Penhall-Jones v Carroll - [2008] FMCA 1556

FEDERAL MAGISTRATES COURT OF AUSTRALIA

PENHALL-JONES v CARROLL

[2008] FMCA 1556

COSTS – Application for orders for costs against solicitors – solicitor in default because not ready to argue his client’s case – whether costs awarded against the client should be paid by the solicitor or whether the solicitor’s own professional fees should be disallowed considered.

Federal Magistrates Court Rules 2001 (Cth)
Human Rights and Equal Opportunity Commission Act 1986 (Cth)
Legal Profession Act 1987 (NSW), s.198L

Baik v Minister for Immigration [2008] FMCA 61
Fuller v Baptist Union of NSW & Anor [2004] FMCA 789
Taylor v CGU Insurance Ltd (2005) 193 FLR 120

Applicant:

MARGARET LEILA PENHALL-JONES

Respondent:

MICHAEL PAUL CARROLL

File Number:

SYG 538 of 2006

Judgment of:

Driver FM

Hearing date:

18 November 2008

Delivered at:

Sydney

Delivered on:

28 November 2008

REPRESENTATION

Counsel for the Applicant:

Mr C P Locke

Solicitors for the Applicant:

Oliveri Lawyers

Counsel for the Respondent:

Mr P G Cutler

Solicitors for the Respondent:

Carroll and Associates

ORDERS

Pursuant to rule 21.07(4)(a) of the Federal Magistrates Court Rules, the costs as between the respondent’s firm and Ms Penhall-Jones of and incidental to the interlocutory application dismissed on 6 December 2005 be disallowed.
Mr Carroll is to pay Ms Penhall-Jones’ costs of and incidental to the present application, fixed in the amount of $5,000.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 538 of 2006

MARGARET LEILA PENHALL-JONES

Applicant

And

MICHAEL PAUL CARROLL

Respondent

REASONS FOR JUDGMENT

Introduction and background

Ms Penhall-Jones was an applicant in this Court under the Human Rights and Equal Opportunity Commission Act 1986 (Cth). Ms Penhall-Jones sought both final and interim relief in relation to alleged disability discrimination and victimisation. She was initially a self-represented litigant but in late 2005 she retained the respondent’s firm to represent her. Her solicitor was Mr Daniel Petkovic who is no longer with the firm. The respondent accepts any liability arising from the conduct of Mr Petkovic.
On 6 December 2005 I ordered that Ms Penhall-Jones’ application for interlocutory relief for victimisation be dismissed for want of prosecution. I awarded costs against her fixed in the sum of $2,000. Mr Petkovic appeared for Ms Penhall-Jones on that day and unsuccessfully sought an adjournment. Subsequently, Ms Penhall‑Jones withdrew her instructions from the respondent’s firm and instructed other solicitors.
On 23 January 2006 Ms Penhall-Jones filed the application currently before the Court in which she seeks orders that the respondent be required to pay the costs that she was ordered to pay in the principal proceedings on 6 December 2005 and, secondly, that costs the respondent’s firm claimed from her for their services as between solicitor and client be disallowed. A further claim that the respondent be required to pay part of additional costs that Ms Penhall-Jones was ordered to pay on 20 January 2006 (after the firm had ceased acting for her) was not pressed.
The application is brought pursuant to rule 21.07 of the Federal Magistrates Court Rules 2001 (Cth) (“the Federal Magistrates Court Rules”). The application had been stood over until the completion of the principal proceedings.
The application is supported by two affidavits by Ms Penhall-Jones, the first filed on 20 February 2006 and the second (being substantially an affidavit in reply) filed on 24 September 2008. Ms Penhall-Jones was cross-examined on her affidavits. She maintained her evidence.
The respondent opposes the granting of the relief claimed. Mr Carroll relies upon a response filed on 28 June 2007 which is supported by an affidavit by Mr Petkovic filed on 28 June 2007. A substantial number of documents are exhibited to that affidavit. Mr Petkovic was also cross-examined on his affidavit and maintained his evidence.
In argument, counsel for Ms Penhall-Jones submitted that it was not necessary for her to prove any misconduct on the part of Mr Petkovic in order to succeed. Mere default is sufficient. He submits that Mr Petkovic had not prepared to argue the interlocutory application on 6 December 2005 when he had undertaken to appear and argue it. He submits that Mr Petkovic’s unpreparedness was the reason for the dismissal of the interlocutory application on that day and that the respondent should bear the costs that Ms Penhall-Jones was required to pay in consequence of that dismissal, as well as being prevented from recovering the firm’s own costs of the interlocutory application.
Counsel for Mr Carroll submits that the interlocutory application was doomed and that Mr Petkovic had attempted to persuade Ms Penhall-Jones to discontinue it. Mr Petkovic (and counsel who had been instructed to advise in relation to the matter generally) were concerned that the interlocutory application did not have reasonable prospects of success and advised Ms Penhall-Jones that s.198L of the Legal Profession Act 1987 (NSW) (“the Legal Profession Act”) (as it then was) prevented the firm from acting in a proceeding without reasonable prospects of success. Mr Petkovic considered that the only hope was to obtain an adjournment of the application for interlocutory relief so that it could be further considered.

