K Muc Trading As G H Healey & Co Sydney v Descaretes Pty Ltd [2006] NSWCA 69 (24 April 2006)

Last Updated: 1 May 2006

NEW SOUTH WALES COURT OF APPEAL

CITATION: K Muc Trading As G H Healey & Co Sydney v Descaretes Pty Ltd [2006] NSWCA 69



FILE NUMBER(S):
40241/05

HEARING DATE(S): 21/02/06

DECISION DATE: 24/04/2006

PARTIES:
Katarina Muc T/as G H Healey & Co Sydney (Claimant)
Descaretes Pty Ltd (Opponent)

JUDGMENT OF: Mason P Ipp JA

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 309/04

LOWER COURT JUDICIAL OFFICER: Garling DCJ

COUNSEL:
A J McQuillen (Claimant)
W Hutchings (Opponent)

SOLICITORS:
G H Healey & Co (Claimant)
Phillips Fox (Opponent)

CATCHWORDS:
LEGAL PRACTITIONERS - costs - application for costs order against solicitor - s 198M(1) of the Legal Profession Act 1987 (NSW) - the effect of a solicitor signing a certificate under s 198L(2) of the Legal Profession Act - discussion of whether proceedings had "reasonable prospects of success" - Lemoto v Able Technical Pty Ltd [2005] NSWCA 153; (2005) 63 NSWLR 300 applied. ND

LEGISLATION CITED:
Legal Profession Act 1987 (NSW), ss 198J, 198L(2), 198M(1) 198N
Supreme Court Act 1970, s 46A(2)
District Court Rules 1973 (NSW), Pt 5 r 2(1), Pt 5 r 2(2), Pt 47 r 5(1), Pt 47 r 5(4), Pt 48 r 3(1)

DECISION:
(1) The default judgment dismissing the application for leave to appeal is set aside (2) Ms Muc pay the costs thrown away in consequence of that judgment being granted by default, including the costs of the attendance by counsel for Descaretes on the morning of 21 February 2006 (3) The application for leave to appeal against the Costs Order made by Garling DCJ (requiring "the plaintiff's solicitor" to pay Descaretes' costs in the action brought by Ms Lincoln against it) is granted (4) The appeal by Ms Muc against the Costs Order is upheld with costs, which include the costs of the application for leave to appeal (5) The Costs Order is set aside.


JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40241/05

DC 309/04

MASON P

IPP JA

Monday 24 April 2006

KATARINA MUC T/AS G H HEALEY & CO SYDNEY v DESCARETES PTY LTD

Judgment

1 MASON P: I agree with Ipp JA.

2 IPP JA:

The matters before the Court

3 These reasons relate to three substantive matters, all involving the same case. The first matter is an application by the claimant, Katarina Muc “trading” as G H Healey & Co (solicitors), to set aside a judgment granted by default against her. By that default judgment, this Court dismissed an application by her for leave to appeal against a costs order (the “Costs Order”) made by Garling DCJ in terms of s 198M(1) of the Legal Profession Act 1987 (NSW). The second matter (subject to the first being resolved favourably to Ms Muc) is her application for leave to appeal against the Costs Order. The third (subject to the application for leave being resolved in her favour), is whether Ms Muc’s appeal against the Costs Order should be upheld.

4 It is necessary to explain how these three matters came before the Court.

5 Their source is the judgment of Garling DCJ, the subject of the application for leave to appeal and the appeal. This judgment concerned proceedings that stemmed from an action brought by Mary June Lincoln against Descaretes Pty Ltd, as first defendant, and Dr David Gronow, as second defendant. Ms Lincoln alleged that Dr Gronow and Descaretes administered facet joint injections to her negligently, as a result of which she contracted serious injuries.

6 On 1 October 2004, Garling DCJ dismissed Ms Lincoln’s claims against Descaretes and Dr Gronow on two grounds, namely, want of prosecution (under Pt 18 r 3 of the District Court Rules 1973 (NSW)) and failure on the part of Ms Lincoln to serve medical reports supporting her claim (in terms of Pt 28 r 9B of those Rules).

