PropertyShares Holdings Pty Ltd v Ujma (No 3)
[2019] VCC 440
•8 April 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BANKING AND FINANCE LIST
Case No. CI-16-05750
| PROPERTYSHARES HOLDINGS PTY LTD (ACN 605 400 815) |
| Plaintiff/Defendant by Counterclaim |
| V |
| MATTEUSZ UJMA & Ors |
| Defendant/Plaintiff by Counterclaim |
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JUDGE: | HER HONOUR JUDGE A RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 28 February 2019 | |
DATE OF RULING: | 8 April 2019 | |
CASE MAY BE CITED AS: | PropertyShares Holdings Pty Ltd v Ujma & Ors (No 3) | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 440 | |
REASONS FOR RULING
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Subject: PRACTICE AND PROCEDURE
Catchwords: COSTS – whether costs order should be made on an indemnity basis against the defendants’ former solicitors under s29 of the Civil Procedure Act 2010 (Vic) or rule 63A.23(1)(c)
Legislation Cited: Civil Procedure Act 2010 (Vic)
County Court Civil Procedure Rules 2008 (Vic)
Cases Cited:Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5) (2014) 48 VR 1
Gatto Corporate Solutions Pty Ltd v Mountney [2016] VSC 752
Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd & Ors (No 8) [2014] VSC 567Kenny & Anor v Gippsreal Ltd [2015] VSC 284
Kenny & Anor v Gippsreal (No 2) [2015] VSC 737
White Industries (QLD) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169
Yara Australia Pty Ltd & Ors v Oswal (2013) 41 VR 302
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff/Applicant | Mr A Purton | B2B Lawyers |
| For the Defendants | No appearance | |
| For Evans Ellis Lawyers/ Respondent | Mr A Ounapuu | DSS Law |
HER HONOUR:
1 This is an application for indemnity costs against a non-party. By an amended summons dated 12 February 2019, the plaintiff (“PropertyShares”) seeks an order that Evans Ellis Lawyers, the solicitors formerly acting for the defendants, pay PropertyShares’ costs on an indemnity basis. Costs of the proceeding are sought from 3 March 2017, being the date upon which the lawyers filed an appearance on behalf of first defendant (“Ujma”) and the third defendant (“Consilium”).
2 PropertyShares applies under s29(1) of the Civil Procedure Act 2010 (Vic) (“CPA”) and in the alternative, r63A.23(1)(c) of the County Court Civil Procedure Rules 2008 (Vic).[1] It relies upon three affidavits of Anthony Wilkinson sworn 6 and 25 September 2018 and 6 February 2019 together with some earlier affidavits filed in the proceeding, namely:
[1]The amended summons dated 12 February 2019 sought orders under r63A.23(1)(a). This was corrected orally at the hearing.
Affidavit of Anthony Wilkinson sworn 22 December 2016;
Affidavit of Benjamin Toll sworn 3 April 2017;
Affidavit of Mateusz Ujma sworn 12 April 2017;
Affidavit of Brenton Wilson affirmed 24 April 2017; and
Affidavit of Anthony Wilkinson sworn 24 April 2017.
3 Evans Ellis opposes the application. In turn, they rely upon an affidavit of Benjamin Skinner, a solicitor formerly employed by Evans Ellis, sworn 22 January 2019.
Background
4 PropertyShares is a lender that provides finance to property developers and other borrowers through a peer-to-peer investment platform. Ujma is a sole director of Consilium. Consilium derives its income from commissions for referring potential loan customers to financiers. PropertyShares claims Ujma and Consilium made false representations regarding loans sought to be advanced to companies associated with a Mr and Mrs Wilson. It was represented that the Wilson entities wished to borrow $350,000 to be secured by second mortgages over a series of properties. PropertyShares agreed to advance the moneys and lent the sum of $348,936 in two payments; namely, $286,000 on 21 March 2016 and the balance of $68,936 on 2 May 2016. The first sum was paid to a company associated with the Wilsons and the second amount was advanced to a Mr Toll.
