Attorney-General Jim McGinty’s proposed magistrates court reform legislation has prompted concern for those chasing small debts.
I BELIEVE your readers would be interested to learn a number of bills currently being considered in State Parliament.
I am a member of a sub-committee of the Australian Institute of Credit Management (WA Division), which is in the process of giving consideration to the magistrates court reform legislative package.
The committee has found certain aspects of the legislative package objectionable in particular certain aspects of the Magistrates Court (Civil Proceeding) Bill 2003 ‘the bill’).
The Attorney-General introduced the bills into parliament in December 2003. I understand the bills have progressed to their second, and in some cases their third, reading.
One area of the proposed bill of particular concern is a provision that would preclude a party (who may be represented by a legal practitioner in proceedings) from being entitled to recover costs associated with such representation (if ultimately successful with the litigation).
Apart from a number of other issues, which I address later in this letter, the bill appears to be a free kick to debtors who have a legitimate debt but simply refuse to pay. What the proposed legislation will allow is for such debtors (of which there are many) time at the expense of a creditor.
A creditor will have to proceed to issue a summons. Then at some point down the track, the debtor, if inclined, will pay the debt without having to bear any costs, which the creditor has had to incur in pursuing the recovery of the debt (apart from minor court fees). These may be payable at the time the summons is filed at the court.
This can only be seen as a win to a debtor who refuses to pay a legitimate debt – put payment off and not be responsible for the costs of the exercise.
There are a number of other issues that arise out of the Bill and those I address in more detail below.
The Attorney-General would appear intent on proceeding with his legislative changes without appropriate consultation with all relevant stakeholders, who would, one way or another, be affected by the proposed legislative change.
Although the Attorney-General may have sought a submission from the Law Society (the Law Society does not represent all members of the legal profession), there are many other organisations and persons who are likely to be affected by the Government’s proposed changes.
It is of concern that there has been very limited consultation, if any, with these other parties and bodies.
My own enquiries have revealed a number of major stakeholders, including the following – Australian Institute of Credit Management (WA) Division; The Institute of Mercantile Agents; The Australian Finance Conference; The Institute of Financial Services; major insurance organisations; various government statutory authorities and local governments; business generally; consumer groups; the Insurance Council; and the Allied Building Trade Association – have not been consulted by the Government in relation to the proposed legislative changes, which will have significant impact on their organisations and the way they carry on business.
A number of these organisations have only in recent times become aware of the Government’s proposed legislative package and this was only after the bills were introduced into parliament.
Why the Government failed to consult and liase with these organisations and other relevant bodies prior to putting together a legislative package is difficult to understand, given the impact the legislation would have not only on these organisations, but many other organisations and individuals.
It would seem that the State Government’s latest method of introducing legislative change is to avoid the demands of vigorous public debate and comment. This approach is from a Government that promised the public that it would be the most open and accountable.
Given that the Magistrates’ Court Reform Legislative Package is one of the most significant to be undertaken for some decades it is of concern that the Attorney-General has seen fit to progress this matter to the point of introducing bills to parliament without consultation with all relevant stakeholders.
A number of the proposed changes are a step forward. However, certain proposed changes are a step backward.
One of the Government’s proposals is that if a party has a claim for up to $7,500, and that party elects to be represented, then such party would not be entitled to recover the costs of such representation if successful with their claim. Similarly, a defendant to such an action if represented (and successful with the defence) would not be allowed to recover his or her cost.
Under the current legislation, a party wishing to pursue a claim of up to $3,000 has a choice of proceeding within the small debts division of the Local Court, which does not allow for representation, or choosing to proceed in the general division, which allows for representation and the right to claim costs of such representation.
What the Government is now proposing is to take away a choice and right that allows a party to be represented by a lawyer if they wish and, if successful, claim costs. The defendant to litigation has a similar right under current legislation.
The proposed legislation raises serious public interest issues, which require further consideration and consultation.
