Sweeping changes proposed to civil procedure in VictoriaAuthor : Andrew Seiter, Senior Associate

General Insurance

On Tuesday 22 June 2010, the Civil Procedure Bill (CP Bill) was introduced into the Victorian Parliament.  Attorney General Rob Hulls described the CP Bill as the most significant civil procedure reforms Victoria has seen for 20 years.  This paper sets out some of the significant changes to the litigation environment relevant to the insurance market.

The CP Bill implements the recommendations of the Victorian Law Reform Commission’s Civil Justice Review Report (the Report) headed by Associate Professor Peter Cashman, formerly a partner of Maurice Blackburn Cashman (now Maurice Blackburn).

The Explanatory Memorandum accompanying the CP Bill says:

“The Bill provides the foundation for a comprehensive overhaul of the civil justice system in Victoria.  It aims to redress an imbalance in the civil justice system to achieve essential goals of accessibility, affordability, proportionality, timeliness, and getting to the truth quickly and easily. ”

It is proposed that it will achieve its aims in two ways.

First,”it seeks to build a culture in which litigants are encouraged to resolve their cases without going to court.  The pre-litigation processes in the Bill provide a general framework for parties and their lawyers to achieve resolution of the dispute without the intervention of the court, or if that is not possible, to narrow the issues in dispute to the real issues in dispute.  Litigation should be regarded as a measure of last resort, where the interests of justice require access to a judicial officer, or the dispute is of such a nature that only judicial determination is appropriate.”

Secondly,”it seeks to build a culture within the court system that supports and encourages litigants and their lawyers to use reasonable endeavours to achieve early resolution of cases by agreement, using appropriate dispute resolution processes where appropriate or to narrow the issues in dispute, except where the interests of justice require access to the court, or where the dispute is of such a nature that only judicial determination is appropriate.”

The Court will be directed to give effect to the overarching purpose” of the proposed legislation when exercising its powers.  Participants to the civil litigation, including the parties, their lawyers, insurers and litigation funders, will be subject to “overarching obligations“, enforceable by court order to ensure they adhere to standards of conduct described in the CP Bill.

Parties will also be obliged to make early and more open disclosure of information and documents material to proposed litigation.  There is an expectation parties will participate in pre-litigation steps.

We anticipate considerable and heated debate about how the CP Bill will, in practice, impact on legal process.

However, initial impressions are that the absence of prescription in the CP Bill may mean that the changes will be challenging and will take a long time to bed down.

The Overarching Purpose
The introduction of the “overarching purpose is intended to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.

The courts will be required to give effect to the overarching purpose when exercising or interpreting its powers.  The courts will have to have regard to factors including the just determination of the civil proceeding, the public interest in the early settlement of disputes, the efficient conduct of the business of the court and use of judicial and administrative resources as well as minimising any delay between the commencement of a civil proceeding and its listing for trial beyond that reasonably required.

The Explanatory Memorandum also explains that the court can have regard to a broad range of discretionary matters including the extent to which the parties have complied with the pre-litigation requirements under the Bill or any other pre-litigation processes.  In other words, what parties and legal practitioners do before a proceeding commences may come under the scrutiny of the court later on.

Judges will also be given discretion in the way in which legal proceedings are conducted.  This may include limiting the time for and issues to be covered in examination and cross-examination of witnesses.  The ability to restrict the length of submissions, the time permitted for parties to present their case and the number of documents that can be tendered will form part of the court’s arsenal to reduce time spent in the courtroom.

Introduction of Pre-Litigation steps
The CP Bill requires parties to participate in pre-litigation steps to encourage resolution before court proceedings are issued.

These pre-litigation requirements do not apply to personal injury claims already covered by Transport Accident Act 1986 (Vic) and Accident Compensation Act 1985 (Vic) as these are already subject to established process. There is also a 6 month transitional period after the Act commences.

Parties must consider options for resolving the dispute through genuine and reasonable negotiations or appropriate dispute resolution.  Each person involved in the dispute must not unreasonably refuse to participate.

The parties are also expected to engage in a pre-litigation process of informal discovery by exchanging appropriate pre-litigation correspondence, information and documents critical to the resolution of the dispute.

However the CP Bill does not prevent the commencement of civil proceedings in a court merely because of non-compliance with the pre-litigation requirements.  Rather, non-compliance is to be taken into account when determining costs or the procedural orders to be made after that litigation commences.

It seems therefore that pre-litigation steps are not compulsory.

The CP Bill also says that each party must bear their own costs in complying with the pre-litigation steps.

