Yara Australia Pty Ltd v Oswal

[2013] VSCA 337

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2012 0167

YARA AUSTRALIA PTY LTD (ACN 076 301 221)	Applicant
v
RADHIKA PANKAJ OSWAL	Respondent
	S APCI 2012 0168
IAN MENZIES CARSON	First Applicant
DAVID LAURENCE MCEVOY	Second Applicant
SIMON GUY THEOBOLD	Third Applicant
v
PANKAJ OSWAL	Respondent
S APCI 2012 0169
ANZ BANKING GROUP LTD (ACN 005 357 522)	First Applicant
IAN MENZIES CARSON	Second Applicant
DAVID LAURENCE MCEVOY	Third Applicant
SIMON GUY THEOBOLD	Fourth Applicant
v
RADHIKA PANKAJ OSWAL	Respondent
S APCI 2012 0170
APACHE FERTILISERS PTY LTD (ACN 153 344 248)	Applicant
v
RADHIKA PANKAJ OSWAL	Respondent

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JUDGES	REDLICH and PRIEST JJA and MACAULAY AJA
WHERE HELD	MELBOURNE
DATE OF HEARING	24 April 2013
DATE OF JUDGMENT	27 November 2013
MEDIUM NEUTRAL CITATION	[2013] VSCA 337	1st Revision 27 November 2013 [61]
JUDGMENT APPEALED FROM	[2012] VSC 356 (Whelan J)

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COSTS – Civil Procedure Act 2010 – Statutory regime – Overarching obligations of parties and legal practitioners – Application for leave to appeal against refusal to order security for costs – Whether failure by legal practitioners to use reasonable endeavours to ensure that the costs incurred in the proceeding were reasonable and proportionate – Section 24 – Whether parties over represented by counsel – Whether application books unnecessarily voluminous – Whether Indemnity costs order appropriate – Sanctions for breach of obligations – Nature of costs orders that may be made. 

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Appearances:	Counsel	Solicitors
For Yara Australia Pty Ltd	Mr R W Douglas with Mr D M Benson	Clayton Utz
For ANZ Banking Group Ltd	Mr A C Archibald QC and Mr M N Connock SC with Dr M D Rush	Herbert Smith Freehills
For Apache Fertilisers Pty Ltd	Mr D J O’Callaghan SC with Mr G P Harris	K & L Gates
For Radhika Pankaj Oswal	Mr P Durack SC	Jones Day
For Ian Menzies Carson & Ors	Mr A C Archibald QC and Mr M N Connock SC with Dr M D Rush	Herbert Smith Freehills
For Pankaj Oswal	Mr A J L Bannon SC with Mr J M Ross	Watson Mangioni Lawyers

REDLICH JA

PRIEST JA
MACAULAY AJA:

1. Following the publication of our reasons refusing an application for leave to appeal from orders of Whelan J in which he had set aside the order of an Associate Justice for security for costs, we requested the parties to address the question whether in the conduct of the leave application there had been a breach by any party of their overarching obligation under the Civil Procedure Act 2010 (‘the Act’) to use reasonable endeavours to ensure that the costs incurred in the proceeding were reasonable and proportionate to the complexity and importance of the issues and the sums in dispute.[1] These reasons are concerned with that question. It has been necessary to consider the nature and extent of that obligation within the structure and purposes of the Act and the sanctions available to the Court in the event of non-compliance. Two factual questions have been addressed in order to determine whether the obligation was breached by any party or their legal practitioners. First, whether there was any over representation of a party by counsel and second, whether the material produced on the hearing of the application for leave to appeal was unnecessary or excessive.

   [1]Section 24(a) and (b).

Background

1. The applicants sought leave to appeal, and if leave was granted, the determination of the appeal, from the orders of Whelan J (as his Honour then was) made 31 August 2012.  His Honour had granted leave and allowed the appeal setting aside the orders of Efthim AsJ that the respondents provide security for the costs of the applicants in proceedings that had been commenced in the Commercial and Equity Division of the Supreme Court.  The application for leave to appeal was heard in one day, there being five senior counsel, six junior counsel and five firms of solicitors representing the parties.  The applicants, ANZ and the receivers, were represented by two senior counsel and one junior, Yara by two junior counsel, Apache by senior and junior counsel, Mr Oswal by senior and junior counsel and Mrs Oswal by senior counsel.  Different firms of solicitors represented each party.[2]  In addition to the notices of appeal and the parties’ written cases, the parties between them filed six lever arch folders of material (the application books).

   [2]            At the hearings before Whelan J and Efthim AsJ there was a very similar, though not identical, level of representation.

1. The applicants ANZ and the receivers had sought security for their costs in the amount of $86,361.00;  and the applicants Apache and Yara, security in the amount of $31,808.20 from the first respondent.  The receivers, who are also defendants in separate proceedings commenced by the second respondent, sought further security from the second respondent in the sum of $22,810.80. 

1. Having regard to the nature of the application, the amount of security sought, the volume of material filed on the application and the degree to which the parties were represented, and in pursuance of the court’s obligation to give effect to the overarching purpose of the Act,[3] the Court sought submissions from the parties pursuant to s 29(2)(b) of the Act directed to the question whether any of them had failed to meet their obligations under the Act to use reasonable endeavours to ensure that the costs incurred were reasonable and proportionate.

