The need for a tailored approach?

11.80 The implementation issues identified earlier have led to considerable support for tailored pre-action protocols for specific types of dispute, recognising that in some instances there should in fact be no applicable protocol.^[127]

11.81 Lord Woolf recognised the importance of targeted protocols, stating that pre-action protocols ‘are not intended to provide a comprehensive code for all pre-action behaviour, but will deal with specific problems in specific areas’.^[128] Indeed, Lord Jackson’s review found that general pre-action protocols led to substantial delay and additional costs, and recommended that the general protocol be repealed, because ‘one size does not fit all’.^[129]

11.82 The Hong Kong Chief Justice’s Working Party on Civil Justice Reform considered that pre-action protocols might have a bigger role to play in specialist lists, rather than general litigation in other courts.^[130] The Working Party did not make any recommendations for the adoption of a general pre-action protocol, and concluded that any specific pre-action protocols introduced in specialist lists should be at the discretion of the courts.^[131]

11.83 Similarly, the Strategic Framework cautioned that not all matters that appeared before courts would be suitable for pre-action protocols. For example:

in the migration jurisdiction, claims have already been through an extensive merits review process, and there is a high volume of relatively simple proceedings … Introducing additional pre-action steps in this process is likely to extend the process and increase costs.^[132]

11.84 Rather, it considered that pre-action protocols might best be targeted at categories identified as complex and time consuming, such as: taxation, competition law, consumer protection law, human rights and intellectual property matters.^[133]

11.85 The report cautioned that, in designing pre-action protocols, the challenges identified in the UK had to be taken into account, including: effective enforcement mechanisms and sanctions; avoiding excessive front-loading of costs; and safeguards to avoid their misuse as a litigation strategy to inconvenience or intimidate the other party.^[134] The report recommended that the Australian Government Attorney-General’s Department should work with federal courts to determine types of matters suitable for pre-action protocols.^[135]

11.86 As Michael Legg and Dorne Boniface note:

The task is to identify the appropriate categories of case and the pre-action steps that will be beneficial. It should also be noted that pre-action protocols may be the victim of their own success. If the role of the protocol in securing more speedy resolution of a dispute is not identified then it may be assumed that the dispute would have resolved without the protocol.^[136]

11.87 In the Consultation Paper, the ALRC asked the following questions about pre-action protocols:

• what measures could be taken to reduce the front-loading of costs in relation to pre-action protocols;^[137]

• what safeguards could be implemented to ensure that individual litigants are not denied access to justice as a result of the operation of pre-action protocols;^[138]

• what requirements could be incorporated into pre-action protocols to maximise information exchange between parties in civil proceedings before federal courts;^[139]

• what else should be included in pre-action protocols for particular types of proceedings to aid parties in narrowing the issues in dispute;^[140] and

• whether cost sanctions are an effective mechanism to ensure that parties comply with pre-action protocols.^[141]

11.88 The ALRC proposed that the Australian Government and the Federal Court, in consultation with relevant stakeholders, should work to develop specific pre-action protocols for particular types of civil dispute with a view to incorporating them in Practice Directions of the Court.^[142]

Reducing front-loading of costs

11.89 Most of the submissions that responded to the question about measures that could be taken to reduce front-loading of costs,^[143] made practical suggestions as to how pre-action protocols could be formulated so as to reduce the front-loading of costs. The measures suggested were either couched in broad terms or else argued that particular matters should be exempt from pre-action protocols.

11.90 A number of submissions argued that an essential measure to reduce such front-loading of costs would be to take a tailored approach, whereby pre-action protocols are only used for suitable cases for the application of measures to reduce front-loading of costs.^[144] The Civil Litigation Committee of the Law Society of NSW’s Young Lawyers (NSW Young Lawyers) submitted that ‘research indicates that protocols are likely to be more useful and cost-effective for cases with a significant amount of uniformity’.^[145]

11.91 Michael Legg explained:

Generally speaking [suitable cases] are matters that are likely to be contested and for which the costs associated with compliance with the pre-action protocol are proportionate to what is at stake in the proceedings.^[146]

