Gao v Zhang
[2005] VSCA 200
•5 August 2005
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 5934 of 2001
| PENG YUAN GAO | Applicant |
| v. | |
| YAN ZHANG | Respondent |
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JUDGES: | ORMISTON and VINCENT, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 5 August 2005 | |
DATE OF JUDGMENT: | 5 August 2005 | |
MEDIUM NEUTRAL CITATION: | [2005] VSCA 200 | |
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Courts, Practice and Procedure – Costs – Unpaid orders – Power under r.63.03(3) to stay proceeding etc. unless costs paid – Nature of Court’s discretion.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | In person | |
| For the Respondent | Mr B. Carew | Clayton Utz |
ORMISTON, J.A.:
This is an application for leave to appeal against the decision of a judge sitting in the Practice Court upholding an order of a Master that the proceeding be stayed pending payment of some $8,052.80 in costs already awarded against him in the proceeding and a further order refusing to stay the orders for costs which made up that sum of $8,052.80. The power invoked by the respondent for this purpose was that presently contained in r.63.03 para.(3). Under that provision the Court has a power, when it has made an interlocutory order for costs and the subject party has failed to pay them, to order that the proceeding should be stayed or dismissed or, in the case of a defendant, that that party's defence be struck out.
The facts surrounding these applications and the appeal to the judge in the Trial Division are set out in her Honour's judgment which may be seen at [2005] VSC 197, but a few matters of detail might be added. In short, it appears that Mr Gao has been conducting the present litigation since 2001 and has been involved in a number of interlocutory applications and pursued them on each occasion through several levels of appeal, each time unsuccessfully. The action essentially arises out of alleged false representations by the respondent that she would both marry the applicant and enter into a business venture, in consequence of which the applicant gave the respondent moneys said to exceed $225,000 which she has refused to repay. Curiously, the first relevant application was brought in March 2002 by the respondent as defendant seeking to have a Master strike out the statement of claim, but that application was unsuccessful, except to the extent that the applicant was directed to give certain further and better particulars, so that there was, of course, no order for costs then made against the applicant. Despite his apparent success, however, the applicant brought an appeal in May 2002 against those orders to a judge in the Practice Court who not only dismissed the appeal but ordered that certain paragraphs of the statement of claim then be struck out, resulting in a partial order for costs against the applicant, being the costs connected with the cost of preparing two affidavits, the other costs being made costs in the cause. The applicant remained dissatisfied and applied for leave to appeal to this Court but, subject to a minor variation, that application was dismissed with costs on 24 June 2002. The applicant remained dissatisfied and sought special leave to appeal to the High Court which was eventually refused in December 2004. There was no order for costs on that occasion.
Then there was a second series of applications, begun by the applicant on the same day as the respondent's pleading summons, in March 2002, to add new defendants and to obtain preliminary discovery from non‑parties. The Master dismissed that application with costs on 25 June 2002. From that the applicant appealed to a judge in the Practice Court in July 2002, who dismissed the appeal and again ordered that the applicant pay costs. That order was itself the subject of an application for leave to appeal in this Court on 16 August 2002, which was likewise dismissed with costs. Again the applicant sought special leave to appeal from that order to the High Court, but that application was refused, again in December 2004.
In November 2002 the costs awarded against the applicant in May 2002, on 24 and 25 June 2002 and in July 2002 were each taxed by the Taxing Master and were allowed in the total sum of $8,052.80. Even that order was the subject of an appeal, but a judge in the Practice Court dismissed the applicant's appeal. The costs in this Court for the leave application refused on 16 August 2002 have not, however, yet been taxed and do not form part of the sum which is the subject of the stay order.
In February 2005 the respondent applied to have the proceeding stayed on the basis that the applicant had failed to pay the taxed costs. In response, in March of this year, the applicant applied for a stay of each of the relevant costs orders, together with an order for the inspection of certain subpoenaed documents which is of no consequence so far as the present application is concerned. Pursuant to a direction of a judge of the Trial Division, those applications were heard by a Master on 28 April 2005. The Master made an order staying the proceeding "pending the payment of the defendant's costs", directing that the applicant pay the costs of that application, and then dismissed that part of the applicant's summons seeking the stay of the several costs orders. As previously mentioned, from those orders an appeal was brought to the judge sitting in the Practice Court who dismissed each of the appeals on 24 May 2005, with further consequential orders for payment of the respondent's costs.
