Kalil v Eppinga

[2020] NSWDC 407

District Court

New South Wales

Medium Neutral Citation:

Kalil v Eppinga [2020] NSWDC 407

Hearing dates:

5 September 2019, 11 October 2019, 25 November 2019, 4 December 2019, 11 December 2019, 20 March 2020, 23 April 2020, 29 April 2020, 30 April 2020, 1 May 2020

Date of orders:

24 July 2020

Decision date:

24 July 2020

Jurisdiction:

Civil

Before:

Wass SC DCJ

Decision:

(1)   The following costs be paid in accordance with order 2 below:

(a) The Plaintiffs' costs of and occasioned by the Defendants' application for leave to file a proposed amended defence provided to the Plaintiffs' lawyers on 15 August 2019 including the costs of and occasioned by the hearing on 5 September 2019.

(b) The Plaintiffs' costs of and occasioned by the Defendants' application for leave to file the 2nd proposed amended defence provided to the Plaintiffs' lawyers on 20 September 2019.

(c) The Plaintiffs' costs of and occasioned by the Defendants' application for leave to file the 3rd proposed amended defence to the plaintiffs' lawyers on 26 September 2019.

(d) The Plaintiffs' costs of an occasioned by the Defendants' application for leave to file the 4th proposed amended defence including the costs of and occasioned by the hearings on 25 November 2019, 4 December 2019 and 11 December 2019.

(e) The Plaintiffs' costs of and occasioned by the Plaintiffs application for a personal costs order pursuant to Section 99 of the Civil Procedure Act 2005 including costs of and occasioned by the hearings on 20 March 2020, 23, 29, 30 April 2020 and 1 May 2020.

(2)   The costs ordered in order (1) above are to be:

(a) Paid to the Plaintiffs by Leonardo Carlo Muriniti and Robert Duane Newell;

(b) Paid upon the indemnity basis; and

(c) Payable forthwith, with leave to the Plaintiffs to have the costs assessed forthwith, if not agreed.

Noted: Papers are referred to the Legal Services Commissioner to determine whether or not Mr Muriniti and/or Mr Newell have engaged in unsatisfactory professional conduct or professional misconduct.

Catchwords:

COSTS - s 99 personal costs order application made by plaintiffs against defendants’ solicitors - indemnity costs - unsatisfactory professional conduct - professional misconduct - baseless allegations of collateral purpose - incompetence - breach of ethical obligations.

Legislation Cited:

Civil Procedure Act 2005

Evidence Act 1995

Defamation Act 2005

Cases Cited:

Ridehalgh v Horsefield [1994] EWCA Civ 40

De Costi Seafoods (Franchises) Pty Limited and Anor v Wachtenheim and Anor (No 6) [2016] NSWDC 378

King v Muriniti [2018] NSWCA 98

Hockey v Fairfax Media Publications [2015] FCA 652

Lemoto v Able Technical Pty Ltd & 2 Ors [2005] NSWCA 153

King v Muriniti [2018] NSWCA 98

Young v Hones (No 2) [2014] NSWCA 338

Young v King (No 3) [2012] NSWLEC 42

Young v King (No 4) [2012] NSWLEC 236

Young v King (No 6) [2015] NSWLEC 111

Young v King (No 8) [2015] NSWLEC 187

Young v King (No 9) [2016] NSWLEC 4

Young v King (No 11) [2017] NSWLEC 34

Young v King [2016] NSWCA 282

Lawcover Insurance Pty Ltd v Leonardo Carlo Muriniti & Robert Duane Newell [2017] NSWSC 1557

Muriniti; Newell v Lawcover Insurance Pty Ltd(No 2) [2018] NSWCA 311

Young v Hughes Trueman Pty Ltd [2016] FCA 1176

Young v Hughes Trueman Pty Ltd (No 4) [2017] FCA 456

Young v Hughes Trueman Pty Ltd [2016] FCCA 989

Muriniti v King; Newell v Hemmings [2019] NSWCA 232

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397

Cultus Petroleum v OMV Australia [1999] NSWSC 435

Seller v Jones [2014] NSWCA 19

Zarth v Williamson & Ors [2006] NSWCA 246

Young v Hughes Trueman [2016] FCCA 989

Category:

Costs

Parties:

Mahmoud Kalil (Plaintiff)
Ellie Rose Eppinga (Defendant)

Representation:

Counsel:
N/A

Solicitors:
L.C Muriniti & Associates (Defendants)
Goldsmiths Lawyers (Plaintiff)

File Number(s):

2019/45573

Publication restriction:

Nil

Judgment

Background

1. The Plaintiffs brought their claims in Defamation. They were at all times legally represented by Mr Goldsmith, the principal lawyer of Goldsmiths Lawyers.

2. On 27 June 2019, the Defendants filed their defences. They were at all times represented by Mr Newell, an employed solicitor of L.C Muriniti and Associates. The principal and only other solicitor of the firm is Mr Muriniti.

3. The matter came before me on ten occasions to deal variously with:

1. various objections to the iterations of the proposed Amended Defence;

2. the application by the Plaintiffs for a personal costs order against Mr Muriniti and later also Mr Newell; and

3. the position of conflict of interest held by Mr Newell in continuing to represent both the Defendants and Mr Muriniti, and later also himself, in respect of the personal costs application made by the Plaintiffs.

4. Having dealt with the proposed Amended Defences, this judgment deals with whether a personal costs order ought be made against either Mr Muriniti or Mr Newell and, if so, on what basis.

Evidence Relied On

5. The Plaintiffs relied on the following evidence:

1. the affidavit of Kaitie Andrews, affirmed on 6 August 2019;

2. three affidavits of Barry Goldsmith, affirmed on 20 September 2019, 9 October 2019 and 20 November 2019 respectively. Mr Goldsmith was cross-examined;

3. affidavits of Ella MacKintosh affirmed on 16 March 2019 and 19 March 2019 respectively;

4. a Notice to Produce dated 6 November 2019; and

5. documents relating to the application for costs.

6. The Defendants relied on:

1. two affidavits from Mr Muriniti sworn 30th of October and 14 November 2019 respectively. Mr Muriniti was cross-examined; and

2. documents relating to the application for costs.

Legal Principles Regarding the Making of as Personal Costs Order and the Basis of the Application

7. Section 98 of the Civil Procedure Act 2005 (“CPA”) invests the Court with power to determine by whom, to whom and to what extent costs are to be paid. That power must be considered in the context of s 56 of the CPA, which requires the Court to give effect to the overriding purpose - the facilitation of the just, quick and cheap resolution of the real issues in the proceedings - when exercising the power in, or interpreting, s 99 of the CPA.

8. Mr Newell and Mr Muriniti are under a duty to assist in furthering the overriding purpose, and a failure to do so may be taken into account by the Court in exercising any discretion under s 99 of the CPA in respect of costs. I have done so in this case.

9. Section 99 of the CPA provides that, if it appears to the Court that costs have been incurred “by the serious neglect, serious incompetence or serious misconduct of a legal practitioner” or “improperly, or without reasonable cause”, in circumstances for which a legal practitioner is responsible, the Court may order the legal practitioner to pay the costs incurred. The legal practitioner is not entitled to demand, recover or accept from the client, any part of the amount that the legal practitioner is directed by the Court to pay.

