Marshall v Fleming
[2013] NSWSC 566
•17 May 2013
Supreme Court
New South Wales
Medium Neutral Citation: Marshall v Fleming [2013] NSWSC 566 Hearing dates: 8 May 2013 Decision date: 17 May 2013 Jurisdiction: Common Law Before: Harrison J Decision: 1. Order pursuant to UCPR 20.14 and/or the Memorandum of Understanding between the Chief Justice of New South Wales and the Chief Judge of the State of New York on References of Questions of Law of 28 October 2010 that a member of the New York Panel of Referees be appointed to act as a referee for inquiry and report on questions of foreign law.
2. Direct that the parties confer and agree within 14 days upon the questions of foreign law that are to be referred in accordance with order 1 above.
3. Order that the costs of the defendants' notice of motion be the defendants' costs in the proceedings.
4. Stand over the plaintiffs' notice of motion to a date to be fixed pending receipt by the parties of the referee's report as anticipated by order 1 above.
5. Reserve the costs of the plaintiffs' notice of motion.
Catchwords: PRIVATE INTERNATIONAL LAW - UCPR 6.43 and 6.44 - where New York law the proper law - where dispute as to content and application of New York law - foreign law notices - whether plaintiffs' pleaded cause of action known to New York law - whether disputed issues should be referred to panel of adjudicators in New York in accordance with Memorandum of Understanding and/or UCPR 20.14 - whether order can be made in absence of one party's consent Legislation Cited: Supreme Court Act 1970
Uniform Civil Procedure Rules 2005Cases Cited: Fleming v Marshall [2011] NSWCA 86 Texts Cited: J Spigelman, "Proof of Foreign Law by Reference to the Foreign Court" (2011) 127 Law Quarterly Review 208 Category: Interlocutory applications Parties: Margaret Lesley Marshall (Plaintiff)
Francis G Fleming (Defendant)Representation: Counsel:
C J Bevan & E W Young (Plaintiffs)
D F Villa & E Bishop (Defendants)
Solicitors:
Turner Freeman (Plaintiffs)
Kennedys (Defendants)
File Number(s): 2009/292939 Publication restriction: Nil
Judgment
HIS HONOUR: The defendants are attorneys practising law in the State of New York in the United States of America. Margaret Marshall is the widow and executor of the estate of the late Neil Marshall under the terms of his will dated 23 December 1992. Kim Marshall is their only son. The deceased was killed in an aircraft accident at Spencer Gulf in South Australia on 31 May 2000. There were no survivors.
The defendants represented the plaintiffs as participants in proceedings conducted in Pennsylvania on their behalf and on behalf of others seeking damages for negligence from the manufacturer of the aircraft that crashed. The proceedings were compromised on 21 February 2003 and the plaintiffs became entitled to the sum of USD 481, 250, representing 8.75 percent of the gross settlement amount of USD 5.5M. From that sum the defendants were entitled to a 22.222 percent contingency fee in accordance with the terms of their retainer.
Before the defendants had accounted to the plaintiffs for the net proceeds of the settlement, they received notice of a claim by a third party to an entitlement to the balance of the net proceeds held by them. In those circumstances the defendants informed the plaintiffs that they were not prepared to account for the net settlement amount unless either an agreement was reached between the plaintiffs and the third party claimant as to their respective entitlements to the fund or the plaintiffs obtained an order from a court of competent jurisdiction as to their entitlement to it. In circumstances to which it is presently unnecessary to set forth in detail, the plaintiffs commenced a series of proceedings in this Court in order to establish their rights to the fund in the face of an insistence by the defendants that they would not release it without resolution of the third party's claims.
The plaintiffs were successful in those third party proceedings. However, as a consequence of taking these other proceedings, the plaintiffs incurred substantial costs, which they were not able completely to recover from the third parties. A shortfall of approximately $350,000 remained. The plaintiffs allege in these proceedings that those and related losses were caused or occasioned to them as the direct result of breaches by the defendants. The precise formulation of the plaintiffs' claims lies at the heart of the current dispute.
The present proceedings were commenced in February 2009 pleading causes of action in contract and in tort pursuant to the law of New South Wales. Later in that year the defendants sought to stay the proceedings on the grounds of forum non conveniens. That application was refused by Rothman J at first instance and effectively affirmed by the Court of Appeal. However, that Court made a provisional finding that the proper law of the defendants' retainer was the law of New York: see Fleming v Marshall [2011] NSWCA 86 at [81].
The plaintiffs thereafter in January 2012 filed an amended statement of claim in which all previously pleaded causes of action were abandoned in favour of a new case pleaded as "a common law or equitable duty to indemnify" under New York law. On 23 August 2012 the plaintiffs served a foreign law notice in compliance with UCPR 6.43 together with an expert report from William Holm. On 6 September 2012 the defendants filed their defence to the amended pleading raising a series of defences under New York law. They later served a report from Mr Joseph Bellacosa that disputed the existence under New York law of the cause of action upon which they perceive the plaintiffs to rely.
