Peter A Clarke

The Civil Procedure Act willbe proclaimed on 1 January 2011. It will have a significant impact on litigators, both solicitors and counsel, approach and conduct litigation in Victorian Courts and Tribunals.

I will be  providing occasional posts on the  operation of the Act over the next 6 weeks. I have included the second reading speech in its entirety below.

This post focuses on section 1 of the Act. For practitioners the relevant provisons are section 1(2)  is the most relevant provision.  At least in the early stages of this process these provisions will be important in applying the rules of procedure.

It provides

Chapter 1—Preliminary

1   Purposes

(1)  The main purposes of this Act are—

(a)  to reform and modernise the laws, practice, procedure and processes relating to the resolution of civil disputes which may lead to civil proceedings and to civil proceedings in the Supreme Court, the County Court and the Magistrates’ Court and provide for uniformity;

(b)  to simplify the language relating to civil procedure;

(c)  to provide for an overarching purpose in relation to the conduct of civil proceedings to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute;

(d)  to amend various Acts in relation to the conduct of civil proceedings to reflect the new procedures.

(2)        Without limiting subsection (1), this Act provides for—

(a) overarching obligations for participants in civil proceedings to improve standards of conduct in litigation;

(b)  the facilitation of the resolution of disputes before civil proceedings are commenced;

(c)  the enhancement of case management powers of the courts, including in relation to discovery;

(d)  further enhancement of appropriate dispute resolution processes;

(e)  reform of the law relating to summary judgment;

(f)  clarifying sanctions available to courts in relation to contravention of discovery obligations.

The explanatory memorandum provides:

CHAPTER 1--PRELIMINARY
This Chapter sets out the purpose of the Bill, when the Bill commences,
definitions for terms used and the application of the Bill.

Clause 1   provides that the main purposes of the Bill are to reform and modernise the laws, practice, procedure and processes relating to
           the resolution of civil disputes which may lead to civil proceedings and to civil proceedings in the Supreme Court,
           County Court and Magistrates' Court and to provide for uniformity, to simplify the language relating to civil procedure
           and to provide for an overarching purpose in relation to the conduct of civil proceedings.
           Without limiting the purposes set out in subclause (1), the Bill implements the following specific reform initiatives--
             ·       overarching obligations for participants in civil proceedings in order to improve the standards of
                     conduct of all participants in litigation;
             ·       measures to assist the facilitation of the resolution of disputes before civil proceedings are commenced;
             ·       the enhancement of case management powers of the courts, including in relation to discovery;
             ·       further enhancement of appropriate dispute resolution processes;
             ·       reform of the law relating to summary judgment;
             ·       clarifying sanctions available to courts in relation to contravention of discovery obligations.

The Second Reading speech provides:

I move:

That this bill be now read a second time.

The Civil Procedure Bill 2010 will reform, modernise and unify the procedure for the conduct of civil litigation. Courts play an important role in adjudicating civil disputes and procedural rights and that role should, of course, continue. But as a public resource, courts must be used responsibly. Parties should not abuse their right of access to the courts by unnecessarily tying up court resources, thereby preventing others from accessing justice. A well-resourced litigant should not be able to use their power to play tactical games and draw out litigation until the other party is forced into an unfair settlement or withdraws.

This bill will curtail such behaviour and arm the courts with the power to prevent such conduct.

Parties should be encouraged to resolve their disputes by agreement, and where they require court intervention, the bill will ensure they adhere to appropriate standards of conduct. The result will be a more accessible civil justice system for those parties who need adjudication by the courts.

Very few of the cases which are lodged with the courts proceed to a final hearing. Most cases settle or are withdrawn prior to trial. However, the process to achieve resolution of civil matters that are started in the courts, including the cases that are settled before trial, is often unduly long and costly. The current cost of litigation has reached a point where access to the civil courts is beyond the reach of most Victorians.

Access to justice in the civil courts is not meaningful unless there are processes in place to facilitate the quick, just and inexpensive resolution of those disputes.

