Solicitor litigants and the Chorley Rule
51That leads me to the second issue raised by the defendants, which relates to the contention that Mr McMahon was at all times a litigant in person. There is a measure of tension between that and the first point since, to the extent that he was, he has no need of any indemnity against costs payable to another.
52The defendants acknowledge that a litigant in person who is a solicitor can, in some circumstances, recover fees for representing himself. They submit, however, that that cannot be allowed in the present case. They relied on the fact that it was an aspect of Mr McMahon's special damages claim that his new firm had the capacity to do the lost Lumley work and that the firm had not filled the gap left by the loss of that work. It was submitted that, since Mr McMahon had the capacity to attend to his own case, he is not entitled to recover for that time because, in acting for himself, he has not lost the opportunity to do any other paying client work.
53A threshold issue is whether Mr McMahon is properly to be regarded as a "solicitor litigant" (that is, a litigant who, being a solicitor, represents himself in the proceedings). Mr McMahon submitted that he is not a solicitor litigant since he was represented at all times by Ardent Legal. He noted that the law has been "tolerably clear" since Salomon v Salomon & Co [1897] AC 22 that a company is a separate legal entity, even as against its own members.
54The defendants submitted that Mr McMahon should be regarded as a solicitor litigant notwithstanding the legal structure through which he operated. They relied upon the decision of Brereton J in McIlraith v Ilkin & Anor (Costs) [2007] NSWSC 1052. In that case, there was an issue as to whether a solicitor litigant was entitled to profit costs for work done by himself. His Honour said (at [11]):
Strictly speaking, Mr Ilkin did not act for himself; a solicitor corporation of which he is the director was the solicitor. However, I have attributed no significance to this distinction, and proceed on the basis that Mr Ilkin is to be regarded as having acted as his own solicitor.
55Mr McMahon submitted that it is not clear from the judgment whether that case is on all fours with the present. It is at least relevant in holding that, in considering costs claimed by a solicitor plaintiff who has appeared in his own cause, it is appropriate to lift the corporate veil. There is an obvious public interest in doing so.
56However, there appear to be two significant differences between McIlraith and the present case. The first is that the solicitor in McIlraith appears to have been the only director of the solicitor corporation, whereas Mr McMahon and his wife are each directors. I should not assume that Mr McMahon's wife had no autonomy in that role. The second is the fact that, in the present case, another employed solicitor was the solicitor on the record for most of the proceedings, albeit possibly under Mr McMahon's control (if Mr McMahon was the principal of the firm, as its origins would suggest).
57I have concluded that professional services provided by Mr McMahon to himself should be treated as work undertaken by a solicitor litigant, while services provided by Mr Quah-Smith should be regarded as having been provided by the separate corporate entity, Ardent Legal.
58Accordingly, as to professional services provided by Mr McMahon to himself, it is necessary to consider the defendants' submissions concerning the "Chorley rule". The general rule is that a litigant appearing in person is not entitled to recover from the unsuccessful party any compensation for time spent preparing and conducting the case.
59In England in 1884, a rule of practice was recognised to operate as an exception to that general rule, providing that a self-represented solicitor is entitled to professional costs. It is known as the Chorley rule or the Chorley exception after the decision in which it was unequivocally recognised, London Scottish Benefit Society v Chorley (1884) 13 QBD 872. In that decision it was explained that, according to the authorities establishing the rule, a solicitor litigant:
does not recover such costs in such circumstances in the capacity of a solicitor, but because, he happening to be a solicitor, his costs are able to be quantified by the Court and its officers.
60In 1976, the High Court held that the Chorley rule applies in Australia to allow a solicitor who acts for himself in litigation to recover his professional costs: Guss v Veenhuizen (No 2) (1976) 136 CLR 47.
61The defendants' submissions noted a series of subsequent decisions in which doubts have been expressed about the continuing appropriateness of the rule. However, as cogently explained by Brereton J in McIlwraith, since the High Court has authoritatively endorsed it, it is not open to this Court to discard it: see McIlwraith at [12] to [26].
