Peter Daniel Dzundza v Thomas Nielsen

[2013] ACTSC 220

PETER DANIEL DZUNDZA v THOMAS NIELSEN
 [2013] ACTSC 220 (6 November 2013)

COSTS – application by the defendant for party/party costs and indemnity costs against the plaintiff
COSTS – application by defendant pursuant to s 189(1) of the Civil Law (Wrongs) Act 2002 (ACT) for any costs order made against the plaintiff to be paid by the solicitor for the plaintiff – whether the plaintiff’s claim had reasonable prospects of success

Civil Law (Wrongs) Act 2002 (ACT), ss 187, 188, 189, 190
Legal Profession Act 1987 (NSW), s 198J

Becker v Queensland Investment Corporation(No 2) [2009] ACTSC 147
Briginshaw v Briginshaw (1938) 60 CLR 336
Calderbank v Calderbank [1975] 3 All ER 333
Computer Machinery Co Ltd v Drescher [1983] 3 All ER 153
Degiorgio v Dunn (No 2) (2005) 62 NSWLR 284
Grbavac v Hart [1997] 1 VR 154
Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435
Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300
MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236
White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169

No. SC 631 of 2009

Judge:  Cowdroy J
Supreme Court of the ACT
Date:   6 November 2013

IN THE SUPREME COURT OF THE     )
  )          No. SC 631 of 2009
AUSTRALIAN CAPITAL TERRITORY )

BETWEEN:PETER DANIEL DZUNDZA

Plaintiff

AND:THOMAS NIELSEN

Defendant

ORDER

Judge:  Cowdroy J
Date:  6 November 2013
Place:  Canberra

THE COURT ORDERS THAT:

1. The Defendant’s application for costs filed 27 August 2013 (‘the Application’) be allowed in part, insofar as:

   a.The Plaintiff pay the costs of the Defendant on a party/party basis up to and including 24 August 2009; and

   b.The Plaintiff pay the costs of the Defendant on an indemnity basis from 25 August 2009 to 26 August 2013 inclusive.

2. The Application be otherwise dismissed.

3. The costs of the Application be reserved.

IN THE SUPREME COURT OF THE     )   No. SC 631 of 2009
  )
AUSTRALIAN CAPITAL TERRITORY )

BETWEEN:PETER DANIEL DZUNDZA

Plaintiff

AND:THOMAS NIELSEN

Defendant

Judge:  Cowdroy J
Date:  6 November 2013
Place:  Canberra

REASONS FOR JUDGMENT

1. By originating claim filed in July 2009, the plaintiff (‘Mr Dzundza’) sued the defendant (‘Dr Nielsen’) for personal injuries sustained in a collision that occurred on 6 April 2008. The following alleged facts may be gleaned from the statement of claim:

1.       At about 5.30 pm on the day of the collision, Mr Dzundza was driving a Harley Davidson motorbike with a pillion passenger along Glenloch Interchange at the intersection of Tuggeranong Parkway and Glenloch Interchange at Acton in the Australian Capital Territory;

2.       Dr Nielsen was driving a white Toyota Camry travelling in the same direction as Mr Dzundza;

3.       At the interchange, Dr Nielsen moved his vehicle from the left lane to the right lane whereupon Mr Dzundza attempted to overtake Dr Nielsen in the left lane;

4.       As a result of Dr Nielsen suddenly moving his vehicle back into the left lane, Mr Dzundza broke in an attempt to avoid a collision with Dr Nielsen;

5.        The rear of Dr Nielsen’s vehicle clipped the front of Mr Dzundza’s motorcycle with such force that Mr Dzundza and his passenger were thrown off the motorcycle;

6.       Injuries sustained by Mr Dzundza as a result of the collision included the dislocation of the right shoulder, an open wound to the right elbow, cuts to the leg, bruising to the leg, and concussion.

1. Mr Dzundza’s pillion passenger was Ms Diana Ruffy. As is detailed below, a motorcycle driven by Mr Wayne Clark was in close proximity to Mr Dzundza at all material times prior to the collision. Mr Clark also had a pillion passenger, namely Ms Rachel McMahon.

1. After the proceeding was listed for hearing in the week commencing 9 September 2013, Mr Dzundza and Dr Nielsen agreed to resolve the claim on the basis that judgment would be entered for Dr Nielsen with costs reserved. Judgment was entered on 26 August 2013.

