Legal practitioner - serious misconduct - preparing letter for client to show third parties advising that Court orders void.
Supreme Court New South Wales
- Medium Neutral Citation
- Provident Capital Ltd v Anderson & Ors (No 3) [2013] NSWSC 705
- Hearing Dates
- 30 May 2013
- Decision Date
- 30/05/2013
- Jurisdiction
- Common Law
- Before
- Beech-Jones J
- Decision
- Costs awarded against a solicitor.
- Catchwords
- COSTS - Legal practitioner - serious misconduct - preparing letter for client to show third parties advising that Court orders void.
- Legislation Cited
- - Civil Procedure Act 2005
- Farm Debt Mediation Act 1994
- Supreme Court Act 1981 (UK) - Cases Cited
- - Ideal Waterproofing Pty Ltd v Buildcorp Australia Pty Ltd [2006] NSWSC 155
- Provident Capital Ltd v Anderson [2012] NSWSC 525
- Ridehalgh v Horsefield [1994] Ch 205
- Waller v Hargraves Secured Investments Ltd [2012] HCA 4; 245 CLR 311
- Whyked Pty Ltd v Yahoo!7 Pty Ltd [2008] NSWSC 477 - Category
- Interlocutory applications
- Parties
- Provident Capital Limited (in liq)(R&M app) (Plaintiff)
Ian Maxwell Anderson (First Defendant)
Sonya Monica Coghlan (Second Defendant)
IASM Holding Pty Ltd (Third Defendant) - Representation
- Solicitors:
Henry Davis York (Plaintiff)
Fox Legal (Third Defendant)
Counsel:
J. Hynes (Plaintiff)
In person (First and Second Defendants)
R. Savage (Sol) (Law Society) - File Number(s)
- 2010/159025
ex tempore Judgment
1This is an application by the plaintiff, Provident Capital Limited ("Provident"), to have the first defendant's solicitor, Mr Nicholas Coren, pay the costs of a notice of motion it brought seeking an injunction preventing the first defendant, Mr Ian Anderson, from entering upon property in respect of which it had an order for possession in its favour.
Background
2Some time in 2006 Mr Anderson granted to Provident a mortgage over property he owned, known as Barry Station (the "Property"). Barry Station appears to be a large rural property near or via Nundle. The mortgage secured repayments of a substantial amount advanced by Provident. Apparently a goods mortgage was also granted.
3As I understand it, in 2009 Mr Anderson went into default. In 2010 Provident commenced these proceedings seeking, inter alia, an order for possession of the Property. In April 2011 an injunction was granted preventing Mr Anderson from entering near or upon the Property.
4On 9 June 2011 consent orders were entered giving Provident possession of the property. It is not entirely clear what the effect of the order for possession was upon the injunction, but it does not matter.
5It appears that the balance of the litigation has until recently involved disputation concerning the goods mortgage (see Provident Capital Ltd v Anderson [2012] NSWSC 525).
6On 8 May 2013 Mr Coren advised the solicitors of Provident that he now acted for the defendants in the proceedings, which included Mr Anderson. His email advising this also made assertions as to Provident's compliance with the Farm Debt Mediation Act 1994 (the "Act") when it sought to enforce its security. He referred to the decision of the High Court of Australia in Waller v Hargraves Secured Investments Ltd [2012] HCA 4; 245 CLR 311. He asserted to Provident solicitors that "the proceedings are void by reason of Provident's breach" of the Act. Mr Coren's email enclosed an unfiled motion seeking summary dismissal of the proceedings. The unfiled motion did not expressly seek orders in relation to the consent orders that had previously been entered. The enclosing of an unfiled notice of motion was odd in that on 3 May 2013 Mr Coren had been sent filed versions of those documents.
7In any event, on 9 May 2013 the proceedings were listed for directions in this Court. There was no appearance on behalf of Mr Anderson or the other party for whom Mr Coren acted. The solicitors for Provident did appear. The proceedings were adjourned until 30 May 2013 in the Registrar's list.
8On 10 May 2013 the solicitors for Provident responded to Mr Coren's assertions concerning the Act. They provided reasons why, in their view, nothing that had occurred was contrary to its provisions.
