Lemoto v Able Technical Pty Ltd - [2005] NSWCA 153

NEW SOUTH WALES COURT OF APPEAL

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

FILE NUMBER(S):
40432/04

HEARING DATE(S): 30 March 2005

JUDGMENT DATE: 09/05/2005

PARTIES:
Semisi Lemoto (Appellant)
Able Technical Pty Limited (First Respondent)
B & C Mailing Pty Limited (Second Respondent)
Christine Stoddart (Third Respondent)

JUDGMENT OF: Hodgson JA Ipp JA McColl JA

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 13332/01

LOWER COURT JUDICIAL OFFICER: Phegan DCJ

COUNSEL:
S Norton SC, M D Causer (Appellant)
First Respondent (No Appearance)
M T McCulloch SC, R G Gambi (Second Respondent)
K Richardson (Third Respondent)

SOLICITORS:
First Law Pacifica (Appellant)
Owen Hodges Lawyers (First Respondent)
Hunt & Hunt Lawyers (Second Respondent)
Gilbert + Tobin (Third Respondent)

CATCHWORDS:
LEGAL PROFESSION - whether costs order properly made against solicitor pursuant to s 198M Legal Profession Act 1987 - whether case that solicitor provided legal services on a claim for damages without reasonable prospects of success - NATURAL JUSTICE - procedural fairness - failure to give full and sufficient notice of basis on which costs order might be made against solicitor - failure to give full and sufficient opportunity to respond to question whether costs order should be made to have regard to principles of natural justice - PROCEDURE - mode of making s 198 M costs application - procedure devised to deal with question whether a s 198M order should be made should have regard to principles of natural justice - JUDICIAL OFFICERS - exercise of judicial power - obligation to give reasons - STATUTORY INTERPRETATION - construction of Part 11, Division 5C of the Legal Professional Act 1987 - WORDS AND PHRASES - "without reasonable prospects of success" (D)

LEGISLATION CITED:
Arbitration (Civil Actions) Act 1983
Civil Liability Act 2002
Conciliation and Arbitration Act 1904 (Cth)
Courts Legislation (Civil Procedure) Amendment Act 1991
District Court Act 1973
District Court Rules 1973
Legal Profession Act 1987
Supreme Court Act 1970
Supreme Court Act 1981 (Imp)
Supreme Court Rules 1970

DECISION:
(1) Extend to 18 June 2004 the time in which the appellant might seek leave to appeal against such orders as were made by the primary judge prior to 19 May 2004 (2)Grant leave to appeal and allow the appeal (3) Set aside the costs order made by Phegan DCJ in Chambers on 25 February 2004 (4)Order the first and second respondents to pay the appellant's costs of the appeal and of the application for leave to appeal (5)Third respondent to bear her costs of the appeal and of the application for leave to appeal.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40432/04
DC 13332/01
HODGSON JA
IPP JA
McCOLL JA
Monday, 9 May 2005

LEMOTO v ABLE TECHNICAL PTY LTD & 2 ORS

FACTS

The appellant acted as the solicitor for the third respondent in proceedings in the District Court in which she sought to recover damages for injuries she allegedly suffered while working at the second respondent’s premises. She had been sent to work at those premises by the first respondent, a labour hire firm. The proceedings were referred to arbitration. The arbitrator entered a verdict for the first and second respondents. The third respondent sought a rehearing pursuant to s 18 Arbitration (Civil Actions) Act 1983. On 26 September 2003 the primary judge entered a verdict and judgment in favour of the first and second respondents.

At a hearing on 23 October 2003 to debate the costs orders which should be made consequent upon the judgment, the second respondent sought a costs order against the appellant pursuant to s 198M, Part 11, Division 5C of the Legal Profession Act (the “Act”). On that occasion, counsel for the third respondent said the transcript of the hearing would be sought in order to respond to the s 198M application. The appellant was not in court on 23 October. The primary judge adjourned the s 198M application. The primary judge subsequently required counsel for the third respondent and the appellant to appear before him on 7 November 2003. On that occasion, his Honour said that he was persuaded that there was a case for an order to be made against each of them pursuant to s 198M of the Act. He invited them to provide affidavits and written submissions on that question.

On 25 November 2003, the matter was re-listed before the primary judge, apparently at the request of the third respondent’s counsel. The appellant said he was not notified of that hearing and did not attend. Counsel for the second respondent attended and informed the primary judge that the second respondent had not sought a personal costs order against the third respondent’s counsel, but only against the appellant. On that occasion, the primary judge acknowledged he had not made an explicit finding that the facts established by the evidence did not found a basis for a reasonable belief that the third respondent’s claim had reasonable prospects of success. His Honour said that that finding was “implicit” and he had no difficulty in “formalising it”.

On 10 December 2003 the associate to the primary judge sent a letter to the appellant which stated that following the mention of the matter on 25 November 2003 the primary judge was of the view that “the order made against [him] pursuant to section 198M of the Act should stand”. The letter invited the appellant “to rebut the presumption that the matter was brought to trial without reasonable prospects of success as provided for in s 198N(3) and (4) of the Act”. On 17 December 2003 the appellant wrote to the associate advising that the transcript of the hearing had been obtained and forwarded to counsel, but that counsel would not be able to draft affidavits prior to the close of the Court term. After the District Court term resumed in 2004 the associate sought to contact the appellant on two occasions to ascertain the position concerning affidavits. During this period the appellant was consulting counsel about the nature of the affidavits he could file, as well as seeking to ascertain what had transpired at the 25 November mention. He did not advise the associate that he was taking those steps.

On 25 February 2004 the primary judge’s associate wrote to the appellant noting that the appellant had failed to file an affidavit and that the primary judge had entered a costs order against him under s 198M of the Act (the “costs order”). On 4 March the appellant filed a Notice of Motion, seeking to set aside the cost order on the grounds (inter alia) that he was not afforded procedural fairness and denied natural justice before the order was made. The primary judge rejected this application. The appellant sought leave to appeal from the making of the costs order.

HELD per McColl JA (Hodgson JA, Ipp JA agreeing), granting leave to appeal and allowing the appeal.

The purpose of Part 11, Division 5C of the Legal Profession Act 1987 is to deter the legal practitioner at the peril of a personal costs order, and possibly disciplinary proceedings, from representing a client whose prospects in pursuing or resisting a claim for damages he or she has formed the view have no reasonable prospects of success.

