Dodgy pleadings? ‘Taking the fifth’ won’t save you

I am speaking on ethics at a seminar on at Leo Cussen next week. In preparation I have dusted off a recent(ish) case in which a Victorian barrister and his instructor were both pinged for indemnity costs as a consequence of an ethical transgression.

Apollo 169 Management Pty Ltd v Pinefield Nominees Pty Ltd [2010] VSC 475

Apollo sued Pinefield on the basis of estoppels and misleading or deceptive conduct said to have arisen from particular conversations.  The allegations were set out in the original statement of claim. After day 1 of the trial the statement of claim was amended but the allegations about the conversations stood.

At trial, nothing was said about the conversations in the plaintiff’s opening. Then no evidence was led about them in evidence-in-chief. In cross-examination Apollo’s key witness agreed that he did not meet either of the other parties to those alleged conversations until well after those conversations were said in the statement of claim to have taken place. This concession made Apollo’s case against Pinefield chronologically untenable.

This caused the judge to ask of the plaintiff’s barrister ‘what is left then of Apollo’s case against Pinefield?

There is nothing left against Pinefield,” answered the plaintiff’s barrister.

Immediately following this concession Apollo’s claim against Pinefield was dismissed.

Costs application against the plaintiff’s lawyers

Pinefield sought its costs pursuant to RSC 63.23(1) and (7) against the plaintiff, the plaintiff’s solicitor and the plaintiff’s barrister. It was successful against all three.

The judgment at  [2010] VSC 475 deals with only the costs application. In her survey some of the relevant authorities Emerton J made the following points:

  • I do not consider that the words “failure to act with reasonable competence and expedition” requires findings of gross negligence” (para 30).
  • There is a line of cases to the effect ‘it is unwise for the court…to treat the pursuit of hopeless cases as a demonstration of incompetence by the lawyers presenting that case.’ In contrast there is a Queensland case to the effect “if the case is plainly unarguable it is improper [of lawyers] to argue it”.
  • Emerton J concluded (para 43) that it was unnecessary for her to resolve the tension between these authorities because on either approach the case before her justified an order for indemnity costs against both the solicitor and the barrister. This was because when the barrister opened the plaintiff’s case he knew that the “very recently amended” pleading was false and could not be supported by any evidence. “The plaintiff’s legal representatives knew that the case was not just hopeless – they knew it to be without foundation.” She concluded that in choosing to persist with the claims on behalf of the plaintiff in the “faint hope” that relevant evidence in support of that claim might emerge in cross-examination the barrister had failed to act “with reasonable competence and expedition”.

The soli

The judge found that there was no difference between the position of the barrister and his instructing solicitors. “[The solicitor] too must have known the pleading to be false. A solicitor does not abdicate his or her professional responsibility once Counsel becomes involved” (para 48).

[The barrister and the solicitor] allowed a pleading which they knew to be false to stand. This constituted a dereliction of their duty to the court.”

 Legal professional privilege

The court noted that both of the plaintiff’s lawyers were constrained in the evidence they could present in their own defence by the plaintiff’s refusal to waive legal professional privilege as to the instructions received and advice given by those lawyers. “…the court should only make an order requiring the legal representative to pay costs if satisfied that there is nothing the legal representative could have said, if unconstrained, to resist the order and that it is in all the circumstances fair to make the order the practitioner must have the benefit of any doubt that could be raised in the mind of the court” (para 54).

Upshot

Ultimately the unsuccessful plaintiff was itself ordered to pay costs on an indemnity basis from the date of a false interlocutory affidavit sworn by the plaintiff’s principal while the lawyers were each ordered to pay indemnity costs from the second day of the trial until the conclusion of the trial three days later. (It was on day 2 of the trial that amendments were made to the statement of claim but allegations which the lawyers should have recognised as being unsustainable were allowed to stand).

The lessons to be learned

This case does not appear to make any new law and, indeed, stops at the fork in the road offered by the two contrasting lines of authorities. I  noted it for two reasons.

Firstly, it provides a handy, current yardstick in answer to the often-asked “Can’t we get costs from the other side’s lawyers personally?”

On the back foot, it is a warning to both barristers and solicitors against persevering with flawed pleadings and doing no more than “taking the fifth” on them when running the trial. Simply not relying upon dubious pleaded allegations in the opening, evidence in chief or in closing is not the same as expressly withdrawing those allegations.

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