Bowman v Datalec Services Pty Limited & Ichor Constructions Pty Limited

The plaintiff's case

1. The plaintiff commenced proceedings by a statement of claim dated 5 August 2020 that nominated Bandeli (Lee) Hagipantelis, of Brydens, as the plaintiff's solicitor. There is no dispute that Mr Wes Ranson is a solicitor with Brydens and that at all relevant times he has had the carriage of these proceedings on behalf of the plaintiff.
2. The statement of claim named two defendants: 1. Datalec Services Pty Ltd, the first defendant (Datalec); and 2. Ichor Constructions Pty Ltd, the second defendant (Ichor).
3. The plaintiff alleges that Datalec was contracted to, and did, install electrical and other infrastructure at a building site at Barangaroo (the site), and that Ichor was the builder, and/or head contractor, and/or principal contractor, at the site. [2]
4. It is the plaintiff's case that he was present at the site on 9 August 2017, as an employee of New Edge Group Pty Ltd, for the purposes of installing air conditioning and related infrastructure. He alleges that as he was walking across part of the floor of the site, he tripped on, and/or fell over, a roll of hessian. He asserts that the presence of the roll of hessian gave rise to a reasonably foreseeable risk of injury and that, as a consequence of tripping and/or falling, he suffered various injuries for which Datalec and Ichor are each liable in negligence. [3]
5. Notices of appearance on behalf of each of Datalec and Ichor were filed on 26 October 2020 and 25 November 2020 respectively. [4] Following the filing of those notices, correspondence passed between the parties regarding (inter alia) the provision of further particulars. A timetable was set by the Court on 2 December 2020 addressing the filing of evidence. [5]

The status of the first and second defendants

1. It is not in dispute that: 1. a liquidator was appointed to Datalec on 11 September 2020 [6] (i.e. approximately 5 weeks after the filing of the statement of claim); and 2. Ichor was placed in voluntary administration on 21 November 2018 [7] (i.e. approximately 21 months prior to the filing of the statement of claim).

Events leading up to the filing of the first notice of motion

1. On 10 February 2021, the solicitor for Datalec wrote to Brydens in the following terms: [8] We have recently been informed by our client that it was placed into liquidation on 20 September 2020. We invite your client to make the appropriate application for leave of the Supreme Court to maintain proceedings against our client. Pending the leave of the Supreme Court we understand the proceedings will effectively be stayed. Please let us know should you wish to discuss (emphasis added in each case).
2. In his response, [9] Mr Ranson did not engage with the issue that had been raised regarding the necessity to seek leave in order to maintain the proceedings which had been commenced. Rather, Mr Ranson asked for a copy of the Certificate of Currency relating to any public liability insurance policy held by Datalec at the date on which the plaintiff allegedly sustained injury. Mr Ranson then advised: Once received, we anticipate our client's instructions will be to file a motion seeking to join that insurer to the proceedings pursuant to s 5 of the Civil Liability (Third Party Claims against Insurers) Act 2017.
3. In the absence of a response from Datalec's solicitor, Mr Ranson renewed his request for a copy of the Certificate of Currency in emails dated 3 March 2021 [10] and 27 April 2021. [11] Neither of those emails made reference to, much less foreshadowed, making any application for a grant of leave.
4. Datalec's solicitor finally responded to Mr Ranson's request for a copy of the Certificate of Currency on 27 April 2021, [12] advising that he anticipated being in a position later that day, or on the following day, to provide some further indication of the availability of the certificate. He also said the following: In the meantime, perhaps you can propose a timetable to give you time to file any notice of motion seeking leave to substitute/join insurers in lieu of the defendants in liquidation and this will give us enough time to provide the certificate of currency etc to you. Or you could as easily just file motions seeking leave to maintain the actions against the defendants in liquidation to get around any delays re the certificates. Can you let me know what is happening regarding the other Defendant in liquidation and your intention to join the employer? (emphasis added)
5. Meanwhile, the solicitor for Ichor had provided Mr Ranson with a copy of the Certificate of Currency for its insurance policy under cover of an email of 13 April 2021. [13]
6. In an email to Datalec's solicitor dated 27 April 2021 [14] Mr Ranson proposed a timetable to "file a motion seeking to join both insurers". Notwithstanding that such a proposal did not address the issue of leave that had been raised in the correspondence of 10 February 2021, Datalec's solicitor responded to the effect that with some minor amendments, Mr Ranson's proposal "should be acceptable to everyone". [15] The same proposal was forwarded to Ichor's solicitor in an email of 27 April 2021 [16] by Ms Cruz, another solicitor at Brydens who was apparently assisting Mr Ranson. Ichor's solicitor responded, indicating his consent. [17] Datalec's solicitor finally provided the Certificate of Currency on 12 May 2021. [18]
7. The proceedings came before the Registrar for directions on 28 April 2021, at which time orders were made for the plaintiff to file a notice of motion seeking to join any insurer(s) by 4 June 2021. On 3 June 2021, Ichor's solicitor wrote to the plaintiff advising that for the purposes of any such motion, "the correct entity to be named as the Second Defendant is MS Amlin Corporate Member Ltd (as sole corporate member of Syndicate 2001)". [19]
8. In circumstances where the plaintiff was in default of the timetable set by the Registrar for the filing of a notice of motion, Datalec's solicitor wrote to Mr Ranson on 8 June 2021 enquiring as to whether any such motion was to be filed. [20] Mr Ranson responded, advising that the motion had been drafted but that he was "seeking to clarify the identity of the syndicate on risk" and asking whether such identity could be confirmed. [21] Datalec's solicitor responded, saying that he was not in a position to provide such confirmation. [22]

