Hodder v Australian Executor Trustees Limited as administrator of the estate of Reece William Hodder [No 3]
[2022] WASC 361
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: HODDER -v- AUSTRALIAN EXECUTOR TRUSTEES LIMITED as administrator of the estate of REECE WILLIAM HODDER [No 3] [2022] WASC 361
CORAM: CURTHOYS J
HEARD: ON THE PAPERS
DELIVERED : 31 OCTOBER 2022
FILE NO/S: CIV 2718 of 2015
BETWEEN: ELAINE GEORGINA HODDER
Plaintiff
AND
AUSTRALIAN EXECUTOR TRUSTEES LIMITED as administrator of the estate of REECE WILLIAM HODDER
First Defendant
DAVID INDICH beneficiary of the estate REECE WILLIAM HODDER
Second Defendant
TANIA MARIE CORBETT as universal beneficiary under the will of REECE WILLIAM HODDER
Third Defendant
TAMMY LEE NARRIER as universal beneficiary under the will of REECE WILLIAM HODDER
Fourth Defendant
TAMARA ROSE INDICH as universal beneficiary under the will of REECE WILLIAM HODDER
Seventh Defendant
JASMINE INDICH as universal beneficiary under the will of REECE WILLIAM HODDER
Eighth Defendant
TYRELL AUGUSTINE HODDER as universal beneficiary under the will of REECE WILLIAM HODDER
Ninth Defendant
MARLEE ROSE RYDER as universal beneficiary under the will of REECE WILLIAM HODDER
Tenth Defendant
CORY DESMOND HODDER as universal beneficiary under the will of REECE WILLIAM HODDER
Eleventh Defendant
THE ESTATE OF THE LATE DAVID NARRIER as universal beneficiary under the will of REECE WILLIAM HODDER
Twelfth Defendant
Catchwords:
Practice and procedure - Costs - Indemnity costs against legal practitioner - Whether indemnity costs should be ordered against solicitor for fourth and seventh defendants - Filing of without prejudice communications before trial - Improper and unreasonable conduct
Legislation:
Rules of the Supreme Court 1971 (WA), O 24A r 7, O 66 r 5
Result:
Solicitor ordered to pay plaintiff's costs of trial adjourned on an indemnity basis
Category: B
Representation:
Counsel:
| Plaintiff | : | Not applicable |
| First Defendant | : | Not applicable |
| Second Defendant | : | Not applicable |
| Third Defendant | : | Not applicable |
| Fourth Defendant | : | Not applicable |
| Seventh Defendant | : | Not applicable |
| Eighth Defendant | : | Not applicable |
| Ninth Defendant | : | Not applicable |
| Tenth Defendant | : | Not applicable |
| Eleventh Defendant | : | Not applicable |
| Twelfth Defendant | : | Not applicable |
Solicitors:
| Plaintiff | : | Corser & Corser |
| First Defendant | : | Gilbert + Tobin |
| Second Defendant | : | Friedman Lurie Singh & D'Angelo (Perth) |
| Third Defendant | : | HLB Lawyers |
| Fourth Defendant | : | George Papamihail Barristers & Solicitors |
| Seventh Defendant | : | George Papamihail Barristers & Solicitors |
| Eighth Defendant | : | In person |
| Ninth Defendant | : | Eastwood Law |
| Tenth Defendant | : | Lawfield Legal Practice |
| Eleventh Defendant | : | Laird Lawyers |
| Twelfth Defendant | : | Roe Legal Services |
Cases referred to in decision:
Berg v IML London Ltd [2002] 1 WLR 3271
Bonitto v Fuerst Brothers & Co Ltd [1944] AC 75
Cutts v Head [1984] Ch 290
Field v Commissioner for Railways for New South Wales [1957] HCA 92; (1957) 99 CLR 285
Garratt v Saxby [2004] 1 WLR 2152
General Mediterranean Holdings SA v Patel [2001] 1 WLR 272
Gippsreal Ltd v Kurek Investments Pty Ltd [2009] VSC 344
Harley v McDonald [2001] 2 AC 678
Hodder v Australian Executor Trustees Ltd as administrative of the estate of Reece William Hodder [2021] WASC 156
Hodder v Australian Executor Trustees Ltd as administrative of the estate of Reece William Hodder [No 2] [2021] WASC 415
Hudspeth v Scholastic Cleaning & Consultancy Services Pty Ltd [2014] VSCA 78
Macplan Logistics Systems Pty Ltd v Baxter Healthcare Pty Ltd (1996) 39 NSWLR 324
Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721
Mecalf v Mardell [2003] 1 AC 120
Michael v Freehill Hollingdale & Page (1990) 3 WAR 223
Millenstead v Grosvenor House (Park Lane) Ltd [1937] 1 KB 717
