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Davies, Geoffrey --- "Can dispute resolution be made generally available?" [2010] OtaLawRw 5; (2010) 12 Otago Law Review 305

Last Updated: 25 February 2012



Can Dispute Resolution Be Made Generally Available?*

The Hon Geoffrey Davies AO**



1. Introduction1

At a conference in Auckland in February last year entitled “Civil Litigation in Crisis – What Crisis?” Sir Gavin Lightman posed the question “Is the adversarial system past its use-by date?” and answered it “yes”. His reason for answering it in this way was, he said, that the system was unaffordable to most potential litigants because the risk of losing and the consequent cost were unsustainable by them.

That our existing system is unaffordable to most potential litigants is something with which most of us would agree. As I shall endeavour to explain in this lecture, I believe that not only is that so but that it will continue to be so for the foreseeable future. Over the last few decades a great deal of time and money has been spent in attempts to make the cost of litigation cheaper. Reforms made during that period in Australia, in England and Wales and in Canada have, I believe, made it only marginally cheaper. For reasons which I shall explain I do not believe that future reforms are likely to have a much more substantial impact on litigation costs than have those reforms.

In his paper, Sir Gavin suggested two possible solutions to this problem. The first was to substantially increase the public funding of civil litigation. The second was to radically change our adversarial system to one more approximating those existing in France and Germany. In my opinion neither of these solutions is practicable.

As to the first, in Australia and, I suspect, in New Zealand, governments have been reducing legal aid in civil actions and I think that trend will continue. It would, I believe, be impossible, from a practicable point of view, to persuade governments to reverse that trend.

His second proposal would also require a substantial increase in government spending and, for that reason, is also impracticable. The European systems have many more judges and support staff than we do and many fewer lawyers. It is perhaps unnecessary to add that any such change would also meet substantial opposition from the legal profession.

I think that the solution to this problem, to the extent that there

* A paper delivered to the Legal Issues Centre at the University of Otago on 25 September 2009.

** A former judge of the Queensland Court of Appeal and former chairman of the Litigation Reform Commission of Queensland.

1 In this lecture I have eschewed using “he or she” or derivatives thereof because of its awkwardness. My opting for “he” rather than “she” is arbitrary.


is a practicable solution, lies, not in trying to make our trial system substantially cheaper, though we should not abandon attempts to do that, but in providing, alongside the existing system, an alternative simpler system by which parties may reach an informed early resolution of their disputes. In one sense, that system is already at hand. Provisions for settlement offers, settlement conferences, mediation and early neutral evaluation already exist in many of our jurisdictions.

But merely providing these has proved insufficient to persuade parties and their lawyers to use them routinely and insufficient to persuade judges to impose them routinely, notwithstanding their power to do so and circumstances justifying their use. I shall explain why I think that is so.

I then want to say why early resolution by agreement must be informed and refer to some reforms, here and elsewhere, which have sought to enable and encourage that.

And finally, I shall explain why I think that more is required to be done and what that should be. In short, parties and their lawyers should be obliged, early in the dispute resolution, to consider a resolution of the dispute either by mediation or early neutral evaluation; and if one party chooses not to accept a proposed resolution by either of these means, but the other does, then the former should be permitted to proceed to trial provided that, if he does no better at judgment, he is obliged, in the absence of special circumstances, to pay all of the costs incurred thereby.

But first I need to say something generally about the aims of civil justice

reform and the ways in which those aims may be pursued.

2. The aims of civil justice reform

In my opinion, civil justice reform should have two principal aims. The first is to reduce the cost (which must include the cost of delay) of dispute resolution without reducing the fairness of that resolution. And the second is to reduce the unfairness which often arises between parties of unequal bargaining power. It is necessary, at the outset, that I define what I mean by fairness in these contexts.

Fairness, in these contexts, has both a narrow and a broad meaning. In its narrow sense it means the achievement of a reasonably accurate result; that is, one which is within the range likely to be reached by a reasonably competent judgment at the conclusion of an action reasonably competently prepared and presented on both sides. In this sense it accurately describes a fair result at trial.

However, in this sense, fairness looks only at the likely result which would have been achieved at trial and ignores any difference in cost between that result and one which might be achieved by an earlier resolution. For this reason it is a misleading description of a fair result achieved by resolution before trial.

A fair resolution of a dispute for any party, in a broader and more


accurate sense, must be one which, at the time at which it is achieved, is at least as beneficial to that party as one which is within the range of a reasonably competent judgment at the time when that would ordinarily have been given, when the difference in cost between those two resolutions is taken into account.

Once the difference in costs between resolution at trial and an earlier resolution is taken into account it can be seen that, in earlier resolution, there is likely to be a substantial margin for error and compromise within which a fair result is possible. Let me give two examples of this, neither of them far-fetched.

First, assume that a plaintiff engages in settlement negotiations, mediation or early neutral evaluation shortly after the commencement of proceedings and that, at that stage, the additional cost to him of taking the proceedings to trial and judgment will be 30% of the amount or value which he is likely to obtain on judgment. In that case, a settlement achieved at that time by which he receives equal to or more than that amount or value less 30% will be a fair settlement for him.

Secondly, assume that a defendant engages in settlement negotiations, mediation or early neutral evaluation shortly after the commencement of proceedings and that, at that stage, the additional cost him of taking the proceedings to trial and judgment will be 30% of the amount or value for which he is likely to be liable on judgment. In that case, payment by him of an amount or value equal to or less than that amount or value plus 30% will be a fair settlement for him.

If these propositions are correct then, on those assumed facts, there is a range of 30% either side of the amount or value for which judgment is likely to be given, within which there is room for error and negotiation.

What parties to a dispute want or, more accurately, what they need when they first approach a litigation lawyer may be expressed in three questions:

1. What is the likely result if the dispute goes to trial and judgment?

2. What will it cost me to get to that result?

3. Can I get to that result, or a result approximating it, more cheaply?

Without answers to each of these questions a party has no real prospect of weighing the relative advantages and disadvantages of, on the one hand, reaching an early agreed resolution and, on the other, proceeding to trial and judgment.

Of course, the questions may not be expressed in these terms. Indeed, they may not even be asked. Nevertheless it seems to me that it is plain that, in order to reach a fair resolution, that is what parties need.

