Woodward v Woodward (No. 2)

[2015] NSWSC 362

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Woodward v Woodward & Anor (No. 2) [2015] NSWSC 362
Hearing dates:	10 March 2015
Date of orders:	02 April 2015
Decision date:	02 April 2015
Jurisdiction:	Common Law
Before:	Slattery J
Decision:	See paragraph [45] of judgment.
Catchwords:	LEGAL PRACTITIONER – costs – where defendants had been ordered to pay plaintiff’s costs thrown away due to adjournment of hearing – where solicitors instructed by defendants did not file a notice of appearance or a notice of ceasing to act – where solicitors communicated to plaintiff that they acted for defendants – where solicitors withdrew representation 13 days before hearing, causing adjournment – whether to order solicitors to pay defendants costs under Civil Procedure Act 2005, s 99 – apportionment of costs between solicitors and defendants
Legislation Cited:	Civil Procedure Act 2005 (“CPA”), ss 98, 99 Uniform Civil Procedure Rules (“UCPR”), rr 7.27, 7.29
Cases Cited:	Harris v Villacare Pty Ltd [2012] NSWSC 452 Ideal Waterproofing Pty Ltd v Buildcorp Australia Pty Ltd [2006] NSWSC 155 Ireland v Retallack (No 2) [2011] NSWSC 1096 Kelly v Jowett (2009) 76 NSWLR 405 Kendirjian v Ayoub [2008] NSWCA 194 Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300 Myers v Elman [1940] AC 282 Re Jones (1870) LR 6 Ch 497 Ridehalgh v Horsfield [1994] Ch 205 Woodward v Woodward & Anor [2015] NSWSC 99
Texts Cited:	Ritchie's Uniform Civil Procedure NSW
Category:	Costs
Parties:	Plaintiff: Stephen James Woodward
Representation:	Counsel: Plaintiff: R. Winfield First and Second Defendants: E. Yam Messrs Bilbie Dan: T. Hale SC Solicitors: Plaintiff: Paul Gowran, Paul Gowran & Co Solicitors First and Second Defendants: Stephen John Churches, Armstrongs Solicitors Pty Limited
File Number(s):	2014/170245
Publication restriction:	No

Judgment

1. This is the second judgment in these proceedings. The reasons for the first judgment are recorded in Woodward v Woodward [2015] NSWSC 99. In that ex tempore judgment, the Court adjourned the proceedings due to the defendants’ conduct and consequently ordered the defendants to pay into court $10,000, being the plaintiff’s costs thrown away due to the adjournment. I foreshadowed that Messrs Bilbie Dan may be liable for the costs of the plaintiff, and ordered Bilbie Dan to show cause as to why they should not personally bear the whole or some part of the plaintiff’s costs thrown away by reason of the adjournment. This judgment concerns the allocation of the liability to pay the plaintiffs’ costs between the defendants, Tyrone and Sharon, and Messrs Bilbie Dan, who had communicated to the plaintiff’s solicitor that they were instructed by the defendants.

2. This judgment should be read with my earlier judgment. Events, matters and persons are referred to in both judgments in the same way. It is not necessary to recount all the facts in this judgment. Ms E. Yam appeared for the defendants. Mr Hale SC appeared for Messrs Bilbie Dan.

3. In the first judgment I did not set out the relevant correspondence between the plaintiff’s and defendants’ solicitors in detail. It is now appropriate to do so in order to consider whether to order Messrs Bilbie Dan to pay some or all of the defendants’ costs.

Correspondence between the parties’ solicitors

4. Prior to Messrs Bilbie Dan being becoming involved in the representation of the defendants in the proceedings, Burke & Meade Lawyers acted for the defendants. Those lawyers filed a valid notice of ceasing to act under Uniform Civil Procedure Rules (“UCPR”), r 7.29 in or around August 2014. It appears that the lawyers ceased to act due to outstanding legal fees the defendants owed those lawyers, which fees those lawyers informed Bilbie Dan in September 2014 were in excess of $10,000.

5. On 4 September 2014, two days after the Registrar in Equity set a date for the hearing of the proceeding, the plaintiff’s solicitor, Paul Gowran, wrote to Tyrone and Sharon notifying them of the listing and the date of the listed hearing before the Court on 19 February 2015.

