Craig v Johnson

Counsel: D Lloyd and A Avery-Williams (Respondent)

Solicitors: Moray & Agnew (Respondent) File Number(s): 2020/276210 Publication restriction: Nil Decision under appeal Court or tribunal: Review Panel pursuant to s 85 of the Legal Profession Uniform Law Application Act 2014 (NSW) Date of Decision: 27 July 2020 File Number(s): 2019/392884

Introduction

1. This is an application for leave to appeal by Ms Loretta Craig and others (the applicants hereinafter, whatever their forensic roles at various times) from a determination of a review panel (the panel) made on 27 July 2020 with regard to an assessment of costs ordered by the New South Wales Court of Appeal.
2. The panel affirmed an earlier determination of a costs assessor that had been certified on 4 March 2020. That assessment called upon the applicants to pay the legal costs in a certain sum of the respondents before me, they being the partners of Johnson Winter and Slattery (JWS), a firm of solicitors.
3. Ms Craig appeared without legal representation for herself, her husband, and a number of companies with which the two of them are associated. On her assurance that she was authorised to do so, I was content with that course. I might add that she presented her submissions perfectly coherently and courteously.
4. The legislation that governs the actions of the assessor and the panel, and the application to this Court, is Part 7 of the Legal Profession Uniform Law Application Act 2014 (NSW) (the Act). As can be seen, s 89(1)(b) of the Act imposes a requirement for leave that applies in this case, because the quantum of the costs in dispute is less than $100,000. As can also be seen from the same section read as a whole, an appeal such as this can be "on matters of law and fact", is by way of a rehearing, and can feature fresh or additional or substitutional evidence by way of leave.

Background

1. My understanding of the complicated factual and procedural history giving rise to this application is as follows.

Multifaceted litigation

1. Many years ago, the applicants were involved in the development of a new form of inkjet printing technology known as "Memjet". A dispute arose between the applicants and other developers that eventually came to the Equity Division of this Court (the primary proceedings). The defendants in those proceedings may be referred to collectively as "Silverbrook". The applicants were represented by JWS and senior and junior counsel. Silverbrook were represented by a firm of solicitors called In Legal.
2. On 6 September 2013, Silverbrook made an offer of settlement to the applicants. They rejected it, assertedly on the basis of advice from counsel and JWS.
3. On 15 November 2013, Sackar J found for Silverbrook: Craig and Ors v Silverbrook and Ors [2013] NSWSC 1687.
4. On 26 February 2016, the applicants filed a statement of claim against some of the Silverbrook defendants. The statement of claim sought, amongst other things, an order that the judgment of Sackar J be set aside.
5. Those defendants subsequently applied to strike out the statement of claim. Thereafter, the applicants sought leave to re-plead their statement of claim.
6. On 28 April 2016, Slattery J ordered that the statement of claim of the applicants be struck out: Craig v Silverbrook [2016] NSWSC 530.
7. After the termination of that attempt to impugn the outcome of the primary proceedings, in November 2016, the applicants brought proceedings against their former solicitors, JWS, founded upon the failure of the litigation against Silverbrook. The claim was commenced in the Professional Negligence list, and was framed in breach of contract and negligence, breach of implied warranty, and misleading and deceptive conduct. An important part of that claim was that JWS should have advised the applicants to accept the offer of settlement, but did not.
8. For at least part of that time, the applicants were represented by the solicitors Charles Filgate & Associates. The solicitor within that firm who had carriage of their matter was Mr Giles. Mr Archibald of counsel was also retained, at least for a time. JWS was represented by the solicitors Moray & Agnew. A solicitor within that firm involved in the representation of JWS was Ms Ness.
9. On 26 February 2018, Mr Giles called Ms Inverarity, a solicitor employed by In Legal, to confirm that he acted for the applicants and to ask whether she would be prepared to sign an affidavit which confirmed her understanding of the offer that had been made in the primary proceedings.

