Rozenblit v Vainer & Anor [2017] HCATrans 167 (18 August 2017)

Last Updated: 22 August 2017

[2017] HCATrans 167

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M52 of 2017

B e t w e e n -

BORIS ROZENBLIT

Applicant

and

MICHAEL VAINER

First Respondent

ALEXANDER VAINER

Second Respondent

Application for special leave to appeal

NETTLE J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 18 AUGUST 2017, AT 11.27 AM

Copyright in the High Court of Australia

MR J.G. KORMAN: Your Honour, I appear on behalf of the applicant in this matter. (instructed by the applicant)

MR M.G. McNAMARA: If the Court pleases, I appear on behalf of the respondents. (instructed by CIE Legal)

NETTLE J: Yes, Mr Korman.

MR KORMAN: Your Honours, the applicant’s case can be stated in five propositions. Firstly, that the common law as stated by Justice Dixon in Cox v Journeaux provides that a suit honestly brought should only be stopped:

when to permit it to proceed . . . would clearly inflict unnecessary injustice upon the opposite party -

Secondly, it cannot be and has not been demonstrably justified as required by section 7(2) of the Charter that the right to have a proceeding determined after a fair and public hearing should be restricted beyond the principle stated in Cox v Journeaux.

NETTLE J: Do you need the Charter to get to that? Is it not just a matter of a principle of law?

MR KORMAN: Yes, it is, your Honour, we do not need the Charter, and the application could proceed on the principle of legality just as well.

GORDON J: What about Gao v Zhang, do you not use that as well?

MR KORMAN: Yes, but Gao v Zhang was derived from the principle in Cox v Journeaux, but we do rely that Gao v Zhang is currently the - should be the authority which governs rule 63.03(3).

NETTLE J: Sorry, you got up to point 3, I think, of your finding.

MR KORMAN: Yes, so point 3 is the principle of legality and, if necessary, the Charter, but the principle of legality on its own as well, requires that the discretion to order a stay under section 63.03 should be exercised in accordance with the rule in Cox v Journeaux. Four, in this case, the continuation of the action would not and will not clearly inflict unnecessary injustice on the respondents and the conclusion in five is that the Court’s exercise of its discretion to order a stay under rule 63.03 miscarried.

NETTLE J: It miscarried why? Because it was not open to reach the conclusion that the only just way to proceed would be by a stay in the proceeding? Is that the way it is put or some other basis?

MR KORMAN: Well, that is the way it is put but it is put that the correct principle was not followed. In other words - - -

GORDON J: So, we have got an error - we have got application, we have got the wrong principle and if you had applied the right principle you would have got a different result.

MR KORMAN: Precisely.

NETTLE J: That is not open to exercise discretion in the way they did.

MR KORMAN: That is right.

NETTLE J: What evidence was there about the capacity of the applicant to meet the costs bills?

MR KORMAN: The applicant put on two affidavits. In one of the affidavits he stated, I did not pay the costs bill because – I will just get the exact wording for you.

NETTLE J: Thank you.

MR KORMAN: I refer to that on page 127 of my submissions and I say at paragraph 35 that the applicant swore two affidavits. The respondents did not seek to cross examine him on either. In the first affidavit, the applicant deposed “I have not paid the costs order that was made against me because I have no way of doing so.” In the second, he deposed that he and his wife were aged pensioners, and also received a small pension from Russia. They lived in a house rented from the Department of Health and Human Services. Other than their personal belongings, their only asset was combined savings of $2,242.

NETTLE J: I had thought, Mr Korman, and this is a question, not an assertion, that the Court of Appeal took the view, either rightly or wrongly, that the applicant had not gone – had not given evidence as to his capacity to pay. Was I right about that?

MR KORMAN: I did not understand that that was the position taken by the Court of Appeal and this - - -

NETTLE J: Thank you. Anyway, had they taken that it would have been erroneous, you say.

MR KORMAN: Yes, and I think that this matter was put before them, these affidavits, in the submissions that were made to the Court of Appeal.

