Just following instructions?

In Royal Caribbean Cruises Ltd v Reed (No.3),1 Paul and Ivy Reed (the respondents) filed a claim for damages in the United States District Court, Southern District of Florida, Miami Division, against Royal Caribbean Cruises Ltd (Royal).

Royal commenced proceedings to invoke an exclusive jurisdiction clause to compel the Reeds to commence proceedings in New South Wales.

Problems arose in serving the Reeds, and Royal sought – and was granted – orders for substituted service; on 18 and 19 February 2021, service was duly effected pursuant to those orders.

The Reeds then filed an interlocutory application to the effect that Florida, and not New South Wales, was the appropriate jurisdiction for the case. Curiously, they also sought to challenge the order for substituted service, despite clearly having been served, obviously being aware of the matter and indeed accepting the jurisdiction of the court by seeking to invoke it through their application.

Perhaps ominously, the judge asked the Reeds’ solicitor “…how the bringing of the application could possibly be within the obligations on him, his firm and his clients under the overarching purpose provisions of civil procedure and practice in this Court”.2 The solicitor noted that he was acting on instructions, and that the matter would have some bearing on proceedings in Florida, albeit he was unable to elaborate on that point.

After a short adjournment, allowing the Australian solicitor to consult with his US counterparts, the Reeds’ solicitor put their argument to the court, raising a number of issues regarding service which approached the question from a very technical point. The court ultimately dismissed the application, being unpersuaded by the technical arguments and also noting that the Reeds had notice of the matter and were before the court, rendering the question of service irrelevant.

The court then turned to the question of costs, and in particular Royal’s application that the Reeds’ Australian solicitor be made jointly and severally liable for their costs, calculated on an indemnity basis. The court noted (at 54):

“Moreover, there was no reasonable basis for the respondents’ interlocutory application. It should never have been brought. The civil practice of this Court is concerned with practical justice. The pointless technical point against service taken by the respondents in circumstances where they do not contest jurisdiction, have appeared, and are well lawyered-up to get on with the case, has served only to waste the time and resources of the Court. It is not in accordance with the respondents’ and their lawyers’ obligations under ss37M and 37N of the Act [Federal Court of Australia Act 1976 (Cth)].”

The court seriously entertained this proposition, and only decided against making the order sought on the basis that the Australian solicitor was relying on his US counterparts for the technical argument. It also took into account that both the short timeframe and tyranny of distance may have played a part. It was clearly a near thing, though, with the court noting (at 59):

“I am not ultimately convinced that in this case the respondents’ solicitors should be liable for the costs of the respondents’ interlocutory application, although, as I have said, it is a close case.”

The message was clear, however. The application should not have been brought, and the solicitor was nearly on the hook for costs due to his part in it. The case is a reminder that solicitors have a duty to bring their own forensic judgement to a matter before the courts3 and have an overriding fundamental duty of independence.4

In short, there are simply some arguments you do not run, no matter what the client’s instructions are. Those who have insufficient regard to this run the risk of paying indemnity costs; prudent practitioners will keep their duty of independence front-of-mind and avoid the problem altogether.

Footnotes
1 [2021] FCA 225.
2 Ibid[13] (Stewart J).
3 Queensland Law Society, Australian Solicitors Conduct Rules 2012 (at 1 June 2012) r17.
4 Ibid r4.

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