Etna & Ors v Arif & Ors [1999] VSCA 99

[1999] VSCA 99

Court of Appeal (Vic)|1999-07-01|Before: CHARLES, CALLAWAY and BATT, JJ.A.

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Court

Court of Appeal (Vic)

Decision date

1999-07-01

Before

CHARLES, CALLAWAY and BATT, JJ.A.

Source

Original judgment source is linked above.

Judgment (86 paragraphs)

[1]

The application for leave to amend was prompted by observations which his Honour had made to counsel for both sides on the previous day of hearing, 2 October. His Honour had raised with junior counsel for the appellant (as he had in substance raised in para.1(a) of his memorandum seeking further submissions apparently transmitted on 1 October) whether, assuming that after the Plan Registration Date there was a continuing obligation to complete and that the express obligation to use best endeavours to procure certification and registration did not continue, there was an obligation to use reasonable endeavours. Counsel responded that no such obligation was pleaded nor were his opponents relying on such an obligation. His Honour asked whether, since the greater includes the lesser, pleading an obligation to use best endeavours might encompass an obligation to use reasonable endeavours. Counsel said that that was "widening the goal posts to an extraordinary level". A little later his Honour expressed himself as being troubled whether "the fallback position is nonetheless to be implied" when the parties have to a degree dealt with time obligations but have failed to deal with them in the event of certain things happening. Towards the end of the day's hearing his Honour took up with senior counsel for the respondents the possible construction which he had put to counsel for the appellant, speaking of "trying to sort out in my own mind how one might properly construe this contract". At the close of proceedings that day he reminded senior counsel that his opponent was arguing that an implied term to use reasonable endeavours had not been pleaded and suggested that he might want to think about that, again raising the question whether pleading of the greater obligation could include the lesser. In making his application for leave to amend on 9 October senior counsel for the respondents indicated that he had reviewed the transcript of proceedings on 2 October. Junior counsel for the appellant submitted that the application should not be allowed as a matter of discretion. Since the reasons adduced by counsel on discretion were substantially the same as those relied on before us, I do not set them out now. His Honour asked whether it was not part of his obligation to ensure that all issues between the parties were determined, to which counsel said that the respondents had identified the issues and that it was not for them to be allowed to raise further issues at that late stage as a result of concerns which the judge had. His Honour read out Rule 36.01(1) and in reliance upon it granted the leave sought, reserving the question of what further time the appellant needed to respond in argument. (It appears that junior counsel was able to deal with the amendment during that day.)

[12]

There may be a question whether, if the former O.XXVIII r.1 and its progenitor, s.222 of the English Common Law Procedure Act 1852, are correctly considered as consisting of two limbs, one discretionary and the other mandatory, it is right to apply decisions on the meaning of the expression "the real questions in controversy" in them to the meaning of the similar phrase in R.36.01(1), where, since the expression occurs in a discretionary context, there is no need to confine it. (The older provisions are capable of being read as single statements with the concluding portion being simply explanatory of the principal consequence of the first portion, but still part and parcel of the opening discretion, so that, for instance, notwithstanding the word "shall", amendment would not be allowed even if it were necessary for the purpose of determining the real questions in controversy if it would be unjust to the other party to allow it by reason, for instance, of the death of a witness. The remarks of Jenkins, L.J. in G.L. Becker Ltd. v. Medway Building & Supplies Ltd. [1958] 1 W.L.R. 1216 at 1231 and Chitty's Archbold's Queen's Bench Practice, 14th edn, 317, support that reading. But I consider it unnecessary, even if open in the face of Dwyer v. O'Mullen, for this Court to decide whether that reading is correct. In the English rules in force until very recently the two parts of s.222 appear in separate rules (O.20 rr.5 and 8(1)), but both are clearly discretionary.) On the basis, however, that it is proper to apply those decisions to R.36.01(1), there must be some modification to the test, in that paragraph (1), even if not the latter portion of the earlier provisions, is applicable "at any stage" of the proceeding, including well before the parties come to trial. It may, perhaps, be said that to procure an amendment at such an early stage the question must have been agitated between the parties as that upon which they were proceeding towards trial. Nevertheless, I find it hard to conceive that, in the absence of unusual circumstances, a plaintiff who has commenced a proceeding alleging, for instance, breach of a duty of care will at an early stage be refused leave to amend the statement of claim to allege misleading and deceptive conduct on the ground that up to that stage that had not been suggested or "agitated" between the parties. Further, if one turns to defences, the fact that Dawson, J.'s explicit reference in The Commonwealth v. Verwayen (1990) 170 C.L.R. 394 at 456 to the provision in rules of court for the giving of leave to amend pleadings for the purpose of determining the real question in controversy was made in the context of the grant of leave to amend a defence to enable a period of limitation to be pleaded by a defendant who had failed to plead it shows at the least, I consider, that the question does not have to have been explicitly agitated. (In that case the defendant had over some period stated that it would not contend that the action was statute-barred, so that that defence can scarcely be said to have been agitated between the parties as a question on which they were proceeding towards trial.) In addition, the terms of para.(3) of R.36.01 suggest that a somewhat wider interpretation of "the real question in controversy" may be required: para.(3) permits amendment under para.(1) having the effect of adding or substituting a cause of action arising after the commencement of the proceeding, and one would think that, at any rate in most cases, such a cause of action is unlikely to have been agitated as the question on which the parties were proceeding towards trial. The word "real", indeed, suggests a contrast between what is ostensible (on the pleadings) and the underlying dispute.

