Able Demolitions and Excavations Pty Ltd v Barry Kenna and Co

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

S CI 2015 3139

ABLE DEMOLITIONS AND EXCAVATIONS (ACN 005 639 449)	Plaintiff
v
BARRY KENNA AND CO (ABN 70 502 885 982)	Defendant

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JUDGE:	Daly AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	2, 9 and 17 December 2015
DATE OF JUDGMENT:	17 March 2016
CASE MAY BE CITED AS:	Able Demolitions and Excavations Pty Ltd v Barry Kenna & Co
MEDIUM NEUTRAL CITATION:	[2016] VSC 96

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COSTS – Solicitor and client – Application for itemised bill under Legal Profession Act 2004 (Vic) – Whether agreeing to receive discounted sum on an ascertainable date in satisfaction of claim for legal costs amounted to an accord and satisfaction which extinguishes client’s rights of review under Part 3.4 of the Legal Profession Act 2004 (Vic) – Construction of agreement – Gadens Lawyers v Beba Enterprises Pty Ltd [2012] VSC 519, Beba Enterprises Pty Ltd v Gadens Lawyers (2013) 41 VR 590 and GLS v Goodman [2015] VSC 627 applied – Parties reached an accord and satisfaction.

CONTRACT – Solicitor and client – Whether applicant prohibited from requesting an itemised bill if parties reached an accord and satisfaction – Legal Profession Act 2004 (Vic) s 3.4.36 – Implied term – Hawkins v Clayton (1988) 164 CLR 539 applied – Interests of justice – Beba Enterprises Pty Ltd v Gadens Lawyers (2013) 41 VR 590 applied – Applicant precluded from requesting an itemised bill.

COSTS – Whether extension of time required for Applicant to commence Costs Court proceedings – Legal Profession Act 2004 (Vic) s 3.4.38 (6) – Length of delay and explanation for delay – Prejudice to applicant – Extension would be granted.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms S F Cherry	Slater + Gordon
For the Defendant	Mr G B Hevey RFD	Barry Kenna & Co

HER HONOUR:

This proceeding commenced in the Costs Court on 16 June 2015, when the applicant, Able Demolitions and Excavations Pty Ltd (‘Able’) issued a summons seeking, among other things, that the respondent, Barry Kenna & Co, a firm of solicitors (‘Mr Kenna’), file and serve an itemised bill in relation to a lump sum bill in accordance with Able’s prior written requests and in accordance with s 3.4.36 of the Legal Profession Act 2004 (Vic) (‘LPA’).

Section 3.4.36 of the LPA provides, relevantly, as follows:

3.4.36 Request for itemised bill.
(1)If a bill is given by a law practice in the form of a lump sum bill, any person who is entitled to apply for a review of the legal costs to which the bill relates may, within 30 days after the day the bill is given, request the law practice to give the person an itemised bill.
(2)The law practice must comply with the request within 21 days after the date on which the request was made.

…
(4)If a person makes a request for an itemised bill in accordance with this section, the law practice must not commence legal proceedings to recover the legal costs from the person until at least 35 days after complying with the request.

The lump sum bill in question, for the sum of $1 million, was dated 7 October 2013, and delivered to Able on or about that date. The bill referred to nine separate files (‘Western Australian matters’) and, next to the sum of $1 million, stated ‘More, but as agreed, and if paid within 30 days.’ A request for what was described as a ‘complete breakdown/detail of the invoice’ was first made on 21 October 2013, and repeated on a number of occasions over the following eighteen months. While Mr Kenna has commenced the process of preparing an itemised bill in relation to a number of years of work, that process is incomplete. A partial payment of $220,000 was made during the course of October 2013, with the outstanding balance (with interest accumulating at a rate of approximately $3,000 per month) as at the date Mr Kenna swore his first affidavit on 17 August 2015, being $942,235.53.

Mr Kenna’s position is that he is not required to produce an itemised bill, which would be a practical, if not necessary, precursor to Able making an application out of time to review the legal costs charged by Mr Kenna under the bill under s 3.4.38 of the LPA. Mr Kenna’s position is that he reached an agreement with Mr Paul Rossignoli, a director and the person in effective control of Able, in May 2012 which compromised any claim for costs by Mr Kenna against Able. That compromise, where Mr Kenna agreed to accept $1,000,000 plus GST for his fees and disbursements on account of the costs incurred by Able, and allowed Able time to pay the compromised amount, is said by Mr Kenna to amount to an accord and satisfaction, which, according to the authorities, would have the effect of relieving Able of its rights to seek an itemised bill and to review the costs being the subject of the compromise.

The parties filed, helpfully, an agreed list of issues for determination in this hearing, which is reproduced below:

1.In May 2012 did the parties reach an accord and satisfaction in relation to legal costs in the amount of $1,000.000 ($1million) plus GST, and if so, what were the terms of that agreement?
2.If ‘yes’ to (1), is the Applicant prohibited from requesting an itemised bill under s 3.4.36 of the Legal Profession Act 2004 (‘LPA’)?
3.If ‘no’ to (1), does the Applicant require an extension of time to commence proceedings in the Costs Court, and in particular to seek an order that the Respondent serve an itemised bill in compliance with s 3.4.36 of the LPA?
4.If ‘yes’ to (3), should an extension of time be granted to the Applicant pursuant to s 3.4.38 of the LPA, having regard to the delay and the reasons for the delay?

5. Should the Respondent now be required to provide an itemised bill?

The legal position regarding cases such as this can be considered to be settled in Victoria. In Gadens Lawyers v Beba Enterprises Pty Ltd,[1] (‘Gadens’) Emerton J held that by entering into an accord and satisfaction which included a term that one party paid a contribution to the other party’s legal and accounting costs in a fixed sum, the paying party waived its rights to review those costs under the LPA. This finding was upheld on appeal.[2] In rejecting a submission that the provisions of the LPA preclude parties who settle with each other about costs are precluded from contracting out of their rights under the LPA, Ashley JA observed as follows:[3]

It is a corollary of the conclusions which I have already expressed that neither ss 3.4.26(5) nor 3.4.48A says anything about the ability of a client or associated third party payer to reach a binding settlement with a law practice respecting the quantum of legal costs charged, or of a non‑associated third party payer to reach a binding settlement respecting the quantum of costs charged with the person who is under a legal obligation to pay those costs. Each of these situations – costs having been incurred and charged out – is temporally distant from the time when a costs agreement may be entered into (and then only between clients or associated third party payers with a law practice).
In that event, subject to considering Beba’s submission that Div 7 is legislation of a kind that cannot be displaced by private agreement, it appears to me that non‑associated third party payers, a fortiori clients and associated third party payers, are not prevented by Div 7 from entering into binding agreements to pay a quantified amount in costs, such agreements precluding a party from later seeking information or applying for a costs review.
…
In my opinion, the consequences which I have outlined make it extremely improbable that Parliament could have intended them. Whilst it must be recognised that P 3.4, and specifically Div 7, is designed to protect persons obliged to pay legal costs, it does not follow that the desirability of parties bringing an end to a legal dispute, including its costs ramifications, and whether or not involving litigation, should be ignored. Nor would it do much for the administration of justice if agreements settling costs issues (whether solely relating to costs, or part of a wider resolution), entered into in apparent good faith, could be at risk of being partly set aside at the instance of the payer, the other party then being at risk, in some cases, of having to repay some part of moneys already received and paid to the party’s legal practitioner.

[1][2012] VSC 519.

[2]Beba Enterprises Pty Ltd v Gadens Lawyers (2013) 41 VR 590 (‘Beba’).

[3]Ibid [75]-[79].

The reasoning in Beba was recently applied by Macaulay J in GLS v Goodman (‘GLS’),[4] where his Honour rejected, among other things, a submission that the reasoning in Beba should be confined to third party payers, stating as follows (citations omitted):

Here, as set out above, the parties made a costs agreement between them at one point in time and, later, following a dispute about the costs, they entered an accord and satisfaction compromising the costs to be paid and displacing any existing right of action for or entitlement to review the costs incurred under the costs agreement. Notwithstanding the breadth of the definition of ‘costs agreement’ in the Act, applying Beba, the accord and satisfaction was not such an agreement and the parties here are not prevented from settling their dispute (including shutting off the possibility of a review of costs).
This analysis and conclusion disposes of all three of the grounds subsumed by this issue: all three incorrectly assume that an agreement made after the making of the costs agreement by which the client relinquishes a right of review in exchange for a reduction in the final amount of costs billed under the costs agreement, is itself a ‘costs agreement’ to which the Act applies.

[4][2015] VSC 627 [56]-[57].

Both Beba and GLS concerned whether entry into an accord and satisfaction extinguished any rights of review under the LPA. Counsel for Able conceded that the effect of GLS meant that the rights extinguished by an accord and satisfaction would extend to a client’s right to receive an itemised bill under s 3.4.36 of the LPA. While no express reference to this right was referred to in GLS,[5] I agree that such a proposition arises logically out of the reasoning in Beba and GLS, in particular, the remarks of Ashley JA extracted above regarding the desirability of facilitating settlements of disputes about legal costs. Of course, in reality, many disputes about cost arise after the provision by a solicitor of an itemised bill, which is not the case here, but there seems to be no reason in principle why the rights waived by a client in entering into an accord and satisfaction regarding costs should not extend to the right to require an itemised bill, given the desirability of encouraging finality in disputation.
[5]Although in Beba, Ashley JA referred to ‘such agreements precluding a party from seeking information or applying for a costs review’ at [76].

Both the Court of Appeal in Beba and Macaulay J in GLS adopted the summary of Emerton J in Gadens[6] of the principles regarding the nature of an accord and satisfaction, which in turn adopted the summary of McColl J in El-Mir v Risk,[7] as follows (omitting citations):
[6]At [35].
[7](2006) 22 BCL 16.

(a) The essence of accord and satisfaction is the acceptance of something in place of a cause of action; the accord is the agreement or consent to accept the satisfaction; upon provision of the satisfaction, there is a discharge which extinguishes the cause of action;

(b) Where there is an agreement to accept a promise in satisfaction of a cause of action, the original cause of action is discharged from the date on which the promise is made;

(c) Where there is an accord and satisfaction, only the agreement for compromise may be enforced because the previous cause of action has gone; it has been ‘satisfied’ by the making of the new agreement constituted by abandonment of the earlier cause of action in return for the promise or other benefit;

(d) In other words, the role of an accord is to replace the former contract with a new one;

(e) The question of whether there has been an accord and satisfaction is one of fact. It turns upon determining the parties’ intentions, which may be discerned from the terms of the document said to constitute all or part of the agreement or from the surrounding circumstances.[8]

[8]Gadens [2012] VSC 519 [35].

In the current case, it is necessary to emphasise that it is not necessary for there to be an actual antecedent dispute between the parties for there to be an accord and satisfaction: it is sufficient that a party to such an agreement has a cause of action which is compromised. As stated by the authors of Cheshire and Fifoot’s Law of Contract:[9]

A very important rule of consideration in practical terms is the rule that compromise of a claim, settlement of a dispute or a forbearance to sue will constitute good consideration. (my emphasis)

[9]N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract (LexisNexis Butterworths, 9^th ed, 2007) [4.24].

Relevantly, the authors stated:[10]

There need not be an express promise either to compromise or to forebear, if such an understanding can be inferred from the circumstances or from the negotiations between the parties.

[10]Ibid.