11.92 Several submissions suggested that complex commercial disputes may not be suitable cases,^[147] at least for specific pre-action protocols.^[148] The Queensland Law Society explained that ‘in the case of commercial disputes, the parties may [already] have engaged in an unsuccessful contractual dispute resolution process’.^[149] NSW Young Lawyers submitted that commercial litigation in the Federal Court and Federal Magistrates Court would be inappropriate matters for mandatory pre-action protocols.^[150]

11.93 The Public Interest Advocacy Centre—whose submission was endorsed by both the Federation of Community Legal Centres (Victoria) Inc and the Public Interest Law Clearing House (Vic) Inc—submitted that ‘the diversity of the issues (and evidence) required to successfully bring human rights claims’ meant that it would be ill-suited to conceive of a specific pre-action protocol under the ‘loose heading’ of human rights.^[151]

11.94 Other measures that were identified that could possibly assist in reducing the front-loading of costs in relation to pre-action protocols were ensuring that:

• the particular steps proposed to constitute a pre-action protocol had been carefully examined given that different steps will have different impacts on costs;^[152]

• parties were clear on the steps that they need to take;^[153]

• protocols were not overly prescriptive;^[154] and

• a proportionate approach was taken with respect to compliance with the protocol^[155] ‘which means [the parties] have a clear idea of what a case is worth’ and ‘the cost of compliance is a fraction of the amount at stake’.^[156]

11.95 A group of large law firms submitted that ‘[t]his issue goes beyond a discussion limited to discovery’ and it ‘requires a very detailed response which we feel is beyond the current scope of the Consultation Paper’.^[157]

Safeguards for access to justice

11.96 As to the safeguards that could be implemented to ensure that individual litigants are not denied access to justice as a result of the operation of pre-action protocols, submissions expressed a range of possibilities which suggests that a number of measures may be required. The Law Council observed that:

courts will increasingly be required to assess whether disputants have acted reasonably, genuinely or even in a proportionate manner in respect of their pre-litigation activities. … [S]ome courts have [already] begun to develop approaches. These broader approaches require courts to (in effect) determine whether an approach is unnecessarily wasteful.^[158]

11.97 However, generally submissions varied depending on the view taken about how pre-action protocols could impinge upon access to justice and also depending on the view taken of who constituted an ‘individual litigant’.

11.98 Legg submitted that the current requirements in the Commonwealth and the soon-to-be-repealed Victorian legislation on pre-action protocols—that provide that a failure to comply with the protocol does not prevent the commencement of litigation—do not technically impede access to justice. He submitted that this was because ‘individual litigants … are not prevented from accessing the court when they do not or are unable to comply with the pre-action protocol requirements’.^[159] However, he acknowledged that ‘[t]his approach does not shield them from a later cost order’.^[160]

11.99 For some, however, the costs implications of pre-action protocols were seen as a real impediment to access to justice.^[161] For example, NSW Young Lawyers committee submitted that:

One potential consequence of a failure to comply with an applicable protocol is that, unless the court orders otherwise, the infringing party would be ordered to pay the costs of the other party on an indemnity basis if unsuccessful. The Committee considers that the risk of an adverse costs order is a significant barrier to access to justice for self-represented litigants (and for financially disadvantaged parties generally).^[162]

11.100 The Department of Immigration and Citizenship (DIAC) expressed concern that ‘the front-loading of costs necessarily entails significant issues with regard to individuals’ access to justice’.^[163] Accordingly, ‘the front-loading of costs must be kept to a level that does not make it prohibitively expensive for individuals to bring actions against Government agencies’.^[164]

11.101 By contrast, a group of large law firms submitted that:

The issue with respect to the application of pre-action protocols to individual litigants appears to arise from concerns that the protocols:

(a) will require those litigants to obtain legal advice regarding compliance with pre-action protocols; or

(b) could have the effect of unnecessarily restricting the individual’s access to a fair hearing because his/her claim is deemed ‘unmeritorious’ prior to being considered by a [c]ourt.

