Tran v Minister for Immigration & Multicultural & Indigenous Affairs

REASONS FOR JUDGMENT 1 On 10 February 2006, I delivered judgment in this proceeding, refusing an application for an extension of time within which to appeal the decision of a Federal Magistrate: Tran v Minister for Immigration & Multicultural & Indigenous Affairs [2006] FCA 77 ("Tran No 1"). In that judgment, I indicated that there was an outstanding issue to de determined. That issue was whether the applicant's solicitor should be ordered to repay to the applicant some portion of the costs that the applicant was ordered to pay to the respondents. 2 Order 62 r 9(1)(c) of the Federal Court Rules provides as follows: "Without limiting the Court's discretion to award costs in a proceeding, if costs are incurred improperly or without reasonable cause, or are wasted by undue delay or by any other misconduct or default, and it appears to the Court that a legal practitioner is responsible (whether personally or through a servant or agent), the Court may, after giving the legal practitioner a reasonable opportunity to be heard, do any of the following: … (c) direct the legal practitioner to repay to the client, costs which the client has been ordered to pay to another party;". 3 Order 62 r 9 was introduced in its present form in 2003 by the Federal Court Amendment Rules (No 3) 2003 (Cth). The rule in its earlier form was unduly restrictive. It required a reference to, and report by, a taxing officer before the power to order a solicitor to repay to his or her client costs ordered to be paid by the client to another party could be invoked. The rule in its previous form appears to have been rarely used. It is possible that because of its restrictive nature, costs orders against solicitors have tended to be dealt with in this Court pursuant to s 43 of the Federal Court Act 1976 (Cth). That section provides, in substance, that the award of costs is in the discretion of the Court or Judge. Plainly s 43 confers upon the Court a wide discretion, though of course that discretion must be exercised judicially. 4 Section 43 does not expressly state that a power to award costs against solicitors is given to the Court. However, the authorities are clear that s 43 does encompass this power. See Levick v Commissioner of Taxation (2000) 102 FCR 155 ("Levick") in which the relevant principles are discussed by the Full Court. 5 In De Sousa v Minister for Immigration, Local Government and Ethnic Affairs (1993) 41 FCR 544, French J discussed, at 546, the restrictions of the previous O 62 r 9. His Honour also stated that the rule did not operate to constrain the broad powers provided for under s 43. 6 The principles under which an order for costs should be made against a legal practitioner for unreasonably instituting or maintaining a proceeding or defence, at least in relation to s 43, suggest that this power should be used sparingly. Indeed, in Levick, the Full Court suggested that in order to invoke the power, there must be something akin to an abuse of process, that is, using the proceeding for an ulterior purpose or without any, or any proper, consideration of the prospects of success. The Full Court referred to White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169 at 236 per Goldberg J to the same effect. See also Re Bendeich (No 2) (1994) 53 FCR 422 at 426-7 per Drummond J. 7 In Kumar v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 133 FCR 582, Mansfield J reviewed the authorities in the context of an application by the respondent Minister for an order that the unsuccessful applicant's solicitor be ordered to pay the costs of the application jointly with the applicant. His Honour accepted that the Court had jurisdiction to make an order for costs against a solicitor. However, he declined in the exercise of his discretion to do so. 8 It seems that the application before Mansfield J was brought under s 43, and his Honour regarded the test that had to be satisfied before such an order was made pursuant to that section as requiring a finding that the solicitor's conduct was tantamount to an abuse of process. He accepted that a hopeless case might support the inference that there was some ulterior purpose for the proceeding. However, he also noted the competing principle that a party is entitled to have a solicitor act for the party even in an unmeritorious case. He referred to Ridehalgh v Horsefield [1994] Ch 205 at 233, where the Court of Appeal said: "A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or a defence which is plainly doomed to fail." 9 His Honour went on to note that a legal practitioner is obliged to give proper advice to his or her client, but that advice need not be taken. It was rarely safe for a court to assume that a hopeless case was being litigated on the advice of the lawyers involved. 