Myers v Elman [1940] AC 282
Pier (WA) Pty Ltd as trustee for Isandi Trust v Jean Maurice Pty Ltd (in liq) [No 7] [2018] WASC 355
Pihiga Pty Ltd v Roche [2011] FCA 240; (2011) 278 ALR 209
Porter Street Investments Pty Ltd v Nellbar Pty Ltd [2022] WASCA 33 (S2)
Reid v Hubbard [No 2] [2004] FCA 180
Ridehalgh v Horsefield [1994] Ch 205
Unilever plc v Procter & Gamble Co [2000] 1 WLR 2436
West's Process Engineering Pty Ltd v Westralian Sands Ltd (1998) 144 FLR 340
CURTHOYS J:
Introduction
This matter was listed before me for trial for five days commencing on 2 October 2020. The plaintiff had brought proceedings seeking adjustment of the parties' entitlements from the intestate estate of her late son, Reece Hodder (the Estate), pursuant to s 7(1)(e) of the Family Provision Act 1972 (WA).
Eleven days before trial, the solicitors for the fourth and seventh defendants, George Papamihail Barristers & Solicitors (George Papamihail), filed documents with the court comprising formal offers and correspondence that disclosed various efforts taken by the parties to resolve the matter (the documents).
Having sighted the documents, I decided that it would not be in the interests of justice to proceed as the trial judge. I accordingly recused myself and made orders vacating and relisting the trial before another judge.
The trial was heard by Hill J between 30 November 2020 and 2 December 2020. Her Honour upheld the plaintiff's application and accordingly made orders for the adjustment of the distribution to the plaintiff from the estate. Costs were agreed between all parties save as between the plaintiff and the fourth and seventh defendants.[1]
[1] See Hodder v Australian Executor Trustees Ltd as administrative of the estate of Reece William Hodder [2021] WASC 156.
The fourth and seventh defendants subsequently made an unsuccessful application for their costs on the basis that the plaintiff unreasonably rejected their offers of compromise.[2]
[2] See Hodder v Australian Executor Trustees Ltd as administrative of the estate of Reece William Hodder[No 2] [2021] WASC 415.
These reasons concern the costs arising from the adjournment of trial caused by the filing of the documents by George Papamihail.
By the minute of proposed orders filed on 24 September 2020, the plaintiff seeks an order that all costs incurred by the plaintiff caused by the adjournment of the trial be paid personally by George Papamihail on an indemnity basis.
On 25 September 2020, I made orders directing the parties to file written submissions as to the costs order proposed by the plaintiff. The only parties to file written submissions were George Papamihail (for the fourth and seventh defendants) and the plaintiff. I have had regard to these submissions.
George Papamihail's position is that the filing of the documents was allowable under O 24A r 7(3) of the Rules of the Supreme Court 1971 (WA) (Rules) and therefore it should not be ordered to pay costs. George Papamihail instead seeks costs against the plaintiff's solicitors or alternatively for costs to be set off against the plaintiff's solicitors. The plaintiff contends that George Papamihail cannot avail itself of the exception provided in O 24A r 7(3) of the Rules.
For the reasons that follow, I have determined that it is appropriate in the circumstances for indemnity costs to be paid by George Papamihail pursuant to O 66 r 5 of the Rules.
Factual background
Efforts to resolve the matter
The filing of the documents occurred in the context of efforts by the parties to settle the matter.
This court has previously set out these events in some detail. I respectfully draw from the summary of Hill J in Hodder v Australian Executor Trustees Ltd as administrator of the estate of Reece William Hodder [No 2].[3]
[3] Hodder v Australian Executor Trustees Ltd as administrator of the estate of Reece William Hodder [No 2] [6] - [21].