10. Mr Goldsmith relied on a decision of Taylor SC DCJ in this Court of De Costi Seafoods (Franchises) Pty Limited and Anor v Wachtenheim and Anor (No 6) [2016] NSWDC 378. Not unlike this case, the underlying claim was not especially unusual or complicated. In the circumstances of that case, his Honour took the view that, “without explanation, three versions of a pleaded claim, the original and two amendments, might be excused. Perhaps the presence of another two amendments should be disregarded before the negligence or incompetence can be regarded as serious. But, in my view, the service of 16 versions of the pleading, whether filed or not, is grossly excessive if unexplained. It raises the possibility that the costs thrown away or occasioned by the amendments reflected in the fifth further amended statement of cross-claim and subsequent versions should be borne by the legal practitioners.”

11. Mr Muriniti explained in that case, as Mr Newell does in this case, that, "Not every amendment of a pleading is caused by the neglect, incompetence or misconduct of a practitioner". I agree. What is required is to examine the conduct of the legal practitioners overall and decide to what extent any or all of the costs occasioned arose by reason of the serious negligence or incompetence, or was attended with misconduct, or were occasioned improperly or without reasonable cause.

12. No real explanation has been provided in this case justifying the various versions of the pleading. Indeed Mr Newell and Mr Muriniti have studiously avoided informing the Court as to the background behind any of the amendments, relying on the Defendants’ claim for privilege over that issue, and complaining that they were responding to the (at times unreasonable) objections put against them on behalf of the Plaintiffs.

13. I have therefore had recourse to: the conduct and attitude that Mr Newell and Mr Muriniti have exhibited in the proceedings (and as informed by unrelated cases); their conduct during the hearing of the motion; the detail of the various amendments and the responses to the objections in the various iterations of the Amended Defences, together with what has been identified in various timesheets.

The Basis of This Application

14. In point form, the Plaintiffs’ position is that Mr Muriniti and Mr Newell both exhibited serious incompetence, based on the following:

1. Neither Mr Muriniti nor Mr Newell has any experience in conducting Defamation cases;

2. Notwithstanding that, both have persevered in providing inadequate Amended Defences, despite “endless” education by the Court as to how to plead matters;

3. Fundamental, wholesale and basic deficiencies were exhibited, for example to plead the facts. Such deficiencies were as a result of a demonstrated lack of knowledge and experience on the part of Mr Muriniti and Mr Newell;

4. Mr Muriniti persevered in engaging Mr Newell against very clear evidence that Mr Newell does not know how to address in a proper way a Defamation case; and where

5. Such perseverance was, from the Plaintiffs’ perspective, expensive, time consuming, and frustrating, against a background where both Mr Muriniti and Mr Newell, have engaged in conduct that is substantially the same as that which has led to the making of personal cost orders against them in the past, showing a tendency to expend costs without due regard to any obligation to the Court or to their opponent, and in breach of s 56 of the CPA.

15. In response, Mr Newell submitted that serious incompetence cannot be established simply by pointing to four attempts at a pleading and complaints within the various drafts. He said that it was a much higher benchmark standard that called for serious incompetence and that no cases have been put forward of a comparable nature to this one to found the application.

Mr Newell’s Alleged Past Incompetence and Mr Muriniti’s Support of Him

16. Mr Muriniti has been associated with Mr Newell for about 15 years. He briefed Mr Newell regularly as a barrister over a period of nearly a decade.

17. In mid-2014 all relevant professional indemnity insurers refused to reinsure Mr Newell as a barrister. The refusal was said by Mr Muriniti to have arisen out of the De Costi litigation (to which I will return), and the resulting costs orders that had been made against him. The costs orders were made against both Mr Muriniti and Mr Newell in respect of that litigation. At that time Mr Newell ceased to be a barrister and commenced work as Mr Muriniti’s employed solicitor.

18. Mr Muriniti accepted that refusing to provide professional indemnity insurance to a legal practitioner is a serious matter but he remains of the view that Mr Newell’s insurance was unfairly declined and he was prepared to employ him. He said that he did not think that Mr Newell had done anything inappropriate to have the insurance declined.

19. Mr Muriniti did not agree with findings of various Courts that: he and Mr Newell had behaved incompetently, unprofessionally, inappropriately and against the true interest of their client; or that costs had been incurred by serious incompetence and serious neglect on his part and on the part of Mr Newell.

20. Mr Muriniti has only once prior to this matter briefed Mr Newell in a Defamation case. Mr Muriniti said that he could not recall the name of the matter, but said that it went to trial before Gibson DCJ. Mr Newell later confirmed that the case was Zarth v Williamson & Ors. In that matter Mr Muriniti’s clients failed in the District Court and in the Court of Appeal (see [2006] NSWCA 246). There were no personal costs orders made against either of them in that case and I have drawn no adverse inference against either Mr Newell or Mr Muriniti by reason of their failure in that case.

The Current Arrangement Between Mr Muriniti and Mr Newell

21. According to Mr Muriniti, the nature of the work relationship is as follows: Mr Muriniti practices from offices in the Northern Beaches area. Mr Newell works full time for the firm, but from his own home. \Mr Newell is remunerated depending on the number of hours worked. Mr Muriniti explained that Mr Newell records his hours on a timesheet and at the appropriate time (usually at the end of the matter) bills Mr Muriniti for his time. Depending on the arrangement with the particular client, if the matter is not successfully concluded Mr Newell might not be paid.

22. In this case Mr Muriniti initially said that Mr Newell “would” be remunerated at the conclusion of the proceedings. When pressed, he changed his answer to “might”. This evidence arose perhaps in the context of Mr Muriniti’s concern about inadvertently waiving his clients’ legal professional privilege. However, the appropriate course would simply have been for Mr Muriniti or Mr Newell to object to Mr Muriniti answering the question as it raised matters of privilege (which he belatedly did), rather than give inconsistent answers. Those inconsistent answers have negatively impacted upon my willingness to accept Mr Muriniti as an honest and reliable witness.

23. Mr Newell has always held a supervised practising certificate whilst working for Mr Muriniti. Mr Muriniti explained that this was so despite Mr Newell’s lengthy legal experience, and that this was because Mr Newell is an employed solicitor. Importantly, Mr Muriniti accepted that this resulted in his obligation to supervise Mr Newell.

24. When asked about the nature and the extent of the supervision, Mr Muriniti said that, “Mr Newell has extensive legal experience. He has more practising experience than I do. So he requires very little in the form of day-to-day practice. Such supervision as I would be called upon would be of an administrative nature. "Is the work being done?" “Is that matter being attended to?" Basically that's it.” Mr Muriniti said that he provided no supervision of a legal nature. He said he regarded Mr Newell as a highly experienced employee and that he has confidence in his legal skills. He said that this was despite the personal costs orders that had been made against Mr Newell in the past. He said that he remained confident that Mr Newell was both able and experienced.

25. Mr Muriniti further explained, “He's given work to do. He does it. And he does it competently, in my view. There are lengthy discussions between myself and Mr Newell concerning the matters such as the pleadings. So it's not a case of me saying, "Here it is. Off you go. Just do it." He does do it. He does the lion's share of the work, but we talk frequently about various issues and what should go in and what shouldn't go into those pleadings. They have been the subject of lengthy discussions.”

