Snorkel Elevating Work Platforms Pty Limited v The Nominal Defendant
[2007] ACTCA 14
•26 June 2007
SNORKEL ELEVATING WORK PLATFORMS PTY LIMITED & ANOR v THE NOMINAL DEFENDANT & ORS
[2007] ACTCA 14 (26 June 2007)
APPEAL from interlocutory decision – first appellant had lodged a Notice of Contribution against second appellant in primary proceedings – first respondent challenged retainer of same counsel to act for both parties – whether challenge to the retainer justified – whether indemnity costs order made against appellants despite first respondent’s challenge to retainer being unsuccessful justified
Law Reform (Miscellaneous Provisions) Act 1955
Civil Law (Wrongs) Act 2002, ss 206, 207, 208
Prince Jefri Bokliah v KPMG [1999] 2 AC 222
Hanna v National Library of Australia [2004] ACTSC 75 (1 September 2004)
Ottway v Jones [1955] 2 All ER 585
Knight v Clifton [1971] Ch 700, 713
TPC v Nicholas Enterprises Pty Ltd (No. 3) (1979) 42 FLR 213, 220
Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129, 156
Cretazzo v Lombardi (1975) 13 SASR 4, 12)
Mannix v Loumbos [2000] NSWCA 32 at [13]
Oshlack v Richmond River Council (1998) 193 CLR 72
Hawksford v Hawksford [2005] NSWSC 463; (2005) 191 FLR 173
Nece Pty Ltd v Ritek Incorporation (1997) 24 ACSR 38, 43; [1997] FCA 504
Alsco Linen Pty Ltd v Cox [2003] NSWSC 550
Church of Jesus Christ of Latter Day Saints & Anor v Rahme & Anor [2003] NSWSC 550
Knox Street Apartments v Flexman [2002] NSWSC 102
Zimmerman Holdings Pty Ltd v Cooney [2002] NSWSC 387
Prince Jefri Bolkiah v KPMG [1999] 2 AC 222
Wagdy Hanna & Associates Pty Ltd v National Library of Australia [2004] ACTSC 75
Kallinicos & Anor v Hunt & Ors (2005) 64 NSWLR 561; [2005] NSWSC 1181
Grimwade v Meagher [1995] 1 VR 446
R v Wilson and Grimwade [1995] 1 VR 163
Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501
The Law Society of New South Wales v Holt [2003] NSWSC 629
Bowen v Stott [2004] WASC 94
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
No. ACTCA 33 - 2006
No. SC 157 of 1999
Judges: Higgins CJ, Gray and Tamberlin JJ
Court of Appeal of the Australian Capital Territory
Date: 26 June 2007
IN THE SUPREME COURT OF THE ) No. ACTCA 33 - 2006
) No. SC 157 of 1999
AUSTRALIAN CAPITAL TERRITORY )
)
COURT OF APPEAL )
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:SNORKEL ELEVATING WORK PLATFORMS PTY LIMITED
ACN 003 724 141
First Appellant
SNORKEL ELEVATING WORK PLATFORMS LIMITED (SNORKEL (EWP) NZ)
Second Appellant
AND:THE NOMINAL DEFENDANT
First Respondent
MICHAEL GERARD HAY
Second Respondent
KENNARDS HIRE PTY LTD
ACN 001 740 727
Third Respondent
KENNARDS HIRE AUSTRALIA PTY LIMITED ACN 000 166 352
Fourth Respondent
EASI-RENTS PTY LIMITED
ACN 003 617 105
Fifth Respondent
BORREN METAL FORMING LIMITED
Sixth Respondent
ORDER
Judges: Higgins CJ, Gray and Tamberlin JJ
Date: 26 June 2007
Place: Canberra
THE COURT ORDERS THAT:
Leave to appeal be granted;
The appeal be allowed;
The costs order made on 24 August 2006 in respect of the challenge to retainer be set aside and in lieu thereof an order that the first respondent pay the appellants’ costs in respect of the challenge to retainer;
The question of the extent of the costs order and whether the first respondent be ordered to pay the other respondents’ costs be remitted to the trial judge; and
The first respondent pay the appellants’ costs of and incidental to this application and appeal.
IN THE SUPREME COURT OF THE ) No. ACTCA 33 - 2006
) No. SC 157 of 1999
AUSTRALIAN CAPITAL TERRITORY )
)
COURT OF APPEAL )
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:SNORKEL ELEVATING WORK PLATFORMS PTY LIMITED
ACN 003 724 141
First Appellant
SNORKEL ELEVATING WORK PLATFORMS LIMITED (SNORKEL (EWP) NZ)
Second Appellant
AND:THE NOMINAL DEFENDANT
First Respondent
MICHAEL GERARD HAY
Second Respondent
KENNARDS HIRE PTY LTD
ACN 001 740 727
Third Respondent
KENNARDS HIRE AUSTRALIA PTY LIMITED ACN 000 166 352
Fourth Respondent
EASI-RENTS PTY LIMITED
ACN 003 617 105
Fifth Respondent
BORREN METAL FORMING LIMITED
Sixth Respondent
Judges: Higgins CJ, Gray and Tamberlin JJ
Date: 26 June 2007
Place: Canberra
REASONS FOR JUDGMENT
THE COURT:
This is an application for leave to appeal on behalf of the applicants/appellants.
