Montana Wines Ltd v McGirr

1 On 6 April 2005 I heard the same Motion in each of these two matters. The Motion sought the following orders; '1. That the defendant's solicitor be ordered to pay and indemnify the third party/cross defendant the whole of the costs payable on the basis that the solicitor has provided legal services to a party without reasonable prospects of success in accordance with s 198M of the Legal Profession Act.

Costs of this Motion.' 2 Mr Best of Counsel appeared for the Lane Cove Municipal Council (hereinafter referred to as "the Council/Third Party") the applicant on the Motion. He read the Affidavit of Mark Robert Debenham sworn 20 December 2004.

The defendant's solicitor Paul Francis Taylor McGirr (hereinafter referred to as "solicitor McGirr") against whom the Cost Orders were sought appeared on his own behalf. He read his Affidavit sworn 7 February 2005. 3 The two Motions arose out of the same accident which occurred on 18 September 2002 in Mary Street, Longueville when a vehicle driven by the Michael James McGirr (hereinafter referred to as "the defendant") collided with a vehicle owned by Montana Wines forcing that vehicle into another vehicle owned by Peter Howarth & Associates Pty Ltd causing damage to both vehicles. The evidence in each matter was almost exactly the same, and I propose to deal with both matters using documents filed in the claim in which Montana Wines was the plaintiff.

GENERAL DESCRIPTON OF ACCIDENT 4 It was not in dispute that at about 2.30am on 18 September 2002 the defendant drove his motor vehicle JM978 in a generally east direction along Mary Street, Longueville. The Council/Third Party had been carrying out work on Mary Street, and at a point further east along Mary Street the roadway was closed. As the defendant drove down Mary Street he was confronted with a sign showing 'road closed' which was across the left hand side of Mary Street and occupied about one third of the width of Mary Street. The defendant swerved to miss the sign. In doing so he moved to the incorrect side of the road where he collided with two vehicles parked outside 14 Mary Street, Longueville. The vehicles were unattended and were usually driven by occupants of 14 Mary Street, Longueville. The vehicle owned by Montana Wines was incorrectly parked, in that it was parked on the right hand side of Mary Street facing east. It was immediately in front of the vehicle owned by Peter Howarth & Associates Pty Ltd which was parked facing the correct direction. The vehicles were parked nose to nose. The defendant's vehicle collided with the vehicle owned by Montana Wines, forcing that vehicle into the vehicle owned by Peter Howarth & Associates Pty Ltd. 5 The defendant exited his vehicle and spoke to the occupants of number 14 Mary Street. The defendant then left the scene and attended Royal North Shore Hospital a short time later for treatment for his injuries. A blood test was taken. The blood test recorded a reading of 0.187.

A SHORT SUMMARY OF THE COURT PROCEEDINGS 6 Montana Wines Ltd issued a Statement of Claim on 26 June 2003 against the defendant claiming an amount of $14,795.91. The defendant filed a Defence on 1 August 2003. On the same day he filed a Third Party Notice against the Council seeking contribution towards or indemnity for any judgment recovered against him by the plaintiff, and also filed a Cross Claim against the plaintiff and the Council seeking to recover from them the value of the loss of the his vehicle in the sum of $6,500.00. The action between the plaintiff and the defendant was settled by Terms of Settlement dated 11 May 2004. The action between the defendant and the Council was settled by Terms filed 8 June 2004 on the following basis; '(i) Verdict and judgment for the third party against the defendant.

(ii) Verdict and judgment for the second cross defendant against the cross claimant.

(iii) The cross claimant to pay the costs of the Third Party Notice and Second Cross Claim as agreed or assessed.'

7 The Council therefore got a judgment and verdict in its favour against the defendant in both the Third Party proceedings and the Cross Claim and also got an order for the defendant to pay the costs of both actions as agreed or assessed. Such order would require the defendant to pay the Council/Third Party's costs on a party/party basis. 8 In the matter of Peter Howarth & Associates the same procedure occurred. A Statement of Claim was issued on behalf of the plaintiff in the Small Claims Division of this court, seeking an amount of $5,320.15. The defendant filed a Defence, a Third Party Notice and a Cross Claim. The proceedings between the plaintiff and the defendant was settled on 14 June 2004. On the same day the proceedings between the defendant and the Council were settled on the same basis as in the Montana matter, namely there was a verdict and judgment in favour of the Council on the Third Party Notice and Cross Claim, and the defendant was ordered to pay the Council's costs of the proceedings as agreed or assessed. I should add that the claim by Peter Howarth & Associates Pty Ltd was transferred to the General Division from the Small Claims Division by the Registrar, apparently on the basis (quite sensibly) that both matters should be heard at the same time.

THE LEGISLATION 9 The Council seeks the order pursuant to s 198M of the Legal Profession Act. The Legal Profession Act 1987 was amended by the Civil Liability Act 2002 effective from 20 March 2002. The Civil Liability Act included a new Division 5(c) into Pt 11 of the Legal Profession Act. The new duties and sanctions under the Act are set out in ss 198J to N. I propose to set out the provisions 198J, K, L, M & N in full; 'Legal Profession Act

198J Solicitor or barrister not to act unless there are reasonable prospects of success

(1) A solicitor or barrister must not provide legal services on a claim or defence of a claim for damages unless the solicitor or barrister reasonably believes on the basis provable facts and a reasonably arguable view of the law that the claim or the defence (as appropriate) has reasonable prospects of success.

(2) A fact is provable only if the solicitor or barrister reasonably believes that the material then available to him or her provides a proper basis for alleging that fact.

(3) This Division applies despite any obligation that a solicitor or barrister may have to act in accordance with the instructions or wishes or his or her client.

(4) A claim has reasonable prospects of success if there are reasonable prospects of damages being recovered on the claim.

This Division does not apply to legal services provided as a preliminary matter for the purpose of a proper and reasonable consideration of whether a claim or defence has reasonable prospects of success.

198L Restrictions on commencing proceedings without reasonable prospects of success

(1) The provision of legal services without reasonable prospects of success does not constitute an offence but is capable of being professional misconduct or unsatisfactory professional conduct.

