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[2006] FCA 548
Federal Court of Australia
2006-05-12
Adam P, Nicholson J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 This is an application for leave to appeal from a judgment and subsequent orders of Federal Magistrate McInnis delivered on 4 August 2005 (Taylor v CGU Insurance Ltd (No 2) [2005] FMCA 1153). In the judgment his Honour dismissed an application before him and ordered that the applicant pay the costs of its former solicitors fixed in the sum of $2000. The notice of appeal is directed to two aspects of the reasons for judgment. The first relates to the Federal Magistrate's determination and dismissal of the applicant's claim for relief by way of a costs order against his former solicitors Talbot & Olivier ('the solicitors') under r 21.07 of the Federal Magistrates Court Rules 2001 ('the FMC Rules'). The second relates to his determination that he did not have jurisdiction and power within the accrued or associated jurisdiction of that Court to determine the applicant's claim for damages against the solicitors. 2 As the claims in issue were brought by the applicant against the solicitors, the respondent took no part in the application. The solicitors appeared and were heard. 3 The notice of appeal also seeks that leave be granted to appeal as a consequence of the application of s 24(1A) of the Federal Court of Australia Act 1976 (Cth). At the hearing it was accepted by both parties that it was not necessary to argue whether the judgment appealed from could properly be characterised as interlocutory and that the Court should take the approach that if leave was required, it is granted. There were accordingly no submissions in opposition on that issue. 4 It is necessary to set out the background circumstances to understand the scope of the notice of appeal. 5 On 10 March 2005, the applicant filed an application claiming, in addition to interest and costs, orders and a declaration in the following form: '1. An order pursuant to Rule 21.07 of the Federal Magistrates Court Rules 2001 that the Applicant's former solicitors, Talbot & Olivier, pay to the Respondent the costs that the Applicant has been ordered to pay to the Respondent. 2. All solicitor/client costs paid to the Applicant's former solicitors, Talbot & Olivier, as damages for contractual or tortious negligence or alternatively as monies paid under a mistake of law or alternatively for damages under s.79 of the Fair Trading Act 1987 (WA) for contravention of s.10 of the Act. 3. A declaration that any further costs which may be claimed by the Applicant's former solicitors, Talbot & Olivier, for services in or in connection with these proceedings are not recoverable.' 6 On 29 March 2005, Registrar Jan ordered, in addition to reserving costs, as follows: '1. The applicant file and serve written submissions on the issue of jurisdiction and power with respect to the applicant's "interlocutory" application filed on 10 March 2005 by 6 April 2005. 2. Talbot & Olivier file and serve answering written submissions by 13 April 2005. 3. The application be listed for hearing and further directions before a Federal Magistrate on a date and time to be fixed, by the Registrar.' 7 A hearing took place on 18 May 2005 before the learned Federal Magistrate. 8 For reasons which his Honour published on 2 August 2005 (Taylor v CGU Insurance Ltd [2005] FMCA 1073), he reached the view that there was no foundation in fact for the claim based on r 21.07 of the FMC Rules. He was also of the view that the accrued or associated jurisdiction of the Federal Magistrates Court did not enable him to determine the damages claim because it could not be invoked after the substantive application had been heard and determined. His Honour was further of the view that the claim sought to be pursued by the applicant against the solicitors was properly a separate and discreet claim either in negligence and/or contract of a kind which should be pursued in a court of competent jurisdiction in separate proceedings. He said it was not an appropriate matter to be pursued as part of the Court's jurisdiction to make a costs order under r 21.07 of the FMC Rules or the general power of the Court to award costs pursuant to s 79 of the Federal Magistrates Act 1999 (Cth). 9 His Honour continued in relation to issues of jurisdiction and power: '35. … I am not satisfied in the circumstances that this court's jurisdiction is enlivened by application of the principles which apply to accrued or associated jurisdiction. It could not be properly argued in this case that there has ever been a claim pursued in the course of the proceedings against the former solicitors of the applicant whereby the application as argued in the substantive hearing could properly be regarded as dealing with the same substratum of facts as the claim now sought to be pursued against the solicitors. The claim against the solicitors arises directly and solely out of the court's judgment and a retrospective assessment of the prospects of success of the application before the court. I cannot see any or any proper basis upon which the claim as framed could be regarded as being within the jurisdiction of the court as part of its accrued jurisdiction. 