Marshall v Fleming

n: 2013-05-17 00:00:00 Before: Harrison J File Number(s): 2009/292935

Judgment 1THE COURT: The proceedings the subject of this appeal arose out of the death of a Mr Neil Marshall on 31 May 2000 following an air crash in South Australia resulting from the failure of the aircraft's two engines. About five years prior to his death the deceased had separated from his wife, Mrs Margaret Marshall (the first applicant) and formed a relationship with Ms Linda Carruthers who was his de facto wife at the time of his death. 2The Marshalls and the surviving family members of other persons killed in the air crash instructed the respondents, a firm of attorneys practising in New York, to bring proceedings on their behalf against the manufacturers of the aircraft and its engines. The proceedings were brought in Pennsylvania where the manufacturers were resident. The proceedings were settled in 2003 but the respondents refused to pay the applicants the share of the settlement proceeds applicable to the claim relating to Mr Marshall's death, unless the applicants obtained in Australia a court determination that Ms Carruthers had no interest in those settlement proceeds. The applicants obtained such a determination from the Equity Division of this Court in 2008. The respondents then paid to the applicants the balance of their share of the settlement proceeds that were remaining after deduction of the respondents' contingency fee. 3In 2009 the applicants commenced the present proceedings claiming that by imposing the above described condition on payment of the settlement proceeds and by other related conduct, the respondents had breached their contract of retainer, breached a duty of care and a fiduciary duty owed to the applicants and committed the tort of conspiracy. The damage that the applicants claimed included an amount equal to the contingency fee that the respondents had deducted from the settlement proceeds and such costs that the applicants incurred in bringing the proceedings against Ms Carruthers as they were not able to recover from her. 4The respondents asserted earlier in these proceedings that New South Wales was a clearly inappropriate forum. That contention was rejected both at first instance and on appeal. However, in his judgment on the appeal Macfarlan JA, with whom Spigelman CJ and Sackville AJA agreed, expressed a provisional view that the proper law of the retainer between the respondents and the applicants was the law of New York (Fleming v Marshall [2011] NSWCA 86 at [78]-[81]). 5If that provisional view was correct, the effect was that the applicants' claim would fail as the proceedings were brought outside the three year limitation period provided by New York law. 6Recognising this difficulty, the applicants amended their claim and asserted that the respondents owed them "a common law or equitable duty" to indemnify the appellants in respect of the net settlement monies including the contingency fee. The pleading asserts this duty arose at the conclusion of the retainer between the applicants and the respondents and independently of such retainer. This apparently was of critical importance because if the obligation arose under the contract of retainer, the three year limitation period would apply and the claim would be statute barred, whereas if it arose independently the limitation period would be a period of six years and not statute barred. 7As an issue of foreign law was involved, the parties were required to comply with r 6.43 of the Uniform Civil Procedure Rules 2005 (NSW) (the UCPR). The applicants served a foreign law notice under r 6.43 and the respondents, disputing the principle of foreign law and the application contended for by the applicants, filed a notice said to be in conformity with r 6.43(3). 8Thereafter the applicants served a Notice of Motion seeking to strike out the respondents' notice under UCPR, r 6.43(3), whilst the respondents sought that the foreign law questions referred to in that notice be referred out to a referee. 9The motion was heard on 8 May 2013 before Harrison J (the primary judge). The primary judge made the following orders: "1. Order pursuant to UCPR 20.14 and/or the Memorandum of Understanding between the Chief Justice of New South Wales and the Chief Judge of the State of New York on References of Questions of Law of 28 October 2010 that a member of the New York Panel of Referees be appointed to act as a referee for inquiry and report on questions of foreign law. 2. Direct that the parties confer and agree within 14 days upon the questions of foreign law that are to be referred in accordance with order 1 above. 3. Order that the costs of the defendants' notice of motion be the defendants' costs in the proceedings. 4. Stand over the plaintiffs' notice of motion to a date to be fixed pending receipt by the parties of the referee's report as anticipated by order 1 above. 5. Reserve the costs of the plaintiffs' notice of motion." 10The applicants sought leave to appeal from these orders and there was a concurrent hearing of the application for leave to appeal in the appeal. 11The Memorandum of Understanding referred to in Order 1 of the orders of the primary judge is the Memorandum of Understanding entered into between the Chief Justice of New South Wales and the Chief Judge of the State of New York (the MOU). Articles 1, 2 and 3 of that Memorandum provide as follows: "ARTICLE 1 If a substantial legal issue in proceedings before one Court is governed by the law of the other Court, each Party shall give consideration, in accordance with its Rules and procedures, to taking steps to have any such contested issue of law referred to the Party of the governing law for an answer to be provided in accordance with the procedures of the requested jurisdiction. ARTICLE 2 The consideration referred to in Article 1 may include: (i) the identification of the precise question of foreign law to be answered; (ii) the identification of the facts or assumptions upon which the answer to the question is to be determined; (iii) the identification of whether and, if so, in what respects the Parties may depart from the facts or assumptions and/or vary the question to be answered in any proceedings in the court of the other Party. ARTICLE 3 Upon the institution of proceedings for the answer to a question pursuant to Articles 1 and 2, each Party undertakes to provide an answer to the referred question of law in accordance with the procedures it has established and as expeditiously as those procedures allow." 12Subsequently by an order dated 21 December 2010, Chief Judge Lippman of the State of New York established a protocol for the implementation of the MOU in New York (the Protocol). The relevant parts of the Protocol provide as follows: "I hereby establish, pursuant to the authority vested in me as Chief Judge of the State of New York, a protocol to formalize cooperation with the Supreme Court of New South Wales with respect to the referral of questions of foreign law. Pursuant to a Memorandum of Understanding between the Chief Judge of the State of New York and the Chief Justice of New South Wales, the Chief Judge of New York shall establish a panel of Referees who shall from time to time be assigned by the Chief Judge to serve as uncompensated volunteers charged with offering answers to questions of law referred by the Supreme Court of New South Wales and who shall otherwise in general be available for consultation with the Judges of the Supreme Court of New South Wales. Such Referees shall be acting outside the scope of their official court duties and for the purpose of advancing the administration of justice and promoting comity and cooperation between the judicial systems of New York and New South Wales. The panel of Referees shall consist of five Judges and Justices selected by the Chief Judge from among the sitting members of the appellate courts of this State. Referees shall be selected on the basis of their reputations for excellence and demonstrated background and interest in international and commercial law matters. Referees will be available to respond to questions of law referred by the Chief Justice of New South Wales to the Chief Judge of the State of New York. Upon receiving such a referral and determining that a substantial question of New York law is presented, the Chief Judge shall assign three members of the panel of Referees to prepare a written response to the question or questions of law presented. Pursuant to the terms of the Memorandum of Understanding between the Chief Judge of the State of New York and the Chief Justice of New South Wales, the letter of referral shall identify: (i) the precise question of New York law to be answered; (ii) the facts or assumptions upon which the answer to the question is to be determined; and (iii) whether and, if so, in what respects the Referees may depart from the facts or assumptions and/or vary the question to be answered. The panel of Referees assigned to respond to the question shall jointly employ their collective expertise and best judgment and discretion to offer a comprehensive and reliable written interpretation and expression of New York law as applied to the facts and assumptions presented in the letter of referral. The Supreme Court of New South Wales shall have the discretion to adopt, modify or reject the Referees' report in whole or in part. The Referees' report is not an official or binding articulation of New York law and shall not have precedential authority." 13The New York panel of referees, referenced in Order 1 made by the primary judge, is the panel of referees to be established under this protocol, which is to be available, in the words of the Protocol, "...to respond to questions of law referred by the Chief Justice of New South Wales to the Chief Judge of the State of New York." 14Although the applicants sought leave to argue several grounds of appeal, their argument primarily was based on three essential points. The first and second concern the exercise of discretion by the primary judge in making the first order. In doing so it is said that he wrongly assumed that the terms of the MOU referred to in the order would apply to the order made with the result that a member or members of the New York Panel of Referees would be appointed. It is also said that his Honour did not identify the particular question or questions of foreign law which were to be referred. The third matter relied upon is in some respects related to the first. It is that the order made by his Honour purportedly under UCPR, r 20.14 was beyond power and should be set aside as of no effect because it does not appoint a particular person or persons as referee. 15For the reasons which follow, each of these arguments should be upheld. Leave to appeal should be granted and the appeal allowed. 16The primary judge purported to exercise the power under UCPR, r 20.14, which enables the court at any stage of proceedings to "...make orders for reference to a referee appointed by the court for inquiry and report by the referee on the whole of the proceedings or any question arising in the proceedings." In that context "question" is defined to include any question in issue, whether of fact or law or both. UCPR, r 20.15(1) provides that the court "may appoint any person as a referee." 17The question for his Honour was whether an order should be made referring any question of foreign law arising in the proceedings to a referee. 