BT (Australasia) Pty Ltd v State of New South Wales (No 9)
[1998] FCA 363
•9 APRIL, 1998
FEDERAL COURT OF AUSTRALIA
DISCOVERY - discovery and inspection of electronic documents - whether party failed to take appropriate steps to locate electronic documents - appropriate form of orders.
BT AUSTRALASIA PTY LTD V STATE OF NEW SOUTH WALES & TELSTRA
NG 572 OF 1995
JUDGMENT NO 9
JUDGE: SACKVLLE J
PLACE: SYDNEY
DATE: 9 APRIL 1998
IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 572 OF 1995
BETWEEN: BT AUSTRALASIA PTY LTD
APPLICANTAND STATE OF NEW SOUTH WALES
FIRST RESPONDENTTELSTRA CORPORATION LIMITED
SECOND RESPONDENTBETWEEN:
AND:
BETWEEN:
STATE OF NEW SOUTH WALES
CROSS CLAIMANT TO FIRST CROSS CLAIMBT AUSTRALASIA PTY LIMITED
FIRST CROSS RESPONDENT TO FIRST CROSS CLAIMBRITISH TELECOMMUNICATIONS PLC
SECOND CROSS RESPONDENT TO FIRST CROSS CLAIMBT AUSTRALASIA PTY LIMITED
CROSS CLAIMANT TO SECOND CROSS CLAIMAND:
TELSTRA CORPORATION LIMITED
CROSS RESPONDENT TO SECOND CROSS CLAIMBETWEEN: BRITISH TELECOMMUNICATIONS PLC
CROSS CLAIMANT TO THIRD CROSS CLAIMAND: TELSTRA CORPORATION LIMITED
CROSS RESPONDENT TO THIRD CROSS CLAIMBETWEEN: BRITISH TELECOMMUNICATIONS PLC
CROSS CLAIMANT TO FOURTH CROSS CLAIMAND: STATE OF NEW SOUTH WALES
CROSS RESPONDENT TO FOURTH CROSS CLAIMBETWEEN: STATE OF NEW SOUTH WALES
CROSS CLAIMANT TO FIFTH CROSS CLAIMAND: TELSTRA CORPORATION LIMITED
CROSS RESPONDENT TO FIFTH CROSS CLAIMBETWEEN: TELSTRA CORPORATION LIMITED
CROSS CLAIMANT TO SIXTH CROSS CLAIMAND: BT AUSTRALASIA PTY LIMITED
CROSS RESPONDENT TO SIXTH CROSS CLAIMBETWEEN: TELSTRA CORPORATION LIMITED
CROSS CLAIMANT TO SEVENTH CROSS CLAIMAND: BRITISH TELECOMMUNICATIONS PLC
CROSS RESPONDENT TO SEVENTH CROSS CLAIMBETWEEN: TELSTRA CORPORATION LIMITED
CROSS CLAIMANT TO EIGHTH CROSS CLAIMAND: STATE OF NEW SOUTH WALES
CROSS RESPONDENT TO EIGHTH CROSS CLAIMJUDGE: SACKVILLE J PLACE: SYDNEY DATE: 9 APRIL, 1998
JUDGMENT NO 9
THE COURT:
Orders that, notwithstanding any existing order relating to discovery, Telstra is required, until further order, to discover from back-up computer tapes only E-Mails and attachments for the persons identified in the letter dated 11 February 1998 from Middletons Moore & Bevins to Blake Dawson Waldron (the “February 1998 letter”).
Orders Telstra to give discovery of the E-Mails and attachments referred to in paragraph 1 on or before 16 June 1998.
Notes that paragraph 1 extends to E-Mails and attachments relevant to the issues identified in, or included within, Schedules One and Two to the May 1996 Orders.
Directs that in selecting back-up tapes for processing and review, Telstra should have regard, to the extent feasible, to the Group priorities referred to in the February 1998 letter, but should discover, in accordance with paragraph 5, E-Mails and attachments within paragraph 1 as soon as practicable after they have been identified, whether or not they relate to a person or Group of persons that led to the selection of the tape or tapes for processing and examinations.
Directs that E-Mails and attachments within paragraph 1 be discovered by fortnightly lists delivered to BT’s solicitors on a CD Rom.
Directs that Telstra shall file with the Court, at the end of each calendar month, commencing on 30 April 1998, a report, a copy of which must be served on BT’s solicitors, setting out the steps taken to comply with paragraph 1 and stating the process made towards completion of the requirements of paragraph 1.
Directs BTA and BT plc, on or before 15 May 1998, to file and serve a list of electronic documents or categories of electronic documents, other than those already discovered or within paragraph 1, that they contend Telstra should be required to discover. Any such list should include a brief statement of the reasons why each document or category of documents is said to be reasonably necessary to the preparation of the case for BTA or BT plc.
Orders that Telstra file and serve within 28 days an affidavit, sworn or affirmed by an officer of Telstra with knowledge of the facts or who has knowledge as a result of reasonable inquiries made by him or her of officers of Telstra (which inquiries and officers the affidavit shall describe and identify):
(a)stating what steps (if any) have been taken by Telstra to preserve discoverable (paper) documents in its possession custody and control and to prevent shredding or other destruction of such documents; and
(b)stating whether any such documents which were or might have been discoverable in these proceedings have been shredded or otherwise destroyed since 1 September 1995 and, if so, which documents or classes of documents (so far as they can be identified) have been shredded or destroyed.
“Reasonable inquiries” for the purposes of this paragraph means inquiries of those persons identified in the February 1998 letter who are currently employed by Telstra.
Orders that Telstra pay the costs of BTA and BT plc, on a party and party basis, of the motion filed on 25 September 1997, as subsequently amended, insofar as the motion seeks or encompasses the relief specified in pars 2, 3, 6 and 7 set out in the Judgment herein.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 572 OF 1995
BETWEEN: BT AUSTRALASIA PTY LTD
APPLICANTAND STATE OF NEW SOUTH WALES
FIRST RESPONDENTTELSTRA CORPORATION LIMITED
SECOND RESPONDENTBETWEEN:
AND:
BETWEEN:
STATE OF NEW SOUTH WALES
CROSS CLAIMANT TO FIRST CROSS CLAIMBT AUSTRALASIA PTY LIMITED
FIRST CROSS RESPONDENT TO FIRST CROSS CLAIMBRITISH TELECOMMUNICATIONS PLC
SECOND CROSS RESPONDENT TO FIRST CROSS CLAIMBT AUSTRALASIA PTY LIMITED
CROSS CLAIMANT TO SECOND CROSS CLAIMAND:
TELSTRA CORPORATION LIMITED
CROSS RESPONDENT TO SECOND CROSS CLAIMBETWEEN: BRITISH TELECOMMUNICATIONS PLC
CROSS CLAIMANT TO THIRD CROSS CLAIMAND: TELSTRA CORPORATION LIMITED
CROSS RESPONDENT TO THIRD CROSS CLAIMBETWEEN: BRITISH TELECOMMUNICATIONS PLC
CROSS CLAIMANT TO FOURTH CROSS CLAIMAND: STATE OF NEW SOUTH WALES
CROSS RESPONDENT TO FOURTH CROSS CLAIMBETWEEN: STATE OF NEW SOUTH WALES
CROSS CLAIMANT TO FIFTH CROSS CLAIMAND: TELSTRA CORPORATION LIMITED
CROSS RESPONDENT TO FIFTH CROSS CLAIMBETWEEN: TELSTRA CORPORATION LIMITED
CROSS CLAIMANT TO SIXTH CROSS CLAIMAND: BT AUSTRALASIA PTY LIMITED
CROSS RESPONDENT TO SIXTH CROSS CLAIMBETWEEN: TELSTRA CORPORATION LIMITED
CROSS CLAIMANT TO SEVENTH CROSS CLAIMAND: BRITISH TELECOMMUNICATIONS PLC
CROSS RESPONDENT TO SEVENTH CROSS CLAIMBETWEEN: TELSTRA CORPORATION LIMITED
CROSS CLAIMANT TO EIGHTH CROSS CLAIMAND: STATE OF NEW SOUTH WALES
CROSS RESPONDENT TO EIGHTH CROSS CLAIMJUDGE: SACKVILLE J PLACE: SYDNEY DATE: 9 APRIL, 1998
REASONS FOR JUDGMENT - NO 9
On 25 September 1997, BT Australasia Pty Ltd (“BTA”) and British Telecommunications plc (“BT plc”) (to which I refer collectively as “BT”) filed a motion seeking certain relief in relation to what was said to be deficiencies in discovery by Telstra Corporation Limited (“Telstra”). The motion was subsequently amended and a further amended notice of motion was filed on 19 March 1998.
