Lawrie v Lawler

Supreme Court of the NT|2015-08-14|Before: Southwood J

COSTS - Judicial review - all of the defendant's costs met by the Northern Territory - indemnity principle - operation of indemnity principle when liability already discharged - liability of defendant to pay costs when the defendant's solicitors did not disclose matters required to be disclosed by Part 3.3 Division 3 of the Legal Profession Act (NT) - whether lump sum costs order should be made.

Lawrie v Lawler [2015] NTSC 19, referred to

[1] On 1 April 2015, I dismissed Ms Lawrie's application for judicial review of the findings made about her by Mr Lawler in his report - Inquiry into Stella Maris 2014.

[2] On 8 May 2015 Mr Lawler filed a summons seeking the following costs orders against Ms Lawrie.

The plaintiff [Ms Lawrie] is to pay the defendant's [Mr Lawler's] costs in the gross amount specified by the Court.

In the alternative, the plaintiff to pay the defendant's costs on an indemnity basis.

[3] Mr Lawler's application for costs was opposed by Ms Lawrie and was heard in full on 10 August 2015.

Mr Lawler's submission on specified lump sum costs assessed on an indemnity basis

[4] Mr Lawler seeks an order that he is entitled to a specified gross amount of costs calculated on an indemnity basis. In support of his application for costs Mr Lawler relied on the following grounds.

[5] First, under r 63.07 of the Supreme Court Rules where the Court orders that costs are to be paid to a party the Court may order that a party is entitled to a gross amount specified in the order instead of taxed costs. The power conferred by the Supreme Court Rules is not confined and may be exercised whenever the circumstances warrant it.[1] Lump sum costs awards ensure that the expense, delay and aggravation arising out of obtaining taxation orders are avoided and may be particularly useful where the conduct of the unsuccessful party has been such that they are unlikely to cooperate with the process of obtaining a taxation order.[2] It may also be appropriate to make a lump sum costs award where a party's conduct has unnecessarily contributed to the costs of the proceeding.[3]

[6] Senior counsel for Mr Lawler, Mr Maurice QC, submitted that this was an appropriate case for a lump sum costs award because this was a proceeding that should never have been commenced. The proceeding was commenced on two false premises which were ultimately abandoned and Ms Lawrie was incapable of answering the defence of waiver. Indeed she made no real attempt to answer that defence to her claim. Further, Ms Lawrie's conduct of the proceeding had unnecessarily contributed to the costs of the proceeding in the following way. Ms Lawrie filed affidavits upon which she did not rely. Reliance on the affidavits was only abandoned on the first day of the trial. This meant that the time spent by Mr Lawler's lawyers preparing to cross-examine Ms Lawrie, Mr Wyvill and Ms Spurr was thrown away. It must have been apparent to Ms Lawrie and her lawyers that her original pleadings and the contents of the affidavits of Ms Lawrie, Mr Wyvill and Ms Spurr meant that Ms Lawrie was required to discover the documents which are contained in volume 4 of exhibit p1 of the hearing. However, it was necessary for Mr Lawler to make a number of applications for discovery and for Mr Maher to engage in extensive correspondence with Ms Spurr before those documents were discovered and produced. The change in Ms Lawrie's position resulted in a loss of court time and necessitated an amendment to Mr Lawler's Statement of Facts Issues and Contentions.

[7] Second, Mr Maurice submitted that r 63.25 of the Supreme Court Rules provides for costs to be taxed either on the standard basis or the indemnity basis. He stated that in Colgate-Palmolive Co v Cussons Pty Ltd[4] his Honour Sheppard J noted that some of the circumstances which have been thought to warrant the exercise of the discretion to order indemnity costs included: evidence of particular misconduct that causes loss of time to the Court and to other parties; the fact that the proceedings were commenced or continued for some motive or wilful disregard of known facts or clearly established law; and the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions. The categories are not closed.

[8] Mr Maurice submitted that the following circumstances justified costs being awarded on an indemnity basis in this case. The proceeding was commenced and continued by Ms Lawrie in wilful disregard of known facts. The contentions were groundless. They included the making of allegations which ought never to have been made because she knew or ought to have known they were false and misleading. Ms Lawrie maintained privilege for an extended period of time when she knew the discovered documents would reveal her true position. He submitted Ms Lawrie, Mr Wyvill and Ms Spurr swore affidavits which contained plainly false statements.

[9] The facts were that Ms Lawrie chose to make no further submissions after her last appearance before the Inquiry. She had made all the submissions she intended to make to the Inquiry and she and her lawyers devised and implemented a strategy of ignoring and disengaging from the Inquiry and focused on discrediting Mr Lawler and his report in other forums.

