RDCW Diamond (Pty) Limited v Da Gloria

RDCW Diamond (Pty) Limited v Da Gloria - [2007] NSWSC 1325 - NSWSC 2006 case summary — Zoe

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(iv) The legal representatives' conduct, as alleged, wasted costs (and time) and they should be separately liable for those costs. 5 Mr Da Gloria submits that costs orders have been made and ought not be disturbed and that none of the allegations is established. 6 The legal representatives submit that the advice given to Mr Da Gloria by them is not before the Court and therefore their conduct, in that regard, cannot be criticised. Further the applications for further and better particulars, the notices to produce and motion that the matter proceed by pleadings were all within the bounds of reasonable behaviour of a legal representative. 7 I set out, at length, the chronology of proceedings before the Court. It is a matter of record and is itemised in a chronology produced by the plaintiff, which, I accept, accurately reflects the proceedings' history, the documents filed, the transcript of proceedings and the judgments issued, all of which are exhibited to the affidavit of Todd Porman sworn 15 February 2007. I set out that chronology. Date Event Source / Reference 3 May 2005 Summons filed by the plaintiff Judgment paragraph 8 11 May 2005 Notice of Appearance filed by the defendant Judgment paragraph 8 Return date for Summons. At Mr Dupree's request, the following orders are made: 18 May 2005 1. Defendant to request further and better particulars by 8 June 2005; Court file 2. Plaintiff to reply by 22 June 2005; 3. Status Conference listed on 29 June 2005. 7 June 2005 Further and better particulars (subsequently determined by the Court to be inappropriate) are sought by defendant Judgment paragraphs 9, 11 and 12 and Court file 21 June 2005 Plaintiff's solicitors respond that the "requests" for further and better particulars are not proper and asks if the defendant has any relevant grounds to oppose the application. Morgan Lewis Attorneys' ("MLA") letter - Annexure B to the Affidavit of S Russo sworn on 6 July 2005. 29 June 2005 Status Conference. Mr Dupree seeks leave to file a Notice of Motion ("NOM") compelling answers to the particulars requested. Order made: Defendant to file and serve a NOM returnable 13 July 2005, for mention only (to receive a hearing date). Court file 7 July 2005 NOM filed by defendant seeking particulars Court file 13 July 2005 Return date for defendant's NOM. Listed for hearing 10 August 2005. Court file 21 July 2005 Plaintiff filed NOM for summary judgment and affidavit of T Porman sworn 21 July 2005. Judgment paragraph 10 and Court file 21 July 2005 Defendant's solicitors are again warned that there is no legitimate defence and that costs may be sought against them personally. MLA letter 21 July 2005 - annexure "A" to the affidavit of T Porman sworn 4 July 2006 28 July 2005 Notice to Produce documents (subsequently determined by the Court to be inappropriate) served by the defendant's solicitor Court file 2 August 2005 Return date for plaintiff's NOM for summary judgment. At Mr Dupree's request, the matter was stood over (to 10 August 2005) to obtain a date to hear the defendant's Motion first. Court file 10 August 2005 Mention. Plaintiff filed NOM in Court to set aside Notice to Produce (an unsealed copy was served on defendant's solicitors on 4 August 2005). The Registrar is ready to hear the defendant's NOM but Mr Dupree is not ready and is unavailable until October and opposes another counsel being used on the grounds of expense. Registrar Riznyczok orders: Defendant's NOM (re: further and better particulars) and plaintiff's NOM (re: setting aside Notice to Produce) listed for hearing 16 September 2005. Summary judgment Motion stood over to 6 October 2005. Court file 16 September 2005 Hearing by Assistant Registrar Howe of defendant's Motion for particulars and the plaintiff's Motion to set aside the Notice to Produce. Decision reserved. Registrar's Reasons for Decision by Assistant Registrar Howe dated 23 September 2005 Decision by Assistant Registrar Howe: 23 September 2005 1. The Defendant's Notice to Produce dated 28 July 2005 is set aside; Registrar's Reasons for Decision by Assistant Registrar Howe dated 23 September 2005 2. The Defendant's Notice of Motion filed 7 July 2005 is dismissed; and 3. The defendant is to pay the costs of both applications. Directions hearing. Mr Dupree informed the Registrar that the plaintiff would be applying to review Assistant Registrar Howe's decision and the plaintiff's summary judgment must await that outcome. Orders made: 6 October 2005 1. Any applications to be filed and served by 26 October 2005; Court file 2. Any applications to be returnable for mention on 2 November 2005. 3. Plaintiff's NOM (re: summary judgment) S/O F/M to then too. The defendant's solicitor files 2 Motions: 11 October 2005 1. To review Registrar's decisions; and Court file 2. To proceed by pleadings. Return date for defendant's NOMs. Mention date of 2 November 2005 vacated and despite Mr Dupree claiming to be unavailable until 2006, the orders made were: 21 October 2005 1. Defendant's NOM applying to review the Registrar's decisions (re: further and better particulars and setting aside Notice to produce) listed for hearing on 4 November 2005. Court file 2. Balance of matters (re: summary judgment and proceeding by way of pleadings) stood over for mention to 15 December 2005. 