Suffice to say the matter was the subject of at least two mediation conferences prior to trial, the most recent occurring on 20 June 2018. The parties in attendance reached agreement for the distribution of the Estate which was subsequently reflected in a draft Deed of Family Arrangement (DOFA). An amended draft of the DOFA was circulated but attempts to finalise the agreement were prevented by several issues including the lack of participation from the eighth defendant.
Correspondence continued between the parties to resolve these issues and finalise the DOFA.
On 9 April 2020, George Papamihail on behalf of the fourth defendant made an offer of comprise to the plaintiff under O 24A of the Rules. An identical offer of compromise was made on behalf of the seventh defendant on 10 April 2020. The plaintiff did not accept either offer. Instead, on 7 May 2020, the plaintiff's solicitors wrote to all defendants requesting that a global offer be made.
On 27 July 2020, George Papamihail sent a without prejudice letter to the plaintiff's solicitors on behalf of the second, third, fourth, seventh and twelfth defendants. The letter stated that the first defendant was 'content' to implement the offer in the letter subject to it being satisfied with the terms of the settlement deed. The letter expressly stated that if the offer was not accepted within the time specified, costs would be sought on an indemnity basis from the plaintiff pursuant to O 24A of the Rules. The plaintiff rejected this offer.
On 13 August 2020, George Papamihail sent a letter to the plaintiff's solicitors alleging the plaintiff had little to no interest in settling the matter. The letter advised that George Papamihail would be seeking indemnity costs against the plaintiff's solicitors primarily because of their prior assertion that the plaintiff would only accept a global offer by all defendants.
On 24 August 2020, George Papamihail sent two letters of offer on behalf of the fourth and seventh defendants to the plaintiff's solicitors under O 24A of the Rules. The plaintiff rejected these offers.
On 15 September 2020, George Papamihail sent a letter on behalf of the fourth and seventh defendants to the plaintiff's solicitors requesting conferral in respect of their concern about the costs of the impending trial and expressing their view that the matter be referred to mediation.
The trial was listed to commence on 2 October 2020.
Filing of the documents
On 21 September 2020, George Papamihail filed the documents with the court. The documents comprised:
(a)the letter from George Papamihail to the plaintiff's solicitors dated 13 August 2020 (August Letter);
(b)the two identical letters of offer from George Papamihail to the plaintiff's solicitors under O 24A of the Rules dated 24 August 2020 (August Offers); and
(c)the letter from George Papamihail to the plaintiff's solicitors dated 15 September 2020 (September Letter).
Each of the four documents was filed as a separate folio document. They were not accompanied by any supporting form or document.
George Papamihail has not explained the purpose of filing the documents nor indeed provided any credible explanation as to the circumstances in which the documents came to be filed. Its written submissions proceed on the basis that the filing was deliberate rather than inadvertent. There is no evidence to suggest anything to the contrary.
I regrettably but unavoidably sighted the documents in the court file.
I subsequently listed the matter for a directions hearing on 25 September 2020. In anticipation of the hearing, the plaintiff filed a minute of proposed orders seeking indemnity costs against George Papamihail. Counsel for the fourth and seventh defendants submitted that the filing of the documents was allowable under O 24A r 7(3) of the Rules.[4]
[4] ts 32 - 33 (25/9/2020).
At the conclusion of the hearing, I ordered inter alia that the documents be removed from the court file and that the parties file written submissions as to the costs order proposed by the plaintiff. The fourth and seventh defendants consented to the removal of the documents.
The other defendants did not make any submissions as to costs. The costs dispute is between the plaintiff and George Papamihail.
The documents
August Letter
The August Letter alleges the plaintiff's solicitors had engaged in 'misconduct' by purporting to have a desire to settle but showing little to no interest in doing so. It refers to a telephone call between Mr George Papamihail of George Papamihail and the plaintiff's solicitors on 10 August 2020 in which Mr Papamihail allegedly notified the plaintiff's solicitors of their misconduct and its contribution to the escalation of costs.
George Papamihail takes particular issue with the 'assertion' made by the plaintiff's solicitors in their letter of 7 May 2020 that the plaintiff would only accept a global offer by all defendants. George Papamihail further alleged that the plaintiff's solicitors breached O 24A r 3(4) of the Rules by failing to serve written acknowledgement of receipt to the offers of the fourth and seventh defendants.
