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[2001] NSWIRComm 311
Industrial Relations Commission (NSW)
2001-12-09
Schmidt J, Marks J
Original judgment source is linked above.
Industrial Relations Commission of New South Wales in Court Session
CITATION : Vision Publishing Pty Ltd v PK Lane Holdings Pty Ltd & 2 Ors [2001] NSWIRComm 311 APPELLANT/APPLICANT ON MOTION: Vision Publishing Pty Ltd (ACN 055 452 492)
FIRST RESPONDENT: Luke Carey PARTIES : SECOND RESPONDENT: Paul Lane
THIRD RESPONDENT: PK Lane Holdings Pty Ltd (ACN 056 330 075) FILE NUMBER: IRC 100 of 1997 CORAM: Schmidt J CATCHWORDS : Costs - costs orders sought against respondents' solicitors - no appearances by solicitors - maintenance and champerty - conditional costs agreement - costs orders made on an indemnity basis
Industrial Relations Act 1991 LEGISLATION CITED : Legal Profession Act 1987 (NSW) Legal Profession Reform Act 1993 Maintenance and Champerty Abolition Act 1993 (NSW) Boner v Anderson (1993) 52 IR 114 Carey & Ors v Industrial Relations Commission of New South Wales & Ors [2000] NSWCA 94 Carey & Ors v Industrial Relations Commission & Ors [1999] NSWCA 189 Clyne v NSW Bar Association (1960) 104 CLR 186 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Giles v Thompson [1994] 1 AC 142 In re Jones (1870) LR 6 CH 497 In re Trepca Mines Ltd (No.2) (1962) 3 WLR 955 Knight v FP Special Assets Limited (1992) 174 CLR 178 Levick v Commissioner of Taxation (2000) 102 FCR 155 CASES CITED : Montague Mining Pty Limited v Gore & Ors (trading as Clayton Utz) [2001] FCA 791 Myers v Elman [1940] AC 282 Orme v Associated Newspapers Group Ltd [1980] CA Transcript 809 Oshlack v Richmond River Council (1998) 193 CLR 72 Singh and Another v Observer Ltd [1989] 2 ALL ER 751 Thai Trading Co. v Taylor (1998) 2 WLR 893CA Trendtex Trading Corporation v Credit Suisse [1981] 3 All ER 520 Vision Publishing Pty Limited v PK Lane Holdings Pty Limited (1998) 84 IR 277 Weldon & Co Services Pty Ltd v Harbinson [2000] NSWSC 389 White Industries (QLD) Pty Ltd v Flower & Hart (1998) 156 ALR 169
HEARING DATES: 09/12/2001 DATE OF JUDGMENT: 11/30/2001
APPELLANT/APPLICANT ON MOTION: Mr Moses of counsel SOLICITORS: LEGAL REPRESENTATIVES: Baker & McKenzie Solicitors
RESPONDENTS: No appearance
JUDGMENT: - 39 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: Schmidt J
DATE: 30 November 2001 MATTER NUMBER IRC 100 OF 1997
VISION PUBLISHING PTY LTD v PK LANE HOLDINGS PTY LTD & 2 ORS Appeal against a decision of Justice Marks given on 19 December 1996 in Matter No. CT 1274 of 1994 JUDGMENT
1 This is an application brought by the respondents to the appeal, Vision Publishing Pty Ltd ('Vision'), by way of notice of motion filed in November 2000. The motion was supported by an affidavit sworn by Michael Michalandos, solicitor. It was filed after judgment was given on the appeal by the Full Court on 1 October 1998 (see (1998) 84 IR 277) and after the Court of Appeal in April 2000 had dismissed the application made to it, in relation to that appeal judgment. (See Carey & Ors v Industrial Relations Commission of New South Wales & Ors [2000] NSWCA 94.)
2 Vision seeks the making of costs orders against James Williams Lyons, trading as Lyons & Lyons ('Lyons & Lyons'), who had acted for the respondents in the proceedings before Marks J at first instance, the Full Court on appeal, the Court of Appeal and until January of this year, in relation to this application. This application was brought in circumstances where the Full Court's orders, (which appear at (1998) 84 IR 277 at 307-8), included orders that the respondents bear Vision's costs at first instance and on appeal. These costs have not been paid.
3 When this motion first came before the Court for mention, Lyons & Lyons appeared for the respondents. Later Lyons & Lyons filed a notice that it had ceased to act for the respondents. A notice to admit facts was thereafter served on Lyons & Lyons in January 2001 and it filed a notice disputing facts later that month. A subpoena to produce documents was also served upon Lyons & Lyons and documents were produced in answer to the subpoena. Despite these steps Lyons & Lyons ceased appearing in the proceedings without explanation and eventually, the motion was heard ex parte.
4 Mr Moses of counsel appeared for Vision at the hearing, and very properly in my view, sought to amend the orders sought by addition of paragraph 3. The orders finally pressed, as filed on 31 October were thus: 1. The solicitor for the Respondents (the Applicants in the substantive proceedings before Justice Marks in matter no: CT1274 of 1994), James William Lyons trading as Lyons & Lyons ("Lyons & Lyons") pay the costs of the Appellant (the Respondent in the substantive hearing before Justice Marks in matter no: CT1274 of 1994) on an indemnity basis as agreed or taxed for:
(a) the proceedings before Justice Marks in matter No. CT1274 of 1994 ("the Original Proceedings"); and
(b) the subsequent appeal proceedings before the Full Bench of the Commission in matter No. IRC 100 of 1997 ("the Appeal Proceedings"). 2. The Solicitor for the Respondents (the Applicants in the substantive proceedings before Justice Marks in matter no: CT1274) James William Lyons trading as Lyons & Lyons pay the costs of the Appellant (the Respondents in the substantive proceedings before Justice Marks in matter no: CT1274 of 1994) of this Motion on a party and party basis as agreed or taxed.
5 The motion was the result of the respondents' failure to comply with the Full Court's costs orders; the refusal of Lyons & Lyons itself to bear any of those costs and Vision having become aware of various costs agreements between the respondents and Lyons & Lyons, the existence of which were discovered during the course of an application Vision had successfully made to the Court of Appeal, for an order for security for costs in its favour. Then produced to the Court of Appeal in response to a subpoena served upon Lyons & Lyons, were two agreements dealing with costs, which in these proceedings were argued by Vision to provide a proper basis for the making of the costs orders here sought against Lyons & Lyons.
6 These two agreements were argued to amount to maintenance and champerty, to be in conflict with various of the provisions of the Legal Profession Act 1987 (NSW) and to have unjustly prejudiced Vision, in that they provided a basis upon which the respondents and Lyons & Lyons were able to maintain these proceedings, in circumstances where Vision was unable to recover costs from any of them, when it was successfully able to defend the claims brought. Similar arguments had been advanced in the Court of Appeal, when Vision had successfully obtained an order for security for costs.
