The short answer is that we’d better be able to because as various people of high authority have commented, the current system is unsustainable. Here’s story as to why.
A costs decision handed down in the NSW Supreme Court in February showed National Australia Bank spent $75 million defending a suit brought by Idoport Pty Ltd, a company run by a technology entrepreneur, John Maconochie.
The case ran for 223 hearing days until it was dismissed when Idoport, which had spent $11 million on the case, ran out of money.
The bank’s bills included $35 million for its solicitors, Freehills, $23 million for reports by expert witnesses, $11 million for barristers and an extraordinary $4 million for photocopying.
I’m publishing an op ed on civil procedure in the Fin this coming Tuesday and below are some notes on the subject necessitated by the fact that in an op ed one only gets 700 odd words, and one has to spice it up – one has to engage the reader. While this shouldn’t – and generally doesn’t – involve any loss of value in the sense of just setting up diversions, the requirement to engage does dictate certain things about the way one makes one’s points. So here’s some additional material.
The problems are manyfold and tricky – as I say in the article, the devil is in the detail. One might say that there are three problems – one inherent in our current institutions, the other two inherent in the situation.
- The adversarial system means that the judge is an umpire rather than a truth finder. This means that the side with the weaker argument on any point (or in general) will labour the business of being beaten on the point. They’ll put their opponents to as high a standard of proof as possible, even if it’s all pretty much a lost cause.
- The problem is also one of asymmetric information. Even if it’s not an adversarial system, each side and the one in the middle, whether they be a judge in an adversarial system or an inquisitor in a civil law system has imperfect knowledge.
Here’s the problem as outlined by High Court Justice Haynes.
Except in unusual cases, it will be in the interests of one side . . . to obfuscate and delay. Usually only one side of the record will be anxious to isolate the determinative issue in the case and have that decided quickly. The other side will have powerful reasons to avoid that being done.
This calls for more ‘case management’. But there’s a bunch of problems here. Even if he’s keen to manage the case, the judge, and perhaps the side wanting to go on a fishing trip or to put its opponent to the test, won’t know what they’ll find. So it’s invidious, even kind of psychologically difficult for the judge to call off the search. And despite strongly worded overarching directions in legislated and regulated statements of the objects of procedure – such as NSW’s directions that the object of procedural rules is “the just, quick and cheap resolution of the real issues in proceeding” there are strict restrictions on how far judges can actually take their case management.
Ronald Sackville is an active voice in the call for more active attacks on the cost of litigation including case management, yet he wonders in hindsight about his own preparedness to let one litigant resist his preference for fewer expert witnesses, and more ‘hot tubbing’ which is the practice of experts giving their evidence together – enabling them to take each other up on various points.
As it happened, the expert evidence on competition issues took a substantial, but not excessive amount of hearing time. Nonetheless, with the benefit of hindsight I have little doubt that it would have been feasible for the experts to have given their oral evidence concurrently. Such a procedure would have been likely to save several days of hearing time without any loss of clarity or cogency in the presentation and testing of the experts opinions. Indeed, I suspect that the market definition issues would have been exposed more starkly had the experts been able to address each other directly than in fact occurred through the orthodox process of cross-examination.
The upshot of all this for me is that we’re unlikely to make much real progress until we go further towards an inquisitorial system – not the Spanish Inquisition (which no-one expects of course) but an exercise in which the judge has the primary task of coming to conclusions on facts and law with the parties there to put their oar in to defend their own interests.
That’s enough for one post, and I’d appreciate people’s thoughts on it.
Then I would hope to follow up with as second one further elaborating the way I would like to see things go. As a quick road map, I’ll concede that at least as far as revealed preference is concerned, the common law system actually seems superior to the civil law system. That is it’s preferred by business, which is a good test of what works in practice. I’ll argue that the common law has indeed got a bunch of critical things right, but that in terms of procedure, an inquisitorial system provides the way forward – but it would have to be a hybrid which retained the best aspects of the common law system, or not only might it fail to be a forward step, it might indeed be a backward one. (That having been said, I think the better things of our own system, in particular the respect for the autonomy of the litigants and for the ways in which communities have evolved of getting things done, would not be in any danger of being compromised. Political and professional support for them is too strong.)
