Cook v Pasminco Ltd (No 2)

Case [2000] FCA 1819

FEDERAL COURT OF AUSTRALIA

COOK V PASMINCO LTD (No 2) [2000] FCA 1819

N 132 OF 2000

SUMMARY

In accordance with the practice of the Federal Court in certain cases of public interest, I have prepared this brief summary to accompany the Reasons for Judgment that are being delivered today.  But the only authoritative pronouncement of my reasons is that contained in the full Reasons for Judgment.  This summary is necessarily incomplete.

The issue presented for decision involves a tension between two important and valued features of the legal system.  First, lawyers must be at liberty, without fear of intimidation, to undertake cases that appear to have little prospect of success.  Second, lawyers must not commence a proceeding irresponsibly, in particular, without any, or any proper, consideration of the question whether the proceeding has any prospect of success at all.

The applicants sued Pasminco for, relevantly, injury to their health alleged to have been caused by noxious emissions from Pasminco’s smelters at Cockle Creek in New South Wales and Port Pirie in South Australia.  On 12 May 2000 I ordered that the application be dismissed as incompetent, because it was beyond this Court’s jurisdiction.  The reason was that the federal claim relied on to attract jurisdiction was “colourable”, “not genuine” and designed to “fabricate” jurisdiction.  The federal claim on which the applicants relied was that for the purposes of Part VA of the Trade Practices Act 1974, the noxious emissions were goods manufactured by Pasminco which Pasminco was supplying in trade or commerce, to the applicants who were injured in their health because the emissions had defects.

Pasminco seeks an order that the applicants’ solicitors, as distinct from the applicants themselves, pay Pasminco’s costs on an indemnity basis.  The applicants’ legal representatives formulated the Trade Practices Act claim.  They have not filed affidavit evidence that they believed the claim had any chance of success or that they acted on the advice of counsel.

I have concluded that the solicitors should pay Pasminco’s costs on an indemnity basis, for the reason that the solicitors gave no consideration, or no proper consideration, to the question whether the federal claim had any prospect of success at all.  If they had done so, they would have appreciated that it had none.

“Indemnity costs” means costs actually incurred except costs unreasonably incurred or costs unreasonable in amount.  In this respect, perhaps Pasminco’s own position involves an inconsistency.  Pasminco’s submission, which I accepted, is that a mere reading of the applicants’ pleading demonstrates that the federal claim was colourable.  Yet in order to convince me of this, detailed written submissions were prepared, senior counsel from Sydney and junior counsel from Melbourne appeared, at least one representative of Pasminco’s Melbourne solicitors attended court to instruct counsel, and three lever arch files of photocopied cases were provided to the Court.  All this tends to suggest that the federal claim was not obviously and necessarily doomed to fail after all, or at least that Pasminco thought it was…

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AGLC
Cook v Pasminco Ltd (No 2) [2000] FCA 1819
Case
[2000] FCA 1819
Decision Date

CaseChat Overview and Summary

In Cook v Pasminco Ltd (No 2), the respondents, Pasminco, sought orders for indemnity costs against the applicants’ solicitors, Coleman & Greig, in relation to a dismissed proceeding. The applicants had initiated a representative action against Pasminco for negligence, nuisance, and breaches of the Trade Practices Act 1974 (Cth), alleging health damage from noxious emissions from Pasminco’s plants. The Federal Court found the federal claims to be untenable and dismissed the proceeding as incompetent.

The legal issues centred on the circumstances under which a solicitor may be ordered to pay costs on an indemnity basis, and whether the solicitors acted recklessly by proceeding with the case despite the clear lack of merit in the federal claims. The Court noted that while the jurisdiction to order such costs is to be exercised sparingly, it was open to the primary Judge to do so in cases of serious dereliction of duty by the solicitor.

The Court held that the conduct of the solicitors warranted an order for indemnity costs. The Court inferred that the solicitors commenced the proceeding without proper consideration of the prospects of success for the federal claims, which had no chance of succeeding. This reckless approach, in the absence of any explanation or evidence to the contrary, led to the conclusion that the solicitors had acted in serious dereliction of their duty.

