MALLON & CO LAWYERS PTY LTD -v- GAM [2012] WASC 376 (10 October 2012)

2 The first defendant on this application raised two contentions. First it was said the endorsement of claim on the writ included a claim made pursuant to the Trade Practices Act 1974 (Cth) and the Fair Trading Act 2005 (WA). It was said O 10 did not authorise service of a writ out of the jurisdiction when the whole or part of the claim was based upon either of these two statutes. Secondly it was argued service ought be set aside on the basis of forum non conveniens. It was submitted the courts of California were a more appropriate jurisdiction in which to litigate the points raised by the plaintiff.

3 It was not in contention between the parties that the endorsement of claim on the writ did refer to the two statutes mentioned above. Further both parties accepted if a writ referring to these statutes could not be served out of the jurisdiction the whole of the claim must fail. It is not possible under O 10 simply to strike out those parts of the claim which could not support an order for service out of the jurisdiction: see Kent v Lechmere Financial Corporation [2002] WASC 75.

4 Order 10 does not by its terms authorise service out of the jurisdiction of a claim based upon either of these two statutes. Prima facie then it might be thought the first defendant's application would succeed. The difficulty is there is a difference of judicial opinion on the question in the State of Victoria. I will deal with these two conflicting authorities in some detail below. But it is worthy of note this issue has never been considered in this State. The only authority which touches on the question is a decision of McKechnie J in Glendalough Holdings Pty Ltd v Summit Chemicals Pty Ltd [2003] WASC 183. This case concerned an application to set aside an order made for service out of the jurisdiction. The third party notice included a claim for breach of the Trade Practices Act. His Honour notes:

As to this latter matter [breach of the Trade Practices Act], Summit concedes that O 10 r 1(1) does not permit service of a writ making a claim under the Trade Practices Act 1975 [11].

5 Clearly the point was not argued before his Honour. If anything at all can be derived from the decision it is perhaps that by implication his Honour accepts the position put by Summit. But as both parties agreed the case is of no assistance in determining the present question.

6 Turning then to the Victorian cases the first is the decision of McDonald J in Williams v The Society of Lloyd's [1994] VicRp 19; [1994] 1 VR 274. The rather complicated facts of the case are not presently relevant. One of the issues his Honour had to deal with was whether or not a claim which was in part based upon the Trade Practices Act could found the issue of a writ to be served out of the jurisdiction. The argument put was a claim under the Trade Practices Act was analogous to a tort claim and on that basis service out of the jurisdiction could be permitted. His Honour accepted that the measure of damages for breach of the provisions of s 52 is the measure of damages available in tort. But he was not satisfied that was enough to say the claim constituted a 'tortious act or omission'. His Honour then referred to the decision of Menhennitt J in Philip Morris Ltd v Ainley & Incorporated Nominal Defendant [1975] VicRp 32; [1975] VR 345 and said:

Applying the reasoning of Menhennitt J, I am of the view that a breach of the provisions of that section do not constitute a 'tortious' act or omission. Accordingly, the provisions of r.7.01(1)(j) do not provide authority for service out of the jurisdiction of this court of its process in respect of an action claiming damages for breach of the provisions of s.52 of the Trade Practices Act (Cth) or s.11 of the Fair Trading Act (Vic.) as the damages sought to be recovered are not caused by a 'tortious' act or omission (312).

7 Although reported in 1994 his Honour's judgment was actually delivered in November 1992. It stood, and was presumably followed numerous times until Justice Byrne considered precisely the same question in Commonwealth Bank of Australia v White [1999] VSC 262; [1999] 2 VR 681. His Honour began by reviewing the history of the Victorian r 7.01(1) beginning with the schedule to the Supreme Court of Judicature Act 1873 (Eng). His Honour then acknowledged the decision in Williams and said:

In my opinion, the answer to the question presently under consideration is to be found by considering the words of r. 7.01(1)(i) as part of a regulation concerning civil procedure which is addressed to legal practitioners. The juxtaposition of paras (f), (g) and (h) with paras (i) and (j) suggests that the distinction is between contract claims on the one hand and tort claims on the other. With the solitary exception of para. (n) relating to Commonwealth Civil Aviation (Carriers' Liability) Act 1959, no mention is made of the juridical bases of the rights to be enforced, whether it be a common law obligation or one created by statute. Accepting, as I do, that a claim in tort may arise under statute as well as at common law, there is no reason in verbiage or policy to exclude one and not the other from the list of r. 7.01(1) proceedings. I conclude that the wrong of misleading and deceptive conduct is a tort within the meaning of para. (i) of r. 7.01(1).

