Jones and Field v Camp in a Box Pty Ltd
[2016] WASC 304
•23 SEPTEMBER 2016
JONES & FIELD -v- CAMP IN A BOX PTY LTD [2016] WASC 304
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASC 304 | |
| Case No: | COR:162/2016 | 7 SEPTEMBER 2016 | |
| Coram: | PRITCHARD J | 23/09/16 | |
| 15 | Judgment Part: | 1 of 1 | |
| Result: | Costs order made against legal practitioner | ||
| B | |||
| PDF Version |
| Parties: | MARTIN BRUCE JONES and MALCOLM FIELD As Liquidators Of Field Deployment Solutions Pty Ltd (In Liq) (ACN 123 307 059) CAMP IN A BOX PTY LTD |
Catchwords: | Practice and procedure Costs Where interlocutory application concluded without a determination on the merits Where one party was almost certain to have succeeded if the matter had been tried Where one party has acted unreasonably in defending the application Practice and procedure Costs O 66 r 5 Rules of the Supreme Court 1971 (WA) Costs against legal practitioner Circumstances in which an order of that kind may be made Interlocutory application to restrain practitioner from acting Where practitioner has personal interest in subject matter of the proceedings Where practitioner likely to be called as a witness Where unreasonable for practitioner to continue to act Whether practitioner should be indemnified by former clients in respect of costs liability |
Legislation: | Corporations Act 2001 (Cth) Legal Profession Conduct Rules 2010 (WA), r 42 Rules of the Supreme Court 1971 (WA), O 66 r 5 |
Case References: | Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 5] [2016] WASC 263 Clay v Karlson (1997) 17 WAR 493 Gray v Sirtex Medical Ltd formerly known as Paragon Medical Ltd [2009] WASC 126 Holborow v MacDonald Rudder [2002] WASC 265 Jeruth Pty Ltd v Haybale Pty Ltd [2004] VSC 319 Kallinicos v Hunt [2006] NSWSC 723 Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1987) 186 CLR 622 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiffs
AND
CAMP IN A BOX PTY LTD
Defendant
Catchwords:
Practice and procedure - Costs - Where interlocutory application concluded without a determination on the merits - Where one party was almost certain to have succeeded if the matter had been tried - Where one party has acted unreasonably in defending the application
Practice and procedure - Costs - O 66 r 5 Rules of the Supreme Court 1971 (WA) - Costs against legal practitioner - Circumstances in which an order of that kind may be made - Interlocutory application to restrain practitioner from acting - Where practitioner has personal interest in subject matter of the proceedings - Where practitioner likely to be called as a witness - Where unreasonable for practitioner to continue to act - Whether practitioner should be indemnified by former clients in respect of costs liability
Legislation:
Corporations Act 2001 (Cth)
Legal Profession Conduct Rules 2010 (WA), r 42
Rules of the Supreme Court 1971 (WA), O 66 r 5
Result:
Costs order made against legal practitioner
Category: B
Representation:
Counsel:
Plaintiffs : Mr S J Penrose
Defendant : Dr J Schoombee
Solicitors:
Plaintiffs : Tottle Partners
Defendant : Western Legal Pty Ltd
Case(s) referred to in judgment(s):
Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194
Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 5] [2016] WASC 263
Clay v Karlson (1997) 17 WAR 493
Gray v Sirtex Medical Ltd formerly known as Paragon Medical Ltd [2009] WASC 126
Holborow v MacDonald Rudder [2002] WASC 265
Jeruth Pty Ltd v Haybale Pty Ltd [2004] VSC 319
Kallinicos v Hunt [2006] NSWSC 723
Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1987) 186 CLR 622
1 PRITCHARD J: The plaintiffs are the liquidators of Field Deployment Solutions Pty Ltd (In Liq) (FDS). They have applied for an order under s 588FF of the Corporations Act 2001 (Cth) to declare an agreement in relation to a voidable transaction to be void. The agreement in question is a deed of assignment between FDS and the defendant made on 3 June 2016 (the Deed of Assignment).
