Nunzio Berardi v Salvatore Russo t/as Russo & Partners (No 2)

1. [1]

   HIS HONOUR: The Court issued judgment on 16 October 2015 in which the following order was made:

2. [2]

   Submissions were filed by defendant on 30 October 2015 in the Registry, along with an Affidavit of Salvatore Russo, sworn 29 October 2015. Submissions in reply were filed by plaintiff on 5 November 2015. The application and submissions were not brought to the attention of the Court, as presently constituted, until December 2017, when a party enquired of the Associate. The file in the Registry had been closed.

3. [3]

   As a result of administrative failure, judgment in relation to this application has not issued until this time. Nevertheless, the Court has perused and considered the submissions filed on behalf of both parties.

Background

1. [4]

   The plaintiff sought leave to appeal from a determination of Magistrate Pierce in respect of a judgment dated 7 October 2014. The Court, as presently constituted, dismissed the plaintiff’s summons on 16 October 2015.

Defendant submissions

1. [5]

   The defendant moves the Court to make a lump sum order for costs for the appeal on an indemnity basis in accordance with s 98(4) of the Civil Procedure Act 2005 (NSW) (“the Act”) as against the plaintiff. The Court is also requested to make a lump sum order for costs for the appeal on an indemnity basis against the legal representatives of the plaintiff pursuant to ss 98, 99(1)(a) and 99(1)(b) of the Act.

2. [6]

   The defendant submits that the appeal, having no merits and clearly no prospects of success, must have been conducted for an ulterior purpose, putting it as high as being, possibly, an abuse of process. It is submitted that a client properly advised would not have embarked on and maintained the appeal.

3. [7]

   The defendant cites in support G E Dal Pont, Law of Costs (2nd ed, 2009, LexisNexis Butterworths), at 539-540, par 16.51 and Colgate-Palmolive Company and Colgate-Palmolive Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 232-234. The defendant makes reference to the need to exercise the discretion found in s 99 of the Act “with care and discretion and only in clear cases”: Ridealgh v Horsfield [1994] Ch 205 (at 229); Re Bendeich (1994) 53 FCR 422; [1994] FCA 1504; Deputy Commissioner of Taxation v Levick (1999) 168 ALR 383; [1999] FCA 1580, per Hill J at [11]; Levick v Deputy Commissioner of Taxation [2000] FCA 674.

4. [8]

   The defendant correctly submits that any order for costs as against a legal representative must be made after they have an opportunity to be heard. Yet, it is submitted, such an order should be made on an indemnity basis in these proceedings, noting that the conduct of the proceedings and the legal representatives is relevant to the exercise of discretion to make a costs order under ss 99(1)(a) and 99(1)(b) of the Act. The defendant referred to the following paragraphs of the judgment; [35]-[46], [51], [60]-[61], [74]-[75], and [84]-[88] and submitted that these would be a basis for the exercise of discretion.

5. [9]

   The amount of costs has been agreed between the parties, being a fixed sum of $11,000. However, the defendant seeks “an order pursuant to s 99 Civil Procedure Act that the solicitor for the plaintiff indemnify the defendant in respect of the said costs order”.

6. [10]

   The Affidavit of Mr Salvatore Russo provides copies of costs request letters. The Affidavit also annexes a letter forwarded to the solicitors for Mr Berardi in respect of what he refers to as “the hopeless nature of the proceedings and as an invitation to them to withdraw from the proceedings”. It is Mr Russo’s belief that the applications in the Local Court and Supreme Court, on appeal, lacked merit and were designed for the purpose of delay.

Plaintiff submissions

1. [11]

   The plaintiff does not oppose the making of the proposed special costs order of $11,000.

2. [12]

   The plaintiff submits that the order sought by the defendant, in relation to the solicitor personally, is not within the terms of the leave granted by the Court on 16 October 2015. Although acknowledging that the Court has the power to re-open the proceedings in order to consider the application, the plaintiff submits that the application was not foreseen in the order made by the Court on 16 October 2015.

3. [13]

   The plaintiff submits that the solicitor concerned ought to be given a reasonable opportunity to be heard, should such an application be entertained (s 99(2) of the Act). It is submitted that the application of the defendant was not contemplated by the order the Court made, given that the order for any further or special costs was “…to be dealt with on the basis on submissions filed” and such submissions were to be limited to “no more than 3 pages”.

