HIS HONOUR: By his statement of claim filed on 21 October 2020, the plaintiff claims damages from the defendant as the result of sexual assaults upon him allegedly committed by the defendant at various locations between 1987 and 1989. The plaintiff was between the ages of 14 and 16 years old at that time. The defendant was then an adult.
Despite the fact that the proceedings were commenced nearly two years ago, nothing much has happened to progress the proceedings in any meaningful sense. No defence to the statement of claim has yet been filed. Threats by the plaintiff to join the State of New South Wales as a second defendant, the entity said to be in charge of the Fort Scratchley Museum in Newcastle where the plaintiff and the defendant first met, have ebbed and flowed with no apparent finality until today when counsel for the plaintiff finally warmed to my invitation to file in court a draft amended statement of claim naming the State as a second defendant that has been lurking in the shadows of correspondence between the parties for some time. It is alleged that the plaintiff sustained injuries as the result of sexual and physical abuse at various institutions for which the State was responsible, including the Reiby Juvenile Justice Centre, the Worimi Shelter and the Mt Penang Detention Centre between 1987 and October 1992 at the hands of people employed there.
On 21 October 2020, the plaintiff filed a notice of motion seeking an order that the defendant's assets be frozen pending resolution of the proceedings pursuant to UCPR 25.11. That application came before Wright J on 11 December that year. In circumstances that do not presently require elaboration, his Honour dismissed the application and ordered the plaintiff forthwith to pay the defendant's costs. His Honour later made a gross sum costs order in the amount of $10,000 in respect of those costs in favour of the defendant following an application that was heard on 13 July 2021. That costs order remains unsatisfied.
On 12 November 2021, the plaintiff was directed to serve any proposed amended statement of claim on the defendant by 26 November 2021 with the defendant directed to indicate by 10 December 2021 whether he consented to the filing of that document. No proposed amended statement of claim was served upon the defendant in accordance with the direction. Notwithstanding that fact, the solicitor for the defendant wrote to the plaintiff's solicitor on 7 December 2021 indicating that he "does not consent to the plaintiff filing the proposed amended statement of claim." Despite an immediate request from the plaintiff's solicitor for the defendant's reasons for then withholding consent to the filing of the amended statement of claim, she received no response.
Accordingly, on 21 January 2022, the plaintiff served the defendant with a notice of change of solicitor and a notice of motion dated 23 January 2022 seeking leave to file the proposed amended statement of claim. That document did not include any amendments seeking to join the State as a second defendant. The defendant had previously indicated by letter dated 7 December 2021 that he opposed the application. It was heard by Registrar Jones and dismissed on 5 April 2022, the plaintiff having informed the Court that he abandoned the proposed amendments. In the somewhat curious events that have now occurred, the plaintiff filed the identical amended statement of claim in court before me with the defendant's consent.
Shortly thereafter, on 21 April 2022, the defendant filed the present application seeking the following relief:
1. An order that the costs incurred by the defendant of and relating to the plaintiff's notice of motion filed on 21 January 2022 which was dismissed on 5 April 2022 be paid to the defendant on a full indemnity basis pursuant to s 98 of the Civil Procedure Act 2005.
2. An order pursuant to s 98(3) and (4) that the plaintiff pay the defendant's costs on a full indemnity basis from the commencement of proceedings to date excluding a prior lump sum costs order ordered by Wright J on 13 July 2021 in the sum of $10,000.00.
3. An order that the costs of and concerning the notice of motion as referred to in order 1 herein and the proceedings be assessed as a specified gross sum pursuant to s 98(4)(c) of the Civil Procedure Act 2005 and be payable forthwith.
4. A declaration pursuant to s 99(1)(a) and (b) of the Civil Procedure Act 2005 that the legal representatives for the defendant unnecessarily incurred costs due to the serious neglect or serious incompetence of the plaintiff's legal representative, or without reasonable cause for which the plaintiff's legal representative was responsible.
5. The court notes that the solicitors for the plaintiff have had a reasonable opportunity to be heard.
6. An order pursuant to s 99(2)(b)(ii) and s 99(c) that the costs assessed as a gross lump sum herein including that of his Honour Wright J be paid to the solicitors for the defendant including the costs of this notice of motion.