The notice of motion of 11 June 2021

1. On 11 June 2021 the plaintiff filed a notice of motion (the first motion) seeking orders which were pleaded in the following terms: 1. Leave be granted under s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 to join MS Amlin Corporate Member Limited for and on behalf of the Underwriting Members of syndicate 2001 at Lloyds of London, to the proceedings. 2. Leave be granted to the Plaintiff to file an Amended Statement of Claim in the form that appears as annexure G in the affidavit supporting to [sic] the Plaintiff's Notice of Motion. 3. Costs of the Motion to be costs in the cause. 4. Any such further orders as this Honourable Court deems fit to make.
2. The first motion was supported by an affidavit of Mr Ranson of 15 June 2021.
3. In or about mid to late June 2021 (it is not precisely clear when) Mr Ranson prepared draft consent orders pursuant to s 5 of the Civil Liability (Third Party Claims against Insurers) Act 2017 (NSW) which he apparently forwarded to at least Ichor's solicitor, who responded on 21 June 2021 suggesting various amendments. [23]
4. On the following day, 22 June, the first motion came before the Registrar for directions. On that occasion, the Registrar ordered that the plaintiff file any further motion seeking to substitute the relevant insurers as defendants to the proceedings by 7 July 2021. The proceedings were stood over for further directions before the Registrar until 14 July 2021.
5. On 1 July 2021, Datalec's insurer advised Mr Ranson that the name of Datalec's insurer as at the date on which the plaintiff allegedly suffered injury was "Certain Underwriters at Lloyds". [24]

The notice of motion of 8 July 2021

1. On 8 July 2021, the plaintiff filed a second notice of motion (the second motion) seeking orders which were pleaded in the following terms: 1. Leave be granted under s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 to join Certain Underwriters at Lloyds to the proceedings. 2. Leave be granted to the Plaintiff to file an Amended Statement of Claim in the form that appears as annexure "A" to this Notice of Motion. 3. Costs of the Motion be costs on the cause. 4. Any such further orders as this Honourable Court deems fit to make.
2. The amended statement of claim referred to in paragraph (2) of the second motion named, as the third and fourth defendants in the proceedings, the respective insurers of Datalec and Ichor.
3. Attached to the second motion was an affidavit of Mr Ranson of 8 July 2021, annexed to which [25] was a letter addressed to Ichor's solicitor of 7 July that was in the following terms: We refer to the submissions made by your Mr O'Connor at the directions hearing on 22 June 2021. We are instructed to maintain our current Notice of Motion seeking to join the insurer to the proceedings as a further defendant rather than substituting the insurer for your client who is in liquidation. We note that the Defendant has been placed into liquidation and at this point is not being deregistered. There is a possibility that the Defendant may become solvent again, in which case it would be appropriate for [the] Defendant to remain in the proceedings.
4. On 12 July 2021 Ichor's solicitor wrote to Brydens in (inter alia) the following terms: [26] At annexure D to the [affidavit of Wes Ranson dated 15 June 2021] is the ASIC extract of [Ichor] which shows Ichor was insolvent and entered into voluntary administration on 21 November 2018 and an administrator [was] appointed. We note under s 440D of the Corporations Act 2001 (NSW) [sic] (Corps Act) that proceedings cannot be commenced, or continued, against a company in administration without leave of the court or written consent of the liquidator in this case. We note that proceedings were commenced against Ichor on 5 August 2020 at which time Ichor were [sic] already in voluntary administration. In accordance with s 440D of the Corps Act, would you please provide us with a copy of the administrator's written consent or confirmation of leave being granted from the Court to commence proceedings against Ichor. In the circumstance [sic] the above is not provided to our office before the next Directions Hearing on 14 July 2021, we put you on notice that we will apply to have the proceedings against Ichor dismissed on the basis that proceedings were commenced (and continued) in contravention of the Corps Act and if proceedings are not dismissed, seek leave to cease to act.
5. This correspondence amounted, in effect, to a more specific articulation of the issue (as it affected Ichor) which had been raised by Datalec's solicitor in his correspondence of 10 February. [27] There is no evidence that Mr Ranson responded ever responded to it. I infer that he did not.
6. The second motion came before the Registrar on 14 July 2021. The submissions filed on behalf of Datalec on the present applications state the following in reference to what occurred on that day: [28] Notwithstanding the emails from (Datalec's) solicitors dated 10 February 2021, 27 April 2021 and 8 June 2021, and the submissions made by (Datalec's) and (Ichor's) solicitors that ……. orders could not be made on the notices of motion, the plaintiff's solicitors persisted with the form of the Notices of Motion and requested that the notices of motion be fixed for hearing.
7. The submissions filed by the solicitor for Ichor on the present applications, having recounted parts of the chronology of events outlined above, state the following: [29] At the directions hearing on 14 July 2021, the plaintiff continued to persist with the same form of Motion. The Defendants raised the same objection.
8. Although the assertions in the submissions of the solicitors for each of Datalec and Ichor are not the subject of sworn evidence, counsel for the plaintiff and Mr Ranson did not suggest that they were factually incorrect. They are, in any event, generally corroborated by other evidence, including what was said in the course of the hearing of the first and second motions on 30 July. [30] I have therefore proceeded on the basis that when the matter was before the Registrar on both 22 June and 14 July, the respective solicitors for Datalec and Ichor raised issues concerning the orders sought in the first and/or second motions, in the context of the necessity for the plaintiff to seek leave to maintain the proceedings which had been commenced, and in circumstances where neither motion sought such an order. I have also proceeded on the basis that in the face of the position taken on behalf of Datalec and Ichor before the Registrar on 14 July, the plaintiff's representative [31] sought to have the first and second motions listed for hearing. The Registrar then fixed a hearing date of 30 July 2021.
9. On 29 July 2021, the day before the hearing of the first and second motions, the solicitor for Ichor filed written submissions specifically pointing, yet again, to provisions in the Corporations Act 2001 (Cth) (the CA) which required the plaintiff to seek Court's leave, and submitting, in effect, that the failure to do so was fatal to both notices of motion. No submissions were filed by the plaintiff in response.

