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[2013] VSC 86
Supreme Court of Victoria
2013-03-08
DERHAM AsJ
Original judgment source is linked above.
PRACTICE AND PROCEDURE - COSTS - Application for an order that plaintiff's solicitors pay first defendant costs thrown away by reason of plaintiff raising and abandoning claim- application made under s 29 of the Civil Procedure Act 2010 and Supreme Court (Civil Procedure) Rules Ch 1 r 63.23 and the inherent jurisdiction - whether no proper basis for claim - whether plaintiff breached overarching obligations - whether no or substantially no prospects of success and unreasonable - no ulterior purpose - White Industries (Qld) Pty Ltd v Flower & Hart [1998] FCA 806- no serious dereliction of duty or serious misconduct - plaintiff's solicitors duty to advance its clients interests by all proper means.
EVIDENCE - loss of client legal privilege - s 125 Evidence Act 2010 (Vic) - whether communications made in furtherance of a deliberate abuse of power - authority to enter land - whether reasonable for plaintiff to request evidence of permission for first defendant's to enter land.
1 This decision concerns an application by the first defendant ("SPI") for an order that Maurice Blackburn Lawyers ("MBL"), alternatively the plaintiff, pay SPI's costs thrown away by reason of MBL giving up an alleged basis for contending that SPI had lost client legal privilege ("privilege") in certain discovered documents ("disputed documents").
2 By summons dated 7 December 2012, the plaintiff applied for an order that SPI produce the disputed documents for inspection. SPI objected to producing those documents on the ground of privilege. Put shortly, the submissions in that application concerned the loss of privilege, or waiver of privilege, either on grounds of 'inconsistency' between maintenance of the privilege and reliance by SPI on expert reports of Mr John Vazey, or because of what might conveniently be called 'associated materials waiver'.
3 On 13 February 2013 I handed down my reasons for decision, rejecting the application: Matthews v SPI Electricity Pty Ltd & Ors [2013] VSC 33.
4 The disputed documents were alleged by the plaintiff to concern the design, setup and conduct of the Valley Span field test which was (and is) set up between poles 38 and 39 beneath the Single Wire Earth Return ("SWER") line, which is part of the system known as the Pentadeen Spur SWER system. It was this powerline, called a conductor, strung between poles 38 and 39 of the SWER line (the "Valley Span") that is alleged to have failed and to have started the fire known as the Kilmore East-Kinglake bushfire that started on 7 February 2009 in Kilmore East ("KEK bushfire").
5 The Valley Span test, which has been reported on by SPI's independent expert, Mr John Vazey, involved SPI stringing three test conductors between poles 38 and 39 of the Valley Span, about three metres below the original conductor, and measuring stresses generated on the test conductors near the conductor fitting where the failure occurred on the original conductor. The test was intended to replicate and measure the conditions that existed on the original conductor.
6 In the lead up to the hearing of the plaintiff's application on 22 January 2013, MBL, representing the plaintiff, had requested that Herbert Smith Freehills ("HSF"), representing SPI, produce the landowners' authorisations for SPI to conduct work on the Valley Span, in setting up and conducting the tests, for the purpose of these proceedings.[1] The purpose of the requests was summarised in a letter from MBL to HSF dated 23 November 2012 (which also dealt with the basis and scope of the waiver of privilege argument) in the following terms:
Notwithstanding the discussion of issues of waiver, it is not conceded that all relevant documents concerning the Valley Span test can be regarded as properly privileged.
We have previously asked your client to produce permits pursuant to which it entered the Beal and Sullivan properties to set up the test. The request was made on several occasions, but no documents were produced.
As you will be aware, your client is entitled to access its assets on a customer's premises only for the purposes of supply, metering or billing of electricity (see 3.3.2 of the Electricity Distribution Code). Setting up infrastructure to conduct a test to support its position in litigation is not one of such purposes.
In the absence of evidence of permission to access the properties, it may be inferred that your client entered the relevant properties without appropriate permission. Such action would be in breach of its statutory/regulatory obligations concerning right of access and would constitute an act of trespass. In such circumstances, no privilege may attach to documents concerning the Valley Span test.
7 Clause 3.3.2 of the Electricity Distribution Code[2] ("Code") provides:
3.3.2 Provided official identification is produced by the distributor's representatives on request, a customer must provide to the distributor's representatives at all times convenient and unhindered access:
(a) to the distributor's equipment for any purposes associated with the supply, metering or billing of electricity; and
(b) to the customer's electrical installation for the purposes of:
8 The contention by the plaintiff and MBL in the correspondence that clause 3.3.2 of the Code did not give SPI the right of access to customers' premises for the purpose of conducting the tests to support its position in this litigation also involves the definition of "supply", which is defined in the Code to mean the delivery of electricity.[3]
9 As the above extract from the MBL letter of 23 November 2012 indicates, from 17 April 2012, MBL had made repeated requests to HSF to produce documents evidencing the authority of SPI to enter land so as to conduct the Valley Span test. The responses received were consistently that all access to poles 38 and 39 had been conducted with the consent of the landowners.
10 This led MBL, on instructions from the relevant landowners, to make further requests for details of the consent given.[4]
11 By the letter of 23 November 2012, and by letters dated 9 January 2013[5] and 11 January 2013[6] MBL informed SPI that, in the absence of an appropriate response to MBL's requests, the plaintiff proposed to submit at the hearing of the summons that no privilege could attach to the disputed documents. This was because SPI's entries onto land for the purposes of the Valley Span test were unlawful and consequently no privilege could exist in any documents pertaining to the test (I shall call this the "trespass argument").