   [3] Section 8 of the Act.

The Civil Procedure Act 2010

1. The statutory regime and the obligations that are imposed by the statute have not previously been considered in any detail at an appellate level. As the enforcement of the overarching obligations under the Act has been so little traversed, there is presently little to guide judicial officers as to the extent of the Court’s powers and the means by which parties or their legal representatives can be penalised for any contravention. We have thus addressed some of these issues at greater length than would ordinarily be necessary when a contravention of the Act is under consideration.

1. The reforms introduced by the Act are described in Williams’ Civil Procedure as breaking new ground in Australia and ‘putting Victoria at the forefront of civil justice reform throughout the common law world.’[4] The Act’s purpose was to reform and modernise the laws, practice, procedure and processes relating to civil proceedings in Victorian courts. The need to ensure that costs were reasonable and proportionate was a core objective of these civil procedure reforms. In respect of the ‘overarching obligation’ provisions discussed below, the Act largely adopted the recommendations of the Victorian Law Reform Commission in its Civil Justice Report, published in May 2008.[5]  That Report was itself heavily influenced by Lord Woolf’s review of the civil justice system in England and Wales, in which he concluded that an unacceptable situation had arisen out of ‘unmanaged adversarial procedure’.[6]

   [4]LexisNexis Butterworths, Civil Procedure: Victoria, vol 2 (at Service 273) [C 1.01.0].

   [5]Victorian Law Reform Commission, Civil Justice Review, Report No 14 (2008).

   [6]Lord Woolf, Access to Justice:  Interim Report to the Lord Chancellor on the Civil Justice System in England and Wales (1995), 13.

1. In the second reading speech to the Act, the Attorney-General stated that the purpose of the reforms was to make the essential goals of the civil justice system ‘accessibility, affordability, proportionality, timeliness and getting to the truth quickly and easily ... once again more achievable’.[7]  The Attorney-General went on to say:

At the core of these reforms is the concept of proportionality.  Participants in litigation will be required to use reasonable endeavours to ensure that legal and other costs spent in the proceeding are reasonable and proportionate to the complexity or importance of the issues in dispute, and the amount in dispute.  The courts will also be required to deal with a civil proceeding in the same manner.  

These provisions are designed to cure unnecessary expenditure on litigation and the inappropriate use of the courts as a public resource, a matter that has been highlighted in several recent decisions.

I note recent judicial statements criticising the costs charged by some lawyers as being disproportionately high in comparison to the amounts in dispute, as well as urging lawyers to focus on resolving disputes, rather than attempting to win at all costs.  Under the civil procedure reforms, these kinds of behaviours will need to change.  

When the courts are used by litigants and lawyers in this way, the public loses faith in the justice system and the courts are unavailable to hear meritorious claims.  This package of reforms will require all participants in the civil justice system to lift the standards of conduct in civil litigation and to work together to achieve a positive change in the civil justice system.[8]

[7]Victoria, Parliamentary Debates, Legislative Assembly, 24 June 2010, 2607 (Attorney-General Rob Hulls).

[8]Ibid.

1. One of the main purposes of the Act is ‘to provide for an overarching purpose in relation to the conduct of civil proceedings to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’.[9]  The Act provides for ‘overarching obligations for participants in civil proceedings to improve standards of conduct in litigation’, and ‘expanding the powers of the courts in relation to costs in relation to civil proceedings’.[10]

   [9]Section 1(1)(c).

   [10]Section 1(2)(a) and (b).

1. The court is obliged to give effect to the overarching purpose of the Act ‘to facilitate the just, efficient, timely and cost effective resolution of the real issues in dispute’.[11] The court is directed to further the overarching purpose by having regard to the objects and matters articulated in s 9 of the Act which include the efficient use of judicial and administrative resources and dealing with the proceeding in a manner proportionate to the complexity and importance of the issues and amount in dispute.

   [11]Section 7.

1. The overarching obligations apply to any person who is a party, any legal practitioner, legal representative or law practice acting for or on behalf of a party.[12]  The overarching obligations do not override any duty or obligation of a legal practitioner arising under common law or statute to the extent that such duties and obligations and the overarching obligations can operate consistently.[13]  But a legal practitioner or law practice engaged by or on behalf of a client in connection with a civil proceeding ‘must comply with the overarching obligations despite any obligation … to act in accordance with the instructions or wishes of the client’.[14] A legal practitioner is not required to comply with any instruction or wish of a client which is inconsistent with the overarching obligations,[15] and must not cause the client to contravene the overarching obligations.[16] To the extent that there is an inconsistency between a legal practitioner’s duty to a client and their overarching obligations, the obligation prevails.[17]

   [12]Section 10.

   [13]Section 13(1).

   [14]Section 13(2).

   [15]Section 13(3)(b).

   [16]Section 14.

   [17]Section 13(3).

1. Part 2.3 outlines the overarching obligations.  The duty stated in s 16 is that each person to whom the overarching obligations apply has a paramount duty to further the administration of justice.  The overarching obligations include the obligation to only take steps that are considered to be necessary to resolve or determine the dispute.[18]

   [18]Section 19.

