Smits v Roach [No 2]

[2004] NSWCA 463

CITATION:	SMITS & ORS v ROACH & ORS [NO 2] [2004] NSWCA 463
HEARING DATE(S):	24 May 2004, 25 May 2004, 26 May 2004
JUDGMENT DATE:	17 December 2004
JUDGMENT OF:	Sheller JA at 1; Ipp JA at 23; Bryson JA at 24
DECISION:	Additional orders as per paragraph 21
CATCHWORDS:	COSTS - Additional orders - consideration of costs in relation to grounds of appeal ultimately not relied upon
LEGISLATION CITED:	Suitors' Fund Act 1951
CASES CITED:	N/A
PARTIES :	Leonardus Geradus Smits - First Appellant John Anthony Leslie - Second Aappellant Plantoy Pty Ltd - Third Appellant Walter Edward Roach - First Respondent Valerie Anne Roach - Second Respondent Winnote Pty Ltd - Third Respondent Sydtech Pty Ltd - Fourth Respondent
FILE NUMBER(S):	CA 40753/02
COUNSEL:	J M Ireland QC - Appellants R M Smith SC/T G R Parker - Respondents
SOLICITORS:	In person - Appellants Maurice Blackburn Cashman - Respondents

LOWER COURTJURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	McClellan J
LOWER COURT JUDICIAL OFFICER :	50099/99

CA 40753/02
SC 50099/99

SHELLER JA
IPP JA
BRYSON JA

Friday, 17 December 2004

SMITS & ORS v ROACH & ORS [NO 2]

Judgment

1 SHELLER JA: On 15 July 2004, the Court delivered judgment in this appeal brought by the plaintiffs, Leonardus Gerardus Smits, John Anthony Leslie (the solicitors) and Plantoy Pty Ltd (Plantoy) from the whole of the decision made by McClellan J on 6 August 2002. The Court set aside orders 1 – 4 made by McClellan J and in lieu thereof dismissed the proceedings against two of the defendants, Walter Edward Roach and Valerie Ann Roach. However, the appeal against the defendants and third and fourth respondents, Sydtech Pty Ltd and Winnote Pty Ltd (the Roach companies), succeeded in part. The Court made the following orders:

1. Appeal allowed;
2. Set aside orders 1-4 made by McClellan J on 6 August 2002;
3. In lieu thereof
(a) Dismiss the proceedings against Mr and Mrs Roach;
(b) The appellants within fourteen days to bring in short minutes of orders for specific performance by the Roach companies of the agreement made on or about 16 September 1999 (the Ten Point Plan);
4. The appellants to pay Mr and Mrs Roach’s costs of the proceedings and of this appeal on a party and party basis.
5. The Roach companies to pay one-half of the appellants’ costs of the proceedings before McClellan J and of this appeal but in respect of the costs of this appeal to have a certificate under the Suitors’ Fund Act 1951 if so entitled.

2 The appellants conceded that Plantoy had no viable claim on any basis in the proceedings. They also conceded that they could not succeed against Valerie Ann Roach who was one of the defendants and the second respondent.

3 On 29 July 2004, the appellants sent to the Court proposed short minutes of order for specific performance of the Ten Point Plan. These proposed minutes led to some agreement and some disagreement between the parties. Questions were raised about amending the orders proposed and, in particular, amending the costs order made by the Court.

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4 The Roach companies submitted that the concession that the third plaintiff and third appellant Plantoy had no viable claim should be reflected in an order formally dismissing the proceedings by Plantoy against the Roach companies. The appellants accepted that it would be appropriate to modify order 3 (a) of the Court’s orders to include reference to the dismissal of all claims by Plantoy in the proceedings.

5 The Roach companies advanced in writing, argument to re-visit the costs order (order 5). It was submitted that the order that the Roach companies pay one-half of the costs of the first and second appellants, Smits and Leslie, of the proceedings before McClellan J and of the appeal was too generous to these appellants. The following variations of the costs order were sought by the respondents:

“(a) Plantoy Pty Ltd to pay the Roach Companies’ costs of the proceedings at first instance and of the appeal.
(b) The Roach Companies to pay the first and second appellants’ costs of the proceedings at first instance and on appeal to the extent that those costs relate to the claims as to the validity and enforceability of the Ten Point Plan, but in respect of the costs of the appeal to have a certificate under the Suitors’ Fund Act 1951 if so entitled;
(c) The first and second appellants otherwise pay the Roach Companies’ costs of the proceedings at first instance and on appeal.”

6 On 10 August 2004, the first and second appellants lodged an application for special leave to appeal to the High Court of Australia. The 28-day period for lodging such an application necessitated that part of this Court’s orders be taken out. The orders taken out were as follows:

“1. That the appeal be allowed.
2. That orders 1 – 4 made by McClellan J on 6 August 2002 be set aside.
3. That in lieu thereof the proceedings be dismissed against the first and fifth defendants.
4. That the appellants within fourteen days bring in short minutes of orders for specific performance by the third and fourth respondents of the agreement made on or about 16 September 1999 (the Ten Point Plan).”

