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).

Recent Victorian Offer of Compromise reform: costs inclusiveness, claim failure, pre-litigation offers and other changes

The Magistrates' Court General Civil Procedure (Offers of Compromise Amendments) Rules 2014 bring the rules on offers of compromise in the Magistrates' Court of Victoria ("MCV") largely into alignment with the Supreme Court of Victoria ("VSC") and County Court of Victoria ("CCV") rules on offers of compromise. This amendment commenced on 1 August 2014. The VSC and CCV rules were amended on 1 September 2013 and 7 October 2013 respectively.

Summary of the reform

By way of summary, the rule amendments for all Victorian Courts implement the following significant changes to Order 26 which concerns offers of compromise:

• Offers of compromise shall be either expressed to be inclusive of costs, or costs are to be paid or received in addition to the offer (r26.02(3)). 
• An acceptance of an offer of compromise may may be withdrawn if the money is not paid within the time specified in the offer or within 28 (SCV/CCV)/30(MCV) days after acceptance of the offer and the court gives leave to do so. A party seeking leave may also seek orders to restore the parties to their position at the time of acceptance and as to the further conduct of the proceeding (r26.07)
• If a party defaults in complying with the offer after its acceptance, a non-defaulting party may apply to the court for an order giving effect to the offer, an order staying or dismissing the proceeding if the plaintiff is in default, an order striking out the defendant's defence if the defendant is in default or an order that a claim, not the subject of the offer, shall proceed (r26.07.1). Where there are multiple defendants this rule is limited to where the offer is made to compromise the claim against all defendants (r26.07.2).
• The consequences of non-acceptance commence at 11am on the second business day after the offer was served, instead of the day after the offer was served (r26.08).
• Where an offer of compromise is made by a defendant and the plaintiff "unreasonably fails to accept the offer" and the claim is dismissed or judgment is entered in favour of the defendant, then, unless the court otherwise orders, the defendant shall be entitled to costs on the usual basis up until 11am on the second business day after the offer was served, and thereafter on an indemnity basis (CCV/SCV)/25% increase on the applicable scale (MCV) (r26.04(4)). The operation of this rule has already been considered, noted below.
• The court can take into account pre-litigation offers in exercising its discretion as to costs, provided the offer was open to be accepted for a period of at least 7 days after the offer was made and the offeror obtains an order no less favourable to the offeror than the terms of the offer (r26.08.1).
• Offers of compromise are extended to "contributor parties" that may be held liable to contribute towards an amount of debt or damages. A contributor party may make an offer to another contributor party to contribute, to a specified extent, to the amount of the debt or damages. If the offer is made and not accepted, and the offeror obtains an order against the offeree more favourable than the terms of the offer, then unless the court otherwise orders, the offeror is entitled to an order that the offeree pays the offeror's costs on the usual basis up until 11am on the second business day after the offer was served, and thereafter on an indemnity basis (SCV/CCV)/25% increase on the applicable scale (MCV) (r26.10).
• Transitional provisions provide that the amendments do not have retrospective effect, and the previous provisions apply to offers of compromise served when the previous provisions were applicable (r26.11).

Click here for the VSC amending legislation (Supreme Court (Chapter I Offers of Compromise Amendments) Rules 2013), here for the CCV amending legislation (County Court (Chapter I Amendment No. 8) Rules 2013) and here for the MCV amending legislation (Magistrates' Court General Civil Procedure (Offers of Compromise Amendments) Rules 2014) from the Victorian Parliament website.

These amendments follow the suggestion by the Victorian Law Reform Commission in its 2008 "Civil Justice Review" Report for the Costs Council to review the rules relating to offers of compromise, and a 2012 consultation process between the Civil Procedure Advisory Group and various industry stakeholders.

Consequences on failure of a claim where there is an offer by a defendant

In Smith v Jovanoska & Anor (No. 2) [2013] VSC 714 the Supreme Court of Victoria considered the new r26.04(4), which provides for cost consequences on a dismissal of a claim where an offer was served by a defendant and the plaintiff unreasonably fails to accept the offer. There, an offer of compromise was served by the first defendant offering to pay the plaintiff $40,000 inclusive of costs. It is not made clear from the decision, but it can be reasonably assumed, that the outcome of the case is that the plaintiff failed in the claim. 

There, Zammit AsJ held that the considerations for "Calderbank" offers (see Calderbank v Calderbank [1975] 3 WLR 586) set out in the matter of Hazeldene’s Chicken Farm v Victorian WorkCover Authority (No 2) [2005] VSCA 298 ("Hazeldene's") are applicable to an offer of compromise under this new provision, and ordered that the plaintiff pay the first defendant's costs from the second business day after the offer was served on an indemnity basis. By way of recap, the matters a court is to have regard to, from Hazeldene's, are as follows:

(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the offer of compromise;
(d) the offeree’s prospects of success as assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.

In Smith, the offer was served late in the proceeding, after mediation and before trial. These facts were decisive in the outcome.

Discussion

Since the reform allows cost inclusive offers, this may have the effect of displacing the "Calderbank" offer as the offer of first resort, since a "Calderbank" offer has the disadvantage of requiring the offeror to prove that the rejection of the offer was unreasonable. However, there is still a benefit in making an offer "plus costs", because where an offer is made "plus costs" it is much easier for the court to assess whether the result is more or less favourable than the offer. This is because where an offer is made "plus costs" there doesn't need to be an assessment of what the costs would have been at the date of the offer.

The inclusion of contributor parties will make offers of compromise more attractive to complex multi-party disputes, such as building and insurance disputes. However, the language of this provision appears convoluted and this may give rise to some disagreement about what sort of parties are intended to be captured by this provision. For instance, is this intended to apply to apportionable claims under Part IVAA Wrongs Act 1958, or contribution proceedings under Part IV Wrongs Act 1958, or both?

Recent (2014) discovery amendments to the Civil Procedure Act 2010 (Vic)

The Justice Legislation Amendment (Discovery, Disclosure and Other Matters) Act 2014 (Vic) was given Royal Asset on 8 April 2014, and amends the Civil Procedure Act 2010 (Vic) (the "CPA"). The amendments mainly concern document management in the discovery process.

Click here for the link to the Explanatory Memorandum.

Click here for the link to the Justice Legislation Amendment (Discovery, Disclosure and Other Matters) Act 2014.

The amending legislation does the following to the CPA:

• It gives a court power to order parties to prepare a statement of issues, which may be used for many purposes including discovery (ss50 and 50A).
• It gives a court power to give directions limiting the obligation of discovery to a class or classes of documents or to documents relating to one or more specified facts or issues in dispute (s55(2)(c)).
• It gives a court power to order a party to pay a specified amount to another party in relation to the costs of discovery, including by way of payment in advance or as costs in the proceeding (s55(4) and (5)).
• It gives the court power, on consent of the parties, to give over all documents in that party's possession or control, on the basis that privilege is not waived (s55A).
• It gives the court power to order a party to provide an affidavit of document management, including details of the volume or location of discoverable documents, the way the documents are arranged or stored, or the party's document management processes more generally (s55B).
• It gives the court power to order oral examination of a deponent of an affidavit of document management or another appropriate person who is able to provide information about the matters in the affidavit (s55C).

The amendments relating to discovery are novel, and reflect the increasing need for proper document management and the kind of document management processes. The purpose of the amendments, expressed in the Explanatory Memorandum, is:

[T]o ensure that the courts, parties and legal practitioners are using appropriate tools to reduce the costs and delays associated with the discovery process, for example by more clearly defining the issues in dispute, considering document management issues prior to undertaking discovery, and limiting the scope of discovery requests.

The amendment that allows a party to hand over all of its documents and maintain privilege is a method used in large-scale litigation where it is considered too onerous for a party to wade through millions of documents to extract privileged and irrelevant documents. Of course, the risk of agreeing to this kind of order is that once a document is seen, it cannot be unseen. On the other hand, this sort of order may avoid the kind of extreme satellite litigation that occurred in the recent High Court of Australia decision of Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited (2013) 303 ALR 199. There, a party inadvertently discovered and produced 13 documents because of errors made in a large and complex discovery process, and the opposing party refused to return them. The discovery dispute started in the New South Wales Supreme Court, then went to the Court of Appeal, and then on to the High Court.

This is the sort of balancing exercise the Court and the parties will need to engage in when considering this kind of order, in light of the overarching purpose to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute (CPA, s7).

Security for costs: Colmax Glass Pty Ltd v Polytrade Pty Ltd [2013] VSC 311

The matter of Colmax Glass Pty Ltd v Polytrade Pty Ltd [2013] VSC 311 was a security for costs application before Derham AsJ in the Supreme Court of Victoria. The dispute involved a claim and counterclaim. The claim alleged a breach of contract by the defendant in not supplying recycled glass to the plaintiff, and the defendant counterclaimed alleging that the plaintiff had prevented the defendant from complying with the agreement.

A security for costs application was issued by the defendant against the plaintiff, and the defendant was successful. The matter is particularly helpful because of the articulation, by Derham AsJ, of the principles concerning security for costs applications. I have set this out below:

Applicable legal principles

14 Rule 62.02 of the Supreme Court (General Civil Procedure) Rules 2005 provides, so far as relevant:

62.02 When security for costs may be ordered 

(1) Where –
...
(b) the plaintiff is a corporation or (not being a plaintiff who sues in a representative capacity) sues, not for the plaintiff’s own benefit, but for the benefit of some other person, and there is reason to believe that the plaintiff has insufficient assets in Victoria to pay the costs of the defendant if ordered to do so;
...
(f) under any Act the Court may require security for costs –
the Court may, on the application of a defendant, order that the plaintiff give security for the costs of the defendant of the proceeding and that the proceeding as against that defendant be stayed until the security is given. 

15 Section 1335 of the Corporations Act 2001 relevantly provides:

Costs

(1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is a reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.

