Stefanou v Fairfield Chase Pty Ltd

[1992] FCA 1084

108'4 7 2

JUDGMENT No. ........ ........ .. I ..,......,

IN THE	FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY)	NO NG 727 of 1989
GENERAL DIVISION	1

BETWEEN JOHN STEFANOU & O T m S
Applicants

AND -

L . I A N -0'13	OTHERS
LIB WRY	Respondents

EX TEMPORE JUDGMENT

EINFELD J izm?iz 13 AUGUST 1992

Several notices of motion are before the Court today. They are the tail end of a very lengthy and complex series of cases which were before the Court over a period of some years involving a dispute concerning a shopping centre in the Sydney suburb of Fairfield. It fell to my lot to preside over that litigation more or less from its outset to its conclusion. In the event, all the various cases were settled but not without a significant passage of time, a considerable amount of work, quite a number of cross-claims, and various other complexities which came into the litigation. A very considerable number of court appearances wae necessary. There were some contested interlocutory proceedings.

The present motions arise from the termination, prior to the completion of the litigation, of the retainer of the	respondent in the proceedings (Fairfield Chase). By their	solicitors (the solicitors) who had appeared for the first
motions Fairfield Chase seeks to have the solicitors joined as
parties to the proceedings and ordered to bring in a bill of .?

'*I

costs in taxable form, in accordance with the secohd schedule

,,.. .

of the Federal Court rules prescribing rates: as to -copts, for . .

work done by them on behalf of Fairfield Chase.. The :motions ask that the bill be taxed and that any amouqt already paid by Fairfield Chase to the solicitors in excess of the amount allowed on taxation be repaid.

The motions raise some important issues on the issue of solicitor and client costs and on the appropriateness of this Court dealing with such costs in cases which have come before it, Amongst other things, it is to be alleged in the course of these motions that there was in existence as between the solicitors and Fairfield Chase an agreement that costs would be paid on what is known as a time charge or time cost basis. There will also be raised an issue concerning the appropriateness of counsel charging what are known as cancellation fees when the circumstances are that time set aside for a hearing is found not to be required or the

counsel's brief is withdrawn.

When the motions were called this morning, formal matters to do with the evidence to be presented and the reading of the appropriate affidavits on which the parties wish to rely were dealt with. Senior counsel for the solicitors then put the submission at the threshold that the motions should either be dismissed in the exercise of discretion or should be cross- vested to the New South Wales Supreme Court.

The basis for the solicitors' argument for cross vesting is that effectively what arises on these motions is the existence or otherwise of an agreement between Fairfield Chase and the solicitors for the payment of the solicitors' costs on a time cost basis. As the Legal Profession Act of New South Wales purports to govern this type of matter in relation to solicitors in New South Wales, it is argued that the questions as to whether there was such an agreement and, if so, what its terms were, do not raise a federal matter. The argument is that it is a simple matter of contract the type of which regularly exercises the Supreme Court and would appropriately be dealt with there.

Some recent decisions of judges of the Supreme Court seem to indicate that notwithstanding anything contained in the Legal Profession Act, there is nothing improper or per se unenforceable about agreements of this kind. In Emeritus Pty Limited v Michael Mobbs [l9911 NSW Conv R 55-588, Studdert J put it in terms that the common law which permitted such agreements has survived the passing of the Legal Profession

Act. Rogers CJ Comm D in sinaleton v Macauarie Broadcastinq

Holdinas Ltd I19911 24 NSWLR 103 expressed the matter a little
differently but came to the same conclusion. See also
Crime Commission v Fleminq [l9911 NSWLR 116 per Gleeson CJ.

All of these and some other cases are discussed in my judgment

in p q

gor~oration & Ors (unreported, 20 August 1992). The consequence is that it does not seem that the Legal Profession Act in fact bears down upon this issue at all.

The argument raises a matter of significant principle. The costs here involved are, of course, costs arising out of Federal Court proceedings. On the face of it, it would seem at least ungracious if not unconscionable for this Court to trouble the Supreme Court with presiding over a costs dispute arising out of proceedings in this Court. Moreover, if this Court has jurisdiction to deal with and arbitrate disputes as to costs in proceedings conducted before it, the Court should surely exercise the jurisdiction unless there are special reasons why that should not be the case. In my opinion, no such reasons exist here.