The substantive proceedings arose out of a claim for damages on behalf of the second respondent against, firstly, the first appellant (Snorkel Australia) and, then, the second appellant (Snorkel NZ) and the other defendants. There are two third parties being the fourth respondent and the Commonwealth (not a party to this application).
On the second day of the hearing, counsel for the first respondent (first defendant) (Mr Stitt QC) purported to challenge the retainer of the legal practitioners representing the second and seventh defendants, Snorkel Australia and Snorkel NZ led by Mr Glissan QC.
Mr Stitt asserted that there was a conflict of interest between those defendants. That assertion arose from the discovery of a Notice of Contribution from Snorkel Australia against Snorkel NZ on 10 August 2006. The trial commenced on 14 August 2006.
The matter was raised on 15 August 2006 by Mr Stitt, in the following terms:
… I understand that my learned friend Mr Glissan has filed some claim on behalf of Snorkel [Australia] against Snorkel New Zealand. Now, I thought there was going to be some leave sought to file that, but I’m told that it’s actually been filed. Could we have clarified whether there is such a cross claim because if there is, we would want to have something to say about it.
Mr Bridge SC, for the plaintiff, asserted opposition to Mr Glissan acting “for two sides [in] the same argument”.
Mr Glissan, apparently surprised by this turn of events, sought to have the matter adjourned to the following morning to “take some instructions”. This was at 3.24 pm. The matter was adjourned accordingly.
On resumption of the matter, Mr Stitt asserted that it now appeared that the interests of the second and seventh defendants were “diametrically opposed” and sought to apply the principle propounded in Prince Jefri Bokliah v KPMG [1999] 2 AC 222, saying:
There are Australian cases to the same effect. And that is that information acquired by lawyers acting for a party in litigation cannot be used against that party, particularly in the same litigation, and that the Court will act to prevent that occurring.
There certainly are such cases, for example, Hanna v National Library of Australia [2004] ACTSC 75 (1 September 2004). However, none of them embrace the principle for which Mr Stitt contended. Rather they endorse the right of a party to prevent lawyers who had been or were acting for a party acting for another party with a contrary interest. However, there is nothing to prevent one party agreeing to common representation in litigation with another party even if there may be issues over which they were or could have been in conflict.
However, the unexplained and apparently current Notice of Contribution between the second and seventh defendants did raise a question as to whether there was a conflict between them which could impact on the progress of the matter. That would occur if, but only if, one or both of the two defendants represented by Mr Glissan, wished to terminate the retainer of him because that Notice was to be pursued.
Mr Glissan then advised that he had, by then, obtained instructions that the Notice was “not to be proceeded with”. It was, having in any event been filed without leave, accordingly struck out by his Honour.
That should have been the end of the matter. There were no conflicting proceedings before the court and, apparently, both defendants had confirmed their consent to be jointly represented by the lawyers led by Mr Glissan.
That left the question as to how the Notice came to be prepared and filed unexplained. His Honour said as to that, addressing Mr Glissan:
… you’ve got a problem and you either accept that there’s a problem and there will be some consequences from that, or you persuade me to the contrary.
In truth, once the informed consent of each defendant was confirmed, there was no problem. Mr Glissan, however, seemed to acquiesce in his Honour’s intimation to the contrary.
The case then proceeded on the issue of quantum of damages.
On 17 August 2006, the application of Mr Stitt was adverted to by Mr Glissan. He produced an outline of argument, a number of cases and offered Mr Marcel Aoud, general manager of the second defendant, to attest that there was no conflict between the defendants and that the lawyers’ retainer to act for both was confirmed.
The evidence of Mr Aoud was that the two defendants had the same insurance cover arranged by their joint head office in the United States of America.
That led Connolly J to observe that “the waters may be muddier” in that instructions were now shown to emanate from a more remote source than the two Snorkel defendants.
How that circumstance, even assuming it to be so, gave rise to a potential conflict between the two Snorkel defendants is not clear. Indeed, it rather tended in the opposite direction. Nevertheless, Connolly J felt that the insurer should “reveal itself”.
Again, Mr Glissan acquiesced in that judicial suggestion. His Honour directed that an affidavit revealing that information be filed by 4.00 pm the next day.
