Wade & McPherson
[2014] FCCA 1321
•25 June 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| WADE & MCPHERSON | [2014] FCCA 1321 |
| Catchwords: PRACTICE AND PROCEDURE – Family Law Rules 2004 rr.1.14, 1.21 and 19.08 do not apply in the Federal Circuit Court – whether Application for costs out of time –whether extension of time should be granted – Court may extend time fixed even after the time has passed – application filed only 3 days late – no practical injustice. |
| Legislation: Family Law Act 1975 (Cth), ss.69ZK, 94A, 117 Children and Young Persons (Care and Protection) Act 1998 (NSW), s.79 |
| Cases cited: Re J (1990) 14 Fam LR 584 In the Marriage of Kohan (1992) 16 Fam LR 245; (1993) FLC 92-340 Levick v Deputy Commissioner of Taxation [2000] FCA 674; (2000) 102 FCR 155 In the Marriage of Mullane (1980) 5 Fam LR 801; FLC 90-826 Wade & McPherson [2013] FCCA 1583 |
| Applicant: | MS WADE |
| Respondent: | MR MCPHERSON |
| File Number: | SYC 1930 of 2013 |
| Judgment of: | Judge Scarlett |
| Hearing date: | Heard in chambers |
| Date of Last Submission: | 28 May 2014 |
| Delivered at: | Sydney |
| Delivered on: | 25 June 2014 |
REPRESENTATION
| Solicitor for the Applicant: | Mr Potkonyak |
| Solicitors for the Applicant: | Capellia Legal |
| Solicitor for the Respondent: | Ms Little |
| Solicitors for the Respondent: | Little & Associates |
ORDERS
The time for the Respondent to file an Application for costs is extended to 11 November 2013.
The Applicant’s solicitor, GEORGE POTKONYAK, is to pay the Respondent’s costs of the proceeding an indemnity basis, fixed in the sum of $4604.00.
I allow three (3) months to pay.
Any application for an order for costs of the Application in a Case filed on 11 November 2013 is to be filed and served within twenty-eight (28) days.
The Applicant’s solicitor GEORGE POTKONYAK is to make a written submission to the Court within twenty-eight (28) days to show cause why a complaint should not be made to the Office of the Legal Services Commissioner in respect of unsatisfactory professional conduct in his conduct of the proceedings.
IT IS NOTED that publication of this judgment under the pseudonym Wade & McPherson is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYC 1930 of 2013
| MS WADE |
Applicant
And
| MR MCPHERSON |
Respondent
REASONS FOR JUDGMENT
Application
This is an Application for costs by the Respondent to an Application brought by the Applicant which was summarily dismissed on 11 October 2013 (Wade & McPherson[1]). The Respondent filed an Application in a Case on 11th November 2013, seeking Orders for costs, either against the Applicant’s solicitor personally or against the Applicant, on an indemnity basis.
[1] [2013] FCCA 1583
The Application is opposed.
Orders Sought
The Respondent, by his Application in a Case, seeks orders against the Applicant’s solicitor, Mr George Potkonyak, or, in the alternative, the Applicant, in the following terms:
a)The costs of the Respondent for his client contribution under his grant of Legal Aid on an indemnity basis as agreed or in default of agreement as assessed under the Family Law Rules;[2]
b)The costs of the Legal Aid Commission of NSW for professional costs and disbursements paid to the solicitor for the father under the grant of Legal Aid on an indemnity basis as agreed or in default of agreement as assessed under the Family Law Rules;
c)The costs of Little & Associates Solicitors for their out of pocket expenses not covered under the grant of Legal Aid on an indemnity basis as agreed or in default of agreement as assessed under the Family Law Rules.
[2] sic
The Applicant’s solicitor filed a submission on 17th January 2014 seeking an order that the Application for costs should be dismissed.
The Respondent’s solicitor has advised the Court in a letter dated 28th May 2014 that the amounts sought by the Respondent are:
a)Client contribution to Legal Aid $450.00;
b)Legal Aid Commission – actual costs paid to Respondent’s solicitors $4,154.00; and
c)Out of pocket travel expenses not covered by Legal Aid $583.80.