The letter sets out the history of the matter including the positions of the parties and the offers proposed at mediation, and the correspondence between the parties regarding offers to settle and proposals to resolve outstanding issues such as the refusal of the eighth defendant to sign the DOFA.
The letter states that George Papamihail would be seeking indemnity costs against the plaintiff's solicitors on the grounds that:
(a)a global offer to the plaintiff by all defendants could not be achieved nor is it a prerequisite under the Rules;
(b)the fourth and seventh defendants were induced by the plaintiff to achieve the 'elusive' global offer;
(c)the plaintiff's solicitors were aware of the division among the defendants; and
(d)the parties' attempts to settle induced by the plaintiff's assertion had resulted in substantial costs.
The offer made by George Papamihail on 27 July 2020 was extended to 21 August 2020.
George Papamihail further notifies the plaintiff's solicitors that it 'intend[s] to rely on this letter in court'.
August Offers
The August Offers contain a header in bold text stating: 'This is a formal written offer which will be filed into, and relied upon in, court - specifically in relation to costs'. Beneath that header is a further statement in bold text stating that '[t]his offer is made under Order 24A of the Rules of the Supreme Court 1971 (WA)'. The offer was to settle the matter for the payment to each of the fourth and seventh defendants of $200,000, exclusive of costs.
The August Offers further provide that in the event the plaintiff rejected the offer, the fourth and seventh defendants would seek to rely on the offer in support of costs against the plaintiff on an indemnity basis. The offer is stated to be open for 28 days.
September Letter
The September Letter requests for the parties to appear well before trial in respect of the issues raised in the letter. It states that the parties are proceeding to trial due to the refusal of the eighth defendant to sign the DOFA or disclaim her interest in the Estate.
George Papamihail expresses concern that the utility of going to trial on account of the position of the eighth defendant is outweighed by 'significant increases in costs to the financial detriment of all parties'. The estimate of total costs (for all parties) of attending trial is stated to be $500,000. George Papamihail sought to confer with the plaintiff's solicitors with the intention of filing a memorandum of conferral and a chamber summons for the matter to be referred to further mediation.
The letter sets out the relevant history of the matter in a similar respect to the August Letter. It further refers to an email sent by the plaintiff's solicitors on 21 June 2019 stating that the plaintiff intended for the matter to be programmed to trial at the earliest opportunity.
George Papamihail alleges that the filing of an entry for trial by the plaintiff's solicitors on 21 May 2020 demonstrated they had little regard to the prior invitation for a global offer made in their letter of 7 May 2020. George Papamihail contends that the eighth defendant's unwillingness to sign the DOFA or disclaim her interest should be resolved by way of mediation.
Legal principles
Without prejudice communications
Statements made without prejudice in a genuine attempt to resolve a dispute are ordinarily not admissible without the consent of the parties to the litigation. This rule protects not only admissions in the form of an offer to settle, but also communications between the parties generally in respect to issues in the dispute including assertions made of the strength and weakness of a party's case or an opponent's case.[5]
[5] Pihiga Pty Ltd v Roche [2011] FCA 240; (2011) 278 ALR 209 [81].
The rule is partly based on public policy, being to 'enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them'.[6] It also rests on a further foundation, being the express or implied agreement of the parties that the communications between them should not be admissible in evidence if those communications do not lead to settlement.[7]
[6] Field v Commissioner for Railways for New South Wales [1957] HCA 92; (1957) 99 CLR 285, 291; see also Cutts v Head [1984] Ch 290, 306 (Oliver LJ).
[7] Pihiga [83] - [86].
However, the rule is not absolute and is subject to exceptions.[8] One of those exceptions is for an offer expressly made without prejudice save as to costs - known as a Calderbank offer - by which the parties expressly or impliedly agree that their communication will not be admissible except in the context of determining costs.[9] An offer of compromise made under O 24A of the Rules may similarly be disclosed to the court for the purpose of determining costs.[10]
Offers of compromise under O 24A
[8] See Unilever plc v Procter & Gamble Co [2000] 1 WLR 2436, 2448 - 2449 (Walker LJ).
[9] Unilever (2445).
[10] Rules of the Supreme Court 1971 (WA) O 24A r 7(2) (Rules).