9As at May 2013, and for some time, either Provident or its receiver had arranged for Robert Emerton to reside at Barry Station. He lived there with his fiancée, Ms Tara Bondarenko and their two young children. On Saturday 11 May 2013 at approximately 10.30am, Ms Bondarenko was walking towards the house on the Property when she saw a vehicle pull up outside the house. There were four men who came out of the vehicle, one of whom was Mr Anderson. One of them had a digital camera. Ms Bondarenko recalls the events that followed:
"I had a conversation with Mr Anderson to the following effect.
Anderson: You have to get off the property today. I'm getting back what's owed to me for the past four years. I'm now back in ownership of Barry Station.
Mr Anderson passed me a laminated piece of paper at this time. I did not read the paper as I was watching Mr Anderson, the three men with him and my two children behind me. I felt concerned for my safety and the safety of my children. I continued to have a conversation with Mr Anderson to the following effect:
Anderson: You're not to touch the cattle.
Bondarenko: What about our horses and sheep?
Anderson: You can take those but you're to be off the property by the end of the today or you will be in trouble with the law for trespassing. Are any of the gates locked? I am going to be driving around.
Bondarenko: No."
10Ms Bondarenko stated that Mr Emerton came upon the scene. Mr Emerton recounts being handed the laminated letter by Ms Bondarenko. At the time it was handed to him she said words to the effect "He says we have to get off the property". He also recounts finding seven additional copies of the letter attached to various locations around Barry Station.
11The laminated letter in question was on the letterhead of Mr Coren's firm. It was dated 10 May 2013, and addressed to Henry Davis York. It stated as follows:
"Henry Davis York
Solicitors
BY EMAIL: 'craig_ensor@hdy.com.au'
Dear Sir
RE: Anderson and Coughlan [sic] ats Provident Capital (In Liquidation) Pty Limited
We refer to our email dated 8 May 2013 and note that at the directions hearing on 9 May 2013, the proceedings were adjourned for further directions hearing on 30 May 2913 [sic].
As both the Supreme Court equity proceedings at common law proceedings are void under s 6 of the Farm Debt Mediation Act, for reasons as detailed previously, the consent orders entered into in the common law proceedings will be deemed never to have been entered into and our client's damages against your client are referable to the amount which will place him in the position he would have been in, if not for the plaintiff's conduct in breach of s 6 of the Farm Debt Mediation Act, will be significant. Of course, under the Corporations Act, our client's claim for damages will be set off, without any reduction which may apply to unsecured creditors in the liquidation, against any amount which it is alleged to be owing by him. Indeed, it may be that our client's claim exceeds the amount alleged owing to your client as he estimates the loss will be many millions of dollars is referable to many issues, such as, conversion of livestock and sale of machinery.
Therefore, so as to crystallise our client's loss, we advise that or [sic] client will attend the property at 10.00 am on 11 May 2013 to enter into lawful possession of the property. Please ensure that any persons who may otherwise have been in occupation of the property under the consent orders or otherwise as anticipated by the unlawful possession by the plaintiff, have removed themselves from the property prior to this date.
Should our client be prevented from entering into possession of the property on 11 May 2013, such conduct will be relied upon as a component of his claim for damage, aggravated dmages [sic] and exemplary damageds [sic] associated with your client's unlawful possession of the property.
IF you have any enwuiries [sic], you may contact our office." (emphasis added)
12Later that afternoon, the solicitor for Provident became aware of what had happened at Barry Station that morning. He wrote an email to Mr Coren in effect complaining about what had happened. The solicitor wrote a further email on Monday 13 May 2013 reciting the course of events and requesting an urgent undertaking from Mr Coren that his client would not cause anyone to attempt to enter Barry Station. This email referred to the letter of 10 May 2013 from Mr Coren that had been presented to Ms Bondarenko on 11 May 2013 by Mr Anderson. The email noted that, although it was addressed to Henry Davis York, it had not been sent to the firm and requested Mr Coren to "check [his] records in order to confirm whether it was sent".
13Ms Bondarenko and Mr Emerton recount that, in the very early hours of the morning of Tuesday 14 May 2013, a vehicle came onto their Property with its lights on. There is obviously a basis for suspecting this conduct was connected in some way to Mr Anderson, but it is not necessary for me to make any finding to that effect.
