Hospital Products Limited v United States Surgical Corporation

[1992] HCATrans 155

•

IN THE HIGH COURT OF AUSTRALIA	•
Office of the Registry

Sydney No S81 of 1983

B e t w e e n -

HOSPITAL PRODUCTS LIMITED

Applicant

and

UNITED STATES SURGICAL

CORPORATION

First Respondent

SURGEONS CHOICE INCORPORATED

Second Respondent

BALLABIL HOLDINGS PTY LIMITED

Third Respondent

ALAN RICHARD BLA<;;KMAN

Fourth Respondent

I.R.D. ENGINEERING SERVICES PTY

LIMITED

Fifth Respondent

Application for an extension

of time (to file bill of costs)

pursuant to Order 60 rule 12(2)

GAUDRON J

(In Chambers)

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON WEDNESDAY, 20 MAY 1992, AT 10.04 AM

Copyright in the High Court of Australia

Hospital(2) 1 20/5/92

MR B.R. McCLINTOCK: If the Court pleases, I appear for the

applicant with my learned friend, MR D. FREDERICKS.

(instructed by Baker & McKenzie)

MR s. RARES:  May it please Your Honour, I appear for the

respondent with my learned friend, MR I. BUTCHER.

(instructed by A.G. Robinson)

HER HONOUR:  We are ready to proceed today, are we?

MR McCLINTOCK:  We are, Your Honour. By way of opening,

Your Honour, might I say this: this is an

application brought by summons for an order under

Order 60 rule 12(2) of the Court's rules and the

particular order sought is an order permitting my

client, who was the successful appellant in

proceedings in the Court, to take a fresh step in

the appeal, the fresh step in question being the

filing of a bill of costs for taxation.

As Your Honour will apprehend, having been the

successful appellant, the respondent, Mr Rares'
client, was ordered to pay my client's costs of the
appeal. Your Honour, I put the application on two

bases: the first somewhat contradicts the nature of

relief actually sought in the summons and my first

proposition is that my client does not require

leave under Order 60 prior to filing the bill and,

if Your Honour accepts that submission, the

appropriate order would be simply a direction to

the Registrar to proceed with taxation.

HER HONOUR:  Or a declaration.

MR McCLINTOCK:  Or a declaration, yes, Your Honour. The

second argument, Your Honour, is that if I am wrong

on the need for an order - wrong on my first

point - that in the circumstances of the case

Your Honour ought to make an order giving my client

leave to proceed with the taxation.

Probably the easiest way by way of opening,

Your Honour, to illustrate those two points is to

take Your Honour, first, to a decision of the

Mr Justice Wilson concerning Order 60, and I will be submitting to Your Honour in relation to that

decision that a view expressed by His Honour as to the need for leave in this situation was expressed

obiter and ought not be followed by Your Honour,

but I am also going to be saying, on the second leg

of my submission, that His Honour provides useful

guidance as to what my client has to establish to

obtain leave.

The particular authority, Your Honour, is

Australian Broadcasting Commission v Industrial

Hospital(2) 2 20/5/92

Court of South Australia, 159 CLR 536. The

particular form of the chambers application in

question was an application for leave to take out a

judgment. However, His Honour went on to deal

with - that was a necessary preliminary to filing a

bill for taxation - and His Honour went on to

express some views obiter as to whether leave in

those circumstances ought to be given. Could I take Your Honour to the passage of the judgment

that commences on page 540 of the report and

Your Honour will see, in the first paragraph that

commences on that page, His Honour said this:

Of course, the reality of the matter is that the extraction of an order after a

significant lapse of time will ordinarily be

an essential prelude to further action such as

the taxing of costs.

Counsel for the appellant has indicated

that he does not, at this stage, seek leave to

proceed to the taxing of costs and so it is

not necessary for me to consider whether the

taxing of costs would itself constitute a

fresh step within the terms of 0.60, r.12(2).

However, it may be expedient for me to express

a view on that question for the guidance of

the parties should it become necessary for

that step to be considered.

In my view the taxing of costs in the

present case could not proceed without leave pursuant to the rule. It is unnecessary for

me to examine the authorities which lead me to

that conclusion but I would merely refer in

passing to Lonergan v Dixon and the recent

decisions in England of Pamplin v Fraser and

Chapman v Chapman.

The question which now arises for consideration is whether, pursuant to O.44,

r.6, I should direct the Registrar to draw up

the order in this case.

In relation to the circumstances under

which leave should be given pursuant to O.60,

r.12(2) -

which, of course, Your Honour, is the step in the

proceedings after no step for six years -

the leading authority is William Crosby & Co.

Pty. Ltd. v The Commonwealth. In that case

the respondents commenced an action in the

High Court against the appellant for damages

for breach of contract. The action was

commenced in 1946 but no steps were taken in

Hospital(2) 3 20/5/92

the proceedings between 1953 and 1963, when
the respondents issued a summons under o.
60,r.12 for an order that they have leave to
take a fresh step in the action. Windeyer J.

gave leave, saying that the rule "enables the

Court to take control of the proceedings by

fixing anew the times within which steps which

have not been taken are to be taken". The

appellant appealed to the Full Court. The

leading judgment was the joint judgment of

McTiernan, Kitto, Taylor and Owen JJ. After

having referred to the manner in which
Windeyer J. had construed the operation of

0.60, r.12(2), their Honours said:

"With respect, we think the learned judge

fell into error in construing the rule as he

did. Its purpose is not to enable the Court

to insist that an action shall proceed and to fix times within which further steps shall be

taken. What it does is to forbid the further

prosecution of proceedings in which no step

has been taken for six years unless leave is

given to continue them, and it follows that it

is for an applicant for leave to show that

there is good reason for excepting the

particular proceedings from the general

prohibition which the rule imposes."

Their Honours allowed the appeal and dismissed

the summons seeking leave to take a fresh step

in the action.

Thus the general rule is that leave

should not be given unless the applicant shows

"good reason for excepting the particular

proceedings from the general prohibition which

the rule imposes". I consider that similar

considerations should apply to the question of

whether, in the light of the length of time

that has elapsed since the date of judgment, I

should direct the Registrar, pursuant to O.44,

r.6, to draw up the judgment. The question of

whether good reason has been shown depends on

all the circumstances of the case and even the

fact of inexcusable delay may not preclude an

applicant from showing that there is good

reason for exception the particular

proceedings from the general prohibition which

the rule imposes:

His Honour then cites a decision of the Queensland

Full Court.

There is, in my view, good reason for

making the necessary direction to the

Registrar in the present case. The affidavit

Hospital(2) 20/5/92

of Peter Colin Walsh dated 25 October 1985

deposes that in 1976 the second respondent

issued proceedings in the Supreme Court of

South Australia seeking a declaration that his

purported dismissal be treated as null and

void. The matter has been listed for hearing

on 2 December 1985. Accordingly there is

still unresolved litigation pending between

the appellant and the second respondent. In

addition, there have been negotiations from

time to time between the appellant and the

second respondent in an attempt to negotiate a

settlement of the action in the Supreme Court
of South Australia. The award of costs has
been a factor in those negotiations and the

failure of the appellant to follow up the

order made on 29 September 1977 has been due,

at least in part, to those negotiations. The

pendency of the litigation between the parties

in the Supreme Court supports the making of a
direction pursuant to O.44,r.6.

In the circumstances, it is not likely

that the second respondent will suffer any
undue prejudice as may have been the case had

there been no issues pending between the

parties.

His Honour then summarized the steps that

His Honour was actually taking in the case.

