Le v Williams
129 Both before the trial judge and in the Court of Appeal the appellant relied on a decision I gave in Le v Williams [2004] NSWSC 645; [2005] NSW ConvR ¶56-109. At [48] I said:
"It may be - I do not need to decide - that this point should properly have been taken in the Local Court, by way of a motion seeking to stay those proceedings on the ground that the solicitors acting there in Mr Williams' name were not really retained by him or otherwise entitled to sue in his name : Richmond v Branson & Son [1914] 1 Ch 968 at 974; Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse and Others [1923] 2 KB 630 at 671 - 672 per Atkin LJ (dissenting, but whose view was upheld on appeal: Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse and Others [1925] AC 112 at 130, 148); Australian Workers' Union and Others v Bowen (1946) 72 CLR 575 at 586, 589, 590, 592; Harry S Bagg's Liquidation Warehouse Pty Ltd and Others v Whittaker and Others (1982) 44 NSWLR 421; Knox Street Apartments v Roger Percival Flexman & Another [2002] NSWSC 102. When the matter has been argued before me, and the amount of money at stake is not large, I think it is preferable to deal with the substance of the point, and ignore the procedural niceties."
130 Mr Sneddon relied on those remarks to support a submission that in the present case it was a matter of procedural discretion whether a challenge to retainer was raised by preliminary motion, or at the hearing of an action. In deciding whether that conclusion can properly be drawn from the remarks, they need to be seen in the procedural context in which they were made.
131 Ms Le, while a tenant of a home unit owned by Mr Williams, caused a fire there which damaged various fittings inside the home unit. The insurer of the body corporate replaced the damaged fittings. Ms Le and Ms Williams agreed to share equally certain costs that were not covered by the insurance. Ms Le paid the amount she was obliged to pay under that agreement, and obtained a release from Mr Williams. Then the insurance company, using the name of Mr Williams, began proceedings in the Local Court against Ms Le, seeking to recover from her the amount it had expended in making good the damage to the fittings in the unit. The proceedings I heard were brought in the Supreme Court by Ms Le against Mr Williams, seeking declarations to the effect that she had paid all she was obliged to pay to Mr Williams, and restraining him from continuing the Local Court proceedings. One of the bases on which she sought the injunction was that the solicitors for the insurer were not entitled to be subrogated to any rights that Mr Williams had against her. I held that, whether or not the insurer was entitled to be subrogated to Mr Williams' rights, it had Mr Williams' consent to bring the action in his name, which was sufficient authority for the insurer to bring the Local Court proceedings in Mr Williams' name. It was at that stage of the judgment that I made the remarks that Mr Sneddon relies upon.
132 Thus, Le v Williams is not an example of a challenge to the retainer of the solicitor to bring particular proceedings being litigated at the final hearing of those self-same proceedings. Rather, it was a case where the authority of a solicitor to bring one set of proceedings was decided at the final hearing of a different set of proceedings. It can be a discretionary reason for refusing an injunction that an adequate remedy is available elsewhere. The remarks I made amounted, for practical purposes, to deciding that, even though the question of the authority of the solicitors could (and perhaps should, from the point of view of proper ordering of the business of the Local Court) have been litigated in the Local Court, I would not regard that possibility as a reason for declining to deal with the point on the application for an injunction. The remarks provide no support for it being a matter of procedural discretion whether a challenge to the retainer of a solicitor to bring a particular piece of litigation is brought by a motion in those proceedings or is litigated at the final hearing of those proceedings.
133 It has been accepted in this Court that a challenge to retainer is not a matter of defence to be disposed of at a trial: United Service Insurance Co Ltd (in liq) v Lang (1935) 35 SR (NSW) 487 at 496-497 per Jordan CJ (with whom Halse Rogers and Street JJ agreed). It has likewise been accepted that the appropriate way of bringing a challenge to retainer is by a substantive motion to have proceedings stayed, brought as soon as the party aggrieved becomes aware of the matter: United Service Insurance at 497; Inglis v Moore (No 2) (1979) 25 ALR 453 at 464; (1979) 46 FLR 470 at 481 per Davies J.
