Riva NSW Pty Limited v Mark A Fraser; Fraser v Riva

Analysis of the Issues

By Notice of Motion dated 13 March 2020 the solicitors seek an order (Order 2) setting aside Orders 5 to 10 of the orders of the Court made on 11 February 2020. The other relief sought on the solicitors' 13 March 2020 motion will be determined on a later occasion. The orders the Court made on 11 February 2020 were the following: "His Honour makes the following orders and directions in proceedings 2017/59269 (referred to in these orders as the "Riva Damages proceedings") and 2017/166645 (referred to in these orders as "the Receiver proceedings") but using the titles of the parties in the Riva Damages proceedings: 1. Adjourn these proceedings to Wednesday, 15 April 2020 at 10am including for any further argument including about the scope of the injunction in the Receiver proceedings. 2. If the plaintiff and the defendant indicate they do not wish to argue any further issues, the date 15 April 2020 will be vacated by consent and the Court will reserve judgment. 3. Vacate these proceedings listed before me at 9.30am on 12 February 2020. 4. Direct the plaintiff to file and serve all final submissions in reply on the existing issues by 9.30am on 12 February 2020. 5. Direct the defendant's solicitors to provide by Wednesday, 19 February either by email or disk an electronic copy of the original of the Word documents, replete with all metadata, comprising the two costs agreements which have been requested by the plaintiff by correspondence on 5 February 2020 ("the requested documents"). 6. Direct the plaintiffs to indicate to the defendant by Friday 21 February 2020 whether they wish to seek greater access to the defendant's computer systems in order to analyse the providence and creation of the requested documents and specifying reasons with a request for access by their own expert. 7. Direct that, within 7 days thereafter, the parties liaise with one another with a view to the plaintiff's nominated expert inspecting such limited parts of the defendant's computer system as will enable the plaintiff's expert to verify the date of creation and providence of the two requested documents. 8. Further direct that the parties file and serve affidavit evidence (if any) arising out of the inspection of the requested documents and the defendant's computer systems, by the plaintiff filing and serving such evidence by Wednesday, 4 March 2020 and the defendant filing and serving any evidence in reply by Wednesday, 18 March 2020. 9. Direct that the plaintiff provide security for potential costs orders against it in relation to the examination of the requested documents by paying into the trust account of the solicitor for the plaintiff by Monday, 17 February 2020 the sum of $3,000. 10. Direct Mr Coffey to inform the solicitors for the defendant that those monies have been received into his trust account, when they are so received for the purpose stated in Order 9. 11. Liberty to apply. 12. Court notes that the liberty of the plaintiff to adduce any further evidence in relation to the creation and providence of the requested documents is dependent upon the plaintiff's compliance with Orders 4, 9 and 10. 13. Note that the Riva Damages proceedings, apart from existing disputes about costs orders, are otherwise dismissed."
The solicitors now submit on their motion that Orders 5 to 10 were entered "irregularly" within UCPR, r 36.15(1) and may therefore now be set aside. Riva argues that these orders were obtained: without regard to due process provided for by the rules of Court; and the solicitors were denied procedural fairness.
The matter was re-listed on 6 March 2020. Mr Clancy agitated on that occasion some of the arguments which have been dealt with from the solicitors' written submissions. Because Mr Clancy complained on 6 March of irregularities in the making the orders of 11 February, the Court gave the solicitors an opportunity to put on a motion to move to set aside the orders. The motion was filed on 13 March 2020 followed by additional evidence and written submissions.
It can be accepted that a denial of procedural fairness is a fundamental irregularity which entitles a person aggrieved both at general law and within the Court's powers under UCPR, r 36.15 to set aside the order entered: Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd (2008) 71 NSWLR 262; (2008) 229 FLR 267; (2008) 65 ACSR 545; [2008] NSWCA 38 at [85]. But whether there has been any denial of procedural fairness here is the issue. The solicitors' contentions that there was a denial of procedural fairness are set out and analysed below.
First, the solicitors complain that Riva did not apply for the 11 February 2020 orders by written motion in conformity with UCPR, r 18.2, and that no application to dispense with the requirements to file and serve a written motion was made.
But this argument is not persuasive. The solicitors were represented by counsel, Mr Barham, on 11 February 2020 in what was essentially a directions hearing. And as not uncommonly occurs in directions hearings, the orders the Court made developed out of submissions being made to the Court on both sides. Mr Barham did not complain about the lack of a formal written motion from Riva, which sought those orders orally, as is not uncommon in directions hearings. The Court can make orders of its own motion without occasioning any irregularity and that is what in substance occurred on this occasion. The Court saw that the solicitors appeared to be relying upon these two costs agreements as part of their evidence, so the Court was attempting by these orders to case manage the proceedings to ensure that all the evidence was available in advance of final submissions on the various issues that had been raised by the parties.
Second, the solicitors complain about how the 11 February hearing was arranged. On 26 November 2019, the then outstanding motions in the proceedings, together with costs issues, were listed for short argument at 9:30am on 12 February 2020. On 9 December 2019, the solicitors filed and served an affidavit of Mr Christopher Clancy of that date which exhibited the two costs agreements being relied upon by the solicitors. The first costs agreement was between the solicitors and Fraser Clancy Lawyers Pty Ltd and the second costs agreement was between the solicitors and Clancy Lawyers Pty Ltd, the current legal representatives of the solicitors. In each case the solicitors themselves trading as the "Fraser Clancy Partnership" retained these corporate entities to act for them.
