Costs in the cause v costs follow the event – what is the difference?

In this blog post I explain the related but different concepts of costs follow the event and costs in the cause. I personally find costs to be an uninteresting topic of law, but if you work in litigation, knowledge of basic costs principles and orders is essential. The simplest way to remember the difference is to understand that costs follow the event is a principle and costs in the cause is an order. While I have used examples from South Australia, the jurisdiction I work in, the content is applicable to other Australian jurisdictions.

The principle – costs follow the event

The principle that costs follow the event is a common law principle that the unsuccessful party pays the legal costs of the successful party in litigation. In simple terms, the loser pays their own costs and the costs of the winner. Where there are multiple events in an action, the costs will be allocated separately for each event, though there will often be a dispute as to whether events are separate or part of the main action. A court may decide to depart from the principle in certain situations after considering the nature of the action, the complexity of the factual and legal issues, the profile of the parties and publicity associated with the matter and the amount recovered.

The common law rule that costs follow the event had been included in statute or rules in most jurisdictions. For example, in South Australia r 263(1) of the Supreme Court Civil Rules 2006 provides that “as a general rule, costs follow the event”. This general rule is subject to more specific rules such as that “the costs of an amendment are to be awarded against the party making the amendment” (r 263(1)(a)). However, costs are awarded at the court’s discretion (see s 40 of South Australia’s Supreme Court Act 1935) and the general rule and more specific rules are subject to orders to the contrary.

The order – costs in the cause

Costs in the cause is an order that costs from an interlocutory hearing (for example) will form part of the general costs and be awarded to the successful party in the action. Costs in the cause orders have existed for over a century in Australia, with the NSW case of Dubbo Refrigerating & Co v Rutherford (1898) 14 WN (NSW) 180 often cited as authority for the interaction between costs in the cause orders and general costs principles.

In Dubbo Refrigerating the plaintiff was suing the defendant for unpaid work boiling down 17,023 of the defendant’s sheep for tallow (sheep fat, commonly used in the 1800s to produce shortening for processed foods and deep frying). Two commissions had occurred in which costs in the cause had been ordered. The plaintiffs were awarded general costs after the hearing. As the case is not readily electronically available I have extracted the key paragraph:

“The costs in both commissions were ordered to be costs in the cause, but it is now said that although the evidence was accepted by the jury as in favour of the defendant, the plaintiffs are entitled to the costs because they are entitled to the general costs of the action.  “Costs in the cause” merely means costs not now disposed of; after the trial they have to be disposed of with the costs of the trial, which are themselves costs in the cause, according to certain settled principles of law which the Prothonotary has followed. Issues are divisible, and if some issues are found for the defendant, although the plaintiff may be the successful party in the action, still the defendant gets the costs of those issues upon which he has succeeded, although they may at first have been costs in the cause. Here the Prothonotary is entitled to assess the costs of these commissions in favour of the party who was successful upon the issues to which the evidence in question was directed, and he has done so. If a plaintiff takes out a commission, and examines a witness whose evidence turns out at the trial to be absolutely immaterial, is the defendant to pay the costs merely because the plaintiff is entitled to the general costs of the action? So here, why should the defendant have to bear the cost of witnesses whom he called to establish his case, and who were in fact instrumental in establishing it? The evidence of these witnesses was within the same category exactly as if the witnesses had been present at the trial, and I am of the opinion that the Prothonotary has acted upon the proper principle in allowing them to the defendant.”

There are several advantages of obtaining an order for costs in the cause versus relying on the principle of costs follow the event, including that the order is not subject to the exceptions that apply to the principle, and the order will ordinarily be respected by the trial judge or an appellate court. It would be very unusual for a court to amend or substitute a costs order made earlier in proceedings. In the case of Koosen v Rose (1897) 45 WR 337 (often incorrectly cited as Coosen v Rose (1897) 45 WR 337) an order for costs in the cause was made in chambers for the costs of the chambers application. At trial the judge interfered with this order, making the plaintiff pay his own costs for the application in chambers. On appeal, the Court of Appeal decided that the trial judge had no jurisdiction to interfere with the costs order of the proceedings in chambers.  

Note the difference between the orders costs in the cause and “plaintiff’s costs in the cause” (more commonly made) or “defendant’s costs in the cause” (rarely made). A “plaintiff’s costs in the cause” order means that if the plaintiff is ultimately awarded costs of the action, the costs the subject of the interlocutory application become part of that. If the plaintiff is not ultimately awarded costs of the action, there is no order as to the costs the subject of the interlocutory application. Often a costs order is requested through an interlocutory application, though orders as to costs prior to the event are often made by consent or otherwise in directions hearings.

 

Attwells v Jackson Lalic Lawyers [2016] HCA 16 – High Court rules on the advocate’s immunity from suit

On 4 May 2016 the High Court handed down its decision on whether to extend the advocate’s immunity from suit to situations where negligent advice is given which leads to the settlement of a case by agreement between parties and consent orders. This case summary has been written for junior lawyers working in litigation and law students studying Ethics and the Legal Profession.

The advocate’s immunity from suit

The two High Court precedents on advocate’s immunity are:

1.       Giannarelli v Wraith (1988) 165 CLR 543

The advocate’s immunity was said to extend beyond conduct of a case in court to “work done out of court which leads to a decision affecting the conduct of the case in court” (at 560). Mason CJ described two tests for determining whether work outside of court will attract the immunity:

a.       “work done out of court which leads to a decision effecting the conduct of the case in court” (at 559)

b.      “where the particular work is so intimately connected with the conduct of the cause in Court that it can fairly be said to be a preliminary decision affecting the way that cause is to be conducted when it comes to a hearing” (adopted from the New Zealand case of Rees v Sinclair [1974] 1 NZLR 180) (the “intimately connected” test).

In D’Orta the High Court held that these two tests are essentially the same.

2.       D’Orta-Ekenaike v Victorian Legal Aid (2005) 223 CLR 1 (applying Giannarelli)

In D’Orta, the High Court confirmed there are two categories where the immunity arises (inside of court and outside of court) and approved Mason CJ’s scope of the immunity for work occurring outside of court. The High Court held the immunity applied in the facts before it where an accused was given negligence advice to plead guilty, as the acceptance of this advice to plead guilty effected the determination of the case by the court as the court cannot conclude its function until a conviction is recorded, and the decision about a plea of guilty is intimately connected to the hearing of a criminal case as it is a decision made preliminary to the hearing of a charge which effects the conduct to the matter before the court.

Facts in Attwells v Jackson Lalic Lawyers

Gregory Attwells was a guarantor of payment of liabilities of a company to a bank. The company defaulted on the payments and the bank commenced proceedings against both the company and the guarantors (see Jackson Lalic Lawyers Pty Ltd v Attwells [2014] NSWCA 335). The guarantors were represented by Jackson Lalic Lawyers in the proceedings. Proceedings settled (on what turned out to be negligent advice from Jackson Lalic Lawyers). The settlement was reflected in consent orders. The negligent advice from Jackson Lalic Lawyers included that the guarantors would be liable to pay the bank $3,399,347, when the guaranteed amount was $1,856.122, and the guarantors were not liable to pay more than this amount. The guarantors signed the consent orders based on this advice. The guarantors commenced negligence proceedings against Jackson Lalic Lawyers in the NSW Supreme Court, where Smchmidt J ordered that the question of whether Jackson Lalic Lawyers is immune from suit be decided separately from the other issues in the negligence proceedings.   

Legal question

Does the advocate’s immunity extend to negligent advice which leads to the settlement of a case by agreement between the parties?

Court of Appeal - Jackson Lalic Lawyers Pty Ltd v Attwells [2014] NSWCA 335

The Court of Appeal held that Jackson Lalic Lawyers’ advice was within the scope of the immunity as the advice fell into the category of work done out of court affecting the conduct off the case in court, that the advice was intimately connected with the conduct of the guarantee proceedings.

High Court

The High Court held 5:2 that the immunity does not extend to negligent advice that leads to a disadvantageous settlement, even where the settlement is made into consent orders. Nettle J and Gaudron J dissented in separate judgments.

French CJ, Kiefel, Bell, Gageler and Keane JJ (the majority judgment):

a.       Intimate connection – look to the policy reason behind the immunity

The High Court majority began its analysis by identifying the policy reason behind the immunity. The rationale behind the advocate’s immunity is that the community at large has a vital interest in the final resolution of decisions by judicial determination, and that after a judicial determination has been made, it should not be open to collateral attacks seeking to demonstrate that a judicial determination is wrong ([34]). The immunity exists to protect the public interest in the finality of judicial decisions ([35]). This rationale is why the scope of the immunity is limited to conduct of the advocate which contributes to a judicial determination ([37]). The Law Society of NSW (as an intervener in proceedings) submitted that the immunity should be extended otherwise lawyers will not encourage their clients to settle their claims, as they will not have immunity from protection ([52]). The High Court rejected this argument, as it does not accord with the primary policy reason for the immunity.  Extending the immunity to advice which leads to the settlement of litigation takes the immunity away from its primary rationale, which is to protect the exercise of judicial power from collateral attack. The “intimate connection” between the advocate’s work and the conduct of the case in court must be such that the work affects the way the case is to be conducted so as to affect its outcome by judicial decision.

b.      Historical connection alone is not sufficient

The joint judgment discussed what would constitute an “intimate connection”, distinguishing “merely historical connections” from “functional connections” ([49]). The Law Society of NSW submitted that negligent advice not to settle is intimately connected with an ensuing judicial decision of the court so as to attract the immunity. The High Court rejected this “historical connection”, stating it is not sufficient that one event precedes another event to create an “intimate connection”. The “intimate connection” discussed in Giannarelli and D’Orta is a “functional connection” which is the connection required by the public policy reason for the immunity.

