Pappas v Aulich Civil Law Pty Ltd [2022] ACTSC 45

Representation: Counsel Self-represented (Applicant) B Anderson (Respondent)

Solicitors Aulich Civil Law (Respondent)

File Number(s): SC 424 of 2021 McCALLUM CJ:

1. Mr Jack Pappas, a barrister, has made an application for a costs assessment under the Legal Profession Act 2006 (ACT) concerning his professional fees in a matter in which he was briefed by Aulich Civil Law Pty Ltd, a law practice. Aulich has not paid the balance claimed and is the respondent to the application. The proceedings in which Mr Pappas was briefed as counsel were personal injury proceedings in this Court. The plaintiff in those proceedings was Mr Henry Carr; the defendants may conveniently be referred to by the name of the relevant insurer, NRMA.

2. The application presently before the Court is an application by Aulich to set aside a subpoena addressed to it issued at the request of Mr Pappas. Before turning to the issues raised by that application, it will be helpful to set out some matters by way of background.

Circumstances in which the dispute as to fees arose

3. The proceedings brought by Mr Carr were settled some days after the commencement of the hearing, evidently on terms requiring NRMA to pay Mr Carr’s costs. It appears to be common ground between Mr Pappas and Aulich that, at the time the settlement was reached, Mr Pappas agreed that he would not look to Mr Carr to make up any shortfall between his professional fees specified in memorandums of fees provided to Aulich and the amount recovered from NRMA on account of those fees. However, there is a dispute between Mr Pappas and Aulich as to the circumstances in which any such shortfall might arise. Mr Pappas contends that he undertook to accept whatever was recovered on “taxation” (assessment); Aulich contends that the undertaking was to accept whatever amount was recovered from NRMA. The difference is subtle but important. Aulich’s understanding of the undertaking would implicitly reserve to it the authority to determine the amount to be paid to Mr Pappas in satisfaction of his outstanding fees without his agreement or any independent assessment.

4. As events transpired, and unbeknownst to Mr Pappas, Aulich compromised a dispute with NRMA as to Mr Carr’s costs without proceeding to assessment. Failing agreement as to costs, Aulich invoked the procedure for assessing the costs of a party provided for in division 2.17.5 of the Court Procedure Rules 2006 (ACT). A bill of costs was filed, as required under rule 1800(3), and listed for assessment. However, before the assessment was concluded, Mr Carr accepted an offer made by NRMA pursuant to rule 1811 of the Court Procedure Rules. Aulich advised Mr Carr to accept that offer without reverting to Mr Pappas.

5. A central issue in the assessment of Mr Pappas’s professional fees is whether, in those circumstances, he is bound by his undertaking to accept an amount less than the sum of his memorandums of fees notwithstanding the fact that he neither assented to the compromise as to costs with NRMA nor had the benefit of participating in the assessment process, so far as it went. Mr Pappas contends that, the bill of costs not having proceeded to assessment (and the offer under rule 1811 having been accepted without his knowledge or agreement), the undertaking he gave when the action was compromised is of no ongoing significance.

6. Contrary to a suggestion made by Aulich in the correspondence, it does not follow that Mr Pappas is resiling from his agreement not to look to Mr Carr for any shortfall between the amount claimed from Aulich and the amount recovered by Mr Carr from NRMA. It is Aulich, not Mr Carr, that is liable to Mr Pappas for his fees. In any event, after a lengthy and at times acrimonious exchange of correspondence concerning Mr Pappas’s outstanding fees, he lodged the costs assessment application.

Mr Pappas’s subpoena

7. The subpoena seeks the production of two categories of documents. Paragraph 1 seeks Aulich’s file in the underlying proceedings between Mr Carr and NRMA. Paragraph 2 is intended to establish a negative. It is common ground that Mr Pappas did not, in this particular matter, disclose the basis on which his legal costs will be worked out, as required by s 270 of the Legal Profession Act. The effect of a failure to disclose is set out in section 277(4) of the Act:

“If a law practice does not disclose to a client or an associated third party payer anything required by this division to be disclosed, the amount of the costs may, on an assessment of the relevant legal costs, be reduced by an amount considered by the Supreme Court to be proportionate to the seriousness of the failure to disclose.”

8. Mr Pappas submitted that there will be an issue in the proceedings as to whether s 277(4) is enlivened in circumstances where Aulich knew there was no disclosure and compromised Mr Carr’s costs within NRMA without reference to Mr Pappas. However, against the risk that the discretion to reduce his fees is enlivened, he seeks to establish that the failure to disclose to Aulich was of minimal seriousness because he charged the same rates to that practice on many occasions, giving rise to the inference that his rates would have been well known within the firm. To that end, he seeks production of any document in the past five years in any of the many matters in which he has been briefed by Aulich in which he has charged less than the hourly or daily rates charged in the Carr matter. He expects there to be nothing to produce in response to that part of the subpoena.

