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Bankrupt man makes ‘elaborate’ allegations against law firm
In an effort to dodge a costs order, a bankrupt man accused a law firm of using delays, the withholding of material, and “false or misleading submissions” to force him into withdrawing his matter.
Naomi Neilson
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Peter Bruce Manzo alleged Cowen Schwarz Marschke Lawyers (CSM) forced him to file a “notice of withdrawal” application the day before an appeal fight to overturn an order of a Federal Court registrar that his estate be sequestrated under the Bankruptcy Act.
CSM Lawyers had been involved in the bankruptcy matter as the petitioning creditor and was awarded a costs order by the registrar.
The withdrawal application had the effect of being taken as a notice of discontinuance, but with the qualification that it carried with it the withdrawal be on the basis that there be no further order for costs.
To prevent the Federal Court from making this costs order, Manzo made the “elaborate” allegations that the firm forced his hand by what he alleged were delays, withholding of sealed files, late service, breaches of filing timetables, and false or misleading statements.
However, Justices John Logan, Melissa Perry and Mary Meagher found the withdrawal application was a “voluntary act”, which usually comes with an “adverse costs consequence”.
“His submissions as to costs were really nothing more than an endeavour to rehearse the merits of an appeal taken to have been discontinued by him under the guise of resisting the making of a costs order,” Justices Logan, Perry and Meagher said.
Turning to whether CSM should receive the costs, the firm relied on the “Chorley” exception, which has been used by law practices in the past to achieve a costs order for the solicitor acting in the matter.
CSM argued it should be awarded a costs order for the solicitor because the size of its firm distinguishes it from the “sole director/sole shareholder” incorporated legal practice.
However, the full bench said there has never been a distinction drawn between a sole practitioner or small legal firm partnership and that of a large legal firm partnership in relation to costs orders.
“Having been rejected, it is difficult to see why the ‘Chorley’ exception should be reviewed based on the size of an incorporated legal practice,” Justices Logan, Perry and Meagher said.
“To do so would revive an inequality before the law in relation to the recovery of costs for a special class of litigant in person.”
While CSM was not entitled to a costs order for acting as a solicitor for itself, the bench said it is entitled to recover outlays.
“All that need to be said further is that we are not satisfied in the events which have transpired that the case is one warranting an order that outlays be assessed on an indemnity basis,” they said.
“Instead, the registrar ought to determine how much reasonably to allow in respect of outlays on the usual party and party basis.”
Naomi Neilson
Naomi Neilson is a senior journalist with a focus on court reporting for Lawyers Weekly.
You can email Naomi at:
