Citigroup Pty Limited v Middling (No.2)

[2014] NSWSC 651

Supreme Court

New South Wales

Medium Neutral Citation:

Citigroup Pty Limited v Middling (No.2) [2014] NSWSC 651

Hearing dates:

On the papers

Decision date:

22 May 2014

Jurisdiction:

Common Law

Before:

Adamson J

Decision:

(1) Order the defendant to pay the plaintiff's and the first cross-defendant's costs occasioned by and thrown away by the amendment, including the costs of the hearing on 22 and 23 April 2014 and the costs of the adjournment of the hearing of the matter, on an indemnity basis.

(2) Stand over the question whether Mr Quy and Mr Elliott ought pay the plaintiff's and the first cross-defendant's costs occasioned by and thrown away by the amendment, including the costs of the hearing on 22 and 23 April 2014 and the costs of the adjournment of the hearing of the matter, on an indemnity basis before me until after the determination or other resolution of the substantive proceedings or further order.

(3) Grant liberty to restore the matter before me for determination of this question when the circumstances set out in (2) above have arisen.

Catchwords:

COSTS - question whether personal costs order ought be made against defendant's legal representatives ought be reserved until the determination of the proceedings - position where matters of a privileged nature would need to be disclosed to the potential prejudice of one party - whether it is desirable for judge to review such privileged material without disclosing it to the other party - desirability of judge who heard oral evidence on adjournment application determining question rather than trial judge

Cases Cited:

Citigroup Pty Limited v Middling [2014] NSWSC 474

Category:

Costs

Parties:

Citigroup Pty Limited (Plaintiff/2nd Cross Defendant)
Dennis James Middling (Defendant/Cross-Claimant)
Perpetual Trustees Victoria Limited (First Cross-Defendant)

Representation:

Counsel:
AR Vincent (Plaintiff)
S Wheelhouse SC/D Elliott (Defendant/Cross-Claimant)
M Ashhurst SC/P Newton (First Cross-Defendant)
Solicitors:
Norton Rose Fulbright Australia (Plaintiff/2nd Cross Defendant)
Quy Lawyers (Defendant/Cross-Claimant)
Kemp Strang (First Cross-defendant)

File Number(s):

2013/47580

Publication restriction:

Nil

Judgment

Introduction

1. This matter was listed for final hearing for 3 days commencing 22 April 2014. Mr Middling, the defendant, applied for leave to amend his defence, which resulted in the matter having to be adjourned. On the amendment application I heard evidence from Mr Quy, the defendant's solicitor, as a result of which I directed Mr Quy and Mr Elliott, the junior barrister instructed by Mr Quy on behalf of the defendant, to file written submissions as to why a personal costs order ought not be made against each of them in respect of the costs of the amendment and the costs thrown away by the adjournment: Citigroup Pty Limited v Middling [2014] NSWSC 474.

Parties' submissions

1. Both Mr Quy and Mr Elliott submitted that I ought not determine whether a personal costs order ought be made in advance of the hearing, since such determination would require privileged information to be disclosed, which could be to the detriment of Mr Middling, the defendant. They also submitted that such determination would give rise to a conflict of interest between Mr Middling and his legal advisers.

1. Mr Elliott, whose submissions were adopted and relied upon by Mr Quy, submitted:

"Mr Elliott would, in answer to the personal costs issue, seek to put factual matters before the Court to further explain the sequence of events leading up to the amendment and adjournment applications made on 22 - 23 April 2014.

However, for Mr Elliott to do so would necessarily involve the disclosure of confidential communications which are the subject of client legal privilege in favour of the defendant, Mr Middling, Mr Elliott's client.

If privilege is to be maintained over those communications, then Mr Elliott would be at a disadvantage in relation to the personal costs issue. If Mr Middling were to waive privilege over those communications, this would need to be following receipt of independent legal advice . . .

There is a real risk however, that the disclosure of such communications would provide to Mr Middling's opponents in the proceedings. . . an unfair strategic advantage."

1. The plaintiff (Citigroup) and the cross-defendant (Perpetual) submitted that a decision ought be made now as to whether either Mr Quy or Mr Elliott or both of them were liable for the costs personally.

