7In Whyte v Brosch (1998) 45 NSWLR 354, the Court of Appeal said that the legal profession should understand a sanction available to the Court was that in the case of costs thrown away because of an adjournment due to the late filing of submissions, the Court could order those costs be paid by the responsible legal practitioner.
8The circumstances in which it would be appropriate for it to make an order of costs against a solicitor were discussed in Wentworth v Rogers [1999] NSWCA 403. The Court referred to a number of English authorities where the general approach taken has provided some guidance for courts here.
9The first of those authorities is Myers v Elman [1940] AC 282 where Viscount Maugham said (at 289):
"In my opinion the jurisdiction as to costs is quite different. Misconduct or default or negligence in the course of the proceedings is in some cases sufficient to justify an order. The primary object of the Court is not to punish the solicitor, but to protect the client who has suffered and to indemnify the party who has been injured. Order LXV., s. 11, of the Rules of the Supreme Court provides the necessary machinery where the person injured is the client of the solicitor. It is a rule supplementary to the summary jurisdiction of the Court. It is not limited to misconduct or default, but expressly extends to costs incurred improperly or without reasonable cause, or which have proved fruitless by reason of undue delay in proceeding under a judgment or order. The jurisdiction to order the solicitor to pay costs to the opposite party is exercised on similar grounds. The principle will be found clearly stated in Halsbury's Laws of England, 2nd ed., vol. xxxi., p. 271, where a number of authorities are cited. It will be found that many of these authorities depend, in cases where the order as to costs has been made, on the negligence or mistake of the solicitor and in that sense only on his misconduct in the proceedings. Some of the cases are those where the solicitor has instituted an action without proper authority, and it may be that they can be supported on the ground that in such cases the solicitor has warranted that he has the authority of his client to act for him in the litigation; but it must be observed that that is not the ground stated by the Court and I think they rest on the jurisdiction of the Court over its officers."
10At 318-319, Lord Wright said:
"The cases of the exercise of this jurisdiction to be found in the reports are numerous and show how the Courts were guided by their opinion as to the character of the conduct complained of. The underlying principle is that the Court has a right and a duty to supervise the conduct of its solicitors, and visit with penalties any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause in which he is engaged professionally, as was said by Abinger C.B. in Stephens v. Hill. The matter complained of need not be criminal. It need not involve peculation or dishonesty. A mere mistake or error of judgment is not generally sufficient, but a gross neglect or inaccuracy in a matter which it is a solicitor's duty to ascertain with accuracy may suffice. Thus, a solicitor may be held bound in certain events to satisfy himself that he has a retainer to act, or as to the accuracy of an affidavit which his client swears. It is impossible to enumerate the various contingencies which may call into operation the exercise of this jurisdiction. It need not involve personal obliquity. The term professional misconduct has often been used to describe the ground on which the Court acts. It would perhaps be more accurate to describe it as conduct which involves a failure on the part of a solicitor to fulfil his duty to the Court and to realize his duty to aid in promoting in his own sphere the cause of justice."
11In the more recent decision of Ridehalgh v Horsefield [1994] Ch 205, Lord Bingham MR discussed each of the words in the phrase "improper, unreasonable or negligent" which appears in the English legislation. His Lordship said at 232:
"'Improper' means what it has been understood to mean in this context for at least half a century. The adjective covers, but is not confined to, conduct which would ordinarily be held to justify disbarment, striking off, suspension from practice or other serious professional penalty. It covers any significant breach of a substantial duty imposed by a relevant code of professional conduct. But it is not in our judgment limited to that. Conduct which would be regarded as improper according to the consensus of professional (including judicial) opinion can be fairly stigmatised as such whether or not it violates the letter of a professional code.
'Unreasonable' also means what it has been understood to mean in this context for at least half a century. The expression aptly describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case, and it makes no difference that the conduct is the product of excessive zeal and not improper motive. But conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting on a practitioner's judgment, but it is not unreasonable."
12Of "negligence" his Lordship said, at 232-233:
"The term 'negligent' was the most controversial of the three. It was argued that the Act of 1990, in this context as in others, used 'negligent' as a term of art involving the well known ingredients of duty, breach, causation and damage. Therefore, it was said, conduct cannot be regarded as negligent unless it involves an actionable breach of the legal representative's duty to his own client, to whom alone a duty is owed. We reject this approach. (1) As already noted, the predecessor of the present Ord. 62, r. 11 made reference to 'reasonable competence.' That expression does not invoke technical concepts of the law of negligence. It seems to us inconceivable that by changing the language Parliament intended to make it harder, rather than easier, for courts to make orders. (2) Since the applicant's right to a wasted costs order against a legal representative depends on showing that the latter is in breach of his duty to the court it makes no sense to superimpose a requirement under this head (but not in the case of impropriety or unreasonableness) that he is also in breach of his duty to his client.