The obligation to ensure costs are reasonable and proportionate

1. The overarching obligation in issue is the obligation of the parties and their practitioners to ensure that legal costs are reasonable and proportionate.  Section 24 imposes a positive obligation to take steps to ensure that costs are not excessive and empowers courts to sanction those who breach their obligations.  Section 24 provides:

24Overarching obligation to ensure costs are reasonable and proportionate

A person to whom the overarching obligations apply must use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to -

(a)       the complexity or importance of the issues in dispute;  and

(b)       the amount in dispute.

1. Section 24 adopts a flexible test.  There is plainly no costs matrix or formula that can be applied in determining whether the parties have met their obligations.  Rather, the court must weigh the legal costs expended against the complexity and importance of the issues and the amount in dispute, in order to determine whether the parties used reasonable endeavours to ensure those costs were proportionate.

1. Each party and their solicitor and counsel have an obligation to comply with the overarching obligation.  Whether any of them have breached that overarching obligation is to be determined by an objective evaluation of their conduct having regard to the issues and the amount in dispute in the proceeding.  The legal practitioners’ duty is non-delegable.  The obligation will override their duty to their client where the discharge of that duty would be inconsistent with the overarching obligation.[19]  The legal practitioner will not be relieved of this overarching responsibility because of the instructions of their client.[20]

   [19]Section 13(1).

   [20]Section 13(2) and (3).

1. Legal practitioners, whether solicitor or counsel, involved in the preparation of pleadings, affidavits or other materials that are to be used in the proceeding or who provide advice as to such matters, have individual responsibilities to comply with the overarching obligation.  Both solicitor and counsel also have an overarching responsibility with respect to the extent and level of their client’s representation.  Each must ensure that, having regard to the issues, the extent and level of representation proposed is reasonable and proportionate.  Advice or instructions given or received by legal practitioners, and instructions given by the client may inform but will not be determinative of the question whether, viewed objectively, there has been a breach of the obligation.

The power to issue sanctions under the Civil Procedure Act

1. Part 2.4 of the Act governs the Court’s power to issue sanctions for contraventions of the overarching obligations. Sections 28 and 29 provide:

28Court may take contravention of overarching obligations into account

(1)In exercising any power in relation to a civil proceeding, a court may take into account any contravention of the overarching obligations.

(2)Without limiting subsection (1), in exercising its discretion as to costs, a court may take into account any contravention of the overarching obligations.

29       Court may make certain orders

(1)If a court is satisfied that, on the balance of probabilities, a person has contravened any overarching obligation, the court may make any order it considers appropriate in the interests of justice including, but not limited to—

(a)an order that the person pay some or all of the legal costs or other costs or expenses of any person arising from the contravention of the overarching obligation;

(b)an order that the legal costs or other costs or expenses of any person be payable immediately and be enforceable immediately;

(c)an order that the person compensate any person for any financial loss or other loss which was materially contributed to by the contravention of the overarching obligation, including—

(i)an order for penalty interest in accordance with the penalty interest rate in respect of any delay in the payment of an amount claimed in the civil proceeding;  or

(ii)       an order for no interest or reduced interest;

(d)an order that the person take any steps specified in the order which are reasonably necessary to remedy any contravention of the overarching obligations by the person;

(e)an order that the person not be permitted to take specified steps in the civil proceeding;

(f)any other order that the court considers to be in the interests of any person who has been prejudicially affected by the contravention of the overarching obligations.

1. Section 29 in particular is a unique provision, conferring powers broader than those in any other jurisdiction in Australia, to sanction legal practitioners and parties who fail to meet their overarching obligations. For example, the Civil Procedure Act 2005 (NSW) provides that the overriding purpose of the Act ‘is to facilitate the just, quick and cheap resolution of the real issues in the proceedings’.[21]  Although there are also provisions relating to more specific obligations such as effective case management, delay and proportionality of costs,[22] the NSW provisions remain more aspirational than obligatory. The Court’s powers as to costs are still governed by the Rules of the Court. There are no broad powers to issue sanctions for contravention of the obligations. Similarly, the Federal Court provisions merely empower the Court to take into account a failure to comply with the duty to act consistently with the overarching purpose when exercising the discretion as to costs.[23]

   [21]Section 56(1).

   [22]See ss 57, 59 and 60.

   [23]Section 37N(4) of the Federal Court of Australia Act 1976 (Cth).

1. Section 29 of the Act provides the Court with broader and more flexible powers than under the Supreme Court (General Civil Procedure) Rules 2005 (‘the Rules’) or under its inherent jurisdiction. Rule 63.23(1) enables the Court to make orders for costs against a legal practitioner who has caused costs to be incurred improperly by a failure to act with reasonable competence and expedition. However, the primary object of r 63.23(1) is not punitive or disciplinary but compensatory, enabling reimbursement of a party’s costs incurred because of the default of the solicitor.[24]  The primary object of the Rule is not to punish the solicitor, but to protect the client who has suffered and to indemnify the party who has been injured.[25]  Rule 63.23(1) also protects solicitors from the negligence or incompetence of counsel.

