Zhang v Ng

Supreme Court of NSW|2021-10-27|Before: Ward CJ

Judgment

HER HONOUR: This is yet another application for costs in circumstances where there has been no hearing on the merits. The application was dealt with on the papers.
By way of introduction, I note that the plaintiff (Ms Zhang) commenced proceedings in this Court by statement of claim on 25 May 2021 against the defendant (Ms Ng), her former personal assistant, seeking, inter alia, recovery of an apartment in Haymarket (which is apparently registered under the defendant's name) (the Haymarket Apartment) together with an amount of $676,200 (being moneys said to have been given by the plaintiff to the defendant for "safe-keeping"). Six weeks after the commencement of proceedings, lawyers who it is said had previously acted for the plaintiff or given her advice in a family law context (the law firm, WB Legal Pty Ltd, to which I will refer as WB Legal) advised the plaintiff's lawyers that it acted for the defendant in the proceedings.

Background

The following sets out more detail of the background to the dispute, as gleaned from the parties' submissions. I here make no findings of any disputed issues of fact.
It is not disputed that for some period (the plaintiff says from about October 2014), until her employment was terminated in about February 2020, the defendant was employed to work for the plaintiff. The plaintiff says that the defendant was employed as the plaintiff's personal assistant and that defendant carried out a number of duties in relation to the plaintiff's personal affairs and also became the plaintiff's confidante. The defendant says that she was employed in various roles by Flourishing Management Group Pty Ltd (FMG) (a company of which the plaintiff was the sole director) until February 2020 and, as of 1 November 2017, was the Senior Financial Investment Manager of FMG.
The plaintiff says that, in the course of that relationship (and in a context where the defendant had (wrongly) informed and convinced the plaintiff that her husband of many years was having an affair and was in the process of transferring assets into an unknown trust) the defendant: agreed to purchase and hold the Haymarket Apartment in the defendant's name on behalf of the plaintiff; arranged for the plaintiff to meet with a solicitor, Mr William Wang of WB Legal to obtain some family law advice about a potential divorce and property settlement; and took possession of the sum of $676,200 and used it to pay various costs and fees for the plaintiff, including costs in respect to the Haymarket Apartment and the costs of WB Legal.
In particular, the plaintiff says that, in late 2017 and early 2018, the defendant arranged for her to meet with Mr Wang of WB Legal; and that, at their first meeting, Mr Wang advised the plaintiff to set up an account on a mobile communications platform called "Threema" so they could communicate secretly while she was overseas. It is said that the defendant assisted the plaintiff to set up that account which the plaintiff then used to communicate with Mr Wang for a period of a couple of months in early 2018.
The plaintiff contends that, during that period, she disclosed to Mr Wang confidential and many personal details regarding her husband, her purchase of the Haymarket Apartment, her husband's companies and their collective assets worldwide.
The defendant says that, in around June 2018, the defendant introduced the plaintiff to Mr Wang of WB Legal. The defendant's position is that she did not know what advice (if any) Mr Wang gave to the plaintiff.
The plaintiff alleges that, on 11 January 2018, she and the defendant entered into a written deed whereby the plaintiff appointed the defendant as her agent and which required the defendant on the plaintiff's direction to purchase and hold the Haymarket Apartment on her behalf as an agent and trustee. The plaintiff says that the rationale at the time for the purchase of the Haymarket Apartment in the defendant's name was in part because the plaintiff did not want her husband of many years to be apprised of her purchase in a context of a potential family law dispute. The plaintiff says that the structure of this purchase was discussed with Mr Wang.
The plaintiff says that in late March 2018, when Mr Wang suggested that he put the plaintiff's husband under surveillance by a private investigator, the plaintiff indicated to Mr Wang that she did not wish to engage his services any longer and his retainer ceased. The plaintiff has subsequently reconciled her issues with her husband.
The plaintiff says that, in early April 2018, she gave to the defendant the sum of $50,000 (which comprises part of the moneys in dispute in these proceedings) and the defendant indicated that she would arrange for Mr Wang's fees (estimated to be about $10,000) to be paid out of that sum. The plaintiff complains that no invoice for Mr Wang's fees was ever provided to her by either Mr Wang or the defendant.