I wish to make the following observations and comments in relation to the Attorney-General’s proposed legislative package.
1) The current law entitles a party to elect, no matter what the dollar size of their claim, to pursue the matter in the general division of the Local Court. If they proceed in the general division (for claims between $0 and $25,000) of the Local Court a party can elect either to be represented by a legal practitioner or alternatively proceed ‘self represented’. The parties have a choice under the current legislation.
2) The party claiming less than $3,000 under the current legislation is entitled to elect to bring the claim either in the general division of the Local Court or the small debts division. If a party elects to commence proceedings for a claim less than $3,000 in the small debts division then they do so unrepresented and the jurisdiction is a no-cost jurisdiction. However, the important point is the parties currently have the choice to elect to go down either path. The proposed legislation takes away such choice.
3) If a party chooses to be represented then the Local Court scale of fees prescribes the amount a party is entitled to recover for representation, which rates are not excessive.
4) If a party is precluded from being represented by a legal practitioner then it does not necessarily follow that the costs of pursuing litigation self represented are going to be any less than if they were represented by a legal practitioner. A party, if self-represented, will have to invest its own time, energies and staff to pursue the claim.
5) What is being proposed by the Attorney-General could effectively mean that such parties would be shut out from pursuing legitimate claims, not so much from the point of view that legislation would not allow them to do so, but more so because it would not be cost effective to do so.
6) A considerable number of commercial enterprises, individuals, government and statutory authorities have the need to commence proceedings in order to recover outstanding moneys. A large number of those claims are for debts under $7,500. The proposal lays a considerable burden on such parties and, as mentioned above, may very well dissuade them from seeking to make a claim. If this was to occur then the end consumer would more than likely have the costs (of the non recoverable debt) passed on to them as one of the hidden costs in the provision of future services and goods.
7) On the other hand, in certain situations where you have the major corporation that does have the expertise and resources to deal with small debt recoveries, then such an organisation would have a substantial advantage over another organisation or individual. Effectively in such situations the playing field would become uneven.
8) Mr McGinty has been quoted in The West Australian as saying that, of the 30,000 actions commenced in the Local Court, 70 per cent of the plaintiffs commencing those proceedings choose to have their claim dealt with by a legal practitioner. As noted above, those parties already have a choice if their claim is for an amount less than $3,000 to proceed either in the small debts division, which does not allow for representation, or to proceed in the general division, which does allow for representation and cost recovery. Based on Mr McGinty’s own figures it would seem clear that parties’ preferred choice is to proceed with legal representation and the right if successful to recover costs. What Mr McGinty is now proposing will remove that choice and this, as noted above, raises serious public issue concerns in regard to the administration of justice.
9) I draw your attention to an article which appeared in The West Australian (Tuesday February 10, WA Legal System in Crisis). This article was addressing serious issues that have arisen in the WA Family Court as a result of a large number of parties to such proceedings being unrepresented.
To quote the article: “Lawyers have painted a dire picture of the State’s legal system, describing unrepresented litigants being coached by judges and a lack of knowledge about legal process causing huge delays and acrimonious in court battles”. The Attorney-General’s current proposed legislation is encouraging parties to be unrepresented, which will only lead to a similar scenario developing in the Local Court.
The proposed legislative changes will not, I believe, result in any savings to the justice system in dollar terms, as a general rule self-represented parties take up a lot more time in the court systems than those matters in which parties are represented by legal practitioners.
This relates not only to representation in court but also in relation to the general administration of matters. Clerical staff’s time at the various court registries is taken up to a much larger degree by persons who are self represented than those who are represented by a legal firm. It is not envisaged that the proposed legislation will in any way assist in streamlining the court processes or workloads. I believe that it will in fact have the reverse effect.
What the Government is about to embark on should be open to the public and business sector for full comment. It is only then that meaningful discussion can occur to ensure that the appropriate legislative package is presented to parliament for consideration.