6. Messrs Bilbie Dan then apparently first became involved in the matter. On 9 September 2014, Bilbie Dan replied to Paul Gowran advising that they now acted for Tyrone and stating that they would contact Mr Gowran again once “the file comes to hand”. That letter enclosed a signed statement by Tyrone addressed to Mr Gowran which stated:

“I wish to inform you the Bilbie Dan Solicitors are now acting on my behalf.”

7. On 11 September 2014, Mr Gowran replied and asked Bilbie Dan to clarify whether they had received Mr Gowran’s 4 September 2014 letter, and whether Bilbie Dan also acted for Sharon as the second defendant.

8. Bilbie Dan replied to that letter on 15 September 2014 confirming that they had received Mr Gowran’s 4 September 2014 letter and were seeking confirmation as to whether they were instructed to act on Sharon’s behalf. This letter was followed by a 7 October 2014 letter enclosing an authority signed by Sharon for Bilbie Dan to act on her behalf.

9. On 9 October 2014, Bilbie Dan wrote to Mr Gowran requesting a copy of the Registrar in Equity’s orders dated 2 September 2014, stating that they had not seen a copy of them. Mr Gowran had also not seen them. On 14 October 2014 Mr Gowran replied setting out the substance of those orders in the same form as was included in the 4 September 2015 letter.

10. Mr Gowran did not receive a response to that letter from Bilbie Dan. On 22 December 2014 Mr Gowran sent by fax to Bilbie Dan a message confirming the solicitors’ advice that they acted for Tyrone, requesting (apparently unnecessary) confirmation that they acted for Sharon, and noting that Bilbie Dan had not filed any document nor other materials in the proceedings. The fax also enclosed a draft notice of alleged ‘surcharges and falsifications’ that the plaintiff alleged the defendants had misappropriated from the estate of the deceased.

11. On or around 13 January 2015, Joseph Dowling, a solicitor employed by Bilbie Dan, telephoned Mr Gowran stating that Bilbie Dan had only just received instructions, that a Notice of Change of Solicitor for both Tyrone and Sharon had be prepared at that the document would be filed. Mr Gowran claims that Mr Dowling said the filing would be done later that day. Mr Dowling’s account is that the filing would occur ‘in due course’.

12. On 28 January 2014, 22 days before the hearing date before me, Mr Gowran again wrote to Bilbie Dan complaining that such notice had not been filed, and asking Bilbie Dan again to advise whether they intended to act on behalf of Tyrone and Sharon.

13. On 30 January 2015 by email and again on 2 February 2015 by post, Mr Gowran forwarded an email from my Associate to Mr Gowran regarding terms of settlement that had been reached between the plaintiff and the third defendant in the proceeding, which had requested Mr Gowran to forward the email to the other parties. The 30 January 2015 email noted that Bilbie Dan had not filed a notice of change of solicitor despite the 15 January 2015 telephone conversation, Mr Gowran was forwarding the correspondence on the basis that Bilbie Dan had stated that they acted on behalf of Tyrone and Sharon.

14. On 9 February 2015, 10 days before the proceeding was listed for hearing, Mr Gowran wrote to Bilbie Dan in the following terms:

“We refer to the above matter, in which you have previously advised us that you act on behalf of both the First and Second Defendants.

We note that you have not filed a Notice of Appearance. Nor have you filed a Defence, nor have you filed any evidence.

We advise that Counsel is turning down other work, so, if you should seek any adjournment, we shall be seeking costs thrown away.”

15. On 12 February 2015, 7 days before the hearing and 4 months and 3 days after having last engaged in written correspondence with the plaintiff’s solicitor, Bilbie Dan wrote to Mr Gowran in the following terms:

“We confirm that we had met with Mr & Mrs Woodward in January in regards to [the] matter and received some limited instructions in regards to the proceedings.

Prior to this, as you know, we had experienced difficulty in contacting Mr Woodward.

However since meeting with Mr & Mrs Woodward, and although we had indicated to you that it was our intention to file a notice of appearance in due course, we have not been instructed to appear in this matter.

We confirm that as of writing we do not act for Mr & Mrs Woodward.