26. Mr Muriniti said in his evidence that he continues to brief outside Counsel in other matters, but in respect of this matter, because it had been accepted on a “very compassionate” basis, he has not done so. However in his affidavit Mr Muriniti stated, “In lieu of briefing counsel, I have adopted the practice of assigning the work which ordinarily would be briefed to Counsel to my employed solicitor and he appears in this matter in the capacity of solicitor advocate instructed by me."

27. Ultimately it appeared that Mr Muriniti would only brief Counsel when Mr Newell could not do everything that needed to be done. Mr Muriniti and Mr Newell try to do most of the work “in-house”, as they have done in this case.

The Conflict of Interest Arising from the Application for a Personal Costs Order and How it was Dealt With

The Foreshadowing of the Personal Costs Order

28. The Plaintiffs first gave notice to Mr Muriniti of their intention to consider a personal costs order against him on 6 August 2019, at a time when the Defendants had served only the Defence.

29. On 8 August 2019 the matter came before Gibson DCJ. Her Honour made orders for the service of the proposed Amended Defence by 15 August 2019. The matter was stood over to the Defamation List on 22 August 2019 for further directions and/or argument. Costs were reserved. The Plaintiffs again foreshadowed the application for a personal costs order against Mr Muriniti.

30. Mr Newell submitted that the email of 6 August 2019 showed, by inference, that the personal costs application “[h]ad a life of its own. It has nothing to do with the fact or concern about what are usually called wasted costs in that jurisdiction.” Mr Newell explained that there was a serious question about collateral purpose, that ought to be dealt with on the question of costs “in a very serious way” as the Courts should be vigilant against costs applications that have an “intimidatory” effect. I allowed the cross-examination of Mr Goldsmith on that issue.

31. In his evidence, Mr Muriniti endorsed the view held by Mr Newell, that Mr Goldsmith had brought the application for a personal cost order for an improper purpose, in order to draw a divide between him and the Defendants, and that it was done “purely as a strategic device”.

32. Mr Muriniti accepted that this was the same argument that he had advanced before the Federal Court in Young v Hughes Trueman [2016] FCCA 989. In that case the argument failed and the Court held that the application had been properly brought. Mr Muriniti denied that his “collateral purpose” argument was devised to disguise and shield from the failings of he and Mr Newell in the preparation of the Defendants’ case.

33. Mr Muriniti accepted that he and Mr Newell were making a serious allegation against Mr Goldsmith and that it needed to be backed by evidence. For reasons that I will come to, I find that there is absolutely no evidence to support the allegation that was made against Mr Goldsmith.

Application for a Personal Costs Order against Mr Muriniti on 5 September 2019

34. On 5 September 2019, Mr Goldsmith made the application for a personal costs order against Mr Muriniti.

35. When the matter reconvened on 11 December 2019 Mr Goldsmith moved on his application for a personal costs order and again argued that:

1. The original Defence was absolutely hopeless;

2. The proposed Amended Defence (the subject of argument on that day) was equally hopeless;

3. The pleadings were simply taken from a book of forms and precedents without any real regard or consideration as to what an appropriate defence required; and

4. Mr Muriniti and Mr Newell have a tendency to file pleadings that are lacking in merit, knowingly in this case subjecting the Plaintiffs to increasingly significant and unnecessary costs, and where he and the Plaintiffs were rightly concerned that the Defendants did not have any funds or assets to meet any costs order.

36. Mr Goldsmith also submitted that he and the Plaintiffs held valid concerns about the propriety of Mr Muriniti and Mr Newell, including that Mr Newell had held himself out to be a barrister at a time when he was not.

The Obvious Conflict of Interest from the Outset

37. It was obvious to Mr Newell from the outset that his decision to continue to act for the Defendants and Mr Muriniti (and later also himself) put him in a position of conflict of interest.

37. Mr Newell initially dealt with the conflict by submitting that neither the legal practitioners nor the Defendants should pay the costs because there was no merit to the application.

38. Mr Newell then appeared to backtrack from the obvious position, that if the legal practitioners were arguing that they ought not pay the costs, the chances increased, so far as any bad pleading was concerned, that the Defendants ought pay the costs. He said, “The consequence of that application failing is that the clients may pay the costs, depending on the view that your Honour takes about the course of what's happened.” He said, “They say that they expect that the costs would fall on to them...That’s the appreciation that they record.”

39. The following exchange occurred:

HER HONOUR: That’s got to be the position, hasn’t it, Mr Newell? We're not arguing that no costs be paid, no orders for costs to be made, are we? Or should I say, are you?

NEWELL: Probably not, but it

HER HONOUR: I want to know yes or no, Mr Newell.

NEWELL: Sorry, what's your Honour's question?

HER HONOUR: I want to know yes or no.

NEWELL: On which question?

HER HONOUR: You said, "Probably not."

NEWELL: It would not be the case that no costs would ever be payable on the basis of the proposed amendments. We do not see that as a likely outcome.

HER HONOUR: The argument, then - back to where we were five minutes ago - the argument, then is that Mr Muriniti would be arguing that his client should pay them and not him. That’s the argument, then, isn’t it?

NEWELL: He's not going to argue they should pay them. I appreciate that’s implicit in resisting a cost application.

HER HONOUR: Of course.

NEWELL: But that’s simply a repetition of the conflict that we all understand. He doesn’t want them to pay them anymore than he wants to pay them himself, but there’s a question of principle here about when and whether a cost application should be made, bearing in mind the impact on the system of justice.

Mr Newell’s Continued Position on the Conflict of Interest

41. Nonetheless, Mr Newell continued to appear for both Defendants, and for Mr Muriniti, and later himself.

42. I was concerned that the only advice that the Defendants had received (on either the issue of conflict of interest or as to any decision to waive privilege as to how the various iterations of the proposed Amended Defence were prepared) was from either Mr Newell or Mr Muriniti.

43. Mr Newell reported that the conflict of interest had been resolved by the Defendants providing consent for him to appear for them whilst also appearing for Mr Muriniti (and indeed by this time also defending the personal costs order against himself).

44. Whilst Mr Newell had seen the particulars upon which the Plaintiffs relied in support of the application for personal costs orders, he did not know what information had been given to the Defendants. Despite the fact that Mr Newell, and not Mr Muriniti, were acting for the Defendants on this issue, Mr Newell had left this to Mr Muriniti to attend to. When pressed, Mr Newell said that neither he nor Mr Muriniti could remember if the Defendants had been given a copy of the particulars or not. One of the reasons why Mr Newell sought the particulars on a previous occasion was to give them to the Defendants for them to get independent advice. When pressed on the fact that Mr Newell had previously argued this, Mr Newell said that he believed that they had been given to the Defendants. The basis of that belief was not made clear. Mr Newell then dismissed the notion that the Defendants required the particulars. He said that he understood that the purpose of them was for he and Mr Muriniti to understand the allegations made against themselves. The exchange with Mr Newell on this issue gave me serious doubts about Mr Newell’s candour.

45. It became apparent in debate that Mr Newell had not been dealing with the Defendants at all on this issue, despite purporting to act for them, and that this had been left to Mr Muriniti, despite the fact that Mr Muriniti was at that time under cross-examination and despite the fact that Mr Muriniti had never appeared for them at any time during the argument relating to the various Amended Defences or the costs application. I regarded that as an extremely serious matter.