2 The costs application the subject of these reasons relates to an application made by the plaintiffs for an injunction to restrain Mr Alan Rumsley from acting as the solicitor for the defendant (the Injunction Application). Initially, the Injunction Application was opposed by the defendant. On 26 August 2016, Mr Rumsley appeared at a directions hearing in relation to the Injunction Application, on the instructions of the defendant (rather than on his own behalf), and indicated that the defendant opposed the Injunction Application. At that directions hearing, I made orders requiring the filing of affidavits and submissions and I listed the Injunction Application for hearing on 7 September 2016.
3 On 2 September 2016, the defendant filed a notice of change of representation, with the result that Mr Rumsley no longer acts for the defendant. Accordingly, there is no longer any need for the Injunction Application. There is, however, now a dispute between the parties as to where the costs of the Injunction Application should fall.
4 The plaintiffs seek an order that Mr Rumsley pay their costs of the Injunction Application, fixed in the sum of $2,500 or such other sum as the Court may determine, to be paid forthwith. The defendant seeks an order that the plaintiffs do pay forthwith the costs of Mr Rumsley and of the defendant, incurred from 2 September 2016 up until 7 September 2016, or, alternatively, an order that there be no order as to costs. In other words, the defendant seeks an order that the plaintiffs pay the costs incurred by it and by Mr Rumsley subsequent to the change of representation of the defendant - that is, the costs incurred in arguing about costs. While counsel for the defendant was unable to advise the Court as to the precise quantum of the costs incurred by the defendant and Mr Rumsley which were the subject of the costs order he sought, he indicated that those costs amounted to less than $2,500.
5 In short, the parties resorted to a contested hearing in respect of costs, which took one hour on 7 September 2016 and which involved written submissions from both sides and supplementary written submissions from the defendant, in circumstances where what was at stake was, at worst, exposure to a costs order on either side amounting to $2,500 or less. The point hardly needs to be made that it is most regrettable that the parties were not able to reach a compromise in respect of costs which might have reflected the commercial reality of the costs incurred in contesting the proposed costs orders.
6 For the reasons which follow, there will be an order that Mr Rumsley pay the plaintiffs' costs of the Injunction Application, fixed in the sum of $2,500, to be paid forthwith.
7 In these reasons for decision, I deal with the following matters:
1. The factual background;
2. The parties' submissions in relation to the appropriate costs order;
3. The relevant legal principles;
4. Why the plaintiffs should be awarded costs; and
5. Why an order should be made that Mr Rumsley pay the plaintiffs' costs.
1. The factual background
8 The Deed of Assignment that is the subject of these proceedings pertains to another action in this Court (CIV 1539 of 2015).
CIV 1539 of 2015
9 The action in CIV 1539 of 2015 concerns an agreement by which parties to a joint venture engaged FDS to supply off-road vehicles for use in connection with work being performed by the joint venture parties in the installation of a gas pipeline from Barrow Island to mainland Australia. The joint venture parties alleged a breach of the agreement by FDS. They commenced the action in CIV 1539 of 2015 seeking relief in relation to the alleged breach of the agreement by FDS. FDS filed a defence and counter-claim in which it alleged a breach of the agreement by the joint venture parties and sought the recovery of contractual entitlements which it says are owing to it, together with other relief.
The Deed of Assignment
10 FDS subsequently assigned its cause of action in the counter-claim in CIV 1539 of 2015 to the defendant in these proceedings by the Deed of Assignment. The Deed of Assignment provides that in the event that the counter-claim is successful, the defendant will pay FDS' legal fees in relation to CIV 1539 of 2015. That Deed of Assignment is said to have created a priority for the payment of FDS' legal fees over the payment of FDS' other debts.
11 Counsel for the defendant confirmed that Mr Rumsley had been acting as FDS' solicitor and that the legal fees the subject of the Deed of Assignment were incurred by FDS for legal services provided by Mr Rumsley. The legal fees are said to be in the vicinity of about $350,000.
These proceedings (COR 162 of 2016)
12 In these proceedings, the plaintiffs contend that the Deed of Assignment was not a commercial transaction and should be set aside. In determining whether that is so, the Court will no doubt need to consider the prospects of success of FDS' counter-claim in CIV 1539 of 2015 and the value of the relief sought in the counter-claim, as compared with the quantum of the legal fees involved, to assess the benefits and burdens of the Deed of Assignment for the parties to the Deed. I note that the Deed of Assignment was executed by only one person, acting on behalf of both FDS and the defendant.
