Chinese Australian Services Society Co-operative Limited v 
Sham-Ho [2012] NSWSC 241 (20 March 2012)
Last Updated: 21 March 2012
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COSTS - application for costs to be paid forthwith - original costs order made against solicitor and solicitor's firm - context of order that solicitor cease to act on grounds of conflict of interest or breach of fiduciary duty or confidentiality - departure from general rule - UCPR 42.7 - whether forthwith order involves variation of earlier judgment - order made that costs be paid forthwith
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Cases Cited:
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Chinese Australian Services Society Co-Operative Ltd v Sham-Ho [2011] NSWSC 829
Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432 Gattelleri v Meagher [1999] NSWSC 1279 Hamod v State of NSW [2007] NSWSC 707 |
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- HER HONOUR: By notice of motion filed 12 October 2011 the plaintiffs seek an order pursuant to rule 42.7 of the Uniform Civil Procedure Rules 2005 ("UCPR") that the costs payable by Russell Phair and Proctor Phair Lawyers pursuant to my judgment in Chinese Australian Services Society Co-Operative Ltd v Sham-Ho [2011] NSWSC 829 be paid forthwith.
- The notice of motion relates to the plaintiffs' successful application for an order to restrain Mr Phair and Proctor Phair Lawyers from acting for the defendants ("the interlocutory proceedings") in defamation proceedings initiated by the plaintiffs ("the principal proceedings").
- There are five defendants ("the defendants"). The first defendant is Helen Sham-Ho. The second defendant is Andrew Lau. The third defendant is Theresa Kwong. The fourth defendant is Simon Ho. The fifth defendant is Joseph Leung. Mr Russell Phair and Phair Proctor Lawyers, acted for the defendants in the principal proceedings until 4 August 2011. Mr Phair is a director of Phair Procter Lawyers.
- On 2 August 2011, the plaintiffs' application to restrain Mr Phair and Proctor Phair Lawyers from acting for the defendants was heard by me.
- On 4 August 2011, I handed down judgment and ordered that Proctor Phair Lawyers and Russell Phair cease to act as solicitors for the defendants in these proceedings, and that Proctor Phair Lawyers and Russell Phair pay the plaintiffs' costs.
- At [22] - [23] of my reasons I stated:
"...I am of the view that Mr Phair is most likely to possess information as to how he came to address his memorandum to CASS and not Messrs Pan, Luong and Fong. Mr Pan says he had a telephone conversation with Mr Pan in relation as to who the invoice should be addressed and this information is relevant to the matters in issue in these current proceedings. I accept that Mr Phair may be called to give evidence as to what was said to him and by whom in relation to his fees.
It is my view that in these circumstances a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that Mr Phair should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice."
- In summary, the plaintiffs seek an order that the costs payable by Proctor Phair Lawyers be paid forthwith and not at the conclusion of the principal proceedings on the basis that, first, Proctor Phair Lawyers are not parties to the principal proceedings; secondly, the costs ordered to be paid by Proctor Phair Lawyers are in relation to separately identifiable interlocutory proceedings that do not interrelate with the principal proceedings; thirdly, the conduct of Proctor Phair Lawyers in acting against the plaintiffs or in continuing to act after being requested to cease, where the plaintiffs were their former clients, was unreasonable; fourthly, it is unknown when the principal proceedings will conclude, however it is likely that the proceedings could continue for another 9 to 12 months.
- Proctor Phair Lawyers' position is, firstly, that the motion relating to the proceedings involving the order for them to cease to act is an interlocutory application instituted in the same Court, with the same Court proceedings number and arise out of matters in the same proceedings and is therefore not a separate proceeding; secondly they did not act unreasonably in continuing to act for the defendants; thirdly, the plaintiffs are precluded by UCPR 36.16 and 42.7 from seeking a variation of my order made on 4 August 2011 and if a special costs application is not made in a timely manner the Court may lack power to entertain the application; fourthly by virtue of a costs arrangement between Proctor Phair Lawyers and the defendants, the defendants are ultimately liable to pay the costs of the interlocutory proceedings and therefore it would be unjust for the court to make an order that they pay the costs forthwith.