134 However, there have also been cases where a challenge to retainer has been conducted in the course of a hearing. One such case was SBBH v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCA 684 at [7] per Mansfield J, where no objection was taken to the retainer issue being argued at that stage. A particularly strong case from Mr Sneddon's point of view is Hillig v Darkinjung Pty Ltd (No 2) [2008] NSWCA 147, a case where the validity of the solicitor's retainer depended upon complex questions concerning the validity of corporate resolutions. In considering whether to order the solicitor to pay the costs of proceedings in which it was held that solicitor had not been validly retained because the resolutions were invalid, McColl JA (with whom Beazley and Giles JJA agreed) said at [54]-[57]:
"… The issues on the three applications were so intertwined that it was appropriate for the primary judge not to resolve the … Interlocutory Process challenging Mr Cunliffe's retainer until he had heard all of the argument and then, having regard to his conclusions, to dismiss it. …
… where the party represented is a defendant, and the question whether the defendant can retain a solicitor lies at the heart of the proceedings, a court would not readily order the solicitor to pay the costs of the proceedings even when the effect of its conclusion is that those the solicitor represented were not authorised to retain him or her.
A solicitor placed on notice of a challenge to retainer would do well to determine, as Zimmerman demonstrates, whether the client's authority to retain him or her can be objectively determined. Where that cannot be done, the court must be anxious to ensure that an order that the solicitor bear the costs is appropriate in all the circumstances. Those circumstances include, in my view, the public interest that citizens have legal representation for the purposes of the conduct of litigation: Orellana-Fuentes v Standard Knitting Mills Pty Ltd [2003] NSWCA 146; (2003) 57 NSWLR 282 (at [96]) per Ipp JA (Spigelman CJ and Handley JA agreeing).
In my view, Mr Cunliffe was entitled to proceed on the basis that the efficacy of the Resolutions and the question whether Darkinjung could retain him, was an issue of law which should properly be determined by the Court and that the defendants should have legal representation for the purposes of that contest. Accordingly I would not exercise the UCPR 42.3(d) power against him in relation to the trial."
135 In other words, in Hillig this Court decided that not merely a permissible, but the proper course for the trial judge to take, in the circumstances of that case, was to permit the issue of retainer to be litigated at the final hearing. In light of that decision, it could not be the law that a challenge to retainer must always be litigated in the course of a substantive motion challenging retainer, that is argued prior to the final hearing.
136 I respectfully agree with the conclusion in Hillig. The Court is now required to organise its business in a way that facilitates the just, quick and cheap resolution of the real issues in the proceedings: section 56 Civil Procedure Act. If, as in Hillig, the issues involved in deciding whether a solicitor is validly retained are dependent on complex questions that also arise at the hearing, the just, quick and cheap disposal of the real issues may require the question of retainer to be dealt with in the course of a final hearing. As well, one can envisage situations where the question that is involved in a final hearing is a question of law that can be argued quickly, so that it would be wasteful to require the parties to come to court on one day to argue about retainer, and on another day to argue about the issue involved in the final hearing. In such a case, a single hearing in which the challenge to retainer and the final hearing are heard concurrently may be appropriate. Further, sometimes the basis on which a question concerning a solicitor's retainer arises might become known only immediately before or in the course of a hearing, and in such a case it might be appropriate to permit the challenge to be argued at the final hearing rather than have the parties incur the delay and extra cost involved in adjourning the final hearing.
137 Recognising that it is sometimes possible for a question of retainer to be argued at the same time as a final hearing does not involve rejecting the view that has long been adopted, that there are often powerful reasons for arguing the question of retainer in advance, and promptly after it becomes known that there is reason to challenge the retainer.