9. Aulich’s application to have the subpoena set aside was lodged on 11 February 2022. The application seeks in the alternative to have specified parts of the subpoena set aside. The grounds for the application are:

(1) That the subpoena has been issued for an improper purpose on the basis that it:

(a) seeks the production of material already in the possession of the applicant;

(b) has been issued for the purpose of asking the court to draw an inference as to the non-existence of documents;

(c) the subpoena otherwise lacks legitimate forensic purpose; and

(d) the subpoena is in the nature of a “fishing expedition”.

(2) The subpoena seeks the production of documents subject to a claim for legal professional privilege.

(3) The subpoena is oppressive.

10. In support of the application, Aulich relied on the affidavit of Caitlin Jade Holloway affirmed on 10 February 2022. Use of the affidavit

11. The first issue raised by the application was whether Aulich should be permitted to use that affidavit. Mr Pappas objected to the affidavit on the basis that the deponent, having been requested for cross-examination, was not available. He noted the terms of rule 6721 of the Court Procedure Rules, which relevantly provides:

Affidavit – cross-examination of maker (1) If an affidavit is to be relied on at a hearing, the court may, by order— (a) direct the person making it to be examined and cross-examined before the court and may order the person to attend the court for the purpose; or (b) dispense with the attendance for cross-examination of the person making it, and direct that the affidavit be used without the person making it being cross-examined in relation to it. Note Pt 6.2 (Applications in proceedings) applies to an application for an order or leave under this rule.

(2) If an affidavit to be relied on at a hearing is served on a party more than 1 day before the day set for the hearing, and the party wishes the person who made the affidavit to attend the court for cross-examination, the party may, by notice served on the party filing or proposing to use an affidavit in the proceeding, require the attendance for cross-examination of the person who made the affidavit. (3) The notice must be served— (a) if the court, by order, sets a time for service—within that time; or (b) if the court does not set a time for service—not later than a reasonable time before the attendance is required. (4) If an affidavit to be relied on at a hearing is served on a party less than 2 days before the day set for the hearing, the person who made the affidavit must attend the court to be available for cross-examination unless the party otherwise agrees or the court dispenses with the attendance of the person under subrule (1). (5) If the person who made the affidavit does not attend for cross-examination as required by a notice under subrule (2), the affidavit must not be used without the court's leave unless the court has dispensed with the attendance of the person under subrule (1). (6) If the person who made the affidavit is cross-examined, the party using the affidavit may re-examine the person. (7) Unless the court otherwise orders, a party who serves a notice under subrule (2) for the person who made an affidavit to attend the court is not liable to pay the expenses of the attendance.”

12. Aulich does not dispute that Mr Pappas gave timely notice requiring Ms Holloway to attend the hearing for cross-examination. Ms Holloway is a solicitor employed by Aulich and deposes that she has “the day-to-day carriage” of this matter. No good reason was given for her failure to attend other than that she took the view that, the application being interlocutory, her attendance was not required unless Mr Pappas could persuade the Court that it was.

13. Aulich’s position on that issue was derived from the jurisprudence of New South Wales where, as a matter of practice or convention, it is accepted that cross-examination will not ordinarily be permitted in an interlocutory application. Aulich relied in this context on the decision of Mossop J in Garrett-Jones v Kendall [2020] ACTCA 27 at [29] where his Honour cited with approval the following passage from the decision of the NSW Court of Appeal in Ren v Jiang [2014] NSWCA 1 at [11] (Leeming JA):

“Cross-examination in support of an interlocutory application is not as of right but requires leave (contrary to the submissions which were initially made to me at the directions hearing), which leave is granted "cautiously" and normally "somewhat sparingly": see the decisions collected and applied by Kenny J in Wu v Avin Operations Pty Ltd (No 3) [2006] FCA 1321 at [18]. It is common practice not to permit cross-examination at all in interlocutory matters; see, for example, Markisic v Commonwealth of Australia [2010] NSWCA 273 at [31] (Beazley and Young JJA).”

14. It may be noted that the decision in Garrett-Jones v Kendall was the refusal of an application for leave to appeal and so does not stand as precedent. That said, the proposition for which it was cited is uncontroversial, save for the intervention of rule 6721, which was not under consideration in that case. There is good reason for containing interlocutory applications within confined evidentiary bounds. The convention accepted in New South Wales reflects, in effect, a recognition of the diminishing returns likely to be achieved from cross-examination the more remote an application is from the final hearing of the action.