Could I now take Your Honour to the terms of the rules themselves to illustrate the proposition

I seek to make that leave is not necessary to file a bill for taxation. Could I first take

Your Honour to Order 60 rule 12. Subrule (1) is

inapplicable in the circumstances of this case.

Subrule (2) says this, Your Honour:

When six years have elapsed from the time

when the last step in a proceeding was taken,

a fresh step shall not be taken without an

order of the Court or a Justice, which may be

made either ex parte or upon notice.

Subrule (3) again does not apply here. It sets out

matters which shall and shall not be deemed to be

steps within a proceeding. Could I then take Your

Honour back to the definition section of the rules, specifically Order 1 rule 5, the definition of

"proceeding". It is an inclusive, rather than an

exhaustive definition, Your Honour, but the

definition is:

"proceeding" includes action, cause, matter

and suit;

Hospital(2) 20/5/92

rules. I do not know whether

Could I then, taking this in reverse order, contents of the

Your Honour has the rules in the same form as I do - - -

HER HONOUR:	I think we have our own version.
MR McCLINTOCK:	The proposition I should make before leaving

the definition of "proceeding" is, of course,

Your Honour it does not include appeal, at least in

its own terms and when one looks at the numerical

arrangement of the rules of the Court, one will see

that with the exception of Order 69A, Order 70 and

Order 70A, which are of course the Nauru Appeal

Rules, the entirety of the rules deal with matters that will be within the original jurisdiction of

the Court, as opposed to the Court's appellate

jurisdiction. One can see that by running one's

eye down the table of contents. For example, one

sees Order 2, "Writs of Summons", Order 3,

"Endorsement of Claim". Just to pick some of them,

perhaps almost at random, Your Honour, one sees for

example, Order 19, "Joinder of Causes of Action",

Order 20, "Pleading Generally", Order 21,

"Statement of Claim". As I said, Your Honour, all

those rules - and this continues really up to

Order 69A - deal with, as I said, matters within

the original jurisdiction of the Court as opposed,

as I said, to the appellate jurisdiction.

The point of making that proposition,

Your Honour, is that Order 60 itself, again, which

deals with time, is distinctly not part of those
parts of the High Court's Rules that deal with

appeals. What I am saying, Your Honour, is that

the word "proceeding" excludes the notion of

appeal, by its definition. The placing of Order 60

rule 12(2) in the parts of the rules that deal with

original matters also tends to indicate that an

appeal is not a proceeding within the meaning of

Order 60 rule 12.

When one comes to Order 70, one will see that

delay in running an appeal is dealt with

specifically and in a way that does not sit easily,

we would submit, with Order 60 rule 12. The

relevant rule, Your Honour, is Order 70 rule 15

which deals specifically with dismissal of appeals

for want of prosecution. Now, we would say that Order 60 rule 12 and Order 70 rule 15 do not sit easily together and it would not be necessary, if

Order 60 rule 12 applied to appeals, to have a

provision such as Order 70 rule 15.

Finally, Your Honour - I do not think I need

specifically take Your Honour to it - but Order 1

Hospital(2) 6 20/5/92

rule 2 itself draws a distinction between the

concept of a proceedings and the concept of an

appeal. What it says is that:

These Rules shall come into operation on

the first day of January, 1953, and shall

apply to all proceedings and appeals commenced

or instituted on or after that date.

So there, Your Honour, we would say there is a

distinction drawn between the two concepts.

Your Honour will recall that Order 60 rule 12 only

applies to proceedings. The submission that I make

by way of opening is that an appeal is not a
proceeding, as is shown by the interpretation and

construction of the rules, and that therefore no

leave is required within Order 60.

In relation, again by way of opening, to my

second proposition, Your Honour, which is that if

Your Honour does not accept me in relation to the

lack of necessity for leave under Order 60, the

submission being that Your Honour ought to give

leave, by way of opening I would wish to say this: the circumstances set out by Mr Justice Wilson, or
touched upon by him, are substantially present in

this case. There were settlement negotiations on

this costs claim from 1985, Your Honour, the appeal

having been determined - - -

HER HONOUR:  Just let me interrupt you there. You said the

best way to open this case - and I know we are

somewhat flexible - but do you propose to read the

affidavits? Are there to be witnesses and cross-

examination and so forth?

MR McCLINTOCK:  I do propose to read the affidavits. I

understand my friend wishes to cross-examine my

witnesses. I may wish to cross-examine his

witnesses. If Your Honour wishes me to - - -

HER HONOUR:  No, no, not at all. I will leave it in your

hands. I just wanted to be sure that you had not

thought we had proceeded	in disregard of
contentious issues.

MR McCLINTOCK:  No, Your Honour, I had not forgotten that I

was going to read my affidavits, Your Honour.	The
appeal was determined by the Court in late 1984.

In 1985 settlement negotiations began between those

instructing me and the solicitor acting for - - -

HER HONOUR:  Now, when you say "between those instructing

me" -

MR MCCLINTOCK:  Baker & McKenzie.

Hospital(2) 7 20/5/92

HER HONOUR:	Who have been in it at all times.
MR McCLINTOCK:	Who have been in it at all times, and

between Mr Robinson who had, following the appeal,

taken over the conduct of the proceedings from the

solicitors formerly acting on behalf of United

States Surgical Corporation. Those negotiations

continued until at least June 1990. I am not

asserting, Your Honour, that the respective firms

were on the phone every day, obviously, but there
were relatively intensive negotiations for that

five year period. That provides the principal

explanation for the delay in propounding a bill for

taxation.

Your Honour will also bear in mind that a

taxation of a bill of costs in this case is an

onerous exercise, particularly for those

propounding the bill. The appeal in the Court,

Your Honour, to illustrate the magnitude of it,

went for the better part of two weeks. It

commenced, as I recall, on a Tuesday afternoon, and

concluded on the Thursday or the Friday of the

following week. It is a very substantial exercise

and we would say that it was in the interests of

everyone to attempt to avoid - when I say

"everyone", Your Honour, not least the Court

itself - to avoid the necessity of having to

actually tax a bill of costs.

We would say also, Your Honour, that looking

at the matter from the point of view of the

respondent, United States Surgical Corporation,

that whatever delay there has been in propounding a

bill of costs has not operated so as to cause any
prejudice whatever to that respondent, indeed, in a

sense, the delay has been in the interests of that

respondent because, as Your Honour would be aware,

interest does not run on a bill of costs until it

is actually taxed.

Those, in summary form, Your Honour, are the

reasons why we say leave should be given. There is

an assertion made by the respondent that leave

ought not to be given because it is entitled to a

set-off arising out of the judgment given by an

American court, or Connecticut court, against my

client. We strongly dispute any entitlement to

that set-off and what we say about that,

Your Honour, is that it is a fight really for

another day, that it would be inappropriate to

disentitle my client to tax its costs because of

the disputed claim for a set-off; that that is a

matter that ought to be raised at the point at

which my client comes to enforce whatever

certificate of taxation it actually receives. In

fact, Your Honour, as the evidence will show, there

Hospital(2) 8 20/5/92

is a security - a fund established by way of

security for costs in these proceedings established

over 10 years ago in the joint names of

Mr Robinson, who is Mr Rares' solicitor, and a

partner of Baker & McKenzie, who are my solicitors,

and one would imagine that the appropriate time to

raise the set-off is the point at which my client,

assuming it gets a certificate of taxation, seeks
an order requiring payment out of the money in that

security fund.

Your Honour, I am sorry to have taken so long

in opening the matter. Could I now take

Your Honour to the affidavits on which I rely.

They are first two affidavits of James Douglas

Beatty. The first was sworn on 18 March 1992.