138 Litigation proceeds on the basis of the court, and the other parties, assuming that the person purporting to act as solicitor for a party has authority from that party to bring the litigation and do the actions that are incidental to the conduct of the litigation. It is that assumption that is the basis of the ostensible authority of a solicitor concerning litigation. A challenge to retainer is a challenge to that assumption. It is often important that it be dealt with promptly after it is known that the challenge exists, lest the court and the parties engage in a charade of purporting to decide issues between parties to litigation when one of those parties is not really there.
139 Hearing a challenge to retainer at the same time as a final hearing involves the final hearing being conducted on a hypothetical basis, that the case being presented in the name of the plaintiff is the case that the plaintiff would present, if it were to be held that the solicitor purporting to act for the plaintiff really had authority to do so. Allowing a hearing to proceed on that sort of hypothetical basis has an inherent risk, that the court needs to assess in light of the facts of the individual case before it, of the hearing involving an abuse of process. Further, a trial judge would often be wary about compulsive powers of the court, like subpoenas or discovery, being used in the name of a plaintiff when there was an unresolved question about whether the solicitor purporting to act for the plaintiff was in truth authorised to do so. Another factor that often tends to favour the separate resolution of challenges of retainer is that, if the party who makes the challenge wishes to claim that the solicitor whose retainer is challenged should pay costs connected with the action, the solicitor must be made a party to at least that application, even though the solicitor personally is not a party to the action itself. It may be that, even in cases where the parties consented to a challenge to retainer being dealt with a final hearing, considerations like these would lead the court, in giving directions, to require that issue be litigated in advance of the final hearing. Ultimately, whether a challenge to retainer should be heard at the same time as a final hearing is a question of management of the individual case, in the decision of which the judge is guided by section 56 Civil Procedure Act.
140 For these reasons, I accept Mr Sneddon's submission that it is in principle possible for a challenge to retainer to be decided at the same time as a final hearing. However, that is not enough to lead to the conclusion that the trial judge made an error in the present case, of a type that would result in his decision being reversed. An important assumption in Mr Sneddon's argument is that, by the Defence to the Amended Statement of Claim, a challenge to retainer was adequately raised. That assumption is directly contrary to the decision of Warrington J in Richmond v Branson that it is not possible for a challenge to retainer to be brought by defence.
141 In my view, that decision of Warrington J continues to state the law in New South Wales. The reason why that is so depends upon the role of pleadings in litigation.
142 That role is to define issues between the parties to the action. Uniform Civil Procedure Rule 6.1 (1) says:
"Except by leave of the court , a party may not take any step in proceedings (including any appearance in court) unless the party has filed a statement of claim or summons in the proceedings or has entered an appearance in the proceedings."
143 UCPR 6.2 (1) says:
"Subject to these rules, the practice notes and any other rules of court, a person may commence proceedings in the court by filing a statement of claim or a summons."
144 UCPR 6.12 (1) says:
"A statement of claim or summons must specifically state the relief claimed by the plaintiff ."
145 UCPR 7.1 (1) says:
"A natural person may commence and carry on proceedings in any court, either by a solicitor acting on his or her behalf or in person."
146 UCPR 7.24 (1) says:
"Every act, matter or thing which, by or under the Civil Procedure Act 2005 or these rules or otherwise by law, is required or allowed to be done by a party may be done by his or her solicitor ."
147 UCPR 14.14 (2) says:
"In a defence or subsequent pleading, a party must plead specifically any matter:
(a) that, if not pleaded specifically, may take the opposite party by surprise, or
(b) that the party alleges makes any claim, defence or other case of the opposite party not maintainable, or
(c) that raises matters of fact not arising out of the preceding pleading."
148 UCPR 14.26(1) and (2) say:
"(1) An allegation of fact made by a party in a pleading is taken to be admitted by any opposite party required to plead in response unless:
(a) in the pleading in response, the opposite party traverses the allegation, or
(b) a joinder of issues under rule 14.27 operates as a denial of the allegation.
(2) A traverse may be made by denial or by a statement of non-admission, either expressly or by necessary implication, and either generally or as to any particular allegation."
