Steicke v Donaldson Walsh Lawyers (No 2) - [2011] SASC 84

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
STEICKE v DONALDSON WALSH LAWYERS (No 2)
[2011] SASC 84
Reasons of Judge Lunn a Master of the Supreme Court
18 May 2011
PROCEDURE
Subpoenas - application by client under s 42(7) of Legal Practitioners Act 1981 to rescind or vary retainer agreements within proceedings under s 42(1) of that Act for taxation of costs - application by defendant under 6R 172(6)(a) to issue subpoenas for s 42(7) hearing - held proceedings under s 42(7) were interlocutory and 6R 172(6) applied - held 6R 172(6)(a) is an adjunct to the Court's powers to control litigation - held application premature as not known what role any evidence of the subpoenaed witnesses would play in the resolution of the disputed issues - application dismissed with liberty to renew.

STEICKE v DONALDSON WALSH LAWYERS (No 2)
[2011] SASC 84
JUDGE LUNN:
Reasons on defendant’s application for permission to issue subpoenas

The defendant is a firm of lawyers. It previously acted for the plaintiff in complex and protracted proceedings in the Family Court. The plaintiff entered into three retainer agreements with the defendant dated 17 May 2005, 13 April 2006 and 3 December 2007 which enabled it to charge her for its services on a time costing basis.
By a letter dated 16 January 2009 the plaintiff requested this Court to tax all of the costs charged to her by the defendant.[1] Pursuant to s 42(7) of the Legal Practitioners Act 1981 (“the LPA”) the plaintiff sought that the Court rescind or vary the three retainer agreements. Section 42(7) provides:
The Supreme Court may, in proceedings under this section, rescind or vary an agreement under sub-section (6) if it considers that any term of the agreement is not fair and reasonable.
[1] On 21 November 2009 I directed that any such request should proceed in this action for administrative convenience, although it had previously been instituted seeking other relief.
Pursuant to directions of the Court, the plaintiff has filed particulars of her claim under s 42(7), which is in effect a statement of claim, and the defendant has filed points of defence, which are in effect a defence to that statement of claim. The defendant has pleaded, inter alia, that from her dealings with other lawyers the plaintiff well understood and appreciated the effect of her retainer agreements with the defendant. The plaintiff has filed points of reply. These quasi pleadings define the issues to be resolved by the Court under s 42(7). The parties have made disclosure of the directly relevant documents, which are voluminous. No hearing date has yet been set for the s 42(7) issues to be determined.
At an early stage of the proceedings the defendant’s counsel intimated that the defendant would be seeking to have the issues under s 42(7) determined by a Justice of the Court on a trial. I raised whether it was possible for a judicial officer other than the one conducting the adjudication of costs to deal with the s 42(7) issues in this action. The point was left in abeyance. On 9 August 2010 the solicitor for the defendant informed me that the defendant did not intend to apply that the preliminary s 42(7) issues be heard by a Justice. If that intimation had not been made, I would have referred the question to a Justice whether a Justice could, or should, determine the s 42(7) issues. If that intimation had not been made by the defendant’s solicitor, I would not have embarked on the present application, as I consider it be one which, if possible, should be dealt with by the judicial officer who is to determine the s 42(7) issues.
On 10 December 2010 the defendant issued an application (FDN26) under 6R 172(6) for permission to issue and serve a subpoena to give evidence against 10 former lawyers who had advised and/or acted for the plaintiff in her Family Court proceedings.[2] The supporting affidavit of the defendant’s solicitor sought to justify the issue of the subpoena on the following grounds:
[2]    The application in respect of Brendan Murray was subsequently abandoned. For the purposes of disposing of the application it is not necessary for me to name the lawyers or to differentiate between them.
15.The evidence to be obtained from the persons sought to be made the subject of a subpoena broadly falls within the following heads:
(a)     Evidence in respect of events occurring during the course of their retainer and generally in connection with documents which have been identified in the affidavits of Mr Branch and Ms Angelino filed in this matter. This evidence goes to topics such as:
(i)The control maintained by the plaintiff over her lawyers, and the work that she required them to do.
(ii)The intention of the plaintiff to achieve her goals irrespective of cost.
(iii)The nature of the matter.
(iv)The importance of the matter to the plaintiff.
(v)The amount of money involved.
(vi)The intricacy of the financial affairs of Mr Steicke.
(vii)The resources needed to prepare for and conduct the plaintiff’s proceedings in the Family Court of Australia.
(b)     Evidence in respect of the knowledge of the plaintiff as to the:
(i)    The differences between charges by different lawyers.
(ii)    The courts’ costs scales.
(iii)The differences between the capabilities and resources of different lawyers.
(iv)The nature and effect of a costs agreement.
(v)The differences between scale costs and costs calculated on a different basis.
The application FDN26 is brought under 6R 172(6) which provides:
(6) A subpoena is not to be issued—
(a) for the purposes of interlocutory proceedings …
unless a Judge or Master authorises the issue of the subpoena.
