King v Muriniti

[2018] NSWCA 98

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:

King v Muriniti [2018] NSWCA 98

Hearing dates:

23 March 2018

Decision date:

10 May 2018

Before:

Basten JA at [1];
Gleeson JA at [48];
Emmett AJA at [53]

Decision:

(1)   Order that Leonardo Carlo Muriniti indemnify Brendan King and Kristina King against the costs payable by them on account of legal fees and disbursements in relation to the proceedings brought against them in this Court by Margo Young, limited to the amount payable by Ms Young pursuant to the costs orders made by the Court in dismissing her appeals in matters No 2015/229797, 2015/229805, 2016/76351 and 2016/76373.

 (2)   Order that the respondent (Mr Muriniti) pay the costs of the motions filed on 31 October 2016 by the applicants on the motions (Mr and Mrs King) in each proceeding.

Catchwords:

COSTS — party/party — orders against non-parties — personal costs orders against lawyers — whether lawyer’s conduct constitutes serious incompetence or neglect — whether personal costs order should be made

 

COSTS — party/party — orders against non-parties — personal costs orders against lawyers — scope of jurisdiction — whether jurisdiction includes indemnity with respect to contractual liabilities to lawyers and third parties — Civil Procedure Act 2005 (NSW), s 99(2)(c)

EVIDENCE — judgments and convictions — admissibility of decisions or findings of fact — whether court can rely on findings made in principal proceedings when exercising jurisdiction to order personal costs against lawyer — Evidence Act 1995 (NSW), s 91

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 3, 56, 57, 98, 99
Criminal Procedure Act 1986 (NSW), Ch 6
Evidence Act 2005 (NSW), ss 9, 11, 91, 92, 93, 178, 190; Pt 3.5
Vexatious Proceedings Act 2008 (NSW), s 8

Uniform Civil Procedure Rules 2005 (NSW), rr 36.15, 36.16

Cases Cited:

Attorney General for the State of New South Wales v Mohareb [2016] NSWSC 1823
Attorney General of New South Wales v Martin [2015] NSWSC 1372
Ireland v Retallack (No 2) [2011] NSWSC 1096
Kendirjian v Ayoub [2008] NSWCA 194
Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300
Mercantile Bank of India Ltd v Central Bank of India Ltd [1938] AC 287
Myers v Elman [1940] AC 282
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4
Prothonotary v Comeskey [2018] NSWCA 18
Re Felicity; FM v Secretary, Department of Family and Community Services (No 4) [2015] NSWCA 19
Teoh v Hunters Hill Council (No 8) [2014] NSWCA 125
Young v King (No 6) [2015] NSWLEC 111
Young v King [2004] LEC 93
Young v King [2016] NSWCA 282
Yu v Cao (2015) 91 NSWLR 190; [2015] NSWCA 276

Category:

Costs

Parties:

Matter Nos. 2015/229797, 2015/229805, 2016/76373 and 2016/76351:

  Brendan King (First Applicant on Notice of Motion)
Kristina King (Second Applicant on Notice of Motion)
Leonardo Carlo Muriniti (Respondent to Notice of Motion)

Representation:

Counsel in Matter Nos. 2015/229797, 2015/229805, 2016/76373 and 2016/76351:

 

Mr M Wright (First and Second Applicant on Notice of Motion)
Mr R Newell (Respondent to Notice of Motion)

 

Solicitors in Matter Nos. 2015/229797, 2015/229805, 2016/76373 and 2016/76351:

  Terence Stern, Solicitor & Attorney (First and Second Applicant on Notice of Motion)
LC Muriniti & Associates (Respondent to Notice of Motion)

File Number(s):

2015/229797; 2015/229805; 2016/76373; 2016/76351

 Decision under appeal 

Court or tribunal:

Land and Environment Court of New South Wales

Citation:

[2015] NSWLEC 111; [2016] NSWLEC 4

Date of Decision:

09 July 2015

Before:

Sheahan J

File Number(s):

2014/40449; 2003/40417

headnote

[This headnote is not to be read as part of the judgment]

On 19 October 2016, the Court of Appeal dismissed four proceedings brought by Margo Young against Brendan King and Kristina King (“the applicants”), and ordered that Ms Young pay the applicants’ costs in each proceeding. Ms Young is now a bankrupt; no amount of the costs order has been paid by her to the applicants.

The submissions made on behalf of Ms Young in the four proceedings had involved extensive and complex allegations of fraud. In its principal judgment, the Court found that there was not a “skerrick of evidence” to support the fraud allegations.

Leonardo Muriniti (“the respondent”) represented Ms Young in the four proceedings. On 31 October 2016, the applicants filed a notice of motion, seeking that the respondent pay to them the costs ordered against Ms Young.

The key issues considered by the Court on the application were:

(i)   whether the court could rely on findings made in the four proceedings when determining whether costs should be ordered against the respondent;

(ii)   whether a costs order should be made against the respondent in respect of the four proceedings;

(iii)   the appropriate form of any costs order made.

The Court (Basten JA, Gleeson JA and Emmett AJA) held:

In relation to (i):

(Per Basten JA, Gleeson JA agreeing)

1. Section 91 of the Evidence Act 1995 (NSW) does not prevent a court, exercising the jurisdiction conferred by Civil Procedure Act 2005 (NSW), s 99, from having regard to findings in its principal judgment. It would be an abuse of process for the respondent to be allowed to challenge the findings made in the substantive proceedings: [44]-[46], [49].

Attorney General for the State of New South Wales v Mohareb [2016] NSWSC 1823; Attorney General of New South Wales v Martin [2015] NSWSC 1372; Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4; Prothonotary v Comeskey [2018] NSWCA 18; Teoh v Hunters Hill Council (No 8) [2014] NSWCA 125; Yu v Cao (2015) 91 NSWLR 190; [2015] NSWCA 276, considered.

2. The principal judgment did need not be tendered as evidence in order for the Court to rely on findings made in the substantive proceedings: [45], [49].

(Per Emmett AJA)

3. If s 91 applies, this would be an appropriate case for waiving the effect of the section under Evidence Act, s 190: [96]. In any event, it is by no means clear that the section applies; it is artificial to treat the present proceedings as “separate” to the proceedings dismissed in 2016, merely because the respondent was not formally a party to the latter: [97].

In relation to (ii):

(Per Basten JA, Gleeson JA agreeing)

4. The power under s 99(2)(c) is not limited to court-ordered costs, and extends to the contractual liability of a party to pay his or her own lawyers. An order can therefore be made, requiring that the respondent indemnify the applicants in respect of costs payable by them to their lawyers in relation to the proceedings: [5], [9], [51].

Re Felicity; FM v Secretary, Department of Family and Community Services (No 4) [2015] NSWCA 19, not followed.

5. The findings made in the principal judgment warrant the drawing of the necessary inferences to order costs against the respondent: [46], [50].

6. (Per Gleeson JA): if it were necessary, the additional reasons given by Emmett AJA further engage the court’s power to award personal costs against the respondent: [50].

(Per Emmett AJA)

7. The court, both at first instance and on appeal, endeavoured to have Ms Young’s representatives clearly explain the allegations of fraud. They failed to do so. The applicants’ costs were incurred due to the serious incompetence and neglect of the respondent, and those employed by him. Accordingly, an order under s 99 should be made: [101].

In relation to (iii):

(Per Basten JA, Gleeson agreeing)

8. As the applicants sought only the amount of costs Ms Young was ordered to pay, any costs order made in respect of the principal proceedings should be limited to that amount; accordingly, costs were to be assessed on the ordinary basis: [10], [11], [51]-[52].

(Per Emmett AJA)

9. The respondent should pay the costs reasonably incurred by the applicants in responding to the four proceedings: [101].

JUDGMENT

1. BASTEN JA: On 19 October 2016 this Court dismissed four separate proceedings brought by Margo Young against Brendan King and Kristina King. Ms Young’s solicitor throughout the proceedings in this Court was Leonardo Carlo Muriniti. By notice of motion filed on 31 October 2016 the Kings sought an order that Mr Muriniti pay their costs of the proceedings in this Court, and the costs of the motion.