On 25 May 2021, as noted above, the plaintiff commenced these proceedings. The defendant was served with the statement of claim on the same day it was filed.
On 26 May 2021, the plaintiff's solicitor wrote to WB Legal requesting a copy of the plaintiff's prior legal file. It does not appear that the file was produced to the plaintiff on that request (see below).
The defendant accepts that a request was made for a copy of the legal file, costs agreement and any invoice issued by WB Legal in relation to the "provision of legal advice regarding the Family Law matters in about early 2018" for which the plaintiff was said to have engaged WB Legal. The defendant says, in her submissions, that no explanation was given in the letter as to why the release of the files was sought. It is not clear whether there was any response at all to that 26 May 2021 letter.
On 6 July 2021, the plaintiff's solicitors received an email from Mr Yanan Wen of WB Legal advising that WB Legal was acting for the defendant in the proceedings and requesting further and better particulars of the claim.
On 7 July 2021, the plaintiff's solicitors wrote to WB Legal and raised concerns about that firm acting for the defendant, having previously acted for the plaintiff and in light of certain factual allegations raised in the statement of claim. The defendant notes that the letter stated that the plaintiff's "family issues, which were disclosed to WB Legal in early 2018" were used by the plaintiff in an employment dispute before the Federal Circuit Court of Australia (for which WB Legal acted for the plaintiff). The letter also adverted to a potential professional complaint to the NSW Law Society (concerning the release of the file). The plaintiff here points out that this letter put WB Legal (and the defendant) on notice that, if a formal notice of appearance was filed by WB Legal for the defendant in these proceedings, the plaintiff would consider filing a motion to remove the firm from acting in the proceedings. The defendant says that on the same day (7 July 2021), Mr Wang advised the defendant that he did not believe he had received any information about the property in dispute in this proceeding but, to be safe, he would transfer the file to Mr Wen. In the defendant's affidavit affirmed 14 October 2021 here relied upon, it is said that Mr Wang called the NSW Law Society, which advised that an information barrier between he and Mr Wen would be sufficient (to deal with any potential conflict of interest).
On 8 July 2021, WB Legal responded by way of letter email stating that WB Legal did not ever act for the plaintiff but, rather, that the firm had acted for her assistant, Ms Ng (though seemingly acknowledging that the family law advice was provided for the benefit of the plaintiff). On 8 July 2021, the defendant points out that in the letter, Mr Wen advised that the legal file (that the plaintiff had requested) was created in the defendant's name; and that Mr Wang had contacted Paul Monaghan of the "Law Society Ethics department" who advised that he did not "believe [WB Legal] need[ed] to transfer the file" to the plaintiff.
The defendant says that the letter advised that Mr Wang would not necessarily be involved in this proceeding and that "an effective information barrier" could be established between Mr Wen and Mr Wang.
The plaintiff appears to have regarded this as an undertaking by WB Legal to ensure that Mr Wang (the solicitor who the plaintiff says had been involved in the family law matter) would not be involved in the present proceedings. On the same day, the plaintiff's solicitor is said to have had a discussion with Mr Wen (as noted, a solicitor of WB Legal), in which she says she received Mr Wen's assurance that Mr Wang would not be in any way involved in the proceedings.
On 9 July 2021, notwithstanding the above, a notice of appearance was filed, identifying Mr Wang as the solicitor on the record for the defendant in these proceedings. The defendant's explanation of this is that the notice of appearance that was filed on the defendant's behalf listed Mr Wen on the first and second pages of that form as the "Legal representative" and included his (not Mr Wang's) telephone and contact email details, but that Mr Wang's name appeared as the "Legal representative" on the electronic filing cover sheet that was automatically generated upon the electronic filing of a document.
On 9 July 2021, the plaintiff's solicitor sent an email to Mr Wen, querying Mr Wang's appointment as the solicitor on the record for the defendant in light of the prior assurances and representations said to have been made to her. The plaintiff's solicitor says that she did not receive any response from Mr Wen or WB Legal to these queries. (The defendant's solicitor says that the email to Mr Wen said (amongst other things): "You may wish to fix this up. While I was told Mr Wang would not be involved in the supreme court proceedings, he has been added as a legal representative representing Lui Jenny Daisy Ng in these proceedings".)
