Law Society Bulletin - March 2022

THE

BULLETIN THE LAW SOCIETY OF SA JOURNAL

VOLUME 44 – ISSUE 2 – MARCH 2022

ALTERNATIVE DISPUTE RESOLUTION

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This issue of The Law Society of South Australia: Bulletin is cited as (2020) 44 (2) LSB(SA). ISSN 1038-6777

CONTENTS ALTERNATIVE DISPUTE RESOLUTION 6

The future of mediation in family law

By Laura Elkins

8

The lawyer’s duty to resolve disputes before commencing legal action and the rise of mediation – By Stephen Dickinson & Margaret Castles

12 28

Representing parties at mediation

By Stephen Dickinson & Margaret Castles Coming to agreement: A mathematical approach to settling disputes – By Bernard O’Brien

Executive Members President: President-Elect: Vice President: Vice President: Treasurer: Immediate Past President: Council Member: Council Member:

J Stewart-Rattray J Marsh A Lazarevich M Tilmouth F Bell R Sandford M Mackie E Shaw

Metropolitan Council Members T Dibden M Tilmouth A Lazarevich M Mackie E Shaw J Marsh C Charles R Piccolo M Jones Country Members S Minney (Northern and Western Region) P Ryan (Central Region) J Kyrimis (Southern Region) Metropolitan Council Members D Colovic E Fah N Harb L MacNichol L Polson M Young Junior Members A Douvartzidis A Kenny Ex Officio Members The Hon J Teague, Prof V Waye, Prof T Leiman Assoc Prof C Symes

FEATURES & NEWS 18

22

26

REGULAR COLUMNS

The hidden cost – Medicare’s Statutory Recovery Scheme

By Suzanne Pinyon

4

President’s Message

5

From the Editor

Disentangling the laws of consent, guardianship and restrictive practices

By Dr Esther Erlings & Dr Laura Grenfell

17

Wellbeing & Resilience: How to build resilience – By Sarah El Sayed

34

Young Lawyers

36

Risk Watch: Contact between the Bench and the Legal Profession

By Kate Marcus

40

Tax Files: No stamp duty or foreign ownership surcharge on transfer of student accommodation facility

By Andrew Shaw

42

Family Law Case Notes

By Craig Nichol & Keleigh Robinson

42

Gazing in the Gazette Complied by Master Elizabeth Olsson

Oral Histories profile: John Goldberg

By Lindy McNamara

KEY LAW SOCIET Y CONTACTS Chief Executive Stephen Hodder stephen.hodder@lawsocietysa.asn.au Executive Officer Rosemary Pridmore rosemary.pridmore@lawsocietysa.asn.au Chief Operations Officer Dale Weetman dale.weetman@lawsocietysa.asn.au Member Services Manager Michelle King michelle.king@lawsocietysa.asn.au Director (Ethics and Practice) Rosalind Burke rosalind.burke@lawsocietysa.asn.au Director (Law Claims) Kiley Rogers krogers@lawguard.com.au Manager (LAF) Annie MacRae annie.macrae@lawsocietysa.asn.au Programme Manager (CPD) Natalie Mackay Natalie.Mackay@lawsocietysa.asn.au Programme Manager (GDLP) Desiree Holland Desiree.Holland@lawsocietysa.asn.au

THE BULLETIN Editor Michael Esposito bulletin@lawsocietysa.asn.au Editorial Committee A Bradshaw P Wilkinson S Errington D Sheldon J Arena D Weekley B Armstrong D Misell M Ford The Law Society Bulletin is published monthly (except January) by: The Law Society of South Australia, Level 10-11, 178 North Tce, Adelaide Ph: (08) 8229 0200 Fax: (08) 8231 1929 Email: bulletin@lawsocietysa.asn.au All contributions letters and enquiries should be directed to The Editor, The Law Society Bulletin, GPO Box 2066, Adelaide 5001.

Views expressed in the Bulletin advertising material included are not necessarily endorsed by The Law Society of South Australia.

No responsibility is accepted by the Society, Editor, Publisher or Printer for accuracy of information or errors or omissions.

PUBLISHER/ADVERTISER Boylen GPO Box 1128 Adelaide 5001 Ph: (08) 8233 9433 Email: admin@boylen.com.au Studio Manager: Madelaine Raschella Elliott Layout: Henry Rivera Advertising Email: sales@boylen.com.au

FROM THE EDITOR

IN THIS ISSUE Considering a court policy on alternative dispute resolution MICHAEL ESPOSITO, EDITOR

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RESOLVING DISPUTES Representing parties at mediation

T

he word “alternative” tends to signify something that diverges from the norm – alternative music; alternative medicine; alternative therapy.

Perhaps when “alternative dispute resolution” was first coined, methods of resolving legal disputes without judicial determination were not quite as widespread. But nowadays, “alternative” does not adequately describe forms of dispute resolution such as mediation, arbitration and conciliation that in a number of jurisdictions and circumstances have been elevated as the preferred course of settling disputes.

Alternative dispute resolution, or ADR, is often a more affordable and quicker way of dealing with a legal problem. Of course, not all disputes can be resolved this way, and trials of course play a fundamental role in not only determining otherwise intractable matters but in clarifying the law, however, utilising ADR gives trial courts more availability to deal with the more complex matters.

The Society has noted that some court-led mediations before some judicial officers have been taking place in the District and Supreme Courts of SA. The Society has written to the Chief Justice to enquire as to whether the Court would consider developing a policy

4 THE BULLETIN March 2022

relating to judicial mediation and referrals to provide mediation.

The Society acknowledges that there is no broad consensus among the profession with regards to judicial officers conducting mediation, but given the differing approaches taken by judicial officers regarding mediation, the Society considered it would be worth looking at establishing a common approach to mediation within the court process. This would hopefully alleviate uncertainties for parties in dispute.

A number of issues would need to be examined when considering a mediation policy, such as how a panel of approved mediators might be selected, whether private and judicial mediators would need to be accredited under the National Mediator Accreditation System, and whether mediation in some form or at least serious consideration of it should be a compulsory part of the process leading up to trial.

The Society does not at this stage have a firm position on a court-based mediation policy, but given the potential benefits of mediation and other forms of ADR in resolving disputes that might perhaps take less of a financial, emotional, and temporal toll on parties, it is worth opening up a discussion on how ADR could be best utilised. B

18

RECOVERY RIGHTS Delays on Medicare notices

22

WITHOUT CONSENT Restrictive practices & guardianship laws

PRESIDENT’S MESSAGE

Future objectives, strategies and initiatives discussed at successful Executive Retreat JUSTIN STEWART-RATTRAY

O

ne of the most important days on the Law Society calendar is the Executive Retreat, when Members of the Society’s Executive put their practice on hold for a day to proactively discuss a range of issues relating to the legal profession.

This year, the Executive Retreat was held at the very pleasant Seacliff Surf Life Saving Club, and the day turned out to be highly productive in terms of planning for the year ahead.

The day began with the Executive receiving a report from Chief Executive Stephen Hodder that reflected on the actions and achievements of the past 12 months. An impressive volume of work was evident. Some of the larger topics included: • Impacts of the COVID-19 pandemic and the Society’s response • The report of the Acting Equal Opportunity Commissioner’s review of harassment in the profession, the Society’s response to the report and various other initiatives of the Society to address harassment, discrimination and bullying in the profession • The Society’s application for a new Professional Standards Scheme • The finalisation of a new Strategic Plan for the Society • The development of new Legal Profession Conduct Rules • Implementation of a new Categories of Practising Certificates and delivered a Legal Practice Management Course in response to LPEAC Rules changes • Consideration of cybersecurity issues for the profession • Various notable and unusual regulatory issues that the Society dealt with • The decline of the Fidelity Fund

Mr Hodder acknowledged the work done by staff, Executive, Council and Committees in achieving so much in the past 12 months, and commended the work of everyone who contributed to the Society’s achievements in what had been another extremely challenging year.

The focus of the day then turned to the year ahead, with reports by Mr Hodder, Operational Manager Dale Weetman, President Elect James Marsh and myself on key objectives and issues for the next 12 months.

Some of the issues discussed included: • Notable anniversaries in the next 12 months • Commencement of practice visits as per the Professional Indemnity Scheme risk management measures • The Wellbeing and Resilience Committee’s development of programs in response to last year’s years health and wellbeing survey • Commencement of the new Professional Standards Scheme as at 1 July 2022 • Further work on addressing sexual harassment, discrimination and bullying, including training for the profession as to the National Model Framework to address sexual harassment in the legal profession, developed by the Law Council of Australia, to guide firms in implementing effective workplace policies; and bystander training • Australian Honour nominations • The Society’s project to improve access to legal assistance for people with disability • A range of CPD matters The Executive finalised a

recommendation to Council for the adoption of a Protocol for the Society’s Procurement of Legal Services. It also reviewed a range of key Society statements, policies and rules, being: • Powers, Objects and Mission of the Society • Operational and Financial Risk Assessment Register of the Society • The Society’s Business Continuity Plan • The Society’s Council and Council Members’ Charter • Delegations of Council and Executive • Rules of the Society • The Society’s Submissions Policy • A review of those eligible to apply for Associate status of the Society Executive also considered membership statistics relating to factors such as renewals, resignations, area of practice, and firm size; the next steps to be taken in deciding the position to be taken by the Society as to measures to address the decline in the Fidelity Fund, the Executive forming a Working Group to inform this issue; miscellaneous amendments to the Rules of the Society to be put before the Council for consideration for recommendation to Members at the 2022 Annual General Meeting; finalisation of the Strategic Plan 2022, further to consultation with Members and relevant Committees; and the formation of an Executive Working Group to assist in the work required due to the current term of the Society’s lease on its premises being due to expire late in 2023.

Overall, it was an extremely cordial and fruitful day, and I am looking forward to reporting further on the matters outlined above throughout the year. B March 2022 THE BULLETIN

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ALTERNATIVE DISPUTE RESOLUTION

The future of mediation in family law LAURA ELKINS, WILLIAMS BARRISTERS & SOLICITORS

W

hilst in family law matters Court is sometimes a necessary pathway, there are many other forms of Alternate Dispute Resolution (ADR) available to assist separated parties to resolve their parenting or property settlement disputes.

The emphasis on utilising these dispute resolution options is reinforced in the Family Law Act which places a positive obligation on family law practitioners to advise their clients about the various non-court based family services available to them.1 Whilst there has of late been a rise in the utilisation of arbitration and collaborative law in family law matters, mediation still appears (at least in the writer’s experience) to be one of the more favoured options for both solicitors and clients alike.

In light of the recent overhaul of the family law system, this article seeks to examine what the utilisation of mediation in family law matters might look like moving forward and the benefits that may flow from this for both clients and solicitors.

To provide some contextual background for those unfamiliar with the recent changes, a significant structural reform to the family court system took place on 1 September 2021. These reforms saw the unification of the Family Court of Australia and the Federal Circuit Court of Australia creating the Federal Circuit and Family Court of Australia (FCFCOA).2 Practically speaking, although the courts have merged, in essence both Courts still exist and continue to operate under two divisions of the new Court, the Family Court of Australia operating as Division 1 and the Federal Circuit Court operating as Division 2.

In addition to creating a single point of entry into the court system for all family law matters, the reforms also introduced

6 THE BULLETIN March 2022

a new national case management pathway to ensure that a consistent approach was being utilised to resolve family law matters; harmonised family law rules3; and an enhanced focus on pre-action procedures and utilisation of dispute resolution.4 You will note from the diagram that Dispute Resolution is a defined step in that case management pathway, illustrating the Court’s emphasis that the parties (where possible) continue to make a genuine effort to resolve their matter and avoid having to proceed to judicial determination.

From a procedural standpoint, the merger has also introduced a raft of new documents that must be filed at the commencement of proceedings. These documents are required to be filed together with the documents previously required to be filed prior to the merger. These documents require parties to provide (amongst other things) evidence of their compliance with the pre action procedures.

So, how are the structural reforms likely to affect the utilisation of mediation in family law matters moving forward?

From the writer’s perspective, following the reforms, an increase in the utilisation of mediation is likely to be most observable in the first instance, in the pre action stages. The primary reason for this being the enhanced emphasis on compliance with pre action requirements.

Whilst pre action mediation has been compulsory5 in all parenting disputes since the 1 July 20076, prior to the recent reforms, the same obligation did not exist at a compulsory level for parties to a property settlement. Prior to 1 September 2021, parties to a property settlement were able to commence proceedings without having to demonstrate having made any genuine effort to resolve their matter beforehand.

The introduction of the new pre action procedures set out in the Central Practice Direction, however, has changed all of this.

From 1 September 2021 parties to a property settlement matter are now required to make a genuine effort to resolve their matter by either negotiation or mediation before they are eligible to commence proceedings. If a resolution is not able to be achieved at that pre action stage, parties must then substantiate the attempts they have made by providing documentary evidence through a Genuine Steps Certificate to be filed with the Court.

The Central Practice Direction makes it clear that if the Court considers that a party or their legal representative have pursued an action without having made a genuine attempt to resolve the issues in dispute beforehand, significant penalties may be imposed, including costs orders being made against both the solicitor and client.7 As a result of this new pre action requirement, it is likely that we may see more and more matters progress through the mediation channels in the first instance.

Whether this will result in a greater percentage of matters resolving at that pre action stage remains to be seen, however that is certainly the legislative intent behind the introduction of these amendments.

In addition to seeing a likely increase of mediation at the pre action stages, given the introduction of the new National Case Management Pathway, it is likely that we will observe a more frequent utilisation of mediation in proceedings that come before the Court.

Whilst prior to the reforms the Court had the power to refer a matter off to dispute resolution at any stage in the proceedings 8 if it appeared likely that it would assist the parties to resolve

ALTERNATIVE DISPUTE RESOLUTION

FIRST COURT EVENT

INTERIM HEARING (if required)

the matter or narrow down the issues in dispute. However, there was no uniformity in how this power was used.

The introduction of ‘Dispute Resolution’ as a defined step in the Court's new Case Management pathway seeks to remedy this and will now mean that all matters will now be referred to various forms of dispute resolution (including various forms of mediation) within five months of the date of commencing proceedings.9 Although there may be implications of the recent reforms that don’t sit well with practitioners, it is hard to imagine how an increased use of mediation in family law matters will not yield more beneficial results for all involved.

DISPUTE RESOLUTION

COMPLIANCE AND READINESS HEARING

From a client’s perspective, mediation enables them to flesh out potential options, air concerns and find a resolution that at the end of the day both parties live with. It also enables a resolution to be reached in a much faster timeframe and at a significantly lesser cost than if the matter were to proceed to court.

From a solicitor’s perspective, as much as we may enjoy the formality and processes involved with contested litigation, there is so much more benefit to be gained for our client if they are able to participate in the resolution process in a meaningful way and are happy with the outcome. The flow on effect for us as a profession is that this puts us in a

TRIAL MANAGEMENT HEARING

TRIAL

(if required)

better position to maintain a long-standing relationship with that client, which in turn may lead to referrals or further business in the future. B Endnotes 1 Family Law Act 1975 (Cth) s12E. 2 Federal Circuit and Family Court of Australia Act 2021.

3 Federal Circuit and Family Court of Australia (Family Law) Rules 2021.

4 Central Practice Direction – Family Law Case Management 1 September 2021.

5 Family Law Act 1975 (Cth) S60i.

6 The Family Law Amendment (Shared Parental Responsibility) Act 2006 (Cth).

7 Central Practice Direction 2021 3.11.

8 Family Law Act 1975 (Cth) 13C(1)(b).

9 Central Practice Direction 2021 5.26.

March 2022 THE BULLETIN

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ALTERNATIVE DISPUTE RESOLUTION

THE LAWYER’S DUTY TO RESOLVE DISPUTES BEFORE COMMENCING LEGAL ACTION AND THE RISE OF MEDIATION. STEPHEN DICKINSON AND MARGARET CASTLES This is the first of two articles from the Society’s Alternative Dispute Resolution Committee in this special ADR edition of the Bulletin dealing with the concept of mediation and the ethical and practical duties that lawyers need to have in mind when recommending mediation to their clients. These articles will be followed in future editions by advice from a number of members of the South Australian legal profession with tips to support lawyers engaging in mediation, and consideration of some of the reasons why lawyers may be reluctant to do so.

Part 1: Lawyers duty to act in the best interests of clients and understanding the mediation process. tephen Dickinson started his career as a commercial litigator. Increasingly troubled by the costs and risk incurred by parties and their advisors focus on legal rights and entitlements, he trained as a mediator and is now a passionate advocate for mediation in commercial and civil disputes. In this article Stephen shares his ideas for integrating mediation and litigation for effective client outcomes.

Clients come to us when they have problems they cannot solve themselves.

Those in conflict often feel they have no option other than Court action, so they seek a legal opinion. Makes sense.

Unsurprisingly lawyers focus on legal rights, entitlements and risk when advising clients who are seeking legal redress or responding to a legal claim. That is, after all, what we have been trained to do, both as students and young practitioners. To analyse how the law applies to a particular set of facts and circumstances.

What can be lost is that lawyers are ethically and professionally required to act in the “best interests” of our clients, which involves much more than legal analysis. The broader picture of what a client wants and needs, and what processes might effectively and affordably achieve

S

8 THE BULLETIN March 2022

those needs, is often eclipsed by lawyers concentrating on legal rights, argument, and procedure.

In reality, very few cases proceed to trial, and as matters progress, costs and risk incurred commonly inform, if not necessitate, settlement discussions (often “on the steps of the courthouse” as the old saying goes). Parties therefore find themselves having invested significant funds preparing for their “day in court” when that day never comes, and in most instances, was never going to arrive.

After many years as a commercial litigator this made little sense to me, and I began to question what it actually means to act in the best interests of one’s client in the context of commercial and civil disputes.