7 The grounds for the application to the High Court related to the failure of this Court to order a new trial of the proceedings on the ground of a reasonable apprehension of bias on the part of the trial Judge and the failure to conclude that a claim for quantum meruit lay against the Roach companies after the retainer agreement between the parties had been terminated without breach on the part of any party.

8 Because of the Roach companies’ submissions of 9 August 2004 raising an argument that the Court of Appeal re-consider orders 3, 4 and 5 made on 15 July 2004, the steps taken by the first and second appellants to enter the Court of Appeal’s orders made on 15 July 2004 were limited to orders 1, 2 and 3 made by the Court of Appeal.

9 The first and second appellants opposed the application by the Roach companies for re-consideration of the costs orders already made. It was submitted that the matter had been determined by the Court and its discretion had been exercised. It should be noted that during the hearing of the appeal no oral submissions were put to the Court about costs nor was the Court asked to reserve its decision on costs until the outcome of the appeal was known. An immediate question therefore arose as to whether the Roach companies should now be permitted to argue costs and, if so, whether this could sufficiently be determined on the papers. The impression from the written submissions was that there was significant contest about the effect on costs of the history and running of the proceedings.

10 The first and second appellants said:

“24. The appellants oppose any reopening of the issue of costs at this belated stage. At the hearing of the appeal the respondents did not make specific submissions on costs nor seek to reserve further argument with respect to costs.
25. However, if the matter is to be reconsidered at the insistence of the respondents, then the Court would not alter the costs orders already made in the appellants’ submissions.”

11 In light of the remaining disputes between the parties, particularly as to costs, the appeal was set down for further hearing on these issues on 2 November 2004. By that time, the parties were agreed that the following orders additional to those orders (1-4) already taken out should be made:

“4AA. DECLARE that a valid and binding agreement was made on or about 16 September 1999 between the first and second appellants of the one part and the third and fourth respondents of the other part whereby:
(a) the first and second appellants were to be admitted as ordinary unsecured creditors in the liquidations of each of the third and fourth respondents in a sum of $500,000 in respect of their time charges in acting as solicitors for those parties in the period up to 1 December 1998;
(b) the first and second appellants were to be at liberty to submit proofs of debt to the liquidators of the third and fourth respondents respectively in respect of out of pocket expenses incurred by them in acting as solicitors for the third and fourth respondents in the period up to 19 April 1999 to a maximum of $75,000; and
(c) that the first and second appellants were to be at liberty to submit proofs of debt to the liquidators of the third and fourth respondents in accordance with their retainer agreement up to a limit of $100,000.
4A. Proceedings by the third plaintiff in SC50099/99 dismissed with costs.
4B. Proceedings by the third appellant in CA40753/02 dismissed with costs.”

12 The Roach companies submitted that order 5 made by the Court should be varied in either one of three ways:

· that the third and fourth respondents pay the first and second appellants’ costs of the proceedings at first instance and on appeal to the extent that those costs relate to the claims as to the validity and enforceability of the Ten Point Plan, but in respect of the costs of the appeal to have a certificate under the Suitors’ Fund Act 1951, if so entitled, and the first and second appellants otherwise pay the third and fourth respondents’ costs of the proceedings at first instance and of the appeal; or

· at first instance, the first and second plaintiffs pay the costs of the third and fourth respondents (the sixth and seventh defendants) for the period up to the filing by the third and fourth respondents of their second cross-claim in October 2001 and thereafter the third and fourth respondents pay one-half of the first and second appellants’ costs of the proceedings and, on appeal, the first and second appellants to pay the third and fourth respondents’ costs of the appeal proceedings for the period up to the filing of the appellants’ amended submissions on 6 February 2004 and thereafter the third and fourth respondents pay one-half of the first and second appellants’ costs of the appeal proceedings but have a certificate under the Suitors’ Fund Act, if so entitled; or

· finally, that the third and fourth respondents pay one-quarter of the first and second appellants’ costs of the proceedings before McClellan J and of this appeal but in respect of the costs of the appeal have a certificate under the Suitors’ Fund Act if so entitled.

13 As indicated above, Mr Ireland QC, for the first and second appellants, submitted that the order for costs having been made should not be disturbed albeit that that order has not been entered. That argument is weakened when it is recognised, as Mr Parker for the Roach companies pointed out, that in their written submissions at p73 of the Orange Book of 23 April 2004, the third and fourth respondents submitted:

“67 If, contrary to the preceding submission, any of the grounds of appeal were successful it would be necessary to consider what orders should be made, and in particular what costs orders would be appropriate given the failure of many of the claims made at first instance (and subsequent abandonment of any appeal in respect of those claims). It is submitted that this would best be addressed if necessary in written submissions after the appeal is decided.”

