Clements v Loel[2023] QSC 271

SUPREME COURT OF QUEENSLAND

1. [1]
   Mr Clements seeks damages for negligence, breach of contract and equitable compensation for breach of fiduciary duty against his former solicitor, Mr Loel, and Mr Loel’s incorporated legal practice. For convenience I will refer to both defendants as the law firm.
2. [2]
   Mr Clements retained the law firm to act for him in the sale of a property at Mutdapily.  The sale was completed in July 2017.  The result was that the proceeds of sale of nearly $1.7m was deposited into the law firm’s trust account.
3. [3]
   Then, the law firm was retained by Mr Clements to act as his solicitors in a transaction whereby Mr Clements lent up to $700,000 to a company called Maitland Finance and Acquisition Pty Ltd.  A loan agreement was drafted by the law firm.  The security for the loan was intended to be a second registered mortgage over a residential property in St Ives in Sydney.
4. [4]
   No second mortgage over the property was ever obtained.  Various payments were made to Maitland.  Mr Clements says the payments were not authorised payments under the loan agreement. The law firm says the payments were authorised by the loan agreement or were “otherwise instructed by Mr Clements.”
5. [5]
   The proceeding has been managed on the commercial list.  Pursuant to commercial list directions, Mr Clements filed an application for summary judgment on 1 September 2023.  The parties exchanged affidavit material.  The parties then consented to orders dismissing the summary judgment application.
6. [6]
   The parties were not able to agree on the appropriate costs order.  The parties have exchanged written submissions on the costs issue and have agreed that this issue can be decided “on the papers”.^[1]
7. [7]
   The parties are not too far apart.  For Mr Clements it was initially contended that the appropriate order was that the law firm pay Mr Clements’ costs of the application. The law firm initially contended the opposite – that Mr Clements should pay their costs. Then, there was a suggestion by the lawyers for Mr Clements that the parties ‘meet in the middle’ and agree that each parties’ costs of the application be their costs in the cause.  The law firm rejected that suggested compromise.  They required that Mr Clements pay Mr Loel and his firm $6,000 on account of their costs.
8. [8]
   However, by the time this matter was reviewed on 17 November 2023, the parties had filed and served written submissions. In his submissions, Mr Clements proposed that:

   1. the court order that the costs of the application be each parties’ costs in the proceeding;
   2. but that, because Mr Clements has been put to the expense of preparing submissions in respect of costs, the court should also order that Mr Loel and his firm pay Mr Clements’ costs of the argument about costs.
9. [9]
   The law firm argued that the appropriate order is that there should be no order as to the costs of the application and the costs argument.
10. [10]
    Quite sensibly, neither party argues that they should have the benefit of a costs order.

The Principles

11. [11]
    The costs of a summary judgment application are a matter for the court’s discretion.^[2]  If an application for summary judgment is successful then it is conventional for the costs to follow the event.^[3]  If an application for summary judgment is unsuccessful then at least one factor for the court to consider in exercising its costs discretion is explained by rule 299(1) of the Uniform Civil Procedure Rules 1999:

“If it appears to the court that a party who applied under this part for judgment was or ought reasonably to have been aware that an opposite party relied on a point that would entitle that party to have the application dismissed, the court may dismiss the application and order costs to be paid within a time specified by the court.”

12. [12]
    The focus of rule 299(1) is the applicant’s awareness, or constructive awareness, that the opposite party had a real prospect of succeeding.^[4] In other words, the focus is on whether the applicant acted reasonably in bringing the application.
13. [13]
    Of course, other factors may be relevant.  But the point of rule 299(1) is to provide a costs disincentive for a party to bring an application for summary judgment merely for tactical or forensic reasons or where they knew or ought reasonably to have known that the summary judgment application had bleak prospects.^[5]
14. [14]
    Viewed more broadly, justice often requires that the party who bears the interlocutory costs be determined by the result in the principal litigation.^[6] Thus, the usual order where an application for summary judgment is dismissed is that the costs of the application be ‘in the cause’.^[7]

Principles Applied

15. [15]
    Here, the plaintiff, Mr Clements, brought the application for summary judgment but he did not proceed with the application once served with the law firm’s material.  As the submissions for the law firm point out, the application was compromised, and the court will not ordinarily look behind the settlement to the reasons or motivation of the parties to settle.^[8]
16. [16]
    As the law firm’s submissions also point out, it is inappropriate for the court to undertake a hypothetical hearing of the substantive application in order to assess the likely result of the hearing.  By their compromise the parties agreed the case needed to proceed to trial.
17. [17]
    The law firm does not contend that Mr Clements was aware, or ought reasonably to have been aware, of its defence. And so, there is no suggestion that rule 299(1) of the UCPR applies.  In fact, it is submitted for Mr Clements that the law firm’s material propounds a positive case that the law firm has not yet pleaded.
18. [18]
    As explained, the contest between the parties is now a narrow one – whether the costs of the summary judgment application ought to be “in the cause” or whether there ought to be no order as to the costs of the application.  The difference, of course, is that if costs of the application are made each parties’ costs in the cause, those costs will form part of each parties’ costs of the proceeding and may be awarded as part of the ultimate costs order.^[9]  If the interlocutory order is that there be ‘no order as to costs’ then the costs of the interlocutory application are borne by each party.
19. [19]
    At trial, Mr Clements may succeed in proving that each payment (except for the first) was unauthorised.  That success in the action would mean that Mr Clements should be entitled to recover all of his costs of the proceeding, including the costs incurred by Mr Clements in bringing the application for summary judgment.  And, of course, the reverse may turn out to be true.  The law firm may succeed in demonstrating that each payment was authorised.  In that event, it would be desirable for the trial judge to have the power to award the law firm all of its costs – including its costs of resisting the application for summary judgment.
20. [20]
    In short, making costs in the cause gives the trial judge the power to give the successful party a full indemnity for its costs or to mould an order that takes into account the costs of the application for summary judgment.  In the circumstances of this case, that makes such an order the better alternative.  It seems to me that this flexibility afforded to the trial judge, who will be in a position to properly assess the substantive merits of the case, is more likely to produce a fairer costs result.
21. [21]
    It remains to deal with Mr Clements’ argument that he ought to have the costs of the argument about costs. It seems to me both undesirable, and possibly a little impractical, for the costs to be split in this way.  It is undesirable for the parties to resolve the substantive hearing but to then argue about costs, as well as the costs of the argument about costs.  And it may be impractical because it may be difficult for a costs assessor to distinguish between the costs of the substantive application as distinct from the costs of the argument about costs. Even if the different components of the costs can be sensibly separated, the better overall solution is for the costs to be in the cause and thus available to the ultimately successful party via the discretion of the trial judge.
22. [22]
    The costs of the application, in their entirety, ought to be disposed of by the trial judge once the result is known.
23. [23]
    The costs of the application will be each parties’ costs in the proceeding.