Mango Boulevard Pty Ltd v Whitton

Case [2018] FCA 399

FEDERAL COURT OF AUSTRALIA

Mango Boulevard Pty Ltd v Whitton [2018] FCA 399

File number: VID 1183 of 2010
Judge: RANGIAH J
Date of judgment: 26 March 2018
Catchwords: PRACTICE AND PROCEDURE – order for costs against applicants – whether respondents should be required to provide affidavits and documents concerning their liability for lawyers’ fees - application of indemnity principle – whether presumption that  clients are liable for lawyers’ fees has been displaced  – whether applicants are permitted to  use documents obtained in course of arbitration
Legislation:

Federal Court Rules 2011 (Cth) rr 1.32-1.35, 20.14(1)(c) and 40

Commercial Arbitration Act 2013 (Qld) s 27

Legal Profession Act 2004 (NSW) (repealed) ss 322(1)(c), 324(1), 324(4), 327 and 327(4)

Legal Profession Act 2007 (Qld)

Legal Profession Uniform Law  (NSW)

Cases cited:

Director of the Fair Work Building Industry Inspectorate v Abbott (No 5) [2013] FCA 522

Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10

Mainieri v Cirillo (2014) 47 VR 127

Mango Boulevard Pty Ltd v Whitton [2015] FCA 1169

Mango Boulevard Pty Ltd v Whitton [2015] FCA 1295

Mango Boulevard Pty Ltd v Whitton [2015] FCA 1352

Pioneer Shipping v BTP Tioxide Ltd [1981] 2 All ER 1030

Shaw v Yarranova Pty Ltd [2011] VSCA 55

The Life Insurance Co of Australia Limited v Phillips (1925) 36 CLR 60

Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd(No 4) [2011] NSWSC 720

Westport Insurance Corporation v Gordian Runoff Limited (2011) 244 CLR 239

Windus v Director, Fair Work Building Industry Inspectorate (2013) 216 FCR 207
Date of hearing: 6 February 2018
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporation
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 62
Counsel for the Applicants: Mr D Butler
Solicitor for the Applicants: Carter Newell
Counsel for the Second and Third Respondents: Mr SP Colditz
Solicitor for the Second and Third Respondents: Delta Law

ORDERS

VID 1183 of 2010
BETWEEN:

MANGO BOULEVARD PTY LTD (ACN 101 544 601)

First Applicant

BMD HOLDINGS PTY LIMITED (ACN 101 093 349)

Second Applicant
AND:

ROBERT WILLIAM WHITTON

First Respondent

RICHARD WILLIAM SPENCER

Second Respondent

SILVANA PEROVICH

Third Respondent

JUDGE:

RANGIAH J

DATE OF ORDER:

26 MARCH 2018

THE COURT DECLARES THAT:

1.The applicants’ disclosure in this proceeding of the documents obtained in the course of an arbitration annexed to the affidavit of Andrew James Shute sworn on 24 January 2018 was necessary for the protection of their legal rights and was no more than was reasonable for that purpose and was accordingly permitted under s 27F(5) of the Commercial Arbitration Act 2013 (Qld).

THE COURT ORDERS THAT:

2.The second and third respondents file and serve:

(a)an affidavit of the second respondent identifying the documents in his control that provide or may provide evidence of the terms of their senior counsel’s cost agreement in relation to proceeding VID 1183/10, and annexing a copy of each of those documents;

(b)an affidavit of the third respondent identifying the documents in her control that…

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Mango Boulevard Pty Ltd v Whitton [2018] FCA 399
Case
[2018] FCA 399
Decision Date

CaseChat Overview and Summary

Mango Boulevard Pty Ltd, the applicant, sought an order from the Federal Court of Australia for the respondents to provide affidavits and documents concerning their liability for their lawyers’ fees. The applicants sought the order to assist them in applying the indemnity principle. The applicants had already obtained a costs order against the respondents, but the respondents had not yet paid any of the costs. The applicants argued that the respondents may have no legal obligation to pay fees to their solicitor and senior counsel, such that interlocutory orders for affidavits and production of documents should be made. The applicants relied on three grounds for their argument: (1) the respondents’ senior counsel’s costs agreement may be void pursuant to statute; (2) the respondents’ liability to pay costs may be subject to a contingency which has not been triggered; and (3) the respondents may have received litigation funding, such that they do not have any liability to pay costs themselves.

