The litigation game is about to be shaken up. New legislative reforms by the Federal government will change the way people and businesses approach legal disputes in Australia [1]. Commercial litigation is inherently uncertain, complicated and costly. These latest reforms aim to save money, time and stress by promoting an alternative to litigation. Disputants will now be required to focus their efforts on resolving their disputes before commencing litigation. But who really is the big winner here? and where is this reform going?
Is the Federal government doing to litigation what they did to taxation in 1992? When taxpayers, not the ATO, became responsible to self-assess their tax [2]. These reforms shift responsibility away from courts to disputants, to make them more accountable to self-determine their disputes.
It’s as if governments have just had an epiphany. If people can resolve their dispute through processes other than litigation, and its keeps them out of court, then it places less pressure on courts. There’s political mileage to be had in implementing a regime which helps achieve the absolutes of less time, cost and stress when dealing with civil disputes. It’s a classical win-win scenario.
Statistics show people and businesses use the menace of litigation as a means of resolving disputes, but when push comes to shove – the dare wanes. According to the previous Attorney General of NSW, a startling 97% of civil cases filed in NSW were settled before final hearing [3].
These new reforms should also be seen in the context of other recent reforms in relation to litigation. Several years ago, the courts introduced an overarching policy that required all participants in litigation (courts included) to pursue “the just, quick and cheap resolution of the real issues in dispute” [4].
This requirement has had a material impact on the way cases are prepared for trial. Sit at any pre-trial hearing, where courts’ manage the preparation of cases for trial, and lawyers toss the ‘just, quick and cheap requirement’ around like marbles in a school yard. So effective is it, that if a party misses an agreed timetable, cases can and do fall over. The principles have been endorsed by the High Court in AON v ANU [5].
So what are the new reforms? The Commonwealth has introduced the Civil Dispute Resolution Act 2011 (the Act) [6]. This Act will require prospective litigants in the Federal Court or the Federal Magistrates Court from 1 August 2011, to lodge a statement showing what ‘genuine steps’ they have taken to try and resolve their dispute before commencing legal proceedings, with some exemptions.
The Act provides a non-exhaustive list of examples of the kinds of steps that could be taken [7]. Whilst the Act does not mandate the taking of any particular steps, it is clear the courts will utilise a back door coercive power to ensure compliance, in that courts can make costs orders against certain parties or their lawyers if they fail to comply with their duties under the Act [8].
The Commonwealth are not the only ones in on the act. The States of NSW and Victoria have already passed their own legislation. In NSW, the new Part 2A of the Civil Procedure Act 2005 commenced by proclamation on 1 April 2011 [9]. In Victoria, the Civil Procedure Act 2010 commenced on 30 March 2011. In time, it is expected other states and territories will follow suite. Failure to do so will give further weight to the argument that a set of uniform civil procedural rules should be introduced in all jurisdictions in Australia. Stay tuned for that issue to be debated in years to come. Another one of those; why hasn’t it happened already issues.
There are those who argue it is premature to be trying to resolve a dispute prior to the commencement of litigation. It is better left to after it commences. A person is often unaware as to the extent of their legal rights until a lawyer has considered the application of the law to the questions of law in dispute. If a person resolves their dispute without obtaining legal advice, they may be blissfully unaware as to what legal rights they are giving up. How can you know what rights you are giving up, when you don’t even know what rights you have in the first place? How much of an issue this becomes is yet to be seen. The real issues in dispute are not articulated until a statement of claim, defence or even a cross claim is drafted, and then they may still need to be amended. Significant amounts of time and money must be expended before a view can be formed as to the merits of a case or the availability of defences. This is the very issue which signifies the dividing line between litigation and mediation. In mediation, the conversation is fundamentally different. The parties move away from rights-based bargaining to interest-based bargaining. In mediation one of the questions posed to disputants is simply this – to what extent will your interests be achieved by pursuing your legal rights through court? Mediation is not about proving who is right and wrong, but rather reaching a fair outcome that each party can live with.
Importantly, these reforms must be balanced on the scales of justice as we must be careful not to throw the baby (in this case justice), out with the bathwater. Some matters need to be put to through a judicial process to be resolved. The new legislation recognises this. There are certain types of matters excluded from operation of the Act. Such as where it is either impracticable or inappropriate to undertake genuine step. For example if the proceedings relate to: a civil penalty or criminal offence, debt recovery, some insolvency laws, appeals, ex parte proceedings or that involves a vexatious litigant. The Act also excludes matters under the Family Law Act 1975, the Migration Act 1958, the Native Title Act 1993 and the Fair Work Act 2009.
Lawyers are obliged to advise clients about the kinds of steps that could be taken. The steps range from discussing directly with each other the issues in dispute to participating in mediation.
Whilst is it is early days, it is foreseeable that mediation will become the default pre-litigation step employed by disputants. Notwithstanding this, parties should also be made aware of and consider other dispute resolution processes such as conciliation, expert determination or arbitration [10].
The statistics in support of mediation speak for themselves. During 2010, the Supreme Court of NSW mediated 683 disputes, of those 51% were resolved by close of the mediation session [11]. According to the ADR Directorate of the Attorney General of NSW, who operate the Community Justice Centres (CJCs) [12]. During 2009 the CJC’s handled 3,179 referrals, and of those 79% achieved settlement [13]. Depending on the type of dispute, parties have at least an even chance of reaching an out of court resolution through mediation. The statistics are historical and should not be relied on as predicting the likelihood of success through mediation as each dispute and the interests and concerns of each party are different.
When it comes to choosing a mediator, parties should be wary of mediators who refer to their success rates as a promotional tool. It’s is irresponsible and borders on unethical, because if a mediator touts they achieve 80% success rates then a party will use this measure as a predictor. Pressure is exerted on party to resolve their dispute because 80% of others do. This undermines a major premise of mediation, that is for people to reach their own decision freely, voluntarily and without undue influence. As the Federal Court of Australia said when it considered these new reforms:[14]
Since 1987, the settlement rates of cases referred to mediation have averaged 55 per cent. Settlement rates at mediation should not, however, be the sole criteria by which the program is evaluated. Many matters which do not settle proceed to trial with issues better defined, or on the basis of agreed facts settled by the parties with the assistance of the mediator. In some instances the parties also agree that the Court should only be asked to determine liability or quantum. These types of results mean savings in costs to the parties and the Court.
The old adage of the willful litigant seeking their day in court will soon be replaced by the thoughtful litigant seeking their day in mediation. The proposition is compelling; resolving disputes through mediation helps save everyone money, time and stress. The beneficiaries of the latest reforms are the community, as they should be.
Over the next few months we will notice a whole new and unusual dialogue emerging from the mouths of litigation lawyers. Don’t be surprised if you hear your lawyer say they want to genuinely try to resolve your dispute before you commence an action. Don’t dismiss the lawyer as having lost their marbles, instead see the lawyer as facilitating a unique opportunity for you to be directly involved in a process to resolve your dispute. The alternative is that if the dispute proceeds to litigation, you won’t decide the outcome – a judicial officer will, and there will be a winner and a loser. If you can reach a fair outcome, you can move on with your life and focus on what you do best.
So before the legislation comes into play, mediation is already on the scoreboard, despite litigation’s long reputation for resolving disputes. Standing on the sidelines are the government, they know they’re on a good thing. Let’s get an update at quarter time!
To nominate Troy Peisley as a mediator, expert determiner or arbitrator in a domestic or international commercial dispute contact +612 9929 9333