36. In the present case the allegations now made by the Applicant against his former solicitors could not be regarded as matters arising out of the substratum of facts in a manner which would attract federal jurisdiction (see Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457 at 472). … 38. … Those additional claims, in my view, do not fall within the accrued or associated jurisdiction of the court. To hold otherwise would be to extend this court's jurisdiction beyond what would be regarded as the proper accrued or associated jurisdiction of the court. 39. A discretion to award costs against a non‑party, including a lawyer of a party, does not, in my view, give rise to extended jurisdiction of the kind sought to be argued for and on behalf of the applicant. …' 10 His Honour then said: '44. The orders made by the Registrar on 29 March 2005 referring the matter to this Court for hearing clearly raised the issue of jurisdiction and power in respect to the Applicant's application then described as "interlocutory" is appropriate in the circumstances for this Court to consider as it has the jurisdiction clearly available in appropriate cases to make an award of costs. It is equally appropriate however for the Court to finally determine the matter by refusing the application for the reasons given. …' His Honour noted that the solicitors had been placed on notice concerning the application and had provided detailed submissions. He stated that he would hear the parties in relation to the precise form of orders and any additional orders for costs arising out of his judgment. 11 His Honour reconvened the Court on 4 August 2005. In the reasons for judgment delivered that day as cited above he stated: '2. The issue which had been agitated before the registrar, which I accept was regarded by the parties as a threshold issue, was the question of whether indeed the court had jurisdiction and power in respect of the orders sought by the applicant in the application filed 10 March 2005. …' His Honour continued: '3. In those circumstances, albeit in the absence of formal substantive submissions on whether or not the application itself should be dismissed upon the court determining whether it had jurisdiction to entertain the application it was my view that it would be artificial and indeed costly for the parties to be put to further trouble and expense of embarking upon an analysis of the merits of the claim that had not been already set out in the affidavit material and indeed submissions made for and on behalf of the applicant. It was on that basis that the court proceeded to make a determination which substantially results in dismissal of the application.' 12 The learned Federal Magistrate then referred to complaints made by the representatives of the applicant that the decision which he delivered on 2 August 2005 had gone beyond the matter referred by the Registrar and had precluded further argument in terms of any relief that the Court might grant and whether any of the issues fell within the accrued or associated jurisdiction of the Court. He then continued: '5. When a matter is referred, however, by the registrar to this court, albeit against the backdrop of directions that the parties file and serve written submissions on the issue of jurisdiction and power in respect to the orders sought in what was described as the interlocutory application filed 10 March 2005, that does not then constrain this court in hearing and determining the application, both in terms of determining the issue of jurisdiction but otherwise making what I regard as an appropriate and practical final determination of the matter.' 13 His Honour further continued: '6. I am not satisfied in the present case that had the matter been simply determined as a preliminary issue with then further argument and submissions on whether or not a claim could or should have been made out, that any further material would in all probability be provided in support of the application by the applicant. Of course other submissions may have been made in relation to issues of negligence and indeed issues of accrued and associated jurisdiction. However, those matters have been considered by the court and I am satisfied that in considering those issues it was appropriate for the court to then, having reached the conclusions it reached, dismiss the application.' He concluded: '7. I do not accept that in those circumstances with the issues having been agitated both in submissions and in the affidavit material that there has been any substantial denial of procedural fairness to the applicant. However, it does lead to a conclusion that may be relevant on the issue of costs. …' Later, his Honour said that he was satisfied that the applicant had the opportunity and taken it to make submissions on the issues finally determined by the Court. He said that in his view the procedure followed by the Court was appropriate having regard to the way in which the matter was argued in both written submissions and before the Court. Accordingly his Honour proceeded to make the orders of 4 August 2005. 14 As pressed in oral argument on the hearing of the appeal, there are two issues advanced by the applicant as appellant. The first is in relation to procedural fairness and the second is in relation to the accrued or associated jurisdiction of the Federal Magistrates Court.