12 HSF responded to the letter of 9 January 2013 by letter dated 11 January 2013. In that letter HSF asked for an explanation of the character of the unlawful conduct, the facts upon which the allegation is based, and the legal principles and authorities pursuant to which it is alleged the unlawful conduct precludes SPI from asserting privilege in relation to the dispute documents.
13 MBL's response, on 11 January 2013, was to repeat that MBL had instructions from the owners of the Sullivan property (on which pole 38 was apparently erected) to seek evidence of permission to enter the land for the purposes of the Valley Span test, "which you have asserted your client has". Otherwise the response was to decline to enter into a hypothetical debate "in circumstances where the issue can be resolved by your client simply producing evidence of permission that you have asserted exists".[7]
14 On 16 January 2013, HSF wrote to MBL pointing out that-
(a) no evidence had been filed in support of any allegation that SPI had engaged in unlawful conduct and no proper basis for the allegation had been given in the correspondence;
(b) HSF had advised MBL of its instructions that the relevant access had been had with the consent of the landowners;
(c) That it is incumbent upon MBL to identify an evidential basis for its position, in the absence of which - in light of HSF's instructions as to the authority of the landowners for SPI to enter the land - it is not open to MBL to assert that an inference may be drawn of unlawfulness;
(d) The ongoing failure of the plaintiff to provide some substantiation for the allegation of unlawfulness is inconsistent with her obligations under the Civil Procedure Act 2010 ("Civil Procedure Act"), particularly ss 20, 22 and 23;
(e) If the allegation of unlawfulness is not withdrawn by noon the next day (17 January), "we wish to test the foundation for the assertion", by cross-examination of Mr Walsh on his affidavit and the production of documents concerning the allegation by notice to produce;
(f) If it becomes apparent that MBL did not have an adequate foundation upon which to allege unlawful conduct by SPI, the latter may seek an order that the costs of the application be paid by the plaintiff or MBL.
15 On 17 January 2013, MBL informed HSF that the plaintiff's summons to be heard on 22 January 2013 would proceed only on the basis of the waiver issue.[8] This meant that the plaintiff no longer proposed, and in fact did not, raise the trespass argument at the hearing of the summons.
16 Prior to receiving notice of this change of position, SPI alleges it incurred costs to prepare its factual and legal defence of the allegation that it had engaged in unlawful conduct and that privilege was thereby lost in the disputed documents.
17 At the hearing of the plaintiff's summons, there was no application by SPI to cross-examine Mr Walsh on his affidavit and no call upon any notice to produce documents relating to the allegation of unlawfulness. Apart from the correspondence exhibited to Ms Overington's affidavit,[9] there is no identification by SPI of the extent of the work performed for the purpose of preparing to resist the argument advanced by MBL on the plaintiff's behalf (the "costs thrown away"). For all I was told it might be limited to taking instructions, writing the letters to MBL and examining the Electricity Industry Act 2000, the Code and the easement over part of the land in which the Pentadeen Spur was erected, as to which see below. This poses the risk that the costs of the argument on the application by SPI might exceed the costs thrown away.
18 There was, however, an application, supported by extensive submissions in writing, for the costs thrown away by the plaintiff's trespass argument to paid by MBL, or by the plaintiff. This application was agreed to be adjourned until the outcome of the primary application made by the plaintiff's summons had been dealt with.
19 SPI seeks an order that MBL pay the costs incurred by SPI to prepare its factual and legal defence of the allegation that it had engaged in unlawful conduct and that privilege was thereby lost in the disputed documents (costs thrown away), on an indemnity basis. SPI submitted that, by:
(a) exhibiting correspondence, in which the trespass argument was made, to the affidavit material filed in support of the summons; and
(b) threatening in correspondence to make the trespass argument in open court at the hearing of the summons; and
(c) maintaining and repeating that threat in numerous pieces of correspondence, before finally abandoning the trespass argument at the eleventh hour;
(a) took a step in connection with a claim in this proceeding that they could not reasonably have believed was necessary to facilitate the resolution or determination of the proceeding;[10]
(b) further or alternatively, caused costs to be incurred improperly or without reasonable cause, or to be wasted by a failure to act with reasonable competence and expedition.[11]
20 In her affidavit Ms Overington referred to clause 3.3.2 of the Code and advanced the proposition that it authorised entry onto the land on which poles 38 and 39 are situated for the purposes of conducting the Valley Span test and that, in addition, pole 38 sits on land over which SPI has a registered easement (the "easement argument"). In its written submissions, SPI contended that the clause identifies circumstances in which a customer must provide a distributor's representatives access to premises, implying, without expressly saying, that clause 3.3.2 of the Code was applicable to authorise SPI to enter the land to install the test conductors and carry out the test.[12] As I conclude later, this appears, prima facie, to misconstrue the clause.
21 The easement referred to in the affidavit of Ms Overington, and exhibited as Exhibit REO4 to her affidavit, was created pursuant to s 88 of the Electricity Industry Act 2000 (Vic) ("the Electricity Act"). An easement under that Act may be created or acquired only for the purpose of erecting or maintaining "powerlines" and grants the electricity company the right to enter land and undertake works for the purposes of and incidental to transmitting electricity safely and economically across such land, and also to inspect and maintain the 'said appliances': see the schedule to the Act.
22 Counsel for SPI also pointed to s 93(1)(e) of the Electricity Act, which confers a broad power on SPI, as an "electricity corporation", "to do all other things necessary or convenient for constructing, maintaining, altering or using any works or undertakings of, or under the control of, the electricity corporation". The right of access granted by s 93(1)(e) of the Electricity Act is, as the plaintiff contended, subject to the conditions of the electricity distributor's licence and to any code that is issued by the Essential Services Commission in relation to exercise of powers under that section: see s 93(5). That Commission has issued the Code.
