New South Wales Supreme Court CITATION : Bagley v Pinebelt Pty Ltd [2000] NSWSC 655 revised - 18/08/2000 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2719/98 HEARING DATE(S) : 12 November 1998, 23 March, 22 April, 6 May, 2 & 20 August 1999 JUDGMENT DATE : 7 July 2000 Albert John Bagley (P/A) PARTIES : Pinebelt Pty Ltd (D) M S Abdul-Karim (R) JUDGMENT OF : Hamilton J D B McGovern & R Bellamy (P/A) COUNSEL : No appearance (D) M M Hilbery (R) Commins Hendriks (P/A) SOLICITORS : No representation (D) John McEncroe & Company (R) CATCHWORDS : PROCEDURE [551] - Costs - Jurisdiction - Persons not parties to proceedings - Barrister - Not retained in proceedings - Causes proceedings for removal of caveat by assisting client to lodge unsupportable caveat - Quality of conduct necessary to found order. Real Property Act 1900 s 74O LEGISLATION CITED : Supreme Court Act 1970 s 76, s 76C Supreme Court Rules Part 52A r 4, r 43, r 43A Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965 De Sousa v Minister for Immigration (1993) 41 FCR 544 Diamond v Baulkham Hills SC [1999] NSWCA 277 Flower & Hart v White Industries (Qld) Pty Ltd (1999) 87 FCR 134 Harley v McDonald [1999] 3 NZLR 545 Knaggs v J A Westaway & Sons Pty Ltd (1996) 40 NSWLR 476 Knight v F P Special Assets Limited (1992) 174 CLR 178 Leicester v Walton 22 November 1995 NSWCA unreported CASES CITED : Levick v DCT [2000] FCA 674 Money Tree Management Services Pty Ltd v DCT (No 2) [2000] SASC 63 Morris v Morris [1982] 1 NSWLR 61 Myers v Elman [1940] AC 282 Pinebelt Pty Ltd v A J Bagley 19 December 1997 and 14 & 22 May 1998 NSWSC Hamilton J unreported Ridehalgh v Horsefield [1994] Ch 205 Symphony Group PLC v Hodgson [1994] QB 179 Wentworth v Rogers [1999] NSWCA 403 White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169 DECISION : That barrister pay plaintiff's costs of the proceedings. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J FRIDAY, 7 JULY 2000 2719/98 ALBERT JOHN BAGLEY v PINEBELT PTY LIMITED JUDGMENT His Honour: 1 This is an application for an order for costs of the proceedings to be made against a barrister. The application arises in the following way. 2 On 19 December 1997 I delivered judgment in proceedings 3422/97 ("my first judgment") between the present defendant ("Pinebelt") as plaintiff and the present plaintiff ("Bagley") as defendant in which Pinebelt sought specific performance of a contract to purchase factory premises in Wagga Wagga ("the property") from Bagley. The contract was alleged to arise from an option to purchase contained in a lease of the property. In my first judgment, I found that a defence based upon an absence of readiness, willingness and ability to complete the contract, if it existed and were still in force, made out and consequently entered judgment for Bagley upon Pinebelt's claim for specific performance. 3 Pinebelt then sought to amend its points of claim, essentially to allege that, the claim for specific performance of the contract having failed, the Court should declare that Bagley held the property upon a constructive trust for Pinebelt, or alternatively, that Pinebelt had a Morris v Morris charge over the property in respect of amounts which it had expended upon it: see Morris v Morris [1982] 1 NSWLR 61. 4 On 14 May 1998 I delivered judgment on that application ("my second judgment"). In my second judgment I said that: "The case for a constructive trust as formulated for the plaintiff is quite inchoate. So far as it can be understood, it seems to be said to arise from a common intention the parties formed that the property should be transferred to the plaintiff and from the fact that the plaintiff made certain payments in respect of the property on the basis of that intention. The difficulty is that the evidence in the case, and even the proposed points of claim now propounded, … proceed on the basis that that intention culminated or was encompassed in a contractual arrangement whereby the plaintiff was granted an option to purchase the property, the payments providing the consideration for that grant; that option was exercised; and thereafter the parties proceeded on the basis that a contract of sale was on foot. The defendant maintained that he had validly terminated that contract: the plaintiff claimed to enforce it specifically; it was upon that claim that I entered judgment for the defendant on the basis that the plaintiff had lacked readiness and ability to perform. There seems to me to be no room in these circumstances to allege that, by reason of the earlier common intention of the parties that the property should be transferred to the plaintiff and its making at that time of the payments alleged, that a constructive trust should be held to arise. The plaintiff got what it bargained for in entering into the contractual arrangement for the option, but lost its right to specific performance of the contract arising from exercise of the option because it was unable to establish its readiness, willingness and ability to perform. The same difficulty arises in relation to the submission that the payments made in the negotiations, and for the purpose of procuring the option, or in pursuit of the contractual arrangements between the parties, ought be regarded as creating a charge over the property in favour of the plaintiff. So far as the rent is concerned, the non-payment, payment or over-payment of those moneys are matters regulated and to be adjudicated on by reference to the terms of the contract embodied in the lease between the parties. If moneys have through mistake been overpaid, that fact may give rise to a right to recover them in an action for restitution, but cannot by reason of the mistake create a proprietary right in the plaintiff in the circumstances revealed in this case." For those reasons I refused Pinebelt's application to file amended points of claim and ordered Pinebelt to pay Bagley's costs of the application. 