New South Wales Court of Appeal CITATION : Twigg & Anor. v. Kung & Anor. [2003] NSWCA 42 HEARING DATE(S) : In Chambers JUDGMENT DATE : 7 March 2003 JUDGMENT OF : Stein JA at 1; Hodgson JA at 2; Foster AJA at 25 DECISION : 1. Set aside costs order made on 11 July 2002. 2. Order the appellants to pay Kung's costs of the appellants' appeal, including those ordered to be paid by Registrar Irwin on 24 February 2002, and also McGlynn's costs up to 11 June 2002. 3. Order Kung to pay one half of McGlynn's costs incurred in relation to the appeal after 11 June 2002. CATCHWORDS : PRACTICE - APPEAL - COSTS - Plaintiff sues two defendants, and first defendant cross-claims against second defendant seeking an indemnity - Plaintiff's claim dismissed, and cross-claim dismissed for that reason - Plaintiff seeks leave to appeal as against first defendant only, and first defendant seeks leave to cross-appeal against dismissal of its cross-claim - Leave to appeal granted and leave to cross-appeal refused - Whether second defendant "affected by the relief sought by a notice of appeal" or "interested in maintaining the decision under appeal" - Who should pay costs arising from joinder of second defendant on application of first defendant. LEGISLATION CITED : Supreme Court Act 2.75A(10) Supreme Court Rules Pt.51, rr.9, 22 and 23 Castellan v. Electric Power Transmission Pty. Ltd. (1967) 69 SR(NSW) 159 CASES CITED : Kelly v. Newcastle Protective Coating [1973] 2 NSWLR 45 Shirt v. Wyong Shire Council [1978] 1 NSWLR Peter Twigg & Mark Twigg (trading as Adrian Twigg & Co.) - appellant PARTIES : Patrick Kam Chiu Kung - 1st respondent Ross Elder McGlynn & Stephen Michael Hahn (trading as McGlynn & Partners) - 2nd respondent FILE NUMBER(S) : CA 40647/00 COUNSEL : The parties consented to the motions being dealt with by the Bench in Chambers without oral submissions. SOLICITORS : Adrian Twigg & Co. for appellant Phillip Yip & Associates for respondents LOWER COURT District Court JURISDICTION : LOWER COURT 2762/99 FILE NUMBER(S) : LOWER COURT Rolfe DCJ JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40647/00 DC 2762/99 STEIN JA HODGSON JA FOSTER AJA Friday 7 March 2003 TWIGG & ANOR. V. KUNG & ANOR. Judgment (On Costs) 1 STEIN JA: I agree with the reasons on Hodgson JA. 2 HODGSON JA: On 11 July 2002, the Court of Appeal gave judgment on an appeal brought by Adrian Twigg & Co. (the appellants) against rejection of its claim against Patrick Kung (Kung) by Rolfe DCJ. The Court dismissed that appeal with costs. A problem has arisen because, on Kung's application, an additional respondent had been joined in the appeal, namely Kung's former solicitors McGlynn & Partners (McGlynn), so that the order made by the Court had the effect that the appellants had to pay the costs of McGlynn as well as those of Kung. 3 The Court has before it a Notice of Motion dated 22 November 2002 by the appellants seeking orders to the effect that they not be liable for McGlynn's costs; and a Notice of Motion dated 26 November 2002 by McGlynn seeking an order that its costs be paid by Kung on an indemnity basis. 4 As set out in the main judgment, the appellants had sued both Kung and McGlynn, claiming entitlement to the benefit of a solicitor's lien for costs over a sum of money paid by Kung to his ex-wife pursuant to orders in Family Law Act proceedings. Kung had put on a cross-claim against McGlynn alleging in effect that, if he was liable to the appellants, he was entitled to be indemnified by his former solicitors. The primary judge dismissed the appellants' claim against both defendants, and accordingly he dismissed Kung's cross-claim against McGlynn without having to decide whether they would have been liable to indemnify Kung if he had been held liable to the appellants. 5 The appellant sought leave to appeal only in relation to the decision in favour of Kung, and did not join McGlynn as an opponent to the application. However, Kung sought leave to cross-appeal against McGlynn. Both applications were heard on 3 September 2001 by a Court comprising Stein JA and Fitzgerald JA. Stein JA delivered the judgment of the Court, as follows: STEIN JA: There are two leave applications before the Court. The first is a summons for leave to appeal by Adrian Twigg & Co against a decision of Judge Rolfe in the District Court. The second is an application for leave to cross appeal brought by the first respondent, Mr Patrick Kam Chiu Kung. So far as the Summons for leave to appeal is concerned, the issue in the draft Notice of Appeal is confined to whether or not his Honour should have found that notice should be imputed to the respondent. In our view that is an arguable matter It was suggested that a recent decision of the Court of Appeal, Grogan v Orr [2001] NSWCA 114, determines the matter. Having examined the decision of Sheller JA joined in by Meagher JA, we are not convinced that that is the situation. In our view it is appropriate to grant leave to the claimants. Accordingly, the Summons for leave to appeal by Adrian Twigg & Co is upheld. Leave to appeal is granted. Costs will be costs in the appeal. By consent time is extended for bringing the Summons for leave to appeal. As far as the application for leave to cross appeal is concerned, this is between Mr Kung and McGlynn & Partners, the cross respondents. They were the second set of solicitors. Negligence against them was pleaded before the District Court. His Honour did not need to deal with the issue because of the way in which he determined the case. Nonetheless, he dismissed the cross-claim for negligence and it is from this dismissal that Mr Kung seeks leave to cross appeal. The matter involves factual findings. In his Honour's judgment, particularly at page 26, there are findings of fact made by his Honour which lead us to conclude that it would be inappropriate to grant leave to cross appeal. Accordingly, the summons for leave to cross appeal is dismissed with costs. 