Resolving Disputes without Courts commentary from Law Council of Australia

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1 Australian Centre for Justice Innovation Civil Justice Research Online Access to Justice Resolving Disputes without Courts commentary from Law Council of Australia Stasia Tan Law Council of Australia Follow this and additional works at: Part of the Civil Law Commons, Courts Commons, and the Dispute Resolution and Arbitration Commons Recommended Citation Tan, Stasia, "Resolving Disputes without Courts commentary from Law Council of Australia" (2012). Access to Justice. Paper 5. This Response or Comment is brought to you for free and open access by Civil Justice Research Online. It has been accepted for inclusion in Access to Justice by an authorized administrator of Civil Justice Research Online. For more information, please contact

2 29 June 2012 Professor Tania Sourdin Director Australian Centre for Court and Justice Innovation (ACCJSI) Monash University Law Chambers Marsh Building 555 Lonsdale Street Melbourne VIC 3000 Australia Dear Professor Sourdin BACKGROUND PAPER REGARDING CIVIL PRE-ACTION OBLIGATIONS The Law Council welcomes the opportunity to provide comments to the Background Paper Resolving Disputes Without Courts: Measuring the Impact of Civil Pre-action Obligations, as part of a Research Project being undertaken by the Australian Centre for Court and Justice Innovation, at Monash University. Please find attached a copy of the Law Council s comments in relation to the Background Paper. If you have any queries, please contact Stasia Tan on (02) or by at Yours sincerely Professor Sally Walker Secretary-General GPO Box 1989, Canberra ACT 2601, DX 5719 Canberra 19 Torrens St Braddon ACT 2612 Telephone Facsimile Law Council of Australia Limited ABN

3 Resolving Disputes without Courts: Measuring the Impact of Civil Pre-Action Obligations Comments on a Discussion Paper written by Professor Tania Sourdin, Monash University, as part of a Project undertaken by the Australian Centre for Court and Justice System Innovation for the Australian Institute of Judicial Administration. 22 June 2012 GPO Box 1989, Canberra ACT 2601, DX 5719 Canberra 19 Torrens St Braddon ACT 2612 Telephone Facsimile Law Council of Australia Limited ABN

4 Table of Contents Executive Summary...3 Civil Pre-Action Obligations...3 Concerns regarding pre-action litigation protocols...5 Increasing the costs of litigation...5 Challenges to pre-action protocols...8 The need for further data...8 Attachment A: Profile of the Law Council of Australia...10 Resolving Disputes Without Courts Measuring the Impact of Civil Pre-Action Obligations Page 2

5 Executive Summary 1. The Law Council welcomes the opportunity to provide comments in response to a Discussion Paper written by Professor Tania Sourdin of Monash University - Resolving Disputes without Courts: Measuring the Impact of Civil Pre-Action Obligations - as part of a Research Project (Project) being undertaken by the Australian Centre for Court and Justice System Innovation for the Australian Institute for Judicial Administration. 2. The Law Council supports, in principle, measures which may promote early resolution of disputes and participation in alternative dispute resolution (ADR) mechanisms. ADR mechanisms may assist parties to identify the real issues in dispute and, in the event that the dispute is litigated, lead to a narrower set of issues being considered. 3. The Law Council acknowledges that in certain types of matters, pre-action obligations may make a substantial contribution towards resolution of a dispute. However, the Law Council opposes a one-size fits all approach and considers that a more flexible approach to pre-action protocols is necessary. 4. The Law Council is also concerned about the potential for pre-litigation obligations to increase and front load the costs of litigation, particularly in matters where expert evidence is necessarily part of the risk assessment for the consideration of settlement by the parties. In addition, the Law Council considers that the costs of litigation may be increased as pre-action obligations, such as genuine steps requirements, may encourage collateral challenges concerning whether all genuine steps have been taken to resolve the dispute. 5. The Law Council suggests that further data and evidence be collected and analysed, to assess the effectiveness of civil pre-litigation obligations and to assist in shaping policy regarding the scope and application of pre-action obligations. Civil Pre-Action Obligations 6. The Law Council notes the Project s broad interpretation of actions and processes which may be considered pre-action obligations, including: the need to disclose information or documents in relation to a cause of action; the need to correspond, and potentially meet, with the person or entity involved in the dispute; undertaking, in good faith, some form of ADR; and conducting genuine and reasonable negotiations with a view to settling without recourse to court proceedings. 7. The Law Council supports, in principle, measures which may promote the early resolution of disputes and participation in ADR mechanisms, to the extent that they contribute towards the timely, just and cost-effective resolution of a dispute. 8. In appropriate cases, ADR and pre-action activities can create real value by contributing to the resolution of disputes by: Resolving Disputes Without Courts Measuring the Impact of Civil Pre-Action Obligations Page 3