1. On 27 August 2013 Dr Nielsen filed an application seeking orders as to costs. As emerged during the hearing of such application, Dr Nielsen alleges that in view of the evidence held by Mr Howes, the former solicitor for Mr Dzundza, it was plain that Mr Dzundza’s claim never had reasonable prospects of success from the time of the initiation of the proceeding up to the date of settlement. It is against that background that the following orders are sought by Dr Nielsen:

1.Mr Dzundza pay Dr Nielsen’s costs of the proceeding on a party – party basis up to and including 24 August 2009;

2.Mr Dzundza pay Dr Nielsen’s costs of the proceeding on an indemnity basis thereafter;

3.Pursuant to s 189(1) of the Civil Law (Wrongs) Act 2002 (ACT) (‘the Act’) Mr Bruce Howes, solicitor, pay to Dr Nielsen all or such part of the costs ordered to be paid by Mr Dzundza to Dr Nielsen as the Court deems appropriate in the circumstances.

1. On 5 September 2013, Mr Dzundza signed a notice reflecting that he was representing himself in the proceeding.

1. When this matter came on for hearing on 9 September 2013, the Court received a letter from Mr Dzundza dated 6 September 2013 which confirmed that he:

1.       would not attend the hearing;

2.       had received copies of Dr Nielsen’s application for costs, the affidavit in support of Daniel Robert Crowe affirmed on 26 August 2013, and the affidavit of Mr Howes sworn 3 September 2013;

3.       understood that costs orders may be made against him at the hearing;

4.       did not wish for the matter to be adjourned; and

5.       did not wish to make any submissions regarding costs.

FACTS

The collision

1. The police were called to the scene of the collision between Mr Dzundza and Dr Nielsen. The details obtained from Dr Nielsen as conveyed to the investigating police officer and contained in the ACT Policing Report prepared by Constable David Pritchard relevantly states:

·      Travelling in lane one of the Tuggeranong Parkway toward Woden, heard a loud bang and was propelled forward, shortly after stopped car and observed motorcycle on the road with a male and female both on ground also.

·      Did not see or hear motorcycle and was unsure of where motorcycle came from.

1. Both Mr Dzundza and his pillion passenger, Ms Ruffy, refused to speak to the police.

1. An eye witness, who is now known to be Mr Matthew Charles Blount, relevantly stated:

·      Travelling in lane one of the Tuggeranong Parkway toward Woden behind a white Toyota Camry, observed two motorcycles overtake in lane two, both travelling very close.

·      Motorcycles may have clipped each other as one of the motorcycle [sic] suddenly came across from lane two to lane one, crossed the unbroken white line and collided with the rear of the white Toyota Camry.

·      Observed brake lights illuminate on motorcycle but not on Camry.

·      Pretty sure Camry was not braking at time of collision.

1. Another witness, now known to be Mr Michael Green, stated:

·      Travelling in lane one of the Tuggeranong Parkway towards Woden, was about half way up the on ramp coming from the City.

·      Observed a big puff of white smoke, and two motorcycle riders on the floor, a white Camry parked ahead of the fallen riders pulled over on the side of the road.

…

·      Observed a second motorcycle approach scene, speak with male rider, then leave scene of collision.

1. On 1 May 2008 Ms Ruffy and her legal advisor, Mr Andrew Finlay, together with Mr Dzundza, contacted the police and spoke to Constable Pritchard. Constable Pritchard noted in relation to Ms Ruffy:

·      She did not witness the cause of the collision due to the fact she was on the back of the motorcycle, but was of the belief a white car displaying P plates was the cause of the accident.

1. Constable Pritchard noted in relation to Mr Dzundza:

·      He was seeking compensation due to the fact he was knocked off his motorcycle. Mr DZUNDZA stated the driver of the vehicle he struck was at fault. Mr DZUNDZA did not wish to attend the Belconnen Police Station to discuss the matter.

1. The following note then appears on the police report:

Police explained to Mr DZUNDZA and Miss RUFFY due to evidence available at the time responsibility for the collision is believed to be with the to [sic] the rider of the Harley Davidson motorcycle, but due to the fact CERT were unable to carry out a formal reconstruction of the collision, no charges or infringements will be issued.