5 Mr Wilson subsequently advised PropertyShares that he never signed any documents and that Ujma had in fact borrowed $150,000 from him. Mr Wilson said Ujma had repaid the $150,000 loan in around March 2016 with a payment of $245,000, of which $95,000 was refunded by Mr Wilson to Ujma. Mr Toll swore an affidavit deposing he had received the sum of $68,936 from Ujma but had refunded this amount to Ujma, less $3,000 which Ujma owed him.
6 It was also alleged by PropertyShares that Ujma provided various loan documents in order to induce PropertyShares to advance the loan moneys with knowledge that those documents had not been executed by the named borrowers and guarantors.
7 PropertyShares sought to recover the sums advanced from the defendants which has been paid in error as a result of the fraudulent representations. The second defendant (“Sochan”) is the former partner of Ujma. It was alleged she had received a benefit from the misappropriated funds in the sum of $150,000 being the sum paid to discharge a liability that she and her former husband, Ujma owed the Wilsons.
8 The procedural background is relevant when considering the application for indemnity costs against the lawyers.
9 The proceeding was commenced by writ dated 22 December 2016.
10 On 22 December 2016, PropertyShares filed a summons seeking a freezing order against the assets of the Ujma and Consilium. The summons was supported by an affidavit of Anthony Wilkinson dated 22 December 2016. His Honour Judge Cosgrave granted the freezing order with a return date of 5 January 2017.
11 At the return date, the freezing order was extended until further order. There were subsequent hearings of the freezing order application on 26 February 2017, 31 March 2017, and 2 May 2017.
12 As required by the freezing order, Ujma filed an affidavit deposing to the financial position of himself and Consilium, on 18 January 2017.
13 Evans Ellis filed a notice of appearance on behalf of Ujma and Consilium on 3 March 2017.
14 On 28 March 2017, PropertyShares filed a statement of claim.
15 On 3 April 2017, Mr Toll filed and served an affidavit setting out his position.
16 On 12 April 2017, Ujma filed and served an affidavit in connection with an application by him and Consilium to set aside or vary the freezing order.
17 PropertyShares filed the following affidavits in opposition to the Second Ujma affidavit:
(a) affidavit of Anthony Wilkinson sworn 24 April 2017;
(b) affidavit of Brenton Wilson sworn 24 April 2017; and
(c) affidavit of Narelle Wilson sworn 24 April 2017.
18 Evans Ellis filed and served a notice of appearance for the second defendant, Ms Sochan, on 26 April 2017.
19 On 27 April 2017, Ujma and Consilium filed a defence and counterclaim. A proper basis certificate was not filed as was required under s42 of the CPA.
20 On 2 May 2017, Judge Cosgrave ordered the freezing order remain in effect pending trial or further order.
21 PropertyShares filed a defence to the counterclaim on 18 May 2017.
22 On 3 July 2017, PropertyShares brought an application for summary judgment. In addition to the previous affidavits, PropertyShares relied on the further additional affidavits:
(a) affidavit of Anthony Gerald Sica sworn 30 June 2017; and
(b) affidavit of Anthony Wilkinson sworn 2 July 2017.
23 Ujma and Consilium did not file any evidence in opposition to this application.
24 On 24 August 2017, summary judgment was entered by consent against Ujma and Consilium for $348,936 plus interest of $62,349.06. A costs order was also made against those defendants who were ordered to pay PropertyShares’ costs of the proceeding, including any reserved costs on the standard basis, to be taxed in default of agreement.
25 The plaintiff’s summons for summary judgment against Sochan was adjourned to 28 September 2017, and subsequently adjourned by consent to 2 October 2017.
26 The plaintiff discontinued its summons against Sochan on 2 October 2017 by consent. Orders were made on that date listing the proceeding for trial on 18 April 2018. The trial was subsequently vacated pursuant to consent orders filed on 5 April 2018. It was noted in Other Matters that the trial had been vacated to enable related proceedings in the Family Court to be determined.
27 The matter was listed for administrative mention on 11 October 2018. On that date an order was made by consent striking out the proceeding against Sochan with a right of reinstatement.
28 PropertyShares’ counsel informed the Court on the hearing of the application that Sochan had breached terms of settlement, and accordingly, steps were being taken to reinstate the proceeding against her. No application to reinstate the proceeding has yet been filed.
Applicable law
29 PropertyShares relies upon s29(1)(a) of the CPA. This provides as follows:
“(1) If a court is satisfied that, on the balance of probabilities, a person has contravened any overarching obligation, the court may make any order it considers appropriate in the interests of justice including, but not limited to—
(a)an order that the person pay some or all of the legal costs or other costs or expenses of any person arising from the contravention of the overarching obligation;”
30 In Yara Australia Pty Ltd & Ors v Oswal,[2] the Court of Appeal on the discretion to award costs under s29 held, inter alia, that:
The Court’s powers under s 29 of the Act include the power to sanction legal practitioners and parties for a contravention of their obligations as the heading to Part 2.4 indicates.
…
Moreover, the power to sanction is not confined to cases of incompetence or improper conduct by a legal practitioner. Where there is a failure by the practitioner, whether solicitor or counsel, to use reasonable endeavours to comply with the overarching obligations, it will be no answer that the practitioner acted upon the explicit and informed instructions of the client. A sanction may be imposed where, contrary to s 13(3)(b), the legal practitioner acts on the instruction of his or her client in breach of the overarching obligations.
[2](2013) 41 VR 302 at [20].
31 By s32 of the CPA, an application for an order under s29 is to be made prior to the finalisation of the civil proceeding to which the application relates. ‘Finalisation’ means to ‘complete’, ‘conclude’ or ‘bring to an end’ the relevant civil proceeding. It is a concept to be applied looking at the position at the end of a case overall and in a practical way, rather than in any technical sense.[3]
[3]Kenny & Anor v Gippsreal Ltd [2015] VSC 284 at [49].
32 It is accepted that the jurisdiction to order costs against a lawyer should be exercised sparingly, with care and discretion and only in clear cases and not with the benefit of hindsight, especially where indemnity costs are sought.[4]
[4]G E Dal Pont, Law of Costs (3rd ed) at 23.7
33 Another matter to take into account is that the court may not be privy to the details and circumstances of the instructions provided to the lawyer. For example, where lawyers are alleged to have pursued a hopeless case, it may be impossible for the lawyer to defend that charge by showing that the client had been advised of the improbability of success and nonetheless insisted on proceeding – without violating the client’s privilege. In circumstances where the lawyers are unable to tell the whole story and where there is room for doubt, the respondent lawyer is entitled to the benefit of it. A court will be wary of making a costs order against a lawyer who cannot give an account of the instructions received.[5]
[5]Ibid at 23.9
34 Other factors that a court may take into account include that lawyers should not be restricted from acting vigorously on behalf of the client in good faith. Lawyers should not be deterred from pursuing their client’s interests for fear of being made personally subject to costs orders. This is to be balanced against the principle that innocent parties should not have to pay costs for which they would not otherwise be liable, which have been incurred as a result of the inappropriate conduct of the lawyer. Additionally, the courts will take into account the fact that lawyers carry out many of their tasks under considerable time pressures and the pressure and urgency pertaining to the matter will influence the court’s determination.[6]
[6]Ibid at 23.12 and 23.13
35 A wasted costs order will not be made against a lawyer unless it is shown that a party has suffered loss as a result of the lawyer’s serious dereliction of duty or gross negligence. The conduct must be the effective cause of the costs incurred. The mere fact that the case ultimately fails is not a basis for awarding costs, nor is it activated merely because the action is struck out for lacking a cause of action. It is only where the client’s cause of action or defence entirely lacks merit but the lawyer pursues the case for a reason unconnected with its merits that the jurisdiction is likely to be attracted. Merely pursuing a hopeless case is insufficient, and certainly is so where the client has misled the lawyers about the grounds that would otherwise not have justified the action.[7] A lawyer who simply pursues a claim or defence that is plainly doomed to fail will not be held to have acted improperly, unreasonably or negligently.[8]
[7]Ibid at 23.17 and 23.19
[8]Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5) [2014] VSC 400 per Dixon J at [57]
36 As Dal Pont notes in Law of Costs:
“The authorities do not support the proposition that simply instituting or maintaining a proceeding on behalf of a client that has no or substantially no prospect of success attracts the jurisdiction to order costs against the lawyer. A client, properly advised that the action is weak and likely to fail, may reject the advice and direct the lawyer to proceed, and for the lawyer to do so is not ethically inappropriate. As such, it is ‘rarely if ever safe for a court to assume that a hopeless case is being litigated on the advice of the lawyers involved.’ There is also the concern that a solicitor should usurp the function of the court by prejudging a client’s case. Weight must be given to the fact that lawyers are required to take any point they earnestly believe to be fairly arguable on behalf of their clients and the court must hear them on that point.”[9]
[9]Ibid at 23.29
37 It may be an abuse of process where the case involves a deliberate or conscious decision of the lawyer taken by reference to circumstances unrelated to the prospects of success, either with a recognition that there is no chance of success, but an intention to use the proceeding for an ulterior purpose or with disregard to any proper consideration of the prospects of success.[10] For example, it is not a defence for a lawyer to say he or she was acting on instructions in lodging a caveat in circumstances where it is obvious no caveatable interest exists.
[10]Dal Pont at 23.30
38 PropertyShares’ counsel referred to the overarching obligations not to make any frivolous, vexatious, abuse of process, or improper basis claims under s 18 of the CPA. He also referred to the obligation under s 42 on legal practitioners to file a proper basis certificate certifying each allegation, denial and non-admission, is available on the factual and legal material.
39 The interaction between s18 and s42 was considered by Dixon J in Dura,[11] where his Honour held, inter alia:
Ultimately, whether a claim has a proper basis is a question for the court. A person discharging the overarching obligation can do so by demonstrating a reasonable belief based on the factual and legal material available at the time. If that is done, the obligation is discharged.
[11]Dura at [87].
40 In the alternative, the plaintiff’s counsel applied under rule 63A.23(1)(c) of the County Court Civil Procedure Rules which provides that where a solicitor for a party has caused costs to be incurred improperly or without reasonable cause or to be wasted by a failure to act with reasonable competence and expedition, the court may make an order that the solicitor pay all or any of the costs payable by any party other than the client.
41 Rule 63.23(1) enables the court to make an order for costs against a lawyer who has caused costs to be incurred improperly by a failure to act with reasonable competence and expedition. The purpose of the rule is not punitive or disciplinary but compensatory enabling reimbursement of a party’s costs incurred because of the default of the solicitor. The primary object is not to punish the solicitor but to protect the client who has suffered and to indemnify the party who has been injured.[12]
[12]Yara Australia Pty Ltd v Oswal [2013] VSCA 337 at [18].
Propertyshares’ contentions
42 Counsel for PropertyShares argues Evans Ellis should pay its costs on an indemnity basis because:
(a) Evans Ellis accepted instructions and filed an appearance to act for Sochan, knowing that any substantive steps taken in the proceeding would crystallise a conflict of interest between Ms Sochan and their other clients;
(b) Evans Ellis filed a defence and counterclaim on behalf of Ujma and Consilium without ever filing a proper basis certificate as required by s42 of the CPA;
(c) In addition, the defence and counterclaim filed on behalf of Ujma and Consilium did not have a proper basis on the factual and legal material available at the time.
Evans Ellis’ contentions
43 Counsel for Evans Ellis submits the claim should be dismissed for the following reasons:
(a) Pursuant to s30(2) of the CPA, the proceeding was finalised on 24 August 2017 when judgment was entered against Ujma and Consilium, and PropertyShares cannot now rely upon s29;
(b) Costs are within the discretion of the Court, and should be ordered only against unsuccessful party’s solicitors when they have unreasonably initiated or continued an action with no prospects of success among others reasons. Ellis Evans has discharged the onus under s18 of the CPA of showing that it had a reasonable belief when filing the defence;[13]
[13]White Industries (QLD) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169 per Goldberg J.