The hearing of the notices of motion

1. It is appropriate at this juncture to set out the relevant provisions of the CA.
2. Section 440D is in the following terms: 440D - Stay of proceedings (1) During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except: (a) with the administrator's written consent; or (b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes. (2) Subsection (1) does not apply to: (a) a criminal proceeding; or (b) a prescribed proceeding.
3. Section 471B is in the following terms: 471B Stay of proceedings and suspension of enforcement process While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with: (a) a proceeding in a court against the company or in relation to property of the company; or (b) enforcement process in relation to such property; except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
4. At the commencement of the hearing on 30 July, and obviously mindful of the position taken by Datalec and Ichor, counsel for the plaintiff said the following: [32] I do have a concern. I have a concern about the matter because the defendant maintains, or certainly the second defendant maintains, an argument that because the plaintiff has never sought leave under the Corporations Law to maintain these proceedings that they are a nullity and so your Honour would not grant the relief sought. We don't accept that but I acknowledge that it is an argument that is going to be advanced. And in those circumstances where there is even the slightest risk that the plaintiff's rights could be jeopardised should that argument succeed, I think it is incumbent on the plaintiff's legal representative to make that application.
5. Counsel subsequently clarified that her reference to making "that application" was a reference to an application for leave to continue the proceedings. [33] It should be noted that although counsel indicated that she did not accept the position taken on behalf of Datalec or Ichor, counsel did not advance any submission as to why that position was, as a matter of law, incorrect.
6. Counsel then said: [34] I am content to proceed on this basis, your Honour, I make the application and we will abide by whatever directions your Honour makes in relation to it.
7. Once again, the reference to "the application" was a reference to an application for leave, in circumstances where neither the first nor the second motion sought any such order.
8. The respective solicitors for Datalec and Ichor submitted that in light of ss 440D and/or s 471B of the CA, the only course available to the Court was to dismiss both motions, given the plaintiff's failure to seek and obtain the necessary leave. The solicitor for Datalec said the following: [35] We forwarded an email to your associate dated 10 February this year and we seek to rely upon that email. As per that email, and as per our client's position on the two or three prior occasions this motion was before the Court for directions, we had placed the solicitors on notice that these proceedings under section 440D or 471B Corporations Act are stayed and that this motion was a nullity. And we have invited the plaintiff's solicitors, since February of this year, to file the appropriate application in the Equity Division of your Honour's court to obtain that leave. Despite our submissions and our prior communications, the plaintiff's solicitors on the last occasion pressed for this matter to proceed to hearing before your Honour today.
9. He then went on to say: [36] Your Honour, as your Honour observed, any such application for leave to maintain the proceedings against defendants in liquidation ought by done by way of formal notice of motion. We don't oppose that course. The difficulty is we have these motions before your Honour today which are a nullity and it is our respectful submission, and as we have informed the plaintiff's solicitors on many numerous prior occasions, the current motions before your Honour are a nullity and ought to be dismissed with costs.
10. When given the opportunity to articulate Ichor's position, Ichor's solicitor said: [37] It is slightly different, your Honour, because in the case of the second defendant, it was actually insolvent before the commencement of the proceedings. So it is not a situation where they went into insolvency during the proceedings, such as the first defendant. The plaintiff to even have commenced proceedings against the second defendant needed to make the application in the Corporations List for leave to commence that proceeding. Also, as was pointed out quite clearly in Taouk v Assure, if that wasn't done, then the proceedings themselves are incompetent. But also, if you want to file an application within the proceeding, you can't do that unless you first obtain leave in the Corporations List. So even if we don't take the point that the initial filing was incompetent and should have just been dismissed for lack of obtaining leave under section 471B of the Corporations Act, and you can only have nunc pro tunc orders under the Corporations Act under 500(2) when the defendant goes into insolvency after the commencement of the proceedings. Leaving all those matters aside, the main point that is made through those decisions is that a motion such as this cannot actually be made in stayed proceedings until the stay is lifted, whether that motion is to join further defendants who might be insurers or directors of a company.
11. When asked what submissions were sought to be made as to the question of costs in the event that the first and second motions were dismissed, counsel for the plaintiff said: [38] There is nothing I can say, your Honour.
12. I then made orders dismissing the first and second motions, as well as an order that the plaintiff pay the costs of Datalec and Ichor of both motions, as agreed or assessed.
13. Immediately thereafter, counsel for the plaintiff said: [39] Your Honour, can I just clarify the costs order, just so there is no confusion about this. That is an order that cannot be executed until the conclusion of the proceedings?
14. At that point, the solicitor for Ichor foreshadowed an application, which was supported by the solicitor for Datalec, that their respective costs of the first and second motions be paid forthwith. I indicated at that point that any such application, if it were to be made, could be argued when the matter was before me for further directions on 17 August 2021.
15. The plaintiff eventually filed a motion seeking leave to proceed against both Datalec and Ichor. Leave was granted by Rees J on 6 September 2020. [40]

