Chinese Australian Services Society Co-operative Limited v Sham-Ho

The costs arrangement between Proctor Phair Lawyers and the defendants 11Proctor Phair Lawyers submitted that a costs arrangement exists whereby the defendants assumed the risk of paying the costs of the interlocutory proceedings should they fail. 12Mr Phair deposed (Aff, 30/11/11) that the defendants wanted him to continue to act for them and that he agreed to do so on the condition that the defendants were prepared to pay the costs if they were unsuccessful in the motion to continue to act. Annexed to Mr Phair's affidavit is an extract of an email sent by Proctor Phair Lawyers to the defendants on 27 July 2011 which included the following: "Needless to say if we are successful in defending the motion the plaintiffs have to pay your costs, however, if you are unsuccessful you are to pay the plaintiffs (sic) costs". 13Mr Phair stated that he subsequently received confirmation from each of the defendants that they wished for him and his firm to continue to act for them on the understanding that they would cover the costs if the motion was unsuccessful. The plaintiffs' solicitor submitted that I should make an order that Proctor Phair Lawyers write to the defendants and advise them to seek independent legal advice in relation to this indemnity. The plaintiffs currently have new solicitors acting for them and can raise that issue with them. 14Mr Phair also stated that, since my orders of 4 August 2011, the defendants and the plaintiffs in the principal proceedings have sought to settle proceedings one of the basis being that there be an agreement to vacate all costs orders. However Mr Hill, solicitor for the plaintiffs/applicants, appears to deny that the plaintiffs ever sought such a term of settlement that include the vacation of all costs orders. 15The plaintiffs submitted, and I agree, that the principles covering the exercise of the discretion under UCPR 42.7(2) should not be affected by the existence of such a private arrangement between the defendants and their then solicitors. The fact remains that the costs order was made against non-party, and that non-party has, independently of these proceedings, entered into an indemnity agreement with the defendants.

Factors warranting departure from usual rule as to costs in interlocutory proceedings 16In Hamod v State of NSW [ 2007] NSWSC 707, at [12] Simpson J considered an application for costs of an interlocutory application to be paid forthwith. Her Honour regarded as relevant the following factors identified by Barrett J in Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432 ; 55 NSWLR 1 on an application under the predecessor to UCPR 42.7: " (i) where the costs order is relevant to a discrete, separately identifiable aspect of the proceedings; (ii) where there is demonstrated some unreasonable conduct on the part of the party against whom the costs have been ordered; (iii) where the proceedings have some distance and time to run, and it may be some time before ultimate disposition." 17The submissions received from the applicants and respondents helpfully addressed these factors, which I will discuss in turn.

(i) Whether the interlocutory proceedings were a discrete aspect of the principal proceedings 18In Hamod and Anor v State of NSW Simpson J described interlocutory proceedings relating to the discovery of documents as "a classic instance of a discrete issue". In my view, these interlocutory proceedings are also a discrete issue quite separate to the principal proceedings. 19The orders made in these interlocutory proceedings do not concern the same parties as are involved in the principal proceedings. The costs order was made against the solicitors to this application, not the defendants in the principal proceedings.

(ii) Whether there was unreasonable conduct by the solicitors 20Mr Phair submitted that he and his firm had not acted unreasonably in defending the motion for ceasing to act. 21In considering a similar application to this one, albeit under the predecessor to UCPR 42.7, Simpson J in Gattelleri v Meagher [ 1999] NSWSC 1279 at [5] clarified that the "fact that the plaintiff was unsuccessful in [the] application does not of itself establish that the conduct was unreasonable". Likewise in this case the fact that Proctor Phair Lawyers were unsuccessful in defending the motion for an order to restrain them from acting does not of itself establish that their conduct was unreasonable. 22However, the plaintiffs submitted that there were elements of unreasonableness in the conduct. The plaintiffs provided a transcript of a preliminary hearing in this matter during which Proctor Phair Lawyers, through a legal representative, conceded that they had not reviewed their files in June 2011 to ascertain whether a conflict of interest existed (T16/6/11), although on 10 May 2011 the plaintiffs wrote to the solicitors requesting them to act. According to the plaintiffs, the defendants' solicitor should have viewed these files earlier. The notice of motion was not filed until 12 October 2011. The solicitors' failure to review their file for four weeks in June 2011 does not in my view constitute unreasonableness.

(iii) Whether the proceedings are close to being finalised 23The substantive proceedings are still at the directions stage with the next directions hearing listed on 7 May 2012. 24Mr Hill, the solicitor for the plaintiffs, stated that he viewed the current prospects of settlement as "hopeless" whereas Mr Phair stated that he predicted that the matter would settle soon. On this evidence it is not possible to form a view as to the parties settlement prospects. 25The plaintiffs submitted that should the matter proceed to trial before a jury, a 10 day hearing would be likely and that such a hearing could not be listed before June 2012. This is a very optimistic view and a June trial date is most unlikely to occur. The hearing will be some months away. In the circumstances where the first plaintiff is a charitable non-profitable organisation and the second plaintiff is a voluntary executive officer of that organisation, I agree with the submission of the plaintiffs that it would be unduly burdensome on them to wait up to a year to have the costs of the interlocutory proceedings satisfied.

Whether the order sought requires the earlier judgment to be varied (UCPR 36.16) 26The plaintiffs submitted that, firstly, it is unfair and unreasonable that the defendants have to expend further costs in objecting to an order that the costs are paid forthwith when the matter should have been argued at the hearing; and secondly, that this order would amount to a variation of the costs order I made on 4 August 2011. 27The defendants submit that the plaintiffs failed, as required by UCPR 36.16(3B), to indicate within 14 days of judgment that they intended to seek a special court order that costs be payable forthwith. 28UCPR 36.16 relevantly states: "36.16 Further power to set aside or vary judgment or order (1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. ... (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered. (3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered. (3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B). (4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order." 29The costs order was that Mr Phair and Proctor Phair Lawyers pay the plaintiffs' costs. The order now sought is that costs be payable forthwith is an additional order. 30While it would have been preferable for the application to be made on the day judgment was handed down, that does not mean it cannot be made at a later date. 31Even if the costs being payable forthwith was mentioned when the judgment was handed down, there would still have been a necessity to hear the arguments now raised by way of written submissions. 32Overall, in the exercise of my discretion, it is my view that the circumstances of this case warrant a departure from the ordinary rule, primarily because Proctor Phair Lawyers role is at an end and they were never a party in these proceedings. Hence, I order the costs order made on 4 August 2011 be payable forthwith. 33Costs of this application are discretionary. Proctor Phair Lawyers submitted that because the plaintiffs did not apply for an order that the costs be paid forthwith at the hearing of the interlocutory proceedings, the court should order that the applicants bear the costs of the application or alternatively there should be no order as to costs. To minimise costs, this issue was argued by way of written submissions. Costs are discretionary. The usual rule should apply. Costs follow the event. Proctor Phair Lawyers is to pay the plaintiffs' costs of this application as agreed or assessed. It follows that these costs should also be paid forthwith as that finalises Proctor Phair Lawyer's involvement in these proceedings.

The Court orders that: (1) Proctor Phair Lawyers and Russell Phair pay the plaintiffs' costs of the motion dated 12 October 2011 forthwith. (2) Proctor Phair Lawyers and Russell Phair pay the plaintiffs' costs of this application forthwith.

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: 20 March 2012