GORDON J: I do not know about that. For example, page 112 of the application book at 69, I think the complaint was:

the applicant’s failure to inform the respondents of his inability to pay the first costs order –

That was one aspect. Then, the second thing that the Court of Appeal took into account was how, in a sense, the failure of your client to explain how they had funded the proceedings so far.

MR KORMAN: Yes, and these were matters that were brought up by the Associate Judge at first instance as aspects of conduct that fell for condemnation, not so much failure to inform the opposing party was after the costs order had been made at that time there had been no information given and what happened was attempts were made to enforce the costs order, the Sherriff was sent around and there was an interchange between the parties, which is what my client requested that – or advised the other party that no further steps would be taken to enforce – at any rate, there was an interchange and that is what underlay the finding of unjustified umbrage.

But the point that has been made here is these did not go to the question of impecuniosity. They went to the question of what I would call past conduct, and the applicant does not seek to enter into the question of whether the past conduct ought not to have been criticised. What the applicant says is that that is the wrong matter to look at. What should be looked at is whether the continuation of the proceedings will clearly cause unnecessary injustice to the other side. All of these matters were historical criticisms of the applicant’s conduct.

NETTLE J: When the matter was before the Associate Judge upon application to stay the proceeding pending payment of the outstanding costs orders, did her Honour have before her evidence that the applicant lacked a capacity to pay?

MR KORMAN: These affidavits had been filed with the court long before.

NETTLE J: Thank you. So, they were before her and to be taken as read before her as they were before the judge on appeal, Justice Cameron, and again before the Court of Appeal?

MR KORMAN: Yes, your Honour.

NETTLE J: So, let there be no doubt about this, you are telling me that there was in the form of those affidavits, clear evidence that he did not have the capacity to pay?

MR KORMAN: Yes, your Honour.

NETTLE J: Thank you.

MR KORMAN: Now, at the heart of the appeal that the applicant seeks special leave to bring lies the question of whether access to justice is a privilege or a right. Analysis of this question in the context of rule 63.03(3) sheds light on the source of the error that the applicant submits was made below. It can readily be seen that different considerations apply to the withdrawal of a privilege and the abrogation of a right. Privileges can be granted as rewards or inducements. They can be withdrawn as punishments. The exercise of the power to withhold or grant privileges is often used to achieve socially beneficial ends. If access to justice were a privilege it would make sense to withdraw that privilege in the service of socially useful ends, specifically, where courts disapprove of the litigant’s conduct they could deny further access by imposing a stay as a sanction with hopefully a deterrent effect and the threat of such sanction would no doubt act as a powerful general deterrent.

But a different philosophy guides the denial of a human right. While the circumstances in which a basic right might be denied are varied, as recognised in section 7(2) of the Charter, it is often the case that a right will not be denied unless its continued exercise threatens the rights of others. That appears to be the rationale underlying the principle in Cox v Journeaux, that a claim honestly brought should not be stayed unless permitting it to proceed would clearly inflict an unnecessary injustice on the opposite party. Thus, if access to justice is a right it is not enough to point to some social utility in order to justify its abrogation. A related dichotomy is that between costs orders and stay orders. Costs orders do not affect basic human rights. They can be fashioned with a view to achieving socially beneficial ends.

It is not unusual for costs orders to be made on an overtly punitive basis. The threat of punitive costs orders achieves the socially beneficial end of discouraging conduct that would incur the disapproval of the Court. Stay orders, that is, orders imposing a permanent stay, deny access to justice. They involve an abrogation of human rights. For that reason, it is submitted, a litigant cannot be shut out of court merely with the view to achieving some socially beneficial end. This must flow from the fact, recognised at common law, that access to justice is a right and not a privilege and if this is so it must follow that access to justice cannot be denied merely as an expression of the Court’s disapproval of the litigant’s conduct.

