McMurphy and G and G (A Law Firm) (No 2)

[2011] FamCA 847

FAMILY COURT OF AUSTRALIA

MCMURPHY & G & G (A LAW FIRM) (NO 2) [2011] FamCA 847

FAMILY LAW – COSTS - Between solicitor and client

Family Law Act 1975 (Cth)

Bate & Priestly (1990) FLC 92-102
Perlman & Perlman (1984) FLC 91-500
DJL & The Central Authority (2000) 201 CLR 226
Parsons & Martin (1984) 5 FCR 235 at 241
Re P’s Bill of Costs (1982) FLC 91-255
Re P’s Bill of Costs (1982) FLC 91-255

APPLICANT: Ms McMurphy

RESPONDENT: G & G LEGAL

FILE NUMBER: MLC 4782 of 2010

DATE DELIVERED: 15 June 2011

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Dessau J

HEARING DATE: 2 June 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Dickson

SOLICITOR FOR THE APPLICANT: Schetzer Constantinou

COUNSEL FOR THE RESPONDENT: Mr St John SC

SOLICITOR FOR THE RESPONDENT: Webb Korfiatis

Orders

1. That the application filed on 27 April 2011 shall be and is hereby dismissed.

2. That all questions of costs shall be adjourned until 10.00amon 16 June 2011.

IT IS NOTED that publication of this judgment under the pseudonym McMurphy & McMurphy is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 4782  of 2010

Ms McMurphy

Applicant

And

G & G LEGAL

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. Mr G from the respondent law firm G & G Legal (for ease, referred to as “G & G”) acted for the applicant Mrs McMurphy (now known as Ms Hirst) in her matrimonial dispute with her husband. 

2. In August 2010, Cleary J held a three-day hearing to determine Ms Hirst’s application against G & G, to set aside a costs agreement entered between G & G and Ms Hirst in 2007, and to set aside a costs assessment order that had been made by Riddiford R on 8 April 2009.  In November 2010, Cleary J granted both applications.  On 8 April 2011, after written submissions as to the costs of that proceeding, Cleary J ordered G & G to pay Ms Hirst’s costs of $80,000 within 28 days, failing which he was to pay her costs on an indemnity basis as agreed or assessed.

3. On 27 April 2011, Ms Hirst filed this application.  Amongst other things, it seeks that G & G refund to her a sum of $230,242.75 paid by her to the firm in May 2009, plus 10.5 per cent interest.  In default of receiving those payments, Ms Hirst seeks various other orders for enforcement, including the lodging of a caveat over property owned by Mr G or entities in which he was a director or shareholder, or had any interest of any nature, and indemnity costs.  She also seeks detailed interim orders, to protect her position.  That application is supported by her affidavit filed on 27 April 2011.  Her solicitor Melanie Davison also filed an affidavit, on 2 June 2011, as to the events since Cleary J’s orders in November 2010.

4. G & G filed a response on 2 June 2011, seeking to dismiss the major parts of Ms Hirst’s application “for want of jurisdiction”, or additionally or alternatively, to dismiss them as an “abuse of process”.  G & G also seeks that the application otherwise be dismissed, and that Ms Hirst and/or her solicitor pay the respondent’s costs on an indemnity basis.  The response was supported by Mr G & G’s affidavit filed on 2 June 2011.

5. The matter came before me in the Duty List.  Mr St John SC for G & G asked me to deal first with the questions of jurisdiction and abuse of process, the latter relating to an issue estoppel argument.  Mr Dickson for Ms Hirst agreed with that approach.  He made the first submissions, to argue in favour of the Court’s jurisdiction to hear his client’s application.

6. First, the history of how the sum of $230,242.75 has come to be held in the G & G trust account can be briefly stated. 

7. In late-March 2009, Ms Hirst withdrew her instructions from G & G.  The firm advised that the outstanding legal costs were then $238,143.18.  Although Ms Hirst’s new lawyer advised her that she could seek an assessment of costs, she was concerned that a delay might unduly interfere with the settlement of the sale of the former matrimonial home, as G & G held a caveat over the property.  G & G had informed her solicitors that the caveat would only be withdrawn upon payment in full of the fees and disbursements plus interest, claimed pursuant to the costs agreement.  She paid the full amount on 19 May 2009, and the property settlement was effected that day.  Her payment was made “under protest”. 

8. Ms Hirst now seeks the refund of that sum, or in fact slightly less, as in the course of the hearing before Cleary J, G & G paid back the sum of $7,900.43 to Ms Hirst, to correct an over-payment.

9. Mr Dickson concedes that there is no specific section or power in the Family Law Act pursuant to which this application is brought.  He submits that the court’s jurisdiction is founded on its inherent power to make orders consequential upon orders already made.  He says that the orders sought are incidental to the orders made by Cleary J, and are to give effect to it. 

