Plaintiffs v Defendant

2 By summons filed 20 November 2012, the plaintiffs now seek an order that the defendant's solicitors pay, on an indemnity basis, the plaintiffs' costs of the proceeding on and from 20 September 2012; alternatively, on and from 6 October 2012; alternatively, on and from 9 October 2012. In the further alternative, the plaintiffs seek an order that the defendant's solicitors pay, on an indemnity basis, the plaintiffs' costs of proving the existence of the loan agreement on and from one of those days. In each case, the relief sought is sought pursuant to s 29 of the Civil Procedure Act 2010.

3 Section 29(1)(a) of the Civil Procedure Act relevantly provides:

"If a court is satisfied that, on the balance of probabilities, a person has contravened any overarching obligation, the court may make any order it considers appropriate in the interests of justice including, but not limited to -

(a) an order that the person pay some or all of the legal costs or other costs or expenses of any person arising from the contravention of the overarching obligation;"

4 It is common ground that the overarching obligations described in the Civil Procedure Act apply to the defendant's solicitors.[2] The overarching obligations include complying with a paramount duty to the Court to further the administration of justice in relation to any civil proceeding in which that person is involved;[3] not making any response to a claim in a civil proceeding that does not, on the factual and legal material available to the person at the time of responding to the claim, have a proper basis;[4] cooperating with other parties in the conduct of the proceeding;[5] and taking appropriate steps to narrow the issues in dispute in the proceeding.[6]

5 The plaintiffs' application for indemnity costs from the defendant's solicitors relates to the defendant's conduct of denying the existence of the loan agreement and alleging that emails relied upon by the plaintiffs in respect of that issue had been fraudulently altered. In essence, the plaintiffs contend that there was no proper basis for the position taken by the defendant on these issues. The plaintiffs then submit that the defendant's solicitors must have known this and, therefore, that they should not have persisted with their denial of the loan agreement, nor with their allegation that the emails relied upon by the plaintiffs had been fraudulently altered.

6 The writ and statement of claim in this proceeding were filed on 3 August 2012. However, the plaintiffs had obtained an ex parte interim injunction the previous day. On 7 August 2012, the injunction was continued.

7 On 20 September 2012, the defendant's solicitors filed and served the defendant's defence - in which the existence of the loan agreement was denied. There is no suggestion that this was done other than on instructions from the defendant.

8 On 28 September 2012, the interlocutory injunction was continued and the trial of the proceeding fixed for hearing on 10 October 2012 (on an estimate of three to four days). At this stage, it was apparent that there was a dispute between the parties as to the genuineness of emails (and email chains) upon which each side relied.

9 Over the next few days, procedural disputes arose between the parties. As a result, on 4 October 2012, the following directions were made:

"1. Each party is required to give discovery to the other side (with copies of all discovered documents) by 4.00pm Friday 5 October 2012.

2. Each party will prepare his, her, its own court book containing the documents that party intends to refer to or rely upon at trial. The documents shall be arranged in chronological order. Each court book is to be filed and served by 10.00am Tuesday 9 October 2012.

3. Each party is to give access to that party's computer from which any relevant email to this proceeding was either sent or received, to the other side by 2.00pm Saturday 6 October 2012.

4. Any expert reports are to be served by 10.00am Tuesday 9 October 2012."

10 The plaintiffs gave access to the relevant computers and email accounts under their control on 5 October 2012. The parties dispute whether the defendant in fact gave access to her computer. However, what is not in dispute is that the defendant did not give access to the email account relevant to this proceeding containing the character string "sexybiotchinnj69". In partial explanation for this, the defendant's solicitors wrote to the plaintiffs' solicitors[7] that they were instructed by the defendant that this email account was an account belonging to the defendant's brother and that the defendant's brother was not prepared to grant the plaintiffs access to it. At that point, one would have been entitled to be somewhat suspicious of the defendant's instructions.

