Haralovic & Carr v Law Society of NSW (No 2)

[2007] NSWADT 97

CITATION:	Haralovic & Carr v Law Society of NSW (No 2) [2007] NSWADT 97
DIVISION:	Legal Services Division
PARTIES:	FIRST APPLICANT Robert Haralovic SECOND RESPONDENT Peter David Carr RESPONDENT Law Society of New South Wales
FILE NUMBER:	062006
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	21 March 2007
DATE OF DECISION:	23 April 2007
BEFORE:	Chesterman M - ADCJ (Deputy President); Greenwood J - Judicial Member; Hayes E - Non Judicial Member
CATCHWORDS:	Application – approval of lay associate (section 17(3))
MATTER FOR DECISION:	Costs
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Legal Profession Act 1987 Legal Profession Act 2004
CASES CITED:	Barwick v Law Society of New South Wales (No 2) (LSD) [2003] NSWADTAP 4 Brooks Maher v Cheung [2001] NSWADT 18 Council of the New South Wales Bar Association v Archer (No 5) [2005] NSWADT 72 Haralovic & Carr v Law Society of NSW [2006] NSWADT 336 Law Society of NSW v Khera (No 2) [2004] NSWADT 103 New South Wales Bar Association v Tedeschi (No 3) [2003] NSWADT 174 Trust Company of Australia Ltd v Craig & Ors [2005] NSWADT 65
REPRESENTATION:	FIRST APPLICANT T Hall, solicitor SECOND APPLICANT In person RESPONDENT L Pierotti, solicitor
ORDERS:	1. The Respondent’s application for a costs order against the First Applicant is dismissed, with no order as to the costs of the application.; 2. The Second Applicant is to pay the costs of the Respondent in these proceedings (including the costs that it incurred in making its application for costs), as agreed or assessed on a party-party basis.

The subject matter of this decision

1 This decision deals with two applications for costs, which come before the present Panel in somewhat unusual circumstances.

2 The first application, in point of time, was filed by the Respondent in these proceedings, the Law Society of New South Wales, on 26 September 2006. It was for an order against the two Applicants, Robert Haralovic and Peter David Carr, for the costs of the proceedings.

3 The second application was filed by the First Applicant on 4 October 2006. It was for an order that the Respondent pay an amount of $550 to cover the costs incurred in preparing submissions in response to the Respondent’s costs application and with respect to ‘any further supplementary appearance’.

Factual background

4 On 10 February 2006, the Applicants filed an application seeking approval for the Second Applicant to be an associate of the First Applicant.

5 The application was made under s. 17(3) of the Legal Profession Act 2004 (‘the LP Act’). The relevant parts of this section state:

17 Associates who are disqualified or convicted persons

(1) A law practice must not have a lay associate whom any principal or legal practitioner associate of the law practice knows to be:

(a) a disqualified person, or

(b) a person who has been convicted of a serious offence,

unless the associate is approved by the relevant authority under subsection (3) …

(3) The relevant authority to approve a person for the purposes of subsection (1) is:…

(c) in the case of a person who has been convicted of a serious offence – the Tribunal.

6 The Second Applicant had been admitted as a solicitor of the Supreme Court of New South Wales in August 1977. In May 2002, he was convicted of two offences involving dishonesty and sentenced to imprisonment for four years. In December 2003, he was struck off the Roll by the Court of Appeal. By virtue of these matters, he is both a person convicted of a serious offence and a disqualified person, within the meaning of s. 17(1).

7 On 17 March 2006, the Council of the Law Society of New South Wales applied for an order under s. 67(4) of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’) that the Council be made a party to the proceedings. The Tribunal subsequently ordered that the Council be joined as Respondent in the proceedings. It also ordered that the Respondent should put forward material supporting reasons for a resolution that it had previously passed indicating that it opposed the application that the First and Second Applicants had made.

8 This application was set down for a hearing commencing on 9 June 2006 before a Tribunal Panel consisting of Acting Judge Karpin, Deputy President, Ms M Riordan, Judicial Member and Ms E Kirkby, Non-judicial Member.

9 In the course of reading a substantial quantity of material that had been filed, her Honour Judge Karpin became aware that the Second Applicant had at some stage been a partner of a firm of lawyers (Turnbull Hill Lawyers) to which her husband had been a consultant. At the commencement of proceedings, she made this fact known to the parties.

10 After a short adjournment, counsel representing the Second Applicant applied for Judge Karpin to disqualify herself on account of the prior connection between her husband and the Second Applicant. Oral submissions and, after the hearing, written submissions on that issue were put to the Tribunal.

