Australia: Courts remind lawyers they have skin in the litigation game following the introduction of the Civil Procedure Act

The Victorian Court of Appeal has shown its willingness to punish lawyers for breaching their overarching obligations under the Civil Procedure Act 2010 (CPA), by imposing cost penalties for burdening the Court with excessive material.

Prior to the decision in Yara Australia Pty Ltd v Oswal [2013] VSCA 337, Courts have provided little guidance as to the extent of their powers to impose penalties on practitioners for breaching their obligations under the CPA.

It is now clear that the CPA confers broader powers than under the Supreme Court Rules or the Court's inherent jurisdiction, as it can be used for disciplinary purposes to sanction parties to litigation, including practitioners.

BACKGROUND

The Court's ruling followed an application for leave to appeal against orders regarding security for costs ranging between $20,000 and $80,000.

The combined representation of the parties in the application comprised five senior counsel, six juniors and five firms of solicitors, who provided the Court with six application folders running to over 2700 pages.

The Court refused the application and sought submissions under section 29(2)(b) of the CPA as to whether any party had contravened their overarching obligations by failing to use reasonable endeavours to ensure that costs incurred were reasonable and proportionate.

DETERMINATION

The Court accepted that it was appropriate for each party to be represented by the counsel that were engaged, as each applicant had distinct interests. However the Court ruled that the legal practitioners had breached their overarching obligation under section 24 of the CPA, because they filed excessive material in the Court books.

The solicitors were ordered to indemnify their clients for half of the respondent's costs, and were unable to charge their clients for half the costs incurred in preparing the excessive material.

The Court noted that there will be a prima facie case that the overarching obligation has been breached where a large volume of material is provided that is unnecessary and excessive.

Importantly, practitioners will be required to take steps necessary to comply with their overarching obligations, even when those actions are in conflict with their client's instructions.

The decision also confirms that the CPA gives Victorian courts the greatest power of any Australian jurisdiction to use punitive and disciplinary measures to sanction lawyers who breach their overarching obligations.

For example, the Federal Court's power to give effect to the overarching purpose extends only to taking into account a lawyer's failure to comply with the overarching purpose when awarding costs in a civil proceeding. In NSW, the Court's powers to award costs are still governed by Court Rules.

IMPACT OF THE DECISION

The Court commented that the sanction provisions in the CPA had been under-utilised, which was surprising given the length of time the CPA has been in force. This decision therefore both guides practitioners as to the scope of the overarching obligations, and reminds judicial officers of their obligation under the CPA to more actively case manage proceedings and scrutinise practitioners' conduct.

The decision should be heeded by parties and practitioners litigating in Victoria. Particular consideration must be given to the exact material that is relevant to proceedings, because it is more likely that courts will now invite submissions from parties to scrutinise the use of excessive material or resources, as well as compliance with the overarching obligations more generally.

Indeed, the Yara decision has already been raised in seven subsequent judgments - an indication of the influence it is already having on the Victorian judiciary.

For example, in Setka v Abbott [2013] VSCA 345 - a matter involving defamation proceedings against the Prime Minister - the Court of Appeal cited Yara when it refused to allow the plaintiff to rely on new grounds not previously relied on in his original Notice of Appeal.

The Court ruled that the plaintiff's advisers had not facilitated the just, efficient, timely and cost effective resolution of the real issues in dispute because they had not identified issues that required determination early in the life of the proceeding. The Court noted that the Yara decision powerfully emphasised that the CPA is "not simply a pious but toothless statement of the considerations which are to motivate participants, lay and professional, in civil litigation".

Similarly, in Wingfoot Australia Partner Pty Ltd v Jovevski [2014] VSCA 21, the Court of Appeal refused to permit the issue of causation, as it was being put by the appellants, to be raised for the first time on appeal. The Court stated this "should have been obvious following the Court of Appeal's decision in Yara Australia Pty Ltd v Oswal".

WHAT DOES THE DECISION MEAN FOR YOU?

Litigants should be both wary of the more punitive approach Courts are now likely to adopt for breaches of the overarching obligations, and conscious of the utility of bringing the Yara decision to the Court's attention in order to remind it that it not only has powers to proactively enforce the overarching obligations, but a responsibility to do so.

Such an approach would be beneficial in circumstances where an opponent adopts tactical procedural moves to delay or frustrate the resolution of a dispute, or otherwise conducts litigation in an inefficient manner.

Indeed, the Explanatory Memorandum to the Civil Procedure Bill 2010 emphasises how the overarching obligations can promote cultural changes in litigation by, amongst other things, discouraging the abuse of legal processes for strategic purposes.

The Yara decision is a call to judicial officers to begin fulfilling this purpose by making better use of the CPA provisions, and a reminder to lawyers and clients of the need for greater efficiency in the way litigation is conducted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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