23 Thus, the Code is the relevant instrument for the purposes of the Electricity Act. The applicable clause is clause 3.3.2 as set out above. MBL contended that the purposes for which access may be gained to a customer's premises pursuant to an easement granted under s 88 of the Electricity Act, and under s 93, or under the Code, must relate to the supply, delivery or transmission of electricity and the maintenance or installation of associated equipment. MBL contended that these rights do not extend to a right of access for the purpose of conducting a test to support the defence of legal proceedings.
24 The parties agreed that for the purposes of the application by SPI for indemnity costs against HSF, it was not necessary for me to determine the question of whether or not the access gained by SPI to the land for the purposes of installing the infrastructure and conducting the Valley Span test was authorised by the Electricity Act, the easement and the Code. What was relevant was the question whether, simply put, there was no proper basis for the contention by MBL that access to the land was unlawful so as to enliven s 125 of the Evidence Act 2010 (Vic) (the "Evidence Act").
25 SPI's submissions were wide ranging and extensive, and covered in addition to the matters referred to above the following matters (in summary):
(a) at no time, either in affidavit material filed with the Court in support of the summons or in correspondence, did the plaintiff produce any evidence to support its trespass argument;
(b) under s 125 of the Evidence Act, the onus of proof is on the party seeking to persuade the Court that the privilege has been lost: Kang v Kwan;[13]
(c) that s 125(1)(a) of the Evidence Act did not apply because there was no allegation of any offence that rendered SPI liable for a civil penalty, nor any allegation of fraud or any other offence. (There was no serious argument to the contrary from counsel for MBL);
(d) that s 125(1)(b) of the Evidence Act, which requires not only that there has been an abuse of a power conferred by or under an Australian law, but that this abuse of power was deliberate, in the sense that the relevant actor knew or intended his or her actions to be an abuse of power, was likewise not capable of being satisfied in this case. SPI pointed to the decision of Einstein J in Idoport Pty Ltd v National Australia Bank Ltd[14] and Kang v Kwan,[15] amongst other cases, to support the proposition that the expression in s 125(1)(b) "a communication or the contents of a document that the client or lawyer (or both), ... knew or ought reasonably to have known was made or prepared in furtherance of a deliberate abuse of a power" required that the client or lawyer (or both) intended his or her actions to be an abuse of power;
(e) that for the privilege in a particular document or communication to be lost, it is necessary for that document or communication to have been prepared or made in furtherance of the deliberate abuse of power. It is not sufficient, SPI contended, to allege fraud or abuse of power at large. It must be connected to the document or communication in question;
(f) Section 29 is a new source of statutory power to order costs against a person, including a legal practitioner, who contravenes an overarching obligation. The only statutory conditions for the exercise of the power are that:
(i) the Court is satisfied that, on the balance of probabilities, the person has contravened the overarching obligation;
(ii) the Court considers the order to be appropriate in the interests of justice;
(iii) the order must relate to the legal costs or other costs or expenses of any person arising from the contravention of the overarching obligation;
(g) MBL could not reasonably have believed the steps that it took to request SPI to produce the permissions to enter the land, and to threaten to challenge the privilege on the grounds of unlawful entry onto the land, were necessary to facilitate the resolution or determination of the proceeding. The Court can be satisfied, on the balance of probabilities, that MBL thereby contravened its overarching obligation under section 19 of the Civil Procedure Act;
(h) that it is appropriate, in the interests of justice, to order that MBL pay the legal costs and other costs or expenses of SPI arising from the contravention of the overarching obligation. Those are the costs incurred by SPI to prepare its factual and legal defence of the allegation that it had engaged in unlawful conduct and that privilege was thereby lost in the disputed documents;
(i) for substantially the same reasons, MBL were liable to pay the costs thrown away under the Supreme Court (General Civil Procedure) Rules ("Supreme Court Rules") (r 63.23(1)) and the inherent jurisdiction of the Court because the conduct was a serious dereliction of duty, as-
(i) It involved a failure to give "reasonable or proper attention to the relevant law and facts in circumstances where if such attention had been given it would have been apparent that there were no worthwhile prospects of success": White Industries (Qld) Pty Ltd v Flower & Hart (a firm).[16] ("Flower & Hart");
(ii) It "was not only untenable, but was brought irresponsibly without any, or any proper, consideration of the question whether it had any prospect of success": Cook v Pasminco (No 2)[17] ("Pasminco");
(iii) It caused costs to be incurred improperly or without reasonable cause, or to be wasted by a failure to act with reasonable competence and expedition: Rule 63.23(1);
Further, for substantially the same reasons, SPI submitted that MBL should be ordered to pay the costs thrown away on an indemnity basis. The conduct caused loss of time to SPI and involved the making and continuation of an allegation "in wilful disregard of known facts or clearly established law": Cohen v State of Victoria (No 3).[18] ("Cohen"); also Pasminco at [66].