The basis upon which dismissal is sought is as follows. It is conceded, as a result of an earlier decision of a Full Court of this Court in Kei'th Hercules & Sons v Steedman [l9871 17 FCR 290 that the Court has jurisdiction to deal with the matters contained in the motions. But it is argued that because of words which fell from the Court in, that case, it is inappropriate to deal with them in this particular case.

said that whilst the Court had jurisdiction in such matters,	In Hercules two members of the Court (Lockhart & Sheppard JJ)
the jurisdiction should be exercised rarely. It is certainly desirable that the Court should not generally be required to arbitrate between solicitors and clients as to costs. Hence it is obvious that their Honours had in mind that the Court should not find itself inundated by such litigation. The resources of the Registry, not to mention the Court itself, would be stretched beyond reasonable bounds if such cases were to come before the Court as a matter of course. On the other hand, as a matter of common experience, it will be fairly rare that such disputes come before the Court at all.
Being constrained as I am by this decision, although it is formally challenged here by Fairfield Chase as being incorrect, it seems that if the solicitors' submissions are not to be upheld, either the present case has to be distinguished in some way or I must find circumstances which bring it within the "rare" framework enunciated by their Honours. It is true that the observations as to rarity were obiter but it would be inappropriate for a single judge to substitute an alternative view where the facts are similar, as they are. I should state my feeling, however, that the dictum in Hercules, seemingly made in passing, may need re- examination. This is because, as it seems to me, the Federal Court should be slow to adopt a process by which acknowledged jurisdiction and power to exercise governance over professional activity undertaken in the course of proceedings before it is effectively transferred to another Court by a refusal of this Court to exercise the jurisdiction. The State
Supreme Courts have their own heavy burden of supervising professional activity in the litigation in their own courts. There are real reasons of comity why courts should not use procedural or volume of work problems to transfer matters elsewhere which most naturally come within the frame of reference of the potential transferor.
However that may be, I should examine this case to see whether it is one which the Court should now entertain. There is no dispute about the nature of the examination which I am to undertake. It is not an examination as to jurisdiction. It is not really even an examination as to the power of the Court to entertain the proceedings. It is a discretionary matter as to whether these particular proceedings should be entertained. The deponents of the affidavits upon which reliance is to be placed in these proceedings have not yet been cross-examined and I can therefore only take the affidavits read as providing a prima facie or arguable set of facts. I do not propose to do so exhaustively at this time but I will mention the more important items.
First of all, there is the general question which would no doubt arise in every case that the relationship between a solicitor and client is a fiduciary one casting duties upon the solicitor to handle the affairs of the client in an appropriately trustworthy and honourable way. This includes, amongst other things, a need for the solicitor to explain or
make available to the client the facts and matters which are relevant to determine whether it is in the client's best
interest to enter such an agreement at all and, if so, whether to enter the agreement which the solicitor is proposing.
Some of the cases to which I have earlier referred have made passing reference to such matters. It is certainly clear from the judgments given in the Supreme Court, and I would
respectfully agree, that such agreements cannot by themselves be final statements of the way in which costs can be resolved where there is a dispute. Questions such as the fairness or reasonableness of the agreement; the possibility of the exploitation of the client by the solicitor; the opportunity for the client to give informed consideration to whether the costs agreement should be agreed to, including the possible opportunity or requirement to obtain independent advice; and whether the client would be better served by a scale or fixed fee arrangement, all have to be considered in an appropriate case.
Secondly, in this particular case there was a most unusual circumstance - by which I do not, at this stage of the case, intend in any way to suggest any impropriety. It is alleged that the representative of Fairfield Chase in the negotiations over fees was then in a personal relationship with one of the solicitors. They later married. The possibility arises of what might generally be called a conflict of interest, such as to mean that the fiduciary relationship between the solicitor
carried out in a way demanded by proper practice. On the and the client was perhaps blurred, not established or not
other hand, if the prima facie evidence is correct, the representative of Fairfield Chase was also a lawyer, apparently of some experience. In such a circumstance it might be decided that the fiduciary duty of the solicitor was of a different less precise character, in that it involved or required somewhat different criteria than would apply in an ordinary relationship between a solicitor and a lay client.
A third set of questions arising here is whether a time cost agreement is one to which this Court should give its approval, having in mind the fact that it is, as Studdert J has said, a matter of the persistence of the common law, or whether the common law should in these times be reviewed. It is not open to dispute that legal costs are a matter of great public concern at the present time. There is much consternation that access to the courts has gone beyond the reach of anyone other than the very rich and the very poor, the latter because they are sometimes subsidised or assisted by the provision of legal aid. Even there, as economic pressures bear down on governments and the community, the availability of legal aid is itself apparently contracting, with the result that fewer people can qualify for the diminishing quantity of money available.
The consequence is that the Courts are actually becoming available to a smaller proportion of the total population as time proceeds. One of the major distinguishing features of a democratic society is ready access to independent courts of
citizens and the state. This is an idle right if sizeable integrity to determine disputes between citizens and between
numbers of people are excluded by excessive costs. If the Court is to give blessing to time cost agreements at all, there may therefore be limitations which it should impose. In some of the cases which I have mentioned, this has been expressed in terms of considerations as to whether such agreements are fair and reasonable. Other words like
"exploitative" are also used. If a particular agreement is to be rejected on such grounds, there would need to be consideration of a comparative method of determining what costs ought to have been charged.
In cases in the Federal Court, one basis for determining whether costs were exorbitant or exploitative would be to compare the costs that might have been charged had the Federal Court costs rules or scale been applied, as would occur if there were no costs agreement. In fact, one order sought in the present motions is for a costs bill to be brought in in accordance with such scales. These are questions of very considerable importance and I regard them as a very special and unusual feature of this particular litigation.
As I said earlier, a further matter arises relating to the appropriateness of cancellation fees for counsel. Such a matter also bears down on the issue of the general costs of litigation. It is one thing to say that a cancellation fee is, as a matter of principle, not unreasonable or
unacceptable; it is a second thing to say that it ought or ought not to be paid by an unsuccessful party where costs are
ordered against that party; it is yet a third thing to determine that a cancellation fee is a reasonable payment to be imposed upon the client in the absence of express or implied consent. Questions for example of whether the client was told anything and given a choice in this connection, and if so what, together with the other matters earlier referred to would all arise.