The Court ordered that Coleman & Greig pay Pasminco’s costs on an indemnity basis, subject to certain conditions, and also ordered that Coleman & Greig pay Pasminco’s costs of the motion on a party and party basis. Additionally, the Court restricted Pasminco's ability to tax the costs without leave and set a deadline for submissions on costs relating to another motion.

Orders

Orders of the court

1. Subject to order (2), the applicants’ solicitors, Coleman & Greig, pay the respondents’ costs of the proceeding on an indemnity basis, to the intent that those costs will be the respondents’ costs actually incurred excluding costs unreasonably incurred and costs to the extent that they are unreasonable in amount.

2. The applicants’ solicitors, Coleman & Greig, pay the respondents’ costs of the respondents’ motion brought by notice of motion filed on 28 June 2000 on the usual party and party basis.

3. The respondents not be at liberty to tax the costs referred to in (1) or (2) without leave of the Court.

4. By 15 December 2000 the applicants and the respondents file and serve submissions as to the order for costs that should be made on the applicants’ motion brought by notice of motion filed on 1 August 2000 seeking an order setting aside the respondents’ subpoena for production issued on 13 July 2000 and addressed to Paul G Gambin of Coleman & Greig, Solicitors.

5. Coleman & Greig and the respondents have liberty to apply on 24 hours’ notice.

Background

Background to the litigation

On 12 May 2000 I ordered that the substantive application be dismissed as incompetent and that the proceeding be stood over to a date to be fixed for the hearing of submissions on costs. By notice of motion filed on 28 June 2000, the respondents (I will refer to them collectively and individually as “Pasminco”) seek an order that the applicants’ solicitors, Coleman & Greig (“the Solicitors”), pay Pasminco’s costs of the proceeding on an indemnity basis. As well, Pasminco seeks an order that the Solicitors pay its costs of the motion.BACKGROUND My earlier reasons for judgment are now reported: Cook v Pasminco Ltd (2000) 99 FCR 548. The substantive proceeding was commenced on 18 February 2000. It was or purported to be a “representative” or “group” proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth) (“the FCA Act”). The applicants sued Pasminco in negligence, in nuisance, and under ss 75AD and 75AG (within Part VA) of the Trade Practices Act 1974 (Cth) (“the TP Act”). The applicants alleged that they and the group members they represented had suffered in their health from noxious emissions from Pasminco’s plants at Cockle Creek in New South Wales and at Port Pirie in South Australia (there was also a claim for damage to real estate – cf s 75AG of the TP Act). The first applicant (“Ms Cook”) and her young daughter, the second applicant, lived at Cockle Creek. The second applicant sued by her next friend, Ms Cook. The third applicant and the eight-year-old fourth applicant lived at Port Pirie. The fourth applicant sued by his next friend, the third applicant. The second and third respondents are wholly owned subsidiaries of the first respondent. The applicants sought an injunction and damages. The applicants pleaded that in the course of its business Pasminco wrongfully caused and permitted emissions of quantities of offensive, noxious and unwholesome smoke, fumes, vapours and gases, lead, sulphur-dioxide and other pollutants from the two plants. The only federal claims were those under Part VA of the TP Act. They were to the effect that in trade or commerce, Pasminco supplied goods manufactured by it which had a defect. Pasminco submitted that it could not arguably be found, as the applicants had pleaded, that the emissions constituted “goods”, that they had been “manufactured” by Pasminco, that they had been “supplied” by Pasminco, that they had been supplied by Pasminco “in trade or commerce”, or that they had a “defect”. I accepted Pasminco’s submissions in relation to “supply”, “in trade or commerce” and “defect”, and did not find it necessary to reach a final view in relation to “goods” or “manufactured”. I concluded that the federal claims were “doomed to fail”, “quite hopeless” and “clearly untenable”. On the basis of this finding I concluded that those claims also satisfied the descriptions “colourable”, “not genuine” and “fabricated”. Those terms were used in the authorities dealing with the question of the circumstances in which the existence of a federal claim will not suffice to support the accrued jurisdiction of the Court: I referred to the cases at par 12 of my earlier reasons for judgment. The result was that there was no federal matter on the basis of which the Court’s accrued jurisdiction to hear and determine the claims of negligence and nuisance was attracted, and I dismissed the proceeding as incompetent.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