2. The history of the proceedings and the basis of the application have been set out by Emmett AJA. There are two issues of legal principle which arise in relation to the application which are addressed below. With respect to the first, it is appropriate to correct an earlier view which I had expressed about the scope of s 99 of the Civil Procedure Act 2005 (NSW). The second involves an issue of general importance as to the operation of s 91 of the Evidence Act 1995 (NSW).

Power to award costs against legal practitioner

3. Section 99, so far as relevant provides as follows:

99   Liability of legal practitioner for unnecessary costs

(1)   This section applies if it appears to the court that costs have been incurred:

(a)   by the serious neglect, serious incompetence or serious misconduct of a legal practitioner, or

(b)   improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible.

(2)   After giving the legal practitioner a reasonable opportunity to be heard, the court may do any one or more of the following:

(a)   it may, by order, disallow the whole or any part of the costs in the proceedings:

…

(ii)   in the case of a solicitor, as between the solicitor and the client,

(b)   it may, by order, direct the legal practitioner:

…

(ii)   in the case of a solicitor, to pay to the client the whole or any part of any costs that the client has been ordered to pay to any other person, whether or not the client has paid those costs,

(c)   it may, by order, direct the legal practitioner to indemnify any party (other than the client) against costs payable by that party.

4. The language of the provision is by no means straightforward. Where subs (2) refers to “the client” it is intended to be “his or her client”, that is the client of the practitioner the subject of the order. Further, the term “costs” is used to cover both costs payable to another party and what might be identified as fees and disbursements payable by the client to his or her lawyers.

5. Paragraph (a) of s 99(2) permits the court to disallow costs in the proceedings payable to the lawyer by his or her client. Paragraph (b) permits the court to order that the lawyer pay to his or her client costs that the client has been ordered to pay to any other person. Paragraph (c) covers costs payable by another party, not being the lawyer’s client. Such a liability could arise in a range of circumstances. Unlike par (b), par (c) provides an indemnity, and one not limited to court-ordered costs. That is not to say that it would not include court-ordered costs, usually payable to a third party to the proceedings, but possibly even to the lawyer’s own client. However, it would extend to liabilities not the subject of a court order, including a contractual liability of the other party to pay his or her own lawyer or third parties, such as expert witnesses. In the Civil Procedure Act, “costs” in relation to proceedings, “means costs payable in or in relation to the proceedings, and includes fees, disbursements, expenses and remuneration.”[1] It follows that Mr and Ms King can seek an order that Ms Young’s solicitor indemnify them against costs payable by them to their lawyers in relation to the proceedings.

   1. Civil Procedure Act, s 3(1) costs.

6. The orders sought on behalf of the Kings was that Mr Muriniti pay to them (the Kings) the amount of costs which Ms Young had been ordered to pay consequent upon the dismissal of her appeal in this Court. In its terms, that order complies with neither paragraph (b) nor paragraph (c) in s 99(2). Because Ms Young is now bankrupt, it is understandable why the Kings would not seek an order that the costs payable to them by Ms Young should be paid by Mr Muriniti to her. However, it is apparent that under par (c) the Kings can seek an order directing Mr Muriniti to indemnify them against costs payable by them (for example, to their solicitors and counsel) to the extent that those costs would have been payable by Ms Young.

7. In Re Felicity; FM v Secretary, Department of Family and Community Services (No 4) I said:[2]

“In one respect the power in s 99 is curiously worded. Although the logic underlying the statutory provision is somewhat obscure, the section does not justify an order that the practitioner indemnify his own client (the applicant) for costs payable by her to the respondents: cf s 99(2)(c). Nor does the section permit, in terms, an order that the practitioner pay to the party entitled to costs, the costs ordered against the client. The available order is limited to one that the practitioner pay to the client the costs the client has been ordered to pay to the other parties: s 99(2)(b)(ii).”

2. [2015] NSWCA 19 at [16].

8. The formula used in the present notices of motion may be derived from the following statement in Re Felicity:[3]

“The absence of a basis in s 99 for an order that the solicitor pay the opposing parties directly, is not an end of the matter. There is a general power in this Court to make such orders in the supervisory jurisdiction with respect to legal practitioners admitted by the Court. An authoritative basis for that jurisdiction to order costs against a practitioner is to be found in Myers v Elman [4] where Lord Wright explained the basis on which the jurisdiction could be involved in the following terms:[5]

‘It would perhaps be more accurate to describe it as conduct which involves a failure on the part of a solicitor to fulfil his duty to the Court and to realize his duty to aid in promoting in his own sphere the cause of justice. … The order is for payment of costs thrown away or lost because of the conduct complained of. It is frequently, as in this case, exercised in order to compensate the opposite party in the action.’”

3. Re Felicity at [18].

4. [1940] AC 282.

5. Ibid at 319.

9. The first extract set out above implies a reading of s 99(2)(c) which is overly restrictive. It suggests that par (c) will support an order to indemnify another party (other than the solicitor’s client) only against an adverse costs order for which the other party may be liable. As explained above, that is not so; the liability may be a contractual liability to the other party’s own solicitor.

Extent of costs payable by lawyer

10. There is a further question where the other parties seek an indemnity for the costs payable to their lawyers: if the costs payable by the solicitor’s client are to be assessed on the ordinary basis, does that limit the extent of the indemnity? In other words, where Ms Young has been ordered to pay the Kings’ costs assessed on the ordinary basis, can the Kings recover a greater amount from Ms Young’s solicitor?

11. That question need not be resolved in this case because the motions in each proceeding seek only “the amount of costs which Margo Young had been ordered to pay consequent upon the dismissal of her appeal by this Court”. There was no requirement that the costs be assessed otherwise than on the ordinary basis. Any costs order against the present respondent will therefore be costs assessed on the ordinary basis.

Evidence of findings that appeal hopeless

12. The argument put on behalf of the respondent was that he, not being a party to the original appeal, was not bound by the findings made by this Court in proceedings between Ms Young and Mr and Ms King. Further, it was submitted that the Kings could not rely upon the judgment in this Court as evidence of the facts as found. In other words, not only was the respondent not bound by the findings, but the findings themselves were not evidence on which the Kings could rely. The latter argument depended upon the terms of s 91 of the Evidence Act which reads as follows:

91   Exclusion of evidence of judgments and convictions

(1)   Evidence of the decision, or of a finding of fact, in an Australian or overseas proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding.

(2)   Evidence that, under this Part, is not admissible to prove the existence of a fact may not be used to prove that fact even if it is relevant for another purpose.

13. In order to address the operation of this provision, it is convenient to consider three aspects, namely (a) the scope of s 91, having regard to other specific exceptions and qualifications in the Evidence Act; (b) the continued operation of any principle or rule of common law or equity, recognised by s 9 of the Act, and (c) the inter-relationship of the Evidence Act and other statute law.

(a)   section 91 – scope of prohibition

14. For s 91 to be engaged there must be a fact which was found in the earlier proceeding, was in issue in that proceeding and is in issue in the current proceeding. In other words, the reference at the end of s 91(1) to “that proceeding” implies two separate proceedings. Further, reading the section in isolation, an expression of opinion (such as, “the claim was incompetently presented”), which was not necessary for the disposal of the earlier proceeding, would not be “the decision”, nor a “finding of a fact … that was in issue in that proceeding”. Yet it would be an opinion which would appear to fall foul of the rule excluding opinion evidence, and possibly the hearsay rule. [6] But then, so would all findings within s 91, which would therefore have no work to do. On the other hand, read literally, s 91 does not exclude findings that were not in issue in the earlier proceeding.

    6. J D Heydon, Cross on Evidence (Lexis Nexis, 10th ed, 2015) at [5190].

15. Several courts have grappled with the operation of s 91 in proceedings dealing with diverse topics, including (a) proceedings to declare a person a vexatious litigant, (b) professional disciplinary proceedings against legal practitioners, (c) applications for costs orders against third parties, and (d) orders for costs against lawyers appearing for one party. Generally speaking, the discussion has addressed s 91 in isolation from its legal context, both in terms of the Evidence Act itself and more broadly. Such an approach is invited by a prohibition stated in universal and unqualified terms, but it is unhelpful. Although the terms of s 91 are unqualified, there are exceptions provided in s 92, and what are described as “savings” in s 93.