16 The first question is whether the threshold condition for the exercise of the power is satisfied, that is, whether there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful. That jurisdictional condition must be satisfied before the discretionary power to order security for costs is enlivened: Livingspring Pty Ltd v Kliger Partners.[3] 

17 It is well established that the proper approach to the matter is that the Court has an unfettered discretion, but on the footing that the very fact that the jurisdiction has been enlivened in the first place may itself be a factor, even a most significant factor, in the exercise of the discretion.[4]

18 If the Court has jurisdiction to order security, the burden rests on the defendant to persuade the Court that an order for security should be made.[5]

19 In exercising the discretion whether to order a company to give security for costs the court must carry out a balancing exercise. It must weigh the injustice to the plaintiff if it is prevented from pursuing a proper claim by an order for security, against the injustice to the defendant if no security is ordered and at trial the plaintiff's claim fails and the defendant is unable to recover costs from the plaintiff: See the observations of Smithers J in Tradestock Pty Ltd v TNT (Management) Pty Ltd.[6] The Court will properly be concerned not to allow the power to order security to be used as an instrument of oppression, but also it will be concerned not to be so reluctant to order security that an impecunious company can use its inability to pay costs to put unfair pressure on the defendant: Keary Developments Ltd v Tarmac Construction Ltd.[7]

20 The various factors that have been found to be potentially relevant in the exercise of the discretion were summarised many years ago, compendiously, by Smart J in Sydmar Pty Ltd v Statewise Developments Pty Ltd.[8] So far as relevant to the present application, those factors include: 

(a) The plaintiff’s prospects of success: Whether the plaintiff's claim is made bona fide and has reasonable prospects of success. In this regard, the authorities make the following points: 

(i) As a general rule, where a claim is prima facie regular on its face and discloses a cause of action, in the absence of evidence to the contrary, the court should proceed on the basis that the claim is bona fide with reasonable prospects of success;[9]
(ii) Assessing the plaintiff's prospects of success is not really a practicable test in any case of reasonable complexity: Interwest Ltd v Tricontinental Corp Ltd;[10] Although it will ordinarily not be practicable to reach any clear view about the merits of the plaintiff's claim, that is not to say that the merits are always irrelevant (unless totally lacking) or that the bona fides of the claim may be disregarded: Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd;[11]
(iii) The court is not obliged to consider at length the merits of the claim, and to do so would ordinarily be a waste of resources: Impex Pty Ltd v Crowner Products Ltd (1994) 13 ACSR 440 (QSC); 

(b) Plaintiff's impecuniosity caused by defendant: Whether the plaintiff's lack of funds has been caused or contributed to by the conduct of the defendant in relation to the transaction the subject of the claim: Sir Lindsay Parkinson & Co Ltd v Triplan Ltd.[12] In this regard, the authorities make the following points: 

(i) The plaintiff carries the burden of persuasion on the question whether the conduct of the defendant was the cause of the plaintiff's financial difficulties: BPM Pty Ltd v HPM Pty Ltd;[13]
(ii) There must be a solid foundation for that conclusion: Right Home Improvements International Pty Ltd v Imperial Alarm Screens (Aust) Pty Ltd,[14] referred to in Sandl Trading Pty Ltd v North American Oil Co;[15].
(iii) The plaintiff carries the onus of satisfying the court on the basis of admissible evidence, see Ninan v St George Bank Ltd;[16] 

(c) Plaintiff's proceeding merely defensive: Whether the plaintiff's proceeding is merely a defence against "self-help" measures taken by the defendant: Heller Factors Pty Ltd v John Arnold's Surf Shop Pty Ltd (in liq);[17] Sydmar Pty Ltd v Statewise Developments Pty Ltd;[18] Interwest Ltd v Tricontinental Corp Ltd.[19] Each case must be looked at to see whether in substance the claim set up is by way of defence such that the plaintiff's claims are properly characterised as defensive; 

(d) Security order would stultify pursuit of legitimate claim: Whether the making of the order would unduly stultify the ability of the plaintiff to pursue an arguable case legitimately instituted: See MA Productions Pty Ltd v Austarama Television Pty Ltd;[20] Drumdurno Pty Ltd v Braham;[21] Ariss v Express Interiors Pty Ltd (in liq);[22] Excelsior Run Pty Ltd (in liq) v Nelius Pty Ltd;[23] 

(e) Contribution by shareholders or creditors to security ordered: The extent to which it is reasonable to expect shareholders or creditors (or beneficiaries, if the company is a trustee) to make funds available to satisfy any order for security which is made: National Bank of New Zealand Ltd v Donald Export Trading Ltd;[24] Pacific Acceptance Corp Ltd (t/as Flack & Flack) v Forsyth (No 2);[25] Drumdurno Pty Ltd v Braham;[26] Newtons Travel Services Pty Ltd v Ansett Transport Industries (Operations) Pty Ltd;[27] 

(f) Delay in applying for security: Delay in applying for security may be ground for refusing to order security. The company, which can be assumed to be in financial difficulties, is entitled to know its position in relation to security at the outset, and before it embarks to any real extent on its litigation, and certainly before it makes a substantial financial commitment toward litigating the claim. See Buckley v Bennell Design & Construction Pty Ltd;[28] Smail v Burton; Re Insurance Assocs Pty Ltd (in liq);[29]

(g) Defendant's cross-claim raising same facts: where the defendant has raised a cross-claim, whether substantially the same facts are likely to be canvassed in determining the claim and cross-claim. The court would ordinarily seek to avoid the situation where the claim is stayed because of the inability of the plaintiff to provide security while the defendant's cross-claim covering the same factual areas proceeds: Sydmar Pty Ltd v Statewise Developments Pty Ltd.[30] 

