New Price Retail Services Pty Limited v David Hanna

[2014] NSWSC 1051

Supreme Court

New South Wales

Medium Neutral Citation:	New Price Retail Services Pty Limited and Anor v David Hanna [2014] NSWSC 1051
Hearing dates:	31 July 2014
Decision date:	04 August 2014
Jurisdiction:	Equity Division
Before:	Sackar J
Decision:	See paragraph [61]
Catchwords:	PROCEDURE - application to join former solicitor of defendant - where order for reference contained explicit provision for joint and several liability on the part of both parties - where no contractual or other basis for liability of solicitor - whether Birkai Pty Ltd v Permanent Custodians Limited correctly decided - whether tenable claim for joinder of solicitor as a necessary party
Legislation Cited:	Civil Procedure Act 2005 Legal Profession Act 2004 Supreme Court Act 1970 Supreme Court Rules 1970 Uniform Civil Procedure Rules 2005
Cases Cited:	ACD Tridon Inc v Tridon Australia Pty Ltd [2003] NSWSC 357 Birkai Pty Ltd v Permanent Custodians Limited (1994) 35 NSWLR 178 Carver v Legal Profession Disciplinary Tribunal [1991] NSWCA 47 Gurtner v Circuit [1968] 2 QB 587 New Price Retail Services Pty Limited and Anor v David Hanna [2014] NSWSC 553 News Ltd v Australian Rugby League (1996) 64 FCR 410 Pegang Mining Company Limited v Choong Sam and Others (1969) 2 PCC 593; [1969] 2 MLJ 52 Qantas Airways Limited v A F Little Pty Limited [1981] 2 NSWLR 34 Ross v Lane Cove Council [2014] NSWCA 50 Slim v Kabra [2005] NSWSC 1190
Texts Cited:	Taylor et al., Ritchie's Uniform Civil Procedure NSW (looseleaf service), LexisNexis, Australia Riley and Dal Pont, Riley Solicitors Manual (looseleaf service), LexisNexis, Australia
Category:	Principal judgment
Parties:	New Price Retail Services Pty Limited - first plaintiff Priceline Pty Limited - second plaintiff David Hanna - defendant Brian Raymond Silvia - referee George Hanna and GMH Legal Pty Ltd - first and second respondents to motion filed on 26 May 2014
Representation:	Counsel: Plaintiffs - M Condon SC Defendant - self represented Referee - J Baird First and second respondents - E Petersen Solicitors: Holman Webb - plaintiffs Self represented - defendant Somerset Ryckmans - referee Linkwell Lawyers - first and second respondents
File Number(s):	2010/356948

Judgment

Proceedings

1. There were a number of issues that it was proposed should be determined at the hearing. They are the subjects of three separate notices of motion, two filed by the plaintiffs and one filed by a court-appointed referee in relation to certain fees.

1. By their motion of 6 September 2013, the plaintiffs sought the adoption of a referee's report and various orders relating to costs.

1. I previously gave judgment in this matter on 9 May 2014 in relation to the adoption of the referee's report: New Price Retail Services Pty Limited and Anor v David Hanna [2014] NSWSC 553 (principal judgment). The terms used in that judgment have been adopted in the present judgment.

1. On 4 May 2012, Brian Silvia of BRI Ferrier was appointed Referee pursuant to UCPR rule 20.14 for enquiry and report into certain matters.

1. The questions relevantly for determination by the Referee were:

1. Whether there are any fees owing, if any, if so in what amount in relation to the Franchise Sundry Account maintained in relation to the Franchise between the parties between 15 November 2005 to 24 September 2009.

2. Whether there are any monies owing, if any, if so in what amount in relation to the Designated Stock Account maintained in relation to the Franchise between the parties between 15 November 2005 to 24 September 2009.

1. Orders 2 and 3 of the orders made on 4 May 2012 provided that:

2. Subject to order 3 hereof, direct that (without affecting the powers of the Court as to costs) the parties, namely New Price Retail Services Pty Limited (ACN 100 732 750), Priceline Pty Ltd (ACN 005 968 310) and David Hanna, be jointly and severally liable to the Referee for the fees payable to him (in the case of several liability, New Price Retail Services Pty Limited and Priceline Pty Ltd together as to one half of the fees payable to the Referee and David Hanna as to the remaining one half.