The apparent delay in dealing with the motion is attributable in part to the need to address other interlocutory disputes between the parties and in part to the referral of certain disputes relating to discovery to a mediator, the Hon J Brownie QC. While the mediation resolved some issues, it did not resolve BT’s complaints against Telstra. At the risk of oversimplification in a case where little is simple, BT’s complaints agitated at the hearing on 27 and 30 March 1998 are twofold. First, BT say that Telstra has failed to comply with its discovery obligations in respect of electronic communications, such as e-mails and other “documents” stored in electronic form. Secondly, BT claim that Telstra has failed to take appropriate steps to prevent the destruction of discoverable documents, including documents stored in electronic form.
The orders sought in relation to those two issues, as reformulated by Mr Margo, who appeared with Mr Bartos and Mr Bell for BT, are as follows:
“Discovery of electronic documents
2. ORDER that:
2.1to the extent it has not already done so Telstra shall by or before 30 June 1998 discover electronic documents, including any or any backup tape, within:
(a)Order 2(a) made on 20 and 29 May 1996 in relation to Telstra’s market discovery;
(b)Order 2(b) made on 20 and 29 May 1996 in relation to Telstra’s market discovery;
(c)Order 2(c) made on 20 and 29 May 1996 in relation to Telstra’s market discovery;
(d)Order 3 made on 20 and 29 May 1996 in relation to Telstra’s non-market discovery;
(e)Order 4 made on 29 August 1996 in relation to Telstra’s market discovery;
(f)Order 6 made on 29 August 1996 in relation to Telstra’s market discovery.
2.2any located electronic documents and attachments shall be discovered by fortnightly lists and delivered to BT’s solicitors on a CD Rom;
2.3Telstra shall give monthly written reports to BT’s solicitors on the progress being made towards completion of compliance with this order.
E-mail etc of specific Telstra employees and consultants
3.ORDER, without limitation of any existing order for discovery by Telstra, that by or before 30 June 1998:
3.1Telstra shall discover in respect of the period from 16 November 1992 to 2 August 1995 electronic e-mail and any attachments thereto within any of the categories in Schedules 1 and 2 to the May 1996 Orders for the persons set out in the letter dated 11 February 1998 from Middletons Moore & Bevins to Blake Dawson Waldron, a copy of which is Schedule B to these orders.
3.2In selecting backup tapes for examination, Telstra shall have regard so far as possible to the Group priorities referred to in the said letter from Middletons Moore & Bevins but shall discover all e-mail and any attachments thereto on any tape as soon as possible after they have been located, whether or not they relate to a person or Group of persons which led to selection of that tape for examination.
3.3Any located e-mails and attachments shall be discovered by fortnightly lists and delivered to BT’s solicitors on a CD Rom.
3.4Telstra shall give monthly written reports to BT’s solicitors on the progress being made towards completion of compliance with this order.
...
Destruction of discoverable documents by Telstra
6.ORDER that:
6.1if Telstra has not already done so, it shall forthwith cause any of its officers and employees who may have relevant documents to be informed in writing that no documents which are relevant to these proceedings may be shredded or discarded and that no electronic documents which are relevant to these proceedings may be overwritten, deleted or erased;
6.2Telstra’s solicitors shall within 10 days advise the solicitors for the other parties in writing when and in what manner order 6.1 has been complied with or, if instructions the subject of that order have already been given, when and in what manner they were given.
7.ORDER that Telstra file and serve within 14 days an affidavit, sworn by an officer of Telstra with knowledge of the facts or who has knowledge as a result of reasonable inquiries made by him of officers of Telstra (which enquiries and officers the affidavit shall describe and identify):
7.1stating whether any documents which were or might have been discoverable by Telstra in these proceedings have been shredded since 1 September 1995 and, if so, what documents, by whom and when;
7.2stating whether any electronic documents which were or might have been discoverable by Telstra in these proceedings have been overwritten, deleted or erased since 1 September 1995 and, if so, what documents, in what circumstances, by whom and when.”
The May 1996 Orders
Paragraph 2 of the orders sought by BT refer to orders made on 20 and 29 May 1996. The orders made on that occasion comprise some thirty-four pages. However, in order to provide some background, it is convenient to set out some of the terms of those orders.
“That in the following orders and schedules:
‘market and competition issues’ means the issues raised by paragraphs 26(b) and 27 of the Amended Statement of Claim....
‘high level documents’ means reports, analyses, surveys, plans, business plans, studies, feasibility studies, strategy or policy documents, manuals, forecasts, assessments, registers, submissions, schedules or similar documents, including documents in electronic format, which aggregate or summarise information or data.
‘the period’ means from 1 April 1991 to date;
‘initial personnel’ means persons employed by Telstra at any time during the period in any of the following positions or in the previous position most nearly equivalent to that position:
(a)Chief Executive Officer;
(b)Group Managing Director;
(c)senior Executive reporting directly to any Group Managing Director;
(d)senior product manager;
(e)product portfolio manager;
(f)member of an Executive Pricing Committee;
(g)member of any Product Gate Committee or the Manager of the Pricing and Packaging Group;
(h)manager, acting manager or assistant to the manager in the Corporate Business Unit, the Corporate Government Group, the Business and Government Group or any predecessor, successor or equivalent of them.
(j)Account Director, Acting Account Director or Assistant to the Account Director in the New South Wales Government Account Team or any predecessor or equivalent thereof.
...
Discovery by Telstra in relation to the market and competition issues
2.That, subject and without prejudice to [BT’s] right to request or apply for further discovery by [Telstra] in any area, [Telstra] shall give discovery by verified list in relation to the market and competition issues as follows:
(a)High level documents which are or were during the period in the possession or custody of any of the initial personnel and which are within one or more of the following categories in Schedule One:
[A large number of categories in Schedule One are specified. They include documents relating to ‘demand side substitutability’, pricing by Telstra, Telstra’s market share and other topics relating to market issues].
(b)To the extent not covered by order 2(a) above, documents relating to any service or services:
(i)prepared for or used by the ‘Gating’ and ‘Pricing’ Committees of [Telstra] during the period;
(ii)...
(iii)which are or were in the custody or possession of Senior Product Managers during the period.
(c)To the extent not covered by any preceding order, high level documents:
(1)which are or were during the period in the possession or custody of initial personnel and which refer to [Telstra] being excluded from tendering on its own in response to the RFT or make representations in that regard;
(2)....
Provided that nothing in this order 2 is intended to or shall impose upon [Telstra] an obligation to discover documents which are not relevant to the market power or dominance of [Telstra] during any part of the period from 1 April 1991 to 1 August 1995 inclusive.
Discovery by Telstra in relation to issues other than the market and competition issues
3.That, subject and without prejudice to [BT’s] right to request or apply for further discovery by [Telstra] in any area, [Telstra] shall give discovery by verified list in relation to the issues other than the market and competition issues as set out in Schedule Two provided that nothing in this order is intended to or shall impose upon [Telstra] an obligation to give discovery that is any more extensive than would be required by an order for general discovery and this order is further subject to any written agreement between the parties limiting discovery.”