The Victorian civil procedure reforms represent a generational change in the way civil litigation will be managed. The proposed changes are the first major attempt at civil law reform in Victoria in over 20 years. Following the recommendations made by Lord Woolf in the Access to Justice Report (1996), the United Kingdom rules of civil procedure were subjected to a major overhaul. Extensive civil reform initiatives were implemented in New South Wales and Queensland several years ago, and recently by the federal government.

The Victorian reform proposals are, therefore, an extension of the trend of civil justice reforms in Australia and in the United Kingdom, and as a package they break new ground, particularly in the areas of the prelitigation requirements and the overarching obligations.

The bill recognises that the civil litigation system has become out of balance and is increasingly unable to achieve essential goals of accessibility, affordability, proportionality, timeliness and getting to the truth quickly and easily. This bill will make these goals once again more achievable.

One of the bill’s key objectives is to build a culture in which litigants are encouraged and empowered to resolve their cases without going to court. Lawyers, litigants, insurers, litigation funders, expert witnesses and the courts will be required to work together to achieve this important objective.

The prelitigation processes will provide a general framework for parties and lawyers to achieve resolution of the dispute or if that is not possible, to narrow the issues in dispute. The bill’s intention is to give real meaning to the saying that litigation should be a measure of last resort.

Once proceedings have been initiated, the role of the overarching obligations is to continue to encourage the parties and their lawyers to use reasonable endeavours to achieve early resolution of cases by agreement or to narrow the issues in dispute except where justice or judicial determination is genuinely required.

The bill also provides clear legislative guidance to judges to proactively manage cases in a manner that will promote the overarching purpose — that is, the just, efficient, timely and cost-effective resolution of the real issues in dispute.

This will empower them to give clear, effective directions in cases by requiring the parties to keep to the real issues in dispute. It should reduce the number of interlocutory applications in complex litigation and could be used, for example, to limit the time taken up in oral submissions.

At the core of these reforms is the concept of proportionality. Participants in litigation will be required to use reasonable endeavours to ensure that legal and other costs spent in the proceeding are reasonable and proportionate to the complexity or importance of the issues in dispute, and the amount in dispute. The courts will also be required to deal with a civil proceeding in the same manner.

These provisions are designed to cure unnecessary expenditure on litigation and the inappropriate use of the courts as a public resource, a matter that has been highlighted in several recent decisions.

I note recent judicial statements criticising the costs charged by some lawyers as being disproportionately high in comparison to the amounts in dispute, as well as urging lawyers to focus on resolving disputes, rather than attempting to win at all costs. Under the civil procedure reforms, these kinds of behaviours will need to change.

When the courts are used by litigants and lawyers in this way, the public loses faith in the justice system and the courts are unavailable to hear meritorious claims. This package of reforms will require all participants in the civil justice system to lift the standards of conduct in civil litigation and to work together to achieve a positive change in the civil justice system.

Reform process

Reform of the civil justice system was identified as one of the priorities in the Attorney-General’s first justice statement. The government gave the Victorian Law Reform Commission a reference in September 2006 to undertake a review of the civil justice system and the commission presented its report in March 2008.

The commission’s work was led by Peter Cashman and the report contains a comprehensive range of recommendations for reform of the civil justice system. The commission set strategic objectives for various reforms of the civil procedure rules, substantive law and case management. These objectives, now reflected in the bill, seek not only to change the formal rules for the conduct of proceedings, but to change litigation culture itself.

Justice statement 2 in October 2008 restated the government’s commitment to reforming civil justice using the VLRC report as a guide.

The government recognised that long-term change was not possible without first securing the agreement of the courts and the profession. Therefore, I established a civil procedure advisory group in November 2008 to consider the commission’s recommendations. The advisory group is chaired by the Chief Justice of the Supreme Court and has representatives from the Supreme, County and Magistrates courts, VCAT, the Victorian Bar, the Law Institute of Victoria, the Federation of Community Legal Centres and the Department of Justice.

The results of the advisory group’s deliberations are now proposed for inclusion in the Civil Procedure Bill and comprise the fundamental architecture for reform of the civil justice system.

