Degree of injustice
33Section 58(2)(b)(vi) of the Civil Procedure Act requires the Court to consider the degree of injustice that would be suffered by the respective parties as a consequence of any order refusing an extension of time.
34The appellants contend there is a triable issue in respect of its main complaint, namely, the Review Panel's decision was in breach of the indemnity principle in that the appellants contend that the respondents had no obligation to pay their solicitors' fees for acting for them in the appeal proceedings before the Industrial Court in Matter No IRC 2876 of 2006. The effect of the appellants' submission was that given they had a "fairly arguable case" they would suffer an injustice if leave to extend time to appeal was refused.
35The basic "indemnity principle" was expressed by Santow JA in Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474 at [45]:
[45] ... Where a party to an action has an agreement with their legal adviser that they do not have to pay any costs, then the general law principle states that that party cannot recover party and party costs against their adversary: McCullum v Ifield [1969] 2 NSWR 329 at 330, per Taylor J, citing Gundry v Sainsbury [1910] 1 KB 645.
36See also Dyktynski v BHP Titanium Minerals Pty Ltd [2004] NSWCA 154; (2004) 60 NSWLR 203 at [7] and CSR Ltd v Eddy [2008] NSWCA 83; (2008) 70 NSWLR 725 at [44] per Basten JA.
37The appellants' contention appears to be that there were various arrangements including arrangements between Watson Mangioni (the firm of solicitors that represented the respondents in the proceedings whilst the order made by Marks J on 14 July 2006 restraining Harmers from representing the respondents remained on foot) and Harmers regarding professional costs. It was said the arrangements raised the question whether the respondents had an obligation to pay the legal costs of either Watson Mangioni or Harmers and, if not, there is nothing the appellants are required to indemnify the respondents against.
38There are documents that the appellants seek to rely upon in respect of which the respondents claim client legal privilege. The documents consist largely of communications (mainly emails) between Harmers and Watson Mangioni regarding payment of outstanding fees and a tax invoice sent by Watson Mangioni to Harmers for professional costs of acting on Harmers' behalf in the proceedings before the Full Bench involving the appellants and respondents. The appellants seek to use the documents to strengthen their contention that they have an arguable case.
39The appellants submitted the documents were not caught by privilege. Reliance was placed on Eddy and in particular what Basten JA said at [60]-[67]. Essentially, what his Honour held was that the existence of a retainer between client and lawyer is not the subject of client legal privilege, but a precondition to its operation. Thus, generally the retainer will not be privileged (Hodgson JA specifically agreeing and McColl JA in general agreement).
40It may be noted that the issue of client legal privilege in Eddy did not involve a consideration of the relevant provisions of the Evidence Act 1995 and was concerned with the tests under the general law: see [61]. However, in [66] Basten JA stated:
[66] There is no doubt that a funding arrangement, whether with a third party or with a lawyer, may be characterised as a confidential document and may indeed be prepared for the dominant purpose of obtaining legal services. However, the nature of the connection must be assessed according to the purpose of the statutory provision. That purpose is the same as the purpose of the general law protection and, for reasons already noted, does not extend to a document the purpose of which is to create the relationship. Different issues may arise in relation to documents prepared for or provided to a litigation funder. Further, because the operation of s 119 of the Evidence Act does not arise, it is sufficient for present purposes to say that the general law principle in relation to lawyer-client costs agreements was correctly stated by Lindgren J in Cook . Accordingly, the costs agreements were not protected by client legal privilege.
41The appellants further submitted that even if privilege applied to the documents it had been waived on the basis that other documents that had been produced by the respondents in respect of which privilege had not been claimed had disclosed the substance of the evidence in respect of which privilege was claimed: see s 122 of the Evidence Act and Attorney-General (NT) v Maurice [1986] HCA 80; (1986) 161 CLR 475 at 487 per Mason and Brennan JJ.
42The respondents relied on s 119 of the Evidence Act , which provides:
119 Litigation
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:
(a) a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made, or
(b) the contents of a confidential document (whether delivered or not) that was prepared,
for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party.
