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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