2014 Nadav Prawer Diversity of Interests and Effective Outcomes? Lawyers as Interested parties and...

Diversity of Interests and Effective Outcomes? Lawyers as Interested Parties and Agents in Mediation

Diversity of Interests and Effective Outcomes? Lawyers as Interested Parties and Agents in

Mediation Nadav Prawer

Doctoral Candidate, Victoria University, Melbourne

03 8554 3800- [email protected]

Solicitor, KWS Legal, Melbourne, Sydney and Jerusalem


Abstract • Court-ordered mediation is an increasingly critical component of the Australian civil

justice system.

• However, the nature of legal practitioners’ remuneration creates comparatively different interests in either settling a case or pursuing it through a court process in the hope of a higher return and more fees.

• The different approaches to settlements as either costs-inclusive or separately enumerated also creates pressure on lawyers to reduce their fees in order to ‘get settlements over the line,’ particularly in Victoria.

• This presentation explores the nature of the relationship between lawyers as agents for their clients and as representatives of their own interests in the specific context of mediation.

• It also explores the growing diversity of approaches to aligning the interests of solicitors with those of their clients in costs outcomes, including fee structures, legislation and, conversely, bargaining strategies.

• It places a particular emphasis on the theoretical and practical descriptions of the relationships between the parties and how this affects access to justice.

The Modern Reality of Mediation- Mediating in the Shadow of Litigation

• Mediation is increasingly practiced by both professional mediators and professional representatives in mediation.

• Parties are skilled in understanding the advantages of mediation and how to manipulate the process.

• Mediation as part of the court process


Illustration- Mediation

Party A Party B Mediator Information

INFO

information

INFO


Sample Enabling Provisions

Supreme Court Rules:

50.07 (1)- Reference to mediator

“At any stage of a proceeding the Court may, with or without the consent of any party, order that the proceeding or any part of the proceeding be referred to a mediator.”

Federal Court Rules:

5.04(1) At any hearing, the Court may make directions for the management, conduct and hearing of a proceeding…

The use of mediation, arbitration or an ADR process to assist in the conduct and resolution of all or part of the proceeding


Lawyers as Parties and Agents

Solicitors Taking Instructions Directly

Party A Party B

Lawyer Lawyer

Mediator


What About Counsel?

Lawyer A

Party B

Barrister Barrister

Mediator

Party A Lawyer

A


The Scenarios

• 1. John, represented by Sam, is suing Alex for damages in a contract dispute for $1,000.000.00. Alex, represented by Douglas, has a strong case but is interested in a commercial settlement and has offered $500,000.00. Sam desperately needs some funds to pay the mortgage.

• 2. David is a barrister desperate for his first big break. He represents Simon in a case which could make new precedent for commercial transaction entitlements. The Defendants are willing to make a higher offer subject to confidentiality.

• 3. William has agreed to take on a matter for a fixed fee, up to and including resolution. The case has dragged on but is now in mediation.

• 4. Andrew has taken on a case on a no-win, no-fee basis, and is entitled to be paid if he wins the case or settles on his client’s instructions.

• 5. Lachlan and Tim are close to settling, but the sticking point is Andrea’s fees which she is asked to reduce.



Tryadic Negotiation

Party C

Party B Party A

Immunity?

• Unique to Australia

• No Negligence

• Will not effect professional conduct charges


Professional Duties

• Legal Profession Act

• Fiduciary Duties

• Governed by the Relationship


The Parties

• Lawyers are participants in negotiations.

• Lawyers are also interested parties

• Lawyers have obligations to the court, and interests in their ongoing right to practice and continued ability to earn an income

OUTCOME:

LAWYERS’ INTERESTS AND THOSE OF THEIR CLIENTS MAY NOT ALWAYS COINCIDE


The System

• The System of Costs can encourage conflicts in many circumstances

• The System can make it difficult for mediation practitioners to understand or determine the interests of the parties and hence work best towards reaching a resolution

• For lawyers, understanding the other parties’ interests is critical in formulating a strategy


Scale Fees For Litigation

• Court-Dependent

• Adjusted Annually

• Usually well below what lawyers work for, but a good indicator of recovery


BATNA and Costs

• What is the lawyer’s interest and likely return?

• Court Scales

• Reputation

• Opportunity Cost

• NPV

• What are the parties’ interests? Do they align?


Aligning the Interests of the Parties- Problems

• Percentages and Success Fees Illegal

• Maintaining effective and enthusiastic representation is essential

• Lawyers are providers of a service and may wish to provide more of that service

• Lawyers are adversarially trained and operate in an adversarial system

• Overly restricting the forms of costs agreements can reduce access to justice

• Costs Agreements are usually confidential

• Conflict between lawyers and parties


Aligning the Interests of the Parties- Solutions

• Role of the Mediator: • Identify the relative money claims- who is being asked to compromise on

what? • Understanding the relative relationships between the parties • Talking to parties and to their representatives • Further rounds of negotiation • Raising the question of fees with solicitors • Acknowledging different fee structures for lawyers and barristers

• Look at Different Kinds of settlements- costs inclusive and exclusive

• Discuss Costs

• Know your Costs Scales


The ‘Costs Inclusive’ Approach

• All inclusive settlement including costs

• ‘Winnings’ apportioned between client and lawyer

• Advantage: Leads to ‘neater’ settlements for the defendant

• Advantage: Plaintiff sees a higher upfront figure, leading to more likelihood of settlement

• Disadvantage: Further negotiation and issues between plaintiff and their lawyers

• Disadvantage: Lawyer may be less likely to recommend this


The ‘Costs Exclusive’ Approach

• Costs separately particularized and ‘fixed’

• ‘Winnings’ separate from costs

• Advantage: Leads to ‘neat’ settlements and finality for all parties

• Advantage: Quicker settlements for plaintiffs

• Disadvantage: need or prospect of negotiation between lawyers and their parties- which might otherwise require further mediation!

• Disadvantage: Lawyers explicitly asked to compromise on fees

• Disadvantage: Lawyer may be less likely to recommend this where

Diversity of Interests and Effective Outcomes? Lawyers as

Interested Parties and Agents in Mediation

The Statutory Costs Approach

• Costs Determined by the Court or a Scale which are non-negotiable for the work

• Injury claims

• Appeals (limited)

• Federal Circuit Court- stage approach

• Legal Aid Approach


What Else Should a Mediator Do About this Situation?

- Recognition of the interests involved

- Acknowledge the validity of the interests involved

- Encourage the parties, where appropriate, to share this information and identify whether there is flexibility

- Have knowledge of the fees and scale rates and recoverability of those fees and charges


The Calderbank/ Open Offer Approach- Encouraging Parties to Make Offers Based on Costs

• Principles of an Offer:

• An offer to settle the case

• If the outcome is the same or more favourable to the party making the offer, indemnity costs may be awarded against the other party

• If Calderbank, court not to be made aware of the offer until conclusion of the case

• If Open, court will be made aware

• Parties can be encouraged to reflect on the likely costs and make an offer of compromise on the basis of reducing costs- lawyers likely to encourage as it raises the prospects of indemnity costs!


Conclusion

1. Lawyers need to be considered as both parties and participants in a negotiation

2. Mediators need to be aware of the nature of lawyers’ interests and can achieve excellent outcomes where they can align all parties’ interests

3. Mediators who are aware of the costs principles, costs scales and the financial interests have more tools to push the parties together

4. Remember- Lawyers do not always think like mediators!


2014 Nadav Prawer Diversity of Interests and Effective Outcomes? Lawyers as Interested parties and...

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