The question whether legal services were provided without reasonable prospects of success for the purposes of Part 11, Division 5C of the Legal Profession Act 1987 turns on whether the solicitor or barrister held a reasonable belief that the provable facts and a reasonably arguable view of the law meant that the prospects of recovering damages or defeating a claim or obtaining a reduction in the damages claimed were “fairly arguable”.

Degiorgio v Dunn (No 2) [2005] NSWSC 3 applied.

The question whether a solicitor or barrister believed that they had material which objectively justified proceeding with a claim or a defence turns on whether that belief “unquestionably fell outside the range of views which could reasonably be entertained”.

Medcalf v Mardell [2002] UKHL 27; [2003] 1 AC 120 referred to.

Section 198J imposes a continuing obligation. There may be a stage in a claim for damages where the fact a legal practitioner could not then reasonably believe that the evidence available would be admissible to enable the claim to be proved or defended, may lead to a prima facie case of a contravention of s 198J
Cahill v Ekstein (Smart J, unreported, Supreme Court of New South Wales, 5 June 1998) referred to.
The mere fact litigation is resolved adversely to a party does not mean costs should be ordered against the legal practitioner who provided legal services to that party.
Deputy Commissioner of Taxation v Levick [1999] FCA 1580; (1999) 168 ALR 383 applied; R v Moore; Ex parte Federated Miscellaneous Workers Union of Australia [1978] HCA 51; (1978) 140 CLR 470; Commonwealth of Australia (Department of Defence); Ex parte Marks [2000] HCA 67; (2000) 75 ALJR 470; Gitsham v Suncorp Metway Insurance Ltd [2002] QCA 416 referred to.

The question whether a s 198M order should be made is discretionary.

When considering whether to make a s 198M order the court should consider the nature of the contravention of Division 5C which has been established, the possibly serious implications of making the costs order and determine whether it is just, in all the circumstances, that a s 198M order should be made and whether it should be as to the whole or part of the costs.
In the absence of regulations to the Legal Profession Act 1987 or District Court Rules regulating the procedure to be adopted, when an issue arises under s 198M the procedure to be adopted is a matter for the judge. The procedure must be devised having regard to the principles of natural justice and should be fair and “as simple and summary as fairness permits”.

Brendon v Spiro [1938] 1 KB 176; LJ; Bahai v Rashidian [1985] 1 WLR 1337; Ridehalgh v Horsfield [1994] Ch 205 referred to.

Where the application for a s 198M order is made by a party, it should be made by notice of motion supported by an affidavit.
Sorridimi v Moros & Anor [2004] NSWCA 168 applied.
The Court must ensure that the legal practitioner against whom a s 198M order is sought has full and sufficient notice of the complaint and full and sufficient opportunity of answering it.

Myers v Elman [1940] AC 282; Ridehalgh v Horsfield [1994] Ch 205; Smith v NSW Bar Association [1992] HCA 36; (1992) 176 CLR 256; O’Reilly v Law Society of New South Wales (1988) 24 NSWLR 204; R v Solicitors Disciplinary Tribunal; Ex parte L [1988] VR 757; Johns v Law Society of New South Wales [1982] 2 NSWLR 1 referred to.

The power to order costs against a non-party must be exercised judicially. The proceedings in which a s 198M order is considered must take place in court and, save in exceptional circumstances such as deliberate non-attendance, in the presence of the person likely to be affected by any order made. They should be determined by the delivery of a judgment which adequately exposes the reasons for the outcome.

Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 referred to.

The primary judge erred in forming the view that this was a case which gave rise to the s 198N presumption.
The primary judge erred in making the costs order:

(a) he failed to accord procedural fairness to the appellant;
(b) he did not inform the appellant of the precise basis upon which he had apparently formed the view that the appellant had provided legal services to the third respondent without reasonable prospects of success;

(c) to the extent it was possible to discern his approach, he failed to consider whether the third respondent’s case was fairly arguable;

(d) he failed to recognise the discretionary nature of s 198M.

The primary judge erred in failing to give reasons for the costs order.

There was no prima facie case that the appellant provided legal services to the third respondent without reasonable prospects of success.

History of the jurisdiction to order legal practitioners to pay the costs of legal proceedings discussed; observations about the procedures which might be followed when considering whether a s 198M order should be made.
ORDERS

Extend to 18 June 2004 the time in which the appellant might seek leave to appeal against such orders as were made by the primary judge prior to 19 May 2004.
Grant leave to appeal and allow the appeal.
Set aside the costs order made by Phegan DCJ in Chambers on 25 February 2004.

Order the first and second respondents to pay the appellant’s costs of the appeal and of the application for leave to appeal.
Third respondent to bear her costs of the appeal and of the application for leave to appeal.
**********

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40432/04
DC 13332/01
HODGSON JA
IPP JA
McCOLL JA
Monday, 9 May 2005

