Steicke v Donaldson Walsh Lawyers - [2010] SASC 188

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
STEICKE v DONALDSON WALSH LAWYERS
[2010] SASC 188
Reasons of Judge Lunn a Master of the Supreme Court
25 June 2010
PROCEDURE - COSTS
Application under s 42(1) of Legal Practitioners Act 1981 for taxation of costs against former solicitor - held was an action under 2006 Civil Rules - determination of preliminary issues - obligation to make discovery (disclosure) of documents - held: R136(1) applied and R274 was inapplicable - need to specify precisely the documents for which disclosure was sought - application for further discovery dismissed.

STEICKE v DONALDSON WALSH LAWYERS
[2010] SASC 188
JUDGE LUNN:
Reasons on defendant’s application for discovery of documents

For many years the plaintiff has been engaged in a mammoth and bitter divorce case in the Family Court which, inter alia, involves property disputes about many millions of dollars. The plaintiff has paid to various lawyers, investigators, forensic accountants and the like in excess of $10.5 million in costs. She understands her husband has incurred costs of about $26 million. From about May 2005 until early 2008 the defendant acted as a lawyer for the plaintiff in relation to these Family Court proceedings. She has paid over $4 million to the defendant for legal costs and disbursements.
Both prior to, and after, the plaintiff was represented by the defendant, she was also represented by Mr Glynn of Hampton Winter and Glynn (“Hamptons”), who are lawyers in Hong Kong, in her disputes with her former husband on retainers independent of her retainers with the defendant. She has paid large sums to Hamptons for their costs and disbursements.
On 27 May 2008 the plaintiff instituted this action seeking relief concerning various monies and property which she alleged the defendant held for her. She also sought an order under s 41 of the Legal Practitioners Act 1981 (“the LPA”) for the defendant to deliver a bill of costs in taxable form for the work which it had done for her. The defendant has delivered various invoices and details of its costs and disbursements totalling $4,122,058, but they are not necessarily in taxable form.[1] The other relief sought in the Summons seems to have been resolved between the parties.
[1] The question of what constitutes a proper taxable form will depend in part upon the outcome of the preliminary issues to be mentioned later.
At a directions hearing on 21 November 2009 the plaintiff indicated she was about to make a request under s 42(1) of the LPA for a taxation of the defendant’s costs.[2] For administrative convenience I directed that any such request should proceed in this action. The plaintiff made her request to the Registrar under s 42(1), and in accordance with 6R 272, by a letter dated 16 January 2009. The letter should have been filed in this proceeding but it has not been, although it will be shortly.
[2] Section 42(1) provides:
The defendant’s charges to the plaintiff were calculated under a basis of charging which was contained in three retainer agreements entered into between the defendant and the plaintiff on 17 May 2005, 13 April 2006 and 3 December 2007 respectively. The plaintiff challenges this basis of charging and seeks to have the three retainer agreements rescinded as not being fair and reasonable pursuant to s 42(7) of the LPA. If that challenge succeeds, the costs will be assessed on the applicable Family Court and Supreme Court scales.
It was agreed between the solicitors for the parties that whether these three retainer agreements were to be rescinded should be determined as preliminary issues on the adjudication.[3] It was also agreed there should be pleadings between the parties on the preliminary issues. On 20 February 2009 I gave directions for the determination of the preliminary issues and pleadings on them. The plaintiff filed particulars of her claim on the preliminary issues on 13 March 2009 (FDN9). The defendant has filed amended particulars of defence on the preliminary issues on 22 June 2010 (FDN15). The plaintiff filed particulars of reply on 24 June 2009 (FDN10) which apparently are to stand as a reply to the amended points of defence.
[3] Catto v Hampton Australia Ltd, Full Court of South Australia, 22 August 2008, [2008] SASC 231.
Since the close of the pleadings on the preliminary issues the parties have been engaged in a process of mutual discovery and production of documents relevant to the preliminary issues.[4] I have not made any orders about discovery of documents, as up until recently the solicitors informed me that they could arrange it between themselves.
[4] Strictly speaking, under the present rules the process should be known as “disclosure of documents”, but the old term “discovery” has continued to be used in this proceeding.
While it acted for the plaintiff the defendant accumulated an enormous quantity of documents relating to the matter. These are now contained in 182 boxes. While they were still acting for the plaintiff the defendant set up a computerised summation system by which it was able to record the contents of all of these documents. The plaintiff now has possession of the 182 boxes, but the defendant has access to their contents via the computer data.
On 22 February 2010 the defendant issued an application (FDN11), the relevant parts of which are as follows:[5]
[5]    Paragraphs 1.1, 1.2 and 2 were not pursued by the plaintiff and will be dismissed.
1.     That the plaintiff make discovery of the following documents:
…
1.3    All correspondence and records of dealings between the plaintiff and Hampton Winter & Glynn and/or Mr Glynn, and in particular records of payments made to them.
1.4    Records of payments made for travel, internationally and within Australia, for Mr Glynn of Hampton Winter & Glynn, and any Australian legal practitioners in connection with the conduct of the plaintiff’s claim against David Steicke; including accommodation, sustenance and associated costs.