The first subpoena

1. On 26 April 2018, as part of the negligence proceedings against JWS, the applicants sought to have issued a subpoena against In Legal, the firm that had represented Silverbrook in the earlier proceedings. In Legal was by then, of course, a third party. The solicitor within In Legal who took responsibility for responding to the subpoena was Ms Inverarity, to whom I have referred above.
2. The subject matter of that subpoena was as follows (derived from Craig & Ors v Johnson & Ors [2018] NSWSC 1539 (Lonergan J) at [10]): 1. File notes made by you [Ms Inverarity] on or about 6 September 2013 to record the instructions pursuant to which you (practising as "In Legal" solicitors) sent a letter ("Offer Letter") to Johnson Winter Slattery solicitors dated 6 September 2013 making an offer to settle proceedings numbered 2010/333159 in the Supreme Court of New South Wales ("Proceedings"). 2. The email or emails to which the Offer Letter was attached. 3. File notes made by you recording any telephone conversations which you had with Mr Andreas Piesiewicz Solicitor employed by Johnson Winter Slattery or any other person at Johnson winter Slattery in relation to the subject matter of the Offer Letter and any response thereto. 4. Any letter, email, or other documents which you received from Johnson Winter Slattery referring or referring to the Offer Letter or its content. 5. Any documents which you have which define the value or quantum of the offer made in the Offer Letter. (emphasis added)
3. On 10 May 2018, Ms Inverarity produced two envelopes to this Court, in answer to the subpoena of the applicants. One of the envelopes was marked "privileged". The other envelope contained a copy of the letter of offer in the earlier proceedings, and the email that Ms Inverarity had sent to JWS dated 6 September 2013 attaching the letter of offer.
4. On 15 May 2018, the applicants filed a notice of motion seeking access to the documents in the first envelope, over which Ms Inverarity had claimed privilege.
5. On 18 May 2018, Ms Inverarity sent an email to Mr Giles (as I have said, the then-solicitor for the applicants) and "cc'ed" Ms Ness, the solicitor within Moray & Agnew, the solicitors for JWS. To that email, Ms Inverarity attached an unsworn draft affidavit dated 19 May 2018. Paragraph 7 of that draft affidavit was as follows:
6. The envelope contains the following documents 1. Email 5 September 2013 4:17pm Fiona Inverarity to David Brewster, Kia Silverbrook, Janette Lee 2. Email 5 September 2013 4:49pm Fiona Inverarity to David Brewster, Kia Silverbrook, Janette Lee 3. Email 5 September 2013 5:10pm Fiona Inverarity to David Brewster, Kia Silverbrook, Janette lee 4. Email 6 September 2013 10:53pm Fiona Inverarity to Matthew Walton 5. Email 6 September 2013 3:33pm Fiona Inverarity to Matthew Walton, Kristina Stern and Vanessa Bosnjak
7. I interpolate that it is from that date (18 May 2018) that the applicants submit that JWS had, or ought to have had, knowledge that there were no file notes captured by the subpoena, and thus had knowledge that the subject of the subsequent appeal simply did not exist. That is on the basis that paragraph 7 of the draft affidavit spoke only of emails, and not of any file notes.
8. On 1 June 2018, the motion about the subpoena was heard.
9. On 30 October 2018, Lonergan J dismissed the motion of the applicants seeking orders that the objection taken by Ms Inverarity to the inspection by the plaintiffs of the documents produced be overruled, and ordered the plaintiffs to pay the costs of the defendants of the notice of motion: Craig v Johnson [2018] NSWSC 1539. A notable aspect of that judgment is that, as one would expect, her Honour did not reveal the details of the documents with regard to which privilege was upheld: see [19]; [25] - [29].

To the Court of Appeal

1. On 26 November 2018, the plaintiffs filed a Notice of Intention to Appeal from that judgment of Lonergan J.
2. On 29 January 2019, the applicants filed a summons seeking leave to appeal from part of the judgment of Lonergan J. The nub of a draft Notice of Appeal subsequently provided was: "[t]he appellant appeals from the part of the decision below in relation to the documents referred to in Category 1 of the Subpoena to Produce referred to in paragraph [10] of the decision of the primary Judge".
3. On 15 May 2019, Mr Giles, solicitor for the applicants, sent an email to Ms Inverarity asking whether the documents marked privileged were those pertaining to category 1, or category 5, or both.
4. On the evening of 23 May 2019 (the day before the hearing as to whether leave to appeal should be granted), the applicants gave notice of their intention to discontinue the summons.
5. On 24 May 2019, at that hearing, the Court of Appeal dismissed the summons of the applicants by consent, and ordered that they pay costs.

