Fallout … Defamation case from 2000 that ran off the tracks … Legal stupidity … Excruciating manoeuvring … Bankruptcy … Delay … Despair … 18 years in the works … All in the ACT Supreme Court … Janek Drevikovsky on the case
That takes the saga of Noel Johnson (client) and Alan Powrie (lawyer) into its 18th year – a Fordyce v Fordyce-style slog that began in 2000 with a bungled defamation claim, passed through years of will-they-won’t-they mediation and has suffered from more than one judicial error.
The latest instalment of Johnson v Powrie was heard in February 2015 and decided in October 2018, with a 102-paragraph judgment from Richard Refshauge, who officially retired from the bench in May 2017. His Honour devoted 74 of those paragraphs to the proceedings’ “tortuous” background.
It began when Johnson engaged Powrie to conduct defamation proceedings in the NSW Supreme Court. Powrie fell at the first hurdle, failing to effectively serve the statement of claim. By this time, it was 2003, so Powrie had to apply for an extension.
The plaintiff was unsuccessful in the action with costs awarded against him. Years later, in 2017, Powrie was struck off for his mismanagement of Johnson’s case.
In 2005, Johnson began negligence proceedings against Powrie in the ACT Supreme Court, seeking damages for the costs of the failed defamation action.
The parties purported to settle by deed of release in 2009. But there was a problem – Powrie’s professional indemnity policy only extended to part of the damage claimed, but not to the defective service and extension of time.
The insurer was prepared to cover $30,967.98, as calculated by professional costs assessor Legalcost.
When it came to the fees outside the insurer’s remit, Powrie and Johnson decided to do things on the cheap. Rather than use Legalcost, whose services the insurer had paid for, they applied for the Supreme Court Registrar to do the maths instead – a no-fee service.
These scant pieces of silver did not satisfy Johnson. So he asked the Deputy Registrar to reconsider her decision, claiming that r.1851 of the Court Procedures Rules gave her the power to do so.
But, as Refshauge noted, r.1851 only applies to assessments on costs payable by one party to another party. There is no similar power in the case of costs payable by a person to their solicitor – only a right to appeal the registrar’s assessment to a judge (r.6256).
Nonetheless, the Deputy Registrar reconsidered her decision. This time she gave written reasons:
“Mr Johnson sought reimbursement of costs paid to Mr Powrie for legal work performed in September and October 2003 allegedly paid for twice.”
The Deputy Registrar’s assessment remained unchanged at $500, and she said “neither party stated that they were unhappy and in accordance with the deed the matter was finalised”.
Finalised things were not. Johnson applied for a review of the Deputy Registrar’s decision, again applying an inapplicable rule, this time r.1855. Even so, his application came before Master Harper in 2010. He dismissed the application, holding the Deputy Registrar had no power to reconsider the assessment, and so there was no decision to review.
Neither Powrie nor Johnson brought the Master’s attention to r.6256, which provides for appeals on costs assessments between client and solicitor.
These were features, said Refshauge J, which “suggested that the Master’s approach was incorrect”.
The court made no orders, suggesting the Deputy Registrar’s decision was a “nullity”, and encouraged the parties to try mediation.
This the parties did, eventually agreeing in August 2011, that Powrie would pay Johnson $10,000 within 28 days, and that the pair would execute a deed of release and immunity.
No prizes for guessing what happens next – Powrie refused to pay, saying Johnson had not executed the deed as required. Johnson demanded the money and sent Powrie a document which purported to satisfy the mediation agreement. Powrie persisted, arguing the agreement was not binding or, alternatively, that Johnson had repudiated it.
In December 2012, Johnson launched proceedings in the ACT Magistrate’s Court for payment of $10,000.
Johnson also applied in the Supreme Court for an extension of time to assess his costs and to appeal the Deputy Registrar’s decision. Refshauge had some difficulty tracing the outcome of these applications, which were recorded differently in the bench book and the court files. Eventually, he concluded Terry Higgins CJ had dismissed the first application and adjourned the second application generally.
Soon after, in May 2013, Powrie was declared bankrupt on his own petition. One Stephen Hundy was allegedly appointed trustee, though Refshauge said he had seen no evidence of the appointment.
The 2015 listing came before Refshauge because no steps had been taken in the appeal, and “it was appropriate for the court to consider” what should be done.
Powrie’s lawyers applied for the appeal to be dismissed and costs awarded. Yet since Powrie was now a bankrupt, it came into question whether the proceedings could progress at all, or how they might be altered.
HH pointed out that under s.58(3) of the Bankruptcy Act creditors cannot commence or take steps in proceedings relating to a provable debt. This provision, he decided, applied to the present case, since the nexus between a “provable debt” and the relevant proceedings could be indirect.
Johnson therefore could not take further steps in the matter, unless the Federal Court granted leave (s.27(1) of the Bankruptcy Act).
Refshauge said the right to conduct the proceedings was a chose in action which had vested in Hundy, the trustee, under s.58(1) of the Bankruptcy Act.
He held Hundy could elect, if he wished, to take over the proceedings, but said there was no obligation to do so. Citing Borneman v Wilson (1884) 28 Ch D 53, Refshauge stressed that if Hundy made an election, he would have to take the matter as he found it, and would be liable to pay costs in the event of failure.
To take over the proceedings Hundy would have to apply to become a party under r.5103 of the Court Procedures Rules. Unless and until that happened, the emeritus judge said it “is not appropriate to give any directions” and “the proceedings cannot continue”.
He did, however, leave one way out – even if Hundy did not apply to be joined as a party, Johnson could still apply for leave to bring the proceedings to an end.
Which, after 18 years of judicial ping pong, might be an act of mercy.