Johnson Tiles Pty Ltd v Esso Australia Ltd

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FEDERAL COURT OF AUSTRALIA

Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 1363

PRACTICE AND PROCEDURES – representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth) – ‘No Win No Fee’ Agreements entered into with group members – consideration of the role of the Court in approving of or supervising fee agreements with group members – whether solicitors ought to be enjoined from enforcing fee agreements with group members without Court approval

CONSTITUTIONAL LAW – inconsistency with State law - whether Legal Practice Act 1996 (Vic) inconsistent with Pt IVA – whether notice under s 78B of the Judiciary Act 1903 (Cth) is required

Federal Court of Australia Act 1976 (Cth) – Pt IVA, ss 33V, 33X, 33Y, 33ZF, 33ZJ and 43(1A)
Legal Practice Act 1996 (Vic) – ss 96, 97 and 98
Judiciary Act 1903 (Cth) – s 78B
Constitution – s 109

Narain v Parnell (1986) 9 FCR 479 – considered
Stock Motor Ploughs Ltd v Forsyth (1932) 48 CLR 128 – cited
Victoria v The Commonwealth (1937) 58 CLR 618 – cited
Australian Mutual Provident Society v Goulden (1986) 160 CLR 330 at 337 – cited
New South Wales v The Commonwealth (1983) 151 CLR 302 – cited
Viskauskas v Niland (1983) 153 CLR 280 – cited
Ex Parte McLean (1930) 43 CLR 472 – cited
Woolf v Snipe (1933) 48 CLR 677 – applied
Keith Hercules & Sons v Steedman (1987) 17 FCR 290 – considered
Bevan Ashford v Geoff Yeandle (Contractors) Ltd [1999] Ch 239 - cited

JOHNSON TILES PTY LTD v ESSO AUSTRALIA LTD
VG 519 OF 1998

JUDGE:         MERKEL J
PLACE:         MELBOURNE
DATE:           1 OCTOBER 1999


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 519 OF 1998

BETWEEN:

JOHNSON TILES PTY LTD (ACN 004 576 103)
AND ORS
Applicant

AND:

ESSO AUSTRALIA LTD (ACN 000 018 566)
AND ANOR
Respondent

JUDGE:

MERKEL J

DATE OF ORDER:

1 OCTOBER 1999

WHERE MADE:

MELBOURNE

UPON Maurice Blackburn Cashman and Slater & Gordon by their counsel undertaking to the Court that until further order, whether by their servants, agents or howsoever otherwise, they:

(a)will not enforce or give effect to ‘No Win No Fee’ Fee & Retainer Agreements entered into by the said firms of solicitors with any persons, other than a representative party, who are group members in proceedings number VG 519 of 1998 and VG 524 of 1998 and will not demand or accept payment of any costs or disbursements pursuant to such agreements other than pursuant to an order or direction of the Court;

(b)will inform all group members who have entered into or signed, or who hereafter enter into or sign, such agreements of these undertakings to the Court.

THE COURT ORDERS THAT:

1.   The Notice of Motion of the respondents dated 6 September 1999 be dismissed.

2.   Maurice Blackburn Cashman and Slater & Gordon pay to the respondents their taxed costs of and incidental to the Notice of Motion.

3.   Maurice Blackburn…

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Details
Case
[1999] FCA 1363
Decision Date

CaseChat Overview and Summary

In Johnson Tiles Pty Ltd v Esso Australia Ltd, the respondents, represented by Esso, sought orders to prevent the applicants’ solicitors, Maurice Blackburn Cashman and Slater & Gordon, from enforcing 'No Win No Fee' agreements with group members. The applicants’ solicitors had been granted leave to represent all group members in a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976. Esso argued that the applicants’ solicitors were entering into fee agreements with group members that entitled them to charge an additional premium fee of 25%, referred to as an uplift fee. Esso contended that group members should be informed of this potential liability in the opt-out notice.

The court considered whether it should exercise its supervisory jurisdiction over the fee arrangements. The applicants’ solicitors had assured the court that group members would not incur a liability for costs other than taxed costs as between solicitor and client and only in accordance with orders or directions of the court. However, the court was concerned that the fee arrangements might not comply with the Act. The court found that it was appropriate to make orders enjoining the applicants’ solicitors from enforcing the 'No Win No Fee' agreements or receiving any payments pursuant to such agreements unless in accordance with an order or direction of the court. The applicants’ solicitors offered undertakings to the court to comply with the proposed injunctions, which the court accepted.

The court dismissed the respondents' Notice of Motion but ordered that the applicants’ solicitors pay the respondents' taxed costs of and incidental to the Notice of Motion. The court also directed that no part of those costs be charged directly or indirectly to the representative parties or to any group members.

Orders

Orders of the court

1. The Notice of Motion of the respondents dated 6 September 1999 be dismissed.

2. Maurice Blackburn Cashman and Slater & Gordon pay to the respondents their taxed costs of and incidental to the Notice of Motion.

