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Excess or necessity? Lawyers reflect on C7 litigation

Excess or necessity? Lawyers reflect on C7 litigation

Now that the costs of the C7 litigation have been released, many are focusing on what the lawyers took home. But the profession is pointing instead to the way various parties handled the case,…

Now that the costs of the C7 litigation have been released, many are focusing on what the lawyers took home. But the profession is pointing instead to the way various parties handled the case, and what could have been done differently. Kate Gibbs reports

JUST HOW mega the “mega-litigation” C7 case was has been fully realised with the release of documents that show a breakdown of costs for some of the parties involved.

Senior barristers reaped millions of dollars in fees from the case, while expert witnesses, photocopies and faxes were also listed high on the most expensive elements.

In the ill-fated case, Seven Network Ltd v News Ltd [2007] FCA 1062 (C7), Seven Network alleged that its pay-TV arm C7 was driven out of business by anti-competitive behaviour. The matter ended up running for five years, and was estimated to cost more than $200 million. Federal Court Justice Ronald Sackville dismissed the claims made by the Seven Network.

The Seven Network was advised by Freehills. Allens Arthur Robinson represented News Ltd and Foxtel, Mallesons Stephen Jaques represented Telstra, Gilbert + Tobin represented PBL, and Chang, Pistilli & Simmons represented Optus. The ruling followed 120 days of hearings that produced almost 10,000 pages of transcript.

Justice Sackville in July described the case as an example of “mega-litigation”, since it had consumed many months of court time and generated vast quantities of paper and electronic documentation.

“An invariable characteristic of mega-litigation is that it imposes a very large burden, not only on the parties, but on the court system and, through that system, the community,” Justice Sackville said at the time.

But just how significant the burden on the parties involved would be was not fully realised until last week when Justice Sackville released documents to the public.

According to the records, Publishing & Broadcasting Ltd spent $21.5 million all up, of which $12.2 million went to law firm Gilbert + Tobin, and $4.5 million to barristers. Senior barrister Tony Meagher SC earned $2.7 million, having charged $700 an hour for his work. Anthony Payne reaped $1.3 million and fellow barrister David Studdy $540,000 from the single case.

Optus spent $9.2 million, including $3.6 million in legal fees for its two firms; Atanaskovic Hartnell and Chang, Pistilli & Simmons. And their barristers’ fees were also considerable, amounting to $3 million in total. Of that, $1.9 million went to Tony Bannon SC and $626,085 to Mark Leeming SC.

But it’s not the legal fees that the profession’s focus is now on. Even after the high figures have been released, sources who spoke to Lawyers Weekly were not surprised by individual lawyers’ fees, but were concerned with how the various parties’ costs could have been reduced in other ways.

Justice Sackville himself was surprised at the amount of money spent on a single case. “My estimate is that the parties have spent in the order of $200 million on legal costs in connection with these proceedings,” he said in July.

He questioned the amount of money spent proportionate to the amount of damages being claimed in the case. When the case opened, Seven suggested that it would be claiming more than $1.1 billion in damages. This was later reduced to between $194.8 and $212.3 million when final submissions were made. “The maximum amount at stake in this litigation has not been very much more than the total legal costs incurred to date,” Justice Sackville said.

“It is difficult to understand how the costs incurred by the parties can be said to be proportionate to what is truly at stake, measured in financial terms,” he said, labelling the expenditure on the C7 litigation “extraordinarily wasteful” and bordering on the “scandalous”.

Mallesons Stephen Jaques partner Roger Forbes, who led the firm’s team representing Telstra in the landmark litigation, echoed Justice Sackville’s suggestion that the expense was wasteful and to a large extent unnecessary.

According to Forbes, elements of the case could have been done differently, and would have resulted in lower costs to the parties involved. He pointed to Seven’s failure to really identify their main case. “They pleaded a case which had literally hundreds of permutations and combinations. They failed to ever really grapple with that … They always wanted to reserve the right to run every point,” he said.

