Nicholas Gruen recently posted about the high cost of civil court proceedings in Australia (and for that matter throughout the common law world):
A more promising kind of imperialism would be the application of simple economic principles to the way various social systems are managed. HECs and managing child support within the tax system are examples of this kind of reform. We should apply it more widely to our system of civil law which, as it stands is a scandal – available to the rich and those poor enough to access legal aid, but only otherwise to those willing to risk a large part of their life savings.
I can see what Nicholas is saying, and it’s a powerful indictment of a legal system whose traditional design may (perhaps) deliver Rolls Royce justice but also at Rolls Royce prices. Moreover, well-intentioned reforms based on the recommendations of the UK Woolf Committee from the 1990s, the most frequently adopted approach to achieving more accessible and affordable civil justice, have at best had mixed success. Woolf-style reforms have been implemented to varying degrees by courts throughout Australia, arguably most fully in the Northern Territory’s Supreme Court.
These systems involve vigorous caseflow management by judges, designed to push cases along and reduce delay and unnecessary tactical time-wasting and expense-incurring tactics by parties with “long pockets”. There are strong costs incentives and disincentives to induce the parties to make detailed informal disclosure of their respective cases and make bona fide attempts to reach a negotiated settlement before even commencing proceedings. In the NT these reforms have certainly reduced the length of Supreme Court lists, apparently by causing quite a few matters either to be settled or abandoned at an early stage. However, it isn’t evident that they have reduced the actual costs of litigation significantly. As in the UK, all that has happened (at least for matters that don’t settle early) is that costs have become “front-end loaded” i.e. much more of the preparation work is done at an early stage of litigation. Surveys in the UK indicate that 81% of lawyers don’t believe that litigation costs have become cheaper for their clients.
However, in Australia that is a long way from the whole picture. For a start, no-fault workers’ compensation and motor accident compensation schemes in most states have effectively removed expensive, risky litigation as a necessary path to justice in the most common types of dispute that average citizens experience. The right to sue at common law is abolished or severely restricted in these areas in most jurisdictions, and actions between injured people and insurers are relatively uncommon (entertaining exceptions include proceedings as to whether injuries resulting from vigorous evening sexual activity while on a work-related trip amounted to a workplace injury).
More importantly, every state and territory now has a “civil and administrative tribunal”, largely copied from Victoria’s VCAT model. The NT has recently established its very own Northern Territory Civil and Administrative Tribunal (NTCAT). Unlike VCAT it doesn’t deal with all domestic building disputes, but it will progressively end up dealing with disputes under some 100 different Acts including residential tenancy disputes. Moreover, it will soon take over the Local Court’s general small claims jurisdiction, with the dollar limit for claims being lifted to $25,000 (personally I think it should be significantly higher again than that).
Tribunals run on the VCAT model are purpose-built to deliver speedy, simplified justice. The Rules and Forms are straightforward and designed to allow litigants to handle their own cases without lawyers. In the NT Act, one key to that objective is section 53 which sets out the overarching principles:
(1) In conducting a proceeding, the Tribunal must act fairly and according to the substantial merits of the matter that is the subject of the proceeding.
(2) The Tribunal:
(a) must comply with the rules of natural justice; and
(b) may inform itself in any way it considers appropriate and is not bound by the rules of evidence; and
(c) must act with as little formality and technicality, and with as much speed as the requirements of this Act, a relevant Act and a proper consideration of the matter permit; and
(d) must ensure, so far as is practicable, that all relevant material is disclosed to the Tribunal to enable it to decide the proceeding with all relevant facts.
(3) The Tribunal may accept any document into evidence despite any non-compliance with a time limit or other requirement under this Act or the relevant Act relating to the document or the service of the document.
