The Defence of Contextual Truth in Defamation Law (Western Australia)

1. Introduction and Overview

The defence of contextual truth represents a significant component of Australia's defamation law framework. This defence acknowledges the complex reality that defamatory publications often contain multiple imputations of varying veracity. It provides defendants with a means to defeat defamation actions even where some statements are false, provided the publication's overall truth outweighs any false elements it contains.

The contextual truth defence operates on the principle that a plaintiff's reputation should not receive legal protection against false imputations when other substantially true imputations in the same publication have already damaged that reputation to such an extent that the false imputations cause no incremental harm. Unlike partial justification (which merely mitigates damages), contextual truth constitutes a complete defence if successfully established.

This chapter examines the statutory basis, elements, procedural requirements, and practical application of the contextual truth defence with particular focus on its operation in Western Australia, where significant jurisdictional differences exist compared to other Australian states and territories.

2. Statutory Framework in Western Australia

2.1 Section 26 of the Defamation Act 2005 (WA)

In Western Australia, the contextual truth defence is enshrined in section 26 of the Defamation Act 2005 (WA), which provides:

26 Defence of contextual truth

(1) It is a defence to the publication of defamatory matter if the defendant proves that—

(a) the matter carried, in addition to the defamatory imputations of which the plaintiff complains, one or more other imputations (contextual imputations) that are substantially true; and

(b) the defamatory imputations do not further harm the reputation of the plaintiff because of the substantial truth of the contextual imputations.

This provision formed part of the uniform defamation legislation adopted across Australian jurisdictions in 2005, which sought to harmonize defamation law throughout the country. However, it is important to note that Western Australia has not adopted the 2020-2021 uniform defamation law amendments (Stage 1 reforms) that have been implemented in other jurisdictions such as New South Wales, Victoria, Queensland, South Australia, Tasmania, and the Australian Capital Territory.

2.2 Distinction from Other Jurisdictions

The 2020 amendments, which Western Australia has not adopted, introduced a significant modification to the contextual truth defence through section 26(2), which explicitly states:

The contextual imputations on which the defendant may rely to establish the defence include imputations of which the plaintiff complains.

This amendment was designed to address limitations in the original formulation of the defence that had been identified through judicial interpretation. The absence of this provision in Western Australia's legislation means that the contextual truth defence operates more restrictively in this jurisdiction compared to those that have adopted the 2020 amendments.

In practical terms, this means defendants in Western Australia cannot "plead back" the plaintiff's own imputations as contextual imputations, creating significant strategic and procedural differences in how the defence operates.

3. Elements of the Defence

To successfully invoke the defence of contextual truth in Western Australia, a defendant must establish two key elements:

3.1 Substantially True Contextual Imputations

The first element requires the defendant to prove that the publication carried, in addition to the defamatory imputations of which the plaintiff complains, one or more other imputations that are substantially true.

Key aspects of this element include:

• Separate imputations: The contextual imputations must be separate from those complained of by the plaintiff. Under the unamended WA provision, these must be "other imputations" beyond those the plaintiff has pleaded.

• Substantial truth: The defendant must prove that these contextual imputations are substantially true on the balance of probabilities. Courts recognize that absolute truth may be difficult to establish; minor inaccuracies will not defeat the defence if the "sting" or substantial meaning of the imputation is true.

3.2 No Further Harm to Reputation

The second element requires the defendant to demonstrate that the defamatory imputations complained of do not further harm the plaintiff's reputation because of the substantial truth of the contextual imputations.

Key aspects of this element include:

• Comparative assessment: This involves a qualitative assessment of the reputational impact of the imputations complained of against the backdrop of the contextual imputations.

• Zero incremental harm: The test is whether, given the truth of the contextual imputations, the false imputations complained of cause any additional damage to the plaintiff's reputation. If the contextual imputations are of such gravity that the false imputations do not materially worsen the plaintiff's reputation, the defence will succeed.

• Balancing exercise: The tribunal of fact (judge or jury) must weigh the gravity of the true imputations against the gravity of the false ones to determine if the latter add anything to the reputational harm.

4. Judicial Interpretation and Key Case Law

The interpretation and application of the contextual truth defence have evolved through judicial consideration in several significant cases. While many of these cases were decided in other jurisdictions, they provide valuable guidance for Western Australian courts in applying the defence.

4.1 The Whole Publication Approach

In Herald & Weekly Times Ltd & Bolt v Popovic [2003] VSCA 161, Gillard AJA established a fundamental principle regarding the contextual truth defence:

"The whole libel that is all the defamatory imputations must be proved as true; it is no defence to prove that part of the defamatory libel is true. The publisher must prove the truth of the defamatory sting."

This principle was reinforced in Besser v Kermode [2011] NSWCA 174, where the court held:

"A defence of contextual truth must defeat the whole defamatory matter (cause of action) of which the plaintiff complains, that is to say all of the plaintiff's stings."

These cases emphasize that the defence must address the entirety of the defamatory matter being complained of, not just portions of it. The contextual truth defence operates at the level of the publication as a whole, not each imputation in isolation. The aim is to defeat the claim entirely, rather than to excuse or justify individual statements.

4.2 The "In Addition To" Requirement

The most significant limitation of the original s 26 (which still applies in WA) was clarified in Besser v Kermode [2011] NSWCA 174. The NSW Court of Appeal confirmed that s 26 (as unamended) "did not permit a defendant to plead back a plaintiff's imputations" as the contextual truths. The court strictly interpreted the phrase "in addition to the imputations of which the plaintiff complains" to mean the defence is only available if the defendant has some extra imputation apart from those the plaintiff has pleaded.

Subsequently, cases such as Mizikovsky v Queensland Television Ltd (QCA 2013) similarly noted that plaintiffs could neutralize contextual truth by adopting the defendant's contextual imputations into their claim, effectively disarming the defence before trial.

4.3 Separate and Distinct Imputations

For the contextual truth defence to succeed, the contextual imputations must be sufficiently separate and distinct from the imputations complained of by the plaintiff. The test applied to determine whether a particular imputation is sufficiently separate and distinct is whether it is "substantially separate" and "self-contained" as opposed to being "merely one ingredient of a component whole which, when taken as a whole, conveys an imputation which is not conveyed by a part or parts of the publication taken separately."

This requirement ensures that defendants cannot simply reformulate the plaintiff's imputations to establish the defence. The contextual imputations must present a separate narrative substantiated by evidence.

4.4 Successful Applications of the Defence

Under the original s 26, successful invocations of contextual truth were relatively rare, except in cases where plaintiffs neglected to plead certain meanings. For instance, in Born Brands Pty Ltd v Nine Network Australia Pty Ltd [2014] NSWCA 369, the defence of contextual truth succeeded against the sole remaining imputation in issue – effectively because the proven truth of other allegations in the broadcast neutralised the sting of that last imputation.

By contrast, in Holt v TCN Channel Nine (2012/2014), the defence was run but ultimately failed – the jury evidently found that the false imputations (such as that the plaintiff wanted his wife to die) did add something to the harm beyond the proved truths. Nevertheless, as noted, Holt received only nominal damages, demonstrating how proven truths can significantly mitigate damages even when contextual truth fails as a complete defence.

5. Procedural Requirements and Pleading Strategy

5.1 Pleading the Defence

A defendant wishing to invoke contextual truth in WA must plead it as a distinct defence in the defence pleading, typically in the alternative to a justification defence. The requirements for pleading and particularization are set out in the Rules of the Supreme Court 1971 (WA), which broadly align with the uniform civil procedure rules in other jurisdictions.

The pleading should include:

1. Identification of contextual imputations: The defence must clearly set out the particular imputation(s) said to be conveyed by the matter that are not among those the plaintiff alleges. These should be pleaded with the same degree of precision as any defamatory imputation.

2. Particulars of substantial truth: The defendant must plead and provide particulars of facts or evidence that will be relied on to prove the substantial truth of each contextual imputation.

3. No further harm assertion: The pleading should assert that, by reason of the substantial truth of these contextual imputations, the plaintiff's reputation was not further harmed by the defamatory imputations complained of.

4. Distinctiveness from plaintiff's imputations: In Western Australia, contextual imputations must be clearly differentiated from the plaintiff's pleaded imputations, given the requirement that they be "in addition to" those complained of.

Failure to comply with these pleading requirements may result in the defence being struck out.

5.2 Plaintiff's Strategic Responses

Under Western Australia's procedures, a plaintiff may respond to a contextual truth plea in several ways:

1. Reply: A plaintiff might file a Reply if there is some affirmative answer, though usually truth is a matter for the defendant alone.

2. Strike-out applications: More commonly, plaintiffs will attack the contextual truth plea via interlocutory applications, seeking to strike out a contextual imputation on the basis that it is not capable of arising or is insufficiently distinct from the pleaded imputations.

3. "Pleading back" or appropriation: A strategic option for plaintiffs in WA is to seek to amend their Statement of Claim to add any defamatory meaning the defendant labels as a contextual imputation, effectively absorbing it into the plaintiff's case and nullifying the "additional" context. In Besser v Kermode, Justice Simpson (at trial) noted the potential for injustice if a plaintiff appropriates a true imputation purely to strip the defendant of a contextual truth defence. However, the Court of Appeal confirmed that under the 2005 wording, the defence strictly requires the imputations to be "in addition" to those complained of. Therefore, if a plaintiff does adopt the would-be contextual imputations into the claim (with leave of the court), the defendant cannot rely on them as context in WA's current framework. Courts may be cautious about allowing late amendments that appear calculated solely to undermine a defence; the timing and overall justice of the case will be considered.

5.3 Jury Considerations

At trial, the contextual truth defence is determined by the jury (if there is a jury) or by the judge in a bench trial. In Western Australia, either party may elect for a jury trial in defamation, although in practice many cases (especially in the WA Supreme Court) proceed without a jury.

If tried by jury, the issues are usually divided as follows:

1. Truth of the contextual imputations: The jury will be asked to decide whether each contextual imputation pleaded by the defendant is substantially true on the balance of probabilities. If the jury finds none of the contextual imputations true, the defence fails immediately.

2. "No further harm" question: If at least one contextual imputation is found true, the jury must assess whether the additional harm caused by the remaining false imputation(s) is negligible or non-existent. This requires them to weigh the gravity of the true imputations against the gravity of the false ones.

The trial judge must craft jury questions or directions to reflect this two-stage process. For example:

1. Are one or more of the following contextual imputations substantially true? If so, identify which ones.

2. If one or more contextual imputations are true, do the defamatory imputations complained of cause any further harm to the plaintiff's reputation because of the substantial truth of the contextual imputations?

It is the defendant's burden to persuade the jury (or judge) on both points.

6. Comparison: 2005 Contextual Truth vs 2021 Amendments

6.1 Key Differences in the Amended Provision

The 2020 Amendment Act (Stage 1 reforms) introduced a revised s 26 (enacted in NSW, Victoria, Queensland, South Australia, etc., from 1 July 2021). Western Australia has not yet adopted these amendments and continues with the original text, but it is important for WA judges and practitioners to understand the differences.

The most significant change in the amended provision is the addition of subsection (2), which states: "The contextual imputations on which the defendant may rely to establish the defence include imputations of which the plaintiff complains."

This amendment explicitly enables defendants to "plead back" the plaintiff's own imputations as contextual imputations, addressing the limitation identified in Besser v Kermode. The requirement for contextual imputations to be "in addition to" the plaintiff's imputations was effectively removed.

6.2 Practical Impact of the Differences

The practical effect of this difference is substantial:

1. Under the 2005/WA law: Defendants cannot use the plaintiff's pleaded imputations as contextual imputations because they are not "in addition to" the plaintiff's pleaded imputations. This allows plaintiffs to strategically "box in" defendants by pleading a broad array of imputations, including any that are substantially true, leaving no surplus truths for the defendant to deploy.

2. Under the 2021 amended law: Defendants can expressly plead that any of the plaintiff's imputations that are substantially true constitute contextual imputations, and argue that in light of those truths, the remaining false imputations cause no further reputational harm.

Illustration of difference: Consider a case where a plaintiff alleges two defamatory imputations from a publication: (1) that he committed fraud (which is true), and (2) that he committed perjury (which is false).

• Under the 2005/WA law, the defendant cannot use imputation (1) as a contextual imputation because it is not "in addition" to the plaintiff's pleaded imputations – it is one of them. The defendant would be forced to run a defence of justification on (1) (succeeding on that part) and separately defend (2) (failing on that). The plaintiff would win on the perjury allegation, albeit with some damage mitigation due to the fraud being proven true.

• Under the 2021 amended law, the defendant could expressly plead that imputation (1) (fraud) is substantially true and constitutes a contextual imputation, and that in light of that truth, imputation (2) (perjury) causes no further reputational harm. If the tribunal of fact agrees, the defendant would succeed in a complete defence.

6.3 Implications for Western Australian Practitioners

For Western Australian lawyers and litigants, the key comparative point is that authorities from other jurisdictions after 1 July 2021 must be read with caution. For example, if a NSW decision in 2022 holds that a defendant was entitled to plead back a plaintiff's imputation, that reasoning is based on the amended provision, not the WA law.

Conversely, older decisions like Besser v Kermode and Mizikovsky remain highly persuasive in WA because they interpret the same statutory language that WA still uses. Unless and until WA updates its defamation statute, a WA court would likely follow the Besser principle that a contextual imputation must be an "additional" one not sued on by the plaintiff.

The strategic dynamics in WA therefore differ significantly from other jurisdictions:

• Plaintiffs can still attempt to preempt contextual truth by broad pleading

• Defendants must be diligent in scanning the publication for any defamatory imputations the plaintiff did not plead

• The scope of contextual truth is narrower in WA than in jurisdictions that have adopted the amendments

7. Worked Examples

7.1 Example 1: The More Serious Imputation

Consider a publication that carries two defamatory imputations about a plaintiff:

1. That the plaintiff has body odor (false)

2. That the plaintiff is a sexual predator (true)

If the plaintiff sues for defamation based only on the first imputation (body odor), the defendant may invoke the contextual truth defence by:

• Identifying the second imputation (sexual predator) as a contextual imputation

• Proving that this contextual imputation is substantially true

• Demonstrating that the imputation about body odor does not further harm the plaintiff's reputation given the truth of the imputation that they are a sexual predator

In this example, the defence would likely succeed because being a sexual predator is objectively more damaging to one's reputation than having body odor. The false imputation does not cause any meaningful additional harm to the plaintiff's reputation in light of the true contextual imputation.

