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Feature Articles

Cite as: September 2012 86 (09) LIJ, p.38.

Costs orders against practitioners personally  are on the rise and highlight the need for practitioners to ensure they assist the courts in the  administration of justice.

By Mark Yorston

The courts continue to provide due and proper administration of justice in circumstances where resources, both human and physical, become more scarce. Some recent cases have highlighted the need for practitioners to remember that, while the courts have the overarching responsibility to determine how proceedings will be managed, practitioners have a significant role in assisting the courts to achieve their purpose. A failure to remember this may have serious consequences for practitioners themselves.

Practitioners must comply with court rules

In Investec Bank (Australia) Limited (ACN 071 292 594) v Mann and Anor1 the court was considering whether a defendant ought have leave to serve an expert’s report out of time. The proceeding was commenced on 6 December 2010 by a bank which appointed receivers and managers over the assets and undertakings of a borrower. The defendants were said to have guaranteed the debts of the borrower. The defendants asserted by their defence, filed in March 2011, inter alia, that certain goods sold by the plaintiff were sold under value. In May 2011 the defence was amended. In June 2011 the defence was further amended to identify that expert evidence would be given at trial as regards the value of the goods sold. On 9 December 2011 the trial was set down to commence on 13 March 2012 with an estimate of four days.

Recognising that r44.03(1)(b)2 requires the service of expert reports no later than 30 days before the commencement of the trial, the plaintiff’s solicitors proposed a timetable in late December 2011 which would enable the parties’ compliance with that rule to be achieved.

The defendants’ solicitors replied in late January proposing a timetable which would require an adjournment of the trial date until early April. The defendants’ solicitors proffered an explanation as to the reason for the delay and, importantly, did not at that stage make application to the court to adjourn the hearing.3

Correspondence continued to pass between the practitioners until on 16 February 2012 the defendants’ solicitors emailed as follows:

“We advise that our clients’ expert requires an additional two weeks to finalise the expert report for the Defendants. We request your client’s consent to this extension of time. We are instructed that our clients will also afford your client a similar extension of time for the filing of its expert material.”

The court noted that:

“The natural reading of the first sentence quoted suggests that the additional two weeks sought to finalise the report was based upon a request made by the expert. It is also a natural reading of the first sentence that the expert had already been retained and that such additional time as was required was for the purpose of a task fairly able to be described as “to finalise” something which had already begun. Indeed it is consistent with an aspect of Mr Davis’ affidavit to which I shall refer below. Before doing so, however, I should mention that a person reading the letter from the defendants’ solicitors would ordinarily also assume that the basis of the information conveyed by the writer (a legal practitioner) was from personal knowledge rather than from what he may have been told by one or other of his clients.”4

At a directions hearing on 17 February 2012, the defendants’ counsel applied for an extension of time in which to file an expert’s report but the application was not accompanied by supporting material of any sort, causing the court to direct that any such application be on summons returnable on 23 February 2012.

It became clear on the material put before the court for that hearing and as a result of further enquiries by the plaintiff’s solicitors that an expert had not as at the time of that hearing been retained by the defendants. Accordingly the defendants were not able at the hearing to offer any evidence as to the probative value which an expert’s report might provide at the trial and the application was refused.

The court reminded the parties of their duty “to have their material ready for trial” and the parties’ practitioners of their duty “to ensure compliance with the rules”.5

If, for whatever reason, practitioners are unable to comply with any order made by a court, they must apply to the court for a variation of that order. In Blue Cross Properties (Toorak) Pty Ltd v Mackie & Staff Pty Ltd6 Habersberger J noted:

“Parties are required to comply with orders of the Court. It is not a matter of choice whether or not the steps set out in an interlocutory order are observed. If an order cannot be complied with for some good reason then application should be made to the Court for variation of the order. At the very least, the consent of the other parties to the variation, such as an extension of time, should first be sought. Here, Elite’s [second third party] solicitors did not advise the other parties that it would not be filing any expert report or that they would not be attending the mediation. If solicitors cannot obtain instructions or funding from the client then they are entitled to file a notice that they have ceased to act. But whilst they remain the solicitors on the record they are, in my opinion, required to comply with the orders of the Court even if they have no funding. Thus, Elite’s solicitor should have attended the mediation, given that he had not applied for any exemption from attendance and had not even advised the other parties that he would not be attending. On the contrary, he had participated in making the arrangements for the mediation.”7

The court then invited the parties to make submissions for costs including whether an order should be made under r63.23. That rule provides for the circumstances in which a court will order that a practitioner becomes personally liable to pay costs.8 Less than a month later in that same proceeding, the defendants’ solicitors sought leave to remove themselves from the record, which application was refused.9 The court in refusing the application was again at pains to remind practitioners of their paramount duty to the court and, importantly, identifying the evidence which will need to be before the court in order for the court to properly consider whether an application for such leave ought to be granted.10

Practitioners must assist in the administration of justice

Of similar significance, but for slightly different reasons, is the matter of Albrizzi (Sales) Pty Ltd v Pamamull.11 In brief, the plaintiff commenced proceedings against the defendant seeking damages over the failure by the defendant to complete a contract for the purchase of a property; a loss was incurred by the plaintiff on the resale of that property.

