Puruse Pty Limited v Council of the City of Sydney - [2009] NSWLEC 163 - NSWLEC 2009 case summary — Zoe

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Puruse Pty Limited v Council of the City of Sydney

[2009] NSWLEC 163

Land and Environment Court (NSW)|2009-08-25|Before: Pepper J

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Source facts

Court

Land and Environment Court (NSW)

Decision date

2009-08-25

Before

Pepper J

Source

Original judgment source is linked above.

Judgment (107 paragraphs)

[1]

Introduction 1 HER HONOUR: The issue for determination in this judgment is whether the legal representatives of the applicants, JPR Legal, should be ordered to pay any wasted costs incurred by the respondent as a result of JPR Legal's conduct during the course of the applicants seeking to amend their summons. 2 For the reasons set out below, in my view it should. This is because the conduct of JPR Legal was "without reasonable cause" pursuant to s 99(1)(b) of the Civil Procedure Act 2005 ("the CPA"). 3 The costs order arose from the applicants' notice of motion seeking leave to amend their grounds of appeal set out in the summons filed by them on 30 April 2009. 4 The applicants were appealing the decision of Commissioner Hoffman of this Court and the consequential orders made by him on 2 April 2009 (Puruse Pty Ltd and Joao Pty Ltd trading as Coopers Hotel, Newtown v Sydney City Council [2009] NSWLEC 1095). Procedural History and Evidence 5 The procedural history of this appeal, at least from the perspective of the applicants, has been an unhappy one, characterised by default and delay. I set it out in full.

[2]

6 Originally the appeal was listed for 30 July 2009. However, pursuant to an application by the applicants the hearing date was vacated on 22 July 2009. The applicants were ordered to pay the respondent's costs thrown away by reason of the vacation of the hearing date. On this date the applicants foreshadowed amendments to their grounds of appeal contained in the summons. 7 Order 4 made by the Court on 22 July 2009 stated: The Applicant is to file and serve a Notice of Motion and supporting Affidavit (which will annex the Applicant's amended grounds) seeking leave to amend their grounds of appeal by 12 August 2009 with a return date of 18 August 2009 before the Duty Judge. 8 Half a day was set aside to hear the appeal. 9 Order 10 stated that "the parties have liberty to restore on 48 hours notice".

[49]

39 There is no doubt that s 99 of the CPA (applicable in this Court by reason of s 4(1) and Sch 1 of the CPA: effective 28 January 2008) now confers a specific power on this Court to order costs personally against a legal practitioner who causes costs to be incurred either due to serious neglect, serious incompetence, serious misconduct or improperly or without reasonable cause. Section 99 states: 99 Liability of legal practitioner for unnecessary costs (1) This section applies if it appears to the court that costs have been incurred: (a) by the serious neglect, serious incompetence or serious misconduct of a legal practitioner, or (b) improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible. 40 Section 56 of the CPA states (emphasis added): 56 Overriding purpose (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. (4) A solicitor or barrister must not, by his or her conduct, cause his or her client to be put in breach of the duty identified in subsection (3). (5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs. 41 Section 57 of the CPA states: 57 Objects of case management (1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects: (a) the just determination of the proceedings, (b) the efficient disposal of the business of the court, (c) the efficient use of available judicial and administrative resources, (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. (2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1). 42 Given that a view has previously been expressed in this Court that it has no supervisory role in relation to legal practitioners and their professional conduct (see Young v King [2004] NSWLEC 93 at [85] per McClellan CJ), r 42.3(2) of the Uniform Civil Procedure Rules 2005 ("UCPR") has not been relied on by the Court in the contemplation of this costs order.