7.2 Example 2: Multiple Imputations in a Business Context

Consider a newspaper article about a Perth businessman that contains the following imputations:

1. That the businessman evaded taxes (false)

2. That the businessman engaged in price-fixing arrangements with competitors (true)

3. That the businessman verbally abused employees (false)

4. That the businessman knowingly sold defective products to consumers (true)

If the businessman sues for defamation based on imputations 1 and 3, the newspaper might invoke the contextual truth defence by:

• Identifying imputations 2 and 4 as contextual imputations

• Proving that these contextual imputations are substantially true

• Demonstrating that the false imputations about tax evasion and verbal abuse do not further harm the businessman's reputation given the truth of the imputations about price-fixing and selling defective products

This defence would only succeed if the newspaper could prove that imputations 2 and 4 are substantially true and that they are of such gravity that imputations 1 and 3 cause no further harm to the businessman's reputation.

7.3 Example 3: Strategic Pleading Considerations

A TV program broadcasts a story about a local official containing these imputations:

1. The official embezzled city funds (true)

2. The official cheated at golf in a charity tournament (false)

Scenario A - Plaintiff omits the embezzlement allegation: If the official sues only on imputation 2 (cheating at golf), the defendant can plead the embezzlement (imputation 1) as a contextual imputation. If proven true, the defendant would likely succeed by arguing that being known as a golf cheat adds nothing to the reputation of someone already proven to be corrupt.

Scenario B - Plaintiff pleads both imputations: If the official includes both imputations in his claim, the defendant in WA cannot use imputation 1 (embezzlement) as a "contextual imputation" because it would not be "in addition to the imputations of which the plaintiff complains." The defendant would need to rely on:

• A direct truth defence (justification) for the embezzlement allegation

• Some other defence for the golf cheating allegation, or accept liability for it

This illustrates how a plaintiff's pleading choices can strategically constrain a defendant under WA law.

8. Practical Considerations for Western Australian Practitioners

8.1 Advising Plaintiffs

When advising potential plaintiffs in defamation actions in Western Australia, practitioners should consider:

1. Strategic pleading: Consider pleading all potential defamatory imputations conveyed by the publication, including those that might be substantially true, to limit the defendant's ability to rely on contextual truth.

2. Anticipating contextual imputations: Review the publication carefully to identify any potential contextual imputations the defendant might rely upon, and consider whether to include these in the original pleading.

3. Responding to contextual truth pleas: Be prepared to challenge the distinctiveness of any contextual imputations pleaded by the defendant, arguing they are not sufficiently separate from the pleaded imputations.

4. Amendment strategy: Consider the timing and strategic value of seeking to amend pleadings to incorporate contextual imputations, while recognizing that courts may view late tactical amendments with skepticism.

8.2 Advising Defendants

When advising defendants considering a contextual truth defence in Western Australia, practitioners should:

1. Jurisdictional awareness: Recognize that Western Australia has not adopted the 2020 uniform law amendments, making the contextual truth defence more restrictive than in other jurisdictions.

2. Thorough publication analysis: Carefully analyze the publication to identify potential contextual imputations not pleaded by the plaintiff that could form the basis of the defence.

3. Evidence assessment: Realistically assess the strength of evidence available to establish the substantial truth of contextual imputations, recognizing the potentially higher evidentiary threshold for serious allegations.

4. Comparative harm analysis: Evaluate whether the defamatory imputations complained of would cause any additional harm to the plaintiff's reputation in light of the contextual imputations, considering factors such as the gravity and subject matter of the imputations.

5. Alternative defences: Consider whether other defences, such as justification (truth) or qualified privilege, may be more appropriate or should be pleaded in the alternative.

6. Strategic pleading: Ensure that contextual imputations are clearly identified and distinguished from the imputations complained of by the plaintiff, with comprehensive particulars provided.

8.3 Interplay with Other Defences

Contextual truth often appears alongside a plea of justification (truth) for the same publication. The defendant will typically attempt justification (s 25) on as many of the plaintiff's imputations as possible, and reserve contextual truth (s 26) for the scenario where one or more imputations cannot be justified.

It is acceptable and common practice to plead both defences—they are not mutually exclusive. From a trial management perspective:

1. The evidence led to establish truth will often serve both defences.

2. If the defendant proves all the plaintiff's imputations true, justification succeeds and contextual truth need not be considered.

3. If the defendant proves only some imputations true, justification fails as a complete defence, but contextual truth may still succeed if the proven truths outweigh the false remainder.

Judges should direct juries carefully on the difference: justification requires every defamatory imputation to be true (a high bar), whereas contextual truth requires at least one contextual imputation to be true and effectively no incremental harm from the plaintiff's imputations.

9. Judicial Considerations

For judges managing defamation proceedings in WA, the contextual truth defence raises particular case management and instructional issues:

9.1 Pleadings Scrutiny

1. At the pleadings stage, scrutinize the formulations of imputations on both sides. A defendant's pleading of contextual truth should be examined for viability: ensure each contextual imputation is properly pleaded and particularized.

2. If a plaintiff seeks to amend pleadings late to absorb a contextual imputation, weigh the prejudice and timing. Courts have a discretion to disallow amendments that would unfairly deprive a defendant of a substantive defence at a very late stage, especially if the contextual truth plea was properly notified earlier.

9.2 Jury Management

1. If a jury trial is on foot, recall that the jury will determine both elements of contextual truth (both truth and "no additional harm"). The judge's role is to explain the concept in summing up and to frame questions that capture the statutory test.

2. When directing a jury on the "no further harm" concept, it may help to instruct jurors to consider the position of the plaintiff's reputation if the true imputations stood alone, and then ask whether adding the false imputation(s) would really make people think any worse of the plaintiff.

3. Clearly instruct that the burden is on the defendant—if the jury is uncertain whether there is additional harm, that uncertainty means the defence has not been proven.

9.3 Multiple Publications or Plaintiffs

1. In cases involving multiple defamatory publications or multiple plaintiffs, the defence must be assessed separately for each publication (since each is a separate cause of action).

2. The defence applies to each plaintiff separately—one plaintiff's reputation might not be saved by truths about another plaintiff.

9.4 Verdict and Judgment Considerations

1. If the trial is by judge alone (which is common given the complexity of issues like contextual truth), the judge must explicitly address the two limbs of s 26 in the reasons for decision, making clear findings on truth of contextual imputations and on the extent of reputational harm.

2. If contextual truth succeeds, it results in a complete defence (judgment for the defendant). If it fails but some imputations are proven true, those truths may still be relevant to mitigation of damages.

10. Conclusion

The defence of contextual truth provides an important mechanism for defendants in defamation actions to avoid liability where the overall truth of a publication outweighs any false statements it contains. In Western Australia, however, its application remains more restrictive than in jurisdictions that have adopted the 2020 uniform law amendments.

The defence reflects a policy decision that truth should prevail over falsity when assessing the sting of a publication as a whole. However, the technical requirements—particularly the need for contextual imputations to be "in addition to" those complained of by the plaintiff—can create significant hurdles for defendants.

Western Australian practitioners must use this defence with precision, crafting pleadings to fit the statutory requirements and marshalling strong evidence for any truth asserted. Judges must guide its use at trial, ensuring that juries (if empanelled) grasp the nuanced task required.

Unless and until WA enacts the uniform amendments, contextual truth in WA operates under the 2005 parameters—a reminder that, in defamation law, context can be everything, but only if you're allowed to plead it.

The Ethics of Time‑Based Billing: When Does “Padding” Become Professional Misconduct?

Few topics generate as much angst among clients—and as many disciplinary files for lawyers—as time‑based billing.

Lawyers practising under the Legal Profession Uniform Law (“LPUL”) face real regulatory peril if they cross the line from honest mistake to dishonest inflation.

This post unpacks how that line is drawn, the cases that illustrate it, and the practical safeguards every firm should adopt.

1. The Legal Baseline: “Fair and Reasonable” Fees

Since 1 July 2022 WA practitioners have operated under the LPUL. Section 172 is blunt: a law practice must not charge more than fair and reasonable legal costs. The law then ups the stakes—section 207 declares that charging above that mark is capable of amounting to unsatisfactory professional conduct or outright professional misconduct.

The Solicitors’ Conduct Rules reinforce the point. They require honesty, competence and proper supervision. Dishonesty in billing is therefore not just a costs problem; it is an ethical failure that can end a career.

2. What Counts as “Over‑Recording”?

• Padding – entering more time than the task consumed (e.g. billing an hour for a five‑minute email).

• Double‑billing – charging two clients for the same period of work.

• Phantom billing – charging for work that never took place.

• Over‑servicing – performing unnecessary work to justify more hours.

Each method inflates the fee. Whether a Tribunal calls it negligence or misconduct depends on why it happened and how bad the excess is.

3. Negligence v Dishonesty

Honest Mistake = Possible Unsatisfactory Conduct

A careless duplicate entry or poor supervision can still attract a reprimand, a fine or compulsory training. In Council of LSNSW v Kernaghan (No 2) [2022] NSWCATOD 64 the solicitor’s disclosure failures and some inflated attendances were labelled unsatisfactory professional conduct—but because there was no dishonesty the tribunal stopped at a reprimand and ethics training.

Deliberate Inflation = Professional Misconduct

Where intent is proved, tribunals show little mercy. In Legal Services Commissioner v Williams [2022] VCAT 806 the practitioner fabricated timesheets and misappropriated trust money. Result: professional misconduct, a nine‑year ban and payment of the regulator’s costs. Closer to home, LPCC v O’Halloran [2013] WASAT 105 saw a six‑month suspension for systematic padding across personal‑injury files.

4. How Much Is “Gross”?

Even without direct proof of intent, a fee can be so high that dishonesty is inferred. Courts ask whether the costs bear a rational relationship to the work and its importance. In Shalhoub v Johnson [2023] NSWDC 555 the District Court endorsed that proportionality test: a huge bill for a modest task is self‑evidently unreasonable.

How big is “huge”? There is no fixed percentage. If an assessor chops 15 % or more off a bill, LPUL s 204(2) usually saddles the firm with the costs of the assessment—another financial sting.

5. Evidence that Wins (or Sinks) a Billing Case

• Metadata never lies – native timesheet logs reveal when an entry was really made. A note created after a bill is issued “screams” reconstruction.

• File notes must match the narrative – vague descriptions such as “file review – 3 h” invite disbelief.

• Expert cost assessors set the benchmark – tribunals lean heavily on their view of what a competent solicitor would have charged.

• Patterns tell stories – a lawyer who always records a neat six hours per day, or rounds every unit to the next hour (see LSC v Panayi [2023] VCAT 39), quickly looks suspect.

6. Disciplinary Consequences

1. Reprimand or caution – for negligent over‑recording quickly rectified.

2. Fine – up to $25 000 in WA; often coupled with extra CPD or practice management training.

3. Conditions on practice – supervision requirements, trust‑account audits, or ethics courses.

4. Suspension – months or years off the roll for dishonest padding.

5. Strike‑off – the “nuclear option” when dishonesty is systemic or the practitioner shows no insight.

Whatever the disciplinary label, tribunals almost always order restitution: over‑charged clients get their money back, sometimes with interest.

7. A Practical Checklist to Stay Safe

• Record time contemporaneously. Reconstruction is where mistakes and temptations breed.

• Compare every draft bill to scale or market norms. Write off hours that look excessive.

• Supervise juniors. Partners remain responsible for systemic padding.

• Use clear narratives. Specify what was done and why it took the time recorded.

• Document write‑offs. They evidence judgement and help defend complaints.

• Invite questions. A bill‑review chat often defuses client anger and reveals errors early.

• Audit files randomly. Compare output to hours; anomalies tend to surface quickly.

• Educate the team. Circulate cautionary case summaries; make ethics part of KPIs, not just budgets.

8. Key Take‑Away

Time‑based billing is not inherently unethical, but transparency and proportionality are non‑negotiable.

The moment a lawyer knowingly records time that was not worked—or continues to bill an amount no reasonable peer could defend—the conduct shifts from sloppy to dishonest.

WA’s Uniform Law, the SAT and the courts have shown they will act decisively when that line is crossed.

A robust billing culture, built on contemporaneous records, active supervision and client‑centred communication, is the best protection.

Pre-Action Discovery in Western Australia

1. Introduction

Pre-action discovery is a procedural mechanism available in Western Australian civil litigation that enables prospective litigants to obtain information before commencing formal proceedings. The Supreme Court of Western Australia has developed a body of jurisprudence addressing various aspects of pre-action discovery, particularly under Order 26A of the Rules of the Supreme Court 1971 (WA) (RSC). This article examines the law relating to pre-action discovery through an analysis of four key decisions: Reynolds v Higgins [2024] WASC 260 (Reynolds), John Lovegrove & Co. Pty. Ltd. & A.J Lovegrove & M.H Lovegrove Trading as Lovegrove Electrical v Lumley [2024] WASC 59 (Lovegrove), Jako Industries Pty Ltd v City of Wanneroo [No 4] [2025] WASC 63 (Jako Industries), and Global Smart Cities Pty Ltd v Perkins (WA) Pty Ltd [2025] WASC 129 (Global Smart Cities).

These decisions collectively address applications for pre-action discovery in various contexts: to identify a potential party (Reynolds), to obtain documents from a former employee (Lovegrove), to extend time for compliance with pre-action discovery orders (Global Smart Cities), and to determine whether a potential cause of action exists (Jako Industries).

2. Legal Framework for Pre-Action Discovery

2.1 Pre-Action Discovery to Identify a Potential Party (O 26A r 3)

Order 26A r 3 of the RSC empowers the Court to order a non-party to give discovery to identify a potential party to an action. In Reynolds v Higgins [2024] WASC 260, Quinlan CJ summarized the principles governing such applications, stating at [31]:

"The principles relating to O 26A r 3 of the Rules of the Supreme Court 1971 (WA) are well settled. Order 26A r 3 empowers the Court to order a non-party to give discovery to identify a potential party to an action where the following conditions are satisfied: (a) the plaintiff wants to commence proceedings against the potential party; (b) the plaintiff has made reasonable enquiries; (c) the plaintiff has not been able to ascertain a description of the potential party sufficient for the purposes of taking proceedings against that potential party; and (d) there are reasonable grounds for believing that the non-party had, has or is likely to have had or to have, possession of information, documents or any object that may assist in ascertaining the description of the potential party."

This framework was further affirmed by reference to The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 2] [2008] WASC 147 at [19] and NW v Bechtel (Western Australia) Pty Ltd [2014] WASC 375 at [13].