I have set out at greater length than might otherwise be the case the basis for this conclusion because I am conscious that it carries with it the consequence that 'tortious act or omission' in para. (j) must likewise comprehend misleading and deceptive conduct in contravention of the Trade Practices Act and the Fair Trading Act. In this I have the misfortune to differ from the conclusion as to para. (j) arrived at in 1992 by McDonald J. in Williams v The Society of Lloyd's at 311-12. It would be presumptuous, if not impertinent, of me to attempt to explain this regrettable difference of opinion between two trial judges of this court. All I can say in my defence is that I have had the benefit of a series of important decisions in this area which were not available to his Honour nearly seven years ago [63] [64].

8 It is not entirely clear from the report what those 'important decisions' might be. But nonetheless there can be no doubt about his Honour's view. It is diametrically opposed to the view taken by McDonald J. The disappointed defendant appealed from his Honour's decision. Being an interlocutory decision the defendant needed leave.

9 The application for leave was heard on 3 September 1999 by Ormiston and Chernov JJA. The application was dismissed. Ormiston JA delivered the reasons of the court in the following terms:

Having had regard to the careful arguments put on each side, we have ultimately come to the conclusion that the matters raised essentially are matters of practice and procedure. So, although there may have been incidental matters about which we might not have agreed with the learned trial judge, we do not believe that substantial injustice will be done to the application if leave were refused. Consequently, the application is refused with costs.

10 It is a sure bet the Court of Appeal in this State would not have been so timid.

11 The defendant was not deterred. It applied for special leave to appeal to the High Court. The application was heard on 11 February 2000 and was refused by a majority. McHugh J delivered the reasons of the majority. His Honour said:

The court accepts that the decision in the present case is an important one for the parties. It also accepts that, as in many such orders, there was much to be said for the course which each side urged upon the primary judge. However, once he had made his decision in favour of the cause urged by the respondent, the applicant faced an extremely difficult task to secure the intervention of the Court of Appeal. Established authority in this country severely restrains such intervention, for reasons often stated. ... The primary judge applied the correct principles and took into account the various objects of the exercise jurisdiction, including those in relation to the service of process. No proper basis is made out for this court to become involved. For those reasons, Justice Kirby and I are not persuaded that this court should grant leave and the application is dismissed.

12 That is how the matter has stood since 1999. There is very little help to be gained by reference to other jurisdictions. The Northern Territory, Victoria and Western Australia are the only jurisdictions where there is neither special rules for statutory claims nor any general provision permitting service outside Australia in relation to causes of action arising within the jurisdiction. But some support Byrne J's view is to be found in Borch v Answer Products Inc [2000] QSC 379 [20] (Holmes J); and Jonstan Pty Ltd v Nicholson [2003] NSWSC 500; (2003) 58 NSWLR 223 (Hulme J).

13 So far as academic commentary is concerned, Davies M, Bell AS & Brereton PLG, Nygh's Conflicts of Laws in Australia (8th ed) [3.73] notes the conflict between the two Victorian decisions. Without offering a detailed analysis the learned authors conclude:

Although strict principle favours McDonald J's view, commercial convenience clearly favours Byrne J's view.

14 After considering both decisions carefully I am satisfied I ought follow the decision of Byrne J. I find his Honour's reasoning compelling and the result commercially sensible. Doubtless the case has been followed numerous times over 13 years. Importantly the Victorian Court of Appeal and the High Court did not conclude there was any error in principle. True it is neither reviewed the decision in detail and neither could be quoted as determinative of the issue. But it is reasonable to expect if his Honour had made a glaring error one or other of the two appellate courts would have stepped in to correct that error.

15 In the circumstances then I am satisfied this was a case which fell within O 10 r 1(1) and service out of the jurisdiction was proper and appropriate.

16 That then leads to the question of whether the matter ought be stayed based upon the choice of forum. Both parties were agreed the court has power to grant a stay on the grounds the forum is inappropriate. The power is discretionary in the sense it involves a subjective balancing process. Deane J in Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 165 CLR 197 put the position in this way:

[T]he relevant factors will vary and in which both the question of the comparative weight to be given to particular factors in the circumstances of a particular case and the decision whether the power should be exercised are matters for individual judgment and, to a significant extent, matters of impression. The power should only be exercised in a clear case and the onus lies upon the defendant to satisfy the local court in which the particular proceedings have been instituted that it is so inappropriate a forum for their determination that their continuation would be oppressive and vexatious to him (248).

17 This position has been further expanded by the High Court in Henry v Henry [1996] HCA 51; [1996] 185 CLR 571. The court specifically approved what was said by Lord Goff of Chieveley in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 and concluded:

[T]he fundamental question being 'where the case may be tried "suitably for the interests of all the parties and for the ends of justice"'.