7 It is necessary, in order to consider the case brought, to put the costs agreements into some context.
8 The original summons, brought under s275 of the Industrial Relations Act 1991, was filed in this Court's predecessor in December 1994. Orders declaring void and/or varying the contracts and arrangements between the parties were sought, as well as money orders of $538,500.00 or in the alternative $108,860.00. The first agreement, entitled a "Conditional Costs Agreement between Solicitor and Client", was made on 10 November 1994, between Lyons & Lyons and two of the three respondents, Mr Lane and Mr Carey ('the 1994 agreement'). The 1994 agreement related to proceedings to be commenced in the then Industrial Court and provided, relevantly, in clauses 3, 5, 11, 12 and 16: CHARGES AND EXPENSES (COSTS): 3. We will ONLY charge you, subject to the successful outcome of the Work:- (a) time spent by a Solicitor (for example, in conference, receiving instructions, advising, travelling negotiating, waiting time at Court, telephone calls, drafting and settling documents and letters, reading documents, and research at the rate of $375.00 per hour ($37.50 per 6 minute unit); with a 25% bonus in the event that we are successful.
(b) non-professional time spent by employees of the firm on work not requiring the skill of a Solicitor (such as a secretary or a clerk typing, filing and serving documents, researching records, making enquiries, delivering documents) at the rate of $60.00 per hour ($10.00 per 6 minute unit); Minimum Time Units : We have chosen a minimum 6 minute unit of time as a commercially practical unit, given that serving you properly invariably involves us in making proper notes of even short activities and filing and recording details. In agreeing to instruct us on these terms we note that you agree you consider this is a reasonable business practice, and agree to us using it to calculate time worked on your matter. (c) photographic reproduction, carbon or other copies of documents at the rate of $1.00 per page;
(d) facsimile transmission at the rate of $8.00 for the first page and $2.00 per page thereafter;
ESTIMATES OF CHARGES, EXPENSES AND PREMIUM 5. We estimate that our charges for the Work, subject to the successful outcome of the matter, will be about $ 20,000.00
We estimate that the expenses we will incur on your behalf will total about $ 20,000.00
We will charge a premium of 25% of all of our charges and expenses the payment of which is conditional upon the successful outcome of the work $ 10,000.00
TOTAL $ 50,000.00
We will advise you of any additional work required beyond the point indicated and of its costs.
COURT COSTS IN YOUR FAVOUR: 11. If, in the proceedings to which this Agreement relates, an order is made, requiring another party to pay your costs of the proceedings, that order will not affect your liability to pay our costs and expenses under this Agreement, but the amount recovered (if any) may be applied towards satisfaction of our charges and expenses. CLIENT INDEMNITY AGAINST COST ORDER IN FAVOUR OF THE OTHER PARTY:
9 The original proceedings were heard by Marks J, commencing on 12 August 1996. The hearing was stood over that day to permit the pursuit of settlement negotiations between the parties. The negotiations extended over some days, but were unsuccessful and the hearing proceeded in December.
10 On 28 August 1996, the second agreement was entered between Lyons & Lyons and all three respondents ('the 1996 agreement'). It referred, in clause 5, to a new costs agreement, said to have been entered between Lyons & Lyons and Mr Carey and Mr Lane on 22 August 1996. This new costs agreement was said to have been annexed to the 1996 agreement and marked B. No such document was however annexed, either to the 1996 agreement produced to this Court in answer to the subpoena served upon Lyons & Lyons, nor to the Court of Appeal. Nor was such a new costs agreement otherwise produced to either court in answer to either subpoena. In the notice disputing facts filed by Lyons & Lyons in these proceedings in January 2001, it was conceded that the 1996 agreement, without annexure B, was the agreement then entered and that no other costs agreements had been entered.
11 The proper inference, so it follows, is that there was no new costs agreement entered on 22 August 1996 between Lyons & Lyons and Mr Carey and Mr Lane and that clause 5 of the 1996 agreement, in so far as it referred to the existence of such a new costs agreement and its annexation, was inaccurate. That position appears to be at odds with the requirements of the Legal Profession Act, which requires that written costs agreements be made, unless of course the 1994 agreement in fact continued to operate, despite the making of the 1996 agreement.
12 In recital B to the 1996 agreement, reference was made to clause 12 of the 1994 agreement quoted above, which required Lyons & Lyons to indemnify Mr Carey and Mr Lane if an order was made in Vision's favour as to its costs of the proceedings before this Court. Reference was also made in the recitals to the proceedings before Marks J having been adjourned, in order that settlement could be discussed by the parties; that Vision had made an offer of settlement, which Lyons & Lyons and the respondents' counsel had recommended, they each having offered to waive their rights to legal costs and disbursements, if the settlement was accepted; that the offer had been rejected by the respondents; that the respondents had asked Lyons & Lyons 'to support them in the action against Vision' and that as a result, it had been agreed that a new costs agreement be entered, under which the respondents "will be wholly responsible for the legal costs of Vision in the event the Court orders that Carey and Lane and PK Lane pay Vision's legal costs." On that basis, it was recited that Mr Carey and Mr Lane accepted that the 1994 agreement was at an end.
13 These circumstances give rise to the question of whether or not the 1994 agreement was ever brought to an end. That, however, is a matter between the parties to these agreements and does not require determination here.
14 The 1996 agreement relevantly provided in clauses 1, 2, 5, 6, 7 and 8: 1 That Lyons & Lyons will act for Carey and Lane and P K Lane on the basis that no fees for legal services and disbursements provided or paid for by Lyons & Lyons will be charged to Carey and Lane and P K Lane unless monies are received from Vision by way of Judgment or settlement.
2 Lyons and Lyons agrees to fund the proceedings and will make no claim against Carey and Lane and P K Lane for the repayment of same unless monies are received from Vision by way of Judgment or settlement.
5 In consideration for Lyons & Lyons agreeing to act on the basis set out in this agreement, details of which are fully set out in the new Costs Agreement between Lyons & Lyons and Carey and Lane dated 22 August 1996 annexed hereto and marked " B ", Carey and Lane and P K Lane hereby indemnify and release Lyons & Lyons from any liability in respect of Vision's legal costs arising under the Cost Agreement dated 10 November 1994.
6 In the event of a successful outcome Lyons & Lyons shall be entitled to their costs under the new agreement and their costs waived under the Costs Agreement of 10 November 1994.
7 Lyons & Lyons hereby agree to pay to Carey and Lane and PK Lane no less than 20% of whatever monies are received from Vision by way of settlement or Judgment notwithstanding that Lyons and Lyons costs and disbursements pursuant to this agreement and the new costs agreement may be equivalent to or more than the total of those monies received. 8 In the event that the monies received by way of settlement or Judgment exceed Lyons & Lyons costs and disbursements in relation to the proceedings then the parties agree that clause seven (7) hereof does not in any way entitled Lyons and Lyons to charge Carey and Lane and PK Lane legal fees and disbursements in excess of the fees and disbursements which Lyons and Lyons are entitled to be paid under this agreement and the new costs agreement.
15 Marks J gave his judgment on 19 December 1996. While the initiating summons alleged that Vision had terminated the parties' agreement or forced the respondents to terminate the agreement, his Honour found that it was the applicants who had terminated it without notice on 30 June 1994 (at p8). His Honour, nevertheless, found the termination provisions of the contract unfair and varied it to provide for termination, upon the giving of reasonable notice, with consequential orders as to payments to be made thereafter to the respondents. Marks J reserved on the question of costs and the quantification of the money orders. The judgment was appealed, but the hearing of the appeal was deferred while Marks J considered the consequential monetary orders to be made, as well as the question of costs.