6 facilitating the exchange of information; assisting parties to seek early resolution of the dispute; and narrowing the issues to be considered, if the matter ultimately proceeds to litigation. 9. There are now a myriad of different ADR processes, including negotiation, mediation, arbitration and collaborative practice. Many of these are being used with increasing effect to assist in the resolution of disputes and may provide significant benefits including: savings in time and money; the preservation of important business relationships; and public savings where disputes no longer proceed to determination through the courts and tribunals. 10. For example, pre-action procedures are employed heavily in relation to personal injury litigation. Most jurisdictions have established extensive legislative obligations for parties under civil procedure legislation and court rules, including obligations to disclose relevant facts within certain timeframes, obligations to engage in mediation and interlocutory settlement negotiations, obligations to certify that claims are well founded, obligations to make genuine offers of settlement, etc. These pre-action procedures have proven to be useful in facilitating the resolution of disputes in the context of personal injury. 11. Pursuant to the Succession Act 2006 (NSW), any applications for a family provision are required to undertake mediation before the matter proceeds to trial. Mediations in this context appear to have been successful in contributing towards settlement of disputes, with 57% of cases being settled at mediation Pre-litigation ADR processes have also proved to be beneficial in the context of medical negligence litigation, in circumstances where the plaintiff has an existing relationship with the health professional's insurer. Pre-litigation ADR processes enable the injured person to obtain the necessary medical and other records and to procure expert evidence going to liability. The potential plaintiff is then able to present his / her claim as a case worth considering for an un-litigated settlement, encouraging the potential defendant to engage in a dialogue. 13. Resolution of a dispute, facilitated through ADR and a settlement are arguably more likely in circumstances where: liability is straight forward; there are minimal or no factual disputes; and the assessment of damages is simple and clear; which requires both that the prognosis for the injured party is stable and capable of final quantification and that the plaintiff s economic loss claim is clear and easy to state. 1 Honourable Justice P A Bergin, 2012, The Objectives, Scope and Focus of Mediation Legislation in Australia, 9 Available online at: pdf Resolving Disputes Without Courts Measuring the Impact of Civil Pre-Action Obligations Page 4

7 14. The Project Background Paper does not discuss the success of the pre action procedures contained in the Family Law Rules 2004 (Cth). However the Law Council understands that the Principal Registrar of the Family Court of Australia will be consulting directly with Professor Sourdin in this regard. 15. While there are a number of successful examples of pre-action procedures noted above, the Law Council considers that a one size fits all approach is inappropriate. Many claims have complexities that do not fit comfortably with pre-action requirements and, when complied with may result in increased costs and delay, which ultimately operate to impede access to justice. 16. For example, relatively simple medical negligence cases may be effectively resolved through ADR. However, in other cases of medical negligence and serious common law injury claims, where clear liability may not be easily established or there are factual disputes, ADR and pre-action obligations may operate to impose additional burdens on the parties. Obtaining clear liability evidence is often an expensive and difficult process, and requires the co-operation of the potential defendant. However, given that there is no obligation for a defendant to pay legal costs, the impetus to engage in pre-action ADR is not attractive for plaintiffs in complex medical negligence and common law injury cases, who would ordinarily be required to meet legal costs and other expenses from their settlement sum. 17. The extent to which pre-action obligations may contribute towards the successful resolution of a dispute may therefore significantly depend on the type and nature of the dispute. Consideration should be given to a more flexible approach to pre-action obligations. 18. Key factors which may also impact on the likelihood of a dispute being mediated and resolved through ADR include: the desire and commitment of the parties to avoid litigation; the commitment of the relevant legal advisers towards ADR; and the skills and training that an ADR expert is able to utilise to effectively explain the ADR process and resolve the key issues between the parties. Concerns regarding pre-action litigation protocols Increasing the costs of litigation 19. The Law Council is concerned that parties may engage in additional processes to ensure that they have satisfied pre-action obligations. Participation in ADR processes may be valuable, but may ultimately fail to successfully facilitate the resolution of a dispute, thereby increasing the cost burden in a particular case. 20. The costs of complying with pre-litigation requirements outlined in the Civil Dispute Resolution Act 2011 (Cth) or in the Federal Court Rules 2011 may disadvantage a party if the requirements are burdensome, inappropriate in the circumstances or are not proportional to the value of the claim in dispute. To challenge the breadth of the requirement in a particular case may add to the costs burden. Resolving Disputes Without Courts Measuring the Impact of Civil Pre-Action Obligations Page 5