In the current case, there was no dispute between the parties at that stage. If Mr Kenna’s version of events is accepted, he and Mr Rossignoli were simply discussing how much would be paid and when it was paid. However, there can be no doubt that as at the time of the meeting on 29 May 2012 (’29 May meeting’), Mr Kenna had a cause of action, being his claim for unpaid fees, which he could have billed then and there, subject of course to Able’s rights of review under the LPA. The question to determine is whether Mr Kenna’s cause of action was in fact compromised at that meeting.

Able disputes that an agreement was reached in May 2012 or at any time. Alternatively, Able contends that even if Mr Kenna’s version of events as to what occurred on 29 May 2012 is correct, the discussions between Mr Rossignoli and Mr Kenna could not give rise to an accord and satisfaction sufficient to deprive Able of its entitlements under the LPA (noting that the LPA is important consumer protection legislation). Among other things, the terms of any such agreement did not amount to a compromise, and were not sufficiently certain to amount to an accord and satisfaction. Given Mr Kenna’s failure to provide an itemised bill, and his past non-compliance with the disclosure provisions of the LPA (at least in relation to his dealings with Able), it would be appropriate to compel Mr Kenna to provide an itemised bill, and also to declare that it would be just and fair to allow Able to apply out of time to review the legal costs charged by Mr Kenna under s 3.4.38 of the LPA, if necessary, and if Able chose to do so after reviewing the itemised bill. Counsel for Able emphasised that Able did not deny its liability to pay some further amount in respect of Mr Kenna’s costs, but that Able wanted to be satisfied that the amount said to be owing was fair in the context of the work actually done.

The factual and legal issues in dispute have to be considered in the context of the nature of the relationship between the parties, the history of the dealings between the parties, and the nature of the matters which were the subject of the costs claimed by Mr Kenna. This was no ordinary solicitor-client relationship. Mr Kenna and Mr Rossignoli were friends of long standing, and Mr Kenna was also close to other members of Mr Rossignoli’s family, a number of whom were involved in the business of Able, a demolition contractor. Mr Kenna had been Able’s solicitor for nearly thirty years.

According to the first affidavit of Mr Kenna sworn on 17 August 2015, Mr Kenna has acted for Able on over two hundred litigious and non-litigious matters (many of which involved substantial litigation). Between 2007 and 2012, Mr Kenna acted for Able in a number of litigious matters in Western Australia, largely arising out of Able’s contract to demolish an iron ore processing plant in Port Hedland (‘BHP contract’). Concerns were first raised by Mr Rossignoli with Mr Kenna about Able’s disputes with BHP over Able’s performance of the BHP contract (‘BHP dispute’) during Christmas Day celebrations in 2007. The BHP dispute resulted in litigation in the Supreme Court of Western Australia after BHP terminated the BHP contract. Further, a proceeding had been brought by Able in the Supreme Court of Western Australia to recover damages for the alleged conversion of property by a former business associate (‘Wilson matter’). The BHP dispute settled in December 2008, and judgment in Able’s favour was delivered in the Wilson matter in April 2012 (although attempts to recover the judgment sum were ultimately unsuccessful owing to the insolvency of Mr Wilson and his related entities).

Mr Kenna deposed that despite spending approximately 2,500 hours on the BHP dispute in 2008, he issued only three invoices for relatively minor amounts, owing to Able’s financial difficulties at the time. Mr Kenna deposed that on several occasions, Mr Richard Charylo, the other director of Able (and Mr Rossignoli’s brother in law), requested that Mr Kenna defer issuing invoices to Able to avoid jeopardising Able’s precarious relationship with its financiers. He deposed that in 2010, he agreed with Mr Charylo that he would invoice Able and be paid his fees in relation to the BHP dispute after Able had raised some funds through the sale of some machinery. An agreement to similar effect was reached between Able and Philip Jewell QC, who by May 2012 had rendered fee slips in the sum of $290,240.00 for work carried out by him for Able between 2009 and 2012 on the Wilson matter.

Mr Kenna deposed that on 29 May 2012, Mr Rossignoli attended his office to discuss selling nineteen vacant lots of land in Ringwood (‘Wonga Road properties’). Mr Kenna agreed to act as his solicitor and attorney. Mr Kenna deposed that he advised Mr Rossignoli that he considered that he estimated that his outstanding costs in relation to the BHP dispute and the Wilson matter (‘Western Australian matters’) were in the range of $1.3 to $1.5 million, but that he was prepared to accept $1 million plus GST ‘all in’. Mr Kenna deposed that Mr Rossignoli agreed to this sum without protest, on condition that Mr Kenna did not issue an invoice or charge interest until he sold the Wonga Road properties, and Mr Kenna agreed to those terms. Mr Kenna deposed that Mr Jewell’s outstanding fees were also discussed at this meeting, and Mr Rossignoli acknowledged that the fees were payable and would be paid at the same time as Mr Kenna’s fees. Mr Kenna deposed that he later spoke with Mr Jewell regarding this conversation, who told him that he was prepared to wait for the sale of the Wonga Road properties to be completed to receive payment for his fees.

Mr Kenna deposed that the sales of the Wonga Road properties proceeded through 2012 and 2013, with most having been sold by October 2013. He deposed that on 1 October 2013, Mr Rossignoli attended his office and requested a further reduction to what Mr Kenna described as the ‘agreed costs amount’, on the basis that the proceeds of sale of the Wonga Road properties had fallen short of his expectations. Mr Kenna refused this request, and told Mr Rossignoli that it amounted to a further discount, given that he had already foregone interest for a further sixteen months, which had cost him a further $80,000. He informed Mr Rossignoli that he had a mortgage securing an amount similar to the unpaid costs, and that since he had agreed to defer payment of his fees in April 2008 he had paid approximately $330,000 in interest to enable Able to have the use of that money. Also at that meeting, Mr Rossignoli suggested putting a proposition to Mr Jewell that he accept $200,000 in full settlement of his claim for fees. Mr Kenna rejected this proposal, as he had Mr Jewell’s agreement to defer recovery of his fees, and he (Mr Kenna) would have to personally make up the shortfall. Mr Kenna deposed that Mr Rossignoli said words to the effect that “All right, send an invoice and the fees will be paid”.

On 7 October 2013, Mr Kenna forwarded what Mr Kenna described in his affidavit as a ‘Short Form Tax Invoice to Able pursuant to my Costs Agreement with Paul’ (‘tax invoice’). I infer that the reference to a Costs Agreement refers to the agreement said to have been reached in May 2012 which Mr Kenna contends amounted to an accord and satisfaction. Indeed, the reference to the alleged agreement (‘May 2012 agreement’) as a ‘costs agreement’ on occasions in Mr Kenna’s affidavit and oral evidence contributed to some rather misconceived submissions on behalf of Able, being that if in fact the parties reached an agreement in May 2012 (which was disputed), it could not be effective because it did not comply with the requirements for a costs agreement under part 3.4 of the LPA. The fact that Mr Kenna described the May 2012 agreement as a costs agreement does not of itself confer upon it the status of a costs agreement, thus attracting the requirements under the LPA. It is clear on the authorities that what is necessary for me to do is to find whether, in fact, there was an accord and satisfaction between the parties. An accord and satisfaction which compromises a claim for costs, or a dispute which arose between parties to a costs agreement is not, without more, itself a costs agreement.[11]
[11]Goodman [2015] VSC 627 [57].

The tax invoice was accompanied by a covering letter which was in its terms consistent with Mr Kenna’s version of events regarding what discussions took place during the meeting on 1 October 2013. The tax invoice was also accompanied by a page headed “If you dispute our legal costs”, and included the following statement:

If you have any concern about our legal costs, or our legal services, please do not hesitate to speak to Barry Kenna. If we cannot satisfactorily resolve your concern with you, you may:
· Seek a costs review by the Costs Court under Division 7 of Part 3.4 of the Legal Profession Act 2004 (“the Act”) within 60 days after the bill is given to you or the law practice requests payment of costs or you pay the costs (whichever is earlier or earliest);
· Apply to VCAT pursuant to section 3.4.32 of the Act to set aside the Costs Agreement entered into between you and us on (date); or
· Make a complaint to the Legal Services Commissioner under chapter 4 of the Act within 60 days after the legal costs were payable or, if an itemised bill was requested in respect of those costs, within 30 days after the request was complied with.

As noted by counsel for Able, the time period specified in the first point above is incorrect, in fact, s 3.4.38 of the LPA provides that a client has twelve months from the date of the issue of a bill to seek to review the costs charged by a legal practitioner. Of course, on Mr Kenna’s case, the tax invoice was not required to include any notification to Able of its rights of review, because it had none, given the parties had reached an accord and satisfaction, by reason of the May 2012 agreement.

Returning to the factual narrative, on 14, 15 and 16 October 2013, Able paid Mr Kenna the total sum of $220,000, and on 22 November 2013 Mr Kenna paid Mr Jewell $50,000. Since December 2013, Mr Kenna has rendered invoices on a monthly basis with respect to the outstanding balance of $800,000 plus GST, plus the interest accumulating upon the unpaid balance.

On 21 October 2013, David Hoffman, Able’s accountant, wrote to Mr Kenna in the following terms:

Paul has instructed me to request from you, in writing, a complete breakdown/detail of your invoice of $1,000,000 + GST.
In addition, he wants to know the date that he will have the above information.
Can you please advise?

On the following day, Mr Kenna wrote to Mr Rossignoli in the following terms:

We received an email from David yesterday requesting a complete breakdown/detail of our invoice of $1,000,000.00 plus GST, in writing. We were surprised to receive this request given that we had reached agreement some years ago as to the amount, yet you have only raised this issue upon being asked to pay the Bill. As you are aware, in the meantime, taking into account your parlous position with the bank, we have not rendered an account which would appear on your balance sheet. Furthermore, we borrowed considerable money to fund our involvement in your disputes in Western Australia and we have not requested any contribution towards this interest.
We request that you reconsider your position towards detailing the accounts as it is a disappointing disregard of our earlier agreement. However, if you persist with your request, in the interests of fairness, we shall engage an independent costing consultant. The current Bill was rendered conditional upon payment with thirty days but after that time, it may be withdrawn and we shall require payment of the full costed amounts. We anticipate that this figure would be 2-3 times the current Bill.
Given your failure to honour our previous agreement, we consider it would be better that we do not act for Able or its related entities while these costs remain an issue.

On 27 October, Mr Rossignoli responded as follows:

Thanks for your response on 22.10.13. I comment as follows -
You say we agreed on a settlement figure. Barry, after a long period of depression, I finally gathered enough energy to come and see you about the amount I owed you. I asked you what the bill would be, you told me that it would be one million dollars. That had me back into a deep depression immediately, as I believed it would be considerably less than half that. Consequently I was not able to discuss it further with you and was unable to negotiate or discuss it and I walked away.
I did not agree to the one million dollars as I felt it was far too high and I was then too depressed to negotiate.
Our business was not in a strong position. I had to let Rick go and reorganize our business. It was extremely difficult in my condition. I also had to try and come to a settlement for personal reasons with Rick, it was also just as hard.
I was never going to be able to comply with Rick’s requests. I made Rick an offer of machinery at a value to sell. Part of that offer was that Rick negotiate the payment with you and pay it to you out of the proceeds of the sales and keep the balance from the sales. (As) I was still unable to address our situation and Rick was in a much better frame of mind to negotiate with you. This is another instance why we had not settled the amount I owed you.
Rick declined my offer. I was surprised and disappointed, but in hindsight, Rick was right to do so. Straight after that, machinery prices declined and became very difficult to sell. He would not have realised the money to pay you and top up his bank.
Since then, I have sold the crane and paid Rick and David the money I owed them. I would like to be in a position to give Rick extra money but I’m not in a position to do so and don’t know if I ever will be.
Barry, at this stage it feels like I’m being over charged, so I have selected one of the options that you explained in your letter that I had. For me this appears to be the least expensive or disruptive.
If you can show me and satisfy me that one million is the amount I owe you, I will take responsibility for it and work towards paying you. I don’t have a desire to take this further. There are five things that I require in each of the nine items.
1.        What you worked on
2.        What you did
3.        The times you spent
4.        The rate you charged
5.        What the disbursements were and what were their costs.
Barry, with you supplying this information to me in a format that I understand and none of the information is over the top, we will come to a settlement. There will be no need to go further, but as a minimum I will require this information, regardless of whether it goes further or not.