I would like to thank the chief justice for her leadership of the advisory group and the members for their significant commitment of time and expertise. The reforms contained in the bill are proceeding with a high degree of support from these important stakeholders. The bill represents an outstanding achievement in collaborative law reform.

The bill is the first part of a major reform program that will continue until 2013, and is likely to involve at least one further piece of substantial amending legislation implementing the remaining recommendations of the commission’s report to be agreed to by the government.

The second phase will emphasise reviewing the costs rules for litigation, but will also include a review of the role of expert witnesses.

Summary of key reforms

The reforms will apply to civil proceedings in the three mainstream Victorian courts: the Supreme Court, the County Court and the Magistrates Court. VCAT is designed to offer flexible and cost-effective practices for determining specific types of disputes, and is not currently included within the scope of these general reforms.

With the exception of the prelitigation requirements, the bill will apply in a civil proceeding where a civil penalty is sought under a civil penalty provision.

The bill will not apply to criminal or quasi-criminal proceedings, for example proceedings for contempt of court, or to the acts listed in clause 4.

Overarching purpose and duties of the courts

The bill will introduce a uniform statutory statement to define the overarching purpose of the courts, which is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.

This might be achieved by determination of the proceeding by the court, agreement between the parties or any appropriate dispute resolution process agreed to by the parties or ordered by the court.

A similar provision introduced in the United Kingdom at the time of the Woolf reforms has been used as the driving force for cultural change in the United Kingdom civil justice system.

The courts will be required to give effect to the overarching purpose when exercising powers or interpreting their powers. When giving effect to the overarching purpose, a court must have regard to a broad range of objects. I have already mentioned proportionality, but other objects include the public interest in the early settlement of disputes by agreement between the parties and the efficient conduct of the business of the court.

The court may also have regard to the extent to which the parties have complied with the prelitigation requirements under this bill or any other prelitigation processes.

This means that what the parties and their lawyers do before a proceeding commences may come under the scrutiny of the court later on, if it turns out that they have failed to take reasonable steps to resolve the dispute.

Overarching obligations — standards of conduct for parties

The bill contains new provisions prescribing standards of conduct in civil proceedings.

The overarching obligations will apply to parties, legal practitioners or other representatives of parties, law practices, any person who provides financial or other assistance to any party insofar as they exercise direct or indirect control, or any influence over the conduct of the proceeding or a party, for example, insurers and litigation funders. They will also apply, where relevant, to expert witnesses, but will not apply to lay witnesses.

The prelitigation requirements apply up until the commencement of proceedings. The overarching obligations commence as soon as a party files its first document in a proceeding and apply to all aspects of a civil proceeding, including appropriate dispute resolution processes, interlocutory proceedings and appeals.

‘Appropriate dispute resolution’ is defined in the bill. The government prefers this expression to ‘alternative dispute resolution’, as ‘ADR’ should become the appropriate vehicle for dispute resolution, not an alternative to ‘mainstream’ litigation. In the future, as a result of these reforms, litigation in the courts should be the last resort when all other options are exhausted, or where the interests of justice require it.

The bill provides that each person to whom the overarching obligations applies has a duty to the court to further the administration of justice. There are 10 overarching obligations that are components of the paramount duty.

Some of these obligations are very familiar to lawyers, and include duties to:

act honestly;

not make any claims or responses that are frivolous, vexatious or do not have, on the material available, a proper legal and factual basis; and

act promptly and minimise delay.

Others are completely new and draw upon good dispute resolution practice and promote the cultural change that is at the centre of these reforms. They include duties to:

cooperate with the parties and the court in connection with the conduct of a civil proceeding;

use reasonable endeavours to resolve the dispute by agreement or using ADR processes, unless it is not in the interests of justice to do so, or the dispute is of such a nature that only judicial determination is appropriate; and

as I mentioned earlier, to ensure that the legal and other costs incurred in connection with the proceeding are reasonable and proportionate to the complexity or importance of the issues and the amount in dispute.