18Before this Court it was argued by the respondents that UCPR, r 6.44(2) provides a specific power of referral of questions of foreign law and, to that extent, performs the same functions, in a more specific context, of the general power of referral under r 20.14. Whether that is so depends upon the construction of r 6.44 and in particular 6.44(2). Rule 6.44 is in the following terms: "6.44(1) The Supreme Court may, on the application of one or more of the parties and with the consent of all of the parties, order that proceedings be commenced in a foreign court in order to answer a question as to the principles of foreign law or as to their application. (2) The Supreme Court may, on the application of one or more of the parties or of its own motion, order that the question of foreign law be answered by a referee appointed in accordance with Division 3 of Part 20. (3) An order under subrule (1) must: (a) state the question of foreign law to be answered, and (b) state the facts or assumptions upon which the answer to the question is to be determined, and (c) contain a statement to the effect that the foreign court may vary the facts or assumptions and the question to be answered, and (d) state whether and to what extent the parties may depart from the facts or assumptions in the determination of the question by the foreign court. (4) The Supreme Court may give directions for the preparation of a statement as to the nature of the issue out of which the question arises for inclusion with the question to be answered by the foreign court or the referee." 19The reference to "the question of foreign law" in this sub-section is to the question which is the subject of an order under r 6.44(1). The use of the expression "the question of foreign law" indicates that what is being referred to is the same question of foreign law as has been referred to earlier. The only earlier reference is in subsection (1). 20The expression "question of foreign law" as used in r 6.44(2) is not defined. However, in its context and having regard to the provisions of rr 6.43(1) and (3) and 6.44(1) and (3)(a), it refers at least to the content of any applicable principle of law and its application in the circumstances. Whilst expert evidence would be admissible as to the first matter in proceedings conducted in Australia, it would not be admissible as to the second: National Mutual Holdings Pty Ltd v The Sentry Corporation (1989) 22 FCR 209 at 226; United States Trust Co of New York v Australia and New Zealand Banking Group Ltd (1995) 37 NSWLR 131 at 146-147; Neilson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54; (2005) 223 CLR 331 at [120]. 21It is not clear to what extent the primary judge relied on r 6.44(2) in making his orders. In the result it is not of particular significance. The specific power in r 6.44(2) does not involve any constraint on the general power in r 20.14 to refer any question in the proceedings to a referee. At the hearing both parties seemed to accept this. 22What was contended however was that, absent consent (as was the case in these proceedings), a reference should only be made in exceptional circumstances. There is no constraint of this nature in either rr 6.44(2) or 20.14 and one should not be implied: Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 at 556 and 558 (Gleeson CJ). As Mahoney JA, as his Honour then was, pointed out in that case (at 568), the construction which should be placed on provisions, such as the UCPR in question, if possible, should be one to provide for powers appropriate to the effective, efficient, timely and just disposal of the proceedings. A limitation of the nature suggested does not assist in that regard. 23In his reasons for making the first order, the primary judge proceeded upon the basis, which was urged by the respondents, that the MOU applied to an appointment of a referee or referees under UCPR, r 20.14. In particular his Honour considered at [17] that "a reference to a panel in New York in accordance with the Memorandum of Understanding is likely to have procedural advantages for both parties and is the preferred course". At [21] he considered: "The advantages associated with a reference to a panel of judges in New York in accordance with the Memorandum of Understanding is that it would provide a certain, and presumably final, answer about the content and application of the law of that State." For those reasons, among others, the primary judge concluded that it was appropriate to make the order sought. 24The MOU does not in its terms apply to a reference to a referee or referees under Division 3 of Part 20. It contemplates the institution of proceedings for an answer to the relevant question of foreign law in the jurisdiction whose governing law is that "foreign law". In the language of Article 1 the relevant question is to be referred to the court of governing law "for an answer to be provided in accordance with the procedures of the requested jurisdiction." Article 4 provides for "other less formal forms of communication and consultation between the Parties regarding questions of law." 25The respondents also rely upon the Protocol, which establishes a procedure to formalise co-operation between the Courts, with respect to the referral of questions of foreign law. The Protocol contemplates that a Panel of Referees will be available to respond to questions of law which are the subject of a letter of referral from the Chief Justice of this Court to the Chief Judge of the State of New York. The Protocol makes no provision for a reference by this Court under UCPR, r 20.14 to either the Chief Judge of New York or to the panel of questions of law much less their application to disputed facts. It envisages a communication from the Chief Justice of this Court to the Chief Judge of the State of New York in respect of specified questions of law based on particular facts and assumption. 