Puruse Pty Limited v Council of the City of Sydney

Events of 18 August 2009 10 When the matter came before me on 18 August 2009 for the hearing of the notice of motion to amend, the applicants orally sought an adjournment of the hearing of the motion because no notice of motion had in fact been filed by them. 11 An affidavit of Ms Leah Harabopoulos sworn on 18 August 2009, a solicitor employed by JPR Legal (the solicitors on the record for the applicants) in support of the application for the adjournment, deposed that the cause of the delay in filing the notice of motion was due to her counsel's unavailability to draft the amended grounds of appeal. Ms Harabopoulos deposed that: 9 On 22 July 2009, the Applicant's junior counsel sent correspondence by e-mail as to his unavailability in the week the Notice of Motion was due and the date on which it was returnable, as well as the date when the Applicant's senior counsel was to return from leave. …

10 On 10 August 2009, I hand delivered a brief in this matter to senior counsel's Chambers.

11 On or about 11 August 2009, I telephoned senior counsel and was informed that he had just returned from leave and was not yet in a position to consider the brief that had been delivered.

12 On or about 12 August 2009, I was informed by junior counsel's clerk that he was unavailable until 22 August 2009.

13 On or about 17 August 2009, I was informed by senior counsel that he had looked at the brief and was in the process of amending the grounds of appeal.

14 On 17 August at 6:06pm, my office received a handwritten copy of senior counsel's proposed amended grounds of appeal. 12 No explanation was given by Ms Harabopoulos as to why, if the applicants' first counsel of choice was not available to draft the amended grounds of appeal, that in order to comply with the Court's orders, alternate counsel was not found. This omission was particularly perplexing given that the amended grounds of appeal were, as it transpired, neither complex nor lengthy.

13 Likewise, no explanation was given by Ms Harabopoulos as to why liberty to restore was not exercised so that the matter could be brought back before the Court prior to the date of the hearing of the motion. Mr Cassels, appearing for the applicants on the application for the adjournment, could similarly not give the Court any assistance in relation to these matters primarily because he did not have any instructions in relation to them. 14 I considered this conduct to be highly unsatisfactory. It is now tolerably clear that the efficient management of the Court is an important consideration that the Court must have regard to when determining applications for adjournments (Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 at [5], [30] and [96]-[103] and Hill Top Residents Action Group Inc v Minister for Planning [2009] NSWLEC 144 at [8]-[9] per Biscoe J. See also ss 56 and 57 of the CPA). 15 Notwithstanding the inconvenience caused to the Court and the waste of Court resources, I nevertheless granted the application for the adjournment and made the consequential orders sought by the applicants. I did so because: (a) first, the adjournment was sought with the consent of the respondent, who quite properly expressed reluctance to prepare for an appeal on grounds that were unclear and poorly drawn up;

(b) second, the Court required the real issues grounding the appeal to be before it and the original grounds of appeal appeared on their face to be unsatisfactory due to a lack of particularity; and

(c) third, both parties assured me that the delay in hearing the notice of motion, and thus the delay in amending the grounds of appeal, would not prejudice the hearing date of the appeal which would proceed on 17 September 2009.

16 Costs orders should never be made to punish litigants for their conduct of proceedings, but should be awarded to compensate the successful parties for the trouble and expense to which they were put by that conduct (Latoudis v Casey (1990) 170 CLR 534 cited recently in Teoh v Hunters Hill Council (No.3) [2009] NSWLEC 121 at [137]). 17 However, a consequence of the applicants' conduct was that wasted costs were incurred by the respondent. Therefore, when the matter came before me on 18 August 2009, I reserved the question of whether the applicants or the applicants' legal advisors would be paying the costs of the respondent's preparation of, and appearance before, the Court on that day on an indemnity basis ("the outstanding costs issue").

18 Thus order 10 in the short minutes of order made by me that day stated the following: Costs of today will be paid on an indemnity basis either by the applicant or the applicant's legal representatives. The question is to be determined by the Court on 25/8/09.

19 Both parties were represented before me when this order was made. In case there was any misunderstanding, I stated that the issue of whether the costs were to be paid on an indemnity basis was not in dispute, but rather at issue was who would be paying them. I further stated that any evidence that the applicants' legal representatives wished to put before the Court in support of a submission against such an order being made should be filed by 25 August 2009.

20 In an affidavit sworn 19 August 2009 in relation to the outstanding costs issue, Ms Price, for the respondent, deposed that on 13 and 14 August 2009 she had tried to contact the solicitors for the applicants on a number of occasions, both by telephone and by email, in order to ascertain whether the notice of motion was proceeding on 18 August 2009 and to seek the applicants' consent to have the matter relisted. Instead of a cooperative and helpful response, she was given an unsatisfactory and largely indeterminate answer as to what would occur on 18 August 2009.

