Re Burgundy Royale Investments Pty Ltd and Ors v Westpac Banking Corporation Ltd and Ors [1991] FCA 52; 50 Jurisdiction 28 FCR 308 (28 February 1991)

FEDERAL COURT OF AUSTRALIA

Re: BURGUNDY ROYALE INVESTMENTS PTY LTD and ORS
And: WESTPAC BANKING CORPORATION LTD and ORS
No. G339 of 1987
FED No. 50
Jurisdiction
28 FCR 308

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Einfeld J.(1)

CATCHWORDS

Jurisdiction - application by former solicitor of party in the principal matter for a determination that there existed a retainer agreement including with a non party on certain terms.

Federal Court of Australia Act 1976 - section 5(2), 22, 23

Federal Court of Australia Rules - order 62 rule 8(1)

Woolf v Snipe and Ors [1933] HCA 5; (1933) 48 CLR 677

Jackson v Sterling Industries Limited [1987] HCA 23; (1987) 162 CLR 612 Hudgson v Endrust (Aust) Pty Ltd (1986) 11 FCR 152

Keith Hercules and Sons v Steedman and Ors (1987) 17 FCR 290

Burgundy Royale Investments Pty Ltd and Ors v Westpac Banking Corp and Ors G 339 of 1987 (Einfeld J unreported 12 July 1990)

In re Johnson and Weatherall (1888) 37 Ch D 433

In re Park, Cole v Park (1889) 41 Ch D 326

HEARING

SYDNEY
28:2:1991

Counsel for Baker and McKenzie Mr R.T. McKeand instructed by

Baker and McKenzie

Counsel and solicitors for the 8th Mr J. Spigelman QC and

cross respondent Mr A. Robertson instructed by

Blake Dawson Waldron

DECISION

There is before the Court an amended notice of motion dated 5 October 1990 brought by Baker and McKenzie, the former solicitors for the applicants in these proceedings. Although the notice of motion was headed as in the principal proceedings, the parties addressed by and served with the motion were the 2nd, 3rd and 4th applicants in matter G 339 of 1987 (The Esplanade Pty Ltd, Kota Nominees Pty Ltd and Golden Gloss Properties Ltd) who did not appear on the motion, as well as Datuk Wong Chik Lim, the 8th cross respondent in that matter who appeared by senior counsel. I shall refer to these as the respondents. For present purposes I proceed on the footing but without finding, as was the basis on which I was asked to decide another aspect of these proceedings to which I shall refer later, that Wong was a director or shareholder of these three companies and of Burgundy Royale, or was a decisive or important figure in their operations and decisions.

2. The orders sought in the motion are principally for declarations that the respondents retained Baker and McKenzie in the principal proceedings and that they agreed to the payment of Baker and McKenzie's fees as charged rather than in accordance with scale or schedule fees. I have been informed that all other aspects of the principal litigation have been settled or finalised.

3. It was agreed between counsel for Wong and for Baker and McKenzie that the question of the jurisdiction and power of this Court to make the orders sought would be dealt with at this stage, with questions of discretion to make the requested orders and necessary findings of fact to abide the decision on this first issue and if necessary be argued at a later date.

4. Thus the issue here is whether the Court has jurisdiction and power to determine, on the application of the former solicitor acting for certain parties in the principal matter, whether there was a retainer agreement, and if so who were the parties to it and what were its terms. It is relevant to note that the jurisdiction exercised in the principal matter G 339 of 1987 arose from section 86 of the Trade Practices Act and any accrued jurisdiction. In that connection Baker and McKenzie's only separate role was when it was before the Court in response to a subpoena to produce documents about which there has been earlier litigation.
Implied Jurisdiction

5. It was submitted that this Court has implied jurisdiction to determine matters of costs between solicitor and client. In Woolf v Snipe and Ors [1933] HCA 5; (1933) 48 CLR 677, Dixon J said at 678:

The superior Courts of law and equity possess a jurisdiction to
ascertain, by taxation, moderation, or fixation, the costs,
charges, and disbursements claimed by an attorney or solicitor
from his client, and that jurisdiction is derived from three
sources and falls under three corresponding heads.

