Wallace v GWH Build Pty Ltd; GWH Build Pty Ltd v Wallace [No 2]

[2016] NSWDC 128

District Court

New South Wales

Medium Neutral Citation:	Wallace v GWH Build Pty Ltd; GWH Build Pty Ltd & Anor v Wallace & Ors [No 2] [2016] NSWDC 128
Hearing dates:	13 May 2016
Date of orders:	08 July 2016
Decision date:	08 July 2016
Jurisdiction:	Civil
Before:	Judge Levy SC
Decision:	See paragraph [46] for orders
Catchwords:	COSTS – whether the plaintiffs’ costs in opposing an unsuccessful motion seeking that the plaintiffs’ solicitors be referred for prosecution for an alleged civil contempt should be paid on an indemnity basis, and whether the solicitor for the opponents should pay those costs personally
Legislation Cited:	Civil Procedure Act 2005, s 56(3), s 99 District Court Act 1973, s 127(1), s 203
Cases Cited:	Botega Pty Ltd v Wales (1977) 1 NSWLR 139 Johnston v Nationwide News Pty Ltd [2005] NSWCA 17 Liverpool City Council v Estephan [2009] NSWCA 161 Wallace v GWH Build Pty Ltd [2016] NSWDC 51
Category:	Costs
Parties:	Deborah Lee Wallace and Mark Wallace (Plaintiffs) GWH Build Pty Ltd (Defendant) GWH Build Pty Ltd (First cross claimant) ACN 125 668 215 Pty Ltd (formerly known as Maitland Motel and Conference Centre Pty Ltd) (Second cross claimant) Deborah Lee Wallace (First cross defendant) Mark Wallace (Second cross defendant) Neon Rock Pty Ltd (Third cross defendant)
Representation:	Counsel: Mr JL Glissan QC (for the applicant defendant and cross claimants on the first motion and for the respondents on the second motion and for their solicitor, Mr Graham Lancaster) Mr JA Trebeck (for the respondent plaintiffs and cross defendants on the first motion and for the applicant plaintiffs on the second motion)   Solicitors: Roberts Legal (Plaintiffs and cross defendants) Lancaster Law & Mediation (Defendants and cross claimants)
File Number(s):	2015/270462
Publication restriction:	None

Judgment

1. On 15 April 2016, inter alia, orders were made dismissing an amended motion filed by the defendant and by the cross claimants (who are for convenience here referred to as the defendants as they are in a common interest) seeking that the solicitors for the plaintiffs be referred to the Supreme Court for prosecution for an alleged civil contempt: Wallace v GWH Build Pty Ltd [2016] NSWDC 51.

2. Questions of whether the plaintiffs’ costs of that unsuccessful motion should be paid on an indemnity basis, and whether the solicitor for the defendants should pay those costs personally, were reserved for further argument.

3. After the exchange of written submissions on those questions, evidence and oral arguments on the costs issues proceeded on 13 May 2016. So as to obviate the need for non-metropolitan practitioners to attend in Sydney to take the reserved judgment, the parties agreed that these reasons for decision should be published on the Caselaw website after notification to the parties. My reasons on the residual costs issues now follow.

Matters already decided

4. The submissions on behalf of the defendants, in effect sought to re-argue the merits of the motion already decided. Those aspects of the defendants' submissions are therefore disregarded.

Jurisdiction

5. On the question of jurisdiction, the defendants argued that there should be no order for costs in relation to their unsuccessful motion seeking to have each of the plaintiffs’ solicitors referred to the Supreme Court for an alleged civil contempt pursuant to s 203 of the District Court Act 1973. because this court lacked jurisdiction as “there was no judgment or order in an action”, as is required by s 127(1) of that Act.

6. That point was considered, but not decided on appeal, in Johnston v Nationwide News Pty Ltd [2005] NSWCA 17, at [24]. In that case, a submission along those lines had not been made to the trial judge, which therefore precluded the argument being raised on appeal.

7. In my opinion, the defendants' jurisdiction argument should be rejected because this court should be taken to have all powers, including implied powers, necessary to secure the proper administration of justice, even where the court has been created by statute: Botega Pty Ltd v Wales (1977) 1 NSWLR 139, at pp 148 – 149.

8. The defendants should be taken to have recognised as much at the hearing of the motion, where they had sought from the plaintiffs, the costs of the contempt motion on an indemnity basis.

