Plaintiff v Defendants

Supreme Court of Victoria|2009-05-01|Before: FORREST J

PRACTICE AND PROCEDURE - Appeal from decision of Associate Justice - Application by non-solicitor for leave to represent company - Supreme Court Rule 1.17(1) - Security for costs - Leave to appear for company refused - Security for costs ordered.

Mr M. Goodman (with leave of the Court represented the Plaintiff)

2 Subsequently, the company and its solicitor and barrister (the first and second defendants respectively) fell out and proceedings at the Victorian Civil and Administrative Tribunal ("the Tribunal") concerning the conduct of the trial and outstanding fees were instituted.[1] Following an application by the defendants, orders were made that the Tribunal had no jurisdiction over the claim by the company for pecuniary losses and that part of the claim was struck out. The company was ordered to provide security for the defendants' costs in relation to the costs dispute, which remained on foot.

3 The company then sought leave to appeal against orders made by the Tribunal pursuant to s 148 of the Victorian Civil & Administrative Tribunal Appeals Act. Associate Justice Daly refused to grant leave and the company has appealed that decision, which is now awaiting a hearing.

4 There are two applications which I am required to determine -

(a) An application by both the defendants that the company's appeal be stayed unless it is represented by a solicitor as required by r 1.17(1) of the Supreme Court Rules.

(b) An application by the second defendant for security of costs in relation to the appeal by the company.

5 The history of the VCAT proceeding and the proceedings in this Court are set out by Associate Justice Daly in her reasons for judgment of 22 August 2008 which are annexed.

6 Mr Goodman has on several occasions in this Court been given leave to appear on behalf of the company, albeit that he is not a legal practitioner. I also granted him leave to appear on this application.

7 The second defendant, on 19 September 2008, by summons, sought

"an order that the proceeding be permanently stayed subject to the qualification that such stay be lifted during such period or periods only as the plaintiff shall have appointed a solicitor to act for it and such solicitor having given notice to the defendants of his or her appointment with an address for service in accordance with the rules".

8 That summons came on before Harper J in the Practice Court on 6 October 2008. Mr Goodman was given leave to appear on behalf of the company to oppose the order sought by the second defendant. Mr Roberts, the solicitor for the second defendant, has deposed, and I accept, that at that hearing Mr Goodman contested the application (at least in part) on the basis that the company did not have the financial wherewithal to afford legal representation. At the request of Mr Goodman, the application was adjourned so that the company had time to file material evidencing its financial position. The company was ordered to pay the costs of the application.

9 On 19 January 2009, the second defendant filed a further summons seeking security for its costs in relation to the company's appeal. This application was supported by a further affidavit sworn by his solicitor, Mr Roberts.

10 Mr Goodman has filed two affidavits; one dated 3 January 2009 and the other on 27 March 2009.

11 These applications originally came on before me in the Practice Court on 30 January, then on 5 February, and finally on 17 April 2009.

Preliminary matter - Previous hearings concerning Mr Goodman's representation of the company: r 1.17(1)

12 Associate Justice Daly determined that on the hearing of the application for leave to appeal that Mr Goodman should be permitted to appear on behalf of the company. However, she made such an order on a limited basis:

"After substantial argument, leave was granted for Mr Goodman to represent the Plaintiff for the purposes of the leave application only. I reserved liberty to the Defendants to apply to renew the stay application in the future. I reserved the question of the representation of the Plaintiff to the Judge hearing the appeal, should leave be granted. I did so on the basis that the leave application was a preliminary stage of an appeal from a jurisdiction where lay representation was common. Mr Goodman's intimate knowledge of the proceeding, the fact that the question of whether leave ought to be granted is ultimately determined by reviewing the transcript and the reasons of the Tribunal rather than extraneous evidence, and evidence of the Plaintiff's difficult financial position were also relevant factors in my granting leave for Mr Goodman to represent the Plaintiff."

13 Notwithstanding the conditions placed upon her order, Mr Goodman contends that this application is, in effect, an attempt to appeal the decision of Associate Justice Daly or, alternatively, a collateral attack upon the order made by Associate Justice Daly.

14 I am of the view that it is open to the defendants to make the application pursuant to r 1.17(1) notwithstanding Associate Justice Daly's order. Her Honour was patently leaving open the question of a renewed application, particularly given that the application before her was made at a preliminary stage of that hearing. The question of the company's representation is a fluid issue and may well be determined by the ongoing conduct of the action or other matters emerging during the course of the proceeding.

Application under rule 1.17.1 Representation of the company by a solicitor

"Except where otherwise provided by or under any Act or these Rules, a corporation, whether or not a party, shall not take any step in a proceeding save by a solicitor."