procedural fairness 15 It is contended in the notice of appeal that the Court erred in failing to accord the applicant procedural fairness in that the Court summarily dismissed the applicant's substantive application without affording the applicant or the solicitors the opportunity to be heard on the issue of the final disposition of the applicant's substantive application. 16 The applicant's contentions on this point run as follows. It is asserted that the applicant's substantive application was not a matter before the Court at the hearing on 18 May 2005. It is said this is apparent from a number of circumstances. The first is the orders of Registrar Jan of 29 March 2005 which make it clear that the hearing was to relate solely to the preliminary issue of jurisdiction and power of the Court to deal with the applicant's application of 10 March 2005. Further, it is said, that the Registrar's order that further directions be made after the hearing dealing with jurisdiction and power makes it clear that it was intended the hearing should only relate to that preliminary issue. 17 Next, it is submitted that at the hearing neither the applicant nor the solicitors made written or oral submissions concerning the final disposition of the application of 10 March 2005 in the event that his Honour should find (as he did) that the jurisdiction under r 21.07 of the FMC Rules was enlivened. It is said this can be seen from the content of the submissions filed by both parties as well the transcript of the hearing. It is submitted that the applicant's 'outline submissions in reply', dated 6 May 2005, make it abundantly clear that the applicant's understanding of the scope of the hearing was restricted to jurisdiction and power. In particular, at [2] is set out what the applicant understood to be the only issues arising for consideration at the hearing. In [4] he referred to determination at a final hearing. Further, during the hearing, counsel for the applicant drew the Court's attention to the fact that the hearing was solely relating to the issue of jurisdiction and power. At one point the Court itself acknowledged the subject of the hearing was jurisdiction and power and asked not to be addressed on the merits. 18 In support the applicant relies on Stead v State Government Insurance Commission (1986) 161 CLR 141 and Escobar v Spindaleri (1986) 7 NSWLR 51. He submits that it cannot be said that the affording of an opportunity to him to address the issues going to the final disposition of the matter, to present further evidence relating to those matters and to make submissions on the evidence as they related to the merits of the case would have had no effect upon the decision of the Court. 19 The solicitors are in agreement with the applicant that to the extent that the learned Federal Magistrate purported to determine the substantial merits, he should not have done so because of the requirements of the law of procedural fairness. 20 There is, therefore, agreement that the applicant's appeal should succeed on this ground.