The present applications

1. When the matter came before me on 17 August 2021 applications were made on behalf of both Datalec and Ichor that their respective costs of the first and second motions be paid forthwith. Faced with those applications, counsel for the plaintiff indicated that there "may be a relevant piece of information" that could bear upon the exercise of the Court's discretion to make the orders which had been sought. [41] In those circumstances, the hearing of the applications that the costs be paid forthwith was adjourned until 27 August, so as to give the plaintiff an opportunity to put such further evidence before the Court as was considered necessary.
2. By the time the proceedings came before me on 27 August, I had received written submissions from all parties on the applications that the costs be paid forthwith. However, the written submissions filed on behalf each of Datalec and Ichor went beyond that, and sought orders that: 1. the costs of each of the first and second motions be paid forthwith by the plaintiff; and 2. the plaintiff's solicitor indemnify the plaintiff for any costs of the dismissed notices of motion that are ordered to be paid forthwith.
3. The order in (2) was expressed, in each case, as being in the "alternative" to the order in (1). Having raised the obvious tension which arose from orders framed in those terms, the respective solicitors for Datalec and Ichor each confirmed [42] that what was in fact sought were orders that: 1. the costs of each of the first and second motions be paid forthwith; and 2. the plaintiff's solicitor indemnify the plaintiff in respect of such costs.
4. There is a difficulty in making the order sought in (2). Such an order appears to be referable to the provisions of s 99(2)(c) of the Civil Procedure Act 2005 (NSW) (the CPA) which are set out below. [43] It will be noted that the terms of s 99(2)(c) expressly exclude a client being indemnified by a legal practitioner. In these circumstances, and in accordance with the way in which the hearing was conducted, I have proceeded on the basis that the application brought by both Datalec and Ichor is that pursuant to s 99(2)(b)(ii) of the CPA the plaintiff's solicitor, Mr Ranson, pay the costs of the first and second motions (which I have ordered be paid by the plaintiff) to the plaintiff.
5. The transcript of the proceedings on 27 August [44] reflects that in circumstances where counsel for the plaintiff and Mr Ranson had only recently become aware of the applications that Mr Ranson pay the costs, and where I was mindful of the necessity to provide Mr Ranson with a proper opportunity to be heard, I made orders for the filing of further written submissions. In doing so, I indicated to the parties that whilst I proposed to determine all outstanding applications in respect of costs on the basis of the written submissions, if any party sought the opportunity to make oral submissions such opportunity would certainly be provided. [45] Further written submissions were filed. No application was made, by any party, for the matter to be relisted for the purpose of making oral submissions.

The evidence of Mr Ranson in response to the applications

1. In response to the present applications, Mr Ranson filed an affidavit of 1 September 2021 in which he stated (inter alia) the following: [6] At the time proceedings were commenced I was not aware of the provisions relating to entities in liquidation, specifically s 471B of the Corporations Act 2001. [7] I had previously had experience with Defendants who had gone into liquidation during the course of proceedings and taken steps to file a motion seeking to join the Defendant's public liability insurer to those proceedings. I had not previously experienced any issues pursuing that course, particularly in cases where the Defendants [sic]. [8] I understood leave was required to proceed against any Defendant who had been deregistered but did not appreciate leave was required to proceed against Defendants who had gone into liquidation. [9] It was my understanding that the Civil Liability (Third Party Claims Against Insurers) Act 2017 was brought in to simplify the process in this area allowing insurers to be brought into proceedings in circumstances when Defendants held a valid public liability policy of insurance at the time of an accident. [10] Once proceedings were commenced and the plaintiff learned that the First Defendant had also gone into liquidation, steps were taken by the Plaintiff to confirm the identities of the Defendants respective public liability insurance to enable those entities to be joined to the proceedings. [11] During the course of these proceedings the Defendants were informed of the Plaintiff's intention to seek leave to join the respective insurers to the proceedings as further Defendants. As outlined in Ms Cruz's affidavit of 20 August 2021 (at annexures "Q", "R", "S", and "T"), both Defendants consented to the Plaintiff filing a Notice of Motion seeking to join the respective insurers to the proceedings as further Defendants on 27 April 2021. [13] It was my understanding (at that time) that the proposed notice of motion was the appropriate course to pursue and the Defendants [sic] consent to that course only reaffirmed that belief. [14] Both Defendants [sic] solicitors were assisting the application by providing the clients perspective insurance details. [15] On 21 June 2021, the Second Defendant's solicitors expressed their belief that the insurer should be substituted to the proceedings rather than being joined as a further Defendant (as referred to at annexure "Z" of Ms Cruz's affidavit of 20 August 2021. [16] Upon receipt of that correspondence, I contacted [counsel] on 1 July 2021 to discuss the issue. I didn't seek counsel's formal advice on the motion to join the insurers but indicated it was a course I had taken in previous cases without issue. I expressed my concern with the Second Defendant's proposal to substitute the insurer as I was worried that may have negative ramifications if the Defendant was ultimately able to come out of the liquidation process and become a registered entity once again. [Counsel] advised she was content with my course of action to join the insurers to the proceedings rather than substituting them in place of the Defendants in liquidation. [17] On the basis of my discussion with [counsel] the Plaintiff maintained his position with regards to both notices of motion filed on 11 June 2021 and 10 August 2021 [sic]. [18] On 14 July 2021 the Plaintiffs notice of motion filed 8 July 2021, was listed before Registrar Jones. Given both Defendants raised objection to the application, orders were made to the motion to be heard by the Duty Judge on 30 July 2021 to consider the suitability of the motion to be listed for hearing. … [20] Until the Plaintiff's notices of motion were dismissed, I did not appreciate that the course of action pursued by the Plaintiff up until that point was unable to be maintained. [21] I apologise to the Court for any misunderstanding on my part with regards to the provisions under the Corporations Act 2001. [22] I have never previously encountered the issues encountered in this application during my 13 years as a legal practitioner.