21 Ms Price further deposed that on 17 August 2009 a series of communications by way of correspondence passed between the solicitors for the applicants and the solicitors for the respondent concerning the motion listed for 18 August 2009. In particular, a letter was sent by post and email to both Ms Harabopoulos and Mr Ryan of JPR Legal requesting the applicants' consent to have the notice of motion removed from the Court's list using the eCourt communication system. The applicants' solicitors refused the request by facsimile sent at 11.21am on 17 August 2009. The facsimile was signed by Mr Joe Ryan. Mr Ryan is the principal of JPR Legal. 22 The solicitors for the respondent therefore proceeded to put the solicitors for the applicants on notice (in correspondence) that if the matter remained in the list they would seek costs. 23 It was not until nearly 4pm on 17 August 2009 that the solicitors for the applicants informed the respondent that the applicants would be seeking an adjournment of the motion on 18 August 2009.

24 When the matter came before the Court on 25 August 2009, Mr Matthew Baird, appearing for the applicants, stated that he was neither aware of order 10 nor of the matters that transpired on 18 August 2009 that led to its making, nor that the outstanding costs issue was to be argued, and moreover, that he had no instructions in any regard. He further informed the Court that Ms Harabopoulos was away on leave for a week.

25 This necessitated another adjournment, granted by the Court, to have the outstanding costs issue dealt with at a later date in order to permit evidence to be adduced by the applicants' legal representatives.

26 The day was not a complete waste, however, as an order was made on 25 August 2009 permitting the applicants to amend the summons on the basis that:

(a) the amendments were appropriate and appeared prima facie to cure, at least in part, the defects in the original grounds of appeal contained in the summons;

(b) the amendments were consented to by the respondent; and

(c) the amendments would not prejudice the hearing date of 17 September 2009. 27 An order was also made adjourning the outstanding costs issue to 9am on 2 September 2009.

28 An application by the respondent to have the costs of the preparation of and appearance before the Court on 18 August 2009 payable on a fixed sum basis, rather than as agreed or assessed, was stood over until 2 September 2009 to be dealt with after the outstanding costs issue was argued in case there was anything arising during the course of the argument that touched upon the application.

29 When the matter came before the Court on 2 September 2009, an affidavit of Ms Harabopoulos sworn 1 September 2009 was read. In the affidavit Ms Harabopoulos stated:

4 When I stated that on 10 August 2009 I hand delivered a brief in this matter to senior counsel's Chambers and that on or about 11 August 2009 I telephoned senior counsel and was informed that he had just returned from leave and was not yet in a position to consider the brief that had been delivered, it was only my intention to provide a chronology for the events leading up to 18 August 2009.

5 It was not my intention for this chronology to be interpreted in any negative way.

6 I apologise to the Court for any offence taken in respect of the chronology.

7 The amended Grounds of Appeal were settled on or about 17 August 2009 and the Amended Grounds of Appeal were filed in accordance with the Court's directions on 18 August 2009.

8 When the orders were made on 22 July 2009, both myself and Mr. Baird of counsel were of the view that there would be sufficient time for the Amended Grounds of Appeal to be settled, filed and served in accordance with the timetable.

9 It was always the position of the Appellant that the grounds of appeal needed to be amended in order to ensure that the appeal had the best prospects of success.

30 No explanation was given in the affidavit as to why, when the matter last came before the Court on 25 August 2009, the applicants were not ready to deal with the outstanding costs issue that had been stood over from 18 August 2009. When I raised the potential omission with counsel for the applicants, a brief adjournment took place for Mr Baird to take instructions from Ms Harabopoulos. Ms Harabopoulos was then sworn in and gave supplementary oral evidence.

31 The gravamen of her oral evidence was as follows: (a) that she had been admitted as recently as 13 February 2008 (a fact not deposed to in her earlier affidavits);

(b) that she had not been in Court on 18 August 2009 because she was in court elsewhere;

(c) that between 12 August and 17 August 2009 she had taken steps to brief Mr Alex Cassels to appear on the notice of motion. It was Mr Cassels who had advised her to draft an affidavit explaining the circumstances of why the notice of motion had not been filed. He informed her that he would seek an adjournment;

(d) that on 17 August 2009 at 6.06pm when the handwritten amended summons arrived from senior counsel, she was not in the office. Other people were there but they did not communicate the arrival of the amended summons to her. While she arrived in the office at 7.20am the next morning, she did not draw up the handwritten amendments into an amended summons or notice of motion. This process occurred later that day, after Mr Cassels returned from Court;

