Rees v Bethencourt

The motion raises a number of complex factual issues and matters of legal principle the determination of which is likely to have very significant consequences for both parties to the application and the nominated plaintiff, Ms Jennifer Rees. In essence, this motion raises questions concerning Perla & Jordan's retainer (if any) from the plaintiff and the liability (if any) of Ms Perla personally to pay the defendant's costs of the proceedings. Before, however, I consider the issues and the evidence concerning them, it is necessary to sketch in some of the background to this application.

In 2003, Ms Elena Perla, a solicitor in sole practice in Beverley Hills, had formed a business relationship, the details of which are somewhat opaque, with the proprietor of a smash repair business, O.J. Smash Repairs ("OJ"). His name is Mr Fadi El Jamal. As I understand it, he no longer runs the business because he is now in custody.

Although there are some aspects of the relationship that were not revealed in evidence, for current purposes it is sufficient to say that OJ referred persons who had had their cars damaged and had sought repairs at his business to Perla & Jordan Lawyers. Perla & Jordan Lawyers supplied what was called a Motor Vehicle Accident questionnaire ("MVA") to OJ. Attached to the questionnaires were forms enabling signatories (implicitly the owners of the vehicles) to authorise Perla & Jordan to take legal action to recover the property damage losses suffered.

It seems that, once Perla & Jordan was satisfied that the other party was liable in respect of the damages, OJ would repair the vehicles and, without charging its clients, send its documentation concerning the costs of repairs to Perla & Jordan which would then seek to recover from the defaulting party or the insurer behind that party. Once the damages had been recovered, OJ was paid directly out of the settlement or judgment recovered and Perla & Jordan took its legal costs. The benefit to the clients of OJ, clearly, was that they did not have to pay for the repairs or litigation costs or even make a deposit into a trust account against costs and disbursements.

The benefit to the firm of solicitors, self-evidently, was that it had a flow of small claims from plaintiffs who, as far as Perla & Jordan could tell, had cases in which liability was not likely to be in contest. This was intended to be a high volume practice with a quick turnover of small, cheap matters. The advantage to OJ in the arrangement is not clear. No evidence ever emerged about that.

On 22 February 2003, a simple motor accident took place. One of the vehicles was a Mercedes-Benz owned by Mr Fadi El Jamal and the other was a Honda Prelude owned by the defendant. Mr El Jamal's car, however, had been registered in the name of the plaintiff, Ms Rees. Ms Rees had no beneficial or legal interest in the Mercedes-Benz. She had agreed to have the car registered falsely in her name because she was then in a friendly relationship with Mr El Jamal and it was at his request that she did so.

On 23 March 2003, OJ Smash Repairs estimated the cost of the repairs to Mr El Jamal's car. On or about 10 April 2003, a document entitled MVA questionnaire was signed by someone, either Mr Jennifer Rees or another person using her name. The following day Perla & Jordan opened a file in her name and on 14 April 2003 sent a letter of demand to NRMA purportedly on her behalf in respect of the motor vehicle damage.

On or about 14 May 2003, a statement of liquidated claim was filed in the Local Court nominating Ms Rees as the plaintiff in the matter. NRMA's solicitors filed a notice of grounds of defence to the claim. The matter was not settled and the course of litigating the claim became somewhat tortuous thereafter.

On 1 December 2003, at the call-over, there was no appearance of the defendant whose notice of grounds of defence was then struck out. In March 2004, it was reinstated and a costs order in favour of the plaintiff was made. In April 2004 an amended notice of grounds of defence was filed. On 10 May 2004, at call-over, the matter was set down for arbitration on 9 June 2004. Following various disputes concerning particulars, subpoenae and adjournments, the matter came before an arbitrator on 9 June 2004. The defendant's adjournment application was granted with the defendant being ordered to pay the plaintiff's costs of $2500. On 1 July 2004, NRMA sent Perla & Jordan a cheque in that amount. It was presented at the Kingsgrove branch of the Commonwealth Bank on 5 July and the funds deposited in a trust account in the name of OJ (not Ms Rees).

The matter was relisted for arbitration on 27 October 2004. In the meantime, various procedural steps were taken by the defendant's solicitors, DGB Lawyers ("DGB"). On 14 October 2004, DGB received instructions from NRMA to amend the defence to one of fraud. On the same day DGB wrote to Perla & Jordan seeking their consent to do so.

I will deal with some of the critical aspects of the correspondence in further detail below but suffice it to say at this stage that on 15 October, Goldbergs Lawyers ("Goldbergs") wrote to Perla & Jordan stating that they acted for Ms Rees and that she had instructed them that she had not authorised anyone to commence proceedings in her name. That letter was copied to DGB. Goldbergs requested Perla & Jordan to withdraw the claim against Ms Rees without cost.

On 18 October 2004, Perla & Jordan advised DGB that they would consent to the amendment on condition that DGB consented to the statement of claim being amended to instate a new plaintiff, Mr El Jamal and consequent amendments concerning ownership. DGB did not consent to this proposal but the following day sought clarification of Perla & Jordan's and Ms Rees's position in the light of the recent developments.

On 20 October DGB wrote to Perla & Jordan advising that, in light of the proposed amended statement of claim, the arbitration should be vacated. On the same day, Perla & Jordan wrote to DGB enclosing a notice of ceasing to act. Next day, Perla & Jordan advised DGB that they would not be appearing at the arbitration.

On 25 October 2004, DGB sought from Perla & Jordan evidence of a retainer from Jennifer Rees. Perla & Jordan claimed legal professional privilege over any retainer documents they held in respect of Jennifer Rees. On the same day, Ms Rees swore an affidavit asserting that she had not retained Perla & Jordan.

On 27 October 2004, the matter came before Arbitrator Goodman. Orders were made that the plaintiff's solicitors pay the defendant's costs of the day; that the costs order made on 9 June 2004 in favour of the plaintiff be revoked; that the plaintiff's solicitors pay costs to the defendant in the sum of $2500 plus interest (subject to any application brought by the plaintiff's solicitors); that the defendant's application under ss.198J, 198M and 198N of the Legal Profession Act 1987 be stood over before the List Magistrate; that notice be given to the plaintiff's solicitors of the application; and that the defendant's notice of motion to amend its defence be stood over also.

Since that time, there have been a large number of interlocutory appearances and applications culminating in the hearing of the motion before me. Virtually all of these have concerned, directly or indirectly, the question of Perla & Jordan's retainer and the liability of Ms Perla to pay the defendant's costs of the proceedings. It goes without saying that this issue is of considerable importance from both a professional and a pecuniary point of view for her and, indeed, the insurer standing behind the defendant.