The issues

1. There are two issues which arise for determination, namely whether: 1. the costs of Datalec and Ichor of the first and second motions should be paid forthwith; and 2. Mr Ranson should be ordered to pay those costs.
2. Some of the conclusions that I have reached in determining the second issue have a bearing on my determination of the first. It is therefore appropriate to consider the two issues in reverse order.

THE LIABILITY OF THE PLAINTIFF'S SOLICITOR FOR COSTS

1. The written submissions filed on behalf of Mr Ranson in respect of this issue, absent the introductory paragraph, should be reproduced in full: [2] The Plaintiff's solicitor filed the relevant Notice [sic] of Motion in good faith, believing that he was pursuing a proper remedy. It is not uncommon for a party to seek leave to maintain proceedings after discovering that a Defendant company either was or has entered administration after the commencement of proceedings. He believed that joinder of the relevant insurers was the way to proceed. The Defendants, at least for a time, appear to have agreed with him. [3] It is submitted that his conduct falls short of what the Court would consider unreasonable for the purposes of s 99(1)(b). That determination is discretionary in nature but requires something more than the simple unnecessary incurring of costs where the making of the usual costs order will not in any way disadvantage the Defendants. [4] The Plaintiff submits that the Court should also take into account the Defendants' late notice of the application for this alternative order which was made without notice by the filing of Written Submissions outside the timetable which necessitated a further adjournment of the matter.
2. It was not submitted, on behalf of either Datalec or Ichor, that Mr Ranson had exhibited serious neglect, incompetence or misconduct. [46] What was submitted was that each of Datalec and Ichor had incurred costs without reasonable cause, in circumstances for which Mr Ranson was responsible. The primary submission made on behalf of each of Datalec and Ichor was that although Mr Ranson had been consistently informed, as far back as February 2021, that the plaintiff's cause of action could not be maintained against either Datalec or Ichor without the leave of the Court, Mr Ranson chose to persist with the first and second motions which, in the absence of an application for leave, simply could not succeed. The essence of the submissions of Datalec and Ichor was that the correctness of the position that each had maintained was fortified by the fact that at the hearing of the first and second motions, no substantive submission was made challenging that position, or opposing an order that the motions be dismissed.
3. To the extent relevant for present purposes, s 99 of the CPA is in the following terms: 99 Liability of legal practitioner for unnecessary costs (1) This section applies if it appears to the court that costs have been incurred-- (a) by the serious neglect, serious incompetence or serious misconduct of a legal practitioner, or (b) improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible. (2) After giving the legal practitioner a reasonable opportunity to be heard, the court may do any one or more of the following-- (a) it may, by order, disallow the whole or any part of the costs in the proceedings-- (i) in the case of a barrister, as between the barrister and the instructing solicitor, or as between the barrister and the client, as the case requires, or (ii) in the case of a solicitor, as between the solicitor and the client, (b) it may, by order, direct the legal practitioner-- (i) in the case of a barrister, to pay to the instructing solicitor or client, or both, the whole or any part of any costs that the instructing solicitor or client, or both, have been ordered to pay to any other person, whether or not the solicitor or client has paid those costs, or (ii) in the case of a solicitor, to pay to the client the whole or any part of any costs that the client has been ordered to pay to any other person, whether or not the client has paid those costs, (c) it may, by order, direct the legal practitioner to indemnify any party (other than the client) against costs payable by that party.
4. In determining whether an order should be made pursuant to s 99(2)(b)(ii) of the CPA, there are two particular principles, and two important public interests, which must be balanced.
5. The first, is that a legal practitioner should not be deterred from pursuing his or her client's interests by fear of some personal liability to the opposing party. As Barrett J (as his Honour then was) observed in Degiorgio v Dunn (No. 2): [47] The legislation is not meant to be an instrument of intimidation, so far as lawyers are concerned.
6. The second, is that a litigant should not be left to bear the costs of unjustifiable conduct, irrespective of whether that conduct has been engaged in by that litigant's own representative, or the representative of the opposing party. In Ridehalgh v Horsefield [48] Bingham MR recognised that in reconciling such competing interests: … full weight must be given to the first of these public interests, but the wasted costs jurisdiction must not be emasculated.
7. In the present case, bearing in mind these principles, the following facts are of particular significance.
8. Firstly, on 10 February 2021 Mr Ranson was alerted to the fact that Datalec had been placed in liquidation. His specific attention was drawn to what Datalec's solicitor correctly considered was the requirement to seek the leave of this Court to maintain the proceedings. Mr Ranson's response did not engage with that issue.
9. Secondly, on 27 April 2021 Datalec's solicitor raised the issue with Mr Ranson again. In doing so, he expressly suggested that the easiest course was for a motion to be filed seeking the leave of the Court to maintain the proceedings against both defendants. Again, Mr Ranson did not engage with that issue.
10. Thirdly, when the first motion came before the Registrar on 11 June 2021, the solicitors for each of Datalec and Ichor raised the necessity for the plaintiff to seek leave. Mr Ranson's response was, in effect, to maintain his position and not seek such an order.
11. Fourthly, on 12 July 2021 the solicitor for Ichor wrote to Mr Ranson in considerable detail, explaining why the leave of the Court was required in order to allow the proceedings (at least against Ichor) to continue. In the course of that correspondence, Mr Ranson's specific attention was drawn to the provisions of s 440D of the CA. Mr Ranson did not respond, and again failed to engage with the issue which had been raised.