5 On 22 May 1998 I determined a notice of motion for the withdrawal from folio identifier 3/607742 relating to the property of caveat number 3365275S lodged by Pinebelt ("the first caveat"). The first caveat in terms claimed an estate or interest in the property specified as "Estate or interest as grantee of an option to Purchase the Land". Under that specification, in the space provided for the instrument or facts by virtue of which the estate or interest was claimed, there was reference to an instrument being a grant of option dated 9 August 1994 by Bagley as grantor to Pinebelt as grantee, and thereunder appeared the following: "And by virtue of agreement between Albert John Bagley (grantor) to grant an option to purchase to Pinebelt Pty Limited (grantee) in consideration for payment of expenses of the grantor by or on behalf of the grantee and/or in consideration of the grantee entering into a lease of the Land at the request of the grantor and by virtue of an oral agreement between the grantor and Peter Rukavina and/or Ivan Rukavina and/or Maria Earsman on behalf of the grantee whereby the grantor agreed to grant an option to purchase the Land to the grantee evidenced by the above instrument." The first caveat was lodged on 28 August 1997. 6 In the judgment which I delivered on 22 May 1998 ("my third judgment") I said: "On 19 December 1997, in these proceedings, I delivered a judgment whereby the plaintiff's claim for specific performance of an agreement for sale of the land alleged to have come into existence upon the exercise of the option was refused on the ground that the plaintiff was not ready, willing and able to perform that agreement. By that judgment it was made patent that the plaintiff could not specifically enforce any agreement arising from the option and could no longer be said to have any estate or interest in the land under the option, or any equity to enforce the transfer of the land to it. In these circumstances, it is plain at this point of time that the plaintiff has no estate or interest such as that claimed in this caveat and the caveat cannot be maintained." I therefore ordered that Pinebelt withdraw the first caveat on or before 29 May 1998. 7 Mr Abdul-Karim, barrister, appeared for Pinebelt during the trial that took place in December 1997, and at the time judgment was delivered on 19 December 1997. He continued to appear as counsel for Pinebelt until and including 22 May 1998. He was aware of my third judgment delivered on that day and read the same. His evidence as to what occurred between 22 and 28 May 1998 in his affidavit filed and read on this application is as follows: "3 Between the period 22 to 28 May 1998 I had a nubmer of discussion [sic] with my instructing solicitor regarding the further conduct of the matter. As a result of those discussions I became aware that Mr Fallins was preparing a Notice of Ceasing to Act which he wanted to file. At the same time Mr Fallins was having regular discussions with the directors of Pinebelt especially Mr Ivan Rukavina. Although I was not regularly updated i was aware that if the directors of Pinebelt were able to meet certain requirement [sic] Mr Fallins was willing to continue acting in the matter. I was also aware that Pinebelt's directors were talking to other legal representatives. 4 On 29 May 1998 I had two conferences with clients and a court appearance in the Court of Appeal scheduled for 3:15 pm that day. At about midday I received a number of telephone calls from Mr Ivan Rukavina. In those calls Mr Rukavina said to me words to the effect: 'I am flying to Sydney to see Mr Fallins and I wanted to remove the caveat as ordered by Justice Hamilton and to put on a new caveat to protect Pineblet [sic] from claims by National Mutual Trustee Limited for vacant posssession and any claim by Bagley'. I said to Mr Rukavina words to the effect: 'I am in my chamber [sic] up to 3:00 pm keep me informed of your progress and if you want any assistance let me know'. 5 Whilst in the Court of Appeal I received at least two urgent messages on my pager to ring Mr Rukavina. I recall leaving the Court of Appeal and telephoning Mr Rukavina. I further recall Mr Rukavina saying words to the effect: 'that he did not know where the Land Titles Office was and either that he could not get Mr Fallins to meet him or was having difficulties contacting Mr Fallins' and that he had a plane to catch back to Wagga Wagga after 5:00 pm. I informed Mr Rukavina that if he wishes to see me I was prepared see [sic] him outside the Supreme Court as sooon as my matter in the Court of Appeal finishes. 6 My matter in the Court of Appeal concluded at about 4:00 pm and I met Mr Rukavina outside the Supreme Court at about 4:15 pm. I accompanied Mr Rukavina to the Land Titles Office. Mr Rukavina had no documents with him. He did not know what form to fill [sic] to remove the caveat and what form was required to place a new caveat. Further, Mr Rukavina did not know the details of the caveatable interest. He asked me to assist him. I assisted Mr Rukavina out of sheer politeness being fully aware of the time restraints [sic] for him to catch his flight and the fact that the Land Titles Office closes at 4:30 pm. 7 To the best of my recollection the required forms were completed without the benefit or assistance of citing any document. I recall the officer from the Land Titles Office asking Mr Rukavina whether he had the company's seal and Mr Rukavina saying the [sic] he did not. I further recall saying to the officer words to the effect: 'I am not a solicitor and that I did not wish to witness Mr Rukavina's signature'. I recall the officer saying words to the effect: 'wait I will see if I could locate a Justice of the Peace who could witness his signature'. 8 After some few moments the officer came back and said words to the effect: 'I made inquiries I could not locate anyone everybody had left I am sure it will be alright if you signed as a his barrister' [sic]. Although I was not absolutely certain I thought that under the new amendments to the Legal Profession Act it was permissible for a barrister to witness a client's signature under the Oaths Act. In reliance on that believe [sic] I witnessed Mr Rukavina's signature crossing out the word 'solicitor' replacing it with the word 'barrister'. 