Kelly v Jowett [2009] NSWCA 278 is the latest wasted costs case. The lawyers against whom the order was made had tendered against them their own intra-office memorandum:
‘Your performance in the conduct of this matter has been pathetic. Your failure, given the recent transfer of these matters, to even have the courtesy to provide Hamad with a memo regarding the status of the file is totally inconsiderate of a colleague already burdened with some of your other similarly neglected files. This file is your mess, clean it up.’
Ooffa! Justice of Appeal McColl, with whom the other justices of appeal agreed, explained at [61] that:
‘The underlying principle is that the court has a right and a duty to supervise the conduct of its solicitors, and visit with penalties any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause in which the solicitor is engaged professionally. The jurisdiction is exercised where it is demonstrated that the solicitor has failed to fulfil his or her duty to the Court and to realise his or her duty to aid in promoting in his own sphere the cause of justice.’
There is a lot of excruciation at the moment about how to regulate lawyers. I reckon the development of this jurisdiction as a principal regulation of litigators would improve the landscape, at least insofar as litigation is concerned. Most of the worst things lawyers do are done in litigation, at terrible cost to society and to the just resolution of disputes.
Development of the jurisdiction would further burden the courts, and would give rise to satellite litigation. It is beset by problems: if exercised mid-case, it produces conflict between lawyers’ self-interest and duty to client; legal professional privilege bedevils the ascertainment of facts, as may without prejudice privilege. But the alternative is continuance of the extremely patchy adherence to the still ill-defined duties by practitioners to the administration of justice, and the rare disciplinary prosecution of misconduct in litigation except the most obviously egregious. The wasted costs jurisdiction is a summary jurisdiction, exercised in a timely way by people who are inherently seized of at least a great deal of the context. The decision makers are used to making decisions. Litigation is their daily bread. Regulators who are not experienced litigators are comparatively disadvantaged in trying to unravel these kinds of disputes. It is hard to underestimate the degree of comparative disadvantage. They lack the gravitas of a trial judge. They get given the run around. Sure they can hire gravitas and litigation experience in the form of a QC, but the cost of doing so is a profound disadvantage in itself.
Here’s an idea out of left-field: give the jurisdiction to the new Costs Court, and resource it appropriately. Alternatively, appoint a litigation ombudsman within each court with this supervisory jurisdiction. This is not a question necessarily for bureaucrats: as Justice of Appeal McColl said at [61], Supreme Courts have both a right and a duty to supervise the conduct of their officers (solicitors) in the administration of justice. It is all very well for judges to speak from time to time about the deplorable standards of advocacy they encounter (along of course with some of the best advocacy in the world). But it is ultimately up to the Courts at least in part to ensure that they do in fact engage in the supervision they claim to engage in, and in a uniform, fair, and predictable way.
The full exposition of the law follows:
‘Statutory framework
55 Subject to the rules of court and to the Civil Procedure Act 2005 (NSW) or any other Act, the Supreme Court has full power to determine by whom, to whom and to what extent costs are to be paid, and may order that costs are to be awarded on the ordinary basis or on an indemnity basis: s 98, Civil Procedure Act.
56 The Court has power to order a legal practitioner to bear costs which have been incurred by the serious neglect, incompetence or misconduct of a legal practitioner or improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible: s 99, Civil Procedure Act. The Court’s power to make an order for costs in the exercise of its supervisory jurisdiction over its own officers, including solicitors notwithstanding that they are not a party, is expressly preserved by UCPR 42.3(2)(g). Section 99, and UCPR 42.3(2)(g) (and their legislative predecessors) reflect the English RSC O 62, r 8(1), which “confirm[ed] the ancient jurisdiction of the court to exercise control over its own officers”: Orchard v South Eastern Electricity Board [1987] QB 565 (at 569) per Sir John Donaldson MR.
