Habib v Radio 2UE Sydney Pty Ltd

Court of Appeal (NSW)|2013-10-22|Before: Leeming JA

Judgment 1On 31 July 2009, this Court granted leave and allowed an appeal from orders dismissing proceedings Mr Habib had brought in the District Court: [2009] NSWCA 231. This Court also ordered the respondents (collectively, Radio 2UE) to pay Mr Habib's costs. Those costs were quantified earlier this year in a certificate issued by a costs review panel in the amount of $156,801.46. 2Mr Peter Erman had been the solicitor on the record for the appellant. He had also been retained by Mr Habib in other matters. It seems that his retainers came to an end around November 2010, for in the affidavits which have been filed in relation to Mr Erman's motion, there is a dispute as to whether solicitor or client terminated the retainer. There is also, on the face of those affidavits, a dispute as to various costs the subject of unpaid invoices from Mr Erman to his former client, both in the appeal and in other matters. The details of that dispute do not presently matter, but its magnitude may be seen from a statement of liquidated claim filed by Mr Erman against Mr Habib on 8 February 2012 claiming the sum of $1,608,965.90 (based on acting for Mr Habib in the Federal Court between 2006 and 2010). Mr Habib's affidavit suggests that the dispute has not been resolved, although leave was granted to discontinue Mr Erman's proceeding on 4 July 2013. 3By notice of motion filed the previous day, 3 July 2013, in the proceedings in the Court of Appeal, Mr Erman sought orders that he be added as a respondent to the appeal, and that the costs ordered by this Court on 31 July 2009 be paid to him. That motion came before me, for directions, on 16 September 2013, in circumstances where two of the members of the Court which made the order have retired, and the third was on leave and overseas. I raised as a threshold matter the question whether I had jurisdiction to make the orders sought in the motion. The active parties (Messrs Erman and Habib) served submissions on the question, in accordance with a timetable made on that day (which was subsequently extended at the request of each of them) on 26 September and 14 and 17 October. On 8 October I directed their attention to this Court's decision of Smith v Yusen Daly Smith International Pty Ltd (In Liq) [2001] NSWCA 458; 53 NSWLR 385, and I have the benefit of submissions on that decision. Finally, on 17 October 2013, Mr Erman served a proposed amended notice of motion seeking additional orders. He now seeks an order that the respondents pay the amount of $156,801.45 into Court pending resolution of this application, as well as declaratory relief. 4For the reasons which follow, I conclude that I do have authority to decide Mr Erman's motion, but only in my capacity as a Judge of the Supreme Court. If I were to determine it, I would be sitting in the Equity Division. To explain why, it is necessary to say something about the nature of Mr Erman's application, and its relationship with the orders made on 31 July 2009, and something about the structure of the Supreme Court of New South Wales.

The nature of Mr Erman's application 5The nature of the entitlement which Mr Erman claims was explained by Jordan CJ in Ex parte Patience; Makinson v The Minister (1940) 40 SR NSW 96 at 100. Where an order for costs has been made in favour of a client, then, although the solicitor acquires no common law title to that right, the solicitor "acquires a right to have his costs paid out of the money, which is analogous to the right which would be created by an equitable assignment of a corresponding part of the money by the client to the solicitor". The Chief Justice said that an order may be obtained directing that the solicitor's costs be paid to the solicitor and not to the client, and that "[i]n practice, however, the solicitor has always been treated as possessing equitable rights in the judgment independently of any declaration of those rights, and the Court's assistance is invoked not to create the rights but to enforce them" (at 101). In particular, he said (at 102, citations omitted): "Where a solicitor had acquired a right to receive his costs out of moneys which had become payable to his client as the result of legal proceedings in which the solicitor had acted, and had thus acquired the right by virtue of the general law and independently of any order of a Court, he could, prior to [legislation authorising an application for a charge over the property recovered or preserved], enforce his right by applying to the Court in which the proceedings had been had for a rule directing the judgment debtor to pay the solicitor the amount of his costs when ascertained by taxation, and in the meantime restraining the judgment debtor from paying and the client from receiving the money without first paying the solicitor the amount of his costs ... If necessary, a suit in Equity could be commenced to enforce the solicitor's right to payment." 6Those principles have been referred to at the appellate level in Worrell v Power & Power [1993] FCA 827; 46 FCR 214 and Grogan v Orr [2001] NSWCA 114. It is clear that the solicitor's right comes into existence when the order was made, and prior to the costs being taxed (see Worrell at 224 and Grogan at [63]). Thus the fact that the Mr Erman's entitlement to solicitor-client costs against his former client has not been determined (and, so far as Mr Habib's affidavit discloses, is disputed) does not of itself preclude his application. A more difficult question may be how those principles apply where, as here, there are successive solicitors. After Mr Erman ceased to act, Demir Legal acted for Mr Habib in the District Court, where, ultimately Mr Habib obtained judgment in the amount of $176,000 and a favourable costs order. Subsequently Mr Habib has been represented by DGT Costs Lawyers (who wrote to the solicitor for Radio 2UE saying that Mr Erman had no authority to act for Mr Habib in any respect and that no amount should be paid to him), and, most recently, by Auscorp Solicitors and Conveyancers. It is on the cards that there may be a dispute between some or all of them as to priority. Nothing in these reasons should be taken to say anything about the nature or merits of that dispute.

