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Harley v McDonald [1999] NZCA 145; [1999] 3 NZLR 545 (11 August 1999)

Last Updated: 1 December 2011

IN THE COURT OF APPEAL OF NEW ZEALAND
CA238/98


BETWEEN
RAYLEE PATRICIA HARLEY


Appellant


AND
ROBERT MCDONALD


Respondent



CA254/98


BETWEEN
GLASGOW HARLEY


Appellant


AND
ROBERT MCDONALD


Respondent

Hearing:
3 May 1999


Coram:
Gault J
Henry J
Thomas J
Keith J
Tipping J


Appearances:
J A Farmer QC and G M Macmillan for Appellant Harley
M J Corry for Appellant Glasgow Harley
D L Mathieson QC for Respondent McDonald
G J McCoy and D H McLellan as amici curiae
W M Wilson QC and C F Finlayson for NZ Bar Association


Judgment:
11 August 1999

JUDGMENT OF THE COURT DELIVERED BY TIPPING J

Introduction

[1] This case raises the question whether, and if so in what circumstances, the High Court may award costs against a barrister personally. The appellant, Raylee Patricia Harley (Mrs Harley) acted as counsel for the respondent, Mr Robert McDonald, in proceedings which he brought in the High Court against FAI (NZ) General Insurance Limited as first defendant (FAI), and the New Zealand Law Society as second defendant. Those proceedings were brought to recover money which Mr McDonald had lost as a result of the collapse of a firm of solicitors known as Renshaw Edwards. FAI was Renshaw Edwards' professional indemnity insurer and was sued under section 9 of the Law Reform Act 1936, which enables a plaintiff in certain circumstances to claim against a defendant's insurer. The Law Society was sued as administrator of the Solicitors Fidelity Guarantee Fund on the basis that Mr McDonald's money had been stolen. Mrs Harley's instructing solicitors were the Nelson firm of Glasgow Harley, which is also an appellant in this Court.
[2] Mr McDonald's claim against FAI was dismissed with an award of costs against him of $115,606.46. Mr McDonald succeeded against the Law Society but for an amount well below what the Society had offered him before trial in a Calderbank letter. As a result Mr McDonald was ordered to pay costs to the Law Society of $30,000 all in. Giles J as the trial Judge declined to order the Law Society to pay Mr McDonald the costs he had to pay FAI. The end result was that against a recovery from the Law Society of $212,843.67 plus interest at 10% from 6 May 1995, Mr McDonald was ordered to pay costs of $30,000 to the Law Society and $115,606.46 to FAI. In addition, he had to pay his own costs. These are in dispute but as rendered (at $260,570.18), they more than exhaust the balance of the monies recovered. Hence, having had some $250,000 stolen from him (nearly $40,000 was earlier repaid by the Fidelity Guarantee Fund), Mr McDonald's proceedings claiming the balance have cost him a lot more than the amount he recovered.

Costs in the High Court

[3] At the conclusion of his substantive judgment, Giles J raised the question whether Mr McDonald's solicitors and counsel should pay some of his costs personally. He said:

Counsel for the plaintiff should also address the issue as to whether any award of costs to FAI should be paid in whole or in part by the plaintiffs solicitors and/or counsel. I require this aspect to be addressed because both in the course of opening and at the time of hearing argument (on 15 October 1997) on FAI's application for dismissal of the claim against it I indicated to counsel for the plaintiff that she needed to reflect carefully on the wisdom of continuing the claim against FAI. I forewarned Mrs Harley that in the event of FAI succeeding the plaintiff could expect little sympathy in relation to costs. FAI has prevailed on grounds fully articulated by Mr Asher QC two days into the trial and in circumstances where counsel for the plaintiff acknowledged the existence of a right to avoid. It is my view that the case against FAI was always weak and it may be that the circumstances are such that Mr McDonald should not have his judgment against the Society eroded by costs which his counsel could and, in my view, should have avoided by more realistically assessing the wisdom of proceeding.

The Court has inherent jurisdiction to impose costs on solicitors that result from their misconduct, negligence or default; Cordery on Solicitors, Horne (8th ed, 1988) p 113, Utah Construction & Mining Co v Watson [1969] NZLR 1062 (CA), Gordon v Treadwell Stacey Smith [1996] 3 NZLR 281 (CA), Da Sousa v Minister of State for Immigration [1993] FCA 146; (1993) 114 ALR 708.

Solicitors have been held liable where the action was improperly undertaken without any bona fide chance of success or where the subject of the dispute was of importance to the solicitors but not to the clients; Hirst and Capes v Fox [1908] AC 416. Where a solicitor allows an action to continue when it is clear that it will fail, he or she may be ordered to pay personally not only the client's costs from the date it became clear that the action could not succeed, but also the costs of the opposing party; Newbiggin-by-the-Sea Gas Co v Armstrong (1879) 13 Ch D 310, Orchard v South Eastern Electricity Board [1987] QB 565, [1987] 1 All ER 95.

I acknowledge that this is a jurisdiction to be used sparingly and that an error of judgment is generally not sufficient. But where, as here, the basis of the claim against FAI was weak and where an opportunity was provided to counsel to reflect on the appropriateness of continuing, I believe the Court is entitled, in the interests of justice, to closely examine the issue.

[4] Having changed his solicitors and counsel, Mr McDonald did make a formal application for costs against his former solicitors (Glasgow Harley) and counsel (Mrs Harley). When the Judge came to consider the issues arising, Glasgow Harley and Mrs Harley were each represented by counsel, their representation being the same as in this Court. The end result was that Glasgow Harley and Mrs Harley were ordered to indemnify Mr McDonald, jointly and severally, as to part of the amount he had been ordered to pay FAI. The amount of the order was $65,000. Although framed as an indemnity, the Judge's order means that between them Glasgow Harley and Mrs Harley have to pay Mr McDonald $65,000 as a contribution to the costs he had to pay FAI. The Judge left it to them to decide how much each would contribute, but they are of course each formally liable for the whole sum. The order was made essentially because the Judge considered the claim against FAI was doomed to failure and should never have been made. We turn to his costs judgment.

High Court judgment (reported at [1999] 1 NZLR 583)

[5] The Judge commenced his discussion of whether he should grant Mr McDonald indemnity against his solicitors and counsel for all or part of the costs he had to pay FAI, by referring to an enquiry he had made of Mrs Harley at the conclusion of her opening address:

.... I required her to outline the precise reason for FAI's presence and the basis upon which the plaintiff contended he could recover against that insurer, in circumstances where counsel accepted that irrespective of whether or not there were two separate policies of professional indemnity insurance, the common-law doctrine of avoidance for non-disclosure applied. Mrs Harley contended that s.9 of the Law Reform Act 1936 applied and that the summary judgment procured by the plaintiff against the Renshaw Edwards partners was all that was necessary to found liability.

[6] The Judge then recorded that after the close of Mr McDonald's case, counsel for FAI had applied for an order dismissing the claim against FAI. The Judge noted that while he considered there was substance in the application (for reasons which will appear below) the deficiency in the plaintiff's claim might be rectified by an amendment which he then made. The Judge observed that in the course of dismissing FAI's application:

.... I specifically invited counsel to carefully reflect upon and reconsider the position as between the plaintiff and FAI because I remained apprehensive as to whether the plaintiff could succeed in the light of the concession as to the application of the doctrine of avoidance for material non-disclosure. I was concerned as to the plaintiff's vulnerability in costs. Notwithstanding that invitation, counsel elected to proceed.

In the end that proved to be an unwise decision for the plaintiff. For reasons expressed in the judgment there really never was any prospect whatever of success against FAI.

[7] Giles J referred to several reasons for that conclusion. The two most important for present purposes can be described for short as the summary judgment point, and the insurer's right to avoid for material non-disclosure. Both will be discussed in more detail in the next sections of this judgment.
[8] Moving to questions of law, Giles J noted that it was accepted by Glasgow Harley that the High Court has jurisdiction to make an order for costs against the solicitors for a party following a serious dereliction of their duty to the Court. He then addressed whether the High Court has any power in similar circumstances to make such an order against counsel, when counsel is a barrister sole. Having discussed the submissions made to him and various authorities, the Judge held that provided counsel is given an opportunity to be heard, the High Court does have jurisdiction to make a costs order against counsel personally. The Judge put it this way:

... the jurisdiction is there, both under r.46 and in the inherent jurisdiction. It is necessary to ensure justice overall. It is available to the Court as a means of ensuring, in the appropriate case, that a litigant should not be financially prejudiced by unjustifiable conduct of litigation by counsel. Furthermore, the jurisdiction accords with reality. It is counsel more than solicitor who makes decisions relating to the conduct of trial which can expose the client to a risk of costs. Where counsel acts incompetently, or fails to responsibly review the state of the case and to advise the client, those risks can become realities.

[9] In deciding to exercise the jurisdiction which he found to exist, the Judge criticised Mrs Harley's reliance upon the summary judgment obtained by Mr McDonald against the partners of Renshaw Edwards. He did so on the basis that Mrs Harley:

... became single-mindedly obsessed with the notion that the summary judgment procured on the guarantee was all that was necessary to bring this claim within the ambit of s. 9 of the Law Reform Act 1936. No consideration or advice appears to have been given to the plaintiff as to the need to establish an insured peril which could bring the policy into play. Moreover, the action was pursued to trial in circumstances where it was acknowledged by counsel that the common law doctrine of avoidance for non-disclosure would apply. And, an objective analysis of the non-disclosure and lack of good faith defence would have demonstrated their inevitable success.

