Ending proceedings early as a model litigant: Can a just outcome be a quick one?

Introduction

The expectation that Commonwealth litigants conduct themselves at a higher standard aims to ensure a just outcome, however, the obligations should not be understood to constrain the Commonwealth from exercising its legitimate rights.

The imbalance of power and resources between government litigants and their private opponents is one justification for the model litigant obligation. With this consideration in mind, it can be difficult to determine when the Commonwealth should avail itself of certain rights in the conduct of litigation, particularly steps (including interlocutory applications) that may have the effect of ending proceedings early.

Any litigation strategy decision must be made in the unique context of the matter, however, some recent authorities provide guidance for any Commonwealth litigant considering particular steps or applications.

When might the Commonwealth apply for summary judgment?

A court may give summary judgment if it satisfied that a defence has no real prospect of success. This concept is relevant to the wide range of civil (cf. administrative review) matters in which the Commonwealth is the plaintiff.

In Deputy Commissioner of Taxation v Morando [2018] VSC 641, the Commissioner applied for summary judgment against the defendant to recover a series of tax-related liabilities in the amount of approximately $1.8 million. The question of the application of the model litigant principles arose in relation to the defendant’s opposition to this application, which included an application for an adjournment.

The Commissioner did not consent to an adjournment of the summary judgment application. The defendant did not provide a substantive factual basis for the need for the adjournment but posited that it would be consistent with the model litigant principles, specifically, the requirement to act consistently in the handling of litigation and to endeavour to limit the scope of legal proceedings wherever possible. The court did not grant the adjournment, noting that the defendant had “simply no defence” to the plaintiff’s claim.

The Commissioner was awarded summary judgment and was also successful in seeking an order that the defendant pay the Commissioner’s costs.

In a recent decision in NSW (Aldous v State of New South Wales [2021] NSWSC 668), a plaintiff facing an application to wholly strike out the proceedings argued that the model litigant obligations imposed in that state prevented the State from pressing its application and required a full hearing on the facts. The court rejected that proposition, accepting the State’s argument that the proceeding before the Supreme Court was the subject of res judicata and/or issue estoppel. In making these orders, Harrison AsJ expressly declined the plaintiff any further opportunity to replead his claim in the future because of its futility. The State was also successful in obtaining orders that the plaintiff pay the State’s costs, on an ordinary basis.

When can the Commonwealth seek security for costs?

The primary purpose of an order for security for costs, which is payable by a plaintiff or applicant in proceedings, is to ensure that if the defendant/respondent succeeds, then they have protection for the legal costs incurred in defending a proceeding. The Commonwealth is understandably reluctant to apply for security for costs, particularly when facing a claim from a private individual, in a first instance matter. This is because, if security is granted but not paid, it stays the proceeding and this may be inconsistent with the principle that the Commonwealth ought not to take advantage of a claimant who lacks the resources to litigate a legitimate claim.

The balance of these considerations shifts once that claim has been tested and wholly dismissed and yet the applicant persists with it – i.e. an appeal.

This was the circumstance in Stallion (NSW) Pty Ltd v Commissioner of Taxation [2020] FCA 554, in which the Commonwealth successfully sought orders that the Appellant give security for costs in respect of the Commonwealth’s costs of, and incidental to, an appeal before the Federal Court of Australia. In making her decision, Jagot J made the following remark:

“As I have said, the circumstances are that the appellant has already had its day or, more to the point, three days, in court, and failed. The respondent is also already exposed in respect of both the outstanding tax debt and the costs below. It is entirely understandable that the respondent wishes to protect its position, in so far as it is able to do so, in respect of the costs of the appeal.” [our emphasis]

Interestingly, this case referred to one of a number of decisions in proceedings between Dr Guy N Elston and the Commonwealth, in which the Commonwealth struck out the applicant pleadings (twice) and also, later, successfully ended the proceedings following the grant (and failure to pay) security on an appeal. In that matter (Elston v Commonwealth of Australia [2014] FCA 704), Dr Elston resisted the grant of security by reference to the model litigation obligations. Katzmann J rejected this, stating at [72]:

“…I reject Dr Elston’s complaint that the Commonwealth breaches its obligations as a model litigant by pursuing its application for security for costs. Nothing in the Legal Services Directions precludes the Commonwealth from doing so. The Commonwealth’s status as a model litigant “influences the way in which the Commonwealth conducts litigation, it does not impinge the Commonwealth’s ability to enforce its substantive rights”: Wodrow v Commonwealth of Australia (2003) 129 FCR 182 at [42] (Stone J).”

How might the Commonwealth approach a mediation when facing a weak case?

It is important for the Commonwealth to meaningfully engage in any attempt to resolve proceedings early by mutual agreement, including at a mediation. To do so may avoid litigation, one of the explicit model litigant principles. That said, there are occasions in which it is clear to the Commonwealth in advance of the mediation that there is no prospect of satisfying the plaintiff’s expectations, particularly in relation to a monetary settlement. In a recent decision in New South Wales, the court found that in such a case, a model litigant may be required to articulate that position in advance of a mediation.

In Murphy v State of NSW [2021] NSWSC 927, the plaintiff claimed damages from the State of New South Wales for wrongful arrest, false imprisonment and malicious prosecution. A court ordered mediation failed to resolve the matter and the plaintiff applied to the court seeking their costs of the mediation from the State because of the State’s alleged failure to forewarn the plaintiff in advance of any mediation that its position was such that it would not pay any money to the plaintiff unless ordered by a court to do so.

The court declined to award the costs because it had insufficient evidence to make the necessary findings:

however, Harrison J observed at [11] – [13]:

“It would not in my view be controversial to expect that one party to litigation should not be permitted to allow the other to incur costs on the basis of an assumed set of facts that the first party knew to be unfounded. For example, if it were hypothetically the position in the present case that the State of New South Wales, as a model litigant, had formed the view that it would never pay money to Mr Murphy unless ordered by a court to do so, and that this view was formed well in advance of a scheduled mediation, it would in my opinion be inappropriate to say the least, and probably misleading, for the State not to make that position clear to Mr Murphy or his solicitor in a timely way, without undue delay, so that unnecessary costs in preparation for it could be avoided. I would not expect that any such view was held by the State when I ordered the parties to mediate.” [our emphasis]

Conclusion

The model litigant principles provide guidance to government litigants, including those instructing external counsel, however, the obligations have limits. Importantly, the requirement to act as a model litigant does not undermine, narrow or remove the rights of the Commonwealth which are available to any litigant and they do not create rights on the part of the opposing litigants. The cases discussed above demonstrate that it is possible to be both robust and fair.

Appendix B to the Legal Services Directions is entitled: "The Commonwealth's obligation to act as a model litigant". The obligations include to:

• deal with claims promptly and not causing unnecessary delay in the handling of claims and litigation;
• pay legitimate claims without litigation, including making partial settlements of claims or interim payments, where it is clear that liability is at least as much as the amount to be paid;
• act consistently in the handling of claims and litigation;
• endeavour to avoid litigation, wherever possible;
• where it is not possible to avoid litigation, keeping the costs of litigation to a minimum, including by:

• not requiring the other party to prove a matter which the Commonwealth or the agency knows to be true, and
• not contesting liability if the Commonwealth or the agency knows that the dispute is really about quantum;

• not take advantage of a claimant who lacks the resources to litigate a legitimate claim;
• not rely on technical defences unless the Commonwealth's or the agency's interests would be prejudiced by the failure to comply with a particular requirement;
• not undertake and pursue appeals unless the Commonwealth or the agency believes that it has reasonable prospects for success or the appeal is otherwise justified in the public interest; and
• apologise where the Commonwealth or the agency is aware that it or its lawyers have acted wrongfully or improperly.