New South Wales Supreme Court CITATION : Christopher John Riley v Bankstown City Council & Anor [2005] NSWSC 748 HEARING DATE(S) : 25 March 2004 JUDGMENT DATE : 28 July 2005 JUDGMENT OF : Hidden J DECISION : Motions dismissed. CATCHWORDS : PRACTICE AND PROCEDURE: Costs - plaintiff's claim dismissed for non-appearance - application by defendants for order for costs against plaintiff's solicitor - Legal Profession Act - Pt 52A of Rules - whether claim had a reaonable prospect of success - inaction by solicitor - exercise of discretion. Supreme Court Rules LEGISLATION CITED : Legal Profession Act 1987 Civil Liability Act 2002 Wyong Shire Council v Shirt (1980) 146 CLR 40 Chappell v Hart (1998) 195 CLR 232 Levick v Commissioner of Taxation (2000) 102 FCR 155 CASES CITED : White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169 Edwards v Edwards [1958] P 235 Cahill v Ekstein & Anor (Smart J, unrep, 5 June 1998) Orchard v South Eastern Electricity Board [1987] 1 QB 565 Christopher John Riley (plaintiff) Bankstown City Council (1st defendant/applicant) PARTIES : Georges River Softball Association Inc (2nd defendant/applicant) Mr R W Gillroy (respondent) FILE NUMBER(S) : SC 20436/2002 No appearance (plaintiff) Mr T Devaris (1st defendant/applicant) COUNSEL : Ms K Williams (2nd defendant/applicant) Mr D Campbell SC / Mr S Finnane (respondent) Garrett Walmsley Madgwick Pty Ltd (plaintiff and respondent) Mr J Wright - Bartier Perry (1st defendant/applicant) SOLICITORS : Ms K A Ruschen - Phillips Fox Lawyers (2nd defendant/applicant) LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HIDDEN J Thursday 28 July 2005 20436/2002 Christopher John Riley v Bankstown City Council & Georges River Softball Association Inc JUDGMENT 1 HIS HONOUR: In the early afternoon of 30 September 1999 the plaintiff, Christopher John Riley, was riding a motor cycle in Kelso Park, Panania. He rode into a rope tied, it was initially thought, between two trees. The rope caught him by the throat, and he was thrown from the motor bike and suffered serious injuries. He subsequently consulted a firm of solicitors, and on 1 October 2002 a statement of claim was filed in this Court claiming damages for negligence against the first defendant, Bankstown City Council and the second defendant, Georges River Softball Association Inc. The first defendant was sued as the occupier of the park. The second defendant was sued as the occupier of relevant portions of the park, pursuant to an agreement with the first defendant, and as the organisation responsible for tying the rope in position. However, at a status conference on 19 November 2003, there being no appearance for the plaintiff, the proceedings were dismissed under Pt 13 r5A of the Supreme Court Rules. 2 Before me are motions by both defendants that the plaintiff's solicitor, to whom I shall refer simply as the respondent, be ordered to indemnify them for the whole of their costs of the proceedings. They rely upon s198M of the Legal Profession Act 1987 or, alternatively, Pt 52A r43 of the Rules. Before turning to those provisions it is necessary to sketch the history of the proceedings. This appears from affidavit evidence filed on behalf of each of the parties, none of which is contested in any material respect. 3 It is not clear from the evidence when the plaintiff instructed the respondent. Communication with the plaintiff was complicated by the fact that he had a speech deficit as a result of the accident. His preliminary instructions were that he had collided with a concealed piece of rope stretched across a public pathway in the park. He said that he and others had regularly used that pathway for riding motor bikes, and this was confirmed by his mother and other members of his family. The respondent considered that he had a reasonable case but, nevertheless, instructed a firm of investigators to examine the scene and obtain statements from any witnesses who might be available. The statement of claim was issued before the investigators' report was furnished. Senior counsel for the respondent, Mr Campbell SC, pointed out in argument that it was issued "on the cusp of the limitation period." 4 The respondent received the report in the later part of November 2002. It included a record of an interview with the plaintiff by an investigator and photographs of the scene. It seems that the plaintiff told the investigator that he was taking a shortcut across a softball field on the bike and that he had never taken that route before. On other occasions, he said, he had ridden either on a tarred road or a footpath alongside the field. From what he said and from the photographs it is apparent that the route he took on the day in question was not a public pathway but, rather, a grassed area between two playing fields. It also emerged from the report that the New South Wales Softball Association had been conducting a "clinic" that day, and that there were children in the vicinity. 5 The respondent was concerned about the inconsistency between what the plaintiff had told him, on the one hand, and what he had told the investigator, on the other, about his use of that part of the park for riding a motor cycle. Nevertheless, given that it appeared that the rope had been strung across what he described in his affidavit as a "canyon type style of corridor" or a "walk corridor way" between the playing fields, he still considered that the claim had a reasonable prospect of success. 