Stay for non-payment of interlocutory costs order - Rozenblit v Vainer [2017] VSCA 52

Although many interlocutory decisions result in orders for payment of costs that are to be taxed and paid at the conclusion of the proceedings (see R 63.20.1), every now and then there is an interlocutory decision made where costs are fixed and are payable forthwith (see R 63.03(2.1)). Whenever such a cost order is made, there is a chance that the party responsible for paying those costs will not pay, and there is a question about how to deal with compliance. 

The primary option appears to be an application, under R 63.03(3), to stay or dismiss the proceeding (if the defaulting party is the plaintiff) or to strike out the defence (if the defaulting party is the defendant). Like R 63.20.1  this is a recent amendment to the Supreme Court Rules. The rule provides as follows:

[63.03](3) Where the Court makes an interlocutory order for costs, the Court may then or thereafter order that if the party liable to pay the costs fails to do so—
(a) if that party is the plaintiff, the proceeding shall be stayed or dismissed;
(b) if that party is a defendant, the defendant's defence shall be struck out.

However, the power is discretionary and it appears that the courts take a conservative approach to granting orders under this rule.

The matter of Rozenblit v Vainer [2017] VSCA 52 contains a neat summary, by Whelan and McLeish JJA, of the principles when a court will stay a proceeding for failure to pay a costs order made on an interlocutory decision, at [67]:

(a) a stay for failure to satisfy an order for costs in an interlocutory matter may only be ordered if it is the only fair and practical way of facilitating the just, efficient, timely and cost-effective resolution of the proceeding;
(b) justice between the parties requires regard to be had to the interests of the party in whose favour the costs were ordered to be paid;
(c) the parties’ conduct of the proceeding to date, and in particular the reasons for which costs were ordered to be taxed immediately, are relevant to the exercise of the power;
(d) a stay should not be ordered unless the conduct of the party in default warrants the condemnation inherent in such an order;
(e) the power is not to be used simply as a means of enforcing payment of the costs in question unless there are grounds for concluding that the party in default is recalcitrant and is capable of remedying the default.

The principles arose out of the case of Gao v Zhang [2005] VSCA 200, discussed by the Court of Appeal in Rozenblit v Vainer at [57]:

57 In Gao v Zhang, this Court upheld an order staying a proceeding pending payment of a series of costs orders. The plaintiff had harassed the defendant persistently with interlocutory applications over minor procedural matters, which were of progressively less merit over time.[51] In the course of his reasons, Ormiston JA (with whom Vincent JA agreed), said that it was necessary to ‘sound a word of warning lest it be thought that orders of this kind can be adopted as a dayto-day means of recovering costs ordered by the court’.[52] The power to stay the proceeding ‘ought not to be employed unless it is the only fair way of protecting the interests of the party seeking such an order’.[53] It was in that context that he described what was said by Dixon J in Cox v Journeaux [No 2] as the ‘basal principle’.[54]

Gao v Zhang was decided at a time when costs were able to be taxed immediately, and therefore a party could incur a substantial debt before the conclusion of the proceeding. As such, the Court of Appeal in Rozenblit v Vainer discussed whether the principles in Gao v Zhang still have application where, because of R 63.20.1, there are fewer circumstances where costs orders will be payable before the conclusion of a proceeding:

61 At the same time, the change in the Rules means that the power in r 63.03(3) now arises for exercise only in cases where the Court has already decided that something in the conduct of the proceeding has warranted the making of an order that costs ordered against a party in an interlocutory matter be taxed immediately. That factor cannot be overlooked. The fact that the Court has required that the costs in question be paid before the proceeding concludes indicates that the case is unusual. The Court’s reasons for imposing that requirement must therefore be taken into account.[60] But it remains the case that a stay should not be ordered simply to give effect to an interlocutory costs order that is taxable immediately. Such an order, after all, will give rise to a debt that may be able to be pursued by other means of enforcement. 

