Gao v Zhang [2005] VSCA 200

Finally, the applicant wishes "to further collect evidence from others for verifying" his cause of action.

7 One can see immediately that the applicant, with his regrettably imperfect knowledge of the law, and, indeed, of the English language, has barely touched on matters which might be relevant to the hearing of an appeal in this matter and none of which could be made out. To add to his difficulties, the applicant's affidavit in support is equally unsatisfactory, referring inadequately to some of the material upon which he wishes to rely and to which the Court has had reference. Largely the history of this case has to be taken from the comprehensive affidavit sworn in opposition. Finally, although from the first paragraph of his affidavit it is clear that the applicant is aware of the present Practice Statement relating to applications of this kind, he has failed entirely to file an outline of submissions in accordance with the Statement or at all, leaving the respondent to file its outline at the last moment.

8 Nevertheless, the Court must do its best in the circumstances to ascertain whether there is or is not some arguable defect in the order made or in the reasons given for it or whether it is attended with such doubt as would justify the giving of leave to appeal. One can at least see why the applicant would be unhappy about the nature of the order made against him. Although it did not involve the permanent dismissal of the action, or a permanent stay, it must be seen as having largely the same effect, if present circumstances continue. The stay ordered is indefinite and will prevent the applicant from pursuing his long-delayed case unless and until he satisfies in full the orders for costs. The total may not seem to be large but the material before the judge indicates that the applicant presently has no means of satisfying those costs orders. Insofar as he has a claim to recover a money sum from the respondent, that claim cannot be pursued by reason of the present order until he comes into some money sufficient to pay the costs. This much, however, may be seen and perhaps was a relevant factor in her Honour's decision, namely, that he has some expectation of receiving a sum in another matter which is presently under the control of the Trustee in Bankruptcy. To what extent he will gain the money he there seeks is uncertain but I do not gather that he thinks it is impossible.

9 As orders of this kind are discretionary, the applicant faces a heavy burden in showing that it is appropriate to grant leave to appeal, for reasons made clear in the many authorities to which the respondent has referred to the Court but which are so well known that they need not be here repeated. Ordinarily, there must be shown some error of principle or either a failure to take into account relevant matters or the wrongful taking into account of irrelevant matters. In the present case the question can only be answered by an examination of the judge's reasons. They need not be set out in detail here, for they can be found comprehensively set out in her judgment. In broad terms, it was said that the provisions of r.63.03(3) are designed to overcome a defect in the jurisdiction of the Court which was revealed by the Full Court decision in Exell v. Exell[1] where it was held that under the inherent jurisdiction of the Court to make an order such as the present it was necessary to show "exceptional circumstances", such as true abuse of process or the like. It followed, said the judge in the present case, by applying a series of decisions of judges in the Trial Division, that the restrictions imposed in Exell were intended to be overcome by the new rule and that consequently the Court has a wide power to make an order for a stay, dismissal or striking out where orders for costs of interlocutory applications have remained unpaid. What her Honour and the other judges upon whose judgments she relied have said about the desire to avoid the restrictions in Exell is undoubtedly correct, but it does not necessarily follow that whenever costs remain outstanding some such order should be made. Thus I believe that it is correct to assess the reasoning both of her Honour and of the judges in the earlier cases so as not to endorse so wide a view of the intended discretion.

10 There are some statements, however, in those earlier cases which suggest, even if they do not fully endorse, an approach which might be thought to be too generous to those having the benefit of costs orders. The outcome of those decisions is not here being criticised, but certain dicta suggest a too lenient attitude to those applications.

11 Although I am of opinion that the judge in the present case came to the correct decision in the special circumstances of the case, substantially for the reasons she stated, it is appropriate for this Court to sound a word of warning, lest it be thought that orders of this kind can be adopted as a day-to-day means of recovering costs ordered by the Court.

12 The power to stay a proceeding, to dismiss a proceeding without trial, or to strike out a defence are each powers which, if exercised, in one way or another deny justice to the party affected and ought not to be employed unless it is the only fair way of protecting the interests of the party seeking such an order. The basal principle, frequently adopted, was stated by Dixon, J. in Cox v. Journeaux (No.2)[2] when he said, in relation to a striking out application:

This passage and several others to like effect were adopted by Sugerman, A.C.J., with whom both Holmes and Mason, JJ.A. concurred on behalf of the New South Wales Court of Appeal, in Rochfort v. John Fairfax & Sons Ltd.[3], which were also largely directed to pleading applications. Sugerman, A.C.J. continued[4] by saying that, although those passages expressed a fundamental principle, "it is not intended to question the extensive inherent jurisdiction of the Court to grant stays of proceedings in the interests of justice; it is merely intended to demonstrate the gravity of an exercise of this power and the necessity for the existence of proper grounds for its exercise". These observations seem equally applicable to the present case. Moreover, merely because the power to stay (and the like) appears in a specific rule of court, then in my opinion it cannot deny the importance of looking to the consequences of an order made under such a power, for in substance the exercise shuts a party out of court.