Background
The substantive Application was for parenting Orders in respect of the parties’ daughter. The child was removed from the mother’s care by the New South Wales Department of Family and Community Services in March 2009. On 17th September 2010 orders were made by the Children’s Court of New South Wales placing the child in the shared parental responsibility of the Father and the Minister for a period of twelve months. From and after that date the child was placed in the sole parental responsibility of the Father.
The Order made by the Children’s Court allocating sole parental responsibility for the child to the Father remained in force.
The Respondent sought summary dismissal of the Application on the basis that this Court does not have jurisdiction to make parenting orders in respect of the child because of the operation of s.69ZK of the Family Law Act 1975 (Cth).
The Applicant had also brought an Application in a Case stating that there was a need for a case to be stated to the Full Court of the Family Court. The Application was supported by an affidavit of the Applicant’s solicitor in which he deposed:
5. Since the current interpretation of s 69ZK of the Family Law Act 1975 appears to be that if there are any orders affecting a child under the provisions of a State welfare Act, any other court is precluded from making orders under the provisions of the Family Law Act affecting that child unless those orders are to take effect upon the expiry of the first orders or if a written consent is given by an authorised officer of a State welfare department. In my opinion such an interpretation is erroneous:[3]
[3] [2013] FCCA 1583 at [14]
The Decision of the Court
In making my decision, I was not satisfied that a case should be stated to the Full Court of the Family Court under the provisions of s.94A of the Family Law Act. The Respondent did not consent and under s.94A(3) both the Judge and one of the parties must wish to have the question of law decided by the Full Court of the Family Court. I held at [22]-[23]:
22.I am not satisfied that it is appropriate for a case to be stated. The facts of the matter are neither lengthy nor complex, in my view. The questions of law to be decided are in essence what the case is about, because if the Applicant is unsuccessful the Application will be dismissed for want of jurisdiction.
23.In my view, the procedure advocated by the Applicant will involve the parties in extra expense and, contrary to the submissions of the Applicant, will increase the delay rather than save time. The warnings by Evatt CJ in Mullane[4] and Daff[5] are very apt, with respect.[6]
[4] In the Marriage of Mullane (1980) 5 Fam LR 801; FLC 90-826
[5] In the Marriage of Daff (1982) 9 Fam LR 546; FLC 91-516
[6] [2013] FCCA 1583 at [22]-[23]
In respect of the Application for a declaration that section 69ZK of the Act did not apply to the particular Orders of the Children’s Court, I was not satisfied that such a declaration should be made. I considered various authorities including the decision of the Supreme Court of New South Wales in Re Felicity[7], where White J considered the earlier decisions of Re J[8] and Fay & Turner[9] but held:
I do not consider that either case suggests a different construction of s 69ZK from that which I have adopted.[10]
[7] [2012] NSWSC 494
[8] (1990) 14 Fam LR 584
[9] [2008] FMCAfam 1508
[10] [2012] NSWSC 494 at [67]
In the substantive decision, I found that the decision in Re Felicity was entirely on point and highly persuasive and proceeded to follow the decision. Accordingly, I found that the substantive Application was incompetent and dismissed both Applications.
Submissions
The Respondent, in an affidavit of 8th November 2013, deposed that he had received a grant of legal aid for the substantive proceedings and advised that he sought that the Applicant or the Applicant’s solicitor should pay:
a)his costs;
b)the costs incurred by the Legal Aid Commission; and
c)his solicitor’s additional costs not covered under his grant of legal aid.
The Respondent annexed to his affidavit copies of letters dated 19th June, 8th July and 6th November 2013 from Legal Aid New South Wales, setting out the terms of his original grant of legal aid and his extensions of legal aid. He also gave a brief outline of his financial circumstances, stating that he worked part-time two days per week as a (omitted) and also receives a partial single parent pension.