HER HONOUR:	Yes, I have that.
MR McCLINTOCK:	Mr Beatty deposes that:

I am a solicitor of this honourable Court and

a partner in the firm of Baker & McKenzie.

2. In May 1981 Equity Proceedings were

commenced in the Supreme Court of New South

Wales, Equity Division, No. 2094 of 1981 by

USSC (Plaintiff) against Hospital Products

International Pty Ltd ("HPI") (First

Defendant) -

To avoid confusion I should say that - it is a

confusion that has been present for the last 10 or

11 years - I do not, of course, appear for HPI.	My
client is HPL, the third respondent, the third
defendant in the original proceedings -

Alan Richard Blackman (Second Defendant),
Hospital Products Limited ("HPL") (Third

Defendant), I.R.D. Engineering Services Pty

Limited ("IRD") -

HER HONOUR:	Should I know what has happened to the others?
MR McCLINTOCK:	Your Honour, that really is dealt with by

the order of the Court in the appeal, which I can
take Your Honour to, if Your Honour wishes. I do

not think it is exhibited to any of the affidavits

but it ought to be in the file.	If it is not, I
can certainly hand up a copy.

HER HONOUR:  Perhaps if you just tell me the effect of the

order.

MR MCCLINTOCK:  The parties to the appeal were Hospital

Products Limited, my client, as the appellant;

United States Surgical Corporation who was the

Hospital(2) 20/5/92

first respondent, Mr Rares' client; Surgeon's

Choice Inc., the second respondent; Ballabil as Hospital Products International Pty Ltd;

Mr BlacJanan, the fourth respondent; I.R.D.

Engineering Services, the fifth respondent. The

orders of the Court were that my client's appeal,

that is Hospital Products Limited's appeal be

allowed, that US Surgical's cross appeal be

dismissed. The costs order was that US Surgical

pay the costs of and incidental to HPL's appeal and

USSC's cross appeal. There had been cross appeals

filed by Surgeon's Choice and by IRD Engineering,

the second and fifth respondents. It was ordered

that those cross appeals be allowed; that the first

respondent, Mr Rares' client, pay those parties'

costs of those cross appeals; and there was an

order that the cross appeals of the third and

fourth, that is Ballabil Holdings, which was

formerly HPI, and BlacJanan be allowed also but

there be no order as to costs of those. Then there

were orders dealing with what had occurred in the

supreme court and setting aside the orders there

and substituting various orders.

HER HONOUR:	I follow that now.
MR McCLINTOCK:	The costs order with which we are concerned,

Your Honour, is the order for costs in favour of

the appellant as against Mr Rares' client, ·which

was the first respondent.

If I could go back to Mr Beatty's affidavit

where he is setting out what had actually occurred

in the history of the proceedings. After he sets

out the parties to the equity proceedings, on the

second page of the affidavit he continues:

At this time I was the partner at Baker &

McKenzie with overall responsibility for

Hospital Products Limited and other companies

in the group.

3. Baker & McKenzie acted for all five

Defendants throughout the equity proceedings

at first instance and during USSC's appeal to
the Court of Appeal. After Mr Justice

McLelland delivered his judgment in the equity

proceedings at first instance it became

evident that there was a potential conflict

between certain of the Defendants, Baker &

McKenzie ceased to act for BlacJanan, HPI Pty

Ltd and IRD. I became the solicitor of record

for HPL and SCI for USSC's appeal to the Court
of Appeal and to the High Court of Australia.

Hospital(2) 10 20/5/92

4.       USSC made a total of five deposits as

security for costs in the Equity Proceedings

between July 1981 and the close of evidence in

June 1982. The five deposits totalled

$395,115.00. The deposits were all paid into

an account with the Australia and New Zealand

Banking Group Ltd (the "ANZ Bank"). The co-

signatories of the account were Robert Andrew

Channon (a partner of Freehill Hollingdale &

Page, solicitors for USSC throughout the

Equity Proceedings and the two subsequent

appeals) and Peter Thomas Dwight (a partner of

Baker & McKenzie and the solicitor of record

for the defendants in the equity proceedings).

This fund became known as the "security fund".

The amount in the security fund is now

approximately $895,000.

5.      The High Court appeal was heard in early

1984 and the High Court handed down its

judgment on October 25, 1984 allowing the

appeal of HPL. The effect of the High Court

orders in relation to costs was to award HPL

and SCI their costs of the entire proceedings
and to award IRD limited costs in respect of

its cross appeal in the High Court.

6.      Upon discharge of the various

interlocutory orders which had restricted

HPL's ability to deal with its assets and

repay its debts - - -

MR RARES:  I object to the following, down to the eighth

line of the next page where it reads "The dispute

resulted", Your Honour. It is hearsay, it is a

summary of a whole lot of other things, it is not

anything to do with any conduct of my client and it

is just a conclusion Your Honour is asked to draw

from facts that are not set out.

HER HONOUR:  I take it I can read it.

MR RARES: Certainly.

HER HONOUR:  Yes. What do you say, Mr Mcclintock?

MR McCLINTOCK:  I would say this, Your Honour, that part of

what this case is about is subjective matters, in

the sense that the reasons on my side for the delay

in bringing forth a bill of costs - this is one

aspect of that matter, to explain to Your Honour

the reasons for the delay. It is part of the

procedural history which occurred after the

determination of the appeal by the Court in 1984.

Hospital(2)	11	20/5/92
HER HONOUR:	I will disallow it.	I do not think anything

very much turns on it anyway. So, it starts, "The

dispute" -

MR MCCLINTOCK:  Yes:

The dispute resulted in proceedings in the

United States District court in Illinois in

about June, 1985 during which AHSC - American Hospital Supply Corporation -

obtained a temporary restraining order

restraining HPL from selling its products

directly in the United States.

HER HONOUR:  Now, who is AHSC?

MR McCLINTOCK: Unfortunately, Your Honour, that can only be explained by the part that Your Honour has rejected

which sets out - perhaps Mr Rares will simply

concede - - -

MR RARES:  I concede it is American Hospital Supply

Corporation.

MR McCLINTOCK:  The affidavit continues, Your Honour:

7. In or about May 1985 USSC commenced
proceedings against HPL, Ballabil Holdings Pty

Ltd, Blackman and Pluteus in the equity division of the Supreme Court of New South

Wales (No. 4236 of 1985) claiming that HPL's

settlement of its proceedings against its

founder and former director, Alan Blackman,

involved a breach of Section 129 of the

Companies Code.

MR RARES:  I object to the next paragraph as a conclusion

and as to relevance, Your Honour. It just says

there is some amounts demanded and some deeds

entered into.

MR McCLINTOCK:  Your Honour, I will not press paragraph 8.

Paragraph 9:

9. In or about June 1985 Broadland

International Finance Limited ("Broadlands"),

a secured creditor of HPL, threatened to

appoint Receivers and Managers in respect of

HPL's assets. HPL then commenced proceedings

in the Equity Division of the Supreme court of

New South Wales (No. 4207 of 1985) seeking

declarations in respect of Broadlands ability

to appoint Receivers and Managers without

giving three months notice. Those proceedings

settled on June 25, 1985.

Hospital(2) 12 20/5/92

I think, Your Honour, these parties have been

involved in one way or another in what might be

described as a welter of litigation over the last

10 years, 12 years in fact, Your Honour. I

remember there were proceedings in the High Court

in 1980 as to the jurisdiction of the Federal Court

between one of the parties to these proceedings and

Mr Rares' client.

HER HONOUR:  I am intrigued that from time to time

proceedings are settled.