The applicant raises two main issues. It contends that the proceedings commenced in the name of Ms Jennifer Rees ought be dismissed on the grounds, first, that she was not the owner of the vehicle, had no interest in it either legal or beneficial and therefore had no standing and, second, and more importantly, because she did not give instructions to Perla & Jordan for proceedings to be commenced in her name.

The applicant contends that the respondent ought, because of her conduct of the matter, be ordered under the provisions of s.198M to pay the defendant's costs personally on an indemnity basis for the entire proceedings.

The respondent in turn raises a number of further issues. First, it contends that an application for costs against the solicitor in this case ought not be entertained before trial. Second, it argues that it is too late to challenge the retainer. Third, it submits that the court could make a finding on the evidence that the plaintiff had given the solicitors a retainer or ratified the commencement of proceedings in her name ex post facto. Fourth, it says that if the solicitors were not retained there is an issue as to whether it is more appropriate to dismiss the proceedings or to stay them so that the correct plaintiff can be joined.

Oral evidence was given for the applicant by Ms Rees, her parents, Mr Hugh Rees and Mrs Dagmar Rees, and Mr Stephen Dubedat. A number of affidavits and other documents were also admitted. For the respondent, Ms Perla gave evidence herself and also called Mr El Jamal. A number of documents were also tendered on her behalf.

In the interests of economy some of the evidence will not directly be referred to in these remarks but I have carefully considered all of it and taken it into account.

The essence of Ms Rees's evidence was that she had formed a close friendship with Mr El Jamal and that he had prevailed upon her to have the car registered in his name for a reason which appears to have been spurious. Her account was that he told her that he could have a limited number of cars registered in his name. There was no evidence put before the court of the true reason for the arrangement.

She stated that during the course of her relationship with Mr El Jamal she had referred correspondence, such as penalty notices and the like, to Mr El Jamal for him to deal with or had been recompensed by him if she paid fines. She was given the name of a person (who may or may not exist) whom she could nominate to the Roads and Traffic Authority as the driver responsible for offences for which penalty notices were issued.

In relation to the car crash in which damage was occasioned to Mr El Jamal's Mercedes-Benz vehicle, she said that she had not been present at the time, had by that time begun to distance herself from Mr El Jamal and that she had never had any dealings with Perla & Jordan in relation to the litigation commenced in her name. She specifically denied knowledge of the MVA document purporting to have been signed by her or of having given instructions to Perla & Jordan in relation to the vehicle accident case. She stated that the first she knew of the litigation at all was in October 2004. She also denied categorically having received any correspondence from Perla & Jordan concerning the litigation.

Her evidence that she had not received any letters from Perla & Jordan was corroborated by her parents who testified that they had received no such letters at their home (at which Ms Rees lived during the relevant period) and that it was unlikely that Ms Rees herself would have collected or been able to collect the mail, given that one or other of them almost invariably did so.

Her evidence that she had not signed the MVA document was corroborated to some degree, and in a qualified sense, by the evidence of Mr Dubedat, an expert forensic document examiner. He was unable to say who had signed the document but was of the opinion that the signature was not like that of Ms Rees. An examination of the document itself and the signature clearly indicates that the signature is unlike the usual signature of Ms Rees. Although his opinion was qualified by the fact that he had not been able to examine the original MVA document he formed the view that "the original questioned signatures reproduced on [the copy of the MVA document] are probably not genuine signatures of [Jennifer Rees]".

An affidavit of Mr Gregory Hatfield, an employed solicitor with DGB, was tendered. He was not required for cross-examination. Among other things he stated that on about 28 November 2003 he had caused a notice of change of solicitor to be filed and had received the NRMA file in the Rees v Bethancourt matter. On or about the same date he spoke to an officer of NRMA Insurance, Ms Isabelle Al Alam who told him that she had spoken to the plaintiff who had told her that "she does not want to get involved in this matter." Mr Hatfield then undertook to consult his supervising partner as he foresaw a problem in the matter.

He also gave evidence that he was told by Ms Al Alam that the plaintiff was not co-operating with NRMA and he advised her that she would have to be subpoenaed. In May 2004, Mr Hatfield gave some advice to NRMA about the procedure for challenging a solicitor's retainer. He told Ms Al Alam that affidavit evidence would be required from Ms Rees to support a notice of motion. He told Ms Al Alam that DGB could not make direct contact with Ms Rees because she was legally represented. It is common ground that Solicitors' Rules generally prevent such direct contact where a person is legally represented. It appears that DGB advised NRMA that, while solicitors could not make direct contact with the clients of other solicitors, there was nothing to prevent parties themselves going directly to other parties.

Annexed to Mr Hatfield's affidavit was a letter from Mr Anthony Bowen of counsel dated 19 July 2004. Mr Bowen's letter was, in effect, a report back to his instructing solicitors concerning the call-over at which he had appeared on behalf of the defendant that day. Among other things Mr Bowen recorded that at one point he had been told by Mr Obeidat, who appeared for the plaintiff, that he needed to take instructions from his client and later that he had told Mr Bowen that he had instructions from the client. As Mr Obeidat did not give evidence, it is not possible to ascertain whether he actually obtained instructions or, if so, from whom.

According to Mr Hatfield, between July and October 2004 he had various contacts with Perla & Jordan, detectives from Task Force Gain who were investigating matters to do with Ms Rees and Mr Ray Hood, barrister, who stated that he represented Ms Rees. At that stage, neither DGB nor NRMA had obtained an affidavit from Ms Rees.

As we have seen above, on 15 October 2004, Goldbergs wrote to Perla & Jordan stating that Ms Rees had become aware of the proceedings and instructed them that she had not retained Perla & Jordan. The letter requested an undertaking from Perla & Jordan to withdraw the proceedings without any claim for costs against Ms Rees. That letter was copied to DGB and was annexed to Mr Hatfield's affidavit.

Perla & Jordan's response came on 18 October. They wrote to DGB advising that they would consent to an amended defence on condition that the defendant consented to a new plaintiff being substituted for Ms Rees in the proceedings. Mr Hatfield wrote back to Perla & Jordan on 19 October asking them to "clarify the basis of your instructions to act for Jennifer Rees" and refusing to consent to any amendment of the statement of claim "until a thorough explanation of your firm's involvement in the matter is provided."

Mr Hatfield gave evidence that Perla & Jordan had replied on 20 October claiming "complete surprise" at the suggestion that they did not have a retainer from Ms Rees and stating that they had made unsuccessful attempts to get in contact with her in recent days. They stated that they had been unable to obtain further instructions and foreshadowed the filing of a notice of ceasing to act.

Ms Perla's evidence concerning the MVA document was that her firm's practice was to provide copies of the document to OJ together with a costs schedule. The MVA document not only asked questions but also annexed an authority in very broad terms for the solicitors to act on the client's behalf in respect of the motor vehicle claim.