Schedule Two contains twenty-six paragraphs (most of which have a number of sub-paragraphs) specifying categories of documents said to be relevant to “issues other than market and competition issues”. It is enough for present purposes to extract par 1 of Schedule Two:
SCHEDULE TWO
1. For the period 16 November 1992 to 2 August 1995 (‘the Period’) -
1.1diary entries of the Telstra employees and consultants listed in Schedule 2A;
1.2E-Mail to and from the Telstra employees and consultants listed in Schedule 2A (including E-mail located only on computer server or hard disk);
1.3documents in personal files and personal notes or records (including meeting notes) of the Telstra employees and consultants listed in Schedule 2A;
1.4internal memoranda, notes, briefing papers, strategy reports, marketing reports, notes of meetings, file notes, notes of telephone conversations, minutes of meeting, spread sheets and summaries;
referring to or recording:
(A)the potential or actual telecommunications services needs or requirements of any New South Wales Government Entity...or New South Wales Government Agency...;
(B)the Telephone and Data Network Agreement (‘TDN Agreement’)...including the rights and obligations of BTA and/or the State of New South Wales thereunder;
(C)potential business opportunities or business prospects available or potentially available to Telstra in relation to any NSWG Entity or NSWG Agency;
(D)meetings with and communications between any Telstra officer, consultant or employee (including those persons referred to in Schedule 2A) and any employee or officer of any NSWG Entity or NSWG Agency.”
Schedule 2A to Schedule Two listed the names of nineteen senior employees and consultants of Telstra.
The May 1996 Orders required Telstra to use its best endeavours to complete discovery by 31 August 1996. The significance of this provision is not the nominated deadline, which has long since receded into the mists of futile litigious aspirations. It is that Telstra was bound to use its best endeavours to complete the discovery process swiftly.
The August 1996 Orders
The August 1996 Orders clarified the scope of a category within Schedule One to the May 1996 Orders. It is not necessary to set out the terms of the August 1996 Orders.
The Letter of 11 February 1998
Paragraph 3.1 of the orders sought by BT refer to a letter dated 11 February 1998, from BT’s solicitors to Telstra’s solicitors. The letter identified sixty-nine employees, former employees and consultants of Telstra in respect of which BT requested Telstra to provide discovery of E-Mails. This letter therefore expanded the original list of persons contained in Schedule 2A to Schedule Two to the May 1996 Orders by fifty. The additional persons are said to have been identified after inspection of Telstra’s (then) recently discovered documents.
The letter also divided the sixty-nine named persons into four categories. This decision reflected BT’s priorities, in the sense that those in Category A were said to be the persons whose E-Mails should first be discovered and made available for inspection. I refer to the list of priorities later when I consider the orders that should be made on the current application.
The Evidence
Mr Margo, on behalf of BT, read, in whole or in part, seven affidavits filed in support of the motion. He tendered six volumes of material (some of which reproduced portions of the affidavits), together with bulky exhibits to the affidavits.
The documents relied on by Telstra included a Telstra Discovery Statement dated 24 March 1998 (“March 1998 TDS”). This document explains the steps taken by Telstra in relation to a discovery. The March 1998 TDS records that Telstra has filed twenty-two lists of documents containing over 221,600 documents. These lists have been compiled as the result of inquiries made of over 400 Telstra employees or former employees. Telstra regards its discovery as having been substantially completed by October 1997, save for E-Mails and electronic documents. The March 1998 TDS records that approximately 12,100 E-Mails have been discovered thus far, of which about 10,800 have been in hard copy form and 1,150 in electronic form.
Mr Street SC, who appeared with Mr Lockhart for Telstra, also read two affidavits. These relate to review of data contained in “back-up tapes”, some of which contain in electronic form material within the scope of Telstra’s discovery obligations. Both deponents, Mr Wilson (a senior associate employed by Telstra’s solicitors) and Mr Kennedy (the Manager of Telstra’s Litigation Support Group) were cross-examined.
The evidence from Mr Wilson and Mr Kennedy encouraged BT to read an affidavit by Mr Wood, an information technology manager. Mr Wood’s evidence supported an alternative proposal by BT for dealing with Telstra’s discovery obligations. Mr Wood too, was cross-examined.
This is merely one of many interlocutory applications to which these proceedings have given rise. On this single application, I have been presented with well over two thousand pages of material, together with oral evidence and submissions extending over two days. The matter has been further complicated by BT putting forward in the course of the hearing an alternative proposal, whereby they would (at Telstra’s cost) search the back-up tapes for discoverable material not yet made available by Telstra. Needless to say, interlocutory disputation on this scale not only places substantial strains on the limited resources of the Court, but diverts the parties from the task of preparing the case for final hearing. Disputation on this scale is also enormously costly, but this does not appear to have daunted the parties’ enthusiasm for engaging in hard-fought interlocutory contests.
Back-Up Tapes
The March 1998 TDS explained the position concerning back-up tapes. This explanation is generally consistent with the affidavit and oral evidence given by Mr Wilson, Mr Kennedy and Mr Wood. The following account is taken in part from the March 1998 TDS, but is supplemented by other evidence, particularly that of Mr Kennedy.
Groups of users of personal computers (“PC’s”) can be connected electronically via a server to enable them to share electronic files, including electronic documents and E-mail. A server is a data storage facility that retains documents that can be accessed by anyone using a PC attached to the server. (Electronic documents can also be stored in the hard drive of a PC or can be downloaded to a disk.) A server allows connected PC’s to share disk storage, space, data, computer applications, software and facilities for printing. It can operate as a fileserver (for sharing documents and data between PC’s), a mailserver (for storing and forwarding electronic mail), or both.
Information on servers is often backed up on magnetic tapes at intervals to minimise or avoid the loss of data should a server “crash”. A back-up tape is essentially a snapshot of all or part of the contents of the server at the time of the back-up session. If the server crashes, the back-up tape can be used to reconstitute the date on the server.
Telstra has gradually implemented a practice of making a copy of all changed files held on the hard disk of a server on a magnetic tape each night. Generally speaking, on the same night the following week, that back-up tape is re-used to record a copy of the changed files on the server’s hard disk as it exists on that night. This has the effect of overwriting (or removing) the information stored on the tape from the previous back-up tape.
A full back-up tape is normally made once a week. That records all information on the server at that moment, as opposed to recording only those files that have changed. Monthly back-up tapes are also made on the last day of each month. Like the daily tapes, the full weekly and monthly tapes are generally re-used and overwritten in the ordinary course of business.
The purpose of the tapes is disaster recovery, not archival storage. Back-up tapes are designed to be recorded and replayed on the same unit. They are therefore not easily accessed for the purpose of recalling specific sets of sub-data.
According to the March 1998 TDS (but not independently supported by evidence), in February 1997 Telstra instigated a search for back-up tapes containing data for the relevant period. By August 1997, this search had yielded 73 tapes, the existence of which was first referred to in Telstra’s Discovery Statement of 29 August 1997 (the “August 1997 TDS”). These tapes apparently relate to servers which serviced floors on which some of the persons nominated by BT were located.
Since that time, Telstra has conducted further inquiries, based on a list of 136 persons (sixty-nine of whom have been nominated by BT) most likely to have recorded or transmitted relevant electronic information. For this purpose it collected back-up tapes relating to some ninety-five servers. In addition, from October 1997, new monthly back-up tapes for each of the identified servers have been retained. However, the new tapes are unlikely to contain information relevant to the proceedings, since they post-date the significant events by a considerable period.
As the result of Telstra’s inquiries, about 970 tapes have been collected. It is said that each of these might contain data relating to one or more of the 136 persons identified as possibly relevant to the proceedings. However, Telstra acknowledges that hundreds of the tapes were created relatively recently and thus are either unlikely to contain information from the relevant period not contained on other tapes or are unlikely to contain information relating to the nominated persons. According to Mr Wilson, about 650 of the tapes were recorded some time after August 1996, suggesting that they are less likely to contain any information relevant to the issues in the case.
Most of the 970 tapes are DAT tapes, which have a maximum capacity of eight gigabytes. Some of the tapes, however, are the new DLT tapes, with a maximum capacity of forty gigabytes. I was informed from the bar table that one gigabyte is the equivalent of about 750,000 pages of information.
