New South Wales Supreme Court CITATION : Wade v Muir (No 2) [2009] NSWSC 991 HEARING DATE(S) : 31 August 2009 JUDGMENT DATE : 23 September 2009 JUDGMENT OF : Harrison J DECISION : Plaintiff to pay LawCover's costs of the plaintiff's unsuccessful application to join LawCover as a defendant. CATCHWORDS : COSTS – unsuccessful application to join insurer as a defendant - where plaintiff's cause of action defective – where insurer allegedly aware of defect – whether insurer either withheld information or whether its conduct brought about the proceedings – plaintiff in possession of relevant information but proceeded in any event – plaintiff ordered to pay costs of the motion LEGISLATION CITED : Law Reform (Miscellaneous Provisions) Act 1946 Legal Profession Act 1987 CATEGORY : Procedural and other rulings CASES CITED : The Owners – Strata Plan No 50530 v Walter Construction Group Ltd (In Liquidation) [2007] NSWCA 124; (2007) 14 ANZ Insurance Cases 61-734 Dawn Florence Wade (Plaintiff) PARTIES : Brian Muir (First Defendant) Donald Wakeling (Second Defendant) FILE NUMBER(S) : SC 20026/2008 COUNSEL : G C Jones (Plaintiff) G Curtin (LawCover) SOLICITORS : Oliveri Lawyers (Plaintiff) HWL Ebsworth Lawyers (LawCover) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROFESSIONAL NEGLIGENCE LIST HARRISON J 23 September 2009 20026/2009 Dawn Florence Wade v Brian Muir and Donald Wakeling (No 2) JUDGMENT 1 HIS HONOUR: The plaintiff made an unsuccessful application to join LawCover Pty Ltd as a defendant in the proceedings pursuant to s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946. LawCover now seeks costs of that unsuccessful application. The plaintiff resists that course and has made detailed submissions on why quite different orders should be made. These include submissions that LawCover should pay the plaintiff's costs. 2 The plaintiff contends that she would not have commenced the application to join LawCover as a defendant in these proceedings if she had known beforehand that the first defendant had not held a practising certificate issued by the Law Society in the period from 1 July 2001 to 10 September 2001. The plaintiff asserts that she did not discover this fact until informed by letter dated 18 August 2009 from Ray Collins of the Law Society. Mr Collins is the Manager of Professional Standards. Background 3 The brief facts would appear to be as follows. The plaintiff made inquiries of the Law Society in January 2008 about whether or not the first defendant had held a practising certificate for the period between 1 July 2001 and February 2002. The proceedings were commenced on 6 February 2009. The notice of motion seeking an order that LawCover be joined as a defendant was filed on 16 March 2009. The motion was heard by me on 5 June 2009 and decided on 29 July 2009: see [2009] NSWSC 723. The Law Society informed the plaintiff of the practising certificate status of the first defendant in letters dated 18 August 2009 and 19 August 2009. 4 The plaintiff's approach has been conveniently summarised in a letter dated 25 August 2009 from her solicitors to LawCover's solicitors, which is in the following relevant terms: "Our client has instructed us that she does not wish to proceed with her application pursuant to section 51 of the Insurance Contracts Act to join your client LawCover Pty. Limited as a defendant in the above proceedings. Our client's above instructions are based on the fact that she only found out from The Law Society on or about the 19th instant that the first defendant in the above proceedings, Mr Brian Muir (Mr Muir) did not hold a practising certificate issued to him by the Law Society of New South Wales for the period from 30 June, 2001 to 10 September, 2002. Please find enclosed copy of letter dated the 18th instant from The Law Society's professional standards department to our client. It would follow that as Mr Muir did not hold a practising certificate for the above period that he was not entitled to practice as a solicitor or that he could lawfully practice as a solicitor for the above period let alone for the purpose of the Legal Profession Act he could not be regarded as a solicitor for the above period. We note however in your letter to us of the 4th instant that you mention that you had been instructed by your client that it issued Mr Muir with certificates of insurance for the periods from 1 July, 2001 to 30 June, 2002 and 1 July, 2002 to 30 June, 2003. Although Mr Muir was covered by a certificate of insurance for the above period he was unlawfully practising as a solicitor during the above period. Of further concern is the fact that after we served your client with our client's statement of claim we wrote to Colin Biggers Paisley on the 17th September, 2008. Your client on receiving a copy of this letter and having being [ sic ] served with our client's statement of claim did not in its letter dated the 19th September, 2008 alert us to the fact that Mr Muir did not hold a practising certificate for the above period bearing in mind that the statement of claim disclosed that the events giving rise to our client's cause of action against Mr Muir apparently occurred prior to the 30th June, 2002. We believe that your client could have ascertained the above fact bearing in mind it is a subsidiary of the Law Society and is a related entity of the Law Society. Please inform us as to whether your client has been aware that Mr Muir did not hold a practising certificate for the above period and if so when did your client first become aware? We also refer you to paragraphs 2, 3, 17,18 and 22 of our client's affidavit sworn 28th May, 2009 wherein she outlines in general her enquiries to ascertain whether or not Mr Muir held a practising certificate for the above period and the difficulties she encountered in making such enquiries. Our