   [24]White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169, 229.

   [25]Myers v Ellman [1940] AC 282, 289 (Viscount Maugham).

1. Hargrave J observed in Director of Consumer Affairs v Scully (No 2),[26] that obligations of this kind set out in the Act did not only arise upon its commencement, but in fact have always existed.[27]  His Honour referred to the joint judgment of Redlich JA and Beach AJA (as he then was) in A Team Diamond Headquarters Pty Ltd v Main Road Property Group Pty Ltd & Ors,[28] in which their Honours said:

There is a significant public interest in the timely resolution of disputes and the most efficient utilisation of scarce court resources.  We doubt whether the legal representatives of the applicants, as officers of the Court, gave any sufficient consideration in preparing or presenting their case as to how they might best assist the Court in the use of its limited resources.  Because of the complexity and increased length of litigation in this age, the obligation which rests upon legal practitioners to give the courts such assistance has become increasingly important.  Practitioners must ensure that the course chosen in the interests of the client is compatible with this overarching duty.  It is a responsibility which should be at the forefront of every practitioner’s considerations throughout the pre-trial and trial process.  Without such assistance from the legal profession, the courts are unlikely to succeed in their endeavour to administer justice in a timely and efficient manner.[29]

[26][2011] VSC 239.

[27]Ibid [22].

[28](2009) 25 VR 189.

[29]Ibid 193-4 [15] (citations omitted).

1. The Court’s powers under s 29 of the Act include the power to sanction legal practitioners and parties for a contravention of their obligations as the heading to Part 2.4 indicates.[30] In our view, these powers are intended to make all those involved in the conduct of litigation — parties and practitioners — accountable for the just, efficient, timely and cost effective resolution of disputes. Through them, Parliament has given the courts flexible means of distributing the cost burden upon and across those who fail to comply with their overarching obligations. A sanction which redistributes that burden may have the effect of compensating a party. It may take the form of a costs order against a practitioner, an order that requires the practitioner to share the burden of a costs order made against their client or an order which deprives the practitioner of costs to which they would otherwise be entitled. The Act is clearly designed to influence the culture of litigation through the imposition of sanctions on those who do not observe their obligations. Moreover, the power to sanction is not confined to cases of incompetence or improper conduct by a legal practitioner. Where there is a failure by the practitioner, whether solicitor or counsel, to use reasonable endeavours to comply with the overarching obligations, it will be no answer that the practitioner acted upon the explicit and informed instructions of the client. A sanction may be imposed where, contrary to s 13(3)(b), the legal practitioner acts on the instruction of his or her client in breach of the overarching obligations.

   [30]As per s 36(1)(a) of the Interpretation of Legislation Act 1984, s 36(1)(a), headings form part of the Act. Any heading must give way to clear and unambiguous words in the provision, but it nonetheless forms part of the interpretative process. See Silk Bros Pty Ltd v State Electricity Commission (Vic) (1943) 67 CLR 1, 16.

1. Section 28(2) enables a court, in exercising its discretion as to costs, to take into account any contravention of the overarching obligations. In our view, the enactment of s 29 together with s 28(2) imbues the Court with broad disciplinary powers that may be reflected in the costs orders that are made. The Court is given a powerful mechanism to exert greater control over the conduct of parties and their legal representatives, and thus over the process of civil litigation and the use of its own limited resources.

1. The Act does not merely reaffirm the existing inherent powers of the court but provides a powerful indication of the will of the Parliament about the values sought to be achieved by the way in which cases are managed in the courts and the balances that have to be struck.  Writing extra-judicially, Chief Justice Black said:

[L]egislation imposing positive duties upon litigants and practitioners, will help to change attitudes and, within constitutionally permissible limits, will confirm that judges do have the power they need to require parties to cooperate to bring about the just resolution of disputes as quickly, inexpensively and efficiently as possible.[31]

[31]Chief Justice Black (as his Honour then was), ‘The role of the judge in attacking endemic delays:  Some lessons from Fast Track’ (2009) 19 Journal of Judicial Administration 88, 92–3.

1. It is therefore somewhat surprising that despite the length of time the Act has been in force, the scope of the sanction provisions in the Act for a failure to comply with the overarching obligations has been under-utilised.

1. Section 29 was considered by Dixon J in Hudspeth and Scholastic Cleaning and Consultancy Services (No 4),[32] His Honour concluding that the jurisdiction has both compensatory and punitive elements where there is a finding of a contravention of an obligation.[33] A number of judges at first instance have emphasised that the Act requires the Court to be proactive and innovative in its approach to achieve its objects.[34]  This approach led Derham AsJ to justify the exercise of the Court’s power to order the production of documents in Matthews v SPI Electricity Pty Ltd & Anor (No 3).[35] A failure to act promptly and minimise delay in contravention of s 25 of the Act was relied upon to support the striking out of proceedings by Digby J in Chan & Ors v Chen & Ors.[36]  J Forrest J in Matthews v SPI Electricity Pty Ltd & Anor (No 2)[37] accepted that s 29 authorises the Court to order a person who the Court is satisfied on the balance of probabilities has contravened an overarching obligation, to pay the costs of any other person ‘arising from the contravention of the overarching obligation’ but refused to make the order sought.  In Bare v Small,[38] Hansen and Tate JJA recently gave effect to the Court’s discretionary power to fix or cap a party’s liability for costs in advance of an appeal, as it considered such an order appropriate to further the overarching purpose identified in s 7 of the Act, namely ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’. In Sunland Waterfront (BVI) Ltd & Anor v Prudentia Investments Pty Ltd & Ors,[39] Warren CJ, Osborn JA and Macaulay AJA approved the approach of Croft J in taking the nature and extent of contraventions of the overarching obligations of the Act into account in making an order as to costs.[40]

   [32][2013] VSC 14.