MR RARES: Mr Mcclintock is just starting off the next time

bomb to - - -

MR McCLINTOCK:  Your Honour, I actually found myself giving

evidence, believe it or not, a month ago in the

Federal Court about an incident in 1982 in these

proceedings in a taxation case, of all things.

Paragraph 10:

10.       On June 27, 1985 Broadlands appointed

Desmond Livingstone Nicholl and Errol George

Chant as Receivers and Managers of property of

HPL specified in the schedule pursuant to a

deed of charge Registered No. 40474.

11.       On June 28, 1985 AHSC appointed Ian

Lawrance Struthers and Geoffrey Ormond

Harrison as Receivers and Managers of the assets of HPL in respect of which it held a

first ranking charge.

12. In about August 1985 litigation ensued

between the two sets of Receivers and Managers

of HPL, as to the scope of the securities
granted by HPL in respect of its property, in

the equity division of the Supreme Court of

New South Wales (No. 4287 of 1985). This

litigation lasted until about February 25,

1986 when judgment was handed down.

13. In late 1985 Freehill Hollingdale & Page

ceased to act for USSC and A.G. Robinson &

Associates became USSC's solicitors of record

and took control of the documents generated by

the litigation between USSC and HPL in

Australia. Andrew George Robinson became the

co-signatory in respect of the security fund.

14.       On October 24, 1985 notice was given in a

letter from Baker & McKenzie to inter alia

Robinson & Associates, solicitors for USSC regarding liens over HPL's property for unpaid

fees and disbursements. The amount of the

unpaid fees and disbursements was

approximately $300,000.

Hospital(2) 13 20/5/92

15. Between about June 1985 and December

1987, there were extensive discussions and

negotiations amongst secured creditors of HPL

and SCI. These negotiations culminated in a

settlement agreement entered into on July 1,

1987 between the Trustees in Bankruptcy of

SCI, Hospital Products Limited (Receivers and Managers Appointed), Broadlands International

Finance Limited ("Broadlands"), Desmond

Livingstone Nicholl and Errol George Chant as

Receivers and Managers of Hospital Products

Limited ("the Broadland Receivers"),

Pittsburgh National Bank ("PNB"), Baker &

McKenzie, Breed Abbot and Morgan ("BAM") and

Gottlieb Rackrnan and Reisman.

MR RARES:	I object to the next two paragraphs down to but not including the last sentence in 17 as being a
summary of this deed.  It will not prove what is in
the deed and of course to tender it - I do not
object to it if it is just put before Your Honour
as his understanding, on the basis that it will be
tendered. If it is his understanding I object to
it.

MR McCLINTOCK:  I do propose to tender it, Your Honour. I

think it was in fact exhibited to the second

affidavit of Mr Beatty. I stand corrected. It is

in fact an exhibit to Mr Robinson's affidavit.

HER HONOUR:	I thought so, yes.
MR MCCLINTOCK:	But it is a matter of indifference whether I

tender it or whether Mr Rares tenders it,

Your Honour.

HER HONOUR:	What do you want to do, Mr Rares?
MR RARES:	I am happy for Mr Mcclintock to tender it because

I do not see that my client should bear any stamp

duty consequences if we tender it and it needed to

be stamped.

MR McCLINTOCK:	I will tender it, Your Honour.
HER HONOUR:	Does it need to be stamped?
MR McCLINTOCK:	I would be surprised if it did, Your Honour,

because it is - I am just trying to find the

execution provision. It was executed in the United

States, Your Honour, as I recall, so one would not

be - - -

HER HONOUR:  There is no objection taken that it cannot be

tendered because it is not stamped.

MR RARES:  I do not take that objection, no, Your Honour.

Hospital(2) 14 20/5/92

HER HONOUR: That has solved something.

MR McCLINTOCK:  I will tender the document, Your Honour. It

is entitled, "Settlement Agreement dated as of

July 1, 1987 among" - and then there is a list of

parties on the front page.

HER HONOUR: It is a copy, I take it?

MR McCLINTOCK:  Yes, it is a copy, Your Honour.

HER HONOUR: That will become exhibit 1.

EXHIBIT:  Exhibit 1 ..... Copy Settlement Agreement

HER HONOUR: There is no problem about that?

MR McCLINTOCK:  No, Your Honour. I will not read

paragraph 16. I take it Mr Rares has withdrawn the

objection, that document having been tendered.

17. Pittsburg National Bank ("PNB"), as part

of the Settlement Agreement, agreed to appoint

receivers and managers of HPL in respect of

HPL's entitlement to costs from USSC and to

instruct these receivers and managers to
instruct Baker & McKenzie to recover the

costs. On or about July 28, 1988, Clyde

Dickens and Kenneth Rennie or Ernst & Young
were appointed by PNB as Receivers and
Managers of HPL's cost claim.

18.      As part of the settlement, PNB agreed

with the law firms (including Baker &McKenzie) as to how the costs claim would be prosecuted

and how monies received from USSC would be

divided.

19. In about October 1990, HPL was placed in

liquidation by ussc.

MR RARES:  I object to the next sentence as a conclusion of

law, Your Honour.

MR McCLINTOCK:  I will not press it, Your Honour.

Paragraph 20 - - -

MR RARES:  I object to the next sentence on the ground of relevance.

HER HONOUR:  I will admit that. It seems to me to be

relevant. The next sentence goes to the security

fund, does it not?

Hospital(2) 15 20/5/92

MR RARES:  Yes, Your Honour, but whether there is a security

fund of not cannot be relevant to whether these

proceedings should have had a bill of taxation

taken out.

HER HONOUR:  That is a matter about which I think there

might - - -

MR RARES:  Yes. Perhaps if I can just foreshadow that

rather than take an objection to each paragraph

that deals with the security fund, I will just

object to it generally on the ground of relevance.

I understand if Your Honour - - -

HER HONOUR:	Do you want to speak to it now or later in the course of your submissions?
MR RARES:	The thrust of our argument about that is that it

cannot be relevant as to whether or not the bill

should be taxed. There was a dispute as to who was

liable for tax on the security fund, whether it was

the trustees, or whether the tax came out of the

fund and how much the tax was going to be, because it cannot go as to my client's ability to meet its

obligation to pay the costs if taxation proceeded
in this Court on the bill. This is just res inter

alios acta, it is - - -

HER HONOUR:	I am not too sure about that.
MR RARES:	Your Honour, it may be a matter for address at

the end of the day.	I just want to take the
position - - -

HER HONOUR:  I will note the objection and note that you are

going to speak to it in some detail in your

submissions.

MR MCCLINTOCK:  Thank you, Your Honour.

20. In late September 1989, AG Robinson &

Associates instructed Touche Ross, Chartered
Accountants, to prepare tax returns in respect

of the income of the security fund for the

1987, 1988 and 1989 financial years. Peter

Thomas Dwight of Baker & McKenzie was asked to

sign these tax returns, which he declined to

do.

21. The tax returns were prepared on the basis that the security fund was a trust

estate of which Andrew George Robinson and

Peter Thomas Dwight were trustees and that no

beneficiary was presently entitled to the

income of the fund. Assessments for income

tax were issued by the Commissioner of

Hospital(2) 16 20/5/92

Taxation for the years June 30, 1985 to

June 30, 1989 on March 27, 1990.

22.      The preparation of the tax returns and

considerable amount of correspondence between

the request by AG Robinson & Associates that

Baker & McKenzie and AG Robinson &

Associates, and ultimately to correspondence

between Baker & McKenzie and the Deputy
Commissioner of Taxation.