The second subpoena

1. On 19 June 2019, the applicants issued a second subpoena addressed to Ms Inverarity. The applicants sought substantially the same material as they had in the first subpoena: see the second judgment of Lonergan J in Craig v Johnson [2020] NSWSC 423 at [17].
2. Notwithstanding the substantial similarity between the material sought in the second subpoena and the first subpoena, the submission of the applicants was that, at the time of the issue of the first subpoena, they "did not apprehend that their solicitor had a description of the documents produced and so could not mount the arguments they wished to as to waiver of privilege", further noting that the second subpoena differed from the first in that "unlike the subpoena" the schedule to the second subpoena excluded file notes: Craig v Johnson [2020] NSWSC 423 at [25].
3. On 6 August 2019, JWS filed a Notice of Motion to set aside the second subpoena as an abuse of process.

Assessment of the costs ordered by Court of Appeal; adverse resolution of second subpoena

1. On 13 December 2019, JWS filed an application for assessment of the costs that were the subject of the order made by the Court of Appeal on 24 May 2019.
2. On 22 April 2020, Lonergan J ordered that the second subpoena be set aside as an abuse of process: Craig v Johnson [2020] NSWSC 423 at [31]. Her Honour also made orders that the applicants were to pay the costs of the underlying notice of motion.
3. Subsequently, in their submissions to the costs assessor pertaining to the costs ordered by the Court of Appeal, the applicants (being the costs respondents in those proceedings), asserted that it was unreasonable to carry out work in relation to the Court of Appeal proceedings in circumstances where it was alleged by the applicants that JWS knew of the absence of file notes, the nub of the appeal about the subpoena.
4. The costs assessor determined that the applicants ought to have made their submissions as to costs to the Court of Appeal, at the time the order was made. Furthermore, the costs assessor considered it improper to change the costs order, or otherwise challenge the merits thereof.
5. Accordingly, on 4 March 2020, the costs assessor issued a certificate of determination finding that costs in the amount of $58,505.58 were payable by the applicants.
6. The applicants sought review of the determination by the review panel, raising three grounds of review.
7. For present purposes, the first two grounds are most relevant: first, the costs assessor did not consider whether it was reasonable to carry out the work in relation to the proceedings behind the first subpoena (the reasonableness ground); secondly, the assessor had failed to consider the knowledge of JWS of the absence of file notes, which were the subject of the application for leave to appeal (a failure to take into account relevant factors).
8. For completeness, ground three of the applicants' submissions to the review panel was that it was the duty of JWS to inform the Court of the absence of the subject matter of the appeal, and its failure to do so contravened the civil procedure principles under s 56 of the Civil Procedure Act 2005 (NSW).
9. On 27 July 2020, the review panel affirmed the decision of the costs assessor.
10. The applicants now seek leave to appeal the determination of the review panel; as I have said, pursuant to s 89 of the Act.