6 Kung then applied to have McGlynn joined as an additional respondent to the appellant's appeal. McGlynn was not made an opponent to that application. It was heard and determined by Registrar Irwin on 24 February 2002. 7 In that application, Kung relied on s.75A(10) of the Supreme Court Act and Pt.51 r.22 and r.23 of the Supreme Court rules. Those provisions are in the following terms: 75A10) The Court may make any finding or assessment, give any judgment, make any order or give any direction which ought to have been given or made or which the nature of the case requires. 22(1) In an appeal from any decision, the Court of Appeal may exercise its powers under the Act and under these rules notwithstanding: (a) that there is no appeal from some part of the decision, (b) that any party to the proceedings in the court below has not appealed, (c) that any ground for allowing or dismissing the appeal or varying the decision is not stated in any notice of appeal, notice of cross-appeal or notice of contention, or (d) that there has been no appeal from some other decision in the proceedings. (2) Where a person is not a party to the proceedings in which the decision under appeal is given, but is served with a notice of appeal with appointment pursuant to a direction of the Court of Appeal, the Court of Appeal may give such decision as might have been given in the court below if the person served had been a party to the proceedings in the court below. (3) In any appeal the Court of Appeal may, on terms, make any order to ensure the determination on the merits of the real question in controversy. (4) The Court of Appeal may, in any appeal, make any order which the Court of Appeal might make on an application for a new trial or for the setting aside of a verdict or judgment. (5) This rule applies subject to the provisions of any Act. 23(1) The Court of Appeal shall not order a new trial: (a) on the ground of misdirection, non-direction or other error of law, (b) on the ground of the improper admission or rejection of evidence, (c) where there has been a trial before a jury, on the ground that the verdict of the jury was not taken upon a question which the trial judge was not asked to leave to the jury, or (d) on any other ground, unless it appears to the Court of Appeal that some substantial wrong or miscarriage has been thereby occasioned. (2) The Court of Appeal may order a new trial on any question without interfering with the decision on any other question. (3) Where it appears to the Court of Appeal that some ground for a new trial affects part only of the matter in controversy, or one or some only of the parties, the Court of Appeal may order a new trial as to that part only, or as to that party or those parties only. (4) Where the Court of Appeal makes an order under subrule (2) or subrule (3), the Court of Appeal may give such judgment or make such order as the nature of the case requires for the disposal of the remainder of the appeal. (5) Where the Court of Appeal orders a new trial, the Court of Appeal may: (a) impose conditions on any party for the purposes of the new trial, (b) direct admissions to be made by any party for the purpose of the new trial, (c) order that the testimony of any witness examined at the former trial may be read from the notes of the testimony, instead of the witness being again examined, and (d) for the purposes of subparagraphs (a) to (c) from time to time make such orders as the Court of Appeal thinks fit. 8 Kung also relied on Castellan v. Electric Power Transmission Pty. Limited (1967) 69 SR(NSW) 159, Kelly v. Newcastle Protective Coating [1973] 2 NSWLR 45 and Shirt v. Wyong Shire Council [1978] 1 NSWLR 631, in support of the proposition that an order not appealed against could be set aside. It was submitted that McGlynn could be affected by the appeal because, if the Court of Appeal upheld the appellants' appeal, this would take away the basis for the primary judge's decision on the cross-claim and the Court of Appeal could then reinstate the cross-claim against McGlynn. 9 The appellants submitted before Registrar Irwin that the above cases only showed that the Court of Appeal could make an order not appealed against in favour of a party who has not appealed, not that it could take away the benefit of an order not subject to appeal from a party who has not appealed. 10 Registrar Irwin in substance acceded to Kung's submissions and he ordered that McGlynn be joined as a respondent to the appeal. McGlynn put on a Notice of Motion seeking a review of that order, but ultimately this was not pursued. It was dismissed on 8 April 2002 on the basis that McGlynn would file a submitting appearance. 