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Reforms to give clout to the court

Reforms to give clout to the court

Following outcry over the substantial cost to taxpayers of a recent spate of "mega-litigation", the Government has moved to ramp up judges' powers in the interests of efficiency. But what do the…

Following outcry over the substantial cost to taxpayers of a recent spate of "mega-litigation", the Government has moved to ramp up judges' powers in the interests of efficiency. But what do the reforms really add to judges' already substantial case management powers? Zoe Lyon investigates

Following a crescendo of criticism over the rapidly expanding costs of so-called "mega-litigation", the Federal Government has attempted to beef up Federal Court judges' powers to keep case lengths - and costs - in line. But given that judges already have considerable discretion over the management of their cases, what do the reforms really add? And can they truly - as the Government clearly hopes - spell the end of "mega-litigation"?

An end to mega-litigation?

Late last month, Attorney General Robert McClelland introduced the Access to Justice (Civil Litigation Reforms) Amendment Bill 2009 (Bill), which seeks to amend the Federal Court of Australia Act 1976 (Act).

The Bill introduces a new "overarching purpose" behind the Act's civil practice and procedure provisions, namely to "facilitate the just resolution of disputes according to the law and as quickly, inexpensively and efficiently as possible", and it puts an obligation on the court, parties and parties' legal representatives to act accordingly.

More specifically, the reforms clarify, and in some cases strengthen, judges' case management powers - including their ability to order costs and give directions - and attempt to streamline the processes for appeals.

In his second reading speech, McClelland made it clear that a primary impetus for the reforms was a number of recent high-profile, lengthy cases - notably Seven Network Ltd v News Ltd [2007] FCA 1062 (C7) and Bell Group Ltd (in liquidation) v Westpac Banking Corporation [No 9] [2008] WASC 239 (Bell).

As McClelland pointed out, these cases drained substantial funds from the public purse. Figures released by the Western Australian Department of Justice, for example, show that in Bell - a case that cost taxpayers $6.2 million - the parties contributed just $900,000, less than 15 per cent of the total.

The reforms in the Bill are designed to equip judges with more powers, and more confidence, to keep a tighter rein on the conduct of cases and prevent cost blow-outs à la Bell. However, according to Mallesons Stephen Jaques partner Roger Forbes, it is debatable whether inefficiency is the reason for the length and cost of such cases.

"Obviously [C7 and Bell] are not the normal run of the mill [cases] and they are a rarity ... and they just suck up so much of the court's money - ultimately, the taxpayers' money." he says. "But I don't know how preventable that is in the sense that you'll always get very large cases coming through the Federal Court system, as well as the state court system.

"They just happen, and all that one can hope for is that they are run as efficiently as they can [be]. The mere fact that a case is large in itself is not a bad thing. [The question is] - is it large because it's been run badly, or is it large because that's just the nature of the beast?"

Clayton Utz partner Rob Cutler agrees that lengthy, costly cases will probably still be par for the course, even if efficiency measures are promoted by legislation and proactively engaged by judges.

"The popular view is that the really complex and lengthy litigation such as Bell and C7 unfairly monopolise the judicial system and drain resources away from what some would say are more deserving areas - legal aid being one," he says. "But against that you've got the unavoidable fact that some cases are incredibly complex and the laws pursuant to which they're run are very complex. And accordingly, when you've got parties with very large transactions or matters, sometimes, unavoidably, the cases are lengthy, complex and costly to all concerned."

That said, Cutler believes that the existence of clear laws requiring parties to litigation - however complex and lengthy the case may be - to factor in efficiency, is a positive step. "I think a principle which would be universally accepted ... is that you need to have rules and laws in place to maximise the efficiency of running litigation, and that's clearly what these amendments are designed to do," he says.

Reinventing the wheel?

Judges have arguably long held many of the case management powers set out in the Bill, and as Freehills partner Graham Johnson points out, much of value of the Bill is in clarifying and making existing powers explicit.

"Federal Court judges currently possess a wide range of powers and the ability to utilise discretion. The proposed amendments serve mainly to clarify these powers, and provide guidance as to how judges should perform the balancing act between the interests of efficiency and justice," he says.

Mallesons' Forbes agrees: "[The reforms] are not revolutionary, but I don't think they pretend to be revolutionary. They are incremental changes in the sense that they confirm some existing practices and, to some extent, extend them. And the particular extension is the explicit empowering of judges to have regard to more than just the interests of the parties in their case. They can take a broader view of the efficient use of court resources," he says.