(a) That the authorities relied upon by SPI deriving from the Electricity Act, the easement and the Code did not extend to authorise the entry on the land for the purposes of conducting the Valley Span test. That was the reason for the requests, repeatedly made, for HSF to produce documents evidencing the authority given to SPI by the landowners to enter the land to conduct the Valley Span test;
(b) For this reason, it was reasonable to request the provision of evidence of the consent of the landowners to access the land for this specific purpose as it is only such consent that will enable a valid entry onto the land by SPI;
(c) That the relevant principles are as summarised by Goldberg J in Flower & Hart,[19] in particular that the authorities reviewed by Goldberg J do not support the proposition that simply instituting or maintaining a proceeding on behalf of a client which has no or substantially no prospect of success will invoke the jurisdiction. There must be something more namely, carrying on that conduct unreasonably;
(d) That the overarching obligation in s 19 of the Civil Procedure Act defines the nature of the practitioners' duty relevant to the circumstances of this application. It remains the case that the costs can only be ordered against that legal practitioner in the event of a serious dereliction of duty: UTSA Pty Ltd (in Liq) v Ultra Tune Australia Pty Ltd[20] ("UTSA") and Flower & Hart.[21] Therefore, subject to an appreciation of the duty imposed by s 19 of the CPA, the common law position as set out by Goldberg J in Flower & Hart applies;
(e) The jurisdiction to award costs against non-party solicitors "ought to be exercised sparingly and with great caution".[22] In this regard, reliance was placed on the observations of Drummond J in Re Bendeich (No 2),[23] cited by Habersberger J in UTSA at [44], as follows:
The cases show that this jurisdiction must be exercised with caution. There is good reason for caution. Too ready an exposure of the lawyer for a party to personal liability for the costs of his client or of the other party is likely to inhibit the way the lawyer acts in conducting the litigation. It frequently happens that a lawyer will have to make judgments as to which of a number of courses is the optimum one to follow, bearing in mind his duty to advance his client's interests by all proper means and his duty to the court to conduct the litigation in proper fashion. The introduction of a third consideration into every day litigation that requires a solicitor to keep in mind the need to minimise the chances of a costs order being made against him personally, would raise a conflict between the lawyer's duties to his client and to the court, on the one hand, and his own interests, on the other. As is understandable, such a conflict would likely be resolved by the solicitor concentrating on identifying and adopting the course most likely to minimise his own personal exposure at the expense of following courses best fitted to advantage his client and to bring the action to an expeditious end.
(f) Another reason for caution was expressed by the Full Court of the Federal Court of Australia in Levick v Deputy Commissioner of Taxation[24] when they said that they endorsed:
the emphasis on caution in making orders against solicitors, particularly as it will often be difficult for a court to know all the details and circumstances of the solicitor's instructions.
(g) It is evident from the correspondence that MBL's enquiry for the permissions or consents for SPI to enter upon the land to conduct the Valley Span test was pursued genuinely and for the purpose of the privilege debate.
(h) It was not an unreasonable proposition to conclude that, where there was no statutory authority, under the Electricity Act, the easement or the Code for SPI to enter upon the land, that the absence of specific consents to enter the properties for the purpose of the test might lead to an inference of fact that the properties had been accessed without permission.
(i) There was a basis for the belief by MBL that the results of the enquiry might have had an impact on the outcome of the debate, because entering onto the land without the consent of one of the landowners (a group member in the proceeding) for the purpose of conducting the Valley Span test might be found to be an abuse of power for the purposes of s 125 of the Evidence Act.
(j) Ultimately, in part because of the unresponsive nature of the correspondence from HSF in relation to the authority or consent given by the landowners, it was determined for the plaintiff to proceed with the challenge to the privilege claimed on the basis of waiver and inconsistent conduct only.
(k) In those circumstances, there is no basis to make an order against MBL or the plaintiff for the costs thrown away, whether on an indemnity basis or otherwise.
27 It is also relevant to observe that, apart from the instructions that are referred to as having been obtained by MBL from the landowners and referred to in the letter from MBL to HSF dated 19 December 2012,[25] the existence or nonexistence of permission by the landowners for SPI to enter the land for the purposes of conducting the Valley Span test was a matter peculiarly within the knowledge of SPI.
28 In the end, MBL abandoned the trespass argument because of the unresponsive nature of the correspondence from HSF. MBL contended that, in those circumstances there was no reasonable basis for the Court to make an order for costs against either MBL or the plaintiff, whether on an indemnity basis or otherwise.
29 Among other things, the object of the Civil Procedure Act is to reform and modernise the practice, procedure and processes relating to civil proceedings in the Supreme Court, and other courts. Provision is made for an overarching purpose in relation to the conduct of civil proceedings, which is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute in those proceedings.[26]
30 In the exercise of its powers, the Court must seek to give effect to the overarching purpose, whether these powers are a part of the Court's inherent, implied or statutory jurisdiction, or arise or are derived from the common law or any of the procedural rules or practices of the Court or otherwise.[27]
31 In making any order or giving any direction in a civil proceeding, the Court must further the overarching purpose by having regard to a number of objects, including so far as relevant to the current application, the efficient conduct of the business of the Court, and dealing with a civil proceeding in a manner proportionate to the complexity or importance of the issues in dispute and the amount in dispute.[28] Further, for the purposes of these objectives, the Court may have regard to several matters, including the extent to which the parties have used reasonable endeavours to resolve the dispute by agreement or to limit the issues in dispute.[29]
32 SPI relied on s 29 of the Civil Procedure Act as the first source of power to order MBL or the plaintiff to pay SPI's costs thrown away. In substance and so far as relevant to this matter, s 29 authorises the Court to order a person who the Court is satisfied on the balance of probabilities has contravened an overarching obligation, to pay the costs of any other person "arising from the contravention of the overarching obligation": s 29(1)(a). The opening words of the section also make it clear that the power is to be exercised where the Court considers it appropriate in the interests of justice. Section 29 does not limit any other power of the Court to make any order, including any order as to costs.[30]
33 The overarching obligations are those set out in ss 16 to 26: see s 2 definition. Those sections identified by the parties as relevant to this application are s 18 (requirement of a proper basis), s 19 (to only take steps to resolve or determine dispute) and s 20 (to cooperate in the conduct of civil proceeding). It may be that there are other potentially relevant sections, including s 22 (to use reasonable endeavours to resolve dispute) and s 26 (to disclose existence of documents).
34 Sections 18, 19 and 20 of the Civil Procedure Act provide:
Overarching obligation - requirement of proper basis
(a) is frivolous; or
(b) is vexatious; or
(c) is an abuse of process; or
(d) does not, on the factual and legal material available to the person at the time of making the claim or responding to the claim, as the case requires, have a proper basis.
