CONCERIA PELL MEC SPA v SWEET RING IMPORTS PTY LIMITED SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL KIRBY P, PRIESTLEY JA and POWELL JA 13 March 1995 [1995] NSWCA 90 COSTS — taxation of costs — issue of certificate of taxation — application for order setting aside certificate of taxation taxed in absence of objecting party — primary judge (Rolfe J) finds that sufficient excuse is given for the absence of the party from the taxation — further finds that no adequate reason has been shown to set aside the certificate — dispute concerning whether costs of earlier solicitor properly included in bill — evidence shows that party, at time of alleged retainer of earlier solicitor, stated in correspondence its ignorance of the proceedings — held (Kirby P; Priestley JA and Powell JA concurring): (1) Granting leave to appeal and allowing the appeal; There was evidence before the primary judge which, without more, provided a proper basis for setting aside the certificate of taxation and requiring explanation to justify the retainer of the earlier solicitors; (2) The proceedings should be returned to the Division for reconsideration as to whether the objection should not be heard on its merits. PRACTICE & PROCEDURE — Commercial Division — review of certificate of taxation — absence of objecting party from taxation — adequate proof of explanation for absence — whether adequate proof of substantial objection — observations by the Court of Appeal on the general desirability of resolution of issues on the merits. Kirby P. The Court has heard a summons for leave to appeal from orders made by Rolfe J in the Commercial Division of the Supreme Court. By consent of the parties, the Court has proceeded to deal with the appeal, pursuant to the leave which the Court is minded to grant. The proceedings arise out of an objection by the claimant to a certificate of taxation which it received in respect of a bill of costs which was taxed. The bill contained substantial items for professional costs, allegedly performed by Messrs Baker McKenzie, solicitors. The claimant's contention is that that firm was not authorised to act on behalf of the fifth defendant in the proceedings in the Commercial Division, namely Sweet Ring Imports Pty Ltd (Sweet Ring). The background to the proceedings is as follows. On 29 May 1989 the claimant filed in the Commercial Division a summons seeking judgment against seven corporate defendants and three personal defendants for moneys outstanding for goods sold and delivered. The goods concerned were hide and leather products. On 17 August 1992, the proceedings were heard by Cole J. On the return of the proceedings, the claimant discontinued, among others, against Sweet Ring. It was ordered to pay Sweet Ring's costs. The claimant obtained judgment against the personal defendants for breach of warranty of authority and for fraud. The personal defendants were ordered to pay the claimant's costs including, amongst other things, the costs which the claimant had been ordered to pay Sweet Ring. 2 UNREPORTED JUDGMENTS The personal defendants, on 22 September 1992, each filed notices of appeal. Remarkably enough those appeals have not yet come on for hearing. They remain to be heard. Nothing in these proceedings touches upon those appeals. On 2 September 1992 Sweet Ring's solicitors, Messrs Helliars, wrote to the claimant's solicitors with an assessment of costs. That assessment included costs in the sum of $46,000, apparently in respect of the costs incurred by Messrs Baker McKenzie, solicitors. Those solicitors had acted for the personal defendants up to the date of the hearing before Cole J. It is the claimant's contention that they did not act for Sweet Ring. By letter 4 September 1992, the claimant's solicitor replied disputing the assessment of costs. On 22 December 1992 Messrs Helliars filed a bill of costs. The majority of the items in that bill related to costs allegedly incurred, with the authority of Sweet Ring, by Messrs Baker McKenzie. On 23 December 1992 the claimant's solicitor's office closed for the long Vacation. On 18 January 1993 the claimant's solicitor's office reopened. The claimant's solicitor received a letter from Helliars enclosing Sweet Ring's bill of costs. Thereafter, the claimant's solicitors sent a letter to Messrs Helliars advising them that a notice of objection to the bill of costs was being filed on 5 February 1993. The claimant's notice of objection to the bill of costs was duly filed. However, on 9 February 1993, the Supreme Court issued a certificate of taxation for the costs of Sweet Ring. On 10 February 1993 the claimant's solicitors served the notice of objection to the bill of costs. That is, after the certificate of taxation was issued. By letter dated 17 