[10] The lawyers for Mr Lawler submitted in their written submissions of 8 May 2015 that Ms Lawrie and her lawyers knew that the following contentions, which were maintained until the first day of the trial, were false and misleading:

In reliance upon Mr Lawler's letter of 17 February 2014 Ms Lawrie did not make any further submissions as to why Mr Lawler should not make any adverse findings about her.

Ms Lawrie and her lawyers relied on the letter of 17 February 2014 when deciding on 14 April 2014 that the lawyers would cease acting and no further submissions would be made.

Ms Spurr's statement that, "Our clients have exhausted their ability to access pro bono legal assistance. Accordingly, we will no longer be representing Ms Lawrie and Mr McCarthy in this matter. In those circumstances we do not propose to respond to the advice of Mr Maher or the subsequent valuation report of Mr Harris."[5]

The following statements in Mr Wyvill's affidavit made on 12 November 2014:

(a) at [8] that on the basis of Mr Lawler's letter of 17 February 2014, he did not at any stage press for information concerning any particular adverse finding which Mr Lawler was contemplating making against Ms Lawrie; and that he would have done so but for the defendant's letter of 17 February 2014;

(b) at [9] that nothing Mr Lawler had said during the hearing of the Stella Maris Inquiry on 13 and 14 March 2014 left him thinking that the defendant was contemplating making any particular adverse finding or findings against Ms Lawrie;

(c) at [10] that the letter dated 26 March 2014 from the defendant advising that he wished to recall Mr McCarthy to give further testimony, but that he did not wish to recall the plaintiff, did not suggest to Mr Wyvill that Mr Lawler was contemplating making any adverse findings against Ms Lawrie - quite the contrary;

(d) at [12] - [14] that on 14 April 2014 he told Ms Spurr that he was not prepared to continue acting for the plaintiff in the Inquiry on a pro bono basis based on three factors, all related to the fact that the defendant had not given notice of proposed adverse findings as foreshadowed in the letter of 17 February 2014;

(e) at [17] that when Mr Wyvill read the defendant's report shortly after it was made public, he was surprised to note that it contained findings adverse to the plaintiff concerning her involvement in the decision to grant a lease over the Stella Maris site to Unions NT.

The following statements in Ms Spurr's affidavit made on 13 November 2014:

(a) She advised the defendant that she ceased acting for Ms Lawrie and Mr McCarthy by a letter dated 15 April 2014 (with a notation that it was proposed that the letter would form part of the agreed bundle of documents)

(b) A critical factor in her decision to cease to act for the plaintiff and Mr McCarthy was that neither Ms Lawrie nor Mr McCarthy had received notice from Mr Lawler that he was considering making any adverse finding against them and, in those circumstances, she was not prepared to continue to act in the matter on a pro bono basis.

The following statements in Ms Lawrie's affidavit made on 14 November 2014:

[11] Mr Maurice submitted that a particularly egregious aspect of the false and misleading assertions made by Ms Lawrie in the material served on her behalf is that, putting aside the supplementary affidavits served on the first day of the trial, the materials were served at a time when Ms Lawrie by her legal representatives was maintaining a claim for legal professional privilege over the documents which ultimately constituted volume 4 of exhibit p1 at the hearing. It was only when the truth came out that Ms Lawrie abandoned her reliance on the contentions set out at [10]. She did so on the first day of the hearing. This necessitated an adjournment so the defendant could amend its Statement of Facts Issues and Contentions. Significant additional costs were incurred as a result of the manner in which Ms Lawrie conducted her case.

[12] Without the reliance that is pleaded in paragraphs 7 to 12 of the original Plaintiff's Statement of Facts Issues and Contentions, Ms Lawrie's claim was doomed to fail. The true facts reveal that Ms Lawrie engaged in a deliberate strategy to disengage from the Inquiry and wrongly maintain that she had been denied procedural fairness.

[13] During his oral submissions Mr Maurice made the following submissions. In relation to the case that was run by Ms Lawrie it was pursued on an unstated premise; that premise being that Ms Lawrie had not waived her right to procedural fairness. In paragraph 25 of her Statement of Facts, Issues and Contentions Ms Lawrie stated:

There are no matters material to the Court's discretion to grant declaratory relief which militate against the grant of a declaration that in reporting adversely to the plaintiff in the report, purportedly pursuant to the Enquiries Act (sic)[6], the defendant failed to observe the requirements of procedural fairness.

