Litigation on the horizon? New obligations regarding managing and retaining relevant documents
Wednesday, 21 December, 2011
Author: Kieran Lomas
On 1 February 2012, new discovery rules (“Rules”) come into force which will affect all litigation commencing after 1 February 2012. While discovery is often a dry topic and only usually of interest to lawyers, there are some important changes to the Rules about which potential litigants should be aware.
Before going too much further, a brief explanation of what “discovery” means may be helpful. In any form of litigation, it is likely that the parties will go through a process called “discovery”. Discovery is the process whereby each party to the litigation discloses to every other party involved in that litigation the existence of documents relevant to the dispute out of which the litigation arises. The other parties can then request to inspect those documents.
Under the current rules, a document is discoverable if it may result in a party advancing his or her case or damaging an opponent’s case or lead a party to a train of inquiry that may do the same. Perhaps unsurprisingly, that expansive definition (which dates back to a case commonly referred to as “Peruvian Guano” decided in 1882) has attracted significant criticism over the years. The term “document” extends to emails, tape recordings, pictures and pretty much any stored information.
The principal complaints with the current process and the “Peruvian Guano” test are:
- Discovery is too expensive and too time consuming; and
- Discovery is used inappropriately for tactical advantage.
Discovery can be and often is expensive and time consuming. It is not uncommon in large scale commercial disputes for one party’s documents meeting the “Peruvian Guano” test to fill several large rooms and constitute hundreds of thousands of pages. In years gone by, it has been something of a rite of passage for junior lawyers to sit in such a room, reviewing documents for weeks on end. The current system allows a large well-funded party to attempt to swamp an opposing party with discoverable documents in the knowledge that that party does not have sufficient resources to properly inspect all of the documents.
As a result of the criticisms, new discovery rules have been drafted, largely designed to respond to these criticisms but also to take advantage of new technological innovations.
There are a number of key changes that will affect the way in which lawyers advise their clients regarding discovery but there are some changes that have widespread repercussions. This article will focus on a new duty placed on a litigant to preserve documents.
Preservation
Under the Rules, a prospective party to litigation has a duty to take reasonable steps to preserve potentially discoverable documents even before proceedings have been commenced. The duty is triggered once litigation is reasonably contemplated.
If you are the party bringing proceedings, it should be clear when litigation is reasonably contemplated, but it may arise sooner than you expect i.e. it would arise once you made the decision to seek advice about a potential claim. If you are the defendant or prospective defendant in a proceeding, you may well reasonably contemplate proceedings much earlier than they are filed, for instance if the claimant has made it clear to you that a claim is being considered.
This duty can cause problems for larger organisations, especially where a number of key staff members may be deemed to have reasonably contemplated litigation. We suggest that early on you obtain legal advice on how best to ensure compliance with your discovery obligations.
Once the obligation to preserve documents has arisen, the party must take all reasonable steps to preserve documents that are either discoverable or reasonably likely to be discoverable. This will first require an analysis of which documents will be discoverable and which will not. Standard discovery now requires each party to disclose documents:
- On which they intend to rely;
- Which are likely to negatively affect their case or that of another prospective party; and
- Which are likely to support another prospective party’s case.
This is a narrower range of documents than under the previous system, but reasonable care should still be taken to ensure the preservation of any documents which fall into those categories, including documents stored electronically. What constitutes reasonable care will differ depending on the circumstances and it would be prudent to obtain legal advice.
There are significant repercussions for failing to comply with the obligation to preserve documents and they range from a Court order requiring you to discover particular documents through to Criminal Penalties under the Crimes Act.
A failure to comply with the duty to preserve documents can have serious consequences and can affect the outcome of a dispute. We suggest that advice is sought as early as possible on what steps should be taken to comply with your obligations in this area, and more generally to assist with your litigation strategy.
For further information please contact:
Kieran Lomas
Phone: 07 834 2631
Email: kieran.lomas@harkness.co.nz
