FEDERAL COURT OF AUSTRALIA

Higginbotham v Kerr [2017] FCA 686

ORDERS

THE COURT ORDERS THAT:

1.    The applicant pay the respondents’ costs of the application for interlocutory relief, set out in the Originating Application filed on 3 May 2017, on an indemnity basis forthwith.

2.    The New South Wales District Registrar of the Federal Court refer to the Legal Services Commissioner of New South Wales these reasons, the evidence filed by the parties, the transcripts and the parties’ submissions in connection with the application for interlocutory relief set out in the Originating Application filed on 3 May 2017, for consideration as to whether the applicant has filed evidence which was misleading and/or not truthful and if so, what ramifications, if any, that should have in relation to his role as a legal practitioner.

3.    The applicant notify the Court within seven (7) days of the completion of any conciliation conference or other resolution of the proceedings.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BURLEY J:

Introduction

1    These proceedings first came before me as duty judge on 3 May 2017, when the applicant, a legal practitioner and partner of the law firm Lander & Rogers, sought interlocutory relief to restrain his fellow partners from requiring his retirement from the partnership. I heard the application on an urgent basis on 5 May 2017, but on 11 May 2017, in circumstances summarised briefly below, the applicant aborted his interlocutory application. He accepted that the application could no longer be sustained because he had failed to disclose material information to the Court. The applicant concedes that he should pay the respondents’ costs of the application on an indemnity basis. The present controversy concerns whether or not the applicant should pay the respondents’ indemnity costs forthwith, and whether the papers relating to the interlocutory application, including these reasons, should be referred to the Legal Services Commissioner of New South Wales.

2    For the reasons set out below, I consider that it is appropriate for the applicant to pay the costs forthwith and also that the papers relating to the interlocutory application, including these reasons, should be referred to the Legal Services Commissioner.

Background

3    On 6 April 2017, the equity partners of Lander & Rogers, lawyers, gave notice to the applicant, under their Partnership Agreement, that after the expiration of one month, his interest as a fixed share partner of the partnership will be terminated. On 11 April 2017, the equity partners gave a further notice to the applicant that he must retire as a fixed share partner six months after receipt of that notice. On 3 May 2017, the applicant filed an Originating Application which sought as interlocutory relief an interim injunction pursuant to s 46PP of the Australian Human Rights Commission Act 1986 (Cth) restraining the equity partners from giving effect to each of the notices, or alternatively, a mandatory injunction directing the respondents to rescind or withdraw the notices.

4    The parties cooperated in the preparation of the matter for an urgent interlocutory hearing on 5 May 2017. At the hearing several affidavits were read, including one dated 2 May 2017 sworn by the applicant. I then reserved my decision.

5    On Wednesday 10 May 2017, the respondents brought an application seeking leave to reopen the hearing in order to file additional evidence that had recently, and fortuitously, come to their attention. The applicant did not oppose the grant of leave and accordingly two further affidavits were received into evidence on the interlocutory application. I gave directions for the filing of affidavit evidence in response and further submissions by the parties as to the ramifications of the additional evidence, and set the matter down for a resumption of the hearing on Friday 12 May 2017.

6    Prior to that resumption, the applicant informed the Court and the respondents that he no longer sought any interlocutory relief. However, there remained an outstanding dispute as to the payment of costs, with the respondents contending that in light of the events that transpired, the applicant should pay them forthwith, on an indemnity basis. The respondents also contended that the affidavits and submissions filed in relation to the interlocutory application, as well as the hearing transcripts, should be provided to the Legal Services Commissioner of New South Wales. I adjourned the proceeding until 30 May 2017 to enable further affidavits and submissions to be filed in relation to the remaining matters in dispute.

7    The applicant filed affidavits in response to the additional evidence on 11 and 15 May 2017. In the latter he accepted that he had failed to provide information to the Court that was material to the grant of the interlocutory injunction, in the form of a job offer that had been made to him prior to the initial hearing.

8    It is unnecessary to go into detail about the non-disclosure. For present purposes it is sufficient to observe that during the course of submissions on 30 May 2017, Senior Counsel for the applicant accepted: (a) that the applicant had been responsible for a material nondisclosure of facts relevant to the Court’s assessment of the balance of convenience in the interlocutory application; (b) that the fact of the nondisclosure meant that the interlocutory application was unable to be maintained; and (c) that for these reasons the applicant consents to an order that he pay the respondents’ costs on an indemnity basis.

9    As I have noted, the concessions made by the applicant were not sufficient to resolve the issues outstanding in relation to the interlocutory application in their entirety. The respondents also seek an order that the applicant pay their costs forthwith pursuant to Federal Court Rules 2011 (Cth) r 40.13. That rule provides:

Taxation of costs awarded on an interlocutory application

If an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished.

Note: The Court may order that costs of an interlocutory application be taxed immediately.

The arguments

10    The respondents submit that costs should be paid forthwith for three reasons; first, that the failure on the part of the applicant to explain why information was not disclosed to the Court prior to the hearing, given his role as an officer of the Court, is inexcusable. Secondly, that costs of the interlocutory application are separately identifiable from the balance of the relief that is sought in the originating application, citing Nichia Corporation v Arrow Electronics Australia Pty Ltd (No 2) [2015] FCA 824 (Nichia) at [4]. Thirdly, that there is likely to be a significant lapse of time before any final determination of the matters agitated in the balance of the originating application, which in itself warrants such an order.