6 Early in February 2003 the solicitor for the first defendant advised the respondent that he had issued a subpoena, returnable on 10 March 2003, to the Commissioner of Police to produce all records relating to the incident. Those documents in fact were produced on 19 February 2003. They comprised a number of reports by police officers and several statements by witnesses. That material confirmed that the New South Wales Softball Association was conducting a clinic on the day in question, and that a number of adults and children were present. The statements of witnesses involved in the clinic explained that the rope with which the plaintiff had collided was positioned for the purpose of the clinic and that softballs were attached to it. It was a thin length of nylon rope, secured by two poles, not by trees, in an area about five metres wide between two softball fields. Immediately prior to the collision the plaintiff was seen to be riding at a high speed. 7 I received this police material not as evidence of the facts asserted in it, but as evidence of the information available to the respondent for the purpose of assessing the strength of the plaintiff's claim. I should add that that material and the investigators' report to which I have referred asserted that the plaintiff was unlicensed and that the bike was unregistered and uninsured, and it appeared from the police material that it had been stolen about a month before the incident. However, it also appeared from the police documents that the plaintiff had borrowed the bike on the day he rode it and it was not said that he was involved in its theft or knew that it was stolen. That he was unlicensed and that the bike was unregistered and uninsured were not matters relied on in argument at the hearing of the motion. 8 A diagram included in the investigators' report contains the assertion that a rider approaching the rope as the plaintiff did would not have been able to see it. Whether that note was based upon a statement to the investigator by the plaintiff or the investigator's own observation is unclear. In an affidavit, Charles Russell, a member of the second defendant association, deposed that at the relevant time there was a sign erected by the first defendant at one end of the softball fields prohibiting the entry of any vehicle into that area. That evidence also was received as part of the information available to the respondent, although there was no reference to the sign in the investigators' report and there is no evidence that he became aware of it from any other source. 9 In the middle of May 2003 the second defendant's solicitor filed and served upon the respondent an affidavit to which the police documents were annexed. On 20 May she wrote a Calderbank letter to the respondent, expressing the view that the plaintiff's claim had no reasonable prospect of success in the light of the information in the police documents, and proposing a verdict in favour of the second defendant upon the basis that it would pay its own costs. She also drew the respondent's attention to the documents in a telephone conversation the next day. However, she received no correspondence from the respondent thereafter. 10 The respondent was concerned about the new information in the police documents, which affected his assessment of the likelihood of success of the claim. He wanted to confer with the plaintiff about it, although he maintained his belief that the claim could succeed. At the end of May 2003 he forwarded copies of the documents to the plaintiff, seeking his response to the allegations in them. Between then and the middle of October he wrote to the plaintiff and contacted his mother on several occasions in an attempt to elicit that response, as well to obtain further instructions to enable him to supply particulars requested by both defendants. These efforts bore no fruit, and in mid October he informed the plaintiff that he could no longer act for him. However, a notice of ceasing to act was not filed until early in 2004. 11 On 8 October 2003 the matter was listed for status conference and was adjourned to 22 October. The plaintiff was directed to serve expert reports and DCM documents, and to respond to requests for particulars, by that date. However, on 22 October there was no appearance for the plaintiff and the directions had not been complied with. That remained the situation on 19 November when, as I have said, the proceedings were dismissed. The plaintiff was ordered to pay the defendants' costs. In his affidavit the respondent conceded that he should have arranged appearance for the plaintiff on 22 October, and should have filed a notice of ceasing to act earlier so as to inform the Court and the defendants of his position, and he apologised for his neglect in those respects. 12 Let me turn, then, to the law governing the present motion. It is convenient to deal first with relevant provisions in Div 5C of Pt 11 of the Legal Profession Act. By s198J(1), a solicitor is prohibited from providing legal services on a claim unless he or she "reasonably believes on the basis of provable facts and a reasonably arguable view of the law that the claim… has reasonable prospects of success". That prohibition applies despite any obligation that the solicitor may have "to act in accordance with the instructions or wishes of his or her client": subs (3). By s198L(1), the provision of legal services without reasonable prospects of success "is capable of being professional misconduct or unsatisfactory professional conduct." Subs (2) of that section requires a solicitor, at the time of filing process initiating a claim, to certify that there are reasonable prospects of success. The respondent filed such a certificate in the present case, albeit about a fortnight after filing the statement of claim and in answer to a requisition. Apparently, he did not serve it upon the defendants. 