LINDGREN J
I turn next to the question of the costs of Pasminco’s motion. Pasminco obtained the order it sought but the issue was arguable, and in fact the Solicitors succeeded, that is, Pasminco failed, on three of the four grounds argued. There will be the usual order for party and party costs on the motion. Because the costs of Pasminco’s earlier motion for summary dismissal and of its present motion are interrelated, the same restraint on taxation will apply.conclusion For the above reasons the Court’s orders will be that:1.Subject to order (2), the applicants’ solicitors, Coleman & Greig, pay the respondents’ costs of the proceeding on an indemnity basis, to the intent that those costs will be the respondents’ costs actually incurred excluding costs unreasonably incurred and costs to the extent that they are unreasonable in amount.2.The applicants’ solicitors, Coleman & Greig, pay the respondents’ costs of the respondents’ motion brought by notice of motion filed on 28 June 2000 on the usual party and party basis.3.The respondents not be at liberty to tax the costs referred to in (1) or (2) without leave of the Court.4.By 15 December 2000 the applicants and the respondents file and serve submissions as to the order for costs that should be made on the applicants’ motion brought by notice of motion filed on 1 August 2000 seeking an order setting aside the respondents’ subpoena for production issued on 13 July 2000 and addressed to Paul G Gambin of Coleman & Greig, Solicitors.5.Coleman & Greig and the respondents have liberty to apply on 24 hours’ notice.

Ratio Decidendi

Legal Principle Established

Established by: LINDGREN J

In Levick, a solicitor had, on behalf of a client presented with a creditor’s petition by the Deputy Commissioner of Taxation, opposed the petition on various Constitutional grounds. On the hearing of the petition, counsel for the debtor was unable to advance any coherent argument to support those grounds and the primary Judge made an order for costs against the solicitor. A Full Court of this Court cautioned against a too ready making of orders that solicitors pay costs because of the importance in the administration of justice that lawyers be available to serve the interests of persons with weak cases. Wilcox, Burchett and Tamberlin JJ stated (at [44]):“¼unreasonable conduct must be more than acting on behalf of a client who has little or no prospect of success. There must be something akin to abuse of process; that is, using the proceeding for an ulterior purpose or without any, or any proper, consideration of the prospects of success.” (my emphasis)Their Honours noted that the primary Judge had inferred that the spurious arguments which had occupied the Court “clearly originated with the lawyers”. Their Honours distinguished situations in which a difficult case is taken to a lawyer by a client who wishes it to be pursued in court and in which a lawyer must present, on instructions, a case which the lawyer regards as bound to fail. Their Honours said (at [45]):“This is a case where the lawyers themselves thought up the ‘legal’ points and advanced them on behalf of the client. It is unreasonable, in the sense of a dereliction of duty (to both the client and the court) for any lawyer to take that course without first being satisfied that the points are, at least, seriously arguable. We agree it was not necessary in the present case that the lawyers be satisfied that the points would succeed; but it was necessary they be satisfied there was a rational basis upon which they might succeed.”The Court concluded that while the jurisdiction to order costs against a solicitor in respect of an unsuccessful issue held to have been pursued in serious dereliction of the solicitor’s duty ought to be exercised sparingly and with great caution, nonetheless it had been open to the primary Judge to take that course in the instant case. Whether he should do so was a question committed to the primary Judge’s discretion and it was not demonstrated that the discretion had miscarried when he had ordered the solicitor to pay costs. Unfortunately, in my opinion the conduct of the Solicitors in the present case warrants the award of an order that they pay Pasminco’s costs on an indemnity basis. The reason is that on the evidence, including the lack of relevant evidence from them explaining the position, I infer that they commenced the proceeding in this Court based on the TP Act claims, without any or any proper consideration of the prospects of success of those claims. If the Solicitors had believed that those claims had had some prospects of success, they could not have been criticised for having launched the proceeding in this Court in order to obtain the advantages they apparently perceived in litigating here. But they were not entitled to commence the proceeding in this Court irresponsibly, recklessly as to whether the federal claims had any prospect of success. Yet it seems to me that this is precisely what they did. If they had responsibly considered the matter, they would have appreciated that the federal claims had no prospect of success at all.