Mark Gustavsson Lawyers and Solicitors

What to do if my client is being sued interstate? Stay cool – a lawyer’s guide to interstate stays of proceedings

A stay of proceedings is a legal term that refers to a halt or suspension of a court case. A stay of proceedings can be temporary, or in some cases, permanent, depending on the circumstances of your client’s case. It essentially puts the case on hold, effectively delaying any further legal proceedings under the stay is lifted.

A stay of proceedings is a legal term that refers to a halt or suspension of a court case. A stay of proceedings can be temporary, or in some cases, permanent, depending on the circumstances of your client’s case. It essentially puts the case on hold, effectively delaying any further legal proceedings under the stay is lifted.

There are various reasons why a stay of proceedings may be granted. This article focuses on the options available to your client where a party starts a court action in an inappropriate forum.

Can I stay a court proceeding commenced interstate?

In Australia, stays and transfers of interstate proceedings are governed by the Service and Execution of Process Act 1992 (Act). This legislation was initially enacted pre-federation in order to ensure co-operation between the then separately governed states and territories, but continues to be relevant today, especially in the context of interstate civil and commercial disputes

Generally, a party can apply to stay (or halt) an interstate court action if another state would be ‘more appropriate’. An application like this is generally made under section 20(4) of the Act. In determining whether another state’s courts would be ‘more appropriate’, a court will look at factors such as:

1. the nature and subject matter of the dispute,

2. the location of the parties and witnesses,

3. the applicable law,

4. the availability of evidence; and

5. the convenience of the parties.

The ‘more appropriate forum’ test applies to stays between states within Australia, but not to transnational stays, where the test is higher. For transnational cases, an Australian court will generally only order a stay of an Australian proceeding where the court considered itself a ‘clearly inappropriate forum’.

We will explain the difference between the ‘more appropriate forum’ test and the ‘clearly inappropriate forum’ test in a separate article. 

Recent guidance regarding interstate stays

Our firm acted for a successful party in an NSW Court of Appeal case for a stay of proceedings.

In this appeal, Joshan v Pizza Pan Group Pty Ltd, the NSW Court of Appeal confirmed that the ‘appropriate court’ should be determined neutrally, without any weight given to any particular factor. In making this finding, the Court of Appeal confirmed that an applicant for a stay need not demonstrates a “clear and compelling basis” for the stay. 

The Court of Appeal in this case also provided guidance about how non-exclusive jurisdiction clauses should be treated when determining a stay application under section 20(4) of the Act.

What to do if you want to stay the interstate proceeding?

Considerable work is required to apply to stay an interstate proceeding. As a less expensive first resort, you may decide to invite the other party to consent to a stay of the proceeding while you attempt a negotiated out of court settlement with them. If the other party agrees to the adjournment, you can explore settlement options without the need for expensive litigation. If the other party is uncooperative, you can request consent on the basis that their court proceeding is vulnerable to a stay application under the Act. If this is necessary, we recommend you word this demand in a specific way, to ensure the demand can be used tactically in any eventual stay application.

If an application to the Court becomes necessary, it is likely you will need to exhibit in evidence the relevant information which demonstrates why another state is ‘more appropriate’. 

This exercise of persuading a court on a stay application involves exhibiting relevant documents, such as key contracts, deeds or agreements, and deposing to the location of the parties. It is also likely to involve consideration of who the potential witnesses will be in the case, and the location of these witnesses at the time of your application.

Are there other tactical advantages to applying for a stay?

If you are successful in having your stay application granted, this can place early pressure on the other party to settle a dispute on terms more favourable to you or your client.

What if I choose not to seek a stay?

If you choose not to seek a stay, you or your client may be committed to participating in the court case interstate. While COVID-19 has seen the introduction of audio- and video-conferencing facilities to many courts and tribunals across Australia, they are not ubiquitous. Even where facilities are available, an interstate court process means the need to engage interstate lawyers, and potentially the need for witnesses to travel interstate to give evidence. Where witnesses are unable to unwilling to attend interstate, this can create additional cost, or prejudice the ability to defend a proceeding.

Get advice

If you have been served with an interstate court process, it is important to act fast. Not only is it important to respond to the substance of the action against you or your company, but it is also important to identify procedural options, such as opposing the jurisdiction of the court as discussed in this article, or other options, such as strike out of court documents or early judgment without trial.

We act for companies and clients in commercial and civil disputes involving stays of proceedings, both in interstate and transnational disputes.

If you have been served with an interstate court process, it is vital that you take action before it is too late.

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