43Reference was made in particular to Rickard Constructions Pty Ltd v Richard Hails Moretti Pty Ltd [2006] NSWSC 234 at [58] and Re Global Medical Imaging Management Limited (in liq) [2001] NSWSC 476. In the first of those cases, Bergin J held:
[58] A different question arises under s 119 of the Act. It is whether the communications were for the dominant purpose of the plaintiff "being provided with professional legal services". I have already decided that the communications were confidential communications. The dominant purpose in the confidential communications was to provide information to the funder so that it would source the continued funding of the litigation. It may be argued, as it was in Global Imaging, that such a purpose is anterior to the dominant purpose of the client "being provided with professional legal services". In Global Imaging Santow J held that the funding agreement in question in "a literal and substantive sense, fulfils the purpose of providing legal services in terms not only of the overall capacity to have them at all, but also their availability at critical junctures in the case" (at [7]).
[59] In this case it is the confidential communications rather than the funding agreement that are under consideration. They are not anterior to the dominant purpose, they are inextricably linked to the nature of the professional legal services being provided to the client. Their dominant purpose was to ensure the overall capacity of the plaintiff to have funding and to ensure that such funding would be forthcoming for the continued funding of the litigation. That seems to me to fall within the description of a dominant purpose of the client "being provided" with professional legal services. This description is to be contrasted with the expression "providing professional legal services". The concept of the client "being provided with" something is of broader import and seems to me to encompass the purpose under consideration here. I am satisfied that the documents are also privileged pursuant to s 119 of the Act.
44In Global Medical Imaging, Santow J held as follows:
[6] At first blush, one might be inclined to treat a funding agreement as falling outside s119, being provided not for the dominant purpose of the provision of professional legal services but, rather, for a purpose anterior to their provision, namely, the funding thereof. Such a view would comport with the trend of a hardening judicial attitude to narrow the scope of the legal professional privilege; see the discussion of the cases cited in "Legal Professional Privilege in Australia" by Dr R J Desiatnik (Prospect, 1999) at 53 as reflected for example that it is not enough for a person merely to assert a claim for privilege ( National Crime Authority v S (1991) 100 ALR 151 at 159 per Lockhart J) That trend of the general law as so interpreted is however not consistently reflected in its statutory counterpart. The Evidence Act 1995 to some extent widens its scope, notably by substituting the dominant purpose test for the sole purpose test, though the general law has now caught up; Esso Australia Resources Ltd v Commissioner of Taxation of the Cth of Australia (1999) 74 ALJR 339.
[7] But that first blush view is not the view that I would, on consideration adopt. To deny legal privilege to a funding agreement of this sort would fail to give proper weight to its inextricable connection with the very subject matter of the legal advice that might be given and the nature of the professional legal services to be rendered. It has the potential to reveal the litigant's likely legal strategy. The funding agreement in a literal and substantive sense, fulfils the purpose of providing legal services in terms not only of the overall capacity to have them at all, but also their availability at critical junctures in the case. While it may not reveal the content of legal advice, it reveals the confidential circumstances of its availability and throws oblique light on the confidential circumstances to which the advice is directed.
[8] One could, for example, infer from a funding agreement the likelihood of tactical advice being given of a particular kind at different stages of the litigation or, for that matter, of the likelihood of an appeal being advised or not advised. I consider this funding agreement could do so.
[9] Accordingly I would conclude that the dominant purpose element is made out.
45The respondents further submitted there had been no waiver of the privilege in the respondents providing, under compulsion, copies of documents to the costs assessor and the District Court: see s 122(5)(iii) of the Evidence Act . Further, the respondents had not acted inconsistently with the maintenance of privilege: Commissioner of Taxation v Rio Tinto Limited [2006] FCAFC 86; (2006) 151 FCR 341 at [50].
46In my opinion, the documents are not privileged. Whilst I am able to accept the documents were confidential communications, I am unable to accept they were prepared for the dominant purpose of the respondents being provided with professional legal services. The documents reveal neither the content of any advice nor any legal strategy, either expressly or inferentially. The documents are essentially communications between two firms regarding the payment of outstanding fees. Insofar as any costs agreement is concerned, I respectfully take the same view as that expressed by Basten JA in Eddy .
47Having come to this view about the documents, I do not think they transform the appellants' case into one that is strongly arguable and the most that could be said is the case is not doomed to failure.
48However, the difficulty the appellants face in pursuing their case for leave is that the respondents have paid to their solicitors the amount determined by the Review Panel. The respondents submitted that as the costs had been paid, regardless of whether they were required to be paid, they were entitled to recover those costs under a party/party order. Reliance was placed on Elders Trustee & Executor Co Ltd; Estate of Howard v Estate of Herbert (1996) 132 FLR 24; (1996) 11 NTR 25 and University of Western Australia v Gray (No 25) [2009] FCA 1227; (2009) 180 FCR 483.
