New South Wales Court of Appeal CITATION: Eurobodalla Shire Council v Wells & 2 Ors [2006] NSWCA 5 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S): Written submissions on Notice of Motion JUDGMENT DATE: 21 February 2006 JUDGMENT OF: Ipp JA at 1 DECISION: (1) Varying the costs order made by this Court on 8 November 2005 (that the Third Respondent [Opponent] pay [the Claimant's] costs of the Third Respondent's [Opponent's] Application for Leave to Appeal which was heard and determined by this Court on 8 November 2005, and in lieu thereof directing the First and Second Respondents [Opponents] pursuant to s 198M of the Legal Profession Act 1987 (NSW), to indemnify [the Claimant] against the whole of the costs payable by [the Claimant] to its legal representatives in respect of and associated with the Third Respondent's [Opponent's] Application for Leave to Appeal which was heard and determined by this Court on 8 November 2005. (2) The [Claimant's] costs of and associated with the claimant's Notice of Motion filed on 30 November 2005 be paid by the First and Second Respondents [Opponents]. CATCHWORDS: LEGAL PRACTITIONERS - costs - application for costs order against barrister and solicitor - s 198M of the Legal Profession Act 1987 (NSW) - discussion of determination that an appeal was "without reasonable prospects of success" - Lemoto v Able Technical Pty Ltd [2005] NSWCA 153 applied. D Civil Liability Act 2002 (NSW), s 16 LEGISLATION CITED: Legal Profession Act 1987 (NSW), ss 198J, 198M, 198N Supreme Court Act 1970 (NSW), s 46(2)(b) CASES CITED: Lemoto v Able Technical Pty Ltd [2005] NSWCA 153 Medcalf v Mardell [2003] 1 AC 120 Eurobodalla Shire Council (Claimant) PARTIES: Trevor Wells (First Opponent) Anthony Porthouse (Second Opponent) Irene Joyce Aldridge (Third Opponent) FILE NUMBER(S): CA 40135/05 COUNSEL: C E Adamson SC/S McCarthy (Claimant) I M Wales SC (First & Second Opponents) SOLICITORS: Phillips Fox (Claimant) Lough Wells Duncan (First & Third Opponents) LOWER COURT JURISDICTION: District Court LOWER COURT FILE NUMBER(S): DC 20/2003 LOWER COURT JUDICIAL OFFICER: Goldring DCJ IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40135/05 DC 20/2003 IPP JA Tuesday 21 February 2006 EUROBODALLA SHIRE COUNCIL v WELLS & 2 ORS Judgment 1 IPP JA: This is an application against a solicitor and barrister (the first two opponents) for an order in terms of s 198M of the Legal Profession Act 1987 (NSW). The claimant, the Eurobodalla Shire Council, claims an indemnity (under that section) against the costs it incurred in resisting a combined application for leave to appeal and appeal by Mrs Irene Aldridge. The first two opponents represented Mrs Aldridge in the application and the appeal. 2 Mrs Aldridge was injured when a bench, on which she was sitting, collapsed. The bench was in a park occupied by the Council. Mrs Aldridge contended that the collapse of the bench was caused by a breach of a duty of care on the part of the Council as occupier. She brought proceedings against the Council for the damages she sustained. 3 Goldring DCJ held that the Council had not been negligent. His Honour also held that Mrs Aldridge had not satisfied the requirements of s 16 of the Civil Liability Act 2002 (NSW) as she had not established that the severity of her non-economic loss was "at least 15% of a most extreme case". Mrs Aldridge incurred out-of-pocket expenses in relation to her injuries amounting to $1,000. On the basis of his Honour's findings, the $1,000 was the only sum that Mrs Aldridge would have recovered had she established that the Council was negligent. 4 Mrs Aldridge sought leave to appeal to this Court and, as I have noted, her application was heard concurrently with her appeal. On 8 November 2005 this Court (comprised of Giles JA, Hunt AJA and myself) dismissed the application for leave to appeal. By reason of the existence of a prior Calderbank offer, Mrs Aldridge was ordered to pay costs on an indemnity basis. 5 In delivering the judgment of the Court in the application for leave, Giles JA said: "For reasons which we think will be apparent from the transcript of the exchanges with counsel for the claimant, we do not think that there is any prospect of a successful appeal as to damages nor in our view is there any real case for liability. Quite the contrary, we consider that the case below should be categorised as hopeless. We should say that, although it was in the end not really pressed, there is nothing to indicate any denial of natural justice by the judge. In our opinion the application for leave to appeal should be dismissed …" 6 Following the dismissal of Mrs Aldridge's claim, the Council moved the Court for the following orders: "1. Varying the costs order made by this Honourable Court on 8 November 2005 (that the Third Respondent [Opponent] pay [the Claimant's] costs of the Third Respondent's [Opponent's] Application for Leave to Appeal which was heard and determined by this Honourable Court of Appeal on 8 November 2005), and in lieu thereof: 1.1 Directing the First and Second Respondents [Opponents] pursuant to s 198M of the Legal Profession Act NSW 1987, to indemnify [the Claimant] against the whole of the costs payable by [the Claimant] to its legal representatives in respect of and associated with the Third Respondent's [Opponent's] Application for Leave to Appeal which was heard and determined by this Honourable Court of Appeal on 8 November 2005; or 1.2 … 2. The [Claimant's] costs of and associated with this Notice of Motion be paid by the First and Second Respondents [Opponents]." 7 The first respondent is the solicitor who had the conduct of Mrs Aldridge's application for leave to appeal and appeal and the second respondent is the barrister who appeared as counsel for Mrs Aldridge in these matters. 8 The Council's notice of motion was referred to me under s 46(2)(b) of the Supreme Court Act 1970 for determination. By consent, the parties' arguments were presented by way of written submissions. 