Order 24A provides a regime under the Rules for making settlement offers which have presumptive costs consequences. A more favourable offer, measured against the judgment ultimately given, gives rise to a presumptive order for costs thereafter in favour of the offer or, unless the court otherwise orders.[11]
[11] Rules O 24A r 10(4), r 10(5).
The purpose of the regime in O 24A is to encourage a party to whom a fair and reasonable offer of compromise has been made to accept the offer and bring the proceedings to an end. It seeks to save public and private costs and avoid the inherent risks and delays of litigation.[12]
[12] Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721, 724.
Order 24A r 6 provides that an offer made in accordance with O 24A shall be taken to have been made without prejudice unless the notice of offer otherwise provides.
Order 24A r 7 provides:
7. Disclosure of offer to Court
(1) No statement of the fact that an offer has been made shall be contained in any pleading or affidavit.
(2) Where an offer has not been accepted, then, except as provided by rule 10(8), no communication with respect to the offer shall be made to the Court at the trial until after all questions of liability and the relief to be granted have been determined.
(3) This rule shall not apply where a notice of offer provides that the offer is not made without prejudice
Disclosure of offer or without prejudice communications
Order 24A r 7 provides for a general prohibition on the disclosure of an offer to the court. The purpose of the rule is to ensure that the trial judge is not made aware of the fact of an offer having been made until after their decision on liability and quantum has been delivered. At that stage, the trial judge may be made aware of such matters in connection with the determination of an appropriate costs order.[13]
[13] West's Process Engineering Pty Ltd v Westralian Sands Ltd(1998) 144 FLR 340, 342.
The prohibition on disclosure in O 24A r 7(1) has been described as directory not compulsory.[14] There is no express provision for the event of an infringement of the rule. The consequences of infringement is in every case a matter for the trial judge to determine having due regard to the object for which the rule was made.[15] A serious breach may prompt a judge to order a new trial while infringement by inadvertence may allow a case to proceed. In Millenstead v Grosvenor House (Park Lane) Ltd,[16] Farwell J described the decision to be made by a trial judge dealing with an improper disclosure of an offer in contravention of the relevant English rule:
If [the trial judge] thinks it proper or necessary for the due administration of justice, he may refuse to hear the action any further and direct it to be tried before another tribunal. On the other hand, if he is satisfied that no injustice will be done, he may allow the matter to proceed and if he adopts the latter course, that in itself affords no ground for an appeal from the order which is ultimately made.
[14] West's Process Engineering (343); see also Millenstead v Grosvenor House (Park Lane) Ltd [1937] 1 KB 717, 739 (Slesser LJ), 740 (Scott LJ).
[15] Garratt v Saxby [2004] 1 WLR 2152 [18]; Millenstead (739) (Slesser LJ), (740) (Scott LJ).
[16] Millenstead (741).
The Rules do not deal with the position of an interlocutory application. Whether on such application disclosure of an offer can properly be made will depend upon the circumstances and will be dealt with by the judge hearing those proceedings in their discretion.[17]
[17] West's Process Engineering (343); see also MacplanLogistics Systems Pty Ltd v Baxter Healthcare Pty Ltd(1996) 39 NSWLR 324; Bonitto v Fuerst Brothers & Co Ltd[1944] AC 75.
In Macplan Logistics Systems Pty Ltd v Baxter Healthcare Pty Ltd,[18] Rolfe J held that an offer sought to tendered in support of an application by the defendant for security for costs was inadmissible. A contrasting decision was reached in West's Process Engineering Pty Ltd v Westralian Sands Ltd.[19] There, the plaintiff objected to affidavit evidence tendered by the defendant in support of its application for security for costs inter alia on the ground that the affidavit improperly disclosed without prejudice offers of settlement, correspondence and discussions. White J held that the matters disclosed in the affidavit were relevant to the issues raised in the interlocutory application for security for costs but relevantly noted that the affidavit 'should be regarded for the purposes of that application only' and 'should be removed from the court's file so that it is not placed before the trial judge in the event the action comes to trial (emphasis added)'. Clearly, his Honour was mindful of the prejudicial effect that the content of the affidavit would have on any trial of the action.
[18] MacplanLogistics Systems Pty Ltd v Baxter Healthcare Pty Ltd(1996) 39 NSWLR 324.
