Determining Factors in a s16(4) Costs Application in a Guardianship and Administration Matter in Western Australia

In this blog post, I explore the factors to be considered in determining a s16(4) costs application in a guardianship and administration matter in the State Administrative Tribunal of Western Australia.

This discussion will rely on the case of Y and CO [2020] WASAT 166 and relevant legislation, including the Guardianship and Administration Act 1990 (WA) (the GA Act) and the State Administrative Tribunal Act 2004 (WA) (SAT Act).

1. The Tribunal's Power to Make Costs Orders

Section 16(4) of the GA Act grants the State Administrative Tribunal the power to order that costs be paid by, or out of the assets of, a represented person if it is satisfied that a party to the proceedings has acted in the best interests of the represented person or the person in respect of whom an application is made [1][21].

The principle in s 87(1) of the SAT Act states that parties usually bear their own costs in a proceeding of the Tribunal [22].

2. Factors to Consider

In determining whether to exercise its discretion to order a represented person to pay another party's legal costs, the Tribunal may consider several factors outlined in Re WA and IA, Ex Parte AA and JA [2011] WASAT 33 [32][59-60].

These factors include:

• Whether the application would have been made without the applicant seeking legal advice;

• The presence of serious allegations of abuse, requiring legal advice and representation;

• Conflict between significant parties that may prevent them from presenting a coherent case without legal assistance;

• The complexity of the application requiring legal advice and representation;

• Whether the application is contentious and unique;

• Whether the application raises a special point of law.

It is important to note that awards of costs pursuant to s 16(4) of the GA Act are not common [60].

3. Acting in the Best Interests of the Represented Person

Section 16(4) of the GA Act conditions the positive exercise of the Tribunal's discretion on being satisfied that the person seeking costs has acted in the best interests of the represented person [33].

However, more than merely acting in the best interests of the person is required to succeed in a costs order under s 16(4) [37].

4. The Amount of Costs Awarded

The amount of costs that may be awarded should be such costs relative to those proceedings as the Tribunal sees fit. The award is not referable solely to the costs incurred by that party [33].

5. The Tribunal's Wide Discretion

The Tribunal has a wide discretion under s 16(4) of the GA Act to award costs, but it should not be read independently of the costs regime in the SAT Act and the starting position that parties bear their own costs [36].

6. Relevant Case: Y and CO [2020] WASAT 166

In the case of Y and CO [2020] WASAT 166, the Tribunal made a costs order of $5,000 under s 16(4) [59].

The reasons for this finding include the applicant (Y) acting in the best interests of the represented person (CO), and that it was unlikely the application, which ultimately benefitted CO, would have been made without legal advice sought by Y [41][46].

Key Take-Aways

• Determining factors in a s16(4) costs application in a guardianship and administration matter in Western Australia involves a careful consideration of various factors and circumstances.

• The Tribunal has a wide discretion to award costs but must be satisfied that the person seeking costs has acted in the best interests of the represented person, among other considerations.

Factors to be considered in determining costs application in a guardianship and administration matter in the State Administrative Tribunal of Western Australia (other than pursuant to s 16(4))

When it comes to costs applications in guardianship and administration matters before the State Administrative Tribunal of Western Australia (SAT), other than pursuant to s 16(4) of the Act, there are various factors to consider.

In this blog post, I discuss these factors, referencing the decision MD [2022] WASAT 45 and relevant legislation, to provide an overview of the key principles and considerations in determining costs applications in such matters.

Starting Point: Parties Bear Their Own Costs

As a starting point, s 87(1) of the SAT Act sets the principle that parties typically bear their own costs in a proceeding of the Tribunal.

This principle was affirmed in RK [2020] WASAT 53 (S) (RK), where the Full Tribunal found that the parties to guardianship and administration proceedings should bear their own costs [10].

Discretion to Award Costs

However, the Tribunal does have discretion to award costs in any proceeding, except as otherwise provided in an enabling Act [11].

This includes the power to order a party to pay the costs of another party for any expenses, loss, inconvenience, or embarrassment resulting from the proceeding [12].

In exercising this discretion, the Tribunal must consider all of the circumstances of the particular case and whether it is fair and reasonable for one party to bear the costs of another [14][15].

