New Zealand: Metamorphosis In The District Court

In this article, Emily Walton, an associate with the Christchurch Lawlink firm of Wynn Williams & Co, details the reforms that are about to take place in the District Court.

Radical changes to civil procedure are on the horizon with the recently released draft District Courts Rules 2007. This article addresses why, how and will the draft rules work?

Why: Background To The Review

Of all civil claims filed in the District Court nationwide, only about 6% evoke a formal response and fewer still ever reach a hearing.

Nonetheless, as the court in which most civil claims for up to $200,000 are filed, the volume of claims, even unanswered, is high and criticism is frequently levelled at the District Court for expense, delay and inefficiencies. Similar criticism has led to review and reform of civil litigation in both England and Australia over the past decade.

Review of District Court procedure has the fundamental objective, identified by the District Court Claims sub-committee, of ensuring the procedure required for a claim should be no more or no less comprehensive than is required fairly and justly to determine it.

Early exchange of information is evidently crucial to achieving this objective. The traditional pre-trial processes are perceived as inevitably cumbersome, time consuming, and frequently at a disproportionate cost.1

By the draft rules, the Rules Committee hopes to create "a streamlined process providing sufficient relevant and shared information will allow settlement to be explored very early on."2

Part 2 of the draft rules overhauls the early claim procedure, summary judgment (a process for obtaining judgment on the papers without a trial where liability is clear), and the trial itself. In future the bulk of civil claims will be governed by this part, with some exceptions including defamation (and see parts 6 to 10 of the draft rules).

Major overhaul will be correspondingly necessary to those whose strategic approach to civil litigation involves employing endless pre-trial applications and interrogatories to punish, bully or protract. Is this the dawning of a new age?

How: A Summary Of Part 2

Commencement Of Proceedings

Proceedings commence with the plaintiff filing a Notice of Claim and serving it on the defendant as soon as practicable. If the Notice is unserved after 12 months, the plaintiff’s claim comes to an end.

The prescribed form for a Notice of Claim is still to come, but its required contents are not dissimilar to Statements of Claim under the existing rules. Materially, the plaintiff (or its solicitor) must now verify by sworn statement the truth of facts pleaded.

The defendant then has 20 working days to serve the plaintiff with its Response. Again, the prescribed form is pending, but the Response is essentially a Defence verified by a sworn statement, albeit it is not filed with the court at this stage.

Then things become radically different. The plaintiff has 20 working days to serve an information capsule on the defendant and the defendant must respond, serving its information capsule up to 20 working days later.

Information capsules are a new concept in New Zealand, although similar measures have been introduced in both England and Australia. The information capsule lists a party's witnesses, attaches "will say" statements for each witness and lists or describes the documents essential to that party's position. The contents must be verified by sworn statement and neither information capsule is filed with the court.

Mandatory exposure of the strengths and weaknesses of each party’s position is impliedly expected to encourage exploration of settlement as the Rules Committee has allowed time for negotiation, giving the plaintiff 90 working days to pursue its claim by filing a Notice of Pursuit of Claim. With it, the plaintiff files the previously unfiled Response and both information capsules with the court.

The plaintiff’s claim ends if it fails to serve its information capsule or file and serve a Notice of Pursuit of Claim within the prescribed time.

Conversely, if the defendant fails to serve its Response or its information capsule within the prescribed time the plaintiff may apply for judgment by default or on formal proof.

The rules for third parties, counterclaims and claims between defendants follow the corresponding provisions in the existing rules.

Settlement Conferences And Trial

There will be three types of trial: summary, simplified or full.

The court or Registrar shall decide whether to allocate a summary trial within 10 working days of receiving proof of service of the Notice of Pursuit of Claim.

Where a summary trial is allocated, only limited pre-trial steps (exchanging further "will say" statements and/or further evidentiary documents) are allowed and summary judgment is not available. Restrictive time frames are prescribed for the giving and testing of evidence and submissions at trial.

If a summary trial is not allocated, a Judicial Settlement Conference is arranged for as soon as practicable after 20 working days from that date.

Where the claim does not settle at the Judicial Settlement Conference, the conference becomes a Judicial Directions Conference where the judge will allocate it to a simplified or a full trial. Orders may be made on any interlocutory applications and case management directions made. A trial date may be set.

The Judicial Directions Conference is the plaintiff’s first opportunity to apply for summary judgment. Summary judgment is available only if a simplified trial or full trial is allocated.

For simplified trials, pre-trial disclosure and interlocutory applications available are more limited than for full trials. Witnesses only need appear if a party has filed and served a notice to cross-examine before trial, or the judge requests it. Each party is limited to one expert witness per specialised discipline.

The High Court Rules procedure is applied to full trials.

Will The Draft Rules Work?

In June 2007, District Court Judge Doherty presented a seminar on Judicial Settlement Conferences at the University of Canterbury during which he revealed the preliminary statistics distilled from the Judicial Settlement Conference pilot scheme which has run in the Christchurch District Court since 2003. The scheme incorporates an exchange of information not dissimilar to that proposed in the draft rules. Of a total of 514 defended claims:

  • 20% settled after a Notice of Judicial Settlement Conference had been sent to the parties but before the Judicial Settlement Conference took place;
  • 33% settled at the Judicial Settlement Conference; and
  • 10% settled within 10 days of the Judicial Settlement Conference.