LEMOTO v ABLE TECHNICAL PTY LTD & 2 ORS

Judgment

HODGSON JA: I agree with the orders proposed by McColl JA and substantially with her reasons. I would add a few comments of my own.
On 25 November 2003, the primary judge indicated to the effect that he had made a finding in terms of s.198N(1) of the Act, that is, that the facts established by the evidence before him did not form a basis for a reasonable belief that the claim in this case had reasonable prospects of success.
Such a finding is a judicial decision that materially affects the interests of persons who provide legal services on a claim, because it raises a presumption that those legal services were provided without reasonable prospects of success. It puts an onus on these persons to rebut that presumption, in circumstances where they are disadvantaged in that endeavour by the finding itself. Further, any attempted rebuttal of that presumption may require that those persons give evidence of communications between them and their client, as contemplated by s.198N(4).
Accordingly, unless there is some indication to the contrary in the legislation, a finding under s.198N(1) should not be made unless persons affected are given natural justice, at least to the extent of being advised that such a finding is under contemplation and given an opportunity to make submissions.
It may be said that s.198M and s.198N, in their statutory context, suggest that such issues should be decided expeditiously, inexpensively and without undue formality. It may also be said that strict application of the principles of natural justice could mean, contrary to this objective, that before an order under s.198M can be made on the basis that a s.198N finding, there might be three contested, time-consuming and expensive hearings: (1) to determine whether there should be a finding under s.198N(1); (2) to determine whether confidential communications can be disclosed, under s.198N(4); and (3) to determine whether the s.198N presumption is rebutted and, if not, whether to make a s.198M order.
Further, the whole process may be complicated by considerations of the interests of the party represented by the persons against whom an order is proposed. A s.198M order is, in itself, in the interests of that party, in that it may relieve that party of the costs of the proceedings; but the process of determining whether such an order should be made may be very much against that party’s interests, by depriving that party of its legal advisers and thereby hindering proper consideration of the possibility of an appeal and the institution and conduct of an appeal, and also by giving rise to disclosure of privileged communications (which, even if it does not involve loss of the privilege for other purposes, could be to the detriment of that party). This may not be a serious difficulty if it is this party itself that applies for the s.198M order, because in that case the party chooses to subject itself to these possible disadvantages. But if, as in this case, the process is initiated by another party, or by the Court, the possible disadvantages to the party for whom the relevant legal services were provided need to be kept steadily in mind.
However, I do not think that, even having regard to these considerations, the legislation discloses an intention to displace ordinary requirements of natural justice. Further, I do think that in many cases all seriously contested issues can and should be dealt with in one hearing.
In some cases, particularly where an oral judgment is delivered, it may be possible for a judge, at the conclusion of the judgment, to indicate to a person or persons who provided legal services that the judge is contemplating a finding in terms of s.198N, for reasons then disclosed, and to invite submissions; and after hearing submissions, to make a finding in terms of s.198N(1) then and there.
But in my opinion, it would usually be preferable to indicate the possibility of a s.198N(1) finding, and then to give directions with a view if possible to a single hearing in which all issues can be determined. If there is a question arising under s.198N(4), the legal adviser might not be able safely to serve evidence disclosing confidential communications on anyone other than the client with whom there were such communications, until that question is resolved; so if the other party to the proceedings is involved in the application for the s.198M order, it may be necessary to decide whether a s.198N(4) issue needs to be determined in advance of the hearing, so that this other party knows before the hearing what the legal adviser’s evidence is to be.
Turning to another matter, I agree with McColl JA that, if a court makes a finding that a barrister or solicitor has provided legal services to a party without reasonable prospects of success, the Court still has a discretion as to whether or not to make an order under s.198M. This discretion is indicated by the use of the word “may”, and in my opinion it is confirmed by the terms of s.198L, according to which provision of services without reasonable prospects of success is not necessarily professional misconduct or even unsatisfactory professional conduct, but only “capable of being” such. That is, the provision of legal services without reasonable prospects of success may not even be unsatisfactory professional conduct; and this in turn suggests that such provision may occur in circumstances where it is not appropriate for an order under s.198M to be made, for example where a barrister is briefed to appear on very short notice.
In the present case, the primary judge erred in making a finding under s.198N without giving natural justice to the appellant, in not recognising the existence of a discretion under s.198M, and in not giving reasons. I agree with McColl JA that it is appropriate for this Court to determine the matter, and I agree with her determination, for the reasons she gives.

IPP JA: I agree with Hodgson JA and McColl JA.
McCOLL JA: This is an application for leave to appeal from a costs order made by Judge Phegan against Semisi Lemoto pursuant to s 198M of the Legal Profession Act 1987. As I am of the view that leave to appeal should be granted I shall refer to the parties as the appellant and the first, second and third respondents respectively.
The costs order was made in respect of the appellant’s conduct as solicitor for Christine Maree Stoddart (the “third respondent”) in damages proceedings (the “principal proceedings”) she brought against Able Technical Pty Ltd (the “first respondent”) and B & C Mailing Pty Ltd (the “second respondent”).
Legislative framework
Section 198M appears in Division 5C of Part 11 of the Legal Profession Act. Part 11 deals with “Legal fees and other costs”. Division 5C was inserted by Schedule 2.2[2] of the Civil Liability Act 2002. The Civil Liability Act was assented to on 18 June 2002 but commenced on 20 March 2002. That date was selected as the commencement date following the Premier’s announcement on 7 September 2001 foreshadowing the introduction of the Civil Liability Bill: Second Reading Speech, New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 28 May 2002, Vol 292 (the “Second Reading Speech”) at 2086.