4 November 2005 Hearing before Associate Justice Malpass of defendant's NOM for review of Registrar's decision. Application for particulars is held to be misconceived and the Notice to Produce to be "unambiguously wide" and "oppressive". NOM dismissed with the defendant to pay the plaintiff's costs of the motion. Plaintiff's NOM for summary judgment and the defendant's NOM to proceed by way of pleadings both listed 15 December 2005 for mention. Court file 15 November 2005 The plaintiff requests the defendant's solicitors to be ready to determine all remaining matters on 15 December 2005. MLA letter 15 November 2005 - annexure "B" to the affidavit of T Porman sworn 4 July 2006 12 December 2005 Defendant's solicitors eventually reply that it is only listed for mention. Russo & Partners' letter 12 December 2005 - annexure "C" to the affidavit of T Porman sworn 4 July 2006 12 December 2005 Plaintiff's solicitors reiterate that all remaining matters can be dealt with on 15 December 2005. MLA letter 12 December 2005 - annexure "D" to the affidavit of T Porman sworn 4 July 2006 15 December 2005 Mention. Defendant's solicitors object to determining matters today and to Registrar Howe. Defendant's NOM to proceed by pleadings listed for hearing 22 February 2006. Court file 17 February 2006 Affidavit of Salvatore Russo filed Court file 22 February 2006 Hearing of defendant's NOM to proceed by pleadings. Orders: Defendant's NOM dismissed with costs. Listed for Directions 13 March 2006 (re: summary judgment). Written Judgment of Registrar Riznyczok dated 22 February 2006 8 March 2006 Defendant's solicitors file NOM seeking a review of Registrar Riznyczok's decision without listing any grounds for their application (in breach of Rule 45.21(b) UCPR 2005) Court file 13 March 2006 Directions hearing. Registrar Howe refers the Summary Judgment application to the Duty Judge (Rothman, J) over Mr Dupree's objection. His Honour Judge Rothman lists the matter at 2pm the next day. Court file 14 March 2006 Hearing of Motion. At Mr Dupree's request the matter is adjourned to hear all extant applications together. His Honour lists the matter on 16 March 2006 with costs reserved. Court file 16 March 2006 Hearing of all extant applications. His Honour Judge Rothman hears the defendant's motion seeking a review of Registrar Riznyczok's decision and the plaintiff's summary judgment application, with judgment reserved. Court file 17 March 2006 At the Court's request, an affidavit of debt is filed for the plaintiff. Affidavit of T Porman sworn 17 March 2006 24 March 2006 The defendant's solicitors object to the plaintiff's affidavit of debt. Russo and Partners' letter - annexure "A" to the affidavit of T Porman sworn 28 March 2006 28 March 2006 A further affidavit of debt is filed for the plaintiff. Affidavit of T Porman sworn 28 March 2006 27 April 2006 Defendant's solicitors file affidavit "in response" to the plaintiff's affidavit of debt Affidavit of S Russo sworn 27 April 2006 19 May 2006 Judgment is handed down Court file

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Principles Re: Indemnity Costs 8 The jurisdiction of the Supreme Court to award costs originates from its status as a superior court of record with inherent jurisdiction, as distinct from a court with statutory and limited jurisdiction. But the jurisdiction, while creating a wide discretion, must be exercised judicially. Almost no discretion is truly "unfettered" and the exercise must give effect to the purposes of the Civil Procedure Act 2005 ("the Act") that now governs the power. 9 Section 98 of the Act confirms that costs are in the discretion of the Court, which has "full power to determine by whom, to whom and to what extent costs are to be paid" and whether such costs are to be paid on the ordinary basis or on an indemnity basis: s 98(1) of the Act. 10 In exercising the discretion under the Act, I am required to give effect to the overriding purpose of the Act, which is "to facilitate the just, quick and cheap resolution of the real issues in the proceedings": s 56(1) of the Act. Further, by operation of s 56(5) of the Act, I am required to have regard to any conduct of a solicitor or barrister that causes his or her client to breach the duty, reposed on all parties to a civil proceeding, to assist the court to further the overriding purpose described: s 56(5) of the Act together with s 56(3) and 56(4) of the Act. 11 The purposes of the Act include the avoidance of delay (s 59), the dictates of justice (s 58) and case management (s 57), all of which would be included in the description of the overriding purpose and are otherwise particularised in the nominated sections. 12 These criteria, while codified in the Act, are not new: see, for example, Idoport Pty Ltd v NAB [2000] NSWSC 338; (2000) 49 NSWLR 51. They do not alter the principles to be applied in the determination of the issues in this application. 