On 29 October 2013, Mr Kenna wrote as follows:

We acknowledge receipt of your letter dated 27th October 2013 and cannot understand how the amount of the fees agreed upon is a surprise. During the BHP case, we often discussed the BHP fees which we expected to be in the $2‑3,000,000.00 range. Given that Able was the Plaintiff and needed to prove its case, it followed that Able’s costs would be at least that amount and most likely, considerably more. Furthermore, you were given various written estimates of costs, one of which alone estimated our costs to be $750,000.00 on the BHP Supreme Court action. Attached is a copy, which may refresh your memory. In any event, we shall commence preparing the particulars requested in your letter.
Philip Jewell of Counsel is owed $290,000.00 and you have held these fee slips for years without any complaint as to the amounts. Please let us have a cheque for the full amount without delay as continuing to request indulgences from Philip is becoming embarrassing.

On 8 November 2013, Mr Hoffman sent an email to Mr Kenna which was signed ‘Paul’, as follows:

Barry, thanks for your reply to my letter of 27th Oct 2013.
However, as you are aware, and as you explained to me before I signed the document, the rate for you was what you would charge if we won costs in respect of the legal actions against BHP and Wilson.
If, something was to go wrong with collecting costs, then you would charge me a rate that was similar to your other clients in the same circumstances.
I still require you to detail your costs in respect of your invoice in the same manner as I requested in my letter of 27th Oct 2013.
If you can show me that the $1,000,000 has been fairly calculated, I will find a way to pay you. Please let me know when the information will be available.

On 11 November 2013, Mr Kenna wrote as follows:

Thank you for your email dated 8th November 2013 and given your assurances that you will pay the bills upon same being satisfactorily detailed, we are prepared to continue acting in current matters. However, in future, we shall give you an estimate of anticipated costs prior to undertaking new matters.
You are correct that the Costs Disclosure Statement contained an hourly rate to reflect the then current legal fees for a practitioner of similar experience in Western Australia. Our current fees at the time were $400.00 per hour.
We have discussed having bills prepared by a specialist costing service who have estimated their fees to be in excess of $100,000.00 and the detailed accounts would not be ready before the new year. As an alternative, we have decided to cost the files in detail, which will take several months to complete. We propose to start with the smaller files and shall let you have particulars on a stage basis. Given the time that has elapsed since the work was done, what is your attitude towards interest on outstanding bills?
The writer is personally liable for the payment of Phil Jewell’s fees and as such, we are required to let you have a disbursement Bill. Attached is the Bill with a summary of the outstanding accounts. Also attached are some of the original fee slips and you will note that Counsel is entitled to interest on outstanding monies. At this stage, there has been no request for interest. Given there is no dispute as to Counsel’s fees, we would appreciate payment as soon as possible.

On 10 December 2013, Mr Rossignoli wrote to Mr Kenna, as follows:

I have requested a breakdown of your account. I have not yet received it and I still require it in the manor (sic) I requested it.
Until I receive it, in full, I am not in a position to discuss this matter and am unable to assess whether I owed you one million ($1,000,000) dollars that you have invoiced. However, in good faith I have given you $220,000.
Barry, I want to know where I stand so that I can come to an agreement with you. At this stage, I am in the dark, and I am unable to assess how you arrived at the $1,000,000.
So Barry, please supply the detailed information to me, as I requested, so that we can move forward towards settling this matter.

On 13 December 2013, Mr Kenna replied as follows:

As previously advised, a costing expert estimated his fees to be in excess of $100,000.00 to detail the Bill. At the same time, he advised that it would take five to six weeks full time work to prepare the details, if we presented the files in an orderly, organised manner.
The files are in an orderly, organised state, but given we do not have the computer software or the experience of the costing expert, we anticipate the detailing will take at least three months full time work. You are not being prejudiced by this delay as the accruing interest will be adjusted according to the final figure arrived at after the detailing of the Bill.

On 3 April 2014, Mr Hoffman wrote as follows:

You are submitting invoices/statements for interest on monies you say is owed to you. As you have not submitted the breakdown of your account, which we have repeatedly asked, for six months, and therefore have not agreed on a figure to enable us to pay you.
We have paid a substantial amount, in advance, of receiving the breakdown in the manner we have requested.
We cannot accept interest bills so please comply with our request so that we can settle this matter.

On 27 November 2014, Mr Kenna wrote as follows:

I am sorry for the delay in providing you with the information requested regarding our outstanding accounts. This is a mammoth task, as all files need to be examined and the information recorded. However, I have made considerable progress and hope to get the information to you prior to Christmas. If not, I will work during the holidays to complete the task as soon as possible. For your information, the costing to date far exceeds the monies you have paid to our office.
The $240,240.00 owed to Philip Jewell SC of Counsel has never been in dispute but has not been paid. You are required to make this payment prior to Christmas.

On 25 February 2015, Mr Hoffman wrote again:

Barry, I have received another Statement of Account from you for interest to 31st January 2015.
I requested a detailed invoice on the 27th October 2013, in the format that I requested and one that I would understand.
To date, 25th Feb 2015, no detailed invoice has been received.
It has been 16 months since my request. This is an extraordinary long time to wait for an invoice, especially for such a large amount of money.
I still require this detailed invoice, and, as you have failed to supply it, then I wonder about the validity of your claim, as well as the reason for sending invoices for interest when you have not supported the amount I owe you.
Barry, I have a legal entitlement to a detailed invoice/s and until I receive same and have time to assess it, I don’t owe you this money.
Your current invoices are not acceptable, and I will not be paying them.
Barry, you wrote to me and advised that you would have the information after the Christmas Break (that’s what I understood the letter to mean)
It is now more than a month since, and still no detailed invoice has been issued.
Barry, please supply the information forthwith.

On 13 March 2015, Mr Kenna replied as follows:

We acknowledge receipt of your letter dated 25 February 2015 and your expressed concerns as to the accruing interest on Able’s outstanding debt for costs and disbursements. However, we question your bona fides on this issue, as we willingly did not bill Able (or claim interest) for a long time after the work was completed. This was because of Able’s solvency difficulties and its precarious relationship with the bank at that time. There was a further delay based on your undertaking to pay the outstanding costs from the proceeds of the Wonga Road sales and again we agreed, without requesting interest. It was only after you had failed to honour your agreements as to the amount and time for payment of the costs that we began to claim interest.
Able is not suffering any prejudice because of the elapse of time while we are preparing details as to our services. As previously advised, this is a mammoth task and at times, there have been up to three persons on the task. Currently, one person is contracted full time to examine the files and detail the work. On the BHP case alone, the current position is that there are in excess of 20,000 work units recorded in about 150 pages of detail. We anticipate this detailed bill alone will total approximately $650-700,000.00. The Wilson cases (3) are likely to be of a similar amount, perhaps a little less. The first detailed draft of this bill has been prepared but needs to be amended and approved by the writer.
There also remains the unaddressed matter of the unpaid fees of Phillip Jewell of Counsel. The outstanding fees are $240,240.00 and are not in dispute. While Counsel has not specifically requested interest at this stage, we anticipate he will do so in due course. We would be pleased to receive an explanation as to why these fees have not been paid.
There is no doubt the nine cases in question will exceed our previously agreed fees and we reserve our rights to uplift the amount to the detailed fees. We do not share your opinion that Able does not currently owe any money and it is put on notice that it must not restructure or rearrange its affairs to avoid the payment of all outstanding costs and disbursements.

On 14 April 2015, Slater + Gordon, solicitors instructed by Able, wrote to Mr Kenna in a letter headed ‘Without prejudice save as to costs’, demanding that Mr Kenna provide a copy of an itemised invoice within seven days. Thereafter, Mr Kenna corresponded with Slater + Gordon.

In his response to Slater + Gordon dated 21 April 2015, Mr Kenna, for the first time, expressly stated his contention that he was not, by reason of the May 2012 agreement, required to provide an itemised bill. In this letter, he stated, among other things:

In any event, we enclose a copy of a letter to Able dated 13 March 2015, which sets out our current position. You will note agreement was reached in regard to a discounted figure for the outstanding fees, which was not honoured by your client. Our account was prepared on the basis of the agreement to comply with our internal bookkeeping procedures.
It is requested that Able make an election as to whether it proposes to rely on the agreement or to abandon same as being unenforceable. Either way, we are prepared to provide accounts as requested, although we would not be required to do so, if the agreement is being relied upon by your client. The detailed accounts will be produced as soon as possible, taking into account our limited resources to review files which substantially occupied this office for about five years. Your demand that the itemised invoices be prepared within seven days is unreasonable and any Application to the Court for an Order to that effect will be opposed.
You will note that there are outstanding fees due to Counsel which have not been in dispute at any time. Counsel requires payment without further delay and a cheque is requested from your client.

Subsequent correspondence failed to resolve the matter, hence the issue of this proceeding.

On 13 October 2015, when setting the matter down for hearing, I ordered that Mr Kenna serve a copy of the (incomplete) itemised bill prepared on his behalf. This was done, and the bill is a substantial document, some 201 pages, covering the period from December 2007 to March 2009, and, according to Mr Kenna’s evidence at trial, dealt only with the BHP dispute. However, unless I was to carry out the task of adding together the sums claimed with respect to each item myself, it is not possible for me to determine the quantum of the costs claimed. Given the evidence of Mr Kenna regarding the time and trouble taken to prepare the incomplete bill (indeed, preparing it internally may have proven it to be a false economy), I can infer that completing the entire itemised bill will require substantial time and resources. This matter is not relevant to the question of whether there was an accord and satisfaction, but might be relevant to my discretion to extend time should I find there was no accord and satisfaction.

The factual narrative in paragraphs 14 to 37 above was largely derived from the affidavit of Mr Kenna sworn on 17 August 2015. Mr Kenna also relied upon the affidavit of Mr Richard Charylo, Mr Rossignoli’s brother-in-law, and, until July 2012, a fellow director and employee of Able. Mr Charylo deposed, in summary, as follows:

(a) he described the business of Able, his role at Able, and noted that virtually all senior staff of Able were members of the Rossignoli family;

(b) he described the relationship, both business and personal, between Mr Kenna and Able and the Rossignoli family since 1987;

(c) he deposed how in January 2007 Able had entered into the BHP contract, for the decommissioning of an iron ore processing plant in Port Hedland, Western Australia, considered to be the largest demolition project in Australia at the time;

(d) over the course of 2007, disputes arose between the parties to the BHP contract as to the suitability of Able’s management personnel, demolition methodology and safety issues. Demolition work was finally suspended on 10 April 2008, and the BHP contract was terminated on 18 June 2008;

(e) Mr Charylo was the nominated administrative director for the BHP contract, and, among other things, was responsible for day to day contact with Mr Kenna, who had been instructed in late December 2007 to act for Able in the BHP dispute. He deposed as follows:

This was a daily commitment, often long after the close of business and on many weekends, for all of 2008. The legal proceedings in the Western Australian Supreme Court were aggressively contested, prosecuted in a hostile manner, without any concessions by either party. The dispute was favourably settled at mediation on 17 December 2008.