7 Thereafter, by notice of motion dated 11 October 2004, Dr Gronow sought an order that “the plaintiff’s [that is, Ms Lincoln’s] solicitor pay [Dr Gronow’s] costs of the proceedings”. On a date not revealed by the papers, Descaretes also filed a notice of motion claiming an order that the “plaintiff’s solicitor” pay its costs of the proceedings on an indemnity basis. In January 2005, Descaretes filed an amended notice of motion seeking the same relief. All three notices of motion were served on G H Healey & Co.

8 On 3 March 2005 Garling DCJ dismissed Dr Gronow’s notice of motion. He found that Ms Lincoln had a reasonably arguable case against him and “the solicitor” should not be ordered to pay costs.

9 Garling DCJ came to a different conclusion as regards Descaretes’ claim. He said that Descaretes, on a number of occasions, had informed “the plaintiff’s solicitor” that the plaintiff, Ms Lincoln, had sued “the wrong defendant”. His Honour said, “a lot of evidence” indicated that “the plaintiff could never have succeeded against [Descaretes]”. For that reason his Honour concluded that “the plaintiff’s solicitor should pay [Descaretes] costs of the proceedings”.

10 Although the motions filed by Descaretes and Dr Gronow sought orders pursuant to s 198M of the Legal Profession Act 1987 and Pt 39A r 14 of the District Court Rules, Garling DCJ remarked, “Neither matter was dealt with on the basis of the District Court Rules.”

11 Ms Muc applied for leave to appeal against the Costs Order. The application for leave to appeal was listed for hearing at 10.15am on 21 February 2006. When the application was called, there was no attendance on Ms Muc’s part. Mr Hutchings, counsel for Descaretes, quite properly asked the Court to stand the matter down until the end of the list. By 12.40 pm, all other matters in the list had been completed. There was still no attendance by any person on behalf of Ms Muc. The Court thereupon, by default, dismissed the application for leave with costs.

12 At some time after the matter was initially called for hearing that morning, Ms Muc briefed Mr McQuillen of counsel to attend court on her behalf. At his request the matter was again called in the afternoon. Mr McQuillen informed the Court that Ms Muc practised as G H Healey & Co, she was the claimant, and he was briefed on her behalf. He sought to have the default judgment against her set aside and requested the Court to grant leave to appeal. Mr Hutchings, on behalf of Descaretes, opposed these applications.

13 After Mr McQuillen had made his submissions, Mason P asked him to state once again why Ms Muc had not been represented when the matter was called at 10.15 am. Mr McQuillen said:

“I was notified of the hearing date at the callover. I had no further communication with the solicitors in relation to this matter and my retainer for the purpose of this hearing and I had no specific retainer for the purpose of this hearing. I understand, and my solicitors want it known to the Court that they, that it’s an oversight, there was a system in the office. I in fact wrote to the solicitors, formally advised them of the hearing date fixed by the Court and that it was an oversight on their part that had missed the day and they apologised to the Court and to the defendants for the inconvenience ...”

14 Mason P had earlier asked Mr Hutchings what his attitude was to the application to set aside the order made by default. Mr Hutchings replied:

“My instructions are to oppose the application but truly it is a matter for your Honours. I can’t advance a reason other than having secured the order we would like to hold on to it.”

15 The Court proceeded to hear full argument on the application for leave. The argument canvassed in detail all matters that would be relevant to an appeal (that is, were the application to set aside the default judgment and the application for leave to appeal to be granted). At the conclusion of argument, Mason P asked the parties whether they consented to the Court “as presently constituted” treating what had occurred “retrospectively as a rolled up hearing”. His Honour suggested that, subject to the Chief Justice giving a direction in terms of s 46A(2) of the Supreme Court Act 1970, the appeal be heard and determined by two judges of appeal, dealing with the matter as an appeal. The Court then reserved its judgment.

16 The parties have consented to the appeal being treated as if it were heard concurrently with the appeal. The parties were given leave to file further written submissions, which they did. The Chief Justice has directed that the Court, constituted by Mason P and myself, hear the appeal

17 Accordingly, these reasons concern Ms Muc’s application to set aside the default judgment, the application for leave to appeal, and the appeal.

The application to set aside the judgment by default and the rolled up application for leave and appeal

18 Less than two hours elapsed between the grant of default judgment and the application to set it aside. Descaretes would suffer no relevant prejudice were the judgment to be set aside. An explanation was given for the omission by Ms Muc to arrange for counsel to appear on its behalf when the matter was called. That explanation, in essence, was that the failure was caused by neglect on her part.

