Andrew Stephenson - Corrs Chambers Westgarth - Turning Mountains into Molehills

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TURNING MOUNTAINS INTO MOLEHILLS –IMPROVEMENTS TO FORMAL DISPUTE RESOLUTION

Presenter:

Andrew StephensonCorrs Chambers Westgarth

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OVERVIEW

• For complex matters involving significant factual matrix and a need for

expert evidence, current legal processes are very inefficient, costly and

cause significant dissatisfaction for all participants

• Most disputes arising from oil and gas projects involve a significant

factual matrix and expert opinion issues

• Client's are dissatisfied with traditional dispute resolution

• It costs too much and takes too long

• Clients have sought to avoid traditional dispute resolution and new

systems have been invented which work

• However there remains a need for a final and binding dispute

resolution system

• The challenge is to improve the existing systems

INFORMA CONFERENCE - NOVEMBER 2015

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IT IS NOT ONLY CLIENTS THAT ARE DISSATISFIED

Aon Risk Services Australia Ltd v Australian National University 239 CLR

175 at 229 per Heydon J):

‘The proceedings reveal a strange alliance. A party which has a duty to assist

the court in achieving certain objectives fails to do so. A court which has a

duty to achieve those objectives does not achieve them. The torpid languor of

one hand washes the drowsy procrastination of the other. Are these

phenomena indications of something chronic in the modern state of litigation?

Or are they merely acute and atypical breakdowns in an otherwise functioning

system? Are they signs of a trend, or do they reveal only an anomaly? One

hopes for one set of answers. One fears that, in reality, there must be

another.’


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PROBLEMS WITH LITIGATION

• Adversarial nature of the Australian Legal System

• Delay and escalating costs is often seen to give a tactical advantage

• Process is extremely tolerant to lack of diligence

• Matters settle not by reference to the merits but the costs associated

with the process

• Need to change culture to reduce such settlements


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PROBLEM 1 - PREJUDICE SUFFERED BY NON DELAYING PARTY

Cropper v Smith (1884) 26 ChD 700 at 710 (per Bowen LJ):

‘I know of no kind of error or mistake which, if not fraudulent or intended to

overreach, the Court ought not to correct, if it can be done without injustice to

the other party. Courts do not exist for the sake of discipline, but for the sake

of deciding matters in controversy and I do not regard such amendments as a

matter of favour or of grace’.


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PROBLEM 1 - PREJUDICE SUFFERED BY NON DELAYING PARTY

Justice delayed is justice denied (costs cannot always compensate)

Aon Risk Services Australia Ltd v Australian National University 239 CLR 175 at

213 (per Heydon J):

‘In the past it has more readily been assumed that an order for the costs

occasioned by the amendment would overcome injustice to the amending

party's opponent. In Cropper v Smith Bowen LJ described an order for

costs as the panacea that heals all. Such a view may largely explain the

decision of this court in Shannon v Lee Chun which upheld a decision

allowing the plaintiff to raise a new case at the second trial, but which

imposed a condition as to costs. The modern view is that even an order for

indemnity costs may not always undo the prejudice a party suffers by late

amendment ... ‘


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PROBLEM 2 - INABILITY OF THE COURT AND PARTIES TO MANAGE THE PROCESS

• Notwithstanding Aon Risk it is likely that delay in interlocutory steps

will be tolerated before trial is set down. Therefore most of the

inefficiency remains

• Court's reluctance to set matters down early. Causes delay and

frustration

• Lack of availability of lawyers

• Requirement for lawyers to re-familiarise themselves with the case


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PROBLEM 3 - LACK OF DISCIPLINE ENCOURAGES BAD PRACTICE

• No imperative to comply with timetable

• Compliance with interlocutory orders regarded as aspirational

• No real effective sanction for failure to comply


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DRIVERS OF COSTS

• Poorly defined pleadings

• Multiple alternatively cases with low or no prospect of success

• Multiple experts for a single technical issue

• Excessive discovery

• Unlimited time for hearings


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SOLUTIONS

1. Case definition at early stage

2. Discouraging multiple alternative cases

3. Avoiding amendments

4. Discovery

5. Interlocutory reform

6. Trial


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CASE DEFINITION

• Pleadings:

– need only specify the material facts

– should not contain legal argument

– should not contain evidence proving the material fact pleaded

– in theory should define issues relevant for discovery

• Pleading usual drawn before expert and lay evidence is available

• Attitude to amending pleadings before trial date set, encourages a lax

approach - no need to get it right


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CASE DEFINITION

• Reform of pleadings by substitution with:

– detailed submission of evidence together with full legal argument

– proof of lay evidence in support of the factual contentions delivered

with submissions

– subsequent expert evidence as required

– how to deal with front loaded costs


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CASE DEFINITION

Suggested process for litigation:

• Issue of writ

• Entry of appearance

• Directions hearing (& identification of any counterclaim)

• Within 3 months, delivery of submissions and factual evidence by

plaintiff (and defendant, if counterclaim)

• Within further 3 months, delivery of defensive contentions and witness

statements by defendant (and plaintiff, if counterclaim)

• Provision of contentions and evidence in reply 6 weeks later

• Expert evidence as required within reasonable time thereafter


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CASE DEFINITION

Statement of Contentions should contain:

• all assertions of facts to be cross referenced with witness statements

• identification of any assertions of opinion requiring expert evidence

• identification by each party of factual allegations relevant to expert

issues

• experts to consider all factual scenarios advanced by all parties


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DISCOURAGING MULTIPLE ALTERNATIVE CASES

• Encourage proper professional judgment about the merits of claims by

imposing appropriate costs for advancing marginal claims

• Awarded costs on an issue by issue basis to encourage an

appropriate exercise of professional judgement


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AVOIDING LATE AMENDMENTS

• The State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 -

the Court adopted a generous attitude to amendments to pleadings

even where there was a risk of jeopardising the trial date

• Aon Risk - legitimate to consider inconvenience to Court and other

Court uses as well as the effect on the non delaying party to the

particular case

• However this does not go far enough. Any amendment to the

interlocutory orders, particularly changes in pleadings, will drive costs

up


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DISCOVERY

• The position in Europe

• If a junior lawyer take 1 minute to review each of 400,000 documents

for relevance it will take 3.86 person years

• Impact of improvements in technology and increases in volume of

documents produced

• Improvement in electronic methods for review. However expensive

manual review still required

• Discovery the best opportunity to reduce document load


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DISCOVERY

Criticism by Judges of excessive documents in case

Baulderstone Hornibrook v Qantas Australia Limited [2003]

FCA 174 at 1 [per Finkelstein J]

‘In his opening Mr Hayes QC, who appeared for BHPL, described the dispute

as ‘a simple case with difficult facts’. It was only at the conclusion of the trial

that I came to appreciate the correctness of this statement. Before then I was

of a contrary view. The pleadings had been amended many times. The trial

occupied nineteen days, often with extended sitting hours. BHPL tendered

twenty affidavits (which took up three files) and sixteen files of exhibits.

Qantas was not outdone. It tendered two lever arch folders of affidavits and

eight files of exhibits, many of which were copies of BHPL's exhibits and, to

make matters worse, there was no mechanism to identify which were

duplicates. It turned out that much of the evidence put in by each side was

irrelevant to any fact in issue and should never have been tendered...’


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DISCOVERY

Practical experience of discovery

• High probability of amendment to the pleadings

• Therefore it is common that discovery is not done by reference to

issues delineated in the pleadings

• Parties chose to discover everything not privileged or confidential and

lose the opportunity to reduce the document load ( however this

decision may also be tactical )


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DISCOVERY

Solution to excessive discovery

• More transparent use of electronic filtering with affidavit from the party

providing discovery setting out work done and approach taken

• Serious cost consequences for excessive discovery

• Avoidance of ‘finishing expeditions’

• Excessive discovery -ability for opposing parties to seek orders from

the Court before anything is done and subsequently


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INTERLOCUTORY REFORM

• Introduction of mandatory interlocutory timetable

• adjustment to be a rare privilege and only given when justified by way

of affidavit

• Create certainty as to timing of conclusion of interlocutory steps

• A hearing date could be set at the outset of the matter

• Trial date to dictate management of the interlocutory steps (not vice

versa)


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INTERLOCUTORY REFORM

Advantages of knowing the duration of Interlocutory Steps

• Parties better understand scope and costs of work to be performed.

Lawyer's can accurately predict costs

• Parties, advisors and witnesses can put the hearing date in their

diaries

• Increases chance of the original Counsel and legal team being

available


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TRIAL

Efficiency of time and costs vs justice

Australian Security and Investment Commission v John David Rich &

Anor [2009] NSWSC 1229, per Austin J at para 75:

‘...the obligation to do justice is absolute; it is not to be apportioned on a sliding scale.

It is unjust, not more or less unjust but simply unjust, to manage a case in way that

denies procedural or substantial fairness: say by shutting a defendant out of

presenting his or her case in answer to the plaintiff's allegations or by preventing the

plaintiff from adequately cross-examining the defendants and their witnesses.’

It is difficult to argue with the sentiment expressed. However if the cost

exceeds the capacity of one or more parties to pay then the failure to

make compromises will cause injustice. Consider the position the other

defendants, Keeling and Greaves who settled rather than go to trial.


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TRIAL

Australian Security and Investment Commission v John David Rich &

Anor [2009] NSWSC 1229 [per Austin J] at para 84:

‘The decisions I have taken during the hearing in this case are consistent with

the principles stated by the High Court in Aon Risk, bearing in mind the

court's paramount duty, acknowledged in that case, to achieve a just

resolution of the proceedings... It has to be recognised in my view that

however hard the Judge might try, consistent with his or her fundamental duty

to do justice in the resolution of the proceedings, to bring about a quick and

cheap resolution of the matters in dispute, some cases are just very long and

costly, the length and cost being contributed to by both sides, and they have

to be seen through to their conclusion’.


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TRIAL

How can the trial be made more efficient?

• abandon the concept that each party has unlimited right to present its

case it whatever way it chooses and encourage a culture which

recognises the best advocacy is usual short

• limit the overall time for the hearing forcing advocates to chose their

best case


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TRIAL

• Anaconda arbitrations conducted in Australia demonstrate what can be

done.

• Claims exceeded AUD 1 Billion

• First hearing conducted over 6 weeks. Dealt with the evidence of 114

witnesses, 75 of whom were called for cross (35 witnesses of fact and

40 expert)

• Second hearing conducted over 4 weeks. Dealt with the evidence of

127 witnesses, of whom 79 were called for cross examination (37

factual and 42 expert)


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MAIN AREAS RIPE FOR REFORM

1. Issue definition

2. Compliance with Court orders for interlocutory steps

3. Increased use of electronic filtering and discovery - cost benefit

analysis of whether discovery is appropriate at all

4. Impose risk for putting alternative cases

5. Consideration of ‘stop-clock’ trials

6. Balance struck between efficiency & time against justice and the

right of the party to present its case as it thinks best


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Andrew Stephenson - Corrs Chambers Westgarth - Turning Mountains into Molehills