(e) that Mr Cassels sent her two emails summarising what occurred in Court on the morning of 18 August 2009. One of these set out the orders that the Court had made, including order 10;

(f) that she forwarded these emails onto her supervising solicitor Ms Kathleen Chiu and the principal of the firm, Mr Joe Ryan, and discussed the contents of the emails with Ms Chiu and Mr Ryan;

(g) that she was on leave for a week commencing 24 August 2009, but prior to going on leave she had briefed her supervising solicitor and the principal of her firm as to where the proceedings were at; and

(h) that no one advised her what to put in her affidavit sworn 1 September 2009.

32 I proceeded to ask Ms Harabopoulos some additional questions. She informed the Court that: (a) Mr Ryan had seen all of the relevant correspondence relating to the notice of motion to be heard on 18 August 2009;

(b) both Mr Ryan and Ms Chiu supervised her work; and

(c) she was aware from Mr Cassel's emails that on 18 August 2009, the Court had awarded costs against the applicants on an indemnity basis and that there was a possibility that the Court might order the legal representatives of the applicants to pay these costs when the matter came back before the Court on 25 August 2009. 33 Based on the oral evidence given by Ms Harabopoulos - in particular, first her admission date, and second, the fact that it appeared that Mr Ryan and/or Ms Chiu had been apprised of the events that had led to the orders made by the Court on 18 August 2009 - I considered it prudent and fair to give Mr Ryan the opportunity of putting before the Court any explanation he might seek to reply upon, either on his behalf or on behalf of JPR Legal. I therefore adjourned the matter to 4.30pm for Mr Baird to seek appropriate instructions. In so doing, I concurred with Mr Baird's disquiet at the number of appearances the outstanding costs order was generating and the consequential costs that were being incurred.

34 At 4.30pm Mr Baird informed me that Mr Ryan did not want to be heard and that apart from the tender of some emails, JPR Legal did not want to put any further material before the Court.

35 The emails that were tendered largely comprised of communications between Ms Harabopoulos, Mr Alex Cassels and Mr Matthew Baird and concerned the drafting of the amended grounds of appeal and the adjournment of the hearing on 18 August 2009. Mr Baird was at pains to inform the Court that the correspondence chain was not complete due to the exclusion of material that was privileged but no submission was made by him that JPR Legal was prejudiced as a result of these exclusions. 36 The emails relevantly demonstrated: (a) that Ms Harabopoulos did take some steps from 11 to 13 August 2009 to put pressure on the engaged counsel to provide her with the amended grounds of appeal;

(b) that Ms Harabopoulos had engaged alternate counsel to appear on 18 August 2009; and

(c) that all of the emails were copied or sent to Ms Chiu, but not necessarily to Mr Ryan. Therefore, Ms Chiu was aware, at least from 11 August 2009, that there would be non-compliance with the Court timetable in providing the notice of motion and amended grounds of appeal to the respondent.

37 It was on this basis that Mr Baird submitted that the conduct of Ms Harabopoulos did not fall within s 99(1)(a) of the CPA. Further, that she had not acted "improperly" in the sense of having engaged in serious misconduct pursuant to s 99(1)(b) of the CPA, and moreover, that there was "reasonable cause" for the costs to have been incurred. Therefore, he submitted, the power to order costs payable by the applicants' solicitors under s 99(1)(b) of the CPA had not been enlivened.

38 In relation to the respondent's costs thrown away on the morning of 25 August 2009 by reason of the applicants' legal representative's state of unpreparedness, I was informed at 4.30pm that an agreement had been reached between the parties as to the payment of these costs. Accordingly, they did not form part of my consideration of the outstanding costs issue and I have excluded the conduct of JPR Legal on that day from my deliberations in relation to the outstanding costs issue.

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.