46. Despite my urging, the Defendants have never received independent legal advice, with advice at all times being provided to them by Mr Muriniti. Mr Newell said that they simply decided not to get it and so he did not forward to them the particulars. Just how the Defendants could have made an informed decision on representation or whether or not they wished to waive privilege on any advice that had been given by Mr Muriniti or Mr Newell about the pleading without such information was not explained.

47. That day’s hearing was conducted over an audio visual link (“AVL”) in light of the restrictions placed by the COVID-19 virus pandemic. At one stage the AVL disconnected. After it resumed Mr Newell “corrected” his submission and said that Ms Eppinga had received the particulars. Given Mr Newell’s earlier statement that he believed that they had not been provided to the Defendants and where both Mr Muriniti and Ms Eppinga were on hand to provide the earlier instructions, I was unconvinced by Mr Newell’s statement.

48. In any event, I regard it as a clear breach of Mr Muriniti’s and Mr Newell’s ethical responsibility to the Defendants to ensure that the Defendants could make fully informed decisions regarding their representation. Mr Newell’s response to the situation was to submit that he and Mr Muriniti were “happy for them getting independent legal advice” and that “they understand independent advice is an issue and they understand the consequences of the personal costs application. It is their decision, at the end of the day, whether they want to take the step of seeking independent advice and going through that process.”

49. Mr Newell did not appear to understand his obligation, as I see it, where he and Mr Muriniti are in such a clear position of conflict of interest, to ensure that the Defendants had independent legal advice and to assist them in that process. I have no doubt that had they arranged for it, the Defendants would have accepted it.

50. So far as how Mr Newell perceived the conflict in continuing to act for himself, Mr Muriniti and the Defendants, I asked him whose interests he will prefer between Mr Muriniti and the Defendants when making submissions on the personal costs order application. He responded, “I'm going to submit everything that's in the interests of the - everything properly in the interests of the Defendants and everything properly in the interests of a proper decision by the Court in terms of the personal costs applications.” That submission was incomprehensible and without substance. Mr Newell’s position was then stated as follows: “I will submit that there should not be a costs order against the Defendants either.”

51. The submission was contrary to Mr Newell’s earlier submission, where he accepted that either Mr Muriniti or he on one hand, or the Defendants on the other, would have to pay the costs thrown away by reason of the amendments.

52. Mr Newell continued to assert that he could vigorously represent the interests of the Defendants, whilst at the same time suggesting that a personal costs order should not be made, “Because of the way that the amendment dispute was handled by the Plaintiffs.”

53. I asked Mr Newell, for the purposes of exploring the difficulty in him appearing for all parties, what his fall-back position would be if I was to find that someone on his side ought pay the costs. Mr Newell responded, “That the strict standard of s 99 has not been met, that the application has a collateral purpose, that it's not in the interests of the Plaintiffs for an application having such a purpose to be made, the Defendants' best interests are protected by resisting that personal costs application. It is not a case of a simple matter that it's in the Defendants' interests to advance a costs application against their solicitors at this stage or any early stage of the proceedings” and that “[a] proper review of the large picture is that the Defendants' interests are being properly protected by Mr Muriniti doing precisely what he's doing”...“because it's still a toxic situation that's being constructed, irrespective of Mr Muriniti's anxiety to protect the Defendants”...“It's a toxic situation. It's designed. It is our submission the situation is designed to cause conflict.”

54. The submission was at times incomprehensible and to the extent that I understood it, it did not answer the question.

55. It became apparent that Mr Newell was not going to make any submission on the fall-back position and that the only submission he would make would be that the personal costs application has no merit. Mr Newell saw no harm to the Defendants in simply submitting that the application for a personal costs order was “unusual and unmeritorious”. He said, “I'm never going to submit that the Defendants should pay the costs. I'm simply going to submit that the s 99 standard has not been met.”

56. When asked how Mr Newell could vigorously and appropriately represent the Defendants by “running dead” on the fall-back position, he described the problem as “conceptual but it's not real and practical.” When alerted to the likelihood that someone in the Defendants’ camp would be paying at least some of the costs (a matter that I regarded as axiomatic in light of the various amendments), and asked how his position could best serve the interests of the Defendants, Mr. Newell responded, “I have made my submission. It's this, that what is being created is a toxic situation. Mr Muriniti would resist at all costs not acting for the Defendants. The Defendants are entitled to form a view that's a toxic situation that they wish to avoid at all costs.”

57. The submission, so far as I understood it, appeared to be that the Defendants would rather pay the Plaintiffs’ costs of the amendments to the Defence than suffer the “toxic” situation caused by their lawyers having to pay them. However, there was no evidence from the Defendants to that effect.

58. Mr Newell also put forward the potential of yet a further conspiracy (the relevance of which is dealt with below in respect of the unrelated cases) which was that, in circumstances where he and Mr Muriniti had “a serious dispute with Lawcover and powerful persons associated with Lawcover” and where “one of the proceedings we're going to take involves a large number of lawyers who acted for Mrs Young and defrauded her. There is a proper anxiety about whether, if the Defendants obtain independent legal advice - but they haven't been told this at all - whether that person would be genuinely independent or would be seeking to cause damage.”

59. It was a ludicrous submission and I have rejected it as any sensible reason to have any concerns about the Defendants receiving independent legal advice, which, in my view, was clearly needed.

The Presentation to the Court of the Defendants' Informed Consent

60. On 5 September 2019, I informed Mr Newell that he ought to consider whether independent representation was needed in light of the continued and obvious conflict of interest. When the matter returned to court on 11 October 2019 Mr Newell again appeared for Mr Muriniti and the Defendants. No evidence had been filed to explain how the conflict had been dealt with. Mr Newell said he had “a few documents” (the transcript of a mention before Gibson DCJ, some correspondence between the Bar Association and Mr Newell as to whether he was holding himself out to be a barrister, and some correspondence between the parties). Mr Newell said that he did not intend filing an affidavit as this was “not needed” and said that he wished to avoid unnecessary cross-examination. I insisted on affidavit evidence in respect of all matters, other than transcript.

61. I informed Mr Newell that any evidence to be relied on, other than transcript, must be supported by an affidavit and that any deponent needs to be available when the matter is next in Court. Mr Newell submitted that the other documents may not be so important and sought time to review his tender. It was abundantly clear to Mr Newell on that day that if the Defendants were to swear affidavits, they would be required at Court on the next occasion.

62. The matter was adjourned to 11 December 2019. At that time written consents by the Defendants, in the form of “irrevocable waivers”, were produced by Mr Muriniti in an affidavit.

63. Mr Newell said that the Defendants acknowledged that they had been made aware of and seen the affidavits and related documents which had been filed in the proceedings by the Plaintiffs in support of their costs application. He said that they had been made aware of the terms of s 99 of the CPA and that an application is being made pursuant to it. He also said that the Defendants were aware from the documents that they had been given, and that the affidavits clearly disclose the allegations made by the Plaintiffs against Mr Muriniti.

64. I asked whether this included any advice to the Defendants about the prospects of success of such a costs application, as the waiver document appeared to indicate that advice had been given by Mr Muriniti or perhaps Mr Newell, that the application had no proper basis.