See also Raveh v The Official Receiver of the State of Israel [2002] WASCA 27; and Singh v Singh [2009] WASCA 53.

18 Before considering the submissions made on behalf of the first defendant it is appropriate to say something about the plaintiff's cause of action. What follows is taken from the writ and the matters referred to in Mallon & Co Lawyers Pty Ltd v Hog's Breath Company Pty Ltd [2011] WASC 236.

19 In or about January 2006 the first defendant retained the plaintiff for and on behalf of a Mr Lamb for the provision of legal services in Western Australia. The agreements were made in Western Australia and were subject to Western Australian law. These agreements contained terms to the effect the plaintiff would be entitled to have all its legal fees and disbursements incurred in acting for Mr Lamb in Federal Court proceedings secured and paid out first from any judgment or settlement sum payable to Mr Lamb. The plaintiff received instructions from Mr Lamb through the first defendant. Legal fees and disbursements were incurred. The Federal Court proceedings were settled by way of a settlement deed entered into on or about 27 November 2008. The settlement deed provided the instalment payments of the settlement sum would be paid into the plaintiff's trust account. On or about 28 November 2008 Mr Lamb through the first defendant provided the plaintiff with a written authorisation to apply the instalment settlement sums to pay the plaintiff's outstanding invoices and disbursements.

20 The Federal Court proceedings were to remain on foot until all of the settlement instalments had been paid. The plaintiff remained on the record for Mr Lamb. The plaintiff received and continued to receive instructions from the first defendant. Some settlement instalment payments were made to the plaintiff's trust account. The plaintiff alleges the first defendant from on or about 17 February 2010 entered into negotiations with the defendants in the Federal Court proceedings which were secret and deliberately kept from the plaintiff. The plaintiff claims that as and from 17 February 2009 and throughout March 2009 the first defendant engaged in conduct that was misleading or deceptive either by way of misrepresentations or silence or omissions. The effect of that conduct was to convey the impression the payments would continue to be made to the plaintiff in the agreed and ordinary course and such arrangements were still in place. The conduct is also said to be misleading or deceptive in that it did not reveal the negotiations that were going on at the time. The negotiations between the first defendant and the defendants to the Federal Court proceedings resulted in an agreement that the settlement sums payable by the defendants be reduced and they be paid directly to the first defendant's trust account. The plaintiff without its knowledge was replaced as solicitor on the record in the Federal Court proceedings. The plaintiff alleges it suffered loss and damage by the misleading and deceptive conduct of the first defendant.

21 The first defendant practices as a lawyer in California. In California he has professional indemnity insurance cover. He does not have any insurance cover for activities in Western Australia. Moreover the policy has what the defendant describes as a 'Foreign Territorial Clause'. Effectively any judgment obtained against the first defendant in a jurisdiction outside the United States of America is not covered by the insurance policy.

22 The first defendant says the fact he might - although not necessarily will - be covered by insurance if the matter is litigated in California requires the matter be stayed in this jurisdiction. Further, the first defendant offers an undertaking that no issue as to limitation will be put against the plaintiff if the matter proceeds in California.

23 On behalf of the plaintiff it is submitted nothing in the material filed by the first defendant makes Western Australia a 'clearly inappropriate' forum. While acknowledging insurance may be a relevant consideration where the connection with the jurisdiction is weak this is not such a case: see Fleming v Marshall [2011] NSWCA 86. Further, counsel for the plaintiff pointed out the insurers of the first defendant had rejected any liability for the claim on a number of other grounds. In particular they pointed out the insurance covered only 'professional services' and the claim made was not in relation to professional services. Furthermore, the policy did not apply to 'division of fees or fees apportioned between any insurer and any other lawyer or lawyers': see letter of Musick, Peeler and Garrett (Attorneys at Law) to the first defendant dated 30 May 2012 annexed to the first defendant's submissions.

24 It is not appropriate in these reasons to canvass how the provisions of the first defendant's professional indemnity policy issued in California might be interpreted by the courts of the United States. But it is reasonable to observe the provision of cover (leaving to one side the territorial limitation) seems unlikely. On the undisputed version of facts it is difficult to see the dispute does not relate to the division of fees or that it relates to the provision of professional services. Without in any way presuming to determine these questions it would seem to me the argument as to insurance cover is at best thin.

25 There is no other prejudice alleged by the first defendant. The connection to this jurisdiction is clearly strong and in my view there is no basis upon which the present application should be stayed.

26 The first defendant's chamber summons will be dismissed. The appearance will accordingly become unconditional. The first defendant should pay the plaintiff's costs on the chamber summons including the reserved costs.