Key Considerations

Some of the key considerations guiding the Tribunal's assessment include whether:

1. A party has conducted itself in a way that unnecessarily prolongs the hearing, has acted unreasonably or inappropriately in its conduct of the proceedings, has been capricious, or the proceedings in some other way constitute an abuse of process. This includes where proceedings should not have been maintained against a party because it is clearly untenable, and no reasonable person would have believed they could be successful [16].

2. Costs have been incurred unnecessarily by a failure of a party to act appropriately in a particular circumstance in the conduct of the proceedings (where the conduct of the party was unreasonable and unfairly caused the increased costs) [16].

Vexatious Proceedings

In the decision of MD [2022] WASAT 45, the term 'vexatiously' was defined under s 3 and s 4 of the SAT Act, with reference to the definition in the Vexatious Proceedings Restriction Act 2002 (WA) under s 3.

Vexatious proceedings are those that are an abuse of the process of a court or a tribunal, instituted to harass or annoy, to cause delay or detriment, or for any other wrongful purpose, or conducted in a manner so as to harass or annoy, cause delay or detriment, or achieve any other wrongful purpose [26].

Section 88(2) of the SAT Act and Costs

While s 88(2) of the SAT Act empowers the Tribunal to order that all or any of the costs of a proceeding be paid by a party, s 88(1) defines 'costs of a proceeding' for this section as those 'other than the costs of a party,' excluding the legal costs sought by a party in a proceeding [28].

Section 87(3) of the SAT Act and Costs

The Tribunal does have the power to order payment of costs by a party under s 87(3) of the SAT Act 'to compensate the other party for any expenses, loss, inconvenience, or embarrassment resulting from the proceeding' [29].

However, as noted in Blaskiewicz, discussing Questdale, the legal rationale for ordering costs is not to punish the person against whom the order is made [17].

Key Take-Aways

• In summary, while the general principle in the SAT Act is that parties bear their own costs in guardianship and administration proceedings, the Tribunal does have discretion to award costs in specific circumstances.

• Key factors to consider when determining costs applications include the conduct of the parties, the reasonableness of their actions, and whether the proceedings were vexatious.

• The Tribunal will carefully examine each case, considering all relevant factors, and determine whether it is fair and reasonable for one party to bear the costs of another.

The Importance of Fair and Reasonable Legal Fees: Understanding Overcharging and its Consequences

Overcharging clients is a topic that has been repeatedly scrutinised in the legal profession.

It not only damages the reputation of individual practitioners but also erodes public trust in the profession as a whole.

This blog post provides a general understanding of the issue of overcharging, drawing on extracts from 3 Western Australian State Administrative Tribunal decisions: Legal Profession Complaints Committee and O'Halloran [2013] WASAT 105, Legal Profession Complaints Committee and Park [2017] WASAT 89, and Legal Profession Complaints Commitee and Penn [2015] WASAT 145.

The Vulnerability of Clients

One of the main reasons courts and disciplinary tribunals take a serious view on overcharging is the inherent power imbalance between lawyers and their clients (Veghelyi v The Law Society of New South Wales).

Clients are often in a vulnerable position when making decisions, as they may not know what work needs to be done or what charges are fair and reasonable.

Lawyers, on the other hand, are in a position of advantage, as they can inform themselves of the necessary work and appropriate charges.

This power imbalance and the trust clients place in their solicitors can lead to the misuse of such advantage and potentially result in adverse findings against lawyers by regulatory bodies and tribunals.

The Consequences of Overcharging

Overcharging can lead to significant consequences for legal practitioners, including suspension or striking off from the profession. In the O'Halloran case, the Tribunal found that the practitioner engaged in a course of conduct of grossly overcharging clients over a period of approximately six years. This conduct was considered to demonstrate that the practitioner was not a fit and proper person to remain a member of the profession.

In the Park case, the Tribunal considered overcharging by 15% to 20% of the proper costs of the criminal proceedings to be very serious.

In the Penn case, the Tribunal examined a situation where the practitioner was alleged to have overcharged their client by a significant margin. The initial amount charged to the client for obtaining a grant of probate, administration of the estate, and representation in various proceedings was $69,028.89. However, after an assessment of the work done, it was determined that a reasonable sum of costs for a competent and diligent practitioner should have been $28,959.80.