16. Section 92 states:

92   Exceptions

(1)   Section 91 (1) does not prevent the admission or use of evidence of the grant of probate, letters of administration or a similar order of a court to prove:

(a)   the death, or date of death, of a person, or

(b)   the due execution of a testamentary document.

(2)   In a civil proceeding, section 91 (1) does not prevent the admission or use of evidence that a party, or a person through or under whom a party claims, has been convicted of an offence ….

(3)   The hearsay rule and the opinion rule do not apply to evidence of a kind referred to in this section.

17. The “savings” provision, s 93, provides as follows:

93   Savings

This Part does not affect the operation of:

(a)   a law that relates to the admissibility or effect of evidence of a conviction tendered in a proceeding (including a criminal proceeding) for defamation, or

(b)   a judgment in rem, or

(c)   the law relating to res judicata or issue estoppel.

18. Section 178 provides for convictions and orders to be proved by the tender of a certificate; the certificate is not only evidence of the conviction or order itself, but “is also evidence of the particular offence or matter in respect of which the conviction… or order was had... or made, if stated in the certificate.”[7]

    7. Evidence Act, s 178(3).

19. Section 92(3) identifies the apparent bases upon which findings in a judgment might be treated as inadmissible as “evidence” of the facts found.

18. Section 93, pars (b) and (c), recognise that Pt 3.5 (ss 91-93) will not affect the operation of a judgment in rem, which is binding on persons regardless of whether they are parties to the proceedings, or “the law relating to res judicata or issue estoppel”, a “saving” which means that any judgment may be tendered as evidence that an issue has been determined as between the parties, or as between one party and other persons who are estopped from contradicting the finding. (It will be necessary to return to the scope of estoppel.)

(b)   general qualifications of prohibition

21. Though expressed as a prohibition in absolute terms, s 91 is also qualified more generally. Thus s 190 provides:

“190   Waiver of rules of evidence

(1)   The court may, if the parties consent, by order dispense with the application of any one or more of the provisions of:

(a)   Division 3, 4 or 5 of Part 2.1, or

(b)   Part 2.2 or 2.3, or

(c)   Parts 3.2–3.8,

in relation to particular evidence or generally.

…

(3)   In a civil proceeding, the court may order that any one or more of the provisions mentioned in subsection (1) do not apply in relation to evidence if:

(a)   the matter to which the evidence relates is not genuinely in dispute, or

(b)   the application of those provisions would cause or involve unnecessary expense or delay.

(4)   Without limiting the matters that the court may take into account in deciding whether to exercise the power conferred by subsection (3), it is to take into account:

(a)   the importance of the evidence in the proceeding, and

(b)   the nature of the cause of action or defence and the nature of the subject-matter of the proceeding, and

(c)   the probative value of the evidence, and

(d)   the powers of the court (if any) to adjourn the hearing, to make another order or to give a direction in relation to the evidence.

22. Sections 91, 92 and 93 are within Pt 3.5 and therefore within s 190. Section 190(3)(b) raises a question as to the potential for more severe detriments than merely “unnecessary expense or delay.” Thus, in the present case, if the respondent’s argument were to be accepted, he would be entitled to reopen the whole of the proceedings recently determined by this Court, with the possible consequence (and intent) that findings would be made which were inconsistent with those in the principal judgment. Indeed, that is not aptly described as a possibility; it must be the purpose of seeking to exclude from the evidence on the costs application the judgment already given. In other words, the result sought would tend to undermine the finality of an otherwise “final” judgment and would thus constitute an abuse of process. Although that event does not appear to be contemplated by s 190(3), it would be surprising if the rules of evidence, as set out in the Evidence Act, were to be read as undermining the inherent power of a court to prevent an abuse of its processes.

23. At least one answer to that somewhat startling possibility may lie in s 9 of the Act which provides:

9   Application of common law and equity

(1)   This Act does not affect the operation of a principle or rule of common law or equity in relation to evidence in a proceeding to which this Act applies, except so far as this Act provides otherwise expressly or by necessary intendment.

(2)   Without limiting subsection (1), this Act does not affect the operation of such a principle or rule so far as it relates to any of the following:

(a)   admission or use of evidence of reasons for a decision of a member of a jury, or of the deliberations of a member of a jury in relation to such a decision, in a proceeding by way of appeal from a judgment, decree, order or sentence of a court,

(b)   the operation of a legal or evidential presumption that is not inconsistent with this Act,

(c)   a court’s power to dispense with the operation of a rule of evidence or procedure in an interlocutory proceeding.

24. The precise scope of the phrase “a principle or rule of common law or equity in relation to evidence” is uncertain. Similarly, where the Evidence Act applies to proceedings (which must include the present proceedings) and makes a statement of universal application, subject to waiver, should it be understood to “provide otherwise”?

25. The Evidence Act itself should not be understood as a special kind of statute. For example, it does not enjoy some quasi-constitutional status. Although it is no doubt true that some evidential provisions, particularly those giving rise to an estoppel, “may have the effect of creating substantive rights as against the person estopped”,[8] a superior court should not readily conclude that rules of evidence constrain the scope of the court’s inherent powers to prevent abuse of its processes. So much is recognised by s 11 of the Act, which provides:

11   General powers of a court

(1)   The power of a court to control the conduct of a proceeding is not affected by this Act, except so far as this Act provides otherwise expressly or by necessary intendment.

(2)   In particular, the powers of a court with respect to abuse of process in a proceeding are not affected.

8. Mercantile Bank of India Ltd v Central Bank of India Ltd [1938] AC 287 at 297 (PC, Lord Wright), cited in Heydon, Cross on Evidence, at [5240].

26. This principle has potential application in relation to the inherent disciplinary power to require a lawyer to pay costs.

(c)   other statute law

27. Section 9 of the Evidence Act does not address possible inconsistency between that Act and other statutes. Nevertheless, the potential for conflict is inevitable, as may be the case with rules of common law or equity. The resolution of potential conflicts is to be achieved by general principles governing the reconciliation of different laws of the same legislature. Often it will be possible to read a provision having a general operation as subject to the requirements of a provision having a limited and particular operation. Further, later provisions may qualify or limit the operation of earlier provisions which are not expressly varied. There are numerous such provisions in Ch 6 of the Criminal Procedure Act 1986 (NSW), headed “Evidentiary matters”, inserted in 2001 or thereafter.

28. There are a number of other legislative provisions which may give rise to an inference that the judgment of a court may be admissible to establish a fact in issue in those proceedings, by reference to a finding made in earlier proceedings.

(i)   Vexatious proceedings order applications

29. The operation of s 91 has been referred to in the context of applications under the Vexatious Proceedings Act 2008 (NSW). Prior to 20 February 2018, s 8 of the Act relevantly provided:

8   Making of vexatious proceedings order

(1)   When orders may be made

An authorised court may make an order under this section … in relation to a person if the court is satisfied that:

(a)   the person has frequently instituted or conducted vexatious proceedings in Australia, ….

(2)   For the purposes of subsection (1), an authorised court may have regard to:

(a)   proceedings instituted or conducted in any Australian court or tribunal …, and

(b)   orders made by any Australian court or tribunal ….

30. In Attorney General of New South Wales v Martin [9] Simpson J held that a judgment of another court could not be tendered in contravention of s 91 of the Evidence Act. [10] In reaching that conclusion Simpson J referred to the fact that in the only appellate decision at that time dealing with the operation of s 8, Teoh v Hunters Hill Council (No 8),[11] this Court had accepted that judgments in other proceedings could be tendered, although they were not determinative. [12] Simpson J noted that s 91 had not been referred to. However Teoh had also stated:[13]

“Ordinarily, the court that heard and decided the earlier proceedings will have been best placed to determine whether they were an abuse of process or instituted without reasonable grounds. It would be an odd result if such a determination simply has to be ignored by a court hearing an application under the VP Act. The oddity of the result is reinforced by the likelihood that an application under the VP Act would be prolonged if the findings made and views expressed in the earlier proceedings could not be taken into account. Indeed there would be a real risk that the court would be burdened with relitigation of issues of the very kind that the legislation is designed to avoid.”

9. [2015] NSWSC 1372.

10.    Martin at [20] and [29].

11. [2014] NSWCA 125.

