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Speech to the Australian Financial Review Legal Conference 2008, Melbourne.



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ATTORNEY-GENERAL THE HON ROBERT McCLELLAND MP

Australian Financial Review Legal Conference 2008

RACV Club, 501 Bourke Street , Melbourne

Tuesday 17 June 2008, 8:00 am

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[Acknowledgements ]

• First , may I acknowledge the traditional owners

of the land we meet on - and pay my respects to

their elders, both past and present.

[Other Acknowl edgements ]

• Chair, Mr James Eyers, Legal Editor,

Australian Financial Review

• Mr Glenn Burge, Editor, Australian Financial

Review

• Ladies and gentlemen

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[Introduction ]

1. In 1789, George Washington wr ote to America’s

first Attorney -General:

“The administration of justice is the firmest pillar

of good government .”

No mere platitude on Washington ’s part.

All of us who have worked in the law, and in

government, appreciate the fundamental truth

within Was hington’s assertion.

2. Yet more than 200 years on, we know that the

rising costs of justice threaten to shake this

firmest pillar of government.

To be relevant justice must be accessible .

3. I know I am not the first to make this

observation.

This is a world -wide concern.

In the United Kingdom, the Lord Woolf’s interim

report on access to civil justice noting: “ The

problem of costs is the most serious problem

besetting our litigation is not system.”

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I would not disagree with that assessment being

made in Australia.

4. The growing complexity of modern business,

together with current trends in the global

economy, are likely to increase large scale

commercial disputes.

Also, the current stock market turmoil is

expected to increase class actions.

This wil l have consequences for all Australians as

we the taxpayers also must bear the cost of

resolving these di sputes.

It is not just a cost to those involved in the

disputes.

5. It is important that we have a robust court

system that deliberates with the benef it of expert

submissions.

Indeed it is the view of the Rudd Government

that we should promote The Federal Court as the

regional hub for commercial litigation.

This necessarily means companies should have

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the option to pursue civil remedies through

litigati on where necessary.

6. Howev er, court resources are finite.

Justice should be available for everyone, not

merely for those who can afford protracted

litigation.

It should be available to working Australians and

small business just as it is available to bi g

business.

7. I have had my own experience of ne edlessly

protracted litigation.

On one occasion I acted for workers who had not

received proper severance pay from their

employ er, a major Australian company.

The litigation ran for three years and it would

have been line ball whether it would have been

cheaper for the company to pay the workers

rather than run the case.

Eventually, judgment was obtained by my clients

and the presiding judge made a penalty order

against the company.

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But it was a hollow victo ry: just prior to

judgment being handed down the company was

wound up.

8. Commercial disputes s uch as these s hould be

resolved expeditiously and economically.

Litigants and the courts must maintain

perspective by ensuring costs are kept

proportionate to t he relief claimed.

As Chief Justice Spigelman of the New South

Wales Supreme Court suggests, “we can’t have

commercial litigation where the flag fall for

discovery is $2 million.”

9. To ensure justice is affordable we need to look at

innovative ways of ke eping our civil courts costs

effective and efficient.

10. But how best do we grapple with large

commercial disputes, including shareholder class

actions?

11. This is not j ust an access to justice issue.

There are also strong economic grounds for

ensuring that litigation costs are proportionate to

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the relief claimed.

Unnecessary delay and time spent in court ties up

significant capital and managerial time which

could be better applied to more productive

endeavours.

As a result, they are financial imposts n ot just on

a company but also on the broader economy.

For example, banks factor the cost of recovering

debt into the c ost and availability of credit.

Given that litigation occurs most frequently at

times of economic downturn, these indirect costs

to small business and the community of litigation

can be amplified at the most counterproductive

times.

12. Of course, the value of the rule of law to a

community cannot be calcul ated in mere dollars and

cents.

But increasingly the question of whether a company

or an organisation can obtain - or rather - afford a

remedy for a civil wrong, boils down to just that

calculation.

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As a result, there is a risk that disputes below a

certain value or litigants without sufficient financial

resources will not be heard by a cou rt.

This is because the costs of hearing them are totally

disproportionate to the value of the claim.

If this leads to a perception that certain wrongs can

go unremedied or only the wealthy can obtain

remedies that inevitably will undermine our system

of justice.

For justice to be relevant it must be accessible.

[Challenges of Commercial Litigation ]

13. Over many centuries we have developed a system of

adversarial justice that has assumed that control of

the court process leading up to trial is best l eft in the

hands of the lawyers - or worse still lawyers

operating within the constraints of court rules and

processes that are overly bureaucratic and

burdensome.

But experience shows it is now clear that in, some

areas, this has been a disaster.

The esta blishment of a separate Federal Magistrates

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Court happened in large part because reform of

family court had proven to be all but impossible.

It is becoming increasingly evident that modern

litigation is no longer an efficient model of dispute

resolution wh en confronting complex business

transactions.

This includes coping with the tsunami of documents

created by electronic communication.

This adds to time costs and delay.

14. Many judges have also spoken of their frustration at

delaying tactics being used for strategic purposes.

For instance, concerns have been raised about the

use of interlocutory actions to delay the resolution

of the real issues in dispute.

