Crowe v Elbeaini

For Ms V Hart (in a personal capacity) Yeldham Price O'Brien Lusk File Number(s): 2008/289701 Publication restriction: Nil

Judgment INTRODUCTION 1These proceedings were settled between the plaintiff and the defendant in the latter part of 2012. On 11 December 2012 the matter came before me as Duty Judge for the purposes of entering what were said to be consent orders giving effect to the settlement which had been reached. 2Unfortunately, as events transpired, the matter was not that simple. In the circumstances more fully described below, an issue emerged, and extended over two days, as to the form of one of the orders which I was asked to make. That issue arose as a consequence of an acrimonious dispute between Ms Virginia Hart (who was the plaintiff's solicitor at the time that the matter was settled) on the one hand, and TL Lawyers Pty Limited ("TL") (who had previously acted for the plaintiff), and its sole director Mr Peter Harvey, on the other. 3I eventually made orders giving effect to the settlement of the proceedings on 13 December 2012. However, I reserved the question of costs on that occasion and it is this issue I am now required to determine. For the purposes of that determination, Ms Hart is now separately represented in a personal capacity. I have had the benefit of written submissions from the parties, as well as oral submissions which I heard on 16 May 2013. 4In order to determine the appropriate orders as to costs it is necessary for me to recount parts of the history of the proceedings. That history is taken, in part, from two affidavits, namely: (i)an affidavit of Ms Hart, sworn on 19 April 2013; and (ii)an affidavit of Ms Amanda Underwood, the defendant's solicitor, sworn on 12 December 2012. 5It is also necessary for me to make reference to aspects of the manner in which the matter proceeded before me on 11 and 13 December 2012. I have done so by reference to the transcript of the proceedings on each of those days. THE REPRESENTATION OF THE PLAINTIFF 6Up until about March 2009, the plaintiff was represented in her proceedings against the defendant by Turner Freeman, Solicitors ("Turner Freeman"). During that time Ms Hart practiced as a solicitor with Turner Freeman. 7In or about March 2009, Ms Hart left Turner Freeman and commenced practice as a salaried partner with TL. At that time, the plaintiff's file was transferred to TL from Turner Freeman. An agreement ("the 2009 agreement") was executed between (inter alios) the plaintiff, the partners of Turner Freeman, TL and Mr Harvey, pursuant to which the plaintiff agreed to pay Turner Freeman's costs which had been incurred up to the time of the transfer of the file. 8At or about the end of 2011, Ms Hart left TL and commenced as a sole practitioner. When she did so, an authority was provided to TL to transfer the plaintiff's file to Ms Hart. 9In her affidavit of 19 April 2013 Ms Hart deposed, somewhat obliquely, to the fact that it "became necessary" for her to leave TL so that she was able to "honour (her) obligations to (her) clients". Whatever the precise circumstances of Ms Hart's departure from TL might have been, it is abundantly clear that they gave rise to considerable ill feeling between her and Mr Harvey. Ms Hart's departure culminated in proceedings being instituted by TL against her in the Equity Division of this Court. 10On 7 September 2012, Mr Harvey wrote to the solicitors for the defendant stating (inter alia) the following: "Any judgment or compromise of these proceedings which results in the payment of money to the plaintiff represents the fruits of this firm's work. As such this firm has an equitable lien on such monies to the extent of this firm's unpaid fees". 11Mr Harvey requested the defendant's solicitors update him as to the progress of the proceedings. He also requested that the amount of an invoice (representing TL's professional fees) which had been issued to the plaintiff be paid prior to any money being paid to the plaintiff upon finalisation of the matter. THE SETTLEMENT OF THE PLAINTIFF'S PROCEEDINGS 12On 26 November 2012 Ms Hart accepted the defendant's Offer of Compromise. Lengthy correspondence followed which eventually led to the proceedings coming before me on 11 December. EVENTS SUBSEQUENT TO SETTLEMENT 13On 27 November 2012, the day following Ms Hart's acceptance of the defendant's offer, Mr Harvey wrote to the defendant's solicitor. Having made reference to a conversation with a Mr Baram (who was a principal of the firm acting for the defendant) Mr Harvey enclosed three Tax Invoices, namely: (i)a Tax invoice issued from Turner Freeman dated 12 May 2009 in a sum of $15,898.85 in respect of costs; (ii)a Tax invoice from TL dated 11 April 2012 in a sum of $89,056.66 in respect of costs and disbursements; and (iii)a further Tax Invoice from TL dated 21 August 2012 in a sum of $832.20 in respect of photocopying and faxing. 14Under cover of an email of 28 November 2012, Ms Underwood, who was the solicitor with carriage of the matter on behalf of the defendant, sent a form of Consent Orders to Ms Hart which had been drafted in order to give effect to the settlement which had been reached. Those proposed orders provided for (inter alia) a verdict and judgment in favour of the plaintiff in a sum of $350,000.00, along with the payment, by the defendant, of the plaintiff's costs of the proceedings as agreed or assessed. Paragraph (13) of the proposed orders was in the following terms: "The defendant is to pay any costs as agreed or taxed in accordance with paragraph 2 to the Court, pending resolution of the dispute between Virginia Hart Medical Lawyers and T L Lawyers concerning the costs and disbursements in these proceedings". 15In an email sent later on the same day, Ms Hart said to Ms Underwood: "As previously advised, the defendant is not entitled to the usual terms in this matter. We are currently sorting out the terms of the Judgment (specifically re TL issue) with the court and will let you know what is agreed in due course". 16In a further email sent later on the same day, Ms Hart said to Ms Underwood: "When the terms of the Judgment are sorted out with the court we will let you know". 