The Injunction Application
13 The evidence in relation to the Injunction Application was set out in an affidavit of Mr Field, sworn 28 July 2016, and in a further affidavit sworn by Mr Field on 17 August 2016. In addition, in the course of the hearing on 7 September 2016, counsel made reference to an affidavit sworn by Mr Rumsley on 17 August 2016, in connection with an application for security for costs made by the defendant in these proceedings.
14 The Injunction Application was advanced on two bases. First, the plaintiffs contended that Mr Rumsley has a personal interest in upholding the Deed of Assignment which the plaintiffs seek to impugn. Secondly, the plaintiffs pointed to the fact that Mr Rumsley is likely to be a material witness as to the circumstances in which the Deed of Assignment was entered into and is, therefore, likely to be called as a witness in these proceedings. I will return to these arguments later in these reasons.
15 Before the plaintiffs filed the Injunction Application, their solicitors conferred with Mr Rumsley, and invited him to cease to act for the defendant. Mr Rumsley declined that invitation.
2. Relevant legal principles
16 If parties to a proceeding resolve a dispute at an interlocutory stage without a hearing of the merits of the action, and if it appears that both parties have acted reasonably in the proceedings until the litigation was resolved or its further prosecution became futile, the usual consequence is that the Court will make no order as to the costs of the proceedings, for to do so would involve it in an examination of the merits of the action.1 However, that general approach is premised on the assumption that the plaintiff acted reasonably in commencing the proceedings and the defendant acted reasonably in defending them. Furthermore, the Court's caution about examining the merits of a case will be particularly pronounced where a consideration of the merits would involve complex factual matters where credit could be in issue.2 If it appears that one of the parties acted unreasonably, or, alternatively, if both parties acted reasonably, but one party was almost certain to have succeeded if the matter had been tried, then a costs order may be made against one of the parties.3
3. The parties' submissions in relation to the appropriate costs order
17 Counsel for the plaintiffs submitted that having regard to the authorities (especially Clay v Karlson4), it was 'always obvious Mr Rumsley ought not act [in these proceedings]. Mr Rumsley's conduct in continuing to act was unreasonable'.5 They submitted that because Mr Rumsley's conduct was unreasonable, he should bear the costs of the Injunction Application.
18 Counsel for the defendant submitted that the defendant's decision to change its legal representation was 'expressly taken to avoid wasteful satellite interlocutory proceedings, notwithstanding that the [Injunction Application] was without merit',6 and that the change in representation did not constitute an admission that Mr Rumsley should not have acted in the first place.7 Counsel for the defendant submitted that once the change in representation occurred, the appropriate course was for the Injunction Application to be dismissed, without taking up any further time of the parties or the Court, but that the plaintiffs nevertheless continued to press for their costs. He submitted that the proper outcome on costs at that point would have been that there be no order as to costs, or that costs be in the cause, and that the Court should not engage in an examination of the merits of the Injunction Application just for costs purposes.8 Counsel for the defendant submitted that the plaintiffs had acted unreasonably in continuing to seek costs against Mr Rumsley personally and that the costs order made by the Court should reflect that judgment.
19 Counsel for the defendant also submitted that if the Court wished to consider the merits of the Injunction Application for the purposes of considering the question of costs, it should conclude that the Application was without merit. In essence, counsel for the defendant submitted that while Mr Rumsley had an interest in the maintenance of the Deed of Assignment as a valid assignment, he did not have a personal interest in the outcome of these proceedings which was sufficient to warrant him ceasing to act for the defendant. In his supplementary written submissions, counsel for the defendant emphasised that Mr Rumsley had a solicitor's lien over the proceeds of any claim by FDS in CIV 1539 of 2015. The argument appeared to be that even if the Deed of Assignment was set aside, Mr Rumsley was still entitled to the payment of his legal fees.