16 The rule itself embodies the common law principle which has been in existence for many years. Its rationale was explained by the New South Wales Court of Appeal in Scotts Head Developments Pty Ltd v Pallisar Pty Ltd,[2] in which Mahoney AP said of the equivalent New South Wales rule:

"This rule represents the established law. This court, as a superior court, has a discretion to determine who will be allowed to appear before it. However, it has long adopted the general rule that it will not allow an appearance by a person who has not been admitted to practise before it. This accords with the long established practice of superior courts in Australia and in England."

His Honour then went on to explain the basis for the rule of practice and said as follows (omitting reference to authorities):

"The rule of practice which the court has adopted whereby appearance is limited to persons admitted to practise before the court is not based on technicalities. It has long been regarded as based on considerations central to the proper administration of justice and the protection of the parties in the litigation. First, the court has emphasised the importance, for the administration of justice, of the fact that those permitted to appear before it owe a responsibility to the court to ensure that the court is properly informed and not misled. ...

Second, the court has regard to the possibility of unqualified or untrained advocates interfering with the course of the proceeding before the court and causing loss to the parties involved. ... Experience has shown that a proceeding conducted by a person unskilled in advocacy tends to last longer and to cost more. In determining whether to allow such an advocate to appear, the court must have regard not merely to the position of the party for whom he seeks to appear, but also to that of the other party. The interest of the defendant in having the proceeding dealt with without unnecessary delay and cost is one which, in my opinion, is to be borne in mind.

Third, there remains the public interest in the effective, efficient and timeous disposal of litigation. The administration of justice requires that full assistance be available to the court in determining the issues of fact and law which come before it. The isolation of issues and the presentation of the consideration which support one answer rather than another are things best done by a person experienced in such matters. Where one party is represented by an advocate less than appropriately skilled, the duty of the court to act with fairness and impartiality between the parties is more difficult and may in some cases be compromised. The court cannot adopt the role of advocate for one party or the other. Ordinarily it cannot undertake investigation of matters beyond the evidence formally before it. ..."[3]

17 No doubt, these considerations underpinned the following statement of the Court of Appeal in this State as to the force of the rule:

"The law is clear. There are sound policy reasons why a corporation ought be represented by a lawyer. Nothing has been submitted in this hearing to warrant variation or exemption from that policy. ... The rule is clear."[4]

18 Ms Annesley, who appeared for the defendants, contended that r 1.17(1) was unyielding and that there was, in effect, no discretion to permit a corporation to take a step in a proceeding unless it did so by a solicitor. She distinguished the position of a step in the proceeding as opposed to granting a right of audience to an officer of the company. She argued that the notice of appeal was, therefore, irregular and that the only course open to the Court was to stay the proceeding until a solicitor was engaged. Alternatively, as I understood her submission, she contended that if there was a discretion to permit a step in the proceeding to be taken by the company without a solicitor, then it should not be exercised and the rule should be applied.

19 I do not accept the proposition that the rule is absolute. The rule is expressed as being subject to other provisions of the rules, which necessarily includes r 2.04, which, by its terms, enables a Court to dispense with compliance with the requirements of the rules. Indeed, there may be cases in which a Court is persuaded, given the circumstances of the officer seeking to represent the company, that it is appropriate to dispense with the requirement of r 1.17. There is nothing that I can see in the decision of Hubbard Association of Scientologists International v Anderson and Just (No. 2),[5] relied upon by Ms Annesley, which points to a contrary construction. Indeed, it is clear from what was said by the Court of Appeal in Lettieri v Strangio & Ors, extracted at [17], that there may be variation or exemption from the rule depending upon the circumstances of the case.

20 In light of the foregoing discussion, the following principles, I think, can be distilled:

(a) The starting point, as rule 1.17 shows, is that usually a company will not be permitted to appear without a legal representative. However, the rule is not absolute.

(b) Where such circumstances warrant it, a company may be permitted to "take a step" without being represented by a legally qualified person.

(i) The manner in which the case has progressed at the time that the application is made.

(ii) The manner in which the case can proceed in the future without a solicitor;

(iii) The complexity of the issues involved in the case.

(iv) Whether the lack of disciplinary measures in relation to the person seeking to represent the company will affect the administration of justice;

(v) Whether the case can be conducted in an orderly and responsible fashion without a solicitor;

(vi) Whether there are financial considerations which would inhibit a company from obtaining legal representation;

(viii) Whether the defendant is likely to expend more funds in defending the claim absent a solicitor acting for the company;

(ix) What effect, if any, permitting a company to appear without a solicitor will have on Court resources and, particularly, the effect upon other litigants in the Court List.

Relevant considerations to the application for a stay unless represented by a solicitor

21 My reading of the file and the affidavits filed on behalf of the parties reveals that there has been an enormous amount of wasted time and effort incurred by reason of Mr Goodman's conduct of the claim on behalf of the company. This is demonstrated by not only the manner in which the leave to appeal application before the Associate Justice was conducted, but also by the conduct of the case subsequently. For instance, the Associate Justice was confronted with a raft of asserted questions of law (numbering over 60 and delivered the day before the hearing) and voluminous documents prepared by Mr Goodman. Her Honour ultimately distilled his claim to a number of points and then refused the company leave. Further, the solicitors for the second defendant have been bombarded with an extraordinary amount of superfluous or irrelevant material, making the management of the defence of the appeal particularly difficult. Frequently over the past months, Mr Goodman has emailed or sent by mail more documentation or correspondence turning the appeal into a paper war of attrition.

22 Mr Goodman's behaviour before the Associate Justice was commented upon by her in the following terms:

"Mr Goodman has pursued the application with vigour and diligence. He has expended substantial effort in identifying questions of law and in preparing submissions in relation to the proposed errors of law. However, his increasingly intemperate and often personal attacks upon Tribunal members and counsel, both in Court and in writing, has led me to question the wisdom of refusing the stay application. In particular, his attacks upon counsel for relying upon superior court judgments (and upon the Tribunal and this Court for allowing them to do so) suggests that Mr Goodman has failed to grasp an essential element of our legal system. While this comment is not intended as a criticism, it does highlight the difficulties faced by lay representatives in proceedings of this nature."

23 Before me, Mr Goodman has conducted himself in a responsible and courteous fashion. However, his affidavits are littered with complaints about counsel and the solicitors acting for the defendants, assertions of conflict of interest, references to without prejudice discussions and many other irrelevant matters.

24 In certain cases a Court may take the view that where a case is close to trial or a non-legally qualified person has been permitted to act on behalf of a company for a considerable period of time during the course of the litigation, then those factors would favour that person continuing to represent the company. In this case, the appeal is still to be heard. The points of law are not simple. The course of the conduct of the appeal up to date causes me real concern as to the disposition of the appeal and any subsequent applications.

The nature of the claim and the prospects of success of the appeal

25 The claim at the Tribunal by the company against the solicitor and the barrister relates to the manner in which the proceeding was conducted on behalf of the company (separate to the extant costs issue). Each defendant has, it is asserted, a defence based upon the decision of the High Court in D'Orta-Ekenaike v Victoria Legal Aid & Anor,[6] which reaffirmed counsel's immunity to suit in relation to the conduct of a trial. The Tribunal was persuaded that it lacked jurisdiction. Associate Justice Daly thought likewise. The order for security of costs made by the Tribunal was on the basis that the company would be unable to pay the defendant's costs if ordered to do so. Whilst it is premature to express any considered view, it is clear that there are significant legal obstacles facing the prosecution of the appeal against her Honour's orders. Moreover, the submissions made by Mr Goodman before the Associate Justice and myself dealt with a wide number of issues. Many of these were irrelevant to the points of law which have required determination; this clearly has escalated the costs of the defendants over and above that which would have been incurred if a solicitor had been acting on behalf of the company. It is also clear that Court resources have been expended well beyond the norm for an application of this type.

26 Harper J permitted an adjournment of the application so as to enable the company to put material as to its financial position. The financial statements of the APP Trust of which the company is Trustee for the financial years 2007 to 2008 were subsequently provided.[7] The financial returns reveal that the trust, having been relatively profitable in 2007, last year suffered a financial turnaround and now has, to use Mr Goodman's words, "no money".[8]

27 The company's accounts were not produced, however according to the financial statements of the Trust in 2008, the retained losses were $459,161 and liabilities exceeded assets by $500,000. Mr Goodman has, on a number of occasions in open Court, said that the company cannot afford legal representation.[9] I accept that this is a relevant consideration favouring Mr Goodman continuing to represent the company.

28 The conduct of the case to date is disheartening. Mr Goodman carries the onus to persuade me that the rule should be departed from and that he should be given leave to represent the company. Whilst I am conscious of the financial position of the company, given the prosecution of the case to date and its drain on Court resources, coupled with the lack of any effective disciplinary measures in relation to Mr Goodman and the fact that there is, at the very least, a hearing of the appeal in this Court still to come, the defendants' submissions should be accepted.

29 I propose to make orders in the terms sought in the second defendant's summons, namely, that the proceeding be permanently stayed subject to the qualification that such stay be lifted during such period or periods only as the plaintiff shall have appointed a solicitor to act for it and such solicitor having given notice to the defendants of his or her appointment with an address for service in accordance with the Rules.

