Appeal rights against personal costs orders against lawyers

Arena Management Pty Ltd (Receiver & Manager Appointed) v Campbell Street Theatre Pty Ltd [2011] NSWCA 128 examines the nature of the appeal rights of non-parties against whom personal costs orders are made.  In that case, the unfortunate person against whom such an order was made was a liquidator.  But in the course of his analysis, Justice of Appeal Campbell considered the cases on appeals in relation to personal costs orders against lawyers, at [74] to [82] (despite the numbering below):

‘Legal Practitioners

  1. As is the case with trustees and executors, for the court to order that a legal practitioner bear the costs of litigation requires the court to make a finding that the conduct of the legal practitioner has been deficient. The need to make that finding takes such a case out of being ” costs that are in the discretion of the court ” , within s 49 Judicature Act . In Re Bradford, Thursby and Farish (1883) 15 QBD 635 (also reported, less fully, sub nom In Re Milton (1884) 32 WR 238) a solicitor had been ordered to pay the costs of proceedings below, on the grounds that his conduct had been vexatious. Bowen LJ, delivering the judgment of the Court of Appeal, held that leave to appeal was not necessary. He noted that the immunity from appeal applied ” as to costs only which by law are left to the discretion of the Court ” , and continued, at 636-637:

“… it was not within the discretion of Day J to punish Mr Hare by his direction as to costs unless Mr Hare had in fact been guilty of some misconduct or negligence, and that there must have been some misconduct or negligence on the part of Mr Hare in order to give the judge jurisdiction to exercise his discretion as to costs. Without fixing the precise limits to the exercise of the judge’s discretion, we are of opinion that on the question whether there has or not been misconduct or negligence by the solicitor there ought to be an appeal.”

  1. Thompson v Fraser (Practice Note) [1986] 1 WLR 17 concerned the construction of s 18(1)(f) Supreme Court Act 1981 (UK) . That statutory provision then stated:

“No appeal shall lie to the Court of Appeal . . . (f) without the leave of the court or tribunal in question, from any order of the High Court or any other court or tribunal made with the consent of the parties or relating only to costs which are by law left to the discretion of the court or tribunal; …”

A trial judge had ordered the solicitor for one of the parties to pay the costs of the litigation, and had refused leave to appeal. Notwithstanding that refusal, the solicitor appealed to the Court of Appeal. In the course of its judgment, the Court (Sir John Donaldson MR, Parker and Croom-Johnson LJJ) held that the appeal was competent. The reason for that conclusion was that (17):

“… an appeal in such circumstances does not relate only to costs or, indeed, primarily to costs; it relates to the conduct of the solicitor. In those circumstances, section 18(1)(f) has no application.”

  1. It is to be observed that this decision was reached without any reliance on whether the costs in question ” are by law left to the discretion of the court or tribunal ” .
  1. Thompson v Fraser has been followed, concerning a rule requiring leave to appeal from an order “as to costs only” , by Lasry J as a single judge of the Victorian Supreme Court in Smirnios v Byrne [2007] VSC 513 at [25]-[28]. I can understand how an order that a legal practitioner is to pay costs is not an order ” relating only to costs” , but there might be room for argument about whether it is ” as to costs only” (see [113] below). It is because of that possible room for argument that I have based my decision that the order involved in the present case is not ” as to costs only” ([47] above) on the express mention in the order that the liquidator is not to have a right of indemnity.
  1. Wilkinson v Kenny [1993] 1 WLR 963 concerned a situation where solicitors had been ordered to pay certain of the costs of litigation, and four-fifths of the costs of the application for the solicitors to pay those costs. The solicitors purported to appeal only against the order concerning the costs of making the application for costs. Sir Thomas Bingham MR at 971 said that he had ” no doubt whatever” that the decision in Thompson v Fraser was correct, and (at 972) ” no doubt” that the views of Nicholls LJ in In re Land and Property Trust Co plc (discussed below at [104]) were correct. However his Lordship held those decisions did not govern the case, because (a) insofar as an application for costs was made against them, they were parties to the action, and (b) the decision as to costs of the application against the solicitors was one that was left to the discretion of the court.
  1. I would prefer to leave for further consideration whether reason (a) is correct. However in light of reason (b) the result is readily understandable. The appeal was not seeking to question whether the judge was correct in holding that the solicitor’s conduct had been deficient, only whether, given that holding, it was correct to order the solicitor to pay the costs of the application for costs.
  1. Michael v Freehill Hollingdale & Page (1990) 3 WAR 223 concerned s 60(1)(e) Supreme Court Act 1935 (WA) which was in terms not materially different to s 102(2)(c) SC Act . An unsuccessful litigant, Dr Michael, sought an order that Malcolm CJ described, with considerable understatement, as “unusual”. It was that the opposing solicitors indemnify him against certain costs that he had been ordered to pay the solicitors’ client, on the basis that the solicitors caused costs to be incurred improperly and without reasonable cause. A Master dismissed the application and Dr Michael sought to appeal, or alternatively sought leave to appeal, the decision of the Master. One basis on which Malcolm CJ, at 227, held that the appeal against the Master’s order did not require leave was that an application for the solicitor to bear the costs was:

“analogous to third-party proceedings in which an unsuccessful party in the principal proceedings seeks contribution in indemnity from a third party in respect of his liability. The difference is that the subject matter of the indemnity in this case comprises the costs which Dr Michael … has been ordered to pay the successful party in the principal proceedings. This being so, it would be consistent with the analogy with third-party proceedings to distinguish the subject matter of the application from costs which by law are in the discretion of a judge or Master.”

  1. Malcolm CJ also said, at 228 that another reason why no leave was necessary was that “[i]n substance the foundation for the exercise of the jurisdiction … is the misconduct of the solicitor.”
  1. Other decisions that an order requiring a legal practitioner to pay the costs of litigation do not need leave to appeal under a provision like s 102(2)(c) SC Act are Macteldir Pty Ltd v Dimoski [2006] FCA 489; (2006) 152 FCR 487 per Lindgren J, Etna v Arif [1999] 2 VR 353 per Batt JA (Charles and Callaway JJA agreeing) at [69], and Emanuel Management Pty Ltd (in liq) v Foster’s Brewing Group Ltd [2003] QCA 516; [2004] 2 Qd R 11 at [11]-[12] (though obiter) per de Jersey CJ, Davies JA and Mullins J. Like Wilkinson v Kenny , in Martinovic v Chief Executive, Qld Transport [2005] QCA 55; [2005] 1 Qd R 502 the Queensland Court of Appeal held that a barrister had no right of appeal without leave against an order that he pay the costs of an application to require him to pay the costs of substantive litigation, when there was no appeal against the finding that he pay the costs of the substantive litigation. However Jerrard JA (White JA agreeing) said at [29] that the obiter remarks in Emanuel at [11]:

“… repeat a principle of long standing, established by the cases cited therein, and which explain that it is not ordinarily within the discretion arising for exercise by a judge as to costs of a proceeding to make an order for payment of costs against a party’s lawyer. That power depends on a finding that the lawyer has been guilty of misconduct, and on the latter question there ought to be an appeal without leave.”‘

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