   [33]Ibid [5]–[7].

   [34]Hodgson v Amcor Ltd;  Amcor Ltd & Ors v Barnes & Ors (2011) 32 VR 495, 504 [26]; Thomas v Powercor Australia Ltd[2010] VSC 489, [41] (Forrest J); Crowe v Trevor Roller Shutter Services Pty Ltd[2010] VSC 536, [19]–[20] (Beach J).

   [35][2013] VSC 116.

   [36][2013] VSC 538.

   [37][2013] VSC 86.

   [38][2013] VSCA 204.

   [39][2013] VSCA 237.

   [40]Ibid [553]–[554].

1. The explanation for the under-utilisation of the provisions of the Act lies in part in a false perception that these provisions and the overarching obligations do not effect any material change to the Rules and the inherent jurisdiction of the Court.[41]  Sackville J, writing extra-judicially, referred to the misconception that specific legislative intervention is unnecessary, since the rules or the inherent powers of the court confer ample authority on the judges to manage litigation in a manner that minimises delays and ensures that costs are proportionate to the matters in dispute, concluding that such a view underestimates the significance of legislation.[42] The Act creates obligations which extend beyond those in the Rules and confers upon the courts a panoply of powers not found in the Rules.

   [41]See for example Octagon Inc v Hewitt & Anor (No 2) [2011] VSC 373, [48]. See also r 63.23 of the Rules and s 24 of the Supreme Court Act 1986 (Vic). As to the Court’s inherent jurisdiction, see White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169; Myers v Elman [1940 AC 282; and Knight v FP Special Assets (1992) 174 CLR 178.

   [42]Justice Sackville, ‘The future of case management in litigation’, (2009) 18 Journal of Judicial Administration 211, 217.

1. The Act prescribes that parties to a civil proceeding are under a strict, positive duty to ensure that they comply with each of the overarching obligations and the court is obliged to enforce these duties.  The statutory sanctions provide a valuable tool for improving case management, reducing waste and delay and enhancing the accessibility and proportionality of civil litigation.  Judicial officers must actively hold the parties to account.

1. Yet as we have observed, sanctions imposed for a breach of any overarching provisions have been a rarity at first instance. When no party invites the court to determine whether there has been a breach of the Act, there may be a judicial disinclination to embark upon such an own-motion inquiry for fear that inquiry as to a potential breach may be time consuming and may require the introduction of material that was not before the court as part of the proceeding. Such fears cannot relieve judges of their responsibilities. But we would not wish it to be thought that a judicial officer at first instance must undertake a substantial inquiry when considering whether there has been a contravention of the Act. As the sanction for a breach will usually lie in an appropriate costs order, a judge may at the conclusion of the reasons for judgment immediately invite oral submissions as to why there should not be a finding that the Act was contravened. The judge may in a relatively brief way deal with that issue in providing succinct reasons for a finding that there has been a breach of the Act and how that finding affects the orders for costs that are to be pronounced.

The submissions

1. ANZ and the receivers, Yara and Apache each filed submissions contending that they had complied with their obligations under s 24.  They submitted that the legal questions raised by the application were complicated, involving a number of legal and factual issues, including the questions as to whether the Holdback Amount was an adequate security for costs, the right of indemnity of Apache and Yara to the fund and a point of general principle about the test for leave when appealing from the decision of an Associate Justice under r 77.06.2(1).  The applicants noted that Whelan J considered the applications to raise ‘an important issue.’ As the recovery of costs was a matter of serious concern, seeking security for costs was important.  Although the sums at stake during the present application for security for costs were not substantial, it was said that there was common ground between the parties that huge costs were likely to be incurred in the remainder of the proceeding.  Matters such as discovery and the preparation of lay and expert evidence were likely to be immensely expensive.  Thus the applicants contended that the true issue was in fact not the quantum of security presently sought, but their ongoing entitlement to seek security for future costs arising in the litigation.  Furthermore, the sums at stake in the underlying litigation are said to be extraordinary.  The applicants refer to the substantial damages claims which, though not yet quantified, may run to hundreds of millions of dollars.

1. As to the materials filed, the applicants submitted that the application books comprising six lever arch volumes contained all the documents necessary for the purposes of the application for leave to appeal and the appeal if leave was granted.  It was submitted that only a relatively small volume of material was filed in the proceeding before Efthim AsJ, which was met by a large volume of material by Mrs Oswal.  The applicants then filed all relevant material that was available.  They noted that they had annotated the material and provided extensive footnote references to make navigating it less difficult than otherwise.