13 An order for the payment of costs by one party (or the legal representatives of the party) is not for the purpose of punishment. Costs generally follow the event because such an order is intended, at least to the extent that the costs incurred were not unreasonable or unreasonably incurred, as compensation (and vindication) for the successful action: Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534; Ohn v Walton (1995) 36 NSWLR 77. 14 Leaving aside for present purposes any issues associated with Calderbank offers or the status of trustees and other special classes, indemnity costs may be awarded, relevantly, when a party/party costs order is insufficient in the circumstances to compensate for costs unreasonably incurred due to the misbehaviour of the other party. Common examples include: misleading a court; conduct that has caused unreasonable delay and expense; where there were no real prospects of success; where there has been unreasonable delay for the purpose of a tactical advantage: see Wentworth v Rogers [1999] NSWCA 403; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants (1988) 81 ALR 397; Rouse v Shepherd (No. 2) (1994) 35 NSWLR 277. There are many other examples of conduct by a losing party that warrants the award of indemnity costs. Costs Against Legal Practitioners: Principle 15 Much authority was cited that, it was submitted, was at least persuasive as to the approach to be taken to the award of costs against legal practitioners. A great deal of it emanates from the Federal Court of Australia. There may be differences between the results of the approach taken by the Federal Court and that taken by this Court. Those differences, if any, may derive from the difference between statutory or inherent jurisdiction being exercised or from the differing nature of the substantive jurisdiction to which the costs issues are ancillary or, perhaps, collateral. 16 In NSW, the Court of Appeal has adumbrated the principles that should be applied. Dealing with the general jurisdiction and the provisions of the Legal Profession Act 2004 (Division 5C, particularly s 198J, s 198L, s 198M and s 198N), the Court, after reciting the history of such orders, set out the principles in the following way: "[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 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 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]).

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[142] Properly administered the Div 5C jurisdiction should not trespass upon the preparedness of legal practitioners to provide legal services in claims for damages as long as they have reasonable prospects of success. However, the purpose of Div 5C is plainly to deter the legal practitioner at the peril of a personal costs order, and possibly disciplinary proceedings, from representing a client whose prospects in pursuing or resisting a claim for damages he or she has formed the view have no reasonable prospects of success. There is no entitlement to legal representation in such cases. It is a matter for the client to determine whether to pursue the claim or defence without such services." ( Lemoto , supra, per McColl JA.) 19 In this application, RDCW Diamond do not rely upon the provisions of the Legal Profession Act. Nevertheless, the principles adumbrated by McColl JA in the quoted passages apply to the exercise of the jurisdiction under s 98 of the Civil Procedure Act and Part 42 of the Uniform Civil Procedure Rules. 20 Costs should not be awarded against a legal practitioner unless there has been real misbehaviour by the practitioner or the proceeding (including a defence) has been maintained without any or any substantial prospects of success in that the proceeding or defence was "futile" or "foredoomed to fail". 21 It is not, in those circumstances, for the legal practitioner to judge the credibility of the client. The practitioner is entitled, if not required, to take the client at face value. Further, a case that depends on altering or adapting the law (certainly on a logical or reasoned basis) is not futile or foredoomed. Practitioners are entitled, without penalty, to pursue for their clients novel issues of law based on an arguably available factual scenario. 22 The desirability of having clients legally represented is a factor in the balance. However, the purpose of legal representation is to aid the administration of justice, not to frustrate it. Application of Principles to Issues in Substantive Proceedings 23 As the earlier judgment seeks to make clear, the substantive proceedings was the enforcement in NSW of a judgment otherwise obtained in South Africa. The earlier judgment was for summary judgment and said: "[26] While the terms of the summons could be more clearly drafted, the intention of the summons was to enforce in Australia the judgment obtained in the South African Court or, if it be different, to sue in Australia for a liquidated sum, being the judgment debt, a debt arising from the judgment of the South African Court, proof of which debt is the judgment in South Africa: see Delfino v Trevis (No 2) [1963] NSWR 194 at 196; Godard v Gray (1870) LR 6 QB 139 at 150.