Mr Bridge SC, who was then appearing for the second respondent (plaintiff) raised an issue as to the extent of the indemnity offered by the insurer (or insurers) to the two Snorkel defendants. This was said to raise a question as to whether the insurer needed to be joined under the Law Reform (Miscellaneous Provisions) Act 1955. That Act had been repealed and the relevant provisions of it replaced by what is now ss 206 and 208 of the Civil Law (Wrongs) Act 2002 (the Wrongs Act). The indemnity and extent of it was otherwise irrelevant to any of the issues before the Court. If the two Snorkel defendants were insured, the insurer was charged with the indemnity its contract required by virtue of s 207. If there was no insurance or a limit on it the Snorkel defendants were liable to recovery action in the usual way.
His Honour returned to the issue of the filing of the Notice saying:
… that’s significant because if it was on instructions the cost will flow one way, and if it wasn’t the costs will flow another. And I am deeply mindful of the dollars that are being chewed up every day we sit and that is a significant point. I would want to know. I would direct that the affidavit indicate whether that document was filed in the Registry on instructions from the second or seventh defendant or their insurer or at the initiative of the principal solicitor in Sydney or at the initiative of the agent in Canberra.
That issue was adjourned to 21 August 2006. There was a further purpose for such an affidavit adverted to in relation to discovery of documents relevant to the principal claim. It was indicated that Mr Michael Samios, solicitor, would be the relevant deponent as to those matters.
On 18 August 2006, Mr Samios executed an affidavit concerning those matters. He explained that Snorkel Australia had initially been the only “Snorkel entity” sued. It had sold the offending elevating work platform in question to the fourth respondent (Kennards). The insurer of Snorkel Australia, Winterthur International Insurance Company (Winterthur) instructed Mr Agnew (solicitor) to “put a demand” on Snorkel NZ which had been joined as the seventh defendant.
It then appeared that Snorkel NZ was also insured by Winterthur. That insurance was the subject of a world wide “global master policy” issued in the USA. Any excess over $1 million was covered through TIG Insurance of America (TIG). There was some subsequent dispute as to whether TIG was a broker or an insurer.
None of these matters was capable of affecting the validity of the retainer of Mr Glissan’s legal team. It did complicate the obtaining of instructions for the Snorkel entities to agree to a settlement whereby they paid over $1 million plus legal costs but had no other consequence.
In relation to the Notice, Mr Samios deposed:
In relation to the notice of contribution by Snorkel Australia against Snorkel NZ, this was done on a tactical basis only as Snorkel NZ has a contractual claim against Borren [the sixth respondent], a party to the proceedings. Snorkel Australia does not have a contractual claim against Borren and therefore, it was thought prudent at the time to issue this notice.
We make no comment on whether this “tactical basis” was sound. Nevertheless, Mr Samios’ affidavit clearly rebutted any suggestion that there was an issue to be litigated in the matter as between the two Snorkel entities.
Mr Glissan objected to Mr Stitt cross-examining Mr Samios on the ground that neither he nor any other party had standing to raise or explore the issue of conflict between the Snorkel defendants.
In response, Mr Stitt offered the response that the affidavit raised more questions than it answered. They were, of course, the questions that had not been asked, that is, about the adequacy of the insurance cover in respect of the Snorkel entities.
His Honour construed that comment, it seems, as an attack on Mr Glissan’s authority to continue to act for the Snorkel entities as to which he needed to be satisfied. This seems to have been based on an assumption that the insurer covering the excess over $1 million was the real client. In truth it was the Snorkel defendants themselves by virtue of their subrogation agreement with Winterthur who had the right to instruct lawyers.
The cross-examination raised and explored the irrelevant question whether TIG was a broker or an insurer and the distinction (if any) between “layer” insurance and reinsurance and then ventured into what were the “instructions” from TIG. This was irrelevant to the litigation unless the Snorkel entities were insolvent and, even then, their insurance cover, even if inadequate, was of no legal concern to any other party so far as the retainer of Mr Glissan and his legal team was concerned.
The matter, at the end of that day, was left on the basis that Mr Glissan would endeavour to obtain further information as to the second level of insurance and the entity providing it.
On 22 August 2002, Mr Glissan handed up further correspondence concerning that question. Mr Stitt queried the sufficiency of that information to resolve the “issue” of the extent of the insurance cover and the details of the provider(s) of it. Mr Glissan undertook the task of producing a further affidavit to clarify those matters.