[19] West's Process EngineeringPty Ltd v Westralian Sands Ltd (1998) 144 FLR 340, 341.
The problem of how a judge should deal with disclosure of an offer is similar to that which arises where there has been disclosure of without prejudice communications. The approach to be taken by a judge in such circumstances was discussed in Berg v IML London Ltd:[20]
The procedure of the court would be greatly hampered and the cost of litigation greatly increased if the court were too easily to come to the conclusion that the viewing of prejudicial irrelevant material necessarily disabled the court from continuing to hear the action.
…
Where a question such as that which has arisen in this case arises, in my judgment there are two aspects to the decision of the court whose recusation is sought. The first question is whether subjectively the judge considers that he is disabled from fairly continuing with the case. If he decides that he is so disabled then that normally is the end of the matter. The matter must be transferred to another judge and it can be only in the rarest cases that an appeal court would intervene to order for the hearing to continue before that judge. The decision is often said to be one within the discretion of the court, but essentially the decision is a subjective decision. That, however, is not the end of the matter.
As I have already indicated, there is … an objective test to be applied. There are circumstances, in my judgment rare circumstances, in which whatever the subjective feeling of the judge in question, he cannot continue with the case without there being a real possibility or a real danger of there being seen to be, by a fair-minded and informed observer, an unfair trial.
The fair-minded observer will appreciate that the judge is not partial to either party, will appreciate that when the judge expresses his views as to whether or not he can continue, he is expressing those views honestly and unaffected by any connection with either party.
Indemnity costs against legal practitioner
[20] Berg v IML London Ltd [2002] 1 WLR 3271 [20] - [22].
The court has inherent jurisdiction to order indemnity costs against a legal practitioner.[21]
[21] Supreme Court Act 1935 (WA) s 16(1)(a); Michael v Freehill Hollingdale & Page (1990) 3 WAR 223, 233 (Seaman J); Ridehalgh v Horsefield [1994] Ch 205, 239.
Order 66 r 5(1) of the Rules provides for the circumstances in which the inherent power is to be exercised:
(1)Where in any proceedings costs are incurred by a party -
(a)as a result of any improper, unreasonable, or negligent act or omission; or
(b)which, in the light of any such act or omission occurring after they were incurred, the Court considers it is unreasonable to expect that party to pay,
the Court may order any practitioner whom it considers to be responsible (whether personally or through a servant or agent) -
(c)to pay those costs personally or to indemnify any party who has been ordered to pay those costs; or
(d)not to claim any relevant costs or fees; or
(e)to refund any relevant costs or fees which may have been paid already.
The jurisdiction to order indemnity costs against a legal practitioner must be exercised with caution but in an appropriate case must be exercised.[22]
[22] Porter Street Investments Pty Ltd v Nellbar Pty Ltd [2022] WASCA 33 (S2) [14]; Reid v Hubbard [No 2] [2004] FCA 180 [18].
The procedure for the determination of costs is a summary procedure. The evidentiary onus to provide a proper basis for making an indemnity costs order under O 66 r 5 rests on the moving party to the civil standard.[23] The procedure must be as fair and as simple as fairness permits. Fairness requires that the legal practitioner who is sought to be made the subject of such an order be very clearly told what they have done wrong and what is claimed against them.[24] To that end, O 66 r 5(2) provides that no order shall be made against a legal practitioner unless they have been given a reasonable opportunity to appear before the court and show cause why the order should not be made.
[23] Pier (WA) Pty Ltd as trustee for Isandi Trust v Jean Maurice Pty Ltd (in liq) [No 7] [2018] WASC 355 [19].
[24] Pier [20]; General Mediterranean Holdings SA v Patel [2001] 1 WLR 272, 276 .
The jurisdiction is both punitive and compensatory.[25] It penalises any conduct of a practitioner which is of such a nature as to defeat justice but also compensates the opposing party who has been put to unnecessary expense by the unjustified conduct of the opponent's lawyers.[26] Further, the risk of a costs order assists more generally in the administration of justice by giving confidence to the courts and litigants that legal practitioners are acting in the best interests of their clients in accordance with professional standards as an officer of the court.[27]
[25] Myers v Elman [1940] AC 282, 302 - 303 (Lord Atkin), 318 - 319 (Lord Wright).