Division 5C relevantly provides:
“Section 198J Solicitor or barrister not to act unless there are reasonable prospects of success
(1) A solicitor or barrister must not provide legal services on a claim or defence of a claim for damages unless the solicitor or barrister reasonably believes on the basis of provable facts and a reasonably arguable view of the law that the claim or the defence (as appropriate) has reasonable prospects of success.
(2) A fact is ‘provable’ only if the solicitor or barrister reasonably believes that the material then available to him or her provides a proper basis for alleging that fact.
(3) This Division applies despite any obligation that a solicitor or barrister may have to act in accordance with the instructions or wishes of his or her client.
(4) A claim has reasonable prospects of success if there are reasonable prospects of damages being recovered on the claim. A defence has reasonable prospects of success if there are reasonable prospects of the defence defeating the claim or leading to a reduction in the damages recovered on the claim.
(5) Provision of legal services in contravention of this section constitutes for the purposes of this Division the provision of legal services ‘without reasonable prospects of success’.
Section 198L Restrictions on commencing proceedings without reasonable prospects of success
(1) The provision of legal services without reasonable prospects of success does not constitute an offence but is capable of being professional misconduct or unsatisfactory professional conduct.
(2) A solicitor or barrister cannot file court documentation on a claim or defence of a claim for damages unless the solicitor or barrister certifies that there are reasonable grounds for believing on the basis of provable facts and a reasonably arguable view of the law that the claim or the defence (as appropriate) has reasonable prospects of success.
…
Section 198M Costs order against solicitor or barrister who acts without reasonable prospects of success
(1) If it appears to a court in which proceedings are taken on a claim for damages that a solicitor or barrister has provided legal services to a party without reasonable prospects of success, the court may of its own motion or on the application of any party to the proceedings make either or both of the following orders in respect of the solicitor or barrister who provided the services:
(a) an order directing the solicitor or barrister to repay to the party to whom the services were provided the whole or any part of the costs that the party has been ordered to pay to any other party,
(b) an order directing the solicitor or barrister to indemnify any party other than the party to whom the services were provided against the whole or any part of the costs payable by the party indemnified.
(2) The Supreme Court may on the application of any party to proceedings on a claim for damages make any order that the court in which proceedings on the claim are taken could make under this section.
(3) An application for an order under this section cannot be made after a final determination has been made under this Part by a costs assessor of the costs payable as a result of an order made by the court in which the proceedings on the claim concerned were taken.
(4) A solicitor or barrister is not entitled to demand, recover or accept from his or her client any part of the amount for which the solicitor or barrister is directed to indemnify a party pursuant to an order under this section.
Section 198N Onus on solicitor or barrister to show facts provided reasonable prospects of success
(1) If the court (‘the trial court’) hearing proceedings on a claim for damages finds that the facts established by the evidence before the court do not form a basis for a reasonable belief that the claim or the defence had reasonable prospects of success, there is a presumption for the purposes of this Division that legal services provided on the claim or the defence (as appropriate) were provided without reasonable prospects of success.
(2) If the Supreme Court (when the Supreme Court is not the trial court) is satisfied, either as a result of a finding of the trial court or otherwise on the basis of the judgment of the trial court, that the facts established by the evidence before the trial court do not form a basis for a reasonable belief that the claim or the defence had reasonable prospects of success, there is a presumption for the purposes of this Division that legal services provided on the claim or the defence (as appropriate) were provided without reasonable prospects of success.
(3) A presumption arising under this section is rebuttable and a solicitor or barrister who seeks to rebut it bears the onus of establishing that at the time legal services were provided there were provable facts (as provided by section 198J) that provided a basis for a reasonable belief that the claim or the defence on which they were provided had reasonable prospects of success.
(4) A solicitor or barrister may, for the purpose of establishing that at the time legal services were provided there were provable facts (as provided by section 198J) that provided a basis for a reasonable belief that the claim or the defence on which they were provided had reasonable prospects of success, produce information or a document despite any duty of confidentiality in respect of a communication between the solicitor or barrister and a client, but only if:
(a) the client is the client to whom the legal services were provided or consents to its disclosure, or
(b) the court is satisfied that it is necessary for the solicitor or barrister to do so in order to rebut a presumption arising under this section. “
Division 5C extended to legal services provided on or after 20 March 2002 even if the legal services were provided in connection with a claim that arose before that date (and whether or not proceedings on the claim were commenced before that date): Legal Profession Act, Schedule 8, cl 90(2).
I will refer to the order contemplated by s 198M (1)(a) as a “repayment order” and that contemplated by s 198M (1)(b) as an “indemnity order”.
The Second Reading Speech to the Civil Liability Bill was mainly concerned with the tort law reform that bill effected. It gives little insight into the legislative purpose of Division 5C. To the extent that there was any statement beyond a repetition of the wording of ss 198J, 198L and 198M, the Premier referred, in substance, to the provisions preventing “unmeritorious claims” and “spurious defences”: Second Reading Speech at 2088.
Statement of the case
In the principal proceedings, the third respondent alleged that she had suffered an injury to her lower back on 11 October 1999 as a consequence of being required to lift boxes while working at the second respondent’s premises. She had been sent to work at those premises by the first respondent, a labour/hire or employment agency. On 26 November 2001 the appellant filed a Statement of Claim in the District Court seeking damages on the third respondent’s behalf acting in his capacity a partner in the firm First Law Pacifica. In those proceedings the first and second respondents were named as the first and second defendants respectively.
As described by the primary judge the third respondent’s case against the respondents was that “they failed to provide [her] at the premises of the second [respondent] with a safe system of work, that she was required as part of that work to undertake heavy lifting which was directly responsible for the herniation of [her] disc at the L5/S1 level and the subsequent need for surgery”.
The principal proceedings were referred to arbitration. On 17 March 2003 the arbitrator entered a verdict for the first and second respondents. In his brief reasons, the Arbitrator concluded that the second respondent neither directed nor requested the third respondent to undertake the lifting she asserted had caused her injury. Accordingly, he concluded that activity was not part of the second respondent’s system of work and, presumably, while he did not expressly so state, there had been no breach of any duty of care. He concluded that the third respondent failed against the first respondent because she had not established that it required her to work in an unsafe environment or system.
The third respondent sought a rehearing of the arbitration: s 18 Arbitration (Civil Actions) Act 1983. The rehearing commenced on 15 September 2003 before the primary judge. The evidence concluded on 18 September 2003. On 26 September 2003 the primary judge delivered judgment in which he entered a verdict and judgment in favour of the first and second respondents.
The primary judge delivered a lengthy judgment. He dealt first with two causation issues. The first was whether the third respondent’s back condition was caused by a pre-existing arthritic condition from which she suffered. The primary judge concluded that it was not.
The second causation issue was whether, even if there was no connection between the third respondent’s pre-existing arthritic condition and her back problems, the back condition itself was a pre-existing condition, “independently triggered and … not in that sense caused by anything that had happened at the premises of the second [respondent] on 11 October 1999”. The primary judge concluded that issue adversely to the third respondent.
His Honour’s decision on the second causation issue was substantially influenced by his conclusions about her credit which he said was “a very significant issue in this case”. The primary judge concluded that the third respondent was “a poor historian”, but that he was not satisfied that “this was a consequence of any systematic attempt on [her] part to distort the truth”. He concluded that he found it difficult “to place, with any confidence, reliance on all the plaintiff’s evidence, and there were a number of respects in which, from a combination of inconsistency and hesitancy, it was difficult to accept a version of events which, for example, was adopted by [counsel for the third respondent] in some of the submissions which she made in support the third respondent’s case”.
Nevertheless, his Honour held that:
“In fairness to the plaintiff, it has to be said that even when allowance is made for the unreliability of her evidence and for the difference in the medical opinions, there is still room on the medical evidence for a conclusion that the lifting incidents on 11 October 1999 were the precipitating cause of the disc protrusion. Certainly one could not say, on the basis of all of the medical evidence, that such a connection is excluded. It is quite consistent with the degenerative condition and the earlier episodes of the onset of back pain and symptoms of sciatica, to conclude that up until 11 October there had been no precipitating event sufficient to bring about the debilitating condition which the plaintiff subsequently suffered. A causal connection in that sense certainly could not be excluded as a possibility. It should also be said in fairness to the plaintiff that the evidence of gradual onset of pain and of its exacerbation, at least when the plaintiff was subsequently employed in late October and early November of 1999, is all consistent with the possibility that there was an undetected but nonetheless real herniation on 11 October.
