Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 8)

1. [1]

   HIS HONOUR: On 15 May 2020 I handed down my principal judgment, Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 7) [2020] NSWSC 554. I should say that this judgment assumes familiarity with that judgment and where possible I will not extensively repeat the findings that I made there. Unless otherwise stated all references to my judgment, will be to Canon Finance (No 7).

2. [2]

   In that judgment I made the following findings in respect to the claim against VPD and Messrs Altenburg and Edwards:

   1. (1)

      VPD’s LiveOffice WAN was intended to include the full SQL software licence and the SQL software was installed on the server dedicated to RMP’s use in VPD’s data centre;

   2. (2)

      No representation had been made by VPD or its representatives that it was Fuji Xerox (“Fuji representation”), despite Dr Beckwith’s firm belief that those representing VPD acted for Fuji;

   3. (3)

      Even if the Fuji representation was made it was not the reason that Dr Beckwith repudiated the contract with VPD;

   4. (4)

      VPD made the following representations to RMP:

   5. (5)

      There was no evidence put forward at the trial that demonstrated that the representations above were misleading or deceptive.

   6. (6)

      I made contingent findings in relation to causation and loss.

3. [3]

   In relation to the case against BHD I found that:

   1. (1)

      There was no evidence that anyone on behalf of BHD had any awareness of anything that was said by Mr Edwards or Mr Altenberg when they were pitching VPD’s goods and services to RMP, nor did they authorise VPD or its representatives to speak on their behalf;

   2. (2)

      BHD did make the representation that it was the financial arm of VPD;

   3. (3)

      This representation was not in contravention of s 12DA Australian Securities and Investment Commission Act 2001 (Cth) (“ASIC Act”) because at all times the arrangement had been held out as a commercial lease securing a commercial loan; and

   4. (4)

      RMP’s case against BHD was one of vicarious liability for the misleading and deceptive conduct alleged against VPD and Messrs Altenberg and Edwards and that on this basis as the claim against VPD and Messrs Altenburg and Edwards failed so to must the claim against BHD, leaving aside technical issues relating to agency.

4. [4]

   For completeness I should record that Mr Moore of counsel, who appeared for RMP and Dr Beckwith, at the hearing of the principal proceedings sought to advance the argument that the failure to include the provision of the LiveOffice WAN system in the Rental Payment Agreement amounted to misleading and deceptive conduct, given the oral representations that had been made about the provision of this service. In Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 3) [2018] NSWSC 1378, I held that it was not open on the pleadings for the cross-claimants to advance this argument. The issue was also the subject of my ruling in Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 4) [2018] NSWSC 1379, where Mr Moore, who represented RMP and Dr Beckwith sought leave to amend the cross-claim to add additional averments to run this case. I refused leave to amend the cross-claim to advance this case. Notwithstanding my rulings some of the evidence led and submissions made by Mr Moore focused on this argument and, inevitably, I was required to explain more fully in my judgment my view about why it did not run.

Relevant orders

1. [5]

   I ordered that the cross-claim be dismissed and entered judgment in favour of the first, second, third and sixth cross defendants as against the cross-claimants: at [315].

2. [6]

   I made the following orders as to costs (order (3)-(6)):

BHD’s application

1. [7]

   In accordance with order (4), BHD, the sixth cross-defendant, made an application for a special costs order by lodging with my chambers a Notice of Motion dated 29 May 2020, an affidavit in support made on the same day and written submissions. I will set out the orders sought in full below:

Mr Altenberg’s application

1. [8]

   Mr Altenburg, the second cross defendant made an application for a special costs order in the same way by Notice of Motion dated 29 May 2020. The following orders were sought:

The application of VPD and Mr Edwards

1. [9]

   VPD and Mr Edwards, the first and third cross defendant, made an application for a special costs order in the same way by Notice of Motion dated 29 May 2020. The following orders were sought:

Lemoto v Able Technical

1. [10]

   On 29 May 2020, by way of email, Ms L Chan, counsel for BHD, through my associate, drew my attention to the following passage from Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300; [2005] NSWCA 153 (“Lemoto”) at [148]:

2. [11]

   In light of the observations of McColl JA above and given the nature of the orders sought by BHD, VPD and Messrs Edwards and Altenburg against the legal practice and its principals I directed the parties to appear before me for a directions hearing on 10 June 2020 with the intention of listing the matter for hearing rather than dealing with the application in chambers on the papers. I listed the matter for hearing on 10 July 2020.

3. [12]

   Having given prior notice in accordance with r 7.29 Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), on 10 June 2020 Mr Gorval filed a ceasing to act notice for RMP and Dr Beckwith. Dr Beckwith, who had been given notice of both, chose not to appear at either the directions hearing or the hearing of 10 July 2020; nor did anyone else appear purporting to represent Dr Beckwith or RMP. The notice included invitations being sent to Dr Beckwith to access the virtual hearing on MS Teams. The invitations were expressly declined.

Procedural issue

1. [13]

   BHD filed an Amended Notice of Motion on 3 July 2020 seeking to amend order 2 in the following way:

2. [14]

   Ms Chan submitted that the amendment merely reflected what was already in BHD’s written submissions and that it was by mere inadvertence that the original Notice of Motion did not correspond with all of the statutory grounds advanced in the written submissions.