[26] Mecalf v Mardell [2003] 1 AC 120[24]; Myers (318) (Lord Wright).
[27] Gippsreal Ltd v Kurek Investments Pty Ltd [2009] VSC 344 [2] as cited in Hudspeth v Scholastic Cleaning & Consultancy Services Pty Ltd [2014] VSCA 78 [4] (Warren CJ). .
It is important to balance two competing public interests. On the one hand, a practitioner should not be deterred from pursuing their client's interests for fear of incurring personal liability to their client's opponents. However, if a practitioner by its conduct has unjustifiably increased the cost of litigation, it is appropriate that that practitioner bear that increased cost.[28]
[28] Ridehalgh (226).
Order 66 r 5 applies to costs incurred as a result of 'improper, unreasonable, or negligent act or omission'. The terms 'improper', 'unreasonable' and 'negligent' invoke terminology with well settled meanings. The definitions provided by the English Court of Appeal in Ridehalgh v Horsefield[29] are instructive. 'Improper' encompasses conduct which would ordinarily be held to justify professional penalty or would be regarded as improper according to the consensus of judicial opinion whether or not it violates the terms of the professional rules. 'Unreasonable' describes conduct which is vexatious or designed to harass the other side rather than advance the resolution of the case. It makes no difference that the conduct is the product of excessive zeal and not improper motive. 'Negligent' should be understood in a non-technical way to denote failure to act with the competence reasonably expected of ordinary members of the profession.
[29] Ridehalgh v Horsefield [1994] Ch 205, 232 - 233.
The origins and the object of the rule eschew an overly technical approach to the construction of the above terms and indeed there is scope for them to overlap. Conduct which is unreasonable may also be improper and conduct which is negligent will very frequently be unreasonable.[30]
[30] Ridehalgh (232 - 233).
Even if the court is satisfied that a legal practitioner has acted improperly, unreasonably or negligently and that such conduct incurred costs, it retains a discretion to decide against an order.[31]
[31] Pier (239).
The disclosure of the documents was prejudicial
I concluded on 25 September 2020 that, having read the documents on the court file, it would not be in the interests of justice for me to proceed as the trial judge and accordingly recused myself.
The circumstances of this case are materially different from those in cases such as West's Engineering where an interlocutory application is made and an offer or without prejudice communications are tendered in support. Here, the documents were filed by George Papamihail without any forewarning of their filing or notice of any application to which they related. The documents appeared on the court file individually without any accompanying form or any reference to a legal process. The filing occurred a mere seven business days before trial with the knowledge that trial had been listed to commence before me.
The content of the documents was plainly prejudicial to the plaintiff. For a trial judge to have been privy to the earlier correspondence between the parties, the terms of offers of compromise and various allegations of misconduct before the commencement of trial would undoubtedly result in a fair-minded and informed observer concluding there would be a real possibility of an unfair trial.
It would have therefore been entirely inappropriate for me to hear the trial.
George Papamihail argues that the filing of the documents was justified by the exception to the rule against disclosure provided in O 24 r 7(3) of the Rules.
Order 24 r 7(3) provides an exception to the general prohibition on disclosure. It permits disclosure of the fact that an offer has been made or a communication with respect to a rejected offer where the notice of offer provides that the offer is not made without prejudice.
George Papamihail contends that it was permitted to file its notices of compromise because they were made on a not without prejudice basis. This submission says nothing of what the court is to make of the prejudicial letters that were also filed.
Both the August Letter and the September Letter not only refer to previous offers to settle and their terms but contain various allegations of misconduct and references to earlier mediations. It is entirely inappropriate for such extraneous matters to be raised before the trial judge.
In any event, the August Offers were plainly not made on a 'not without prejudice' basis. The offers state that they 'will be filed into, and relied upon, in court - specifically in relation to costs' and are 'made under Order 24A'. They further provide that in the event the plaintiff rejected the offers, they would be relied upon in support of costs against the plaintiff on an indemnity basis. These statements do not make the August Offers not without prejudice. There is no express reference to the August Offers being made not without prejudice or similar terms.
The fact that they are expressly made under the O 24A regime makes them nothing more than standard offers of compromise under the Rules and therefore qualify as without prejudice communications.
