Government Model Litigant – Guidelines & Indemnities

Purpose of paper

This article explores the circumstances where it is necessary for State and Commonwealth governments to bind third parties, to comply with the Model Litigant Guidelines (‘Guidelines’).

Summary of Model Litigant Guidelines

The Guidelines exist pursuant to both Commonwealth and Victorian legislation. Their purpose is to ensure that the Commonwealth and State governments and their agents (‘Government’) act honestly and fairly in the conduct of litigation.

In simple terms the Guidelines require Governments to avoid, prevent and limit the scope of legal proceedings wherever possible. Where this is not possible Governments are to keep the costs of litigation to a minimum by not;

• requiring the opposing party/ies to prove a matter which they know to be true;
• making attempts to resolve the litigation through settlement offers or payments into court; and
• not to appealing any decision unless the appeal has a reasonable prospect of success or is otherwise justified in the public interest.

Case Study

One transaction involving the grant to Government of a licence from a third party software developer threw up the somewhat unusual circumstance of needing to apply the Guidelines to third parties.

It was a condition of the Software Licence Agreement (‘SLA’) that the provider of the software grant the Government licensee an indemnity against claims made against the Government arising from its use of the software licensed.

The indemnity required the software developer was to indemnify the Government against any claims made by third parties for the infringement of their intellectual property rights arising from the Government’s use of the software.

The Problem

In return for giving this indemnity, the software provider required the following from the Government:

• sole control over running the case including an option to defend or settle the case; and
• the option to bring the action in the name of the Government.

The Solution

Given that the terms of the indemnity allowed for the software provider to litigate in the name of the Government, a clause was inserted into the SLA requiring the software provider to:

1. act in a diligent and timely manner;
2. grant the Government consultation rights throughout the progression of any litigation that activated the indemnity;
3. the right to step in and assume control of the litigation where the software developer, in the reasonable opinion of the Government, runs the litigation in a way that is harmful to the Government; and
4. refrain from entering into any settlement agreement that would require any action on the part of the Government, and
5. allow the Government the right to retain allow the Government the right to retain the control and use of its name.

Concluding Remarks

It will be appreciated that the intention and effect of the above clause is to in effect secure compliance by the software provider with the Guidelines in the circumstances where, pursuant to the indemnity it gave, the software provider assumes control of any litigation brought against the Government arising out of the Government’s use of the software licence to it.