Federal Court of Australia

Harvey v Dioceses of Sale Catholic Education Ltd (St Joseph’s Primary School Wonthaggi) (No 3) [2021] FCA 1420

ORDERS

THE COURT ORDERS THAT:

1.    Starnet Legal Pty Ltd and Mr DJ Hancock of counsel are to bear personally the legal costs of the respondent incurred in relation to its interlocutory application dated 1 July 2020, including the costs related to the preparation of the submissions on costs filed by the respondent on 1 November 2021.

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

REASONS FOR JUDGMENT

O’CALLAGHAN J:

1    In Harvey v Dioceses of Sale Catholic Education Ltd (St Joseph’s Primary School Wonthaggi) (No 2) [2021] FCA 1102 (Harvey (No 2)), I made orders striking out [11]-[19] and [34]-[44] of the applicants’ amended statement of claim (ASOC) filed on 19 November 2019, on the basis that the impugned paragraphs wholly failed to plead any proper cause of action. As that judgment records, the solicitors for the respondent made numerous attempts to dissuade the legal representatives for the applicants that those paragraphs were doomed to failure.

2    This proceeding is related to VID 106 of 2019, in which I made similar orders in respect of a strike-out application in relation to the amended statement of claim in that proceeding. See Milkins v Dioceses of Sale Catholic Education Ltd (St Joseph’s Primary School Wonthaggi) (No 2) [2021] FCA 1103.

3    The respondent’s attempts to persuade the applicants that large parts of the pleaded claim were hopeless has a long history.

4    After the amended statement of claim was filed in November 2019, the respondent’s solicitors on 6 March 2020, wrote to the solicitors for the applicants, including in the following terms:

2.    In our view, 4 of the allegations made in each of the ASOCs still do not comply with the pleading requirements stipulated by the Federal Court Rules 2011. They cannot be properly understood and do not put our client on notice of the case against it.

3.    In the circumstances, the offending paragraphs of the ASOCs ought to be amended or struck out.

4.    It is a serious matter that all 4 of these allegations have already been critiqued in correspondence from us in June 2019 and then the subject of a successful strike out application by the Court where both Statements of Claim were struck out in their entirety.

5.    The reasons why these allegations were defective were clearly explained to you in both correspondence and in detailed submissions to the Court. Your continual failure to properly address these issues strongly suggests that your clients are incapable or unwilling to formulate the claims in a way that comply with the Court’s requirements.

6.    In an effort to resolve the issue without bringing the matter back before the Court, we invite your clients to amend the ASOCs to address the deficiencies raised in this letter. If your clients do not agree, we anticipate receiving instructions to have those claims permanently dismissed with no scope for them to be re-pleaded.

5    The applicants responded by letter dated 21 April 2020. They denied in emphatic terms that there was any substantive problem with the pleading. By way of example only, the letter made the following claims:

[W]e do not accept that your client does not understand that it is the programs themselves that are the primary subject of this allegation.

…

With respect, your client is attempting to have our clients draft their pleadings in a manner which is impermissible for an indirect discrimination complaint.

…

To provide your client with the above information, putting aside that it is inappropriate for an indirect discrimination complaint, would invite consideration of matters that are irrelevant and time wasting …

With respect, and in our view, your client does indeed understand the case against it, or alternatively, has misconceived the nature of an indirect disability discrimination claim.

…

You allege that none of the allegations state which of the obligations were breached by the respondent, and how. We respectfully disagree.

…

[W]e disagree that paragraph 35.3 is an ‘incomprehensible mix of obligations seemingly arising from multiple sources’. We repeat:

a.    Paragraph 35.3 is subservient to paragraph 35, which makes a claim that the respondent has breached sections s.5.2(1) and s.5.2(2) - being, in short, obligations to take reasonable steps and consult;

b.    Paragraph 35.3 clearly alleges that the Respondent has failed to meaningfully consult, being the obligation required under s.5.2(2) previously referred to, such consultation being clarified in General Comment 7 of the Convention.

c.    Paragraph 35.3.1 clearly sets out that any consultation that occurred did not comply with the Disability Standards for Education as applied through s12(8) of the DDA. The breaches are set out clearly in the sub paragraphs to paragraph 35.3.1.