accrued or associated jurisdiction 21 The notice of appeal contends that in respect of the applicant's claims against the solicitors as they appear in [2] of the claim cited above at [5], the Court erred in holding that these did not fall within the accrued or associated jurisdiction of the Federal Magistrates Court. This ground is supported by four sub-grounds. 22 The first is that the Court erred in holding that, in order for the applicant's additional claims to fall within the Court's accrued or associated jurisdiction, the claims were required to deal with the same substratum of facts as the 'substantive hearing', namely, the principal proceedings between the applicant and respondent as opposed to the applicant's claim for an order for costs against the solicitors pursuant to r 21.07 of the FMC Rules. In support, reliance is placed on LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575 at 581 per Gibbs CJ, Mason, Wilson, Brennan Deane and Dawson JJ (Murphy J agreeing) where it is said it was made clear that the relief sought by a party does not need to depend on federal law for that party's claim to arise under federal law. It is said that the applicant's additional claims in [2] of the claim are in respect of rights or circumstances which are the creation of federal law. Those additional claims arise, it is said, from the same substratum of facts as the claim for an order under r 21.07 of the FMC Rules and is a federal matter as it is part of the federal matter between the applicant and respondent. 23 The second sub-ground is that it was not submitted by either the applicant or the solicitors that the applicant was required to show that his additional claims arose from the same substratum of facts as the 'substantive hearing' between the applicant and the respondent so that the Court denied the applicant procedural fairness by deciding the issue without hearing the applicant on it. It is said this is apparent from the content of the written submissions of both parties and the oral submissions of both parties in the transcript of the hearing. Support is sought from Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208 at [78]-[79] per Ipp JA (Mason P agreeing), that if a judge contemplates determining a case on a different basis than that upon which the parties have conducted it, he or she must inform the parties so that they have an opportunity to address any new or changed issues which have arisen. 24 The third sub-ground is that the Court should have held that the applicant's claim for an order for costs against the solicitors, after trial, is part of the federal jurisdiction of the Court to determine a 'matter' and not a severable and distinct claim from the 'substantive hearing' in that the applicant's claim for costs is part of the 'substantive hearing'. Here it is said that the decision of the Full Court in Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 is conclusive of this sub-ground. There, the members of the Full Court (Lee, Hill and Cooper JJ) described the nature of the associated and accrued jurisdiction of this Court (at 228-229) as follows: 'Section 19 of the Act [the Federal Court of Australia Act 1976 (Cth)] provides that the Federal Court has such original jurisdiction as is "vested" in it by laws made by the Parliament. Section 32 of the Act states that jurisdiction is "conferred" on the Federal Court in respect of matters, not otherwise within its jurisdiction, that are associated with matters in which the jurisdiction of the Court is "invoked". The additional jurisdiction conferred by s 32 is in respect of "associated federal claims": see Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 per Mason J at 516. The jurisdiction of the Federal Court as "conferred" or "vested" in respect of matters, includes an accrued jurisdiction to deal with claims that are not derived from the federal jurisdiction provided by Parliament but are derived from common law, equity, or State statute law. That accrued jurisdiction is said to be a jurisdiction necessary for the resolution of the whole "matter" out of which the controversy between the parties has arisen and is part of the federal jurisdiction: see Philip Morris.' 25 The members of the Full Court then turned to the power of the Court to order costs (at 229) stating as follows: 'In addition to the above, s 43 of the Act confers on the Court a broad jurisdiction to award costs in "all proceedings before the Court". Section 43 recognises that courts of common law have no jurisdiction to award costs unless such a jurisdiction is conferred by statute. … The jurisdiction to award costs in relation to a proceeding duly invoked in the Court is federal jurisdiction and no question can arise that a claim for costs is a severable and distinct claim that is not part of the "matter". Therefore, questions of accrued or cross-vested jurisdiction, considered in Pallas v Finlay (1985) 61 ALR 220 and Darling Downs Investments Pty Ltd v Ellwood (1988) 18 FCR 510, do not need to be addressed here. There seems no reason to doubt that s 43 confers upon the Court jurisdiction to award costs not only against persons who are parties but also against persons who are not. …' 26 The fourth sub-ground is that the Court should have held that, if the applicant's claims in [2] and under r 21.07 of the FMC Rules arose from a common substratum of facts, the additional claims against the solicitors were able to be regarded as part of the same 'matter' and fell within the accrued or associated or jurisdiction of the Court and could be determined by the Court even if the claim under r 21.07 of the FMC Rules should be rejected. In support it is said the expression 'matter', in the context of s 22 and s 23 of the Federal Court of Australia Act, is a term of wide import. It conveys, in the general context of curially determinable disputes, the notion of a 'justiciable controversy, identifiable independently of the proceedings which are brought for its determination and encompassing all claims made within the scope of the controversy': Fencott v Muller (1983) 152 CLR 570 at 603 per Mason, Murphy, Brennan and Deane JJ. It is contended that the applicant's claims relating to solicitor/client costs are not otherwise within the jurisdiction of the Federal Magistrates Court. However, they are associated with matters in which the jurisdiction of the Court is invoked, those matters being the initial action against the respondent brought by the applicant, in particular the order for costs against the solicitors which he now seeks as part of that action. The applicant's claims are part of the 'matter' as they arise out of 'common transactions and facts' and 'a common substratum of facts': Re Wakim; Ex parte McNally (1999) 198 CLR 511 at 563; Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 512. Support is also sought in Fencott v Muller at 608 where it is said that '… in the end, it is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter'. It is said that the claim for an order for costs against the solicitors is a substantial part of the controversy in relation to which it would be appropriate and convenient for the whole controversy to be determined by the Federal Magistrates Court because these additional claims are part of the 'matter': Fencott v Muller at 610. 