Deloitte partner rebuffed on costs challenge

loses costs challenge

Deloitte’s David Mansfield.

Deloitte’s David Mansfield has come away with a shiner from a challenge he brought on in the District court of NSW after an earlier bout left him bloodied and leaking costs.

In December 2017 a NSW District Court judge ordered Mansfield to pay the costs of a defendant in proceedings he’d brought against directors of the Camperdown Bowling & Recreation Club Ltd (CB&RC).

Mansfield was appointed official liquidator of CB&RC back in 2012 and in 2015 commenced proceedings against the directors, including one Leanne Townend.

According to the December 2017 decision of District court judge David Wilson, Townend is the only director who has not subsequently declared bankruptcy but given her unfortunate personal circumstances, which the judge has detailed at length, it’s a bit of a mystery why Mansfield pursued her.

Given it was his contention that she was a director maybe had his eye on an insurance policy?

As it turned out, Mansfield was able to prove that Townend had been a director, despite her testimony that she’d been a volunteer social director but couldn’t persuade the judge that she’d known or should’ve known the company had traded whilst insolvent.

” … the evidence did not establish that Ms Townend acted other than honestly in her dealings as a director of the Company,” the judge concluded.

Mansfield was ordered to pay Townend’s costs. Within a month he’d filed a notice of motion seeking to vary the costs order on the basis that as Townend had been represented pro bono by the Law Society’s Nerida Harvey.

As outlined in Mansfield v Townend (No 2) [2018] NSWDC 177 (29 June 2018)  the Deloitte partner argued “that to award costs where there is no obligation for costs to be paid would unduly enrich the successful party and would be inconsistent with the principles underlying the indemnity rule.” The judge found otherwise.

“In the circumstances, it cannot be said that the costs order, as made, offends the indemnity rule. The costs paid will go to meet the professional fees and disbursements incurred on behalf of the 1st defendant. There is no risk of unjust enrichment,” Justice Wilson said.

“Whilst it is not disputed that legal services were provided to the 1st defendant pursuant to the Pro Bono Service of the Law Society of New South Wales, there is evidence of an obligation by the 1st defendant to pay costs in the event of a successful outcome and costs being ordered by the Court,” the judge said.

He quoted Regulation 7.41 to the Uniform Civil Procedure Rules 2005, which states: “if an order for costs is made in favour of a litigant who is assisted under the scheme, the barrister or solicitor who has provided the legal assistance is entitled to recover the amount of costs that another person is required to pay under the order”.

“It is submitted by counsel for the 1st defendant, and I accept, that there is a public policy issue underlying awarding costs in the circumstances.

“Not only are lawyers who are prepared to provide their services on a pro bono basis assisting parties to litigation who may otherwise be unrepresented, they also provide invaluable assistance to the Courts in New South Wales in the administration of justice generally.

“To take this case as an example, it involved complex issues arising under the Corporations Act 2001 which a layperson would have no prospect of mastering, let alone advocating.”

We don’t know the sum of the original costs order but the judge ruled that it should stand and for good measure ordered Mansfield to pay the costs Townend incurred defending his unsuccessful challenge.

Further reading:

Mansfield v Townend [2017] NSWDC 370 (20 December 2017)

About the Author

Peter Gosnell
Insolvency News Online illuminates the practice of insolvency Australia-wide, highlighting the triumphs and travails of the nation’s registered practitioners and the accounting and legal professionals who work with them. INO is produced by Peter Gosnell, former business editor and senior business reporter at The Daily Telegraph newspaper. During a decade-long career, your correspondent reported on such notable corporate collapses as HIH, One.Tel, Westpoint and Fincorp as well as some of the nation's highest profile bankruptcies and the investigations and prosecutions arising from Australia's most notorious instances of white-collar crime.

1 Comment on "Deloitte partner rebuffed on costs challenge"

  1. Jim Johnson | 6 July 2018 at 10:31 am | Reply

    The current Legal Profession Uniform Law provisions have a definition of “pro bono” and that can also vary from retainer to retainer.

    It is a little understood concept and can be one in which there is a no win no fee basis or one in which the work is done on the basis that no fees will be charged.

    It is very important to understand the difference and lawyers I believe have a responsibility to detail the precise arrangements in their disclosure obligations (noting that liquidators are government or commercial clients) and any costs agreements. I also think that it is relevant to avoid unqualified use of the words suggesting that work is being done pro bono without explanation as to the basis under which it being conducted.

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