On 20 July 2021, the plaintiff's solicitor sent a further letter to WB Legal, again requesting the plaintiff's legal file (the defendant points out that the letter indicated that otherwise a formal complaint would be made to the Office of the Legal Services Commissioner) and stating that it was inappropriate for the firm to remain on the record for the defendant.
The defendant notes that the letter stated that the plaintiff did not believe "the proposed information barrier has been set up" (but that even if it were, it would not adequately address the conflicts). The letter put the defendant on notice that, if the firm did not withdraw, the plaintiff's solicitor had instructions to file a motion to seek an order for the removal of WB Legal.
On 20 July 2021, the plaintiff's solicitor also wrote (the defendant notes, to both Mr Wen and Mr Wang) providing further and better particulars of the claim.
On 22 July 2021, Mr Wang responded to the plaintiff's solicitor stating that "in both our view and the advice received from Law Society Ethics … we are under no obligation to release the files under which we took instructions and provided advice to Ms Daisy Ng"; and noting that "[y]ou have yourself suggested that you are able to file a notice of motion on conflict of interest but have sought instructions for an application to OLSC instead".
The plaintiff says that it was there alleged, inter alia, that the plaintiff's solicitor was in breach of the Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015 (NSW) by raising issues with the firm acting for the defendant and that the letter requested that the plaintiff agree to a stay of the entirety of the proceedings. WB Legal refused to withdraw from the proceedings. Later that day (at 3.12pm), the plaintiff's solicitor received notification from the Court that Mr Wen had been appointed the solicitor on the record for the defendant in the place of Mr Wang.
The defendant points out that the "Notice of Change of Solicitor" form, as with the notice of appearance, listed Mr Wen's name as the "Legal representative" and included his contact details; but on this form Mr Wen's name was listed in the "Notice of Change of Solicitor" form. Mr Wen's name ("YA NAN WB Legal WEN") was listed as "Legal representative" on the electronic filing cover sheet that was automatically generated upon the electronic filing of a document.
On 7 September 2021, the plaintiff filed a notice of motion seeking orders that WB Legal be restrained from acting as the solicitors for the defendant or as an alternative, an order that Mr Wang not be involved in any way in the conduct of the defendant's proceedings. On 8 September 2021, the affidavit affirmed on that day by Ms Rachelle Gao Zhang in support of the plaintiff's motion was served via email on Mr Wen of WB Legal.
The defendant has deposed that, on 8 September 2021, the defendant had a conversation with Mr Wen during which Mr Wen confirmed that there was a "Chinese wall" in place between he and Mr Wang and that, even if Mr Wang did get confidential information, it would not affect Mr Wen. The defendant has deposed that in that same conversation, the defendant said she did not wish to defend the motion because she did not want to "spend time and money fighting this" instead, she preferred engaging another lawyer.
On 9 September 2021, Mr Wang of WB Legal informed the plaintiff's solicitor via email that WB Legal had decided to withdraw from the matter.
On 27 September 2021, at 9am, the day before the first return of the plaintiff's motion (and, the plaintiff says, without prior notice or relevant explanation), WB Legal filed and served a Notice of Intention of Ceasing to Act under r 7.29(2) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). As the plaintiff points out, under the UCPR a final Notice of Ceasing to Act cannot be filed until seven days after the service of the Notice of Intention of Ceasing to Act on the client.
On 28 September 2021, at the first return of the plaintiff's motion, orders were made in respect to the substantive conduct of the matter, as well as orders and notations with respect to the plaintiff's motion. Relevantly, it was noted that the defendant's solicitor had served a Notice of Intention to file a Notice of Ceasing to Act under r 7.29(2) of the UCPR, such that it appeared that the plaintiff's notice of motion seeking orders to restrain WB Legal from acting might be otiose; and the plaintiff's notice of motion filed on 7 September 2021 was stood over for directions on 5 October 2021. Ms Ng was not represented on 28 September 2021.
On or about 4 October 2021, at 3.20pm, WB Legal filed a Notice of Ceasing to Act under r 7.29 of the UCPR.
On 5 October 2021, the matter was listed for further directions and Ms Ng again appeared without legal representation. On that occasion, I dismissed the notice of motion filed by the plaintiff on 7 September 2021 and reserved the question of costs of that motion to be dealt with on the papers following service of submissions in accordance with the orders made on 28 September 2021. Those submissions have now been filed.

