District Court New South Wales Medium Neutral Citation: Homsi v Pasquale (No. 3) [2018] NSWDC 279 Hearing dates: 27 September 2018 Date of orders: 05 October 2018 Decision date: 05 October 2018 Jurisdiction: Civil Before: Gibson DCJ Decision: (1) Plaintiff pay the respondent's costs of the appearances on 22 and 24 May 2018 in relation to the notice to produce served by the respondent, Mr Jason Di Michiel trading as Premier Compensation Lawyers Pty Ltd. (2) Application by the respondent, Mr Jason Di Michiel trading as Premier Compensation Lawyers Pty Ltd, for costs of the motion filed on 27 February 2018 dismissed, with each party to pay his, her or its costs of the application, including the hearing on 28 September 2018. Catchwords: COSTS – unsuccessful application for costs against the solicitor for the defendant – whether costs should follow the event – whether the solicitor's conduct "invited" the application - "disentitling conduct" – each party to pay own costs of the application Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56 – 62, 98 and 99 Uniform Civil Procedure Rules 2005 (NSW), rr 42.1, 42.34 and 42.35 Cases Cited: Arian v Nguyen [2001] NSWCA 5 Bendigo and Adelaide Bank Limited v Jaeger (District Court of New South Wales, 23 August 2017) Cha v Oh (No 13) (2009) 9 DCLR (NSW) 67 Cretazzo v Lombardi (1975) 11 SASR 1 Homsi v Nabulsi [2017] NSWDC 16 Homsi v Pasquale [2017] NSWDC 371 Homsi v Pasquale (No. 2) [2018] NSWDC 276 Mahenthirarasa v State Rail Authority of New South Wales (No 2) (2008) 72 NSWLR 273 Moseley v AB (No 2) [2017] NSWSC 1812 Ritter v Godfrey [1920] 2 KB 47 Ryde Developments Pty Ltd v Property Investors Alliance Pty Ltd (No 2) [2018] NSWCA 40 Tomanovic v Global Mortgage Equity Corp Pty Ltd (No 2) (2011) 288 ALR 385 Waterman v Gerling (Costs) [2005] NSWSC 1111 Texts Cited: P. Taylor, Dr E. Elms, M. Meek SC, The Hon Justice G. Bellew, Ritchie's Uniform Civil Procedure NSW (LexisNexis, Australia) Category: Costs Parties: Plaintiff/Applicant: Souraya Homsi Defendant: Felli Pasquale Respondent: Jason Di Michiel Representation: Counsel: Plaintiff/Applicant: Mr Purkiss Defendant: Mr A J J Renshaw Respondent: Ms A Horvath Solicitors: Plaintiff/Applicant: Drexler & Partners Litigation and Compensation Lawyers Defendant: Hall & Wilcox Lawyers Respondent: Kennedys (Australasia) Pty Ltd File Number(s): 2016/200013 Publication restriction: None Judgment The application before the court 1. In my judgment Homsi v Pasquale (No. 2) [2018] NSWDC 276, I dismissed a notice of motion seeking orders pursuant to ss 98 and 99 Civil Procedure Act 2005 (NSW) for the plaintiff's former solicitor (hereafter "Mr Di Michiel") to pay the costs of Drexler Litigation Lawyers including counsel fees and the defendant's costs and disbursements on an indemnity basis. Mr Di Michiel now brings an application for costs of the unsuccessful motion. A preliminary application by the plaintiff 1. As a preliminary matter, I note that Mr Purkiss, who appeared for the plaintiff, sought leave to withdraw from the proceedings. 2. I have already refused one application from Drexler Litigation Lawyers (Homsi v Pasquale [2017] NSWDC 371) made on the day of the hearing. 3. Applications of this kind are becoming increasingly common, as Letherbarrow SC DCJ, the List Judge of this court has observed (see Bendigo and Adelaide Bank Limited v Jaeger (District Court of New South Wales, 23 August 2017)). The circumstances in which a legal representative would be entitled to seek orders permitting withdrawal in the course of closing submissions would need to be extreme, as the authors of Ritchie's Uniform Civil Procedure NSW (LexisNexis, Australia) note at [7.29] citing Cha v Oh (No 13) (2009) 9 DCLR (NSW) 67. Mr Purkiss was unable to identify any factors warranting his withdrawing from the case, and his application was accordingly refused. Mr Di Michiel's application for costs 1. Mr Di Michiel seeks the following orders, on the basis that he successfully defended the application, brought by the plaintiff and supported by the defendant, that he should pay the costs of the trial: 1. The plaintiff and the defendant to pay the respondent's costs of the notice of motion filed on 27 February 2018 on the ordinary basis, excluding the costs which were reserved on 24 May 2018, subject to the respondent not recovering against either the plaintiff or the defendant any costs which the respondent has already recovered by way of settlement with the other party. 