Another point in relation to the dichotomy between costs and stay orders is that the discretion to make an adverse costs order is very broad. As his Honour Justice of Appeal Ormiston stated in Gao v Zhang, leave to appeal a costs order is rarely granted. On the other hand, the discretion to order a permanent stay, at least under the principle of Cox v Journeaux was tightly constrained. A claim could only be brought when to permit it to proceed would amount to abuse of jurisdiction or necessarily clearly inflict unnecessary injustice on the opposite party. A key proposition underlying the applicant’s case is that while costs orders are frequently exercised punitively, stay orders should never be principally guided by punitive considerations.

Thus, costs orders and stay orders are uncomfortable bedfellows. They do not lie easily together. But rule 63.03(3) brings these conceptually opposed type of orders together in the one rule. My preliminary searches have revealed no similar rule in other State and federal jurisdictions, but I say that guardedly. The juxtaposition of stay and costs orders in rule 63.03 creates the risk which has materialised in this case that basic human rights would be abrogated by reason of stay orders as a means of expressing the Court’s disapproval of litigant’s conduct which had earlier been reflected in a punitive costs order.

NETTLE J: Now, the question is confined to Victoria, in effect.

MR KORMAN: The question is confined to Victoria but, in my submission, it remains a matter of – no, actually I should say not really. It is - - -

NETTLE J: What is the principle or question of principle of general importance that is involved then?

MR KORMAN: Well, besides the fact that I would submit that even if confined to Victoria, it is generally important, but the question is whether the trial judge found that the power to stay a proceeding arising from a statutory source is not governed by Cox v Journeaux. Her Honour found that Cox v Journeaux must be restricted to the exercise of the Court’s inherent jurisdiction to stay proceedings.

Now, that finding was not disturbed by the Court of Appeal and so the position that we are in is that in any State - and I think I stated in my submissions that the UCPR in New South Wales and Queensland does not provide for a power to stay but the rules in the other States do - not necessarily in the context of non-payment of a costs order but the power exists in the rules.

If the law as stated by her Honour Justice Cameron is the law of this country, that means that Cox v Journeaux does not govern the exercise of that power in the non-UCPR States, and I think I made the point towards the end of my submissions that one of the difficulties that now arise is that those persons falling under the jurisdiction of courts in different States will face an arbitrary difference in the way that such applications should be decided.

Rule 63.03(3) can be understood in two ways. The first sees a rule as an enforcement provision; that is, debtors can be compelled to pay costs orders by imposition of a permanent stay on the suit. With rising consciousness of human rights, that approach has fallen away in other contexts, debtors’ prisons have been abolished - - -

NETTLE J: For quite some time.

MR KORMAN: Quite some time ago, and the Court of Appeal was, with respect, correct in rejecting the position taken by the Associate Judge and trial judge that Justice of Appeal Ormiston’s discouragement in Gao of the use of the rule for routine debt collection no longer applied. But the second approach, which is the approach taken by the Court of Appeal, looks past the costs order itself to the reasons that the costs order was made. This is particularly salient in the light of rule 63.20.1 which was adverted to in all the judgments, and that is the rule that requires a specific costs order – court order if interlocutory costs are to be taxed forthwith. That was found to be the legislative change which justified departure from Gao v Zhang.

The reasoning behind that was that it is often the case that costs are ordered to be taxed forthwith, interlocutory costs, for punitive reasons. The problem is that where that sanction is evaded by non-payment, a stay order – sorry, I will say that again. Where the sanction that is provided by 63.20.1, that is the imposition of an immediately taxed interlocutory costs order, is evaded by non-payment, 63.03 provides the power to order a stay order to ensure that the objects of the punitive costs order are not frustrated.

It is here in this juxtaposition of the power to grant a stay with the issue of costs order at this point where the contradictory nature of these orders has led the Court into error below. In this case, an order that interlocutory costs be paid forthwith was made because the applicant’s conduct in his applications to amend had, in the view of the Associate Judge, given rise to delay and additional costs and because the applicant had orally sought leave to cure drafting deficiencies her Honour had identified.