Plaintiff's submissions

The plaintiff says that she has incurred not insignificant legal costs on the notice of motion (including the preparation and filing of her notice of motion and a supporting affidavit, service costs, and attendance by Counsel at two directions hearings). The plaintiff seeks those costs on an indemnity basis; or alternatively, on an ordinary basis.
The plaintiff accepts that, because her notice of motion has become otiose and there has been no hearing on the merits, there is no "event" for costs to follow and that the guiding principles with respect to costs are those set out in Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622 (Lai Qin) (see below). However, the plaintiff submits that, in withdrawing from the record after the motion was filed, the defendant has effectively (if not actually) surrendered on the motion; and, as such, a costs order should be made despite there not having been a concluded hearing.
In summary, the plaintiff's position is that: WB Legal should have never been on the record; the defendant was given fair notice of the plaintiff's intention to file a motion to seek the removal of WB Legal as solicitors on at least two occasions (by the letters of 7 and 20 July 2021); WB Legal was given nearly 6 weeks to withdraw from acting and did not do so before a formal motion was filed; and WB Legal did not file a Notice of Intention of Ceasing to Act until the day before the first return of the motion (some 20 days after the filing of the motion). In those circumstances, it is said that the defendant has essentially surrendered to the relief sought in the notice of motion.
In that context, the plaintiff says that her solicitor took steps on 26 May 2021 to try and obtain a copy of the plaintiff's legal file from WB Legal so that she could satisfy herself as to the scope of the prior legal advice and that she was refused access to the same. The plaintiff says that there was a reasoned and cogent basis for her concern as to WB Legal acting in the proceeding (which she says has not been challenged); and that she has at all times acted in good faith and for a proper purpose and disclosed her concerns and reasons for WB Legal to cease to act immediately after the firm first appeared in the proceedings given the issues raised on the pleadings. It is noted that Mr Wang is a director of WB Legal and the plaintiff's position is that it was not appropriate, as such, that his firm remain on the record in the proceedings. The plaintiff submits that she has acted reasonably, and fully complied with her obligations, as a litigant at all times (not having acted oppressively in its conduct of the proceedings nor having taken any procedural steps which have caused the defendant to incur unnecessary expenses); and it is said that no proper notice was provided by the defendant of her solicitor's withdrawal.
On that basis the plaintiff contends that she is entitled to her costs on an indemnity basis, or alternatively, on an ordinary basis and the plaintiff submits that it would be unfair and manifestly unjust were she (as a "wholly successful" plaintiff) not to be permitted her costs of the motion.

