The Victorian Court of Appeal has sent a strong message that the overarching obligation under section 24 of the Victorian Civil Procedure Act 2010 - to ensure that the costs of litigation are 'reasonable and proportionate' - is ignored by lawyers and litigants at their peril.
The proceedings followed the collapse of a fertiliser business, which had been placed into administration in 2010. Judicial commentary on the overarching obligations arose in an appeal against an earlier decision on security for costs.
An apparently straight-forward matter was attended by five senior counsel, six junior counsel, and five firms of solicitors, who filed over 2700 pages of evidence in support of the application. The Court sought an explanation from the parties as to whether any breaches of the overarching obligations under the Civil Procedure Act 2010 had occurred.
The Court determined that the parties were not 'overrepresented' - due to the complexity of the issues and the likely costs of future proceedings. As each of the applicants had separate and distinct interests, the Court found that each were entitled to separate representation. The Court was careful to emphasise that section 24 of the Civil Procedure Act concerning proportionate costs 'is not to be construed as requiring a party to forfeit that right'.
The Court determined that much of the 2700 pages of material filed was either duplicative or 'peripheral to the application or entirely unnecessary', such as:
• old statements of claim
• reams of email correspondence
• materials from related but immaterial proceedings in other states and jurisdictions.
It was found that the inclusion of the material violated section 24 on the basis that it increased costs for all parties and placed an unnecessary burden on the court.
What do the 'overarching obligations' require lawyers and litigants to do - or not do?
Section 24 of the Civil Procedure Act 2010 provides:
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.
The judgment cites the second reading speech to the Act, in which the then Attorney-General Hulls stated:
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 […] These provisions are designed to cure unnecessary expenditure on litigation and the inappropriate use of the courts as a public resource.
The overarching obligations apply to litigants and legal practitioners alike. Importantly, legal practitioners are required to act in accordance with the overarching obligations even when this conflicts with client instructions.
What does this decision mean for litigation culture in Victoria?
Addressing a recent National Costs Lawyers conference at the Law Institute of Victoria, Justice Croft said that the judgment was a 'watershed' moment:
It is clear that practitioners can no longer hold the mistaken belief that the obligations under the Act are merely aspirational rather than obligatory.
Since late last year, the case has been raised in seven other proceedings, suggesting that Victoria's judiciary is willing to make use of case management tools to contain the costs of litigation.
But we're model litigants anyway, aren't we?
The State of Victoria is subject to the Model Litigant Guidelines which require government entities to abide by high standards of litigant conduct, including keeping costs to a minimum, and avoiding unnecessary delay.
While the decision in Yara may not alter the approach of model litigants, it provides important guidance from Victoria's highest court on the scope of the overarching obligations contained in the Civil Procedure Act 2010, by which all litigants - including model litigants - are bound.
The Court warned future litigants that they will effectively be under a positive obligation to demonstrate that materials are compliant with the overarching obligations:
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. [emphasis added]
We will be watching this space closely for future decisions in this area.
For more information about Yara Australia Pty Ltd v Oswal  VSCA 337, please contact:
t 8684 0458
Managing Principal Solicitor
t 8684 0418