Bechara v Cross

Judgment 1MACFARLAN JA: This is an application by Ms Maria Bechara, solicitor, for leave to appeal against costs orders made by Levy DCJ on 7 February and 31 May 2013 in proceedings brought by Ms Bechara in the District Court against two former clients (the "Defendants") for the recovery of professional fees claimed to be due by them. The application was heard concurrently with the appeal that would lie if leave were granted. The Defendants did not appear at the hearing in this Court. 2By consent orders made in the District Court proceedings on 18 October 2012, issues concerning the claim for costs, including whether their amount was fair and reasonable, were referred to a barrister for inquiry and report. The orders contained detailed directions concerning the conduct of the reference and noted an undertaking by the Defendants in relation to their defences. 3On 21 December 2012 the Defendants lodged with the Referee a document entitled "Defendants' Supplementary Submissions for Purpose of the Referee Inquiry" incorporating some serious allegations concerning Ms Bechara's conduct. These were mainly related to her statutory obligations of disclosure. Believing that the making of those allegations contravened the consent orders of 18 October 2012, or the agreements between the parties reflected in them, Ms Bechara filed a Notice of Motion seeking a direction of the Court to the Referee that he, in effect, ignore the allegations. 4The Notice of Motion was heard and determined by Levy DCJ on 7 February 2013. His Honour dismissed the motion, with costs, saying in his judgment of that date: "It is surely the function of the referee to determine the matters before him both as to their relevance and significance to the dispute that he is required to report on". 5Contrary to Ms Bechara's, at least initial, submission, Levy DCJ did not find that he had no jurisdiction to make the direction sought by Ms Bechara. Rather, as the passage I have quoted suggests, he took the view that the motion should, in the exercise of his discretion, be dismissed because the Referee was well able to consider the terms of the consent orders under which he was appointed and determine the relevance of the allegations to the reference, with the consequence that there was no need for the Court to make any direction. There was no error in this approach and thus none in his Honour's dismissal of the motion. It follows that the order for costs, which in the usual fashion followed the event, was properly made. Ms Bechara should thus not be granted leave to appeal against that costs order. 6Later in February, the allegations referred to in [3] above were withdrawn and the Referee reported to the Court. As a result, the matter came before Levy DCJ again on 31 May 2013. 7In his ex tempore judgment of that date, his Honour resolved in favour of Ms Bechara an outstanding issue concerning the quantum of her claim and, in light of the terms of the Referee's report, found that Ms Bechara was entitled to a judgment for $198,397.16. 8As Ms Bechara achieved a more favourable result in the proceedings than that contained in an Offer of Compromise which she had served, his Honour ordered that Ms Bechara's costs from 19 October 2012, including the costs of the reference, be paid by the Defendants on an indemnity basis. However his Honour also ordered that each party should (subject to the effect of some limited specific costs orders that had been made) pay their own costs incurred in the proceedings up to 19 October 2012. 9The latter order is the second subject of this application. Ms Bechara contends that as she was successful in the proceedings, the Defendants should have been ordered to pay such of her costs as were not subject to the indemnity costs order (that is, those incurred up until 19 October 2012) on a party/party basis. She did not contend that the qualification concerning specific costs orders that had been made should not stand. 10The primary judge did not record his reasons for making this costs order, save that he preceded his conclusion by the words: "Having heard the arguments of counsel and for reasons that ought be plain from interchange between myself and counsel during the exploration of the basis of those submissions ... ". 11Efforts to obtain a transcript of the hearing of 31 May 2013 proved unsuccessful. As a result, at the hearing in this Court, Ms Bechara was given an opportunity to file affidavits concerning the District Court hearing of 31 May 2013. Those affidavits were served on the Defendants with an invitation to indicate if they wished to respond or otherwise be heard by the Court. As directed, Ms Bechara subsequently confirmed to the Court that she had received no response from the Defendants to that invitation. 12The first affidavit filed was one of Ms Bechara of 15 April 2014. Having refreshed her memory from the notes she made at the District Court hearing and from a letter sent to her shortly after the hearing by Mr Doyle Gray of counsel, who appeared for her on that day, Ms Bechara said that the submission to Levy DCJ of the solicitor who appeared for the Defendants, Mr Nathan Jones, was to the effect that "without a finding in relation to disclosure we say that each party [should] bear its own costs up to the date of the Offer of Compromise". Mr Jones' reference to "disclosure" was to the allegations to which I have referred in [3] above. 