11 In a letter dated 22 June 2006 to the Registry, the solicitor for the First Applicant indicated that he had been advised by the Second Applicant of the Second Applicant’s wish to withdraw ‘his present application’, on account of ‘personal reasons’ that had arisen since the hearing of 9 June 2006.

12 The matter was relisted before the Tribunal on 6 September 2006. On that day, by consent, the Tribunal made the following orders:

1. Applicant (Carr’s) application for disqualification is withdrawn.

2. The Tribunal notes the agreement of the parties that the substantive application in these proceedings is to be dismissed.

3. Respondent is to file and serve any submission as to costs on or before 27 September 2006.

4. Applicant to file and serve any submissions in reply on or before 29 September 2006.

5. Either parties to make any application for the matter to be listed for oral argument on or before 4 October 2006; in default of which issues as to costs are to be determined on the papers.

13 During September and October 2006, each of the three parties filed a written submission on costs. The submission of the Second Applicant, filed on 5 September 2006, contained the following passage:-

After lengthy discussion with my wife we also concluded that the proceedings would not be resolved within a reasonable timeframe. We faced the prospect of many months of uncertainty, and little income. In the circumstances, I decided to withdraw my application and pursue alternative employment.

My reasons for doing so included the fact that the proceedings were and had become much more adversarial in nature than I had ever contemplated. I was also concerned at the potential lengthy delays which would preclude me from earning income. For these reasons decided (sic) to discontinue the proceedings.

14 In this submission, the Second Applicant said that this discussion with his wife occurred ‘over the weekend of the 10th and 11th August’, following proceedings ‘that had been conducted on the 9th’. It would appear, however, that he was thinking of the hearing on 9 June 2006. Although, as it happens, there was a directions hearing in this case on 9 August 2006, that day was a Wednesday, whereas 9 June was a Friday.

15 On account of a further matter raised by the Second Applicant in this submission, the three members of the Tribunal Panel formed the view that the Panel as a whole should give consideration to disqualifying itself on the ground of apprehended bias.

16 At a directions hearing held by Judge Karpin on 1 November 2006, the solicitors for the First Applicant and the Respondent made some observations on the costs issues remaining for determination. The Second Applicant, although notified of this hearing, did not appear and was not represented.

17 In a reserved judgment delivered on 29 November 2006 (Haralovic & Carr v Law Society of NSW [2006] NSWADT 336), the Tribunal held that it should indeed disqualify itself from further participation in the proceedings. Its judgment concluded as follows at [23]:-

In the circumstances the matter will be listed before a fresh Tribunal. That Tribunal will be invited to deal with the issue of costs on the papers. If the fresh Tribunal is not prepared to deal with the matter on the papers, the parties will be advised in due course.

18 After the present Panel had been constituted, it reached the conclusion that the issue of costs in these proceedings could be determined without a further hearing, pursuant to s. 76 of the ADT Act.

19 On 7 February 2007, at the request of the Presiding Member (Acting Judge Chesterman, Deputy President) the Registry wrote to the parties seeking supplementary submissions from them on the possible relevance of s. 88 of the ADT Act to the issue of costs. Supplementary submissions relating to this specific question were received from the First Applicant and the Respondent.

20 The written material before the present Panel, on the basis of which it reaches the decisions set out below, is accordingly as follows:-

From the First Applicant – submissions filed on 4 October 2006 and supplementary submissions filed on 15 March 2007

From the Second Applicant – submissions filed on 5 September 2006

From the Respondent – submissions filed on 26 September 2006, supplementary submissions filed on 27 February 2007 and further supplementary submissions filed on 21 March 2007

A transcript (which has been made available to the parties) of the directions hearing held by Judge Karpin on 1 November 2006

The Tribunal’s decision dated 29 November 2006.

21 The governing provision. As initially formulated, the Respondent based its application for costs on s. 20 of the LP Act. The relevant provisions of this section are subsections (2) and (3), which state:-

(2) On making an order under this Division, or on determining an application for approval under section 17 (Associates who are disqualified or convicted persons), the Tribunal may make orders for costs.

(3) An order for costs:

(a) may be for a specified amount or an unspecified amount, and

(b) if for an unspecified amount, may specify the basis on which the amount is to be determined, and

(c) may specify the terms on which costs must be paid.

22 In its supplementary and further supplementary submissions, however, the Respondent relied on s. 88 of the ADT Act as the governing provision. This section states:-

(1) Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award of costs.

(2) The Tribunal may:

(a) determine by whom and to what extent costs are to be paid, and

(b) order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on any other basis.

(3) However, the Tribunal may not award costs in relation to proceedings for an original decision unless the enactment under which the Tribunal has jurisdiction to make the decision provides for the awarding of costs.