client instructs that had she been made aware by your client after it was served with our client's statement of claim that Mr Muir had not been issued by the Law Society with a practising certificate for the above period then she would not have proceeded with her application to join your client as a defendant in the above proceedings. We believe that your client was placed in a much better position to get access to information viz that Mr Muir did not hold a practising certificate for the above period. We believe your client's apparent failure to access the above information or if it did access such information your client has caused our client to proceed with her above application against your client lulled into the belief that Mr Muir had been issued by the Law Society with a practising certificate entitling him to practice as a solicitor for the above period when clearly this was not the case." 5 There was no reply to that letter. However, LawCover's response can be reduced to the following propositions that are derived from its written submissions. 6 First, as LawCover did not take the point that the plaintiff's application should fail because the first defendant did not hold a practising certificate at the relevant time, the plaintiff cannot advance her own failure to ascertain the true position as a basis either for a costs order in her favour or for her resistance to an application that she pay LawCover's costs. 7 Secondly, the plaintiff's application was dismissed on other grounds. This submission is to the effect that whatever may be the relevance or significance of the fact that the first defendant did not hold a practising certificate at the relevant time, the plaintiff failed in her application to join LawCover as a defendant in the proceedings for reasons that were wholly unrelated to the practising certificate issue. Despite the fact that the plaintiff's application was, in effect, doomed to fail on this basis alone, the plaintiff persisted with it. She did so despite being made aware of The Owners – Strata Plan No 50530 v Walter Construction Group Ltd (In Liquidation) [2007] NSWCA 124; (2007) 14 ANZ Insurance Cases 61-734. That suggests, according to LawCover's submissions, that the plaintiff's contention that she would not have proceeded with the application if she had been informed of, or had known, the true position in relation to the first defendant's practising certificate status, ought to be rejected as either disingenuous or simply irrelevant. 8 Thirdly, the plaintiff bore the onus of proof in respect of all relevant facts in issue, including the establishment of an arguable cause of action against the first defendant that would have triggered an indemnity under the LawCover policy. The plaintiff made her own inquiries in January 2008, presumably for that purpose. She relied upon the response that she received to that inquiry on the present application. The plaintiff made further inquiries by letter dated 17 August 2009, to which her submissions refer. The Law Society advised the plaintiff the following day in writing that the first defendant "did not hold a practising certificate issued to him by the Law Society of New South Wales for the period from 30 June 2001 to 10 September 2002". LawCover submitted that the plaintiff could have made the same (successful) inquiries at any time. 9 Fourthly, there was no independent basis upon which to contend that LawCover was in effect subject to an obligation to make inquiries on behalf of the plaintiff in anticipation that she was or may have been unaware of some difficulty with her case. The burden of this submission was to the effect that the proceedings are and remain adversary in nature and that no occasion has arisen, either as a matter of fairness or professional comity, that would have obliged LawCover either to do or say anything on pain of an adverse costs order if it failed to do so. 10 Finally, there is no evidence from the plaintiff that she would not have commenced or continued with the application to join LawCover if she had known or subsequently become aware of the true facts. Submissions by her counsel in all of the circumstances are not sufficient for her purposes. That submission is maintained by LawCover in the face of the plaintiff's additional submissions in the following terms: "1. It is clear that the plaintiff before she commenced these proceedings was under the belief that Mr Muir held a practising certificate issued by the Law Society from July, 2001 to February, 2002 following her enquiry with a receptionist at the Law Society which enquiry is deposed to in paragraph 3 of the plaintiff's affidavit. 2. It was not until around 1 May, 2009 after she read the ADT decision regarding Mr Muir heard on 14 July, 2008 and decided on 25 August, 2008 wherein the ADT observed: 'The Respondent practitioner (Mr Muir) did not practice between 1 July, 2001 and 10 September, 2002.' (paragraph 16 of plaintiff's affidavit) that the plaintiff began to have some real concerns as to whether Mr Muir held a practising certificate issued to him by the Law Society during the period referred to in paragraph 1 above. 3. The plaintiff to her credit immediately after becoming aware of the ADT's observation referred to in paragraph 2 above made an enquiry with the Law Society's receptionist and not being satisfied with the response she received from such enquiry she then wrote to the Office of the Legal Services Commissioner requesting if they could establish if Mr Muir held a practising certificate for the period referred to in paragraph 1 above. (paragraphs 17 and 18 of the plaintiff's affidavit)." 11 The plaintiff's affidavit both refers to and annexes a copy of the ADT decision. It does not refer to whether or not the plaintiff received a reply from the Legal Services Commissioner to her letter dated 6 May 2009. 