27 There is a fifth sub-ground to this ground asserting that the Court erred in failing to require notices under s 78B of the Judiciary Act 1903 (Cth) to be issued and served on the Attorneys General of the Commonwealth and States because the issue of jurisdiction involved a matter arising under the Constitution or involving its interpretation, namely, the extent of federal jurisdiction with respect to a matter under Ch 3. Such notices have now been delivered and none of the parties notified wishes to be heard. 28 In relation to these submissions, the solicitors contend that there is no error in his Honour's reasoning with respect to the issue of accrued or associated jurisdiction. It is said that he did not determine that there was accrued jurisdiction and then proceed to resolve that issue on the substantive merits. Rather his Honour considered that the case for the application of accrued or associated jurisdiction was without merit, so that there is no procedural fairness issue which arose in relation to that portion of his reasoning. The solicitors also contend that his reasoning on that issue of jurisdiction is correct because there was no common substratum of facts between the claim in [2] for damages on the one hand and, the applicant's claim against the respondent on the other. 29 In my opinion, the reasoning of the Full Court in Caboolture is conclusive of the issue in the applicant's favour. That reasoning makes apparent that jurisdiction is attracted to the application against the solicitors by its character as an application for costs in the proceeding. There is no need to further inquire into the comparative substratum of facts of the substantive application and the costs application. On the authority of the reasoning of the Full Court in Caboolture, that is so even through the application for costs is brought against the solicitors who are not parties to the proceeding.
Form of orders 30 In supplementary submissions the applicant contends that the matter should be remitted for hearing before a different Federal Magistrate: Northern NSW FM Pty Ltd v Australian Broadcasting Tribunal (1990) 26 FCR 39 at 41-43, particularly at 42 and Industry Research and Development Board v IMT Ltd (2001) 46 ATR 275 at [34]-[41]. The solicitors oppose this course of action, but on the basis that the second ground of appeal relating to accrued or associated jurisdiction should not succeed. They seek an order limited to the effect that the merits of the substantive application on the first ground of appeal be heard and determined. That is, that there not be any reargument of the question of jurisdiction and power on the accrued or associated jurisdiction of the Court. 31 In Industry Research, Nicholson J, at [40] after discussion of the authorities, started from the usual position that remission to a differently constituted tribunal (in that case the Administrative Appeals Tribunal) is the ordinary way to proceed. In the circumstances before his Honour, it was found that remission should occur to a differently constituted tribunal. This was on the basis that, in that case, credibility findings were involved in relation to profound conflict in evidence between witnesses. This is to be considered against the comments of Davies and Foster JJ in Northern NSW FM at 42-43: 'If a decision has been set aside for error and remitted for rehearing, it will generally seem fairer to the parties that the matter be heard and decided again by a differently constituted tribunal. This is because the member constituting the Tribunal in the original inquiry or hearing will already have expressed a view upon facts which will have to be determined in the rehearing. The aggrieved party may think that a rehearing before the Tribunal as originally constituted could be worthless, for the member's views have been stated. Thus, if a decision of the Administrative Appeals Tribunal has been set aside and the matter remitted for rehearing, the President of that Tribunal ordinarily allocates to the rehearing a different member of the Tribunal. There are, of course, cases where it is convenient for the Tribunal as previously constituted to deal with the matter. And occasionally the Court itself expresses such a view, so as to make it clear that it would not be improper for the Tribunal as previously constituted to consider the matter again. …' 32 In the present case although his Honour has not made credibility findings, he has expressed his views as to the merits of the claim as expressed in [2]. In his reasons of 2 August 2005, after a review of the authorities, his Honour stated that he did not regard the material before him and the claim under r 21.07 of the FMC Rules as one that could be regarded as misconduct of a kind which would lead to a conclusion that the solicitors had failed to discharge a duty to the Court. It was his Honour's view that the applicant's claim now ought to be properly pursued as a separate and discrete claim either in negligence and/or contract in a court of competent jurisdiction. 33 In my view, in light of his Honour's views on the applicant's claim, the present is an instance where the matter should be remitted to a differently constituted Court. The issues to be considered by the Court, are not, as has been put for the solicitors, such that require a knowledge of the claim pursuant to the Trade Practices Act or involve discretion that can only be exercised by the trial judge who had the conduct of trial and who has first hand knowledge of the matters in issue between the parties and how they were determined.