19 In the circumstances, it seems to me that the question whether the application to set aside the default judgment should be granted depends on whether a miscarriage of justice would be the result, were that not to occur. That would be the case were this Court to conclude that the judgment against Ms Muc was plainly wrong.

20 Accordingly, I shall first consider the merits of the rolled up application for leave to appeal and appeal.

21 Basically, two principal issues were argued. These were:

(a) Whether the Costs Order made against “the plaintiff’s solicitor” was an order against Ms Muc or whether it was an order against Mr Healey. Ms Muc contended that she, as the proprietor of G H Healey & Co, was “the plaintiff’s solicitor” in terms of the judge’s order. Descaretes, on the other hand, contended that Mr Healey was “the plaintiff’s solicitor” and the judge’s order applied to him. On that basis, according to Descaretes, Ms Muc had no standing to appeal against the judge’s order.

(b) On the assumption that the Costs Order applied to Ms Muc and she had standing to appeal, whether Garling DCJ was correct in holding that, on the evidence, Ms Lincoln “could never have succeeded” against Descaretes.

22 The cardinal issue in regard to standing is whether Garling DCJ intended, in making the Costs Order against “the plaintiff’s solicitor”, to make an order against Ms Muc (as G H Healey & Co) or whether he intended to make an order against Mr Healey, personally. His Honour did not expressly indicate the person (or firm) against whom (or which) his order was made. Thus, his Honour’s intention has to be discerned from his judgment and the surrounding circumstances.

The relevant statutory provisions

23 Section 198M of the Legal Profession Act was the source of the power exercised by Garling DCJ in making the Costs Order and I shall set out the relevant provisions of that Act.

24 Section 198J provides:

“(1) A solicitor ... must not provide legal services on a claim or defence of a claim for damages unless the solicitor or barrister reasonably believes on the basis of provable facts and a reasonably arguable view of the law that the claim or the defence (as appropriate) has reasonable prospects of success.

(2) A fact is provable only if the solicitor ... reasonably believes that the material then available to him or her provides a proper basis for alleging that fact.

...

(4) A claim has reasonable prospects of success if there are reasonable prospects of damages being recovered on the claim ...

(5) Provision of legal services in contravention of this section constitutes for the purposes of this Division the provision of legal services without reasonable prospects of success”.

25 Section 198L(2) provides:

“A solicitor ... cannot file originating process ... on a claim for damages unless the solicitor ... certifies that there are reasonable grounds for believing on the basis of provable facts and a reasonably arguable view of the law that the claim ... has reasonable prospects of success.”

26 Section 198M(1) provides:

“If it appears to a Court in which proceedings are taken on a claim for damages that a solicitor ... has provided legal services to a party without reasonable prospects of success, the Court may of its own motion or on the application of any party to the proceedings make either or both of the following orders in respect of the solicitor ... who provided the services:

(a) ...

(b) an order directing the solicitor ... to indemnify any party other than the party to whom the services were provided against the whole or any part of the costs payable by the party indemnified.”

27 Section 198N provides:

“(1) If the Court (the trial court) hearing proceedings on a claim for damages finds that the facts established by the evidence before the Court do not form a basis for a reasonable belief that the claim ... had reasonable prospects of success, there is a presumption for the purposes of this Division that legal services provided on the claim ... were provided without reasonable prospects of success.

(2) ...

(3) A presumption arising under this section is rebuttable and a solicitor ... who seeks to rebut it bears the onus of establishing that at the time legal services were provided there were provable facts (as provided by s 198J) that provided a basis for a reasonable belief that the claim ... on which they were provided had reasonable prospects of success.”

28 These provisions speak for themselves. I would note merely that they do not indicate that a solicitor, who provides legal services to a party without reasonable prospects of success in terms of s 198M(1), is necessarily the solicitor who provides a certificate in terms of s 198L(2).

29 Ms Lincoln commenced her action against Descaretes and Dr Gronow on 30 January 2004. On that date Pt 5 r 2(1) of the District Court Rules provided that, where a plaintiff sues “by a solicitor”, an originating process must be signed “by or on behalf of the solicitor in accordance with the Rules”. Part 5 r 2(2)(a) provided that where the plaintiff sues by a solicitor, an originating process shall have subscribed to it “the name, address and telephone number of the solicitor”. Part 47 r 5(1) provided:

“Where any signature by a solicitor (the Solicitor) is required or permitted for the purpose of any proceedings, the signature for the Solicitor by any of the following persons shall, as well as the signature of the Solicitor, be sufficient:

(a) a partner of the Solicitor

...

