01 Dec 2010

Making pre-litigation protocols work

by Brigitte Markovic, Stuart Clark, Julia Virgo

If pre-litigation protocols are to achieve their stated aim, there will need to be an emphasis on co-operation between not just the parties and their lawyers but also between the parties and the court.

Last year saw significant legislative activity in the relatively new area of “pre-litigation protocols” — the name given to the mandatory steps a potential litigant must undertake before commencing civil proceedings. These protocols will oblige litigants to pursue a range of alternative dispute resolution (ADR) steps before commencing proceedings — either to settle or to narrow the issues genuinely in dispute.

Naturally enough, it is hoped that the advent of pre-litigation protocols will increase efficiency, reduce cost and delay to the parties, and free the courts from unnecessary cases that could (or should) have been settled before commencement of proceedings — or at least before protracted litigation ensues. [1]

This is positive for potential litigants, provided all stakeholders genuinely engage.

Legislative developments

At the federal level, the Civil Disputes Bill 2010, which was introduced into Parliament in June, is now before the Senate.

In Victoria, as part of the Civil Procedure Act 2010, the provisions for pre-litigation protocols will commence on 1 January 2011.

There is also an anticipated NSW Bill that, we understand, will be introduced shortly.

Suggested protocols

While theVictorianAct [2] provides few specific examples, the Commonwealth Bill suggests the following steps:

  • Notify the other person of the issues that are, or may be, in dispute and offer to discuss them, with a view to resolving the dispute. 
  • Respond appropriately to any such notification. 
  • Provide relevant information and documents to the other person to enable the other person to understand the issues involved and how the dispute might be resolved. 
  • Consider whether the dispute could be resolved by a process facilitated by another person, including an ADR process. 
  • If such a process is agreed to, then: 

agree on a particular person to facilitate the process; and 

— attend the process.

  • If such a process is conducted but does not result in resolution of the dispute, consider a different process. 
  • Attempt to negotiate with the other person, with a view to resolving some or all the issues in dispute, or authorise a representative to do so.

“Genuine” or “reasonable” steps

The Commonwealth Bill obliges the parties to take “genuine steps” to resolve a dispute, whereas the Victorian Act adopts the concept of “reasonable steps” (as will, we understand, the proposed NSW Bill).[3]

In its report to the Attorney General, the National Alternative Dispute Resolution Advisory Council (NADRAC) recommended the formulation of “genuine steps”, arguing that the alternatives are more subjective and may undermine the confidentiality of ADR processes.[4]

NADRAC also suggested that, in situations where there is an imbalance of power or finance, the alternatives may lead to injustice by causing some parties to feel they have to make concessions.

We wonder whether the use of the word “reasonable” may suffer from the same interpretative flaw.

Statement

Both the Commonwealth Bill and the Victorian Act require litigants to file a statement or certify that the required pre-litigation steps have been undertaken or, alternatively, set out the reasons why some or all of the steps could not be taken.[5]

For example, in urgent cases it would be neither appropriate nor productive to enter into pre-litigation negotiations with the other parties.[6]

Exemptions

The Commonwealth Bill and the Victorian Act identify proceedings that are exempt from pre-litigation protocols. These include appeals, civil penalty proceedings, ex-parte proceedings and proceedings originating from certain tribunals or under specified Acts where some form of review or attempt at settlement may have occurred before proceedings were commenced.[7]

Neither the Victorian Act nor, we understand, the NSW Bill exempts small claims such as simple debt recovery matters. This is a concern — particularly as a significant proportion of low-value claims proceed to a default judgment as a consequence of the defendant’s failure to respond to the statement of claim.

Reviewing the pre-litigation steps statement will be an additional burden, given the volume of claims typically filed in those courts. Moreover, it is difficult to see how a pre-litigation protocol could be of assistance in matters that proceed to default judgment.

Compliance

The Commonwealth Bill imposes a duty on lawyers to give their clients detailed advice about the need to comply with pre-litigation protocols.

This is not a requirement of the Victorian Act, but is likely to be included in the NSW Bill along with costs sanctions for non-compliance.

Neither the Commonwealth Bill nor the Victorian Act actually prevents a litigant from commencing proceedings where there has been non-compliance with a pre-litigation protocol.[8] That said, a litigant who would otherwise have been required to do so, may face costs sanctions and a range of other case management orders where a satisfactory explanation for such failure cannot be provided.[9]

NSW Bill

It remains to be seen when the NSW Bill will be introduced and how prescriptive it will be in terms of its application to civil proceedings.

While it is unlikely to include a general, one-size-fits-all pre-litigation protocol, it is to be hoped that it will provide a framework through which specific and tailored pre-litigation protocols may be identified for particular types of proceedings or specific to particular court lists.

Concluding observations

To the extent that mandatory pre-litigation protocols are prescribed by the rules, they will be of most benefit if they encourage parties to adopt appropriate ADR measures both before and after proceedings commence. Tailored pre-litigation protocols would also benefit from the inclusion of provisions that encourage the courts to make full use of their case management powers to enhance the prospects of settlement through ADR.

If pre-litigation protocols are to achieve their stated aim, there will need to be an emphasis on co-operation between not just the parties and their lawyers but also between the parties and the court. A shift away from entrenched positions and overly adversarial litigation can only be achieved when all involved actively work towards that goal.

This article was first published in Inhouse Counsel, Vol 14 No 3, December 2010

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[1] Clause 3 of the Commonwealth Bill states: “The object of this Act is to ensure that, as far as possible, people take genuine steps to resolve disputes before certain civil proceedings are instituted.” [back]

[2] Section 34. [back]

[3] Clause 4 of Commonwealth Bill; section 34 of Victorian Act. [back]

[4] NADRAC, The resolve to resolve — embracing ADR to improve access to justice in the federal jurisdiction: a report to the Attorney General. [back]

[5] Clauses 6 and 7 of Commonwealth Bill; section 43 of Victorian Act. [back]

[6] [24]–[27] of Explanatory Memorandum to Commonwealth Bill; section 44 of Victorian Act. [back]

[7] Clauses 15 and 16 of Cth Bill; section 32 of Victorian Act. [back]

[8] Clause 10(2) of Cth Bill; section 36 of Victorian Act. [back]

[9] Clause 12 of Cth Bill; section 38 of Victorian Act. [back]

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.