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Focus: Civil Justice Reform – June 2008

VLRC civil justice reform report: pre-trial examinations and discovery

In brief: In the final instalment of our three-part series on the Victorian Law Reform Commission's recent report into the reform of the Victorian civil justice system, Partner Peter O'Donahoo (view CV) and Lawyers Eloise Dias and Rebecca Semple review recommendations for pre-trial examinations and the discovery process.

How does it affect you?

  • The Victorian Law Reform Commission proposes that parties be permitted to examine on oath or affirmation any person who has information relevant to the matters in dispute in a proceeding, before the hearing.
  • For companies that tend to be involved in complex, large-scale litigation, pre-trial examinations may facilitate earlier disclosure of information in proceedings and encourage settlement. It also has, however, the potential for abuse and cost-escalation, as is often the case in the United States where depositions are commonly employed.
  • The VLRC proposes to narrow the range of documents required to be discovered by parties, bringing the test for discovery in line with other jurisdictions, and also recommends broadening the court's powers to manage the process of discovery.
  • The proposed changes to discovery may assist in reducing the inefficiencies and cost of disclosure in more complex, large-scale litigation and provide flexibility for parties to tailor discovery to suit their needs. However, the VLRC also proposes the introduction of expedited inspection of 'readily identifiable' documents, which may be counter-productive to those goals.

Pre-trial examinations

Pre-trial examinations (PTEs), or 'depositions', are common in the United States, Canada and the United Kingdom but are rarely employed in Australia. PTEs enable parties to a civil proceeding to examine, on oath or affirmation, any person who has information relevant to the matters in dispute before the hearing. They are not substitutes for the adducing of oral evidence at trial. Rather, they serve a similar function to written interrogatories, with the perceived benefit over the latter being that PTEs are less formal and the answers cannot be 'filtered' in advance by a lawyer.

The Victorian Law Reform Commission (the VLRC) proposes new statutory provisions entitling parties to a civil proceeding, with the court's prior leave, to examine any person on oath or affirmation at any stage of a proceeding. The main reason for the recommendation, as stated in its report, is that 'it is in the interests of justice for all relevant information to be disclosed at an early stage in proceedings, in an environment not constrained by the rules of evidence, to assist the parties to assess the strengths and weaknesses of their respective cases'.1

The aim of PTEs

The express purpose of a PTE is to:

  • facilitate pre-trial disclosure of information;
  • assist the parties to obtain a better understanding of, and therefore to limit, the real issues in dispute;
  • facilitate settlement; and
  • restrict or eliminate the need to call or test particular evidence if the matters proceeds to hearing.

The provisions would also make it clear that requiring a person to submit to a PTE would be a step of 'last resort', to be taken only when less formal and more co-operative means of obtaining information from relevant persons have been exhausted.

The leave of the court (or the other party's consent) would be required before conducting a PTE. The VLRC recommends that there be a presumption in favour of granting leave, subject to the exercise of judicial control to limit costs and prevent abuse. The court would also be empowered to give such directions, as appropriate in its view, as to the conduct of PTEs, such as limiting the nature and duration of an examination or appointing an independent examiner to conduct the examination. The court would retain its inherent power to prevent abuse of the court's process.

Parties would be expected to agree on the details of the PTE, including nominating appropriate corporate examinees. At all times, examinees would retain their right to refuse to answer a question on the grounds of legal professional privilege or the privilege against self-incrimination. Since one of the features of PTEs is reduced formality, the rules of evidence would not apply. Objections to questions, however, would be permitted and noted on the record, should the transcript be sought to be introduced into evidence at the trial.

The VLRC recommends that the use of a PTE transcript at trial should be permitted but in the following circumstances only:

  • to impeach a witness's testimony;
  • where the examinee has since died or become unfit to give evidence at the trial;
  • where all the parties consent; or
  • where the court gives leave.

Regarding the costs of PTEs, the reasonable costs incurred in preparing and conducting examinations would be recoverable as costs in the proceeding (subject to the court's usual discretion).

Potential concerns and safeguards

Several submissions to the VLRC expressed opposition to the use of PTEs, with the predominant concern being that they have the potential to become another costly step in court proceedings. Somewhat related to this was the recognition of the potential for their abuse. A number of submissions noted the US experience where depositions form part of an arsenal of pre-trial discovery processes that are often criticised as 'fishing expeditions'.

