Plaintiffs v Defendants

2 The defendants' counsel and his instructing solicitor appeared on Monday morning to represent themselves. They confirmed they were not instructed to appear on behalf of the defendants. The defendants were initially unrepresented, although that condition did not continue indefinitely. The defendants were well aware of the hearing.

3 The defendants' counsel sought an adjournment on the basis that insufficient notice of the application had been given. He informed the court that while he had notified his insurers, they had been unable to arrange representation for him, and his clients had been unable to arrange alternate counsel. Thus, my concern to avoid the risk of an adverse impact on the trial, of the application for costs against the defendants' legal practitioners, was not misplaced.

4 At the conclusion of the plaintiffs' submissions I declined to call on the defendants' counsel and solicitor to respond to the plaintiffs' application for an award of costs against them, as I was not persuaded such an order should be made. Instead, the defendants' counsel was invited to seek instructions to make submissions on behalf of the defendants, if they sought to resist an order for indemnity costs. Counsel was remarkably prompt in obtaining instructions. In substance, the defendants sought to contradict findings made in the reasons for judgment on the defendants' application to restrain the plaintiffs' solicitors from continuing to act. The application for an adjournment was not pressed.

5 For reasons given in the oral judgment delivered last Thursday afternoon, an order for indemnity costs against the defendants is fully justified, and will be made. Because the decision made on the defendants' application was the final determination of a discrete dispute between the parties, I will order that the plaintiffs' costs of and incidental to the application be paid on an indemnity basis, such costs to be taxed immediately in default of agreement.

6 For reasons given below, the plaintiffs' application for an order for costs against the defendants' practitioners is refused.

7 The plaintiffs supported their application for an order for costs against the legal practitioners on three grounds:

(1) the application was an abuse of process in which the practitioners participated;

(2) the practitioners breached their obligation under the Civil Procedure Act 2010 by bringing the application without a proper basis; and

(3) the plaintiffs' solicitors and counsel had given the defendants and their practitioners six warnings to the effect that there was no proper basis for the application.

8 The warnings included statements made by the defendants' counsel in submissions challenging the basis for the application, and two important letters. The submissions made before Croft J were to the effect that the proposed application was without merit. In letters dated 10 December 2015 and 23 December 2015, the plaintiffs' solicitors went much further, and threatened the defendants' solicitors with an application for a costs order against them. In their letter of 10 December 2015, Mereine wrote:[1]

There is no basis in fact or law for your application to restrain Richard Mereine from acting in this proceeding. Mr Mereine will continue to act for the plaintiffs in this proceeding. Any application your clients chose to make will be defended. Our clients, Mr Mereine and our firm will likewise seek an order for indemnity costs against you and your clients in relation to that application.

We put you on notice that if the application against HWL Ebsworth and Richard Mereine is pressed we will seek an order for indemnity costs against you, your client and associated legal practitioners under s 29 of the Civil Procedure Act 2010 (Vic) for the following reasons:

(a) as your client is well aware, since 2010 Richard Mereine has acted in numerous proceedings for Rodney Bruce Jane and entities associated with him against your client; and

(b) although the issue of the alleged conflict was raised on several occasions and in various forms, the application by your client to restrain Richard Alan Mereine and this firm from acting for Rodney Jane and the entities associated with him was only filed on 16 December 2013 in the Family Court of Australia. That application was heard and determined by Justice Cronin and dismissed with costs.

10 The principles to be applied on an application that legal practitioners be made liable for costs under s 29 of the Civil Procedure Act, was considered in Yara Australia Pty Ltd v Oswal.[3] The Court of Appeal held:

1. Section 28(2) enables a court, in exercising its discretion as to costs, to take into account any contravention of the overarching obligations. In our view, the enactment of s 29 together with s 28(2) imbues the Court with broad disciplinary powers that may be reflected in the costs orders that are made. The Court is given a powerful mechanism to exert greater control over the conduct of parties and their legal representatives, and thus over the process of civil litigation and the use of its own limited resources.
2. The Act does not merely reaffirm the existing inherent powers of the court but provides a powerful indication of the will of the Parliament about the values sought to be achieved by the way in which cases are managed in the courts and the balances that have to be struck. Writing extra-judicially, Chief Justice Black said:

[L]egislation imposing positive duties upon litigants and practitioners, will help to change attitudes and, within constitutionally permissible limits, will confirm that judges do have the power they need to require parties to cooperate to bring about the just resolution of disputes as quickly, inexpensively and efficiently as possible.[4]

11 The facts under consideration in Yara concerned the preparation of application books by solicitors. There is a material difference between the primary responsibility of a solicitor for work of that character, and the conduct of practitioners advocating a client's case in court. The Court of Appeal stated the object of the extended duty of legal practitioners under the Civil Procedure Act 2010 thus:[5]

The Act prescribes that parties to a civil proceeding are under a strict, positive duty to ensure that they comply with each of the overarching obligations and the court is obliged to enforce these duties. The statutory sanctions provide a valuable tool for improving case management, reducing waste and delay and enhancing the accessibility and proportionality of civil litigation.

Judicial officers must actively hold the parties to account.

12 The Court of Appeal did not purport to analyse other circumstances in which an application for an order for costs against a practitioner might arise, or consider the factors that might inform an enquiry into conduct of an advocate, or practitioner engaged in in-court work.

13 In Dura (Australia) Construction Pty Ltd v Hue Boutique Living Pty Ltd (No 5),[6] Dixon J reviewed the principles to be applied when making a costs order under s 29 of the Act, including the decision of the Court of Appeal in Yara, but went on to identify some particular aspects of the power that may go some way to explain why it has not been deployed more frequently. As Dixon J observed,[7] applications for such orders present unique difficulties not present when orders are made against the litigant:

1. Costs orders against lawyers for another party may present a back-door means of recovering costs not otherwise recoverable against an impoverished litigant. There is a tendency for the length and cost of wasted costs hearings to match or even exceed the original trial. There is a risk that well-resourced litigants might utilise the jurisdiction to browbeat, bludgeon, or threaten the other side. These factors too remain relevant to the exercise of discretion under s 29 if warranted in the circumstances.
2. The non-party costs jurisdiction can involve making a finding of fault against the lawyer likely to damage his or her professional reputation and visiting upon the lawyer a financial sanction. Although this consequence can be said to warrant caution in the exercise of the wasted costs jurisdiction, Parliament's intention when enacting the Civil Procedure Act was to effect cultural change and as the Court of Appeal stated in Yara, judicial officers must actively hold the parties to account.
3. The need for caution in the exercise of the s 29 discretion arises from its statutory context, which is complemented by the analogous wasted costs jurisdiction. Many of these general discretionary considerations are consistent with the overarching purpose of civil litigation and so are capable, in an appropriate case, of being relevant to the discretion under s 29.
4. Noble Lawyers contended that with some of those considerations in mind, allegations of breach of duty against an opponent's solicitor with a view to a costs order should be confined to questions that are apt for summary disposition by the court. In Ridehalgh v Horsefield, the court observed:

Hearings should be measured in hours and not in days or weeks. Judges must not reject the weapon which Parliament has intended to be used for the protection of those injured by unjustifiable conduct of the other side's lawyers, but they must be astute to control what threatens to become a new and costly form of satellite litigation.

1. In Harley v McDonald, the Privy Council stated:

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 of an abuse of its processes which results in excessive or unnecessary costs to litigants can thus be dealt with summarily on agreed facts or after a brief enquiry if the facts are not all agreed.

14 The Court of Appeal in Yara acknowledged the need to avoid a substantial enquiry into the conduct of a practitioner on an application for costs, concluding that it was appropriate for a brief summary enquiry and determination to be made:[8]

Yet as we have observed, sanctions imposed for a breach of any overarching provisions have been a rarity at first instance. When no party invites the court to determine whether there has been a breach of the Act, there may be a judicial disinclination to embark upon such an own-motion inquiry for fear that inquiry as to a potential breach may be time consuming and may require the introduction of material that was not before the court as part of the proceeding. Such fears cannot relieve judges of their responsibilities. But we would not wish it to be thought that a judicial officer at first instance must undertake a substantial inquiry when considering whether there has been a contravention of the Act. As the sanction for a breach will usually lie in an appropriate costs order, a judge may at the conclusion of the reasons for judgment immediately invite oral submissions as to why there should not be a finding that the Act was contravened. The judge may in a relatively brief way deal with that issue in providing succinct reasons for a finding that there has been a breach of the Act and how that finding affects the orders for costs that are to be pronounced. [Emphasis added]