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[32] The plaintiff has established the foreign judgment; that no monies have been paid; that there has been no satisfaction of the terms of that judgment or any part of it; and that the debt is owed to the plaintiff by the defendant. In those circumstances, the plaintiff is entitled to judgment on the summons." 24 A judgment enforcing a judgment from a foreign court may be set aside if the original judgment of the other jurisdiction is set aside or varied: Remilton v CML Assurance (1907) 24 WN (NSW) 177; Bell v Bell (1954) 73 WN (NSW) 7; Doyle v Hall Chadwick [2007] NSWCA 159 at [51]. But the enforcement and registration of the foreign judgment in this jurisdiction cannot be defended on a basis (other than fraud) for which the foreign judgment can be set aside or defended in that foreign jurisdiction. 25 All of the interlocutory steps undertaken by Mr Dupree and Mr Russo on behalf of Mr Da Gloria were directed to that which could not be done. On the facts that were known to them, there was no defence in this jurisdiction to the enforcement of the foreign judgment. Nor was there an attempt to submit that the common law should be altered to allow such a defence. (The last sentence should not be taken to mean that such a submission would have been arguable.) 26 As a consequence the actions of Mr Da Gloria were unreasonable and caused unreasonable delay and expense in circumstances where there were no real prospects of success and were probably taken for some unknown tactical advantage. Party/party costs do not properly compensate for that unreasonable cost and expense and indemnity costs are appropriate. 27 Further, it was unnecessary for the legal representatives to judge the credibility of Mr Da Gloria for them to have known that what was proposed by way of defence was both "futile" or "foredoomed to fail" and the proceeding was maintained without any substantial prospects of success. 28 Mere lack of success is not the criterion by which these aspects are measured. These proceedings have been defended vexatiously in the sense that the defence was obviously untenable or manifestly groundless: Attorney-General (NSW) v Wentworth (1988) 14 NSWLR 481 at 491. For a court to make an order of the kind sought, it is not sufficient that the party against whom the order is sought is unsuccessful; but here, on the facts known, there was no substantial prospects of success: R v Moore; ex parte FMWU (1978) 140 CLR 470 at 473; Canceri v Taylor (1994) 1 IRCR 120 (55 IR 316); Kanan v APTU (1992) 43 IR 257 at 304. The delay and other matters addressed also convince me that interest on costs actually paid by RDCW Diamond should accrue and be ordered until those costs, to the extent they are determined to be reasonable, are paid by the respondents. Conclusion 29 At one stage an issue arose as to the role of the legal representatives and Mr Da Gloria. It was submitted by RDCW Diamond that the conduct of the proceedings evidenced negligence by the legal representatives. I need make no such finding and I do not. 30 Mr Dupree, somewhat inappropriately, continued to appear for Mr Da Gloria during this application for costs and while he was separately represented at the Bar Table. There is an obvious conflict in such an approach. But it discloses no breakdown in the relationship between the legal representatives and Mr Da Gloria. However, legal representatives are not the mere mouthpieces of their client. They are required to exercise independent judgment and conduct themselves consistently with their duty to the Court as described in ss 56(3), 56(4) and 56(5) of the Civil Procedure Act. 31 The tests for the making of the orders sought have been satisfied and, in the exercise of my discretion, I will make those orders. 32 One last matter remains. It was submitted that these further orders could not be made because of the form of the orders published with the earlier judgment or the reasons for it. 33 When the reasons for the earlier judgment were delivered, I proposed the orders there set out, an application for orders beyond those was advanced and leave or liberty to apply for any special order in relation to costs or interest was granted. As a matter of form and substance, the proceedings remained on foot for the limited purpose stated. These orders relate solely to that limited purpose. 34 The earlier orders were entered. These orders, by leave, are additional to the earlier orders and do not require their re-opening. If it did, there would be jurisdiction so to do because the earlier orders do not reflect the stated intention of allowing this application. Similar reasoning applies to the costs orders made on the interlocutory applications. It is permissible to re-assess those orders in light of the entire course of the proceedings. 35 I make the following further orders:

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