Although the practitioner argued that the assessment conducted by the Costs Consultant called by the Legal Profession Complaints Committee as an expert witness (Mr. Forbes) was incomplete, and failed to take into account the entire scope of work performed, the Tribunal ultimately accepted Mr. Forbes' evidence as to the appropriate charge.

The practitioner eventually conceded to a revised figure of $51,363.28, which still represented a significant overcharging of $17,665.61 or 25.6%.

The Tribunal found this level of overcharging to be excessive and agreed with the Committee's submission that such misconduct warranted disciplinary action.

The Penn case highlights the importance of transparency and fairness in legal billing, as well as the consequences practitioners may face for overcharging their clients, even when the practitioner disputes the extent of the overcharging.

Key Take-Aways

• The issue of overcharging in the legal profession is a serious matter that not only affects the reputation of individual practitioners but also the profession as a whole.

• Clients are often in a vulnerable position, and the trust they place in their lawyers should not be abused.

• Legal practitioners have a responsibility to ensure they charge their clients fairly and reasonably, and those who fail to do so may face severe consequences, including disciplinary action and damage to their professional reputation.

Do You Need a Signature for a Costs Agreement? Criteria for Determining Retainers with Lawyers

As a costs lawyer in Western Australia, I am sometimes asked whether a signature is required for a costs agreement and what criteria apply for determining if a retainer exists with a lawyer.

In this blog post, I address these questions and provide a general understanding of the subject matter.

I rely on the recent decision in Cappello v Homebuilding Pty Ltd [2022] NSWDC 725, which offers useful insights into the issue, while also referencing other relevant cases.

Is a Signature Required for a Costs Agreement?

The short answer is no, a signature is not always required for a costs agreement.

As established in Arjunan v Neighbourhood Associates No DP 285853 [2022] NSWSC 691, a costs agreement that is "unsigned but executed by conduct" is still valid.

Issues arise only when the costs agreement imposes a highly specific requirement for signing and returning the documents, as was the case in O'Neill v Wilson [2011] QSC 220.

Criteria for Determining If a Retainer Exists with a Lawyer

A retainer can exist even without a formal costs agreement, as long as there is evidence of an obligation to pay the lawyer's costs. Here are some key points to consider:

1. A strong presumption of a contract of retainer exists when a solicitor appears on the record for a party, and the party is aware of this (Halliday v SACS Group Pty Ltd [1993] HCA 13; 67 ALJR 678 at [7]).

2. Proof of a retainer can be implied from conduct (Shaw v Yarranova Pty Ltd [2011] VSCA 55 at [17]).

3. A party claiming under a party/party costs order needs only to provide enough evidence to infer that they were obliged to pay their solicitor's costs (Grundmann v Georgeson [2000] QCA 394 at [6] and [9]).

4. Courts generally accept the existence of a retainer when a solicitor has performed work on behalf of a person with their knowledge and assent, in circumstances consistent with that person being the solicitor's client (Shaw v Yarranova Pty Ltd [2011] VSCA 55 at [19]).

5. The onus of proving the absence of a retainer lies with the party who challenges its existence (Halliday v SACS Group Pty Ltd [1993] HCA 13; 67 ALJR 678 at [7]).

6. To displace the rule, a party against whom a costs order has been made (i.e. the opposing party in a party-party taxation of costs) must prove that under no circumstances does the client (their opponent, to whom they have been ordered to party-party costs) have any liability to pay costs to their solicitors (Shaw v Yarranova Pty Ltd [2011] VSCA 55 at [20]; Davies v Taylor (No 2) [1974] AC 225).

7. In the absence of a costs agreement, a solicitor can still recover costs from a client on a "fair and reasonable" basis, under a type of statutory quantum meruit (see, by analogy, s 319 of the Legal Profession Act 2004).

Conclusion

• In summary, a signature is not always required for a costs agreement, and a retainer can exist even without a formal costs agreement.

• The key is to look at the conduct of the parties involved and whether there is an implied obligation to pay the lawyer's costs. It is important to be aware of these factors when dealing with costs agreements and retainers in a legal context.