However, the biggest disincentive to using lawyers lies in the fact that the default position in NTCAT (and other CATs) is that legal costs are not awarded (although costs can be awarded if a party has been guilty of significant time-wasting or other misbehaviour in conducting their case). This means that in many/most cases parties do indeed handle their matter themselves, although canny corporates (e.g. builders in the domestic building jurisdiction of VCAT) often make strategic use of lawyers at key points to outgun naive consumer plaintiffs. However in most situations, even with a $25,000 claim limit, it makes little sense to have a lawyer run your case when the legal costs will inevitably consume a large proportion of the judgment sum, even for a plaintiff who has a 100% win.
The downside of this largely lawyer-free tribunal “paradise” is that it can often result in quite arbitrary and unfair outcomes, where the more literate, educated, confident and business-like litigants-in-person tend to win irrespective of the actual merits of their case.
I am not at all sure that the current situation is an improvement on traditional common law civil court justice, although it is undeniably a lot cheaper and quicker.
However I’m optimistic about the future under the CAT model for resolving bread-and-butter disputes. At the moment few lawyers have examined or reformed their practice models in response to VCAT and its copyCAT tribunals in other states. Litigation firms have mostly failed to respond to the challenge of a new tribunal model that is in the process of stripping them of much of the “bread-and-butter” work on which their practices have depended.
And yet in my view there are huge opportunities for progressive lawyers to undertake remunerative legal work in the CAT tribunals in a way that WILL achieve both accessible and affordable justice for clients along with a financially rewarding and satisfying living for practitioners. Traditional litigation management models involve the lawyer acting as the “sage on the stage” who completely takes charge of the client’s litigation and undertakes all the work on it from go to whoa, even though many of the tasks are very routine and tedious and entirely capable of being done by the client (sometimes with some judicious expert hints from a lawyer “guide on the side”). Of course lawyers charge their clients at generous rates for all that tedious routine work, partly because they can, partly because high practice overheads necessitate it, and partly because the legal consequence of lawyers taking almost full responsibility for the conduct of litigation is that their potential professional negligence liability (and hence professional indemnity insurance premium) is massive.
In the CAT era, lawyers will be forced to re-evaluate their liitgation practice model. Clients will need to retain both formal and actual “litigant-in-person” responsibility for conduct of their own matters; lawyers will not go “on the record” in the tribunal and will not be legally or practically responsible for conducting the case. Most clients are entirely capable of keeping a systematic diary (the key litigation skill for a solicitor); sending, receiving and filing documents; attending case management conferences by themselves; and engaging in everyday phone, letter and email communication with their opponent/s, witnesses and the tribunal.
There are certainly key aspects of a case where expert legal assistance confers large advantages:
- initial strategic analysis of the case, including what needs to be proved and how it can be proved;
- taking witness statements from the key witnesses;
- occasional advice on procedural/tactical aspects;
- attendance at the mediation conference; and
- actual conduct of the final hearing.
As lawyers adjust to the CAT era, those aspects will typically be undertaken by lawyers on a piecework, fixed fee basis as the matter proceeds. Legal fees for a matter conducted on this “teamwork” basis, with the client taking responsibility and doing all the routine tasks, will typically involve total legal fees of less than $10,000 (and sometimes quite a bit less) for the average dispute with a final hearing length of a day or less. And there will be minimal risk of being ordered to pay the other side’s costs even if you lose.
If, as is already starting to happen, the VCAT model ultimately subsumes most areas of general litigation work in Australia (except big commercial disputes), market pressures will force lawyers to adopt this sort of “guide on the side” approach. The result should be a fair, accessible, affordable legal system where litigants don’t need “to risk a large part of their life savings”.
Thanks Ken, and as I wrote the words you quote I was thinking – I may even have said it in that or another post – that we’re effectively working round the outrage by corralling off more and more areas of legal disputation from the courts.
The essential requirement of most civil court cases is the independence and integrity of the arbiter of the case. It’s nice if there’s a high level of expertise, but only nice. So long as the arbiter is reasonably intelligent, capable of listening etc, that’s fine for me.
