Managing eDiscovery in New Zealand

Update 25 Feb 2013: All speaker slides are now available at this link.

Last week I presented at the Ernst & Young / E-Discovery Consulting “Managing eDiscovery in New Zealand” conference in Auckland.

The slides for my presentation, “Document Review: Getting, preparing & reviewing data under the new High Court Discovery Rules” are here:

Judge David Harvey gave the keynote presentation, and has also put up his slides:

Handling confidential documents in discovery

By its nature, discovery often involves disclosing confidential documents, or documents containing confidential information.

Confidentiality is usually not grounds for withholding (i.e. not disclosing) a discoverable document. Documents can be withheld on the grounds of privilege (either as codified in the Evidence Act 2006, or the residual common law privileges) or irrelevance, but there is no privilege for “commercial sensitivity” or other such aspects of confidentiality (see ss 68-70 of the Evidence Act for other grounds).

But this does not mean that confidential documents need to be handed over without restriction.

The starting point is relevance, under the “adverse documents” test. If a document is not required to be discovered, then issues of handling confidential information in that document should not arise.

If a document is discoverable, then High Court Rule 8.15(2)(f) permits the producing party to propose “restrictions … to protect the claimed confidentiality of any document”. Rule 8.28(3) then permits the producing party to produce those documents subject to the proposed restrictions. If the receiving parties wish to challenge the proposed restrictions, they may do so pursuant to Rule 8.25.

There are several important points to note:

  1. The confidential documents must be listed as confidential documents in the affidavit of documents (usually ‘part 3’).
  2. The proposed restrictions on the confidential documents must be stated in the affidavit of documents itself.
  3. The producing party is free, within reason, to propose whatever restrictions they consider appropriate, though this should be read subject to the duty to co-operate.
  4. It is up to the receiving party to challenge the restrictions, if they wish. This will usually require an interlocutory application or a memorandum seeking directions (a party that inappropriately claimed confidentiality, or proposed inappropriate conditions, would likely have to pay costs).

What restrictions can be applied?

While rule 8.30(4) limits the use of discovered documents to the purposes of the proceeding only, and prevents extra-judicial disclosure, the producing party still may wish protect the confidentiality of certain information.

The producing party is at liberty to propose appropriate restrictions. Common restrictions include:

  • Redacting documents. While relevant information cannot be withheld on the grounds of confidentiality, non-relevant confidential information could be redacted, making the resulting document discoverable with redactions (“DWR”; the same can apply to privileged documents). For example, a document may be commercially sensitive because it contains sales figures or name of other customers. If sales figures or customer names are not relevant to the dispute, a redacted version of the document omitting that information could be provided (as a Part 1 document).
  • Limiting inspection. Confidential documents are sometimes provided on an “attorney’s eyes only” basis that limits inspection to the receiving party’s lawyers and experts only. This is usually supported by an undertaking from the receiving party’s solicitor.
  • A combination of the above, where redacted versions are made available to the receiving party themselves (without restrictions), and the full versions are available for the receiving party’s lawyers (with undertakings) to inspect in order to confirm the legitimacy of the redactions.

Common sense should prevail

Care should be taken not to claim confidentiality over-zealously. Rule 8.30(4) provides a reasonably robust level of protection to all discovery documents, and it is not necessary (nor appropriate) to claim confidentiality across tracts of documents without an “elevated” need to do so. A robust case should be made.

In practice, most discovery issues of this nature can and should be resolved between the parties on a common sense basis – which is supported to some extent by the duty to co-operate that the new rules impose.

Tailored discovery under the new High Court Rules

A recent High Court judgment of Justice Asher includes some useful comments on tailored discovery and proportionality under the 2012 High Court Rules. While the decisions in Commerce Commission v Cathay Pacific Airways Ltd [2012] NZHC 726 is relatively straightforward, the comments carry weight because Justice Asher was on the Rules Committee that forumulated the new requirements.

The starting point in such a consideration of appropriate tailored discovery orders must be an analysis of the issues. Discovery categories will reflect the issues and will only be ordered for the discovery of documents that are relevant to those issues. Except in exceptional circumstances, these issues will be discernible from a review of the pleadings. Discovery orders that are essentially of a “fishing” nature are not part of tailored discovery. Orders will not be granted where the categories do not relate to a pleaded relevant issue, but rather a non-pleaded issue which might be pleaded should discovery reveal documents that support such a pleading.

Which highlights the importance of getting the pleadings right. It is surprising how much issues can “shift” from those pleaded, especially if insufficient analysis of available documents (usually only your client’s documents, pre-discovery) is carried out before pleading.