The defendant did not concede that this sub-rule was applicable, but said it had brought the application out of an abundance of caution in case it was held to apply. For the reasons which follow, I hold that it is applicable.
“Interlocutory proceeding” is defined in 6R as follows:
interlocutory proceeding means a proceeding of any of the following kinds in which an order or direction of the Court is sought—
(a)a proceeding that is preliminary or ancillary to an action or appellate proceeding, or an intended action or appellate proceeding, in the Court;
Examples—
1An application to require production of evidentiary material that may assist in the formulation of an action.
2An application for a Mareva order.
(b)a proceeding for an order or direction about the course or conduct or an action or appellate proceeding;
Example—
An application for extension of time to take a step in an action.
(c)a proceeding related to the enforcement of a judgment;
Example—
An application for an order or direction under the Enforcement of Judgments Act 1991.
I accept the submission of the plaintiff’s counsel that the determination of the s 42(7) issues are a proceeding that is preliminary or ancillary to an action within sub-paragraph (a) of that definition. In earlier reasons in this action[3] I held that an application under s 42(1) of the LPA was an action for the purpose of the 2006 Rules. Section 42(7) of that Act, as quoted above, allows the s 42(7) issues to be dealt with in the s 42(1) proceedings. That makes it preliminary or ancillary to the s 42(1) proceedings. The s 42(1) proceedings are for a taxation[4] and the s 42(7) proceedings are for the purpose of determining how that taxation is to proceed. If the s 42(7) proceedings results in the rescission of one or more of the retainer agreements, the adjudication will then proceed, wholly or in part, on the relevant Court scales and not under the terms of those retainer agreements. If the s 42(7) proceedings result in a variation to a retainer agreement, the adjudication will proceed in accordance with that retainer agreement as varied. If the s 42(7) proceedings wholly fail, the adjudication will proceed on the basis of the provisions of the retainer agreements.[5]
[3] [2010] SASC 188, published on 25 June 2010.
[4] Which equates under Chapter 12 of the Supreme Court Rules 2006 to an adjudication under that chapter.
[5] These determinations will affect both the nature and the type of the work for which the defendant was entitled to charge the plaintiff and the amounts payable by the plaintiff for it. It has been common ground in this action that if the three retainer agreements govern the defendant’s charging a significantly higher amount will be found to be payable by the plaintiff than if its charges are to be fixed under the relevant Court scales.
Some reference was made in the submissions to authorities on the meaning of “interlocutory proceeding” in earlier versions of the Rules which did not contain the definition quoted above. It is unclear as to the extent, if any, to which this definition has varied the common law meaning of “interlocutory proceeding”. It is sufficient here to decide the issue upon the interpretation of the definition as set out above. It is consistent with the latest view on the common law meaning of interlocutory.[6]
[6] See Hardel Pty Ltd v Burrell & Family Pty Ltd (2009) 103 SASR 408.
There are no reported authorities of which I am aware about the criteria to be applied in authorising the issuing of a subpoena under 6R 172(6)(a). In submissions reference was made to the comments of Wicks J in New Ashwick Pty Ltd & Anor v Iama & Anor (No 1)[7] where he said concerning the repealed similar 87R 81.02:
… question of whether leave should be given under r 81.02 is another matter altogether where leave is concerned. Consideration needs to be given to a number of factors including the likelihood of prejudice to one or more of the parties to the action brought about by the delay occasioned by elevating an application for discovery into a major piece of litigation. The inconvenience to a non-party in being subjected to an application for disclosure and production of documents must be weighed against the prejudice to one or more of the parties to the action in the event that relevant documents are not made available in the litigation.
87R 81.02, under which that case was decided, provided:
Where a subpoena is required for the purpose of proceedings in Chambers, such subpoena shall issue from the Registrar with the concurrence of a Judge or Master.
(At the time of the decision of Wicks J it read “upon a note from the Judge or Master” and not “with the concurrence of a Judge or Master”.)
[7] 29 November 2000, [2000] SASC 416 (Unreported) [13].
There is a significant difference between 87R 81.02 and 6R 172(6)(a) in that the former applied only to proceedings in chambers and the latter applies only to interlocutory proceedings. Proceedings in chambers by no means wholly equate with interlocutory proceedings. Under the 1987 Rules, where there was no equivalent of the definition of interlocutory proceeding in 6R 4, an interlocutory proceeding could be the trial of an action; eg. orders for extensions of time under s 48 of the Limitation of Actions Act or the trial of an issue.[8] It is not necessary here to go into the murky distinction at common law between final and interlocutory proceedings and orders except to note that some such proceedings could result in a trial. Hence there would appear to be a huge range of proceedings which could be classified as interlocutory, ranging from the trivial to the very substantial.
[8] Finemores (No 3) Pty Ltd v Evan (1998) 199 LSJS 34; CGU Insurance Ltd v Pettit (2009) 264 LSJS 55.