17Ms Hart's references to "sorting out" the terms of the judgment "with the court" were curious at best. The court file in these proceedings does not indicate that the court was approached for any purpose as at 28 November. Ms Hart's suggestion that she was "currently" engaged in doing so was apt to mislead. Moreover, Ms Hart's suggestion that she was doing so in the defendant's absence, and that she would "let (the defendant) know" when the issue was resolved, raised a number of other issues. One such issue concerned the impropriety of one party, in circumstances such as those prevailing in this case, approaching the court in the absence of the other party, in order to raise issues about the form of orders which might be made. 18In light of the dispute which had arisen between herself and Mr Harvey, Ms Hart had formulated a procedure to be adopted when any litigation in which TL might be entitled to costs was finalised. At the time of such finalisation, Ms Hart would: (i)inform TL of the outcome; (ii)ask TL for a final tax invoice setting out its costs and disbursements; and (iii)ask TL for a letter confirming their consent to all costs and disbursements being paid into court or into an interest bearing joint account. 19This practice had been adopted in at least one previous matter in which TL had agreed to an order that monies owing to them on account of fees be paid into court pending resolution of the dispute with Ms Hart. It was in these circumstances that on 28 November 2012 Ms Hart sent an email to Samantha Morris (who was Mr Harvey's personal assistant at TL) in the following terms: "Further to my previous email in relation to the matter of (named party), I confirm that the same situation has arisen in this matter (save for the fact that court approval is not required in this case). Would you therefore please provide the following TODAY in order that copies may be forwarded to the Court and the defendant's solicitors as a matter of urgency? (a)A tax invoice in the amount of $89,894.86 (as you are aware, I requested final tax invoices on 27 September 2012, however the only tax invoice TL has provided to me in relation to this matter is dated 10 April 2012); and (b)A letter stating that TL Lawyers consents to the defendant paying the amount of $89,894.86 into court or into an interest bearing account once costs have been agreed or assessed, pending resolution of disputes between its disputes with the plaintiff and myself (sic)". 20The order proposed in (b) was apparently based upon an order which had been made (with the consent of TL) the previous matter referred to in [19]. Ms Hart, it seems, assumed (at least initially) that TL would consent to the same course being adopted in the present case. For reasons which remain unexplained, Ms Hart did not receive a response to her email to Ms Morris. 21Unsurprisingly, in light of Ms Hart's earlier indications that she was in the process of approaching the court to "sort out" orders, Ms Underwood took issue with the suggestion that Ms Hart was somehow at liberty to take such a course in the defendant's absence. In an email of 29 November 2012 Ms Underwood made it clear that she expected to be notified in the event that the court was approached for any purpose relating to the proposed orders. This caused Ms Hart to respond in (inter alia) the following terms: "It's the order re TL that's the problem Amanda, and that's what I am trying to sort out. There has been no correspondence with the court specific to this matter". 22Ms Hart's indication in that email that there had in fact been no correspondence with the court was somewhat at odds with what she had previously told Ms Underwood in her emails of 28 November. 23On 3 December 2012 Mr Harvey wrote to the defendant's solicitor stating (inter alia) as follows: "We request that, pursuant to the lien detailed in our letter to you dated 7 September 2012, the relevant amount of $89,886.86 be paid to TL Lawyers on condition that an undertaking is provided to you that TL will remit any monies from this amount found to be owing to Ms Hart, to her". 24The amount of $89,886.86 represented the total fees said to be owed to TL. It did not take into account any amount said to be owing to Turner Freeman. Mr Harvey did not provide a copy of his letter of 3 December to Ms Hart. 25On 10 December Ms Underwood wrote to Ms Hart enclosing a copy of Mr Harvey's letter of 3 December. She suggested that the matter be put before the List Judge so that the issue of the fees owing to TL (as well as those owing to Turner Freeman) could be resolved, and judgment entered. 26In a response sent on the same day, Ms Hart told Ms Underwood that she had contacted the court requesting that the matter be listed. Ms Hart also stated the following: "We note that Paul Baram has been in possession of the letter from TL Lawyers dated 3 December 2012 and had had discussions with, presumably Peter Harvey, prior to that date. Had you or Paul had the courtesy to advise me of this at least a week ago, I would not have spent the past week waiting to receive the requested tax invoice etc. from TL Lawyers and we could have had the matter listed earlier. As previously discussed, there was/is no need for TL Lawyers or Turner Freeman to claim a lien, the costs of both firms being secured by the Tripartite Agreement entered into in 2009, as well as the undertaking provided by me to TL. In circumstances where I have had to claim a lien over part of the monies claimed by TL and in any event, the plaintiff may wish to have TL's costs assessed, nothing can be paid to TL. We therefore propose that the amount claimed by TL be paid into court or an interest-bearing account in the joint names of TL Lawyers and Virginia Hart, pending resolution of disputes between TL Lawyers and Virginia Hart. We have had this order made in another matter". 27It was not correct for Ms Hart to assert that the 2009 agreement secured the costs of both Turner Freeman and TL. Recital B to that agreement recorded the fact that its purpose was to "secure the payment of the former solicitor's unpaid costs..." Under the terms of the agreement, the "former solicitor" was Turner Freeman, not TL. 28Later on the same day Ms Underwood wrote to Ms Hart enclosing a further form of consent orders. Paragraph (2) of those orders made provision for the defendant to pay the plaintiff's costs. Paragraph (3) was in the following terms: "The defendant will deduct $89,888.86 ("the TL fees") from the Settlement Sum and pay the TL fees to [ ]". 