(d) a solicitor employed by:

(i) the Solicitor, or

(ii) ..., or

(iii) the Solicitor’s employer, or

(iv) the firm in which the Solicitor ... is a partner.”

Part 47 r 5(4) provided:

“A signature made pursuant to this rule shall be accompanied by a statement of the capacity in which the signature is made.”

Part 48 r 3(1) provided:

“Where a solicitor signs, and files on behalf of a party in any proceedings, any originating process ... the solicitor shall be the solicitor of the party on the record of the proceedings.”

30 As regards these provisions, I would note that Pt 47 r 5(1) contemplates that the “Solicitor” in terms of Pt 47 and Pt 48 may be a partner of a solicitor or an employee of a solicitor. The signature for the Solicitor by any of those persons is sufficient compliance with requirements under the Rules that the Solicitor must provide his or her signature for the purpose of any proceedings. Part 47 r 5(1)(d)(iv) indicates that the Solicitor may be a partner of a firm, but, apparently, not the firm itself.

The factual circumstances relating to the standing of Ms Muc

31 Ms Lincoln’s statement of claim was filed on 30 January 2004. It was signed by Mr Healey and under his signature appeared the words “Plaintiff’s Solicitor By her Consultant”. In accordance with Pt 5 r 2(2), the statement of claim had subscribed to it the name and address of G H Healey & Co as well as the telephone number of that firm.

32 The expression “Plaintiff’s Solicitor By her Consultant” suggests that Mr Healey signed the statement of claim as an employee of the Solicitor. The insertion of the name of G H Healey & Co, and the reference to Mr Healey being the consultant of a woman (singular), indicates that Mr Healey was employed as consultant to the female proprietor of that firm. The insertion of the name, address and telephone number of G H Healey & Co was apparently intended to be in compliance with Pt 5 r 2(2)(a).

33 On 3 September 2004, Mr Bradford William Gower, a solicitor, made an affidavit. The papers do not reveal in support of which application the affidavit was filed, but its contents refer to the dismissal of Ms Lincoln’s claim and s 198 of the Legal Profession Act. In this affidavit Mr Gower testified that he was a solicitor in the employ of G H Healey & Co “and as such, have recently assumed conduct of this matter on behalf of the plaintiff, under the supervision of my Principal”.

34 An affidavit by Ms Keely Louise Graham, a solicitor in the employ of Phillips Fox, Descaretes’ solicitors, indicated that in May 2004 she was dealing with Mr Gower on the basis that he was the solicitor acting for Ms Lincoln (as an employee of G H Healey & Co).

35 On 8 December 2004, Mr Gower made a further affidavit, again saying that he was a solicitor in the employ of G H Healey & Co. He stated in this affidavit that Ms Lincoln’s file had been allocated to him on or about 22 April 2004 and, until about 26 October 2004, he had had the carriage of the matter on a day to day basis, under the supervision of his principal. Annexed to this affidavit was a letter dated 23 April 2004 written by G H Healey & Co to Phillips Fox stating:

“Due to an internal reorganisation, this matter has been allocated to Mr Brad Gower of our Sutherland office for ongoing carriage.”

The letter ended:

“Contact Brad Gower

Consultant: Greg Healey”

36 By affidavit sworn on 14 December 2004, Ms Cassandra Siaw Lei Tan, a solicitor, testified that she was a solicitor “in the employ of the solicitor of the plaintiff”. She stated that Mr Gower was no longer employed by G H Healey & Co. It appears that at the date of Ms Tan’s affidavit she was conducting the matter on behalf of Ms Lincoln. Ms Tan described Mr Healey as “the senior consultant to this practice”.

37 On 30 January 2004, a s 198L certificate, signed by Mr Healey as “Plaintiff’s Solicitor By her Consultant”, was filed with the District Court.

38 On 10 April 2004 Dr Gronow’s solicitors filed a notice of motion on G H Healey & Co. By that notice Dr Gronow applied for the dismissal of Ms Lincoln’s cause of action for failure to comply with Pt 28 r 9B of the District Court Rules.