Communications with the insurer

1. On 18 June 2008, NRMA Insurance Limited (‘NRMA’), the third party insurer for Dr Nielsen, received the Personal Injury Claim Notification made by Mr Dzundza. The form discloses that Mr Dzundza first consulted his solicitor, Mr Howes, on 15 May 2008. The description of the accident contained in the claim form is as follows:

Riding my motorcycle through the Glenlock [sic] interchange and was hit by a car who changed lanes [without] indicating hitting the front of my bike wheel.

1. By letter dated 14 August 2008, NRMA supplied Mr Howes’ firm, Howes Kaye Halpin, with a copy of the police report, details of which are extracted above. Such letter stated:

I advise that our liability investigations are continuing. We will notify your office once a determination is made.

1. On 17 September 2008 NRMA provided to Howes Kaye Halpin a copy of an investigation report conducted by Verifact. The cover letter from NRMA stated:

We will provide your [sic] with our liability determination shortly.

1. The attached Verifact report was made in respect of a claim made by Ms Ruffy for damages for personal injuries which she sustained as a result of the accident. The executive summary contained in the report is the version of the accident provided by Ms Ruffy. It states, inter alia:

[Ms Ruffy] has alleged that as the two motorcycles approached the Glenloch Interchange at an approximate speed of 70Km/Hr, a motor vehicle, driven by the Insured, Thomas NIELSEN, collided with the motorcycle on which she was a pillion passenger.

1. NRMA did not deny liability on the part of Dr Nielsen until 6 November 2008 when it wrote to Mr Howes stating:

The enquiries into the circumstances of the accident are now almost complete, however, we deny our insured has breached his duty of care to your client.

1. This was the first indication that liability would be disputed by Dr Nielsen.

1. A further Verifact report dated 31 October 2008 (‘the second Verifact report’) was attached to NRMA’s letter of 6 November 2008. Attached to the second Verifact report was a copy of the transcript of an interview between Constable Pritchard and the investigator for Verifact on 22 October 2008.

1. The second Verifact report was critical of the police officer who attended the scene, claiming that he did not act promptly and had not been provided with support by his superiors ‘in conducting a thorough investigation in this matter’. It also refers to the fact that he did not issue an infringement notice to the driver identified at fault within the six month statute of limitations required for traffic offences. The conclusion states:

We have now completed our inquiries in relation to this matter.

There exist several inconsistencies with this matter. Our inquiries have identified the police investigation was poor and failed to commence any action against the driver, Peter DZUNDZA, who was identified as being at fault and colliding with another motor cycle prior to impacting with the rear of the Insured’s vehicle.

1. On 11 November 2008 Mr Howes wrote to NRMA referring to their letter of 6 November 2008 and stated relevantly:

We have perused the “factual investigation” provided by you. In view of its contents and your denial of liability, it is necessary for us to forward this document to our client. In that regard we would have thought it more appropriate that you delete from the report the details of the witnesses referred to therein as under the Privacy Act we do not believe that their names should be released tour [sic] client at this time.

1. On 8 December 2008 NRMA provided a redacted copy of the factual report as requested.

1. On 20 November 2008 Mr Finlay, solicitor for Ms Ruffy, wrote to NRMA. Significantly the letter stated that Mr Dzundza ‘was not in any way affected by alcohol’. Such letter was written in view of the fact that Ms Ruffy had commenced proceedings (SC 793/08) against Mr Dzundza on 16 September 2008.

1. On 23 March 2009, Mr Howes received a statement signed on 12 May 2008 by Ms McMahon (the pillion passenger on Mr Clark’s motorcycle) in relation to Ms Ruffy’s claim. Ms McMahon stated that when Mr Clark’s motorcycle entered the interchange, such vehicle was approximately five metres ahead of Mr Dzundza’s motorcycle and slightly to the right. Despite admitting that she did not witness the collision as Mr Clark’s motorcycle was ahead of Mr Dzundza’s, Ms McMahon also stated that:

I believe the driver of the old white sedan [Dr Nielsen’s car] was either travelling too quickly and/or failed to give way or observe [Mr Dzundza’s] motorcycle as the two roads merge[d] and that he failed to keep within his lane way [sic].

1. In a letter of 19 May 2009 to Mr Howes, NRMA relevantly stated:

I note that we have not received any contact from your office since your request for an additional copy of our factual investigation report on 11 November 2008.

