Altorfer & Stow (a firm) v Lindsay
[2005] WASCA 73
•14 APRIL 2005
ALTORFER & STOW (A FIRM) -v- LINDSAY & ANOR [2005] WASCA 73
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASCA 73 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | FUL:32/2004 | 10 FEBRUARY 2005 | |
| Coram: | WHEELER JA MCLURE JA | 14/04/05 | |
| 21 | Judgment Part: | 1 of 1 | |
| Result: | Leave to appeal granted in FUL 32 of 2004 and the appeal dismissed Appeal FUL 148 of 2004 dismissed | ||
| B | |||
| PDF Version |
| Parties: | ALTORFER & STOW (A FIRM) BRIAN DESMOND LINDSAY THE PERSONS NAMED AS PLAINTIFFS IN SUPREME COURT CIV 1647 OF 2003 PERSONS NAMED AS PLAINTIFFS IN SUPREME COURT CIV 1647 OF 2003 AND RESPONDENTS (PLAINTIFFS) IN FUL 154 OF 2003 |
Catchwords: | Practice and procedure Whether action commenced and continued by solicitors without respondents' authority Whether subsequent ratification Turns on own facts Taxation of bill of costs Whether taxing officer made error of principle Whether leave required under s 60(1)(e) of the Supreme Court Act to appeal from review of taxation Whether respondents liable for costs under litigation funding arrangements |
Legislation: | Supreme Court Act 1935 (WA), s 57, s 60 Supreme Court Rules, O 66, r 53, r 54, r 55 |
Case References: | Australian Coal & Shale Employees Federation v The Commonwealth (1953) 94 CLR 621 Clairs Keeley v Treacy & Ors (2003) 28 WAR 139 Clairs Keeley v Treacy & Ors [2004] WASCA 277 Davies v Taylor (No 2) [1974] AC 225 Dowden v Shire of Cranbourne [1933] VLR 255 Dyktynski v BHP Titanium Minerals Pty Ltd (2004) 60 NSWLR 203 Halliday v High Performance Personnel Pty Ltd (1993) 113 ALR 637 House v The King (1936) 55 CLR 499 Hudgson v Endrust (Australia) Pty Ltd (1986) 11 FCR 152 Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 2) [2003] VSC 212 Jones v Civil Service Association Inc [2003] WASCA 321 Latoudis v Casey (1990) 170 CLR 534 Michael v Freehill Hollingdale and Page (1990) 3 WAR 223 Pegrum v Fatharly (1996) 14 WAR 92 Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495 Allesch v Maunz (2000) 203 CLR 172 Australian Electrical Electronics Foundry & Engineering Union (WA Branch) v Hamersley Iron Pty Ltd (1998) 19 WAR 145 Australian Securities & Investment Commission v Rich [2004] NSWSC 970 Bandwill Pty Ltd v SpencerLaitt (2000) 23 WAR 390 Blackall v Trotter (No 1) [1969] VR 939 Carr v Finance Corp of Australia Ltd (No 1) (1981) 147 CLR 246 CDJ v VAJ (1998) 197 CLR 172 Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 Coulton v Holcombe (1986) 162 CLR 1 Dalgety Australia Operations Ltd v F F Seeley Nominees Pty Ltd (No 2) (1988) 49 SASR 75 Eastland Technology Australia Pty Ltd v Whisson (2003) 28 WAR 308 Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 Ernst & Young (Reg) v Tynski Pty Ltd (2003) 47 ACSR 433 Fenton v Queen's Ferry Wire Rope Company (1868) LR 7 Eq 267 Freehill Hollingdale & Page v Bandwill Pty Ltd [2000] WASCA 150 Hancock Family Memorial Foundation v Porteous (2000) 201 CLR 347 Helljay Investments Pty Ltd v Deputy Commissioner of Taxation (1999) 74 ALJR 68 In re Will of Gilbert (1946) 46 SR (NSW) 318 Inglis v Moore (No 2) (1979) 46 FLR 470 Johnson v Johnson (2000) 201 CLR 488 Kellar v Williams [2004] UKPC 30 Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR 251 Maxwell v Keun [1928] 1 KR 645 McCreed v The Queen (2003) 27 WAR 554 McCullum v Ifield [1969] 2 NSWR 329 McKewins Hairdressing & Beauty Supplies v Deputy Commissioner of Taxation (2000) 74 ALJR 1000 Metwally v University of Wollongong (1985) 59 ALJR 481 Mossensons (A Firm) v Coastline Associates, unreported; SCt of WA; Library No 970661; 2 December 1997 New Pinnacle Group Silver Mining Co v Luhrig Coal & Ore Dressing Appliances Co (1902) 2 SR (NSW) 50 Newman v Financial Wisdom Ltd (No 2) [2004] VSC 282 R v Whiteway; Ex parte Stevenson [1961] VR 168 Re Luck (2003) 203 ALR 1 Re Minister for Minerals and Energy; Ex parte Wingate Holdings Pty Ltd [1987] WAR 190 Re The National Old Age Pension Trust; Stevens v Taverner (1912) 57 Sol Jo 114 Richmond v Branson & Son [1914] 1 Ch 968 Sali v SPC Ltd (1993) 116 ALR 625 Thornton v Repatriation Commission (1981) 35 ALR 485 Vakauta v Kelly (1989) 167 CLR 568 Van Stokkum v Finance Brokers Supervisory Board [2004] WASC 42 Victoria Teachers Credit Union Ltd v KPMG (A Firm) (2000) 1 VR 654 Webb & Hay v The Queen (1994) 181 CLR 41 Western Australia v Bond Corporation Holdings (1991) 5 WAR 40 Wilson v Metaxas [1989] WAR 285 Yates Settlement Trust v Patterson (1954) 1 All ER 619 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : ALTORFER & STOW (A FIRM) -v- LINDSAY & ANOR [2005] WASCA 73 CORAM : WHEELER JA
- MCLURE JA
- Applicant
AND
BRIAN DESMOND LINDSAY
THE PERSONS NAMED AS PLAINTIFFS IN SUPREME COURT CIV 1647 OF 2003
Respondents
- Applicant
AND
BRIAN DESMOND LINDSAY