14 In his oral submissions, Mr Ireland conceded that the costs of what he described as the first round of submissions should not be allowed to the first and second appellants.

15 In broad terms, there are two ways of approaching the question of costs. One is to take a broad-brush approach which the Court did in the order already made. The other is to attempt to fix one or other party with certain costs, such as appeal books filed but not needed, as the result of the way in which the grounds of appeal were amended and argued.

16 The proceedings had a complicated procedural history. The Roach companies were not joined as defendants until 3 March 2000. At that stage the only claims made against them were remuneration claims which ultimately failed both at the hearing and on appeal. The claim was that the solicitors’ retainer had been wrongfully repudiated by the Roach interests. Reliance was placed on an implied term that the solicitors had a present entitlement to damages. The Ten Point Plan was not relied on. In September 2001, Mr Roach sought and obtained leave to intervene in the name of the Roach companies, which were in liquidation. On 9 October 2001, the Roach companies filed a defence claiming that the Ten Point Plan was not a valid and binding agreement and, alternatively if it was, that it discharged them from liability. In October 2001, the solicitors alleged that the liquidators had breached the Ten Point Plan agreed in September 1999 by refusing to admit them as a creditor in the sum of $500,000. On 18 February 2002, for the first time, the solicitors filed a third further amended summons seeking an order for specific performance of the Ten Point Plan. It was not until 26 June 2002, that application was made to McClellan J to disqualify himself on grounds of apprehended bias.

17 The appellants’ notice of appeal with appointment was filed on 29 November 2002. It contained thirty grounds. On 17 January 2003, the appellants filed a notice of amended and supplementary grounds of appeal with appointment which contained 204 grounds.

18 As appears in para 18 of my judgment in the appeal, the grounds relied upon at the hearing of the appeal were set out in a further amended notice of appeal filed on 11 December 2003 which was followed by the appellants’ amended submissions filed on 6 February 2004. The reduction of the number of grounds of appeal, in itself, demonstrates the likelihood of a considerable waste of time and resources before December 2003 for which the appellants should be accountable. However the argument to this Court as presented, which was further refined, even though it failed in large part, was at no level a hopeless one. The Roach companies submitted that the first and second appellants should pay the whole of the Roach companies’ costs for the period between March 2000 and October 2001.

19 This Court was of opinion that the trial Judge should have revealed at the outset that his brother was a partner at Freehills and a defendant in the proceedings by the Roach interests against Freehills. On this ground of appeal the Roach interests succeeded because of waiver. This Court was of the opinion that the trial Judge had erred in finding the second retainer agreement wholly void and unenforceable [70]. Even so, the first and second appellants failed on this aspect of the argument to recover on a quantum meruit because of the contingency arrangement [79-85].

20 In my opinion, the first and second appellants should not be entitled to recover any part of the costs of the Red and Blue appeal books, the submissions filed or the time spent in the preparation of arguments for grounds of appeal not ultimately relied upon. On further reflection, I think Order 5 proposed in my reasons for judgment, in so far as it applied to the costs of the hearing at first instance, was too generous and should be amended to reduce the liability of the Roach companies to pay one-quarter of the first and second appellants’ costs of the proceedings before McClellan J. Subject to the matters already referred to I would leave the order for costs payable by the Roach companies to one-half of the first and second appellants’ costs of the appeal.

21 Accordingly, in my opinion the orders of the Court should be in addition to the orders already taken out:

“4AA. DECLARE that a valid and binding agreement was made on or about 16 September 1999 between the first and second appellants of the one part and the third and fourth respondents of the other part whereby:
(a) the first and second appellants were to be admitted as ordinary unsecured creditors in the liquidations of each of the third and fourth respondents in a sum of $500,000 in respect of their time charges in acting as solicitors for those parties in the period up to 1 December 1998;
(b) the first and second appellants were to be at liberty to submit proofs of debt to the liquidators of the third and fourth respondents respectively in respect of out of pocket expenses incurred by them in acting as solicitors for the third and fourth respondents in the period up to 19 April 1999 to a maximum of $75,000; and
(c) that the first and second appellants were to be at liberty to submit proofs of debt to the liquidators of the third and fourth respondents in accordance with their retainer agreement up to a limit of $100,000.
4A. Proceedings by the third plaintiff in SC50099/99 dismissed with costs.
4B. Proceedings by the third appellant in CA40753/02 dismissed with costs.
5. Set aside order 5 and in lieu thereof order the third and fourth respondents to pay one-quarter of the first and second appellants’ costs of the proceedings before McClellan J and one-half of the first and second appellants’ costs of the appeal excluding any costs incurred by the first and second appellants for any part of the Red and Blue appeal books, submissions filed or time spent in the preparation of arguments for grounds of appeal not ultimately relied upon.

22 The costs of this application should be costs in the appeal.

23 IPP JA: I agree with Sheller JA.

24 BRYSON JA: I agree with Sheller JA.

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Last Modified: 07/16/2007