In light of this and our denial of liability, can you please advise whether you are instructed to proceed with this matter. If you are instructed to proceed notwithstanding the denial of liability, we ask that you attend to the following:

1.Seek your client’s instructions to issue proceedings;

2.Re-submit your client’s section 64 [of the Act] information of 3 September 2008 in the form of a Statutory Declaration as requested in our letters of 19 August and 8 October 2008; and

3.Provide a response (in the form of a Statutory Declaration) to our additional request for section 64 information dated 8 October 2008.

If you are not instructed to proceed, please advise our office as soon as possible so that we may finalise our file.

Correspondence between the solicitors on the record

1. On 12 August 2009 Mr Howes conferred with DLA Phillips Fox (as the firm was then known), solicitors for Dr Nielsen, to discuss the alleged liability of Dr Nielsen for the collision. Mr Howes stated during the conversation that he believed there were inconsistencies in the Verifact reports.

1. On 24 August 2009 DLA Phillips Fox made an offer to Mr Dzundza on behalf of Dr Nielsen to settle the matter. The letter, headed ‘Without prejudice save as to costs and interest’, relevantly stated:

At the time of the accident, [Dr Nielsen] was travelling from Civic to his home in Curtin and was therefore driving in the left lane of the Tuggeranong Parkway.

Given he planned to exit the Parkway to the left, [Dr Nielsen] had no reason to move into the right lane prior to the accident as alleged – and he denies he did so.

We note [Dr Nielsen’s] account of the accident is supported by an independent witness who was travelling behind him (but also in the left lane of the Parkway) and the evidence suggests [Mr Dzundza] lost control of his motorcycle and collided with the rear of [Dr Nielsen’s] vehicle without warning.

However, by way of compromise, we are instructed to offer that this matter be resolved on the basis that a verdict be entered for [Dr Nielsen] and that each party bear its own costs.

If your client does not accept the offer and ultimately obtains a judgment which is less favourable to him than the terms of our offer, we will apply for an order that your client pay the defendant’s costs on an indemnity basis from the date of his letter.

1. Mr Howes, by letter dated 30 September 2009, provided the police report to DLA Phillips Fox.

1. A second offer of settlement, also headed ‘Without prejudice save as to costs and interest’, was subsequently made by DLA Phillps Fox on behalf of Dr Nielsen by letter dated 15 April 2011. Such letter referred to the fact that Ms Ruffy had ‘amended her personal injury proceedings and is now suing [Mr Dzundza] in negligence’. The letter continued relevantly:

In a final attempt to resolve this matter, we are instructed to repeat our previous offer that this matter be resolved on the basis that a judgment be entered for [Dr Nielsen] and that each party bear their own costs.

If your client does not accept the offer and ultimately a judgment is entered against him, we will apply for an order that your client pay [Dr Nielsen’s] costs on an indemnity basis from 24 August 2009.

1. A third offer of settlement was made by DLA Phillips Fox on behalf of Dr Nielsen by letter dated 9 March 2012 and headed ‘Without prejudice save as to costs’. Such letter relevantly stated:

Your client’s pillion passenger, who sustained relatively serious injuries in the course of the subject accident, filed proceedings naming [Mr Dzundza] as the only negligent party.

Furthermore, there are no independent witnesses to the accident who support your client’s account of how it transpired.

On the contrary, Mr Blount, who was travelling in the vehicle immediately behind that driven by [Dr Nielsen], observed your client’s motorcycle veer into the left-hand lane and collide with the rear of [Dr Nielsen’s] vehicle. (See documents produced by the Australian Federal Police.)

We also note your client’s blood-alcohol reading taken at approximately 9.00pm while he was at The Canberra Hospital several hours after the accident. Once we have received our client’s long-outstanding sworn Interrogatories, we anticipate being instructed to obtain a report from a pharmacologist as to his likely level of intoxication at the time of the accident.

…

You will recall our client having, on a number of occasions, offered to bear its own costs if a verdict is entered in [his] favour.

We are instructed, in one final effort to resolve this matter prior to trial and against the background of the issues identified above, to reopen that offer for a further 28 days.

This offer is made on a Calderbank basis. In the event the offer is not accepted and your client is unsuccessful at hearing, we will seek an order that he pay our client’s costs on an indemnity basis from the date of our client’s initial Calderbank offer.