65. As is clear from the foregoing history it was I, and not Mr Goldsmith, who first raised the issue as to whether or not Mr Newell or Mr Muriniti could continue to act for the Defendants, in conflict with their own interest. Mr Newell argued nonetheless that Mr Goldsmith has used the issue to drive a wedge between him and Mr Muriniti on the one hand and the Defendants on the other. This was again a serious allegation, made against Mr Goldsmith with absolutely no foundation.

66. In any event, Mr Goldsmith explained that he believed that Mr Muriniti’s response on 10 October 2019 to my enquiries (that the question of conflict had been addressed and resolved by virtue of informed consent) was so vague in detail as to be meaningless and that he regarded it as wholly inadequate and that this had prompted a greater consideration and concern on his part.

67. At that time I interrupted the cross-examination of Mr Goldsmith as I too had become increasingly concerned of the need to properly resolve the issue of the conflict before the matter proceeded further. Mr Goldsmith’s cross-examination was temporarily postponed and the matter was adjourned so that the Defendants could be questioned by me.

Taking the Defendants’ Evidence

68. The Defendants’ evidence was taken via AVL from Mr Muriniti’s offices. A number of times, when the Defendants were faced with questions regarding their attitude to taking independent legal advice and the consequences of having Mr Newell and Mr Muriniti appear for them on the personal costs order application, the AVL disconnected.

69. I sensed at the time, and a review of the transcript confirmed, for example, that a number of times Ms Eppinga commenced an answer as the link was disconnected, only to say something slightly different when the link was reconnected. I also found her evidence at times to be inconsistent and seemingly not the product of any real consideration (as set out below).

70. Given those observations, and my findings in respect of the conversation between Mr Newell and Mr Muriniti about Mr Muriniti’s evidence when Mr Muriniti was under cross-examination and when the AVL was disconnected (referred to below), I have absolutely no confidence that the Defendants were not coached by someone in their answers, including during their evidence when the AVL link disconnected.

71. I have set out at length below the various matters that I put to the Defendants to ensure that they understood their rights. Given the adamant nature of both Defendants’ responses, I am bound to accept their position that, contrary to their own interests, they did not wish to have any independent legal advice of any kind on the issue of conflict, or on the application, or to seek the assistance of any barrister without cost, to assist them in their proceedings going forward.

72. Mr Newell at one stage accepted that there would be a “serious conflict” for either he or Mr Muriniti to give advice to the Defendants as to prospects of success of the motion. Notwithstanding, Mr Newell, acting in the Defendants’ interest, took no steps to ensure that the Defendants had such advice, and Mr Muriniti appears to have advised the Defendants in relation to the application, indeed at a time he was under cross-examination.

73. Given the maintenance of legal professional privilege by the Defendants, the content of that advice is unknown and it is therefore not possible to know to what extent the Defendants’ attitudes have been affected by the advice given by Mr Muriniti and/or Mr Newell, given in clear and serious conflict of interest. However, given the findings that I have made on the question of who is to pay the Plaintiffs’ costs, there has been in my view no prejudice to them in any event.

74. It is, however, appropriate in my view that the circumstances in which the Defendants were advised by Mr Muriniti and/or Mr Newell be examined by the Legal Services Commissioner to determine whether either Mr Newell or Mr Muriniti has acted in circumstances of unsatisfactory professional conduct or professional misconduct, and I refer the papers on that issue.

Ms Eppinga’s Evidence

75. Ms Eppinga gave evidence that she was aware that there had been a claim by the Plaintiffs for a personal costs order against Mr Muriniti and that there was power in the Court to order that Mr Muriniti pay the legal costs if there had been serious negligence on his part. She said that she had read all the transcript of the proceedings.

76. I explained to Ms Eppinga that the reason generally why such orders were made was so that parties to litigation should not have to pay the costs of serious errors and negligence on behalf of their lawyers because it's simply not fair, for example, for her for her to pay those costs if those costs are properly paid by her lawyers. Ms Eppinga said she did not understand this proposition.

77. I asked Ms Eppinga as to whether she was aware of the circumstances in which a Court can make a personal costs order against a lawyer. Contrary to her earlier answer, she said that not only was she aware of it and had been told numerous times. She said she understood that the only basis upon which a Court can make a personal costs order is if it is satisfied that her lawyers have been seriously negligent in running her case.

78. So far as the conflict of interest is concerned, Ms Eppinga said she understood that it would mean that her lawyers would be arguing that she does not have to pay the costs and also arguing, that they do not have to pay the costs either. She said she understood that in order for Mr Newell to argue that Mr Muriniti does not have to pay the costs, it means that, logically, he is less in a position to defend her interests.

79. Ms Eppinga was adamant that she did not wish to obtain independent legal advice and that she had been offered an opportunity to get independent legal advice numerous times. However she also said that she was not assisted in that process, by someone being suggested or in any other way and she was simply told that she could get independent legal advice. That said, Ms Eppinga said, “If I wished to get some, I would have gone and got it.”

80. I tried to explain to Ms Eppinga that the reason that I wanted her to have independent legal advice was because there was a reasonable argument that could be put that her lawyers, and not she, should have to pay the Plaintiffs’ costs of responding to the many different versions of the Defence that has been put forward by her lawyers. Her response to my explanation was, “I don't agree.”

81. I explained to Ms Eppinga that there was such a reasonable argument and that no one would be putting an argument on her behalf, increasing her exposure to a costs order. I explained that because her lawyers are going to argue that neither should pay the costs, no-one was going to separately argue that she should not pay them. I explained my concern that it might follow that she would be faced with a costs order in the vicinity of $80,000 in respect of the various changes to her pleading. Ms Eppinga responded that, “It seems a bit excessive.”

75. Ms Eppinga did not appear to have been advised about the extent of her costs exposure. When asked whether she was aware when she made her decision that she might be exposed potentially to a costs order of some tens of thousands of dollars, she replied, “I do now.” However she later said that she had been told “numerous times”. I did not accept that answer in circumstances where neither Mr Newell nor Mr Muriniti had asked Mr Goldsmith about the Plaintiffs’ costs to date and where that had only been revealed by Mr Goldsmith moments before.

76. Ms Eppinga went on to say, “What I'm trying to say is I feel like - I don't know how to put it, but hasn't the other side of this been doing that as well? Like, they're asking for particulars and all this stuff...and that's prolonged it as well.”

77. I explained to Ms Eppinga that this part of the case was about the fact that her lawyers had drafted many versions of the Defence and every time that they send it to the Plaintiffs' lawyers it costs money for them to look at it, to come to Court and argue about it and that this had occurred on about five occasions. I explained that her costs exposure was probably in the order of about $40,000 or $50,000. Ms Eppinga said that she knew this when she made her decision not to engage independent legal advice. She then said, what was obvious, that she did not know the extent to her exposure as “Mr Goldsmith just said the amount”.

78. I explained to Ms Eppinga that she may be asked to pay those costs in circumstances where Mr Newell is representing someone who could also be ordered to pay that amount so that she would have to pay nothing and I wanted her at Court, to ensure that she knew what was at stake and to make sure that she had been properly informed about that.

79. I explained to Ms Eppinga that I was not comfortable with the situation and that I needed to ensure that she had a fair hearing on this issue. At that point Ms Eppinga appeared to me to be upset and said, “Yeah, to be honest, I'm not comfortable about this whole thing either. It's really blown out a little bit more than it--”.