21 In Livingspring Pty Ltd v Kliger Partners the Court of Appeal said:[31] 

There are, of course, particular discretionary matters of which the plaintiff must necessarily have carriage. If, for example, the plaintiff corporation asserts that an order for security would impose on it such a financial burden as would stultify the litigation, the plaintiff must establish the facts which make good that assertion. We respectfully adopt what the Full Federal Court said in this regard in Bell v Wholesale Co Pty Ltd v Gates Export Corporation (No 2):

In our opinion a court is not justified in declining to order security on the ground that to do so will frustrate the litigation unless a company in the position of the appellant here establishes that those who stand behind it and who will benefit from the litigation if it is successful (whether they be shareholders or creditors or, as in this case, beneficiaries under a trust) are also without means. It is not for a party seeking security to raise the matter, it is an essential part of the case of a company seeking to resist an order for security on the ground that the granting of the security will frustrate the litigation to raise the issue of impecuniosity of those whom the litigation will benefit and to prove the necessary facts.
The same would be true of a contention that the plaintiff’s impecuniosity was caused by the defendant.

22 In Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd,[32] Winneke P and Phillips JA, made the following observations:[33] 

It is thus apparent that the justification for the statutory rule is that the defendant, not being a voluntary litigant, deserves to be protected from the consequences of limited liability. Those who seek to conduct their businesses through limited liability companies expect to receive the benefits which such liability attracts. It seems to us a necessary corollary that they should be prepared to accept the strictures imposed by the section [s 1335] if the company embarks upon litigation: Buckley v Bennell Design and Constructions Pty. Ltd. (1974) 1 ACLR 301at 304 (NSW Court of Appeal).

It has not been, and could not be, suggested that the section compels the court to order security against an impecunious corporate plaintiff. The court is given an unfettered discretion to do what is justly required by the circumstances of each case. Street CJ made this point in Buckley when he said, at 305: 

It seems to me that the discretion could properly be regarded as ordinarily exercisable so as to protect a defendant sued by an impecunious company, but that, if the court in any case takes the view that this protection should not be afforded to the defendant, it has an unlimited and unrestricted discretion to give effect to such view without having to look for special circumstances.

The defendant persuaded Derham AsJ that the threshold question was satisfied because the company had no paid up capital, had no property in Victoria, was the subject of many winding up applications, had refused to provide evidence of its capacity to pay costs, and its plant and equipment was under charge to the NAB. An unaudited balance sheet produced by the plaintiff did not help the situation either, revealing a dire situation. His Honour ordered that security be provided even though His Honour found that the claim was bona fide, there was some foundation for the submission that the plaintiff's impecuniosity was caused by the defendant, and there was some delay by the defendant in issuing the application for security.

County Court Commercial List Practice Notes for 2013.

The County Court has issued several practice notes for the Commercial List.

The first is Practice Note PNCI 3-2013 for the Commercial List, General Division, of the County Court of Victoria. This supersedes the previous practice note issued. Click here for the Practice Note PNCI 3-2013.

The main points of note in Practice Note PNCI 3-2013 are as follows:

• It concerns the General Division only.
• Once an appearance is filed an administrative mention is triggered, which requires the parties to submit consent orders to the court and for the court to nominate a trial date. If the parties are not ready to proceed at the time an administrative mention notice is received, they should contact the directions group indicating why the matter is not ready and requesting that the case be listed for administrative mention.
• Discovery of certain minimum documents will be required, and a catch all order of the documents which are 'reasonable in the circumstances' for a party to discover will be made. The parties must determine the question of reasonableness, and if they cannot, they can obtain the assistance of the Court.
• The Court encourages the preparation of agreed lists of discoverable documents.
• Applications for interlocutory hearings may be made to the Commercial List Duty Judge through the Directions Group. Applications are made by filing a draft form of order together with any affidavit(s) in support, unless the Rules specifically require the issue of a summons.
• The Court may order a case conference or a judicial resolution conference. The parties, or a representative of a corporate party with authority to settle the proceeding, must attend. A case conference will be held in open court and counsel for the parties will be expected to be able to discuss the issues of fact and law. There will be an opportunity for private negotiations.
• The Judge may participate in without prejudice discussions where both parties are present at a judicial resolution conference. Everything said or done in a judicial resolution conference is confidential. The Judge who conducts the judicial resolution conference will not hear the trial of the proceeding unless the parties consent.
• Every effort will be made to ensure that General Division cases are listed before a Judge with commercial experience. Where a case cannot be reached, it will be transferred to the Expedited Cases Division and listed before a specific commercial Judge, with priority.
• Parties are encouraged to agree to the tender of non-contentious documents wherever possible.

The second is Practice Note PNCI 1-2013 for the Commercial List Duty Judge. This supersedes the previous practice note issue. Click here for Practice Note PNCI 1-2013.