No wonder the common law system is preferred by business.
It seems to be working wonderfully well for NAB, Freehills et al!
The common law system clearly works best for those with deep pockets, which is essentially the problem- It’s a Rolls Royce system.
You’re absolutely right, Nick. The court system is yet another case of government failure. People with disputes get around this government failure by settlement, ie. not actually resolving the essence of the dispute at all, but rather making calculations about the likelihood of success in, and the potential costs of, full-blown litigation.
“The adversarial system means that the judge is an umpire rather than a truth finder.”
The adversarial system acknowledges that The Truth will never be fully uncovered, but that a procedure whereby parties lead evidence and are then cross-examined on it is the best way to get as close as possible to The Truth. You can certainly argue whether that is right or not, but it is misleading to set up a dichotomy of “umpire” and “truth finder” because it implies that the umpire is indifferent to the truth. And to the extent that it implies that inquisitorial systems do not involve the weighing of conflicting evidence from parties whose interests are divergent, ie. umpiring, it also misleading.
“The upshot of all this for me is that were unlikely to make much real progress until we go further towards an inquisitorial system…”
The devil is in the details. What particular aspects of the inquisitorial system would you like implemented? Small things make a big difference when it comes to civil procedure.
Cheers
BBB
PS. it can be confusing to refer to the alternatives as ‘common law’ and ‘civil law’ when adversarial procedures are not exclusive to ‘common law’ countries and inquisitorial procedures are not exclusive to ‘civil law’ countries. The common law/civil law distinction is better used when highlighting the difference between systems which continue to include judge-made law as well as the general principle of precedent and systems that rely (at least officially) on statute alone.
Actually, it might also be worth mentioning where we can make the biggest gains: pleadings and the discovery process. This is where a lot of cash gets spent, and where a lot of the pretentious 19th-century procedural cruft resides. If you want your article to be well-informed, you’re going to have to look into what the Federal Court has done in the Victorian registry. Last I heard they had a rocket docket pilot going that aimed at getting rid of pleadings (not sure what they’ve got instead) and stripping down discovery. There was also talk of time limits for leading evidence at the hearing.
BBB
Changing the system from adversarial to inquisitorial has been the siren song of supposed reformers for years. It always founders on the practicalities. Have a look at how long cases run in France and Italy. Judges should be given a greater role earlier. In England the court gets involved soon after pleadings close (when a statement of claim is filed and served and the defence is filed and served). There are mini “hearings” where the court pushes the sides to explain why they are running various arguments and putting pressure on them to explain why they need the number of witnesses they propose calling . The result is that cases come on earlier and are far shorter in duration.
Lawyers are expensive, and little wonder when there is such a large demand and tightly limited supply. If (by chance) our governments had spent as much money and public emotion breaking the back of the lawyers union, as compared to the effort that went into the building workers or dockside unions, then the whole process would be cheaper.
Just my opinion but fishing trips should be ruled out completely. If the side seeking evidence is unable to clearly and concisely state the problem, what they are looking for and why, then they should be told to stop wasting the court’s time. A specific “anti-fishing” rule would give the judge ammunition to call it off, “Sorry, your search is vague, anti-fishing kick in”, or “Sorry, you didn’t find what you were looking for, you had your shot, no more of that”.
I’ve only skimmed over this particular case, but Idoport Pty Ltd seem to believe that they were heavily involved in the development of the “valuable Intellectual Property”. In which case you would think they could provide a nice, detailed list of what to search for. If they can’t provide that then this itself would be evidence that Idoport was only tangentially involved with the research and development effort, making me think that NAB should own the IP.