However, the nature of litigation is such that all litigants (not just individual litigants) will require advice and assistance to properly prepare and run a case. The existence of pre-action protocols may add to the matters in relation to which litigants obtain such advice, but their existence will not of themselves require litigants to obtain such advice.^[165]

11.102 Legg queried what was meant by the expression ‘individual litigant’ in the ALRC’s question:

Does it mean:

• a self-represented party who through lack of legal representation is either unaware or unable to comply with the relevant protocol;

• any natural person, whether legally represented or not; or

• any person, including corporations who must be legally represented?^[166]

11.103 He submitted that ‘[t]he amount of leeway a court may or should give in relation to non-compliance is likely to vary depending on which of the above scenarios is applicable’.^[167] He identified the following possible safeguards:

• Including the lack of legal representation or lack of financial resources in the matters to be considered in determining what are ‘reasonable’ or ‘genuine’ steps in relation to compliance with a protocol.

• Allowing an individual to apply to the [c]ourt to be relieved from compliance with a pre-action protocol.

• The provision of simple pro-forma letters of demand that can be used in relation to certain categories of case.^[168]

11.104 NSW Young Lawyers focused on the needs of ‘self-represented litigants (and … financially disadvantaged parties generally)’,^[169] whereas the group of large law firms focused on the needs of ‘all litigants’.^[170] Accordingly, submissions proposed different possible safeguards depending on their view of who needed protection with respect to access to justice.

11.105 For NSW Young Lawyers, for example, ‘access to justice for individual litigants can best be achieved where the costs of abiding by the protocols are not fixed’.^[171] It was of the view that

there is too much variation within Federal Court matters for fixed costs to provide any reasonable and reliable reimbursement to a party. If fixed costs were to be imposed, it is likely that the paying party would be advantaged at the expense of the party receiving the costs as fixed costs rarely reflect the true costs of litigation. … [T]his may act to reduce access to justice.^[172]

11.106 DIAC referred to the safeguard afforded by O 80 of the Federal Court Rules (Cth) which provides for the appointment of pro bono legal assistance by the court.^[173]

11.107 By contrast, as the group of large law firms were of the view that ‘[a]s far as the need to obtain advice is concerned, the position of an individual litigant is no different to the position of any other litigant’,^[174] they did not consider there to be a need for any safeguards, other than acknowledging that:

[t]he financial circumstances of the parties may be relevant to costs in circumstances where the court is asked to consider whether it is reasonable to require an individual litigant to comply with any of the steps required under a pre-action protocol.^[175]

Maximising information exchange

11.108 Several submissions critiqued the goal of ‘maximising’ information exchange.^[176] For Legg, information exchange ‘needs to focus on quality of information not just quantity’.^[177] Both the Queensland Law Society and the group of large law firms thought that specific obligations to maximise information exchange may detract from the primary purpose of a pre-action protocol, namely to effect early resolution of the dispute.^[178] The Queensland Law Society explained:

If such protocols are required, they should not result in parties having to undertake significant, unregulated, searches for records in order to comply. The costs of complying could defeat the objectives of the process.^[179]

11.109 The group of large law firms submitted that, ‘in some instances, maximising information exchange may broaden, rather than narrow, the issues in dispute’.^[180] For this reason—and to avoid possible ‘fishing expeditions’—they cautioned that careful consideration needed to be given to the drafting of limits.^[181] Rather than focusing on maximising information exchange, there is need for information exchange to be proportionate.^[182] The group also submitted that the nature of the dispute was relevant in determining to what extent information should be disclosed pursuant to a pre-action protocol.^[183] For example, there could be greater benefit in the early exchange of information in smaller scale disputes and such requirements would be ‘particularly ill-suited to large complex disputes’.^[184]

11.110 Legg advocated a broader approach: ‘a party should disclose the documents or information which demonstrates why it has a cause of action or why it is entitled to relief’.^[185] However, he acknowledged that ‘such a requirement is more easily stated than complied with’,^[186] particularly given that ‘[p]re-action protocols apply prior to the filing of pleadings so that determining what the necessary information to exchange is may be even more difficult to define’.^[187] Nonetheless, Legg submitted that:

these tests may provide some guidance as to what would be an acceptable level of disclosure i.e. the documents or information that a party would reasonably expect to rely on if it was to commence legal proceedings.^[188]

