Civil Procedure Act 2010 (Vic) — Litigation considerations to avoid a personal costs order

The CPA imposes overarching obligations on parties and practitioners in civil proceedings issued in courts. These obligations reflect a fundamental shift in litigation culture: disputes are to be resolved justly, efficiently, timely and cost-effectively.

Critically, CPA obligations:

• apply from the earliest stages of a dispute, not just after proceedings have been issued;
• override client instructions where inconsistent;
• expose practitioners personally to adverse cost orders; and
• are actively enforced by courts, including on the court’s own motion.

Sections 16–27 of the CPA set out the overarching obligations. The most significant obligations include:

• Paramount duty to the court to further the administration of justice (section 16)
• Proper basis for claims and defences (section 18)
• Honest conduct — not misleading or deceptive (section 21)
• Reasonable endeavours to resolve or narrow disputes (section 23)
• Costs to be reasonable and proportionate to the issues and amount in dispute (section 24)
• Conduct of proceedings to minimise delay (section 25)

If these obligations are breached, section 29 of the CPA empowers the court to make any order it considers appropriate in the interests of justice, including:

• personal cost orders;
• compensation orders; and
• other remedial or punitive orders.

A. Early investigation and verification

Before commencing proceedings, practitioners should:

• identify the elements of each cause of action;
• verify key facts (eg ownership, identity of parties, standing, limitation issues);
• assess whether the claim is supported by admissible evidence; and
• ensure expert evidence is necessary, appropriate and properly scoped.

Failure to undertake these steps has exposed practitioners to personal cost orders where claims were later abandoned, amended or shown to lack merit.

B. Reasonable steps to resolve or narrow the dispute

The CPA requires parties to take reasonable steps to resolve disputes or narrow the issues before and during proceedings. What is reasonable depends on the nature of the dispute but may include:

• correspondence setting out the nature of the claim and the relief sought;
• early exchange of key documents and information;
• genuine settlement discussions or mediation; and
• consideration of whether litigation is necessary or proportionate to the amount in dispute.

Commencing proceedings without evidence of these steps having been undertaken risks adverse cost consequences, even where the claim ultimately succeeds.

C. Proportionality and commercial reality

Practitioners must continually assess whether the cost of litigation is proportionate to:

• the issues in dispute;
• the relief realistically available; and
• the complexity and importance of the matter.

Litigating “on principle” where only nominal damages are available is a significant CPA risk. Courts have shown a willingness to dismiss proceedings and impose indemnity costs where litigation becomes disproportionate or pyrrhic.

D. Preparation on the assumption the matter will run to trial

Practitioners should prepare matters as if they will not settle, particularly where trial dates are set. Reliance on mediation or settlement to cure preparation gaps is inconsistent with CPA obligations.

Failure to prepare core liability and expert evidence early has resulted in:

• refused or costly adjournments; and
• indemnity cost orders against solicitors for under-prepared cases.

The LPLC has observed increased claims involving personal cost orders arising from:

• pleading causes of action with no proper basis;
• suing the wrong party;
• failure to verify critical facts early;
• inadequate or late expert evidence;
• abandoning substantial parts of a case late in proceedings;
• pursuing litigation for nominal damages only;
• disproportionate interlocutory conduct; and
• lack of control over counsel, experts or client conduct.

Courts have repeatedly emphasised that innocent or inadvertent breaches are no defence.

Extra care is required where applications are made without notice.

Practitioners must:

• check and comply with relevant court practice notes;
• make full and frank disclosure of all material facts, including adverse matters;
• make reasonable inquiries to ensure disclosure is complete; and
• not assume omissions will be corrected by the court.

Failure to comply with practice notes or disclosure obligations even inadvertently, may constitute breaches of the CPA and expose practitioners to personal cost orders.

Before issuing proceedings

• Map causes of action against evidence and identify gaps early;
• Verify parties, standing, assets and jurisdiction;
• Assess whether damages are substantive, nominal or speculative;
• Advise clients clearly on their CPA obligations;
• Document reasonable steps taken to resolve or narrow the dispute.

As the matter progresses

• Continually reassess merits, evidence and proportionality;
• Maintain control of counsel, experts and client communications;
• Ensure expert evidence is appropriate, disclosed and necessary;
• Prepare matters on the basis they will proceed to trial;
• Avoid interlocutory or trial conduct that wastes court resources.

The CPA requires practitioners to think critically before litigating. Comprehensive investigation, early preparation and ongoing proportionality assessments core professional obligations. A disciplined pre-litigation approach protects clients, practitioners and the integrity of the civil justice system.