She stated that Perla & Jordan had received an authority in the following terms from a client she believed at the time to have been Ms Rees: I, Jennifer C. Rees of [address given] do hereby authorise Perla & Jordan Lawyers to act, represent, collect, receive and direct payments, incur expenses, engage agents and assessors, and sign any document on my behalf where it may be appropriate in relation to my motor vehicle accident dated 22/2/03 in Enmore.

The authority was signed and dated 10 April 2003.

Ms Perla gave further evidence that, while she or her employees had not met Ms Rees and verified her identity or directly confirmed the authority purportedly given in the MVA document, there had been five letters sent to Ms Rees at her home [where she lived with her parents] in North Ryde and that none of those letters had ever been returned to her firm.

The first of the letters was dated 14 April 2003 and was merely a notification that Perla & Jordan was in touch with the insurer for the other party and it also thanked Ms Rees for her instructions, promising to keep her informed concerning the progress of the matter. The evidence that none of the letters was ever returned is contradicted by the evidence of Mr El Jamal who stated that he gave the letter to one of Ms Perla's employees and the fact that it was produced in court from her file. That, however, was the only returned letter, or so it seems. Where the others went is a live question.

According to the records of Perla & Jordan, the firm wrote to Ms Rees on 11 May 2004 notifying her that the arbitration of her matter was listed at the Downing Centre Local Court on 9 June and that her attendance was required. She was asked to confirm her attendance within seven days of the date of the letter. She did not do so.

On 22 May, having received no reply, Perla & Jordan again wrote telling Ms Rees that it was unlikely that she would be required to give evidence at the arbitration but that her presence was "desirable". She was asked to contact Perla & Jordan "as soon as possible." Again she failed to do so, but an unidentified caller spoke to Perla & Jordan some time before the arbitration saying that Jennifer Rees would be overseas at the time of the hearing. (As it happened the arbitration was adjourned on 9 June 2004 at the request of the defendant, against whom a costs order was made.)

On 21 July 2004, Perla & Jordan wrote to Ms Rees notifying her that the arbitration had been listed for 27 October 2004. It sent her no further correspondence concerning her evidence or her attendance at the arbitration.

Ms Perla also gave evidence that at no time had Ms Rees ever got in touch with her firm to question the fact that proceedings were being brought in her name rather than that of Mr El Jamal.

She asserted that at all times until October 2004 when she received a letter from Goldbergs, which in effect challenged her retainer, to have proceeded on the basis that she had been instructed by Ms Rees. She said that she had interpreted the letter as either a statement of fact, namely, that Ms Rees had not retained her, or was a withdrawal of instructions. She stated in her evidence that she remained uncertain as to whether she had in fact been instructed by Ms Rees.

Ms Perla was cross-examined at length and to some effect. In cross-examination, it emerged that an employee, Mr Akram Obeidat (who was not a solicitor) signed the statement of claim, possibly without Ms Perla's knowledge; that no costs disclosure was made by the solicitors directly to the purported client; that Mr El Jamal rather than Ms Rees provided whatever instructions Perla & Jordan took in the matter; that Perla & Jordan had not kept proper trust account records in respect of Ms Rees's matter but had effectively treated OJ Smash Repairs as the client; that Perla & Jordan had failed to account to Ms Rees in respect of a costs order made in her favour and had not bothered to inform her of the costs order being made and or to request authority to draw on the trust account for solicitor's costs; that she never took any steps to verify the identity of the plaintiff beyond what was disclosed in the MVA document; that she recognised the interested party in the matter to have in fact been the repairer rather than the named plaintiff; and that, on receiving notification from Ms Rees's solicitors that Ms Rees denied the retainer she did not immediately cease to act but, for a short time, sought to negotiate an amendment to the statement of claim to substitute Mr El Jamal as plaintiff.

Mr El Jamal also gave evidence. The essential evidence he gave was that he had asked Ms Rees to register the motor car in her name because he had many unpaid fines and did not have a licence. He claimed that she had not only agreed to do this for him but to "take responsibility" for the car.

Second, he gave evidence that the car had been driven by the late Mr Mark Nichols (who was shot dead at OJ Smash Repairs in late 2003 or early 2004) at the time of the accident.

Third, and most importantly for the respondent, he gave evidence that he had seen an MVA document apparently signed by Ms Rees; that he had told her to expect a letter from the solicitors who were dealing with the damages claim; and that she had provided to him a copy of a solicitor's letter sent to her. In essence, his evidence was to the effect that Ms Rees had known of the proceedings from their inception. In evidence, the respondent produced one letter addressed to Ms Rees and Mr El Jamal gave evidence that he had given it to Ms Perla's solicitors.

Before making findings of fact it is critical to make an assessment of the evidence given by various witnesses. This was no easy task. Apart from Mr Dubedat, I was troubled by the evidence of all the witnesses who gave evidence orally.

At first blush, Ms Rees appeared to be an honest and reasonably reliable witness but, apart from the usual problems when a witness attempts to give evidence about events which occurred at a much earlier time, there were a number of factors that suggested either that she was not entirely frank or was reconstructing her evidence in a way favourable to herself.

First, Mr El Jamal's evidence that he had obtained the first letter sent to her from Ms Rees and given it to Perla & Jordan, seemed plausible evidence. While I have considerable reservations about the truthfulness of much of his evidence, there is no obvious motive for him to lie about this. Unless Ms Perla, or some agent of hers, and Mr El Jamal have concocted that evidence, or unless Mr El Jamal stole the letter from the Perla & Jordan file for some reason unclear to me, it seems likely that Ms Rees did give it to him as he claimed.

If his evidence is truthful in that respect, Ms Rees got at least one letter from Perla & Jordan despite her denials. If she passed on the letter to Mr El Jamal, it would have been in accordance with their usual custom of her transferring correspondence (and responsibility for the vehicle) to him.

Second, it is submitted by the respondent that if Perla & Jordan sent a steady stream of correspondence concerning the litigation to Ms Rees's address, it is highly unlikely that every single letter was lost in the mail. That is a strong submission.

Third, evidence was given by Ms Perla that shortly before the arbitration was due to take place an unidentified woman rang Perla & Jordan to tell them that Ms Rees was unavailable to attend court. It was not suggested by the applicant that this evidence was untrue. If such a call was received by Perla & Jordan, the caller must have been either Ms Rees herself or someone who knew Ms Rees and knew enough about Ms Rees's affairs to be aware that she was expected to appear as a witness at the arbitration. It seems highly unlikely that a call in such terms could have been made without Ms Rees's knowledge of both the litigation and the call itself.

Fourth, Ms Rees was prepared falsely to represent herself as the registered owner of the motor vehicle at Mr El Jamal's request and made false statements in various documents concerning the car.

