Express law No. 11

15 October 2004

Inappropriateness of a plaintiff's solicitor contacting
a defendant who is, or is to be indemnified

In the ACT it is regarded as inappropriate conduct
for a plaintiff's solicitor to contact a prospective
defendant, at least in relation to a motor vehicle claim
where the defendant is, or is to be indemnified by a
third party insurer.

A solicitor obtaining a statement from a witness where
all other information known about the matter is inconsistent
with that statement is likely to be considered as improper
and unreasonable conduct warranting a costs sanction.

James Hills v Sam Raunio & Ors

Supreme Court of the Australian Capital Territory,
1 October 2004, Connolly J, [2004] ACTSC 98

Background

The plaintiff suffered catastrophic spinal injuries in
a single vehicle motor vehicle accident on 9 June 1995
in NSW. The plaintiff had borrowed a motorbike from the
first defendant, a fellow employee of the third defendant
at a forestry settlement, and was riding back to the accommodation
area of the camp when he struck a fence post. It was agreed
that if liability were established damages should be assessed
at $1.55 million.

It was alleged by the plaintiff that the accident occurred
as a consequence of the motorbike's faulty brakes
and that the first and third defendants were liable for
the plaintiff's injuries as they were aware the motorbike
had faulty brakes and they had failed to warn the plaintiff.

Plaintiff's solicitor's conduct

In the course of preparing the matter for trial the plaintiff's
solicitor had a telephone conversation with the first defendant
and took file notes wherein it was recorded that the first
defendant denied there were problems with the brakes prior
to the accident. Subsequently the solicitor obtained a
signed statement from the first defendant which contained
an admission that the brakes were in need of readjustment
prior to the accident.

Substantive proceedings

Connolly J entered judgment for the defendants. In doing
so His Honour:

  • accepted the signed statement obtained by the plaintiff's
    solicitor from the first defendant was a falsehood
  • accepted the first defendant had signed the statement
    without reading its content, assuming it reflected the
    content of the earlier telephone conversation with the
    solicitor, namely that the brakes were not faulty to
    his knowledge
  • stated that in order to find for the plaintiff, there
    must be a finding that the brakes of the motorcycle had
    failed, and the first and third defendants were aware
    of the faulty brakes prior to the accident and had failed
    to warn
  • found that this was not proven on the evidence
  • was critical of the conduct of the plaintiff's
    employed solicitor in directly approaching the first
    defendant and obtaining the signed statement from him,
    contrary to the telephone notes of the prior conversation.

Application for indemnity costs against the plaintiff's
solicitor

Subsequently the defendants brought an application for
indemnity costs against the plaintiff's solicitor
on the basis of the critical findings in Connolly J's
judgment. His Honour awarded indemnity costs against the
plaintiff's solicitor for two days of the hearing.

Findings

In relation to the conduct of the plaintiff's solicitor
Connolly J said [22]:

there should be no question that … in the Australian
Capital Territory it will be regarded as quite inappropriate
conduct for a plaintiff's solicitor to contact
a prospective defendant, at least in a motor vehicle
accident where that defendant will be covered by third
party insurance.

In relation to the indemnity costs order Connolly J found
[23]–[25]:

the decision to contact Mr Raunio [the first defendant] … is
not conduct which itself would justify an adverse costs
order.

The false admission document, however, is another matter … [and]
was conduct deserving of some sanction. This was, on
any view, improper and unreasonable conduct, and it seems
to me that a costs sanction is appropriate.

… It is clearly the law that the costs sanction
is "not to punish the solicitor, but to protect
the client who has suffered and to indemnify the party
who has been injured" (per Viscount Maugham in
Myers v Elman at 289). The costs order should therefore
be limited to the extent that the improper conduct has
put the defendants to unreasonable costs.

Implications for clients

  • Consideration should be given to seeking a third party
    costs order and/or indemnity costs order where another
    party or third party's conduct has improperly added
    to the costs of a matter by, for example, prolonging
    a hearing.
  • This case can be cited if the Commonwealth seeks to
    prevent attempts by a plaintiff's solicitor to
    speak to a defendant who has been or is to be indemnified
    by the Commonwealth or Comcover. There may be an argument
    that a defendant indemnified by third party insurance
    differs from a defendant indemnified by the Commonwealth
    or Comcover. In these circumstances it would be prudent
    to advise such a plaintiff's solicitor that what
    they are seeking to do 'appears to be at odds with
    the decision of Connolly J in Hills v Raunio & Ors' or
    words to that effect.
  • Caution must be taken if a statement to be obtained
    or used in a matter could be inconsistent with other
    information on file. For example, detailed clear file
    notes should be kept of the fact that a witness has independently
    agreed to give a statement and has independently changed
    their mind or recollection. In addition a covering letter
    should be sent to the witness which;
    • confirms the content of the conversation during
      which the witness changed their recollection;
    • refers to the relevant parts of the statement where
      the witness has independently changed their mind or
      recollection; and
    • explains the importance of the witness carefully
      considering the statement and satisfying themselves
      it is accurate.

Informing a witness of these matters in person, in front
of a witness, is also preferable.

Text of the decision is available at:
http://www.supremecourt.act.gov.au/judgments/hills1.htm

For further information please contact:

Peta Jane Piper
Senior Lawyer
T 02 6253 7409 F 02 6253 7302
peta.piper@ags.gov.au

Important: The material in Express law is
provided as an early, interim view for general information
only and further analysis on the matter may be prepared
by AGS. The material should not be relied upon for
the purpose of a particular matter. Please contact
AGS before any action or decision is taken on the basis
of any of the material in this message.