Citation: Riva NSW Pty Ltd v Fraser Clancy Lawyers [2019] NSWDC 348
Court: District Court of New South Wales
Date: 24 July 2019
Judge: Wilson SC DCJ
Background
The defendant law firm (the solicitors) acted for the plaintiff company in District Court proceedings arising from an alleged negligence claim against a former solicitor. When the plaintiff refused to pay the solicitors' fees, the solicitors pursued costs assessment and ultimately obtained a costs determination and registered judgment. What followed was a prolonged sequence of appeals, challenges, and enforcement skirmishes spanning nearly a decade.
Throughout the proceedings, two individuals associated with the plaintiff gave evidence that was found to be false. One of those individuals had a prior fraud conviction, had been banned from managing corporations by ASIC, and received a suspended sentence for failing to comply with ASIC notices to produce. The plaintiff's conduct included irregularly obtaining Local Court orders after the proceedings had been transferred to the District Court, misrepresenting the outcome of those proceedings to its bank, and swearing affidavits that the court found to be knowingly false.
This third judgment addressed the solicitors' application to vary the earlier costs order, seeking indemnity costs, interest on costs, and clarification of an earlier order. The court took the occasion to survey the full history of the proceedings and consider what further orders and referrals were warranted.
Legal Issues
- Whether the plaintiff's costs liability should be assessed on an indemnity basis rather than the ordinary basis
- Whether interest should be awarded on the defendants' outstanding costs under s 101(5) of the Civil Procedure Act 2005
- Whether the conduct of the plaintiff and its associated individuals warranted referral to ASIC and the Office of the Director of Public Prosecutions
- Whether the plaintiff's legal representatives had failed their duty to the court under s 56 of the Civil Procedure Act 2005, warranting referral to the Law Society and the Bar Association
Decision
The court granted indemnity costs. The history of the proceedings demonstrated a sustained pattern of vexatious conduct, bad faith, and deliberate attempts to mislead the court and third parties. An earlier judge had already characterised the proceedings as vexatious and involving bad faith. Wilson SC DCJ found this characterisation was fully borne out by the subsequent conduct surveyed in the chronology.
On the question of false affidavits, the court found that two individuals connected to the plaintiff had sworn affidavits knowing them to be false. One had previously admitted under cross-examination in 2012 that his affidavit evidence was untrue. The court concluded that this conduct, together with the irregular obtaining of Local Court orders after transfer and deliberate misrepresentations to the plaintiff's bank, crossed the threshold for referral to the Director of Public Prosecutions.
The court also directed referral to ASIC. Given one individual's existing history of banning and disqualification, and the conduct throughout these proceedings, the court recommended ASIC consider placing both individuals on the list of persons disqualified from involvement in managing corporations.
Regarding the plaintiff's legal representatives, the court directed that the names of all solicitors and barristers who had acted for the plaintiff be provided to the Registrar, who would in turn notify the Law Society and the Bar Association of their failure to comply with their duty to the court and obligations under s 56 of the Civil Procedure Act. Interest on the defendants' costs was also awarded from the date those costs were incurred.
Orders Made
- The Registrar directed to refer the two individuals associated with the plaintiff to ASIC, with a recommendation they be disqualified from managing corporations
- The Registrar directed to refer the proceedings to the Office of the Director of Public Prosecutions for consideration of prosecuting those individuals for swearing affidavits known to be false
- The defendants' solicitor to provide the Registrar with a list of all solicitors and barristers who acted for the plaintiff
- The Registrar to notify the Law Society of NSW and the NSW Bar Association of those practitioners' failure to comply with their duty to the court and obligations under s 56 of the Civil Procedure Act
- The plaintiff to pay the defendants' costs on an indemnity basis, covering all Notices of Motion and other applications
- The plaintiff to pay interest on the defendants' outstanding costs from the date those costs were incurred, pursuant to s 101(5) of the Civil Procedure Act
- Liberty to the defendants to apply for a gross sum costs order under s 98(4)(c) of the Civil Procedure Act
- Liberty to the defendants to apply for a further freezing order
- Copies of the judgment to be sent to the plaintiff, the defendants, the two named individuals, and any legal practitioners identified as having acted for the plaintiff
Key Takeaways
- Indemnity costs are available where proceedings are found to be vexatious and conducted in bad faith, and this characterisation can be sustained across multiple judgment stages where the underlying conduct remains consistent throughout the litigation.
- Where a party's witnesses have been found to have sworn false affidavits, including by their own concession under cross-examination, a court may direct referral to the DPP for consideration of criminal prosecution.
- Under s 56 of the Civil Procedure Act 2005, both parties and their legal representatives bear obligations to facilitate the just, quick, and cheap resolution of proceedings. The District Court found that the plaintiff's lawyers had failed those obligations and directed the relevant professional bodies be notified accordingly.
- Irregular conduct in obtaining orders from a court after proceedings have been transferred, and misrepresenting litigation outcomes to third parties such as banks, formed part of the court's broader assessment of bad faith warranting the most serious available responses.
- A court may direct referral to ASIC where individuals involved in managing a corporation have a prior history of banning or disqualification and have conducted themselves in a manner consistent with that prior finding.
Legislation and Cases Referenced
Legislation
- Civil Procedure Act 2005 (NSW), ss 56, 98(1), 98(4)(c), 101(5)
- Uniform Civil Procedure Rules 2005 (NSW)
Cases
- Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
- Degmam Pty Ltd (In Liq) v Wright (No 2) [1983] 2 NSWLR 354
- Hamod v State of NSW (2002) 188 ALR 659
- Harrison v Schipp [2001] NSWCA 13
- Ingot Capital Investment v Macquarie Equity Capital Markets Ltd (No 7) (2008) 65 ACSR 324
- Leichhardt Municipal Council v Green [2004] NSWCA 341
- Mead v Watson as Liquidator for Hypec Electronics (2005) 23 ACLC 718
- Oshlack v Richmond River Council (1998) 193 CLR 72
- Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62