Defendant's submissions

The defendant's position is that none of the recognised circumstances in which costs may be awarded in the absence of a contested hearing here applies and contends (as noted above) for no order as to costs in circumstances where there was no contest of the motion (that is, no "event").
The defendant says that it is far from clear whether the plaintiff would have been successful in her notice of motion (arguing that, by virtue of the alternative prayer 2 in the notice of motion, there is a concession that WB Legal might continue to act for the defendant provided there was an effective information barrier). The defendant argues that in order for the plaintiff to be successful in the notice of motion, she needed to persuade the court both that Mr Wang received confidential information relevant to these proceedings from the plaintiff and that an effective information barrier between Mr Wang and Mr Wen was not possible and effective (for example, in mitigating against any conflict arising from Mr Wang being potentially called as a material witness).
As to the first of those matters, it is said that, even if the plaintiff's evidence is taken at face value, there is no evidence in her affidavit that she disclosed any confidential information to Mr Wang. Reference is made to the conversations with Mr Wang to which the plaintiff has deposed at [12], [14] and [17] of her affidavit in the proceedings. Of those, the defendant says that: there is nothing in [12] as to the provision of material information to Mr Wang; the conversation at [14] was said to be in the presence of the defendant, and hence it is said that any information provided by the plaintiff to Mr Wang at that meeting could not be confidential to these proceedings between the plaintiff and the defendant; and that the conversations at [17] are not set out in direct speech and amount to conclusory assertions of disclosure of "highly confidential information" to Mr Wang (which the defendant says cannot simply be accepted on the plaintiff's bare assertions).
As to the second of those matters, the defendant argues that there is no evidence to suggest that an "information barrier" between Mr Wang and Mr Wen would not be possible or effective. The defendant says that the reference to Mr Wang on the electronically generated cover sheet to the notice of appearance was clearly a clerical error (and it is suggested that it was accepted as such by the plaintiff - by reference to the email of 9 July 2021 referred to above, suggesting that the defendant's solicitor "may wish to fix this up").
For the following reasons, the defendant contends that the present case is far from the rare cases where it can be concluded that the plaintiff would "almost certainly" have succeeded if the motion were to have been heard.
First, that there was a dispute as to whether there was in fact any potential or actual conflict of interest (the defendants referring to the plaintiff's allegation on 7 July 2021 of a potential conflict of interest issue based, in part, on the suggestion or supposition that family issues said to have been disclosed to WB Legal in early 2018 had been used by the defendant in employment dispute proceedings in the Federal Circuit Court); and to the proposition that any such conflict could have been managed by Mr Wang not being involved in the proceedings and by the establishment of an information barrier (with the defendant referring in this context both to the response provided by the Law Society to Mr Wang and to the apparent acquiescence by the plaintiff to this proposal until 20 July 2021).
Second, the defendant emphasises that the reference to Mr Wang on the coversheet to the notice of appearance is not reflected in the operative provisions of the notice of appearance and appears to have been a clerical error.