(f) following the settlement of the BHP dispute, Mr Rossignoli’s attendance at Able’s office was irregular. Mr Charylo attended the office every day and continued to administer the affairs of Able, including instructing Mr Kenna in the Wilson matter;

(g) the Wilson matter involved two contested Supreme Court proceedings between Able and its related entities and entities associated with a Mr Jason Wilson, with a trial held over thirteen days in September/October 2011, and judgment delivered on 19 April 2012 in Able’s favour, being $1,762,521.65 plus interest and costs;

(h) Mr Kenna regularly advised Able of his anticipated fees and the anticipated fees of the Western Australian agents and counsel engaged in the BHP dispute. Mr Charylo was aware that Mr Kenna’s fees in the BHP dispute alone could be in the order of $1-1.5 million;

(i) in June 2008, he was concerned as to Able’s financial position, and raised the subject of legal fees with Mr Kenna. Mr Kenna agreed to Mr Charylo’s request that he render only minimal interim accounts and did so between August and December 2008, in the sum of $5,000 on the first day of each month, to cover some of his out of pocket expenses;

(j) after the settlement of the BHP dispute in December 2008, Able’s financial position was critical, and its relationship with its bank precarious. He again approached Mr Kenna and requested that he refrain from rendering any accounts at all, as recording debt on Able’s balance sheet would have caused Able major difficulty with its bank. Mr Kenna agreed to this request, and he and Mr Kenna agreed that Mr Kenna would render his final account for the BHP dispute after Able had disposed of sufficient assets to secure its final position and pay his and counsel’s outstanding fees;

(k) during 2009, Able’s financial position deteriorated further, and a machinery auction in late 2009 failed to generate anywhere near the anticipated return of $40 million. After the auction he approached Mr Kenna again, and requested that he not render an account until after Able disposed of some of its machinery to meet its financial commitments. Mr Kenna agreed, and advised that senior counsel was also prepared to wait until Able was in a position to pay their fees;

(l) by 2012, Able’s financial position had stabilised to some degree, but Mr Rossignoli did not appear to be interested in resuming demolition work. In June 2012, he met Mr Rossignoli to discuss his future at Able, and presented to Mr Rossignoli, in effect, a redundancy claim. This claim was rejected by Mr Rossignoli; and

(m)on 1 July 2012, he received an email from Matthew Rossignoli, Mr Rossignoli’s son, containing the settlement offer. The letter putting forward the settlement offer stated, among other things, as follows (with spelling errors corrected):

The settlement that I am putting to you is that the list of assets nominated here at first, remain in the company that owns them and you are to sell them as is.
Invoicing will be done by David and both the deposit and payment received will go into Able’s account, including GST.
David will distribute these monies as listed and described in the proposal. He will use the monies received to pay down this list of creditors in the order stated. The GST will be put aside to be paid when due.
Once this list of creditors has been paid out in full, the assets in Whelan the Wrecker, with the exception of the PC 1000, (if not sold at this stage) will be transferred into another company and the balance of the list of assets for sale, will be transferred into Whelan the Wrecker.
I will transfer my half of Whelan the Wrecker to you. You will become owner and sole director of Whelan the Wrecker. Whelan will become 100% yours with the balance of assets not sold from this list. You will resign from Able as a director.
Able is carrying out the initial advertising of this list of assets, but after this, any further costs of advertising will be at your cost. We will pay for this if you need us to, but that cost will be removed from your entitlements or loan to Able.
Rick, I am happy to answer any questions that you might have and I might have some myself. I am looking forward to meeting with you, but until we are a little further down the track, I think it is better that we correspond by email. It gives both of us time to work through our answers properly.
Rick, I am sorry I have taken so long to reach this position and return to you, but without stopping personal contact, it was going to take a lot longer.
As you can see, there is no land. The bank hold a mortgage on all the land, so if I were to consider handing land over to you, you would have to pay out the bank for all of the land you have suggested.
So far, the bank has demanded $300,000 per block and taken this amount as the land was settled. Also, there would be GST and stamp duty. This would equate to $1,400,000 plus!! As you know, neither of us have that money. So this transaction was impossible. For this reason, I don’t know why the land was on the list.

The settlement offer included a sheet containing two tables. The first was headed ‘Assets for sale’, and included a schedule of assets and their values, totalling $2,770,000. The second table was headed ‘Able’s liabilities are to be paid in this order from sales of assets from above list’. The first eight items in this schedule included severance payments to Mr Charylo and other Able employees, loans made to Able by Mr Charylo and Mr Hoffman, and ‘Paul’s entitlements’. Item nine was ‘Phil Jewel’ (sic), next to the figure of $290,240.00, and item ten was ‘Barry Kenna’, next to the figure $1,000,000.

Able relied upon an affidavit sworn by Mr Rossignoli on 14 September 2015. He deposed, in summary, as follows:

(a) he made the affidavit in response to Mr Kenna’s and Mr Charylo’s affidavits of 17 August 2015, and in relation to two issues:

(i) whether he should be allowed to ask the Costs Court to assess costs, because Mr Kenna’s bill is more than 12 months old; and

(ii) whether he had already made an agreement with Mr Kenna about the amounts to be paid;

(b) he has not responded to other matters raised in these affidavits because he understands he does not need to, but does not accept everything else they say is true and correct;

(c) Mr Kenna acted for Able in the BHP dispute to try and resolve the dispute. After the BHP contract was cancelled, Mr Kenna told him Able should hire Perth based solicitors as they “would know how things worked in the West”. Mr Kenna retained the firm of Mark & Sands, and Mark & Sands hired a local barrister. Mr Kenna advised him to brief Phillip Jewell and a Melbourne QC for the mediation with BHP in late 2008;

(d) he did not recall receiving any accounts from Mr Kenna about the BHP dispute. He does recall that sometime in 2008 Mr Kenna asked him to give him $30,000 for his fees to date. He told Mr Kenna he could pay $5,000 per month, then Mr Kenna told him not to worry about it and he would give him a bill for the lot at the end of the matter. He had no knowledge of anyone from Able asking for invoices to be deferred;

(e) he is now aware that three invoices were issued by Mr Kenna for the BHP dispute in the amount of $5,500 each, which he believed Mr Charylo authorised to be paid. He produced the invoices, which he has been informed by his solicitors refer to the wrong interest rate and contain other incorrect information about Able’s rights;

(f) in 2008 he received invoices from Marks & Sands, which he paid. He also recalled receiving a bill for Phillip Jewell. He could not recall how much this bill was for, but he recalls he paid about $50,000 towards it;

(g) in mid to late 2007 he retained Mr Kenna to act in the Wilson matter. Two separate proceedings were heard together in 2011. Able won the case, but was only able to recover about $17,000 out of a total judgment of about $3 million, because of the insolvency of Mr Wilson and his related entities; and

(h) he does not recall receiving any accounts in respect of the Wilson matter. However, he did recall a discussion about Mr Kenna’s hourly rate, which he believed was in 2011. He deposed as follows:

Barry asked me to sign a document that referred to an hourly rate of $500. He told me this was just a rate we would get from the other side when we won, not the rate I would have to pay him.

In response to the evidence of Mr Kenna regarding the May 2012 agreement, Mr Rossignoli deposed, as follows:

Sometime in early 2012 I went and saw Barry preparing documents for the sale of 19 lots of land I owned in Ringwood. I am sure this was well before May 2012 as the first of the sales of those lots had settled by 23 May 2012. I told Barry that I would pay his legal fees for the Wilson and BHP matters once the land had been sold and bank was paid out and my mortgages discharged. He agreed to that. I didn’t know how much was owed and there was no discussion about the amount at that meeting. I expected it to be between $200-400,000 but I didn’t have anything to base this on as I did not even know what Barry’s hourly rate was.
In June when I had sold most of the blocks of land in Ringwood, I went to see Barry again to find out how much was owed. Barry said ‘you owe me one million dollars’. This was the first time he had told me that the fees could be anything like a million dollars. I was shocked and I told him that I thought that was too much and that it shouldn’t be that high. He said that that was the amount. I left Barry’s office as I was completely shocked and didn’t know what else to say.
The figure of $1.3-$1.5 million was never mentioned to me at any time.
Over this time, I was suffering from depression. I felt unable to face Barry again after being so shocked, and I did not speak to Barry again about fees for a few months. At the beginning of October I got the courage to approach him again because I wanted to resolve the matter. I went to see him at his office to try and negotiate the amount. Barry refused to reduce the figure from $1 million, so we did not come to any agreement.
…
I did not agree with Barry to pay an amount of $1 million for legal fees at this meeting or at any other time.

Mr Rossignoli then deposed to receiving the tax invoice on or about 7 October 2013, and exhibited the subsequent correspondence between Able and Mr Kenna, and then Slater + Gordon and Mr Kenna.

Mr Rossignoli then responded to the evidence deposed to by Mr Charylo in his affidavit, in summary, as follows:

(a) he did not agree that Able was regularly advised about anticipated fees. At no time was he made aware that costs in the BHP dispute could be in the order of $1-1.5 million. If he had been advised that costs might reach that figure Able would not have continued with the litigation;

(b) he was not aware of Mr Charylo (or anyone else) requesting minimal accounts being rendered, although he was now aware that in 2008 Able received some monthly invoices for $5,500 (including GST);

(c) he am not aware of Mr Charylo approaching Mr Kenna asking him to refrain from rendering any invoices;

(d) in or about the end of May 2012 he decided to cease conducting Able’s demolition business. He advised Mr Charylo that there was no longer a position for him at Able and gave him one months’ notice. He subsequently requested a meeting with Mr Charylo at his home to discuss a redundancy payment and repayment of money he had lent Able. At that meeting, Mr Charylo presented him with a claim for payment of $2,500,000. Mr Rossignoli rejected the claim; and

(e) he made the settlement offer to Mr Charylo by email which included a list of assets and liabilities of Able at the time. He proposed that Mr Charylo receive the balance of any of the assets remaining after payment of liabilities as set out in paragraph 4 of the settlement offer. He included a round figure of $1 million for legal fees because that was the amount Mr Kenna had told him he wanted. It was not an amount he had agreed to pay. He expected Mr Charylo to negotiate with Mr Kenna until they agreed on a figure and that would also increase the balance available to Mr Charylo. The settlement offer was rejected by Mr Charylo.

Finally, in support of his application for an extension of time, Mr Rossignoli deposed, in summary, as follows:

(a) the main reason for the delay is bringing the application is because he has spent the past two years asking for an itemised bill, which he believed Mr Kenna would provide;

(b) without an itemised bill, he cannot work out whether Mr Kenna’s costs are reasonable;

(c) Mr Kenna has said many times that he would provide an itemised bill, but he has not done so;

(d) he wants the Court to tell Mr Kenna he has to explain how his costs were calculated, so he can work out how much Able might actually owe him; and

(e) he has been informed and believes that some of the information provided to him was wrong: for example, Mr Kenna never told him he had twelve months to seek a costs review by the Costs Court.