By virtue of section 5(2) of the Federal Court of Australia Act, this Court is a superior Court of record and a Court of law and equity. It was submitted that only the first two of the sources identified by Dixon J are relevant here. They are:

First, a jurisdiction exists founded upon the relation to the
Court of attorneys and solicitors considered as its officers.
This jurisdiction, commonly called the general jurisdiction of
the Court, enables it to regulate the charges made for work
done by attorneys and solicitors of the Court in that capacity,
and to prevent exorbitant demands.
Second, when a contested claim for costs comes before the Court
it has jurisdiction to determine by taxation or analogous
proceeding the amount of costs.

Counsel for Baker and McKenzie also referred to two English decisions in support of his submission that the Court's implied powers to deal with matters of costs between solicitor and client are wide in scope: In re Johnson and Weatherall (1888) 37 Ch D 433 and In re Park, Cole v Park (1889) 41 Ch D 326. However, as it seems to me, to establish that the Court has such wide powers of this kind is not sufficient. What needs to be established is that the Court has the jurisdiction to make the requested declarations on a motion in the actual litigation brought by the former solicitors for certain parties claiming that their retainer came also from or was guaranteed by another.
Sections 22 and 23 of the Federal Court of Australia Act

6. Section 22 reads as follows:

The Court shall, in every matter before the Court, grant,
either absolutely or on such terms and conditions as the Court
thinks just, all remedies to which any of the parties appears
to be entitled in respect of a legal or equitable claim
properly brought forward by him in the matter, so that, as far
as possible, all matters in controversy between the parties may
be completely and finally determined and all multiplicity of
proceedings concerning any of those matters avoided.

7. Section 23 reads:

The Court has power, in relation to matters in which it has
jurisdiction, to make orders of such kinds, including
interlocutory orders, and to issue, or direct the issue of,
writs of such kinds, as the Court thinks appropriate.

8. Baker and McKenzie relied on the interpretation of those sections by a Full Court of this Court in Keith Hercules and Sons v Steedman and Ors (1987) 17 FCR 290. In that case a dispute had arisen as to solicitor and client costs. The solicitor Hercules was not a party to the proceedings but by consent was made a respondent to a notice of motion by his former clients, the Steedmans. The latter were applying inter alia for the taxation of a solicitor and client bill of costs. It was held that the Court had the jurisdiction and power in such a case to refer the solicitor/client bill to taxation. Thus it was submitted here that the Court has the power, within the proceedings in which the costs were incurred, to quantify solicitor/client costs.

9. However, Baker and McKenzie conceded that in this case the Court is asked to go a few steps further than Hercules, in that prior to referring the matter to taxation, the Court is to be asked to determine whether there was a retainer agreement, who were the parties to it, and whether the agreement was for costs as charged or according to scale or schedule fees. In this connection Baker and McKenzie submitted that Hudgson v Endrust (Aust) Pty Ltd (1986) 11 FCR 152 is authority for the proposition that the powers of the registrar on taxation extend to determining questions of retainer. They say that it follows that the Court can determine other issues involved in a taxation than the mere quantum of costs.
8th Cross Respondent's Submissions

10. Wong submitted that unless section 23 gives the Court the power it needs, it has no jurisdiction. He argued that Hercules was wrong in deciding that the Court had the jurisdiction and power to submit the issue of solicitor/client costs for taxation in the context of the proceedings in which the costs were incurred. It was submitted either that section 23 is not that wide in scope, or that the orders requested here go considerably further than Hercules and are not authorised by that decision.

11. It was argued that the correct view of section 23 is to be found in the decision of the High Court of Australia in Jackson v Sterling Industries Limited [1987] HCA 23; (1987) 162 CLR 612 at 622:

Wide though that power is, it is subject to both jurisdictional
and other limits. It exists only "in relation to matters" in
respect of which jurisdiction has been conferred upon the
Federal Court. Even in relation to such matters, the power is
restricted to the making of the "kinds" of order, whether final
or interlocutory, which are capable of properly being seen as
"appropriate" to be made by the Federal Court in the exercise
of its jurisdiction.

and at 632:

The effect of s 23 is to equip the Federal Court with powers
arising expressly or by implication, in this case from the
Trade Practices Act, and with powers that are incidental and
necessary to the exercise of the jurisdiction conferred by that
Act and the powers so conferred.