(2) A solicitor or barrister cannot file court documentation on a claim or defence of a claim for damages unless the solicitor or barrister certifies that there are reasonable grounds for believing on the basis of provable facts and a reasonably arguable view of the law that the claim or the defence (as appropriate) has reasonable prospects of success.

(3) Court documentation on a claim or defence of a claim for damages is not to be accepted for lodgement unless accompanied by the certification required by this section. Rules of court may make provision for or with respect to the form of that certification.

(a) a Statement of Claim, summons, cross-claim, defence or further pleading, or

(b) an amended Statement of Claim, summons, cross-claim, defence or further pleading, or

(c) any other document of a kind prescribed by the regulations.

cross-claim includes counter-claim and cross-action.

198M Costs order against solicitor or barrister who acts without reasonable prospects of success

(1) If it appears to a court in which proceedings are taken on a claim for damages that a solicitor or barrister has provided legal services to a party without reasonable prospects of success, the court may of its own motion or on the application of any party to the proceedings make either or both of the following orders in respect of the solicitor or barrister who provided the services:

(a) an order directing the solicitor or barrister to repay to the party to whom the services were provided the whole or any part of the costs that the party has been ordered to pay to any other party,

(b) an order directing the solicitor or barrister to indemnify any party other than the party to whom the services were provided against the whole or any part of the costs payable by the party indemnified.

(2) The Supreme Court may on the application of any party to proceedings on a claim for damages make any order that the court in which proceedings on the claim are taken could make under this section.

(3) An application for an order under this section cannot be made after a final determination has been made under this Part by a costs assessor of the costs payable as a result of an order made by the court in which the proceedings on the claim concerned were taken.

(4) A solicitor or barrister is not entitled to demand, recover or accept from his or her client any part of the amount for which the solicitor or barrister is directed to indemnify a party pursuant to an order under this section.

198N Onus on solicitor or barrister to show facts provided reasonable prospects of success

(1) If the court ( the trial court ) hearing proceedings on a claim for damages finds that the facts established by the evidence before the court do not form a basis for reasonable belief that the claim or the defence had reasonable prospects of success, there is a presumption for the purposes of this Division that legal services provided on the claim or the defence (as appropriate) were provided without reasonable prospects of success.

(2) If the Supreme Court (when the Supreme Court is not the trial court) is satisfied, either as a result of a finding of the trial court or otherwise on the basis of the judgment of the trial court, that the facts established by the evidence before the trial court do not form a basis for a reasonable belief that the claim or the defence had reasonable prospects of success, there is a presumption for the purposes of this Division that legal services provided on the claim or the defence (as appropriate) were provided without reasonable prospects of success.

(3) A presumption arising un der this section is rebuttable and a solicitor or barrister who seeks to rebut it bears the onus of establishing that at the time legal services were provided there were provable facts (as provided by section 198J) that provided a basis for reasonable belief that the claim or the defence on which they were provided had reasonable prospects of success.

(4) A solicitor or barrister may, for the purpose of establishing that at the time legal services were provided there were provable facts (as provided by section 198J) that provided a basis for a reasonable belief that the claim or the defence on which they were provided had reasonable prospects of success, produce information or a document despite any duty of confidentiality in respect of a communication between the solicitor or barrister and a client, but only if:

(a) the client is the client to whom the legal services were provided or consents to its disclosure, or

(b) the court is satisfied that it is necessary for the solicitor or barrister to do so in order to rebut the presumption arising under this section.

(5) Provision of legal services in contravention of this section constitutes for the purpose of this Division the provision of legal service without reasonable prospects of success.

10 The submission made on behalf of the Council was that the defendant's solicitor could not have reasonably believed; 'on the basis of provable facts and a reasonably arguable view of the law that the claim … has reasonable prospects of success'

because of the provisions of s 50 of the Civil Liability Act. I propose to set out the provisions of ss 47, 48, 49 and 50 of the Act highlighting the important sections of sub-sections (1) and (2) of s 50;

'47 Part applies to civil liability for death, injury or property damage

(1) This Part applies to civil liability of any kind for personal injury damages (as defined in Part 2) or damage to property.

(2) This Part does not apply to civil liability that is excluded from the operation of this Part by section 3B.

48 Effect of intoxication on duty and standard of care

(1) The following principles apply in connection with the effect that a person's intoxication has on the duty and standard of care that the person is owed:

(a) in determining whether a duty of care arises, it is not relevant to consider the possibility of likelihood that a person may be intoxicated or that a person who is intoxicated may be exposed to increased risk because the person's capacity to exercise reasonable care and skill is impaired as a result of being intoxicated,

(b) a person is not owed a duty of care merely because the person is intoxicated,

(c) the fact that a person is or may be intoxicated does not of itself increase or otherwise affect the standard of care owed to the person.

(2) This section applies in place of a provision of section 74 of the Motor Accidents Act 1988 or section 138 of the Motor Accidents Compensation Act 1999 to the extent of any inconsistency between this section and the provision.

(1) This section applies when it is established that the person whose death, injury or damage is the subject of proceedings for the recovery of damages was at the time of the act or omission that caused the death, injury or damage intoxicated to the extent that the person's capacity to exercise reasonable care and skill was impaired.

(2) A court is not to award damages in respect of liability to which this Part applies unless satisfied that the death, injury or damage to property (or some other injury or damage to property) is likely to have occurred even if the person had not been intoxicated .

(3) If the court is satisfied that the death, injury or damage to property (or some other injury or damage to property) is likely to have occurred even if the person had not been intoxicated, it is to be presumed that the person was contributorily negligent unless the court is satisfied that the person's intoxication did not contribute in any way to the cause of the death, injury or damage.

(4) When there is a presumption of contributory negligence, the court must assess damages on the basis that the damages to which the person would be entitled in the absence of contributory negligence are to be reduced on account of contributory negligence by 25% or a greater percentage determined by the court to be appropriate in the circumstances of the case.

(5) This section does not apply in a case where the court is satisfied that the intoxication was not self-induced.