12. Teoh at [52].

13. Teoh at [53].

31. What might well have been divined from that (undoubtedly accurate) statement was that the purpose and structure of the Vexatious Proceedings Act, to say nothing of the language of s 8(2) as it then stood, was inconsistent with the operation of s 91 of the Evidence Act, in relation to applications for vexatious proceedings orders. It was an available conclusion that that level of inconsistency could properly be resolved by treating the later statute (the Vexatious Proceedings Act), which also had a specific operation with respect to a defined class of proceedings, as impliedly repealing (or, more precisely, withdrawing the operation of) the Evidence Act, s 91, in relation to those proceedings. Such an approach to statutory construction would be consistent with that adopted in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd. [14]

    14. [2018] HCA 4.

32. In the later decision of Attorney General for the State of New South Wales v Mohareb,[15] Schmidt J disagreed with Simpson J in Martin, stating that s 91 was not engaged at all. In the view of Schmidt J, the decision of the Commissioner of the Land and Environment Court, rejected in Martin, was not tendered “to prove the existence of facts that were in issue in the Land and Environment Court proceedings”, but rather to prove that the defendant was a party to the proceedings, that they had been dismissed, and “that this had been the result of the conclusions reached by the Commissioner, that the proceedings would be vexatious and frivolous if they were to proceed further”. [16] However, that view disregards the extent to which s 91 is based on the exclusion of hearsay and opinion evidence.

    15. [2016] NSWSC 1823.

    16.    Mohareb at [28]-[29].

33. The division of opinion with respect to the Vexatious Proceedings Act has now been resolved by the introduction of s 8(2)(c), which provides that the court considering an application for a vexatious proceedings order may have regard to “evidence of the decision, or a finding of fact, of any Australian court or tribunal hearing such proceedings or making such orders, even if that evidence would otherwise not be admissible by virtue of s 91 of the Evidence Act 1995.”[17] Nevertheless, as explained above, even prior to 20 February 2018, the Vexatious Proceedings Act provided an example of a statute which was inconsistent with s 91 of the Evidence Act and impliedly constrained its operation.

    17. Vexatious Proceedings Act, s 8(2)(c).

(ii)   Professional disciplinary proceedings

34. There are other statutory regimes which would appear to raise similar issues. One example may be professional disciplinary proceedings against legal practitioners. In Prothonotary v Comeskey,[18] a case involving the operation of the Trans-Tasman Mutual Recognition Act 1997 (Cth) with respect to the admission of a New Zealand practitioner who had been the subject of offences in New Zealand, the Court admitted a decision of the New Zealand Disciplinary Tribunal suspending the respondent from practice. Macfarlan JA said that the reasons were in evidence before the Court but “are not evidence of the facts found by the Tribunal” as a result of ss 91 and 92 of the Evidence Act. [19] They were held to be relevant “to the state of the respondent’s knowledge at the time he applied for admission in New South Wales”. [20]

    18. [2018] NSWCA 18.

    19. Comeskey at [48].

    20. Comeskey at [48].

35. Without referring to the operation of s 91, I took a different view as to the inferences which could be derived from the decision of the New Zealand Disciplinary Tribunal. [21] It would have been appropriate to add that because of the relationship between the court and a legal practitioner, with the concomitant duty of candour imposed on the practitioner, the disciplinary jurisdiction would not permit a practitioner to require the Prothonotary to prove again a finding of misconduct made in other proceedings because reliance could not be placed upon those findings. Hence s 91 was not engaged.

    21. Comeskey at [6].

36. This conclusion is relevant with respect to the exercise of jurisdiction under s 99 of the Civil Procedure Act. Section 99 reflects an element of the disciplinary jurisdiction exercised by this Court. It stems from inherent powers of the Court to mulct practitioners with respect to legal costs improperly incurred, as explained in Myers v Elman. [22] Thus, it would be consistent to conclude that s 91 did not interfere with the existing disciplinary jurisdiction of this Court with respect to legal practitioners.

    22. [1940] AC 282 at 318 (Lord Wright), applied in Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300 at [85] (McColl JA).

(iii)   Unnecessary costs jurisdiction

37. Arguably, the jurisdiction of this Court under s 99 of the Civil Procedure Act does not engage s 91 of the Evidence Act, because there is no separate proceeding with respect to the liability of the legal practitioner to pay costs or indemnify a party as to costs. In its terms, s 99 confers a power on “the court” to impose responsibility on the legal practitioner responsible for a party having incurred unnecessary costs, within the meaning of s 99(1). The references in s 99(1) and (2) to “the court”, together with the reference in s 99(2)(a) to “the costs in the proceedings”, are consistent with the power being exercised in the proceedings between the original parties. Further, although s 99(2) requires that the legal practitioner be given a reasonable opportunity to be heard, there is no suggestion that he or she becomes a party to the proceedings, at least in such a way as to constitute fresh proceedings. Although s 99(4) provides that the court may direct that “notice of any proceedings or order under this section with respect to a legal practitioner” be given to certain persons, it should not be inferred that this language implies that there will be fresh proceedings commenced under the section. Such an implication would be inconsistent with the form and purpose of subs (1) and (2).

38. Accordingly, on the basis that s 91 envisages that there will be separate proceedings, findings in the earlier proceeding being relevant to an issue in the later proceedings, that precondition is not met when the jurisdiction under s 99 is invoked.

39. Further, s 99 is engaged “if it appears to the court that” costs have been incurred on a particular basis. There is no reason why the circumstances may not appear wholly, or partly, from impressions formed in the course of the trial (or in this case the appeal). Except as a matter of convenience, there is no reason to rely upon findings made in the judgment, which could simply be repeated. By the same token, it would be bizarre if, by a rule of evidence, the court were not permitted to take account of its own findings in making a costs order against a legal practitioner.

40. That is not to say that the practitioner is not entitled to give evidence and call evidence and make submissions as to the appropriate inferences to be drawn from the circumstances so revealed.

41. While the text of s 91 supports a textual analysis, it is arguable that this approach gives effect to form, rather than substance or purpose. Further, arguably a textual approach may be appropriate with respect to some issues, but not others. For example, it might be accepted that an application for a “third party costs order” seeks to vary the orders made in the proceedings with respect to costs and must therefore be made within the time limits prescribed for the variation of orders in a proceeding. [23] On the other hand, as a matter of substance, an application for a third party costs order involves other persons who were not party to the substantive proceedings; the possible liability of the third party not having been an issue in the substantive proceedings,, the evidence which may be relevant to the third party costs order may extend well beyond the evidence called at the trial, as was demonstrated by Yu v Cao. [24]

    23. Uniform Civil Procedure Rules 2005 (NSW), r 36.16.

    24. (2015) 91 NSWLR 190; [2015] NSWCA 276.

42. It may be conceded that what may be treated as one proceeding for a specific purpose need not be so treated for other purposes. However, the indication in s 91 that there will be “other proceedings” reflects the fact that the exclusionary rules as to hearsay evidence and opinion evidence underpin s 91. If those exclusionary rules are not apt to apply to an application for a costs order under s 99, s 91 of the Evidence Act should not be construed to apply to that jurisdiction.

43. A further basis for concluding that s 91 was not engaged relies upon the requirement that what is excluded is a “decision” or a “finding of fact” in the earlier proceeding, to prove the existence of a fact in issue in the later proceeding. As noted above, it may be possible to conclude that the expression of a view that the conduct of the earlier proceeding had been vexatious was neither a “decision” reached in that proceeding, nor a finding of a fact in issue. Again, however, the preferable course is to construe s 91 by reference to its underlying rationales, namely the exclusion of non-expert opinion evidence and hearsay evidence. An overly literalistic approach to the language used in s 91 should give way to a purposive approach, assuming the provision is otherwise engaged.

44. In short, if the practitioner were entitled to prevent the court having regard to findings in its principal judgment, he would, presumably, be entitled to seek recusal of the whole bench on the basis of pre-judgment. That would obviously be inconsistent with the scope and purpose of s 99 and its historical antecedents. However, if the court is entitled to take account of its findings, to the extent that they are relevant, it would be absurd that it could not have regard to the very judgment in which those findings were expressed. The only contention standing in the way of that approach is the reading of s 91 relied on by the practitioner; however, properly understood, s 91 is not engaged in the present circumstances. Indeed, there is no reason to require that the substantive judgment be tendered or treated as “evidence” on the costs application.