12 The plaintiff's notice of motion came before me on 5 June, 10 July, 5 August, 14 August and 31 August 2009. It was not until the last of these occasions that the plaintiff made any mention of the proposition that she would neither have commenced nor continued with her application to join LawCover as a defendant if she had been aware of the fact that the first defendant had not practised as a solicitor for the period between 1 July 2001 and 10 September 2002. By her own account, the plaintiff knew the position as early as approximately 5 May 2009, which was the day before she wrote to the Legal Services Commissioner. Her present complaint is not that she did not know the true position but rather that she was not informed by LawCover after she filed her motion to join it whether or not it was of any potential significance to her application. 13 By letter dated 4 August 2009, the solicitors for LawCover advised the plaintiff's solicitor that LawCover issued the first defendant with certificates of insurance for the periods 1 July 2001 to 30 June 2002 and 1 July 2002 to 30 June 2003. Copies of the relevant policies were provided. It apparently remains controversial for the plaintiff's present purposes, however, whether the first defendant was either an insured solicitor or an insurable solicitor during the period in question. Section 41 of the Legal Profession Act 1987 (now repealed) provided as follows: " 41 Solicitor to be insured and to make contributions (1) The Law Society Council must not issue a practising certificate to an insurable solicitor unless it is satisfied: (a) that there is, or will be, in force with respect to the solicitor an approved insurance policy, and . . ." 14 Section 39 of that Act defined "insurable solicitor" to mean "a solicitor required by the regulations to be an insured solicitor". Consideration 15 The plaintiff's legal submission is encapsulated in the following paragraph of her solicitor's letter dated 25 August 2009 referred to earlier: "In Rowland v Portus (1906) 6 SR (NSW) 74 the defendant withheld information as to the execution of certain documents, alleged to be testamentary documents. The plaintiffs lacking the information the defendants could have provided, commenced an unsuccessful administration action. Despite the plaintiff's failure in the action, the court ordered their costs to be paid out of the estate, principally because the defendant withheld the true facts from the plaintiffs. We also refer you to the judgment of Kaye J. in the Victorian Court of Appeal in the case of Verna Trading Pty. Ltd. v New India Assurance Co. Ltd [1991] 1 VR 129 at pp. 152-6 which was supported by McGarvie J. wherein His Honour opined in effect that in exceptional cases that [ sic ] a successful defendant can be ordered to pay the costs of the plaintiff where the conduct of the defendant has brought about the proceedings. It is submitted that a case can be mounted that your client be ordered to pay at least a significant amount of our client's costs in her undertaking her application to join your client as a defendant." 16 In the present case, by way of contrast, the plaintiff did not lack the information that LawCover could have provided. The plaintiff in fact had that information from as early as shortly before 6 May 2009, which was the date of the letter from the plaintiff's solicitor to the Legal Services Commissioner. What the plaintiff apparently lacked was an appreciation that the information had, or may have had, some significance. This follows from the fact that the application was continued after the information was received in early May 2009 when the ADT decision was read. Not only did the plaintiff know it by then but she also annexed a copy of the ADT decision to the affidavit upon which she relied in support of her motion. The information is contained in the opening paragraph of the Tribunal's Reasons for Decision. The plaintiff's affidavit demonstrates that she knew the true facts. It does not refer to her lack of appreciation of the significance of this information or to the fact that she would not have sought to join LawCover if she had known the true facts. No mention of those facts was made in any allegedly significant or relevant context until raised in response to LawCover's present application for costs of the motion. 17 Nor is this a case where the conduct of LawCover could be said to have brought about the proceedings, meaning the motion to join it as a defendant. The proceedings were brought about by the plaintiff's earlier failure to make the inquiries that she later made, or her earlier failure to appreciate the significance of the information they produced. The plaintiff has only sought to promote the information to some level of significance now when faced with an application for costs, which could and arguably would have been wholly obviated if the application to join LawCover as a defendant had been considered more closely beforehand. On one view, the plaintiff's affidavit clearly demonstrates that even when the information was in her possession she continued with the application notwithstanding. In the circumstances of this case it is not open to the plaintiff to turn to LawCover and say in effect, "you should have told me to withdraw my motion". When LawCover did this in another context, by referring the plaintiff to Walter Construction Group, she ignored the warning. The plaintiff was in my opinion determined to proceed with the application no matter what she was told or by whom. Conclusion and orders 18 The plaintiff's application to join LawCover was unsuccessful. No basis has been shown for any unusual costs order to be made. The plaintiff should pay LawCover's costs of that application. ********** 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.