[10] The Judge took the view that Mrs Harley had pursued "a hopeless case" against FAI without Mr McDonald receiving the degree of objective and independent advice he should have received as to the risks of so doing. In coming to his view as to the relief he should award Mr McDonald and the consequences of his decision for the Bar generally, the Judge said:

Doing the best I can, I conclude that the plaintiff should be indemnified to the extent of $65,000 in respect of those costs. There is jurisdiction to award those directly costs in favour of the defendants but given that they will recover against the judgment sum, [pursuant to a charging order they had obtained] I consider that the appropriate order is to direct the plaintiff's solicitors and counsel to jointly and severally indemnify the plaintiff in the sum of $65,000 in respect of costs directed to be paid by the plaintiff to the first defendant. I am clear in my own mind that a significant proportion of those costs (as between solicitors and counsel) should be borne by counsel. But the solicitors elected to accept this reverse brief and they had the conduct of the litigation. In those circumstances the appropriate order is a joint and several order leaving it to the liable parties to reach a sensible and moral accommodation themselves.

I do not consider that this determination will lead to the consequences Mr Farmer QC foreshadowed for counsel, whether at the independent Bar or with firms. The jurisdiction will be invoked sparingly and only in the most glaring of cases. It is compensatory in a limited sense: here, by allowing the plaintiff to recover a proportion of costs he must pay to other litigants. But for the protection the successful defendants have in terms of access to the judgment fund, the order could have been one awarding costs to the defendants payable by plaintiff's solicitor/counsel personally.

Mr McDonald's case against FAI

[11] Put shortly, Mr McDonald brought his claim against FAI on the basis of the summary judgment he had obtained against the partners of Renshaw Edwards, in combination with s9 of the Law Reform Act 1936. The summary judgment had been obtained without opposition and a copy of the formal judgment was annexed to the statement of claim. Mr McDonald's statement of claim in the summary judgment proceedings had alleged that Renshaw Edwards guaranteed payment of both principal and interest in respect of the monies he had invested through their nominee company. He also claimed on the basis of a failure by the firm to account to him for those monies.
[12] The precise pleading was that the partners of Renshaw Edwards were "liable to [Mr McDonald] both on an account and jointly and severally pursuant to their undertaking of guarantee". Judgment was entered in terms of the guarantee. This is apparent from the fact that as mentioned further below, interest was awarded in terms of the guarantee, ie. at 21% per annum, compounded monthly.
[13] In his statement of claim which was drafted by Mrs Harley, Mr McDonald alleged after the formal paragraphs describing the parties:

4 By 158 (sic) of the Law Practitioners Act 1982, the Second Defendant is the trustee of the Solicitors Fidelity Guarantee Fund ("the Guarantee Fund") and by s.173 of that Act on payment of the Guarantee Fund of any money in settlement in whole or in part of any claim the Second Defendant is subrogated to the extent of that payment to all the rights and remedies of the claimants in respect of the theft by a legal practitioner to which the claim relates.

5 Claims have been admitted against the Guarantee Fund with respect to thefts by Messrs Renshaw and Edwards of moneys entrusted to them in the course of their practice totalling $21,820,209.20.

6 On 5 May 1992, the Plaintiff's application for summary judgment against Patrick Renshaw, Keith Edwards, Paul Vincent Paino, Michael Basil-Jones and John Corryn Gwilliam ("Renshaw Edwards") was granted and judgment was entered in the total sum of $423,488.26 against each Defendant, together with interest to the day of payment of 21 per cent per annum compounded monthly.

Particulars

(a) A copy of the judgment is annexed marked "A".

First alternative cause of action against First Defendant under s 9 of the Law Reform Act 1936 and the Renshaw Edwards Professional Indemnity Policy

7 The Plaintiff repeats paragraphs 1 to 6 inclusive.

8 Renshaw Edwards was party to a contract of insurance by which the partners as insured were indemnified against liability for losses subject to the terms and conditions of the contract of insurance.

9 The First Defendant was the professional indemnity insurer of Renshaw Edwards under the Professional Indemnity Policy No. 91/5384 of Renshaw Edwards through the Justicia Mutual Association Inc Professional Indemnity Policy underwritten by FAI NZ General Insurance Co Limited ("FAI") effective date 1 October 1991 to 30 September 1992 ("the Renshaw Edwards Professional Indemnity Policy").

Particulars

(b) Annexed marked "B" is the cover note from Alexander Stenhouse dated 13 January 1992.

10 The terms and conditions of such contract are set out in a printed policy wording for members of Justicia Mutual Association Inc and a letter from Alexander Stenhouse Limited dated 13 January 1992 setting out-

a) that the effective date of the policy was from 1 October 1991 to 30 September 1992, both days inclusive;

b) that the class of insurance was professional indemnity;

c) that the covering was professional liabilities with a limit of indemnity of $2,000,000, a policy deductible of $50,000 (costs inclusive);

d) and that there were extensions, including a dishonesty of partners extension with a limit of $1,000,000 in the aggregate and two automatic reinstatement's of the amount of insurance.

11 The First Defendant has denied liability to indemnify Renshaw Edwards and claims that the Renshaw Edwards Professional Indemnity Policy was avoided from inception for actual fraud under clause 3.11 of the Renshaw Edwards Professional Indemnity Policy for non-disclosure in the proposal of any predating dishonest activities on the part of either of Messrs Renshaw and Edwards.

Particulars

(d) Annexed marked "C" is a copy of the letter from Johnston Pritchard Fee and Partners dated 12 November 1992.

12 The Renshaw Edwards Professional Indemnity Policy was in full force and effect at all times material to the proceeding and Renshaw Edwards is entitled to indemnity under the Renshaw Edwards Professional Indemnity Policy and the Plaintiff is entitled to insurance moneys that are or may become payable by the First Defendant under the Renshaw Edwards Professional Indemnity Policy pursuant to the provisions of s 9 of the Law Reform Act 1936.

THE PLAINTIFF CLAIMS:

a) Payment of the sum of $423,488.26 together with interest from 5 May 1992 to the date of payment of 21 percent per annum compounded monthly, less the sum of $84,710.59.

b) The costs of and incidental to this proceeding on a solicitor and client basis.

c) Such further or other relief as this Honourable Court deems fit.

Second alternative causes of action against First Defendant under s 9 of the Law Reform Act 1936 and the Basil Jones Professional Indemnity Policy.

13 The Plaintiff repeats paragraphs 1 to 6 inclusive.

14 Mr Basil Jones was a party to a contract of insurance, by which he as insured was indemnified against liability for losses subject to the terms and conditions of the contract of insurance.

15 The First Defendant was the professional indemnity insurer of Mr Basil Jones under the Professional Indemnity Policy No. 91/5465 of Mr Basil Jones through the Justicia Mutual Association Inc Professional Indemnity Policy underwritten by FAI effective date 1 October 1991 to 30 September 1992 ("the Basil Jones Professional Indemnity Policy").

Particulars

(d) Annexed noted "D" is the cover note from Alexander Stenhouse dated 13 January 1992.

16 The terms and conditions of such contract are set out in the printed policy wording for members of Justicia Mutual Association Inc and a letter from Alexander Stenhouse Limited dated 13 January 1992 setting out -

a) that the effective date of the policy was from 1 October 1991 to 30 September 1992, both days inclusive,

b) that the class of insurance was professional indemnity;

c) and that, the covering was professional liabilities with a limit of indemnity of $600,000, a policy deductible of $3,000 (costs inclusive).

17 The First Defendant has denied liability to indemnify Mr Basil Jones and claims the acts and omissions of dishonesty on the part of Messrs Renshaw and Edwards, which have resulted in claims against Mr Basil Jones, vitiate any cover that might otherwise have been available to Mr Basil Jones.

Particulars

(e) Annexed marked "E" is a copy of the letter from Johnston Pritchard Fee & Partners dated 16 June 1995.

18 The Basil Jones Professional Indemnity Policy was in full force and effect at all times material to the proceeding and Mr Basil Jones is entitled to indemnity under the Basil Jones Professional Indemnity Policy and the Plaintiff is entitled to insurance moneys that are or may become payable by the First Defendant under the Basil Jones Professional Indemnity Policy pursuant to the provisions of s.9 of the Law Reform Act 1936.

THE PLAINTIFF CLAIMS:

a) Payment of the sum of $597,000.

b) The costs of and incidental to this proceeding on a solicitor and client basis.

c) Such further or other relief as this Honourable Court deems fit.

[14] The remainder of the statement of claim contained allegations against the Law Society in respect of the Guarantee Fund. The general thrust of this claim was that the monies referred to had been stolen. The details need not be set out. Certain aspects of the two bases of claim against FAI as pleaded should be noted.
[15] An essential pleading was that Mr McDonald had obtained summary judgment against "Renshaw Edwards" (the firm being defined as including Mr Basil-Jones) in the sum of $423,488.26 plus interest at 21% to date of payment compounded monthly. The basis for judgment in these terms can only have been the contract between the firm and Mr McDonald, whereby the firm agreed to guarantee the principal monies and interest on that basis. It is also of note for later purposes that in the plaintiff's own pleading, Mr Basil-Jones was said to be a partner in the firm of Renshaw Edwards.
[16] The first claim against FAI (via the Renshaw Edwards PI policy) was for the same contractual amount, including interest in the same terms, as per the summary judgment, less certain immaterial deductions. The only basis for the claim as pleaded was that Renshaw Edwards were indemnified for "liability for losses" and the cover was in respect of "professional liabilities".
[17] The second claim against FAI (via the Basil-Jones PI policy) was for the sum of $597,000.00 (this being the limit of the Basil-Jones cover less a deductible of $3,000). This claim also seems to have been based on the summary judgment. Again, it seems to have been based on Mr Basil-Jones being "indemnified against liability for losses" and that the class of insurance was "professional indemnity".
[18] From this it appears that in respect of both claims the chain of allegations leading to the supposed liability of FAI as the firm's insurer, was simply:

Although not expressly pleaded it must have been implicitly alleged that the amount of the summary judgment was a qualifying loss as regards the firm of solicitors (as opposed to Mr McDonald) and that there was a professional liability resting on the firm to meet the judgment. But no attempt seems to have been made in the pleading or at trial to link Mr McDonald's claim to the terms of cover or to the terms of section 9 of the Law Reform Act 1936.

