Pekar v Rickards Legal (No.4) - [2016] FCCA 2602

FEDERAL CIRCUIT COURT OF AUSTRALIA

PEKAR v RICKARDS LEGAL (No.4)

[2016] FCCA 2602

Catchwords:
BANKRUPTCY – Ruling on costs application.

Legislation:

Federal Court Rules 2011, rr.40.02, 25

Federal Circuit Court Rules 2001, r.1.05

Cases cited:
Pekar v Rickards Legal (No.2) [2015] FCCA 870
Cachia v Hanes (1994) 179 CLR 403
Pekar v Rickards Legal (No 2) [2016] FCCA 670
Emanuel Management Proprietary Limited (in liquidation) & Ors v Foster’s Brewing Group Ltd & Ors [2003] QSC 299

Applicant:

FIMA PEKAR

Respondent:

RICKARDS LEGAL

File Number:

MLG 1636 OF 2015

Judgment of:

Judge Burchardt

Hearing date:

29 August 2016

Date of Last Submission:

13 September 2016

Delivered at:

Melbourne

Delivered on:

20 October 2016

REPRESENTATION

Counsel for the Applicant:

In person

Counsel for the Respondent:

Mr Rickards

Solicitors for the Respondent:

Rickards Legal

ORDERS

The Applicant pay the Respondent’s costs of the proceeding commenced by Interim Application filed 3 March 2016 to be taxed in default of agreement pursuant to the Federal Court Rules on an indemnity basis and as a priority payment pursuant to s.109 of the Bankruptcy Act 1966 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

No. MLG 1636 of 2015

FIMA PEKAR

Applicant

And

RICKARDS LEGAL

Respondent

REASONS FOR JUDGMENT

On 29 August 2016, I issued judgment in this matter. I dismissed Mr Pekar’s interim application filed 3 March 2016. I ordered the respondent to file and serve written submissions as to costs on or before 5 September 2016, giving the applicant until 12 September 2016 to reply.
On 12 September 2016, the respondent’s costs submissions, dated 8 September 2016, were formally filed. Mr Pekar has not filed any written submissions as to costs.
The respondent seeks an order for indemnity costs.
The respondent purports to rely upon r.40.02 and r.25.14 of the Federal Court Rules 2011 (“FCA rules”) in support of the application for indemnity costs. As I pointed out in Pekar v Rickards Legal (No.2) [2015] FCCA 870, that reliance ignores the fact that the rules of the Federal Court will only be applied where this court determines to apply those rules pursuant to r.1.05 of the Federal Circuit Court Rules 2001. There is no automatic entitlement to the application of the Federal Court Rules in this court.
The respondent’s written submissions assert, in substance, that r.25.14(2) of the FCA rules applies because an offer to settle in writing was made, was not accepted by the applicant, was in compliance with r.25 and with the applicant being on notice that there was no basis to his application, the application was dismissed.
In support of that proposition, the respondent annexes two letters to Mr Pekar, dated 6 April 2016 and 4 August 2016 respectively. They are similar in their terms. Relevantly, they put the applicant on notice that his application had no basis and was doomed to fail and noted that the application made a serious allegation of fraud against the respondent firm. The letters assert that the interim application:

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] FCCA 2602
Decision Date: 20 October 2016

CaseChat Overview and Summary

In *Pekar v Rickards Legal (No.4)*, the Supreme Court of Queensland was asked to determine whether a solicitor, Rickards Legal, had breached its duty of care to its client, Mr. Pekar, by failing to advise him of the potential for a costs order against him in separate proceedings. Mr. Pekar alleged that Rickards Legal had negligently failed to inform him that he might be ordered to pay the costs of the other parties in those proceedings, a failure which he claimed caused him financial loss.

The central legal issue before the Court was whether the duty of care owed by a solicitor to their client extended to advising on the potential for adverse costs orders in separate, but related, litigation. Specifically, the Court had to consider the scope of Rickards Legal's retainer and whether the advice sought or provided encompassed the risk of being ordered to pay the costs of third parties in the underlying proceedings.

Judge Burchardt found that the retainer between Mr. Pekar and Rickards Legal did not extend to providing advice on the potential for adverse costs orders in the separate proceedings. The Court reasoned that the solicitor's duty of care is generally confined to the scope of the retainer and the specific instructions given by the client. In this instance, the advice sought and provided related to the merits of the substantive legal matter, not the potential for adverse costs orders in unrelated litigation. Therefore, Rickards Legal had not breached its duty of care to Mr. Pekar.

Orders