Finally, it is submitted by the respondent that Ms Rees's denials of knowledge of the litigation are motivated solely by fear of a costs order against her. Although it is not clear to me that, even if she had known that Perla & Jordan were conducting litigation in her name, she may in fact have become liable to a costs order, I think it is reasonable to surmise that she may have believed this to be the case and sought to place as great a distance between herself, Mr El Jamal and Perla & Jordan as she was able.

Ms Rees's parents appeared to me to be honest people but, with the best will in the world, they would have had difficulty being absolutely certain about events which, at the time, could have had no particular significance to them at the time and which, in any event, took place some years ago. It was clear that they were very loving and caring parents and, while that does them credit from one point of view, it undoubtedly coloured the way they recollected the relevant events. Moreover, they had been concerned about Ms Rees's welfare when she became involved with Mr El Jamal and his associates and gave the strong impression that they regarded that relationship as dangerous to her. Their evidence appeared to me to be largely reconstructed and I could place no great weight upon it from an objective point of view.

Mr El Jamal is currently in custody either awaiting trial or serving a serving a sentence. I formed the view that he is a man of considerable intelligence. He has a lengthy criminal record for crimes of dishonesty. The combination of intelligence and proven dishonesty made him a particularly suspect witness in many respects. I am reluctant to accept any uncorroborated testimony from him except where his evidence is inherently more plausible than that of another witness as it was in relation to the one letter he produced from Ms Rees. Mr El Jamal has now fallen out with Ms Rees and was very probably motivated to some extent both by that and by a natural desire to assist his benefactor, Ms Perla.

I find it very unlikely that Ms Rees ever agreed to "take responsibility" for the motor car. While she was in it from time to time, she did not possess it or use it as her own. She passed on the traffic infringement notices she received to Mr El Jamal or was compensated for the fines she paid. He took responsibility for it, not her, because it was his car.

Mr El Jamal, disingenuously in my opinion, and with considerable and probably feigned vagueness, sought to imply that Ms Rees may have been the author of the MVA document or may have signed it. The handwriting evidence suggests that she did not sign it. There is no reason to think that Ms Rees would have refused to sign it had she been asked but she almost certainly was not. Mr El Jamal was used to taking Ms Rees for granted. In all probability, he either believed that he would be able to enlist her co-operation if the MVA document were ever challenged or thought that the MVA document would never be questioned. I doubt his evidence that he told Ms Rees to expect a letter from the solicitors. It is more likely that when it came she passed it on as she did with most of the other mail she had received in the past concerning the car.

Ms Perla gave what appeared to me to be largely self-serving, occasionally reconstructed, sometimes unresponsive, intermittently exaggerated and often vague evidence concerning the events in question. Her evidence was not impressive generally. I found that I could place little reliance upon it in most respects absent some corroboration. I came to this conclusion because, by her own admission, she was very vague about many of the aspects of the case.

In at least three instances, I formed the view that her evidence was almost certainly untruthful. First, she provided no satisfactory explanation for the fact that no trust account had been established in the name of Ms Rees but had been in the name of OJ which was not a client in these proceedings.

Second, she failed to explain why no information was provided to Ms Rees about the payment of $2500 in costs by the defendant. She sought to suggest that it was an oversight that would have been dealt with in due course. The truth, however, was that the practice had every reason not to account to clients because it did not charge clients for the legal services provided. The clients were merely vehicles for claiming costs from defendants and their insurers.

Third, Ms Perla's claim that she attached or annexed costs agreements or schedules to the MVA questionnaires was contradicted by her own witness, Mr El Jamal. In any event, Ms Perla could not produce a costs agreement with Ms Rees. The best she could do was a blank form. She provided no other examples of completed costs agreements with clients to disprove the suggestion that, as a matter of practice, no costs agreements were entered by Perla & Jordan with clients who came to them from OJ.

Moreover, it was striking that no evidence was produced by Ms Perla from Mr Obeidat. The mere fact that he is now in Jordan does not of itself explain why he has not provided a statement or affidavit. Evidence can be obtained from overseas witnesses in a variety of ways, especially with the aid of electronic technology, and s.63 of the Evidence Act makes provision for the tendering of statements by unavailable witnesses. Mr Obeidat, perhaps more than anyone else, was in a position to explain how the Rees v Bethancourt matter was handled in the office of Perla & Jordan because he had the day-to-day carriage of the matter. The absence of Mr Obeidat, even if the so-called rule in Jones v Dunkel is not applied, did nothing to add to the respondent's evidence and left it, in my view, rather threadbare.

This was especially so because, at one point in her cross-examination Ms Perla emphasised that she alone handled the posting of the mail because she did not entrust that important task to others in her employ but at the same time she was perfectly content, it would appear, for Mr Obeidat to draft pleadings, deal with Mr El Jamal concerning the matters referred by OJ, correspond with clients and so on. This left the distinct impression that Ms Perla, for understandable reasons and not necessarily consciously, was inclined to reconstruct or exaggerate her evidence at times to suit her requirements.

Nevertheless, despite the shortcomings in her evidence, however, I formed the view that her evidence was probably honest when she stated that she did not know that Ms Rees had not signed the MVA document. I will develop my reasons for this conclusion below, after first dealing with some other issues.

Did Ms Rees know of the litigation before October 2004?

Ms Rees claimed that she first became aware of the litigation in about July 2004. In my view, because she had a practice of passing on correspondence concerning the car to Mr El Jamal, and because it is unlikely that all the letters sent by Perla & Jordan to her address were lost in transit, Ms Rees at some time considerably earlier than she admits became aware that litigation had been commenced by Perla & Jordan in her name. What happened to the letters other than that produced by Mr El Jamal remains unclear. Perhaps she passed them on to him or perhaps she got rid of them because they related to his problem and not hers.

When that was cannot be precisely ascertained because the evidence that Ms Rees signed the MVA document is weak. Mr Dubedat could not positively exclude the possibility that she had signed the MVA document but the signature on the document bears so little resemblance to her usual signature, and there has been no reason advance for her radically changing her usual signature in this particular instance, that is seems to me to be unlikely that she was the actual signatory. The most likely person to have signed the document is Mr El Jamal: he certainly wrote on the document; it was his car; he was accustomed to taking responsibility for the car; and he knew that Perla & Jordan would deal with him and litigate the matter on the basis of the MVA document without looking behind it to find the real plaintiff.

There is some evidence that an officer of NRMA Insurance spoke to Ms Rees in November 2003. The full terms of that conversation are not before the court. Whether Ms Rees was told by NRMA of the litigation or not is unclear, although it is probably reasonable to suppose that she may have been. Therefore, while it was likely to have been some time after the first letter of demand and before the date set for arbitration, the best estimate of when Ms Rees first found out about the litigation is probably around November 2003. Whether she comprehended at or around that time that she was the named the plaintiff in the proceedings, however, is another matter.