After the two cost agreements were served, Riva's solicitors wrote to the legal representatives of the solicitors on 20 December 2019 requesting that a forensic expert review all soft copies of those documents on the firm's IT system. The solicitors declined this request, contending that it had no basis.
Just before the adjourned date fixed for the hearing of the motions, Mr Raphael contacted the Court to seek to have the proceedings relisted on an urgent basis. This resulted in my Associate emailing the parties on 10 February 2020 to the following effect: "Upon Mr Raphael's application to list the proceedings tomorrow for mention at 9:30am, the matter will be listed at that time (for no more than one hour)"
The solicitors complained that neither they nor their counsel had any knowledge of Mr Raphael's communication to my chambers. The Court has reviewed the emails to the Court from the parties and cannot find an email which was sent by Mr Raphael to my Associate requesting the matter to be listed on 11 February. The Court infers therefore it most probably was relisted as a result of a telephone call, rather than an email. The solicitors complained that they were not informed by Mr Raphael in advance that the matter was going to be listed before the adjourned appointed date of 12 February.
Without calling an enquiry into the issue, the Court cannot determine the correctness or otherwise of the contention that Mr Raphael did not inform the solicitors before contacting the Court. The obligations of parties to only communicate with the Court with the consent of the other side are well known: Legal Profession Uniform Conduct (Barristers) Rules 2015 ("Barristers' Rules"), r 54 and Re JRL; Ex Parte CJL (1986) 161 CLR 342; (1986) 66 ALR 239; [1986] HCA 39, at 350 per Mason J. It is expected that all parties should follow these protocols.
Whatever complaint is made about this communication between Mr Raphael to my chambers, the Court decided to relist the matter because it looked as though if the matter were not dealt with in advance of the hearing on 12 February, then one or other party may end up applying for an adjournment on 12 February. My Associate then followed the universal practice of the Court of copying all correspondence from the Court to one party, to all other parties. Whatever had been the prior communications, the solicitors therefore knew of Mr Raphael's communication to these chambers within a very short time after it had occurred.
On 10 February 2020, Mr Michael Coffey, the solicitor for Riva provided his affidavit of 10 February 2020 to the Court and to the solicitors. The solicitors do not complain that they were not copied into this communication to the Court. But they say that it did not constitute proper service upon them. The affidavit laid some of the evidentiary groundwork for the orders which Riva was seeking on 11 February. The solicitors say it is "highly irregular" for the affidavit to set out the orders being sought in this way. Mr Coffey's affidavit did depose to his receipt of instructions to apply to "have the authenticity of the retainer letters verified".
The solicitors submit that all of this meant that they had to deal at short notice with an unscheduled hearing for which they were not prepared and which resulted in coercive orders being made against them without a proper written application.
This argument is not persuasive. Mr Barham of counsel was present on 11 February and although he complained "this has all come very late. I am not across everything. I am trying to get across everything" at the opening of the hearing on that day, Mr Barham did not apply for an adjournment on the basis that he was unable to deal with the material. He did not even apply to stand the matter down to take time to seek further instructions. Mr Barham is experienced equity counsel and the Court is entitled to assume that he was exercising judgment by instructions as to how to conduct the proceedings in slightly difficult circumstances from his client's point of view.
Mr Barham, as it appeared to the Court, took the practical view, he would seek to engage with the arguments as they were being presented by Riva. He did not suggest that he needed time to put on more evidence. And he deployed the very arguments that the solicitors have since then continue to deploy in answer to this application. Mr Barham conducted himself in a way which indicated obvious confidence and familiarity with the matter, as he had been counsel in it for some time. And to assist him on this application, his solicitor Mr Clancy asked permission to and was granted permission to sit with him at the Bar table to give instructions.
And the Court notes that Mr Barham does not appear on the solicitors' 13 March motion seeking to set aside these orders. Nor do the solicitors' arguments on the 13 March motion explain why the Court should not have relied upon Mr Barham's forensic choices to continue to conduct the proceedings on that day and not seek to stand the matter down, or to have it adjourned. The Court does not accept that the conduct to which the solicitors point occasioned any procedural unfairness to them.
Third, the solicitors complain about the conduct of the hearing on 11 February 2020. They say that in substance serious allegations were made of potential fraud or misconduct against the solicitors without any evidence or any basis for those allegations, as is required by the Barristers' Rules, r 65 and by reason of a legal practitioners' duty to the Court in general practice. The solicitors say that the allegation being made is a serious one: in substance an allegation of forging a document or creating a backdated document which was designed to falsely represent the date on which it was actually created and executed.
