Jasmin Solar Pty Ltd v Fitzpatrick Legal Pty Ltd
[2017] VSC 220
•27 April 2017
| IN THE SUPREME COURT OF VICTORIA |
AT MELBOURNE
COSTS COURT
S CI 2016 3941
IN THE MATTER of Section 198(1)(a) of the Legal Profession Uniform Law
Application Act (2014)
| JASMIN SOLAR PTY LTD | Applicant |
| v | |
| FITZPATRICK LEGAL PTY LTD (ABN 61 925 524) | Respondent |
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JUDGE: | Wood AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 7 April 2017 |
DATE OF DECISION & REASONS: | 27 April 2017 |
CASE MAY BE CITED AS: | Jasmin Solar Pty Ltd v Fitzpatrick Legal Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2017] VSC 220 |
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STANDING to seek review under s 198(1)(a) of the Legal Profession Uniform Law2014 (Vic)
CONSIDERATION of s 170(1)(a) and ‘commercial client’ – Jurisdiction of the Costs Court – Breaches of Civil Procedure Act2010 (Vic) – Costs of the proceeding
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DECISION AND REASONS
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Ms S Cherry | Madgwicks |
| For the Respondent | Mr M Rivette | Fitzpatrick Legal Pty Ltd |
HIS HONOUR:
The hearing of preliminary issues in this matter concluded on 7 April 2017 at which time I reserved my decision. I now publish my decision and reasons.
The applicant is a former client of the respondent law firm. The applicant has initiated a review of costs charged pursuant to the Legal Profession Uniform Law2014 (‘the Act’). There are other proceedings on foot between the parties. The applicant terminated the retainer with the respondent but was subsequently unsuccessful in an attempt to obtain documents from the respondent’s file. The respondent’s lien was upheld by Justice Ginnane.[1] That decision has been appealed and the Court of Appeal has reserved judgment.[2]
[1]Jasmin Solar Pty Ltd v Fitzpatrick Legal Pty Ltd (2016) VSC 631.
[2]S APCI 2016 0154.
The initiating Summons for Taxation was filed on 26 September 2016 and seven invoices were attached. On 15 November 2016 an order was made by a Judicial Registrar that the respondent file and serve any cost agreement and costs disclosure by 29 November 2016. This order was partially complied with on 5 December 2016 when Cost Agreements were provided. The parties then attended an unsuccessful mediation on 8 December 2016 before a Judicial Registrar. The disclosure material was not supplied by the respondent until 22 December 2016.[3]
[3]Affidavit of Christopher John Grisenti sworn 23 March 2017.
On 13 December 2016 an order was made by the Judicial Registrar for the applicant to file and serve a statement of issues by 24 January 2017. This document, also containing submissions in respect to each issue, was filed on 25 January 2017. The respondent was given until 28 February 2017 to file a statement in reply raising any additional issues. This was not filed until 7 March 2017.
The order of 13 December 2016 also provided that the applicant file and serve any affidavits by 14 March 2017 with the respondent to file any affidavits by 28 March 2017. Voluminous material was filed late.
The applicant filed an affidavit of Christopher John Grisenti on 24 March 2017. Mr Grisenti is a costs lawyer retained by the applicant and the affidavit merely exhibits the three Cost Agreements and additional disclosure material previously provided by the respondent to the applicant (referred to in paragraph 3 above). The affidavit comprised two pages but exhibited 394 pages of material.
The respondent was to file its affidavit material in reply by 28 March 2017. Affidavits of Timothy John North SC and David John Fitzpatrick were filed on 4 April 2017 and an affidavit of Henry Mathwin Heuzenroeder was filed on 5 April 2017. The affidavit of Mr Fitzpatrick comprised 30 pages with 82 exhibits totalling 595 pages. The affidavits of Mr North and Mr Heuzenroeder were relatively brief.
The applicant’s statement of issues identified two more invoices that were not attached to the Summons. However, of the nine invoices identified in these two documents, review was only sought in relation to six invoices.[4]
[4]Dated 7 October 2015, 17 November 2015, 1 February 2016, 15 March 2016, 2 June 2016 and 2 August 2016.
The applicant’s statement of issues identifies three Cost Agreements in existence between the parties. The first one, dated 27 July 2015, described the scope to be to provide advice in relation to an arbitration, the second also dated 27 July 2015 described the scope to be to provide advice to he applicant in relation to potential breaches under Australian Consumer Law and the third one signed by Dr Matthew Starr (Managing Director of the applicant) on 9 April 2016, described the scope to be in relation to two Federal Court proceedings involving the applicant. The applicant only sought to advance preliminary argument in relation to the second and third Cost Agreements. The first Cost Agreement related to one invoice and the applicant did not seek to review it.
The applicant identified three issues for preliminary determination. First, whether there had been an accord and satisfaction in respect of any part of the legal costs. Secondly, whether either of the Cost Agreements were valid in relation to any part of the legal costs to be reviewed. Thirdly, on what basis legal costs should be assessed in the absence of a valid Cost Agreement.
