Federal Court of Australia

Pekar v Jess (Trustee) (No 4) [2021] FCA 534

ORDERS

THE COURT ORDERS THAT:

1.    Notwithstanding the Respondent having sought orders alternatively to that provided for in Order 2 of the Courts reasons of 6 May 2021 the Applicant be awarded costs in the sum of $2,000.

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

REASONS FOR JUDGMENT

KERR J:

1    On 6 May 2021 the Court delivered judgment and published its reasons in Pekar v Jess (Trustee) (No 3) [2021] FCA 466 (Pekar No 3).

2    Pekar No 3 was a decision in respect of the Applicant's application for review of a taxation of costs. The Court set the Certificate of Taxation aside and in lieu thereof ordered that the Respondent be awarded his costs in a lesser sum.

3    An order was made, subject to either party seeking an alternative order, that the Respondent pay the Applicant’s costs in the sum of $2,000. That was the cost of the filing fee the Applicant incurred for filing an application for review of the taxation. The Court ordered that if any alternative order was sought the Court would determine that question on the papers.

4    The Respondent has sought an alternative order as to costs: he submits that the Applicant should be ordered to pay the Respondent’s costs on an indemnity basis; or on the ordinary party-party basis; or that there be no order as to costs at all.

5    These reasons assume a familiarity with those the Court delivered in Pekar No 3. They are to be read in conjunction with those reasons.

6    The Applicant did not take the occasion to seek an alternative costs order—however she has filed an affidavit in which she alleges there has been continuing failure of Rothwell Lawyers to comply with orders of this Court. In that affidavit she also requests the Court to make an order referring Rothwell Lawyers’ conduct to the Victorian Legal Services Commissioner for disciplinary charges of professional misconduct.

7    I reject that what is asserted in the Applicant’s affidavit is relevantly responsive to what order for costs the Court should make. I therefore return to the submissions advanced by the Respondent.

8    The Respondent accepts that ordinarily costs follow the event. He does not dispute that the Applicant has succeeded facially in her claim to review the taxation. The Respondent however is correct that, if circumstances justify it, the Court has a discretion as to award costs otherwise than to the successful party.

9    The written submissions advanced by the Respondent in support of the orders it seeks the Court make in the exercise of that discretion are as follows:

2.     Facially, the Applicant (to a very limited extent) succeeded in her claim to review the Taxation Decision. However, the Applicant's “success” is limited and minimal comparatively to relief she sought in her review, which was for “all the items allowed by [the] Registrar” and “dismissal of the whole bill”. The Applicant fell well short of the relief she claimed. As such the extent to which the Applicant was unsuccessful is far greater than the extent to which she was successful.

3.    Where the Applicant sought the entirety of the bill to be taxed off, it is reasonable to conclude that the extent of her failure is to the sum of $11,693.05 being the amount which the Court allowed. Insofar as she was successful, this amount can only be measured by the amount which was taxed off. This amount is $2,684.11. The Applicant later submitted (contradictory to the relief sought in her application) that the bill ought to be reduced to $2,254.973. In either event, it is inescapable that the Applicant's application was more a failure than a success.

4.    On this backdrop it is difficult to conclude that the Applicant was ultimately successful and that the Respondents were unsuccessful. It follows that it is not appropriate to award the Applicant her costs on the basis that she was successful in her application.

Unsuccessful objections

5.     The Applicant made a multitude of unsupported objections to the bill. These objections are referred to at [34] and dealt with at [80] of the Reasons. The application would have been dismissed insofar as the application related to these objections (refer [80] of the Reasons). Further, these objections are no more than “unsupported broad allegations”.

6.     The Applicant demanded copies of the relevant documents pertaining to these objections late in the piece, and despite this lateness was provided with an opportunity to inspect the file. The Applicant declined this offer. Had the Applicant taken up the offer to inspect the file, it might have been made apparent to her that these objections could not succeed.

7.     The Respondents were put to significant cost in responding to these objections and were successful in doing so. They should not be made to bear the expense of doing so. This is especially so where the Applicant failed, without any reasonable explanation, to take a step (in inspecting the file) which is both one reasonably expected to have been taken in the process of prosecuting her claim and one which could have averted or minimised the costs incurred by the Respondents.

Fraud

8.     Throughout the course of the proceeding the Applicant, on multiple occasion made allegations of fraud. These allegations were rejected. It is trite law that an unsupported and unproven allegation of fraud warrants the award of indemnity costs. This position and the reasons which underpin it are helpfully set out at [16.57] of Dal Pont as follows:

“…..a person should not allege fraud or other improper conduct without a proper evidentiary foundation, as such an allegation may be recounted in the community and through the media, and harm a litigant's reputation before evidence has been offered and submitted to the scrutiny of cross-examination or rebuttal. The court aims to deter unsupported allegations of this kind by, inter alia, costs orders, whether special costs orders against a litigant, or a costs order against his or her lawyer.”

9.     The Applicant alleged fraud in respect of the objections referred to in [34] of the Reasons. These objections were not upheld and axiomatically, the accompanying fraud allegations are unproven. These allegations were made by the Applicant without her having inspected Rothwell Lawyers’ file and were maintained after and despite her refusing to inspect Rothwell Lawyer’s file. The Applicant made these allegations without evidentiary foundation.

10.     His Honour’s finding in respect of the reasonableness of the Applicant’s allegations of fraud arising from the issues of duplication and exhibiting of an incorrect fee slip (refer [63] and [64] of the Reasons) are not relevant to this issue. Notwithstanding those unfortunate events, which may have given rise to such suspicions of fraud for those specific matters, no such events occurred with respect to the Applicant's unsuccessful objections. As such, the allegations of fraud in respect of same are baseless and should not have been made. The court's orders as to costs must reflect as much. Further, these objections and fraud allegations amount to “allegations which ought never to have been made” which is of itself, grounds for an order for indemnity costs.

11.     The Applicant should not be afforded leniency on account of being a self-represented litigant with respect to her allegations of fraud. She has alleged fraud unsuccessfully in prior proceedings and has previously been given leniency by the Courts in this respect. The Applicant’s previous unproven allegations of fraud have gone “unpunished” (that is, no special costs order made) and a special costs order is warranted as a deterrent for the Applicant from making similar unfounded allegations in potential future proceedings.

12.     Notwithstanding the above, upon consideration of all matters, it may also be appropriate to make only a standard costs order (in favour of the Respondents) or revert to the initial position of no costs order at all. However, awarding the Applicant her costs is not appropriate in the circumstances.

(Footnotes omitted)

10    The fundamental problem with those submissions generally, and more specifically in so far as they seek to attribute a want reasonableness on the Applicant’s part in alleging fraud, is that they take little or no account of the adverse findings the Court made in Pekar No 3 regarding the Respondent’s own conduct.

11    They thus fly in the face of the Court’s observation at [67] that many of the difficulties (and the considerable time costs incurred) in the proceeding were self-inflicted by the Respondent. It is uncontentious that the Respondent’s solicitors, Rothwell Lawyers, had originally prepared a single bill of costs for two proceedings: one in respect of a proceeding which had been conducted in this Court, the other in the Federal Circuit Court of Australia. Following that single bill of costs having been rejected for filing, the Respondent thereafter submitted two separate bills, one in respect of each proceeding, but in which a large number of the same costs for the same legal services that had been provided by Rothwell Lawyers were claimed.

12    In Pekar No 3 the Court addressed what had happened as follows:

60.    …The two bills later separately submitted were significantly deficient (to put it neutrally) in that the costs claimed in each included a plethora of unjustified items by way of unidentified duplications of the other- which but for the professional and careful way in which Registrar Allaway took care to disentangle the two would have resulted (subject only to review) in a wholly unjustified windfall to the Respondent's lawyers. Moreover the form in which those later bills were submitted gave rise, entirely understandably, to the perception in the Applicant that that a fraud was being perpetrated on her…

13    In respect of an allegation of fraud the Applicant had pressed in her review which is centrally the focus of the Respondent’s submissions the Court reasoned:

63.     Given the uncontentious fact that there were many duplicated items in those bills that there can be no occasion for criticising an unrepresented litigant for initially pressing that claim. Further, I am sceptical that it was unreasonable of Mrs Pekar not to have been disabused of that notion after the bills had been taxed and many duplicated items had been taxed off. The taxing off of those duplicated items does not assist in reaching a conclusion that there had been such an intent. It might mean no more than that the intended fraud had not succeeded.