The solicitors submit that Riva is advancing a "bootstrap argument", with no evidentiary basis to support an allegation of possible forgery. Michael Coffey says he decided to pursue this line of enquiry because he noticed that no notice of change of solicitor was filed at the same time that the second cost agreement is said to have been signed. He says this gives rise to a suspicion that the costs agreement may have been signed at a different time. The Court does not have to investigate whether that suspicion is correct or not at this stage.
But this argument does not persuade the Court that any irregularity has occurred. It needs to be remembered that all Riva was doing here was seeking orders for the production of two documents, so they could verify the date that the two documents were created. If the solicitors were going to rely upon on these two documents on costs issues, Riva are entitled to test their authenticity. Indeed if the solicitors are advancing the documents, the Court would perhaps be denying Riva procedural fairness if it refused to allow the documents to be tested.
These documents could have been sought by notice to produce or subpoena but were instead sought by oral motion on the basis of affidavit evidence. Riva was not putting a submission that there has necessarily been misconduct by the solicitors. All Riva is seeking to do is to seek more information about these two documents in the solicitors' case: and to ascertain the earliest date the two costs agreement could have been signed.
In the Court's view, the request for the documents relate to a relevant issue. So long as the solicitors are placing any reliance upon these two costs agreements, this was a legitimate line of enquiry for Riva, which would be difficult for the Court to refuse. The question of the existence or otherwise of either of these cost agreements at any particular time is a relevant issue when the Court comes to consider quantifying a special gross sum costs order.
Fourth, the solicitors argue that Riva did not rely upon any express power of the Court to seek the production of these documents. They submit that if Riva had sought to issue a notice to produce for these documents and the solicitors had sought to set the notices aside, Riva would need to demonstrate relevance and legitimate forensic purpose for the request for the documents or to demonstrate that they would materially assist the Court on an identified issue and that there was a reasonable basis, beyond mere speculation, that the documents would so assist: Cohen v Morgans [2019] NSWSC 608 at [63] per Ward CJ in Eq. The solicitors point out that Riva could have sought orders for inspection of property under UCPR, r 23.8 or a request under Evidence Act 1995, s 166, all of which would have given proper notice to the solicitors of the nature of the application, and would have allowed the solicitors to prepare properly and present their case.
But in the Court's view there are several answers to this contention. Once again, at no stage in the course of the hearing on 11 February 2020 did Mr Barham raise any issue of denial of procedural fairness, or for the need for these various heads of power to be specifically identified. And the time to do that was on 11 February when the alleged denial occurred and when the solicitors were represented by counsel.
But more importantly, even if one of these heads of power had been identified Riva would have been able to demonstrate relevance to an issue. The question whether or not there was a costs agreement specifying particular rates for charging legal fees between solicitor and client at a particular time, and the terms of any such agreement, are matters relevant to the Court's task in fixing a specified gross sum costs order instead of assessed costs. The existence of a costs agreement is at least one basis to infer whether or not charges for legal services invoiced by solicitors were reasonable. And the existence of a costs agreement might be given weight in the fixing of the specified gross sum instead of assessed costs. Costs agreements are commonly referred to in the course of judicial analysis in judgments on such applications.
Fifth, in their oral submissions on 6 March, and in their written submissions. the solicitors raised another argument. They say that had they been given a proper opportunity to put their case that they would have argued that there is no requirement in their case to make a costs agreement between the solicitors and the two solicitor corporations, Fraser Clancy Pty Ltd and Clancy Pty Ltd. This is because Legal Profession Uniform Law NSW ("the Uniform Law"), Part 4.3 does not apply when a law practice is a client. Uniform Law, s 170(1) makes this clear. The solicitors qualify as a "commercial or government client" because they are a "law practice" within the meaning of the Uniform Law: Uniform Law, ss 170(1) and (2).
The solicitors' construction of Uniform Law, ss 170(1) and (2) appears to be correct. But that does not necessarily lead to the conclusion that production of these two documents for examination is inappropriate. The important question is whether the solicitors are relying upon the cost agreements or not. If the solicitors are relying upon the cost agreements then as evidence in support of their case for a specified gross sum costs order, then they are relevant to determining the quantum of specified gross sum costs. If relied upon by the solicitors, Riva is entitled to call for the original documents and find out when the cost agreements were signed.
Before proceeding further, the Court observes at this point that the challenge that the Court will permit to the date of the costs agreements is considerably narrower than Riva assumes. Riva submits in its written submissions of 3 April 2020 that if the costs agreements are established "not to have come into existence on the day it purports to have been brought into being" this may affect Mr Clancy's credibility. The Court makes clear that on the remaining issues in these proceedings it does not envisage any cross-examination taking place. Issues of indemnity costs and specified gross sum costs orders will be decided on the documentary materials available to the Court.