While many of the specific powers set out in the Bill may already be in the hands of judges, the extent to which they can use them was arguably thrown into doubt by the decision in Queensland v JL Holdings Pty Ltd (1997) 141 ALR 353 (JL Holdings), which held that efficiency could not come at the expense of attaining justice between the parties.

As McClelland points out in his second reading speech, this decision has dampened judges' confidence when it comes to using case management powers to promote efficiency.

"[JL Holdings] has led to a restrictive interpretation by the courts of what is in the interests of justice, and has made judges more cautious about considering the need to effectively and efficiently manage the court's overall workload," McClelland said, adding that one of objectives for the reforms is to overrule this "restrictive interpretation".

Forbes agrees that JL Holdings has probably inhibited judges from using all the weapons at their disposal when it comes to controlling the cost and time of cases.

"Quite a number of those things dealt with in the [Bill] are things that courts probably have power to do already in many cases, but I think the thrust of the provisions is to make the court's power to do those things explicit and give judges confidence that if they do them, they won't find themselves being appealed," he says.

"[JL Holdings] is frequently thrown back at judges who try to run matters very efficiently and tightly. What I think [the Government] is trying to do is to tilt the scales back a little bit, away from individual litigants, so that judges when making orders in cases ... are allowed to take into account a broader range of factors, including the overall efficient administration of justice."

Will money talk?

Perhaps one of the standout reforms for lawyers is the introduction of an explicit legislative power allowing judges to award costs against lawyers who act in contravention of the overarching purpose. While power to award costs against lawyers already exists in the Federal Court Rules, Forbes believes that the Bill will clear up any doubt.

"I think there was a bit of a question as to whether the court could confer upon itself that power by putting something in the Rules. This makes it explicit in the Act ... that the court does have that power ... and it explicitly links the power to make the [costs] order with the behaviour of lawyers which is inconsistent with the overarching purpose," he explains.

While describing it as "fairly draconian", Clayton Utz's Cutler believes that it's an important power for judges to have up their sleeves. "It is obviously a fairly draconian order that the court can make ... but if there are cases where lawyers are not acting in accordance with - most importantly - their clients' instructions and in the interests of their client, then I see no issue whatsoever with the imposition of a costs order against a lawyer," he says.

Freehills' Johnson concurs, adding that it's a weapon unlikely to be wielded indiscriminantly. "It's no bad thing that Federal Court judges have capacity in their armoury to deal with matters in a variety of ways where litigation is unduly prolonged, [but] it seems likely that the power to award costs against legal representatives will rarely be exercised and only in extreme cases," he says.

The Bill also introduces a new, related power which will allow judges to order a lawyer to give their client an estimate of costs, and the likely duration of their client's chosen course of action. "That's quite a useful power for a judge and I doubt whether they've been able to force a lawyer to do that in the past," Mallesons' Forbes says. "I think it's a way of allowing the court to more actively control the way in which lawyers are giving advice to their clients if they're concerned the lawyers aren't doing that properly."

As well as costs against lawyers, the Bill also makes it clear that judges can take a flexible approach to awarding costs against parties where they have failed to comply with the overarching purpose.

However, Forbes' concern is that by setting out a "shopping list" of potential cost orders, the Bill could potentially result in additional court time being used by parties arguing over costs. "You might get a situation arising - and this is a matter for judges to control, I think - where you have this sort of Royal Commission into the manner in which each party conducted itself throughout the litigation - whether they be the winner or the loser - [with] the judge being invited to embark on a process of inquiry about how each party conducted itself," he explains.

"That can happen now - that's not new. People will frequently ask the court to make special cost orders. But this sort of encourages it. So I think one thing that courts are going to have to look out for is that this particular provision doesn't become a problem in itself."

A step forward

Overall, the lawyers that Lawyers Weekly spoke to considered the reforms a positive step, which at the very least clarify some of the grey areas surrounding judicial case management powers and get courts, lawyers and parties thinking about the need to maximise the efficiency of court processes.

"It has often been said that there is a need for courts to ensure that the use of public resources is proportionate to the issues in dispute," Johnson says. "Of course, measures which meet the proposed objectives without sacrificing just outcomes are to be welcomed."

Forbes adds: "I don't think that there's anything massively new here ... but I think it focuses the court and lawyers [to ask] 'Is this step I'm taking truly necessary or is it just being taken to bog things down and make things more expensive?'. Now, we ought to have always asked that question - but this gives certain teeth to that."

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