80. What followed were a number of attempted exchanges between Ms Eppinga and myself on the issue. It was not transcribed but Ms Eppinga appeared to be asserting that Mr Goldsmith was in some way responsible for the various iterations of the proposed amended Defence and that the application for the personal costs order was in some way utterly inappropriate (a vision of the proceeding that accorded with the views of Mr Muriniti and Mr Newell).

81. I explained to Ms Eppinga that the position of her lawyers was the very reason she should, in my view, have obtained independent legal advice. I said, “That’s one of the things that an independent lawyer can talk to you about. Because I know at the moment that’s what you've been told by your lawyers, but you need to remember that on this application, they are not only representing your interests, but they're representing the interests of someone who is diametrically opposed to your interests. Does that make sense? That it’s in Mr Muriniti’s interests not to pay the costs order; which increases the likelihood that you have to pay it.”

82. I also explained to Ms Eppinga that if she is ordered to pay the costs, that even if she had no money now to pay them, that obligation from a Court order can last a number of years, and that for example, money can be taken out of her wages for many years to pay that obligation. She responded, “Cool.” However my note records that at this time she appeared to be quite upset with what I was telling her. She then said that she had been through it numerous times.

83. Ms Eppinga again said that she did not want independent legal advice. She said that she thought the independent legal advice was about “the conflict” and “the costs”. She made no mention of the issue of the waiver of privilege.

84. Ms Eppinga also said, “But I don't have money to go to another lawyer, so that doesn’t really work. So I can't--” When I asked her whether this was the reason why she did not want to get independent legal advice, because she thought it would cost her something, she replied “No; it’s because I'm 100% happy with what I've got now, and I'm happy with it; I don't want anyone’s else’s opinion; I don't want it.”

85. When I explained to her that this would mean that no one would speak up for her positively that she should not pay the costs, as opposed to Mr Muriniti, she said, “What, I didn’t get that.” When I asked her whether or not she was perfectly happy knowing that the way things are structured at the moment, that no one would stand up and say that Mr Muriniti should pay the costs, and that that increases her possible exposure to a very significant costs order, she said that she “did not know.”

86. I explained to Ms Eppinga that with my assistance, she could obtain free independent advice about this issue, so that she was properly informed to make a decision. She said that she was offered that, and declined because she was happy with what she had “[b]ecause it’s been a long time now, and I trust them with what they're doing, and I'm just happy to continue this way.”

87. When I explained to Ms Eppinga that the Defence document had been amended four or five times, and in some circumstances it was to make amendments to even basic fundamental mistakes in her pleading, she said, “It’s a messy situation, so I can understand how that has happened, yeah” and that they were asked to do “some pretty basic changes to the things by Mr Goldsmith”. When I explained to her that a number of those changes had to be made because her lawyers have almost no experience in Defamation law, she said, “I feel like they're doing fine.”

88. Ms Eppinga did not receive any independent legal advice about whether or not she ought to waive legal professional privilege. She said she had been told by her lawyers that she should get independent legal advice on the issue of privilege. When I asked her if she was content that she did not want to receive any further advice about whether or not she should waive privilege, she responded, “I won't say I'm content with any of this, but yeah.” She said that she did not wish to obtain any further legal advice about whether or not she should waive privilege. However, when I then asked her whether she wished to tell me who is responsible for the different versions of her Defence or to keep that matter confidential, she said that she did not know.

89. I then explained to Ms Eppinga that that was a matter that I was considering and that it might make a very big difference potentially, as to whether or not she would be ordered to pay costs. I was part way through this explanation when the AVL again disconnected. When the link resumed she said that she did not wish to waive privilege.

90. Ms Eppinga said that she knew from the outset that Mr Muriniti and Mr Newell did not have any real experience in Defamation law. She said that she did not understand, until more recently, that Defamation law is a very specialised area, that it involves a particular special language at times, and that terms of art well understood by defamation lawyers are often not well understood by those who do not often practice in the area. She said that she understood that the running of specific defences such as qualified privilege and comment, being run in her case, can be particularly difficult even for lawyers who are very experienced.

91. Ms Eppinga said that she also knew that the Bar Association could provide to her, free of charge, a barrister who could act for her at least in preparing her pleadings without losing Mr Muriniti or Mr Newell as her lawyers, and that she was “offered that at the beginning of this”. She said that although she was given a barrister's name and number, she did not want to explore that avenue because she was happy with and trusted her lawyers. She said that she did not discuss this with her lawyers and that it was up to her to decide. Just who had given her the name and number of the unnamed barrister was not clear and neither Mr Muriniti not Mr Newell mentioned doing this for her. I asked her whether her lawyers told her that from time to time Mr Muriniti does brief barristers to assist him in his trials. She said she did not know what that meant. She said that she had been told that she could have a barrister act for her who is specialised in Defamation law who could assist Mr Muriniti without any extra charge, but that she did not want one because she was very happy with what she had. She said, “I've come too far now especially to go back to square one. So it's not going to happen. I'm happy. I'm more than happy.” I tried to explain to her that she would not be going back to square one, but she was adamant that she was more than happy with her legal representation.

92. When I asked her if she had any interest in Mr Muriniti briefing a barrister who would only charge her if she won the case and a costs order was made in her favour, she said “[a]ll I have interest in is, like, having this case go ahead and for it to take its course, and that's all I'm interested in…I just want to go forward with the case, with the lawyers I've got, and that's what I'm happy to do.”

93. I explained to Ms Eppinga that there are nearly 100 barristers in New South Wales who practise in Defamation who have up to 61 years of experience in the area, any one of whom might be prepared to take her case while still retaining Mr Muriniti and Mr Newell. She said that she already knew this, that she did not want to engage a barrister, that she had been offered a barrister who she did not think had much experience because they were not much older than she and so she was happy with what she had. She said that she did not speak with them or contact them to make that decision. She said “[b]ecause I chose not to, because that was the decision I chose. I'm happy.” I asked her why this was so. She replied “Leo [Muriniti] and Robert [Newell]. That's why. Because I'm confident in what I've got. I've been confident from the start, I'm still confident now, and I feel like we're talking about this prolonged stuff, and I feel like the only thing prolonging it now is this. So I'm happy with what I've got, and I just want to get moving now. Whatever happens in the end is going to happen, so”.

94. Ms Eppinga said that she did not think she would change her view if it was the case that one of the reasons why the case has been so prolonged has been the actions of her lawyers. She volunteered, “[m]ore so the other party has done that.” She again said that she had made up her mind and that she was happy with her legal representation. She agreed that no amount of information would change her mind.

95. I attempted to ask Ms Eppinga whether or not she wished to waive legal professional privilege. She said that she did not, and just wanted the case to go on. She agreed that she did not want me to know why her Defence had changed four or five times.

96. So far as the particulars document dated 3 April 2020 is concerned, Ms Eppinga said that she had had it for a while. When I asked her how she got it, she said, somewhat delphically, “I was given it.” When asked from whom, the AVL disconnected. When it reconnected, Ms Eppinga said she received it from Mr Muriniti's secretary and that she came into the office and picked it up. I was unconvinced by her answer.

Ms Milham’s Evidence

104. Ms Milham also confirmed that she had been provided with the materials set out in her affidavit and that she had received the transcripts of the matter every time it was in Court. She said she had received the particulars document dated 3 April 2020 after the last Court date.