Third, that there was no proper basis for the plaintiff to allege, on 20 July 2021, that she believed no "proposed information barrier has been set up" and even if it were, it would "not adequately address the conflicts as enunciated in our letter dated 7 July 2021". The defendant says that (though I interpose to note that it is impossible for me on the present application to make any informed assessment of this) from 8 July 2021 (the day after the plaintiff alleged a potential conflict of interest), Mr Wang was not actually involved in the proceeding other than that he wrote a letter to the plaintiff's solicitor on 22 July 2021 (which the defendant emphasises was "purely" in response to a letter that had been expressly addressed to both Mr Wen and Mr Wang). The defendant maintains that the fact that Mr Wang is a director of WB Legal does not render it inappropriate for WB Legal to remain on the record in the proceeding and says nor does it detract from there being an effective information barrier. The defendant further says that WB Legal is "not an insignificant law firm in terms of size", noting that (excluding junior lawyers and non-legal staff) WB Legal has two "Senior Partners" (being Mr Wang and Mr Wen), five senior associates and one special counsel.
The defendant notes that the plaintiff does not seek costs of the motion on the basis that the defendant acted unreasonably (referring to the plaintiff's submission at [41]-[43]) but contends that, in any event, she did not act unreasonably. In that regard, it is said, first, that the defendant acted promptly, recommending (on 8 July 2021) an information barrier and that Mr Wang not be involved with the proceeding; and noting that Mr Wang had contacted the NSW Law Society for assistance (and it is said that he was advised that an information barrier was sufficient and that there was no need to transfer the file to the plaintiff); and, second, that the defendant explained cogently and in good faith why WB Legal did not consider that it was required to release the file or that there was a conflict of interest.
Conversely, the defendant complains that the plaintiff (contrary to her submissions at 42) did not herself act reasonably as a litigant. It is said that the plaintiff took a "relatively aggressive" stance in relation to the issues early on in the correspondence, pointing to the fact that the first request for the file was not accompanied by any reasons; and that in the letters of 7 July 2021 and 20 July 2021, there was reference to the making of a formal professional complaint to the NSW Law Society and to the Office of the Legal Services Commissioner, respectively. Complaint is also made as to the fact that, despite first alleging a potential conflict of interest (as a matter of urgency) on 7 July 2021, the plaintiff did not file her notice of motion until 7 September 2021 (some 2 months after the letter of 7 July 2021 and some seven weeks after the defendant's last correspondence on the issue on 22 July 2021). In this context it is said that there was a cogent basis for WB Legal not considering there to be a conflict and no proper basis as to why an information barrier would not be effective. In those circumstances, it is submitted that a notice of motion was not necessary.
Turning then to the basis on which the plaintiff presses for costs of the motion, the defendant contends that it did not "effectively surrender" on the motion. The defendant says that she opted not to contest the motion purely because she did not wish to expend time and money in defending the motion and sought a practical outcome of looking for another lawyer to avoid unnecessary litigation.
The defendant says that, in this specific factual context, it would be contrary to the principle that parties ought to act reasonably to avoid unnecessary litigation and ought to seek to resolve disputes consistent with the overriding purpose in s 56 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act), were a party to feel compelled to contest such a motion for fear that not to do so might be said to constitute a "complete surrender" sounding in costs. It is said that such a position would also be inconsistent with the general principle that, where there is no hearing on the merits, each party should bear its own costs.