THE THIRD PARTY/COUNCIL PRIMARY SUBMISSION 11 The primary submission of the Council/Third Party was that solicitor McGirr must have been aware that the defendant was; ' intoxicated to the extent that the person's capacity to exercise reasonable care and skill was impaired'

because of the defendant's blood alcohol reading of 0.187. The Council/Third Party then submitted that solicitor McGirr could not have reasonably believed that the defendant's claim had reasonable prospects of success because a court would not be satisfied that the damage to the property;

'is likely to have occurred even if the defendant had not been intoxicated'

and the defendant's arguments to the contrary were not 'fairly arguable'.

FORM OF THIRD PARTY/COUNCIL MOTION 12 The order sought by Council/Third Party against solicitor McGirr was poorly drafted. It sought the following order; 'that the defendant's solicitor be ordered to pay and indemnify the third party/cross defendant the whole of the costs payable… in accordance with s 198M of the Legal Profession Act.'

13 I found the provisions of s 198M(1)(a) & (b) very difficult to interpret. I have set out in paragraph 22 references to the cases which I have considered in preparing this judgment. In each of those cases the two subsections were referred to either as; 198M(1)(a) the repayment order 198M (1)(b) the indemnity order I am not sure that it is so simple. 14 Section 198M(1)(a)

In my view s 198M(1)(a) literally means; An order directing the solicitor to repay to the party to whom the services were rendered (in this case the DEFENDANT ) the whole or any part of the costs that the party (in this case the DEFENDANT) has been ordered to pay to any other party (in this case the COUNCIL/THIRD PARTY). In this matter the defendant agreed in the Terms of Settlement to pay the Council/Third Party's costs on a party/party basis.

S 198M(1)(a) seems to be the appropriate section where the solicitor's client has paid the other party's costs and the court, either on the application of the client, or the court itself or one of the parties decides that the solicitor should repay his client the costs so paid. The effect would be that the solicitor and not the client would pay the costs.

In this case it was agreed that the costs order made against the defendant in favour of the Council/Third Party had not been paid. Indeed that was the basis of my jurisdiction to hear the application as s 198M(3) allows the application to be made at any time prior to a final determination by a costs assessor of the costs payable under the court order.

It therefore follows that if s 198M(a) is restricted to a repayment it would not be applicable in this matter.

Moreover in its motion the Council/Third Party seeks an order to the solicitor to pay the 'whole of the costs payable….". If s 198M(1)(a) is relied on then the solicitor could only be ordered to pay the amount of the costs ordered against the defendant, that is, costs on a party and party basis as provided for in the Terms of Settlement.

In my view s 198(1)(b) literally means; An order directing the solicitor to indemnify any party (in this case the COUNCIL/THIRD PARTY) other than the party to whom the services were provided (in this case the DEFENDANT) against the whole or any part of the costs payable by the party indemnified (in this case the COUNCIL/THIRD PARTY).

16 What do the words 'the whole or any part of the costs payable by the party indemnified' mean?. One literal meaning to be given to those words would be that the solicitor is to indemnify the Council/Third Party against any costs order payable by it. It could be interpreted that such clause would require the solicitor to indemnify the Council if a costs order was made in the proceedings for the Council to pay another party's costs. for example the plaintiff's costs in the original proceedings. Such costs would be "costs payable by the party indemnified" that is, the Council/Third Party. 17 The other interpretation is that "the whole or any part of the costs payable by the party indemnified" (in this case the Council/Third Party) means the costs payable by the Council/Third Party to its solicitors. I note in passing that "costs" are defined in the Act as follows; "costs includes fees, charges, disbursements, expenses and remuneration."

If that is the meaning to be given to the section it certainly introduces a concept not presently known to the law. I know of no power which would allow a court to order a party or a non-party to pay the whole of the costs payable by another party to its solicitors. The court can of course award costs on an indemnity basis and order the costs to be assessed on that basis. In trying to interpret the meaning to be given to the sections, I am required to have regard to the Second Reading Speech of the Bill in the Parliament. The Premier Mr Carr had this to say; 'The Government has changed the standard for assessing unmeritorious claims in the bill. Under clause 198J the standard will be that the solicitor or barrister must reasonably believe, on the basis of provable facts and a reasonably arguable view of the law, that the claim has reasonable prospects of success. This requirement will also apply to defendant lawyers so that they cannot advance spurious defences. In either case solicitors or barristers must reasonably believe that the material available to them provides a proper basis for alleging the facts on which they want to rely.

We have excluded from these requirements preliminary advice on damages claims. A solicitor or barrister must be able to take initial instructions and advise the client on whether or not their claim or defence has reasonable prospects of success without being in breach of these clauses. Under clause 198L barristers and solicitors must satisfy the standard of reasonable prospects of success before they commence proceedings or file a defence. Under clause 198M they risk having costs awarded against them if they act without reasonable prospects of success. This bill introduces vital tort law reform. I will be sending the bill and the Government's actuarial advice to my counterparts in all other States and Territories. The bill builds on the Government's work with the insurance industry and other jurisdictions to find solutions for people affected by the public liability crisis.'

18 The speech is unhelpful except that it indicates the intention that "under clause 198M they (solicitor or barrister) risk having costs awarded against them if they act without reasonable prospects of success."

19 I have to give some meaning to the legislation consistent with the objects of the legislation as indicated in the Act and in the Second Reading Speech. With considerable reluctance and considerable trepidation, I hold that s 198M(1)(b) would permit me to make an order against solicitor McGirr that he indemnify the Council/Third Party against the costs payable by the Council/Third Party to its solicitors either on an indemnity basis if it is to be the whole of the costs, or on some other basis and probably a party/party basis if I should determine that the indemnity should be for part of the costs. 20 I should emphasise at this stage the effect of s 198M(4) which provides; 'A solicitor or barrister is not entitled to demand, recover or accept from his or her client any part of the amount for which the solicitor or barrister is directed to indemnify a party pursuant to an order under this section.

It therefore follows that if I make an indemnity order under s 198M(1)(b) the solicitor will be liable to pay the costs and will not be able to recover or accept payment of those costs from the defendant. The defendant who drove with a blood alcohol reading of .187 will not be responsible for the costs of the Council at all.