4. [14]

   It is further submitted that the case that was brought on behalf of the plaintiff, although unsuccessful, was not doomed to fail nor was it futile. The plaintiff, in citing the judgment of the Court (Nunzio Berardi v Salvatore Russo t/as Russo & Partners [2015] NSWSC 1520), submits that it demonstrates the complex nature of the case and that it was not brought “for an ulterior purpose”.

5. [15]

   The plaintiff submits that the order sought in relation to a personal costs order against the solicitor for the plaintiff is therefore ill-founded and that the only appropriate costs order be that the plaintiff pay the defendant the amount of $11,000, being the defendant’s costs in the proceedings.

Principles to be applied

1. [16]

   The Court has power in relation to the ordering of costs in proceedings, under s 98 of the Act:

2. [17]

   Section 99 of the Act, ‘liability of legal practitioner for unnecessary costs’ outlines the circumstances in which an order for costs against a legal practitioner can be made, as follows:

3. [18]

   The jurisdiction of the Supreme Court to award costs originates from its status as a superior court of record with inherent jurisdiction, as distinct from a court with statutory and limited jurisdiction. But the jurisdiction, while creating a wide discretion, must be exercised judicially. No discretion is truly “unfettered” and its exercise must give effect to the purposes of the Act that now governs the power and may not consider extraneous matters.

4. [19]

   Section 98 of the Act confirms that costs are in the discretion of the Court, which has “full power to determine by whom, to whom and to what extent costs are to be paid” and whether such costs are to be paid on the ordinary basis or on an indemnity basis: s 98(1) of the Act.

5. [20]

   In exercising the discretion under the Act, the Court is required to give effect to the overriding purpose of the Act, which is “to facilitate the just, quick and cheap resolution of the real issues in the proceedings”: s 56(1) of the Act. Further, by operation of s 56(5) of the Act, the Court is required to have regard to any conduct of a solicitor or barrister that causes his or her client to breach the duty, reposed on all parties to a civil proceeding, to assist the court to further the overriding purpose described: s 56(5) of the Act together with ss 56(3) and 56(4) of the Act.

6. [21]

   The purposes of the Act include the avoidance of delay (s 59), the dictates of justice (s 58) and case management (s 57), all of which would be included in the description of the overriding purpose and are otherwise particularised in the nominated sections.

7. [22]

   These criteria, while codified in the Act, are not new: see, for example, Idoport Pty Ltd v NAB (2000) 49 NSWLR 51; [2000] NSWSC 338. They do not alter the principles to be applied in the determination of the issues in this application.

8. [23]

   An order for the payment of costs by one party (or the legal representatives of the party) is not for the purpose of punishment. Costs generally follow the event because such an order is intended, at least to the extent that the costs incurred were not unreasonable or unreasonably incurred, as compensation (and vindication) for the successful action: Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59; Ohn v Walton (1995) 36 NSWLR 77.

9. [24]

   Leaving aside for present purposes any issues associated with Calderbank offers or the status of trustees and other special classes, indemnity costs may be awarded, relevantly, when a party/party costs order is insufficient, in the circumstances, to compensate for costs unreasonably incurred due to the misbehaviour of the other party. Common examples include: misleading a court; conduct that has caused unreasonable delay and expense; where there were no real prospects of success; where there has been unreasonable delay for the purpose of a tactical advantage: see Wentworth v Rogers [1999] NSWCA 403; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants (1988) 81 ALR 397; Rouse v Shepherd (No 2) (1994) 35 NSWLR 277. There are many other examples of conduct by a losing party that warrants the award of indemnity costs.

Costs against Legal Practitioners: Principle

1. [25]

   Much authority was cited that, it was submitted, was at least persuasive as to the approach to be taken to the award of costs against legal practitioners. A great deal of it emanates from the Federal Court of Australia. There may be differences between the results of the approach taken by the Federal Court and that taken by this Court. Those differences, if any, may derive from the difference between statutory or inherent jurisdiction being exercised or from the differing nature of the substantive jurisdiction to which the costs issues are ancillary or, perhaps, collateral.

2. [26]

   In New South Wales, the Court of Appeal has adumbrated the principles that should be applied. Dealing with the general jurisdiction and the provisions of the Legal Profession Act 2004 (NSW) (Division 5C, particularly ss 198J, 198L, 198M and 198N), the Court, after reciting the history of such orders, set out the principles in the following way:

3. [27]

   The Court of Appeal in Lemoto deals with the tension between the various counts and the principle to be applied. The Court of Appeal said:

4. [28]

   Her Honour McColl JA then discusses the purposes of the provisions of the Legal Profession Act there in issue and their promulgation through the vehicle of the Civil Liability Act 2002 (NSW) and her Honour comments:

5. [29]

   In this application, the defendant does not rely upon the provisions of the Legal Profession Act. Nevertheless, the principles adumbrated by McColl JA in the quoted passages apply to the exercise of the jurisdiction under s 98 of the Act and Part 42 of the Uniform Civil Procedure Rules 2005 (NSW).

6. [30]

   Costs should not be awarded against a legal practitioner unless there has been real misbehaviour by the practitioner or the proceeding (including a defence) has been maintained without any, or any substantial, prospects of success being that the proceeding or defence was “futile” or “foredoomed to fail”.

7. [31]

   It is not, in those circumstances, for the legal practitioner to judge the credibility of the client. The practitioner is entitled, if not required, to take the client at face value. Moreover, a case that depends on altering or adapting the law (certainly on a logical or reasoned basis) is not futile or foredoomed. Practitioners are entitled, without penalty, to pursue for their clients novel issues of law based on an arguably available factual scenario.

8. [32]

   The desirability of having clients legally represented is a factor in the balance. However, the purpose of legal representation is to aid the administration of justice, not to frustrate it.

Consideration/application

1. [33]

   Further to the foregoing, the Court should emphasise, as stated earlier, the duty imposed on the Court, legal representatives and parties to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56 of the Act. Conduct by a client or by legal representatives acting for the clients that frustrates or deliberately works against the expeditious resolution of the issues defined by the proceedings is conduct in breach of the duty to the Court and such a breach is a factor, if not the defining factor, in determining an exercise of discretion under the Act.

2. [34]

   Moreover, acting on instructions that a legal representative knows to be inconsistent with the legal representative’s and the client’s duty to the Court is an important factor when the Court is required to exercise the discretion to award costs against legal representatives.

3. [35]

   Nevertheless, even under the duty imposed upon legal representatives and clients under the provisions of s 56 of the Act, a client and that client’s legal representative are entitled to pursue points that are arguable, even if novel.

4. [36]

   The points raised in these proceedings are not, especially, novel.

5. [37]

   Further, it cannot be said that the issues raised, whether for the first time on appeal or otherwise, are wholly unarguable, even though wrong and even, if at least partly, misconceived. The misconception arises from a misconception of the Legal Profession Act, arising from a strict reading of the terms of a particular provision and a failure to read that particular provision within the context of the entire statute.

6. [38]

   In other words, the proposition advanced by the plaintiff was not wholly unreasonable or untenable. Nor was the proposition unarguable.

7. [39]

   It arose, as stated, partly as a result of a failure to construe provisions of the Legal Profession Act within the context of the entire statute and by virtue of a misunderstanding of that which the learned magistrate decided and the manner in which he reached that conclusion. Otherwise, it arose from a failure properly to plead that which was sought to be argued or a failure to adduce evidence on the issue.

8. [40]

   In other words, the Court takes the view that there is no breach of the duty under s 56 of the Act by the legal representatives. The principles and considerations that give rise to an exercise of discretion in favour of an order for costs, against persons other than a party to the proceedings, have not arisen. If there were a breach of duty, it is of a different kind, and it is between the plaintiff and his legal representative to resolve their respective liability for the costs.

9. [41]

   In short, the application by the successful defendants, for a costs order against the legal representatives of the plaintiff, ought be dismissed. The application for a lump sum costs order is granted.

10. [42]

    The Court makes the following orders:

    1. (1)

       Application for costs order against the legal representatives of the plaintiff dismissed;

    2. (2)

       Vary order [2] of the orders issued by the Court on 16 October 2015 in this matter, by inserting, at the end of the order, after the word “proceedings”, the words “in the amount of $11,000”;

    3. (3)

       Pursuant to s 100 of the Civil Procedure Act 2005 (NSW), interest payable on $11,000 from 16 October 2015 until the date of this judgment at the rate prescribed by the Uniform Civil Procedure Rules 2005 (NSW) for interest after judgment;

    4. (4)

       Interest after judgment on $11,000 pursuant to s 101 of the Civil Procedure Act 2005 (NSW) in accordance with rates prescribed by the Uniform Civil Procedure Rules 2005 (NSW);

    5. (5)

       Otherwise, proceedings dismissed.