Citation: Wallace v GWH Build Pty Ltd; GWH Build Pty Ltd & Anor v Wallace & Ors [No 2] [2016] NSWDC 128
Court: District Court of New South Wales
Date: 8 July 2016
Judge: Judge Levy SC
Background
This decision resolved reserved costs questions arising from an earlier judgment in which the District Court dismissed an amended motion filed by the defendants and cross-claimants. That motion had sought to refer the plaintiffs' solicitors to the Supreme Court for prosecution for an alleged civil contempt under s 203 of the District Court Act 1973. The earlier judgment found the contempt allegations to be entirely without arguable merit and a "vituperative distraction" from the central issues in the case.
Two costs questions were left unresolved after that dismissal: first, whether the plaintiffs' costs of resisting the motion should be assessed on an indemnity basis rather than the ordinary basis; and second, whether the defendants' solicitor, Mr Lancaster, should personally bear those costs under s 99 of the Civil Procedure Act 2005.
Written submissions were exchanged, followed by oral argument and evidence on 13 May 2016. Mr Lancaster filed an affidavit and gave oral evidence at that hearing, represented by Senior Counsel.
Legal Issues
- Whether the District Court had jurisdiction to award costs in relation to the contempt motion, given the requirement in s 127(1) of the District Court Act 1973 that there be a "judgment or order in an action"
- Whether the plaintiffs' costs of resisting the failed contempt motion should be paid on an indemnity basis
- Whether Mr Lancaster, the defendants' solicitor, should be ordered to pay those costs personally under s 99 of the Civil Procedure Act 2005
Decision
Jurisdiction. The District Court rejected the defendants' argument that it lacked jurisdiction to award costs at all. The court held that, as a court created to administer justice, it possesses implied powers necessary to secure proper administration of justice, even where established by statute, following Botega Pty Ltd v Wales (1977) 1 NSWLR 139. The court also noted that the defendants had themselves sought indemnity costs against the plaintiffs when the motion was heard, which implicitly acknowledged the existence of the court's jurisdiction. They could not now resile from that position.
Indemnity costs. The court found that the contempt motion had no rational connection with the issues in the case and was contrary to the requirements of s 56 of the Civil Procedure Act 2005. It unnecessarily delayed the completion of interlocutory matters and prolonged the proceedings, causing the plaintiffs to incur considerable additional costs. Following Liverpool City Council v Estephan [2009] NSWCA 161, the court characterised the motion as a procedural delinquency justifying indemnity costs.
Personal costs order against Mr Lancaster. The court declined to make a personal costs order against Mr Lancaster. He had acted on the advice of counsel (both junior and senior) and on his clients' instructions. As a general principle, a solicitor acting on counsel's advice in good faith is not exposed to a personal costs order. The court acknowledged that a prima facie case for a personal order might have arisen from Mr Lancaster's continued pursuit of the claim against the plaintiffs' principal solicitor once the evidence revealed it was unarguable except on a vicarious liability basis. However, the court found it was not rationally possible to apportion costs between the two separate arguments that had failed, making any personal costs order arbitrary and therefore impermissible.
Orders Made
- The defendant and cross-claimants are to pay, on an indemnity basis, the costs incurred by the plaintiffs in resisting the amended motion filed on 4 February 2016, which sought referral of the plaintiffs' solicitors to the Supreme Court under s 203 of the District Court Act 1973 for consideration of a prosecution for alleged civil contempt.
- Liberty to apply on 7 days' notice if further or other orders are required.
Key Takeaways
- A court established by statute possesses implied powers necessary for the proper administration of justice, including jurisdiction to award costs arising from an interlocutory contempt motion, even absent a formal "judgment or order in an action" under s 127(1) of the District Court Act 1973.
- Where a party simultaneously claims costs jurisdiction for its own benefit while later denying that same jurisdiction to resist an adverse costs order, the court will treat the party as having conceded the point.
- Indemnity costs are available where an interlocutory motion constitutes a procedural delinquency: specifically where it lacks rational connection to the issues in the case, delays proceedings, and causes the opposing party to incur unnecessary costs contrary to s 56 of the Civil Procedure Act 2005.
- Under s 99 of the Civil Procedure Act 2005, a personal costs order against a solicitor requires a finding of serious neglect, serious incompetence, serious misconduct, or costs incurred improperly or without reasonable cause. Acting on counsel's advice and client instructions will generally weigh against such an order.
- Where it is not rationally possible to apportion costs between distinct failed arguments, a personal costs order cannot be made on an arbitrary basis and must be declined.
Legislation and Cases Referenced
Legislation
- Civil Procedure Act 2005 (NSW), ss 56(3), 56(4), 56(5), 99
- District Court Act 1973 (NSW), ss 127(1), 203
Cases
- Botega Pty Ltd v Wales (1977) 1 NSWLR 139
- Johnston v Nationwide News Pty Ltd [2005] NSWCA 17
- Liverpool City Council v Estephan [2009] NSWCA 161
- Wallace v GWH Build Pty Ltd [2016] NSWDC 51 (the primary costs judgment)