|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
Federal Court of Australia - Full Court Decisions |
Last Updated: 13 April 2007
FEDERAL COURT OF AUSTRALIA
Macteldir Pty Limited v Roskov [2007] FCAFC 49
COSTS – whether legal practitioner responsible for costs under
Order 62 Rule 9 Federal Court Rules – whether conduct of case is
unreasonable - necessary for client to demonstrate serious dereliction of
duty
Copyright Act 1976 (Cth),
s 115(4)
Federal Court of Australia Act 1976 (Cth), ss 22,
23, 25(6), 32, 43
Judiciary Act 1903 (Cth), s 39B(1A)(c)
Federal Court Rules, O 35 r 11, O 62 r
9
Australasian Meat Industry Employees
Union v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98 cited
Fencott v
Muller [1983] HCA 12; (1983) 152 CLR 570 cited
Levick v Commissioner of Taxation [2000] FCA 674;
(2000) 102 FCR 155 cited
LNC Industries v BMW (Aust) Pty Ltd [1983] HCA 31; (1983)
151 CLR 575 cited
Roberts v Gippsland Agricultural and Earthmoving
Contracting Co Pty Ltd [1956] VLR 555
cited
MACTELDIR
PTY LIMITED v JAMES ROSKOV & ANOR
NSD2280 OF
2005
SPENDER, KIEFEL & EMMETT JJ
12 APRIL
2007
SYDNEY
|
AND:
|
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The Appellant pay the Respondents’ costs of the appeal.
Note: Settlement
and entry of orders is dealt with in Order 36 of the Federal Court
Rules.
|
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF
AUSTRALIA
|
|
BETWEEN:
|
MACTELDIR PTY LIMITED
Appellant |
|
AND:
|
JAMES ROSKOV
First Respondent JOHN DE MEYRICK Second Respondent |
|
JUDGES:
|
SPENDER, KIEFEL & EMMETT JJ
|
|
DATE:
|
12 APRIL 2007
|
|
PLACE:
|
SYDNEY
|
REASONS FOR JUDGMENT
1 The second respondent (the Barrister) appeared on behalf of the appellant (the Client), on the instructions of the first respondent (the Solicitor), in a proceeding brought in the Federal Court against Mile Dimovski and Rockdale Ilinden Soccer Club Inc (the Wrongdoers). The Client was dissatisfied with the way in which the proceeding was conducted by the Barrister and the Solicitor and asked the Court to make orders that the Barrister and Solicitor repay to the Client certain costs that the Client was ordered to pay to the Wrongdoers and an order disallowing any costs of the proceeding between the Barrister and the Solicitor on the one hand, and the Client on the other hand.
2 The basis of the Client’s claim is that the costs in question were incurred improperly or without reasonable cause, or that they were wasted by misconduct or default and that the Barrister and the Solicitor were responsible. Under Order 62 Rule 9 of the Federal Court Rules, where it appears to the Court that a legal practitioner is responsible for costs so incurred or wasted, the Court may disallow the costs as between the legal practitioner and the legal practitioner’s client, and may direct the legal practitioner to repay to the client costs that the client has been ordered to pay to another party.
3 The Client made the claim against the Barrister and Solicitor by notice of motion filed on 24 February 2004 in the original proceeding, which was brought in the name of the Client against the Wrongdoers in 2001. On 2 November 2005, for reasons published on that day, Justice Allsop ordered that the notice of motion be dismissed and ordered the Client to pay the costs of the motion of the Barrister and the Solicitor. The Client appealed to the Full Court from those orders by filing a notice of appeal on 23 November 2005.
THE SETTLEMENT OF THE ORIGINAL PROCEEDING
4 In the original proceeding, the Client had made allegations against the Wrongdoers of infringement of the Client’s copyright in certain advertising material contained in a directory published by the Client. The Client’s claim was settled following negotiations between the Client and the Wrongdoers. Following the settlement, the proceeding was listed for directions before Madgwick J on 7 August 2001, when the Solicitor informed his Honour that terms of settlement had been signed. The Solicitor said that he would be "seeking leave to hand up a copy in order to seal same".
5 The solicitor then provided to his Honour a document entitled "TERMS OF SETTLEMENT". The document was signed by the Solicitor on behalf of the Client and by the solicitor for the Wrongdoers. The Terms of Settlement provided as follows:
"BY CONSENT and without admission of liability the parties agree to the following orders:
1. This is the full and final settlement of this matter and the Terms are not to be disclosed by any party.
2. The [Wrongdoers] will not publish, produce, distribute, promote or in anyway be related with the publication, production, distribution or promotion of any book, booklet, magazine or document which contains advertisements, pictorials or drawings with similar and the same contents which have been copied or reproduced from the form and layout of the [Client’s] Telephone Directory.
3. The [Wrongdoers] will publicly announce an apology to the plaintiffs through the Radio Station 2NBC which broadcasts in the Macedonian language within the state of New South Wales and consents to the announcement. The [Wrongdoers] will also advertise an apology with a Macedonian newspaper which circulates in New South Wales.
4. The contents of the advertisement/apology will be as agreed between the [Client] and [the Wrongdoers] and if there is no agreement within one month from the date of these orders then both parties will be bound by the decision of the Mediators Dimitar Todorovski and Igor Aleksandrov Avramovski.
5. The first [Wrongdoer] will not advertise or announce through any radio station advertisements which have been copied or reproduced from the form and layout of the [Client’s] Telephone Directory.
6. The first [Wrongdoer] will pay all legal and associated costs and disbursements in respect of these proceedings for both the [Client] and the second [Wrongdoer], on behalf of the [Client] agreed to be sum in the sum of $ 7,000.00 payable within 28 days.
7. The [Wrongdoers] will deliver to the plaintiffs the remainder of the printed directories which were printed by Rockdale Ilinden Soccer Club, which have not yet been distributed within one calendar month from the date of these orders."