Understanding Special Costs Orders: When Are They Made?

In certain complex and important legal matters, special costs orders can be made to address the inadequacy of the costs allowable under the applicable costs determinations.

In this blog post, I discuss the legal principles surrounding special costs orders and the circumstances under which they may be granted, with reference to the case of BCBC Singapore Pte Ltd v PT Bayan Resources TBK (No 5) [2023] WASC 116.

Legal Principles

The power to make special costs orders is found in sub-section 141(3) of the Legal Profession Uniform Law Application Act 2022 (WA). This section replaced section 280(1) of the Legal Profession Act 2008 (WA) but is relevantly identical, meaning that authorities dealing with the previous section remain applicable.

As per the Court of Appeal decision in Sino Iron Pty Ltd v Mineralogy Pty Ltd (No 2) [2017] WASCA 76 (S), special costs orders may be made if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity, or importance of the matter. These orders are considered special and are only made if specified conditions are met.

Two Essential Components

To exercise the power to make a special costs order, the court must form an opinion that has two components:

1. The court must form the view that the maximum amount allowable under the relevant scale item is inadequate, in the sense that there is a fairly arguable case that the bill to be presented to the taxing officer may properly tax at an amount greater than the limit imposed by the relevant cost determination.

2. The court must also form the opinion that the inadequacy of the costs allowable under a costs determination arises because of the "unusual difficulty, complexity or importance of the matter."

Establishing a Fairly Arguable Case

A fairly arguable case will not be established merely because a party incurred greater costs than those allowable under the relevant determination.

However, if a party has applied significantly greater legal resources to each step in the litigation than those for which allowance is made under the relevant determinations, and this is viewed in the context of the difficulty, complexity, or importance of the matter, the conclusion that there is a fairly arguable case may be sustained.

The term "unusual" in this context qualifies only the "difficulty" of the matter, and not its "complexity" or "importance." It means unusual when compared to the usual run of civil cases determined in the court.

Case Example: BCBC Singapore Pte Ltd v PT Bayan Resources TBK (No 5) [2023] WASC 116

In this case, the court was satisfied that the Freezing Orders Proceedings were complex and important, justifying the special costs orders.

The nature and importance of the proceedings led the court to conclude that Bayan was justified in engaging counsel with greater experience and expertise in commercial litigation than in the usual run of civil cases, as well as solicitors who charged more than the scale rates.

Key Take-Aways

• Special costs orders are made in cases of unusual difficulty, complexity, or importance when the maximum amount allowable under the relevant scale item is inadequate.

• These orders are not made lightly, and the court must be satisfied that there is a fairly arguable case that the amount of costs allowable is inadequate because of the specific nature of the matter.

When Should Indemnity Costs Be Awarded in Relation to a Calderbank Offer?

In Western Australian litigation, indemnity costs may be awarded in certain circumstances when a Calderbank offer has not been accepted.

Calderbank offers are settlement offers made outside of court that, if rejected unreasonably, can lead to an order for indemnity costs.

This blog post explores the principles governing the exercise of the court's discretion to make such an award, drawing on the case of Middendorp v Lygina (No 2) [2021] WASC 431 (S).

Principles Governing Indemnity Costs in Relation to Calderbank Offers

As established in Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 and summarized in Eccles v Koolan Iron Ore Pty Ltd (No 3) [2013] WASC 418 (S), there are several principles that apply when determining whether a Calderbank offer justifies an award of indemnity costs:

1. A Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable.

2. All relevant facts and circumstances must be considered in determining whether a party's rejection of a Calderbank offer was unreasonable.

3. The mere fact that the recipient of a Calderbank offer is ultimately worse off than he or she would have been had the offer been accepted does not mean its rejection was unreasonable.

4. Whether conduct is reasonable or unreasonable always involves matters of judgment and impression.

5. It is not possible nor desirable to enumerate exhaustively all circumstances which must be taken into account in deciding whether the rejection of a Calderbank offer was unreasonable, but ordinarily, regard should be had to factors such as:

• the stage of the proceeding in which the offer was received,

• the time allowed to the offeree to consider the offer,

• the extent of the compromise offered,

• the offeree's prospects of success,

• the clarity with which the terms of the offer were expressed, and

• whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it.