One of the difficulties with the present application for leave, as with other proceedings brought by the applicant relating to the present action, and for that matter other actions, is the difficulty in understanding what Mr Gao wishes to say. He steadfastly refuses to have an interpreter but, try as he may, his English is difficult to follow and that is reflected in the various documents he files in support of his case. For example, although this ordinarily is of critical importance to any application such as the present, his proposed notice of appeal sets out grounds which either are difficult to follow or, unfortunately for the applicant, do not provide a basis for an appeal from an interlocutory order such as here is under consideration. By way of example, his first ground asserts that the Court "has power to stay the proceedings or not to stay", a proposition with which it is hard to disagree, save that on its face it does not provide a basis for interfering with the judge's discretion. Grounds 2 and 3 object, in the first place, that the judge said that it was "not her duty to find the nature of the deceit", by which I would gather, particularly from reading the rest of the two paragraphs, that the applicant is asserting that the judge should have considered the facts in greater detail and made findings of a kind which would show that it was both inappropriate and unfair to stay his proceeding. Assuming the issue to be relevant, the materials are simply inadequate. Another ground merely asserts that the respondent should pay the applicant's costs, which is just stating the appropriate outcome if he is successful. A fifth ground reads:
"Plaintiff is unable to pay the cost now and reserves fund from other proceeding. At least plaintiff should be entitled to have sum form of fund for cover the costs." [sic]
Finally, the applicant wishes "to further collect evidence from others for verifying" his cause of action.
One can see immediately that the applicant, with his regrettably imperfect knowledge of the law, and, indeed, of the English language, has barely touched on matters which might be relevant to the hearing of an appeal in this matter and none of which could be made out. To add to his difficulties, the applicant's affidavit in support is equally unsatisfactory, referring inadequately to some of the material upon which he wishes to rely and to which the Court has had reference. Largely the history of this case has to be taken from the comprehensive affidavit sworn in opposition. Finally, although from the first paragraph of his affidavit it is clear that the applicant is aware of the present Practice Statement relating to applications of this kind, he has failed entirely to file an outline of submissions in accordance with the Statement or at all, leaving the respondent to file its outline at the last moment.
Nevertheless, the Court must do its best in the circumstances to ascertain whether there is or is not some arguable defect in the order made or in the reasons given for it or whether it is attended with such doubt as would justify the giving of leave to appeal. One can at least see why the applicant would be unhappy about the nature of the order made against him. Although it did not involve the permanent dismissal of the action, or a permanent stay, it must be seen as having largely the same effect, if present circumstances continue. The stay ordered is indefinite and will prevent the applicant from pursuing his long‑delayed case unless and until he satisfies in full the orders for costs. The total may not seem to be large but the material before the judge indicates that the applicant presently has no means of satisfying those costs orders. Insofar as he has a claim to recover a money sum from the respondent, that claim cannot be pursued by reason of the present order until he comes into some money sufficient to pay the costs. This much, however, may be seen and perhaps was a relevant factor in her Honour's decision, namely, that he has some expectation of receiving a sum in another matter which is presently under the control of the Trustee in Bankruptcy. To what extent he will gain the money he there seeks is uncertain but I do not gather that he thinks it is impossible.