A Variation to the 11 February 2020 Orders

If the solicitors are not relying on the costs agreements then this issue may fall away. This was not an option that the Court considered on 11 February or 6 March but when considering submissions on the 13 March 2020 motion the Court has rethought what are appropriate orders on the application. The Court may be able to save the parties both inconvenience and waste of resources in the implementation of the orders made on 11 February 2020.
The Court can at any time (whether or not there is an irregularity in earlier orders) make such orders and directions as it thinks fit (whether or not they are inconsistent with the rules of Court) for the speedy determination of the real issues between the parties: Civil Procedure Act, s 61(1). The Court has decided that it will give the solicitors an opportunity to withdraw any reliance upon these two documents. Whether they are a mere retainer or a costs agreement made in conformity with the Uniform Law, if they are relied upon, Riva is entitled to challenge them because they are relevant. But the solicitors may be able to make their case without these documents. And if they do, then this whole issue of production of the cost agreements will fall away, because the authenticity and dating of the cost agreements will only be a collateral credit issue into which the Court will not allow investigation. If that is the course the solicitors wish to take, the Court will permanently stay the 11 February 2020 orders.
Efficiency indicates that another aspect of the Court's orders of 11 February should be varied using Civil Procedure Act,s 61(1). Expert examination of the solicitors' computer systems should not be necessary. The Court can take into account matters of common knowledge without proof of such matters being required: Evidence Act, s 144. The existing orders have been made on the basis that the two disputed costs agreements are held in the form of electronic documents (probably in Word format) that can readily be transmitted from the solicitors to Riva. The kind of information that is readily available from Word documents is a matter of common knowledge, of which the Court can take judicial notice. It is well established, for example, that the Court can take judicial notice of the operation of the Internet: Jones v Tobin (2002) 71 ALD 629; (2002) EOC 93-247; [2002] FCA 1150. This issue is of a similar character. Assuming the documents are in Word format, by accessing the "File" and "Info" menus in the document, the "created" date for the document will be obvious from the document's metadata file.
The "created" date in that metadata should be sufficient for the Court's analytical purposes to determine when the document was first created. It is not consistent with the proportionate expenditure of legal costs in a proceeding which is already about legal costs, for the Court to now authorise the parties to engage in a more complex contest of expert evidence about this issue.
For the reasons earlier given, the dating of the document is of peripheral relevance to the current contest. If the document was in fact created later than the solicitors claim it was created, then that later date is likely to be obvious, just by looking at the "created" date in the metadata of the two documents. This is a simple exercise which should take only a few minutes. The Court will permit that to occur. But the Court presently does not see why a substantial enquiry involving an expert interrogating the solicitors' computer systems is necessary on such an issue.
The Court will therefore stay Order 6 of the orders made on 11 February 2020, even if the solicitors seek to rely upon these costs agreements. The Court does so, on the basis that compliance with Order 5 of the 11 February 2020 orders, followed by a quick inspection of the file/info metadata of the costs agreement documents, should be quite sufficient to decide the question of when they were first created. But in order to give Riva procedural fairness and before finally deciding what is "common knowledge", and therefore to comply with Evidence Act, s 144(4), the Court will permit Riva to serve on the solicitors and provide to my Associate a one page submission explaining why it contends that the stay on Order 6 should be removed. The solicitors will have a right of reply. If Riva does not provide a submission, or if it is not persuasive, the stay will remain in place.
It order 6 is stayed then orders 7 to 10 should also be stayed. If expert examination is not going to occur there will be no requirement for further evidence. And there will be no requirement for holding money as security for the solicitors' costs of engaging in expert.

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Judgment (7 paragraphs)

Cases Cited (14)

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