12. Fifthly, when the first and second motions came before the Registrar on 14 July 2021, some two days later, the respective solicitors for Datalec and Ichor, yet again, raised the issue that the leave of the Court was necessary before any further step could be taken in the proceedings. The response of the plaintiff's representative, which I infer was on Mr Ranson's instructions, was to seek orders that the first and second motions be listed for hearing. Once again, the issue of leave was entirely ignored.
13. Finally, on 29 July 2021, the day before the hearing of the first and second motions, the solicitor for Ichor filed detailed written submissions explaining, once again, why the plaintiff's failure to seek leave was fatal to both motions. As I have previously noted, although counsel for the plaintiff "did not accept" the correctness of that position on the hearing of the motions, no substantive submission was advanced as to why such position was legally incorrect, or why the first and second motions should not be dismissed. There was, in effect, a total capitulation on the part of the plaintiff.
14. With these matters in mind, a number of observations must be made as to both Mr Ranson's affidavit, and the submissions advanced on his behalf.
15. To begin with, and at the risk of being repetitive, Mr Ranson's attention was consistently drawn to the necessity to seek leave. Even if it is accepted that he was not aware, at the time of the commencement of the proceedings, of the relevant provisions of the CA, those provisions were drawn to his attention, both generally and specifically, and on numerous occasions, by the solicitors for each of Datalec and Ichor. In circumstances where Mr Ranson's affidavit is largely silent on this question, I am left to conclude that he did not consider, at least in any substantive way, those provisions, or the respective positions of Datalec and Ichor which stemmed from them. Further, and on his own admission, Mr Ranson did not seek any "formal advice" from counsel in relation to motion to join the insurers. On the evidence, he did not seek any advice at all, formal or otherwise, regarding the specific issue of leave.
16. Given all of these circumstances, I am unable to accept Mr Ranson's assertion [49] that until the first and second motions were dismissed, he "did not appreciate that the course of action pursued by the Plaintiff up until that point was unable to be maintained". The fact that the proceedings could not be maintained absent a grant of leave had been consistently drawn to his attention, in varying degrees of detail, as far back as February 2021.
17. I accept the submission made by counsel on Mr Ranson's behalf that it is "not uncommon for a party to seek leave to maintain proceedings after discovering the defendant company either was or has entered administration after the commencement of proceedings". However, the simple point to be made in response to that submission is that despite being told on numerous occasions that such leave was necessary, Mr Ranson did not seek an order for it, and chose to proceed with the first and second motions in the absence of it. His belief that the joinder of the relevant insurers "was the way to proceed" was entirely misconceived. The first and second motions should never have been brought in the absence of an application for, and a grant of, leave.
18. It is somewhat curious, in light of the chronology of events that I have set out, that the positions adopted by the respective solicitors for Datalec and Ichor were not, at least for a period, entirely consistent with the proposition that leave was required. Mr Ranson has fairly pointed out in his affidavit [50] that at one point, the solicitors for each of Datalec acquiesced to a proposal that orders be made by consent facilitating the joinder of the insurers. Be that as it may, the unequivocal position of each of Datalec and Ichor, namely that leave was required, must have been clear to Mr Ranson, at the latest, by the time that the first notice of motion came before the Registrar on 22 June 2021. Neither Datalec nor Ichor resiled from that position at any time thereafter. On the contrary, each made it clear, through their respective solicitors, that such a position was maintained.
19. What might amount to an absence of "reasonable cause" in the context in which that term is used in s 99(1)(b) of the CPA will necessarily depend upon the entirety of the circumstances of the particular case. Whilst a mere mistake or error of judgment may not be sufficient to amount to an absence of reasonable cause, gross neglect or inaccuracy in respect of a matter which a legal practitioner has a duty to ascertain with accuracy may suffice. [51]
20. Importantly, given what occurred in this case, it has been observed that a legal practitioner's lack of familiarity with, and consequent failure to observe, applicable rules of Court may amount to a breach of duty which will sound in an order that he or she pay wasted costs personally. [52] In my view, the position is no different when the circumstances involve, as they did in the present case, a legal practitioner having an unfamiliarity with important statutory provisions governing the commencement, and the subsequent continuation of, proceedings. Given such circumstances, I am unable to accept the proposition advanced on behalf of Mr Ranson that his conduct "falls short of what the Court would consider unreasonable for the purposes of s 99(1)(b)". This is particularly so given that no substantive submission was advanced as to why Mr Ranson's conduct should not be regarded as unreasonable.
21. Further, and for the reasons I have set out, this case certainly involved (adopting the phraseology of counsel for Mr Ranson) "something more than the simple unnecessary incurring costs". What it involved was Datalec and Ichor incurring the costs of the first and second motions in circumstances where those costs would not have been incurred had Mr Ranson understood what was required, and had he made even a cursory reference to the statutory provisions which had been drawn to his attention. The submission that the making of "the usual costs order" would not disadvantage either Datalec or Ichor is not to the point.
22. Finally, to the extent that the submissions made on behalf of Mr Ranson may have suggested that he was prejudiced by the late notice of the application that he pay the costs personally, I do not accept that to be the case. As I have set out, I took all steps to ensure that Mr Ranson was given a proper opportunity to be heard, as required by s 99(2) of the CPA. He availed himself of that opportunity by providing, through his counsel, written submissions, and he did not accept my invitation to have the matter relisted for oral submissions.
23. In all of these circumstances, I am satisfied that the costs incurred by each of Datalec and Ichor of the first and second motions were incurred without reasonable cause, in circumstances for which Mr Ranson was responsible. An order should therefore be made that Mr Ranson pay those costs to the plaintiff pursuant to s 99(2)(b)(ii) of the CPA.