Costs Against Legal Practitioners: Relevant Legal Principles

43 In Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300 at [92] McColl JA set out seven guiding principles to consider when exercising the power to order a legal practitioner to pay the costs of proceedings in which they have represented parties. They are: 92 The new Div 5C should be construed against the background of the following principles which can be gleaned from the English and Australian authorities which have considered the power to order legal practitioners to pay the costs of proceedings in which they have represented parties:

(a) The jurisdiction to order a legal practitioner to pay the costs of legal proceedings in respect of which he or she provided legal services (2005) 63 NSWLR 300 at 321 must be exercised "with care and discretion and only in clear cases": Ridehalgh (at 229); Re Bendeich (No 2) (1994) 53 FCR 422; Deputy Commissioner of Taxation v Levick (1999) 168 ALR 383 at 389 [11]; 43 ATR 621 at 627 [11], per Hill J; Levick v Commissioner of Taxation (2000) 102 FCR 155 at 166 [44]; Gitsham v Suncorp Metway Insurance Ltd [2002] QCA 416 at [8], per White J (with whom Davies JA and Williams JA agreed); De Sousa v Minister for Immigration, Local Government and Ethnic Affairs (1993) 41 FCR 544; Money Tree Management Services Pty Ltd and Institute of Taxation Research v Deputy Commissioner of Taxation (No 3) (2000) 45 ATR 262;

(b) A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he or she acts for a party who pursues a claim or a defence which is plainly doomed to fail: Ridehalgh (at 233); Medcalf v Mardell [2003] 1 AC 120 at 143 [56], per Lord Hobhouse of Woodborough ; White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169; 29 ACSR 21 (affirmed on appeal; Flower & Hart (a firm) v White Industries (Qld) Pty Ltd (1999) 87 FCR 134); Levick v Commissioner of Taxation; cf Steindl Nominees Pty Ltd v Laghaifar [2003] 2 Qd R 683;

(c) the legal practitioner is not "the judge of the credibility of the witnesses or of the validity of the arguments": Tombling v Universal Bulb Co Ltd [1951] 2 TLR 289 at 297; [1951] WN 247 at 238; the legal practitioner is not "the ultimate judge, and if he reasonably decides to believe his client, criticism cannot be directed to him": Myers v Elman (at 304) per Lord Atkin; Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406 at 413 [34]; 47 ATR 1 at 8 [34], per Callinan J;

(d) A judge considering making a wasted costs order arising out of an advocate's conduct of court proceedings must make full allowance for the exigencies of acting in that environment; only when, with all allowances made, a legal practitioner's conduct of court proceedings is quite plainly unjustifiable can it be appropriate to make a wasted costs order: Ridehalgh (at 236, 237);

(e) A legal practitioner against whom a claim for a costs order is made must have full and sufficient notice of the complaint and full and sufficient opportunity of answering it: Myers v Elman (at 318); Orchard v South Eastern Electricity Board (at 572); Ridehalgh (at 229);

(f) Where a legal practitioner's ability to rebut the complaint is hampered by the duty of confidentiality to the client he or she should be given the benefit of the doubt: Orchard v South Eastern Electricity Board (at 572); Ridehalgh (at 229); in such circumstances "[t]he court should not make an order against a practitioner precluded by legal professional privilege from advancing his full answer to the complaint made against him without satisfying itself that it is in all the circumstances fair to do so": Medcalf (at 134 [23]) per Lord Bingham of Cornhill;

(g) The procedure to be followed in determining applications for wasted costs must be fair and "as simple and summary as fairness (2005) 63 NSWLR 300 at 322 permits...[h]earings should be measured in hours, and not in days or weeks... Judges ... must be astute to control what threatens to become a new and costly form of satellite litigation": Ridehalgh (at 238-239); Harley v McDonald [2001] 2 AC 678 at 703 [50]; Medcalf (at 136 [24]).

44 Lemoto and the cases predating it were decided before the enactment of ss 56, 57 and 99 of the CPA. They must be reconsidered in this light. As McDougall J observed in Whyked Pty Limited v Yahoo!7 Pty Limited [2008] NSWSC 477 (at [12] see also [19] and [20]): 12 The parties referred me to many decided cases. Some of those cases dealt with other legislation, such as s198M of the Legal Profession Act 1987 (NSW) (see now s348 of the Legal Profession Act 2004): Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300; Degiorgio v Dunn (No.2) (2000) 62 NSWLR 284. Others related to the Federal Court of Australia Act and the Federal Court Rules ; Levick v Commissioner of Taxation (2000) 102 FCR 155; White Industries (Qld) Pty Ltd v Flower and Hart (a firm) (1998) 156 ALR 169. While I accept that those and other cases may provide valuable guidance to the exercise of the discretion, they need to be read by reference to the statutory powers with which they are concerned. Further, and more generally, it is necessary to bear in mind that the power to order costs against a legal practitioner is that now found in s99 of the Civil Procedure Act , and to be exercised in accordance with the terms of that section. There is a danger in substituting analyses of, or glosses upon, the section for the language employed in it.