We have released to Mr Woodward all documentation held by us, and confirm that any further communication should be directed directly to Mr & Mrs Woodward”.

Correspondence between the defendants and their solicitors

16. It is not clear on the evidence when the defendants first approached Bilbie Dan, but this apparently occurred through the defendants’ daughter, Tarrell Woodward, meeting with Nicholas Dan, a partner of Bilbie Dan and leaving her telephone number with the firm. That must have occurred before 9 September 2014, when Bilbie Dan first wrote to Paul Gowran stating that the firm acted for Tyrone. Bilbie Dan had written to the defendants on 4 November 2014 “referring to previous correspondence”, requesting the defendants to meet with the firm as a matter of urgency, and noting the listing of the 19 February 2015 hearing.

17. Joseph Dowling, a solicitor in the employee of Messrs Bilbie Dan, deposes to his interactions between Bilbie Dan and the defendants. Nicholas Dan, a partner of Bilbie Dan, provided Mr Dowling with the Bilbie Dan’s file on 24 December 2014. This was 3 and a half months after Bilbie Dan’s first correspondence to Mr Gowran on 9 September 2014. On 24 December 2015, Mr Dowling wrote a letter to what he understood was the defendants’ home address. That letter again requested the defendants meet with Bilbie Dan urgently, and stated:

“Unfortunately, if we have not received any instructions from you by 16 January 2015, we will have to write to the other parties in this matter and confirm that we no longer act for you”.

18. The defendants visited Bilbie Dan’s offices on or around 13 January 2015, apparently for the first time. The defendants provided Bilbie Dan with some court documents, which Burke & Meade had not provided to Bilbie Dan based upon the defendants’ outstanding payment of their fees. Mr Dowling told Tyrone that Bilbie Dan would review the documents, contact the plaintiff and stay in touch with Tyrone and Sharon.

19. Three weeks later, on 3 February 2015, Mr Dowling sent the defendants a letter indicating that Bilbie Dan would require the defendant to deposit funds into its trust account in order for Bilbie Dan to act. On the same day, Mr Dowling called Tyrone to relay the same information. Tyrone said that he would confer with Sharon. Mr Dowling said that this would have to occur quickly.

20. A further week later, on 10 February 2015, Mr Dowling sent the defendants another letter. It confirmed that Bilbie Dan had not heard further from the defendants, that the defendants’ documents could be collected from Bilbie Dan’s offices and that Bilbie Dan would inform the other parties to the proceeding that they did not act for the defendants.

21. On 12 February 2015, Tyrone called Mr Dowling and agreed to uplift the court documents from Bilbie Dan’s offices. Later that day Mr Dowling sent Mr Gowran a letter stating that Bilbie Dan was not instructed to appear for the defendants in the hearing, as set out above in paragraph 15 above.

22. Bilbie Dan apparently never provided Tyrone and Sharon with a costs disclosure. It does not appear that a costs agreement was ever entered into by the parties.

Power to order costs against a party’s solicitor

23. The Court has a wide discretion to order costs under Civil Procedure Act 2005 (“CPA”), s 98(1):

“(1)   Subject to rules of court and to this or any other Act:

(a)   costs are in the discretion of the court, and

(b)   the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c)   the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.”

24. The Court’s power to order a solicitor to pay the client the whole or part of the client’s costs is found in CPA, s 99. This power arises where costs have been incurred either by a solicitor’s neglect or otherwise improperly in circumstances where the solicitor is responsible:

“(1)   This section applies if it appears to the court that costs have been incurred:

by the serious neglect, serious incompetence or serious misconduct of a legal practitioner, or

improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible.

After giving the legal practitioner a reasonable opportunity to be heard, the court may do any one or more of the following:

[…]

(b)   it may, by order, direct the legal practitioner:

[…]

(ii)   in the case of a solicitor, to pay to the client the whole or any part of any costs that the client has been ordered to pay to any other person, whether or not the client has paid those costs,

[…]

(7)   In this section, ‘client’ includes former client.”