Ultimately, I came to conclude that a lawyer’s duty to act in the best interests of his or her client is met by advising that client by reference to a much broader suite of issues, including: • Legal rights and entitlements (including the merits or otherwise of their case) • Legal and commercial risk (including legal costs incurred and potentially ordered by a Court) • Financial circumstances (including assets, entitlements, liabilities, opportunities and risk outside of the matters in dispute) • Personal circumstances (including

age, health, and both professional and personal relationships) • Commercial, financial, and strategic objectives Having completed mediation training some years earlier, I put two and two together and realised that: • in most cases mediation is more likely to deliver results that align with the best interests of disputing parties than litigation (where mediation allows for the introduction of this broader suite of issues and litigation delivers rigid procedures and relief that, by necessity, commonly excludes such considerations); and • mediation therefore presents a better opportunity for lawyers to act in their clients’ best interests, and consequentially meet their professional and fiduciary duties.

Why Mediation?

The above may explain the increasing prevalence of mediation in the context of civil and commercial disputes over the past 20 years, both here and overseas.

Mediation has become mandatory within certain of our Commonwealth and State Courts and Tribunals. Federal and State legislation is now littered with references to voluntary and mandatory mediation.

Best practice now sees those drafting policy documents and dispute resolution

ALTERNATIVE DISPUTE RESOLUTION

clauses introducing the need to mediate before commencing legal action, industry bodies and commercial stakeholders promote and encourage mediation in place of litigation, and public awareness of mediation as an alternative to Court action continues to grow.

Our professional conduct rules lay the foundation for engagement in mediation.

The SA Barristers Rules1 and Australian Solicitor Conduct Rules2 require barristers and solicitors to act in the best interests of their clients, to advise clients of alternatives to litigation, and to explore compromise options with clients.

The combination of our professional and fiduciary duties to our clients, and our duty to the court and to the administration of justice provides a compelling framework for embedding mediation in the management of all civil and commercial disputes.

This may explain the judiciary’s longstanding and determined efforts in many Australian civil jurisdictions to encourage the profession to assist our clients to resolve their disputes before or shortly after commencing legal action.

In South Australia our professional and fiduciary obligations are embedded in the Uniform Civil Court Rules (UCCR) which require lawyers (that is, barristers and solicitors) to: • Encourage parties to resolve disputes before commencing litigation; • Narrow the scope of disputes; • Ensure that time and costs incurred are proportionate to the importance and value of subject matter; and • Use court resources appropriately and efficiently.

The rules set out a detailed list of steps that must be taken before action is commenced. These include:

•

Identifying and responding to each cause of action; • Quantifying damages and calculating relief; • Attaching expert reports; • Including sufficient material to allow the other party to respond; and • Making offers capable of giving rise to a legally binding agreement3.

It goes without saying that diligently engaging in all of these steps will put parties in an excellent position to understand their case and engage in informed negotiations. There is a perception that significant costs are associated with taking these steps before commencing litigation, which make it a somewhat less attractive option. Again, this makes little sense where the typical approach to litigation – where parties exchange pleadings, move to discovery, and then begin the process of gathering and evaluating evidence – is an extremely expensive and drawn-out exercise, and undertaken in the knowledge that less than 5% of matters run to trial.

It might be thought premature to engage in settlement negotiations before all of this information is gathered, usually over a period of many months (or years).

Yet parties often understand their goals in relation to a dispute well enough to discuss solutions, without costly and timeconsuming engagement with these steps, which are designed for trial readiness, not finding workable solutions.

There is also a perception that parties will not settle until they have borne the pain of legal costs and are nearing a trial date. Although this may be the case with some parties, most will follow the persuasive and well-presented advice and recommendations of their lawyers, and the likelihood of this will only grow if

the prescribed pre-action steps have been followed.

The financial and broader benefits of settling a case before or shortly after commencing action are obvious, yet too often settlement discussions do not start until well into the court process. Whilst some cases do require full disclosure, analysis of evidence and detailed legal argument, many do not, and can be effectively resolved with pragmatic reference to other interests.

When to mediate?

For this reason, the SA Uniform Civil Rules also require that before issuing proceedings, parties are required to arrange a pre-action meeting, at which they must identify the main issues in dispute, consider how the issues might be resolve without recourse to litigation, negotiate in good faith, and consider sharing the cost of an independent chair for that meeting.

The Court’s encouragement for parties to resolve their disputes before legal action is commenced or is allowed to proceed is reinforced by exemptions from the obligation to comply with the pre-action steps for parties who have engaged in mediation (UCCR R61.8), the Court’s discretion to order that pre-action steps be taken after action is commenced (UCCR R61.12), the Court’s power to make adverse costs orders if pre-action steps are not taken, including the failure to attend a pre-action meeting (UCCR R61.12) and the Court’s power to order parties to attend either court-annexed or private mediation (UCCR R131.3).

All of this, when combined, suggests that the most appropriate time for parties to engage in mediation is following completion of the pre-action steps, in lieu of a pre-action meeting and before legal action is commenced.

March 2022 THE BULLETIN

9

ALTERNATIVE DISPUTE RESOLUTION

So what is mediation?

In Australia the National Mediation Accreditation System Standards describe mediation as a process that promotes the self-determination of participants in which participants, with the support of a mediator: a. communicate with each other, exchange information and seek understanding b. identify, clarify and explore interests, issues and underlying needs c. consider their alternatives d. generate and evaluate options e. negotiate with each other; and f. reach and make their own decisions4.

Internationally, the Singapore Convention 5describes mediation as a party driven process for discussing and resolving disputes. The mediator’s role is not to adjudicate, but rather to facilitate discussions between disputing parties to arrive at a mutually acceptable solution.

The process promotes the preservation of relationships between the parties.

It is flexible, confidential, and in many instances, more cost and time efficient than other dispute resolution processes such as litigation and arbitration.

In New Zealand6 mediation is described as a consensual, confidential, and relatively informal negotiation process in which a skilled and independent third party helps parties to define the issues in dispute, to explore settlement options, and to negotiate a mutually acceptable settlement; and in the UK, as a flexible and confidential process in which an independent and impartial third person helps the parties talk through the issues, negotiate, and come to a mutually agreeable solution7.

All of these models make clear that mediation is a facilitated, collaborative, direct engagement between parties in which diverse issues not just legal concerns can be agitated, with the mediator facilitating open discussion and problem solving, rather than directing the parties to outcomes.

Facilitative mediation is an internationally recognised and applied process that has been developed through multi-disciplinary research and practice over many, many years. For this reason, it is

10 THE BULLETIN March 2022

critical for lawyers who are recommending and engaging mediators understand the process, and for those conducting mediations to be trained and accredited in delivering this process.

The South Australian experience For many of us, experience may have differed from the above expectations.

Indeed, in South Australia, the experience has long been that mediation often consists of a senior lawyer or experienced decision maker reading position papers and hearing opening statements, followed by the mediator and lawyers (not the parties) developing and exchanging offers through incremental evaluation of legal rights, entitlements, and arguments. Once these avenues have been exhausted, the focus then becomes costs and risk, in an effort to “bridge the gap”. This often occurs by shuttle negotiation, where parties don’t sit in the same room, have little engagement in the process, and any communication they do have relates solely to legal issues and imposed commercial outcomes. This process lends itself to lawyers focussing on legal argument and solutions from the outset, and mediators being evaluative and directive.

As a result, many practitioners have a narrow view of what mediation involves, envisaging an opportunity to engage in legal and adversarial argument, followed by a “banging of the heads” and concluding in a commercial negotiation.

This is not mediation.

To be fair, these views are likely informed by past experience, where such practices have been commonplace. To contemplate something different also requires a not-so-subtle shift in mindset for many practitioners who have been trained and are practiced in advising on legal rights and presenting legal argument. Such practices are contrary to the fundamental principle of mediation that solutions should not become the focus until: • The parties have been afforded an opportunity to express their respective viewpoints and objectives • The parties and mediator have worked together to identify matters that need to be addressed to see their dispute resolved

•

The mediator has worked with the parties both together and separately to gain a better understanding of the parties’ underlying needs, interests, and objectives, before turning to potential solutions.

A facilitative model allows parties to engage directly to better understand the grievances, needs and objectives of their opponent, which will more likely result in mutually acceptable and therefore durable outcomes (often not contemplated by the mediator or the parties’ advisors, and certainly not available through traditional Court processes). A trained and experienced mediator should facilitate these discussions without imposing their own views or authority on the process, or the outcomes.

Improving our approach to mediation Approaching mediation with this model in mind, infers a different style of lawyer-client relationship.

Clients naturally wish to understand their legal rights, entitlements, and risk before participating in mediation, and before entering an agreement, however a lawyer who is truly acting in the best interests of their client will take the time to better understand their client, including their client’s true motivations and objectives, and how non-traditional settlement models and terms may best serve their clients’ needs and interests.

Mediation is a proven way of redirecting focus towards solutionsfocussed decision making, with legal rights, entitlements and risk forming only part of what should be a range of other relevant considerations, each specific to the disputing parties and the case at hand.

That is not to say legal rights, entitlements, and arguments available to clients should be disregarded at mediation (or in any forum). To suggest this would be a nonsense. We need to recognise, however, that mediation is no longer the alternative but the norm, and the process requires a holistic approach when taking instructions, engaging in good faith discussion and negotiations, and developing solutions for parties in dispute.

Mediation should not be considered by

ALTERNATIVE DISPUTE RESOLUTION

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understand what true mediation actually involves. If mediation is understood, embraced, and practiced properly, it has the potential to improve our legal system, the way we practice law, the sustainability of legal practice, and the outcomes for people who find themselves in conflict.

Authors Stephen Dickinson and Margaret Castles are both experienced mediators and solicitors, members of the Alternative Dispute Committee of the Law Society and committed to expanding the use and understanding of mediation in civil process in South Australia.

Stephen is the principal of Ansr. Dispute Resolution, and a Director of the National Mediator Standards Board. Margaret is a lecturer at Adelaide Law School, manages the Law School free legal advice services, and also practices as a mediator. B

inspiring confidence

lawyers or their clients as an opportunity to achieve fast and cheap outcomes, with little to no preparation (or fees). Failure to prepare for mediation creates a risk that one’s client will find themselves making ill or uninformed decisions or missing a valuable opportunity to resolve their dispute in terms that may be favourable to them. If lawyers are to meet their professional and fiduciary duties, they need to understand not only their client’s case, needs and objectives, but also assess the case, needs, objectives and strategies of their opponent.

Likewise, if lawyers focus solely on legal rights, entitlements and risk, they are depriving their clients of the true benefits of mediation.

Lawyers (and mediators) should

Endnotes 1 SA Bar Association Barristers’ Conduct Rules (2013) Rule 39 2 Australian Solicitors’ Conduct Rules (SA) 2011 v3 Rule 7 3 Uniform Civil Rules SA 2020 Rule 61.

4 National Mediation Accreditation System Standards Part III practice standards https:// msb.org.au/themes/msb/assets/documents/ national-mediator-accreditation-system-2015. pdf#page=9 5 United Nations Commission on International Trade Law United Nations Convention on International Settlement Agreements Resulting from Mediation 2018 https://uncitral.un.org/sites/uncitral. un.org/files/singapore_convention_eng.pdf 6 New Zealand Dispute Resolution Centre Mediation Rules (2018) https://www.nzdrc. co.nz/mediation/mediation-rules/ 7 UK Ministry of Justice Guide to Civil Mediation https://www.gov.uk/guidance/a-guide-to-civilmediation#what-is-mediation

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ALTERNATIVE DISPUTE RESOLUTION

REPRESENTING PARTIES AT MEDIATION STEPHEN DICKINSON AND MARGARET CASTLES

B

efore approaching any mediation, it is imperative that a lawyer understands their client as best they can. What is driving your client? What is your client hoping to achieve? What are your client’s financial and personal circumstances? How will your client cope with litigation? How will your client present and behave at mediation?

How will your client perform as a witness if the matter remains unresolved?

To achieve best results for clients, lawyers should also seek to understand their opponent and the opposing party or parties by assessing these very questions with the information available.

The first steps towards mediation involves a strong understanding of your client and their opponents in the context of the facts and circumstances of the case.

This requires an enquiry and assessment of matters outside of the legal context, where almost all disputes involve a factual, psychological and or commercial matrix beyond legal considerations. For this reason, assuming litigation as the only way forward is flawed.

This applies to most if not all disputes, notwithstanding the nature of your client, whether they be senior executives of a major corporate, a small business owner, an insurer or aggrieved family members.

There is always a human element, in the factual background, party dynamics, or in decision making processes, whether it be your client or another party or advisor.

The reality for many litigants is that they have tried and failed to resolve a

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problem, become embittered, adversarial and closed minded, and see litigation as the only path to get what they want. The way a lawyer deals with their client at this point is a pivotally important.

Clients may well assume litigation is the only option because they are not aware of the range of alternatives that really exist, and don’t understand that legal rights and entitlements are not the only indicator of best interests. There will be a broad range of interests and outcomes that a client needs to consider before engaging in litigation. Prohibitive costs and delays will be one factor, as will be the impact on the client’s business, financial resilience, family and relationships, future plans, reputation, commercial opportunities and commercial viability.

Counselling a client on compromise is not a zero-sum calculation, but should involve consideration of each of these factors, with lawyers supporting their client to evaluate a range of legal and non-legal considerations in the context of the client’s specific circumstances and objectives – a holistic approach.

Lawyers are well placed to engage with these issues. They can predict possible legal outcomes, but also have insight and experience in the practical consequences of choices made before and after the commencement of legal action.

Educating your client Firstly, clients need to understand the difference between litigation and

mediation. The former is rules bound, time consuming, evidence based, and can be extremely stressful. It may take a very long time, and the costs incurred may end up far greater than the client ever imagined.

Professional conduct rules make it clear that lawyers have a professional and fiduciary duty to disabuse clients of the notion that going to court is the “normal” way to resolve disputes, and instead encourage them to think of alternatives early.

Clients need to understand they have the option to settle early and walk away with as much if not more money than might be achievable following the litigation path, win lose or draw. This is particularly so for clients that have limited resources, for whom affording thousands or tens of thousands in legal fees means mortgaging their house or borrowing money from others. It also applies to clients who may have boundless financial resources, but whose time, money and human resources are better invested in other opportunities.

It is important to explain what mediation is – a meeting in which the client can speak and engage, produce ideas, and explore options, with the other party and the mediator. Mediation is a process where the client can have autonomy and control over their own dispute and their own outcomes. This will depend upon the style of mediator being chosen, as some will take a directive negotiation approach rather than facilitating a broader conversation.

The client should be advised that they

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may be expected to play an active role in the process, and that the mediator is likely to engage with them directly, and may recommend joint sessions, potentially without lawyers present. Importantly, the client should be asked to think of options and solutions, and workshop these with their advisor ahead of the mediation.

Fundamental to all of this is that a party’s active participation in the preparation, content and outcome of mediation is key to client satisfaction and mutually acceptable (and therefore durable) outcomes.

Just as clients often don’t understand what mediation is, nor do they know how to approach it. Typically they will feel that as swords have been drawn they need to be careful as to what they say and to whom they speak, and that offering solutions demonstrates weakness.

Too often have I have seen parties blindsided at mediation – asked to sign mediation agreements without having an opportunity to read the agreement, asking questions about routine aspects of the process, and expecting the mediator to provide advice or determine the matter.

Regrettably, I have also encountered advisors shielding their clients from the other party, preventing clients from raising non-legal matters in private sessions that are clearly important to them, and even parking issues on the basis that they are or will become the subject of a separate litigation.

The better prepared parties are for the

process, the more likely they will be in a position to make decisions that align with their needs and interests, and the more likely they will be satisfied with the process and outcome, whether their matters resolves or not.

Creating a landscape for informed decision making Too often have I heard cost considerations as an excuse for a failure to prepare for mediation, whether this be due to costs already incurred, or some misguided view that mediation is a cheap option for resolving disputes.

Lawyers who fail to prepare for mediation and consequently place their clients in a position where they are expected to make ill and uninformed decisions are in breach of their professional and fiduciary duties.

If the excuse is costs already incurred, it is difficult not to ask whether the advisor had a sound knowledge and understanding of their client’s financial circumstances when first taking instructions, and how costs incurred may have been better expended – too often disproportionate costs are incurred by the exchange of adversarial correspondence and the preparation and filing of pleadings before the merits of a case are properly tested, and the underlying needs and interests of a party are properly explored.

Whilst time and costs savings are clear advantages of mediation, and principles of commerciality and proportionality are

critical, client interests are not best served by lack of preparation.

Although mediation may give rise to some additional costs, if one properly prepares for mediation, much of the work product should be transferable to trial preparation if the matter remains unresolved.

Failure to prepare, exchange vital information and workshop potential solutions often see mediations fail, be adjourned or what is worse, parties agreeing to terms that are contrary to their legal entitlements and underlying needs and interests. Terms agreed in this context are also less likely to be observed by the parties, creating further disputes and issues of enforceability.

Where are the valuations? Where are the up-to-date financials? Where are the expert reports? Where is the tax advice?

Where are the medical reports? Where are the parenting plans? Where are the costs estimates to trial? All of this information will enable a mediation to be productive and effective. Without it, parties are not in a position to make informed decisions.

This is not to mention information that may not be directly relevant in a strict legal context, but may be relevant to the underlying interests, needs and objectives of the parties and therefore critical to the matter resolving. Best outcomes are often achieved by parties and their advisors thinking outside the square and introducing assets, concepts and opportunities that may not be March 2022 THE BULLETIN

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readily apparent, but are attractive to their opponent, this being one of the advantages of (properly conducted) mediation.

Pre-Mediation Conferences The importance of pre-mediation conferences cannot be overstated, whether they be held by telephone, online or in person.

Pre-mediation conferences serve many and varied purposes, and should be considered best practice in the context of preparing for mediation.

Trained and experienced mediators may use pre-mediation conferences to ensure all necessary information and material will be available at the mediation allowing parties to engage in informed discussions, to gain a better understanding of the dispute and the motivations, needs and objectives of the parties (which are often not apparent from the pleadings or correspondence), to perform any necessary reality-testing, and to commence workshopping settlement models (not final outcomes).

Subject to party dynamics and individual needs, a mediator may also encourage parties to attend pre-mediation conferences to apply certain of these practices directly, and to gain the trust and confidence of the parties ahead of the mediation.