16 His Honour gave a further judgment on 5 November 1997, in which the amount payable to the corporate respondent was quantified as $61,040, less a sum of $23,000, which it was conceded by the respondents was owed to Vision. No money orders were made in favour of Mr Carey or Mr Lane. His Honour's judgment recorded that the respondents had made Vision an offer of compromise in September 1996, for forgiveness of the debt owed to Vision, plus a payment of $10,000 to Mr Lane and Mr Carey, plus payment of costs of $10,000. A further offer for payment of $10,000 to Mr Carey and Mr Lane and forgiveness of the debt was made to Vision by the respondents in October 1996. Vision rejected both offers. In those circumstances, his Honour ordered Vision to pay 90% of each of the respondents' costs, on a party/party basis to 2 September 1996 and thereafter, 90% of their costs on an indemnity basis. His Honour made costs orders in favour of Mr Lane and Mr Carey, even though no orders were made in their favour, because of his view that it was not improper for the proceedings to have been commenced in their names as well as that of the corporate respondent and because the hearing of their claims did not add to the overall costs of the proceedings.
17 The appeal judgment records at p5 that after the appeal had been lodged: 'Subsequently, without any notice being given to Vision, the three respondents to the appeal moved to have a consent order signed by Marks J; to have the Registrar issue a certificate under s182 of the Industrial Relations Act 1996 as to that order being a judgment debt; and to register the certificate with the District Court for enforcement. Vision first became aware of those steps when monies were removed from its bank account in pursuance of the orders. The appellant moved the Full Bench to retrieve and forestall those steps and, under delegation from the Full Bench, Mr Justice Hungerford granted a stay of the orders on 11 December 1997. Arrangements were made for the monies removed from the bank account of Vision to be deposited with the Registrar of the Court where they are presently held.'
18 On 16 October 1998, the Full Court upheld Vision's appeal against the decisions of Marks J. His Honour's judgments were set aside and orders as to costs were made against the respondents in relation to the first instance proceedings and the appeal, including the proceedings before Hungerford J.
19 The Full Court considered that Marks J had adopted an excessively interventionist approach at the hearing (p40), including in relation to the adoption of relief not sought by the respondents, but raised with them by his Honour during their counsel's closing submissions, despite the objections of Vision's counsel (p39). The Full Bench concluded that this had led his Honour into error. It was concluded that the finding that the termination provision of the agreement between Vision and the corporate respondent was unfair, was not reasonably open on the evidence (p43); that there had been a failure to have regard to the fact that it was the respondents who had terminated the agreement without notice (p47) and that the exercise of the discretion in favour of the respondents had miscarried (p49).
20 The respondents then approached the Court of Appeal. In February 1999, Vision made an application for security for costs against Mr Lane, who was no longer residing in Australia, as well as against the corporate respondent. The application was heard by Registrar Jupp later in March.
21 The application was also supported by an affidavit sworn by Michael Michalandos. He assessed Vision's taxed costs of these proceedings to have amounted to $180,000 and recounted his failure to obtain any response to his enquiries of Lyons & Lyons in relation to the costs order made by the Full Court, which had not been met by the respondents. Vision's costs and disbursements of the proceedings before the Court of Appeal were estimated at between $25,000 to $30,000.
22 Mr Michalandos swore a further affidavit in those proceedings, attached to which was correspondence in which Lyons & Lyons advised as to the difficulties which it was experiencing in making contact with Mr Lane. At one point his whereabouts were unknown. An affidavit was later sworn by David Jenkins, the solicitor then acting for the respondents, in which he swore that he had been informed that Mr Lane was in London visiting friends and that neither he nor the corporate respondents had any assets which could be used to satisfy any order granted in favour of Vision for security of its costs. In cross examination, Mr Jenkins conceded that he had received this information from Mr Carey.
23 At the hearing before Registrar Jupp it was conceded for the corporate respondent that it would be unable to pay the costs of the proceedings, if ordered to do so. Mr Jenkins was also cross examined on the response made by Lyons & Lyons to the subpoena served upon it, as well as in relation to the two costs agreements then produced to the Court. He confirmed that he had been unable to find any records kept by Lyons & Lyons, as to costs and disbursements incurred in the proceedings before Marks J or the Full Court on behalf of the respondents. He conceded that this was unusual. He also conceded that Lyons & Lyons would have to bear any order as to security made against the respondents in the proceedings before the Court of Appeal, although, it was submitted during objection to the question, raised after it had in fact been answered, that this was a matter to be determined upon a proper construction of the 1996 agreement.
24 The parties filed written submissions in relation to the security for costs orders sought by Vision. It was submitted for Vision that the Court of Appeal proceedings were being funded by Lyons & Lyons, which would be responsible under the 1996 costs agreements, for meeting any order for security made against the respondents. It was also argued that Lyons & Lyons would have the substantial benefit of the proceedings, if the respondents were ultimately successful before the Court of Appeal and the Full Court, on any rehearing of the appeal from Marks J. It was submitted that any contrary conclusion would require the view to be taken that Lyons & Lyons were in breach of their obligations under the Legal Profession Act, to have in place a written costs agreement with their clients in relation to the Court of Appeal proceedings.
25 It was also argued that if the 1994 agreement remained in force, it required Lyons & Lyons to meet any costs order made against the respondents. If the 1996 agreement was in force, it was argued that it gave Lyons & Lyons the primary interest in the proceedings, because if the Court of Appeal proceedings were unsuccessful, it would not have any of its outstanding costs and disbursements paid. The only risk for the respondents was that of a further costs order being made against them, a small risk, particularly given that it had been conceded that they had little or no assets, to meet such orders.
26 It followed, so it was argued, that Lyons & Lyons, the primary beneficiary of the proceedings, was hiding behind the skirts of the impecunious respondents. Similar submissions to those advanced here in relation to the illegality of the costs agreements and maintenance and champerty, were also pressed. Attention was particularly drawn to the nature of the professional charges agreed in the 1994 agreement - $375 per hour plus a 25% premium, irrespective of which solicitor performed the work, plus $60 per hour for non-professional time. This was contrasted with the charges made by Vision's lawyers, at hourly rates of $375 an hour when a partner was performing work and $200 an hour for an employed solicitor, without any premium or additional charges for non-professional time. It was submitted that the practical effect was to give Lyons & Lyons a share in the proceeds of the litigation.
27 It was submitted that the end result, given the money orders made by Marks J in favour of the corporate respondent, was that Lyons & Lyons would receive 80% of that award. It followed, so it was submitted, that a finding of abuse of process, was available.
28 The respondents' submissions went in detail to the relief sought by the respondents from the Court of Appeal. It was submitted that the relief sought by all three respondents was identical, as were the issues raised. There was but one set of costs as a result. As there were no orders for security sought against Mr Carey, it followed, so it was argued, that the application would be heard, whatever the outcome of the application for security was.
