5 It was the consensus of the parties before Schmidt J that, although dealing with the subject of costs being available against a legal practitioner acting without reasonable prospect of success in the context of the provisions of the Legal Profession Act 1987, nevertheless, the approach to that matter was applicable to the operation of r 209 and the applicable principles were those set down by the Court of Appeal in Lemoto v Able Technical Pty Ltd and ors [2005] NSWCA 153; 63 NSWLR 300. That approach has not been departed from on appeal.
6 Although a number of matters were raised by Professor Kennett against the conduct of the proceedings by Dr Berwick as resulting in wasted costs being incurred, her Honour found that only one matter had been established, namely, the wasted costs of three hearing days being 20, 21 and 22 February 2008 during which the matter could not usefully proceed or properly proceed due to Dr Berwick's illness. Her Honour's conclusion on this matter was succinctly set out in two paragraphs of the costs judgment (Kennett and anor v Mayrana Pty Lts & ors (No 11) [2009] NSW IRComm 99):
[204] It was argued for Professor Kennett that Rule 209 of the Industrial Relations Commission Rules contemplated that orders could be made in his favour in respect of the consequences of Dr Berwick's illness and his withdrawal from the proceedings. What occurred amounted to a default, where the proceedings could not conveniently proceed, or were adjourned, without useful progress. On Dr Berwick's evidence, the reason why the hearing of the submissions on 20, 21 and 22 February 2008 could not proceed, was the result of the consequences of the illness from which he was suffering. That evidence must be accepted. That being so, it must also be accepted that the order Professor Kennett seeks is available to be made. The Rule in this respect is compensatory, rather than disciplinary.
[205] The Rule clearly contemplates that a client such as Professor Kennett may be sheltered from the cost consequences which must inevitably fall upon someone, when such an illness occurs. In the circumstance, I am satisfied that the discretion should be exercised in favour of Professor Kennett, both in respect of Dr Berwick's costs and the costs Professor Kennett has been ordered to pay the respondents, in this respect. Neither Professor Kennett nor Dr Berwick are responsible for Dr Berwick falling ill, but clearly the Rule contemplates that the consequences of such a situation, if it arises, may properly fall on the legal representative, rather than on the client. In this case, that seems to me a just outcome, particularly given the evidence as to how it was that Dr Berwick came to appreciate his illness and to seek treatment and the consequences which resulted for Professor Kennett.
7 Dr Berwick has appealed against the costs orders made relying upon the application of r 209, submitting that, while the rule is not only punitive but is also compensatory, no order can be made under the rule unless there is some dereliction on the part of the practitioner in the conduct of the case. Inability to continue to appear for parties because of illness leading to the adjournment of proceedings was a circumstance that did not fall within the provisions of r 209.
8 After her Honour had delivered judgment on 29 June 2009 on the costs issues, it was drawn to her attention that the costs judgment had not dealt with a costs application made by Dr Berwick in relation to Professor Kennett's motion seeking wasted costs. Her Honour accepted that there had been an oversight and in a short supplementary judgment (Kennett and anor v Mayrana Pty Ltd and ors (No 12) [2009] NSWIRComm 116) her Honour shortly stated her reasons for making the further orders, stating as follows:
[4] As for Professor Kennett's motion, they succeeded in part, with an order in his favour against Dr Berwick in relation to proceedings on 20, 21 and 22 February 2009 and orders against the former solicitors in relation to costs thrown away as the result of Mr Prior resiling from the opinions expressed in his first reports. Otherwise the orders sought by Professor Kennett were refused.
[5] The ordinary rule is that costs should follow the event. While Professor Kennett was only partially successful on his motion, that was not as the result of any misconduct in relation to the pursuit or hearing of the motions. I can see no basis on which an order for the costs of the motions could be made in favour of either Dr Berwick or the former solicitors, in the circumstances.
Orders
[6] For the reasons given, I order that Dr Berwick and the former solicitors bear the costs of Professor Kennett's motion, as agreed or assessed and that Mr Pak must bear the costs of his motion as agreed or assessed.
9 Dr Berwick and separately, Ms Muc and Mr Healey, have appealed against these orders primarily claiming that they were not notified prior to the judgment and had not been heard or appropriately heard as to the consequential costs orders to be made on Professor Kennett's costs motion
CONSIDERATION
10 In considering these matters, it is necessary to briefly refer to what occurred on 20, 21 and 22 February 2008 and what her Honour said about Professor Kennett's evidence and Dr Berwick in relation to the issue of costs.