3. [15]

   Mr Fernon attached an Amended Notice of Motion to his written submissions filed on 6 July 2020 seeking to add the following wording to orders (3) and (4):

4. [16]

   VPD and Mr Edwards filed an Amended Notice of Motion on 7 July 2020 seeking to add the following wording to orders (2) and (3):

5. [17]

   I record that although Mr Lloyd of counsel submitted that his client was disadvantaged by such late amendments, I granted each of the moving parties leave to rely upon an amended notice of motion adding reliance upon s 62 Uniform Law. No specific substantive or forensic prejudice was pointed to. Accordingly, I will deal with each of the orders sought as outlined in the parties amended Notice of Motion.

Another procedural issue

1. [18]

   While my judgment was reserved, on 30 November 2020, the Court received a letter from a person appointed trustee in bankruptcy for Dr Beckwith informing the Court that a bankruptcy order had been made against him on 25 August 2020. For that reason, I convened a directions hearing on 10 December 2020 to ascertain the position of the parties regarding the effect of s 58(3) Bankruptcy Act 1966 (Cth) on the application against Dr Beckwith.

2. [19]

   Mr Fernon (now of senior counsel) was able to inform me that his solicitors’ inquiries established that Dr Beckwith’s bankruptcy was made on his debtor’s petition and that there was no suggestion from the company register that RMP’s legal status was in doubt. After discussion counsel agreed to confer to attempt to reach a consensus position. Mr Lloyd (now also of senior counsel) indicated that Dr Beckwith’s bankruptcy could not affect the solicitors’ position and he was anxious for the matter to be determined soon.

3. [20]

   I allowed a few days for the parties to attempt to reach consensus. By email dated 15 December 2020, writing on behalf of counsel for all moving parties, Mr Fernon advised me that so far as each motion sought relief against Dr Beckwith that part of the application was withdrawn. I assume that this is because of the stay contained in s 58(3) Bankruptcy Act: Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52; [2007] HCA 56 at [67].

4. [21]

   Any references to the position of Dr Beckwith, as opposed to RMP, in these reasons should be read as providing context only as relevant to the extant claims.

BHD’s argument

1. [22]

   Indemnity costs are sought against RMP on two bases. First on 21 August 2018, BHD served an “offer of compromise” offering to settle for a verdict in favour of BHD with no order as to costs. Ms Chan “conceded” that the offer did not comply with Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) because it was not open for 28 days given the proximity of the commencement of the hearing on 27 August 2018: but compare with UCPR 20.26(7)(b). However, Ms Chan submits that the offer should be given effect as a Calderbank v Calderbank offer enlivening a discretion to order that BHD’s costs are payable on an indemnity basis. Secondly, and in the alternative, Ms Chan argues that indemnity costs are warranted because the proceedings were brought and maintained by a party having “no reasonable prospects of success”. See for example Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359. Ms Chan referred to my findings at [96] – [98] and [299] – [312] of my judgment.

2. [23]

   Ms Chan submitted that the solicitors should pay BHD’s costs on an indemnity basis. Relying on the principles expounded in Lemoto (at [107]-[112]), Ms Chan submitted that it was “improper” for the solicitors to bring and maintain its claim against BHD because it was an unarguable and futile case (s 99(1) Civil Procedure Act). She argued that on the facts available to the solicitors, any reasonable lawyer would have concluded that there was no arguable case against BHD. She submitted that on the pleadings it was impossible to understand the basis on which the claim was made against BHD. Counsel submitted that the inadequacy of the claim was further demonstrated by the numerous requests for particulars made by BHD which were not satisfactorily answered and the lack of detailed submissions advanced at the hearing to support the claim against BHD. Ms Chan argued that initially the claim against BHD had been brought under the Australian Consumer Law (“ACL”) and that it was not until she had drawn to Mr Moore’s attention that a claim against BHD had to be brought under the ASIC Act that the claim was belatedly amended. Ms Chan also submitted that damage was of the gist of the claim whether brought under the ACL or ASIC Act and that the claim against BHD was incapable of sounding in other than purely nominal damages.

3. [24]

   Ms Chan also argued that I should draw an adverse inference from the failure of the solicitors to adduce evidence of the advice given by Mr Moore supporting the claim as framed to infer that the claim against BHD was futile. It was said I should infer that counsel’s advice would not advance the solicitors’ case and I should more readily infer that the case against BHD was brought without reasonable prospects of success.

4. [25]

   Moreover, counsel submitted that the result itself demonstrated the baselessness of the claim.

Mr Altenburg’s argument

1. [26]

   Mr Fernon submitted that an indemnity costs order should be made against RMP and Dr Beckwith for the whole of the claim because after receiving legal advice they should have known that the claim against Mr Altenberg had no prospect of success. In the alternative, Mr Fernon submitted that pursuant to UCPR r 42.15A I should make an indemnity costs order against RMP and Dr Beckwith from 27 October 2017, the date on which an offer of compromise complying with the rules was made to RMP and Dr Beckwith. The offer was for judgment in favour of Mr Altenburg with no order as to costs. The offer was neither accepted nor otherwise responded to. In the event the offer was more favourable to RMP than the judgment.