c.       Consent orders

The settlement was embodied in consent orders, and the respondent argued that this involvement of the court was sufficient to constitute an “intimate connection”. The High Court rejected this argument, as the substantive content of the rights and obligations in the consent orders were determined by the parties without any determination by the court. The terms of the settlement agreement “were not, in any way, the result of the exercise of judicial power”. The High Court left the question open as to whether it would be different in situations where “the making of the order itself requires the resolution of issues by the exercise of judicial power” such as where representative proceedings are settled or where proceedings on behalf of a person under legal incapacity are to be compromised.

The dissenters

Gordon J held that the advocates immunity does extend to negligent advice leading to settlement where the agreement is reflected in consent orders. Gordon J focused on a different aspect of the plurality’s judgment in D’Orta, being that the immunity plays a part in a series of rules which are “designed to achieve finality in the quelling of disputes by the exercise of judicial power” ([100]), equating the final quelling of disputes with “work intimately connected with” work in the court, and proceeded to focus on the final quelling of disputes rather than the intimate connection test the plurality focused on. While the majority distinguished Attwells v Jackson Lalic Lawyers from D’Orta, Gordon J argued that both cases involved a final quelling of the outcome, in that both admissions were given legal effect by authority of the court – in one case by entry of conviction, and in the other by entry of verdict and a judgment. Gordon J was careful to analyse the orders made by the court. Orders 1-9 constituted orders of the court recording a verdict and judgment made, whereas paragraphs 10 onwards in the orders merely noted the agreement made between the parties. The verdict and final judgment contained in Orders 1-9 constituted a final quelling of a controversy by exercise of judicial power which attracts the advocate’s immunity from suit.

Nettle J agreed with Gordon J’s reasons for dissenting, focusing on the final quelling of a dispute by judicial power. Even where the parties are agreed on the orders which should be made for the final determination of their rights and liabilities, it remains for the court to be satisfied that it is appropriate to do so to order, which involved judicial power and attracts the advocate’s immunity. 

What is the difference between judicial review and an appeal?

Understanding the difference between judicial review and an appeal is particularly important for junior lawyers working in litigation, public law, and the court system (such as associates, tipstaves and researchers). Although the basics of judicial review are taught at law school, it can be easy to quickly forget the basic distinction between judicial review and an appeal.

Appeal

An appeal challenges the outcome of a particular decision made by a tribunal or court. Generally, a person who is a party to the matter or aggrieved by the decision can lodge an appeal. Understanding the court hierarchy and statute detailing the right to appeal is important in understanding where to lodge your appeal. For example, if the original decision was made by the Victorian Civil and Administrative Tribunal (VCAT), an appeal can be made to the Supreme Court of Victoria (except if the decision was made by a President or Vice President of VCAT where the application for appeal must be made to the Court of Appeal).

Appeals can be by right or discretionary. Where the appeal is discretionary, an application must address why the appeal should be allowed and the grounds for appeal should. Leave to appeal will generally be granted at the Court of Appeal level where the applicant has “a real prospect for success”.

An example of when leave to appeal is required is for appeals to the High Court acting in its appellate jurisdiction under s.73 of the Commonwealth Constitution. The potential appellant must make an application for leave or special leave to appeal by filing Form 23 (r.41.03 High Court Rules 2004). Where leave is granted to appeal, the appellant can then initiate the appeal proceedings by filing the Form 24 notice of appeal (r.42.01, r.42.02 High Court Rules 2004).

After an appeal has been allowed, the appellate court will then make a decision as to whether the grounds of appeal have been made out. The appeal court will consider the submissions and decide on one of the following outcomes:

1.       Affirm the lower court decision;

2.       Modify the lower court decision – where the appellate court agrees in part with the lower court decision; or

3.       Reverse the lower court decision and find for the appellant. Where the appellate court finds that the lower court’s decision cannot be sustained, the decision of the lower court can be set aside. Reversing the lower court decision may also include setting aside orders made by the lower court and making new orders.

Pursuing judicial review of a decision is very different from appealing a decision. While an appeal focuses on whether the decision itself is correct or incorrect, judicial review focuses on whether the decision maker conformed with statutory or common law powers conferred on the decision maker.

Judicial review

Judicial review is an application for the court to determine whether an official action conforms with the power given. The judicial review process scrutinises the decision making process and analyses whether or not the decision was made within power. Decisions that may be subject to judicial review include decisions made by the executive arm of government, decisions made by tribunals, and decisions made by lower courts.