costs 34 The solicitors further seek to maintain the costs order in their favour made by his Honour. Additionally they invite the Court to grant a costs certificate pursuant to s 6 of the Federal Proceedings (Costs) 1981 Act (Cth) ('Costs Act') in relation to the costs incurred by the respondent with respect to the appeal under s 6(3)(a). 35 With respect to the costs order made by his Honour in favour of the solicitors, this followed the event of his reasoning. As the appeal has succeeded on both principal grounds, the costs order cannot be maintained. The applicant is entitled to his order for costs. 36 The entitlement of a respondent to a costs certificate under the Costs Act is provided for in s 6. Subsection 6(1) reads: '(1) Subject to this Act, where a Federal appeal succeeds on a question of law, the court that heard the appeal may, on the application of a respondent to the appeal, grant to the respondent a costs certificate in respect of the appeal.' In the Costs Act there is no definition of appellant or respondent. Section 3(2) of that Act provides that a reference (inter alia) to a respondent to an appeal shall be read as including a reference to the legal personal representative of the respondent. Subsection 6(3) provides: '(3) The certificate that may be granted under subsection (1) or (2) by a court to a respondent to a Federal appeal is a certificate stating that, in the opinion of the court, it would be appropriate for the Attorney-General to authorize a payment under this Act to the respondent in respect of: (a) the costs incurred by the respondent in relation to the appeal; and (b) any costs incurred by an appellant in relation to the appeal that have been, or are required to be, paid by the respondent to the appellant in pursuance of an order of the court, not being costs to which a costs certificate granted under section 7 relates.' In my view these provisions are applicable to the person or body who or which in fact is responsive to the appeal. In this proceeding it is the solicitors. The fact that they are not joined as a party does not take them outside the statutory language which, in the context of the Costs Act, looks to the reality of who responded to the appeal. 37 I therefore find nothing in the Costs Act to prevent its application to a certificate in respect of costs of a non-party respondent. The solicitors' application for a certificate should therefore be granted.
I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholson.
Counsel for the Applicant: DH Solomon
Solicitor for the Applicant: Solomon Brothers
Counsel for Talbot & Olivier: CP Stevenson
Solicitor for the Talbot & Olivier: Pynt & Partners
Date of Hearing: 28 March 2006
Date of Judgment: 12 May 2006
Taylor
CGU Insurance Limited
[2005] FMCA 1153
[2005] FMCA 1073
(1993) 45 FCR 224
(1986) 7 NSWLR 51
(1983) 152 CLR 570
(1983) 151 CLR 575
(1990) 26 FCR 39
(1981) 148 CLR 457
(1999) 198 CLR 511
(1986) 161 CLR 141
(1980) 145 CLR 457
(1985) 61 ALR 220
(1988) 18 FCR 510