Implementation issues

Front-loading of costs

5.25 A central criticism of pre-action protocols in the UK is that, by requiring more work to be done up front, the protocols have front-loaded cost for litigants and, in some cases, increased the total cost of litigation.[33] For example, one comprehensive cross-section and time-series data study concluded that ‘it seems overall case costs have increased substantially over pre-2000 costs for cases of comparable value’, with the Woolf reforms being a plausible explanation.[34]

5.26 Professor Michael Zander suggests, in relation to the Woolf reforms, that cases subjected to pre-action protocols can be divided into three categories:

  • cases that prior to the introduction of pre-action protocols would have gone to trial, and still go to trial;

  • cases that would have gone to trial prior to the introduction of pre-action protocols, but are settled as a result of work done in the protocol period; and

  • cases that would have settled anyway and compliance with pre-action protocols have only added to the cost.[35]

5.27 While Zander notes that the data is unclear, he suggests that if the majority of cases lie in the third category (where extra work is required which brings little or no benefit) instead of the second category (where there are obvious cost savings), then the Woolf reforms have not met the objective of reducing litigation costs.[36] This accords with some views that pre-action protocols in the UK ‘provided quicker, although not necessarily cheaper, justice and sensible, effective case handling’.[37]

5.28 While studies that have examined the impact of the Woolf reforms have found positive changes in the culture of litigation marked by greater cooperation and increases in settlement,[38] the problems of cost were still intractable.[39]

5.29 In a 2009 review of the costs of civil litigation in the UK, Lord Justice Jackson was of the opinion that general pre-action protocols lead to substantial delay and additional costs, and recommended that the general protocol be repealed, because ‘one size does not fit all’.[40] In addition, in relation to specific pre-action protocols, it was noted that

there is a clear majority view amongst commercial litigators and counsel, shared by Commercial Court judges, that pre-action protocols are unwelcome in commercial litigation. They generate additional costs and delay to no useful purpose at all.[41]

5.30 These sentiments were echoed in 2004 in a report by the Hong Kong Chief Justice’s Working Party on Civil Justice Reform, which cautioned that:

Pre-action protocols should only be adopted where such front-loading is considered justifiable in that the benefits of early settlement resulting from the protocol are likely to outweigh the disadvantages from such front-loading.[42]

5.31 A number of Australian legal professional bodies have also expressed similar concern about the front-loading of costs. For example, the New South Wales (NSW) Law Society is of the opinion that:

what constitutes ‘cost effective’ [pre-action protocols] will vary greatly depending on the nature of the disputes and the parties involved. However, mandatory pre-action protocols will effectively increase the cost of litigation by adding another layer of costs to the litigation process ... Pre-action protocols are also inappropriate for low value claims because of the increased cost involved, and in many cases are completely unnecessary.[43]

5.32 Others argue that the front-loading of costs is justified where the protocols reduce the total cost of litigation.[44] For example, in cases where compliance with pre-action protocols successfully narrows the issues in dispute, there may be cost savings associated with a more expedited, less complex and shorter trial.[45] As Lord Woolf foreshadowed in his report:

[t]here are practitioners who fear that the use of pre-action protocols will lead to unnecessary front-loading of costs. While the protocols will certainly bring work forward by comparison with the usual present practice, this is to be welcomed. The work has to be done to enable cases to be resolved, and bringing the work forward will enable some cases to settle earlier.[46]

5.33 Thus, while pre-action protocols may have the effect of front-loading costs,

it does so in a controlled manner while increasing the possibility of settlement ... [This] is preferable to the failure to fully pursue settlement, and ultimately incur significant costs during the course of litigation, where they can escalate in an unrestrained way.[47]

5.34 The ALRC is interested in stakeholder views on how front-loading of costs can be reduced, and what safeguards can be implemented to ensure that individual litigants are not denied access to justice as a result of the operation of pre-action protocols.

Question 5–1 What measures could be taken to reduce the front-loading of costs in relation to pre-action protocols?

Question 5–2 What safeguards could be implemented to ensure that individual litigants are not denied access to justice as a result of pre-action protocols?