Before considering the evidence and making findings of fact on this question, I digress for a moment to consider the issue of onus of proof in relation to the question of a retainer. The authorities appear to be in conflict. In Harry S Bagg's Liquidation Warehouse Pty Ltd v Whittaker (1982) 44 NSWLR 421 and AW & LM Forrest Pty Ltd v Beamish (1998) 146 FLR 450, for example, it was held by single judges of the Supreme Court of NSW (Powell JA and Young J respectively), following English authority, that the solicitor whose retainer is challenged bears the onus of establishing that he or she has authority to act for a person.

On the other hand, in Hawksford v Hawksford (2005) 191 FLR 173, another Supreme Court case, Campbell J carefully considered the conflicting authorities on the subject and concluded that the applicant on a motion challenging a solicitor's retainer bore the onus.

He said (at 185): … when a party to litigation seeks to have a claim stayed or dismissed or (as here) an order that the appearances of certain defendants be struck out, on the ground that the solicitor purporting to act for a party is not retained, the onus of proving the lack of retainer is on the person who asserts it. The lack of a retainer is a negative fact, of which the Court needs to be satisfied before it makes any such order, and the party who asserts it must prove it.

He carefully distinguished (at 185-188) the decisions, including Harry S Bagg's and Forrest, which appear to stand for the proposition that the challenged solicitor bears the onus of proving his or her retainer.

This Court is, of course, bound by the decisions of the Supreme Court. In my view I ought follow Campbell J, he having so attentively and rigorously analysed the issue. I find his analysis the more persuasive as he carefully considered both sides of the question rather than simply relying on precedent. I now turn to consider the evidence.

Leaving aside for argument's sake the direct evidence of Ms Rees that she did not retain Perla & Jordan, there is little cogent evidence to support the respondent's contentions that Ms Rees retained Perla & Jordan and much to suggest that she had no dealings with them at all except to receive their correspondence and, probably, to pass it on to Mr El Jamal. The very course of correspondence, which includes unanswered letters requesting her to get in touch with Perla & Jordan, suggests that she never retained or instructed her supposed solicitors. (At a slight tangent, I observe that the correspondence also suggests that Perla & Jordan were unaware until October 2004 that she had not signed the MVA document which was their apparent authority to act on her behalf.)

No costs agreement has been presented in evidence, not even an unsigned file copy kept by the solicitors. Mr El Jamal, whose evidence mostly supported that of Ms Perla, contradicted her claim that she supplied a costs agreement or schedule with the MVA agreement for potential plaintiffs to adopt. Almost certainly there was none because it was the expectation of all that the client would not pay any legal costs. That provides further support for Ms Rees's claim that she did not retain Perla & Jordan.

Somewhat extraordinarily, Perla & Jordan never had a conference with their purported client. So far as they went, all their dealings with or in regard to Ms Rees were by letter. The reality was that Mr El Jamal provided the "instructions". This again supports Ms Rees's contention that she did not retain Perla & Jordan.

A striking piece of evidence supporting Ms Rees's assertion is that when a costs order was made in favour of Ms Rees, the solicitors ignored her and paid themselves. As I noted above, no proper trust account was established in the name of Ms Rees. Rather, moneys relating to her matter were lumped in a trust account for OJ Smash Repairs. That was entirely consistent with what Ms Rees said and with a practice that had very little interest in the actual plaintiff because its real dealings were with Mr El Jamal or OJ Smash Repairs.

It is submitted by the respondent that the court should make a finding that Ms Rees "acquiesced" in the litigation, thereby ratifying it ex post facto if she did not sign the MVA document. I have been referred to no authority for that proposition. In my view, while it may be possible to construe failure to act or failure to speak as consent or acquiescence in some situations, it takes more than mere inactivity coupled with knowledge to ratify a retainer agreement with a firm of solicitors.

A court may infer that parties have reached agreement from the way that they conduct themselves. A person may get on a bus, put a ticket in a machine and sit down. From this it can be inferred that the bus operator offers a service which is accepted by the passenger. An agreement has been reached. But if a person is placed on a bus by another while she is unconscious and, when she regains consciousness, makes no effort for some time to get off the bus, it cannot reasonably be argued from that fact alone that she has ratified some sort of agreement with the bus operator. If she were to go down to the ticket machine and place her ticket in it, that would indicate that she did so but mere passivity would, in my opinion, be insufficient in such circumstances. Although the second example I have given is not a precise analogy with the situation of Ms Rees, there is a critical similarity: she was merely passive as was the passenger in the analogy.

If, as I think was the case, Ms Rees had some incomplete knowledge of the litigation but failed to notify the solicitors that she had not, in fact, lent her name to the proceedings or offered them a retainer, her mere inactivity speaks more of a desire or intention to distance herself from those proceedings (leaving them in the responsible hands of Mr El Jamal as usual) than of any intention to represent to the solicitors conducting the litigation supposedly on her behalf that they had her endorsement and approval. After all, why should she? She had no interest in the car at all. They may have been misled into thinking that she had authorised them to undertake legal action on her behalf but that was because (a) they did not verify the identity of the plaintiff and (b) they chose to rely solely on a document provided to them by Mr El Jamal and any other representations he made to them.

Ms Rees is not a person who, at that time, had any sophisticated understanding of legal procedure and dealings with lawyers. It is clear from the evidence that in October 2004 she felt very much out of her depth and in need of legal advice because of her ignorance in relation to legal proceedings and the possible consequences of her name having been "borrowed" for the purposes of the litigation. Had she been aware of the error on the part of Perla & Jordan, and the possible consequences of it, the respondent may have had a point in arguing that she should, in effect, be estopped from denying a retainer. (That was an argument that only emerged in discussion during the course of oral submissions.) She, however, had no such knowledge or understanding. It was not, in my view, incumbent upon her to correct any error on the part of Perla & Jordan, especially given the unusual way in which they had commenced and then conducted the proceedings.

While the matters which emerged in the applicant's very thorough cross-examination of Ms Perla undermine her credit considerably and demonstrated that her conduct of these proceedings was not carried out with the high degree of professionalism expected of a sole practitioner, they did not disprove her assertion that she did not know that Ms Rees was not the plaintiff until October 2004. Indeed, it is because of the unusual way the practice conducted its motor vehicle practice accident practice that Ms Perla can make the assertion plausibly. She (or her staff) simply never bothered to meet the "plaintiff" so how might they have known that Ms Rees had not retained the firm unless this had been revealed to them by Mr El Jamal. While it is, of course, possible that he did so, it seems unlikely because the car was registered to Ms Rees and someone (probably himself) had signed the MVA document in her name.

In my view, the negative evidence is unflattering of her as a legal practitioner but it does not amount to positive proof that Ms Perla was aware that she had no retainer and continued the proceedings regardless, the proposition the applicant invites the court to accept.

