Authorities on wasted costs application
227All parties referred to Lemoto as containing relevant principles in relation to whether orders should be made under s 99. Lemoto considered s 198M of the Legal Profession Act 1987 (repealed) which provided for costs orders to be made against lawyers acting in matters without reasonable prospects of success, inter alia. After setting out at [84] - [91] the history of the jurisdiction to make costs orders against lawyers in English cases such as Myers v Elman and Orchard v South Eastern Electricity Board [1987] QB 565 , McColl JA ( Hodgson and Ipp JJA agreeing) at [92] set out seven guiding principles as follows:
The new Division 5C [of the Legal Profession Act] should be construed against the background of the following principles which can be gleaned from the English and Australian authorities which have considered the power to order legal practitioners to pay the costs of proceedings in which they have represented parties:
(a) The jurisdiction to order a legal practitioner to pay the costs of legal proceedings in respect of which he or she provided legal services must be exercised "with care and discretion and only in clear cases": Ridehalgh (at 229); Re Bendeich (No 2) (1994) FCR 422; Deputy Commissioner of Taxation v Levick (1999) 168 ALR 383 at 389 [11]; 43 ATR 621 at 627 [11] per Hill J; Levick v Deputy Commissioner of Taxation (2000) 102 FCR 155 at 166 [44]; Gitsham v Suncorp Metway Insurance Ltd [2002] QCA 416 at [8] per White J (with whom Davies and Williams JJA agreed); De Sousa v Minister for Immigration, Local Government and Ethnic Affairs (1993) 41 FCR 544; Money Tree Management Service Pty Ltd v Deputy Commissioner of Taxation (No 3) (2000) 45 ATR 262;
(b) A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he or she acts for a party who pursues a claim or a defence which is plainly doomed to fail: Ridehalgh (at 233); Medcalf v Mardell [2003] 1 AC 120 at 143 [56] per Lord Hobhouse; White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169 (affirmed on appeal, Flower & Hart (a firm) v White Industries (Qld) Pty Ltd (1999) 87 FCR 137; Levick v Deputy Commissioner of Taxation ; cf Steindl Nominees Pty Ltd v Laghaifar [2003] 2 Qd R 683;
(c) the legal practitioner is not "the judge of the credibility of the witnesses or the validity of the argument": Tombling v Universal Bulb Co Ltd [1951] 2 TLR 289 at 297; [1951] WN 247 at 238; the legal practitioner is not "the ultimate judge, and if he reasonably decides to believe his client, criticism cannot be directed to him": Myers v Elman (at 304, per Lord Atkin); Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406 at 413 [34]; 47 ATR 1 at 8 [34], per Callinan J;
(d) A judge considering making a wasted costs order arising out of an advocate's conduct of court proceedings must make full allowance for the exigencies of acting in that environment; only when, with all allowances made, a legal practitioner's conduct of court proceedings is quite plainly unjustifiable can it be appropriate to make a wasted costs order: Ridehalgh (at 236, 237);
(e) A legal practitioner against whom a claim for a costs order is made must have full and sufficient notice of the complaint and full and sufficient opportunity of answering it: Myers v Elman (at 318); Orchard v South Eastern Electricity Board (at 572); Ridehalgh (at 229);
(f) Where a legal practitioner's ability to rebut the complaint is hampered by the duty of confidentiality to the client he or she should be given the benefit of the doubt: Orchard v South Eastern Electricity Board (at 572); Ridehalgh (at 229); in such circumstances "[t]he court should not make an order against a practitioner precluded by legal professional privilege from advancing his full answer to the complaint made against him without satisfying itself that it is in all the circumstances fair to do so": Medcalf (at 134 [23] per Lord Bingham of Cornhill);
(g) The procedure to be followed in determining applications for wasted costs must be fair and "as simple and summary as fairness permits...[h]earings should be measured in hours, and not in days or weeks... Judges ... must be astute to control what threatens to become a new and costly form of satellite litigation": Ridehalgh (at 238 - 239); Harley v McDonald [2001] 2 AC 678 at 703 [50]; Medcalf (at 136 [24]).
228The legislative framework considered in Lemoto included repealed s 76C of the Supreme Court Act 1970 which enabled the court "to penalise a solicitor whose serious neglect, incompetence or misconduct delays proceedings ... by making orders for the payment of costs". That section preceded s 99 of the CP Act.
229In Ridehalgh (English Court of Appeal) Bingham MR, Rose and Waite LJJ considered s 51(6) of the Supreme Court Act 1981 (UK) which provided that "the court may disallow, or (as the case may be) order the legal or other representative concerned to meet, the whole of any wasted costs or such part of them as may be determined in accordance with rules of court". Section 51(7) defined "wasted costs" as any costs incurred by a party "as a result of any improper, unreasonable or negligent act or omission on the part of" a lawyer or "which, in the light of any such act or omission occurring after they were incurred, the court considers it is unreasonable to expect that party to pay." The court stated at 232 - 233:
"Unreasonable" also means what it has been understood to mean in this context for at least half a century. The expression aptly describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case, and it makes no difference that the conduct is the product of excessive zeal and not improper motive. But conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting on a practitioner's judgment, but it is not unreasonable.
The term "negligent" was the most controversial of the three. It was argued that the Act of 1990, in this context as in others, uses "negligent" as a term of art involving the well known ingredients of duty, breach, causation and damage. Therefore, it was said, conduct cannot be regarded as negligent unless it involves an actionable breach of the legal representative's duty to his own client, to whom alone a duty is owed. We reject this approach. (1) As already noted, the predecessor of the present Ord. 62, r. 11 made reference to "reasonable competence". That expression does not invoke technical concepts of the law of negligence. It seems to us inconceivable that by changing the language parliament intended to make it harder, rather than easier, for courts to make orders. (2) Since the applicant's right to a wasted costs order against a legal representative depends on showing that the latter is in breach of his duty to the court it makes no sense to superimpose a requirement under this head (but not in the case of impropriety or unreasonableness) that he is also in breach of his duty to his client.
We cannot regard this as, in practical terms, a very live issue, since it requires some ingenuity to postulate a situation in which a legal representative causes the other side to incur unnecessary costs without at the same time running up unnecessary costs for his own side and so breaching the ordinary duty owed by a legal representative to his client. But for whatever importance it may have, we are clear that "negligent" should be understood in an untechnical way to denote failure to act with the competence reasonably to be expected of ordinary members of the profession.
In adopting an untechnical approach to the meaning of negligence in this context, we would however wish firmly to discountenance any suggestion that an applicant for a wasted costs order under this head need prove anything less than he would have to prove in an action for negligence: "advice, acts or omissions in the course of their professional work which no member of the profession who was reasonably well-informed and competent would have given or done or omitted to do;" an error "such as no reasonably well-informed and competent member of that profession could have made;" see Saif Ali v. Sydney Mitchell & Co. [1980] A.C. 198, 218, 220, per Lord Diplock.
230Lemoto referred to Harley v McDonald at [50] - [51] (Privy Council appeal from New Zealand Court of Appeal) (Lord Hope, Lord Clyde, Lord Hobhouse, Lord Scott, and Dame Sian Elias):
As a general rule allegations of breach of duty relating to the conduct of the case by a barrister or solicitor with a view to the making of a costs order should be confined strictly to questions which are apt for summary disposal by the court. Failures to appear, conduct which leads to an otherwise avoidable step in the proceedings or the prolongation of a hearing by gross repetition or extreme slowness in the presentation of evidence or argument are typical examples. The factual basis for the exercise of the jurisdiction in such circumstances is likely to be found in facts which are within judicial knowledge because the relevant events took place in court or are facts that can easily be verified. Wasting the time of the court or an abuse of its processes which results in excessive or unnecessary cost to litigants can thus be dealt with summarily on agreed facts or after a brief inquiry if the facts are not all agreed. Scope for the making of a costs order that will compensate as well as penalise is then likely to be found in making an order against the practitioner that will indemnify the opposing litigant against costs incurred as a result of the breach of duty that would otherwise not be recoverable.
Circumstances which involve serious breaches of the practitioner's duty to the court may however raise questions about his duty to the client which involve allegations of professional misconduct. They may also raise questions as to whether the practitioner is liable in damages to the client for negligence. But it is not appropriate when considering whether or not to make a costs order for the court to rule upon whether, in addition to a breach of the duty to the court, there has been a breach of the rules of professional conduct. This is a matter which will ordinarily be dealt with by way of complaint under the disciplinary procedures of the 1982 Act. Nor is it appropriate for the court in exercising its summary jurisdiction to make a costs order to say whether the client has a cause of action against his barrister or solicitor for negligence. This is a matter which ought be dealt with in separate proceedings, in which the issues of fact and law between the client and the practitioner are clearly focused and the practitioner is given a full and fair opportunity to respond to the client's claim.
231These cases predate the introduction of s 99 of the CP Act (2005). Section 99 must be read in light of s 56(1) of CP Act which provides that the overriding purpose of the Act and rules is the just, quick and cheap resolution of the real issues in the proceedings and s 57 which identifies the objects of case management; see Puruse at [45] citing also Kendirjian v Ayoub and Lemery at [13] inter alia. This approach is confirmed in the most recent Court of Appeal authority to consider s 99, Kelly v Jowett .
232In Kelly v Jowett McColl JA (Beazley JA and Barrett J concurring) identified the statutory context for the consideration of costs under s 98 and s 99 of the CP Act. The Court's power to make an order for costs is expressly preserved in Pt 42 r 42.3(2)(g) of the UCPR. Her Honour noted at [56] that a court's power to order costs is in the exercise of its supervisory jurisdiction over its own officers which reflects English authority which confirmed that ancient jurisdiction of a court. At [57] her Honour stated:
The Court's power to make costs orders in respect of a legal practitioner has, as the discussion to which I will shortly turn demonstrates, always been exercised to ensure legal practitioners observe their duty to the Court and, in turn, to the administration of justice, to ensure among other obligations the expeditious and efficient conduct of litigation. Those obligations now find express reflection in s 56(1) and s 56(3) of the Civil Procedure Act in requiring parties to civil proceedings to assist the Court to further the just, quick and cheap resolution of the real issues in the proceedings and directing that "[a] solicitor ... must not, by his or her conduct, cause his or her client to be put in breach of the duty identified in subsection (3)": s 56(4).
233At [ 60] - [62] her Honour stated:
The jurisdiction to make costs orders against legal practitioners referred to in s 99 of the Civil Procedure Act and r 42.3(2)(g), now commonly referred to as the "wasted costs" jurisdiction, must be exercised "with care and discretion and only in clear cases": Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300 at 320 92 per McColl JA (Hodgson JA and Ipp JA agreeing). In exercising the jurisdiction, however, the Court takes into consideration the public interest reflected in the legislative provisions to which I have referred, that litigants should not be financially prejudiced by the unjustifiable conduct of litigation by their or their opponent's lawyers: Ridehalgh v Horsfield [1994] Ch 205. It is the public interest in the administration of justice which is the source of duties that lawyers owe to the court: Rondel v Worsley [1969] 1 AC 191 at 227 per Lord Reid.
The wasted costs jurisdiction is based on the court's right and duty to supervise the conduct of its solicitors: Myers v Elman , per Lord Atkin (at 302), per Lord Wright (at 318-319), per Lord Porter (at 334-336). The underlying principle is that the court has a right and a duty to supervise the conduct of its solicitors, and visit with penalties any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause in which the solicitor is engaged professionally. The jurisdiction is exercised where it is demonstrated that the solicitor has failed to fulfil his or her duty to the Court and to realise his or her duty to aid in promoting in his own sphere the cause of justice. The order is for payment of costs thrown away or lost because of the conduct complained of and is frequently exercised in order to compensate the opposite party in the action: Myers v Elman per Lord Wright (at 319); see also Sydney South West Area Health Service v Stamoulis [2009] NSWCA 153 (at [204]) per Ipp JA (Beazley JA and Giles JA relevantly agreeing).
The history of the wasted costs jurisdiction was discussed in Lemoto (at 318 [83] and following). As can be seen from that discussion many of the principles were explained in the seminal decision of Myers v Elman which makes it clear that the object of the wasted costs jurisdiction is to protect the client who has suffered and to indemnify the party who has been injured. Misconduct or default or negligence in the course of the proceedings is in some cases sufficient to justify an order: Myers v Elman (at 289) per Viscount Maugham, Lord Russell of Killowen (at 307) and Lord Porter (at 334) agreeing.
234The terms serious neglect and serious incompetence are not defined in the CP Act. The Applicants are not alleging serious misconduct. At [14] - [17] Sully J in Ideal Waterproofing considered these terms in relation to s 99 and applied the meaning of these terms from Ridehalgh set out above in par 229.
235Sully J at [18] also applied a further principle referred to in GE Dal Pont, Lawyers' Professional Responsibility in Australia and New Zealand , 2nd ed (2001) LBC Information Services at 374 - 375 which states that the jurisdiction to order costs against a lawyer personally is to be exercised sparingly because, among other things, it is difficult for a court to know all the details and circumstances of the lawyer's instructions. The jurisdiction does not arise because of a lawyer's bona fide mistake or error of judgment . The conduct must involve some serious dereliction of duty or gross negligence. At [19] Sully J also applied from Harley v McDonald [1999] NZLR 545 (New Zealand Court of Appeal) at [59] - [61] the principle that officers of the court are expected to behave with a certain level of competence and care and if in serious dereliction of such duty, officers are amenable to the costs jurisdiction of the court. In that case it was not considered necessary or desirable to attempt to define the level of incompetence or negligence required for the jurisdiction to arise.
236Windeyer J in Karwala at [10] and McDougall J in Whyked at [18] expressed caution in applying the views in Harley which concerned the inherent jurisdiction of the New Zealand Court of Appeal to order costs against lawyers. Windeyer J did not think that decision relevant to a case concerning statutory jurisdiction such as s 99(1) which is independent of the requirements for professional conduct. As highlighted in Whyked , s 99 is not framed by reference to a test of serious dereliction favoured by the New Zealand Court of Appeal . The approach of Sully J was nevertheless applied in both cases and his considerations and principles all need to be borne in mind in this matter. Lemery at [72] referred to Ideal Waterproofing and Ridehalgh in relation to the meaning of serious neglect in s 99 as a substantial omission which no member of the legal profession who was reasonably well informed and competent would have omitted to do.
237There are relatively few decisions under s 99 of the CP Act in the Supreme Court and this Court it would appear, based on a table provided by Mr Taylor's counsel of 20 such cases decided since 2005. Orders under s 99 in favour of the opposing party were made in only four cases. As identified by Mr Taylor's counsel (par 127) there is no case where this Court or the Supreme Court has made an order under s 99 requiring a lawyer to compensate his or her client. Four cases, Ideal Waterproofing , Holmes , Dubow and European Hire Cars , are identified where clients have sought costs from their lawyer or former lawyer under s 99, all unsuccessfully.
238The costs sought under s 99 are the Applicants' costs of the misjoinder motion, indemnification for the costs ordered by the Court to be paid on 6 November 2009 (the Crown's costs) and reimbursement for all fees paid to the Respondents in relation to whole or part of the proceedings. Section 99(2)(a) provides that a court may disallow the whole or part of costs in proceedings as between a barrister and client and as between a solicitor and client. The claim for reimbursement of costs paid to T&W and Mr Taylor is presumably under this subsection. Section 99(2)(b) provides that a court may direct a solicitor or barrister to pay a client the whole or part of any costs the client has been ordered to pay to another person (here the Crown's costs of the misjoinder motion and subsequent discontinuance by the Applicants). Under s 99(2)(c) a court can also direct a lawyer to indemnify any party not his or her client against costs payable by that party. That subsection is not relevant to this application.