The costs order was, as costs orders often are, punitive in nature and the punitive nature of this order was highlighted by the departure from the default position and under rule 63.20.1 costs were ordered to be taxed immediately. But the punitive effect of that order was vitiated by the applicant’s impecuniosity. In the applicant’s own words, he did not pay the costs order because he had no way of doing so. Now, rule 63.03 appears to provide a solution to this problem, imposition of a stay, but the permissible operation of a costs order is much broader than that of a stay order. It is only in limited cases, and one of those cases was Gao v Zhang, where there is an overlap such that the conduct which justified the costs order is also conduct which would justify a stay.

NETTLE J: Which is to say harassment or collateral purpose.

MR KORMAN: Yes, but in a much broader range of cases - and I would say that probably the great majority of them would fall in the category of disapproval of past conduct - in those cases, the conduct which justified the costs order will not be the conduct that justifies abrogation of a plaintiff’s access to justice. On its face then, rule 63.03(3) appears to offer a back-up sanction to 63.20.1 but that appears as illusory because it is only rarely that a permanent stay can constitute a back-up sanction for a punitive costs order.

I should also say that really there is no real need for 63.03(3) if there is a provision in the rules for the power to order a stay, but put that to one side. The Associate Judge, the trial judge and the Full Bench of the Court of Appeal placed emphasis on the fact that rule 63.03(3) will nowadays be invoked only after an order has been made for costs to be taxed immediately.

But their Honours, with greatest respect, fell into error because they failed to appreciate the limited ambit within which the rule in 63.03(3) can constitute a back-up for 60.20.1. It is thus a matter fundamental to the protection of the rights of access to justice in this State - and I should interpose that I have mentioned the relevance to other States - that this Court determined the constraints that govern the extent to which rule 63.03 can be put to work as an adjunct to the operation of rule 63.20.1.

This special leave application involves questions of law of public importance and general application. Now, I have covered this in our interchange where I say that it is now the law that a distinction must be drawn as to whether a stay has been ordered pursuant to the Court’s inherent jurisdiction or under the Court rules. The source of power seems irrelevant from a litigant’s point of view but it has serious repercussions in terms of access to justice.

NETTLE J: Your submission is that the criteria which apply to a stay for failure to pay a costs order are the same regardless of whether the order is made under 63.03 or an exercise of the inherent jurisdiction.

MR KORMAN: That is exactly my point, that there ought be no distinction between the two.

NETTLE J: Yes. The error inhered in thinking that there was.

MR KORMAN: Yes.

NETTLE J: Yes, I follow. I see you are out of time, Mr Korman; thank you. Yes, Mr McNamara.

MR McNAMARA: If the Court pleases, dealing firstly with that last matter, that is, does one effectively apply Cox v Journeaux without more or is there a difference when one is concerned with application under 63.03? The way that was dealt with below is, firstly, the Associate Judge applied the test in Gao v Zhang because that is the test she was urged by both my learned friend and me to apply without reference to Cox v Journeaux. So, therefore, the learned Associate Judge applied the Gao v Zhang test.

It was then a ground of appeal that, notwithstanding that my learned friend had not urged Cox v Journeaux before the Associate Judge, that the Associate Judge erred in failing to apply the Cox v Journeaux test. Her Honour Justice Cameron rejected that submission and that matter was agitated most relevantly for present purposes again in the Court of Appeal. The Court of Appeal, as your Honours will have read, took the view that because her Honour Justice Cameron endorsed the approach of the learned Associate Justice then the Court of Appeal was effectively concerned with the approach of the learned Associate Justice.

In terms of Cox v Journeaux, in Gao Justice of Appeal Ormiston quoted from Justice Dixon’s statements in Cox v Journeaux and he did so to support his conclusion that a stay had to be the only fair way of protecting the interests of the other party. Also, his Honour Justice of Appeal Ormiston used the statements to emphasise the need to look to the very serious consequences of making an order under the rule.

NETTLE J: Yes.