At a case-management conference on 3 December 2009, the trial judge ordered, inter alia, that:

“. . . the legal representatives of the parties to confer and agree to the appointment of a joint surveyor to survey the property at . . . and to determine the discrepancy, if any, between the physical boundary of the property and the boundary shown on the Certificate of Title. . .”

On 14 December the plaintiff’s solicitors suggested the appointment of a specific surveyor. The defendant’s solicitors did not reply to the proposal or to further correspondence in January requesting a reply. The defendant’s solicitors then engaged that surveyor to prepare a report, which they sent to the plaintiff’s solicitors on 24 February 2010. The defendant’s solicitors advised that they would file the report with the court, which they did. It seems clear from that which followed that, while the report may have been filed with the court, it did not find its way onto the file which the trial judge had before him in court on the day the trial was to commence.

On the morning of the hearing, the defendant’s solicitors sought, and were granted, leave to cease to act. The defendant, who was accompanied by another solicitor who was not at that time retained to act in the proceeding before the court that day, requested an adjournment of the matter. The judge refused, stating:

“I’m not prepared to give you an adjournment. I can’t see any foundation for me to deny the plaintiffs their entitlement to present their case today. You are a defendant in this proceeding, you have been a defendant in this proceeding since August and you have had solicitors acting for you until this morning, and your affidavit gives me no basis whatsoever to put the plaintiff to the cost and inconvenience of an adjournment.”

The judge then proceeded to hear the case and found for the plaintiff. However, he deferred execution of the order for one day and allowed the defendant a further opportunity to persuade him why he should not give effect to the earlier order. After hearing from the defendant’s counsel, the defendant’s application was dismissed.

While much of the judgment of the Court of Appeal centred on whether the trial judge had failed to afford natural justice to an unrepresented litigant,12 the Court was critical of the role played by the respondent’s counsel in the trial in failing to bring to the attention of the judge the existence of the survey report. The Court noted that:

“As an officer involved in the administration of justice, and having regard to the fact the appellant was unrepresented and in evident difficulty, he ought to have assisted the judge in this way. Counsel has a duty to ensure that the Court’s attention is drawn to relevant matters especially where the opposing litigant is unrepresented. It is hard, if not impossible, to understand why he did not do so.”13

This was a factor in the decision of the Court of Appeal to order that neither party should be awarded costs of appeal, even though the Court ultimately determined that the appellant had no arguable defence to the claim originally made by the respondent.14

In yet a further instalment of this matter, Justice Hayne used the special leave application brought by the appellant to strongly question the conclusion of the Court of Appeal that the appellant had been denied procedural fairness on the original hearing of the matter.15 After hearing the appellant’s submissions, the judge concluded:

“We are not to be taken as endorsing the Court of Appeal’s conclusion that the trial judge denied the applicant procedural fairness by refusing the applicant an adjournment of the trial. The applicant was not ready to proceed on the day fixed for the trial to begin for reasons that were wholly within his control. Neither the fact that the applicant’s then solicitor withdrew on the morning of the trial or any of the other circumstances that then attended the matter required the conclusion that the trial should be adjourned.”

In the writer’s view, practitioners ought take this statement, emanating as it does from a member of the country’s highest court, to indicate that courts throughout the state will view more seriously than in the past actions of practitioners which adversely impact on the ability of the court to fulfil its primary function in the due administration of justice.

Practitioners must ensure they have been properly retained

It is perhaps also timely for practitioners to ensure that they have properly understood the merits of a proceeding being brought on behalf of a client and that they have been properly retained to conduct that proceeding. In the last two years there have been three notable cases in which practitioners have failed to ensure that they were properly retained.

In the first of these cases, the practitioner appears at no stage to have spoken with one of the plaintiffs for whom he purported to act.16 Judd J summarised the position as follows:

“It was common ground that Ms Gilbert did not consent to become a plaintiff or give any instructions to [the practitioners] and was unaware of the proceeding until the defendants attempted execution of judgment . . . From about the time of the application for summary Judgment, [the practitioner] knew that Ms Gilbert was not an active participant in the proceeding. The validity of any assumption he may have made concerning Ms Gilbert’s authority must have been seriously questioned by him on a number of occasions. The Cost Agreement remained unsigned . . . He did not seek to contact Ms Gilbert to clarify her role, instructions or whereabouts. In the circumstances, he should have sought direct communications with his “client”.