2.2 Pre-Action Discovery to Determine Whether to Commence Proceedings (O 26A r 4)

Order 26A r 4 allows for pre-action discovery to enable a prospective plaintiff to determine whether to commence proceedings. In Jako Industries [2025] WASC 129, Howard J referenced the Court of Appeal's summary in BWS v ARV [No 2] [2021] WASCA 62 at [28]-[37], explaining at [22]:

"The discretionary power under O 26A r 4(4) is enlivened if the court is satisfied that: (a) the applicant 'may have a cause of action against' the potential party; (b) the applicant wants 'to commence proceedings against' the potential party; (c) the applicant has made 'reasonable enquiries' for the purpose of obtaining sufficient information to enable him or her to decide whether to commence proceedings; (d) the applicant has not been able to obtain sufficient information to enable him or her to make a decision; and (e) there are 'reasonable grounds for believing' that the potential party had, has, or is likely to have had or have, possession of documents that may assist the applicant in making the decision."

3. The "May Have a Cause of Action" Threshold

A critical threshold for pre-action discovery under O 26A r 4 is establishing that the applicant "may have a cause of action" against the potential party. The courts have clarified that this is a lower threshold than establishing a prima facie case, but requires more than mere assertion.

In Jako Industries [2025] WASC 129, Howard J, referring to BWS v ARV [2021] WASCA 62 at [33], emphasized at [41]-[42]:

"In my view, there is nothing on the material which could be described as '... some tangible backing or objective foundation that takes the existence of the cause of action beyond a mere allegation, suspicion or assertion.'

While Jako Industries did not have to positively establish the existence of a cause of action, it has to demonstrate more than mere assertion, conjecture or suspicion."

This principle was further explained in Reynolds [2024] WASC 260, where Quinlan CJ noted at [40]:

"As reflected in the principles set out above, an order for discovery will not be made if the prospective action is merely speculative. This does not mean that the plaintiff seeking discovery as to the identity of a prospective party must demonstrate that it has a prima facie case. To use the words of O 26A r 3, the plaintiff must 'appear' to have a cause of action; it is not necessary, under the rule, to find that the plaintiff in fact has a good cause of action."

4. Discretionary Factors Governing Pre-Action Discovery

Even where the threshold requirements for pre-action discovery are met, the Court retains a discretion whether to order discovery. The Court of Appeal in BWS v ARV [2021] WASCA 62 identified several factors relevant to this discretion, which were summarized in Jako Industries [2025] WASC 129 at [26]:

"1. the likelihood that a cause of action of the kind suggested will be found to exist; 2. the nature and significance of the potential cause of action; 3. the likely effect of an order of the kind contended for on the potential party; 4. whether the applicant has any other adequate means of obtaining the information; 5. the nature and confidentiality of the documents proposed to be obtained; 6. the possible significance of the information in a documents to the decision whether to commence the contemplated proceedings; 7. whether the applicant is able to compensate the potential party for its costs of complying with the order; 8. whether there is any evidence of bad faith on the part of the applicant; and 9. the extent to which the cost and effort involved in undertaking the proposed discovery and inspection is proportionate to the likely value of the claim if successful."

In Reynolds [2024] WASC 260, Quinlan CJ applied these factors and concluded at [82]-[83]:

"In all of the circumstances, I am satisfied that the interests of justice favour an order for pre-action discovery of the trust deed of the Trust or such other documents that identify the trustee.

Senator Reynolds seeks to bring a bona fide claim to set aside the Trust pursuant to s 89 of the Property Law Act 1969 (WA). That claim is (a) not merely speculative, and (b), on the evidence before me, may be the only prospect of Senator Reynolds ever satisfying a potential judgment debt in the defamation proceedings. Those two matters in my view weigh strongly in favour of Senator Reynolds at least having discovery so as to enable such a claim to be formulated, and having received further advice including as to the prospects of success, commencing that claim."

5. Costs Principles for Pre-Action Discovery

The costs principles governing pre-action discovery applications have been addressed in several decisions. In Lovegrove [2024] WASC 59, Master Russell summarized the general approach at [15]-[17]:

"It was also uncontroversial that in an application for pre-action discovery, the usual rule is that the party seeking discovery should pay the costs of the application and the discovering party's reasonable costs and expenses of complying with any order made."

This starting position reflects the characterization of pre-action discovery as an "indulgence" sought by the applicant. However, the Court of Appeal in Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 (S) established an important qualification to this general rule by creating a mechanism for potential recoupment of these costs when substantive proceedings are later commenced. The details of this mechanism and its practical application are discussed in Section 6.2 below.

The principles from Kelbush were further applied in Lovegrove [2024] WASC 59, where Master Russell noted at [24]-[25]:

"As observed by Martin CJ in the Kelbush Costs Decision, the proper course in proceedings of this nature is to order, in the absence of any reason to the contrary, that the applicant for the indulgence of pre-trial discovery pay both the respondent's costs of the application and the respondent's reasonable costs of complying with any order for discovery made.

I am not satisfied there is any reason in this case to justify any change from the usual course or why the applicant for pre-action discovery, Lovegrove, should not pay the costs of the application and Mr Lumley's reasonable costs and expenses of giving the discovery."

6. Confidentiality and Procedural Considerations

6.1 Confidentiality of Discovered Documents

The Court may impose confidentiality regimes on documents obtained through pre-action discovery. In Reynolds [2024] WASC 260, Quinlan CJ addressed confidentiality at [86]-[89]:

"Ms Higgins submitted that, in the event that I made an order for pre-action discovery, reliance upon the implied undertaking (i.e., the so-called Harman undertaking) in relation to the use of discovered documents would not be sufficient and that I should make particular orders to protect the confidentiality of the document (or documents) discovered.

I am satisfied that I should do so. The evidence before me confirms, and I would have to be living under a rock not to know, that litigation involving Ms Higgins is litigated as much in the public arena as it is in the courts: court documents are provided to media outlets prior to their being served or even filed, speeches and 'door-stop' interviews are regularly conducted on the doors of the courts and self-appointed experts dissect, analyse and predict the outcome of court proceedings before they have even begun...

The Court, however, can and should control the dissemination of private and sensitive documents that have neither been tendered nor adduced in evidence. This is particularly so in relation to documents produced under compulsion such as will occur in this case...

While I will hear the parties as to the precise terms of the orders, my preliminary view is that the document or documents discovered should be provided to a single nominated practitioner from the solicitors acting for Senator Reynolds, following the provision by the practitioner of a signed undertaking to the Court that he or she will retain possession and control of the document, not copy the document and not communicate the contents of the document, save for the purpose of taking instructions from Senator Reynolds and commencing the proposed proceedings (and for no other purpose)."

6.2 The Kelbush Costs Mechanism and Time Limitations

The Court of Appeal in Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 (S) established a specific mechanism for addressing costs in pre-action discovery cases. Martin CJ (with whom Buss JA and Mitchell J agreed) set out the following principles at [2]-[4]:

"[2] ... the proper course in proceedings of this nature is to order, in the absence of any reason to the contrary, that the applicant for the indulgence of pre-trial discovery pay both the respondent's costs of the application and the respondent's reasonable costs of complying with any order for discovery made. Further, it is my view that the obligation to pay costs should not be deferred indefinitely merely because proceedings are subsequently commenced by the applicant against the respondent.

[3] However, as a matter of principle, there should be a mechanism by which such an applicant can recoup not only the costs that it is ordered to pay to such a respondent, but also its own costs of the pre-trial discovery application if it commences proceedings against the respondent and it appears to the court responsible for those proceedings that such costs should be ordered to be paid to the applicant...

[4] The mechanism by which those costs can be recouped would be by way of an order empowering the current appellant to make an application in the course of any subsequent proceedings for orders with respect to not only the costs that it is ordered to pay the respondent today, but also with respect to its own costs of the application before the master."

In implementing these principles, the Court of Appeal made the following costs order in Kelbush: "Appellant to pay respondent's costs of application for and compliance with orders for pre-action discovery" (as recorded in the "Result" section of the judgment). Importantly, as Martin CJ explained at [3], this was "subject to an order enabling recoupment of those costs" through the mechanism described in paragraph [4].

This costs mechanism typically includes a time limitation to ensure that costs issues are not left unresolved indefinitely. In Global Smart Cities v City of Wanneroo [No 4] [2025] WASC 63, Howard J considered an application to extend such a time limitation. The case demonstrated that this type of order concerning time limitations has become a common feature in pre-action discovery applications, as Howard J noted at [20]:

"The Master made Order 6, which is now commonly made in these actions. The idea being that these matters should be addressed promptly, and the question of costs not left to hang indefinitely, as the Chief Justice might have said."

The specific orders at issue in that case included:

1. Orders 5 and 6 made by the Master, with Order 6 placing a time limit on when the cost issues could be addressed through the Kelbush mechanism

2. Order 2 made by Howard J on 13 October 2023 extending that time limit in light of a confidentiality regime that had been imposed

3. An application to further extend the time period

As Howard J noted at [19]-[21]:

"I consider, in making his Orders 5 and 6, the Master recognised and adapted that mechanism but also sought to give effect to the statements of principle in [2] of the Chief Justice's reasons that the obligation should not be deferred indefinitely.

The Master made Order 6, which is now commonly made in these actions. The idea being that these matters should be addressed promptly, and the question of costs not left to hang indefinitely, as the Chief Justice might have said.

Order 2 I made on 13 October 2023 sought to extend that to a definable or knowable date to give effect to Order 6, as made by the Master, in light of the confidentiality regime which I considered should be imposed."

Howard J ultimately declined to further extend the time limitation, emphasizing at [27] that:

"It seems to me that the plaintiff has not taken advantage of the time that was extended by my Order, and it seems to me in the interests of justice that that time period ought not to be further extended."

This case demonstrates the courts' concern with balancing:

1. The right of pre-action discovery applicants to potentially recover their costs if they subsequently commence proceedings; and

2. The need to ensure that cost issues are resolved within a reasonable timeframe rather than being deferred indefinitely.

7. Conclusion

Pre-action discovery in Western Australia is governed by a body of jurisprudence that balances the interests of prospective plaintiffs in obtaining information necessary to make informed litigation decisions against the burden placed on potential defendants.

The courts have developed nuanced approaches to the threshold requirements, discretionary factors, costs principles, and procedural considerations involved in pre-action discovery applications.

While the courts generally recognize pre-action discovery as an "indulgence", they have also acknowledged its important role in facilitating access to justice by enabling parties to make informed decisions about whether to commence litigation.

The consistent theme throughout the jurisprudence is that pre-action discovery should be ordered where it serves the interests of justice and the proper administration of potential litigation, but with appropriate safeguards to prevent abuse and unnecessary burden on responding parties.

Walking the Tightrope: When to Consider Capacity Applications in Litigation

Introduction

The decision in M -v- P [No 3] [2024] WASC 123 provides guidance on the approach courts take when considering applications regarding a litigant's capacity.

Justice Lundberg's judgment illuminates the delicate balance courts must strike between protecting potentially vulnerable litigants and respecting individual autonomy. This decision carries particular significance for practitioners faced with opposing self-represented litigants whose capacity may be questionable, offering a roadmap for appropriate procedural steps while highlighting the evidentiary threshold required for such applications.

The case reinforces the Court's protective jurisdiction while demonstrating judicial reluctance to make declarations of incapacity without proper evidence. It establishes an intermediate pathway through referral to the Public Advocate that practitioners should note when contemplating similar applications.

Background of Relevant Case Law

The principles applicable to applications under Order 70 of the Rules of the Supreme Court 1971 (WA) ('RSC') have been developed through several key decisions.

In A v City of Swan [No 5] [2010] WASC 204, Murphy JA provided a detailed analysis of the Court's parens patriae jurisdiction and the principles governing determinations of capacity. His Honour emphasised that capacity is not a fixed standard but fluctuates according to the legal character, complexity, and significance of the matter in question.

More recently in Snook v Magistrate Trevor Darge [No 2] [2024] WASC 91, Seaward J summarised the applicable principles, noting that proof of complete incapacity is not required, and that a person can lack mental capacity to participate in legal proceedings whilst still being capable of performing the usual activities of daily life.

The Court in Farrell v Allregal Enterprises Pty Ltd [2008] WASCA 264 established a procedural framework for seeking assistance from the Public Advocate in determining questions of capacity, which Justice Lundberg adopted in the present case.

Facts of the Case

M -v- P [No 3] concerned a defamation action brought by an unrepresented plaintiff against the defendant, both of whom were medical practitioners (at [1]). The action, which had been on foot for over a year, involved allegations of defamation through "several oral and written communications allegedly published by the defendant" with "around 18 publications identified in the pleadings" (at [1]).

The plaintiff was engaged in multiple disputes across various courts and tribunals, all whilst self-represented (at [1]-[2]).

The defendant applied for an order that the plaintiff be declared a person under a disability by reason of mental illness, defect or infirmity, within the meaning of paragraph (c) of the definition of 'person under disability' in Order 70 rule 1 of the RSC (at [3]).

Order 70 RSC relates to the Court's parens patriae jurisdiction, which derives from "the inherent obligation of the Crown to care for those who are unable to care for themselves" and is expressly conferred by s 16(1)(d) and s 23 of the Supreme Court Act 1935 (WA) (at [5]).

Significantly, the defendant did not present any medical evidence in support of the application (at [14]) but rather invited the Court to draw inferences about the plaintiff's capacity from the plaintiff's conduct, communications, and court documents.

The defendant presented an alternative pathway in the event the Court was not prepared to make an immediate declaration, proposing orders that would request the Public Advocate investigate and report on whether the plaintiff had the ability to make reasonable judgments about the conduct of the proceedings (at [7]-[8]).

The plaintiff strongly opposed the application, filing multiple submissions totalling 87 pages and a 156-page affidavit (at [15]).

Analysis of the Court's Reasoning

Justice Lundberg commenced his analysis by acknowledging the serious nature of the application and the Court's duty to consider whether a person has the requisite capacity when put on notice (at [19]). His Honour emphasised the risk that any final determination of the action could later be challenged as irregular if the plaintiff were subsequently found to be under a disability (at [20]).

The Court accepted the following principles from Snook v Magistrate Trevor Darge [No 2] (at [21]):

1. There is no fixed standard of mental capacity required at law

2. The standard fluctuates according to the legal character, complexity and significance of the matter

3. Proof of complete incapacity is not required

4. A person can lack capacity for legal proceedings while still managing daily activities

5. The Court must consider whether the person can understand the case, make decisions, and give instructions

6. Self-represented litigants are held to a higher standard of capacity than those with legal representation

Justice Lundberg stressed the serious consequence of a declaration under Order 70 RSC - namely, that it would "preclude the individual exercising their right to prosecute, compromise or participate in the specific litigation in their own name" (at [22]).

Rather than determining the application on the material before the Court, His Honour opted for the alternative pathway of seeking assistance from the Public Advocate (at [24]), but only after satisfying himself that the application had a "reasonable basis of succeeding" (at [24]).