105. Ms Milham appreciated that a claim for a personal costs order had been made against her solicitor and that this has put both Mr Muriniti and Mr Newell in a position where they are acting for her in conflict of with own interests. She understood that this, at least in part, had arisen because there had been about four or five different versions of her Defence put forward.

106. I explained to Ms Milham that I wanted to ensure that she had had legal advice on this issue, from a “person completely independent” advising her of her rights. She replied, “Yes. I have been advised very strongly. They have actually told me.” She then clarified that this advice had not been independent.

107. Ms Milham said that she understood that any independent legal advice could be given to her in short time, briefly and free of charge. Ms Milham explained that she had already been to the Legal Aid and to “the pro bono scheme” for another lawyer, that she had spoken to numerous people and volunteered that she was extremely comfortable with her lawyers. She said she understood that she could obtain independent legal advice free of charge.

108. I explained to Ms Milham that there was a reasonable argument that could be put that her lawyers and not she should pay the Plaintiffs' costs of responding to the many different versions of the Defence put forward by her lawyers, and that with Mr Newell representing Mr Muriniti and her, that faced with a choice between her paying some tens of thousands of dollars in legal costs or her lawyers paying it, no one was going to positively assert that it should be her lawyers and not she that should pay it. She said that she understood this and that it increased her exposure to the risk of such an order being made against her instead of her lawyers.

109. Ms Milham said that she understood that her potential exposure might be in the order of 40 or 50 thousand dollars.

110. Ms Milham works part time. She said that she also understood that if she was ordered to pay those costs, that they could be ordered to be paid straight away and that money could be taken out of her wages every week to pay those costs.

111. Ms Milham understood that the purpose of any independent legal advice would be to advise her about the conflict of interest and the costs application. Ms Milham confirmed she did not wish for any independent legal advice.

112. She also said that she understood that her lawyers were claiming legal professional privilege on her behalf and that, as a result, the Court was not going to be informed as to the reason why the various changes were made to the Defence.

113. Ms Milham said that she had been advised about whether or not to claim privilege by “various people and the lawyer.” When I asked her to specify who those people were, she said, “Well, my lawyers and just talking to different people. I don't have their names.” I found the evidence that she had been talking to various different unnamed people difficult to accept. When I asked her, “When you say “your lawyers”, do you mean you received that advice from Mr Muriniti and from Mr Newell?”, the AVL disconnected.

114. When the AVL reconnected, Ms Milham then told me that the only lawyer who had given her advice about whether or not to waive legal professional privilege was Mr Muriniti, and that the latest of those meetings with Mr Murinti was just after the last Court appearance (when Mr Muriniti was still under cross-examination). As a result of that advice, Ms Milham did not wish to waive her privilege.

115. Ms Milham said that Mr Muriniti had told her that neither he nor Mr Newell were Defamation lawyers and that they have little experience in Defamation law. She understood that Defamation law is an extremely specialised area of the law and that people are best represented at times by those who are well familiar with the legal principles that operate in that area of the law.

116. Mr Milham said that she also understood that the Bar Association can provide her with the help of a specialised Defamation lawyer either free of charge or to only be charged if there's a costs order made in her favour, with Mr Newell and Mr Muriniti still involved.

117. Ms Milham said that she had not proceeded to get any independent advice because she had already spoken to numerous people (she nominated Legal Aid, the Law Society and another unnamed lawyer), and that with their advice and with Mr Muriniti’s advice, she was comfortable. She said that she had also thought about having the assistance of a specialised Defamation barrister but did not want to take any steps to find out whether or not that was something she wanted.

118. She too, as noted above, had had a conference with Mr Muriniti whilst he was under cross-examination and where Mr Newell was appearing for the Defendants. She said that Mr Muriniti provided her with some advice in respect of the particulars alleged against him and Mr Newell.

Unreasonable Delay Occasioned by Mr Newell and Mr Muriniti in Bringing Forward the Defendants’ Evidence on the Irrevocable Waiver

119. As I have already referred to, once it was obvious that the only advice that had been given to the Defendants, had been given by Mr Muriniti, who was not independent, and that this had undoubtedly informed the views of the Defendants in respect of all matters, I required that the Defendants provide an affidavit and be asked questions about it in Court as to whether the consent to have Mr Newell acting for them on the application was truly an informed one. I am of the view now having heard from them, that it was not.

120. In doing so, I set out for Mr Newell’s benefit a number of matters that I expected to be covered in the affidavits. Mr Newell said, “I myself will deal with it, who [at that time] are (sic) not exposed to a costs order, will obtain the affidavits from the Defendants, if they're willing to give them and we will canvas all of the matters that your Honour has raised today.” That did not occur. Some weeks later, on the next occasion the matter was before the Court, the waivers were simply produced without an affidavit. Mr Newell sought an adjournment.

121. I explained to Mr Newell that I did not regard him to be the appropriate person to prepare the advice to the Defendants (as he had suggested because at that time he was not facing a personal costs order) as he was also appearing for Mr Muriniti. I explained, “It's just not appropriate that you advise - well, I think I've probably already made clear that there are any number of pathways that can be adopted. Someone can provide that advice that is truly independent, someone who frankly it would be better is a Defamation law specialist, because they can then give advice about what is or is not wrong with the pleadings and I suspect the NSW Bar Association will provide someone to give pro bono assistance on that very limited issue and then affidavits can be done, so that I can be satisfied that both Defendants are properly informed in giving their consent.” That did not occur.

122. At one point Mr Newell agreed that the Defendants be advised by someone who was truly independent. He then changed his mind and said, “I can't agree on behalf of the Defendants that they will consult a solicitor. I can agree that they will be told that that is an option that they might pursue. My instructions are, they're already fully aware of the Bar Association scheme and have rejected that in favour of having someone from their local community”.

123. Initially Mr Newell submitted that the Defendants had been counselled to obtain independent legal advice. When I pressed him on the detail of what had occurred, he simply said that they had been “counselled about the existence of it, the availability of it”. Mr Newell’s lack of candour was obvious.

124. I again made it clear that I wished to ask the Defendants about their respective positions. I stated in terms, “Maybe they can put on some affidavits about that and I can ask them about that when we come back to Court.” Mr Newell agreed.

125. Mr Newell also accepted that where Mr Muriniti had given advice about prospects, there would be a question of his independence.

126. At that point I adjourned the proceedings on the basis that I was sufficiently concerned about what was occurring to satisfy myself as to the basis of their consent other than that disclosed in the “irrevocable waiver” documents, as it seemed to me that the advice that was given was not sufficient to inform them.

444. In September 2016, Bromwich J dismissed an application by Ms Young for an extension of time to file a notice of appeal from Smith J of the Federal Circuit Court refusing to set aside the bankruptcy notice; Young v Hughes Trueman Pty Ltd [2016] FCA 1176. Bromwich J, in dismissing the application, described the argument as unacceptable “fevered imaginings” and observed that the conduct as reprehensible.