Telstra’s Litigation Support Group has five dedicated servers, located in Melbourne, restoring the tapes to enable the electronically recorded data to be reviewed. The process of restoration includes what Mr Kennedy described as a “software exercise” and takes from one to three hours per tape. Telstra has a team of four people devoting most of their time to the process of restoration of the tapes.
Once the tapes are restored, they are copied and made available on reviewing servers in a setting that enables the directories for those tapes to be accessed. It is then possible to identify the files backed-up on the tapes. The next step that has been taken by Telstra is to identify whether there is data in the mail directories on the tapes. If so, a search is undertaken by reference to the sixty-nine names provided by BT.
As from late February 1998, Telstra has had a team engaged in a “page by page” review of E-Mails located by reference to the sixty-nine names. Initially the review team comprised four articled clerks and three law graduates. The team was increased to thirteen on 27 March 1998. According to Mr Kennedy, they use twelve reviewing screens. Up to date, Telstra has not attempted to locate and review electronic data other than E-Mails to or from the sixty-nine identified persons. Nor has it ascertained whether a search engine can be used to search selectively the data on the tapes.
Because the physical review of E-Mails is a time-consuming process, an attempt has been made to avoid duplication on different tapes. This involves merging the E-Mail information from a number of tapes, thereby eliminating duplication prior to the review. According to Mr Kennedy, this process takes about two to three hours per tape, but has the advantage of speeding up the review process.
Mr Kennedy’s evidence was that the review team (presumably on the assumption that the team comprises seven members) can review about 300 E-Mails per day. Once discoverable E-Mails are identified, they are placed in a CD, in a format readily accessible by BT. Mr Kennedy estimated that it will take several months to review all E-Mails on the tapes.
It should be noted that the evidence of Mr Wilson was that the review teams had reviewed about 24,000 E-Mails over a period of three weeks, of which about 1,000 were determined to be potentially relevant to the case. This suggests a rather greater processing capacity than the 300 per day suggested by Mr Kennedy. Since Mr Kennedy’s estimate was based on Mr Wilson’s advice, I prefer Mr Wilson’s direct evidence which suggests that a seven person team has reviewed daily about 1,500 E-Mails.
Factual Background
Given the volume of material with which I have been presented, it is neither practicable nor sensible to attempt to recount the history of the discovery process in these proceedings. I have had occasion to deal with discovery disputes in earlier judgments, particularly Judgment No 4 (29 August 1997) in which I criticised Telstra’s unilateral decision to change its approach to market discovery as less than satisfactory. I shall limit this account to what seem to me to be the major events or issues.
The starting point is a concession by Mr Street, on behalf of Telstra, that data recorded in electronic form by Telstra is and always has been discoverable, provided it comes within the scope of the discovery orders made from time to time in the proceedings. Mr Street also confirmed the statement in the March 1998 TDS that Telstra had substantially complied with its discovery by October 1997, save for data recorded in electronic form in the “back-up tapes”. It is the information recorded on these tapes that is at the heart of the current dispute between BT and Telstra.
Although no issue arises on the present motion in relation to BT’s discovery, the evidence shows that BT accepted at an early stage that it was obliged to locate relevant electronic material and to commit technical resources to enable such material to be reviewed and presented in a secure form. By early 1996, BT had identified a large quantity of electronic material as potentially discoverable. This material was assembled on a dedicated computer system, a process which involved the restoration of archived or back-up material. The review of electronic material was carried out over a period of about eight months, with most of the review being undertaken by a team of three para-legals under the supervision of a solicitor. The result was that BT’s discovery lists included electronic material, with privileged material identified in the manner adopted for hard copy documents.
The parties commenced corresponding on the topic of Telstra’s discovery of electronic material on 4 February 1997. On that date BT’s solicitors noted in a letter that electronic files containing E-Mail messages had been discovered for only two of Telstra’s employees (neither of whom was included in Schedule 2A to the May 1996 Orders). The letter identified another 23 persons whose E-Mail records were relevant to the proceedings (some of whom had been included in Schedule 2A). As I have noted, Telstra claims, in the March 1998 TDS, that it had begun to collect the back-up tapes in February 1997.
On 17 February 1997, Telstra’s solicitors replied to BT’s letter, stating that
“Telstra has discovered a substantial number of emails in electronic or other files sourced from a large number of individuals.”
This prompted a response from BT’s solicitors inquiring whether Telstra held E-Mail files for its senior employees, some of whom were identified in the correspondence. On 11 March 1997, Telstra’s solicitors stated that inquiries of Telstra personnel were continuing in an attempt to identify hard copy and electronic records, including E-Mail. In that letter, Telstra’s solicitors advised that they could not say when Telstra’s discovery would be complete.
On 20 March 1997, BT’s solicitors complained in strong terms about Telstra’s failure, in the seventeen months since the commencement of proceedings, to discover electronic E-Mail records for its employees, other than the two previously identified. The letter pointed out that it was likely that E-Mails in electronic form only would be relevant to issues in the case. It concluded by requesting advice as to when further discovery of E-Mail electronic records would be made. The complaint elicited this response from Telstra, in a letter dated 24 March 1997:
“As we have said Telstra continues to make enquiries to identify relevant records. As you would appreciate relevant personnel of whom enquiries are necessary have either moved into new positions within Telstra or left the organisation. As a result enquiries cannot always be completed quickly. Subject to what we have said, it is presently anticipated that Telstra’s discovery will be completed at the end of May after further lists of documents are filed and served.”
It should be noted that this statement was made in the knowledge that BT had been complaining for some time about the absence of E-Mail records in electronic form. It should also be noted that the letter of 24 March 1997 makes no mention of the existence of back-up tapes, despite the fact that (according to the March 1998 TDS) Telstra had been searching for such tapes since the previous month.
After further complaints from BT, Telstra’s solicitors acknowledged, on 22 April 1997, that the assertions made in their letter of 17 February 1997 were wrong. Telstra now accepted that it had discovered E-Mail in electronic form for only two of its employees, neither of whom was included in Schedule 2A to the May 1996 Orders. The letter apologised for the error, but provided no explanation as to how it came about. Telstra has still not provided any explanation for this apparently egregious mistake.
Telstra’s solicitors’ letter of 22 April 1997 stated that Telstra had discovered “in excess of 5,100 emails in hard copy and/or electronic form”. Some of these were E-Mails recorded only in electronic form, for example those located on floppy disks or the hard drives of servers. However, having regard to the absence of discovery of E-Mail in electronic form for the persons identified in Schedule 2A to the May 1996 Orders, I infer that the E-Mails discovered by Telstra to this point were predominantly hard copy versions or electronic counterparts of hard copy versions. Telstra adduced no evidence to suggest that this inference is not well founded and, indeed, the March 1998 TDS supports the inference.
The letter also contained the following passage:
“In your correspondence you have been concerned only with email in electronic form and not emails in hard copy form. It would seem you have done so on the basis of assertions made in your letters that
(a)Generally only a small percentage of emails are ever printed and filed in hard copy form;
(b)There is a large quantity of emails which exist solely in electronic form;
(c)The electronic files (containing emails) are stored on one or more file servers which are the only relevant source of such files; and
(d)The authors or recipients of emails are not relevant source of electronic emails.
We are not aware of the information upon which you rely in making these assertions and more particularly in making these assertions in relation to records of Telstra. In those circumstances, we will continue to make enquiries to identify relevant records held by Telstra and to enable it to complete its discovery, as indicated in both correspondence and at the last directions hearing.”
It is difficult to understand why Telstra would dispute the proposition that a large quantity of E-Mails exist solely in electronic form, particularly having regard to the subsequent experiences in reviewing material from the back-up tapes. It is even more difficult to understand why reference was still not made to the back-up tapes, which Telstra was in the process of collecting.