(4) In this section, costs includes:

(a) costs of or incidental to proceedings in the Tribunal, and

(b) the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application.

23 In his supplementary submissions, the First Applicant also argued that s. 88 of the ADT Act, rather than s. 20 of the LP Act, regulated the awarding of costs in the particular circumstances of this case.

24 The concurring submissions on this question both placed some emphasis on the fact that the application filed under s. 17 of the LP Act had been withdrawn at the instigation of the Second Applicant before the Tribunal had made any ‘order’ or ‘determination’ such as could trigger the operation of s. 20(2).

25 In at least three decisions under the Legal Profession Act 1987, which is the predecessor to the LP Act, the Tribunal has expressed the view that s. 88 provides the basis for costs orders in situations not covered directly by the Legal Profession Act. These decisions are Barwick v Law Society of New South Wales (No 2) (LSD) [2003] NSWADTAP 4 (at [200]), Law Society of NSW v Khera (No 2) [2004] NSWADT 103 (at [15]) and Council of the New South Wales Bar Association v Archer (No 5) [2005] NSWADT 72.

26 The reasoning in the last of these authorities appears to the present Panel to support the conclusion that s. 88 of the ADT Act would apply in the present situation even if an ‘order’ as mentioned in s. 20(2) of the LP Act had been made by the Tribunal. Because s. 20(2) ‘provides for the awarding of costs’ without indicating the basis on which costs orders may be made, s. 88 of the ADT Act becomes applicable (as contemplated in s. 88(3)) and s. 88(1) states that the requirement of ‘special circumstances’ should be observed.

27 In view of these authorities and of the apparent agreement of the parties on this question, the Panel concludes that any award of costs in this case is subject to the requirement of ‘special circumstances warranting an award of costs’ in s. 88(1) of the ADT Act.

28 ‘Special circumstances’. It is well established (see eg Brooks Maher v Cheung [2001] NSWADT 18 at [14]), that the phrase ‘special circumstances’ in s. 88(1) means ‘circumstances which are out of the ordinary, without having to be extraordinary or exceptional’. It is also well established that the relevant ‘special circumstances’ must be such as to ‘warrant’ an award of costs.

29 In New South Wales Bar Association v Tedeschi (No 3) [2003] NSWADT 174, at [14], the Tribunal referred to submissions made to it as to the meaning of the phrase ‘special circumstances so warrant’ in s 171E(2) of the Legal Profession Act 1987. The Tribunal expressed no disagreement with them. It stated that, according to these submissions, the phrase required

…something unusual or different about the case to take the matter out of the ordinary course, according to which the presumption that there be no costs order would be expected to apply, which renders that ordinary course apparently less appropriate or fair. But that does not require that the case be extremely unusual, uncommon or exceptional.

30 A recognised category of ‘special circumstances’ – see eg Trust Company of Australia Ltd v Craig & Ors [2005] NSWADT 65 at [44 – 45] and Nawi No 3 Pty Ltd & Ors v ING Management Ltd [2005] NSWADT 235 at [23] – is where a party, having commenced a proceeding in the Tribunal, withdraws it without good reason before the commencement of the hearing. This is not an ‘ordinary’ circumstance, and the fact that the other party or parties have been put to significant expense in conducting preparations that turn out to be unnecessary has been held sufficient to ‘warrant’ a costs order.

31 The Respondent’s application against the Second Applicant. In the Panel’s opinion, the conduct of the Second Applicant falls within the category just outlined. The matters on which it bases this conclusion are as follows.

32 In conjunction with the First Applicant, the Second Applicant filed an application under the LP Act. The Respondent, in the exercise of functions conferred on it by this Act, obtained an order joining it as the Respondent and requiring it to put before the Tribunal material showing why it believed that the application should be refused. In due course the matter was set down for substantive hearing. Both the Respondent and the First Applicant incurred costs in preparing for the hearing and instructing solicitors to represent them. Before all the evidence adduced by the Applicants had been received, the matter was adjourned in order that the question whether Judge Karpin should disqualify herself could be resolved. At this point, the Second Applicant decided to withdraw his application.

33 The only evidence of the reasons why the Second Applicant discontinued the proceedings is a passage, reproduced above at [13], in his submissions on costs. In the Panel’s opinion, they do not sufficiently justify his behaviour to prevent the conclusion being reached that these are ‘special circumstances warranting an award of costs’ against him.

34 As a former practitioner with many years’ experience, the Second Applicant could hardly have been unaware that legal proceedings are often more difficult to pursue and take longer to finalise than may initially be thought. From the time when the Respondent was joined as a party, he knew that the mere fact that his application was opposed would (to use his words) render the proceedings ‘more adversarial’ and might well lead to ‘many months of uncertainty’. Yet he chose to continue with the proceedings, causing both the Respondent and the First Applicant to incur costs that could have been avoided.