That affidavit, from Mr Samios, was dated 23 August 2006 and filed in court on 24 August 2006. The second level insurer was identified as “TIG Speciality Insurance” and cover was identified as $50 million. The “parent company” of that insurer was also referred to. This led Mr Stitt into further unexplored territory. He submitted:
… Fairfax Financial Holdings [“the parent company”] is not itself a licensed insurer and it is in fact a financial company, and I propose to tender some more documents in a moment to establish that proposition. My learned friend is in the position where his retainer is being challenged. He has put forward an assertion on oath as to who the relevant insurer is, apparently inferentially to establish a retainer relationship between him and that person, that client. When that is subjected to critical analysis, of which this document is part, it’s plain that that company is not a licensed insurer. And I propose in a moment to tender some other documents which demonstrates (sic) that beyond all possible argument.
The documents in question were print-outs off the internet. They referred (exhibits 1-9) to Texas Insurance Group Inc, TIG Insurance Group and TIG Insurance Co as well as Fairfax Financial Holdings Ltd, the latter being an umbrella financial services company having those other companies as subsidiaries. One of those subsidiaries was TIG Speciality Insurance Company.
Mr Stitt then submitted that the retainer had not been established. He contended that the client retaining the solicitors instructing Mr Glissan had not been identified. Nor had the terms of the retainer been established. Neither of those propositions could be justified on the material presented to the Court.
There is some controversy about the onus of establishing or disputing retainers. However, prima facie, the client is the party represented. It may have assigned its right to instruct lawyers by reason of an insurance policy containing a subrogation agreement. However, lawyers instructed pursuant to such an agreement are validly retained. The terms of it, so long as they extended, as Mr Samios deposed they did, to taking such steps as may be necessary to prosecute the case at hand, are otherwise irrelevant. The identity of the insurer, save for that purpose, is irrelevant as also is the extent of the insurance cover or the availability of excess, layer or reinsurers beyond that offered by the primary insurer. However, this was the main thrust of Mr Stitt’s submissions as to the retainer of the lawyers for Snorkel Australia and Snorkel NZ. The balance of the “application” focussed on the question of a possible remaining conflict of interest between Snorkel Australia and Snorkel NZ.
That had been, at least from the resumption of proceedings on 17 August 2006, a non-issue.
In the course of the reply to this evidence, his Honour commented that “it took about four days to work out who the insurer was”. This was because Mr Stitt had raised the non-issue of the identity not merely of the primary insurer but also the question of the extent of the insurance cover of the Snorkel interests.
Had Connolly J acceded to Mr Stitt’s submissions he would have been led, not merely into the exploration of false issues, as he was, but also into appellable error.
As it was, his Honour ruled:
… It seems to me that the application to challenge the retainer was entirely properly brought on the basis of the attempted filing of a pleading which clearly would bring the second and seventh defendants’ interest into conflict. What has emerged since then has been a deeply [un]satisfactory saga of the gradual emergence of the factual basis of the retainer of the second and seventh defendant. Not without a degree of hesitation, I am however not minded to make an adverse order against the second and seventh defendants in relation only to the ongoing involvement in the case.
It does seem to me that we eventually found although the managing director of the two interests was unable to throw any light on the situation. Mr Samios eventually emerged despite having to retreat from his early sworn affidavit, was able to give evidence that he was retained by the XL Insurance Group in Australia, and that he had instructed Minter Ellison in Canberra as his agents. Any issues surrounding the compliance or not with New South Wales practices in relation to fee agreements, it seems to me is not a matter for this court. Any issues relating to a New South Wales solicitor holding themselves out as both the solicitor for an insurer and a claim manager is not for this court, and there is on the record an ACT solicitor properly acting in the matter, with Minters instructing Mr Glissan.
All that’s emerged about the status of the insurers is a matter of deep disquiet. One has the strong feeling that the court has been regarded as a mere annoyance, it’s all too hard to produce documents, however I am not going to uphold the challenge to your retainer. However, the challenge was entirely properly brought, it has taken days to eke out reluctantly from a series of witnesses sufficient basis to put the challenge aside, and that has been entirely the fault, it seems to me, of the second and seventh defendants, if not precisely the fault of Mr Samios. It seems to me that the costs, although Mr Stitt’s application is unsuccessful, it seems to me that the second and seventh defendant, albeit the costs thrown away by reason of the need for this clearly brought about by the filing, attempted filing of a pleading that threw this matter off the rails.
The parties, other than the Snorkel interests, accordingly sought and were granted an order awarding them the costs “thrown away” by the first respondent’s applications on an indemnity basis.
Though Mr Stitt had not addressed the question of costs specifically, Mr Barry QC, for the sixth defendant (Borren), submitted correctly, that Mr Stitt’s challenge was “misconceived” as had been the notice claiming contribution between the Snorkel interests.
Mr Bridge, for the plaintiff, expressed no view about Mr Stitt’s application save to urge prompt resolution of it.
His Honour, at AB 191, decided that the “attempted filing” of the notice claiming contribution had effectively caused costs to be wasted stating:
I don’t know whether any of the other parties want to be heard on that, I presume that cost order would be the order sought by Mr Stitt, by the plaintiff.