9 As at 28 May 1998 the brief sent to me by Mr Fallins was still in my chamber [sic] and I was not asked to return it. ……" Mr Abdul-Karim was quite extensively cross examined. In the course of his oral evidence it was made plain that he not only witnessed the execution of the caveat, but himself composed and hand wrote its contents. This is corroborated by similarity between its terms and the letter which he wrote to his instructing solicitor, which is set out in [8] below. He continued to assert in cross examination that what he did at Mr Rukavina's request that day was done out of politeness: he repeatedly described his role as that of a "tour guide". 8 It should be added that on 19 May 1998 Mr Fallins had sent to Pinebelt a notice of intending to cease to act. On 26 May 1998 Mr Abdul-Karim wrote to Mr Fallins enclosing "the required Statement to the Summons for Leave to Appeal [sic]" and advised that the documents would have to be filed on or before 28 May 1998, being the last day. However, oral evidence made it clear that the proposed appeal was from my refusal to allow Pinebelt to amend its claim on 14 May 1998, rather than from the order for withdrawal of the caveat on 22 May 1998. Further, on 28 May 1998 Mr Abdul-Karim wrote to Mr Fallins in terms following: "There is an undoubted caveatable interest under lease dated July 1997 [sic]. There are other caveatable interest in relation the following [sic]: An equitable claim in the nature of a trust in that the lessor holds an option to purchase the demised property in favour of the lessee on trust until such time a determination is made as to the price to be paid under proper interpretation of the option [sic]." On 28 May 1998 pursuant to his notice of intention Mr Fallins filed a notice of ceasing to act for Pinebelt in proceedings 3422/97. It is not clear from the evidence whether this occurred before, during or after Mr Abdul-Karim's attendance at the Land Titles Office. In any event, there is no suggestion in the evidence that the filing of the notice to cease to act or the termination of his retainer as barrister was communicated to Mr Abdul-Karim by or on behalf of Mr Fallins before that attendance. As I understand it, no summons for leave to appeal was ever filed. No application was made for an order staying the effect of my order of 22 May 1998 for the withdrawal of the first caveat. 9 The following appears from the caveat lodged on 28 May 1998 ("the second caveat"). The caveator is Pinebelt, and the address for service is the address in Wagga Wagga of Ivan Peter Rukavina, the principal of Pinebelt. The estate or interest claimed is stated as follows: "Nature of the estate or interest in Land/Registered Dealing: 1 Lease dated 21/08/1997 - 21/08/1999. 2 An equitable claim in the nature of a trust in that the lessee holds an option to purchase the land from the lessor and that the lessee is entitled to a determination as to the price to be paid under the option. The option dated 9/8/94. 3 Appeal against judgment of Justice Hamilton. by virtue of the instrument referred to below/facts stated below:" The boxes appearing immediately below the last quoted words were empty. 10 Section 74O of the Real Property Act 1900 ("the RPA") provides as follows: "Restrictions on lodgment of further caveats if earlier caveat lapses or is withdrawn (1) This section applies if a caveat lodged under a provision of this Part in respect of any particular estate or interest in land or any particular right arising out of a restrictive covenant: (a) subsequently lapses, or (b) is, after an application is lodged with the Registrar-General for the preparation of a notice under section 74C (3), 74I (1) or (2), 74J (1) or 74JA (3), withdrawn under another provision of this Part, or (c) is withdrawn or lapses under section 74MA, and the same caveator lodges a further caveat with the Registrar-General in respect of the same estate, interest or right and purporting to be based on the same facts as the first caveat. (2) A further caveat to which this section refers has no effect unless: (a) the Supreme Court has made an order giving leave for the lodgment of the further caveat and the order or an office copy of the order accompanies the further caveat when it is lodged with the Registrar-General, or (b) the further caveat is endorsed with the consent of the primary applicant or possessory applicant for, or the registered proprietor of, the estate or interest affected by the further caveat." 11 These proceedings, separate from 3422/97, were commenced by summons on 5 June 1998. It made claims for (inter alia) a declaration that the second caveat contravened s 74O and an injunction restraining the lodgment of further caveats. On 17 June 1998 I heard and determined the claim for that declaration as a separate question in these proceedings. In my view the second caveat clearly contravened s 74O. In addition, it was clearly bad in that it did not on its face show a caveatable interest, the interest claimed being stated to be based upon an option to purchase which had already been adjudged unenforceable. Mr Aitken, of counsel, who appeared for Pinebelt on that day, did not seek to support the caveat. I thought it procedurally simpler, rather than make an order under s 74O, simply to order Pinebelt to withdraw the caveat. Costs against practitioners: the legislative framework 12 As to orders for costs against legal practitioners, the relevant statutory framework is as follows. The Supreme Court Act 1970 ("the SCA") provides: "76 Costs (1) Subject to this Act and the rules and subject to any other Act: (a) costs shall be in the discretion of the Court, (b) the Court shall have full power to determine by whom and to what extent costs are to be paid, and (c) the Court may order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on an indemnity basis. …… 76C Costs liability of solicitor (1) The Court may, at any stage of any proceedings, make one or more of the following orders in respect of a solicitor whose serious neglect, serious incompetence or serious misconduct delays, or contributes to delaying, those proceedings: (a) disallow the whole or any part of the costs between the solicitor and his or her client, (b) direct the solicitor to repay to his or her client the whole or any part of the costs which the client has been ordered to pay to any other party, (c) direct the solicitor to indemnify any party other than his or her client against the whole or any part of the costs payable by the party indemnified. …… (5) Nothing in this section limits the generality of section 76 or any other provision of this Act. …… There is no corresponding provision in the SCA relating to barristers. 