7. Order the solicitors for the plaintiff to indemnify the plaintiff and cause payment to the solicitors for the defendant as assessed by this Honourable Court within seven days as directed by the solicitors for the defendant.
8. Order that in default of compliance with these orders the proceedings be stayed.
9. Order that the defendant have liberty to apply on three days' notice.
In support of the application, the defendant relied upon a series of affidavits affirmed by his solicitor Gavin John Hanrahan. Paragraphs 35 and 36 of Mr Hanrahan's 23 May 2022 affidavit are as follows:
"35. I assess the defendant's costs for work undertaken in relation to the plaintiff's ASOC motion as $18,778.54. This amount excludes the costs order referred to at paragraph 18 above. This amount relates to Turnbull Hill and Mr Baran's fees, inclusive of GST, for the period 12 January 2022 to 5 April 2022, including a reduction of 20% to Turnbull Hill's fees:
(a) Turnbull Hill Tax Invoice dated 2 March 2022 for $5,016.00 (reduced to $4,012.80);
(b) Turnbull Hill Tax fees for the period 18 February 2022 to 5 April 2022 for $3,710.30 (reduced to $2,968.24); and
(c) Mr Baran's Tax Invoice dated 8 April 2022 for $11,797.50.
36. I assess the defendant's costs from the commencement of the proceedings to the date of this affidavit as $40,264.58. This amount excludes the costs order referred to at paragraph 18 above. This amount relates to Turnbull Hill and Mr Baran's fees, inclusive of GST, for the period 21 October 2020 to 9 May 2022, including a reduction of 20% to Turnbull Hill's fees:
(a) Turnbull Hill Tax Invoice dated 16 November 2021 (with the fees relating to the costs order redacted) for $9,493.55 (reduced to $7,594.84);
(b) Turnbull Hill Tax Invoice dated 12 January 2022 for $3,426.50 (reduced to $2,741.20);
(c) Turnbull Hill Tax Invoice dated 2 March 2022 for $5,016.00 (reduced to $4,012.80);
(d) Turnbull Hill Tax fees for the period 18 February 2022 to 5 April 2022 for $3,710.30 (reduced to $2,968.24);
(e) Turnbull Hill Tax fees for the period 6 April 2022 to 23 May 2022 estimated as $5,000.00 (reduced to $4,000.00);
(f) Mr Baran's Tax Invoice dated 16 July 2021 for $1,650.00;
(g) Mr Baran's Tax Invoice dated 8 April 2022 for $11,797.50; and
(h) Mr Baran's costs for the defendant's motion estimated as $5,500.00."
The defendant correctly observed that it is almost the second anniversary of the filing of the original statement of claim, which on the defendant's submission failed to plead a case against him in a proper form. But for the belated filing of the amended statement of claim today, that would have continued to be the position. However, I consider that it is incorrect to say, as the defendant has also submitted, that the original statement of claim has been "abandoned by serving the first and second amended versions". Until today, those versions, although circulated, were never filed and until today the defendant opposed them. The plaintiff could not on my understanding be taken to have abandoned the original statement of claim until such time as a later pleading superseded it. The amended statement of claim filed today by consent did just that. Be that as it may, the defendant prays in aid the plaintiff's indecision and procrastination over two years concerning the final constitution of the proceedings as evidence of conduct by his solicitors that would warrant, or support, the making of the orders that he seeks.
In seeking to secure personal costs orders against the plaintiff's legal representatives, the defendant must establish that the conduct of the lawyers concerned satisfies the test identified in Rahman v Al-Maharmeh (No 2) [2021] NSWCA 151 at [22] per Brereton JA as follows:
"[22] … The jurisdiction to make such orders is to be exercised 'with care and discretion and only in clear cases'. In considering such an application, courts apply a three‐stage approach, asking first, has the legal representative of whom complaint is made acted improperly, unreasonably, or negligently; secondly, if so, did such conduct cause the applicant to incur unnecessary costs; and thirdly, if so, is it in all the circumstances just to order the legal representative to compensate the applicant for the whole or any part of the relevant costs."
