By Stefan Sudweeks, Partner & Luke Scrimes, Lawyer

In circumstances where the Australian legal industry has seen a dramatic uptick in applications for personal costs orders against practitioners, the New South Wales Court of Appeal has provided practical guidance on the proper use of such applications.

The appellants acted for defendants in defamation proceedings which were commenced by the respondents. Due to ongoing issues with the defendants’ pleadings, the respondents’ solicitors wrote to the appellants on multiple occasions threatening an application for personal costs orders against the appellants personally.

On 5 September 2019, the respondents’ solicitors instituted an application for personal costs orders against the appellants, which was ultimately successful. The New South Wales Court of Appeal overturned the personal costs order made against the appellants. In doing so, the Court found that the impugned pleadings were not so defective as to warrant a personal costs order being made against the appellants.

In allowing the appeal, the Court admonished the respondents’ solicitors’ conduct and reiterated that generally, applications for personal costs orders against a legal representative should be made at the conclusion, not the commencement of proceedings and counselled against practitioners threatening such applications against their opponents while proceedings were ongoing.

The Court noted that this general rule had multiple bases, including that:

• often it cannot be determined until the conclusion of the trial whether steps taken in the proceedings were warranted or unreasonable;
• the impugned practitioner’s independence may be compromised and their independence undermined, especially where such applications are threatened;
• the bringing, or even the threatening of, such an application, will often if not usually place the practitioner in a position of conflict and deprive their client of its chosen representation while proceedings are still on foot.

This decision provides a timely reminder to practitioners that an application for a personal costs orders against opposing practitioners is to be used as a shield not a sword, where their client has suffered demonstrable prejudice at the hands of that opposing practitioner, determined once those proceedings have concluded.

Muriniti v Kalil [2022] NSWCA 109