445. On 5 May 2017, Lee J in granting an application for costs against the Respondents personally; Young v Hughes Trueman Pty Ltd (No 4) [2017] FCA 456, made the following comments:

"[56] Whether [maintaining the conspiracy] be misplaced zeal or some other reason, the fact is that [Mr Newell and Mr Muriniti] have not only instituted and maintained a proceeding which had no prospects of success but have also engaged in something more, being unreasonable conduct in making serious allegations absent a reasonable basis and also with a disregard of any proper consideration of the prospects of success. For whatever reason, the maintenance of the allegation in this proceeding amounts to a dereliction of duties of each of Mr Newell and Mr Muriniti to the Court. It has also caused them to breach the duty contained in s 37N(2) of the Act by failing to take sufficient account of the overarching purpose and failing to assist Mrs Young to comply with her duty to conduct the proceeding before Bromwich J according to law and as quickly, inexpensively and efficiently as possible.

[57] A costs order which will have the effect of compensating the respondents ought to be made. Given my findings, there is clearly a relevant delinquency sufficient to justify the awarding of costs on an indemnity basis: see Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233. My view that indemnity costs are appropriate is fortified by the fact that at material times the Solicitors have been on notice that the respondents have regarded the allegations of conspiracy as being made and maintained inconsistently with professional standards. The Solicitors could have been in no doubt as to the possibility of a personal costs order being sought if the allegations were persisted in."

The Respondents’ Lack of Candour and the Most Recent Case

475. Despite my raising with Mr Newell the decision by Sackar J and the following appeal, and my concern that I had not been provided with all relevant decisions, to understand the submission that the various conspiracy theories could be litigated and where it was asserted that new proceedings had been commenced in April 2020 in respect of one or more of those conspiracy allegations, I was not taken to the most recent relevant decision: Muriniti v King; Newell v Hemmings [2019] NSWCA 232 (2 October 2019). In that case Mr Newell and Mr Muriniti were ordered to pay the costs personally.

476. At that time the Court recorded the “complicated litigation history” which I have set out and held that Sackar J’s decision was correct and that the Respondents have “consistently frustrated all of Lawcover’s attempts to bring the applications for leave to appeal to an end. That active non-cooperation has persisted even after the High Court refused special leave in May 2019 and persists today.”

477. In that case, the Respondents made lengthy written and oral submissions in order to “re-agitate the proceedings [against Lawcover] already conclusively determined”. The Court determined that the submissions were “hopeless”. The Respondent’s arguments were described as “extravagant and labyrinthine” and did not address the relevant application.

478. So far as the conspiracy theory that Mr Muriniti and Mr Newell attempted to peddle in these proceedings, the Court of Appeal held that they “have made, and continue to make, unwarranted allegations of a most serious kind about Lawcover’s conduct in seeking to bring the proceedings to a close”: one that was dismissed once by Sackar J and twice by the Court of Appeal.

479. The Court of Appeal described Lawcover’s conduct, as “proper and commendably restrained” and Mr Muriniti’s and Mr Newell’s claims as “extravagant and, on the evidence, baseless”. The Court went on to describe the fact that there was no evidence or coherent argument advanced that there was any cause of action against Lawcover and refused to enter into any examination of the original theory. The Court observed that the conspiracy theory regarding Lawcover could not be correct in the face of the conclusive finding by this Court that Lawcover was entitled not to appeal from orders made.

480. The Court of Appeal observed that delays and costs in the matter were already unacceptable and that the “saga of litigation orchestrated by [Mr Newell and Mr Muriniti] must one day come to an end” and that the Lawcover conspiracy theory could never be progressed and ought not be allowed to “continue to moulder in the Court’s lists”. The Respondents have been permanently restrained from pursuing an appeal against the orders made in Young v King (No 11) and as such any further allegations arising from the original conspiracy theory cannot reasonably be said to have any prospects of success.

481. This latest decision flies in the face of submissions made by Mr Newell and Mr Muriniti in his evidence that, once properly understood, the conspiracy theories would have good prospects of success. As such I regard the failure by Mr Newell to draw my attention to this decision in submissions and the failure by Mr Muriniti to refer to it in his evidence, has been a significant dereliction of their respective duties of candour to the court. Given that it was not raised in argument, I have not taken it into account as tendency evidence. The cases that I have referred to in the tendency context, are either those cases put forward by Mr Goldsmith, the decision of Sackar J. And the appeal from the decision, and any cases referred to therein (for example the Federal Court cases).

482. The Court of Appeal observed that the conduct of Mr Newell and Mr Muriniti gave cause for concern: that they have been variously been found to have “behaved incompetently, unprofessionally, inappropriately and against the true interests of their client. Each has embarked on futile litigious activities and incurred considerable unnecessary costs liabilities”, “made serious allegations amounting to fraud with no apparent proper basis”; and have “sought needlessly to prolong these proceedings on the basis of even more outlandish allegations made in correspondence and repeated in this Court with no apparent basis.”

483. The fact, that in light of those observations by the Court, Mr Muriniti and Mr Newell continue to do so before me is cause for considerable concern. I note that the Court of Appeal directed the Registrar to forward the papers to the Legal Services Commissioner with a recommendation that he investigate whether the conduct of Mr Muriniti and Mr Newell amounts to either unsatisfactory professional conduct or professional misconduct. I propose to do the same in this matter on this issue.

Legal Principles - Indemnity Costs

484. The Court has a very wide discretion in relation to an award of costs. It can award indemnity costs pursuant to s 98(1)(c) of CPA.

485. An award for indemnity costs may be made in a variety of circumstances. In this case it is founded on the many and varied acts of delinquency on the part of Mr Newell and Mr Muriniti which has also justified the making of personal costs orders.

486. The costs are to be paid on an indemnity basis.

Finding In Respect of Personal Costs Orders Against Mr Newell and Mr Muriniti

487. It follows that I propose to make the orders sought by the Plaintiffs in the Notice of Motion, together with the costs of the further hearing on the same issues, on dates not listed in the Motion.

Orders

488. I make the following orders:

1. I order that the following costs be paid in accordance with order 2 below:

1. The Plaintiffs' costs of and occasioned by the Defendants' application for leave to file a proposed amended defence provided to the Plaintiffs' lawyers on 15 August 2019 including the costs of and occasioned by the hearing on 5 September 2019.

2. The Plaintiffs' costs of and occasioned by the Defendants' application for leave to file the 2nd proposed amended defence provided to the Plaintiffs' lawyers on 20 September 2019.

3. The Plaintiffs' costs of and occasioned by the Defendants' application for leave to file the 3rd proposed amended defence to the Plaintiffs' lawyers on 26 September 2019.

4. The Plaintiffs' costs of an occasioned by the Defendants' application for leave to file the 4th proposed amended defence including the costs of and occasioned by the hearings on 25 November 2019, 4 December 2019 and 11 December 2019.

5. The Plaintiffs' costs of and occasioned by the Plaintiffs application for a personal costs order pursuant to Section 99 of the Civil Procedure Act 2005 including costs of and occasioned by the hearings on 20 March 2020, 23, 29, 30 April 2020 and 1 May 2020.

2. The costs ordered in order 1 above are to be paid:

1. to the Plaintiffs by Leonardo Carlo Muriniti and Robert Duane Newell;

2. upon the indemnity basis; and

3. forthwith, with leave bring grated to the Plaintiffs to have the costs assessed forthwith, if not agreed.

Noted: These reasons are to be sent by the Registrar so that the matter may be referred to the Legal Services Commissioner to determine whether or not Mr Muriniti and/or Mr Newell have engaged in unsatisfactory professional conduct or professional misconduct.

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Decision last updated: 31 July 2020