11.111 By contrast, the group of large law firms stated that:

At a general level, we consider that it is too onerous to require parties attempting settlement in a pre-litigation phase to compile a list of ‘critical documents’ leading to a formal exchange with the other parties as this could unnecessarily distract or delay any settlement or ADR negotiations and, in our view, will lead to front-loading of costs. We are concerned about the rise of satellite litigation over the meaning of ‘documents critical to the resolution of the dispute’.^[189]

11.112 The Law Council cautioned against introducing provisions similar to the Victorian provisions, given that they have only been operating for a short time, ‘in line with its position on pre-action protocols’.^[190]

Narrowing issues in dispute

11.113 Only two submissions specifically responded to the question about requirements to aid the narrowing of the issues in dispute.^[191] The Law Council explained that it concurred with some of the commentary in the Consultation Paper that ‘obligations imposed on parties by pre-action protocols may not be able to take into account the nature of the dispute’.^[192] By contrast, Legg submitted that:

The issues in dispute may be further narrowed if parties are able to take the next step after the provision of relevant information/documentation and provide their perspective or interpretation as to why they are entitled to relief. The party should ‘join the dots’ for its opponent so that a party’s position is clear.^[193]

11.114 However, he acknowledged that such a solution is not problem-free, noting that:

this additional step will incur additional costs as there is a need to provide a document that is compelling in its reasoning and legal analysis. Consequently, the amount of costs which are front-loaded are increased.^[194]

Costs sanctions—an effective compliance mechanism?

11.115 Two submissions advocated the use of costs sanctions as an effective mechanism to ensure that parties comply with pre-action protocols. However, two other submissions expressed concerns. Some other possible compliance mechanisms were identified.

11.116 Both Legg and the NSW Young Lawyers submitted that there was value in using cost sanctions as a mechanism to ensure compliance with pre-action protocols.^[195] Legg observed that ‘[t]he use of costs awards is a traditional sanction in litigation’ and could assist to ensure compliance from the beginning, thus effecting the desired cultural change.^[196] NSW Young Lawyers emphasised that ‘the deterrent value of costs sanctions will likely be necessary in order to ensure compliance with pre-action protocols’.^[197]

11.117 A number of concerns were also expressed. A group of large law firms were concerned that such sanctions might give rise to further disputes:

as to whether a party complied with a pre-action protocol, and a resulting risk of increased costs for both parties and impositions on the judicial system. We note also that most cases do not progress to final costs orders or subsequent taxation/assessment, and query how much of a discipline this will impose on any prospective plaintiff or defendant who is minded to abuse the process.^[198]

11.118 The Law Council noted that there was little statistical data concerning the effectiveness of costs sanctions:

Studies compiled after the introduction of the Woolf Reforms in the United Kingdom are difficult to obtain and in any event may be of limited relevance considering the differences in the legal culture and framework in Australia.^[199]

11.119 Two submissions identified other options that could act as effective mechanisms to ensure that parties complied with pre-action protocols.^[200] NSW Young Lawyers thought that in its discretion in making procedural directions, the Federal Court should be able to take an unreasonable failure to comply with a pre-action protocol into account.^[201] The Law Council however thought that the ‘management of disputes’ would be a ‘better’ compliance mechanism than costs sanctions.^[202] Earlier in the Law Council’s submission, it had explained its preference for ‘a tailored approach to pre-action protocols and particularly ADR within a multi-door court concept’ where pre-action protocols—including discovery—would be managed by a court officer or ADR judge on a case-by-case basis.^[203]

Specific pre-action protocols

11.120 There was a general lack of support for the ALRC’s proposal that the Australian Government and the Federal Court, in consultation with relevant stakeholders, should work to develop specific pre-action protocols for particular types of civil dispute with a view to incorporating them in Practice Directions of the Court.

11.121 An issue that arose in two submissions—both in one submission in favour of the ALRC’s proposal^[204] and in one opposed to it^[205]—was the contention that pre-action protocols do not really constitute alternatives to discovery. Both the group of large law firms and the Queensland Law Society were of this view.