198M (1) REASONABLE PROSPECTS OF SUCCESS 21 In Digiorgio v Dunn (No 2) [2005] NSWSC 3 Barrett J said as follows; 16 An order may be made against a legal practitioner under s 198M(1) if it appears to the court in which proceedings are taken on a claim for damages that the practitioner has provided legal services to a party to the proceedings "without reasonable prospects of success". A claim is to be regarded as having "reasonable prospects of success" if "there are reasonable prospects of damages being recovered on the claim". This is stated in s.198J(4). It presumably follows that a party is "without reasonable prospects of success" if, in relation to the party's claim, there are not "reasonable prospects of damages being recovered on the claim".

22 In this matter I have considered carefully the following cases; Michelle Christopher v Owners Corporation Strata Plan 6276 & Ors Judge M.J. Finnane QC District Court No. 4668 of 2002 dated 17 February 2005

Momibo Pty Ltd & Barry Byrne v John Burnett Adams & John Robyn Marsden t/as Marsdens Law Group Judge Neilson District Court 31 August 2004

Degiorgio v Dunn (No 2) [2005] NSWSC 3 Judge Barrett SC

Lemoto v Able Technical Pty Ltd & Ors (2005) NSW CA 9 May 2005 NSW Court of Appeal McColl JA, Hodgson JA and Ipp JA

23 In my view His Honour Judge Barrett has carefully and usefully discussed the relevant legal principles in Degiorgio. Whilst the extract I propose to use is longer than I would usually set out in a judgment, in my view his exposition of the law is so important to my decision in this matter that I propose to set out paragraphs 17 to 28 of his judgment. '17 A helpful analysis of the elements underlying s 198M(1) is to be found in the judgment of Judge Neilson of the District Court of New South Wales in Momibo Pty Ltd v Adam (unreported, 31 August 2004). His Honour identified five such elements. The first is that reasonable belief (as subjectively held by the practitioner) encompasses the other four and entails a proposition or propositions that can be regarded as logically arguable in an objective sense. The second element is that the reasonable belief must have its objective foundation in material available to the practitioner at the relevant time, which material is not confined to admissible evidence as such and may extend to material that is credible but not strictly admissible. Third, it must be seen that the material thus identified constitutes a proper basis for alleging each relevant fact. Fourth, the claim must proceed according to a reasonably arguable view of the law, a matter not to be approached narrowly; arguably available extension and innovation may be contemplated. The fifth element is that there be reasonable prospects of damages being recovered in the action - not necessarily damages as claimed but some damages, however modest.

18 I would add to this two observations in relation to the fifth element. First, the reference to damages should be understood in the way already discussed. Second, the provisions are not concerned with quantum of damages, with the result that the fifth element will be satisfied even if a prospect of merely nominal or token damages can be seen.

19 Neilson DCJ expressed an opinion, with which I agree, that the relevant provisions of the Legal Profession Act are intended to change general law principles to the general effect that a lawyer may with impunity act for a client in proceedings which are apparently hopeless, provided that the lawyer is not aware that the proceeding might amount to an abuse of process. That apparent legislative intention may serve to add content to the statutory language.

20 When that statutory language is examined, it is seen that, while s.198J(4) goes some way towards explaining "reasonable prospects of success", it does so in a way that does not attempt to explain or define "reasonable prospects". The meaning of that expression must be gathered by analogy, with such attention as is permissible paid to Parliamentary materials.

21 In some contexts, "reasonable prospects of success" signifies no more than "arguable". I quote the following passage from the decision of the Australian Industrial Relations Commission in Westend Pallets Pty Ltd v Lally (1996) 69 IR 1 at p.12:

"The requirement for an arguable case of either legal error or that the discretion has been miscarried will mean that applicants must demonstrate that their case has a reasonable prospect of success."

22 It may also be said that "reasonable prospects of success" connotes something less than likelihood of success - hence the formulation of Sheppard J in Ahern v Deputy Commissioner of Taxation (1983) 78 FLR 202. "… will be likely to succeed or at least have reasonable prospects of success" [emphasis added]. That the test is not a particularly stringent one is suggested by an observation of Gleeson CJ, McHugh and Gummow JJ in United Mexican States v Cabal (2001) CLR 165 at p.174:

"A constitutional challenge to legislation is always a matter of public importance. If it has even reasonable prospects of success, special leave to appeal will be granted - almost as a matter of course" [emphasis added].

23 I was referred by counsel to an article by Nicholas Beaumont, "What are reasonable prospects of success?" (2004) 78 ALJR 812 in which it is suggested that a claim satisfies the statutory requirement "if it is not hopeless or entirely without merit". The "not hopeless" construction is put forward by reference to Cadogan v McCarthy & Stone (Developments) Ltd [2002] L&TR 249, an English decision about the phrase "reasonable prospects of being able to bring about this occupation". Saville LJ there said (at pp.253-4);

"The reason why it must be established that there is a reasonable prospect of obtaining permission is that otherwise the landlords could only be said to be contemplating, rather than genuinely intending, the desired course of action. A reasonable prospect in this context accordingly means a real chance, a prospect that is strong enough to be acted on by a reasonable landlord minded to go ahead with plans which require permission, as opposed to a prospect that should be treated as merely fanciful or as one that should sensibly be ignored by a reasonable landlord. A reasonable prospect does not entail that it is more likely than not that permission will be obtained."

24 The learned author sees the "not fanciful" formulation of Saville LJ as supported by the decision of the High Court in Bushell v Repatriation Commission (1992) 175 CLR 408 which concerned the expression "reasonable hypothesis". Brennan J (at p.428) approved the distinction drawn in Repatriation Commission v Webb (1987) 76 ALR 131 at p.135 between "a theory that is rationally based" and one that is "irrational, absurd or ridiculous".

25 The explanatory note accompanying the Civil Liability Bill 2002 provides no guidance on the meaning of "reasonable prospects of success". The Premier's second reading speech (Hansard, Legislative Assembly, 28 May 2002, p.2085) is of some assistance in that it refers to "unmeritorious claims" and "spurious defences". The adjective "unmeritorious" refers to something that is devoid of merit. Something is "spurious" if it is false or not genuine.