Determination

There is no dispute as to the applicable principles in relation to the exercise of the discretion as to costs (to which both parties referred in their submissions). It is well known that s 98 of the Civil Procedure Act confers a broad power to award costs, noting the breadth of the power there conferred (see Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack); Hamod v New South Wales [2011] NSWCA 375 (Hamod) at [813] per Beazley JA, as Her Excellency then was (with whom Giles and Whealy JJA agreed)); and that the discretion must be exercised on a principled and judicial basis (see Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 (Sangare) at [24] per Kiefel CJ, Bell, Gageler, Keane and Nettle JJ; Williams v Lewer (1974) 2 NSWLR 91 at 95 per Rath J; Sharpe v Wakefield [1891] AC 173 at 179 per Lord Halsbury LC).
It is also well known that the general rule is that costs follow the event, unless it appears that some other order should be made (r 42.1 of the UCPR). Thus, there is a "reasonable expectation" that a successful party will be awarded costs against the unsuccessful party (see Oshlack at [67], [134]; Sangare at [25]). The costs jurisdiction (absent cases where there is disentitling conduct) is compensatory not punitive in nature (see Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59; Allplastics Engineering Pty Ltd v Dornoch Ltd [2006] NSWCA 33 at [34] per Tobias JA (with whom Santow JA agreed); Douglass v Lawton Pty Ltd (No 2) [2007] NSWCA 90 at [22] per Beazley JA, as Her Excellency then was (with whom Hodgson and Basten JJA agreed)). Further, it is for the losing party seeking a departure from the usual rule to establish the reason for such a departure (see Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 at [10] per Brereton J). The central and overriding principle is, of course, to do justice between the parties in each particular case.
The difficulty that commonly arises, as has arisen in the present case, is where there is no hearing on the merits. This is because, as explained by McHugh J (at [6]-[8]) in Lai Qin, where there has been no hearing on the merits, a court is necessarily deprived of the factor that usually determines whether or how to make a costs order. In those circumstances, the appropriate order will ordinarily be that each party bears its own costs. Relevantly, this is, as McHugh J made clear in Lai Qin, because a Court cannot try a hypothetical action between the parties in order to determine the question of costs. (See also in this regard, the observations of the Court of Appeal in Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 (Nichols v NFS Agribusiness), in particular, at [8]-[9] per Basten JA and at [30] per Payne JA).
That said, there are circumstances (albeit thought likely by McHugh J to be rare) in which it is recognised that a costs order may be appropriate even though (as is the case here with the motion for removal of WB Legal) there has been no hearing on the merits. Those include where there has been unreasonable conduct on the part of a party in commencing or continuing with the litigation; where a party would almost certainly have succeeded had the matter been fully tried; and where a party effectively surrenders or capitulates to the other.
In the present case, in essence the plaintiff relies on the last of those categories of case. It is relevant here to note that in One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 (One.Tel) at [6], Burchett J (after considering Lai Qin and Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201 per Hill J) drew a distinction between where one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement "so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs". His Honour considered that, in the former type of case, there would commonly be lacking any basis for an exercise of the costs discretion otherwise than by an award of costs to the successful party; whereas the latter type of case was more problematic since in that type of case his Honour considered that there may be "difficulty in discerning a clear reason why one party, rather than the other, should bear the costs". (See also the consideration of these principles in Hunter Development Corporation v Save Our Rail NSW Incorporated (No 2) (2016) 93 NSWLR 704; [2016] NSWCA 375.)
I have considered the above principles in a number of cases and remain firmly of the view that satellite litigation about costs is to be avoided. In the present case, this is particularly so in circumstances where there is a live dispute as to the existence of any potential or actual conflict - namely, what confidential information it is said was disclosed to Mr Wang. Pausing here, the reliance that the defendant seeks to place on the response obtained by Mr Wang to his enquiry of the Law Society (both as to the efficacy of an information barrier and as to any obligation to transfer the file) (and I say this with no disrespect at all to the Law Society) must surely depend on the accuracy or reliability and completeness of the information given by Mr Wang to the officer with whom he spoke. Indeed in any professional context, the extent to which reliance can be placed on advice given must be affected by the nature of the instructions or assumptions on which it is based. One need only refer to Dyer v Chrysanthou (No 2) (Injunction) [2021] FCA 641 to test that proposition.
It would be inappropriate here to explore the content of the information provided to the Law Society and the advice obtained, in order to determine the present costs issue; nor would it be appropriate to try an hypothetical case as to the existence of the alleged conflict in order to determine this dispute.