As orders of this kind are discretionary, the applicant faces a heavy burden in showing that it is appropriate to grant leave to appeal, for reasons made clear in the many authorities to which the respondent has referred to the Court but which are so well known that they need not be here repeated. Ordinarily, there must be shown some error of principle or either a failure to take into account relevant matters or the wrongful taking into account of irrelevant matters. In the present case the question can only be answered by an examination of the judge's reasons. They need not be set out in detail here, for they can be found comprehensively set out in her judgment. In broad terms, it was said that the provisions of r.63.03(3) are designed to overcome a defect in the jurisdiction of the Court which was revealed by the Full Court decision in Exell v. Exell[1] where it was held that under the inherent jurisdiction of the Court to make an order such as the present it was necessary to show "exceptional circumstances", such as true abuse of process or the like. It followed, said the judge in the present case, by applying a series of decisions of judges in the Trial Division, that the restrictions imposed in Exell were intended to be overcome by the new rule and that consequently the Court has a wide power to make an order for a stay, dismissal or striking out where orders for costs of interlocutory applications have remained unpaid. What her Honour and the other judges upon whose judgments she relied have said about the desire to avoid the restrictions in Exell is undoubtedly correct, but it does not necessarily follow that whenever costs remain outstanding some such order should be made. Thus I believe that it is correct to assess the reasoning both of her Honour and of the judges in the earlier cases so as not to endorse so wide a view of the intended discretion.
[1][1984] V.R. 1, esp. at 8‑9
There are some statements, however, in those earlier cases which suggest, even if they do not fully endorse, an approach which might be thought to be too generous to those having the benefit of costs orders. The outcome of those decisions is not here being criticised, but certain dicta suggest a too lenient attitude to those applications.
Although I am of opinion that the judge in the present case came to the correct decision in the special circumstances of the case, substantially for the reasons she stated, it is appropriate for this Court to sound a word of warning, lest it be thought that orders of this kind can be adopted as a day‑to‑day means of recovering costs ordered by the Court.
The power to stay a proceeding, to dismiss a proceeding without trial, or to strike out a defence are each powers which, if exercised, in one way or another deny justice to the party affected and ought not to be employed unless it is the only fair way of protecting the interests of the party seeking such an order. The basal principle, frequently adopted, was stated by Dixon, J. in Cox v. Journeaux(No.2)[2] when he said, in relation to a striking out application:
"The principle, in general paramount, that a claim honestly made by a suitor for judicial relief must be investigated and decided in the manner appointed, must be observed. A litigant is entitled to submit for determination according to the due course of procedure a claim which he believes he can establish, although its foundation may in fact be slender. It is only when to permit it to proceed would amount to an abuse of jurisdiction, or would clearly inflict unnecessary injustice upon the opposite party that a suit should be stopped."
This passage and several others to like effect were adopted by Sugerman, A.C.J., with whom both Holmes and Mason, JJ.A. concurred on behalf of the New South Wales Court of Appeal, in Rochfort v. John Fairfax & Sons Ltd.[3], which were also largely directed to pleading applications. Sugerman, A.C.J. continued[4] by saying that, although those passages expressed a fundamental principle, "it is not intended to question the extensive inherent jurisdiction of the Court to grant stays of proceedings in the interests of justice; it is merely intended to demonstrate the gravity of an exercise of this power and the necessity for the existence of proper grounds for its exercise". These observations seem equally applicable to the present case. Moreover, merely because the power to stay (and the like) appears in a specific rule of court, then in my opinion it cannot deny the importance of looking to the consequences of an order made under such a power, for in substance the exercise shuts a party out of court.
[2](1935) 55 C.L.R. 713 at 720
[3][1972] 1 N.S.W.L.R. 16 at 19
[4]Ibid
Furthermore, even a seemingly temporary stay may have the same effect, if it is expressed to be indefinite in duration and there is no practical likelihood of the condition being satisfied. If the party against whom an order under r.63.03(3) is made has no funds or any real expectation of them in the foreseeable future, the outcome will be substantially the same as a permanent stay or dismissal, although the stay may not be dressed as a permanent stay but merely as one operating until the specific costs are paid. Further, in the orderly administration of justice it is undesirable to make orders of a seemingly temporary kind if the matter is to remain unresolved and not return to court for some final orders. If there is no specified date for the payment of the relevant costs, then frequently the proceeding is as good as permanently stayed. Moreover, to put off the trial into the indefinite future, especially when an action has been on foot for some four years or so and relates to events some time earlier, is not likely to conduce to a satisfactory trial if the party does find the necessary sum to pay out the costs orders. In short, a temporary order of this kind should ordinarily be made only if the Court believes or at least has reason strongly to suspect that the party refusing to pay the orders for costs is being recalcitrant and will in fact pay the order if it is forced to do so. Otherwise, the order, if I might so describe it, is like a wolf in sheep's clothing, seemingly temporary but effectively permanent.