Consideration

Rule 21.07 of the Federal Magistrates Court Rules is in the following terms:
(1)   The Court or a Registrar may make an order for costs against a lawyer if the lawyer, or an employee or agent of the lawyer, has caused costs:
(a)    to be incurred by a party or another person; or
(b)    to be thrown away;
because of undue delay, negligence, improper conduct or other misconduct or default.
(2)   A lawyer may be in default if a hearing may not proceed conveniently because the lawyer has unreasonably failed:
(a)   to attend, or send another person to attend, the hearing; or
(b)to file, lodge or deliver a document as required; or
(c)to prepare any proper evidence or information; or
(d)to do any other act necessary for the hearing to proceed.
(3)An order for costs against a lawyer may be made on the motion of the Court or Registrar, or on application by a party to the proceeding or by another person who has incurred the costs or costs thrown away.
(4)The order may provide:
(a)    that the costs, or part of the costs, as between the lawyer and party be disallowed; or
(b)   that the lawyer pay the costs, or part of the costs incurred by the other person; or
(c) that the lawyer pay to the party or other person the costs, or part of the costs, that the party has been ordered to pay to the other person.
(5)   Before making an order for costs, the Court or Registrar:
(a)must give the lawyer, and any other person who may be affected by the decision, a reasonable opportunity to be heard; and
(b)   may order that notice of the order, or of any proceeding against the lawyer be given to a party for whom the lawyer may be acting or any other person.
Ms Penhall-Jones relies in particular upon sub-rules (1)(a) and (b) and (2)(a), (c) and (d). The application of the rule has been considered by this Court on a number of occasions, notably by McInnis FM in Taylor v CGU Insurance Ltd (2005) 193 FLR 120 and by Barnes FM in Baik v Minister for Immigration [2008] FMCA 61. I agree, with respect, with the principles set out by her Honour at [52]-[60] in Baik.
In the present case, Ms Penhall-Jones and Mr Petkovic differ as to the detail of certain conversations between them but the material facts are clear. I make the following findings. Ms Penhall-Jones had commenced difficult and complex human rights proceedings against the NSW Ministry of Transport as a self-represented litigant. I had encouraged Ms Penhall-Jones to seek legal representation as I was concerned about Ms Penhall-Jones’ capacity to conduct the proceedings effectively on her own and I considered that professional legal assistance might assist in narrowing the issues in dispute between the parties, shorten the legal proceedings and reduce the costs exposure of the parties. Ms Penhall-Jones had an initial conference with Mr Carroll on 21 October 2005 in which she explained her proceedings and she and Mr Carroll discussed the possibility of the firm acting for her in them. Ms Penhall-Jones also met Mr Petkovic on that day. There was subsequent correspondence and telephone communication between Ms Penhall-Jones and Mr Petkovic in which Ms Penhall-Jones provided further information. Mr Petkovic briefed counsel on 10 November 2005. Ms Penhall-Jones saw Mr Petkovic again on 16 November 2005 when they discussed the possibility of Mr Petkovic attending the hearing of the application for interlocutory relief and dealing with other aspects of the case.
On 17 November 2005 Ms Penhall-Jones gave instructions to Mr Petkovic by e-mail and sought his agreement to appear on the hearing of the interlocutory application on 6 December 2005. Mr Petkovic responded by e-mail on the same day[1] in which he accepted instructions and said:
I would be pleased to attend the motion on 6 December 2005 and I am happy to argue the matter on your behalf. I can’t comment for counsel, except to say that she has set aside time in her diary to attend the hearing.
[1] Exhibit DP9 to the affidavit of Mr Petkovic
I find that a relationship of solicitor and client was established between Ms Penhall-Jones and Mr Petkovic at that time.
On 24 November 2005, following the provision of additional material by Ms Penhall-Jones, she met with Mr Petkovic and counsel when they provided advice to her. It is apparent that counsel (and in consequence, Mr Petkovic) were concerned about the prospects of success of the interlocutory application and suggested that it be stood over until the first day of the trial of the matter.
On 28 November 2008 Mr Petkovic sent to Ms Penhall-Jones correspondence formalising the solicitor and client relationship. Curiously, Mr Petkovic did not assume full carriage of the proceedings and Ms Penhall-Jones continued to deal with the Ministry of Transport directly as if she was self-represented.
Between then and 5 December 2005 there were various communications between Mr Petkovic and Ms Penhall-Jones but those were inconclusive. On 5 December 2005 Ms Penhall-Jones confirmed in writing her instructions to Mr Petkovic to argue the interlocutory application when it was heard the following day. Mr Petkovic spoke to counsel, who was pessimistic. Mr Petkovic subsequently put his (or possibly more accurately, counsel’s) concerns to Ms Penhall-Jones orally. Mr Petkovic filed a notice of appearance on the same afternoon and spoke to my associate to advise her that on the following day he would be seeking to have the interlocutory application stood over.
On 6 December 2005 Ms Penhall-Jones confirmed her instructions to Mr Petkovic to appear and argue the interlocutory application. Mr Petkovic again spoke to counsel who expressed an extremely gloomy view about the prospects of success. Ms Penhall-Jones again confirmed her instructions.