On 11 June 1997, Telstra’s counsel informed me at a directions hearing that reasonable attempts were being made to produce E-Mails in “computer form”. This proposition was restated in a letter dated 16 July 1997 from Telstra’s solicitors. The letter pointed out that some records would have been destroyed in the ordinary course of Telstra’s business and thus Telstra would not be able to produce all relevant E-Mails in electronic form once stored in personal computers. The letter also recorded that Telstra had discovered 6,000 E-Mails to that point, most of which were in hard copy form. The letter concluded as follows:
“Enquiries of Telstra personnel (including the other personnel you nominated) have not revealed relevant email in electronic form other than those which have been discovered. We are continuing to review potentially relevant records which have been collected. Should relevant email in electronic form be identified during tasks to complete Telstra’s discovery they will be produced together with all other records found to be relevant.”
On 28 August 1997, Telstra prepared the first TDS (the “August 1997 TDS”). The statement was prepared in order to advise the Court as to the steps taken by Telstra to ensure timely compliance with the Court’s orders. In relation to non-market discovery, the August 1997 TDS said this:
“3.In relation to schedule 2 to the 29 May 1996 orders Telstra are not aware of any substantial amount of documents that remain to be discovered and produced in relation to the issues in these proceedings other than certain e-mail back up tapes as to which see annexure “E1”.
4.The parties have foreshadowed recent correspondence that the parties’ discovery will be reviewed for the purpose of discussing the adequacy of the parties’ discovery.”
Annexure E1 is headed “Electronic Records Discovery” and is as follows:
“1.To date, Telstra has discovered, and the other parties have had inspection of, more than 6,000 emails up to and including its 13th list. Most of the emails are in hard copy form.
2.In addition, Telstra has located the 73 magnetic tapes listed in annexure “E2” which may contain data stored at some time during the Period on computer fileservers onto which one or more of the persons listed in Schedule 2A of the orders of Sackville J made and amended on 20 and 29 May 1996 may have stored data, including emails.
3.These tapes are ‘backup’ tapes which, in the normal course of Telstra’s business, are produced daily for each fileserver in the network solely for the purpose of recovering from a catastrophic failure in which information on the fileserver becomes corrupted. In the normal course, these tapes are reused on a cyclical weekly or monthly basis for each server and discarded when no longer technically useable. The tapes located and listed in annexure ‘E2’ are all those which have been identified to date as having been retained.
4.The backup tapes contain a snapshot of all the information stored on the fileserver at the instant in time when the record is made. The amount of information stored on the tapes is therefore vast. By way of example, the task of producing a list of only the names (as opposed to the content) of the documents stored on a tape takes approximately half a day. The list of such names for the first tape inspected by Telstra would exceed 1,800 pages if printed.
5.Although some of the names of the documents tend to indicate that they may belong to a person listed in Schedule 2A, the vast majority of the document names bear no relation to the person who created the document. It is therefore generally not possible to determine the relevance or otherwise of a particular document copied on the tape without restoring the data to a fileserver or fileservers dedicated to the task and opening and then reviewing each document believed to be relevant.
6.As the tape contains all data held on the fileserver at the instant the tape was made, the majority of the data will be wholly irrelevant and some of the data may be legally privileged.
7.Telstra will formally list these back up tapes within seven days. Inspection can be made available immediately thereafter subject to two matters. The first matter is technology, whether or not Telstra has a legal obligation to do so, if requested Telstra will provide reasonable co-operation to attempt to restore the tapes to a fileserver so they can be read. Second, Telstra is entitled to protect its legally privileged material either by agreement from BTA that Telstra has three weeks from the time BTA seeks a copy of any material from a tape to assert any privilege claim or inspection of tapes will be deferred until Telstra has reviewed the entire tape for privileged material (which task will take an unknown time).
This document is the first mention in the proceedings that Telstra had discovered back-up tapes which might contain discoverable material in electronic form.
BT responded to the August 1997 TDS on 1 September 1997. The response included the following:
“Telstra’s ‘Electronic Records Discovery’
24.The TDS reveals, for the first time, that the work required to complete Telstra’s discovery of e-mail, which it was ordered to discover in May 1996, may exceed in time and resources the work required to process the 89,000 non-market documents discovered by Telstra on 31 July 1997. The TDS takes no account of the requirements for Telstra to do this work. Telstra instead proposes that BT should do it.
25.Annexures E1 and E2 to the TDS deal only with e-mail. Given what is there revealed about Telstra’s inadequate discovery of e-mail, BT has no confidence that Telstra has met its obligations under the current orders to discover other electronic records of information.”
On 4 September 1997, at a directions hearing, there was some discussion about the August 1997 TDS. Telstra’s counsel indicated to the Court that Telstra expected to complete its discovery, including electronic material, by the end of October 1997.
Discussions then took place between the parties at a meeting held on 9 September 1997. Telstra’s solicitors wrote to BT’s solicitors the following day setting out “action items” arising from the meeting
“1.BT and Telstra’s technical experts will seek to develop a method of accessing the 73 backup tapes. This will involve locating the tapes in Sydney and performing a technical assessment of the best way to access relevant information.
2.Your firm will provide us with a list of people in respect of whom it requires electronic records including e-mail.
3.Telstra will proceed to discover electronic records for the 26 nominated personnel previously identified.
4.Telstra will continue to seek to identify any additional backup tapes for the 26 nominated personnel.”
By letter dated 12 September 1997, BT agreed to the suggestion that both should explore ways of accessing relevant information on the 73 tapes. The letter nominated tapes that should be given priority and to which BT should be given access in their unprocessed form. BT also agreed that its analysis of the tapes should not prejudice any claim by Telstra to privilege and that BT would keep the contents of the tapes confidential to its legal representatives and computer experts. The letter stated that, by agreeing to the process, they should not be deemed to have assumed responsibility for extracting discoverable material from the tapes.
In the letter, BT noted that all current discovery orders required discovery of electronic documents and that a request had already been made for further information on this score. BT also complained about the re-use of back-up tapes since 1 September 1995, when discovery orders were first made.
The parties were in dispute as to precisely what was agreed in September 1997. I do not think that there is much to be gained by attempting to resolve all aspects of this dispute. The following emerges from the evidence:
Issues of confidentiality were not resolved until 28 November 1997. At that point the first seven tapes were delivered to BT.
Telstra supplied to BT, in stages after 28 November 1997, most if not all the 73 tapes that had been identified in September 1997. Despite the expenditure of “many tens of thousands of dollars” BT were unable to access and read the tapes.
During this period BT requested Telstra in writing to advise what steps it had taken to locate E-Mails of the persons whom BT by that stage had nominated and complained about lack of progress.
On 11 February 1998, in what I have described as the February 1998 letter, BT wrote to Telstra accepting that there had been little return from the work put in by their experts. BT maintained the position that Telstra was obliged to take the necessary steps to complete discovery. The letter nominated the sixty-nine Telstra employees or consultants in respect of whom BT expected to receive E-Mails.
During the period September 1997 to 11 February 1998 Telstra located many hundreds more tapes. However, it did not make systematic attempts to restore the tapes in order to enable the review process to begin. (Mr Wilson, in his affidavit of 27 March 1998, says that by the date of his affidavit only twenty tapes had been restored.) Accordingly, no review of electronic data on the tapes took place during this period.
Telstra’s Non-Compliance with Discovery Obligations to Discover Electronic Material
As I have already noted, Mr Street conceded on behalf of Telstra that Telstra was obliged to discover data or information stored or recorded by electronic means. That concession was correct, having regard to the terms of the May 1996 Orders. The orders specifically embraced documents in electronic form: see, for example, the definition of “high level documents” and the express inclusion of E-Mails in par 1.2 of the Schedule Two. In any event, the Federal Court Rules (“FCR”) define the word “document” to include any “material data or information stored by mechanical or electronic means”: FCR, O 1, r 4. The word “document” in an order for discovery made by the Court would ordinarily be read in accordance with the definition in the FCR. Mr Street did not dispute that proposition.