6 The following exchange then took place between Madgwick J and the Solicitor:
Madgwick J: "If you want the terms not to be disclosed you won’t be able to file them in court, you’ll have to seek leave to discontinue on the basis that the parties have reached agreement."
Solicitor: "There are certain orders there, your Honour, that concern costs and certain things that the [Wrongdoers] had to advertise and apologise and certainly other matters which...’
Madgwick J: "Are these undertakings to the Court are they?"
Solicitor: "They are undertakings between..."
Madgwick J: "Either that or you abandon and they are not to be disclosed matter."
Solicitor: "We will abandon that then, your Honour"
Madgwick J: "Alright. I note the undertakings to the Court contained in paragraphs 2, 3 and 5. I note the agreement in paragraph 4. I note the undertaking in paragraph 7. I order the first [Wrongdoer] to pay the costs of the [Client] and second [Wrongdoer] agreed at $7,000 payable within 28 days to [the Solicitor]."
Solicitor: "That’s correct, your Honour."
Madgwick J: "Thank you. The matter is otherwise by consent dismissed."
It appears that his Honour was prepared to treat paragraphs 2, 3, 5 and 7 as undertakings to the Court in circumstances when, although the Terms of Settlement were signed on behalf of the Wrongdoers, they were not expressed as undertakings and there was no one in Court to proffer the undertakings on behalf of the Wrongdoers.
7 A report of listing in respect of the original proceeding was completed by the associate to Madgwick J. The report of listing contained the following:
"RESULTS
His Honour noted the following as per the attached Terms of Settlement:
1. undertakings to the Court as per paras 2, 3, 5 & 7;
2. agreement as per para 4.
His Honour ordered the following:
3. Order in accordance with para 6.
4. By consent, the matter is dismissed."
However, no orders were entered in the original proceeding.
ENFORCEMENT OF THE SETTLEMENT
8 Subsequently, the client was apparently concerned that the Wrongdoers were again infringing its copyright. On 27 February 2002, a second proceeding was commenced in the Court in the name of the Client. The Wrongdoers were named as respondents. The Client made a claim of infringement of copyright by material published in the 2002 edition of a directory/calendar published by one of the Wrongdoers. In a statement of claim filed in the new proceeding, the Client complained of breaches of the Terms of Settlement.
9 However, at the first directions hearing in respect of the second proceeding on 21 June 2002 before Wilcox J, the Barrister informed his Honour that the application and statement of claim had not been served on the Wrongdoers and that the Client wished to discontinue the proceeding. A notice of discontinuance was filed in Court, bringing that proceeding to an end. Having regard to subsequent events, it is perhaps unfortunate that the course of discontinuing that proceeding was adopted.
10 On 12 July 2002, at the behest of the Barrister and the Solicitor, a notice of motion was filed in the original proceeding in the name of the Client. The notice of motion claimed the following relief:
"1. An Order restraining the [Wrongdoers], their servants and agents, from further publication, distribution and promotion of the publication titled, ‘Sports Magazine, Club Sponsor’s and Member’s Directory 2002 Volume 2’, or any later volume or edition thereof.
2. An Order restraining the [Wrongdoers], their servants and agents, from publishing, distributing and promoting any other book, booklet, magazine or document, being in the nature of a directory printed in the form, layout style, content and general appearance of the [Client’s] Macedonian Telephone Directory.
3. An Order restraining the [Wrongdoers], their servants and agents, from promoting the publication referred to in Order 1, in any radio broadcast, print media or other form of mass communication.
4. An Order that the [Wrongdoers] account to the [Client] in respect of all moneys received and all profits made in respect of the publication titled, ‘Sports Magazine, Club Sponsor’s & Member’s Directory 2002 Volume 2.’
5. An Order that the [Wrongdoers] pay to the [Client] damages in the amount of profit indicated by the taking of accounts pursuant to Order 4.
6. An Order that the [Wrongdoers] pay to the [Client] pursuant to section 115(4) of the Copyright Act 1976 (Clth), such other damages as to the Court seems just.
7. An Order that the [Wrongdoers] deliver to the [Client] within 28 days, all remaining copies of the publication referred to in Order 1, wheresoever those copies may be located within the possession, control and recovery of the [Wrongdoers], their servants and agents.
8. Such other and further orders as to the Court seem just.
9. Costs."
11 The notice of motion encountered difficulties. It came before Madgwick J for directions on 19 July 2002. At the outset, his Honour suggested that it may be necessary for the Client to start a new proceeding. After some discussion concerning the Wrongdoers’ answer to the allegations that were foreshadowed by the notice of motion, his Honour suggested to the Barrister that the Client proceed by way of independent application. Counsel for the Wrongdoers submitted that that course was necessary to obtain the relief claimed in the notice of motion. The proceeding was stood over to 26 July 2002 for argument on that question.
12 Several days after 19 July 2002, the Barrister made a written submission to Madgwick J, a copy of which was provided to counsel for the Wrongdoers. The submission addressed the question of whether the matter was properly before the Court by way of notice of motion with supporting affidavits. The submission drew attention to ss 22 and 23 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) and to a number of authorities in support of the proposition that the enforcement of compromise settlements should be by way of notice of motion in the originating suit. The Barrister submitted that the matter was properly before the Court and that, on 26 July 2002, a time should be fixed for the Wrongdoers to file and serve any affidavit evidence they wished to rely on in answer to the notice of motion. The Barrister endorsed on his submission a reply from counsel for the Wrongdoers making it clear that the Wrongdoers’ position was that the notice of motion procedure was not appropriate, because it would require a factual enquiry by the Court. No mention was made of jurisdiction.
13 When the matter came before Madgwick J on 26 July 2002, the Barrister indicated to his Honour that he wished to proceed with the matter as presently constituted. After referring to the Barrister’s written submissions, his Honour asked counsel for the Wrongdoers whether he wished to argue the point. Counsel for the Wrongdoers said:
"I will be raising that point, it will be a point that we take. We take it for a number of reasons and they are not just procedural. I have indicated on three occasions that I will be taking that point..."
