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Recently, in an unusual piece of litigation, the New South Wales
Supreme Court further refined the test for making personal cost
orders against solicitors.
The power of a court to make cost orders against solicitors is
found in both section 99 of the Civil Procedure Act 2010
and sections 345-348 of the Legal Profession Act 2004.
It has been generally accepted that the jurisdiction should not
be exercised lightly and that a solicitor had to display a serious
(or moderately serious) degree of "misfeasance" before
the jurisdiction would be invoked.
The decision in Harris v Villacare Pty
Limited1 demonstrates that the personal costs order
jurisdiction can be triggered by potentially "low level"
errors of judgment or by conduct which again, on a relatively low
level, is regarded as being "without reasonable
cause".
The facts of the litigation (at least, at this stage) were
relatively simple:
the plaintiff, who was seriously injured in a motor vehicle
accident, applied for a preliminary discovery order against his
previous employer
the employer carried workers compensation insurance and the
workers compensation insurer instructed the lawyers to appear for
the defendant
initially the defendant resisted the preliminary discovery
application but ultimately, consent orders were made:
granting the plaintiff certain preliminary discovery
orders
ordering the defendant to pay the plaintiffs' costs.
there was no suggestion that the defendant would be unable to
meet the costs order. Nevertheless, the judge, of his own motion
raised the issue of a potential costs order against the
defendant's solicitors personally.
The focus of the judge's attention was an affidavit of the
defendant's solicitor which was over four pages long and
attached "78 pages of annexures separated by 25
dividers".
In the judgment, the Court took the view that the affidavit:
was largely irrelevant to the matters in issue
to the extent to which it was relevant, attached an excessive
number of documents.
The judge expressed the view that the affidavit was a waste of
time and paper.
In their defence, the solicitors filed evidence and put
submissions that:
in evidentiary matters, the practice of various judges is not
entirely consistent
the affidavit, in draft form, had been submitted to
counsel
the extent of the annexures arose out of the solicitors'
desire to put a whole chain of correspondence (on a particular
issue) before the Court rather than "cherry pick"
particular items of correspondence.
The judge was not persuaded by this material.
The Court noted that one limb of section 99 required
"serious neglect, serious incompetence or serious
misconduct". The judge concluded that none of these elements
was present.
The judge then reviewed the second limb of section 99 and
concluded that it was appropriate for him to make a personal costs
order simply if costs were incurred "without reasonable
cause".
The judge took the view that the costs occasioned by irrelevant
or overly lengthy affidavit evidence filed by the defendant's
solicitor were costs occasioned "without reasonable
cause".
The defendant's solicitor suffered a personal costs
order.
The judge concluded:
"One of the most important tasks of lawyers engaged in
litigation is to sort the relevant from the irrelevant and to make
the judgments enabling this to occur. Experience over 40 years
shows that, increasingly, this is not being done and the Court and
the parties are obliged to deal with, as occurred here, 50 or so
pages and in other cases hundreds of pages when, at the most, one
or a much smaller number would do. Although the circumstances are
different, one only has to reflect on the number of occasions when,
of hundreds of documents included in "Tender Bundles"
only a relative few are referred to, to illustrate the
point.
Whether the change in practice is inspired by a greater fear
of being sued, or the fact that charging for time or copies often
rewards an increase in the size of the task or in the volume of
paper, or simply avoids having to make decisions, there can be no
doubt that the courts are being deluged with material that years
ago would not have passed solicitors' desks or counsels'
chambers and should not now."
Comment
The judgment demonstrates an increasingly aggressive approach to
the personal costs order jurisdiction.
While the amount in issue was relatively small, this new
development is somewhat disturbing and practitioners and insurers
will need to be careful and conscious of current changes.
Footnote
1Harris v Villacare Pty Limited
[2012] NSWSC 452.
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about your specific circumstances.
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