57 The Court’s power to make costs orders in respect of a legal practitioner has, as the discussion to which I will shortly turn demonstrates, always been exercised to ensure legal practitioners observe their duty to the Court and, in turn, to the administration of justice, to ensure among other obligations the expeditious and efficient conduct of litigation. Those obligations now find express reflection in s 56(1) and (3) of the Civil Procedure Act in requiring parties to civil proceedings to assist the Court to further the just, quick and cheap resolution of the real issues in the proceedings and directing that “[a] solicitor … must not, by his or her conduct, cause his or her client to be put in breach of the duty identified in subsection (3)”: s 56(4).
58 These provisions reflect the fact that “the courts are concerned not only with justice between the parties, which remains their priority, but also with the public interest in the proper and efficient use of public resources”: Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 258 ALR 14 (at [23]) per French CJ. The resolution of disputes serves the public as a whole, not merely the parties to the proceedings: Aon (at [113]) per Gummow, Hayne, Crennan, Kiefel and Bell JJ.
59 In considering exercising its discretion to make costs orders against legal practitioners, the Court may take into account a legal practitioner’s failure to comply with s 56: s 56(5); see also Kendirjian v Ayoub [2008] NSWCA 194 (at [209]) per McColl JA (Beazley JA agreeing).
Wasted costs orders
60 The jurisdiction to make costs orders against legal practitioners referred to in s 99 and UCPR 42.3(2)(g), now commonly referred to as the “wasted costs” jurisdiction, must be exercised “with care and discretion and only in clear cases”: Lemoto v Able Technical Pty Ltd & 2 Ors [2005] NSWCA 153; (2005) 63 NSWLR 300 (at [92](a)) per McColl JA (Hodgson and Ipp JJA agreeing). In exercising the jurisdiction, however, the Court takes into consideration the public interest reflected in the legislative provisions to which I have referred, that litigants should not be financially prejudiced by the unjustifiable conduct of litigation by their or their opponent’s lawyers: Ridehalgh v Horsfield [1994] Ch 205. It is the public interest in the administration of justice which is the source of duties that lawyers owe to the court: Rondel v Worsley [1969] 1 AC 191 (at 227) per Lord Morris.
61 The wasted costs jurisdiction is based on the court’s right and duty to supervise the conduct of its solicitors: Myers v Elman (at 302) per Lord Atkin, (at 318 – 319) per Lord Wright, (at 334 – 336) per Lord Porter. The underlying principle is that the court has a right and a duty to supervise the conduct of its solicitors, and visit with penalties any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause in which the solicitor is engaged professionally. The jurisdiction is exercised where it is demonstrated that the solicitor has failed to fulfil his or her duty to the Court and to realise his or her duty to aid in promoting in his own sphere the cause of justice. The order is for payment of costs thrown away or lost because of the conduct complained of and is frequently exercised in order to compensate the opposite party in the action: Myers v Elman (at 319) per Lord Wright; see also Sydney South West Area Health Service v Stamoulis [2009] NSWCA 153 (at [204]) per Ipp JA (Beazley and Giles JJA relevantly agreeing).
62 The history of the wasted costs jurisdiction was discussed in Lemoto (at [83] ff). As can be seen from that discussion many of the principles were explained in the seminal decision of Myers v Elman which makes it clear that the object of the wasted costs jurisdiction is to protect the client who has suffered and to indemnify the party who has been injured. Misconduct or default or negligence in the course of the proceedings is in some cases sufficient to justify an order: Myers v Elman (at 289) per Viscount Maugham (Lord Russell of Killowen (at 307) and Lord Porter (at 334) agreeing).
63 The critical question in Myers v Elman was whether a solicitor could be ordered to pay to the plaintiff the costs of an action because the solicitor had delivered defences which he must have known or suspected to be false, and had prepared and permitted his clients to make affidavits of documents which were inadequate and false. The solicitor had left the conduct of proceedings largely to his managing clerk.
64 The trial judge held that the solicitor had not been guilty of professional misconduct in allowing the defences to be delivered, but that he had been guilty of such misconduct in allowing the inadequate affidavits of documents to be made. He ordered the solicitor to pay one-third of the plaintiff’s costs of the action and two-thirds of the costs of the application. On appeal the Court of Appeal relevantly held (Myers v Rothfield [1939] 1 KB 109 per Greer and Slesser LJJ, MacKinnon LJ dissenting), that, assuming that the acts in question, if done by a solicitor personally, would constitute professional misconduct on his part, the solicitor was not liable as he had appointed a fully qualified clerk to prepare the defences and affidavits of documents, and the acts had been done not by the solicitor himself but by the clerk.