While Forbes respected Seven’s right to do this, and he understood that parties don’t want to give away points too early, he said this causes expenses in the trial that it need not have. “The main gist of their case was probably one-tenth of the volume of the case. We had all this other stuff around it that we had to deal with,” Forbes said.

This method used by Seven wasted other parties’ time, according to Forbes. “They would say ‘we’re entitled to run all the points we want to and we don’t have to, at the outset, decide which are the best ones and which are the bad ones’,” he said. He suggested that one potential method to deal with these problems would be to allow judges to play a more interventionist role in “weeding out the wheat from the chaff”.

His comments come after the Federal Attorney-General Philip Ruddock, the Labor Party and peak legal bodies all backed calls in July for judges to be given greater powers to order big companies out of publicly funded courts and into binding private arbitration.

At the time, Justice Sackville urged parties to the case to resolve their dispute outside court, but he lacked the power to order binding arbitration unless the parties agreed. Both the Victorian Law Reform Commission and the Australian Lawyers Alliance called for this loophole to be closed in July this year, following the C7 case.

Ruddock said he would “not be averse to examining the issue, particularly if Victoria intended to mandate such requirements”, The Australian reported. “It would seem pyrrhic to simply leave the alternative jurisdiction of the Federal Court available to parties that may be excluded from the Victorian jurisdiction. I have been a long-time supporter of alternative dispute resolution — this applies to commercial disputes as much as any other.”

In the C7 case, former Federal Court judge Tony Fitzgerald played the role of mediator. Forbes recalls how the mediator was engaged: “All the parties came together. They all had their wish list of categories and he helped them sort out the differences. That was good at that level.”

But Forbes said it would be beneficial if judges could play a more hands-on, interventionist role. “It’s hard for them to roll their sleeves up and, as it were, come off the bench and directly engage in the discussion about what documents the parties really need and what it will cost for that discovery to be given. It would be great if there was such a role, even if it’s not the judge who is hearing the trial, but a judge who could play that role,” he said.

Forbes said that a major expense and difficulty in big litigation arises with interlocutory battles over, for example, discovery. This process has to be done very formally; affidavits have to be prepared, documents tendered, and there are lengthy hearings and cross-examinations, he said. “A lot of these things, not all by any means, could normally be sorted out around a table without the formality. It would save a lot of money.”

Forbes didn’t claim to have the perfect solution, but he suggested that it should be learned from the C7 case that there is a role for judges, possibly one not hearing the case, to “step off the bench and engage more directly with the parties over those issues at the start of the trial”.

Justice Sackville also commented on the discovery process and noted that he had to step in to limit it to an extent. “The outcome of the processes of discovery and production of documents in this case was an electronic database containing 85,653 documents, comprising 589,392 pages. Ultimately, 12,849 ‘documents’, comprising 115,586 pages, were admitted into evidence. The exhibit list would have been very much longer had I not rejected the tender of substantial categories of documents that the parties, particularly Seven, wished to have in evidence.”

He added: “Quite apart from the evidence, the volume of written submissions filed by the parties was truly astonishing. Seven produced 1,556 pages of written closing submissions in chief and 812 pages of reply submissions (not counting confidential portions of certain chapters and one electronic attachment containing spreadsheets which apparently runs for 8,900 or so pages). The respondents managed to generate some 2,594 pages of written closing submissions between them. The parties’ closing submissions were supplemented by yet further outlines, notes and summaries.

“In addition, the pleadings amounted to 1,028 pages. The statements of lay witnesses that were admitted into evidence run to 1,613 pages. The expert reports in evidence totalled 2,041 pages of text, plus many hundred pages of appendices, calculations and the like. The transcript of the trial is 9,530 pages in length,” said Justice Sackville. He joked that “I have not been idle these past nine months”.

Mallesons’ Forbes said that if courts could be handed the power to deal with these sorts of issues, and help parties sort their claims, they should be given it.

Like this story? Read more:

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Excess or necessity? Lawyers reflect on C7 litigation
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