By Sarah Hawksworth -
Snapshot
- As reflected in the Government’s recent Productivity Commission Inquiry Report, ‘access to justice’ in civil litigation, is frequently limited to ‘big business’, high net worth individuals and those who qualify for a form of legal assistance such as legal aid, thereby effectively leaving out the ‘missing middle’.
- The emergence of after the event (ATE) insurance in the Australian legal market may help to facilitate access to justice for plaintiffs who might otherwise be denied such access. Furthermore, in cases where the plaintiff has an ATE policy, it can also lead to greater recovery rates for successful defendants.
- Whilst in the past, ATE insurance has sometimes been seen as a somewhat controversial alternative to more traditional funding methods, its use and acceptance is now relatively widespread in other common law jurisdictions such as England and Wales. The Irish High Court also recently affirmed the ‘important purpose’ of ATE in facilitating what it called ‘access to justice for persons who might otherwise be denied such access’.
This article looks at the ability of individuals and businesses to access the legal system in Australia and the potential impact on access through the introduction of after-the-event insurance (also known as ‘ATE’ insurance) as an addition or alternative to traditional funding methods.
The current position
There are considerable costs involved in plaintiffs accessing the courts in civil claims. In most circumstances, a plaintiff will effectively need to fund their solicitor’s costs and disbursements on an ongoing basis. There is also the risk of an adverse costs order if they lose their claim. Plaintiffs may also be required to make a payment in court as security for costs.
These costs can, in many circumstances, be an insurmountable obstacle preventing plaintiffs with meritorious claims from seeking redress. Many plaintiffs either do not have the financial ability to fund a claim on an ongoing basis or cannot afford to take the financial risk in the event their claim fails. Where there is a possibility that a plaintiff may lose their claim (there are risks with nearly all litigation) and the losses result in the bankruptcy or liquidation of the plaintiff, then plaintiffs can and do decide not to proceed, even with the strongest of claims.
There are a number of potential traditional funding options that plaintiffs could utilise to bring a meritorious claim where they do not have the funds or are unable to take financial risk. These mainly include: third party litigation funding, solicitor CFA (‘conditional fee agreement’) and legal aid. An in-depth look at the different funding options is beyond the scope of this article.
Many plaintiffs do not fit the criteria to secure traditional funding. In the Productivity Commission’s recent Access to Justice Arrangements report, it estimates that only 8 per cent of Australian households would likely meet income and asset tests for legal aid, leaving the majority of low and middle income earners with limited capacity for managing large and unexpected legal costs (Productivity Commission, Access to Justice Arrangements [Inquiry Report No. 72, 5 September 2014], 28). This is also true of small businesses, which make a significant contribution to the Australian economy but are less likely to have claims that will fall within the criteria for traditional funding.
Access to the justice system therefore seems severely limited to big business, high net worth individuals, and those who qualify for a form of legal assistance, such as legal aid. However, relatively recent developments in the insurance market could increase access to the courts for all Australians.