13 At the relevant times Part 52A of the Supreme Court Rules 1970 ("the SCR") contained the following provisions: "4 Powers of the Court generally (1) The powers and discretions of the Court under section 76 of the Act (which relates to costs generally) shall be exercised subject to and in accordance with this Part. (2) Subject to subrule (5), the Court shall not, in the exercise of its powers and discretions under section 76 of the Act, make any order for costs against a person who is not a party. (3) Subject to subrule (4), Part 4 rule 4A and Part 11 rule 1A, a person shall not be made a party for the purpose of making an application for costs against the person. …… (5) Subrule (2) shall not limit the power of the Court to make any order: (a) under rule 43 … … (e) in exercise of its supervisory jurisdiction over its own officers … (6) Save as mentioned in subrules (1) to (5), this Part has effect subject to the Act and to the rules and subject to any other Act. …… 43 Liability of solicitor (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 Court that a solicitor is responsible (whether personally or through a servant or agent), the Court may, after giving the solicitor a reasonable opportunity to be heard: (a) disallow the costs as between the solicitor and the solicitor's client, including disallowing the costs for any step in the proceedings; (b) direct the solicitor to repay to the client costs which the client has been ordered to pay to any other party; and (c) direct the solicitor to indemnify any party other than the client against costs payable by the party indemnified. (2) Without limiting the generality of subrule (1), a solicitor is responsible for default for the purposes of that subrule where any proceedings cannot conveniently proceed, or can proceed only with the incurring of extra costs or with the inconvenience of the Court or another party to the proceedings, because of the failure of the solicitor: (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 Court; (d) to be prepared with any proper evidence or account; (e) to comply with any provision of the rules or any judgment or order or direction of the Court; or (f) otherwise to proceed. …… (6) This rule is in addition to and is intended to operate independently of the provisions of section 76C of the Act and does not apply in circumstances where section 76C of the Act applies." 43A Liability of barrister (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 Court that a barrister is responsible (whether personally or through a servant or agent), the Court may, after giving the barrister a reasonable opportunity to be heard: (a) disallow the costs as between the barrister and his or her instructing solicitor or as between the barrister and the client; (b) direct the barrister to repay to the client costs which the client has been ordered to pay to any other party; and (c) direct the barrister 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 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: (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 Court; (d) to be prepared with any proper evidence or account; or (e) otherwise to proceed ... (3) The Court may, before making an order under subrule (1), refer the matter to a registrar for enquiry and report. (4) The Court may order that notice of any proceedings or order against a barrister under this rule shall be given to the barrister's instructing solicitor or client in such manner as may be specified in the order under this subrule." Rule 43A has since been amended, but in ways that do not throw light upon the interpretation of the rules as they stood at the time of these events. Power to make order sought 14 The defendant contends that the Court has power to make the order sought. On Mr Abdul-Karim's behalf no submission was put that the Court does not have power to make the order. It was expressly conceded by Mr Hilbery of counsel that it may have such power. The statutory provisions set out above must be regarded against a background of authority. The High Court has ruled that a provision similar to s 76, without more, is not restricted in its ambit to making orders against parties, but justifies the making of orders against non parties in appropriate circumstances: Knight v F P Special Assets Limited (1992) 174 CLR 178. The same approach has been taken in England by the House of Lords in Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965 (see also the decisions of the Court of Appeal in Symphony Group PLC v Hodgson [1994] QB 179 and Ridehalgh v Horsefield [1994] Ch 205; and by a five Judge Court of Appeal in New Zealand in Harley v McDonald [1999] 3 NZLR 545. Knight's case has been applied in the Federal Court in De Sousa v Minister for Immigration (1993) 41 FCR 544; White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169 (affirmed on appeal: Flower & Hart v White Industries (Qld) Pty Ltd (1999) 87 FCR 134); and most recently Levick v DCT [2000] FCA 674; by the Supreme Court of South Australia in Money Tree Management Services Pty Ltd v DCT (No 2) [2000] SASC 63; and by the NSW Court of Appeal in relation to the District Court in Knaggs v J A Westaway & Sons Pty Ltd (1996) 40 NSWLR 476 and to the Land and Environment Court in Diamond v Baulkham Hills SC [1999] NSWCA 277. 