45 The statutory power contained in s 99 of the CPA must be read together with s 56 of that Act and the UCPR which provide for the overriding purpose of the just, quick and cheap resolution of the real issues in the proceedings (Kendirjian v Ayoub (No 2) [2008] NSWCA 255 at [13] and Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 221 FLR 241 at [66]). This Court is obliged to give effect to this purpose when interpreting and exercising any power given to it by the CPA or the UCPR (ss 56(2) and 57(2) of the CPA and see Lemery at [67]). This includes the discretionary power to order costs contained in s 99 of the CPA (Kendirjian at [13] and Lemery at [67]).

46 Further, a party to civil proceedings is under a duty to assist the Court to further the overriding purpose, to participate in the processes of the Court and to comply with directions and orders of the Court (s 56(3) of the CPA and Lemery at [66]). Critically, legal practitioners must not cause their clients to be put in breach of that duty (s 56(4) of the CPA and Lemery at [66]) and the Court may take into account any failure to comply with s 56(3) or (4) in exercising its discretion in relation to costs (s 56(5) of the CPA).

47 The legislative enshrinement of these principles is a reflection of the central importance of case management which "is now an accepted aspect of the system of civil justice administered by the courts in Australia" (Aon at [92]). The centrality of case management is to minimise the (Aon at [5]): …irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account.

This is because "speed and efficiency, the sense of minimum delay and expense, are seen as essential to a just resolution of the proceedings" ( Aon at [98]). 48 Even prior to the enactment of the CPA and UCPR, the Court in Lemoto stressed that "a core aspect of the administration of justice" from the perspective of the legal practitioner is "the prompt and efficient disposal of litigation" (Lemoto at [96], see also [95] and [97]). Therefore, notwithstanding the caution expressed in Whyked as to the current usefulness of Lemoto, the principles espoused therein remain relevant and offer, in my view, a good starting point in any consideration of a wasted costs order. 49 Section 99 of the CPA is in terms similar to that of s 51 of the Supreme Court Act 1981 which was under consideration in the judgment of the Court of Appeal of England in Ridehalgh v Horsefield [1994] Ch 205. Significantly, in that case the Court of Appeal considered the meaning of the words "improper" and "unreasonable" contained in s 51. 50 Their Lordships' approach has been followed in the construction of s 99 in New South Wales (see Ideal Waterproofing Pty Limited v Buildcorp Australia Pty Ltd [2006] NSWSC 155 at [12]-[17], Whyked at [14]-[16] and European Hire Cars Pty Ltd v Costello [2009] NSWSC 526 at [59]). 51 In Ridehalgh (at 226) the Court rationalised such costs orders on the basis that litigants should not bear the costs of unjustifiable conduct by their legal representatives. It was what the Court described as its "wasted costs jurisdiction" (at 225G). At least insofar as superior courts of unlimited jurisdiction are concerned, the Court noted that this jurisdiction existed at common law prior to its regulation by enacted rules of curial practice and procedure (at 226-229).

52 In Whyked McDougall J, in considering the power conferred by s 99, reviewed the existing authorities, in particular Ridehalgh, and stated the following principles (at [13]-[20]): 13 Sully J considered the power conferred by s99, and authorities bearing on the exercise of that power, in Ideal Waterproofing Pty Ltd v Buildcorp Australia Pty Ltd [2006] NSWSC 155. His Honour concluded at [17] that s99 should be applied consistently with the principles stated in Ridehalgh v Horsefield [1994] Ch 205, with what his Honour referred to as "two additional riders". 14 Ridehalgh concerned s51 of the English Supreme Court Act 1981. There is no relevant distinction between the terms of that section and the terms of s99. At 223-233, the Court of Appeal in Ridehalgh considered the adjectives "improper", "unreasonable" and "negligent". Their Lordships said: 'Improper' means what it has been understood to mean in this context for at least half a century. The adjective covers, but is not confined to, conduct which would ordinarily be held to justify disbarment, striking off, suspension from practice or other serious professional penalty. It covers any significant breach of a substantial duty imposed by a relevant code of professional conduct. But it is not in our judgment limited to that. Conduct which would be regarded as improper according to the consensus of professional (including judicial) opinion can be fairly stigmatised as such whether or not it violates the letter of a professional code.

'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.

53 I accept that the facts in Whyked are of limited application to the present proceedings. They concerned a solicitor who signed a certificate verifying that there were reasonable prospects of success in respect of a difficult case and who was otherwise diligent in performing his retainer. The courts have said repeatedly that the jurisdiction to order costs personally against a legal practitioner must not be exercised in such a way that "a legal practitioner must give up a case if it has difficulties, or serious difficulties" (Costello at [60]).