26 I accept that this legislation imposes upon lawyers a standard that is more demanding than that applicable in cases where, by reference to general law principles, a costs order is sought against a party's lawyer. Cases of that kind turn upon the lawyer's duty to the court. Here, by contrast, the lawyer is subject to a statutory duty reflective of the interests of the community. A recent statement of the relevant general law approach may be found in the decision of the Queensland Court of Appeal in Steindl Nominees Pty Ltd v Laghaifar [2002] 2 QdR 683. Davies JA there said (at p.689), with the concurrence of the other members of the court and after reviewing earlier authorities:

"To the extent that those statements state or imply that it is not improper for a legal representative to present a case which he or she knows to be bound to fail, I would reject them. I would prefer to say that it is one thing to present a case which is barely arguable (but arguable nevertheless) but most likely to fail; it is quite another to present a case which is plainly unarguable and ought to be so to the lawyer who presents it. In my opinion, with respect, it is improper for counsel to present, even on instructions, a case which he or she regards as bound to fail because, if he or she so regards it, he or she must also regard it as unarguable."

27 In drawing a line at a somewhat higher point on the relevant scale of conduct, the Legal Profession Act should not, in my opinion, be presumed to intend that lawyers practising in New South Wales courts must boycott every claimant with a weak case. A statutory provision denying to the community legal services in a particular class of litigation cannot be intended to stifle genuine but problematic cases. Not do I see the statutory provisions as intended to expose a lawyer to the prospect of personal liability for costs in every case in which a court, having heard all the evidence and argument, comes to a conclusion showing that his or her client's case was not as strong as may have appeared at the outset to be. The legislation is not meant to be an instrument of intimidation, so far as layers are concerned.

28 The several factors to which I have referred, including the references in the Premier's second reading speech and the apparent legislative purpose, cause me to adopt the construction of "without reasonable prospects of success" that equates its meaning with " so lacking in merit or substance as to be not fairly arguable ". The concept is one that falls appreciably short of "likely to succeed".

24 In Lemoto Her Honour Judge McColl JA discussed the test for reasonable prospects of success and indeed set out the same paragraphs from the decision of Barrett J in Digiorgio. She had this to say; 'Barrett J's construction of the expression "without reasonable prospects of success" appears to me to accommodate both the purpose of Division 5C and to reflect the language of s 198J. The test, whether a claim or a defence was "so lacking in merit or substance as to be not fairly arguable", must be applied, however, in the context of the constituent components of s 198J. In the context the question becomes whether the solicitor or barrister held a reasonable belief that the provable facts and a reasonably arguable view of the law meant that the prospects of recovering damages or defeating a claim or obtaining a reduction in the damages claimed were "fairly arguable". These are matters about which reasonable minds might differ. The question will be whether the solicitor or barrister's belief that they had material which objectively justified proceedings with the claim or the defence "unquestionably fell outside the range of views which could reasonably be entertained": Medcalf v Mardell Lord Steyn (2003) 1AC 120.

THE SOLICITORS EVIDENCE RE PROVABLE FACTS 25 Solicitor McGirr set out in his Affidavit the evidence upon which he relied in coming to the view that the defendant had reasonable prospects of success in his claim against the Council. He referred to the following matters; 1. He knew the accident site well having lived close by for twenty-seven years.

2. He visited the accident site in Mary Street, Longueville at 7am the accident having occurred at about 2.30am. He said that turning from Kenneth Street into Mary Street there were no signs placed by way of warning in either Kenneth or Mary Streets. He said he was familiar with the Australian Road Safety Standards and those standards in relations to the requirement for signs had not been complied with.

He said there was one barricade just past the intersection of Belcott Street and Mary Street. He said the reflector lights were not working. The barricade was placed at an angle with the 'road closed' sign attached to it. He said the lighting was poor and the 'road closed' sign was at an angle. He said that there were no warning cones tapering to guide traffic, no 'road work ahead' signs or detour signs or markers on the roadway in Mary Street.

He said parking in Mary Street from the Kenneth Street end and in the immediate vicinity both before and after the barricade had not been restricted. He said a dark coloured vehicle was permitted to park adjacent and behind the barricade approximately seven metres from the barricade. He saw the vehicles involved in the collision and the first and the first vehicle being the vehicle being owned by Montana Wines Ltd was parked on the incorrect side of the street and facing in the wrong direction.

He said he was approached by a person who he believed to be a nearby neighbour who told him words to the effect;

"Over the last couple of days there have been several accidents and near accidents but this doesn't seem to make any difference to the Council."

He approached the work site from the opposite end of Mary Street and found that that approach was fully sign posted. A 'roadwork ahead' sign was approximately 100 metres from the intersection, 'roadwork ahead' sign was approximately 30 to 40 metres from the excavation site, a 'roadwork ahead' sign was approximately 20 metres from the excavation site as well as bollards and plastic barricades. In addition a detour sign had been installed directing traffic away from the excavation site. With exception of the detour sign, all other signs had been placed on the side on the side of road and not in the path of traffic.

He arranged for photographs to be taken and was told that at approximately 8.30am the Council arrived and placed signs in Mary Street similar to the warning signs at the other end of the excavation site.

Solicitor McGirr said that based on his examination of the site on the morning of the incident and information he obtained subsequently, he was of the view that the accident was likely to have occurred, even if the defendant had not been intoxicated. His view was that the accident site was an accident waiting to happen. He said his client was able to avoid colliding with the barricade and this was an important factor in his reaching his opinion. He said his opinion may have been different if the defendant had collided with the barrier. He said that the defendant having avoid colliding with the barricade was then faced with illegally parked vehicles less than 10 metres ahead. The vehicle was dark coloured, faced in the incorrect direction and he was of the opinion that the defendant would have collided with the vehicle even if not affected by alcohol. In setting out those statements solicitor McGirr was obviously setting his beliefs.

26 The Council/Third Party had obtained a report from Dr Pearl. That report was not tendered and neither the Council/Third Party nor solicitor McGirr sought to refer to it. 27 Solicitor McGirr relied upon a traffic engineering investigation report of consulting forensic engineers Jamieson Foley dated 19 February 2004 and tendered as Exhibit 1. Mr Jamieson noted that the 'road closed' sign as photographed on 18 September 2002, being the sign which confronted the defendant was changed to a 'lane closed' sign by the following day. He found the lighting to be of a minimum standard and found that the approach to the sign 'road closed' in the direction which the defendant had travelling, clearly had not been signposted in accordance with the Australian Standard. 28 Mr Jamieson conceded that; "The driver was later blood tested with a high range of blood alcohol content and therefore alcohol affectation must be considered as 'a primary contributing factor'."