The Court found that the defendant had raised the issue in a "legitimate manner" and that there was material capable of supporting the declaration sought (at [25]). This conclusion was reached after considering:

1. The material in the plaintiff's submissions and affidavit

2. The Court's own observations of the plaintiff in several appearances since early 2023

3. The "volume of the material adduced by the plaintiff and the nature of the serious allegations he raises"

4. The manner in which the plaintiff articulated allegations, which "goes well beyond the ordinary language of a passionate or zealous litigant in person" (at [26])

Of particular note, Justice Lundberg observed that the plaintiff's affidavit material contained "lengthy personal accounts of the plaintiff's life, his family and background, personal photographs one would not expect to be adduced in evidence in this action, and personal and intimate WhatsApp and text messages, as well as records of voicemail messages" - all deemed irrelevant to both the application and the proceeding (at [27]).

The Court also highlighted the plaintiff's "intense focus on those who stand against him" and "the belief that there is a network of people coordinating actions against him" (at [28]).

Justice Lundberg considered the complexity of defamation actions and the significant decisions a plaintiff would ordinarily need to make regarding pleadings, evidence, and responses to defences (at [29]).

Ultimately, the Court decided to request assistance from the Public Advocate under s 97(1)(c) of the Guardianship and Administration Act 1990 (WA) (at [30]-[31]), with specific orders structured to facilitate this assistance while preserving procedural fairness (at [37]).

Quantification and Assessment Aspects

Justice Lundberg's judgment provides valuable guidance on how courts assess a litigant's capacity in the absence of direct medical evidence. The Court identified several quantifiable factors that may indicate capacity concerns:

1. The volume of material produced by a litigant (the plaintiff filed 87 pages of submissions and a 156-page affidavit)

2. The relevance of material to the proceedings (substantial irrelevant personal content was noted)

3. The nature and manner of allegations made (references to "criminal networks" and conspiracies)

4. The complexity of the underlying proceedings (defamation involving multiple publications)

5. The litigant's conduct in court proceedings over time

The Court acknowledged that drawing inferences about capacity from these factors is "legitimate" (at [14]) but also that "the absence of direct medical evidence renders an applicant's task of discharging its burden of proof more onerous" (at [14]).

The judgment establishes that the threshold for referring the matter to the Public Advocate is that "the application has a reasonable basis of succeeding" (at [24]), which is evidently lower than the threshold for making the declaration itself.

Worked Example: Practical Application

Consider a solicitor representing a defendant in a complex commercial dispute where the unrepresented plaintiff exhibits concerning behaviours:

Scenario: The plaintiff has filed multiple, excessively lengthy submissions containing irrelevant personal information, makes allegations of widespread conspiracy against various institutions, demonstrates an inability to focus on relevant legal issues despite judicial guidance, and produces volumes of irrelevant evidence.

Step 1: Document all instances of concerning conduct or communications

• Compile court transcripts showing the plaintiff's inability to follow judicial directions

• Collate all written communications demonstrating disorganised thinking or paranoid ideation

• Catalogue filed documents showing irrelevant content or inability to address legal issues

Step 2: Assess whether the conduct crosses the threshold from merely vexatious to suggesting incapacity

• Compare to established case law (e.g., M -v- P [No 3], A v City of Swan [No 5])

• Consider the complexity of the particular proceedings and demands on the litigant

• Evaluate whether the conduct suggests an inability to understand the proceedings or make reasonable judgments

Step 3: Consider the ethical implications and proportionality

• Is the application genuinely in the interests of justice, or merely tactical?

• Are there less intrusive alternatives available?

• What impact would the application have on the proceedings and the plaintiff?

Step 4: Frame the application with appropriate sensitivity

• Propose the "alternative pathway" approach rather than seeking an immediate declaration

• Structure orders similar to those in M -v- P [No 3] requesting Public Advocate assistance

• Ensure all evidence presented is objective and factual, avoiding speculation

Step-by-Step Guidance for Practitioners

When faced with a potentially incapacitated opposing party, practitioners should:

1. Maintain detailed records of all interactions with the opposing party, particularly noting:

   • Inability to understand or engage with legal concepts

   • Persistent irrelevant submissions or evidence

   • Paranoid or delusional thinking in correspondence or submissions

   • Inability to follow court directions or understand procedural requirements

2. Consult the relevant procedural rules governing capacity in your jurisdiction (e.g., Order 70 RSC in Western Australia)

3. Consider whether the threshold for intervention is met:

   • Is there a genuine basis for concern beyond mere frustration with a difficult litigant?

   • Does the conduct go "well beyond the ordinary language of a passionate or zealous litigant in person"?

   • Is the nature of the proceedings sufficiently complex to require a higher standard of capacity?

4. Explore alternative pathways:

   • Consider whether a less intrusive approach might assist the opposing party

   • Identify relevant support services or authorities (e.g., Public Advocate) that might provide assistance

5. Frame the application appropriately:

   • Seek preliminary assistance from appropriate authorities before requesting declarations

   • Structure proposed orders to allow for investigation before determination

   • Request the court's guidance on procedure

6. Prepare for procedural delays:

   • Advise clients that such applications may extend timeframes

   • Consider whether interim arrangements are necessary

7. Maintain proportionality:

   • Ensure the scope of any application is confined to the specific proceedings

   • Avoid unnecessarily broad declarations that might impact the opposing party's autonomy in other matters

Evidence and Arguments for Each Side

For the Applicant (Party Questioning Capacity)

Evidence:

• Court documents containing irrelevant, excessive, or disorganised content

• Transcripts demonstrating inability to follow judicial guidance or respond to questions

• Correspondence showing paranoid ideation or delusional thinking

• Witness evidence of behaviour in court or mediation settings

• Expert evidence (if available) regarding the cognitive demands of the specific proceedings

Arguments:

• The Court has a duty to ensure parties can meaningfully participate in proceedings

• Allowing proceedings to continue risks injustice to both parties

• The complexity of the proceedings requires a certain level of capacity

• The Court's parens patriae jurisdiction is protective, not punitive

• The alternative pathway approach provides appropriate procedural safeguards

For the Respondent (Party Whose Capacity is Questioned)

Evidence:

• Evidence of capacity to manage other aspects of life

• Examples of logical and coherent submissions or correspondence

• Evidence of previous successful litigation management

• Character evidence from professional colleagues or associates

• Expert evidence (if available) supporting capacity

Arguments:

• The presumption of capacity must be respected

• Passionate or unusual advocacy is not equivalent to incapacity

• The application represents an attempt to impede access to justice

• Less restrictive alternatives have not been explored

• The absence of medical evidence is fatal to the application

• The serious consequences for civil rights require a high evidentiary threshold

Key Takeaways for Legal Practice

1. Evidence threshold: While medical evidence is not strictly required for capacity applications, its absence significantly increases the burden of proof on the applicant.

2. Alternative pathways: Courts may prefer a staged approach involving investigative assistance from authorities such as the Public Advocate before making declarations.

3. Contextual assessment: Capacity requirements fluctuate according to the nature and complexity of the proceedings - defamation actions, with their complexity, demand a higher standard.

4. Preserving autonomy: Courts remain conscious of the serious impact of declarations on individual autonomy and will only intervene where genuinely necessary.

5. Tactical considerations: Practitioners must ensure capacity applications are genuinely motivated by legitimate concerns rather than tactical advantage.

6. Self-representation factor: Courts recognise that self-represented litigants require a higher standard of capacity than those with legal representation.

7. Documentation importance: Systematic documentation of concerning conduct or communications is essential for establishing sufficient grounds for investigation.

Conclusion

M -v- P [No 3] offers a nuanced approach to the challenging intersection of mental capacity and litigation rights. The judgment reinforces the Court's protective role while establishing procedural safeguards that respect individual autonomy. By adopting the "alternative pathway" of seeking Public Advocate assistance, Justice Lundberg has demonstrated a balanced approach that other courts may follow.

For practitioners, the case underscores the need for careful consideration before initiating capacity applications, the importance of thorough documentation, and the value of structured, proportionate approaches that prioritise investigation before declaration.

The decision ultimately serves as a reminder that while the legal system must protect vulnerable individuals, it must do so with appropriate restraint and procedural fairness, recognising that declarations of incapacity represent a significant limitation on fundamental rights of access to justice.

The Significance of Apologies in Defamation Proceedings: Analysis of Wright v de Kauwe

1. Introduction

The Western Australian Court of Appeal's decision in Wright v de Kauwe [2024] WASCA 51 provides guidance on the significance of apologies in defamation proceedings, particularly in the context of settlement offers.

The case illuminates how courts assess the adequacy of apologies when determining whether a plaintiff's rejection of a settlement offer was reasonable for costs purposes.

The Court's analysis offers insights into the relative importance of monetary and non-monetary elements in defamation settlements, emphasising that vindication of reputation through an appropriate apology can be as significant as financial compensation.

This decision is noteworthy for its detailed consideration of how courts should approach the adequacy of proffered apologies when exercising costs discretion following a plaintiff's rejection of Calderbank offers. It provides authoritative guidance on a previously underdeveloped area of law concerning the intersection of apologies, settlement offers, and costs consequences in defamation proceedings.

2. Background of Relevant Preceding Case Law

The Role of Apologies in Defamation Law

Apologies have long held a special place in defamation law, serving multiple purposes:

1. Statutory recognition: Section 38(1)(a) of the Defamation Act 2005 (WA) specifically recognises that an apology is evidence in mitigation of damages. Section 20 protects apologies from being admissible in determining fault or liability.

2. Vindication of reputation: As noted in Cassell & Co Ltd v Broome [1972] AC 1027, an apology can serve to vindicate a plaintiff's reputation where monetary compensation alone may be insufficient.

3. Settlement context: In Ford Motor Co of Australia Ltd v Lo Presti [2009] WASCA 115, the Court established principles for assessing Calderbank offers, including "the extent of the compromise offered" as a relevant factor.

4. Costs consequences: In Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96, the Court emphasised that in determining whether rejection of an offer was unreasonable, "all relevant facts and circumstances must be considered" including the extent of compromise offered.

Prior to Wright v de Kauwe, there was limited guidance on how courts should weigh the adequacy of apologies when assessing whether rejection of a settlement offer was reasonable for costs purposes.

3. Detailed Facts of the Case

The Defamatory Publications

Dr Brendan de Kauwe brought a defamation action against Mr Matthew Wright, five director defendants (Mr Cohen, Mr Saad, Ms Shenhar, Mr Gilboa, and Mr Karasik) and Mr Pamensky. Dr de Kauwe and the director defendants were directors of eSense Lab Ltd, and Mr Pamensky was its company secretary [96].

The trial judge found that Dr de Kauwe had been defamed by imputations in four publications:

1. A letter from three director defendants to Dr de Kauwe on 5 February 2018 [97(1)]

2. A letter from Mr Cohen to Dr de Kauwe on 15 February 2018 [97(2)]

3. An announcement by eSense to the ASX on 13 March 2018 (First ASX Announcement) [97(3)]

4. An announcement by eSense to the ASX on 21 March 2018 (Second ASX Announcement) [97(4)]

The defamatory imputations included that Dr de Kauwe was not fit to be a director, was a blackmailer and extortionist, and had engaged in conduct warranting investigation [136-137].

Settlement Offers and Proposed Apologies

The defendants made several Calderbank offers:

1. 17 August 2020: $500,000 plus costs and an apology [289-290]

2. 14 October 2020: $650,000 plus costs and an apology [289-290]

3. 26 January 2021: $750,000 plus costs and an apology [289-290]

4. 27 January 2021: $850,000 plus costs and an apology [289-290]

5. 28 January 2021: $850,000 plus costs and an apology [289-290]

The proposed apology in each offer was identical and stated:

"We the undersigned (Haim Cohen, Ilan Saad, Galit Shenhar, Eran Gilboa, Benjamin Karasik and Ian Pamensky) each accept that we variously published or caused to be published 2 ASX announcements released to the market and to other parties by eSense-Lab Ltd in 2018. In the ASX announcements various allegations were made concerning Dr de Kauwe, which we accept were defamatory of him.

We sincerely and unreservedly apologise for the damage, hurt, distress and embarrassment that we have caused to Dr de Kauwe and we fully and unreservedly retract the defamatory allegations we made.

We hereby undertake to refrain from making any further such statements regarding Dr de Kauwe in the future." [290]

Notably, Mr Wright was not a signatory to the proposed apology.

4. Analysis of the Court's Reasoning

The Trial Judge's Approach to Apologies in Settlement Offers

The trial judge found that Dr de Kauwe's rejection of the Calderbank offers was not unreasonable, in part because the proposed apology was inadequate. The trial judge identified several limitations in the apology:

1. It referred only to the ASX Announcements and not to the defamatory letters [304]

2. The defendants made no offer to publish it to a wider audience [305]

3. It did not identify the specific allegations being retracted [306]

4. The settlement was "without any admission of liability" which detracted from the apology's value [307]

The trial judge stated that "in settlement of defamation claims the offer and terms of an apology is of paramount importance" [319] and concluded that "the inadequacy of the apology... is of itself a sufficient reason to make Dr de Kauwe's failure to accept the offer not unreasonable" [320].

The Court of Appeal's Analysis

Mitchell JA (with whom Buss P and Lundberg J agreed) concluded that the trial judge did not make an error of principle in his approach to the significance of the apology. The Court held:

1. Weight versus error of principle: The director defendants' complaint that the trial judge placed "excessive weight" on the terms of the apology did not disclose a proper basis for appellate intervention [324].

2. Significance of apologies in defamation: It is open to a trial court to give significant weight to the adequacy or inadequacy of an apology proffered as part of a settlement offer when assessing whether rejection was unreasonable [325].

3. Statutory context: The Court noted the significance of apologies in the Defamation Act, including their role as evidence in mitigation of damages under s 38(1)(a) and in offers to make amends under s 18 [325].

4. Holistic approach: Mitchell JA emphasised that the trial judge had considered all the circumstances, with the apology being only one factor (albeit an important one) [326].

5. Vindication versus compensation: The Court recognised that "the publication of a judgment of the court provides for its own vindication of a plaintiff's reputation. Where a private settlement is offered, there will ordinarily be no public vindication of the plaintiff's reputation except to the extent that a public apology is offered by the defendant" [328].

The Court rejected the argument that the trial judge had erred in principle by elevating the significance of the apology, finding that the judge had properly considered all relevant circumstances.