[15]

With regard to his Honour's exercise of discretion, it was submitted for the appellant that the appellant was of very limited means and understandably anxious as to the outcome of the case; that the case had by the time of the application for leave to amend already well exceeded the total estimate of its duration of three days given to the judge who fixed it for hearing; that the appellant was entitled to expect that the respondents' case, in what was essentially a conveyancing dispute, was in final form at the conclusion of the opening at lunchtime on the second day; and (by implication) that his Honour had failed to have regard to those considerations. It was further put that under the modern approach to amendments courts have long discarded as a shibboleth the proposition that an order for costs is an adequate panacea, and reliance was placed upon the statement by Lord Griffiths in Ketteman v. Hansel Properties Ltd. [1987] A.C. 189 at 220, which it was said was adopted in The Commonwealth v. Verwayen at 456-457, 461-462, 464-465, 482 and 498 and not disavowed in Queensland v. JL Holdings Pty. Ltd. [1997] HCA 1; (1997) 189 C.L.R. 146 at 155. This was particularly so, it was submitted, in litigation between natural persons and where to allow the amendment at a late stage of a trial might completely change the outcome of the trial. Here, it was said, a new claim had been allowed, changing the basis of the case, in contrast to Howarth v. Adey [1996] VICSC 4; [1996] 2 V.R. 535. It was accepted that whether to allow an amendment is a discretionary matter for a trial judge, but it was submitted that an appellate court will intervene where the discretion has miscarried, particularly to ensure that trials in modern times are conducted efficiently and fairly. Here the appearance of the impartial administration of justice had been eroded by the allowance of amendments, made at the invitation of the Bench itself, well after the conclusion of evidence and the filing of final submissions.

[16]

In my judgment, his Honour's discretion did not miscarry. This is so whether or not the allegation of the implied term should ultimately prove correct, because the allegation cannot be said to be obviously bad in law: The Commonwealth v. Verwayen at 456 and 464. The fundamental principle which should guide a trial judge upon an application for amendment of pleadings so as to plead a new or alternative claim or defence is that such an application should ordinarily be allowed provided that any injustice arising to the other party from doing so can be compensated by the imposition of terms: Howarth v. Adey at 542-543 and Wilson v. Grimwade [1995] VicRp 80; [1995] 2 V.R. 628 at 632 and 634. It is true that the application for leave to amend was made on the last day of hearing, after the close of evidence and the filing of written submissions. But the question raised by the amendment was simply a legal question of implication in or construction of a written contract. In that regard the observations of Isaacs, J. in O'Keefe v. Williams [1910] HCA 40; (1910) 11 C.L.R. 171 at 203-206 are particularly apposite. Indeed, the facts concerning amendment in that case are very close to those here. For the appellants there had throughout the action rested their case on an express contract in a wide sense and not on implication, and then in the end sought leave to add a count based on implication, which Isaacs, J. at 204 described as consisting simply of a better and fuller legal statement of uncontroverted facts, with the same results dependent upon the same circumstances and upon almost the same formal allegations of fact. This, he held, led to a just determination of the matters "really in issue". Although not concerned with amendment of pleadings, the well-known statement in Connecticut Fire Insurance Company v. Kavanagh [1892] A.C. 473 at 480, referred to by Isaacs, J., that when a question of law is raised for the first time in a court of last resort, upon the construction of a document, it is not only competent but expedient, in the interests of justice, to entertain the plea, points to the same conclusion as regards exercise of discretion at first instance. The amendment went to the very heart of the dispute between the parties as to whether the appellant as vendor could rescind in May 1998 when he had had a cheque for $26,000 since November 1997.