14On the morning of Tuesday 14 May 2013 Mr Coren responded to the email that had been sent to him on 13 May 2013. The response asserted that the correspondence had been sent to Provident's solicitors, and asserted that "We received no reply to such correspondence whatsoever". The email further asserted that: "The property has been unlawfully occupied by your client and even though Supreme Court orders currently exist you have been on notice of our client's position that the proceedings were void since 7 May 2013 wherein we advised you of such position by email and no response was provided by you".
15Presumably the reference to 7 May 2013 is to the email of 8 May 2013, to which I have already referred. There was a response to that email provided by the solicitors for Provident (see [8]). Moreover, the solicitors for Provident, in their affidavits, have denied receipt of the letter of 10 May 2013. I am satisfied that Mr Coren did not send that letter to Henry Davis York on that day. I am satisfied that if a letter in those terms had been sent it would have raised sufficient alarm bells to warrant some form of preventive action being taken.
16Mr Coren's email of 14 May 2013 further recited that his client had no intention of breaching the current orders and was open to achieving "some amicable arrangement to allow him possession of his property". Not surprisingly this response did not satisfy Provident. Its solicitors and counsel approached me as Duty Judge on 14 May 2013 and filed a motion seeking an urgent ex parte injunction preventing Mr Anderson from entering upon the Property. Even though on one view such relief was already in place, I nevertheless granted it and stood the matter over to Thursday 16 May 2013. I made orders for service of the motion.
17When the matter returned on that day, Mr Coren appeared on behalf of Mr Anderson. After some brief discussion I extended the injunction until further order. Provident also advised the Court on that day that not only was it seeking costs of its motion from Mr Anderson, it was also seeking such costs from Mr Coren. Provident had placed Mr Coren on notice of that application on the previous day. I made orders facilitating the giving of appropriate notice of that application. In particular, I ordered that Mr Coren be notified within a short period of time of the precise basis for that application so as to allow him an opportunity to consider his position and, in particular, notify his insurer if he considered that was appropriate (see s 99 of the Civil Procedure Act 2005 ("CPA") and Practice Note SC Gen 5).
18Consistent with my orders, within a short period of time Provident filed a notice of motion expressly seeking an order that Mr Coren, as well as Mr Anderson, pay the costs of its earlier motion on an indemnity basis and provided a short outline specifying the precise reasons why those orders were sought.
19It should be noted that on 17 May 2013 Mr Coren wrote again to Provident's solicitors and, in effect, sought to reiterate the position as asserted in his letter of 10 May 2013 as to the alleged "voidness" of the proceedings and the Court's orders based upon the alleged failure to comply with the Act.
20The notice of motion seeking indemnity costs from Mr Anderson and Mr Coren was returnable before me today. A representative of the Law Society, Mr Savage, appeared and advised the Court that in the meantime Mr Coren's practising certificate had been revoked and a manager had been appointed to the affairs of his practice.
21Mr Anderson appeared at the hearing of this notice of motion, but sought an adjournment. He indicated that he had only became aware in the last day or two that Mr Coren's practising certificate had been revoked. It was clear he had no real idea of the basis for the application for costs. From the bar table he gave an explanation for his behaviour in entering the Property. I will not act on that as evidence before me. Nevertheless, I granted Mr Anderson's application to adjourn so much of the notice of motion as sought a costs order against him to enable him to obtain legal advice and alternative legal representation.
22However, I proceeded with the motion insofar as it sought relief against Mr Coren. Mr Coren had previously indicated that he would be appearing today. However, despite my standing the matter down, his being called three times, and it otherwise being clear that he knew the matter was listed for today, he did not appear. Accordingly the matter has proceeded in his absence
Provident's Costs Application
23The basis for Provident's costs application against Mr Coren concerns his conduct, so it says, in arming Mr Anderson with a grossly misleading letter concerning the status of the Court orders so as to enable Mr Anderson to attempt to remove Provident's representatives from occupation of the Property.
24Provident relies on s 99 of the CPA. It provides:
"Liability of legal practitioner for unnecessary costs
(1) This section applies if it appears to the court that costs have been incurred:
(a) by the serious neglect, serious incompetence or serious misconduct of a legal practitioner, or
(b) improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible.