1. In respect of the representation of the applicants by counsel, they submit that each of the applicants, who had interests that were separate and distinct from each other, should be separately represented.  Given the nature of the application and the significant sums of money at stake in the underlying litigation, they submit that it was responsible, sensible and appropriate for the applicants to each be represented by junior and senior counsel.[43]  Thus the applicants submit that each of them at all times complied with their s 24 obligations.

   [43]Yara noted in its further submissions that it was represented only by senior counsel and the instructing solicitor as second junior counsel.

1. The orders sought on all of the applications for leave to appeal were substantially the same.  Each applicant sought security for costs and a stay of proceedings until security was provided.  Yara and Apache adopted the submissions of ANZ and the Receivers.[44]  The issues in this Court were confined.  There were three main questions requiring determination: first, whether Whelan J acted on wrong principles in granting leave to appeal;  second, whether he erred in finding that the ‘Holdback Amount’ provided sufficient security for costs;  and, third, whether he was wrong to hold that Apache’s and Yara’s right of indemnity was different from that of an insured defendant.  The submissions of the applicants largely overlapped in addressing these issues.

   [44][2013] VSCA 156, [80], [84].

1. Both before Whelan J and in this court the applicants failed to make out their primary claim that the Holdback Amount was insufficient to constitute adequate security in the absence of any evidence of any claim that would deplete it.  The other issues were also decided adversely to the applicants, the Court refusing leave on each ground. 

Was there any unnecessary representation of the parties?

1. The scope of s 24 is not rigidly defined, but it plainly includes an obligation to ensure that parties are not over-represented.  The applicants and their legal practitioners had an obligation to use reasonable endeavours to ensure that the costs of the applicants’ legal representation were reasonable and proportionate.

1. The second reading speech to the Act identifies the practice of unnecessarily briefing two barristers as a procedural issue that needs redress. The Attorney-General, in discussing s 24 said:

In relation to the duty to ensure costs are reasonable and proportionate, an example of a possible breach may be the practice of briefing two barristers (senior counsel and junior counsel) where the complexity of the case does not warrant it.  I note that the obligation is worded so that resources are not unreasonably constrained for cases that might in themselves be for a small amount, but that have significant precedent or public interest value.[45]

[45]Victoria, Parliamentary Debates, Legislative Assembly, 24 June 2010, 2609 (Attorney-General Rob Hulls).

1. Each of the applicants was seeking security for costs, supported by submissions that were to a large extent in the same terms. The appearance of seven counsel for the applicants, three of them senior counsel, and two of them appearing for the same party on an application for leave to appeal on a security for costs application, in conjunction with the voluminous content of the application books, compelled the Court to inquire as to whether there had been any contravention of the Act.

1. In order to comply with the particular overarching obligation in s 24, the legal practitioners — solicitors and counsel — who act for or on behalf of a party or who are asked to so act, must always give careful consideration to the level and the extent of the representation that is necessary for a party in a proceeding. Even where a party provides informed instructions to their legal practitioners that they wish particular counsel to be briefed, the legal practitioners who act on their behalf have an overriding duty to consider whether, having regard to the matters set out in s 24 and any other relevant circumstances, the engagement of particular counsel will contravene the Act. There will be proceedings in which the complexity or importance of the issues and the amount in dispute will not justify the engagement of counsel of particular seniority or will not justify the engagement of more than one counsel.

1. Despite the applicants’ submissions being substantially the same, ANZ and the receivers, who were represented by two senior counsel and a junior counsel, explained in their written submissions that because lead counsel overseeing the litigation, and who had appeared before Efthim AsJ and Whelan J, was unavailable for the preparation of the written submissions, other senior counsel was briefed to draft the written submissions with junior counsel.  As the availability of lead senior counsel and junior counsel for the hearing was also uncertain, senior counsel who had prepared the submissions was briefed to appear.  Lead counsel became available shortly before the hearing.  Having regard to the importance and complexity of the issues, the likely costs of the proceedings, the amount in dispute and the fact that the oral submissions of lead senior counsel succinctly narrowed the focus of the application, it cannot be said that the engagement of three counsel, and the costs thereby incurred were not reasonable and proportionate.

1. Although counsel who appeared for Apache and Yara adopted the submissions of ANZ and the receivers, their counsel also made discrete and brief but important submissions which were relevant to their clients’ position. 

1. Each of the applicants, whose interests were separate and distinct, was entitled to separate representation. Section 24 is not to be construed as requiring a party to forfeit that right. In the context of the broader litigation, which is likely to be immensely complex and expensive, it was appropriate that each party be represented at this application by the counsel that were engaged. It is not without significance that neither respondent contends that there was any contravention of the Act in this regard. As a result of the explanations proffered by the parties as to the reasons for the unusual degree of legal representation in the proceedings, and having regard to the issues and the manner in which the hearing was conducted, we are satisfied that there was no breach of the overarching obligation in that regard.