However, evaluating the evidence as a whole and in taking proper account of the various matters that I have now recorded, both with regard to the plaintiff’s medical history leading up the incident in October but perhaps even more importantly the plaintiff’s history in the period immediately following her employment with the second defendant, the plaintiff has failed on the balance of probabilities to establish a causal connection between whatever happened on that occasion and the onset of the condition which ultimately required the intervention of surgery in the early part of 2000. For that reason alone, the plaintiff’s case against both of the defendants fails.
The difficulty for the plaintiff is that, while one can interpret the evidence in a way favourable to the plaintiff, such a favourable interpretation only stands alongside a number of other equally feasible alternatives, and in those circumstances there is a failure on the plaintiff’s part to shift the onus even on the balance of probabilities in her favour.” (emphasis added)
His Honour’s conclusion on the second causation issue was sufficient to conclude the case adversely to the third respondent. However, even though, as he acknowledged, it was not “strictly necessary … for the judgment to go any further”, he went on to indicate “in brief outline”, that the third respondent’s claim would also have failed because she had not established that either the first or second respondent had breached its duty of care.
Insofar as the second respondent was concerned, the primary judge found:
“The plaintiff was told on more than one occasion and by more than one employee of the second defendant that part of her job was to bring the videos that were contained in the boxes of forty on the pallet to the table where she was working at assembling the smaller boxes and inserting the video cassettes for the purpose of the mail-out. Words were used in that context which varied from a reference to the large boxes to references to videos or video cassettes. However, even on the plaintiff’s evidence, there was never an explicit direction that a full box containing forty video cassettes had to be carried from the pallet to the worktable. The plaintiff herself conceded in this regard, and it is to her credit that she did, that it was her interpretation of the words which were used, rather than the words themselves that led her to conclude that she was expected to carry boxes of 40 than anything less …
The other area of uncertainty which was again, on the plaintiff’s own admission, a product of her interpretation of the words which were used, was a significance that the plaintiff attached to the comment of the person she described as Maria on the afternoon of 11 October in the context of Maria’s observation that the plaintiff had been seen asking an employee from another department to carry a box of video cassettes for her. According to the plaintiff she was told that she must ‘carry her own weight’ or words to that effect. There was nothing said by Maria in that context explicitly requiring the plaintiff to carry a box of forty videos. As a matter of common sense, the reference to carrying one’s own weight is more likely to be understood as no more than a version of the common phrase of ‘pulling’ one’s own weight. In other words, and indeed the plaintiff did give evidence to this effect, that what was being said to her was that every employee had to do their share of the work and specific tasks could not be delegated to other employees to the extent that it slowed down or interfered with that other employee’s work. That was the gist of what was being said to the plaintiff. In the transportation of video cassettes from the pallets to the worktable, the plaintiff had to do her share. What was not said to the plaintiff at any stage, even on the plaintiff’s own evidence, was that she was required to carry a box of forty videos. … The case against the defendants therefore, insofar as it was based on an alleged requirement that the plaintiff lift and carry boxes of forty videos was a consequence not of any explicit instruction to that effect, but of the plaintiff’s interpretation of statements that were made to her by employees of the second defendant. It was the plaintiff’s own decision, by way of such interpretation, on the afternoon of 11 October that led her to the attempts which she made unsuccessfully to lift and carry a full box. It was the plaintiff’s resolution to do it, not the defendant’s instructions.
In coming to that conclusion, I acknowledge that such a conclusion was understandable. But that does not take the case against the defendants any further. The plaintiff had not long before been told that her job was at an end; she was, in words which she used at least in her statement of May 2000, ‘embarrassed and humiliated’ by what had been said to her by the person called Maria; she persuaded herself in the light of comments that had been made that she was expected to carry the full box, apart from any other reason, because it would speed up her rate of progress because it would cut down the number of trips she had to make from the worktable to the pallet and that she felt under some pressure to speed up in the light of the comments that had been made. In those circumstances the fact that she perceived herself to be under some imperative to try to lift the box is understandable. But it is certainly not enough to expose the defendants to liability for compelling her to do so. The pressures which she might have felt, real as they were, were not of a kind sufficient to suggest a disregard on the part of the second defendant of the plaintiff’s safety.” (emphasis added)
After rejecting the third respondent’s case against the second respondent, the primary judge said:
“The case against the first defendant was also based on the failure of the first defendant to warn the second defendant of the plaintiff’s limitations as a consequence of her arthritic condition. In that respect, again, the plaintiff’s evidence is not as strong as the case put on the plaintiff’s behalf would suggest. In Ms Ryan’s address on behalf of the plaintiff, it was submitted that the plaintiff’s uncontradicted evidence was that she informed the first defendant of her limitations and when each job or placement was offered to her by the first defendant, would raise with the first defendant’s servants or agents whether it involved heavy or repetitive lifting. On each occasion she was told that it did not. This included her work at the second defendant’s premises for which she was clearly constitutionally unsuited.
I have already made comment on the vagueness and hesitancy of the plaintiff’s presentation. The plaintiff’s evidence did not substantiate, with the clarity expressed by counsel, the nature of the conditions put by the plaintiff to the first defendant. The plaintiff’s evidence was rather that she had more than once, and more than likely on each occasion she was commissioned to do work by the first defendant, reminded the first defendant’s employees that she only wanted jobs involving light duties. If that is as far as the plaintiff’s evidence can be taken, and there is considerable evidence to support that conclusion that what was involved in the work at the second defendant’s premises was no more than light duties as that term is generally understood. I say that with some caution because it is an area that remained unexplored on the evidence and for reasons I have already given, does not have to be resolved for the purpose of dealing with this case. But I must draw attention nonetheless, in canvassing the question of breach of duty, to the fact that the issue of the level of knowledge of the defendant of the plaintiff’s condition, that is, of the first defendant and in turn the alleged failure of the first defendant to communicate that to the second defendant, is not on the plaintiff’s evidence as clear cut as suggested, and certainly does not necessarily lead to the conclusions which I was invited to reach against the first defendant.
There is the specific claim that the plaintiff explicitly advised the first defendant of her arthritis. That is another aspect of the evidence on which I am left to rely entirely on the plaintiff, because what little other evidence there is, would lead to a conclusion contrary to the plaintiff’s evidence that she actually wrote on the application form or some similar document that she suffered from this condition and that it was a significant factor in the range of employment which she was able to undertake. There is no such reference in the registration document which became exhibit 1D1 nor in anything written by the plaintiff in the other documents which became exhibit 1D9. The only reference to arthritis appears under the first defendant’s log in a hand which clearly is not that of the plaintiff. This was part of the comment, which I referred to earlier inserted against the reason for the plaintiff’s ceasing employment on 11 October while working for the second defendant. That does not support a conclusion that the first defendant, prior to the commissioning of the plaintiff to work for the second defendant, was aware in any meaningful sense of the extent of the plaintiff’s chronic arthritis and its impact on her capacity to undertake work of any kind other than of the most sedentary and untaxing kind, which, I accept, evidence was in fact the case.
Those are not in any sense adequate reasons for the conclusion that there was no breach of duty on the part of either the first or second defendant had that been necessary to decide for the purpose of resolving this case, but I hope sufficient to indicate that even if I had been persuaded of a causal connection, there was not sufficient evidence to establish a breach of duty and that the plaintiff’s case would therefore have failed on that ground quite independently of the question of causation.
In conclusion I wish to make two further observations, again in the circumstances not strictly necessary, but which further underline what was in a comprehensive sense a very weak case for the plaintiff. Even if the plaintiff had succeeded in establishing both causation and breach of duty against either or against the defendants, the damages the plaintiff was likely to have been able to recover would have been modest in the extreme. It is not entirely clear, and it is not necessary to take the matter any further, that the plaintiff would have exceeded the thresholds imposed by the relevant parts of s 151 of the Workers Compensation Act, either with regard to non-economic or, even more so, with regard to economic loss. Had she done so, it would have been a very slim margin.” (emphasis added)
The costs applications