10 A somewhat different approach was taken by the Queensland Court of Appeal in Steindl Nominees Pty Ltd v Laghaifar [2003] 2 Qd R 683 ("Steindl"), where Davies JA (with whom Williams JA and Philippides J agreed) rejected the proposition that it was not improper for a legal representative to present a case which that legal representative knew, or ought to know, was hopeless. Mansfield J regarded himself as bound to follow the approach in Levick, in preference to that adopted in Steindl. He therefore declined to make the order sought. 11 In Bagshaw v Scott [2005] FCA 104, Bennett J adopted a similar approach to that of Mansfield J in Kumar. Her Honour said, at [44], that the power to order costs against solicitors had to be exercised with care and discretion, and only in clear cases. There had to be something which amounted to a serious dereliction of duty. Simply instituting or maintaining on instructions proceedings which had no real prospect of success was not such a dereliction of duty. 12 In Kumar, Mansfield J referred to O 62 r 9 in its present form. Having concluded that there was no warrant for ordering the solicitor in that case to pay costs, pursuant to s 43, he went on to say that this did not excuse the solicitor from the obligation to provide appropriate advice to the client before instituting proceedings. His Honour then said, at [15], that if the client did not take that advice, the solicitor "has the duty to the Court not to incur costs improperly or without reasonable cause". He referred to this power as the so called "wasted costs jurisdiction". 13 It appears that his Honour drew a distinction between instituting proceedings that were essentially hopeless, where something akin to an abuse of process had to be shown before costs could be ordered, and conducting proceedings in a manner that involved costs being improperly incurred, or at least incurred without reasonable cause. On any view, there will be some overlap between the principles to be applied when considering whether to award costs against a legal practitioner under s 43, or under O 62 r 9(1). 14 It is unnecessary for me to say anything further about s 43. It may be arguable that the principles stated in Levick require some further consideration in the light of the later reasoning of the Queensland Court of Appeal in Steindl. However, any such reconsideration will have to await the attention of a Full Court. 15 Order 62 r 9(1) seems to me not to be similarly constrained. The question whether costs have been unreasonably incurred because of the manner in which a legal practitioner has conducted a case should not require consideration of whether this was done for an ulterior purpose. If a client instructs a legal representative to take points that are manifestly without merit, the legal representative has a duty to the Court to refuse to act on those instructions. In that regard, there is a distinction between points that are barely arguable, but most likely to fail which can and sometimes must be taken, and points that are simply unarguable. If a point is plainly unarguable, it is improper to argue it. If a client insists upon it being argued, the legal representative should decline to do so and, if necessary, withdraw from the proceeding. 16 That brings me to the present case. The question whether O 62 r 9(1)(c) should be invoked has arisen because the applicant pursued what purported to be "a constitutional argument". It took only moments for that argument to be abandoned at the time of the hearing. The nature, and history, of the constitutional claim is set out in Tran No 1 at [16]-[20] and [25]. 17 After handing down judgment in Tran No 1, I made orders in the following terms: "1. The respondents file and serve any affidavits concerning the issue of costs thrown away by reason of the applicant's constitutional challenge, on or before 17 February 2006. 2. The applicant's solicitor file and serve any affidavits upon which he intends to rely in relation to whether an order should be made pursuant to O 62 r 9(1)(c) on or before 24 February 2006. 3. If the applicant's solicitor wishes to cross-examine any deponent of an affidavit in accordance with order 1 of these orders, he give notice of intention to cross-examine on or before 24 February 2006." 18 I indicated, in accordance with the requirements of O 62 r 9(1), that I would give the applicant's solicitor an opportunity to be heard on the matter. 19 On 17 February 2006, an affidavit was filed by the respondents' solicitor. The deponent, Ms Maria Ngo, stated that she believed costs had been thrown away as a result of the constitutional matters raised by the applicant. She stated that following the issue of a notice of a constitutional matter pursuant to s 78B of the Judiciary Act 1903 (Cth), the respondents changed solicitors from Clayton Utz, who originally were the solicitors on the record for the respondents, to the Australian Government Solicitor. 