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All.Insurance.Professional Indemnity

The evidence, which has emerged during the hearing of the Banksia class action, has gripped the Victorian legal profession. Details that have come to light about the legal fees and the conduct of certain legal practitioners involved in the action have verged on scandalous.  Justice John Dixon’s scathing comments in the most recent decision (the 18th) about the conduct of the legal team behind the action and his decision to refer their conduct to prosecutors has brought into focus just how sharp the sting in the tail of the Victorian civil procedure rules can be, and should make anyone involved in civil litigation in this State pause for thought.

The Civil Procedure Act 2010 (Vic) (the CPA), a legislative framework that goes far beyond the legislative frameworks of other states and territories, provides an overarching purpose “to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute”. The CPA applies to civil litigation in all of Victoria’s State Courts: Supreme Court, County Court and Magistrates Court.

In order to discharge the paramount duty owed to the Court, the CPA requires all parties to a proceeding to sign and file an “Overarching Obligations Certificate” (Certificate). The obligations themselves are self-explanatory and require the parties to:

  • act honestly

  • not make a frivolous or vexatious claim (a claim or response that has no proper basis)

  • only take steps to resolve or determine the dispute

  • cooperate in the conduct of civil proceeding

  • not mislead or deceive

  • use reasonable endeavours to resolve the dispute

  • narrow the issues in dispute

  • ensure costs are reasonable and proportionate

  • minimise delay, and

  • disclose the existence of documents.

While parties may have become blasé about completing the Certificate without giving any thought to what may happen if a party fails to comply with the obligations, Courts have, on numerous occasions, shown a willingness to exercise the very broad powers afforded by the CPA by imposing sanctions on parties who breach their obligations:

  • Yara Australia Pty Ltd [2013] VSCA 337 made clear that if a legal practitioner is found to have contravened the obligations, the practitioner may be ordered to personally pay the costs incurred by the other party.

  • Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSC 400 likewise showed that if there was a contravention of the CPA, costs may be ordered against practitioners in the inherent disciplinary jurisdiction of the Court.

  • Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd & Ors (Ruling No 8) [2014] VSC 567 noted that the CPA empowers the Court with a wide discretion to make any order it considers appropriate in the interests of justice.

  • Actrol Parts Pty Ltd v Coppi (No 3) [2015] VSC 758 found that the employer had contravened the Act by failing to ensure that its investment in the proceeding was reasonable and proportionate to the real issues in dispute. This resulted in an indemnity costs order being made.

The latest Banksia decision has again brought the obligations imposed by the CPA into the spotlight. In particular, Justice Dixon noted 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

  • while advocates and experts are immune from suit at common law, they are not immune from a compensation order under s 29 of the CPA.  That is, the CPA provides a wider category than that of being an officer of the court, and

  • the maintenance and restoration of public faith and confidence in the administration of justice is not just the responsibility of the Courts.

His judgment also makes clear the restorative capacity of the civil justice system to protect fundamental values, to protect its integrity through the commitment of the judiciary and the profession to preserve, maintain and nourish the common law’s absolute commitment to the proper administration of justice.

The latest Banksia decision serves as a timely reminder of the importance of the Certificate and the positive obligations imposed by the CPA on all parties, including lawyers, insurers, expert witnesses and litigation funders. It also highlights the far-reaching discretionary powers of the Court to sanction any contravention it deems fit in its pursuit of justice, reinforcing just how seriously parties should take the obligations the CPA imposes on them.

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