62The defendants submitted, however, that the Chorley rule is properly characterised as allowing an indemnity (in the case of solicitor litigants) against "opportunity cost" rather than the direct cost of the solicitor's professional time, citing Atlas v Kalyk [2001] NSWCA 10 per Handley JA at [9], Meagher and Sheller JJA agreeing at [13] and [14] respectively. It is appropriate to consider the whole of the relevant passage:
It might be said, with respect, that although solicitors representing themselves in litigation have no need of any indemnity against professional costs paid or payable to another practitioner, there is still scope for the indemnity principle. Such solicitors will have spent time and trouble representing themselves and, to that extent, they will have lost the opportunity of using that time doing professional work for other clients and being remunerated accordingly. The indemnity in the case of solicitor litigants is, therefore, against the opportunity cost rather than the direct cost of their professional time spent on their own case.
63The defendants relied upon the fact that, in the proceedings before me, Mr McMahon gave evidence (in support of his claim for special damages) that as a result of the publication of the matters complained of he had lost the Lumley work and had been unable to replace it. Specifically, he said that he only had enough work to fill approximately 20 hours per week (T344.15 - 49). On that basis, the defendants argued that, by working on his own case, Mr McMahon did not lose any real opportunity of doing other paying work (since he would not have had a full load of other paying work in any event).
64Mr McMahon submitted that that is a selective statement of the rationale for the Chorley rule which does not reflect the principle approved by the High Court in Guss. Regrettably I feel compelled, if not bound, to accept that submission. In Khera v Jones [2006] NSWCA 85, the Court of Appeal refused leave to appeal in a case in which it was argued that there should be an exception to the Chorley rule in the case of an unemployed solicitor who was arguing the case in his spare time: Khera v Jones [2006] NSWCA 85. Although a decision to refuse leave does not stand as binding authority, the Court's reasons provide a clear statement of the present law.
65The Chorley rule did not emerge unscathed. The Court said (at [3]):
If the "rule of practice" deserves continuing application, the present case is a most undeserving applicant for inclusion. Indeed, it casts further doubt on the sustainability of the Chorley rule.
66Had the issue been "uncluttered by authority", the Court would have favoured the approach of the Full Court of the Supreme Court of Western Australia in Dobree v Hoffman (1996) 18 WAR 36 in which the Chorley rule was abandoned. However, the Court concluded, following the decision in Atlas v Kalyk, that the decision in Guss is binding, reiterating the High Court's admonition that it is for that Court alone to determine whether one of its previous decisions is to be departed from or overruled: see Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 403.
67The rationale for the Chorley rule explained in Guss is, quite simply, that unlike the case of an ordinary layman, work done by a solicitor can be quantified on a taxation of costs: at 52.6. Neither the appropriateness of the rule nor the untested assumption that work done by "ordinary laymen" cannot be quantified appears to have been in dispute. The decision turned on differing views as to the significance of the fact that, due to an error in the registry, the particular solicitor's name had not been entered in the Register of Practitioners of the High Court, raising an issue as to whether his costs could indeed be "quantified on a taxation" in accordance with the rules of court. The case accordingly did not afford the occasion for a particularly satisfactory analysis of the competing considerations for exempting people who happen to be solicitors from the general rule that a litigant who represents himself cannot recover compensation for the time spent doing so.
68Ultimately, however, that is the authority that binds me. It follows, in my view, that if Mr McMahon is properly characterised as a solicitor litigant, he is entitled to the benefit of the Chorley rule notwithstanding his own evidence suggesting that he was able to act for himself during what would otherwise have been spare time. As already explained, I am of the view that Mr McMahon is to be regarded as a solicitor litigant as to those legal services provided by himself.
69It remains to consider the significance of those considerations in the context of the application for indemnity costs under s 40(2) of the Defamation Act. Under an assessment on the ordinary basis, "party/party" costs are assessed by determining appropriate fair and reasonable costs: see ss 364 and 365 of the Legal Profession Act 2004. However, where party/party costs are assessed on an indemnity basis, the assessor is to allow all costs other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount: s 364(4) of the Legal Profession Act r 42.5 of the Uniform Civil Procedure Rules 2005.
70The position is complicated by the fact that the evidence is inconclusive as to whether Mr McMahon has any liability to Ardent Legal.