Maggbury P/L & Anor v Hafele Australia P/L & Anor [2001] QSC 78

[1] WILSON J: This application relates to the assessment of costs pursuant to two costs orders made by White J on interlocutory applications on 1 February 2000 and 12 May 2000. In each case the plaintiffs were ordered to pay the second defendant's costs to be assessed.

[2] The second defendant is a German manufacturing company which distributes its products worldwide. Its Australian subsidiary (the first defendant) carries on business in Victoria where it has its head office. It has about 55 full-time and part-time employees in Victoria. It always retains a Melbourne firm of solicitors, Logie- Smith Lanyon, for its legal work.

[3] By writ issued out of the Supreme Court of Queensland on 21 September 1998, the plaintiffs commenced an action against the defendants claiming relief in respect of alleged breaches of a confidentiality agreement, the wrongful termination of an oral agreement, and the misuse of and unauthorised disclosure of confidential information arising out of intellectual property in the design of a certain folding ironing board. The defendants retained Logie-Smith Lanyon in relation to the action; in turn that firm engaged a Brisbane firm of solicitors, Shand Taylor Lawyers, to be their agents. The Brisbane firm appeared as solicitors on the record for the defendants. The action proceeded to trial very quickly, with judgment at first instance being given on 22 January 1999. Subsequently there was an appeal to the Court of Appeal and an application for special leave to appeal to the High Court is pending. The orders for costs made by White J on 1 February 2000 and 12 May 2000 relate to contempt proceedings.

[4] Two costs statements were prepared on behalf of the second defendant and filed on 26 June 2000. Each statement contained particulars of "fees", being the professional charges made by Shand Taylor Lawyers (drawn in accordance with Queensland's Uniform Civil Procedure Rules (UCPR)), and "outlays", which included the fees (comprising both professional charges and disbursements) of Logie-Smith Lanyon (purportedly drawn in accordance with the Supreme Court Rules (Victoria)). A number of objections were taken by the plaintiffs, which are not presently relevant. On 13 July 2000 an Acting Deputy Registrar directed the second defendant to "redraw, file and serve the bills to reflect that the Melbourne solicitors are the principals and the Brisbane solicitors as town agents", and set a timetable relevant to the assessments. On 1 August 2000 the plaintiffs amended their objections to the costs statements to include assertions that the second defendant cannot recover professional charges and outlays claimed because no solicitor at Logie-Smith Lanyon was admitted to practice in Queensland and no solicitor at that firm held a current Queensland practising certificate. The Acting Deputy Registrar's direction was amended on 2 August 2000 by extending the timetable previously set.

[5] On 10 August 2000 I ordered that the following questions be referred to the court for determination:

(a) Are the defendants entitled to have assessed and recover on a standard basis fees paid to Messrs Logie-Smith Lanyon for the work undertaken by that firm as principals in the conduct of the litigation in the Supreme Court of Queensland referred to in the two costs statements filed 26 June 2000;

(b) If the answer to (a) is yes, then on what scale are those fees to be assessed;

(c) Should the directions made by Acting Deputy Registrar C Figg on 13 July 2000 as amended on 2 August 2000 be set aside?

[6] At the outset, counsel for the plaintiffs submitted that I should decline to entertain the second defendant's application. He submitted that the second defendant was in contempt of court by reason of its not having complied with certain costs orders against it. While the Court has a discretion to refuse to hear someone who is in contempt, it is a discretion exercised only in exceptional cases. See X Ltd v Morgan-Grampian Publishers Ltd [1991] 1 AC 1; R v Gooch [1998] EWCA Crim 132; [1998] 1 WLR 1100; Maggbury Pty Ltd v Hafele Australia Pty Ltd [2000] QSC 220, 31 August 2000; In the Marriage of Fahmi [1995] FamCAFC 106; (1995) 121 FLR 210. There has been no finding of contempt against the second defendant. Even if the discretion can be enlivened in the absence of such a finding (which I doubt), in view of the history of this litigation and the importance of the issue raised on the present application, I would entertain the second defendant's application.

[7] The second defendant's primary submission was, in effect, that the costs statements had been properly drawn. Its secondary (or alternative) submission was that "there would simply be one bill which would not distinguish between the fees [of the Queensland and Victorian solicitors] in any relevant respect" except as to the application of the different scales of costs (transcript of argument on 12 September 1999 pages 98-99).

[8] No member of the Victorian firm has been admitted to practice in Queensland.