Authority to decide Mr Erman's application 7The essential and threshold problem faced by Mr Erman's notice of motion is that he seeks orders which are not aspects of the appeal created by s 127 of the District Court Act 1973. The whole of that controversy (essentially, whether there was appellable error in the dismissal of Mr Habib's proceedings in the District Court) was resolved by orders made on 31 July 2009. Mr Erman was not a necessary or proper party to the appeal. In short, Mr Erman's notice of motion seeks to enforce aspects of the rights created by the orders which resolved the appeal, but it is not part of the appeal. The question is how does this fit into the allocation of jurisdiction and assignment of business in the Supreme Court. 8The Supreme Court Act 1970 "divides" the Court into the Court of Appeal and the Common Law and Equity Divisions: s 38. That does not mean that there are separate courts. There is a single Supreme Court of New South Wales, within which is the Court of Appeal: Smith v Yusen Daly Smith at [25]. Anything else would be inconsistent with s 73 of the Constitution. 9The Supreme Court Act assigns various categories of proceedings to the Court of Appeal: s 48(2). Proceedings which are not assigned to the Court of Appeal are assigned to the Court's Divisions: s 49. Intra-curial arrangements for the transaction of the business of the Court of Appeal are made by the President of the Court of Appeal while arrangements for the transaction of the business of the Divisions are made by the Chief Judge and judges of that Division: s 39(2). 10The Court of Appeal is ordinarily constituted by three Judges of Appeal: s 43(1). It may be constituted by two Judges of Appeal in the circumstances contemplated by ss 46A and 46B, and one or more of the Judges of Appeal may be an acting Judge of Appeal appointed under s 37 or an additional Judge of Appeal appointed under s 36. A single Judge of Appeal may deliver its judgments: s 45A(4). Further, subsections 46(1) and (2) of the Supreme Court Act empower a single Judge of Appeal to exercise certain powers of the Court of Appeal, and his or her judgment, direction or order takes effect as a judgment, direction or order of the Court of Appeal. True it is that s 46(1)(d) empowers a Judge of Appeal to deal with costs and other matters incidental to the making of consent orders or the dismissal of an appeal for want of prosecution or on the application of the appellant. However, costs of Mr Habib's appeal were dealt with by the Court of Appeal in 2009. Although the subject matter of Mr Erman's claimed equitable rights is that costs order, I do not consider that his motion falls within s 46(1)(d); it is a different dispute, between different parties and involving different issues, whose subject matter is the orders made in 2009 determining the appeal from the District Court. 11It is also true that s 44 of the Supreme Court Act permits the Court of Appeal to exercise every power, jurisdiction or authority of the Court. But that does not override the limited circumstances prescribed by s 46(1) and (2) in which a single Judge of Appeal can exercise the powers of the Court of Appeal. I did not understand Mr Erman to submit that the Court of Appeal, in its ordinary composition of three Judges of Appeal, ought to hear and determine his motion. Even if he did, in the circumstances as described in more detail below, I would not regard that as an appropriate or efficient course. 12Instead, Mr Erman's primary submission was for me to hear and determine his notice of motion, sitting alone. He relied on what Jordan CJ had said in Ex parte Patience at 102 about application being made to the court which made the order. That carries little weight for present purposes, once it is appreciated that, as Spigelman CJ said in Smith v Yusen Daly Smith at [26], "Orders made by the Court of Appeal only have force and effect because they are orders of the Supreme Court, made by the Court of Appeal. They are not orders of the Court of Appeal." 13Further, since neither s 46(1) nor s 46(2) apply, if I acceded to Mr Erman's submission I would necessarily be sitting as a Judge of the Supreme Court, and be taken to be doing so in the Equity Division, just as Meagher JA was held to be sitting in the Equity Division in determining a motion concerning costs in Smith v Yusen Daly Smith: see at [31], [33] and [37]. 14I agree with Mr Erman that the course he proposes is available. But it is not an attractive course. It is unattractive because it clashes with the allocation of proceedings by the Supreme Court Act and because it seems likely to involve factual disputes which are most efficiently determined in the ordinary way by a judge sitting in the Equity Division. 15Judges of Appeal almost invariably hear and determine disputes assigned to the Court of Appeal by s 48(2). Judges of the Supreme Court who have been nominated by the Chief Justice to act in a Division almost invariably hear and determine disputes assigned to that Division. What is proposed by Mr Erman clashes with the allocation of proceedings made by the Supreme Court Act. There are occasions when for some special reason it is desirable for a Judge of Appeal to sit in a Division as a Judge of the Supreme Court. But there is no such special reason in the present case. 16Further, so far as I can see from the record as it presently stands, there is every possibility of a series of disputes as to the facts. The first possible dispute is the interlocutory relief which Mr Erman now proposes to seek (I do not at present know whether it is opposed by Mr Habib, although the solicitor for Radio 2UE advised that his clients would consent to the funds being paid into Court). The larger factual dispute seems likely to be whether, as is flagged by Mr Habib's affidavit, Mr Erman is entitled to assert rights in relation to monies to be provided by Radio 2UE, and as to the priority between Mr Erman's claim and the claims of Mr Habib's subsequent solicitors. The procedures of the Equity Division are well-placed to resolve such disputes of primary fact, which only rarely arise in the Court of Appeal. There seems every likelihood that the dispute will extend more broadly than the appeal which gave rise to the order made on 31 July 2009 to other proceedings which have nothing to do with the Court of Appeal (for both parties' submissions have referred to costs incurred in other proceedings). 17Mr Erman's submissions anticipated that I might reach that conclusion, and asked in those circumstances for the motion to be remitted to the Equity Division. Mr Habib invited me to strike it out as an abuse of process, or because (so it was said) of the operation of the maxim that someone who seeks equity must do equity. I confess that I struggle to see how, on the materials presently before me, there can be an abuse of process in Mr Erman seeking to enforce rights flowing in equity from the making of a costs order, but it is sufficient for present purposes merely to record that Mr Habib has failed to discharge the heavy onus he bears to make good this allegation: Williams v Spautz (1992) 174 CLR 509 at 529. Moreover, irrespective of the correctness or otherwise of any complaints made by Mr Habib, the maxim can have no application to the present issue, which is merely the procedural question as to how and by whom that application is to be determined. 18Accordingly, I decline to strike out the motion. It follows that Mr Erman's motion is taken to have been validly commenced in the Court of Appeal, even though he should have commenced in the Equity Division: see Supreme Court Act, s 51(2)(a). 19I note that the parties have filed affidavits in the proceeding in the Court of Appeal, which may be sought to be read when Mr Erman's application is heard substantively. The more efficient course, and one which is consistent with ss 56-58 of the Civil Procedure Act 2005, is to order that the notice of motion filed 3 July 2013 stand as a summons in the Equity Division (a course authorised by ss 14, 16 and 63 of the Civil Procedure Act), and be remitted to that Division there to be continued and disposed of. Power to do so is supplied by s 51(2)(b) of the Supreme Court Act. That remitter will include Mr Erman's application to amend. In the first instance, it will be listed before a Registrar in the Equity Division at a time to be notified to the parties. 20Prima facie, the costs incurred in respect of the matters raised by me ought to be costs in the application, it being necessary for the question to be resolved, and being a point not free from difficulty, but as I have heard no argument and there may be correspondence of which I am unaware, that may be revisited by the parties before the judge to whom the application is remitted.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 October 2013

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