A recent case before the High Court concerned a stay of proceedings not based on the inherent jurisdiction of courts to prevent an abuse of process by the plaintiff but on a rule of court concerned with non-payment of an interlocutory order for costs.
The case was Rozenblit v Vainer  HCA 23. There the appellant had brought proceedings in the Supreme Court of Victoria in which he alleged that the first respondent had fraudulently transferred to his father, shares owned by the appellant. The appellant and the first respondent were jointly developing and commercialising tyre recycling technologies, with the appellant alleging that he had invented the technologies. He applied, unsuccessfully, on two occasions for leave to amend his statement of claim and was ordered to pay the respondents’ costs, it also being ordered that costs be taxed immediately. The appellant did not pay the costs. He applied a third time to amend, to add a claim which concerned the conduct of the respondents in placing the company in which the shares were held into voluntary liquidation. Although the respondents’ objections to the amendment were overruled, unconditional leave to amend was not granted and an order was made staying the proceedings until the costs, the subject of the orders, were paid. That the appellant’s financial circumstances were such that he could not pay the costs was not contested, his evidence as to that fact being unchallenged in cross-examination. This was an important factor in the case.
Rule 63.20.1 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) provides that interlocutory costs are not taxable until the proceeding has concluded unless the court orders otherwise. Rule 63.03(3) provides: “Where the Court makes an interlocutory order for costs, the Court may then or thereafter order that if the party liable to pay the costs fails to do so—(a) if that party is the plaintiff, the proceeding shall be stayed or dismissed; (b) if that party is a defendant, the defendant’s defence shall be struck out.”
The High Court unanimously allowed the appeal, deciding that the order made in reliance of r 63.03(3)(a) should not have been made.
In so deciding, the High Court said:
- The court’s reasons for making the order under r 63.20.1 should be taken into account in an application for a stay. However, per Gordon and Edelman JJ (para 111): “The fact that the Court had previously been willing to order that interlocutory costs be taxed indicates unsavoury conduct. But the grant of a stay does not necessarily follow such an order. The Court, when considering an application for a stay, must decide afresh (as part of considering whether to exercise the discretion to grant the stay) whether the conduct of an impecunious party is so extreme as to justify bringing the proceedings to an end, and whether so ending the claim, is the only way to do justice between the parties. The effective end of a proceeding is a far more significant consequence for a party than an order that interlocutory costs be paid forthwith. It follows that the conduct justifying the grant of a stay will necessarily be more worthy of condemnation than the conduct justifying the making of an interlocutory costs order to be paid forthwith. While historical conduct may assist the Court’s inquiry, it does not necessarily provide a final answer.”
- There was nothing in the Civil Procedure Act 2010 (Vic) or the Rules which suggested that the principles which informed the exercise of the power to stay proceedings arising from the inherent jurisdiction of the courts should not be applied to the exercise of the same power given by r 63.03(3). In the absence of such an indication, it was to be inferred that those well-established principles were intended to apply.
- Where the conduct of the defaulting party is relied upon in an application for an order as draconian as a stay under r 63.03(3), it must amount to conduct which is commensurately serious or conduct which falls for condemnation but not merely conduct which is open to criticism.
- Per Kiefel CJ and Bell J (para 28): “Here, the appellant’s conduct might have warranted some criticism, but that did not elevate it to the status of conduct warranting condemnation. The conduct was not persistent and it could not be described as harassment. There may have been changes to the appellant’s pleading but there were only two unsuccessful applications to amend and no attempt to pursue them further. The third application to amend had merit. No doubt the respondents and the primary judge may have been frustrated by aspects of the appellant’s conduct and the errors, confusion and the delay that it caused. His attitude, obviously enough, was a cause of irritation. But it was not found that his conduct was so inefficient or so productive of delay that it had a serious impact upon the progress of the proceeding or that the costs occasioned by it caused real prejudice to the respondents.”
- Per Kiefel CJ and Bell J (para 31): “What was said in Aon (Aon Risk Services Australia Ltd v Australian National University HCA 2009) albeit in the context of applications for amendment, is a useful reminder of the usual tolerances in litigation. It was there observed that some degree of delay and some wasted costs are inevitably associated with amendments. … It is the extent of the delay and costs, together with any prejudice that might be caused, which is relevant to the grant or refusal of permission to a party to alter its case.”
- Per Kiefel CJ and Bell J (para 34): “If a stay order is contemplated and its effect may be to bring the proceedings to an end it is necessary that all reasonable alternatives to such an order be investigated. As the reasons of Keane J and of Gordon and Edelman JJ show, there was an alternative course open, to grant leave to amend conditioned on payment of the costs orders. In the event, as seems likely, that they were not paid the respondents would be protected from the further expenses associated with the new claim, but the appellant would not be denied a determination on his existing claims. But in our view this point was not reached.”