1.5    Records of all costs paid by the plaintiff in respect of the proceedings by the plaintiff against David Steicke.
…
Application made pursuant to Rules 136 … of the Supreme Court Civil Rules.
This is only an application for discovery. It is not an application for production of any documents. Hence, any question of privilege is irrelevant, as privileged documents still need to be discovered.
Although the application stated it was brought under Rule 136, both counsel mounted arguments based on 6R 274(1) and (4)(a) which provide:
274—General provisions about adjudication upon costs
(1)This rule applies both to proceedings in the nature of a preliminary assessment of costs and proceedings in the nature of a detailed adjudication upon costs.
…
(4)The Court may—
(a) require a party to produce its records of costs and disbursements and any other material that might be relevant to the assessment.
This rule is irrelevant in that sub-r (4)(a) is confined to production of documents and does not deal with their discovery. “Relevant to the assessment” in sub-r (4)(a) probably means it is confined to the actual adjudication process and does not extend to the determination of preliminary contractual issues.
The power of the Court to make an order for discovery of documents on a request for taxation under s 42(1) of the LPA is not particularly clear. It would seem a proceeding under s 42(1) of the LPA is an action as defined in 6RR 28(1) and 30(1), (2) and (3) of the Supreme Court Civil Rules 2006 which provide:
28—Nature of action
(a)An action is a proceeding in the Court (other than an interlocutory or appellate proceeding) in which a person (the plaintiff) asks the Court to make a final determination of a justiciable issue or to exercise any other power vested in the Court.
…
30—Subject matter of action
(1) An action is based on a claim.
(2)A claim is an assertion that grounds exist on which the Court should or may in its discretion determine a justiciable issue, or exercise any other power, in the plaintiff’s favour (and includes a cross claim and a third party claim).
(3)A claim is based on a cause of action (that is, some basis in law and fact on which the plaintiff asks the Court for a remedy).
This proceeding is now based on a request to exercise a power vested in the Court within the meaning of “power” in 6RR 28(1) and 30(2). However, by 6R 272(1) such an action is not commenced in the usual way by a summons. The summons in this action did not institute the claim under s 42(1), but a claim under s 41 of the LPA
6R 136(1) provides:
136—Obligation to disclose documents
(1)Each party must disclose the documents that are, or have been, in the party’s possession and—
(a)are directly relevant to any issue raised in the pleadings; or
(b)are to be disclosed by order of the Court.
Interestingly, this Rule is not on its terms confined to actions, although it clearly applies to them. It has never been the practice of the Court to require parties to an adjudication of costs pursuant to s 42(1) of the LPA to make discovery of documents and I have never seen it done. However, R136(1)(b) is a proper basis and head of power on which I can make an order for discovery in this action.
I also need to consider the operation of 6R 145(1) in the context of this matter which provides:
145—Non-compliance with obligations of disclosure and production of documents
(1)If there is reason to doubt whether a party has fully complied with the party’s obligations to disclose and produce documents under this Part, the Court may make orders the Court considers appropriate to ensure that the obligations have been fully complied with and, if necessary, to enforce those obligations.
In the context of what has occurred here, the documents in the 182 boxes can be treated as documents of which de facto discovery has already been made by the plaintiff to the defendant. It would be a pointless exercise to require the plaintiff to now make discovery of the contents of those boxes. In my view, the present application should be treated as one to be dealt with as if it was under 6R 145(1) on the basis that the defendant has to show that there is “reason to doubt” that the plaintiff has not already discovered to it by the contents of the 182 boxes relevant documents which she ought to properly discover.[6]
[6] 6R136(1)(a) is irrelevant in this matter and thus there is no significance in whether documents are directly or indirectly relevant.
In refusing generally the orders sought for discovery, the following two paragraphs deal with all of the categories 1.3, 1.4 and 1.5 of the application. I then deal with some individual matters relating to some of those paragraphs.
In essence, the defendant’s contention, through paragraph 12 of its Amended Defence, is that the plaintiff understood the matters going to whether the retainer was fair and reasonable from, inter alia, her dealings with Hamptons and other solicitors and because she was prepared to spend large sums on costs to win her case. Whether a retainer agreement is fair and reasonable in the circumstances is to be judged on the circumstances as they existed at the time the retainer was made.[7] Thus, the Court does not have regard to future circumstances except insofar as they possibly could have been reasonably anticipated at the time the retainer was entered into. What occurred after the last retainer was made on 3 December 2007 may be of marginal relevance in determining what the plaintiff understood as at 3 December.   However, it is likely to be of so little probative value as not to justify the expense and trouble of discovering all of the documents coming into existence after that date.[8] Insofar as the documents sought existed at or prior to 3 December 2007, it is likely that they are contained in the 182 boxes. If this had been an application under 6R 145(1), there was not sufficient evidence to show a reason to doubt, as distinct from a mere suspicion, that the plaintiff had not supplied all of the documents in question to the defendant while it acted for her.[9]
[7]    McNamara Business and Property Law v Kasmeridis (2007) 97 SASR 129 at [45]; Renton Resources Pty Ltd v Johnson Winter & Slattery [2005] SASC 231 at [45]-[46].