15. However, rule 6721 appears to effect a reversal of the accepted convention, at least insofar as it requires the party relying on an affidavit whose deponent has been requested to attend for cross-examination to move the Court for dispensation from that requirement. The Court Procedures Rules do not, in terms, draw a distinction between interlocutory and final hearings. Part 6.2 governs any “application in a proceeding”. An application under rule 6604 to set aside a subpoena is an application in a proceeding and is governed by that part. Rule 6721 governs the position where an affidavit is to be “relied on at a hearing”. There does not appear to be any warrant in the text of the rules for giving the word “hearing” a narrow construction. The note to the rule contemplates that any application to dispense with the attendance of the person making the affidavit will itself be made by way of an “application in a proceeding” in accordance with part 6.2. In short, there appears to be no warrant in the language of the rule to conclude that it does not apply to the hearing of an application in a proceeding.

16. It may nonetheless be accepted that, in an application of the present kind, the Court would readily dispense with the attendance of the deponent, just as, in accordance with the convention in New South Wales, leave to cross-examine on such an application is required and is granted sparingly. In response to Mr Pappas’s objection to the use of the affidavit, counsel for Aulich made an oral application to dispense with the attendance of the witness, as allowed under rule 6016. The content of the affidavit is uncontroversial and indeed was largely replicated in Mr Pappas’s own account in oral submissions of the issues in the proceedings. I accept that there may have been matters relevant to the application that Mr Pappas could properly have explored in cross-examination and he was entitled to take the point (although I note in that context that one of the matters identified as a potential topic for cross-examination was the circumstances in which NRMA’s offer to settle costs, having been rejected, was renewed for acceptance; that may be answered by rule 1811(3)(b)).

17. In any event, having regard to the importance of resolving the present dispute as quickly, inexpensively and efficiently as possible (cf s 5A of the Civil Procedures Act 2004 (ACT)), I determined to accede to the oral application to dispense with the requirement for Ms Holloway to attend for cross-examination and to permit the use of the affidavit notwithstanding her absence.

No basis for setting aside the subpoena

18. Turning to the substantive issue, I have concluded that the application to have the subpoena set aside should be dismissed for the following reasons.

19. Probably regardless of the resolution of the issue concerning the terms of Mr Pappas’s undertaking, the task for the assessor will be to assess Mr Pappas’s fees having regard to the criteria specified in s 300 of the Legal Profession Act as follows:

(1) In conducting an assessment of legal costs, the Supreme Court must consider— (a) whether or not it was reasonable to carry out the work to which the legal costs relate; and (b) whether or not the work was carried out in a reasonable way; and (c) the fairness and reasonableness of the amount of legal costs in relation to the work, except to the extent that section 300A (Assessment of costs by reference to costs agreement) or section 300B (Assessment of costs by reference to scale of costs etc) applies to any disputed costs; and (d) if the costs agreement contained provision for an uplift fee under section 284 (Conditional costs agreements involving uplift fees), whether the uplift fee was justified in the circumstances.

Note The Civil Law (Wrongs) Act 2002, pt 14.1 (Maximum costs for certain personal injury damages claims) contains limitations on legal costs. (2) In considering what is a fair and reasonable amount of legal costs, the Supreme Court may have regard to any or all of the following matters: (a) whether the law practice and any Australian legal practitioner or Australian-registered foreign lawyer acting on its behalf complied with this Act;

Note This Act is defined in the dictionary. (b) any disclosures made by the law practice under division 3.2.3 (Costs disclosure); (c) any relevant advertisement about— (i) the law practice's costs; or (ii) the skills of the law practice or of any Australian legal practitioner or Australian-registered foreign lawyer acting on its behalf; (d) the skill, labour and responsibility displayed on the part of the Australian legal practitioner or Australian-registered foreign lawyer responsible for the matter; (e) the retainer and whether the work done was within the scope of the retainer; (f) the complexity, novelty or difficulty of the matter; (g) the quality of the work done; (h) the place where, and circumstances in which, the legal services were provided; (i) the time within which the work was required to be done; (j) any other relevant matter.

20. Mr Pappas noted that the assessment is also governed by rules 1760 and 1761 of the Court Procedures Rules. Rule 1760 confers broad powers on the Registrar in assessing costs, including power to compel the attendance of witnesses and the production of documents and power to examine witnesses under oath. Rule 1761 specifies a broad range of mandatory criteria in the assessment of costs.