12. Thus Wong submitted that any order sought must both be "in relation to" matters in which the Court has jurisdiction and be "appropriate" thereto. Wong submitted that the orders here fail in both respects, having regard to the fact that "the matter" is Burgundy Royale v Westpac No. G 339 of 1987.

13. Furthermore, section 22 does not apply because it is about "parties" and Baker and McKenzie is not a party to that matter number.

14. Alternatively, it was submitted that this Court has no jurisdiction to make the requested orders because they are substantive and, as such, should be dealt with by way of application and not, as has been done, by notice of motion. Order 4 rule 1 and Order 19 rule 1 of the Federal Court of Australia Rules were cited. They read, respectively:

ORDER 4
1. Except as otherwise provided in these Rules all
proceedings in the Court's original jurisdiction shall be
commenced by filing an application.
ORDER 19
1. Any interlocutory or other application in any proceeding
which has already been commenced in accordance with these
Rules shall be made by motion.

15. Finally, Wong submits that he is not amenable to the orders requested because as a cross respondent, he was not a "party" to the proceedings in which Baker and McKenzie's costs were incurred.
Discussion

16. Woolf concerned a notice of motion filed by a solicitor, in which an order was sought for the taxation of a bill of costs in respect to clients he had represented in a matter before the Court. In addition to the passages earlier referred to, Dixon J stated that some statutory jurisdiction for the making of such an order was necessary and that:

Rules of Court ought not to be construed as enlarging or
conferring jurisdiction or affecting substantive rights (at 681).

17. On that basis, the motion was dismissed despite the existence of a rule applicable to the case that might have covered the position.

18. In Jackson the High Court of Australia discussed the scope of section 23 in connection with the question of the Federal Court's power to grant Mareva injunctions. Wilson and Dawson JJ stated that despite section 5(2) of the Federal Court of Australia Act, the Federal Court had limits upon its functions which differentiated it from other Australian superior Courts. Normally a superior court of record has a general jurisdiction as a result of which there exists a presumption that it acts within jurisdiction. Their Honours held that this presumption does not exist in the case of the Federal Court (618), but as a consequence of the vesting in it of the judicial power of the Commonwealth, the Federal Court does have such implied power as is necessarily inherent in the nature of the judicial power itself (619). This implied power is no less than the inherent power of a Court of general jurisdiction, but does not create new rights or extend jurisdiction beyond that which is vested in it. Accordingly their Honours held that section 23 did not extend the jurisdiction of the Federal Court but was limited to the making of orders regarding matters in which the Court already has jurisdiction.

19. Brennan and Toohey JJ stated that section 23 granted the Federal Court such power as is necessary or incidental to the exercise of the Court's jurisdiction (620). Deane J said that while section 23 is a wide power , it is "subject to both jurisdictional and other limits" (622).

20. In Hercules Justice Sweeney held that Order 62 rule 8(1) gave the Court the power to make the order sought in the notice of motion. Its relevant parts are:

Unless the Court or a Judge in a particular case otherwise orders,
bills of costs and fees which -
(a) are payable to barristers and solicitors entitled or
admitted to practise in the Court in respect of business
transacted by them in the Court or its registries; and
(b) have been directed by a judgment or order to be taxed or
under these Rules are liable to be taxed without express
direction,
shall be taxed allowed and certified by a Registrar who in
these Rules is referred to as the taxing officer.

Sweeney J added that section 23 also authorised such an order (294).

21. Justice Lockhart held that the power conferred by Order 62 rule 8 was confined to ordering taxation between parties to the proceedings. As such it did not extend to taxation as between solicitor and client. His Honour stated at 297:

Rule 8 of O 62, when read in isolation from other rules in that
Order, is literally capable of applying to the taxation of
costs directed by Woodward J in this case, but when the rule is
read in the context of the other rules in the Order in which it
finds itself it seems to me that it cannot fairly be construed
as applying to a taxation of costs of the kind in question here.

His Honour added:

In my opinion s 23 confers power upon this Court to direct the
taxation of a bill of costs as between a solicitor and his
client when the costs are incurred in connection with a
proceeding in this Court; but it would be in a comparatively
rare case that the occasion would arise for the exercise of the power.