The main points of note in Practice Note PNCI 1-2013 are as follows:

• The Duty Judge hears all case conferences and judicial resolution conferences, in addition to administrative mentions, directions hearings and hearing interlocutory disputes. In other lists of the Commercial List, the Judge in charge will deal with interlocutory applications, and not the Duty Judge.
• Unless a summons is specifically required by the rules, the standard order reserving liberty to apply will be regarded by the court as obviating the need for a summons to apply for all other applications.
• Where a summons is not required for an application, application is made by email to the directions group, and the email must be copied to all other parties. An affidavit is not required where only correspondence is relied on, and the correspondence may be produced as a bundle at the hearing.
• Where the application requires evidence of contentious facts, an affidavit is necessary. The affidavit must be served in sufficient time before the application is heard to allow all parties an opportunity to respond to the application.
• If the matter requires a relatively short directions hearing in the General Division, it is likely to be given a return date on the next available Thursday at 9.30am provided the time estimate is less than 1 hour.
• Short directions hearings in the Expedited Cases Division will be listed on Fridays at 9.30am.
• More substantive interlocutory matters will be listed during Monday to Wednesday subject to the availability of the Duty Judge. 
• Proceedings are not automatically transcribed unless by prior arrangement.

The third is Practice Note PNCI 2-2013 for the Commercial List, Expedited Cases Division. This supersedes the previous practice note issued. Click here for Practice Note PNCI 2-2013.

The main points of note in Practice Note PNCI 2-2013 are as follows:

• Directions will depend on the circumstances of the case, and flexibility will be shown in relation to interlocutory steps and the mode of presenting evidence at the trial.

New costs regime for the Supreme Court of Victoria: Supreme Court (Chapter I New Scale of Costs and Other Costs Amendments) Rules 2012

The Supreme Court (Chapter I New Scale of Costs and Other Costs Amendments) Rules 2012 is a significant amendment to Order 63 (costs) and the Scale of Costs in the Supreme Court (General Civil Procedure) Rules 2005. The amendment commences on 1 April 2013 in relation to all proceedings irrespective of commencement date (that is, it applies to proceedings commenced before 1 April 2013).

2 major changes include the removal of the 3 current bases of taxation (being party-party, solicitor-client and indemnity) and the replacement with ‘standard basis’ (being all costs reasonably incurred and of reasonable amount) and ‘indemnity basis’; and the alteration of the Scale of Costs to a time charging basis of 6 minute units.

In terms of the time-value of the Scale of Costs, the following are the hourly rates for attendances by a legal practice (based on the 6 minute units):

• Item 1(a) attendance requiring legal skill or knowledge, $36 per 6 min, being $360 per hour.
• Item 1(b) attendance requiring legal skill or knowledge by an employee who is not a legal practitioner, $27 per 6 min, being $270 per hour.
• Item 1(c) attendance not requiring legal skill or knowledge capable of being performed by a clerk $21 per 6 min, being $210 per hour.

Where the attendances in the Scale of Costs are not based on folios or individual attendance charges, they are based on the timed charges above. 

Counsel's fees are a maximum of $500 per hour and $5,000 per day for junior counsel, and $750 per hour and $7,500 per day for senior counsel.

The scale is expressed to be GST exclusive, so the above rates are the GST exclusive figures.

I have included below the explanation from the Supreme Court, followed by the Practice Note (1 of 2013):

Explanatory note

Commencing on 1 April 2013 the Supreme Court (Chapter I New Scale of Costs and Other Costs Amendments) Rules 2012 introduce a new scale of costs for the Supreme Court and make significant amendments to aspects of the costs rules. 

The new Rule 63.90 will provide that the Rules as amended

“apply to all things done or required to be done or omitted to be done on or after 1 April 2013 in or in relation to, any proceeding in the Court… regardless of the date of commencement of the proceeding”.

The Court has also issued Practice Note No 1 of 2013 which includes a summary of the changes, an explanation of the process for applications for allowance of counsel fees in excess of scale, and the guideline figure for allowance for the reproduction of documents (22 cents per printed side of a page). 

All lawyers practising in the Supreme Court civil jurisdiction should familiarise themselves with the changes. 

In summary, the major changes to the Rules are

• The current bases for taxation will be replaced with the following:

i. standard basis- all costs reasonably incurred and of reasonable amount 

ii. indemnity basis- (as now) all costs except in so far as they are of an unreasonable amount or have been unreasonably incurred.

• Interlocutory costs orders are not to be taxed until the completion of proceedings unless the Court orders otherwise. 

• The parties’ costs in the proceeding, unless the Court orders otherwise, will include reserved costs, the cost of an interlocutory application if no order is made or the order is silent as to costs, and costs thrown away by reason of amendment to a pleading or of and occasioned by amendment to a pleading. 

• Proceedings for debt or damages which do not recover amounts over $100,000 only attract County Court costs unless the Court orders otherwise. 

The main changes to the Scale of Costs are:

• The scale is exclusive of GST 

• The scale has been changed to allow a higher hourly rate for attendances charged in 6-minute units in line with most time recording systems currently used by law firms. The hourly rates actually charged by the individuals who performed the work will need to be included in the bill as well. 

• The cost of photocopying is entirely discretionary in the scale. Guidelines for photocopying will be issued from time to time. 

• The scale provides an allowance for solicitors to approve documents drawn by Counsel prior to filing and service. 

• The scale provides for the leaving of messages by email or SMS or other means that are 20 words or less. 

• The charges for letters include delivery by any means. No additional charge applies. 