Adopting this approach can save time and reduce frustrations on the day of the mediation, reduces the risk of failed or adjourned mediations, and lays the foundation for parties and their advisors to explore legal, non-legal and mutually accept outcomes.

Pre-mediation meetings can also be used by lawyers to “get on the front foot” by highlighting the strengths of their client’s case, creating a narrative that best aligns with their client’s case, and introducing settlement models that best align with their client’s objectives.

Lawyers may also benefit from an independent and impartial voice reinforcing their advice or reality testing clients who have expectations that are

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difficult to manage, which is often best before rather than during the mediation proper.

I encourage mediators and lawyers alike to embrace the practice of premediation meetings. They should not be considered an imposition or “extra layer of costs”, but an opportunity for lawyers to protect and advance their client’s interests, and an investment in the process and client outcomes.

Selecting your mediator – beware of rigidity As explained in our previous article, “The lawyer’s duty to resolve disputes before commencing legal action and the rise of mediation”, true mediation involves an internationally recognised and applied process that has been developed through multi-disciplinary research and practice over many, many years.

For this reason, it is important for those within our profession to understand the process before ordering, attending, and conducting mediations.

Unfortunately, many lawyers are critical and sceptical of mediation, which I expect is largely due to their experience of what has been traditionally described as “mediation” in the South Australian legal landscape.

Of concern are reports of mediators and lawyers speaking of “trends” away from position papers, opening statements and joint sessions with parties present. I have heard mediators and lawyers describe position papers as a waste of time and money, opening statements as harmful to the process, and bringing parties together as unnecessarily emotive and dangerous.

Such thinking suggests lack of understanding of basic principles of mediation and fails to recognise that each and every dispute is different. I was once told the only thing more complex than a human being is the relationship between two human beings, and it follows that such complexities only increase with the more parties and advisors involved.

Whilst there may be very good reason to avoid position papers (eg. for reasons

of commerciality, or where sufficient information is available elsewhere) and opening statements (eg. where there is a history of unnecessarily adversarial conduct or an imbalance of power), there are often very good reasons to exchange position papers (eg. to introduce a narrative, unknown facts and circumstances, or potential settlement models) and deliver opening statements (eg. where there is some concern that a party may not have been alerted to a fact or risk that may inform their thinking and decision making).

And whilst there may be good reason to keep parties apart (eg. a history of abuse or risk of violence), it is a primary principle of mediation that parties be encouraged to communicate directly with the support of the mediator, with or without advisors present.

Some suggest that “lawyer-mediators” and lawyers are inclined to discourage joint sessions with parties present to avoid what may be regarded emotive and therefore counterproductive discourse.

Others recognise that experienced decision makers and lawyers are trained to focus on legal argument and legal solutions, making it difficult for them to appreciate the importance and benefit of introducing non-legal considerations and solutions.

These views are also misplaced – emotion forms a part of almost every dispute at every level and allowing parties to address the dispute against the context of their emotional response is an important first step in holistic problem solving.

It is also said that experienced decisionmakers and lawyers have a tendency to retain control, and impose themselves on the process and outcomes, rendering party input and engagement redundant. Imagine being a party at mediation and hearing the mediator or lawyers say, “We all know where this is heading” or “Can we just get on with it”, as I have on far too many occasions. This tells the parties that they have no control over the process, or the outcomes and that there is little point in engaging.

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Whilst certain matters and parties benefit (if not require) an experienced decisionmaker or lawyer to act as mediator, this is the exception not the norm, and where this is necessary engaging a mediator with legal experience and mediation training can represent the best of both worlds.

Skilled and experienced mediators are able to follow proven processes and apply fundamental principles whilst also remaining agile when conducting mediations. With the benefit of having read the materials and conducting premediation meetings, mediators can consider the need and appropriateness of particular steps (eg. position papers and / or opening statements) and which session dynamics are most likely to advance and potentially resolve matters (eg. private versus joint sessions, meeting advisors with or without their client’s present, or meeting parties without advisors).

Mediators should also be agile throughout the mediation itself, subject to many and varied factors, including the introduction of new facts, issues, arguments and settlement models, the responses of parties and their advisors

to such matters, and the effectiveness or otherwise of party and advisor dynamics that have been attempted to that point.

It is important for mediators to consider appropriate pathways towards resolution ahead of time, but also be ready to change course where necessary.

Accepting that all disputes are different, it follows that there is no “one size fits all” when it comes to mediation, and therefore disregarding or indeed introducing particular steps of the mediation process without proper consideration is the first step towards a failed mediation, or at least outcomes that fail to meet party needs and expectations.

Work with the mediation process As an advisor, you should feel free to propose steps and session dynamics to the mediator, both prior to and during a mediation. Mediators should welcome this where parties should feel some ownership of the process and its outcomes. That being said, parties and their advisors should also place trust in the mediator if and when certain steps and session dynamics are proposed or challenged by the mediator as there may be very good

reason for this, noting the mediator is the only person who has the benefit of being in every room.

Advisors should also be comfortable calling on the mediator to meet with their client in private session, whether this is to listen, reality test, reinforce advice or workshop solutions. Advisors should consider the mediator a resource and be comfortable working with the mediator to advance discussions towards mutually acceptable solutions.

Whilst it is important for mediators to give parties and their advisors time and space during a mediation, mediators who spend more time alone at mediation than with one or other of the parties may not be performing the role that they have been engaged to perform. Do not be afraid to speak with the mediator privately to discuss next steps, or to capture or recapture their engagement.

Further, inviting a mediator to sit in with you and your client when discussing issues and workshopping options can be a valuable tool in advancing and directing the process and its outcomes, including in your client’s favour.

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Working with the mediator to manage client behaviours Mediators can be an important resource and support for lawyers with clients who are not accepting of their advice or recommendations. The impact of a third, independent and impartial voice cannot be overstated, and is most effective where the mediator has taken steps to build rapport and gain the trust and confidence of the parties from the outset.

The solicitor-client relationship is very different to the party-mediator relationship, where clients are often reluctant to disclose certain matters to their advisor in fear that it may impact the advice they receive and ultimate legal outcomes. Time and again have I seen advisors caught off guard by hearing something from their client for the first time during mediation which has caused them to change their outlook or advice.

Sometimes this information would have been disastrous to their client’s case had the matter proceeded to trial, whilst at other times relates to the client’s specific circumstances and goals.

As an advisor you can support the party-mediator relationship by demonstrating respect towards the mediator and counselling your client to trust the mediator and the process.

More often than not, parties mirror the behaviours and language of their advisors. Unlike a judge, it is not your role to persuade the mediator, and attempting to do so is likely to be a waste of time and energy, particularly if presented in an adversarial manner. Advisors barracking for their client’s cause or denigrating their opponent or the opposing party is the first steps to a protracted or failed mediation, as clients will follow suit.

The most compelling method of

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advancing your client’s position is to have them deliver their story, grievances, arguments, and objectives, whether this be to the mediator, or to the other party and their advisors. Ideally, advisors will prepare clients ahead of mediation to capture this opportunity if and when it presents. Create a narrative that best aligns with your client’s interests and objectives.

Remember that your mediator, the parties, and their advisors are all human beings, and compelling narratives resonate. If your client has been wronged, explain why it is reasonable for them to expect redress.

If your client’s conduct is in question, provide a reasonable explanation for their conduct or for what has occurred.

Basic neuroscience tells us that our brains retain new and interesting information in favour of that which is familiar or dull. Neuroscience also tells us that associating something that is interesting (your client’s narrative) with knowledge (your client’s legal argument) will more likely resonate. When you discuss past cases, what do you recall?

The legal arguments presented, or the characters and storyline?

Two invaluable strategies at mediation are to encourage parties to place a value on intangible outcomes and to become inward rather than outward focused.

The former involves placing a value on unquantifiable objectives and such as certainty, interruption to life, interruption to business, capturing or losing commercial opportunities, reputation, maintaining or restoring commercial and personal relationships, and protecting the health and wellbeing of oneself and others.

And the latter involves reversing the language from “what are they getting away with”, “matters of principle” and “winning and losing”, to what resolution will mean

to your client without reference to their opponent and having considered the unquantifiable objectives and outcomes referred to when performing the first exercise.

Whilst on the face of it these processes may appear outside of your job description as a lawyer, they are actually required of those wishing to meet their professional and fiduciary duties to their clients, where a holistic approach should be taken when advising clients on the wisdom or otherwise of decisions being made against the complex backdrop of their commercial and personal circumstances.

In order to manage client expectations and behaviours at mediation, it is incumbent on lawyers to practice these methods, or at a minimum, support mediators who do so. If you are more comfortable acting as your client’s legal advocate, or unable to practice these methods in fear that this may undermine your client’s confidence in you as their lawyer, you can lean on the mediator to perform this role.

Remember, mediators are there to work with you and your client to facilitate good faith discussions and develop mutually acceptable outcomes between the parties.

Mediators should not be seen as another opponent, nor should they impose themselves on the process or the outcomes.

Working with your mediator is more likely to achieve better results for your clients which in turn can only serve to improve your reputation and your legal practice.

Stephen is a commercial lawyer and mediator, Principal of Ansr. Dispute Resolution, and a director of the national Mediator Standards Board. Margaret is a lecturer at Adelaide Law School, manages the Adelaide Law School free legal advice services, and is a practicing mediator. B

WELLBEING & RESILIENCE

How to build resilience SARAH EL SAYED, JONES HARLEY TOOLE

G

iven the high-pressure environment associated with practising as a lawyer, it is not uncommon for lawyers to experience extreme emotions of stress, anxiety and depression. These emotions are often triggered by the demands of the role. It is likely that most lawyers will encounter challenging situations and/ or setbacks in their legal career and what is most important is not the challenges themselves but how we respond.

Employing techniques of resilience is a learned skill and by practising over time you can continue to build your resilience to respond to events of adversity.

Below are a few tips on how you can build personal resilience to overcome anxiety in the workplace and in your personal life.

ACKNOWLEDGE YOUR EMOTIONS First and foremost, you should acknowledge your emotions. An effective way of quickly reducing our levels of stress is to acknowledge how we feel.

Next time you are feeling overwhelmed, pick up a pen and paper and write down a few sentences about how you are feeling and what is making you feel that way. Sit with those thoughts without judgement and ask yourself “what should I do”.

Acknowledging your emotions is a useful tool to create distance between the emotion itself and the negative feelings that accompany it.

possible. Ask yourself the question “What advice would I give to my colleague if they raised this issue with me?”

REFLECT Ask yourself reflective questions.

Anxiety is associated with a heightened sense of helplessness. Asking questions such as “what can I learn from this” or “what is a difficult situation I faced in the past and how did I overcome that situation” allow us to think of the positive outcomes that may eventuate rather than ruminating on our problems in our mind.

ADOPT A NEW PERSPECTIVE Do you find you are able to give great advice to others but often have difficulty navigating your own problems? This is a common issue that many people face, and that is why adopting a new perspective is such an effective technique to employ when dealing with life stresses. Looking at your problems through a neutral lense can help provide clarity as to the best solution

a state of stress and neutralise feelings of irritation. Practice this exercise when you are feeling stressed and observe how it makes you feel.

BREATHE Do not underestimate the power of breathing. Diaphragmatic breathing also known as belly breathing is a technique that involves engaging your stomach, abdominal muscles and diaphragm when breathing. As little as a few minutes a day of diaphragmatic breathing is enough to allow your body to begin to relax when in

FIND THE CERTAINTY Life is full of uncertainties. Not knowing what is going to happen increases our sense of threat and therefore uncertainty is often central to our feelings of anxiety. When dealing with situations of uncertainty ask yourself “what do I already know” and “what is familiar to me”. By finding some certainty in the situation you will reduce your overall sense of threat.

Getting a handle on these practical techniques, even if taking just one small step today, can help improve your response to stress and help you to be more effective under pressure. We can’t always control incoming pressures but we can control how we respond to them. Happy resilience building.

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FEATURE

The hidden cost – Medicare’s Statutory Recovery Scheme SUZANNE PINYON, PARTNER, ANDERSONS SOLICITORS

INTRODUCTION For decades there has been a gradual erosion of an injured person’s entitlement to seek compensation through legislative changes and judicial judgments as well as a significant increase in the cost of pursuing a personal injury claim.

As a result of the significant cost incurred to pursue a claim to trial, the majority of personal injury claims settle by way of an out of court settlement.

Before settling a claim, personal injury lawyers need to ensure that all monies claimable by the injured party are included in the claim. This includes any monies which are repayable pursuant to a statutory recovery scheme such as the Medicare Compensation Recovery Program.

The Commonwealth Government, through the Health and Other Services (Compensation) Act 1995 (Cth) ("the Act") and the Medicare Compensation Recovery Program took effect on 1 January, 1996.

The Program, administered by Services Australia, imposes mandatory obligations on claimants and the compensation payers (notifiable party) with respect to monies owed to the Commonwealth which, in turn, impacts on the cost of pursuing the claim and the timely resolution of the claim.

There can be no objection in theory to the Commonwealth Government’s right of recovery in circumstances where there

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is a third party responsible for the damage suffered by the claimant and the claimant is entitled to compensation.

An injured party should not be allowed to “double dip” and the Recovery Program is intended to protect against double dipping and to ensure public money used in the treatment of a person’s injuries is recovered in circumstances where there is a compensation payer.

However, for many years, litigation lawyers have been questioning the cost of the Recovery Program and whether it is a worthwhile cost, given the mounting administrative costs and delays associated with the program and the ever-increasing delay and associated cost to the parties to litigation in complying with their statutory obligations.

THE COMMONWEALTH’S RIGHT TO RECOVERY The Commonwealth’s right of recovery for payments made to an injured party through Medicare arises from the Health and Other Services (Compensation) Act 1995 (Cth) ("the Act"). Section 32(1) of the Act mandates that if a Judgment or Settlement has been made a compensation payer/insurer must not pay the compensable person any part of the compensation before a Notice of Charge has been issued save and except:

a. If the timeframe for giving the Notice of Charge has expired (section 32(1) (a)). This expiry time is three months after Medicare receives notice of the Judgment or settlement (section 23(1) if no Notice of Past Benefits has been provided in the six months prior to the settlement or otherwise within 28 days after Medicare receives notice of the Judgment or settlement (section 24(4)); b. If Medicare has issued a Notice of Past Benefits during the six months before settlement and the insurer withholds an amount of compensation equal to the amount in that Notice (section 32(1) (b)).

Section 28 of the Act states that the compensation payer/insurer must pay the amount pursuant to a valid Notice of Charge within 28 days.

A Notice of Charge received from Medicare is valid for six months from the date of the Charge.

If a compensation payer is liable pursuant to a Notice of Charge to pay an amount to the Commonwealth in respect to compensation, the compensation payer must not pay any part of the compensation amount to the compensable person (section 32(2)) unless: a. The Commonwealth has been paid the amount in the Notice of Charge (section 32(2)(a)); or

FEATURE

b. 28 days has passed since the Notice of Charge was issued and the amount in that Notice is withheld from the compensable person.

If the compensable person receives a compensation payment from a compensation payer/insurer in contravention of the aforementioned provisions, the compensation payer/ insurer is not entitled to recover the amount from the compensable person.

If a Notice of Charge has been issued and the compensation payer or insurer fails to make payment to the Commonwealth within 28 days of the Notice, the amount is recoverable from the compensation payer or insurer and is recoverable as a debt to the Commonwealth.

The penalty for breach of the provisions by the compensation payer/ insurer is imprisonment for 12 months.

It can be seen from the aforementioned provisions that there is a stringent obligation on the part of the compensation payer/insurer to withhold payment of compensation until a valid Notice of Charge has been received and the amount specified in the Charge is paid to Medicare.

There is an option for the parties at settlement of a claim to agree to the payment of 10% of the total settlement funds to Medicare, referred to as an advance payment option.

Division 2A of the Act relates to advance payments. In summary, an advance payment which is equal to 10% of the compensation amount may be made where: a. A Notice of Charge has not been given in the past six months; b. Notice of Judgment or Settlement has been given under section 23; c. Notice of intention to make an advance payment has been given to the compensable person under section 33A; and d. The amount of compensation is $5,000.00 or more.

The payment of 10% discharges the compensation payer/insurer’s liability to the Commonwealth. If the amount specified in the Notice of Charge is less than the advance payment, the compensable person will be refunded this amount from the Commonwealth.

If the amount specified in the Notice of Charge is more than the advance payment, the compensable person will be liable to pay the difference to the Commonwealth within 28 days.

compensable injury are recovered and this includes making sure the full amount owed to Medicare is recovered from the compensation payer.

This is more of a challenge than you would expect and can add significant time and cost to the conduct of the claim.

Prior to COVID-19, there were already significant delays with the provision of documents from Medicare as well as numerous changes made to the forms required to be completed.

Obtaining a Notice of Charge from Medicare requires a client to complete a current Third Party Authority Form together with a Request for a Medicare History statement and declaration. All forms can be lodged electronically by sending an email to compensation. recovery@servicesaustralia.gov.au, however any correspondence from Medicare will be posted and they will not correspond by email or facsimile.

OBTAINING A NOTICE OF CHARGE FROM MEDICARE

Claimants are presently experiencing an approximate six-month delay in the provision of a Notice of Charge from Medicare. This is due to the current processing time required for Medicare to provide a History statement by post and

As personal injury lawyers, our aim is to maximise our client’s legal entitlements.

Part of this process is to ensure that all out of pocket expenses related to the

CURRENT DELAYS WITH PROVISION OF NOTICES OF PAST BENEFITS AND NOTICES OF CHARGE FROM MEDICARE

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FEATURE

for Medicare to process the completed statement and declaration and post a Notice of Charge to the claimant and the compensation payer.

The most recent directive from Medicare, issued in December 2021, states that Services Australia is continuing to try to process all compensation claims within three months of being advised by the notifiable party of a compensation claim reaching Judgment or Settlement or the notifiable party lodging an advance payment for that claim.