Examples of when an application for judicial review might be made is where there is some evidence the entity/decision maker granted with the public power has:

·         breached the limits placed on the grant of that power;

·         done something more than was authorised;

·         done something authorised in an unauthorised way; or

·         not done something when there was a duty to act.

The bar for finding an error has occurred is high – it is not enough that the court would have been minded to act differently – the regulator’s misjudgement or error must be so substantial as to take the impugned act or omission beyond that realm where reasonable minds would agree to differ.

The power to conduct judicial review comes from a number of sources:

1.       State and Territory Supreme Courts – the judicial review jurisdiction was part of the common law powers of the Supreme Courts at their foundation, and included the power to issue prerogative writs such as certiorari, prohibition and mandamus. Several jurisdictions have extended review powers to tribunals, such as NSW which has the NSW Civil and Administrative Tribunal and Victoria which has VCAT.  

2.       Federal Court (ADJR Act review)– has been granted a statutory judicial review jurisdiction by the Administrative Decisions (Judicial Review) Act 1977 (Cth). The Federal Court can also undertake Constitutional judicial review, as s.39B(1) of the Judiciary Act 1903 gives the Federal Court similar jurisdiction to the High Court’s judicial review power under s.75(v) of the Commonwealth Constitution.

3.       High Court (Constitutional judicial review) – section 75(v) of the Commonwealth Constitution gives the High Court original jurisdiction in a number of matters including all matters “in which a writ of Mandamus or prohibition or injunction is sought against an officer of the Commonwealth”.  

Where a decision maker has not acted in conformity with the power given, the court will treat the decision as a nullity. The purported exercise of power is disregarded and is treated as yet to be effectively exercised. The court conducting the judicial review generally cannot substitute its decision for the decision of the original decision maker. If a court decides a decision was made beyond the scope of the original decision maker’s powers, the matter will be sent back to the relevant tribunal or government agency for the decision to be remade in accordance with the decision maker’s powers.

At common law, a number of remedies developed from prerogative writs are available where an application for judicial review is made. A prerogative writ is an official order whereby the judiciary directs another arm of government (the executive). These remedies commonly include:

1.       Mandamus – compels the performance of a public duty – i.e. compels a decision maker to make a decision.

2.       Prohibition – prohibits the decision maker from acting outside of the law.

3.       Certiorari – quashed past conduct for which there was no jurisdiction.

Less commonly:

4.       Quo warranto – requires a person to show the authority on which they hold a certain power.

5.       Procedendo – appellate court orders a lower court to proceed with judgment.

The ADJR Act expanded the type of remedies available and removed some of the requirements of the prerogative writs. For example, remedies available under s.16(1) of the ADJR Act include:

1.       Quashing or setting aside the decision;

2.       Referring the decision back to the decision maker for further consideration;

3.       Declaration stating the rights of the parties; and

4.       Directing parties to do or refrain from doing an act.

The outcome of a judicial review is very different to the outcome of an appeal where a judge can substitute the decision of the first instance judge with its own decision where necessary.

The distinction sounds easy….

The distinction between an appeal and an application for judicial review appears easy. However, it can get confusing for junior lawyers when reading a judgment where it is not made initially clear whether it is an appeal or a judicial review. In this case, scroll to the bottom of the judgment and look at the language used in the decision and orders. It is important to keep the difference in the forefront of your head. While most of the time litigation lawyers will appeal decisions, there may be circumstances in which an application for judicial review may lead to the desired outcome, especially where damages are not sought. 

ACCC v RL Adams Pty Ltd [2015] FCA 1016 – Federal Court cracks down on falsely advertised “free range eggs”

Do you like your eggs free range? Do you care about the wellbeing of laying chickens but worry the “free range” eggs you buy aren’t really free range? There is good news on the horizon. The ACCC has recently started prosecuting false representations of free range standards. In the most recent free range egg misrepresentation case, Australian Competition and Consumer Commission v RL Adams Pty Ltd [2015] FCA 1016, the Federal Court found several instances of misleading and deceptive conduct in the way eggs were advertised as “free range” when they were not, and imposed large (but arguably not large enough) penalties on the offending company.

Facts:

RL Adams Pty Ltd is an Australian company which produces and sells chicken eggs. RL Adams’ main farm is Wingrave Farm in Queensland. About 83% of the eggs from Wingrave Farm are marketed as free range. The company use brand names Mountain Range Eggs and Drakes Free Range Eggs on its cartons. RL Adams represented on their free range cartons and on their website www.fresheggs.com.au that laying hens were able to move around freely on open range pastures on an ordinary day and on most days. The reality was that the laying hens were unable to and did not move freely on an open range in the relevant period. In the relevant 9 month period, the hens were kept locked in barns.

Example of Mountain Range Eggs carton packaging making the "free range" claims (image taken from the judgment):

What were the sections contravened?

Three sections of the Competition and Consumer Act were contravened:

1.       Section 18 of the Australian Consumer Law being Schedule 2 of the Competition and Consumer Act 2010 (Cth) which provides a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive.