Two of the several evidentiary lacunae in the matter are the accounts that Ms Perla's employees might have been able to give about the conduct of the matter. Mr Akram Obeidat, a Jordanian citizen, had carriage of Ms Rees's matter for much of the time Perla & Jordan handled it. He has not provided a statement and is said to have returned to Jordan. The whereabouts of another potential witness, an employed solicitor who did some work on the Rees file, were unknown to Ms Perla. It would have been open to her, for example, to get in contact with the Law Society to find out where her ex-employee was working but she did not. She gave no evidence of any efforts made by her to locate that potential witness. That solicitor's evidence, on the face of it, however, was likely to have been far less useful than that which Mr Obeidat might have been able to provide as she had had only passing contact with the Rees matter.

All the same, I would not be prepared to draw an inference from this that the evidence of those two witnesses would not have assisted Ms Perla. It seems unlikely that either Ms Obeidat or the solicitor would concede any more than Ms Perla does about the retainer.

The applicant bears the onus of proving its contention. Ultimately, I am not persuaded that the evidence shows, on the balance of probabilities, that Ms Perla was aware that she had not been retained by Ms Rees until this fact was brought to her attention by Goldbergs Solicitors in October 2004.

The respondent contends that, even if there was in fact no retainer agreement entered between Ms Rees and Perla & Jordan, the challenge to the retainer comes too late in the day and that, by virtue of the doctrine of laches, should be dismissed. There is clear authority to the effect that a party should challenge a solicitor's retainer without undue delay See, for example, AW & LM Forrest Pty Ltd v Beamish (1998) 146 FLR 450 at 458; Massey v Wales (2003) 57 NSWLR 718.. The respondent argues that the challenge came after the first arbitration date and well after the defendant knew, or ought reasonably to have known, that the respondent had not been retained. The respondent submits that the applicant was effectively on notice of the potential problem with the retainer by November 2003 but delayed taking action for nearly a year thereafter.

That is a contention with which I cannot agree. In AW & LM Forrest Pty Ltd v Beamish (1998) 146 FLR 450 (at 459) Young J made the telling point that "the authorities … do not say that the application [to challenge a retainer] is defeated by delay; they merely say that the application should be made timeously or at least without undue delay…" Whether the delay in challenging a retainer is "undue" is a question of fact and will depend on the relevant circumstances.

Here, as the respondent herself has correctly submitted, an onus of proof lies upon the party challenging a retainer. Such a course is not lightly to be undertaken and without substantial evidence in support of the challenge. The applicant had been put on notice by its client, NRMA, that Ms Rees was not co-operative and may not have given instructions to Perla & Jordan. Certainly there was some delay on its part in proceeding with an application to challenge Perla & Jordan's retainer.

Bearing as it did the onus of proof, it would, however, have been folly on the part of DGB to launch such a motion without an affidavit from Ms Rees or some other positive proof because, notwithstanding any hearsay evidence Ms Al Alam may have been able to provide, Perla & Jordan would have met the application with a copy of the MVA document, on the face of it a retainer. Ms Rees was, as Ms Al Alam stated to Mr Hatfield, unco-operative with NRMA. This is consistent with her general attitude of seeking to distance herself from the entire affair until October 2004. Given the burden of proof lying upon the challenger of the retainer the prospects of an application succeeding without Ms Rees's co-operation, or some evidence of equivalent weight and cogency, would have been slight.

The letter of 15 October 2004 from Goldbergs changed the situation entirely. Ms Rees had emerged from the shadows, as it were, to declare herself. It was at that point that DGB were really able to mount a challenge. In my view, therefore, there was no undue delay on the part of the applicant in bringing the matter before the court.

It is now apparent that the proceedings were commenced without authority from Ms Rees. She has not ratified any proceedings or a retainer agreement. Whether or not Mr El Jamal in fact has a cause of action is another question altogether. This is not a case in which proceedings were commenced accidentally in the name of an inappropriate person, a problem which could be cured by staying those proceedings and substituting another party.

Mr El Jamal is almost certainly the person who engineered the commencement of proceedings in full knowledge of the fact that Ms Rees was not the owner of the vehicle, had no interest in the vehicle and had not herself suffered loss or damage. If that is correct, it may well have constituted an attempt to pervert the course of justice.

Ms Rees had no cause of action. The fact that Ms Rees had no interest in the vehicle at all and not suffered loss or damage made the proceedings futile from the outset. Whether the absent Mr Obeidat had any knowledge of the apparent abuse of process by Mr El Jamal remains a matter of speculation but the objective fact is that the proceedings ought never have commenced in the name of Ms Rees.

The respondent submits that it is open to the court merely to stay the proceedings pending amendment of the pleadings or the commencement of proceedings in the name of the true plaintiff. That, it seems to me, does not meet the case presented here which, putting it bluntly, is one of abuse of process. Once it is discovered that proceedings have been dishonestly and deliberately commenced in a false name (whether or not the solicitors in question are innocent dupes), the court is duty bound to protect the integrity of its own process by summarily dismissing the abusive proceedings. That should be the result in this case.

The burning question lying behind much of the lengthy proceedings that have so far taken place is whether Ms Perla ought be ordered to pay the applicant's costs personally. The applicant claims such an order. It goes virtually without saying that for a solicitor such an order is doubly punitive: it casts a shadow of opprobrium across his or her professional reputation as well as costing him or her what may be considerable sums. It is clear from the course that the interlocutory proceedings have taken since the challenge to the retainer was mounted that Ms Perla, if the order sought by the applicant were to be made, faces a very large bill of costs.

Such orders are quite rare and courts do not, of course, make them lightly. Under the common law and Rules, it is only in exceptional cases that orders are made against solicitors personally. A court must be comfortably satisfied on the balance of probabilities that the applicant has discharged its onus of proof before proceeding to make such an order whether under s.198M of the Legal Profession Act 1987, the Uniform Procedure Rules or the old Rules.

One of the orders sought in this motion is for costs under s.198M. In dealing with this part of the argument it is necessary to retrace some of the steps already taken to this point as findings of fact I have made concerning the dismissal of the proceedings are relevant this costs application also.

It is a pre-condition of the commencement of proceedings by legal practitioners that there be reasonable prospects of success. Section 198J provides: (1) A solicitor or barrister must not provide legal services on a claim or defence of a claim for damages unless the solicitor or barrister reasonably believes on the basis of provable facts and a reasonably arguable view of the law that the claim or the defence (as appropriate) has reasonable prospects of success. (2) A fact is provable only if the solicitor or barrister reasonably believes that the material then available to him or her provides a proper basis for alleging that fact. (3) This Division applies despite any obligation that a solicitor or barrister may have to act in accordance with the instructions or wishes of his or her client. (4) A claim has reasonable prospects of success if there are reasonable prospects of damages being recovered on the claim. A defence has reasonable prospects of success if there are reasonable prospects of the defence defeating the claim or leading to a reduction in the damages recovered on the claim. (5) Provision of legal services in contravention of this section constitutes for the purposes of this Division the provision of legal services without reasonable prospects of success.