15 The incidence of Knight's case in the legislative framework relating to this Court was discussed in the Court of Appeal in Leicester v Walton 22 November 1995 NSWCA unreported; see also Wentworth v Rogers [1999] NSWCA 403. In Leicester v Walton the Court was dealing with a situation where, shortly before the hearing of an appeal, an employed solicitor was directed by his employer (the Medical Defence Union) to cease to appear for an appellant. He filed notice of ceasing to act without giving the seven days notice required by Part 66 r 7 of the SCR. The hearing of the appeal was aborted by the inability of the appellant to obtain other representation in the available time. Concerning the application of Knight's case in the context of the provisions relationg to this Court Priestley, Sheller and Cole JJA in a joint judgment said: "The Court's power to award costs is now statutory and it is to the statute, to the rules of the Court and to any other Act, that one must look to find the extent of the Court's jurisdiction; Knight v FP Special Assets Ltd (1992) 174 CLR 178. The Court has no inherent jurisdiction in respect of costs beyond this. It is important to note, as Mason CJ and Deane J remarked of s 58 of the Queensland Supreme Court Act 1867 in Knight v FP Special Assets Ltd at 183, that the area of operation of s 76 necessarily depends upon the scope, as it exists from time to time, of other legislative provisions dealing with the award of costs. Unrestricted by the terms of any rules, this section would enable the Court to order the United Medical Defence or Mr Pike to pay the respondent's costs. But, the rules of Court dealing with the award of costs in cases governed by s 76, have the effect of reducing the scope of the power conferred by that section." Their Honours then set out the provisions of Part 76C of the SCA and Part 42A rules 4 and 43 of the SCR. They said that an order could not be made against the solicitor because they did not regard his conduct as amounting to "serious neglect, serious incompetence or serious misconduct". In relation to the possibility of making an order under Part 32 rule 43 they said: "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. Mr Pike, so far as appears, was entitled to advise his client that he would no longer act for him. Had Mr Pike complied with Pt 66 r 7 and, after due notice, filed a notice of ceasing to act, it is difficult to see how an adjournment of the appeal could have been avoided. It is unlikely that in the few extra days Dr Leicester would have been able to obtain other representation. He would have been compelled to make the application for adjournment that he did and the application would have been successful with the consequence of wasted costs that follows. Earlier notice to the Court may have resulted in the Court's being able to hear another matter on the day vacated. We do not think in this case that costs could be said to have been insured [sic] improperly or without reasonable cause or wasted as the result of any misconduct or default of Mr Pike. In our opinion the facts do not warrant an order that Mr Pike indemnify any of the parties for the costs of the application before Sheller JA or the costs thrown away as a result of the adjournment of the appeal. The Court has no power to make any order against United Medical Defence." 16 It seems clear that the Court of Appeal took the view that s 76 of itself gave this Court power to make orders for costs against non parties but that that power was restricted by the provisions of Part 52A r 4. However, by reason of the exception of r 43 contained in Part 52A r 4(5)(a) an order can be made in appropriate circumstances against a non party solicitor. The central reason given for not making an order against the solicitor in that case was that there was no causal connexion between the waste of costs and the solicitor's conduct; the solicitor would not have acted improperly if he had filed notice of ceasing to act after giving seven days notice and the abortion of the hearing of the appeal, which was what caused the waste of costs, would have occurred in any event; it could not be said to have been caused by the solicitor's inappropriate conduct. It may be that the Court of Appeal also took the view that the nature of the conduct was not sufficient to justify a costs order. Certainly the Court took the view that there was no longer an inherent power to order costs against practitioners: see also Wentworth v Rogers [25]. It also emphasised that, whatever the source of power, the order should always be compensatory, not punitive. 17 The basis on which a compensatory order may be made within a supervisory jurisdiction over practitioners was expounded by Goldberg J in White Industries supra 156 ALR at 229-230. In my opinion, the Court could in this case act in the exercise of that power as preserved by Part 52A r 4(5)(e) of the SCR with the same result as come to below. However, I am content to proceed under the provisions of r 43A. 18 However, r 43A does raise the question of an anomaly in the Rules. Already, in the case of a solicitor there is a tension in the relationship between the exception to Part 52A r 4 specified in terms of r 43 and the exception specified in terms of the supervisory jurisdiction of the Court over its officers, or at least a question of the respective ambits of those powers. The additional problem in relation to barristers arises from the fact that r 43A, unlike r 43, receives no mention whatever in r 4 including it in the list of exceptions. On the one hand r 4 prohibits the power in s 76 being used to make orders against non parties. On the other hand, r 43A, generally similar to r 43, provides for the making of costs orders against barristers in circumstances where they are clearly not parties to the proceedings. Nor would there seem to be any reason for providing for making costs orders against barristers if they were parties, since in those circumstances, the ordinary rules relating to parties and the generality of the discretion in s 76 would apply. 19 In my view the omission of r 43A from the exceptions in r 4 must be taken to be simply a drafting anomaly. The regulation of the circumstances in which orders may be made against barristers in r 43A (which is later in promulgation than r 4) must be taken as creating an exception to r 4 to permit s 76 to operate in its full ambit in respect of barristers, at least in the circumstances provided for in r 43A, and this despite the lack of provision of a specific exception in r 4. 