Cost Law Commentary

The Civil Procedure Act Starts to Bite

Last week, the Court of Appeal handed down a significant judgment, giving insight into the Court's view of the effect of the Civil Procedure Act 2010, and the obligations of practitioners.  The clear message is that the sanction powers in the CPA are a case management tool which should be utilised by the judiciary to change the culture of litigation at all costs.  The CPA enables the Court to reduce delays and waste, improve accessibility and achieve proportionality. In Yara Australia Pty Ltd v Oswald [2013] VSCA 337, the Court of Appeal gave a clear message that practitioners have an overarching obligation to conduct litigation in a manner proportionate to the matters in issue, and that "it will be no answer that the practitioner acted upon the explicit and informed instructions of the client", if there is failure by the practitioner to use reasonable endeavours to comply with the overarching obligation to ensure costs are reasonable and proportionate (s 24 of the CPA).

The matter involved an appeal from a decision of Whelan J setting aside a previous order for security for costs.  The principle litigation is large and complex, the appeal was heard in one day and involved a number of applications for security ranging in amount from $31,802.20 to $86,361.  There were three applicants and two respondents, represented in total by five senior counsel,  six junior counsel and five firms of solicitors.  In addition to the notices of appeal and written submissions, there were six volumes of application books.

The Court expressed concern as to the proportionality of representation and material, given the amounts in issue and the nature of the application , and of its own volition sought submissions from the parties as to whether there had been a failure to meet the CPA obligations to use reasonable endeavours to ensure the costs incurred were reasonable and proportionate.

The judgment is an extensive consideration of the obligations imposed by the CPA, providing a guide to judicial officers regarding the Court's "powers and  the means by which parties or their legal representatives can be penalised for any contravention".  The Court suggests that the sanction provisions of the CPA have been underutilised to date, perhaps due to a "false perception that these provisions and the overarching obligations do not effect any material change to the Rules and the inherent jurisdiction of the Court".

A strong theme in the judgment is that practitioners cannot rely on the fact that they were acting in accordance with instructions, as grounds to justify the manner in which the matter has been conducted.  They must recognise that their duties to the Court override instructions from a client, where there is a tension between the two.  A further theme of the judgment is that there is a duty on a judicial officer to consider whether the overarching provisions have been breached.  It is not simply a matter to be considered only when a party raises the issue.  "Judicial officers must actively hold the parties to account".

The Court notes that the concept of costs being proportionate is at the core of the legal reforms introduced by the CPA, and that section 24 imposes a positive obligation on both solicitors and counsel to take steps to ensure that costs are not excessive.  One aspect of the overarching purpose, which is the focus of the court, is "cost effective resolution of the real issues in dispute", and this involves the court dealing with a matter in a manner proportionate to the "complexity and importance of the issues and amount in dispute".

An objective evaluation of the steps taken by a legal practitioner involves weighing the legal costs expended "against the complexity and importance of the issues and the amount in dispute, in order to determine whether the parties used reasonable endeavours to ensure that costs were proportionate".

The Court's powers where there is a contravention of obligations, include sanctions and cost orders.  Such powers are not confined to cases of incompetence or improper conduct, but extend to breaches of the overarching obligations.  Cost orders can include orders that the practitioners bear some or all of the costs of the opposing party, or an order restricting the costs which the practitioner can charge to their own client.

The first aspect of the particular case considered was whether the level of representation by counsel was reasonable and proportionate.  The factors relevant include the complexity or importance of the issues, the likely costs of the proceedings,  the amount in dispute, the benefits achieved by the level of representation and the manner in which the hearing was conducted.  The Court found that oral submissions of the lead senior counsel narrowed the focus of the application.  It was also noted that the overall litigation is likely to be "immensely complex and expensive", and this was grounds for separate representation of parties.

The second aspect considered was the extent of material in the application books, which extended to six folders of more than 2700 pages.  "Overly voluminous application material strains the administrative resources of the Court and the time of judges themselves".  The costs must be proportionate the specific application, and it was not an answer that the overall costs in the litigation would be very substantial.  The Court found that there had been a breach of the overarching obligation to ensure costs were reasonable and proportionate. It refused to make an order for indemnity costs, and has invited further submissions on the appropriate costs orders.