Submissions of the applicants

1. I turn now to summarise why the applicants say that I should intervene in this matter by way of upholding their appeal. Although I received extensive written submissions from the applicants, they were subject to a helpful degree of clarification and refinement by Mrs Craig in oral submissions. For that reason, I shall only briefly summarise the written submissions, and shall set out in more detail my understanding of the points relied upon by the applicants by the conclusion of the hearing.
2. As a foundational matter, it is important to note the asserted reason behind the decision of the applicants to discontinue their summons seeking leave to appeal against the first decision of Lonergan J about the first subpoena.
3. As I have shown, the subpoena to produce served upon Ms Inverarity on 26 April 2018 sought, amongst other things, the production of file notes made by Ms Inverarity recording any telephone conversations which she had had with the solicitor employed by JWS in relation to the subject matter of the Offer Letter in the proceedings against Silverbrook.
4. The applicants also sought any correspondence or other documents received by In Legal from JWS referring to the letter of offer. The file notes and emails respectively comprised items 3 and 4 on the subpoena schedule.
5. Realising at a very late stage that there were in fact no file notes produced, it became clear to the applicants that pursuing leave to appeal against the decision of Lonergan J was fruitless. That realisation was substantially based upon reflection upon the contents of paragraph 7 of the draft affidavit of Ms Inverarity, which referred to no such item. It is for that reason that they withdrew their summons seeking that leave on 23 May 2019.
6. The principal written submission of the applicants before me was that JWS ought to have known that the putative appeal of the applicants in relation to the first subpoena was fruitless. That is because, the thesis was, JWS should have known that the subject matter of the proposed appeal (the file notes) did not exist. And that proposition is based upon the transmission by Ms Inverarity of her own draft affidavit to that effect to Ms Ness many months beforehand.
7. That proposition led on to some written "sub-points": that the assertedly fruitless costs incurred could not be reasonable ones; that in rejecting the basal submission of the applicants, the review panel fell into error; and that there was a responsibility upon the solicitors for JWS, and thereby on JWS, to invite attention to the futility of the appeal of the applicants, their opponents.
8. Other aspects of the written submissions, such as the proposition that a "false issue" had been maintained by the solicitors for JWS in order to "distract" the erstwhile solicitor for the applicants, and whether JWS had wrongfully claimed privilege with regard to certain documents before the review panel, were not developed orally. I regard them as extraneous, and for those two reasons shall not discuss them further.
9. As I have said, at the hearing before me, it was explained that the primary and straightforward complaint could be understood to be that, once Ms Ness received the email of Ms Inverarity that attached the draft affidavit of herself which revealed - at the least implicitly - that there were no file notes said to be privileged and captured by the subpoena, it became unreasonable for the solicitors for JWS to expend time, effort, and money preparing to resist an appeal that they knew, or at the least ought reasonably to have known, was doomed to fail. For that reason, the submission goes, no costs incurred in such an effort could have been fair or reasonable.
10. The applicants emphasised or expanded upon the following matters in oral submissions.
11. First, the question of timing. This point referred to the passage of time between the email sent from Ms Inverarity on 18 May 2018 and leave to appeal being commenced to be sought on 23 January 2019. Put simply, the point as I understood it was that the solicitors for JWS had known, or ought reasonably to have known, for months before the receipt of the appeal documents of the applicants that no file notes had been produced in answer to the subpoena. That demonstrates that JWS had unreasonably incurred costs after 23 January 2019 when it had become clear that there were no file notes many months beforehand.
12. Secondly, it is clear that a solicitor employed by Moray & Agnew had the draft affidavit from Ms Inverarity in 2018, because it was addressed to her. And she could readily infer from the draft affidavit that its putative deponent was asserting that emails had indeed been produced in answer to category 1 of the subpoena, but no file notes had been produced.
13. Thirdly, Moray & Agnew had at the least a responsibility to the Court to draw attention to the futility of the proposed forensic steps of the applicants, in "that the appeal was futile" due to the obvious non-existence of the proposed subject matter of the appeal: file notes.
14. Fourthly, the dispute about answering the subpoena was primarily between the applicants and the third party upon which it had been served, and which was claiming privilege over some documents: In Legal. The solicitors for JWS were permitted to appear in that dispute as a "contradictor" (to use the term of the applicants), because JWS was the defendant in the professional negligence claim in which the subpoena arose as an interlocutory matter. The proposition was that, as a contradictor, JWS and its solicitors had a special responsibility of openness with regard to the futility of an appeal in that interlocutory dispute.
15. Fifthly, a bill of costs submitted and relied upon by JWS itself showed that Ms Inverarity had been in communication with Moray & Agnew, evidenced by the entry "perusing letter between applicant's counsel and former solicitor and attempts to access file notes".
16. Sixthly, it was only months after the receipt of the email and draft affidavit that the then-solicitors for the applicants themselves appreciated their import. That is why the application for leave to appeal was withdrawn at the last minute. And it was only months after that that it came to be appreciated by the same solicitors that the crucial draft affidavit had been electronically provided to Ms Ness in early 2018. That is the explanation why no submission about the inappropriateness of a costs order - founded upon the propositions placed before me - had been made to the Court of Appeal at the time that the order was made.
17. Seventhly and finally, in oral submissions in reply, the applicants paid JWS and their solicitors something of a compliment: it was said that they had demonstrated close attention to detail on many other occasions in their interactions with the applicants. But that compliment was relied upon in support of the proposition that an employee of JWS would have readily inferred and appreciated the connection between the draft affidavit and the proposed appeal.
18. To summarise: by the conclusion of the hearing, the gravamen of the application for leave to appeal of the applicants was that because Moray & Agnew had received the summons seeking leave to appeal and draft notice of appeal on 23 January 2019 - many months after the receipt of the draft affidavit from Ms Inverarity - any work done thereafter was futile, and it was incumbent upon Moray & Agnew to inform the lawyers for the applicants, or at the very least the Court, that there simply were no file notes in the privileged envelope.