(2) After giving the legal practitioner a reasonable opportunity to be heard, the court may do any one or more of the following:
(a) it may, by order, disallow the whole or any part of the costs in the proceedings:
(i) in the case of a barrister, as between the barrister and the instructing solicitor, or as between the barrister and the client, as the case requires, or
(ii) in the case of a solicitor, as between the solicitor and the client,
(b) it may, by order, direct the legal practitioner:
(i) in the case of a barrister, to pay to the instructing solicitor or client, or both, the whole or any part of any costs that the instructing solicitor or client, or both, have been ordered to pay to any other person, whether or not the solicitor or client has paid those costs, or
(ii) in the case of a solicitor, to pay to the client the whole or any part of any costs that the client has been ordered to pay to any other person, whether or not the client has paid those costs,
(c) it may, by order, direct the legal practitioner to indemnify any party (other than the client) against costs payable by that party.
(3) Before making such an order, the court may refer the matter to a costs assessor (within the meaning of Part 3.2 of the Legal Profession Act 2004) for inquiry and report.
(4) The court may direct that notice of any proceedings or order under this section with respect to a legal practitioner be given:
(a) in the case of a barrister, to the instructing solicitor or client, or both, as the court may direct, or
(b) in the case of a solicitor, to the client.
(5) The court may give ancillary directions to give full effect to an order under this section, including directions to a legal practitioner to provide a bill of costs in assessable form:
(a) to the court, or
(b) to a party to the proceedings, or
(c) in the case of a barrister, to the instructing solicitor or client, or both, or
(d) in the case of a solicitor, to the client.
(6) A party's legal practitioner is not entitled to demand, recover or accept:
(a) in the case of a barrister, from the instructing solicitor or client, or
(b) in the case of a solicitor, from the client,
any part of the amount for which the legal practitioner is directed by the court to indemnify any party pursuant to an order referred to in subsection (2) (c).
(7) In this section, client includes former client."
25The provisions of s 99 were discussed by McDougall J in Whyked Pty Ltd v Yahoo!7 Pty Ltd [2008] NSWSC 477 at [9] to [20]. His Honour referred to the analysis of Sully J in Ideal Waterproofing Pty Ltd v Buildcorp Australia Pty Ltd [2006] NSWSC 155, who in turn relied upon the discussion by the United Kingdom Court of Appeal in Ridehalgh v Horsefield [1994] Ch 205 of the phrases, "improper", "unreasonable" and "negligent" in s 51 of the Supreme Court Act 1981 (UK). His Honour also referred at [17] to the "two additional riders" added by Sully J to that discussion in Ideal Waterproofing v Buildcorp Australia, namely:
"(1) the jurisdiction to order costs against a legal practitioner personally is one to be exercised sparingly, because (among other things), the court would not always know all the details and circumstances of the practitioner's instructions. Thus, for the jurisdiction to arise, the conduct must involve some serious dereliction of duty or gross negligence (Dal Pont: Lawyers' Professional Responsibility in Australia and New Zealand (Second Edition) at 374-375); and
(2) the inherent power of the court to order its officers to pay costs in an appropriate case is ordinarily one to be exercised on the basis of a serious dereliction of the duty owed by the officer to the court. However, it is neither necessary nor desirable to define the level of incompetence or negligence at which the costs jurisdiction will arise (Harley v McDonald [1999] 3 NZLR 545 at [59] to [61])."
26In Whyked at [18] to [19] McDougall J expressed some doubts about these qualifications and, in particular, the use of the phrase "serious dereliction" of duty on the part of a legal practitioner as being an appropriate test. His Honour queried whether that phrase was sourced in the inherent jurisdiction of the Court, rather than being apposite to s 99 of the CPA. Nevertheless, his Honour proceeded on the basis outlined by Sully J in Ideal Waterproofing. I will do likewise. In the end result it makes no difference because, if the conduct alleged against Mr Coren was established, then in my view it clearly falls within s 99(1)(a) of the CPA irrespective of what approach is adopted. However, the first issue to be determined is whether Mr Coren's conduct can be so characterised.
27The letter of 10 May 2013 has a number of troubling features. Firstly, although not expressed well, its message is clear. It asserts that the consent orders made by this Court are void ("deemed never to have been entered"), because of some alleged failure on the part of Provident to comply with s 6 of the Act. This is said by the letter to have the result that Mr Anderson is free to ignore those orders and to take possession of the Property. These assertions are, of course, entirely misconceived.
28The decision in Waller confirmed that, where applicable, a failure to comply with s 6 of the Act will, at least for a period, prevent a financier from proceeding to enforce its security over some agricultural land in some circumstances. However, it is a completely different matter to assert that a failure to comply with s 6, even if established, has the effect that orders of this Court granting possession are deemed never to have been entered. To the contrary, orders of this Court are valid unless and until set aside.
29At most, the possible existence of a non-compliance with s 6 of the Act might have granted a basis for Mr Anderson to apply to set aside the consent orders for possession, if the preconditions for attacking the consent orders were otherwise established. However, the existence of such a breach, in and of itself, could never be an excuse for ignoring Court orders.
30The next matter that arises concerns Mr Coren's intentions in writing the letter. On the face of it, the letter is addressed to Provident's solicitors and purports to give notice of his client's actions. However, I have already found that the letter was not sent. Further, it is clear that Mr Coren gave the letter to Mr Anderson because Mr Anderson brandished it in a laminated form at the property and distributed copies of it around the property.
31The letter purports to give Provident's solicitors one day's notice of action that Mr Coren must have known was extraordinary and inflammatory in the context of litigation that had been going on for many years. Contrary to the terms of the letter this was not referred to in previous correspondence. There is nothing in the evidence to suggest that on a previous occasion Mr Coren had asserted that the orders made by the Court were somehow void, as opposed to attacking Provident's conduct in bringing the proceedings as involving an alleged breach of the Act.
32Given my finding that the letter was not sent, the date of the letter being in close proximity to Mr Anderson's entry onto the Property and the extraordinary terms in which it is expressed, I am satisfied that Mr Coren provided the letter to Mr Anderson either knowing or at least strongly suspecting that it would be used by Mr Anderson in an attempt to eject Provident's representatives from the Property.
33I am also satisfied that he did so having deliberately not provided notice to the legal representatives of Provident that that would occur. Thus, in effect, Mr Coren went behind the backs of the legal representatives for his opponent in litigation and handed his client a piece of paper knowing or strongly suspecting that his client would use that paper as a means of attempting to evict Provident's representatives from the Property.
34The next matter concerns Mr Coren's belief as to the veracity of the assertions made in the letter that the orders of the Court are "deemed never to have been entered". Mr Coren declined the opportunity to come to the Court to give an explanation for any aspect of his conduct, including as to whether when he wrote the letter he genuinely believed that that assertion was either true or a matter that was capable of some legal justification. It was an assertion that a moment's thought should have caused any reasonable legal solicitor to pause.
35I have been referred to r 34 of the revised Professional Conduct and Practice Rules for legal practitioners which states, inter alia:
"A practitioner must not, in any communication with another person on behalf of a client:
34.1 represent to that person that anything is true which the practitioner knows or reasonably believes is untrue; or
34.2 make any statement that is calculated to mislead or intimidate the other person, and which grossly exceeds the legitimate assertion of the rights or entitlement of the practitioner's client; or
..."
36A legal practitioner does not have to have a subjective belief in the complete accuracy of every assertion they make on a matter of law either in submissions or in correspondence engaged in on behalf of their client. In the ordinary course, it may suffice if the practitioner considers that a relevant assertion on a matter of law is something which is reasonably open on the current state of the law. Of course whether that is so will always depend upon the context. However, it is difficult to envisage any circumstance in which a solicitor could arm their client with a letter advising them that they should ignore the orders of a superior Court.
37In the end, I am not satisfied that when he wrote the letter Mr Coren definitely knew that the assertion that the Supreme Court orders were deemed never to have been entered was untrue. When the matter returned to Court on 16 May 2013, Mr Coren did not seem particularly enthusiastic to maintain that assertion. Nevertheless, he has put various propositions to similar effect in other items of correspondence.
38However, I do find that he did not have any reasonable belief in the truth of the statement. In fact I am satisfied that he was reckless as to whether that statement was either true or not or one that was capable of being justified or not.
39Moreover, in terms of subrule 34.2, I am satisfied that he made the statement in the letter in a calculated manner designed to intimidate another person, that is, those persons whom he knew or strongly suspected would be presented with the letter by his client.