Neither Mr Stitt, for the first defendant nor Mr Bridge for the plaintiff, had addressed expressly the issue of costs. Thus Mr Glissan, save inferentially, had not addressed the issue either.
All other parties asked then for costs “on an indemnity basis”. Mr Stitt opposed Borren having costs on the basis it had “been supporting Mr Glissan”.
Nevertheless, whilst supporting the costs order he had sought, Mr Barry observed, aptly, to his Honour:
You would of course be able, your Honour, to take the view that Mr Stitt’s application having failed, the ordinary result for the client is that his client would pay the costs of everyone, but I don’t submit that would be appropriate in this case for the reasons indicated, namely that these proceedings started because of the misconceived cross-claim between the second and seventh defendants.
Mr Glissan apparently accepted that it had been ruled that his clients should pay costs but disputed the claim for indemnity costs.
His Honour then ruled as follows:
It seems to me that this is an appropriate case for indemnity costs, the course as the evidence emerged revealed that what was put in chief consistently collapsed, a different version emerged which on further inquiry became even more doubtful and required further rounds of inquiry, all entirely at the camp of the second and seventh defendant. I will order that the costs of all other parties be met by the second and seventh defendants on an indemnity basis. I will also give the parties leave to bring in short orders to that effect and have the costs thrown away, taxed, or agreed and enforced.
His Honour further observed that he would, if it were made, favour an application that Mr Samios be ordered to pay the costs personally. No such application was made.
Leave to Appeal
On 31 August 2006 the solicitors for the Snorkel interests made application for leave to appeal against the costs order.
The affidavit supporting that application proposed the following grounds of appeal:
(a)his Honour erred in the exercise of his discretion to order costs;
(b)his Honour erred in principle in ordering costs on an indemnity basis;
(c)his Honour erred in entertaining the challenge to the retainer of the legal representatives of the second and seventh defendants on the application of the first defendant said to be raised by the notice of contribution lodged on 10 August 2006;
(d)his Honour erred in permitting the application to continue when leave to rely on the offending pleading was not sought; and
(e)his Honour erred in permitting the application to continue when the issue of conflict had been resolved.
The relief to be sought was that:
(a)the interlocutory judgment of Connolly J given 24 August 2006 be set aside;
(b)the costs in the application of the first defendant as to the retainer of the solicitors for the second defendant and seventh defendant in Hay v Snorkel Elevating Work Platforms Pty Limited & Ors (SC 157 of 1999) be paid by the first defendant on an indemnity basis; and
(c)in the alternative to paragraph 3(a), order that the question of costs in the trial in the matter of Hay v Snorkel Elevating Work Platforms Pty Limited & Ors (SC 157 of 1999) be remitted to another judge of the ACT Supreme Court to be determined in accordance with law or order that the questions of costs in the trial of Hay v Snorkel Elevating Work Platforms Pty Limited & Ors (SC 157 of 1999) be determined by the Court of Appeal.
Submissions of the Applicants
The applicants relied on submissions that the first respondent lacked standing. Mr Williams SC, who appeared with Mr Sharwood for the applicants, acknowledged the jurisdiction of the court to deny audience to legal practitioners whose appearance, despite their legal right to appear, would be an affront to the administration of justice.
What was that “affront”? Mr Williams accepted that a conflict between the second and seventh defendants might be such if it was a real one. However, it had been rapidly resolved. There was thereafter no such conflict.
The further question of the nature and extent of the indemnity offered by the instructing insurer and its capacity or liability to pay out the entire likely judgment was not relevant nor was an enquiry into it permissible in the proceedings as framed.
The applicants further complained that they were not given a proper opportunity to oppose the unconventional costs order actually made. Hence counsel did not seek to canvass the conclusion that costs should be ordered but only the extent of it.
The order that a successful party should pay costs was “exceptional” (Ottway v Jones [1955] 2 All ER 585; Knight v Clifton [1971] Ch 700, 713; TPC v Nicholas Enterprises Pty Ltd (No. 3) (1979) 42 FLR 213, 220; Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129, 156; Cretazzo v Lombardi (1975) 13 SASR 4, 12).
The “deep disquiet” his Honour expressed was, it was submitted, related only to this false issue. There was no real issue as to the retainer of the lawyers for the Snorkel interests as such.
Hence the discretion miscarried.
Further, the order for costs on an indemnity basis was not warranted.
First Respondent’s submissions
The first respondent noted in its submissions that it had been:
… keen to ensure that any judgment it obtained on its Notice Claiming Contribution against either [the second or seventh defendants] would be enforceable, and would not be liable to be challenged by either party because they had not been adequately represented so as to protect their own interests.
Further, the Notice between the second and seventh defendants represented a conflict between them. No complaint was made as to the adjournment Mr Glissan then sought.