Overarching obligation to only take steps to resolve or determine dispute
Overarching obligation to cooperate in the conduct of civil proceeding
(a) apply to any legal practitioner or any law practice acting for or on behalf of a party: Civil Procedure Act s 10(1)(b), (c);
(b) apply in respect of the conduct of any aspect of a civil proceeding, including, but not limited to any interlocutory application or interlocutory proceeding: Civil Procedure Act s 11(a);
(c) do not override any duty or obligation of a legal practitioner to a client to the extent that those duties and obligations and the overarching obligations can operate consistently: Civil Procedure Act s 13(1); and
(d) must be complied with by a legal practitioner or a law practice engaged by, or on behalf of, a client in connection with a civil proceeding despite any obligation the legal practitioner or the law practice has to act in accordance with the instructions or wishes of the client: Civil Procedure Act s 13(2).
Supreme Court Rules and inherent jurisdiction
36 SPI also relied on the provisions in the Supreme Court Rules, namely rule 63.23(1), and the inherent jurisdiction of the Court.[31] Rule 63.23(1) provides, so far as relevant:
(1) Where a solicitor for a party, whether personally or through a servant or agent, has caused costs to be incurred improperly or without reasonable cause or to be wasted by a failure to act with reasonable competence and expedition, the Court may make an order that -
.....
(c) the solicitor pay all or any of the costs payable by any party other than the client.
37 It was common ground that the principles governing the power to award costs against a solicitor pursuant to the rules or inherent jurisdiction were appropriately summarised by Goldberg J in Flower & Hart,[32] who reviewed the relevant authorities and, in summary, concluded:
(a) simply instituting or maintaining a proceeding on behalf of a client which has no or substantially no prospect of success will not invoke the jurisdiction; [33]
(b) it is necessary to establish an ulterior purpose, an abuse of process or an unreasonable continuation of proceedings which have little or no prospects of success;[34]
(c) it is not clear what is encompassed by "unreasonably" initiating or continuing proceedings if they have no or substantially no chance of success. It seems that it involves some deliberate or conscious decision taken by reference to circumstances unrelated to the prospects of success with either a recognition that there is no chance of success but an intention to use the proceeding for an ulterior purpose or with a disregard of any proper consideration of the prospects of success;[35]
(d) the unreasonableness must relate to reasons unconnected with success in the litigation or to an otherwise ulterior purpose or to a serious dereliction of duty or serious misconduct in promoting the cause of and the proper administration of justice;
(e) it is a relevant serious dereliction of duty or misconduct not to give reasonable or proper attention to the relevant law and facts in circumstances where if such attention had been given it would have been apparent that there were no worthwhile prospects of success; [36] and
(f) expressing the principle this way accommodates the competing principle that a party is entitled to have a practitioner act for him or her even in an unmeritorious case.[37]
38 The principles governing the power to make an order for indemnity costs were recently identified by J Forrest J in Cohen.[38] In that case His Honour made an order for indemnity costs against a plaintiff's solicitor in a group proceeding. His Honour set out, at [10], the well-known passage from the judgment of Harper J in Ugly Tribe Co Pty Ltd v Sikola,[39] in which the special circumstances justifying a departure from the usual course were said to include "conduct which causes loss of time to the Court and to other parties" and "the commencement or continuation of proceedings in wilful disregard of known facts or clearly established law".[40]
39 In Pasminco[41] Lindgren J made an indemnity costs order against the solicitors for a plaintiff in a group proceeding. In so doing, he followed the reasoning of Goldberg J in Flower & Hart, and other authorities, and additionally held (at [66]):
In substance, the reasons I have given above for concluding that the Solicitors should pay Pasminco's costs are also my reasons for ordering that the costs be paid on an indemnity basis. In so far as it was brought under Part VA of the TP Act, the proceeding was not only untenable, but was brought irresponsibly without any, or any proper, consideration of the question whether it had any prospect of success ...
40 These principles governing a special costs order, and some of the circumstances in which Courts have made a special costs order, were recently reviewed by Croft J in Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3).[42] In the course of that review, Croft J referred to the decision of Victorian Court of Appeal in Macedon Ranges Shire Council v Thompson in which Redlich JA and Beach AJA said that:[43]
Where the proceeding has no prospect of success
[15] Costs may be ordered whenever it appears that an action has been commenced in circumstances where the applicant properly advised should have known it had no chance of success. When a litigant presses on where on proper consideration their case should have been seen to be hopeless, the discretion to make a special costs order may be enlivened. French J (as he then was) in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers Western Australia & Anor[44] considered that the discretion to award such costs would be enlivened when a party persisted, for whatever reason, in what should on proper consideration have been seen to be a hopeless case, and alluding to the presumption referred to by Woodward J in Fountain Selected Meats said that it was an unnecessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. But where the litigant did not recognise that its case was without merit a court may be disinclined to make a special costs order.[45] The Court must measure the litigant's conduct against the facts then known or which ought to have been known, the inquiries that the litigant ought reasonably to have made and the legal advice which the litigant ought reasonably to have obtained.[46] This exercise may be subject to some qualification in respect of a self represented litigant. (emphasis added)
41 The provision of the Evidence Act relevant to the trespass argument is s 125. It provides:
125 Loss of client legal privilege - misconduct
(1) This Division does not prevent the adducing of evidence of -
(a) a communication made or the contents of a document prepared by a client or lawyer (or both), or a party who is not represented in the proceeding by a lawyer, in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty; or
(b) a communication or the contents of a document that the client or lawyer (or both), or the party, knew or ought reasonably to have known was made or prepared in furtherance of a deliberate abuse of a power.