6. The party who makes a Calderbank offer that is rejected bears the onus of satisfying the court that it should make an award of indemnity costs in his or her favor.

7. The standard for awarding indemnity costs should not be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis absent some blameworthy conduct on its part - a test of unreasonableness should not be upheld on other than clear grounds. (Put another way, the standard for awarding indemnity costs should be maintained at a level where an unsuccessful party is not at risk of being ordered to pay costs assessed on an indemnity basis without engaging in some form of blameworthy conduct. A finding of unreasonableness should only be based on clear and compelling grounds, rather than being applied too easily or casually).

Assessment of Calderbank Offers

As reiterated in Strzelecki Holdings Pty Ltd v Jorgensen, Calderbank offers must be assessed without the benefit of hindsight and having regard to the strength of the parties' cases as they then stood.

A party's erroneous prediction about the prospects of litigation, on the basis of which they reject a Calderbank offer, may not be regarded as unreasonable if that party was not, at the time, and for good reason, in possession of sufficient information to make a proper assessment of its prospects, or if the circumstances upon which the assessment was based later changed.

Additionally, the terms of a Calderbank offer must be unambiguous, and it will not be unreasonable to reject an offer if there is some reasonable doubt about the nature and extent of what was being offered.

Case Example: Middendorp v Lygina (No 2) [2021] WASC 431 (S)

In this case, the court found that an order for indemnity costs (for a part of the costs) was justified due to the unreasonable rejection of a Calderbank offer.

The court considered factors such as the late stage of the proceeding, the defendant's prospects of success, the short timeframe for acceptance, the extent of the compromise offered, the clarity of the offer's terms, and the fact that the offer foreshadowed an application for indemnity costs in the event of rejection.

The court also noted that the unsuccessful party had not provided a reason for not accepting the offer beyond the usual prospects of being successful in litigation, which further justified the indemnity costs order.

Key Take-Aways

• Indemnity costs may be awarded in relation to a Calderbank offer if the rejection of the offer is found to be unreasonable.

• The court will consider various factors to determine whether the rejection was unreasonable, such as the stage of the proceeding, the time allowed for consideration, the extent of the compromise offered, the offeree's prospects of success, the clarity of the terms, and whether the offer foreshadowed an application for indemnity costs in the event of rejection.

• It is essential for legal practitioners to carefully consider the principles outlined above when advising clients on the potential consequences of rejecting a Calderbank offer, as an unreasonable rejection may lead to an indemnity costs order against their client.

Principles for Costs Appeals

As a costs lawyer in Western Australia, I often come across situations where clients wish to appeal costs orders.

While the right to appeal is an essential part of the legal process, it is important to understand the principles that govern costs appeals.

In this blog post, I explore these principles, drawing from the case of Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96.

The Discretionary Nature of Costs Orders

Costs orders involve the exercise of discretion by the court. This means that the judge has the authority to decide on the appropriate costs order based on the specific circumstances of the case.

Consequently, the principles applicable to appeals against discretionary decisions also apply to costs appeals.

Limits of Appellate Intervention

An appellate court is not entitled to substitute its own decision for the decision under appeal simply because it would have reached a different conclusion, or because it considers that a different outcome would be more just and equitable.

Instead, an appellate court must be satisfied that the order made stands outside the limits of a sound discretionary judgment before intervening.

Establishing Errors in the Primary Decision

To demonstrate that a costs order is outside the limits of a sound discretionary judgment, an appellant must establish either an express error or demonstrate that an error can be inferred.

An express error occurs when the primary judge:

1. Acted upon a wrong principle,

2. Mistook the facts,

3. Took into account an irrelevant consideration, or

4. Failed to take into account a relevant consideration.

An error may be inferred if the order under appeal is shown to be unreasonable or plainly unjust.

Understanding the Apportionment of Costs in Western Australian Legal Cases

This blog post provides a general overview of the apportionment of costs, based on the Western Australian case of Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96.

1. The Importance of Success in Determining Costs

Success in legal proceedings is determined based on the reality of the circumstances involved in the case ([50]).