40It also follows from the findings that I have already made that even though the letter is, on its face, addressed to the solicitors for Provident it was, in fact, written by him as a communication intended for other persons, namely those persons whom he knew or strongly suspected would be presented with the letter by his client.
41Thus, in the end result, I am satisfied that Mr Coren armed his client with a letter, reckless as to whether it was true or not in asserting that the Supreme Court orders were deemed never to have been entered, and he did so knowing or strongly suspecting that his client would use that letter in an attempt to evict Provident's representatives from the Property. He engaged in that conduct behind the backs of the solicitors acting on behalf of Provident.
42In my view, it must follow that this conduct answers the description of "serious misconduct", within the meaning of s 99(1)(a) of the CPA.
43The next question concerns whether Mr Coren's conduct was such that Provident's costs were "incurred by" that misconduct (s 99(1)).
44Mr Emerton has been living on Barry Station since early 2011. In his affidavit he recounts various occasions during 2011 when Mr Anderson appears to have attempted entry onto the Property. The last occasion that he refers to is 4 June 2011, which is five days prior to the entry of the consent order granting Provident possession. Mr Emerton then records that he has had no further contact with Mr Anderson until the events the subject of this application. This history suggests that, until Mr Coren's intervention, Mr Anderson was not minded to enter upon the Property. The balance of the evidence and the findings that I have made suggest that the intervening event that led to Mr Anderson's attempt to evict Provident's representatives on 11 May 2013 was the engagement of Mr Coren and the provision of the letter of 10 May 2013.
45In those circumstances I am satisfied that, absent the letter from Mr Coren, Mr Anderson would not have attempted to evict Provident's representatives. Mr Anderson needed the letter to have some authority in his dealings with Provident's representatives at the property and possibly the local police force. Mr Coren purported to provide him with that authority. Mr Coren's misconduct occasioned the incurring of costs by Provident.
46Section 99 confers on the Court a discretion as to whether to make an order against a legal practitioner in these circumstances. Given that I have found Mr Coren engaged in serious misconduct and that that conduct caused costs to be occasioned, there is otherwise nothing in the circumstances which would suggest that the discretion should not be exercised. It follows that I will make an order under s 99(1)(c), namely that Mr Coren indemnify Provident for the legal costs payable by Provident to its solicitors in bringing the notice of motion filed 14 May 2013 and this motion seeking costs. The above findings also warrant those costs being ordered to be paid on an indemnity basis and payable forthwith.
47Provident also seeks an order that its costs be specified in a gross sum pursuant to s 98(4)(c) of the CPA. I consider that course is justified. I see no utility in having Provident await the outcome of an assessment process where it has been put to unnecessary cost and its representatives to unnecessary distress as a result of misconduct by an officer of the Court.
48An affidavit has been read seeking to quantify those costs. This affidavit has been served on Mr Coren. The affidavit estimates both solicitor and counsel costs and includes the costs of today. The total amount claimed is $58,177.00.
49I have perused the schedules outlining those bills, as well as the proposed charge-out rates. It must be borne in mind that this sorry event started, so far as Provident was concerned, on a Saturday morning. As I have indicated, Mr Anderson presented himself at the Property some distance from Sydney at 10.30am. By 1.26pm a partner from the firm of solicitors acting for Provident had communicated his client's position to Mr Coren in no uncertain terms. Provident and its legal representatives were required to move with great haste in dealing with what appeared to them to be egregious conduct. They were also entitled to treat it with the utmost seriousness.
50In the circumstances, the time spent seems to me to be generally reasonable. Making a modest allowance for the possibility of some either excessive charging or extra time spent over and above that which was necessary, I will fix the gross sum in the amount of $55,000.
51Accordingly the Court orders that:
(1)Pursuant to s 99(2)(c) of the Civil Procedure Act, Mr Nicholas Coren pay the Plaintiff's costs of and incidental to the Notice of Motion filed 14 May 2013, including the Plaintiff's costs of the notice of motion filed 20 May 2013, on an indemnity basis.
(2)Pursuant to s 98(4)(c) of the Civil Procedure Act, the costs the subject of order 1 be fixed in the amount of $55,000.
(3)The costs be payable forthwith.
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