29 The fact that Mr Lane was not in the jurisdiction was thus submitted to be irrelevant. He was intending to return and Mr Carey was in the jurisdiction, thus Vision was in no worse position than if only Mr Carey had proceeded against it. Mr Carey and Mr Lane were not hiding behind the corporate respondent. While it could not satisfy a costs order, they were the primary claimants and it was but a vehicle through which they conducted their business affairs. They were both available as to costs, whatever they were worth. It was also argued that the application raised a variety of public interest considerations, a further reason for not granting the order sought, as to security.
30 As to the 1994 and 1996 costs agreements, it was submitted that they did not apply to the Court of Appeal proceedings. Under the 1994 agreement, the respondents lost the right to indemnity of Vision's costs, having rejected the advice of Lyons & Lyons to settle the matter when it was before Marks J. It was submitted to be absurd to suggest that simply because a contingent costs agreement existed, that the only reason the application was being pursued was for the benefit of Lyons & Lyons.
31 There was no doubt that the corporate respondent could not meet any costs order made against it. Any difficulty with the costs agreements, as Vision submitted, were, however, difficulties for Lyons & Lyons, not the respondents.
32 It also argued that security for costs would shut out the respondents. Mr Lane and the corporate respondent had no means to meet the order. Various alternative orders to those sought were also advanced, if the Registrar was against the respondents in relation to their primary position.
33 Lyons & Lyons later advised Vision that it had found and produced some costs records to the Court of Appeal. They were not in evidence in these proceedings, but had been inspected by Mr Michalandos. He kept a copy of the computer generated 'matter cost summary report', then produced by Lyons & Lyons, which recorded total costs of $50,308 as at 9 October 1997. Mr Michalandos' evidence was that time recording of costs had been maintained for the period 22 September 1994 to 2 September 1996, but not thereafter.
34 In submissions subsequently filed for Vision, it was submitted to Registrar Jupp in relation to these records, that they suggested that no time records had been maintained by Lyons & Lyons in relation to the work performed for the respondents after the 1996 agreement was entered.
35 Those records, it must be noted, seemed to be quite different to the computer generated records produced this year to this Court in these proceedings, which related to work performed between September 1994 and October 1998, totalling some $113,379. How these new records came into existence, so as to be produced in these proceedings, but not to the Court of Appeal, cannot be determined on the evidence, given that Lyons & Lyons did not appear to defend the orders here sought against it.
36 Registrar Jupp gave his decision in June 1999 (Carey & Ors v Industrial Relations Commission & Ors [1999] NSWCA 189). Mr Lane was then found not to be a resident of New South Wales and it was concluded by the Registrar that if the 1994 agreement were still in force, it would justify an order for security being made against he and the corporate respondent. The Registrar, however, accepted that the 1994 agreement had been superseded by the 1996 agreement.
37 The Registrar found it unnecessary to decide whether the two costs agreements were illegal. He found that the 1996 agreement was still in effect, it not having been replaced by any other agreement. He concluded thereupon that: 'I do note however that I am uneasy about the practical consequences of these costs agreements. It does appear that the principal motivation in bringing the proceedings in the Court of Appeal is to get a reversal of the costs orders. The actual amount of money involved in the orders made by Marks J is overwhelmed by the costs of the proceedings. It seems even if they are successful in the Court of Appeal and then successful on a further appeal in the Industrial Court, that Mr Carey and Mr Lane will only ever get $7,608. My understanding of the costs agreement is that Lyons & Lyons will be entitled to a 25% premium on their chargeable costs if they are successful. This would not be recoverable from the 2nd opponent and would have to be paid by the claimants. Under the circumstances it appears that the solicitors for the claimants may have more interest in maintaining these proceedings than the claimants themselves. This would appear to be a relevant consideration in determining whether security for costs should be ordered."(p7)
38 At p9, the Registrar observed, having in mind the complaint which the respondents advanced in their application to the Court of Appeal, that 'even if the Court of Appeal can be persuaded that it has jurisdiction in this case, it is unlikely that any relief would be granted.' Having determined that Vision's costs of the Court of Appeal proceedings would be in the order of some $24,000, he ordered that Mr Lane and the corporate respondent each provide security for costs in the sum of $8,000.
39 The corporate respondent paid $8,000 security. Mr Lane did not. Vision enquired of Lyons & Lyons who had paid the $8,000, it having been accepted before the Registrar that the corporate respondent was unable to pay the costs of the proceedings. No answer was given.
40 Unknown to Registrar Jupp, a further conditional costs agreement was entered between Lyons & Lyons and the respondents on 18 May 1999 ('the 1999 agreement'). It related to the Court of Appeal proceedings and any further appeal heard by this Court. Significantly, the agreement included an estimate of the respondents' costs and expenses of $120,000, including in relation to the work performed under the 1994 and 1996 agreements. A 25% premium was agreed, but in relation to charges at professional rates significantly lower than those provided in the 1994 agreement. The 1999 agreement provided in clause 3: 3. We will charge you, including the work undertaken in the Cost Agreements of 10 November 1994 and 28 August 1999, only on the successful outcome of the Work:-
(a) time spent by a Solicitor (for example, in conference, receiving instructions, advising travelling, negotiating, waiting time at Court, telephone calls, drafting and settling documents and letters, reading documents, and research at the rate of $200.00 per hour or $20.00 per 6 minute unit. If the solicitor doing the work is a partner then the rate is $300.00 per hour or $30.00 per 6 minute unit;
(b) non-professional time spent by employees of the firm on work not requiring the skill of a Solicitor (such as a secretary or a clerk typing, filing and serving documents, researching records, making enquiries, delivering documents) at the rate of $90.00 per hour ($9.00 per 6 minute unit);
(c) photographic reproduction, carbon or other copies of documents at the rate of $2.00 per page;
(d) facsimile transmission at the rate of $8.00 for the first page and $2.00 per page thereafter;
(f) the amount set out in each of the abovementioned items may be increased on 1 July each year in accordance with the variation in the Consumer Price Index as it stands on 30 June immediately preceding the date of variation as compared with the same index at the same date 12 months prior thereto.
DISBURSEMENTS : * We will pay initially all expenses incurred on your behalf.
(f) and all other expenses incurred in agitating your claim.
41 It was further agreed that if the respondents were unsuccessful and costs orders were made in favour of Vision, no costs and expenses would be payable to Lyons & Lyons, unless otherwise agreed.
42 In July 1999, Vision made a further settlement offer, which included the respondents and/or Lyons & Lyons paying part of Vision's costs, the Court of Appeal proceedings being discontinued and full releases being given by all parties. The offer was not accepted.
43 In April 2000, the Court of Appeal dismissed the application brought to it, finding that the respondents had failed to make out their claim that they had been denied procedural fairness by the Full Bench on the hearing of Vision's appeal from Marks J.
44 Thereafter Vision sought the release of the $8,000 paid as security by the corporate respondent. While Lyons & Lyons itself did not oppose the release it sought, it was unable to obtain instructions from the respondents to consent to the release. Lyons & Lyons advised Vision that it had lost contact with Mr Carey and Mr Lane after the appeal decision was given. That position remained unaltered, when these proceedings came before the Court.