26The MOU and subsequent Protocol provide an effective inexpensive method by which questions of foreign law can be determined. However, that method involves the co-operation of the parties both in identifying the questions of law arising on particular facts and assumptions (and possibly alternative sets of facts and assumptions) and agreeing to be bound by the result. It is regrettable having regard to the amount involved in these proceedings that the parties could not or would not co-operate to achieve this end. However, the MOU did not contain provisions which are engaged on the making of an order under UCPR, r 20.14 or otherwise, so as to require that a member or members of the proposed panel be appointed (and accept appointment) as a referee for inquiry and report on any particular question of foreign law. 27The primary judge erred in making an order which in terms assumed that the MOU would be engaged in this way or that it otherwise provided a basis for the making of an order in the terms made. 28The primary judge also erred by failing to identify the question of law to be determined by the referee. Rule 6.44(2) requires a question of foreign law to be identified. The order failed to do this. 29Further, even if regard is had only to r 20.14 that rule requires a question to be referred. It does not seem that a reference can be made and the question identified at a later point of time. 30In one sense this difficulty may be more apparent than real. If this were the only difficulty the order could have been perfected prior to it being given effect. If this were the only issue with the orders leave to appeal may well have been refused. 31More importantly, however, the primary judge erred in failing to appoint a referee. This was probably because of his assumption that the Memorandum of Understanding would apply to the orders. As we have indicated, it would not. In any event it is clear from UCPR, r 20.14 that the court must appoint the referee. The reference to the court in that rule is a reference to a court to which the Civil Procedure Act 2005 (NSW) and the UCPR apply (Civil Procedure Act, Sch 1, s 4). The Supreme Court is one of those courts and is comprised of the judges and associate judges of the Court (Supreme Court Act 1970 (NSW), s 25). It follows that an appointment can be made only by judges or associate judges subject to their power to delegate matters to other officers of the Court. There is no power to delegate the power to appoint a referee to someone who is not at least an officer of the Court. 32In those circumstances the discretion of the primary judge miscarried and Orders 1 and 2 of the orders made by him should be set aside. 33A difficulty which arises is that the revised Draft Notice of Appeal does not precisely articulate the grounds on which the applicants have been successful. The applicants should be directed in these circumstances to file a Notice of Appeal raising the three matters referred to in par [14]. Leave to appeal should otherwise be refused. Whilst a number of the other matters raised on the revised Draft Notice of Appeal may be arguable, they raise no question of general importance and to the extent necessary can be further dealt with in interlocutory proceedings in the Common Law Division. 34The Court has reached this conclusion with some regret as the primary judge quite properly was endeavouring in making his orders to dispose of the matter as inexpensively and expeditiously as possible. We have looked at the notices given by each party under UCPR, r 6.43 and without deciding whether or not they comply with the UCPR, neither of them seem to identify adequately the foreign law issues involved. This is presumably why the primary judge made Order 2. Although it is not for this Court to give directions, it would seem a relatively simple matter for the applicants to identify the cause of action under New York law on which they rely, the elements of that cause of action and the facts which they say make out those elements. The respondents then should be in a position to indicate whether they dispute the existence of the cause of action, its elements as articulated by the applicants and what facts they dispute. This would demonstrate whether there was any dispute as to principles of foreign law and the extent of the factual dispute between the parties. 35As to costs, the Court's present view is that the respondents should pay the applicants' costs of the appeal and the application for leave but the costs of the proceedings below should be determined by the primary judge or such other judge of the Common Law Division who hears the proceedings. However, as the parties have indicated they wish to make further submissions on costs, they should be given the opportunity to do so. 36In the result the Court makes the following orders: (1)Grant the applicants leave to appeal limited to the three matters referred to in par [14] of this judgment. (2)Direct the applicants to file a Notice of Appeal limited to those matters within 7 days. (3)Leave to appeal otherwise refused. (4)Appeal allowed. (5)Set aside Orders 1 to 5 of the orders of the primary judge made on 17 May 2013. (6)Reserve the costs of the plaintiff's notice of motion for determination by a judge of the Common Law Division. (7)Direct the respondents to file such submissions as they wish to make on the question of costs of the appeal within 7 days. (8)Direct the applicants to file submissions in reply within 7 days.