[9] The second defendant has paid the Victorian firm the professional charges and outlays the subject of the present dispute.

[10] Party and party costs are intended to be an indemnity (or partial indemnity) for legal costs actually incurred in the conduct of litigation: Cachia v Harris [1994] HCA 14; (1994) 179 CLR 403 at 410-411. The source of the power to award such costs is to be found in statute - originally the Statute of Gloucester 1278 (6 Edw I c 1), and in Queensland the Supreme Court Act 1995 (Qld) s 221 (formerly the Supreme Court Act 1867 (Qld) s 58), which provides -

221. The Supreme Court shall have power to award costs in all cases lawfully brought before it and not provided for otherwise than by this section."

By the Supreme Court of Queensland Act 1991 (Qld) (s 118 and Schedule 1) rules of court may be made in relation to "costs in civil proceedings". Chapter 17 of the UCPR is concerned with the assessment of party and party costs. (The assessment of costs between a solicitor and his or her client is dealt with elsewhere, in the Queensland Law Society Act 1952 (Qld) Part 4B.) Rule 691 provides -

691. A party to a proceeding can not recover any costs of the proceeding from another party other than under these rules or an order of the court."

[11] The assessment of costs is performed by the Registrar (rule 684). The procedure to assess costs is dealt with in Chapter 17, Part 2, Division 5, of the UCPR. The party entitled to costs must file an application for costs to be assessed accompanied by a costs statement in the approved form (rule 709), which provides for an itemised statement of fees and outlays.

714. (1) A solicitor who includes in a costs statement a charge for work done by another solicitor practising in Queensland as agent for the solicitor must claim the charge as a professional charge, not as a disbursement.

(2) The registrar may assess and allow a charge mentioned in subrule (1) even though it is not paid before the assessment.

(3) However, if a solicitor includes in a costs statement a charge for work done by a solicitor or barrister practising outside Queensland, the solicitor must claim the charge as a disbursement.

(4) If a registrar allows a charge mentioned in subrule (3) when assessing costs, the amount the registrar allows must, so far as practicable, be an amount appropriate in the place where the solicitor or barrister practises."

[13] The rule is poorly drafted insofar as it refers to a solicitor's including charges for certain work in a costs statement and to the solicitor's claiming a charge as a disbursement. Because the rules relate to party and party assessments, the costs statement is that of the party entitled to costs, not that of his or her solicitor. Often it will be prepared by the solicitor who acted for him or her in the litigation, but this will not always be the case. For example, the party may dispense with the services of that solicitor before the statement is prepared, either retaining another solicitor or acting on his or her own behalf. Accordingly, those references to a solicitor should, in my view, be read as references to the party.

[14] Rule 714 deals with two quite different situations -

(i)Where a party's Queensland solicitor engages another Queensland solicitor as his or her agent - the relationship often being described as that of "principal solicitor and town agent". In Re Lamrock, Brown & Hall [1908] ArgusLawRp 4; [1908] VLR 238 at 254 Cussen J described the applicable principle as being "that in such a case there is no privity between the client and the .... [town agent] ... solicitor, who, so far as the client is concerned, may be regarded as acting as the clerk for the solicitor actually employed."

Hence, the charges of the town agent are itemised among the professional charges in the costs statement.

(ii)Where there is a Queensland solicitor on the record, but part of the work is done by a barrister or solicitor practising outside Queensland. In Elders Trustee and Executor Company Ltd v Herbert (1996) 111 NTR 25 at 38 Kearney J said of a similar situation involving litigation in the Northern Territory:

"When a Territory solicitor acts for a party to litigation in Territory courts under instruction from that party's interstate solicitors, who are not entitled to practise in the Territory, he is not acting in that litigation as the interstate solicitor's agent in the sense that they are the `principal solicitors' and he is their `town agent'. In these circumstances the Territory solicitor on the record is the solicitor responsible for the Territory litigation, as a professional legal agent for the interstate client. In such a case there is a contractual relationship between the client and the Territory solicitor, the instructions being transmitted by the interstate solicitors (not entitled to practise in the Territory) as the client's agent for that purpose."

See also McCullie v Butler [1962] 2 QB 309 at 312-313; Hyndman v Ward (1899) 15 TLR 182. As Diplock J explained in McCullie, the interstate practitioner's charges are to be treated like the charges of any other foreign agent, and claimed as a disbursement. I respectfully adopt this analysis. It follows that the costs statements have been properly drawn.