9. To have advanced that argument, by implication, the defendants in effect asserted the existence of an implied jurisdiction in the court. Therefore, they cannot now consistently maintain a contrary argument in respect of their own liability for costs on the same issue upon which they were unsuccessful.

10. Accordingly, I consider that jurisdiction exists to entertain the costs argument that is under present consideration. In considering whether power exists to make the orders under present contemplation, there is no need to search beyond the provisions of s 56(4) and (5) of the Civil Procedure Act 2005

Indemnity costs

11. The plaintiffs argue that they should not be out-of-pocket for even one cent as a result of the unmeritorious amended motion filed on behalf of the defendants.

12. In support of that position, they invoke the earlier findings that the application for referral for alleged contempt was unmeritorious, and was a vituperative distraction from the central issues in the case: Judgment [202], [211]; contrary to the letter and the spirit of s 56(3) of the Civil Procedure Act 2005. An aggravating factor was the claim that the plaintiffs’ principal solicitor was guilty of contempt. That was a proposition that I found to have been entirely without arguable merit. Nevertheless, the amended motion was pressed vigorously. The pursuit of the amended motion had the effect of hindering the progress of the litigation whilst this interlocutory issue remained outstanding.

13. In those circumstances, the plaintiffs were obliged to incur considerable costs. This was where the other disputed procedural issues concerning the grant of leave to amend the pleadings and whether the subpoena was enforceable, occupied very little court time in comparison to the most serious and potentially career damaging allegations of contempt on the part of the solicitors for the plaintiffs.

14. The defendants argued that as the principal solicitor for the plaintiff was also the supervising solicitor of his employed solicitor who had carriage of the plaintiffs' litigation, and therefore pursuant to the obligation to supervise his employee, it was argued that there was a sound basis for asserting a vicarious liability on the part of the principal, even though that argument was rejected. Liability for an alleged civil contempt should be seen as being personal to the alleged contemnor, and not vicarious.

15. In seeking to resist an order for indemnity costs the defendants argued that the contempt issue was justifiably raised for consideration by the court, despite the rejection of the defendants’ arguments on that issue.

16. The defendants’ allegations of a claimed civil contempt were fully considered and rejected in the determination of the motion and it is not necessary to here recite the reasons why those allegations were rejected: Wallace v GWH Build Pty Ltd [2016] NSWDC 51, at paragraphs [151] - [212].

17. It is clear from the defendants’ submissions, and from the evidence of the defendants’ solicitor, Mr Graham Lancaster, that the defendants’ attack on the solicitors for the plaintiff was considered by the defendants’ team as being an important step to be pursued as being directly relevant to the conduct of the litigation.

18. Those circumstances serve to trigger a consideration of whether the amended motion should be characterised as a procedural delinquency for which indemnity costs should be ordered: Liverpool City Council v Estephan [2009] NSWCA 161 at [95].

19. In my opinion, the effect of the defendants’ contempt motion was to unnecessarily distract from and prolong the pending proceedings, and to delay the completion of interlocutory matters, which in turn had the effect of delaying the timing of an ultimate trial. As a result of those matters, the plaintiffs have incurred considerable additional costs. This was contrary to the requirements of s 56 of the Civil Procedure Act 2005.

20. I consider that the underpinning allegations of a civil contempt on the part of the solicitors for the plaintiffs had no rational connection with the issues in the case. A conclusion to that effect would ordinarily justify the plaintiffs being indemnified for the unnecessary costs they have consequently incurred: Liverpool City Council v Estephan [2009] NSWCA 161 at [95].

Whether defendants’ solicitor is personally liable for plaintiffs' costs

21. Properly, the plaintiffs made no submissions on the question of whether Mr Lancaster should personally pay the plaintiffs’ indemnity costs, as that is an inherent discretionary matter for the court to determine.

22. The principles concerning whether a personal costs order should be made against a solicitor are embodied within s 99 of the Civil Procedure Act 2005. Such an order must be founded upon costs being incurred because of either: serious neglect, serious incompetence or serious misconduct on the part of a legal practitioner: s 99(1)(a), or because costs were incurred improperly, without reasonable cause: s 99(1)(b).

23. In view of the seriousness of those considerations, and given the significant burden a personal costs order would impose, Mr Lancaster was given the opportunity to be heard on that issue. On that question, he filed an affidavit sworn on 27 April 2016, and he also gave oral evidence on 13 May 2016, at which time he was represented by Senior Counsel: T4 – T24.