10. The abuse of process argument is said by G & G to arise in the context of an issue estoppel, Cleary J having already found that she had no jurisdiction to determine this question of a refund of the monies.  Mr Dickson submits that there was no application properly made before Cleary J, that her Honour simply refused the order on that basis, that the application was therefore not dealt with on its merits, and there is no issue estoppel or abuse of process.

11. Mr St John submits that there is no jurisdiction as there is no “matrimonial cause” under s 4(1) of the Family Law Act. He submits that the present proceeding does not fall within sub-sections (a) to (eb) of the definition of “matrimonial cause”. As there was no argument to the contrary on that point, there is no need to recite those various provisions. He submits that the only possible provision to found jurisdiction is in s 4(1)(f) of the Act. It includes within the definition of a matrimonial cause:

    Any other proceedings (including proceedings with respect to the enforcement of a decree or the service of process) in relation to concurrent, pending or completed proceedings of a kind referred to in any of paragraphs (a) to (eb), including proceedings of such a kind pending at, or completed before, the commencement of this Act.

12. Mr St John argues that although the court could, as it did, determine the costs within that definition, what is sought here is not an order for costs, nor an enforcement of her Honour’s orders, nor consequential to the orders previously made. 

13. As to the issue estoppel argument, Mr St John submits that the question of jurisdiction for a refund order was dealt with directly by Cleary J in the costs judgment when her Honour found “no jurisdictional basis” for making the order.  For the application to be made by Ms Hirst several days later is an abuse of process. 

ISSUE ESTOPPEL

1. As Mr St John has argued that Cleary J has already made a finding that there is no jurisdiction in this case, and therefore the question is not even open to me, it is logical to deal with it first. 

2. Although I do not have a copy of the submissions to Cleary J on Ms Hirst’s behalf, as to the costs arising from her Honour’s orders, it is clear that although her Honour invited written submissions specifically and exclusively on the costs issue, a refund of the monies held by G & G was also sought by Ms Hirst in those submissions. 

3. I do have, annexed to Ms Hirst’s affidavit, the submissions in reply for G & G, that deal with the refund issue.  First, it was argued that the applicant’s submissions were “irregular”, given that the parties only had leave to file submissions on the question of costs, and that further, an application for a refund was never part of the relief sought in the substantive application before her Honour.

4. At paragraph 28 of those submissions for G & G, it was submitted as “problematic in any event that the Court has any jurisdictional power to make such orders (even had they been properly sought).”

5. The submissions dealt then with the prejudice to G & G in the “disgorgement order” sought by Ms Hirst, again given that her case was not run on that basis, and there would be a denial of natural justice to G & G. 

6. At paragraph 31, the submission was made that Ms Hirst had established “…no legal or equitable basis within the jurisdictional power of the Court on which she would be entitled to such a ‘disgorgement’ order and indeed none exists.”

7. The submissions went on to argue that the jurisdiction of the court was limited to ordering a refund of costs only in particular circumstances that were then enumerated, and discussed in more detail.  

8. Mr Dickson says that it is clear from those submissions that G & G had accepted the court’s jurisdiction.  That is not a fair assessment of the submissions which did squarely identify a jurisdictional issue.  In any event, even had jurisdiction been conceded, if there were no jurisdiction, it could not be founded merely by way of concession. 

9. Cleary J dealt with the application for the refund order, under that heading, in her costs judgment delivered on 8 April 2011.  At paragraph 49, her Honour said:

   The applicant has sought an order for refund of the sum of $268,824.38.  This application does not relate to the costs of the proceedings to set aside the costs agreement and costs assessment order.  Whilst it is understandable that the application is made, I can find no jurisdictional basis for dealing with it in this context...

10. In that sole paragraph on the topic, her Honour went on to refer to G & G’s obligation at that point to draw fresh bills of costs and serve them on Ms Hirst, and that if a dispute about costs then continued it should be dealt with by the “Costs Registrar” in “the ordinary way”. 

11. It was her Honour’s statement that there was “no jurisdictional basis for dealing with [the refund order] in this context”, upon which the issue estoppel argument was founded. 

12. The principle of issue estoppel is set out in Halsbury’s Laws of Australia at paragraph 190-100 as follows:

    A final judgment by a competent tribunal creates an issue-estoppel in that it forever binds the parties and all those who claim through them in respect of any issue of fact or law which was legally indispensible to that decision.

13. Halsbury’s describes the parties being bound in the sense that:

    … they are precluded in subsequent proceedings from asserting, as against other parties to the judgment, to the contrary of any issue fundamental to the judgment.

14. Counsel for Ms Hirst argues now that her Honour did not deal with the application on its merits.  The reference to there being no jurisdiction “in this context” was simply an observation that she had permitted submissions only on the question of costs following substantive orders.