PERSONS NAMED AS PLAINTIFFS IN SUPREME COURT CIV 1647 OF 2003 AND RESPONDENTS (PLAINTIFFS) IN FUL 154 OF 2003
Respondents
(Page 2)
ON APPEAL FROM:
For File No : FUL 32 of 2004
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
File No : CIV 1647 of 2003
For File No : FUL 148 of 2004
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
File No : CIV 1647 of 2003
Catchwords:
Practice and procedure - Whether action commenced and continued by solicitors without respondents' authority - Whether subsequent ratification - Turns on own facts
Taxation of bill of costs - Whether taxing officer made error of principle - Whether leave required under s 60(1)(e) of the Supreme Court Act to appeal from review of taxation - Whether respondents liable for costs under litigation funding arrangements
Legislation:
Supreme Court Act 1935 (WA), s 57, s 60
Supreme Court Rules, O 66, r 53, r 54, r 55
Result:
Leave to appeal granted in FUL 32 of 2004 and the appeal dismissed
Appeal FUL 148 of 2004 dismissed
(Page 3)
Category: B
Representation:
FUL 32 of 2004
Counsel:
Applicant : Mr D L Armstrong
Respondents : Mr J C Giles
Solicitors:
Applicant : Altorfer & Stow
Respondents : Solomon Brothers
FUL 148 of 2004
Counsel:
Applicant : Mr D L Armstrong
Respondents : Mr J C Giles
Solicitors:
Applicant : Altorfer & Stow
Respondents : Solomon Brothers
Case(s) referred to in judgment(s):
Australian Coal & Shale Employees Federation v The Commonwealth (1953) 94 CLR 621
Clairs Keeley v Treacy & Ors (2003) 28 WAR 139
Clairs Keeley v Treacy & Ors [2004] WASCA 277
Davies v Taylor (No 2) [1974] AC 225
Dowden v Shire of Cranbourne [1933] VLR 255
Dyktynski v BHP Titanium Minerals Pty Ltd (2004) 60 NSWLR 203
Halliday v High Performance Personnel Pty Ltd (1993) 113 ALR 637
House v The King (1936) 55 CLR 499
Hudgson v Endrust (Australia) Pty Ltd (1986) 11 FCR 152
Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 2) [2003] VSC 212
(Page 4)
Jones v Civil Service Association Inc [2003] WASCA 321
Latoudis v Casey (1990) 170 CLR 534
Michael v Freehill Hollingdale and Page (1990) 3 WAR 223
Pegrum v Fatharly (1996) 14 WAR 92
Case(s) also cited:
Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495
Allesch v Maunz (2000) 203 CLR 172
Australian Electrical Electronics Foundry & Engineering Union (WA Branch) v Hamersley Iron Pty Ltd (1998) 19 WAR 145
Australian Securities & Investment Commission v Rich [2004] NSWSC 970
Bandwill Pty Ltd v SpencerLaitt (2000) 23 WAR 390
Blackall v Trotter (No 1) [1969] VR 939
Carr v Finance Corp of Australia Ltd (No 1) (1981) 147 CLR 246
CDJ v VAJ (1998) 197 CLR 172
Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194
Coulton v Holcombe (1986) 162 CLR 1
Dalgety Australia Operations Ltd v F F Seeley Nominees Pty Ltd (No 2) (1988) 49 SASR 75
Eastland Technology Australia Pty Ltd v Whisson (2003) 28 WAR 308
Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337
Ernst & Young (Reg) v Tynski Pty Ltd (2003) 47 ACSR 433
Fenton v Queen's Ferry Wire Rope Company (1868) LR 7 Eq 267
Freehill Hollingdale & Page v Bandwill Pty Ltd [2000] WASCA 150
Hancock Family Memorial Foundation v Porteous (2000) 201 CLR 347
Helljay Investments Pty Ltd v Deputy Commissioner of Taxation (1999) 74 ALJR 68
In re Will of Gilbert (1946) 46 SR (NSW) 318
Inglis v Moore (No 2) (1979) 46 FLR 470
Johnson v Johnson (2000) 201 CLR 488
Kellar v Williams [2004] UKPC 30
Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR 251
Maxwell v Keun [1928] 1 KR 645
McCreed v The Queen (2003) 27 WAR 554
McCullum v Ifield [1969] 2 NSWR 329
McKewins Hairdressing & Beauty Supplies v Deputy Commissioner of Taxation (2000) 74 ALJR 1000
Metwally v University of Wollongong (1985) 59 ALJR 481
(Page 5)
Mossensons (A Firm) v Coastline Associates, unreported; SCt of WA; Library No 970661; 2 December 1997
New Pinnacle Group Silver Mining Co v Luhrig Coal & Ore Dressing Appliances Co (1902) 2 SR (NSW) 50
Newman v Financial Wisdom Ltd (No 2) [2004] VSC 282
R v Whiteway; Ex parte Stevenson [1961] VR 168
Re Luck (2003) 203 ALR 1
Re Minister for Minerals and Energy; Ex parte Wingate Holdings Pty Ltd [1987] WAR 190
Re The National Old Age Pension Trust; Stevens v Taverner (1912) 57 Sol Jo 114
Richmond v Branson & Son [1914] 1 Ch 968
Sali v SPC Ltd (1993) 116 ALR 625
Thornton v Repatriation Commission (1981) 35 ALR 485
Vakauta v Kelly (1989) 167 CLR 568
Van Stokkum v Finance Brokers Supervisory Board [2004] WASC 42
Victoria Teachers Credit Union Ltd v KPMG (A Firm) (2000) 1 VR 654
Webb & Hay v The Queen (1994) 181 CLR 41
Western Australia v Bond Corporation Holdings (1991) 5 WAR 40
Wilson v Metaxas [1989] WAR 285
Yates Settlement Trust v Patterson (1954) 1 All ER 619
(Page 6)
1 WHEELER JA: I have had the advantage of reading in draft the reasons for decision of McLure JA. I agree with those reasons and have nothing to add.