November 1994, Messrs Helliars advised the claimant's solicitors that they, Messrs Helliars, had the certificate of costs issued by the Court. They requested payment of the costs, including sums for the items of work allegedly performed by Messrs Baker McKenzie for Sweet Ring. Two questions were posed in the proceedings before Rolfe J which were for the setting aside of the certificate of taxation. The first was whether there had been an adequate explanation shown for the delay in applying to set aside the certificate of taxation. For reasons which his Honour delivered on 17 February 1995 his Honour concluded that a sufficient explanation had been shown. To that extent, he upheld the application by the claimant to set aside the certificate of taxation. However, in proceeding to his reasons for judgment, his Honour concluded that no reason had been shown sufficient to warrant his setting aside the certificate of taxation to sustain the contention of the claimant that Messrs Baker McKenzie did not act for Sweet Ring. In the course of his reasons, Rolfe J said: This, it has been submitted, means and was intended to mean that Messrs Baker McKenzie did not act for the fifth defendant and, therefore, were not entitled to any costs. Therefore, if the matter was referred back to the taxing officer, the sole issue would be whether Messrs Baker McKenzie acted for the fifth defendant. It seems to me that I am in as good a position as the taxing officer would be to determine that on the evidence before me, and save for one submission, in the light of the objections taken to the affidavit of Mr Capogreco, which I have upheld, there is simply no evidence that Messrs Baker McKenzie did not act for the fifth defendant."''The determination, therefore, concluded before Rolfe J upon the basis there was no evidence that Messrs Baker McKenzie did not act for Sweet Ring. URJ CONCERIA PELL MEC SPA v SWEET RING IMPORTS PTY LIMITED (Kirby P) 3 Placed before this Court is a letter of 22 June 1992 from Messrs Helliars to Messrs Joseph G Capogreco & Associates, the solicitors for the claimant. This letter, was relevantly in these terms; We are instructed by Sweet Ring Imports Pty Limited and in particular by its shareholders Mr and Mrs Fengels. It has recently come to our client's attention that the company is a defendant in Supreme Court proceedings Commercial Division No. 50242 of 89 taken out by Conceria Pell MEC SPA for whom we understand you act. We note that your Mr Capogreco has indicated that our client company was served with the proceedings at its office at 1/147A King Street, Sydney. That is the address of the company's previous solicitors. Accordingly, we further understand your Mr Capogreco to have confirmed that an Affidavit of Service was available. We ask that we be provided with a copy of this Affidavit. Our client only became aware of these proceedings last week. We have written to Messrs Baker McKenzie seeking a copy of the pleadings and when available shall advise our client's instructions.' Also placed before the Court is the result of a company search which reveals that, at the relevant dates, Mr Jurgen Fengels and Miss Mary Ann Fengels were the sole directors of Sweet Ring. With every respect to Rolfe J, it appears that his Honour may have overlooked the statement apparently made on behalf of Sweet Ring, indicating that Sweet Ring had only recently come to know of the proceedings taken in the Supreme Court. It is possible that this statement could be explained. It is possible, for example, that the statement, unelaborated, does not indicate the full extent of the relationship between Messrs Baker McKenzie and Sweet Ring at the relevant time. However, on the face of things, the statement is sufficient to indicate there was evidence which, at least, raised a doubt as to theretainer which, at the relevant times, had been given by Sweet Ring allegedly to Messrs Baker McKenzie. Thus it is difficult to see, on the evidence which was before Rolfe J, how a company which had only recently come to know of proceedings in the Supreme Court could have retained solicitors to act for it in those proceedings. I say this without any predetermination of the issue. It has been foreshadowed that, if the matter is returned to the Commercial Division, there will be additional evidence which may be placed before that Division to elaborate the sparse material which was before Rolfe J. For the reasons stated, it would seem that Rolfe J overlooked evidence which was before him. That evidence supplies the gap which his Honour felt to be missing. It casts at least some doubt, without more, upon the authority of Messrs Baker and McKenzie to charge costs upon the footing that they had been retained by Sweet Ring at a time when that company was asserting, through Messrs Helliars, its solicitors, its ignorance of the proceedings. Upon that footing, I would be disposed to grant leave, allow the appeal and to require the matter to be returned to the Division for reconsideration. There is a further reason, as was pointed out by Priestley JA during argument. In Rolfe J's reasons, cited above, his Honour stated that he was in as good a position as the taxing officer would be to determine the authority of Messrs Baker McKenzie. But, on the material before him, there was simply no evidence that Messrs Baker McKenzie at the relevant time were retained to act for the fifth defendant. 