Both Mr Kenna and Mr Charylo filed and served affidavits in response to Mr Rossignoli’s affidavit sworn 14 September 2015. In his affidavit sworn on 13 November 2015, Mr Kenna deposed, in summary, as follows:

(a) Mark & Sands were engaged as agents in the BHP dispute and local barristers were briefed for appearances and limited advice in the Supreme Court proceedings. The BHP dispute was resolved at mediation in late 2008, and the terms were consistent with all legal advice given by Able’s lawyers, were heavily in Able’s favour, and included a $250,000 cash contribution towards Able’s costs of the proceeding;

(b) he did not invoice Able for costs in the Wilson matter, as they were part of the aggregated costs agreement. He did have a discussion with Mr Rossignoli in 2011 as to the hourly rate in the Wilson matter in the terms deposed to by Mr Rossignoli, and Mr Rossignoli signed a costs agreement;

(c) he had a meeting with Mr Rossignoli in about September 2011 regarding the sale of the Wonga Road properties. He provided Mr Rossignoli with an estimate of the sale fees and enquired whether Able had financially recovered sufficiently to pay his fees for the Western Australian matters. Mr Rossignoli told him he would pay Mr Kenna’s fees and counsel’s outstanding accounts upon the sale of the Wonga Road properties. Mr Rossignoli did not refer to any priority payments to banks, and he cannot recall whether the amount of the fees for the Western Australian matters was discussed at that meeting;

(d) during the legal proceedings in Western Australia, Mr Kenna had many discussions with Mr Rossignoli as to his estimate of costs, which on the BHP dispute alone were always estimated to be in the $1-$1.5 million range. Mr Rossignoli did not dispute the amount of this estimate at any time;

(e) by June 2012, only four of the Wonga Road properties had been sold. He believed the meeting referred to by Mr Rossignoli in paragraph 17 of Mr Rossignoli’s affidavit is the meeting where the May 2012 agreement was reached. Mr Kenna deposed as follows:

During this meeting, he showed no signs of shock, nor did he protest as to the amount of my fees being $1 million plus GST. He confirmed the account would be paid from the sale of the Wonga Road properties in due course, before leaving the office; and

(f) he has located a file note of the meeting held on 1 October 2013 (‘file note’).[12] The file note is on a piece of paper with a typed heading

‘Able’s files in Western Australia settled all-in with Paul for $1,000,000 + GST.’

[12]Exhibit ‘BJK-36’.

Below the heading is a table listing nine matter numbers and descriptions and the dates the files were opened. Under this table was a handwritten note, as follows:

Advised we would not take less than the $1M & we will be invoicing Able soon.
Phil Jewell need to be paid also P.R. would he take $200K in settlement - No BDK would have to pay the balance.

In his supplementary affidavit sworn on 13 November 2015, Mr Charylo deposed, in summary, as follows:

(a) he asserted that Mr Rossignoli had downplayed his (Mr Charylo’s) role at Able; and contended that Mr Rossignoli was often uninvolved in the day to day affairs of Able;

(b) it was his sole responsibility to instruct lawyers on behalf of Able in the Wilson matter and other proceedings in Western Australia;

(c) he denied making a claim for $2,500,000 at the time of his departure from Able;

(d) upon referred to the offer made by Mr Rossignoli on 1 July 2012, he did not believe there would be sufficient funds raised from the sale of the assets to pay the legal fees, which were listed as the last priority;

(e) under no circumstances was he prepared to enter further negotiations with Mr Kenna or Mr Jewell regarding a reductions of fees; and

(f) he was not aware of any arrangements between Mr Rossignoli and Able’s lawyers.

During the course of a brief examination-in-chief at trial, Mr Charylo gave evidence that Able expected to make a profit of $100 million from the BHP contract.

Each of the witnesses were extensively cross-examined. It became clear, particularly after the cross-examination of Mr Rossignoli, that there were relatively few significant matters in dispute between the parties: the most significant being what was actually said at the 29 May meeting.

Mr Kenna was cross-examined in some detail regarding his knowledge and understanding of his obligations under the LPA, particularly with respect to his disclosure obligations, the requirements for valid costs agreements, and what he needed to inform clients about when he issued bills. What emerged from this evidence was that his statement that ‘he doesn’t pretend to be an expert on costs’[13] was indeed justified. He seeks advice from a costs consultant from time to time, and relies upon others to inform him of relevant changes to legislation. He accepted that the attachment of notices to bills containing out of date notices regarding clients’ rights of review was an oversight, and gave evidence that these notices are attached by his staff to all bills. When referred to the attachment of the out of date notice to the tax invoice as being inconsistent with his current position that Able had no rights of review about which to be informed, he stated that was not anything he gave any thought to when he caused the tax invoice to be issued. He confirmed that he considered the May 2012 agreement to be a costs agreement.
[13]T54.

Mr Kenna agreed that he would generally document important matters for Able, but he did not document the May 2012 agreement. He was not able to locate the costs agreement for the Wilson matter, because he has not fully searched the two cubic metres of files he holds in relation to the Western Australian matters. He does not recall signing the three costs agreements exhibited to his affidavit, which all related to the BHP dispute, but he would have signed them on the dates they bore. He agreed that he agreed to charge Able $400 per hour in the event that Able was unable to recover its costs from others, notwithstanding the reference to charging $500 per hour in the cost disclosure statements exhibited to his affidavit. He was not able to explain what is meant by ‘the indemnity principle’.

When asked about the 29 May meeting, Mr Kenna said that there was no discussion between him and Mr Rossignoli about Mr Kenna providing an itemised bill, or that Able was entitled to complain to the Legal Services Commissioner about costs. He said:

No, there was no discussion at all in that conversation about itemised bills or the like, it was just I’ll – ‘I’m happy to take a million plus GST for my costs’ and Paul said, ‘That will be all right, but you’ll have to wait until I sell Wonga Road’. That’s – the conversation – it went a little bit further than that, he said ‘Don’t bill me in the meantime’.

He agreed that there was nothing said in the 29 May meeting about the impact of the agreement upon Able’s rights.

He was not sure whether he used the term ‘all-in’ when explaining what amount he would accept in respect of costs. The term ‘all-in’ referred to all outstanding fees, there was no discussion of the $15,000 already paid by Able in 2008. He considered that his claim, and the sum agreed, included all nine matters referred to in the tax invoice, notwithstanding that, by reference to the file note, not all of the matters had been opened before May 2012. He believes the typed part of the file note, including the table, was prepared by an employee who extracted the relevant details from the firm’s records. He was also not able to explain why some of the disclosure statements exhibited to his affidavit pre‑dated the dates upon which the files were opened.

Mr Kenna was asked about the engagement of Philip Jewell. Mr Kenna gave evidence that Mr Jewell was engaged by Able to conduct the appeal in the BHP dispute, which did not go very far, and was briefed in the Wilson matter. He never had a costs agreement with Mr Jewell, although there may have been some discussions about Mr Jewell’s fees between Mr Kenna and (presumably) Mr Rossignoli when Mr Jewell was appointed senior counsel and was about to represent Able in a long trial. He does not believe that he ever provided a written statement to Able providing an estimate of Mr Jewell’s fees, but that Mr Jewell was rendering fee slips on a regular basis.

Returning to the May 2012 agreement, Mr Kenna gave evidence that the legal costs Mr Kenna would be entitled to charge Able would be greater than $1 million. Once the BHP dispute became litigious in June 2008, he estimated that the costs of going to trial would be around $1.5 million. This was in part based upon an estimate of BHP’s costs, which were likely to be in the order of $2-3 million, as referred to by Mr Kenna in his email to Mr Rossignoli on 29 October 2013. He conceded that these estimates differed from the estimates provided in the costs disclosure statements, but that he frequently discussed costs with Mr Rossignoli.

The $1 million put to Mr Rossignoli at the 29 May meeting was in part based upon his estimate of his costs in the BHP dispute. He worked about 2,500 hours on the BHP dispute in 2008, which at an hourly rate of $400 amounted to $1 million. Once the time spent on the Wilson matter was factored in, which resulted in a twenty day trial, during which he instructed in court, Mr Kenna took the view that Able would be getting a lot of work for free, but if he got $1 million, he would be happy to ‘call it quits’. Able always got fee reductions from Mr Kenna. He agreed some matters were still ongoing as at May 2012. He confirmed that he put the sum of $1 million to Mr Rossignoli at the 29 May 2012 meeting as a sum he would be happy to accept, and Mr Rossignoli also said he would be happy to accept that figure. He noted that following the settlement of the BHP dispute in December 2008, Able received the sum of $250,000 on account of costs, which was paid to Able, not him.

Moving ahead to October 2013, he gave evidence that the file note was already on the file when Mr Rossignoli attended his office on 1 October 2013. He gave evidence that in October 2013 he held the view that Able was not legally entitled to an itemised bill (although he did not convey this to Mr Rossignoli), but he wanted to put Mr Rossignoli’s mind at rest. He gave some explanation as to how he undertook the task of preparing the particulars over 2014, but that he stopped once Slater + Gordon became involved. Finally, he confirmed that if he was unsuccessful in establishing an accord and satisfaction, he reserved his rights to prepare a bill claiming costs for all of the work done by him in the Western Australian matters.

During the course of re‑examination, Mr Kenna gave the following evidence:

(a) the Wilson matter commenced in February 2007;

(b) Mr Rossignoli told Mr Kenna that he had been ‘tossed off’ the BHP site on Christmas Day 2007. He has no recollection of signing the 2 January 2008 and 25 July 2008 costs agreements;

(c) when asked why he did not document the May 2012 agreement, Mr Kenna said there was very little documentation of his dealings with Able: in the past he has paid millions of dollars of barristers’ fees on behalf of Able without getting money into his trust account, as Mr Rossignoli has always been honourable to his word;

(d) the reason why he did not send Able bills for the Western Australian matters was because Mr Charylo asked him not to do so;

(e) he confirmed that the $1 million was sought for all outstanding moneys;

(f) he continued to carry out work in relation to the sale of the Wonga Road properties; and

(g) he saw Mr Rossignoli between May 2012 and October 2013 when he acted for him in a dispute with a body corporate manager.