45 Registrar Jupp required signed orders to be obtained at a hearing of a motion brought by Vision in relation to the release of the $8,000 security. The release was signed by Lyons & Lyons. In September 2000, the Court of Appeal released the $8,000 and Vision sought a contribution to its costs from Lyons & Lyons. Lyons & Lyons refused, confirming that it still had been unable to obtain instructions from its clients, but asserting that responsibility for Vision's costs 'rests solely with our clients'. Reference was made in Lyons & Lyons' letter to the 1996 agreement, but not the 1999 agreement.
46 This motion was filed on 9 November 2000. It was mentioned on 16 November, when Mr Jenkins appeared for the respondents and again at the further mention on 30 November, when he also announced that he was appearing for Lyons & Lyons. Later on that day a notice that Lyons & Lyons had ceased to act for the respondents was filed. There was no appearance on 11 December or thereafter in the proceedings, either for the respondents or Lyons & Lyons.
47 In the notice disputing facts later filed by Lyons & Lyons, in January 2001, it was admitted that Lyons & Lyons had not entered into any other costs agreements with the respondents in respect of the proceedings before this Court, other than the 1994 and 1996 agreements. Those agreements and the 1999 agreement were later produced to the Court in answer to the subpoena served upon Lyons & Lyons, as was a copy of records of costs and disbursements incurred for the respondents in the proceedings before Marks J, the Full Court and the Court of Appeal. As I have said no explanation as to when these records of costs and disbursements came into existence, was advanced in the proceedings, given the absence of Lyons & Lyons at the hearing. The inference which flows from the evidence is that the records were created after the hearing before Registrar Jupp.
48 I am satisfied that if a proper case be made out on the evidence, the Court has power to make the costs orders sought against Lyons & Lyons in these proceedings, having in mind the provisions of s181 of the Act and Rule 209 of the Commission's rules. (See Knight v FP Special Assets Limited (1992) 174 CLR 178, at pp189-90). Such an order may be made, even though the Full Court has already made costs orders against the respondents in the appeal proceedings. (See Weldon & Co Services Pty Ltd v Harbinson [2000] NSWSC 389).
49 Mr Moses also placed reliance upon the decision in Myers v Elman [1940] AC 282, as long establishing a court's power to order costs against a solicitor. At p289-90, reference was there made to In re Jones (1870) LR 6 CH 497 about which it was said: 'It was a case where the solicitor had engaged to indemnify the plaintiff against the costs of a doubtful suit which failed. The defendants, failing to recover their costs from the plaintiff, applied by petition for (amongst other things) an order on the solicitor to pay their costs. Lord Hatherley began by laying down the general principle. He said, "I think it the duty of the Court to be equally anxious to see that solicitors not only perform their duty towards their own clients, but also towards all those against whom they are concerned." He added that care should be taken to see that the litigation is the bona fide litigation of the client who instructs the solicitor and not one carried on altogether on the solicitor's account, a well known proposition with which we are not concerned here. The solicitor was ordered to pay the costs. I cannot find that the proposition laid down by Lord Hatherley has ever been doubted and the cases cited in Halsbury certainly tend to support it. It is hardly necessary to point out that Lord Haltherley's phrase implying the solicitor's duty to parties for whom he is not acting is founded on his duty to the Court.
50 Undoubtedly, the proper approach when costs orders are sought against a party's legal representative, is to ensure that the representative has an opportunity to be heard in relation to the orders sought. The application here brought was advanced on grounds which can only be described as raising issues of the most serious and unusual kind. In those circumstances, Mr Moses very properly drew attention to arguments which might be made against various of the submissions which he sought to advance in favour of Vision's application. I have taken them into account. There is, however, no doubt that Lyons & Lyons had knowledge of this motion, appeared in the proceedings and was on notice of the hearing of the orders sought against it. In the circumstances, it was appropriate to proceed to hear Vision's application ex parte. Nevertheless, the absence of Lyons & Lyons at the hearing was troubling. My concerns were, however, allayed by the form of order finally pressed for Vision.
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.
52 Maintenance and champerty were originally both common law crimes and torts. Over the years, they also arose for consideration in the context of illegal contracts and various public policy considerations. In New South Wales the common law offence and tort were abolished by the Maintenance and Champerty Abolition Act 1993 (NSW), which however provides in s6: Preservation of liability under certain contracts 6. This Act does not affect any rule of law as to the cases in which a contract is to be treated as contrary to public policy or as otherwise illegal, whether the contract was made before, or is made after, the commencement of this Act.
53 The result seems to have been that the common law, as to the effect of maintenance and champerty on contracts, remained unaffected by the enactment of the Maintenance and Champerty Abolition Act. That is, such a contract is 'to be treated as contrary to public policy or otherwise illegal'. Trendtex Trading Corporation v Credit Suisse [1981] 3 All ER 520 per Lord Roskill at p530.
54 The approach long adopted to champertous contracts, can be illustrated by reference to the judgment of Lord Denning In re Trepca Mines Ltd (No.2) (1962) 3 WLR 955 at 966: "But there is one species of maintenance for which the common law rarely admits of any just cause or excuse, and that is champerty. Champerty is derived from campi partitio (division of the field). It occurs when the person maintaining another stipulates for a share of the proceeds: see the definitions collected by Scrutton LJ in Haseldine v Hosken [1933] 1 KB 831. The reason why the common law condemns champerty is because of the abuses to which it may give rise. The common law fears that the champertous maintainer might be tempted, for his own personal gain, to inflame the damages, to suppress evidence, or even to suborn witnesses. These fears may be exaggerated; but, be that so or not, the law for centuries has declared champerty to be unlawful, and we cannot do otherwise than enforce the law;..."
55 In New South Wales this position was further altered by the enactment of the Legal Profession Reform Act 1993, which introduced Part 11 to the Legal Profession Act, permitting a new form of contingency fee arrangement. The relevant provisions are ss186 and 187 which provide: 186. Conditional costs agreements (1) A barrister or solicitor may make a costs agreement under which the payment of all of the barrister's or solicitor's costs is contingent on the successful outcome of the matter in which the barrister or solicitor provides the legal services. (2) Any such costs agreement is called a conditional costs agreement. (3) A conditional costs agreement may relate to proceedings in a court or tribunal, except criminal proceedings. (4) A conditional costs agreement must set out the circumstances constituting the successful outcome of the matter. (5) A conditional costs agreement may exclude disbursements from the costs that are payable only on the successful outcome of the matter. 187. Payment of premium under conditional costs agreement (1) A conditional costs agreement may provide for the payment of a premium on those costs otherwise payable under the agreement only on the successful outcome of the matter. (2) The premium is to be a specified percentage of those costs or a specified additional amount. The premium is to be separately identified in the agreement. (3) The premium is not to exceed 25% of those costs. (4) However, the regulations may vary that maximum percentage of costs. Different percentages may be prescribed for different circumstances.
56 It would appear to follow from Part 11, that a conditional costs agreement which does not adhere to the requirements there specified, may still be contrary to public policy and illegal. Section 127 is also relevant. It provides: 127 Professional misconduct and unsatisfactory professional conduct (1) For the purposes of this Part, professional misconduct includes: (a) unsatisfactory professional conduct, where the conduct is such that it involves a substantial or consistent failure to reach reasonable standards of competence and diligence, or (b) conduct (whether consisting of an act or omission) occurring otherwise than in connection with the practice of law which, if established, would justify a finding that a legal practitioner is not of good fame and character or is not a fit and proper person to remain on the roll of legal practitioners, or (b1) (Repealed) (c) conduct that is declared to be professional misconduct by any provision of this Act. (2) For the purposes of this Part: unsatisfactory professional conduct includes conduct (whether consisting of an act or omission) occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent legal practitioner. (3) Maintenance or champerty by a legal practitioner (except in connection with a conditional costs agreement under Part 11) may constitute professional misconduct despite the Maintenance and Champerty Abolition Act 1993 .
57 The common law in relation to agreements as to the costs of litigation has developed over the years, with many courts emphasising the importance of impecunious litigants having access to justice. See for example, Giles v Thompson [1994] 1 AC 142 and Thai Trading Co. v Taylor (1998) 2 WLR 893CA. In the latter case, the view taken was that an agreement that a solicitor acting for a party to the litigation would forego all or part of the fee if the case was unsuccessful, was not illegal and contrary to public policy, so long as it was not agreed that more than ordinary profit costs and disbursements would be recovered if the case were won.
58 Given the terms of the 1994 and 1996 agreements here in question, it seems as if there has not been an adherence to this basic premise, a concept also inherent in the provisions of s188, s208C and s208D of the Legal Profession Act. Section 188 provides: 188. Costs not to be calculated on amount recovered in proceedings A costs agreement may not provide that costs are to be determined as a proportion of, or are to vary according to, the amount recovered in any proceedings to which the agreement relates.
59 The Legal Profession Act permits clients to apply for an assessment of a bill of costs. Section 208C requires such an application to be declined, if the disputed costs are subject to a costs agreement that complies with Division 3 of the Act, but s208D gives the costs assessor the power to consider whether a particular term of a costs agreement is just. Given the rate of the costs agreed in the 1999 costs agreement, particularly when compared to those provided some years earlier in the 1994 agreement, it is difficult to see how the 1994 agreement could be found to have been other than unjust. It plainly provided for more than ordinary profit costs, which were then further inflated by a 25% premium.
60 In Clyne v NSW Bar Association (1960) 104 CLR 186 at pp203-5, the High Court had earlier said as to such an arrangement that: 'It may be necessary some day to consider whether maintenance as a crime at common law ought not now to be regarded as obsolete. But, whether we regard it as a crime or as a civil wrong only, it is obvious that, in relation to maintenance, special considerations must apply to a solicitor, since it is, in a sense, the business of a solicitor to maintain litigation for his clients. It would appear indeed to be impossible for a solicitor to be held, in relation to legal proceedings conducted for a client, to be guilty of maintenance except perhaps in two cases, one of which might amount to champerty. For a solicitor could hardly be held guilty of a crime in respect of conduct which is recognized by the law as perfectly proper professional conduct. And it seems to be established that a solicitor may with perfect propriety act for a client who has no means, and expend his own money in payment of counsel's fees and other outgoings, although he 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. This, however, is subject to two conditions. One is that he has considered the case and believes that his client has a reasonable cause of action or defence as the case may be. And the other is that he must not in any case bargain with his client for an interest in the subject-matter of litigation, or (what is in substance the same thing) for remuneration proportionate to the amount which may be recovered by his client in a proceeding: see Fleming, The Law of Torts (1957) p. 638, where it is pointed out that the position in the United States is different.
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.'
61 Both the 1994 agreement and later the 1996 agreement, were inconsistent with these ideas. The 1994 agreement contemplated that Lyons & Lyons would be paid at rates inconsistent with the idea discussed in Clyne - that they must not involve the solicitor in bargaining with his client for what is in substance an interest in the subject matter of the litigation or a remuneration proportionate to the amount to be recovered by the client in the proceedings It is difficult to see how the rates agreed in 1994 - at $375 per hour irrespective of which solicitor performed the work, together with additional hourly costs of $60 for non-professional work - plus a 25% bonus in the event of success, compared to the significantly lower rates agreed in 1999 - did not offend these notions.
62 While the 1996 agreement suggested to the contrary, no new costs agreement was then entered between Lyons & Lyons and the respondents. There is no reason to infer from the evidence that there was then any change in approach as to the basis upon which costs were being charged. That does not appear to have ocurred until 1999. Indeed, the 1996 agreement, considered together with an apparent failure to keep proper costs records at that time, confirms that, in reality, the effect of the parties' agreements was to give Lyons & Lyons a share of the proceeds of the litigation in the order of 80%.
63 In all of those circumstances, I am satisfied that justice requires that a costs order should now flow against Lyons & Lyons and in favour of Vision.
64 The 1994 agreement provided that the respondents would only be charged costs and disbursements by Lyons & Lyons, if there was a judgment or settlement in their favour and that they would also be indemnified against a costs order in favour of Vision, so long as they accepted Lyons & Lyons' 'professional advice and recommendations as to the reasonableness, fairness or propriety of an offer of settlement' amongst other matters.
65 As the recitals to the 1996 agreement record, during the hearing before Marks J a settlement offer was made by Vision, which both the respondents' counsel and Lyons & Lyons recommended to them, but the respondents rejected. That offer was: 'i The proceedings be discontinued.
iii The debt allegedly owed by Carey and Lane and P K Lane to Vision in the sum of $27,000.00 be forgiven by Vision.'
66 The 1996 agreement recited that a new and separate costs agreement had been entered, the respondents having sought and Lyons & Lyons having agreed to provide them its support. That did not occur and the position at the time of the hearing before Registrar Jupp was that proper records as to the work performed by Lyons & Lyons in the proceedings before the Court, were not being kept. As I have already noted how, in these circumstances, records as to that work were later created, remains a matter of mystery.
67 The 1996 agreement, however, dealt with both the costs already incurred in the proceedings before Marks J and those to be incurred. It proceeded on an acceptance that the 1994 agreement was at an end. It did not provide for an indemnity for Vision's costs and it was on this basis that Lyons & Lyons later resisted Vision's request for payment of its costs.
68 The amount of the money order quantified by Marks J in November 1997 was $38,040 net. That was the amount which the respondents were seeking to preserve on the appeal before the Full Bench and the Court of Appeal, together with the costs orders Marks J had made. As Registrar Jupp observed, Lyons & Lyons plainly had the primary interest in the claims being advanced.
69 When similar arguments to those here advanced for Vision were raised before Registrar Jupp, the 1999 agreement was shortly afterwards entered by the respondents and Lyons & Lyons. Given the terms of that agreement, it is difficult to see that development as doing other than confirming the correctness of the conclusions reached by Registrar Jupp, with which I agree, as to the nature of the interest which Lyons & Lyons had acquired in these proceedings as recorded in the 1994 and 1996 agreements.
70 The 1999 agreement, after all, dealt with work performed in connection with the Court of Appeal proceedings, as well as that performed under the 1994 and 1996 agreements. It provided that costs were only to be paid if the Court of Appeal proceedings were successful and then at rates significantly lower than those provided in the 1994 agreement, thereby also abandoning the basis upon which it had been agreed in the 1996 agreement, that the fruits of the proceedings were to be shared. That development was further accompanied by the apparent creation of records as to work performed in connection with these proceedings, after September 1996.