The court noted that in Shaw v Yarranova Pty Ltd, the Victorian Court of Appeal held that there is a presumption that clients are liable for their lawyers’ fees and that the party who challenges the existence of the retainer bears the onus of establishing the absence of it. The court held that the applicants had not demonstrated that it was likely that the indemnity principle had been displaced. The applicants had not addressed the relevance of s 27F of the Commercial Arbitration Act to the scope of the implied undertaking, nor, for that matter, had they addressed the Court’s jurisdiction to release the applicants from their implied undertaking in relation to a private arbitration. In the absence of submissions, the court did not propose to rule upon these issues. However, it may be noted that as s 27F of the Commercial Arbitration Act allows use of confidential material in certain circumstances, it may be that any implied undertaking does not apply where the relevant circumstances exist. The declaration may be sufficient. The court intended to take the confidential material into account for the purposes of the present application.

The court ordered that the respondents file and serve affidavits and documents within 14 days of the date of the order. The court also noted that the parties had liberty to apply and that costs were reserved.

Orders

Orders of the court

2. The second and third respondents file and serve:

(a) an affidavit of the second respondent identifying the documents in his control that provide or may provide evidence of the terms of their senior counsel’s cost agreement in relation to proceeding VID 1183/10, and annexing a copy of each of those documents;

(b) an affidavit of the third respondent identifying the documents in her control that provide or may provide evidence of the terms of their senior counsel’s cost agreement in relation to proceeding VID 1183/10;

within 14 days of today’s date.

3. The parties have liberty to apply.

4. Costs are reserved.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

In Shaw v Yarranova Pty Ltd [2011] VSCA 55, the Victorian Court of Appeal held:[19]… The existence of a contract of retainer and the liability of the client for the solicitor’s costs will be presumed, and the party who challenges the existence of the retainer in such circumstances bears the onus of establishing the absence of it.… [20]Where the party against whom the costs order has been made seeks to displace the rule, it is necessary to prove that under no circumstances does the client have any liability to pay costs to his or her solicitors…[22] …In Victoria and elsewhere in Australia the indemnity rule has been treated as permitting recovery of costs from the party against whom the order is made, although a third party has indemnified the successful party or paid their costs. …[26] …The principles governing an application for an order that documents be produced are not different from those governing applications for access to documents produced in answer to a subpoena. So where an application is made in the Costs Court that the party in whose favour a costs order has been made produce documents asserted to be relevant to the application of the indemnity principle, the applicant must identify a legitimate forensic purpose for which access is sought, and establish that it is ‘on the cards’ that the documents will materially assist his case. There will be no legitimate forensic purpose if, ‘all the party is doing is trying to get hold of the documents to see whether they may assist him in his case.’ The court must both be satisfied that the documents are relevant to an issue and that there is something in the material then before the court that makes it appear likely that the documents will materially assist the applicant. …[27] ...The evidence did not raise the likelihood that the costs that had been or were to be paid were less than those that had been taxed. [28] By contrast, in Kuek v Devflan Pty Ltd there were circumstances placed before the Costs Judge which gave him reason to order the production of retainer letters and costs agreements. The material was there sufficient to raise the likelihood that the party/party costs may have exceeded the successful party’s actual liability to its lawyers. But there must be evidence before the Costs Court that renders it likely that the indemnity principle has either in whole or part been displaced.(Footnotes omitted, emphasis added.) The applicants submit that the passage in paragraph [28] of Shaw v Yarranova that “the material was there sufficient to raise the likelihood that the party/party costs may have exceeded the successful party’s actual liability to its lawyers” represents the test that should be applied to their interlocutory application for production of affidavits and documents. As that passage reads, it is sufficient if the applicant demonstrates the mere likelihood of a possibility. I do not think that is precisely what was meant by the Court of Appeal, as it would be inconsistent with paragraphs [26], [27] and the last sentence of [28]. If production of costs agreements and other documents is to be ordered, there must be evidence that renders it likely that the indemnity principle has either in whole or part been displaced. The word “likely” in this context does not mean more probable than not, but instead means “on the cards”: see [26]. To similar effect, in Windus, Barker J at [20] framed the issue as requiring “reasonable grounds” to be raised. Whether senior counsel’s costs agreement may be void