The first witness called, Mr Aoud, could not explain the genesis of the Notice of Contribution nor had he involved himself in the litigation.
Mr Glissan then took further instructions and offered Mr Samios. The latter did reveal an immediate insurer who was his source of instructions but in doing so revealed a further insurer who had an interest in the matter. This was said to necessitate further inquiries.
As a result, Mr Stitt submitted, his client had standing to raise the issue of retainer if only by reason of its interest in the smooth running of the trial.
In large measure, he submitted, it was the Court’s own initiative which led to the course the application took.
There was clearly a conflict of interest which the Court had to clarify.
The discretion to award costs against the second and seventh defendants in favour of all other parties was properly exercised and not challenged.
Further there was, as the trial judge remarked, a consistent collapse and differing versions as to the source of instructions following the raising of the issue by reason of the filing of the Notice.
The suggestion that the difficulties with discovery infected the trial judge’s decision was rejected.
Submissions of other parties
The second respondent/plaintiff, offered support for these submissions. So also, jointly, did the third, fourth and fifth respondents. The sixth respondent separately added its support.
Reply of Applicants
The applicants, in oral argument, emphasised that the matter in question started as a challenge to retainer of Mr Glissan and those instructing him, though triggered by the apparent or potential conflict between the Snorkel defendants.
In response to that concern, Mr Aoud the managing director of the instructing insurer had deposed to his responsibility for instructing those lawyers with the approval of the insured Snorkel entities.
The indemnity of both by the same insurer was regarded by Mr Aoud as answering the question whether the Notice indicated a conflict between the Snorkel entities. The cross-examination had strayed off that topic into discovery issues, separately dealt with ultimately, and then to the identity and coverage of insurers.
As pointed out in argument, the question of the adequacy of the insurer’s indemnity was relevant, if at all, to an application for security. None had been made. Mr Williams contended that this confusion and cross-over, as he put it, caused the prolongation of the inquiry upon which his Honour had been persuaded by Mr Stitt to embark.
Insofar as Mr Aoud could not elucidate the background to the Notice being filed, Mr Samios had explained it and confirmed that the source of his instructions was the primary insurer acting on the subrogation agreement with the Snorkel defendants. Unfortunately, there was further confusion arising from the submission by Mr Stitt as to the role of the “layer” insurer as the “true” source of instructions. It was, of course, merely the source of additional indemnity, a matter of interest to the parties only if enforcement of a judgment was in issue or if the direct access provisions of the Wrongs Act needed to be invoked (on that issue generally, see the article by Judge Rein SC, [2007] ALJ 180).
The problem, Mr Williams suggested, arose from the lack of precision and notice of what the Snorkel defendants (or their lawyers) needed to meet.
He also highlighted the apparent misinterpretation of Mr Samios’ evidence as “retreating from his earlier sworn evidence”. It seems that was a reference to the role of the “layer” insurer in approving any settlement that called on its indemnity. In truth, that was not a retreat at all. The approval of a settlement, if proposed, did not include a right to determine who was retained for the Snorkel defendants. Indeed, it is important to bear in mind that re-insurance is a lay-off of risk by an insurer not the insured.
Thus, Mr Williams contended, it was unfair to have blamed Mr Samios for starting the process when the impetus for its continuance was the confusion so created.
Ultimately, the Nominal defendant’s challenge was unsuccessful and the discretion to award costs, though enlivened, should have been exercised according to the “usual rule”, there being no sufficient reason to depart from it.
As Foster AJA noted in Mannix v Loumbos [2000] NSWCA 32 at [13], the principles enunciated by McHugh J in Oshlack v Richmond River Council (1998) 193 CLR 72 at 97-98 represented the law, that is:
… The ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.
Errors on the part of the solicitors for the appellant in good faith did not so mislead the other side so as to fall within this ground of exception.
Further Reply by Respondents
Mr Stitt commenced by referring to the filed Notice as constituting, if not an admission, at least an assertion of conflict between the second and seventh defendants.
Mr Stitt’s submissions became less than convincing when he was asked to identify the issue which remained after the Notice was disavowed by the Snorkel defendants. In any event there was no substance in the contention that the emergence of such an issue between the Snorkel defendants could affect any other party unless the Snorkel defendants chose to litigate it as between themselves in the then current proceedings.
It was further plain that Mr Stitt could not convincingly suggest that the reference to the second layer of insurance was anything but a red herring. Nor did Mr Stitt seem to be able to articulate the concept of run-off insurance, so far as that was relevant. It seemed to be accepted that the second layer insurer was liable to indemnify the Snorkel defendants over and above the limit of $1 million but was writing no new business. Even if that was in doubt it was not an issue in the litigation before his Honour.