After delivering his judgment on 26 September 2003 the primary judge asked whether there were any submissions on costs. Ms Bojanac, representing the second respondent, sought an order for indemnity costs from the date of a Calderbank offer, alternatively in relation to the rehearing generally. The first respondent’s legal representative made no application. The appellant, who had attended court to take the judgment, informed the primary judge that he was not in a position to deal with the second respondent’s costs application. The matter was left on the basis that a suitable date would be determined on which occasion submissions concerning costs would be made.
The matter was relisted before the primary judge on 23 October 2003. On that occasion, Ms Ryan, counsel for the third respondent at the hearing appeared, as too, did Mr Gambi, counsel for the second respondent. Mr Gambi also appears to have mentioned the matter on behalf of the first respondent.
It is common ground that the appellant was not present during the 23 October 2003 proceedings.
The proceedings on 23 October 2003 were, to say the least, somewhat confusing.
At the outset Mr Gambi mentioned the appearance of the first respondent which, he informed his Honour, sought “to rely on the [second respondent’s application] and submissions with respect to the s 198J and 198M application of the Legal Profession Act which is part of the application … the second defendant wishes to make that the plaintiff’s solicitor’s costs …”.
At this stage the primary judge interrupted Mr Gambi and observed, accurately, that he did not think that application had been mentioned before. Mr Gambi acknowledged that his Honour’s observation was correct, responding:
“Not in those terms your Honour. I think your Honour’s been invited to consider the question of the plaintiff’s solicitors being ordered to pay costs but it’s pursuant to those sections that the application is made, so that the first defendant supports the second defendant’s submissions and application out of respect of that matter (sic, as in original) but does not have correspondence or offers and obviously can’t rely on the second defendant’s submissions in relation to any amended costs order that your Honour may make with respect to those matters. My learned friend wishes to make an application in relation to the matter today. It may be preferable if that could be made first before I launch into any submissions or application I wish to make.” (emphasis added)
The underlined portion of this statement was wrong. So far as the transcript reveals, there had been no prior application to the primary judge for a personal costs order against the appellant nor any intimation of such an application.
Ms Ryan then submitted that, as the application Mr Gambi wished to pursue was “a very serious one”, “we would like the opportunity to have available to us prior to such an application being made your Honour’s judgment and a copy of the trial script (sic)”. She contended that the third respondent’s solicitors should be given an appropriate opportunity to consider the judgment and the transcript properly.
The primary judge sought Mr Gambi’s attitude to Ms Ryan’s application. Mr Gambi referred to the fact that the second respondent relied upon an offer of compromise and Calderbank letters as well as the Arbitrator’s award. He then said:
“We will invite your Honour to read that [the Arbitrator’s award] and … considering the submissions that have been made in the case, the point that we wish to make is at all times, the plaintiff’s case has really been one that it was either well known to her or well known to her legal representatives and didn’t change between the arbitration and the hearing. Indeed, your Honour, she failed. The arbitrator really only considered one issue and that was the system of work and whether there was a breach per se. Your Honour not only considered that with respect and found against the plaintiff, but your Honour considered the separate issue of causation which the Arbitrator didn’t even get to because he didn’t need to.” (emphasis added)
Mr Gambi then made it plain that he was resisting Ms Ryan’s application for an adjournment on the basis that the primary judge could deal with the question of costs based on offers of compromise and Calderbank letters “on the papers”. The following exchange took place:
“Mr Gambi: … the question of whether or not there was any real prospect of success in our submission there really wasn’t any, and the plaintiff really should have known about it at the conclusion of the arbitration.
His Honour: Now that the s 191 [sic, this was presumably a reference to s 198M of the Legal Profession Act] matter is being put on a more formal basis, it seems to me that that is a discrete issue which I would be wary of resolving in short compass this morning. I take your point, I should read the Arbitrator’s award in the circumstances even though it might be brief enough for me to read quickly. I would prefer not to resolve that issue.” (emphasis added)
His Honour then observed that he had not previously dealt with an application pursuant to s 198M. He opined that where a “formal application” pursuant to that section was made then “the counsel and/or solicitor for the party concerned would be entitled to prepare by way of response whether it is by way of affidavit and/or some other means, a response to that application”. He indicated that he was sympathetic to adjourning the s 198M matter but that the question of costs as between the parties could proceed.
Before proceeding with that course, however, the primary judge enquired whether there was any “mechanism” for an application pursuant to s 198M. Mr Gambi submitted that “s 148B” of the District Court Act 1973 (NSW) was the “starting point”. Although the transcript records Mr Gambi as having referred to “s 148B”, he most probably referred to s 148E which gives the District Court power to make legal practitioners liable for their client’s costs in certain circumstances. He gave the primary judge a copy of s 198J and s 198M of the Act and contended that the latter section was the source of his Honour’s power.
At this stage, with respect, the primary judge appears to have become somewhat distracted by a belief that the second respondent’s application was one pursuant to s 198M(1)(a), namely that the appellant repay to the third respondent any costs she was ordered to pay to any other party rather than, as appeared tolerably clear from Mr Gambi’s application, an order pursuant to s 198M(1)(b) directing the third respondent’s legal representatives to indemnify the first and second respondents in respect of their costs of the proceedings.
It was in the context of observing that the issue was “strictly one between the plaintiff and those acting for her” in which the second respondent had, according to the primary judge, only an “oblique … interest” that his Honour also expressed a concern that the application should not lead to an “escalation of further costs on the part of those representing the successful parties, having obtained a favourable costs order as to whether they had any further role in the pursuance of the matter as between client and those representing the unsuccessful client …”.
The primary judge also expressed concern as to whether the third respondent should be represented for the purpose of the application, a matter he did not pursue further.