In response to an enquiry from Madgwick J as to how long it would take to determine the point, counsel for the Wrongdoers responded "two hours".
14 On 30 July 2002, the Barrister wrote to the Solicitor confirming advice that had been given by him and providing further advice on the evidence required in support of the motion. Nothing was said concerning the appropriateness of the process that had been adopted. The letter of 30 July 2002 contained the following warning:
"Whilst on the present facts [the Client] should succeed, nothing is certain in litigation, and if we are to meet the [the Wrongdoers’] case as they appear intent upon running it, then we will need to provide much more compelling evidence than we have at present."
15 On 11 October 2002, the notice of motion was once again listed for directions before Madgwick J. While there was discussion concerning the likely issues, there was no discussion concerning the appropriateness of the process that had been adopted. On 4 November 2002, the solicitors for the Wrongdoers wrote to the Solicitor. After dealing with proposed interrogatories and other evidentiary matters, the letter relevantly said:
"...we assume these proceedings are not in the nature of contempt proceedings. That has always been our view but the matter requires confirmation for abundant caution because of the leave sought by [the Client] to administer interrogatories."
The Solicitor responded on 5 November 2002, relevantly saying:
"The proceedings are not in the nature of contempt proceedings, which should be apparent from the pleadings."
THE STATEMENT OF A SPECIAL CASE FOR THE FULL COURT
16 The notice of motion was listed for hearing before Madgwick J for five days commencing 10 March 2003. When the matter was called on for hearing on that day, the Barrister indicated to Madgwick J that senior counsel for the Wrongdoers wished to "raise a threshold matter in respect of jurisdiction". The Barrister indicated to Madgwick J that he was in a position to argue the matter immediately. After some reference to the question of whether "the matter" had been raised previously, the Barrister submitted that what was then being raised was that the Court did not have jurisdiction and that that question had never been raised before.
17 Senior counsel for the Wrongdoers then took his Honour to the transcript of the hearings on 19 July 2002 and on 26 July 2002 and referred to discussion of the question of "whether the matter was properly on foot under the present proceedings". The Barrister reiterated that the Wrongdoers had never raised the matter of jurisdiction but that he was ready to proceed.
18 Madgwick J asked the Barrister whether he was pressing all the paragraphs in the notice of motion. The Barrister responded that the only paragraph that really now mattered was paragraph 6 dealing with damages. He said that the matter "comes down to the enforcement of the terms". The following exchange then occurred:
Madgwick J: "... the Court’s jurisdiction has been challenged. In order to judge that I at least have to know what exactly you’re seeking – now, what exactly are you seeking, that’s all. I am not asking you why I just want to know what."
Barrister: "What we are seeking is the enforcement of the terms of settlement and damages."
Madgwick J: "Do you seek any of 1, 2, 3, 4, 5 or any variation downwards of any of those paragraphs?"
Barrister: "The only orders we are seeking Order 2 which is still relevant. We are seeking Order 6 and Order 7 and, of course, 8 and 9."
Madgwick J: "You are seeking 2 and 6 is that right?"
Barrister: "Yes, we’re seeking enforcement of the terms."
19 Shortly afterwards, following an exchange between Madgwick J and senior counsel for the Wrongdoers, the Barrister informed his Honour that he was not now relying on s 115(4) of the Copyright Act 1976 (Cth) (Copyright Act), which was the subject of Order 6 of the notice of motion. Senior counsel for the Wrongdoers then commented that that concession made clear that the matter before the Court was simply a breach of contract case and that that had certain important ramifications. The first, he said, was that the Court simply did not have jurisdiction to litigate a bare breach of contract case and that that is all that was before the Court at that time.
20 Subsequently, senior counsel for the Wrongdoers, in referring to s 32 of the Federal Court Act, said:
"There is no dispute between the parties as to what the terms of agreement are. They are the terms that were in the terms of settlement.
We don’t, for example, say that we didn’t make any such agreement. We say we did make such an agreement and indeed the Court has already in settling the matter in accordance with those terms accepted undertakings and made orders so that in a sense there already has been summary enforcement by the process that was gone through by the parties back in August 2001. Now, that process is not spent. What the [Client] says is well then notwithstanding our agreement and everybody understands this to be the agreement you have subsequently acted in breach of that agreement and that, your Honour, is really a separate and identifiable factual controversy between the parties so that any work that section 22 had to do has in fact – it was done on the day that your Honour made orders and accepted undertakings in accordance with the terms of settlement and what has thereafter happened some months later is that another controversy has arisen between the parties as to whether or not in fact by the subsequent publication of another directory there was a breach of that contract between them."
21 When Madgwick J raised the question of whether the proceeding was for contempt, senior counsel for the Wrongdoers submitted that, if it were a contempt proceeding, that would be a different matter but said that it was not a contempt proceeding. He said that it "it is in truth and in substance a breach of contract."
22 After a further exchange with the Barrister, Madgwick J said:
"Now, if they are not contempt proceedings then whatever the powers of the Court in relation to the terms of settlement where the terms don’t merge in orders or other proceedings of the Court including the acceptance of undertaking then I can’t see that those cases have much to do with the situation whereas it seems to me the terms of settlement have merged in proceedings of the Court and that does seem to me to be the case here."
Subsequently, his Honour said:
"...it seems to me the only way I’ve got jurisdiction is to regard these as proceedings that irregularly alleged contempt and if they irregularly allege contempt then you better make up your mind whether you want to allege contempt and if you do we’d better set about regularising things and we better see to the costs of what’s happened."