During the course of cross‑examination, Mr Charylo gave the following evidence:

(a) there were many discussions between he and Mr Rossignoli regarding BHP’s fees and Able’s fees in 2008, as he was concerned about Able’s cash flow. Mr Rossignoli told him that BHP’s costs would be twice as much as Able’s;

(b) he has been a company director for thirty years, and believes he understands his obligations as a company director, but has not undertaken any training courses relating to his role or obligations as a company director;

(c) he has received legal advice regarding his evidence in this proceeding, being that his evidence had to be truthful. His affidavits were drafted by Mr Kenna and checked by him. He has not received any legal advice regarding insolvency;

(d) he agreed that there had been a significant falling out between him and Mr Rossignoli at around the time of his departure from Able, which had caused a significant rift in the family;

(e) his role in the BHP contract was to put the tender together, and he was later involved only in administrative issues concerning Able’s performance of the BHP contract;

(f) it was Mr Rossignoli’s decision to obtain legal advice regarding the BHP dispute in December 2007. Mr Rossignoli was the principal director of Able, he owned the company, and ‘ran the show’;

(g) however, both he and Mr Rossignoli were equally involved in instructing lawyers in the BHP dispute, he was the person who had day to day contact with the lawyers, as Mr Rossignoli was often away, and he was based in Melbourne. He visited Western Australia during the course of the BHP dispute, but did not attend the mediation. He does not recall seeing any document which explains the consequences of settling the BHP dispute;

(h) he agreed that Able’s judgment in the Wilson matter proved to be unenforceable: he does not recall having been given any advice regarding Able’s prospects of enforcing the judgment, apart from advice from Mr Kenna to wind up the companies;

(i) he gave evidence that the estimate of costs provided to him verbally by Mr Kenna in the BHP dispute was in the order of $1-1.5 million in around April/May 2008. He does not recall the figure of $2-3 million being discussed. He has never seen a costs agreement between Mr Kenna and Able. He trusted Mr Kenna, as he was a family friend;

(j) when discussing with Mr Kenna how Able would pay Mr Kenna’s fees, the discussion was around Able selling machinery, not land. He noted that the settlement offer made no reference to land amongst the assets listed; and

(k) he was not aware of any agreement between Mr Rossignoli and Mr Kenna with respect to costs. Neither Mr Kenna or Mr Rossignoli told him anything about an agreement. He did not know whether the sum of $1 million recorded against Mr Kenna’s name was an agreed amount or an amount under discussion.

Mr Rossignoli gave the following evidence in cross‑examination about the events leading up to the BHP dispute:

(a) he agreed he and Mr Kenna were good friends, and that Mr Kenna was his trusted solicitor;

(b) he disagreed that Able’s expected profit from the BHP contract was around $100 million: there was some potential to sell some plant and equipment intact, which could realise between $60-100 million, but if the equipment was sold as scrap metal, Able would make a profit of $15 million;

(c) he agreed he raised Able’s problems with BHP with Mr Kenna at lunch on Christmas Day 2007; and

(d) he did not believe that he met Mr Kenna on 2 January 2008, as he believed he was on holidays at Puncheon Island at that time, where he usually went after Christmas, although later he said it could be correct that he did not travel there that year. He could not recall meeting with a Mr Tony Hamilton shortly after Christmas 2007, said to have been arranged by Mr Kenna, to discuss Mr Hamilton assisting Able in his dealings with BHP. He denies signing a costs agreement on 2 January 2008, and does not recall signing a costs agreement for the BHP dispute. Instead, he gave evidence that he signed three documents for Mr Kenna in November 2011, just before going to Perth for the Wilson matter. Mr Rossignoli said that Mr Jewell was also there, standing behind Mr Kenna, in Mr Kenna’s office when Mr Kenna told him ‘sign here, this is to get the money out of Wilson’. Mr Kenna told him the fee was $500 per hour so he could get the money out of Wilson, but Able would not be liable for that if something went wrong.

Mr Rossignoli was asked questions about the BHP contract, the BHP dispute, and Mr Kenna’s involvement in the BHP dispute. Mr Rossignoli gave the following evidence:

(a) Mr Kenna had advised him prior to Able’s entry into the BHP contract that the terms were heavily weighted in favour of BHP. This was consistent with the advice given by his QC at the mediation of the BHP dispute in December 2008, which was to the effect that he must settle, because he could not win. At that time Able had $5 million worth of equipment sitting at Port Hedland;

(b) he does not recall going outside with Mr Kenna during the course of the mediation and telling Mr Kenna that he wanted more money, namely $250,000. He believes BHP paid Able $20,000 and no mention was made of legal costs;

(c) Mr Kenna never gave him a bill in 2008, he asked for $30,000, and when Mr Rossignoli asked if Able could pay $5,000 per month, Mr Kenna told him he would give him a bill at the end. He only recently found out that three invoices had been paid. He did not recall that Mr Kenna had in the past paid for counsel’s fees on Able’s behalf;

(d) he believes that Able paid nearly $500,000 to the Perth solicitors in respect of the BHP dispute, and Mr Kenna was really just a ‘post box’;

(e) he never asked Mr Kenna not to put in an account, and was not aware that Mr Charylo had requested this of Mr Kenna. He had not considered the implications for Able’s balance sheet if Mr Kenna had rendered an invoice for $1 million plus: Able’s accountant said it was not a problem because Able had a lot of assets, which it could realise in a ‘fire sale’ if necessary, its real problem was that he could not borrow from the bank;

(f) Mr Kenna kept working on the Wilson matter during 2009 and 2010, with the Wilson matter coming to a head in 2011; and

(g) judgment was handed down in the Wilson matter in April 2012.

Mr Rossignoli was cross-examined extensively about the meetings and discussions he held with Mr Kenna in and around May 2012. His evidence is summarised as follows:

(a) he agreed he attended Mr Kenna’s office on 29 May 2012 to give Mr Kenna some power of attorney documents regarding the Wonga Road properties as he was due to go away in June, and that at that time the Western Australian matters had largely been finalised;

(b) the Wonga Road properties were owned by a company controlled by him;

(c) sales of four of the lots were ready to settle when the subdivision went through on 23 May 2012;

(d) at the 29 May meeting, Mr Rossignoli told Mr Kenna that as soon as he had paid the bank Mr Kenna was next. However, there was no discussion of $1 million, or any other figure;

(e) he denied that at that meeting Mr Kenna raised the issue of how Able was going to be paid for all the work Mr Kenna had done, as Mr Kenna knew his situation, as he had to subdivide the Wonga Road properties and he owed the bank $6 million;

(f) however, he later conceded that it was probably at the 29 May meeting that he told Mr Kenna that he would pay Mr Kenna after the Wonga Road properties had been sold, and he asked Mr Kenna how much Able owed him. He also conceded that the chronology of events in his affidavit was wrong; and

(g) at the 29 May meeting Mr Kenna said ‘it’s $1 million you owe me’ and he nearly fell off his chair. Mr Rossignoli responded ‘That’s too much Barry’, to which Mr Kenna responded ‘That’s what I want, I won’t take less than $1 million’. He refused to negotiate, and the conversation ended. He was not capable of talking about it further, and that is why he tried to ‘put it on Rick’s plate’ through the settlement offer, as Mr Charylo would end up with more money if he negotiated with Mr Kenna. In the end, the sale of the equipment did not realise nearly as much as he expected.

While Mr Rossignoli ultimately changed his evidence regarding what he said occurred at the 29 May meeting, Mr Rossignoli maintained that Mr Kenna did not tell him that he was entitled to costs of $1.3-$1.5 million. He himself made no mention at the 29 May meeting of his own expectation that the costs were in the range of $200‑$400,000: he did not really know what Mr Kenna’s costs were, but he thought it was about that much.

Mr Rossignoli agreed that the reference in his affidavit to a meeting in ‘June’ must have been a meeting in June 2013, not June 2012, because it was a meeting held after most of the Wonga Road properties had been sold. He said at that meeting he tried to negotiate with Mr Kenna, but provided no further details. He was shocked when he discovered that Mr Kenna was not prepared to negotiate. By that time, in addition to the money repaid to the banks, Rossi Recycling had received $139,000 from the proceeds of sale of the Wonga Road properties, and he had received $150-$180,000. No money had been paid to Mr Kenna, and he had not put away any money to pay Mr Kenna’s fees.

At first, Mr Rossignoli gave evidence that he did not recall any further face to face meetings with Mr Kenna after the 29 May meeting, save for a brief meeting in August 2012 to discuss Mr Charylo, and, presumably, given the evidence referred to above, the meeting in June 2013. There was no reference to Mr Kenna’s claim for $1 million at these meetings. It was put to Mr Rossignoli that he and Mr Kenna in fact worked closely in the period between June and October 2013. Mr Rossignoli agreed that he attended a three hour meeting with Mr Kenna in July 2013, where Mr Kenna was representing him in a dispute about a body corporate manager. He said that at this meeting Mr Kenna asked him about what he was going to do about the fees, and he responded that ‘we have to sit down and talk about it.’ There was also correspondence about the body corporate issue, and he sent his son Glen along with Mr Kenna to another meeting regarding this issue in September 2013.

Mr Rossignoli does not recall specifically a meeting with Mr Kenna in October 2013, but accepts that it probably did happen, and that during that meeting Mr Kenna said that he would not be taking less than $1 million, and that he would be invoicing Able soon. He agreed that he asked whether Mr Kenna could ask Mr Jewell to take $200,000 for his fees, as while he considered Mr Jewell to be a friend, all contact was through Mr Kenna. He did not believe Mr Jewell overcharged him, but he did not really know. He agreed that Mr Jewell wrote him a handwritten letter about the outstanding fees in October 2015.

Mr Rossignoli was asked some questions about his settlement offer to Mr Charylo. He put the settlement offer together, in part based upon information provided to him by Mr Hoffman about staff entitlements, including his own, and the amounts for legal fees were based upon what Mr Kenna told him the lawyers wanted. However, he expected Mr Charylo to negotiate with Mr Kenna about his fees because they were ‘best mates’. He told Mr Charylo that he should negotiate with Mr Kenna and Mr Jewell, but did not put that in his affidavit because he did not think of it at the time. He agreed that he was not considering transferring any land to Mr Charylo. He did not accept that the reference to the amounts to be paid to Mr Kenna and Mr Jewell amounted to an acknowledgment that Able was liable for these amounts.

Mr Rossignoli was taken to a schedule listing the nineteen Wonga Road properties, their dates of sale and settlement, the amounts they were sold for and the distribution of the proceeds. This document was not tendered into evidence over the objection of counsel for Able, but Mr Rossignoli agreed with the contentions of counsel for Mr Rossignoli that of the $6.3 million realised from the sale of the Wonga Road properties, Westpac received about $3.3 million, the Commonwealth Bank received about $1.5 million, Rossi Recycling received about $200,000, and Mr Rossignoli received $695,000. Mr Rossignoli said the latter funds were used to pay the debts of Eastern Recycling, a loss making business controlled by him. He agreed that he had told Mr Kenna that he would pay his legal fees once the sale of the Wonga Park properties had settled, and in fact paid $270,000 to Mr Kenna and Mr Jewell from the proceeds of the last lot (although the last block was not sold until 2014.)

Mr Rossignoli gave evidence that he had not put any money away to pay Mr Kenna’s fees. However, he would be able to pay the outstanding amounts within sixty days if required to do so.

During the course of his re-examination, Mr Rossignoli gave the following evidence, in summary:

(a) he told his son Matthew to tell Mr Charylo to negotiate with Mr Kenna about the legal fees, as Matthew was the ‘go between’ at the time, because by that time he and Mr Charylo were not on speaking terms;

(b) (notwithstanding his evidence under cross‑examination) he was not able to put a date on the meeting where he first heard about Mr Kenna’s claim for $1 million, but he believed there were three meetings where Mr Kenna’s fees were discussed: first when he put the Wonga Road properties on the market, the second when the figure of $1 million was first mentioned, and the last when Mr Kenna told him that he would send Able a bill;

(c) he had not paid Mr Kenna for his fees for the BHP dispute because Mr Kenna had not given him a bill. He was grateful for that, because Able was going to be in financial difficulties until Mr Wilson paid what he owed; and

(d) he usually visits Puncheon Island a day or so after Christmas and stays a week or ten days. He did that every year, or at least believed he had.