3. Maurice Blackburn Cashman and Slater & Gordon not charge, directly or indirectly, the representative parties or group members any part of the costs payable under these orders or of the costs incurred by them in relation to the Notice of Motion.

Background

Background to the litigation

The present case raises the question of the extent to which and the manner in which the Court is to be concerned with fee arrangements entered into by solicitors acting for representative parties and group members represented by the representative party in a representative proceeding under PtIVA of the Federal Court of Australia Act 1976 (Cth) (“the Act”).Background On 25 September 1998 an explosion and fire occurred at the Longford Gas Plant. As a consequence of the explosion and fire, gas ceased to be generally available to gas consumers in the State of Victoria. Several representative proceedings under Pt IVA of the Act were issued against the respondents (“Esso”) claiming damages on behalf of the represented persons. The represented persons, who are said to exceed one million, fell into three categories of group members – business users, domestic users and stood down workers who suffered financial loss as a result of the cessation of supply of gas. As a result of orders made by the Court on 5 February 1999 Maurice Blackburn & Co (now Maurice Blackburn Cashman) and Slater & Gordon (“the applicants’ solicitors”) were granted leave to appear as solicitors on the record in two of the representative proceedings which were consolidated. A further representative proceeding commenced by another firm of solicitors on behalf of another applicant was stayed. The orders, in effect, permitted the applicants’ solicitors to represent all group members to the exclusion of other solicitors. Pursuant to orders of the Court, dated 25 June 1999 and made pursuant to ss 33X and 33Y of the Act, an extensive advertising campaign was undertaken by the applicants’ solicitors. The advertisements gave notice to group members of the commencement of the representative proceedings and of their right, pursuant to s 33J(2) of the Act, to opt out of the representative proceedings on or before 19 August 1999. Less than 200 opt out notices were filed by the closing date. The notice, which was in a form approved by the Court under s 33Y of the Act after hearing submissions of the parties on 4 June 1999, contained the following statement:“If you believe you are a Group Member you should obtain your own legal advice or contact the Maurice Blackburn Cashman/Slater & Gordon Class Action Facility on 1800 812 597.” During the hearing on 4 June 1999 Esso claimed that the applicants’ solicitors were entering into fee agreements with group members which entitled the solicitors to charge the group members a premium, referred to as an uplift fee, of 25% over and above the solicitor and client costs and disbursements incurred by them. Esso contended that if it was proposed that group members were to be liable to the applicants’ solicitors for costs pursuant to fee agreements then they should be informed of that potential liability in the notice to be given pursuant to s 33X. After I expressed my concern about such fee arrangements with group members to senior counsel acting for the representative parties I was assured that, under the fee arrangements the applicants’ solicitors proposed to enter into with group members, the group members would not incur a liability for costs other than taxed costs as between solicitor and client and, even then, only in accordance with orders of the Court or the prior approval of the Court. After receiving that assurance I approved the form of the opt out notice proposed by the applicants’ solicitors which did not contain a statement concerning any potential liability group members may incur for legal costs.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

It is appropriate for the Court to exercise its supervisory jurisdiction by making orders enjoining the applicants’ solicitors from acting upon or giving effect to the ‘No Win No Fee’ agreements made, or to be made, with group members or from receiving any payment of fees or disbursements pursuant to such agreements other than in accordance with an order or direction of the Court. The applicants’ solicitors have, through counsel, offered an undertaking to the Court broadly in the terms of the proposed injunctions, in the event that the Court was of the view that orders, of the kind to which I have referred, are appropriate. I am prepared to accept those undertakings in lieu of the injunctions that I would otherwise have granted.Conclusion For the above reasons I am prepared to accept undertakings to be proffered on behalf of the applicants’ solicitors, Maurice Blackburn Cashman and Slater & Gordon, that until further order the said solicitors, whether by their servants, agents or howsoever otherwise:(a)will not enforce or give effect to ‘No Win No Fee’ Fee & Retainer Agreements entered into by the said firms of solicitors with any persons, other than a representative party, who are group members in proceedings number VG 519 of 1998 and VG 524 of 1998 and will not demand or accept payment of any costs or disbursements pursuant to such agreements other than pursuant to an order or direction of the Court;(b)will inform all group members who have entered into or signed, or who hereafter enter into or sign, such agreements of these undertakings to the Court.In my view it was proper for Esso to move the Court for the orders sought by it on the Notice of Motion. As Esso has substantially succeeded in obtaining the relief it sought it ought to receive its costs of and incidental to the motion from the applicants’ solicitors. Accordingly, I propose to order that Slater & Gordon and Maurice Blackburn Cashman pay Esso’s taxed costs of and incidental to the Notice of Motion. As those costs should be costs for which the firms of solicitors, rather than their clients or group members, are liable I also propose to direct that no part of those costs be charged directly or indirectly to the representative parties or to any group members.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.