39 On 13 May 2004 Phillips Fox, for Descaretes, served a similar notice of motion on G H Healey & Co, as the solicitors for Ms Lincoln. On 11 June 2004 Dr Gronow’s solicitors served Dr Gronow’s defence on G H Healey & Co, as Ms Lincoln’s solicitors.

40 On 28 September 2004 G H Healey & Co filed and served a notice of motion on behalf of Ms Lincoln seeking an extension of time to file an expert’s report on her behalf and an extension of time for the hearing of the motions of Descaretes and Dr Gronow seeking dismissal of Ms Lincoln’s claim.

41 Dr Gronow’s notice of motion seeking an order that “the plaintiff’s solicitor” pay Dr Gronow’s costs of the proceedings was served on Ms Lincoln “C/o - G H Healey & Co”. Descaretes notice of motion seeking an order that “the plaintiff’s solicitor” pay Descaretes costs of the proceedings was served on:

“The Plaintiff
C/- G H Healey & Co”

An amended notice of motion by Descaretes seeking similar relief, but dated 10 January 2005, was served in the same way.

42 On 21 February 2004, Ms Graham filed an affidavit, presumably in support of Descaretes’ notice of motion seeking an order that Ms Lincoln’s solicitor pay its costs. To this affidavit she attached a series of letters from G H Healey & Co on behalf of Ms Lincoln to Phillips Fox. One of those letters (dated 21 December 2004) asked G H Healey & Co to “please confirm unequivocally that you are instructed by, and that Mr McQuillen is briefed for both the plaintiff and the plaintiff’s solicitor”. G H Healey & Co replied by letter dated 27 January 2005 saying that it was awaiting advice from counsel.

43 On 15 December 2004, Garling DCJ heard the motions of Descaretes and Dr Gronow that “the plaintiff’s solicitor” pay their costs. The judge asked Mr McQuillen for whom he was appearing. Mr McQuillen replied that he appeared for Ms Lincoln and did not appear for “the solicitor”. Later, however, Mr McQuillen said that he had instructions to appear for G H Healey & Co in relation to the motions.

44 During the course of argument Garling DCJ asked:

“Were these served, the two motions, served upon the solicitor who it is alleged would be paying costs?”

45 Mr S Davis, then appearing for both Descaretes and Dr Gronow, replied, “they’ve been served on G H Healey & Co at the address which has always been nominated for that firm”. The following exchange then occurred:

“HIS HONOUR: Who do you say should be paying the costs?

DAVIS: Well the motion specifies the plaintiff’s solicitor. The record has it that the plaintiff’s solicitor is Gregory Harrison Healey ...”

In context, the statement that the record indicated that Ms Lincoln’s solicitor was Mr Healey, was based on the fact that Mr Healey signed the s 198L certificate.

46 The following exchange then occurred:

“HIS HONOUR: Yes, but hang on a second. And you say it has been served upon G H Healey & Co, Bondi Junction.

DAVIS: Yes.

HIS HONOUR: Which was the address for service?

DAVIS: Yes, I’ll just check that ...”

47 Mr Davis then indicated that the motions were indeed served on G H Healey & Co and said:

“... [c]ertainly Mr Gower filed an affidavit and served it on us, answering the matters that were raised by the application.”

48 Garling DCJ responded:

“Now, Mr McQuillen, it appears they have been served upon the solicitor, so what’s your application? I take it that you’re appearing in the interests of G H Healey & Co?”

Mr McQuillen replied in the affirmative and said that he had “just got those instructions”.

49 Garling DCJ asked Mr McQuillen if he was content for him (the judge) to hear the motions of Descaretes and Dr Gronow. Mr McQuillen answered in the affirmative. Mr Davis proceeded to say, “I move on two notices of motion”. Mr Davis did not object to Mr McQuillen opposing the motions on behalf of G H Healey & Co and did not query his standing. The motions were then heard.

50 The exchanges on 15 December 2004 before Garling DCJ, and the culmination thereof as described in the preceding two paragraphs, indicate that his Honour was satisfied that “G H Healey & Co” be regarded as the party at risk in having a costs order under s 198M of the Legal Practitioners Act made against it.

