CSR Limited & Anor v Eddy & Anor

Cook v Pasminco Limited (No. 2) (2000) 107 FCR 44 James CASES CITED : Giannarelli v Wraith (No. 2) (1991) 171 CLR 592 James Hardie & Coy Pty Ltd v Yeomans [2000] NSWSC 539 Kiwi Munchies P/L vThai Airways International [2004] NSWSC 89 Z v New South Wales Crime Commission [2007] HCA 7

CSR Limited PARTIES : Mildalco Pty Ltd Jarradd Eddy (administrator ad litem representing the Estate of the Late John Leonard Thompson) Costs Review Panel

COUNSEL : Mr T. G. R. Parker (SC) (Pl) Mr M. J. Leeming (SC) / Mr C.H. Withers (Def)

SOLICITORS : Makinson & d'Apice Lawyers (Pl) Alex Stuart & Associates Solicitors (Def)

LOWER COURT JUDICIAL OFFICER : Mr Balding / Mr Walsh

• 9 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION LIST

JUDGMENT 1 HIS HONOUR: The plaintiff was the employer of the late Mr Thompson. The first defendant is the administrator ad litem of his estate. The late Mr Thompson recovered a judgment against the plaintiff and an order for costs was made in his favour. 2 On 8 June 2005, the first defendant made application for assessment of the party/party costs order. The application was referred to a costs assessor ( Mr Webeck). 3 The first defendant had not received any memoranda of costs and disbursements from his solicitor. An objection relied on by the plaintiff raised, inter alia, a question of breach of the indemnity rule. 4 On 15 June 2005, the costs assessor purported to give notice, pursuant to s207 of the Legal Profession Act 1987 (NSW) (the 1987 Act), for the production to him of, inter alia, the following:- "(c) a copy of the fee agreement with the applicant (to be supplied to me on a confidential basis;)". 5 The solicitors for the first defendant responded by forwarding a copy of their fee agreement and a copy of the fee agreement had with Counsel. The letter enclosing these document contained, inter alia, the following:- "As requested by you, we have today forwarded a copy of this letter to the Respondents, but we have not provided them with a copy of our costs agreements with Mr Thompson and the cost agreement as between our firm and Mr Joseph SC. In this respect, we note you requested a copy of such agreements be forwarded to you on a confidential basis. Having said this, should you direct that we forward a copy of same to the Respondents, we will then of course do this forthwith."

6 By letter dated 7 July 2005, the solicitors for the plaintiff conveyed further submissions to the costs assessor (inter alia, it was submitted that the plaintiff was entitled to consider the terms of the fee agreement so that any necessary submission could be made in respect of it). 7 The submissions made reference to the judgment of Lindgren J in Cook v Pasminco Limited (No.2) (2000) 107 FCR 44. In that case, a subpoena had been issued to require the production of a costs agreement. A claim for legal professional privilege was considered in that context. At paragraph 47, Lindgren J made observations of a general nature in relation to costs agreements made between a solicitor and a prospective client. The Judge held that part of the agreement was privileged. 8 The costs assessor completed the costs assessment process and issued his Certificate on 13 January 2006. It was accompanied by his reasons for determination. 9 The costs assessor did not make the fee agreements available to the solicitors for the plaintiff. His reasons made no reference to either the fee agreements or the indemnity rule. 10 The plaintiff made application for a review by the Panel. The application was referred to a Panel (constituted by Messrs Balding and Walsh). In the review, the plaintiff propounded error by the costs assessor in failing to provide it with a copy of the fee agreement between the first defendant and his solicitors and to satisfy himself that the costs indemnity rule had not been breached. The Panel confirmed the determination of the costs assessor and delivered a Statement of Reasons. 11 In this Statement of Reasons, the Panel referred to my earlier decision of James Hardie & Coy Pty Ltd v Yeomans [2000] NSWSC 539 and the judgment in Kiwi Munchies P/L v Thai Airways International [2004] NSWSC 89. The Statement also recited passages from both judgments. It also contained the following:- "28. The Review Panel considers that it is bound by the authorities of Yeomans and Kiwi Munchies P/L. The decision of Lindgren J in Cook v Pasminco Ltd (No. 2) is not as persuasive authority as contended by the Review Applicant. The Review Applicants have made no reference whatsoever to the aforementioned authorities apart from Cook v Pasminco Ltd (No. 2).