11    The applicant opposes such an order on the basis that, when he commenced the application, he considered that there was a serious question to be tried and that there would be significant adverse financial and reputational consequences for him in the event that he ceased being a partner of Lander & Rogers. He submits that had he disclosed the additional information about a job offer from a different firm, such information would have had no material bearing upon the outcome of his interlocutory application. In those circumstances, whilst he accepts that he should have disclosed the matters omitted from his evidence, he submits that it does not warrant an order for indemnity costs to be paid forthwith.

Consideration

12    It is unnecessary for present purposes to address the detail of the applicant’s nondisclosure. I have recorded the effect of the concessions that he has made in [8] above. I consider that the nondisclosure was material and entirely warranted the concessions subsequently made by the applicant. It was plainly incumbent upon the applicant as an officer of the Court, to ensure that material facts within his knowledge were disclosed; Legal Practitioners Complaints Committee v Dixon [2006] WASCA 27 at [10]; Coe v NSW Bar Association [2000] NSWCA 13 at [8] – [10]. In circumstances where the applicant sought to restrain his partners from terminating his involvement in the partnership, the relevance to the question of the balance of convenience of his receipt of what was at least an offer of a position with another firm is, and ought to have been, obvious.

13    In my view the facts of the present case warrant a departure from the ordinary rule expressed in FCR r 40.13.

14    The circumstances in which the Court may make an order as to the payment of costs forthwith should be governed by the question of whether the demands of justice require that there be a departure from the general practice envisaged by the rule; Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd [1992] FCA 423; (1992) 36 FCR 297 at 312 (Olney J). The categories of cases where a forthwith order is appropriate are open, but unreasonable conduct on the part of the party against whom costs have been ordered is one such category; Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1 at [12]. See also Bevillesta Pty Ltd v D Tannous No 2 Pty Ltd [2010] NSWCA 277 at [31] – [39] (McColl JA, Allsop P and Handley AJA agreeing).

15    Another is where the final determination of the parties’ competing claims will not be heard for some time. In that circumstance it may be appropriate to justify a departure from the normal position set out in FCR r 40.13 in the absence of any unreasonable conduct; Nichia at [7]. A consideration to take into account is whether inconvenience would be caused because essentially the same costs might be taxed on two separate occasions; McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 (Weinberg J) at [24].

16    The interlocutory application brought by the applicant represents a discrete part of the controversy between the parties. It has now been concluded. The evidence indicates that in the normal course it may be between four and five months before the complaint to the Human Rights Commission (Commission) can be allocated to an officer in the Commission and, once allocated, a further 2 – 4 weeks for conciliation to take place. If the Commission believes there is no reasonable prospect of resolving the matter by conciliation, the complaint will be terminated, which will likely take a further week. If the matter is expedited by the Commission, the complaint could be set down for conciliation in June 2017, but there is no evidence that an application for expedition has been made, and in the absence of interlocutory orders being in place it is perhaps unlikely that expedition would be granted.

17    Accordingly, it is most likely that the Commission will consider the complaint in the next four to six months. Thereafter, in the event that the conciliation process is unsuccessful, the Federal Court proceedings will be resumed. The parties agree that final resolution is may well take between 12 to 14 months from that resumption.

18    In the present case I consider that the conceded material nondisclosure on the part of Mr Higginbotham amounts to unreasonable conduct on the part of the applicant. Taken together with the likely delay between now and the final resolution of the proceedings in Court, and the discrete, separately identifiable nature of the subject matter of the interlocutory application for costs purposes, the circumstances warrant the grant of an order that Mr Higginbotham pay the indemnity costs of the interlocutory application forthwith.

19    It is unnecessary to determine whether the information that the applicant failed to disclose, if exposed at the time of the interlocutory application, would have affected the outcome of the application. The answer to that question does not have a bearing on the conclusion that I have reached.

20    The respondents urged that the circumstances that I have touched upon above warrant an order that the District Registrar of the Federal Court refer the transcripts, and affidavits and submissions filed in connection with the interlocutory application, to the Legal Services Commissioner of New South Wales for consideration as to the ramifications, if any, that the evidence of the applicant may have in relation to his role as a legal practitioner. I agree.

21    In terms of the further conduct of the proceedings, it is apparent that any further steps in this Court must await the outcome of the conciliation process. Accordingly, I will direct that the applicant notify the Court within seven (7) days of the completion of any conciliation conference or other resolution of the proceedings, so that further directions in the matter may then be given.

22    The orders that I make are, accordingly, that:

1.    The applicant pay the respondents’ costs of the application for interlocutory relief set out in the Originating Application filed on 3 May 2017, on an indemnity basis forthwith.

2.    The New South Wales District Registrar of the Federal Court refer to the Legal Services Commissioner of New South Wales these reasons, the evidence filed by the parties, the transcripts and the parties’ submissions in connection with the application for interlocutory relief set out in the Originating Application filed on 3 May 2017, for consideration as to whether the applicant has filed evidence which was misleading and/or not truthful and if so, what ramifications, if any, that should have in relation to his role as a legal practitioner.

3.    The applicant notify the Court within seven (7) days of the completion of any conciliation conference or other resolution of the proceedings.

Associate:

Dated:    19 June 2017

SCHEDULE OF PARTIES