George Papamihail submitted that it filed the notices of compromise to better serve public policy considerations underlying O 24A as articulated in Maitland Hospital v Fisher [No 2].[32] It alleged that the plaintiff's solicitors had significantly increased private and public costs by inviting offers they could not accept and proceeding to trial without giving the plaintiff the opportunity settle the matter.[33] The irony is that by filing of the documents, George Papamihail unnecessarily escalated private and public costs and delayed the commencement of trial. The public policy considerations George Papamihail relies upon only serve to underline its improper conduct.
[32] Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721, 724.
[33] Submissions by the solicitors for the fourth and seventh defendant filed 29 September 2020 [23] (George Papamihail's Submissions).
The O 24A regime entitles a solicitor to assume that the offers will be relied upon after judgment, not days out from trial. The fourth and seventh defendants relied on the August Offers in support of their application for the payment of their costs following trial. That was the appropriate stage to tender these offers. They should not have been brought to the attention of the trial judge before trial. If George Papamihail also sought to raise the conduct alleged in the letters, the appropriate opportunity to do would again be at the conclusion of the trial.
The filing of the documents was in no way justified by O 24A r 7(3).
Whether George Papamihail should pay indemnity costs
It is not in dispute that the filing of the documents incurred costs by resulting in the adjournment of trial. The question is whether the filing of the documents was improper, unreasonable or negligent.
Despite requesting that George Papamihail file submissions as to the proposed order for indemnity costs, those submissions do not explain in any depth why the proposed costs order should not be made.
Again, George Papamihail has not provided a clear explanation as to why the documents were filed in the first place. In the absence of such an explanation, I can only attempt to infer its intentions.
At best, the documents were filed in support of a yet to be filed chamber summons for the matter to be referred back to mediation. At worst, the filing was to obtain an adjournment or pressure the plaintiff to settle. Either way, the filing of the documents was inappropriate. The failure of George Papamihail to adequately explain the purpose of filing the documents only compounds its misconduct.
The documents raise matters that could only ever have been dealt with after the trial. They comprised and cited without prejudice communications which included offers of compromise and allegations of misconduct. Notably, the August Letter - and to a lesser extent the August Offers - assert an entitlement to indemnity costs against the plaintiff. The disclosure of this alleged entitlement to the court prior to trial was a flagrant abuse of the court's processes. George Papamihail persisted in asserting this entitlement in its written submissions.[34]
[34] George Papamihail's Submissions [31] - [34].
Further, by disclosing information of what took place at mediation, the filing of the documents was a flagrant breach of the privilege that attaches to mediations under s 71 of the Supreme Court Act 1935 (WA).
I am accordingly satisfied that George Papamihail's filing of the documents was improper and unreasonable given the conduct:
(a)was a serious breach of the prohibition on the disclosure of without prejudice communications under the Rules;
(b)led to an otherwise avoidable step in the proceedings by resulting in the adjournment and the re-listing of the trial;[35]
(c)was vexatious and designed to harass the plaintiff rather than advance the resolution of the case;[36]
(d)was a flagrant breach of s 71 of the Supreme Court Act;
(e)does not permit any reasonable explanation;[37] and
(f)denotes a failure to act with the competence reasonably to be expected of ordinary members of the profession.[38]
[35] Harley v McDonald [2001] 2 AC 678, 703.
[36] Ridehalgh (232).
[37] Ridehalgh (232).
[38] Ridehalgh (233).
Conclusion
For these reasons, George Papamihail should be ordered to pay indemnity costs for the adjournment of the trial pursuant to O 66 r 5 of the Rules.
I believe that such an order is necessary to adequately compensate the plaintiff and appropriately penalise the conduct of George Papamihail in defeating the administration of justice.
The plaintiff was the only party seeking indemnity costs.
I accordingly order that all costs reasonably incurred by the plaintiff caused by the adjournment of the trial listed for 2 October 2020 and the reserved costs of the directions hearing of 25 September 2020 be paid by George Papamihail Barristers & Solicitors personally on an indemnity basis and taxed on that basis if not agreed, with such costs to be paid within 14 days of being notified of those costs by the plaintiff and, failing agreement, within 14 days of the taxation of those costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SB
Associate to the Honourable Justice Curthoys
31 OCTOBER 2022
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