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The applicants have not addressed the relevance of s 27F of the Commercial Arbitration Act to the scope of the implied undertaking, nor, for that matter, have they addressed the Court’s jurisdiction to release the applicants from their implied undertaking in relation to a private arbitration. In the absence of submissions, I do not propose to rule upon these issues. However, it may be noted that as s 27F of the Commercial Arbitration Act allows use of confidential material in certain circumstances, it may be that any implied undertaking does not apply where the relevant circumstances exist. The declaration may be sufficient. I intend to take the confidential material into account for the purposes of the present application.Consideration In oral submissions, the applicants raised three grounds upon which they assert that the respondents may have no legal obligation to pay fees to their solicitor and senior counsel, such that interlocutory orders for affidavits and production of documents should be made. The grounds are that:(1) The respondents’ senior counsel’s costs agreement may be void pursuant to statute. (2)The respondents’ liability to pay costs may be subject to a contingency which has not been triggered.(3)The respondents may have received litigation funding, such that they do not have any liability to pay costs themselves. While the applicants’ written submissions also disputed the fees of one of the respondents’ junior counsel, they did not pursue that issue in their oral submissions. Their oral submissions confined their case to the three grounds they raised. In Shaw v Yarranova Pty Ltd [2011] VSCA 55, the Victorian Court of Appeal held:[19]… The existence of a contract of retainer and the liability of the client for the solicitor’s costs will be presumed, and the party who challenges the existence of the retainer in such circumstances bears the onus of establishing the absence of it.… [20]Where the party against whom the costs order has been made seeks to displace the rule, it is necessary to prove that under no circumstances does the client have any liability to pay costs to his or her solicitors…[22] …In Victoria and elsewhere in Australia the indemnity rule has been treated as permitting recovery of costs from the party against whom the order is made, although a third party has indemnified the successful party or paid their costs. …[26] …The principles governing an application for an order that documents be produced are not different from those governing applications for access to documents produced in answer to a subpoena. So where an application is made in the Costs Court that the party in whose favour a costs order has been made produce documents asserted to be relevant to the application of the indemnity principle, the applicant must identify a legitimate forensic purpose for which access is sought, and establish that it is ‘on the cards’ that the documents will materially assist his case. There will be no legitimate forensic purpose if, ‘all the party is doing is trying to get hold of the documents to see whether they may assist him in his case.’ The court must both be satisfied that the documents are relevant to an issue and that there is something in the material then before the court that makes it appear likely that the documents will materially assist the applicant. …[27] ...The evidence did not raise the likelihood that the costs that had been or were to be paid were less than those that had been taxed. [28] By contrast, in Kuek v Devflan Pty Ltd there were circumstances placed before the Costs Judge which gave him reason to order the production of retainer letters and costs agreements. The material was there sufficient to raise the likelihood that the party/party costs may have exceeded the successful party’s actual liability to its lawyers. But there must be evidence before the Costs Court that renders it likely that the indemnity principle has either in whole or part been displaced.(Footnotes omitted, emphasis added.)