11 The substantive proceedings had been adjourned in late September 2007, after 19 hearing days, with the evidence substantially completed but with a requirement to hear one further witness for the respondents. Her Honour made arrangements with the parties to have the matters relisted on the February dates to receive the further evidence and then to hear the parties' submissions. When the matter resumed -on 20 February 2008, however, Dr Berwick made an application that the matter proceed by way of written submissions. Her Honour rejected that application on the basis that it was clearly understood at the September adjournment that the three February days would be available for the taking of additional evidence and the making of final submissions by all parties so that the matter would be concluded in that time frame. In the course of making his submission, Dr Berwick accepted that all of his submissions had not been fully prepared and were not complete and that he would need to examine accounting material in order to be able to properly address the issues for the applicants. Following her Honour's ruling against an adjournment for the purposes of filing written submissions, a further and final witness was called for the respondents. This evidence was relatively brief and Dr Berwick cross-examined the witness. At the conclusion of that evidence, Dr Berwick tended some further material for the applicants and closed the applicants' case. After the morning tea adjournment, Dr Berwick was directed to commence submissions on the basis that he had accepted that they were well advanced although not yet completed and that there were further matters to attend to. Dr Berwick's address continued after the luncheon adjournment and into the afternoon and finally reached the point where Dr Berwick required a further adjournment because of matters that had been raised in exchanges with her Honour and his need to consult the transcript. He sought to have the remaining time used by the other parties. Her Honour declined to call on the other parties at that time and was critical of Dr Berwick for not being able to complete his submissions noting, to the extent that submissions had been made, they had not yet addressed much of the substance of the application. Her Honour adjourned one hour earlier than normal and reserved the costs of the adjournment.
12 On 21 February 2008, Dr Berwick continued to address, but said that he was awaiting the arrival at Court of further submissions that had been prepared and which he required for the purposes of his oral submissions. Dr Berwick continued to address, but her Honour noted that the address was progressing extremely slowly with documents and transcript references being supplied from within and outside the Court by Dr Berwick's instructing solicitor. Her Honour asked Dr Berwick to be candid and to concede that he had nothing further to put until he was in possession of the written submission upon which he was waiting. In response, Dr Berwick sought and was granted an adjournment to ascertain the whereabouts of the document. On resumption, Dr Berwick said that he did not yet have the document but there were matters in it that he did not understand and he would therefore need an adjournment. The document was, in fact, being prepared by the applicant's expert witness, Mr Prior. There was a further adjournment to obtain the document, but when the matter resumed only a précis of it was available and Dr Berwick confessed to not fully understanding the contents of the document. In the circumstances, her Honour, clearly with reluctance, adjourned the proceedings again until the following day, making it clear that upon resumption of submissions, Dr Berwick would not be permitted to canvass matters that he had already dealt with in oral submissions. Her Honour reserved the question of costs. The matter was to resume at a later starting time the following day and the parties were asked to consult their diaries as it was clear that further time would be needed to complete the case.
13 When the matter resumed on 22 February 2008, Dr Berwick announced that a situation had arisen where "for the moment he was unable to continue with the case" as there were issues he needed to address. He needed some assistance and he was about to receive that assistance - he had discussed his position with those at the bar table. It became clear that Dr Berwick was referring to an inability brought about by his own illness. His initial application was that the matter be stood over generally but he did say that it may not be very sensible for him to make any commitment in regard to new dates as he did not want to further inconvenience her Honour or the parties by accepting dates where there may or may not be further difficulties. During discussion her Honour noted that, if the position was that Dr Berwick was unable to continue, the sensible thing was that he should no longer appear at the bar table and ought to withdraw and his instructing solicitor should take instructions from the applicants. Her Honour then adjourned briefly so that the parties could have some discussions and upon resumption, the applicants' solicitor, Mr Healey, appeared. Mr Healey then engaged in discussion as to an appropriate timetable on the basis that other counsel would have to be briefed to conclude the matter. The matter was then adjourned until 11 March 2008. On that day new counsel appeared for the applicants and having filed written submissions, addressed those submissions orally. The other parties then addressed her Honour and the matter was concluded on that day.