2 MCLURE JA: There are two matters before this Court. The applicant seeks leave to appeal (in FUL 32/2004) from a decision of Master Sanderson made on 8 March 2004 dismissing the applicant's (defendant's) application to stay Supreme Court action CIV 1647/2003 ("the discovery action") on the ground, inter alia, that the respondents' (plaintiffs') solicitors, Solomon Bros, did not have authority to commence and prosecute the discovery action. In that action, the respondents claim delivery up to Solomon Bros of all documents and papers owned by the respondents. The applicant is a firm of solicitors carrying on business in Geraldton. The respondents claim to be former clients of the applicant.
3 Following a defended chambers application in the discovery action, Master Sanderson ordered delivery up of a number of documents ("discovery order"). The applicant filed an application for leave to appeal the discovery order. The application for leave was automatically discontinued as a result of the applicant's failure to comply with time limits. A series of costs orders were made against the applicant in the discontinued application for leave. A bill of costs was lodged. After taxation but before certification by the Taxing Master, the applicant objected to the taxation on the ground that the respondents were not liable for the solicitors' fees. The Registrar dismissed that objection. The applicant applied for review of the taxation. It then applied to adjourn the hearing of its review application. On 8 September 2004 Master Sanderson dismissed the application for an adjournment and the review application. The applicant appeals to this Court from both decisions (in FUL 148/2004).
Background
4 In addition to the discovery action, the respondents commenced proceedings against the applicant in relation to loans brokered for the respondents by Geraldton Finance Co Pty Ltd ("liability action"). This action was the subject of an agreed stay following the decision of this Court in Clairs Keeley v Treacy & Ors (2003) 28 WAR 139 (Clairs Keeley No 1). The Clairs Keeley action has been stayed on the ground that it is champertously maintained and an abuse of process.
5 IMF (Aust) Ltd ("IMF") is funding the discovery action and the liability action. Originally the funding was on the same terms and
(Page 7)
- conditions considered by the Full Court in Clairs Keeley No 1. IMF is also funding numerous other actions in this Court relating to finance-broking transactions. The centrepiece of the finance-broking litigation is an action by more than 3000 plaintiffs against the Finance Brokers Supervisory Board ("Board action"). The respondents are also plaintiffs in the Board action (as are the plaintiffs in the Clairs Keeley action and the other actions).
6 The respondents originally entered into a litigation funding agreement with IMF and, purportedly by their duly authorised agent IMF, into a retainer agreement with Solomon Bros. Following Clairs Keeley No 1 the contractual arrangements between IMF, the respondents (and other investor plaintiffs) and Solomon Bros were varied ("agreements as varied"). The plaintiffs in the Clairs Keeley action applied to lift the stay on the basis of the agreements as varied. That application was dismissed in Clairs Keeley v Treacy & Ors [2004] WASCA 277 (Clairs Keeley No 2). Clairs Keeley No 2 was heard on 7 September 2004. Following Clairs Keeley No 2 further steps were taken to attempt to satisfy the Court's continuing concern.
The Stay Application
7 The applicant's stay application was based on two grounds; firstly, that Solomon Bros had commenced and continued the discovery action without authority; and, secondly, that it was a champertously maintained abuse of process as in Clairs Keeley No 1. At the time of the hearing of the stay application, Clairs Keeley No 1 had been decided. The agreements as varied had been put in place and the plaintiffs in the Clairs Keeley action had applied to lift the stay. That application had not been heard. However, the Finance Brokers Supervisory Board had applied for an interim stay of the Board action which was heard by me on 26 February 2004. That application was based on the agreements as varied. On 2 March 2004, I ordered an interim stay, giving oral reasons for that decision. My reasons were subsequently published in written form. I had to consider whether it was arguable that Clairs Keeley No 1 continued to apply notwithstanding the agreements as varied. The same issue would have confronted the Master if he was required to determine whether the discovery action was an abuse of process without the benefit (or otherwise) of my reasons in the Board action. In those circumstances, the Master decided to confine the hearing of the stay application to the retainer issue, leaving the abuse of process ground to be argued and determined at a later stage. The transcript of the hearing shows the
(Page 8)
- respondents did not address the Court on the merits of the abuse of process ground and the Master did not rule on it.