20 In these circumstances, in my opinion the relationship among ss 76 and 76C of the SCA and Part 52A rr 4, 43 and 43A of the SCR merit the further attention of the rule making body, and perhaps the legislature. 21 The only other question is whether r 43A should be taken to be limited in its ambit to conduct of barristers in the very proceedings in which costs are sought. Mr Abdul-Karim played no actual part as a barrister in the proceedings in which an order for costs is sought against him, namely, these proceedings. He never held any retainer in these proceedings. However, the two sets of proceedings are closely related. I note that the claim for the removal of the second caveat could have been made, as well as by separate summons initiating fresh proceedings, by cross claim in proceedings 3422/97, as the claim to remove the first caveat was made. Although judgments had been delivered in those proceedings, the proceedings were still pending at the time and the Court's function in relation to them was not spent. Indeed, subsequently, in November 1998, an order was made consolidating these proceedings and 3422/97. 22 In my opinion a limitation of r 43A so as to permit an order only in proceedings in which the barrister has actually been retained would be a limitation akin to that which, after long prevailing in England, was rejected by the House of Lords in Aiden Shipping. It is true that in that and other cases the courts were not considering a rule in terms of the NSW Part 52A r 43A. The terms of that rule may be said to suggest in the use of expressions such as "other party" that the barrister concerned must be acting in the very suit for a party. However, one of the cases in which the rule provides for the making of an order is where costs are "… wasted by undue delay or by any other misconduct … and … a barrister is responsible …" This is a provision in terms of generality, and bearing in mind the width of the discretion conferred by s 76 and the modern interpretation of that provision, I am of the view that the generality of the ambit of the power conferred by the words set out above ought not to be read down. The cases make it plain that one of the circumstances in which an order may be made against a non party is where that person caused the proceedings. In my view, there is no reason to limit the generality of the proposition that an order under r 43A(1) may be made where costs are "… wasted by undue delay or by any other misconduct … and … a barrister is responsible …" 23 I am of the view in the light of the foregoing authorities and, as I have said, it is not controverted on Mr Abdul-Karim's behalf in these proceedings that the Court has power to make an order for costs against Mr Abdul-Karim in these proceedings under r 43A. Findings of fact 24 The facts as I find them are that in the dying days, or perhaps more accurately on the dying day, of his retainer as a barrister in proceedings 3422/97 Mr Abdul-Karim took the unusual step of going, at Mr Rukavina's request, to the Land Titles Office with him. After some equivocation in his evidence, his position was that he believed himself still retained by the solicitor at the time of assisting with the caveat, and I find that he held that belief. If, in fact, his retainer by Mr Fallins was at an end, then I find that he was retained by Pinebelt through Mr Rukavina by direct client access to advise concerning the second caveat. There is no doubt that in the Land Titles Office he assisted Mr Rukavina to formulate the terms of a caveat (indeed, wrote it on the form in his own hand) and witnessed Mr Rukavina's signature on it. I also find that he was acting as a barrister rather than a "tour guide" when he lent that assistance, despite his repeated use of the latter expression in evidence. In the manners stated he assisted the client in lodging the caveat and encouraged the client to do so. It is clear that he did not advise the client in any way not to do so or discourage it from so doing. He claims to have acted in haste, but recommended a caveat in virtually identical terms in a letter written to his instructing solicitor on the same day. He acknowledges having read the relevant earlier judgments of the Court. Whether order should be made 25 Once it is established that there is power to make an order and the facts are found, it falls to be decided whether an order should be made. Mr Hilbery of counsel earnestly entreated the Court not to make an order for costs against Mr Abdul-Karim. He submitted that this would be unfair to or harsh upon him in the circumstances, and would also be undesirable in signalling the imposition of too hard a test on barristers or legal practitioners generally. Whether or not an order should be made raises questions in the present case of the quality of the misconduct necessary to meet the terms of r 43A; whether Mr Abdul-Karim's conduct was of that quality; whether the conduct was causative of the incurring of the costs sought to be ordered; and whether an order ought in all the circumstances, in the exercise of the Court's discretion, be made. 26 As to the first of these questions, the barrister's acts or omissions, to justify an order under r 43A in the present case, must come under the rubric "misconduct". Although this term does not form part of the statutory pattern in others of the jurisdictions in respect of which the cited authorities were decided, I think its use produces the same conclusions as were there reached, that mere negligence or an error of judgment will not justify an order for costs. The necessary conduct must be able to be characterised as "gross negligence" or "gross incompetence" which amounts "to a serious dereliction of duty". The quality of the necessary conduct was expounded as follows in the judgment of the New Zealand Court of Appeal (on appeal from Giles J) delivered by Tipping J in Harley v