64.     I do not doubt that Mrs Pekar’s apprehension of intentional fraud on the part of Rothwell Lawyer (sic) was heightened after she read and gave attention to the affidavit of Ms Rothwell as sworn on 24 March 2021 in which it was revealed that the firm had claimed $1,750.00 as a disbursement to counsel when the bill from Ms Gobbo she exhibited at TPR-5 was in a significantly lesser sum. Mr Pekar raised that inconsistency in his oral submissions. He submitted that the excessive claim was proof of the false and misleading fraud committed by the respondent's lawyers-and in any event that particular item should be taxed down to the lesser amount of $350.00 as the fee note for Ms Gobbo provided.

65.     Because that specific allegation of alleged fraud had not been identified earlier Mr Lapirow applied for, and I granted, leave to the respondents to file and serve any affidavit as would explain the discrepancy.

14    Although the Court ultimately accepted the “tortured explanation” offered by Ms Rothwell, a solicitor from Rothwell Lawyers, in her responsive affidavit, it observed that had Ms Rothwell taken reasonable care to review her affidavit and to satisfy herself of the accuracy of its contents, she would have immediately identified that inconsistency. I reasoned that Rothwell Lawyers’ reliance on the earlier affidavit in the form it had earlier been filed reflected:

66.    …an entire insufficiency of care on its part in responding to the orders the court had made requiring an explanation of circumstances in which this proceeding had to address–that of the duplication of costs in their bill with those claimed in another proceeding–asserted by the applicants to be those of fraud.

15    Rothwell Lawyers initially disdained to explain what had happened to create the circumstances in which the relevant controversies arose. In that respect the Court recorded the following findings:

68 Had Rothwell Lawyer's frankly acknowledged in a straightforward way at the first Case Management Hearing that they had made mistakes in the preparation of Mrs Pekar's bill, apologised to her for the duplication of many items having created understandable suspicions on her part, and undertaken to provide a full explanation this review could have been concluded in much shorter time and with much less ill-will.

69     It was only after repeated orders of the court had been made that the full context in which the bills had been prepared, grudgingly, was made apparent.

70     Notwithstanding the unfortunate prior history I have referred to above, in light of that unchallenged evidence (which included the explanation provided by Ms Rothwell only after the hearing of the review) I reject that the fraud Mrs Pekar alleges is proven.

16    In those circumstances the Court esteems the Respondent’s submissions as to the Applicant’s asserted want of reasonableness in advancing the contentions she did as amounting to a plea for the Court to focus on a mote in that unrepresented litigant’s eye while ignoring the beam in its own. That plea is rejected.

17    I more specifically reject that the Respondent’s late made offer to make available its entire file for inspection by the Applicant as is referred to in the Respondent’s written submission bears significantly upon how, as an evaluative exercise of discretion the costs of this proceeding should be allocated. That offer was taken into account by the Court only in respect of its conclusion at [79]. In that regard it was a factor the Court took into account in entitling it, in the absence of a sound foundation to the contrary, to rely on Registrar Allaway’s conclusions with respect to such of the costs claimed by the Respondent allowed on taxation other than those the Court, on de novo review, had determined to have been unjustified.

18    In every other respect Rothwell Lawyers’ offer came far too late to have any bearing on the costs to be awarded in these proceedings. It was made only in the teeth of this Court hearing the review, and long after the Respondent on prior occasions had manifested disdain of any need to explain what had happened. As the Court noted at [60] it had been only grudgingly, and after repeated Court orders, that the underlying facts had emerged.

19    The Respondent, by the conduct of his lawyers, was responsible for initially double charging for the same legal services. Thereafter, again by reason of the conduct of his lawyers, the Respondent continued to be the author of his own misfortune in incurring unnecessary costs. As the Court observed at [68]:

68.     Had Rothwell Lawyer’s frankly acknowledged in a straightforward way at the first Case Management Hearing that they had made mistakes in the preparation of Mrs Pekar's bill, apologised to her for the duplication of many items having created understandable suspicions on her part, and undertaken to provide a full explanation this review could have been concluded in much shorter time and with much less ill-will.

20    The Respondent, despite the Applicant’s conceded success in the review she initiated, now seeks to avoid the expensive consequences of his own lawyer’s conduct by heaping responsibility for the unnecessary costs occasioned onto the unrepresented litigant whose interests his solicitors had shown a considerable lack of regard for; and on an indemnity basis. That needs only to be recognised to cause it to be rejected.

21    I reject the Respondent’s submission that the Applicant should be required to pay the Respondent’s costs on an indemnity or any other basis or, alternatively, that there be no order as to costs.

22    Nothing in the Respondent’s submissions persuades me that I should not exercise my discretion to award the Applicant her costs as is usual in the instance of a successful litigant albeit that will be confined, as an unrepresented litigant, to recovery of the amount of the filing fee she incurred to initiate her review. I accept as the Respondent contends that in that regard the Applicant’s success was not comprehensive. However the result, understood in the round, was in her favour. A not inconsiderable number of legal services charged for by the Respondent’s lawyers that had been upheld in the taxation were held to be unjustified and her bill reduced.

23    For completeness I should specifically indicate that I am also entirely unpersuaded of the submission advanced on behalf of the Respondent at [11] of his submissions. That submission is as follows:

11.     The Applicant should not be afforded leniency on account of being a self-represented litigant with respect to her allegations of fraud. She has alleged fraud unsuccessfully in prior proceedings and has previously been given leniency by the Courts in this respect. The Applicant’s previous unproven allegations of fraud have gone "unpunished" (that is, no special costs order made) and a special costs order is warranted as a deterrent for the Applicant from making similar unfounded allegations in potential future proceedings.

24    That submission is footnoted to the reasons of Judge Burchardt in Holden, As Trustee of The Bankrupt Estate of Pekar v Pekar (No.6) [2020] FCCA 3385. It having been cited in respect of costs, I have read it. It is a decision in respect of an application by the Applicant in the Federal Circuit Court of Australia in which the Applicant sought review of the mirror taxation conducted by Registrar Allaway in MLG 932 of 2015. The fraud the Applicant then alleged, but failed to prove, in that proceeding thus arose out of the same matrix of circumstances as addressed in Pekar No 3.

25    That circumstance entirely fails to justify the conclusion that the Applicant has relevant a prior history of making unwarranted and unsucessful allegations of fraud as would call for a deterrent response. It merely establishes that the Applicant advanced like claims of fraud in two parallel reviews of taxations in which the overlapping common feature was the Respondent’s initial double charging for his legal services. That the Applicant did not persuade either Court to make the findings contended for does not gainsay that there was a plausible basis for her claim: the alternative being want of competence on the part of the Respondents’ lawyers to a degree rarely observed—and then not frankly acknowledged. As the Court reasoned in Pekar No 3:

70     Notwithstanding the unfortunate prior history I have referred to above, in light of that unchallenged evidence (which included the explanation provided by Ms Rothwell only after the hearing of the review) I reject that the fraud Mrs Pekar alleges is proven.

71     However, what is inescapable in the alternative is that Rothwell Lawyers must be concluded to have been both professionally remiss and careless of Ms Pekar’s interests. I am satisfied that Rothwell Lawyers submitted bills for taxation, prepared by a third party costs assessor in circumstances in which the costs assessor had expressed at least some doubt about its instructions, without checking that the items charged for in those bills as had been prepared fairly reflected their entitlements.

26    I will order the Respondent to pay the Applicant’s costs in the sum of $2,000.00.

27    Finally I should address the Applicant’s request that I refer Rothwell Lawyers to the Victorian Legal Services Commissioner for disciplinary charges of professional misconduct.

28    It may be accepted that the Respondent’s present submissions, assuming them to be based on the advice of his solicitors, lessens the confidence the Court expresses at [74] in Pekar No 3 that no further attention would need to be given to that question. However, I am unpersuaded I should take such a step. The request made by the Applicant assumes the Court has made findings it has not made.

29    Although in both Pekar No 3 and in these reasons I have made explicit findings of extremely significant fallings short by Respondent’s lawyers of the professional standards expected of legal practitioners I have made no findings of professional misconduct. That is not by mere inadvertence. An allegation of professional misconduct requires more than mere falling short of professional competence. The Applicant does not ask me to press a complaint of unsatisfactory professional conduct.

30    I am satisfied that I ought not prolong this proceeding further. Each side already has made too extravagant claims about the misconduct of the other. I should not further indulge those inclinations—on either account.

31    If the Applicant wants to initiate a complaint about Rothwell Lawyers’ asserted professional misconduct it is open to her to do so.

Associate:

Dated:    19 May 2021