9 It is common ground between the parties that the Legal Profession Act governs the Council's application. Three sections of the Act are of particular relevance, namely, ss 198J, 198M and 198N. 10 Section 198J relevantly provides: "(1) A solicitor or barrister must not provide legal services on a claim … for damages unless the solicitor or barrister reasonably believes on the basis of provable facts and a reasonably arguable view of the law that the claim or the defence (as appropriate) has reasonable prospects of success. (2) A fact is provable only if the solicitor or barrister reasonably believes that the material then available to him or her provides a proper basis for alleging that fact. … (4) A claim has reasonable prospects of success if there are reasonable prospect of damages being recovered on the claim. … (5) Provision of legal services in contravention of this section constitutes for the purposes of this Division the provision of legal services without reasonable prospects of success ." 11 Section 198M relevantly 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) … (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. (2) The Supreme Court may on the application of any party to proceedings on a claim for damages make an order that the court in which proceedings on the claim are taken could make under this section." 12 Section 198N relevantly provides: "(1) … (2) If the Supreme Court (when the Supreme Court is not the trial court) is satisfied, either as a result of a finding of the trial court or otherwise on the basis of the judgment of the trial court, that the facts established by the evidence before the trial Court do not form a basis for a reasonable belief that the claim or the defence had reasonable prospects of success, there is a presumption for the purposes of this Division that legal services provided on the claim or the defence (as appropriate) were provided without reasonable prospects of success. (3) A presumption arising under this section is rebuttable and a solicitor or barrister who seeks to rebut it bears the onus of establishing that at the time legal services were provided there were provable facts (as provided by s 198J) that provided a basis for a reasonable belief that the claim or the defence on which they were provided had reasonable prospects of success." 13 In my opinion, the phrase in s 198M(1), "a court in which proceedings are taken on a claim for damages", covers an application in the Court of Appeal for leave to appeal against an award of damages. Thus, in my opinion, s 198M confers on the Court of Appeal jurisdiction to make an order in terms thereof in respect of applications made to it for leave to appeal against judgments of other courts. The first two opponents accept that this Court has jurisdiction under s 198M "to make orders of the kind sought by the claimant". 14 Section 198M and related sections have been the subject of a careful exposition by McColl JA (with whom Hodgson JA and myself agreed) in Lemoto v Able Technical Pty Ltd [2005] NSWCA 153. Her Honour said at [132] that in the context of s 198(J): "[T]he question becomes whether the solicitor or barrister held a reasonable belief that the provable facts and a reasonably arguable view of the law meant that the prospects of recovering damages or defeating a claim or obtaining a reduction in the damages claimed were 'fairly arguable'. These are matters about which reasonable minds might differ. The question will be whether the solicitor or barrister's belief that they had material which objectively justified proceeding with the claim or the defence 'unquestionably fell outside the range of views which could reasonably be entertained': Medcalf v Mardell [2003] 1 AC 120 at [40] per Lord Steyn." 15 The first two opponents filed written submissions in which they pointed out that the trial judge made no finding as to why and how the accident occurred. The written submissions refer to two particular possibilities in this respect. One is that a bolt in the bench had corroded at one end and gave way when Mrs Aldridge sat down. The other is that vandals removed a bolt or bolts from the bench (there was evidence that it was "not uncommon for metal parts to be removed from wooden park furniture …"). The first two opponents submit that it was reasonably arguable that the bench collapsed by reason of one or other of these possible causes and that, had the Council exercised due care, neither would have materialised. 16 The first two opponents contend that, if the bolt was corroded, "it is obviously likely that an inspection would have revealed the corrosion"; on the other hand, if the metal fittings had been removed deliberately, a prudent Council (in the light of the past removal of fittings) would arguably have taken steps to make the fittings difficult to remove. In the latter respect, the first two opponents draw attention Mrs Aldridge's amended statement of claim which asserted that Council was negligent in its "failure to feather [ie widen or deform] the bolts at the nut ends at the time of construction to prevent removal of bolts". 17 An overriding problem for the first two opponents, however, is that, at trial, no evidence was adduced on Mrs Aldridge's behalf to establish what had caused the bench to collapse. It was not shown that the collapse was caused by the corrosion of a bolt, or by a missing bolt, or by a design defect, or simply by reason of a weakening of the bench resulting from ordinary wear and tear over the passage of time. In regard to the latter possibility, the bench had been in constant use for 15 years. 18 As it could not be proved what caused the collapse, it could not be proved that it was caused by some act or omission on the Council's part. This gap in the evidence meant that an essential element of Mrs Aldridge's cause of action was missing. 