It is difficult to understand why a solicitor would overlook such an important element of his relationship with a client as a costs agreement unless he had been told that she was not to be exposed to any costs. A solicitor would ordinarily be expected to explain to those who might become liable for costs the scope of that risk. By purporting to act on behalf of Ms Gilbert and commencing a proceeding in her name, [the practitioner] exposed her to the risk of an order for costs. By the time the trial had commenced the risk had already materialised into costs orders. [The practitioner] continued to hold Ms Gilbert out to the defendants, and to the court, as a party amenable to an order for costs. Nothing was said on her behalf at the time of the defendants’ application for costs to differentiate her position from that of Mr Bray. Thus, following judgment in the main proceeding, Ms Gilbert’s risk of liability for costs once again materialised. The defendants applied for costs against both plaintiffs.”17 In the final analysis, the court ordered that the practitioner and counsel be substituted for Ms Gilbert in the original court order made against her and that they bear the costs of Ms Gilbert and the defendants in bringing the application to have herself extricated from the proceeding on an indemnity basis.18

In the second of the cases:

“A Dr Cohen was the named representative plaintiff in a group proceeding issued pursuant to Part 4A of the Supreme Court Act against three defendants.

The proceeding, issued in December 2008, arose out of bushfires in 2003 in Northern Victoria and was instituted by [the practitioners]. Unfortunately. . .Dr Cohen knew nothing about being named as the representative plaintiff until October 2010.

Once he learnt of his involvement, Dr Cohen applied to be removed as the plaintiff and to have any costs orders made against him transferred to [the practitioners]. It is conceded that Dr Cohen did not authorise the solicitors to issue or maintain this proceeding on his behalf. Ultimately, the orders sought by Dr Cohen were consented to by [the practitioners].”19

The judge determined that the appropriate course was for him to refer the conduct of the practitioner to the Legal Services Commission for investigation.20 He concluded in a further hearing that:

“The conduct of [the practitioners] amounted to a serious breach of its ethical obligations. It was, at least, distinctly arguable that it constituted a contempt of court.”21

He ordered that the costs of the proceeding and the defendants’ costs previously ordered to be paid by the named plaintiff be paid by the principals and/or directors of the practitioners’ firm on an indemnity basis.22

The third case involved the bringing of a proceeding on behalf of a company at the behest of one of the two directors of that company in the knowledge that the other director opposed the bringing of that proceeding.23 The named plaintiff then sought to discontinue that proceeding and the court was requested to consider who should bear the proceeding’s costs. In the course of determining that question the court was also required to examine the purported retainer of the solicitors. The court concluded that:

“. . . [The director] and [the firm of solicitors] have improperly exposed Sitzler to the risks of a costs order and allowed that to materialise into reality.

I consider that [the director] and [the solicitors] commenced this proceeding knowing that there was no authority to do so. This must amount to a wilful disregard by both parties of the law.

If justice is to be done, the circumstances require that these costs [of the defendants and the non-parties] be paid on an indemnity basis.”24

Conclusion

Over recent years, and especially since the introduction of the Civil Procedure Act,25 courts have shown a greater willingness to remind practitioners that if they forget, for whatever reason, their overriding duty to the court, they do so at their peril. In the writer’s view, there is no doubt that all courts, as they strive for greater efficiencies in the administration of justice, will require practitioners’ willing assistance in achieving those goals and will not be backward in imposing penalties upon those whom they perceive to be failing in that duty.

Importantly, the High Court may also be giving a sign as to the balance which the Court needs to adopt between the due administration of justice and the entitlement of self- represented litigants. That in itself may also have further ramifications for practitioners.



MARK YORSTON is Chair of the Litigation Section of the LIV and is an accredited specialist in commercial litigation and business law.

1. Investec Bank (Australia) Limited (ACN 071 292 594) v Peter Kenneth Mann and Anor 2012 VSC 58 (28 February 2012).

2. Supreme Court (General Civil Procedure) Rules 2005 (Vic) r44.03.

3. Note 1 above, at [9].

4. Note 1 above, at [11].

5. Note 1 above, at [13].

6. Blue Cross Properties (Toorak) Pty Ltd v Mackie & Staff Pty Ltd & Ors [2007] VSC 304.

7. Note 6 above, at [16].

8. Note 2 above, r63.23.

9. Note 1 above.

10. Note 1 above, at [8].

11. Albrizzi (Sales) Pty Ltd v Pamamull (unreported, Supreme Court of Victoria, 22 and 25 March 2010, Pagone J).

12. Pamamull v Albrizzi (Sales) Pty Ltd (No 2) [2011] VSCA 260.

13. Note 12 above, at [111].

14. Pamamull v Albrizzi (Sales) Pty Ltd (No 3) [2011] VSCA 320 at [14]–[17].

15. Pamamull v Albrizzi (Sales) Pty Ltd [2012] HCA Trans 63 (9 March 2012).

16. Bray & Anor v Dye & Anor (No 2) [2010] VSC 152.

17. Note 16 above, at [48]–[50].

18. Note 16 above, at [83].

19. Cohen v State of Victoria (No 2) [2011] VSC 165.

20. Cohen v State of Victoria and Ors (No 2) [2011] VSC 165 at [41]; also see Legal Profession Act 2004 (Vic) s4.4.8.

21. Cohen v State of Victoria and Ors (No 3) [2011] VSC 229 at [18].

22. Note 21 above, at [22].

23. Sitzler Savage Pty Ltd v Northern Mining Holdings Pty Ltd and Ors [2012] VSC 104.

24. Note 23 above, at [196]–[198].

25. Civil Procedure Act 2010 (Vic).

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