23 Senior counsel for the Wrongdoers then said:
"...contrary to what your Honour has said, we would accept that the [Client] could sue upon the terms of settlement as an agreement... the agreement itself we would accept itself constitutes a contract but where we depart from our learned friends is this that if in fact they want to sue on a separate contract claim they can’t bring it in this proceeding because the Court simply does not have the jurisdiction on that bare contract claim... there is certainly nothing left of a copyright case and damages and anything that can arise out of a copyright case... that’s been replaced with a contract... what has been superseded or what has merged is, in fact, the copyright claim into the agreement and the orders that the Court made. Now, stemming from that, if there has been a breach, we would accept that there is now a contract in place and that the [Client] can sue on the contract. But what we say the [Client] can’t do is that it just can’t come back to this Court and say I’d like damages for breach of contract...’
Madgwick J observed that the Client could come to the Court and ask the Court to enforce its own orders. Senior counsel for the Wrongdoers responded that it would have been possible to commence proceedings for contempt but that the Client had not done that.
24 After further discussion concerning the process up to that time and after referring to several authorities, senior counsel for the Wrongdoers advanced the proposition that, where the Federal Court has a bare contract claim in front of it, the Court does not have jurisdiction. He said that, where s 22 has been used in the past, it has been in the limited class of case of summary enforcement. However, he said, s 22 is now spent, because the Court has made orders and accepted undertakings: any summary enforcement has taken place by reason of the orders and undertakings and s 22 no longer has any work to do.
25 After further exchanges, Madgwick J briefly interrupted the hearing to explain to several visiting Vietnamese judges in open court, the nature of the proceeding. After briefly referring to the background to the proceeding, his Honour summarised the contentions of senior counsel for the Wrongdoers as follows:
"He says if you are trying to enforce earlier orders of the Court you should do that by way of formal proceedings that are very like criminal proceedings for contempt of the Court... [When] what you are relying on are your contractual rights under the agreement to settle the original proceeding so what you are doing is really suing for breach of contract but you are trying to do that in the Federal Court and the Federal Court does not exist to hear simply breach of contract cases... Although historically this action did have something to do with the Federal Court, it is really a different case so this Court now doesn’t have jurisdiction to deal with this case..."
The hearing then resumed. Senior counsel for the Wrongdoers did not dissent from that summary, and nor did the Barrister.
26 The Barrister then pointed out that the Client was endeavouring to enforce a contract that had become a contract in a proceeding that had been instituted in the Court and that had been settled within the Court. He pointed out that the contract was made by the settlement of a proceeding that was on foot and for which the Court had jurisdiction. Madgwick J observed, however, that there was a new dispute, which involved an inquiry into facts that occurred after judgment.
27 It is significant that the dialogue thus summarised proceeded on the basis that what the Barrister was requesting was the enforcement of the Terms of Settlement. No mention was made of the fact that the notice of motion claimed relief that went beyond enforcement of the Terms of Settlement. The debate centred on the Court’s jurisdiction to deal with breach of the contract constituted by the Terms of Settlement.
28 Ultimately, after an adjournment, the Barrister proposed that the question of jurisdiction be referred to a Full Court. The Barrister said that, if the Full Court were to accept the proposition advanced on behalf of the Wrongdoers, the Client may seek to convert the proceeding into proceedings for contempt. He said that there would be no point in going off to some other court to start an action on the basis of breach of contract.
THE SPECIAL CASE
29 On 14 March 2003, a question was reserved for the consideration and determination of the Full Court pursuant to s 25(6) of the Federal Court Act. The question was whether the Court has jurisdiction to grant the relief sought pursuant to the Client’s notice of motion filed on 12 July 2002. It is perhaps unfortunate that the question was formulated in that way, having regard to the fact that the relief claimed in the notice of motion went well beyond the enforcement of the Terms of Settlement.
30 On 13 June 2003, the Barrister wrote to the Solicitor saying that the special case involved "a very moot technical point of legal reasoning" and advised that, if the Client lost or was not given leave to file contempt proceedings, it should seek leave to have the proceeding cross-vested to the Supreme Court or the District Court. That advice was passed on to the Client by the Solicitor.
31 The parties were directed by the Court to file written submissions in relation to the special case in accordance with a timetable fixed by the Court. Both parties filed submissions in accordance with the directions.
32 On 2 September 2003, the associate to Wilcox J wrote to the legal advisers to both parties saying that the judges assigned to the matter had considered the written submissions received from the parties and required clarification as follows:
"...a report of listing dated 7 August 2001...records the giving of undertakings to the Court in terms of paras 2, 3, 5, and 7 of set Terms of Settlement. However, the Terms of Settlement are not framed in terms of undertakings to the Court and the report of listing suggests that there was no appearance on behalf of the respondents on 7 August 2001.
I have been requested to ask each of you the following questions:
(i) do you contend that undertakings to the Court were given on 7 August 2001?
(ii) if so, how were the undertakings conveyed to the Court?
(iii) if undertakings were given, does that have any bearing on the Special Case? If so, how?"
Thus, the members of the Full Court were mindful of the fact that no one on behalf of the Wrongdoers had ever proffered undertakings to the Court.
33 The Barrister responded on 2 October 2003, relevantly answering the questions as follows:
"(i) Yes, that appears to be the effect of whatever transpired on that day, as recorded in the Report of Listing.
(ii) It would seem that the undertakings were given orally from the Bar table; or more likely that the Court, in declining to treat paragraphs 2, 3, 5 and 7 of the terms as the basis for final Orders, was prepared instead to accept those paragraphs as undertakings to the Court.
(iii) Yes, the fact that parts of the parties’ terms were taken to be undertakings to the Court, adds substantially to the scope of the Court’s jurisdiction in the matter... the parties came seeking Orders which the Court treated (as to the essential parts) as undertakings. As such... it is not just a matter of seeking to enforce the terms of the parties’ agreement, but also the undertakings that were given to the Court in respect thereof. It is also worth noting that, provided jurisdiction pertains, the Court has complete control of its own processes and... section 22 of the Act permits the Court to ‘grant, either absolutely or on such terms and conditions as the Court thinks just, all remedies to which any of the parties may be entitled.’"