8 21. Pre-action obligations may also be inappropriate in the context of commercial litigation, where parties are likely to proceed with litigation only as a last resort, after other reasonable methods of resolution of the dispute have already been explored. 22. In addition, pre-action obligations are unlikely to assist in the early resolution of complex medical negligence cases, where there are conflicting expert opinions on negligence from multiple medical disciplines, factual disputes, a need for interrogation and extensive discovery, multiple defendants and issues with apportionment. 23. In some jurisdictions, lawyers have obligations to inform their clients of alternatives to fully contested litigation (for example, Law Society of NSW Advocacy Rule 17A), potentially encouraging some changes to the adversarial culture of the legal system. 24. The Law Council is also concerned that in practice, pre-action obligations are increasingly becoming subsumed into the ordinary litigation process. This operates to undermine the objective of encouraging parties to engage in early consideration of the issues in dispute and to consider alternative means of resolution, prior to the commencement of litigation. 25. The Law Council is advised that, in some cases, pre-action obligations have been used by defendants to test the waters, by demanding extensive particulars of a potential claim. Pre-action obligations may also be used to frustrate the claimant and delay the filing of a claim; where a respondent appears to be engaging in reasonable negotiations, but is in reality attempting to wear the claimant down to accept a lower settlement. Such strategies have potential to adversely impact on access to justice and the dispute resolution process. 26. For example, in the context of Superannuation and Total and Permanent Disability (TPD) claims, parties must engage in mandatory internal dispute resolution processes. Pursuant to the internal dispute resolution process: a superannuation fund is required to respond within 90 days of receiving a complaint; or an insurer is required to respond to a complaint within 45 days of receiving a complaint. 27. Only in circumstances where a complaint has not been satisfactorily resolved, is a complaint able to be pursued via an external dispute resolution process through the Financial Ombudsman Service, the Superannuation Complaints Tribunal and / or proceedings in the Supreme or District Courts. 2 2 Before a claim can be filed, a complaint under s101 of the Superannuation Industry (Supervision) Act 1993 (Cth) must be lodged with the super fund that is denying the claim and/or the insurer. This is an internal dispute resolution process, or "an IDR complaint". It is a mandatory step if one is to later access an external dispute resolution process or "EDR". The EDR schemes available for super fund members are the Financial Ombudsman Service (FOS) or the Superannuation Complaints Tribunal (SCT). These complainants can also choose to file proceedings in the Supreme or District Courts. A Super fund is required to respond within 90 days of receiving a complaint (see section 19 of the Superannuation Resolution of Complaints Act 1993). The Insurance Code of Practice requires insurers to respond to a complaint within 45 days of receiving a complaint. It is only if a complaint has not been satisfactorily resolved or these time limits are not met, can the complaint be taken to the SCT or FOS. If a complainant were to ignore these requirements and head to court, there may be costs consequences. Resolving Disputes Without Courts Measuring the Impact of Civil Pre-Action Obligations Page 6