A staggering 66% of all defended claims settled at or around the Judicial Settlement Conference.

So there is empirical support for having confidence in the new regime arising out of both the pilot scheme and similar reforms in England and Australia.

In England since Lord Woolf's review of the civil litigation and enactment of the Civil Procedure Rules, pre-action protocols have been introduced for many civil claims including defamation, construction and engineering disputes and personal injury proceedings. Early exchange of information and exploration of settlement are consistent themes.

The Personal Injuries Proceedings Act 2002 ("PIPA") in Queensland, Australia also involves pre-proceeding exchange of information, compulsory conferences and even (to the horror of many local practitioners) mandatory settlement offers.

It is apparent from commentary on these overseas civil procedure initiatives that on the whole they are viewed favourably, although not unreservedly so.

Whether our draft rules will achieve their objective of just, speedy and inexpensive determination of proceedings may partly depend on lessons learned from similar international initiatives.

Time Frames

It is not unknown for Statements of Claim to lie in a defendant’s in tray unheeded for too long, sometimes even until judgment by default is entered because the defendant has taken no steps in response.

The prescribed time frames for initial procedural steps, particularly service of information capsules, are undeniably tight. Defendants have just two months to investigate the claim, interview witnesses, engage experts and prepare an information capsule. Some plaintiffs will maximize this advantage, issuing proceedings without forewarning.

This will be particularly challenging where an insurer is involved and coverage must also be resolved during these two months.

One criticism of the English Pre-Action Protocol for Construction and Engineering Disputes found on review by the Technology and Construction Solicitors Association in 2003 was that parties used the process to protract litigation.3

The time frames imposed by our draft rules should prevent this eventuating here but conversely, may be so restrictive that our "streamlined" procedure could be bogged down by applications for extensions of time. Perhaps parties should be free to agree extensions of time of up to three months to serve their information capsules as per the revised English Pre-Action Protocol for Construction and Engineering Disputes.

In their current form, the draft rules require that, more than ever, clients need to know it is vital to take immediate advice on any Notice of Claim served, not least to avoid the risk of missing crucial evidence or information when documents are prepared in haste.

Front Loading Of Costs

The Rules Committee acknowledges that "to an extent the new process will result in a greater front-loading of costs when compared to the current civil litigation regime" but suggests the trade off is "the early exchange of basic information is likely to facilitate early settlements between the parties themselves or, failing that, after early judicial intervention."

The preliminary results of the Judicial Settlement Conference pilot scheme indicate this may well be a fair trade-off.

Certainly, since the introduction of the PIPA process in personal injury claims in Queensland, the decline in claims lodged in 2002/3 and thereafter has been dramatic; the number in 2002/3 is down 75% on the preceding year and down by more than two-thirds (68%) from the average of the preceding 7 years.5

Whether this is entirely due to the PIPA procedure or whether the imposition of caps on damages and recoverable costs is also instrumental is unknown, as claims only come to the court’s attention if PIPA fails to resolve the claim. Nonetheless, the statistics are compellingly similar to those of our pilot scheme.

Clients must be aware that a large proportion of costs will now be incurred early in the proceedings and must be encouraged, where appropriate, to explore settlement and alternative dispute resolution before proceedings commence.

Access To Justice/Abuse Of Process

The Rules Committee envisages the filing fee be nominal "in keeping with the access to justice aim of the draft Rules". But in some hands, access to justice can create a miscarriage of justice.

The 2003 review of the English Pre-Action Protocol for Construction and Engineering Disputes found the protocol open to abuse with claimants initiating speculative (or sometimes entirely spurious) claims in the hope that the protocol led to settlement without the need for them to prove their case. This left potential defendants with no obligation but to incur costs in complying with the Protocol without any right of recovery.

Our Rules Committee has endeavoured to guard against such abuses by ensuring an application to strike out a pleading may be made at any time after proceedings are commenced, expressly defined to include the early procedural steps from issuing a Notice of Claim. Costs will be also recoverable for the whole proceedings.

As each Notice of Claim will be filed the court will be able to monitor proceedings from the outset. This is a deviation from the original recommendations released by the Rules Committee in August 2004, but in light of the Queensland experience, a prudent one.

Conclusion

Civil litigation is poised to undergo a procedural and philosophical metamorphosis with the eventual enactment of the District Courts Rules 2007. Although not without their challenges, lawyers should be comforted by the success of similar initiatives overseas and the Rules Committee’s apparent willingness to avoid the pitfalls of those that have gone before us.

Lawyers will need to work with their clients to raise awareness of the changes, the importance of prompt action and the proactive focus on dispute resolution.

Footnotes

1 Rules Committee Consultation Paper 13 August 2007

2 Ibid.

3 Kimberley Eyssell, Charles Russell LLP, Changes To The Pre-Action Protocol For Construction & Engineering Disputes

4 National Trends in Personal Injury Litigation: Before and After "Ipp": Processor E W Wright, Dean and Professor of Law, School of Law, University of Newcastle.

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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