[14] If Ms Lawrie had waived her right to procedural fairness, the case that was run before the Court commencing on 27 January 2015 should never have been run. Once the documents contained in volume 4 of exhibit p1 had been produced, Mr Maurice signalled that Mr Lawler intended to raise waiver as a defence. That position was formally taken up in Mr Lawler's Second Amended Statement of Facts Issues and Contentions and the case proceeded with Ms Lawrie in effect denying that she waived her right to procedural fairness. Ms Lawrie's denial could only stand up if, notwithstanding the material for which she had claimed privilege, she and her legal team had not embarked on a deceptive strategy to ignore, disengage and discredit the Inquiry. However, despite Mr Wyvill and Ms Spurr swearing fresh affidavits on the morning of 27 January 2014, all three of them being available to give evidence, and Ms Lawrie and Ms Spurr being in Court for most of the hearing in January, neither Ms Lawrie nor Mr Wyvill nor Ms Spurr were prepared to back up Ms Lawrie's denial that she had waived her right to procedural fairness by giving evidence. Mr Young did not read their affidavits and it may be inferred that neither Ms Lawrie nor Mr Wyvill nor Ms Spurr were prepared to be cross-examined about what they had deposed in their affidavits. If Ms Lawrie, Mr Wyvill and Ms Spurr were not prepared to give evidence which explained the inferences to which the documents in volume 4 of exhibit p1 gave rise, the case should never have been brought. Mr Maurice submitted that in fact Ms Lawrie, Mr Wyvill and Ms Spurr had conspired to engage in a course of deceit and despicable behaviour to make it appear that the plaintiff had not adopted a strategy to ignore, disengage and discredit the Inquiry. The case depended upon Ms Lawrie, Mr Wyvill and Ms Spurr getting away with an outrageous deception of the Court.

[15] Mr Maurice submitted that Ms Lawrie's abandoned case hinged on two assertions of fact. First, that Ms Lawrie, Mr Wyvill and Ms Spurr had relied on a letter written by Mr Lawler on 17 February 2014 in determining how Ms Lawrie ought to participate in and contribute to the Inquiry. Second, that Ms Lawrie, Mr Wyvill and Mr Spurr believed that Mr Lawler was not considering making any findings in his report which were adverse to Ms Lawrie. These allegations were pleaded in Ms Lawrie's original Statement of Facts, Issues and Contentions and were the subject of the affidavits made by Ms Lawrie and Mr Wyvill and Ms Spurr who were principal actors in the events giving rise to the litigation. The allegations were plainly untrue.

[16] There is a great deal of force in Mr Maurice's submissions. They are made even more forceful by counsel for Ms Lawrie, Mr Crowley's response to them. When asked on 10 August 2015 if Ms Lawrie wished to give evidence or contradict the submissions made by Mr Maurice which went beyond, well beyond, the findings that I had made in my reasons for decision in Lawrie v Lawler,[7] Mr Crowley told the Court his instructions were to remain silent.

[17] While I accept Mr Maurice's submission that the proceeding was commenced in wilful disregard of the known facts and ought not to have been commenced, in my opinion, it is unnecessary to make the further findings arising out of Mr Maurice's submissions. I understand that a number of these matters are still subject to investigation by the police and by the Law Society of the Northern Territory. However, subject to what I have stated below and based on the findings that I have made in Lawrie v Lawler[8] and the manner in which Ms Lawrie conducted her case, this is an appropriate case to make a specific lump sum order for costs which are assessed on an indemnity basis up to the end of the hearing in January 2015 and on a party/party basis for the recusal applications and for the costs applications. The Court has sufficient information before it to make such an order and Mr Crowley told the Court that Ms Lawrie had chosen not to challenge the fairness and reasonableness of the figures in the schedule provided by Mr Maher and being exhibit p1 in the costs application.

[18] As to Ms Lawrie's contention on costs, the main basis on which costs were opposed by Ms Lawrie was that Mr Lawler did not incur a liability to pay Mr Maher's costs because he was wholly indemnified for costs by the Northern Territory Government, who has paid all of Mr Maher's fees and disbursements. It was submitted that as costs between parties to legal proceedings are awarded on an indemnity basis and Mr Lawler has paid no costs and incurred no liability to pay costs he is unable to obtain a costs order against Ms Lawrie.

[19] If Ms Lawrie's contention as to costs were to succeed, it would mean that the people of the Northern Territory were left to pay for Mr Lawler's costs in circumstances where Ms Lawrie's claim should never have been commenced.