25. The purpose of the s 99 power to make costs orders against legal practitioners is to ensure that legal practitioners observe their duties to the Court, including the duty to ensure the expeditious and efficient conduct of litigation. In considering whether to order costs against a legal practitioner, the Court may take into account a legal practitioner’s failure to comply with that duty, enshrined in CPA, s 56 as being to assist the Court to facilitate the just quick and cheap resolution of the real issues in the proceedings; Kendirjian v Ayoub [2008] NSWCA 194 at [209] per McColl JA (Beazley JA agreeing); Kelly v Jowett (2009) 76 NSWLR 405 (“Kelly”) at [57] - [59] per McColl JA (Beazley JA (as she then was) and Barrett JA agreeing).

26. The jurisdiction is based on the Court’s right and duty to supervise the conduct of its solicitors: Myers v Elman [1940] AC 282 at 302 (per Lord Atkin), at 318-319 (per Lord Wright) and at 334-336 (per Lord Porter).

27. McColl JA in Kelly (at [66]) noted that the purpose of ordering wasted costs against a solicitor in respect of the opposite party’s costs is to reflect the court’s duty “to be equally anxious to see that solicitors not only perform their duty towards their own clients, but also towards all those against whom they are concerned”, citing Re Jones (1870) LR 6 Ch 497 at 499 per Lord Hatherley LC.

28. To enliven the Court’s power to award costs against a practitioner under s 99(1)(a), the practitioner’s conduct must amount to a “serious dereliction of duty or gross negligence”: Ideal Waterproofing Pty Ltd v Buildcorp Australia Pty Ltd [2006] NSWSC 155.

29. The notion of costs being incurred ‘improperly’ under s 99(1)(b) covers “conduct which would be regarded as improper according to the consensus of professional (including judicial) opinion […] whether or not it violates the letter of a professional code”; Ridehalgh v Horsfield [1994] Ch 205 at 232.

30. Under s 99(1)(b), a practitioner may also be ordered to pay its clients costs incurred “without reasonable cause” in circumstances for which the practitioner is responsible. That phrase is to be given its ordinary, natural and well understood meaning, which is not materially different from “unreasonable” or “not reasonable”; Ireland v Retallack (No 2) [2011] NSWSC 1096 at [46]. Conduct that leads to another party unnecessarily incurring costs for which the practitioner’s client is liable may justify compensatory orders against the practitioner: see for example Harris v Villacare Pty Ltd [2012] NSWSC 452, where a practitioner was ordered to pay 80% of the other party’s costs incurred in responding to an affidavit of the practitioner that included unnecessarily lengthy material.

31. The jurisdiction to order costs under CPA, s 99 must be exercised “with care and discretion and only in clear cases”: Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300 at [92](a) per McColl J (Hodgson and Ipp JA agreeing).

32. The discretionary s 99 power may be enlivened here, where the adjournment which precipitated the costs order against the defendants was arguably itself caused by the conduct of the defendants’ solicitors, Messrs Bilbie Dan.

Submissions

33. For Messrs Bilbie Dan, Mr Hale SC relied upon the fact that at no point did Messrs Bilbie Dan file a notice of appearance under UCPR, r 7.26 (change of solicitor or agent) or 7.28 (appointment of solicitor by previously unrepresented party). The explanation given is that Bilbie Dan were not in a position to make a determination of what was involved in the defendants’ case, because until January 2015 the solicitors had not met with the defendants nor read the relevant court documents, those being held by the defendants’ former solicitors.

34. Mr Hale SC also emphasised the high threshold under s 99(1)(a) for it to be open to the Court to order costs against a legal practitioner. He submitted that Bilbie Dan’s conduct here did not amount to a “serious dereliction of duty”, and that it was only with the benefit of hindsight that one could say the solicitors ought to have demanded the defendant’s attendance to clarify their case by at least November or else withdrawn the representation to the plaintiff that they acted for the defendants. Without having viewed the file, Bilbie Dan could not have known they ought to have made such demands. It was the defendants’ conduct in failing to respond to Bilbie Dan, in Mr Hale SC’s submission, that led to the plaintiff incurring costs.

35. Ms Yam for the defendants put it differently. She submitted that it was unreasonable for Bilbie Dan to represent that they acted for the defendants from September 2014 to February 2015, even without filing a formal notice of appearance, only to withdraw that representation 7 days before the matter was listed for hearing. In particular, Ms Yam points in particular to the period between 13 January 2015, when Bilbie Dan first met with the defendants, to 3 February 2015, when Bilbie Dan requested the defendants to provide funds into their trust account. That three week delay in requesting funds from the defendant was unreasonable, in Ms Yam’s submission, given that the basis for Bilbie Dan withdrawing its representation was the defendants’ failure to provide funds.