21. Taking the respondent’s grounds in turn, it may be accepted that Mr Pappas may already hold copies of some of the documents caught by the subpoena. I do not think it follows that the subpoena has been issued for an improper purpose. Having regard to the criteria specified in section 300 of the Legal Profession Act, it seems to me that perusal of the file sequentially and as a whole would at least be capable of informing matters relevant to the assessment. While the whole file may not need to be put before the Registrar for the purpose of the assessment, it is likely that it will be helpful to Mr Pappas in preparing to meet any objections to the bill.

22. The contention that the subpoena has been issued for the (allegedly improper) purpose of asking the Court to draw an inference as to the non-existence of documents is directed solely to the second category of documents sought, namely, any matter in which Mr Pappas has charged less than the rates charged in the Carr matter. I would understand it to be a legitimate forensic purpose to seek to establish a negative. No authority to the contrary was cited.

23. A separate ground in relation to that second category of documents was the contention that the subpoena is oppressive. In a letter dated 21 January 2022 annexed to Ms Holloway’s affidavit, it was asserted that, for the five-year period covered by the subpoena, Mr Pappas would have been briefed somewhere between 20 to 30 times a year, meaning that the subpoena sought documents from as many as 100 to 150 different matters most of which it was said have been completed and archived. That assertion was made in the correspondence but not established or expanded upon in the affidavit. Absent evidence on the issue, I am not satisfied that a search of the law practice’s accounting records for the past five years could not readily be undertaken for the purpose identified, namely, to ascertain whether Mr Pappas has ever been briefed at lower rates than those charged in the Carr matter. In circumstances where the law firm has foreshadowed reliance upon the failure to disclose as a basis on which Mr Pappas’s fees might be reduced on assessment, that is a relevant inquiry. Lifting the veil of hostility now apparently clothing communications between Mr Pappas and the principal of the firm, the very fact that Mr Pappas had until this dispute been briefed so often by the firm suggests that the constancy of his rates should not be a real issue in dispute. So long as it is in dispute, Mr Pappas is entitled to call for documents the absence of which will tend to prove his contention.

24. Grounds 1(c) and (d) may be addressed together. Aulich contends that the subpoena “otherwise lacks legitimate forensic purpose” and is in the nature of a “fishing expedition”. I do not accept those contentions. As already indicated, while a cost assessment could be undertaken without the need for the assessor to inspect the whole of the solicitor’s file (although there was no evidence on that issue), it cannot be said that the file is irrelevant, or not conceivably relevant, particularly in circumstances where the correspondence suggests that there were complexities to the matter which might have increased the amount of time required to be spent on it by junior counsel.

25. Finally, Aulich submits that the subpoena should be set aside because it seeks the production of documents subject to a claim for legal professional privilege. Counsel for Aulich referred to two authorities to support that contention: Registrar of the Court of Appeal v Craven (No 1) (1994) 126 ALR 668 and Shire of Katanning v Bride [2016] WASC 118 at [31] to [34].

26. Craven was not an application to set aside a subpoena. The NSW Court of Appeal in that case did not have to determine any issue concerning the subpoenas in question because, as recorded in the judgment of Meagher JA at 699, they were never called on. His Honour remarked in passing that, on their face, the subpoenas were “largely improper” because they sought privileged documents. Those remarks should not be understood to establish a general principle that a subpoena seeking privileged documents will invariably have been issued for an improper purpose. That is an issue that will always require consideration of the circumstances of the particular case.

27. Shire of Katanning v Bride was a case in which, by his own admission, Mr Bride had requested the issue of the subpoena for the purpose of enabling him to explore at the hearing of the substantive application the privileged communications between his opposing party and its solicitors.

28. That is very different from the present case. It seems unlikely that Mr Pappas’s subpoena would catch any document recording a privileged communication between Mr Carr and the solicitor which was not also shared with Mr Pappas at the relevant time. Certainly, no evidence or submission was put to persuade me that there is any likelihood that the subpoena will catch such documents, still less that the subpoena was issued for the improper purpose of exploring communications in which Mr Pappas did not or was not entitled to participate.

29. For those reasons, I make the following orders:

30. I dismiss the application.

31. I order the respondent to pay the applicant’s costs.

I certify that the preceding 29 numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Chief Justice McCallum

Associate:

Date: 16 March 2022

Amendments

21 March 2022 Replace “Registrar of the Court of Appeal v Craven (No 1) (1994) 166 ALR 668” with “Registrar of the Court of Appeal v Craven (No 1) (1994) 126 ALR 668” Paragraphs: coversheet, [25]

21 March 2022 Replace “council” with “counsel” Paragraphs: [24]