As I shall explain, at present in your system and my own, neither the first nor the second question is likely to be answered with any reasonable accuracy. However, as I shall also explain, it is possible to achieve much


greater accuracy in each case than exists at present, sufficient to enable a

reasonably accurate answer to be given to the third question.

Whilst you must accept that neither of the examples which I have given of the effect which going to trial and judgment has on the final amount which a plaintiff is likely to recover or defendant is likely to pay is far-fetched, you may say that neither of these results is fair and that what we must do is reduce the cost of going to trial and judgment to one that it is much less costly, only a tiny fraction of the amount or value involved. My answer to this is that this is most unlikely to be achieved in the foreseeable future without radically altering our civil justice system or substantially increasing public funding of civil litigation, neither of which, as I have explained, is practicable, or remunerating litigation lawyers at an uneconomic level, which is also impracticable. I shall explain why I think that is so.

3. The ways in which these aims may be pursued

Broadly speaking, there are two principal ways in which the achievement of these aims may be pursued.

The first of these is by attempting to reduce the existing cost of resolution by trial and judgment. This may be pursued by simplifying or eliminating some steps in the process between commencement of proceedings and judgment. For example, in Queensland we have simplified and narrowed the ambit of discovery and virtually eliminated interrogatories. Or it may be pursued by otherwise reducing the work done and time taken between commencement of proceedings and judgment. Case management is one example of an attempt to achieve this. Another is by reducing the number of witnesses who may be called on any one question. We have done this with respect to expert witnesses.

In pursuit of this way the word “proportionality” is often used: meaning that the cost of resolution should be proportionate to the importance and complexity of the matter in dispute;2 or it should be proportionate to the amount or value in dispute. There is no evidence that proportionality in either of these senses has yet been achieved or that it is likely to be achieved in the foreseeable future. Nor is it at all clear that, if proportionality in either of these, not necessarily consistent senses were achievable it would yield a fair result.

The second, and quite different way of achieving these aims is by enabling and persuading parties and their lawyers to reach a reasonably informed agreed resolution as early as possible in the dispute resolution process. I shall discuss later what I mean by a reasonably informed agreement and some ways in which this aim may be pursued.

Most civil justice reform to date has been concerned with the first of


  1. The phrase used in the Access to Justice (Civil Litigation Reforms) Amendment Bill 2009 (Cth).



these ways; attempting to reduce the existing cost of resolution by trial and judgment. The same may be said of most commentary about civil justice reform. For example, take one of the longer papers delivered at the conference referred to earlier, that given by Justice Ruth McColl of the New South Wales Court of Appeal. Of 75 paragraphs, Her Honour devoted only 4 to the possibility of resolution by agreement.

The substantial focus of law reformers to date on the process leading up to trial and judgment and the absence of any substantial focus on enabling and encouraging early fair resolution by agreement seems puzzling. In the first place, it is inconsistent with what actually happens. In my own jurisdiction more than 97% of actions commenced are resolved before trial and judgment, the vast majority of them by agreement. This seems to be at least some evidence that most parties to disputes prefer to resolve them by agreement than by trial and judgment.

Secondly, early resolution by agreement has so many advantages, the first and most obvious of which is a saving in cost as the examples which I have given illustrate. But there are many other advantages of an agreed resolution . An agreement can be moulded to achieve an outcome which both parties will accept rather than being bound by rules to a fixed result which, certainly the losing party and, in many cases both parties may not want. It is more conducive to an amicable resumption of a former relationship between the parties, whether business or personal. Parties are more likely to feel in control of achievement of a result which they have chosen themselves than one which is imposed on them. And some parties value the privacy of an agreed solution.

There are also many other advantages of an early resolution. One is that this is when recollections are clearest and most reliable. We know from our experience that memory fades quickly; and empirical research has shown how it may be distorted by contact with others during trial preparation. Whilst some disputes depend, in part, on documentary evidence, oral evidence plays a large part in most.

A second is that the longer an adversarial contest continues, the more it is that adversarial attitudes harden; parties tending to believe more strongly in the reliability of their own evidence and the rightness of their own cause. And the more that that occurs, the less it is that parties are able to make concessions.

And a third advantage is that the early resolution of some disputes reduces the delay in others and that, in turn, tends to make litigants and their lawyers, especially on the defence side, more amenable to resolution by agreement.

So I think it is necessary to explain why our system, and those who practise in it, focus so much on trial and judgment and so little on early fair resolution by agreement; and why, nevertheless, our litigation system remains so expensive.


4. Why the focus is on trial and judgment and why that remains so expensive

(a) Two systemic assumptions

I have, in the past, mentioned two basic assumptions upon which, it seemed to me, our civil justice system is based.3 The first of these is that, once proceedings in a dispute have commenced, it will be resolved by trial and judgment. The second is that the best way of resolving a dispute is by a contest between competing adversaries. These systemic assumptions, together with our legal education system, affect the attitude of litigation lawyers and judges to the resolution of disputes after and even before litigation commences, as I shall endeavour to show.

I do not mean by stating either of these assumptions that most judges, or even most litigation lawyers, believe that it is always better to go to court than to settle. I mean rather that the procedures and practices which constitute our system make those assumptions and that we, as lawyers and judges, perhaps subconsciously, accept and apply those assumptions in our conduct of dispute resolution during, and even before the commencement of litigation.

Notwithstanding that many of us now believe that, generally, it is better to resolve a dispute by agreement than by trial, from the time an action is commenced the parties are obliged, by the system, by judges and by their lawyers, to embark on procedures designed to bring the action to trial; exchange of pleadings, requests for and provision of particulars, discovery and so on. The possibility of resolution by agreement, if referred to at all in rules of court, is mentioned only as an incidental possibility, not as a primary goal.

Yet, as I have mentioned, this is inconsistent with what actually occurs and fails sufficiently to take into account both the obvious advantages of an agreed resolution and the cost saving of early resolution.

If we accept these assumptions it is reasonable to focus our attention and effort upon the trial, ensuring that all is in readiness for that event. If, on the other hand, we reject them and, on the contrary, assume that most cases will, and should be resolved by agreement, then our attention and effort should be focused on when that can best be achieved and how it can best be achieved fairly.