49In Elders it was held that where costs had already been paid to interstate solicitors before they had been admitted to practice in the Northern Territory, those costs could be recovered under a part/party costs order. In Gray , Barker J stated at [38] and [40]-[41]:
[38] In Re Hope , the English Court of Appeal considered that Fullalove v Parker and Re Jones applied and, at 767, said that while no person as an attorney or solicitor should carry on an action or suit without being certificated, there was nothing to prevent the client from paying the attorney and the want of a certificate could not create any impropriety on the part of the client in doing so. The Court added, at 767:
No doubt [the client] might have refused to pay the costs incurred, but he was bound in honour to pay them, and if he had done so, and there was nothing to show that he had not, he had a right to recover them from the person who had been ordered to pay.
...
[40] In Elders Trustee and Executor Co Ltd v Estate of Herbert [1996] NTSC 37; (1996) 132 FLR 24; 11 NTR 25 the Court of Appeal of the Supreme Court of the Northern Territory dealt with the costs recovery position in the Northern Territory where uncertificated out-of-Territory legal practitioners had acted for the successful party who had the benefit of a costs order from the trial judge. Section 22(4) of the Legal Practitioners Act 1974 (NT) relevantly provided:
A legal practitioner is not entitled to recover any costs or disbursements in respect of any work of a professional nature done by him as a legal practitioner if, at the time at which the work was done, he was not the holder of a current unrestricted practising certificate or restricted certificate class 2.
Gallop J, with whom Thomas J agreed (and with whom Kearney J appears to have agreed on this point) explained that when an order for costs was made in favour of a party, they were entitled to be indemnified for all costs properly paid out in the maintenance of the action and in that regard referred to Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403 per Mason CJ, Brennan, Deane, Dawson and McHugh JJ at 410 - 411. Gallop J then referred to what Kearney J had held in an earlier case about the operation of s 22(4). In TNT Bulkships Ltd v Hopkins [1989] NTSC 42; (1989) 65 NTR 1, Kearney J had regard to s 22(4) and held that: (1) a successful plaintiff cannot recover the costs of his uncertificated solicitor from the defendant except as to monies he has already paid to that solicitor on account of his costs in the action; (2) no costs were recoverable by the plaintiff on taxation for professional work done by a solicitor as he was not a legal practitioner in the Territory; (3) no costs were recoverable by the plaintiff for professional work done by another uncertificated practitioner, save in respect of monies paid prior to taxation; (4) s 22(4) is directed specifically at a person who is a legal practitioner but who lacks a practising certificate; (5) there was, in effect, no real question that the out-of-Territory lawyers were acting as agents. Gallop J said (111 NTR at 33) that he did not agree with Kearney J about the operation of s 22(4). However, his Honour considered that Kearney J was correct, whatever the operation of s 22(4), in deciding the costs and disbursements already paid were recoverable and that all of the old cases - Fullalove v Parker , Re Jones , Re Hope and Fowler - supported that proposition.
[41] With respect, it seems to me that the correct principle to be drawn from the older cases cited by Gallop J, in the light of Fowler , is that, provided the statute governing a legal practitioner's fees does not have the effect of extinguishing the debt between a legal practitioner and client because the practitioner was, at material times, uncertificated (and absent any other statutory rules governing the recovery of party and party costs), then, if the fee has been paid by the client without notice of the practitioner's disability, they can recover it as party and party costs under a costs order. Fowler elucidates this principle, although the result in that case was different from the earlier cited cases.
50There is nothing in the Legal Profession Act that has the effect of extinguishing the debt between the respondents and their solicitors. Accordingly, I agree with the respondents that as the fees have already been paid by the respondents, they are entitled to recover them as party and party costs from the appellants under a costs order.
51The respondents also referred to ss 367A and 365(2) of the Legal Profession Act :
367A Determinations of costs assessments for party/party costs
A costs assessor is to determine an application for an assessment of costs payable as a result of an order made by a court or tribunal by making a determination of the fair and reasonable amount of those costs.
365 Effect of costs agreements in assessments of party/party costs
(1) A costs assessor may obtain a copy of, and may have regard to, a costs agreement.
(2) However, a costs assessor must not apply the terms of a costs agreement for the purposes of determining appropriate fair and reasonable costs when assessing costs payable as a result of an order by a court or tribunal.
52Given that the costs have already been paid, it would seem that the terms of any costs agreement between the respondents and their solicitors, and documents relating to it, are irrelevant.