MR McNAMARA: So, Justice of Appeal Ormiston in Gao in formulating the principles which his Honour considered applied in application under rule 63.03 drew on the principles espoused by Justice Dixon in Cox v Journeaux. Most importantly, in terms of the test but also something that each of the courts below were not surprisingly very cognisant of and that is the seriousness of making an order such as this.

GORDON J: Where do I find the seriousness addressed? So, when you get to application book 111 at 67 – so assume for the moment you are right about all of those matters, the Court of Appeal then sets out in 67 what it describes in summary as the principles to be exercised. Where do we find the last one to which you properly referred, that is, the very serious consequences under the rule? Where does it say that it should not end the litigation as it would have done here and did here? They seem to omit the very final aspect of what you would expect to be in as part of the principles.

MR McNAMARA: It is certainly something that the court – that their Honours Justices of Appeal Whelan and McLeish had mentioned earlier in their reasons.

GORDON J: I accept that. They set out what they think is sort of the analysis you have just gone to, but when you get to the summary it seems to be omitted.

MR McNAMARA: One sees in subparagraph 67(d), your Honour:

a stay should not be ordered unless the conduct of the party in default warrants the condemnation inherent in such an order –

and that gives an insight, in my respectful submission, to - - -

GORDON J: That is not looking at consequences, though, is it, the very serious consequences that would follow from the stay, that is, that the litigation would be at an end?

MR McNAMARA: Their Honours elsewhere described those words of the condemnation that in using those words his Honour Justice of Appeal Ormiston was looking to the serious consequences of the order. Clearly, in my respectful submission, in describing the matter as an order of last resort, it is clear that the Court of Appeal regarded it as a serious order and it is not surprising that any court would regard a stay of a proceeding in the face of an applicant or a plaintiff saying I cannot pay the orders that are the subject of this stay then, in my submission, it is readily apparent that any court would regard making a stay but more so making a stay in the face of that evidence to be a very serious matter.

NETTLE J: Just pausing there, would it be fair to say if one looks at the criteria listed in 67(a) through (e) that (a) is the principle and (b) through (e) are epexegetical of the principle?

MR McNAMARA: Yes, and some of the subsequent matters pick up elements that were referred to, and I will come to them briefly in a moment, if I may, but some of those subsequent matters, as your Honours are aware, pick up matters that were referred to by Justice of Appeal Ormiston in Gao and in subparagraph (c) there is a particular attention to the rule that my learned friend referred to, rule 63.20.1, that now - - -

NETTLE J: It is really working through the Cox v Journeaux test that is epitomised in 67(a).

MR McNAMARA: Yes, so one sees it is not just Cox v Journeaux because one is now, in my respectful submission - this is where I began, but to explain why I began there, that it is not simply a matter of applying a test in Cox v Journeaux, it is that one is now operating in a different landscape, and that was recognised by each of the courts below.

NETTLE J: Just pausing there, would it still be fair to say notwithstanding the changed context that the test remains it is the only fair and practical way of facilitating the justice?

MR McNAMARA: Yes, which is what - I think Justice of Appeal Ormiston did not use the word “practical”, he simply used the words “the only fair”. So the reason for making the order must be serious, must be the only fair way of achieving justice between the parties and he also said ordinarily before such an order would be made there would be conduct on the part of the party in default warranting condemnation to the extent of making so serious an order and that criteria was commented on by the Court of Appeal - and I apologise, your Honours, I just cannot find where that was but in the - - -

NETTLE J: We can come back to it. Can I ask you this then? How in this – well, assuming I am correct in thinking that there was evidence the man did not have money sufficient with which to pay the taxed bill of costs and that there was no evidence – certainly it appears no suggestion, still there is evidence that he was acting out of motivation of harassment or collateral purpose, how could it be open to reach the view that the only fair way to proceed is by staying his action knowing full well that he has not got the means to start it again?