71 Were any of these agreements contrary to the Legal Profession Act as argued for Vision? Section 184(5) provides that a costs agreement may form a part of a contract for the provision of legal services, but under s184(4), is void, if it is not in writing or evidenced in writing.
72 All three agreements were plainly in writing. The difficulty with the 1996 agreement was that annexure B, the new costs agreement said to have been entered on 22 August 1996, was either never entered or was not evidenced in writing. In either case the result was the same. Section 189 makes any provision of a costs agreement which is inconsistent with the Division void. A question which thus arises is whether clause 12 of the 1994 agreement, whereby Lyons & Lyons indemnified the respondents in respect of any costs order made against them, was void under s189, it not being a provision provided for in the Division and furthermore illegal, as amounting to champerty.
73 Lyons & Lyons, by agreeing to bear Vision's costs of the proceedings if the claim did not succeed, plainly provided assistance to the respondents in their pursuit of the litigation. That assistance was given in return for legal fees agreed at a substantially inflated rate, together with a 25% premium on such costs, in the event of success and to make no charge, but to pay Vision's costs, if the claim failed. It is difficult to see how this did not amount to both maintenance and champerty, of a kind not permitted by the Legal Profession Act.
74 This aspect of the 1994 agreement was not repeated in the 1996 agreement. Even if had been, it would have been of no comfort to Vision. Vision had no contractual or other right to rely upon the 1994 agreement, even if, as was eventually the case, the respondents were themselves unable to make good the costs orders made against them. The 1996 agreement further confirmed the nature of the interest in the litigation which Lyons & Lyons had acquired.
75 That position appears to have brought these circumstances into that class discussed by Lord Denning In re Trepca Mines earlier quoted. They plainly did not fall into the class of contracts discussed in Giles at p146, where a pre-existing genuine commercial interest in the outcome of the litigation justified an otherwise champertous agreement. They also fell into the kinds of circumstances discussed by the High Court in Clyne. It is one thing for legal representatives to support clients of little means in the pursuit of their rights. It is another when that support is provided on a basis that the legal representative, having acquired an interest in the proceedings inconsistent with the provisions of the Legal Profession Act, pursues the proceedings to the point where injustice is visited upon the respondent, who is resisting an unmeritorious claim, with never any prospect of recovery of its own costs. That prospect here arose from the costs agreements which had been agreed on terms inconsistent with the provisions of the Legal Professional Act and on a basis which involved maintenance and champerty, on the part of the applicant's legal representatives.
76 Given the claims made in the summons, the judgment of Marks J and that of the Full Court on appeal, to which I have earlier referred, it appears that it was an unmeritorious claim here being pursued against Vision. While that is a conclusion which, in my view, would ordinarily not be available when a claim has succeeded at first instance, but failed on appeal, two rather unusual circumstances here before the Court, put this case into a different category.
77 The first is the recommendation made by both Lyons & Lyons and counsel then appearing for the respondents, that the offer made by Vision during the adjournment of the hearing before Marks J should be accepted, all the legal representatives then also offering to waive their own costs and disbursements, if the offer were accepted. That offer was rejected and still Lyons & Lyons supported the pursuit of the claim in accordance with the 1996 agreement, on the basis I have outlined.
78 The second aspect was the failure of the respondents' case before Marks J, where his Honour found, contrary to the case they advanced that it was they, not Vision, which had terminated the parties' contract. His Honour declined to make any orders in favour of either Mr Carey and Mr Lane and, as the Full Court found, as the result of his Honour's intervention, made orders in favour of the corporate respondent in terms neither sought in the respondents' summons, nor in the case they advanced, until those terms were raised with their counsel by his Honour during that counsel's closing submissions.
79 I am fortified in the conclusions I have reached by the approach taken by other courts in a variety of cases.
80 In Singh and Another v Observer Ltd [1989] 2 ALL ER 751, McPherson J was dealing with an application for an indemnity costs order against persons maintaining a libel action. The plaintiff there had been ordered to provide security for costs and had done so by means of a personal undertaking given by his solicitor, backed by a guarantee given to the solicitor by persons unknown. It was contended that the Court had no jurisdiction to make an order for costs against the unknown maintainer, nor to disclose his identity. Under consideration were legislative provision as to costs not dissimilar to those contained in s181 of the Act. It was held at p756: 'Looking at Ord 62, I find no restriction which would prevent the court's jurisdiction extending, in proper circumstances, to somebody proved to be maintaining an action. Indeed, it seems to me that it would be wrong to impose such a limitation on the court's powers. I am glad to be able to say that the court would not be helpless to make an order, should it be proved that an action has truly been kept going purely because of outside financing, and thus to have been maintained, without the maintainer having any interest whatsoever in the litigation, and by persons who hope never to be made liable for a penny of the other side's costs, should their action fail. It would surely be contrary to justice so to restrict the operation of s51.
81 In adopting this approach, McPherson J followed the approach of Lord Denning MR in Orme v Associated Newspapers Group Ltd [1980] CA Transcript 809: 'For centuries the law has said that every person must bring his suit on his own behalf and at his own expense. No third person is allowed to support him by paying the costs of it unless he has some legitimate interest sufficient to warrant his interference in it. Maintenance is no longer a criminal offence. But it is still contrary to the civil law. It is still contrary to public policy. I tried to explain it in Hill v Archibold [1967] 3 All ER 110 at 112-113, [1968] I QB 686 at 695, and in the recent case of Trendtex Trading Corp v Credit Suisse [1980] 3 All ER 721 at 741, [1980] QB 629 at 653. The result of it all is that: "It is perfectly legitimate today for one person to support another in bringing or resisting an action (as by paying the costs of it) provided that he has a legitimate and genuine interest in the result of it and the circumstances are such as reasonably to warrant his giving his support", and this is an important addition, "provided always that the one who supports the litigation, if it fails, pays the costs of the others side."'
82 McPherson J also observed at p757: 'During argument reference was made to common circumstances in which others pay for the litigation of a party, for example legally aided cases, insurance cases and union-assisted cases which make up much of today's non-jury list. But legal aid is statutory and so are the restrictions on recovery of costs from the fund. The legal aid authorities can control the hardship which may be caused to successful litigants who may not recover their costs, by requiring counsel to give fearless opinions as to the merits of a case as a condition of continuing legal aid. Insurance companies are subrogated to their insured's rights, and both they and unions invariably pay the costs of unsuccessful litigation. Otherwise, injustice could certainly result and I do not believe that if, for example, unions decided simply to refuse to pay costs in the these cases, the court would not step in.
83 Here, of course, the evidence was that the respondents refused to accept their legal representatives' advice that they should settle their claims on the basis of the offer made by Vision during the adjournment of the hearing before Marks J. Lyons & Lyons, having already placed itself in a position where it had an interest in the proceedings, then pursued that interest by maintaining the litigation. Having done so, it refused to meet Vision's costs, even when finally unsuccessful in its approach to the Court of Appeal. It is plainly appropriate in these circumstances for the Court now to step in.