McDonald supra [55] - [57]: "[55] Having established that jurisdiction exists to make an order for costs against a barrister, it is necessary to consider the criteria for its exercise. The logical starting point is the basis upon which solicitors are personally liable for costs in comparable circumstances. It is well established that such liability arises upon a serious dereliction of duty to the Court. That was the test applied in England before the wasted costs legislation came into effect. The phrase 'serious dereliction of duty' was used by Viscount Maugham at p 292 in Myers v Elman [[1940] AC 282]: for a later application of the jurisdiction see Edwards v Edwards [1958] P 235 per Sachs J. The same test applies in Australia: see White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169 (FCA) and da Sousa v Minister of State . It has been suggested that Giles J's references to the wasted costs regime in England represented the adoption of a lower threshold in New Zealand than serious dereliction of duty to the Court: see Webb [Duncan Webb, "Hopeless Cases: In Defence of Compensating Litigants at the Advocate's Expense" (1999) 30 VUWLR 295] at p 314. We doubt Giles J was proposing a lower threshold (see his reference to serious dereliction at p 593) but if he was, we consider we should adhere to the serious dereliction of duty test for both barristers and solicitors. At least so far as solicitors are concerned this has been the test at common law for many years and there is, in our view, no reason to change it. If Parliament were to consider the common law threshold too high, legislation such as that in England can always be enacted. [56] In principle the liability of barristers for costs should rest on the same basis. There is no logical reason to distinguish between barristers and solicitors in this respect. The more is this so, since the fact that in New Zealand both are officers of the Court is a significant factor supporting the existence of the jurisdiction to award costs. When, as here, the default is said to lie in negligence or incompetence, it is necessary to consider whether such failings can ever amount to a serious dereliction of duty to the Court, and if so, at what level. Essentially what is said against Mrs Harley is that through gross incompetence she failed to identify that the claim against FAI was hopeless, and persuaded herself that it stood a reasonable prospect of success, when in fact it had none. [57] Negligence or incompetence on the part of a barrister or solicitor at an appropriately high level is capable of amounting to a serious dereliction of duty to the Court. While simple negligence or errors of judgment have generally never sufficed for a serious dereliction of duty, neither has it been necessary to go as far as demonstrating bad faith or other moral wrongdoing. The speeches in Myers v Elman demonstrate these points. At p 291 Viscount Maugham made it clear that negligence at a sufficiently high level could amount to a serious dereliction of duty. At p 304 Lord Atkin said that 'gross negligence' could lead to the exercise of the jurisdiction. And at p 319 Lord Wright said: '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 CB in Stephens v Hill [(1842) 10 M & W 28]. 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.' In R & T Thew Ltd v Reeves (No 2) [1982] 3 All ER 1086 (CA), the Court of Appeal affirmed that a solicitor could be made subject to costs personally if guilty of negligence or incompetence of a sufficiently serious kind. Myers v Elman was cited by Lord Denning MR at p 1089 in the course of indicating that errors of judgment or 'mere negligence' were not enough. The conduct in question was described by His Lordship as being 'at most a mere slip'. Hence the jurisdiction was not invoked. O'Connor LJ, with whom Dunn LJ agreed, viewed the case as being one of incompetence (p 1091) but not at a level capable of amounting to a serious dereliction of duty." The conclusion that the English cases correctly expressed the test that should be applied in this Court was confirmed by the Court of Appeal in Wentworth v Rogers supra [41]. The rule or proposition that such orders should be made only sparingly and in respect of gross breach of duty recognises the speed at which and stress under which legal practitioners have to carry out many of their functions, particularly in relation to litigation, and the undesirability that minor lapses or errors of judgment under stress should visit costs upon them personally. 27 So far as the conduct is concerned, in my view there is here a very clear case that Mr Abdul-Karim should not have acted as he did. The lodgment of the fresh caveat was clearly wrong. The importance of proper conduct by practitioners in relation to the lodgment of caveats was the subject of a note in (1999) 73 ALJ 534. Whilst there can be difficulties as to whether a second caveat is, in terms of s 74O(1), "in respect of the same estate, interest or right" or "is based on the same facts", I am of the view that the lodgment of this caveat was a breach of s 74O of the RPA; although it propounded a trust interest, that trust interest was alleged on the face of the caveat to arise solely from the option already adjudged unenforceable. In any event, without reference to the provisions of s 74O, it was a caveat that was quite without basis, in that, on its face, the interest in respect of which it was claimed depended for its efficacy on the existence and enforceability of an option to purchase, which option to purchase had, as I have said, already been ruled unenforceable as between these parties by the Court and could not therefore give rise to an estate or interest in the land. In my view, on both these bases, and certainly on at least one of them, the caveat was unsupportable, was bound to be removed by the Court if the registered proprietor went to the expense of seeking its withdrawal, and was in fact so ordered to be withdrawn. Mr Abdul-Karim, consulted about the lodgment of the caveat, did not tell his client not to lodge the caveat and assisted in the preparation and lodgment of it. Mr Abdul-Karim attempted to say in his oral evidence that he simply, in effect, out of politeness did something Mr Rukavina asked him to do and had no responsibility for the client's act in lodging the caveat. Insofar as he attempted to say this, I simply do not accept it. He went with Mr Rukavina to the Land Titles Office. He did not tell Mr Rukavina that the lodgment of a further caveat to protect the interest that the client claimed to have (other than as a lessee) was quite unjustifiable and ought not be done. Instead of doing that he assisted him to draw the caveat in terms that were unsupportable and witnessed his signature. And, as I have already found (see [24]), he did so as a barrister, not a "tour guide". 