In relation to the duty to ensure costs are reasonable and proportionate, an example of a possible breach may be the practice of briefing two barristers (senior counsel and junior counsel) where the complexity of the case does not warrant it. I note that the obligation is worded so that resources are not unreasonably constrained for cases that might in themselves be for a small amount, but that have significant precedent or public interest value.

The bill clarifies any potential conflict that a person who carries the overarching obligations may have with other legal, contractual or other obligations that person may have. It provides that the overarching obligations will prevail to the extent of any inconsistency. However, this provision does not override the lawyer’s special duty to the court, which is paramount.

Imposing equivalent duties on participants in litigation will address the conduct of some parties who sometimes are invisible to the court, but by their decisions inappropriately use the courts, to further their own interests.

Parties will be required to certify in their pleadings that they have read and understood the obligations and their lawyers will have to certify that the allegations they make have a proper basis.

There are examples in the United Kingdom, and interstate, such as in the Federal Court and in NSW, of overriding or overarching purposes for the courts. Victoria will be the first Australian jurisdiction to implement statutory conduct obligations that apply not only to lawyers, but to all participants who have the power to influence the course of civil litigation.

The chief justice has recently drawn attention to the ethical challenges faced by lawyers in light of the ever-increasing commercialisation of legal practice. This bill makes clear the fundamental ethical obligations of lawyers in conducting litigation, especially their duties to the court. It will assist them in resolving tensions between such duties and the demands of overzealous clients by also bringing clients and those who fund litigation within the orbit of the overarching obligations.

The court will be able to impose penalties for breach of the overarching obligations. In deciding if a sanction for non-compliance is appropriate, the court will be required to take into account whether or not a party has had legal representation.

A lawyer may be required to personally bear any costs order made by the court for breach of the obligations, and an order may be made that those costs are payable immediately and enforceable immediately.

General prelitigation requirements — background

The bill will introduce mandatory general prelitigation requirements for parties to use reasonable endeavours to resolve the dispute by agreement, or to clarify and narrow the issues in dispute in the event that civil proceedings are commenced.

The prelitigation requirements signify an important cultural turning point for the legal profession and potential litigants in that they will require persons involved in civil disputes to take reasonable steps, having regard to their situation and the nature of the dispute:

to resolve the dispute by agreement; or

to clarify and narrow the issues in dispute in the event that civil proceedings are commenced.

Each person involved in a civil dispute must exchange appropriate prelitigation correspondence, information and documents critical to the resolution of the dispute.

Each person involved in a civil dispute must also consider options for resolving the dispute without the need for civil proceedings in a court, including, but not limited to, resolution through genuine and reasonable negotiations or appropriate dispute resolution.

This bill does not make ADR compulsory, but persons involved in a civil dispute must not unreasonably refuse to participate in genuine and reasonable negotiations or appropriate dispute resolution.

Parties or their legal representatives will be required to certify that they have complied with the prelitigation requirements, and if they have not, to set out the reasons for such non-compliance.

It is at this stage that a party, if it regards that it would be unreasonable for it to comply with the prelitigation requirements, would set out the reasons why they have not. Examples might include where property is at risk of dissipation or destruction if advance notice of proceedings were given; where a party is terminally ill; where a limitation period is about to expire and a cause of action would be statute barred if legal proceedings were not commenced immediately.

A court may not prevent the commencement of civil proceedings in the court merely because of non-compliance with the prelitigation requirements, but where a party has failed to meet those requirements, they are at risk of adverse costs orders being made against them once they get to court.

Examples of a failure to comply might include an unreasonable refusal to participate in mediation or other ADR, or an unreasonable refusal to consider a reasonable offer of settlement.

The prelitigation requirements are less prescriptive than the general pre-action protocol recommended by the commission. The advisory group has given much consideration to achieving the right balance between providing enough guidance to the parties in the prelitigation stage, and avoiding creating a system that inadvertently builds in further layers of cost and delay.

The aim is to ensure that disputants have taken the opportunity to understand what is in dispute and to consider whether it can be resolved without resorting to litigation. In doing so, the prelitigation requirements only reflect current good practice.