34 Once again, it is significant that the language of that response indicates that the Barrister was seeking to enforce the Terms of Settlement, notwithstanding the wider claims in the notice of motion. The present Full Court was not taken to any response from the Wrongdoers.
35 There was no oral argument before the Full Court in relation to the special case. With the concurrence of the parties, the matter was decided on the basis of the written submissions provided in accordance with the directions given by the Court. The present Full Court was not taken to those written submissions.
36 On 17 October 2003, for reasons published on that day, the Full Court ordered that:
• the question in the Special Case be answered No;
• the Client pay the Wrongdoers’ costs in relation to the Special Case; and
• the matter be remitted to Madgwick J.
37 In its reasons for those orders, the Full Court said that the genesis of the problem in the case was the failure of the parties properly to implement the agreement that they negotiated in August 2001. Their Honours observed that, when the matter came before Madgwick J, only one of the orders proposed in the Terms of Settlement was made, being the one dealing with costs; the other proposed orders were transformed into undertakings by the Wrongdoers to the Court. The Full Court observed that it was not clear how that came about but went on to say that, in response to an enquiry made on behalf of the Court, counsel for the Wrongdoers expressly accepted that undertakings were given to the Court in terms of Orders 2, 3, 5 and 7. The Full Court proceeded, therefore, on that basis.
38 In its reasons of 17 October 2003, the Full Court observed that Madgwick J had, apparently with the concurrence of the Solicitor, ordered that "the matter is dismissed". Their Honours considered that that order brought the original proceeding to an end, subject only to such rights of enforcement as arose out of the undertakings accepted, and the orders made, by Madgwick J. Their honours considered that, while the costs agreement, recorded in paragraph 6 of the Terms of Settlement, became enforceable as an order of the Court, the same could not be said of the promises embodied in paragraphs 2, 3, 5 and 7 of the Terms of Settlement. Whatever their intention, the parties did not obtain orders in respect of those matters.
39 However, the Full Court went on to say that, accepting the concession that the promises set out in paragraphs 2, 3, 5 and 7 of the Terms of Settlement were accepted as undertakings to the Court, it might have been open to the Client to institute proceedings for contempt, but that that course had not been taken. The Full Court observed that the Barrister seemed to accept that there was no enforceable order in relation to the matters mentioned in paragraphs 2, 3, 5 and 7 of the Terms of Settlement and that that is why he said that the Client sought to enforce, not just an agreement in the nature of a contract between the parties, but an agreement to seek orders of the Court. The Full Court said that, according to the Barrister, the reason why the Court has jurisdiction to entertain such an application is that the settlement agreement arose out of proceedings in the Court and concerned orders to be made by the Court.
40 The Full Court then said at [51]:
"There is no doubt that the agreement sought to be enforced by [the Client] arose out of proceedings in this Court and concerned orders to be made in this Court. However, the relevant proposed orders (paras 2, 3, 5 and 7 in the Terms of Settlement) have not been made. Even assuming the orders sought in the notice of motion go no further than to enforce these proposed orders, had they been made, in fact they have not; consequently, there is no basis for the Court to make enforcement orders."
41 The Full Court then went on to consider the position on the basis that the undertakings given to the Court were actually orders of the Court. Their Honours considered that the situation before them did not fall within the category of cases where the Court would ordinarily enforce a compromise agreement in the suit compromised. That course would be permitted only if the compromise agreement related solely to:
• the conduct or prosecution of that suit;
• the staying or dismissal of the suit,
• the granting of the whole or part of the relief claimed in the suit; or
• the doing of that which the suit was brought to enforce.
42 Where, however, the compromise agreement involved matters extraneous to the suit compromised, the Court would ordinarily leave a party to proceed by separate proceedings. A compromise agreement would involve matters extraneous to the suit if:
• it dealt with property as to which no question was raised in the suit;
• it provided for things to be done that went beyond the ordinary range of what the Court would order in the suit;
• its enforcement involved giving effect to equities of a different nature from those involved in the suit;
• there were parties to the agreement who were not parties to the suit.
Further, if there were a substantial question to be determined as to what were the terms of the compromise agreement or as to whether it was valid or specifically enforceable, a party would ordinarily be left to commence a separate proceeding so that such matters might be fully investigated. The Full Court referred generally to Roberts v Gippsland Agricultural and Earthmoving Contracting Co Pty Ltd [1956] VLR 555 at 562-563 as support for the above propositions.
43 The Full Court then observed that factual matters with respect to the new publication alleged in the notice of motion were in dispute and that, accordingly, it was not a case of the Client seeking a stay or dismissal of the original proceeding; nor was it a case of granting the relief claimed in the original proceeding. Therefore, it did not seem to the Full Court that justice could be done "under the summary procedure" of the Court adopted on behalf of the Client. In addition, their Honours considered that, since Madgwick J had ordered that the original proceeding be dismissed on 7 August 2001, it would be necessary to reinstate the original proceeding before making any orders for enforcement of any agreement between the parties but the Client had not applied for reinstatement of the original proceeding.
44 The Full Court also considered s 22 of the Federal Court Act and said that it did not suffice to found the Client’s application. Further, their Honours considered that, while the associated jurisdiction conferred by s 32 of the Federal Court Act may, in an appropriate case, extend the scope of the Court’s jurisdiction, that could only occur if both the original claim and the claim argued to fall within s 32 are part of one "matter", the test being whether both claims arise out of the same substratum of fact: see Fencott v Muller [1983] HCA 12; (1983) 152 CLR 570 at 606 and 607. Their Honours considered that, in the case before them, the orders sought on behalf of the Client related to the Wrongdoers’ conduct in respect of a publication that was different from the publication to which the conduct in issue in the original proceeding related. Given that publication was of the essence of both of the new complaints, each complaint necessarily raised at least one separate factual issue.