The current focus, due to the backlog, is for Medicare to register new cases and action new cases nearing Judgment or Settlement. For this reason, from December 2021 requests will no longer be processed in order of date received but will focus on: 1. Processing initial requests for History Statements and associated Notices of Past Benefits.

2. Any subsequent requests for History Statements and associated Notices of Past Benefits being processed only when the notifiable party has formally advised of a Judgment/Settlement or

the claim is within six weeks of a Trial or Mediation.

3. Other requests to process will now only be considered if exceptional circumstances apply.

Due to an ongoing delay in processing Notices of Charge following a 10% advance payment to Medicare, Medicare will reimburse the full 10% of the settlement monies to the claimant if a valid Notice of Charge is not determined within three months of Medicare being advised by the notifiable party of a compensation claim reaching settlement or the notifiable party lodging an advance payment for that claim.

However, this timeframe is dependent on Medicare receiving the correct forms which contain all of the necessary information and the information is consistent with previous information provided to Medicare with respect to the claim.

TIPS FOR ASSISTING WITH THE TIMELY PROVISION OF DOCUMENTS FROM MEDICARE 1. Ensure the current version of the forms are used, including the Third Party Authority to be signed by your client.

2. Ensure all fields are complete and contain all necessary information including complete addresses and the correct date of injury.

3. Ensure that all forms submitted are consistent and contain the same information such as the claimant’s contact details, date of birth, date of injury and date of settlement.

4. If your client has a MyGov account they can make a request for a History Statement directly through their account.

5. Following Settlement or Judgment, request a copy of correspondence from the notifiable party to Medicare including the documents relating to an advance payment and the Notice of Judgment or Settlement to ensure that the documents provide sufficient and correct information.

6. Ensure the History Statement and Declaration are inclusive of all pages even if no related services were identified and return to Medicare as one bundle.

The current delays with Medicare are resulting in most claims proceeding to a Mediation without a valid Notice of Charge

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FEATURE

and I am hopeful this will change with the new focus of Medicare to prioritise matters proceeding to Trial or Mediation.

Proceeding to settlement negotiations without a valid Notice of Charge risks a less than full recovery from the compensation payer of monies owing to Medicare.

There is no ability to negotiate with Medicare where the full amount has not been recovered from the compensation payer due to an allowance being made by the parties for the risks associated with proving liability and proceeding to trial. When a percentage is allocated for contributory negligence this can be included in the Notice of settlement and the Medicare Charge will be reduced by the percentage agreed for contributory negligence.

The situation has and continues to arise where substantial recovery is owed to Medicare in circumstances where the dispute on liability and the risk associated with trial results in a settlement proposal

which is less than the Notice of Charge or the Notice of Charge is a significant portion of the proposed settlement amount.

It is preferable to have a valid Notice of Charge at the time of negotiation and settlement. If you do not have a valid Notice of Charge at the time of negotiation but your client has completed an updated History Statement, include any additional amounts identified in the updated statement as related to the claim and provide a copy of the completed History Statement and declaration to the notifiable party.

In most cases, the items identified by the claimant as related to the claim are accepted by Medicare and a Notice of Charge is in accordance with what is identified by the claimant.

THE HIDDEN COST It is important to avoid the risk of double dipping and for compensation

payers to meet the costs associated with a compensable injury, however, at what cost?

The Medicare Recovery Program is really not intended to avoid double dipping as, prior to the introduction of this program, claimants did not seek to recover what was paid by Medicare as it was not a cost incurred by them. It is only since the introduction of this recovery program that it has become mandatory to recover the money on behalf of the Commonwealth. The real purpose of the recovery program is to, quite rightly, recoup monies for the Commonwealth which are recoverable from a third party. However, with the recovery to injured parties often being less than full recovery due to the cost, delay and risk of litigation and with the cost and delay associated with the administration of the recovery program, it is questionable as to whether the program is worthwhile for all concerned. B

Society raises concerns with Medicare processing delays

T

he Law Society has been in correspondence with Federal Senator and Minister for Government Services The Hon Linda Reynolds with regards to delays with Medicare processing and Issuing Claims History Statements and Notices of Past Benefits.

As referred to in the above article, claimants are obliged under the Health and Other Services (Compensation) Act 1995 (Cth) to refund the cost of accident-related compensation medical attendances to Medicare at the conclusion of a personal injury matter.

The Society’s correspondence followed

the instigation of the Queensland Law Society, with the Society endorsing the views set out in the Queensland Law Society’s earlier letter. The Society’s subsequent correspondence drew upon the collective experience of Members of the Accident Compensation Committee and noting the delays in Medicare providing a valid notice of charge in personal injury, MVA and workers’ compensation matters. The letter outlined how delayed settlement refunds have real and practical implications for claimants whose matters are significantly delayed.

In December, Members of the

Society’s Accident Compensation Committee came to understand that Medicare had no longer been issuing Claims History Statements in advance of a settlement. As a result, the Society wrote to the Senator again in December, noting the potential implications of this arrangement for plaintiffs in a range of claims where there may be a significant recovery.

The Senator subsequently wrote to the Society in January advising that requests for secondary Medicare History Statements would only be considered where exceptional circumstances apply. B March 2022 THE BULLETIN

21

RESTRICTIVE PRACTICES

DISENTANGLING THE LAWS OF CONSENT, GUARDIANSHIP AND RESTRICTIVE PRACTICES DR ESTHER ERLINGS, LECTURER, FLINDERS LAW SCHOOL AND DR LAURA GRENFELL, ASSOCIATE PROFESSOR IN LAW, ADELAIDE LAW SCHOOL

R

estricting the movement and liberty of a person without their consent is understood as contrary to the law - and could on occasion constitute unlawful detention. In care settings, such as disability care and residential aged care, differing means of restricting a person’s movement or liberty are known as restrictive practices (RP). The intrusive nature of most RP means their use normally requires the consent of the person to which they are applied. Where a person has impaired decision-making capacity and is subject to a guardianship order, the power to consent to RP is conferred on a substitute decision-maker; a private guardian (often a family member) or the Public Advocate (where no family member or friend is available/appropriate). But what if there is no guardianship order in place, whereas a person is deemed unable to provide valid consent to restrictive measures – can a family member informally consent? This is one of many questions raised by the use of RP in care settings.

In mid-2021, the definition of RPs in the residential aged care sector was finally aligned with the disability sector.1 This means that both sectors now understand RP as the following interventions: seclusion (confinement to a room where voluntary exit is prevented), chemical restraint (normally sedation), mechanical restraint

22 THE BULLETIN March 2022

(the use of devices such as bedrails), physical restraint (physical intervention) and environmental restraint (restrictions on a person’s free access to all parts of their environment).2 However, RP remain subject to interlocking federal and state laws, many of which lack adequate clarity regarding consent. This lack of clarity affects those who have, or may have, the power to consent to restrictive practices, as well as the providers of aged/disability care.

Under the relevant federal laws – the Aged Care Act 1997, the National Disability Insurance Scheme Act 2013 (NDIS) and their subordinate regulations – care providers must ensure that the use of RP is in accordance with an individual behaviour support plan (BSP). The BSP sets out the circumstances that may lead to a RP; whether the RP is a last resort after considering alternative strategies, the least restrictive and for the shortest period of time; and whether the RP is based on the informed consent of the care recipient and/or authorised in line with state/territory laws like those concerning guardianship. The federal schemes thus leave the detail of authorisation and consent to state/territory legislative schemes, such as SA’s Guardianship and Administration Act 1993 (GAA) and the Consent to Medical Treatment and Palliative Care Act 1995 (SA) (‘CMTPCA’).

Moreover, they operate alongside – and interact with – the common law of torts, in particular the trespass torts.

This article sets out recent legal developments relating to restrictions and RP in care settings and their implications.

It focuses on two SA cases, The Public Advocate v C, B3 (Public Advocate Case) on false imprisonment and Re KF; Re ZT; Re WD4 (‘KF Case’) concerned with RP more broadly.

The Public Advocate Case The Public Advocate Case concerned Mr C, a 95-year-old man with moderate dementia and impaired vision. The Public Advocate had been appointed as his guardian for the purposes of lifestyle and accommodation and, as such, arranged for him to reside in a locked Memory Support Unit. Given that Mr C could not leave this unit as he possessed neither the code nor a swipe card to unlock the keypad, the question arose whether his guardian should have applied for ‘special orders’ authorising detention under s 32 GAA, and whether, in their absence, the tort of false imprisonment arose.5 A preliminary issue was how to get Mr C and his case before the court, since being under guardianship meant that he had no legal capacity and therefore no standing. This was achieved via a successful writ of habeas corpus.6 On the

RESTRICTIVE PRACTICES

matter of whether the ordinary powers of guardianship covered accommodation in a locked ward (a form of de facto detention), the Full Court of the SA Supreme Court found that, following the insertion of s 32 ‘special orders’ into GAA, this was no longer the case.7 False imprisonment was also made out: the lack of s 32 orders removed the lawful justification of Mr C’s detention, and the severity of the restrictions placed on Mr C met the level required for establishment of the tort.8 Even though he was occasionally granted his liberty, when in the locked ward, Mr C could not leave, and on outings he was supervised and made to understand he was to return to the unit.

The Public Advocate Case’s result is that special orders now need to be applied for if the circumstances of s 32 GAA (directed living, detention or forced treatment) are being contemplated.

Neglecting to do so can have serious consequences for the guardian and the care facility. False imprisonment is actionable per se, and civil liability may therefore follow without evidence of specific damage.9 What is more, a care facility that detains its residents without a proper legal basis (ie a GAA s32 order) could lose its registration,10 and BSPs cannot be finalised without the necessary State authorisations, causing a risk of

penalties for failure to have final plans in place.11 Ensuring that legal rules are complied with is therefore crucial, but for that to happen, the rules must be clear and that is not necessarily the case.

SACAT’s approach to RP in Re KF The Public Advocate Case fundamentally changed the legal landscape of guardianship but also created a level of confusion. For example, some aged/ disability care providers worried that every restrictive practice would now need an appointed guardian with special court authorisation under s32 GAA. In mid-2019, Anglicare SA took a series of test cases to the South Australian Civil and Administrative Tribunal (SACAT), covering interventions including the use of a safety helmet, seatbelt lock and behaviour-controlling medication.

These cases were joined in the judgment of Re KF in which Senior Member Rugless conducted the task of disentangling and clarifying the law as it applies to South Australia. This was a formidable task, especially since, unlike jurisdictions like New South Wales, South Australia (SA) has not harmonised its guardianship law with the NDIS definition of RP, and both the Advance Care Directive Act 2013 (SA),12 and Consent to Medical Treatment legislation, the CMTPCA,

play into the mix. Part of the difficulty for SACAT was deciding which RP (1) could be approved under the CMTPCA’s “person responsible” scheme of substitute decision-making,13 (2) would require appointment of a guardian with simple powers,14 or (3) would further require special authorisation under s 32 of the GAA, and which practices were not regulated RP at all.

In coming to its conclusions, SACAT was motivated by allowing, as far as possible, for the current practice of informal consent by family members under the CMTPCA to continue to exist.15 It did so by adopting a very broad definition of “medical treatment”, which would cover most instances of chemical, environmental and mechanical restraint, deemed ‘less intrusive’ RP.16 The Tribunal considered that chemical restraint could form part of “physical therapy” (which includes the prescription or supply of drugs to improve comfort or quality of life),17 because “to influence or manage someone’s behaviour by the prescription of drugs may improve their comfort and quality of life”, especially in case of self-harming behaviours or behaviours exposing the person to risk.18 Mechanical and environmental restraint could fall under “healthcare”, interpreted as including “taking care of ” a condition.19 It was held that both medical treatment March 2022 THE BULLETIN

23

RESTRICTIVE PRACTICES

1. DIRECTION, DETENTION, 2. UNSUPERVISED FORCED TREATMENT ‘HEALTH CARE’

3. SUPERVISED ‘HEALTH 4. CHEMICAL RESTRAINT 5. SAFETY DEVICE CARE’ (‘PHYSICAL THERAPY’) (RESTRICTIVE)

6. S AFETY DEVICE (‘NON-BEHAVIOURAL’)

If: • seclusion, detention or the need for directed or enforceable decision-making, or • healthcare and medical treatment (including chemical, mechanical and environmental constraint) involving any type of physical restraint (use of force).

If: • RP (mechanical or environmental restraint) as part of health care, but no supervision by a medical/ health practitioner.

If: • RP (mechanical or environmental restraint) as part of Health Care under supervision of medical/ health practitioner.

Chemical restraint involves administration of medication and is always supervised by a medical/ health practitioner.

If: • a safety device is used for a behavioural purpose (‘to restrain… challenging behaviours’) and/or not for a therapeutic purpose, and • the practice restricts rights and freedom of movement.

If: • the primary purpose is for a non-behavioural purpose (to protect from injury), and • the device does not restrict rights or freedom of movement, and • no force is used in its employment.

Guardianship with special s 32 GAA powers/ court authorisation required.

If no s 32 GAA order, and elements of the tort are met, torts of false imprisonment or trespass may follow.

Guardianship covering ‘health’ required.

The order should set out the guardian’s role in making decisions about RP.

No need for guardianship; consent under CMTPCA possible.

No need for guardianship; consent under CMTPCA possible.* *Person charged with ongoing day to day supervision, care and wellbeing (ie the provider) cannot consent.

No need for guardianship; consent under CMTPCA possible (if used to ensure safety).

It is not a restrictive practice.

No consent laws apply.

and healthcare seek to promote “a person’s comfort, health or well-being”.20 They could therefore cover certain ‘less intrusive’ RP, even where these were aimed at modifying behaviour, since “to utilise any mechanical or environmental restraint, or the administration of drugs, in order to minimise challenging or distressing behaviours for a person with a mental incapacity, are all practices employed for the purpose of improving a person’s health, wellbeing, comfort and quality of life.”21 As part of medical treatment, it would be possible for a family member to consent to these practices as a “person responsible”, and no guardianship would have to be applied for, subject to there being supervision by a health practitioner and no physical restraint. If no health practitioner was available to supervise (which SACAT surmised would often be the case in disability care),22 a guardianship order would become necessary. The use of physical restraint would cause the practice to be

24 THE BULLETIN March 2022

regarded as treatment by force, and, like the RP of seclusion or directed detention, warrant a s 32 GAA order to not fall foul of guardianship law – and, by extension, the law of torts. A final important safeguard is that providers (who can otherwise be persons responsible) cannot legally consent to chemical restraint.23 As a result of Re KF’s approach, there is now a vast array of RP that can be authorised/consented to as part of “medical treatment” in SA, with guardianship and special orders only required in certain specific circumstances.

Additionally, Re KF clarified that where a safety device is employed, this only becomes a RP where it is specifically used to modify behaviour and restricts freedom.24 For example, a safety helmet that is voluntarily fitted and does not interfere with a person’s movement would not constitute a RP. This reduces the formality of the required processes, but at the same time it is arguable that removing

some RP from the ambit of regulation could weaken safeguards for protected persons. SACAT’s various findings create a patchwork of practices to which different rules apply, as demonstrated in the table below based on the KF Case.

Whilst the KF Case answered many questions, it raised many too. For example, the difference between the use of safety devices for a behavioural or non-behavioural purpose (5 and 6) is not always clear, especially when considering the requirements involved. What to make of bedrails, for example? They may be put in place for a primary safety purpose, but still restrict movement in some (but not all)25 cases. Would that make them a restrictive or a non-behavioural safety device (5 or 6)?

The suggestion that s 32 GAA powers are only needed in respect of healthcare where force (identified as physical restraint) is involved can also be questioned. It may be that, in some

RESTRICTIVE PRACTICES

cases, an order for detention is called for instead. In particular, it could be argued that exceptionally high levels of sedation effectively amount to detention and, without s 32 GAA orders, to false imprisonment. A 2021 SA coronial inquiry suggests that this is not a mere theoretical possibility,26 and equally raises questions around the alleged “less intrusive” nature of chemical restraint. In the inquest into Mr Beahl’s death, expert evidence was given ‘that although medications that Mr Beahl was prescribed were all within common clinical practice, he was on maximal doses’,27 leaving him sedated to the point of being unable to move (and, ultimately, hastening his death). In such situations, force may not need to be used if sedatives are presented together with painkillers, or a person is already under a level of sedation that makes it difficult for them to truly agitate. Yet, if a positive and deliberate act (chemical restraining) directly causes a person to be wholly confined to a certain area (their bed) without reasonable possibility to escape, this prima facie meets the requirements of false imprisonment.28 Future test cases may explore this issue further.

GOING FORWARD The Public Advocate Case is an important reminder to care facilities that detention, even if partial, must be lawful at all times.

Those managing care facilities may need to reconsider the use of locked units and doors with keypads where residents are effectively prevented from leaving – unless these residents are subject to a s32 GAA detention order.

In the KF case, by deciding that consent was to be principally determined under the CMTPCA scheme, SACAT took a pragmatic approach, which reduces the need for guardianship orders when certain, non-force, RP are used under the supervision of a medical/health practitioner. One risk is that this may lead to insufficient safeguards protecting those with impaired decision-making ability from overly intrusive RP like chemical restraints.

A family member can now informally consent to such RP under the CMTPCA, but advocates have warned that, in practice, this consent-model is sub-optimal because the substitute decision-maker may have little experience in this role and may feel under

pressure to consent.29 A senior practitioner model where an independent expert can authorise such RP may be preferable.

Since 2014, Australia’s disability sector has had a National Framework for Reducing and Eliminating the Use of RP; similarly, since 2015, the National Mental Health Commission has been ‘working towards the elimination’ of RP.30 Both question the therapeutic value of using RP, in particular physical, mechanical and chemical restraints and seclusion.31 By contrast, despite the findings of the Royal Commission into Aged Care on the ‘clear overuse’ of RP including physical and chemical restraint,32 the aged care sector has no national framework for eliminating RP. In going forward, it is time for SA and federal lawmakers to go further than tinkering with legislative schemes like the GAA and the Aged Care Act and to embark on some bold reform to strengthen the safeguards for those in care settings. B Endnotes 1 See ss54-9, 54-10 of the Aged Care Act 1997 (Cth) and the dictionary in Sch1. Previously the Aged Care Act referred to physical or chemical restraint but did not offer any definition. See the Quality of Care Principles 2014 (Cth) (‘QOCP’) Part4A. 2 NDIS (Restrictive Practices and Behaviour Support) Rules 2018 (Cth), Rule 6.