2. [27]

   In relation to the solicitors Mr Fernon submitted that an indemnity costs order should be made against them because the case against Mr Altenburg had no real prospects of success. With respect to the Fuji representations, Mr Fernon submitted that Dr Beckwith’s evidence provided no reasonable basis for advancing this claim as the evidence of Mr Dimond and Mr Henderson demonstrated that it was Mr Dimond and Mr Henderson who made the relevant decisions about the systems and practices RMP would adopt. It was on Mr Henderson’s advice that the “VPD/Fuji” quote was the best option and not that Fuji would be supplying the services that RMP entered into the Subscriber Agreement.

3. [28]

   He argued by reference to my judgment at [296] and [297] that the solicitors had failed to advance a case on the loss and damage occasioned by the alleged misleading and deceptive conduct and that the experts qualified to give evidence by the solicitors had not been briefed to answer the ultimate question at the hearing, whether the software would perform to the standard required. Mr Fernon argued that the solicitors could not shield behind the advice of Mr Moore because as solicitors their duties were independent of counsel’s and that in any event when provided with the opportunity to put Mr Moore’s advice before the court they failed to do so.

4. [29]

   Mr Fernon submitted that the inadequacy of the conduct of the claim by the solicitors is evidenced by their failure to provide the documents identified in the cross-claim until 1 September 2017 despite written requests and the request for further and better particulars on 4 September 2017 and 29 September 2017 which remained unanswered until 24 October 2017.

5. [30]

   Mr Fernon argued that in the event that I found part only of Dr Beckwith’s and RMP’s claim to be hopeless I could make an order for a proportion of the costs of the proceedings be paid by the solicitors.

VPD’s and Mr Edwards’s argument

1. [31]

   Mr Morris QC, who appeared with Mr Erskine of Counsel for VPD and Mr Edwards, argued that the costs payable by the unsuccessful cross-claimants ought to be payable on the indemnity basis. He relied upon what he described as “the maintenance of an utterly untenable cross-claim and the conduct of the trial, which was itself entirely unreasonable” (Written Submissions [8]). He referred to many of the factual findings made in my final judgment to make good this argument. He also relied upon three letters exhibited with his instructing solicitor’s affidavit (Affidavit, Anthony Thomas Delaney, 29 May 2020). Those letters were dated 10 July 2017; 31 July 2017 and 18 September 2017, pointing out the serious shortcomings of RMP’s case, the relevant principles informing the exercise of the discretion to award indemnity costs and the risk to the solicitors that such an order may be sought against them. For this reason, he submitted that the solicitors were aware of the misconceived and untenable nature of the claim and ought to be held accountable for the unnecessary incurring of costs.

2. [32]

   Mr Morris submitted that the solicitors should pay VPD’s and Mr Edwards’s costs on an indemnity basis. He advanced similar submissions to Mr Fernon, arguing that the solicitors had no basis for establishing that the representation about the suitability of the software was misleading. He noted that the expert they had qualified was unable to answer this question. He further argued that the solicitors failed to ground in the evidence a claim in loss and damage, a crucial element of a claim brought under the ACL.

3. [33]

   Like Mr Fernon, Mr Morris argued that the solicitors were unable to rely on the advice of Mr Moore to exonerate them from a claim for costs on an indemnity basis as the solicitors were required to satisfy themselves of the viability of the claim. In any event, he argued that an adverse inference should be drawn that the advice of counsel was not favourable to RMP and Dr Beckwith’s claim in circumstances where privilege had been waived (as it had been) and the solicitors had failed to adduce evidence of counsel’s advice.

The solicitors’ argument

1. [34]

   Mr Lloyd, who appeared for the solicitors, argued that there is evidence that there was an arguable case to be made against the other parties. To this end he provided me with a comprehensive table setting the elements of the cause of action, the provable facts in relation to that cause of action and my findings on each element.

2. [35]

   In relation to the Fuji representation Mr Lloyd submitted that this evidence was discernible from Dr Beckwith’s affidavit. Mr Lloyd submitted in accordance with Tombling v Universal Bulb Co Ltd [1951] 2 TLR 289 at 298; Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] HCA 26 at [34]; Lemoto at [92] that it was not improper for a solicitor to accept the client’s version of events and that the process of discerning the weight to be given to the evidence falls to the process of the administration of justice, not the solicitor. He further submitted that the reliance on Dr Beckwith’s first affidavit to substantiate the claim was not without some merit given the lengthy affidavit’s filed in reply and the time taken by all counsel at the hearing to examine witnesses and test the accuracy and reliability of the competing claims. Ultimately, Mr Lloyd submitted that the three core aspects of RMP’s case on misleading and deceptive conduct, the element of reliance and resulting loss would have been made good if Dr Beckwith’s affidavit evidence, including his second affidavit, had been accepted.

3. [36]

   Mr Lloyd argued by reference to my judgment at [307] that the representation that BHD was the financial arm of VPD had been made good. Mr Lloyd submitted that with respect to the vicarious liability argument there was an arguable case as it hinged on the matters, facts and circumstances relied on to found the principal claim. On the argument as to the adequacy of the pleadings and response to the request for particulars, Mr Lloyd submitted that these matters should have been appropriately ventilated under UCPR prior to the hearing and should not be stockpiled for use as ammunition on the question of costs

4. [37]

   In relation to damages Mr Lloyd reminded me that it was not just damages but declaratory relief which was sought. He further submitted that the question is whether there is a reasonably arguable claim that can sound in damages, even nominal damages. He emphasised that the thrust of the case on damages was in effect a claim for an indemnity for the amount due to the plaintiff, Canon Finance, under the Rental Payment Agreement even if I had been unpersuaded by that approach for the reasons expressed at [292]-[298].