The respondent filed its own statement of issues on 7 March 2017. Some of the issues overlapped with those identified by the applicant. It identified four issues. The first was whether any of the Cost Agreements were void. Secondly, whether there had been an estoppel or accord and satisfaction. Thirdly, in the event that any of the Cost Agreements were void, on what basis should the costs be assessed. Fourthly, whether counsel’s fees should be assessed separate from the respondent’s professional costs.
The order of 13 December 2016 scheduled the hearing of these preliminary issues for 7 April 2017. At 4.47pm on 6 April 2017 the respondent emailed a new document headed ‘Respondent’s Outline of Submissions on Jurisdcition’ to the applicant and the Court.
In summary, it was now belatedly submitted by the respondent that the Costs Court has no jurisdiction under the Act to entertain this proceeding brought by the applicant. It is submitted that Part 4.3 of the Act, which contains client review rights to the Costs Court (and law practice disclosure obligation provisions), is specifically excluded from applying to the parties.
The Act states at section 170(1)(a) that Part 4.3 of the Act (with the exception of a few irrelevant sections) does not apply to a ‘commercial client’. It is submitted that the applicant is a ‘subsidiary of a foreign company’ as defined in the Corporations Act2001 and is therefore prevented from reviewing costs in the Costs Court. There is no doubt from ASIC records[5] that from 22 June 2012 the applicant was a subsidiary of a foreign company that controlled more than half the votes that might be cast at a general meeting or held more than 50% of the issued share capital.[6] Essentially the respondent’s primary position was that the proceedings should be dismissed as the applicant has no standing, and the Costs Court has no jurisdiction to entertain these proceedings. The respondent relied upon Federated Engine Drivers and Fireman’sAssociationof Australasia v Broken Hill Proprietary Co[7] and Byrne v R[8] in relation to the question of jurisdiction. The respondent also sought an order that the applicant pay the respondent’s costs on an indemnity basis.
[5]Attachments A and B to the Submissions on Jurisdiction.
[6]See definitions of ‘subsidiary’and ‘foreign company’ (ss.9 & 46 Corporation Act 2001).
[7](1911) 12 CLR 398 at 415 per Griffith CJ.
[8](1999) 199 CLR 1 at [91] per Kirby J.
The jurisdiction of the Costs Court is prescribed by section 17D of the Supreme CourtAct 1986. The jurisdiction extends to party and party costs arising from Supreme Court, County Court, Magistrates’ Court and VCAT proceedings. Section 17D(1)(ea) provides that the Costs Court can also assess costs under Division 7 of Part 4.3 of the Act.
At the hearing the applicant’s counsel conceded that the applicant fell within the definition of a ‘commercial client’.[9] The respondent submited that in those circumstances the proceeding should be dismissed.[10] In addition to the concession made on behalf of the applicant about its standing, submissions were made in the hearing that Dr Starr was also a client. The definition of ‘client’ is in Section 6 of the Act as follows - ‘includes a person to whom or for whom legal services are provided’. There was no application to amend the proceeding to include Dr Starr as the applicant. At the conclusion of the hearing the respondent submitted that there was no accrued jurisdiction through Dr Starr and ‘he can’t be substituted as applicant now’.[11] It was also submitted that Dr Starr was not an applicant and that the Court had a legal obligation to decide the matter on the basis of the application before the Court.[12] Those submissions went unanswered when Counsel for the applicant addressed the Court after that point on other issues.[13]
[9]Transcript page 15 - lines 9 to 14.
[10]Transcript page 9 – lines 11 to 15.
[11]Transcript page 33 - lines 1 to 4.
[12]Transcript page 26 - lines 28 to 31
[13]Transcript pages 35 to 40.
The Cost Agreements and exhibited documentation prominently describe the applicant company under the definition of ‘client’ at the front of the documents. Instructions were obtained at various statges from Dr Matthew Starr, Steven Spielman, Fred Sellar and Richard Carson. They were all directors of the applicant at the relevant times.[14] Emails from Dr Starr describe him as the Managing Director of the applicant. The advice and litigation involved the rights of the applicant. The applicant argued that Dr Starr was also a client and relied on the inclusion of review rights in the Cost Agreements and wording around the signing clause for support.[15] However, picking up the wording in the definition of ’client’ in the Act, there is insufficient material to conclude the respondent provided legal services ‘to’ him or ‘for’ him in his personal capacity. He was a director and not even a shareholder. The legal work was legal advice as to the applicant’s rights and litigation was conducted in the name of the applicant, for the benefit of the applicant.
[14]From 30 May 2012, 19 June 2012, 19 June 2012 and 27 June 2013 respectively.
[15](Transcript page 16 - line 8 to page 18 - line 25, page 23 - lines 9 to 12, and page 24 - lines 25 to 31.
