Mahommed v Cox as Administrator of the Deceased Estate of Dixon

1. The respondent's costs application filed 21 July 2023 is dismissed.
2. There be no order as to costs of the respondent's costs application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT: 1 We published our reasons and made orders dismissing this appeal on 14 July 2023: Mohammed v Cox as Administrator of the Deceased Estate of Dixon [2023] FCAFC 107. Our orders were: 1. The appeal is dismissed. 2. The appellant is to pay the respondent's costs of the appeal to be agreed or taxed. 3. Either party may apply to vary order (2) or may seek some different costs order, by filing short submissions not exceeding 3 pages and any affidavits in support within 7 days of the date of these orders. 4. If any application is made pursuant to order (3) the party against whom the application is made may respond by filing short submissions not exceeding 3 pages and any affidavits in response within 7 days of receipt of the application. 5. Subject to any further order of the Court, any application made pursuant to order (3) will be determined on the papers. 2 On 21 July 2023, the respondent applied for an order pursuant to s 43 of the Federal Court of Australia Act 1976 (Cth) (Act) that Mr Leonardus Smits and "Murray Lawyers [sic] Pty Ltd" pay the respondent's costs of the appeal on an indemnity basis. Mr Smits is the solicitor for the appellant and in that capacity argued the appeal. From various documents filed in the appeal, Murray Laws Pty Ltd is the firm on the record for the appellant and we will assume that the respondent has made a mistake in the name of the firm. The respondent relies on her affidavit of 21 July 2023 and submissions in support. Mr Smits and Murray Laws oppose the application for reasons set out in a submission authored by Mr Smits and filed on 28 July 2023. 3 The costs application is put on three grounds each of which concern the commencement and prosecution of the appeal: (1) Failure by Mr Smits and Murray Laws to comply with their obligations at s 37N(2) of the Act. (2) A serious dereliction of the duty owed to the Court. (3) An abuse of process. 4 Each of those contentions commence with the proposition that manifestly the appeal was without merit which objectively the appellant, Mr Smits and Murray Laws ought to have understood. In addition, Mr Smits and the appellant have enjoyed a long-standing commercial relationship, from which it should be inferred Mr Smits lacked objectivity in giving advice to the appellant about the appeal and that overall the appellant abused the processes of the Court by pursuing the appeal for the ulterior purpose of harassing the respondent. The respondent in her affidavit deposes to certain facts which strongly support the inference that the appellant is insolvent. Further, she states that litigation in the Supreme Court of New South Wales and in this Court between her and the appellant "has worn me down, financially and mentally because of the constant barrage of documents, proceedings, affidavits, processes, telephone calls with my solicitors and conferences". The appellant has not filed an affidavit to dispute these matters. More particularly on the abuse of process contention, the respondent submits by reference to documents in the appeal book, that Mr Smits is personally a party to some of the transaction documents that were said to be relevant to the appeal, in particular a deed of assignment of 22 December 2014, whereby Mr Smits as assignor assigned to the appellant certain debts said to be owed by Mr Dixon, although how those debts were owed to Mr Smits is far from clear. There are further submissions to the effect that the appellant ought to have appreciated that there was no realistic prospect of prosecuting a successful appeal against the orders made by the primary judge and permitted Mr Smits and Murray Laws to "conjure" meritless appeal grounds. 5 In response, Mr Smits for himself and Murray Laws submits that the costs application raises a complex and novel claim of abuse of process, fails to adequately distinguish between the separate interests of the appellant and his lawyers, fails to adequately particularise the various contentions of misconduct, characterises the claim as "speculative or conjectural, desperate and scandalous" and submits that it should not be concluded that the appeal grounds had no merit and that the appellant and his lawyers knew that to be so. 6 The power conferred by s 43(3)(f) of the Act to make an order that a lawyer for a party be personally responsible for all or part of the costs of a proceeding is one that should only be exercised in clear cases and with considerable caution: White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169 (White Industries) at 229-231 (Goldberg J); Levick v Deputy Commissioner of Taxation [2000] FCA 674; 102 FCR 155 at [29]-[44] (Wilcox, Burchett and Tamberlin JJ). There is also a very useful summary of the principles by Wigney J in Mitry Lawyers v Barnden [2014] FCA 918 at [42]. This is not the occasion to restate those principles. 7 Whilst we were critical in our primary reasons of the drafting of the appeal grounds and the manner in which the written submissions of Mr Smits were drafted and developed orally (in particular at [3]-[6]), and we concluded that the appeal was without merit, there is no proper basis to infer that Mr Smits knew or ought to have known this, but nonetheless advised the appellant to commence and prosecute it. As explained by Goldberg J in White Industries at 231, a conclusion that a matter is without merit and has no real prospect of success is insufficient to enliven the discretion to make a personal costs order against the lawyer for the responsible party. Nor is there a proper basis to draw the serious inference that the appellant pursued the appeal for an ulterior purpose and that Mr Smits either knew or ought to have known that was so. In our view, the application rises no higher than a general inference that Mr Smits failed to exercise reasonable care in circumstances where, if he had, the appeal would most likely not have been brought. That failure is directly linked to another: to assist the appellant to comply with the overarching purpose. This is a case of a lack of care, rather than an example of prosecution of a manifestly hopeless appeal in knowledge of that fact or a serious dereliction of the duty owed by Mr Smits to the Court or other serious misconduct: cf Harvey v Dioceses of Sale Catholic Education Ltd (No 3) [2021] FCA 1420 at [28] and [34] (O'Callaghan J). 8 For these reasons, the respondent's costs application filed on 21 July 2023, is dismissed and in our view there should be no order about the costs of the respondent's costs application. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Markovic, Goodman and McElwaine.