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A future-ready justice system for Singapore

The proposed introduction of litigation scale costs may hurt Republic's standing as a global litigation hub.

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IN 2015, the Chief Justice established the Civil Justice Commission (CJC) to review Singapore's civil justice system, with the goal of transforming and modernising the litigation process. The CJC's report was issued in October 2018, along with a consultation paper containing wide-ranging recommendations. These include overhauling the Court process and enhancing early judicial oversight of Court proceedings. They will give judges more flexibility and control, ensuring a more time- and cost-effective administration of justice for litigants.

Singapore's judicial system has two objectives: to make access to justice available and effective for the man on the street, and to develop Singapore into the international legal hub that we have set our sights on.

Thus, the constant enhancement of the judicial system to achieve those twin goals is both necessary and welcome.

LITIGATION SCALE COSTS

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One of the recommendations in the CJC Report is the implementation of scale costs for litigation, with professional fees to be charged pegged to the monetary amount in dispute. These fees (set at S$15,500 for the entire trial process for a High Court claim of S$250,000, and going up in tandem with the claim quantum by ever decreasing percentages, such that the proposed professional fees for a S$5 million claim are S$98,000) are a fraction of what it now costs to conduct litigation properly.

One estimate puts the proposed scale costs at under 20 per cent of those being currently charged for an average litigation suit in the High Court conducted by non-Senior Counsel (Senior Counsel being able to command higher fees).

While making the litigation regime more accessible to the public is an important public interest, it is questionable if litigation scale costs are the best way forward, or if a combination of other industry innovations - ranging from flexible fee arrangements to a seamless, tech-assisted small claims dispute process - could be a more effective solution.

The proposal for litigation scale costs - which would be by default ad valorem to the claim quantum, regardless of the dispute's nature or the complexity of the issues, the client's needs, or the volume of evidence - has predictably caused consternation among the legal fraternity.

Lawyers have described it as an existential crisis to the domestic litigation bar, a solution where no real problem exists. It also poses a threat to the bar's pro bono culture: many small-firm practitioners, who punch above their weight in doing pro bono work, will find themselves in the trenches trying to survive the day to day.

If this clamour is only the noise of lawyers protecting their rice bowl, it should carry less weight. After all, we live in an age of disruption and no industry should hold its way of doing business as sacred.

But are litigation scale costs in line with our aim to innovate and develop Singapore into an international and commercial law-making hub and a global restructuring centre?

Some thoughts.

EMBRACING INNOVATION

We have been working hard to establish Singapore as a legal, dispute and restructuring hub on the Asian and international stage. The Singapore International Arbitration Centre has seen phenomenal growth and acceptance as a leading arbitration centre. It handled a record 452 new cases in 2017, experiencing faster growth than its competitors, including London's Court of International Arbitration.

In tandem with this, we have set up the Singapore International Commercial Court and the Singapore International Mediation Centre. The aim, as stated by Minister of Law K Shanmugam, is to be "well-positioned to offer commercial parties a comprehensive suite of dispute resolution options to support their business needs".

One big factor in determining if Singapore is an appropriate forum for dispute resolution is the depth and maturity of its jurisprudence - in other words, whether Singapore's case law is sufficiently well-developed and discussed in judgments. At the Singapore Academy Law Conference in 2011, Chief Justice Chan Sek Keong emphasised that "our ultimate objective is to build up a large body of local jurisprudence, so that local decisions can be cited first instead of English decisions". This is well noted by our judges, who have worked diligently to build up the body of case law in Singapore.

However, if scale costs are implemented, the lower fees would mean that lawyers will not have the resources to delve into more novel or complex aspects of the law. Instead, they may find themselves limited to making basic arguments that work, not those that push the law forward. This will stymie the continuing development of the depth and breadth of Singapore law that is critical to our continued status as a legal innovation hub.

HOLLOWING OUT OF THE TALENT POOL

Another key component of developing our country into a world-class legal centre is our human capital. We have been growing as a hub for legal services, which requires that our law firms attract the best and the brightest. Our established law faculties continue to rise in international rankings. The National University of Singapore's Law School has been ranked 15th in the world and top in Asia for the past two years.

The scale costs are not intended to apply to arbitrations or cases before the Singapore International Commercial Court (SICC). Both are forums where international firms can practise freely. With foreign law firms not bound by these scale costs, there will be pressure on bright law graduates seeking the challenge of handling complex legal cases to join international law firms. As talent migrates to international firms and other practice areas, this will hollow out the local litigation bar. If access to justice requires a high quality of legal practitioners, then litigation scale costs may be counterproductive. The litigation scale costs will create greater stratification in the legal market. Put simply, more-established litigation practitioners will be able to negotiate higher case fees, and will be in a stronger position to refuse briefs at scale costs. This means that up-and-coming lawyers and those in lesser-known firms with weaker bargaining power will be under greater pressure to agree to scale costs, intensifying the stratification in the industry - a form of elitism in the law.

As I pen this, I am conscious that I have had the privilege of standing before the Singapore Bench as a Senior Counsel for 10 years. The past decade has seen fewer members of the bar admitted as practising Senior Counsel in a considered move by the Courts to ensure a high quality of our Senior Counsel bar. The litigation scale costs proposal would be advantageous to existing Senior Counsel and more-established litigation practices - particularly large blue-chip Singapore firms - who have more leverage to negotiate fees. But it will also potentially limit the development of rising legal stars, which would hurt the industry as a whole and Singapore's development as a legal hub.

They say a rising tide lifts all boats. The reverse is true of an ebbing one.

SCALE COSTS ARE ANTI-COMPETITIVE

Price-fixing in any form is anti-competitive. The legal industry used to be subject to scale costs for conveyancing transactions, pegged to the property's value.

These scale costs were removed on the basis that the free market should be allowed to set the value for professional services.

The same argument holds true for litigation fees. The charges should depend on the complexity of the issues and the client's needs. In many disputes, the monetary quantum is only one item at stake, and is hardly a good gauge of the work required. For example, a simple debt recovery of S$5 million may not require complex arguments of law. On the other hand, a S$5 million shareholder dispute involving constructive trusts, breaches of fiduciary duty and novel points of law on quantification could drag on for two years. In such a complex case, justice would not be done to the legal issues on a budget that the scale prescribes.

In addition, scale costs structures would encourage proliferation of litigation. If litigants know that their professional fees are in effect capped, they would be incentivised to fight the litigation through to the end and take their chances with a "lottery" in the Courts. This may lead to more, and longer-drawn, litigation.

In other words, scale costs would disincentivise litigants from reaching amicable settlements. Consequently, the litigants' interests would be misaligned from those of their counsel, creating potential conflicts of interest.

It has been said that the best way to predict the future is to invent it. We live in an age of disruption, and lawyers are not immune. We must embrace change and improvements, but they have to be the right change and improvements. Perhaps, rather than fall back on an old regime like scale costs, our industry must find a bigger canvas and reinvent itself in even more transformative ways to serve its clients, the public, and the nation.

  • The writer is joint managing partner, TSMP Law Corporation