Costs - Indemnity costs - Where costs to be borne by the plaintiff's legal advisers

Supreme Court Act 1935 (WA), s 71

Order for indemnity costs made payable by plaintiff's legal advisers with liberty to set aside and liberty to apply if difficulty apportioning responsibility

Order for the fifth defendant be joined as a defendant discharged

Bentley v Nelson [1963] WAR 89

1 MARTIN CJ: Before me today is an application to discharge an injunction granted by a member of this Court on 3 November 2006 against the first, second and third defendants and one additional party who was to be added to that action, but without notice being given to those parties or them being heard in relation to the orders sought.

2 Procedural fairness is an almost universal aspect of judicial proceedings and therefore of our system of justice. One of the basic principles of procedural fairness is that a person whose interests might be affected by a determination or order is entitled to be heard before that determination or order is made.

3 In rare and exceptional circumstances, the interests of justice, to which, of course, all other principles, including procedural fairness, are subservient will require a court to make orders without hearing from a party whose interests might be affected by those orders because otherwise some vital objective or interest might be lost forever and justice thwarted. Those circumstances are rare and exceptional indeed and will be strictly confined and constrained to situations in which there is absolutely no way whatsoever in which procedural fairness can be provided compatibly with the requirements of justice.

4 One such circumstance recognised by authority and longstanding practice is the situation in which a party asserts that the Court should issue an immediate, but interim injunction to restrain a person from doing something without first giving notice to that person or hearing from them, perhaps because time does not permit because some vital interest will be lost if the injunction is not granted immediately, or perhaps because there is a real risk that if given notice of the proceedings the other party will take steps to thwart the order before it can be made.

5 But in any case in which the Court is moved to depart from the basic requirements of procedural fairness, the Court should zealously scrutinise the proposition that there is absolutely no way whatsoever in which procedural fairness can be provided compatibly with the interests of justice and only proceed without affording procedural fairness if satisfied that it is the only way in which justice can be achieved and then only depart from procedural fairness to the minimum extent necessary to meet the requirements of justice.

6 When such an application is made, practical necessity requires that the Court must be entitled to assume that any legal practitioner involved in making the application has fulfilled his or her duties as an officer of the Court.

7 When moving the Court to make orders without hearing from a party affected, those duties include firstly, the duty of satisfying themselves that there is absolutely no way whatsoever in which the legitimate interests of their client can be protected without moving the Court to depart from basic procedural fairness; secondly, the duty of satisfying themselves that the interests of their client being advanced by the application are no mere forensic or tactical advantage or interest, but a real and substantive interest which cannot otherwise be protected and that the application is not being brought to secure some collateral or tactical advantage; and thirdly, that the Court has before it all the evidence and information that could possibly impact upon the exercise of this rare and exceptional jurisdiction.

8 I turn now to the circumstances of the present case with those general principles in mind. The proceedings to which I have referred and in which the injunction was granted are part of a morass of interconnected proceedings between these and other parties. It is perhaps sufficient for present purposes if I group, perhaps over-generally, the parties to these various proceedings into three groups; one of which I will call the vendor group, which includes the fourth defendants in CIV 1124 of 2004 who are Sebastiano and Mario Fazio; the sixth defendants in that matter, being Giuseppe and Nunziata Monastra; and the plaintiff in the matter before me now, who is also the fifth defendant in the above-named action, Bianca Rosie Naso. I call them "the vendor group" because they have entered into agreements to sell their interests in the land in question to the Danehill Nominees interests.

9 There are two other groups, who I will call "the purchaser group," comprised of Danehill Nominees Pty Ltd and Vincenzo and Giuseppina Fazio; and a group that I will call "the owner group," which is Vincenzo Tranchita and Mr Tony Grego. I call them owners because they were parties who had not previously entered into transactions to sell their interests to Danehill and interests associated with Danehill.

10 The history of the matter is that some time ago an injunction was granted in favour of Mr Tranchita restraining dealings in the land by the owners. In June of this year, Mr Tranchita sought to discharge that injunction, having apparently entered into an agreement with the group that I am calling the purchaser group.

11 Before the injunction granted in favour of Mr Tranchita was discharged, two of the members of the group that I am calling the vendor group; namely, the fourth and sixth defendants in CIV 1124 of 2004, applied for an injunction restraining dealings in the land. That application came before me and was heard and determined by me on 20 June. On that day, I gave reasons in Court for refusing that application, which included reliance upon their claim to be entitled to rely upon pre-emptive rights created by the August 2000 agreement and various other causes of action which they asserted.

12 I canvassed in the course of those reasons the issues arising from the fact that they had entered into agreements with the Danehill group and the difficulties that lay in their path of placing reliance upon the pre-emptive provisions in the August 2000 agreement. The solicitor and then counsel for the plaintiff in these current proceedings, Mrs Naso, were present when that matter was argued and determined.

13 On 26 June, I heard an application by Mr Tony Grego, a recent defendant in this action, for injunctive relief. That application was also brought before I discharged the injunction granted in favour of Mr Tranchita and on that day I granted an injunction in favour of Mr Grego for reasons that were peculiar to him and his particular circumstances. That would have been clear to anybody who was there, which included the solicitors and then counsel for Mrs Naso.

14 On the same day I had before me an application by the current plaintiff, Mrs Naso, for an injunction. I inquired of her then counsel as to whether, in the light of the injunction granted in favour of Mr Tony Grego, he wished to press that application. He indicated, after taking instructions, that he did not wish to press it. There was then some debate about whether the injunction should be adjourned or dismissed and after hearing that debate I put the proposition to senior counsel for Mrs Naso that he should either press on with his application or agree to it being dismissed. After taking instructions, he agreed that he would not oppose the matter being dismissed.

15 At the time those events occurred, I made it clear to all present, including the solicitor and then counsel for Mrs Naso, that I would not discharge the injunction granted in favour of Mr Grego without giving notice to parties whose interests were affected by that injunction and in particular, the case of Mrs Naso without giving her an opportunity to renew the application that she had made for interlocutory injunction and which I was then dismissing. The dismissal was therefore made expressly conditional upon a recognition of the fact that it would be without prejudice to Mrs Naso's capacity to renew her application should circumstances change and in particular, should the circumstances in relation to other injunctive relief change.

16 The matter was then directed to proceed to mediation and it came before the Principal Registrar on 1 and 2 November. From his report there were protracted attempts to settle these complicated issues.

17 The mediation completed at 8 pm in the evening on 2 November. During the course of the morning of 3 November without notice to anybody and in particular, without notice to any of the defendants to these proceedings and without notice to anybody against whom injunctive relief was sought, an application was made to the Court by Mrs Naso for the grant of injunctive relief. I was then unavailable to hear the matter because I was not in Perth, but it would have been clear on inquiry to the Court that I would have been available the following Monday, 6 November (3 November being a Friday).

18 In support of the application for injunction an affidavit was sworn by Mrs Naso's solicitor. He deposed at a number of points in that affidavit to information he had received and discussions that had taken place in the course of the mediation. That affidavit was a clear contravention of s 71 of the Supreme Court Act 1935 (WA) (the "Act") which imposes a duty of confidence upon all who participate in mediation in relation to discussions and events that take place in the course of mediation.

19 The terms of s 71 are wide and that is because of the obvious public interest in the strict enforcement of the confidentiality of mediation. There is a very strong public interest in the promotion of mediation as a means for the resolution of disputes. That interest will be jeopardised if parties and lawyers participating in mediation are not able to speak with complete candour, confident in the knowledge that the confidentiality of their communications will be respected and protected.

20 The resources of this Court are limited and would not extend to trying any significant proportion of the cases that are lodged in the Court. In fact, less than 5 per cent of the matters that are lodged in the Court are determined after a trial. More than 95 per cent of the matters that are lodged in the Court are determined some other way and unless that continues through the use of mechanisms such as mediation, the public interest will suffer most adversely.

21 Not only, of course, is the public interest in the efficient utilisation of the limited resources of the Court advanced by s 71, but also the interests of the parties to any mediation in achieving a timely resolution of their dispute without the further expense of a trial are protected by that section. It is therefore my view, that the Court must be rigorous to ensure due and full compliance with s 71.

22 I will not compound the breach of s 71 by repeating what was in the affidavit material, other than to say that its general tenor was to suggest that the basis for urgency was an apprehension that there was a meeting to take place later that day (3 November) which might result in a settlement agreement between other parties to the interconnected disputes which, in turn, might result in the discharge of the injunction granted in favour of Mr Grego.

23 In my view, that provided no adequate or sufficient basis whatsoever for moving the Court to depart from the fundamental requirements of procedural fairness to which I have referred. An injunction had been granted in favour of Mr Grego by my order. It would obviously be necessary for there to be another order of the Court lifting that injunction before Mrs Naso was at any risk. I had made clear to all parties concerned and their advisors, that that would not occur without notice.

24 If there was any reasonable basis for apprehension that that might occur because of my absence from Perth on Friday, 3 November, the proper course was to contact the Principal Registrar and make clear to the Principal Registrar that Mrs Naso had an interest in the injunction granted at the suit of Mr Grego and that therefore no steps should be taken to lift that injunction without reference to me. Although I was out of Perth, I was readily contactable. Instead of that obvious course being taken, another member of the Court was immediately moved for injunctive relief without notice to the other parties. Any inquiry to the List Clerk would have revealed that I was available to hear any application on the next Court sitting day which was Monday, 6 November. Further and in any event, the application was made without prior request or demand for an undertaking from any of the parties to be enjoined.

25 When the matter came on before the Judge who was moved to grant the injunction, the hearing was brief indeed. Counsel appearing for Mrs Naso was the counsel who had represented her at all relevant previous hearings (but is not the counsel who appears for her today). It is clear from my review of the transcript of those proceedings that there was no disclosure of the application that had been made by Sebastiano and Maria Fazio and Giuseppe and Nunziata Monastra that I had dismissed on 20 June. There was no disclosure of the reasons why I had dismissed that application nor any attempt to draw his Honour's attention to what might be arguable differences between the position of Mrs Naso and those parties whose application for interlocutory injunction had been dismissed.

26 There was reliance upon material that was put before the Court in clear contravention of s 71 of the Act. There was no disclosure to the Judge of the fact that Mrs Naso has consistently disavowed the validity of the pre-emptive right created in the agreement of August 2000 which was the basis upon which I issued the injunction in favour of Mr Grego.

27 There was no clear enunciation of the arguable case relied upon in support of the injunction or any attempt to enunciate the distinctions between the rights asserted by Mrs Naso as compared to those asserted on behalf of Mr Grego. It is also clear that the ambit of the injunction sought is much wider than was necessary to protect the legitimate interests of Mrs Naso.

28 It is clear from both the affidavit material and from the report of the Principal Registrar that has been provided to me, that the effect of the injunction was to significantly prejudice negotiations that were to take place later on 3 November between other parties to the proceedings and which appear to have been the driving force for the timing of the application for the injunction earlier that day.

29 On the materials available to me, there is at least an available inference that the application was made for the purpose of precluding those negotiations proceeding to a successful completion, so as to prevent any agreement which might fracture the ranks of the parties to these complicated proceedings.

30 For reasons I will develop, I do not think it is necessary for me to determine whether that was the purpose with which the application for injunction was brought, but it is clear from the material available to me that the application had that effect.

31 Because of the improper use of confidential material, contrary to s 71, and because of the various material nondisclosures to which I have referred, the authorities make clear that the only course reasonably open to me is to discharge the injunction (see for example Bentley v Nelson [1963] WAR 89).

32 It follows also that the parties moving for the discharge of the injunction should have their costs. While I will hear from counsel for Mrs Naso before making any final orders, it is my tentative view, that because of the features of the application to which I have referred, that the Court should mark its disapproval of the conduct of those responsible for the application for the injunction without notice by ordering that costs be paid on an indemnity basis; that is to say, that those moving for the discharge of the injunction should have all their costs reasonably incurred for all work reasonably done.

33 The unacceptable aspects of the application for the injunction without notice, were all matters that should have been known to Mrs Naso's legal advisers, but which she could not be expected to have known herself, particularly given the circumstances of her health and which are referred to in the material before me.

34 I therefore cannot presently see any reason why she should be visited with the adverse costs order. There seems to me, to have been a clear breach by the legal practitioners concerned in this application of the important duty of confidence imposed by s 71 of the Act. There also seems to me, to have been failures to conform with the duty to only move the Court without notice in appropriate circumstances and the duty to make full disclosure when such applications are made. There is also an open question as to whether the application was brought so as to secure some forensic or tactical advantage of disrupting settlement negotiations between other parties, a question which I do not currently need to resolve because of my tentative view that the other matters to which I have referred are sufficient in themselves, to justify an order that the costs in favour of the parties moving for the discharge of these injunctions should be borne by Mrs Naso's legal advisers; namely, her solicitor and counsel, but I will, of course, give them the opportunity to be heard in relation to such an order. It should be noted that in hearing the application for the discharge of injunction today, no submissions were advanced on behalf of Mrs Naso's solicitors; and counsel representing Mrs Naso at the time of the application for injunction is not present either.

35 The order I would propose is that I will reserve liberty to apply to Mrs Naso's barrister, but provisional upon that liberty, the order I will make is that the interlocutory injunction granted on 3 November be discharged; that the parties moving for the discharge of that injunction will have their costs of the application on an indemnity basis; that is to say, all costs reasonably incurred for all work reasonably done are to be paid by the legal advisers to Mrs Naso, by which I mean solicitor and counsel, but with liberty to counsel to move to set aside that order; and if there is any difficulty about apportioning responsibility as between solicitor and counsel, I will reserve liberty to apply in that regard as well.

36 In relation to the future of Mrs Naso's injunction or her ambitions for an injunction, the authorities make clear that my discharge of the injunction obtained without notice to the other parties is without prejudice to her capacity to move the Court for a further injunction in similar terms. She is, therefore, plainly at liberty to do so but for all the reasons I have given, I cannot see any reason why that matter needs any particular urgency or priority. Therefore, if she does wish to move for an injunction, she should do so upon notice with an outline of submissions and the matter will be brought before me for determination in the usual course.

1. The interlocutory injunction made on 3 November 2006 be discharged; but with liberty to Mrs Naso to re-apply.

2. The first, second and third defendants, being Danehill Nominees Ptd Ltd, Vincenzo and Giuseppina Fazio and Vincenzo Tranchita have their costs of the application on an indemnity basis; ie all costs reasonably incurred for work reasonably done, to be paid by the legal advisers to Mrs Naso (ie solicitor and counsel), but with liberty to counsel to move to set aside that order; and if there is any difficulty about apportioning responsibility as between solicitor and counsel, liberty to apply generally.

3. The order made on 3 November 2006 that Tony Grego be joined as a defendant to the action be discharged.

4. The affidavit of Mr P Solarski, sworn 3 November 2006 be placed in a sealed envelope on the Court file (and only opened on the order of a Judge).