On 18 October 2012 the defendants served a notice of dispute and foreign law notice and on 3 December 2012 served a proposed amended notice of dispute as to foreign law. It is the defendants' position that the facts and matters pleaded by the plaintiffs disclose no cause of action that can be characterised as an action for indemnity that is available under New York law. They contend that the plaintiffs' claims are actions for the reimbursement of legal fees incurred by them, which properly considered constitute damages for professional negligence rather than claims for indemnity. The former is now time barred by New York limitation provisions. A money claim would also be out of time in New York. The plaintiffs' reformulated case is presumably not vulnerable to the prospect of a limitation defence.
It is not presently necessary for me to resolve the question of the correct characterisation of the plaintiffs' claims about the existence and therefore the viability of the case that the plaintiffs now seek to mount. It is, however, obvious that the early resolution of that dispute is of central importance to the further conduct of, and ultimately the final outcome in, the proceedings.
The proceedings came before me in these circumstances for the determination of two notices of motion. The plaintiffs' notice of motion filed 7 November 2012 seeks the following relief:
1. An order striking out the foreign law notice filed by the defendants on 18 October 2012.
2. An order striking out the notice of dispute filed by the defendants on 18 October 2012.
3. An order that the defendants file a foreign law notice that is compliant with UCPR 6.43(1) within seven days of the date of the making of order 1 above setting out the relevant principles of foreign law and their application to the issue of foreign law.
4. An order that the defendants file a notice of dispute as to foreign law that is compliant with UCPR 6.43(3) within seven days of the date of the making of order 2 above setting out the matters in dispute.
5. In the event that the defendants do not comply with orders 3 and 4 above, the defendants' defence be struck out and judgment be entered for the plaintiffs for damages to be assessed.
6. The defendants pay the plaintiffs' costs.
The defendants' notice of motion filed 6 February 2012 seeks the following relief:
1. An order pursuant to UCPR 20.14 and/or the Memorandum of Understanding between the Chief Justice of New South Wales and the Chief Judge of the State of New York on References of Questions of Law of 28 October 2010 that a member of the New York Panel of Referees be appointed to act as a referee for inquiry and report on the questions of foreign law set out in annexure 'A' to the motion.
2. An order pursuant to UCPR 28.2 that the questions of foreign law set out in annexure "A" be determined separately and in advance of any other question in the proceedings.
The rules to which the parties have referred are in the following relevant terms:
6.43 Filing of notices
(1) A party who contends that an issue in proceedings in the Supreme Court is governed by foreign law must file and serve on the other parties affected by the issue a notice (a "foreign law notice") setting out the relevant principles of foreign law and their application to the issue.
(2) The foreign law notice must be filed and served by the party contending that an issue is governed by foreign law not more than 6 weeks after the filing by that party of a summons, statement of claim, statement of cross-claim or defence in respect of the proceedings.
(3) A party on whom a foreign law notice is served who disputes the principles of foreign law or their application must file and serve on the other parties affected by the issue a notice setting out the matter or matters in dispute (a "notice of dispute as to foreign law").
(4) The notice of dispute as to foreign law must be filed and served not more than 8 weeks after the date of service of the foreign law notice.
6.44 Orders
(1) The Supreme Court may, on the application of one or more of the parties and with the consent of all of the parties, order that proceedings be commenced in a foreign court in order to answer a question as to the principles of foreign law or as to their application.
(2) The Supreme Court may, on the application of one or more of the parties or of its own motion, order that the question of foreign law be answered by a referee appointed in accordance with Division 3 of Part 20.
(3) An order under subrule (1) must:
(a) state the question of foreign law to be answered, and
(b) state the facts or assumptions upon which the answer to the question is to be determined, and
(c) contain a statement to the effect that the foreign court may vary the facts or assumptions and the question to be answered, and
(d) state whether and to what extent the parties may depart from the facts or assumptions in the determination of the question by the foreign court.
(4) The Supreme Court may give directions for the preparation of a statement as to the nature of the issue out of which the question arises for inclusion with the question to be answered by the foreign court or the referee.
20.14 Orders of referral
(1) At any stage of the proceedings, the court may make orders for reference to a referee appointed by the court for inquiry and report by the referee on the whole of the proceedings or on any question arising in the proceedings.
(2) ...
28.2 Order for decision
The court may make orders for the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings.
It is convenient to deal with the defendants' motion first.