20 Counsel for the defendant submitted that this case was very different from the factual circumstances in Clay v Karlson, in that there was no allegation that Mr Rumsley (who did not draft the Deed of Assignment) had acted negligently or been guilty of misconduct.
21 In addition, counsel for the defendant submitted that it was not the case that Mr Rumsley was, or would be, a material witness in these proceedings. He submitted that Mr Rumsley's views in relation to the Deed of Assignment would not be relevant to the Court's assessment of the commerciality of the Deed.
22 Counsel for the defendant also submitted that the plaintiffs had failed to explain why Mr Rumsley would be a material witness and that the Court could not, therefore, conclude that Mr Rumsley would be a material witness in these proceedings. He submitted that there was very little information in Mr Field's affidavits to explain the likely nature of the evidence which would be given by Mr Rumsley, and that Mr Rumsley's views of the merits of the Deed of Assignment would be irrelevant to the Court's assessment of its validity. Counsel for the defendant further submitted that the fact that Mr Rumsley was to be called as a witness did not of itself warrant his ceasing to act, as there was no possibility that any issue as to his credibility would arise.
4. Why the plaintiffs should be awarded costs
23 In my view, this is one of those relatively rare cases in which it is possible to conclude that the plaintiffs would clearly have succeeded in the Injunction Application, so that they should not have to bear the costs of bringing that Application. (The question of where the costs should fall as between the defendant or Mr Rumsley is dealt with later in these reasons.)
24 In reaching that conclusion, it is appropriate to start by bearing in mind the principles in relation to the Court's jurisdiction to restrain solicitors from acting for a party. The relevant principles were recently set out by Tottle J in Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 5].9 I gratefully adopt his Honour's summary of the relevant provisions:
[35] [T]he test to be applied is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting in the interests of the protection of the integrity of the judicial process and the due administration of justice including the appearance of justice: Kallinicos v Hunt [2005] NSWSC 1184; (2005) 64 NSWLR 561 [76].
[36] … [I]t is helpful to be reminded of the rationale for the exercise by the court of this aspect of its inherent supervisory jurisdiction. In Holborow v MacDonald Rudder [2002] WASC 265, EM Heenan J at [27] referred to the observations of Mason J (as his Honour then was) in Giannarelli v Wraith(1988) 165 CLR 543 at 555 - 556 on the paramountcy of the duty owed by counsel to the court and the incidents of that duty, and at [28] and [29] stated:
If there are circumstances which are likely to imperil the discharge of these duties to a court by a legal practitioner acting in a cause, whether because of some prior association with one or more of the parties against whom the practitioner is then to act, or because of some conduct by the practitioner, whether arising from associations with the client or a close interest which gives rise to the fair and reasonable perception that the practitioner may not exercise the necessary independent judgment, a court may conclude that the lawyer should be restrained from acting, even for a client who desires to continue his service - Clay v Karlson (supra); Wan v McDonald(1992) 33 FCR 491; National Mutual Holdings Pty Ltd v Sentry Corp(1989) 22 FCR 209 and Afkos Industries Pty Ltd v Pullinger Stewart[2001] WASCA 372.
From the wider viewpoint, including the perspective of the legal practitioner's duty to the court, it can readily be perceived that this situation justifies intervention by the court because of an actual or sufficiently material threatened conflict of interest by the practitioner, as an officer bearing fiduciary obligations, between his obligations to the court, and his obligations to the client or to some other interest. So it has long been accepted that a legal practitioner, who is likely to be a witness in a case should not act as counsel, or continue to act as counsel if a situation arises where he is unexpectedly required to give evidence. The reason being is that the personal integrity of the practitioner may be put in issue if his credibility is at stake as a witness, and that this will, or may, constitute a personal interest inconsistent with the practitioner's duty to the court or to the client. Other similar conflicts of interest can arise if, for example, the counsel or solicitor had a substantial personal stake in the litigation...