3 The Public Advocate v C, B (2019) 133 SASR 353. For a more detailed discussion, see Esther Erlings, ‘False Imprisonment in Locked Wards: The Public Advocate v C, B’ (2019) 21 Flinders Law Journal 109.

4 Re KF; Re ZT; Re WD [2019] SACAT 37 (21 August 2019).

5 False imprisonment requires an intentional, positive act that directly causes a person to be restricted to a certain area with no reasonable possibility of escape, and for which lawful justification or a valid defence is lacking: see White & Ors v SA (2010) 106 SASR 521. An order under s32 GAA would grant the lawful justification.

6 The Public Advocate Case, 369-70 [66] (Kourakis CJ).

7 Ibid 367 [56] (Kourakis CJ). Discussion of the law at [25]—[55].

8 Ibid 371 [72] (Kourakis CJ). Discussion of the law at [67]—[72].

9 Lewis v Australian Capital Territory (2020) 94 ALJR 740, 754 [45] (Gordon J). This does not mean that substantial damages automatically follow: see ibid 758 [72] for the difference between liability (actionable per se) and remedy (damages).

10 See NDIS (Provider Registration and Practice Standards) Rules 2018 (Cth) Sch4; QOCP Part4A; ‘Responsibilities of Approved Aged Care

Providers’, Australian Government, Department of Health (Web Page, 28 September 2021) <https:// www.health.gov.au/health-topics/aged-care/ providing-aged-care-services/responsibilities>.

11 See, eg, Aged Care Quality and Safety Commission, Regulation of Restrictive Practices and the Role of the Senior Practitioner, Restrictive Practices (Regulatory Bulletin RB 2021-13, Doc No FRMACC-0738, 28 June 2021) 11, 15.

12 The Advance Care Directives Act 2013 (SA) provides for substitute decision-making and the CMTPCA cross-references this act (as well as the GAA) with respect to consent for persons lacking capacity.

13 CMTPCA Part2A (ss14-14D).

14 Under s29 of the GAA. 15 Re KF [16]-[26]; [82].

16 Ibid [77].

17 CMTPCA s4(1).

18 Re KF [98].

19 S14(1) CMTPCA; ibid [100].

20 Re KF [105].

21 Ibid [106]-[107].

22 By contrast, aged care facilities are generally staffed with registered nurses and other health professionals. See ibid [127].

23 CMTPC Regulations 2014 (SA) Reg5(b).

24 See Re KF Attachment 2 ‘Application 2019/ SC002640 regarding KF’ [13]-[16]; Attachment 3 ‘Application 2014/SC9128923 regarding WD’ [16]-[20].

25 Where bedrails effectively have the result of aiding a person’s movement (for example because they cannot sit up without them), it now seems like SA will follow NSW precedent (VZM [2020] NSWCATGD 25 (3 August 2020)) in holding that in such a case there is no RP at hand.

26 Inquest Into the Death of Raymond Saxon Beahl (Coroner’s Court of SA, Coroner Whittle, 23 November 2021).

27 Ibid [7.3].

28 See Hart v Herron [1984] Aust Torts Reports 80-201 cited in Herron v HarperCollins Publishers Australia P/L (No 3) [2020] FCA 1687 (25 November 2020) on false imprisonment caused by sedative drugs; Loretta A Donnelly-Moreno, Timby’s Fundamental Nursing Skills and Concepts (Wolters Kluwer, 12th ed, 2020) 38.

29 Office of the Public Advocate (Qld), Reform Options Paper, 5 October 2021, p3.

30 Australian Government, Department of Social Services (Web Page, 3 February 2022) <https://www.dss.gov.au/our-responsibilities/ disability-and-carers/publications-articles/policyresearch/national-framework-for-reducing-andeliminating-the-use-of-restrictive-practices-inthe-disability-service-sector>.

31 Australian Government, National Mental Health Commission (Web Page, 3 February 2022) <https://www.mentalhealthcommission.gov. au/news/2015/may/seclusion-and-restraintposition-paper-released>; A Case for Change: Position Paper on Seclusion, Restraint and Restrictive Practices in Mental Health Services (May 2015).

32 Commonwealth, RCAC, Final Report: Care, Dignity and Respect Vol 2 (2021) 143, 148, 162-4.

March 2022 THE BULLETIN

25

ORAL HISTORIES

Government clashes impact presidency LINDY MCNAMARA

D

ealing with the fallout from the Magarey Farlam defalcation and a fractious relationship between the Law Society and the State Government made for interesting times during John Goldberg’s presidency in 2008.

During an oral history interview with the Law Society, Mr Goldberg spoke candidly about his time as president and the clashes that occurred between the Society and various members of the sitting Labor Government, some whom he described as having an “immense dislike” for lawyers.

“I suppose the main issue for the Society (during my presidency) was its relationship with the Government, and I’m not sure that that was a particularly significant issue in the sense that it affected either the working of the Society or the profession, but we all viewed it as undesirable…we didn’t have a good relationship with the government,” he said.

“The Attorney-General was Mick Atkinson, and the Premier was Mike Rann, and Mike Rann for some reason which I never got to the bottom of had an immense dislike for lawyers, even though some of his friends, and certainly some of his fellow parliamentarians - and even people in cabinet - were lawyers, but he didn’t like lawyers. He didn’t like lawyers and whenever he got the opportunity he had a go at them. And in fact, I was told whenever he was having a politically hard time he’d call a press conference and have a blast at lawyers, just to divert attention.

“The Attorney-General, Mick Atkinson, was quite different: he had a law degree but he’d never practised law, he’d gone straight into the union movement.

He was a very eccentric fellow, quite smart and a number of my fellow lawyers (a

26 THE BULLETIN March 2022

small number) got on very well with him.

But he tended to fight with most people, and I think that was his default setting.”

Despite the disharmony, Mr Goldberg said the Law Society continued to make submissions “but with some very interesting results”.

“Depending on the Minister, sometimes they were well received, and often the Law Society gave the Government (and the Opposition) information that they would never have got from anywhere else, and obviously it involved quite senior lawyers devoting a lot of their free time to helping get good policy rather than bad policy. So it wasn’t even political in some cases, it was just proper legal analysis.

“But as for dealings with the AttorneyGeneral, I remember on one occasion we had received a pile of amendments to the Legal Practitioners Regulations, and we said ‘three of the amendments are okay, we’re happy with those, but there are another 10 amendments (I’m guessing the numbers now) that shouldn’t be adopted’ and we gave detailed reasons. So he immediately adopted the 10 that we had objected to and didn’t adopt the three that we’d approved!”

The aftermath of the Magarey Farlam defalcation also featured prominently in his 12 months leading the Society.

“It just engendered quite a lot of bad publicity, which was very difficult to fight because it didn’t matter how you responded; in fact, we said ‘look, we have acted precisely according to the legislation, and if we have not done things it’s because the legislation didn’t allow us to do it’, and the retort we got from the media was ‘yes, but you’re responsible, because at the time that the legislation was introduced the

John Goldberg

Law Society was canvassed about it and approved it’.

“So whatever happened, we couldn’t win. I think in the circumstances we were probably better off keeping our heads down and just dealing with the issue, and ultimately, getting the full payout to the victims.

“I did chair a committee that looked at the aftermath of that and proposed some changes to practices to try and avoid a recurrence. Having said that, there is no way to completely avoid fraud.

No-one has invented a system that will do that yet.”

Admitted to practise in 1971 and running a small practice for the first 27 years, Mr Goldberg said he first became actively involved with the Law Society when he joined the Professional Indemnity Insurance Committee in 1993.

“Apart from being a Member, I’d had virtually nothing to do with the Law Society up until that time and probably for good reason because I had a busy

ORAL HISTORIES

small practice and I really just didn’t have the time. But I was asked to go on that committee, I’m not sure by whom now, it might have been Allan Hunter, and that was really my first real engagement with the Law Society.

“That committee eventually morphed into Lawguard Management as a result of a report prepared by Tim Anderson QC and I survived the transition... I stayed on Lawguard Management as a director for quite a long time.”

After serving on the Law Society’s Council for some years he was elected to the Executive in 2004, taking on the role of president in 2008. He sat on several committees, believing the Ethics Committee was the “most interesting”.

Reflecting on the profession today, the 2012 Brian Withers Award recipient said an ongoing “bad” aspect was the cost of and delay in litigation.

“Litigation used to be fairly inexpensive and quick. The Supreme Court did most of the civil trials and there was the local court, which was magistrates.

The District Court had only just got going when I started and it was restricted to minor financial matters; there was no Federal Court.

“But a lot of litigation - most civil litigation - was in the Supreme Court, and a long trial was three days, and a large discovery was 100 documents, and you could actually have disputes resolved quite quickly by a judge. I think back then mediation had not been heard of. Negotiation, which is hardly ever mentioned nowadays, was how you settled most disputes. I think it probably still is.

“There are a number of downsides to the fact that litigation has now become colossally expensive, time consuming, etc.

One is that disputes rarely get resolved by a judgment; that is very much the exception rather than the rule now.

“And we talk about mediation, but the problem with mediation is it doesn’t always lead to a just outcome, particularly if one party is much more financially powerful than another, and despite the fact that good mediators aim for a just outcome, if you’ve got a financially powerful person attending a mediation, they don’t have to settle, and they can say ‘no, we’ll go to trial’, and the less powerful person will realise that they won’t be able to afford it, and so they settle. And then everyone says ‘this demonstrates the benefit of mediation, it’s settled’. Not necessarily.

“It might be a triumph for the power of money over poverty, whereas an independent judge can impose an outcome and the parties are bound by it. If you can afford it a judgment can lead to a more just outcome. This is a personal point of view, but I think that that is a downside of the high cost of litigation.

“The other downside of so few cases going to trial is you’ve got these highly qualified judges who are not writing judgments anymore, and you’ve got a lot of barristers who get hardly any trial work. But I’m not sure what the solution is, because litigation is never going to be cheap again; it’s not going to happen.

And despite fast-tracking and simplifying, we just have this deeply entrenched procedure now, which of course has spread to arbitration as well, where it’s time consuming and expensive. So that’s changed quite dramatically.”

Mr Goldberg said on the positive side, legal research was so much easier today.

“I can remember - and this would amaze junior lawyers - you wouldn’t think

of, say, looking up the Local Government Act as legal research, would you, you’d turn to AustLII or one of the online services and you’d look at the Act and find what you’re looking for. Not in the past.

“You’d get out the last consolidation of the Local Government Act, which might be 15 years out of date, and then you would have to look at 20 separate amendments to make sure that you were looking at the correct legislation. And if you were in a firm that had people that were able to do this, they would have literally cut and pasted the amendments into the original reprint, which would mean that there were these bits of paper all over the place, and it would be almost indecipherable but at least you would say ‘this is a consolidation of sorts’.

“There were no loose-leaf publications, so there was nothing that was kept up to date, it was only ever hard cover editions that might be updated on occasions, but there were some things that were not done at all.

“So, for example, we had no Australian textbook on the Supreme Court Rules, so if you wanted to look at judicial interpretation of the Supreme Court Rules you had to go to the English textbook and then cross reference that to all the Australian cases. So even an argument on the Supreme Court Rules might take a full day to prepare, instead of looking up something in five minutes; it was extraordinarily labour intensive compared with now.”

To read more about Mr Goldberg’s service to the Law Society and early years in the law – including acting as counsel for Tim Marcus Clark in the State Bank Royal Commission – go to www.lawsocietysa.asn.au. B March 2022 THE BULLETIN

27

DISPUTE RESOLUTION

COMING TO AN AGREEMENT: A MATHEMATICAL APPROACH TO SETTLING DISPUTES BERNARD O’BRIEN

INTRODUCTION

S

ince the early 1960s there has emerged amongst both academic lawyers and economists an ever-growing interest in the study of law and economics. This has now become such an amorphous and diverse field of academic interest that there are encyclopedias on law and economics. It has also become an intellectual discipline in its own right. So much so that it has readily spread across that great divide between the common law and the civil law traditions.

Whilst much of the scholarship in this area is essentially of theoretical interest only with no immediately foreseeable practical applications there are some areas where that is not quite true. One of those areas is what I would call “Settlement Theory”.

This is a formal theory about the way litigants and their legal advisers settle disputes.

What is sought to be developed in this endeavour is what is called a formal system. A formal system is a system of logic built on axioms or assumptions from which theorems or conclusions are derived by the application of a rigorous process of reasoning. Whilst this can be very mathematical, it doesn’t always need to be and in fact there are some outstanding examples which are devoid altogether of both numbers and mathematical symbols.

A famous example of which is Ronald Coase’s article on “The Problem of Social Cost”.1 For this work and others he was awarded the Nobel Prize in 1991.

That article contains no equations at all but makes copious reference to some 19th century English cases in actions in nuisance. From that article is derived the now famous Coase Theorem one formulation of which states: “…that if trade in an externality is possible

28 THE BULLETIN March 2022

and there are sufficiently low transaction costs, bargaining will lead to a Pareto efficient outcome regardless of the initial allocation of property”2 Essentially the same methodology is adopted when analysing how the parties to a dispute would arrive at a settlement.3 In the first instance the analysis shows that there is what is called the basic model.4 Whilst this model represents a very good place to start, however, its effectiveness in terms of modelling the real world is limited by the assumptions upon which it relies. Initially the model proceeds as an application of Decision Theory but it quickly becomes an analysis in Games Theory.5 Settlements in both criminal and civil matters are so pervasive that if a matter goes to trial that is seen as a failure. Why did the settlement process fail to resolve the dispute? That is a question which would be posed by those responsible for the administration of the court caseload, it is not the first question a practitioner would ask. A practitioner would ask what can this analysis tell me about how I can get the best result for my client? This paper will look at this area of study principally from that point of view. In doing so I will put to one side settlements in crime and personal injuries and focus exclusively on commercial litigation.

THE BASIC MODEL As we all know the overwhelming majority of cases settle before a trial is concluded. The question is how is the decision to settle arrived at? There is a branch of mathematics which is formally known as decision theory which analyses decisions which involve risk. The mathematics involved in decision theory is quite simple and straight-forward. It can

best be explained by taking, as an example, a simple piece of litigation. P sues D for breach of contract and is seeking $100,000 in damages. We will assume that from the commencement of the action to judgment solicitor/client costs will be $40,0006 and taxed costs will be $30,000. We will also assume, again for the sake of simplicity, that solicitor/client costs and taxed costs will be the same for both P and D. It is far from certain that P will win, however we can derive an estimate of P’s chances of success. Let us assume that P’s chances of success are 60%, we can now analyse the nature of the decision which P faces by the use of the following diagram.

FIGURE 1: 0.6

0.4

100,000 -40,000 30,000 90,000 -40,000 -30,000 -70,000

Expected Value of the Ligitation for P:

54,000

-28,000 26,000

If P wins, he will get $100,000 in damages, he will have paid $40,000 in solicitor/client costs and will be paid in taxed costs $30,000. That information is set out at the top diagram. Therefore, if he wins, he will be paid a total of $90,000 and he has a 60% chance of that happening which is therefore 0.6 x 90,000 = 54,000.

If he loses, he will have paid $40,000 and will have to pay a further $30,000 in taxed costs, which gives a total of $70,000, which has a 40% probability of occurring, thus 0.4 x -70,000 = -28,000.

DISPUTE RESOLUTION

The expected value of the litigation to P is the sum of those two products namely $54,000 +(-28,000) = 26,000. If we now undertake the same analysis in relation to D then we obtain the following diagram:

FIGURE 2: 0.6

0.4

100,000 -40,000 -30,000 -170,000 -40,000 30,000 -10,000

Expected Value of the Ligitation for D:

-102,000

-4,000 -106,000

Equation 1

Equation 2

If we add both Equations 1 and 2 together in order to arrive at the joint expected value of the litigation then that net amount is -2S, namely double the parties’ individual solicitor/client costs.

Ed + Ep = -2S

Undertaking exactly the same approach for D, as we did in respect of P, results in a very different outcome. Instead of it being an expected value for D of $-26,000, we have an expected value for D of -$106,000. Whilst the use of actual numbers is useful it is more revealing to examine the problem algebraically.

Let: Vp be the expected value of the litigation to P; Vd be the expected value of the litigation to D; J be the judgment sum (in the example $100,000); S be solicitor/client costs (e.g. $40,000); C be the taxed costs (e.g. $30,000); p is the probability of P winning; and (1 – p) is the probability of D winning.

The expected value of the litigation to P is: Ep = p(J + C - S) + [(1 – p)( - C - S)] Ep = pJ + pC – pS - C – S + pC + pS Ep = pJ + 2pC – C – S = $26,000

The expected value of the litigation to D is: Ed = p(- J - C - S) + [(1 – p)(C - S)] Ed = - pJ - pC – pS + C – S - pC + pS Ed = C – S – pJ – 2pC = - $106,000

Equation 3

And (Ed + S) + (Ep +S) = 0

Equation 4

Thus, from the collective perspective of the parties, the litigation is a negative sum game with the only winners being the lawyers. Obviously once litigation is viewed in this light the most sensible course for the parties to take is to resolve the dispute and bring the litigation to an end. For the purposes of this analysis I will assume that both parties are risk neutral, that is they are neither gamblers nor unusually timid little souls. Whilst they are prepared to take a risk, they will only take risks when are sensible and prudent.

Equations 1 and 2 set out the expected value of the litigation to P and D respectively. That is to say that if the matter goes to trial then P has an expectation which is valued at $26,000 and similarly D has an expectation of being out of pocket to the tune of $106,000.

Thus, if D was offered a settlement by paying any amount greater than $106,000 then he would refuse, assuming that he was both rational and risk neutral.

Similarly, P would refuse any offer which was less than $26,000 for the same reason.