13 Furthermore, even a seemingly temporary stay may have the same effect, if it is expressed to be indefinite in duration and there is no practical likelihood of the condition being satisfied. If the party against whom an order under r.63.03(3) is made has no funds or any real expectation of them in the foreseeable future, the outcome will be substantially the same as a permanent stay or dismissal, although the stay may not be dressed as a permanent stay but merely as one operating until the specific costs are paid. Further, in the orderly administration of justice it is undesirable to make orders of a seemingly temporary kind if the matter is to remain unresolved and not return to court for some final orders. If there is no specified date for the payment of the relevant costs, then frequently the proceeding is as good as permanently stayed. Moreover, to put off the trial into the indefinite future, especially when an action has been on foot for some four years or so and relates to events some time earlier, is not likely to conduce to a satisfactory trial if the party does find the necessary sum to pay out the costs orders. In short, a temporary order of this kind should ordinarily be made only if the Court believes or at least has reason strongly to suspect that the party refusing to pay the orders for costs is being recalcitrant and will in fact pay the order if it is forced to do so. Otherwise, the order, if I might so describe it, is like a wolf in sheep's clothing, seemingly temporary but effectively permanent.

14 As I have said, these observations are intended to rebut a tendency, which appears in certain dicta in some unreported cases[5] under r.63.03(3) of treating the newly granted power almost as a means of debt collecting, whereas what it was intended to do was to ensure justice as between the parties in circumstances where one party builds up a large debt of costs to the extent that it deprives or restricts the other party of the ability fairly to conduct the litigation. That is not to say that an order of this kind will only be made in exceptional circumstances, which was said in Exell before the rule was introduced with respect to an attempt to impose a stay by means of a self-executing order in relation to non-payment of costs. But even if the power be not exceptional, an order of this kind is not to be treated as an everyday occurrence, for it must be realised that interlocutory orders for costs are frequently made, particularly in complex cases, and from time to time they may even be set off against orders made against the opposite party. Cf. Joskovitz v. Bonnick[6] .

15 It follows, therefore, that unless the object of the order is merely to provide a temporary stay to force a wealthy, or at least not impecunious, but recalcitrant litigant to pay awards of costs which that party is well able to pay, then the power should be treated as one which will have the effect of bringing to an end litigation without the benefit of a trial to which a litigant is ordinarily entitled. The reason for making such an order must therefore be serious and essentially the only practical way to ensure justice between the parties. Consequently, although in some of the cases impecuniosity was said to be irrelevant, I cannot see that such a broad statement is accurate so far as the exercise of this kind of drastic power is concerned. In an analogous field, the courts, both generally and pursuant to their rules, have ordinarily always hesitated about imposing liability to provide security for costs by individual litigants, whatever may be said of the rules applicable to corporations or upon appeals, when the parties have had their day in court. If a party is clearly shown to be impecunious, then a court cannot act to grant even a temporary stay order under r.63.03(3) except upon the understanding that it will thereby be bringing the litigation effectively to an end. But even in applications seeking permanent orders, the financial capacity of a party may be relevant in deciding whether a refusal to pay has been deliberate and it is often important to know, if it is possible to do so, why and under what circumstances the relevant costs orders remain unpaid.