11 However, this did not finally resolve questions associated with the joinder of McGlynn as a respondent, and there was correspondence between McGlynn's solicitors and Kung's solicitors. It commenced with the following letter dated 20 May 2002 from McGlynn's solicitors: We refer to your client's application determined by Registrar Irwin on 25 February 2002 to join our clients to the appeal proceedings pursuant to Part 51 Rule 9(2) of the Supreme Court Rules. As you know, we were not served with the application to join our clients and were not therefore provided with an opportunity to be heard on the application. We sought a copy of the application from you and by your letter of 1 March 2002 you declined to provide us with a copy. We understand that you sought the joinder of our clients to the appeal pursuant to Part 51 Rule 9(2). Despite that rule, we do not know why you thought it appropriate that our clients be joined to the Appeal in the light of your having been refused leave to appeal against the verdict in our clients' favour on the Cross-Claim. When we sought to appeal the decision of Registrar Irwin, you informed the court that you agreed with Registrar Irwin's view that it was more appropriate for our clients to file a submitting appearance. It is our understanding that it is common ground as between the Appellants, Respondent and our clients that: 1 The only matter before the Court of Appeal is the appeal by Adrian Twigg and Co; 2. The only orders sought in the appeal proceedings before the Court are by Adrian Twigg and Co against your client; 3. No orders are sought, in the matter before the Court of Appeal, against our clients by either Adrian Twigg and Co or your client; and 4. Your client's application for leave to cross appeal as against our clients has been refused by the Court of Appeal. The result of that refusal is a final judgement in favour of our clients on the Cross-Claim. Please confirm within 7 days if you dispute any of the above. If we do not hear from you, we will proceed on the basis that the summary set out above is correct. On that basis, we will proceed to file a submitting appearance, save as to costs. If you do dispute any of the above, then we will need to seek instructions about declining to file any submitting appearance and the need to appear on the appeal. In that event, Senior Counsel will be briefed and we will be looking to your client for costs. If we do proceed to file a submitting appearance, indeed as suggested by Registrar Irwin, then we would expect the contents of this letter to be drawn to the attention of the Court of Appeal in the event there is any alteration to the abovementioned position. A copy of this letter has been forwarded to Adrian Twigg and Co. 12 Kung's solicitors replied by letter dated 21 May 2002, as follows: We refer to your letter dated 20 May 2002. Prior to the 18 April 2002 your client had appeared through its legal representatives on at least two occasions before the Registrar (21 March and 8 April 2002) seeking to have a timetable set down for the hearing of a Notice of Motion to appeal the orders of the Registrar, or otherwise to have the orders set aside, pursuant to which your client was joined to the proceedings. On the last occasion before Registrar Irwin on 18 April 2002 you were fully aware of the whole of the circumstances surrounding this matter. It was with this knowledge that you proposed, and it was agreed by the appellant and respondent, that by consent your client would file a submitting appearance, save as to costs. It was also agreed by the parties that on the basis of your client filing a submitting appearance (save as to costs) neither the applicant nor respondent would seek any order for costs in relation to your client's discontinuing its Notice of Motion. If your client is now proposing to attend on the Court of Appeal hearing your client should seek an order setting aside the previous consent orders made by the court. In the event that such an order is sought we will of course be seeking costs in relation to the earlier Notice of Motion that was discontinued by consent. We will also need to obtain instructions as to whether to oppose any application to set aside the consent orders. We do not intend to respond to your four points as to what is your "understanding" as to the common ground as between the Appellants, Respondent and your clients. You are fully aware of the nature of the appeal before the Court of Appeal and it is a matter for you to advise your client as to whether it is in their interest or not to attend at that hearing. 