Dubey v Robert Chrzaszcz & Associates Pty Ltd
[2022] SASC 116
•13 October 2022
Supreme Court of South Australia
(Civil)
DUBEY v ROBERT CHRZASZCZ & ASSOCIATES PTY LTD
[2022] SASC 116
Judgment of Judge Dart a Master of the Supreme Court
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - TAXATION AND OTHER FORMS OF ASSESSMENT
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - DISCOVERY OF DOCUMENTS - UNDERTAKINGS AND USE OF DOCUMENTS - RELEASE FROM IMPLIED UNDERTAKING
Costs dispute between solicitor and client - dispute as to two agreements in relation to the costs payable - solicitor acted in family law proceedings - documents from that proceeding relevant to the alleged agreements - does the Harman principle restrict the use of documents in the taxation proceeding?
Held: The Harman principle does not apply to the documents in question.
Legal Practitioners Act 1981 (SA) Schedule 3 clause 46, referred to.
All State Life Insurance Co v Australia and New Zealand Banking Group Ltd (1995) 57 FCR 360; Forty Two International Pty Ltd v Barnes [2010] FCA 397; Harman v Secretary of State for Home Department [1983] 1 AC 280; Hearn v Street (2008) 235 CLR 125; Home Office v Harman [1982] All ER 532; K & S Corp Ltd v Number 1 Betting Shop Ltd [2005] SASC 228; Riddick v Thames Board Mills Ltd [1977] QB 881; Sybron Corporation v Barclays Bank PLC [1985] CH 299; Wilden Pump and Engineering Co v Fusfeld [1985] FSR 581, considered.
DUBEY v ROBERT CHRZASZCZ & ASSOCIATES PTY LTD
[2022] SASC 116
This matter is a taxation of costs. It is unusually complex for such a matter. These reasons deal with the question of whether any issue arises in respect of a Harman undertaking.[1] No is the answer.
[1] Home Office v Harman [1982] All ER 532.
Background
Both the applicant and respondent are legal practitioners. At the beginning of her legal career the applicant worked in the respondent’s firm. She thereafter moved interstate and presently practices in New South Wales. In 2014 the applicant asked the respondent to act for her in proceedings commenced in the Federal Circuit Court in Canberra. The proceedings were subsequently transferred to the New South Wales registry of that Court. The applicant had separated from her partner, who then commenced family law proceedings.
The respondent was reluctant to act. He suggested that the applicant would be better advised to appoint a practitioner in the Australian Capital Territory or, subsequently, in New South Wales to act. The applicant persisted and, ultimately, he agreed to act in the matter. Counsel in Sydney was retained.
Initially the proceedings were expected to be relatively straightforward. That proved not to be the case. There was much interlocutory skirmishing. It took about four years to resolve the matter.
There are two primary issues that arise on the taxation. They will be dealt with in separate reasons. I simply note that the issues are the facts and circumstances in relation to the provision of an invoice in August 2018. That was very shortly before the trial was to commence in Sydney. Funds were transferred from the respondent’s trust account to the firm account at that time. The issue in respect of that is whether the invoice that was prepared for the exercise of moving money from the trust account was intended to be for all work done in the four years to that date, or was simply an interim invoice.
The other issue relates to conversations between the parties sometime after the matter settled, at about the time the respondent sent a final bill. The respondent says an agreement was reached, as a result of which he discounted the invoice and took an agreed amount from the trust account. The applicant says that no agreement was reached.
Both of the issues depend partly on documents and partly on the conversations. That creates credit issues. It might be thought unwise for practitioners to pursue or defend matters where the outcome turns on findings of credit.
Due to the nature of the issues, each of the parties has been subject to cross‑examination in relation to the two issues. That involved affidavits and other material that had been either filed, or prepared for use in but not filed, in the Federal Circuit Court proceedings. The parties were questioned about aspects of the documents. After the cross‑examination of each had been completed, a date was set for final submissions.
On the date listed for final submissions, the applicant raised a question of whether the documents utilised by the parties in cross‑examination were subject to a Harman undertaking and, if so, whether the use in this taxation proceeding would be a breach of that undertaking and therefore potentially a contempt of Court. The applicant submitted that the Court should not rely on the documents.
What is the Harman undertaking?
Broadly speaking, the Harman undertaking is an obligation imposed on a party not to use documents obtained during the course of litigation for any other purpose.
The legal principle takes its name from the case of Harman v Secretary of State for Home Department.[2] Although that case is of relatively recent origin, the principle had been developing since the middle of the 19th Century.[3]
[2] [1983] 1 AC 280.
[3] See, for example, Williams v Prince of Wales Life Co (1857) 23 BEAV 338 (53 ER 133).
In Harman, Lord Diplock said:[4]
The use of discovery involves an inroad, in the interests of achieving justice, upon the right of the individual to keep his own documents to himself; it is an inroad that calls for safeguards against abuse, and these the English legal system provides … through its rules about abuse of process and contempt of court.
[4] Harman v Secretary of State for Home Department [1983] 1 AC 280 at 300.