[19] It was in this situation that the Judge offered Mrs Harley an amendment during the course of trial to the effect that "the circumstances relating to the procuring of the summary judgment ... constituted a loss covered by the policies ... for which [FAI] is liable".
[20] Another facet of the pleadings is important. The Renshaw Edwards policy was claimed to have a dishonesty of partners extension, whereas by contrast there was no such allegation in respect of the Basil-Jones' policy. Contrary to what was suggested at the hearing, this pleading does represent the correct position, ie. that there was no dishonesty of partners extension in the Basil-Jones' policy. We shall refer to this again below. The policies were unarguably on the same footing, so far as they were able to be avoided for any material non disclosure. Innocent partners were equally vulnerable to have the policy avoided as were dishonest partners, because the liability to make full disclosure was that of the firm and each member, rather than that of the partners viewed individually. This of course may well have been the position even if there had been a dishonesty of partners extension in the Basil-Jones' policy; but the absence of that extension removed any foundation for an argument to distinguish between them on this basis. It was only if the policy was not avoidable from the outset that in the Renshaw Edwards case, but not the Basil-Jones case, innocent partners could recover for the dishonesty of other partners. Avoidance for material non disclosure is clearly available irrespective of whether there is an express clause to that effect. Mrs Harley's argument based on the absence of such a clause was therefore futile.

Submissions in summary

[21] In challenging the judgment against Mrs Harley, Mr Farmer made three principal submissions: first, that the Judge had no jurisdiction to make the order against her; second, that the Judge had wrongly made factual findings and entertained issues beyond the scope of the issues properly before him; and third, that even if the Judge did have jurisdiction to award costs against Mrs Harley, he was wrong to do so in the circumstances of the case. For Glasgow Harley, Mr Corry accepted there was jurisdiction to make a costs order against his client solicitors but argued that the exercise of the jurisdiction was not appropriate in his client's case. Mr Mathieson for Mr McDonald contended that the Judge had been correct, both as to jurisdiction and as to its exercise in the present case. Mr McCoy appeared as amicus curiae. He was appointed in that capacity having represented Mr McDonald after Mrs Harley, but having had his instructions recently withdrawn. His submissions were in favour of jurisdiction and, while accepting that the Judge had gone into certain matters not properly before him, he argued that the Judge had nevertheless come to the correct conclusion on the facts. Mr Wilson presented submissions for the Bar Association which had been granted leave to intervene. He supported Mr Farmer's submissions on jurisdiction and in doing so argued that the inherent jurisdiction of the High Court should not be invoked in defiance of or to circumvent the rule of law which grants barristers immunity from suit.

Costs against counsel - jurisdiction

[22] The competing considerations are essentially these. On the one hand, there should be jurisdiction so as to make counsel accountable for a serious dereliction of duty. If that is an appropriate policy for the law to adopt, the inherent jurisdiction and Rule 46 of the High Court Rules are appropriate vehicles for implementation of the policy. On the other hand, it is said that as barristers are, for policy reasons, immune from suit, those same reasons justify a similar immunity from, or lack of jurisdiction to make, costs orders of the kind now in issue.
[23] The immunity of barristers from civil liability at the suit of their lay clients has been a feature of the common law for many years. The immunity covers work done in court and pre-trial work so intimately connected with the conduct of the trial that it can fairly be said to be a preliminary decision affecting the way the case is to be conducted in court. The leading cases are, in England: Rondel v Worsley [1969] 1 AC 191 (HL) and Saif Ali v Sydney Mitchell & Co [1980] AC 198 (HL); in Australia: Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543 (HCA), and in New Zealand: Rees v Sinclair [1974] 1 NZLR 180 (CA).
[24] There are a number of policy reasons which have been held to underpin the immunity rule. First, there is the fact that counsel owe duties to the Court as well as to their clients. These duties may sometimes conflict. Exposure to claims for negligence or other breach of duty at the suit of the client, could seriously jeopardise the need for counsel to exercise an independent mind and judgment; see Mason CJ in Giannarelli v Wraith at 557, Lord Reid in Rondel v Worsley at 227-229, and McCarthy P in Rees v Sinclair at 182-5.
[25] Second, there is the risk that exposure to civil liability would encourage counsel to adopt a no-stone-unturned policy, to the detriment of the efficient conduct of proceedings; see Rondel v Worsley per Lord Pearce at 273 and per Lord Reid at 228-229, and Rees v Sinclair per McCarthy P at 185.
[26] Third, there is the need for finality of litigation, and thus to avoid collateral attacks on the decision of the court by claims for negligence against counsel, see Lord Morris in Rondel v Worsley at 251; Lord Diplock in Saif Ali v Sydney Mitchell & Co at 222-223; and Mason CJ in Giannarelli v Wraith at 558.
[27] The fourth policy matter is the general immunity from civil liability which attaches to those engaged in the judicial process. It is not just barristers who enjoy immunity. So does the Judge, so too do the parties and the witnesses in relation to what they say in court. So also do jurors. Lord Diplock referred to this point in Saif Ali v Sydney Mitchell & Co at 222, as did Lord Reid in Rondel v Worsley at 230 and Lord Pearce at 273.
[28] The fifth point relates to the so-called cab rank principle which obliges barristers to accept a brief in their field of practise, whatever their personal feelings about the matter, unless they have a proper reason for declining to act. In Rondel v Worsley at 227 Lord Reid suggested that this duty distinguished barristers from all other professions including solicitors.
[29] In England, prior to the enactment of a specific power to make a so-called "wasted costs" order, the High Court had no inherent power to award costs against barristers personally. The specific power was conveyed by way of an amendment to section 51 of the Supreme Court Act 1981 (UK) which came into force on 1 October 1991. The absence of any inherent power was referred to by the Court of Appeal in Orchard v South Eastern Electricity Board [1987] 1 All ER 95.
[30] Following the introduction of the statutory power, the Court of Appeal confirmed in Ridehalgh v Horsefield [1994] Ch 205 that there had previously been no jurisdiction to make a costs order against a barrister. The effect of the amendment was to extend the jurisdiction for the first time to barristers. Mr Farmer argued that, in the same way as it was found necessary to pass legislation in the United Kingdom, so in New Zealand this Court should leave it to Parliament to legislate, if it thought fit. It would be an inappropriate use of the inherent jurisdiction, he submitted, to hold that the High Court had power to order barristers to pay costs.
[31] There is, however, a significant difference in this respect between the historical position in England and the present position in New Zealand. In New Zealand, both barristers and solicitors are officers of the Court; they are enrolled as "barristers and solicitors of the Court": see s49 of the Law Practitioners Act 1982. In England, only solicitors hold that office; barristers do not. Statute apart, the High Court in England has no direct control over barristers. English barristers are members of one of the Inns of Court and responsible for their conduct to the Benchers of their Inn. The Judges of the High Court in England hold their ultimate authority over barristers, not as Judges, but as visitors to the Inns. There is a helpful reference to this topic in Duncan Webb's article - Hopeless Cases: In Defence of Compensating Litigants at the Litigant's Expense (1999) 30 VUWLR 295 at 299. A reasonably recent statement of the position in England before the wasted costs legislation can be found in the speech of Lord Upjohn in Rondel v Worsley (supra) at 282:

"[A barrister] is not an officer of the court in the same strict sense that a solicitor is; if a solicitor fails in his duty to the court he is subject to the jurisdiction of the court which can, and in a proper case does, make summary orders against him. The barrister is not subject to any such jurisdiction on the part of the judge ..."

To the same effect is 4 Halsbury's Laws of England (Volume 3 - Barristers) at 1132, citing the early case of Wettenhall v Wakefield [1833] EngR 876; (1833) 10 Bing 335; (1833) 131 ER 934 in which Tindal CJ indicated, albeit obliquely, that a barrister was not "strictly and properly 'an officer of the Court'".

[32] Mr Farmer submitted that the common law immunity of barristers from suit is what precluded an award of costs against them in England prior to the enactment of the wasted costs legislation. In making that submission he relied upon the judgment of Sir John Donaldson MR in Orchard v South Eastern Electricity Board (supra). In his judgment the Master of the Rolls expressly disagreed with certain obiter dicta of his predecessor Lord Denning MR in Kelly v London Transport Executive [1982] 2 All ER 842, 851 to the effect that barristers had no immunity "if they fail to have regard to their duty to the Court and to the other side". In expressing his disagreement Sir John said:

... whilst there is no doubt that members of the Bar owe a duty to the court as well as their lay client, I know of no basis for a contention that they owe any independent duty to their lay client's opponent. Furthermore, so far as I am aware, the courts have never asserted any jurisdiction over members of the Bar, apart from their general jurisdiction to control the conduct of all who appear before them and apart from their appellate jurisdiction as visitors of the four Inns of Court, and it would seriously undermine the independence of the Bar if they did so. Equally, I can find no basis in logic or authority for holding that the essential public interest immunity affirmed in Rondel v Worsley [1967] 3 All ER 993, [1969] 1 AC 191 protects the Bar only in relation to claims by their own lay clients, leaving them unprotected in respect of the far greater risk of claims by disgruntled litigants on the other side.