It is recognised that there will be some disputes where it would be unreasonable to require the parties to go through a prelitigation process. There may be an urgent time limit that must be met, or the case is one in which only a judicial direction or decision will suffice. It is hoped that these types of cases will be adequately allowed for by the courts in considering the reasonableness of the parties’ actions in individual cases where the prelitigation process has not been adopted.

To provide some guidance around what matters do not need to follow this process, there are some limited statutory exceptions, including appeals, proceedings under the Charter of Human Rights and Responsibilities, and proceedings in which civil penalties are sought. The bill contains an exemption for Corporations Law matters in recognition of the prescriptive nature of many such proceedings (for example, chapter 5 liquidation proceedings), but this exemption may be reviewed in the light of any developments at the commonwealth level.

The existence of prelitigation protocols for claims under the Accident Compensation Act 1985 and the Transport Accident Act 1986 also qualify those claims for an exemption.

It is anticipated that most cases for which the prelitigation requirements would be inappropriate would be covered by the test in clause 34, which only requires reasonable prelitigation steps to be taken, having regard to the disputants’ situation and the nature of the dispute. However, the bill also provides the courts with a general power to exempt civil proceedings or classes of civil proceeding from compliance with the prelitigation requirements. This will allow the courts to make rules that more clearly identify the classes of disputant who are not required to take the steps envisaged by clause 34 where the courts think that such clarification is necessary.

In addition, the bill provides the courts with a rule-making power to design specific prelitigation processes for certain types of cases. The experience in the United Kingdom of the use of specific pre-action protocols has been very positive, according to Lord Justice Jackson in his recent final report on civil litigation costs.

It is expected that the development of any exceptions and specific protocols will occur in the consultative spirit that has characterised the reform process to date. The operation of the prelitigation requirements and any rules made to clarify their operation will be reviewed by the government to ensure that this new and innovative reform achieves its objectives.

Costs of compliance

Generally, there will be a presumption that each person involved in a civil dispute or party to a civil proceeding is to bear that person’s or party’s own costs of compliance with the prelitigation requirements, subject to the rules of court.

This presumption may be displaced where a court is satisfied that it is reasonable to do so, having regard to furthering the overarching purpose. A court may order that a representative of a party to a civil proceeding, rather than the party, pay some or all of another party’s cost of compliance with the prelitigation requirements if the court is satisfied that, by the representative’s conduct in relation to compliance with the prelitigation requirements, another party has unnecessarily incurred costs in complying with the prelitigation requirements.

Despite the general rule that each party will bear their own costs, where a party fails to comply with the prelitigation requirements, the court will be able take this into account in determining costs in respect of civil proceedings which are issued in respect of that civil dispute, or in making other orders.

Claims for personal injury under the Transport Accident Act 1986

Claims for personal injury under part 6 of the Transport Accident Act 1986 may be conducted in accordance with a voluntary prelitigation process. There are currently no sanctions for breach of the Transport Accident Commission’s voluntary prelitigation scheme. The sanctions for breach of the prelitigation requirements under this bill will also be applicable to claims conducted pursuant to the voluntary pre-action process under the Transport Accident Commission regime. The bill will not, however, interfere with the fixed costs regime that applies to compliance with the TAC prelitigation regime.

For transport accident claims that are not conducted in accordance with the voluntary prelitigation process, those claims will be governed by this bill — that is, they are civil proceedings as defined in the bill and must comply with the prelitigation requirements.

Express case management powers for judges and magistrates

The courts already have broad, inherent discretion to manage their own proceedings. The primary objective of the case management reforms is to make it clear that the courts have express power to make appropriate orders and impose reasonable limits to enable them to better or actively manage the conduct of proceedings, thereby reducing costs and delay.

The bill provides clear legislative guidance to judges to proactively manage cases in a manner that will promote the overarching purpose — that is, the just, efficient, timely and cost-effective resolution of the real issues in dispute.

The bill provides that for the purpose of ensuring that a civil proceeding is managed and conducted in accordance with the overarching purpose, the court may give any direction or make any order it considers appropriate.