54 Similarly, the courts have emphasised that the jurisdiction is to be exercised "sparingly" (Ridehalgh at 229) or "with care and discretion and only in clear cases" (Lemoto at [92] and Hooker v Gilling (No 2) [2007] NSWCA 214 at [36]). Further, it has been stated that courts should be slow to initiate an inquiry into whether costs should be made payable by a legal practitioner, although in straightforward cases, such as the present, this proscription loses potency (Ridehalgh at 238D).

55 The decisions of Lemery and Kendirjian were of greater assistance to the determination of the issue presently before me, although I acknowledge that the defaults Hammerschlag J identified in Lemery were considerably worse in terms of delinquency than those in the present proceedings.

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.

57 In Kendirjian the conduct the Court concluded led to wasted costs consisted of inadequate written submissions filed on behalf of the applicants resulting in an inability to determine the appeal on the day listed for hearing and the necessity for further written submissions to be prepared (at [15]). Further wasted costs were incurred when confusion by the applicants arose as to the purport of the Court's directions for further written submissions. The Court noted that "no sensible explanation was proffered for how this confusion came about" (at [16]). The Court concluded that (at [31]): 31 In our view the legal practitioners' conduct in failing to comply with the Court's rules constituted delinquency in the conduct of the proceedings of the sort to which we have earlier referred. Further their conduct caused the appellant to be in breach of his duty to assist the Court to further its overriding purpose, in particular, in delaying their disposition and in causing additional costs to be incurred. Their conduct effectively prevented the Court from conducting the appeal in the manner it should have been conducted, namely by hearing and reserving judgment on 26 October 2007. The Notice of Motion was necessary because of the failure to communicate accurately the order the Court had made concerning written submissions to Dr Morrison SC and Mr M McHugh. Consideration

58 While the comments quoted above from Aon were in the context of an application to amend with a consequential order seeking an adjournment, they are nevertheless apposite in the present case where the conduct of JPR Legal caused (Ridehalgh at 237F) the hearing of the motion (which had been specially fixed before the Court) to be delayed.

59 I accept the submissions of Mr Baird that the evidence adduced in these proceedings does not disclose any "serious misconduct", "serious incompetence" or "serious neglect", as those terms have been construed in Lemery, on the part of the applicants' legal advisers sufficient to enliven the power contained in s 99(1)(a) of the CPA. 60 The question, therefore, is whether the conduct of JPR Legal in breaching the orders of the Court made on 22 July 2009 and leading up to, and including, the appearance before the Court on 18 August 2009, were sufficient to engage s 99(1)(b) of the CPA.

61 The evidence does not, in my view, disclose any "improper" conduct by the applicants' legal practitioners that could reasonably satisfy the description of a significant breach of a substantial duty imposed by a relevant code of professional conduct (Ridehalgh at 232D-E cited with approval in Whyked at [14]).

62 Thus the question may be further confined to whether the conduct of JPR Legal caused costs to be incurred "without reasonable cause" or, put another way, in a manner that did not "permit reasonable explanation" (Ridehalgh at 232F).

63 In my opinion, the evidence clearly demonstrates that the conduct of the solicitors for the applicants reached the threshold contemplated by the phrase "without reasonable cause" in s 99(1)(b).

64 The emails and material contained in the affidavits of Ms Harabopoulos did not, in my view, merely disclose conduct that the applicants' legal practitioners could describe as a "course adopted [that] may be regarded as optimistic and as reflecting on a practitioner's judgment, but not unreasonable" (Ridehalgh at 232F). That is to say, the anticipation on 17 August 2009 that the amendments would be received from counsel and that the motion could proceed on 18 August 2009 was, in the face of repeated attempts by the respondent's solicitors to elicit a response from JPR Legal in relation to both the receipt and hearing of the motion and the rejection by JPR Legal of the respondent's request to have the matter removed from the Court's list on 17 August 2009, beyond misguided optimism or mere poor judgment. Rather the conduct, viewed in its entirety, amounted to a flagrant disregard for the orders and processes of the Court and a flagrant disinterest as to the possible impact that a breach of those orders would have on the respondent.

65 The statements made by the Court in Ridehalgh must now be viewed through the prism of the practice management provisions contained in the CPA, as recently endorsed by the comments made by the High Court in Aon. It is now unlikely, in my view, that a legal practitioner who permits court rules to be breached acting in the hope that no costs will be wasted, will be found to be acting with "reasonable cause" if costs are in fact wasted absent having taken some steps to avoid or minimise the costs incurred. In the present case, no real steps were taken by the applicants' legal practitioners to avoid or minimise the looming wasted costs of the respondent on 18 August 2009. A facsimile communication late in the afternoon on 17 August 2009 telling the respondent that an adjournment of the motion would be sought the next morning can only be summarised as 'too little, too late'.

