Helby v Council for the Law Society of New South Wales (No. 2)

[2014] NSWSC 92

Supreme Court

New South Wales

Medium Neutral Citation:	Helby v Council for the Law Society of New South Wales and anor (No. 2) [2014] NSWSC 92
Hearing dates:	Written submissions
Decision date:	18 February 2014
Before:	Bellew J
Decision:	1.The first defendant is to pay the plaintiff's costs of the proceedings on the usual basis, as agreed or assessed.
Catchwords:	COSTS - whether costs should follow the event - whether conduct of the first defendant justified an award of indemnity costs
Legislation Cited:	Civil Procedure Act 2005 Legal Profession Act 2004 Uniform Civil Procedure Rules 2005
Cases Cited:	Atlas Corp Pty Limited v Kalyk [2001] NSWCA 10 Council of the Law Society of New South Wales v McGuire (No 3) [2012] NSWADT 118 Helby v Council for the Law Society of New South Wales and anor. [2013] NSWSC 1938 Milne v Attorney-General (Tas) (1956) 95 CLR 460 Oshlack v Richmond River Council [1988] HCA 11; (1998) 193 CLR 72
Category:	Costs
Parties:	Christopher Vincent Helby - Plaintiff
Representation:	Counsel: Mr E W Young - Plaintiff Mr P Jammy - First Defendant Solicitors: Austin and Giugni Solicitors - Plaintiff Anne-Marie Foord - First Defendant
File Number(s):	2013 / 357249
Publication restriction:	Nil

Judgment

INTRODUCTION

1. In this matter the plaintiff brought proceedings against the Council for the Law Society of New South Wales ("the first defendant") seeking to set aside decisions that his practicing certificate be suspended and that a manager be appointed to his practice. In a judgment delivered on 20 December 2013, I concluded that both of those decisions made by the first defendant should be set aside (see Helby v Council for the Law Society of New South Wales and anor. [2013] NSWSC 1938). At that time, I gave the parties an opportunity to provide further submissions in relation to the question of costs

1. I have now had the benefit of written submissions from each party in relation to that question.

THE SUBMISSIONS OF THE PLAINTIFF

1. Counsel for the plaintiff made two principal submissions on the question of costs.

1. Firstly, he submitted that having regard to the fact that the plaintiff had wholly succeeded in the proceedings, there was no reason why costs ought not follow the event, in accordance with the general rule.

1. Further, he submitted that the terms of any such order should require the first defendant to pay such costs on an indemnity basis.

1. The second submission was put on two bases. Firstly, counsel argued, in effect, that the first defendant had engaged in misconduct by making a number of serious allegations against the plaintiff without a proper evidentiary basis to support them. Secondly, in the alternative, counsel relied upon the fact that the plaintiff had offered to settle the proceedings on the basis that the first defendant consent to the orders sought, but only be responsible for payment of 50% of the plaintiff's costs, an offer which was rejected by the first defendant.

1. As to the first submission, namely that costs should follow the event, counsel for the plaintiff relied on the provisions of rule 42.1 of the Uniform Civil Procedure Rules 2005 which is in the following terms:

42.1 General rule that costs follow the event

Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.

1. In short, counsel submitted that there was no feature of the case which would cause me to depart from the application of the general rule. In advancing this submission, he relied upon the decision in Milne v Attorney-General (Tas) (1956) 95 CLR 460 where (at 477) the High Court stated the principle which is embodied in r. 42.1.

1. As to the second submission, counsel for the plaintiff firstly argued that there had been no proper evidentiary basis upon which it was reasonably open to the first defendant to firstly, suspend the plaintiff's practicing certificate and secondly, to resist the relief he sought in the proceedings before me. It was submitted that such conduct was unreasonable and justified an order that the plaintiff's costs be paid on an indemnity basis.

1. Secondly, counsel submitted that the contents of a letter sent by the plaintiff's solicitor to the first defendant on 29 November 2013 supported the making of such an order. That letter stated, in part, as follows:

"Having regard to what was submitted by your council to the Court on 26 November 2013, we note that the first defendant now relies upon allegations of a most serious nature against our client...In the nature of there being a scheme of tax avoidance, and to defraud the Commissioner of Taxation."

1. Having suggested that the allegations made by the first defendant had no evidentiary basis, and having effectively invited the Society to withdraw them, the letter went on to say the following:

"We respectfully invite the defendants to consent to the orders 1 - 4 inclusive sought in the Summons on the basis that the first defendant only be ordered to pay 50 percent of the plaintiff's costs as agreed or assessed.

...

Please note that in the unfortunate event that the offer contained in this letter is refused or otherwise not accepted, and our client is successful at the final hearing, our client intends to rely upon this letter in an application that the first defendant pay our client's costs on an indemnity basis. In this regard, we presume that the second defendant will file a submitting appearance, however if he does not do so and wishes to continue to agitate the matter in court, our client will also rely upon this letter in an application for an order for costs against him on a joint and several basis."

1. It should be noted that the second defendant, who was the manager appointed to the plaintiff's practice by the first defendant, played no active part in the hearing before me.

