Chapter 2<strong>Facilitating</strong> <strong>the</strong> <strong>Early</strong> <strong>Resolution</strong> <strong>of</strong><strong>Disputes</strong> <strong>without</strong> <strong>Litigation</strong>(f)(g)accepted, identifying which <strong>of</strong> <strong>the</strong> claimant’s contentions are accepted and whichare disputed and <strong>the</strong> reasons why <strong>the</strong>y are disputed(iii) enclose a copy <strong>of</strong> documents requested by <strong>the</strong> claimant or explain why <strong>the</strong>y arenot enclosed(iv) identify and ask for a copy <strong>of</strong> any fur<strong>the</strong>r essential documents, not in <strong>the</strong>respondent’s possession, which <strong>the</strong> respondent wishes to see(v)state whe<strong>the</strong>r <strong>the</strong> respondent is prepared to make an <strong>of</strong>fer to resolve <strong>the</strong> matterand if so <strong>the</strong> terms <strong>of</strong> such <strong>of</strong>fer(vi) state whe<strong>the</strong>r <strong>the</strong> respondent is prepared to enter into mediation or o<strong>the</strong>r form <strong>of</strong>dispute resolution.In <strong>the</strong> event that <strong>the</strong> claim is not resolved or withdrawn, <strong>the</strong> parties should conductgenuine and reasonable negotiations with a view to resolving <strong>the</strong> claim economically and<strong>without</strong> court proceedings.Where a person in dispute makes an <strong>of</strong>fer <strong>of</strong> compromise before any legal proceedingsare commenced <strong>the</strong> court may, after <strong>the</strong> determination <strong>of</strong> <strong>the</strong> court proceedings, takethat into consideration on <strong>the</strong> question <strong>of</strong> costs in any proceedings. 3976. Specific pre-action protocols applicable to particular types <strong>of</strong> dispute should be developed by <strong>the</strong>proposed Civil Justice Council in conjunction with representatives <strong>of</strong> stakeholder groups in eachrelevant area (eg, commercial disputes, building disputes, medical negligence, general personalinjury, etc.).7. Where a specific pre-action protocol is developed for a particular type <strong>of</strong> dispute it wouldbe referred to <strong>the</strong> Rules Committee for approval and implementation by way <strong>of</strong> a practicenote in each <strong>of</strong> <strong>the</strong> Magistrates’ Court, <strong>the</strong> County Court and <strong>the</strong> Supreme Court, with suchmodifications as may be appropriate in each <strong>of</strong> <strong>the</strong> three jurisdictions.8. Except in (defined) exceptional circumstances, compliance with <strong>the</strong> requirements <strong>of</strong> <strong>the</strong> practicenotes would be an expected condition precedent to <strong>the</strong> commencement <strong>of</strong> proceedings ineach <strong>of</strong> <strong>the</strong> three courts. The obligation to comply with <strong>the</strong> requirements <strong>of</strong> applicable practicenotes would be statutory. A person seeking to formally commence a legal proceeding should berequired to certify whe<strong>the</strong>r <strong>the</strong> pre-action protocol requirements have been complied with, andwhere <strong>the</strong>y have not to set out <strong>the</strong> reasons for such non compliance.9. Because it would not be practicable for court registry staff to determine whe<strong>the</strong>r <strong>the</strong>re hadbeen compliance with <strong>the</strong> pre-action protocol requirements or to evaluate <strong>the</strong> adequacy <strong>of</strong> <strong>the</strong>reasons for noncompliance, <strong>the</strong> court would not have power to decline to allow proceedingsto be commenced because <strong>of</strong> noncompliance. 