Duarte v Coshott, in the matter of Duarte

1. The application for a special costs order against Mr Nicholas Prassas be dismissed.
2. There be no order as to the costs of the application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BROMWICH J: 1 The question that arises is whether certain costs of the applicant in these proceedings should be paid by the respondent's solicitor personally. 2 On 20 October 2017, I granted an application to set aside a bankruptcy notice that had been issued at the request of the respondent, Mr Michael Coshott: Duarte v Coshott, in the matter of Duarte [2017] FCA 1238. This judgment assumes familiarity with those reasons. 3 In Duarte, it was found that there was no valid debt at the time that the bankruptcy notice was issued. It was also found that the respondent had been put on clear notice from 11 April 2017, by letter to his solicitor, of the defects in the bankruptcy notice. At the applicant's request, the Court made orders that the respondent pay the applicant's costs, fixed in a lump sum, with those costs to be paid on an ordinary basis up to and including 11 April 2017, and on an indemnity basis thereafter. A registrar of the Court has since fixed those costs in the sum of $28,765.52. 4 In her submissions to the Court, the applicant also sought for a special costs order to be made against the respondent's solicitor, Mr Prassas. At the time of my decision, I considered that there was insufficient material to justify such an order. However, leave was granted for the applicant to file a formal application together with any further evidence she wished to advance in support. 5 The applicant has since filed further submissions and an affidavit of her solicitor. In that material, the applicant presses for the making of an order that Mr Prassas pay her costs of the proceedings from 25 May 2017 onwards. The basis for this position is that, on 25 May 2017, it was put to Mr Prassas by letter that concessions had been made through him (and counsel) in the Local Court proceedings on 11 May 2017 to the effect that the respondent had received several payments towards the debt claimed in the bankruptcy notice. It is submitted that, in those circumstances, Mr Prassas must be taken to have known that the bankruptcy notice was overstated or otherwise invalid, and has knowingly maintained a position in this Court that was bound to fail. 6 The Court's power under s 43 of the Federal Court of Australia Act 1976 (Cth) to make a costs order against a solicitor is well-established: Levick v Deputy Commissioner of Taxation [2000] FCA 674; 102 FCR 155. It is a power that must be exercised with care and discretion and only in a clear case. In Mitry Lawyers v Barnden [2014] FCA 918, Wigney J summarised the relevant principles at [44] as follows: 1. Instituting or maintaining a proceeding on behalf of a client which has no, or substantially no, prospect of success will not, without more, invoke the jurisdiction to make a costs order against a lawyer. 2. Something which involves "unreasonable conduct" is required. 3. What constitutes unreasonable conduct will depend on the circumstances of the particular case. 4. The element of acting unreasonably 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, or an intention to use the proceeding for an ulterior purpose, or to abuse the processes of the court, or with a disregard of any proper consideration of the prospects of success. 5. The circumstances must involve or result in a serious dereliction of duty owed to the court, or serious misconduct in promoting the course of, and the proper administration of, justice. 6. An ulterior purpose or an abuse of process cannot be assumed simply because the case is hopeless. 7. The reason that the mere pursuit of an unmeritorious case is not so sufficient to invoke the jurisdiction to make a costs order against a lawyer is that a party is entitled to have a practitioner act for him or her in an unmeritorious case. The court is concerned to avoid the risks of a practice developing whereby lawyers endeavour to browbeat their opponents into abandoning clients, or particular issues or arguments, for fear of personal costs orders being made against them. 7 Broadly speaking, the principles require unreasonable conduct on the part of the solicitor that entails a serious dereliction of his or her duty to the Court. Levick is an example of a case that involved a finding of such conduct. 8 As observed in Levick at [41]-[42], there are competing principles at play. On the one hand, a party is entitled to have a practitioner act for him or her in an unmeritorious case. On the other hand, the practitioner should not lend his assistance to proceedings that are an abuse of the process of the Court: Ridehalgh v Horsefield [1994] Ch 205 at 234, cited with approval in Levick at [42]. Of course, the dividing line between a hopeless case and one constituting an abuse of process may not always be clear. But where there is doubt, the legal representative is entitled to the benefit of it: Ridehalgh at 234. 9 It will readily be seen that the applicant goes no further in this case than suggesting that Mr Prassas was aware that his client's position was hopeless. There is no allegation that he maintained his client's position for an ulterior purpose or in such a way as to constitute an abuse of process. Nor is there any complaint about the manner in which the case was argued. In those circumstances, the Court has been given no reason for finding that this was other than a case in which a practitioner has properly acted on instructions from his or her client. I am therefore not satisfied that there has been any "unreasonable conduct" on the part of Mr Prassas in the sense required by the authorities. 10 The applicant says (without evidence) that the costs order is sought due to the fact that the respondent resides overseas and has no assets in Australia. That may be a reason why the applicant wishes for the order to be made, but it is not a proper basis for the Court to exercise the discretion to do so. 11 The application for a personal costs order is refused. As Mr Prassas did not seek an order for costs, none should be made. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromwich.