Industrial Court of New South Wales CITATION: Piriz v AAPT Limited (No 3) [2006] NSWIRComm 117 APPLICANT Eduardo Piriz PARTIES: RESPONDENT AAPT Limited FILE NUMBER(S): IRC 2687 of 2002 CORAM: Staff J Costs - Statutory power to order costs against legal practitioner - Were costs "wasted by undue delay or by any other misconduct or default" - Was legal practitioner responsible - Discussion - Costs order discretionary - Caution urged - Not a clear case - Industrial Relations Commission Rules, r 209 CATCHWORDS: Legal Practitioners - Statutory power to order costs against practitioner - Were costs "wasted by undue delay or by any other misconduct or default" - Was legal practitioner responsible - Discussion - Costs order discretionary - Caution urged - Not a clear case - Industrial Relations Commission Rules, r 209 LEGISLATION CITED: Industrial Relations Act 1996 Industrial Relations Commission Rules 1996 Harley v McDonald [2001] 2 AC 678 Leicester v Walton (NSWCA, 22 November 1995, unreported, Priestly, Sheller and Cole JJA, BC9501770) CASES CITED: Lemoto v Able Technical Pty Ltd and Others (2005) 63 NSWLR 300 Piriz v AAPT Limited (No 2) [2006] NSWIRComm 75 Ridehalgh v Horsefield [1994] Ch 205 HEARING DATES: 17/03/2006 DATE OF JUDGMENT: 04/05/2006 APPLICANT LEGAL REPRESENTATIVES: Mr N J Beaumont of counsel Solicitor: Mr P Hayward Haywards Solicitors JUDGMENT: - 1 - INDUSTRIAL COURT OF NEW SOUTH WALES CORAM: STAFF J 5 April 2006 Matter No IRC 2687 of 2002 EDUARDO PIRIZ v AAPT LIMITED (No 3) Application under s 106 of the Industrial Relations Act 1996 JUDGMENT [2006] NSWIRComm 117 1 On 15 March 2006 in Piriz v AAPT Limited (No 2) [2006] NSWIRComm 75, I determined notices of motion filed by Eduardo Piriz ("the applicant") and AAPT Limited ("the respondent"). Having found that the applicant had failed to comply with self-executing orders made by the Court on 23 October 2005, I made orders regularising any defect in the service of affidavits by the applicant. 2 I caused this matter to be listed pursuant to r 209 of the Industrial Relations Commission Rules 1996 ("the Rules") to hear submissions on behalf of the applicant's solicitor, Mr James Biady, as to why the Court should not make an order directing Mr Biady to pay the costs that had been ordered to be paid to the respondent in respect of the motions and to disallow his own costs in respect of those motions. 3 Rule 209 of the Rules is in the following terms: 209 Barrister or solicitor or agent to repay costs due to delay, misconduct etc (1) Where 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 Commission that a barrister, solicitor or agent is responsible, the Commission may, after giving the barrister, solicitor or agent a reasonable opportunity to be heard: (a) disallow the costs as between the solicitor or agent and the solicitor's or the agent's client, (b) disallow the costs as between the barrister and that barrister's instructing solicitor or as between the barrister and the client, (c) direct the barrister, solicitor or agent to repay to the client costs which the client has been ordered to pay to any other party, (d) direct the barrister, solicitor or agent to indemnify any party other than the client against costs payable by the party indemnified. (2) Without limiting the generality of subrule (1), a barrister, solicitor or agent is responsible for default for the purposes of that subrule where any proceedings cannot conveniently proceed, or fail or are adjourned without useful progress being made, because of the failure of the barrister, solicitor or agent: (a) to attend in person or by a proper representative, (b) to file any document which ought to have been filed, (c) to deliver any document which ought to have been delivered for the use of the Commission, (d) to be prepared with any proper evidence or account, or (e) otherwise to proceed. (3) The Commission may, before making an order under subrule (1), refer the matter to the Registrar for enquiry and report. (4) The Commission may order that notice of any proceedings or order under this Rule must be given to the client in such manner as may be specified in the order under this subrule. (5) The term solicitor in this Rule includes the solicitor's agent. Background 4 These proceedings have a lamentable history. A summons seeking relief under s 106 of the Industrial Relations Act 1996 ("the Act") was filed by the applicant on 10 May 2002. 5 On 21 October 2005, I rejected a notice of motion by the respondent seeking the dismissal of the summons for want of prosecution. Various self-executing orders were made on this date, which in summary, required the applicant to file and serve all affidavit material to be relied upon by 23 December 2005: Piriz v AAPT Limited (No 2). The applicant served affidavits which it sought to rely upon by facsimile on 23 December 2005, including the applicant's affidavit, minus the annexures. The Rules do not provide for such service. 6 The evidence disclosed that Mr Biady left to travel overseas on 6 December 2005, leaving a solicitor, Ms J Khoo, who had been admitted in August 2005, with the carriage of this matter. In Piriz v AAPT Limited (No 2), I said at [18]: I can only infer that Mr Biady thought that it was appropriate to leave an inexperienced solicitor responsible for complying with orders that included a self-executing order. A fair reading of my earlier judgment in Piriz v AAPT would lead to the conclusion that these proceedings remained on foot by the finest of margins. Furthermore, the way this case proceeded, as put by Mr Prince, makes it plain that a conscious decision was taken to proceed in the way they did and not plead mistake or other mitigation but rather choosing to contest the default on the basis that it was a most technical breach of the Rules. Evidence in Rule 209 Proceedings 7 Mr N J Beaumont of counsel appeared for Mr Biady and tendered an affidavit of Mr Biady sworn 17 March 2006. Mr Biady stated that in late 2004, he met with prospective witnesses and prepared statements for them in December 2004 and January 2005. Arrangements were made for a barrister to convert the statements into appropriate affidavit form. The affidavits were returned to Mr Biady who formed the view that further work was required on the affidavits. Therefore, in July 2005, Mr Biady employed a senior locum solicitor to undertake that task. At about this time, the respondent's motion for dismissal of the proceedings was part heard. To avoid incurring unnecessary costs, Mr Biady did not have the affidavits finally settled by counsel until after judgment was delivered in respect of the strike out application, such judgment being delivered on 21 October 2005. 8 Mr Biady stated that, prior to his departure overseas in December 2005, the main task that remained to be done, was to have counsel settle the affidavit material for the applicant and for affidavits to be sent to witnesses for approval and swearing and then to be filed and served. This was in essence the task that Mr Biady left for Ms Khoo to perform. 9 Mr Biady deposed that, prior to his departure, he had arranged that during his absence overseas, a Mr Brett Hurley, an experienced and senior solicitor, who had previously had his own legal practice and had over 11 years post-admission experience, would be available to supervise and give advice as necessary to Ms Khoo. Mr Hurley had been involved as a consultant to Mr Biady's legal practice since early 2005. In addition, Mr Biady had arranged for two senior solicitor principals of another law firm located on the same floor as Mr Biady's practice to be available to assist Ms Khoo. Arrangements were also made for Mr Graeme Fernie, a solicitor who often appears as agent for Mr Biady, to also be available. 10 Mr Biady stated that whilst overseas he was also available from time to time to speak by internet telephone, by email or internet instant messaging and he made contact with Ms Khoo on a number of occasions. Consideration 11 The question for determination is whether "costs … [were] wasted by undue delay or by any other misconduct or default" and that "it appears to the Commission … a solicitor is responsible." 12 Mr Beaumont submitted that the Court only had the power to make an order where it is satisfied that: (a) the solicitor is responsible for "undue delay" or "other misconduct or default", and (b) that conduct caused the waste of costs. 13 It was further submitted that the demonstration of a causal link is essential: Ridehalgh v Horsefield [1994] Ch 205 at 237. 14 The principles applicable to the consideration of exercising a statutory power to order costs against a legal practitioner was recently considered by the Court of Appeal in Lemoto v Able Technical Pty Ltd and Others (2005) 63 NSWLR 300, where McColl JA, with whom Hodgson and Ipp JA agreed, stated at [92] - [93]: [92] The new Div 5C should be construed against the background of the following principles which can be gleaned from the English and Australian authorities which have considered the power to order legal practitioners to pay the costs of proceedings in which they have represented parties: (a) The jurisdiction to order a legal practitioner to pay the costs of legal proceedings in respect of which he or she provided legal services must be exercised "with care and discretion and only in clear cases": Ridehalgh (at 229); Re Bendeich (No 2) (1994) 53 FCR 422; Deputy Commissioner of Taxation v Levick (1999) 168 ALR 383 at 389 [11]; 43 ATR 621 at 627 [11], per Hill J; Levick v Commissioner of Taxation (2000) 102 FCR 155 at 166 [44]; Gitsham v Suncorp Metway Insurance Ltd [2002] QCA 416 at [8], per White J (with whom Davies JA and Williams JA agreed); De Sousa v Minister for Immigration, Local Government and Ethnic Affairs (1993) 41 FCR 544; Money Tree Management Services Pty Ltd and Institute of Taxation Research v Deputy Commissioner of Taxation (No 3) (2000) 45 ATR 262; (b) A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he or she acts for a party who pursues a claim or a defence which is plainly doomed to fail: Ridehalgh (at 233); Medcalf v Mardell [2003] 1 AC 120 at 143 [56], per Lord Hobhouse of Woodborough; White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169; 29 ACSR 21 (affirmed on appeal; Flower & Hart (a firm) v White Industries (Qld) Pty Ltd (1999) 87 FCR 134); Levick v Commissioner of Taxation ; cf Steindl Nominees Pty Ltd v Laghaifar [2003] 2 QdR 683; (c) the legal practitioner is not "the judge of the credibility of the witnesses or of the validity of the arguments": Tombling v Universal Bulb Co Ltd [1951] 2 TLR 289 at 97; [1951] WN 247 at 238; the legal practitioner is not "the ultimate judge, and if he reasonably decides to believe his client, criticism cannot be directed to him": Myers v Elman (at 304) per Lord Atkin; Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406 at 413 [34]; 47 ATR 1 at 8 [34], per Callinan J; (d) A judge considering making a wasted costs order arising out of an advocate's conduct of court proceedings must make full allowance for the exigencies of acting in that environment; only when, with all allowances made, a legal practitioner's conduct of court proceedings is quite plainly unjustifiable can it be appropriate to make a wasted costs order: Ridehalgh (at 236, 237); (e) A legal practitioner against whom a claim for a costs order is made must have full and sufficient notice of the complaint and full and sufficient opportunity of answering it: Myers v Elman (at 318); Orchard v South Eastern Electricity Board (at 572); Ridehalgh (at 229); (f) Where a legal practitioner's ability to rebut the complaint is hampered by the duty of confidentiality to the client he or she should be given the benefit of the doubt: Orchard v South Eastern Electricity Board (at 572); Ridehalgh (at 229); in such circumstances "[t]he court should not make an order against a practitioner precluded by legal professional privilege from advancing his full answer to the complaint made against him without satisfying itself that it is in all the circumstances fair to do so": Medcalf (at 134 [23]) per Lord Bingham of Cornhill; (g) The procedure to be followed in determining applications for wasted costs must be fair and "as simple and summary as fairness permits…[h]earings should be measured in hours, and not in days or weeks… Judges … must be astute to control what threatens to become a new and costly form of satellite litigation": Ridehalgh (at 238–239); Harley v McDonald [2001] 2 AC 678 at 703 [50]; Medcalf (at 136 [24]). [93] The authorities concerning the sparing exercise of the jurisdiction to make wasted costs orders against legal practitioners (sub-par (a)) are consistent with cases in which orders are sought that a lay non-party pay the costs of litigation; such an order is exceptional: Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965 at 980, per Lord Goff of Chieveley; Taylor v Pace Developments Ltd [1991] BCC 406 at 410; Symphony Group Plc v Hodgson [1994] QB 179 at 192–193, per Balcombe LJ; Flinn v Flinn [1999] VSCA 134 at [24]. 15 A further relevant consideration as stated in Leicester v Walton (NSWCA, 22 November 1995, unreported, Priestly, Sheller and Cole JJA, BC9501770), is at [15]: … The Court should not make an order for costs against Mr Pike for the purpose of punishing him or to demonstrate its disfavour of the way he or his employer has acted in this matter. The grounds for making an order against him must be that his action or inaction led to the incurring of costs which would not otherwise have been incurred or the wasting of costs which would not otherwise have been wasted… 16 It is appropriate that I apply the above principles to the facts of this matter. On the evidence, I find that Mr Biady took reasonable and responsible steps to ensure that the affidavit evidence was well progressed before he left to go overseas; that a number of solicitors were available to assist and advise Ms Khoo including a colleague of 11 years experience as a legal practitioner and that counsel who was briefed in the case was also available to assist. 17 Despite these arrangements, the affidavits were not served in accordance with the Rules. As I have already observed, I found in Piriz v AAPT Limited (No 2) that there was a curable irregularity in the service of the affidavits. 18 I accept Mr Beaumont's contention that the evidence of the steps taken by Mr Biady could not be characterised as amounting to "undue delay, misconduct or default". As was observed in Lemoto, a wasted costs order should only be made against a solicitor in a "clear case". Furthermore, in Harley v McDonald [2001] 2 AC 678, the Privy Council stated at [55]: Then there is the question as to the kind of conduct that can be regarded as involving a serious breach of duty to the court… A simple mistake or oversight or a mere error of judgment will not, of itself, be sufficiently serious to fall into that category. Something more is required. In Myers v Elman [1940] AC 282, 291 - 292 Viscount Maugham indicated that the test was whether the conduct amounted to a serious dereliction of duty, and that negligence could be so described if it was at a sufficiently high level. Lord Atkin described, at p 304, the kind of negligence that could lead to an exercise of the jurisdiction as gross negligence. Lord Wright said, at p 319, that, while a mere mistake or error of judgment is not generally sufficient, a gross neglect or inaccuracy in a matter which it was a solicitor's duty to ascertain with accuracy, such as whether he had a retainer to act, might suffice. A more precise definition of the level of seriousness is not appropriate. But where negligence or incompetence is alleged the conduct must be put into its proper context. 19 In my view, in light of the evidence now before the Court, this is not a clear case where the Court should use its exceptional jurisdiction of visiting upon the solicitor personally the burden of costs that would ordinarily, and in this case, will be borne by his client. 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.