36. Ms Yam further submitted that Bilbie Dan should have been aware from an early point that the defendants might present the financial issues that eventually led to Bilbie Dan withdrawing its representation. That possibility should have been clear from the letter dated 16 September 2014 that Bilbie Dan received from the defendants’ former solicitors, which stated that the solicitors would not release the defendants’ file until the defendants had paid its legal costs in full. Given that warning sign, Ms Yam submits that Bilbie Dan’s request for funds from the defendants on 3 February 2015, only 16 days before the listed hearing, was particularly unreasonable.

37. Ms Yam submitted that despite the fact that Bilbie Dan had not formally filed a notice of appearance, they had represented to the plaintiff that they were instructed to act for the defendants and so they were substantively under an obligation to abide by the UCPR, r 7.29 requirement to give 28 days’ notice before ceasing to act for the defendants. Mr Hale SC denied that any analysis could be undertaken on the basis that Bilbie Dan’s representations to the plaintiff acted as a de facto notice of appearance.

38. Ms Yam submitted that Bilbie Dan were aware that it would be unreasonable to withdraw so late in the proceedings. She pointed to Bilbie Dan’s 24 December 2014 letter which states “if we have not received any instructions from you by 16 January 2015, we will have to write to the other parties in this matter and confirm that we no longer act for you”. That 16 January 2015 deadline would have permitted Bilbie Dan enough time to give 28 days’ notice to the plaintiff and the Court that they had ceased to act. In fact, the defendants did attend Bilbie Dan’s offices before 16 January 2015, and so believed that Bilby Dan would continue to act for them.

Consideration

39. The present question is whether the plaintiff’s costs thrown away in preparing for and attending the adjourned hearing, for which I ordered the defendants to pay into court, were incurred by the serious neglect, serious incompetence or serious misconduct of the solicitors or were incurred improperly, or without reasonable cause, in circumstances for which the solicitors were responsible.

40. Ms Yam’s submissions are generally persuasive. Mr Hale SC put Messrs Bilbie Dan’s case at its highest and their position may well have been worse but for his effective advocacy.

41. The only applicable ground here for ordering costs against Messrs Bilbie Dan is CPA, s 99(1) for the incurring of costs “without reasonable cause” for which they were responsible. I accept Mr Hale SC’s submission that there is no “serious incompetence” or “serious misconduct” or other impropriety.

42. But Messrs Bilbie Dan should have done something here much earlier, as Ms Yam has submitted. Even if the clients could not be brought to a decision to give instructions quickly, the firm should have been far more proactive to require the client commit earlier than they did. Their 24 December 2014 letter to the client was reasonably appropriate. But it should have been sent much earlier. Alternatively, once the original 16 January deadline expired it should have been acted on immediately to ensure that the other side was not misled into thinking that the first and second defendants were still engaging lawyers.

43. This result does not depend on notices of appearance. In the end Messrs Bilbie Dan did not act between 16 January 2015 and 12 February 2016 to immediately assess the situation and what had been brought to them and then, make a decision not to act, and inform the plaintiff’s solicitors of that decision. To do otherwise was unreasonably to risk the plaintiff incurring unnecessary professional costs.

44. Enough has already been spent on this issue. The above result should perhaps also encompass costs. But I will leave it open to the first and second defendants who may wish to apply for a costs orders.

Conclusion

45. The Court makes the following orders:

1. In the result for the reasons given, Messrs Bilbie Dan must pay personally pursuant to Civil Procedure Act, s 99, 50 per cent of the costs that the defendants have been ordered to pay the plaintiffs.

2. As the first and second defendants have paid $10,000 into Court on account of the plaintiffs’ costs Messrs Bilbie Dan must pay $5000 to the first and second defendants; and

3. the parties are otherwise to pay their own costs of this hearing, unless the first and second defendants apply for an order for costs.

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Amendments

14 April 2015 - put case references in

Decision last updated: 14 April 2015