29In her covering email, Ms Underwood observed: "It is our view that this issue should be determined by the court. We propose to advise the court that TL Lawyers have requested that the TL fees by paid to that firm on the condition that an undertaking is provided to us that TL Lawyers will remit any monies from this amount found to be owing to you directly to you. Our position is that it is otherwise a matter between you and TL Lawyers". THE PROCEEDINGS ON 11 DECEMBER 2012 30The matter was referred to me by the Registrar on 11 December 2012. On that occasion, Ms Hart appeared for the plaintiff and Mr Evans of counsel appeared for the defendant. 31When the matter was called Miss Toshack, solicitor, announced her appearance on behalf of TL and indicated that TL wished to intervene in the proceedings. No notice of motion had been filed by TL seeking any such order. 32It was immediately apparent that no agreement had been reached regarding the form of the orders I was being asked to make. Mr Evans informed me that he had seen a draft of proposed orders but had formed the view that they did not sufficiently protect the defendant's position. When I asked Ms Toshack whether it was sufficient, for the purposes of TL, that the monies be paid into a joint account she responded: "No, I would not be asking for a joint account. I would be seeking that the money be paid into court or alternatively into a trust account at TL Lawyers with an undertaking that the money not be touched until there was a settlement between Ms Hart and TL Lawyers". 33The position of TL, as articulated in those terms by Ms Toshack, was different to that which Mr Harvey had set out in his letter of 3 December to Ms Underwood. 34Ms Toshack emphasised that TL would object to any order pursuant to which the monies were to be paid into an account in the names of Ms Hart and Mr Harvey. Why this position was taken was not explained at the time. Further, in circumstances where there had been correspondence between the various parties as I have set out, the failure on the part of TL to give notice, either to Ms Hart or to Ms Underwood, of an intention to intervene was also not explained. 35I then gave all of those involved, including Ms Toshack on behalf of TL, an opportunity to try and resolve the matter by consent. After a short time, I was informed that a resolution was not possible on terms with which all parties agreed. 36I expressed the view at that time that if TL wished to intervene, it would be necessary to file a notice of motion seeking the necessary orders. It was inappropriate for TL to attend and seek to intervene in the absence of proper notice having been given to the parties to the proceedings, and without the applicable procedural formalities having been observed. 37It was evident that for as long as the issue between Ms Hart and TL remained unresolved, it was likely that the plaintiff would be deprived of payment of the settlement monies. That circumstance, had it been allowed to continue for any appreciable period, would have operated unfairly to the plaintiff, particularly in circumstances where the dispute which had arisen was not of her making. For this reason, and in circumstances where the matter had come before me only days before the conclusion of the 2012 law term, I made a number of orders which brought the matter back before me on 13 December 2012. 38When I did so Ms Hart asked that she be able to "confirm" that date at some later time, as she wished to brief counsel in the matter. I made the observation at that time that Ms Hart had ample opportunity to brief counsel if that was what she wished to do. THE NOTICE OF MOTION FILED BY TL 39Pursuant to the orders made on 11 December, a notice of motion was subsequently filed on behalf of TL supported by an affidavit of Mr Harvey. That motion sought the following orders: 1. TL Lawyers Pty Ltd be granted leave to intervene in the proceedings pursuant to Rule 6.24(1) of the Uniform Civil Procedure Rules 2005. 2. Pursuant to Rule 21.7(1) of the Uniform Civil Procedure Rules 2005, TL Lawyers Pty Ltd be granted leave to tender a document produced by Virginia Hart in answer to a Notice to Produce in proceedings 2012/8190 in the Equity Division of this honourable Court, being a Conditional Costs Agreement between Ms Hart and the plaintiff in respect of these proceedings. 3. The defendant to pay the plaintiff's costs of the principal proceedings as agreed or assessed, with the defendant to pay the following: (a) TL Lawyers Pty Ltd $89,888.86; and (b) Turner Freeman $15,898.85 TOTAL: $105,787.71 4. The monies payable to TL Lawyers Pty Ltd and Turner Freeman be paid to those firms directly. 5. Any other order the Court deems fit. 40The affidavit of Mr Harvey which was relied upon in support of the notice of motion was essentially a formal one. It set out aspects of the history of the matter, and it annexed relevant correspondence. Its contents were otherwise unremarkable. 41It will be apparent that the orders sought in the Notice of Motion reflected the adoption, by TL, of a position which was not only different to that set out in Mr Harvey's letter of 3 December, but also different to that which had been set out by Ms Toshack when the matter was before me on 11 December. THE PROCEEDINGS ON 13 DECEMBER 2012 42When the matter came before me on 13 December 2012, Ms Rees SC appeared for TL, Ms Hart appeared for the plaintiff, and Mr Evans appeared for the defendant. In light of the various submissions which have been made that costs should be ordered against Ms Hart personally, it is necessary for me to make reference to a number of aspects of Ms Hart's conduct of the proceedings on that day. 43At the commencement of the proceedings Ms Hart indicated that she was "unwell", and "incapable of running the matter". She also informed me that she had been advised by Senior Counsel that the matter "should be stood over to when he is available". I determined, in all of the circumstances, that the matter should proceed. 