- l0 -

So far as I am aware, there is no case in this Court, and I am not aware of any case anywhere else, which definitively, if at all, has passed on this particular question. The matter would equally arise if this case was in the Supreme Court as in this Court, but I can see no reason at all why this Court would impose upon the Supreme Court the burden of determining the appropriateness of a cancellation fee charged in respect of a case fought in this Court.

If the current motions were dismissed, the matter could be fought out in the Supreme Court. It is true that if that occurred, the taxing of any bill ordered to be brought in would be performed by an officer of the Supreme Court who is likely to have had some experience in solicitor and client taxations. Supreme Court taxing officers may also, for all I know, receive solicitor and client disputes from the District Court, perhaps even from other places.

Hence, as a matter of principle, the fact that a solicitor and client bill ultimately had to be taxed by a Supreme Court

heard in the Supreme Court, would probably not raise a special	taxing officer, a necessary consequence of- having the matter
or rare question within the meaning of the expression used in Hercules - although it must be extremely unusual in a Federal Court case. But lengthy and complex shopping centre litigation, regrettably familiar to this Court, is in my experience comparatively rare in the Supreme Court. So is the situation of the solicitors' retainer being withdrawn close to

but before the end of lengthy litigation, with the consequence of counsel's briefs being withdrawn after dates had been fixed and secured. Added to the other features of this case which I have mentioned, these matters add additional factors of unusualness to this case such as to bring it within the Full Court's reservations in -.

In all the circumstances it seems to me that I should exercise my discretion in favour of the entertainment of these motions. I therefore reject the application to dismiss them or cross- vest them to the Supreme Court.

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I certify thst this and !he	i
precsdins pzges arn a true ccpy of t h s	t,
I Re3sor.s for Judgment herein of hi:	Eonoilr
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: Dated:	3 0 /q /-