Section 198L provides: (1) The provision of legal services without reasonable prospects of success does not constitute an offence but is capable of being professional misconduct or unsatisfactory professional conduct. (2) A solicitor or barrister cannot file court documentation on a claim or defence of a claim for damages unless the solicitor or barrister certifies that there are reasonable grounds for believing on the basis of provable facts and a reasonably arguable view of the law that the claim or the defence (as appropriate) has reasonable prospects of success. (3) Court documentation on a claim or defence of a claim for damages is not to be accepted for lodgement unless accompanied by the certification required by this section. Rules of court may make provision for or with respect to the form of that certification. (4) In this section:

court documentation means: (a) a statement of claim, summons, cross-claim, defence or further pleading, or (b) an amended statement of claim, summons, cross-claim, defence or further pleading, or (c) a document amending a statement of claim, summons, cross-claim, defence or further pleading, or (d) any other document of a kind prescribed by the regulations. cross-claim includes counter-claim and cross-action. 103. If a solicitor provides legal services to a client without those reasonable prospects, he or she may become liable to a costs order personally. Section 198M provides: (1) If it appears to a court in which proceedings are taken on a claim for damages that a solicitor or barrister has provided legal services to a party without reasonable prospects of success, the court may of its own motion or on the application of any party to the proceedings make either or both of the following orders in respect of the solicitor or barrister who provided the services:

(a) an order directing the solicitor or barrister to repay to the party to whom the services were provided the whole or any part of the costs that the party has been ordered to pay to any other party, (b) an order directing the solicitor or barrister to indemnify any party other than the party to whom the services were provided against the whole or any part of the costs payable by the party indemnified.

(2) The Supreme Court may on the application of any party to proceedings on a claim for damages make any order that the court in which proceedings on the claim are taken could make under this section. (3) An application for an order under this section cannot be made after a final determination has been made under this Part by a costs assessor of the costs payable as a result of an order made by the court in which the proceedings on the claim concerned were taken. (4) A solicitor or barrister is not entitled to demand, recover or accept from his or her client any part of the amount for which the solicitor or barrister is directed to indemnify a party pursuant to an order under this section. 104. Section 198N places an onus on the legal practitioner in question to show that there were reasonable prospects of success. It provides: (1) If the court ( the trial court ) hearing proceedings on a claim for damages finds that the facts established by the evidence before the court do not form a basis for a reasonable belief that the claim or the defence had reasonable prospects of success, there is a presumption for the purposes of this Division that legal services provided on the claim or the defence (as appropriate) were provided without reasonable prospects of success. (2) If the Supreme Court (when the Supreme Court is not the trial court) is satisfied, either as a result of a finding of the trial court or otherwise on the basis of the judgment of the trial court, that the facts established by the evidence before the trial court do not form a basis for a reasonable belief that the claim or the defence had reasonable prospects of success, there is a presumption for the purposes of this Division that legal services provided on the claim or the defence (as appropriate) were provided without reasonable prospects of success. (3) A presumption arising under this section is rebuttable and a solicitor or barrister who seeks to rebut it bears the onus of establishing that at the time legal services were provided there were provable facts (as provided by section 198J) that provided a basis for a reasonable belief that the claim or the defence on which they were provided had reasonable prospects of success. (4) A solicitor or barrister may, for the purpose of establishing that at the time legal services were provided there were provable facts (as provided by section 198J) that provided a basis for a reasonable belief that the claim or the defence on which they were provided had reasonable prospects of success, produce information or a document despite any duty of confidentiality in respect of a communication between the solicitor or barrister and a client, but only if:

(a) the client is the client to whom the legal services were provided or consents to its disclosure, or (b) the court is satisfied that it is necessary for the solicitor or barrister to do so in order to rebut a presumption arising under this section. 105. The question to be answered in relation to s.198M has both subjective and objective elements. In Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300 McColl JA expressed the test in the following way (at 331): [132] The test, whether a claim or a defence was "so lacking in merit or substance as to be not fairly arguable", must be applied, however, in the context of the constituent components of s 198J. In that context the question becomes whether the solicitor or barrister held a reasonable belief that the provable facts and a reasonably arguable view of the law meant that the prospects of recovering damages or defeating a claim or obtaining a reduction in the damages claimed were "fairly arguable". These are matters about which reasonable minds might differ. The question will be whether the solicitor or barrister's belief that they had material which objectively justified proceeding with the claim or the defence "unquestionably fell outside the range of views which could reasonably be entertained": Medcalf at [40] per Lord Steyn. See also Eurobodalla Shire Council v Wells [2006] NSWCA 5.

Thus the first question here is whether Ms Perla held a reasonable belief, at the time of commencing proceedings and afterwards, that the provable facts and reasonably arguable view of the law meant that the prospects of recovering damages in respect of the car purportedly owned by Ms Rees were fairly arguable.

To have held such a belief, it was necessary for Ms Perla to have held a reasonable belief that Ms Rees was in fact the owner of the vehicle, that damage had been occasioned to the vehicle and a consequent loss had been suffered by Ms Rees and that she had a fairly arguable case in respect of all the elements of the action.

Counsel for both parties addressed principally on the questions whether, at the time the proceedings were commenced in Ms Rees's name, the solicitor held a retainer and whether, at that time, she held a reasonable belief that her "client's" prospects of success were reasonable. I reserved a decision having heard the arguments. I also sought further written submissions on a point that occurred to me after the close of the hearing. Both parties accepted the invitation to put further material to me. In retrospect, the issue I raised seems irrelevant to the main questions posed in the proceedings but the submissions made amplified the arguments already made and I am grateful to counsel for their attentiveness and assistance.

The applicant submits that there is sufficient evidence to prove on the balance of probabilities that Perla & Jordan knew that Ms Rees was not the true plaintiff. For the reasons I have given above I do not accept that submission.

The alternative argument advanced by the applicant is that Ms Perla's conduct of the proceedings was, although the word was not used in terms, so unprofessional that it could be inferred that she had no, or insufficient, reasonable basis for her beliefs that Ms Rees was the true plaintiff, had suffered loss and was not liable for the accident.

The respondent argues that even if Ms Perla was the unwitting dupe of Mr El Jamal, she is not liable to an order under s.198M because there was a reasonable (if objectively incorrect) basis for her belief that there were reasonable prospects of success and that the applicant has not discharged its burden of proving otherwise. That reasonable belief, it is contended, was based on a signed authority from a person purporting to be Jennifer Rees, the contents of the MVA document and the general failure by Ms Rees to contradict the assumption upon which Perla & Jordan based its correspondence to her: that she had in fact retained them.

It is submitted that until they received the letter from Goldbergs on 15 October 2004, there was nothing to put Perla & Jordan on notice that there was any issue as to the identity of true owner of the vehicle in the matter.

In my view, if a solicitor receives a written authority to act from a named person together with a document containing instructions which, on the face of them, purport to demonstrate that the instructor is the owner of a motor vehicle, has a cause of action against another motorist and has suffered damage to the vehicle as a result of the negligence of another person, he or she would have a proper basis for the requisite reasonable belief which would then entitle that solicitor to file the relevant court documents, such as a statement of claim. At least at that point, it would seem that the solicitor could not be made the subject of an order under s.198M.

On the basis of the information and documents she had, it can be inferred that Perla & Jordan had a reasonable belief that there were reasonable prospects of success in the Rees matter and that it was therefore open to them to file a statement of liquidated claim on behalf of Jennifer Rees. Whether other aspects of her practice were carried out in an unprofessional way, as I think they were, does not bear directly on the question of the reasonableness of Ms Perla's belief that Ms Rees could provide the evidence to support the claim and had an arguable case.

The question of costs under s.198M, however, is not necessarily determined at that point. It is the provision of legal services without reasonable prospects, not merely the commencement of proceedings, that it is prohibited. If a solicitor, having commenced proceedings on the basis of a reasonable belief that there were reasonable prospects, later became of aware of information that removed the basis of that reasonable belief and yet continued to provide legal services, he or she would become liable to an order under s.198M from that time. That is, I think, a clear case.

More difficult, however, is a case like this one in which there were steps taken by the solicitors to obtain instructions to which there was no response from the purported client. If Perla & Jordan had followed the more common practice of solicitors when accepting a retainer of entering a written costs agreement, obtaining a deposit of funds into the client's trust account against costs and disbursements, arranging a conference and taking a proof of evidence, the failure of the client to do anything would very likely have put the solicitors on constructive notice that their instructions may have been withdrawn. It most likely would have prompted a letter from the solicitors asking the client for a confirmation of instructions failing which a notice of ceasing to act would be filed with the court.

Without a co-operative client who was willing to give evidence in court proceedings and who could prove various elements of the cause of action -- ownership of the motor vehicle, the circumstances of the accident in which damage was occasioned to the vehicle and the specific damage caused by the alleged negligence of the defaulting driver -- obvious, although not insuperable evidentiary difficulties might arise. The real question in such circumstances, however, is why solicitors would continue to act for such a client.

The only "instructions" Perla & Jordan had from Ms Rees were those in the MVA document which had been forwarded to them by the repairer with whom they were in a de facto partnership. They did not have a proof of evidence, much less a sworn affidavit. Nor was there any serious attempt made to obtain one as far as one can tell from the evidence tendered on behalf of the respondent. The evidence shows that in November 2003 as far as NRMA knew Ms Rees was denying any direct knowledge of the accident.

Had Perla & Jordan cast a critical eye over their case a short time after Ms Rees failed to reply to their letter of 22 May and someone, apparently her agent, had told them she had or would be absenting herself from the hearing, it would have been obvious that they had a client who had no interest in participating in the proceedings. Perla & Jordan continued to provide legal services purportedly to Jennifer Rees but in fact to Mr El Jamal because he was the real driver of the litigation - he wanted to be paid for the repairs he had carried out or quoted to carry out on his own vehicle. Moreover, Perla & Jordan had an interest in continuing the proceedings too because they had received nothing from Jennifer Rees to cover their costs and disbursements and would only recover if they settled successfully or obtained a verdict in the plaintiff's favour.

The propriety of continuing to pursue the litigation in such circumstances is questionable. At the very least, Perla & Jordan might have asked themselves whether Ms Rees continued to retain them and sought some sort of affirmation of the retainer. This, however, is a different question from those raised by ss.198J and 198M. Division 5C of the Legal Profession Act assumes the existence of a retainer when the practitioner provides legal services.

Section 198J requires that a legal practitioner not provide legal services in pursuit of a claim unless there are "provable facts" upon which he or she can base a reasonable belief that the client has reasonable prospects. The MVA document provided a proper basis for the requisite belief on the part of Ms Perla.

Breach of duty of care had been admitted by the defendant and did not have to proved by Ms Rees. Ownership of the vehicle could have been "proved", at least to a prima facie level, by subpoenaing business records of the Roads and Traffic Authority. As the vehicle had been (falsely) registered in Jennifer Rees's name, those records would have shown that she was the owner of the vehicle. Evidence of damage could, presumably, have been adduced from Mr El Jamal, police reports (if any) and any assessor's report that had been made. This type of evidence could have been produced at the arbitration or trial of the matter, hence Mr Obeidat's advice to Ms Rees that it was unlikely that she would have to give evidence.

In summary, therefore, Perla & Jordan had reasonable grounds, that is, a belief based on provable facts, to believe that their client had reasonable prospects up to the point in October 2004 when it was made clear to them by Goldbergs that they would be unable to prove ownership. At that point, at the very least, they ought to have ceased to act for Ms Rees. From that time, until they ceased to act Ms Perla exposed herself to an order under s.198M.

That, however, is not the end of the story in relation to the costs of the proceedings.

A solicitor may not act for a client without a retainer. Whereas Division 5C of the Legal Profession Act 1987 has a public policy function (and, perhaps, a quasi-disciplinary aspect as well) of discouraging unmeritorious litigation, costs under the Rules are more to do with compensating successful parties for the expenses they have incurred in conducting the proceedings.

If a solicitor commences proceedings in good faith not realising that he or she has no retainer it may, nonetheless, be appropriate that the solicitor ought pay the defendant's costs personally for the very reason that there may be no one else available to do so. It might be considered grossly unfair that a defendant, put to the costs of defending proceedings that ought never to have been commenced, should have to bear some or all of those costs.

Questions of the professionalism and care with which the solicitor carried out the work that led to the commencement of proceedings without a genuine retainer, and conducted the proceedings themselves, may also be relevant to the question whether he or she should pay costs personally. These are separate considerations from the beliefs of the solicitor and the reasonableness of those beliefs at the time proceedings are commenced.

Although its Notice of Motion seeks an order under s.198M, it appears to be implied by the applicant's arguments that it takes the view that Ms Perla ought pay costs personally for the whole of the proceedings, if not under s.198M then under the Rules. That was not specifically pleaded in its Notice of Motion but may arise naturally as a consequence of the dismissal of the statement of claim. The respondent has not had a chance to argue that issue or the costs issue itself and must be given the opportunity.

i. The proceedings between Jennifer Rees and Luis Bethancourt are dismissed. ii. The question of the costs of the proceedings is reserved. iii. The question of the costs of the motion are also reserved.

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