[8]    It is highly unlikely that the judge hearing the preliminary issues would allow extensive evidence about those subsequent events and the establishment of a detailed history about what occurred thereafter. If the topic is permitted, it would almost certainly only be in general terms.
[9]    Ceneavenue Pty Ltd & Ors v Martin & Ors [2008] SASC 332, White J.
The terms of the orders as sought in paragraphs 1.3, 1.4 and 1.5 of the application are all far too broad. They are what are colloquially known as ambit claims. Counsel for the defendant readily conceded that they had to be substantially confined. However, no written formulation of the precise orders actually sought at the hearing was put before the Court. Other than possibly in respect of minor matters it is not for the Court to prune down the terms of the orders in the application into what are justifiable terms. The precise terms of the order can be of considerable importance if there are subsequent arguments about non-compliance. It is for the defendant to construct the order in the terms which are justified.[10] In the absence of a satisfactory formulation of the orders sought by the defendant, I am not prepared to grant any order for discovery.
[10] Wildbores v Amatek Ltd (1998) 199 LSJS 49.
Paragraph 1.3 was far too broad. Where orders are sought in terms of documents within a particular category, it must be shown that all of the documents in that category are relevant.[11] Here, quite clearly, much of the potential correspondence would have no relevance to any issue raised on the pleadings on the preliminary issues.
[11] Finsbury Print Pty Ltd v CPI Graphics Ltd (No. 2) [2006] SASC 352.
In his submissions, counsel for the defendant sought to refine what was sought in 1.3 and 1.4. The plaintiff did not oppose disclosing the retainer agreements for Hamptons. The written outline for the defendant referred to “fee notes” and in the course of argument its counsel changed this to invoices for the charges of Hamptons prior to March 2005 and after December 2007. I am not satisfied these terms are a meaningful and proper way in which to express an order for discovery, even if it was proper to make it.
On paragraph 1.5 of the application counsel for the defendant made the following additional submission. He contended that s 42(7) of the LPA required the Court to engage in a two-stage exercise. The first was to determine whether the terms of the agreement were fair and reasonable. He conceded this had to be determined as at the time of the making of the retainer agreement. He submitted that there was a second stage of the exercise in that the Court had then to consider on the whole of the circumstances up to the time of the hearing whether it was proper to exercise its discretion to set aside or vary the retainer agreement. He contended that on this second stage the Court was not limited to circumstances existing at the time of the making of the retainer agreement and could take into account matter occurring afterwards.[12] He submitted that on the second stage the amount of money actually spent by the plaintiff was a factor which could be taken into account in showing the extent to which she was prepared to go financially to win this case against her former husband.
[12] Whether these submissions are correct will be a matter for the Court in determining the preliminary issues under s 42(7), but for the purpose of this discovery application I treat them as being reasonably arguable.
The factual basis for this second stage argument has not been pleaded in the amended points of defence. Hence, it is not directly relevant. However, I accept that it is an argument which is reasonably open to the defendant at the trial and is therefore a basis for saying that the total amounts which the plaintiff has expended are at least indirectly relevant.
Whether it is in the interests of justice that discovery of the documents in paragraph 1.5 should be ordered depends upon their potential utility in the just resolution of the issues between the parties on the preliminary determination when balanced against the time, trouble and cost of the plaintiff having to make this discovery. In her affidavit of 27 May 2008 the plaintiff has deposed that by that date she had already spent $10.5 million on the case and she had exhausted all of her available resources in paying those costs. This was not challenged by the defendant. It seems that the plaintiff was seeking in the Family Court further orders for interim payments by her former husband to enable her to meet ongoing legal costs. In the light of what was deposed to in her affidavit, I do not see that any arithmetical calculation of the precise amount which the plaintiff had spent to that date, or subsequently, has any real prospect of advancing the defendant’s argument on this point. Whether she has spent $10 million or $15 million is not the basis of the argument. It is in colloquial terms whether she has scraped the bottom of the barrel in pursuing her claim against her former husband. This seems to be beyond argument. Hence, I do not consider she should be put to the time, trouble and expense of having to discover all the documents for, and in effect account for, all of the legal and related expenses which she has incurred in this long and complex case.[13]
[13] Although it has not been made the subject of evidence, what I have been told during the course of various submissions is to the effect that the proceedings in the Family Court are by no means yet completed. If so, it may well be that the final amount of the costs to the plaintiff of the litigation with her former husband will not be known at the time of the determination of the preliminary issues.
I have today made the following orders:
1Paragraphs 1 and 2 of FDN11 are dismissed.
2Costs of FDN11 are to be paid by the defendant to the plaintiff.
3Liberty to the plaintiff to apply for any further consequential costs orders.
4Fit for counsel.
5Further directions hearing to be held on Thursday 15 July 2010 at 9.45am.

“On the application …
(b) of a person who is liable to pay, or has paid, any legal costs,
the Supreme Court may tax and settle the bill for those costs.”
Although this section refers to the Court taxing the costs, the expression now used in chapter 12 of the Supreme Court Civil Rules 2006 for that process is adjudicating.