Conclusions

45. Given the nature of the jurisdiction conferred by s 99 of the Civil Procedure Act, in my view s 91 of the Evidence Act has no operation. Indeed, it would be a technicality to require one of the parties to proceedings for a third party costs order to tender as evidence the judgment of the court in the substantive proceedings. The judgment does not need to be tendered for the court to take into account and place reliance upon the findings it had made in the substantive proceedings.

46. Further, it would be an abuse of process for the solicitor to be allowed to challenge the findings made in the substantive proceedings. It was open to him to call such evidence as he wished by way of confession and avoidance or mitigation, but that he did not do. The findings in the substantive judgment as to the conduct of the proceedings therefore warrant the drawing of the inferences required by s 99, supporting an order for costs against the solicitor for Ms Young.

47. Orders should be made in the following terms:

1. Order that Leonardo Carlo Muriniti indemnify Brendan King and Kristina King against the costs payable by them on account of legal fees and disbursements in relation to the proceedings brought against them in this Court by Margo Young, limited to the amount payable by Ms Young pursuant to the costs orders made by the Court in dismissing her appeals in matters No 2015/229797, 2015/229805, 2016/76351 and 2016/76373.

1. Order that the respondent (Mr Muriniti) pay the costs of the motions filed on 31 October 2016 by the applicants on the motions (Mr and Mrs King) in each proceeding.

48. GLEESON JA: Following dismissal with costs on 19 October 2016 of four separate proceedings brought by Ms Margo Young against Mr Brendan King and Mrs Kristina King (one by way of appeal and three by way of summons seeking leave to appeal[25] ), Mr and Mrs King applied for orders that Mr Leonardo Muriniti, the solicitor for Ms Young, pay to Mr and Mrs King the amount of costs that Ms Young was ordered to pay to them. That application arises in circumstances where Ms Young is now a bankrupt and no amount of the costs order has been paid by her to Mr and Mrs King.

    25. Young v King [2016] NSWCA 282 (the principal judgment).

49. On the question of whether s 91 of the Evidence Act 1995 (NSW) precludes reliance by Mr and Mrs King upon the judgment of this Court as evidence of the facts as found, I agree with Basten JA for the reasons given by his Honour that s 91 of the Evidence Act has no operation when the Court is exercising the jurisdiction conferred by s 99 of the Civil Procedure Act 2005 (NSW).

50. I agree with Basten JA and Emmett AJA that the Court’s power under s 99(1) of the Civil Procedure Act in respect of wasted costs, is engaged in the present case. That conclusion follows from the findings in the principal judgment as to the conduct of the proceedings in this Court, and if it were necessary, from the additional reasons given by Emmett AJA.

51. I agree with Basten JA for the reasons his Honour gives, that s 99(2)(c) of the Civil Procedure Act supports an order directing Mr Muriniti to indemnify Mr and Mrs King against costs payable by them (such as, to their solicitors and counsel) to the extent that those costs would have been payable by Ms Young.

52. As to the form of order that should be made in the present case, I agree with Basten JA that the wasted costs are to be assessed on the ordinary basis given the terms of the order sought by Mr and Mrs King. I also agree with the orders proposed by Basten JA.

53. EMMETT AJA: On 19 October 2016, for reasons published on that day (the Principal Reasons), the Court ordered that four separate proceedings (the Four Proceedings) be dismissed[26] . In these reasons, terms are used as defined in the Principal Reasons. The moving party in each of the Four Proceedings, which were heard on 21 and 22 June 2016, was Mrs Margo Young (Mrs Young). The respondents in each of the proceedings were, relevantly, Mr Brendan King and Mrs Kristina King (Mr and Mrs King). The Court ordered that Mrs Young pay the costs of Mr and Mrs King in each of the Four Proceedings. It appears that Mrs Young has not paid the costs ordered on 19 October 2016 and is unable to do so.

    26. See Young v King [2016] NSWCA 282.

54. By notice of motion filed in each of the Four Proceedings on 31 October 2016, Mr and Mrs King have applied for orders that Mr Leonardo Muriniti (Mr Muriniti) pay to them the amount of costs that Mrs Young was ordered to pay to them. Mr Muriniti was the solicitor on the record for Mrs Young in the Four Proceedings. At the hearing of the Four Proceedings, Mrs Young was represented by Mr R Newell (Mr Newell), a solicitor employed by Mr Muriniti. The Court has now received extensive written submissions and heard oral argument from the parties in relation to the present applications. Mr Newell also appeared on behalf Mr Muriniti on the hearing of the present applications.

Basis for the present applications

55. The present applications for orders against Mr Muriniti are founded on s 98 and s 99 of the Civil Procedure Act 2005 (NSW) (the Procedure Act). Section 98(1) relevantly provides that, subject to rules of Court and to the Procedure Act and any other act, costs are in the discretion of the Court. The Court has full power to determine by whom, to whom and to what extent costs are to be paid and the Court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. Under s 98(2), subject to the same qualification, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. Under s 98(3), an order as to costs may be made by the Court at any stage of the proceedings or after the conclusion of the proceedings.

56. Section 99 applies, relevantly, if it appears to the Court that a solicitor has been responsible for the incurring of costs and that the costs were incurred by the serious neglect, serious incompetence or serious misconduct of that solicitor. Section 99(2) relevantly provides that, after giving the solicitor a reasonable opportunity to be heard, the Court may direct the solicitor to pay to the client the whole or any part of any costs that the client has been ordered to pay to any other person, whether or not the client has paid those costs. In addition, the Court may also direct the solicitor to indemnify a party other than the solicitor’s client against costs payable by that party.

57. The relevant effect of those provisions for present purposes is that, if it appears to the Court that a party to proceedings has incurred costs to a lawyer acting for that party and that the costs were incurred by the serious neglect, serious incompetence or serious misconduct of a solicitor, other than the lawyer acting for that party, the Court may direct that solicitor to indemnify that party against the costs payable by that party to that party’s lawyer. [27]

    27. See Re Felicity (No 4) [2015] NSWCA 19 at [16] and [52].

58. In deciding whether to make such an order, there must be a careful balancing of the following:

• the public interest in maintaining and nurturing a legal profession that provides vigorous representation for litigants in Court, uncompromised by the fear of personal sanctions for failure and the need to maintain and nurture the obligation to give independent legal advice to litigants, on the one hand, and

• the public interest in the efficient administration of justice in the light of the overriding purpose of the provisions of the Procedure Act to facilitate the just, quick and cheap resolution of the real issues in the proceedings[28] , on the other hand.

  28. See s 56(1) of the Procedure Act.

Section 99 must be read contextually with regard to those objects and the requirement that proceedings in any court are to be managed having regard to:

• the just determination of the proceedings;

• the efficient disposal of the business of the Court;

• the efficient use of available judicial and administrative resources; and

• the timely disposal of the proceedings[29] .

  29. See s 57 of the Procedure Act.

59. Under s 56(3) of the Procedure Act, a party to civil proceedings is under a duty to assist the Court to further the overriding purpose stated above and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. In addition, under s 56(4), a solicitor or barrister representing the party in proceedings must not, by the conduct of that solicitor or barrister, cause a party to civil proceedings to be put in breach of the duty referred to in s 56(3). Under s 56(5), the court may take into account any failure to comply with those requirements in exercising the discretion with respect to costs.

60. What constitutes the conduct of proceedings without reasonable cause in circumstances in which a legal practitioner is responsible must be understood in the context of the obligations imposed on the legal practitioner by s 56(4) of the Procedure Act. [30] The making of misconceived allegations wholly unsupported by any evidence constitutes incompetent and unreasonable conduct by a practitioner. That is so even if the practitioner makes the allegations on the express instructions of a client, since such conduct will constitute a breach of the practitioner’s separate obligation under s 56(4). [31]

    30. See Ireland v Retallack (No 2) [2011] NSWSC 1096 at [6]; Kendirjian v Ayoub [2008] NSWCA 194 at [209].

    31.    See Re Felicity (No 4) at [23] and [37]-[38].

Background to the Four Proceedings

61. Each of the Four Proceedings arose out of attempts made by Mrs Young to have orders made on 19 February 2004 by the L&E Court set aside. The orders were made in the Original Proceedings, which had been brought by Mrs Young against Mr and Mrs King. The Original Proceedings arose out of drainage problems experienced by Mrs Young in relation to the King Property, which adjoins the Young Property, both of which are situated in Forestville. The King Property is lower than the Young Property, such that the natural flow of water is from the Young Property to the King Property. The King Property slopes to the rear, such that the natural flow of water is from the front to the rear of the King Property. The rear boundary of the King Property is a common boundary with properties that have frontage to another street in Forestville.