51 On 3 March 2005, Garling DCJ delivered judgment. His Honour recounted the relevant history which he commenced by stating:

“The plaintiff’s solicitors filed a statement of claim, the plaintiff’s solicitors were G H Healey & Co.”

The judge referred to the fact that on 30 January 2004 Mr Healey signed a certificate in terms of s 198L of the Legal Profession Act. His Honour went on to refer to a number of appearances “where the solicitor, Mr Gower, was appearing for the plaintiff”. In the course of his judgment Garling DCJ referred to “the plaintiff’s solicitor” having been told on a number of occasions that Descaretes did not provide any treatment, equipment or premises for the treatment of Ms Lincoln. G H Healey & Co was told this by letters written to it by Phillips Fox.

Conclusion as to the standing of Ms Muc

52 All the documents filed and served on behalf of Ms Lincoln in her action were filed and served by G H Healey & Co. All the documents served by the solicitors for Dr Gronow and Descaretes in that action were served on G H Healey & Co. The correspondence between the parties’ solicitors was between the solicitors acting for Descaretes and Dr Gronow, on the one hand, and G H Healey & Co, acting for Ms Lincoln, on the other.

53 From time to time, prior to trial, a number of different solicitors, all of whom were acting as employees of G H Healey & Co, had the carriage of the matter for Ms Lincoln.

54 At the hearing of the motions that led to the Costs Order made by Garling DCJ, Mr McQuillen made it plain that he was acting for G H Healey & Co. Mr Davis, for Descaretes, although initially asserting that the “plaintiff’s solicitor” was Mr Healey, did not demur when Mr McQuillen said that he was representing G H Healey & Co and, as I have noted, did not challenge Mr McQuillen’s standing.

55 In Garling DCJ’s judgment, he specifically referred to G H Healey & Co as Ms Lincoln’s solicitors who filed the statement of claim.

56 Generally, the matters to which I have referred indicate that his Honour intended his order to refer to G H Healey & Co. The fact that Mr Healey signed the s 198L certificate does not detract from this. There is nothing in the Legal Profession Act that indicates that the solicitor who signed the s 198L certificate is to be taken to be the solicitor who has provided legal services without reasonable prospects of success in terms of s 198M. The Rules of the District Court, as I have explained, do not take the issue further.

57 In my opinion, Descaretes’ argument that the order made by Garling DCJ applies to Mr Healey (and not the proprietor of G H Healey & Co) has no substance. At the hearing before this Court, Mr McQuillen represented Ms Muc being, he said, the proprietor of G H Healey & Co. On that basis, Mr McQuillen was representing a party who had standing to bring the application.

The factual circumstances relating to Ms Lincoln’s case against Descaretes

58 Ms Lincoln was a nurse. On 9 September 1987 and 4 November 1993 she injured her spine at work. In about 1996 her general practitioner referred her to Sydney Pain Management Centre at Ryde for treatment of her injuries. There, over a period of time, she received treatment from various doctors. These doctors included Dr Gronow.

59 In 1997 a doctor at Sydney Pain Management Centre in Ryde advised Ms Lincoln to undertake a course of facet joint injections. Ms Lincoln was told that that treatment was not conducted at the Sydney Pain Management Centre’s Ryde premises but was carried out at rooms in Macquarie Street, Sydney. She was asked to make an appointment there. She did so with the staff at the Sydney Pain Management Centre at Ryde.

60 Ms Lincoln kept the appointment at Macquarie Street, Sydney and there met Dr Gronow. The rooms where Ms Lincoln so attended were those of an imaging company. She understood that the facet joint injections were to be carried out under the guidance of x-rays. Dr Gronow proceeded to administer the injections.

61 After the first round of treatment, Ms Lincoln attempted to make a further appointment with the receptionist at the Macquarie Street rooms. The receptionist however refused to make an appointment and informed Ms Lincoln that appointments needed to be made through Sydney Pain Management Centre at Ryde. This Ms Lincoln did.

62 The procedure was that she would ring Sydney Pain Management Centre at Ryde and ask for an appointment with Dr Gronow for facet joint injections. She would then be given an appointment that she would keep at the Macquarie Street, Sydney, rooms.

63 For the period from 1997 to 2 February 2001, about three times a year, Ms Lincoln continued to receive these facet joint injections from Dr Gronow at the rooms in Macquarie Street, Sydney.