[33] We agree that the common law immunity affirmed in Rondel v Worsley must logically protect barristers from claims made by litigants on the other side as well as by their own clients. The basis of that protection, ie. public interest immunity as Sir John Donaldson put it, cannot, however, be transferred automatically to the different situation which arises when there has been a breach of the barrister's duty to the Court causing loss to a litigant, for which compensation would otherwise be appropriate in costs. Although it may be possible to argue that the concept of immunity from suit is consistent with absence of liability for costs, the two are not interdependent. To recognise this method of control over barristers in cases of serious dereliction of duty does not impinge in any material way on the principle of immunity. The power of control is in the hands of the Court, not those of a party, albeit a party can request the Court to exercise the power. Nor is such recognition inconsistent with the policy reasons which support the immunity.
[34] Furthermore Orchard's case does not support the contention that the public interest immunity afforded to barristers was regarded as the reason why the Court had no inherent jurisdiction to award costs against a barrister. The substance of the reasoning in Orchard was that barristers should have immunity from suit not only at the hands of their own clients, but also at the hands of litigants on the other side. The Court's inherent and summary powers over its officers for a breach of duty to the Court did not apply in England to barristers, not for reasons of immunity from suit but because barristers were not officers of the Court. Public interest immunity is engaged when "an action will [otherwise] lie against counsel": see the leading early decision of the Court of Exchequer in Swinfen v Lord Chelmsford (1860) 5 H & N 890, 923; [1860] EngR 838; 157 ER 1436, 1450. An action will lie only when the plaintiff has a cause of action. The summary jurisdiction of the High Court to deal with breaches of duty to the Court does not involve any cause of action vested in a litigant. That is why the jurisdiction is referred to as summary.
[35] The historical development of the two branches of the profession demonstrates that it was not barristers' immunity from suit which was the basis of the lack of any inherent jurisdiction in the Court to award costs against them, but rather the fact that barristers, as distinct from solicitors, were never regarded as officers of the Court. The subject is discussed in detail in Holdsworth: A History of English law (Second Edition - reprint of 1977 - Volume 6) at 431-481. At 434 Holdsworth points out that by the end of the 16th century the mode of appointment of barristers and solicitors (the latter then being known as attorneys) was quite different. In the case of barristers the Judges had delegated to the Inns of Court the power of admitting their members to practise in the Courts. On the other hand, attorneys were admitted to practise directly by the Judges and thereby became officers of the Court. At 434 Holdsworth says:

The cases show that the Courts were ready to act with severity, even to the throwing an attorney over the bar, in a case of grave misconduct: Byrchley's Case (1585) Jenkins 262 ...

The attorney was never allowed to forget that he was an officer of the Court and subject to its discipline. The barrister, on the other hand, was in no sense an officer of the Court, and was much less directly under its control. It is true that he could be disbarred either by the benchers of his Inn, or by the Court, for unprofessional conduct, and in this period for professional incapacity. Thus in the Chancery barristers were punished for prolix or scandalous pleadings: Hill's Case (1603) Cary 27 ...

At 435:

It is not surprising, therefore, to find that the personnel of the attorney's profession differed from the personnel of the bar. The attorneys, being officers of the Court, were closely connected by their method of appointment, by their privileges, and by their business, with the other members of clerical staff of the Courts ...

And at 436:

On the other hand, the barrister had no permanent connection with clerkship, or the clerical staff of the Courts. He must know the forms of the Court; but he was interested, not in a mechanical copying or working of these forms, but in the legal principles applied through them ...

[36] Holdsworth then goes on to discuss the different types of education afforded to barristers and attorneys, the differences in the development of the organised professions on each side, and the development of the rule that barristers had to be engaged by solicitors and not directly by the lay client. He traces the historical difference between solicitors and attorneys and their gradual amalgamation into one professional group under the name of solicitors. There then follows a discussion of the different ranks within the profession of barristers which is of considerable interest in itself but of no immediate relevance.
[37] There is no suggestion in Holdsworth's discussion that it was immunity from suit which was the foundation for the lack of any inherent jurisdiction of the Courts over barristers whether in relation to costs or otherwise. The only inherent jurisdiction which the Judges asserted at that time over barristers related to the ultimate step of disbarment. The delegation by the Judges to the Inns of Court of the power to admit to practise reserved that one aspect to the Judges concurrently with the Inns. Short of that ultimate control, which gradually fell into abeyance in favour of the Inns, there was no assertion by the Judges of any disciplinary or other inherent power over barristers. The reason was that they were not officers of the Court and were thus not amenable to the sort of sanctions available against those who were. For those reasons and the policy reasons which follow, we cannot accept the submission that the common law immunity of barristers from suit means that they are not subject to the summary jurisdiction of the High Court of New Zealand whose officers they undoubtedly are.
[38] Giles J saw the fact that barristers in New Zealand are officers of the Court as supporting the power to award costs against them. Mr Farmer argued to the contrary. He submitted that as the barrister's duty to the Court was one of the policy factors supporting their immunity from suit, it was illogical to use that same duty to support a power to award costs. It does not necessarily follow, however, that a policy which justifies granting barristers an immunity from the consequences of a breach of duty to their clients, also justifies an immunity from the consequences of a breach of their duty to the Court. Indeed Mr McCoy stressed that difference. We are inclined to agree that to award costs against barristers on the basis of breach of duty to their clients, would, if the breach related to immune work, have the appearance of an inappropriate outflanking of the immunity rule, the more so as costs orders are of necessity compensatory as regards the recipient, albeit punitive as regards the barrister. Such orders relieve the barrister's client in whole or in part from some liability which the client would otherwise have, or if couched as an indemnity, already has.
[39] But if a costs order is made on account of a barrister's breach of duty to the Court, and can be sought only while the issue of the costs of the proceeding remains alive, some of the policy considerations underpinning the immunity rule do not apply, for example the finality point. Similarly if the jurisdiction can be invoked, as we propose, only in cases of serious dereliction of duty to the Court, the force of the remaining policy considerations is much reduced and cannot withstand the policy justification for holding barristers accountable in a tangible way for qualifying breaches of their duty to the Court. No cause of action is thereby vested in the client, whose only right is to ask the Court, within the confines of the original proceeding, to consider making a costs order against the barrister.
[40] We will now explain our reasons for coming to these views by examining more closely how the policy considerations which support the immunity rule relate to the suggested jurisdiction to award costs against barristers. The first policy consideration as earlier noted is that counsel owe duties to the court as well as to the client. In cases of conflict the duty to the Court prevails. An inability to provide a sanction for breach in the form of costs would not be consistent with the court's power and duty to control the conduct of barristers. If a costs sanction could not be invoked because of the immunity rule, this would unreasonably circumscribe the ways in which a tangible sanction could be imposed. Barristers have never been immune from contempt proceedings; see Arlidge, Eady & Smith on Contempt (2nd edition - 1999) Chapter 10 Part IV. In the area of incompetence, however, the remedy of contempt is most unlikely to be appropriate. Yet some sanction is necessary to ensure that barristers are accountable for breaches of the standards of conduct and competence required of them.
[41] Hence we do not see the fact that a barrister owes duties to the court as well as to the client as supporting the view that a barrister should be immune from an order for costs. If anything the converse applies. Second, there is the question of efficiency and the potential no stone unturned problem. In the case of breaches of duty to the Court the problem is again likely to be the converse. We do not see the risk of encouraging undue diligence as supporting the view that a grave lack of competence or diligence should be incapable of remedy by an order for costs based on a breach of duty to the Court. Breaches of duty to the Court are more likely to involve cases which should never have been pursued rather than those which are pursued too thoroughly. There is very little risk that the cure will be worse than the malady.
[42] The third matter is that of finality. As indicated earlier, there will be no risk of collateral attack if the jurisdiction to award costs arises only within the proceeding concerned and while the question of costs remains alive. The same Judge will decide both the proceeding and the costs issue. Further factual matters may require investigation but within the confines of the existing proceeding. There will still be no capacity for the client to commence separate proceedings against the barrister in respect of immune work.
[43] The fourth aspect is the general immunity enjoyed by those involved in the judicial process. That general immunity, which in any event is not absolute, does not extend to solicitors, nor does it extend to barristers in respect of non immune work. Barristers as officers of the court owe duties to the Court. We do not regard the immunity which attaches to other participants as justifying a blanket immunity for barristers, thus covering conduct amounting to a serious dereliction of duty to the Court. It is in the public interest to have barristers responsible to the Court to achieve a proper level of competence. Incompetence would otherwise be something outside the ambit of judicial control, save indirectly by means of a reference to the Law Society as a complaint. It will usually be more appropriate for the court itself to deal with breaches of duty by its officers, at least of the present kind, rather than referring them to the Law Society whose function is directed more to the interests of the profession than those of the court, although obviously in the case of barristers there will be a significant overlap. The court already has powers in relation to contempt, but incompetence in itself is hardly likely to qualify as contempt. To make it so, in order to render it subject to judicial control, would be an undesirably oppressive step. Nevertheless, as we will make clear later, the level of incompetence necessary to found a costs order should be a high one.
[44] The fifth and final policy consideration is the cab rank principle. Again, we do not see that principle as justifying the proposition that a barrister can be incompetent or negligent to a qualifying extent, but nevertheless immune from the sanction of costs. Persons holding themselves out as competent to practise as a barrister owe a duty to society, enforceable by the Court, to achieve a minimum level of competence and to take basic care. In any case, in New Zealand solicitors are subject to a professional duty, very similar to the cab rank principle which applies to barristers. Rule 1.02 of the Rules of Professional Conduct for Barristers and Solicitors (5th ed - 1998) provides that a practitioner (defined to include both barristers and solicitors) must, as a professional person, be available to the public and must not, without good cause, refuse to accept instructions for services within the practitioner's fields of practice from any particular client or prospective client. Hence, the difference between barristers and solicitors in this respect, to which Lord Reid referred in Rondel v Worsley (supra), is not wholly applicable in New Zealand.
[45] It is of moment that prior to the wasted costs legislation in the United Kingdom costs were ordered against solicitors, not on the basis of a breach of duty to the client or other litigant, but on the basis on a breach of duty to the Court, see Lord Atkin in Myers v Elman [1940] AC 282, 303 (HL). Similarly Lord Porter at 336 said that the court was not enforcing a civil right, but exercising its authority over the conduct of its officer. As we have already noted, barristers in the United Kingdom are not officers of the court; in New Zealand they are, as barristers (and solicitors) of the High Court. In considering costs as a sanction for a breach of duty to the Court, it is not necessary to distinguish between immune and non-immune work. If a barrister is in serious dereliction of duty to the Court it does not matter to what kind of work the dereliction relates.
[46] In our view it is desirable in the public interest for the High Court in appropriate cases to have power to award costs against a barrister personally. The policy factors underpinning the rule which affords to barristers immunity from suit at the hands of their clients, either do not exist or are much reduced in the case of a costs sanction for a serious dereliction of duty to the Court. As Sir Thomas Bingham MR said at 236 in Ridehalgh v Horsefield (supra):

It is one thing to say that an advocate shall be immune from claims in negligence by an aggrieved and unsuccessful client. It is quite another for the court to take steps to rectify, at the expense of the advocate, breaches by the advocate of the duty he owed to the court to further the ends of justice.