15 While a 'substantial inquiry' is obviously undesirable, some inquiry is necessary. It will be noticed at once that the enquiry in Yara, however summary, was informed by the reasons for judgment. That will not always suffice. The seriousness of the allegations, and likely consequences, emphasise that caution is required in reaching a conclusion, on a summary basis, that an actionable breach has occurred. As Dixon J held in Dura:[9]

To order a lawyer to pay the costs of litigation is a 'serious charge', deriving from the fact that it is occasioned by an alleged breach of a duty to the court. To this end, the court may take into account the repercussions of making an order of this kind. It is accepted that the principles in Briginshaw v Briginshaw apply, and the court should not make an order solely based on inference without evidence. For reasons already stated, I accept that the discretion under s 29 is governed by the principles in Briginshaw.

16 A further consideration is the question of client legal privilege, which will almost always place the practitioner in a difficult, if not impossible, position when called upon to defend his or her conduct, unless the enquiry is concerned with wholly administrative work, such as the compilation of application books. Another consideration is the centrality of the adversarial system as part of our constitutional foundations, and the reasons why advocates enjoy immunity from suit in certain circumstances.

17 The plaintiffs' reliance on warnings, constituted by a threat of a costs order against the defendants' practitioners, was misplaced. There is a material difference between giving notice to an opposite party of an intention to seek indemnity costs at the conclusion of an application or trial, and such a threat made against the legal practitioners engaged by the opposite party. The resolution of a question of costs between litigants is informed by wellunderstood principles. An application for costs, even indemnity costs, at the conclusion of a trial or application is unexceptional.

18 Applications for costs against the legal practitioners, engaged by an opposite party, will almost certainly invite consideration of factors well beyond what is necessary to resolve a question of costs as between parties, or matters recorded in reasons for judgment, or what may be observed by the trial judge. In Dura, Dixon J identified some of these factors, including the risk that an application for costs may itself amount to an abuse of process, the difficulties involved in finding fault, the risk of satellite litigation, and client legal privilege. To those matters I would add the integrity of the adversarial system, and the dependency of the courts on continuing representation of litigants by competent counsel and solicitors.

19 The threat of a costs order against a practitioner, engaged in litigation, based on the perceived strength or weakness of a case is, unfortunately, not uncommon. In most instances I have observed, such threats have been unnecessarily provocative, uninformed and premature. If found to be improper, the maker may have breached the paramount duty to further the administration of justice, and the overarching obligations to ensure a proper basis for the threat at the time it was made. After all, such a threat foreshadows a claim. In such circumstances, the maker would be amenable to an order under s 29 of the Act. In the present case, the threat was based upon the plaintiffs' subjective assessment of the defendants' prospects of success, made prior to the defendants having filed all of their material, without the advantage of any adjudication by the court. It was premature, provocative and unjustified.

20 The factors identified by Mr Mereine, in his letter of 23 December 2015, did not provide a proper basis for the threat. A threat based on a prediction of the likely outcome of an application or trial, before the evidence is complete, is subjective, and uninformed by any findings of the court on the material presented at the trial or hearing. His reliance on the earlier determination of a similar application in the Family Court was misplaced for, as the trial judge said, it was based on the evidence before him.

21 Sometimes a threat may be intended as no more than bluster or negotiating rhetoric. If so, it is improper. Such a threat may be reasonably understood by the person against whom it is made, as a challenge to his or her duty to continue to act on behalf of a client and pursue a particular course in response to instructions. All practitioners must, of course, comply with their duty to the court, and statutory obligations under the Act. But if such a threat is to be taken seriously, a moment's reflection should cause the maker to realise that it may have the tendency to interfere with the ability of a litigant, the practitioner's client, to advance a case for adjudication by the court.