We cannot regard this as, in practical terms, a very live issue, since it requires some ingenuity to postulate a situation in which a legal representative causes the other side to incur unnecessary costs without at the same time running up unnecessary costs for his own side and so breaching the ordinary duty owed by a legal representative to his client. But for whatever importance it may have, we are clear that 'negligent' should be understood in an untechnical way to denote failure to act with the competence reasonably to be expected of ordinary members of the profession.
In adopting an untechnical approach to the meaning of negligence in this context, we would however wish firmly to discountenance any suggestion that an applicant for a wasted costs order under this head need prove anything less than he would have to prove in an action for negligence: 'advice, acts or omissions in the course of their professional work which no member of the profession who was reasonably well-informed and competent would have given or done or omitted to do;' an error 'such as no reasonably well-informed and competent member of that profession could have made:' see Saif Ali v. Sydney Mitchell & Co. [1980] A.C. 198, 218, 220, per Lord Diplock."
13In Clark v Girdwood [1877] 7 Ch D 9, it was held that a "mere mistake or error of judgment" was not generally sufficient nor that the jurisdiction extended to an ordinary claim for negligence (at 23). As was said by Lord Wright in Myers v Elman at 319, while the basis of the inherent jurisdiction of the court is the duty of the court to supervise the conduct of its officers, it is usually inappropriate for it to exercise its punitive jurisdiction of its own motion and that the jurisdiction is not merely punitive but compensatory. However, where appropriate it may be invoked to save the expense of a claim of an action for negligence or breach of warranty of authority:
"This summary procedure may often be invoked to save the expense of an action. Thus it may in proper cases take the place of an action for negligence, or an action for breach of warranty of authority brought by the person named as defendant in the writ. The jurisdiction is not merely punitive but compensatory. The order is for payment of costs thrown away or lost because of the conduct complained of. It is frequently, as in this case, exercised in order to compensate the opposite party in the action."
14The statutory authority of the courts to make an order directing a legal practitioner to indemnify any other party against costs payable by that party is contained in s 99 of the Civil Procedure Act 2005. Section 99 provides as follows:
"99 Liability of legal practitioner for unnecessary costs
(1) This section applies if it appears to the court that costs have been incurred:
(a) by the serious neglect, serious incompetence or serious misconduct of a legal practitioner, or
(b) improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible.
(2) After giving the legal practitioner a reasonable opportunity to be heard, the court may do any one or more of the following:
(a) it may, by order, disallow the whole or any part of the costs in the proceedings:
(i) in the case of a barrister, as between the barrister and the instructing solicitor, or as between the barrister and the client, as the case requires, or
(ii) in the case of a solicitor, as between the solicitor and the client,
(b) it may, by order, direct the legal practitioner:
(i) in the case of a barrister, to pay to the instructing solicitor or client, or both, the whole or any part of any costs that the instructing solicitor or client, or both, have been ordered to pay to any other person, whether or not the solicitor or client has paid those costs, or
(ii) in the case of a solicitor, to pay to the client the whole or any part of any costs that the client has been ordered to pay to any other person, whether or not the client has paid those costs,
(c) it may, by order, direct the legal practitioner to indemnify any party (other than the client) against costs payable by that party.
(3) Before making such an order, the court may refer the matter to a costs assessor (within the meaning of Part 3.2 of the Legal Profession Act 2004) for inquiry and report.
(4) The court may direct that notice of any proceedings or order under this section with respect to a legal practitioner be given:
(a) in the case of a barrister, to the instructing solicitor or client, or both, as the court may direct, or
(b) in the case of a solicitor, to the client.
(5) The court may give ancillary directions to give full effect to an order under this section, including directions to a legal practitioner to provide a bill of costs in assessable form:
(a) to the court, or
(b) to a party to the proceedings, or
(c) in the case of a barrister, to the instructing solicitor or client, or both, or
(d) in the case of a solicitor, to the client.
(6) A party's legal practitioner is not entitled to demand, recover or accept:
(a) in the case of a barrister, from the instructing solicitor or client, or
(b) in the case of a solicitor, from the client,
any part of the amount for which the legal practitioner is directed by the court to indemnify any party pursuant to an order referred to in subsection (2) (c).
(7) In this section, client includes former client."
15Counsel for the plaintiffs' submitted that there was no suggestion that the plaintiffs' solicitors have engaged in any misconduct within s 99(1)(a) or to have incurred costs improperly or without reasonable cause within s 99(1)(b) of the Civil Procedure Act.
16Accordingly, it was submitted that in order to make any costs order against the plaintiffs' solicitors, the Court must be satisfied that they have caused costs to have been incurred due to their "serious neglect" or "serious incompetence" within s 99(1)(a) of the Civil Procedure Act.
17Counsel for the defendant submitted that there was a series of failures by the plaintiffs' solicitors which led to the hearing before this Court on 12 October 2012. It was submitted that the failure to file a change of address for service with the court and the failure of the solicitor with carriage of the matter to diarise the hearing on 2 July 2012 led to the non-appearance of the plaintiffs' solicitors before Registrar Musgrave on 23 July 2012. It was submitted that there was a further failure by the plaintiffs' solicitors to file a notice of motion to set aside the orders of 23 July 2012 within the 14 day time period provided by r 36.16(3A) of the UCPR, such notice of motion not being filed on behalf of the plaintiffs until 29 August 2012.
18In Kelly & Anor v Jowett [2009] NSWCA 278 at [60], the Court discussed the "wasted costs" jurisdiction as contained in s 99 of the Civil Procedure Act and that it must be exercised "with care and discretion and only in clear cases" as stated in Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300 at 320. McColl JA (Beazley JA agreeing) stated that:
"In exercising the jurisdiction, however, the Court takes into consideration the public interest reflected in the legislative provisions to which I have referred, that litigants should not be financially prejudiced by the unjustifiable conduct of litigation by their or their opponent's lawyers: Ridehalgh v Horsfield [1994] Ch 205."
19The facts in Kelly v Jowett were that the executors of an estate failed to comply with court orders and rules requiring affidavits be filed, and also failed to lead any evidence or undertake cross-examination at the hearing. The trial judge made orders that the executors pay the plaintiff's costs on an indemnity basis and that their solicitor pay costs on an indemnity basis for failing to comply with undertakings given regarding the filing of evidence. The executors appealed against the costs orders as they had not been informed by their solicitor regarding the progress of the matter and were unaware that they had failed to comply with court orders. They sought an order that the principals of the firm that employed the solicitor pay their costs on an indemnity basis.
20The Court of Appeal held that the Court had the power to make a wasted costs order against the principals of the firm regardless of whether they had personal knowledge or not of the way in which their employed solicitor was neglecting the conduct of the proceedings. Their failure to ensure the timely filing of affidavits amounted to "serious neglect":
"[77] The minimum discharge of Mr Hagipantelis and Mr Bryden's duty was to ensure that the affidavits were filed in time to enable Mr Jowett's legal representatives to complete their preparation for the hearing and for the hearing to proceed on 29 May 2008. Their failure to do so was a serious neglect of their duties. That neglect caused Mr Jowett to incur, at least, the costs of preparing for the hearing on 29 May 2008, of the hearing itself and of the stay application."
21In Kendirjian v Ayoub [2008] NSWCA 194, the Court determined that the appellant's former legal representatives had wasted costs due to serious neglect. The solicitor and counsel for the appellant did not dispute the Court's finding that they were guilty of serious neglect in preparing written submissions but they contended they were unintended and therefore should not be treated punitively. The conduct which the Court concluded had led to wasted costs consisted of the inadequate written submissions filed on behalf of the appellant, the inability to determine the appeal on the day listed for hearing and, as a consequence, the requirement for additional written submissions to be prepared.
22In a hearing on the papers, Kendirjian v Ayoub (No 2) [2008] NSWCA 255, the Court said that the position was further compounded by confusion on the appellant's side as to the purport of the Court's directions in relation to further written submissions. The Court said at [16]:
"In our view, the incurring of more costs was sufficiently connected with the original conduct of the legal practitioners so as also to have been incurred by reason of their serious neglect."
23In this case, the failure to diarise the hearing date of 2 July 2012 led to issue of the notice under UCPR 13.6. If that had been received there would have been an attendance and the matter would not have been dismissed. However, it was not received and it is necessary to see whether there is some serious neglect of the solicitors in relation to its non-receipt.
24If a notice of change of address had been filed pursuant to UCPR 4.6 then presumably the letter would have been sent to the new address. However, UCPR 4.6 is permissive and not mandatory, and provided some other reasonable step was taken to bring mail sent to their old address to the new then their conduct in failing to file a notice of change of address could not be described as "serious neglect".
25They did take reasonable steps by putting in place a redirection notice. It was the court's failure to include the firm's name in the letter which caused the problem. The notice of change of solicitor filed on 25 October 2010 included the firm name in the address for service.
26The failure to file the notice of motion within the 14-day period under UCPR 36.16(3A) was, given my decision of 31 October 2012, not causative of loss. See par [20] of my judgment. Accordingly, I will not order the solicitors to pay the costs.
27I will hear any further submissions on costs.
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Decision last updated: 12 December 2012