As I have said, these observations are intended to rebut a tendency, which appears in certain dicta in some unreported cases[5] under r.63.03(3) of treating the newly granted power almost as a means of debt collecting, whereas what it was intended to do was to ensure justice as between the parties in circumstances where one party builds up a large debt of costs to the extent that it deprives or restricts the other party of the ability fairly to conduct the litigation. That is not to say that an order of this kind will only be made in exceptional circumstances, which was said in Exell before the rule was introduced with respect to an attempt to impose a stay by means of a self‑executing order in relation to non‑payment of costs. But even if the power be not exceptional, an order of this kind is not to be treated as an everyday occurrence, for it must be realised that interlocutory orders for costs are frequently made, particularly in complex cases, and from time to time they may even be set off against orders made against the opposite party. Cf. Joskovitz v. Bonnick[6] .
[5]Referred to in Williams Supreme Court Practice para.I63.03.10, though I do not criticise this outcome.
[6][1964] V.R. 654
It follows, therefore, that unless the object of the order is merely to provide a temporary stay to force a wealthy, or at least not impecunious, but recalcitrant litigant to pay awards of costs which that party is well able to pay, then the power should be treated as one which will have the effect of bringing to an end litigation without the benefit of a trial to which a litigant is ordinarily entitled. The reason for making such an order must therefore be serious and essentially the only practical way to ensure justice between the parties. Consequently, although in some of the cases impecuniosity was said to be irrelevant, I cannot see that such a broad statement is accurate so far as the exercise of this kind of drastic power is concerned. In an analogous field, the courts, both generally and pursuant to their rules, have ordinarily always hesitated about imposing liability to provide security for costs by individual litigants, whatever may be said of the rules applicable to corporations or upon appeals, when the parties have had their day in court. If a party is clearly shown to be impecunious, then a court cannot act to grant even a temporary stay order under r.63.03(3) except upon the understanding that it will thereby be bringing the litigation effectively to an end. But even in applications seeking permanent orders, the financial capacity of a party may be relevant in deciding whether a refusal to pay has been deliberate and it is often important to know, if it is possible to do so, why and under what circumstances the relevant costs orders remain unpaid.
On the other hand, if substantial orders for costs are built up and are unpaid, then that must reflect the expenditure of money by the unsatisfied litigant and that will, to that extent more often than not, see that party financially inconvenienced to the extent that it may not be able properly to prepare its case. In the absence of evidence, however, it is perhaps rash to assume that the inability to recover particular sums by way of costs will necessarily have that adverse consequence, so that, the smaller the total amount of costs outstanding, the less likely it is that the party with the benefit of the costs order will be denied a fair opportunity to present its case, although circumstances will necessarily always vary. Moreover, I cannot accept as a broad statement that in complex (or other) cases, the trial "should only be permitted to proceed if the parties are at least put on a relatively even footing before it commences", as was quoted from one of the unreported cases by the learned judge at [19]. However desirable that may be in theory, that cannot ordinarily be the basis for an order of this kind, unless something else be shown. I should add, as it has from time to time been seen to be relevant,[7] that the failure to appeal against the subject costs orders is of little consequence, in my opinion, since this Court so rarely gives leave to appeal against cost orders. In any event, as a matter of practical fact, any appeal against an order of substance will almost inevitably carry an appeal against the order for costs which will naturally depend upon the outcome of the appeal, as in fact occurred in the many appeals brought by the applicant.
[7]See judgment below at [17].
