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Litigation – what are the real costs?

News that Joe Hockey was unsuccessful in his costs dispute with Fairfax was even more keenly reported than the defamation judgment itself.  Some reports indicate that Hockey has spent close to $800,000 on legal fees, leaving him half a million out of pocket once he receives his damages, interest and the 15% or ordinary costs awarded.  Some commentators have suggested that this is an example of the financial barriers to obtaining justice through litigation – the idea that the very real risk of being worse off overall even if you win the substantive hearing is a disincentive to litigate, and thus an impediment to justice.

But this misses the point altogether.  A costs order is generally the final stage of any dispute.  For most people, the financial realities of access to justice is a brick wall they face right from the beginning.  Whether or not a costs order is awarded has no impact on the fact that litigants need to find a way to fund their case from day one.   The issue is not whether you are prepared to risk your $800,000 on litigation as Joe Hockey has, it is whether or not you can actually get your hands on the money in the first place.   Despite commonly held misconceptions, very few legal practitioners in Australia are able to operate on a no win – no fee basis, and those that do are in the specific areas of law where an outcome can be predicted by the practitioner before very little work has been done. Law firms also are generally unable to fund litigation themselves, as the chances of getting paid if you lose are virtually nil.  Like other businesses, law firms have an obligation to pay wages and salaries as they fall due.    Pro bono work is common, but other than by very large firms it simply cannot be done for complex litigation.   The reality is that if you haven’t got access to the cash, you can’t afford the justice.  Often, it comes down to what assets you are able to borrow against, or what friends and family you can lean on.  Many valid and strong cases are discontinued every day because one of the parties is unable to raise the necessary finances, and sadly, often the opposing party are acutely aware that this is the case, which significantly informs their strategy and strengthens their position.

This is further complicated by the fact that the legal jurisdictions most commonly accessed by those with limited financial resources are often non-costs jurisdictions in any case, such as the Fair Work Commission and NSW Civil and Administrative Tribunal.  Only in exceptional circumstances will an order be made by these tribunals allowing a successful party to recover their costs.  These litigants not only face uncertainty over whether they will win their case, but have to perform a delicate balancing act of determining if the value of a claim outweighs the costs of asserting it.

Meanwhile, the costs of the Commonwealth’s case against Philip Morris over the plain packaging of cigarettes is set to reach $50 million of our tax dollars.   It’s not often that we see the Commonwealth as the underdog in litigation, but it seems as if the school yard bully has finally met its match.  The Commonwealth clearly values its laws relating to plain packaging of cigarettes, but with the benefit of hindsight it’s arguable that this money would have been better spent  directly on other measures to combat smoking.  Most frighteningly, Big Tobacco have obviously done their calculations.  Their costs so far are difficult to estimate, but we can assume that they consider their financial interest in branded packaging is worth the full extent of their legal muscle.  We can only guess at how big that interest is.

It’s great to see that at least some of us get to have our day in court.

 

* Helen Carter is the Director and founding solicitor at PCC Lawyers, a team of employment practitioners based in Sydney, with many years of combined knowledge and experience in workplace law, industrial relations, workplace investigations and training.  They provide a high standard of excellence and an exceptional level of personal service to a variety of clients in the Sydney metropolitan area, Central Coast, regional NSW and interstate.

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