44Ms Rees then sought to read the affidavit of Mr Harvey, the contents of which, as I have said, were unremarkable. Upon seeking to do so, Ms Hart objected to Mr Harvey's affidavit. The transcript then records the following exchange (commencing at T25 L27): "Hart: I have foreshadowed that this is a matter which (Senior Counsel) has to deal with". HIS HONOUR: As I told you earlier in the week, this is a matter which would have to be dealt with later this week. I made the observation and I will make it again, there are more than 1800 people at the Bar and other people should be available if you wish to brief them. I am going to stand the matter down. Ms Rees would you let me know when Mr Harvey is available? Hart: I am not in a position to deal with the matter your Honour. My friend was of the view that the motion was not necessary. If precedent is raised here it would be an enormous appeal. I would ask that the money be paid into court." 45I then stood the matter down for a short period. 46When the matter resumed, Ms Rees informed me that Mr Harvey was in Newcastle but that arrangements had been made for him to drive to Sydney. However she then informed me that, such arrangements having been made, Ms Hart had indicated that Mr Harvey was no longer required and that the previous objection by Ms Hart to Mr Harvey's affidavit had been withdrawn. 47When I enquired of Ms Hart as to whether this was, in fact, the position, she said: "I have contacted (Senior Counsel). He cannot be present this afternoon. I am advised not to cross-examine Mr Harvey myself so he is not required". 48The hearing of TL's motion then proceeded. 49Ms Rees submitted that as a matter of discretion, I should make an order pursuant to r 6.24 of the Uniform Civil Procedure Rules allowing TL to intervene. She further submitted that an order that an amount equal to the costs of TL be paid into court was not appropriate in circumstances where TL was asserting an equitable lien. This, she argued, was because payment into court did not operate to discharge the lien, in circumstances where a discharge was necessary in order to protect the defendant from having any ongoing liability to TL. 50Ms Rees submitted that in terms of the issue arising from the lien asserted by TL, I should make an order allowing the entirety of the monies said to be owing to TL, as well as the entirety of the monies said to be owing to Turner Freeman, to be paid to TL, upon an undertaking being given by Mr Harvey to: (i)repay to the plaintiff any monies determined to be owing to the plaintiff following a costs assessment; and (ii)to repay to Ms Hart any monies determined to be owing to her following the resolution of the proceedings conducted in the Equity Division. 51Those orders outlined by Ms Rees represented yet a further shift in TL's position from the respective positions which had been adopted in Mr Harvey's letter of 3 December, in the proceedings on 11 December, and in the notice of motion. 52Mr Evans, who appeared for the defendant, supported the submissions of Ms Rees. He pointed out, in particular, that extinguishing the lien was of particular significance from the point of view of his client. 53Ms Hart was then given an opportunity to address the court. She again asserted that she was at a disadvantage because her preferred counsel was not available. She proceeded to make various references to making an application for security for costs, to filing a "strike out motion", and to filing a cross claim, all of which were apparently references to the proceedings in the Equity Division between herself and TL. In doing so, she made reference to what were said to be the personal consequences of her departure from TL. All of those matters were largely, if not wholly, irrelevant to the issue I was required to determine. 54Importantly however, in the course of making these references, Ms Hart said (commencing at T 12 line 29): "The issue in dispute is in the Equity proceedings and I would submit the funds be paid into court on the basis of that issue in dispute. There is no issue in dispute here between the parties. This is simply trying to get judgment entered and in terms of the - the sums are not determined that is why the orders are - it is very clearly - yes, the plaintiff accepts that the amounts prima facie, the amounts claimed by Turner Freeman and TL Lawyers are payable to them subject to her statutory right to assessment, and it appears others' costs are going to be assessed, not only party/party but solicitor/client and not in terms of the - so, the amounts are not determined and even the validity of the lien has not yet been tested and it is not correct to say, yes, the plaintiff is seeking to deny me the 35% of fees to which I am entitled" (my emphasis). 55Having expressly accepted that the amounts in question were payable to Turner Freeman and TL respectively, Ms Hart objected to any of the funds being paid to Mr Harvey, and submitted that it was "not appropriate" to accept any undertaking from him in the terms which had been suggested by Ms Rees. When I enquired of Ms Hart whether, in making that submission, she was suggesting that such an undertaking, if given, would not be honoured, she responded by saying: "It is not appropriate for me to suggest that". 56However a short time later Ms Hart suggested that very thing, saying (commencing at T15 L47): "First of all, it looks like there is going to be a party/party assessment first and, as I say, the proceedings may well be dragged out very shortly and the reason for my request for security for costs is that TL Lawyers is not in a good financial position. Now he has much more to use this money, to have it to use, and may not be in a position to repay it. As I say, it is all too uncertain". 