29 He referred to the 'Haddon Matrix' which apparently demonstrates the potential interactions between factors involved in the causation of motor vehicle accidents and said; "The theory behind the Haddon Matrix is that if only one of the contributing factors was removed from the 'chain of events', then the event probably would not have occurred. It would have had a less severe outcome."

30 Mr Jamieson then went on to say; "In this instance it could be reasonably said that had the driver possessed a zero BAC, then the crash probably would not have occurred. However the same could be said for the absence of appropriate sign posting for the 'road closure/obstruction' and the lack of parking control. Had these road works been signposted and managed in accordance with Australian Standard AS1742.3 (particularly prohibiting parked vehicles on such a narrow carriageway so close to the closure) then the crash similarly would not have occurred.

31 In the summary and conclusions Mr Jamieson said; "This report recognised the obvious contribution of a high range blood alcohol content to this crash. Whilst it is beyond the expertise of the present author make commentary of the precise level of contribution to this crash, it is considered a matter of common knowledge that a high range blood alcohol content would significantly disable a driver."

32 He completed his report with the following conclusion; "In summary, this crash exhibited typical multi factual circumstances. It is considered that contributing factors to this crash were -

(ii) An absence of prior warning signposting to the roadwork.

(iii) An absence of devices to gradually taper traffic away from the barrier.

(iv) A narrow local road which allowed on-site parking within the roadway.

FINDING RE NEGLIGENCE 33 Solicitor McGirr submitted that the primary cause of the accident was the failures of the Council/Third Party as detailed in reasons (ii) to (v) of Mr Jamieson's report above. In my view, absence regard to s 50 of the Civil Liability Act, the defendant would have succeeded in establishing negligence on the part of the Council/Third Party in an amount in my view, somewhere between 20% and 40%. Clearly, absence the provision of s 50 of the Civil Liability Act, there were reasonable prospects of damages being recovered on the claim and a claim under s 198M against the solicitor must fail.

CIVIL LIABILITY ACT S 50 34 I have already set out the provisions of s 50 of the Civil Liability Act. Under s 50(1) the defendant in filing the Third Party Notice and Cross Claim was claiming damages to property from the Council. The defendant was at the time of the accident in which the damage was caused, intoxicated to the extent that the defendant's capacity to exercise reasonable care and skill was impaired. Such finding is inevitable given the blood alcohol reading of 0.187. 35 For the Council/Third Party to succeed in obtaining the order against solicitor McGirr, Council has to satisfy me on the balance of probabilities that the proposition that a court would be satisfied that this accident was likely to have occurred even if the defendant had not been intoxicated, is a proposition 'so lacking in merit or substance as to be not fairly arguable'. The concept is one that falls appreciably short of 'likely to succeed'. (see Digiorgio v Dunn (No 2) [2005] NSWSC 3, para 28) 36 I accept that solicitor McGirr believed that based on all of the evidence to which I have referred the proposition that the court would find that the accident was likely to have occurred even if the defendant had not been intoxicated was fairly arguable. But his personal beliefs are not determinative because an objective test is to be applied (see Momibo Pty Ltd Neilson DCJ page 45). 37 In my view a court considering this matter would have regard to statements such as that made by Howie JA (All members of the court agreeing) in the guideline judgment in relation to the offence of high range PCA; Application by the Attorney General under s 37 of the Crimes (Sentencing Procedure) Act for a guideline judgment concerning the offence of High Range Prescribed concentration of alcohol under s 9(4) of the Road Transport (Safety & Traffic Management) Act 1999 204 NSW CCA 303 at para 101 when His Honour said;

" It is a matter of common knowledge that at the level of intoxication represented by a reading of 0.15 the person must have consumed a quantity of alcohol that would not only manifestly influence his or her driving skills, but have led the person to appreciate that fact or, at least the risk of it.

The court hearing the matter would keep coming back to the fact that the reading was 0.187, an extremely high reading." 38 The court hearing the matter would be entitled to have regard to the information contained in the Road Users Handbook 1996 a publication issued by the Roads & Traffic Authority wherein the following information is given; ' A driver's risk of being involved in a crash increases with the amount of alcohol in the bloodstream. At .05 the risk of a crash for the average driver is about twice that of zero blood alcohol. The risk keeps getting higher as the blood alcohol level rises;

at .15 it is twenty-six times higher than at zero.'

39 The court would be entitled to at least consider that the position of the Council's sign on Mary Street presented no more a potential danger than a parked car which could have been expected to have been parked there. 40 Mr Jamieson the expert relied upon by the defendant and the solicitor acknowledged; ' Alcohol affectation must be considered as a primary contributing factor ,

and in this instance it could be reasonably said that had the driver possessed a zero BAC, then the crash would probably not have occurred.'

Surely that opinion, if accepted by the court, (and it came from the defendant's own expert) would make it extremely difficult for the court to find that the accident is likely to have happened even if the driver was not intoxicated.