16 On the other hand, if substantial orders for costs are built up and are unpaid, then that must reflect the expenditure of money by the unsatisfied litigant and that will, to that extent more often than not, see that party financially inconvenienced to the extent that it may not be able properly to prepare its case. In the absence of evidence, however, it is perhaps rash to assume that the inability to recover particular sums by way of costs will necessarily have that adverse consequence, so that, the smaller the total amount of costs outstanding, the less likely it is that the party with the benefit of the costs order will be denied a fair opportunity to present its case, although circumstances will necessarily always vary. Moreover, I cannot accept as a broad statement that in complex (or other) cases, the trial "should only be permitted to proceed if the parties are at least put on a relatively even footing before it commences", as was quoted from one of the unreported cases by the learned judge at [19]. However desirable that may be in theory, that cannot ordinarily be the basis for an order of this kind, unless something else be shown. I should add, as it has from time to time been seen to be relevant,[7] that the failure to appeal against the subject costs orders is of little consequence, in my opinion, since this Court so rarely gives leave to appeal against cost orders. In any event, as a matter of practical fact, any appeal against an order of substance will almost inevitably carry an appeal against the order for costs which will naturally depend upon the outcome of the appeal, as in fact occurred in the many appeals brought by the applicant.

17 Finally, at least for the present, if an order of this kind is to be made, there must be seen to have been some conduct on the part of the party in default which falls for condemnation to the extent of making so draconian an order. For this purpose frequent litigation of minor interlocutory points may, at least in due course, point to misuse of the Court's process, in the limited sense of a deliberate harassing of the other side, such that it can no longer be permitted to continue. Ordinarily, therefore, one would assume before making an order of this kind that there would be a series of orders for costs and that they usually would be of a kind which did not involve the genuine resolution of disputes relating to interlocutory matters which have to be resolved before the matter can go to trial. For this purpose, then, the way in which each interlocutory dispute has been contested may well be relevant. From time to time appeals, at least to a judge in the Practice Court, may be justified but to pursue them further to both this Court and the High Court, in cases where issues are essentially peripheral, may evidence an effective harassing of the other party of a kind which may justify a stay or the putting an end to the litigation. Of course, naturally, from time to time, interlocutory matters of importance are heard by both this Court and the High Court. Nonetheless, a party seeking an order such as the present may be able to bring to the Court's attention factors which would indicate a pattern suggesting at least a harassing of, or unfair dealing with, the opposite party, which in one way or another is exacerbated by a deliberate or regular refusal to pay the consequential costs of those applications.

18 The judge in the present case had a difficult task for it was essentially a discretionary decision which had to be made upon the whole of the relevant materials. The amount of costs, just over $8,000, was, one may concede, comparatively small; indeed it could barely be suggested, at least in the absence of evidence of which there was none, that the defendant had been deprived of that sum to the extent likely to prevent the respondent from conducting her defence properly to the action. On the other hand, the amount did not derive from only one or two orders but from a series of orders made in related interlocutory applications which, as time passed and each went up the appellate chain, appeared of less and less merit and more and more ill conceived. The first costs order was a minor order and the judge there was otherwise persuaded to make the rest of the costs costs in the cause, largely because the applicant at that stage conceded that his statement of claim required amendment. What followed, however, was an essential failure of the applicant to understand what was relevant and what could fairly be sought from the courts at the appellate level. The reasons given in the subsequent steps in the proceeding, particularly in the decisions in this Court and in the High Court, show how little merit there was in each point, even though no costs orders from the High Court are relevant for present purposes and in fact none were made because of the procedure there adopted. But it is essentially unfair to harass another party by appeals to the highest courts in the land over minor procedural matters, especially as

even now it is impossible to ascertain what real point was sought to be made or achieved.

19 There was, therefore, a point at which the judge could fairly conclude that the applicant should not be permitted to harass the respondent persistently with proceedings of this kind unless and until he paid out the consequent costs. That is not to suggest, however, that even thereafter the applicant ought to conduct litigation in the future in the same way. The justice of the case, however, can fairly be accepted as pointing to the same conclusion which the judge reached in the very circumstances revealed by the whole of the evidence and which she described. Consequently, there is neither such doubt attending the judge's decision as would justify the grant of leave to appeal, nor does the justice of the case require that leave to appeal against this order should be granted.

20 As to the application relating to an order for a stay of the Court's orders for the costs themselves, there is no merit whatever in the application, especially having regard to the Court's accepted practice in relation to orders for costs.

21 If I might add this point, if r.63.03(3) was seen to be a simple method of recovering costs, then that might be a basis for reconsidering the Court's attitude to granting leave to appeal from costs orders, but that in itself would appear to be undesirable.

22 The application must therefore be refused.

VINCENT, J.A.:

23 I agree, and for the reasons advanced by Ormiston, J.A, that this application should be dismissed. I specifically wish to associate myself with the views expressed by him concerning the proper approach to be adopted when considering applications made pursuant to r.63.03.

At a glance

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Judgment (9 paragraphs)

Parties