1. The offers of settlement were not accepted by Mr Dzundza. At a callover on 13 November 2012, Ms Alison McNamara (a solicitor of Howes Kaye Halpin) was shown information provided to DLA Phillips Fox by Mr Blount. The information of Mr Blount referred to the fact that he was travelling behind the Toyota driven by Dr Nielsen when he observed two motorcycles travelling very close together immediately before the accident. Mr Blount also stated that:

1.     The Toyota did not change lanes nor slow down;

2.     The Toyota was always in the left hand lane; and

3.     The Harley Davidson in the right hand lane moved across to the left lane cutting Mr Blount’s vehicle off and resulting in the accident with the Toyota.

1. Mr Blount concluded:

Based on my observations the causes of the accident were the two motorcycles. The motorcycle involved in the accident looked to clip the back wheel of the other motorbike at which point he lost control drove across the solid white line signifying the two lanes and hit the back of the Toyota Camry.

1. On 31 July 2013 Dr Nielsen’s solicitor supplied a copy of a statement obtained from Ms Ruffy (which was used in her claim against Mr Dzundza) to Mr Dzundza’s solicitors. Ms Ruffy made the following comments in her statement:

At no stage in the moments preceding the collision did Dr Nielsen’s car move from the left lane and Mr Dzundza’s motorcycle simply collided with the rear of it.

In the lead-up to the collision, Mr Dzundza was riding his motorcycle in an erratic and unsafe manner and it seems to me that he simply lost control of the motorcycle due to the way he was riding it.

I consider the collision to have been entirely Mr Dzundza’s fault and at no time did I see Dr Nielsen’s car leave the left lane, ‘cut off’ Mr Dzundza’s motorcycle or slow or stop suddenly.

1. DLA Phillips Fox again wrote to Howes Kaye Halpin on 7 August 2013, stating inter alia:

We are instructed to reiterate that, with respect, your client’s case is in our view doomed to failure. The hearing is now only four weeks away and you have not yet served any evidence on your client’s behalf to support the contention that [Dr Nielsen] was in any way negligent in relation to the subject motor vehicle accident.

As you will recall, [Dr Nielsen] has on several occasions (between 24 August 2009 and 9 March 2012) offered to bear his own costs if [Mr Dzundza] consented to a verdict being entered in [Dr Nielsen’s] favour.

In light of the considerable additional costs incurred since March 2012, [Dr Nielsen] is no longer prepared to bear his own costs in relation to this matter.

It is our understanding that [Mr Dzundza] is impecunious and would be unable to satisfy any costs order made against him in [Dr Neilsen’s] favour.

1. Such letter also raised for the first time the prospect of Dr Nielsen seeking an order that Mr Howes pay any costs order made against Mr Dzundza in favour of Dr Nielsen. Relevantly, the letter stated:

In all of the circumstances, we are instructed to put you on notice that [Dr Nielsen] will make an application to the Court pursuant to Section 189 of the Act for an order that your firm pay all of the costs your client will ultimately be ordered to pay up to [Dr Nielsen].

1. Howes Kaye Halpin responded by letter dated 8 August 2013, relevantly stating:

We note your concern that our client has not served any evidence to support the contention that [Dr Nielsen’s] negligence caused the motor vehicle accident.

In the course of these proceedings we have provided answers to particulars and our client has sworn interrogatories, both of which have detailed the claims against [Dr Nielsen]. In summary, that is that the defendant changed lanes suddenly and in the course of so doing collided with our client’s motorcycle.

…

In the event that your client proceeds with an application pursuant to section 189 of the Act we advise that it will be vigorously defended and if your application is unsuccessful that we will tender this letter on the issue of costs.

1. Following mediation, Mr Dzundza consented to judgment in favour of Dr Nielsen on 26 August 2013 with costs reserved.

CONSIDERATION

Claim for costs against Mr Dzundza

1. Dr Nielsen seeks two orders against Mr Dzundza as set out at [4] above, namely that:

1.Mr Dzundza pay Dr Nielsen’s costs of the proceeding on a party/party basis up to and including 24 August 2009; and

2.Mr Dzundza pay Dr Nielsen’s costs of the proceeding on an indemnity basis thereafter.

1. Given that judgment has been entered in Dr Nielsen’s favour, and in the absence of any submissions by Mr Dzundza to the contrary, Dr Nielsen should receive his costs of the proceeding at least on a party/party basis as is the usual course.