11 At 10.56am on 9 October 2012 (the day before the trial commenced), the plaintiffs served a report from their expert, Mr Liddle. The report was headed, "Investigation: Validity of Certain Information Contained in Confidential Emails between Geoffrey Edelsten and Stacey da Silva between March 1 and 31 June 2012". In the report, Mr Liddle said, amongst other things:

"Without access to the original electronic copies of the email messages it is impossible to determine whether a printed copy of an email message purporting to be an original is a true and correct record. In order to ensure the validity of the emails I obtained original electronic copies of the emails located in the Google Apps Mail Service of Dr Geoffrey Edelsten for the purpose of verification and further investigation."

12 The report concluded that it was possible to prove "beyond all doubt" which version of the various competing email messages were true and correct copies, and which had been altered. Mr Liddle's conclusion was that the copies of the emails which were being put forward by the defendant as authentic were in fact false and amounted to "a clumsy and at best amateurish attempt" to mislead. Notwithstanding that the defendant (or perhaps more correctly, the defendant's solicitors) had retained an expert who was also given access to the plaintiffs' computer equipment, the defendant never served any expert report.

13 The trial commenced the day after Mr Liddle's report was served (10 October 2012). While the defendant was represented by her solicitors and counsel, she was not present. She has at all relevant times (so far as this proceeding is concerned) remained in the United States.

14 The first day of the trial was taken up with an opening and the second plaintiff's evidence-in-chief and cross-examination. Cross-examination of the second plaintiff continued on day two (11 October). Following the conclusion of the second plaintiff's evidence, the plaintiffs called Ms Whitaker and Mr Liddle. By lunch time on the second day, the plaintiffs had closed their case.

15 The defendant did not open her case. Her case commenced by the calling of her evidence-in-chief over a video link during the afternoon of the second day of the trial. There was then a problem with cross-examination being pursued at that time because the defendant did not have access to all of the relevant documents about which Senior Counsel for the plaintiffs wished to cross-examine. Accordingly, the cross-examination of the defendant was conducted on the third morning of the trial. Throughout the defendant's evidence, she maintained that her version of the relevant emails was the correct version. At the conclusion of the defendant's evidence, the defendant closed her case. Addresses were conducted on the afternoon of the third day of the trial.

16 As is recorded in the principal judgment,[8] counsel for the defendant abandoned the defendant's denial of a loan agreement in the defendant's final address. Again, as recorded in the principal judgment, having regard to the evidence which had been called, counsel for the defendant could not reasonably have taken any other approach.[9]

17 In support of their application, the plaintiffs rely upon rules of professional conduct to the following effect:[10]

(a) A legal practitioner must not act as the mere mouthpiece of the client ... and must exercise the forensic judgments called for during the case independently, after appropriate consideration of the client's ... wishes where practicable.

(b) A legal practitioner must not draw or settle any court document alleging criminality, fraud or other serious misconduct if the factual material available to the practitioner does not provide a proper basis for the allegation.

(c) A legal practitioner must not make allegations or suggestions in court against any person that are not reasonably justified by the material then available to the practitioner.

18 There is no doubt that the defendant's solicitors pursued a defence of this proceeding which involved the assertion that the defendant's version of relevant emails was correct - and that where there was a discrepancy, this was because the plaintiffs' version had been improperly altered or tampered with. This defence was pursued until the commencement of the defendant's final address, when it was then abandoned. I am satisfied that at all times, in pursuing this defence, the defendant's solicitors were acting on the instructions of the defendant. Indeed, when the defence was eventually abandoned, it was abandoned in the face of the defendant's evidence to the contrary.

19 It is always easy to say with hindsight that a legal practitioner should have taken more steps to determine whether his or her instructions were correct. That said, in circumstances where fraud is alleged by one's client, a legal practitioner is required to take particular care.

20 This proceeding came on for trial relatively quickly. It did so because of the nature of the allegations made in it, and the relief sought.[11] Having regard to the instructions the defendant's solicitors then possessed, I see nothing improper, or in breach of any rule of conduct, or in breach of any overarching obligation or other provision of the Civil Procedure Act, in the drawing, settling and filing of the defendant's defence. Further, having regard to the provision by the defendant to her solicitors of her version of the relevant emails, I make the same findings in relation to the defendant's solicitor's conduct up to and including 9 October (the day before trial, and the day on which Mr Liddle's report was served).

