Rahman v Al-Maharmeh (No 2)

1. [1]

   MEAGHER JA: I agree with Brereton JA.

2. [2]

   LEEMING JA: I agree with Brereton JA.

3. [3]

   BRERETON JA: On 15 March 2021 the Court granted leave to appeal and allowed an appeal by the appellant Samar Abdul Rahman from the refusal by Wilson SC DCJ of her application for leave to commence proceedings after the expiration of the limitation period fixed by (NSW) Motor Accidents Compensation Act 1999 (“MAC Act”), s 109. [1] The Court set aside the orders made by the District Court and in lieu thereof, granted leave to the appellant nunc pro tunc under s 109, to commence the proceedings instituted by her in the District Court against the respondent Sarah Al-Maharmeh by statement of claim filed in proceedings 2019/190375 on 19 June 2019. The costs of the proceedings, both at first instance and on appeal, was not resolved. I made the following observations: [2]

4. [4]

   The Court made the following direction: [3]

5. [5]

   (NSW) Civil Procedure Act 2005 (“CPA”), s 99(1) (“Liability of legal practitioner for unnecessary costs”) 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.” Subsection (2) provides that, “[a]fter giving the legal practitioner a reasonable opportunity to be heard, the court may do any one or more of the following”:

6. [6]

   Subsection (6)(b) provides that “[a] party’s legal practitioner is not entitled to demand, recover or accept, in the case of a solicitor, from the client, any part of the amount for which the legal practitioner is directed by the court to indemnify any party pursuant to an order referred to in subsection (2)(c).”

Submissions

1. [7]

   Pursuant to the direction referred to above, the Court received submissions from the appellant independently of her solicitors Prominent Lawyers (“Prominent”), from the respondent, and from Prominent. Those submissions may be summarised as follows.

2. [8]

   For the appellant, it was submitted that she should not be out of pocket for any costs or disbursements, in respect of both the application at first instance and the appellate proceedings. It was submitted that:

   1. (1)

      As to the application at first instance, if costs were awarded in her favour against the respondent, then the appellant’s solicitor should be liable for any shortfall between the party/party component and the solicitor/client component, or alternatively her solicitor should not be entitled to charge beyond party/party costs. If on the other hand she were ordered to pay the respondent’s costs, then she should have a complete indemnity from her solicitors;

   2. (2)

      As to the appellate proceedings, if the respondent were ordered to pay the appellant’s costs, then the appellant’s solicitor should not be entitled to charge beyond a party/party basis. If costs were not awarded in her favour against the respondent, then the appellant‘s solicitor should pay her costs on an indemnity basis or otherwise completely indemnify her. If the appellant were ordered to pay the respondent’s costs and disbursements, then she should be indemnified by her solicitor.

3. [9]

   The respondent sought an order that the appellant’s solicitors personally pay the respondent’s costs of the motions at first instance and of the proceedings in this Court. It was submitted that although CPA, s 99(2)(b)(ii), was not engaged, because the appellant had succeeded, the Court’s supervisory jurisdiction enabled it to make a wasted costs order of the nature proposed, [4] and that the appellant’s solicitors had failed to fulfill their duty to the Court in a way that had led to the incurring of unnecessary or wasted costs. [5]

4. [10]

   For Prominent it was submitted that, the appellant having succeeded, she was entitled to an order for costs against the respondent. Prominent proffered an undertaking that they would not seek payment of any costs or disbursements related to the motions in the District Court or the appellate proceedings that were not recoverable from the respondent. In those circumstances, they submitted that no “disallowing order” under s 99 should be made.

5. [11]

   The appellant submitted that s 99 does not confer power to order the payment of the respondent’s costs directly as against the solicitor: it was submitted that it is first necessary to decide the question of costs between the appellant and the respondent, and once that is determined, s 99 potentially authorises:

   1. (1)

      disallowing costs as between Prominent and the appellant;

   2. (2)

      ordering Prominent to pay the costs ordered to be paid by their client (the appellant) to the respondent; or

   3. (3)

      requiring Prominent to indemnify the appellant for any costs she might be ordered to pay the respondent.

6. [12]

   It was further submitted that s 99 does not provide for the appellant’s barrister’s fees and other disbursements incurred before the primary judge and on appeal to be awarded against Prominent, although it was acknowledged that the general costs powers of the Court under CPA, s 98(1), extends to do so.

7. [13]

   As to the first step, the appellant sought her costs against the respondent, both of the MAC Act s 109 application before Wilson DCJ and of the appellate proceedings. In the event that the Court were to decline to make costs orders against the respondent, the appellant pressed her submissions of 24 March 2021 to the effect that she should be indemnified by Prominent for any shortfall. Further, she submitted that if she were ordered to pay the respondent’s costs, it should be ordered pursuant to CPA, s 99(b)(ii), that Prominent pay those costs.

8. [14]

   In response to the appellant’s further submissions, the respondent clarified that a wasted costs order was sought in the Court’s supervisory jurisdiction with respect to legal practitioners, and/or under CPA, s 98.

9. [15]

   In response to Prominent’s submissions, it was stated that the costs order that the respondent seeks is one to the effect that the costs of the District Court proceedings and the appellate proceedings, and nothing else, be paid by Prominent.

10. [16]

    Prominent’s position was summarised as follows:

    1. (1)

       the appropriate costs order in the proceedings is that the respondent pay the appellant's costs of the hearing before Wilson DCJ, and the appellant’s costs of and incidental to the appellate proceedings;

    2. (2)

       the alternative costs order sought in the appellant's further submissions (to the effect that Prominent indemnify the appellant in respect of any costs ordered to be paid to the respondent) does not arise; and

    3. (3)

       a 'wasted costs order' should not be made against Prominent in favour of the respondent.