(b) Labour intensiveness and adversarialism

Working within that system, with those assumptions, lawyers are necessarily adversarial. However much we may encourage trial lawyers to be more cooperative and open with one another, as Sir Owen Dixon said more than 40 years ago, in a system such as ours, “the object of the parties is always victory, not abstract truth.”4 The same is true, with

3 G L Davies “Civil Justice Reform: Why We Need To Question Some Basic Assumptions” (2006) 25 CJQ 32; see also Civil Justice Reform: Some Common Problems, Some Possible Solutions” (2006) 16 JJA 5.

4 O Dixon Jesting Pilate (Law Book Co, 1965) at 16.


equal force, of the parties’ lawyers. I do not believe that court rules or legislation5 stating some overriding or overarching purpose, such as “to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible” and a duty of the parties or their lawyers to act consistently with that purpose will change that.

Given the nature of our system, and the mindset which it encourages, it is unsurprising that, when preparing for trial, a lawyer does not conduct any cost/benefit analysis; that is, he will not ask whether the possible advantage of doing more work or taking an additional step in the action will outweigh the additional cost involved. On the contrary, once satisfied that that step or that work may improve the client’s chances of winning, the lawyer is likely to proceed to take that step or do that work. Too much preparation is always better than too little.

Moreover, a concern, on the lawyer ’s part, that a disenchanted litigant may sue if some possible step is not taken and the action is lost, tends to ensure that no stone is left unturned in the quest for victory. Too much work is safer than too little.

And finally, unfortunately, there is the financial reward. I do not mean to imply that lawyers will generally do more than is necessary in order to achieve greater financial reward. Nevertheless, underlying the other reasons is the consciousness that doing more will result in greater reward.

(c) The consequences of these

The result of all this, it seems to be me, is that, notwithstanding reforms aimed at reducing the cost of litigation, provided that our system remains fundamentally an adversarial one lawyers will continue to act adversarially and, consequently, that system will remain very labour intensive and very expensive. It is even possible that some of the reforms aimed at reducing the cost of litigation may actually increase it. For example, there is some evidence from the United States where an individual docket case management system has existed in the Federal Courts for many years, that that system may even increase costs.6

Moreover, in most civil justice systems including, I think, yours,7 there remains a substantial time gap between commencement of proceedings and trial. The longer that time gap is, the more work that is done, and repeated, and consequently the more expensive is the cost of resolution. We all know of cases in which, through effluxion of time and the consequent repetition of tasks, costs have come to exceed the amount or value involved.

5 For example, as proposed in s 37N of the Access to Justice (Civil Litigation Reforms) Amendment Bill 2009 (Cth). See also Civil Procedure Act 2005 (NSW), s 56.

6 The Rand Report; see “Civil Justice Reform” footnote 3 at footnote 31.

7 Hansen J, Courts Administration, the Judiciary and the Efficient Delivery

of Justice: A Personal View [2007] OtaLawRw 2; (2007) 11 Otago LR 351, 356.


It is possible to reduce that time gap and cost of litigation somewhat by changing radically the way in which costs, both party and party and solicitor and own client, are fixed; that is, by fixing them, not by the amount of work done, but by reference to the stage reached in an action, with a prima facie maximum amount fixed for each stage. That is already occurring in some areas of litigation. Sophisticated, economically powerful litigants in Australia have, for some time, been insisting on litigation lawyers agreeing, in advance, on a fixed fee for a piece of litigation or on a fixed fee for each stage thereof. However, if lawyers are to be properly compensated for the work which they must do in order to prepare for trial in the system which we have, I think that this change, like so many others, will have only limited effect.

So even if we were to assume that our adversarial system of trial and judgment would be, but for its cost, the best way of resolving disputes, it will, I believe, remain so expensive as to be an uneconomical risk for most potential litigants in most disputes.

5. An early resolution must be reasonably informed

I mentioned earlier the advantages of an early agreed resolution. Nevertheless I accept that there are some disputes which may not be readily amenable to resolution by agreement. Examples may include those the resolution of which depend solely on a question of law, those which involve a question of principle which is important to one or both sides and those which clearly must be resolved in favour of one side or the other. Those in which there are serious questions of credit, for example where fraud is alleged, may also fall into this category. However, cases of these kinds are uncommon and many of them can be decided in some summary way. Most of these are also suited to early neutral evaluation, to which I refer later. As we all know, in the vast majority of cases, the most likely result will be somewhere between the contentions on one side and those on the other. Moreover, most cases are decided by resolving disputed questions of fact rather than fine questions of law.

Nevertheless, the advantages of an early agreed resolution are negated if it is unfair to either party. And it may not be fair if it is not reasonably informed. It is therefore necessary to consider what is a reasonably informed resolution.

There are two unfortunate aspects, it seems to me, of the adversarial system’s attitude to disclosure. The first is that, though it provides for disclosure of documentary evidence, it does so only late in the dispute resolution process. That is understandable only if the sole object of the process is trial and judgment.

The second, and more curious is that it imposes no requirement at all to disclose oral evidence; and this notwithstanding that most cases are decided mainly on the basis of oral evidence. It is difficult to understand a rationale for this other than trial by ambush; or to reconcile it with the obligation to disclose documentary evidence. This failure has, to some extent, been alleviated in some jurisdictions by a requirement that, prior


to trial, each party served upon the other copies of witness statements. But for the purpose of early resolution this is of little use.

What is necessary for an informed early resolution, in my opinion, is that each party or, more accurately, each party’s lawyer have the other ’s knowledge of the relevant issues and the evidence directly relevant to those issues at the time that such early resolution is contemplated. At the time that an action is commenced the plaintiff’s lawyer should know what the plaintiff’s relevant contentions are and have in his possession sufficient of the evidence directly relevant to those contentions to justify commencing the proceedings; and at or shortly after that time the defendant’s lawyer should know which of those contentions are in issue and whether any other contentions are in issue, and have in his possession sufficient of the evidence directly relevant to those contentions to justify the defence. That combined knowledge should be sufficient to enable either lawyer to make a reasonable assessment of the likely judgment. The failure of our systems to enable each to have that combined knowledge at an early stage in the dispute resolution is sometimes a true impediment, and is more often perceived to be an impediment to early resolution by agreement.