The determination of the s 42(7) issues in this action will not be by a trial, as that term is generally used in the Supreme Court Rules 2006.[9] If it was a trial, my jurisdiction to hear it would be limited by 6R 208.[10] The procedures adopted for the hearing under s 42(7) will generally be akin to those used for a trial, but it will not be a trial for the purposes of the Rules.
[9] See the comment below relating to the applicability of 6R 209.
[10] No point was raised about Masters hearing s 42(7) disputes as part of s 42(1) taxations in McNamara Business & Property Law v Kasmeridis (2007) 97 SASR 129 or similar proceedings under 6R 271(6) in Catto v Hampton, Full Court, 22 August 2008, [2008] SASC 231.
The proceeding under s 42(7) is litigation for the purposes of 6R 116 and proceedings for the purposes of 6R 117(1). Under those Rules I am obliged to manage this hearing as expeditiously and economically as is consistent with the proper administration of justice and to make all necessary orders for the proper conduct of the proceedings in the interests of justice. Furthermore, under 6R 209[11] I am empowered to give directions about the nature of the evidence to be adduced, the way in which the evidence is to be placed before the Court and the number of witnesses which a party may call, but subject to the principles set out in 6R 209(3). In my view, the authorisation to be given under 6R 172(6)(a) is an adjunct to my duties as the presiding judicial officer pursuant to 6RR 116, 117(1) and 209. It enables me to give effect to those Rules by controlling what witnesses a party can bring before the Court on subpoena. In accordance with what Wicks J said in New Askwick Pty Ltd above, it enables the Court to prevent, as far as it can, the hearing becoming unduly protracted and expensive.
[11] Although 6R 209 refers to trial, its sub-r (5) extends its operation to other hearings, including the hearing of s 42(7) issues.
I have reached the conclusion that the defendant’s application FDN26 is premature and should be dismissed, but with liberty to renew it later in the proceedings. My reasons for this conclusion are as follows.
It has not been decided as yet which party will be dux litis at the hearing on the s 42(7) issues. There has been a practice on such hearings that the lawyer, which is seeking to uphold its costs agreement, has been dux litis, but in my experience it has always been by consent and the point has not been argued. The need of, and the utility of, the subpoenas may well be different, depending on whether the plaintiff is to be cross-examined before or after the subpoenaed witnesses are called by the defendant.
While the defendant has some documents which have been disclosed by the plaintiff about her dealings with the nine lawyers to whom the subpoena is proposed to be directed, there was no suggestion that it had obtained statements from any of those lawyers to be able to know what they would say in their evidence in chief on the matters outlined in the affidavit quoted above. The submissions of the defendant’s counsel assumed that their evidence would support the defendant’s pleaded case, but on the evidence before me there is no real justification for that assumption. I am doubtful whether the defendant would be prepared to call these witnesses “on the blind” if it was not reasonably certain that their evidence would support its case about the knowledge, and the consistency of the conduct, of the plaintiff. The defendant’s counsel suggested that if these lawyers were served with subpoenas, they would be more likely to give statements to the defendant, but I do not consider it is a proper use of a subpoena in these circumstances to induce the addressee to give a statement and then to decide whether to call the person depending on the contents of that statement. All of the addressees of the subpoenas are, or have been, practising lawyers who have acted for the plaintiff and it is highly unlikely that they would voluntarily give any statements to the defendant unless the plaintiff consented to this.
If the defendant is to be dux litis, it is unlikely that it would call these witnesses if it did not have statements from them. If the defendant indicates that it will call them even if it has no statements from them, then I may be prepared later to reconsider the authorisation to issue the subpoena to such witnesses.
If the plaintiff is to be dux litis, the defendant will need to cross-examine her on her dealings with these other lawyers. This may result in admissions which would mean it would be pointless for it to seek to call those lawyers. Whether it would call them as part of the defence case if it did not have statements from them faces the same difficulties as those outlined above if it was dux litis. There may be objections under the Rule in Browne v Dunn to evidence in chief being led from these witnesses about matters which were not put to the plaintiff in her cross-examination.
I am informed that the hearing of the s 42(7) issues is likely to take several weeks. Because of my fixed commitments to conduct various lists in alternate weeks, it will be impossible for me to have a continuous hearing. However, the likely breaks in the hearing will give the defendant the opportunity to apply again for authorisation to issue subpoenas. Whether they should then be authorised can be assessed in the light of what has already transpired in the hearing.
I do not need to deal with the extensive questions of relevance and privilege which were debated in the submissions on this application. They can be left to more appropriate times in the hearing if the addressees of the subpoenas are to be called.
I have today made the following orders:
1FDN26 is dismissed.
2Costs reserved.
3Liberty to the defendant to renew applications under 6R 172(6)(a) later in the proceeding.
4Further directions hearing set for Wednesday 8 June at 9.30am.