24. Mr Lancaster was admitted to practise in June 1990, and since that time he has had no adverse conduct findings made against him: Affidavit of Mr Lancaster, paragraphs [24] - [26].

25. In essence, Mr Lancaster stated that he had received advice from Mr Darien Nagle of Counsel, to the effect that the proposed amended motion raising allegations of a civil contempt against the plaintiffs’ solicitors, was an appropriate matter to pursue: Affidavit of Mr Lancaster, par [7]. It transpired this advice was given to him by telephone: T22.13 – T22.21.

26. Mr Lancaster justified his contention that there was reasonable arguability of the contempt motion by saying he had the benefit of the advice of Junior Counsel, which was later confirmed by Senior Counsel, and on “a reading of the authorities”, which he did not identify: Affidavit of Mr Lancaster, par [27].

27. Mr Lancaster also stated that before filing the amended motion, he had discussed the proposed amended motion with Mr Glissan QC, who had confirmed that there was a proper basis for pursuing the order for referral of the plaintiffs’ solicitors’ contempt: Affidavit of Mr Lancaster, par [8]. That amended motion was filed on 4 February 2016.

28. Mr Lancaster was cross-examined on his affidavit, and on the merits of the contempt motion generally.

29. As to the advice Mr Lancaster obtained from Junior Counsel, he explained the circumstances to have been as follows:

“Q. You referred to receiving advice from junior counsel in paragraph 7 of your affidavit?

A. Yes.

Q. May I advise you to look at your affidavit whenever you please, it is not a memory test. When did you receive that advice?

A. The first time I received the advice was on the afternoon of, I believe it was 10 December, the Thursday when the material came through from Ms Crosby indicating that she had sent the material produced in the District Court to Ms Bathshiels(?). I provided a copy of that to Mr Nagle of counsel and he rang me back and said, “She’s committed a contempt, she’s used these documents with the District Court in the Local Court proceedings.”

Q. My question was when did you get that advice - so you nominated 10 December 2015?

A. I believe that’s the case, if that was the Thursday--

Q. Don’t worry about the day of the week. That was oral advice?

A. That’s correct.

Q. Did you receive any written advice at any point?

A. No.”

[T4,37 – T5.8]

30. Mr Lancaster stated he discussed that advice with Junior Counsel on a number of occasions (T5.11), and that it was not his common practice to seek advice in writing on interlocutory matters: T5.21. Whilst that may be a reasonable approach for general matters of interlocutory dispute, it is surprising that a matter of such acknowledged professional seriousness (T5.25) involving allegations of impropriety on the part of fellow practitioners, would not have been documented in some way. That said, nothing turns on that point in this case, as Senior Counsel has appeared in the motion and has argued the point.

31. Mr Lancaster acknowledged that, in hindsight, it would have been prudent to have obtained counsel’s advice in writing: T7.10 – T7.47. Mr Lancaster stated that a written advice does not necessarily indicate intellectual rigour: T7.32. Obviously, the intellectual rigour of an oral advice necessarily remains opaque to analysis where it has not been minuted or made the subject of a suitably detailed file note.

32. In this instance, it is not possible to evaluate the intellectual rigour of the opinion he obtained from counsel because Mr Lancaster did not minute or make a file note of any of the oral advices he received: T7.35; T12.33; T22.13 – T22.21.

33. In cross-examination, he gave the following evidence:

“Q. If you had received a written advice, which did not contain intellectual rigour, you would have been able to form a view of that when you read it, wouldn’t you?

A. If I had obtained an advice that didn’t have that, I would - yes, I would be able to look at it--

Q. That’s one of the reasons it’s prudent to obtain written advice in serious matters, isn’t it?

A. That is a reason, yes.

Q. Typically counsel’s advice, indeed whether it’s counsel’s advice or a solicitor’s advice, contains ideally an analysis of the legal principles, an analysis of the facts, reasoning applying the law to those facts and a conclusion, ideally?

A. Ideally yes. I was going to say not always.

HIS HONOUR

Q. I suppose it’s always considered relative to the importance of the issue at hand, isn’t it?

A. It is, but it’s also a matter for the client, and sometimes how much the client is prepared to spend on the advice. I am talking from a client perspective there, rather than from my own perspective, but it is not often that I have had written advice from counsel over the last 20-odd years even on matters - not in the detail - I can think of about four separate occasions that’s been necessary, and some of those related to appeals.”