62 The above analysis is consistent with the other relevant development since Gao v Zhang was decided: the enactment of the CPA. As is well-known, the Court is required, when exercising its powers under the Rules, to seek to give effect to the overarching purpose of the CPA, being ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’.[61]The grant of a stay represents the extreme case where the dispute is not to be resolved at all pending the meeting of a costs order. Consistently with the approach in Gao v Zhang, that circumstance can only arise when there is no other fair and practical way of ensuring justice between the parties.

That is, the approach remains the same because of the overarching purpose in section 7 of the Civil Procedure Act 2010 to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.

Update and refresher on offers of compromise in civil litigation

I recently presented a seminar to several audiences on offers of compromise under Order 26 of the Supreme Court (General Civil Procedure) Rules 2005, offers to settle under Order 25 of the Federal Court Rules 2011, and "Calderbank" offers under the common law.

The take-home message from this seminar is that the amendment to the offer of compromise rules in the Supreme Court of Victoria to allow cost inclusive offers (now consistent with the Federal Court Rules 2011) has made offers of compromise more attractive, and arguably better than "Calderbank" offers. This is particularly so when taking into account the onus of proof for each: an offeree for an offer of compromise needs to prove "special circumstances" that demonstrate why an offer of compromise should not apply, whereas an offeror needs to prove that it was unreasonable for the offeree to have rejected a "Calderbank" Offer. That is, it is much easier for an offeror to obtain a costs benefit from an offer of compromise than from a "Calderbank" Offer, where the offer has bettered the result.

I've included below the Slides from the seminar, embedded from Slideshare.

I hope you find the slides informative and helpful.

2015 amendment: Victorian Supreme Court Rules jettison old summary judgment test

As of 4 May 2015 the Supreme Court (General Civil Procedure) Rules 2005 were amended by the Supreme Court (Chapter I Summary Judgment Amendment) Rules 2015.

These amendments made important revisions to the Rules including:

• To revise Order 22 to facilitate the new test for summary judgment in Part 4.4 of the Civil Procedure Act 2010 ("no real prospects of success"), and to maintain most of the previous procedure for making application for summary judgment (that is, to show cause in response).
• To remove from the scope of Rule 23.01 ("Stay or Judgment in proceeding") the ground that a claim or defence does not disclose a cause of action.
• To revoke Rule 23.03 altogether, which provided for summary judgment where the defendant has a good defence on the merits.

The summary judgment amendment was necessary because of the uncertainty of the process of obtaining summary judgment under Part 4.4 of the Civil Procedure Act 2010, including the interaction of Part 4.4 with the previous Order 22. For instance, Part 4.4 contains no requirement for a responding affidavit to show cause, nor does it require a particular standard of evidence in support of the application. The application of the procedures in Order 22 to Part 4.4, prior to the amendment, was unclear. The result was that it was possible to circumvent the strict requirements for summary judgment in Order 22 by making application under Part 4.4 of the Civil Procedure Act 2010 which arguably contains a more liberal test for obtaining summary judgment (see Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158).

Now Order 22 seeks to facilitate summary judgment under Part 4.4, in the following manner:

• it sets out what is required in a supporting affidavit, that is, verifying the facts and stating in the deponent's belief that the claim or defence has no real prospects of success;
• it sets out the evidentiary requirements for affidavit material in support of an application;
• it sets out a requirement for the respondent to show cause not less than 3 days before the hearing in the summons;
• it sets out the evidentiary requirements in showing cause;
• it allows cross-examination on the affidavit material;
• it provides for directions to be given where the application is not fruitful;
• it contains a provision for setting aside the judgment where there is no appearance by the respondent; and
• it sets out a process for third party procedure applications.

Vexatious Proceedings Act 2014 (Vic): the three tiers of litigation restraint

The Vexatious Proceedings Act 2014 (Vic) (the "Act") commenced on 31 October 2014, and repeals the previous single-tier system for dealing with vexatious litigants in (the then) s21 Supreme Court Act 1986 (Vic).