• The scale includes a charge to receive correspondence by any means and placing a copy of the letter on a file. This includes the printing of emails or facsimiles. 

• The scale differentiates between perusal, scanning and examination of documents. 

• Items 11, 12, and 13 of the scale include allowances for review and consideration, delegation and supervision, and research. 

• The scale provides allowances for redaction and collation, pagination and indexing of documents.

• Item 17 of the scale includes an allowance of an additional amount having regard to the circumstances of the case. 

• Fixed fees are provided in relation to Corporations short form bills. Additional costs in the way of reasonable disbursements can be allowed.

Tips

• An order for costs will by default mean reasonable 'costs' (standard basis) not the lower recovery test of 'necessary or proper' (party and party basis). Parties seeking orders on a different basis will require a specific order to that effect.
• An order for indemnity costs means on scale - so if the intention is to order that costs be taxed on the basis of the costs agreement in place between the party and their lawyers this will need to be articulated in the order.
• Parties who wish to recover interlocutory costs before the conclusion of proceedings will need to apply for a order that the costs be taxed forthwith.
• Amendments to pleadings will be costs in the proceeding unless the Court orders otherwise. If a party seeks costs 'thrown away' (i.e. wasted as a result of the amendment) or costs 'of and occasioned by' (i.e. future costs arising from the amendment) they need an order to this effect.
• Counsel must ask for an order if they are contending for costs to be recovered from the other party over and above the maximums in the scale ($7,500 for senior counsel and $5,000 for junior counsel). They can either seek an order for a specific sum, or an order that a figure above the maximum is appropriate with the quantum to be determined by the Costs Court on taxation.

Practice Note (No. 1 of 2013)

The New Scale of Costs and Counsel fees

1. The Chief Justice has authorised the issue of the following practice note.

2. Significant changes have been introduced to the Supreme Court of Victoria scale of costs contained in Appendix A and to the provisions in Rule 63 of the Supreme Court (General Civil Procedure) Rules 2005 generally. The changes are effective from 1 April 2013 and apply to work undertaken after that date.

3. The basis of allowance of costs has changed to abolish the default “necessary or proper” test for party and party costs. The standard basis of costs that are “reasonable in amount and reasonably incurred” is now the usual basis for assessment or taxation of party and party costs. Indemnity costs may be allowed if the Court so orders.

4. The scale in its preamble allows the Judge, Associate Judge, Costs Judge, Judicial Registrar or costs registrar full discretion to allow any fee, cost or disbursement in full or in part or such other fee, costs or disbursement as is fair or reasonable to compensate for the work actually done.

5. Item 19 in the new scale now contains maxima fees for Counsel. Where costs are taxed pursuant to an order of the Supreme Court, Counsel’s fees in excess of scale cannot be allowed by the Costs Court unless the Supreme Court otherwise orders. Therefore where costs are sought pursuant to an order of the Supreme Court, and a party seeks sums for Counsel’s fees in excess of the maximums in the scale, an application will need to be made to the Supreme Court at the time a costs order is sought and an order made that Counsel’s fees in excess of the scale be allowed before they can be allowed on taxation by the Costs Court.

6. The Supreme Court may fix the rate or amount of Counsel’s fees above scale, or direct the Costs Court to allow the fees of Counsel in excess of scale when assessing or taxing the costs. In the latter case the Costs Judge, Judicial Registrar or Costs Registrar will fix the rate of charge in excess of the scale amount.

7. The Costs Court will only have a full discretion to allow fees in excess of the maximum in limited circumstances. For example, pursuant to a Notice of Discontinuance or arising from the acceptance of a formal Offer of Compromise, or taxation pursuant to the terms of a Release, or in reviews under the Legal Profession Act 2004 where the reviews are conducted in accordance with scale.

8. Additional changes have also been made including:

(a) The scale is exclusive of GST. This amendment allows legal practitioners who charge their clients on scale to add GST to the total sum to be charged. 

(b) The scale has been changed to allow a higher hourly rate for attendances but now in 6-minute units in line with most time recording systems currently used by law firms. The hourly rates actually charged by the individuals who performed the work will need to be included in the bill as well. 

(c) The cost of photocopying is entirely discretionary in the scale. Guidelines for photocopying will be issued from time to time. The guide is not intended to limit the discretion to allow higher or lower fees if it is considered appropriate. Guidelines appears at paragraph 11 below. 

(d) The scale provides an allowance for solicitors to approve documents drawn by Counsel prior to filing and service. 

(e) The scale provides for the leaving of messages by email or SMS or other means that are 20 words or less. 

(f) The charges for letters include delivery by any means. No additional charge applies. 

(g) The scale includes a charge to receive correspondence by any means and placing a copy of the letter on a file. This includes the printing of emails or facsimiles. 

(h) The scale differentiates between perusal, scanning and examination of documents. 

(i) Items 11, 12, and 13 of the scale include allowances for review and consideration, delegation and supervision, and research. Applications to the Costs Court for allowances for these items will need to be supported by file notes or other means. The Costs Court has a full discretion to make allowances for claims made pursuant to these items depending on the proof produced and the particular claims made for perusal, scanning and examination in the bill of costs. 