Naturally, a lot of this case goes into interpretation of the contract… one of my pet hates is creative contracts. If the government can do one thing for the citizens and for the legal industry it would be to make a registry of “standard” contract terms, with well understood meaning. They your contract can just refer to the terms that apply: I’ll have a 1001, 1451 and a 1321 with XXX as the A party and YYY as the B party. Contract done. It would take a bit of time and money to set it up, but save sooo much effort down the line, not just for people who end up in court, but also for people who don’t want to end up in court. To some extent, the Howard government tried this with AWA’s but they went the other way — let people write whatever into a contract, and then try and get it registered. It led to a big mess, and I think they are still behind in actually reading those things.
Thx all – I’ll try to respond to BBB’s questions in the part two, but the next installment (not part two) will be the column after it gets published tomorrow morning.
Can we clarify the issues here? As Tel suggests, it doesn’t look as though Idoport had a really strong case, yet they spent themselves into bankruptcy pursuing it. The implicit message of the post seems to be that NAB won because of its deep pockets, but a win at a cost of $75 million, none of which, presumably, will be recovered, doesn’t look like a good deal unless you assume that Idoport was highly likely to get a big judgement if the case had been decided on the merits.
An alternative possibility based on a very quick skim – Idoport’s losses in the early rounds were such that settling and paying NAB’s costs would bankrupt them anyway. So they elected to keep fighting in the hope that NAB would pay them to go away. NAB refused to do this, and spent a fortune to discourage likeminded litigants. I’m not sure where exactly this gets us.
Yes I agree John, the story looks like Idoport was something of a ‘troll’ – which received funding for its case from a hedge fund. (It isn’t quite a troll because it had previous contractual relations with NAB, and as I understand it the essence of the case was in contract, not IP).
And the size of its claim was $50 billion. As you say, I’m not really criticising NAB for standing up for itself. But one’s sympathies in the case are a bit of a tabloid diversion are they not?
There were a bunch of facts, and I don’t accept that we needed something like $100 million and a sizeable chunk of a decade to get to some resolution of them. That’s absurd, don’t you think?
And despite all that it IS ridiculous that one side won because of its deep pockets. It’s grossly unjust and grossly inefficient. It just so happens that we’re not very sympathetic to Idoport in this case.
The Idoport case is not the norm. Most cases in the superior courts run relatively smoothly and get to trial within 18 months – 2 years if they don’t setle (which most do). There will always be big complicated hard fought cases which will turn into battles of attrition. Have a look at the C7 litigation, the Pyramid cases of the early 90s and lets not forget the McLibel case in UK. Some cases go off the rails, are badly run by the parties and are badly managed by the courts. There is plenty enough wrong with the Australian system but compared to some of the civil law jurisdictions we move like greased lightening. Civil litigation in Italy is a joke. Even in some common law countries the record is utterly dismal. India has cases which have been running for 20 years. The UK system is hideously expensive (at least the London caes) but moves quickly and quite efficiently.
What usually bogs down big Supreme and Federal Court cases is discovery coupled with a fuzzy idea of what one is suing about. On the former any document relevant to an issue in dispute is discoverable. For example in the Longford class action that meant more than a dozen barristers spending more than a year poring over gas and fuel records about what warnings were given about a disruption to the supply line etc… On the latter point too many lawyers take the view that every possible cause of action possible should be pleaded in the alternative. That can mean taking a case in all sorts of directions.
While litigation has always had a bad wrap on cost the blow out in the time a case takes to run to judgment is a worrying modern phenomanum. The answer is close and ruthless management by judges, registrars and Masters. Hitting lawyers with sanctions like costs orders they have to pay themselves when they don’t meet a deadline is not a bad start. Applying the Federal Court’s rocket docket is another reform worth applying across the board.
As for one side winning because of deep pockets that has always been a fact of life. That is especially the case with practised iltigants like banks and insurance companies, the model corporate citizens. The antidote in personal injury is the no win no fee approach taken by plaintiff’s firms. In some cases contingency feees should be used. That keeps the plaintiff on the field.