5. [38]

   Mr Lloyd also argued that the solicitors briefed experienced counsel and, I should infer, acted in accordance with his advice so far as their instructions permitted. Mr Moore represented RMP and Dr Beckwith from early in the proceedings and for the whole of the trial before me. Mr Moore was admitted as a barrister in 1977 and, notably, had published a book entitled “Deceptive Trade Practices”. Mr Lloyd submitted that a conclusion can be drawn that as the parties have not sought an order for costs against Mr Moore that he and by extension the solicitor’s acted with a proper purpose.

6. [39]

   I interpolate that at the hearing Mr Lloyd advanced submissions in relation to the procedure to be adopted where the trial court had concluded that the claim or defence had no reasonable prospects of success. No such explicit finding had been made here. He submitted that in this case there would be a need for a rehearing which I would not engage in. These procedural matters relate to the availability of the presumption under cl 6 Uniform Law. All moving parties assured me that they were not relying on cl 6 presumption and there is no need to consider this submission further.

7. [40]

   In relation to the Jones v Dunkel inference advanced by each party Mr Lloyd argued that such an inference is incapable of being drawn given the late amendments to include Sch 2 by the parties. He submitted that whereas cl 6 Sch 2 provides the court with the power to order the disclosure of otherwise confidential documents in response to an order for indemnity costs against a solicitor, s 99 Civil Procedure Act does not. Mr Lloyd further submitted that no adverse inference could be drawn about the failure to adduce Mr Moore’s advice given that privilege was waived so close to the costs hearing and the parties all had the same opportunity, such as it was, to obtain the material for themselves. The moving parties had not sought to avail themselves of that opportunity but preferred to rely on an asserted inference only.

8. [41]

   Mr Lloyd argued that all costs orders are discretionary and that in deciding whether to make such an order I should consider the conduct of Mr Morris’s client in the whole sorry Exhibit XD1 saga ([183]-[197]), even if any entitlement to the wasted costs were eschewed, as Mr Morris had made clear. Mr Lloyd also argued that it was significant to the success of Dr Beckwith and RMP’s claim that I did not allow amendments to the cross claim at the commencement of the hearing permitting Mr Moore to run his preferred case: Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 3) [2018] NSWSC 1378; Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 4) [2018] NSWSC 1379.

Statutory framework

1. [42]

   Section 98 Civil Procedure Act 2005 (NSW) is in the following terms:

Case law on costs on the indemnity basis

1. [43]

   The principles informing the exercise of the Court’s discretion to depart from the general rule applicable in adversary litigation, that the successful party is entitled to an order for costs on the usual party and party basis, to award costs on the indemnity basis were not seriously in question in this case. For this reason it is unnecessary to multiply references to the many authorities which have expounded the relevant considerations. Counsel were generally agreed that the relevant principles were still to be found in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 (Woodward J) and Colgate-Palmolive Company & Another v Cussons Pty Ltd (1993) 46 FCR 225 at 232 – 234 (Shepherd J). I accept Mr Morris’s submission that the principles to be derived from these cases and the decision of the Court of Appeal in Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616 are admirably summarised by White J (as her Honour then was)(with whom Williams JA and Wilson J agreed) in Di Carlo v Dubios and Ors [2002] QCA 225 at [36] – [38], which I now set out:

2. [44]

   It is, I think, also worth bearing in mind Shepherd J’s conclusion expressed in his sixth principle formulated in Colgate-Palmolive at 234:

Decision on BHD’s application against RMP

1. [45]

   It will be recalled that BHD seeks an order for indemnity costs against RMP on two bases. First that RMP’s case against BHD was, effectively, hopeless. In this regard it might fall into that category summarised by White J in the Queensland Court of Appeal of advancing a case in “wilful disregard of known facts”. And secondly, and in the alternative by seeking to treat the offer of compromise as a Calderbank v Calderbank offer.

2. [46]

   The decision should be made against the background provided by the general principles I have referred to including that the norm is that costs are awarded to the successful party on the usual party and party basis, or, as it is now put, on the ordinary basis. There needs to be, as White J expressed it, “some special or unusual feature in the case to justify a court departing from the ordinary practice”. As I have said, bringing a case in wilful disregard of known facts is one such circumstance recognised by the cases and another is “the imprudent refusal of an offer to compromise”. Bringing a case in wilful disregard of known facts may, perhaps, be equated with the “without reasonable cause” requirement in S99(1)(b), or “without reasonable prospects of success” in Sch 2 of Uniform law.