[18]

The final factor for consideration is that the possibility of there being the implied term and the possible need to amend were raised by the trial judge himself in his memorandum and orally with both counsel. I do not accept the submission for the appellant that thereby the appearance of the impartial administration of justice was eroded or that it was unfair or unjust to invite or allow the amendment. The judge had clearly been giving consideration to the proper construction of the contracts and was, as he said, troubled and concerned on that score. In my view, it was perfectly proper for his Honour to raise with the parties a possible construction which did not depend upon any additional facts, because he would have been in a difficult position if, not having done so, he felt obliged to come to the view that there was no other construction open than that one. He was assuredly not the first judge to take such a step. That having been done, it was desirable to ensure, both for the correctness of the Court's records and in case there was an appeal, that the pleadings reflected that possible view of the contract. All too frequently one finds in appeals or when a judgment falls for consideration in another proceeding that the record in the first trial is incomplete or out of date. In the corresponding rule in force in England until earlier this year (O.20, r.8) the power to order amendment could be exercised by the court of its own motion or on the application of any party. Rule 36.01(1) does not itself authorise the Court to act of its own motion. But there is a general provision in R.1.14(2) authorising the Court to exercise any power under the Rules of its own motion. In The Supreme Court Practice 1997, para.20/5-8/3 it is stated that the (English High) Court has to date very rarely exercised the power to order amendment of its own motion, but later in the paragraph it is said, "The rule enables the Court, by persuasion, if possible, and, by order, if necessary to raise the real point at issue between the parties". In my view, it was in order for his Honour to suggest to senior counsel for the respondents that he consider whether an amendment was necessary. In short, his Honour's two suggestions did not, either alone or in combination, erode or give the appearance of eroding the impartial administration of justice: compare Montedeen Pty. Ltd. v. Bamco Villa Pty. Ltd. [1999] VSCA 59 at [43-45].

[27]

I have now reached the point where the submissions of the parties diverged. A number of arguments may first be disposed of summarily. Special Condition 17, referred to for the respondents, which I have not set out, but which relates to waiver of any provision of the contract "expressed or implied", is a standard, generally expressed, clause and does no more relevantly than acknowledge the possibility of there being implied terms. On the other hand, Special Conditions 14.1.1 and 14.1.2, relied on by the appellant, do not stand in the way of the implication of a term which is otherwise to be implied. In Hart v. MacDonald [1910] HCA 13; (1910) 10 C.L.R. 417 it was held that the implication of a term to give business efficacy to a contract was not affected by the inclusion in the contract of a provision that there was no agreement or understanding not embodied in the tender and acceptance constituting the contract, for the term arose "by necessary implication upon a construction of the express words" (per Griffith, C.J. at 421), and "[e]very implication which the law makes is embodied in the contract just as effectively as if it were written therein in express language" (per O'Connor, J. at 427). Likewise Isaacs, J. said at 430 that an implication is as much a part of a contract as any term couched in express words. In relation to statutes, Rose v. Hvric [1963] HCA 13; (1963) 108 C.L.R. 353 at 358 is comparable. Hope v. RCA Photophone of Australia Pty. Ltd. [1937] HCA 90; (1937) 59 C.L.R. 348 at 363 per Dixon, J. might be thought to be to the contrary of Hart v. MacDonald, which is not cited in it. I think, however, that the explanation of Hope is that it was concerned with the possibility of the existence of circumstances extraneous to the contract from which an implication might be drawn. Special Condition 14.1.1, therefore, cannot assist the appellant. Nor can Special Condition 14.1.2, because it is concerned to exclude terms, conditions, representations and warranties other than those included in this contract. For reasons already given, an implied term or condition is included in the contract. Nor do I accept the appellant's argument that the putative implied obligation (however expressed) is directly inconsistent with the express provisions of Special Conditions 2.2 and 2.5.1. In my view, they can sit together: the implied term operates after the Plan Registration Date and admits of the appellant's rescinding pursuant to Special Condition 2.5.1 provided that up to rescission he has used the requisite endeavours to procure certification and registration. I accept that it may be another question whether Special Condition 2.2 constitutes a code, that is, is exhaustive, on the subject of the appellant's obligations with respect to certification and registration of the plan. I defer consideration of that question for the moment.

