LYGINA -v- LAWLEY LEGAL [2025] WASC 68 (11 April 2025)

Why Ms Lygina contends indemnity costs should be awarded

1. Ms Lygina referred to the Court of Appeal's decision in Swansdale Pty Ltd v Whitecrest Pty Ltd[1] and submitted that there were three 'special or unusual features' of this case that justified an award of indemnity costs. She contended that these were the severity of Lawley Legal's non-compliance with cost disclosure obligations, the fact that Lawley Legal maintained an untenable defence and that Lawley Legal engaged in conduct that fell below professional standards.[2]
2. With regard to the alleged severity of Lawley Legal's non-compliance with cost disclosure obligations, Ms Lygina relied on allegations that she made in the statement of claim that Lawley Legal had failed to comply with its obligations under the Legal Profession Act. She submitted that when taken as a whole, Lawley Legal's failure to comply with its cost disclosure obligations was at the severe end of the spectrum.[3]
3. With regard to the alleged untenability of Lawley Legal's defence, Ms Lygina submitted that Lawley Legal maintained its opposition to the application for five months before consenting to orders, despite the indefensibility of the cost agreements. She argued that it might be inferred from the fact that Lawley Legal later agreed to orders, that it failed to properly engage in conferral before proceedings were issued. It was submitted that Lawley Legal's failure to confer justified an award of indemnity costs.[4]
4. With regard to the conduct that it is alleged fell below professional standards, Ms Lygina contended that Lawley Legal's conduct demonstrated a lack of transparency that undermined her ability to make an informed choice about her legal representation. She submitted that Lawley Legal's billing practices, including charging rates above cost determinations without proper disclosure and explanation, raised concerns about adherence to ethical norms. It was also argued that Lawley Legal's conduct had the potential to erode trust. Ms Lygina also complained about delays in the issuing of the re-drawn bills and conferral that was necessary in regard to those bills.[5]
5. Ms Lygina submitted that Lawley Legal's conduct represented a significant departure from professional obligations. It was contended that concerns about Lawley Legal's conduct needed to be considered in the context of concerns about Lawley Legal's conduct described in Middendorp v Lygina (No 2).[6]
6. Lawley Legal submitted that it conceded that Ms Lygina should be entitled to the principal relief that she sought early in the proceedings and without the need for any mediation, or determination of the issues by this court. It was argued that since the filing of the originating summons there were only minor appearances in these proceedings.[7]
7. Lawley Legal submitted that it was not 'inevitable' that the court would have upheld Ms Lygina's claim and set aside the costs agreements. It was contended that even if a court were to conclude that a costs agreement is not fair or not reasonable, it was not obliged to set aside the cost agreements.[8]
8. Lawley Legal referred to the fact that an order for indemnity costs had been sought from the outset. It submitted that the proceedings were resolved by consent at an early stage and that the orders made did not admit the allegations made in the statement of claim. It was contended that any allegation that the defence of the proceeding was untenable was baseless.[9]
9. Lawley Legal also sought to distinguish between conduct that occurred in the present proceedings and conduct in other proceedings. It submitted that any inadequate costs disclosure was not an occurrence in the present proceedings. It denied engaging in any substandard professional conduct but submitted that in any event the allegations did not relate to conduct in these proceedings.[10]
10. Lawley Legal submitted that Ms Lygina had advanced no evidence to justify why a party/party costs order would be insufficient. It argued that there was no evidence about the costs that she would need to pay her solicitors, or that the scale would be insufficient.[11]
11. Lawley Legal sought to rely on affidavits sworn by Mr Robert Guerrini and Mr Sam Paonni and submitted that the proceedings were settled for commercial reasons.[12]
12. In response Ms Lygina submitted that Lawley Legal's sudden agreement to set aside the cost agreements, after months of opposition and unnecessary cost accumulation, was unreasonable conduct that justifies an indemnity costs order. She also contended that requesting pleadings was unreasonable and served no purpose.[13]
13. Ms Lygina submitted that the claim that the action was settled for commercial reasons was vague and unsatisfactory and questioned why those reasons were not present from the outset.[14]

1. The approach taken by courts to the determination of costs where proceedings have been resolved without trial was explained by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin,[15] as follows:

In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.