There was no suggestion that Dr Starr was a third party payer. He would need to be classified as a client or third party payer in order to have standing to initiate a review under the Act. He would then be personally liable for the legal costs if that were the case. This might offer another explanation as to why proceedings were not initiated by him and no application was made to join him as applicant. The respondent also ran an argument of Anshum estoppel on the basis that it was the applicant who ran the lien proceedings before Ginnane J and the Court of Appeal as the client. The potential exposure to costs might also explain why it was the applicant who brought those proceedings.
In short, the applicant also argued that the respondent had submitted to the jurisdiction, taken proactive steps in the litigation to advance the review,[16] was estopped from making the ‘no jurisdiction submission,[17] had engaged in misleading and deceptive conduct[18] and may have contracted into the Act with the applicant for a right of review.[19]
[16]Transcript page 20 - lines 4 to 17.
[17]Transcript page 19 - line 27 to page 20 - line 3 and page 24 - lines 4 to 24.
[18]Transcript page 19 - lines 17 to 23 and page 23 - lines 18 to 25.
[19]Transcript page 19 - lines 4 to 8.
The inclusion of review rights in the respondent’s Cost Agreement and invoices[20] cannot confer jurisdiction on the Costs Court if legislation prohibits the applicant from initiating this proceeding.
[20]Only the invoices from North SC make reference to the review rights only applying to a client who is not a commercial client under the Act.
The respondent contended that the litigation before Ginnane J and the Court of Appeal was brought in the name of the applicant as the client. It was submitted that this precludes an argument now that Dr Starr was a client. This was the Anshun point referred to in paragraph 18 above. Having considered the judgment of Ginnane J there is no doubt that the case proceeded on the basis that the applicant was the client. Strictly speaking, there is nothing in the judgment to suggest the case was run on the basis that the applicant was the only client. In any event, I do not need to come to a concluded view on this aspect.
In relation to the question of costs both parties seek costs orders in their favour. The respondent sought indemnity costs[21] and the applicant sought costs ‘in full’.[22] For the reasons that follow there is no justification for either party to receive a favourable costs order.
[21]Transcript page 9 - lines 11 to 15.
[22]Transcript page 25 - lines 3 to 4.
The proceeding has to be dismissed for want of jurisdiction. Ordinarily costs would follow the event, that is, in favour of the respondent. There are several reasons why this should not be the result.
First, the respondent previously acted for the applicant and was aware of its corporate structure. The respondent initiated Federal Court proceedings on the applicant’s behalf. At the hearing on 7 April 2017 the respondent produced, and relied upon, two ASIC searches in relation to the applicant’s status. It was apparent on their face that at the time of the first search on 4 September 2015, the applicant was a subsidiary of a foreign company. The search was no doubt undertaken as a pre-curser to issuing proceedings in the Federal Court on behalf of the applicant at that time.
The current proceeding in the Costs Court was issued on 26 September 2016. The respondent was already on notice at that time (due to the ASIC search in 2015) that there was a potential issue as to the applicant’s standing to invoke the jurisdiction of the Costs Court. This aspect should have been explored and clarified when the proceedings were initiated in September 2016.
It was only at 8.40am on 6 April 2017 (the day before the hearing) that a fresh search was undertaken. This second search revealed a change to the share structure but it further confirmed that the share structure still disqualified the applicant from having standing to bring this proceeding. The respondent’s inaction from September 2016 until 6 April 2017 contributed to wasted Court resources and legal costs incurred by the applicant.
Additional relevant conduct is that they failed to identify this critical issue in their written submissions filed (late) on 7 March 2017 and they only partially complied with the order of the Judicial Registrar made on 15 November 2016.
Secondly, the respondent’s Cost Agreement and invoices contained words that conveyed to the applicant that there was a right to review costs in the Costs Court. This was misleading and plainly incorrect.
Both parties cited breaches of the the Civil Procedure Act 2010 (Vic) (‘CPA’) against each other.[23] The overarching purpose of the CPA is to ‘facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’.[24] The overarching obligations apply to any party.[25] A party must ensure ‘legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate.[26] The costs incurred are not reasonable and proportionate because the jurisdictional issue should have been identified at the outset given the respondent had the information necessary to identify the issue in their possession. A party must also use reasonable endeavours to act promptly and minimise delay.[27] The respondent has not acted consistently with these obligations.
[23]Transcript - pages 20 and 28.
[24]Section 7(1) CPA.
[25]Section 10(1)(a) CPA.
[26]Section 24 CPA.
[27]Section 25(a) and (b) CPA.
The applicant is also not entitled to costs as the proceeding initiated by it has been dismissed for lack of jurisdiction and it knew what their status was as a subsidiary of a foreign company. The applicant’s legal representatives should have satisfied themselves that the applicant had standing before issuing the proceeding. The CPA provisions referred to in paragraph 29 above apply to the applicant and its legal practitioners. There was not a proper basis to issue the proceeding on behalf of the applicant on the factual and legal material available.[28]
[28]Section 18(d) CPA.
THE COURT ORDERS THAT:
1. The proceedings be dismissed.
2. There be no order for costs.
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