[65]

'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. … We were invited to give the three adjectives (improper, unreasonable and negligent) specific, self-contained meanings, so as to avoid overlap between the three. We do not read these very familiar expressions in that way. Conduct which is unreasonable may also be improper, and conduct which is negligent will very frequently be (if it is not by definition) unreasonable. We do not think any sharp differentiation between these expressions is useful or necessary or intended." [at 323D - 233E] 15 At 233-234, their Lordships pointed out that a legal practitioner did not act improperly, unreasonably or negligently simply because he or she acted for someone whose case was doomed to fail; their Lordships appeared to consider that something more, amounting in effect to abuse of process, was required: "A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or a defence which is plainly doomed to fail. … It is not entirely easy to distinguish by definition between the hopeless case and the case which amounts to an abuse of the process, but in practice it is not hard to say which is which and if there is doubt the legal representative is entitled to the benefit of it." [at 233F - 234F] 16 At 239, their Lordships noted that a finding that the legal practitioner had acted improperly, unreasonably or negligently did not mean that he or she must be ordered to pay wasted costs. Such a finding enlivened the discretion to make such an order, and required, in their Lordships' view, that their be some reason why the discretion should not be exercised in favour of the parties seeking it: "Even if the court is satisfied that a legal representative has acted improperly, unreasonably or negligently and that such conduct has caused the other side to incur an identifiable sum of wasted costs, it is not bound to make an order, but in that situation it would of course have to give sustainable reasons for exercising its discretion against making an order." [at 239F] 17 The "two additional riders" to which Sully J referred in Ideal Waterproofing were: (1) the jurisdiction to order costs against a legal practitioner personally is one to be exercised sparingly, because (among other things), the court would not always know all the details and circumstances of the practitioner's instructions. Thus, for the jurisdiction to arise, the conduct must involve some serious dereliction of duty or gross negligence ( Dal Pont: Lawyers' Professional Responsibility in Australia and New Zealand (Second Edition) at 374-375); and (2) the inherent power of the court to order its officers to pay costs in an appropriate case is ordinarily one to be exercised on the basis of a serious dereliction of the duty owed by the officer to the court. However, it is neither necessary nor desirable to define the level of incompetence or negligence at which the costs jurisdiction will arise ( Harley v McDonald [1999] 3 NZLR 545 at [59] to [61]). 18 I am not entirely sure that the views expressed in Harley are directly applicable to the exercise of the power conferred by s99 of the Civil Procedure Act . Harley was a case on the inherent jurisdiction of the court. That is why their Honours talked about conduct amounting to a serious dereliction of the duty owed by a legal practitioner to the court. For better or for worse, the legislature has seen fit to enact a statutory test that is framed in the terms now to be found in s99, and not by reference to the test of serious dereliction favoured by the Court of Appeal in Harley . 19 With that qualification, however, I propose to do as Windeyer J did in Karwal v Skrzypczak [2007] NSWSC 931 at [9], and proceed substantially on the basis outlined by Sully J in Ideal Waterproofing . I note in passing that Windeyer J at [10] appeared to share my doubt as to the relevance of cases involving the inherent jurisdiction to the exercise of the power conferred by s99. 20 I see little point in analysing further the numerous decisions to which I was referred. I intend no disrespect thereby either to the submissions or to the decisions in question.

[69]

56 The decision of Lemery concerned the repeated and egregious failure of a party's legal representatives to ensure compliance with various court orders for the preparation of affidavits and to inform the client as to the consequences of default. In ordering costs pursuant to s 99(1)(a) of the CPA associated with the non-compliance personally against the impugned solicitor and the barrister, Hammerschlag J relevantly stated (at [69]-[74]): 69 Under s 99(1)(a) of the Civil Procedure Act , the jurisdiction to order a legal practitioner to pay costs is enlivened if costs have been incurred by serious neglect, serious incompetence or serious misconduct on the part of that legal practitioner. 70 The power in s 99 read with s 56 of that Act is to be exercised in accordance with the particular terms of the sections: Newmont Yandal Operations Pty Ltd v J Aron Corporation (2007) 70 NSWLR 411 at [116]; Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 at [29]; Whyked Pty Ltd v Yahoo!7 Pty Ltd [2008] NSWSC 477 at [12] and following. 71 Nevertheless, what is meant by "neglect" and "misconduct" on the part of legal practitioners has been considered by the Courts in this country and in England and guidance is to be derived from such authorities. 72 Undoubtedly "serious neglect" within the meaning of s 99(1) would include a substantial omission on the part of a legal practitioner which no member of the profession who was reasonably well-informed and competent would have omitted to do: see Wentworth v Rogers [1999] NSWCA 403; Ideal Waterproofing Pty Ltd v Buildcorp Australia Pty Ltd [2006] NSWSC 155; Ridehalgh v Horsefield [1994] Ch 205 at 223-233. 73 Undoubtedly, "serious misconduct" within the meaning of s 99(1) includes a substantial breach by a practitioner of the Professional Conduct and Practice Rules and a substantial breach by a practitioner of his or her duty to the Court or of his or her fiduciary duties to the client. 74 In Myers v Elman [1940] AC 282 at 318-319 Lord Wright said of the term "professional misconduct": It would perhaps be more accurate to describe it as conduct which involves a failure on the part of a solicitor to fulfil his duty to the court and to realise his duty to aid in promoting, in his own sphere, the cause of justice.