3. [47]

   For completeness I will set out a number of the primary findings of fact that I made in my judgment at [12] – [86]. In general terms, RMP repudiated the contract for the supply of IT goods and services because it found itself unable to comfortably afford the monthly outgoings. Dr Beckwith did not appreciate that he had entered into a commercial loan agreement structured as a commercial lease over the equipment and that the effect of bringing the arrangements to an end was that RMP would be liable to repay the full amount. He did not appreciate that BHD had entered into the loan arrangements effectively as the agent for Canon Finance, as principal. When the reality of these matters were drawn to his attention in February 2016 he formed the conviction that he had been “had”, my word. And this is made clear from the evidence I have summarised from his email correspondence at [72] to [77]. His position is summarised in his affidavit of 19 October 2017 at [111] which I have set out at [77]. Although I rejected his evidence about these matters, I did not regard him as a dishonest witness. Rather he was genuinely mistaken about matters which would have been clear to him if he had paid proper attention to his own business interests. One factor he relied upon was his belief that it had not been disclosed to him that the financial obligations under the contract would be owed to Canon Finance. There can be no doubt on the findings I made that Dr Beckwith convinced himself that he had been severely misled by each of BHD, Mr Altenburg, Mr Edwards and VPD.

4. [48]

   Focusing on facts relevant to BHD’s claim for indemnity costs, I did express difficulty in understanding RMP’s case (see my judgment at [299]). As I understood the case made against BHD, it turned upon what was said to be a misleading representation that BHD was the financial arm of VPD and that it was vicariously liable on the basis of the principals discussed in Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Limited (1931) 46 CLR 41; [1931] HCA 53. I found that the “financial arm” representation was made but the second and more significant limb of the claim failed because there was no wrongful conduct of others to be attributed to BHD, and the conditions for a case of vicarious liability in any event had not been otherwise satisfied. In particular, I was not satisfied it had been proved that BHD was a principal of VPD in relation to the contract for the provision of the IT equipment and services, notwithstanding that it was BHD which was the party the Rental Payment Agreement and not VPD.

5. [49]

   I am not satisfied that the difficulty counsel had in articulating his client’s claim against BHD, and the consideration that the claim failed, of themselves demonstrate that there was a “wilful disregard of known facts” in maintaining the claim against BHD. The claim was obviously one of some difficulty involving a degree of complexity, but RMP’s claim essentially failed because it failed to satisfy me on the balance of probabilities that its version of the contestable facts should be accepted. That the case was never strong, does not establish that it was hopeless, or so weak that no commercial litigant acting in its own interests would institute and maintain it. Had RMP’s version been accepted, as Mr Lloyd argued, the result would have been different. I reject this limb of the argument for indemnity costs.

6. [50]

   I turn then to the second ground which relates to the informal offer of compromise served on 21 August 2018. I interpolate I am not convinced that Ms Chan’s concession was well made given UCPR 20.26(7)(b). This part of the argument is capable of falling into Shepherd J’s category of “an imprudent refusal of an offer to compromise”, always accepting that the categories of case which may attract the exercise of the discretion invoked by BHD are not closed. It is well recognised, especially in commercial litigation, that a “walk away” offer may be one of considerable value. This may be particularly so in what seems to have been very cost intensive litigation. The adoption of the form of an offer of compromise under the rules, even if the offer was non-compliant in a material way, would convey to the recipient that the offer was seriously made with a view to having costs consequences if rejected. It would be implicit to the recipient that the offer was made with a view to laying a foundation for an application for indemnity costs if the offer was refused.

7. [51]

   While I have not been persuaded that the claim against BHD viewed prospectively had no reasonable prospect of success, a prudent litigator would not have regarded it as strong. Indeed, by the time the offer was made, its weakness would have been palpable. When it was made RMP had already settled with Canon Finance and the latter’s entitlements against RMP were founded on the assignment from BHD to Canon Finance of its chose in action in the Rental Payment Agreement. Avoidance of the Rental Payment Agreement, to which BHD was a party, was no longer an essential factual ingredient in RMP’s prospect of success against the other parties for an indemnity for RMP’s liability to Canon Finance. I am satisfied given all the circumstances that it was “imprudent” for RMP to reject BHD’s offer. If it is necessary to so find, this is a sufficiently special or unusual feature of the case to justify displacement of the norm that the successful party is entitled to costs on the ordinary basis. I am satisfied that it is appropriate in the exercise of my discretion to order that BHD’s costs that I have awarded against RMP be assessed on the usual basis to 21 August 2018 and thereafter on the indemnity basis.

Decision on Mr Altenberg’s application against RMP for indemnity costs

1. [52]

   I remind myself that there are two bases to this application too. First, RMP should have known that its claim had no real prospects of success. And, secondly the costs consequences of RMP’s failure to accept the offer of compromise of 27 October 2017 by operation of r 42.15A UCPR.

2. [53]

   That RMP’s claim was comprehensively lost does not of itself establish that it had no prospects of success. With the exception of the representation that the IT equipment and services were to be provided by Fuji/Xerox, I found that each of the core representations contended for by RMP were made by VPD and Mr Edwards but not by Mr Altenberg ([260] – [262]). There was no separate claim that Mr Altenberg was a person “involved” in the contravention of s 18 of Sch 2 (the Australian Consumer Law), Competition and Consumer Act 2010 (Cth) (“the ACL”).