The Solicitor for the Applicant has filed a submission seeking that the application for costs should be dismissed for the following reasons:
a)The application for costs is out of time (by three days, 11th November 2013 instead of 8th November);
b)None of the factors in s.117(2A) of the Family Law Act 1975 (Cth) militates against the Applicant except that she was wholly unsuccessful – she acted in good faith and on the advice of her solicitor;
c)The action was brought because of the “unreasonable refusal” of the Respondent to facilitate unsupervised time with the parties’ child;
d)The Court should be guided by s.99 of the Civil Procedure Act 2005 (NSW) when deciding whether costs should be awarded against a legal practitioner;
e)If the orders of the Children’s Court do not involve the Minister, Director-General of the Department of Family and Community Services or any other “person” then the matter is no longer a care and protection matter under s.79(1)(a)(i) of the Children and Young Persons (Care and Protection) Act 1998 (Cth) and, consequently, the Children’s Court has no jurisdiction;
f)The decision of the Supreme Court in Re Felicity, which I followed, was wrongly decided;
g)I erred in dismissing the application to refer the matter to the Full Court of the Family Court; and
h)“The State courts and the counsel funded by the NSW government are responsible for the erroneous interpretation of the law regarding the matters considered in this case and in Re Felicity. It is just and equitable that the NSW government, through the office of the Legal Aid bears the father’s cost in these proceedings.”[11]
[11] Submission page 3 paragraph [10]
Costs
Costs in matters under the Family Law Act are covered by the provisions of s.117 of the Act. Whilst s.117(1) provides that subject to subsection (2) and other sections, each party to proceedings under the Act shall bear his or her own costs, s.117(2) provides:
If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order of otherwise, as the court considers just.
Subsections (4), (4A) and (5) do not apply in this case, but subsection (2A) clearly applies. Subsection 2A sets out a number of matters to which the Court shall have regard in considering what order (if any) should be made under subsection (2).
It is well-established that the usual rule is that costs, when awarded, are made on a party and party basis. There are various authorities to that effect, including In the Marriage of Kohan[12]; Colgate-Palmolive Co v Cussons Pty Ltd[13], and, more recently, Prantage & Prantage[14].
[12] (1992) 16 Fam LR 245; (1993) FLC 92-340
[13] [1993] FCA 536; (1993) 46 FCR 225; 118 ALR 248
[14] [2013] FamCAFC 105; (20130 49 Fam LR 197
In Colgate-Palmolive v Cussons, Sheppard J held that there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. His Honour noted some of the circumstances which have been thought to warrant the exercise of the discretion, including:
a)the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
b)evidence of particular misconduct that causes loss of time to the Court and to other parties;
c)the fact that the proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law;
d)the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions;
e)an imprudent refusal of an offer to compromise; and
f)an award of costs on an indemnity basis against a contemnor.[15]
[15] [1993] FCA 536 at [24]
The Rules make provision for on order for costs to be made against a lawyer. Rule 21.07 provides at (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.
Sub-rule (5) provides:
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.
The Hearing of the Substantive Application
The hearing of the Respondent’s Application for summary dismissal took place on the afternoon of 23rd September 2013. The parties relied on written submissions and the solicitors for the parties spoke to those submissions on the day.
The Applicant’s submission was filed on 9th September 2013. In that submission the Applicant’s solicitor, Mr Potkonyak, referred to the decisions of Slack FM in Fay & Turner[16] and Rowlands J of the Family Court in Re J[17], submitting that both of those decisions supported his contentions.
[16] [2008] FMCAfam 1508
[17] (1994) 14 Fam LR 584
Mr Potkonyak also referred to the decision of White J in the Supreme Court of New South Wales in Re Felicity[18], conceding that it was a case ‘identical to the instant one”. However, the decision in Re Felicity did not support Mr Potkonyak’s contentions and he submitted that it should not be followed as it was wrongly decided, saying at paragraph [46] of his submission:
His Honour accepted the argument by the counsel for the Director-General that the constitutional provision under s 109 has been ousted by the provisions of s 69ZK. That is an absurd argument saying that the Commonwealth Parliament could enact legislation that is repugnant to the provisions of the Constitution – according to his Honour (at [50]).
[18] [2012] NSWSC 494
Notwithstanding this scathing criticism, I found the decision in Re K to be “clearly on point and is highly persuasive. The decision should be followed.”[19]
[19] [2013] FCCA 1583
The solicitor for the Respondent, Ms Little, filed a written submission on 13th September 2013. Attached to her submission were copies of the judgment in Re Felicity and two subsequent decisions, Re Felicity (No.2)[20] and Re Felicity[21].