13 Relevantly for present purposes, s198M provides: (1) If it appears to a court in which proceedings are taken on a claim for damages that a solicitor or barrister has provided legal services to a party without reasonable prospects of success, the court may of its own motion or on the application of any party to the proceedings make either or both of the following orders in respect of the solicitor or barrister who provided the services: (a) an order directing the solicitor or barrister to repay to the party to whom the services were provided the whole or any part of the costs that the party has been ordered to pay to any other party, (b) an order directing the solicitor or barrister to indemnify any party other than the party to whom the services were provided against the whole or any part of the costs payable by the party indemnified. … It is paragraph (b) of that subsection upon which the defendants rely. 14 Ms Williams of counsel argued the motion for the second defendant and her submissions were adopted by Mr Devaris, for the first defendant. I shall deal with the arguments about the provisions of the Legal Profession Act before turning to Pt 52A r43 of the Rules. 15 It is common ground that the provision of legal services, within the meaning of Pt 11 of Div 5C, is a continuing notion, and that I must consider the state of affairs not just at the time the statement of claim was issued but also in the light of the events which unfolded thereafter. Ms Williams does not challenge the honesty of the respondent's assertions in his affidavit about his continuing belief in the claim's prospects of success. However, s198J(1) requires that belief to be reasonable. She submitted that it would not have been reasonable, if not upon receipt of the investigators' report, certainly by the time the police documents were available to the respondent. 16 She argued that the investigators' report should have "set alarm bells ringing", particularly as it disclosed that there was not a public pathway in the area where the rope was positioned and contained a significant inconsistency in the plaintiff's account of his use of that area for riding motor cycles. Yet it appears that, having received that report, the respondent made no enquiries of the plaintiff or of anyone else to address those matters. Nor does he appear to have given any attention to the police documents until the end of May 2003, more than two months after they were available to him. 17 Ms Williams submitted that the information in those documents put paid to any reasonable prospect of success in the claim. They presented a picture of a man riding a motor cycle at high speed through a softball training area where adults and children were present. It was an area where one would not expect vehicular traffic (and, according to Mr Russell's affidavit, where such traffic was expressly forbidden.) She argued that the second defendant did not owe the plaintiff any relevant duty of care because it was not reasonably foreseeable that the training rope would constitute a hazard for motor bike riders. Such a risk, she said, was "far-fetched or fanciful", citing Wyong Shire Council v Shirt (1980) 146 CLR 40, per Mason J at 47. She also referred to s5B of the Civil Liability Act 2002. 18 She submitted, in the alternative, that it would not be appropriate to extend the scope of the second defendant's liability to the plaintiff's injuries: s5D of the Civil Liability Act. Citing the re-examination of causation in Chappell v Hart (1998) 195 CLR 232, she argued that the accident was as a matter of common sense the product of the plaintiff's unreasonable conduct, notwithstanding that it would not have occurred but for the rope. Finally, she argued that, in any event, the plaintiff's behaviour amounted to contributory negligence of such an order as wholly to defeat his claim: s5S of the Civil Liability Act. 19 Counsel were not able to refer me to any authority dealing directly with the Legal Profession Act provisions. However, in argument for the respondent, Mr Campbell supplied me with a copy of a helpful paper entitled "Reasonable prospects of success: new Pt 11 Div 5C of the Legal Profession Act 1987", prepared in March 2004 by Nicholas Beaumont of counsel. An edited and expanded version of that paper, entitled "What are 'reasonable prospects of success'?", is now to be found in (2004) 78 ALJ 812. It is the absence of reasonable prospects of success which enlivens the discretion to make an order against a practitioner under s198M. Mr Beaumont argues that that expression means no more than "not hopeless or entirely without merit." He contends that any higher threshold would inhibit the proper prosecution of claims (or raising of defences) which are borderline or innovative. 20 He refers to the second reading speech and ensuing debate in respect of the bill introducing Pt 5C to the Legal Profession Act, conveying that the purpose of the new provisions is to stop "spurious" claims (or defences) by lawyers. He examines authority on pre-existing powers of courts to make personal costs orders against practitioners, noting a general unwillingness to sanction practitioners by such orders for acting in a hopeless case unless doing so amounts, in the circumstances, to a dereliction of professional duty. Among the cases to which he refers is the decision of the Full Federal Court in Levick v Commissioner of Taxation (2000) 102 FCR 155, in which the Court (at [44]) adopted the conclusion of Goldberg J in White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169. In that case, after examining a number of relevant authorities in this country and in England, Goldberg J said (at 239): This analysis of the cases makes it clear that the jurisdiction to order costs against an unsuccessful party's solicitors is enlivened when they have unreasonably initiated or continued an action when it had no or substantially no prospects of success but such unreasonableness must relate to reasons unconnected with success in the litigation or to an otherwise ulterior purpose or to a serious dereliction of duty or serious misconduct in promoting the cause of and the proper administration of justice. Further, the cases establish the proposition that it is a relevant serious dereliction of duty or misconduct not to give reasonable or proper attention to the relevant law and facts in circumstances where if such attention had been given it would have been apparent that there were no worthwhile prospects of success. 