[37] At [30] and [31], his Honour stressed that whilst the court will act to ensure that the duty owed by practitioners to the court is not imperilled by a want of independence on the part of a practitioner, a clear case is required before a solicitor will be restrained from acting. In this respect, his Honour said:
It seems to me that if it can be demonstrated that there is a risk that a practitioner will disregard his overriding duty to the court that this will usually, if not always, require action by the court to avoid such a risk by preventing the practitioner from acting even if the relief is sought by an opposing party in the litigation…
Consequently, if an opposing party asserts that a legal practitioner should be restrained from acting for his opponent it is necessary for a clear case to be made that the practitioner concerned is in a position where he is fixed with an interest which conflicts with his duty to the court and that that interest is one of such a nature that the solicitor or counsel may fail in his overriding duty to the court… [T]he insidious threat imposed by a practitioner who, wittingly or unwittingly, does have a conflict between his personal interests and the duties which he owes to the court is another matter. As the passage cited from Giannarelli v Wraith (supra) reveals, it is inevitable that a practitioner in a cause will be obliged to advance his client's interest but he must only do so while simultaneously observing his duties to the court and preferring that overriding duty to any other. That this is, and for ages has been, done regularly by counsel and solicitors in litigious proceedings is testimony to the professional traditions which should be the mantle of all practitioners. Consequently, although a court will always be alert to consider whether or not these are in jeopardy, in my view it would usually take an unequivocal situation to justify restraining a practitioner from acting on these grounds.
[38] Those principles are reflected in r 42 of the Legal Profession Conduct Rules 2010 (WA), which is in the following terms:
42. Practitioner as material witness in client's case
(1) A practitioner must not act for a client in the hearing of a case in which it is known, or becomes apparent, that the practitioner will be required to give evidence centrally material to the determination of contested issues before the court.
(2) In the circumstances provided for in subr (1) an associate of the practitioner's law practice may act for the client if -
(a) in the practitioner's reasonable opinion there are exceptional circumstances that justify the associate acting; and
(b) the client, having been given an opportunity to obtain independent legal advice concerning the issue, consents to the associate acting.
[40] … The fact that a lawyer from a firm may be required to give evidence in a matter does not compel the conclusion that the firm cannot act in the matter. There must be some realistic sense of impropriety about the circumstances which justifies the conclusion that unless an injunction is granted, the integrity of the judicial process would be impaired: Westpac Banking Corporation v Newey [2013] NSWSC 533 [22] (Pembroke J). If a lawyer who is to be a witness will be giving evidence of a formal nature or about a minor matter, then, ordinarily, there will be no impediment to his or her firm continuing to act.
25 As I have already noted above at [14], the Injunction Application was advanced on two bases: that Mr Rumsley has a personal interest in upholding the Deed of Assignment; and the fact that Mr Rumsley is likely to be called as a witness. It is necessary to say something in respect of both of those points.
26 Counsel for the plaintiffs submitted that Mr Rumsley had a personal interest in maintaining the validity of the Deed of Assignment, and that that of itself was sufficient to give rise to 'the fair and reasonable perception that the practitioner may not exercise the necessary independent judgment' which a practitioner owes as an incident of his or her duty to the Court. I accept that submission. As I understand the position (having regard to the parties' submissions), the Deed of Assignment will operate so that if the defendant is successful on the counter-claim in CIV 1539 of 2015, it will be liable to pay Mr Rumsley's legal fees for acting for FDS in that action. The Deed of Assignment thus puts Mr Rumsley in a more advantageous position than if FDS remained liable to pay his fees. As I have already noted, counsel for the defendant submitted that that was not the case, because Mr Rumsley had a solicitor's lien in respect of any proceeds of FDS' counter-claim. However, that conclusion is one which is contested by the plaintiffs. Given that FDS is in liquidation, it would hardly be surprising if a priority of that kind were not contested, having regard to the position of the other creditors of FDS. At the very least, then, Mr Rumsley has an interest in the validity of the Deed of Assignment because, if valid, it would avoid such arguments, with the result that he can be assured of the payment of his fees.