1. On 2 December 2013, a letter under the hand of the Manager of the Professional Standards Department of the Law Society of NSW was forwarded to the plaintiff's solicitors. That letter stated, in part, as follows:

"Concerning the conduct of Mr Christopher Helby (Mr Helby), the Law Society remains of the view (as expressed in court) that Mr Helby's conduct with regard to his fees charged in respect of the Toohey Estate constituted a misappropriation of Trust Funds with the knowledge and intention on Mr Helby's part that the money taken as fees would otherwise have been due and owing to the Australian Taxation Office. Mr Helby has acknowledged that his fees were calculated by reference to the potential tax liability of the Toohey Estate, rather than by reference to the actual work done by him on behalf of the Estate. The Law Society's view in this regard is supported by, and based on the report of the Trust Account Investigator, and the suggestion that these are new allegations - made purely for tactical reasons - is wholly without foundation.

In the circumstances, the decision by the Law Society to suspend Mr Helby's Practicing Certificate was - and remains - justified.

The Law Society declines to consent to the orders as proposed by you in the letter under reply."

THE SUBMISSIONS OF THE FIRST DEFENDANT

1. Counsel for the first defendant recognised the general principle embodied in r. 42.1. However, he submitted that it was open to the court to depart from that general rule in circumstances where the participation of the unsuccessful party in proceedings had been in the public interest. In advancing that submission he relied upon the decision in Oshlack v Richmond River Council [1988] HCA 11; (1998) 193 CLR 72.

1. Counsel submitted that the decisions of the first defendant to suspend the plaintiff's practicing certificate and appoint a manager to his practice were decisions made in the exercise of a statutory power in the public interest and that in these circumstances, having regard to particular aspects of the current proceedings, a costs order in favour of the plaintiff ought not be made. The particular aspects of the current proceedings upon which counsel relied in advancing that submission included the fact that I had found that there were aspects of the plaintiff's conduct which fell substantially short of what might reasonably be expected of a solicitor. They also included what he submitted were inconsistent explanations advanced by the plaintiff concerning the basis upon which he had charged the fees in question.

1. Counsel also submitted that although I had concluded that the first defendant had failed to establish that it was necessary in the public interest to suspend the plaintiff's practicing certificate, there was nothing in my reasons for judgment which suggested that the first defendant had acted unreasonably, or that it had been motivated, in making the relevant decisions, by any consideration other than a genuine desire to protect the public. It was submitted that in circumstances where I had been critical of aspects of the plaintiff's conduct, and where the first defendant had acted in a bona fide manner at all times, no costs order ought be made against the first defendant. Counsel did not precisely articulate the terms of any order(s) which would follow in the event that I was minded to accept these submissions.

1. In terms of the position of the second defendant, counsel submitted that there was no need, and indeed no basis upon which, to make a costs order against that defendant in circumstances where he had played no active role in the proceedings. He also pointed out that in the event that I were minded to make an order against the first defendant, the plaintiff would be adequately protected.

CONSIDERATION AND CONCLUSION

The first issue - should costs follow the event?

1. In my view, in circumstances where the entirety of the decisions made by the first defendant were set aside, there is no reason why costs ought not follow the event.

1. The fact that the first defendant was exercising a statutory power in a genuine belief that it was necessary to do so does not alter the fact that it was completely unsuccessful in the proceedings. More importantly, that circumstance is not altered by my finding (at [65]) that there were aspects of the plaintiff's accounting practices, and his associated conduct, which fell substantially short of what one might reasonably expect of a solicitor. The more relevant consideration is that the fundamental allegation made by the first defendant was that the plaintiff had, in differing ways, acted dishonestly and that it was for this reason that it was in the public interest that his practicing certificate be suspended. For the reasons set out in my judgment, I was not satisfied that this was the case.

1. It may well be that on his own admission the plaintiff contravened provisions of the Legal Profession Act 2004 in varying respects. However, those contraventions did not form any part of the basis upon which the first defendant concluded that it was in the public interest to suspend the plaintiff's practicing certificate. Indeed, as I pointed out in my judgment (at [64]), counsel appearing for the first defendant was at pains to draw a distinction between what he described as the "procedural transgressions" to which the plaintiff had admitted, and the more serious allegations of dishonesty which were made against him. In doing so, counsel made it clear that it was the latter, not the former, which led the first defendant to make the decision to suspend the plaintiff's practicing certificate. Having adopted that unequivocal position through its counsel, it is hardly open to the first defendant to now assert that conduct of the plaintiff which formed no part of the decision to suspend his practicing certificate should somehow operate in such a way as to disentitle him to an order for costs in his favour.

1. For all of these reasons, I am satisfied that a proper exercise of my discretion warrants an order for costs being made in the plaintiff's favour, in accordance with the general rule.

The second issue - should costs be awarded in favour of the plaintiff on an indemnity basis?

1. The second issue is whether or not the order I propose to make should require the first defendant to pay the plaintiff's costs on an indemnity basis. In this regard, r. 42.2 is in the following terms:

42.2 General rule as to assessment of costs

Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis.