13 McGlynn's solicitors then sent a letter dated 4 June 2002, in the following terms: We refer to your facsimile letter to us of 21 May 2002. Paragraph five of your letter seems to suggest that orders were made by the court, by consent of the parties, for our clients to file a submitting appearance save as to costs. The fourth paragraph of your letter also seems to suggest that it was our clients who proposed that we file a submitting appearance. You will recall that on 4 April 2002 we submitted that the directions hearing in the matter ought to be adjourned until such time as our motion had been determined. Registrar Irwin agreed with this. Registrar Irwin, however, expressed the view that it would be "a total waste of costs to have his decision reviewed before the full Court of Appeal". Registrar Irwin indicated that Twigg & Co's appeal against your client would be substantially delayed if our application were to be determined prior to the substantive proceedings. Registrar Irwin suggested, in the alternative, that we file a submitting appearance, save as to costs. The matter was adjourned until Monday 8 April 2002 for us to us to obtain instructions in relation to Registrar Irwin's suggested course of action. It has always been our understanding that the matters set out on page 2 of our letter of 20 May 2002 are correct. On that basis, we sought urgent instructions from our clients to file a submitting appearance. We did not seek to have our motion dismissed on the basis that it would be unsuccessful. Rather, it was done to suit the parties and the court. We agree with the submissions made by Paul Brereton SC in opposition to your client's application to join our clients and remain of the view that our application would have succeeded. It was not conveyed to us that your client would only agree to no order being made as to costs on the condition that our clients file a submitting appearance. In paragraph five of your letter, you suggest that perhaps you may oppose any appearance filed by our clients in the proceedings. Does your client now seek orders against our clients in their absence? The purpose of our correspondence of 20 May 2002 was to confirm our understanding of your client's position in view of the fact that our clients were not a party to your client's application to join our clients to the proceedings. We ask that you do respond to the four points outlined in our letter of 20 May 2002 as to what our understanding is as to the common ground as between the appellants, respondents and our clients. Once again, as we were not a party to the application to join our clients, we wish to clarify the common ground as between our mutual clients. 14 Kung's solicitors replied by letter dated 11 June 2002, as follows: We refer to your letter dated 4 June 2002. In relation to the first six paragraphs of your letter we have nothing further to add. If your client now decides it does not wish to file a submitting appearance, save as to costs, you will have to have the previous orders made by consent set aside by the court. We will make submissions as to relevant cost orders at that stage to the court. The remaining two paragraphs of your letter are yet another attempt to "set up" a particular situation by seeking to procure admissions from our client. We are not responding to the four points outlined in your letter dated 20 May 2002. The proceedings are constituted as they are constituted and it is a matter for you to advise your client as to whether they should attend at the hearing or not. 15 The appeal was heard on 2 July 2002. McGlynn appeared represented by Senior Counsel. After discussion, the position was reached that no order affecting McGlynn would be sought, apart of course from whatever order was made on the appellants' appeal, unless and until the appellants' appeal was upheld and McGlynn had been notified and given an opportunity to be heard. Unless and until that happened, McGlynn would submit save as to costs. Senior Counsel for McGlynn then took no further part in the appeal. Costs were reserved. 16 The parties have provided written submissions, which I need not repeat. 17 In my opinion, McGlynn should initially have been joined as an opponent to the appellants' application for leave and a respondent to the appellants' appeal. Part 51 r.9 is in the following terms: 9(1) Each party to the proceedings in the court below who is affected by the relief sought by a notice of appeal or is interested in maintaining the decision under appeal shall be joined as a party appellant or respondent to the appeal. (2) The Court of Appeal may order the addition or removal of any person as a party appellant or respondent to an appeal. (3) A person shall not be made an appellant without his consent. (4) An appellant who considers that respondents need not be separately represented on the appeal may notify such respondents that objection will be taken to more than one set of costs being allowed between them. (5) An appellant who considers that a respondent should enter a submitting appearance and take no further active part in the proceedings may notify that respondent that objection will be taken to any order for costs, incurred after that date, other than for costs as a submitting party, being made in favour of that respondent. (6) The failure by: (a) an appellant to give notice under subrules (4) or (5), or (b) a claimant to give a corresponding notice pursuant to subrule (7), does not limit the powers of the Court with respect to the costs of the proceedings. (7) This rule applies, making such changes as are necessary, to an application for leave to appeal or to cross-appeal. In my opinion, McGlynn was a party affected by the relief claimed by the appellants, in that if the appeal was successful, it totally removed the only basis on which Kung's cross-claim against McGlynn had been dismissed by the primary judge, so that there was then a possibility (in my opinion a possibility that was reasonable, not remote or fanciful) that Kung would then seek to revive the cross-claim by either seeking leave to appeal or seeking an order under Pt.51 r.22. 