3. [54]

   Although the Fuji representation was rejected by me, because of the state of knowledge of Mr Henderson and Mr Dimond, I was also satisfied that Dr Beckwith had been left with the strong and genuine belief that the IT equipment and services were to be supplied by Fuji/Xerox. He knew that the original approach was made to Fuji/Xerox, he probably appreciated that Mr Altenberg worked for that company, and that the goods and services were to be provided by a multinational company like Fuji/Xerox was doubtless capable of being a consideration material to the entry into the contract. Dr Beckwith was the controlling mind of RMP and although he relied upon Mr Henderson and Mr Dimond and signed off on the agreement on their assessment of the proposal, the final decision was his, even if Mr Dimond was authorised to sign the Subscriber Agreements on behalf of RMP. Mr Dimond’s authority was directly derived from Dr Beckwith. Had Dr Beckwith’s evidence been accepted, the outcome of the case in relation to this particular representation may well have been very different.

4. [55]

   I am not satisfied that Mr Altenberg has demonstrated that RMP’s case against him had no real prospect of success. Even were it otherwise, I may have had reservations about whether an order for indemnity costs on this count was appropriate given Mr Altenberg’s obfuscation when he was asked about his role in the proposal by Mr Henderson, in the presence of Dr Beckwith at the September Meeting.

5. [56]

   On the other hand, I am satisfied that Mr Altenberg has obtained a judgment on the claim which is no less favourable to him than the terms of the offer within the meaning of UCPR 42.15A. I am not of the view that Mr Altenberg’s obfuscation is a matter which should lead me to order otherwise than in accordance with the provisions of the rule. I will order RMP to pay Mr Altenberg’s costs on the ordinary basis up to 27 October 2017 and on the indemnity basis thereafter.

Decision on VPD’s and Mr Edwards’s applications

1. [57]

   RMP’s case against VPD and Mr Edwards was built upon four representations said to have been made. The core representations were summarised at [89] and [252] of my judgment they are: the IT equipment, software and services would address RMP’s current IT inefficiencies; the equipment software and services would address certain scanning issues RMP was experiencing; and the equipment, software and services would be quicker and more efficient. The fourth representation is the Fuji representation which I dealt with at [241] – [251]. I accepted that the three core representations had been made, but the Fuji representation had not. In relation to the Fuji representation, I repeat that I accepted that Dr Beckwith genuinely believed that that representation had been made and on the basis of it had the expectation that that company or a related company, VPD, was the supplier. That part of the case was lost because I accepted evidence other than Dr Beckwith’s evidence.

2. [58]

   I did not accept that the evidence established that the representations were misleading or deceptive. I found that the representations were material and to that extent were relied upon by RMP in entering into the various agreements, but I found that the factual cause of the claimed loss was RMP’s repudiation of the contracts for financial reasons. I was not satisfied that RMP had proved its loss even though it obviously had attracted a legal liability to Canon Finance, for the simple reason that I was persuaded that had it not entered into the contracts for the supply of VPD’s goods and services it would have entered into a similar contract with another supplier at about the same time and in the same price bracket.

3. [59]

   All of these findings really depended upon my preference for evidence other than that of Dr Beckwith on most issues. Had I accepted his evidence in preference to the evidence of other witnesses, the outcome may well have been different. Had I accepted Dr Beckwith’s evidence in preference to the evidence of the other witnesses and contemporaneous documents even the Fuji representation may have got up.

4. [60]

   For these reasons it cannot be said, in my judgment, that RMP’s claim against VPD and Mr Edwards had no reasonable prospect of success. Doubtless by the time the final hearing commenced before me, viewed from the standpoint of the cross-defendants, there was a considerable, indeed formidable, body of evidence generated by the usual pre-trial procedures, in the possession of all parties, against RMP’s case. By then, RMP’s case certainly could not have been described as strong. Viewed objectively it might best have been assessed as weak, but it is wrong to say it was complete untenable. It was not unreasonable for RMP to maintain it.

5. [61]

   In coming to this conclusion, I have borne in mind that, originally, when the cross-claim was commenced, Mr Henderson and Mr Dimond were joined as cross-defendants. Although Mr Henderson was called in RMP’s case, given that he had left RMP’s employ at the end of 2016 when the contract remained on foot, he was not really in RMP’s camp. I infer that RMP’s lawyers did not have access to him until after the resolution of the case against him.

6. [62]

   I acknowledge that I did not accede to Mr Moore’s application to amend the cross-claim to run the case he preferred to present which was that the Rental Payment Agreement was the actual contract, the Subscriber Agreements were mere quotes, and the actual contract did not provide for other than the supply of necessary hardware. However, this does not seem to me to be relevant to the issue I now have to determine. In my judgment I found it necessary to address aspects of that matter and I am not of the view that the preferred case had any real prospect of success because the Subscriber Agreements were contracts for supply binding VPD to provide all of the equipment, software and services necessary to set up and run the cloud based IT system offered.

7. [63]

   VPD and Mr Edwards have not established the condition relied upon to enliven the consideration of an indemnity costs order in their favour. I might also say that as Mr Lloyd argued the unsatisfactory evidence initially lead on behalf of VPD and Mr Edwards on the “full SQL licence” issue (see [175] - [240]) is a matter highly relevant to the question of whether these parties were otherwise appropriate beneficiaries of an indemnity costs order. As I have said, Mr Morris has made clear that VPD and Mr Edwards would not pursue the costs wasted on the ventilation of that issue by reference to the false document, Exhibit XD1. Mr Morris conceded it “was in fact not a genuine document” (501.50 – 502.1T) although initially proffered by VPD’s principal witness as such. A disavowal to any entitlement to the costs wasted on that false issue does not exhaust the demands of justice raised by it. I would have thought, had it been necessary to address it, that the promulgation of that issue by VPD amounted to what might be referred to as disentitling conduct. It would seem to me that only a worthy litigant without forensic fault is entitled to the benefit of an indemnity costs order when it would otherwise be appropriate. I wish to make it completely clear that I do not include either Mr Morris, Mr Erskine or their instructing solicitor in this criticism. Their conduct was in every way beyond reproach. They were, as it were, the victims of their instructions in this regard.