[15] Section 209 of the Supreme Court Act 1995 (Qld) (formerly s 38A of the Supreme Court Act 1867 (Qld), introduced by the Supreme Court Act Amendment Act 1973 (Qld)) provides -

"Appearance to be in person or by barrister or solicitor or person allowed by the judge

209.(1) In all matters and proceedings in the Supreme Court a party may appear in person or by a barrister or solicitor or by any person allowed by special leave of the judge in any case.

(2) A person who is not a barrister or solicitor of the Supreme Court shall not be entitled to claim or recover or receive directly or indirectly a sum of money or other remuneration for appearing or acting on behalf of another person in the Supreme Court.

"party" includes a person served with notice of or attending a matter or proceeding although not named in the record."

[16] Section 209(2) expressly prohibits someone other than a practitioner of the Supreme Court of Queensland from claiming, recovering or receiving remuneration for acting for another in the Supreme Court of Queensland. Two principal questions emerge -

(i) whether the Victorian solicitors were "acting for another in the Supreme Court"; and

(ii) if they were, whether s 209(2) prohibits the second defendant (their client) from recovering costs against the plaintiffs.

[17] Section 209 is directed at who may perform work for a client "in the Supreme Court". In introducing the bill for the Supreme Court Act Amendment Act 1973 (Qld), the Minister for Justice said -

"This amending Bill has one objective, namely, to enable solicitors to have a right of audience in the Supreme Court of Queensland." Hansard 18 September 1973 p 580.

"This Bill will amend the Supreme Court Act of 1867 by inserting a new section that will give a solicitor a statutory right of audience in the Supreme Court of Queensland. ..... The Bill provides that any party appearing before the Supreme Court will, after the date of assent to the Bill, be able to appear either in person or by a barrister or a solicitor, or by any person allowed by special leave of the judge. Under the Bill, the only person able to claim or recover a fee for appearing or acting on behalf of a party to a matter or proceeding in the Supreme Court will be a barrister or a solicitor.....

The ideals of any judicial system are cheaper and speedier justice under the law, and I believe that by giving solicitors a right of audience in the Supreme Court, the Bill will go some way towards achieving these ideals."

Hansard 25 September 1973 p 673. See Acts Interpretation Act 1954 (Qld) s 14B.

[18] The second defendant appeared in the Supreme Court by counsel duly admitted in Queensland. The Queensland solicitors, as solicitors on the record, performed work "in the Supreme Court" and thereby assumed certain obligations to the Court. In my opinion, the work of the Victorian solicitors, who admittedly played the major role in the preparation of the second defendant's defence, is properly characterised as work "in relation to" proceedings in the Supreme Court rather than as work "in the Supreme Court".

[19] If, contrary to the view I have expressed, the Victorian solicitors did "act for" the second defendant "in the Supreme Court", whether the second defendant may recover costs against the plaintiff turns on whether s 209(2) extinguished the debt otherwise owing by it to the Victorian solicitors, or whether it merely barred their remedy. If it extinguished the debt, then the second defendant cannot recover the costs on a party and party basis, whether or not they have been paid. But, if, as the second defendant submitted, it only barred the remedy of the Victorian solicitors, then on the indemnity principle it may recover the costs on a party and party assessment since they have already been paid, although it would not be able to do so if they had not been paid.

[20] In approaching this question, I have gained some assistance from decisions on provisions in other jurisdictions, although the wording of s 209 is unique to Queensland.

[21] Section 26 of the English Solicitors Act 1843 (UK) was considered in In re Jones (1860) LR 9 Eq 63 and In re Hope (1872) LR 7 Ch App 766. It was in the following terms-

"...no person who as an attorney or solicitor shall sue, prosecute, defend, or carry on any action or suit, or any proceedings, in any of the courts aforesaid without having previously obtained a stamped certificate which shall be then in force, shall be capable of maintaining any action or suit at law or in equity for the recovery of any fee, reward, or disbursement for or in respect of any business, matter, or thing done by him as an attorney or solicitor as aforesaid whilst he shall have been without such certificate as last aforesaid."