9 28. However, the Law Council is advised that the experience of some practitioners working in the Superannuation and Total and Permanent Disability practice is that in the majority of cases, superannuation funds and insurers will maintain their original denial to pay a claim or will fail to respond within the requisite time frames. 29. As such, the internal dispute resolution processes often fail to contribute to the earlier resolution of disputes, and may cause further delays and operate to the disadvantage of the complainants. 30. The following examples are provided to highlight this point: (a) Ms H left work due to debilitating symptoms arising from Hashimoto's disease and chronic fatigue syndrome. Ms H, who had an income protection policy with an insurance provider, supported her claim under the policy by two medical certificates. The insurer had initially paid under the policy but terminated the payments following an independent medical examination conducted by the insurer's identified doctor (IME). Ms H sought re-instatement of the payments, however this request was denied. The denial was sent more than 60 days after the complaint was lodged (i.e. outside of the 45 day limitation period) and merely stated that the IME was correct. Ms H has commenced action in the District Court. The delay in proceedings has meant that Ms H has been required to survive on limited means, relying on Centrelink payments and unable to receive payments pursuant to her insurance policy. (b) Ms F suffered orthopaedic injuries and was unable to return to work. Ms F s superannuation fund and its insurer paid Ms F disability benefits for 2 years but declined to pay the TPD lump sum, on the basis that the condition had not stabilised. Ms F s attempts at rehabilitation were unsuccessful, a claim supported by her treating specialist. The superannuation fund demanded that Ms F be further examined by a doctor of the insurer's choice. Proceedings were commenced in the Supreme Court. Following the commencement of proceedings, the insurer advised that the claim had been accepted and agreed to pay legal costs and interest. The client was not required to undergo further medical examinations or rehabilitation programs and received a lump sum payment. 31. In the context of professional negligence claims, the relevant Practice Notes of both the Supreme and District Courts require the plaintiff to file evidence of breach of duty of care, causation and damages when issuing a Statement of Claim. However, there is no onus on the proposed defendant to participate in any pre-litigation discovery or disclosure. 32. Furthermore, ambiguity in Part 2A of the Civil Procedure Act 2005 (NSW), which does not allow for a potential defendant to adhere to the obligation to disclose relevant information, may make it difficult to obtain a potential defendant's medical records. The Law Council is advised that in circumstances where a potential defendant is unwilling to disclose relevant information, the defendant has argued that the information was sought in an 'investigation' context as opposed to formal litigation and need not be disclosed, thereby defeating the purpose of Part 2A. Resolving Disputes Without Courts Measuring the Impact of Civil Pre-Action Obligations Page 7

10 33. As such, pre-action obligations in the context of professional negligence claims may result in additional costs and burdens on a plaintiff, which are not similarly required to be met by a potential defendant. Challenges to pre-action protocols 34. The Law Council considers that pre-action obligations may in some cases provide an additional point of dispute, with associated higher costs. 35. The Explanatory Memorandum as circulated in the House of Representatives relating to the Civil Dispute Resolution Bill 2010 (Cth) by the then Attorney-General, the Honourable Robert McClelland MP noted the overall aims of the Bill (at page 4) were: to change the adversarial culture often associated with disputes; to have people turn their minds to resolution before becoming entrenched in a litigious position; and where a dispute cannot be resolved, ensuring that if a matter does progress to court, the issues are properly identified, ultimately reducing the time required for a court to determine the matter. 36. However the Law Council is concerned that additional disputes may arise on the basis of: uncertainty surrounding the relevant obligations; and / or whether a party has adequately satisfied their pre-action obligations (such as taking all genuine steps to resolve the dispute, as is required under the Civil Dispute Resolution Act 2010). The need for further data 37. The Law Council considers that, at present, there is insufficient data regarding the impacts of pre-action protocols. Stakeholder views on the effectiveness of preaction protocols differ depending on the particular context or type of matter under consideration. 38. As highlighted earlier, although pre-action protocols have been applied with some success in the context of simple personal injury and medical negligence matters, the effectiveness of pre-action protocols in the context of other matters, including complex injuries cases, commercial litigation and superannuation and TDP cases, is questionable. 39. Pre-action negotiations may be beneficial to the claimants and defendants alike in appropriate cases. However, in more complex claims, where liability and damages are disputed, the traditional court based resolution with court imposed mediations may be preferable, to ensure access to justice and the swift resolution of disputes. 40. The Law Council understands that the Federal Court is currently undertaking a review of the operation of the Civil Dispute Resolution Act 2010 (Cth), which came into effect on 1 August Resolving Disputes Without Courts Measuring the Impact of Civil Pre-Action Obligations Page 8