In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra‑curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. ...

Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission [Unreported; Federal Court of Australia; 10 February 1989] where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.

If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.

1. Ms Lygina's submissions in support of indemnity costs proceeded on the assumption that the factual allegations that she makes have been established, or should be accepted.
2. Lawley Legal has not admitted those allegations, however. Lawley Legal did not file a defence admitting any of the allegations made in the statement of claim. The orders made by Registrar Whitbread on 10 November 2022 expressly recorded that Lawley Legal did not admit the allegations made in the statement of claim.
3. While Ms Lygina filed an affidavit in support of the relief that she seeks in these proceedings,[16] there has not been any trial at which the allegations she made in that affidavit have been found to be true. Nor have those allegations been tested by cross-examination.
4. Determination of whether Lawley Legal engaged in 'severe' non-compliance with its obligations, could not defend the proceedings because of that non-compliance, or engaged in unprofessional conduct as claimed by Ms Lygina, would require the determination of the principal disputed matters of fact in these proceedings. I am not satisfied that it would be possible to properly determine these matters on the basis of the evidence presently available to the court.
5. Even if it was, I do not consider that it would be appropriate to do so for the purposes of an indemnity costs application. In Nichols v NFS Agribusiness Pty Ltd[17], Basten JA observed that:

...although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon.

1. With respect, I agree with Basten JA.
2. I do not consider that it can be inferred from the fact that Lawley Legal ultimately agreed to the orders sought, that it failed to engage in conferral prior to the action. Nor do I consider that the fact that pleadings were ordered justifies an order for indemnity costs.
3. The conduct discussed in Middendorp v Lygina (No 2) was not the subject of these proceedings. It is not apparent to me that that conduct justifies the making of an order for indemnity costs in these proceedings.
4. I do consider, however, that Lawley Legal's decision to agree to the substantive orders sought by Ms Lygina involved a capitulation by Lawley Legal that establishes that Ms Lygina was the successful party in these proceedings. The authorities recognise that where one party capitulates, an award of costs may be appropriate even where there is no trial. In One.Tel Ltd v Deputy Commissioner of Taxation,[18] Burchett J said:

In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs.

1. As Ms Lygina was the successful party in these proceedings, I consider that Lawley Legal should pay her costs of the proceedings to be assessed, if not agreed. I am not satisfied that Ms Lygina has established that those costs should be assessed on an indemnity basis, however. If assessment is necessary, costs should be assessed on a party/party basis.
2. I will hear from the parties on the question of what orders I should make to give effect to these reasons and in relation to the costs of Ms Lygina's costs application.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Swansdale Pty Ltd v Whitecrest Pty Ltd [2010] WASCA 129 (S) [10].

[2] Plaintiff's written submissions re: indemnity costs dated 3 July 2024 (the Plaintiff's Initial Submissions), par 1.

[3] Plaintiff's Initial Submissions, pars 17 - 22.

[4] Plaintiff's Initial Submissions, pars 23 - 30.

[5] Plaintiff's Initial Submissions, pars 31 - 32.

[6] Middendorp v Lygina (No 2) [2021] WASC 431 (S).

[7] Defendant's Outline of Submissions in Opposition to Plaintiff's Application for Indemnity Costs dated 19 September 2024 (Defendant's Submissions), pars 7 - 8.

[9] Defendant's Submissions, pars 22(i) - (iv), (vi).

[10] Defendant's Submissions, pars 22(v) and (vii).

[11] Defendant's Submissions, pars 22(viii) and (ix).

[12] Defendant's Submissions, pars 25 - 26.

[13] Plaintiff's Responsive Submissions re Indemnity Costs Application dated 8 October 2024 (Plaintiff's Responsive Submissions), par 1.

[14] Plaintiff's Responsive Submissions, par 2.

[15] Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 at 624 ‑ 625.

[16] Affidavit of Irina Lygina Sworn 22 June 2022.

[17] Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; (2018) 97 NSWLR 681 [8]. See also Molnar v Good Mood Food Pty Ltd [2020] FCA 1242 [19].

[18] One.Tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 [6].