65 The House of Lords reversed the Court of Appeal’s decision. It said the plaintiff was not asking the court to exercise its disciplinary jurisdiction over officers of the court but, rather, its jurisdiction to order a legal practitioner to pay costs by reason of some misconduct, default or negligence in the course of proceedings, a jurisdiction which could be exercised where the solicitor was merely negligent, so that the solicitor could not “shelter himself behind a clerk, for whose actions within the scope of his authority he is liable”: Myers v Elman (at 288, 291) per Viscount Maugham. Lord Atkin distinguished between the court’s disciplinary jurisdiction in respect of officers of the court and its wasted costs jurisdiction, saying, that while in disciplinary proceedings “[n]o punishment based on personal misconduct will be inflicted unless the party visited is himself proved to be personally implicated”, the jurisdiction as to costs will be exercised where “there has been no personal complicity by the solicitor charged”: Myers v Elman (at 302–3); see to like effect Lord Wright (at 321) and Lord Porter (at 334 – 335).
66 Making wasted cost orders against a solicitor in respect of the costs of the opposite party reflects the duty of the court “to be equally anxious to see that solicitors not only perform their duty towards their own clients, but also towards all those against whom they are concerned”: Re Jones (1870) 6 Ch App 497 (at 499) per Lord Hatherley LC. In Myers v Elman (at 290), after observing that he could not find that the proposition laid down by Lord Hatherley LC had ever been doubted, Viscount Maugham said, “…Lord Hatherley’s phrase implying the solicitor’s duty to parties for whom he is not acting is founded on his duty to the Court.” It seemed clear to him “[t]hat a partner in a firm of solicitors cannot escape from such an order on the ground that he took no active part in the proceedings”. As Lord Porter explained (at 335), “[i]t is misconduct in the way in which the work entrusted to his firm is carried on, not the personal misdoing of the individual, which gives rise to the exercise of the jurisdiction”.
67 Lord Atkin said (at 302 – 303):
“From time immemorial, judges have exercised over solicitors, using the phrase in its now extended form, a disciplinary jurisdiction in cases of misconduct. At times the misconduct is associated with the conduct of litigation proceeding in the court itself. Rules are disobeyed, false statements are made to the court or to the parties by which the course of justice is either perverted or delayed. The duty owed to the court to conduct litigation before it with due propriety is owed by the solicitors for the respective parties, whether they be carrying on the profession alone or as a firm. They cannot evade the consequences of breach of duty by showing that the performance of the particular duty of which breach is alleged was delegated by them to a clerk. … [A]s far as the interests of the court and the other litigants are concerned, it is a matter of no moment whether the work is actually done by the solicitor on the record or by his servant or agent. If the court is deceived or the litigant is improperly delayed or put to unnecessary expense, the solicitor on the record will be held responsible, and will be admonished or visited with such pecuniary penalty as the court thinks necessary, in the circumstances of the case… . [T]he words ‘professional misconduct’ themselves are not necessarily confined to cases where the solicitor himself is personally guilty. After all, they only mean misconduct in the exercise of the profession, and they cover cases where a duty is owed by the solicitor to the court and is not performed owing to the wrongdoing of the clerk to whom that duty has been entrusted. … It seems to me quite incorrect to suppose that the cases in which solicitors have been ordered to pay costs where there has been no personal complicity are cases in which the court is exercising a kind of summary jurisdiction in contract or tort by way of awarding damages for breach of warranty of authority. The court is not concerning itself with a breach of duty to the other litigant, but with a breach of duty to itself. Its jurisdiction is punitive, and is exercised in appropriate cases and in appropriate measure where there has been no personal complicity by the solicitor charged.” (emphasis added)
68 The court may “design its [costs] sanction for breach of [a legal practitioner’s] duty in a way that will enable it to provide compensation for the disadvantaged litigant”: Harley v McDonald [2001] UKPC 18; [2001] 2 AC 678 (at [49]).’
