Focus: Impact of 'overarching purpose' on costs orders
2 April 2012
In brief: A recent Federal Court decision, in which a solicitor was ordered to pay the other party's costs personally, illustrates the significant impact of the 'overarching purpose' on the exercise of judicial discretion to make costs orders. Partner Alex Cuthbertson (view CV) and Lawyer Katherine Cooke report.
How does it affect you?
- The Federal Court has emphasised that the duty to comply with the 'overarching purpose' contained in sections 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (the Act) has had a significant impact on the obligations of parties to civil proceedings, and their lawyers.
- This decision1 makes it clear that a failure properly to plead a claim may be regarded as a breach of the overarching purpose. Accordingly, the Federal Court may now be more likely to make cost orders where it considers this failure has hampered the court's ability to resolve a dispute as quickly, inexpensively and efficiently as possible.
Since 1 January 2010, parties to civil proceedings in the Federal Court, and their lawyers, have been required to act consistently with the 'overarching purpose'.
Sections 37M and 37N were introduced into the Act by the Access to Justice (Civil Litigation Reforms) Amendment Act 2009 (Cth). Section 37M provides that the overarching purpose of the Federal Court Rules is to facilitate the just resolution of disputes:
- according to law; and
- as quickly, inexpensively and efficiently as possible.
The objectives of the overarching purpose include the efficient use of judicial and administrative resources, timely disposal of proceedings, and the resolution of disputes at a cost proportionate to the dispute's importance and complexity.
Section 37N imposes a duty on parties to civil proceedings to act consistently with the overarching purpose and imposes an obligation on the parties' lawyers to assist them to comply with this duty. In exercising the discretion to award costs in a civil proceeding, the court must take account of any failure to comply with this duty either by a party or the party's lawyer.
The case involves an application brought on behalf of Luke Modra by his mother, alleging unlawful discrimination in contravention of the Disability Discrimination Act 1992 (Cth).
On two occasions, Justice Gray made orders requiring the applicant to correct deficiencies in his statement of claim. On the second occasion, the orders made by the court specified in some detail the matters that were required to be included in the statement of claim, and Justice Gray warned the applicant's solicitor that if the applicant's case was not pleaded adequately, he would consider awarding costs against him personally.
The amended statement of claim did not comply with the orders and, in particular, failed to provide adequate particulars. Justice Gray ordered the applicant to pay the defendant's costs that were thrown away by reason of the deficient pleading, as well as the costs of that day's hearing. His Honour adjourned to a further hearing the question of whether the applicant's solicitor should pay these costs personally.
Justice Gray ordered the applicant's solicitor to pay the costs personally.
He described the orders that he had made detailing the matters to be included in the statement of claim as 'unprecedented' in his experience. He stated that he made these orders to provide the applicant's solicitor and counsel with a guide to ensure that the amended statement of claim met the ordinary requirements of pleading.
His Honour emphasised the impact that deficient pleadings will have on the just determination of any case. He observed that an imprecise pleading places an extra burden on the judge and increases the risk of the judge falling into error; adds to the expense of a proceeding, by requiring the opposing party to do more work than would normally be the case; and is likely to increase the trial's length. Thus, he concluded, a failure to plead a claim correctly will impact not only on justice but also on timeliness, efficiency and expense.
Justice Gray referred to previous authorities that have held that a serious dereliction of duty or serious misconduct needs to exist before the court will order a legal practitioner to pay costs personally.2 He accepted that the principles established in these authorities continued to apply, but noted that the content of the duty of a legal practitioner in the Federal Court has been significantly changed by the introduction of ss 37M and 37N. His Honour stated (at ):
To accept the proposition that ss 37M and 37N of the Federal Court Act leave the situation as it was according to authorities decided prior to 2010 would be to attribute to Parliament the intention to achieve nothing by enacting detailed legislation. In truth, the impact of those sections on the obligations of legal practitioners practising in this Court is significant. Section 37N(2)(b) requires a legal practitioner to assist the party on whose behalf he or she acts to comply with a duty to conduct a proceeding in a way that is consistent with the overarching purpose to which s 37M refers. That overarching purpose has objectives that include efficiency, timeliness and economy, as well as justice. It may be accepted that costs can only be ordered against a legal practitioner in the event of that practitioner's serious dereliction of duty, but it must be recognised that the content of the duty has been changed by legislation.
Orders of the type that Justice Gray made in Modra v State of Victoria are very unusual. Nevertheless, they demonstrate the importance that the Federal Court attaches to the role of parties and their lawyers in facilitating the conduct of proceedings in a manner that is efficient, timely and economical. Parties to civil proceedings should take note of the requirement to conduct proceedings in such a way.
Under the Federal Court Rules, judges have a broad discretion to award costs. This case demonstrates that, while the existing authorities regarding the exercise of this discretion remain relevant, they must now be interpreted and applied to take account of the overarching purpose. The decision makes clear that a failure properly to plead a claim may be regarded as a failure to comply with the overarching purpose. Accordingly, the Federal Court may now be more likely to make costs orders in these circumstances.
- Modra v State of Victoria  FCA 240.
- See White Industries (Qld) Pty Ltd v Flower & Hart (a firm)  FCA 806; (1998) 156 ALR 169.
- Alex Cuthbertson Partner,
Ph: +61 3 9613 8740
- Paul NicolsPartner, Sector Leader, Industrials,
Ph: +61 2 9230 4414
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