41 Of course it has to be acknowledged that there will be accidents where a driver has the high range content of alcohol but is not guilty of any negligence at all. Such a driver might be stationary and hit in the rear by another vehicle. In those circumstances there would almost certainly be no negligence on the part of the driver affected by alcohol, and a court would have no difficulty in being satisfied that such accident is likely to have occurred even if the person had not been intoxicated. That however is not the case here where really the defendant is trying to establish the negligence of the Council as the primary reason. 42 The consequence of the finding that a court would not be satisfied that this accident is likely to have occurred even if the defendant had not been intoxicated, is that the defendant loses the opportunity to obtain damages from the Council, which clearly owed him a duty of care and which on the evidence was clearly negligent and in breach of its duty of care. I have found that the percentage contribution which a court could find as representing contribution to the cause of the accident as a result of the Council's negligence to be as high as 40%. However if the defendant cannot satisfy the court on the s 50(2) test, then he cannot recover any damages. 43 A remarkable example of the injustice which s 50(2) can bring about is to be found in the very instructive decision of Her Honour Judge Sidis in Ashley James Russell v Mark and Joanne Edwards District Court Newcastle 23 November 2004. In that case the plaintiff who was sixteen years old and who was attending a house party where he had consumed alcohol dived into a swimming pool at the home causing a displaced fracture of the C5 vertebrae with other damage at C4/5 and 5,6 levels. Judge Sidis found she would have apportioned liability 75% to the owner and 25% to the plaintiff. However, in cross examination the plaintiff in effect admitted that he would not have dived into the pool if he had not been affected by alcohol. Her Honour found that in light of that admission she was bound by the provisions of s 50(2) and because of that provision was not able to award the plaintiff any damages at all. I note that Her Honour had this to say in relation to Pt 6 of the Civil Liability Act 2002; 'In my view these consequences were not those that were considered by those who drafted the legislation and I would seriously recommend that those responsible for the legislation re-visit the provisions of Pt 6 of the Act in order to assess the harshness of its consequences; and I further note that Heyden J in Victims Compensation Fund Corporation v Brown (2003) 201 ALR 260 noted that it is necessary to consider the purposes of the legislation which limits circumstances in which compensation is to be awarded. He said the clear emphasis of the Civil Liability Act is placed upon personal responsibility. According to Heyden J that the legislation results in outcomes that are irrational, anomalous or harsh is not decisive.'

44 For all of the above reasons I come to the view that a court would not award damages to the defendant on his Cross Claim because at the time the damage was suffered, the defendant was intoxicated to the extent that his capacity to exercise reasonable care and skill was impaired and a court would not be satisfied that the damage was likely to have occurred even if the defendant had not been intoxicated. I further find that the case to the contrary was not fairly arguable.

45 For the reasons I have given above I find that solicitor McGirr did provide legal services in the claim for damages by the defendant without reasonably believing, on the basis of provable facts and a reasonably arguable view of the law, that the defendant's claim for damages had reasonable prospects of success. I come to that finding adopting the meaning given to the words 'without reasonable prospects of success' by Barrett J in Degiorgio v Dunn (No 2), that is 'so lacking in merit or substance as to be not fairly arguable.' 46 Those findings do not finalise the matter as the power under s 198M is a discretionary power.

DISCRETIONARY FACTORS 47 I was not referred by the parties to the decision of Lemoto v Able Technical Pty Ltd & Ors (2005) NSW CA 153, 9 May 2005 as the decision was not handed down at the date of the hearing. I found the decision helpful. I do not feel it necessary to bring the decision to the attention of the parties and call for further submissions. At paragraph 130 Her Honour Judge McColl with whom Hodgson JA and Ipp JA agreed, said as follows; ' The question whether a s 198M order should be made is discretionary. The court 'may' make either a repayment order or an indemnity order; s 198M(1). The discretion operates even if the court concludes that the legal practitioner provided legal services to a party without reasonable prospects of success.'

48 S 198K, L, M and N form part of Division 5(c) introduced into the Legal Profession Act in 2002 as part of the package involving tort law reform and the introduction of the Civil Liability Act. Her Honour McColl JA in Lemoto went on to say; 'There can be no doubt that by inserting Division 5(c) in the Legal Profession Act the legislature intended the making of a costs order pursuant to the new provisions to involve either an exercise of disciplinary power or the exercise of a power ancillary to a disciplinary power, rather than to be merely an aspect of the court's costs jurisdiction. Although the immediate context of Division 5(c) is Pt 11 of the Legal Profession Act which deals with 'legal fees and other costs', it appears in the legislation concerned with regulating the legal profession; see in particular Pt 10 which deals with 'complaints and discipline'. The other provisions to which I have referred which empower the Supreme and District Courts to order a legal practitioner to pay costs appear in the legislation dealing with the courts' practices and procedures.'

49 I am of the view that in considering factors to be taken into account when I exercise my discretion I have to bear in mind that s 198L provides as follows; 'The provision of legal services without reasonable prospects of success does not constitute an offence, but is capable of being professional misconduct or unsatisfactory professional conduct.'

50 The head note from Lemoto includes the following statement; 'When considering whether to make a s 198M order the court should consider the nature of the contravention of Division 5(c) which has been established the possible serious implications of making the costs order and determine whether it is just in all the circumstances that a s 198M order should be made and whether it should be as to the whole or part of the costs.'

51 I do take all of those matters into account. I do not consider that the conduct of solicitor McGirr in this matter amounted to professional misconduct or unsatisfactory professional conduct. The main criticism which in my view can be made of him, is that he was over zealous in attempting to protect the interests of his client. I gathered from the evidence that solicitor McGirr is the uncle of the defendant, and it appears to me, as sadly is quite often the case that the family relationship between solicitor McGirr and the defendant may have affected the objectivity with which solicitor McGirr considered the evidence and the case. 52 I did ask the parties to make further submissions to me as at one stage I was concerned as to the basis on which I was to consider the matter, bearing in mind that the proceedings between the defendant and the Council/Third Party was settled and the Terms of Settlement included a term that the defendant was to pay the costs and disbursements of the Council/Third Party. I thought at one stage that such Terms of Settlement would be the end of this matter, but although the correspondence was not handed to me, it is apparently not in dispute that an agreement was reached to settle the matter on the basis indicated but without prejudice to the rights of the Council/Third Party to bring this application. The time in which the application was brought was within the time indicated in s 198M(3) and before a final determination has been made by a cost assessor of the costs payable as a result of the order made in the Terms of Settlement and confirmed by the court. 53 There was no evidence before me as to the financial position of the defendant. In Momibo Pty Ltd v Marsden & Ors it was clear that the plaintiff had no assets and a costs order against the plaintiff would be of no real value. In that case Neilson DCJ did not make an order against the solicitors. Finnane QC DCJ did make an order against the solicitor Firth in the matter of Christopher v Owners Corporation of Strata Plan 6276 in which case there was evidence that the plaintiff was impecunious. In Degiorgio Barrett J did not make the costs order against the solicitor, where the only evidence as to the plaintiff's financial prospects was that all he owned was a mobile phone. 54 In this matter there was no evidence at all as to the financial position of the defendant.