2. The plaintiff to pay the respondent's costs of the appearances on 22 and 24 May 2018, which were reserved on 24 May 2018. 1. These orders were sought on the following bases (see paragraph 2 of the submissions made on behalf of Mr Di Michiel): 1. There is no doubt that on "the event" (being this motion) the respondent was successful and that status ordinarily results in an order that the costs of the successful party be paid by the unsuccessful party or parties. 2. The onus lies on the losing party or parties to establish a basis for any departure from the general rule: Waterman v Gerling (Costs) [2005] NSWSC 1111 at [10]. Ms Horvath on behalf of Mr Di Michiel submits that there are no circumstances which are sufficiently "special" to justify depriving him of his costs. 3. Whilst the motion was filed by the plaintiff, there can be no doubt that each of the plaintiff and the defendant were moving parties, and each should be liable for the respondent's costs on a joint and several basis. 1. The application is opposed. Mr Purkiss relied upon earlier submissions by his counsel. Mr Renshaw's submissions emphasised that the defendant had been caught up by the plaintiff's application as well as emphasising the disentitling conduct of Mr Di Michiel (Ritter v Godfrey [1920] 2 KB 47), ranging from his failure to commence proceedings for the same plaintiff in time (which resulted in the dismissal of her otherwise good claim: Homsi v Nabulsi [2017] NSWDC 16) to the breaches of solicitors' obligations demonstrated by his staff's evidence to the extraordinary circumstances in which his father, a retired doctor, filled out certificates for Mr Di Michiel's clients in Mr Di Michiel's office. Mr Renshaw described the certificate Dr Di Michiel provided in this case as "perjured", given the inconsistency of dates. He also complained that counsel who appeared for him on the application had refused to inform the court, when asked by me before the application began, whether costs would be sought if the motion failed. 2. While Ms Horvath had a ready answer for the second of these arguments (namely that the costs information was provided to the plaintiff and defendant in Calderbank letters), she never answered the first challenge to my satisfaction. She sought to argue that my refusal to order costs personally against Mr Di Michiel amounted to a complete exoneration of her client's conduct, and that the perceived impropriety by Dr Di Michiel, which caused Mr Di Michiel to withdraw shortly before the hearing, should be sheeted home to Dr Di Michiel and not to Mr Di Michiel. The relevant principles of law 1. The discretion to award costs was previously regarded as unfettered (Cretazzo v Lombardi (1975) 11 SASR 1 at [11] per Bray CJ, cited with approval in Arian v Nguyen [2001] NSWCA 5 at [41], [44] and [45] per Ipp AJA). The demand for greater efficiency in litigation has led the courts to place significant qualifications on the former approach of the courts: ss 56 – 62 Civil Procedure Act 2005 (NSW). In addition, where the conduct of a solicitor has been less than it should be, that may be reflected in an order for costs against the solicitor personally: ss 98 and 99 Civil Procedure Act 2005 (NSW). 2. The principle that costs should follow the event (UCPR r 42.1) is, like many other principles, best demonstrated by analysis of the factors relevant to the ousting of this presumption, taking these relevant factors into account. In Tomanovic v Global Mortgage Equity Corp Pty Ltd (No 2) (2011) 288 ALR 385 at [97]-[98], Campbell JA set out the following (non-exhaustive) list of such factors: "[97] In Oshlack v Richmond River Council (1998) 193 CLR 72 McHugh J said, at [69], 97–98: In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874, Devlin J formulated the relevant principle as follows: No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct. "Misconduct" in this context means misconduct relating to the litigation: King & Co v Gillard & Co [1905] 2 Ch 7; Donald Campbell & Co Ltd v Pollak [1927] AC 732 at 812, or the circumstances leading up to the litigation: Bostock v Ramsey Urban District Council [1900] 2 QB 616. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation: Jones v McKie [1964] 1 WLR 960 ; [1964] 2 All ER 842; Bostock [1900] 2 QB 616 at 622 625 and 627; unnecessarily protracts the proceedings: Forbes v Samuel [1913] 3 KB 706; succeeds on a point not argued before a lower court: Armstrong v Boulton [1990] VR 215 at 223; prosecutes the matter solely for the purpose of increasing the costs recoverable: Hobbs v Marlowe [1978] AC 16; or obtains relief which the unsuccessful party had already offered in settlement of the dispute: Jenkins v Hope [1896] 1 Ch 278. [98] Though McHugh J's judgment was a dissenting judgment, I did not see anything in the joint judgment of Gaudron and Gummow JJ or in the judgment of Kirby J (all three of whom made up the majority) that is to the contrary. Its statement of principle seems to me, with respect, to be correct as far as it goes. However, because it states when the court may properly depart from the usual order as to costs it still leaves a discretion as to whether, in any particular case that falls within the scope of the examples that McHugh J gives, it is appropriate for the court actually to depart from the usual order as to costs. Further, the list of examples that McHugh J gives does not purport to be an exhaustive listing of the circumstances in which an overall successful party ought not receive costs, or ought bear costs of the other side. Nor does his Honour seek to differentiate the sort of circumstances in which an overall successful party should not receive costs (with the effect that each side bears its own costs) from the circumstances in which the overall successful party should pay the costs of the loser." 1. Other factors may also be of relevance, such as the size of the damages, particularly where the amount in question falls below prescribed amounts as is the case with damages awards in the Supreme and District Courts: see UCPR rr 42.34 and 42.35. In addition, the "event" triggering the costs order may be regarded as not being established where a party has received only nominal damages, unless some other legal right is vindicated by the judgment. 2. A further relevant factor is often taken into account. When determining whether costs should follow the event, attention should be paid to the different roles played by plaintiffs and defendants. Courts may take into account a defendant is not a moving party to litigation but is brought into the litigation against the defendant's will: Ritter v Godfrey at 53 per Lord Sterndale MR. His Lordship stated: "But it is clear that consideration sufficient to justify a refusal of costs to a plaintiff are not necessarily sufficient in the case of a defendant, for the former initiates the litigation, while the latter is brought into it against his will. Speaking generally, I think that it may be said that, in order to justify an order refusing a defendant his costs, he must be shown to have been guilty of conduct which induced the plaintiff to bring the action and without which it would probably not have been brought. This is also stated by Vaughan Williams LJ in Bostock v Ramsay Urban District Council [1900] 2 QB 616 at 625 and is generally may be tested by the questions stated in the judgment of the two other members of the court, Smith and Romer LJJ, in the same case, i.e. was the defendant's conduct such as to encourage the plaintiff to believe that he had a good cause of action." 1. These principles have particular relevance to these proceedings in that the suspicions of the defendant were aroused by the extraordinary conduct of Dr Di Michiel (Mr Di Michiel's father) in holding consultations with patients in his son's legal firm as opposed to in a medical practice, and where Dr Di Michiel was himself a retired medical practitioner, and by other proceedings involving the defendant's insurer where similar events had occurred (some of those certificates were tendered during the hearing). 2. What is "disentitling conduct"? In Moseley v AB (No 2) [2017] NSWSC 1812, Walton J set out the relevant principles at [71]-[73] as follows: "[71] The most common circumstance in which the general rule may be displaced is evidence of disentitling conduct on the part of the successful party: Oshlack v Richmond River Council at [40] and [69]; G R Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263. The disentitling conduct does not necessarily need to amount to misconduct; it may simply be any conduct "calculated to occasion unnecessary expense": Lollis v Loulatzis (No 2) [2008] VSC 35 at [29]; Keddie v Foxall [1955] VLR 320 at 323–4. [72] In Commonwealth v Gretton [2008] NSWCA 117, Hodgson JA addressed the principles of fairness underlying the making of a costs order, which may at times warrant departure from the general rule (at [121]): [121] In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach. [73] Further factors identified as relevant to informing judicial discretion were identified in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 at [97]–[98] (per Campbell JA) (see also, Oshlack v Richmond River Council at [69] (McHugh J); and Ritter v Godfrey [1920] 2 KB 47). They include, but are not limited to, the following: (1) whether the successful party effectively invited the litigation; (2) whether the successful party unnecessarily protracted the proceedings. (3) whether the successful party succeeded on a point not argued before a lower court; (4) whether the successful party prosecuted the matter solely for the purpose of increasing the costs recoverable; and (5) whether the successful party had obtained relief which the unsuccessful party had already offered in settlement of the dispute." 1. Ms Horvath's submission is that "none of the factors" identified above would justify displacing the general rule. However, the gravamen of the claims put on behalf of both the plaintiff and the defendant is that the disentitling conduct of Mr Di Michiel in causing her to lose a claim where she had genuine entitlements (Homsi v Nabulsi), arrange for his father to fill out a medical certificate in his office to start the claim and withdraw without warning in the weeks before the hearing by reason of Dr Di Michiel's behaviour, amounted to conduct which effectively "invited" the litigation in the sense identified by Ritter v Godfrey. The wrongful acts of Mr Di Michiel were inextricably tied up with the conduct of the trial by reason of his role as the plaintiff's solicitor, and not a distinct and separable issue of the kind identified in Ryde Developments Pty Ltd v Property Investors Alliance Pty Ltd (No 2) [2018] NSWCA 40 at [17]-[18]. 2. As noted above, Ms Horvath, in her written submissions (paragraphs 10 and 11) and address in reply, essentially relies upon her client's success in the notice of motion, which meant that none of the particulars advanced by the plaintiff had been sufficient to warrant a costs order against him. 3. However, success in the litigation does not guarantee costs will follow the event. In Mahenthirarasa v State Rail Authority of New South Wales (No 2) (2008) 72 NSWLR 273 at [10], Basten JA (with whom Giles and Bell JJA agreed) stated: "[10] It does not follow, even where the discretion is subject to the principle that costs follow the event, as required by r 42.1, that costs will inevitably be awarded in favour of the successful party. In Latoudis, Mason CJ gave examples of circumstances where that would not follow. One was where the successful defendant by his or her conduct after the event said to constitute the offence, had brought the prosecution upon himself or herself; a second was where the defendant, having had an opportunity to explain the events before a charge was laid, declined to do so, and a third was where the defence involved the unreasonable prolongation of the proceedings: 170 CLR at 544. Each example focused upon the circumstances of the successful party and not those of the unsuccessful party: see also Ritter v Godfrey [1920] 2 KB 47 at 60 (Atkin LJ)." 1. The same is the case here. Applications of this kind turn upon the facts of individual proceedings, in particular from the circumstances of the successful party, and not just those of the unsuccessful party. The application for costs against the defendant 1. There are strong factors warranting the displacement of the presumption that costs should follow the event in relation to the defendant. 2. First, the application was brought by notice of motion filed by the plaintiff and, while Ms Horvath sought to categorise the position of the defendant as being in the same boat as the plaintiff, the defendant really had little alternative. Second, unlike the plaintiff and Mr Di Michiel, the defendant had nothing to go on but suspicions of Dr Di Michiel and his son's conduct in circumstances where, as the evidence tendered in the proceedings showed, this conduct appeared to be part of a larger scheme. Third, the submissions concerning disentitling conduct have particular weight where the conduct was for the purpose of bringing a case against the defendant. In addition, the break in the chain of causation which was relevant to the plaintiff's application for costs (and was the principal reason why it failed) did not apply to the defendant, who had no knowledge of any of these matters. 