[20] [2012] NSWSC 1561
[21] [2013] NSWCA 21
Mr Potkonyak did not see fit to mention either of those two latter decisions during the proceedings, although, in fairness, Ms Little had placed them squarely before the Court for consideration.
I note that Mr Potkonyak argued all three of those cases for the Plaintiff and then Applicant in the Supreme Court and the Court of Appeal. In my view a description of the entire sequence of those Re Felicity decisions will illustrate an important point to be made in this costs decision.
Whether the Application for Costs is out of time
In his submission in reply to the Application for costs, Mr Potkonyak complains that the application is out of time:
1. Although the Act (s 117) and the Rules (r 19.08) provide that the Court may make orders for costs against unsuccessful party in the proceedings, the Rules require that the application for costs be made within 28 days from the date of the final orders (r 19.08(2)(b)).
2. The final orders were made on 11 October 2013 and the Application in a Case was filed on 11 November 2013, instead of by 8 November 2013 (r 1.21(3)).
3. It is a very simple application; there cannot be a reasonable excuse for the failure to file the application within the time specified by the Rules. There was no application for the extension of time pursuant to r 1.14(1), nor an explanation given for the delay…
It appears that Mr Potkonyak is referring to rules 1.14, 1.21 and 19.08 of the Family Law Rules 2004 in his submission, although they do not apply in this Court. The Federal Circuit Court Rules 2001 have applied since 30 July 2001.
Rule 21.02 provides for applications for costs to be made:
(1) An application for an order for costs may be made:
(a) at any stage in a proceeding; or
(b) within 28 days after a final decree or order is made; or
(c) within any further time allowed by the Court.
Rule 3.05 permits the Court to extend or shorten a time fixed by the Rules and, in particular, sub-rule (3) provides:
The time fixed may be extended even if the time fixed has passed.
Notwithstanding the complaint by Mr Potkonyak, the Application for costs was filed only three days after the 28 day period prescribed by the Rules and there is no practical injustice in extending the necessary time for consideration of the Application. A delay of only three days is trivial, in my view.
The time for filing the Application for costs is extended to 11 November 2013.
Re Felicity
The original decision of Re Felicity was heard by White J on 1 May 2012 and delivered that same day. Mr Potkonyak argued the case for the Plaintiff. His Honour found that none of the arguments advanced for the Plaintiff had substance and dismissed the summons.
The Court ordered that the Plaintiff pay the first and second defendant’s costs. However, his Honour went on to direct:
76.I direct that within 21 days the plaintiff’s solicitor provide to my associate a written submission (if he wishes to make a submission) in relation to the question as to whether I ought to make an order under s 99 of the Civil Procedure Act 2005 directing payment of costs by the solicitor.
77.I direct that the plaintiff’s solicitor notify the plaintiff that I am considering whether such an order should be made and I direct that a copy of the submissions to be provided to my associate, if any, be provided also to the plaintiff. If Mr Potkonyak wishes to be heard orally in relation to that matter, then the matter can be relisted for further argument by arrangement with my associate.[22]
[22] [2012] NSWSC 494 at [76]-[77]
On 22nd May 2012 White J heard submissions on the question of an order for costs against the plaintiff’s solicitor. His Honour handed down his decision on 14th December 2012 (Re Felicity (No.2)[23]. His Honour decided to make no further order, that is, he decided not to make an order under s.99 of the Civil Procedure Act directing payment of costs by Mr Potkonyak.
[23] [2012] NSWSC 1561
However, the decision not to make an order can hardly be seen as a ringing endorsement by the Court of Mr Potkonyak’s conduct of the matter. His Honour held:
2. In this case there is no question of the plaintiff’s solicitor having misconducted the proceedings. It is not a case in which the solicitor has increased costs by failing to comply with court orders or presented evidence he knew to be false. Rather, the question is whether the legal arguments advanced by Mr Potkonyak for the plaintiff, which were clearly arguments for which he, and not his client, was responsible, were so untenable that I should conclude that the costs were incurred “without reasonable cause, in circumstances for which [he] is responsible” (s 99(1)(b)).
3. In Lemoto v Able Technical Pty Ltd [2005] NSWCA 153; (2005) 63 NSWLR 300, McColl JA, with whom Hodgson and Ipp JJA agreed, discussed the exercise of the jurisdiction to make a wasted costs order(in that case, under s 198M of the Legal Profession Act 1987 (NSW) and confirmed that it is not enough that a legal practitioner commence or maintain proceedings with no or no substantial prospects of success (at [111]). The proceedings must be “plainly unarguable”, not barely arguable, or “untenable and obviously so” (Steindl Nominees Pty Ltd v Laghaifar [2003] QCA 157; [2003] 2 Qd R 683 at 689; Lemoto v Able Technical at [113]). In Levick v Deputy Commissioner of Taxation [2000] FCA 674; (2000) 102 FCR 155, the Full Court of the Federal Court said in a case such as the present which involves no unresolved question of fact and where the unsuccessful argument clearly originated clearly with the lawyer, as distinct from the lawyer taking on a difficult argument that the client was determined to pursue, it is necessary for the lawyer to be satisfied that there is a rational basis upon which the argument might succeed.[24]
[24] [2012] NSWSC 1561 at [2]-[3]
His Honour went on to hold at [6]:
Nonetheless, I have concluded that the arguments advanced by Mr Potkonyak were not so obviously untenable that I should find that the costs incurred as a result of his advancing the arguments were incurred improperly or without reasonable cause, or were incurred as a result of serious incompetence.[25]
[25] Ibid at [6]
The next event to occur was that on 17 September 2012 the Plaintiff sought leave to appeal against the decision in Re Felicity. The summons was heard on 8 February 2013 and decided that same day. The Applicant, as then was, required a substantial extension of time as the decision in Re Felicity was handed down on 1 May 2012 and the summons was not filed until 17 September that year. The summons seeking leave to appeal was dismissed with costs (Re Felicity[26]).
[26] [2013] NSWCA 21
The reasons for the decision were given by Macfarlan JA, with whom Beazley JA agreed. His Honour held at [3]:
It is unnecessary to consider discretionary considerations which may weigh against the applicant as I am of the view that the appeal sought to be brought has no realistic prospect of success. The reasons why the applicant failed at first instance are clearly described by White J’s thorough judgment. On her application to this Court, the applicant has not been able to advance any arguable basis for a conclusion that White J erred in any respect. The essence of the applicant’s argument is that s 69ZK of the Family Law Act 1975 (Cth) is inapplicable because, although the Children & Young Persons (Care and Protection) Act 1998 )NSW) is a “child welfare law” within the meaning of the section, that Act is invalid because it is inconsistent with the Family Law Act – see s 109 of the Constitution. However, as White J held, there is no such inconsistency because s 69ZK resolves any potential inconsistency.[27]
[27] Ibid at [3]
Conclusions
What the Court has to decide is whether:
a)the Applicant should pay the Respondent’s costs of the proceedings;
b)if costs are to be ordered, whether the usual rule applies or whether costs should be on an indemnity basis; and
c)if costs are to be ordered, on whatever basis, whether an order should be made that the Applicant’s solicitor should pay those costs.
The matters to be taken into account in forming an opinion that there are circumstances that justify the Court in making an order for costs in favour of the Respondent are taken from the considerations in subsection 117(2A):
a)the Respondent’s strained financial circumstances, set out at [14];
b)the fact that the Respondent is in receipt of a grant of legal aid, which involved his having to make a contribution of $450.00;
c)the fact that the Applicant was wholly unsuccessful in the proceedings; and
d)another matter considered by the Court to be relevant, the fact that the Applicant’s case was a weak case without any realistic prospect of success.
It is quite clear that the substantive Application had little or no chance of success. In the circumstances, it is nothing short of astonishing that the Applicant’s solicitor could still, in his submission in opposition to the costs application, should make this contention:
9. ‘Serious incompetence’ and ‘without reasonable cause’. Without repeating the arguments regarding s 69ZK in the substantive proceedings it is desirable to draw the Court’s attention to the following points:
(a)If the orders of the Children’s Court that do not involve the Minister, Director-General of the Community Services or any other “person” (apart from the child’s parent or parents), such as an order pursuant to s 79(1)(a)(i) of the Children and Young Persons (Care and Protection) Act 1998, the matter is no longer a care and protection matter and is outside of the jurisdiction of the Children’s Court. Indeed, such ruling has been made, on 8 October 2013, by the current President of the Children’s Court, Judge Johnston (who is a District Court judge), in a case very similar to the present case. His Honour made such ruling at a preliminary hearing and the transcripts have not yet been released.