[31]

The fundamental nature of the contract bears on the appellant's argument that the language of Special Condition 2 is clear and unambiguous and that the provision deals in its express terms completely with the consequences of non-satisfaction of the contingent condition; that the legal relationship subsisting between the parties after 31 August 1997 was one at will; and that, until the plan was certified and registered or one party rescinded, there was no obligation on either party to take any step. The argument was, or means, in short that there was simply a vacuum. Now, whilst there are relationships such as tenancies at will known to the law, the contractual position contended for by the appellant is, I should have thought, highly unusual where, for the reasons I have given, the relationship of the parties is at bottom that of vendor and purchaser of land. It is true that the purchaser, no less than the vendor, had the option of rescinding; but the purchaser, unlike the vendor, if desirous of completing the contract had neither the power to do something to ensure completion nor (if the appellant be correct) the comfort of a provision obliging the vendor to do so. Whilst each had the power of veto, as it were, the purchaser was otherwise at the mercy of the vendor: cf. Zieme v. Gregory [1963] VicRp 34; [1963] V.R. 214 at 223. It is true that the appellant's construction would cause no problems in the event that the plan had been certified and then lodged in registrable form immediately before the Plan Registration Date, so that registration a few days afterwards without any further act of the vendor might be expected. But in other sets of circumstances the parties would, on the appellant's construction, simply drift along with nothing necessarily being done. I do not accept that there was, as asserted, a period devoid of operative obligations, or "contractual vacuum", as his Honour called it. A term must be implied to give business efficacy to the contract. (I am not suggesting that the contract would otherwise be illusory: for a start, the purchaser had the benefit of the appellant vendor's obligation under Special Condition 2.2.)

[40]

This issue occupied little of the argument. Having regard to my conclusion on the last two issues which I have considered, it is strictly unnecessary for me to consider this issue. Having done so, however, I see no reason to differ in any way from the trial judge's reasons and conclusion. I therefore content myself with a few remarks only. First, the appellant's execution of the second deed of variation with Esanda on 23 October 1997, whilst it might show or constitute an election to affirm the project, cannot show or constitute an election to affirm the contracts in question, for it was transacted with a stranger to those contracts. Secondly, under Special Condition 2.5.1 the appellant had a right of rescission "at any time" before registration of the plan. As the joint judgment in Immer (No.145) Pty. Ltd. v. United Church in Australia Property Trust (N.S.W.) [1993] HCA 27; (1993) 182 C.L.R. 26 at 42 states, where (as is thus the case here) the right to rescind is a continuing one, it is not so readily concluded that the party entitled to rescind has abandoned that right completely as opposed to taking no action to exercise the right at the time in question. Compare Tropical Traders Ltd. v. Goonan [1964] HCA 20; (1964) 111 C.L.R. 41 at 55. Thirdly, as regards documents, the only one whose effect is arguable is the letter of 10 November 1997 from the appellant's conveyancing solicitors to the solicitor for the second respondent. The works with which it deals seem to be extras. Even if it can be said to relate to the contract, I think that it does no more than state an intention to hold the second respondent to the contract in the event that he should in the future decline to continue with the balcony. In other words, it does not communicate a present election, but merely foreshadows a possible election in the future. It is to be noted that, even if I were wrong about that, the other two contracts would not be affected. Fourthly, in the written submissions in reply on behalf of the appellant on this question reference was made to cross-examination of the second and third respondents and their solicitors which, it was submitted, showed that at all times each appreciated that the appellant retained a right to rescind which each at all relevant times wanted to restrict by procuring a further extension of the Plan Registration Date. This cross-examination is not referred to in his Honour's reasons concerning election. Since I would in any event decide issue (e) in favour of the appellant, I do not find it necessary to consider whether the submission is borne out and, if so, its effect.