"Where -

the plaintiff is a corporation or (not being a plaintiff who sues in a representative capacity) sues, not for the plaintiff's own benefit, but for the benefit of some other person, and there is reason to believe that the plaintiff has insufficient assets in Victoria to pay the costs of the defendant if ordered to do so;

the Court may, on the application of a defendant, order that the plaintiff give security for the costs of the defendant of the proceeding and that the proceeding as against that defendant be stayed until the security is given."

31 The second defendant also relies upon an analogous provision in the Corporations Act 2001. Section 1335(1) provides:

"Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given."

32 In Livingspring v Kliger,[10] the Court of Appeal (Maxwell P and Buchanan JA) set out comprehensively the manner in which such an application must be considered:

"The first question to be addressed is whether the threshold condition for the exercise of the power is satisfied, that is, whether there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful.

That jurisdictional condition must be satisfied before the discretionary power to order security for costs is enlivened.

"The language of the statutory test is clear. The court must address the question which the section poses:

Is there reason to believe that the corporation will be unable to pay the defendant's costs?

There is no warrant for - and no apparent advantage in - adopting the much lengthier Beach Petroleum formulation, which requires the court to decide whether there is reason to believe that there is a real chance that in events which can fairly be described as reasonably possible the corporation will be unable to pay, ... even if in other events which can be fairly described as reasonably possible the corporation would be able to pay...".[11]

33 The Court also made it clear that in relation to the burden of proof.

"The burden rests on the defendant, from first to last, to persuade the court that the order for security should be made".[12]

34 I have already mentioned the parlous financial position of the company. It is not necessary to analyse the company's financial position in any detail, given what was said by Mr Goodman, the sole director and shareholder of the company which has a $2 paid up capital. As I have said, he told me that he, his wife and the company had "no money".

35 Mr Goodman argued that, as the second defendant was insured (which fact was not disputed), then that was a relevant consideration to refusing to exercise discretion in favour of the grant of security for costs. That proposition was rejected by the Court of Appeal in Livingspring v Kliger in which the Court said:

"We can see no reason in principle why an insured defendant should be in any different position from an uninsured defendant for this purpose. Let it be assumed that the insurer has agreed to indemnify the defendant against the plaintiff's claims. The insurer should be regarded as having exactly the same entitlement as the insured defendant to protection against the risk that the plaintiff will be unable to meet an adverse costs order."[13]

36 Mr Goodman argued that there was unnecessary delay on the part of the second defendant in bringing this application. That argument should also be rejected. True it is that the second defendant did not issue an application for security of costs at the time it made its initial application under r 1.17. The delay is, however, only that of four months from the date of Associate Justice Daly's decision and no prejudice has been demonstrated by Mr Goodman as a result of that delay.

37 Save to refer to what I have said at [25], it is not necessary to say any more on this topic.

The proceeding has resulted in impecuniosity of the company

38 There is nothing in the material before me to indicate that the company has sustained any pecuniary loss due to the defendants' conduct.

39 The second defendant's solicitor, Mr Roberts, estimates that over $70,000 has been spent in costs to date in defence of the Tribunal proceeding and the associated appeal to this Court. He estimates that a sum of $10,000 would be incurred by the second defendant in defending the appeal from the decision of the Associate Justice.[14]

Resolution of the application for security for costs

40 I am satisfied, both from the statements of Mr Goodman himself as well as the financial statements, that the company will be unable to pay the costs of the second defendant in respect of the appeal of the decision of the Tribunal. The considerations which I have adverted to point squarely, it seems to me, to the company being required to provide security for the second defendant's costs.

41 I propose to order that the plaintiff provide security for the second defendant's costs in the sum of $10,000 within 28 days and the proceeding be stayed until the security is given.

[1] Applications J10/2007 and J22/2007 filed in January 2007.

[2] Unreported, New South Wales Court of Appeal, 6 September 1994.

[3] See also Bay Marine Pty Ltd v Clayton County Properties Pty Ltd (1986) 8 NSWLR 104.

[4] Lettieri v Strangio & Ors [2008] VSCA 205 [18].

[7] Exhibit MG65 to Mr Goodman's affidavit.

[8] Mr Goodman's statement before me at the hearing on 17 April 2008.

[9] Mr Roberts' affidavit of 19 January 2009 [11].

[11] [2008] VSCA 93 [11] and [14].

[14] Mr Roberts' affidavit of 19 January 2009 [13] and [16].

At a glance

Court

Decision date

Before

Source

Judgment (89 paragraphs)

Parties

Cases Cited (2)