66 Having said this, when regard is paid to the full exigencies giving rise to the proposed costs order, I decline to make a costs order personally against Ms Harabopoulos due to her extreme inexperience as a newly admitted solicitor and the fact that some steps were taken by her between 11 August and 13 August 2009 to obtain from counsel the amended grounds of appeal and to deal with the breach of the timetable in respect of the filing and service of the notice of motion.

67 Instead, it is appropriate to make the order against the firm, JPR Legal, on the basis that: (a) first, Mr Ryan (the principal of that firm) and Ms Chiu (Ms Harabopoulos' supervising solicitor) supervised Ms Harabopoulos' work at all material times; and

(b) second, Mr Ryan and Ms Chiu were aware of the non-compliance with the Court orders at least by 17 August 2009. For example, it was Mr Ryan who signed the letter to the respondent on 17 August 2009 refusing consent to have the matter removed from the Court's list on 18 August 2009. 68 Procedural defaults are, it is regrettably acknowledged, an unavoidable part of litigation. Unforeseen events can cause even the most carefully crafted timetable to be breached. Ordinarily such defaults will not result in this sort of costs order being contemplated, let alone made. 69 But there can be no doubt that the respondent's costs were wasted by the applicants' legal advisers' failure to comply with the orders made on 22 July 2009 and, importantly, their failure to attend to that non-compliance in a timely and reasonable way. It is also tolerably clear, absent any evidence to the contrary, that the applicants were in no way responsible for these wasted costs.

70 In the present case, the solicitors for the applicants could easily have avoided, or at the very least considerably minimised, the wasted costs of the respondent by, for example, responding to that party's enquiries promptly about the whereabouts of the motion and whether it was proceeding on 18 August 2009, by agreeing to have the matter removed from the Court list, or by exercising the liberty to restore granted to the parties to set a new timetable for the filing and hearing of the motion. None of these steps were taken. In fact one of them was expressly rejected by JPR Legal.

71 The reason for not doing so given by Mr Baird, namely, that because as late as 17 August 2009 at 11.21am it was still anticipated that the default could be remedied by the amendments being received from senior counsel thereby permitting the motion to proceed the next day was, with respect, inadequate and, in my view, plainly unreasonable. Given that the motion and the amended grounds of appeal were to be served by 12 August 2009, presumably to allow the respondent sufficient time to obtain instructions in relation to the proposed amendments prior to the hearing on 18 August 2009, the applicants' "optimism", as it was described by Mr Baird, that the motion could proceed on 18 August 2009 (especially in light of their knowledge on 17 August 2009 of their state of unpreparedness) was, on any view, unreasonable.

Conclusion as to the Outstanding Costs Order 72 The conduct of JPR Legal caused the applicants, through no fault of their own, to be in breach of their duty to assist the Court to discharge its overriding purpose of the Act and caused wasted costs to be incurred by the respondent. In my opinion, this conduct fell sufficiently below the threshold expected of a competent and diligent firm of solicitors acting with reasonable cause in all the circumstances. A costs award against the firm personally is warranted, "the order is not made punitively, but because of the unacceptable delays and additional work caused by the legal practitioner's conduct" (Kendirjian at [32]). 73 For these reasons, the Court determines that it is an appropriate exercise of its discretion to find the wasted costs of the respondent in relation to its preparation for, and appearance on 18 August 2009, are to be borne not by the applicants but by the applicants' legal advisers, JPR Legal.

74 The solicitors for the respondent sought their preparation costs from 13 to 18 August 2009 for the adjourned motion. As these costs relate to the failure of the applicants' legal practitioners to comply with the orders of the Court on 22 July 2009, I am of the view that an entitlement to costs paid on an indemnity basis from 13 to 18 August 2009 is appropriate (see Kendirjian at [21]-[27]).

75 The respondent also sought the costs, on a party-party basis, for 19 and 20 August 2009 which included the cost of preparing Ms Price's affidavit referred to above at paragraphs 20 - 23 and the costs associated with responding to the amended grounds of appeal and preparing for the notice of motion.

76 To the extent that the costs of the preparation of Ms Price's affidavit, in part, flowed from the outstanding costs order issue, the respondent is entitled to these costs. However, the affidavit also included material relevant to applications the respondent made to have various costs orders payable by way of fixed sum rather than as agreed or assessed. To the extent that the preparation costs of the affidavit contained this material, for reasons that are explained below, this component is to be treated as a cost in the cause.