8 The applicant says the Master erred in taking this approach. The respondents submitted to this Court that they did not have notice, or sufficient notice, of the applicant's intention to seek a stay on the basis of Clairs Keeley No 1, a submission they also made to the Master. Having regard to the evidence adduced on the application and the close involvement of counsel for the respondents in the other stay applications, I doubt that would be so. However, it is unnecessary to determine the correctness of the submission or the related question whether the respondents would have been disadvantaged if the argument had proceeded on the day.
9 Regardless of these matters, I am not persuaded the Master erred in deferring consideration of whether the discovery action was an abuse of process. I accept that as a general rule it is highly undesirable to deal separately with different grounds in support of an application. However, very unusual circumstances were at play in this case. The discovery action is one of a large number of finance brokers' actions all being funded by IMF in which Solomon Bros act for the plaintiffs. My reasons for granting an interim stay of the Board action were to be published in written form. They were clearly relevant to the Master's assessment of the applicant's application based on abuse of process. If decision-makers proceed independently and without reference to other relevant decisions, inappropriate inconsistencies may arise. I am not persuaded the Master was wrong in deferring consideration of the issue or that the applicant has suffered any substantial injustice. It remains open to the applicant to apply for a stay of the discovery action on the ground of abuse of process.
10 I turn now to the other ground for the stay, namely, that Solomon Bros had commenced and continued the discovery action without the respondents' authority. It is apparent from the Master's reasons that he addressed a broader question, namely, whether there was a retainer agreement between the respondents and Solomon Bros.
11 The Master concluded that the applicant bore the onus of establishing its contention. No challenge is made to that proposition. The Master also concluded that there was a retainer between the respondents and Solomon Bros. He relied on the following matters: firstly, the respondents had directed the applicant in writing to deliver the documents to Solomon Bros; secondly, the existence of the funding and retainer agreements; thirdly, the respondents had received two detailed reports from Solomon
(Page 9)
- Bros. The Master also relied on the decision in Clairs Keeley No 1. He said:
"… I think that the decision in the case of Clairs Keeley v Treacy puts the matter to rest once and for all. There would appear to be no argument that the arrangements between these plaintiffs are the same as the arrangements between the solicitors and the litigation funder in the Treacy decision. The Full Court, comprising five judges, examined with some care the arrangement in that case.
It is clear that their Honours came to the conclusion that there was a retainer between the solicitors and the client. The fact that a stay was issued was all to do with matters other than a direct attack upon the retainer. If I was to determine this matter as the defendants would have me do, that is to say, conclude that there was no retainer, I would, I think, be undercutting the very basis of the decision of the Full Court in Treacy. That would of course be entirely inappropriate.
So apart from the fact that I am satisfied based upon the evidence that there is a retainer between the plaintiff and their solicitors, I am also satisfied that I am bound by what is effectively the ratio in the Treacy decision that I could not for that reason alone conclude that there was no retainer between Solomon Bros and the plaintiffs."
13 An analysis of the existence and scope of Solomon Bros' authority starts with the original funding and retainer agreements and related documents. The respondents contend they are the source of Solomon Bros' authority to commence and continue the discovery action.
14 The funding agreement provides that the Explanatory Material is to be taken into account in construing the funding agreement for the purpose of ascertaining the parties' intentions and resolving any ambiguity (cl 1.4).
(Page 10)
- That is a reference to a document entitled "Explanatory Material for West Australian Finance Broking Victims" dated 30 July 2001.
15 The Explanatory Material explains that IMF proposed to provide funding "for victims of WA finance brokers to recover their debts and losses from loans and other investments made through finance brokers". Recovery would be pursued "from all available and worthwhile sources, including the Finance Brokers Supervisory Board". IMF would provide funding for pursuit of any appropriate claim or legal remedy, depending on the circumstances applicable to the particular debt or loss recovery claim. It also states that IMF would assess, and where appropriate investigate, the available remedy for recovery of each debt or losses flowing from each debt and report its assessment to the client. If IMF, on completion of the assessment, considered there was a worthwhile remedy to pursue to recover any debt or associated losses, IMF would notify the client and then take appropriate steps "to pursue recovery, including engaging Solomon Brothers as solicitors for the client". The implication is that IMF does not require the client's consent to the particular recovery action contemplated. The only legal action expressly referred to in the Explanatory Material is a proposed action against the Finance Brokers Supervisory Board, although other recovery action by litigation is contemplated in general terms.
16 The respondents rely on recitals C, D and E, cl 2.1, 2.2, 5.2 and 9, 10 and 11 of the funding agreement in support of the contention that the respondents had authorised the commencement and continuation of the discovery action. Recital C identifies the amount claimed by the client (defined as "the Debt"); recital D notes that the client claims the Debt arose out of an identified mortgage-lending transaction ("Transaction"); recital E records the clients' wishes to appoint IMF to collect the Debt and to receive any moneys agreed or adjudged to be due to the client. Under cl 2.1 the client appoints IMF to collect the debt and to collect or receive payment of any settlement debt or judgment debt. By cl 2.2 the client appoints IMF as an inquiry agent to undertake specific activities which includes investigating the conduct of persons in relation to the Transaction but does not expressly refer to engaging solicitors on behalf of the client. Clause 5.2 comes closest. It provides:
"[IMF] shall bear and pay all solicitor and party costs payable by the [client] to the Solicitors in relation to any legal work done by the Solicitors in relation to the collection of, payment of or payment in lieu of the Debt …".