[59]

In the case of the solicitors the respondents adopted the same attitude on the questions of a summons, extension and leave itself as they did in the case of the appellant. It is established that an order that a solicitor personally pay costs is not an order "as to costs only" which are in the discretion of the court, but rather is an order in the disciplinary jurisdiction of the court (even though the main object of the order may be compensatory): In Re Bradford, Thursby and Farish (1883) 15 Q.B.D. 635; Thompson v. Fraser [1985] 3 All E.R. 511 at 512; [1986] 1 W.L.R. 17; and Michael v. Freehill Hollingdale & Page (1990) 3 W.A.R. 223 at 228 and 231-233; cf. In Re Hardwick (1883) 12 Q.B.D. 148; In Re Land and Property Trust Co. Plc [1991] 1 W.L.R. 601 at 604-605; and Wilkinson v. Kenny [1993] 1 W.L.R. 963 at 971 and 974. (The compensatory object of the order is emphasised in Myers v. Elman [1940] A.C. 282 at 289 and 319, contra at 303; Michael at 233; Ridehalgh v. Horsefield [1994] Ch. 205 at 227; and White Industries (Qld) Pty. Ltd. v. Flower & Hart [1998] FCA 806; (1998) 156 A.L.R. 169 at 229-230 (affd. sub nom. Flower & Hart v. White Industries (Qld) Pty. Ltd. [1999] F.C.A. 773) and cases there cited.) In the first-mentioned case (scil., In Re Bradford, Thursby & Farish) it was held that a judge had no discretion to make an order for costs against a solicitor personally unless there had been misconduct or negligence and that on that question there ought to be an appeal without leave. Later cases have taken a wider view and in Thompson v. Fraser at (All E.R.) 512 Sir John Donaldson, M.R. said that the Court was unanimously of the view that an appeal in such circumstances did not relate only to costs "or, indeed, primarily to costs: it relates to the conduct of the solicitor." Although the word "only" does not appear in the Victorian s.17A(1)(b), that difference does not, in my view, make the long-established line of authority distinguishable and, whilst it is not binding upon this Court, I consider that we should follow it. If, however, leave is required I would grant leave, for the appeal raises a question of some general importance as to the interpretation of Rule 63.23 and a prima facie case of error in the interpretation and application of that rule is shown.

[63]

The basis of the respondents' application was that they had unnecessarily incurred costs on the issue of whether, because of the extent of the appellant's indebtedness to his new financier, a secured creditor, specific performance of the contract was impossible. The costs had, it was claimed, been unnecessarily incurred by reason of the appellant's solicitors' having prepared the affidavit sworn by the appellant on 1 July 1998 (and in particular paras.5 and 54-58 of that affidavit) and the affidavits of David Gall sworn 4 September 1998, Vitina Bernadette Costa sworn that day, John Antoni Costa sworn 9 September 1998 and Mario Costa sworn that day when the solicitors knew or ought to have known that the conditions for re-financing imposed by St. George were not such as to preclude specific performance of the contract. The respondents' attack was two-fold. First, it was said that the solicitors knew or should have known to be false statements in the affidavits which they prepared and had had sworn to the effect that St. George would not permit the contracts of sale in question to be settled at the contract prices but would inevitably require settlement at current market values. In his affidavit of 1 July 1998 the appellant had referred to deposing in an affidavit of 20 May 1998 that raising of sufficient funds to pay out encumbrances on the title could not be effected on the basis of the sale prices of (amongst others) the units in question. He swore that sufficient funds to re-finance the project could only be procured on the basis that re-financiers could lend against the units on the basis of current market valuations (which were considerably higher than the contract prices). In his affidavit of 4 September 1998 Mr. Gall, executive manager of St. George for Victoria, swore that, if Catani requested that a discharge of mortgage be provided by St. George as mortgagee in respect of a sale for the price for one of the three units in question set out in the relevant contract instead of substantially the market value of the unit, he would not authorise St. George to provide such discharge without the consent of each of the guarantors (the four deponents other than himself mentioned earlier in this paragraph, together, it would seem, with a company of which the appellant was a director), as in his opinion to do so might expose St. George to claims from the guarantors. It was pointed out, however, for the respondents that on the very day that the appellant swore his affidavit of 1 July the re-financing of the project was settled with St. George and documents were executed including a deed of cross-collateralisation which included clauses giving the guarantors' consent to St. George's settling the three contracts in question for the sale prices respectively contained in them.

