What to do when the question of a non-party costs order against counsel arises

As mentioned in my last blog post, I gave a paper to the Junior Bar Conference in 2017 which I titled ‘Tips on Costs and Fees’, so what follows is a couple of years old. Tip no. 2 was ‘Know what to do when the question of a non-party costs order arises’.

A leading text is Professor Dal Pont’s Law of Costs (3rd ed., 2013), chapters 22 of which is devoted to non-party costs orders generally and chapter 23 to such orders against lawyers.

When you are pursuing such an order, try to dance elegantly between the conflicting obligations:

  • on your client to give early notice of any intention to seek a non-party costs order which can be an important factor in the discretion to make a non-party costs order [see Dal Pont at [22.24] et seq but see also [23.62] et seq];
  • on you and the others to whom the overarching obligations apply not to make any claim or make a response to any claim that does not, on the factual and legal material available to the person at the time of making the claim or responding to the claim, as the case requires, have a proper basis: s. 18(d) Civil Procedure Act 2010.

The s. 18(d) obligation has echoes in the conduct rules.  See rr. 60, 61, and 64 – 66 of the Legal Profession Uniform Conduct (Barristers) Rules 2015 (within the part entitled ‘Responsible Use of Court Process and Privilege’). Compare rr. 21.1 – 21.4, 21.6 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (within an identically named part), and also the specific r. 32 about having proper foundations for allegations against fellow practitioners. As to proper factual and legal foundations generally, see my paper ‘The Consequences of Serious Allegations Without an Adequate Foundation’ at (March/April 2014) 121 Precedent 4.

Depending on how a communication relating to the possibility of seeking a non-party costs order against an opposing lawyer is drafted, the conduct rules relating to conflicts of self-interest and duty to advance client interests referred to below, mean that the allegation may well require fresh representation for the client of the opposing lawyer. An application which might be seen to be likely to have that result might itself represent a breach of the overarching obligations or might be dismissed as inconsistent with the overarching purpose.  Worse, if you make the allegation irresponsibly and/or prematurely, you might end up with an obligation to compensate the opposing lawyer’s client for the costs occasioned, under s. 29 of the Civil Procedure Act 2010.

Warn any client who, by the end of the proceedings, might not be able to satisfy a costs order in favour of its opponent, of the possibility that a non-party costs order might be sought against a person funding proceedings (your client’s wife, your client’s director, your client’s holding company, for example), and do not fuel such an application by allowing deep pocketed non-clients to instruct you or giving that appearance (by the absence of your actual client at a mediation, for example).  Address advice to your client and communicate it to them.

Consider the possibility that you may owe a duty of care to a non-client with whom you are dealing as agent for the client for the purposes of communicating instructions which might require you to warn them of the possibility of a non-client costs order application being made against them. Especially if the non-client has promised your instructor, or promised you, to pay your fees.

In your own interest, take steps to ensure that your instructor has observed these precautions, and is actually taking instructions from his or her client which is of course desirable for many other reasons.

When you are resisting a non-party costs application against a client, demand the particularity and procedural rigour appropriate to such a claim, which in my experience has to be fought hard for.  Where the respondent to such an application has genuinely been intimately involved in and understood the litigation as the alter ego of the litigant, very summary procedures might be appropriate, especially where the named party and the non-party have more or less identical interests.  See Yara at [27].

Where that is not so, or there is a contest about that proposition, pleadings, discovery and appropriate time to obtain advice and prepare might be appropriate.  But some judges, and all applicants in applications for non-party costs orders, believe that the jurisdiction is so summary and sui generis that vaguely cast assertions of serious wrongdoing are permissible. I have twice fought for and obtained particulars, precision and time to prepare, once in an application by a billionaire for a non-party costs order against the husband of the plaintiff who unsuccessfully sued him.  Though the application sought payment of about $2 million, the applicant’s senior counsel told me that the husband did not need separate representation and the application should be heard without any interlocutory process on the return date of the summons a few days’ hence.  The Supreme Court required pleading-like documents and fixed the matter for a trial on an estimate of several days, several months after the summons was served.

One finds that if the costs order applicant is required to articulate serious allegations with proper particulars, they tend to drop away, or that what sounded very serious in a vague way is suddenly explained to mean something less serious.  Especially is that so if a gentle reminder is given of the obligations referred to above to have a proper foundation for allegations.

The following authorities are useful in the pursuit of appropriate procedural rigour: Symphony Group Plc v Hodgson [1994] Q.B. 179 at 192 para (7) (where the Court of Appeal also said at (6) that the summary procedures and extended operation of litigation estoppels to the non-party often permitted in these application are only justified where it is fair by virtue of the named party’s relationship with the non-party); Deutsche Bank AG v Sebastian Holdings Inc [2016] EWCA Civ 23; [2016] 4 WLR 17 (Court of Appeal) at [44]; Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd [2013] VSC 14 (John Dixon J); Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5) [2014] VSC 400 (John Dixon J) at 57(h) (‘A legal practitioner against whom a claim for a costs order is made must have full and sufficient notice of the complaint and full and sufficient opportunity of answering it, and a legal practitioner should not be called on to reply unless an apparently strong prima facie case has been made.’)

When you are resisting a non-party costs application against you:

  • Notify the claim to the LPLC.  Note that by cl. 5.8 of the policy, such claims attract a deterrent deductible ($8,000 instead of $4,000).  Your liability to pay a non-party costs order or compensation under the Civil Procedure Act 2010 (or otherwise) will otherwise often be covered as well as your defence costs, the LPLC will often take over your defence appointing lawyers with an expertise in defending this kind of claim, and you pay no deductible and are not required to contribute to defence costs if you win.  (By cl. 20, barristers are required immediately to give notice of any circumstance, defined to mean ‘an incident, occurrence, fact or matter which may give rise to a claim’.  If anyone starts talking about non-party costs applications and you have reason to believe any respondent to such an application might seek to apportion blame to you, consider notifying that circumstance.)
  • Almost always, once a court has called on the solicitor to respond on the basis that there is an apparently strong prima facie case, counsel should cease to act for the client in recognition of the conflict between (i) self-interest / interest of an associate such as your firm and (ii) duty to advance your client’s interest.  See rr. 35, 101(b), 101(f), 101(g) and 102 of the barristers’ conduct rules.  The two latter provisions make clear that when such a conflict between duty to advance the client’s interests and self-interest (or interest of an associate of the barrister) arises, the barrister must ‘refuse to retain the brief’.  I say ‘almost always’ because my discussions with members of the Ethics Committee suggest that there may be exceptional situations involving abusive and unmeritorious applications where counsel instructed by fully informed clients to bat on must do so.  That would definitely be an application to the Ethics Committee scenario. (Barristers’ obligations where they perceive a conflict between an instructor’s obligation to advance his client’s interests and self-interest of an instructing solicitor are dealt with at r. 120.)
  • Understand that legal professional privilege may not be the refuge it once was: Dura (Aust) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5) [2014] VSC 400 at [109] et seq (John Dixon J).  Be careful not to seek to fall prey to temptation by seeking to hide behind privilege if there is no privileged communication which justifies the submission.
  • Be reassured that allegations against a lawyer of breaching the overarching obligations ought to be established on the civil standard, in its application to serious allegations, as explained by Dixon J in Briginshaw v Briginshaw (1930) 60 CLR 336, 361-3.  See Dura at [108]; Re Manlio (No 2) [2016] VSC 130 at [23] (McDonald J).
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