It was held that an uncertificated solicitor could not maintain an action to recover his or her fees, but, to the extent that he or she had paid the fees, the client could enforce a costs order against another party to the litigation. The client could not enforce the unpaid balance against another party because, although the debt remained alive, the solicitor could not enforce the debt against the client: Re O'Connor's Bill of Costs [1993] 1 QdR 423 at 426. In Queensland s 44 of the Queensland Law Society Act 1952 (Qld) is to similar effect. It provides -

"Solicitor may not act or recover fees whilst uncertificated

44. No person acting as a solicitor for a client shall sue, prosecute, defend, or carry on any action or suit or any proceedings in any court without having previously obtained a practising certificate which shall be then in force, or shall be capable of maintaining any action or suit for the recovery of any fee, reward, or disbursement for or in respect of any business, matter, or thing done by the person as a solicitor whilst the person shall have been without such practising certificate."

[22] In England the introduction of s 12 of the Solicitors Act 1874 (UK) s 12 changed the law to preclude any person from recovering costs on account of work done by an unqualified person. That provided (in part) -

"No costs, fee, reward, or disbursement on account of or in relation to any act or proceeding done or taken by any person who acts as an attorney or solicitor, without being duly qualified so to act, shall be recoverable in any action, suit, or matter by any person or persons whomsoever."

It was held to disentitle a successful party to an arbitration from recovering the costs and disbursements of his solicitor from the party otherwise liable (Fowler v Monmouthshire Canal Co (1879) 4 QBD 334). On a solicitor and client taxation items relating to work done while the solicitor was uncertificated were disallowed in In re Sweeting [1898] 1 Ch 208, a taxation being a "matter" within the meaning of the section, and an uncertificated solicitor was not allowed to retain a client's moneys on account of costs and disbursements in Browne v Barber [1913] 2 KB 553.

[23] The issue before me is not the entitlement of the Victorian solicitors to receive the costs, but that of their client to recover the costs against another party - a question on which s 209 is silent. In Queensland, unlike some other Australian jurisdictions, there is no statutory provision or rule of court which expressly contemplates a Queensland solicitor acting as agent for an interstate practitioner: Legal Practitioners Act 1974 (NT) s 136(2); Supreme Court Rules (NT) rule 63.42(1) (which is similar to rule 714(3) of the UCPR) and rule 63.68; Supreme Court Rules (Victoria) rules 63.44 and 63.66; see Elders Trustee and Executor Company Ltd v Herbert (1996) 111 NTR 25. Section 209(2) differs from s 12 of the English Act of 1874 in that it does not expressly prohibit any person whomsoever from recovering costs in relation to work done by someone without Queensland qualifications.

[24] Unlike any of the other provisions I have discussed, s 209(2) provides that an unqualified person "shall not be entitled to claim or recover or receive directly or indirectly" remuneration for acting on behalf of another in the Supreme Court. Although, as senior counsel for the second defendant submitted, the section does not address the position of the party for whom the work is performed, and it does not expressly render any agreement between that party and the unqualified person unlawful or void, it strikes not just at receipt of remuneration but at entitlement to receive remuneration. In other words, it extinguishes the debt of a client to an unqualified person who acts for him or her in the Supreme Court.

(ii) that s 209 of the Supreme Court Act 1995 (Qld) does not preclude the second defendant from having the fees it paid to Logie-Smith Lanyon assessed on the standard basis and recovering them against the plaintiffs, because that firm did not appear or act for it in the Supreme Court;

(iii) that the directions made by the Acting Deputy Registrar on 13 July 2000 as amended on 2 August 2000 should be set aside.

[26] Rule 714 (4) of the UCPR provides that when assessing costs for work done by a solicitor practising outside Queensland the registrar must, so far as practicable, allow an amount appropriate in the place where the solicitor practises. In the circumstances of the present case, the costs should, so far as practicable, be assessed according to the relevant scale in the Supreme Court Rules (Victoria) (Ch I Appendix A).

1. It is declared that the costs statements filed by the second defendant on 26 June 2000 have been properly drawn.

2. It is ordered that the directions of Acting Deputy Registrar (Assessment) Figg made on 13 July 2000, as amended on 2 August 2000, be set aside.

3. It is declared that the second defendant is entitled to have assessed and to recover on a standard basis the costs the subject of those costs statements, including the fees of Logie-Smith Lanyon claimed as disbursements in those costs statements.

4. It is directed that, so far as may be practicable, the fees of Logie-Smith Lanyon be assessed according to the relevant scale in the Supreme Court Rules (Victoria).

5. It is directed that, on a date to be fixed, the Registrar assess the costs statements of the second defendant filed on 26 June 2000.

6. It is ordered that the respondent plaintiff pay the applicant second defendant's costs of and incidental to the application, to be assessed on the standard basis and not to include the costs of the appearance on 12 September 2000.

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