(Page 11)
17 Other clauses in the funding agreement are clearly predicated on the assumption that the solicitors will commence proceedings in the name of the clients (cl 5.4, 5.5, 6.1, 9, 10 and 11).
18 The original retainer agreement is in a letter dated 31 July 2001 from Solomon Bros to IMF. The respondents rely on the first paragraph of that letter, in particular, the following:
"I am enclosing our standard Terms of Engagement, which together with this letter, will constitute the terms and conditions on which we will, on instructions of [IMF], represent clients who accept the IMF Package or otherwise engage IMF to assist with recovery of debts and investigation and recovery of losses associated with investments made through finance brokers."
19 Clause 3 of the retainer agreement provides:
"3.1 As is apparent from the proposed agreement between IMF and clients, IMF will act only as agent for each client.
3.2 Responsibility for, and entitlement to, giving of instructions to Solomon Brothers, including settlement or discontinuance of claims, rest solely with each client."
20 It is contended that the parties to the retainer agreement are IMF, the clients by their duly authorised agent IMF and Solomon Bros. Originally the funding agreement was relied on as the source of IMF's purported authority to enter into the retainer agreement on behalf of clients. However, the retainer agreement was provided to clients at the time of the variations and has been incorporated (in amended form) into the clients' agreement directly with Solomon Bros.
21 In addition to the contractual documentation, the respondents rely on their direction and authority in writing to the applicant for the delivery up of documents to Solomon Bros (the "Direction") and letters from Solomon Bros to the respondents dated 18 November and 18 December 2003. The Direction contains no reference to any threatened legal action in the event of a failure to comply. Counsel for the respondents suggests this Court should infer that Solomon Bros forwarded the Direction to the respondents under cover of a letter referring to legal action if the applicant failed to comply. A large amount of evidence was filed on behalf of the respondents on the question of authority. No such letter is in evidence. There is no direct evidence from the respondents confirming that Solomon
(Page 12)
- Bros commenced and continued the discovery action with their authority. In the circumstances, I decline to draw the suggested inference.
22 Solomon Bros' letter of 18 November 2003 refers to the Board action and the discovery action. The respondents were advised of an application to join them as plaintiffs in the Board action. However, the letter does not state that they are plaintiffs in the discovery action; it simply states that two proceedings have been commenced against the applicant.
23 By letter of 10 December 2003 to the respondents, Solomon Bros advised of the proposed variations to the funding and retainer agreements. The funding agreement was varied and a new retainer agreement was made directly between Solomon Bros and the clients to be effective from 3 December 2003. There is no reference in the letter or the contractual variations to the discovery action.
24 In a letter dated 18 December 2003 to the respondents Solomon Bros reported on the interim stay in the Board action. The letter also states:
"[The applicant has] also threatened an application for a stay. The circumstances of the proceedings against [the applicant] are separate to the proceedings against the Board and involve different considerations. The action against [the applicant] which has so far progressed is a claim for delivery up of your property (documents) held by [the applicant]. IMF is funding that as part of its engagement by you as investigator. It does not take a share of the proceeds of that action: IMF could not take a portion of your documents.
… We consider [the applicant's] threatened application should be opposed. The documents which we, on your behalf, are seeking to obtain from [the applicant] are likely to be important for the action against the Board and the action for damages against [the applicant]. A stay of the action against [the applicant] for delivery up of your documents would, in our opinion, cause you considerable harm. However, you are entitled to instruct us to agree to a stay should you disagree with our advice. Please contact us if you do wish us to consent to the stay. If we do not hear from you we will assume that you wish us to oppose the application for a stay; if you wish us to oppose [the applicant's] application, you do not need to contact us."
(Page 13)
25 The evidence discloses that no respondent expressed surprise or concern about the discovery action or instructed Solomon Bros to agree to a stay of that action.
26 Solomon Bros again wrote to the respondents on 17 December 2004 following Clairs Keeley No 2. The letter is in general terms and does not refer to any specific litigation other than the Board action. Enclosed with the letter is a Direction and Acceptance Form in which the respondents are asked to tick the appropriate box, one of which is:
"I/we wish to proceed with the actions in which I/we are currently plaintiff with Solomon Bros as my/our solicitors and with funding from [IMF]".
27 At the time of the hearing of this application, approximately two-thirds of the respondents had signed the form. Two elected not to continue but gave an instruction to defend this application.
28 There is hearsay evidence from the applicant that four plaintiffs in the discovery action were not aware that the discovery action had been issued in their names and other evidence that approximately 40 of the respondents are not former clients of the applicant. In the course of oral submissions counsel for the applicant appeared to suggest, in effect, that the action ought to be stayed in relation to these respondents (plaintiffs) because the action was frivolous and vexatious and thus an abuse of process. Abuse of process can manifest itself in many and varied forms. This basis for the claim was not apparent from the application and was not dealt with below. It is inappropriate for this Court to address this matter for the first time.