(2) For the purposes of this section, if the commission of the fraud, offence or act, or the abuse of power, is a fact in issue and there are reasonable grounds for finding that -
(a) the fraud, offence or act, or the abuse of power, was committed; and
(b) a communication was made or document prepared in furtherance of the commission of the fraud, offence or act or the abuse of power -
the court may find that the communication was so made or the document so prepared.
(3) In this section, power means a power conferred by or under an Australian law.
42 In Kang v Kwan[47] Santow J summarised the principles in relation to the operation of s 125 of the Evidence Act. It is not necessary for the purposes of these reasons to set out all of the principles. It is sufficient to notice these:
(a) A person who alleges that privilege does not apply to a communication tenders an issue for decision and has the onus of proving it:[48] per McHugh J in Commissioner of Australian Federal Police v Propend Finance Pty Ltd;[49]
(b) It is not sufficient for the party seeking to resist the claim for privilege merely to state or assert that the communication was made in furtherance of a fraud or other illegal purpose, but must adduce admissible evidence in support of that proposition:[50] Commissioner of Australian Federal Police v Propend Finance Pty Ltd;[51]
(c) The use of the word "deliberate" in s 125(1)(b) requires that the client know that the acts in question are an abuse of power, not merely that the client unknowingly but deliberately commit acts that constitute an abuse of power:[52] per Hodgson CJ in Idoport Pty Ltd & Anor v National Australia Bank Ltd & Ors;[53] See also Van Der Lee v New South Wales[54] and Bare v Small;[55] and
(d) It is clear from the requirement that there be a "deliberate" abuse of power that an "abuse of power" which is dishonest would be caught by s 125(1)(b). It is possible, but not authoritatively determined, that a deliberate abuse of power necessarily involves some element of dishonesty. In Kang v Kwan Santow J left this question open for future decision.[56]
43 The following further matters are also relevant:
(a) Section 125 does not require that the abuse of power be a fact in issue in a proceeding in order for a document that is prepared in furtherance of the deliberate abuse of power to be held not to be privileged by virtue of that section: See s 125(2), s 131A and Amcor Ltd v Barnes;[57]
(b) The definition in the Shorter Oxford English Dictionary of "furtherance" is "the fact of being helped forward; the action of helping forward; advancement, aid, assistance". This provides a useful indication of conduct that may be held to be in furtherance of a deliberate abuse of power: Amcor Ltd v Barnes.[58]
44 It seems to me that in concluding that the Electricity Act, the easement and the Code did not authorise SPI to enter upon the land in question to conduct the Valley Span test, including the installation of the test conductors and the testing equipment, MBL had the better of the argument. That is, none of these provisions, strictly construed, authorised entry onto the subject land for the purpose of installing the infrastructure for, and conducting, the Valley Span test. Although it is agreed that I do not need to determine that question, it is a necessary ingredient in the assessment of whether MBL has instituted a claim with no or substantially no prospects of success and has done so unreasonably. Alternatively, it is necessary in order to determine whether MBL or the plaintiff 'reasonably' believed that the 'step' (challenging the privilege on the basis of the trespass argument) was necessary to facilitate the resolution or determination of the proceeding, for the purpose of s 19 of the Civil Procedure Act.
45 For the reasons that follow, I conclude (for the purposes of this application only) that on their proper construction, the powers given to SPI - under Electricity Act, the easement and the Code - to enter the lands on which the Pentadeen Spur is built, are all limited to purposes associated with the supply of electricity and do not extend to the setting up of the test conductors and the carrying out of the test..
46 SPI contended, naturally enough, that the Electricity Act, the easement under it and the Code provided statutory authority to SPI to enter the land. But the argument directed to those matters failed to take into account the whole of the relevant parts of the provisions.
47 SPI submitted that there was nothing to indicate MBL properly investigated SPI's statutory rights of access, and for that purpose referred to s 93(1)(e) of the Electricity Act, which (it was submitted by SPI) confers a broad power on it, as an "electricity corporation", "to do all other things necessary or convenient for constructing, maintaining, altering, or using any works or undertakings of, or under the control of, the electricity corporation".[59]
48 SPI did not, however, refer, as the plaintiff did,[60] to the qualifications in s 93(5) of that Act, which, so far as relevant, provide that the section (and thus the authority it confers) applies subject to the conditions of the licence of the distribution company and any "access code" applying to the exercise of powers under the section issued by the Commission. Curiously, there is no definition in the legislation of an "access code", nor in the Essential Services Commission Act 2001, under which Act the Commission is authorised to make Codes of Practice.
49 Nevertheless, it appears from the terms of the Code that each distributor (and it is common ground that SPI is a distributor) must comply with the Code under its licence: see clause 1.3 of the Code. Moreover, the plaintiff made submissions based on a construction of s 93(1)(e) and (5) of the Electricity Act that involved treating the Code as an "access code" and as applicable under SPI's licence conditions, and SPI did not argue to the contrary.
50 I therefore think it safe to conclude, albeit without a full and complete analysis, that the width of the power of SPI advanced in argument was circumscribed as submitted by the plaintiff. That is, the power was limited, essentially, to performing work related to the supply of electricity. It has never been suggested that the installation of the 3 test conductors and the testing equipment related to the supply of electricity.
51 In the end, given the preliminary conclusion I have reached as to the lack of statutory entitlement for SPI to enter the land on which the Pentadeen Spur (and poles 38 and 39) were built, the remaining reason advanced by SPI to establish that MBL's conduct was in breach of an overarching obligation (particularly s 19), or had no or substantially no prospects of success, and was "unreasonable" (in the extended sense used by Goldberg J in Flower & Hart) was the absence of any evidence advanced by MBL to establish that SPI did not have the consent of the relevant landowners.