Purpose and background to the Act

The purpose of the Act and the summary of the powers given to Victorian courts and the Victorian Civil and Administrative Tribunal ("VCAT") are set out in the explanatory memorandum to the Bill as follows:

The [Act] introduces a new regime for the management and prevention of vexatious litigation in Victorian courts and tribunals. The [Act] aims to improve the effectiveness of the justice system by ensuring that unmeritorious litigation is disposed of at an early stage and that persons are prevented from wasting court time with further unmeritorious cases. This will allow court and judicial resources to be allocated to the determination of meritorious cases, which will reduce delays in the court system for other pending matters.

The [Act] enables the Supreme Court, the County Court, the Magistrates' Court and VCAT to make various types of "litigation restraint orders", which increase in severity in accordance with a person's litigation history and pattern of vexatious behaviour. The Children's Court is also given the power to make litigation restraint orders, but only in relation to litigation conducted under the intervention order legislation. The tiered approach to litigation restraint orders promotes early intervention and aims to provide flexibility for the Courts and VCAT to adopt a proportionate response to a person's conduct.

An extract from the legislative guide to the Act published by the Civil Law Policy division of the Department of Justice notes that a 2008 Victorian Parliamentary Law Reform Committee conducted an inquiry into vexatious litigants, and found:

that, although small in number, vexatious litigants consume a disproportionate amount of court and tribunal time and resources, which creates delays in the courts and reduces access to justice for other members of the community with meritorious claims. The Committee also found that vexatious litigants can have a significant financial and emotional impact on the people they sue. 

For example, one vexatious litigant brought 77 separate civil and criminal proceedings over an 11-year period. Many of these proceedings were private prosecutions attempting to summon grand juries to hear treason charges against judicial officers, government ministers and other public officials. Despite the fact that these allegations were completely lacking in substance, considerable court time was required to hear and ultimately dismiss the claims. This not only caused embarrassment, inconvenience and expense to those involved in the proceedings (who were required to spend time and money in contesting the baseless allegations), but it also created delays in the court system for other litigants with genuine claims.

Summary of the Act's provisions

The Act empowers all Courts and VCAT to make a form of litigation restraint order ("LRO"). Altogether there are three types of litigation restraint order, including the Limited Litigation Restraint Order ("LLRO"), the Extended Litigation Restraint Order ("ELRO") and the General Litigation Restraint Order ("GLRO"). In this article and in the Act they are presented in order of increasing breadth and severity, with the LLRO (Part 2) restricting the issue of interlocutory proceedings, the ELRO (Part 3) restricting the issue of litigation in respect of a particular matter or against a particular person, and the GLRO (Part 4) restricting all litigation without leave. There are also associated orders, including an acting in concert order that seeks to prevent a person from acting in concert with a person the subject of a LRO (Part 5) and an appeal restriction order restricting the right to appeal a decision to refuse leave to proceed (Part 6).  The Act aligns the existing regimes in relation to vexatious litigants under the intervention order legislation, including the Family Violence Protection Act 2008 and the Personal Safety Intervention Orders Act 2010.

The central definitions in the Act are "vexatious application" and "vexatious proceeding" that are defined in s3 as:

(a) an interlocutory application / proceeding that is an abuse of the process of a court or tribunal;

(b) an interlocutory application made / proceeding commenced to harass or annoy, to cause delay or detriment, or for another wrongful purpose;

(c) an interlocutory application made or pursued / proceeding commenced or pursued without reasonable ground;

(d) an interlocutory application pursued / proceeding conducted in a way so as to harass or annoy, cause delay or detriment, or achieve another wrongful purpose;

The definitions are then applied to the relevant available orders throughout the Act.

A summary of each type of order, including relevant sections of the Act, is set out below.

