Case: Gao v Zhang [2005] VR 380
Outcome: discussed
The applicant's submissions can be summarised as follows: &#8226; the nett effect of the respondents' conduct was that prior to his agreement with them the applicant had a business which paid him a decent income doing something he enjoyed and was good at doing; whereas after his involvement with them he had no business, no job, no shares, and no ability to restart his previous business &#8226; the proceeding had been on foot for approximately two and three-quarter years when the order of his Honour was made, which was not a sufficient period to indicate a delay so great that the matter should not be allowed to proceed &#8226; the applicant's failure to pay costs the subject of the order was due to his impecuniosity, which had been brought about by the conduct of the respondents &#8226; the proceedings were well advanced &#8226; difficulties with the applicant's pleading had been cured by the filing and serving of the second amended statement of claim &#8226; there was no indication that, if the proceeding were allowed to continue, the applicant would not be able to prosecute it diligently &#8226; this was not a case where the history of the matter could be attributed to poor conduct on the part of the applicant, and which fell for condemnation to the extent of making an order that a matter be stayed unless costs were paid: Gao v Zhang [2005] VR 380 &#8226; supposing the decision to be wrong, substantial injustice would flow if it were allowed to stand, in that the claim against the respondents would be at an end, and if the applicant's claim were true the respondents would have executed and benefited from a most egregious fraud. 6 The respondents' submissions can be summarised as follows: &#8226; the orders made by his Honour on 14 December 2007 were entirely reasonable in the circumstances and no error in his Honour's approach or reasons had been demonstrated &#8226; it was open to his Honour to have dismissed the proceedings on 14 December 2007 because of the applicant's failure to prosecute. Prior to that date no explanation had been offered by the applicant for his failure to pay any part of the costs ordered against him on 22 December 2006. Inferences could be drawn from this failure about the applicant's ability and willingness to continue to prosecute the matter &#8226; by allowing the applicant until 29 February 2008 to pay costs (which were ordered against him on 22 December 2006) his Honour granted a final indulgence to the applicant rather than dismiss the proceeding on 14 December 2007 &#8226; no cogent reason had been advanced why the applicant would be able to obtain funding of $20,000 and not the full amounts of costs payable &#8226; no evidence had been provided in relation to whether there has been any attempt to raise or obtain funding for the full $68,609.41 assessed at taxation &#8226; the orders made on 14 December 2007 would not result in "substantial injustice" because the orders did not finally dispose of the matter. The orders merely required the applicant to pay an amount of costs to the respondent, which costs were ordered to be paid on 22 December 2006, by 29 February 2008 &#8226; even if the practical effect of the orders were to end the proceedings that would not of itself amount to substantial injustice in circumstances where his Honour could reasonably have dismissed the proceedings on 14 December 2007. 9 In her submissions Ms Heyworth-Smith for the applicant relied on the decision of the Victorian Court of Appeal in Gao v Zhang [2005] VR 380, a decision to which his Honour also referred in his judgment. That case concerned an interpretation of r 63.03(3) Supreme Court Rules (Vic) which provided inter alia that, where the court had made an interlocutory order for costs and the subject party failed to pay them, the court had power to stay or dismiss the proceeding or, where the party was the defendant, to strike out the defence. 10 In Gao v Zhang [2005] VR 380, the applicant sought leave to appeal against the decision of a judge upholding an order of a master that, inter alia , the proceeding be stayed pending payment of costs already awarded against him in the proceeding. Ormiston JA, delivering the decision of the Court of Appeal, observed that such orders were discretionary, and the applicant faced a heavy burden in showing that it was appropriate to grant leave to appeal. However, his Honour observed further that, although the Supreme Court had power to make an order for a stay, dismissal or striking out where orders for costs of interlocutory applications remained unpaid, it did not necessarily follow that whenever costs remained outstanding some such order should be made (at 383). Indeed his Honour considered that it was not appropriate that orders of this kind be adopted as a day-to-day means of recovering costs ordered by the court (at 394). His Honour continued (at 384): "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) [1935] HCA 48 ; (1935) 52 CLR 713 at [720] when he said, in relation to a striking out application, ...The principle, in general paramount, that a claim honestly made by a suitor for judicial relief must be investigated and decided in the manner appointed, must be observed. A litigant is entitled to submit for determination according to the due course of procedure a claim which he believes he can establish, although its foundation may in fact be slender. It is only when to permit it to proceed would amount to an abuse of jurisdiction, or would clearly inflict unnecessary injustice upon the opposite party that a suit should be stopped." 12 In this case, I consider that there is sufficient doubt to warrant reconsideration of his Honour's decision. I take this view because: &#8226; although his Honour quite properly made detailed reference to Gao v Zhang [2005] VR 380 in his judgment, and clearly sought to achieve fairness between the parties with respect to his orders, the facts in the present proceedings bear few similarities to those in Gao v Zhang [2005] VR 380 where the Court considered that the conduct of the applicant justified the relevant order. There does not appear to be an element of harassment of the respondents in these proceedings or deliberate conduct by the applicant which warrants condemnation as was found to be the case in Gao v Zhang [2005] VR 380 &#8226; notwithstanding the apparent financial difficulties of the applicant, there is evidence before the Court (including this application before me) which indicates a willingness to prosecute the matter &#8226; while it appears that the applicant in this case has financial difficulties, and has had difficulty raising funds to pay the outstanding costs, the paramount principle as made plain by Dixon J in Cox v Journeaux (No 2) [1935] HCA 48 ; (1935) 52 CLR 713 is that a claim honestly made by a suitor for judicial relief must be investigated and decided in the manner appointed &#8226; as pointed out by Ormiston JA in Gao v Zhang [2005] VR 380, costs awards at interlocutory stages in proceedings are common without the continuation of the matter necessarily depending on the payment of those costs prior to trial. 13 Second, in my view the applicant would suffer substantial injustice if leave to appeal were refused, supposing his Honour's decision to be wrong. As pointed out by Ormiston JA in Gao v Zhang [2005] VR 380, impecuniosity is not irrelevant so far as the exercise of this kind of drastic power is concerned, and there is some evidence before the Court that the applicant is in significant financial straits. Although his Honour's orders were limited to payment of costs, it is clear that a failure of the applicant to pay the outstanding costs would constitute the death knell to the substantive proceedings in this case. As I have observed, historically the conduct of the applicant in this case is not in the nature of harassment as was the case in Gao v Zhang [2005] VR 380, and it is debatable whether it was so reprehensible as to warrant dismissal in lieu of payment of outstanding costs.