[66]

An affidavit was sworn on 5 November 1998 by the partner in the firm of solicitors who had the care and conduct of the proceeding. The deponent said that neither he nor the two solicitors assisting him had been aware of the relevant provisions of the deed of cross-collateralisation until they were raised during the trial. He swore that the deed was part of a large bundle of security documents prepared by the solicitors for St. George. Settlement of finance provided by St. George was to be effected on 1 July 1998 and was proceeding with some haste given the position of the former financier, Esanda. Neither he nor his relevant assistant was "privy to all of the documents prepared", although he was generally aware of the nature of the securities to be provided. The deponent swore that "in the late evening of 30 June 1998" his firm had received the security documents, some 27 in number, from the solicitors for St. George. They were to be executed the next morning, with settlement scheduled for the afternoon. The independent solicitor acting for the guarantors had the documents executed by them in his presence on the morning of 1 July**,** and returned the documents to St. George's solicitors. A copy of the deed of cross-collateralisation was not retained by the appellant's solicitors. The deponent stated that he had prepared a draft affidavit for Mr. Gall to swear; that Mr. Gall, St. George's solicitor, the deponent and his assistant solicitor attended a meeting on 2 September 1998 with senior and junior counsel for the appellant at which the draft affidavit was considered. The critical words in Mr. Gall's affidavit, which I have earlier summarised, were substituted in the draft by Mr. Gall and the solicitor for St. George, and the affidavit, with some other alterations, was re-engrossed and sworn. Neither of them mentioned the deed of cross-collateralisation during the meeting. His Honour pointed out that the affidavit did not state whether the deponent or either of his assistants read the documents prior to their execution. He inferred that neither the deponent nor the solicitor assisting him in the litigation perused the document. No party before us sought to challenge that inference.

[75]

In my opinion, the solicitors made good their challenge to his Honour's construction of Rule 63.23(1). I consider that "negligence" in para.(1) connotes more than "mere" or "tortious" negligence: some kind of professional impropriety or "gross" negligence is required. This follows from the language of the paragraph itself, the apparent history or source of the particular words, and such authorities as there are. As regards the language of para.(1), the word "negligence" appears as one of the alternatives in the second limb (namely, that commencing "to be wasted") of the introductory "where" clause. It appears there in a context of words denoting blameworthy conduct: it is juxtaposed to the preceding "undue delay" and the succeeding "other misconduct or default" (emphasis added). That context suggests that its meaning is to be ascertained from that of its companion words or phrases. More importantly, the word "other" suggests that "undue delay" and "negligence" are to be construed as being of the same kind as "misconduct or default". That "negligence" connotes negligent misconduct or other negligent impropriety is shown, for a start, by decisions on forerunners or cognates of the present Rule 63.71(1). That provision uses, in relation to costs, the very words appearing in Rule 63.23(1) from "incurred" down to "default". It then goes on, "or where from any other cause the amount of costs is excessive". It was that clause which fell for consideration in Re Commonwealth Oil Corporation Ltd. [1917] 1 Ch. 404, but the preceding words of the English Rule in question (O. LXV r.27(38A)), like those in the equivalent and same-numbered Victorian rule in force until 1 January 1987, spoke of costs' having been "increased by unnecessary delay or by improper, vexatious, prolix or unnecessary proceedings, or by other misconduct or negligence" (emphasis added). At 412 Sargant, J. rejected a suggestion that the words "from any other cause" in the sub-rule were limited to matters of the same kind as the matters mentioned in the preceding words, that is to say, that they applied only where there had been "something like misconduct on the part of the solicitor." It is clear that his Lordship accepted that the preceding words, which included the word "negligence", albeit in a slightly different context and in a different order, did connote "something like misconduct on the part of the solicitor". In an earlier case, In re Johnston; Mills v. Johnston [1904] 1 Ch. 132 Farwell, J. at 136, having read the preceding words, said:

[81]