8. [64]

   I will not make an indemnity costs order against RMP in favour of VPD and Mr Edwards.

Statutory provisions concerning solicitors’ liability for costs

1. [65]

   Section 99 Civil Procedure Act is expressed as follows:

2. [66]

   Section 62 Uniform Law is expressed as follows:

3. [67]

   Under cl 2(1) Sch 2 Uniform Law a law practice must not provide legal services on a claim or a defence unless a legal practitioner reasonably believes on the basis of provable facts and a reasonably arguable view of the law that it has reasonable prospects of success.

4. [68]

   By cl 2(5) legal services that are provided in contravention of cl 2 amount to the provision of legal services without reasonable prospects of success. And by cl 4(1) the provision of legal services without reasonable prospects of success is capable of constituting unsatisfactory professional conduct or professional misconduct.

5. [69]

   Clause 5 and 6 are important and I will set them out in full:

Case law on solicitors’ liability for costs

1. [70]

   In Lemoto McColl JA dealt with the construction and meaning of Part 11, Div 5C Legal Profession Act 2004 (NSW). The provisions of that Act are substantially replicated by Sch 2 Legal Profession Uniform Application Act. I will set out the relevant findings of her Honour below at [92] – [142]:

2. [71]

   I note that McColl JA emphasised that the decision to make such a costs order is discretionary: at [130].

3. [72]

   In Newell; Muriniti v De Costi (2018) 97 NSWLR 398; [2018] NSWCA 49 (“Newell”) Beazley P said the following at [57] – [60]:

4. [73]

   On the construction of s 99 Beazley P said:

5. [74]

   In relation to s 99 Beazley P said at [76] that “[t]he jurisdiction is to be exercised with care and only in a clear case”.

Decision on BHD’s claim against the solicitors

1. [75]

   It will be recalled that BHD seeks an order for indemnity costs against the solicitors on two bases. First, it invokes s 99 Civil Procedure Act to argue that the whole of its costs has been incurred by, relevantly, the serious incompetence of the solicitors, or they have been incurred improperly in circumstances for which the solicitors are responsible. The conditions imposed by s 99(1)(a) and (b) are relied upon in the alternative and for essentially the same reasons. Secondly, cl 5 of Sch 2 of the Uniform Law is invoked on the ground that the whole of the claim against BHD had no reasonable prospects of success.

2. [76]

   It needs to be borne in mind that the expressions “serious incompetence” or “improper” connote a high degree of departure from the standard of competence, on the one hand, or ethical propriety in the conduct of litigation, on the other. Although Ms Chan employed the word “improper” in her submissions I rather took the emphasis to be on the question of competence.

3. [77]

   I accept there is some force in Ms Chan’s argument that the lack of coherent articulation of the case against BHD and the erroneous invocation of the ACL as opposed to the ASIC Act legitimately raise a question of competence. However, I am not satisfied that these matters establish incompetence to the high degree required to constitute serious incompetence. With some difficulty, one was able to grasp the case that RMP sought to make against BHD. Moreover, although the mistake as to the applicable legislation suggests a lack of expertise, in substance, the claim was brought and maintained as one by a consumer claiming damages against a finance provider for misleading or deceptive conduct.

4. [78]

   I have also taken into account that the solicitors involved, in the overall scheme of things, are generally relatively junior, compared to Mr Moore, and appropriately briefed counsel who held himself out as having expertise in this field. I infer that they sought and followed his advice in furtherance of RMP’s instructions. I would not infer from the failure of the solicitors to produce any written advice from Mr Moore or a file note of oral advice that the disclosure of his advice would not assist them to resist BHD’s claim of serious incompetence. Although one may assume that usually in comparatively complex litigation, counsel’s written advice would be obtained, the expectation one has in that regard does not of itself lay an adequate foundation for drawing such an inference. It could not be said that solicitors invariably require counsel’s written advice. Although file notes are usually and prudently made of oral advice again the practice is not invariable. Moreover, on the evidence, Dr Beckwith did not always seek or take legal advice in his commercial dealings. I am not persuaded that the evidence lays a foundation from which I can be comfortably satisfied that there are extant documents recording Mr Moore’s advice or that it is more likely than not that Dr Beckwith would have instructed the solicitors to follow it had it been given. No call for any document was made even though the evidence established that privilege had expressly been waived.

5. [79]

   I accept that solicitors have equal professional standing to barristers. The formal qualifications for practice in either role are effectively the same, leaving aside the additional requirement of satisfactorily undertaking the Bar Practice Course before the Council of the New South Wales Bar Association will issue a practising certificate. However, one needs to have regard to the practical reality that solicitors will often brief a particular barrister because he or she possesses expertise in an area of practice superior to that of the solicitor. The briefing policy of most solicitors is one of “horses for courses”. Given Mr Moore’s long experience at the Bar and his apparent expertise in this area, I am satisfied that the solicitors, quite reasonably, would have followed his advice in so far as their instructions permitted them to do so. This last matter is of some importance because as Beazley P said in Newell (at [228]) before an order can be made it is necessary for BHD to demonstrate in respect of Mr Gorval, Mr Lynch and the legal practice the specific conduct of each of them individually which is said to constitute the relevant serious incompetence to ground an order that one or other or all of them pay BHD’s costs. In my judgment that has not been done.

6. [80]

   I am not satisfied that BHD has established its case for a costs order under s 99 Civil Procedure Act.

7. [81]

   I turn then to the questions of whether the solicitors acted on RMP’s claim against BHD without a reasonable belief based on provable facts and a reasonably arguable view of the law that it had reasonable prospects of success.

8. [82]

   I have already found for the purpose of determining BHD’s claim for indemnity costs from RMP that despite its palpable weakness, the claim is not one which, viewed prospectively, had no reasonable prospect of success. The test at each level of inquiry is substantially the same. My findings in this regard, as I have analysed them above, to my mind exclude the operation of cl 6 of Sch 2 of the Uniform Law. That is, I did not find in substance that the facts established by the evidence did not form a basis for a reasonable belief that the claim brought by RMP against BHD had reasonable prospects of success. Rather, I rejected the contestable facts upon which the claim was based by my preference for other evidence. Accordingly the presumption created by cl 6(1), as all counsel accepted, does not arise and the onus lies upon BHD to show that the facts proved that the claim had no reasonable prospects of success.

9. [83]

   As Lemoto and Newell show the approach to what constitutes “without reasonable prospects of success” in the statutory context is that articulated by Barrett J (as his Honour then was) in Degiorgio v Dunn (No 2) 62 NSWLR 284; [2005] NSWSC 3 (“Degiorgio”) at [28]. His Honour observed:

Decision on Mr Altenburg’s claim against the solicitors

1. [84]

   Applying the Degiorgio test to Mr Altenberg’s application for costs against the solicitors, making the same finding in relation to the inapplicability of the cl 6(1) presumption, and declining to draw an adverse inference against the solicitors for the reasons already given in relation to BHD’s claim, I am not satisfied for the reasons expressed at [54] above that Mr Altenberg has demonstrated on the balance of probabilities that the solicitors brought RMP’s claim without reasonable prospects of success, or without reasonable cause, as the case may be. Exercising the same care and restraint, I am not satisfied that this is a clear case of a solicitor having brought a claim that had no reasonable prospects of success in the statutory sense whether under s 99 Civil Procedure Act or Sch 2 Uniform law. That the Fuji representation was pressed but diffidently by Mr Moore at the conclusion of the trial does not alter my analysis in this regard. Mr Altenberg’s application for an order that the solicitor pay his costs must be refused.

Decision on VPD’s and Mr Edwards claim for costs against the solicitors

1. [85]

   Like Mr Altenberg, VPD and Mr Edwards rely upon s 99 Civil Procedure Act, and upon the provisions of the Uniform Law, in the alternative. As I have observed there is no real difference in substance between the statutory formulations which both equate to “not fairly arguable”. So far as they claimed indemnity costs against RMP, I have already found for the reasons given at [57]-[64] that VPD and Mr Edwards have not established that the claim against them was brought and maintained without reasonable prospects of success. In substance, as I have observed already in relation to the other moving parties, this finding determines the outcome of the statutory inquiry relevant to the question of whether the solicitors should be ordered to pay VPD’s and Mr Edwards’s costs.

2. [86]

   Adopting the same reasoning, applying the appropriate care and restraint, and declining to draw an inference that counsel’s advice would not help the solicitor’s case for the reasons already given, I am not satisfied that RMP’s claim was “so lacking in merit or substance as to be not fairly arguable”. Given that the statutory requirement that a legal practitioner must reasonably belief that provable facts and a reasonably arguable view of the law justify bringing the claim, connotes an objective test, I am satisfied that the claim was “fairly arguable” as explained by Barrett J.

3. [87]

   In these circumstances, the claim for the costs against the solicitors must be dismissed.

Orders

1. [88]

   My orders are:

   1. (1)

      Pursuant to Order 4 of the orders pronounced by me on 15 May 2020 in Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 7) (“the previous orders”), order the first cross-claimant to pay the costs of the second cross-defendant on the ordinary basis up to and including 27 October 2017 and on the indemnity basis thereafter;

   2. (2)

      Pursuant to Order 4 of the previous orders, order the first cross-claimant to pay the costs of the sixth cross-defendant on the usual basis up to and including 21 August 2018 and thereafter on the indemnity basis;

   3. (3)

      Pursuant to Order 4 of the previous orders, refuse the application of the first and third cross-defendants for an order for costs against the first cross-claimant on the indemnity basis;

   4. (4)

      Dismiss the claim of each of the first, second, third and sixth cross-defendants for an order that the third, fourth and fifth respondents (“the solicitors”) pay their costs of the proceedings;

   5. (5)

      The first, second, third and sixth cross-defendants to pay the solicitors’ costs of their application for a personal costs order against the solicitors;

   6. (6)

      Note that the applications brought by the first, second, third and sixth cross-defendants against the second cross-claimant are stayed by force of section 58(3) Bankruptcy Act 1966 (Cth).