Subsidiary evidentiary determination

1. During the course of the hearing before me, counsel for JWS submitted that an affidavit that had been placed before the review panel by the applicants but had not been admitted before Lonergan J should, as a result, be limited in its use before me, so as not to be admissible for the truth of its contents, pursuant to s 136 of the Evidence Act 1995 (NSW). But in my opinion, no such limitation is called for; because that ruling plays no role in my determination, I shall not discuss it further.

Leave to appeal?

1. I turn first to the preliminary question of whether leave to appeal should be granted, a proposition that was opposed.
2. As counsel for JWS submitted before me, the quantum involved here is not enormous; no question of public importance is raised; and Parliament has imposed an important fetter upon matters such as these requiring determination of a judge of this Court.
3. To be weighed against that resistance is the fact that almost $60,000 is a very large sum to ordinary citizens; I infer from the whole history that I have recounted that Ms Craig and her husband are impecunious; it is obvious that she feels that she has been the subject of an injustice; to refuse leave would be, in a sense, to shut the door of the Court in the face of an unrepresented litigant; the matter was fully argued in any event; and on one view it does raise some unusual questions about costs.
4. In all of those circumstances, on balance I propose to grant leave.

Determination

1. Nevertheless, in my view, the appeal should be dismissed. I say that for the following reasons, largely consonant with the submissions of counsel for JWS.
2. First, the email attaching the unsworn affidavit upon which the thesis of the applicants is founded was primarily and directly addressed to the applicants' own solicitor. Ms Ness was merely "cc'ed" into it.
3. In other words, even assuming for the sake of argument only that something could be inferred from that draft affidavit that meant that the appeal from the first decision of Lonergan J was futile, responsibility for deducing that fell at the feet of the solicitor for the applicants, not the solicitor for their opponent in the professional negligence proceedings. (Of course, not having heard a word from him, I make no adverse finding about the professional conduct of the former solicitor for the applicants whatsoever.)
4. Secondly, the affidavit that was transmitted was a draft one. In other words, it must be thought of as a contingent document, not as written sworn evidence. And it is to be recalled that Ms Inverarity was the solicitor for the opponent of the applicants on the subpoena argument. No subsequent sworn affidavit was placed in evidence before me.
5. Speaking generally, in my opinion a solicitor or barrister would be very cautious in drawing inferences from draft, unsigned documents. My experience as solicitor and counsel is that, whenever one sees a draft affidavit, one reflects upon whether the putative deponent will indeed be prepared to swear to it. (Again, of course I make no criticism whatsoever of Ms Inverarity in these general observations about the "probative value" of draft documents.)
6. Thirdly, the precise subject matter that one might infer, on the basis of the draft affidavit, did not exist, was, and would reasonably have been, by no means pellucid to Ms Ness. That is for a number of "sub-reasons", additional to the draft nature of the affidavit.
7. First, although the draft affidavit spoke of emails having been produced in answer to category 1, file notes, including file notes that may have been attached to or incorporated within emails, were not categorically ruled out at paragraph 7 thereof.
8. Secondly, in the first judgment of Lonergan J that was to be the subject of the appeal, the matter had been resolved upon the establishment of client legal privilege and the failure to establish waiver thereof. In other words, her Honour never categorically stated the nature of the documents that had or had not been produced in answer to the first subpoena; of course, I make not the slightest criticism of that, because the whole point of the dispute before her Honour was that, because privilege was claimed and established, the parties were not to know what had been produced.
9. Thirdly and relatedly, there was no evidence before me that Ms Ness ever actually saw the documents produced, quite apart from what was contained in the judgment of her Honour.