1. The only question then is whether Mr Dzundza should pay the costs of Dr Nielsen on an indemnity basis after 24 August 2009, such date being when DLA Phillips Fox made the first offer of settlement on behalf of Dr Nielsen referred to at [28] above. Such claim is founded on the argument that each of the three offers of settlement made by Dr Neilsen to Mr Dzundza were in accordance with the principles first outlined in Calderbank v Calderbank [1975] 3 All ER 333.

1. Calderbank offers have been the subject of extensive judicial consideration. A summary of the general principles was provided by Refshauge J in Becker v Queensland Investment Corporation(No 2) [2009] ACTSC 147 at [12]. For the purposes of the present proceeding, it suffices to note that:

1.       Each offer of settlement made by Dr Nielsen was, in accordance with a recognised procedure for making Calderbank offers, marked ‘without prejudice save as to costs’: Computer Machinery Co Ltd v Drescher [1983] 3 All ER 153 at 155-6.

2.       The terms of the settlement proposed by Dr Nielsen were ‘unambiguously clear’: Grbavac v Hart [1997] 1 VR 154 at 160.

3.       The first offer of settlement was made promptly by Dr Nieslen, and especially in light of the subsequent offers made by Dr Nielsen on the same terms, the time afforded to Mr Dzundza to consider the offer was more than reasonable: Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 (‘Hazeldene’s Chicken Farm’) at [25].

4.       Each offer of settlement made by Dr Nielsen foreshadowed that he would make an application for indemnity costs against Mr Dzundza should Mr Dzundza reject the offer and ultimately be unsuccessful in his claim: Hazeldene’s Chicken Farm at [25].

1. The mere making of a Calderbank offer will not necessarily entitle the offeror to indemnity costs: MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 240. In the circumstances outlined immediately above however, it is entirely appropriate that Mr Dzundza be ordered to pay Dr Nielsen’s costs of the proceeding on an indemnity basis from 25 August 2009 onwards.

Claim for costs to be paid by Mr Howes

1. Dr Nielsen seeks an order that Mr Howes pay all orders as to costs made against Mr Dzundza. Such order is sought under s 189(1)(a) of the Act, which relevantly provides:

Costs order against lawyer acting without reasonable prospects of success

(1)If the court in which a pleading has been signed in relation to a claim for damages considers that legal services were provided by a lawyer for a client on the claim, or in defence of the claim, without the claim or defence having reasonable prospects of success, the court may (on its own initiative or on the application of a party to the proceeding) make either or both of the following orders:

(a)an order directing the lawyer to repay to the client (or to pay) all or part of the costs that the client has been ordered to pay to another party;

(b)an order directing the lawyer to indemnify a party other than the client against all or part of the costs payable by that party.

1. Such order is sought because of Dr Nielsen’s belief that Mr Dzundza is impecunious: see [35] above. In order for Dr Nielsen to succeed on such claim, it must be demonstrated that Mr Howes provided legal services in relation to Mr Dzundza’s claim ‘without the claim… having reasonable prospects of success’: s 189(1) of the Act. The originating claim of Mr Dzundza contained the required certification of a solicitor on the record, signed by Mr Howes: s 188 of the Act. Such certification stated:

I, Bruce Howes certify that I believe, on the basis of provable facts and a reasonably arguable view of the law, that this claim has reasonable prospects of success.

1. There are no authorities concerning the interpretation of s 189(1) of the Act. Against this background, there are two considerations for the Court. The first is one of construction, namely whether s 189 of the Act applies to legal services provided by a lawyer after a certification under s 188 is given. The second consideration is whether Mr Dzundza’s claim had reasonable prospects of success.

Construction of s 189(1)

1. Dr Nielsen submitted that s 189 relates to legal services provided after the date of certification of the relevant pleading, in this instance being Mr Dzundza’s statement of claim. Such submission is predicated on the basis that the Act imposes upon lawyers a continuing obligation to ensure that a claim or defence has reasonable prospects of success from the date of certification until the determinative hearing of the matter.

1. Section 189 is contained within Part 14.2 of the Act. Section 187(2), which is also contained within Part 14.2, relevantly states:

This part does not apply to legal services provided by a lawyer in relation to a claim for damages at any time before the lawyers gives the certification required under section 188 for the claim.

1. It follows then that there are strictly two available interpretations of when s 189 applies to legal services. The first is that contended for by Dr Nielsen, namely that the obligation imposed on the lawyer applies at all times after the certification of the relevant pleading. The second is that s 189 only applies at the point in time at which a lawyer provides the requisite certification, and that there is no continuing obligation upon such lawyer to ensure that a claim or defence has reasonable prospects of success.