45 The Full Court then made clear its view that, where undertakings to the Court have been given, the Court would ordinarily have jurisdiction to enforce such undertakings. Their Honours referred to the observations made by the High Court in Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98 at 114-115 as authority for the proposition that the Federal Court has a wide range of remedies to ensure compliance with its orders. Their Honours went on to say that there is no reason why, in an ordinary case, the Court could not grant an injunction to restrain a breach of an undertaking to the Court. Their Honours observed that it might have been possible for the Client to frame its motion as a claim for injunctive relief to restrain conduct that would otherwise have amounted to contempt, but that it did not do so. The Full Court did not mention Order 35 rule 11 of the Federal Court Rules. That question will be taken up below.
46 The Full Court referred specifically to the second undertaking arising out of the Terms of Settlement, to the effect that the Wrongdoers would not publish, distribute or promote any other document that contains material with similar content, which has been copied or reproduced from the former layout of the Client’s telephone directory. Their Honours observed that, while that undertaking extended to future publications, the notice of motion claimed orders restraining the Wrongdoers that go beyond the terms of that undertaking. The proposed orders would restrain the Wrongdoers in terms beyond the terms of the undertaking because they were not limited to documents copied or reproduced from the Client’s telephone directory. The notice of motion also claimed an account of profits and damages. The Full Court concluded that the Client’s departure from a claim merely to enforce the existing undertakings took the notice of motion away from the ordinary case. For that reason, the Full Court concluded that the Federal Court had no jurisdiction to grant the relief sought in the notice of motion.
47 Thus, the Full Court, in substance, pointed out that the relief claimed in the notice of motion went, to a significant degree, beyond the mere enforcement of the particular undertakings given pursuant to the Terms of Settlement. Their Honours were at pains to point out that, if the Client was seeking to do no more than enforce undertakings given to the Court, there would have been no impediment to the grant of injunctions to enforce the undertakings.
48 Complaint is now made on behalf of the Client that the attention of the Full Court was not drawn to the provisions of Order 35 rule 11 of the Federal Court Rules. Order 35 rule 11(1) relevantly provides that, where a person gives an undertaking to the Court to do or refrain from doing any act and the person fails to fulfil the undertaking, any party may move for an order requiring that person to do or refrain from doing the act in question. Under rule 11(2), the Court, on being satisfied that the undertaking was binding on a person, is required to make such an order. Under rule 11(3) the Court may be informed of an undertaking to the Court by, amongst other things, a reference to a note made by the Judge who heard the proceeding.
49 Having regard to the reasons and conclusions of the Full Court, it is tolerably clear that the Full Court would not have regarded Order 35 rule 11 as decisive. The Full Court considered the motion on the basis of all of the relief claimed by it, including the orders restraining further infringement of copyright, the order for taking accounts and the order for damages, in the amount of any profits. That relief goes well beyond the Terms of Settlement and any undertakings given on 7 August 2001 that might have been enforced pursuant to Order 35 rule 11.
50 A further complaint now made on behalf of the Client is that the Client had instructed the Barrister and the Solicitor that all the Client wanted to do was "to enforce the settlement". That is what the Barrister told Madgwick J. It may be, therefore, that the Full Court proceeded on a misapprehension as to what was wanted by the Client’s notice of motion. Had there been oral argument on the special case, that misapprehension may have been corrected. It is perhaps unfortunate that there was no oral argument in the course of which the Barrister may have been able to articulate the limit of the relief that was really sought by the Client, as the Barrister partly did in his letter of 2 October 2003.
INSTITUTION OF PROCEEDINGS AGAINST THE LAWYERS
51 Following remission by the Full Court, the notice of motion came before Madgwick J again on 7 November 2003. The Barrister announced that the Full Court had concluded that the Court would seem to have jurisdiction to offer relief in two ways, one being contempt and the other being by way of injunctive relief. The Barrister referred specifically to the following observations of the Full Court at [57] and [59]:
"It is unnecessary for us to make any general statement about the jurisdiction of the Court to enforce compromises of existing proceedings. However, we wish to make it clear that, where undertakings to the Court have been given, ordinarily the Court would have jurisdiction to enforce such undertakings.
There is no reason why, in an ordinary case, the Court could not grant an injunction to restrain a breach of an undertaking to the Court."
The Barrister said that the Client had instructed him that it would seek leave to amend the notice of motion to proceed by way of injunctive relief. Counsel for the Wrongdoers then asserted that the proper course would be for the existing notice of motion to be dismissed and for another notice of motion be filed.
52 In the course of argument concerning the costs of the motion that then ensued, Madgwick J pointed out that it had not been the Client’s choice to proceed in the way in which the matter had proceeded. His Honour raised the question of whether the Client should get some indemnity from one or more of its legal advisers. Thereafter, the Client obtained separate legal advice and the Barrister and the Solicitor ceased to act for the Client.
53 On 2 December 2003, Madgwick J dismissed the notice of motion of 12 July 2002 and ordered the Client to pay to the Wrongdoers’ the costs of and incidental to the notice of motion. The Client then filed its notice of motion of 24 February 2004.
THE DECISION OF THE PRIMARY JUDGE
54 By its notice of motion of 24 February 2004, the Client seeks orders:
• that the Solicitor and the Barrister repay to the Client the costs that the Client has been ordered to pay to the Wrongdoers in the proceeding;
• disallowing any costs of the proceeding between the Solicitor and the Client;
• disallowing any costs of the proceeding between the Barrister and the Client; and
• that the Solicitor and the Barrister pay the Client’s costs of the application.
55 The primary judge recorded that it was common ground that such orders as are sought in the notice of motion should only be made after the exercise of great caution and upon the Court being satisfied that the relevant default of the legal practitioner is sufficiently serious to amount to a breach of duty, not only to the relevant client, but also to the Court. In general, it was common ground on the hearing of the appeal that the statements of principle made by the primary judge were correct.
