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Costs consequence for firm that failed to commence proceedings

In Rahman v Al-Maharmeh (No.2) [2021] NSWCA 151, the New South Wales Court of Appeal allowed an application by the appellant, Ms Rahman, for a costs order against her solicitors, Prominent Lawyers.

Background

The appellant was injured in a motor vehicle accident in 2014. Despite the appellant providing timely written instructions to commence proceedings, Prominent Lawyers filed the statement of claim after the limitation period had expired.

Consequently, the appellant was required to seek leave to commence proceedings under s109 of the Motor Accidents Compensation Act 1999 (NSW) (MAC Act). At first instance, the appellant’s application was dismissed, however, on appeal leave was granted to commence proceedings.

The appellant sought costs against Prominent Lawyers for both the application at first instance and the appellate proceedings.[1]

Issues

The issues in the case were:

  • what, if any, costs order should be made between the parties
  • whether Prominent Lawyers should be ordered to pay the unsuccessful respondent’s costs, and
  • whether a ‘wasted costs order’ should be made against Prominent Lawyers in favour of the appellant.

Issues considered

  • Costs between the parties

The court acknowledged that the failure to commence proceedings within time (which necessitated the proceedings under s109 of the MAC Act) was solely the fault of the appellant.[2] However, the respondent contributed to the extent of the costs incurred by adopting a position of ‘active opposition’.[3] Further, the respondent had not sought an order for costs against the appellant for those proceedings. The court therefore concluded that each party should bear its own costs.[4]

  • Liability of Prominent Lawyers for the respondent’s costs

In determining Prominent Lawyer’s liability to pay costs, the court considered s99 of the Civil Procedure Act 2005 (NSW). Section 99 applies “if it appears to the court that costs have been incurred by the serious neglect, serious incompetence or serious misconduct of a legal practitioner, or improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible”.

A costs order against legal representatives under s99 should be exercised with care and discretion, and only in clear cases.[5] In making that assessment, the court considered three questions:

  1. Whether the representative had acted improperly, unreasonably or negligently?
  2. Whether such conduct caused unnecessary costs to be incurred?
  3. Whether it was just to make an order in all the circumstances?[6]

While the court was satisfied that Prominent Lawyers had acted negligently, it found that “had the respondent not chosen to adopt a position of active opposition, the costs would have been relatively slight”.[7] By engaging in arguments that were ultimately unsuccessful, the respondent considerably increased the costs incurred by itself and the appellant.[8]

Given this, the court concluded that it would not be just to order Prominent Lawyers to pay the costs of the respondent.

  • Liability of Prominent Lawyers for the appellant’s ‘wasted’ costs

The court held:

“Prominent’s egregious and unexplained failure to commence proceedings in a timely manner in accordance with their instructions, and their subsequent failure to furnish to the Court any more than the bare minimum of an explanation, were the fundamental and dominant causes of the proceedings, and the costs incurred in them.”[9]

The court was satisfied that the costs were incurred without reasonable cause and that Prominent Lawyers was responsible.[10]

Accordingly, the court ordered that the appellant’s costs and disbursements of the proceedings be disallowed as between Prominent Lawyers and the appellant, to “the intent that the disbursements (including counsel’s fees) are to be borne by Prominent Lawyers”.11

Irene Gallagher is a Law Graduate Intern at Queensland Law Society Ethics and Practice Centre. This article has been approved by Grace van Baarle, Solicitor and Manager, QLS Ethics and Practice Centre.

Footnotes
1 Rahman v Al-Maharmeh (No.2) [2021] NSWCA 151, [8].
2 Ibid [17].
3 Ibid.
4 Ibid [18].
5 Ibid [22].
6 Ibid.
7 Ibid [23].
8 Ibid.
9 Ibid [21].
10 Ibid [24].
11 Ibid [27].

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