By this stage Mr Gambi appears to have formed the view that the s 198M application was more trouble than it was worth. He advised the primary judge that “in lieu of making the application under s 198 of the Legal Profession Act we simply bring the application based on the correspondence and the offers that have been made under Part 39A r 14.” It is not clear his Honour appreciated what Mr Gambi was seeking to do as his response was to say he would stand that application over in order, in substance, to give the third respondent’s legal representatives an opportunity to put on evidence.
The primary judge indicated that if he concluded the appellant and/or counsel who had appeared in the principal proceedings should show cause as to why they should not be burdened with a personal costs order, he would give them an opportunity whether by way of affidavit or by way of making a statement in Court to indicate why they should not bear the costs. He again expressed concern that in those circumstances the third respondent would not have an opportunity to make submissions.
Mr Gambi finally appears to have proceeded with the application foreshadowed on 26 September 2003 that the third respondent bear the costs of the principal proceedings on an indemnity basis relying upon an offer of compromise and Calderbank letters. He tendered the various offers and correspondence upon which he relied as well as the Arbitrator’s award.
After hearing from Ms Ryan the primary judge sought details from Mr Gambi concerning the nature of the costs order he sought against the third respondent. Mr Gambi advised that the second respondent sought indemnity costs from the date of what appears to have been the offer of compromise, 17 February 2003. His Honour then said, “I make that order”. He did not articulate the precise order he made at that stage. He ordered the third respondent to pay the first respondent’s costs on a party-party basis.
Mr Gambi then enquired as to what course the primary judge proposed to pursue to deal with “the 39A and s 198 issue”. He indicated that he was prepared to assist his Honour with “short submissions” without charging his client and that his instructing solicitor was also prepared to put on a “short affidavit about some matters” without further cost to the second respondent.
The primary judge said he proposed to give the matter further consideration and that his associate would contact Mr Gambi’s instructing solicitor if he decided “to take the matter further”. Once again he indicated that he was “sensitive to the interests of the plaintiff should the matter be taken any further”.
It appears that the primary judge subsequently contacted Ms Ryan and the appellant and required them to attend before him on 7 November 2003. The transcript records Ms Ryan as appearing for the third respondent and there being no appearance for the first or second respondent. Although not recorded in the transcript, it is common ground that the appellant was present on this occasion, however the primary judge addressed all his remarks to counsel. His Honour said:
“Ms Ryan I asked you and your instructing solicitor to be here this morning. … I have given further and very careful consideration to the question of the appropriate costs order that should be made in the matter of Stoddart and I am at this stage persuaded that there is a case for an order to be made against yourself and your instructing solicitor under s 198M of the Legal Profession Act. That’s as far as I propose to take the matter this morning and to invite you, whether you do this jointly or separately is a matter between you and your instructing solicitor, to provide written submissions on that question.”
Ms Ryan informed his Honour that as a result of what had fallen from him on the previous occasion she no longer appeared in the matter and had been replaced by Mr Lidden.
After she informed his Honour of this he said that he was inviting the solicitor and barrister for the third respondent to prepare affidavits with regard to the “matters alluded to in s 198M” and that it would be a matter for Mr Lidden to make submissions.
There was some debate about when some transcript would be available (apparently the transcript of the trial) following which the primary judge said:
“Can we just work on that general basis that you will be given a further two weeks to finalise the affidavits after receipt of the transcript and that will be a matter which I can monitor and my associate will confirm a final timetable with each of you when we get to that stage.”
His Honour then added:
“Now the other matter I do want to be very clear about, when you say that you’re no longer appearing in this matter, Ms Ryan, the matter of Stoddart per se has concluded. Any further costs incurred at this stage are certainly not costs under any circumstances to be borne by the plaintiff and/or any other party to the proceedings … this is a matter at this stage between yourselves and the Court and if you choose to seek the assistance of counsel then it is obviously entirely a matter for you, but it is between you and counsel, not between the plaintiff and counsel.”
After indicating, again, that a timetable would be finalised in due course, his Honour also said:
“… and obviously at that stage a date will have to be arranged for final submissions ….”
On 25 November 2003, Mr Harrison SC with Mr Torrington appeared for Ms Ryan before his Honour. Mr Gambi appeared for the second respondent. The appellant did not appear on that occasion and, has sworn an affidavit in which he asserts that he was not notified of this hearing. The respondents did not dispute that proposition.
It does not appear from the transcript of 25 November how the matter came to be relisted before his Honour on that occasion. However, it appears from a judgment his Honour delivered in the matter on 19 May 2004 to which I will come, that the matter was relisted at Mr Harrison’s request.
Mr Gambi made it clear to the primary judge on 25 November that the second respondent had not sought a personal costs order against Ms Ryan, but only against the third respondent’s solicitors.
His Honour observed, however, that he had included Ms Ryan in what appeared to be his conclusion that there was a prima facie case for an order to be made pursuant to s 198M because:
“… I was presented with a case which was demonstrably deficient in terms of its likelihood of success, conducted by counsel and obviously under instructions from a solicitor. If that’s all I know about the matter, it is very hard for me to differentiate.”
His Honour went on to explain that one of the reasons he had sought affidavits was, in effect, to determine the circumstances in which counsel had been briefed and in which the appellant had been instructed in order to assist him to reach his final conclusion.
At this stage the primary judge made it plain that whatever the second respondent’s original application had been, he took the view that once he had decided to accede to the request, the responsibility for “taking the matter to the next step is entirely mine”.
A lengthy exchange between the primary judge and Mr Harrison followed the details of which, save as to one matter, do not require repetition. That matter is that Mr Harrison drew to the primary judge’s attention the fact that before there was any onus under s 198N on a solicitor or barrister to put on any evidence, there was an anterior requirement of a finding that the facts established by the evidence before the court did not form a basis for a reasonable belief that the claim had reasonable prospects of success. He submitted that it was not clear whether the primary judge “had formed that view, but not expressed it in those terms or … may not yet have formed that view or be inclined to make that finding”.

