Firth v Wowk

[2008] NSWCA 104

New South Wales

Court of Appeal

CITATION:	Firth v Wowk & Ors [2008] NSWCA 104
HEARING DATE(S):	21 May 2008
JUDGMENT DATE:	21 May 2008
JUDGMENT OF:	Giles JA at 1; McColl JA at 24; Bell JA at 25
EX TEMPORE JUDGMENT DATE:	21 May 2008
DECISION:	(1) Appeal allowed; (2) Set aside the order made on 19 April 2007 that Mr Firth indemnify the defendants in respect of the costs order made in paragraph 19; (3) Reserve the question of costs below and on appeal.
CATCHWORDS:	Costs - order against solicitor if provided legal services without reasonable prospects of success - order authorised by s 348(1)(b) Legal Profession Act that solicitor indemnify for costs payable by party indemnified - order made that solicitor indemnify with respect to costs payable by another party to party indemnified - not authorised by s348(1)(b) - order set aside.
CATEGORY:	Principal judgment
CASES CITED:	Laurence v M D Nikolaidis & Co [2003] NSWCA 129; (2003) 57 NSWLR 355.
PARTIES:	Stephen Paul Firth - Appellant Jury Wowk and Michael Donovan - First Respondents Neil Kennedy - Second Respondent
FILE NUMBER(S):	CA 40301/07
COUNSEL:	A S Morrison SC & R I Goodridge - Firth Submitting appearance - Wowk No appearance - Donovan No appearance - Kennedy
SOLICITORS:	Firths - The Compensation Lawyers - Firth Home Wilkinson Lowry - First Respondent Wowk
LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 3110/05
LOWER COURT JUDICIAL OFFICER:	Truss DCJ
LOWER COURT DATE OF DECISION:	19 April 2007
LOWER COURT MEDIUM NEUTRAL CITATION:	Neil Kennedy v Jury Wowk and Michael Donovan & Anor, Truss DCJ, 19 April 2007

CA 40301/07
DC 3110/05

GILES JA
McCOLL JA
BELL JA

Wednesday 21 May 2008

FIRTH v WOWK & ORS

Judgment

1 GILES JA: This is an appeal, pursuant to leave granted on 24 September 2007, from an order made in the District Court on 19 April 2007 in the terms “that Mr Firth indemnify the defendants in respect of the costs order made in paragraph 19”.

The District Court proceedings

2 The District Court proceedings were brought by the second respondent, Mr Neil Kennedy, against the first respondents, Messrs Jury Wowk and Michael Donovan. The appellant, Mr Stephen Firth, was the solicitor acting for Mr Kennedy from early December 2005. The order was made purportedly pursuant to s 348(1)(b) of the Legal Profession Act 2004, and obliged Mr Firth to indemnify Messrs Wowk and Donovan in respect to the paragraph 19 costs order “that the plaintiff pay the defendant’s costs of the proceedings on an ordinary basis up to 26 August 2005 and thereafter on an indemnity basis”.

3 Mr Kennedy was injured at work on 7 January 1998. In February 1998 he retained Messrs Wowk and Donovan, solicitors practising as Doherty Partners, to provide legal services in relation to his injury.

4 On 28 July 2005 L J Sharpe & Co, solicitors, commenced proceedings in the District Court on behalf of Mr Kennedy against Messrs Wowk and Donovan claiming damages for negligence in their provision of legal services. It was alleged that they had applied for lump sum payments under ss 66 and 67 of the Workers Compensation Act 1987 without advising Mr Kennedy of his entitlement to bring common law proceedings, whereby he lost the right to bring the proceedings which he otherwise would have brought and suffered loss.

5 On 6 December 2005 Mr Firth, who practised under the name Firths - The Compensation Lawyers, became the solicitor for Mr Kennedy in place of L J Sharpe & Co. The proceeding did not come to a hearing. In early December 2006 Mr Firth ceased to act for Mr Kennedy. On 13 December 2006 the proceedings were dismissed.

6 By notice of motion filed on 14 December 2006 Messrs Wowk and Donovan applied for an order that Mr Kennedy pay their costs on the indemnity basis from 26 August 2005, relying on an offer of compromise, and for an order that Mr Firth “indemnify the Defendants in relation to the whole of the Defendants’ costs of the claim on the indemnity basis on or after 7 December 2005”.