In Lemoto v Able Technical Pty Ltd & 2 Ors (2005) 63 NSWLR 300; [2005] NSWCA 153, McColl JA said this at [192]-[195]:
"[192] Thirdly, because Division 5C operates at the fault line between a legal practitioner's duty to the Court and his or her duty to the client it has the potential to expose clients to unfortunate consequences. Thus in Degiorgio v Dunn (No 2) where the defendant sought costs on an indemnity basis not only from the unsuccessful plaintiff but also from his solicitor, the solicitor withdrew from the retainer immediately it became clear that an application for a costs order against him would be pursued. At the hearing on costs, the plaintiff appeared without legal representation and his former solicitor was represented by counsel.
[193] There is a real risk if s 198M applications are made immediately after proceedings have concluded (which I accept is the most realistic time for any such application) that the client may be prejudiced if the legal practitioner ceases to act because of a perceived conflict of interest leaving the client unable to secure advice as to the prospects of a successful appeal from the person most familiar with the proceedings.
[194] Fourthly, I share the concern expressed elsewhere of the risk of a practice developing whereby solicitors endeavour to browbeat their opponents into abandoning clients or particular issues or arguments for fear of personal costs orders being made against them: see Levick v Commissioner of Taxation (at 166); Patrick v Capital Finance Corp (Australasia) Pty Ltd [2004] FCA 1249.
[195] Finally, as I earlier noted, in Ridehalgh at 238 - 239 the Court of Appeal warned that judges 'must be astute to control what threatens to become a new and costly form of satellite litigation'. Despite this warning the House of Lords observed in Medcalf (at [13]):
'… [T]he clear warnings given in [Ridehalgh] have not proved sufficient to deter parties from incurring large and disproportionate sums of costs in pursuing protracted claims for wasted costs, many of which have proved unsuccessful'."
In Muriniti v Kalil [2022] NSWCA 109, Brereton JA also said this at [8]:
"[8] It has previously been observed that the threat of an application under (NSW) Civil Procedure Act 2005 … s 99, for personal costs orders against opposing lawyers, should not lightly be made, and that such applications should not be permitted to become satellite litigation that dominates the substantive proceedings."
Mr Baran of counsel for the defendant accepts that he must satisfy the three stage test identified by Brereton JA in Rahman v Al-Maharmeh and that wasted costs orders should only be made in circumstances where the jurisdiction to do so is exercised with care and only in clear cases: Lemoto at [92]. Even though Mr Baran also uncontroversially acknowledged that orders of the kind he seeks are usually made at the conclusion of a trial, he also emphasises that that is only a general rule and the unique circumstances of a particular case may require that a party be compensated for all of the costs that he or she has had to pay that are directly caused by the unreasonable behaviour or incompetence of the opposing party's lawyers. Mr Baran submits that this is such a case. It should also be observed that I must take into account the public interest reflected in the legislative provisions that litigants should not be financially prejudiced by the unjustifiable conduct of litigation by their lawyers or their opponent's lawyers.
Sections 98 and 99 of the Civil Procedure Act 2005 are in these relevant terms:
98 Courts powers as to costs
(1) Subject to rules of court and to this or any other Act--
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.
(3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.
(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to--
(a) costs up to, or from, a specified stage of the proceedings, or
(b) a specified proportion of the assessed costs, or
(c) a specified gross sum instead of assessed costs, or
(d) such proportion of the assessed costs as does not exceed a specified amount.
(5) …
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.
(3) …
In this case, the defendant relied specifically upon the following matters that he contends arise from the conduct of the plaintiff's solicitors:
(a) Making an application for a freezing order or an asset preservation order in circumstances where the plaintiff had no basis to do so.
(b) Serving a first version of an amended statement of claim joining the State of New South Wales then abandoning that claim without explanation.
(c) Serving a second amended statement of claim and then timetabling a notice of motion to have the leave order heard by the Court without telling the Court or the defendant that in fact the plaintiff had decided to abandon the second version of the amended statement of claim and go back to the first amended statement of claim and only disclosing that tactic in the plaintiff's written submissions such that the hearing before the Registrar and all the preparation that went into it was entirely wasted.
(d) Engaging in inordinate delay to the extent that after two years the proceedings still are not properly constituted.
(e) Engaging in inordinate delay by failing to file a notice of motion seeking leave to join the State of New South Wales and rely on the first amended statement of claim.