29 The only matter before us is the contractual question whether Solomon Bros acted within the scope of any retainer in commencing and continuing the discovery action. We are not concerned with whether any contracts of retainer are enforceable or voidable for breach of fiduciary duty.
30 Like any other agreement, a contract of retainer may be oral or in writing, express or implied: Pegrum v Fatharly (1996) 14 WAR 92 at 102. The professional conduct rules do not impact on the contractual analysis. Further, as between the parties to an action, there is a presumption that the solicitor on the record represents the party with whom he or she is recorded as being solicitor, at least where the party is aware of the litigation and takes no steps to rectify the record: Halliday v High Performance Personnel Pty Ltd (1993) 113 ALR 637 at 639.
(Page 14)
31 I start with the relevance of Clairs Keeley No 1. It is not suggested that any res judicata or issue estoppel arises from the (interlocutory) decision in Clairs Keeley No 1. Further, the relevance of the findings and conclusions in Clairs Keeley No 1 depend upon whether the facts and the evidence in support are relevantly similar. For example, one important difference is that the plaintiffs, by their solicitors Solomon Bros, had commenced the Clairs Keeley action before entering into the funding and retainer agreements. On the other hand, the discovery action was commenced on 25 June 2003 which was some time after the respondents had entered into the funding and retainer agreements.
32 The Full Court in Clairs Keeley No 1 and No 2 were not called upon to address the question whether IMF had authority to instruct Solomon Bros to commence or continue the proceedings; the issue was the scope of the (conceded) retainer to act for the plaintiffs in the Clairs Keeley action. There would be a clear inference from the circumstances that Solomon Bros did in fact have authority to continue the Clairs Keeley action with IMF as the funder. However, the Court in Clairs Keeley No 1 concluded that IMF's authority was limited to engaging Solomon Bros upon terms that they would charge on the scale applicable to the work the solicitors undertook; in particular, the clients did not authorise IMF to enter into a costs agreement on the clients behalf.
33 Another relevant difference is that the plaintiffs in the Clairs Keeley action (and the Board action) are seeking damages for their losses. In contrast, the discovery action is part of the investigation process and does not directly produce any financial return to the plaintiffs. Such ancillary action is not aptly described as "recovery action" and is not expressly referred to in the Explanatory Material or the funding agreement. That being the case, the funding agreement does not expressly or impliedly give IMF the clients' authority to instruct Solomon Bros to commence (or continue) the discovery action on their behalf. Further, the retainer agreement does not give Solomon Bros authority to commence (or continue) the discovery action.
34 The respondents say this Court should draw an inference of pre-existing authority to commence proceedings from the respondents' execution of the Direction and the respondents' failure to express surprise or the absence of any other reaction to Solomon Bros' letters of 18 November and 18 December 2003. In circumstances where the relevant agreements are of such generality with IMF playing a pivotal role and the clients not being exposed to any financial risk, other than the risk
(Page 15)
- associated with the financial failure of the funder, I would not draw any such inference.
35 The next question is whether the commencement and continuation of the discovery action has been ratified. The continuation of an unauthorised action is itself unauthorised unless there is subsequent ratification. An action commenced without authority is capable of being ratified: Jones v Civil Service Association Inc [2003] WASCA 321 at [31]. In order to ratify, it is necessary that the person have knowledge of all material circumstances: Bowstead on Agency, 15th ed, article 16, page 64. Ratification may be express or implied by conduct.
36 The letter of 18 November 2003 is an inadequate foundation for an inference of ratification. The letter does not make it clear that the respondents are plaintiffs in the discovery action. That omission is rectified in the letter of 18 December 2003. It is made clear to the respondents in that letter that they are parties to the discovery action and that Solomon Bros is seeking their instructions as to whether to agree to a stay of that action, silence indicating lack of agreement. No respondent expressed surprise or concern about the discovery action or agreed to a stay. I am satisfied on this evidence that the respondents have knowledge of all material matters and by their inaction have impliedly ratified the commencement and continuation of the discovery action.
37 In these circumstances, I would grant leave to appeal from Master Sanderson's decision on the stay application but affirm the decision refusing a stay on the ground that the respondents have ratified the commencement and continuation of the discovery action.
Taxation Related Issues
38 As already noted, a series of costs orders were made against the applicant in the discontinued application for leave to appeal. A bill of costs was taxed. Taxation of the bill took place before Registrar Johnston on 14 April 2004. At the completion of the taxation counsel for the applicant requested the Registrar to withhold signing the certificate of taxation (allocatur) pending instructions from his client.
39 By letter dated 15 April 2004 the applicant objected in writing to the whole bill on the ground that the respondents had not incurred any costs and did not have a liability to pay costs to Solomon Bros, relying on the funding and retainer agreements in support of the claim. The Registrar dismissed the objection without considering its merits on the ground that there can be no error in principle if the issue was not raised at the taxation.
(Page 16)
- The Registrar signed his certificate on 28 April 2004. Costs were taxed in the sum of $2654.75 and, in response to threats of execution, the applicant paid that amount under protest in July 2004.
40 The applicant applied to adjourn the review of taxation. The adjournment application and the application to review the taxation came on for hearing before Master Sanderson on 8 September 2004. The applicant sought an adjournment on the basis that it had applied for leave to appeal from the refusal of the stay. Master Sanderson refused the adjournment on the ground that the review of taxation raised a separate and discrete issue.