(Errors in original.)

6    As a result, the applicants did not take up the respondent’s invitation to amend. The respondent then applied to have the impugned paragraphs of the ASOC struck out by interlocutory application dated 1 July 2020.

7    In my reasons in Harvey (No 2), I made an order that the legal representatives for the applicants file and serve any submissions or evidence in relation to the question of whether they should personally bear the costs of the respondent’s application by 4:00pm on 4 October 2021, being 21 days after the date of the order.

8    The applicants have since applied for leave to appeal from those orders, by an application for leave to appeal dated 27 September 2021.

9    The legal representatives for the applicants did not file any submissions by 4 October, as required under the orders.

10    On 8 October, I caused my associate to send the following email to the parties’ practitioners:

Dear Practitioners

On 13 September 2021, his Honour ordered that the legal representatives for the applicants in VID106/2019 and VID107/2019 file and serve any submissions or evidence in relation to the question of whether they should personally bear the costs of the respondent’s application in each matter by 4pm on 4 October 2021.

That order has not been complied with by either applicant.

His Honour requires the submissions to be filed and served forthwith.

11    Mahir Qureshi of Starnet Legal Pty Ltd, the legal representatives for the applicants, responded in the following terms on the same day:

Dear [Associate],

The Orders made by HH O’Callaghan dated 13 September 2021 is the subject of an application for leave to appeal filed with the Court of 27 September 2021.

12    I caused my associate to send the following email to Mr Qureshi that afternoon:

Dear Mr Qureshi

You are under a misapprehension. Filing an application for leave to appeal does not relieve any party from their obligation to comply with his Honour’s orders in relation to costs.

13    Later that afternoon, Mr Qureshi sent the following email to my associate:

Dear Associate,

We advise that we are seeking a stay of his Honour’s Orders dated 13 September 2021, namely paragraph 3 in each proceeding.

We note that we will amend our draft notice of appeal and the application for leave to appeal to add this application for a stay to the above Orders in each proceeding.

14    Paragraph 3 referred to by Mr Qureshi is the order set out at [7] above requiring the applicants’ legal representatives to file submissions and/or evidence.

15    On 14 October, I caused my associate to send an email to Mr Qureshi, as follows:

Dear Mr Qureshi

His Honour has asked me to write to you in the following terms.

As the legal representative for the applicants in VID106/2019 and VID107/2019, you were ordered to file and serve any submissions or evidence in relation to the question of whether you should personally bear the costs of the respondent’s application dated 1 July 2020 by 4pm on 4 October 2021 (the Orders). See Harvey v Dioceses of Sale Catholic Education Ltd (St Joseph’s Primary School Wonthaggi) (No 2) [2021] FCA 1102 and Milkins v Dioceses of Sale Catholic Education Ltd (St Joseph’s Primary School Wonthaggi) (No 2) [2021] FCA 1103.

Despite twice being directed to comply with the Orders, you have refused to do so, claiming firstly that the Orders (and the other orders made) are the subject of an application for leave to appeal, and secondly that “we are seeking a stay of his Honour’s Orders”.

Neither of those propositions means that you are not obliged to comply with the Orders.

His Honour directs that you do comply with the Orders no later than 4pm tomorrow.

In that regard, his Honour directs your attention to r 41.04(1) of the Federal Court Rules 2011 (Cth) and to the provisions contained in Part 42 of the Rules in relation to contempt of court.