The primary judge responded to this submission by saying:
“… I accept that I did not make an explicit finding to that effect. I have to say, however, that it was implicit and that I have no hesitation in saying, for the purpose of dealing with your submissions at the moment, that I did reach such a conclusion and that I have no difficulty, therefore, in formalising that.”
There was then some further discussion between the primary judge and Mr Harrison in the course of which the primary judge indicated that he was inclined to “revise [his] earlier order and to simply call on Ms Ryan to show cause under Part 39A”.
Despite the view he had expressed on 23 October 2003 that resolution of the original s 198M application was a matter over which he had sole control, the primary judge asked Mr Gambi whether he should continue to call on the appellant to respond to the s 198M application. Mr Gambi affirmed that his instructions were to maintain the second respondent’s position as against the appellant. The primary judge then expressed concern as to whether he should explicitly discriminate between the solicitor and the barrister noting, as he did so, that “there is no one here to represent the solicitor”.
After some further discussion his Honour adjourned the matter and advised that counsel would be informed of how he intended to proceed from that point.
On 10 December 2003 the associate to the primary judge sent a letter to the appellant which stated:
“Following the mention of this matter on 25 November 2003 his Honour, Judge Phegan is of the view that the order made against you under s 198M of the Legal Profession Act 1987 should stand.
You are accordingly invited to rebut the presumption that the matter was brought to trial without reasonable prospects of success as provided for in s 198N (3) and (4) of the Act. In the circumstances his Honour has extended the time for filing any affidavit in support for a further fourteen (14) days from the date of this letter.
As the fourteen (14) days will not expire until after the conclusion of the current term the matter will not be resolved until after the commencement of the new term in February 2004.” (emphasis added)
On the same day the associate also forwarded a letter to Ms Ryan advising that the primary judge was satisfied, following Mr Harrison’s submissions on her behalf, “that neither s 198M of the Legal Profession Act 1987 nor Part 39A r 14A of the District Court Rules is applicable to your conduct of this matter on behalf of the plaintiff”. Ms Ryan was advised that in the circumstances she was not required:
“… to file any affidavit in defence of your conduct and earlier orders made pursuant to those provisions are rescinded to the extent that they apply to you. However, his Honour is of the view that the orders should stand insofar as they apply to your instructing solicitor, Mr Semisi Lemoto and he will be advised accordingly”.
On 17 December 2003 the appellant sent a letter responding to the associate’s letter to him. He advised that the transcript of the full hearing had been collected on 10 December 2003 and had been forwarded to counsel the same day, but that counsel would not be able to draft affidavits prior to the close of the Court term and, further, that the appellant would be overseas from 20 December 2003 until 20 January 2004.
The District Court’s 2004 term commenced on 2 February. On 30 January 2004 the primary judge asked his associate to telephone the appellant’s office. It appears she spoke to a secretary in the appellant’s office who undertook to remind Mr Lemoto of the outstanding affidavits. A further phone call was made by the primary judge’s associate to the appellant’s offices on 11 February 2004.
On 19 February 2004 the primary judge ascertained that the appellant had not filed any affidavits. On 25 February 2004 the associate to his Honour forwarded the following letter to the appellant:
“Dear Mr Lemoto,
Stoddart v Able Technical Pty Ltd & B C Mailing Pty Limited
With reference to the above matter the letter dated 17 December 2003 from your office is noted.
Given the fact that it is now one month since your return from overseas and as there is no record of the receipt of any affidavit filed on your behalf in the District Court Registry, his Honour, Judge Phegan has entered a costs order against you under s 198M of the Legal Profession Act 1987.
This order is effective as of today’s date.”
The letter was copied to the second respondent’s solicitor.
As is apparent, the letter did not purport to convey the terms of the order the primary judge had made nor give any reasons why the order had been made. During the hearing of the appeal Mr McCulloch SC, who appeared with Mr Gambi for the second respondent, handed to the Court a document he described as a computerised summary of the orders as recorded in the District Court. That document records against the date 25 February 2004, “Order the slr for the plf to pay plf’s costs of the proceedings under s 198M of the Legal Profession Act (Judge Phegan)”.

I have earlier noted that it was not clear whether the costs order the primary judge made against the appellant was a repayment order or an indemnity order. In my view the better construction is that it was a repayment order, requiring the appellant to repay to the third respondent the costs she had been ordered to pay the first and second respondents. Accordingly the costs orders the primary judge made in their favour against the third respondent on 23 October 2003 continue to operate. It is unnecessary for this Court to make any order dealing with the costs of the principal proceedings.
In my view, however, the third respondent should not bear any part of the appellant’s costs of the appeal. She did not initiate or in any way participate in the costs order proceedings before the primary judge. She was properly joined as a party to the appeal and actively participated by way of written submissions and the adoption, in court, of the second respondent’s submissions. In my view she should bear her own costs.
I propose the following orders:
(1)Extend to 18 June 2004 the time in which the appellant might seek leave to appeal against such orders as were made by the primary judge prior to 19 May 2004.
(2) Grant leave to appeal and allow the appeal.
(3)Set aside the costs order made by Phegan DCJ in Chambers on 25 February 2004.
(4)Order the first and second respondents to pay the appellant’s costs of the appeal and of the application for leave to appeal.
(5) Third respondent to bear her costs of the appeal and of the application for leave to appeal.

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LAST UPDATED: 09/05/2005