29. The Review Panel notes that the Costs Assessor did not specifically make any reference to him having regard to the Costs Agreement between the Respondent and his solicitor or that he was satisfied that the Respondent had not breached the costs indemnity rule. Notwithstanding his failure to do so the Review Panel is nevertheless satisfied that proper regard has now been made to Costs Agreement and notwithstanding the fact that a Tax Invoice/Bill of Costs has not been rendered to the plaintiff, it is satisfied that the Respondent has not breached the costs indemnity rule."

12 On 24 July 2006, the plaintiff filed a Summons in this Court. It brings a challenge to the determination of the Panel. It seeks relief pursuant to s384 of the Legal Profession Act 2004 (the Act). 13 Apart from seeking an order that the Certificate of the Panel be set aside, the plaintiff also sought the following:- "2. An order that the second defendant, the Costs Review Panel, provide the plaintiffs with a copy of the costs agreements between any of the late John Leonard Thompson, his solicitors and his counsel (Costs Agreements) on the file of the Costs Assessor." 14 The relief sought in this prayer was not pressed. Presumably, it may have been accepted that there was no power to make the order sought by the plaintiff. The costs assessment process is not a proceeding in this Court and it does not contain procedures which enable a party to require the production of documents. 15 Before proceeding further, I should mention one other matter. The plaintiff did not challenge what I described as the merits of the decision of the Panel (the rejection of the grounds of appeal). It was said that not having seen the costs agreements, it was not in a position to do so. 16 The appeal was heard on 9 March 2007. The parties relied on written submissions. Oral submissions were also made. 17 Section 384 enables the bringing of an appeal as to a matter of law arising in the proceedings to determine an application. There is no dispute that the Act applies to the present appeal. 18 The thrust of the case advanced orally by the plaintiff (which differed somewhat from that put in writing) is that there were errors of law (including a denial of natural justice). 19 The question of whether or not a denial of natural justice fell within the contemplation of s384 was raised. However, it was not pursued. The thinking seemed to be that, in any event, a challenge on the grounds of a denial of natural justice could be pursued in a leave application. Accordingly, I shall proceed on the basis that for the purposes of this case there is no issue between the parties concerning it. 20 Before proceeding further, I should refer to certain of the contents of the written outline of submissions of the plaintiff. Under the heading "Issues On Appeal", the following appears:- "19. The Plaintiffs challenge the Costs Review Panel's determination on two bases. First, the Plaintiffs submit that the costs agreements were not privileged. In Yeomans , the costs respondent had belatedly sought to raise this argument but the learned Master refused to permit it to do so (see at [13]). 20. Second, the Plaintiffs contend that if the costs agreements were privileged then privilege has been waived and the decision of Master Malpass in Yeomans is incorrect." 21 The next two headings to be found in those submissions are "Is the costs agreement privileged?" and "Waiver of privilege". The last two paragraphs that appear under the latter heading are as follows:- "33. It follows that the position of a costs applicant under the Legal Profession Act 1987 (NSW), is in substance, the same as the position of a costs applicant under the High Court Rules which were being considered by his Honour Justice McHugh in Giannarelli . In either case, faced with a request to provide documents which are privileged, it is open to the costs applicant to assert the privilege and refuse to provide the documents to a costs assessor. If the costs applicant chooses not to assert the privilege however and provides the documents to the costs assessor then the rules of natural justice require that those documents be provided to the costs respondent also. 34. The injustice in any other view is clearly illustrated by the facts of this case as it is plain that the Costs Review Panel, from the terms of their determination, had regard to the costs agreement in reaching the conclusion that there was no substance to the Plaintiffs' contentions concerning the costs indemnity principle. This is a clear breach of the rules of natural justice." 22 It was submitted that one error of law was a misunderstanding of what had been said in Yeomans. The misunderstanding was said to be a belief that Yeomans had decided the question of whether or not the costs agreement in that case attracted legal professional privilege. Paragraph 13 of the judgment in Yeomans makes it clear that this was not the case. It was common ground in this case that the question was not dealt with in Yeomans. 23 The denial of natural justice was said to be the failure by the Panel to provide the plaintiff with a copy of the costs agreement. In support of this submission, the Court was taken to the judgment of McHugh J in Giannarelli v Wraith (No.2) (1991) 171 CLR 592. It is a case which is distinguishable.