The Relevant Principles
56 The parties generally accepted as correct the statements of principle found in Levick v Commissioner of Taxation [2000] FCA 674; (2000) 102 FCR 155 at [43] and [44]. Thus, in a claim under Order 62 rule 9, it is necessary for a client to demonstrate a serious dereliction of duty by the legal practitioner or a failure on the part of the legal practitioner to fulfil a duty owed to the Court to aid in promoting, in the practitioner’s own sphere, the cause of justice. It will often be difficult for a court to know all of the details and circumstances of a legal practitioner’s instructions. Further, the Court must be concerned about the risk of a practice developing whereby legal practitioners endeavour to brow beat their opponents into abandoning clients, or particular issues or arguments, for fear of a personal costs order being made.
57 Nevertheless, it is equally important to uphold the right of the Court to order a legal practitioner to pay costs wasted by the practitioner’s unreasonable conduct of a case. What constitutes unreasonable conduct will depend upon the circumstances of the particular case. However, unreasonable conduct must be more than acting on behalf of a client who has little or no prospect of success. There must be something akin to an abuse of process. Using a proceeding for an ulterior purpose or conducting a proceeding without any, or any proper, consideration of the prospects of success in the proceeding would be sufficient to justify an order against a legal practitioner who was responsible for that conduct.
The Findings of the Primary Judge
58 The Client relies on a number of findings made by the primary judge concerning the approach by the Barrister to the notice of motion of 12 July 2002. It is therefore desirable to set out the findings made by his Honour.
59 First, the Barrister did not appear to appreciate that, to the extent that the motion was based on facts that were common to the original claim, the motion was within the jurisdiction of the Court. While the notice of motion was badly framed, it asserted a claim for relief under the Copyright Act, which would be a federal claim. The Barrister failed to alert the Full Court to that basis of the Court’s jurisdiction.
60 Secondly, the Barrister pressed the motion as the enforcement of a contract of settlement. He recognised that there may have been some debate about whether such a contract was in the original matter in respect of which the Terms of Settlement had been filed. However, even though it may have been correct to argue that that contract was part of the original matter, it would have been appropriate for the Barrister to recognise the advisability of adding another basis to the jurisdictional foundation because of the possible doubt as to whether the contract claim was part of the original matter. Ultimately, the Barrister recognised such a need, in so far as his written response to the Full Court’s enquiry made clear that he was seeking an order to enforce undertakings given to the Court. Nevertheless, the Barrister’s submissions to the Full Court on the Special Case appear to have been less than clear.
61 Thirdly, the Barrister sought to rely on the associated jurisdiction of the Court under s 32 of the Federal Court Act. However, on one view, s 32 was less than centrally relevant. If the contract claim was not in the original matter but was a different matter, it may have been within the jurisdiction of the Federal Court by reason of s 39B(1A)(c) of the Judiciary Act 1903 (Cth), rather than s 32 of the Federal Court Act. Under s 39B(1A)(c), the original jurisdiction of the Federal Court includes jurisdiction in any matter arising under any law made by the Commonwealth Parliament. Thus, a claim for damages for breach of a contract in respect of a right or property that is the creation of federal law is a claim that arises under federal law (see LNC Industries v BMW (Aust) Pty Ltd [1983] HCA 31; (1983) 151 CLR 575 at 582-3). The Barrister failed to alert the Full Court to such an alternative basis for jurisdiction, namely, that the subject matter of the contract was a proceeding to enforce rights claimed under the Copyright Act.
62 Fourthly, the Barrister was ignorant of the provisions of Order 35 rule 11. He failed to draw the attention of the Full Court to that provision.
63 Finally, the Barrister took the view that it was desirable to avoid a fresh proceeding for infringement of copyright or a proceeding for contempt. A fresh proceeding for infringement of copyright such as that discontinued on 21 June 2002, of course, would have avoided all of the procedural difficulties that were encountered by the Client.
64 The primary judge considered that the Barrister had failed to alert the Court to at least two clear bases of jurisdiction and to the existence of an express rule that would have made clear what he was otherwise putting. His Honour considered that the Barrister maintained a more than arguable case that the contract claim was part of the original matter and sought to buttress that with the proposition that the Court had jurisdiction to enforce undertakings given to the Court. That latter proposition was clearly put in the letter to the Full Court, even though it may not have been clear in the Barrister’s written submissions. The primary judge considered that both of those arguments were correct, notwithstanding the conclusion of the Full Court. His Honour observed, however, that the Barrister did not seek leave to ask the Full Court to withdraw its reasons, when perhaps he should have done so.
65 The primary judge considered that a clearer understanding of federal jurisdiction on the part of a Barrister may have ensured that the Full Court was alerted to the considerations that his Honour considered should plainly have led to an affirmative answer to the question posed in the special case. Nevertheless, as his Honour observed, the Barrister had a sufficient understanding to put at least two out of a number of available arguments clearly enough. His Honour considered that the Barrister could reasonably have expected that he had made clear to the Full Court that he was seeking to enforce, not only the contract between Client and the Wrongdoers, but also the undertakings given to the Court by the Wrongdoers.
66 While the primary judge was thus critical of the conduct of the Barrister, his Honour did not consider that the conduct merited sanction under Order 62 rule 9 or s 43. A fortiori, his Honour saw no basis for sanctioning the Solicitor. Having reached those conclusions, his Honour dismissed the motion of 24 February 2004.