27 In addition, this is a case in which the plaintiffs have indicated that it is likely that they will call Mr Rumsley as a witness in these proceedings. In his affidavit of 17 August 2016, Mr Field deposed that he and Mr Jones were 'very likely to wish to proof Mr Rumsley as to the merits of the counter-claim and the defence to the claim in the [action in CIV 1539 of 2015] and I expect Mr Jones and I are reasonably likely to call Mr Rumsley as a witness in these proceedings'.10 Counsel for the plaintiffs submitted that the evidence that the plaintiffs sought to obtain from Mr Rumsley pertained to the circumstances surrounding the entry into the Deed of Assignment and the role Mr Rumsley played in relation to that Deed. Counsel for the plaintiffs submitted that it was apparent from the affidavit Mr Rumsley had filed in relation to the security for costs application that he has considerable knowledge relating to the cause of action in CIV 1539 of 2015, which he acquired whilst acting for FDS.11
28 Mr Rumsley has since been issued with a summons for examination by the plaintiffs in connection with the liquidation of FDS. Counsel for the plaintiffs submitted that the outcome of that examination, rather than a separate proofing of Mr Rumsley, would disclose the nature of the evidence that he would be able to give in these proceedings.
29 For present purposes it is neither necessary nor appropriate for the Court to engage in a detailed consideration of the likely evidence that Mr Rumsley might be able to give in these proceedings. Quite apart from the fact that that matter may be argued at some future point, the practical reality is that at present the Court does not know, and cannot ascertain, with certainty, what Mr Rumsley's evidence will be. I accept the submission of counsel for the plaintiff that where it appears that a practitioner is likely to face circumstances in which he or she should cease to act, it is appropriate that that matter be drawn to the attention of the practitioner by an opposing party at the earliest opportunity, and, if necessary, that any application for injunctive relief be made without delay. That being so, it could not have been fatal to the Injunction Application that the nature of the evidence likely to be given by Mr Rumsley in the proceedings was not known with particularity.
30 In any event, Mr Field, the liquidator of FDS, is of the opinion that Mr Rumsley will be able to give evidence of relevance to the commerciality of the Deed of Assignment. That view does not appear to me to be unreasonable. Given that Mr Rumsley acted for FDS, he may (subject to any claim to legal professional privilege which might be made) be able to give evidence of the circumstances in which the Deed of Assignment came to be executed, that may bear upon the Court's assessment of the commerciality of the Deed. Finally, the reason for calling Mr Rumsley is not confined to proving matters of a formal or minor nature in the context of these proceedings. On the contrary, it appears likely that Mr Rumsley's evidence will be material to the determination of contested issues in these proceedings.
31 In Clay v Karlson, Templeman J observed:12
[I]t is generally unwise for a practitioner who is likely to be called as a witness to continue to represent his client in those proceedings. It must follow, I think, that the case is even stronger against the solicitor acting who has a personal interest in the outcome of the action: he is more than simply a witness.
32 In my view, that observation is entirely apt in this case.
33 Taking into account both the personal interest Mr Rumsley has in the validity of the Deed of Assignment and the fact that he is likely be called as a witness to give evidence on matters centrally material to the determination of this matter, I am satisfied that there was a clear case to restrain Mr Rumsley from acting for the defendant in this case. In my view, that conclusion was sufficiently clear from the circumstances known to the parties when the plaintiffs drew their concerns to Mr Rumsley's attention immediately before filing the Injunction Application, so that from that point it was unreasonable for Mr Rumsley not to stand aside, without being injuncted from acting. In those circumstances, the plaintiffs should not have to bear the costs of the Injunction Application. That raises the question of who should pay those costs.
5. Why an order should be made that Mr Rumsley pay the plaintiffs' costs
34 Counsel for the plaintiffs sought an order that Mr Rumsley pay the plaintiffs' costs of the Injunction Application. That aspect of their costs application raises two questions. The first is whether it is proper to make a costs order against Mr Rumsley when he is not a party in his own right to these proceedings, or at least to the Injunction Application.13 The second question which arises, if Mr Rumsley is required to pay the plaintiffs' costs, is whether he should be indemnified by the defendant for those costs.
35 I am persuaded that Mr Rumsley should pay the plaintiffs' costs in this case, for three reasons.
36 First, it was Mr Rumsley's unreasonable conduct, in deciding to continue to act, which necessitated that the plaintiffs bring the Injunction Application.