In each case the offer would fall short of the respective parties’ expected value of the litigation. Therefore, if this matter is going to settle the settlement offers will have to come within the difference between the expected value of the litigation to both P and D. In other words, the only settlement offers which will resolve the dispute are those that come within the -2S range or in the case of this illustration $80,000, that is from $26,000 to $106,000. This range is sometimes called the Settlement Range and sometimes called the Surplus. For the purposes of this paper I will adopt the term Surplus.

In short, any offer greater than D paying P $26,000 and not more than D paying P $106,000 is better for both parties than if they went to trial. If they were to settle for say $66,000 then P gives up a claim worth $26,000 and gets an additional $40,000.

Whereas D escapes a potential liability of $106,000 and incurs a cost of $66,000, thus, in theory, saving $40,000. Note that that $40,000 each is the equivalent of the saving which each party makes by settling and therefore not having to pay their respective lawyers. An “all in” settlement of $66,000 satisfies Equation 4 above.

Indeed, it is the only amount which will satisfy Equation 4.

One may well object to the fact that this dual saving of $40,000 each is somewhat illusory in that it rests entirely on a speculative scenario as to what would happen if the matter did not settle and instead went to trial. The expected value of the litigation if it went to trial is necessarily hypothetical. Obviously if P is offered $26,001 in settlement, she would not be persuaded that by accepting such an offer she would be better off by a dollar than if March 2022 THE BULLETIN

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she were to go to trial. Similarly, an offer of $105,999 made to D would not persuade him that this constituted an improvement in his position. However, the midpoint between these two expected values will ordinarily maximise the likelihood that both parties are better off by settling at that midpoint than if they went to trial.

STRATEGIES IN HOW TO DIVIDE THE SURPLUS The Surplus could in theory be divided in a variety of different ways. However, there is a certain intuitive appeal in simply splitting it down the middle, it is certainly the most equitable division, but it is ultimately a matter of negotiations between the parties and there is no guarantee that the concepts of fairness will drive those negotiations. One would have thought that the parties’ respective attitudes to risk would potentially play a critical role. Thus, if one party was risk averse and the other was either a risk taker or was risk neutral then that would shift the point of division in favour of the latter. In addition to attitudes to risk there is also the assessment of risk. Up to now I have assumed that the parties agree on the measurement of risk, namely that P has a 60% chance of success and conversely D’s prospects of success are 40%. If the parties disagreed on the extent of the risk which each were exposed to then that would add another dimension to the difficulty in arriving at a compromise.

In Table 1 below I have set out the variation in what is a fair settlement given different assessments of the risk: Thus, if P put her chances at 70% a fair settlement to her would be $82,000, whereas if D’s estimate of P’s chances

of success was say 50% then he would assess a fair settlement at $50,000. This of course assumes that both parties are not only fair but are also risk neutral. If, however, they are both risk takers and also refuse to be fair, that is refuse to split the Surplus down the middle, then if they were also both optimistic about their chances of success they would end up “hopelessly apart”. Thus, ideally for a matter to settle both parties have to be realistic, risk neutral and fair, unless of course optimism is matched by pessimism, risk taking is matched by risk aversion and feelings of over-entitlement are matched by feelings of being undeserving. We could describe this combination as a hawk-dove confrontation in which the hawk will always be significantly better off than the dove and, as a consequence, every litigator will be a hawk and hence the game will be transformed into a hawk against hawk contest in which relatively few matters will settle. For that reason, a perpetuation of hawk against hawk contests would not be sustainable. Of course, if one’s opponent is a dove then it would obviously profit the other party to play the role of a hawk. However, assuming both parties are represented by experienced litigators one would not expect that there would be that many hawk-dove contests.

A hawk against hawk contest is the best combination if one wants to prolong the dispute and maximise the costs arising out of it. A hawk against hawk contest takes a bad situation and only makes it worse.

It needs to be remembered that litigation is a negative sum game. Given that it is a negative sum game the best one can do, all else being equal, is to get out of it sooner rather than later. Consequently, a hawk is not an ideal litigator any more than

TABLE 1: P’s Chances of Success 0.8 0.7 0.6 0.5 0.4 0.3 0.2

Fair Settlement 98,000 82,000 66,000 50,000 34,000 18,000 2,000

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P’s Expected Value 58,000 42,000 26,000 10,000 -6,000 -22,000 -38,000

D’s Expected Value -138,000 -122,000 -106,000 -90,000 -74,000 -58,000 -42,000

is a dove. The obvious choice is therefore something in between in which the parties search for common ground. I will call this the owl strategy. The owl begins by first determining what is at stake, namely undertakes an assessment of damages and costs and the respective parties’ chances of success. In order to undertake those evaluations both the lawyers and the parties need to familiarise themselves with the case which usually takes time and money.

In addition, usually the parties have to move on from a relentless desire to see justice being done to a more pragmatic appreciation of the costs and the risks which litigation invariably entail. In short, the parties will typically need to arrive at least at a point of indifference between wanting the case to go on and wanting the case to settle. All of which takes both time and money. If, having arrived at that point of indifference, the parties share a common assessment of costs, damages and their respective chances of success then the matter ought to be ripe for settlement. The most likely point of settlement is the one that is perceived by both parties as being fair, namely one which splits the Surplus down the middle. A settlement which both parties, with some equanimity, can walk away from. The “all in figure” is therefore arrived at by simply adding S to both P and D’s expected value of the litigation and if one adds those two sums together one arrives at zero, which is Equation 4.

Thus, what began as a negative sum game becomes a zero sum game and by moving from a negative sum game to a zero sum game both parties are better off.

Such an outcome is fine if both parties will, in the end, want to cooperate and settle upon an objectively fair division.

However what if one of the parties had no interest in being fair all that he wanted was to take as large a share of the Surplus as he can get. How would he do that?

One possibility is that he could play the role of the proposer in what is called the Ultimatum Game.

In an ultimatum game there are two players a proposer and a responder.

The proposer is given, for want of a better word, an endowment of some description. Let us say $100. The proposer must share the endowment with the responder however the proposer gets to

DISPUTE RESOLUTION

determine the allocation of the shares.

So, for example, the proposer may offer $1 to the responder and retain $99 for himself, or he may offer to split the pie with the responder evenly, a 50:50 split or somewhere in between. However, that is not the end of the matter; before any division of the endowment can take place the responder must accept the proposer’s offer. If she rejects the offer then neither party gets anything. There is no opportunity for the responder to reject the proposed offer and to come back with a counter-offer. Likewise, the proposer cannot put a second offer if the first is rejected. Either the responder accepts the offer and goes away with something in her pocket or rejects the offer and both parties walk away empty handed. It is a take it or leave it situation.

This game has been studied in an experimental setting, typically employing university students as subjects, around the world for decades. A meta-analysis of the published literature shows that typically the proposer offers on average a 60:40 split in favour of the proposer and around 16% of offers are rejected.7 Obviously such an outcome does not sit comfortably with the assumption of homo economicus namely that in their economic dealings with others people are essentially rational self-maximisers of their utilities. That is a fundamental axiom of neo-classical economics. However, all is not lost. When the proposer was given $100, he was actually given that sum of money and it was to be shared between himself and the responder, as per an agreed split. Otherwise it was forfeited if there was no agreed split. Carrying out this experiment using university students in advanced industrial economies imposed a practical limit on the size of the endowment. If the amount of the endowment was not $100 but rather $1 million would an offer of a 1% share (i.e. $10,000) be so readily rejected? Given the limits on the availability of research funds it was decided to conduct the experiments using villagers drawn from 8 rural villages in India where the endowments ranged from 20 rupees to 20,000 rupees (1.6 hours of work to 1,600 hours of work).8 Thus there was a sufficient variation in the size of the pie in order to see what impact its size had on the rejection rate.

As the size of the stake increased there was an exponential decay in the rejection rate. It went from 40% when the size of the pie was around the equivalent of one hour of work to zero when the amount involved reached the equivalent of 100 hours of work.9 Hence when the stakes are low there is a lot of enthusiasm for fairness and cooperation, however as the stakes increase naked self-interest becomes the horse to beat.11 In litigation, so far as the parties are concerned, the stakes are nearly always very high. However, as is superficially obvious, negotiations to resolve a litigious dispute is not an ultimatum game. The parties are not assigned roles, such as proposer and responder, and negotiations are not confined to a single round which concludes with a take it or leave it offer.

Nonetheless, one or both the parties can attempt to turn negotiations into an ultimatum game. A party who plays the role of a hawk would: • Always plays hard ball, • At every opportunity treat the other side’s case with contempt, • Issue orders as to the procedural steps which the other party must take, as if he was a Master of the Court, • Never miss an opportunity to be bloody-minded, and unpredictable.

If the other side is a dove then the hawk, by doing the above, is able to define the nature of the game and to assume the role of the proposer. When the hawk makes a proposal, he states emphatically that this is his client’s first and only offer and thus he attempts to define the negotiations as an ultimatum game in which he, without a by your leave, has assumed the role of the proposer and conversely this leaves the dove as a responder in a high stakes ultimatum game. If the offer is significantly better than that party’s expected value of the litigation, even though the offer gives the lion’s share of the Surplus to the hawk, the dove will, if persuaded that this is an ultimatum game, feel that she has no choice but to take the offer. However, once one realises that this is not an ultimatum game and there is no reason why any offer made by either party will be final, there is therefore no reason why the hawk would not come back with a better

offer if the first offer was rejected, so long as any subsequent offer left the hawk better off than if he went to trial.

Let us suppose in the first round of negotiations D offers as an “all in” settlement Ep + Q1S where Q1is equal to 0.2. In other words, he offers an 80:20 split in his favour. It is an offer which is not so small that it can be dismissed with contempt and if P is a dove then P would be under a lot pressure to accept, even though it is palpably an unfair offer.

FIGURE 3: Ep + Q2S p

Reject 1-p Ep

Accept Ep + Q1S

Figure 3 sets out P’s options. She can either accept the offer the value of which is Ep + Q1S or reject the offer in the hope or expectation that a better offer is sitting in the wings, namely p(Ep + Q2S) + Ep(1 – p), p is the probability that a further offer will be made and Q2 is P’s proposed share of the Surplus. Thus, P’s point of indifference (i.e. the point where P’s expected value of acceptance is equal to P’s expected value of rejection) is: p(Ep + Q2S) + Ep(1 – p) = Ep + Q1S or pEp + pQ2S + Ep – pEp = Ep + Q1S

Equation 5

From the above it follows that p = Q1/Q2 at the point of indifference. Thus if P, for example, is hoping that D will come back with an offer of a 50:50 split then if P estimates that the probability of D making such an offer is 40% or less then the expected value of rejecting D’s original offer is no better than the actual March 2022 THE BULLETIN

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value of accepting that offer. In which case, it may be thought, that P should accept the original offer unless P is a risk-taker or wants to stand on her pride.

Nevertheless, there is more to the analysis than just that. As one can see D’s offer puts P in something of a pickle, however if P rejects D’s original offer and makes a counter-offer of a 50:50 split that would put him in a pickle as well. He is now the one facing a take it or leave it offer. The position which P presents to D is that either he accepts P’s offer or they will see each other in court. D is thus faced with four choices: • Insist on an 80:20 split and if necessary, go to trial, • Make a further offer of a 70:30 split, • Make a further offer of a 60:40 split, or • Accept a 50:50 split.

Of those four choices in reality there are only two that are feasible. If D proposes either a 70:30 split or a 60:40 split he is signaling to P that his previous take it all leave offer was just a bluff and that would only encourage P to hold out for a 50:50 split. Therefore, D’s choices in reality are either to accept P’s offer or to insist on an 80:20 split. In fact, D’s decision-tree will look essentially the same as was P’s in Figure 3. See Figure 4 below:

FIGURE 4: Ep + Q1S p

Reject 1-p Ed

Accept Ep + Q2S

At D’s point of indifference, the following equation holds: p(Ed + Q1S) + Ed(1 – p) = Ed + Q2S

Equation 6 From which it follows that p = Q2/

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Q1. It will be recalled that Q2 equals 50% and Q1 equals 80% therefore p = 0.625.

In other words, unless the probability of P accepting D’s original offer of an 80:20 split is greater than 62.5% then P’s counter-offer of a 50:50 split has the same or better expected value for D than the hope that P will in the end accept an 80:20 split. Furthermore, if D doesn’t accept P’s offer then the situation will become a Mexican standoff and negotiations will be stalemated, meanwhile as each party continues paying their respective solicitors S gets smaller and smaller.11 While this is a case of who blinks first, P is the one who is making a fair offer and D is the one who is seeking to profit from an unfair offer (although this would not be readily apparent to the casual observer) and for the reasons set out below, as a matter of principle, the parties should always adopt an even split of the Surplus.

If these negotiations were taking place on day one of the dispute, we would be looking at J = $100,000, C = $30,000 and S = $40,000. Whilst the values of J and C, assuming that the original calculations were accurate, will remain constant throughout the course of the litigation up to the time of judgment, however that is not true of S. S is the solicitor/client costs as will be incurred in the future. S does not include solicitor/costs which have already been paid or incurred in the past. This significantly effects the extent to which the parties are apart. If the offer of an 80:20 split was made by D on day one then it would come to an amount of $42,000 and P’s counter-offer of a 50:50 split would come to $66,000. Thus, they would be $24,000 apart. If those same offers were made half-way through the case when each party had spent $20,000 on their solicitors then they would only be $12,000 apart.

It will be recalled that Equation (1) is: Ep = pJ + 2pC – C – S; and Equation (2) is: Ed = C – S – pJ – 2pC. If there is a 50:50 split that is the equivalent of adding S to both equations. Equation (1) therefore has the value of Ep = pJ + 2pC – C = $66,000 and Equation (2) has the value of Ed = C - pJ - 2pC = -$66,000. A symmetrical split has the effect of removing the Surplus from the calculations, whereas an asymmetrical split retains the Surplus. Thus as time

passes and more and more money is spent on the lawyers and the experts in which case an asymmetrical offer will, with the progressive payment of legal costs, approach a symmetrical offer and if the only point of difference between the parties is whether the split should be symmetrical or asymmetrical then it is definitely the case that the only winner is the lawyers and the experts. If on day one all that separated the parties was the terms on which the Surplus was to be split, D wanting 80:20 and P wanting 50:50, which lead to a difference in offers of $24,000, a gap too large to bridge, but after each party has spent $20,000 in legal costs we have halved the gap which is no longer too large to bridge then all that has been achieved is that an extra $40,000 has been spent on lawyers and other experts and the parties are commensurately worse off.

All of this would have been avoided had the parties from the outset adopted the principle of a 50:50 split of the Surplus.

SOME BRIEF OBSERVATIONS The key to understanding and applying a games theoretic approach to settlement negotiations is to look at the whole picture and, in particular, to look at the position from both parties’ points of view and not to solely focus on one’s own position.

One may be in a quandary but then one’s opponent may also be in quandary, which may or may not be as bad as one’s own position. Also, another important lesson to be drawn here is the fact that one should not be terrified of taking risks when reason and common sense tells one that these are risks worth taking. In short don’t be a dove. Similarly, it is far from obvious that there is any advantage in being a hawk and there is a very real risk that by adopting such a role one may only achieve lining the pockets of the legal profession.

At the end of the day litigious negotiations have a centre of gravity and that is a fair division of the pie. Not only is litigation a negative sum game but once it commences the parties lose control over their destiny insofar as their destiny is determined or shaped by the litigation. Apart from taking the matter through to a trial and judgment the only way for the parties to win back that loss of control is to cooperate with each other

DISPUTE RESOLUTION

and ordinarily that can only be achieved through each treating the other fairly.

The desire to be in control of one’s own destiny is a very powerful magnet which draws parties into being cooperative and therefore into settling their disputes fairly.

In adopting these three categories, the hawk, the owl and the dove may be seen by many as an over-simplification.

Human beings are not so easily defined, they are much more subtle and nuanced with no two people being exactly the same. None of which can be denied, however the intention here is to identify different points on a spectrum which at one end there is an extreme version of the hawk strategy and at the other there is an extreme version of a dove strategy, with the centre being occupied by the owl. Essentially the hawk, the owl and the dove are conceptual models with each sufficiently delineated from the others to separate out three quite different strategies. The significance of which is to demonstrate that whilst an even division of the pie is the centre of gravity in respect of the negotiating process that point, however, is not set in stone. The point at which a dispute ultimately resolves is a matter which can be substantially affected by strategy, particularly in those cases where one of the parties/players adopts a bad strategy, such as being a dove.

Thus, so long as neither party is adopting a bad strategy the process of negotiations ought to arrive at a good approximation to a fair division of the pie. It will be recalled that the centre of gravity in the example is S + Ep (i.e. $66,000), in the case of P, and S + Ed (i.e. -$66,000), in the case of D. A properly informed intuition would ordinarily regard any offer which was substantially outside the range of $55k to $70k as not being acceptable to the party disadvantaged by that offer. In which case the offer would be refused leaving the offeror with the choice of going to trial the expected value of which would be less advantageous than to settle somewhere between $55k and $70k. Hence, so long as that range is more attractive to both parties than going to trial then in the majority of cases the matter ought to settle at some point within the range constituted by the Surplus.

Up to this point it has been tacitly

assumed that the parties’ involvement in litigation is a one off or that it is only on rare occasions in which the parties find themselves involved in litigation. That of course overlooks those parties who are serial litigants, a classic example of which would be an insurer. In the case of a serial litigant that party has open to it the opportunity to make a credible threat of putting a take or leave it offer that is not a bluff. Let us suppose B always makes an offer which allocates 80% of the Surplus to it, leaving only 20% to the other party. If that offer is not accepted the matter will invariably go to trial and B develops a notorious reputation of doing just that. Whilst on those rare occasions when the other party courageously takes them on, they would on average be worse off than had they split the Surplus. That loss, however, would be relatively minor compared to the gains which they would make in the vast majority of cases wherein the other party accepted the only rational alternative which was available to them. In the case of serial litigants, it may well pay to be a hawk and in which case settlements would not be fair.

ATTITUDES TO AND ASSESSMENT OF RISK Civil litigation has, in the community, a bad reputation and one which is richly deserved. Going to court is an undertaking which only the foolhardy would ever embrace with enthusiasm.

