Thursday, 19 April 2012 by Jason Cheung I April 19, 2012 Allens Arthur Robertson highlighted a recent judgement in the Federal Court where a personal cost order was made because His Honour found that a revised Statement of Claim was in breach of Section 37M of the Access to Justice (Civil Litigation Reforms) Amendment Act 2009 (Cth). Section 37M provides that the overarching purpose of the Federal Court Rules is to facilitate the just resolution of disputes: according to law; and as quickly, inexpensively and efficiently as possible. His Honour found that the solicitor had failed to comply with orders made by the judge regarding the correct pleadings in a Statement of Claim. Whilst historically it was thought that serious misconduct would have had to have occurred for personal cost orders to be made, His Honour stated that the content of the duty has been changed and thus the bar significantly lowered for orders to be made. In our Forensic Matters publication in September 2011 "Issue 11-04 - Audit Negligence", we discussed the shareholder class action brought against PwC and Centro. PwC has now conceded that it was negligent in the conduct of the audit of Centro's 2007 accounts, which resulted in $3.1 billion in debt being classified as non-current, rather than current. However, the issue of personal cost orders against Counsel and solicitors was the subject of an apparently lively debate between Counsel and Justice Gordon in the Federal Court on 16 April 2012. Counsel for PwC were setting out its defence which included saying that it was the individual audit partner who made representations to shareholders and not PwC itself. This prompted Justice Gordon to warn PwC’s Counsel that if PwC persisted in holding a position that she ultimately found had no basis, the court could make personal cost orders against Counsel and lawyers. The next day, Counsel for PwC requested that Justice Gordon withdraw these comments because the threat of a cost order against them would lead to a potential conflict of interest between their own interests and those of their client, PwC. There is clearly some mileage in these arguments left, so we will have to wait to see how they turn out. However, these two cases highlight the issues of the apparently lowering of the bar for which personal cost orders can be made and the significant conflicts of interest that may arise. If more Federal Court judges take this stance, this could lead to Counsel and solicitors being placed in difficult positions. It remains to be seen whether the quest for ‘quicker, less expensive and more efficient’ justice leads to ‘better’ justice. Read our Forensics Matters article on Centro The Allens Arthur Robertson discussion is available here: http://www.aar.com.au/pubs/ The Centro case is discussed here: http://www.smh.com.au/business/pwc-lawyers-fear-conflict-of-interest-in-centro-case