(c) Where a costs order is sought against a lawyer under formerly r 63.23, the claimant must show a causal connection between the lawyer’s conduct and the particular financial loss sought to be recovered – this had not been demonstrated;[14] and
(d) Where the application is in part based on a breach of the CPA, and the application is out of time, PropertyShares should not be permitted to bring the very same case under the Rules.[15]
[14]Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd & Ors (No 8) [2014] VSC 567 at [161].
[15]Kenny & Anor v Gippsreal (No 2) [2015] VSC 737 at [50].
Consideration
44 It is necessary to determine the preliminary point first, namely, whether the application under s29 can be entertained because the proceeding has been finalised. Counsel for PropertyShares informed the court that the proceeding had not been finalised because relief was still being sought against Sochan. He advised that an application would be made to reinstate the proceeding as against her due to a failure to comply with the terms. As for the fact that the matter had been resolved by consent against the remaining defendants, he submitted this did not mean the proceeding itself had been finalised. He argued there was only one proceeding and that it still was on foot given the ongoing claim against Sochan.
45 Counsel for Evans Ellis submitted the proceeding had been finalised when summary judgment was entered against the first and third defendants. Given this, it was not open for an application to be made now under s29 as it was out of time under s30(2) of the CPA.
46 On balance, I accept the argument put forward on behalf of PropertyShares, namely, that whilst there is still an extant claim on foot against one of the parties, the proceeding itself has not been finalised. The proceeding against Sochan had not been finalised in circumstances were Counsel for PropertyShares informs the Court that the proceeding will be reinstated against her. Although this was not the subject of evidence, I accept Counsel’s assurance given to that effect. Accordingly, I find PropertyShares is not precluded from making its application under s29 of the CPA.
47 The first ground relied upon by PropertyShares to justify an order for costs is the allegations regarding the circumstances relating to Sochan and the filing of an appearance. It is alleged that the lawyers filed an appearance to act for her knowing that any substantive step taken in the proceeding would crystallise a conflict of interest between her and the other defendants.
48 Mr Skinner deposes to the circumstances in which his former firm filed an appearance on behalf of Ms Sochan. It was stated by Mr Wilkinson in his affidavit of 25 September 2018 that Sochan did not provide any instructions to the lawyers and he referred to an affidavit which had been sworn by her on 28 September 2017. In this affidavit she deposed that she had not provided instructions to Evans Ellis. By contrast, the affidavit from Mr Skinner exhibits an email upon which he relies confirming he was provided with instructions by Sochan to file an appearance. He further deposes that no further steps were taken in respect of her defence to the claim given the ongoing negotiations regarding a commercial settlement with the plaintiff and the other defendants. Mr Skinner deposes that Mr Ujma, who is the former partner of Ms Sochan, had told him that he was trying to get her out of the proceeding. Mr Skinner deposed that he spoke to Sochan and explained the potential for conflict and that he received instructions on 25 April 2017. At that stage it appeared to be the situation she would sit on the sideline while Ujma and Consilium advanced their settlement discussions with PropertyShares. She confirmed this and said words to the effect she did not want to know anything about it and just wanted out. He says that from that date it was made known to PropertyShares that the proceeding did not materially concern the second defendant and should otherwise be dealt with primarily in settlement negotiations with the other defendants. He also deposes that Mr Wilkinson had acquiesced to this and that Mr Wilkinson did not otherwise address the position of Sochan until it became clear the matter would not settle and after default judgment was made against the other defendants by consent.
49 Mr Wilkinson deposes that Sochan was present at court when the summary judgment application was heard on 24 August 2017. He says he was told by a representative on behalf of the defendants, Ms Weiner that the lawyers could not continue to act because of a conflict. Given this, he did not press on with an application for summary judgment on that day against Sochan.
50 The gist of the claim for costs in respect of this aspect is that PropertyShares incurred costs which it would otherwise not have done so. But this argument does not appear to be borne out by the facts, namely, that Evans Ellis filed an appearance only and that subsequently another firm was engaged by Sochan to act on her behalf and defend the proceeding. In this case, even assuming there was some negligent or somehow improper conduct on behalf of Evans Ellis by filing an appearance for Sochan, which is far from clear on the facts provided, that such conduct caused any costs to be wasted. Mr Wilkinson deposes in paragraph 34 of his affidavit of 25 September 2018 that costs were wasted because the proceeding “essentially started afresh when she retained new lawyers”. The costs of defending the claim, including preparing a defence would have been incurred in any event assuming no settlement was reached with the second defendant. I am not satisfied the applicant has proved any costs were wasted merely by reason of Evans Ellis filing an appearance on behalf of Sochan. It cannot be gainsaid that she would have consented to summary judgment on 24 August 2017 had another firm being acting for her at that time. Accordingly, this ground is not made out.
51 The next ground relied upon was the fact that Evans Ellis did not file a proper basis certificate as required by s42 of the CPA. Many letters were sent by Mr Wilkinson pointing out that the certificate had not been filed. There is no dispute that a certificate was not filed.
52 The omission to file a proper basis certificate has not been explained by Mr Skinner in his affidavit.
53 The issue then is what the effect of this breach is and whether it gives rise to a claim for wasted costs in consequence. Counsel for PropertyShares submits the court can draw an inference that Evans Ellis did not file a certificate as they knew the defence and counterclaim did not have a proper basis. Other than conjecture, there is no evidentiary basis open to the court for drawing such an inference. Such an inference would give rise to an allegation of what is tantamount to serious misconduct on the part of the lawyers and needs to be established on the Briginshaw standard.[16] There could be other explanations such as an oversight or simply negligence on the lawyers’ part as to why the certificate was not lodged. Whilst it is unsatisfactory that this omission has not been explained by Mr Skinner, nevertheless, the mere fact of a failure to provide a certificate does not in my view support the inference sought to be drawn by PropertyShares. Furthermore, even if that inference could be drawn, I fail to see how the costs thereafter are deemed to have been wasted as a consequence of the failure to file a certificate. Judgment was entered against the defendants on 24 August 2017, only a few months after the defence and counterclaim was filed. In order to make this claim good, it would have to have been shown that somehow the defendants would have capitulated at or about the time the defence was filed in April 2017. Settlement discussions were taking place prior to the defendants agreeing to the entry of summary judgment. It is speculative as to whether the defendants might have compromised any earlier.
[16] Per Daly AsJ in Gatto Corporate Solutions Pty Ltd v Mountney [2016] VSC 752 at [15]
54 I am not satisfied the failure to file a proper basis certificate under s42 caused any costs to be wasted as alleged by PropertyShares, being all the costs of the proceeding claimed from 24 April 2017.
55 The third matter relied upon by PropertyShares is that the defence and counterclaim did not have a proper basis on the factual and legal material available at that time. It is put that Evans Ellis must have known that the matters pleaded in the defence and counterclaim, in particular, in paragraph 6, was contrary to the affidavit material filed on behalf of PropertyShares. There is certainly a conflict in the evidence as to the circumstances in which the moneys were advanced. On PropertyShares’ case, it would appear fairly clear that the funds were not advanced to the Wilson entities at their request. It also appears from the affidavit material filed that the Wilsons did not sign the loan documents and furthermore an affidavit from a solicitor, Mr Sica, confirmed that he had not witnessed the documents alleged to have been signed. PropertyShares also relied upon bank statements which revealed a money trail which supported its case.
56 In contrast to this, the defence states that Mr Wilson did approach Ujma for a loan as Wilson wanted to borrow money to pay off various debts owed to the State Revenue Office. In paragraph 6 of the defence it is further alleged that Wilson asked for a loan of between $250,000 to $350,000 out of which he could also discharge the amount Ujma owed Wilson to pay down some of the SRO debt and also invest in a development in Prahran. Self-evidently, there is a complete dichotomy between that statement and the evidence that was filed on behalf of PropertyShares.
57 In paragraphs 4 and 12 of Mr Skinner’s affidavit he deposes that instructions were given by Ujma to the effect set out in the defence and counterclaim and that to this day, Ujma refutes the allegations made by the PropertyShares.