52 The absence of a power to enter the land for the purpose of conducting the Valley Span test under the Electricity Act, the easement and the Code provides the springboard from which MBL justified and explained its requests for evidence of the owners' permissions to access the properties. In my view, it was not unreasonable for MBL to request from HSF (as the solicitors acting for SPI) information relating to the permissions that were asserted by HSF to have been given by the landowners. I take into account in assessing the reasonableness of this request the fact that the overarching obligation in s 20 of the Civil Procedure Act requires the parties and their solicitors to cooperate in connection with the conduct of the proceeding. Beyond the assertion by HSF that the entry onto the land was with the consent of the landowners, there was only limited cooperation from HSF in responding to MBL's request. Indeed the letter from HSF dated 11 January 2013[61] showed a resistance to cooperation.
53 That it was not unreasonable for MBL to make the request is particularly so where at least one of the landowners in question (Sullivan) instructed MBL to request details of the consent. That instruction gives rise to a reasonable implication that Sullivan had instructed that he or she had not given, or had no recollection of giving, the consent or permission in question.
54 If, as MBL contended, the only basis for SPI to enter upon the land to conduct the Valley Span test was the consent of the landowners, the absence of that consent was pregnant with the possibility that the Valley Span test was set up and undertaken by SPI in circumstances where SPI knew that its access to the land involved a deliberate abuse of a power, in the sense that SPI knew that without landowner consent it had no right to enter the land to set up and conduct the test.[62]
55 If that were so, then some of the disputed documents, being those generally identified by the plaintiff[63] before the affidavit of Ms Overington of 17 January 2013, revealed detailed information about many of the documents, and even afterwards in relation to the documents identified in her affidavit and described by me in my earlier reasons for decision as the "Category 5" documents,[64] were potentially connected with the alleged deliberate abuse of power. That is because they are documents concerning the specifications for the construction of the test conductors, and for the testing equipment installed on the conductors, and, for all that the plaintiff knew, may have been prepared "in furtherance of the deliberate abuse of power" (within the meaning of s 125(1)(b) of the Evidence Act) in the sense that they (the communications or contents of the documents) were a necessary precursor to the installation of the conductors, which required entry onto the land.
56 Thus, the crux of the application for costs against MBL turns on whether it was reasonable for MBL to request evidence of the consent of the landowners that HSF asserted SPI had in order to access poles 38 and 39 of the Pentadeen Spur. It is enough to conclude that in so contending MBL was not acting unreasonably.
57 Then there are other considerations relevant to both the claim that MBL or the plaintiff should pay the costs thrown away, and to whether those costs should be awarded on an indemnity basis, as follows:
(a) having regard to my observations concerning the source of the power of SPI to enter the land for the purposes of the test, it is not possible to conclude that MBL and the plaintiff did not have any merit in raising the issue of consent. This is not a case of maintaining a claim in a proceeding on behalf of the plaintiff which has no or substantially no prospect of success; [65]
(b) that consideration also substantially meets the contention that there was no proper basis for the trespass argument for the purpose of s 18 of the Civil Procedure Act;
(c) SPI did not establish an ulterior purpose, an abuse of process or an unreasonable continuation of proceedings which have little or no prospects of success;[66]
(d) SPI did not establish some deliberate or conscious decision taken by reference to circumstances unrelated to the prospects of success with either a recognition that there is no chance of success but an intention to use the proceeding for an ulterior purpose or with a disregard of any proper consideration of the prospects of success;[67]
(e) the advancing of the trespass argument in the correspondence, and the request for evidence of the consents, in the circumstances I have described, did not constitute the taking of a step in connection with a claim in the proceeding[68] where MBL or the plaintiff did not reasonably believe the step to be necessary to facilitate the resolution or determination of the proceeding, for the purposes of s 19 of the Civil Procedure Act;
(f) there was no unreasonableness on the part of MBL or the plaintiff that related to reasons unconnected with success in the litigation or to an otherwise ulterior purpose or to a serious dereliction of duty or serious misconduct in promoting the trespass argument;
(g) to expose MBL to personal liability for the costs of SPI thrown away is likely to inhibit the way MBL acts in conducting the litigation;[69]
(h) if the statements made by HSF, on instructions, that SPI had the relevant consents is properly to be seen as a sufficient response to MBL's requests, this is a case where MBL, or the plaintiff on advise from MBL, did not recognise that its case was without merit. In that circumstance, I am disinclined to make any special costs order;[70]
(i) in measuring the plaintiff's conduct against the facts known to her, or which ought to have been known, and the inquiries that the plaintiff did make, or ought reasonably to have made, and the legal advice which she ought reasonably to have obtained, it is not a case where properly advised the plaintiff should have known she had no prospects of success in pursuing the trespass argument, at least up to the point where it was clear that HSF and SPI would not cooperate and produce the consents requested;[71]
(j) this seems to me to be a case where MBL have made judgments as to which of a number of bases of challenge to the privilege claimed by SPI is the optimum one to follow. Bearing in mind MBL's duty to advance its client's interests by all proper means and its duty to the court to conduct the litigation in proper fashion, in all the circumstances I have referred to, the raising and dropping of the trespass argument was justified;[72]
(k) the awarding of costs against MBL is likely to introduce 'a third consideration' into the conduct of this litigation. That is, one that requires MBL to keep in mind the need to minimise the chances of a costs order being made against it personally, which would raise a conflict between MBL's duties to its client and to the court, on the one hand, and its own interests, on the other;[73] and
(l) having regard to my assessment of the basis for MBL's contention that entry on the land for the purpose of the tests was unlawful, this is not a case where a party has persisted, for whatever reason, in what should on proper consideration have been seen to be a hopeless case. Indeed, upon getting no cooperation from HSF in the production of the consents or permissions, MBL advised that it would proceed on the waiver issue alone.