MR McNAMARA: Well, it is based partly, your Honour, on the very unusual history of this case which the Associate Judge who had the conduct of the matter from the directions hearing on 25 August 2014, which was after the proceeding had reached an advanced stage because pleadings had closed, discovery and inspection had been completed, a second mediation had taken place and the parties went to court on 25 August for a directions hearing with all that having happened when one would normally expect there to be directions for trial. What happened instead was that a long course of applications for leave to amend were embarked upon - two failed oral applications, two failed applications by summons, eight iterations at least of a proposed amended statement of claim - - -

NETTLE J: No doubt that was very vexing and no doubt that is why you got an order for costs against him but there is no finding he was acting otherwise than out of a well-intentioned sense of achieving justice according to law, is there?

MR McNAMARA: No, and the application for a stay, it was not suggested that he was seeking to somehow improperly and deliberately vex or harass my clients.

NETTLE J: All right, well, he lacked the capacity to know how to plead. It took him three goes to get there. It doubtless cost you money but he was not acting improperly in the sense of with impropriety. Why is the only way in which to achieve justice between the parties to stop his action dead, particularly when he finally got his pleading into a form which is recognised to be acceptable?

MR McNAMARA: Because, in the process, your Honour, he put the plaintiff – put the defendants to very considerable expense - - -

NETTLE J: We have got that much, that is why you get the costs order.

MR McNAMARA: But merely having them is, if they are not paid, really in substance an empty thing, your Honour.

GORDON J: Well, is it though? There was a finding that the delay in payment would not have been a hindrance to you. They deal with that aspect about non-payment to the defendant; that is considered.

MR McNAMARA: With respect, your Honour, I do not think it was put quite that high but clearly it was not put, I did not put it below, and nor did I put evidence before the Court that the non-payment impaired my client’s ability to defend the proceeding. So, but nonetheless my clients were put over a fairly lengthy period of time to considerable expense and considerable delay by the first two oral applications and the first two applications by a summons which sounded in firstly orders – two orders for costs which after a net offer of approximately $17,000 amounted to $50,000, so a very substantial sum and, secondly, caused a long delay, that is, three years ago or almost three years ago on 25 August 2014 there was the oral application and the third application for leave to amend was not concluded until December of 2015.

So, there was a long delay and there were substantial costs and the court saw fit to order that those costs be taxable forthwith because of the manner in which the proceeding – the manner in which the applications for leave to amend were conducted by the plaintiff, and that again looks to the number of applications – applications dismissed and at least, as I mentioned, eight iterations of a proposed amended statement of claim.

GORDON J: But as Justice Nettle put to you, they may explain the order for the costs forthwith, they do not explain the stay, do they?

MR McNAMARA: Well, in my submission, they do because they provided the foundation for a stay and her Honour exercised – her Honour saw fit - her Honour having had the conduct of the matter, as I indicated, from August 2014 to December 2015 with many - maybe being before her at least seven or eight court days, saw fit in the exercise of a broad discretion conferred by rule 63.03 to order the stay. So, her Honour - - -

GORDON J: That is what we are asking. We are asking whether the correct principle was applied and we are putting to an aspect of the principle which you do not embrace, as I understand it, that is, the purpose of the costs orders as distinct from the purpose of the stay, at least, there is different questions that arise at those two aspects and then, second, whether or not - if we have identified the wrong principle, whether or not the result would have been different. Did your client ever plead to this latest statement of claim?

MR McNAMARA: No, because the leave that was given was conditional. That was part of the balancing. The leave given was, in effect, conditional in the sense that leave was given but the stay was imposed and if the costs are paid then the stay is lifted and the proceeding will go forward. So, there was no occasion for my client to plead to the amendments because judgment was delivered on the stay application - - -

NETTLE J: Is it right, as Mr - that at the time at which her Honour the learned Associate Judge made that order, she knew there was uncontested evidence that he had not the money with which to pay the cost?

MR McNAMARA: Yes, that evidence was put in July of 2015. There was a question which was never answered as to how he had been able to pay the disbursements along the way. There was a question which was unanswered as to how he would pay the expert evidence which his claim, as originally formulated, required and which it was put by my learned friend, his claim as amended would require additional expert evidence.