3. The Court orders that the defendant provide security for the Referee's fees in a form acceptable to the Referee in the sum of $9,000.00 and that the Reference shall not commence until such security is provided.

1. Upon the application by the plaintiffs for adoption of the report, allegations were made of bias or a breach of procedural fairness on the part of the Referee by the defendant, Mr David Hanna. Those allegations were founded on ex parte communications between the Referee and the plaintiffs, in circumstances where the complaining party was instrumental in determining the regime of the reference and had engaged in similar communications.

1. It should also be noted that Mr Hanna was represented by a Mr George Hanna during the course of the reference, but was self-represented at the adoption hearing (see principal judgment at [5], [46]) and remains so.

1. For the reasons expressed in the principal judgment, I proposed to make the order, contained in paragraph 1 of the 6 September 2013 motion, that the Referee's reports dated 24 July 2013 and 16 August 2013 be adopted. I also invited the parties to re-list the matter so that questions of costs, whether Mr Hanna should pay into court the amount determined by the referee and whether Mr Hanna should pay the whole costs of the Reference and provide security for such costs.

1. On 23 May 2014, the Referee filed a motion in relation to his fees. That motion sought an order that the Referee's fees be fixed in the sum of $325,931 (exclusive of GST) and that those fees be paid by the parties to the proceedings within seven days of the making of such orders.

1. At a directions hearing on that day, the plaintiffs indicated that they would be seeking to join Mr George Hanna and GMH Legal to the proceedings. I ordered that any such motion and supporting affidavits be filed and served by 26 May, and stood the matter over to 30 May.

1. On 26 May, the plaintiffs filed a motion seeking an order that Mr George Hanna and GMH Legal be joined as respondents to the 6 September 2013 motion and the motion of the Referee filed in court on 23 May 2014. The plaintiffs sought an order pursuant to the court's inherent jurisdiction and/or pursuant to UCPR r 20.18 making Mr George Hanna and GMH Legal jointly and severally liable for the costs of the Referee, or in the alternative one-half of those costs.

1. It is therefore necessary to determine a number of issues - whether Mr George Hanna and GMH Legal should be joined to the proceedings and on what basis, what is the amount to be fixed in relation to the Referee's fees, and who should be responsible for the payment of those fees (and, if necessary, in what proportions).

1. On 30 May at a directions hearing, I made orders by consent that the three motions be listed for hearing on 31 July and that the parties serve on each other an outline of submissions at least five days prior to that hearing date.

1. In advance of the hearing, on 1 July Mr David Hanna emailed the other parties and my Associate to request an adjournment on the basis that a staff member (who replaces him while he is attending court) had requested a period of leave due to a death in the family. He requested a date to be fixed on or after 2 September 2014.

1. I was on leave and did not return until 14 July.

1. Mr David Hanna also swore an affidavit dated 28 July 2014, which he filed in support of his request for an extension of the hearing date. He detailed previous occasions on which extensions had been granted to both the plaintiffs and the Referee. He indicated that he could not prepare for the hearing due to the absence of his staff member, who had requested additional time off for medical treatment.

1. Mr David Hanna appeared by telephone, and made a formal application for an adjournment to a date to be fixed.

1. Given the application made by Mr David Hanna to adjourn the proceedings, and his status as a litigant in person, I acceded to that request and will adjourn the motion of the referee in relation to the fixing of his fees, and the balance of the plaintiff's motion of 6 September 2013 to a date to be determined. I reserved the costs of the adjournment.

1. I also indicated to the parties that I was minded to direct that the remuneration of the referee be determined by a Registrar.

1. I nonetheless determined to hear the application for joinder. I announced my decision at the conclusion of the hearing, dismissing the application. These are my reasons.

The joinder issue

1. The plaintiffs sought to join Mr George Hanna and GMH Legal to their motion and the motion of the Referee. However, in their submissions in reply the plaintiffs accepted that no relief could be pressed against GMH Legal Pty Ltd, and therefore that aspect of the motion falls away.

1. It has also been conceded by the plaintiffs that Mr George Hanna did not breach any duty of care, nor did he violate any relevant section of the Legal Profession Act or the Civil Procedure Act. There is also no suggestion of any contractual basis for liability between Mr George Hanna and the Referee (see T11/25-T11/30).

1. It should be noted that the referee made no submissions in favour or against on the issue of joinder. Mr Hanna, appearing by telephone, did not take issue with the question of joinder being determined in his absence. He of course reserved his rights to make submissions on the issues of remuneration and the balance of the plaintiff's motion.

1. An order for the payment of the remuneration of the referee may be made under UCPR rule 20.18, which provides:

20.18 Remuneration of referee

(1) The court:

(a) may determine the amount of the fees to be paid to a referee, and

(b) may direct how, when and by whom the whole or any part of any such fees are to be payable, and

(c) may determine the consequences of failure to comply with a direction under paragraph (b).

(2) Subrule (1) does not affect the powers of the court as to costs.

1. It may also be observed that the provision made by the court for the funding of the reference is subject to a later application for an order for the costs of the reference to be paid by the unsuccessful party: ACD Tridon Inc v Tridon Australia Pty Ltd [2003] NSWSC 357 at [61] (in relation to the predecessor rule, Supreme Court Rules 1970, Part 72 rule 6).

1. Under UCPR rule 6.24, a Court may join a party if joinder is proper or necessary. That rule provides:

6.24 Court may join party if joinder proper or necessary

(1) If the court considers that a person ought to have been joined as a party, or is a person whose joinder as a party is necessary to the determination of all matters in dispute in any proceedings, the court may order that the person be joined as a party.

(2) Without limiting subrule (1), in proceedings for the possession of land, the court may order that a person (not being a party to the proceedings) who is in possession of the whole or any part of the land (whether in person or by a tenant) be added as a defendant.

1. The rule clearly contains two bases upon which an application for joinder may be ordered, namely the joinder of a party who ought to have been made a party and the joinder of a "necessary" party.

1. In Pegang Mining Company Limited v Choong Sam and Others (1969) 2 PCC 593; [1969] 2 MLJ 52, Lord Diplock delivered the judgment of the Privy Council. It was asserted that the Court below lacked jurisdiction to add a party, as that party had no sufficient interest in the subject matter of the proceedings. To come within the operative rule in relation to joinder, the party to be joined must be one "who ought to have been joined, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the cause or matter".

1. At 602, Lord Diplock observed:

...one of the principal objects of the rule is to enable the Court to prevent injustice being done to a person whose rights will be affected by its judgments by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard...

A better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?

1. Those observations were adopted by the Full Federal Court in News Ltd v Australian Rugby League (1996) 64 FCR 410 at 524-525, where it was noted by the Court (Lockhart, von Doussa and Sackville JJ):

In our opinion, the question should be decided according to the test proposed by Lord Diplock. The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected. The requirement that a third party's rights against, or liability to, any party to the proceedings be directly affected is an important qualification that recognises that many orders of a court are likely to affect other people to a greater or lesser extent.

1. The breadth of the discretion under rule 6.24, as illustrated by Ritchie's at [6.24.25], demonstrates that the test in Pegang Mining is not exhaustive.

1. In Ross v Lane Cove Council [2014] NSWCA 50, Leeming JA (Meagher JA and Tobias AJA agreeing) observed at [51]:

It is settled law that a person who is directly affected by the orders sought in a proceeding is a necessary party, and that the obligation to join that person rests upon the plaintiff or applicant or person applying for those orders.

1. It should also be noted that UCPR rule 6.26 provides:

6.26 Joinder to recover costs

(1) Except to the extent to which these rules expressly provide, a party may not join another person as a party to any proceedings for the purpose of making an application for costs against the other person.

(2) This rule does not apply:

(a) if the other person would otherwise be a proper party to the proceedings, or

(b) if the party joins the other person by means of a cross-claim in respect of a claim for costs against the party.

1. Therefore, if the application is indeed made for the purpose of making an application for costs, unless I am satisfied that Mr George Hanna is otherwise a proper party to the proceedings, rule 6.26 would appear to preclude their joinder.

1. The plaintiffs submit that rule 6.26 has no application as the referee does not seek the costs of the reference, but seeks his remuneration qua referee. However, for reasons that shall become clear, it is not necessary to determine whether UCPR rule 6.26 has any application in the present case.