This might include ensuring that the proceeding is conducted promptly and efficiently or encouraging the parties to cooperate with each other in the conduct of the civil proceedings, to settle the proceeding or to use ADR, or limiting the time for the hearing including the number of witnesses and the time taken for examination or cross-examination of witnesses.

The bill further provides that a court may make any order or give any direction it considers appropriate in relation to pre-trial procedures. This is an important power. The bill gives judges and magistrates powers to make orders in relation to setting timetables, time limits and time frames for completion of a proceeding and the use of ADR to assist in the conduct and resolution of all or part of the proceeding.

Further, the bill empowers judges and magistrates to make orders in relation to the conduct of the hearing in a civil proceeding, including: limiting the time to be taken in leading evidence, cross-examining or re-examining, not allowing cross-examination of witnesses or limiting the number of witnesses including expert witnesses and limiting the length of written and oral submissions.

Sanctions apply for breach of the case management orders or directions made by a judge or magistrate. These include costs orders, dismissal of the civil proceeding, striking out of parts of a claim or any other order that the court considers appropriate.

Liberalising the test for summary judgement

The bill reforms the procedure for the earlier determination of disputes, including liberalising the test for the summary disposal of unmeritorious claims and defences. This will help the courts to remove at an early stage cases where a party has no real prospect of success.

Improving appropriate dispute resolution

The bill provides that a court may make an order referring a civil proceeding, or part of a civil proceeding, to appropriate dispute resolution to resolve or settle the proceeding.

The provisions will be essentially facilitative and complement the legislation passed in 2009 in respect of judicial dispute resolution (the Courts Legislation Amendment (Judicial Resolution Conference) Act 2009). The courts are already empowered under their rules and legislation to make orders of this kind, but the purpose of the provision and the extensive definition of ADR is to encourage the courts to make more use of the variety of ADR processes that are available to litigants for resolving their disputes.

The bill also enhances the capacity of the courts to order that parties participate in non-binding ADR, with or without their consent.

There is an expectation that the courts will become, as the Supreme Court’s Commercial Court has named itself, a true litigation laboratory and get some runs on the board, encouraging and in some cases requiring parties to engage with appropriate dispute resolution processes to achieve an early settlement of their dispute.

Narrowing the test of discovery

The commission recommended reform of the procedure for the compulsory production of documents in civil proceedings. The discovery procedure is a critical element of fact-finding in litigation and has become a very contested and costly process.

The main concerns with discovery revolve around issues of expense, scale and delay, as well as abuse of discovery obligations.

It is identified by stakeholders as the most expensive aspect of the civil justice system. For example, it was reported that in one Supreme Court case, a party spent $40 million on the discovery process alone, and that 120 legal professionals worked on the discovery process.

At present, the respective courts’ rules require the disclosure of all documents that are directly or indirectly relevant to issues in a case. In the United Kingdom and some other Australian jurisdictions, the discovery test has been narrowed to remove the requirement of indirect relevance. The advisory group recommended that the test in Victoria be similarly narrowed and the government understands that the courts are currently considering adoption of a test similar to that applied by the Federal Court.

The bill implements the commission’s recommendations with respect to case management reforms and sanctions for discovery abuse.

As with the case management reforms, it clarifies that a court may make any order in relation to discovery that it considers necessary or appropriate, including limiting or expanding a party’s obligation to make discovery.

Further, the bill clarifies that a court may make any order or give any directions it considers appropriate if the court finds that there has been:

a failure to comply with discovery obligations;

a failure to comply with any order or direction of the court in relation to discovery; or

conduct intended to delay, frustrate or avoid discovery of discoverable documents.

Conclusion

This bill is a landmark reform in the way that civil disputes in Victoria are managed and resolved. It will strengthen the changes that are already occurring to develop a less adversarial approach to dispute resolution. It will promote a culture that focuses on achieving the best outcomes in a timely and cost-effective way for disputants, whether they are global corporations or individuals going about their daily lives. This government has already made great strides in promoting ADR. Now it is complementing those initiatives with a bill that provides the foundations for the comprehensive overhaul of civil litigation in Victoria.