7 In the Legal Profession Act the definition of “law practice” in s 4 includes “an Australian legal practitioner who is a sole practitioner”. Mr Firth was a law practice. He was also an “associate of a law practice” within that phrase as defined in s 7.

8 Section 345 provides that a law practice must not provide legal services on a claim or defence of a claim for damages unless “a legal practitioner associate responsible for the provision of services concerned reasonably believes on the basis of provable facts and a reasonably arguable view of the law that the claim or the defence (as appropriate) has reasonable prospects of success”.

9 Sections 348 and 349 of the Legal Profession Act relevantly provide -

“ 348 Costs order against law practice acting without reasonable prospects of success

(1) If it appears to a court in which proceedings are taken on a claim for damages that a law practice has provided legal services to a party without reasonable prospects of success, the court may of its own motion or on the application of any party to the proceedings make either or both of the following orders in respect of the practice or of a legal practitioner associate of the practice responsible for providing the services:


(a) an order directing the practice or associate to repay to the party to whom the services were provided the whole or any part of the costs that the party has been ordered to pay to any other party,

(b) an order directing the practice or associate to indemnify any party other than the party to whom the services were provided against the whole or any part of the costs payable by the party indemnified.


(2) The Supreme Court may on the application of any party to proceedings on a claim for damages make any order that the court in which proceedings on the claim are taken could make under this section.

(3) … ”


“349 Onus of showing facts provided reasonable prospects of success

(1) If the court (the trial court) hearing proceedings on a claim for damages finds that the facts established by the evidence before the court do not form a basis for a reasonable belief that the claim or the defence had reasonable prospects of success, there is a presumption for the purposes of this Division that legal services provided on the claim or the defence (as appropriate) were provided without reasonable prospects of success.

(2) If the Supreme Court (when the Supreme Court is not the trial court) is satisfied, either as a result of a finding of the trial court or otherwise on the basis of the judgment of the trial court, that the facts established by the evidence before the trial court do not form a basis for a reasonable belief that the claim or the defence had reasonable prospects of success, there is a presumption for the purposes of this Division that legal services provided on the claim or the defence (as appropriate) were provided without reasonable prospects of success.

(3) A presumption arising under this section is rebuttable and a person seeking to rebut it bears the onus of establishing that at the time legal services were provided there were provable facts (as provided by section 345 (Law practice not to act unless there are reasonable prospects of success)) that provided a basis for a reasonable belief that the claim or the defence on which they were provided had reasonable prospects of success.

(4) ... ”

10 Truss DCJ made a costs order against Mr Kennedy, the paragraph 19 costs earlier set out. She did not accept Mr Firth’s submission that the District Court lacked jurisdiction to make the order sought against him, found that Mr Firth had provided legal services to Mr Kennedy without reasonable prospects of success within the meaning of s 348(1) of the Legal Profession Act, and made the order against Mr Firth in the terms earlier set out.

The appeal

11 Mr Wowk filed an appearance in this court in which he submitted save as to costs. Mr Donovan did not file an appearance, but on the leave application indicated that his position was that of a submitting appearance. The Court was informed on the leave application that Mr Kennedy had told Mr Firth’s instructing solicitor that he would not be appearing. None of Messrs Wowk, Donovan and Kennedy appeared when called when this matter was heard. From copy letters provided to us we were satisfied that each had notice that the appeal was to be heard.

12 The question of Mr Kennedy’s joinder as the second respondent is one which need not be determined. He had a practical interest in upholding the trial judge’s order, in that payment by Mr Firth would discharge his liability under the paragraph 19 costs order, although the question of contribution would remain. Whether he had a legal interest warranting his joinder as a respondent to the appeal is more doubtful.

13 Some of Mr Firth’s grounds of appeal took up an obvious error in the trial judge’s order. No doubt recognising that Mr Firth had acted for Mr Kennedy only from early December 2005, the order claimed by Messrs Wowk and Donovan was for indemnity against costs “on or after 7 December 2005”. The order made by the trial judge was not so limited.

14 When leave to appeal was granted the Court asked whether application had been made to the trial judge to correct the error under the slip rule, and indicated that the error might be dealt with in that way rather than by an appeal. Mr Firth submitted before us that the slip rule was not available. As at present advised I consider that it was, but it is not necessary to come to a concluded view because Mr Firth’s challenges to the order made against him went beyond its temporal extent. It is as well to remind, however, that an appeal should not be brought if the error is capable of correction under the slip rule. The proper course is to apply for correction.