1. Citigroup submitted that no such evidence has been identified but that, in any event, the Court could review any such evidence in the absence of the other parties in order to determine whether those documents or that evidence is properly the subject of a claim for privilege. Citigroup submitted, in the alternative, that I should order the defendant to pay Citigroup's and Perpetual's costs on an indemnity basis and that I should reserve the question of whether Mr Quy and Mr Elliott ought pay the costs until after the determination of the substantive proceedings or until further order.

1. Perpetual submitted that, having regard to the evidence of Mr Quy at the hearing of the adjournment application that he had not even turned his mind to the question of a defence under the Contracts Review Act 1980 (NSW) until he conferred with Mr Wheelhouse SC shortly before the hearing, the proposition that it would be necessary for Mr Quy and Mr Elliott to traverse privileged communications, is without foundation.

1. Perpetual submitted, in the alternative, that the Court could consider the information alleged to be privileged without disclosing it to either Perpetual and Citigroup.

1. Perpetual submitted further that any conflict between Mr Middling and his legal advisers was inherent in the application for a personal costs order and was not a reason to defer it until the final determination of the proceedings.

1. Perpetual also contended that it would suffer prejudice if the costs question were not determined now because it may be that I would not be the trial judge and the trial judge would not have heard and seen the evidence in support of the adjournment application. In that event, were the matter to be determined by the trial judge, the nuances of the evidence before me would be lost.

Reasons

1. It is difficult to accept that there are any matters of a privileged nature that would be required to be disclosed by Mr Elliott or Mr Quy on the issue of personal costs orders. Mr Quy's evidence about his failure to consider the Contracts Review Act 1980 (NSW) would suggest that there are no such matters. Nonetheless, Mr Elliott's submissions, which I assume were written on his express and unequivocal instructions, are directly to the contrary. Mr Quy's written submission rely on Mr Elliott's. Both Mr Elliott and Mr Quy, as legal practitioners, owe a duty of candour to the Court. In these circumstances, I accept their representation that it would be necessary to traverse factual matters of a privileged nature in order to determine the costs application and that this would be to Mr Middling's detriment.

1. Although Perpetual and Citigroup have suggested that I might review such privileged material without disclosing it to them, I do not regard that option as desirable. It is generally appropriate, as a matter of natural justice, that each party have an opportunity to be heard on all the material before the Court. Furthermore, the Court benefits from having a contradictor who has access to all such material. For these reasons, I would prefer to defer ruling on the personal costs order until such material can be disclosed to Perpetual and Citigroup so that I may hear from them as to why a personal costs order ought be made.

1. I accept Perpetual's submissions that it is not desirable that the costs of the adjournment be determined by the trial judge, unless I happen to be the trial judge. I have had the benefit of seeing and hearing Mr Quy give evidence on the adjournment application and this is part of the material on which the application for a personal costs order arises. Accordingly I consider that the preferable course is to reserve the question whether Mr Quy and Mr Elliott ought pay the costs personally of the adjournment and the amendment but to order that such question is to be decided by me after the determination or other resolution of the proceedings.

1. In the meantime, Perpetual and Citigroup are entitled to an order for costs against the defendant. It is appropriate that these costs be on an indemnity basis because the amendment and adjournment were required through no fault of either Perpetual or Citigroup, who had little notice of the applications and had prepared for a final hearing of the matter, in the reasonable expectation that it would be heard in the allocated time. This order cannot be enforced until the determination of the proceedings, and may be affected by an order made concerning Mr Quy and Mr Elliott's liability, if any, for such costs.

Orders

1. I make the following orders:

(1)   Order the defendant to pay the plaintiff's and the first cross-defendant's costs occasioned by and thrown away by the amendment, including the costs of the hearing on 22 and 23 April 2014 and the costs of the adjournment of the hearing of the matter, on an indemnity basis.

(2)   Stand over the question whether Mr Quy and Mr Elliott ought pay the plaintiff's and the first cross-defendant's costs occasioned by and thrown away by the amendment, including the costs of the hearing on 22 and 23 April 2014 and the costs of the adjournment of the hearing of the matter, on an indemnity basis before me until after the determination or other resolution of the substantive proceedings or further order.

(3)   Grant liberty to restore the matter before me for determination of this question when the circumstances set out in (2) above have arisen.

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Decision last updated: 23 May 2014