15 Nov 2011

Avoiding one size fits all

by Michael Legg

The Federal Attorney-General has announced that the Government will introduce the Civil Dispute Resolution Bill to implement recommendations made by the National Alternative Dispute Resolution Advisory Council (NADRAC) by requiring prospective litigants to take genuine steps to attempt to resolve their disputes before commencing proceedings in federal courts. NADRAC recommend the adoption of pre-action guidelines which would inform the meaning of genuine steps and would be a basis for a court being able to award adverse costs orders. The guidelines would include outlining the issues in the dispute, attaching necessary documentation and suggesting a method for resolving the matter such as mediation.

Pre-action guidelines or protocols that alert parties to the possibility of using ADR and require the exchange of information so that the strengths and weaknesses of a case can be evaluated before commencement of proceedings could promote the early resolution of disputes without court intervention. However, pre-action protocols should not be imposed on all cases in the hope that "one size fits all". Successful pre-action protocols adopt a bespoke approach that matches the required "genuine steps" with the category of case. Indeed, in the UK Lord Woolf in his Final Report on Access to Justice stated that pre-action protocols should not cover all areas of litigation, but should deal with specific problems in specific areas, including personal injury, medical negligence and housing. More recently, Lord Justice Jackson concluded in the UK Costs Review in December 2009 that the default pre-action protocol that applies to all cases for which no specific protocol applies should be abandoned as it had been ineffective.

The UK experience also seems to uniformly point to pre-action protocols front-loading costs and in some cases increasing the cost of litigation. Fewer disputes may need to use court resources but disputants do not appear to save any expense by staying out of court. The Government is able to reduce the resources needed for the courts by shifting the costs to the litigants. Concerns have been raised that the front‑loading of costs applies to all cases, including those that would have settled not just the minority that go to trial. Where additional up-front costs reduce total costs then clearly a protocol is beneficial. It is a misnomer to suggest that just because most cases settle there is no utility in a pre-action protocol. The aim is to bring the settlement forward so that less cost and delay is incurred prior to that settlement. However, where it is an additional cost without the savings, such as where a case would resolve fairly quickly without the "genuine steps" then it makes accessing the legal system more expensive. This can then have important ramifications for access to justice. However; assertions of front-loading of costs should not be seen as reason for abandoning pre-action protocols as a potential reform. The task is to identify the appropriate categories of case and the pre-action steps that will be beneficial. Avoiding unnecessary costs requires the tailoring of the "genuine steps" to the dispute. In Australia it has long been recognized that no single case management model can or should be applied to all forms of litigation – case management techniques have to be adapted to the demands of particular categories of litigation. Similarly, what amounts to genuine steps must vary from one case type to another.

In Australia it has been suggested that a one size fits all approach may be avoided by employing the concept of proportionality. Proportionality means that the costs to the parties of dispute resolution must be proportionate to the importance and complexity of the subject matter in dispute. Proportionality also connotes a matching of claims with appropriate procedures. However, in describing the relationship between a claim and the cost to resolve that claim it is inherently imprecise. As a result it must be recognized that proportionality acts as a "rule of thumb" or guideline. The difficulty for legal practitioners and parties is how to determine what is a proportionate response to the requirements in a protocol. One parties proportionate letter of claim is another party's inadequate or excessively prepared "notice of dispute", which can in turn invite satellite litigation as to whether genuine steps have been undertaken. Proportionality is a key concept for civil litigation but alone is not the solution.

There must be research conducted to determine which categories of case benefit from a protocol and what pre-action steps those cases should be subject to. The only way that this can be meaningfully done is to collect baseline data now to allow for comparison once pre-action protocol pilot schemes are implemented. Otherwise reform is left to be conducted on the basis of anecdote, hearsay and gut-reaction. Moreover, without such base-line data it will not be possible to say with any confidence whether a protocol has been successful or unsuccessful let alone identify the reasons for that outcome. More generally consultation between those designing pre-action protocols and the legal profession is essential so that norms of conduct and the goals of specific protocols are not devoid of reality and bear some resemblance to what can be reasonably expected but with a view to seeking improvement. If a one size fits all approach is adopted in Australian legislation then the costs to access the civil justice system may increase and access to justice hampered or denied.

This was written by Michael Legg and was first published in Australian Financial Review Dealbook on 18 June 2010

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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.