21 It seems to me that the real question in this application is whether or not the overarching obligations under the Civil Procedure Act required the defendant's legal practitioners to abandon the defendant's denial of the loan agreement (and the corresponding allegation that the plaintiffs' emails were false) at the start of the trial, or on either of its first two days. In defence of their position, the solicitors for the defendant point to the fact that a critical original email[12] (if not the critical original email) was not provided to them (or tendered) until the second day of the trial.[13] The solicitors for the defendant say that, without access to this original email, their position was as described by Mr Liddle. That is, it was difficult to determine whether or not the other emails of which they were aware which had been produced by the plaintiffs were genuine. The plaintiffs dispute this,[14] and say that in any event, other emails, sufficient to show that the defendant's allegations were without foundation, had been provided to the defendant's solicitors prior to the commencement of the trial. Additionally, the plaintiffs contend that notwithstanding that the critical email was not in the court book and was not produced by them at trial until the second day (together with Mr Liddle's supplementary report), the email had been provided to the defendant's solicitors as part of the discovery process on 5 and 6 October, and was thus available to the defendant's expert.

22 It is always possible to say that an issue, upon which it becomes clear that a party will ultimately be unsuccessful, could have been abandoned earlier if greater diligence had been exercised. However, the mere failure to abandon a point at the earliest possible time does not mandate a conclusion that an overarching obligation of the Civil Procedure Act has been breached.

23 In my view, it was not unreasonable for the defendant's solicitors to maintain the defendant's defences during the first day of the trial. The point is more debatable when one comes to the second day. At the commencement of the defendant's case, her counsel advised the Court that the defendant would be the only witness. At that point, the defendant's solicitors must have known that the allegation that the plaintiffs had altered relevant emails could not be sustained: the expert they had retained on this issue was not going to be called. The uncontradicted evidence at this stage was that emails which had been forwarded or replied to could not necessarily be relied upon. On the other hand, original emails (ie not a forwarded to or replied to copy) were genuine. It followed that the defendant's evidence that she had not sent an email agreeing to the loan and containing the words "im amanda mcgee witness to stacy agreeing to the terms of the loan" had to be false.

24 I have looked carefully at the defendant's evidence-in-chief. I have taken into account the fact that counsel for the defendant did not open the defendant's case (and thereby repeat any allegation that the plaintiffs' emails were the fraudulent ones). In the end, I have come to the conclusion that while a counsel of perfection would have suggested that the concession made on the afternoon of the third day of the trial could (and possibly should) have been made 24 hours earlier, the failure to take this step at that time did not involve the contravention of any of the overarching obligations in the Civil Procedure Act. This is so particularly when one has regard to the obvious difficulty of acting for an individual client (who appeared to me to be somewhat unsophisticated as well) who was not in the jurisdiction at any relevant time.

25 The application for an order for costs against the defendant's solicitors will be refused.

[1] Norman South Pty Ltd & Anor v da Silva [2012] VSC 477.

[2] See s 10 of the Civil Procedure Act.

[3] See s 16.

[4] See s 18(3).

[5] See s 20.

[6] See s 23.

[8] Norman South Pty Ltd & Anor v da Silva [2012] VSC 477.

[10] Professional Conduct and Practice Rules 2005, rules 13.1, 16.1 and 16.2.

[11] Including non-publication orders under s 18 of the Supreme Court Act 1986.

[12] That is, the email received by the second plaintiff dated Friday May 11 2012 at 8.29am (which email was not a part of a forwarded or replied to email) containing the defendant's agreement to the terms of the loan and the words "im amanda mcgee witness of stacy agreeing to the terms of the loan".

[13] It was on the second morning of the trial that Mr Liddle's second report, dealing with this email, was also tendered.

[14] Although not the fact that this additional email and Mr Liddle's second report were both put in evidence on the morning of the second day of the trial.