1. Section 190(1) of the Act is illuminative. It provides that:

Onus on lawyer to show facts provided reasonable prospects of success

(1)     For this part, it must be presumed that legal services were provided for a client by a lawyer on a claim for damages, or in defence of a claim for damages, without the claim or defence having reasonable prospects of success if—

(a)     the trial court hearing the action finds that the facts established by the evidence before the court do not form the basis for a belief on reasonable grounds that the claim or defence had reasonable prospects of success; or

(b)     the Supreme Court (if it is not the trial court) is satisfied, because of a finding, or the judgment, of the trial court, that the facts established by the evidence before the trial court do not form the basis for a belief on reasonable grounds that the claim or defence had reasonable prospects of success.

1. Relevantly, the court determining whether legal services were provided by a lawyer without a claim or defence having reasonable prospects of success must have regard to the facts established ‘by the evidence before the court’. There is no suggestion that the evidence the court is to consider must be restricted to that which was available to the lawyer at the time of providing the requisite certification. Rather, the only reasonable reading of s 190 establishes that the relevant court is to have regard to all of the evidence that is put before it at trial. In these circumstances it could scarcely be suggested that the obligation on a lawyer under s 189 should not also be assessed in light of the evidence that arises after certification and up to the trial.

1. This interpretation is supported by an obvious policy consideration. Lawyers should be encouraged to assess the strength of a claim or defence throughout the duration of a proceeding and provide advice to their client accordingly. A certification under s 188 does not, in the opinion of the Court, merely indicate that a claim or defence has reasonable prospects of success at the commencement of litigation. Rather, s 189 imposes upon a lawyer a continuing duty to monitor the evidence in his client’s case.

1. It follows that s 189 of the Act relates to legal services provided at the date of certification of the relevant pleading and at all times thereafter until the determinative hearing of the proceeding.

Reasonable prospects of success

1. As noted above, there are no authorities concerning the interpretation of s 189 of the Act to which the Court might refer in order to assess the circumstances which constitute reasonable prospects of success. However, the decision of the New South Wales Court of Appeal in Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300 (‘Lemoto’) considers the application of s 198J of the now repealed Legal Profession Act 1987 (NSW). Section 198J was similar, but not identical, to s 189 of the Act. Section 198J relevantly provided:

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.

…

(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.

…

1. At [92] in Lemoto, McColl JA considered the following general principles regarding the power to order legal practitioners to pay the costs of proceedings in which they have represented parties:

(a)The jurisdiction to order a legal practitioner to pay the costs of legal proceedings in respect of which he or she provided legal services must be exercised “with care and discretion and only in clear cases”;

(b) A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he or she acts for a party who pursues a claim or a defence which is plainly doomed to fail;

(c)the legal practitioner is not “the judge of the credibility of the witnesses or the validity of the argument… [and] the legal practitioner is not “the ultimate judge, and if he reasonably decides to believe his client, criticism cannot be directed to him”;

[References omitted]

…

1. At [131] in Lemoto, McColl JA referred to the decision of Barrett J in Degiorgio v Dunn (No 2) (2005) 62 NSWLR 284 where his Honour at [28] of his decision found ‘without reasonable prospects of success’ to equate in meaning to ‘so lacking in merit or substance as to be not fairly arguable’. His Honour also found that the ‘concept is one that falls appreciably short of ‘likely to succeed’’.

1. At [133] in Lemoto, McColl JA said:

Although it might be assumed that the question whether a s 198M order should be made will ordinarily arise where a litigant has been unsuccessful, it needs to be emphasised that the mere fact litigation is resolved adversely to a party does not mean costs should, in consequence, be ordered against the legal adviser, whether he or she be a solicitor or a barrister.

[References omitted]

1. Given the similarity between s 198J of the Legal Profession Act 1987 (NSW) and s 189(1) of the Act, as well as the applicability of the sound general principles referred to in Lemoto, the Court is satisfied that the decision of Lemoto should be relied upon in the present proceeding.