57Ms Hart's reference to "he" was obviously a reference to Mr Harvey. Her reference to a "request for security for costs" was seemingly a reference to an application she had made (or was proposing to make) in the Equity Division proceedings. The reference to "this money", and the comments which followed, can only be construed as a submission by Ms Hart that there was a danger that if the orders sought by TL were granted, the funds would be dissipated, and Mr Harvey may not honour the undertaking he was prepared to give were he called upon to do so. 58By the conclusion of the proceedings on 13 December, and despite the time which had been taken up in dealing with the matter, the issue between TL and Ms Hart was a narrow one. Ms Hart expressly conceded, albeit at a very late stage, that the monies in question were payable to TL and Turner Freeman respectively. The only question was whether it was appropriate for those monies to be paid to Mr Harvey on certain undertakings, or whether it was appropriate to deal with such monies in some other way. That issue did not justify the time or the costs which were expended over two days in bringing it before the court. THE ORDERS OF 13 DECEMBER 2012 59Ultimately, for reasons given at the time, I made a number of orders (inter alia) giving effect to the settlement of the proceedings and the payment of amounts representing the costs of TL and Turner Freeman to be paid to Mr Harvey. I reserved the question of costs and made orders giving the parties the opportunity to provide written submissions in relation to that question. Subsequently, on 16 May 2013, I heard oral submissions. 60Between making the orders on 13 December 2012, and hearing oral submissions on costs on 16 May 2013, Ms Hart obtained representation in her own right. I was also informed that Ms Hart had indemnified the plaintiff in respect of any order for costs I might make against the plaintiff.

The submissions on behalf of Ms Hart 61Mr Lloyd of counsel, who appeared for Ms Hart, opposed the making of a costs order against Ms Hart personally. He submitted that in the circumstances, the only appropriate order was that TL pay the costs of all parties of its notice of motion. 62Mr Lloyd submitted that there were two well settled principles which were applicable in determining whether or not a personal costs order should be made against Ms Hart. The first, was that the jurisdiction to make such an order was only to be exercised with care and discretion, only in clear cases, and only when the conduct of court proceedings by a legal practitioner was plainly unjustifiable (see Ridehalgh v Horsfield [1994] Ch 205; Lemoto v Able Technical Pty Limited [2005] NSWCA 153; (2005) 63 NSWLR 300; Kelly v Jowett [2009] NSWCA 278). The second, was that an applicant who seeks a personal costs order must demonstrate that the waste of costs was caused by the offending conduct of the legal practitioner (see Kelly v Jowett (supra)). 63In support of the submission that the making of a costs order against Ms Hart was not appropriate, Mr Lloyd firstly argued that although aspects of Ms Hart's conduct before me on 11 and 13 December 2012 were regrettable, she had tendered an apology to the court. Whilst the tendering of an apology, and its terms, are not determinative of the question I have to decide, it should be noted that Ms Hart's apology was limited to her failure to brief counsel to argue the matter on 13 December. It said nothing about those other aspects of her conduct to which I have referred. 64Mr Lloyd further submitted that properly viewed, the costs which were incurred in the proceedings on 11 and 13 December were attributable to the decision of TL to intervene, in circumstances where TL (or perhaps more specifically Mr Harvey) had failed to give any proper consideration to the precise relief which was sought. 65In this regard, Mr Lloyd submitted that there had been a lack of care and precision on the part of Mr Harvey in formulating the position of TL prior to 13 December 2012. He submitted that a comparison between Mr Harvey's letter of 3 December 2012, the submissions made to the court on 11 December, the relief sought in the notice of motion filed on 12 December, and then finally the relief sought when the matter came back before me on 13 December, represented continuous and material changes in TL's position. He submitted that in these circumstances, TL had not succeeded in its motion, and that the true cause of any wasted costs was the failure on the part of Mr Harvey to give proper consideration to what orders were actually sought by TL. 66Finally, Mr Lloyd also relied upon other aspects of the conduct of TL in the proceedings as being causative of the wasted costs. These included Mr Harvey's failure to respond to Ms Hart's email of 28 November, and his failure to notify the parties of TL's intention to seek to intervene in the proceedings. The submissions on behalf of T L 67The initial submission of TL was that the defendant's costs from 26 November 2012 be paid by the plaintiff or by Ms Hart. In the alternative, TL submitted that: (iii)the defendant's costs from 26 November 2012 to 12 December 2012 inclusive be paid by the plaintiff or by Ms Hart; and (iv)that the defendant's costs of the hearing of 13 December 2012 be paid, as to one third by TL and as to two thirds by the plaintiff / Ms Hart. 68However, in submissions in reply, TL altered its earlier position and submitted that in view of (inter alia) the fact that Ms Hart had indemnified the plaintiff, the appropriate orders were: (i)that the defendant's costs from 26 November 2012 be paid by Ms Hart; and (ii)that TL's costs be paid by Ms Hart. 69In advancing this position, senior counsel for TL relied upon a number of aspects of Ms Hart's conduct when the matter was before me on 11 and 13 December. Senior counsel submitted, in particular, that notwithstanding her acceptance of the fact that both TL and Turner Freeman were entitled to be paid the respective amounts in question, Ms Hart had in fact "opposed ... at every turn" the making of any order which gave effect to such acceptance. Senior counsel pointed out that Ms Hart's opposition to the making of the orders sought by TL had extended to making allegations, without any evidentiary foundation, about TL's financial viability, and the likelihood of Mr Harvey complying with the undertakings he had offered. Senior Counsel also pointed to the circumstances surrounding Ms Hart's objection to the affidavit of Mr Harvey, and her subsequent withdrawal of that objection. The effect of these submissions was that I should conclude that it was Ms Hart's conduct that was the effective cause of the wasted costs. 70Senior counsel also submitted that I would conclude on the evidence that Ms Hart's objection to the making of the orders sought had not been motivated by a desire to protect the plaintiff's interests, but by an attempt to protect her position in terms of the litigation between herself and TL. It was submitted, in particular, that I would conclude that in opposing the orders sought, Ms Hart was desirous of protecting a "pool" of money from she could draw, in the event that she secured a judgment in her favour in the proceedings brought against her by TL. 71Senior counsel also submitted that in acting as she did, Ms Hart had exposed the plaintiff to an adverse costs order by litigating an issue in which the plaintiff had not interest. It was submitted that Ms Hart ought to have realised that in doing so, she had a clear conflict of interest and that in these circumstances, she should not have proceeded as she did.

