New South Wales Supreme Court COULTER v. RAMPLING [2005] NSWSC 273 CITATION : This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 04/03/2005 JUDGMENT DATE : 6 April 2005 JURISDICTION : COMMON LAW JUDGMENT OF : Greg James J at 1 DECISION : I order the applicant and the applicant's solicitor, Mr Weller jointly to pay the costs of the plaintiff on an indemnity basis CATCHWORDS : Costs - Doomed application to cross-appeal - conduct of proceedings - power to award indemnity costs - power to award costs against legal practitioner - whether specific provision of rules limits ambit of Act. NSW Supreme Court Act 1970 LEGISLATION CITED : Legal Profession Act 1984 Leicester v. Walton (unreported, NSWCA 22 November 1995) Harley v. McDonald (2001) 2 AC 678 CASES CITED : De Sousa (1993) 41 FCR 554 Bendiech (No. 2) (1994) 53 FCR 422 White Industries v. Flower & Hart (1998) 156 ALR 169 PARTIES : JULIE FRANCIS COULTER v. GARRY BRIAN RAMPLING & ANOR FILE NUMBER(S) : SC No. 30066 of 2004 Plaintiff: A Crossland COUNSEL : J Azzi, for Mr Herbert Weller No appearance for Mr Rampling Plaintiff: Michael A McKelvey & Associates SOLICITORS : Defendant: Herbert Weller Solicitor LOWER COURT JURISDICTION : - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LIST GREG JAMES, J. WEDNESDAY 6 APRIL 2005 No. 30066 of 2004 JULIE FRANCIS COULTER v. GARRY BRIAN RAMPLING & ANOR JUDGMENT 1 HIS HONOUR: As recited in my judgment of 24 February 2005, application has been made by the successful appellant that the costs I had determined should be paid on an indemnity basis, be ordered to be paid by the respondent's legal practitioner, that is, Mr. Weller, solicitor. 2 It is not necessary for me to expatiate further on the events that led to my ordering Mr. Weller to pay the costs occasioned by the hearing of 24 February 2005 being vacated, those costs to be paid on an indemnity basis. It is further not necessary for me to refer in detail to my judgment of 10 February 2005 on the application for leave to file a cross-claim out of time, except to refer in particular to paragraph 16 which noted that the proposed grounds of the cross-appeal confined themselves to an asserted error below in failing to find the contract wholly illegal and that I had concluded such error, even if made out could not get over the problems which, on my view of the Tribunal's judgment, would remain and which meant that even if the appeal on that ground was successful, no other result would have been reached. 3 In paragraph 17, I noted that the cross-appeal, as it was sought to proceed with it on the application for leave, bore no resemblance to the originally suggested cross-appeal which apparently involved some question of recision of the contract, and which also, even if it succeeded, would not result in there being any different result overall in the proceedings. 4 I further concluded that for the respondent/cross-appellant or his lawyer to consider he could sit back, contending that the plaintiff's summons was a nullity and that he was entitled to be supplied with the transcript so as to deliberate on possible bases for a cross-appeal, was a view that neither the plaintiff nor his legal advisers were ever entitled to take. I concluded at paragraph 23 that although the respondent had been given every opportunity to produce every argument and all evidence upon which he might wish to rely, the relief he sought should not be granted as it was futile and that should have been obvious (paragraph 24) at the outset. 5 Particularly was it doomed and futile because the basis of the appeal, even if it had succeeded, was so restricted that the end product of the litigation would have been no different. I condemned the proceedings as entirely unreasonable and concluded that the costs should be paid on an indemnity basis. In that judgment I expressed the view that I would be willing to entertain an application that the costs be borne in the first instance by the defendant's solicitor who had taken an entirely unwarranted attitude, he expressed as due to an oversight or inadvertence, that the cross-appeal remained able to be put on, notwithstanding the lapse of time, because of some asserted defect in the original summons, holding that it was quite clear that solicitor entirely failed to advert to the true question which was whether any cross-appeal might have such substance as to produce a different result in the litigation were it to be successful. I concluded that the conduct of the application in seeking to put on the cross-appeal was unreasonable and reserved leave to the parties to make an application in respect of the solicitor. 6 Following my judgment of 24 February 2005, the matter came back into the list before me. There was no appearance for or on behalf of the defendant, the respondent to the application. I was informed that Dr. Azzi now appeared only for the solicitor and the directions I had given concerning notification of the client of the nature of the application had been complied with. It was not contested that I should rely on the oral assurances given to me in this regard from the bar table. Mr. Weller was not present, apparently being engaged in other litigation. Neither he nor his client gave any relevant evidence beyond that I had considered on the leave application. 7 The parties have now provided me with written submissions and oral argument concerning whether or not the solicitor should be held liable jointly with his client for the costs occasioned to the plaintiff by the application to put on the cross-appeal. 8 My attention was drawn to s.76C of the Supreme Court Act 1970. Section 76C(1) provides for three courses the court might take. Section 76C(1)(b) provides (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: Supreme Court Act 1970 No. 52 (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, 9 Sub-rule (5) provides that sub-rule (2) shall not limit the power of the court to make any order "(e) in the exercise of its supervisory jurisdiction over its own officers including solicitors, barristers and court appointed liquidators". 