As can be seen from the summary of the evidence, after various concessions made by Mr Rossignoli in cross‑examination, the parties’ version of events do not differ as much as one might have thought from reading the witnesses’ affidavits. It is common ground that the commercial significance of the BHP dispute and the Wilson matter were, for Able, quite profound, and that Mr Kenna did a lot of work for Able on those matters (despite Mr Rossignoli trying to downplay his role in the BHP dispute). The evidence of Mr Kenna and Mr Charylo to the effect that both parties’ costs of the BHP dispute were the subject of frequent discussion, at least during the course of 2008, was disputed, and Mr Rossignoli gave quite confusing, and at times, rather incredible evidence about which costs agreements he signed and when. Mr Rossignoli denied any knowledge of Mr Kenna being requested not to render a bill for his fees in 2008 and 2010, but agreed that Able benefitted financially from Mr Kenna not doing so.

Mr Rossignoli also agreed that he intended to pay Mr Kenna his fees, and Mr Jewell’s fees, from the proceeds of sale of the Wonga Road properties, and that he told Mr Kenna that was what he intended to do, and Mr Kenna agreed. He ultimately conceded that it was probably during the 29 May meeting that Mr Kenna first raised the figure of $1 million, and that the chronology of events related in paragraphs 16 and 17 in his affidavit was inaccurate. He maintains his denial that Mr Kenna told him at that meeting that his actual costs were in the range of $1.3-$1.5 million, and that he agreed to pay Mr Kenna $1 million. He also does not accept that the reference to $1 million against Mr Kenna’s name in the settlement offer amounted to an acknowledgement of that debt, and maintains that he told Mr Charylo (through his son) that he should negotiate with the lawyers about their fees. Significantly, this evidence was not referred to in his affidavit, or put to Mr Charylo in cross‑examination.

Mr Rossignoli maintains that he was shocked and depressed after the 29 May meeting, such that he could not face discussing Mr Kenna’s claim of $1 million, which was why he tried to ‘pass it on’ to Mr Charylo. However, no medical evidence was advanced by Able to support this contention, and I am entitled to infer that any such evidence was either not available (perhaps because Mr Rossignoli was not receiving any medical treatment at the time), or would not have assisted Able’s case. It was not entirely clear from the evidence whether there was a further meeting between Mr Rossignoli and Mr Kenna in June 2013 where fees were discussed, but Mr Rossignoli agreed that Mr Kenna assisted him with a dispute with a body corporate manager and attended a three hour meeting with him during the winter of 2013. Mr Rossignoli agrees that there was a meeting in or around October 2013 where Mr Kenna refused to accept less than $1 million in fees, and refused to put a proposal to Mr Jewell to reduce his fees. Mr Rossignoli contended that he did not know he was entitled to request and receive an itemised bill until after he received the tax invoice. He largely agreed with the analysis put to him by counsel for Mr Kenna about the way in which the proceeds of the sale of the Wonga Road properties were distributed. He largely agreed that, contrary to his intentions, that funds were not set aside from the sale of the Wonga Road properties to pay Mr Kenna and Mr Jewell, save that he gave evidence that the payments totalling $270,000 in October 2013 were made from the sale of the Wonga Road properties.

Accordingly, the most significant issue in dispute (subject to the submissions of the parties regarding the legal consequences of any factual findings I make) is what was said and agreed during the 29 May meeting. Mr Kenna accepts that he bears the onus of proof in establishing that an accord and satisfaction was reached between him and Able. He accepts that, apart from the settlement offer and the file note (and the tax invoice itself), there is no documentary evidence of the May 2012 agreement, but contends that his failure to document the May 2012 agreement is consistent with the longstanding and close personal and commercial relationship between the parties, and his experience that Mr Rossignoli was a man who honoured his word.

In the end, the question can only be resolved by me determining who I believe, Mr Kenna or Mr Rossignoli, in circumstances where there were no witnesses to the conversation, and limited documentary corroboration. Having regard to the evidence regarding Able’s financial position over the relevant period, the limited documentary evidence available, the concessions made by Mr Rossignoli in cross‑examination (which detracted from the accuracy of the evidence of his affidavit), and the conclusion I reached during the course of cross‑examination of Mr Kenna that he is an honest witness, I prefer the evidence of Mr Kenna over that of Mr Rossignoli where their evidence diverges on critical matters. Accordingly, I accept that during the 29 May meeting, Mr Kenna and Mr Rossignoli agreed that upon the settlement of the sales of the Wonga Road properties, Able would pay Mr Kenna the sum of $1 million plus GST in full and final settlement of Mr Kenna’s claim for legal fees, estimated to be in the order of $1.3-$1.5 million, and that Mr Kenna would refrain from rendering a bill and claiming interest in the meantime.

The largely uncontentious evidence regarding the surrounding commercial circumstances, in particular Able’s fluctuating financial position, weighs in favour of a finding that an agreement was made, and provides some clues as to Mr Rossignoli’s motivations for resiling from that agreement in October 2013. Going back to 2008, it is apparent that the commercial stakes for Able in the BHP dispute were high. The terms of the BHP contract were heavily in favour of BHP, and once the BHP contract was terminated, Able faced not only not being able to make a substantial profit, but also having $5 million worth of equipment stranded at that Port Hedland site for a significant period of time. It is not surprising that Able was prepared to devote substantial resources to achieving a favourable outcome from the BHP dispute, particularly when it had the good fortune of having a trusted solicitor who was prepared to refrain from rendering invoices, which, if rendered, would further jeopardise its precarious position with its financiers.

By early to mid‑2012, the position had, as contended for by counsel for Mr Kenna, changed considerably. Able had a judgment in its favour in the Wilson matter of some $2 million plus costs. There is no evidence as to whether the parties knew as at 29 May 2012 that no funds would be recoverable from Mr Wilson and his companies. The Wonga Road properties had been subdivided, and while they apparently did not realise as much as Mr Rossignoli anticipated, there was clearly going to be a surplus after the banks were paid out. Able’s demolition business was to be wound up, and the settlement offer demonstrates that Mr Rossignoli expected that nearly $3 million could be realised from the sale of equipment. Mr Rossignoli always understood that Mr Kenna and Mr Jewell had to be paid their fees, and, in the case of Mr Jewell, a specific sum had been invoiced. The timing was right to make an agreement of the nature of the May 2012 agreement.

By October 2013, the situation had deteriorated again. The sales of the Wonga Road properties were almost complete, as Mr Kenna well knew, and Mr Rossignoli knew Mr Kenna knew, as Mr Kenna was handling the conveyancing process. However, they had not realised as much as expected, and the surplus was being used to prop up other ailing businesses controlled by Mr Rossignoli, rather than being set aside for the payment of legal fees. The sale of Able’s equipment apparently achieved far less than expected. Mr Rossignoli had every incentive to try and negotiate with Mr Kenna and Mr Jewell to obtain a reduced amount for their fees, and when those efforts failed, to use whatever commercial and/or legal means at his disposal to delay or even avoid payment altogether.

The limited documentary evidence available also supports the making of the May 2012 agreement. Mr Rossignoli’s contention that the reference to the sum of $1 million in the settlement offer did not amount to an acknowledgement of the debt is somewhat disingenuous, as was his evidence that he expected Mr Charylo to negotiate the figure down, noting that it was not put to Mr Charylo that Mr Rossignoli directly or indirectly put this proposition to him. As noted by counsel for Mr Kenna in his submissions, the proposed mechanics of dealing with creditors in the settlement offer is not consistent with the proposition that Mr Charylo could or should negotiate the quantum of the fees to be paid. To that I would add that the use of the term ‘creditors’ is hardly consistent with there being a dispute over the quantum of the fees. One possibility is that Mr Rossignoli wanted Mr Charylo to take responsibility for dealing with the legal fees not because he was depressed, but because if the fees were able to be paid from the proceeds of the equipment sales then that would leave more of the surplus of the proceeds of the sale of the Wonga Road properties available to Mr Rossignoli.

Further, the file note also supports the existence of the May 2012 agreement. It is correct that its provenance is unclear, and that the schedule refers to two matters which were opened after 29 May 2012. But, in the absence of any finding that it was somehow concocted to support Mr Kenna’s case (which I refuse to accept), it clearly came into existence sometime between 1 June 2012 and 1 October 2013, and the heading is clear in its terms. The two files which were opened after 29 May 2012 were opened on 1 June 2012, three days later, and both concerned the enforcement of the judgment in the Wilson matter, which in terms of the amount of legal work required, could be expected to be relatively minor matters.

It is significant, albeit not conclusive, that Mr Kenna consistently maintained his position that there had been an agreement reached between him and Able once the parties commenced corresponding regarding the payment of costs in October 2013. The tax invoice stated ‘More, but as agreed’, and in his very first response to the request for a detailed bill Mr Kenna referred to, among other things, Able’s ‘disappointing disregard of our earlier agreement’. Of course, the settlement offer, the file note, and the post‑tax invoice correspondence are documents which were brought into existence after 29 May 2012. However, while post‑contractual conduct is generally not admissible for the purpose of constructing the terms of a contract, it is, all other things considered, generally admissible for the purpose of whether in fact a contract has been made.[14] The reverse could be said for the submissions of counsel for Able to effect that the doctrine of contra preferentum applies in the current case because of the power imbalance between a solicitor and his or her client: such a principle might be relevant to construing the terms of a contract, but I cannot see how it can be relevant to determining the factual question of whether an agreement has been reached. In any event, even if it were relevant, I agree with the observations of counsel for Mr Kenna that in the current situation, the balance of power was weighted in Able’s favour.
[14]See Isotomic Pty Ltd and anor v Adelaide International Raceway Pty Ltd [2007] SASC 111 [54].

In preferring the evidence of Mr Kenna over that of Mr Rossignoli, I do not need to make a positive finding that Mr Rossignoli has been dishonest, or has engaged in a self‑serving reconstruction of events, or genuinely misunderstood what took place at the 29 May meeting. However, I can, and will make a positive finding that Mr Kenna was, in all respects, an honest witness. He did not evade questions or seek to obfuscate, and his credibility was undisturbed by cross‑examination. He freely conceded his lack of detailed knowledge about certain aspects of his obligations under the LPA, and that he had not meticulously observed all of the requirements of the LPA in his dealings with Able. Indeed, the tenor of the cross‑examination of Mr Kenna on these matters seemed to be directed at persuading me that because he did not properly keep abreast of all of his obligations under the LPA, and because of the somewhat freewheeling nature of his dealings with Able, I should conclude that he is not a witness of truth. To the contrary, Mr Kenna’s candid concessions regarding his limitations in that regard only served to bolster my conclusion that he was indeed an honest witness.

In any event, any failures by Mr Kenna to comply with his obligations under the LPA are not particularly relevant to the questions of whether the parties had reached an accord and satisfaction. They may be relevant to the exercise of discretion as to whether to grant an extension of time to review costs, or to the outcome of any taxation. There might be room for some debate about whether, given the tax invoice annexed a notice regarding Able’s rights under review which was inaccurate, whether Mr Kenna is barred from recovering legal costs by reason of the terms of 3.4.33(1) of the LPA.[15] However, as no action has been taken by Mr Kenna as yet to recover the costs, this is not a debate that needs to be resolved now, although my tentative view is that given the reasoning of the Court of Appeal in Beba, as applied in GLS and the current case, there may well be a divergence in approach between New South Wales and Victoria on this question.
[15]See Koutsaris & Anor v Metledge & Associates [2004] NSWCA 313 [11], per Hodgson JA. In this case, the majority of the Court of Appeal held that a proceeding to enforce an accord and satisfaction concerning legal costs was, in the absence of any distinguishing factors, a proceeding for the recovery of legal costs within the meaning of the Legal Profession Act 1987 (NSW).