21 Against that background, Mr Beaumont writes, it appears that part of the purpose of the amendments to the Legal Profession Act was to ensure that acting in a hopeless case is capable in itself of providing a basis for a costs sanction against a practitioner. This, he argues, supports the view that the notion of reasonable prospects of success is confined to proceedings which are not hopeless, as does the fact that s198L(1) could expose a practitioner who conducts proceedings without such prospects of success to disciplinary sanction. 22 Viewed in this way, Mr Campbell submitted, the respondent could reasonably have believed at all relevant times that his client's case was not hopeless. His instructions were that the plaintiff had ridden into a rope which was difficult to see, had been thrown from the bike and had sustained very serious injuries. He also had instructions that the incident occurred in an area where bikes were frequently ridden. True it is that the information contained in the investigators' report and the police documents called significant aspects of the plaintiff's account into question and required further investigation. This, said Mr Campbell, is precisely what the respondent sought to do, albeit belatedly, by seeking further instructions from his client. Pending those instructions, it was reasonable for him to maintain a belief that the claim was not without merit. 23 There is much to commend the views of Mr Beaumont, expressed in a paper which appears to be well researched and cogently reasoned. Nevertheless, the scope of the notion of reasonable prospects of success was not fully argued before me and, in the event, it is not a matter about which I need express a concluded view. From the material which became available to the respondent after the statement of claim was filed, it should have been apparent to him that there were very real obstacles in the path of the plaintiff's claim. On the other hand, I can see the force of Mr Campbell's argument that a prudent solicitor might not have determined that the claim was hopeless before seeking his client's response to the matters raised in that material. However, even if it could be said that there came a point at which it was not reasonable for the respondent to maintain a belief in the prospects of success of the claim, the question remains whether the discretion conferred by s198M should be exercised against him. I have decided that it should not. 24 As I have said, the respondent received the investigators' report in November 2002. Although the subpoena for the police documents was returnable on 10 March 2003, they were in fact produced to the Court in February of that year. However that may be, the respondent was aware of the return date of the subpoena and should have known that they would be available for his inspection from that day. There is no doubt that he should have sought his client's instructions after he received the investigators' report. Certainly, he should have inspected the police documents promptly after the return of the subpoena and sought instructions at that stage. In the meantime, he should have informed the solicitors for the defendants that he required further instructions and that, until they were received, the matter was on hold. 25 There is also no doubt that the defendants incurred costs throughout 2003. Solicitors for both of them sought particulars early in that year, and there were a number of status conferences in March, October and November. Grounds of defence were filed for the first defendant in September and for the second defendant in June. DCM documents were filed for the first defendant in October and for the second defendant in September. 26 Ms Williams placed emphasis on the Calderbank letter of 20 May 2003, which informed the respondent that the second defendant's costs were "minimal" at that stage but would "increase significantly" if the case had to be prepared for trial. She submitted, and I accept, that the respondent should at that point have been well aware of the difficulties which the plaintiff might face in pursuing the claim and should have sought instructions urgently, so as to be able to respond to the letter. Yet, even then, he left it to the end of the month to seek instructions and at no time informed the second defendant's solicitor that he was having difficulty in obtaining them. 27 On the evidence before me, it must be said that the respondent's conduct of the case was far from satisfactory. As I have said, in his affidavit he acknowledged as much. Whether the matter calls for disciplinary investigation is not a matter about which I could, or should, make any comment. However, this is not a case in which an unmeritorious claim was pursued at a time when a practitioner ought not to have believed that it had reasonable prospects of success. Rather, it is a case where, having received information calling the merit of his client's claim into question, the practitioner did nothing to advance the matter apart from a fruitless attempt to obtain further instructions. In the event, the proceedings were dismissed not after a hearing on the merits or even upon an application for summary dismissal, but simply because of a failure to appear. 