However, proposed sub-section 37(1) goes on to say that a court may still order that a party to a civil proceeding pay all or a specific part of another party’s costs of compliance with the pre-litigation requirements if satisfied that it is reasonable to do so, having regard to furthering the overarching purpose.

Sub-section 37(2) will give the Court power to make orders against a party’s representative if satisfied the representative has unnecessarily caused costs to be incurred.

What are Overarching Obligations and the Paramount Duty?
To assist in achieving the overarching purpose, the CP Bill imposes overarching obligations on all participants to the civil litigation, direct and indirect, which apply from the time a party files their first document in Court.

Insurers, litigation funders and expert witnesses are also subject to the overarching obligations.

A person subject to the overarching obligations has a ˜paramount duty’ to the court to further the administration of justice.  Traditionally, only lawyers had owed a duty of this nature.

The CP Bill sets out a œmission statement of model conduct requirements that will constitute the overarching obligations, stating that parties:

  • must act honestly;
  • must co-operate with the other parties and the court;
  • must not take any step unless the person reasonably believes it  is necessary to facilitate the resolution or determination of the proceeding;
  • must act promptly and minimise delay;
  • must not make any claim that is frivolous, vexatious, an abuse of process or does not have, on the factual or legal material available to the person at the time, a proper basis;
  • must not act in a misleading or deceptive way;
  • must use reasonable endeavours to resolve a dispute by agreement;
  • must use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to the complexity or importance of the issues in dispute and the amount in dispute; and
  • if a dispute cannot be resolved, the parties must use reasonable endeavours, by agreement, to resolve or narrow the scope of issues in dispute.

Subject to the paramount duty, the overarching obligations prevail over any legal, contractual or other obligation to the extent of inconsistency.

Further, a lawyer must not comply with any instruction or wish of the client which is inconsistent with the overarching obligations.

As discussed above, compliance with the overarching obligations may be taken into account when making orders for procedural steps to be taken in the proceeding and the orders for costs.

Certification of Proceedings
Victoria will, if the CP Bill is passed, adopt a process of certification of pleadings similar to that already in force in some other States.

The legal practitioner filing a Writ and Statement of Claim for a Plaintiff or a defence for a defendant must certify that there is a proper basis, on the factual and legal material available, to their pleadings.

In other words, each allegation of fact and or denial must be based on reasonable belief and have a proper basis in fact or law.

Disclosure of documents
The Bill also introduces an overarching obligation to œdisclose all documents at the œearliest reasonable time which a person is or ought to be aware of and considers, or ought to reasonably consider, are œcritical to the resolution of the dispute.

“Disclose” means to provide a list of the critical documents at the earliest stage.

The term “critical documents” is intended to be narrower in obligation than what is required by discovery.  The Explanatory Memorandum explains œthe test is meant to capture those documents that a party would reasonably be expected to have relied on as forming the basis of the party’s claim when commencing the proceedings, as well as documents that the party knows will adversely affect the party’s case.

Legal privilege is maintained.

As litigation funders and insurers are covered by the overarching obligations, their documents may also become subject to disclosure.  Careful consideration will therefore have to be given to steps that may be taken so material received on notification of claims may be protected by legal privilege.

Contravention of the Overarching Obligations
If a court is satisfied that, on the balance of probabilities, a person has contravened any overarching obligation, the court may make any order it considers appropriate in the interests of justice including, but not limited to orders:

  • for legal costs or other costs or expenses arising from the contravention of the overarching obligation, including payment of those costs immediately;
  • that the person compensate any person for any financial or other loss including penalty interest or an order for no interest or reduced interest;
  • that the person take steps reasonably necessary to remedy any contravention of the overarching obligations;
  • the person not be permitted to take specified steps in the civil proceeding.

Finally, there is broad discretion for the court to make any other order that the court considers to be in the interests of any person who has been prejudicially affected by the contravention of the overarching obligations.

The Act also allows an application for an order in respect of contravention to be made not only by a party to the civil proceeding but any other person who, in the opinion of the court, has a sufficient interest in the proceeding or on the court’s own motion.

The process from here
The CP Bill has only just been introduced into Parliament.

However, we expect it will be given fast passage, as has been recent practice in Victorian Parliament.

With such considerable change proposed, vigorous debate about the CP Bill is expected.  If passed (as is expected) the nature and scope of the CP Bill means that we are still likely to see development of processes, practices and procedures once the substantial proposed powers are handed to the court.

Wotton + Kearney will track the CP Bill’s passage and industry response and will issue further alerts.