SHOULD THE COSTS BE PAYABLE FORTHWITH?

1. Rule 42.7 of the Uniform Civil Procedure Rules 2005 (NSW) (the rules) is in the following terms: Interlocutory applications and reserved costs (1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including-- (a) costs that are reserved, and (b) costs in respect of any such application or step in respect of which no order as to costs is made, are to be paid and otherwise dealt with in the same way as the general costs of the proceedings. (2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings.
2. In considering whether I should exercise my discretion to "order otherwise" under r 42.7(2) of the rules, I respectfully agree with the view expressed by Katzmann J (in the context of O 62 r 3 of the Federal Court Rules 2011 (Cth)) in Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd (No 2), [53] namely that because the facts of the cases necessarily differ, hard and fast rules governing the exercise of such discretion cannot be laid down. That said, a number of general principles which inform the exercise of the discretion can be distilled from the authorities. They include the following: 1. the general principle is that issues of costs should be resolved when the proceedings are concluded, and the rights of the parties have been finally determined; [54] 2. that general principle will usually serve the interests of justice because it will avoid multiple cost assessments and possible unfairness, and will limit the risk of interlocutory proceedings being used to exhaust the financial resources of one of the parties; [55] 3. it follows that an order that costs be paid forthwith is an exception which will only be made in a case that is out of the ordinary. This is because such an order has the capacity to stultify proceedings, particularly those brought by persons with limited resources, and because such an order carries a risk of operating unfairly where, over the course of the proceedings, there may be orders made that one party should pay the costs of the other from time to time; [56] 4. that said, a provision such as r. 42.7(2) of the rules clearly contemplates that there may be circumstances in which a departure from the general principle is warranted. Such a departure may be justified in a case where costs have been incurred following an interlocutory application which is incompetent or misconceived and which, on a proper analysis, should never have been brought; [57] 5. a departure from the general principle may also be justified if there is an element of unreasonableness in the conduct of the unsuccessful party, and it is likely that there will be a long delay between the interlocutory proceedings and the conclusion of the principal proceedings; and [58] 6. other factors which may be relevant to considering whether a departure from the general rule is justified will include whether the costs order on the interlocutory application was relevant to a discrete and separately identifiable aspect of the proceedings, and whether any costs liability is likely to be affected by the final outcome of the proceedings; [59]
3. Bearing these principles in mind, and for the following reasons, I have come to the conclusion that the discretion in r 42.7(2) should be exercised in favour of making an order that the costs be payable forthwith.
4. Firstly, for the reasons that I have given, the first and second motions were misconceived and should never have been brought in the absence of an application for, and a grant of, leave.
5. Secondly, in circumstances where the necessity for a grant of leave was raised, on several occasions, with Mr Ranson, his conduct in proceeding with the first and second motions was unreasonable.
6. Thirdly, the costs of the first and second motions relate to a discrete and separately identifiable aspect of the proceedings.
7. Fourthly, it can be reasonably anticipated that a hearing date is some way off.
8. Finally, I am unable to accept the submission advanced by counsel for the plaintiff and Mr Ranson that the fact that these are personal injury proceedings is "a significant factor to be taken into account". That submission was advanced in support of the proposition that there is a disparity between the capacity of an injured worker to meet a costs order, and that of an insured defendant. I accept that there is such a disparity. However, in circumstances where, for the reasons I have given, Mr Ranson should be ordered to pay the costs to the plaintiff, the potential for stultification of the proceedings referred to by Black J in Elsmore Resources does not arise.