41 The Master's reasons for dismissing the review application are as follows:
"… I am satisfied that [the taxing officer's] approach in principle is right, but even if I be wrong in that, and the learned Registrar should have reviewed the position, I am simply not satisfied that this is a case where there was no liability for costs on the part of the respondents, such as would disentitle any orders for costs being made in their favour. I think it is common ground between the parties that there is a litigation funding arrangement in position.
That seems to me to be properly characterised as an indemnity arrangement. I am satisfied that in that circumstance the authorities rule one way - that there is an entitlement to costs resting with the party who is protected by an indemnity agreement and that it is not a factor which disentitles the party to an order for costs."
42 The applicant relies on a number of alleged errors. On the application to adjourn, the applicant contends the Master erred in refusing to adjourn the review of taxation pending the hearing of the application for leave to appeal in FUL 32 of 2004 and the hearing and determination of the application to remove the stay in Clairs Keeley.
43 It is the case that if Solomon Bros commenced and continued the discovery action without authority or that action was permanently stayed as an abuse of process, there would be adverse cost consequences for Solomon Bros and the respondents respectively. However, the objection to the taxation was, as the Master correctly observed, on an unrelated matter being the respondents' liability for costs under the funding and retainer agreements. The refusal of an adjournment is a discretionary
(Page 17)
- order on a matter of practice and procedure. Accordingly, the principles in House v The King (1936) 55 CLR 499 at pages 504 - 505 apply which requires the applicant to show an error of law or fact or a result that is so plainly unjust as to warrant the interference of an appellate court. The applicant has failed in that regard.
44 On the review of taxation, the applicant contends the Master erred in concluding that the Registrar did not err in failing to consider the objection and erred in characterising the arrangement between the respondents, IMF and Solomon Bros, as, in effect, an indemnity arrangement. The grounds include a claim that the Master should have disqualified himself for bias on the basis of his decision on the stay application. This ground is entirely unmeritorious and was not pressed at the hearing.
45 Before addressing the merits, it is appropriate to deal with the respondents' contention that the applicant requires leave to appeal the Master's decision on the review of taxation because s 60(1)(e) of the Supreme Court Act 1935 (WA) applies. Section 60(1)(e) materially provides:
"(1) No appeal shall lie to the Court of Appeal -
(e) without the leave of the Judge or the Master making the order, from the order of a Judge or a Master … as to costs only which by law are left to the discretion of the Judge or the Master".
47 Only the Judge or Master who made the decision has jurisdiction to grant leave. Leave has not been obtained from Master Sanderson. The respondents raised the question of the need for leave at a directions hearing before Master Sanderson and it is said the Master was of the view that leave was not required because the appeal was not as to costs only. However, on 20 October 2004 on the motion of the applicant, Master Sanderson ordered in FUL 148 of 2004 that the application for leave to appeal be heard inter partes; the application for leave to appeal be heard together with the appeal and with the application for leave to appeal and the appeal in FUL 32 of 2004.
(Page 18)
48 If leave to appeal is required under s 60(1)(e) of the Supreme Court Act, this Court does not have the power to grant leave. Accordingly, it is necessary to determine whether leave is required.
49 The construction of s 60(1)(e) of the Act was considered in Michael v Freehill Hollingdale and Page (1990) 3 WAR 223. In that case the appellant sought an order under O 66 r 5 of the Supreme Court Rules that the respondent firm of solicitors indemnify him for his costs of a Supreme Court action on the basis that the respondent caused his costs to be incurred improperly and without reasonable cause. The Full Court held that because the exercise of the Court's discretionary power to grant indemnity costs against solicitors depended on proof of misconduct or negligence, the application did not fall within s 60(1)(e).
50 It is not correct to describe Master Sanderson's order on the review as an order "as to costs which by law are left to the discretion" of the Court. Firstly, the Master was not exercising a discretion as the jurisdiction to review arises only when there is an error of principle. Secondly, the order is not "as to" costs but (at best) "in relation to" costs. Accordingly, there is an appeal as of right from Master Sanderson's order dismissing the application to review. There is no challenge to a coram of two members hearing the appeal, which appears to be permitted by s 57(1) of the Supreme Court Act.
51 I turn now to the question whether the taxing officer erred in refusing to consider the objection. In order to answer that question it is necessary to refer to O 66 r 53, 54 and 55.
52 Order 66 r 53 materially provides:
"(1) A party who contends that the taxing officer has made an error in principle in allowing or disallowing any item or part of an item in a bill of costs taxed by him may, at any time before a certificate of taxation dealing finally with that item is signed, or at such earlier time as may, in any case, be fixed by the taxing officer -
(a) deliver to the other party interested in the allowance or disallowance and carry in before the taxing officer, an objection in writing to the allowance or disallowance specifying in the objection by a list, in a short and concise form, the items or parts of items objected to, and the grounds and reasons for the objection; and
(Page 19)
- (b) thereupon apply to the taxing officer to review the taxation in respect of those items or parts."
53 Order 66 r 54 deals with the taxing officer's obligations on review. It materially provides:
"(1) Upon an application under the last preceding rule to review the taxation, the taxing officer shall reconsider and review his taxation in relation to the objections, and he may, if he thinks fit, receive further evidence in respect of the objection."