The submissions of the defendant 72The defendant submitted that whatever the issue might have been between TL and Ms Hart, it had nothing to do with the defendant, was not of his making, and was wholly unrelated to the claim which had been brought against him by the plaintiff. It was submitted that in these circumstances, and where matters in dispute between Ms Hart and TL were already the subject of proceedings in the Equity Division of this Court, the issue which had arisen between them ought to have been litigated in those proceedings. 73It was submitted on behalf of the defendant that all of the costs he had incurred following the acceptance of the Offer of Compromise represented costs which were wasted as a consequence of Ms Hart's conduct, and/or her failure to comply with her duty to the court pursuant to s. 56(3) of the Civil Procedure Act 2005 ("the CPA"). In this regard, the solicitor for the defendant referred me to the decisions in Lemoto (supra) along with Harris v Villa Care Pty Limited [2012] NSWSC 452 and NA & J Investments Pty Limited v Minister administering the Water Management Act 2000 (No 2) [2011] NSWLEC 98. 74In these circumstances the defendant submitted that I should make orders (inter alia) requiring Ms hart to indemnify the defendant, pursuant to s. 99(2)(c) of the CPA, in relation to the additional costs which had been incurred. It was further submitted that any costs should be payable on an indemnity basis.

CONSIDERATION AND CONCLUSION The relevant statutory provisions 75Having regard to the submissions that an order for the payment of costs should be made personally against Ms Hart, it is necessary for me to make reference to s. 99 of the CPA which is in (inter alia) 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. 76Section 99 gives the court power to order a legal practitioner to bear costs which have been incurred (inter alia) without reasonable cause, in circumstances for which that legal practitioner is responsible. In the present case, they affect only the position of Ms Hart. Whilst Mr Harvey is also a legal practitioner, and whilst submissions have been made that TL should bear the costs, TL intervened in the proceedings. Any order requiring it to pay costs would be one made pursuant to the court's power in s. 98 of the CPA. 77In Whyked Pty Limited v Yahoo!7 Pty Limited [2008] NSWSC 477 McDougall J (at [12]), whilst noting that the general law provided valuable guidance to the exercise of discretion to award costs against a legal practitioner, emphasised that the discretion to do so must be exercised by reference to the statutory formulation of the power. In particular his Honour said: "..... it is necessary to bear in mind that the power to order costs against a legal practitioner is that now found in s. 99 of the Civil Procedure Act, and to be exercised in accordance with the terms of that section. There is a danger in substituting analyses of, or glosses upon, the section for the language employed in it". 78Subsequently in Treadwell v Hickey [2010] NSWSC 1119 Barrett J (as his Honour then was) noted (at [29]) that the central concepts found in s. 99(1), namely those of "neglect", "incompetence", "misconduct", "improperly" and "without reasonable cause", were not identified in the CPA, be it within s. 99 or otherwise. However, his Honour pointed out (in [31]) that the decision in Ridehalgh (supra) concerned aspects of the construction of provisions contained in the Supreme Court Act (UK) 1981 which generally corresponded with those of s. 99. 79In Ridehalgh (supra) Bingham JR, Rose LJ and Waite LJ, in considering the meaning to be given to (inter alia) "unreasonable" said (at 223 and following): "Unreasonable also means what it has been understood to mean in this context for at least half a century. The expression aptly describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case, and it makes no difference that the conduct is the product of excessive zeal and not improper motive. But conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting on a practitioner's judgment, but it is not unreasonable". 80In Kelly v Jowett [2009] NSWCA 278 McColl JA (Beazley JA and Barrett JA agreeing) observed (commencing at [57]) that the court's power to make costs orders in respect of a legal practitioner has always been exercised to ensure legal practitioners observe their duties to the court and to the administration of justice, so as to ensure (among other obligations) the expeditious and efficient conduct of litigation. Her Honour continued (commencing at [60]): "The jurisdiction to make costs orders against legal practitioners referred to in s 99 .... now commonly referred to as the "wasted costs" jurisdiction, must be exercised "with care and discretion and only in clear cases": Lemoto v Able Technical Pty Ltd & 2 Ors [2005] NSWCA 153; (2005) 63 NSWLR 300 (at 92) per McColl JA (Hodgson and Ipp JJA agreeing). In exercising the jurisdiction, however, the Court takes into consideration the public interest reflected in the legislative provisions to which I have referred, that litigants should not be financially prejudiced by the unjustifiable conduct of litigation by their or their opponent's lawyers: Ridehalgh v Horsfield [1994] Ch 205. It is the public interest in the administration of justice which is the source of duties that lawyers owe to the court: Rondel v Worsley [1969] 1 AC 191 (at 227) per Lord Morris. [61] The wasted costs jurisdiction is based on the court's right and duty to supervise the conduct of its solicitors: Myers v Elman (at 302) per Lord Atkin, (at 318 - 319) per Lord Wright, (at 334 - 336) per Lord Porter. The underlying principle is that the court has a right and a duty to supervise the conduct of its solicitors, and visit with penalties any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause in which the solicitor is engaged professionally. The jurisdiction is exercised where it is demonstrated that the solicitor has failed to fulfil his or her duty to the Court and to realise his or her duty to aid in promoting in his own sphere the cause of justice. The order is for payment of costs thrown away or lost because of the conduct complained of and is frequently exercised in order to compensate the opposite party in the action: Myers v Elman (at 319) per Lord Wright; see also Sydney South West Area Health Service v Stamoulis [2009] NSWCA 153 (at [204]) per Ipp JA (Beazley and Giles JJA relevantly agreeing). [62] The history of the wasted costs jurisdiction was discussed in Lemoto (at [83] ff). As can be seen from that discussion many of the principles were explained in the seminal decision of Myers v Elman which makes it clear that the object of the wasted costs jurisdiction is to protect the client who has suffered and to indemnify the party who has been injured. Misconduct or default or negligence in the course of the proceedings is in some cases sufficient to justify an order: Myers v Elman (at 289) per Viscount Maugham (Lord Russell of Killowen (at 307) and Lord Porter (at 334) agreeing)." 81In her earlier decision in Lemoto (supra) her Honour had noted (at [92]) that the jurisdiction to order a legal practitioner to pay the costs of legal proceedings in respect of which he or she provided legal services must be exercised "with care and discretion and only in clear cases". Her Honour also observed that a Judge who is considering making a wasted costs order arising out of an advocate's conduct of court proceedings must make full allowance for the exigencies of acting in that environment and that it is only when, with all allowances made, that a legal practitioner's conduct of court proceedings is quite plainly unjustifiable that it can be appropriate to make a wasted costs order. That latter observation had previously been made in Ridehalgh (supra) (at 229).

The position of Ms Hart 82There is, as I have noted, evidence that on 28 November 2012 Ms Hart contacted Mr Harvey's personal assistant, Ms Morris, in an effort to resolve the matter. I accept that she received no reply to her correspondence from Mr Harvey, an issue to which I have made further reference to below. 83However in all of the circumstances, I take the view that a number of aspects of Ms Hart's conduct which followed were both unreasonable and unjustifiable, and were a cause, albeit not the sole cause, of unnecessary costs being incurred by the defendant. 84Having had no response from Mr Harvey, it is not exactly clear what Ms Hart did to try and resolve the impasse which obviously existed. Her various assertions to Ms Underwood that she was "sorting it out with the court" were, as I have already observed, apt to mislead. There is no evidence that she had any direct correspondence with Mr Harvey, following her email to Ms Morris, in an effort to try and resolve the matter. 85Further, particular aspects of Ms Hart's conduct when the matter was before me, particularly on 13 December, were in my view clearly unreasonable in the sense described in Ridehalgh (supra). They included, in particular, the circumstances in which Ms Hart initially objected to the affidavit of Mr Harvey, only to withdraw that objection after arrangements had been put in place for Mr Harvey to travel to Sydney from Newcastle for the purposes of being cross-examined. Only a matter of minutes after her withdrawal of that objection, Ms Hart informed me that she accepted that the amounts in question were (subject to any costs assessment which might be carried out) payable to each of Turner Freeman and TL. If that was her position, there was never any need to cross examine Mr Harvey. In my view, her conduct in objecting to his affidavit was unjustified. 86Moreover, if it was Ms Hart's position on 13 December that she accepted that the amounts in question were properly payable to Turner Freeman and Mr Harvey, that must also have been her position when the matter was before me on 11 December. There is nothing in the evidence before me which would have caused her position to change in that regard within that two day period. Had Ms Hart properly communicated what was ultimately her position at the outset of proceedings on 11 December, or even at the outset of the proceedings on 13 December, rather than wasting the court's time taking unwarranted objections to the evidence, a considerable deal of time and costs would, in all likelihood, have been saved. 87Further, and notwithstanding her express acceptance that the funds were properly payable to Turner Freeman and TL, Ms Hart continued to oppose the making of the orders which were sought by TL. Her opposition was twofold. Firstly, Ms Hart questioned the financial viability of TL, along with the ability (and perhaps even the willingness) of Mr Harvey to honour the undertaking he was prepared to give the court. Those were allegations of the utmost seriousness. They were made in the absence of any evidence whatsoever to support them. 88Secondly, Ms Hart opposed the making of the orders by reference to a cross-claim which she indicated she had filed, or proposed to file, in the proceedings in the Equity Division, seeking damages from both Turner Freeman and TL. That, in my view, was irrelevant to the issue I was required to determine. 89Although there may be a deal of suspicion about the matter, I am not able to reach the conclusion that in acting as she did Ms Hart was attempting, as counsel for TL suggested, to preserve a "pool" of funds upon which she could draw in the event that a judgment was entered in her favour in the Equity Division proceedings. What can be said however, is that having accepted that the monies in question were properly payable to Turner Freeman and TL, and in circumstances where undertakings had been proffered by Mr Harvey regarding the repayment of any money which was found to be owing to her, Ms Hart continued to oppose the making of the orders sought by TL in the absence of any proper foundation. 90In all of these circumstances, and for these reasons, I regard Ms Hart's conduct as unreasonable, and I am satisfied that it was a cause of costs being wasted, and unnecessarily incurred by the defendant.