23.       On about April 30, 1990, a summons was

filed in Dwight v Robinson & Ors (2393 of

1990) in the Equity Division of the Supreme

Court of New South Wales. This litigation was

in relation to the taxation liability for the

security fund. A Cross-Claim was filed by

Andrew George Robinson against Peter Thomas

Dwight on about June 6, 1990. On about

July 19, 1990, a settlement was reached

effectively allowing for all costs in relation to the income tax issue and tax liabilities to

be met out of the security fund.

HER HONOUR:  I take it that is legal costs?

MR McCLINTOCK: Legal costs, yes. Tax liabilities in fact

included the actual liability to the Commissioner,

although - I do not think there is any evidence of this but as I understand the position, the Federal Court has recently ruled that Mr Dwight is not

liable to pay tax on the particular fund.

24.       On May 28, 1990, Peter Dwight lodged

objections to the income tax assessment which

were disallowed. There are currently

proceedings in the Federal Court of Australia

in relation to the disallowance of the

objections.

25. In or about July 1990, Sibylle Krieger

left the firm of Baker & McKenzie.

MR RARES:  I object to the next sentence and the next

paragraph as being a summary - trying to get in -

and this becomes material at this point of time,

particularly, Your Honour, as the end of the six

years come up. There is just this in globe

statement "some delays" in paragraph 25 and then

26, another thing that has caused "some delay" and

there are all these things, like other ways of

recovering costs and the like that are just not

specified and what is really being sought to be

done is to get a series of conclusions admitted as

evidence of what did or did not happen and how

Hospital(2) 17 20/5/92

Baker & McKenzie or Mr Beatty may have been

affected in these two respects.

HER HONOUR:  I will allow it. It seems to me that is a

matter for cross-examination rather than relevance.

MR MCCLINTOCK:  Thank you, Your Honour.

This caused some delays as she had had the

day-to-day handling of the HPL file since

approximately 1983.

26. Another difficulty which has caused some

delay was that under the 1987 Settlement

Agreement, the law firms (which included Baker

& McKenzie) agreed to forego periodic or

advance payment of the costs and expenses

associated with rendering legal services to

HPL and the PNB receivers in connection with

the prosecution of the costs claim. This

meant that Baker & McKenzie effectively had

to, and still has to, fund the preparation of

the bill of costs and other costs associated
with the costs claim. As a result of this
consideration was given to other ways of

recovering costs, or funding the recovery,

other than taxation of the complete bills.

27. Since about August 1985, there have been

regular negotiations and correspondence

between Baker & McKenzie and the solicitors

for USSC Robinson & Associates aimed at

achieving a settlement of the costs issue.

28. These negotiations were complicated -

MR RARES:  I am sorry, I should have objected to 27. I have

not done so because I understand that the evidence

of what is said to be the "regular negotiations" is

in Mr Beatty's second affidavit. If that is the

essence of it, I do not press the objection to that

paragraph, but otherwise I would because, again,

that is a conclusion and that is a matter of some

dispute.

HER HONOUR: There is evidence, I think - - -

MR RARES:  Yes, he has got a second affidavit with a number

of letters and file notes of Ms Krieger - - -

HER HONOUR:	You propose to read the second affidavit?
MR MCCLINTOCK:	I do, Your Honour.
MR RARES:	If that is what referred to, there is no problem.

Hospital(2) 18 20/5/92

MR McCLINTOCK:  I will certainly be reading that affidavit,

Your Honour, and unfortunately taking Your Honour

to some of the correspondence.

28. These negotiations were complicated and

prolonged, especially during 1987 to 1991, by

the fact that Robinson & Associates (the

solicitors for USSC) asserted in writing, on

numerous occasions, that USSC was entitled to

set-off against HPL's costs claim an award of

damages obtained by USSC against HPI Pty Ltd

in -

HER HONOUR:	HPI.
MR McCLINTOCK:	I think Mr Rares, in one of his affidavits,

has a copy of the judgment in question,

Your Honour, and in so far as it is obviously the

judgment itself which will be the relevant thing,

rather than - - -

HER HONOUR:  No, what I am concerned about is by HPI. The

person you are claiming to act for is HPL. I just

do not follow it. Is there something I am missing?

MR McCLINTOCK:  The judgment in question, Your Honour, there

were a number of parties to the Connecticut

proceedings and, as I understand the position, the

judgment was given against Blackman, HPI and HPL

for $73 million-odd.

HER HONOUR:  It is just that it does not make any sense to

talk about a judgment against HPI.

MR McCLINTOCK:  I think the confusion arose because the way

the case was referred to was USSC v HPI and Others.

I think the position was that HPL was joined at

some point after the proceedings had, in fact, been

commenced, Your Honour.

HER HONOUR: All right, that makes sense of it, and it is

not objected to.

MR RARES: 

Your Honour, we have got a copy of the judgment

which shows that HPL is a party liable so that on
that basis, and Your Honour understands - - -

MR MCCLINTOCK: 

The affidavit continues:

As the basis of this set-off, USSC relies on a

settlement agreement of other proceedings in

which HPL had agreed with HPI Pty Limited and

Blackman to indemnify them and each of them

against any award of damages made in the

patent proceedings.

Hospital(2) 19 20/5/92

It now seems that resolution by settlement

will not be possible and that HPL's claim for

costs will need to be quantified by taxation

of a bill of costs.

29. Deberah Vine-Hall of DSA Costs

Consultants was retained in late 1991 to

prepare the Bills of Costs for taxation. This

Bill has now been prepared and is ready to be

filed for taxation, subject only to a possible

addition of a disbursement for fees paid to

the law firm, Breed Abbot and Morgan.

Exhibited to me at the time of swearing this

my affidavit and marked with the letters "JDB-

1" is a copy of the proposed Bill of Costs.

HER HONOUR:  Could I just interrupt you. By how much are

you outside the six year period?

MR McCLINTOCK:  The precise time, Your Honour - I will just

make absolutely sure about it - - -

MR RARES:  It is about a year and a half. The judgment was

25 October 1984 and you filed the summons on

18 March 1992.

MR McCLINTOCK:  My friend is correct. I just wanted to

check the date of the judgment again.	It was
25 October 1984.

HER HONOUR:  And there was not a step taking out the

judgment at any stage?

MR McCLINTOCK:  The judgment was in fact taken out. I am

afraid that my copy does not reveal the date upon

which that judgment was in fact taken out.

Unfortunately I have a copy which bears the seal of

the court - perhaps while that is being checked by

my instructing solicitors, Your Honour, I will

inform Your Honour as soon as I know, but on the

assumption that the last step was the giving of the

judgment, the date would run in October 1990 and,

as Mr Rares says, the summons was filed in March,

so therefore the period would be approximately a

year and a half.

MR RARES:  Justice Wilson's judgment says taking out the

judgment is not a step.

MR McCLINTOCK: It does indeed, Your Honour. It may be

important just to isolate the precise date and I

have asked inquiries to be made. I am not quite

sure whether Your Honour wishes me to tender the

bill of costs separately from the affidavit.

HER HONOUR:  I have already seen two copies of it, I think.

You do not need further copies, I am sure.

Hospital(2) 20 20/5/92

MR McCLINTOCK:  I would not have thought so, Your Honour.

The only part of it I would ask Your Honour to note

is that in this one, the amount claimed is in

excess of $300,000.

HER HONOUR:	Yes.
MR MCCLINTOCK:	Might I now take Your Honour to Mr Beatty's

second affidavit which was sworn 21 April 1992.

HER HONOUR:  Yes, I have that.

MR MCCLINTOCK: Again Mr Beatty deposes that he is:

a solicitor of this honourable Court and a

partner in the firm of Baker & McKenzie.

In paragraph 2 he refers to the earlier affidavit.

