Federal Court Dismisses Application for Relief from Discovery Orders

OUTCOME: Dismissed

FEDERAL COURT OF [RESPONDENT]

[NAME] v [RESPONDENT[COMPANY] [PHONE] [2012] FCA 595 Citation: [NAME] v [RESPONDENT[COMPANY] [PHONE] [2012] FCA 595

Parties: [NAME] (IN HIS OWN RIGHT AND AS REPRESENTATIVE OF THE GROUP MEMBERS) v [RESPONDENT[COMPANY] [PHONE]

File number: NSD 499 of 2011

Judge: PERRAM J

Date of judgment: 8 June 2012

Catchwords: PRACTICE AND PROCEDURE – Discovery – application for suspension of discovery – whether an order shifting the costs of discovery might be appropriate – whether changing the procedure by which discovery is provided is inappropriate when the initial procedure is well advanced

Legislation: Rules of the Supreme Court 1883 (UK) O 31, rr 25-27 Daniell's Chancery Practice ([NAME], 8th ed, 1914)

Date of hearing: 18, 30 May 2012

Place: [APPELLANT]: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 16

Counsel for the Applicant: [redacted]

Solicitor for the Applicant: [redacted]

Counsel for the Respondent: [redacted]

Solicitor for the Respondent: [redacted]

IN THE FEDERAL COURT OF [RESPONDENT] [APPELLANT] 499 of 2011

BETWEEN: [NAME] (IN HIS OWN RIGHT AND AS REPRESENTATIVE OF THE GROUP MEMBERS)

Applicant

[RESPONDENT]

Respondent

[APPELLANT] OF ORDER: 8 JUNE 2012 [APPELLANT]

THE COURT ORDERS THAT:

1. The respondent's interlocutory application be dismissed. 2. The respondent pay the applicant's costs as taxed or agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Applicant

[RESPONDENT]

Respondent

JUDGE: PERRAM J DATE: 8 JUNE 2012 PLACE: [APPELLANT] FOR

JUDGMENT 1 On 14 February 2012 I made orders regulating the provision by [RESPONDENT] of discovery of its documents to [NAME]'s solicitors. [RESPONDENT] now seeks to be relieved until further order of the burden of further compliance with those orders. 2 This is an investor class action. Discovery has been an involved affair consisting, thus far, of two stages. The first stage was conducted under the auspices of orders which, in their original form, were made by Emmett J on 8 July 2011. This first stage resulted in the discovery of 2,732 documents to Mr [NAME] solicitors. To identify those documents it was necessary for those involved to review in excess of 80,000 documents of which 27,234 were subject to detailed review. In all the cost to [RESPONDENT] was $387,000. 3 Discussions then took place between the parties with respect to the provision of a second stage of discovery. The parties were unable to agree on the categories but following a mediation with the Hon. [COUNSEL] QC consensus was achieved. This resulted in consent orders which I obediently made on 14 February 2012. Appended to the orders was an agreement which I was asked to, and did, note. The orders and the relevant part of the agreement are as follows: THE COURT ORDERS THAT:

1. The respondent will use reasonable endeavours to give verified discovery of the categories of documents listed in Annexure A (the second tranche of discovery) by 4pm on 26 April 2012.

2. The respondent will deliver the second tranche of discovery by way of periodic batches not larger than 2,000 documents per batch.