THE APPEAL
67 In the special case, the Full Court dealt with the question before it as one of jurisdiction to grant the relief claimed in the notice of motion of 12 July 2002. That is how the question was framed. However, the real issue before the Full Court was the appropriateness of the process adopted by the Barrister and the Solicitor, rather than the jurisdiction of the Federal Court. Clearly enough, the relief claimed in the notice of motion was within the jurisdiction of the Federal Court. Injunctions to restrain infringement of copyright and claims for an account or damages for infringement of copyright are unquestionably within the jurisdiction of the Federal Court. There can be no doubt that the claims that were the subject of the notice of motion of 12 July 2002 were within the jurisdiction of the Federal Court. On the other hand, to seek relief in respect of such claims, which clearly went beyond the Terms of Settlement, by a motion in a proceeding that had been dismissed, was entirely inappropriate. That is what the Full Court decided, albeit that it dealt with the matter as one of jurisdiction.
68 The Client contended before the present Full Court that the primary judge erred in dismissing the Client’s motion of 24 February 2004. The Client argued that the conduct of the Barrister and the Solicitor constituted negligence or incompetence of a sufficiently high level to amount to a serious dereliction of duty. It said that failure to have regard to express rules of Court and yet advise the Client to engage in what was characterised by senior counsel for the Client as "a complex and risky procedure" resulted in the waste of the costs of the hearing of the special case before the Full Court and of the hearings before Madgwick J.
69 The Client contended further that the acts and omissions of the Barrister and the Solicitor, over the course of the proceeding, constituted more than simple errors of judgment or mistakes as to legal principle or ignorance of procedural rules. It said that, despite the warning given by Madgwick J and by counsel for the Wrongdoers, the Barrister and the Solicitor did not properly consider the matter and failed to cause the appropriate application to be filed. In addition, they did not present the special case to the Full Court in a clear manner.
70 The Client also contended that to recommend a "risky and complex procedure", yet not make full submissions and cite the relevant authorities to support the case for the relief claimed, compounded the negligence of the Barrister and the Solicitor. Even if the Full Court reached a wrong conclusion on the special case, as the primary judge suggested, the fault lay in the manner in which the Barrister presented the special case to the Full Court.
71 In any event, the Client contended the matters that were the subject of criticism by the primary judge amounted to a dereliction of duty that was sufficient to make it just and equitable for the Barrister and the Solicitor to indemnify the Client. The Client contended that its instructions to the Barrister and the Solicitor were to enforce the undertakings given to the Court by the Wrongdoers. Indeed, the primary judge found that both the Barrister and the Solicitor understood that the Client’s wishes were "to enforce the settlement". The notice of motion of 12 July, of course claimed significantly more than enforcement of the Terms of Settlement, as the Full Court said. In so far as the Barrister and the Solicitor pressed all of the relief in the notice of motion, they appear to have gone beyond what they understood their instructions to be. The Client says, therefore, that the Barrister and Solicitor wasted costs by filing and prosecuting a notice of motion that sought relief beyond the enforcement of the Terms of Settlement.
72 The Client says that Order 35 rule 11 provided a simple and efficient process to obtain appropriate relief and an application under Order 35 rule 11 would have been heard expeditiously and the success or failure of such an application would have been known very quickly. It says that by failing to advise of the availability of a procedure that would have provided it with an expedient adjudication of the relevant issues and by pursuing the remedies of damages and account, notwithstanding the reservations of Madgwick J, the Barrister and the Solicitor to the Court were in dereliction of the duty owed by them.
73 However, the question before the present Full Court is not whether there was a failure on the part of the Barrister and Solicitor to fulfil or perform their instructions and retainer carefully and competently. The present proceeding is not a claim by the Client against the Barrister and the Solicitor for breach of a duty to give careful and competent advice in connection with the conduct of the Wrongdoers. Nor is it a claim for damages for breach of a term of the retainer by the Client of the Barrister and the Solicitor. If this proceeding were a claim for damages for breach of a duty to advise carefully and competently or for breach of a term of the retainer of the Barrister and Solicitor in the conduct of the proceeding, a question would arise as to whether advocate’s immunity could be called in aid as an answer to such a claim. Such immunity should not be circumvented by a claim under Order 62 rule 9. To succeed in a claim under Order 62 rule 9, much more must be established.
74 To succeed in a claim under Order 62 rule 9, the legal practitioner must be responsible for costs being incurred improperly or without reasonable cause or for costs being wasted by misconduct or default. That requires conduct much more serious than would give rise to a claim for damages. The question is whether the conduct of the Barrister and the Solicitor constitutes a serious dereliction, or failure to fulfil, their duty to the Court. Putting it another way, the question is whether they advised the adoption of a procedure without any proper consideration of the prospects of success of that procedure, such that their conduct can be characterised as being akin to an abuse of process.
75 It is hardly possible to conclude that the Barrister and the Solicitor advised the procedure in question without any proper consideration of the prospects of success. It is clear that the Barrister and the Solicitor believed that the procedure that was adopted was open and was appropriate. Even if they were wrong in that belief, it was a genuinely held belief. In so far as the primary judge held that their belief was correct, it must be regarded as a reasonable belief.
76 While the Barrister, and the Solicitor in so far as he adopted the Barrister’s advice, hardly served the Client well in the procedural advice they gave and the decisions they made in the performance of their retainer, it cannot be said that their actions constitute a serious dereliction of a duty owed to the Court to aid in promoting the cause of justice. There has been nothing akin to an abuse of process. There has been no suggestion that the Barrister and Solicitor were doing anything more than attempting to enforce the Client’s rights. The Barrister and Solicitor were not responsible for costs being incurred improperly or without reasonable cause or for costs being wasted by misconduct or default, within Order 62 rule 9.
CONCLUSION
77 It follows that there should be no order as contemplated by Order 62 rule
9. The appeal must be dismissed with costs.
Associate:
Dated: 12
April 2007
|
Solicitor for the Appellant:
|
|
|
Counsel for the First Respondent:
|
|
|
Solicitor for the First Respondent:
|
|
|
Counsel for the Second Respondent:
|
M L Williams SC with N Murray
|
|
Solicitor for the Second Respondent:
|
McCabe Terrill
|
|
Date of Hearing:
|
|
|
Date of Judgment:
|
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/cth/FCAFC/2007/49.html