- UCPR 42.7 sets out the usual rule in relation to costs of interlocutory proceedings:
"42.7 Interlocutory applications and reserved costs
(1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including:
(a) costs that are reserved, and
(b) costs in respect of any such application or step in respect of which no order as to costs is made,
are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.
(2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings."
- However, the costs order was made against the solicitors personally. They are not a party in these proceedings. Proctor Phair Lawyers role is at an end. They have no further role to play in these proceedings.
The costs arrangement between Proctor Phair Lawyers and the defendants
- Proctor Phair Lawyers submitted that a costs arrangement exists whereby the defendants assumed the risk of paying the costs of the interlocutory proceedings should they fail.
- Mr Phair deposed (Aff, 30/11/11) that the defendants wanted him to continue to act for them and that he agreed to do so on the condition that the defendants were prepared to pay the costs if they were unsuccessful in the motion to continue to act. Annexed to Mr Phair's affidavit is an extract of an email sent by Proctor Phair Lawyers to the defendants on 27 July 2011 which included the following:
"Needless to say if we are successful in defending the motion the plaintiffs have to pay your costs, however, if you are unsuccessful you are to pay the plaintiffs (sic) costs".
- Mr Phair stated that he subsequently received confirmation from each of the defendants that they wished for him and his firm to continue to act for them on the understanding that they would cover the costs if the motion was unsuccessful. The plaintiffs' solicitor submitted that I should make an order that Proctor Phair Lawyers write to the defendants and advise them to seek independent legal advice in relation to this indemnity. The plaintiffs currently have new solicitors acting for them and can raise that issue with them.
- Mr Phair also stated that, since my orders of 4 August 2011, the defendants and the plaintiffs in the principal proceedings have sought to settle proceedings one of the basis being that there be an agreement to vacate all costs orders. However Mr Hill, solicitor for the plaintiffs/applicants, appears to deny that the plaintiffs ever sought such a term of settlement that include the vacation of all costs orders.
- The plaintiffs submitted, and I agree, that the principles covering the exercise of the discretion under UCPR 42.7(2) should not be affected by the existence of such a private arrangement between the defendants and their then solicitors. The fact remains that the costs order was made against non-party, and that non-party has, independently of these proceedings, entered into an indemnity agreement with the defendants.
Factors warranting departure from usual rule as to costs in interlocutory proceedings
- In Hamod v State of NSW [ 2007] NSWSC 707, at [12] Simpson J considered an application for costs of an interlocutory application to be paid forthwith. Her Honour regarded as relevant the following factors identified by Barrett J in Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432 ; 55 NSWLR 1 on an application under the predecessor to UCPR 42.7:
" (i) where the costs order is relevant to a discrete, separately identifiable aspect of the proceedings;
(ii) where there is demonstrated some unreasonable conduct on the part of the party against whom the costs have been ordered;
(iii) where the proceedings have some distance and time to run, and it may be some time before ultimate disposition."
- The submissions received from the applicants and respondents helpfully addressed these factors, which I will discuss in turn.
(i) Whether the interlocutory proceedings were a discrete aspect of the principal proceedings
- In Hamod and Anor v State of NSW Simpson J described interlocutory proceedings relating to the discovery of documents as "a classic instance of a discrete issue". In my view, these interlocutory proceedings are also a discrete issue quite separate to the principal proceedings.
- The orders made in these interlocutory proceedings do not concern the same parties as are involved in the principal proceedings. The costs order was made against the solicitors to this application, not the defendants in the principal proceedings.
(ii) Whether there was unreasonable conduct by the solicitors
- Mr Phair submitted that he and his firm had not acted unreasonably in defending the motion for ceasing to act.