(j) Any claim made for research will not be allowed unless the research involves a legal question of some complexity that is not procedural in nature.
(k) The scale provides allowances for redaction and collation, pagination and indexing of documents. These allowances are for the time taken to complete each task that is reasonable in the circumstances. 

(l) Item 17 of the scale includes an allowance of an additional amount having regard to the circumstances of the case. Rule 63 provides that bills of costs are to be prepared on an itemised and chronological basis without differentiation between instructions for brief or preparation for trial work and any other work. 

(m) Fixed fees are provided in relation to Corporations short form bills. Additional costs in the way of reasonable disbursements can be allowed.

10. Appendix B of the scale includes allowances for Witness Expenses and interpreters’ fees. An additional fee or higher fees may be allowed if the Court makes an order for a higher rate.

11. Guide to reproduction of documents

The scale of costs allows a discretion in relation to copy documents. The new scale provides at item 4 that reproduction by photocopy or other machine made copy including hard copies of electronic documents shall be at the discretion of the Costs Court.

As a guide, the Costs Court will allow reproduction as follows:

Reproduction— 

for each printed side of a page
0.22

If printed out of the office, the amount charged by the service provider should be claimed as a disbursement and will be allowed if reasonable.

Offers of compromise and 'cost inclusiveness': Victorian Education Foundation Ltd v AC Hall Airconditioning Contracting Pty Ltd [2013] VSCA 32

Late last year I presented a seminar on Offers of Compromise and Calderbank offers with Daryl Williams, S.C., to the Victorian Bar. I was going through that paper again today and, whilst trawling through AustLII, happened to see a fresh judgment in the Victorian Supreme Court of Appeal which discussed 'cost inclusive' offers of compromise.

The matter of Victorian Education Foundation Ltd v AC Hall Airconditioning Contracting Pty Ltd [2013] VSCA 32 was a leave to appeal application (Neave and Priest JJA) from a costs order made by a Judge of the County Court of Victoria (Ginnane J). There were orders made by the County Court that VEF pay AC Hall the sum of $131,430, and costs of $34,254.68 were awarded to AC Hall based on an offer of compromise made by AC Hall on 12 October 2011 for $145,000 plus costs. Costs were ordered to be paid on a party-party basis to the date of the offer, and thereafter on a solicitor-client basis. An issue arose because there were earlier offers made including:

• A purported offer of compromise on 8 July 2010 by VEF for $165,000 expressed to be 'in full and final settlement of its claim', purportedly pursuant to Order 26 of the County Court Rules; and
• A purported offer of compromise on 29 November 2010 by AC Hall for $165,000 expressed to be 'in full and final settlement' of its claim.

The County Court held that VEF's offer was an 'all in' offer and fell foul of the Rules, following Aquatec-Maxon Pty Ltd v Barwon Region Water Authority (No 8) [2007] VSC 363. The County Court also held that it was not a 'Calderbank' offer as it was impossible to determine whether VEF achieved a more favourable outcome than was offered. The County Court held that the offer of AC Hall for $145,000 was more favourable to VEF than the judgment sum, and AC Hall was entitled to costs under Order 26. 

VEF clearly would not be happy with this outcome, since the order plus costs was around $165,000, which was the amount first offered by it to AC Hall. 

The Rule surrounding the controversy is Rule 26.03 which provides as follows:

(7) Upon the acceptance of an offer of compromise in accordance with paragraph (4), unless the Court otherwise orders, the defendant shall pay the costs of the plaintiff in respect of the claim up to and including the day the offer was served.
(8) If an offer of compromise contains a term which purports to negative or limit the operation of paragraph (7), that term shall be of no effect for any purpose under this Part.

I have discussed two interesting aspects of the judgment below, being the re-iteration by the Court of Appeal that an offer of compromise cannot be expressed to be costs inclusive, and whether the meaning of an offer of compromise is to be determined objectively or subjectively.

Priest JA, with Neave JA agreeing, refused the application for leave to appeal. Priest JA held that since the offer was expressed as being in 'full and final settlement' the County Court was correct in interpreting the offer of compromise as being inclusive of costs, and therefore was proscribed by Rule 26.03(8) (at [24] to [25]). Priest JA considered the reasoning of Giles J in Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd (1991) 25 NSWLR 349. In that case, an offer of compromise was expressed to be 'inclusive of costs'. Giles J held that this took the offer outside of the operation of the Rules, which Priest JA noted was almost precisely the same terms as Rule 26.03(8). 

Priest JA then considered whether the term concerning inclusiveness of costs could be severed from the offer. His Honour held that it would be impossible to do so and leave any part of the offer salvageable (at [29]).

VEF argued that the County Court should have held that AC Hall was under no misapprehension as to what the offer meant, particularly where AC Hall made a later offer in similar terms. Priest JA held that this argument was without substance as (first) it was not possible to determine what the offer actually meant, and (secondly) in determining what an offer means it falls to be construed objectively according to its terms and not according to a subjective belief that a party might have harboured as to its terms. Priest JA referred to Theiss Contractors Pty Ltd v SCI Operations Pty Ltd (Unreported, 21 September 1990, Sup Crt NSW, Rogers CJ Comm D) in support of this latter proposition.

This case serves as an important reminder that offers of compromise must be prepared pursuant to the rules to avoid this sort of harsh outcome for an offeror.

Civil Procedure Amendment Act 2012 receives royal assent and commences 1 May 2013

I attended the Commercial Bar Association annual cocktail party in the Supreme Court of Victoria library on 30 October 2012, and during his speech the Attorney-General Robert Clark noted that the Civil Procedure Amendment Act 2012 received Royal Assent that morning.

I previously wrote about the structure of the Civil Procedure Amendment Bill 2012 in my article Civil Procedure Amendment Bill 2012 - costs disclosure and expert evidence. The structure of the Act has not appeared to have changed since it was introduced as a Bill.

By way of summary, the Act:

• empowers the Court to make orders about costs disclosure;
• empowers the Court to make orders about the costs of proceedings;
• empowers the Court to make orders managing expert witnesses; and
• removes duplicative certification requirements for frequent litigants. 

The Civil Procedure Amendment Act 2012 commences as an amendment to the Civil Procedure Act 2010 on 1 May 2013.

The full authorised text from the Victorian Parliament is here.

On another note, at the cocktail party the Commercial Bar Association launched its new website: http://www.commbar.com.au

Civil Procedure Amendment Bill 2012 - costs disclosure and expert evidence

The Civil Procedure Amendment Bill 2012 was recently introduced into the Victorian Parliament by Attorney-General Robert Clark and is currently being considered by the lower house. The Civil Procedure Amendment Bill 2012 is an amendment to the Civil Procedure Act 2010.

The explanatory memorandum of the Civil Procedure Amendment Bill 2012 notes that it is being introduced to give additional powers and discretions for the Courts in relation to costs disclosure and expert evidence:

The Civil Procedure Amendment Bill 2012 amends the Civil Procedure Act 2010 to introduce specific powers and discretions for the courts in relation to costs and expert evidence, to amend and create greater flexibility in the overarching obligations and proper basis certification requirements and to make other technical amendments.

The Bill aims to reduce costs and delays for persons involved in civil litigation in Victoria, and improve the effectiveness of the civil justice system. The Bill builds on the foundation established by the Civil Procedure Act 2010 in seeking to give judges and magistrates a clear legislative mandate to proactively manage cases in a manner that will promote the just, efficient, timely and cost-effective resolution of the real issues in dispute in a civil proceeding.

Part 2 of the Civil Procedure Amendment Bill 2012 gives the Court power to require costs disclosure to a lawyer's own client, and expands the type of costs orders which are able to be made:

Disclosure of litigation costs by a lawyer to his or her client is critical for informed decision-making. The Bill gives the courts a discretionary power to order that a lawyer make costs disclosure to the lawyer's own client. The order may be made at any stage of the proceeding. This will allow the courts, in appropriate cases, to increase the parties' access to information in relation to actual and estimated costs and disbursements incurred prior to trial, thereby encouraging more informed decision-making and the settlement of appropriate cases. 

The Bill also clarifies and strengthens the courts' discretionary power to make other costs orders aside from the usual order that the losing party pay the winning party's costs. The Bill provides that the court may make any costs order that it considers appropriate to further the overarching purpose. Specific powers include ordering costs as a lump sum figure instead of taxed costs, ordering a party to pay a proportion of costs or fixing or capping recoverable costs in advance. Such orders avoid or narrow the scope of a taxation of costs. The objective is to increase the use of other costs orders in appropriate cases, thereby reducing the complexity, time and cost associated with taxation. Orders may be made in relation to any aspect of a proceeding, including, but not limited to, any interlocutory proceeding.

Part 3 of the Civil Procedure Amendment Bill 2012 gives the Court greater power to manage expert evidence, including requiring parties to seek directions if the party intends to adduce expert evidence at trial, ordering conferences and joint reports and limiting expert evidence in Court:

Expert evidence plays a critical role in civil litigation and is often essential to the just determination of an issue in dispute between the parties. However, expert evidence can also be a significant source of expense, complexity and delay in civil litigation. For example, the disproportionate use of expert witnesses has the potential to increase costs and delays for parties and reduce the effectiveness of the civil justice system as a whole. The inherent complexity and volume of expert evidence can also limit its usefulness to decision-makers.

The main objective of the expert evidence provisions is to reduce the costs and delays associated with expert evidence by providing clear legislative guidance and encouragement for the courts to actively manage and control expert evidence. The provisions also aim to improve the quality and integrity of expert evidence and enhance its usefulness to judges and magistrates.

Some of the expert evidence provisions consolidate existing powers of the courts, for example in the rules of court and practice directions. Although the existing powers of the court may be sufficient for the court to give directions and impose reasonable limits on any party in respect of expert evidence, clear statutory provisions will have greater impact in encouraging the courts to actively manage and control expert evidence. This will also resolve any argument about the limits of existing rule-making powers and will overcome any constraints on the exercise of powers that exist at common law.

Finally, the Civil Procedure Amendment Bill 2012 amends the certification requirements, including extending certification to any 'substantive document' that a party relies on (with some qualification).

The expert provisions appear to be detailed and, if the Civil Procedure Amendment Bill 2012 is passed and given Royal Assent, practitioners will need to quickly get up to speed with the detail in the bill. The proposed commencement date is 1 May 2012 or on proclamation.