The VLRC nonetheless concluded that PTEs should be introduced, albeit subject to appropriate safeguards. The key safeguard noted in the report is judicial control, including the requirement that the leave of the court be obtained before a PTE may be conducted. The other safeguard is the professionalism of the legal profession, whose behaviour in relation to PTEs would be regulated by a new code of conduct. Broadly, practitioners and their clients would be required to endeavour, in good faith, to:

  • minimise the amount of time required for an examination;
  • avoid needless formalities;
  • avoid repetition and other oppressive behaviour; and
  • confine examinations to relevant matters.

Ultimately, however, if the recommendations are adopted, it will remain to be seen how successful these safeguards will be in preventing unnecessary and costly use (and abuse) of the procedure.

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Discovery

New test for discovery

Currently in Victoria, the threshold test for determining whether a document must be discovered is the Peruvian Guano2 or 'train of inquiry' approach. This test enables documents to be discovered that are not directly relevant but that may fairly lead the parties to a train of inquiry that would advance their own case or damage their adversary's case.

The VLRC's second exposure draft report of September 2007 advocated the retention of the train of inquiry test. Importantly, the VLRC's final report now proposes that the test be narrowed to require discovery of documents that are directly relevant to the issues in dispute. While a narrower test may not substantially reduce the time and cost involved in the discovery process, it is likely to focus parties' minds on the parameters of discovery, assist to narrow issues and encourage cultural change.3

Case management powers

In contrast to other jurisdictions, the powers of Victorian courts to regulate the discovery process are not extensively defined. While courts have general powers to limit discovery, the rules of court do not define the specific types of orders courts may make in exercising that power.

To reduce cost and delay, the VLRC recommends that courts be provided with judicial discretion to make any order on disclosure it considers necessary or appropriate. Such orders may include orders relieving a party from the obligation to make discovery (or discovery of certain documents) and orders limiting discovery to particular categories of documents, or requiring certain categories to be discovered before the close of pleadings.

A key recommendation is for courts to be able to appoint a 'Special Master' to actively case-manage discovery in complex litigation. The Special Master would conduct meetings or hearings with the parties in a more informal manner and assist them to identify appropriate strategies to manage discovery. The Special Master would also be available to hear and determine interim discovery applications and consider questions of privilege. While this is unlikely to reduce the number of discovery disputes, it may offer parties the flexibility to tailor the discovery process to suit the circumstances of an individual case and 'free up' judges' time.

Interim disclosure orders

The VLRC proposes a new procedure to enable the court, in certain cases, to make interim inspection orders requiring a party to make available for inspection all documents it has within a 'readily identifiable' category or description.

The VLRC considers that this measure will alleviate the burden and expense of parties having to review and categorise documents, make a judgment about whether each document is relevant to the issues in dispute in the proceedings and prepare lists of documents. It proposes certain safeguards against abuse, including a requirement that disclosure shall not give rise to a waiver of privilege and the inspecting party may not copy or use documents except to the extent that would allow the party to obtain further discovery.

This proposal may hinder the VLRC's goal of reducing the overall cost and complexity of the litigation process. It would add a further step to the discovery process and permit inspection of potentially irrelevant documents. It may also encourage 'fishing expeditions' and potentially result in privileged or confidential documents being viewed by another party.

Document repositories

The VLRC recommends a new power be granted to courts to order the creation of 'document repositories' in certain cases. Document repositories would be used by parties where there is a likelihood of multiple claims involving a party who has already made discovery in one proceeding. This proposal aims to reduce the expense, burden and delay involved in the process of document production and inspection in overlapping proceedings. There is a concern, however, that the use of document repositories may, in some cases, be counter-productive to these goals as it could significantly broaden the scope of discovery and may also raise potential privilege issues. This proposal will need to be carefully monitored.

Other key recommendations in relation to discovery include:

  • the introduction of an obligation on parties to disclose the identity of an insurer or litigation funder exercising any control or influence over the conduct of the insured or assisted party, and provision for judicial discretion in appropriate cases to order disclosure of a party's insurance contract or funding arrangements; and
  • further sanctions to permit a court to order indemnity costs against a party or a lawyer who aids and abets any discovery default, and to enable a court to compel a person to give evidence orally or by way of affidavit in connection with a discovery default.

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Conclusions

The VLRC's recommendations in relation to PTEs and discovery have the potential to enable parties to large-scale litigation to 'access the truth' earlier in proceedings, thereby narrowing the issues in dispute, as well as promoting settlement. Certain parts of the recommendations, however, may be open to abuse. The State Government's response to these recommendations will be keenly anticipated, as they are likely to impact on any significant litigation in Victoria.

Footnotes
  1. VLRC, Civil Justice Review: Report (2008) at p 414.
  2. Compagnie Financiere du Pacifique v Peruvian Guano Co (1882) 11 QBD 55.
  3. VLRC, Civil Justice Review: Report (2008) at p466.

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