398 However, where <strong>the</strong> pre-action protocolrequirements have not been complied with <strong>the</strong> court could, in appropriate cases, order a stay <strong>of</strong>proceedings pending compliance with such requirements.10. The ‘exceptional’ circumstances where compliance with any pre-action protocol requirementswould not be mandatory would include situations where:• a limitation period may be about to expire and a cause <strong>of</strong> action would be statute barred iflegal proceedings are not commenced immediately• an important test case or public interest issue requires judicial determination• <strong>the</strong>re is a significant risk that a party to a dispute will suffer prejudice if legal proceedings arenot commenced, in circumstances where advance notification <strong>of</strong> proceedings may result inconduct such as <strong>the</strong> dissipation <strong>of</strong> assets or destruction <strong>of</strong> evidence• <strong>the</strong>re is a reasonable basis for a person in dispute to conclude that <strong>the</strong> dispute is intractable• <strong>the</strong> legal proceeding does not arise out <strong>of</strong> a dispute• <strong>the</strong> parties have agreed to dispense with compliance with <strong>the</strong> requirements <strong>of</strong> <strong>the</strong> protocol.11. Unreasonable failure to comply with an applicable protocol or <strong>the</strong> general standards <strong>of</strong> pre-actionconduct should be taken into account by <strong>the</strong> court, for example in determining costs, in makingorders about <strong>the</strong> procedural obligations <strong>of</strong> parties to litigation, and in <strong>the</strong> awarding <strong>of</strong> interest144Victorian Law Reform Commission - Civil Justice Review: Report
on damages. Unless <strong>the</strong> court orders o<strong>the</strong>rwise, a person in dispute who unreasonably fails tocomply with <strong>the</strong> pre-action requirements:• would not be entitled to recover any costs at <strong>the</strong> conclusion <strong>of</strong> litigation, even if <strong>the</strong> personis successful• would be ordered to pay <strong>the</strong> costs <strong>of</strong> <strong>the</strong> o<strong>the</strong>r party on an indemnity basis if unsuccessful.12. The operation <strong>of</strong> <strong>the</strong> protocols and general standard <strong>of</strong> pre-action conduct should be monitoredby <strong>the</strong> Civil Justice Council, in consultation with representatives <strong>of</strong> relevant stakeholder groups,and modified as necessary in <strong>the</strong> light <strong>of</strong> practical experience.13. There should be an entitlement to recover costs for work done in compliance with <strong>the</strong> pre-actionprotocol requirements in cases which proceed to litigation. Specific pre-action protocols shouldattempt to specify <strong>the</strong> amount <strong>of</strong> costs recoverable, on a party–party basis, for carrying out<strong>the</strong> work covered by <strong>the</strong> protocols. As with <strong>the</strong> current Transport Accident Commission (TAC)protocols in Victoria, such costs should be ei<strong>the</strong>r fixed (with allowance for inflation) or calculatedin a determinate manner (eg, like <strong>the</strong> fixed costs payable in certain types <strong>of</strong> simple cases inEngland and Wales, where costs are calculated on a fixed base amount plus an additionalpercentage <strong>of</strong> <strong>the</strong> amount claimed). Consideration should be given to whe<strong>the</strong>r specific pre-actionprotocols should include a procedure for mandatory pre-trial <strong>of</strong>fers which would be taken intoaccount by <strong>the</strong> court when determining costs at <strong>the</strong> conclusion <strong>of</strong> any legal proceeding.14. Where <strong>the</strong> parties to a dispute have agreed to settle <strong>the</strong> dispute before starting proceedings buthave not agreed on who is to pay <strong>the</strong> costs <strong>of</strong> and incidental to <strong>the</strong> dispute or <strong>the</strong> amount tobe paid 399 , and <strong>the</strong>re is no pre-action protocol which provides for such costs, any party to <strong>the</strong>dispute may apply to <strong>the</strong> court for an order:(i)(ii)(iii)for <strong>the</strong> costs <strong>of</strong> and incidental to <strong>the</strong> dispute to be taxed or assessed, orawarding costs to or against any party to <strong>the</strong> dispute, orawarding costs against a person who is not a party to <strong>the</strong> dispute, if <strong>the</strong> court is satisfiedthat it is in <strong>the</strong> interests <strong>of</strong> justice to do so.15. Where, taking into account <strong>the</strong> nature <strong>of</strong> <strong>the</strong> dispute and <strong>the</strong> likely means <strong>of</strong> <strong>the</strong> parties, <strong>the</strong>costs <strong>of</strong> and incidental to <strong>the</strong> dispute are relatively modest, <strong>the</strong>re should be a presumption thateach party to <strong>the</strong> dispute will bear its own costs. The court should have power to determine <strong>the</strong>application on <strong>the</strong> basis <strong>of</strong> written submissions from <strong>the</strong> parties, <strong>without</strong> a hearing and <strong>without</strong>having to give reasons, or refer <strong>the</strong> matter to mediation or o<strong>the</strong>r form <strong>of</strong> alternative disputeresolution.Pre-action protocols: additional matters1. Where a defendant only agrees to settle a case, prior to commencement <strong>of</strong> proceedings, <strong>without</strong>payment <strong>of</strong> any costs and on condition that <strong>the</strong> o<strong>the</strong>r party not seek an order for costs, <strong>the</strong> o<strong>the</strong>rparty will have to elect to ei<strong>the</strong>r settle <strong>the</strong> case on <strong>the</strong> terms proposed or proceed with litigation<strong>of</strong> <strong>the</strong> claim, notwithstanding <strong>the</strong> settlement <strong>of</strong>fer. Where <strong>the</strong> matter proceeds to litigation, <strong>the</strong>reasonableness <strong>of</strong> <strong>the</strong> conduct <strong>of</strong> each party, including in relation to costs, could be later taken intoaccount by <strong>the</strong> court.2. A statutory provision is required to protect <strong>the</strong> information and documents provided in accordancewith <strong>the</strong> protocol, to ensure <strong>the</strong>y are not used for a purpose o<strong>the</strong>r than in connection with<strong>the</strong> resolution <strong>of</strong> <strong>the</strong> dispute between <strong>the</strong> parties. This could be an implied undertaking as fordocuments produced on discovery in litigation, or an express statutory prohibition on use o<strong>the</strong>rthan in connection with <strong>the</strong> dispute and any litigation arising out <strong>of</strong> <strong>the</strong> dispute.3. Where a party to a dispute is particularly vulnerable, under a disability or o<strong>the</strong>rwise not reasonablycapable <strong>of</strong> complying with <strong>the</strong> pre-action protocol requirements, this may be taken into accountby <strong>the</strong> court as an acceptable ground for noncompliance if <strong>the</strong> dispute proceeds to litigation. Thisshould provide some protection for some self-represented persons.397 These draft guidelines are basedsubstantially on <strong>the</strong> Protocols PracticeDirection, October 2006, adoptedin England and Wales. See <strong>the</strong>discussion below, and <strong>the</strong> Departmentfor Constitutional Affairs, PracticeDirection: Protocols (2006) at 3 December 2007.398 Accordingly, unlike in Queenslandunder <strong>the</strong> Personal Injuries ProceedingsAct 2002 (Qld), it will not be necessaryto consider <strong>the</strong> question <strong>of</strong> whe<strong>the</strong>rproceedings can be validly commencedwhen <strong>the</strong> pre-action requirementshave not been complied with. It is alsopresumably unnecessary to specifywhe<strong>the</strong>r or not <strong>the</strong> requirements are‘procedural’ or ‘substantive’. See <strong>the</strong>consideration <strong>of</strong> <strong>the</strong> Personal InjuriesProceedings Act 2002 (Qld) in <strong>the</strong>decision <strong>of</strong> <strong>the</strong> NSW Court <strong>of</strong> Appealin Hamilton v Merck and Co Inc [2006]NSWCA 55 (Spigelman CJ, HandleyJA and Tobias JA). Any proceedingscommenced would not be a nullitymerely because <strong>of</strong> noncompliance with<strong>the</strong> pre-action requirements, but <strong>the</strong>court would be empowered to stayproceedings pending compliance, inappropriate cases.399 In Hong Kong, <strong>the</strong> Civil Justice(Miscellaneous Amendments) Bill2007 (HK) makes provision for ‘costsonly proceedings’, including where adispute is settled before proceedingsare commenced and where <strong>the</strong> partieshave agreed on who is to pay <strong>the</strong> costs<strong>of</strong> and incidental to <strong>the</strong> proceedingsbut have not agreed on <strong>the</strong> amount <strong>of</strong>such costs (s 52B(1)): above n 103.145