16    The following day, the applicants filed and served their submissions. They did not file any evidence.

17    Wotton & Kearney Lawyers, the solicitors for the respondent, were copied to all the above correspondence.

18    Because the applicants’ submissions advanced the proposition that no order should be made that the applicants pay the costs of the strike-out application, on 18 October 2021, I caused my associate to write to Mr Bhrig Chauhan of Wotton & Kearney Lawyers, copying Starnet Legal, directing the respondent to file its submissions within 14 days, which it did.

19    The applicants’ submissions said, in substance, not only that the legal practitioners should not be personally liable for the costs of the strike-out application, but, despite the fact that the respondent had been successful in its application, it should not be awarded its costs because the respondent did not provide the applicants with sufficient warning of the strike-out application. It was claimed, in the submissions, that if such warning had been given, the applicants would have amended their statement of claim and the strike-out application would have been unnecessary.

20    That is, quite frankly, an absurd submission in circumstances where the applicants were given every opportunity to amend, and did not afford themselves of any such opportunity, and where it was the unsuccessful respondent to the strike-out application.

21    Accordingly, it is appropriate that the applicants pay the costs of the respondent in relation to that application.

22    The question then arises whether the legal practitioners should be personally responsible for those costs.

23    The parties to a civil proceeding in this court are required to conduct the proceeding in a way consistent with the overarching purpose stated in s 37M of the Federal Court of Australia Act 1976 (Cth) (FCA Act). This requires parties to litigation to conduct themselves in such a way as to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. See s 37N(1) of the FCA Act, which imposes a duty on parties to act consistently with this purpose.

24    By s 37N(2) of the FCA Act, a party’s lawyer must, in the conduct of civil proceedings before the court, take account of the overarching purpose and assist the party to comply with their s 37N(1) duty. Section 37N(4) requires that, in exercising the discretion to award costs in the civil proceeding, the court must take account of any failure by the party, or the party’s lawyer, to comply with the duties imposed by ss 37N(1) and (2).

25    Section 43(3)(f) of the FCA Act is an express source of power in the court to order a party’s lawyer to bear the costs personally.

26    The principles which guide the court when considering to exercise the discretion under s 43(3)(f) of the FCA Act have been discussed in a number of cases.

27    The power to award costs against a party’s lawyer should be exercised with considerable caution and only in clear cases. As Wigney J said in Mitry Lawyers v Barnden [2014] FCA 918 at [42]:

1.    Instituting or maintaining a proceeding on behalf of a client which has no, or substantially no, prospect of success will not, without more, invoke the jurisdiction to make a costs order against a lawyer.

2.    Something which involves “unreasonable conduct” is required.

3.    What constitutes unreasonable conduct will depend on the circumstances of the particular case.

4.    The element of acting unreasonably involves some deliberate or conscious decision taken by reference to circumstances unrelated to the prospects of success, with either a recognition that there is no chance of success, or an intention to use the proceeding for an ulterior purpose, or to abuse the processes of the court, or with a disregard of any proper consideration of the prospects of success.

5.    The circumstances must involve or result in a serious dereliction of duty owed to the court, or serious misconduct in promoting the course of, and the proper administration of, justice.

6.    An ulterior purpose or an abuse of process cannot be assumed simply because the case is hopeless.

7.    The reason that the mere pursuit of an unmeritorious case is not so sufficient to invoke the jurisdiction to make a costs order against a lawyer is that a party is entitled to have a practitioner act for him or her in an unmeritorious case. The court is concerned to avoid the risks of a practice developing whereby lawyers endeavour to browbeat their opponents into abandoning clients, or particular issues or arguments, for fear of personal costs orders being made against them.

28    The applicants’ legal practitioners (being Starnet Legal Pty Ltd and Mr DJ Hancock of counsel) were obliged to give careful consideration to whether there was a factual and legal basis for the impugned paragraphs of the ASOC. See, eg, Ryan v Primesafe [2015] FCA 8; (2015) 323 ALR 107 at [87]. In my view, in this case, the legal practitioners acted with a complete disregard of any proper consideration of the prospects of success of the impugned claims. That they did so is readily apparent from the fact that the myriad and manifest deficiencies of the impugned claims had been repeatedly pointed out by the solicitors for the respondent, but ignored, or dismissed on untenable grounds.