However, it should also be noted that the public interest in maintenance of the integrity of the administration of justice is also here relevant. Whether an information barrier might effectively have been put in place would not to my mind necessarily have been determinative of the application for the removal of Mr Wen from the record (or to restrain WB Legal from continuing to act for the defendant in the proceedings). That is because (and without entering into debate as to the significance or insignificance of the legal practice in terms of its size), there would almost inevitably remain room for concern as to the dissemination of information, consciously or otherwise, within the firm where the knowledge reposed in one of the only two senior partners of the firm.
In Michael Smith Real Estate Pty Ltd t/as Raine & Horne Marrickville v Chmait [2021] NSWSC 1160, I recently had cause to consider the applicable principles on an application to restrain legal practitioners from continuing to act for a party to the proceedings; and I noted the summary of those principles by Gleeson JA in Li v Jin Lian Group Pty Ltd [2018] NSWSC 479 at [6]-[9] and the earlier articulation of the relevant test by Brereton J, as his Honour then was, in Kallinicos v Hunt (2005) 64 NSWLR 561; [2005] NSWSC 1181 at [76] (Kallinicos v Hunt). I do not here need to repeat those principles. I simply emphasise that the relevant conceptual lens on such an application is the administration of justice. It is for that reason that I do not accept the proposition by the defendant in the present case (to the extent that this be her contention) that the motion would have been determined simply by reference to the ability to establish an effective information barrier (or by Mr Wang ceasing personally to act in the proceedings). (See the test posed in El-Cheikh v Miraki [2017] NSWSC 1765 at [20] by McDougall J.)
In Kallinicos v Hunt, it will be recalled, the application was by a former client to restrain his former solicitor from acting on behalf of the defendants in proceedings, not on the basis that the solicitor was in possession of confidential information of his that was at risk of disclosure but, rather, on the basis that there was a likelihood of the solicitor being a material witness and having a perceived interest in the outcome of the proceedings (see at [1]). That issue may well have arisen in the present case insofar as the plaintiff appears to wish to put in issue evidence of what advice was given in relation to the acquisition and registration in the defendant's name of the Haymarket Apartment.
In the inherent jurisdiction of the Court (recognised in Kallincos v Hunt at [57] and in the authorities there cited) over its officers and to control its process in aid of the administration of justice, the test to be applied is "whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice" (see Kallinicos v Hunt at [76] and the authorities there cited).
That said, what the above suggests to me is that it would not be appropriate here to explore the likelihood or otherwise that the motion might have succeeded at the end of a contested hearing; and I do not consider that it would be appropriate to depart from the usual costs order on the basis that this was an application that would almost certainly have succeeded (although it seems to me on the bare facts outlined above, the prospects of success for such an application would have seemed reasonable).
As to the complaint by the defendant that the plaintiff acted unreasonably in the correspondence leading up to the motion (or delayed in its commencement), I do not accept that the criticism of the plaintiff's conduct is well-founded. If WB Legal was retained by or on behalf of the plaintiff or the company of which she was the sole director, then no proper basis has been put forward to resist the request for the return of the plaintiff's legal file. If the file related to a retainer by the defendant in her personal capacity then that would be a different issue. However, it is not apparent that any such reason was given for the retention of the file at the outset. In any event, complaint that there was not compliance with the request coupled with indication of an intention to make a formal complaint through available processes does not seem to me to amount to unreasonable conduct to warrant not departing from the usual costs order were I otherwise to have been of the view that such a departure was warranted. As to the issue of delay, complaint can be levelled at both sides.
Turning then to the question whether there was an "effective surrender", it seems to me (though denied by the defendant) that in practical terms there was a surrender. Whether that be for practical purposes (as it is submitted it was) is not to the point. The fact is that, up to the filing of the notice of ceasing to act, the position taken by WB Legal (no doubt on instructions) was that it was not withdrawing from acting for the defendant in the proceedings (and it maintained in this context that there was no potential or actual conflict - and did not accept that it was the recipient of confidential information). By filing the notice of ceasing to act (and I accept that this was not an admission by the defendant of the matters that had been contended by the plaintiff as warranting the removal of WB Legal), the defendant nevertheless acceded to the relief that had been sought. In that sense it is a situation where the plaintiff obtained the relief she sought and that she would otherwise not have been able to obtain that relief but for the filing of the notice of motion.
Balancing all of the above, I consider that the appropriate order to be made is that the costs of the motion be the plaintiff's costs in the cause. I am conscious of the fact that there remains a dispute as to the issue of potential or actual conflict and as to what if any confidential information was disclosed. I do not accept that an indemnity costs order is appropriate in the circumstances.

Order

Accordingly, I make the following order in relation to the notice of motion. 1. Order that the plaintiff's costs of the notice of motion filed on 7 September 2021 be the plaintiff's costs in the cause.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 October 2021

Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015(NSW)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (7 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (26)

Cited By (1)