20 Exhibited to Ms Ngo's affidavit was an estimate of costs thrown away by reason of the constitutional point having been raised by the applicant. The estimate was prepared by a costs consultant. The costs thrown away, on a party/party basis, were assessed to be $1048. 21 The applicant's solicitor filed no affidavits in relation to whether an order should be made pursuant to O 62 r 9(1)(c). Nor did he give notice of intention to cross-examine Ms Ngo. He did, however, indicate that he wished to be heard on the matter. 22 At the hearing, the applicant's solicitor was invited to explain why he had pursued a constitutional point that he knew, or ought to have known, was utterly devoid of merit. He submitted that there was merit in the constitutional point, but that he had been unable to explain it properly because his client had no funds, and accordingly, the work that would have been necessary to allow the point to be argued properly had not been undertaken. He acknowledged that the s 78B notices that had been filed were in the nature of "holding documents" designed simply to preserve a constitutional argument that might be able to be better formulated at a later stage. He criticised the Migration Act 1958 (Cth) as a whole, and levelled a series of criticisms at the Migration Review Tribunal, and the system under which it operated, none of which had anything to do with the constitutional validity of the provisions in question. He did, however, advert to the "separation of powers" as the key to some as yet undefined constitutional point, and several times spoke of "grey areas". Finally, he queried whether the amount of $1048, calculated by the costs consultant as being the sum thrown away (on a party/party basis) by reason of the introduction of the constitutional challenge into the proceeding, was excessive. 23 I am in no doubt that the applicant's solicitor had no idea what he was talking about when he foreshadowed with me, at a directions hearing on 26 October 2005, that the applicant would be challenging the constitutional validity of certain provisions of the Migration Act. He was told, in clear terms, that he should give careful consideration to whether such a challenge could properly be maintained. He was also told that, in the event that some form of constitutional argument was pursued, and it turned out to be entirely spurious, I would consider whether or not to order costs against him personally. I also informed him that if the constitutional challenge was not to be pursued, he should notify my associate, and the respondents, forthwith. 24 In due course, s 78 B notices issued. They were all but incoherent. At the hearing, the applicant's solicitor pursued what purported to be a constitutional argument, of sorts, for some minutes, and then acknowledged, in effect, that he was unable to argue the point. He was no better able to identify any constitutional issue in the costs hearing before me. It is interesting to note that in Levick, a bankruptcy case, a similar inability to articulate in any sensible manner a purported constitutional challenge to the validity of a series of Commonwealth Acts (including the Taxation Administration Act 1953 (Cth), the Income Tax Assessment Act 1936 (Cth), and the Corporations Law) was properly visited with an order for costs against the debtor's solicitor. 25 In the circumstances of this case, I consider that it would be unfair to require the applicant to pay the additional costs incurred by reason of the introduction of an entirely hopeless legal point, and one that would have been beyond the applicant's comprehension. It was her legal representative who pursued this point, even when he knew that he was in no position to say anything sensible in support of it. 26 I propose therefore to make an order pursuant to O 62 r 9(1)(c) to the effect that the applicant's solicitor repay the client the costs thrown away by reason of the pursuit of the constitutional challenge. I am told that the applicant is impecunious. It is likely that the respondents will pursue her for costs. The best course, in these circumstances, is to order that the method by which the applicant's solicitor repay her for these costs is to make a payment directly to the respondents, which sum will of course, be deducted from any amount owing by the applicant by way of costs. I will fix the amount to be paid by the applicant's solicitor in the sum of $1000, which seems to me to be a very modest figure in the circumstances. 27 The applicant's solicitor asked for time to pay. I will order the applicant's solicitor to pay to the respondents the sum of $1000, that amount to be paid on or before 9 May 2006.