3. The applicant will provide the respondent with particulars of the group member [NAME] by 23 February 2012.

4. The matter be re-listed for further directions on 1 May 2012 at 9:30 am. THE COURT NOTES THAT: (i) The parties acknowledge that the precise number of respondent's documents to be reviewed in order to complete the second tranche of discovery is presently unknown and accordingly it is possible that the respondent may need to seek additional time to complete the second tranche of discovery and serve a list of documents in accordance with Rule 20.17. (ii) If the respondent believes it will require additional time to fulfil the second tranche of discovery obligations, it will notify the applicant immediately. In doing so the respondent will inform the applicant of: (a) the number of documents that have been reviewed to that point in time; (b) the number of documents remaining to be reviewed; and (c) a genuine estimate as to the additional time required to complete the second tranche of discovery and serve a verified list of documents. (Emphasis in original.) 4 I will not set out the precise discovery categories. It suffices to say that there were twelve categories contemplated. 5 The task of providing this discovery has proved somewhat larger than [RESPONDENT]' attorneys anticipated. A total of a further 210,000 additional documents have been uplifted from [RESPONDENT]. This pool has been interrogated using keyword searches. Each of the twelve categories has associated with it a particular set of such keyword searches. At the time of the delivery of [RESPONDENT]' brief 54,539 documents had been subjected to detailed review. By the time of the conclusion of the hearing it appeared that there remained perhaps another 147,421 documents to be subject to detailed review. The cost to [RESPONDENT] of the second stage to the date of the brief was $215,000 and the cost of discovery as a whole is now in excess of $600,000. 6 Where this went, according to Mr [RESPONDENT] of counsel, who put [RESPONDENT]' case with considerable force and clarity, was this: the amount that this process was costing when weighed in the balance against the amount the class members might ultimately recover revealed the presence of disproportion. Indeed, he submitted that at least at the date of the brief Mr [NAME] had not provided any statement of what the claim was worth at all. 7 When the matter was first called on Mr [APPELLANT] of counsel submitted that the claim was worth potentially in the vicinity of $35-75 million and the costs of discovery had to be seen in that light. His basic point, however, was that the parties had reached an agreement about these matters following a mediation and [RESPONDENT] could not walk away from that agreement just because it now found the burden of its promises tiresome. 8 [RESPONDENT] submissions made plain that they only sought discharge of the orders of 14 February 2012 as a last resort. They also suggested two possible intermediate solutions: first, that Mr [NAME] might pay for discovery himself hereafter; or, secondly, that I might submit the parties to more discussions. These points need to be viewed in light of the fact that the class action brought in Mr [NAME] name is funded by IMF and that it has indemnified Mr [NAME] against costs orders. 9 During the course of the initial hearing I was disposed to see very significant attractions in the first intermediate course and in a variation that required [RESPONDENT] and [NAME] to share the costs of discovery. By making those seeking discovery pay for it, at least in the first instance, there could be an efficient aligning of interests. Those responsible for specifying the breadth of the discovery process would be responsible also for the cost resulting from that breadth. 10 Because of the serious implications of taking that course I stood the matter over to permit Mr [NAME] attorneys to put a more substantive argument against the proposal. 11 When the hearing reconvened Mr [COUNSEL] of senior counsel then appeared with Mr [APPELLANT]. 12 Conveniently, the parties were in agreement that the Court did have power to order the party seeking discovery to pay for it and it was not on this question that issue was joined. Instead, Mr [NAME] principal argument had four aspects. First, it would be unsound to approach the way discovery was being conducted on a different basis to the way in which it had already been conducted in this particular case. Decisions had been taken on one basis and it would not be fair to switch horses mid-stream. Secondly, the manner in which the hearing had played out meant that there was not before the Court the materials which would be necessary to consider whether the power should be exercised. Thirdly, and related in a sense to the second point, there were difficult issues about the relationship which would exist, if the orders were made, between Mr [RESPONDENT] (and his supporters) and [RESPONDENT]' solicitors. What, might occur for example, if Mr [RESPONDENT] supporters thought that [RESPONDENT] solicitors were working inefficiently? How might their attitude to privilege be approached? Funding by one party of the costs of another's lawyers was not uncommon but generally arose in situations of common interest privilege. To yoke with fiscal bindings one party to the other party's attorneys was a course filled with unforeseeable perils. Finally, the proposed course was highly novel and was not lightly to be embraced. Mr [RESPONDENT], on the other hand, submitted that Mr [RESPONDENT] was largely jumping at shadows. 13 On balance, and not without some hesitation, I think Mr [NAME] arguments should be accepted. There may well be complexities about the structure of such an arrangement which cannot readily be foreseen on the state of the evidence. It may be that those difficulties might be resolved by ordering the party seeking discovery to put up security for its costs, which appears to have been the practice in the latter part of the nineteenth century and in the earlier part of the twentieth: [NAME] ([NAME], 8th ed, 1914, Vol I at 575) ('Under the existing practice of the Court, the giving of security for costs is in general a necessary preliminary to the obtaining of discovery, whether by interrogatories or by production of documents'). This procedure was governed by the Rules of the Supreme Court 1883 (UK), O 31, rr 25-27. But I do not think I should decide that now. Nor do I think, on balance, that it would be fair to change the rules half way through the process. 14 There remains then the principal question of what should be done with the categories which are still to be processed. These are categories 3-5 and 7-9. 15 The difficulty with [RESPONDENT]' position is, I think, twofold. First, as the orders (and agreement) of 14 February 2012 make clear, it was understood by both parties that the scope of the regimè they were submitting to was unknown. They agreed between themselves that if there were more documents than anticipated the solution would lie, not in a revisitation of the question of whether discovery should be narrowed, but in the provision instead of more time. The present application is contrary to the solution the parties appear already to have agreed. Secondly, there is no evidence that either party is prejudiced by the expense in the sense that it cannot be borne or recovered ultimately from the opposing party. 16 In that circumstance the appropriate result is that the application be dismissed with costs as taxed or agreed. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

Associate: Dated: 8 June 2012