3. Those factors, and the somewhat more sympathetic approach taken by courts to defendants in relation to the displacement of the presumption (as evidenced in statements of principle enunciated in Ritter v Godfrey) warrant a very significant departure from the usual rule. 4. That does not mean that the defendant should in fact be entitled to costs (as to which see Arian v Nguyen); Mr Renshaw does not put such a submission to the court. The order he seeks is an order that each party pay its own costs of the notice of motion. 5. I find this to be a compelling argument. The manner in which the claim was prosecuted (as opposed to the actual merits of the case) would have excited suspicion from any opponent. Mr Di Michiel's withdrawal from the case shortly before the hearing, which led Mr Renshaw's client to have the proceedings relisted on an urgent basis, only added more fuel to the fire. The fact that the defendant ultimately failed in the application does not, in the unusual circumstances of this case, mean that the defendant should not be entitled to the presumption that costs follow the event should be rebutted. 6. This brings me to the question of the extent to which the court should make an adjustment to an order that costs follow the event. I put this question to Ms Horvath, but she did not put any alternative to an order seeking the whole of the costs. 7. As Ms Horvath has adopted an "all or nothing" approach to the apportionment of costs in the event that I were of the view that costs should not follow the event, I propose to accept Mr Renshaw's more realistic submission that there should be no costs in relation to his client's participation in the application the subject of the notice of motion brought by the plaintiff. 8. The question of costs following the event for this application for costs also then arises. Mr Renshaw made it clear that his application for no order as to costs would extend to the costs of this application, were his client successful. This was a reasonable and sensible suggestion and is one of the reasons why I was inclined to find in his client's favour in Mr Di Michiel's application for costs. The position of the plaintiff 1. The plaintiff is in a different category to the defendant, in that the plaintiff had information available to her to allay the suspicions which were of such concern to the defendant. 2. In addition, there are reserved costs relating to a notice to produce filed on 19 April 2018, which costs are sought against the plaintiff alone. 3. Some weight must be given to the disentitling conduct of Mr Di Michiel, particularly the circumstances in which he failed to lodge the plaintiff's earlier claim against Mr Nabilsi in circumstances of clear professional negligence. I was not, however, addressed on anything other than an "all or nothing" approach to the costs sought by Mr Di Michiel. 4. By reason of the "all or nothing" approach taken on behalf of Mr Di Michiel, I consider I have no alternative other than to make the costs order sought by Mr Purkiss, namely for no order as to costs, including the costs of this application. 5. The issue of reserved costs, however, falls into a separate category. Reserved costs 1. One additional issue in relation to the plaintiff is the question of reserved costs following the notice to produce sent to the plaintiff by Mr Di Michiel's solicitors. This resulted in a series of return dates and disputes about documentation over the period 1 May to 19 June 2018. Ms Horvath submits, and I accept, that had the plaintiff complied with the notice to produce issued on 19 April 2018, their appearances on 22 and 24 May 2018 would have been unnecessary. The documents in question were relevant to the respondent's defence of the motion. In those circumstances, the plaintiff should pay Mr Di Michiel's costs of the appearances on 22 and 24 May 2018 and I so order. Orders 1. Plaintiff pay the respondent's costs of the appearances on 22 and 24 May 2018 in relation to the notice to produce served by the respondent, Mr Jason Di Michiel trading as Premier Compensation Lawyers Pty Ltd. 2. Application by the respondent, Mr Jason Di Michiel trading as Premier Compensation Lawyers Pty Ltd, for costs of the motion filed on 27 February 2018 dismissed, with each party to pay his, her or its costs of the application, including the hearing on 28 September 2018. ********** 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. Decision last updated: 29 October 2018