(I add that it is also surprising how, occassionally, some practitioners don’t seem overly perturbed by the growing divergence, even to the point of conflict, between their pleadings and their asserted “key issues”!)

Of course, pleadings can be amended, and such amendment is commonplace (in Cathay the Commission was on the 5th version of its statement of claim).

On proportionality, His Honour says:

To determine the proportionality arguments in relation to tailored discovery of particular categories it is necessary to consider the chances of finding relevant documents in the discovery exercise and their degree of relevance. This should then be balanced against the cost of carrying out that discovery process. Broader considerations such as the amount at issue, the resources of the parties, and delay to the proceedings may also be relevant…

It is notable that it is not so much the amount at issue or the resources of the parties that are of primary relevance (though they are still factors), but balancing of the chances of finding relevant documents verus the cost of doing so. As His Honour clearly summarises:

In a decision whether to order discovery under the particular category it is necessary to measure the likely return of relevant documents against the cost of the exercise. If highly relevant documents may be revealed, then a greater cost can be justified.

E-discovery – redacting electronic documents

More information is coming soon on New Zealand’s e-discovery solution – the electronic discovery solution developed right here in New Zealand to support the new discovery rules taking effect on 1 February 2012 (see this earlier post).

One feature is the ability to safely redact PDF documents directly in a web browser.

Redaction is increasingly important in New Zealand civil litigation, given the volume of documents and the propensity for sensitive and/or privileged information to be mixed with other discoverable information. The High Court Rules (current and new) allow redaction of certain information on the grounds of confidentiality and/or privilege. Conditions can be proposed by the disclosing party to protect confidential information – for example, the provision of certain documents (redacted or not) may be made on an “attorney’s eyes only” basis (to adopt the US parlance; in practice it often extends to experts too). Other parties can challenge the proposed restrictions, however this requires them to bring an application to do so, and in practice such issues can usually be resolved without the Court’s intervention.

The new High Court Rules will generally mean that documents must be redacted electronically, in PDF format. In practice, there are 3 key challenges to doing so:

  1. Making it easy – ideally, the lawyer will be able to make their own redactions directly on each PDF while viewing it anywhere and any time, without the need to install separate standalone software and without any fuss. In particular, this avoids the  inefficient and obsolete process of printing documents, manually redacting them, and then re-scanning them.
  2. Making the redactions permanent and secure – there are many real-world examples of unsafe, or non-permanent, redactions, where an apparently redacted document still allows the underlying text to be easily retrieved (read about a recent example – by a judge! – here).
  3. Handling duplicates – there is no point redacting one version of a document, only to have a duplicate produced in original form.

Safe and easy PDF redaction (via the browser) is one of the features of the New Zealand developed e-discovery solution that will be announced soon. Stay tuned for more information in coming weeks.

A new Electronic Discovery solution, coming soon…

A pre-announcement:

New High Court Rules (and District Court Rules) promoting the use of electronic discovery come into force on 1 February 2012. Key features of the “default” regime under the new rules include the following:

  • Discovered documents must be exchanged electronically.
  • Parties must provide a standardised list of discovered documents.
  • Documents must be provided in PDF format (unless not possible for particular file types), with the document number as the filename.
  • Native files must be provided if requested.
  • Parties must take reasonable steps to exclude duplicates.
  • Emails and attachments are to be listed separately but sequentially on the document list.

These changes reflect the ever-increasing volume of data (in particular, electronic data) in modern litigation, and the need to effectively and efficiently handle the discovery process.

A New Zealand solution

This new regime requires a new solution. Stay tuned for an announcement of a new web-based electronic discovery system developed right here in New Zealand, that supports the new rules on electronic discovery as well as providing early case assessment and detailed review capabilities. This system has been locally developed over the past several years.

Key features include:

  • New Zealand designed and developed system, cognisant of the new High Court Rules on electronic discovery
  • Fully managed, web-based solution – no software to install or maintain, and can be accessed on any computer, notebook, or tablet
  • Handle projects ranging from a few dozen, up to hundreds of thousands of documents
  • Securely access, review and upload project documents anywhere, anytime
  • Track discoverability, privilege, confidentiality, and other document attributes
  • View common document formats in any standard web browser without the need to install Office software
  • Powerful search and analysis capabilities across the document repository
  • Generate discovery lists and electronic bundles of documents (native format or converted to PDF, stamped with document numbers)
  • Automated handling and de-duplication of Outlook email archives and common document types
  • Single-user or collaborative multi-user options (including the ability for clients to upload their own documents)
  • Fully locally supported
  • Customisable by a local development team
  • And much more!