15 Another of Mr Firth’s grounds of appeal was that the trial judge “erred in finding that the District Court had jurisdiction”. He made two submissions in relation to jurisdiction.

16 The first was that s 348 only permits an order “in respect of the practice or of a legal practitioner associate of the practice responsible for providing the services” and Mr Firth was not the legal practitioner associate responsible for providing the services. It is correct that Mr Firth was not the legal practitioner associate responsible for providing the services for the period prior to early December 2005, but he was thereafter. There was jurisdiction, or more correctly power, to make an order against him, although the exercise of the power was flawed by the error earlier described.

17 The second was that the effect of s 349 was that an order can only be made by the District Court where it is the court hearing proceedings on a claim for damages, and that Mr Kennedy’s claim did not come to a hearing. Accordingly, it was said, only the Supreme Court could make an order against Mr Firth pursuant to s 348(2). I do not agree. Section 349 operates to establish a rebuttable presumption where the court has heard proceedings on a claim for damages and finds that the facts established by the evidence did not form a basis for a reasonable belief. The presumption may suffice to establish what must appear to a court as required by s 348(1), but is not necessary. For s 348(1) it is enough that it appears to the court that the law practice has provided legal services to a party without reasonable prospect of success, and that may appear for reasons other than a finding in a substantive hearing. The court for that purpose is the court “in which proceedings are taken on a claim for damages”, in the present case the District Court, and taking proceedings on a claim for damages is less than conducting a hearing.

18 Mr Firth’s grounds of appeal were otherwise concerned with whether he had provided legal services to Mr Kennedy without reasonable prospects of success. However, there was a further error in the trial judge’s order, although not one on which Mr Firth relied until the Court drew attention to it, which makes it unnecessary to consider that question.

19 Section 348(1) authorises the orders in its paras (a) and (b). Para (a) had no application. The trial judge purported to act under para (b). An order could be made under para (b) directing Mr Firth to indemnify Messrs Wowk and Donovan “against the whole or any part of the costs payable by the party indemnified”: that is, against the whole or any part of the costs payable by Messrs Wowk and Donovan. But the order made by the trial judge was not such an order. It was an order that Mr Firth indemnify Messrs Wowk and Donovan “in respect of the costs order made in paragraph 19”. Indemnity is oddly used in the order, but the order meant that Mr Firth should pay Messrs Wowk and Donovan the costs payable by Mr Kennedy pursuant to the paragraph 19 costs order. Section 348(1)(b) did not authorise the order made by the trial judge.

20 The costs payable by Mr Kennedy to Messrs Wowk and Donovan may upon assessment have been the same in amount as the costs payable by Messrs Wowk and Donovan, but they may not. At least according to the notice of motion of 14 December 2006 Doherty Partners were the solicitors for Messrs Wowk and Donovan, and correspondence in evidence suggests that Doherty Partners acted throughout, but it is quite unclear what costs might be recoverable from Mr Kennedy. Those costs might include recompense for time spent by Mr Wowk or Mr Donovan, see Laurence v M D Nikolaidis & Co [2003] NSWCA 129; (2003) 57 NSWLR 355 especially at [52]-[58] 372-4. Thus the error which I have above described was a material error, or at least it is not shown that it was not a material error.

21 It follows that the appeal must be allowed and the order made by the trial judge must be set aside. Messrs Wowk and Donovan could perhaps have cross-appealed with a view to obtaining a different order on the basis of the judge’s findings, but did not do so.

22 Mr Firth said that the finding that he had provided legal services to Mr Kennedy without reasonable prospects of success was a serious one, and pointed out that such conduct was capable of being unsatisfactory professional conduct or professional misconduct (see Legal Profession Act s 347(1)). The seriousness may be accepted, but as I have said it is not necessary to consider the question and it is sufficient to record that the findings are challenged and the challenge remains open.

23 I propose therefore that an order be made allowing the appeal and setting aside the order against Mr Firth made by the trial judge. I propose that we now hear Mr Firth in relation to costs.

24 MCCOLL JA: I agree.

25 BELL JA: I also agree.

[Counsel addressed on costs. Directions were given in relation to further submissions. The orders made were -
1. Appeal allowed.
2. Set aside the order made on 19 April 2007 that Mr Firth indemnify the defendants in respect of the costs order made in paragraph 19.
3. Reserve the question of costs below and on appeal.]

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