4 UNREPORTED JUDGMENTS It was conceded in this proceeding before the Court today, by the solicitor for the opponent, that before the taxing officer, the onus would have been upon the opponent to prove that Messrs Baker McKenzie had a retainer from Sweet Ring, in order to sustain the items in the bill of costs which were objected to by the claimant. I consider that that concession was properly made. Upon that footing, again with respect to Rolfe J, his Honour appears to have misstated the differing position in relation to the consideration of the objection on the one hand by the taxing officer and, on the other, by himself. Before Rolfe J the onus was squarely upon the claimant to disturb the certificate of taxation which had issued. So the position was not the same as it had been before the taxing officer. It was different in a material respect. The claimant was at a marked disadvantage which it sought to have repaired. Therefore, for these two reasons, and for the additional reason that the course which I propose will ensure that the Commercial Division has the opportunity, upon a proper basis, to consider whether the objection should be determined on the merits, I am of the view that the matter should go back to the Division for reconsideration. Generally speaking, it is highly desirable that courts should dispose of issues on the merits. A party denied the opportunity to have the merits of its contest determined will often have a deep, and sometimes a justifiable, objection to the law's technicalities. It has been pointed out that the claimant is a foreign company, apparently with its office in Italy. An order for security for costs has been sought. In my opinion it is appropriate, there being special circumstances in the residence of the claimant company overseas, to order security for costs in the normal way. The security sought is $5,000. It would appear that that is an appropriate sum. It should be paid before the proceedings continue in the Division. If need be, it would be left to the Division to vary such order as the circumstances or the practice of the Division require. The orders which I would propose are: 1. Grant leave to appeal; 2. Allow the appeal; 3. Set aside the orders made by Rolfe J dated 17 February 1995; 4. In lieu thereof, order that the motion be returned to the Commercial Division for reconsideration in the Division;5. Order that the claimant pay security for the costs of the further proceedings in the Supreme Court in the sum of $5,000 and stay the further proceedings in the Court until such sum has been deposited with the Registrar of the Commercial Division or until security, in a form reasonably acceptable to the Registrar of that Division, is provided in the sum of $5,000; and 6. Order that the opponent pay the costs of the summons for leave to appeal and of the appeal but have a certificate under the Suitors" Fund Act 1951 in respect of the costs of the appeal. Priestley JA. I agree. I have nothing to add. Powell JA. I also agree. Kirby P. Such are the orders of the Court. 1. Grant leave to appeal; 2. Allow the appeal; 3. Set aside the orders made by Rolfe J dated 17 February 1995; URJ CONCERIA PELL MEC SPA v SWEET RING IMPORTS PTY LIMITED (Kirby P) 5 4. In lieu thereof, order that the motion be returned to the Commercial Division for reconsideration in the Division; 5. Order that the claimant pay security for the costs of the further proceedings in the Supreme Court in the sum of $5,000 and stay the 5 further proceedings in the Court until such sum has been deposited with the Registrar of the Commercial Division or until security, in a form reasonably acceptable to the Registrar of that Division, is provided in the sum of $5,000; and 6. Order that the opponent pay the costs of the summons for leave to 10 appeal and of the appeal but have a certificate under the Suitors' Fund Act 1951 in respect of the costs of the appeal. Counsel for the claimant: M K Meek 15 Solicitors for the claimant: Joseph G Capogreco and Assocs Counsel for the opponent: M J FitzGerald (sol) Solicitors for the opponents: Helliars City Solicitors