The global coronavirus (COVID-19) pandemic has swiftly and decisively changed the approach of the courts to civil litigation. The changes have been essential to accommodate the new social distancing rules and to protect the health of the public and the courts.

Practice notes and directions guide the legal profession through the civil procedure process in the current environment. Many of the new measures will be temporary (although they may last many months), but others might be adopted long term. In this article, we look beyond the new 'rules and regulations' and recommend some practical steps to assist businesses effectively resolve commercial disputes during the pandemic.

Adjournment and delays

Many cases which were listed for final hearing in the courts have been adjourned at the instigation of the courts. Our experience suggests that these will not be re-listed until early 2021.

For some commercial parties, adjournment will come as a relief – it will free up financial and human resources to focus on generating business in what is without doubt a challenging economic environment. Other businesses may be relying on a favourable outcome in a court proceeding to provide much needed funds.

A delay in 'your day in court' does not mean that a dispute is put on the shelf. Provided a party understands its exposure in the proceeding, and is prepared to compromise to some extent, notice of an adjournment gives a good opportunity to explore a commercial settlement.

Understanding exposure so the right choices can be made in relation to a dispute is critical – the obligations imposed on directors do not change in a pandemic. Amongst other things, directors must ensure that they continue to act in the best interests of the company and in good faith. A director of a company which is a party to litigation must ensure that the company has carried out its due diligence before compromising a claim.

The first step in this due diligence, when a hearing date has been adjourned or the procedural timetable delayed, is to obtain and consider what litigators refer to as an 'advice on prospects'.

The advice might be more qualified where social distancing is in place, so that potential witnesses cannot be interviewed and assessed face-to-face and those archive boxes in the warehouse are unable to be accessed. But an advice will tell a director what the company's prospects are based on what is known at the time of the advice and identify risks which might suggest settlement has advantages over a court determination. Armed with this, a party to litigation can use additional time provided by the new court practice management processes to engage in genuine settlement negotiations with the other party.

Adapting to 'remote' mediation

If negotiation is not an option, the courts (and private mediators) continue to conduct mediations through phone and video conferencing. The technology is effective and has been used increasingly in the last decade (even before the pandemic). There are some changes recommended in preparation for a remote mediation as against a traditional face to face mediation.

Use of position papers

First, the flow of discussion on video screens is often not as fluid as the flow of discussion where the parties are all present in one room. Position papers therefore take on a new significance. A position paper can succinctly and effectively set out a party's claim or defence, the basis for its claim or defence (in a non-legal sense) and the party's expectations of the mediation process. It provides background to the mediator and discloses to the counterparty the particular interests which need to be addressed during the mediation process. Whilst preparation of a position paper is sometimes seen as unnecessary for face-to-face mediations, there is real value in insisting on the exchange of papers before the parties and mediator enter the 'virtual' room.

Additional preparation

Secondly, some additional preparation is also required within the party's team attending the remote mediation. Video conferencing requires the participants to 'take their turns'. It is useful for the legal team and client representatives to agree in advance who will be responsible for addressing the mediator or responding to submissions from the other party on particular topics. This avoids the need for hushed or 'muted' discussions and assists in the 'flow' of the mediation.

Legal practitioners should encourage their clients to contribute to the discussion. Mediation is ultimately the parties' process and they should have an opportunity to actively participate rather than observe. An experienced mediator will likely encourage this so it is important that clients are prepared.

Focus on confidentiality

Thirdly, confidentiality is paramount in mediation. An experienced mediator should specifically ask the parties on the phone line or video to confirm who is present. This is particularly important for telephone conferences.

The mediator should also directly raise the question of whether any participant is recording the mediation (other than by taking notes as is the usual practice). A mediation should not be recorded by anyone without the express consent of all participants. If you are participating in a mediation and have concerns about confidentiality, you should ask to speak privately to the mediator. The mediator should then raise the issue (again privately) with the other party.

Be aware that misrepresentations made by a party during mediation may not be protected by privilege and may be actionable.

Effective use of critical documents

Finally (but not exhaustively), parties should consider sending a copy of any critical document to the mediator and the other party before the mediation commences. Even where the other party will have pleadings and may have inspected discovered documents, this courtesy will help avoid downtime during the phone or video while the critical document is identified and located. Ideally, these limited documents would be provided with the position paper in advance of the mediation and would be clearly marked so that time is not lost searching for them while everyone is online or onscreen.

Civil Procedure Act 2010 (Vic)

The 'overarching obligations' contained in the Civil Procedure Act 2010 (Vic) (Act). These obligations apply to the parties, their legal representatives and other participants in civil proceedings in Victoria. The obligations endorse the recommendations in this article that parties actively explore settlement of commercial disputes during the pandemic.

Obligation to resolve disputes

Specifically, s 22 of the Act obliges the "use of reasonable endeavours to resolve a dispute by agreement between the persons in dispute" unless it is not in the interests of justice to do so or the dispute can only be determined by judicial determination. This obligation will continue to apply even where civil proceedings are adjourned or a trial date vacated indefinitely.

Where the entire dispute cannot be resolved, s 23 of the Act mandates the use of reasonable endeavours to resolve issues or to narrow the scope of the remaining issues in dispute.

Obligation to avoid delay and control costs

Additionally, s 24 of the Act imposes an obligation on parties and other participants in civil litigation to "use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to – (a) the complexity or importance of the issues in dispute; and (b) the amount in dispute".

Delay to the procedural timetable in proceedings or an adjournment of a hearing almost inevitably results in increased legal costs and expenses. Section 25 obliges participants to use reasonable endeavours to "act promptly and minimise delay".

The obligations in s 24 and s 25 of the Act necessitate an evaluation by parties and their legal counsel of settlement options in almost all civil proceedings pending before the courts. The delays imposed by the pandemic can only result in increased legal fees and expenses, even if those costs are deferred while restrictions are in place.

Failure by a party or legal representative to properly and genuinely consider how a commercial dispute might be resolved outside of the court would be inconsistent with that person's obligations under both s 24 and s 25 of the Act.

Observations

For businesses which have litigation 'on their books' during the pandemic, there are tangible (and legal) reasons why the dispute underlying the litigation needs to be actively managed and assessed. If you are a party to litigation, irrespective of whether you are bringing a claim or defending a claim, the period of an adjournment or delay can and should be used to explore a commercial settlement or, where settlement is not possible, to narrow the dispute so that when the courts are again listing matters, the parties are ready to move into trial and to conduct the hearing efficiently and without significant increase in legal costs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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