1. Turning to the present application, there are certain matters which are critical for consideration. First and foremost, the accounts of the accident provided by various witnesses were factually inconsistent or incomplete. For instance:

(a)     Ms Ruffy’s statements changed radically between the version of events she provided to the police and the version she relied on in her claim against Mr Dzundza;

(b)     Mr Green, despite being a witness to the accident, did not materially assist in identifying the cause of the accident;

(c)     Mr Blount’s recollections were in conflict with those provided by Mr Dzundza and Ms McMahon;

(d)     Dr Nielsen did not witness the cause of the accident; and

(e)     Mr Clark did not provide a statement.

1. Second, the conduct of Mr Howes must be considered against the available facts. Mr Howes investigated Mr Dzundza’s claim following the denial of liability by NRMA on 6 November 2008. Mr Howes wrote to Mr Dzundza on a number of occasions prior to commencing proceedings against Dr Nielsen on behalf of Mr Dzundza, namely on 2, 15, and 16 December 2008, and 4 March 2009. Mr Howes also spoke to Mr Dzundza on 23 March 2009 and 7 July 2009 to take further instructions. On 8 July 2009 Mr Dzundza instructed Mr Howes to issue proceedings against Dr Nielsen. Mr Howes did so on the basis of Mr Dzundza’s instructions which were, to a degree, supported by Ms McMahon’s statement.

1. Since Mr Dzundza has not waived the legal professional privilege with respect to these communications, Mr Howes is not at liberty to disclose the content of correspondence passed between himself and Mr Dzundza. This has severely constrained Mr Howe’s ability to oppose the costs claim made against him.

1. It is unnecessary to refer to the remainder of the correspondence between Mr Dzundza and Mr Howes save as to that which related to Dr Nielsen’s Calderbank offers. Mr Howes either sent written correspondence to, or had discussions with, Mr Dzundza on 22 September 2009, 23 November 2009, 19 April 2011 and 30 May 2011. On 31 May 2011 Mr Howes informed DLA Phillips Fox that he could not consider the then most recent Calderbank offer until he had received instructions from Mr Dzundza. Mr Howes again discussed the Calderbank offers of Dr Nielsen with Mr Dzundza on 6 September 2011 and on 20 March 2012.

1. It was not until approximately 31 July 2013 that Mr Howes received correspondence from DLA Phillips Fox which included the statement of Ms Ruffy used by her in her claim against Mr Dzundza. Mr Howes spoke with Mr Dzundza shortly thereafter, and wrote to him on 2 August 2013. Two mediations were subsequently held, but they did not resolve the dispute. Finally, on 26 August 2013 Mr Dzundza consented to judgment in favour of Dr Nielsen with costs reserved.

1. A question arises as to the standard of proof to be applied in considering the claim against Mr Howes. In White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169 the Court considered a claim brought against a firm of solicitors for an order that the solicitors pay the opposing party’s costs of the unsuccessful proceedings. A dispute existed between the parties as to whether the approach propounded in Briginshaw v Briginshaw (1938) 60 CLR 336 at 362 should be adopted. Goldberg J found at 199 that it was appropriate to apply Briginshaw because of the seriousness of the allegations.

1. It is unnecessary to consider the aspect of proof further in the present proceeding. The Court finds that even without adopting the Briginshaw approach the evidence does not support the proposition that Mr Howes provided legal services to Mr Dzundza without Mr Dzundza’s claim having reasonable prospects of success. This is based upon the inconsistent and incomplete nature of the accounts of the accident provided by various witnesses, and upon the conduct of Mr Howes, which can be described as diligent. As was observed by McColl J at [92] in Lemoto, a legal practitioner is not ‘the judge of the credibility of the witnesses’.

CONCLUSION

1. It follows that the claim against Mr Howes for costs and indemnity costs fails. The Court will reserve the question of costs of the application against Mr Howes at the request of the parties.

1. In respect of the costs of the proceeding claimed against the plaintiff the Court orders that the plaintiff pay the costs of the defendant on a party/party basis up to and including 24 August 2009 and that the plaintiff pay the costs of the defendant on an indemnity basis from 25 August 2009 to 26 August 2013 inclusive.

I certify that the preceding sixty seven (67) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Cowdroy.

Associate:

Date:              6 November 2013

Counsel for the Plaintiff:  The Plaintiff did not appear
Counsel for the Defendant:  Mr J Pappas
Solicitor for the Defendant:  DLA Piper Australia
Counsel for Mr Howes:  Mr D Higgs SC
Solicitor for Mr Howes:  Howes Kaye Halpin
Date of Hearing:  9 September 2013
Date of Judgment:   6 November 2013