58 For the reasons identified above in respect of the applicable principles of law, it is difficult for the court to find a basis for not accepting those instructions were given in circumstances where legal privilege applies. Counsel for PropertyShares did not dispute the fact that instructions were provided. It may well be that the instructions given to Mr Skinner were false but that was a matter for the court to determine ultimately at trial. As counsel for Evans Ellis pointed out, it was not up to Mr Skinner to usurp the function of the court. No doubt, the conflicting evidentiary matters would have been challenged at trial and been the subject of extensive cross examination had the matter proceeded. But other than asserting the merits of the defence lacked foundation, there are no other matters alleged, such as the lawyers were acting for an improper collateral purpose or engaged in serious misconduct. The defence may well have been hopeless but that in itself is not a reason for making a wasted costs order against a lawyer. It must be shown that by filing the defence, the lawyers’ conduct amounted to an abuse of process or serious misconduct on their part. On the materials filed, I am not satisfied on the Briginshaw standard that it has been shown that by filing a defence in accordance with instructions of their client, Evans Ellis engaged in conduct which warrants a wasted costs order against them.
59 The mere fact that there was a subsequent settlement does not in my view amount to an admission capable of being held against Evans Ellis that they knew or should have known that their client’s defence was hopeless and it was improper to act in accordance with the instructions provided. As can be accepted, parties often settle for various reasons, including commercial reasons as referred to by Mr Skinner in his affidavit at paragraph 11.
60 It should also be remembered that the defence was filed on 27 April 2017, and on or about the same date as some of the affidavits which were filed upon which PropertyShares seeks to rely. Three of the affidavits relied upon by PropertyShares were dated 24 April 2017. As has been observed above, the court should take into account time constraints and pressures which may apply. In this case, three of the affidavits were served almost contemporaneously as the defence and counterclaim and would have required the lawyers to not only consider their contents but to have sought instructions and to have advised their client not to file a defence in the form proposed and/or to inform the client that their instructions could not be followed. Again, the difficulty is that the court is not privy to the confidential communications between the lawyers and their clients. It may well be the case that Evans Ellis informed the clients the defence was hopeless but were given instructions to proceed nevertheless. These are matters which are subject to legal professional privilege.
61 The other matter to consider is the question of causation. It is unclear what are the costs said to have been wasted as result of the defence being filed. It is put generally that had the defence not been filed, then the parties would have capitulated at an earlier time and that somehow the costs of the summary judgment application may have been avoided. Again, the requirement is that the costs claimed must be said to have been caused by the conduct of the lawyer. I am not persuaded that by filing the defence and counterclaim on 27 April 2017, this caused costs to be incurred unnecessarily that should be paid by the lawyers.
62 Additionally, even if I am wrong in the exercise of my discretion not to make an order for wasted costs, there is no evidence before the court about the quantum of such costs. PropertyShares did not refer in its submissions to the costs order already made in its favour against the first and third defendants on 24 August 2017. Those defendants were ordered to pay the costs of the proceeding on a standard basis. The order sought in this application is for indemnity costs of the proceeding from 3 April 2017. Self-evidently, PropertyShares cannot recover twice for its costs and there is no evidence as to whether it has in fact sought and/or obtained payment of its costs from the first and third defendants on the standard basis as ordered. Assuming recovery had occurred, then the plaintiff would only be entitled to the difference between the standard amount and any amount to be awarded on an indemnity basis. In the absence of any evidence about the fate of the recovery of the costs already ordered, the court is not in a position to make an award of indemnity costs of the proceeding as is sought.
Conclusion
63 As noted above, costs orders against lawyers for wasted costs should only be made in clear cases and with caution. Having regard to the relevant principles, I am not persuaded a wasted costs order should be made against Evans Ellis in the circumstances of this case either under s29 of the CPA or r63A.23(1)(c). Accordingly, I will dismiss the amended summons filed 12 February 2109.
64 Subject to hearing from the parties, I propose ordering that PropertyShares pays Evans Ellis’s lawyers’ costs of the application on a standard basis, to be taxed in default of agreement.
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Certificate
I certify that these 17 pages are a true copy of the Reasons for Ruling of Her Honour Judge A Ryan delivered on 8 April 2019.
Dated: 8 April 2019
Associate to Her Honour Judge A Ryan
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