As between the appellant and the respondent

1. [17]

   As to the position between the parties, while it is relevant that the appellant ultimately succeeded, it is also relevant that she required an indulgence, namely leave to commence her proceedings out of time. It is also relevant that as between the appellant and the respondent, the fault for not commencing proceedings within time lay squarely in the appellant’s camp. This was not a case in which any act or omission on the part of the respondent had contributed to the failure to commence proceedings within time. The proceedings were necessitated by the appellant’s default. However, while, as the respondent emphasised, the MAC Act s 109 proceedings were unavoidable once the appellant was out of time, it is also true that the respondent did not have to oppose the s 109 application, and by doing so lead the judge into error as this Court has ultimately found. The respondent, by adopting a position of active opposition, contributed to the extent of the costs incurred, including in particular the costs of an appeal.

2. [18]

   The respondent did not seek an order for costs against the appellant, either in respect of the proceedings in the District Court on in this Court. In the absence of any such application, and a corresponding opportunity to respond to it, such an order should not be made. However, it does not follow that the respondent should pay the appellant’s costs. The cause of the litigation was first, the appellant’s failure to commence proceedings in time in the first place, and secondly, the less than ample explanation provided for that failure, which resulted in the primary judge’s refusal to extend time, and thus the need for an appeal. As between the appellant and the respondent, there should be no order as to costs, to the intent that each party bear its own costs, both at first instance and in this Court.

The position of the solicitors

1. [19]

   That then leaves for consideration the position of the solicitors. In the principal judgment, I said: [6]

2. [20]

   Later, after referring to the principles relevant to wasted costs orders, I continued: [7]

3. [21]

   Despite the invitation implicit in paragraph [97] of the principal judgment, Prominent have not offered, in argument or evidence, any explanation for the events which are wholly within their knowledge or control that led to the failure to institute proceedings in time, nor why so economical an approach was adopted to providing an explanation for it at first instance. In my assessment, Prominent’s egregious and unexplained failure to commence proceedings in a timely manner in accordance with their instructions, and their subsequent failure to furnish to the Court any more than the bare minimum of an explanation, were the fundamental and dominant causes for the proceedings, and the costs incurred in them.

4. [22]

   The first question is whether, as the respondent submits, Prominent should be required to pay the unsuccessful respondent’s costs. The jurisdiction to make such orders is to be exercised “with care and discretion and only in clear cases”. [8] In considering such an application, courts apply a three‐stage approach, asking first, has the legal representative of whom complaint is made acted improperly, unreasonably, or negligently; secondly, if so, did such conduct cause the applicant to incur unnecessary costs; and thirdly, if so, is it in all the circumstances just to order the legal representative to compensate the applicant for the whole or any part of the relevant costs. [9]

5. [23]

   In response to the application, Prominent have argued that there is nothing before the Court to suggest that the impugned conduct involved a breach of the relevant solicitors' duties to the Court, much less a serious dereliction of those duties; and that the respondent has not established a causal link between the impugned conduct of Prominent and the respondent's costs of the proceedings. As to the first, I am satisfied, absent any explanation from them whatsoever, that they have at least acted negligently, and that the negligence was more than mere, which suffices to engage the jurisdiction. [10] As to the second, the MAC Act s 109 proceedings, and the appeal, were necessitated by that negligence. However, the respondent chose to oppose an extension of time, and then to oppose the appeal, and to incur the costs of doing so. Had the respondent not chosen to adopt a position of active opposition, the costs would have been relatively slight. The respondent engaged in the argument, in its own interests, and by doing so considerably increased the costs that would be incurred, both by itself and by the appellant. An application for leave under MAC Act, s 109, may not infrequently be associated with negligence on the part of a plaintiff’s solicitor, and defendants should not be encouraged to oppose such applications in the belief that if unsuccessful they may nonetheless recover costs from the plaintiff’s solicitor. In my view, in all the circumstances of this case it would not be just to order Prominent to compensate the respondent for the whole or any part of its costs.

6. [24]

   That leaves the position as between the appellant, who will not have the benefit of a costs order against the respondent, and her solicitors. It was Prominent’s failure to commence proceedings in a timely manner in accordance with their instructions that necessitated the application, with the result that the appellant incurred costs of the application and the appeal, which ought never to have been required. I am therefore satisfied that costs have been incurred without reasonable cause, in circumstances for which a legal practitioner is responsible, in the sense referred to in CPA, s 99(1)(b).

7. [25]

   While Prominent ultimately proffered an undertaking that they would not seek payment of any costs or disbursements related to the motions in the District Court or the appellate proceedings that were not recoverable from the respondent, that was in the context that they were proposing that the respondent be ordered to pay the appellant’s costs, and it is not entirely clear that the offer of an undertaking extended to circumstances where there is to be no costs order against the respondent in favour of the appellant. No such undertaking was proffered during the hearing, when there was an opportunity and an invitation to do so.

8. [26]

   While the appellant should not be required to bear the respondent’s costs, she should not be out of pocket, and all costs and disbursements (including counsel’s fees) of the relevant proceedings should be disallowed as between Prominent and the appellant. The intent is that the disbursements (including counsel’s fees) are to be borne by Prominent.

Orders

1. [27]

   The following orders should be made:

   1. (1)

      As between the appellant and the respondent, make no order as to costs of the proceedings in the District Court on the appellant’s motion filed 3 October 2019 and the respondent’s motion filed 28 August 2019, or of the proceedings in this Court, to the intent that each party bear its own costs; and

   2. (2)

      Pursuant to (NSW) Civil Procedure Act 2005, s 99, order that all costs and disbursements (including counsel’s fees) of the proceedings referred to in order (1) be disallowed as between Prominent Lawyers and the appellant, to the intent that the disbursements (including counsel’s fees) are to be borne by Prominent Lawyers.