The court examines the overall outcome of the proceedings and the parties' success on individual issues.

The determination of success is not a mere mathematical calculation but rather an assessment of the parties' achievements on the substantive aspects of the case.

The court may depart from the general rule that costs follow the event and modify a costs order to take into account specific factors.

These factors can include unreasonable conduct by the successful party or the failure of that party on one or more particular issues ([50]).

The court's discretion in modifying costs orders is guided by the Rules of the Supreme Court, the established practice of the court, and legal authorities.

If the court is of the opinion that the successful party's conduct has resulted in costs being unnecessarily or unreasonably incurred, the court may deprive that party of costs, either wholly or in part ([50]).

The court may even order the successful party to pay the costs of the unsuccessful party, either wholly or in part, depending on the circumstances. This highlights the importance of maintaining reasonable conduct throughout the litigation process.

In cases where the successful party fails on specific issues, the court may exercise its discretion to apportion costs accordingly. This may involve ordering the successful party to pay the costs of those issues on which they have failed ([50]). However, it is essential to recognize that the court will only exercise this power when there are discrete and severable issues that have significantly added to the cost of the proceedings.

2. Discretion to Apportion Costs

The court has a wide discretion to apportion costs, which must be exercised judicially (Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96, [48]).

Apportionment of costs should only be made where there are discrete and severable issues on which the successful party failed, and which added to the cost of the proceedings in a significant and readily discernible way (Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96, [51]).

3. Modifying the Usual Costs Orders

When the court decides to modify the usual costs orders to reflect the limited success of the successful party, this power should be exercised broadly, as a matter of impression, without any attempt at mathematical precision (Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96, [52]).

This approach acknowledges the complexities of separating different issues and the varying importance of different issues within a case.

4. Apportionment of Costs in Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96

In this case, the court ultimately determined that a just apportionment of costs would require Strzelecki to pay two-thirds of the Jorgensens' costs of the action.

This conclusion was reached based on a broad analysis of the case, taking into account the various components of the action and their relative significance, and acknowledging the common factual substratum and legal issues in some components of the case (Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96, [97]-[100]).

Can an Incorporated Legal Practice Recover Costs for Work Done by Its Solicitors When Acting for Itself?

In light of the Pentelow decision, there has been a growing interest in the question of whether an incorporated legal practice acting for itself can recover costs for work done by its solicitors. In this blog, I explore the current state of the law on this topic.

The General Rule: Self-Represented Litigants Cannot Recover Costs

As a general rule, self-represented litigants are not entitled to recover any recompense for the value of their time spent in litigation. This rule is based on the principle that a party should not be compensated for their own time and effort spent in pursuing or defending a legal claim.

In Bell Lawyers Pty Ltd v Pentelow, the High Court of Australia determined that the Chorley exception, which previously allowed self-represented solicitors to recover their professional costs, should not be recognized as part of Australian common law.

Incorporated Legal Practices and the Employed Solicitor Rule

The question of whether an incorporated legal practice can recover costs for work done by its solicitors when acting for itself was left open in Bell Lawyers. The court noted that it might be queried whether a solicitor employed by an incorporated legal practice of which he or she is the sole director has sufficient professional detachment to be characterized as acting in a professional legal capacity.

Subsequent cases have sought to address this question.

In United Petroleum Australia Pty Ltd v Herbert Smith Freehills, the Court of Appeal held that a claim by a firm of solicitors (operating as a partnership) to recover costs for the work of its employees fit within the general rule for self-represented litigants, and not within the "well-established understanding" relating to employed solicitors.

The "employed solicitor rule" refers to a well-established understanding in Australian law that allows non-lawyer parties, such as government entities or corporations, to recover costs for legal services provided by their in-house or employed lawyers. This rule operates within the indemnity principle, as even though there is no liability to pay a third party (such as an external law practice), there is still a clear distinction between the client and the lawyer, as well as a functional equivalence between paying external lawyers and offsetting the overhead costs incurred by employing lawyers to act on behalf of their employer.