NETTLE J: But it was not put to him, look, you are able to pay the other costs, you can pay these costs too?

MR McNAMARA: No, it was not, your Honour.

GORDON J: So, the passages that you are referring to are at 106, 107 and 109, are they, of the judgment of the Associate Justice dealing with the plaintiff’s impecuniosity and inability to pay?

MR McNAMARA: Yes, but certainly my client did not - as my learned friend says, did not seek to cross-examine the plaintiff on his affidavit and did not seek to lead evidence that he had the capacity to pay. If I may return briefly to the principles; so as asked to do so by both parties, the learned Associate Judge applied the principle in Gao v Zhang and the Court of Appeal – at which, as I have pointed out, drew on the test in Cox v Journeaux.

The Court of Appeal set out the principles that your Honour Justice Nettle drew my attention to at paragraph 67 and they dealt with some additional matters because since Cox v Journeaux and since Gao v Zhang there is now the Civil Procedure Act and, so, paragraph 67(a) incorporates the overarching requirements in section 7(1) of the Civil Procedure Act.

The other matters draw on Gao v Zhang except for subparagraph (c) which says that it is appropriate to take into account another matter which did not exist at the time of Cox v Journeaux or Gao v Zhang and that is, unlike the position entailed in Victoria for many years, one is now not entitled to simply go off and tax interlocutory costs as of right in the Supreme Court of Victoria, the costs are not taxable until the end of the proceeding unless the court otherwise orders and the court in subparagraph (c) indicated that that was another factor to be taken into account.

So, in my respectful submission, there is no error of principle. There is no error in the principles that are set out by the Court of Appeal and the Court of Appeal concluded that at the end of paragraph 68 of its reasons on page 112 of the application book:

On a fair reading, the associate judge proceeded in accordance with the principles articulated above, and the judge –

GORDON J: That is 67, is it not?

MR McNAMARA: Paragraph 67 is the summary of principles and then 68 deals with some observations made below and in the last sentence of paragraph 68 in the joint reasons their Honours say:

On a fair reading, the associate judge proceeded in accordance with the principles articulated above, and the judge was right to dismiss the appeal in that respect.

So, in my submission, there is no error in the statement of principle by the Court of Appeal and the Court of Appeal has said that the Associate Judge proceeded in accordance with those principles and that there is no error, the judge was right to dismiss the appeal from the Associate Judge. Just dealing very briefly with the Charter and also with the - - -

NETTLE J: I do not think we need to hear from you on the Charter, Mr McNamara.

MR McNAMARA: If your Honour pleases. And, finally, for the reasons set out in paragraphs 10 and 11 of the respondent’s response, it is submitted that there is no special leave question. My learned friend seemed to – appeared to concede that rule 63.03 is confined to Victoria. I should add that in the Federal Court - - -

GORDON J: I was going to say, that does not accord with my past history.

MR McNAMARA: In the Federal – I am not sure what your Honour has in mind. In the Federal Court in Welsh v Digilin and possibly in other cases, there was a – I think, initially stay, subsequently dismissal, for non-payment of interlocutory costs but those orders were not made under a special rule like 63.03 but the reason I intended to draw them to your attention was that they were made under an order concerning default and that if a party defaults the court – if the party is a plaintiff the court may dismiss the proceeding. So, although 63 - - -

GORDON J: Staged process.

MR McNAMARA: Yes. So, although 63.03 seems to be limited to Victoria, yes, at least in the Federal Court a rule about default has been used - - -

GORDON J: A national court.

MR McNAMARA: Yes, has been used and some of the other courts have a general rule about default that one might seek to enliven and mount a case along the lines of Welsh v Digilin. Other courts do not seem to have that sort of order. If the Court pleases.

NETTLE J: Thank you very much, Mr McNamara. Any reply, Mr Korman?

MR KORMAN: Yes, your Honours, just a few points. Firstly, in relation to the point about Gao v Zhang, the fact is - and I developed this in my reply - that Gao did not distinguish Cox v Journeaux. Quite the opposite, the headnote states Cox v Journeaux applied. So, an analysis of the judgment - - -

NETTLE J: I think you are both in heated agreement about that.

MR KORMAN: Yes. The second point I wanted to make was in relation to the first of the points set out in the Court of Appeal as the summary of points that need to be followed – I will just find it - - -

GORDON J: Paragraph 67 on page 111.

MR KORMAN: Subparagraph (a) clearly is – relates back to the Civil Procedure Act. Now, I am not sure if I heard your Honour correctly as saying that this is in some way a reference back to Cox v Journeaux but, in my submission, it should not be seen that way, and why I say this is because the principle in Cox v Journeaux is stated in very succinct and clear terms, capable of clear application. It is important that where the power to deprive a litigant of his basic rights is involved that the.....principle should be stated in as clear language as possible that will permit the minimum idiosyncrasies between different judges and different courts.

NETTLE J: How otherwise would you state it than in (a)?

MR KORMAN: I have no issue with that being in the list of criteria.

NETTLE J: No, how would you state the overriding principle which you say must be - - -

MR KORMAN: I would insert the principle from Cox v Journeaux, and that is the applicant’s point, that that principle ought not be discarded. It is still good law – it should still be good law in Australia. That is really the only two points I wanted to make, your Honours.

NETTLE J: Yes, thank you, Mr Korman. The Court will adjourn briefly to consider the matter.

AT 12.09 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.13 PM:

NETTLE J: Mr Korman, we are not disposed to grant special leave upon the application as constituted. The Court, however, would be disposed to grant special leave to appeal on the question as follows, which would be whether in circumstances where a party has not conducted litigation in a manner amounting to harassment or because of collateral purpose and where the party lacks means sufficient to meet an interlocutory costs order made against him or her, it is open, as a matter of law, to conclude that the only fair and practical way of ensuring justice between the parties is to make an order pursuant to rule 63.03(3) or an exercise of the inherent jurisdiction to stay the proceeding.

MR KORMAN: Yes, your Honour, I am happy with that.

NETTLE J: Do you seek special leave - - -

MR KORMAN: Yes, your Honour.

NETTLE J: Do you wish to be heard in opposition to that at all, Mr McNamara?

MR MCNAMARA: Excuse me for one moment, your Honour.

NETTLE J: Certainly.

MR MCNAMARA: No, I do not, your Honour.

NETTLE J: Thank you. Gentlemen, there will be a grant of special leave on the following question. In circumstances where there has not been a finding that a party has conducted litigation in a matter amounting to harassment or because of collateral purpose and where that party does not have means sufficient to meet interlocutory costs orders made against him or her, is it open, as a matter of law, to conclude that the only fair and practical way of ensuring justice between the parties is to make an order pursuant to rule 63.03(3) of the Supreme Court (General Civil Procedure) Rules 2015 in the State of Victoria or an exercise of the inherent jurisdiction staying the proceeding.

That will be the sole grant of appeal and the sole question to be contested in the appeal. Mr Korman, you will need to amend your application and grounds of appeal accordingly.

MR KORMAN: Yes, your Honour.

NETTLE J: That will need to be done relatively post-haste in consultation with the Registrar with whom, gentlemen, both of you should consult after the hearing as to the further interlocutory steps. The costs of the application will be reserved.

MR McNAMARA: If the Court pleases.

NETTLE J: One further thing, having regard to the nature of this proceeding, the time which it has been in existence, the amounts of money involved and where it now stands and especially in view of what has been said about previous attempts at mediation, we would sincerely urge the parties to consider again the sensibility of once more submitting the dispute to mediation before the matter proceeds further and, no doubt, further at much and additional greater cost. Having said that, the Court will now adjourn.

AT 12.27 PM THE MATTER WAS CONCLUDED