Vision Publishing Pty Ltd v PK Lane Holdings Pty Ltd & 2 Ors

Vision Publishing Pty Ltd v PK Lane Holdings Pty Ltd & 2 Ors - [2001] NSWIRComm 311 - NSWIRComm 2001 case summary — Zoe

[87]

51 The starting point here must be the allegations made as to maintenance and champerty. In Halsbury's Laws of Australia, these terms are conveniently defined at Volume 6 paragraphs 110-7135 and 110-7140, respectively as: 'Maintenance' is the giving of assistance or encouragement, by a person who has neither an interest in the litigation nor any other motive recognised as justifying the interference, to a party to litigation. Maintenance is, however, justified by the existence of an interest in the subject matter of the litigation. However a potential liability to the other litigant is not an essential requirement. Thus, if the interference may be justified, for example, by the poverty of the person maintained. Maintenance is not regarded as contrary to public policy. The rule of public policy against maintenance is, however, an explanation of the rule of law by which the assignment of a bare right of action in contract or tort is prohibited. Although such an assignment has traditionally been regarded as savouring of maintenance or as likely to lead to maintenance, the assignment is valid if, on analysis of the whole transaction, the assignee has a genuine commercial or proprietary interest in the success of the proceedings. Moreover, the fact that a profit is made on the assignment does not mean that it is invalid. 'Champerty' is a particular form of maintenance, namely, maintenance of an action in consideration of a promise to give the maintainer a share in the proceeds or subject matter of the action. The rule of public policy extends to proceedings to establish a right to recover money on the liquidation of a company, and generally to all contentious proceedings where property which is in dispute becomes the subject of a contract to share in the proceeds of the proceedings. However, a solicitor may with propriety act for a client who has no means, and expend money in payment of counsel's fees and outgoings, although the solicitor has no prospect of being paid either fees or outgoings except by virtue of a judgment or order against the other party to the proceedings, provided that the solicitor believes the client has a reasonable cause of action, and that the solicitor does not bargain with the client for an interest in the subject matter of the litigation or for a remuneration in proportion to the amount which may be recovered by the client. More generally, it now appears that an agreement for maintenance should be treated as infringing public policy on the basis that it is champertous only if there is a wanton and officious intermeddling with the disputes of others. What is objectionable is trafficking in litigation.

[97]

That the position of an attorney is as we have stated it above appears to have been recognized long ago. It is so stated in Bacon's Abridgement and in Hawkins , and these authorities are cited in Russell on Crimes , 10th ed. (1950) vol. 1, p. 381 for the proposition that "a solicitor, when retained, may lawfully prosecute or defend an action, and lay out his own money in the suit ". In charging a jury in Ladd v. London Road Car Co . (1900) 110 LTJo 80 the Lord Chief Justice (Lord Russell of Killowen ) said: "In reference to the subject of speculative actions generally, I think it right to say, on the part of the profession and the class of persons who were litigants in such cases, that it was perfectly consistent with the highest honour to take up a speculative action in this sense - viz., that if a solicitor heard of an injury to a client and honestly took pains to inform himself whether there was a bona fide cause of action, it was consistent with the honour of the profession that the solicitor should take up the action." After observing that if it were not so, the wrongs of the "humbler classes" might go unvindicated, he said: "Justice would very often not be done if there were no professional men to take up their cases and take the chance of ultimate payment; but this was on the supposition that the solicitor had honestly satisfied himself by careful inquiry that an honest case existed." This statement was approved by the Court of Appeal in Rich v. Cook (1900) 110 LTJo 94. The whole position is admirably put by Ostler J. in Sievwright v. Ward (1935) NZLR 43 to which the appellant himself referred us. His Honour said: "If a solicitor (or a partner of a firm of solicitors) has honestly investigated a client's case, and honestly come to the conclusion that the client has a good cause of action or a good defence to an action, then, so long as he makes no bargain with his client to take a share of the proceeds, he does not, by advancing money for disbursements and by conducting the case without having received any payment on account of his costs, commit the wrong of either champerty or maintenance. I think further that, whether the solicitor does this without any prior agreement with his client, or whether he makes a prior agreement either that in any case he shall be repaid such costs and disbursements, or that he should be paid only out of the proceeds of the suit, and that if there are no proceeds the solicitor will bear the loss, the result is the same: the solicitor would be guilty of no wrong. To hold otherwise would be against the public interest" (1935) NZLR, at p 47. Then, after citing Ladd's Case (1900) 110 LTJo 80 and Rich v. Cook (1900) 110 LTJo 94, his Honour said: "In the statement quoted it is said that solicitors may lawfully take the chance of ultimate payment. In many cases the solicitor must know the client to be so poor that unless the action succeeds he will never be able to pay the costs, and the only chance he has of recovering them is out of the proceeds of the judgment. It is the taking of that chance which, in my opinion, the Court of Appeal has said is not only lawful, but consistent with the highest professional honour" (1935) NZLR, at p 48.'

[124]

86 That concern arose against the background of the approach adopted by the Full Federal Court in Levick v Commissioner of Taxation (2000) 102 FCR 155, where his Honour was a member of the appeal bench. There under consideration was an appeal from an order made by Hill J, that a solicitor personally bear certain costs incurred by the respondent in relation to certain bankruptcy proceedings. The appeal was dismissed, the Full Court emphasising that the jurisdiction to make such orders should be exercised sparingly and with great caution. It was said at p166: 'We accept the statements of principle made in the cases we have cited. We endorse the emphasis on caution in making orders against solicitors, particularly as it will often be difficult for a court to know all the details and circumstances of the solicitor's instructions. We share the concern expressed by Donaldson MR and Dillon LJ in Orchard about the risk of a practice developing whereby solicitors endeavour to browbeat their opponents into abandoning clients, or particular issues or arguments, for fear of a personal costs order being made against them. We agree such conduct might amount to contempt of court. Having said that, it is equally important to uphold the right of a court to order a solicitor to pay costs wasted by the solicitor's unreasonable conduct of a case. What constitutes unreasonable conduct must depend upon the circumstances of the case; no comprehensive definition is possible. In the context of instituting or maintaining a proceeding or defence, we agree with Goldberg J that unreasonable conduct must be more than acting on behalf of a client who has little or no prospect of success. There must be something akin to abuse of process; that is, using the proceeding for an ulterior purpose or without any, or any proper, consideration of the prospects of success. In the present case, Hill J inferred that the subject arguments "clearly originated with the lawyers"; that is, Mr Levick and Mr Fitzgibbon. No challenge can be made to that inference. So this is not a case, like Orchard, where a difficult case was taken to a lawyer by a client who wished it to be pursued in the court. Neither is it a case, like that contemplated in Ridehalgh v Horsefield , where the lawyer had "to present, on instructions, a case which he regards as bound to fail". This is a case where the lawyers themselves thought up the "legal" points and advanced them on behalf of the client. It is unreasonable, in the sense of a dereliction of duty (to both the client and the court), for any lawyer to take that course without first being satisfied that the points are, at least, seriously arguable. We agree it was not necessary in the present case that the lawyers be satisfied that the points would succeed; but it was necessary they be satisfied there was a rational basis upon which they might succeed.

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