I’ve often thought that one of the central tenets of civil procedure should be some up front estimate of the magnitude of the issues at hand (measured in money) with some intentional scoping out of the proportion of that amount that should be expended in legal procedure. At present – correct me if I’m wrong – the arrangement is that the lawyers just do their thing – or can, in principle, do their thing independently of the value of the case. Of course I expect some judges would try to weigh in on behalf of commonsense, to the extent they could within their authority, to encourage the parties to minimise procedural complexity where the amounts at issue were small.
I like your suggestion that the costs scale in civil litigation should be a sliding one based on the amount for which the plaintiff succeeds (although that gets a bit tricky where the defendant succeeds). This principle applies in a very limited way in the NT Local Court where the default (albeit subject to discretion) is that costs are awarded at 80% of Supreme Court scale up to $50,000 and 100% over that. Having a wider sliding scale depending on judgment amount might help.
But the real problem is that it is still a hopelessly expensive and inefficient way of apportioning costs liability. In the NT (other states are variations on the same principle) costs of the successful litigant are “taxed” on either a “standard” or “indemnity” basis. On both bases every single item of claimed costs is assessed by an independent costs assessor on whether it was reasonable to do that item of work and whether the length of time claimed for it was reasonable. The difference is that on the “standard” basis the benefit of the doubt goes to the paying/losing party whereas on the “indemnity” it goes to the winning/receiving party.
Mostly this results in the winning party getting around 70% of what their lawyer actually charged, although an anally retentive lawyer who time costs and file notes exhaustively might recover 80-85% (although the recording process has nothing whatever to do with real world efficiency or effectiveness).
The real problem with this method of assessing costs is that it will often be actually almost impossible for a costs assessor to work out meaningfully whether it was “reasonable” to do a particular item of work or whether it took a “reasonable” amount of time. Moreover the entire concept is bizarre and grossly inefficient. Imagine if every customer of every mechanic only had to pay the bill after a process where they had the right to challenge (for days on end if they feel like it) the reasonableness of replacing every single nut, screw and washer and how long it took to strip the carby (assuming cars actually have carbies these days).
That’s why I think a system where the default is that each party bears their own costs, and which is designed to encourage the parties to enter into fixed fee item by item arrangements on an ad hoc basis as the matter progresses, is vastly superior. It is much more efficient and completely knowable and controllable by the client/consumer as the matter progresses. Of course there is no reason why the ordinary common law courts could not adopt the VCAT method if they saw fit or were mandated to do so, but there may (perhaps) be good reasons for costs to follow the event in larger commercial disputes (that is a separate question).
I think you’ve misunderstood me. What I’m suggesting isn’t in reference to ‘costs’ – ie what one applies to the court to have awarded one, but rather a process whereby it becomes standard to scope out a case at the outset and then agree on a process whereby not more than some figure – I’d start at 10% of the total amount at issue – is expended in legal procedure – in administrative costs in settling the dispute with procedure adapted to suit. So if the dispute is for say $2,000, one might have the magistrate interviewing both parties – over the phone if they wish – and then coming to a conclusion. The idea is to have a system that automatically adjusts its degree of sophistication to the practical magnitude of the dispute. I also think it is important to impose strong duties to act to reasonably solve disputes and mitigate damages so that if in the process of coming to a determination the magistrate decides that one party has not acted consistently with those duties, they have the ability to award the other party all costs, including their own inconvenience and all court costs of the unreasonable party’s unreasonableness.
Yes that sounds much more sensible than the current system. There would be no reason why 10% (say)* of the amount for which a party succeeds should not be the default, although perhaps there should be a discretion for the judge/magistrate to set (up front) a higher percentage where it is evident that the complexity of the matter is genuinely significantly greater than the amount in dispute.