The plaintiffs' response to the defendants' application is instructive. It proceeds upon the basis that the application is an abuse of process on several grounds. First, the plaintiffs submitted that a reference under UCPR 20.14 could only be made under UCPR Part 6 Div 9 and only then with the consent of all of the parties. That is said to be so because it involves a refusal to exercise jurisdiction that the Court has a statutory duty to exercise in the absence of such consent. The plaintiffs have refused to consent to such a reference, which they contend in effect is the end of the matter.
In support of that contention, the plaintiffs refer to and rely upon what was said by Spigelman CJ in this case in the Court of Appeal. At [6] to [11], his Honour said the following:
"[6] In any event, as Mr Braham SC accepted in the course of his submissions, the weight to be given to the fact that an issue of foreign law arises, when determining whether or not a stay of proceedings in New South Wales should be ordered, has been significantly attenuated by the adoption of a new procedure in this Court. The rules now permit the Court to refer such an issue for determination by the relevant foreign court, as distinct from adopting the traditional approach of choosing between conflicting expert evidence. The rules also expressly authorise the appointment of a referee for this purpose. (For the relevant background see J J Spigelman 'Proof of Foreign Law by Reference to the Foreign Court' (2011) 127 Law Quarterly Review 208.)
[7] Part 6 Div 9 of the Uniform Civil Procedure Rules 2005, reinforced by s125 of the Supreme Court Act 1970, makes provision for the identification of a dispute between the parties on an issue of foreign law which, with the consent of the parties, may be the subject of an order that proceedings be commenced in a foreign court in order to answer a question as to the principles of foreign law or as to their application.
[8] The rules further expressly empower the Court to refer such a matter for determination by a referee, pursuant to the long established provisions for the appointment of referees. Such a referee could come from and sit in the foreign jurisdiction. Although consent of the parties is not a condition of the exercise of a power to make such a reference it has, nevertheless, long been the practice of the Court to do so only with the consent of the parties.
[9] Pursuant to a Memorandum of Understanding between myself, as Chief Justice of New South Wales, and the Chief Judge of New York, a reference of a question of law from this Court to New York will be determined by three appellate judges selected by the Chief Judge to answer the question or questions referred by this Court. The New York judges would not sit as the New York Court of Appeals, but would sit as volunteer referees.
[10] It is by no means clear whether the present case is one in which this mechanism for deciding such an issue would be more cost effective than the customary means of determining a question of foreign law by expert evidence. However, the determination of an issue of professional practice is one of the kinds of legal issues for which there is unlikely to be a single correct answer. Advice from three serving appellate judges of the foreign jurisdiction is much more likely to be accurate than an Australian judge choosing between contesting expert reports.
[11] As this mechanism is available if sought, I would reject the submission of Mr Braham SC, that the possibility that an issue of this character may arise in the present proceedings is entitled to weight in determining whether this Court is a clearly inappropriate forum."
The Chief Justice noted that the parties to the proceedings expressly declined an invitation from the Court to have all questions of foreign law determined in New York by the expert panel established under the Memorandum of Understanding between the heads of the respective jurisdictions, which memorandum underlies UCPR Part 6 Div 9. The plaintiffs therefore contend that the appeal was conducted and determined upon the basis of an acceptance of jurisdiction by this Court on all questions of foreign law. The plaintiffs submit that such conduct and the Court's reliance upon it constituted either a binding election by both parties or a procedural estoppel against now seeking to depart from it by placing reliance upon the rights that the parties would otherwise have under UCPR Part 6 Div 9.
I do not think that this is correct. It does not seem to me that either party is, or should be, bound by the respective positions that they adopted at a time when the issues in the case were significantly different. The setting and the context of anything that occurred in the Court of Appeal have now changed. The issue that was agitating the parties in the Court of Appeal was what was the proper law of the contract. The plaintiffs did not then accept , as they do now, that their available causes of action arise wholly under New York law and raise only issues of New York law. The parties' conduct of the Court of Appeal proceedings does not, and in the circumstances ought not to, constrain the determination of the current application. Since then the plaintiffs' case has been recast in the way referred to earlier.
The amended statement of claim raises issues of New York law that were no part of the proceedings at the time that the Court of Appeal was being asked to determine the most convenient forum and the proper law of the contract of retainer. Indeed, the amended statement of claim abandoned all the causes of action that had previously been relied upon and now pleads new ones that expressly arise solely under New York law and to which the defendants have expressly pleaded defences arising under New York law. In the light of those changes the defendants perceive that a reference to a panel in New York in accordance with the Memorandum of Understanding is likely to have procedural advantages for both parties and is the preferred course. I agree.