Mr Petkovic appeared on behalf of Ms Penhall-Jones and sought an adjournment based upon late service of an affidavit. The Ministry of Transport elected not to rely on that affidavit. I refused the adjournment. It was plain that Mr Petkovic was not in a position to argue the merits of the interlocutory application and I dismissed it for want of prosecution with costs.
I draw the following conclusions from the facts. Mr Petkovic had an ambivalent attitude to his role in the matter. On the one hand, he was willing to take instructions from Ms Penhall-Jones and to agree to act on them. On the other hand, he passed on advice from counsel as to the prospects of success of the interlocutory application and recommended a course of action that Ms Penhall-Jones did not agree to. Ms Penhall-Jones had strong views about the merits of her proceedings and the manner in which they should be pursued. Mr Petkovic, while willing to act, was concerned about the possible infringement of s.198L of the Legal Profession Act which, at the time, provided:
(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.
(3) Court documentation on a claim or defence of a claim for damages is not to be accepted for lodgement unless accompanied by the certification required by this section. Rules of court may make provision for or with respect to the form of that certification.
(4) In this section:
"court documentation" means:
(a) a statement of claim, summons, cross-claim, defence or further pleading, or
(b) an amended statement of claim, summons, cross-claim, defence or further pleading, or
(c) a document amending a statement of claim, summons, cross-claim, defence or further pleading, or
(d) any other document of a kind prescribed by the regulations.
"cross-claim" includes counter-claim and cross-action.
Mr Petkovic was mistaken. The section did not apply in the circumstances of this matter in its own terms because the proceedings had already been commenced by Ms Penhall-Jones as a litigant in person. In any event, I have previously found that the section did not apply to proceedings in this Court[2]. Mr Petkovic was desultory in preparing to argue the interlocutory application because of his concern about his own professional responsibility and counsel’s grim view of the prospects of success of the application. He and counsel saw the best course to be standing over the interlocutory application until the first day of the trial of the whole matter (which required substantial additional preparation).
[2] Fuller v Baptist Union of NSW & Anor [2004] FMCA 789
I accept that Mr Petkovic did commit a ‘default’ on 6 December 2005 in that he was not ready to argue the interlocutory application on behalf of Ms Penhall-Jones. He had been instructed to argue the merits of the application and had accepted those instructions. However, that default was not the cause of the costs order I made against Ms Penhall-Jones on that day. Ms Penhall-Jones had an unrealistic expectation as to what could be achieved on an interlocutory basis pending the trial of the matter. Counsel (and Mr Petkovic) were rightly concerned about the prospects of success of the interlocutory application. It was unrealistic to expect (as Ms Penhall-Jones apparently did) that she could secure a return to work on an interlocutory basis when she had already accepted workers compensation benefits. There is no doubt in my mind that if the interlocutory application had been argued on 6 December 2005, I would have dismissed it and made a costs order of no less an amount. I reject the claim that Mr Carroll should be required to pay the costs of $2,000 that Ms Penhall-Jones was ordered to pay in consequence of the dismissal of the interlocutory application.
On the other hand, Ms Penhall-Jones should not have to pay the costs of the respondent’s firm in relation to the interlocutory application as between solicitor and client. In the first place, Mr Petkovic did not assume full carriage of the matter until the day before the hearing of the interlocutory application when he filed a notice of appearance. He encouraged Ms Penhall-Jones to continue to act as a litigant in person notwithstanding that a solicitor and client relationship had been established following his acceptance of instructions. Secondly, although Mr Petkovic sought and obtained advice from counsel about the interlocutory application and provided advice to Ms Penhall-Jones, he did little or nothing in response to her specific instructions to prepare to argue the merits of the interlocutory application. Mr Petkovic considered (correctly) that the application was doomed to fail but he had accepted his client’s instructions. He had a responsibility to do his best on the basis of those instructions. He did virtually nothing to prepare to argue the merits of the interlocutory application and pinned everything on securing an adjournment.
I will order, pursuant to rule 21.07(4)(a) of the Federal Magistrates Court Rules that the costs as between the respondent’s firm and Ms Penhall-Jones of and incidental to the interlocutory application dismissed on 6 December 2005 be disallowed.
Mr Carroll should bear the costs of the present application in which Ms Penhall-Jones has been partially successful. The Rules of this Court do not make specific provision in the Court scale for costs of an application of this nature. In argument, the parties agreed that I should fix costs in favour of the successful party in the range of $5,000 to $8,000.
I will order that Mr Carroll pay Ms Penhall-Jones’ costs of and incidental to the present application, fixed in the amount of $5,000.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Driver FM

Associate:

Date: 28 November 2008