As I have also pointed out, the May 1996 Orders also required Telstra to use its best endeavours to complete discovery by 31 August 1996. Even after that deadline passed, in my view the orders obliged Telstra to use its best endeavours to ensure that discovery was complete as soon as reasonably possible. It was not for Telstra to choose which of its discovery obligations to comply with. Nor was it for Telstra to decide that it would postpone performance of its obligations to a time of its own choosing. Mr Street did not contend otherwise.
In my opinion, Telstra has failed to comply fully with its discovery obligations concerning electronic data or information in a number of respects.
First, until at least February 1997, Telstra neither disclosed the existence of back-up tapes, nor took any steps to restore those tapes with a view to ascertaining whether and how discoverable electronic material could be identified and presented in usable form. I accept and appreciate that the purpose of making and retaining the back-up was essentially disaster recovery, rather than archival. Nonetheless, as subsequent events have demonstrated, it is feasible, albeit difficult and expensive, for the tapes to be restored and a review process set in place to identify discoverable material. Moreover, as Mr Kennedy acknowledged in his evidence, the system of back-up tapes adopted by Telstra was standard in the industry.
Mr Street stressed the importance of not simply being wise in retrospect. He pointed out that, as Mr Kennedy had noted in his evidence, Telstra had not previously been required to give discovery of electronically stored material via back-up tapes. However, no responsible officer of Telstra gave evidence that Telstra could not have been expected to appreciate the significance of the back-up tapes as a likely source of discoverable material, not otherwise available, in these proceedings. Nor was any explanation proffered to account for what appears to have been a very serious oversight.
It is true that Mr Kennedy expressed some surprise in his evidence that the practice of automatic over-writing had not prevented Telstra from locating tapes going back to 1995 and earlier. However, Telstra did not adduce evidence to suggest that the reason that it had not endeavoured to locate back-up tapes before February 1997 was because it erroneously thought that any surviving tapes did not contain any relevant electronic data. The fact is that the tapes do contain much material that is relevant to the issues in the proceedings, even though it is technically difficult to retrieve and the task of review is time consuming.
Telstra is, obviously enough, an experienced litigant. Equally obviously, it is a technologically sophisticated organisation, although I do not think that technological sophistication is a prerequisite to a litigant or its advisers making inquiries to ascertain whether discoverable electronic communications or documents have been recorded and retained in a retrievable form. In this case it must be remembered that the May 1996 Orders specifically required Telstra to discover E-Mail to and from the nineteen employees and consultants listed in Schedule 2A.
Mr Street pointed out that BT had expanded the nominated class, most recently to include the sixty-nine persons listed in BT’s letter of 11 February 1998. But the expansion of the class cannot explain Telstra’s lack of activity in relation to the back-up tapes prior to February 1997. In April 1997 Telstra belatedly conceded that by that stage it had provided E-Mails only in respect of two Telstra employees. This is hardly a case in which consideration of the back-up tapes could be said to have been unnecessary because Telstra had available reliable and efficacious alternative techniques for locating electronic material. The fact that Telstra took over two months to make the concession about discovery of E-Mails shows that its discovery of electronic information was, at best, poorly organised.
Secondly, Telstra did not inform either BT or the Court until late August 1997 that in February 1997 it had begun to search for back-up tapes containing discoverable electronic material. This omission is very difficult to understand, given that during this period BT made repeated inquiries about discovery of electronic material, particularly E-Mails. Moreover, from February to October 1997, Telstra took no steps to prevent overwriting of back-up tapes, notwithstanding that by this time it obviously appreciated the significance of the back-up tapes.
I have referred to February 1997 as being the time at which Telstra instigated a search for back-up tapes. This claim is made in the March 1998 TDS, but is not supported by evidence from any officer of Telstra. Be that as it may, so far as BT and the Court are concerned, the first reference to Telstra’s search for back-up tapes was made in the August 1997 TDS. Thus, on Telstra’s own account, it waited six months after instigating the search for back-up tapes to notify BT or the Court that it was searching for (and had located) a potentially important source of discoverable material.
The March 1998 TDS records that, as from October 1997, new monthly back-up tapes for ninety-five targeted servers were retained by Telstra and not reused. I infer, therefore, that no such steps were taken during the preceding eight months, when Telstra was well aware that back-up tapes existed which contained, or were very likely to contain, discoverable material. Having regard to the purpose for which back-up tapes were maintained, the likelihood is that relatively little pertinent information was lost by overwriting during 1997, since the relevant material would have been created before 1995. Nonetheless, it is also difficult to understand why it took until October 1997 for Telstra to decide not to reuse tapes from the targeted servers. Indeed, the action in October 1997 seems to have been prompted by a complaint made on behalf of BT on 12 September 1997 concerning the reuse of back-up tapes.
During this period much correspondence passed between the parties. I regard some of Telstra’s responses during this period as unhelpful and, on occasions, misleading. For example the letter of 24 March 1997 was sent at a time when Telstra knew that BT were complaining about the lack of discovery of electronic material, and Telstra itself had commenced the process of compiling back-up tapes. Yet the letter asserted that, subject to continuing enquiries, Telstra’s discovery would be completed by the end of May. A reader of the letter might be forgiven for concluding that the inquiries being made related to making contact with relevant personnel who had left Telstra or had moved to new positions. There was no indication that the inquiries included collecting the back-up tapes, which Telstra must have known were likely to contain material information and access to which presented difficult technical and logistical problems. The letter was neither full nor entirely accurate.
Thirdly, during the period September 1997 to early February 1998, Telstra did not make systematic attempts to restore the back-up tapes that had been located. I appreciate that there were technical difficulties in the process of restoration and that BT had agreed to assist in resolving the difficulties. But BT made it clear that they were not assuming responsibility for extracting discoverable material from the tapes. In the absence of evidence from a responsible officer from Telstra explaining why no further steps were taken during this period, the inference to be drawn is that Telstra failed to make reasonable progress in restoring the tapes during that five month period. While this failure is not as significant as the first two matters to which I have referred, I consider that the absence of reasonable progress during the five month period does not reflect well on Telstra’s determination to comply with its discovery obligations in a timely fashion.
Mr Street submitted that blame should not be sheeted home to Telstra in respect of the three matters I have identified. He said that BT had not drawn attention to problems with discovery of electronic material before February 1997 and even then complaints were directed to inadequate discovery of E-Mails. Moreover, BT had taken upon themselves the task of resolving the difficulties with the back-up tapes during the period November 1997 to February 1998 and Telstra had co-operated in that task.
Having regard to the terms of the May 1996 Orders and to Mr Street’s concession about their scope, I do not think that it is an answer for Telstra to say that BT should have complained earlier or raised a broader range of issues. Telstra was aware of its discovery obligations. In any event, BT complained repeatedly about Telstra’s failure to discover E-Mails recorded in electronic form and sometimes received inaccurate or unhelpful responses. For reasons I have explained, I do not think that BT’s offer of assistance in September 1997 relieved Telstra from the obligation to make continuing efforts to restore the tapes and to get the process of review of accessible electronic material under way.
What Should be Done?
BT seek orders that Telstra discover electronic documents, to the extent it has not already done so, within a number of categories identified by reference principally to the May 1996 Orders. The categories identified relate both to Telstra’s discovery on market and competition issues and to its discovery on non-market issues, as limited by Schedule Two to the orders. In addition, and without limiting any other order for discovery, BT seeks orders requiring Telstra to discover, in respect of the period 16 November 1992 to 2 August 1995, electronic E-Mail and any attachments thereto within any of the categories in Schedules One and Two to the May 1996 Orders for the sixty-nine persons set out in BT’s letter of 11 February 1998. The terms of the second order appear to reflect the fact that Telstra has been searching electronic material derived from the back-up tapes by reference to the sixty-nine named persons.
As I understand Mr Street’s submissions, Telstra accepts that it should discover E-Mails of the sixty-nine identified persons, but only in respect of the non-market issues identified in Schedule Two to the May 1996 Orders. I further understood Mr Street to say that, although Telstra would prefer not to have to discover the attachments to any E-Mails from the sixty-nine identified persons, it did not strongly resist an order to that effect. The evidence suggests that it is a more difficult task to gain access to attachments to E-Mails as distinct from the E-Mails themselves, because it is necessary to open up the specific “document” and review it separately. While this takes time, the task is feasible.