The position of TL Lawyers 91TL became aware of the acceptance of the defendant's Offer of Compromise as early as 27 November, 2012. In the face of correspondence from Ms Hart seeking (inter alia) documentation in an effort to finalise the matter, neither Mr Harvey, nor anyone on his behalf, responded to her. Rather, correspondence was entered into between Mr Harvey and the defendant's solicitor. The complete failure to respond to Ms Hart's correspondence, apart from being discourteous, was hardly conducive to resolving the issue which had arisen. 92Further, as a matter of common sense, it must have been apparent to Mr Harvey that the proposal set out in his letter of 3 December 2012 could only be put into effect either: (i)with the consent of Ms Hart; or (ii)by an order of the court. 93On the evidence before me, Mr Harvey did not, at any stage, seek Ms Hart's consent. It may well be, given the nature of the dispute between them, that he thought that such consent would not be forthcoming. If that was the case, it follows that as early as 3 December 2012, i.e. more than one week before the matter came before me, Mr Harvey must have realised that the only way of obtaining the order he then sought was to make application to the court. 94Against that background, it was wholly inappropriate for TL, in the absence of filing a motion or otherwise giving notice, to attend before the court on 11 December 2012 and seek to intervene. Proper consideration should have been given to TL's position well before that time, and a notice of motion should have been filed. Had the matter been approached in that way, there is at least some prospect that the issue which emerged between TL and Ms Hart would have been narrowed and resolved far earlier, and far more quickly, than proved to be the case. 95I also accept the submission advanced by Mr Lloyd that between the time of Mr Harvey's letter of 3 December, and the time at which the matter came before me on 13 December, there had been several shifts in TL's stated position. That, in my view, reflected a failure to give proper consideration to TL's position, and the orders which were sought. 96For all of these reasons, it is my view that the conduct of TL was also a cause of what eventuated, and a cause of costs being wasted and unnecessarily incurred by the defendant.

CONCLUSION 97For the reasons outlined, I have come to the view that the defendant's costs should be borne equally by Ms Hart and TL. 98The solicitor for the defendant submitted that any costs should be ordered to be paid on an indemnity basis. Notwithstanding the matters to which I have referred relating to the conduct of Ms Hart and TL, I am not satisfied that such an order is warranted. 99Departure from the settled practice of awarding costs on the ordinary basis is necessarily discretionary. Beyond the need for a special or unusual feature in the case, no fixed rule can be laid down as to the circumstances which might justify the making of such an order (see Harrison and anor v Schipp; Cameron and anor. v Schipp [2001] NSWCA 13 at [139]. 100The categories of case in which an order for indemnity costs can be made are not rigid. It is necessary to consider each case on its own facts, having regard to the general principle that any order for costs should usually be made on the ordinary basis unless there is some special circumstance to justify the making of a different order (see Colgate Palmolive Co and anor v Cussons Pty Limited (1993) 118 ALR 248 at 256). 101Despite the shortcomings in the conduct of the matter on the part of both Ms Hart and TL, I am not satisfied that an order that the defendant's costs be payable on an indemnity basis is appropriate.

ORDERS 102I make the following orders: (1)The defendant is to pay the plaintiff's costs of the proceedings up to and including 26 November 2012, as agreed or assessed. (2)Pursuant to s. 99(2)(c) of the Civil Procedure Act 2005, Ms Virginia Hart is to indemnify the defendant as to one half of the defendant's costs of the proceedings after 26 November 2012, as agreed or assessed. (3)TL Lawyers Pty Limited is to pay one half of the costs of the defendant's costs of the proceedings after 26 November 2012, as agreed or assessed. (4)TL Lawyers Pty Limited and Ms Virginia Hart are otherwise to pay their own costs.

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 September 2013