29    It is clear that the impugned paragraphs (and the applicants’ continued refusal to amend them) originated with the applicants’ legal practitioners. There is no suggestion from the applicants (who were afforded, but declined, the opportunity to put on evidence) that this is a matter in which a difficult case was taken to the legal practitioners by clients who wished to pursue it in court, against the advice of their legal representatives. Cf Levick v Commissioner of Taxation (2000) 102 FCR 155 at 166 [45]. In my view, the applicants’ legal practitioners bear responsibility for their refusal further to amend the statement of claim. In that regard, I refer in particular to the applicants’ repeated refusals to so amend, and the fact that this was the respondent’s second successful strike-out application. The ASOC the subject of the decision in Harvey (No 2) was filed in response to orders I made requiring the applicants to amend their original statement of claim to rectify similar issues.

30    The written submission resisting the making of an order that the legal practitioners personally bear the costs of the strike-out application was entitled “Applicants’ submissions pursuant to orders dated 13 September 2021”. In fact, they were submissions made by the legal representatives on their own behalf. Those submissions proceeded on the basis that the making of such an order was limited to conduct in the realm of “serious misconduct” or “a serious dereliction of duty”. The making of such an order is not so circumscribed, as I have made clear above.

31    Further, the submissions claim that the legal representatives had “conducted these proceedings to the best of their abilities” and had “adhered to all court orders” and “filed all materials in a timely manner”. The submissions also asserted that the legal practitioners accepted their retainers on “a no-win, no-fee basis”, and that to date, they have not received or charged any fees. In my view, those submissions are entirely beside the point.

32    It was also submitted that the applicants’ “offer to amend the ASOC in their written submissions dated 11 September 2020 was reasonable”. That “offer” was contained in a single paragraph within the lengthy submission filed by the applicants opposing the strike-out application, and was in the following terms:

The Applicants are content to provide a Further Amended Statement of Claim, addressing the concessions and admissions of omissions, as set out in the April 2020 letter, as follows (and/or as the Court orders):

a.    Re-plead paragraph 35, addressing formatting problems, typographical errors and omissions of paragraph numbers.

b.    Insert the material facts currently set out in Annexure A of the assertion of rights in the victimisation complaint.

c.    Insert the words “in paragraph 43”, in paragraph 44 of the ASOC.

d.    Insert the words “as per s22 (2) (a) and (c)[”] in paragraph 36.

33    In my view, that “offer” was meaningless. Evidently, the proposed amendments largely addressed formatting or typographical errors, and did not go to the substance of the deficiencies identified by the respondent, such as those set out in [4] above, and discussed in greater detail in Harvey (No 2). But, in any event, it had nothing to do with the fact that the respondent was left with no choice but to pursue the strike-out application.

34    It is, of course, the case that the power to make orders that legal practitioners bear costs personally is to be exercised sparingly and with great caution. One of the reasons that is so is “the risk of a practice developing whereby solicitors endeavour to browbeat their opponents into abandoning ... particular issues or arguments, for fear of a personal costs order being made against them”. See Levick v Commissioner of Taxation (2000) 102 FCR 155 at 166 [43]. But in a case such as this, where a manifestly hopeless series of pleas is persevered with, in the face of detailed and self-evidently correct criticisms directed to that manifest hopelessness, it is an appropriate case in which, for the reasons given above, an exceptional order requiring the legal practitioners pay the cost of the strike-out application should be made.

35    Accordingly, I will order that Starnet Legal Pty Ltd and Mr DJ Hancock of counsel are to bear personally the legal costs of the respondent incurred in relation to its interlocutory application dated 1 July 2020, including the costs related to the preparation of the submissions on costs filed by the respondent on 1 November 2021.

Associate:

Dated:    17 November 2021