Information exchange and narrowing the issues in dispute

5.35 As noted above, where settlement is not achieved as a result of compliance with pre-action protocols, a secondary aim of the protocols is to facilitate relevant information exchange and narrow the issues in dispute. Pre-action protocols can impose requirements for information exchange that range from a simple letter of demand to requiring a detailed narrative and legal analysis, coupled with the provision of documents and information essential to the claim.

5.36 For example, information exchange may be looked at in the context of international arbitration. Under the International Bar Association Rules on Taking Expert Evidence in International Arbitration (IBA Rules), each party must ‘within a time specified by the Arbitral Tribunal, submit to it and to all other parties all documents available to it on which it relies ... except documents that have already been submitted by another party’.[48] Parties may also submit a Request to Produce, containing a description of each document requested and statements as to how the documents are relevant to the case and material to its outcome.[49] The responding party must then produce such documents, or state an objection in writing to the Arbitral Tribunal. The Tribunal may then make a ruling, and would only compel disclosure where, among other things, ‘the issues that the requesting party wishes to prove are relevant to the case and material to its outcomes’.[50]

5.37 Prior to proceedings, the parties submit a claims memorial which contains not only a summary of the facts but also their legal analysis and attaches any documents on which the party intends to rely, including in some instances, witness statements.[51] The ALRC heard in consultations that requiring parties to provide a kind of ‘narrative’ as a pre-litigation step would aid in narrowing the issues in dispute. One early submission to the Inquiry suggested that the ‘the IBA rules and the hybrid approach to discovery should be considered as an alternative to the current regime of discovery’.[52]

5.38 There may be concerns that pre-action protocols governing information exchange cannot operate with sufficient flexibility to take account of the principle of proportionality. In cases where the issues are less complex and the number of relevant documents is small and easily identified, allocating resources to the disclosure of such documents may be cost-effective. In larger, more complex cases, the extent of the obligations imposed on the parties by pre-action protocols might not take into consideration both the nature of the dispute and the usefulness of detailed information exchange, having regard to the front-loading of costs. A measure of flexibility may be necessary to ensure access to justice for all litigants.[53]

5.39 The ALRC is interested in stakeholder views on how pre-action protocols might be best designed to facilitate information exchange between the parties, and whether principles from international arbitration would be instructive in this regard. Further, the ALRC seeks views about what else should be included in pre-action protocols for particular types of proceedings that would aid parties in narrowing the issues in dispute.

Question 5–3 What requirements can be incorporated into pre-action protocols to maximise information exchange between parties in civil proceedings before federal courts?

Question 5–4 What else should be included in pre-action protocols for particular types of proceedings to aid parties in narrowing the issues in dispute?

Compliance, enforcement and satellite litigation

5.40 Pre-action protocols have also been criticised for creating a battleground for ‘satellite litigation’,[54] arising from disputes as to whether a party has complied with the relevant protocol. It appears important, therefore, that courts play an active role in the enforcement of pre-action protocols, and for sanctions to be clear and effective.

5.41 Indeed, non-compliance with the protocols and the lack of proper enforcement of sanctions are among the chief criticisms of the Woolf reforms.[55] For example, it has been noted that while some courts are willing to strictly enforce compliance with the pre-action protocols, this is by no means universal.[56] As Gerber and Mailman note in relation to the Technology and Construction Court in England:

There have been instances reported where courts have asked parties at case management conferences whether they have complied with the requirements of the relevant protocols, and the parties have responded ‘yes’ even when they have not. The courts in these cases did not look behind this, or seek details in compliance.[57]

5.42 John Peysner and Mary Seneviratne have identified that some practitioners in the UK post-Woolf reforms ‘thought that the overriding objective gave too much discretion to the courts’,[58] resulting in a lack of guidance and inconsistent interpretation of the rules. Views were also expressed that the certainty of the old system resulted in cost savings.[59] This may be a symptom of a lack of education of the judiciary and the legal profession in complying with any proposed pre-action protocols, and the relative lack of case law in the area.