Telstra resisted further orders on two grounds. First, it submitted that it had complied with its discovery obligations. I have already rejected that argument.
Telstra’s second argument is that the burden of additional discovery is too great and the benefit to BT and for the conduct of the litigation too uncertain to warrant requiring Telstra to trawl through the vast amount of data recorded electronically on the back-up tapes in order to extract the full range of discoverable documents sought by BT. Mr Street points out that Telstra has already discovered over 220,000 documents. BT have put on some forty statements, including a report from experts that addresses the market issues. Accordingly, he submits that there is not enough to justify the allocation of resources required to search for documents, particularly those related to market issues from the hundreds of potentially relevant tapes, each containing vast quantities of information.
Mr Street relied on the evidence of Mr Wilson and Mr Kennedy. Mr Wilson said that the review process thus far has been confined to determining whether the back-up tapes contain discoverable E-Mails or attachments relating to the sixty-nine identified persons. (There seems to be disagreement whether the number of persons identified is sixty-eight or sixty-nine, but nothing turns on this.) The tapes had not been reviewed to determine whether they contain other records, such as word-processing documents, spreadsheets and presentations. He thought that, based on the work to date, it would take “some months” before the review of E-Mail on all tapes could be completed. However, Mr Wilson, who is a solicitor, was not himself familiar with the technical issues involved in restoring and reviewing the back-up tapes. Nor did he know anything of the legal issues in the case.
Mr Kennedy, whose expertise includes computer technology, said that, because of the large number of as yet unscanned tapes, he could not give an accurate analysis of the time that will be involved in continuing the present form of review for E-Mails and attachments. He thought, in general terms, that it would take “some months”. He pointed out that there are technical difficulties in co-ordinating the restoration and review of tapes. However, he acknowledged that no specific analysis had been undertaken as to the period required to review information other than E-Mails and attachments.
In my view, it is clear that Telstra should proceed, as rapidly as is feasible, to review E-Mails and attachments of the sixty-nine identified persons derived from the back-up tapes. I see no reason, having regard to Telstra’s failure to comply with its discovery obligations, why the review process should be confined to the issues identified in Schedule Two to the May 1996 Orders. In other words, the review of E-Mails and attachments should ascertain whether any of them are discoverable under the May 1996 Orders, insofar as they relate to the market and competition issues. In my opinion, a review of the E-Mails and attachments for this wider purpose is feasible. It is essentially a matter of the review team being given instructions to identify a wider class of documents.
I appreciate that the volume of work will be greater. However, the review team was expanded from seven to thirteen on the day of the hearing. It is a reasonable expectation that the expanded team will make swifter progress in the task of review than has previously been experienced, particularly as its members become more familiar with the duties they have to perform. Moreover, Telstra did not suggest that it was impracticable to expand the team further to process the information more rapidly. I also think that the task will be assisted by sustained efforts on the part of Telstra to identify and process the tapes most likely to contain relevant information. The evidence, although incomplete, left me with the clear impression that a substantial majority of the 970 tapes found by Telstra contain little or no information material to the issues in the present case.
Telstra should be required to discover all E-Mails and attachments for the sixty-nine identified persons by 16 June 1998. Telstra should be required to make discovery of these electronic documents by fortnightly lists delivered to BT’s solicitors on a CD Rom. I think it appropriate, having regard to Telstra’s failure to comply with its obligations, to provide that, in selecting back-up tapes for examination, Telstra should have regard to the priorities specified in BT’s letters of 11 February 1998. Telstra should file a report at the conclusion of each calendar month, commencing on 30 April 1998, reporting on progress in complying with these orders.
There is little doubt that some of the back-up tapes containing data from the relevant periods record information, other than E-Mails and attachments, material to the market and non-market issues. I am unable to say whether any of this information is likely to be important to the litigation, in the sense of adding anything significant to material already discovered. Mr Margo relied on some general observations by the experts whose report on market issues has already been filed. But I do not think those observations establish that the information is likely to be important on market questions, although the possibility cannot be excluded.
On the present state of the evidence, I simply cannot say how long it would take Telstra to locate and identify electronic documents other than the E-Mails and attachments to which I have already referred. Indeed, I am uncertain whether it will prove technically feasible to locate and identify all such documents.
In my view, the appropriate course is to adopt a selective approach to further discovery by Telstra. BT should have reserved to it the right to nominate either specific electronic documents or a limited number of narrowly defined categories of such documents, not within the class already identified by me, that they claim should be discovered by Telstra. Any list prepared by BT should be accompanied by a short statement, in respect of each document or category of document, explaining why BT consider that discovery of that category of documents is reasonably required for preparation of its case.
I am conscious, having regard to the history of this case, that a reservation of this kind may be taken as an invitation to produce a list of unmanageable proportions or one which will give rise to yet further prolonged disputation. My intention is that BT’s list should be confined to relatively few documents or categories of documents for which there is a demonstrated need. If the list goes beyond what I have in mind, the consequence may be that no further discovery orders will be made against Telstra. I most emphatically do not have in mind any attempt to relitigate the issues addressed in this judgment.
In my opinion, the preparation of a list by BT should be followed by a conference between technical experts appointed by each party. The aim of this conference should be a joint report on
whether and how the requested information can be located and identified by Telstra;
the form in which the requested information can be presented;
a feasible timetable for extracting and presenting the information.
If agreement cannot be reached, separate reports will have to be prepared.
In the absence of any agreement for an alternative means of dispute resolution, it will be necessary for me to resolve any disagreement. However, the Court time available for the purpose will necessarily be strictly limited. The Court simply does not have the time to allow the parties to litigate exhaustively every one of the interlocutory disputes in which they choose to engage. Notwithstanding the amounts at stake, this litigation must take its place alongside other litigation in which equally deserving parties seek to have their disputes determined.
BT’s Alternative Submission
The hearing on the issues dealt with in this judgment took place on Friday, 27 March 1998 and Monday, 30 March 1998. I suggested in the course of argument on 27 March 1998 that the parties might usefully discuss the outstanding questions relating to Telstra’s discovery of electronic documents. Presumably as a result of this suggestion some discussions took place over the weekend.
Unhappily the discussions did not bear fruit, in that no agreement was reached between the parties on the discovery issues. However, at the resumed hearing on 30 March 1998, Mr Margo on behalf of BT put forward an alternative suggestion as to how the difficulties concerning Telstra’s discovery could be resolved. In substance, BT’s proposal was that Telstra would take responsibility for the restoration of the back-up tapes and BT would take responsibility for review of the electronically stored information made accessible by the restoration process. BT’s proposal contemplated that the full cost of the restoration and review process would be met by Telstra.
I accept that this proposal, albeit put belatedly, was intended to provide a workable and efficient means of locating and identifying discoverable material on the back-up tapes. Nonetheless, I think that there are a number of difficulties with the proposal and that it should not be adopted.
The difficulties include the following:
The evidence does not establish that the suggested procedure will be technically feasible. Mr Wood, an expert in information technology, gave evidence in support of BT’s proposal. However, Mr Wood came into the matter only late on 27 March 1998. He has no specific knowledge of Telstra’s systems. Nor does Mr Wood have any previous experience with back-up tapes on the scale maintained by Telstra or of the difficulties of retrieving information from such a large number of tapes. I am not confident that the suggested approach would work smoothly from a technical point of view.
Telstra (and the State) strongly opposed BT’s suggestion. The significance of this is that BT’s proposal contemplates that Telstra would authorise Mr Kennedy to liaise directly with BT’s solicitors and computer experts “on technical matters relating to the restoration and review process”. It also provides for BT to submit any technical questions in writing to Mr Kennedy and for Telstra to “answer them to the best of its ability within 48 hours”. In the absence of willing co-operation from Telstra, it seems to me that the proposal is a recipe for continual disputation between the parties.