(f) Failing to disclose to the defendant at an appropriate time that in fact the State of New South Wales was the subject of negotiations and that a forensic decision had been taken not to join that defendant in circumstances where the plaintiff had provided statements demonstrating serious allegations of tortious conduct against State run institutions.
I pause to observe that Mr Barter of counsel appeared for the plaintiff instructed by the solicitors whose conduct is said to be the subject of these criticisms. No attention was given in the proceedings before me on this application to the question of whether Mr Barter appeared for the plaintiff but not the solicitor or for the solicitor but not the plaintiff or for both. In the latter case, no reference was made to the potential for a conflict of interest between the plaintiff as the party ordinarily liable for any adverse costs order and the solicitors who may wish to argue that the ordinary rule should not be disturbed. Having regard to the conclusions at which I have arrived, that potential has not assumed any direct importance. Notwithstanding that, the following matters, described by Brereton JA in Muriniti v Kalil at [46] should be noted:
"[46] Courts have not infrequently deprecated the threatening or making of applications for personal costs orders during or prior to the final hearing. This is for multiple reasons. First, often it cannot be determined until the conclusion of the trial whether steps taken in the matter were warranted, or unreasonable. Secondly, the lawyer's independence may be compromised, and the client's confidence undermined, by an opponent's threats to apply for costs against the lawyer during the proceedings. Thirdly, such a threat or application will often if not usually place the lawyer in position of conflict, resulting in the lawyer deciding that he or she can no longer act, depriving the client of its chosen representation while the proceedings are still on foot."
Although as I have indicated, the second and third points made by his Honour do not presently arise, the first one does. The defendant's proposition is that the plaintiff's legal representatives have been unacceptably desultory in their approach to the litigation and appear from time to time to have been stalled in a state of either chronic or intermittent indecision. The evidence reveals that the plaintiff's lawyers have for some time been in discussions with the State and that their decision not until today to commence proceedings against it was informed by the hope that some extra judicial resolution of the proceedings was or might have been possible. The defendant's response to that suggestion is that such a hope should not have operated to leave the proceedings in a frail condition for so long, devoid of momentum, particularly having regard to the fact that the defendant has incurred costs that might have, to some extent at least, been avoided if the matter had been progressed with considerably more alacrity.
As accurate as the defendant's criticisms would appear to be, I am disinclined to make an order that the plaintiff pay all or some portion of the defendant's costs incurred beyond what might have been expected in a case such as this to date, or that the burden of such costs should be borne by the plaintiff's lawyers. First, despite the somewhat unsatisfactory nature of the way the case has been conducted so far, I am not satisfied that the conduct of the plaintiff's solicitors could be said to have acted improperly, unreasonably, or negligently. Forensic decisions that turn out to be wrong or ill-advised or delays that could have been avoided with a little more attention to detail do not necessarily or easily attract any of these adverbs. Secondly, there is a real risk that the relationship between the plaintiff and his solicitor may be adversely affected by such an order and that the conduct of the proceedings might become stalled even further. Thirdly, but in a related sense, although I am not in a position to make any decision or determination about the plaintiff's injuries or disabilities that are alleged to have arisen from the defendant's impugned conduct, there is material to suggest that he is suffering from some problems that might be exacerbated should he be forced to seek alternative representation. Finally, with the recent decision to join the State now having been made, it might be expected that the proceedings will acquire a momentum that they have lacked until now. There is a risk that that momentum may be lost if the plaintiff's solicitors are foist with yet another matter to contemplate, strictly unrelated to the progress of the litigation.
In my opinion, quite apart from the fundamental difficulty that the plaintiff's solicitors have not have acted improperly, unreasonably, or negligently, this is a case in which it is overwhelmingly preferable to postpone any orders for costs relating to the proceedings thus far until they are finally concluded or resolved. I note that neither the plaintiff nor the defendant is a man of means. The outstanding costs order favouring the defendant remains unsatisfied and there would appear to be no prospect that the plaintiff could personally satisfy a further order. It goes without saying that casting the burden of such an order upon his solicitors would undoubtedly see them out of the case while simultaneously causing unintended collateral damage to the plaintiff himself.
In my view, the defendant's notice of motion should be dismissed. However, in the circumstances, I consider that the costs of the motion should be the defendant's costs in the proceedings.
[2]
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Decision last updated: 14 October 2022