LLRO:

• It is directed at preventing a person from making or continuing an interlocutory application, or a specified type of an interlocutory application, in a proceeding (s12).
• It may be applied for by the Attorney-General, a person against whom a vexatious application has been made or a person with sufficient interest in the matter (s10).
• It may be made by any court or VCAT if satisfied that the person, who is a party to a proceeding, has made two or more interlocutory applications in the proceeding and the interlocutory applications are vexatious applications (s11).
• When making a LLRO, a Court or VCAT can take into account any matter it considers relevant including any interlocutory application made by the person or an entity controlled by the person in any Australian court or tribunal, the existence of a LRO or associated order against the person, and any other matter relating to the way in which the person conducts or has conducted litigation (s11).
• An interlocutory application to which the order relates is stayed, or if made in contravention of the order, is of no effect (s13).
• The making of a LLRO in respect of a proceeding does not affect the person's right to make or continue an interlocutory proceeding in another proceeding in a Victorian court or tribunal or to commence or continue another proceeding in a Victorian court or tribunal (s14).

ELRO:

• An ELRO issued by the Supreme Court of Victoria against a person may restrict the commencement or continuation of a proceeding in any Victorian court or tribunal in respect of a matter, person, or entity described in the order (s20), and issued by another jurisdiction is restricted to that jurisdiction only (s21, s22, s23, s24).
• An ELRO may be applied for by the Attorney-General, a person against whom a vexatious proceeding has been commenced or continued, or a person with sufficient interest in the matter (s16).
• It may be made by any court or VCAT if satisfied that the person has frequently commenced or conducted vexatious proceedings against a person or other entity or in relation to a matter (s17).
• A proceeding the subject of an ELRO is either stayed, or if commenced in contravention of the order, is of no effect (s25).
• A proceeding issued by a person in respect of a matter, person, or entity not specified in an ELRO is not affected by the ELRO (s26).
• With the exception of the Supreme Court, a proceeding issued in a jurisdiction that did not issue the ELRO is not affected by the ELRO (s26).

GLRO:

• It restricts the continuation or commencement of any proceeding in a Victorian court or tribunal without leave of either the Supreme Court or the Victorian court or tribunal in which the proceeding is being heard (s30).
• It may only be applied for by the Attorney-General (s28).
• It may only be made by a Judge of the Supreme Court of Victoria (s29).
• It may only be made if the Judge is satisfied that the person has persistently and without reasonable grounds commenced or conducted vexatious proceedings (s29).
• The Judge may take into account any matter he or she considers relevant including any proceeding commenced or conducted by the person or an entity controlled by the person in any Australian court or tribunal, the existence of an LRO or associated order against the person or any other matter relating to the way in which the person conducts or has conducted litigation (s29).
• It stays a proceeding the subject of the GLRO and renders of no effect a proceeding commenced in contravention of the GLRO (s32). 

Acting in concert order:

• It may be applied for by a person who applied for a LRO to which the other person is subject, or by a person named in an interlocutory application or a proceeding that, if made or commenced by the person subject to the LRO, would contravene the terms of the LRO (s34).
• A number of orders may be made by a court or VCAT including a LRO on the same terms as the person with whom the person is acting in concert, that the interlocutory proceeding is struck out or the proceeding stayed and that costs are payable (s35).
• A GLRO is not available for an acting in concert order (s35).

Appeal restriction order:

• It restricts a person from making an appeal against a decision of a court or tribunal either refusing leave to make or continue an interlocutory application or refusing leave to commence or continue a proceeding (s37).
• An order made by the Supreme Court relates to all courts or tribunals and an order made by a court or tribunal other than the Supreme Court relates to that court or tribunal only (s37, s38).
• It stays an application for leave to appeal and renders an application for leave to appeal made in contravention of the order of no effect (s40).

Leave to proceed where an LRO is in force

A person must obtain leave to proceed if a proceeding or interlocutory application is sought to be made that would otherwise contravene the relevant LRO. That person must disclose matters relevant to the application, including his or her history of leave to proceed applications, a history of each interlocutory application or proceeding commenced that is vexatious or which has been stayed or dismissed on the basis that each has no merit, and an explanation of how the application for leave to proceed is materially different to each application previously made and disclosed (s56). 