It would potentially still be problematic for a judge/assessor later to meaningfully assess a costs penalty against a party who wastes time or otherwise acts improperly based on the extent of the time and money wasted. The process itself would be hopelessly inefficient and would be assessing something that is largely unknowable with any precision (as with my previous comments on the current taxation of costs system). I would be content with a system that imposed fixed and arbitrary costs penalties for naughtiness.
*Although 20% of the judgment amount arguably goes closer to a realistic pre-estimate of reasonable and achievable actual costs charges. There is no chance of running any $25K matter for anything like $2500, whereas $5000 is in the ballpark if a lawyer adopts the teamwork with client approach discussed in the primary post.
Now I think you guys have a really, really important topic here which is all about a massive social injustice (ie, real inequality in access to law).
But not being a law practitioner of any kind (neither lawyer nor legal petitioner/defender) I have no idea where it goes from here. My very little familiarity with VCAT was quite unsatisfactory.
So who’s gonna do something about this ? Do we have to wait until we have at least one lawyer per 300 men+women+children ? And if we did, would that make any difference ? After all, lawyerly ‘competition’ doesn’t seem to have done anything at all to improve the quality of the practice of law or diminish the cost of being involved in it. And isn’t free market’ competition supposed to achieve that without any ‘social engineering’ being required ?
Maybe it is time to revive my discussion about “The Law of Minimum Necessary Discomfort” ? At least Paul Frijters understands that.
With respect Ken, you clearly don’t have any practical experience of VCAT. Lawyers are already far more flexible (and have been for a long time) than you seem to think. Virtually all planning matters are fixed fee. Lawyers are used in the ways you’re hoping for, as strategic interveners and performers. My wife has appeared (many times) for objectors, for Councils and for developers. She’ll do this on all sorts of arrangements (but almost all fixed fee), from just an initial consult right through to running the whole show.
She’s now too expensive for most objectors and Councils, but will still do some jobs for them, and if it’s complex (particularly the evidence and cross-examination) then obviously she needs more involvement. She’ll assign a junior to some VCAT cases, at a heavy discount, to get them experience. Some developers just want her for the whole thing, others will work with her and a planning company, her and a barrister, all sorts of arrangements. All fixed cost (and much less than $10k for a day, and she’s in a top tier firm). This has all been par for the course for a long time now. Objectors front up and often acquit themselves well without spending a dime, Councils mostly appear for themselves unless it’s too complex, it’s all happening just how you hope it might happen in the future.
The main failing in the system is the quality of members. Some are excellent, some are not. Everyone knows who they are (good and bad), and the more difficult cases tend to have the better members assigned to them.
It is true that some lost cases that are eminently appealable aren’t appealed, due to the cost of the Supreme Court. But honest conversations are always had with the proponent as to chances and costs. Some developers are willing to shell out more, and some Councils will have Councillors needing to make a domestic political point, while some wealthy objectors have too much time and money. But the price certainly starts getting to $10k a day there.
I had the misfortune to be in the Audience at a VCAT hearing last week. It is a case involving a home owner and a builder. I lasted one and three quarter days before I became mentally too unwell to continue observing this charade called justice. It was more like a lawyer run torture chamber were the lawyer for the builder got to ask many superfluous questions so as to waste time and divert attention from the main issues, but it was the method used and the control of the players by the lawyers that most disgusted me. The questioning was like pick a box, just randomly pick a question from the five volumes each of 600 pages of which two were not presented. VCAT had misplaced them, later found. All designed to mislead and confuse. The member allowed all of these shenanigans to continue after all this is normal in lawyer world where the victims are charged $2300 per hour. There were six experts, four lawyers and a member all in the room and all on the payroll to discuss how water flows down a hill. My only suggestion is that VCAT present every one of its customers with a large plastic bucket so as they do not mess up the floor! Fascism is where one group are allowed to plunder from another group without impunity. Currently in Australia lawyers are being allowed to plunder wealth from the hard working souls of Australia and all our government can do is facilitate a painless death for the victims and ensure those who have been driven to the needle stay alive for a little bit longer. the