5. Quantification and Assessment Aspects

Balancing Monetary and Non-Monetary Elements

The Court's approach demonstrates the need to balance monetary and non-monetary elements when assessing the adequacy of settlement offers in defamation cases:

1. Comparing monetary value: The trial judge compared the settlement sum offered ($650,000-$850,000) with the judgment eventually obtained ($530,880 plus interest of $72,262.82, totalling $603,142.82) [297-302].

2. Costs considerations: The difference between costs taxed on a special costs order basis versus party/party costs was taken into account when comparing the offers to the judgment [300-301].

3. Vindication value: The Court recognised that an apology offers vindication that monetary compensation alone cannot provide, particularly where a private settlement precludes the vindication provided by a judgment [328].

4. Timing factors: The timing of offers and time allowed for consideration were relevant factors, with the Court noting that some offers were open for unreasonably short periods close to trial [312-315].

The Court's analysis reinforces that quantifying the adequacy of settlement offers in defamation cases requires consideration of both the monetary value and the qualitative aspects of proposed apologies.

6. Worked Example of Practical Application

Perspective A: Plaintiff's Counsel

Scenario: Your client has been defamed by publications alleging professional misconduct. The defendant has offered $200,000, costs on a party/party basis, and an apology.

Application of Wright v de Kauwe principles:

1. Assess apology adequacy:

   • Does it address all defamatory publications or only some?

   • Does it clearly identify and retract the defamatory imputations?

   • Is it offered without qualification or undermined by denial of liability?

   • Will it be published to reach the same audience as the defamation?

2. Monetary assessment:

   • Compare offer amount to likely damages plus interest

   • Consider difference between party/party costs and potential special costs order

   • Calculate overall difference between offer and potential judgment value

3. Timing considerations:

   • Is sufficient time allowed for proper consideration of the offer?

   • Is the offer made close to trial when preparation costs are high?

4. Advise client: "While the monetary offer of $200,000 appears reasonable, the apology is inadequate because it doesn't clearly identify the imputations being retracted and wouldn't reach the same audience as the original publication. Based on Wright v de Kauwe, rejection would likely not be considered unreasonable for costs purposes."

Perspective B: Defendant's Counsel

Scenario: Your client has published material that may be defamatory. You are preparing a Calderbank offer.

Application of Wright v de Kauwe principles:

1. Design comprehensive apology:

   • Address all potentially defamatory publications

   • Specifically identify the imputations being retracted

   • Provide for publication to reach similar audience as the defamation

   • Consider whether unqualified acceptance of defamatory nature is possible

2. Structure monetary component:

   • Ensure offer covers likely damages plus reasonable interest

   • Consider offering costs on a more generous basis than party/party

   • Calculate potential value difference if special costs order were made

3. Timing strategy:

   • Allow reasonable time for consideration (at least 14-21 days)

   • Make offer well before trial preparation intensifies

4. Advise client: "To maximize costs protection, your apology should address both publications, specifically acknowledge the false imputations, and be published on your website. The monetary offer should exceed your counsel's assessment of likely damages by at least 20% to account for interest and costs differentials. We should allow at least 21 days for consideration to avoid the timing issues identified in Wright v de Kauwe."

7. Step-by-Step Guidance for Practitioners

Advising Plaintiffs on Settlement Offers

1. Assess the apology's adequacy:

   • Does it address all defamatory publications?

   • Does it specifically identify and retract the defamatory imputations?

   • Is the publication method appropriate to reach the original audience?

   • Is the apology undermined by qualifications or denials?

2. Evaluate monetary compensation:

   • Compare offer to realistic assessment of general and special damages

   • Add pre-judgment interest likely to accrue

   • Consider difference between party/party costs and indemnity costs

   • Assess total package value against likely judgment value

3. Consider timing factors:

   • Is sufficient time provided to consider the offer?

   • At what stage of proceedings is the offer made?

   • What costs have already been incurred?

4. Document reasons for rejection:

   • Record specific deficiencies in the apology

   • Note any valuation issues in monetary component

   • Consider counter-offering with adequate apology terms

Advising Defendants on Formulating Offers

1. Craft a comprehensive apology:

   • Address all defamatory publications specifically

   • Clearly identify the imputations being retracted

   • Propose appropriate publication method(s)

   • Avoid qualifying language that undermines sincerity

2. Structure monetary component strategically:

   • Offer should exceed realistic damages assessment

   • Include allowance for pre-judgment interest

   • Consider offering costs on more favorable basis than party/party

   • Ensure total package exceeds likely judgment value

3. Time the offer appropriately:

   • Allow reasonable time for consideration (minimum 14-21 days)

   • Make offer sufficiently early in proceedings

   • Avoid timing close to hearing dates or when plaintiff is preparing for trial

4. Clear communication:

   • Specify all terms clearly without ambiguity

   • Explicitly state costs consequences if rejected

   • Ensure settlement deed terms (if applicable) are provided with offer

8. Specific Evidence and Arguments

For Plaintiffs

1. Inadequacy of apology:

   • Evidence of all defamatory publications not addressed in the apology

   • Analysis of audience reached by original publication versus proposed apology

   • Expert evidence on reputational harm requiring specific vindication

   • Evidence of continuing harm due to inadequate vindication

2. Monetary considerations:

   • Evidence of special damages incurred

   • Comparable awards in similar defamation cases

   • Documentation of actual legal costs exceeding party/party costs

   • Evidence of aggravating factors justifying higher damages

3. Procedural arguments:

   • Evidence of unreasonable time pressure to consider offer

   • Documentation of proximity to trial and preparation costs already incurred

   • Evidence of ambiguity or uncertainty in offer terms

For Defendants

1. Adequacy of apology:

   • Evidence that apology would reach similar audience to original publication

   • Precedents showing similar apologies accepted as adequate

   • Evidence that apology addresses core reputational concerns

   • Documentation of attempts to refine apology terms

2. Monetary considerations:

   • Comparative analysis showing offer exceeded likely judgment

   • Expert evidence on appropriate quantum

   • Calculations showing offer's value considering interest and costs

   • Evidence of mitigating factors justifying lower damages

3. Procedural arguments:

   • Evidence that timeframe for considering offer was reasonable

   • Documentation of early timing in proceedings

   • Evidence of clarity and certainty in offer terms

9. Key Takeaways for Legal Practice

1. Apology design is critical: Courts recognize that apologies serve a distinct purpose in defamation that monetary compensation cannot provide. Apologies should address all defamatory publications, specifically identify the imputations being retracted, and propose appropriate publication methods.

2. Holistic assessment: When assessing settlement offers, courts take a holistic approach considering the monetary component, adequacy of apology, timing, and procedural aspects. No single factor is determinative.

3. Vindication value: Courts acknowledge that vindication of reputation through an appropriate apology is a core purpose of defamation proceedings, and private settlements lacking adequate vindication may reasonably be rejected despite generous monetary offers.

4. Cost protection strategy: To maximize costs protection, defendants should ensure apologies are comprehensive, specific, and published appropriately, while monetary offers should clearly exceed likely judgment values accounting for interest and costs differentials.

5. Timing matters: Offers should allow reasonable time for consideration and be made sufficiently early in proceedings to avoid being compromised by proximity to trial.

6. Documentation importance: Both parties should document their reasoning regarding offer adequacy or inadequacy to support later costs applications.

10. Conclusion on Broader Significance

Wright v de Kauwe represents an important development in defamation jurisprudence by providing guidance on the significance of apologies in settlement offers. The decision reinforces that defamation law serves purposes beyond mere compensation, with vindication of reputation being a central objective that apologies specifically address.

The Court's approach acknowledges the unique nature of reputational harm and the limited capacity of monetary compensation alone to remedy such harm. This recognition has significant implications for defamation practice, emphasizing that crafting appropriate apologies is not merely a peripheral element of settlement strategy but central to it.

The decision also brings welcome clarity to the application of Calderbank principles in the defamation context, providing a structured framework for assessing whether rejection of settlement offers was reasonable. This guidance will likely influence settlement practices in defamation proceedings by encouraging more carefully crafted apologies and more realistic assessment of non-monetary elements.

As defamation continues to evolve in the digital age, where reputational harm can spread rapidly and persistently, the significance of appropriately tailored apologies is only likely to increase. Wright v de Kauwe provides a foundation for this evolving area of law, emphasizing that effective vindication requires attention to the qualitative aspects of apologies rather than merely their existence.

Understanding Advance Health Directives in WA: Legal Analysis of CK [2025] WASAT 27

Introduction

The decision in CK [2025] WASAT 27 provides significant guidance on the requirements for valid Advance Health Directives (AHDs) in Western Australia, particularly regarding the capacity necessary to execute such instruments.

The case is notable for its detailed examination of the 'full legal capacity' test under the Guardianship and Administration Act 1990 (WA) ('GA Act') and its application to persons with cognitive impairments.

This decision clarifies the standards that must be met for an AHD to be legally enforceable, especially concerning consent to medical research—an area that has seen legislative development in recent years following the COVID-19 pandemic.

The case has substantial implications for legal practitioners advising clients on AHDs, medical practitioners assessing capacity, and substitute decision-makers navigating complex healthcare decisions. It also addresses the critical intersection between autonomy in healthcare decision-making and protection of vulnerable individuals.

Detailed Facts of the Case

Background and Initial Orders

CK, a 63-year-old man, was diagnosed with Autism Spectrum Disorder (ASD) at age 61 after being found dehydrated and wandering the streets following his mother's sudden death in late 2022 (at [1]). The Tribunal initially appointed the Office of the Public Advocate as CK's guardian in early 2023 to make decisions about services (the '2023 Orders') (at [1]).

Execution of Legal Documents

In late 2023, CK signed several legal documents, including:

• A will

• An enduring power of attorney appointing his younger sister EK as attorney

• An advance health directive recording consent to participate in medical research ('CK AHD') (at [2])

Deterioration and Further Applications

In August 2024, CK was admitted to hospital following a significant decline in his mental health. He had stopped taking medication after hearing voices that instructed him to do so. He was subsequently diagnosed with schizophrenia (at [3]). During this admission, concerns arose about financial transactions, with allegations that CK had given significant sums to EK to pay her mortgage and purchase diamonds (at [3]). This prompted the Hospital to seek review of the 2023 Orders and appointment of an administrator (at [3]). The Tribunal appointed the Public Trustee as emergency administrator (at [3]).

The Advance Health Directive Issue

At the October 2024 hearing, CK expressed that he did not want to participate in medical research where he would receive a placebo, yet this was precisely what he had agreed to in the CK AHD (at [4]). The Tribunal accepted an oral application from CK to determine the validity of the CK AHD (at [4]).

Final Orders

At the November 2024 hearing, the Tribunal appointed the Public Trustee as CK's administrator and reappointed the Public Advocate as his guardian. Critically, the Tribunal revoked the enduring power of attorney and declared the CK AHD invalid (at [5]).

Analysis of the Tribunal's Reasoning

Legal Framework for Advance Health Directives

The Tribunal's analysis begins with the fundamental legal requirements for creating a valid AHD under Part 9B of the GA Act. Section 110P provides that a person who has reached 18 years of age and who has "full legal capacity" may make an AHD containing treatment decisions for future treatment (at [16]).

Notably, the GA Act does not define 'full legal capacity'. The Tribunal referred to the Western Australian Department of Health's guidance, which describes this standard as requiring that a person:

• Understands information or advice relevant to decisions in the AHD

• Understands the likely effects of decisions on future treatment

• Can weigh potential pros and cons of decisions

• Can communicate decisions about future treatment (at [16])

Medical Research Consent Provisions

The Tribunal considered the 2020 amendments to the GA Act introducing Part 9E, which created mechanisms for substitute decision-makers to consent to medical research for people lacking capacity (at [17]). The Tribunal noted that in August 2022, the prescribed AHD form was expanded to include a section allowing consent to participate in medical research (at [18]).

Assessment of CK's Capacity

The Tribunal employed a multi-faceted approach to determine whether CK lacked capacity at the time of executing the AHD:

1. Evidence of Mental Disability: The Tribunal found that CK's diagnoses of ASD, schizophrenia, and cognitive impairment constituted a 'mental disability' within the meaning of the GA Act (at [31]).

2. Capacity for Financial Decisions: Extensive evidence demonstrated CK could not manage day-to-day finances without assistance, including inability to calculate necessary expenditure, identify financial implications of decisions, or implement problem-solving strategies for financial issues (at [47]).

3. Capacity for Personal Decisions: Medical evidence indicated CK lacked capacity to make medical treatment decisions due to impaired understanding of illness and treatment requirements (at [55]). He also showed limited ability to make accommodation decisions or identify service needs (at [56-57]).

4. Understanding of the AHD Terms: The Tribunal found a crucial disconnect between CK's expressed wishes and the content of the AHD. While CK clearly articulated not wanting to receive a placebo in research, the AHD he signed explicitly consented to this (at [24]). This demonstrated he did not understand the nature or consequences of the treatment decisions in the document when he signed it.

The Tribunal concluded that CK lacked the "full legal capacity" required under s 110P of the GA Act at the time the AHD was executed (at [58]). This finding formed the basis for declaring the AHD invalid under s 110W (at [82]).

Practical Application: A Doctor's Guide to Capacity Assessment for AHDs

When assessing capacity for an AHD, medical practitioners should follow this structured approach based on the CK decision:

Step 1: Assess Understanding of General Information

• Does the person understand what an AHD is?

• Can they explain the purpose of the document in their own words?