10 Part 52A Rule 43 of the Supreme Court Rules relates to the circumstance in which costs are incurred improperly or without reasonable cause or wasted by undue delay or by any other misconduct or default and it appears that a solicitor is responsible. 11 In such circumstance, the court may, after giving the solicitor, as has been given here, a reasonable opportunity to be heard, make orders to the effect of the three options provided for by s.76C. Here, as under s.76C, the solicitor may be directed to re-pay to the client costs the client has been ordered to pay to any other party by Part 52A Rule 43(1)(b). 12 The plaintiff's submission referred to paragraph 26 of my judgment of 10 February 2005 in asserting that "the entire colloquy that has gone on since the original summons was issued has been a distraction from the proper conduct of the proceedings" and submitted that under s.76C or Part 52 Rule 4(5)(e) or Part 52 Rule 43 there was power to order the solicitor to pay the costs even if I was not satisfied of professional misconduct or unprofessional conduct by the solicitor. It was submitted that the findings that I had already made were clear that the costs of the motion for leave to file the cross-claim were incurred "improperly" or "without reasonable cause". 13 My attention was drawn to the decision of the New South Wales Court of Appeal in Leicester v. Walton (unreported, 22 November 1995) in which the court held that the awarding of costs was not for the purpose of punishing the solicitor or to demonstrate its disfavour of the way the court might consider he or his employer has acted in a matter, but because his action or inaction led to the incurring of costs that would not otherwise have been incurred. Plainly, that test is met here. 14 Plainly, is that the case having regard in particular, to the advice on the cross-appeal provided to Mr. Weller by Dr. Azzi of counsel, which is Annexure A to the affidavit of Herbert Weller which was restricted to the question of whether there had been a proper rescission of the building contract and which included the following passage"- "3. I am not in a position to comment on the merits of such a cross-appeal without the benefit of the transcript." 15 Notwithstanding, counsel drew to Mr. Weller's attention the time constraints involved in attempting to file a cross-claim out of time and agreed to prepare a draft of the cross-appeal, notwithstanding that he said that without the transcript "elaboration of the grounds of cross-appeal will be difficult". 16 There is nothing in that advice to suggest the cross-appeal had any prospect. There is nothing I have seen since to suggest any prospect. There is nothing to suggest that Mr. Weller should not have been aware from the outset that the cross-appeal and the motion seeking leave to file it were doomed, in that the cross-appeal had no reasonable prospect of success. 17 As was submitted by counsel for the plaintiff, that the proposed cross-appeal was doomed, was the product of a plain reading of the judgment of the Consumer Trader & Tenancy Tribunal. The key factual findings were so unequivocal as to make it perfectly clear that the argument that the entire contract was illegal could not dispose of the question of whether the appellant/plaintiff was entitled to recover the monies spent by her and provided to the defendant, the applicant, to cross appeal under a contract that was illegal but where she was not in pari delictu with him. Indeed, the monies were provided in consequence of the false representations made by the cross appellant and were recoverable on that ground. 18 I am satisfied that the costs were incurred by reason of default and without reasonable cause. There is no evidence to suggest that the client insisted Mr. Weller proceed after proper advice on that topic. Indeed, there is no evidence to suggest Mr. Weller provided proper advice on that topic. The stated beliefs as to the validity of the summons, the necessity to provide the transcript and the prospect of not putting on the cross-appeal until the transcript was provided only goes to suggest that the solicitor was concerned to seek when the transcript was provided, to canvass it for any possible ground of appeal. If so, that canvass was notable unsuccessful. It was clear at the outset that the grounds asserted for the cross-appeal could not present it with any prospects. These always were proceedings that had no reasonable prospect of success. It is not necessary that I go so far as to say that they were maintained for an ulterior purpose, but I certainly do conclude that the application has occasioned unreasonable delay and expense. When I said, "whatever legal merit such grounds of appeal may have, they could not be considered meritorious", contrary to the submission made on Mr. Weller's behalf, I was not concluding that the proposed cross-appeal had some legal merit. 19 It was argued on Mr. Weller's behalf that a personal costs order under s.76 of the Supreme Court Act should only be made upon a finding of a serious dereliction of duty or gross negligence on his part and that courts would not make such an order on the basis that the solicitor has pursued a hopeless case where the client expressly instructed the solicitor to proceed. As to that proposition, Harley v. McDonald (2001) 2 AC 678 was cited and De Sousa (1993) 41 FCR 554 was also drawn to my attention. In a sense, those cases dealt with other days. Section 198L of the Legal Profession Act 1984 has now been enacted. So far as that might apply to an application for leave to cross-appeal, it is plain that the certificate required could not properly have been given by Mr. Weller. Even if that statutory provision does not apply, on my understanding of law and the practice of legal representatives, it remains an obligation on the legal representative not to proceed where it is obvious that the claim entirely lacks merit. In any event there was no evidence to suggest such instructions were given here. 20 It is submitted that it could not be said that Mr. Weller is guilty or would be found guilty, of gross (not mere) dereliction or negligence and/or professional misconduct in the way he conducted his client's case sufficient to warrant a personal costs order against him: re Bendiech (No. 2) (1994) 53 FCR 422 at 427 per Drummond, J. 21 I have no quarrel with the general proposition that, other than in circumstances of gross dereliction or negligence and professional misconduct a personal costs order might not be warranted but I do not accept the proposition that what occurred here does not merit that description. This was a case where the processes of the court were put in train without any prospect that they could yield a result, which would be of advantage to the putative cross appellant. The only function that the application could have served would have been to delay the appeal and render it more costly. In my view it is a case which falls within the principles referred to by Weinberg, J.in White Industries v. Flower & Hart (1998) 156 ALR 169. This case was hopeless and a competent practitioner would have realised that. 22 I cannot conceive that it could be contemplated that it would be regarded as honestly and fairly arguable, that the contract was illegal without considering the result and what good it might do to the client to argue that at the end of the day. 23 There remains at issue, however, the question of whether in the circumstances Mr. Weller and his client should be made jointly liable to indemnify the appellant/plaintiff against the incidence of costs thrown away and wasted by reason of the application. It is submitted that none of the provisions to which I have previously referred should be construed as having such amplitude as to permit such an order to be made. It is submitted that s.76 of the Supreme Court Act 1970, which provides by s.76(1) that "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 be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or an indemnity basis." …. should be read down by reference to s.76C and the provisions of the Rules to which I have referred so that the amplitude of power in s.76 to order costs against non-parties is to be regarded as constrained by those other provisions such that no costs should be ordered against the solicitor, notwithstanding the conclusions to which I have come. I would reject this construction. 24 Although s.76 is expressed to be subject to the other provisions of the Act and the Rules, those provisions do not purport to exhaust the court's power to award costs, although they do regulate the exercise of that power in the cases there identified. In my view Section76 in its terms is wide enough to empower the Court to make a joint order for payment by solicitor and client of indemnity costs. 25 It was submitted that the conduct of the proceedings by Mr. Weller fell far short of that contemplated in Part 52A Rule 43 and/or Practice Note 108, and that the costs were properly and reasonably incurred in expressing reservations about the summons, accepting service of an amended summons, reading the lengthy and complex judgment of the Tribunal, accepting instructions to cross-appeal, giving the subsequent undertaking in court by the client to pay indemnity costs thrown away as a result of late filing of the appeal, if leave was to be granted and providing the material to the court by way of detailed chronology and submissions. Other matters were referred to. This is to mistake the nature of the order I made. I did not order costs at the appeal but of the failed application to cross-appeal. Nor am I minded to disallow costs the solicitor might properly charge his own client. I am concerned with extra costs being occasioned to the plaintiff. It was asserted that the cross-appeal could not cause prejudice to the plaintiff as it merely refined the relief sought, that issues genuinely in dispute were identified and there was a reasonable basis for alleging facts in pleading, that the cross-appeal was arguable and had merit and that the parties underestimated the amount of time the whole matter would take and that these costs should not be ordered. 26 All of these are answered by the simple proposition that from first to last it was perfectly clear the application was doomed. It was submitted that any dereliction of duty by Mr. Weller was not serious in that he had to give reasonable and proper attention was to the relevant law and doing so would not have made it apparent that there were no worthwhile prospects of success. 27 As is by now patent, I reject the proposition that it was not apparent there were no worthwhile prospects of success. In particular it is clear that there was no worthwhile prospect of success in the ground sought to be put on and it is clear that, having regard to the fact the application was out of time, it was inevitable that the application would be refused. 28 In my view, s.76 is wide enough to allow an order that the solicitor pay jointly with his client the costs on an indemnity basis that have been incurred on the application. That order is to the intent that the plaintiff should be entitled to look to either or both of the solicitor and the defendant. I therefore order the applicant and the applicant's solicitor, Mr. Weller, jointly to pay the costs of the plaintiff on an indemnity basis. 29 As I consider that this matter raises some seriously disquieting features, I refer this and the earlier judgments to the Legal Services Commission. 06/04/2005 - Paragraph 21 citation out of order - Paragraph(s) 21 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.