28 The respondent's real fault was his inaction and his failure to communicate with the defendants' solicitors. I do not say that the little he did do in 2003 could not amount to the provision of legal services in the relevant sense, but the fact that there was no active pursuit of the claim is material to the exercise of the discretion under s198M. I acknowledge that that is a salutary provision, to which courts should have recourse in appropriate cases. Notwithstanding s198L(1), I approach it on the basis that, like the pre-existing provisions for costs orders against practitioners, its purpose is compensatory rather than punitive or disciplinary: cf White Industries (supra) at 229. 29 Nevertheless, it needs hardly be said that an order under the section should not be made lightly. One would hope that it would rarely be called for. Ms Williams submitted that, if the order were not made in the present case, "the sanction will be nothing more than a hollow threat." I cannot agree. The sanction should be confined to clear cases and, for the reasons I have given, this is not one of them. The defendants have an order for costs against the plaintiff (although I have no knowledge of the prospects of recovery). In all the circumstances, an order against the respondent under s198M is not appropriate. 30 Alternatively, the defendants rely upon Pt 52A r43(1), which relevantly provides: 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) … (b) … (c) direct the solicitor to indemnify any party other than the client against costs payable by the party indemnified. 31 This basis of the application is founded upon the matters to which I have already referred and, in my view, should be determined in the same way. The sub-rule needs to be applied according to its terms and it confers a wide discretion. Nevertheless, it is common ground that the exercise of that discretion must be guided by the authorities reviewed by Goldberg J in White Industries and the statements of principle, quoted above, which his Honour extracted from them. 32 In White Industries and Levick v Commissioner of Taxation (supra) the proceedings which led to applications for costs orders against practitioners had progressed to the stage of a hearing. So had all of the cases to which Goldberg J referred in White Industries in which orders were made against practitioners because of the pursuit of an unmeritorious claim. These included two cases upon which Ms Williams relied in particular: Edwards v Edwards [1958] P 235 and Cahill v Ekstein & Anor (Smart J, unrep, 5 June 1998). 33 In Edwards, a claim which was found to be hopeless was dismissed. The solicitor for the unsuccessful party was ordered to pay the other party's costs from the time of discovery of documents which demonstrated that the claim must fail. Sachs J found that the matter had been pursued even though the position "cried aloud for careful appraisement in the light of proper and sufficient analysis of the documents disclosed on discovery" (at 253). 34 In Cahill v Ekstein, Smart J ordered a solicitor to pay part of the costs of opposing parties in the light of "powerful" material challenging his client's claim, which had been served upon him well before the hearing. His Honour found that the impact of that material "was not lost" on the solicitor or his client and that both realised that the case could not be won (at 10). Nevertheless, after unsuccessful attempts to settle the proceedings, they pressed on. His Honour saw it as "not unreasonable" that they should try to settle the matter, but concluded that there came a time when it was "seriously wrong" for the solicitor to continue to act (at 11). 35 The difference between those cases and the present case is obvious. The respondent was aware of the difficulties presented by the investigators' report and the police documents, and eventually he attempted to obtain his client's instructions about that material. Otherwise, he appears to have sat on his hands and he took no further step in the prosecution of the claim. Ultimately, having been unable to obtain further instructions, he withdrew from the matter. 36 It is unnecessary to repeat the deficiencies in his conduct. His lack of communication with the defendants' solicitors is a matter about which those parties have every right to complain. I do not suggest that, in cases such as this, an order for costs against a practitioner could be made only when an unmeritorious claim had proceeded to hearing. However, again, the fact that the claim was not pursued in the present case is of significance in the exercise of the discretion conferred by the sub-rule. One of the cases referred to by Goldberg J in White Industries was Orchard v South Eastern Electricity Board [1987] 1 QB 565, in which Sir John Donaldson MR described the relevant jurisdiction as one "which falls to be exercised with care and discretion and only in clear cases" (at 572). In all the circumstances, I do not see in the respondent's conduct the "serious dereliction of duty or misconduct" which Goldberg J was describing in the passage from his judgment previously quoted. I would not make an order against the respondent under the sub-rule. 37 Accordingly, the motions are dismissed. However, in the circumstances, it may not be appropriate that costs should follow the event. I am minded to direct each party to his or its own costs, but the parties should have an opportunity to be heard on this if they wish. They should communicate with my associate about that matter within seven days. ********** 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.