1. Rule 42.5 is in the following terms:

42.5 Indemnity costs

If the court determines that costs are to be paid on an indemnity basis:

(a) in the case of costs payable out of property held or controlled by a person who is a party to the proceedings:

(i) in the capacity of trustee, executor, administrator or legal representative of a deceased estate, or

(ii) in any other fiduciary capacity,

all costs (other than those that have been incurred in breach of the person's duty in that capacity) are to be allowed, and

(b) in any other case, all costs (other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount) are to be allowed.

1. Further s. 98 of the Civil Procedure Act 2005 is in the following terms:

98 Courts powers as to costs

(1) Subject to rules of court and to this or any other Act:

(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.

(3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.

(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:

(a) costs up to, or from, a specified stage of the proceedings, or

(b) a specified proportion of the assessed costs, or

(c) a specified gross sum instead of assessed costs, or

(d) such proportion of the assessed costs as does not exceed a specified amount.

(5) The powers of the court under this section apply in relation to a married woman, whether as party, tutor, relator or otherwise, and this section has effect in addition to, and despite anything in, the Married Persons (Equality of Status) Act 1996 .

(6) In this section, "costs" include:

(a) the costs of the administration of any estate or trust, and

(b) in the case of an appeal to the court, the costs of the proceedings giving rise to the appeal, and

(c) in the case of proceedings transferred or removed into the court, the costs of the proceedings before they were transferred or removed.

1. The seriousness of the allegations which were made against the plaintiff by the first defendant, and which are summarised at [53] of my judgment, need no further comment. The origin of those allegations can be traced, in part, to the contents of a letter of 23 May 2013 send by the plaintiff to Mr House who was investigating the matter on behalf of the second defendant. The relevant part(s) of that letter are set out in my judgment (at [15]). It will be evident that in reaching my conclusions, I necessarily had regard to the evidence given by the plaintiff before me (see for example my reasons at [75]-[77] in relation to the allegation that he had acted dishonestly, and my reasons at [85] and [88] in relation to the allegation that he had engaged in overcharging). Obviously, none of that evidence was available to the first defendant at the time that it made its decision. The first defendant then chose, as it was entitled to do, to test such matters in cross-examination. Although I was not ultimately satisfied that the allegations brought by the first defendant were made out, and although the seriousness of those allegations was such that they ought to have been put squarely to the plaintiff, I am not satisfied that the first defendant acted unreasonably in the sense for which counsel for the plaintiff contended.

1. For the same reasons I am not satisfied that the position adopted by the first defendant in responding to the letter from the plaintiff's solicitors of 29 November 2013 was unreasonable in all of the circumstances.

1. It follows that in my view there is no aspect of the second defendant's conduct, be it in terms of the making of the original decisions or in its conduct of the proceedings, which would justify the making of an order that the plaintiff's costs be paid on an indemnity basis.

1. Finally, whilst acknowledging that in circumstances where he was represented in the proceedings the plaintiff was not able to claim the costs of his personal time, counsel submitted that the plaintiff was entitled to other expenses which had been incurred in furtherance of the preparation of his case and that accordingly, this should be reflected in the terms of any costs order made in his favour. In this regard, counsel drew my attention to the decision in Council of the Law Society of New South Wales v McGuire (No 3) [2012] NSWADT 118 where the Administrative Decisions Tribunal adopted a similar approach in making of a costs order pursuant to what was then s. 566 of the Legal Profession Act 2004. In doing so, and in referring the matter to a costs assessor, the Tribunal concluded (inter alia):

(i)   that the allowable expenses should include reasonable travel expenses incurred by the solicitor in appearing before the Tribunal and in furtherance of the preparation of his case, including preparations with lawyers instructed to act for him;

(ii)   that the out of pocket expenses reasonably incurred in defending the proceedings should be allowed, but were not to include the payment of any "personal time" involved, calculated by reference to rates for a senior lawyer; and

(iii)   should allow any "lost opportunity" costs able to be demonstrated by the respondent practitioner caused during the personal time he expended on the preparation of his case (see Atlas Corp Pty Limited v Kalyk [2001] NSWCA 10).

1. In my view, the circumstances of the present case are such that a similar approach should be taken in assessing the amount of the costs to which the plaintiff may be entitled pursuant to the order that I propose to make. In the absence of agreement being reached between the plaintiff and the first defendant, the question of whether the plaintiff has adduced sufficient evidence to support the inclusion of any such amounts in an assessment of the costs payable to him will be a matter for determination by the Costs Assessor who deals with the matter.

1. Finally there is, in my view, no warrant for the making of an order in respect of costs against the second defendant, who played no active part in the proceedings. Quite apart from any other consideration, the point raised by counsel for the first defendant as to the adequacy of the plaintiff's protection in light of the order I propose to make is, in my view, a point well made.

ORDERS

1. For the forgoing reasons I make the following order:

(1)   The first defendant is to pay the plaintiff's costs of the proceedings on the usual basis, as agreed or assessed.

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Decision last updated: 18 February 2014