Justice Sackville has noted the powerlessness of

judges “in the face of litigants who, for whatev er

reason, decide to press on notwithstanding huge and

often disproportionate costs burdens.”

As a result, courts and judges now confront the

question of how to reconcile their role as an

independent and impartial arbiter with the need to

control proceed ings by interventionist and active

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participation to ensure that justice is done.

For Government, large -scale commercial litigation

poses a different set of challenges to the

administration of justice.

How do we ensure the ‘big end of town’ doesn’t

monopo lise the court’s time, to the detriment of the

entire civil justice system?

And a perennial issue - how do we better guarantee

that taxpayer funds are spent effectively and used

efficiently?

[Reforms to the Federal Court System ]

15 . I be lieve there is r oom for reform.

In fact it’s essential if we’re to have a legal

framework that is efficient, and improves the

productivity and competitiveness of our economy.

And one that provides fair access to justice.

16 . But as mentioned, I also want to ensure that th e

Federal Court of Australia is well equipped to

operate as a regional hub for commercial litigation.

17 . So in conjunction with the courts I am considering a

range of possible reforms to the federal court

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system.

This will fulfil the Government’s objectiv es - to cut

red -tape, rationalise business regulations, and

responsibly manage the economy.

[Cost to the Community ]

18 . We know that large corporate clients are well

resourced to pay for teams of lawyers for months in

court.

But only part of the cost.

It’ s the wider community that bears the cost of

maintai ning the civil justice system.

The taxpayer not only picks up the tab through

judicial salaries, court officer and registry staff

salaries, and court premises but also effectively

shoulders part of the co st of highly -paid lawyers

through the tax system.

19 . In relation to the last matter I note Victorian

deputy premier Rob Hulls’ recent comments that

the courts are in danger of becoming “a fiefdom

for large corporate entities to take action…in the

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full kn owledge that their legal fees are tax -deductible.”

20 . There is undoubtedly a public benefit in ensuring

that individuals and companies have proper

advice and representation to meet their often

complex legal obligat ions.

However, that benefit comes with re ciprocal

obligations to not abuse the litigation process for

corporate or strategic purposes.

I believe there is some merit in examining the

role of public funding where there has been an

abuse of process or a case has been unnecessarily

or unreasonably pr otracted.

21 . In relation to tax deductibility, it is a general

principle in the income tax law that expenses

relating to income earning activities are

deductible.

Denying or limiting deductibility would overturn

a basic principle of the tax law .

It cou ld involve complex changes to the tax . It

could in fact lead to more litigation as a result of

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disputes over the meaning of new tax provisions

Before any suggestion that action should be taken

in this area there would need to be careful whole -of -government consideration .

23 However, b earing in mind the need to ensure that

parties do not abuse the court system, I believe it is

appropriate that consideration be given to

providing federal courts with greater statutory

power to award costs in relation to unnece ssary

interlocutory proceedings.

24 . Also, i n recent years, the United Kingdom has

moved towards a system of full cost pricing across

all civil courts.

This means litigants pay court fees closely matched

to the full price of the court.

There are concessio ns for the less well -off. But

greater cost recovery, for those who can afford it, is

widely accepted throughout the UK.

25 . While I am keen to explore options that ensure

public money is equitably spent - I have no intention

of inhibiting the resolution o f large commercial

disputes.

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Or to out -price the Federal Court from becoming a

regional judicial hub.

26 . I have asked my Department to engage in initial

consultations on the idea of greater cost recovery

for large litigators and to find a balance between

these competing considerations.

27 . I have also written to my State and Territory

counterparts seeking their views.

Greater cost recovery would require a consistent

approach across Australian jurisdictions, to

discourage big litigators forum shopping.

Indeed, many of the initiatives that I have

mentioned here today would benefit from

cooperation across jurisdictions so I look forward to

discussing many of them with my SCAG colleagues.

28 . Cost recovery for mega -litigators was recently

suggested by Chief Justice Spigelman who observed

that “[companies] are prepared to demand and

pay for [access to justice] through their own lawyers

but not pay, as it were, the community.”

29 . On the other hand, Chief Justice Gleeson of the

High Court has remarked that “charging people on

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a user pays basis for the administration of justice,

which is an exercise of government power, has a

philosophical problem about it .”

30 . However, a limited system of cost recovery for big

litigators could potentially benefit a range of court

support services.

31 . In times of restraint on government spending, I

have to look at new ways of funding community

justice initiatives.

32 . Targeted cost recovery shouldn’t inhibit

corporations seekin g access to the justice system.

But the reve nue raised could help organisations

expand their services to poorly -resourced court

users.

33 . For example, one possible initiative could be the

extension of the Court Network Program which has

been operating very successfully in this state for the

last 28 years.

Court Network provides information, support and

referral services to people attending Victorian

courts and is now looking to extend its services to all

Federal courts in Australia .

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The service is particularly valuable to vulnerable

litigants incl uding those who have suffered from

domestic violence.

34 . I would welcome further debate on the issue of cost

recovery generally.

[Case Management ]

35 . I also see value in developing the role of ju dges as

case managers.