Paragraph 3:

From late 1985 until July 1990, there were

negotiations and correspondence between Baker

& McKenzie and the solicitors for USSC,

Robinson & Associates aimed at achieving a

settlement of the costs issue. These
negotiations were one of the factors which
influenced Baker & McKenzie not to proceed

with a taxation of costs until 1991.

4. Exhibited to me at the time of swearing

this affidavit and marked with the letters

JDB-2 are copies of the correspondence between

Robinson & Associates and Baker & McKenzie.

Exhibit JDB-2 consists of the following

correspondence:

MR RARES:  I object to the first two. I do not mind the

fact that the dates are there and that they are

said to be without prejudice correspondence aimed

at negotiating, but they are without prejudice

correspondence.

HER HONOUR:  You object only to the tender of the documents,

not to the fact that there were letters sent.

MR RARES: That is right. Perhaps on reflection I think I

will withdraw it. It is too complicated.

MR McCLINTOCK:  It might be easier, Your Honour, if I took

Your Honour to JDB-2, which is the correspondence, and to JDB-3, which is the file notes, together at

the same time. Your Honour will see that the next

paragraph, paragraph 5, annexes file notes of

Ms Sibylle Krieger and to my surprise, Your Honour,

they are actually legible and can be read. I would

wish to take Your Honour to those documents. But

because the file notes and the letters are in

Hospital(2) 21 20/5/92

distinct exhibits, there is an overlap in

chronological order. Could I ask, if it does not

trespass too much, Your Honour, if Your Honour

could have the two exhibits in front of Your Honour

and I will - - -

HER HONOUR:  I will do my best.

MR McCLINTOCK: Also to maximize confusion in an already

confused case, Your Honour, the correspondence is

in reverse chronological order and it commences at

the back. If I could take Your Honour, first, to

JDB-3, the last item in JDB-3. It commences two

pages in and Your Honour will see it is headed

"File Note", it is dated 29.10.85. The reference

is SK, which Your Honour might well infer was

Sibylle Krieger. It recalls a conversation from

Mr Robinson and the part that I would wish to refer

Your Honour to is the part headed "Re costs of

proceedings" and it says:

has quoted USSC up to $200K to do taxation.

That is obviously a reference to what Mr Robinson

told Miss Krieger.

Believes that most cost consultants approached

have refused.

- discussed his past estimates of reasonable

settlement offers - $SOOK - $lm, $600K - 900K.

He said - based on a "guesstimate" of

Freehills. Told him, surprisingly low -

USSC's costs must be a large multiple of that.

He agreed, but said he didn't think Horton's

and Hughes' fees would be recoverable (not

clear why not).

Mr Horton and Mr Hughes, Your Honour, of course

were the respective senior counsel on both sides.

- Given our letter re s.39A charge, he

couldn't recommend to USSC that they offer any

more than about $450K all up, for costs.

Takes into a/c -

1. delay (he thinks 2 years before any

certified bill likely)

2. possibility that no-one will tax HPL's

bill due to lack of funds - expects Broadlands

won't be interested to put up the costs,. esp.

if a large part will be paid to Baker &

McKenzie.

3. Interest doesn't fun on costs until

certified etc while USSC is earning about $90k

a year on the security deposits.

Hospital(2) 22 20/5/92

Told him, would try and get him an all-up

figure of costs incl. US counsel.

As soon as he gets control of security

funds intends to invest for longer terms@

higher interest.

Asked whether Wright will be replaced by

Beatty - told him can't see any -

and I do not think what follows there is of any

relevance at all, Your Honour.

Your Honour, I have just been informed that

the order was entered on 17 May 1985 so, even

assuming that to be a fresh step, Your Honour, we

would require - - -

HER HONOUR: Still a year out.

MR McCLINTOCK:  Yes, Your Honour, 10 months out, if one

takes the end point as the filing of the summons,

which would be March.

Could I then take Your Honour, to get this in

chronological order, to JDB-2 and the first letter

appearing at the end of that, which is a letter

from AG Robinson & Associates addressed to

Ms Sibylle Krieger, Baker & McKenzie. Your Honour

will see - the first parts of it deal with 'the

security fund. That is paragraphs 1 and 2 and 3.

I should take Your Honour to what is in the middle

of paragraph 3. It says:

Although we note your advice that you

anticipate instructions to commence

preparation of a bill of costs, we cannot

believe that settlement of the costs question

could possibly be envisaged prior to this

maturity date.

That, of course, is a reference to 4 January 1987.

If you think we are wrong in this assumption,

please let us know and we will make

arrangements with the bank to shorten the
maturity date.

On the question of costs, we record our previous requests for you to provide us with a

breakdown of your costs and disbursements in a

form which would enable us to give our client

some advice on the subject. If you proceed to

taxation of your bill without giving us at

least these basic details then clearly the

costs of such taxation will become an issue.

Hospital(2) 23 20/5/92

The next item, Your Honour, is in JOB-3, again

a file note, in September 1986; again between

Mr Robinson and Ms Krieger.	Ms Krieger's note says
this:

discussions with USSC - could be in the

awkward position of taxing "another firm's

bill".

Robinson - wants to talk Tues/Wed/Thurs - next week.

10.30 Tues 23.9 Level 10.

Obviously enough getting up arrangements to discuss

the settlement of the matter. The next item is

again another diary note of Ms Krieger, the next

three pages in JOB-3, dated 23 September 1986,

headed "HPL - costs recovery". It says "c/w",

obviously conference with "Andrew Robinson /JOB"

which Your Honour would infer, of course, is

Mr Beatty. In the first item Ms Krieger has noted:

Connecticut proc's continuing ags HPI &

Blackman. 5.11.86.

HPL has indemnified HPI $27m + punitive

damages.

depositions taken earlier this year 14 ex-

directors etc make the case pretty conclusive

ags HPI. USSC also claims treble damages.

Rights of set-off.

USSC may be prep to settle for amt in security dep. Have really written it off

already.

Has no instructions to put any offer.

doesn't know what's happening in the asset

ownership dispute in the C of A -

Court of Appeal. Again, Your Honour, fairly

clearly something Mr Robinson said to Ms Krieger

and Mr Beatty. There is nothing in the rest of

that note that I think I need take Your Honour to,

unless my friend wishes me to. The next step is

another conversation between Ms Krieger and

Mr Robinson, which is the next diary note. It is a

four-page note of which the first and last pages

are not numbered, the second and third are. It was

should refer Your Honour to one item on page 1 which is the third from the bottom:

dated 5.11.86, conference with Andrew Robinson and

Hospital(2) 24 20/5/92

Have detailed opinion fr senior counsel on

set-off.

JOB - qu of priorities - how does USSC take

priority over Broadlands etc.

Robinson - risk of set-off - could reduce

costs to nil.

to tax costs would cost USSC $1/4m.

You get a reference to something Mr Robinson said.

could recommend that they pay us $1/4m

instead. If we are pd to tax bill, our cl

could lose out. JOB - secured creditors won't

accept that. Have made own assessment. Won't

even settle for amt in trust a/c.

Again, over the page, Your Honour.	11 AR 11 ,
Mr Robinson -

doubts very much whether USSC will settle for

more than is in the security fund.

Once again, Your Honour, there are obviously

continuing discussions about settling the costs

claim. On 13/11/86, which is the next diary note,

it recalls a conversation between Ms Krieger and

Mr Robinson. This is the note:

final hearing - Dec.22

stay rejected

if are going to talk need to talk before

then.

once geared up for hearing, doubts whether

we can settle anything then.

The next item is another conversation in December

1986, Andrew Robinson, again with Ms Krieger:

told him - no news - unable to get

instructions to settle costs.

they are making final preparation for patent proceedings.

If I could now take Your Honour back to JDB-2,

Your Honour will see that after the letter I

previously referred Your Honour to there is a

letter dated 14 January 1987 from AG Robinson &

Associates to Baker & McKenzie enclosing a receipt

in relation to the security fund, a document

Hospital(2) 25 20/5/92

obviously relevant to the Connecticut case, and in
the middle of the last paragraph saying:

If any prospect of settlement remains, perhaps it would be opportune to conduct further

discussions. With respect to Mr Beatty's
apparent confidence concerning the outcome of
the patent case we would submit that the vast

amount of evidence supporting each item on the

chronology cannot easily be disregarded.

Again, settlement negotiations continuing,

Your Honour. The next item is a diary note two

days later, again part of JDB-3. It is dated

16.1.87, again it is a conversation between

Ms Krieger and Mr Robinson.	The relevant part is
really the last two lines:

can we settle? Fund now has about $770K.

The next item is the next diary note which is

2.4.87 and again between Ms Krieger and

Mr Robinson. It says:

A$375K w'out prej offer to settle Australia

excludes patent & antitrust

told him, I didn't think so - will get

instructions, but think they will want·

something much closer to what we think our

bill will tax for.

he asked for counter-offer.

Your Honour, the next item appears in JDB-2 and it is a letter dated 17 March 1988. It sets out - it

is again from Baker & McKenzie, signed by

Ms Krieger to AG Robinson. It indicates that:

the United States Bankruptcy Court, District

of Connecticut made orders on February 25,

1988 approving settlement agreements proposed

by the trustee in bankruptcy of SCI, and

authorizing the trustee, to the extent of the

Court's jurisdiction, to complete the

settlement.

Accordingly, HPL is now in a position to take

all necessary steps to quantify and recover

from your client its Costs Claim arising from

the Equity Proceedings.

If preparation and taxation of bills of costs in the Supreme Court of New South Wales and the High Court of Australia become necessary,

HPL will seek recovery of the fees and

Hospital(2) 26 20/5/92

disbursements incurred by us, its costs of

retaining U.S. counsel in respect of the

counsel's fees.	Equity Proceedings, and senior and junior
As we have informed you in the past, HPL's
total costs of the Equity Proceedings were as
follows:
Solicitors' fees and $1,040,086.00

disbursements:

Junior and senior

counsel's fees; $933,676,00

We are aware of the position which u.s.s.c.

has taken in the Connecticut Bankruptcy Court

Proceedings.	As we understand it, u.s.s.c.
maintains that:

1. u.s.s.c. is entitled to set off against

H.P.L. to the extent of H.P.L'S Costs Claim

any award of damages given in favour of

u.s.s.c. against H.P.I., s.c.I. and Blackman

in the Connecticut patent proceedings.

2. "[T]he process of taxation results in an

award of only a portion of the costs charged
by the solicitor to the client. Thus it is

more than likely that Messrs Baker & McKenzie

already have received more than the amount

that would be allowed after taxation."

Then Ms Krieger sets out her answers in respect of those two points and, in the third last paragraph:

You have previously referred to the

possibility of settling for the amount in the

joint bank account, which must presently

approach A$900,000.	We believe that this
amount is inadequate to settle HPL's Costs

Claim. Unless the Costs Claim can now be settled promptly, we will shortly engage costs

consultants to prepare a bill of costs.

In our opinion, a high proportion of the costs incurred by HPL in respect of the Equity

Proceedings will be recoverable upon taxation.

If necessary, we shall require production of

the details of costs incurred by u.s.s.c. to

demonstrate the modesty of H.P.L's costs by

comparison to those of u.s.s.c.

Please let us know as soon as possible whether

there is any point in a final attempt to

settle the Costs Claim. Please also let us

Hospital(2) 27 20/5/92

have details of the amounts accrued to the

joint bank account -

and so on. A request, Your Honour, for a counter

offer from the solicitors for USSC. The next item

also appears in JDB-2, Your Honour. It is a letter

from AG Robinson & Associates, a response to the

letter I have just taken Your Honour to. It is

dated 28 March 1988 and it refers to that letter

and sets out a list of queries in relation to the previous letter. The relevant part really is the

last paragraph which says:

As to a final attempt to settle the costs

claim, with respect, this must depend on the

amount your client would be prepared to accept

in settlement. We have made several overtures

and have made certain offers to your client.

The only reaction we have received to date are that the offers are "unacceptable". If your

client is serious about wishing to settle this

matter, then perhaps you might be able to

obtain instructions to advise us of its

opening offer.

We await your reply.

The next response, Your Honour, is a letter dated

27 May 1988. One would think it has obviously been
prompted by contact in the meantime, but the

evidence does not go as far as showing that. It

sets up a settlement meeting, so to speak, requests

the information referred to in the earlier letter:

Once our client has this information and has

had a reasonable time to consider its contents

and seek advice, we are instructed that our
client may wish to convene a meeting with your

clients to discuss the matter. In this event our client has suggested either San Francisco

or Los Angeles as a convenient forum. Perhaps

you would let us know whether your clients
would be prepared to attend such a meeting in

California.

One might think that offer would have been

responded to with great alacrity, Your Honour.

HER HONOUR:  If it had been made to me, it would not have,

but there you are.

MR RARES: Certainly not last week, anyway.

MR McCLINTOCK:  If it had only been San Francisco,

Your Honour, I would hope Your Honour would have

responded with alacrity; Los Angeles I could

understand.

Hospital(2) 28 20/5/92

The next item is a letter, Your Honour, again

in JDB-2, dated 7 June 1988, referring back to the

March 28 letter, but obviously prompted by the

27 May letter that I have taken Your Honour to.	In
response to the queries again set out in that
letter, the significant paragraph is really the first full one on page 2:

We refer to your request for an "opening

offer" to settle HPL's costs claim. As we

have previously indicated, in our opinion, a
high proportion of the total costs of

A$2,675,887 incurred by HPL will be

recoverable upon taxation. As a result, any

proposed settlement for the amount in the

joint bank account (let alone any lesser

amount) is, in our opinion, clearly

inadequate. We would, however, be prepared

strongly to recommend settlement of the costs

claim for A$1,950,000, and we would be happy

to meet with you to explain why we believe

that this is reasonable in all the

circumstances.

We refer to your letter dated May 27, 1988.
We would be prepared to attend settlement

discussions in California at a mutually

convenient time.

Could you please let us have the details of

the -

security fund. The next item, Your Honour, is

solicitors who delay, he would be entitled to.

The last thing I should say, Your Honour, is

that if Your Honour were to rule against us

Your Honour ought to order the costs of this

application to be paid in any event by the

applicant because it had to take this proceeding

and seek the indulgence of the Court and bring us

to Court on the - - -

HER HONOUR:  And set them off?

MR RARES:  Yes. I made that sub silentio to my ..... ,

Your Honour.

HER HONOUR:	Yes, Mr Mcclintock.
MR McCLINTOCK:	Your Honour, could I deal first with the

point that Mr Rares raised last which is the set-

off point, and I will do it very briefly,

Your Honour. First, nothing I have said,

Hospital(2) 93 20/5/92

Your Honour, I would hope, would be taken as

suggesting that anything should be done to

prejudice Mr Rares' claim in relation to the set-

off. All I have said is it is for another day and,

Your Honour, we would say for another place.	The
appropriate way of dealing with the matter, we
would say - - -

HER HONOUR:  I would like some submissions on that, just

"another place".