One of the most common descriptions which experienced legal practitioners use in respect of litigation is that it is a lottery. Modern jurisprudence is a body of learning that no human being could hope to master in a lifetime. The tax legislation alone is impenetrable to all but those who do nothing but tax and have had years of experience in doing so and even they could not hope to master all aspects of their particular discipline. Over the course of a trial it is far from uncommon for everyone deeply involved in the matter to come away at the end of the trial knowing twice as much about that matter than when the trial first began and this is despite countless hours of pretrial preparation.

It is therefore little wonder that litigation is such a lottery and then throw in the idiosyncrasies of individual judges and the whole thing becomes a very opaque

process. If all of that wasn’t enough, before the trial even begins, the system opens up the case of each of the parties to attack through pleadings battles, discovery and a rich variety of other interlocutory proceedings, such as forum applications, Anton Pillar orders, third party discovery, medical and other expert examinations and reports. On top of all of this is the irrepressible outflow of funds in the payment of lawyers and other experts.

The above description of the litigious process may not look pretty but it is extremely effective in achieving one of its primary functions. In this case the function which is sought to be achieved is to deflate the expectations of both parties in respect of the litigation. When litigation commences it is often common for both to feel a sense of profound indignation of how they have been treated, in the case of the plaintiff, or of what they have been accused, in the case of the defendant.

This deep sense of indignation leads to both sides developing overly optimistic expectations about their chances of success. With such high expectations it is very hard for either party to accept a settlement in which one, or the other or both feel they have sold themselves short.

Consequently, those expectations have to be deflated and at times that can be very hard to achieve and when that is achieved it is not only at considerable financial cost to the litigants but also it takes its toll in stress and anxiety on both them and their legal representatives. The most effective weapon which the system deploys in this regard is to engender a real fear that it is just a lottery, that both parties each have a 50% chance of success and also the fear that the whole exercise could quickly turn into a nightmare. The inscrutability of interlocutory proceedings also goes a long way in deflating expectations.

If properly conducted interlocutory proceedings should provide no sign or encouragement from any judicial officer to either party that their case is somehow blessed and that their decision to sue or defend was the right one. The appearance of impartiality is not only designed to give litigants confidence in the system but also to discourage them from any feeling of over-confidence in the system.

Not only does the litigious system March 2022 THE BULLETIN

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deflate any exuberance of over confidence amongst litigants the system isn’t designed to cater for cases in which the outcome is either virtually certain or reasonably close to certainty. Take the example which I have used throughout this paper. If P’s chances of success were 90% then, according to Equation (4), the case ought to settle for $114,000 even though she has only claimed $100,000 and she has spent nothing in costs. Obviously, where the plaintiff has spent nothing in costs, the most she could hope to recover in a settlement is the amount of her claim.

If a defendant admits both liability and quantum then that ought to be the effective end of the litigation. The logic behind Equation (4) breaks down as the probabilities approach certainty. If, in the unlikely event, a plaintiff with a near certain chance of success were to refuse all reasonable offers to settle the matter then Calderbank offers and the making of formal offers under the Rules plus applications based on an abuse of process would arguably all come into play.

Such cases in extremis are not ordinarily the subject of litigation nor are they the subject of this analysis. Thus, one is looking at cases where the plaintiff ’s chances of success will range from say 35% to 75%. There will not be many parties who are involved in that litigation who will not take the risks seriously and be immune from having their exuberant expectations deflated.

Putting an actual number to the plaintiff ’s chances of success will not be capable of a high degree of precision.

One would be doing well if in theory one had a margin of error of say 5% or 10%.

Assigning probabilities to different cases is little more than applying an impressionistic weighting of one case in comparison with another. At best one could rank different cases as to their respective chances of success and to convert those ranks into a number between 0 and 1. But beyond that, the hope that one could achieve any greater precision would be illusory. One

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could always independently poll 10 or 20 experienced litigators all of whom had studied the relevant material in depth, however that would not be practical, but at least in theory the assignment of probabilities could be meaningful and therefore impressionistic and unbiased estimates may be regarded as an inexact measure of a real and meaningful number.

Rather than making quantitative estimates of the plaintiff ’s probability of success one could begin by making qualitative statements with probabilities assigned to each rank. Thus, one could say that the plaintiff ’s case was: Very strong Strong Neither strong nor weak Weak Very weak

70% 60% 50% 40% 30%

and leave it at that. Over the course of time as more is discovered about a given case there may well be a need to reclassify and adjust all other calculations accordingly. The full range could go from 25% to 75% and the numerical spaces between each grade could be used in respect of cases which fall between each grade. Cases which fall outside this range are either so strong or so weak that they should be regarded as falling into special categories and subject to a separate analysis. The underlying thesis here is that litigation, although not random, is drawn towards random outcomes. So that one begins the assessment of the chances of success at 50% and moves up or down from that point only where there is a clear justification to do so. Extreme assessments at either end of the scale should be viewed with suspicion.

Where extremes prevail with respect to either party, be it in terms of strategy, chances of success or in attitudes towards risk, the distance between offer and counter-offer will, more often than not, be too great to bridge. Consequently, the parties need first to converge on the middle ground in respect of strategy,

attitudes towards risk and assessments of risk. Where the parties adopt an owl strategy, are realistic about the prospects of success and failure and are risk neutral then there is a sound basis for a settlement to be reached. If any of those three factors are allowed to go into overdrive then achieving a settlement will become ever more difficult. B Endnotes 1. (1960) 3 Journal of Law and Economics 1- 44.

2. This is taken from Wikipedia. In this case an externality is a social cost, such as pollution, which doesn’t appear in the profit/loss statement of the polluter. In this context Pareto efficiency simply refers to maximising the profit which can be gained from a given resource. Unfortunately, in respect to the Coase Theorem there is a variety of ways in which it can be formulated. Put succinctly the theorem is that where bargaining is possible and transaction costs can be ignored an efficient allocation of resources is invariant to the initial legal assignment of property rights with respect to those resources. See also H Hovenkamp: “Coase” Encyclopedia of Law and Economics Springer (2013) at 28-1.

3. Originally this methodology was first applied to criminal matters. See Landes WM “An Economic Analysis of the Courts” (1971) 14 Journal of Law and Economics 61-108.

4. See Bielen S, Marneffe W and Vereeck L: “Litigation Decision” (2015) Encyclopedia of Law and Economics; Springer at 589-1.

5. Both Decision and Games Theory are branches of mathematics and neither are particularly difficult to understand for a novice.

6. S is always the projected future solicitor/client costs so as time goes on and money is paid to the solicitor for work which has already been performed S gets smaller and smaller.

7. Oosterbeek, H., Sloof, R. & van de Kuilen, G. “Cultural Differences in Ultimatum Game Experiments: Evidence from a Meta-Analysis.”

Experimental Economics 7, 171–188 (2004). https:// doi.org/10.1023/B:EXEC.0000026978.14316.74 8. Andersen S et al “Stakes Matter in Ultimatum Games” American Economic Review 101 (December 2011): 3427–3439 http://www.aeaweb.org/ articles.php?doi=10.1257/aer.101.7.3427 9. Ibid at 3434.

10. As a former Premier of NSW, Jack Lang once said in a race always back self-interest because at least you know he is trying.

11. As noted earlier, S are projected solicitor/client costs in the future therefore, with the passage of time, S gets smaller and smaller.

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Restrictions relaxed just in time for Young Lawyers Christmas drinks

T

he annual Young Lawyers’ Christmas Drinks was held on Friday, 19 November 2021 at Community on North Terrace. Following months of Vitamin D deprivation and social reclusiveness, the 2021 cohort of young lawyers were pleased that Mr Steven Marshall MP (on hearing of such plans to gather for Christmas Drinks), had a change of heart and allowed 109 young lawyers to responsibly enjoy a strict menu of Shiraz, Sauvignon Blanc and a beverage that was referred to only as “sparkling white”.

It was no secret that 2021 was a long and, at times, stressful year for a number of young lawyers. However, we were very grateful for the opportunity to socialise in person once again. In keeping with the theme of 2021, patrons ensured that a 1.5 metre distance was maintained for all “mingling”.

The Young Lawyers’ Committee would like to thank Community for their hospitality and ensuring that COVID guidelines were met so that this event could proceed, as well as our major sponsor Burgess Paluch Legal Recruitment, who continues to make our events possible.

Most of all, the Young Lawyers’ Committee would like to thank all those who attended and continue to support the events held by the Committee (and we look forward to seeing you all at the 2022 Gala).

For those who wish to relive the evening, photographs have been uploaded on the Young Lawyers’ Committee Facebook and Instagram pages.

March 2022 THE BULLETIN

35

RISK WATCH

Social Distancing - Not just for COVID: Contact between the Bench and the Legal Profession.

KATE MARCUS, RISK & CLAIMS SOLICITOR

T

he South Australian legal fraternity is fortunate to maintain close-knit professional relationships. However, how those relationships are perceived by clients must always be considered.

Even more important is the relationship between members of the independent Bar and the judiciary, particularly as it is quite common for the judiciary to be appointed from senior counsel. All judicial officers, including many registrars, tribunal members, senior judges etc were all once part of the profession at large with many having professional ties spanning decades.

Bias, whether apprehended or actual, has the potential to lead to client dissatisfaction at best and costs orders or disciplinary redress at worst. Accordingly, professional relationships should remain as such or be disclosed either with consent or the parties recusing themselves.

The High Court case of Charisteas v Charisteas & Ors [2021] HCA 29 provides a salient reminder of how parties need to maintain professional relationships.

Facts The appellant husband and the first respondent wife had been involved in an ongoing family law matter. The parties had separated in 2005 and the husband had commenced proceedings in 2006. In 2015 the trial judge (Walters J) had held that the previous Property Orders of 2011 were not final orders and that the Court retained powers to make orders under the relevant Family Law Act 1975 (Cth). On 12 February 2018, the trial judge purported to make orders under s79 of that Act which, while they did not set aside or vary the previous Property Orders of 2011, were inconsistent with them. Three days later, the trial judge retired.

Aware of “gossip”, the husband’s solicitor wrote to the wife’s barrister, Ms Anderson requesting assurances that during the time the former Judge was handling the matter, that she had had no contact with him outside of court.

36 THE BULLETIN March 2022

The barrister responded indicating that they had met for a “drink or coffee” on approximately four occasions, had spoken by telephone on five occasions, had exchanged “occasional” and “numerous” text messages during various periods from 2016 to 2018. Apart from a brief hiatus during the evidence stage of the trial, all of these instances had occurred during the time that Walters J had been presiding over the matter. The barrister indicated that the “communications” with the trial judge did not concern the substance of the case. The husband subsequently filed an amended notice of appeal adding grounds alleging apprehension of bias. There was no suggestion of actual bias. The Full Court dismissed the appeal. The appellant husband then appealed that decision to the High Court.

DECISION The High Court held that the 2018 Property Orders should be set aside on the grounds of apprehended bias. Private communications between a judge and a barrister for one of the parties (without the knowledge and consent of the other parties) gave the apprehension of bias.

Ordinary judicial practice dictates that once a matter is underway, only in the most exceptional of cases, can there be any communication or association between the judge and one of the parties to the matter.

A hypothetical fair-minded observer is not conceived of as a lawyer but as a member of the public.

The Court held that: “A fairminded lay observer, understanding that ordinary and most basic of judicial practice, would reasonably apprehend that the trial judge might not bring an impartial mind to the resolution of the questions his Honour was required to decide. The trial judge’s impartiality might have been compromised by something said in the course of the communications with the wife’s barrister, or by some aspect of the personal

relationship exemplified by the communications.

Accordingly, there is a logical and direct connection between the communications and the feared departure from the trial judge deciding the case on its merits.” [Paragraph 15] Additionally, the lack of disclosure in this matter was particularly concerning.

The Court commented: “It is difficult to comprehend how the trial judge could have failed to appreciate the need to disclose the communications, particularly when he was dealing with the application to recuse himself on other grounds. It may give the hypothetical observer reason to doubt the correctness of the claim by the wife’s barrister that their communications did not concern “the substance” of the case, if the ambiguity inherent in that statement is not itself of sufficient concern.” [Paragraph 19] It may be accepted that many judges and lawyers, barristers in particular, may have continuing professional and personal connections. The means by which their contact can be resumed is by the judge making orders and publishing reasons, thereby bringing the relevant litigation to an end.

Accordingly, the husband’s appeal was successful. The orders made by Walter J were set aside and the matter was remitted for rehearing before a single judge of the Family Court. The wife was ordered to pay the costs of the appeal.

LESSONS TO BE LEARNED Judicial independence is at the heart of the legal system in Australia.

It is imperative that judges are, and are seen to be, independent and impartial.

Notwithstanding the adversarial nature of our legal system and the fact that we have duties to strongly advocate for our clients, this is also true for legal practitioners given the overriding duties that practitioners owe the court. Although this matter was about

RISK WATCH

the apprehension of bias and not actual bias there are key lessons for the profession to follow: 1. Maintain strict professional conduct with the judiciary.

2. If social contact is practically unavoidable, get the consent of all parties.

3. This extends beyond the judge. Be aware of contact with Judge’s Associates and other court staff.

4. Many judges and lawyers, barristers in particular, may have continuing

professional and personal connections.

The means by which their contact can be resumed is by a judge making orders and publishing reasons, thereby bringing the relevant litigation to an end.

5. Disappointed clients complain. Let them be disappointed with the outcome on the merits of the claim and not on the basis of apprehended bias arising from the conduct of the parties.

6. Inappropriate contact will not be tolerated. This may culminate in a retrial or potentially disciplinary action

7. The potential costs and time lost are substantial It is easy to imagine a scenario whereby the lawyer who had such contact with the judge potentially bearing the costs of an aborted trial.

This case has ramifications for all lawyers in how they interact with the judiciary. It serves as a reminder that apprehensions of bias in the Courts will not be tolerated. From a risks perspective care should be taken to avoid the dangers of having “inappropriate” contact.

Peter Slattery appointed Chair of the Legal Services Commission GABRIELLE CANNY, DIRECTOR, LEGAL SERVICES COMMISSION

T

he SA government has selected Peter Slattery to be the new Chairperson of the Legal Services Commission. Mr Slattery took up the role on 1 January, 2022.

This appointment ensures the LSC Board continues to have a deep and broad range of the high-level skills required at a large legal practice in the 21st century.

PASSING ON THE BATON After two years of exceptional service to the Commission, the previous Chair, Jason Karas, has stepped aside because of his professional workload in 2022.

Mr Karas’ energy, expertise, leadership and dedication have greatly assisted the Commission’s development and he has warmly welcomed the appointment of Mr Slattery.

“It has been a privilege to serve the Commission as Chairperson for the past two years and assist its delivery of vital services to those in need,” Mr Karas said.

“I am very pleased to pass the baton to Peter Slattery, a highly regarded SA lawyer with a proven track record of successfully managing the work of a large legal practice. Peter’s experience and expertise will be a great asset to the Commission

and I wish him the very best with this important role.

“It has been a professional highlight to work with the Commission including on the creation and implementation of the new Strategic Plan for 2021-2024, the extended reach of LSC services during the pandemic, and the use of technology to enhance access to justice for all South Australians.”

PETER SLATTERY Mr Slattery is a founding partner of Johnson Winter & Slattery and served as the firm’s Managing Partner from 1996 until mid-2021. Established in 1993, this national firm provides legal services to major business organisations and government agencies. As well, it provides significant pro bono help throughout Australia to organisations that assist homeless people, young people, victims of domestic violence and people with disability.

“The Commission plays a pivotal role in providing access to justice in SA and I look forward to supporting the delivery of its services,” Mr Slattery said.

“In collaboration with multiple

Peter Slattery

stakeholders in the legal sector and more broadly, the Commission provides crucial assistance to the most disadvantaged members of our community. I am honoured to assist the provision of those services and the collaborative relationships that underpin them.”

The Commission’s Board includes Mr Slattery (Chairperson), Ms Catherine Nelson, Ms Debra Contala, Ms Lucinda Byers and me (as LSC Director). B March 2022 THE BULLETIN

37

SUPERANNUATION

#BreakTheBias on International Women’s Day ANDREW PROEBSTL, CHIEF EXECUTIVE, LEGALSUPER

In the lead up to International Women’s Day, it is timely to review the barriers to superannuation equality for women and to look at what can be done to boost super for women.

I

nternational Women’s Day (IWD) is held on 8 March each year and the theme for 2022 is #BreakTheBias.

In support of the day and this year’s theme, on 8 March we are all encouraged to “Imagine a gender equal world. A world free of bias, stereotypes and discrimination. A world that’s diverse, equitable, and inclusive. A world where difference is valued and celebrated.

Together, we can forge women’s equality.

Collectively we can all #BreakTheBias.”1 legalsuper supports IWD and the achievement of its aims, not only on 8 March each year, but at all times.

One of the ways we demonstrate this support is by being a proud and active member of Women in Super, a not-for-profit organisation that works to improve women’s retirement outcomes, by advocating for a super system void of gender-based inequality.2 Through Women in Super, we continue to advocate for changes to make superannuation more equal for women, including via workplace gender equality; superannuation and paid parental leave; and more women on superannuation fund boards.

38 THE BULLETIN March 2022

THE SUPERANNUATION GENDER GAP On average, when women and men retire, women usually have around 30 per cent less in super than men. In dollar terms, this equates to a $67,000.00 disparity.3 Add in the fact that your super balance will continue to earn compound interest in retirement, the actual gap, over time, is even bigger.

WHY WOMEN ACCUMULATE LESS SUPER There are a number of historical, structural and cultural reasons why women continue to be unfairly disadvantaged when it comes to accumulating super and saving for retirement.

Gender pay gap The gender pay gap is a significant contributor to the gender super gap.

According to data from the Federal Government’s Workplace Gender Equality Agency (WEGA), the current full-time total earnings gender pay gap (which includes overtime payments) is 16.8 per cent. This means women’s average weekly total full-time earnings are $323.30 less per week compared to men.

WEGA also calculates that the fulltime total remuneration gender pay gap is 20.1 per cent, meaning men working fulltime earn nearly $25,534 a year more than women working full-time.4 In relation to the legal profession, WEGA notes that in a group of professions called Professional, Scientific and Technical Services, and which includes lawyers, accountants and others, the gender pay gap for average weekly full-time earnings is 25.3 per cent.5 The caregiving burden Women are more likely to be primary carers. Women account for more than 70 per cent of primary caregiving, on average, taking five years out of the workforce to act as a carer.

Return to workforce barriers Women often face barriers to returning to work after taking time out as a carer. Whether due to limited opportunities or necessity, they may accept employment in roles below their skill level to balance caring and earning responsibilities.

Part-time workers Women are more likely to work parttime or casually than men, contributed to by a lack of workplace flexibility to accommodate care responsibilities. This not only affects the amount women earn but career and wage progression.

SUPERANNUATION

Inequality Historical and ongoing discrimination and bias in hiring, pay decisions, promotions, and the undervaluation of ‘female’ jobs/dominated industries.

Tax advantages Males are eligible for a disproportionate number of tax concessions within super.

Women receive one third of government tax concessions on super, while men receive the other two thirds.

Compound interest A lifetime of earning widens the gap, and compounding interest deepens this divide further. Males are earning compound interest on their larger savings, which means more interest in the long term.

WAYS TO GROW YOUR SUPER While there are a number of unarguable unfair systemic and cultural barriers placed in the way of women seeking to save for the retirement they want and deserve, there are strategies which might help some women at different stages of their careers and lives.

Ways to contribute to your super In addition to the superannuation paid into your account by your employer under the Superannuation Guarantee, you can also consider growing your super via salary sacrifice; personal voluntary contributions;

spousal contributions; contribution splitting; and by checking to see if you are eligible for government contributions.

More information on these and other strategies can be found on the legalsuper website at legalsuper.com.au/growingyour-super or on the Australian Tax Office website at https://www.ato.gov.au/ individuals/super/growing-your-super/.

Contribute sooner rather than later Compounding interest means the longer your money is invested – the more interest you make. Boosting your super, or your spouse’s super, is a way to help close the super gap.

WE’RE HERE TO HELP Too often we can put the needs of others before our own, to our own detriment, and this includes not prioritising our long-term financial future. legalsuper is here to empower all members to make choices leading to better outcomes in retirement. For women, we are working to close the super gap and increase the long-term financial security of our members, so that generations of women which follow us can achieve the same.

If you’d like to meet with us to discuss any aspect of your super - whether it be in relation to contributions, your investment options, insurance and fees or consolidating multiple super accounts into one account - our team is available

for 1-to-1 consultations, offering tailored information and support. Contact us via mail@legalsuper.com.au or on 1800 060 312, 8am-8pm (AEST), Monday to Friday to book an appointment.

Legal Super Pty Ltd ABN 37 004 455 789 is the Trustee of legalsuper ABN 60 346 078 879 and holds Australian Financial Services Licence No. 246315 under the Corporations Act 2001. The information contained in this document is of a general nature only and does not take into account your objectives, financial situation or needs. You should therefore consider the appropriateness of the information and obtain and read the relevant legalsuper Product Disclosure Statement (PDS) and Target Market Determination (TMD) (available at legalsuper.com.au or by calling 1800 060 312) before making any decision in relation to legalsuper. Past performance is not a guide to future performance.

Andrew Proebstl can be contacted on ph 03 9602 0101 or via aproebstl@legalsuper. com.au. B

Endnotes 1 https://www.internationalwomensday.com/ 2 https://www.womeninsuper.com.au/ 3 https://www.industrysuper.com/campaigns/ closing-the-gender-superannuation-gap/ 4 https://www.wgea.gov.au/publications/ australias-gender-pay-gap5 https://www.wgea.gov.au/newsroom/finallyequal-pay-day

March 2022 THE BULLETIN

39

TAX FILES

No stamp duty or foreign ownership surcharge on transfer of student accommodation facility ANDREW SHAW, PRINCIPAL, SHAW LAWYERS

“W

ho says you can’t go home? There’s only one place they call me one of their own, just a hometown boy born a rolling stone, who says you can’t go home? ” – Jon Bon Jovi “Who Says You Can’t Go Home? ” (2006).

The Supreme Court of South Australia recently determined that a student accommodation facility was not “predominantly used for residential purposes” and therefore a transfer of the facility was not liable for stamp duty or foreign ownership surcharge: Perpetual Corporate Trust Limited v Commissioner of State Taxation.1

Qualifying land In South Australia, no liability to stamp duty arises in relation to a conveyance or transfer of an interest in “qualifying land” executed on or after 1 July 2018.2 “Qualifying land” means land that is used for any purpose other than land that is “taken to be used for residential purposes” or “taken to be used for primary production”.3 Land will be “taken to be used for residential purposes” if the Commissioner of State Taxation, after taking into account information provided by the Valuer-General, determines that it is “being predominantly used for that purpose”.4 Whether or not land is “predominantly used for residential purposes” is not always clear.

Background A developer built a 17-level purposebuilt student accommodation facility at 231 Waymouth St Adelaide. The building was leased to Excel, an operator of student accommodation facilities, until 30 September 2019.

On 30 September 2019, the applicant (Perpetual) purchased the freehold property. The lease to Excel and other business assets in respect of the facility

40 THE BULLETIN March 2022

were assigned to another company, Scape.

Since that date Scape has operated the student accommodation facility at the property under the Atira brand (Atira).

The respondent (Commissioner) assessed stamp duty of $6,868,830 on transfer of the property to Perpetual, which included a foreign ownership surcharge of $3,850,000.5 Perpetual’s objection to the Treasurer was disallowed because, in the Treasurer’s opinion, the property provided “long-term accommodation” and therefore did not constitute qualifying land.

Perpetual appealed to the Supreme Court against the objection decision. Such an appeal is in the nature of a rehearing de novo; the Court stands in the shoes of the Commissioner.6 The Supreme Court determined that the property was qualifying land for the purpose of s 105A of the Act. Accordingly Perpetual’s appeal was allowed.

Key observations: There are various ways to characterise a property. A property that may be regarded as residential by one method of characterisation may not necessarily be regarded as such by another.7 The Court noted that the “residential” Land Use Code prepared by the Office of the Valuer-General has ten different categories, and twenty-four different subcategories, plus further sub-sub categories.

The property in question had different Land Use Codes and Local Government Codes including “residential”, “other”, and “commercial” categories. Construction codes classify buildings differently again.

The Court concluded that “different methods of classification or categorisation of buildings provide little assistance in determining whether the

property falls within the designation of qualifying land for the purposes of s 105A of the Act.”8 The Court considered authorities on the meaning of “reside” and “residence” in planning and tax cases. The Court referred to the decision of the Full Federal Court in Marana Holdings, in which the Federal Court said, in the context of GST legislation, that both expressions “have the connotation of permanent, or at least long-term commitment dwelling in a particular place”.9 Ultimately the Court (in the present case) noted that planning and tax cases are of limited use in determining whether a property is qualifying land for the purposes of s 105A of the Act. In particular, planning instruments can be construed with more flexibility and with a pragmatic approach. Taxation cases are generally concerned with a particular transaction, and planning cases are directed towards the practical use of premises.10 The Court did, however, consider it appropriate to adopt the meaning distilled by the Full Federal Court in Marana Holdings, given the careful and considered analysis of dictionary meanings in that case.11 Section 105A should not be given a narrow construction.12 Given the controversy about the meaning of “residential purposes”, and the fact that it is not defined in the Act, it is appropriate to look at Parliament’s intention in introducing s 105A. It is clear that Parliament’s intention was to benefit business, to encourage business transactions, and “to remove significant costs barriers to business investment and expansion”.

Businesses are the intended beneficiaries of the exemption in s 105A and the property must be characterised in that light.13

TAX FILES

The statistics in evidence before the Court showed that, in 2018, 89% of students stayed for less than 52 weeks (two semesters) and 63% of students stayed for one semester or less with the average length of stay being 25 weeks. 65% of students did not extend their stay beyond the initial booking period. In 2019, 86% of students stayed for less than 52 weeks, 49% of students stayed one semester or less, with the average length of stay being 29 weeks. 83% of students did not extend their stay beyond the initial booking period. The only other occupants who were not students were short term tourists.14 The Court noted that the property is not analogous to a retirement village (average stay is seven years), or an aged care facility (average stay is two years seven months) where the biggest cause of departure is death. The nature of the amenities and activities at the student accommodation facility are also very different to a retirement village or aged care facility, and support the proposition that the facility is not intended to offer long-term residence.15 The Court placed little or no weight on the following: students who stayed for more than four weeks were required to provide their own bed linen, towels, and kitchen utensils; students were required to clean their own rooms; students who stayed more than four weeks were required to sign a residential tenancies agreement (which does not change the nature of their commitment to living at the property); the fact that Atira’s advertising material describes itself as a “home away from home” and its occupants as “residents”, and the words “welcome home” appear

on the front of the handbook. An organisation cannot define its character by the way it advertises itself.16 The Court found it clear that the majority of students did not envisage living at the property for an extended period of time and that students did not commit to living at the property on a longterm or permanent basis.17 The fact that Excel assigned all the business agreements and other commercial aspects of the property to Atira at the time of sale also supports the conclusion that the property is qualifying land: “the subject of the transfer was a commercial entity, rather than a residential property”.18 Take home messages • Expressions must be understood in their context. The definition of a word or phrase for one purpose (e.g. planning) will not necessarily be helpful in a different context (e.g. stamp duty).

• Government or industry codes are not conclusive. A property may have a particular character for the purposes of a statute, regardless of government or industry codes or other labels.

• Dictionary definitions are helpful to interpret the common or ordinary meaning of an undefined word or expression.

• Exemptions should not be construed narrowly.

• For tax (and stamp duty) purposes at least, “residential” connotes permanence, or at least long-term commitment to dwelling in a particular place.

• This decision is also relevant when determining if a property is residential land for the purpose of

foreign ownership surcharge. While other jurisdictions do not have the “qualifying land” exclusion from duty found in s 105A, the decision is of interest in those jurisdictions for their foreign ownership surcharge regimes.

Tax Files is contributed by members of the Taxation Committee of the Business Law Section of the Law Council of Australia. B Endnotes 1 [2022] SASC 7 (Bochner AJ), 25 January 2022.

2 Stamp Duties Act 1923 (S.A.) (‘the Act’), s 105A. 3 s 105A(1) of the Act. 4 s 105A(2)(a)(i) of the Act. Land not being used for any particular purpose, and vacant land, may also be taken to be used for residential purposes under different limbs of s 105A(2)(a) not relevant to this article.

5 Foreign ownership surcharge is payable in addition to duty if a foreign entity acquires an interest in residential land: ss 72 & 102AB of the Act. The definition of “residential land” reflects the definition in s 105A. 6 At [10]. See Part 10, Division 2 of the Taxation Administration Act 1996 (S.A.); Kyren Nominees Pty Ltd v Commissioner of State Taxation [2013] SASC 58, at [88].

7 At [76] – [81].

8 At [82].

9 Marana Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 307, at [26] – [33].

10 At [84] – [104].

11 At [112].

12 At [105] - [107]. Consistent with the approach in earlier cases referred to that an exemption which exists for the purpose of rewarding or protecting some class of activity is not to be given a narrow application.

13 At [109] – [111] referring to the Second Reading Speech on introduction of s 105A and the Treasurer’s 2015-2016 Budget Speech.

14 At [37] – [38], [113].

15 At [117] – [118]; also [41] – [43].

16 At [114] – [116].

17 At [113] – [114].

18 At [121].

March 2022 THE BULLETIN

41

FAMILY LAW CASE NOTES

Family Law Case Notes CRAIG NICOL AND KELEIGH ROBINSON, THE FAMILY LAW BOOK

SPOUSAL MAINTENANCE – CONSENT ORDER (MADE AS PART OF PROPERTY ORDERS) THAT HUSBAND PAY WIFE’S MORTGAGE COULD ONLY BE A MAINTENANCE ORDER

I

n Thorpe & Stirling [2021] FedCFamC1A 86 (15 December, 2021) the Full Court (Aldridge, McEvoy & Altobelli JJ) allowed an appeal from a decision of Judge Kemp where a final consent order required the wife to sell a property and provided that she receive $430,000 of the sale proceeds on the basis that the husband would be guarantor and pay mortgage payments on a future loan of up to $500,000.

The order provided that the husband would continue to pay the mortgage until its

loan balance was discharged. The husband refused to pay after the wife re-married, contending that the order was a spousal maintenance order that had no effect upon re-marriage per s 82(4) of the Act. Considering the order (“Order 36”), the Full Court said (from [20]): “ … [T]he husband’s liability under the mortgage remains until it is paid out. …

[T]hat liability could … exceed what the husband otherwise received under the … orders ( … ) [26] … [P]roperty, as defined, is limited to existing property, whatever it may be (Stanford v Stanford [2012] HCA 52; … ), and does not extend to property that might be received in the future … [Section 79] does not empower the Court to make an order

3 JAN 2021 – 2 FEB 2022 ACTS PROCLAIMED Statutes Amendment (Intervention Orders and Penalties) Act 2021 (No 37 of 2021) Commencement: 4 April 2022 Gazetted: 27 January 2022, Gazette No. 6 of 2022

ACTS ASSENTED TO Nil

APPOINTMENTS District Court of South Australia

against property which does not presently exist but could be brought into existence by the exercise of borrowing capacity … ( … ) [36] … [H]is Honour found … the husband’s obligations under Order 36 ‘were likely to be paid out of the husband’s future income stream including his receipt of any … bonus payments’ ( … ) [37] Order 36 does not work an alteration of the interests of the parties in their property but rather creates an obligation which is separate to the division of that property.

[38] … [T]herefore, that Order 36 could not be an order made under s 79 of the Act … ( … ) [45] … Order 36 can be seen as being made as a spousal maintenance order …” B

A MONTHLY REVIEW OF ACTS, APPOINTMENTS, REGULATIONS AND RULES COMPILED BY MASTER ELIZABETH OLSSON OF THE DISTRICT COURT OF SOUTH AUSTRALIA

Environmental Resources and Development Court of South Australia Licensing Court of South Australia Judge From 17 January 2022 Anthony Brenton Allen QC Gazetted: 14 January 2022, Gazette No. 4 of 2022 From 24 January 2022 Emily Fleur Telfer QC Gazetted: 20 January 2022, Gazette No. 5 of 2022

Deputy Independent Commissioner Against Corruption for a term commencing on 14 February 2022 and expiring on 13 February 2025 Paul James Alsbury Gazetted: 20 January 2022, Gazette No. 5 of 2022

RULES

REGULATIONS PROMULGATED (3 JANUARY 2022 – 2 FEBRUARY 2022) REGULATION NAME

REG NO. DATE GAZETTED

Superannuation (Prescribed Authority and Exclusion of Payment) Amendment Regulations 2022

1 of 2022

Criminal Law Consolidation (Criminal Organisations) (Prescribed Place—Thebarton) Amendment Regulations 2022

2 of 2022

20 January 2022, Gazette No. 5 of 2022

Criminal Law Consolidation (Criminal Organisations) (Prescribed Place—Thebarton) (No 2) Amendment Regulations 2022

3 of 2022

20 January 2022, Gazette No. 5 of 2022

20 January 2022, Gazette No. 5 of 2022

Criminal Law Consolidation (Criminal Organisations) (Prescribed Place—Thebarton) (No 3) Amendment Regulations 2022

4 of 2022

20 January 2022, Gazette No. 5 of 2022

Criminal Law Consolidation (Criminal Organisations) (Prescribed Place—Thebarton) (No 4) Amendment Regulations 2022

5 of 2022

20 January 2022, Gazette No. 5 of 2022

Electoral (Miscellaneous) Amendment Regulations 2022

6 of 2022

27 January 2022, Gazette No. 6 of 2022

42 THE BULLETIN March 2022

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All information divulged to the LawCare counsellor is totally confidential.

To contact Dr Jill 08 8110 5279 7 days a week LawCare is a member service made possible by the generous support of Arthur J. Gallagher

The Litigation Assistance Fund (LAF) is a non-profit charitable trust for which the Law Society acts as trustee. Since 1992 it has provided funding assistance to approximately 1,500 civil claimants.

LAF receives applications for funding assistance from solicitors on behalf of civil claimants seeking compensation/ damages who are unable to meet the fees and/or disbursements of prosecuting their claim. The applications are subjected to a means test and a merits test. Two different forms of funding exist – Disbursements Only Funding (DOF) and Full Funding.

LAF funds itself by receiving a relatively small portion of the monetary proceeds (usually damages) achieved by the claimants whom it assists. Claimants who received DOF funding repay the amount received, plus an uplift of 100% on that amount. Claimants who received Full Funding repay the amount received, plus 15% of their damages. This ensures LAF’s ability to continue to provide assistance to claimants.

LAF recommends considering whether applying to LAF is the best course in the circumstances of the claim. There may be better methods of obtaining funding/ representation. For example, all Funding Agreements with LAF give LAF certain rights including that funding can be withdrawn and/or varied.

For further information, please visit the Law Society’s website or contact Annie MacRae on 8229 0263.

Marita Bajinskis

formerly of Howe Martin & Associates is a Principal at Blackwood Family Lawyers in Melbourne Marita is an Accredited Family Law Specialist and can assist with all family law matters including: • • • •

matrimonial and de facto property settlements superannuation children’s issues

3/224 Queen Street Melbourne VIC 3000 T: 03 8672 5222

Marita.Bajinskis@ blackwoodfamilylawyers.com.au www.blackwoodfamilylawyers.com.au

FOR PROFESSIONAL ACTUARIAL ADVICE ON - Personal Injury - Workers Compensation - Value Of Superannuation Contact

Deborah Jones, Geoff Keen or Victor Tien 08 8232 1333 contact@brettandwatson.com.au www.brettandwatson.com.au

Ground Floor 157 Grenfell Street Adelaide SA 5000 March 2022 THE BULLETIN

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