Check back for more information in coming months.

(features described are subject to change before the system is publicly launched)

New High Court rules and the impact on electronic discovery

The Rules Committee of the High Court has released its final draft of new rules on civil discovery. This is the final stage of a long-running process to update the often troublesome rules relating to discovery, in particular electronic discovery. The latest rules are available here (pdf).

Background

For those who are lucky enough not to have been involved in civil litigation, discovery is a legal process that requires each side in the case to “discover” all relevant documents to the other side – the legal equivalent of laying your cards on the table. That doesn’t just mean documents that support your case – parties are also obliged to produce damaging documents. There are only limited grounds for refusing to disclose documents, such as legal privilege, and even then certain steps must be followed.

Unfortunately, discovery has become often a very difficult and time-consuming (and therefore expensive) part of modern commercial litigation. The general rules of discovery were laid down in the nineteenth century, when most documents could only be produced by hand or at significant cost. It was also a lot more obvious what a “document” was back then – usually ink on paper.

In recent years there has been an explosion in the amount, and type, of documents in business. The most obvious are computer documents (Word docs, spreadsheets, etc) and email. Most significant businesses are now heavily reliant on electronic communications. Documents still include paper files, faxes, and accounts, but also include modern documents such as databases, text messages, and even tweets, and huge amounts of documents can be created during the course of an ordinary day. As a result, parties to litigation are often required to handle huge volumes of documents. In large litigations I am involved in, it is common to have tens of thousands of emails and other electronic documents in play.

Reform

The discovery reform aims to modernise the rules to improve the discovery process for the benefit of litigants, and better reflect the modern realities of business and society. I have submitted on the first draft rules, and note a few highlights and changes in the proposed final draft:

  • Parties must co-operate on discovery (oh, were it always that way!) and ensure “technology is used efficiently and effectively”. (8.2)
  • Parties “must take all reasonable steps to preserve [relevant documents]”, including ensuring that “documents in electronic form which are potentially discoverable [be] preserved in readily retreivable form even if they would otherwise be deleted in the ordinary course of business” (8.3). This is a significant and powerful rule that imposes an express duty to preserve electronic records (see below for more details). When a dispute arises, it may be a prudent strategy to put the other party on express notice of this duty.
  • The rules introduce two types of discovery – standard and tailored (8.6). Thankfully, the proposed threshhold of 200 documents for tailored discovery (previously called non-standard discovery) has been dropped. Even small commercial litigations tend to have far more than 200 documents these days!
  • Parties must undertake a “reasonable search” for electronic documents, which includes some room for negotiation over whether it is or isn’t unduly costly to do so in certain cases (8.14).
  • Original native files (that are discoverable) are to be provided on request (8.27(4)). While I had proposed clearer language here, the rule is still to that effect.
  • Documents are to be exchanged by way of PDF where possible (sched 9, clause 1).
  • The proposed requirement of chronological ordering is not mandatory – a different order may be applied if more convenient (sched 9, clause 2).
  • Exchanged documents should be DRM free (well, it’s not quite as explicit as I had proposed but it’s a start) (sched 9, clause 6.8).

Duty to preserve documents

The most notable change for non-lawyers is the duty to preserve evidence, in particular electronic records. Unlike in the US, there is no tort of “spoilation of evidence” in New Zealand. There can still be serious consequences for destroying evidence, but the threshhold is unclear and there has not generally been a positive duty to preserve documents for the purposes of potential litigation.

The proposed rule 8.3 will change that. It requires a person who knows that a document is “reasonably likely” to be relevant to a legal dispute (whether or not any dispute has arisen) to take “all reasonable steps to preserve that document”. The term “knows” here is likely to be taken as meaning “ought reasonably to know”.

In particular, the rule will require that potentially relevant electronic documents “must be preserved in readily retrievable form even if they would otherwise be deleted in the ordinary course of business”.

The most obvious type of document here is email. Many businesses let their users fully manage their own emails. If a user deletes an email from their inbox, it may be impossible to recover. This new rule will require prudent businesses to ensure there are proper processes in place for retaining important emails. Under the new Limitation Act, it may be necessary to ensure retention of some records for up to 15 years, which is the duration of the new law’s “longstop” limitation period.

The proposed rules do not set out a penalty for failing to preserve documents, but a Court may make adverse findings, or even impose more serious sanctions such as contempt of court, against a party who fails to preserve documents.

While it is far from Sarbanes-Oxley, this change is welcome and good for the interests of justice.

The rules are expected to be implemented by early 2012.