The Hong Kong judiciary has launched a pilot scheme for the discovery and production in commercial litigation cases of documents that are stored in electronic form. The pilot scheme takes effect on 1 September 2014 and will be reviewed by the judiciary after one year. This e-bulletin looks at the pilot scheme and its possible implications for litigation in Hong Kong. It also looks at some practical steps parties can take to identify and preserve electronic documents for review and discovery under the new framework.
1. The pilot scheme
Practice Direction SL1.2 (Practice Direction) provides a framework for the reasonable, proportionate and economical discovery and supply of electronic documents as evidence. It applies to all actions commenced in, or transferred to the Commercial List on or after 1 September 2014 where the claim or counterclaim exceeds HK$8 million and there are at least 10,000 documents to be searched, or where either the parties agree or the court directs them to follow the Practice Direction. In respect of what is discoverable, the Practice Direction applies a narrower test of direct relevance than the usual broad Peruvian Guano ‘train of enquiry’ test, which remains applicable in Hong Kong for general discovery.
The new framework encourages a co-operative party-driven approach involving proactive discussion early on in the proceedings to agree, amongst others issues, on the scope of electronic discovery. A questionnaire called the Electronic Documents Discovery Questionnaire (EDDQ) is contained in a Schedule to the Practice Direction. It is designed to assist the process and to concentrate the parties’ minds on issues such as who the relevant custodians are, the parameters the parties want to put in place around a search, source of documents and their accessibility. The Practice Direction recommends parties file the EDDQ in draft form at the pleadings stage (but in any event, with a statement of truth, seven days before the first case management conference).
Click here to read the Practice Direction.
2. Implications of the new framework in Hong Kong
Parties taking their obligations under the Practice Direction seriously will need to ascertain at an early stage how electronic documents are preserved, where they are kept, who are the most important custodians, what the appropriate parameters are in terms of keywords, dates etc. Parties will also need to familiarize themselves with the technical aspects of electronic discovery and may, as a result, need to retain an e-discovery or data management provider early on in the process. All these steps may add to costs incurred early on in the proceedings. Having said that, for parties who are involved in actions involving large-scale electronic discovery, operating under this new framework is likely, overall, to be a cost-saving exercise as discovery will be limited to the scope agreed with the other side (or directed by the court). Of course, there will always be a risk that the documents generated in the first search run reveal a trail of new documents that need to be discovered, but a tranche by tranche approach still has more chance of keeping costs down than a full blown discovery exercise without parameters.
Under the current discovery regime, parties to litigation in Hong Kong have not generally tended to engage in a co-operative way. This is despite the existence of a practice direction on case management which states that parties should try to agree on the directions for modifying discovery obligations (e.g. limiting discovery to specified issues). It is unlikely that we will see a notable increase in co-operation in the short term and we expect there to be a reliance on the court to give directions on the scope of e-discovery, as well as seeing a greater volume of interlocutory applications such as for specific discovery or further and better discovery.
That said, if the parties blatantly ignore their obligations under the Practice Direction to discuss with the other side and proactively consider the scope of their searches (particularly the parameters of what is disclosed), or give insufficient discovery, the court may become inclined to apply costs sanctions made against non-compliant parties as has been the case in England & Wales.
3. Practical tips for litigation under the new framework
As mentioned earlier, operating under the Practice Direction properly and efficiently will require an early assessment of the universe of data, the relevant custodians, time period and search parameters. Parties will also need to familiarize themselves with the technical aspects of electronic discovery and may need to retain an e-discovery or data management specialist.
In order to identify the relevant data, parties and their lawyers (and where relevant, e-discovery providers) will need to work together to (i) find out early who the key custodians of documents are; (ii) interview the custodians to find out about their working practices and involvement in the case; (iii) understand the IT infrastructure in place in the organization, what documents are stored where and how they are backed-up or archived; and (iv) obtain copies of the organisation’s IT, backup and data retention policies. In order effectively to preserve the data, relevant backup tapes will need to be taken out of circulation and kept physically segregated. If a forensic analysis is likely to be necessary (for example to recover deleted emails or identify usage), staff ought to be instructed as early as possible temporarily to stop using the relevant computers. Also, if metadata (i.e., information regarding the precise time/date of emails or when documents were created or amended) is likely to be important, measures must be put into place to freeze document usage.
For an efficient review and discovery exercise, we recommend that parties try to agree the approach to filtering/searching for documents or seek directions from the court before launching on a review. A wasted costs order may be issued against a party who unilaterally pursues a review of documents, particularly where the court later orders that further discovery is necessary and/or the search terms used by the party were not relevant to the matter or fair to the other side.