Some attempt has been made in my own jurisdiction and in England and Wales to provide for the exchange of information at or before commencement of proceedings. I shall say something more about these in the next section of this lecture.

6. Some existing means of enabling and encouraging early reasonably informed resolution

What follows are some reforms introduced, here and elsewhere, which have some effect in encouraging early, reasonably informed agreed resolution.

Because I am speaking of the New Zealand system, what follows relates primarily to actions other than actions for personal injuries. Legislation in my own jurisdiction has also virtually eliminated personal injury litigation. I shall, nevertheless, say something further below about that legislation because it has had an effect on litigation other than personal injury litigation and because some of its provisions can be readily adapted to litigation other than personal injury litigation.

Also, because in Australia family law is administered by a separate court with which I have no familiarity, I am not in this lecture speaking of family law disputes though many of the reforms referred to below may well be appropriate also to the resolution of those disputes.

(a) Exchange of information before commencement of litigation

The Civil Procedure Rules 1998, introduced in England and Wales in consequence of the Woolf Report provide for pre-action protocols which require parties, before commencement of litigation, to state, in a summary way, their principal contentions and to identify the principal evidence relevant to those contentions. This should enable them or, more


accurately, their lawyers to identify the principal issues and evidence and thereby to form a more accurate estimate of the likely result if the case were to go to trial and judgment.

In my own State, legislation commencing in 1994, though in respect of personal injury actions only,8 requires parties to a dispute, before commencement of litigation, to state what they see as the real issues and to exchange information within their knowledge or which they can reasonably obtain, relevant to those issues. The kind of information which must be provided by a claimant includes the nature of the cause of action, a brief statement of the facts upon which the cause of action arises, the names and addresses of relevant witnesses to those facts, a statement of the damages claimed and of the facts on which that is based and copies of the principal documents relied on not thought to be in the posssession of the respondent. The respondent to the claim is then required to reciprocate, providing similar information within his knowledge. The pre-action protocols in England and Wales show how provisions such as these may be easily adapted to actions of other kinds.

If provisions such as these are to be effective it is essential that these exchanges be summary and informal; for example, by letter stating that information and attaching the principal documents not in the possession of the other. Unfortunately, however, for reasons which I have mentioned when explaining the causes of the labour intensiveness of our system, lawyers tend to do this more formally and at greater length than is necessary, thus increasing the cost of this process. It is important that this tendency be restrained both by clear description of what is required and, where necessary, by costs orders.

Provisions of this kind, if kept to an informal summary, can do much to ensure fairness, and the perception of fairness between the parties, at little increase in cost, in resolving a dispute by agreement before or shortly after the commencement of litigation or at least in narrowing the issues. And while these requirements may increase the cost of that tiny percentage of actions which go to trial, they are likely, in my view, to increase substantially the prospect of early resolution by agreement.

Although these provisions require such an exchange of information before proceedings commence, thus enabling resolution without the need to commence proceedings, it would be possible, at little greater expense and with less change to your system, to require this exchange immediately after commencement.

(b) Appointment of an independent expert witness before litigation commences

Another common difficulty in early fair resolution of disputes is a perception, not always justified, that there are contradictory expert

8 Motor Accident Insurance Act 1994, Workers Compensation and

Rehabilitation Act 2003, Personal Injuries Proceedings Act 2003.



opinions, relevant to that resolution, which cannot be reconciled. Nevertheless that perception may be sufficient to prevent early resolution of a dispute.

Rules of court in my own jurisdiction, supported by some legislation, provide, with some exceptions, that all expert witnesses who will give evidence in an action must be either agreed to by the parties or appointed by the court. These provisions contemplate that such an agreement or appointment may be made before litigation has commenced.9

Where two or more persons agree that there is a dispute between them that will probably result in a proceeding and that obtaining expert evidence immediately may help in resolving a substantial issue in the dispute, those persons may jointly appoint an expert and in any proceedings between those persons to which the expert’s opinion is relevant, unless the court otherwise orders, that expert will be the only expert who may give evidence on that question. And similarly, where a person believes on reasonable grounds that there is a dispute between that person and one or more others that will probably result in a proceeding and that obtaining expert evidence immediately may help in resolving a substantial issue in the dispute, a court may, on the application of such person appoint an expert to give an opinion relevant to that issue, with the same result in any subsequent proceedings between that person and the other or others.

A relevant purpose of these provisions is to enable parties to a dispute, to which a question involving expertise is relevant, to resolve that dispute by agreement in the confidence that, if it were to go to trial, the opinion which they have been provided would be the opinion upon which the court’s decision would be based.

These provisions, and parallel provisions permitting the court to appoint an expert after commencement of litigation, provide a carrot and a stick. The carrot is the opportunity given to the parties to have an independent expert appointed before commencement of litigation. The stick is that if parties do not take advantage of that opportunity and, instead, obtain their own respective expert opinions, the court will, nevertheless, probably appoint its own expert whose evidence will be admitted in lieu of that of those experts engaged separately by the parties.

These provisions have purposes other than that just mentioned: to reduce the number of expert witnesses called at trial; to minimise disputes about expert evidence; and, importantly, to make expert evidence more objective. But it is the purpose of enabling parties to resolve any question involving expertise early in the dispute resolution process which is of greatest importance in this context. In some cases, a question involving expertise may be the central question in dispute; and in many others its

9 Chapter 11 (Evidence), Part 5 (Expert Evidence) of the Uniform Civil Procedure Rules 1998 (Qld). The protocols in England and Wales, referred to earlier, also encourage this.


resolution may more readily enable the resolution of the other issues.

(c) Requiring provision by a party’s lawyer of an early realistic assessment to a party of his prospects of success and of the likely cost of litigating to trial and judgment

At the outset of litigation a client should be given a realistic assessment of his prospects of success and a realistic assessment of the likely cost of litigating to trial and judgment. I have explained why these assessments are necessary for fair resolution of a dispute.

(i) Requiring provision of a realistic estimate of the likely judgment

A solicitor has a common law duty to advise a client on the likely outcome of proposed litigation.10 The content of that duty may depend on the level of sophistication of the client11 and the relevant knowledge and means of knowledge of relevant facts by the solicitor.