15. Counsel for G & G submits that the matter was clearly considered by her Honour, who did not refuse it on the basis that it was unfair or that there was no formal application, but on the basis that there was no jurisdiction. 

16. Her Honour’s findings on the topic of a refund order were brief.  They occupied only a few sentences in one of 49 paragraphs.  That is no criticism of her Honour.  The topic at hand, as she clearly noted, was the costs between the parties following the completed proceedings.  The “refund order” had not been a part of the substantive application, had not been raised during the substantive proceedings, and had only arisen in the course of costs submissions although it was unrelated to them. 

17. On the one hand, her Honour’s reference to there being “no jurisdictional basis” for dealing with the application, clearly suggests that her Honour made a finding that she had no jurisdiction. 

18. On the other hand, that sentence follows immediately upon her Honour’s observation that the application did not relate to the costs of the proceedings, and was followed by the words “in this context”.  That suggests that her Honour was not in fact dealing with jurisdiction as such. 

19. In my view her Honour’s brief comments are simply too ambiguous for me to find that she has given a final finding on the topic such that the current application is an abuse of process, with the effect that a party would be shut out from bringing the issue before the court on that basis. 

20. That brings me then to the fundamental question of jurisdiction. 

JURISDICTION

1. There is no dispute that the proceedings before Cleary J for the setting aside of the costs agreement and the costs assessment order constituted a matrimonial cause under s 4(1)(f) of the Act. They were proceedings “in relation to …completed proceedings” of a kind referred to in s 4(1)(ca). The issue is as to whether the jurisdiction for this current application exists.

2. In Bate & Priestly (1990) FLC 92-102, a decision of the New South Wales Court of Appeal, Mahoney J.A. (at p77,675) noted the construction of various definitions of “matrimonial cause” and their application to any particular set of facts, as “not without difficulty”. His Honour then considered the High Court’s decision in Perlman & Perlman (1984) FLC 91-500, the primary authority relied upon by Mr St John.

3. In Perlman, the Family Court had previously approved a maintenance agreement between the parties pursuant to s 87 of the Family Law Act.  The husband failed to comply with his obligations under the agreement.  The wife began enforcement proceedings in the Supreme Court of New South Wales.  The husband sought to have the wife’s summons struck out on the ground that the proceedings were a “matrimonial cause”, and that the Supreme Court had no jurisdiction to hear the proceedings.  The husband was unsuccessful in that argument before the Supreme Court, the New South Wales Court of Appeal, and subsequently the High Court.

4. In dealing with the applicant husband’s argument that the wife’s enforcement proceedings were proceedings “in relation to completed proceedings”, Gibbs CJ said (at p 79,056):

   The words ‘in relation to’ import the existence of a connection or association between the two proceedings, or in other words that the proceedings in question must bear an appropriate relationship to completed proceedings of the requisite kind…An appropriate relationship may exist if the order sought in the proceedings in question is consequential on or incidental to a decree made in the completed proceedings…

5. Gibbs CJ held that the application to enforce the maintenance agreement was not consequential on or incidental to the order approving the maintenance agreement.  He held that there was no connection between those proceedings and the deed “except of a remote and indirect kind”.  The proceedings brought to obtain approval of the deed simply formed “part of the historical background”. 

6. In Perlman, the Full Court of the High Court was unanimous in the view that the enforcement proceedings did not constitute “proceedings…in relation to…completed proceedings” so as to fall within paragraph (f) of s 4(1) of the Family Law Act. 

7. In Bate & Priestly, the husband and wife also had a maintenance agreement approved by the Family Court pursuant to s 87 of the Act in 1979. In 1984, upon the application of one party, the 1979 agreement was revoked and orders were made for a property settlement. The husband was to pay the wife $50,000, and as part of the settlement he executed a Deed of Acknowledgment of that sum as a debt. He did not pay it. The wife began proceedings in the District Court to recover the money. The husband claimed that the proceedings were a matrimonial cause and must be dealt with in the Family Court.

8. The District Court determined that it had jurisdiction.  In the NSW Court of Appeal, Mahoney J.A. and Hope A.J.A. agreed.  Kirby P dissented.  The majority held that the proceedings in relation to the enforcement of the deed arose from the husband’s failure to comply with his obligations under the deed.  The wife was not seeking to enforce a Family Court order. 

9. In this case, Mr St John submits, there is not even an attempt at enforcement as there was in Perlman or Bate & Priestly.  In this case, two relevant substantive orders were made.  One set aside the costs agreement.  The other set aside the costs assessment order.  There is no issue of enforcement about either of those orders contained within the current application brought by Ms Hirst.  There is now a process that must be undertaken between solicitor and client as to the rendering of bills.  In due course, there will be an assessment as to the monies owed by her to G & G.  If G & G holds monies that he is not permitted to hold, Ms Hirst can pursue her remedies for the payment of those monies to her, but any such remedies or orders are not consequential to the orders made in this court, which effectively just opened the way for a different form of assessing the costs owed by Ms Hirst to the solicitor.