• Do they understand when the AHD would take effect? (i.e., when they can no longer make decisions)

Step 2: Evaluate Comprehension of Specific Treatment Decisions

• Ask the person to explain each treatment decision included in the AHD

• For medical research consent, determine if they understand:

  • The difference between treatment and research

  • The concept of placebos and control groups

  • That research may not improve their condition

  • The specific types of research they are consenting to

Step 3: Test Ability to Weigh Consequences

• Ask the person to explain potential benefits and risks of each decision

• Determine if they can articulate why they are making specific choices

• Assess if they can explain how the decisions align with their values and preferences

Step 4: Identify Red Flags from the CK Case

• Discrepancy between verbal statements and written consent (as with CK's placebo consent)

• Evidence of influence from family members or others

• Demonstrated deficits in managing other aspects of life (financial matters, healthcare)

• Recent significant medical or psychiatric diagnoses

• Evidence of cognitive fluctuations or decline

Step 5: Document the Assessment Process

• Record specific questions asked and responses received

• Document the person's explanation of treatment decisions in their own words

• Note any concerns about capacity and how these were explored

• Consider obtaining a specialist psychiatric or geriatric assessment if concerns arise

Step 6: Reassess When Necessary

• If the person's condition fluctuates, consider reassessment when they are at their best

• For progressive conditions, earlier documentation is advisable

Guidance for Legal Practitioners

Initial Client Assessment

1. Preliminary Capacity Screening

   • Observe client's ability to maintain focus during consultation

   • Ask open-ended questions about the purpose of the AHD

   • Assess consistency of instructions across multiple meetings

   • Document observations contemporaneously

2. Client Interview Strategy

   • Meet with the client alone initially

   • Use clear, simple language avoiding legal jargon

   • Break down complex concepts into manageable parts

   • Allow sufficient time for questions and clarification

3. Red Flags Requiring Further Investigation

   • Recent significant diagnoses (as with CK's late-life ASD diagnosis)

   • Family members providing instructions or answering for the client

   • Pronounced memory difficulties or confusion

   • Inconsistent instructions or significant changes to previous arrangements

Documentation and Professional Collaboration

1. Medical Evidence

   • Obtain specific medical opinion on capacity for AHD purposes

   • Ensure medical report addresses the elements of full legal capacity

   • Consider specialist assessment for clients with cognitive impairments

   • Document attempts to obtain medical evidence

2. Drafting Considerations

   • Use clear, simple language in the AHD

   • Include explanatory notes for complex decisions (particularly research consent)

   • Document discussions about the consequences of specific decisions

   • Consider video recording the execution and explanation process

3. Execution Process

   • Allow sufficient time for final review and questions

   • Ask the client to explain key decisions in their own words

   • Document the client's explanations

   • Consider involving an independent witness beyond statutory requirements

Post-Execution Practice

1. Regular Reviews

   • Recommend periodic review of the AHD, especially after significant health changes

   • Document client's continued understanding at each review

   • Update the AHD when necessary to reflect changed circumstances or wishes

2. Record Keeping

   • Maintain detailed file notes of capacity assessment process

   • Preserve all drafts and records of client instructions

   • Document reasons for proceeding despite any concerns

Evidence and Arguments

Evidence Supporting AHD Validity

1. Medical Evidence

   • Reports showing stable cognitive function at time of execution

   • Specialist assessments confirming decision-making capacity

   • Documentation of client explaining treatment decisions consistently

2. Procedural Evidence

   • Contemporaneous file notes showing thorough explanation process

   • Evidence that medical terminology was explained in plain language

   • Documentation showing client initiated the AHD process independently

   • Witnesses attesting to apparent understanding

3. Arguments for Validity

   • Diagnosis alone (e.g., ASD as in CK's case) does not automatically negate capacity

   • A person may have capacity for some decisions but not others

   • The right to make unwise decisions is preserved if understanding is present

   • Fluctuating capacity may include periods of valid decision-making

Evidence Supporting AHD Invalidity

1. Medical Evidence

   • Diagnoses affecting cognition or decision-making (as with CK's schizophrenia)

   • Clinical observations of confusion or limited understanding

   • Documentation of inability to manage other aspects of life (as with CK's finances)

2. Contradictory Statements

   • Documented statements contradicting the AHD terms (as with CK's placebo objection)

   • Inconsistent explanations of treatment decisions

   • Inability to explain consequences of decisions when questioned

3. Arguments for Invalidity

   • Failure to meet any element of the "full legal capacity" test is sufficient

   • The complexity of medical research consent requires sophisticated understanding

   • Evidence of influence or pressure from family members

   • Protection of vulnerable persons is a primary consideration

Key Takeaways for Legal Practice

1. Capacity Assessment is Multi-Dimensional

   • Capacity must be assessed specifically for the decision at hand

   • Evidence from multiple domains (financial, personal, healthcare) may be relevant

   • Medical diagnosis alone is insufficient—functional assessment is crucial

2. Medical Research Consent Requires Special Attention

   • The CK decision highlights particular vulnerability in research consent

   • Specific explanation of concepts like placebos and experimental treatments is essential

   • Practitioners should consider additional safeguards for research consent provisions

3. Documentation is Critical

   • Thorough contemporaneous records of the capacity assessment process

   • Documentation of explanations provided and client's demonstrated understanding

   • Evidence of steps taken to enhance understanding (plain language, visual aids)

4. Collaborative Approach

   • Engage with medical practitioners early in the process

   • Consider involving allied health professionals (psychologists, occupational therapists)

   • Multi-disciplinary assessment may strengthen the validity of the AHD

5. Risk Management

   • Identify high-risk clients who may require additional safeguards

   • Consider declining to act if capacity concerns cannot be resolved

   • Be prepared to justify the basis for proceeding despite potential concerns

Conclusion

The CK decision provides valuable guidance on the standards for valid AHDs in Western Australia, particularly regarding the capacity required for medical research consent. The case emphasises the importance of a person's functional understanding of treatment decisions rather than merely focusing on diagnostic criteria.

For legal practitioners, the decision underscores the need for thorough capacity assessment processes, meticulous documentation, and careful explanation of complex medical concepts. It highlights the tension between respecting autonomy in healthcare decision-making and protecting vulnerable individuals from consenting to procedures they do not fully comprehend.

The broader significance of this case extends beyond AHDs to inform practice in other areas requiring capacity assessment, including enduring powers of attorney and wills. As medical research continues to advance and legal instruments become increasingly complex, practitioners must develop robust methods for ensuring clients genuinely understand the documents they are executing.

The CK decision serves as a reminder that valid execution of legal documents requires more than mere formal compliance with signing requirements—it demands genuine understanding of content and consequences, particularly for vulnerable clients with cognitive impairments.

Apportionment of Costs in Defamation Proceedings: Greenwich v Latham (No 3)

Introduction

The Federal Court of Australia's decision in Greenwich v Latham (No 3) [2025] FCA 312 explains the principles governing costs orders in defamation proceedings where a plaintiff achieves partial success. This case represents a contribution to the jurisprudence on costs apportionment in defamation matters, particularly when dealing with multiple publications and imputations. Justice O'Callaghan's reasoning offers practical guidance on when costs should follow the event despite a plaintiff's partial success, and when indemnity costs might be warranted following the rejection of a settlement offer.

Background: Costs Principles in Defamation Proceedings

The apportionment of costs in defamation proceedings has evolved considerably in recent years, with courts increasingly willing to divide costs to reflect the parties' respective successes and failures. The legal framework for costs orders in the Federal Court includes s 43 of the Federal Court of Australia Act 1976 (Cth), which vests a wide discretion in the Court with respect to costs.

As summarised by White J in Hockey v Fairfax Media Publications Pty Ltd (No 2) (2015) 237 FCR 127 (Hockey (No 2)), the relevant principles include:

1. The wide discretion must be exercised judicially (Hockey (No 2) at 134 [37]);

2. Ordinarily, costs follow the event, with a successful litigant receiving costs absent special circumstances (Hockey (No 2) at 134 [37]);

3. Courts are increasingly prepared to apportion costs where a party succeeds on only some claims (Hockey (No 2) at 143 [88]);

4. A litigant succeeding on only part of their claim may reasonably bear the expense of litigating unsuccessful portions (Hockey (No 2) at 134 [37]); and

5. Apportionment may be appropriate where issues on which the plaintiff failed were "clearly dominant or separable" (Hockey (No 2) at 142 [87]).

Facts of the Case

Greenwich v Latham (No 3) concerned the costs determination following Justice O'Callaghan's judgment in Greenwich v Latham [2024] FCA 1050 (the primary judgment). The defamation proceeding was brought by Alexander Greenwich, member for Sydney in the NSW Legislative Assembly, against Mark Latham, an independent member of the NSW Legislative Council, regarding two publications: the "primary tweet" and the "DT quotes" (at [2]-[3]).

At trial, Mr Greenwich contended that each publication conveyed two defamatory imputations and claimed damages for non-economic loss, aggravated damages, and injunctive relief (at [3]).

Regarding the primary tweet, Justice O'Callaghan found that:

• The imputation that Mr Greenwich "engages in disgusting sexual activities" was conveyed and was defamatory (at [5], [9]);

• The imputation that Mr Greenwich "is not a fit and proper person to be a member of the NSW Parliament because he engages in disgusting sexual activities" was not conveyed (at [6]).

Regarding the DT quotes, Justice O'Callaghan found that:

• Neither pleaded imputation was conveyed (at [8]).

Justice O'Callaghan awarded Mr Greenwich $100,000 in damages for non-economic loss and $40,000 in aggravated damages (at [12]). A subsequent application for injunctive relief was dismissed in Greenwich v Latham (No 2) [2025] FCA 131 (at [13]).

The Court's Reasoning on Costs

Apportionment of Costs

Mr Latham submitted that each party should pay its own costs or, alternatively, that he should only be ordered to pay one quarter of Mr Greenwich's costs on a party-party basis (at [22]-[24]). This submission was based on Mr Latham's claim that he succeeded on a "preponderance of the issues" - specifically, the second pleaded imputation regarding the primary tweet and the entirety of the claim regarding the DT quotes (at [24]).

In contrast, Mr Greenwich argued he should be awarded the whole of his costs because he was successful in his claim and there was no reason costs should not follow the event (at [25]). Mr Greenwich's counsel, Dr Collins AM KC, submitted that it was misconceived to rely on a numerical comparison of issues (at [26]).

Dr Collins advanced five key reasons why the case would have been run in exactly the same way even if Mr Greenwich had sued only in respect of the primary tweet (at [27]):

1. The affidavit evidence relied upon would have been identical, covering necessary background, context, and damages (at [27(1)]);

2. All the same witnesses would have been called (at [27(2)]);

3. The DT quotes case was not severable from the primary tweet case due to "an unbroken chain of causation" between the publications (at [27(3)]);

4. The second pleaded imputation regarding the primary tweet involved only brief legal argument with no additional evidence (at [27(4)]); and

5. All evidence about serious harm would still have been necessary (at [27(5)]).

Justice O'Callaghan found these submissions "irresistible" and accepted that Mr Greenwich should recover his costs of the proceeding (at [29]). His Honour noted that while Mr Greenwich was unsuccessful in his application for injunctive relief, this was offset by delays and expenses caused by Mr Latham's insistence that Mr Greenwich provide sworn evidence about his sources of funding for the proceeding (at [30]).

Indemnity Costs

Mr Greenwich submitted that costs should be paid on an indemnity basis, principally because Mr Latham unreasonably rejected an offer to settle contained in a concerns notice dated 19 April 2023 (at [32]). The offer included terms requiring:

• A public apology and retraction;

• Permanent disabling of comments on the apology;

• Undertakings not to publish similar imputations in future;

• Payment of Mr Greenwich's reasonable expenses; and

• Payment of $20,000 compensation (at [33]).

After reviewing the principles governing indemnity costs following rejected settlement offers from CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 and Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40, Justice O'Callaghan was not persuaded that Mr Latham's rejection of the offer was unreasonable (at [44]).

His Honour reasoned that:

• The DT quotes were not defamatory, yet formed a significant part of the concerns notice (at [44]);

• The undertakings sought were "very broad and unlimited in time" (at [44]);

• The proposed terms would have imposed "onerous obligations to monitor social media that may have posed difficulties in enforcement" (at [44]).

Consequently, Justice O'Callaghan declined to award costs on an indemnity basis (at [46]).

Practical Application: A Worked Example

Consider the following hypothetical scenario:

Plaintiff X sues Defendant Y for defamation regarding three separate publications (A, B, and C). Each publication has two pleaded imputations. At trial, X succeeds on both imputations for publication A, one imputation for publication B, and fails entirely on publication C. X is awarded $150,000 in damages.

Applying the principles from Greenwich v Latham (No 3):

1. Consider whether the successful and unsuccessful claims are truly separable or whether they form part of an interconnected narrative;

2. Determine whether the same evidence would have been necessary even if only the successful claims had been pursued;

3. Assess whether the unsuccessful publications or imputations added significant complexity or length to the proceedings.

If the evidence and witnesses would have been largely the same regardless of whether publications B and C were included, a court would likely award X their full costs despite the partial success. However, if publication C required distinct evidence and significantly extended the proceedings, the court might reduce X's recoverable costs to reflect this unnecessary expenditure.

Guidance for Practitioners

When advising clients on costs in defamation proceedings with partial success, practitioners should:

1. Assess Practical Severability

• Consider whether the successful and unsuccessful claims share common evidentiary foundations

• Determine if the same witnesses would have been required even without the unsuccessful claims

• Evaluate whether preparation would have been substantially different if only successful claims were pursued

2. Evaluate the Relative Significance of Claims

• Consider whether the unsuccessful claims were peripheral or central to the overall case

• Assess the proportion of court time and evidence devoted to unsuccessful claims

• Determine whether unsuccessful claims significantly extended proceedings

3. Consider Settlement Offers

• Ensure settlement offers are reasonable and proportionate

• Make offers that acknowledge the strength and weaknesses of the case

• For defendants, consider the potential for indemnity costs when evaluating settlement offers

4. Prepare Detailed Records

• Document time spent on different aspects of the case

• Keep records that differentiate between work on distinct publications or imputations

• Be prepared to demonstrate how time and resources would have been allocated if only successful claims were pursued

Arguments and Evidence for Each Side

For Plaintiffs Seeking Full Costs

1. Evidence that the same witnesses would have been called regardless of unsuccessful claims

2. Documentation showing that preparation for successful and unsuccessful claims overlapped significantly

3. Evidence that the defendant's conduct necessitated pursuit of all claims together

4. Argument that unsuccessful claims formed part of a single narrative requiring comprehensive treatment

For Defendants Seeking Apportionment

1. Evidence that unsuccessful claims significantly extended proceedings

2. Documentation of distinct evidence pertaining solely to unsuccessful claims

3. Argument that unsuccessful claims were clearly separable and dominant parts of the case

4. Time records showing disproportionate resources devoted to unsuccessful claims

Key Takeaways for Legal Practice

1. Severability is Practical, Not Theoretical: The test for apportionment turns on practical considerations of how the case would have been run, not merely the numerical proportion of successful claims.

2. Evidence Overlap is Crucial: Where the same evidence would have been necessary even if only successful claims were pursued, courts are unlikely to apportion costs.

3. Careful Offer Construction: Settlement offers should be carefully constructed to make rejection unreasonable. Broad undertakings and coverage of ultimately unsuccessful claims may undermine arguments for indemnity costs.

4. Document Resource Allocation: Practitioners should document how resources are allocated between different aspects of a case to support or defend against apportionment applications.

5. Look Beyond Numbers: Courts will not merely count successful versus unsuccessful imputations but will assess their relative significance and the resources devoted to them.

Conclusion

Greenwich v Latham (No 3) represents a significant contribution to the evolving jurisprudence on costs in defamation proceedings. Justice O'Callaghan's decision reinforces that courts will take a practical approach to costs apportionment, looking beyond mere numerical success to consider how the case would actually have been conducted if only the successful claims had been pursued.