1. Counsel for the plaintiffs submit that the joinder of Mr George Hanna is warranted for the proper determination of the dispute, to achieve finality of litigation and avoid multiplicity of proceedings. Various statutory provisions such as section 56 of the Civil Procedure Act and section 63 of the Supreme Court Act are called in aid of those submissions.

1. Another basis for the joinder application is to ensure that the rules of natural justice are observed, by reference to Gurtner v Circuit [1968] 2 QB 587, in the sense that if Mr George Hanna might be required to contribute to the costs of the Reference then he should be able to challenge the quantum of that remuneration.

1. Counsel for Mr George Hanna declines such an invitation and submits that his joinder cannot be "proper or necessary", as he is not necessary to the determination of any matter presently in dispute.

1. The plaintiffs submit that the Court is not required, on an application such as the present, to determine the merits of the underlying dispute. In Qantas Airways Limited v A F Little Pty Limited [1981] 2 NSWLR 34, Glass JA observed at 38:

When the plaintiff asserts on tenable grounds that such matters of dispute cannot be completely determined without the joinder of the builder as a party, a ground for the exercise of the power given by r 8 is made out and an order to that effect cannot be challenged for want of power.

1. The plaintiffs submit that their claim against Mr George Hanna is plainly tenable and this is supported by Birkai Pty Ltd v Permanent Custodians Limited (1994) 35 NSWLR 178.

1. In that case, Brownie J ordered a solicitor, acting for a disclosed client, to personally pay the balance of the fees of a referee under the Supreme Court Rules 1970, Part 72 rule 6. One half of the fees of the referee were outstanding (the other half had already been paid by the opposing party) and the client was evidently insolvent.

1. His Honour quoted from the New South Wales Solicitors Manual that "the conduct of solicitors, when dealing with third parties, of whom they are asking some services on behalf of a client, must be governed by principles of honesty, fairness and of the general law".

1. The circumstances in Birkai are different in that "nobody appears to have given any thought to securing the payment of the referee's fees": at 180. It should be noted, as the submissions for Mr George Hanna, that this problem is addressed by Supreme Court Practice Note SC Eq 3, which sets out the Usual Order for Reference in Annexure 2 and includes a proposed order in the following terms:

2 Direct that (without affecting the powers of the Court as to costs) the parties, namely [state relevant parties], be jointly and severally liable to the referee for the fees payable to him.

1. In the present case, the orders made on 4 May 2012 explicitly identified who was to be responsible for the payment of the referee's fees, namely joint and several liability on the part of the plaintiffs and the defendant. Counsel for the plaintiff assert that, since Brownie J found the order for reference in Birkai contained a promise that the parties be jointly and severally liable at 179G-180A, this distinction is of no moment.

1. Brownie J dismissed the submission that the solicitors should pay because they had contracted as principals for the payment of the referee's fees. However, his Honour then proceeded to consider orders being made as a matter of discretion and observed at 180E:

On a number of previous occasions I have said that if the Court is to ask people to act as referees, then, generally speaking, the Court should see that they are paid proper fees for their work, and that people who ask the Court to appoint referees must expect the Court to see that the referees are paid those fees; and I see no reason to change that view now. It is regrettable that at the time the orders under Pt 72 were made, nobody said or did anything effective about the referee's fees, and that nobody appears to have given any thought to securing the payment of the applicant's fees before trouble arose, but on the material now before me, it is not easy to see any reason why the applicant ought not to be paid by someone.

1. In a process of reasoning which is somewhat unclear as to why the solicitor should bear the burden when no basis for liability under contract or tort (or any other statutory basis) is demonstrated, and which explicitly describes the orders sought as "unprecedented", Brownie J considered that the orders should be made.

1. Birkai is referred to in Slim v Kabra [2005] NSWSC 1190 at [48] per McLaughlin AsJ, but in my view the sentiment being endorsed is that referee's ought to be paid for their work, rather than any agreement with the principle that in the event that a client is unable to pay then a solicitor should step into the breach and assume liability.