10. Mr St John argues that there is no inherent jurisdiction argument, if the court simply does not have jurisdiction. 

11. Mr Dickson relies on the Full Court of the High Court decision in DJL & The Central Authority (2000) 201 CLR 226 as the foundation to his argument that this court has the inherent jurisdiction to deal with Ms Hirst’s application.

12. In that case, the High Court was called upon to consider the extent of the Family Court’s jurisdiction.  Citing with approval Bowen CJ, Northrop and Toohey JJ in Parsons & Martin (1984) 5 FCR 235 at 241, Gleeson CJ and Gaudron, McHugh, Gummow and Hayne JJ noted that the Family Court is a statutory court and that it accordingly has powers expressly or by implication conferred by the legislation which governs it. It also has:

    …such powers as are incidental and necessary to the exercise of the jurisdiction or the power so conferred.

13. Again citing Parsons & Martin, their Honours emphasised that the term “inherent jurisdiction” should be avoided as an identification of “the incidental and necessary power of a statutory court.” 

14. Mr Dickson submits that the orders now sought are “incidental” to the orders made by Cleary J.  As he put it, the power he seeks the court to exercise is “fairly and squarely” incidental to the power exercised by Cleary J and “gives effect to it”.  He argues that Ms Hirst is seeking an order “consequential upon” the order already made and that it would be an injustice to allow her to set aside the costs agreement and the costs assessment order, but to deny her the money that is only in G & G’s hands because of that agreement and order. 

15. Mr Dickson submits that the order sought is consequential to Cleary J’s orders in that the monies paid by Ms Hirst to G & G were only paid to achieve the withdrawal of caveat which was lodged pursuant to a charge directly arising from the costs agreement.  He submits that it would be an injustice to allow Ms Hirst to set aside the costs agreement and costs assessment order, but then to deny her the money that has been in G & G’s trust account only because of that agreement and order.  Although there will have to be a determination as to any sum owed by her to G & G, at this stage there is not even a rendered bill and therefore the money cannot belong to G & G. 

16. Mr Dickson referred me to Re P’s Bill of Costs (1982) FLC 91-255 where Evatt CJ and Fogarty J (Gee J dissenting) dealt with the court’s source of power to determine the issue of the validity and/or enforceability of costs agreements. Their Honours considered favourably the source of power in particular sections of the Act but found that in any event the court had “inherent powers” in “appropriate circumstances”, that is, powers that arise as a necessary adjunct to “the existence of the court itself” and as are “necessary to control and regulate the proceedings before it and to avoid injustice.” They held that the Act and Regulations provided an exclusive code relating to disputed accounts between a solicitor and client for any business done by the solicitor for the client in or incidental to Family Law Act proceedings. 

1. Although the majority in Re P’s Bill of Costs referred to a “power and the duty to determine any issue between the solicitor and client” which may arise in relation to costs, it is clear that there were limitations on that power. Evatt CJ and Fogarty J went on to say (at p 77,418):

   …the Family Court is not a Court for recovery of debts between solicitor and client arising out of family law proceedings but it is the Court to finally determine disputes between the solicitor and client on that topic.

2. In this case, I am not satisfied that there is a power to order a refund of monies as “incidental and necessary” to the exercise of the court’s jurisdiction.  The court’s jurisdiction was to determine if the costs agreement should be set aside.  It has done that and the proceeding in that respect is completed.  The court’s jurisdiction otherwise was to determine if a costs assessment order made by a Registrar should be set aside.  It has done that and that part of the proceeding is completed. 

3. There are now outstanding processes for the parties to undertake.  The first is that an itemised bill of costs must be rendered by G & G.  I have not heard full arguments as to why that has not yet occurred.  The delay is troubling, particularly in the light of Cleary J’s expectation, expressly referred to in the costs judgment, that it “should have commenced as soon as the orders and Reasons for Judgment were delivered”, that is, in November 2010. 

4. I need not and cannot begin to guess at the eventual outcome as between Ms Hirst and G & G, save to observe that there has never been any suggestion other than that work was undertaken on Ms Hirst’s behalf, that without the costs agreement and costs assessment order, the amount owing for it needs to be assessed, and that in addition G & G owes Hirst costs arising from Cleary J’s April 2011 orders.  Any debt issues that may arise between the parties can be addressed at the appropriate time in the appropriate court.

THE ORDERS

1. The order I propose is that the application filed on 27 April 2011 shall be and is hereby dismissed.

I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Dessau delivered on 15 June 2011.

Associate: 

Date: