Counting the Costs

The following article was published in the Law Institute Journal in April 2007.

 

The VLRC released a civil justice consultation paper in September 2006 asking people for their opinions on everything from discovery, to conduct of lawyers and alternative dispute resolution.

One of the key issues under review is costs.

Legal and associated costs are often the most critical determinant of whether or not members of the community have access to the courts.

Costs considerations will not only determine the price of access to justice for litigants, but will often have an important impact on the conduct and outcome of litigation.

Some of the already well documented problems with costs include:

  • determining costs on hourly rates, which can lead to uncertainty over the final bill and is open to overservicing
  • cost of expert witnesses and their increasing use
  • the wide ambit of document discovery which can lead to costs blowouts in complex matters
  • the often disproportionate relationship between costs and the matter in dispute
  • law firm mark-ups on expenses such as faxing and photocopying

Submissions that addressed the issue of costs came up with a lengthy list of problems that could be rectified through law reform. These can be broadly grouped in the following categories:

  • pre-litigation disclosure by persons in dispute
  • fee and billing methods used by lawyers
  • the conduct of participants in the civil litigation process
  • procedural rules for the conduct of litigation
  • judicial and court resources
  • court and case management
  • court fees and transcript costs
  • procedures for the assessment and recovery of costs
  • particular problems for certain categories of litigants.

Other jurisdictions

The VLRC is looking to the experience of other jurisdictions and their reforms in this area.

The UK went through a civil justice upheaval in the 1990s with the reforms recommended by Lord Woolf.

While there has been a noticeable drop in the number of claims pursued in the UK courts, the reforms have not reduced the costs of resolving civil disputes.

Part of the Woolf reforms included the introduction of fixed costs for certain types of trials and the exchange of costs estimates.

However, a recent review by the UK’s Civil Justice Council found lawyers and judges were not taking the costs estimates seriously, thus undermining their effectiveness. It recommended the establishment of an overseeing Costs Council to review reforms to rein in costs but the government has yet to act on this.

Many other jurisdictions have investigated civil reforms in recent years which affect costs, including Manitoba, Hong Kong, New Zealand, News South Wales, and Ireland.

Road to reform

Although the VLRC has yet to decide what costs issues it will consider in the civil justice review, there are a number of matters that may warrant attention:

(1) Is there a case for the establishment of an independent body, such as the Costs Council recently recommended by the English Civil Justice Council, which would comprise stakeholder representatives under judicial leadership and would have an ongoing role in monitoring costs reforms and proposing further reform?

(2) Is there a need for a change in the principles and procedures governing the recovery of costs by successful parties in civil litigation?

(3) Is there a case for allowing clients the option of fee agreements which provide for the calculation of legal fees as a percentage of the amount in issue, subject to appropriate safeguards, including possible judicial approval?

(4) Is the present system of allowing substantial ‘commercial’ mark ups on out-of-pocket expenses and disbursements defensible, in relation to both party–party and solicitor–client costs?

(5) Is there a case for the establishment of a contingency legal aid fund, which would operate in a manner similar to commercial litigation funders, but which would retain the profits derived from funding successful cases to facilitate the

(a) funding of further cases

(b) provision of an indemnity in respect of successful defendants costs

(c) provision of security for costs

(d) financing of ‘public interest’ litigation

(6) Is there a need for more determinate, predictable or ‘fixed’ costs for certain types of work or certain categories of cases;

(7)  Should there be more automatic costs sanctions in the event of interlocutory and procedural default;

(8) Should court and associated fees be standardised, simplified and restructured to provide an additional economic incentive to the early disposition or settlement of disputes?

(9) Is there a case to require parties to disclose estimates of costs to the court and to the other party;

(10) Is there a need to modify costs rules to accommodate problems experienced in certain categories of cases, including ‘public interest’ cases and proceedings brought by self-represented litigants.

The VLRC is aware that some aspects of the issues referred to above are already the subject of investigation and report by others and that therefore it may not be necessary or appropriate for such matters to be investigated in the course of the current civil justice enquiry.

The VLRC’s Civil Justice Review is due to report to the government in early September this year. A full copy of Dr Cashman’s paper ‘The Cost of Access to the Courts’, delivered at the Confidence in the Courts conference 9–11 February 2007, is available on the VLRC website: www.lawreform.com.au.

Date published: 
01 Sep 2006

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