11.122 Both acknowledged that pre-action protocols were directed at encouraging the early resolution of disputes, particularly by way of ADR. While a pre-action protocol ordinarily requires the early disclosure of information, neither submission considered that this equated to a true alternative to discovery.

11.123 The group of large law firms explained:

The Commission’s discussion of pre-action protocols suggests that a pre-action protocol might be an ‘alternative’ to discovery. Similarly, the questions raised in the Consultation Paper suggested that, provided specific issues such as front-loading of costs can be addressed, greater use of pre-action protocols will address problems connected with current discovery practices.

As the Consultation Paper notes, pre-action protocols can be an important case management tool, facilitating ADR processes and early settlement of disputes. Where this is not possible, they may assist in narrowing the issues in dispute, which may reduce the extent of discovery required and thus reduce the time and expense associated with Court proceedings. However, we suggest that the formulation of pre-action protocols raise numerous issues that extend far beyond discovery and the scope of the present Inquiry. An appropriate pre-action protocol may go some way to addressing some of the problems with current discovery practices, but it will generally do so indirectly—by removing the need for litigation altogether, or by narrowing its overall scope. Pre-action protocols may yield some discovery-related benefits, but there does not appear to be any direct or necessary correlation.^[206]

11.124 This submission also stated that ‘[i]t would not be appropriate to tailor pre-action protocols to address specific problems arising in discovery’.^[207] The group’s reasons for holding this view were that pre-action protocols:

• that are designed to address discovery issues might undermine the settlement of disputes—for example, a pre-action protocol designed to maximise information may be used as a ‘fishing expedition’; and

• are not subject to the same regulation as is the case with preliminary discovery—for example, the latter requires that a party must have exhausted all other avenues of enquiry and ensures that they will only be granted discovery for specific limited purposes.^[208]

11.125 The group of large law firms concluded:

Given the number of other considerations relevant to pre-action protocols, their introduction ought to be considered in a context which is broader than their impact on discovery.^[209]

11.126 The majority of submissions that addressed the ALRC’s proposal for the development of specific pre-action protocols did not support it,^[210] focusing on possible problems with pre-action protocols. Some of the reasons advanced in opposition were that pre-action protocols could:

• increase costs,^[211] particularly by way of front-loading costs;^[212]

• impinge upon access to justice,^[213] particularly by increasing complexities for unrepresented or self-represented litigants;^[214]

• be inappropriate for public interest litigation where the aim of litigation is to obtain a legal ruling;^[215]

• create some practical difficulties as a general obligation to produce ‘key’ documents may be too vague and ambiguous;^[216] and

• delay the onset of litigation,^[217] presumably where litigation is required due to the principles in question or the intransigence of the parties.

11.127 Of the twelve submissions that responded to this issue,^[218] only three were clearly in favour of it,^[219] and arguably each was in favour of the wording of the proposal rather than the use of specific pre-action protocols as an alternative to discovery per se. For example, for the group of large law firms, ‘[p]re-action protocols are not an “alternative” to discovery’,^[220] although they considered that they ‘may indirectly assist in resolving problems associated with the discovery process’.^[221]

11.128 All three submissions that supported the ALRC’s initial proposal agreed that there needed to be a tailored approach to pre-action protocols.^[222] Legg explained:

[A]s the success of pre-action protocols depends on a bespoke approach it follows that there must be research or at least consultation to determine which categories of case benefit from a protocol and what pre-action steps those cases should be subject to.^[223]

11.129 The Law Council was of a similar view, arguing that ‘[d]etailed examination rather than a hasty implementation of specific pre-action protocols for streams of matters is required’.^[224]

11.130 Legg also submitted that the proposed consultation would be ‘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’.^[225]

11.131 For the Law Council, the proposal could be improved by use of the concept of a multi-door court house—as originally suggested in 1976 by Professor Frank EA Sander of Harvard Law School and which encompassed ADR.^[226]

11.132 These three submissions were muted as to the advantages of specific
pre-action protocols, as is illustrated by the comment of the large law firm group that—at best—pre-action protocols ‘may indirectly assist’ in addressing problems with the discovery process.^[227]

ALRC’s views

11.133 The ALRC considers that the question of measures that could be taken to reduce the front-loading of costs in respect of pre-action protocols goes beyond a discussion limited to discovery. As pre-action protocols are not an ‘alternative’ to discovery, the formulation of pre-action protocols raises a range of issues that extend beyond discovery and the scope of this Inquiry. Nevertheless there is value in canvassing the views on the matters raised as submissions provided constructive comments and insights.