35 In his submissions on costs, the Second Applicant made the following points: (a) he had commenced the proceedings validly; (b) he had attempted to comply with all orders made in order to prepare them for hearing; (c) the proceedings were never determined adversely against him; and (d) his decision to discontinue saved the Respondent the ongoing costs of opposing his application in what was developing as a protracted hearing. He also stated that he was currently earning only a modest income and that a costs order would have a severe economic effect upon him.

36 In the Panel’s opinion, although the last of these matters gives cause for some sympathy for the Second Applicant’s position, none of them constitutes a reason for refraining from making a costs order to which the Respondent is otherwise entitled.

37 For these reasons, the Panel is satisfied that there are ‘special circumstances warranting’ an order that the Second Applicant pay the costs of the Respondent, as agreed or assessed on a party-party basis. As claimed by the Respondent in its supplementary submissions filed on 27 February 2007, that order should extend to the costs that it incurred in making its application for costs.

38 The Respondent’s application against the First Applicant. In its submissions, the Respondent argued that the positions of the First and Second Applicants could not be differentiated with regard to costs. They had been co-applicants for an order by the Tribunal under s. 17(3) of the LP Act and should both be held responsible for the decision to discontinue this application. The onus lay on the First Applicant as well as the Second Applicant to ensure that this application was properly maintainable and prosecuted.

39 If, as initially contended by the Respondent, the basis for awarding costs were the familiar one of ‘costs follow the event’, this argument would seem compelling. But in applying the criterion of ‘special circumstances’ it is necessary to consider, as has just been illustrated, whether the behaviour of the party against whom a costs order is sought has been such as to ‘warrant’ an order being made.

40 The First Applicant’s submissions included the following claims: (a) that the discontinuance of the proceedings in this matter had ‘nothing to do with any conduct (antecedent or otherwise)’ on his part and (b) that once the Second Applicant had decided to discontinue any continuance of them by the First Applicant was ‘a practical impossibility’.

41 The second of these claims is self-evident and did indeed form part of the reasoning put forward in the Respondent’s submissions on costs.

42 The first of them is consistent with the account given above of the withdrawal of the application (see in particular the outline at [11] of the letter dated 22 June 2006 from the First Applicant’s solicitor to the Registry). Furthermore, it is not contradicted by anything said by the Second Respondent in his submissions on costs or by any other aspect of the evidence.

43 Contrary to a submission by the Respondent, it is not incumbent on the First Applicant in this situation to bring forward ‘appropriate evidence’ in order to differentiate himself from the Second Applicant. Because s. 88(1) of the ADT Act requires that the Tribunal be ‘satisfied’ that there are ‘special circumstances’, the onus lies, in the Panel’s opinion, on an applicant for costs to adduce the requisite evidence.

44 For these reasons, the Panel accepts the submissions by the First Applicant that he should not be held to have played any role in the decision to discontinue the proceedings and that he could have done nothing to continue them.

45 On the basis of these findings, the Panel concludes that the reasons why it has found that there are ‘special circumstances warranting an award of costs’ against the Second Applicant do not apply to the First Applicant. No other ground for upholding the Respondent’s application for costs against the First Applicant was advanced.

46 For these reasons, the Panel dismisses the Respondent’s application for costs against the First Applicant.

The First Applicant’s application for costs

47 This application (see [3] above) was predicated on the Respondent’s claim for costs against the First Applicant being dismissed. It is an application for the costs incurred in defending this claim, which the Panel has indeed dismissed.

48 In his submissions, the First Applicant argued that a ‘nominal’ costs order against the Respondent would in this event be justified, on the ground that it ‘might serve to indicate to the Law Society that whilst it may have contended that costs should follow without distinction, that the submission is erroneous and ought not have been put’.

49 The difficulty with this line of argument is that, although the Respondent and the First Applicant appeared both to agree that awards of costs in this case would be subject to s. 88 of the ADT Act, it was only after this section was drawn to their attention. The question of this section’s applicability is in fact not straightforward. If, as initially assumed by both these parties, the familiar rule of ‘costs follow the event’ had applied instead, an award of costs against the First Applicant might well have been appropriate (see [39] above).

50 In the cases decided under s. 88, it has been recognised that ‘special circumstances’ may exist when the case put forward by the unsuccessful party is wholly unmeritorious. But for the reasons just given, the Panel does not believe that the Respondent’s application for costs against the First Applicant answers this description.

51 The Panel accordingly dismisses the First Applicant’s application for costs against the Respondent. It does so by indicating in its order relating to the Respondent’s application that there should be no order for costs on the application itself.