MR MCCLINTOCK:  I will do the best I can to allay

Your Honour's fears about it. The reason why is

this: Order 71 rule 12(2), which my friend

referred Your Honour to, is clearly restricted to

proceedings in this Court and that is, it does not

operate so as to permit a set-off of between a
judgment of the Connecticut court and an order for
costs in this case and, indeed, when one looks at

it, Your Honour, the rule has to be read

distributively, that is:

A set-off for damages or costs between

parties may be allowed by the Court or a

Justice in cases where the set-off arises as

the result of different proceedings either

notwithstanding or subject to the liens of the

respective solicitors of the parties for their

costs.

One might be able to set off damages against costs in proceedings in the court, but there is no power there to set off damages in another court against

costs in this Court.

Your Honour, at the point at which a

certificate of taxation is granted, in reality the

function of this Court is over. What then happens

is my client has a debt owed to it by the

respondent, constituted by the amounts specified in

the certificate of taxation which it can enforce

simply by suing in the New South Wales Supreme

Court or whatever court of appropriate jurisdiction

there is. It is not a matter, in fact, that one

would think would even be within the jurisdiction

of this Court, even though it arises from - - -

HER HONOUR:  That is not my understanding of what you do

with costs. My understanding is you do not sue for

them, you file a document and somebody goes out and

levies execution if they are not paid.

MR McCLINTOCK:  One would be entitled to do that,

Your Honour, but one would in fact be entitled to

sue upon it, if one wished to, sue upon the

judgment.

Hospital(2) 94 20/5/92

HER HONOUR:	Where?
MR McCLINTOCK:	One would have thought in any, to use a

phrase from somewhere else, in any court of

be the New South Wales court. competent jurisdiction, which one would think would

HER HONOUR:	I thought there was a case in about 1904 where somebody tried to register a judgment of this Court
in the Victorian Supreme Court and that got resolved.
MR McCLINTOCK:	One could understand, Your Honour, readily

the impossibility or the inappropriateness of

registering a judgment but, in my submission, there

would be nothing to stop me suing, stop my client

suing. In any event, it could arise in another

way, Your Honour. At some point - and this is

really where it is likely to come up, Your Honour -

the situation in relation to the security fund is

going to have to be resolved. Now, that will

either be after the High Court has certified the

costs and/or after the New South Wales Supreme

Court has. Now, it is at that point when my client

sues, if Mr Robinson refuses to pay the money out

and my client commences proceedings in relation to

that, at which it is likely that the claims for

set-off in relation to that fund will be dealt

with.

Nevertheless, if Your Honour has any concern

about it, the appropriate course would be the

course that Your Honour has suggested, which would

be to give my client leave and then permit an

application - or leave it to Mr Rares to move to

stay the - - -

HER HONOUR:  But if it is going to be the case - I do not

indicate one way or the other - that there is a

set-off for $70 million, there is no point

proceeding with the taxation, is there?

MR McCLINTOCK: That is quite true, Your Honour,

although - - -

HER HONOUR:  I do not entirely understand how Mr Rares

thinks he can have it all resolved in one

proceeding even, if it is a discretion of the

individual courts, but the sensible thing must be

just to stop the taxation - give you leave and stop

the taxation while it is considered.

MR McCLINTOCK:  Yes, or leave it to - it may be that there

might be other ways of resolving it, but - - -

HER HONOUR: Settlement.

Hospital(2) 95 20/5/92

MR RARES:	We should live so long.
MR McCLINTOCK:	Your Honour, it has been a very long time

for me, if not for Mr Rares, who has only very

recently put his toe in this particular pond or

swimming pool.

One, of course, cannot operate on the basis of

possibility of settlement, but Your Honour is quite

correct, it will have to be resolved at some stage.

What I am trying to suggest is that really it ought

to be left to the parties to determine, in this

sense, how it is done, that if Mr Rares wishes to

stay the taxation, he ought to be permitted to move

to do so, although I would not suggest Your Honour

should make any order in relation to that.	If he
wishes to do so, he can move.	It may be felt on

the other side of the bar table that there might be other more appropriate places or methods of dealing

with it and, with great respect, Your Honour, it

really is an unusual legal dispute to be being

determined in the High Court of Australia and I am

not sure whether, at that stage, some form of

remitter might not be appropriate. That again can

wait till then.

Your Honour, could I go to deal with the other points as shortly as I can, Your Honour.	Can I say
this about what Mr Rares said about prejudice.	He

first relied upon the fact of Mr Robinson's lack of

knowledge of the High Court proceedings. Now, I do

not dispute that Mr Robinson has no real knowledge

of that, other than what he had been able to glean

from the file, but the reason for that is not any

delay on the part of my client, it is the fact of

the change of solicitors on the part of USSC in

1985. That lack of knowledge would have been as

detrimental to USSC in 1985 as it is in 1992 and,

therefore, in my submission, it is not something

that Your Honour ought to take into account.

Next, Your Honour, Ms Warner in her affidavit

in which she deposes to her lack of recollection of

the matter framed the relevant paragraph extremely

carefully and no doubt totally honestly.	It was
paragraph 6.	She says:

I have not reviewed the relevant files

for several years. I believe that my lack of

recollection through the passing of time would

significantly impair my ability to assist

Messrs AG Robinson Creais in the review of

and if appropriate objection to the proposed

bill of costs.

Hospital(2) 96 20/5/92

We say, Your Honour, that realistically Ms warner,

if she had access to the file, could easily get the

knowledge back.

Your Honour, again, as I have said before, the

burden is on us to establish our entitlement to the

individual items of cost. If we do not do that, we

do not get them. Here, the disbursements, and one would think that they are the area where there can

be no really substantial dispute as to whether the

disbursement was paid. There it is a question of

was it an appropriate disbursement and was it

incurred, how much was incurred?

When Your Honour looks at the draft bill of

costs Your Honour will probably infer that my

client has suffered equally through lapse of time,

in a sense. The items specified for disbursements,

obviously principally being counsels' fees, total

$317,000. There are other matters, of course, like

accommodation in Canberra and the printing of the

appeal books and filing fees and so on.	The
solicitors' profit costs claim pales into

insignificance beside that. It is only $43,000

compared to the disbursements of $317,000.

Realistically, Your Honour, it is only within that

$43,000 that there is any scope for any of the problems that have been suggested by Mr Rares.

Further, Your Honour, there is evidenc·e from Ms Warner but there is no evidence from the other solicitors from Freehill Hollingdale & Page who

participated in this appeal. There is no evidence

from Mr Channon, who was the relevant partner of

Freehills at the time. There is no evidence from

Mr Ford who, Your Honour will recall, Mr Robinson

indicated is now with Blake Dawson Waldron.

Next, Your Honour, in relation to the US

attorneys referred to, this was a matter in the

High Court of Australia. The US attorneys would

have nothing, we would say, to contribute to

questions as to whether the work was done or not

done at all.

Finally on the prejudice point, I would wish

to put that the reason why this bill has not been

brought forward before now is relatively obvious

from what Mr Beatty said, Your Honour. In his

evidence and in his affidavit - I will not repeat

anything I have said except to mention what he said

in re-examination about his awareness of the

requirements of Order 60 rule 12. He said it was

1992 he became aware of it and so, to some extent,

Your Honour, the case must be that he was not aware

of it. That must have been a contributing factor.

That type of inattention, Your Honour, so easy to

Hospital(2) 97 20/5/92

make or so easy to miss, ought not to prejudice the

parties involved here.

Your Honour, those are my submissions.

HER HONOUR:  Thank you. I will reserve in this case.

AT 3.29 PM THE MATTER WAS ADJOURNED SINE DIE

Hospital(2) 98 20/5/92