The proposal provides for any dispute as to technical matters “which the parties are unable to resolve after good faith discussions” to be referred for expert determination by a computer expert agreed between the parties or nominated by two other experts. Mr Margo did not explain the source of power to make an order to this effect, in the absence of agreement between the parties.
The proposal requires Telstra to indemnify BT for its costs, including equipment and overheads of reviewing the tapes “up to the stage at which BT elects to terminate the process or all discoverable documents located on the tapes have been discovered”. Any disputes are to be resolved by the Court. This, too, is a recipe for continuous disputation.
BT’s proposals would require a special regime to protect Telstra’s privilege in documents to be scrutinised by BT’s team. Mr Margo said that it was simply a matter of applying the same or a similar regime to that agreed upon in November 1997. I do not think it is that simple. In the absence of agreement to a regime, the need for a special regime to be imposed and enforced creates yet further difficulties.
Accordingly, I do not accept BT’s alternative proposals as an appropriate means of dealing with Telstra’s continuing obligation to give discovery of electronic documents.
Destruction of Documents
BT seek the relief specified in pars 6 and 7 of the proposed orders, on the basis that Telstra has admitted that, since the commencement of proceedings
relevant documents have been shredded; and
back-up tapes containing E-Mails and other electronic documents have been deleted or erased.
It is convenient to deal with the second complaint first. The back-up tapes maintained for disaster recovery purposes were overwritten, in the manner I have described, in the ordinary course of Telstra’s business. Telstra realised, no later than in or shortly after February 1997, that back-up tapes were in existence and that these (at the least) might contain electronic material relevant to the issues in the case. Telstra continued overwriting back-up tapes until October 1997. It should have ceased this practice much earlier. Nonetheless, I was not invited to find and I do not find that the delay was due to a deliberate decision to delete or erase discoverable electronic material. The probabilities are that the delay was the product of a failure to appreciate that Telstra’s customary procedures should have been modified to ensure full compliance with its discovery obligations.
I should add that there is no evidence that Telstra has authorised or knowingly countenanced the destruction of electronic documents otherwise than by means of over-writing back-up tapes. Doubtless, E-Mails and other electronic documents were frequently deleted or erased by Telstra staff shortly after they were sent or received. Depending on when the deletion or erasure occurred, the electronic documents affected would not necessarily have been preserved on back-up tapes. But there is no evidence, for example, that relevant electronic material preserved on floppy disks or the hard drives of servers has been deleted or erased.
One of the orders sought by BT is that Telstra should inform its employees that electronic documents relevant to these proceedings are not to be overwritten, deleted or erased (par 6). I see no point to this order. If Telstra was not fully alive to its discovery obligations at an earlier stage, it now is. On the evidence it has taken appropriate steps, albeit belatedly, to preserve back-up tapes. The litigation has now been underway for over three years. There is nothing to suggest inappropriate deletion or erasure is occurring.
Another order sought by BT is that Telstra file and serve an affidavit stating whether any electronic documents which were or might have been discoverable have been overwritten, deleted or erased since 1 September 1995 and, if so, in what circumstances, by whom and when (par 7.2). This order would require Telstra to undertake not merely a monumental task, but an impossible one. BT have not sought an order that BT make inquiries of particular individuals of whom there is reason to believe that they have deleted or erased relevant electronic material. Rather, BT have sought an order of such scope as to be unmanageable. Moreover, even if the endeavour were feasible, I doubt that it would materially assist in preparing the case for trial.
In support of BT’s claim for relief in relating to the shredding of documents, Mr Margo referred to a number of matters:
First, in an affidavit sworn on 22 April 1996, in connection with an earlier discovery dispute, Mr Mullane, General Manager of Product Marketing in Telstra’s Corporate and Government Business Unit, stated that “[m]any documents that have been held by me are shredded on a regular basis and often at least once a month”. He also said that he was aware that many Senior Product Managers and other Product Managers shred documents held by them regularly. (BT took no action at the time based on these statements.)
Secondly, Mr Todd, an employee of Telstra’s solicitors, gave the following evidence on 19 August 1997 in the course of cross-examination directed mainly to other issues:
“Have you, since learning about the shredding, caused any instruction to be given to Telstra officers not to continue shredding documents which might be discoverable in these proceedings?---I haven’t. I don’t know if my partners have.
You would be aware if something like that had gone on, would not you?---I would expect to be aware of that but I’m not aware of it.”
Thirdly, on 12 September 1997, BT’s solicitors wrote to Telstra complaining about the reuse of back-up tapes and about Mr Todd’s inability to state whether instructions had been given to stop shredding documents. The letter requested Telstra to advise, inter alia, as to the steps taken to prevent shredding or discarding of paper documents. Telstra’s reply to this letter did not directly respond to the request made by BT.
Fourthly, at a directions hearing on 17 September 1997, BT’s counsel sought an assurance from Telstra that a direction had been given to stop the shredding of paper documents and the erasure of electronic documents. No such assurance was given by Telstra’s counsel. None has been given since.
It is somewhat unfortunate that BT, having been aware of Mr Mullane’s evidence in April 1996, did not formally pursue the issue of shredding of documents until the letter of 12 September 1997. It is even more unfortunate that Telstra has chosen not to respond in a constructive manner, but seems to have sought resolutely to avoid the issue. Regrettably, this unhelpful approach does not seem to me to be an isolated phenomenon.
In my opinion, Telstra should be required to inform the Court and BT what steps, if any, have been taken by Telstra to preserve discoverable “paper” documents in its possession, custody or control. In addition, Telstra should file and serve an affidavit by a responsible officer stating, after reasonable inquiries, whether any documents which were or might have been discoverable in the proceedings have been shredded since 1 September 1995. The affidavit should also identify (so far as can be done) the documents or classes of documents that have been shredded or otherwise destroyed. It is obviously not feasible for exhaustive inquiries to be made of every Telstra officer or employee. The most practical way of keeping Telstra’s obligations within reasonable bounds is to limit Telstra’s obligation to make inquiries to those of the sixty-nine persons referred to in BT’s letter of 11 February 1998 who are currently employed by Telstra.
Costs
BT sought an order for indemnity costs. But for two factors to which I shall refer, I think that there is much force in Mr Margo’s submission that, since Telstra’s failure to comply with its discovery obligations has occasioned the current application, it should pay costs on an indemnity basis. Telstra’s conduct was not merely an oversight or the result of an unavoidable inability to process a vast amount of material. Telstra failed over a long period to take appropriate steps to ensure that it complied, as best it could, with the discovery orders made in these proceedings. Its approach to discovery of electronic material has been unsatisfactory in important respects. Its approach to the destruction of “paper” documents has also been unsatisfactory in certain respects.
The first factor to which I have alluded is that, like so many of the interlocutory proceedings in the case, the Court has been inundated by a vast quantity of material, much of it not necessary for the purposes of the application. The burden on the Court is increased unnecessarily by this approach to interlocutory disputes. So is the burden on other parties, even though they may have brought the interlocutory proceedings on themselves. The second factor is that some time was taken up at the hearing with BT’s suggested alternative approach to discovery of electronic material. Although that alternative approach was well-intentioned, I have not accepted BT’s submission that it should be adopted.
In these circumstances, I think the appropriate order is that Telstra should pay BT’s costs on a party and party basis of the motion filed on 25 September 1997, as subsequently amended, insofar as the motion seeks or encompasses the relief specified in pars 2, 3, 6 and 7 set out in the judgment.
I certify that this and the preceding thirty-two (32) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville.
Associate:
Dated: 9 April, 1998
Counsel for the Applicant: Mr R F Margo, Mr J Bartos Solicitor for the Applicant: Middletons Moore & Bevins. Counsel for the First Respondent Mr W G Muddle and Mr D R Stack Solicitor for the First Respondent Crown Solicitors Office Counsel for the Second Respondent:
Mr A W Street SC and Mr J R J Lockhart
Solicitor for the Second Respondent: Blake Dawson Waldron. Date of Hearing:
27 and 30 March 1998
Date of Judgment: 9 April, 1998
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