(b)Decision in Re Felicity [2012] NSWSC 494, which was followed in this matter, is full of errors, some of which have been raised in the final submission in this Court, and will be re-agitated in the NSW Court of Appeal in light of the ruling referred to in (a) above which, together, with the erroneous interpretation of s 69ZK, creates discrimination against a class of children: a parent dissatisfied with orders of the Children’s Court where the only remaining order is pursuant to s 79(1)(1)(a)(i), has nowhere to take his or her grievance; the Children’s Court has no jurisdiction over the matter and the Family Law courts refuse to hear an application for the reason of erroneous interpretation of s 69ZK.[28]
[28] Submission 17 January 2014 at pages 2 and 3
This submission ignores reality. It will not do to refer to a preliminary decision made by the President of the Children’s Court on 8th October 2013 which is unpublished, unreported and completely lacking in facts.
It is nothing short of fanciful for Mr Potkonyak to refer to some argument which “will be raised in the NSW Court of Appeal in light of the ruling referred to in (a) above…” What proceedings are being referred to? It is of no persuasive value whatsoever to rely on some proposed application to the Court of Appeal at some future time. There is only decision of the NSW Court of Appeal that has any relevance to these proceedings, and that is the decision handed down in Re Felicity[29] on 8th February 2013, dismissing the summons seeking leave to appeal.
[29] [2013] NSWCA 21
The relevant facts are these:
a)The decision of White J in Re Felicity was handed down on 1st May 2012.
b)The decision comprehensively disposed of the plaintiff’s application, as his Honour found that “none of the arguments advanced for the mother has substance.”[30]
c)The application for leave to appeal was dismissed by the New South Wales Court of Appeal on 8th February 2013, where Macfarlan J held that “the appeal sought to be brought has no realistic prospects of success…the applicant has not been able to advance any arguable basis for a conclusion that White J erred in any respect”.
d)The substantive application in Wade & McPherson[31] was not argued in this Court until 23rd September 2013, over seven months after the decision of the Court of Appeal was handed down.
[30] [2012] NSWSC 494 at [72]
[31] [2013] FCCA 1583
Mr Potkonyak argued his case in the substantive application as if the decision of the Court of Appeal had never been made. In his submissions, which he filed on 9th September 2013, he completely ignored the Court of Appeal decision. It was the Respondent’s solicitor who provided a copy of the Court of Appeal decision to the Court attached to her submission, filed on 13th September 2013. A re-reading of Mr Potkonyak’s submission shows that nowhere in that submission did he make any mention whatsoever of the fact that the decision of White J in Re Felicity had been upheld on appeal.
Mr Potkonyak cannot be heard to argue that he was in any way unaware of the decision of the Court of Appeal on 8 February 2013; he argued the case. Had it not been for the Respondent’s solicitor attaching a copy of the Court of Appeal decision to her submission, this Court would not have been aware of it.
To this day, he is arguing that the decision of White J at first instance was wrong, blithely ignoring the Court of Appeal decision to the contrary.
It is settled law. It was settled law when he argued the case in this Court on 23rd September 2013.
It is well-established that costs will only be awarded on an indemnity basis where there is some “special or unusual feature in the case to justify the Court in departing from the ordinary practice” (Colgate-Palmolive v Cussons[32] per Sheppard J at [24]). In my view, this is such a case.
[32] supra
The Application was filed on 11 April 2013 and was argued on 23 September 2013 “in wilful disregard of known facts or clearly established law”.[33]
[33] Ibid at [24]
I am satisfied that costs should be awarded on an indemnity basis.
The final question to be decided is whether an order should be made that Mr Potkonyak should pay the costs personally.
I have read the decision of White J in Re Felicity (No 2)[34], where his Honour examined whether Mr Potkonyak should be held liable for unnecessary costs under s. 99(1) of the Civil Procedure Act 2005 (NSW). It will be recalled that his Honour eventually decided that an order should not be made.