22 Such threats can also have a chilling effect on a practitioner's ability to act in the best interests of a client. A solicitor or counsel, against whom a threat is made, may feel compelled, or may take advantage of the opportunity, to apply for leave to withdraw on the threshold of a hearing or trial. Such a step was taken by the defendants' solicitor following receipt of Mr Mereine's letter of 10 December 2015, who made application for leave to withdraw shortly before the date then fixed for trial. The basis of his application was the threat of costs against him. Leave to withdraw was granted by the trial judge.

23 In my opinion, all such threats intrude on the special relationship between litigant and practitioner, which is fundamental to the maintenance of the adversarial system of justice that continues to be a cornerstone of our civil justice system. Contrary to the plaintiffs' submission that the warnings provided a basis for making an order for costs against the defendants' legal representatives, I find these particular threats were uninformed, premature, and unjustified.

24 Turning to the remaining grounds advanced by the plaintiffs, I am not satisfied on the material before the court, applying the Briginshaw test, that the practitioners participated in an abuse of process. Nor am I satisfied that the conduct of the practitioners constituted a breach of an overarching obligation, when making and prosecuting the application. Facts which justify an order for indemnity costs against a party do not automatically translate into a basis for such an order against that party's legal practitioners. The court must be satisfied that the conduct of the practitioners was in breach of a relevant duty or overarching obligation, and that the breach justified a personal order for costs. Some enquiry is necessary, beyond that which will suffice for an order for indemnity costs against a party.

25 In Dura, Dixon J considered the requirement that a practitioner be satisfied of a proper basis for making a claim. His Honour said:[10]

Section 18 of the Civil Procedure Act expresses the overarching obligation to operate more broadly than the proper basis certification requirements under s 42 of the Act. When a substantive document is filed, a legal practitioner making a proper basis certification must certify that on the factual and legal material available each allegation of fact, each denial, or each non-admission in a document has a proper basis. The legal practitioner's determination for the purposes of a proper basis certification must be based on a reasonable belief as to the truth or untruth of an allegation or denial or, in the case of a non-admission, that the legal practitioner does not know, and therefore cannot say, whether a fact alleged or denied is true or untrue. Ultimately, whether a claim has a proper basis is a question for the court. A person discharging the overarching obligation can do so by demonstrating a reasonable belief based on the factual and legal material available at the time. If that is done, the obligation is discharged. The legislature appears to have intended that the s 18 obligation be complementary with the obligation to certify under s 42.

26 There is no suggestion in the authorities, that a practitioner alleged to have acted in breach of an overarching obligation, assumes any burden to satisfy the court that he or she had a reasonable belief in a proper basis to make a claim or advance a particular case. Practitioners may, of course, choose to do so, but will be entitled to expect a court to approach the enquiry into alleged misconduct in the usual way. A court must be satisfied that a breach has occurred. While the outcome of an application or trial, and reasons for judgement, may inform the question, it cannot be determinative. The trial will rarely involve an investigation of the practitioner's conduct in prosecuting the trial.

27 Dixon J observed in Dura[11] that a 'claim', for the purpose of s 18 of the Act, may include an application such as that made by the defendants. He held:

The statutory obligation is not, like some other overarching obligations or the obligation under Div 5C the Legal Profession Act, continuous or ongoing. It does not apply to the action of maintaining a claim or conduct such as providing legal services. The provision is addressed to the moment in time when a claim is made or responded to; it does not expose a legal practitioner to an ongoing duty as assumed in Hue's submissions.

28 While the reference to a 'claim' may be inapt, qualified in s 18 of the Act by the terminology of pleadings, and the requirement of a 'Proper Basis Certificate', Dixon J saw no reason to exclude interlocutory applications from its embrace. The plaintiffs conceded that the time to address the question of the practitioner's satisfaction of a proper basis for this 'claim' was the time the application was initiated. But if the ambit of 'claim' is extend to making interlocutory applications, but confined to initiation, practitioners might be relieved, under this particular duty, of any obligation to consider the sufficiency of evidence subsequently filed.

29 There is no overarching obligation, expressed in terms of a duty to only advance a case or contention which the practitioner reasonably believes has some basis in fact or law. That is not to suggest such an obligation does not exist, but it is not readily discernible in the Act, unless s 18 is given the extended meaning contemplated by Dixon J in Dura, and the obligation is continuing. Notwithstanding reservations concerning the scope of s 18, I will proceed on the basis that it applies to interlocutory applications, and is a continuing obligation.

30 At the time the application advanced in court, and well before that time, there was a basis upon which Robert Jane may have felt aggrieved by Mr Mereine continuing to act for Rodney Jane, and for the companies that Robert Jane once controlled. The relationship between Mr Mereine, Robert Jane and his companies extended back to around the year 2000, perhaps even earlier. Whether that drove Robert Jane to make the application is unclear. He was not cross-examined. Notwithstanding an earlier application to restrain Mr Mereine from acting in the Family Court, which failed, and various unprosecuted threats made on behalf of Robert Jane by other solicitors, this application would not have come as a surprise to the plaintiffs' solicitors.

31 The issues for trial in this proceeding are quite different to those in the Family Court. The material before the court did not permit a soundly based inference that, even when the application was advanced in court, the defendants' solicitor and counsel had reason to believe Robert Jane's complaint was baseless, or brought for tactical reasons. No application was made by the plaintiffs to prevent the defendants from advancing the application, or to have it summarily dismissed as an abuse of process, or as having no reasonable prospects of success. On the contrary, they cooperated in the filing of material, including a lengthy affidavit by Mr Mereine. The application was fully argued and the court was invited to assess of the whole of the evidence filed by both sides.

32 Robert Jane elected to advance his application primarily to protect confidential information he claimed to have communicated to Mr Mereine that was at risk of misuse in the trial to commence on 4 May. His evidence failed to provide a sufficient basis to restrain Mr Mereine from continuing to act. He had previously failed to provide an adequate factual foundation for earlier allegations against Mr Mereine. I also found that the application was calculated to delay the trial. That was sufficient to justify an order for indemnity costs against the defendants.

33 The plaintiffs did not propose that any enquiry be conducted into the conduct of the practitioners, beyond a review of the reasons for judgment, some correspondence and transcript, and of course Mr Mereine's letters. They must be taken to contend that because there was a finding that the application was without merit, and calculated to delay the commencement of the trial, the practitioners could not have formed the requisite belief in a proper basis, and thus shared the defendants' purpose. I reject that contention.

34 From the evidence that was available, a practitioner might well have concluded, reasonably, that an application to restrain Mr Mereine from acting in this proceeding, having regard to his involvement in the Ryder proceeding in 2007, was arguable. Those presently engaged in this proceeding were not the same solicitors and counsel engaged by Robert Jane and associated entities in the Family Court proceeding. It is true that where litigation tactics are involved, lawyers may often play a part. But to be liable for an order under s 29 of the Act, their conduct must be found to be in breach of an overarching obligation. A sound evidentiary basis is required before adverse findings made against a party will be extended to their solicitor and counsel.

35 The plaintiffs failed to establish that the defendants' practitioners did not hold the necessary reasonable belief, or intended to merely disrupt the trial. The plaintiffs' reliance on warnings and threats did not substitute for the necessary evidence. While the plaintiffs might have suspected the practitioners complicit in the clients purpose, the evidence before the court was insufficient to warrant such serious findings against practitioners. Accordingly, the plaintiffs failed to establish, to the necessary degree of satisfaction, that the practitioners were guilty of the serious misconduct alleged.

36 The application for indemnity costs against the practitioners is refused.

[3] [2013] VSCA 337; (2013) 41 VR 302.

[4] Chief Justice Black (as his Honour then was), 'The role of the judge in attacking endemic delays: Some lessons from Fast Track' (2009) 19 Journal of Judicial Administration 88, 92-3.

[5] [2013] VSCA 337, [26].

[6] [2014] VSC 400.

[7] Ibid [100]-[101], [103]-[105] (citations omitted).

[8] [2013] VSCA 337, [27].

[9] [2014] VSC 400, [108] (citations omitted).

[10] [2014] VSC 400 [87]. Emphasis added