Material in the application books

1. The Act is designed to protect litigants from incurring excessive costs, but it is also designed to protect against the inappropriate use of the courts as a public resource.  Overly voluminous application material strains the administrative resources of the Court and the time of judges themselves.  Where a large volume of material is provided to a court that is unnecessary and excessive, there will be a prima facie case that the overriding obligation has been breached.  The court was provided with six application folders, comprising submissions, affidavit material, transcript and authorities running to over 2700 pages.  Two folders pertained to the Mr Oswal application and four folders related to the application of Mrs Oswal.  The affidavit material from the parties’ solicitors contained a variety of largely extraneous materials, included old statements of claim, swathes of email correspondence, materials from related proceedings in Western Australia, and transcripts from related hearings in the Supreme Court of Victoria.  Much of this material was either peripheral to the application or entirely unnecessary.

1. The application books in the Mrs Oswal application include all of the evidence filed by the parties before Efthim AsJ, and all written submissions filed by the parties before Efthim AsJ and Whelan J.  Transcript and, in particular, written submissions from the proceeding below, are not generally to be included in an application book.[46]  The transcript and submissions in the proceeding before Efthim AsJ were entirely otiose.

   [46]Contrary to the contents of the Supreme Court of Victoria’s Registrar’s Notes on the Preparation of Appeal Books, October 2000, 4.

1. The affidavit dated 4 May 2012, filed on behalf of ANZ and the receivers, ran for 369 pages and contained a number of unnecessary documents, mostly concerning related but not directly relevant proceedings in other courts and jurisdictions.  This included a writ and statement of claim dated 2 September 2011;  Radhika Oswal’s application for an interlocutory injunction;  the reasons for judgment of Davies J in respect of that interlocutory injunction and the transcript of that hearing;  bills of costs in respect of that application;  the judgment of the Western Australian Court of Appeal in Oswal v Yara Australia Pty Ltd;[47] the transcript of a hearing before Ferguson J in the Supreme Court of Victoria in the matter No. S CI 2011 785;  copies of freezing orders made by the Western Australian District Court;  and letters from Freehills, Jones Day and Middletons in respect of these interlocutory applications.  The proceedings in Western Australia and before Davies and Ferguson JJ in the Supreme Court of Victoria were not referred to at all in the applicants’ submissions, aside from an indirect reference to ‘orders made in other proceedings’.

   [47][2011] WASCA 121.

1. The affidavit dated 7 May 2012, filed on behalf of Yara, ran for 77 pages.  It contained correspondence between the firms regarding the receipt of documents in respect of the statement of claim and the orders of Davies J that Mrs Oswal provide further and better particulars.  The Table to clauses 10 and 11 of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 (WA) was also included in the affidavit.  None of this material was relevant to the application before this Court.

1. The affidavit dated 21 May 2012, filed on behalf of Apache, ran for 198 pages.  The affidavit contained correspondence seeking advice from a cost consultant on the quantum of the security for costs application.  The letter contains a copy of the amended writ and statement of claim, dated 24 April 2012, which runs for 170 pages and duplicates the copy already provided in the application book.

1. The affidavit dated 29 May 2012, filed on behalf of Mrs Oswal, mostly comprises material that was relevant and relied upon during the application, including copies of the guarantees and indemnities between the parties;  the Apache and Yara Share Sale Deeds;  and the Share Mortgage between Mrs Oswal and ANZ.  This affidavit runs for 391 pages.  The only unnecessary document is the Report from Grace Costs Consultants, estimating the total application costs to be $149,977.70.  This report is duplicated in the affidavit of Margaret Vine from Grace Costs.

1. The Mr Oswal application books were also excessive and contained extraneous material.  The application books again contained all of the submissions and some transcript material from the hearings before Efthim AsJ and Whelan J.  The affidavit filed on behalf of ANZ and the Receivers ran for 139 pages and included copies of judgments involving the parties from the Federal Court and the Supreme Court of Western Australia.  These decisions were not relevant to this application.  The only material of relevance to this application was the bundle of correspondence between the parties regarding the security for costs application and the six page costs report.

1. The affidavit filed on behalf of Mr Oswal, ran for 492 pages.  It contained copies of the Share Mortgage between Mr Oswal and ANZ and the Share Sale Deed between ANZ, Mrs Oswal and Yara.  Superfluous material was also included, such as the prospectus for Yara Pilbara Holdings, 20 pages of Reserve Bank data on the daily price of the $US and judgment in the matter of Tap (Harriet) v Burrup Fertilisers Pty Ltd.[48]

   [48][2011] WASC 264.

1. The application books also contained a substantial amount of duplicated material.  The Mr Oswal application books and the Mrs Oswal application books both contain 81 pages of transcript from the proceedings before Efthim AsJ on 12 June 2012, and 118 pages of transcript from proceedings before Whelan J (as his Honour was then) on 9 August 2012.  The reasons of Whelan J are reproduced in each of the applications.

1. In their supplementary submissions, both respondents contended that most of the material contained within the application books and which was produced by the applicants was unnecessary to the resolution of the issues we have identified or any other matter relevant to the applications.  That contention is made out.  The respondents identified the evidence that was referred to in the parties written submissions before Whelan J, which comprised only a small proportion of the material now contained in the application books.  The application books contained voluminous unnecessary material which increased the costs for all parties and the burden on the court.  Very little of it was the subject of any reference in oral argument.  In all, significantly more than half of the material in the application books was entirely unnecessary to the questions raised by the notice of appeal.  