11 41. In the absence of empirical data, the Law Council is unable to provide further comments in relation to the operation of pre-action obligations arising from the Civil Dispute Resolution Act and the extent to which it may have been effective or otherwise, to promote the timely, just and cost effective resolution of disputes. 42. The Law Council notes that reliable, consistent, comparable court statistics about referral to, and use of, ADR and the outcome, and impact, of ADR is not readily available in all jurisdictions in Australia. The Productivity Commission s Report on Government Services does not include any data on ADR or arbitration/mediation as part of justice system statistics While individual courts and tribunals may record some information, possibly available in an annual report or on a website, this information is not consistent or comparable across jurisdictions or over time. 44. As a result of this lack of comparable data, Australian ADR and civil litigation reform policy does not have a strong evidence base and it is difficult to construct criteria or benchmarks to initiate or evaluate programs. The National Alternative Dispute Resolution Advisory Council has repeatedly called for consistent data collection criteria, including in its recent 2009 report The Resolve to Resolve - Embracing ADR to Improve Access to Justice in the Federal Jurisdiction Detailed consideration of the purpose of pre-action protocols may better enable an assessment of the extent to which pre-action obligations have been successful in contributing towards the resolution of disputes. 46. The Law Council therefore highlights the need for further efforts to be made to collect data and evidence on the effects of civil pre-action obligations to better inform the operation and application of civil pre-action obligations. This recommendation is made with the understanding that the legal profession s cooperation will be important, as information regarding the effective operation of preaction obligations in contributing to the resolution of claims is unlikely to be available through the traditional sources. 47. The Law Council would be happy to provide any further assistance or comments. 3 Productivity Commission, 2012 Report on Government Services 2012, C4 Available online at: data/assets/pdf_file/0020/114932/16-government-services partc.pdf 4 National Alternative Dispute Resolution Advisory Council, 2009, The Resolve to Resolve Embracing ADR to Improve Access to Justice in the Federal Jurisdiction Available online: Resolving Disputes Without Courts Measuring the Impact of Civil Pre-Action Obligations Page 9

12 Attachment A: Profile of the Law Council of Australia The Law Council of Australia exists to represent the legal profession at the national level, to speak on behalf of its constituent bodies on national issues, and to promote the administration of justice, access to justice and general improvement of the law. The Law Council advises governments, courts and federal agencies on ways in which the law and the justice system can be improved for the benefit of the community. The Law Council also represents the Australian legal profession overseas, and maintains close relationships with legal professional bodies throughout the world. The Law Council was established in 1933, and represents 16 Australian State and Territory law societies and bar associations and the Large Law Firm Group, which are known collectively as the Council s constituent bodies. The Law Council s constituent bodies are: Australian Capital Bar Association Australian Capital Territory Law Society Bar Association of Queensland Inc Law Institute of Victoria Law Society of New South Wales Law Society of South Australia Law Society of Tasmania Law Society Northern Territory Law Society of Western Australia New South Wales Bar Association Northern Territory Bar Association Queensland Law Society South Australian Bar Association Tasmanian Independent Bar The Large Law Firm Group (LLFG) The Victorian Bar Inc Western Australian Bar Association Through this representation, the Law Council effectively acts on behalf of approximately 56,000 lawyers across Australia. The Law Council is governed by a board of 17 Directors one from each of the constituent bodies and six elected Executives. The Directors meet quarterly to set objectives, policy and priorities for the Law Council. Between the meetings of Directors, policies and governance responsibility for the Law Council is exercised by the elected Executive, led by the President who serves a 12 month term. The Council s six Executive are nominated and elected by the board of Directors. Members of the 2012 Executive are: Ms Catherine Gale, President Mr Joe Catanzariti, President-Elect Mr Michael Colbran QC, Treasurer Mr Duncan McConnel, Executive Member Ms Leanne Topfer, Executive Member Mr Stuart Westgarth, Executive Member The Secretariat serves the Law Council nationally and is based in Canberra. Resolving Disputes Without Courts Measuring the Impact of Civil Pre-Action Obligations Page 10

13 Resolving Disputes Without Courts Measuring the Impact of Civil Pre-Action Obligations Page 11

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