Immediately before the introduction, with effect from 1 January 1987, of the Rules containing Rule 63.23 and for very many years before that, Chapter I of the Rules had contained in Order 65 rr.5 and 11 provisions authorising orders making solicitors personally liable for costs, in the first case to any party and in the second case to the solicitor's client (by way of disallowance of costs or of reimbursement of costs which the client had been ordered to pay another person). But r.5 dealt only with the case where the trial could not conveniently proceed through neglect on the part of the solicitor (which is now found elaborated in para.(2) of Rule 63.23), and r.11, although of a general nature like Rule 63.23(1), did not include the word "negligence", referring relevantly only to "any undue delay ... or ... any misconduct or default of the solicitor". The equivalent English rules are discussed in Ridehalgh v. Horsefield at 227. A new rule introduced in England in 1960 in place of Order 65 r.11 spoke of costs wasted "by undue delay or any other misconduct or default", again with no reference to "negligence". In Orchard v. South Eastern Electricity Board [1987] Q.B. 565 Sir John Donaldson M.R. said at 572 that the jurisdiction under the rule introduced in 1960 was to be exercised "only in clear cases." He made it plain that he considered that that category included cases where the proceedings instituted by a solicitor constituted an abuse of process or were unjustifiably oppressive. In 1986 the English rules were amended so as to omit reference to "misconduct" and to introduce reference to "reasonable competence". It is to be observed that in Ridehalgh v. Horsefield at 229 the English Court of Appeal was of opinion that the changes, first, removed "the implication that any conduct must amount to misconduct if it is to found a wasted costs order" and, secondly, suggested "the ordinary standard of negligence and not a higher standard requiring proof of gross neglect or serious dereliction of duty". At 230 the Court of Appeal did not question that the new rule was intended "to cut down limitations hitherto thought to restrict the court's jurisdiction to make wasted costs orders". In 1990 the English Supreme Court Act 1981 was amended to authorise the making of orders against legal or other representatives in respect of "wasted costs". These were defined as costs incurred, amongst other things, as a result of "any improper, unreasonable or negligent act or omission". In Ridehalgh v. Horsefield, at 232-233 the Court of Appeal dealt with the meaning of "negligent" in that definition. It rejected an argument that the word invoked technical concepts of the law of negligence, namely, an actionable breach of the legal representative's duty to his own client, to whom alone a duty is owed. It held that the word was to be understood in an untechnical way to denote failure to act with the competence reasonably to be expected of ordinary members of the profession.

[84]

On the basis that "negligence" in Rule 63.23(1) is limited to professional impropriety or the like and serious or gross, as opposed to mere, negligence, I turn to the second challenge to his Honour's decision to make a costs order against the solicitors. In view of the interpretation I have arrived at, it is unnecessary to decide the precise point raised by this challenge, namely, whether the preparing and filing of the affidavits without having read the deed of cross-collateralisation and picked up in it the provisions which were relevant, though apparently somewhat unusual in such a document, constituted negligence. That conduct, in my opinion, plainly did not constitute professional impropriety, dereliction of duty to the Court, or other misconduct or default, or serious or gross negligence. It is to be remembered that the deed of cross-collateralisation was accompanied by 26 other documents and had to be, along with them, executed as a matter of urgency. The solicitors were not acting for the guarantors other than the appellant, though they were acting for him and the borrower, Catani. The main concern as regards the deed was to ensure that it was satisfactory to the guarantors after they had received independent legal advice. There was no over-reaching of the Court, no dereliction of duty to it nor any other impropriety in the omission and in the preparing and swearing of the affidavits, even of those sworn in September. The solicitors' omission was careless and mistaken, for each document should have been perused before a client was allowed to execute it, but, in the circumstances, the omission did not amount to serious or gross negligence. Independently of the foregoing considerations, there is much to be said for the view that there could not have been "negligence" or other misconduct or default within Rule 63.23(1) unless the solicitors should have read the deed for the purpose of the litigation, and that, although the deed related to the re-financing and the re-financing was relevant to an assertion in the affidavit of 20 May (though the defence had not yet been served), any perusal of the deed on 30 June or 1 July 1998 that was requisite, was requisite not for the purpose of the litigation, but for the finalisation of the security documents on which the re-financing of the project depended.