However, this understanding does not extend to parties that are lawyers representing themselves. According to the United Petroleum Australia Pty Ltd v Freehills case, the only exception that previously allowed lawyers to recover costs for self-representation was the Chorley exception, which has since been overruled in Bell Lawyers. Allowing law firms to recover costs on the basis that the legal work was undertaken by employed solicitors, rather than the firm's owners, would potentially undermine the outcome of the Bell Lawyers decision.

In Guneser v Aitken Partners, the court considered whether an incorporated legal practice acting for itself could recover costs in respect of work done by its employee solicitors. The court followed a similar approach to the Court of Appeal in United Petroleum, asking whether the incorporated legal practice fit within the general exclusionary rule for self-represented litigants and whether the claim fell within the "employed solicitor rule" so that its costs were recoverable. Ultimately, the court determined that the general exclusionary rule applied, and the "employed solicitor rule" (or the "well-established understanding") did not apply.

Key take-aways

• An incorporated legal practice acting for itself cannot recover costs in respect of work done by its solicitors.

• This conclusion is consistent with the general rule that self-represented litigants cannot recover costs and the court's reluctance to recognise exceptions to this rule.

Cases mentioned in this blog:

• Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29; (2019) 93 ALJR 1007

• United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2020] VSCA 15

• Guneser v Aitken Partners (Cross Appeal On Costs) [2020] VSC 329

Indemnity Costs and the Consequences of Unwarranted Allegations in Legal Proceedings

In the legal world, we often come across situations where allegations are made that should never have been made, and personal attacks are directed at lawyers. Such actions can have serious consequences, not only for the parties involved but also for the legal system as a whole.

In this blog post, I discuss the importance of indemnity costs and the potential consequences of lawyers making personal attacks, with a focus on a recent Supreme Court of the Australian Capital Territory (Court of Appeal) decision, Michael Wilson & Partners Ltd v Nicholls (No 10) [2023] ACTCA 13.

Indemnity costs are awarded in cases where a party has acted unreasonably or in bad faith, thereby causing the other party to incur additional costs. These costs are ordered in circumstances where allegations are made "which ought never to have been made," the case is "unduly prolonged by groundless contentions," or where "the applicant, properly advised, should have known that he had no chance of success" or "persists in what should on proper consideration be seen to be a hopeless case" (Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (No 2) [2017] FCAFC 116 at [5]).

In the case of Michael Wilson & Partners Ltd v Nicholls (No 10) [2023] ACTCA 13, the Court ordered indemnity costs against the applicant for reagitating issues that had previously been determined adversely by the Court. The applicant, properly advised, must have been aware that he had no prospects of success in the application. The sixth respondent, in this case, was entitled to indemnity costs for the unwarranted allegations and groundless contentions made by the applicant.

Moreover, the applicant in this case had a propensity to advance personal attacks directed at counsel for the sixth respondent and the instructing solicitor. Allegations of this kind should not be made by admitted practitioners against other admitted practitioners without clear and compelling evidence. As no such evidence was advanced before the Court, the sixth respondent should not be put to any cost in respect of agitating those allegations. This matter formed an independent basis for ordering indemnity costs.

It is important to note that lawyers who make personal attacks or unwarranted allegations may face consequences beyond costs orders. In Michael Wilson & Partners Ltd v Nicholls (No 10) [2023] ACTCA 13, the Court considered whether it was appropriate to restrain the applicant's representative, Mr. Wilson, from continuing to act for the applicant. This decision was based on the potential finding that Mr. Wilson was not in a position to give impartial and independent advice to the applicant and was acting as a mere mouthpiece for his personal interest and grievance against the sixth respondent and their legal advisors.

The Court has inherent powers and powers under the Legal Profession (Solicitors) Conduct Rules 2015 (ACT) (rr 17.1 and 27.2) to make such orders. However, in this case, the Court decided not to make such an order due to the exceptional nature of the remedy and the lack of submissions on the issue by the parties.

In conclusion, it is crucial for legal practitioners to maintain professionalism and avoid making unwarranted allegations or personal attacks. Such actions may result in indemnity costs being ordered against their clients and potential consequences for the practitioners themselves. The case of Michael Wilson & Partners Ltd v Nicholls (No 10) [2023] ACTCA 13 serves as a reminder of the importance of upholding high standards of conduct in the legal profession.