Secondly, the plaintiffs contend that it is an abuse of process to attempt to circumvent the requirement for consent in UCPR 6.44(1) by applying for the reference out under a rule having no application to questions of foreign law because it has no consent requirement. However, consent is not a necessary condition of the defendants' request for a reference. The terms of UCPR 6.44(2) make this clear. All the more does this appear to be so when regard is had to the fact that the rule came into effect from 25 June 2010 pursuant to s 125 of the Supreme Court Act 1970, which for presently relevant purposes is in these terms:
"125 Arrangements for exchange of information between Court and foreign courts
(1) Rules may be made under this Act, or under the Civil Procedure Act 2005, for or with respect to:
(a) the referral by the Court of a question as to the principles of foreign law, or their application, to a foreign court for information, advice or assistance (with or without the consent of parties to proceedings), and
(b) the provision by the Court, to a foreign court, of information, advice or assistance on a question as to the principles of Australian law, or their application.
(2)..."
Thirdly, according to the plaintiffs at least, UCPR 20.14 does not apply to questions of foreign law. It relates instead only to questions of fact arising in proceedings determined in this Court that need to be determined by experts in specialised areas of knowledge. The principle requiring specific provisions to prevail over general provisions operates to ensure that UCPR Part 6 Div 9 covers the field on referring out questions of foreign law. However, the specific reference in that rule to Division 3 of Part 20 reaffirms the operation of UCPR 20.14 in the context of an issue concerning foreign law. The suggestion that the specific should prevail over the general appears in this case to yield to the ordinary, and contrary, meaning of the wording of the rules concerned. The plaintiffs' contention that UCPR 20.14 does not apply to questions of foreign law is simply not correct.
The only issue of doubt that appears to attend that conclusion arises from the reference by the Chief Justice to the usual or customary disinclination or long practice of the Court to order a reference except where the consent of all of the parties is forthcoming. His Honour cited no case or rule in support of that suggestion, and none has been drawn to my attention in this application. His Honour's comment appears also with respect to have been in conflict with the otherwise clear words used in the rules. This view is also reinforced by the terms of s 125 of the Act. In the absence of any analysis that convinces me that such a practice exists or that it is universal and binding, I am unable to utilise it now.
Is the application otherwise so without merit that the interests of justice do not favour it? In an article entitled "Proof of Foreign Law by Reference to the Foreign Court" (2011) 127 Law Quarterly Review 208 at 213, then Chief Justice Spigelman suggested that "[a] reference will always...provide a more accurate answer, indeed, an authoritative answer, than expert evidence". In the present case the parties have marshalled opposing experts with differing opinions about New York law in the context of the current pleading, and there is some likelihood that further modified opinions are eager to emerge. The advantages associated with a reference to a panel of judges in New York in accordance with the Memorandum of Understanding is that it would provide a certain, and presumably final, answer about the content and application of the law of that State. It would not involve a process of experts in contest about the issues but would become one solely for the appointed judges to determine. The process is also free, in the sense that no fee is charged for the service provided by the panel. It is also quick, with an indicative time of eight weeks after assignment to the panel by the Chief Judge in New York. All of this conforms to the well know overriding purpose in this Court.
In my opinion it is appropriate that a member or members of the New York Panel of Referees be appointed pursuant to UCPR 20.14 and/or the Memorandum of Understanding dated 28 October 2010 to act as a referee for inquiry and report on appropriate questions of foreign law. The defendants have already specified what those questions should be, but I expressed some doubt in the course of the hearing of these applications that they were adequate. Whether or not my concerns were sound, it seems to me that the matter is not simply one for the defendants alone to control and that both the defendants and the plaintiffs should be given an opportunity to confer and agree upon the questions to be referred before the process is finalised.
The defendants have also sought an order pursuant to UCPR 28.2. It does not seem to me, having regard to the content and timing of the anticipated referral to the panel, that any such order is presently necessary. If the referral to the New York panel proceeds as anticipated, the questions of foreign law will necessarily be determined as if an "order... for the decision of any question separately from any other question" had been made.
It also follows in my view that orders of the type sought by the plaintiffs in their notice of motion ought for obvious reasons await the outcome of the referral to the panel. In the event that they retain some utility at the conclusion of that process, I will deal with the matters raised by the plaintiffs then.
Orders
In these circumstances I consider that the following orders should be made:
1. Order pursuant to UCPR 20.14 and/or the Memorandum of Understanding between the Chief Justice of New South Wales and the Chief Judge of the State of New York on References of Questions of Law of 28 October 2010 that a member of the New York Panel of Referees be appointed to act as a referee for inquiry and report on questions of foreign law.
2. Direct that the parties confer and agree within 14 days upon the questions of foreign law that are to be referred in accordance with order 1 above.
3. Order that the costs of the defendants' notice of motion be the defendants' costs in the proceedings.
4. Stand over the plaintiffs' notice of motion to a date to be fixed pending receipt by the parties of the referee's report as anticipated by order 1 above.
5. Reserve the costs of the plaintiffs' notice of motion.
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Decision last updated: 17 May 2013