Further, it appeared that the contention Mr Stitt had advanced, namely, that there was some inconsistency in Mr Samios’ evidence was based on a misunderstanding by Mr Stitt as to whether “TIG” referred merely to a broker or to an insurer.
The final position Mr Stitt adopted was that, as Mr Glissan had appeared to accept that a costs order should be made against his clients, it could not now be challenged. He contended that conclusion was further supported by the unreasonable conduct, as he characterised it, of those representing the Snorkel defendants.
The other respondents simply supported the decision appealed from.
The Issues
Challenge to retainer:
The usual situation of a challenge to retainer is illustrated by Hawksford v Hawksford (2005) 191 FLR 173; [2005] NSWSC 463.
In that case two brothers, the directors of the second plaintiff, fell into disputation. One of the defendants was a solicitor, who held a casting vote as a shareholder in the company of which the two brothers were directors. The plaintiffs challenged the retainer of a solicitor appointed to act for the second and third defendants. One of the two brothers was the first defendant.
The solicitor shareholder had a retainer agreement with the company. The first defendant, as managing director of the company, had instructed the solicitor to act for the second and third defendants.
Campbell J addressed a number of issues. The first was the burden of establishing the challenge. That, his Honour held, rested with the challenger. The second was the issue of retainer. That related to the authority to appoint the solicitor to act. In the case of a deadlocked company, as this was, that authority was lacking. It needed a Court order to appoint lawyers for the company.
Nevertheless, a managing director, in more usual circumstances, would, as did Mr Aoud in this case, have actual authority to retain lawyers (see Nece Pty Ltd v Ritek Incorporation (1997) 24 ACSR 38, 43; [1997] FCA 504 per Lehane J) but there might be unusual litigation where that appointment required Board ratification. That was not the case here.
It is the normal business of an insurer to instruct lawyers to act for their insured. It follows that no suspicion of lack of authority was raised by the appearance of the same lawyers for the two Snorkel defendants. There was no protest from either of those defendants that they did not accept the retainer of those lawyers by their insurer.
Alsco Linen Pty Ltd v Cox; Church of Jesus Christ of Latter Day Saints & Anor v Rahme & Anor [2003] NSWSC 550 did involve a challenge to a retainer undertaken by an insurer exercising a right by subrogation to retain lawyers for an insured.
Grove J in that case pointed out that a challenge to retainer should not be entertained unless the challenger makes an independent application doing so. It had not done so. The Local Court Magistrate therefore correctly dismissed an oral challenge to the lawyers’ retainer.
Knox Street Apartments v Flexman [2002] NSWSC 102 was a case of rival groups claiming authority to represent a company. It was thus a different situation from the present case. Zimmerman Holdings Pty Ltd v Cooney [2002] NSWSC 387 was a case of a creditor challenging the debtor company’s lawyers authority to act for it. It turned on the validity of the appointment of the directors approving the retainer. That appointment was found defective by Master McLaughlin. There was no such issue in the present case.
In the present case, as at 16 August 2006, no issue was raised which would provide grounds to challenge the retainer of the lawyers appearing for the Snorkel defendants.
If anything, it only raised a concern as to the propriety of the same lawyers appearing for parties who appeared to be at issue in relation to their respective liability to the plaintiff as between them should the plaintiff succeed against them. That was more a potential concern only as leave had not been sought to file the Notice, but it was a legitimate question for other parties to raise as it could have had implications for the future conduct of the case.
Restraint of lawyers from acting:
It is accepted that an interested party may seek to restrain lawyers from acting for a party where that person’s interests, for example, in the confidentiality of information, are threatened.
Though involving accountants and not lawyers, that was the issue addressed in Prince Jefri Bolkiah v KPMG [1999] 2 AC 222. That and similar authorities were considered in this Court in Wagdy Hanna & Associates Pty Ltd v National Library of Australia [2004] ACTSC 75.
That jurisdiction was further explained by Brereton J in Kallinicos & Anor v Hunt & Ors (2005) 64 NSWLR 561; [2005] NSWSC 1181. The application in that case was not based upon the existence of confidential information in the possession of the former solicitor but rather on the basis that the solicitor might be a witness and, hence, given the nature of the evidence he might be called upon to give, lacked the perception of impartiality and independence a lawyer for a party should have.
Two additional bases for intervention were identified. The first was said to be an obligation of loyalty to the former client. The second, more generally, invoked the Court’s jurisdiction over the conduct of its officers. The obligation of loyalty is not relevant in the present case. In any event, it would be unlikely that such an objection could be mounted otherwise than on behalf of the former client unless the circumstances fell within the third more general category.
As Brereton J noted, at 572, the power to deny audience to a lawyer when the interests of justice require it, by reason of conflict of interest and duty or otherwise, does not depend on a breach of the rules of professional conduct for lawyers:
[43] … The issue was not whether a rule was breached, but whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice required the removal of the solicitor, the goal being to protect not just the interests of the individual litigant but more importantly public confidence in the administration of justice.
An illustration of such a circumstance is Grimwade v Meagher [1995] 1 VR 446. The respondent had, years before, been retained to prosecute the applicant. The prosecution was ultimately stayed, some criticism being made of the manner in which the prosecution had been conducted (see R v Wilson and Grimwade [1995] 1 VR 163). The applicant (plaintiff) brought civil proceedings in relation to the matters the subject of the prosecution. The respondent was retained to represent the defendants. The applicant contended that it might be perceived that the respondent would use the proceedings to, inter alia, vindicate his conduct of the prior proceedings and sought an order that he be restrained from so appearing.
Mandie J upheld that contention. Mr Meagher QC was prohibited from appearing.
In Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501, the lawyers retained had, inter alia, received confidential information in a related matter from a third party. A basis for upholding the restraining order was that (at 524 per Brooking JA, with whom Ormiston and Chernov JJA agreed):
[58] … what has been done by [the lawyers] – and I would have regard to the whole of their conduct here – is so offensive to common notions of fairness and justice that they should, as officers of the Court, be brought to heel notwithstanding that they have not … infringed any legal or equitable right.
On the other hand, Grove J in The Law Society of New South Wales v Holt [2003] NSWSC 629 refused to restrain a solicitor previously employed by the Law Society of New South Wales from acting for a solicitor, the subject of disciplinary proceedings, though he had handled some unrelated prior disciplinary matters involving the solicitor whilst employed by the Law Society. There was no confidential information to protect. It was put by counsel for the Society that it was a conflict of interest, or, perhaps, of loyalties case invoking the more general basis. That contention was rejected.
The power to intervene was referred to in the following terms in Bowen v Stott [2004] WASC 94:
[51] … The objective test to be applied … is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice required that counsel be so prevented from acting ….
In that case the nature and extent of the instructions given to the respective solicitors was to be an issue. Thus their professional conduct could be in issue. It was therefore a case similar to Grimwade v Meagher (supra).
Applying those tests to the instant case it is impossible to believe that, once the issue of conflict between the second and seventh defendants was resolved by the confirmation of their instructions to continue common representation and the eschewing of the Notice, any issue remained as to the propriety of the retainer for the same lawyers to act for the two Snorkel defendants. Nor could any “fair-minded reasonably informed member of the public” entertain such a notion.
The issue of the extent of the insurance cover of the Snorkel defendants and the source of it was irrelevant and should not have been the subject of inquiry.
The Costs Order
It follows from the above that the only interest the other parties had in the Notice for Contribution between the Snorkel defendants was to ascertain whether they intended to delay proceedings by seeking to be separately represented to pursue it in the substantive proceedings.
The pursuit of the retainer issue following the resolution of that question, exploring the nature and extent of insurance cover, which had been raised without prior notice, was not a reasonable course to have been initiated or pursued.
The challenge was, beyond that point, baseless. It was dismissed. The Snorkel defendants’ costs incurred in meeting it should have been met by the first respondent. Mr Samios’ decision to file the Notice was not a sound one, it being unnecessary to achieve the purpose he thought it might. It raised an unnecessary question. However, it was not so egregious an error of judgment as to deprive the Snorkel defendants of the costs of defending that point beyond the application.
It follows that the leave to appeal should be granted, the appeal upheld and the costs order in respect of the challenge to retainer set aside.
It is ordered in lieu of that order that the first respondent pay the costs of the appellants in respect of the challenge to retainer. The extent of that order and the question of the costs of the other respondents should be remitted to the trial judge to determine whether there be no order as to costs or the first respondent should pay those costs also.
The first respondent is to pay the appellant’s costs of and incidental to this application and appeal.
I certify that the preceding one hundred and twenty-one (121) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.
Associate:
Date: 26 June 2007
Counsel for the 1st and 2nd Appellants: Mr D Williams SC with Mr W Sharwood
Solicitor for the 1st and 2nd Appellants: Minter Ellison
Counsel for the 1st Respondent: Mr R Stitt QC with Mr J Morris
Solicitor for the 1st Respondent: Hunt and Hunt
Counsel for the 2nd Respondent: Mr R E Williams QC with Mr M Fordham
Solicitor for the 2nd Respondent: Capon and Hubert
Counsel for the 3rd, 4th & 5th Respondents: Mr C S Leahy SC
Solicitor for the 3rd, 4th & 5th Respondents: Bradley Allen Lawyers
Counsel for the 6th Respondent: Mr G Blank
Solicitor for the 6th Respondent: Mallesons Stephen Jaques
Date of hearing: 19 February 2007
Date of judgment: 26 June 2007
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