2.       Section 29(1)(a) of the Australian Consumer Law which provides a person must not, in trade or commerce, in the connection or supply of goods, make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use.

3.       Section 33 of the Australian Consumer Law which provides a person must not, in trade or commerce, engage in conduct that is liable to mislead the public about the nature of the goods.

RL Adams Pty Ltd admitted to the contraventions, so most of Justice Edelman’s judgment concerns appropriate penalties.

Previous pecuniary penalties imposed in free range egg misrepresentation cases include:

·         No penalty imposed on the company, penalties of $30,000 and $20,000 were imposed on Directors – ACCC v CI & Co Pty Ltd [2010] FCA 1511;

·         $100,000 penalty imposed (suggested by parties) on the company - ACCC v Turi Foods Pty Ltd (No 2) [2012] FCA 19;

·         $50,000 penalty imposed on an individual – ACCC v Bruhn [2012] FCA 959;

·         $400,000 joint pecuniary penalty imposed on the companies responsible for “Steggles” products – ACCC  [2013] FCA 1109;

·         $375,000 penalty imposed on Luv-A-Duck – ACCC v  [2013] FCA 1136;

·         $300,000 penalty imposed on Pirovic Enterprises. This penalty was large considering the annual profits of Prirovic from free range eggs in NSW was $380,000 -  [2014] FCA 1028.

These cases show penalties imposed have varied greatly. In earlier cases, the ACCC often did not pursue a pecuniary penalty against the company. In more recent years, the ACCC has sought and successfully obtained pecuniary penalties against companies, in some instances by consent. The ACCC has never come close to awarding the maximum penalty of $1.1 million on a company. In the RL Adams Case, the Federal Court stated that pecuniary penalties imposed in previous cases provide little assistance (at [51]):

“With contraventions of the nature of those in this case, the breadth and variety of the many factors involved in an assessment of pecuniary penalties has the effect that any range of penalties derived from previous cases can only ever be stated in very broad terms. Indeed, the well-established term “range” can sometimes be misleading. It might be more accurate to say that an assessment of the general run of cases, including the cases mentioned in the introduction to these reasons, has so far revealed that penalties for contraventions by corporations have varied from $100,000 to $400,000”.

What pecuniary penalty did RL Adams have to pay?

RL Adams was ordered to pay $250,000 for its contravention. The Federal Court characterised the conduct as one contravention under the totality principle, but warned it should not be assumed that a series of related infringements will always be treated as a single contravention [10]. The amount was reached after considering the factors in s.224(2):

 “(2)  In determining the appropriate pecuniary penalty, the court must have regard to all relevant matters including:

(a)  the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and

(b)  the circumstances in which the act or omission took place; and

(c)  whether the person has previously been found by a court in proceedings under Chapter 4 or this Part to have engaged in any similar conduct.”

In particular, the Federal Court considered:

1.       Mitigating factors

RL Adams admitted to the contraventions early on, and completely cooperated with the ACCC in their investigations, including disclosing all relevant information requested by the ACCC.

2.       Deterrence

General deterrence is an important consideration in the imposition of pecuniary penalties [10]. Given penalties in previous “free range” misrepresentation cases have not deterred other companies in the industry making false representations about eggs, it could be argued that the pecuniary penalty needs to be raised for the sake of general deterrence.

3.       Size of RL Adams, its financial position and profits made by its representations

The additional profits obtained if eggs labelled “barn laid” had been sold as “free range” was $102,198 [62]. This profit was at the expense of purchasers. While other sellers of free range eggs may have made a loss, this loss is unquantifiable. RL Adams operations are of a small size compared to other producers.

4.       Infringement was not intentional

RL Adams confined the free range hens to barns at the time due to biosecurity issues. RL Adams had received advice about an outbreak of H7 avian influenza and about outbreaks of infectious laryngotracheitis [68]. Despite this motivation, RL Adams knew it had made free range representations and knew its hens were not free range.

5.       Previous contraventions

This was RL Adams first contravention [76].

6.       Extent of contraventions

The eggs were supplied to 63 retail locations in the relevant period across Queensland, NSW and the Northern Territory, where consumers paid premium price for the eggs despite the eggs not being free range eggs.

7.       Lack of compliance program

RL Adams did not have a compliance program to meet obligations under the Australian Consumer Law [79].

What other orders were made?

As well as the pecuniary penalty of $250,000, the following orders were made:

1.       Publication orders

a.       That RL Adams publish a correction notice on website within 14 days; and

b.      That RL Adams publish a corrective advertisement in each major metropolitan newspaper in each State or territory RL Adams supplies eggs

2.       Compliance orders

a.       appointment of compliance officer;

b.      requirements for officer training, staff training, and complaints handling;

c.       reporting obligations on progress to the ACCC; and

d.      the maintenance and administration of the ACCC compliance program for a period of 3 years.

3.       Costs orders

a.       RL Adams was ordered to pay the ACCC’s costs to the sum of $25,000.

What does this mean for the future of the free range egg industry?

The case shows the ACCC continues to be willing to investigate and prosecute companies and individuals making “free range egg” misrepresentations. While Justice Edelman discussed the importance of general deterrence in several sections of the judgment, the pecuniary penalty of $250,000 is in line with other recent cases, and is unlikely to deter other perpetrators. This aspect of the judgment is disappointing, as Justice Edelman seemed to set himself up to make a larger pecuniary penalty before settling with $250,000 which RL Adams had submitted was an appropriate penalty. 

ACTING AS A MODEL LITIGANT – A CRASH COURSE

In a nutshell what is required of a model litigant?

In civil litigation, it is not enough for government litigants to act honestly and according to court rules. The state and its agencies are held to a higher professional standard in civil litigation than other litigants and must act fairly with complete propriety. I flesh out what these higher professional standards mean in practice below.

Who has to act as a model litigant?

The state and its agencies must act as a model litigant in civil litigation as well as in dispute resolution. The Commonwealth government, state governments, local councils, and government departments must all act as a model litigant. Lawyers working in-house for the government and lawyers in private practice acting for government clients need to be aware of the obligations of the government as model litigant, as the principles place limits on strategy and conduct commonly used in civil litigation.

Why are government litigants held to a higher professional standard?

The obligation to act as a model advocate can be traced to the broad concept of the rule of law. Everyone, including the government, must abide by the laws of Australia. No one is above the law. All are to be equal before the law. It is assumed that the government is the more powerful party in civil litigation. To address this power imbalance and therefore respect the rule of law, government litigants are held to higher professional standards than other litigants. The model litigant principles also reflect the fact that government and its agencies must act in the public interest. A set of principles is required to assist government lawyers act in the public interest and ensure government power is not abused. 

Where can I find the law and who can enforce the model litigant principles?

Model litigant principles were first developed by the courts and can be found in the common law. Most Australian jurisdictions have usefully summarised these principles either in regulations or policies. It is important to note that individuals cannot enforce the model litigant principles as a cause of action in separate court proceedings. This was clarified by the Federal Court in Caporale v Deputy Commissioner of Taxation [2013] FCA 427 where the court stated the relevant model litigant policy was created by the Commonwealth for their own internal supervisory purposes. The model litigant principles did not give rise to private rights. The issue of non-compliance is to be dealt with:

1.        Through the government’s own mechanisms; and

2.       By the judge in the original court proceedings.

In practice, the model litigant principles are monitored by judges during the matter and are monitored by the relevant government audit authority after the dispute resolution or litigation has concluded.

At the Commonwealth level, the model litigant principles can be found in the Legal Services Directions 2005 (Cth). Breaches are investigated by the Office of Legal Services Coordination.

NSW government and its agencies are bound by the Model Litigant Policy, which contains detailed guidelines on best practice. This statement of principles reflects the existing common law. If an individual wishes to complain about a government litigant’s non-compliance with the policy, complaints are referred to the CEO of the relevant government agency. Victoria has its Model Litigant Guidelines 2001 (revised 2011), and other states have similar policies or guidelines.

The obligations of a model litigant include:

1.       Promptly dealing with claims

Unnecessary delay must be avoided. This means some delay tactics commonly used in commercial litigation may be inappropriate. Agencies should not purposely prolong litigation.

2.       Paying out legitimate claims

This may extend to partial payment of a claim even before litigation commences where it is clear the matter will be about quantum and government liability will be at least that amount.

3.       Acting consistently in handling claims and litigation

4.       Avoiding litigation, where possible

There are a few reasons why model litigants must strive to avoid litigation. First, litigation is expensive and it is in the public interest not to waste resources or tax payer money. Second, it is assumed alternative dispute resolution assists to overcome the perceived power disadvantage of persons in a dispute with the government. There is a real focus on alternative dispute resolution within government and their agencies. Government agencies should attempt to settle outside of court through offers of settlement, offers of compromise and alternative dispute resolution.

5.       Making an early assessment of the case

Related to the above point, a government agency should ensure early assessments are made of matters to identify the government’s likelihood of success in pursuing the case and the government agency’s potential liability.

6.       Keeping litigation costs to a minimum including:

a.       Not requiring the other party to prove a fact where the state knows it to be true; and

b.      Not contesting liability where the state knows the real issue is quantum rather than liability.

Government agencies should ensure they do not incur extra costs by taking technical points. The focus should be on the real issue in dispute. Rule of thumb: “good points should be pressed hard; technical points should not be”. There are some situations where taking a technical point would be permissible, but technical points should only be pursued where the government’s interests would be prejudiced by the failure to take that technical point.

7.       Not taking advantage of claimants with limited resources

Resources include money and knowledge. Government lawyers should be particularly alert where the other side is an individual who is self represented.

8.       Not appealing unless there is a reasonable likelihood of success or there is a public interest in seeking the appeal

If the government decides there is a justifiable reason for appeal the decision to appeal should be made as soon as practicable.

9.       Apologising where the state or its lawyers have acted improperly

It is important to note that the obligation to be a model litigant does not prevent the government from winning cases or putting their best case assertively forward. The obligation to be a model litigant does NOT prevent the state from:

1.       Acting firmly and properly protecting its interests;

2.       Enforcing costs orders;

3.       Claiming legal professional privilege or other forms of privilege;

4.       Claiming public interest immunity;

5.       Pleading limitation periods;

6.       Seeking security for costs;

7.       Opposing unreasonable or oppressive claims or processes;

8.       Requiring opposing litigants to comply with procedural obligations; and

9.       Making applications to strike out untenable claims.

If you are the lawyer and your client is a government agency, it is your responsibility to ensure that your litigation and dispute resolution work reflects the obligations of the model litigant. Situations could arise where there is a conflict between what your government client is instructing you to do and your obligations as model litigant.

Key cases:

The obligations of the model litigant have been described in the key cases as requiring “the State and its agencies, as parties to litigation, act with complete propriety, fairly and in accordance with the highest professional standards”. This catchphrase has been adopted in the model litigant policies of most jurisdictions. For further information see the earlier key cases of:

1.       Melbourne Steamship Limited v Moorhead (1912) 15 CLR 133 at 342;

2.       Kenny v State of South Australia (1987) 46 SASR 268 at 273; and

3.       Yong Jun Qin v The Minister for Immigration and Ethnic Affairs (1997) 75 FCR 155.

Highlights of judicial commentary in recent cases includes:

1.       Morely & Ors v Australian Securities and Investments Commission [2010] NSWCA 33

 This case was one of the James Hardie group asbestos cases. The NSW Supreme Court discussed the model litigant obligations and emphasised that government litigants do not have a private interest and their actions should reflect this. The NSW Supreme Court held that the failure to call a particular witness was a breach of ASIC’s obligations as model litigant:

“[716] the government agency has no legitimate private interest of the kind which often arises in civil litigation. It acts, and acts only, in the public interest as identified in the regulatory regime.

In partial answer to the first of the questions, whether its failure to call a witness can constitute a breach of the obligation of fairness, in our opinion it can.”

2.       ACCC v Australia and New Zealand Banking Group Ltd (No.2) [2010] FCA 567

The Federal Court held ANZ had failed to follow its obligations as model litigant and the ACCC was ordered to pay 80% of ANZ’s costs. The ACC’s breach centred on the nature of their interrogatories, which included 98 separate and unclear questions:

“[26] ACCC must frame the interrogatory in a way which does not cast an obligation on the other side to do the best it can with the interrogatory and reframe it. The intention must be made clear...if the intention is not clear, the person interrogated does not have an obligation to frame what it perceives to be the intention.”

3.       Qantas Airways Ltd v Transport Workers Union of Australia [2011] FCA 470

The Federal Court emphasised the importance of government litigants being “impartial”, as they do not have a private interest akin to an individual in litigation.

“[192] The submissions were, in my opinion, a little too partisan at times for a statutory officeholder. By partisan I mean infused by a measure of zeal rather than detachment. I would have thought that the Ombudsman should aspire to be a model litigant rather than a partisan one.”

4.       LVR (WA) Pty Ltd v Administrative Appeals Tribunal [2012] FCAFC 90

This case suggested that acting as model litigant is particularly important where independent legal representatives are not involved.

“Speaking generally and without reflecting on counsel who appeared before us, being a model litigant requires the Commonwealth and its agencies, as parties to litigation, to act with complete propriety, fairly and in accordance with the highest professional standards.

This obligation may require more than merely acting honestly and in accordance with the law and court rules.

… [A]s Melbourne Steamship Limited v Moorhead (1912) 15 CLR 333 at 342 reveals,  that expectation, even a century ago, was of long standing. To bring the matter up to the present we note that in Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 286 ALR 501, Heydon J said ASIC accepted that there was, in the words of Griffith CJ in Moorhead, an “old-fashioned traditional, and almost instinctive, standard of fair play to be observed by the Crown in dealing with subjects”. Its powers are exercised for the public good. It has no legitimate private interest in the performance of its functions. And often it is larger and has access to greater resources than private litigants. Hence it must act as a moral exemplar ….

In our opinion, counsel representing the executive government must pay scrupulous attention to what the discharge of that obligation requires, especially where legal representatives who are independent of the agency are not involved in the litigation.”

Limitation Periods - a trap for young players

Junior lawyers are frequently warned by their supervising solicitors to watch out for limitation periods. However, this warning is rarely accompanied by training on limitation periods or what to say to your client. In this article I explain where to go to find the relevant limitation period and suggest appropriate steps to advise your client and avoid professional negligence liability.

What is a limitation period?

A limitation period is a time frame within which a certain cause of action must be commenced in a court. After the expiration of the relevant time period, legal action cannot be brought.

Where can I find the relevant limitation period?

Limitation periods can be found in both statute and contract:

1.       Statute

In NSW the main statute of limitation is the Limitation Act 1969. Section 14 is the general limitation provision and provides that for causes of action founded in contract and causes of action founded in tort are “not maintainable if brought after the expiration of a limitation period of six years”.

It is very important to know the correct cause of action because apart from this general rule for contracts and torts there are exceptions and special rules for almost every cause of action. Some examples:

a.       Defamation – limitation period of 1 year running from the date of publication – section 14B Limitation Act 1969 (can be extended to 3 years by a court under section 56A).

b.      Action under a Deed – limitation period of 12 years running from the date on which the cause of action first accrues – section 16 Limitation Act 1969.

c.       Recovery of land – limitation period of 12 years running from the date on which the cause of action first accrues – section 27 Limitation Act 1969.

d.      Redemption of property in possession of a mortgagee – limitation period runs from the later of the date at which the mortgagee last goes into possession of the property or the date at which the mortgagee last received a mortgage payment – section 41 Limitation Act 1969.

e.      Personal injury action – a complicated regime where the limitation period runs from whichever of the two periods is first to expire:

a.       The “3 year post discoverability limitation period” running from when the cause of action is discoverable; and

b.      The “12 year long-stop limitation period” running from when the time of the act or omission that led to the injury/death (can be extended by the court).

Not all limitation periods are contained in the Limitation Act 1969. Limitation periods in specialist fields like insurance and employment law are found in the “mother Act” of that field such as the Fair Work Act 2007 (Cth) which specifies a 21 day limitation period for commencing unfair dismissal claims.

2.       Contract

Some limitation periods can be found in contract. Contractual limitation periods are common in the insurance and building sectors. The contract may specify that a claim needs to be made within a specific time period, ie that “any claim must be made within 30 days of the purchaser becoming aware of the claim”.

Law Cover has a very useful “Schedule of Limitation Periods” which shows where you should look to find the limitation period for your relevant cause of action (http://www.lawcover.com.au/schedule-of-limitation-periods/). While this guide is useful, it is not a substitute for you as a lawyer checking the primary source. Limitation periods in areas such as employment law change frequently. Do not get caught out. Check the primary source.

Finding the start date and end date of the limitation period: When does the cause of action accrue?

For general contract and torts claims under section 14 of the Limitation Act 1969, the cause of action runs “from the date on which the cause of action first accrues to the plaintiff”. Generally, the cause of action first accrues at the time the breach of contract occurs (Sheldon v McBreath (1993) Aus Torts Report 81-209). There are exceptions to this including money loans payable on demand.

Money loans payable on demand

A money loan payable on demand will exist where no time for repayment has been specified or the loan is stated to be payable “on demand”. This type of money loan is most common between friends and family members who have not sought prior legal advice, as usually there is some sort of arrangement about when the money is to be repaid. Loans payable on demand create an immediate debt. The lender’s cause of action begins when the loan is made. Money loans are subject to a 6 year limitation period from when the borrower receives the money. In practice, this means the borrower does not have to repay the loan once six years has passed.

How to appropriately advise your client

1.       Mention limitation periods straight away

A typical way lawyers are caught out is when a client wants to pursue a claim but pulls out after given an estimate of costs to pursue litigation. At this point lawyers may have often advised on the likelihood of success only. The same client could return in a few years time having decided to pursue their matter in court. You did not advise on the limitation period at first instance, which could lead to a professional negligence claim if the limitation period has expired.

How to avoid this? ALWAYS advise on limitation periods at first instance. Even if your client is talking to you on the phone and you are not yet sure what the cause of action is, let the client know that limitation periods do apply, and depending on the cause of action, your client could be in or out of time. Advise of the length of the limitation period and the effect – ie “once the period has expired you will be statute barred from pursuing your claim”.

2.       Make a file note of the conversation

ALWAYS make a file note when you advise a client on a limitation period over the phone or in person. You could even write a letter or email to your client referencing the conversation, the causes of action discussed and the relevant limitation period.

Help! The limitation period expires in three days. What should I do?

You can only apply for an extension of the limitation period in certain circumstances such as if the claim is a personal injury or defamation matter. Advise your client that an application for an extension of the limitation period may not be successful. The safest course of action at this point may be to commence proceedings.

Commencing action in the appropriate court will preserve your position and make sure your client gets in within the limitation period. To commence proceedings you will have to file a Statement of Claim in the appropriate court.