Cao v Goldsmith t/as Goldsmith Lawyers

Background 6 Soon after his arrival in Australia, Mr Cao joined a social club called the Chinese Professional Club of Australia (Club). The Club had a "chat" group, the members of which chatted to each other by email about matters of mutual interest. Emails sent by way of "chat" were circulated to all registered users of the email services provided by the Club. 7 On 20 November 2011, an email in the Chinese language was published to the members of the Club's chat group (the relevant email). Mr Cao considered that it was defamatory of him. The email was sent from the email address liunancy2005@hotmail.com and was signed "Nancy". Nancy is Ms Liu. 8 Mr Cao then approached Mr Goldsmith, who is the principal of Goldsmith Lawyers, for advice in connection with the relevant email. At around the same time as he approached Mr Goldsmith, Mr Cao learned that Ms Liu is the wife of George Yu, who had been the President of the Club for a number of years and whose views about modern China were views with which Mr Cao disagreed. Mr Cao suspected that, in fact, it was Mr Yu who had written and sent the relevant email. 9 Nonetheless, on the advice of Mr Goldsmith, on 3 September 2012, Mr Cao sued Ms Liu, and only Ms Liu, for defamation in the District Court of New South Wales. He did not join Mr Yu as a second defendant in that proceeding. The decision not to join Mr Yu was a deliberate one made on the advice of Mr Goldsmith although, according to Mr Cao, he had always questioned the wisdom of suing only Ms Liu and not joining Mr Yu. 10 In the District Court, Mr Goldsmith represented Mr Cao as a solicitor advocate. The defamation trial lasted 12 days. 11 During the course of cross-examination by Mr Goldsmith at the trial, Mr Yu admitted that it was he who had drafted and sent the email in question and that his wife had not been involved. In light of that evidence, the defamation case was lost. 12 Following the defamation trial, Mr Cao retained new legal representatives. He then filed an application seeking a costs order against Mr Yu pursuant to s 98(1)(b) of the Civil Procedure Act 2005 (NSW) and against Mr Goldsmith pursuant to s 99 of the same Act. Mr Cao subsequently discontinued his application against Mr Goldsmith but pressed on with his application against Mr Yu. 13 A District Court judge made the non-party costs order against Mr Yu for which Mr Cao had applied. 14 Subsequently, on 14 September 2015, the NSW Court of Appeal set aside the non-party costs order (Yu v Cao (2015) 91 NSWLR 190). 15 In the meantime, Mr Goldsmith's costs were assessed. That assessment was undertaken for the purposes of Mr Cao's application for a non-party costs order against Mr Yu. However, after Mr Goldsmith's costs were assessed, he (Goldsmith) took immediate steps to obtain a judgment against Mr Cao in the amount of the assessments which had been obtained. Upon his application, a judgment was obtained in his favour in the Supreme Court of NSW for $140,474.40, being the assessed costs payable by Mr Cao to Mr Goldsmith in respect of the District Court defamation proceedings. 16 In the Court below, the primary judge addressed the question of whether Mr Cao had established a counter-claim, set off or cross-demand of sufficient strength and magnitude to justify an order setting aside the Bankruptcy Notice. 17 It is not necessary to discuss the reasons of the primary judge in great detail. His Honour decided to dismiss Mr Cao's application for three main reasons: First, his Honour held that Mr Goldsmith's advice to Mr Cao that it was not possible to join Mr Yu as an additional defendant in the defamation proceedings had not been negligent and was correct. The primary judge also considered that the other allegations of negligence made by Mr Cao did not have sufficient substance to justify setting aside the Bankruptcy Notice. Second, the primary judge held that Mr Goldsmith had the benefit of advocate's immunity. Third, the primary judge was of the opinion that there was insufficient evidence before him to establish a prima facie case in negligence against Mr Goldsmith. The primary judge did, however, also find that, as postulated, Mr Cao's claim for damages would exceed the amount of Mr Goldsmith's judgment debt and that Mr Cao could not have raised his claims in the proceeding in which the judgment was obtained.

Consideration (Costs) 18 We formed the view that the primary judge should have set aside the Bankruptcy Notice and that none of the reasons which he gave for not doing so justified the decision to which he had come. In particular, there was evidence before the primary judge of sufficient weight to support the alleged counter-claim against Mr Goldsmith and there was also evidence before the primary judge explaining why it was that proceedings against Mr Goldsmith had not been instituted as at the date of the hearing in the Court below. 19 Mr Cao sought the costs of the appeal and of the hearing before the primary judge. Counsel argued that the costs of the appeal should follow the event. In support of Mr Cao's application that Mr Goldsmith should pay his costs of the proceeding in the Circuit Court, it was submitted on behalf of Mr Cao that the Bankruptcy Notice should never have been issued in the first place. The Bankruptcy Notice had been issued at a time when Mr Cao's entitlements against Mr Yu for costs remained unresolved and was based upon a Supreme Court judgment which had been obtained by Mr Goldsmith having opportunistically seized upon the assessments of his costs which had been undertaken for the purposes of Mr Cao's application for a non-party costs order against Mr Yu. 20 By letter dated 17 December 2014, Mr Cao's new legal advisers notified Mr Goldsmith of Mr Cao's professional negligence claim against him. Mr Goldsmith did not respond to that letter at the time but, instead, chose to issue a Bankruptcy Notice. 21 On 16 January 2015, Mr Cao's then solicitors wrote to Mr Goldsmith contending that proceeding in bankruptcy against Mr Cao at that time was inappropriate in all of the circumstances and that the foreshadowed bankruptcy proceeding would be vigorously defended. In particular, Mr Cao's solicitors drew Mr Goldsmith's attention to the fact that, as at January 2015, the Court of Appeal had only recently reserved its decision in relation to the appeal from the District Court's order granting Mr Cao's application for a non-party costs order against Mr Yu and that there seemed little point in Mr Goldsmith and Mr Cao litigating their respective claims against each other pending the decision of the Court of Appeal. The Bankruptcy Notice was issued three days after this letter was sent. 22 Counsel for Mr Cao also submitted that the service of the Bankruptcy Notice upon Mr Cao had been a pressure tactic intended by Mr Goldsmith to elicit payment of his costs in circumstances where he well knew that those costs were in dispute and where Mr Cao was contemplating an action for damages for negligence against him. 23 Counsel for Mr Goldsmith argued that his client should have his costs of the appeal and of the proceeding in the Circuit Court or, alternatively, that both sets of costs should abide the outcome of the negligence proceedings. He submitted that Mr Cao had refrained from commencing proceedings against Mr Goldsmith and had not undertaken to do so until after the commencement of the hearing of the appeal in this Court. Counsel argued that it was his delay in taking action against Mr Goldsmith which had led to the Bankruptcy Notice being issued and then to the subsequent hearings in the Circuit Court and in this Court. 24 We took the view that the costs of the Appeal should follow the event. We were reinforced in this view by the circumstance that Mr Goldsmith had withdrawn his opposition to Mr Cao's Appeal thus rendering the Appeal unopposed. 25 We also found the submissions made on behalf of Mr Cao in this Court persuasive on the question of costs of the hearing before the primary judge and accepted them. In our judgment, the Bankruptcy Notice should never have been issued. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Foster, Gleeson and Markovic.