The decision also highlights the challenges plaintiffs can face in securing indemnity costs following rejected settlement offers, particularly where those offers encompass ultimately unsuccessful claims or contain broad undertakings that may be difficult to enforce.

Adequacy of Judicial Reasons

1 Introduction and Principles

The obligation to provide adequate reasons is a fundamental aspect of the judicial function and a key component of procedural fairness. Adequate reasons serve multiple purposes: they demonstrate that the decision-maker has properly considered the issues; they allow parties to understand why they have won or lost; they enable effective appellate review; and they contribute to transparency and public confidence in the administration of justice.

As the High Court observed in DL v The Queen (2018) 266 CLR 1 at [32], the "content and detail of reasons 'will vary...'" according to the jurisdiction of the court and the subject matter being considered. However, the usual baseline for adequacy is that reasons "identify the principles of law applied by the judge and the main factual findings on which the judge relied."

2 The Public Interest Immunity Context: Chief Commissioner of Police v Crupi

The 2024 High Court decision in Chief Commissioner of Police v Crupi [2024] HCA 34 provides important guidance on the adequacy of reasons, particularly in the context of public interest immunity claims. The case illustrates that even in sensitive matters, courts must articulate their reasoning process with sufficient clarity to demonstrate that the required evaluative exercise has been properly undertaken.

Background

The first respondent, Vincenzo Crupi, was charged with the murder of Giuseppe "Pino" Acquaro, a solicitor who had provided information to police and was shot dead in March 2016. The Chief Commissioner of Police had disclosed substantial documentation to Crupi but sought to resist disclosure of approximately 600 pages of additional material ("the PII material") on the ground of public interest immunity. The basis for the claim was that disclosure might reveal the identity of an informer ("Informer Z") or enable that identity to be ascertained, with serious risk to the informer's safety.

The primary judge dismissed the application to resist disclosure in a decision comprising only five paragraphs. The substantive reasoning was limited to observations that information concerning Informer Z would be "likely to be of substantial assistance to the defence" and that the Chief Commissioner had "not made good his claim."

The High Court's Analysis

The High Court found the primary judge's reasons to be "extremely brief" and inadequate. They did not disclose any process of weighing the competing public interests for and against production as required by s 130(1) of the Evidence Act 2008 (Vic), and they did not justify the order for production that was made.

The Court emphasized several key deficiencies:

1. The reasons did not reveal whether the primary judge had "evaluate[d] the respective public interests and determine[d] whether on balance the public interest which calls for non-disclosure outweighs the public interest in the administration of justice that requires that the parties be given a fair trial on all the relevant and material evidence" (citing Sankey v Whitlam (1978) 142 CLR 1 at 95-96).

2. There was no evidence to suggest the primary judge engaged in the balancing exercise at the appropriate level for each individual document or class of document.

3. The reasons failed to address how competing interests were balanced, particularly given the "potential for serious harm to be occasioned to Informer Z should disclosure be ordered, and the impact on the provision of criminal intelligence by other informers."

4. The reasons did not explain key considerations such as whether refusing production would deny the first respondent a fair trial, or whether there were alternative means of disclosing parts of documents without revealing the informer's identity.

3 Principles for Ensuring Adequacy of Reasons

Drawing from Crupi and other authorities, the following principles should guide judicial officers in delivering adequate reasons:

(a) Articulation of the Legal Framework

Reasons must identify the relevant legal principles and statutory provisions being applied. This provides the framework within which the factual findings and evaluative judgments operate.

Worked Example 1:

Inadequate approach: "Having considered the evidence and submissions, I find that the plaintiff has established a cause of action."

Adequate approach: "This application requires consideration of s 130(1) of the Evidence Act, which provides that if the public interest in admitting evidence is outweighed by the public interest in preserving secrecy or confidentiality, the court may direct that the information not be adduced. Section 130(5) requires consideration of several factors including [list relevant factors]. I must undertake a balancing exercise, weighing the competing public interests for each document or class of documents."

(b) Identification of Key Facts and Findings

Reasons should identify the material facts found by the court and explain, at least briefly, the basis for those findings.

Worked Example 2:

Inadequate approach: "Having reviewed the affidavits, I accept the plaintiff's evidence."

Adequate approach: "The critical factual dispute concerns when the defendant became aware of the defect. On this point, I accept Ms. Smith's evidence, corroborated by the contemporaneous email dated 15 March 2023 (Exhibit P3), that she notified the defendant on that date. I reject the defendant's claim of having no knowledge until April, finding this inconsistent with both the documentary evidence and the testimony of the independent witness, Mr. Johnson."

(c) Demonstration of the Evaluative Process

Where a decision involves balancing competing considerations or interests, the reasons must demonstrate that this evaluative process has occurred, even if necessarily expressed in general terms.

Worked Example 3:

Inadequate approach: "Having considered all factors, I find that an injunction should be granted."

Adequate approach: "In considering whether to grant the interlocutory injunction, I must weigh the balance of convenience and the risk of injustice to either party. If I refuse the injunction and the plaintiff ultimately succeeds, they will suffer the following prejudice: [details]. Conversely, if I grant the injunction and the defendant ultimately succeeds, they will suffer harm through: [details]. Having weighed these considerations, I find the balance favors granting the injunction because [reasoning]."

(d) Document-Specific Analysis Where Required

In cases involving multiple documents or pieces of evidence that require individual assessment (such as claims of privilege or public interest immunity), reasons should demonstrate consideration at the appropriate level of specificity.

Worked Example 4:

Inadequate approach: "Having reviewed all the documents, I find they should be disclosed."

Adequate approach: "I have reviewed each category of documents claimed to be subject to public interest immunity. For Category A (operational methods), I find the public interest in non-disclosure outweighs the interest in disclosure because [reasons]. For Category B (informant information), I must consider each document individually. Documents 1-5 contain information that would identify the informant and, given the evidence of serious risk to their safety, the public interest favors non-disclosure. However, Documents 6-10 can be partially disclosed with appropriate redactions because they contain factual information potentially crucial to the defense while redactions can adequately protect the informant's identity."

(e) Justification of Orders Made

Reasons must explain how the findings and evaluative process lead to the specific orders made.

Worked Example 5:

Inadequate approach: "For these reasons, the application is allowed."

Adequate approach: "Having found that Documents 1-5 should not be disclosed but Documents 6-10 should be partially disclosed with redactions, I make the following orders: (1) The application for public interest immunity is upheld in respect of Documents 1-5; (2) Documents 6-10 shall be produced with redactions to paragraphs [specific paragraphs] to protect the identity of the informant while providing the defendant with the factual information relevant to their defense; (3) The redacted documents shall be disclosed within 14 days."

4 Special Considerations for Sensitive Matters

As demonstrated in Crupi, cases involving sensitive matters such as public interest immunity, legal professional privilege, or confidential information present particular challenges. In such cases:

1. Balance between transparency and protection: While the content of what can be disclosed publicly may be limited, the reasoning process itself must still be visible.

2. Consideration of alternative measures: Reasons should address whether alternative measures (such as redactions, summaries, or agreed facts) might satisfy the needs of justice while protecting sensitive information.

3. Specific consideration of harm: Where disclosure may cause specific harm (as with the risk to Informer Z in Crupi), the reasons must demonstrate how this potential harm has been evaluated against the interests favoring disclosure.

5 Adoption of Submissions

While adoption of a party's submissions may sometimes be sufficient to provide adequate reasons, Crupi demonstrates the limitations of this approach. The Court noted that even if the primary judge's adoption of the amici curiae's submissions sufficiently explained the forensic utility of the PII material, it did not address the balancing exercise required by s 130(1).

Worked Example 6:

Inadequate adoption: "I adopt the plaintiff's submissions on this point."

Adequate adoption: "I accept and adopt the plaintiff's submissions on the interpretation of clause 5.2 of the contract, as set out at paragraphs 15-27 of their written submissions. Those submissions correctly identify that the natural and ordinary meaning of 'reasonable endeavors' in this commercial context does not require the defendant to take steps that would be commercially disadvantageous. I would add that this interpretation is consistent with the authorities cited, particularly Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [41]-[43]."

6 Adequacy in Interlocutory Decisions

Crupi highlights that even interlocutory decisions require adequate reasons, particularly where significant consequences may flow from the decision. While interlocutory reasons may be more concise than final judgments, they must still demonstrate proper consideration of the relevant issues.

This is particularly important where:

• The decision may have significant practical consequences for the parties

• The decision involves a complex evaluative exercise

• The decision may effectively determine substantive rights

• The decision involves competing interests of substantial weight

7 Practical Guidance

To ensure reasons are adequate, particularly in complex or sensitive cases, consider these guidelines:

1. Structured approach: Adopt a structured approach that identifies the legal framework, key factual findings, and reasoning process.

2. Checklist for evaluative exercises: Where balancing competing considerations (as in Crupi), consider creating a checklist of factors to address.

3. Document management: Where multiple documents require individual consideration, develop a systematic approach (such as categories or a schedule) to demonstrate that appropriate consideration has been given to each.

4. Transparency about constraints: Where the sensitivity of information limits what can be included in public reasons, acknowledge this constraint while still demonstrating that the required reasoning process has occurred.

5. Review for comprehensibility: Consider whether a party reading the reasons would understand why they succeeded or failed, and whether an appellate court could effectively review the decision.

8 Conclusion

The adequacy of judicial reasons is not merely a formal requirement but a substantive aspect of the proper administration of justice. As Crupi demonstrates, even in sensitive contexts involving competing public interests, courts must articulate their reasoning with sufficient clarity to demonstrate that the required evaluative process has been undertaken and to justify the orders made. Failure to do so may result in appealable error, even where the ultimate decision might have been correct.

Two Decisions, One Principle: How Pentelow and Birketu Together Reshape Law Firm Litigation Strategy

Introduction

The landscape of costs recovery in Australian litigation has undergone a significant transformation with two landmark High Court decisions: Bell Lawyers Pty Ltd v Pentelow (2019) 269 CLR 333 and Birketu Pty Ltd v Atanaskovic [2025] HCA 2. Together, these decisions establish a coherent framework based on the principle of equality before the law, while maintaining important distinctions that have practical implications for law firms engaged in litigation. This article examines how these decisions collectively reshape the ability of legal practitioners to recover costs when representing themselves or their firms, and the practical implications for litigation strategy.

Background: Bell Lawyers v Pentelow

In Bell Lawyers v Pentelow, the High Court abolished the so-called "Chorley exception" to the general rule that self-represented litigants cannot recover professional costs. This long-standing exception had permitted self-represented solicitors, uniquely among all professions, to recover costs for their own time spent in litigation.

The High Court held that the Chorley exception was an "affront to the fundamental value of equality of all persons before the law" and thus had no place in the common law of Australia. However, the Court made clear that its decision did not disturb the "well-established understanding" that where an in-house solicitor appears in proceedings to represent their employer, the employer remains entitled to recover costs.

The decision left open a critical question: could a law firm recover costs for work done by its employed solicitors (as distinct from partners) when the firm itself was a party to the proceedings?

Facts of Birketu v Atanaskovic

The Birketu case directly addressed this unresolved question. Atanaskovic Hartnell, an unincorporated legal practice, had commenced proceedings in the Supreme Court of New South Wales against former clients Birketu Pty Ltd and WIN Corporation Pty Ltd to recover legal fees. Mr. Atanaskovic, a partner of the firm, was the solicitor on the record throughout.

The firm was successful in the litigation, and Hammerschlag J ordered that Birketu pay Atanaskovic Hartnell's costs. When Atanaskovic Hartnell sought to recover costs, it claimed $305,463 for professional fees for work done by its employed solicitors, while making no claim for work done by Mr. Atanaskovic or any other partner.

Birketu objected, arguing that following Bell Lawyers, the firm could not recover costs for work done by its own employed solicitors. This question proceeded through the courts, with Brereton JA at first instance ruling that the firm could not recover such costs, the Court of Appeal (by majority) overturning that decision, and finally the High Court dismissing Birketu's appeal, thereby affirming the Court of Appeal's decision and allowing recovery of costs for employed solicitors.

Legal Reasoning in Birketu

The High Court's decision featured both majority and minority opinions.

The majority (Gageler CJ, Gordon, Edelman, Gleeson and Beech-Jones JJ) held that "an order for costs in favour of an unincorporated law firm entitles the firm to obtain recompense for legal work performed by an employed solicitor of the firm." They reasoned that the general common law principle applies to a litigant solicitor or unincorporated law firm in the same way as it applies to other litigants. Like any other litigant, the solicitor or firm cannot obtain recompense for their own legal work. But also like any other litigant, the solicitor or firm can obtain recompense for legal work done by their employees.

The majority distinguished this situation from the Chorley exception by emphasising that the expenses of salaries and overheads associated with having legal work done by employees constitute professional legal costs actually incurred by the solicitor or firm. The recompense is to the solicitor or firm for professional legal costs thereby actually incurred.

Justice Steward dissented, arguing that allowing recovery would "make a mockery of what was decided in Bell Lawyers, and would, in substance, resurrect the Chorley exception." He reasoned that when employed solicitors work under the supervision of a firm, that is the work of the firm itself. The time of employed solicitors is the firm's time, and when those solicitors work on the firm's own litigation, the firm loses the value of those hours which might otherwise have been profitably utilised for clients.

Justice Jagot also wrote separately, siding with Justice Steward's position.

Quantification of Recoverable Costs

The High Court in Birketu provided important guidance on the quantification of recoverable costs for employed solicitors. The Court addressed this in paragraphs 31-36 of the judgment, under the heading "Quantification."

The majority noted that concerns about law firms potentially profiting from litigation through employed solicitors relate not to "the availability of such recompense by way of an order for costs but to its quantification by way of assessment" (para 31). This is an important distinction—the principle of recoverability is separate from the method of quantification.

The Court explained the traditional approach in paragraph 33:

"The plurality in Bell Lawyers noted that 'the traditional approach has been to award costs on a basis comparable to the costs which would have been incurred and allowed ... had an independent solicitor been engaged' on the 'assumption', or more accurately the 'sensible and reasonable presumption', that application of the approach will not ordinarily result in an employer-litigant obtaining more than an indemnity for expenses actually incurred."

Critically, paragraph 34 establishes that this presumption is rebuttable:

"The presumption on which the traditional approach is founded has never been treated as more than a presumption of fact, it being open to an objecting party to show that application of the approach in a particular case would in fact result in the employer-litigant receiving more than an indemnity for expenses actually incurred."

The Court further noted in paragraph 35 that in assessment proceedings, while an assessor might investigate whether the principle of indemnity would be infringed, "this task is not one which should be undertaken without a good and sufficient cause." The mere fact that costs are being sought for work done by employed solicitors of a litigant law firm is not sufficient to trigger such an investigation.