5.43 Further, sanctions in the form of cost orders may have substantial adverse impacts on self-represented litigants, who would require legal advice in the pre-litigation process.[60] There may be concerns that pre-litigation requirements would place further burdens on community legal centres and other such organisations that are already under-resourced. The prospect of an adverse cost order might also pressure some litigants into abandoning a claim, thus denying them access to justice.[61]

Question 5–5 Are cost sanctions an effective mechanism to ensure that parties comply with pre-action protocols?

[33] H Genn, Judging Civil Justice (The Hamlyn Lectures) (2009), 56.

[34] P Fenn, N Rickman and D Vancappa, ‘The Unintended Consequences of Reforming Civil Procedure: Evidence from the Woolf Reforms in England and Wales’ (Paper presented at 26th Annual Conference of European Association of Law and Economics, Roma, Italy), 28.

[35] M Zander, ‘Where Are We Heading with the Funding of Civil Litigation?’ (2003) 22 Justice Quarterly 23, 23–25.

[36] Ibid.

[37] R Byron, ‘An Update on Dispute Resolution in England and Wales: Evolution or Revolution?’ (2001) 75 Tulane Law Review 1297, 1312.

[38] See P Abrams, T Goriely and R Moorhead, More Civil Justice? The Impact of the Woolf Reforms on Pre-action Behaviour (2002), prepared for the Law Society and Civil Justice Council, xiii: The study was mainly qualitative and was based on in-depth interviews with 54 lawyers, insurers, and claim managers. See also J Peysner and M Seneviratne, The Management of Civil Cases: The Courts and the Post-Woolf Landscape (2005) prepared for the Department for Constitutional Affairs (UK).

[39] Ibid.

[40] R Jackson, Review of Civil Litigation Costs: Final Report (2009), 343.

[41] Ibid, 345.

[42] Chief Justice’s Working Party on Civil Justice Reform (Hong Kong), Civil Justice Reform: Final Report (2004), 65–66.

[43] Law Society of NSW, Submission to A Strategic Framework for Access to Justice in the Federal Justice System (2009), 2–3.

[44] M Legg and D Boniface, ‘Pre-action Protocols in Australia’ (2010) 20 Journal of Judicial Administration 39, 50.

[45] P Gerber and B Mailman, ‘Construction Litigation: Can We Do It Better?’ (2005) 31 Monash University Law Review 237, 245.

[46] Lord Woolf, Access to Justice: Final Report (1996), 113.

[47] P Gerber and B Mailman, ‘Construction Litigation: Can We Do It Better?’ (2005) 31 Monash University Law Review 237, 245.

[48] International Bar Association, IBA Rules on Taking Evidence in International Arbitration (2010), Art 3(1).

[49] Ibid, Art 3(a)–(b).

[50] Ibid, Art 7.

[51] M Born, International Commercial Arbitration: Commentary and Materials (2001), 459.

[52] Monash University Law Students’ Society ‘Just Leadership’ Program, Submission DR 01, 7 October 2010.

[53] See Australian Government Attorney-General’s Department Access to Justice Taskforce, A Strategic Framework for Access to Justice in the Federal Civil Justice System (2009), 104.

[54] M Legg and D Boniface, ‘Pre-action Protocols in Australia’ (2010) 20 Journal of Judicial Administration 39, 54.

[55] R Jackson, Review of Civil Litigation Costs: Final Report (2009), 396.

[56] P Gerber and B Mailman, ‘Construction Litigation: Can We Do It Better?’ (2005) 31 Monash University Law Review 237, 249.

[57] Ibid, citing C McKenna and C Cummins, The Construction and Engineering Pre-action Protocol (2005) <www.law-now.com/> at 25 October 2010. This paper was based on responses from practitioners and judges to a survey evaluating the success of pre-action protocols in the UK.

[58] J Peysner and M Seneviratne, The Management of Civil Cases: The Courts and the Post-Woolf Landscape (2005) prepared for the Department for Constitutional Affairs (UK), iii.

[59] Ibid, 16.

[60] See Victorian Law Reform Commission, Civil Justice Review, Report 14 (2008), 141 where a number of submissions are summarised addressing these issues.

[61] Ibid.