THE WHOLE OR ANY PART OF THE COSTS 55 The other decision which I have to make is whether, if I make an order against solicitor McGirr, it should be on the basis that he is to pay the whole or part of the costs incurred by the Council/Third Party. I note that the only order sought by the Council/Third Party was an order that the solicitor pay the whole of the costs. Whilst I consider it may have been wiser for an order to be sought in the alternative for either the whole or for part of the costs, I take the view that notwithstanding the form of the order sought, that I am able, if I make an order, to order the solicitor to pay part of the costs. 56 I have already indicated that absence of any indication in the Act I regard the words ' whole of the costs' to be equivalent to an order for costs on an indemnity basis. 57 One matter which is very much in favour of the Council/Third Party succeeding in its application for costs on an indemnity basis is that the solicitors acting for the Council warned the solicitor on many occasions and as early as 12 November 2003 that the Council would seek to rely on s 50(2) of the Civil Liability Act. I am also required to take into account the of Mark Robert Debenham deposed in his Affidavit that on 11 December 2002 the Council offered to settle the matter on the basis that the defendant withdraw the Cross Claim and pay the Council's costs, then estimated to be $2,000 to $3,000 in each matter. The offer was rejected. This matter was then settled on 8 June 2004 following a letter from the defendant's solicitor to the Council's solicitors offering to settle the matter on the same basis. The other matter involving Peter Howarth & Associates as plaintiff was settled on 14 June 2004 on the same basis. Of

59 However my decision was based on legislation s 198L to N of the Legal Profession Act introduced in 2002 and which Neilson DCJ in Momibo Pty Ltd 31 August 2004 described as novel, and also referred to the lack of authority on such section. Indeed all of the cases to which I have referred Degiorgio, Christopher, Momibo and Lemoto were all decided after the settlement of the action between the parties in this matter. Moreover in relation to s 50(2) of the Civil Liability Act introduced at the same time, the only case to which I was referred and which I could find was the decision of Sidis DCJ in Russell v Edwards. That case was instructive on this point as well, because although the plaintiff in that matter failed because of the provisions of s 50(2) there was no suggestion, nor could there have been, that the solicitors acting for the unsuccessful plaintiff should be the subject of an order under s 198M. 60 When considering whether to award costs against the solicitor on an indemnity basis in favour of the Council I take into account the behaviour of the Council at the time of the accident. As indicated I formed the view that it would be open for a court to find that the Council was guilty of contributory negligence to an amount at the highest of 40%. In my view it would have been open to the court to find that the failure of the Council to properly signpost the road and to properly warn road users of the significant danger represented by the road works was very serious indeed. In my view that is a matter which I can take into account when exercising my discretion as to the making of an indemnity costs order in favour of the Council. 61 I have come to the view that if I were to make an order against solicitor McGirr it would be that he should indemnify the Council against the order agreed upon by the parties in the Terms of Settlement so that the effect would be that solicitor McGirr would then be responsible for those costs on a party/party basis.

DECISION 62 I then have to come to the decision as to whether in the exercise of my discretion I should make an order under s 198M against solicitor McGirr. In making my decision I have to; 'determine whether it is just in all the circumstances that a s 198M order should be made and whether it should be made as to the whole or part of the costs' ( Lemoto ).

63 I have considered all of the matters that I have referred to in this judgment. I have taken into account all of the matters set out in the affidavit of Mark Robert Debenham and the submissions of Mr Best of Counsel for the Council/Third Party. In the exercise of my discretion I have decided not to make an order. 64 For the reasons which I have already given, if I were to make an order it would be an indemnity order for the party/party costs. The Council/Third Party already has an order for the payment of those costs. There was no evidence before me that the defendant Michael James McGirr was unlikely to pay such costs. There was no evidence, for instance, as to whether or not he had paid the amounts which he agreed to pay to the plaintiff in the settlement of each matter. There was no evidence as to his financial situation at all. I take into account the statements of McColl JA in Lemoto as to the possible serious consequences flowing from the making of an order, bearing in mind the provisions of s 198L of the Legal Profession Act. 65 In declining to make an order I take into account what Heyden J said in Victims Compensation Fund Corporation v Brown that the clear emphasis of the Civil Liability Act is placed upon personal responsibility. In deciding whether in this case it is just in all the circumstances for an order to be made against the solicitor, it appears to me to be a strange concept of justice that the effect of such an order would be that the person who drove his vehicle with a blood alcohol reading of .187 would escape completely responsibility for the order for costs which he agreed to pay to the Council.

66 I have found this a very difficult matter to determine. I note that the Court of Appeal in Lemoto gave certain guidelines as to how it considered these applications under s 198M should be conducted. In this matter I did not have to consider the provisions of s 198N because clearly I did not hear the substantive action I had to, in effect forecast what a court hearing the matter would do. However, solicitor McGirr did indicate that the defendant had refused to waive solicitor/client privilege and solicitor McGirr said he was therefore not able to put to the court any of the instructions which he obtained from the defendant McGirr. One matter which troubled me is whether the defendant should have been separately represented at the hearing. In my view the application could not have detrimentally affected the defendant McGirr, but clearly he could have benefited substantially from the hearing of the Motion in that if a repayment order or an indemnity order had been made against solicitor McGirr and the amount was paid, it would have excused defendant McGirr from the payment of the order. In the end it appeared to me that based on the instructions which solicitor McGirr said he had from the defendant McGirr, it was clear that the defendant McGirr was aware of the nature of the orders sought in the Notice of Motion. It appeared to me then to be a matter for him as to whether or not he sought to be represented. 67 There was reference in the evidence to the fact that when solicitor McGirr filed the defendant's Defence, Cross Claim and Third Party Notice he omitted to attach a certificate under s 198L of the Legal Profession Act. The documents should not then have been accepted for filing. They were. Solicitor McGirr said it was his intention to file the certificate but it was overlooked. He intended to file it subsequently but the matters were then settled. In the circumstances I do not find that such matters affected the issues I was required to determine.

68 I will hear from the parties in relation to costs. 69 I make these preliminary observations. Whilst the Motion in each case has been dismissed such dismissal was on discretionary grounds. My preliminary view is that the appropriate order in the exercise of my discretion in all of the circumstances of this case would be that each party should pay its own costs. PROPOSED ORDERS 70 I would propose the following orders;

2. In each matter each party is to pay its own costs.

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