In nearly 30 years in practice at the bar, both as junior and senior counsel, I found that, in the vast majority of cases which came to me, the solicitor had overestimated to the client his chances of success. That is understandable.

In the first place, at the time when he first consults his solicitor, the client may feel that he has been wronged by his opponent. The lawyer may attempt to dampen down expectations a little but, even if he does, his advice will frequently be given an optimistic interpretation by the client.

Secondly, the lawyer will ordinarily hear only one side of the story and his advice will be based on that; and, though he may say that there might well be a contradictory version, that may not be seen by the client as a serious qualification. Performance of the mutual obligation to exchange principal contentions and evidence should enable a more objective assessment to be given.

Thirdly, the client often makes it clear that he believes that his prospects of success are good; and no one likes to disappoint a patron especially where a pessimistic opinion might well lose that patron and consequently the prospect of remunerative work. I do not mean to imply here that the majority of lawyers are likely to deliberately overestimate their clients’ prospects of success in order to obtain or retain work. I mean rather that the pressure on the lawyer to satisfy the client is an underlying factor.

Having failed, in the first place, to give the client a realistic estimate of the prospects of success or having failed to correct the client’s overoptimistic interpretation of his opinion, the lawyer, unsurprisingly, then finds it difficult later to moderate that estimate or moderate the client’s misinterpretation of it. This can, and often does lead to disappointed expectations later, either when first confronted with a

  1. Levicon International Holdings BV v Linklaters (A Firm) [2009] EWHC 812 (Comm).

11 Phelps v Stewart [2007] EWHC 1561 (Ch).


realistic estimate or only at trial.

In my opinion, this common law duty should be stated more specifically in legislation or rules of court in the light of the information which the solicitor will have if the duty to exchange principal contentions and evidence at the commencement of litigation is imposed and enforced. Such provisions should provide for costs penalties for failing to perform that duty which should be a continuing one.

(ii) Requiring provision of a realistic estimate of the likely cost of an action to trial and judgment

In Queensland and, I assume, elsewhere, subject to an exception in the case of litigants defined as sophisticated litigants, a lawyer is obliged, upon taking instructions, to give the client an estimate of the total legal costs, the range of costs likely to be recovered if the client is successful and the range of costs likely to be payable to the other party if the client is unsuccessful.12 And he must disclose any substantial change to that estimate.13

These are useful provisions. Unfortunately, however, they are not always complied with and, when they are, the estimates often appear to be inadequate, sometimes grossly so.

I occasionally act as a mediator in commercial disputes. Almost invariably when I do, I require the lawyers on each side, before the mediation meeting, to exchange estimates of the additional costs likely to be incurred by their respective parties if the matter proceeds to trial. I then spend some time with them, and their clients, at the outset of the mediation meeting, exploring the consequences to the parties, in the event of the matter proceeding to trial, upon what appear from the pleadings to be the reasonably possible results at trial. This is, more often than not, a useful exercise in a number of ways.

In the first place, it often reveals a wide discrepancy in the cost estimates of the parties’ lawyers, a discrepancy which sometimes reflects their respective preferences for settlement, on the one hand, and trial on the other. Secondly, it often reveals that this is the first opportunity which the parties have been given to see a realistic comparison of the cost or benefit to them of immediate settlement, on the one hand, and ultimate trial and judgment on the other. And thirdly, it puts some pressure on lawyers, often for the first time, to face this and advise their clients accordingly.

Unfortunately these meetings often occur late in the dispute resolution process; not too late to avoid some costs by settling then, but often much later and at much greater cost than could reasonably have been achieved.

12 Legal Profession Act 2007, ss 308 (1)(c) and (d), s 311. It is unclear what the consequence is of breach of this provision. See, however Access to Justice (Civil Litigation Reforms) Amendment Bill 2009, ss 37N and 43 (3)(f).

13 Ibid, s 315.


What each party needs is an objective assessment, as soon as possible after the exchange of contentions and information referred to earlier, if it is not feasible to do so before then, of the likely cost to that party of proceeding to trial and judgment.

The obligation to provide this assessment should be stated specifically in legislation or court rules and that assessment should be exchanged and provided to the mediator at a mediation meeting. It should also be available to the court, after judgment in the action, in order to assess whether the lawyer has adequately performed his obligation to the client and, if he has not, whether he should be deprived of costs.

(d) Attaching sufficient cost incentives to offers of settlement including

those made before commencement of litigation

Rules 14.10 and 14.11 of your rules provide, amongst other things, that, subject to the discretion of the court, a party who makes an offer of settlement to another which is more beneficial to that other party than the judgment obtained by that party, is entitled to costs incurred after the date of that offer. My first criticism of these rules is that they, like their equivalent rules in Australia and elsewhere, apply only to offers made by a party to an action. They therefore do not apply to an offer made by one party to a dispute to the other in circumstances in which that dispute later becomes the subject of litigation. There is no logical or common sense reason, in my opinion, why such a rule should be so limited. On the contrary, there is an even stronger argument, in my opinion, that a person who makes a reasonable offer before litigation should be entitled to be protected against the costs of that litigation than there is that one who makes such an offer during its course should be entitled to be so protected. The Civil Procedure Rules 1998 of England and Wales seem to provide for this situation though perhaps not with sufficient specificity.14

However I have two further criticism of your provisions when compared to equivalent provisions in Australia and in England and Wales. The first is that they do not provide sufficient incentive to make such an offer. And the second is that they provide no incentive to a plaintiff or prospective plaintiff to make such an offer. On the contrary, their terms indicate that they apply only to offers more beneficial than the judgment obtained by the other party; that is, presumably, by the plaintiff on the claim or the defendant on a counterclaim.15

As to the first of these criticisms, whereas your rules provide, in effect, that, in the event of such an offer, subject to the discretion of the court, the defendant is entitled to costs incurred after the date of the offer, the relevant rule in my own jurisdictionprovides, in that event, that the court

14 Civil Procedure Rules, rule 36.10.

15 A plaintiff may well make an offer more beneficial than a judgment

obtained by him; but it is inconceivable that, on his own claim, he

would make an offer more beneficial than a judgment obtained by the

defendant.


must order the plaintiff to pay the defendant’s costs after the date of the offer unless the plaintiff shows that some other order is appropriate.16

Notwithstanding your rules 14.6 and 14.7, the Queensland provisions provide a somewhat greater incentive, than yours do, to make such an offer of settlement and to accept it if it is objectively reasonable. In my opinion such additional incentive is necessary to overcome the reluctance of lawyers to settle early. I shall say a little more about that reluctance in the next part of this lecture.