With the exception of an ELRO made under the intervention order legislation, a person protected by the LRO (including the person who made the LRO to which the application for leave relates or the person named in the interlocutory application or proceeding to which the application for leave relates) must not be given notice of a leave application by a person the subject to a LRO unless the relevant court or VCAT considers that leave to proceed should be granted (s59, s60). In the event that notice is given, that person may be heard (s62). An application for leave to proceed is determined by written submissions or by oral hearing and an oral hearing is required only if there are exceptional circumstances and it is appropriate to do so in the interests of justice (s63).

Discussion

Given the new system provides a lowered threshold for obtaining a LRO, it will be interesting to see the use and threatened use of the LRO in proceedings. For instance, where there is an ongoing discovery battle in a proceeding where, on one view, a party is unwilling to hand over documents and the other party is bombarding that party with applications for further and better discovery, will a threat to obtain an ELRO by the respondent to those proceeding arise? The definition of "vexatious application" does not appear to be cumulative, so such an application (on the respondent's view) may justifiably be regarded as a proceeding made or pursued to "harass or annoy, cause delay or detriment, or achieve another wrongful purpose". Whether or not the threat is justified, a LRO could become another tool to seek to subjugate the other party in litigation, like allegations of breaches of overarching obligations, threats of indemnity costs and threats of personal cost orders against legal practitioners.

Of course, there are likely to be significant efficiencies made by the enactment of this Act, given the examples provided in the legislative guide to the Act and the lowering of the threshold. If this sort of vexatious litigation is restricted, then the courts, VCAT and the parties to proceedings in those jurisdictions are likely to benefit. 

On another topic, it makes sense that a person protected by a LRO is not bothered by applications for leave to proceed, since a vexatious litigant who is prone to issuing multiple vexatious proceedings would also be prone to issuing multiple applications for leave to proceed. However, it is unclear whether the balance is correctly struck in not giving the person protected by a LRO a right to be heard before the court has made its mind up. That is, the Act requires disclosure by the person the subject of the LRO of the various matters that are relevant for the leave to proceed application, and a court or VCAT can decide a leave to proceed application on the basis of that material alone without having heard from the person protected by the LRO. Also, the Act expresses a preference for determination to occur on written submissions and without an oral hearing.

The author, like many others, looks forward to reading the first case published under the Act to see how it works in practice.

2014 Victorian Civil Appeal Reforms: requirement for leave to appeal, new time limits, and no entitlement to an oral hearing

The Courts Legislation (Miscellaneous Amendments) Act 2014 implemented changes to the Supreme Court Act 1986 (Vic) that include a requirement for leave to appeal for all civil appeals, with limited exceptions, and there is no entitlement to an oral hearing for leave to appeal. The changes commenced on 10 November 2014, and the Supreme Court (General Civil Procedure) Rules 2005 were amended also.

These reforms follow the criminal appeal "Ashley-Venne" reforms in 2011, which implemented a leave to appeal requirement. The Court of Appeal has reported (see link to "Revised Instruction to the Profession and Litigants" here) that the criminal appeal reforms requiring leave in all cases have enabled the Court of Appeal to expedite dramatically the hearing of criminal appeals, and it is considered that similar efficiencies can be gained for civil appeals by implementing a leave to appeal requirement also.

The essential features of the new civil appeals regime are set out in the document "Revised Instruction to the Profession and Litigants: Court of Appeal: Proposed New Regime for Civil Appeals and Applications", which was recently published by the Supreme Court of Victoria. This is extracted below, and the author of this article has added the relevant section and rule references in square parentheses, for ease of reference:

• With few exceptions (appeals against refusal to grant habeas corpus and appeals under the Serious Sex Offenders (Detention and Supervision) Act 2009) leave to appeal will be required for all appeals [s14A]. Leave to appeal will be granted only if the Court is satisfied there is a real prospect of success on the appeal [s14C].
• Appeals and applications for leave to appeal will be commenced by filing rather than service [s14B, r64.05]. Service is to take place after the appeal or application, and other required documents, are accepted for filing by the Registrar and a sealed copy of the application for leave to appeal, or appeal, has been returned by the Court.
• The time for initiating applications for leave and appeals will be standardised to 28 days [s14B; r64.05].
• An applicant for leave, or appellant, will be required to file a written case (10 pages maximum unless otherwise permitted in advance) with the application for leave, or appeal, setting out the detailed contentions in support of the grounds [r64.01; r64.03; r64.04]. An applicant for leave must address the merits of the application and the appeal [r64.04].
• A respondent will have 28 days to file and serve a written case in response, or file a notice of intention not to respond or contest [r64.11].
• A respondent will also have 28 days in which to file a cross-application for leave to appeal, or cross-appeal, and accompanying written case and/or a notice of contention and accompanying written case [r64.30; r64.31]. Service of a cross-application for leave to appeal, or a cross-appeal, is to take place after the application or appeal, and other required documents, are accepted for filing by the Registrar and a sealed copy of the cross-application for leave to appeal, or cross-appeal, has been returned by the Court.
• Applications, other than for leave to appeal, will continue to be commenced by filing an application supported by affidavit and submissions [r64.03]
• Greater capacity for a single judge to determine applications, including for leave to appeal, and on the papers without an oral hearing [s14D; r64.40]. There will be no entitlement to an oral hearing and whether there will be an oral hearing will be the decision of the Court [s14D; r64.15].
• Where an application for leave to appeal is determined without an oral hearing the applicant can apply to two or more judges to set aside or vary a dismissal of the application, unless the single judge has also determined that the application is totally without merit in which case the determination on the papers is final [s14D; r64.15]. Such applications to set aside or vary a dismissal of an application will be by way of oral hearing and be determined on the basis of the materials filed prior to the decision to dismiss the application and any additional documents ordered by the Court or the Registrar [s14D; r64.18]. To rely on further material the Court’s leave will be required [s14D; r64.18].
• Applications determined on the papers will be final, other than applications for leave to appeal, and it will not be possible to apply to set aside or vary a dismissal of such an application, whether determined on the papers or by way of oral hearing. There will be an exception for ex parte orders.
• More intense Registry management of applications and appeals, including early assessment of applications and appeals, and communication with the parties to establish a timetable and making of orders and directions to prepare applications for hearing, or determination by the Court on the papers, and to prepare appeals for hearing.
• As appeals will require the leave of the Court, applications for leave will be streamed so that applications for leave to appeal will be listed either with the hearing of the appeal or listed separately, with an appeal being listed at a later date, if leave is granted.
• An emphasis on electronic filing wherever possible.
• Greater compliance with Court orders. In particular, subject to the Court’s order, if applicant or appellant fails to comply with a direction or order for a month or longer the application or appeal will be taken to be abandoned [r64.45].
• The ability of the Court, on its own motion, or for a party, to apply for dismissal of an application or appeal [r64.46]

The Victorian Bar hosted a seminar on 20 October 2014 in which Judicial and Administrative members of the Court of Appeal discussed the civil appeal reforms. Click here for the video presentation (note - only members of the Victorian Bar can access this video).

The most contentious aspects of these reforms are:

1. The perceived abrogation of the right of appeal, which has been replaced with a requirement for leave to appeal.
2. A leave to appeal application can be determined "on the papers" by a single Judge and without an oral hearing. 

Given applications for leave to appeal can be determined on the papers and without an oral hearing, when a single Judge of Appeal is making an order refusing leave to appeal in part or in whole, including determining that the application for leave to appeal is totally without merit, it is expected that the giving of the order includes the giving of reasons. This is not expressed in the Rules, but in the author's view is the only logical construction of the rules in circumstances where the order dismissing the application can be determined in the absence of the parties, and subsequently set aside or varied under s14D/r64.18 before two Judges of the Court of Appeal. Also, this construction would be consistent with s24 of the Charter of Human Rights and Responsibilities Act 2006 (Vic).