In Riddick v Thames Board Mills Ltd Lord Denning MR said: [5]
Compulsion [to disclose on discovery] is an invasion of a private right to keep one’s documents to oneself. The public interest in privacy and confidence demands that this compulsion should not be pressed further than the course of justice requires. The courts should, therefore, not allow the other party – or anyone else – to use the documents for any ulterior or alien purpose. Otherwise the courts themselves would be doing injustice.
[5] [1977] QB 881 at 896.
The leading Australian decision in relation to the principle is the High Court decision of Hearn v Street.[6] In the majority judgment Hayne, Heydon and Crennan JJ said:
Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, [7] to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. The types of material disclosed to which this principle applies include documents inspected after discovery,[8] answers to interrogatories,[9] documents produced on subpoena,[10] documents produced for the purposes of taxation of costs,[11] documents produced pursuant to a direction from an arbitrator,[12] documents seized pursuant to an Anton Piller order,[13] witness statements served pursuant to a judicial direction[14] and affidavits.[15]
[6] (2008) 235 CLR 125.
[7] Bourns Inc v Raychem Corp [1999] 1 All ER 908 at 916 [19]; affd [1999] 3 All ER 154 at 169-170.
[8] Riddick v Thames Board Mills Ltd [1977] QB 881; Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 32-33; [1995] HCA 19.
[9] Central Queensland Cement Pty Ltd v Hardy [1989] 2 Qd R 509 at 510-511; Ainsworth v Hanrahan (1991) 25 NSWLR 155.
[10] Eltran Pty Ltd v Westpac Banking Corporation (1990) 25 FCR 322.
[11] Bourns Inc v Raychem Corp [1999] 3 All ER 154 at 169-170.
[12] Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 33, 39, 46-47 and 48.
[13] Cobra Golf Inc v Rata [1996] FSR 819.
[14] Central Queensland Cement Pty Ltd v Hardy [1989] 2 Qd R 509; Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217 at 223; State Bank of South Australia v Smoothdale (No 2) Ltd (1995) 64 SASR 224 at 229.
[15] Medway v Doublelock Ltd [1978] 1 WLR 710; [1978] 1 All ER 1261; Re Addstone Pty Ltd (in liq); Ex parte Macks (1998) 30 ACSR 156.
In Forty Two International Pty Ltd v Barnes[16] Yates J explained the nature of the undertaking:[17]
The principle has been expressed in terms of an implied “undertaking” given to the court. However, as explained in Hearne v Street (2008) 235 CLR 125 in [105]–[108], this characterisation of the obligation is a conceptual artefact having its origins in the historical requirement that the use of documents generated by litigious processes depended on the giving of an express undertaking: Richardson v Hastings (1844) 7 Beav 354; Hopkinson v Lord Burghley (1867) LR 2 Ch App 447. Since at least the decision in Alterskye v Scott [1948] 1 All ER 469, the principle has also been described in terms of an implied “obligation”. The plurality in Hearne characterised the principle as an obligation of substantive law, quoting with approval (in [108]) the observations of Hobhouse J in Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756 at 764:
The expression of the obligation as an implied undertaking given to the court derives from the historical origin of the principle. It is now in reality a legal obligation which arises by operation of law by virtue of the circumstances under which the relevant person obtained the documents or information.
[16] [2010] FCA 397.
[17] [2010] FCA 397 at [68].
Simply stated, therefore, documents produced in litigation, to another party under a compulsion, by reason of a rule of court or court order, are protected from misuse. The protection is said to arise from the implied undertaking not to misuse documents. It is a misuse to use documents for an ulterior or alien purpose.
Use of documents in litigation other than the litigation in which the documents were produced may be a misuse. A breach of the implied undertaking is a contempt of court.
Context
The Harman issue arises in the context of a taxation of costs as between solicitor and client. Such a taxation must be conducted by the Supreme Court. It is one of the ways in which the Court regulates the conduct of its officers. The Federal Circuit Court has, and had, a process to tax legal costs pursuant to orders of the Court. It does not have any power to tax costs as between solicitor and client in relation to litigation before it. If it did have such a power, no Harman issue would arise because the taxation would occur in the same litigation in which the documents were provided.
It follows that, when a costs dispute between a solicitor and client arises, it is necessary to issue separate proceedings to deal with that dispute. The applicant, who was a party in the Federal Circuit Court proceeding, issued these proceedings. The process to be adopted is set out in Schedule 3 to the Legal Practitioners Act 1981 (“the LPA”). Relevant for present purposes is clause 46, which provides as follows:
46—Criteria for adjudication
(1)In conducting an adjudication of legal costs, the Supreme Court must—
(a)consider—
(i)whether or not it was reasonable to carry out the work to which the legal costs relate; and
(ii)whether or not the work was carried out in a reasonable manner; and
(iii)the fairness and reasonableness of the amount of legal costs in relation to the work, except to the extent that clause 47 or 48 applies to any disputed costs; and
(b)if the legal costs have been the subject of a complaint to the Commissioner of overcharging—have regard to any recommendation made by the Commissioner that the charges be reduced or an amount refunded to the client.