64 On 2 February 2001, when Dr Gronow was treating Ms Lincoln at the rooms in Macquarie Street, Sydney, she was infected by staphylococcus. This was the last occasion on which Dr Gronow administered injections to her.

65 Garling DCJ said:

“... [t]he plaintiff sets out a history which no doubt the solicitor accepted and that history was that she was treated by the doctor, that she was a nurse, that it was her belief that the procedure being carried out may not have been carried out in conditions which were as ideal as they should have been, that immediately after, or shortly after, one of these injections she suffered a very severe reaction, sought treatment and as a result suffered considerable pain and disability and matter of that nature.”

66 It was on that basis that his Honour found that Ms Lincoln had a reasonably arguable case against Dr Gronow.

67 Ms Lincoln sued Descaretes trading as the Sydney Pain Management Centre. After the statement of claim was served, Descaretes’ solicitors wrote to G H Healey & Co saying, in effect, as Garling DCJ observed:

“You have the wrong defendant. The treatment was not carried out at the Sydney Pain Management Centre but was carried out at another place. If you are alleging they were negligent in what they did then you should be bringing proceedings against them.”

68 Garling DCJ said of this advice:

“The plaintiff’s solicitor was told this on a number of occasions, but, as I see it, did nothing about that and continued to pursue the claim against the clinic. They were told on a number of occasions they had the incorrect first defendant. It would not have been a difficult matter to find who the correct first defendant was. In this day and age one can have discovery, interrogatories, and matters of that nature, which would quickly have revealed where the treatment was actually carried out and who was in control of that place. None of that was done. The case simply continued on against [Descaretes], and whilst I was reluctant to deal with that matter when I dismissed the case I have since had tendered to me a lot of evidence which would indicate that the plaintiff could never have succeeded against [Descaretes] and accordingly I am of the view that that activates s 198M of the Legal Profession Act 1987 ...”

69 Mr Gower testified that on 29 January 2004 an on-line inquiry was made “as to the ultimate holding entity of Sydney Pain Management Centre”. The inquiry revealed that the trading name of Descaretes was Sydney Pain Management Centre. In the considerable correspondence that passed between the solicitors on this issue, Phillips Fox never denied that Descaretes traded as Sydney Pain Management Centre.

70 On 27 July 2004, G H Healey & Co obtained a “historical extract” from the Australian Securities & Investment Commission. This showed Descaretes’ principal place of business to be Macquarie Street, Parramatta and that, from December 1996 to December 2000, it had had its place of business in Elizabeth Street, Sydney. The extract also showed that Dr Gronow and one Robyn Gronow (of the same address as Dr Gronow) were the two directors of Descaretes.

71 In his affidavit of 28 September 2004, Mr Gower described Dr Gronow as “a director, shareholder, and the medical director of Sydney Pain Management Centre”. An extract of a search at the Australian Securities & Investment Commission annexed to that affidavit showed Descaretes’ registered office as being in Elizabeth Street, Sydney.

72 Mr Gower’s affidavit also annexed statements of account from Sydney Pain Management Centre to GIO (Newcastle) for the period from 29 February 1996 to 3 July 1998. These referred to work done by Sydney Pain Management Centre in 1996 and 1998 in Sydney. The statements of account contained the words “Sydney Pain Management Centre” and underneath them, the words “Sydney and Parramatta”.

73 Descaretes relied on an affidavit Ms Quinn, the general manager of the Sydney Pain Management Centre. Ms Quinn said:

“2. I have reviewed [Descaretes] records and based on this review I believe that [Descaretes]:

2.1 did not provide any treatment to the plaintiff on or about 2 February 2001;

2.2 did not provide equipment or premises for any treatment of the plaintiff on or about 2 February 2001.”

Did Ms Lincoln have a reasonably arguable case against Descaretes?

74 Mr Hutchings (on behalf of Descaretes) submitted that the evidence revealed merely that Dr Gronow was attached to the Sydney Pain Management Centre, had rooms at Ryde, and carried out procedures at the premises of the imaging company. He submitted that there was no evidence that that the imaging company had anything to do with the Sydney Pain Management Centre. Mr Hutchins submitted that, when Dr Gronow was carrying out procedures at the rooms of the imaging company, he was acting in a capacity unconnected with Sydney Pain Management Centre.