[34] supra
Of course, this matter is not being decided under the Civil Procedure Act, which is an Act of the State of New South Wales. Rule 21.07 is the rule which the Court must consider.
Subsection 99(1) of the Civil Procedure Act applies if it appears to the Court that costs have been incurred:
(a) by the serious neglect, serious incompetence or serious misconduct of a legal practitioner, or
(b) improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible.
By comparison, Rule 21.07 refers to costs incurred or thrown away:
because of undue delay, negligence, improper conduct or other misconduct or default.
The provisions of the subsection and the Rule are similar but not identical.
In Re Felicity (No.2), White J concluded that “the arguments advanced by Mr Potkonyak were not so obviously untenable …that the costs incurred as a result of his advancing the arguments were incurred improperly or without reasonable cause, or were incurred as a result of serious incompetence.”[35] His Honour went on to say about the arguments based upon the Commonwealth Powers (Family Law – Children) Act 1986 (NSW) were “more problematic, but I think they should be characterised as barely arguable rather than unarguable”.[36]
[35] Ibid at [6]
[36] Ibid
However, by the time the arguments were made in this case, the Court of Appeal had already handed down its decision on 8 February 2013. The matter had been put beyond doubt.
Thus, the arguments advanced by Mr Potkonyak in the proceedings before this Court could no longer be characterised as barely arguable. They had become unarguable.
In my view, the actions of Mr Potkonyak in advancing arguments that were clearly unarguable as a result of the decision of the Court of Appeal, which he chose not to put before the Court, were improper. He had an obligation to the Court to disclose that the decision of Re Felicity at first instance had been upheld on appeal, and he did not do so.
In my view, that constitutes improper conduct by a lawyer under sub-rule 21.07(1).
Sub-rule 21.07 requires that the lawyer must be given a reasonable opportunity to be heard. He has been afforded the opportunity to make a written submission as to why such an order should not been made against him, and has provided that submission to the Court.
I have considered the submission and I am not persuaded by it.
This is a case where the unsuccessful argument clearly originated with the lawyer “as distinct from the lawyer taking on a difficult argument that the client was determined to pursue” (see Re Felicity (No.2) at [3]).
I am satisfied that the costs should be paid by the lawyer personally.
The Quantum of the Costs
The Respondent seeks the following amount by way of costs:
a)his Legal Aid contribution in the sum of $450.00;
b)the costs paid by Legal Aid New South Wales to his solicitors, amounting to $4154.00; and
c)his solicitor’s travel expenses not covered by Legal Aid, $583.80.
The Respondent’s contribution of $450.00 and the amount of $4154.00 paid to his solicitor by Legal Aid New South Wales are uncontroversial. However, there appears to be a difficulty in allowing the claim for disbursements of $583.80, being travel expenses not covered by Legal Aid. It does not appear that this amount is allowable, as s.41 of the Legal Aid Commission Act 1979 (NSW) would preclude a claim for disbursements over and above that allowed by Legal Aid New South Wales.
I propose to set the amount of costs payable at $4604.00.
I will allow three months to pay.
If the Respondent seeks an order for costs in respect of this matter, he should file and serve a further Application within 28 days.
Unsatisfactory Professional Conduct
It is a matter of concern that Mr Potkonyak chose to argue the substantive matter by way of an attack on the reasoning in the decision at first instance in Re Felicity without attempting to bring to the Court’s attention the decision of the Court of Appeal made seven months earlier. His submission in respect of costs took a similar line.
It is the duty of an advocate to bring to the attention of a Court a decision relevant to the case, even if it is adverse to the case which he seeks to argue. There is no evidence that he has ever referred to the Court of Appeal decision in either of his submissions. Such an action would have misled the Court had not the Respondent’s solicitor attached a copy of that decision to her submission.
This action by Mr Potkonyak appears to be quite improper and may well constitute unsatisfactory professional conduct under s. 496 of the Legal Profession Act 2004 (NSW).
The solicitor will be allowed 28 days to make a written submission as to whether the Court should refer the matter to the Office of the Legal Services Commissioner to investigate whether his actions constitute unsatisfactory professional conduct.
I certify that the preceding seventy-eight (78) paragraphs are a true copy of the reasons for judgment of Judge Scarlett
Associate:
Date: 25 June 2014
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