11.134 The ALRC considers that some of the views expressed in submissions in respect of reducing the front-loading of costs reflect good sense. The ALRC considers that the measures suggested could possibly assist in reducing the front-loading of costs. However, the ALRC acknowledges that it may be a challenge to design pre-action protocols that meet all of these requirements. For example, there is a tension between ensuring the clarity of the steps while not being overly prescriptive.

11.135 The ALRC considers that a number of the safeguards to ensure access to justice that were suggested in submissions have merit, as reflected by the adoption of some in a number of jurisdictions. For example, the proposed amendments to the Civil Procedure Act 2005 (NSW) specifically state that a court may have regard to whether or not the persons in dispute were legally represented in determining whether to take the failure to comply with the pre-litigation requirements into account.^[228]

11.136 With respect to the question on requirements that could maximise information exchange, the ALRC agrees that, in a pre-litigation phase, it is preferable to aim for proportionate information exchange rather than focus on maximising information exchange.

11.137 Submissions took varying approaches as to what the requirements should be to assist this goal. Given the ALRC’s view that pre-action protocols are only tangentially relevant to discovery, the ALRC considers that this Inquiry is not the appropriate place to express a concluded view.

11.138 Submissions diverged in their response to the issue of the effectiveness of costs sanctions as a compliance mechanism. The ALRC notes that while the use of costs awards is a traditional sanction in litigation, there is little statistical data available to assess the effectiveness in the context of pre-action protocols. The ALRC considers that it cannot express a view on the effectiveness of cost sanctions as a compliance mechanism in this context.

11.139 In the Consultation Paper, the ALRC expressed the initial view that there was a strong case for the development of specific pre-action protocols for particular types of dispute, as they could prescribe more directly than ‘genuine’ or ‘reasonable’ steps requirements the conduct expected of prospective litigants when it comes to information disclosure and document exchange.^[229]

11.140 In light of submissions received—particularly the view expressed in two submissions that a pre-action protocol does not constitute a true alternative to discovery—the ALRC has re-evaluated the merits of its initial proposal.

11.141 The ALRC acknowledges that pre-action protocols aim to do more than ameliorate problems with discovery. This is particularly clear when one reflects on the fact that pre-action protocols are concerned with steps taken before the issuing of civil proceedings, whereas discovery is a procedure commonly sanctioned by the court in such proceedings. The two different procedures operate in different spheres.

11.142 The ALRC agrees with the large law firm group that ‘[p]re-action protocols may yield some discovery-related benefits, but there does not appear to be any direct or necessary correlation’.^[230] While pre-action protocols may result in benefits in the discovery sphere—such as promoting a more cooperative culture and the narrowing of the issues in dispute, possibly resulting in reduced overuse of discovery, possibly reduced costs, and possibly the settlement of the dispute before a need for discovery arises—these are indirect, albeit positive ‘by-products’.

11.143 The ALRC considers that there are a number of considerations relevant to the introduction of specific pre-action protocols. Indeed, the need to consider a number of issues is reflected by the series of questions that the ALRC asked of stakeholders, for example about measures to reduce the front-loading of costs, safeguards to ensure that access to justice is not impinged, and the effectiveness of cost sanctions to ensure compliance. The introduction of pre-action protocols should be considered in a context which is broader than their impact on discovery.

11.144 The ALRC concludes that it would be inappropriate to recommend the adoption of specific pre-action protocols from the perspective of wanting to address problems with discovery when they are not primarily aimed at remedying problems with discovery and given that their introduction raises a number of much broader considerations. In light of these considerations, the ALRC makes no recommendations in relation to the use of pre-action protocols.