1. The first issue we have identified required analysis of the principles attending the grant or refusal of leave from an Associate Justice.  The second issue principally involved construction of the relevant share sale deeds and the contingencies related thereto.  There was little need to have regard to any documents beyond the share sale deeds themselves.  The third issue also called for a consideration of principle without the need to consider any evidentiary material.  None of the issues required production of the evidence filed by the parties before Efthim AsJ, the written submissions filed by the parties before Efthim AsJ or Whelan J or a transcript of those hearings. 

1. We are unpersuaded by the applicants’ contention that the expenses incurred in respect of this applications must be seen in the context of the litigation as a whole, which will require both parties to incur very substantial legal fees.  Such expenditure as is incurred on an interlocutory application must be proportionate to the proceeding in question.  We are satisfied on the balance of probabilities that the overarching obligation under s 24 to ensure that costs were reasonable and proportionate has been breached by the filing of excessive material.

1. The Act’s objective is the reform of the culture of unnecessary expenditure on civil litigation.  Parliament has intended that this reform can only be achieved by holding parties to account for undesirable civil litigation practices that are unfortunately too common.  The court was burdened with excessive material.  The applicants and the respondents were burdened with the costs of that material.  There has been a breach of the overarching obligation to ensure the costs are reasonable and proportionate by including in the application books voluminous material that was extraneous or repetitious and excessive. 

The application for a special costs order

1. Mrs Oswal sought indemnity costs from Apache and Yara on the basis that ‘the very making of the applications was inconsistent with the overarching obligation’ in s 24 of the Act. This argument rested upon the assertion that no substantial injustice was shown to arise from the decision of Whelan J as the applicants Apache and Yara would be able to recover costs from the Holdback Amount being property owned by the respondents, and over which they had granted the applicants security.

1. The applications of Yara and Apache were not inconsistent with the overarching obligation under s 24 of the Act. Had the applications been bound to fail, the obligations under ss 18 and 19 of the Act may have been relevant. As Yara submitted in reply, it had always maintained that the Holdback Amount was not part of the respondents’ property and could not provide security for any costs. Had that submission been made out substantial injustice would arise.

1. Mr Oswal, in a more restrained submission, said that it was ‘open to the court’ to make an order for costs ‘on a higher basis’ but relied only upon the inclusion of unnecessary and voluminous material in the application books to justify such an order.

1. The breach of the overarching obligation under the Act is a matter that may be taken into account in making an order for costs. There will be cases where a breach of an obligation under the Act may support an order for indemnity costs. The breach may well reflect an already well-recognised basis for the making of such a costs order. We do not need to consider whether there may be contraventions which give rise to any new bases for the making of such orders.

1. In this case the respondents have not demonstrated that any special costs order should be made in their favour.  The applicants have not engaged in unmeritorious or deliberate improper conduct such as would warrant the court showing its disapproval and at the same time preventing the respondents being left out of pocket.[49]  If it is appropriate that the usual costs orders following the outcome of the proceeding are made in the respondents’ favour, any additional costs in the preparation for hearing that they have incurred as a result of the breach of the obligation will be recoverable from the applicants.

   [49]Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435; Aljade and Malaysian Kuwaiti Investment Co v Oversea-Chinese Banking Corp Ltd [2004] VSC 351.

Orders that may be made

1. The applicants have requested that they be given an opportunity to make further submissions as to the nature of any order that we may make in the event that we find a contravention of the Act to have been made out. One applicant has foreshadowed an argument that if the application books are found to be inappropriately voluminous, they are not responsible for its content.

1. An order that may be appropriate is that the solicitor-client costs which each legal practitioner may seek to recover from their client not include a percentage of the costs of the preparation of the application books. A further order that could also be made is that the legal practitioners for the applicants pay a portion of the respondents’ costs of the applications that are related to the preparation for the hearing. We will hear from the parties as to what orders we should pronounce as to costs in light of the breach of the overarching obligation of the Act.

1. We will direct that the solicitors for each of the applicants provide their clients with a copy of the reasons of the Court, and its orders.

Orders

1. After hearing from the parties following the delivery of judgment the Court pronounced orders to the following effect:

(1)   Each application for leave to appeal is dismissed.

(2)   Each applicant pay the respondent’s costs of the application.

(3)   Each applicant’s solicitor indemnify the applicant for 50% of the respondent’s costs incurred as a consequence of the excessive or unnecessary content of the application books.

(4)   The applicant’s solicitor be disallowed recovery from the applicant of 50% of the costs relating to the preparation of the application books, and costs incidental thereto.

(5)   For the purpose of determining the appropriate amounts that the applicant’s solicitor should bear under order 3, the applicant’s solicitor’s responsibility for the preparation of the application books be referred to the Costs Court to be assessed according to the extent of the contribution made by each applicant to the application books in proceedings 2012 numbered 167, 169 and 170, in default of agreement between the applicants.

(6)   Each applicant’s solicitors provide the applicant with a copy of these orders, and the Court’s reasons for orders 3, 4 and 5.

(7)   The costs ordered by these orders may be taxed immediately.

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