62. In 2002, Mr and Mrs King carried out work on the King Property, involving excavation on the boundary with the Young Property. In the Original Proceedings in the L&E Court, Mrs Young alleged that Mr and Mrs King had carried out various unlawful works on the King Property, including the construction of a footing, construction of a retaining wall and underpinning of existing footings to a dwelling house.

63. The Original Proceedings were fixed for hearing on 16 February 2004 before Justice McClellan, Chief Judge of the L&E Court. After an opening by counsel for Mrs Young and a position statement by the solicitor for Mr and Mrs King, the parties entered into negotiations that led to the Settlement Agreement, whereby the dispute was resolved, except in relation to costs. The Settlement Agreement entailed the giving of an undertaking by Mr and Mrs King to the L&E Court to carry out certain works on the King Property, in consideration for which Mrs Young agreed to the dismissal of the Original Proceedings.

64. On 19 February 2004, for reasons given on that day, McClellan CJ accepted that the retaining wall operated to interrupt the flow of sub-surface water and, accordingly, unless adequately drained, certain problems identified by one of the experts who gave evidence was likely to occur. His Honour was satisfied that the works that Mr and Mrs King had agreed to undertake were made necessary by reason of the construction of the retaining wall, which Mr and Mrs King conceded had been constructed without consent. His Honour therefore concluded that Mrs Young had succeeded in the Original Proceedings. His Honour noted the undertaking given to the L&E Court on behalf Mr and Mrs King, ordered that the Original Proceedings be dismissed and ordered Mr and Mrs King to pay Mrs Young's costs. [32] The orders were made by consent, except as to costs (the 2004 Orders).

    32.    Young v King [2004] LEC 93.

65. On 8 March 2004, the undertaking given on behalf Mr and Mrs King was varied. The undertaking, as varied, was to:

• carry out certain works identified in Exhibit A, which was in evidence in the Original Proceedings;

• lodge a Development Application with the Council for the erection of a retaining wall on the boundary between the Young Property and the King Property, with such wall to include the drainage works referred to in Exhibit A;

• make all reasonable endeavours to progress the development application; and

• complete the retaining wall works following the Council granting development consent.

66. Mr and Mrs King lodged a Development Application with the Council, seeking approval of the works identified in Exhibit A. The works contemplated by Exhibit A involved some work on the Young Property, for which Mrs Young declined to give her consent. As a result, the Development Application was refused and the work contemplated by Exhibit A has not been carried out.

67. On 23 May 2008, Mrs Young filed a Notice of Motion in the L&E Court seeking such orders as the L&E Court deemed fit to compel compliance by Mr and Mrs King with their undertakings and declarations as to the effect of the orders made by the L&E Court in the Original Proceedings. In the alternative, the Motion sought an order that the order made on 19 February 2004 dismissing the Original Proceedings be vacated and that the Original Proceedings be reinstated. Ultimately, Sheahan J (the primary judge) made orders on 9 July 2015 that the 2008 Motion be dismissed, that other proceedings commenced by Mrs Young be dismissed and that Mrs Young pay Mr and Mrs King’s costs of the Original Proceedings since 8 March 2004. [33]

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

Issues in the Four Proceedings

68. Mrs Young thereafter commenced the Four Proceedings. The substantive complaints that were agitated in the Four Proceedings were as follows:

1. The primary judge failed or omitted to give adequate reasons for rejecting Mrs Young’s fraud allegations.

2. That failure occurred after a trial of eight days and after reserving judgment for eight months.

3. It should be inferred from the inadequacy of the reasons and the lengthy delay in giving judgment that the primary judge overlooked important pleadings and essential evidence and argument, resulting in a miscarriage of justice.

4. The primary judge failed or omitted to consider submissions by Mrs Young that the elements of unilateral mistake at general law, and in particular the requirement that Mrs Young’s legal representatives were affected by the same actual mistake, were not a condition precedent to the application of UCPR, r 36.15 in circumstances otherwise analogous to “unilateral mistake”.

5. The Original Orders were obtained by reason of fraudulent representations on the part of one or all of Mr Griffiths, Mr Robert Springett (an expert retained for Mr and Mrs King), and Mr and Mrs King, which was prima facie established by incontrovertible written evidence, in that, in a letter of 5 January 2004, Mr Springett confirmed that the 65 mm drain referred to in Exhibit A was draining to the rear of the King property, whereas the L&E Court was told that the Exhibit A solution involved disconnecting the 65 mm drain from draining to Calca Crescent and taking it to an outlet in the rear. The contents of the letter of 5 January 2004 were known to Mr King.

6. A finding or determination by the primary judge that fraud cannot be established against “anyone involved in the matter”, in the absence of reasons to displace the prima facie inference of fraud, was unsafe and the occasion of a miscarriage of justice.

7. The primary judge erred in applying Briginshaw principles without demonstrating reasoned regard to the totality of Mrs Young’s evidence.

8. The primary judge erred in excluding evidence of Mr Hones and Mr Hemmings, who acted for Mrs Young, and the exclusion of that evidence was, for a variety of reasons, productive of a miscarriage of justice.

9. The primary judge erred in excluding evidence of Dr Perrens and Mr Warwick Davies, engineers retained on behalf of Mrs Young, and the exclusion of that evidence was, for a variety of reasons, productive of a miscarriage of justice.

10. The cumulative effect of the primary judge’s reasons in the multiple judgments given in connection with the ongoing dispute between Mrs Young and Mrs and Mrs King discloses a reasonable apprehension of bias against Mrs Young’s claim.

69. The entire thrust of Mrs Young’s complaints in the hearing of the Four Proceedings was against the conduct of her former legal advisers and witnesses, as well as Mr and Mrs King and their advisers and the Council. Despite the very extensive and complex allegations of fraud, there was no evidence to support an alleged conspiracy involving Mr and Mrs King or their advisers or Mrs Young’s former advisers or the Council, as was asserted in the course of the hearing. The primary judge was not directed to any evidence of conspiracy involving Mrs Young’s advisers. There were simply assertions, without reference to evidentiary support, despite the extremely serious nature of the allegations. It was never suggested, for example, that Mrs Young’s former advisers acted without authority. There was nothing to suggest that her former solicitor or barrister had exceeded their authority by entering into the Settlement Agreement or consenting to the 2004 Orders. Mrs Young’s former advisers were, at all times, acting within the scope of their authority in resolving the Original Proceedings by entering into the Settlement Agreement and the Consent Orders.

70. The adequacy of the primary judge’s reasons in rejecting the fraud allegations was originally the only ground of appeal raised on behalf of Mrs Young. Amendments were made to assert that the primary judge had delayed in delivering judgment and had overlooked important pleadings and essential evidence. Those grounds were rejected in the Principal Reasons, on the basis that the primary judge had made perfectly clear his reasons for rejecting the allegations of fraud, namely, the lack of evidence of any real probative value that would warrant a finding of fraudulent behaviour, especially given the Briginshaw standard. The absence of any evidence in relation to those critical allegations of fraud and mistake is significant in the light of the procedural history of the proceedings since 2008 and the express statements by the primary judge that he was anxious at all times in the course of case management to ensure that Mrs Young was given every opportunity to tell her story.

Complaints of Mr and Mrs King

71. In the present applications, Mr and Mrs King contend that several features of the conduct of the Four Proceedings by Mr Muriniti and Mr Newell demonstrate serious neglect and serious incompetence that caused costs to be incurred improperly and without reasonable cause. Three categories of conduct are said to justify the making of an order under s 99 as follows:

1. bringing the Four Proceedings in circumstances where they had no reasonable prospect of success;

2. making very serious allegations of fraud that were wholly unsupported by evidence and that should never have been made, in circumstances where there was no evidence to support the serious allegations in the L&E Court;

3. the manner in which the Four Proceedings were conducted in this Court both before and during the hearing.

I shall deal with the first two of those categories together and then say something about the third.

No reasonable prospect of success and no evidence

72. In relation to the first two categories of conduct, Mr and Mrs King assert the following:

• The fraud allegations were extensive and unduly complicated and the pleadings were verbose and voluminous. The allegations of fraud and submissions made on behalf of Mrs Young were summarised in schedules to the Principal Reasons, which run to some 16 pages.

• The primary judge gave Mrs Young repeated opportunities over a number of years to plead her fraud case and to marshal evidence in support of that case but she and those advising her were unable to produce “a skerrick of evidence” to support the serious allegations made.

• The allegations concerning common and unilateral mistake were mutually inconsistent and misconceived.

• The ground of appeal concerning apprehended bias, relying upon the cumulative effect of five separate judgments, was misconceived.

73. The primary judge specifically directed that the pleadings in the L&E Court be certified by Mr Muriniti as having reasonable prospects of success. His Honour gave that direction because of the seriousness of the allegations made. Mr and Mrs King emphasise the fact that Mr Muriniti was thereby required to turn his mind to the questions of the prospects of success of the allegations and certify that the allegations had reasonable prospects of success on the basis of provable facts and a reasonably arguable view of the law.

74. Mr and Mrs King assert that, under s 56 of the Procedure Act, a legal practitioner has an independent duty. Whether or not Mr Muriniti or Mr Newell gave advice to Mrs Young that the claims she was making were untenable and whether or not she gave express instructions to make the claims, with or without that advice, they say that the allegations should not have been made by a responsible legal practitioner if to do so would have involved a breach of the legal practitioner’s duty under s 56. They assert that a rational and competent assessment of the pleadings and evidence would have revealed to a legal practitioner of ordinary competence that the allegations could not succeed and should never have been made. In any event, they say, the attitude of Mrs Young or her instructions could not excuse prolix and complicated allegations unsupported by evidence. Mr and Mrs King assert that Mr Muriniti could not have held a reasonable belief that Mrs Young’s pleaded case had a reasonable prospect of success based upon either provable facts or a reasonably arguable view of the law.

Conduct of the proceedings in this Court

75. Mr and Mrs King make the following complaints about the manner in which the Four Proceedings were conducted in this Court:

• The grounds of appeal raised were extensive and poorly articulated.

• The grounds of appeal in relation to the adequacy of the reasons of the primary judge that were without substance and, in relation to apprehended bias, were fundamentally misconceived.

• There was substantial departure from the grounds of appeal in oral submissions, thereby prolonging the hearing.

• There were unduly lengthy oral submissions during the hearing without taking the Court to any evidence to support the allegations of fraud, despite being pressed repeatedly by the Court to do so.

76. Mrs Young’s application to set aside the orders made by the L&E Court was based on r 36.15 of the Uniform Civil Procedure Rules 2005. Rule 36.15 relevantly provides that a judgment or order may, on sufficient cause being shown, be set aside if the judgment was given or entered or the order was made irregularly, illegally or against good faith. One of the complaints made on behalf of Mrs Young was that the primary judge failed or omitted to consider submissions made on her behalf that the elements of unilateral mistake at general law and in particular the requirement that Mrs Young’s legal representatives were affected by the same actual mistake were not a condition precedent to the application of r 36.15.

77. Mr and Mrs King assert that Mrs Young was given ample opportunity to produce evidence as to mistake on the part of her legal advisers but there was simply no evidence. Attempts were made to impugn the exercise of discretion by the primary judge to refuse extremely belated attempts to lead evidence from lawyers and witnesses who had been retained by Mrs Young. No reason was advanced in support of the contention that the primary judge acted in accordance with a wrong principle or ignored relevant material or decided on the basis of a misapprehension of the facts in exercising his discretion to refuse Mrs Young the opportunity of calling the four further witnesses. There was simply no basis for admitting fresh evidence as was sought. There was no basis whatsoever in the evidence at trial to conclude that Mrs Young’s advisers were induced to advise her to enter into the Settlement Agreement by reason of any misapprehension or misunderstanding of the facts.

78. Further, Mr and Mrs King say, the ground of appeal of apprehended bias was completely without substance, amounting to no more than a complaint that Mrs Young had been unsuccessful in all her attempts to set aside the 2004 Orders. There had been no application for the primary judge to recuse himself during the trial.

79. In the course of the hearing of the Four Proceedings, Mr Newell suggested that an apprehension of pre-judgment arose from the cumulative effect of a number of the primary judge’s judgments, including two delivered after the judgment under appeal. Mr Newell either misunderstood or misstated the test of apprehended bias. The test of apprehended bias is objective, looks forward and is distinct from actual bias. An inquiry based on the content of a judgment could be a mechanism for identifying actual bias but not apprehended bias. Actual bias was not alleged. Mr and Mrs King assert that, even if it had been, the material relied upon was self-evidently inadequate for that purpose. The ground was imprecisely articulated and Mr Newell departed substantially from it during oral argument. Ultimately, the ground was confined to the nature of any order for remitting if the appeals otherwise succeeded.

80. The hearing of the Four Proceedings occupied two full days, with the Court sitting longer than usual hours on both days. Most of the first day was taken up with Mr Newell’s submissions relating to the allegations of fraud and the alleged inadequacy of the reasons of the primary judge in relation to his rejection of the allegation of fraud. Mr Newell was pressed repeatedly to identify the evidence supporting the allegations of fraud but failed to do so.

81. Mr Newell was unable to answer how the Settlement Agreement could be avoided or why it was that Mrs Young was not bound by the conduct of her duly authorised agents in entering into it on her behalf. The inability of Mr Newell to answer specific questions from the Court in the course of the hearing, particularly in relation to the fraud and conspiracy allegations and the mistake ground, added very considerably to the length of the hearing.

Mr Muriniti’s response

82. Mr Muriniti relied on written submissions dated 20 June 2017 in response to the submissions summarised above. In addition, he relied on 47 further pages of written submissions dated 18 December 2017 entitled “Conspiracy Submissions”. Finally, Mr Muriniti relied on a short written submission of 18 December 2017 dealing with the application of s 91 of the Evidence Act 1995 (NSW) (the Evidence Act).

83. Mr Newell contended on behalf Mr Muriniti that, in considering the question of whether or not any of the Four Proceedings had reasonable prospects of success and whether the conduct of the Four Proceedings exhibited serious neglect or serious incompetence, it was not open to this Court to have regard to any findings made in the Principal Reasons. In particular, he contended that, notwithstanding that this Court concluded in the Principal Reasons that there was not a skerrick of evidence to support the allegation of fraud or conspiracy and that the allegations should not have been made, Mr Muriniti was entitled to make further submissions in order to persuade the Court to a different conclusion. In that regard, Mr Muriniti relied on s 91 of the Evidence Act.

84. Section 91 relevantly provides that evidence of the decision, or of a finding of fact, in an Australian proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding. However, s 190(3)(b) relevantly provides that, in a civil proceeding, the Court may order that s 91 does not apply in relation to evidence if the application of that provision would cause or involve unnecessary expense or delay.

85. Mr Muriniti’s contention appears to be that, notwithstanding the conclusions reached by this Court following full argument on the hearing of the Four Proceedings, if the Court could now be persuaded to reach a different conclusion on precisely the same material, the stance adopted by him in the conduct of the Four Proceedings would be vindicated. The position taken by Mr and Mrs King, through their counsel, is that, if that approach were to be accepted, they repeat all of their submissions made in June 2016 that led to the conclusions of the Court in the Principal Reasons.

86. On the hearing of the present applications, in seeking to develop the conspiracy and fraud case, Mr Newell said that Mrs Young was induced, by representations made by various people, to believe that she was receiving a “drain and retain solution” to the problems created by the work carried out in 2001 by Mr and Mrs King. It was asserted that knowingly false representations were made by the lawyers both for Mr and Mrs King and for Mrs Young and the expert witnesses called by both of them.