37 Secondly, a costs order can be made against Mr Rumsley even though he is not a party to the proceedings. Order 66 r 5 of the Rules of the Supreme Court 1971 (WA) permits the court to make a costs order against a legal practitioner. Order 66 r 5(1) relevantly provides that where in any proceedings costs are incurred by a party as a result of any unreasonable act the Court may order any practitioner whom it considers to be responsible (whether personally or through a servant or agent) to pay those costs personally. Order 66 r 5(2) provides that ordinarily no such order will be made against a practitioner unless he has been given a reasonable opportunity to appear before the Court and show cause why the order should not be made. Mr Rumsley was heard in respect of the costs order sought by the plaintiffs. He was represented at the hearing on 7 September 2016 by counsel (who advised the court that he represented the defendant and to the extent necessary, Mr Rumsley).
38 Thirdly, counsel for the defendant and Mr Rumsley accepted that the costs order, if made, should be made against Mr Rumsley. It appears that Mr Rumsley continued to act for the defendant until 2 September 2016, with the concurrence of the defendant. At the directions hearing on 26 August 2016, Mr Rumsley appeared, expressly, on behalf of the defendant.14 There may be an argument that in that situation a practitioner should be indemnified by his or her client for any costs order. Similar circumstances existed in Kallinicos v Hunt.15 In that case, an application was made to restrain a solicitor from continuing to act for the defendant to an action. The application named the solicitor as the person to be restrained and as the person against whom a costs order was sought. However, the solicitor was not named as a party to the proceedings. Brereton J concluded that the solicitor should be restrained from acting for the defendant, and that he should be responsible for the plaintiffs' costs of the application and of the costs argument. However, his Honour concluded that the solicitor should be indemnified in respect of his costs liability by his former clients, upon whose behalf, and in whose interests, and on whose instructions, he was acting in resisting the motion and incurring that costs liability.16 Accordingly, his Honour made an order that the solicitor pay the plaintiffs' costs of the application and an order that the former clients pay the solicitor's costs of doing so.
39 In my view, however, there appears to be a strong counterargument that the responsibility for determining whether to cease to act must ultimately rest with the solicitor, irrespective of the views of the client, so that the solicitor should not be indemnified by the client for any costs incurred in continuing to act. The solicitor's ethical duty to the court and to the administration of justice must clearly take precedence over his or her client's wishes. However, I refrain from reaching any final view on that question in this case because it is not necessary to do so. That is because I raised the question of who should bear the plaintiffs' costs with counsel for the defendant and Mr Rumsley, on 7 September 2016. He expressly accepted that if the Court were persuaded that a costs order should be made in favour of the plaintiffs, that order should be made in the terms sought by the plaintiffs, namely that Mr Rumsley pay the plaintiffs' costs.
40 The order which should be made is that Mr Rumsley pay the plaintiffs' costs of the Injunction Application, fixed in the sum of $2,500, such costs to be paid forthwith.
1Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194, 201 (Hill J).
2Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194, 201 (Hill J).
3Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1987) 186 CLR 622; Gray v Sirtex Medical Ltd formerly known as Paragon Medical Ltd [2009] WASC 126 [67] (Le Miere J); Jeruth Pty Ltd v Haybale Pty Ltd [2004] VSC 319 [2] - [8] (Redlich J).
4Clay v Karlson (1997) 17 WAR 493.
5 Plaintiffs' submissions dated 6 September 2016 [8].
6 Defendant's submissions dated 6 September 2016 [3].
7 Defendant's submissions dated 6 September 2016 [14].
8 Defendant's submissions dated 6 September 2016 [15].
9Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 5] [2016] WASC 263.
10 Affidavit of Malcolm Field sworn 17 August 2016 [13].
11 Plaintiffs' submissions in support of application for injunction dated 21 August 2016 [10] - [11].
12Clay v Karlson (1997) 17 WAR 493.
13Holborow v MacDonald Rudder [2002] WASC 265 [1] - [2] (EM Heenan J).
14Kallinicos v Hunt [2006] NSWSC 723.
15Kallinicos v Hunt [2006] NSWSC 723.
16Kallinicos v Hunt [2006] NSWSC 723 [23].
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