[T7.39 – T8.14]

34. The implication from the above extract of Mr Lancaster’s evidence, and the fact that the amended motion was filed alleging civil contempt, is that Mr Lancaster in fact had his clients’ instructions to take such a course. That position was confirmed by Mr Lancaster in his oral evidence: T12.50 – T13.2. Mr Lancaster stated he was “pretty confident” he had discussed with his clients the merits of the amended notice of motion which embodied the contempt allegations: T13.49.

35. Mr Lancaster had specifically sought advice from Mr Nagle by telephone about whether the plaintiffs’ principal solicitor should be included in the amended motion for referral for contempt, and then he made a decision to that effect based on that advice: T8.34 – T9.40. Mr Lancaster was unaware of any background discussions that might have taken place between Mr Nagle and Mr Glissan QC: T9.48. Mr Glissan QC was not briefed until early February 2016: T10.4. It is therefore apparent from the circumstances that the discussions between Junior and Senior Counsel had occurred before Senior Counsel had been formally briefed in the matter: T10.1.

36. The briefing of Mr Glissan QC was apparently arranged by Mr Nagle, as appears from the following extract from the evidence:

“Q. But you’re putting it forward in paragraph 7 of your affidavit as justification for bringing these proceedings, that not only Mr Nagle had given you advice, but he had discussed the proposed motion with Queen’s Counsel, and Queen’s Counsel had advised that the motion was in an appropriate form to file, and that it was appropriate to pursue the orders sought in the notice of motion?

A. That’s correct.

HIS HONOUR: By “bringing these proceedings” I take it you mean the amended motion?

TREBECK: Yes, I do, thank you.

WITNESS: What I’m saying there is Mr Glissan wasn’t formally briefed at that time, but that Mr Nagle had had the discussion with Mr Glissan.

TREBECK

Q. Yes, but you don’t know whether Mr Glissan looked at any document?

A. I don’t, no.

Q. You don’t know what Mr Nagle had said?

A. Well--

Q. You don’t know, you weren’t there?

A. I don’t know precisely. I know that we had a conversation regarding that matter at that time.

Q. Yes, that’s right?

A. I don’t know what he said to Mr Glissan.

Q. It’s a classic hearsay situation isn’t it, Mr Lancaster?

A. Yes.

Q. At that stage you didn’t take any steps to approach Mr Glissan QC and obtain his opinion directly, did you?

A. No, I didn’t.

Q. Did you ever receive any express advice from Mr Glissan QC concerning the appropriateness of the amended notice of motion contained in the contempt allegations?

A. No, I didn’t until he was briefed. Mr Nagle advised me that the client was prepared to brief him and that--

Q. My question was did you ever receive any express advice from Mr Glissan, ever?

A. Yes, yes I have, but after the filing of the notice of motion.

HIS HONOUR

Q. Just going back a step, you said that Mr Nagle had indicated the clients were prepared to brief senior counsel, wasn’t that an inquiry that was normally taken by instructing solicitors, not counsel?

A. Not - traditionally that would be the case, your Honour, but in this particular case the relationship between the client and Mr Nagle has been a greater relationship than I have had with the client. The client was introduced to me by Mr Nagle.

Q. So what is that relationship?

A. Mr Nagle has performed work for this client on a number of occasions previously.

Q. So it was a referral?

A. Yes.

TREBECK

Q. So Mr Nagle has been acting for those standing behind GWH Build and the other companies involved in this case for a number of years. Is that right?

A. I couldn’t say for a number of years, but certainly on a number of other matters, yes. I wouldn’t say that “a number of years” was wrong, but yes, I couldn’t say for certain.

Q. Did you receive any invoices for advices given in respect of the amended notice of motion contempt allegations from Mr Nagle?

A. I have received invoices for the motion.

Q. That wasn’t my question.

A. Okay.

Q. It’s a pretty simply one. Did you get a bill from Mr Nagle for giving you advice about whether or not you should bring the contempt application?

A. Not specifically, because he never gave me written advice.”

[T10.10 – T11.42]

37. On 1 and 2 March 2016, when Mr Lancaster received two affidavits from the employed solicitor for the plaintiff, he was in a position to realise that the principal solicitor could not reasonably have been shown to have participated in the events upon which the contentious allegations of contempt were based.

38. Mr Lancaster stated that at the time, he did not specifically review the pursuit of the motion, although he spoke with counsel on the subject of whether or not it was appropriate to abandon the motion, and he took the view it was not appropriate to abandon the motion: T15.50 – T17.1. Mr Lancaster had earlier stated that he felt duty bound to refer the allegation of contempt to the court: T6.48.