18 In any event, Kung did seek leave to appeal, and as noted above, the application was dismissed on the basis that factual findings of the primary judge made success unlikely, even if the appellants' appeal were to succeed. However, that did not mean that Kung's cross-claim was then beyond revival. 19 I accept that, even if the appellants' appeal were successful, Kung could not pursue his cross-claim unless the primary judge's dismissal of that cross-claim was set aside. Although success of the appellants' appeal would overcome any issue estoppel arising from the dismissal (since the only basis for the dismissal had been destroyed by the appellants' success on appeal), in my opinion it would not overcome cause of action estoppel: see Spencer Bower, Turner & Handley, Res Judicata (10th Ed), pars.[181] and [182]. And although Pt.51 r.22 could permit the setting aside of the dismissal even though there was no cross-appeal on foot, in my opinion the Court of Appeal would not do so where leave to cross-appeal had been refused, without re-visiting the question of leave to cross-appeal. 20 However, the grant or refusal of leave to cross-appeal is an interlocutory judgment, and allowance of the appellants' appeal could amount to a change of circumstances justifying reconsideration of it. It is possible that, if the appeal were allowed, the final judgment of the Court of Appeal could show a basis for departing from the prima facie view taken by the judges considering the leave application on the material before them. In particular, this final judgment could possibly support an approach that the finding of the primary judge that McGlynn had no duty to the appellants to enquire further as to a possible lien for costs did not necessarily mean that they had no duty to their own client Kung to make such enquiries or give some advice about the matter. 21 It is perhaps a matter of judgment, on which minds could reasonably differ, as to whether this possibility of reviving the cross-claim was really so remote that, after dismissal of the application for leave to cross-appeal, McGlynn was no longer a party affected or interested within Pt.59 r.9. In my opinion, however, Registrar Irwin was not in error in deciding that it was. It would have been preferable for this question to have been determined at a hearing of which McGlynn had notice, because it was plainly a matter in respect of which McGlynn may have had substantial submissions to put, so that, if McGlynn was not notified of this hearing, there was a real likelihood of a second contested hearing on the same issue. As it happened, this was avoided by the arrangement made about a submitting appearance, but unfortunately that arrangement did not completely resolve matters. 22 In my opinion, what should have happened is an arrangement whereby, subject to the agreement of the Court, the appellants' appeal would be heard and decided, and then, if the appeal was upheld and Kung decided to try to revive his cross-claim, there would be a separate hearing in which the question of whether or not he could revive the cross-claim would be determined. Then McGlynn, if content to leave the contesting of the appeal to Kung, could simply submit on the first hearing, and then, if the appeal were upheld and Kung applied to revive his cross-claim, McGlynn could contest that application. Had that course been taken, then McGlynn would not have incurred any costs after making that arrangement, in the events that have occurred. I think the appellants should pay McGlynn's costs up to 11 June 2002. 23 As it happened, McGlynn incurred additional costs in being represented by Senior Counsel at the hearing of the appeal, at least initially; and the real question that has to be determined now is who should bear those additional costs. In my opinion, both Kung and McGlynn were at fault in not achieving the arrangement I have specified; but I think Kung was marginally more at fault because McGlynn at least tried to achieve clarity as to what was happening. I think this view would be properly reflected by requiring Kung to pay his own costs incurred in dealing with McGlynn, and paying one half of McGlynn's costs incurred since 11 June 2002. There is in my opinion no question making any of these costs on an indemnity basis. 24 For those reasons, I propose the following orders: 1. Set aside costs order made on 11 July 2002. 2. Order the appellants to pay Kung's costs of the appellants' appeal, including those ordered to be paid by Registrar Irwin on 24 February 2002, and also McGlynn's costs up to 11 June 2002. 3. Order Kung to pay one half of McGlynn's costs incurred in relation to the appeal after 11 June 2002. 25 FOSTER AJA: I agree with Hodgson JA. ********** Last Modified: 03/10/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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