, would further enable the court to fashion orders in a manner directed to ensuring that appropriate searches – nothing less,  nothing more – are undertaken.
16.	CommBar supports the proposed amendment to Order 15 Rules 3 and 5 as attached at Annexure A.
US-style depositions
17.	Proposal 5-1 and the commentary thereafter in the Consultation Paper discusses the possible introduction of US-style depositions for particular types of civil dispute, with a view to incorporating their use in Practice Directions of the Court.
18.	Subject to appropriate safeguards discussed below, CommBar supports the introduction of depositions in an appropriate case.  CommBar submits that depositions should be introduced via appropriate Practice Directions in the first instance and incorporated into the Rules at a later date if, in the profession’s view, experience using depositions brings about positive change to pre-trial processes. CommBar also recommends that any introduction of a deposition process be undertaken on a trial basis and with appropriate safeguards.
19.	CommBar notes that while the introduction of depositions is described below as amendments to the Federal Court Rules, these should be re-styled as Practice Directions of the Court in the first instance.  This will allow more flexibility and will ensure that changes to the Rules are made only after local experience is obtained.
20.	A deposition, otherwise known as a pre-trial oral examination, is simply ‘an out-of-court question and answer session under oath, conducted in advance of a lawsuit as part of the discovery process’
21.	The Law Council conducted an in depth analysis of US-style oral depositions in 2006 (Final Report) and recommended that depositions be introduced on a trial basis.  Among other things the Law Council noted in its Final Report that:
“An issue which is very significant is the extent to which litigators in the United States identify as a significant benefit that oral depositions offer an alternative to interminable document discovery.  They state that, in relation to certain documents, issues can be quickly dealt with by some questions of a witness which would otherwise be difficult to track through a paper trail.”
22.	US experience suggests that the use of depositions at an early stage can assist the examining party to:
(a)	understand the meaning of documents already in the possession of the examining party and consequently limit the extent to which further documents are sought; and
(b)	identify, with particularity, further documents or categories of documents which may be required (ie for example, categories limited by date or, in relation to emails, limited by reference to sender/recipient etc).
23.	In addition to the benefits depositions are likely to have in reducing the need for voluminous discovery in some cases, US experience suggests that depositions:
(a)	facilitate compromise at an early stage because each party experiences a process of oral examination and is able to observe the oral examination of the other party thus enabling a more informed and realistic assessment of the prospects of success and the risks of failure; and
(b)	reduce the number, length and costs associated with written witness statements, because depositions have the effect of narrowing the issues in dispute.
24.	The advantages and disadvantages of depositions are set out more fully in the Consultation Paper at paragraph 5.97 and are discussed in detail in the Law Council’s Final Report.  CommBar notes that the issue of introducing depositions has in the past been seen as “controversial” among some practitioners, and that support for depositions has previously mainly come from those with US court experience.
25.	In any event, given the problems and cost associated with discovery in its present form, there is a need to make bold changes to the present system.  There is no reason why depositions cannot be used in Australia to improve the pre-trial process, as is evident from US experience.  
26.	Accordingly, CommBar supports the introduction of depositions, subject to safeguards to prevent their abuse, as proposed by Finkelstein J.  In summary, depositions:
(a)	should be available only by leave or at the initiative of the court, with leave granted upon good cause being shown;
(b)	unless otherwise ordered, a deposition should be limited to 1 day of 7 hours;
(c)	unless the court otherwise orders, a maximum of (say) 5 witnesses be deposed (compare with the limit of 10 under Rule 30 of the Federal Rules of Civil Procedure in the US);
(d)	the party requesting the deposition should bear the cost of the deposition in the first instance; and
(e)	depositions would be taken before a court appointed discovery master, as discussed from paragraph 29 below.
27.	CommBar supports the proposed introduction of Order 16A into the Federal Court Rules (in the form of a Practice Note in the first instance) as proposed by Finkelstein J, and as attached at Annexure B.
Special discovery masters
28.	Question 3-8 of the Consultation Paper asks whether special masters should be introduced to manage the discovery process in proceedings before the Federal Court, and if so, what model ought to be introduced.
29.	CommBar notes that while the introduction of special masters is described below in terms of amendments to the Federal Court Rules, these should be converted into Practice Directions of the Court in the first instance.  
30.	CommBar supports the introduction of special masters to manage discovery in an appropriate case. In particular, CommBar supports the introduction of special masters pursuant to Justice Finkelstein’s proposed Order 72A of the Federal Court Rules (subject to what is said at 30 above). CommBar however, notes  two  concerns with this initiative, namely  possible Constitutional difficulties ( that is if the masters are required to make binding decisions without the consent of the parties) and that such an initiative might  unfairly disadvantage  litigants with relatively unequal economic resourses. 
31.	Under the model proposed by Finkelstein J, a special master is a private lawyer, law professor or retired judge appointed by order of the court to assist in the adjudicative process in a particular case and is paid for by the parties not the court.  The proposed model is based on rule 53 of the Federal Rules of Civil Procedure in the US. The US model is described in the Consultation Paper at paragraph 3.164 as follows:
“Under r 53 of the Federal Rules of Civil Procedure, US courts may appoint masters to perform any duties to which the parties consent, to ‘hold trial proceedings and make or recommend findings of fact’ in certain circumstances and handle pre- or post-trial issues that a judge cannot handle in a timely or effective manner. Special masters are appointed by an order of the court that states the master’s duties, any limits on the master’s authority, the nature of permitted ex parte communications, how the master’s findings will be reviewed and the terms of the master’s compensation. The compensation must be paid either by the parties or funded by the subject matter of the action. A master may regulate the proceedings and ‘take all appropriate measures to perform the assigned duties fairly and efficiently’, and may also impose a range of sanctions.
Before the court acts on a master’s recommendations, the parties have an opportunity to object. The court reviews findings of fact de novo (unless the parties have agreed they will be reviewed for clear error),reviews findings of law de novo and reviews procedural rulings ‘only for an abuse of discretion’.”
32.	Finkelstein J notes that:
“The rationale for appointing discovery masters in large or complex cases is straightforward.  It goes without saying that Federal Court judges for the most part have neither the time nor the inclination to oversee the seemingly endless discovery disputes that attend large cases – confidentiality, privilege, relevance and so on.”

33.	The model put forward by Finkelstein J and supported by CommBar would allow special masters to oversee and manage the deposition process, as discussed above.  
34.	In addition, and depending on the precise terms of the appointment order, the discovery master would have the power to preside over all aspects of discovery including:
(a)	preparing discovery orders;
(b)	creating a confidentiality regime;
(c)	monitoring production of documents and compliance with orders;
(d)	examining documents for privilege; and
(e)	holding full evidentiary hearings and issuing recommended findings of fact and law to resolve discovery disputes (appealable to the trial judge on the terms specified in the order of appointment.)
35.	The discovery master would be paid by the parties pursuant to the terms of appointment as ordered by the court.
36.	In CommBar’s experience, dealing with discovery issues in large cases can be time consuming for the parties and for the judge.  By appointing special masters to deal with discovery issues, judges and other judicial officers will have more time available to conduct trials and prepare their reasons for judgment, thereby enhancing the efficiency of the Court.   
37.	Order 72A as proposed by Finkelstein J, and as supported by CommBar, is set out below at Annexure C.
Dated  January  2011.