39. At that time, he maintained the view that the principal solicitor was vicariously liable for contempt: T18.43 – T18.47.

40. Mr Lancaster said that as a result of his discussions about the merit allegations of contempt against the principle solicitor, on the day before the hearing commenced, he felt comfortable that the motion should proceed: T19.32. He considered that counsel was running the application, and he should not interfere to stop the process: T19.16 – T20.2. He received no advice to the effect that the process should be stopped: T20.43. On that subject, he gave the following evidence:

“Q. I think the effect of what you've been asked is that there are two processes by which decisions are made. One is the advice of counsel that you received, and the other is whether you exercised any independent judgment on the appropriateness of that advice or the prospective course that had been embarked upon?

A. I did not exercise at that point in time any independent judgment on it, because my judgment had been informed by the advice and the discussions. I have a difficulty, your Honour, with that suggestion of independence, because I'm part of the process and for me to be informed by counsel and advised, and then to separate that advice and go against it, I would have to have a proper basis to do so.

Q. Yes, I understand. There's a well understood view brought [about] in the legal profession that solicitors, when embarking upon a course of professional activity, exercise their own independent judgment on the justification of the course adopted, quite apart from whatever advice is received from counsel. In other words, counsel's advice is not always necessarily a shelter. Do you understand that view?

A. I understand the view that your Honour has put to me, yes.

Q. Is it a view you share?

A. It is a view that has to apply at particular points. It doesn't apply consistently. There is the counterpoint that if counsel's advice accords with your own view, then there is no reason to go against that advice, and I suppose that's what I'm saying here - is that as at the morning of those submissions, my view remained that there had been a - although on a technical basis, and I understood after the exculpatory material the manner in which it happened.

But the fact that it had happened was the fact that I was being advised by counsel to continue proceeding with - the mere fact that the production had been made in a separate proceedings, in a separate court involving different parties. It was no judgment morally or otherwise about Ms Crosby's behaviour, it was the fact that the matter had happened and that was why the matter proceeded from that point on to be left in the hands of the Court.

Q. So you are suggesting that there was a point of no return?

A. No, not so much a point of no return, but her evidence had explained the conduct, but the conduct had still occurred; and the view that was taken of the conduct that had occurred was that it still constituted grounds for contempt technically, although there wasn't any aggravating features after her evidence had been given.

Q. So did that analysis also apply to Mr Roberts at that time?

A. No, it didn't. The Mr Roberts scenario was still based on vicarious liability at that time, because she had given the indication that he hadn't been involved in the process.”

[T20.47 – T21.43]

[Emphasised transcript correction incorporated]

41. The foregoing analysis leads me to conclude that Mr Lancaster filed the amended motion alleging a civil contempt on the advice of counsel, and that this was done on the instructions of his clients. In those circumstances, in general terms, a personal cost order against Mr Lancaster would be inappropriate.

42. The remaining question is whether, in the lead-up to, and in the course of the hearing, Mr Lancaster should have exercised his own independent judgment as a legal practitioner in relation to the continued pursuit of the claim of civil contempt on the part of the principal solicitor for the plaintiff, where the evidence revealed that assertion was unarguable, except on the basis of a claim of vicarious liability, an argument that was of itself without merit.

43. On the latter question, prima facie, a personal cost order would be justifiable because by continuing on an unarguable course, costs were being incurred without reasonable cause: s 99(1)(b) of the Civil Procedure Act 2005.

44. However, at that point in the proceedings, there would be an insurmountable difficulty in seeking to rationally distinguish the extent of the costs of the motion against the principal solicitor from the costs associated with the arguments raised against the employed solicitor.

45. Once that point is given due recognition, I consider that it becomes futile to further consider whether a personal costs order should be made against Mr Lancaster. This is because it would not be rationally possible to apportion the costs in question between the two respective arguments that have each failed to succeed. Given that futility, I conclude that I must decline to make a personal cost order against Mr Lancaster, as such orders may not be made on any arbitrary basis.

Orders

46. I make the following orders:

1. The defendant and the cross-claimants pay on the indemnity basis the costs incurred by the plaintiffs in resisting the amended motion filed on 4 February 2016 which sought the referral of the solicitors for the plaintiffs to the Supreme Court pursuant to s 203 of the District Court Act 1973 for consideration of a prosecution for an alleged civil contempt;

2. Liberty to apply on 7 days notice if further or other orders are required.

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Decision last updated: 11 July 2016