The judgment also mentioned in paragraph 36 that there might be an alternative approach involving a different conception of "indemnity" which could affect quantification differently, though this was not fully developed as it wasn't necessary for resolving the case.

The Combined Impact of Both Decisions

Read together, Bell Lawyers and Birketu establish a framework for costs recovery that can be summarised as follows:

1. The general rule is that self-represented litigants cannot recover professional costs for their own time spent in litigation.

2. This rule applies equally to solicitors and law firms that represent themselves (the Chorley exception is abolished).

3. A law firm can recover costs for work done by its employed solicitors when the firm is a party to the proceedings.

4. The "in-house solicitor rule" remains intact: when a government department, corporation, or other entity is represented by its employed solicitor, that entity can recover costs.

5. In quantifying recoverable costs, courts will generally use the traditional approach of comparing the costs to those that would have been incurred had an independent solicitor been engaged, but this is subject to the presumption not resulting in the litigant obtaining more than an indemnity.

This framework has significant implications for litigation strategy for law firms that become involved in litigation themselves.

A Worked Example

Consider a hypothetical scenario from a former client's perspective:

Acme Corporation is sued by its former solicitors, Smith & Jones LLP, for unpaid fees totalling $500,000. Smith & Jones succeeds in the litigation, with Ms. Smith (a partner) acting as the solicitor on the record and the firm's employed solicitors performing most of the legal work. The court orders Acme to pay Smith & Jones' costs.

Smith & Jones submits a bill claiming $140,000 for work done by its employed solicitors, calculated at rates comparable to what would have been charged by independent solicitors. Acme, hoping to reduce this amount, considers challenging the quantification.

Following Birketu, Acme understands that while Smith & Jones can recover costs for work done by employed solicitors, the High Court emphasised that these costs should represent a true indemnity. Importantly, the Court noted (at paragraph 35) that although a costs assessor might investigate whether the principle of indemnity is being infringed, "this task is not one which should be undertaken without a good and sufficient cause." The mere fact that costs are being sought for work done by employed solicitors is not sufficient to trigger such an investigation.

To challenge the quantification of costs, Acme faces a multi-step task to establish that the assessment should be limited to a true indemnity rather than market rates:

Step 1: Understand what constitutes a "true indemnity"
A true indemnity in this context means the actual expense incurred by Smith & Jones in having employed solicitors work on the litigation. This comprises primarily:

• Salary costs: The portion of the employed solicitors' annual salaries attributable to the time spent on this matter (e.g., if a solicitor earning $60,000 annually spent 10% of their working time on the matter, the salary component would be $6,000)

• Overheads: The additional costs necessarily incurred in employing the solicitors, including office space, equipment, administrative support, professional indemnity insurance, and other practice costs that would not have been incurred but for the employment of these solicitors

• Opportunity costs: Though more controversial, potentially the value of other billable work the employed solicitors could have undertaken for paying clients during the time spent on this litigation. Arguments for including opportunity costs suggest they represent real economic loss to the firm and are consistent with the High Court's recognition in Birketu that firms incur actual costs when deploying employed solicitors on their own litigation. Arguments against contend that opportunity costs are speculative, difficult to quantify, and their inclusion might reintroduce the profit element that Bell Lawyers sought to eliminate from self-representation.

Step 2: Establish a prima facie case of "good and sufficient cause"
Acme must identify specific grounds suggesting that Smith & Jones' claimed costs substantially exceed a true indemnity. This requires more than mere assertion—Acme needs evidence suggesting a significant disparity.

Step 3: Gather available evidence
Without access to internal firm records, Acme must rely on indirect evidence such as market knowledge, prior dealings with Smith & Jones, and expert testimony about typical employment costs for comparable firms.

The critical challenge for Acme is meeting the threshold of "good and sufficient cause" with limited information, as the High Court has intentionally set a high bar to avoid routine investigations into firms' internal cost structures.

As a former client with limited insight into Smith & Jones' internal operations, Acme considers what might constitute "good and sufficient cause" and what evidence it could realistically obtain:

1. Evidence of profitability disparity: Acme could argue that allowing recovery at standard market rates would provide Smith & Jones with a significant profit rather than mere indemnity:

   • Publicly available financial information showing the firm's profit margin and ratio of revenue to salary costs

   • Evidence that the firm's business model relies on large markups between employed solicitor costs and billing rates

   • Comparison between the firm's published charge-out rates to clients (which include profit components) and the rates claimed in costs recovery

2. Alternative fee arrangements and discounting practices: Acme could demonstrate:

   • That Smith & Jones routinely offers substantial discounts from their standard rates to clients

   • Evidence the firm uses fixed fee arrangements that effectively discount hourly rates

   • Marketing materials where the firm promotes itself as cost-effective or offering competitive rates

3. Internal versus external rate disparities: Acme could seek to establish:

   • Different rates being charged to different clients for identical work by the same employed solicitors

   • Evidence from recruitment advertisements showing salary ranges that, even with overhead allocations, would result in costs substantially below claimed rates

4. Historical client relationship evidence: Acme could leverage its former relationship:

   • Prior invoices showing the firm's actual billing rates for the same employed solicitors

   • Records of fee discussions where the firm provided cost estimates at rates lower than now claimed

   • Evidence of how the firm described its fee structure during the client relationship

   • Contemporaneous records of which employed solicitors worked on Acme matters and their experience levels

5. Firm structure and staffing patterns: Acme could argue:

   • The firm's high leverage ratio (number of employed solicitors per partner) indicates a business model reliant on marking up junior solicitor time

   • That work claimed at senior solicitor rates was likely performed by junior staff under limited supervision

   • The firm has re-graded fee earners as more senior for costs recovery than how they were presented to clients

The key for Acme is establishing that quantification based on standard market rates would amount to providing Smith & Jones with a profit rather than a true indemnity for costs actually incurred. This aligns with the High Court's emphasis in Birketu that costs awards should provide indemnity for expenses actually incurred by the law firm, not a vehicle for profit from self-representation.

If Acme succeeds in establishing "good and sufficient cause," the costs assessor might then investigate whether the claimed $140,000 genuinely represents an indemnity for costs incurred by Smith & Jones. The costs assessor could potentially reduce the recoverable amount to more closely reflect the firm's actual expenditure on employed solicitors for the litigation.

However, without establishing such "good and sufficient cause," Acme would likely be required to pay costs based on the traditional approach—what would have been incurred had independent solicitors been engaged—even if this exceeds Smith & Jones' actual employment costs.

Key Takeaways

1. Partner/employee distinction matters: Law firms cannot recover costs for work done by partners representing the firm, but can recover costs for work done by their employed solicitors.

2. Quantification follows indemnity principle: The principle of indemnity governs quantification, with a rebuttable presumption that costs comparable to engaging independent solicitors is appropriate.

3. Burden on objecting party: The burden is on the objecting party to demonstrate that the assessed costs would exceed a true indemnity, and costs assessors should not investigate this issue without good cause.

4. Structure enables strategic choices: Different structural arrangements for legal representation provide strategic options for law firms involved in litigation, particularly regarding the allocation of work between partners and employed solicitors.

5. Balance of principles retained: The decisions balance the principle of equality before the law with the principle that costs orders should provide indemnity for expenses actually incurred.

Conclusion

The combined effect of Bell Lawyers and Birketu represents a nuanced approach to costs recovery for legal practitioners. While abolishing the special privilege that solicitors historically enjoyed to recover costs for their own time, the High Court has maintained the principle that litigants—including law firms—should be indemnified for actual expenses incurred, including those relating to employed solicitors.

For law firms, these decisions require thoughtful consideration of how to structure their representation when they themselves are parties to proceedings. While the costs associated with partner time remain non-recoverable, the ability to recover costs for employed solicitors provides significant strategic flexibility.

The decisions also highlight the importance of proper cost recording and allocation, as challenges to quantification may arise where the assessed amount would exceed a true indemnity. Law firms should ensure they maintain clear records that demonstrate the actual costs incurred through the deployment of employed solicitors on their own litigation matters.

The Judicial Reluctance to Engage in Hypothetical Merits Assessment for Costs Determination: An Examination of Lygina and the Ex parte Lai Qin Principles

Introduction

In litigation that concludes without a trial on the merits, the question of costs allocation frequently emerges as a contentious issue. The courts have consistently demonstrated reluctance to engage in hypothetical assessments of how a matter might have been determined had it proceeded to trial. This principle, articulated in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 ("Ex parte Lai Qin"), has been reaffirmed and applied in the recent decision of Lygina v Lawley Legal [2025] WASC 68. This article examines the tension between the presumption that successful parties should receive costs and the judicial reluctance to conduct hypothetical merits assessments when proceedings conclude without substantive adjudication.

The Lygina Decision: Facts and Context

In Lygina v Lawley Legal [2025] WASC 68, the plaintiff, Ms. Lygina, a former client of the defendant law firm, commenced proceedings in June 2022 seeking orders under s 288(2) of the Legal Profession Act 2008 (WA) to set aside costs agreements and requiring Lawley Legal to re-issue bills based on the relevant costs scale. Ms. Lygina's statement of claim alleged various failures by Lawley Legal to comply with obligations under the Legal Profession Act.

Significantly, Lawley Legal did not file a defence. Instead, on 10 November 2022, Registrar Whitbread made orders setting aside the costs agreements and requiring Lawley Legal to re-issue bills drawn on the relevant costs scale. These orders were made in terms proposed by Lawley Legal, which notably did not admit the allegations made in the statement of claim.

After securing these substantive orders, Ms. Lygina sought costs on an indemnity basis, arguing that the defendant's non-compliance with cost disclosure obligations was severe, that Lawley Legal had maintained an untenable defence, and that its conduct fell below professional standards.

Justice Palmer was therefore confronted with a costs application following proceedings that concluded without trial by virtue of the defendant effectively capitulating to the primary relief sought, while expressly not admitting the factual allegations that would ordinarily justify such relief.

The Ex parte Lai Qin Principles and Their Application in Lygina

In Ex parte Lai Qin, McHugh J articulated the fundamental challenge in determining costs where proceedings have been resolved without trial:

"When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order."

McHugh J distinguished between two categories of cases:

1. Cases where "one party, after litigating for some time, effectively surrenders to the other"; and

2. Cases where "some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs."

Justice Palmer in Lygina determined that the case fell into the first category, finding that "Lawley Legal's decision to agree to the substantive orders sought by Ms. Lygina involved a capitulation by Lawley Legal that establishes that Ms. Lygina was the successful party in these proceedings."

However, Justice Palmer declined to order indemnity costs, stating:

"Determination of whether Lawley Legal engaged in 'severe' non-compliance with its obligations, could not defend the proceedings because of that non-compliance, or engaged in unprofessional conduct as claimed by Ms. Lygina, would require the determination of the principal disputed matters of fact in these proceedings. I am not satisfied that it would be possible to properly determine these matters on the basis of the evidence presently available to the court."

Justice Palmer relied upon Basten JA's observation in Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 that an order for costs should only be made "where that judgement is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon."

The Tension: Success Without Trial vs. Avoiding Hypothetical Adjudication

The Lygina decision exemplifies the tension courts face: on one hand, recognising that a party who secures the relief sought should ordinarily receive costs; on the other hand, refusing to engage in what would amount to a "trial on the papers" solely for costs purposes.

Justice Palmer resolved this tension by:

1. Determining that Ms. Lygina was the successful party based on Lawley Legal's capitulation to the primary relief sought;

2. Ordering costs on a party/party basis, reflecting her success; but

3. Rejecting indemnity costs, which would have required judicial determination of disputed factual matters central to the substantive case.

This approach honours both the principle that successful parties should receive costs and the principle that courts should not conduct hypothetical merit assessments of untried cases.

A Worked Example: Application of the Principles

Consider a hypothetical scenario involving Smith v Jones Professional Services:

Smith is employed by Jones Professional Services as an accountant. Their employment agreement contains a restraint of trade clause. When Smith subsequently leaves Jones and begins servicing former clients, Jones commences proceedings alleging breach of the restraint clause and seeking an injunction and damages.

After discovery reveals potentially problematic drafting in the restraint clause, Jones agrees to consent orders discontinuing the proceedings, with the orders expressly stating that Jones does not admit any of Smith's defences or counterclaims.

Smith then seeks indemnity costs, arguing that:

1. Jones knew the restraint was unenforceable when proceedings commenced;

2. Jones engaged in intimidatory conduct; and

3. Jones deliberately pursued unmeritorious litigation for an improper purpose.

Applying the Lygina principles, the court would likely:

1. Identify that Jones' agreement to discontinue constituted a capitulation, making Smith the successful party;

2. Award Smith costs on a party/party basis reflecting this success; but

3. Decline to award indemnity costs, as determining whether Jones knew the restraint was unenforceable or had improper purposes would require the very trial the consent orders avoided.

Key Takeaways

1. Capitulation vs. Settlement Distinction: Courts distinguish between a party's capitulation (which will normally result in costs following the event) and settlement due to supervening circumstances (which may result in no order as to costs).

2. Evidence Required for Indemnity Costs: Mere allegations of unreasonable conduct, improper purpose, or untenable defence will not suffice for indemnity costs if these allegations remain untested and disputed. Courts will not conduct a "hypothetical trial" solely for costs purposes.

3. Strategic Implications for Consent Orders: Parties agreeing to consent orders should carefully consider the costs implications. A non-admission clause will not shield a party from ordinary costs if the court characterises the consent as effective capitulation.

4. Threshold for Determining "Special Circumstances": Courts require clear, undisputed evidence of "special or unusual features" to award indemnity costs in matters resolved without trial. This evidence must be "manifest by reference to known circumstances, not in dispute."

5. Documentation of Conduct: Parties seeking indemnity costs should document the opposing party's conduct contemporaneously and seek to have unreasonable conduct acknowledged in correspondence or court proceedings, rather than relying solely on contested allegations.

Conclusion

The Lygina decision reinforces the courts' adherence to the Ex parte Lai Qin principles, demonstrating judicial reluctance to engage in hypothetical merits assessments solely for costs determination. While courts will identify "successful parties" based on practical outcomes (including capitulation through consent orders), they will not delve into contested factual matrices to determine whether conduct warrants special costs orders unless those facts are manifest and undisputed.

This approach balances efficiency with fairness: successful parties receive their costs without courts having to conduct "paper trials" of factual disputes that the parties themselves chose not to litigate to conclusion. Practitioners should therefore be mindful that while non-admission clauses in consent orders may protect against substantive liability findings, they will not shield a capitulating party from normal costs consequences.