ORDERS

1. In dismissing the first and second motions, I made an order that the costs of each of Datalec and Ichor of the motions be paid by the plaintiff. It was only after making that order that the present applications were made. No submission was made on behalf of the plaintiff or Mr Ranson that, in the event that I determined that one or other (or both) of those applications should succeed, it was not open to me to vary my previous order. I am satisfied that it is open to me to do so. [60]
2. I make the following orders: 1. Pursuant to r 36.16(3) of the Uniform Civil Procedure Rules 2005 (NSW) the order made on 30 July 2021 requiring the plaintiff to pay the costs of the first and second defendants is varied as follows. 2. In respect of the costs of the first defendant, Datalec Pty Limited, and the second defendant, Ichor Constructions Pty Limited, of the notices of motion filed by the plaintiff dated 11 June 2021 and 8 July 2021 I order that: 1. those costs are to be paid by the plaintiff as agreed or assessed; 2. pursuant to r 42.7(2) of the Uniform Civil Procedure Rules 2005 (NSW), those costs are to be paid forthwith; and 3. pursuant to s 99(2)(b)(ii) of the Civil Procedure Act 2005 (NSW) the plaintiff's solicitor, Mr Ranson, is to pay to the plaintiff the whole of those costs.

Endnotes

1. It is noted that no objection was taken, by any party, to any of the evidentiary material in (1) and (2).
2. Statement of claim at [3] and [4].
3. Statement of claim at [13] - [26].
4. Affidavit of Ms Cruz of 20 August 2021 at [2] and [4].
5. Affidavit of Ms Cruz of 20 August 2021 at [7] - [11].
6. Annexure C to the affidavit of Mr Ranson of 15 June 2021.
7. Annexure D to the affidavit of Mr Ranson of 15 June 2021.
8. Annexure J to the affidavit of Ms Cruz of 20 August 2021.
9. Annexure K to the affidavit of Ms Cruz of 20 August 2021.
10. Annexure L to the affidavit of Ms Cruz of 20 August 2021.
11. Annexure O to the affidavit of Ms Cruz of 20 August 2021.
12. Annexure P to the affidavit of Ms Cruz of 20 August 2021.
13. Annexure N to the affidavit of Ms Cruz of 20 August 2021.
14. Annexure Q to the affidavit of Ms Cruz of 20 August 2021.
15. Annexure R to the affidavit of Ms Cruz of 20 August 2021.
16. Annexure S to the affidavit of Ms Cruz of 20 August 2021.
17. Annexure T to the affidavit of Ms Cruz of 20 August 2021.
18. Annexure U to the affidavit of Ms Cruz of 20 August 2021.
19. Annexure V to the affidavit of Ms Cruz of 20 August 2021.
20. Annexure W to the affidavit of Ms Cruz of 20 August 2021.
21. Annexure X to the affidavit of Ms Cruz of 20 August 2021.
22. Annexure Y to the affidavit of Ms Cruz of 20 August 2021.
23. Annexure Z to the affidavit of Ms Cruz of 20 August 2021.
24. Annexure AA to the affidavit of Ms Cruz of 20 August 2021.
25. Annexure C.
26. Annexure BB to the affidavit of Ms Cruz of 20 August 2021.
27. See [10] above.
28. At [7].
29. At [17]; [19].
30. [39]-[41] below.
31. The record of proceedings for the directions hearing indicates that the plaintiff was represented by a Ms Boettcher.
32. T3.1 - T3.9.
33. T3.13 - T3.17.
34. T4.1 - T4.3.
35. T4.12 - T4.21.
36. T 4.39 - T 4.45.
37. T 5.8 - T 5.29.
38. T 7.20.
39. T 7.49 - T 8.1.
40. In the matters of Datalec Services Pty Ltd (in liq) and Ichor Constructions Pty Ltd (in liq) [2021] NSWSC 1183.
41. T 7.2.
42. T 2.1 - T 3.30.
43. Set out below at [57].
44. T 3. 41 - T 5.10.
45. T 4.47 - T 5.6.
46. See s 99(1)(a) of the Civil Procedure Act 2005 (NSW).
47. (2005) 62 NSWLR 284; [2005] NSWSC 3 at [27].
48. [1994] 2 Ch 205 at 226.
49. At [20].
50. At [11] and [12].
51. Myers v Elman [1940] AC 282 at 319 per Lord Wright.
52. Riv-Oland Marble Co (Vic) Pty Limited v Settef Spa [1989] 63 ALJR 519 (per Brennan, Dawson and McHugh JJ).
53. [2010] FCA 1347 at [13].
54. Brasington v Overton Investments Pty Ltd [2001] FCA 571 at [3].
55. Rafferty v Time 2000 West Pty Ltd (No 3) [2009] FCA 727; (2009) 257 ALR 503 at [20].
56. In the matter of Elsmore Resources Limited [2014] NSWSC 1390 at [5].
57. Power Infrastructure at [14].
58. Elsmore Resources at [5].
59. Re Punters Show Pty Ltd [2017] NSWSC 605 at [90]; Hamod v New South Wales [2007] NSWSC 707 at [5]; Ritson v Community Publishing Ltd [2012] NSWSC 586 at [4].
60. See r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) and Re Inchcape (Earl); Craigmyle v Inchcape [1942] Ch 394. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 November 2021