10. Fourthly, the draft affidavit was transmitted in May 2018, and the first document with regard to the appeal was received in January 2019. I think one might infer from this multifaceted litigation that there would have been many other documents passing between the parties during those eight months. And one can also readily infer that a solicitor in practice would have been working on many other matters apart from this one. The point is that it is hardly to be expected that Ms Ness - or anyone else - would have appreciated that a draft affidavit, transmitted many months before to the solicitors for the applicants and "cc'ed" to the solicitors for JWS, conclusively demonstrated that an appeal initiated by those self-same solicitors was futile. Indeed, as I have already indicated by my recitation of the history, the solicitors for the applicants did not draw that inference until very much later.
11. In short, for many reasons, I do not accept that it has been established that Ms Ness ought reasonably to have appreciated that the appeal was futile. And in my opinion it has certainly not been established that she actually appreciated that proposition.
12. Returning to my substantive reasons, fourthly, whether so-called contradictor on the subpoena argument or not, in hard fought adversarial civil proceedings pertaining to alleged professional negligence committed by the previous solicitors of the applicants, even if (to be clear, for the sake of argument only) Ms Ness had drawn the inference, in my opinion it was not incumbent on her to draw it to the attention of the then-legal team of the applicants, or to this Court.
13. Fifthly, even if it be the case that the solicitors and counsel for the applicants did not appreciate, at the time of the dismissal of the appeal and the concomitant making of the order for costs, that there was some basis for resistance of the latter, that is hardly a failing that is to be laid at the feet of JWS or its solicitors. (Yet again, in the circumstances and for obvious reasons, I make no criticism whatsoever of the previous solicitors of the applicants.)
14. Sixthly, as a matter of statutory interpretation, s 76 of the Act calls upon a costs assessor (and thereafter, a review panel, and thereafter, if leave to appeal is granted, this Court) to "determine what is a fair and reasonable amount of costs for the work concerned". In my opinion, Parliament is speaking of an evaluative judgment about quantum, not in any sense the merits of the costs order already made by a court. Any other objective intention underpinning the legislation would be extremely surprising. In my view, it does not permit an assessor, a panel, or me, to denude a costs order of efficacy; even more so, in the case of a costs order made by a court above me in the judicial hierarchy. And yet, shorn of complexity, that is what the submissions of the applicants asked me to do: not to set aside the order explicitly, but to set it at naught implicitly.
15. In short: after having developed, with the assistance of both parties, what I believe to be a detailed understanding of the procedural history pertaining here, for many reasons I do not accept that it was unreasonable for the solicitors for JWS to commence and continue work on resisting the putative appeal of the applicants. For that reason, I reject the submission of the applicants that the costs order made many months ago by the Court of Appeal should be robbed of its force. The appeal based upon those theses must be dismissed.

Costs

1. No contingent submissions about the question of costs were invited by me at the end of a long and demanding hearing. If costs cannot be agreed within 7 days of today by way of signed consent short minutes of order forwarded by email to my associate, they will be determined in Chambers, on the basis of concise written submissions; as needs be, the timetable and other logistics of that process will be notified to the parties by my associate.
2. For their assistance, my initial thought is that the applicants should pay the costs of the successful respondents, on the ordinary basis.

Orders

1. For the preceding reasons, I make the following orders: 1. Leave to appeal granted. 2. Appeal dismissed. 3. Costs reserved.

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: 17 February 2021