Discovery obligations and sanctions under the Civil Procedure Act

The significance of the Civil Procedure Act 2010 and the role of legislative intent in determining its scope have been reiterated in a recent decision of the Victorian Court of Appeal.

In National Builders Group IP Holdings Pty Ltd v ACN 092 675 164 Pty Ltd (in liq) & Anor,[1] Maxwell P and Kaye JA considered the role of the Civil Procedure Act 2010 (the ‘Act’) and the power it confers on judges to impose sanctions for failure to comply with discovery obligations. In doing so, their Honours also made observations about the Act and civil procedure more broadly.

The decision at first instance

The applicant sought leave to appeal an order of Vickery J striking out its defence due to a failure to comply with discovery obligations.[2]

The impugned conduct arose in circumstances where Vickery J had made self-executing orders requiring the filing of a supplementary affidavit of documents, such orders being in response to persistent deficiencies in the discovery process. His Honour found that, of the two defendants in the proceeding, the applicant (the first defendant)[3] had not advanced a satisfactory explanation for its delay in complying with discovery obligations under r 29.04 of the Supreme Court (General Civil Procedure) Rules 2005. His Honour proceeded to order that the defence be struck out pursuant to s 56 of the Act.

The legislation

The powers of the courts and the range of sanctions available in relation to discovery exist in s 56 of the Act. Section 56(1) provides that:

‘A court may make any order or give any direction it considers appropriate if the court finds that there has been— 
(a)     a failure to comply with discovery obligations; or
(b)     a failure to comply with any order or direction of the court in relation to discovery; or
(c)     conduct intended to delay, frustrate or avoid discovery of discoverable documents.’

The powers open to a court include, but are not limited to, those listed in s 56(2). Relevant to the present case, s 56(2)(j) permits ‘dismissing any part of the claim or defence of a party who is responsible for any conduct referred to in subsection (1)’.

The appeal

The application for leave to appeal was made on three grounds. They were that:[4]

  • Vickery J applied s 56 in a manner that interfered with the applicant’s right to a fair trial;
  • the discretion exercised under that provision miscarried, in the sense that the striking out order was a disproportionate sanction for the conduct; and
  • it would be unfair that the applicant be shut out from an opportunity to defend in circumstances where another defendant in the proceeding might successfully do so.

Maxwell P and Kaye JA were inclined to uphold an order of Vickery J striking out the appellant’s defence; their Honours considered that the order ‘was within the scope of a sound exercise of the discretion conferred’ under s 56.[5] Their Honours however allowed the appeal due to a technicality arising from the nature of the dispute and the relief sought by the plaintiff in the proceeding — reasons largely in alignment with the third ground of appeal — but not without making a number of important observations about the Act and the scope of judicial powers under it.

Their Honours stated that:[6]

‘The severity of the consequence [in striking out a defence] should serve as a salutary reminder to all civil litigants in this Court that judges will not hesitate to give full effect to the clear intention of Parliament as expressed in the [Act], by imposing severe sanctions in cases of serious non-compliance with discovery obligations’.

In considering the legislative framework of the Act, their Honours cited the then Attorney-General’s second reading speech for the Civil Procedure Bill 2010 (both generally and in relation to discovery), as well as provisions of the Act relating to the overarching purpose (s 7(1)) and the courts’ powers to further that purpose (s 9). Against this backdrop of policy and intent, their Honours then considered the scope of s 56 of the Act.

In addressing the grounds of appeal, the Court made a number of key observations. First, in relation to the alleged right to a hearing, their Honours held that certain dictum in Logicrose Ltd v South and Uniting Football Co Ltd,[7] which the Court of Appeal had quoted in British American Tobacco Australia Services Ltd v Cowell,[8] did not curtail the power to strike out a claim or defence under s 56(2)(j) of the Act. Their Honours held this was so because:

  • the powers conferred under the Act should be ‘determined by examining the statutory language used, in the context of the Act as a whole and — in particular — of the overarching obligations’;[9]
  • the Act had been structured in a way that provided for separate powers in relation to discovery;[10] and
  • there was nothing in the Act which had the effect of confining the exercise of powers under s 56 only to situations where there had been an abuse of process.[11]

Their Honours held that ‘[t]he only limitation on the exercise of the power is that it be exercised lawfully, that is, within the conventional limits governing the exercise of any judicial discretion’.[12] Further, on the issue of right to trial, their Honours held that such a right ‘has never been unqualified’ and is ‘conditional on compliance with [rules of procedure]’.[13]

Looking to the scope of the powers under the Act more generally and not merely those conferred by s 56, their Honours held:[14]

‘The legislature could not have expressed more clearly its intention to prove the cost-efficiency of civil litigation and — to that end — to authorise sanctions for non-compliance, including the sanction of denying a party a hearing’.

On the second ground of appeal — whether the striking out order was disproportionate as a sanction for non-compliance — their Honours identified this ground as calling into question the discretion Vickery J exercised under s 56. In drawing upon principles relating to judicial discretion,[15] the Court held that it was open to Vickery J to order as his Honour had in the case. Especially was this so given his Honour’s ‘management of all the pre-trial stages’ and having been privy to the parties giving evidence about the discovery process.[16]

Conclusion

The decision of the Court of Appeal in National Builders Group serves as a reminder about the extent of powers under the Act. It illustrates the tendency of the courts to interpret the provisions of the Act broadly.

Critically, the decision is authority for the view that courts may impose a sanction as solemn as striking out a defence or claim and may do so where a party fails to comply with its discovery obligations in civil litigation. This will be so, even if this means depriving a litigant of whatever right it may have to a hearing.


[1]: [2015] VSCA 260.

[2]: ACN 092675164 (in liq) v National Builders Group Pty Ltd [2014] VSC 530.

[3]: As the striking out order only applied to the first defendant, the second defendant was not party to the leave application.

[4]: [2015] VSCA 260 [4].

[5]: Ibid [5].

[6]: Ibid [7].

[7]: Unreported, Chancery Division, 5 February 1988.

[8]: (2002) 7 VR 524, 576.

[9]: [2015] VSCA 260 [36].

[10]: Ibid [37].

[11]: Ibid [38].

[12]: Ibid.

[13]: Ibid [40].

[14]: Ibid [41].

[15]: Ibid [45]; see House v The King (1936) 55 CLR 499.

[16]: Ibid [46].