knowledge 16 September 2022 |

Discovery: The endurance of Peruvian Guano

In a complex insurance claim, the plaintiffs in Chubb European Group SE (formerly Ace European) v Perrigo Company Plc¹ sought declarations as to the coverage of the Defendants’ claims under a number of Directors’ & Officers’ Liability policies under which the plaintiff insurer declined indemnity.

A motion for discovery was brought by the Defendants following the parties’ failure to agree on the categories of discovery. The plaintiffs refused discovery on the basis that the request amounted to a “general trawl” and “the documents sought are irrelevant, unnecessary and wholly disproportionate having regard to the actual dispute between the parties”.

Holland J’s analysis of the law on discovery addresses the following key principles:

Key Principles of Discovery

• Generally discovery is for the very specific and limited purpose of enhancing the prospects of justice being done². Although discovery can make a valuable – even critical - contribution to the administration of justice, discovery risks defeating rather than enhancing access to justice where documents are voluminous or finding them involves significant expense³.

• The three concepts of relevance, necessity and proportionality are linked such that a neat discrete analysis of each is not possible.

• Peruvian Guano⁴ remains the “starting point” to the principle of relevance pending anticipated reform.

• Relevance usually implies necessity but recent cases place a greater focus on the need to satisfy the necessity test⁵.

• Save perhaps as to simple and clear issues, it is not generally appropriate at discovery stage to determine, for the purpose of deciding whether documents should be discovered, issues of law or fact to be contested at trial – including issues as to admissibility of evidence.

• The bar for the standard of proof of relevance in Peruvian Guano which states that a document is relevant where it is “reasonable to suppose” that it “contains information which may – not which must – either directly or indirectly enable the party requiring affidavit either to advance his case or to damage the case of his adversary” may have been raised in recent case law to a higher standard of proving that a document will be relevant ”as a matter of probability”. It has previously been held that a court will not “order discovery simply because there is a possibility that documents may be relevant”. The court noted the requirement for clarification of this in the pending reform of discovery law.

• The concept of “litigious advantage”, whereby a document should be discovered where the applicant for discovery would suffer litigious disadvantage by not seeing it or would gain litigious advantage by seeing it,  has become irremovably lodged in the lexicon of the law of discovery⁶.

• In principle, discovery is available as to matters arguably constituting or likely to illuminate the factual matrix.

• In the years since Peruvian Guano, the principle of proportionality has become an important criterion in order to avoid the imposition of excessive burdens on parties to litigation as a result of wide ranging orders⁷.

• Exercise of the courts’ “broad discretion” requires the exercise of imperfectly informed judgment in deciding the likelihood of a document being relevant without sight of the documents in advance⁸.

• Framing discovery requests for all documents “relating to” in a request for discovery can greatly expand the scope of discovery.  The formulation “evidences or records” can be useful to attempt to reduce the burden of discovery to that which is genuinely necessary. However, the use of the word “evidences” does not entitle the person making discovery to decide to discover a document, or not, based on a judgment whether it will be formally admissible in evidence at trial.

• The court may reformulate the categories of discovery sought and grant discovery in the terms of the categories as reformulated.⁹  Reformulation will typically be by way of narrowing the category to a subset of that sought.

Court Decision

The court in this instance was not convinced by the plaintiffs’ assertions of disproportionality as no estimate of likely costs or time were provided. Holland J stated that the plaintiffs’ position as to disproportionality seemed similar to that identified by Costello J in IBRC v Fingleton¹⁰ as based on “generalities” as opposed to “meaningful evidence”. The court ultimately refused a number of categories of discovery on the basis that discovery was irrelevant, unnecessary or did not confer a “litigious advantage”. The court exercised its discretion to reformulate a number of categories providing a narrower subset of documents including limiting the scope of discovery to documents which “evidence or record”.

Comment

This case is a reminder of the consideration that should be given to the principle of proportionality when framing discovery categories and of the court’s broad discretion to narrow overly broad discovery requests for the fair disposal of proceedings.