Vexatious Litigants

Vexatious Litigants

By Leigh Adams

How to recognise them and what to do about them

The pattern is usually that the relevant person (B) sues another (A) without proper cause and in losing, the court makes an order for costs against B. It is frequently the case that B then appeals and again loses with more cost orders being made. A might then sue B for recovery of the costs that he has sustained in court proceedings and A might eventually decide to apply to the Court to make B a bankrupt.

The issue then becomes more complicated because under s58 of the Bankruptcy Act, litigation claims of the bankrupt vest in the trustee of the bankrupt. Accordingly, it is up to the trustee to decide whether to continue with those claims or abandon them. This is provided for in s60.

However, where vexatious claims are concerned, it is invariably the case that the trustee simply discontinues the claims.

It is not uncommon for the bankrupt to then sue the trustee for refusing to continue the claim. It is at this point that a bankrupt could be declared vexatious.

A Bankrupt’s right to appeal a vexatious finding?

The question arises as to whether a bankrupt vexatious litigant can appeal from the Court’s declaration that the bankrupt is indeed vexatious, or does this right of appeal vest in the bankruptcy trustee?

This issue was resolved by the Court in Jambrecina -v- Official Trustee in Bankruptcy (2003) 2 ABC (NS) 58. The Court in that case considered s60(4)(a) and s116(2)(g) of the Bankruptcy Act and concluded that the right to challenge the declaration was a right which vested in the trustee, not the bankrupt.

And if the litigant starts proceedings in another State?

One of the problems with having a Court declare a litigant as vexatious is that such a declaration in NSW does not extend to making the litigant vexatious in any other State. You need a separate order from each Court and a separate order from the Federal Court as well. Furthermore, the NSW Supreme Court historically could not take into account any action of the litigant elsewhere in Australia in considering whether to make an order.

The Vexatious Proceedings Act 2008 (NSW)

This Act, which became law in November 2008, addresses the second of these issues.

The Act defines vexatious proceedings (s6) as:

(a) proceedings that are an abuse of the court process, and

(b) proceedings instituted to harass or annoy or to cause delay or detriment, or for another wrongful purpose, and

(c) proceedings instituted or pursued without reasonable grounds, and

(d) proceedings conducted in a way as to harass or annoy or to cause delay or detriment or to achieve another wrongful purpose.

The Act provides for the Supreme Court to make orders including (s9(7)),

(a) an order staying all or part of any proceedings in NSW already instituted by the person, and / or

(b) an order prohibiting a person from instituting proceedings in NSW, and / or

(c) any other order as the Court considers appropriate in relation to the person.

In making the orders, section 8 provides that the Court can have regard to the person’s prior institution and conduct of proceedings elsewhere in Australia and whether the person has acted in concert with another person who has been declared a vexatious litigant in another State or Territory.

Conclusion

Debt recovery and credit management work will always attract a fair share of vexatious litigants. It is heartening to know that the Courts will assist litigants acting in good faith in the process of recovery work, and the Vexatious Proceedings Act 2008 (NSW) is to be welcomed as assisting such litigants in avoiding the waste and inconvenience of dealing with vexatious litigants.