84 Mr Moses drew attention to the decision of Wilcox J in Montague Mining Pty Limited v Gore & Ors (trading as Clayton Utz) [2001] FCA 791. There reference was made by his Honour to the position of lawyers acting on a speculative or conditional costs basis, although those were not the circumstances which were there before his Honour for consideration. That consideration arose in the context of the High Court's decision in Knight where it was said at p192-3: 'For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.'
85 Wilcox J was concerned, at paragraphs 57 to 58, that lawyers acting on a speculative or conditional costs basis for impecunious clients, which might be the critical factor in determining whether the action proceeds, would be put at risk if the approach of the High Court in Knight were extended. At paragraph 58, his Honour said: 'A lawyer acting on a speculative or conditional costs basis may not have an interest in the judgment sum; although I apprehend the lawyer would be entitled to deduct from the judgment sum any disbursements advanced and (possibly) the costs due under a costs agreement. However, even without a charge on the judgment sum, a lawyer acting on this basis has an interest in the orders sought by the client. In the words of Mason CJ and Deane J, the lawyer "has an interest in the subject of the litigation". Depending upon circumstances, the lawyer's costs interest in the litigation may rival in size the stake of the client'
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.
87 Here Lyons & Lyons did not appear to defend the orders sought against it, so that evidence which might have gone to questions such as the respondents' instructions was not put before the Court. The circumstances in which the 1996 agreement came to be made however, appear in the recitals to that agreement and detail the circumstances in which Vision's offer was rejected in 1996, leading to the making of the 1996 agreement. It is necessary to take that evidence into account.
88 In doing so, I agree entirely that a real degree of caution must be adopted in making costs orders against solicitors, when their clients' cases have failed. I have been anxious to do so here. On the evidence I am, however, satisfied that the circumstances here, unusual as they are, do not just concern a lawyer acting on a speculative basis and do fall into that category of cases where it is appropriate that a costs order should be made against the respondents' legal representatives, Lyons & Lyons.
89 I turn to the final question. The order sought was on an indemnity basis, even though orders were not made on that basis by the Full Court against the respondents. Those orders, it must be noted, were made at a time when the existence of the 1994 and 1996 agreements was unknown to Vision. Reliance for this was placed upon the approach discussed by Hill J in Boner v Anderson (1993) 52 IR 114 at p118: 'There is little doubt that orders for costs on an indemnity basis still constitute exceptions to the general rule. While costs are, under the Act and the rules, within the absolute discretion of the Court, nevertheless the Court must exercise its discretion judicially. Many of the criteria upon which such discretion is exercised in cases involving indemnity costs are to be found in the cases to which Mr Shaw referred and in a number of other cases dealing with the matter. It is fair to say that generally speaking an order for costs on an indemnity basis is justified in a case in which there are special or unusual features of an unmeritorious or improper nature surrounding the case of one party (usually the loser) which make it unreasonable and unfair that the successful party should be out of pocket as a result of the proceedings.
It is unnecessary to traverse the cases in any detail; they demonstrate in one form or another special or usual circumstances which manifest themselves in improper or unmeritorious conduct by the unsuccessful party, as for example, in cases involving the maintenance of a vexatious claim or defence, the institution and/or maintenance of an action or defence which while not vexatious or involving an ulterior or collateral purpose, may, on a rational basis, be described as untenable or doomed to failure and cases where a party has conducted its case in wilful disregard of known facts or clearly established law. However, even where there are special or unusual circumstances attaching to a particular case it does not follow as of course that indemnity costs will be awarded. But it may be observed, and the authorities demonstrate, that the categories of special or unusual circumstances justifying indemnity costs are not closed; a too rigid or narrow approach can lead to error in the exercise of the discretion. (See generally on indemnity costs Singleton v Macquarie Broadcasting Holdings Ltd and Qantas Airways Ltd v Dillington (unreported, Supreme Court, 14 May 1987) and Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 33-35, per Kirby P, Gleeson CJ concurring).'
90 The proper inference on the evidence, it was submitted, was that but for the 1994 and 1996 agreements, this litigation would not have taken the course which it did. Here serious misconduct by an officer of the court was demonstrated and the appropriate costs order should follow. Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 per McHugh J was also relied upon, where his Honour said: '"Misconduct" in this context means misconduct relating to the litigation ( King & Co v Gillard & Co [1905] 2 Ch 7 ; Donald Campbell & Co Ltd v Pollack [1927] AC 732 at 812), or the circumstances leading up to the litigation ( Bostock v Ramsey Urban District Council [1900] 2 QB 616). Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation ( Jones v McKie [1964] 1 WLR 960; [1964] 2 ALL ER 842; Bostock [1900] 2 QB 616 at 622, 625, 627); unnecessarily protracts the proceedings ( Forbes v Samuel [1913] 3 KB 706); succeeds on a point not argued before a lower court ( Armstrong v Boulton [1990] VR 215 at 223); prosecutes the matter solely for the purpose of increasing the costs recoverable ( Hobbs v Marlowe [1978] AC 16); or obtains relief which the unsuccessful party had already offered in settlement of the dispute ( Jenkins v Hope [1896] 1 Ch 278).
91 Here, from the making of the 1994 agreement, Lyons & Lyons obtained a share in the proceedings. Then, having recommended settlement on the basis that the proceedings be discontinued, each side to bear their own costs and the $27,000 debt the respondents owed Vision to be forgiven, Lyons & Lyons not only continued to fund the litigation, but on a basis which further embedded its share in the proceeds of the litigation and on a basis which resulted in Vision having no prospect of having its costs of the litigation met. I am satisfied that this falls into the type of cases where a departure from the usual party/party costs order is warranted.
92 The discussion of indemnity costs orders by Goldberg J in White Industries (QLD) Pty Ltd v Flower & Hart (1998) 156 ALR 169 at 252 where reference is made to the approach of Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-4, further confirms my view that this is an appropriate case for such orders. ` Orders
93 For all of these reasons, I make the following orders: 1. The solicitor for the Respondents (the Applicants in the substantive proceedings before Justice Marks in matter no: CT1274 of 1994), James William Lyons trading as Lyons & Lyons ("Lyons & Lyons") to pay the costs of the Appellant (the Respondent in the substantive hearing before Justice Marks in matter no: CT1274 of 1994) on an indemnity basis as agreed or taxed for:
(a) the proceedings before Justice Marks in matter No. CT1274 of 1994 ("the Original Proceedings"); and
(b) the subsequent appeal proceedings before the Full Bench of the Commission in matter No. IRC 100 of 1997 ("the Appeal Proceedings"). 2. The Solicitor for the Respondents (the Applicants in the substantive proceedings before Justice Marks in matter no: CT1274) James William Lyons trading as Lyons &Lyons pay the costs of the Appellant (the Respondents in the substantive proceedings before Justice Marks in matter no: CT1274 of 1994) of this Motion on a party and party basis as agreed or assessed.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Vision Publishing Pty Ltd
PK Lane Holdings Pty Ltd & 2 Ors
(1993) 52 IR 114
(1960) 104 CLR 186
(1993) 46 FCR 225
(1992) 174 CLR 178
(2000) 102 FCR 155
(1998) 193 CLR 72
(1998) 84 IR 277
(1998) 156 ALR 169
(1991) 22 NSWLR 1