87. Thus, it was put to McClellan CJ that was what proposed was a “drain and retain solution”. That is to say, if Mr and Mrs King excavated on the King Property, they would be required to retain the cut face and drain the water on the King Property. However, if there was previously a retaining wall on the boundary, any drainage would be on the Young Property. It was asserted that Mr and Mrs King knew that Mrs Young had been induced to believe that only a “drain and retain” remedy was being sought whereas in fact it was always intended to create something different. It was asserted that the legal representatives had an agreement to mislead Mrs Young. When McClellan CJ said that he understood a “drain and retain” solution was being proposed, Mr Griffiths, the solicitor acting for Mr and Mrs King, should have indicated that that was not what was foreshadowed. Therefore, Mr Newell asserts, an inference should have been drawn that a different proposal was deliberately planned.

88. Mr Newell referred to discussions concerning a pit on the King Property, which was represented to be an “absorption pit”. He asserted that that representation was known by Mr and Mrs King to be false. The lawyers for both sides and the engineers for both sides were also alleged to have known that that representation was false because a report had previously been provided that described it as a discharge pit. Mr Newell asserted that all of the persons alleged to have been involved in the conspiracy, Mr and Mrs King, their lawyers and Mrs Young’s lawyers and the engineers, believed that the misrepresentation would not be discovered by Mrs Young. Mr Newell asserted that there could never be drainage to the pit and that it was necessary to devise the theory that the watercourse ran parallel to the retaining wall. No one told the Chief Judge about the watercourse. Accordingly, Exhibit A could never be a solution to the problem experienced by Mrs Young.

89. Mr Newell referred to evidence that an easement of 2.4 m would be required to drain the water. However, Mrs Young’s house was only 1.4 m from the boundary. Accordingly, he submits that it should have been obvious to the lawyers and to the engineers that the proposed drain could not fit in the area proposed.

90. Mr Newell said that the proposition was that there would be a water detention system on the Young Property, which assumed a watercourse passing through the Young Property. Another path for the water therefore had to be found but Mrs Young was not told of that necessity. Rather, he said, Mrs Young and the Chief Judge were told something that was completely false, because the only way in which the watercourse could be constructed entailed the demolition of her home. He asserted that the retaining wall proposed by Exhibit A could never have been approved because the watercourse went under the house on the King Property.

91. Even if it be assumed that the solution proposed as the compromise in the Settlement Agreement, which was approved by the Chief Judge, was impracticable for the reasons advanced, the issue was whether that was by reason of mistake or fraud. As indicated above, in the alternative, Mrs Young asserted that there was a common mistake. However, in the absence of evidence demonstrating mistake on both sides, that thesis could not succeed. A fortiori, the hypothesis of conspiracy could not succeed.

92. The highest that the matter appears to be put on behalf of Mr Muriniti is that it must have been obvious to the lawyers and to the engineers that the so called solution of Exhibit A could not succeed. Therefore, Mr Newell contends on behalf of Mr Muriniti, an inference should be drawn that the lawyers and engineers deliberately misrepresented the position both to Mrs Young and to the Chief Judge.

93. The motive for the alleged conspiracy was said to be that the Council needed a solution for a drainage problem from the street and the lawyers and the engineers sought to assist the Council in deceiving Mrs Young into accepting a solution that would have required the demolition of her house in order to give the Council a solution to its drainage problem. There was simply no evidence to enable the Court to draw that inference or to conclude that any of those alleged to have been participants in the conspiracy had in fact been guilty of conspiracy or knowingly making false representations.

Conclusion

94. As I have said above, it is significant that Mr Newell, who appeared for Mrs Young in the Four Proceedings, also appeared for Mr Muriniti on the hearing of the present applications. Unsurprisingly, it was not suggested by Mr Newell that his conduct of the Four Proceedings was incompetent so as to justify making further submissions to persuade the Court to reach a different conclusion from that reached in the Principal Reasons. It was not suggested that the material covered the submissions advanced in the additional 47 pages were to overcome some oversight. There was no other explanation as to why the new submissions on conspiracy and fraud that were made on the hearing of the present applications were not made on the hearing of the four proceedings.

95. More significantly, there was no evidence from Mr Muriniti that sought to justify the conduct of the Four Proceedings. There was no evidence from Mr Muriniti or anyone else on his behalf explaining why the fraud grounds were pressed. For example, Mr Muriniti might have adduced evidence explaining his thought processes and referring to the material relied upon by him to justify his certification of the pleadings alleging fraud and the preparation and the filing of the amended notice of appeal and detailed submissions in support of the grounds in the Four Proceedings. He chose not to do so. Rather, Mr Newell set about arguing, afresh, over some 47 pages, as to why the allegation of fraud should have succeeded.

96. There is no justification whatsoever for the Court to have regard to the 47 pages of detailed submissions in support of a finding that there was in truth a conspiracy involving the lawyers for Mr and Mrs King, the lawyers for Mrs Young, the expert witnesses called by both of them as well as officers of the Council. Whether or not s 91 of the Evidence Act applies, so as to preclude reliance on any finding made earlier, this would have been an appropriate case for the making an order under s 190.

97. In any event, it is by no means clear that s 91 has any application. The Court is being asked to make orders as to the costs of proceedings that have been decided by the Court. It is artificial to treat the four applications presently before the Court as separate proceedings simply because Mr Muriniti was not formally a party to the Four Proceedings. He was, of course, intimately involved in the Four Proceedings. On the hearing of the present applications, Mr Newell asserted that the thrust of the contentions that were intended to be advanced in the hearing of the Four Proceedings was that the primary judge failed to give adequate reasons for rejecting the allegations of fraud and conspiracy. He asserted that the extended oral argument in ventilating the fraud and conspiracy case during the hearing of the Four Proceedings was the result of questioning by the Court.

98. However, as indicated in the Principal Reasons, the primary judge endeavoured to have Mrs Young’s case of fraud and conspiracy particularised. This Court, on the hearing of the Four Proceedings, endeavoured to have Mr Newell explain the fraud and conspiracy case by reference to the evidence. In order to consider Mr Newell’s arguments on behalf of Mrs Young that the primary judge had failed to give adequate reasons for dismissing the fraud and conspiracy case, it was essential for this Court to understand precisely what the fraud and conspiracy case consisted of. It was not possible for this Court to entertain arguments that the primary judge had failed to give adequate reasons for dismissing a case unless the Court understood precisely what the case was. One might have expected that it would have been a reasonably straightforward exercise for Mr Newell to outline the elements of the fraud and conspiracy case that had been advanced to the primary judge that he was contending had not been adequately dealt with by the primary judge in his Honour’s reasons.

99. Of course, it is not sufficient to attract s 99 to demonstrate that a case is hopeless. The conduct of the legal practitioner, Mr Muriniti in this case, must go beyond that. However, I am not persuaded that there was material available to Mr Muriniti that would have justified making the allegations that were made before the primary judge, on the hearing of the Four Proceedings or on the hearing of the present applications. Had the fraud and conspiracy claim been formulated with some greater clarity, the primary judge may have been in a position to explain in greater detail his reasons for concluding that the fraud or conspiracy case was not made out. That deficiency was the result of the way in which the case was conducted before his Honour.

100. I am satisfied that Mr Muriniti was responsible for the incurring of Mr and Mrs King’s costs in the Four Proceedings and that the costs were incurred by serious incompetence and serious neglect on his part and on the part of those employed by him. It is therefore appropriate for the Court to make an order under s 99 of the Procedure Act against Mr Muriniti in favour of Mr and Mrs King.

101. One course would be to order Mr Muriniti to pay to Mr and Mrs King the costs that Mrs Young has been ordered to pay to them. However, Mr and Mrs King would then be out-of-pocket to the extent that the costs actually incurred exceeded the costs recoverable under an order for costs on the ordinary basis. I consider, therefore, that the appropriate order is that Mr Muriniti pay to Mr and Mrs King the amount of costs reasonably incurred by them in responding to the Four Proceedings. Mr Muriniti should pay the costs incurred by Mr and Mrs King in the present applications.

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Endnotes

Amendments

11 May 2018 - [68] Amending "Mrs King" to read "Mrs Young".

[98] Amending "Mrs King" to read "Mrs Young" in third sentence.

27 March 2019 - [2] Changing "Evidence Act 2005" to read "Evidence Act 1995".

[33] Amending name of Act to "Vexatious Proceedings Act".

Decision last updated: 27 March 2019