77 As to the costs associated with the amended grounds of appeal and the preparation for the hearing of the motion on 25 August 2009, these costs would have been incurred in any event by the respondent and are largely covered by an earlier costs order made by the Court. I therefore make no further orders in this regard.

78 The respondent also sought the costs of 1 and 2 September 2009, which included the preparation for the appearance on 2 September 2009 and the preparation for an application that the costs of the 13 to 18 August 2009 be payable by way of fixed sum and not as agreed or assessed.

79 I accept the applicants' submissions that the respondent was not entitled to these costs and that they be costs in the cause in the ordinary course because: (a) first, to the extent that they included work for the appearance on 2 September 2009 in relation to the outstanding costs issue, this was a matter between the Court and the applicants and did not concern the respondent and therefore the applicants ought not be liable for them;

(b) second, to the extent that they are referable to the application made by the respondent on 2 September 2009 to have the costs of 13 to 18 August 2009 payable on a fixed sum basis, these costs ought, for the reasons given below, properly to be costs in the cause; and

(c) third, in relation to the costs of the respondent for the appearance before the Court on 2 September 2009. While I agree that this appearance was necessitated by the failure of the applicants' legal advisers to come prepared to deal with the outstanding costs issue on 25 August 2009, thereby delaying any application by the respondent for the costs of 13 to 18 August 2009 to be paid to them on a fixed basis on that date, the respondent has ultimately failed in its application for these costs to be fixed, and therefore, in my view, the most appropriate order is that these costs ought to be costs in the cause also.

80 The respondent sought an order that the costs awarded to them between 13 and 18 August 2009, for part of the preparation of Ms Price's affidavit on 19 August 2009, and for its appearance before the Court on 2 September 2009, be payable on a specified gross sum basis pursuant to s 98(4)(c) of the CPA. 81 In so doing, it relied on the decision in Harrison v Schipp (2002) 54 NSWLR 738 at [21]-[22]. The respondent argued that an award of fixed costs was preferable because the amount of costs in question was sufficiently small that the cost of assessing these costs would outweigh the actual quantum of the costs themselves. In support of its application, the respondent relied on the affidavit of Ms Price sworn 19 August 2009, together with an updated schedule of costs. No underlying material such as bills of costs were, however, provided with the schedule of costs.

82 Section 98 of the CPA relevantly provides as follows: 98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount.

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".]

vi. nevertheless the power to award a gross sum must be exercised judicially, and after giving the parties an adequate opportunity to make submissions on the matter: Leary v Leary [1987] 1 WLR 72 at 76, and Beach Petroleum NL v Johnson (No.2) (1995) 57 FCR 119 at 120'; vii. In terms of the necessity for the approach taken to be logical, fair and reasonable, Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No 2) (1995) '57 FCR 119, put the matter as follows, at paras [16]:

'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:

(a) first, there is no suggestion that the applicants would not be in a position to pay the costs at the conclusion of the proceedings;

(b) second, this type of costs order is typically made once the litigation has concluded. The present proceedings are ongoing and the order would be premature; and

(c) third, the narrative given to the Court to quantify the sum to be fixed was partial, included duplicated costs and included costs which could not easily be identified, isolated and/or allocated to the orders made above by the Court.

86 I accept the submissions of the applicants. A simple illustration of the difficulty of separating out the costs that may be fairly specified from those that cannot will suffice. The costs associated with the preparation of the affidavit of Ms Price may be divided into two categories: the costs referable to those parts of the affidavit relevant to the wasted costs of 13 to 18 August 2009, and the costs pertaining to the present application. It is only through a process of assessment by a qualified assessor that a proper allocation of these costs may be made. The Court is not in a position to do so on the evidence before it.

87 In short, I do not have sufficient confidence on the material before me to arrive at an appropriate sum to be fixed, and therefore, I cannot be confident that the approach taken by the Court to estimate the fixed costs would be logical, fair and reasonable. I therefore decline to make such an order.

88 The formal orders of the Court are therefore as follows:

(1) that the applicants pay the respondent's costs of its preparation and appearance before the Court from 13 to 18 August 2009 in respect of the motion to amend on an indemnity basis;

(2) that the legal advisers for the applicants, JPR Legal, indemnify the applicants against the costs payable pursuant to order 1 above;

(3) that the applicants pay the costs of preparation of the affidavit of Ms Price sworn 19 August 2009 that are referable to the outstanding costs issue as agreed or assessed. The remainder of the preparation costs of this affidavit are to be costs in the cause; and

(4) that the applicants' costs of their appearance before the Court on 2 September 2009 are to be costs in the cause. **********

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