11 May 2007

Making summary judgment more summary in the Federal Court

by Michael Legg

The equation of no reasonable prospects of success with the test for a verdict "as a matter of law" will lower the threshold but it remains to be seen whether in practice summary judgment will be used more frequently.

Section 31A of the Federal Court of Australia Act allows a court to grant summary judgment if a party has no reasonable prospect of successfully prosecuting or defending whole or part of a proceeding. This section only applies to proceedings commenced after 1 December 2005.

Background

The purpose of section 31A, according to the Explanatory Memorandum introducing the Bill, is to reduce costs and delay by deterring unmeritorious proceedings. Section 31A, particularly subsection (3), moves away from the cautious approach previously taken by courts in deciding whether to give summary judgment. Traditionally, courts applied the stricter common law tests of "no reasonable cause of action", "manifestly groundless" or "clearly untenable" tests (Dey v Victorian Railways Commissioners (1949) 78 CLR 62 and General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125).

Meaning of "no reasonable prospect of success"

What does it mean to say a claim or defence has "no reasonable prospect of success"?

In some instances the Federal Court has been able to avoid defining the precise scope of section 31A because the proceedings would have been dismissed under one of the stricter common law tests. However, in Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd [2006] FCA 1352 Justice Rares gave the issue detailed consideration and applied the test for a verdict "as a matter of law". The reasoning in Boston Commercial has been followed by other Federal Court judges and may be summarised as follows:

  • In assessing whether there are reasonable prospects of success, the Court must be cautious not to do an injustice by summary dismissal.
  • There will be reasonable prospects of success if there is evidence which may be reasonably believed so as to enable the party against whom summary judgment is sought to succeed at the final hearing.
  • Evidence of an ambivalent character will usually be sufficient to amount to reasonable prospects.
  • The discretion under section 31A cannot be enlivened unless only one conclusion can be said to be reasonable.

The High Court has not yet been called upon to interpret "reasonable prospect of success". There are, however, some related decisions which can provide guidance. For example, in Agar v Hyde (2000) 201 CLR 552, in response to a suggestion that a more lenient test be adopted for summary judgment, the Court said that:

"It would be wrong to deny a plaintiff resort to the ordinary processes of a court on the basis of a prediction made at the outset of a proceeding if that prediction is to be made simply on a preponderance of probabilities. However, while a plaintiff has a right to their day in court it is not absolute and must be evaluated through the court's processes."

Proof of no reasonable prospect of success

For a party to demonstrate that section 31A applies, two courses of action are available:

  • demonstrating a defect in the pleadings that cannot be cured, even by amendment; or
  • putting evidence on in support of an application that excludes facts essential to a claim or defence from being established.

In relation to the former, Justice Greenwood in Rogers v Asset Loan Co Pty Ltd [2007] FCA 195 observes that where leave to replead may cure a deficient claim it is not appropriate to find that a proceeding has no reasonable prospects of success. However, in determining whether a deficiency may be cured the Court can consider the history of the matter including previous amendments to pleadings.

The latter is illustrated by Alphapharm Pty Ltd v Merck & Co Inc [2006] FCA 1227 where the respondents sought summary judgment in a patent dispute but the Court declined to find that the claim had no reasonable prospects of success without expert evidence.

The Federal Court has also recognised that when an applicant seeks summary judgment under section 31A, it may be insufficient for the respondent to simply put the other side to proof. The Respondent would need to demonstrate that there is evidence to support their defence.

Conclusion

The aim of section 31A was to make summary judgment easier to achieve. The equation of no reasonable prospects of success with the test for a verdict "as a matter of law" will lower the threshold but it remains to be seen whether in practice summary judgment will be used more frequently.

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