Kalloghlian v Mitry

Court of Appeal (NSW)|2023-03-31|Before: Gleeson JA, Mitchelmore JA, Adamson JA, Peden J

Background to the application for orders against Mr Mitry

The background to Mr Kalloghlian's application was not contentious and is summarised in the reasons of the primary judge at [10] to [80]. What follows is taken largely from the reasons.
In March 2014, Mr Kalloghlian engaged Villa to provide architectural services for a substantial renovation of his property in Hunters Hill ('Property'). On 13 July 2015, Mr Kalloghlian and PCM entered into a written cost-plus contract in relation to the alterations and additions to the Property (Building Contract). The Home Building Act 1989 (NSW) applied to the majority of the works that were the subject of the Building Contract.
In October 2016, PCM ceased carrying out work at the Property, complaining of unpaid progress payments. Mr Kalloghlian, in turn, complained to Mr Mitry about Villa and PCM, alleging defects in the building work: [10].
By letter to Villa dated 28 October 2016, sent on the instructions of Mr Kalloghlian, Mr Mitry warned that Mr Kalloghlian intended to commence proceedings in relation to defects: [10]. When he provided Mr Kalloghlian with a draft of this letter, Mr Mitry advised that "until we have a formal report, we don't have a quantified claim": [11].
In early November 2016, Mr Kalloghlian instructed Mr Mitry to engage John Worthington, a building expert, to prepare a report on the defects to assist with consideration of a possible claim against Villa: [12]. On 20 April 2017, Mr Worthington produced his first report, expressing the view that PCM and Villa had caused loss to Mr Kalloghlian: [14].
On 4 April 2017, Mr Mitry had sent Mr Kalloghlian a letter of engagement, which was in a standard form: [13]. On his review of the report Mr Worthington produced that same month, Mr Mitry considered that it could not be used in litigation but could be used for negotiation. On 8 May 2017, Mr Mitry served the report on PCM and Villa on a "without prejudice basis" and sought their response: [14].

Mr Kalloghlian's claim against Mr Mitry

Section 99 of the CP Act provides: 99 Liability of legal practitioner for unnecessary costs (cf Act No 52 1970, section 76C; SCR Part 52A, rules 43 and 43A) (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. … (7) In this section, client includes former client.
In his Amended Points of Claim filed on 10 January 2023 (APC), Mr Kalloghlian relied on both limbs of s 99(1) in support of the claimed Solicitor/Client Costs and the Costs Order Costs: APC [30]-[31]. In the APC, Mr Kalloghlian advanced a number of allegations about Mr Mitry's conduct of the District Court and Supreme Court proceedings. Although Mr Kalloghlian's counsel at the hearing before the primary judge submitted that the points of claim should not be read strictly, her Honour did not accept that submission, "particularly in circumstances where his counsel appeared to take some care with them and amended them several times, including on the final day of the hearing": [92].
The conduct on which Mr Kalloghlian relied as engaging s 99(1) of the CP Act was as follows: 1. Notwithstanding that the first report of Mr Worthington was "of little or no probative value for the purpose of Court proceedings in relation to the Dispute", and despite instructions to do so, Mr Mitry did not take steps to commence proceedings against PCM or Villa, or cause an expert report of probative value to be prepared: APC [9]-[11]. 2. Mr Mitry "drafted, filed and served" a Defence to PCM's claim that (APC [13]): "(a) was poorly pleaded and particularised and was liable to be struck out in whole or in part; (b) admitted the Building Contract; (c) pleaded the existence of breaches by the First Defendant of the Building Contract but did not particularise them, whether by reference to the First Worthington Report or in any other way; and (d) pleaded a set off by reference to a Cross Claim but failed to file a Cross Claim." 1. Mr Mitry sent a letter to PCM's solicitor on 17 August 2017 requesting instructions about service of proceedings in the Supreme Court and yet failed to commence such a claim: APC [14]. 2. In November 2017, Mr Mitry advised the District Court of an intention to make an application to transfer the proceedings to the Supreme Court and failed to make that application: APC [15]. 3. The cross-claim that Mr Mitry "drafted, filed and served" in May 2018 (APC [16]): "(a) was filed eight months late and in breach of the directions of the Court; (b) was poorly particularised and liable to be struck out in whole or in part; (c) pleaded the Building Contract; (d) particularised a number of defects derived from the First Worthington Report but did not particularise them, whether by reference to the First Worthington Report or in any other way; and (e) brought no claim against the Second to Fourth Defendants [being the director of PCM, Villa and the director of Villa]." 1. Mr Mitry "caused to be served" a further report of Mr Worthington in July 2018 which was late, of little or no probative value for the District Court proceedings, and "if solely relied upon in the District Court proceedings, placed the Plaintiff at risk of failure and paying the costs of the First Defendant, such as to justify a decision not to proceed to final hearing in reliance upon it": APC [17]. 2. Following the adjournment of the hearing, at which point the Court ordered the Plaintiff to file and serve a further report of Mr Worthington (APC [18]), Mr Mitry did not serve the further report he received, "in the absence of which, or the service of an alternative report, the Plaintiff was at risk of failure in the District Court Proceedings and paying the costs of the First Defendant, such as to justify a decision not to proceed to final hearing without such a report": APC [19]. 3. The Technology and Construction List Statement that was filed on 5 March 2019, inter alia, denied the enforceability of the Building Contract "contrary to admissions made in the District Court Proceedings"; sought to join Villa and the director defendants and raise causes of action "which could have been raised in the District Court Proceedings"; pleaded new causes of action; referred to additional expert evidence which was not served; and "if relied upon, amounted to a case against all of the Defendants which was substantially new relative to the case in the District Court Proceedings, the effect of which was that the costs incurred by the Plaintiff and the First Defendant [PCM] were wasted": APC [21].
In concluding that Mr Kalloghlian had failed to discharge his onus of proving that Mr Mitry had behaved in a way that was "quite plainly unjustifiable" (at [108]), her Honour preferred the evidence of Mr Mitry ("a truthful witness" who "made appropriate concessions") where there was an inconsistency between his evidence and that of Mr Kalloghlian ("generally an unimpressive witness"): [100]-[101]. Her Honour found that Mr Kalloghlian was involved in each step of his litigation, gave his opinions about all matters and was kept aware of what was going on, including in relation to the experts and barristers engaged: [102(1)-(2), (6)-(7), (9)]. Mr Kalloghlian was also kept informed about the progress of the pleadings and the weaknesses of his case against PCM; and he was advised by Mr Mitry (and by barristers including Mr Hand) that the proposed defects claim against Villa required an expert report before it could be properly pleaded and progressed: [102(3)-(5)]]. Mr Mitry applied himself independently to the progress of the case, and although he relied upon the advice of counsel in progressing the case her Honour did not consider this to be inappropriate or unreasonable: [102(8)].
Her Honour considered that Mr Kalloghlian's "real complaint" was "that Mr Thomas' Commercial List Statement raising, inter alia, misleading and deceptive conduct against the architect was not prepared at the outset of the matter by Mr Mitry": [103]. In circumstances where there was no defence to PCM's claim and "only a set-off pleaded for defects that could be proved", her Honour was not in a position, on a summary motion, to determine the likely outcome in the absence of a judgment on any of the claims, and to assess the likely costs consequences should the matter have been finally determined: [104]. Her Honour addressed each of the key matters on which Mr Kalloghlian relied at [105] (see [35] above), finding that none of the conduct satisfied either s 99(1)(a) or s 99(1)(b), and some of the key matters did not satisfy a more fundamental requirement, such as that the costs meet the definition of "costs" in the CP Act.
In light of her Honour's conclusion on the key matters, it was not strictly necessary to decide questions of causation. Nonetheless, her Honour concluded that none of the conduct complained of could have caused PCM to incur wasted costs because the Costs Order Costs were referable only to PCM's claim for unpaid progress payments: [110]. Her Honour developed this point in [111]-[112], stating: "The builder's case was always one in relation to which Mr Kalloghlian had no defence, other than a set off for any amount successfully recovered from the builder by way of cross-claim. Even if Mr Kalloghlian's cross-claim had been prosecuted in the District Court and the benefit of a set-off was applied, it did not mean that the builder would not have been entitled to a costs order for its costs of its claim. This was advised by Mr Hand in November 2018. None of the conduct complained of in the points of claim could have caused the builder to incur wasted costs, for which Mr Kalloghlian became liable."
It was also not apparent to her Honour why the conduct complained of could have caused 'wasted' costs in terms of the Solicitor/Client Costs, as the invoices related to investigating claims and pursuing the cross-claim which was retained in the Supreme Court proceedings. There was no further evidence served in the Supreme Court after the proceedings were transferred from the District Court, which indicated that the evidence prepared to that point was considered sufficient to support the Supreme Court claims. The expert report of Mr Worthington could also be taken to have been necessary given it was expressly referred to in the Supreme Court proceedings: [113].
Relevantly to the Amended Notice of Contention, Mr Mitry had submitted that Mr Kalloghlian's application was out of time because it was not filed within 14 days of the final orders, as required by r 36.16 of the UCPR: [115]. Her Honour stated that it was unnecessary to decide this issue, having already concluded that it was not appropriate to make the orders sought: [117].

Mr Kalloghlian's arguments on the appeal

The Amended Notice of Appeal contained nine grounds of appeal, four of which were not pressed. In the written submissions filed on behalf of Mr Kalloghlian, grounds 1, 2 and 3 were addressed together, separate and brief attention was given to ground 6, and ground 7 was also separately addressed.

Grounds 1, 2 and 3

Grounds 1, 2 and 3 of the Amended Notice of Appeal were as follows: "1. The learned judge erred in her decision that the applicant failed to discharge the legal onus of proving that a personal costs order should be made against the respondent having regard to the entirety of the relevant and admissible evidence and the proper construction of s 99 of the Civil Procedure Act 2005 (NSW) ("the CPA"). 2. The learned judge erred in failing to find that the applicant had established a prima case that a personal costs [order] should be made against the respondent having regard to the entirety of the relevant and admissible evidence and the proper construction of s 99 of the CPA. 3. Further or in the alternative to ground 2 above, the learned judge erred in failing to find the respondent had not discharged the evidentiary burden to satisfy the court that an order should not be made against the respondent having regard to the entirety of the relevant and admissible evidence and the proper construction of s 99 of the CPA."
In a lengthy introduction to the submissions on the grounds, Mr Kalloghlian submitted that: 1. he should have been advised, from the outset, about the absence of any defence to PCM's claim for unpaid progress payments. The absence of any advice on that subject was sufficient, in his submission, to ground a prima facie case so as to shift the burden of proof to Mr Mitry; and 2. in circumstances where any defects claim could only be brought when admissible evidence was available, once Mr Worthington abandoned his position on defects, in November 2018, Mr Kalloghlian should have been advised that "at its highest the defects claim was never going to be worth more than $155,119.70 and [he] was inevitably faced with a net position of an outlay to the builder of at least $432,595.34 and any consequent orders relating to interest and costs".
Mr Kalloghlian submitted that the primary judge's finding that he was continuously informed about the weaknesses of his case against the builder, including that Mr Worthington's evidence was not very good, needed to be seen in a context in which he was "not rigidly opposed to a realistic outcome". In response to a question during the hearing about the content of a "realistic outcome", Senior Counsel replied that it involved Mr Kalloghlian having to pay at least $580,000 (being the unpaid progress payments) less $155,000 (being the defects to which Mr Worthington adhered). Senior Counsel later submitted: "The realistic outcome is he had to pay a lot of money and he should have been advised, we say, should have been advised. If he didn't pay it, that's his business, he'd be foolish not to. But he should have been advised this is your position, it's bad, you can't win or you can't win as much as you might have thought. You're bound in the long run to pay either all or the major part of the builder's claim."
Mr Kalloghlian's submissions on grounds 1, 2 and 3 rested on a premise that was not consistent with the case run below and was otherwise not supported by the evidence. Contrary to the written and oral submissions, the way Mr Kalloghlian now put his case was not his "real claim" before the primary judge.
I have extracted the primary judge's summary of the two limbs of Mr Kalloghlian's case at [5]. As Mr Mitry submitted in detail, by reference to both the evidence and the submissions advanced on Mr Kalloghlian's behalf below, her Honour's encapsulation of his case was accurate. That case rested, in turn, on the particular conduct of Mr Mitry that was pleaded in the APC (see [35] above).
Mr Kalloghlian submitted in his reply submissions that the first limb of his claim as summarised by the primary judge "explicitly involves the proposition that there was no defence to the builders (sic) claim", and that "[a]t the very least, it is clearly implied". I do not accept that submission. The allegation of woeful preparation in the first limb was directed at "the case against the builder for defects" (emphasis added), which can only be a reference to the subject of the cross-claim. So much is also apparent from the balance of her Honour's summary of the first limb: the allegedly insufficient evidence left "no option but to agree to pay the builder's claim and the builder's costs of the District Court proceedings, and start the claim against the builder again in the Supreme Court". This closely reflected the content of the closing submissions filed on Mr Kalloghlian's behalf below, at [35]: "The evidence also establishes that the District Court case that the respondents prosecuted was so ill-prepared and subject to such inordinate delays and breaches of Court directions (mainly with respect to the obtaining of a report from Mr Worthington in a timely fashion), … such that, when it came to hearing, it was effectively hopeless, or sufficiently so such that the risk of running to trial … in circumstances where no further adjournment was available, meant the only course was to capitulate by paying the judgment and the costs penalties that followed on 1 April 2019."
As is apparent from these submissions, it was always Mr Kalloghlian's case that the defence to PCM's claim in the District Court was a set-off in the form of the defects claim. His counsel confirmed this in response to a question from the primary judge, in his oral opening, as to whether PCM's claim was defended on instructions. At no stage did Mr Kalloghlian suggest in the Court below that the builder's claim should not have been answered that way. Rather, his contention was that the answer he pleaded should have been better prepared and in a more timely fashion.
Consistently with her Honour's characterisation of his case below, Mr Kalloghlian did not include in the APC (as part of Mr Mitry's conduct of which he complained) an omission on the part of Mr Mitry to advise him that PCM's claim should never have been defended. To the contrary, the conduct of which Mr Kalloghlian complained in the APC included that Mr Mitry had, in both the defence and the cross-claim, admitted and/or relied on the Building Contract (pursuant to which PCM's claim was made). This was said to have given rise to wasted costs, among other things, because in the Supreme Court proceedings the Building Contract was disputed. By contrast, the "costly diversion" of which Mr Kalloghlian now complains is said to be the product of defending PCM's claim at all.
In his written submissions in support of Grounds 1, 2 and 3, Mr Kalloghlian referred to the finding of the primary judge at [111] (see [38] above) and submitted that the conclusion her Honour there expressed should have led her to find for him. That submission takes [111] out of context and relies on it for a proposition with which her Honour was not there concerned.
As the primary judge observed at [88] by reference to NHB Enterprises Pty Ltd v Corry (No 5) [2020] NSWSC 1838 at [51] (Ward CJ in Eq), in determining an application under s 99 of the CP Act it is appropriate first to identify where costs have been incurred by a party as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative. Once a finding of conduct by a legal practitioner to engage the operation of s 99(1) of the CP Act is made, the next step is to determine whether such conduct caused costs to be incurred that would not otherwise have been incurred but for that conduct. At [111], the primary judge was considering the second step, on two assumptions, neither of which was made good: (i) costs had been incurred as a result of the pleaded acts or omissions of Mr Mitry; and (ii) the pleaded acts or omissions were properly characterised as improper, unreasonable or negligent. The point her Honour made at [111], responsively to the case then put, was that PCM would have been entitled to the costs of its claim irrespective of the merits of the cross-claim. Mr Mitry submitted, correctly, that this did not amount to a finding that PCM's claim should never have been defended; and it cannot now be relied upon for that purpose.
I accept Mr Mitry's submission that if the complaint now made had been put below, it is a complaint that he would have been in a position to address in his evidence. An appellate court will not entertain a new point where evidence could have been given in the court below which by any possibility could have prevented the point from succeeding: Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; [1950] HCA 35; Water Board v Moustakas (1988) 180 CLR 491 at 497; [1988] HCA 12. The application of that principle does not permit the case Mr Kalloghlian now advances to be put on appeal.
In any event, the evidence before the Court does not support Mr Kalloghlian's new point. As his counsel below frankly accepted, Mr Kalloghlian's case on the PCM claim was that the only available response was to set-off the alleged builder defects. The Defence that was filed on Mr Kalloghlian's instructions (and that he verified) admitted the Building Contract, and that its terms required the claimed payments to be made but for the defective works, for which there should be a set-off as against the claimed payments.
The cross-claim in support of that set-off was supported only by the evidence of Mr Worthington. From the time Mr Hand was briefed, he consistently advised that Mr Worthington's evidence was unlikely to be admissible, including because he had "entered the arena". According to Mr Hand's email of 18 November 2018, he reiterated this to Mr Kalloghlian in conference in the lead up to the hearing, around which time Mr Worthington changed his position (adversely to Mr Kalloghlian) on a large number of the claimed defects. In that same email, Mr Hand reported that Mr Kalloghlian appeared to understand the realities, including as to costs.
This having been "plainly explained to him", Mr Kalloghlian had authorised an opening settlement offer of $200,000, and had indicated that he was prepared to pay more. However, according to Mr Hand "that all changed on Friday" having regard to the adjournment application. After the adjournment was granted, Mr Hand gave further advice which was provided to Mr Kalloghlian the same day, reiterating the problems with the evidence and "strongly urg[ing]" him to increase his settlement offer "to one that more accurately reflects the risks involved in proceeding to a final hearing".
Even without the opportunity that would, fairly, need be accorded to Mr Mitry to respond to the case that Mr Kalloghlian now seeks to put, it is against the weight of the evidence. Grounds 1, 2 and 3 should be dismissed.

Ground 6

Ground 6 of the Amended Notice of Appeal contended that the primary judge erred "in requiring the applicant to prove that the respondent 'behaved in a way that no reasonable practitioner would have behaved' for the purposes of the application under s 99 of the [CP Act]". This ground was not addressed orally; and in written submissions there was but one paragraph, which cross-referred to earlier paragraphs in the submissions to the effect that the relevant principles were "well-established" and included references to Muriniti v Mercia Financial Solutions Pty Ltd [2021] NSWCA 180 at [14]-[16] and Muriniti v Kalil [2022] NSWCA 109 at [42]-[45].
The primary judge made the impugned statement in the context of considering the allegation in APC [21]. As her Honour noted, APC [21] "merely referred to the filing of the List Statement in this Court and the allegations that Mr Kalloghlian asserts ought to have been agitated by his lawyers from the outset": [105(7)]. Her Honour rejected the factual proposition on which this allegation rested, namely, that Mr Kalloghlian had provided Mr Mitry, in October 2016, with substantially more instructions than those recorded in the original statement that Mr Mitry had taken, and had informed him that he had significant concerns about having been misled as to the price of the renovation works. The impugned statement was made expressly on an "even if I am wrong" basis. In the absence of any challenge to the factual position, the alleged error, even if it were made out, is not material.
Turning to the substance of the ground, in [88] of the primary judge's reasons her Honour provided a comprehensive summary of the principles that are applicable to s 99 of the CP Act and the inherent jurisdiction. Relevantly, her Honour observed, by reference to Re Felicity; FM v Secretary, Department of Family and Community Services (No 4) [2015] NSWCA 19 ("Re Felicity") at [24] (Basten JA, Ward JA and Emmett JA agreeing) that the adjectives of neglect, incompetence and misconduct, which are not defined in the CP Act, do not constitute discrete and independent concepts and should not be treated as terms of art. Her Honour also referred in this context to the guidance provided by Bingham MR in respect of the UK's equivalent provision in Ridehalgh v Horsefield [1994] Ch 205 at 232-233, which was cited with approval in Re Felicity at [24] and in Wentworth v Rogers [1999] NSWCA 403 at [32]-[35], [41] (Handley and Stein JJA, Sheppard AJA).
With the qualification that the adjectives should not be sharply differentiated (at 233), Bingham MR relevantly said the following about the adjective "unreasonable" at 232: "But conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and reflecting on a practitioner's judgment, but it is not unreasonable."
Her Honour further observed that in considering wasted costs arising out of a lawyer's conduct of court proceedings, "full allowance must be made for the exigencies in acting in that environment and only when, with all allowances made, a legal practitioner's conduct of court proceedings is quite plainly unjustifiable is it appropriate to make such an order": [88(7)] (citations omitted).
As Mr Mitry submitted, the impugned statement may have been shorthand, but it nonetheless reflected the substance of the authorities which her Honour had earlier summarised and understood. The ground is thus not made out as a matter of substance.

Ground 7

As with ground 6, ground 7 was only addressed in writing. By this ground, Mr Kalloghlian contended that the primary judge erred "in considering that the alleged failures of the respondent to plead a cause of action cannot amount to gross negligence or improper conduct for the purpose of s 99 of the [CP Act] because that cause of action 'has not been demonstrated to have been the correct or a successful cause of action' because the proceedings were not the subject of a judgment". He submitted that the primary judge was concerned to emphasise (both during the hearing and in the primary judgment) that she was unable to assess the respondent's conduct for the purposes of s 99 of the CPA because there had been no judicial determination of the defects case or the Supreme Court case. Mr Kalloghlian submitted that as a matter of implication, her Honour had concluded that there was no power to make a costs order against a solicitor in the circumstances, when that was not the case.
The submissions on this ground did not engage her Honour's reasons in [105], in which she concluded that each of the complaints that Mr Kalloghlian advanced in support of his application did not satisfy the criteria in s 99(1) of the CP Act. Her Honour's conclusion, at [108], that Mr Kalloghlian had failed to discharge his onus of proving that Mr Mitry had behaved in a way that was "quite plainly unjustifiable" was the product of that reasoning.
In any event, the consequences of this alleged error on her Honour's decision, Mr Kalloghlian submitted, was that "at the least, the primary judge should have attempted to decide whether there was a prima facie case" regarding Mr Mitry's conduct as to PCM's claim for unpaid progress payments. Mr Kalloghlian submitted that the PCM claim "could only have resolved in the builder's favour in whole or in great measure". Although not expressly stated, the implication is that her Honour's reluctance to embark upon an evaluation of the underlying substantive claims could not have applied to PCM's claim, as there was never any defence to it. I have dealt above with the manner in which Mr Kalloghlian's reliance on the complaint that there was an absence of any defence to that claim represents an impermissible departure from the bases on which he sought the orders before the primary judge. Her Honour did not err, either in the manner alleged or at all, in not engaging with a complaint that Mr Kalloghlian did not then advance.

Conclusion

The appeal should be dismissed. In those circumstances, it is not necessary to deal with the parties' submissions as to quantum or on the Notice of Contention. Costs should follow the event.
ADAMSON JA: I agree with Mitchelmore JA.

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Property (Building Contract). The Home Building Act 1989(NSW)

HEADNOTE [This headnote is not to be read as part of the judgment] The appellant, Mr Kalloghlian, appealed against the decision to dismiss his application in the Supreme Court for a personal costs order against the respondent solicitor, Richard Mitry, who had acted for him in proceedings in the District Court and the Supreme Court involving claims arising from renovations to Mr Kalloghlian's family home. On 11 May 2017, the builder, Pure Construction Management Pty Ltd (PCM), commenced District Court proceedings against Mr Kalloghlian claiming unpaid progress payments. On 16 August 2017, a Defence was filed which referred to a set-off by reason of a cross-claim. On 25 May 2018, Mr Kalloghlian filed a cross-claim, alleging defective works. In March 2019, Mr Kalloghlian commenced proceedings in the Supreme Court against PCM, the architect, Villa & Villa Pty Ltd and the directors of both companies. On 1 April 2019, orders were made in the Supreme Court by consent, pursuant to which the District Court proceedings were transferred to the Supreme Court, judgment for PCM was given on its claim and Mr Kalloghlian was ordered to pay PCM's costs of that claim and the costs payable pursuant to an earlier costs order. Mr Kalloghlian made an application, pursuant to s 99 of the Civil Procedure Act 2005 (NSW) (CP Act) and/or the inherent jurisdiction of the Supreme Court, seeking (i) an order disallowing the costs paid or payable by Mr Kalloghlian to Mr Mitry for fees or disbursements in whole or in any portion that the Court determined; and (ii) an order that Mr Mitry pay to Mr Kalloghlian the sum of the costs that he had been ordered on 1 April 2019 to pay to PCM. Mr Kalloghlian put his case for those orders before the primary judge on two bases, set out by the primary judge as follows: "(1) the case against the builder for defects was 'woefully prepared' by the solicitor, with insufficient evidence to support the claim, such that there was no option but to agree to pay the builder's claim and the builder's costs of the District Court proceedings, and start the defects claim against the builder again in the Supreme Court; and (2) Mr Kalloghlian always wanted to bring a claim against the architect, and such a claim was only devised after it was too late to join that action in the District Court, which was the solicitor's fault." Her Honour dismissed the application on the basis that Mr Kalloghlian had not discharged his onus of proving that Mr Mitry had behaved in a way that was "quite plainly unjustifiable" and her Honour was not persuaded that it was appropriate to make a personal costs order. Her Honour also stated (in obiter dictum) that she was not persuaded that Mr Mitry's conduct caused the claimed wasted costs. On appeal, Mr Kalloghlian contended that he should have been advised, from the outset, about the absence of any defence to PCM's claim and that he was inevitably faced with a net position of an outlay to PCM. The absence of that advice grounded a strong prima facie case which shifted the onus to Mr Mitry, who did not demonstrate that the personal costs order should not be made (Grounds 1, 2 and 3). He also contended that the primary judge erred in requiring him to prove that Mr Mitry "behaved in a way that no reasonable practitioner would have behaved" (Ground 6) and considering that her Honour could not assess Mr Mitry's conduct for the purposes of s 99 of the CP Act because there had been no judicial determination of the defects case or the Supreme Court case (Ground 7). The Court (Mitchelmore JA, Gleeson and Adamson JJA agreeing), dismissing the appeal, held: 1. Grounds 1, 2 and 3 represent an impermissible departure from the case ran below. Mr Kalloghlian did not contend below that Mr Mitry had omitted to advise him that PCM's claim should never have been defended: at [7], [45]-[52]. In any event, the argument is against the weight of the evidence: [7], [53]-[56]. Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35; Water Board v Moustakas (1988) 180 CLR 491; [1988] HCA 12 applied; NHB Enterprises Pty Ltd v Corry (No 5) [2020] NSWSC 1838 considered. 1. As to Ground 6, the alleged error is not material as the impugned statement was made on an "even if I am wrong" basis and there was no challenge to the underlying factual finding: [58]. Additionally, the impugned statement reflected the substance of the authorities earlier summarised and understood by the primary judge: [59]-[62]. Muriniti v Mercia Financial Solutions Pty Ltd [2021] NSWCA 180; Muriniti v Kalil [2022] NSWCA 109; Wentworth v Rogers [1999] NSWCA 403 cited; Re Felicity; FM v Secretary, Department of Family and Community Services (No 4) [2015] NSWCA 19; Ridehalgh v Horsefield [1994] Ch 205 considered. 1. Ground 7 does not engage with the primary judge's reasons for concluding that Mr Kalloghlian's complaints did not satisfy s 99(1) of the CP Act: [64]. Additionally, the contention that her Honour's reluctance to evaluate the substantive claims should not have applied to PCM's claim was based on a complaint that Mr Kalloghlian did not advance before the primary judge: [65].

JUDGMENT

GLEESON JA: I agree with Mitchelmore JA.
MITCHELMORE JA: The appellant, Avedis Kalloghlian, applied for a personal costs order against the respondent solicitor, Richard Mitry. Mr Mitry acted for Mr Kalloghlian in proceedings in the District Court of New South Wales in which he was the defendant and cross-claimant. Mr Mitry also initially represented Mr Kalloghlian in Supreme Court proceedings in which he was the plaintiff. The primary judge dismissed the application: Kalloghlian v Mitry Lawyers Pty Ltd (No 2) [2022] NSWSC 1071. This is an appeal from her Honour's decision.
The proceedings in the District Court and the Supreme Court involved claims arising from renovations to Mr Kalloghlian's family home. The builder, Pure Construction Management Pty Ltd (PCM), commenced the proceedings in the District Court against Mr Kalloghlian in May 2017, claiming unpaid progress payments. Mr Kalloghlian filed a cross-claim in those proceedings against PCM, alleging defective works; and in March 2019, he commenced the proceedings in the Supreme Court against PCM, the architect, Villa & Villa Pty Ltd (Villa) and the directors of both companies. On 1 April 2019, Hammerschlag J made orders by consent, pursuant to which the District Court proceedings were transferred to the Supreme Court, judgment for PCM was given on its claim, and Mr Kalloghlian was ordered to pay PCM's costs of that claim, provisionally assessed at $215,000, as well as the costs payable pursuant to an earlier costs order, provisionally assessed at $10,000.
Mr Kalloghlian made the application the subject of this appeal in the Supreme Court proceedings, pursuant to s 99 of the Civil Procedure Act 2005 (NSW) (CP Act) and/or the inherent jurisdiction of the Supreme Court, seeking: 1. an order disallowing the costs paid or payable by Mr Kalloghlian to Mr Mitry for fees or disbursements in whole or in any portion that the Court determined (the Solicitor/Client Costs); and 2. an order that Mr Mitry pay to Mr Kalloghlian the sum of the costs that Hammerschlag J ordered him to pay to PCM (Costs Order Costs).
Before the primary judge, Mr Kalloghlian put his case for those orders on two bases, which her Honour set out at [6]: "(1) the case against the builder for defects was 'woefully prepared' by the solicitor, with insufficient evidence to support the claim, such that there was no option but to agree to pay the builder's claim and the builder's costs of the District Court proceedings, and start the defects claim against the builder again in the Supreme Court; and (2) Mr Kalloghlian always wanted to bring a claim against the architect, and such a claim was only devised after it was too late to join that action in the District Court, which was the solicitor's fault."

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