58 For these reasons I am not satisfied that MBL or the plaintiff should pay SPI's costs thrown away as asked. It follows that if I were satisfied that either should pay those costs I would not order them to be paid on an indemnity basis.
SECRETARY TO THE DEPARTMENT OF SUSTAINABILITY AND ENVIRONMENT
SECRETARY TO THE DEPARTMENT OF SUSTAINABILITY AND ENVIRONMENT
[1] Exhibit REO-2 to the Affidavit of Ruth Elizabeth Overington sworn 21 January 2013. Letters from MBL to HSF dated 17 April, 11 May, 23 November and 19 December 2012.
[2] It was common ground that the Electricity Distribution Code is published by the Essential Services Commission and regulates the distribution of electricity pursuant to a distribution licence.
[3] Electricity Distribution Code, January 2011, version 6, clause 19, definition of "supply".
[4] Letter 19 December 2012, Exhibit "REO-2" to the affidavit of Ruth Elizabeth Overington sworn 21 January 2013.
[7] Exhibit "REO-2" to the affidavit of Ruth Elizabeth Overington sworn 21 January 2013.
[8] Exhibit "REO-5" to the affidavit of Ruth Elizabeth Overington sworn 21 January 2013.
[9] Affidavit of Ruth Elizabeth Overington, solicitor for SPI, sworn 21 January 2013
[12] SPI written submission dated 21 January 2013, [21].
[13] [2001] NSWSC 698, [37] per Santow J.
[14] [2001] NSWSC 222, [64].
[15] [2001] NSWSC 698, [37].
[18] [2011] VSC 229, [10].
[19] [1998] FCA 806; (1998) 156 ALR 169, 236 & 239; [1998] FCA 806.
[20] (2004) VSC 105, [44]-[51].
[21] [1998] FCA 806; (1998) 156 ALR 169, 236 & 239; [1998] FCA 806.
[22] Levick v Deputy Commissioner of Taxation [2000] FCA 674; (2000) 102 FCR 155, [50] per Wilcox, Burchett and Tamberlin JJ; UTSA (2004) VSC 105, [44].
[24] Levick v Deputy Commissioner of Taxation [2000] FCA 674; (2000) 102 FCR 155, [43] per Wilcox, Burchett and Tamberlin JJ; UTSA (2004) VSC 105, [45].
[25] Where it was said, "We are instructed by the landowners of the Sullivan property to request details of any consent to access pole 38 provided within the last 12 months. We ask that you provide details of such consent, and any permits to set up the test and/or enter the Sullivan property, by Friday 4 January 2013."
[26] Civil Procedure Act 2010 (Vic) s 1.
[31] Myers v Elman [1940] AC 282; Ridehalgh v Horsefield [1994] Ch 205.
[32] [1998] FCA 806; (1998) 156 ALR 169, 236 & 239.
[40] The principles governing costs were also recently summarised by Croft J in Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399 at [11]- [19].
[42] [2012] VSC 399, [11]-[19].
[43] [2009] VSCA 209, [15] (Redlich JA and Beach AJA).
[44] Unreported, Federal Court of Australia, 9 February 1993, French J (as he then was).
[45] Hurstville Municipal Council v Connor (1991) 24 NSWLR 724 (Loveday J); Monitronix Ltd v Michael (1992) 7 WAR 195 (Murray J); Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, [18] (Harper J); Clarke v Deputy Commissioner of Taxation [2002] FCA 75; (2002) 50 ATR 173.
[46] Aljade and MKIC v OCBC [2004] VSC 351 (Redlich J).
[47] [2001] NSWSC 698, [37] per Santow J.
[48] [2001] NSWSC 697, [37](3).
[49] (1997) 141 ALR 545, 587.
[50] [2001] NSWSC 697, [37](5).
[51] (1997) 141 ALR 545, 587.
[52] [2001] NSWSC 697, [37](10).
[53] [2001] NSWSC 222, [64].
[56] [2001] NSWSC 697, [37](9).
[57] [2011] VSC 341, [66]-[70] per Kyrou J.
[58] [2011] VSC 341, [59] per Kyrou J.
[59] SPI's written submissions dated 21 January 2013, [31(b)].
[60] Plaintiff's written submissions dated 12 February 2013, [9]-[12].
[62] See Kang v Kwan [2001] NSWSC 698, [10] per Santow J.
[63] See paragraph [57] of the reasons in Matthews v SPI Electricity Pty Ltd & Ors [2012] VSC 33.
[64] See Matthews v SPI Electricity Pty Ltd & Ors [2012] VSC 33, [72].
[68] Assuming for present purposes that asserting in correspondence a legal basis for production of privileged documents amounts to "taking a step" in connection with a claim in the proceeding, which I doubt.
[69] See Re Bendeich (No 2) [1994] FCA 1504; (1994) 53 FCR 422, 426-7.
[70] Macedon Ranges Shire Council v Thompson (Supra), citing Hurstville Municipal Council v Connor (1991) 24 NSWLR 724 (Loveday J); Monitronix Ltd v Michael (1992) 7 WAR 195 (Murray J); Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, [18] (Harper J); Clarke v Deputy Commissioner of Taxation [2002] FCA 75; (2002) 50 ATR 173.
[71] Macedon Ranges Shire Council v Thompson (Supra), citing Aljade and MKIC v OCBC [2004] VSC 351 (Redlich J).
[72] See Re Bendeich (No 2) [1994] FCA 1504; (1994) 53 FCR 422, 426-7.
Matthews
SPI Electricity Pty Ltd & Anor
(1998) 156 ALR 169
(2000) 107 FCR 44
(2000) 102 FCR 155
(1994) 53 FCR 422
(1991) 24 NSWLR 724
(1992) 7 WAR 195
(1997) 141 ALR 545