19 Mrs Aldridge's case as to the liability of the Council suffered from other serious and fundamental defects. 20 In commencing his argument in the application for leave, the second opponent said: "Essentially, the plaintiff complains that his Honour, in finding a verdict [and] judgment for the defendant, denied the plaintiff natural justice and procedural fairness in the way that he approached determining issues of damages and liability in the case. … We also contend that his Honour in any event was in error in the decision he made that the plaintiff did not exceed the relevant threshold for an award of non-economic loss under the Civil Liability Act. We also contend his Honour in any event was in error in the decision he made that the Council had not carried out an adequate inspection." 21 As regards the argument that there had been a denial of natural justice, two points can be made. First, Giles JA, in giving the judgment of the Court of Appeal, said, "although it was in the end not really pressed, there is nothing to indicate any denial of natural justice by the judge". Secondly, the first two opponents' written submissions do not raise this issue. 22 In the application for leave, the second opponent said that there was no evidence about inspection. Mrs Aldridge's own expert testified that he was not certain that damage to the bolts "would have been fully visible at a cursory inspection". Importantly, the evidence did not establish that, at the time of the accident, the bolts were damaged in any way. The second opponent conceded that the inspection point was "weak"; in fact, it could not possibly succeed. 23 In the application for leave, the second opponent said that Mrs Aldridge's argument on liability was "based on design". But this argument faced the insuperable obstacle that there was no evidence as to who had designed or constructed the benches. Further, there was no evidence as to whether the Council knew or should have known that the design was defective. There was no evidence of any previous problem with the bench. The first two opponents' written submissions make no mention of the design argument. 24 As regards the argument that the Council should have taken steps to prevent bolts from being removed from the bench, it was not proved at trial that, at the time of the accident, a bolt was missing from the bench. Moreover, no case of feathering the bolts was actually run before the trial judge. 25 It is not necessary, in the circumstances, to deal with the problems that Mrs Aldridge faced in attempting to satisfy the requirements of s 16 of the Civil Liability Act. 26 Having re-examined the material I am satisfied that there is no reason for me to alter my concurrence with the view expressed by the Court of which I was a member, namely, that the case below was "hopeless". Simply put, the evidence adduced at trial did not establish necessary elements of Mrs Aldridge's cause of action. This should have been obvious prior to the launching of Mrs Aldridge's application for leave to appeal and her appeal. 27 I am satisfied, in accordance with s 198N of the Act, that the facts established by the evidence before the trial Court do not form a basis for a reasonable belief that Mrs Aldridge's claim had reasonable prospects of success. It follows that the presumption referred in s 198N applies and has not been rebutted. 28 Despite concluding that the first two opponents provided legal services to Mrs Aldridge without reasonable prospects of success, I retain a discretion whether or not to make an order against them in terms of s 198M. In exercising that discretion I take into account the observations of McColl JA in Lemoto at [138], namely: "When considering whether to make a s 198M order the Court should, in my view, consider the nature of the contravention of Division 5C which has been established, the possibly serious implications of making the costs order and determine whether it is just, in all the circumstances, that a repayment and/or indemnity order should be made and whether it should be as to the whole or part of the costs." 29 I see no redeeming feature in this case. There is no question of difficult law that was involved in the decision whether or not to prosecute Mrs Aldridge's claim. No account appears to have been taken of the need to prove the facts necessary to support her cause of action (see Lemoto at [115]). 30 Mrs Aldridge is a 55 year-old Aboriginal woman who at the time of the trial was unemployed. She said that she worked when she was "younger," doing "bean picking and corn pulling". She does not seem to have been employed for a number of years. According to a report by Dr Michael Price dated 11 June 1998, as at that date Mrs Aldridge was living with friends in a tin shed with no heating and only one or two blankets. 31 In these circumstances, the prospect of Mrs Aldridge paying the costs of the application for leave to appeal was zero. At least by the time that trial came to an end, the missing elements in Mrs Aldridge's cause of action and the insuperable defects in her case had become obvious. Any appeal would inevitably fail. The case fell into the category described by McColl JA in Lemoto at [142], namely: "There is no entitlement to legal representation in such cases. It is a matter for the client to determine whether to pursue the claim or defence without such services". The first two opponents were reckless, in the light of s 198M, in continuing to prosecute an appeal on Mrs Aldridge's behalf. 32 I propose to exercise my discretion in favour of the Council and to make an order in terms of the notice of motion. I therefore make an order in terms of paragraphs 1 (on the basis that paragraph 1.2 is excised from it) and 2 of the Council's notice of motion of 30 November 2005. ********** 22/02/2006 - Name of Senior Counsel for Claimant spelt incorrectly - Paragraph(s) - DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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