As to the second of these criticisms, whereas your rules apply only to offers made by a defendant, including a defendant to a counterclaim, the rules of my own jurisdiction apply also to an offer made by a plaintiff, entitling the plaintiff who obtains a judgment more beneficial than the offer which he made, to costs on an indemnity basis after the date of the offer, unless the defendant shows that some other order is appropriate.17

There is, in my opinion, no logical or common sense reason why a plaintiff who makes a reasonable offer of settlement should not be adequately protected in costs if that offer is rejected by a defendant.

For those reasons, I commend the Queensland rules to you in this respect. Similar provisions exist in the Civil Procedure Rules 1998, England and Wales, referred to earlier.

On the other hand, I think that your rule 14.11(4), which provides, additionally, that an offer may be taken into account in assessing costs if it is close to but less beneficial to the offeree than the judgment, is one which should be adopted elsewhere. Particularly in actions for damages which, whilst capable of estimation, are not capable of precise calculation, a disputant who makes an offer to settle which is close to but a little less beneficial to the offeree than the judgment sum, deserves to be protected in costs where the amount of that offer is within the range of a reasonable judgment. And this is especially so where that offer is made early in the proceedings or before action. Such a provision encourages early fair resolution.18

(e) Enabling and encouraging an early settlement conference/

mediation

I have already recognized that there are some kinds of disputes which may not be readily amenable to an early negotiated resolution, including by mediation, and have given some examples of these. Two other examples are worth mentioning. The first is where a party or that party’s

16 Uniform Civil Procedure Rules, rule 361.

17 Uniform Civil Procedure Rules, rule 360.

18 And, in my opinion, it provides much greater certainty than an

interpretation of the rules in my own jurisdiction, or of those in England

and Wales, which would permit such a result: as occurred in Carver v

BAA [2008] EWCA Civ 412. It seems that serious consideration is being

given in England and Wales to a rule change to reverse that decision and

to provide specifically for that eventuality: see Review of Civil LItigation

Costs: Preliminary Report by Rt Hon Lord Justice Jackson (2010).


lawyer has an unrealistic view of the likely result upon judgment. The second is where, because of a substantial financial imbalance between the parties, the negotiating power of the poorer party may be impaired by his realisation that litigation against his richer opponent may lead to his own financial ruin. In both of these examples, however, the dispute is, in my opinion, ideally suited to early neutral evaluation as, indeed, are most other cases which are unsuited to negotiated resolution.

There may also be some disputes in which it may be unwise to engage in any such negotiation before there has been a quite extensive exchange of information. However, these would be only a tiny minority of cases. In the vast majority, provided there has been some early exchange of information, as in the processes to which I have referred, there should be sufficient relevant information in the possession of both parties to enable them to negotiate, whether or not that negotiation involves a mediator, without significant risk of unfairness.

By your rule 7.79 a judge may, before the hearing of a proceeding, and apparently even over the objection of one or both parties, convene a conference of the parties for the purpose of negotiating a settlement. However your rule permits the making of a mediation order only with the consent of the parties. In my own jurisdiction a judge may order mediation to take place over the objection of one or even both parties.

At about the same time that the mediation provisions became part of the court rules in Queensland, the first of the legislative provisions with respect to personal injury actions, referred to earlier,19 was introduced. In addition to mandating, before commencement of litigation, exchange of essential information and, with some exceptions, exchange of offers of settlement, it also requires the parties, with some exceptions, to attend a conference, which may be conducted by the mediator, at which they must actively participate in an attempt to settle the dispute.20 By these provisions, litigation lawyers became compelled to engage in a negotiation process, albeit only in personal injury cases. In doing so, they came to see that this process did not impose the threat to their income which they had previously thought it would, because, while it might reduce the income which they would derive from each case, it would, instead, ensure a more rapid turnover of cases. An important consequence of this, it seems, is that lawyers became less unwilling to engage in early negotiation, including mediation, in other kinds of litigation than they had been hitherto. This may be seen in an increase in early settlement and in mediations in Queensland, generally, since

1995, in contrast to the failure of the profession to embrace early neutral evaluation, referred to below, introduced at the same time.

In England and Wales it has been recognized that parties and, I would add, particularly their lawyers, sometimes need to be encouraged by the


19 Motor Accident Insurance Act 1994.

20 Ibid, ss 51A and 51B.


court to embark on ADR and that such encouragement may be robust.21

This may include requiring the parties to exchange lists of neutral

individuals who are available to conduct ADR procedures, to endeavour

in good faith to agree on a neutral individual or panel and to take “such

serious steps as they may be advised to resolve their disputes by ADR

procedures before the neutral individual or panel so chosen.”22 Robust

encouragement of this kind may, by bringing the parties together in a

non-adversarial environment in which each party may come to see the

weaknesses of its own case and the strengths of that of the opponent,

bring about an agreed resolution.

The Civil Procedure Rules 1998, England and Wales permit cost penalties to be imposed on parties for unreasonably refusing to engage in a mediation process and on their lawyers for unreasonably encouraging such refusal.23 And in Australia legislation is presently proposed which will permit cost penalties to be imposed upon parties for this and upon lawyers for unreasonably encouraging this.24 The possibility of these costs penalties may be a useful way of encouraging both parties and their lawyers to engage in resolution in this way; though it may be difficult, in many cases, to prove a breach of these provisions and, for that reason, the threat of such costs penalties may not be seen as a real one.

I shall later explain why I think that even this robust encouragement appears to be insufficient to persuade lawyers and their clients to embrace mediation in all cases where it might resolve a dispute cheaply and fairly.

It seems to me that a final offer, made during the course of a settlement conference or mediation which fails to resolve a dispute, should have the same effect as an offer of settlement made pursuant to the rules applicable to such offers.

Your rule 7.79 recognizes that a judge may conduct a mediation conference. I think that is a sensible rule provided, as your rules do, that that judge does not conduct any subsequent proceedings in the action if the mediation fails.