[94]

83 The principles applicable in exercising the discretion to make an award of costs fixed in a specific sum are set out in the decision of Harrison J in Hamod v State of New South Wales (No 13) [2009] NSWSC 756 at [3]-[4], citing Einstein J in Idoport Pty Limited v National Australia Bank Limited [2007] NSWSC 23 at [9]: 9 For present purposes it seems convenient to commence with a recitation of the principles which inform the exercise of the discretion: i. the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119, Von Doussa J page 265: [following Purchase J in Leary v Leary [1987] 1 All ER 261 who described the purpose of the rule allowing the fixing of a gross sum as "the avoidance of expense, delay and aggravation involved in protracted litigation arising out of taxation" (All ER page 265)]; ii. the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum at [16]; iii. the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp (2002) 54 NSWLR 738, per Giles JA at para [22]; [following ( Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA) and adopted in Sony Entertainment v Smith (2005) 215 ALR 788; [2005] FCA 228; BC200500963 at para [199]; iv. a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schipp at para [22]; v. the gross sum "can only be fixed broadly having regard to the information before the Court": Beach Petroleum at 124; [In Hadid v Lenfest Communications Inc [2000] FCA 628 at [35] it was said that the evidence enabled fixing a gross sum "only if I apply a much broader brush than would be applied on taxation, but that ... is what the rule contemplates".]

[96]

'On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary "fail safe" discount on the cost estimates submitted to the Court: Leary v Leary at 265.' 84 These principles were endorsed by this Court in SDA Australia Pty Ltd v Ashfield Municipal Council [2009] NSWLEC 123 at [16] per Lloyd J. In that case his Honour said (at [12]-[16]): 12 Mr Clay relies upon a number of authorities, in particular the judgment of Palmer J in Sherborne Estate (No 2): Vanvalen v Neaves [2005] NSWSC 1003; (2005) 65 NSWLR 268 in which his Honour outlined some of the principles that apply when a court is considering whether to exercise its power under s 98(4). 13 Palmer J notes, at [40], that one of the justifications for exercising that power is to give effect to the overriding purpose facilitating the just, quick and cheap resolution of the real issues in dispute as mandated by s 56 of the Civil Procedure Act . His Honour continued to state, at [41], however, that the power under section 98(4) must be exercised judicially. That is, the exercise of the power must have a proper factual foundation and must be explicable according to legal principle. 14 His Honour went on to say, at [42], that the court's decision under s 98(4) would have to be an informed one; that is, founded on a consideration of the costs actually incurred, the circumstances at the time at which they were incurred, whether they were reasonable in those circumstances and what would have been a reasonable amount to have incurred. 15 In that particular case, Palmer J noted that there was no evidence before the Court sufficient to enable the Court to make any logical, fair and reasonable estimate of what would be an appropriate gross sum to incorporate in the costs order. 16 Mr Clay also refers me to the judgment of Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 in which his Honour also set out, at [9], a number of principles relevant to the exercise of the discretion to make an order under s 98(4)(c) of the Civil Procedure Act. Those principles include, inter alia (i) that the court has to be confident that the approach taken to estimate costs is logical, fair and reasonable; and (ii) the courts must have sufficient confidence in arriving at an appropriate sum of materials available. 85 The applicants resisted such an order being made on a three-fold basis:

Puruse Pty Limited v Council of the City of Sydney

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