36 . Justice Sackville, informed by his ‘C7’ experience,

believes judges should be given explicit statutory

powers for case management.

37 . His Honour argues that these powers would ensure

costs are kept proportionate to the matter in

dispute, and would relieve the court of undue

resource burdens.

38 . The evolution of judges from independent

adjudicators into active case managers is becoming

more widely accepted in Australia.

39 . As indicated recently by the Victorian Law Reform

Commission, more can certainly be done.

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40 .As Ronald Sack ville indicated, active case

management in federal courts may need a statutory

foundation.

41 . To this end, I note the statutory requirement in

NSW that disputes be resolved justly, cheaply and

as efficiently as possible.

This notion could also be enshri ned in federal

statutes as the overriding purpose of case

management in federal courts.

42 . The Commission also noted that lawyers and their

clients can do more to better manage civil cases.

I am considering the merits of pre -action protocols

to set out c odes of sensible conduct that parties

would be expected to follow when faced with the

prospect of litigation.

43 . Another option I am considering for the Federal

Court is to provide it with broad powers to make

directions limiting:

• the time for examining witnesses;

• the number of witnesses;

• the number of docu ments tendered in evidence;

and

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• the time for submissions.

The Federal Court is currently examining how this

might be done.

It is commendable that the court is examining these

issues and I look forward t o receiving its proposal.

These powers should be used to confine the court’s

inquiry to the real issues in dis pute.

At all times, case management should be

proportionate to the issues in dispute and not

become another cost burden or cause of delay.

[Ot her Case Management Proposals ]

46 . The courts themselves have suggested innovative

solutions to address the modern challenges of mega -litigation.

47 . For example, Western Australian judges have

proposed that multiple trial judges preside over

large cases at first instance.

The intention is to split up witnesses between the

judges and for them to hear concurrently.

Significantly, Australia would lead the world if this

proposal was introduced.

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48 . Another innovation is the ‘Fast Track List’ or

‘Rocket Docke t’, recently introduced in the

Victorian District Registry of the Federal Court.

It is intended to streamline civil court procedures,

making case management more efficient and cost

effective.

49 . So far the ‘Rocket Docket’ has achieved impressive

results .

Matters on the List are taking an average of

115 days from the date of filing to finalisation.

50 . Options like the Rocket Docket, multiple trial

judges, and extended case management powers are

certainly worth considering.

[Alternative Dispute Resol ution ]

51 . Since my appointment as Attorney -General, I have

spoken frequently about the enormous value of

Alternative Dispute Resolution.

And of the need for courts to make far greater use

of qualified adjudicators.

I would like to see ADR processes built in to the

fabric of our court system.

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52 . Even if a matter can’t be resolved through ADR, the

issues in dispute can be significantly narrowe d to

shorten court proceedings.

53 . To this end, I recently asked the National

Alternative Dispute Resolution Advis ory Council to

report on strategies that would remove barriers to

Alternative Dispute Resolution (ADR) by providing

incentives to ensure its greater use, as an alternative

to and during litigation.

[Litigation Funding ]

54 . If properly managed, litigation funding has the

potential to provide access to justice to a broader

range of people.

It can assist in providing a remedy where the likely

cost of litigation is disproportionate to the sum in

dispute.

55 . However, I am concerned that in some cases there

ap pears to have been insufficient disclosure of the

funding arrangements to either the court or those

who have been funded.

It may be necessary to consider if adverse costs

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orders should be enforceable against third -party

funders and also whether the funde rs should have

adequate capital to meet those orders.

56 . The regulation of litigation funding is an issue

currently before the Standing Committee of

Attorneys -General.

However, it is important to ensure that business is

not burdened with unnecessary ext ra regulation.

The work to come out of SCAG may be used as a

basis for wider consultation on this matter.

And I encourage legal professionals to put forward

their views.

[Conclusion ]

57 . The possible reforms I have mentioned are aimed at

providing flex ibility, reducing delays and

minimising the cost of litigation.

Mega -litigation and shareholder class actions, in

particular, could benefit from faster and cheaper

court procedures.

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58 . I acce pt there is no “silver bullet”.

I agree with the comments of th e Victorian

Attorney -General that what is required is a cultural

change in the way in which we resolve disputes and

use the court system.

Lawyers have a duty to their clients to provide the

best poss ible advice and representation.

But they also have a r esponsibility to ensure that

our system of civil justice remains strong and that

public confidence in our courts is not undermined.

They should not put their passion for the contest

ahead of securing practical outcomes for their

client.

59 . Debate on our courts’ future must consider the

equitable use o f finite court resources.

I want the pillars that support our federal courts to

hold down the costs of justice.

Affordable justice can contribute to our courts

ability to be a centre of excellence for commerc ial

litigation in our region.

From that base we can support the growing

productivity and competitiveness of our economy.

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60 . In conclusion, I want to commend the Australian

Financial Review for organising this comprehensive

conference.

61 . I am sure toda y’s conference will encourage further

discourse and help people and companies to devise

new solutions to old problems - and innovative

approaches to emerging challenges.

62 . I wish you well.

ENDS