[20] In support of Ms Lawrie's contention, Mr Crowley relied on the following statement of Bankes LJ in Adams v London Improved Motor Builders, Limited[9]:

When once it is established that the solicitors were acting for the plaintiff with his knowledge and assent, it seems to me that he became liable to the solicitors for costs, and that liability would not be excluded merely because the Union also undertook to pay the costs. It is necessary to go a step further and prove that there was a bargain, either between the Union and the solicitors, or between the plaintiff and the solicitors, that under no circumstances was the plaintiff to be liable for costs.

[21] Mr Crowley submitted that this is a case in which there was an agreement between the Northern Territory and Mr Maher that under no circumstances was Mr Lawler to be liable for Mr Maher's costs.[10] Indeed the agreement went further and covered Mr Lawler in the event he lost the litigation and became liable to pay Ms Lawrie's costs.

[22] I accept Mr Crowley's submission to the following extent. I find there was such an agreement. The agreement may be inferred from the following facts. The Request for Legal Services sent to Mr Maher on 5 August 2014 suggests that he was to be retained on the same or similar basis as he had been retained during the Inquiry. His legal services were requested by the Department of the Chief Minister, and the Department was described as the paying agency. It was determined by Mr Smyth who was the case manager within the Solicitor for the Northern Territory that Mr Maher was to be engaged by the Department of Chief Minister to act for Mr Lawler. On 6 August 2014 Mr Maher sent an email to Legal Services SFNT (Solicitor for the Northern Territory) in which he stated, "Thanks for these instructions". In his email to Mr Lawler on 7 August 2014, Mr Maher stated, "Ms Hart of the Department of Chief Minister has confirmed that all my invoices should be directed to the department for payment." This seems to be the only communication between Mr Maher and Mr Lawler about costs. On 14 August 2015, Mr Maher sent his costs disclosure statement and agreement to Legal Service SFNT. He then sent all of his cost estimates, revised costs estimates and invoices to the Department of the Chief Minister through the established procurement process. His cost estimates were approved by the appropriate people within the Northern Territory Government and his fees and disbursements were paid by the Northern Territory Government. Mr Maher did not send his costs disclosure statement and agreement to Mr Lawler nor did he copy any invoices to Mr Lawler or seek Mr Lawler's approval for his fees. On 24 December 2014 Mr Maher received an email from Mrs Hart which stated, "On Mr Gary Barnes behalf, this email is to confirm the earlier email advice, provided to you on 15 December 2015, that the Northern Territory Government indemnifies Mr John Lawler in respect not only to his solicitor/client costs but also in respect of any adverse costs order which may be made in the present Supreme Court proceeding brought by Ms Lawrie."

[23] Intuitively, you would think that a Commissioner who has been appointed by the Administrator of the Northern Territory following a resolution of the Parliament of the Northern Territory to conduct an Inquiry on behalf of the Northern Territory would have his legal costs covered in such a manner and would not to be responsible for his legal fees.

[24] However, the indemnity principle for the recovery of legal costs is not as confined as Mr Crowley contends on behalf of Ms Lawrie. Ms Lawrie ought to have known that the Northern Territory would cover the legal costs of a commissioner appointed under the Inquiries Act.

[25] In Dyktynski v BHP Titanium Minerals Pty Ltd[11] her Honour McColl JA stated at [68] and [69]:

The fundamental principle to be applied in deciding whether a costs order ought be made was stated by Lord Cranworth in Clarke & Chapman v Hart (1858) 6 HL Cas 632 at 667; [1858] EngR 475; 10 ER 1443 at 1457: "... I think that the general principle upon the subject of costs is, and ought to be ... that the costs ought never be considered as a penalty or punishment, but merely a necessary consequence of a party having created a litigation in which [s]he has failed ...".

Lord Cranworth's statement is reflected in the underlying rationale of a costs order that "it is just and reasonable that the party who has caused the other party to incur costs of litigation should reimburse that party for the liability incurred": Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 567 per McHugh J.

[26] It is now well recognised that there are cases in which a party to litigation will naturally and obviously cause a third party to incur costs and it is just and reasonable that the third party should be reimbursed for the costs caused by the unsuccessful litigant and that the successful party to the litigation will be entitled to a costs order even though the benefit of the order will enure to the third party. These cases recognise that the indemnity principle must be reasonably understood and applied.[12] This is such a case. Through his senior counsel, Mr Maurice, Mr Lawler has undertaken to the Court to reimburse the Northern Territory to the extent of any fees he is able to recover as the result of a costs order being made in his favour. As it was the Administrator of the Northern Territory who appointed Mr Lawler to conduct the Inquiry into Stella Maris upon a resolution of the Parliament of the Northern Territory, the Northern Territory had a legitimate interest in upholding the integrity of the report produced by Mr Lawler. Mr Lawler had an interest in maintaining his reputation.

[27] It would be a very odd result indeed, if having engaged in the conduct which brought about the Inquiry into Stella Maris and then commenced litigation which should never have been commenced, the people of the Northern Territory, and not Ms Lawrie, should be left to pay for Mr Lawler's fees for successfully defending a claim of the kind brought by Ms Lawrie and her original lawyers.

[28] In view of my findings (at [22]) that this is an agreement which falls within the first limb of Adams v London Improved Motor Builders, Limited,[13] it is unnecessary to consider Mr Crowley's submissions based on s 303 to s 311 of the Legal Profession Act. Mr Maher provided the Northern Territory Government with his costs disclosure statement and agreement. My unconsidered view is that the provisions of the Legal Practitioners Act would not have applied in any event. Mr Maher's fees have been paid and there is no dispute between Mr Maher and Mr Lawler about his fees. Section 311 of the Legal Profession Act has no impact on a client's liability to pay his solicitor. It merely bars the solicitor's remedy until the fees are assessed in accordance with the Act.

[29] I have reviewed the fee schedules, invoices and affidavit material provided by Mr Maher. I have also reviewed the whole of the Supreme Court file. In my opinion, the total fees and disbursements of $245,855.74 calculated by Mr Maher is a fair and reasonable amount if total costs are assessed on an indemnity basis, exclusive of goods and services tax. I am reassured in this view by the fact that Ms Lawrie and her counsel have not challenged the fairness and reasonableness of the cost amounts presented by Mr Maher.

[30] However, as I have stated above, it is only the total amount of costs incurred by the end of the hearing, attending to take judgment and amounts ancillary to reporting and advising on those matters which should be assessed on an indemnity basis. The costs of the recusal applications and the costs of the costs applications should be assessed on a party/party basis. The position taken by Ms Lawrie in relation to the bias applications was arguable, as was her position in relation to costs, and those applications arose out of recent discovery by Mr Lawler's lawyers.

[31] In his affidavit of 8 May 2015 Mr Maher deposes that as at that date, his total of fees and disbursements including counsel fees were $168,408.38, excluding goods and services tax. Exhibit p1 tendered on 10 August 2015 lists a total of fees and disbursements of $245,855.74. The difference between $245,855.74 and $168,408.38 is $77,447.36. As I understand Mr Maher's costs, the amount of $77,447.36 represents the fees and disbursements charged for the recusal applications and the costs applications. A fair assessment of those costs assessed on a party/party basis is 60 percent of the amount of $77,447.36, which is $46,468.42. If that amount is added to the amount of $168,408.38, that gives a total amount of costs of $214,876 rounded down to the nearest dollar, which is a fair and reasonable amount of costs to be awarded in favour of Mr Lawler.

[32] I order that Ms Lawrie pay Mr Lawler's costs in the amount of $214,876.

[1] Harrison and Anor v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 at [21].

[2] Sony Entertainment Australia Ltd and Others v Smith and Others [2005] FCA 228; (2005) 215 ALR 788 at [190] and [192]; Beach Petroleum NL v Johnson (1995) 57 FCR 119 at 120; Leary v Leary [1987] 1 All ER 261 at 265a.

[3] Sony Entertainment Australia Ltd and Others v Smith and Others [2005] FCA 228; (2005) 215 ALR 788 at [192].

[4] [1993] FCA 536; (1993) 46 FCR 225 at 233, cited with approval in BAE Systems Australia Ltd v Rothwell [2013] NTCA 3; (2013) 275 FLR 244 at [26].

[5] Letter from Ms Spurr to Mr Lawler dated 15 April 2015: see Lawrie v Lawler [2015] NTSC 19 at [180].

[10] Paragraph 7(c) of Amended Plaintiff's Outline of Argument - Costs.

[12] Dyktynski v BHP Titanium Minerals Pty Ltd [2004] NSWCA 154; (2004) 60 NSWLR 203 at [94] per McColl JA.

[13] [1921] 1 KB 495 at 501: "It is necessary to go a step further and prove that there was a bargain, either [1] between the Union and the solicitors, or ..., that under no circumstances was the plaintiff to be liable for costs."

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Judgment (28 paragraphs)

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Cases Cited (7)