(f) Enabling and encouraging early neutral evaluation

Early neutral evaluation is a way of providing the parties with a realistic opinion of the likely result at trial and of ensuring, in provisions to which I am about to refer, that a party who fails to accept such evaluation proceeds at the risk of a cost penalty if his failure proves, at trial, to have been unjustified. As I mentioned earlier, it is particularly appropriate to those cases in which a party or a party’s lawyer appears to have an

21 Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 at [10].

22 Ibid, at [30].

23 Dunnett v Railtrack plc [ 2002] EWCA Civ 303 at [15]. In Halsey at [12]-[35]

the Court of Appeal discussed the factors to be considered in determining

whether such a refusal was unreasonable.

24 Access to Justice (Civil Litigation Reforms) Amendment Bill 2009, s

37N.


unrealistic view of his prospects of success at trial and those in which there is a substantial financial imbalance between the parties which may affect the capacity of the poorer party to negotiate a fair resolution; and it is also suited to most other cases which are unsuited to a negotiated resolution.

Provisions for neutral evaluation exist in court rules in several jurisdictions in Australia. They have existed in Queensland since 1995 where the process is called “case appraisal”. A case appraisal is a non binding decision given by a court approved appraiser after a summary procedure which may consist of no more than receipt of the pleadings or of a statement of issues, statements or short oral evidence from the principal witnesses and brief submissions on each side. The decision must be in writing but the appraiser need not give reasons and is not encouraged to do so.

If the parties accept the decision it becomes a judgment of the court. If one party chooses to challenge the decision, the action proceeds to trial and judgment but with the following consequence. If the challenger does no better at judgment than the decision of the appraiser, the challenger must pay all costs incurred unless, in special circumstances, the court thinks that some other order is appropriate.

Unfortunately this cost consequence does not penalise that class of defendants, possibly the majority, who would probably have been obliged to pay the costs of the action in any event; that is, those defendants who would, in any event, have been liable to some extent, the question in the case being the extent of that liability or of the damages. It might have been better to provide that, in that class of case, a defendant challenger who fails to do better at judgment than the decision of the case appraiser, should pay costs on an indemnity basis unless the court thinks that some other order is appropriate.

After more than a decade since its introduction, this form of early neutral evaluation, unlike mediation which was introduced into court rules at the same time, is now rarely used. There are, it seems to me, two possible explanations for this.

The first is that the risk that such an evaluation might come as an unpleasant shock to the client who has been given an overoptimistic assessment of the chances of success, may be a risk that the lawyer is not prepared to take. Mediation, which has been more readily accepted, does not have as much risk of this.

The second and possibly better reason is that, though it was designed as a process to be conducted in a summary way on limited material, lawyers who are by nature careful and conservative tended to prepare for early neutral evaluation as if it were a trial. They were unwilling to settle for a less than perfect view. And so the costs of case appraisal became disproportionate to its benefit.

Moreover, notwithstanding that judges have the power to order case appraisal over the objection of the parties, that power has been rarely


exercised. Nor have judges sought, as they could have, to confine the way in which appraisals are conducted. They remain, on the whole, reluctant to interfere in the conduct, by the parties’ lawyers, of the dispute resolution process.

The idea of early neutral evaluation - a good one - became spoiled by its execution. Unless this approach is changed, early neutral evaluation will not be chosen by litigation lawyers and will not be mandated by courts. For reasons which I shall give in the next part of this paper, I do not think that litigation lawyers can be expected, voluntarily, to initiate this change of approach. It must be mandated either by court rules or by judicial order.

If, as I believe, there can be no sensible objection to judges conducting mediations, then it is even more sensible that they should be permitted to conduct early neutral evaluations of the kind I have just discussed.

What I said earlier about conferring on courts a power to impose a costs penalty upon a party for unreasonably refusing to engage in a mediation process and against a lawyer for unreasonably discouraging such engagement applies also to early neutral evaluation.

7. Why that is not enough

The Queensland system, with which I have most familiarity, has, in one form or another, most of the features which I have just discussed. Nevertheless these have not succeeded in encouraging lawyers and their clients to attempt to resolve their disputes at an early stage by agreement or by early neutral evaluation in all or even most cases in which one or other of these might well resolve the dispute cheaply and fairly. There are, I believe, several reasons for this. As I have already mentioned some of these in another context it is, I think, sufficient if I summarise them here.

The first of these is the inability, or perceived inability of the parties’ lawyers, and consequently of the parties, at an early stage to arrive at realistic estimates of the likely result at judgment and of the likely cost of achieving that result. Without these it is impossible to make a realistic comparison between early resolution by agreement and later resolution by trial.

A second is that lawyers tend to be cautious and conservative in dispute resolution. It is difficult, for the most part, to criticise that and, in many respects, that caution and conservatism serves the clients well. But not always. In many cases, in my opinion, it causes lawyers to eschew the possibility of early resolution and, instead, continue to trial and judgment notwithstanding that an early agreed settlement might well have been of greater benefit to their clients.

A third is that lawyers are educated to enter and work in a system which has a long and admired history and tradition. Resolution of disputes by agreement has never been part of that system. It is not surprising, given the caution and conservatism to which I have just referred, that


lawyers are reluctant to depart from that system or readily to accept changes to it.

A fourth is that there is still an adversarial mindset in much of what litigation lawyers do and refrain from doing. An open book approach, such as might lead to an early agreed resolution, may be fine in theory, but only if it is practised on both sides. No lawyer wants to put his client at a disadvantage and that may occur if he adopts that approach but his opponent does not.

A fifth is that, over the last few decades, there has been an increase in litigation and threats of litigation against lawyers. Consequently lawyers have become increasingly aware of the need to protect themselves against the risk of their own liability. And while a lawyer may be at risk of being sued if he settles his client’s action early, he is rarely, if ever, at risk for continuing to trial and judgment.

And finally, lawyers, at least subconsciously, are aware that they will earn more income from a dispute that goes to trial and judgment than one which is resolved at an early stage by agreement.

These facts may explain why, as seems to be the case, the advantages of early resolution by agreement are sometimes more apparent to the parties to a dispute than they are to their lawyers.

All of these facts continue to militate against early mutual disclosure and early resolution by agreement. The only way in which, in my opinion, these can be satisfactorily achieved is by requiring both sides to a dispute, by which I mean the parties and their lawyers, to act positively to enable both of these to occur unless it appears to a court that there is some reason which makes it inappropriate.

The procedures to which I referred in the preceding part of this paper are, for the most part, designed to encourage parties to disputes but, by and large, not their lawyers, to resolve them by early fair agreement, in most cases by providing incentives to those parties to use those procedures and, in a few cases, by imposing penalties on them for not doing so. But most parties, in the conduct of their disputes, are guided by and dependent on the advice of their lawyers. No doubt, in some cases, sophisticated repeat litigants may have informed views on whether, for example, negotiation, with or without mediation, is likely to be of benefit. But in most dispute resolutions the parties listen to and act on the advice of their lawyers. So in most cases it will be the party’s lawyer, rather than the party, who will, in effect, decide whether an attempt should be made to seek to resolve the dispute by agreement; and, more specifically, whether and if so to what extent the party will engage, and engage co- operatively in any of the procedures discussed earlier.

Consequently it is the lawyers, more than the parties, who should be encouraged to resolve disputes early in all cases in which, objectively, that would be likely to yield a fair result. And, for the reasons mentioned, the lawyers may need more robust persuasion than their clients.


8. What more should be done?

In the first place, all of the reforms mentioned in part 6 of this paper should, I think, be adopted here. Each of them makes some contribution to the achievement of a system in which fair dispute resolution may be made available at an affordable cost. However, whilst I think that all of these are necessary to that end it is plain, I think, that they are not, alone, sufficient to achieve that. In addition, I believe that the following are necessary:

1. A costs penalty should be imposed on a party for not genuinely and reasonably engaging in the summary process of early exchange of essential information and evidence; and imposed on a lawyer for failing to encourage his client to so engage. It may be possible, at the first case management conference under your rules, to resolve the question whether there has been a breach of these provisions.

2. A costs penalty should be imposed on a lawyer who, within a specified time of commencement of proceedings, fails to give his client a realistic estimate of the likely judgment. Of course, whether there has been a breach of this obligation could be determined only after resolution but it would be possible to provide for this by requiring the lawyer, within that specified time, to file a copy of his estimate in a sealed envelope to be opened only after resolution. It is essential, in order to minimise costs, that this estimate be in a summary form.

A breach of this obligation may be difficult to prove and should not be established by the wisdom of hindsight. In many cases a range of likely results may be sufficient. But the difficulty in establishing a breach of this obligation is not a reason for not imposing it or providing for a penalty for its breach.

3. A similar costs penalty should be imposed on a lawyer for failing to give his client, within the same time, a realistic estimate of the costs; in particular, of the difference between the costs up to the time when the parties are obliged to engage in negotiation, mediation or early neutral evaluation and the time at which judgment after trial might be reasonably expected. A similar requirement to file a copy of this estimate should be imposed.

4. The provisions with respect to offers of settlement should be strengthened in the ways referred to earlier.

5. A settlement conference or mediation should be mandated in all cases except where it is established to the satisfaction of the court that neither of these is appropriate. Generally that will be so only when it seems likely that neither will be able, fairly, to resolve the action or any substantial issue in it. Examples may be where a party has an unrealistic opinion of his prospects; or where the economic disparity between the parties may make fair resolution by these means difficult.


6. A costs penalty should be imposed on a party who does not genuinely and reasonably engage in a settlement conference or mediation; and a costs penalty should be imposed on that party’s lawyer if he fails to encourage his client genuinely and reasonably to engage in a settlement conference or mediation. The difficulty in proving breach of either of these provisions may be, to some extent, overcome, in the case of a mediation, by requiring the mediator, in a report to the court to be opened only after resolution, to state whether, in his opinion, a party or the party’s lawyer has failed to perform his obligation; and to provide that his opinion that there was a breach shall be prima facie evidence of that breach.

7. An early neutral evaluation should be mandated in all cases in which a settlement conference or a mediation has not occurred except where it is established to the satisfaction of the court that an early neutral evaluation is inappropriate.

8. A costs penalty should be imposed on a party who does not genuinely and reasonably engage in an early neutral evaluation; and a cost penalty should be imposed on that party’s lawyer if he fails to encourage his client genuinely and reasonably to engage in the early neutral evaluation. The evaluator should be required to provide a report to the court of the kind mentioned in 6 with the same consequences.

9. Providing that where a party declines to accept an offer made in a mediation or to accept an evaluation made in an early neutral evaluation, but elects to proceed to trial and judgment, then unless that party achieves a more beneficial result at judgment he shall be obliged, in the absence of special circumstances, to pay the whole of the costs of his opponent (on an indemnity basis in the case of a defendant who would have been liable to pay the costs in any event) from the time of that offer or evaluation until judgment.

9. Conclusion

It is time that we accepted the reality that changes, here and there, to our civil trial system are unlikely, in the foreseeable future, to make litigating to trial and judgment affordable to the average litigant. Once that reality is accepted, it is plain that some alternative means must be found for resolving disputes at an affordable cost.

It is also time that we not only accepted as a reality the substantial cost difference for both parties between an early agreed resolution and a later resolution by trial and judgment, but also ensured that they are fully informed of this at an early stage of the dispute resolution process and confronted with the realistic choices open to them.

I accept that any person involved in a justiciable dispute has a reasonable expectation that he may have it resolved by a court. However, against that expectation must be balanced the expectation of that person’s opponent to resolution of that dispute at an affordable cost; and the expectations of other potential litigants to timely resolution of their disputes.


I believe that a balance between these competing expectations can best be achieved by mandating early informal exchange of principal contentions and of centrally relevant evidence; by requiring lawyers to give their clients an early estimate of the likely result at trial and of the likely cost of achieving that result; other than in exceptional cases, by mandating a settlement conference, a mediation or an early neutral evaluation; and by obliging a party who rejects an offer of settlement or an early neutral evaluation to assume the cost risk of proceeding to trial and judgment.

I do not suggest that this is an ideal solution. I do not think that there is one. But it is, I believe, as close as we can realistically come to a system which makes reasonably fair, reasonably economical, early dispute resolution available consistently with the maintenance of an adversary system such as ours.


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