(2)In considering what is a fair and reasonable amount of legal costs, the Supreme Court may have regard to any or all of the following matters:
(a)whether the law practice and any legal practitioner or Australian-registered foreign lawyer acting on its behalf has complied with the law;
(b)any disclosures made by the law practice under Part 3;
(c)any relevant advertisement as to—
(i)the law practice's costs; or
(ii)the skills of the law practice or of any legal practitioner or Australian-registered foreign lawyer acting on its behalf;
(d)the skill, labour and responsibility displayed on the part of the legal practitioner or Australian-registered foreign lawyer responsible for the matter;
(e)the retainer and whether the work done was within the scope of the retainer;
(f)the complexity, novelty or difficulty of the matter;
(g)the quality of the work done;
(h)the place where, and circumstances in which, the legal services were provided;
(i)the time within which the work was required to be done;
(j)any other relevant matter.
The criteria are wide and will often call for a consideration of documents involved in the underlying litigation.
The relevant documents
The applicant says that the following documents are protected, or at least fall within, the scope of the Harman undertaking. The documents were prepared for use in the Federal Circuit Court proceedings. The documents are:
·the applicant’s trial affidavit sworn 5 July 2018;
·the applicant’s correction affidavits sworn 1 August 2018;
·the affidavit of Ms Mourad (the other party in the Federal Circuit Court proceedings) sworn 31 July 2018;
·the affidavit of the applicant sworn 25 February 2016 filed in the Federal Circuit Court seeking further and better discovery from Ms Mourad, and
·several documents discovered by Ms Mourad in the Federal Circuit Court proceedings.
A number of the documents referred to are affidavits. The position in this State appears to be that, once an affidavit has been admitted into evidence, the undertaking no longer applies.[18]
[18] K & S Corp Ltd v Number 1 Betting Shop Ltd [2005] SASC 228 at [65], Debelle J.
Consideration
I think the documents referred to above can be separated into two categories. The first category I deal with is the three affidavits of the applicant, which were prepared for use in the Federal Circuit Court proceedings. Those documents do not fall within the scope of the Harman principle. The mischief at which the principle is directed at is the use of another party’s confidential information obtained by compulsion during the course of litigation. It is to protect the privacy of the information. The three affidavits are not documents of that nature. They were not obtained by reason of compulsion. They are the applicant’s own documents, now being used in litigation she has commenced. It is no misuse for the respondent to refer to them in cross-examination.
The position is different with the affidavit of Ms Mourad and documents discovered by her in the Federal Court proceedings. The starting point in relation to those documents is that the Harman principle may apply.
The issue to be determined in respect of those documents is whether the use of those documents in a taxation process is the use of the documents for an ulterior or alien purpose. I think not.
In the ordinary course of a taxation, documents on a court file are referred to, viewed and considered for the purposes of a taxation. If the Federal Circuit Court was conducting a taxation of costs pursuant to an order that it made in favour of a litigant, no issue of the Harman undertaking would arise.
The question is whether, when the taxation proceeds in another court, any relevant difference arises. Although this taxation is dealing with issues other than a straight line-by-line taxation, it is still a taxation proceeding.
The Harman principle does not provide an absolute prohibition against all use of documents obtained in the litigation process. In Sybron Corporation v Barclays Bank PLC[19] Scott J held that the use of discovered documents to commence a new proceeding against parties who could have been joined to the original proceedings was not an inappropriate use of the documents. In Wilden Pump and Engineering Co v Fusfeld[20] a party instituted new proceedings against a non-party seeking the production of documents and information. It did so by utilising knowledge arising from documents discovered in the main proceeding. That was held not to breach the implied undertaking.
[19] [1985] CH 299 at 328.
[20] [1985] FSR 581.
The approach referred to in the previous paragraph was approved of in Australia by Hill J in All State Life Insurance Co v Australia and New Zealand Banking Group Ltd.[21] In that case separate holding proceedings had been issued against other parties. The use of the discovered documents from the main proceeding to institute the holding proceedings was not a breach of the implied undertaking.
[21] (1995) 57 FCR 360 at 378.
What the authorities suggest is that the use of documents for an ancillary or related purpose will not be a breach of the implied undertaking. This taxation process is ancillary or related to the original Federal Circuit Court litigation. It is dealing with issues arising out of that litigation and, in particular, the costs of a legal practitioner acting for the applicant in the original litigation. For that reason, the Harman principle does not apply in respect of this proceeding. The use of documents is not for an ulterior purpose. There is therefore no breach of the implied undertaking.
It is not necessary to consider the respondent’s other argument. The taxation action is conducted pursuant to the provisions of the LPA. The respondents submitted that s 46 of the Third Schedule of the LPA requires the Court to have regard to a number of matters in conducting a taxation. He also submitted that the statutory scheme necessarily overrides the common law prohibition on the use of documents in breach of the Harman undertaking. The submission is a serious one and requires careful consideration. However, it is not necessary to form a concluded view on that argument for the purpose of resolving the present controversy. It can be left for another day.
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