24 During oral argument this issue came to be accepted as the real threshold dispute between the parties. An initial observation to be made is that the plaintiff's submissions are erroneously founded. 25 For the plaintiff to succeed in this appeal, it is not sufficient to merely demonstrate an error of law. The plaintiff bears the onus of demonstrating that any error of law justifies the disturbing of the determination. 26 As I understand the case orally pressed by the plaintiff, it was not ultimately suggested that the misunderstanding satisfied this test. Rather, the plaintiff looked to the allegation of denial of natural justice. In those circumstances it was incumbent upon the plaintiff to demonstrate that what was said to fall within the category of a denial of natural justice justified the disturbing of the determination (this might be thought to be a difficulty where there is no challenge to the merits). 27 It is unremarkable that no complaint as to denial of natural justice is made in respect of the determination by the costs assessor. It was not suggested that an inspection of the costs agreement was required to deal with any submission made by the first defendant. There is nothing in the reasons given by the costs assessor that suggests that the costs agreement played any part whatsoever in his reasoning process and/or had any impact on his ultimate determination. 28 The plaintiff contends that what was said in paragraph 29 of the Statement of Reasons reveals that the Panel itself had regard to the costs agreement. If that be the case, I am not satisfied that there was any denial of natural justice by the Panel. 29 Natural justice is a flexible concept of fairness. What is required concerning fairness may vary from case to case. Cases can be expected to be determined upon their own particular facts. 30 If the Panel did have regard to the costs agreement, it did so for the purposes of considering the case being advanced by the plaintiff (whether or not there had been a breach of the indemnity rule). 31 It would be erroneous to suggest (which seems to be what is being done in the plaintiff's submissions in reply), that the first defendant was seeking to put material before the decision maker which the plaintiff was not allowed to see, or to allege that he was engaging in secret communications. The first respondent was responding to a notice given pursuant to s207 of the 1987 Act (which then had application), which may be described as a statutory compulsory process (see Yeomans at Paragraph 26). 32 What happened in this case is not dissimilar from what happens in a court from time to time. The court may perform a similar exercise when dealing with disputes concerning inspection of documents (be they disputes concerning matters of privilege or forensic advantage).

33 In response to allegations of denial of natural justice, the first defendant relied on what was said in Yeomans (which was followed in Kiwi Munchies). It was argued that these authorities establish that there is no breach of natural justice by the costs assessor having regard to a costs agreement without disclosing it to the opposing party. 34 What was said in Yeomans had application to the factual context that was before the Court in that case. In my view, it also has application to the factual context in this case. 35 For completeness, I should also mention the provisions contained in s359(2) of the Act. It is thereby provided that a costs assessor is not bound by rules of evidence and may inform himself or herself on any matter in such manner as he or she thinks fit.

36 In the circumstances, it is unnecessary to deal with the submissions that were made on the questions of privilege and waiver of privilege. It is not surprising that the plaintiff changed its approach during oral submissions. It soon became clear that these questions were lacking in significance in this case. 37 However, because much was said concerning these questions, I feel that some brief observations should be made. 38 The Court has been taken to a number of judgments on the question of privilege. I have already referred to Cook. The plaintiff also referred the Court to Z v New South Wales Crime Commission [2007] HCA 7. In written submissions made on behalf of the first defendant the following appears :- "26. It is perfectly plain that the Costs Agreements were created for the dominant purpose of Mr Thompson (and his personal representative) being provided with legal services in connection with the litigation against CSR. That was implicit (but not argued) in Yeomans and Kiwi Munchies . Moreover, it is supported by the decisions of Santow J in Re Global Medical Imaging Management Ltd (in liq) [2001] NSWSC 476, of Barrett J in Apple Computer Australia Pty Ltd v Wily [2002] NSWSC 855, of Bergin J in Rickard Constructions Pty Ltd v Richard Hails Moretti Pty Ltd [2006] NSWSC 234 and of Austin J in Re Bauhaus Pyrmont Pty Ltd (In liq) [2006] NSWSC 543." 39 What was relied on in the case of Z proceeded on an assumption that there was no retainer prior to the making of the costs agreement. Whilst mostly this is the position, in some instances it is not. What the position was in the present case remains unknown. 40 An application of the approach taken in Cook requires having the costs agreement before the Court. In the present case, the document was not before the Court. 41 In the present case, the first defendant complied with a call to produce documents on a confidential basis. Strictly speaking, no claim for privilege had to be made. As far as he was concerned, they were being held on a confidential basis. He was not seeking to rely on the documents and did not ask the costs assessor to look at them. There could be no waiver of any privilege in respect of the produced documents. 42 The submissions made in respect of waiver were formal in nature. It was accepted that I would follow what was said in Yeomans and I do so. 43 The Summons is dismissed. The plaintiff is to pay the costs of the Summons. The exhibit may be returned. **********

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