Finally, at least for the present, if an order of this kind is to be made, there must be seen to have been some conduct on the part of the party in default which falls for condemnation to the extent of making so draconian an order. For this purpose frequent litigation of minor interlocutory points may, at least in due course, point to misuse of the Court's process, in the limited sense of a deliberate harassing of the other side, such that it can no longer be permitted to continue. Ordinarily, therefore, one would assume before making an order of this kind that there would be a series of orders for costs and that they usually would be of a kind which did not involve the genuine resolution of disputes relating to interlocutory matters which have to be resolved before the matter can go to trial. For this purpose, then, the way in which each interlocutory dispute has been contested may well be relevant. From time to time appeals, at least to a judge in the Practice Court, may be justified but to pursue them further to both this Court and the High Court, in cases where issues are essentially peripheral, may evidence an effective harassing of the other party of a kind which may justify a stay or the putting an end to the litigation. Of course, naturally, from time to time, interlocutory matters of importance are heard by both this Court and the High Court. Nonetheless, a party seeking an order such as the present may be able to bring to the Court's attention factors which would indicate a pattern suggesting at least a harassing of, or unfair dealing with, the opposite party, which in one way or another is exacerbated by a deliberate or regular refusal to pay the consequential costs of those applications.
The judge in the present case had a difficult task for it was essentially a discretionary decision which had to be made upon the whole of the relevant materials. The amount of costs, just over $8,000, was, one may concede, comparatively small; indeed it could barely be suggested, at least in the absence of evidence of which there was none, that the defendant had been deprived of that sum to the extent likely to prevent the respondent from conducting her defence properly to the action. On the other hand, the amount did not derive from only one or two orders but from a series of orders made in related interlocutory applications which, as time passed and each went up the appellate chain, appeared of less and less merit and more and more ill conceived. The first costs order was a minor order and the judge there was otherwise persuaded to make the rest of the costs costs in the cause, largely because the applicant at that stage conceded that his statement of claim required amendment. What followed, however, was an essential failure of the applicant to understand what was relevant and what could fairly be sought from the courts at the appellate level. The reasons given in the subsequent steps in the proceeding, particularly in the decisions in this Court and in the High Court, show how little merit there was in each point, even though no costs orders from the High Court are relevant for present purposes and in fact none were made because of the procedure there adopted. But it is essentially unfair to harass another party by appeals to the highest courts in the land over minor procedural matters, especially as
even now it is impossible to ascertain what real point was sought to be made or achieved.
There was, therefore, a point at which the judge could fairly conclude that the applicant should not be permitted to harass the respondent persistently with proceedings of this kind unless and until he paid out the consequent costs. That is not to suggest, however, that even thereafter the applicant ought to conduct litigation in the future in the same way. The justice of the case, however, can fairly be accepted as pointing to the same conclusion which the judge reached in the very circumstances revealed by the whole of the evidence and which she described. Consequently, there is neither such doubt attending the judge's decision as would justify the grant of leave to appeal, nor does the justice of the case require that leave to appeal against this order should be granted.
As to the application relating to an order for a stay of the Court's orders for the costs themselves, there is no merit whatever in the application, especially having regard to the Court's accepted practice in relation to orders for costs.
If I might add this point, if r.63.03(3) was seen to be a simple method of recovering costs, then that might be a basis for reconsidering the Court's attitude to granting leave to appeal from costs orders, but that in itself would appear to be undesirable.
The application must therefore be refused.
VINCENT, J.A.:
I agree, and for the reasons advanced by Ormiston, J.A, that this application should be dismissed. I specifically wish to associate myself with the views expressed by him concerning the proper approach to be adopted when considering applications made pursuant to r.63.03.
ORMISTON, J.A.:
The order of the Court therefore is that the application be dismissed.
(Discussion ensued re costs.)
ORMISTON, J.A.:
Although Mr Gao sought that the matter be heard on the papers, the Court was unable to do so because it lacked an outline of submissions by him filed in accordance with the Practice Statement. The decision not to have an oral hearing in the conventional way had to be made last Tuesday and at that stage the Court was uncertain what steps Mr Gao was going to take in relation to the filing of any such outline. It was therefore necessary for the matter to be listed and so we do not accept that this was a basis for not making an order for costs today of the conventional kind.
The order of the Court therefore should be that the applicant pay the respondent's costs of the application.
I would add, moreover, with respect to the late filing of the respondent’s affidavit by four days, that in relation to that Mr Gao could have sought an adjournment if that inconvenienced him, but in fact the application had already been adjourned by the Registrar for at least one week to our knowledge.
The order of the Court therefore is that the applicant pay the respondent's costs of and incidental to today's application.
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