[47] Nothing said is intended to undermine the settled rule that a client cannot sue a barrister for damages on account of immune work. The jurisdiction to award costs against a barrister in qualifying circumstances can be found in Rule 46 of the High Court Rules, or the inherent jurisdiction, or a combination of both. Rule 46(1) provides that except as expressly provided in any Act, all matters relating to the costs of or incidental to any proceeding or any step therein shall be in the discretion of the Court. Various specific provisions follow but they are expressly said not to limit the generality of subclause (1).
[48] Recent cases in this Court concerning the inherent jurisdiction of the High Court support its availability in present circumstances. In R v Accused [1989] 1 NZLR 660, 667, Cooke P said of the inherent jurisdiction that its very strength was its adaptability. In Accused v Attorney-General (1997) 15 CRNZ 148, 151, Henry J, writing for the Court, said:

The High Court derives its general jurisdiction from its status as a superior Court and in particular from s16 of the Judicature Act 1908. The latter gives the Court "all judicial jurisdiction which may be necessary to administer the laws of New Zealand". Inherent jurisdiction is the exercise of an ancillary power, which is not conferred by statute or by rules of Court, and exists to enable the Court to act effectively within its primary jurisdiction. Due administration of justice according to law is its cornerstone. Reference need only be made to the earlier cases of Taylor v A-G [1975] 2 NZLR 675 (CA) and BCNZ v A-G [1982] 1 NZLR 120 (CA) for statements of general principle, and we find it unnecessary, and indeed undesirable, to attempt to define the power any further. Its exercise cannot of course contravene any statutory provision or established principle of general law.

[49] In R v Moke and Lawrence [1996] 1 NZLR 263, 267, Thomas J, speaking for the Court, said of the inherent jurisdiction:

Indeed, it is both unwise and unnecessary to seek to define the scope of the Court's inherent jurisdiction. Broad principles governing its exercise is all that is required. The Court may involve its inherent jurisdiction whenever the justice of the case so demands. It is a power, which may be exercised even in respect of matters, which are regulated by statute or by rules of Court providing, of course, that the exercise of the power does not contravene any statutory provision. The need to do justice is paramount. (See Master Jacob's article, "The Inherent Jurisdiction of the Court" (1970) CLP 23, at p 24, referred to in R v Duval [1995] 3 NZLR 202, at p 205.

[50] We are satisfied the exercise of the inherent jurisdiction to award costs against a barrister does not contravene any statutory provision or established principle of general law. Barristers' immunity from suit is confined to claims by clients for civil relief arising out of immune work. Barristers are not thereby rendered immune from sanctions for breach of duty to the Court. An award of costs made by the court on account of such a breach is both practically and conceptually a different matter from an award of damages made in proceedings instituted for the purpose by a client. The need to do justice in the sense of holding barristers accountable for qualifying breaches of their duty to the Court is, as this Court said in Moke v Lawrence, a paramount consideration. A costs order of the kind in issue has the effect of a fine which the court orders to be paid to the client or direct to the client's opponent if that is the more appropriate course.
[51] The jurisdiction exercised by Giles J is not without other judicial support. In Kooky Garments Ltd v Charlton [1994] 1 NZLR 587 at 590 Thomas J, sitting in the High Court, noted that an order for costs could be made against counsel. His remark was in that respect obiter as the actual order was made against the solicitors involved. In Niven & Ors v National Mutual Life Association of Australasia Ltd & Ors (unreported, Wellington CP596/92, judgment 24 November 1995), a case which coincidentally also involved Mrs Harley, Heron J proceeded on the basis that he had power to award costs against counsel personally, albeit the matter was not ultimately pursued. In Gordon v Treadwell Stacey Smith [1996] 3 NZLR 281 (CA), Blanchard J delivering the judgment of this Court, said that New Zealand Courts have in recent years declared that "legal advisers" who misconduct litigation may be ordered personally to pay costs. Examples cited were Kooky Garments (supra), Y v M [1994] 3 NZLR 581 (which involved solicitors), and Poa v Cornwell (1995) 8 PRNZ 588 (which also involved solicitors). In Gordon's case this Court's use of the expression "legal advisers" instead of the more conventional reference to barristers and solicitors suggests that the Court was not intending to limit its observation to solicitors.
[52] We have considered whether rendering barristers liable for costs would be to introduce an undesirable fetter on the independent and fearless pursuit of their clients' interests. No counsel worth their salt ought to be distracted from such pursuit by the prospect of having to pay costs in qualifying circumstances. We believe that barristers are made of sterner stuff than to allow a necessary measure of accountability to inhibit their traditional fearless independence. We are not aware of any such chilling effect having resulted from the United Kingdom legislation, nor does it ever seem to have been a matter of concern in respect of solicitors.
[53] Brief reference to the position in Australia and Canada is appropriate. Mr McCoy, for whose assistance generally we are most grateful, advised the Court that there were no known instances in Australia of an application for costs having been made against a barrister personally, in either the State or Federal Courts. However, in Da Sousa v Minister of State for Immigration Local Government and Ethnic Affairs [1993] FCA 146; (1993) 114 ALR 708, 712, French J suggested there was jurisdiction to award costs against a solicitor advocate who had instituted completely unmeritorious immigration proceedings. Giles J made reference to this case at [1999] 1 NZLR 583, 591. In Canada the position is clear. The Supreme Court held in Young v Young (1993) 108 DLR (4th) 193, 284 per McLachlin J (La Forest, Gonthier, Sopinka, Cory and Iacobucci JJ concurring; L'Heureux-Dubé dissenting), that Courts possessing inherent jurisdiction might properly use that jurisdiction to order barristers to pay costs personally, albeit the need for considerable caution in doing so was stressed. The Supreme Court underlined the availability of the remedy against barristers by referring both to barristers specifically and by saying that costs could be ordered against "any member of the legal profession". Thus the position adopted in Canada supports the approach which we consider should be adopted in New Zealand.
[54] It is significant that when the Law Practitioners Act 1982 replaced the 1955 Act, Parliament for the first time included negligence and incompetence as subjects of potential disciplinary action for barristers and solicitors alike: see ss106(3)(c) and 112(1)(c) of the 1982 Act in comparison with ss34 and 35 of the 1955 Act. This suggests that it was regarded as being desirable in the public interest for the profession to be able to control, and if necessary discipline, practitioners who fall below minimum levels of competence and care. In addition, powers were introduced whereby disciplinary tribunals were able to order practitioners to cease to accept work or hold themselves out as competent, in particular fields of practice. Furthermore, the tribunals were given the power to award compensation within defined limits and to order reduction or refund of costs. The fact that there is now this general power available within the profession supports the view that in qualifying circumstances the High Court should have a similar power in respect of costs. In any event it is unconvincing in the light of the statutory position to say that the immunity rule is an impediment to the courts exercising an equivalent power which is designed principally to compensate a victim of qualifying incompetence. For the various reasons we have traversed in this section of the judgment, we are satisfied that this Court should uphold the view to which Giles J came on the jurisdiction question.

Basis for exercise of jurisdiction

[55] Having established that jurisdiction exists to make an order for costs against a barrister, it is necessary to consider the criteria for its exercise. The logical starting point is the basis upon which solicitors are personally liable for costs in comparable circumstances. It is well established that such liability arises upon a serious dereliction of duty to the Court. That was the test applied in England before the wasted costs legislation came into effect. The phrase "serious dereliction of duty" was used by Lord Maugham at 292 in Myers v Elman (supra): for a later application of the jurisdiction see Edwards v Edwards [1958] P 235 per Sachs J. The same test applies in Australia: see White Industries (Qld) Pty v Flower & Hart [1998] FCA 806; (1998) 156 ALR 169 (FCA) and Da Sousa v Minister of State (supra). It has been suggested that Giles J's references to the wasted costs regime in England represented the adoption of a lower threshold in New Zealand than serious dereliction of duty to the Court: see Webb (op cit) at 314. We doubt Giles J was proposing a lower threshold (see his reference to serious dereliction at [1999] 1 NZLR 583, 593) but if he was, we consider we should adhere to the serious dereliction of duty test for both barristers and solicitors. At least so far as solicitors are concerned this has been the test at common law for many years and there is, in our view, no reason to change it. If Parliament were to consider the common law threshold too high, legislation such as that in England can always be enacted.
[56] In principle the liability of barristers for costs should rest on the same basis. There is no logical reason to distinguish between barristers and solicitors in this respect. The more is this so, since the fact that in New Zealand both are officers of the Court is a significant factor supporting the existence of the jurisdiction to award costs. When, as here, the default is said to lie in negligence or incompetence, it is necessary to consider whether such failings can ever amount to a serious dereliction of duty to the Court, and if so, at what level. Essentially what is said against Mrs Harley is that through gross incompetence she failed to identify that the claim against FAI was hopeless, and persuaded herself that it stood a reasonable prospect of success, when in fact it had none.
[57] Negligence or incompetence on the part of a barrister or a solicitor at an appropriately high level is capable of amounting to a serious dereliction of duty to the Court. While simple negligence or errors of judgment have generally never sufficed for a serious dereliction of duty, neither has it been necessary to go as far as demonstrating bad faith or other moral wrongdoing. The speeches in Myers v Elman (supra) demonstrate these points. At 291 Lord Maugham made it clear that negligence at a sufficiently high level could amount to a serious dereliction of duty. At 304 Lord Atkin said that "gross negligence" could lead to the exercise of the jurisdiction. And at 319 Lord Wright said:

The underlying principle is that the Court has a right and a duty to supervise the conduct of its solicitors, and visit with penalties any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause in which he is engaged professionally, as was said by Abinger C.B. in Stephens v Hill (1842) 10 M. & W. 28. The matter complained of need not be criminal. It need not involve peculation or dishonesty. A mere mistake or error of judgment is not generally sufficient, but a gross neglect or inaccuracy in a matter which it is a solicitor's duty to ascertain with accuracy may suffice.