54 Master Sanderson was acting under O 66 r 55. That rule materially provides:
"(1) If a party is dissatisfied with the certificate of the taxing officer as to any item or part of an item objected to under rule 53 of this order, he may, within 14 days from the date of the certificate … apply to a judge in chambers for an order to review the taxation as to that item or part of an item.
(2) The judge, if of opinion that the taxing officer has made an error in principle, may thereupon make such order to rectify the error as the judge thinks just.
(3) The certificate of the taxing officer is final and conclusive as to all matters which have not been objected to in accordance with these rules."
55 There is no challenge to the proposition that an objection can be taken under O 66 r 53 to the whole bill rather than to specific items: Dowden v Shire of Cranbourne [1933] VLR 255 at 260; Dyktynski v BHP Titanium Minerals Pty Ltd (2004) 60 NSWLR 203 at 205. I proceed on that basis.
56 The approach taken by the Registrar and upheld by the Master was that the taxing officer cannot make an error in principle for the purposes of r 53 unless the issue the subject of the objection had been raised and considered by the taxing officer at the taxation. There is no justification in the language of r 53 or in principle for such a limitation. The taxing officer's powers and duties on a taxation continue until he becomes functus officio on the issue of a certificate: Australian Coal & Shale Employees Federation v The Commonwealth (1953) 94 CLR 621 at 624.
(Page 20)
- An error of principle can be made in allowing or disallowing an item notwithstanding that a material issue of fact or law has not been brought to the taxing officer's attention by the parties. The applicant's objection, filed in accordance with r 53, raised a potential error of principle, in which event the taxing officer was obliged under r 54(1) to reconsider and review his taxation in relation to that objection. However, the Master himself ruled on the substantive question which is now under challenge before this Court and I turn to that matter.
57 The resolution of the objection depends upon the construction of the funding agreement and retainer agreement. Although the agreements have been varied, the material terms as to costs have not altered.
58 Clause 5.2 of the funding agreement is set out earlier. It refers to IMF having to bear and pay all solicitor and party costs "payable by the [client] to the Solicitors in relation to any legal work done by the Solicitors …". These costs are defined as the "Funding Costs". By cl 9.1 of the funding agreement, each client agrees with IMF to pay from any moneys collected or received IMF's Investigation Costs and Funding Costs. The term Investigation Costs is defined as the cost of all investigations carried out by IMF in accordance with the funding agreement.
59 Clause 2 of the retainer agreement deals with payments. It materially provides:
"2.1 The agreement between the client, IMF and us is a tri-partite agreement and, despite primary liability for legal costs and disbursements ('Costs') generally being imposed on the client and not the client's agent, IMF will be liable for payment of our Costs rather than the client. However, IMF will be entitled to reimburse itself for Costs paid or owing from moneys successfully recovered on behalf of a client.
2.2 In light of IMF's promises to clients that there is nothing to pay except out of recovered money, we do not reserve or have any right to recover Costs from a client if IMF fails to pay us, except from moneys successfully recovered by or on behalf of the client."
60 Clause 2.1 is unhappily drafted; it provides that primary liability for costs is on the clients but that IMF is liable for payment of the costs rather than the client. Liability for costs without an obligation to pay them
(Page 21)
- would, prima facie, be a contradiction in terms. However, it is clear when cl 2.1 is read with cl 2.2 that the clients do have a liability to pay legal costs from recovered moneys. The scheme is that the clients and IMF are liable to the solicitors for legal costs which must be paid by IMF who will be reimbursed those costs from moneys successfully recovered on behalf of a client, as will Solomon Bros if IMF fails to pay them.
61 The general rule is that costs are recoverable on a party and party basis where the party on the record is liable for costs incurred by his or her solicitors; the underlying rationale being that it is just and reasonable that the party who has caused the other party to incur the costs of litigation should reimburse that party for the liability incurred: Latoudis v Casey (1990) 170 CLR 534 at 567 per McHugh J. The principle is sometimes referred to as the indemnity principle (see Dyktynski v BHP Titanium Minerals Pty Ltd (supra) at 216). The indemnity principle is not breached if the litigant is in turn indemnified by a third party for his or her legal costs: see Davies v Taylor (No 2) [1974] AC 225; Hudgson v Endrust (Australia) Pty Ltd (1986) 11 FCR 152. Further, it has been suggested that in considering the indemnity principle, regard should be had to substance rather than form and to the real, as distinct from the nominal, plaintiff: Dyktynski v BHP Titanium Minerals (supra) per McColl JA at 220. This is the explanation for a number of exceptions to the indemnity principle. However, the "real party" rationale could not properly apply unless the non-party's interest falls within an exception to the rule against champerty and maintenance.
62 Costs are also recoverable by a successful party whose liability for his or her solicitors' costs only accrues on success: Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 2) [2003] VSC 212 [122] - [127]. In this case the effect of the agreements is that, in the event money is recovered on behalf of a client, the client is liable to pay the solicitors' costs by way of reimbursement to the funder, or to the solicitors in the event the funder fails to pay. That is so even if the solicitors' costs form part of the Investigation Costs. Based on the authorities to which I have referred, the respondents are relevantly liable for the solicitors' costs. Accordingly, the Master did not err in dismissing the review application. I would therefore dismiss the appeal.
Conclusion
63 In FUL 32 of 2004 I would grant leave to appeal and dismiss the appeal. In FUL 148 of 2004 I would dismiss the application and the appeal.
12
54
2