- In considering a similar application to this one, albeit under the predecessor to UCPR 42.7, Simpson J in Gattelleri v Meagher [ 1999] NSWSC 1279 at[5] clarified that the "fact that the plaintiff was unsuccessful in [the] application does not of itself establish that the conduct was unreasonable". Likewise in this case the fact that Proctor Phair Lawyers were unsuccessful in defending the motion for an order to restrain them from acting does not of itself establish that their conduct was unreasonable.
- However, the plaintiffs submitted that there were elements of unreasonableness in the conduct. The plaintiffs provided a transcript of a preliminary hearing in this matter during which Proctor Phair Lawyers, through a legal representative, conceded that they had not reviewed their files in June 2011 to ascertain whether a conflict of interest existed (T16/6/11), although on 10 May 2011 the plaintiffs wrote to the solicitors requesting them to act. According to the plaintiffs, the defendants' solicitor should have viewed these files earlier. The notice of motion was not filed until 12 October 2011. The solicitors' failure to review their file for four weeks in June 2011 does not in my view constitute unreasonableness.
(iii) Whether the proceedings are close to being finalised
- The substantive proceedings are still at the directions stage with the next directions hearing listed on 7 May 2012.
- Mr Hill, the solicitor for the plaintiffs, stated that he viewed the current prospects of settlement as "hopeless" whereas Mr Phair stated that he predicted that the matter would settle soon. On this evidence it is not possible to form a view as to the parties settlement prospects.
- The plaintiffs submitted that should the matter proceed to trial before a jury, a 10 day hearing would be likely and that such a hearing could not be listed before June 2012. This is a very optimistic view and a June trial date is most unlikely to occur. The hearing will be some months away. In the circumstances where the first plaintiff is a charitable non-profitable organisation and the second plaintiff is a voluntary executive officer of that organisation, I agree with the submission of the plaintiffs that it would be unduly burdensome on them to wait up to a year to have the costs of the interlocutory proceedings satisfied.
Whether the order sought requires the earlier judgment to be varied (UCPR 36.16)
- The plaintiffs submitted that, firstly, it is unfair and unreasonable that the defendants have to expend further costs in objecting to an order that the costs are paid forthwith when the matter should have been argued at the hearing; and secondly, that this order would amount to a variation of the costs order I made on 4 August 2011.
- The defendants submit that the plaintiffs failed, as required by UCPR 36.16(3B), to indicate within 14 days of judgment that they intended to seek a special court order that costs be payable forthwith.
- UCPR 36.16 relevantly states:
"36.16 Further power to set aside or vary judgment or order
(1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order.
...
(3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered.
(3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered.
(3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B).
(4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order."
- The costs order was that Mr Phair and Proctor Phair Lawyers pay the plaintiffs' costs. The order now sought is that costs be payable forthwith is an additional order.
- While it would have been preferable for the application to be made on the day judgment was handed down, that does not mean it cannot be made at a later date.
- Even if the costs being payable forthwith was mentioned when the judgment was handed down, there would still have been a necessity to hear the arguments now raised by way of written submissions.
- Overall, in the exercise of my discretion, it is my view that the circumstances of this case warrant a departure from the ordinary rule, primarily because Proctor Phair Lawyers role is at an end and they were never a party in these proceedings. Hence, I order the costs order made on 4 August 2011 be payable forthwith.
- Costs of this application are discretionary. Proctor Phair Lawyers submitted that because the plaintiffs did not apply for an order that the costs be paid forthwith at the hearing of the interlocutory proceedings, the court should order that the applicants bear the costs of the application or alternatively there should be no order as to costs. To minimise costs, this issue was argued by way of written submissions. Costs are discretionary. The usual rule should apply. Costs follow the event. Proctor Phair Lawyers is to pay the plaintiffs' costs of this application as agreed or assessed. It follows that these costs should also be paid forthwith as that finalises Proctor Phair Lawyer's involvement in these proceedings.
The Court orders that:
(1) Proctor Phair Lawyers and Russell Phair pay the plaintiffs' costs of the motion dated 12 October 2011 forthwith.
(2) Proctor Phair Lawyers and Russell Phair pay the plaintiffs' costs of this application forthwith.
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