In R & T Thew Ltd v Reeves (No. 2) [1982] 3 All ER 1086 (CA), the Court of Appeal affirmed that a solicitor could be made subject to costs personally if guilty of negligence or incompetence of a sufficiently serious kind. Myers v Elman (supra) was cited by Lord Denning MR at 1089 in the course of indicating that errors of judgment or 'mere negligence' were not enough. The conduct in question was described by His Lordship as being 'at most a mere slip'. Hence the jurisdiction was not invoked. O'Connor LJ, with whom Dunn LJ agreed, viewed the case as being one of incompetence (at 1091) but not at a level capable of amounting to a serious dereliction of duty.

[58] Two years later in Davy-Chiesman v Davy-Chiesman [1984] 1 All ER 321 (CA), the Court of Appeal found a solicitor to be in serious dereliction of his duty to the Court in failing to advise the Legal Aid authorities that because of a change in circumstances his client no longer had any reasonable chance of success in the litigation he was pursuing. The Court held that the solicitor ought to have appreciated that the claim in question had become untenable. Indeed it appeared that the solicitor had appreciated this but had allowed his own views to be overridden by the forcefully expressed contrary views of counsel (as to which see para 85 below). Although the legal aid dimension was the immediate context, the case stands for the proposition that it can amount to a serious dereliction of duty for a solicitor not to appreciate that a claim has no reasonable chance of success, if such would be apparent to a 'reasonable solicitor': see per Dillon LJ at 335. For present purposes that may be putting the matter rather too low but the point remains that serious incompetence resulting in a failure to appreciate that a claim is untenable is capable of amounting to a serious dereliction of duty to the Court.
[59] An officer of the Court, whose role is to assist in the administration of justice, cannot properly perform that role if falling below minimum levels of competence and care. There is therefore a duty resting on such officers to achieve and maintain appropriate levels of competence and care. If in serious dereliction of such duty, the officer is properly amenable to the costs jurisdiction of the Court. This duty is reinforced by the fact that Parliament has decreed that practitioners, both barristers and solicitors, must perform at a certain level of competence and care, otherwise sanctions are available in terms of sections 106 and 112 of the Law Practitioners Act 1982. That level is prescribed by giving the disciplinary Tribunals power to make orders if of opinion that the practitioner has been guilty of negligence or incompetence in a professional capacity, and that the negligence or incompetence has been of such a degree or so frequent as to reflect on the practitioner's fitness to practise as a barrister or solicitor or as to tend to bring the profession into disrepute.
[60] It is neither necessary nor desirable to attempt to define the level of incompetence or negligence at which the costs jurisdiction can be invoked beyond saying that such incompetence or negligence must amount to a serious dereliction of duty to the Court. There is no necessary correspondence between the level at which disciplinary sanctions are possible under the Law Practitioners Act 1982 and the level required to constitute a serious dereliction of duty to the Court. It can be said, however, that the levels will often coincide, and incompetence or negligence falling short of a disciplinary level under the Act, will not ordinarily amount to a serious dereliction of duty to the Court.
[61] The English "wasted costs" legislation gives the court jurisdiction if the legal representative has acted "improperly, unreasonably, or negligently". The United Kingdom Parliament has determined that standard to be appropriate, but in terms of the inherent jurisdiction of the High Court in New Zealand we do not consider the standard should ordinarily be set lower than that adopted by our Parliament for the purposes of the Law Practitioners Act 1982. For this Court to adopt the United Kingdom approach, would come close to legislating. Against that background it is necessary now to examine the circumstances of this case to see whether Giles J was right in deciding that the jurisdiction should be exercised against Mrs Harley and Glasgow Harley.

Were costs justified as against Mrs Harley?

[62] Mr Farmer argued that the case against FAI was not hopeless but he submitted that even if it was, Mrs Harley ought not to have been ordered to pay costs on that account. He relied upon the decision of the Court of Appeal in Ridehalgh v Horsefield (supra). The Court (Sir Thomas Bingham MR, Rose and Waite LJJ) discussed the position under the English "wasted costs" regime when the conduct of the barrister consists in pursuing a hopeless case. The judgment of the Court was delivered by Sir Thomas Bingham MR. At 479 His Lordship said:

Pursuing a hopeless case

A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or a defence which is plainly doomed to fail. As Lord Pearce observed in Rondel v Worsley [1969] 1 AC 275:


"It is easier, pleasanter and more advantageous professionally for barristers to advise, represent or defend those who are decent and reasonable and likely to succeed in their action or their defence than those who are unpleasant, unreasonable, disreputable, and have an apparently hopeless case. Yet it would be tragic if our legal system came to provide no reputable defenders, representatives or advisers for the latter."


As is well known, barristers in independent practice are not permitted to pick and choose their clients. Paragraph 209 of their Code of Conduct provides:


"A barrister in independent practice must comply with the 'Cab-rank rule' and accordingly except only as otherwise provided in paragraphs 501 502 and 503 he must in any field in which he professes to practise in relation to work appropriate to his experience and seniority and irrespective of whether his client is paying privately or is legally aided or otherwise publicly funded; (a) accept any brief to appear before a court in which he professes to practise; (b) accept any instructions; (c) act for any person on whose behalf he is briefed or instructed; and do so irrespective of (i) the party on whose behalf he is briefed or instructed (ii) the nature of the case and (iii) any belief or opinion which he may have formed as to the character reputation cause conduct guilt or innocence of that person."


As is also well known, solicitors are not subject to an equivalent cab-rank rule, but many solicitors would and do respect the public policy underlying it by affording representation to the unpopular and the unmeritorious. Legal representatives will, of course, whether barristers or solicitors, advise clients of the perceived weakness of their case and of the risk of failure. But clients are free to reject advice and insist that cases be litigated. It is rarely if ever safe for a court to assume that a hopeless case is being litigated on the advice of the lawyers involved. They are there to present the case; it is (as Samuel Johnson unforgettably pointed out) for the judge and not the lawyers to judge it.


It is, however, one thing for a legal representative to present, on instructions, a case which he regards as bound to fail; it is quite another to lend his assistance to proceedings which are an abuse of the process of the court. Whether instructed or not, a legal representative is not entitled to use litigious procedures for purposes for which they were not intended, as by issuing or pursuing proceedings for reasons unconnected with success in the litigation or pursuing a case known to be dishonest, nor is he entitled to evade rules intended to safeguard the interests of justice, as by knowingly failing to make full disclosure on ex parte application or knowingly conniving at incomplete disclosure of documents. It is not entirely easy to distinguish by definition between the hopeless case and the case which amounts to an abuse of the process, but in practice it is not hard to say which is which and if there is doubt the legal representative is entitled to the benefit of it.

[63] With respect, all the points made are valuable and important in their context. But the position in the present case, as it seems to us, is not that Mrs Harley prosecuted a hopeless case knowing it to be hopeless, but rather that she did not appreciate how hopeless the case was. She did not therefore advise her client to that effect. The question is whether Mrs Harley was thereby negligent or incompetent to the extent required to justify a costs order. She cannot claim to have been pursuing a case, known to be hopeless, but in accordance with fully informed instructions. At this point we return to the two matters which each, in the event, posed and were always going to pose insuperable problems for Mr McDonald's claim against FAI.
[64] The first concerns the summary judgment and the reliance which Mrs Harley placed upon it. It is clear from the pleadings, Mrs Harley's final submissions and Giles J's substantive judgment, that Mr McDonald's case was advanced on the basis that the summary judgment of itself satisfied the provisions of section 9 of the Law Reform Act 1936 which is in these terms:

9. AMOUNT OF LIABILITY TO BE CHARGE ON INSURANCE MONEY PAYABLE AGAINST THAT LIABILITY

(1) If any person (hereinafter in this Part of this Act referred to as the insured) has, whether before or after the passing of this Act, entered into a contract of insurance by which he is indemnified against liability to pay any damages or compensation, the amount of his liability shall, on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance money that is or may become payable in respect of that liability.

(2) If, on the happening of the event giving rise to any claim for damages or compensation as aforesaid, the insured has died insolvent or is bankrupt or, in the case of a corporation, is being wound up, or if any subsequent bankruptcy or winding up of the insured is deemed to have commenced not later than the happening of that event, the provisions of the last preceding subsection shall apply notwithstanding the insolvency, bankruptcy, or winding up of the insured.

(3) Every charge created by this section shall have priority over all other charges affecting the said insurance money, and where the same insurance money is subject to 2 or more charges by virtue of this Part of this Act those charges shall have priority between themselves in the order of the dates of the events out of which the liability arose, or, if such charges arise out of events happening on the same date, they shall rank equally between themselves.

(4) Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same Court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the Court shall have the same powers, as if the action were against the insured:

Provided that, except where the provisions of subsection (2) of this section apply, no such action shall be commenced in any Court except with the leave of that Court.

(5) Such an action may be brought although judgment has been already recovered against the insured for damages or compensation in respect of the same matter.

(6) Any payment made by an insurer under the contract of insurance without actual notice of the existence of any such charge shall to the extent of that payment be a valid discharge to the insurer, notwithstanding anything in this Part of this Act contained.

(7) No insurer shall be liable under this Part of this Act for any sum beyond the limits fixed by the contract of insurance between himself and the insured.

[65] The purpose and scope of the section are straightforward. In certain circumstances the plaintiff is given direct access to insurance monies payable to the defendant. This can happen only if the defendant's liability to the plaintiff is indemnified by the insurer. If the policy does not cover the circumstances giving rise to the liability, or if the policy does not otherwise apply, for example because of valid avoidance for material non disclosure, the plaintiff cannot succeed against the insurer. In short, the plaintiff can be in no better position against the insurer than the defendant would have been: see UEB Packaging Ltd v QBE Insurance (International) Limited [1998] 2 NZLR 64, 70 (CA).
[66] The first step under the section is to identify the contract of insurance under which the insured has an indemnity against liability to pay any damages or compensation. The terms of that contract and the cover afforded will be important. In this case the policies were the Renshaw Edwards policy and the Basil-Jones policy mentioned earlier.
[67] It is next necessary to identify an event to which the policy responds. That event must be one which creates in the insured an indemnified liability to pay damages or compensation. In this case it was necessary for Mr McDonald to plead and prove an event covered by the policies whereby Renshaw Edwards, or any of its partners in circumstances binding the firm, became liable to pay him damages or compensation. The statement of claim in the summary judgment proceedings alleged a liability to pay a contract debt and a sum said to be payable "on an account". Judgment was entered on the basis of the contractual debt. Breach of contract was demonstrably not an insured peril. It was not an event giving rise to any indemnified liability to pay damages or compensation. Neither policy insured the firm or its partners against any liability they might have for breach of contract, or, for that matter, against any liability they might have had on an account, which in any event would not, conventionally at least, be regarded as involving damages or compensation. What is more any liability on an account must, in the circumstances as concurrently advanced in the claim against the Law Society, have been based on fraud, ie. theft, leading to further difficulties both in terms of the policies themselves and on the non disclosure front. For these reasons Mr McDonald's claim under section 9 in reliance on the summary judgment was bound to fail.
[68] The ambit of cover was clearly apparent from the policies which were on a claims made basis. The difficulty was clearly foreshadowed in the statement of defence. No tenable basis for escaping from this immediate and elementary difficulty was ever advanced. Mr Farmer did his best to extricate Mrs Harley from this position by emphasising the presence of the claim for an account. Not only was that not the basis of the judgment either as pleaded or as entered, it was also not the basis upon which Mr McDonald's claim was presented in the High Court. In any event it was a two-edged sword, because of the inevitable connotation of fraud. Put simply, Mr McDonald neither pleaded nor proved an event engaging the cover provided to the solicitors by the policies. Mrs Harley appears to have failed to appreciate that fatal defect even after it had been pointed out by the Judge.
[69] Had Mr McDonald been able to surmount the summary judgment problem he was inevitably going to be in equal if not greater difficulty on account of FAI's contention that it had validly avoided the policies for material non disclosure. When cover was obtained or renewed for the year during which the claims were made there was a failure to disclose the existence of the fraudulent conduct which had already taken place. That non disclosure was fatal to both policies as the Judge held. The pleadings asserted that Mr Basil-Jones was a member of the firm of Renshaw Edwards. Even if he had been insured as a separate principal, his policy had no dishonesty of partners extension.
[70] Mr Basil-Jones had sought separate quotations on different bases, first that the cover was for himself only, and implicitly as an alternative, that he remained part of the firm. He also asked for separate quotes for cover including and not including dishonesty of partners. The cover as ultimately arranged was for "Renshaw Edwards/Basil-Jones". It expressly did not extend to dishonesty of partners. Both the heading of the debit note/invoice and the reference to dishonesty of partners not being insured, make it clear that the cover pertained to Mr Basil-Jones as a member of the firm of Renshaw Edwards. While Mr Basil-Jones did at one time say in a letter of 5 February 1992 to the brokers that his policy was "intended to cover the Lower Hutt practice only", he acknowledged that "the Upper Hutt partners" were named on his policy. He referred again to the Upper Hutt "partners" later in the same letter. Both the documents and Mr Basil-Jones' own correspondence therefore led to the conclusion that the same people were covered in the two polices, ie. the Upper Hutt policy (Renshaw Edwards) and the Lower Hutt policy (Basil-Jones). While for other purposes, the Lower Hutt practice may have been viewed as a separate practice, clearly, at least as regards Professional Indemnity insurance, all partners were proprietors as regards both practices.
[71] In the light of this information which was or should have been available to Mrs Harley close to the start of her involvement, both policies were clearly avoidable for material non disclosure. Indeed Mrs Harley herself had pleaded in para 5 of the Statement of Claim that claims totalling over $21m had been admitted by the Guarantee Fund in respect of thefts by Messrs Renshaw and Edwards. At the time the policies were each taken out or renewed at least one partner had knowledge of the potential for a claim and no mention of that circumstance was made to the insurers. It is evident from Giles J's substantive judgment that Mrs Harley acknowledged that FAI had a right of avoidance for non disclosure. That acknowledgement may have been intended to apply only to the Renshaw Edwards policy, but in view of the absence of any dishonesty of partners extension in the Basil-Jones policy, the position was if anything worse from Mr McDonald's point of view in relation to that policy.
[72] We have borne in mind the various additional points raised by Mr Farmer on Mrs Harley's behalf. Mr McDonald was undoubtedly a very difficult client for reasons which do not need to be discussed. That fact did not, however, bear on Mrs Harley's responsibility, both to Mr McDonald and to the Court, to identify whether his claim against FAI was viable. The difficult nature of her client was not material to her failure to identify how hopeless the case against FAI really was. Reliance was placed on Mrs Harley's understanding that the Law Society had itself issued proceedings against FAI. She apparently based Mr McDonald's statement of claim on the statement of claim in the Law Society proceeding, of which she obtained a copy. This issue cannot be taken further, save to say that Mrs Harley had a duty independently to satisfy herself that the claim was tenable. The Court was not informed how far the Law Society claim had developed, or how exactly it was framed.
[73] Mrs Harley also says she satisfied herself that proceedings by Mr McDonald against FAI were appropriate by reference to the approach of this Court in FAI (New Zealand) General Insurance Company v Blundell and Brown [1994] 1 NZLR 11. In that case a solicitor, L was in breach of his fiduciary duty and liable for such breach to the plaintiff. The potential for such a claim had been duly notified to FAI as L's Professional Indemnity insurer. FAI had accepted liability to indemnify L. Quantum was established by litigation, but then L went bankrupt. The plaintiff sought leave to sue FAI under section 9 of the Law Reform Act 1936, having earlier claimed a charge on the money payable under L's policy. Leave was given in the High Court. FAI appealed, relying on matters not relevant to the present case. Its appeal was dismissed.
[74] That case is clearly distinguishable because FAI had acknowledged liability to indemnify L. L's breach of fiduciary duty must therefore have been covered by the policy which was thereby clearly invoked. No issue of avoidance for non disclosure arose. How it could be thought that the Blundell and Brown case would overcome the obvious difficulties in Mr McDonald's case is hard to see.
[75] Additional matters raised as supporting Mrs Harley's position were the Judge's amendment and his declining to give judgment for FAI at the end of the plaintiff's case. Those matters, if helpful to Mrs Harley at all, could only assist her from that point on. The Judge gave a clear warning of his views at the time. His giving Mr McDonald's case a possible chance by the amendment, and the benefit of whatever doubt the Judge otherwise felt at that stage, hardly provides Mrs Harley with any justification for her conduct. In her evidence she contended that at the time Giles J made his ruling, "FAI's full position and defence remained unclear". It must, however, be said that FAI's statement of defence was extremely clear, cogent and comprehensive. It raised, amongst other matters, the two points that were indeed fatal to the claim. The communication difficulties which Mrs Harley had with her client do not impress us as excusing her failure to identify the case as hopeless. All that was necessary was some clear thinking and a clear letter to her instructing solicitors explaining the problems. Had Mr McDonald chosen to go ahead following such advice, the case would have had a different dimension.
[76] Mrs Harley also contended that the case was arguable in terms of her final written submissions. On the important issues they appear to us entirely to miss the difficulties. They are themselves evidence of Mrs Harley's failure to appreciate those difficulties. In para 9 of the submissions counsel proceeded on the erroneous assumption that FAI had to rely on the wording of the policy to avoid for material non disclosure. At para 19 she seems to have assumed that the summary judgment was entered on the basis of fraud or dishonesty, which was obviously not the case, and would have been a two edged sword in any event. In para 13 appeared the bland statement that under section 9 FAI was "liable to pay damages or compensation". That was framed as an independent liability to Mr McDonald rather than as a liability to indemnify the firm for any damages or compensation it or its partners may have had to pay within the scope of cover. Unhappily the tenor of the submissions gives the appearance that counsel had no grasp of the essential issues or of the necessary matters that had to be shown before Mr McDonald's case against FAI under section 9 could succeed.
[77] Finally, we mention Mr Farmer's point about the attention Giles J gave to the right of FAI to avoid the Basil-Jones policy on account of an unrelated non disclosure involving the National Bank. This may well have been an additional basis for avoiding that policy. But it cannot be said to make any the less obvious FAI's ability to avoid the policy for non disclosure of the earlier frauds. As noted previously, this policy did not even have a dishonesty of partners extension, which might possibly have given rise to the argument that, by implication, the unknown frauds of other partners were not something for non disclosure of which FAI could cancel the separate policy in the name of Mr Basil-Jones.
[78] Although not expressly raised by counsel, we have considered whether Mr McDonald's case against FAI might have been tenable, if it had been pleaded and presented on the basis that there was cover because the money which he lost had been stolen. This was the basis of the claim against the Law Society. Such a claim may have been possible against FAI as indemnifier of the innocent partners of Renshaw Edwards, there being in that policy a dishonesty of partners extension. But such a claim would in any event have foundered on FAI's ability to avoid for non disclosure. The fact that no such basis of claim was pleaded, either originally or by requested amendment, simply underlines Mrs Harley's inability to analyse the various issues involved.
[79] We do not consider that Mrs Harley's handling of the matter can be excused on the basis that she was justified in pursuing the case to the point of putting FAI to proof of the facts and circumstances entitling it to avoid. Such a proposition does not address the summary judgment point, nor does it recognise the fact that the very case Mr McDonald was putting up against the Law Society, and what was by then common knowledge about the activities of Renshaw Edwards, made it a virtual certainty that FAI's purported avoidance would be upheld. Indeed Mrs Harley herself accepted its right to avoid as regards the Renshaw Edwards policy, if not both, but thought that somehow the position was otherwise with the Basil-Jones policy. If anything the case for avoidance of that policy was stronger. On the Judge's perception, the concession, as he called it, as regards avoidability, seems to have applied to both policies. Again it must be said that counsel's presentation of the case in this respect gives the clear impression that she had no grasp of the essential issues.
[80] We will now relate the foregoing discussion to the criteria identified earlier for an award of costs against a barrister. Mindful of the seriousness of the matter from Mrs Harley's point of view, we are driven to the conclusion that she displayed in her handling of the case against FAI incompetence of such a degree that she was in serious dereliction of her duty to the Court. She fell well below the level of competence which the Court is entitled to expect of those who practise before it and are its officers. We are therefore of the view that although Giles J did consider matters and issues which were not properly part of his costs consideration, it was open to him, on the basis of the matters properly before him, to order Mrs Harley to indemnify Mr McDonald for the costs he had to pay FAI to the extent of $65,000.

Cross appeal on quantum

[81] Mr McDonald contended that the amount awarded by Giles J was too low. We have considered that issue and come to the view that even though the Judge took into account extraneous matters, $65,000 was a reasonable sum to award in all the relevant circumstances. We are certainly not persuaded it was outside the range properly available to the Judge, bearing in mind all the various aspects of the costs question which he had to consider.

The position of the solicitors

[82] Glasgow Harley also appeal against their involvement in the costs order. No jurisdictional issue arises. The test of serious dereliction of duty is accepted. Prior to the "wasted costs" jurisdiction in England, the leading case was Myers v Elman (supra). Lord Wright's speech at 311ff contains a valuable historical account of the development of the jurisdiction. Giles J cited relevant cases in the passage from his substantive judgment quoted in para 3 above. Solicitors acting in the role of counsel are entitled to the same immunity for immune work as barristers sole. We are here concerned with the position of solicitors in cases where counsel has been instructed. The solicitors will not therefore be likely to be doing immune work themselves. Unless that is so, they can be sued for negligence like any other professional person.
[83] The issue is whether Glasgow Harley demonstrated incompetence or negligence of such a degree as to amount to a serious dereliction of their duty to the Court. Mr Corry, in arguing that the Judge had erred in his assessment of the position of Glasgow Harley, focussed on two matters. The first was the suggested factual and legal complexity of the case. The second was the fact that the solicitors had briefed counsel and were therefore entitled to rely on the assessment and advice of counsel. In our view the first point is of little assistance to Glasgow Harley. As regards FAI, the case was not complicated either factually or legally. Mr McDonald had to show that Renshaw Edwards, or one or more of the partners, had a liability to him against which they were indemnified by FAI. Any competent solicitor when addressing that issue, with or without the help of counsel, ought to have seen that the summary judgment, at least on the basis advanced, would not suffice in itself.
[84] The position with the avoidance issue was little different. The fact of avoidance was relied on by FAI at an early stage. Mr Corry indicated that the solicitors had undertaken their own independent legal research and review of the facts. There is, however, no evidence from the solicitors putting forward any basis, let alone a tenable basis, on which they considered the two obvious difficulties could be overcome. It seems therefore that they too cannot have identified those difficulties. The Judge described the relationship between the solicitors and counsel as a reverse brief, signifying that the solicitors became involved at the request of counsel. Solicitors who brief counsel, or who, unconventionally, are asked by counsel to act as solicitors still have continuing responsibilities, both to the client and to the Court. Solicitors on the record are there for a purpose. They are responsible to the Court for the due prosecution of the case and they are obliged to apply their own minds to the viability of their client's contentions: see Ward LJ in Count Tolstoy v Lord Aldington [1996] 2 All ER 556 at 571 (CA). A solicitor who goes on the record as solicitor for a party thereby represents to the Court that he or she has the necessary level of competence to act as solicitor in those proceedings. Going on the record is not a mere formality.
[85] Ordinarily the advice of counsel will be a powerful factor upon which solicitors can rely, but only if the advice comes in properly reasoned form and the solicitor is satisfied, after appropriate consideration, that the advice is tenable: see Davy-Chiesman v Davy-Chiesman (supra) at 332 per May LJ; at 335-336 per Dillon LJ, Donaldson MR concurring; Locke v Chamberwell Health Authority [1991] 2 Med LR 249 (CA) at 254 per Taylor LJ; Ridehalgh v Horsefield (supra) at 237G per Lord Bingham MR and Yates Property Corporation (in liquidation) v Boland [1998] FCA 8; (1998) 157 ALR 30, 53 (Full Federal Court). This does not mean that solicitors must replicate the consideration which counsel has given to the matter; obviously not because the solicitor will not usually have the experience or the skills possessed by the barrister. That is why the barrister is briefed. In this case however there is no evidence that either the instructing solicitor or counsel had any particular experience, skill or specialised knowledge. Solicitors should at least satisfy themselves that counsel's advice and proposed course of action is not obviously wrong: see Yates Property (supra). There is no evidence that Mrs Harley gave her instructing solicitors anything approaching a reasoned opinion as to how Mr McDonald could successfully sue FAI, and as to the evidence necessary to do so. In the present case the solicitors cannot in our view rely with any force on their having briefed counsel. In that light the discussions which took place from time to time were of little moment. The lack of reasoned advice concerning the difficulties was no doubt because counsel did not see them as difficulties, at least not to the extent they obviously were. That leads to the question whether the solicitors should nevertheless themselves have seen the difficulties and their extent.
[86] It is unusual to have a proceeding in which the plaintiff is suing the defendant's insurer direct. Claims under section 9 of the Law Reform Act 1936 are comparatively rare. It is not too much to ask of solicitors briefing counsel in such circumstances, to give some consideration to the elements necessary for a successful claim. If the solicitors did give the matter such consideration, they appear to have missed, or at least seriously underestimated, the obvious difficulties. That both counsel and the solicitors did so is strange, the more so as the solicitors professed to have done their own independent research. It is probable that the solicitors' explanation of what happened when the Judge raised the problems, had a more pervasive relevance. Mr Corry pointed out that the Judge's warning to counsel was the subject of discussions between counsel and the solicitors. The solicitor engaged was said to have been assured by counsel that comprehensive and reasoned advice on all issues was being given directly by counsel to Mr McDonald at his specific request. It appears from this that even at that point the solicitors did not involve themselves in how the problems raised by the Judge were to be overcome but simply accepted counsel's assurances.
[87] We consider that the solicitors' breach of duty to the Court was at the same level as that of counsel. Their incompetence, in failing to identify the difficulties as insuperable, was a serious dereliction of their duty to the Court. The consequences for Mr McDonald need no emphasis. By suing FAI in hopeless circumstances he has exhausted most, if not all of the money he recovered from the Law Society. That assessment is based on the sum of $115,000 which he had to pay FAI for costs, and on the premise that of his total solicitor and client costs amounting to $260,000 ($15,000 for the solicitors and $245,000 for counsel), a sum in the vicinity of $100,000 can reasonably be ascribed to the FAI dimension.
[88] The wider consequence of this case for solicitors is that they simply cannot pass the client's affairs over to counsel without discharging a continuing responsibility to monitor the progress and the viability of the proceedings from their client's point of view. Equally, solicitors cannot simply go on the record pro forma at the behest of counsel, and leave everything to counsel thereafter, without retaining some responsibility to their client and the Court. This point is supported by Rule 11.10 of the Rules of Professional Conduct (supra) which requires barristers to keep their instructing solicitors reasonably informed of the progress of the brief.
[89] For the various reasons which we have traversed in this section of the judgment we uphold Giles J's order against Glasgow Harley.

Summary

[90] In view of the length and detailed nature of this judgment we will bring together the essential elements in the following summary:

(1) The High Court has power to order a barrister to pay costs personally.

(2) That power may be exercised if the barrister is in serious dereliction of his or her duty to the Court.

(3) The same power applies to solicitors and on the same basis.

(4) Both Mrs Harley and Glasgow Harley were incompetent to a level which amounted to a serious dereliction of their duties to the Court. The order made against them by Giles J was therefore justified.

Formal disposition of appeals and cross appeal

[91] We therefore dismiss both appeals and the cross appeal and order Mrs Harley and Glasgow Harley, jointly and severally, to pay Mr McDonald costs in the sum of $5,000 plus disbursements to be fixed if necessary by the Registrar.

Solicitors
Phillips Fox, Auckland, for Appellant Harley
Carter & Partners, Auckland, for Appellant Glasgow Harley
Mackay & Gilkison, Wellington, for Respondent McDonald
Jones Fee, Auckland, as amici curiae
Bell Gully Buddle Weir, Wellington, for NZ Bar Association

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