14 In her costs decision [No 11] delivered on 9 June 2009, her Honour analysed the evidence on the costs issues given by Professor Kennett and Dr Berwick as well as the evidence of Mr Healey. Her Honour noted the inconsistency of aspects of Professor Kennett's evidence and expressed difficulty in accepting aspects of the Professor's evidence, although she had no such difficulty with Dr Berwick's evidence. There was one aspect of the Professor's evidence that her Honour described as being "implausible" and "contradictory" in face of other parts of the Professor's evidence and the evidence of Dr Berwick and Mr Healey. Her Honour noted that, unlike Professor Kennett, Dr Berwick understood the difficulty of establishing the profitability of the College and that some parts of Professor Kennett's evidence could not be accepted. Professor Kennett complained about Dr Berwick's attention to the case in early 2008 and spoke of his cause for concern and later learning of Dr Berwick's illness and need to withdraw from the case. Professor Kennett had formed the view that Dr Berwick had lost interest in the case but her Honour stated "that was not the difficulty" but rather it was Dr Berwick's illness and the fact that it was not until February 2008 that he realised that he was unwell. Her Honour noted that Dr Berwick had advised, at various times, of the numerous difficulties with the claimed unfairness of the sale agreement and that Dr Berwick had re-cast the pleadings to concentrate on the consulting agreement. Dr Berwick had also written to his solicitors complaining of their inattention to the matter and had urged the applicants to offer a settlement and repeatedly encouraged them to make an offer or to accept offers received, but her Honour noted that Professor Kennett was not interested in compromise.
15 It is against that background that her Honour's orders are to be considered and whether r 209 was available to impose a costs order on Dr Berwick for the wasted costs of the three February hearing days. These matters require the Court to consider the construction of the rule to ascertain its proper reach and application.
16 The Industrial Relations Commission Rules 1996 were introduced following the enactment of the Industrial Relations Act 1996 and the repeal of the Industrial Relations Act 1991. The Rules, in large part, were an adoption or adaptation of the Rules of the Supreme Court. Rule 209 was an adaptation of Pt 52A, R 43 of the Supreme Court Rules 1970 dealing with the liability of solicitors and Pt 52A, r 43A dealing with liability of barristers. At that time the Supreme Court, under s 76 of the Supreme Court Act 1970, possessed a wide power to order costs, subject to the Supreme Court Act and Rules. Section 76C specifically dealt with costs liable to be met by a solicitor where serious neglect, serious incompetence or serious misconduct delayed or contributed to delay in the proceedings. Rule 209, with necessary amendments, substantially reproduced Pt 52A, rr 43 and 43A of the Supreme Court Rules. The Supreme Court Rules contained a further provision, not found in r 209, referring to the rule being in addition to and being intended to operate independently of the provisions of s 76C of the Supreme Court Act and was, therefore, not to apply in circumstances where s 76C of that Act applied. The costs provisions of the Industrial Relations Act were different from those contained in s 76 and s 76C of the Supreme Court Act: pursuant to s 181 of the Industrial Relations Act, subject to the rules of the Commission and any other Act or law, the Commission could award costs and costs were to be in the discretion of the Commission and the Commission was empowered to determine by whom and to what extent costs were to be paid. Special provisions were made in relation to the costs of industrial agents and a distinction was made between the costs orders available when the Commission was sitting in Court Session (now the Industrial Court) and when it was sitting as the Industrial Relations Commission.
17 Given that history, it is appropriate to consider what has been said in the Supreme Court about the operation of Pt 52A, rr 43 and 43A. In Wentworth v Rogers [1999] NSWCA 403, the Court of Appeal gave consideration to the operation of ss 76 and 76C of the Supreme Court Act and the operation of Pt 52A, r 43 of the Rules of the Court. In considering in what circumstances orders for costs may be made against a solicitor, the Court of Appeal stated:
Costs orders against solicitors
[21] There are two statutory provisions which deal with orders for costs against solicitors. The first is s 76C of the Supreme Court Act 1970 and the second is r 43(1)(c) of Pt 52A of the Supreme Court Rules. So far as relevant, s 76C of the Supreme Court Act says:
76C(1) The Court may, at any stage of any proceedings, make one or more of the following orders in respect of a solicitor whose serious neglect, serious incompetence or serious misconduct delays, or contributes to delaying, those proceedings:
(a) disallow the whole or any part of the costs between the solicitor and his or her client;
(b) direct the solicitor to repay his or her client the whole or any part of the costs which the client has been ordered to pay to any other party;
(c) direct the solicitor to indemnify any party other than his or her client against the whole or any part of the costs payable by the party indemnified.
...
(5) Nothing in this section limits the generality of s76 or any other provision of this Act.
[22] S 76 of the Act provides, inter alia, that, subject to the Act and the Rules and subject to any other Act, costs shall be in the discretion of the Court and that the Court shall have full power to determine by whom and to what extent costs are to be paid.