Discovery take second chair in NSW Supreme Court

A new Practice Note issued by the Supreme Court of New South Wales (SC Eq 11, Disclosure in the Equity Division) has the potential to greatly reduce the overall cost of proceedings commenced in the Equity Division of that Court. The Practice Note commenced on 26 March 2012 and applies to all new and existing proceedings in the Equity Division, excluding the Commercial Arbitration List which does not deal with matters involving significant discovery or interlocutory steps.

The Practice Note provides that the Court will not permit "disclosure" of documents (which includes the processes of discovery, subpoenas, interrogatories and notices to produce) until after the parties have exchanged their respective affidavit evidence, unless exceptional circumstances exist which necessitate disclosure prior to this time. Whilst it remains to be seen what will constitute exceptional circumstances, recent cases suggest that there must be circumstances that are not normal or usual and they must be something out of the ordinary to necessitate disclosure. Further, even after affidavit evidence has been exchanged by the parties, an application for a discovery order (or other disclosure process such as third party subpoenas) will succeed only where the Court deems it necessary for the resolution of the real issues in dispute. It has been held that 'necessity' in this context requires the disclosure to be reasonably necessary for disposing of the matter fairly or in the interests of a fair trial.

Under the new Practice Note, any application for a discovery order, following the exchange of witness evidence, must be supported by an affidavit that includes:

• the reasons why discovery is necessary for the resolution of the real issues in dispute;
• an articulation of the documents, or classes of documents, sought; and
• the likely costs that will be incurred in the event of a discovery order.

While the impact of any new rule such as this will depend on its practical application, it is fair to say that at the very least it reverses the traditional timeline for litigation - that is where discovery (i.e. the exchange between the parties of relevant documents in their possession) is completed following the closing of pleadings and prior to the parties preparing their evidence.  The precise effect on costs and case management will no doubt differ on a case by case basis. However, it can be expected that in requiring discovery to be based on substantiated claims (through affidavit evidence) rather than on the basis of mere allegations (through pleadings), the Practice Note will lead to:

• a need for each party to comprehensively assess and plan their case at the "front end" of the litigation process. We can expect that this will lead to more tailored claims based on the actual documents and witnesses available to a party rather than on allegations of conduct;
• less speculative actions, where an aggrieved party makes a variety of claims in the hope of retrieving helpful documents from their opponents or third parties in support;
• greater efforts to resolve disputes prior to the commencement of formal litigation, given that the cost and inconvenience of evidence preparation will be incurred early on; and
• despite the point above, an overall reduction in the costs of litigation, as only those issues that are not otherwise able to be proved (and are able to be justified to the Court) will be the subject of discovery (or other disclosure) orders.

Discovery has traditionally been an integral but often expensive and intrusive aspect of litigation.  Following the introduction of the Practice Note, it is likely that discovery will now be used in the Equity Division to "fill in the gaps" for key issues that are not otherwise able to be proved.  In so doing, the Practice Note continues the trend by both State and Federal Courts of implementing procedures designed to minimise the overall cost and time associated with litigation - the focus being to quickly establish the principal issues in dispute, rather than permit expensive and drawn-out fact finding exercises which may not ultimately be relevant to resolving the dispute.