149 As is shown by the parts of the rules that I have emphasised, all these rules presuppose that there is a person who is the plaintiff in litigation, who makes allegations in the statement of claim, to which the defendant responds in a defence. An allegation by the defendant to the effect that "the person named as plaintiff is not making any allegations at all in the document that has been filed as the statement of claim, because that person has given no authority of the statement of claim filed" is a type of allegation that does not fit within the universe of discourse, or the framework of assumptions, within which the pleading rules relating to a defence operate.
150 It is a clear abuse of the process of the court for someone to bring litigation, supposedly in the name of a particular person, when there is no authority from that particular person to bring the litigation. A court will deal with an abuse of process of that kind once it is established that a supposed plaintiff has not given authority for the litigation to be brought. The appropriate way of bringing that sort of abuse of process to the attention of the court, and establishing the facts underlying it, if there is any doubt about them, is usually by a notice of motion seeking to strike out the statement of claim or to stay the action. However, if in the course of litigation it becomes clear to the court that its process is being abused in this way, it will act of its own motion to bring the abuse to an end. It may be that the abuse comes to the attention of the court only in the course of a final hearing, either incidentally as evidence emerges, or as a result of the counsel appearing before the judge agreeing either expressly or by their conduct to litigate the question of whether the action is authorised, and the judge not intervening to require that issue to be decided before the rest of the case proceeds. What is in substance happening then, though, is the argument of a motion challenging the retainer, not the deciding of an issue that can properly be raised by a defence in an action.
151 The case law that I have discussed is consistent with this analysis. It will be recalled that Richmond v Branson concentrated closely on what allegations it was permissible to make in a defence. Likewise Atkin LJ, Viscount Cave and Lord Atkinson in Russian Bank, and Clauson LJ in Banco de Bilbao held it was not possible to raise a challenge to retainer by a defence. By contrast, Lord Parker in Daimler did not put the matter in terms of what could be raised as a matter of defence - rather he put it in terms of what the court should do once it became aware that an action was being run in the name of a corporation that was incapable of giving a retainer. I recognise that Lord Parmoor in Daimler talked about the objection then before him being entertained at the trial "as a defence", but he was the only judge in Daimler who said that, and an unreasoned diktat like the one I have quoted at para [99] above is not persuasive. Like Lord Parker in Daimler, the language of the judges in John Shaw was not cast in terms of what matters can be raised as a defence, but rather in terms of how the court deals with an abuse of process once it is aware of it. Indeed, Roche LJ said that if an objection to the right to sue is not taken by a preliminary motion "the Court need not, and ordinarily should not, entertain such an objection at trial as if it were a defence." (emphasis added) - thus recognising that it is not actually a defence. The objection to the authority of the solicitor who purported to appear for the petitioners in AWU v Bowen appears to have been gone into at the trial either consensually, or under the extended powers of Bankruptcy Rule 132.
152 The important difference between what can be raised as a defence, and what can be raised by a motion challenging retainer, is shown by the consequences of a defendant succeeding in what is alleged in those two different forms of process. Success in a defence entitles the defendant to a judgment against the plaintiff, that gives rise to an estoppel by judgment preventing the plaintiff thereafter denying the truth of the defence so established. Success in a motion challenging retainer results in the action being struck out or stayed. It creates no estoppel against the nominal plaintiff, because the nominal plaintiff was not a party to the litigation. It is unthinkable that a court's processes could operate to raise an estoppel by judgment against someone who the court has itself decided was not a party to the litigation from which the estoppel arose.
153 Thus, even if a generous construction is given to the pleadings so that they are treated as purporting to raise an issue about whether Mrs Daher needed a tutor (and hence whether the solicitor acting on Basil's instructions had authority to act for Mrs Daher), that "issue" is one that cannot properly be raised by a defence. An issue about whether the solicitor for the plaintiff had a valid retainer could have been available for decision by the judge only if the parties had by their conduct at the trial litigated what was in substance an informal challenge to retainer. I turn to that question.