13The second affidavit filed was that of Mr Doyle Gray of 16 April 2014. He annexed a copy of his letter of 3 June 2013 to Ms Bechara in which he said in relation to the hearing on 31 May 2013: "Mr Jones submitted that the Defendants had made an allegation that the Plaintiff had failed to make disclosure, no finding had been made about that, but the fact that the Defendants had made the allegation was sufficient reason for the Court to order otherwise. That reasoning was accepted by Judge Levy. That reasoning is in error: an untested allegation - that was withdrawn ... - has no rational connection with judgment following resolution of the balance of a dispute." 14Mr Doyle Gray recalled that in the course of argument Levy DCJ referred to "the failure of the Plaintiff to prove that she had complied with her disclosure obligations by sending correspondence to the Defendants about costs, and that this was relevant to the exercise of his discretion as to costs". 15On the basis of the evidence put before this Court, my view is that Ms Bechara demonstrated that his Honour did not have any good reason to depart from the ordinary rule that costs follow the event (Uniform Civil Procedure Rules 2005 (NSW), r 42.1). It was clear from the material before his Honour and his entry of judgment in Ms Bechara's favour that Ms Bechara had been successful in the proceedings. Prima facie she should therefore have obtained an award of costs. The Defendants' allegations against her were withdrawn and thus not shown by the Defendants to have any substance. It was not incumbent upon Ms Bechara to refute allegations that were no longer pursued. Her success in the proceedings was undiminished by them. 16As I consider that Ms Bechara has demonstrated clear error in relation to the order made on 31 May 2013 that, subject to some specified exceptions, each party pay their own costs of the proceedings incurred up to 19 October 2012, leave to appeal against that order should be granted and the appeal allowed. 17Ms Bechara has incurred costs in the appeal, through no fault of her own, because the transcript of the District Court proceedings could not be obtained. The Court has no power to grant Ms Bechara a certificate under the Suitors' Fund Act 1951 (NSW) in respect of these costs. However, this may be a suitable case for the Director-General to consider forming the opinion referred to in s 6C(1)(c) of the Act. Whether or not the Director-General does so is a matter for him. 18I note in conclusion that the Defendants are bankrupt and that Ms Bechara obtained from the Federal Circuit Court leave under s 58(3) of the Bankruptcy Act 1966 (Cth) to proceed against the Defendants. It is unnecessary to consider whether it was necessary for Ms Bechara to obtain that leave. I also note that whilst the Defendants were initially named as the respondents to Ms Bechara's Summons for Leave to Appeal, she subsequently obtained an order substituting their trustee in bankruptcy. The position was corrected at the hearing before this Court when an order was made restoring the Defendants to their position as the respondents to the application. 19I propose the following orders: (1)Grant leave to Ms Bechara to appeal against costs order (1) made by Levy DCJ on 31 May 2013. (2)Direct Ms Bechara to file a Notice of Appeal in the form of the draft supplied by her to the Court within 14 days of today's date. (3)Allow the appeal. (4)Set aside costs order (1) made on 31 May 2013. (5)In lieu thereof, order that the Defendants pay on the party/party basis Ms Bechara's costs incurred by her up until 19 October 2012, save for those the subject of costs orders made on 26 March 2012, 20 July 2012 and 7 March 2013 which costs orders are to remain operative. (6)Order the Defendants to pay Ms Bechara's costs of the application for leave to appeal and appeal. (7)Grant the Defendants a certificate under the Suitors' Fund Act 1951, if qualified. 20EMMETT JA: Ms Maria Bechara, a solicitor, seeks leave to appeal from costs orders made in the District Court. The orders were made in proceedings brought by Ms Bechara against former clients for the recovery of fees. Ms Bechara made an offer of compromise and was ultimately successful in obtaining judgment for an amount greater than the amount in her offer. Relevantly, the District Court awarded Ms Bechara her costs after the offer on an indemnity basis, but denied her any costs before the making of the offer, ordering that the parties bear their own costs up to the date of the offer. 21Ms Bechara contends that the District Court erred in the way that it dealt with her costs of the proceedings. She also contends that the District Court erred in ordering her to pay the costs of a motion that was dismissed by the District Court. I have had the advantage of reading in draft form the proposed reasons of Macfarlan JA. I agree with Macfarlan JA, for the reasons given by his Honour, that there was no error in the approach of the District Court in ordering that Ms Bechara's notice of motion be dismissed with costs. I also agree with Macfarlan JA, for the reasons given by his Honour, that there was clear error on the part of the District Court in relation to the exercise of discretion concerning the costs of the proceedings. I agree with the orders proposed by Macfarlan JA. 22SACKVILLE AJA: I agree with Macfarlan JA.