Justice Sheppard agreed with this conclusion. His Honour stated:

I have reached the conclusion that the making of an order that
the client pay the amount of the costs when ascertained by
taxation is within power. This Court, being a superior Court
of record and having the powers which it has, particularly
those conferred by s 23, has power to control the amount which
a solicitor appearing before it may charge his client. That
control would not be complete unless it included the power to
order a client to pay his solicitor what was properly due to
him for work done for the client in this Court. Such a power,
in my opinion, falls well within the powers conferred by s 23
particularly in the light of the conclusions reached by the
Full Court of this Court and the High Court in Jackson v
Sterling Industries Ltd [1987] HCA 23; (1986) 12 FCR 267, (1987) 162 CLR 612.

Both judges commented that this power is not one which the Court would exercise very often.
Conclusions

22. The crux of this matter is that if Baker and McKenzie's motion is outside the jurisdiction and power of the Court to entertain within the framework of matter number G 339 of 1987, Baker and McKenzie will have to commence a new proceeding. If, as may be assumed, the respondents to that proceeding will not submit to the jurisdiction of the Australian Courts, they will have to be conducted elsewhere, presumably Hong Kong. I am informed that there are or may be legal problems for Baker and McKenzie's success if that course is adopted. Hence this decision may come to be a final determination of a dispute between the parties about a matter which was apparently not satisfactorily or fully dealt with at the time of the discussions and negotiations between the parties about costs.

23. At the outset of the hearing, I expressed a difficulty in seeing how a motion could be permitted which in effect "reconstructed" the parties to the action in which it was brought. Wong was not a party to the action itself but entered the proceedings by way of a cross claim against him. Baker and McKenzie was not a party at all. However, I can see and accept, and am bound by, the rationale of the cases which interpret the Court's jurisdiction as including ancillary matters which arise in litigation, such as solicitor/client costs where there was no dispute as to who was "the client". That seems to apply in the case of The Esplanade, Kota Nominees and Golden Gloss Properties who were applicants in the principal proceeding for whom Baker and McKenzie acted. I hold that the Court has jurisdiction to grant declaratory relief against them.

24. As for Wong, an earlier argument in the principal proceedings over a subpoena, to which I have referred, raised a similar consideration to that which arises here. That was in the first instance an argument about whether Baker and McKenzie had a lien over its documents as against Wong because he was or was akin to being a client of Baker and McKenzie. Although opposing the lien, it was also there suggested by Wong that certain documents in Baker and McKenzie's possession should be withheld from production to and inspection by other parties on the grounds of legal professional privilege because of Wong's relationship with Baker and McKenzie.

25. It is true that that matter was dealt with as on demurrer and therefore the evidence was not subjected to testing and facts were not found. I held that Baker and McKenzie had a lien over Wong's documents: Burgundy Royale Investments Pty Ltd and Ors v Westpac Banking Corporation Ltd, unreported 12 July 1990, but in the end, the matter of legal professional privilege was not finally determined because, as I understand it, the litigation was settled.

26. However, I think that I must assume, and can certainly not exclude, for present purposes that some evidence of that kind would be led here if jurisdiction exists to litigate the current motion. That means that it may be established that Wong stood in relation to Baker and McKenzie as client does to solicitor. Although he was not a party to the initial litigation, he certainly was a party in the litigation in which the costs were incurred. Depending on the result of the litigation, he may in effect have been required to pay some part of the costs of Baker and McKenzie's clients, even if by means of orders that Westpac pay the costs of Burgundy Royale and the other companies and that he pay Westpac's costs including its liabilities to those companies. This means in substance that he would be meeting some of their obligations to Baker and McKenzie.

27. In those circumstances, the authorities which I have quoted appear to give the Court jurisdiction to entertain an application for an order, and make a finding, for the purpose of considering whether the appropriate costs should be taxed, that there was a retainer agreement between Wong and Baker and McKenzie. I so hold.

28. I direct that the parties bring in short minutes of the orders or declarations that should be made to give expression to these conclusions and, unless it is desired to test this ruling on appeal at this stage, a timetable for the further hearing of this motion. I will hear the parties on costs when the appropriate orders or declarations are being considered. Action number G 466 of 1990 should be listed for mention when this takes place.