28 In my view, this conduct constitutes "misconduct or default" within the meaning of Part 52A r 43A(1). I agree with Mr Hilbery's submission that there are grave dangers in the too ready imposition of personal costs orders against practitioners (and it is amply supported by authority). A feeling of threat of personal liability arising from decisions, some trifling in themselves and many necessarily taken in the sometimes white hot cauldron of litigation, has a potential to paralyse the decisive and fearless conduct which advocates are daily called on to engage in. The manner in which this danger has been guarded against in the authorities is to stipulate that it is only in the case of grave or clear or gross negligence or incompetence that liability for costs ought be imposed. I take the view that that threshold has been crossed in this case. As I have said, Mr Abdul-Karim was engaged in the litigation at earlier stages, claims to have read the judgments closely, says that he settled the terms of a summons for leave to appeal from the refusal of an amendment and participated in the subsequent proceedings that led to the withdrawal of the first caveat. In assisting the lodgment of the second caveat, ignorance of s 74O of the RPA would be egregious; but even more basic is the disregarding of the fact that the very interest claimed was an interest that the Court had held to be unenforceable and therefore non caveatable. This is conduct of a far more serious character than the mere ignorance of a procedural rule as to ceasing to act, as in Leicester v Walton supra. 29 The next question is whether the conduct of Mr Abdul-Karim caused the costs to be incurred. Here also this case is distinguished from Leicester v Walton, where the solicitor's actions were not in the requisite sense a cause of the waste of costs: the waste of costs would have occurred in any event. In this case I have come to the conclusion that Mr Abdul-Karim's actions were the cause or a cause of the waste of costs. The client was anxious to put a fresh caveat on the property; one element of the fresh caveat it desired to lodge related to a lease. A caveat protecting its unregistered lease would not have been an improper caveat and would not have been liable to summary removal by the Court. The terms of the caveat which was in fact put on were composed by Mr Abdul-Karim and written in his own hand. They included the material that made the caveat improper, namely, either a repetition of a caveat the withdrawal of which had already been ordered, or the justification of the caveat by reference to an alleged estate or interest which was not a valid caveatable estate or interest because it proceeded by reference to an option to purchase which had already been ruled unenforceable, and that in litigation in which Mr Abdul-Karim had participated. There is no evidence to suggest that such a caveat would have been lodged at the time had Mr Abdul-Karim not intervened; it is not clear on the evidence that the client would have persisted in lodging a caveat in these terms had he been told that Mr Abdul-Karim would not assist in drawing a caveat in those terms and there is no evidence to found a conclusion that the caveat would still have been lodged had Mr Abdul-Karim advised that to lodge such a caveat would simply draw an inevitably successful application to withdraw it with an order for costs. 30 In determining the appropriate exxercise of the Court's discretion, I return to Mr Hilbery's propositions set out in [25], that to order costs against Mr Abdul-Karim would be unfair to or harsh upon him in the circumstances, and would also be undesirable in signalling the imposition of too hard a test on barristers or legal practitioners generally. With these propositions I do not agree. I do agree, as pointed out more than once above, that the Court ought not lightly make orders for costs against legal practitioners and, in considering whether to do so, ought bear in mind the speed at which and stress under which legal practitioners have to carry out many of their functions, particularly in relation to litigation. This, in my view, is recognised in the necessity for a cautious and sparing use of the power to make orders for costs against legal practitioners and is in my view part of the reason for the rule or proposition that it is only in strong cases or in respect of gross breach of duty that such orders should be made. I have borne all these things in mind in considering the appropriate exercise of the Court's discretion. 31 In the circumstances it seems to me established that the plaintiff's costs of the proceedings are "… wasted by undue delay or by any other misconduct … and … a barrister is responsible …" within the meaning of r 43A and that the appropriate exercise of the Court's discretion is that Mr Abdul-Karim ought be ordered to bear the plaintiff's costs which were incurred in procuring an order by the Court for the withdrawal of the second caveat. It seems to me that the appropriate order would be an order under paragraph (c) of r 43A(1) directing the barrister to indemnify the plaintiff against the costs payable by him. However, I shall hear any submissions as to the form of the order and as to the costs of these proceedings when short minutes are brought in. …oOo… Last Modified: 09/27/2000 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.