1. In the present case, although it may well be argued by the plaintiffs that the question of who is responsible for the costs of the reference is to be determined after the quantum of those costs is determined (and therefore the parties that are sought to be joined should have the opportunity to challenge, if they wish, any aspect of that remuneration), in my view the plaintiffs have not established a tenable ground for the joinder of Mr George Hanna.

1. There are two reasons for declining the joinder.

1. The first is that I cannot detect a sound reasoning process in Birkai. Brownie J observes at 180F that "it is not easy to see any reason why the applicant ought not to be paid by someone" and that the available choices are making the proposed orders that the solicitor pay the balance of the fees, ordering the defendants to pay the whole of the referee's fees (which is put aside immediately, despite the earlier inference of joint and several liability) or leaving the referee unpaid (described as an "unattractive result").

1. Brownie J then held at 181 that:

...the [Law Society] ruling in its express terms reflects an ethical rather than a legal obligation, but an ethical obligation may well carry with it serious economic consequences to a professional person; and the orders now sought are unprecedented, although this may only mean that no other solicitor has failed to honour the ethical obligation.

Weighing all this up, I consider that I should make the orders sought.

1. In my view, there is not sufficient reasoning in Birkai to suggest why a solicitor should bear the burden of the referee's fees other than that someone should, and therefore I am not persuaded that the case was correctly decided, nor that it provides a basis for a tenable claim such that joinder would be warranted.

1. The second reason for declining to join Mr George Hanna is that I do not agree that an ethical obligation alone (arising every time a third party is obtained by the solicitor, or indeed ordered by the Court of its own motion) permits the exercise of a discretion to order that a solicitor pay the costs of a referee in the absence of any basis of legal liability.

1. It would seem to me at least somewhat analogous with the position between a client, their solicitor and counsel at general law, where no contractual relationship exists between the solicitor and counsel. The latter could not recover his or her fees from their instructing solicitor as they had no legal right to do so: see Riley's Solicitors Manual at [28,055].

1. Of course, although there was no legal entitlement, professional disciplinary sanctions could be imposed. Such an example is provided in Carver v Legal Profession Disciplinary Tribunal [1991] NSWCA 47, in which Clarke JA observed, Meagher JA and Hope AJA agreeing, that "it has long been accepted that barristers have no right to sue for outstanding fees; the obligation of the solicitor sounds only in honour". Both the solicitor and the barrister had submitted to arbitration over the quantum of fees, but the subsequent award was ignored by the solicitor. The Court of Appeal found that a finding of professional misconduct arose in the particular circumstances of the case, but Clarke JA was careful to observe:

It is not possible, in my opinion, to make a statement of principle of universal application that a failure by a solicitor to pay counsel's fees does, or does not, constitute professional misconduct. As it seems to me there may be cases in which failure to pay counsel's fees may be regarded as professional misconduct.

If, for instance, a solicitor admitted that the fees claimed were due but refused to pay them because of an argument he had had with counsel about another matter it would, in my opinion, be open to a tribunal to hold that the refusal constituted professional misconduct. On the other hand, one could conceive of situations in which failure to pay counsel's fees may not amount to professional misconduct.

1. It is only as a consequence of amendments to the Legal Profession Act 1987, and similar provisions in the current Legal Profession Act 2004, that enable barristers and solicitors to enter into contracts for the provision of legal services.

1. I point to Carver, not as an authority in relation to joinder, but merely to illustrate the conceptual difference between the consequences that might flow from a breach of an ethical obligation, in the absence of any contractual or other liability, and those that might flow from the breach of a legal obligation. The former is not converted into the latter without some difficulty.

1. Furthermore, if circumstances arise where a client becomes impecunious and the solicitor himself is not paid, it cannot be the case that the solicitor should also bear the costs of a third party such as a referee without more.

1. I should note that in the present case, Mr David Hanna is not bankrupt or otherwise impecunious and has given no indication of his ability to pay the fees of the Referee (let alone the amount that was the subject of the Reference itself). I do not think it appropriate to infer anything from his position as a self-represented litigant.

1. I therefore would dismiss the motion of the plaintiff to join Mr George Hanna and GMH Legal. Counsel for the plaintiff indicated he could not resist an application for costs and I would therefore order that the costs of both respondents be paid by the plaintiffs on the ordinary basis.

Decision last updated: 05 August 2014