75 Mr Hutchings submitted that, in March 2004, by the letters from Phillips Fox, G H Healey & Co was put on notice that Descaretes was not a proper party to the proceedings. G H Healey & Co should not have continued with the proceedings, he submitted, without requiring discovery and interrogatories.

76 In my view, however, there were several factors that would have suggested to a reasonable solicitor in the position of G H Healey & Co that Dr Gronow was acting on behalf of Descaretes when he administered treatment to Ms Lincoln at the rooms in Macquarie Street, Sydney.

77 Firstly, Dr Gronow - as one of two directors of Descaretes (the second being a person of the same surname living at the same address as him) - appears to have been able to exercise significant control over Descaretes. He was also a shareholder of the company and its medical director. Dr Gronow having treated Ms Lincoln on behalf of Sydney Pain Management Centre at its rooms of in Ryde, there was a reasonable inference that he continued to treat her on behalf of Sydney Pain Management Centre at the rooms in Macquarie Street, Sydney.

78 Secondly, this inference was reinforced by the fact that Ms Lincoln, as she was required to do, made her appointments to see Dr Gronow at Macquarie Street, Sydney by speaking to a person at Sydney Pain Management Centre, Ryde.

79 Thirdly, the searches carried out by G H Healey & Co (as well as the Sydney Pain Management Centre statements of account) showed that the Sydney Pain Management Centre carried on business in Sydney.

80 Fourthly, Descaretes did not file a defence to Ms Lincoln’s claim.

81 Fifthly, in her affidavit, Ms Quinn said nothing about whether the Sydney Pain Management Centre carried on any business in Macquarie Street, Sydney. Nor did she say anything about the treatment that Ms Lincoln alleged she had received from Dr Gronow at the Macquarie Street, Sydney premises prior to 2 February 2001. Ms Quinn did not traverse any of the other allegations made by Ms Lincoln. Further, when Ms Quinn testified that there were no records of any treatment administered to Ms Lincoln, she did not say what records she examined, so that it is not known whether she looked at part or all of the records of the Sydney Pain Management Centre.

82 Sixthly, although Dr Gronow was the person who was alleged to have administered the injection on 2 February 2001 that caused the infection, and although he was one of the two directors of Descaretes and its medical director, he did not make any affidavit refuting the allegation that when he treated Ms Lincoln in Macquarie Street, Sydney, he did so on behalf of Sydney Pain Management Centre.

83 Seventhly, Descaretes did not provide any evidence to the effect that it did not carry on business in Macquarie Street, Sydney, or anywhere else in the city.

84 In Lemoto v Able Technical Pty Ltd [2005] NSWCA 153; (2005) 63 NSWLR 300 McColl JA said at 320 to 321:

“The jurisdiction to order a legal practitioner to pay the costs of legal proceedings in respect of which he or she provided legal services must be exercised ‘with care and discretion and only in clear cases’”.

The same sentiments were reiterated by Young CJ in Eq (with whom Santow JA and Bryson JA agreed) in Re The Black Stump Enterprises Pty Ltd and Associated Companies (No 2) [2006] NSWCA 60 at [8] to [9].

85 In my view, Garling DCJ plainly erred in finding that “a lot of evidence” indicated that “the plaintiff could never have succeeded against [Descaretes]”. In my view it was perfectly reasonable for G H Healey & Co to refuse to accept the bald assertion of Phillips Fox that, by suing Descaretes, Ms Lincoln had sued the wrong defendant

Conclusion

86 In view of the firm conclusion to which I have come on the merits of the appeal, it would be a miscarriage of justice were the default judgment to remain.

87 Accordingly, I propose the following orders:

(a) The default judgment dismissing the application for leave to appeal is set aside.

(b) Ms Muc pay the costs thrown away in consequence of that judgment being granted by default, including the costs of the attendance by counsel for Descaretes on the morning of 21 February 2006.

(c) The application for leave to appeal against the Costs Order made by Garling DCJ (requiring “the plaintiff’s solicitor” to pay Descaretes’ costs in the action brought by Ms Lincoln against it) is granted.

(d) The appeal by Ms Muc against the Costs Order is upheld with costs, which include the costs of the application for leave to appeal.

(e) The Costs Order is set aside.

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LAST UPDATED: 01/05/2006