Finally, I do not accept that Mr Kenna’s conduct in causing to be issued a tax invoice which attached a statement of rights, and in initially agreeing to provide details of the costs incurred by Able on the Western Australian matters is necessarily inconsistent with an accord and satisfaction having been concluded between Mr Kenna and Able. Mr Kenna’s evidence is that he had not turned his mind to the question of whether he needed to inform Able of its rights of review, either at the time of the making of the May 2012 agreement, or when he caused the tax invoice to be issued. He believes that one of his office staff would have attached the statement to the tax invoice, which is no doubt a routine practice when billing clients. I accept his explanation that given that at the time the tax invoice was issued he was still doing work for Able, he wanted to put Mr Rossignoli’s mind at ease. I can infer that given he had previously estimated his fees in the Western Australian matters would be in the range of $1.3-$1.5 million, he expected that, if he were to prepare a detailed invoice, he believed he would be able to reassure Mr Rossignoli that Able had in fact received a substantial discount.

For completeness, I should add that to the extent that Mr Charylo was able to give relevant evidence, I accept that he was a witness of truth. His evidence was not disturbed upon cross‑examination, and, while I understand he is close friends with Mr Kenna, and has had a bitter falling out with Mr Rossignoli, I do not believe he tailored his evidence to advance Mr Kenna’s case. He was candid about what he did and did not know.

The particular relevance of Mr Charylo’s evidence is that it corroborates Mr Kenna’s evidence that:

(a) the directors of Able, Mr Rossignoli and Mr Charylo, were regularly informed of Able’s likely costs during the course of the BHP dispute, and those fees were estimated to be in the order of $1-$1.5 million;

(b) the legal work undertaken by Mr Kenna and others in relation to the BHP dispute in 2008 was quite intensive; and

(c) Mr Kenna agreed to Mr Charylo’s requests to refrain from issuing an invoice in relation to the BHP dispute until Able was in a position to pay the fees.

Given my factual findings, the question remains as to whether the May 2012 agreement amounts to an accord and satisfaction which extinguished Able’s rights of review and entitlements under the LPA. Unlike the agreements being considered in Beba and GLS, it is clear from the evidence of both Mr Kenna and Mr Rossignoli that these rights were not in the actual contemplation of the parties during the 29 May meeting. Mr Kenna candidly stated that the issue did not occur to him at the time, while Mr Rossignoli’s evidence is that he was not aware of his rights to request an itemised bill until after he received the tax invoice. That evidence is unsurprising, given the history of dealings between the parties.

However, the subjective intentions (or lack thereof) are of course irrelevant to the construction of the terms of the agreement. The parties’ intentions must be determined objectively, from the evidence of what was said in all of the circumstances. Put in an expanded form, what transpired at the 29 May 2012 meeting was as follows: Mr Kenna told Mr Rossignoli he had a claim for costs, which if invoiced in the ordinary way would be in the order of $1.3-$1.5 million, subject of course to Able’s rights of review. However, he was prepared to accept a lesser amount. Whether he used the term ‘happy to accept’, ‘all-in’, or ‘call it quits’ does not really matter: each of these terms has the flavour of finality. Mr Rossignoli agreed, provided that he had time to pay, and that interest would not accumulate prior to the settlement of the sale of the Wonga Road properties. This is a classic example of an accord and satisfaction: Mr Kenna accepted Able’s promise to pay a discounted sum on an ascertainable date in satisfaction of his claim for legal costs. The May 2012 agreement involved a substantial compromise on Mr Kenna’s part: both in reducing the quantum of the claim and in extending the time for payment. There is no uncertainty in the terms, and the evidence demonstrates that it was always clear to the parties that Mr Kenna’s claim for fees was always considered separately to Mr Jewell’s invoices. The fact that Mr Kenna’s assertion that his actual costs were in the range of $1.3-$1.5 million were not supported by any detailed calculations or other evidence is beside the point: it was always open to Mr Rossignoli to request such information before agreeing to the figure of $1 million. Mr Rossignoli is an experienced businessman, who at that stage was under no undue pressure to pay Mr Kenna’s fees, and it is apparent from the evidence that many months would pass before the Wonga Road properties were sold, giving Mr Rossignoli an ample opportunity to query or seek information about costs, particularly given that Mr Kenna was still doing legal work for him.

Finally, the question arises whether the May 2012 agreement included a term which precluded Able from relying upon its rights under the LPA, in particular, its rights to receive an itemised bill, and its rights to review the costs charged by Mr Kenna. The written submissions filed on behalf of Able appear to concede that if I found an accord and satisfaction, those rights would be extinguished, rather, the submissions contended I should not make such a finding, or that the terms of the May 2012 agreement were so uncertain such that it is unenforceable.

It is certainly the case that it was not an expressly articulated term of the May 2012 agreement that Able would relinquish its rights to receive information and its rights of review: it is clear from the evidence that this was not in the contemplation of the parties during the 29 May meeting. However, for the avoidance of doubt, I would imply such a term into the May 2012 agreement on the basis that ‘it is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case’, being the test applicable for the implication of terms in oral contracts.[16]
[16]See Hawkins v Clayton (1988) 164 CLR 539, 573. This test was also endorsed by the High Court in Byrne v Australian Airlines Ltd (1995) 185 CLR 410, 422; Breen v Williams (1996) 186 CLR 71, 90; Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351, 374 and Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588, 610.

In determining whether such a term ought to be implied into the May 2012 agreement, one need not go beyond the observations of Ashley JA in Beba, referred to in paragraph 6 of these reasons, to the effect that it would not be in the interests of justice if agreements entered in good faith in settling costs issues could be at risk of being set aside at the instance of the payer. In my view, it would be necessary for the reasonable and effective operation of the May 2012 agreement that the agreement finally determine the rights and obligations of the parties. Further, this is not a case where I need approach the May 2012 agreement with ‘considerable caution’ or be ‘sensitive to the consequences of inequality of bargaining power’,[17] given my previous observation regarding the balance of bargaining power between Able and Mr Kenna: it was reasonably apparent from the evidence that in circumstances where Mr Kenna was unlikely to take legal action against Able (given his personal relationship with the Rossignoli family), he was largely dependent upon the whims and financial capacity of Mr Rossignoli to receive payment for a substantial amount of work carried out by him over a number of years.
[17]See Maurice Blackburn v Burmingham [2009] VSC 20 [116]-[117].

Accordingly, returning to the issues for determination identified by the parties (see paragraph 5 of these reasons), my conclusions are as follows:

(a) in May 2012, the parties reached an accord and satisfaction in relation to legal costs. The terms of the May 2012 agreement were that Mr Kenna would accept $1 million in full and final payment for his work on the Western Australian matters (including the work yet to be carried out in enforcing the judgment in the Wilson matter, and refrain from issuing a tax invoice and charging interest until the completion of the settlement of the sale of the Wonga Road properties. Able agreed to pay the $1 million, and surrendered its rights to seek information and review the legal costs. Mr Rossignoli also acknowledged that Able was liable to pay Mr Jewell’s fees in the sum of $290,240;

(b) by reason of the finding in paragraph (a) above, Able is precluded from requesting an itemised bill under s 3.4.36 of the LPA;

(c) subject to my comments below, it is unnecessary to determine whether Able requires an extension of time to commence proceedings in the Costs Court and in particular, to seek an order that Mr Kenna serve an itemised bill in compliance with s 3.4.36 of the LPA;

(d) subject to my comments below, it is not necessary to determine whether an extension of time to apply for a review of Mr Kenna’s costs is required, having regard to the delay and the reasons for the delay; and

(e) subject to my comments below, given the answers provided in relation to (a) and (b) above, Mr Kenna is not required to provide an itemised bill in relation to the Western Australian matters.

Strictly speaking, it is not necessary for me to deal with the question of whether Able needs an extension of time to request an itemised bill or apply to review Mr Kenna’s fees. However, I shall do so, in the event that I am found to be wrong on the question of whether an accord and satisfaction had been reached which precluded Able’s rights under part 3.4 of the LPA. Given that I have heard evidence and submissions in relation to these matters, and the expressed wishes of the parties, I should address these issues in these reasons.

In relation to the question in (c) above, I do not believe that Able requires an extension of time to request an itemised bill from Mr Kenna. The tax invoice was issued on or about 7 October 2013. The first request for a ‘complete breakdown/detail’ of the tax invoice was made by email on 21 October 2013. On 27 October 2013, a further request was made, which set out with some specific what information was required from Mr Kenna. Both of these requests were made within the thirty day period after the tax invoice was delivered. While the requests did not refer to s 3.4.36 of the LPA, or for that matter an itemised bill, it is sufficiently clear from the terms of the correspondence, particularly the email of 27 October 2013 that what, in effect, Able was seeking was an itemised bill. It would be contrary to the consumer protection objectives of the LPA to require a client to make use of the term ‘itemised bill’ or refer to the relevant provision of the LPA in a request in order for that request to be valid. In any event, it is difficult to see how a client’s request for information regarding what matters a solicitor worked on, what the solicitor did, the time spent on those tasks, the hourly rate charged, and what the disbursements were and their value could be construed otherwise than as a request for an itemised bill. Given that request was within time, no extension of time is required.

In relation to the question in (d) above, there is no dispute between the parties as to the relevant principles governing the determination of an application for an extension of time under s 3.4.38(6) of the LPA of whether, having regard to the delay and the reasons for the delay, it was just and fair to grant an extension. These are summarised in Professor Dal Pont,[18] as follows (omitting citations):
[18]G E Dal Pont, Law of Costs (LexisNexis Butterworths, 3^rd ed, 2013) [5.12]. These principles were summarised and adopted by Hargrave J in Moussageas v Victorian Compensation Lawyers [2012] VSC 330 [31].

·the length of the delay, attached to which is the nature and degree of prejudice to the lawyer in allowing time to be enlarged, compared to the prejudice to the client in denying the application to extend time;
·the reasons for the delay, specifically whether it is properly explicable;
·whether the client was aware of the right to seek costs assessment – which now in any case comes within costs disclosure obligations – and in this context, whether or not the client was represented is a relevant consideration;
·whether there is evidence suggesting that the bill might be excessive;
·whether the client had paid the bill without demur; or
·the lawyer’s reasons for opposing the enlargement, it being important that, as an officer of the court, the lawyer is seen to act honestly, ethically and with proper motives, not merely to prevent the assessment of a bill taking place.

Yet it has been noted that ‘it would be a mistake to approach such an application on the basis that it should be allowed as a matter of course unless the practitioner can show that substantial prejudice will be caused by an extension of time’. The legislation, after all, imposes time limits, and generous ones at that (other than in Tasmania), which should presumably incline the court against allowing an extension of time in the absence of compelling reasons. The onus therefore clearly lies on the applicant for an extension to satisfy the court that it is in the interests of justice that the time limit should be extended.

In my view, an extension of time, if sought, ought to be granted. If Able’s summons filed 18 June 2015 was to be treated as an application for an extension of time to bring an application for review, then the relevant delay is eight months, which I agree is not an unduly lengthy delay in the light of the reasons for the delay, and Mr Kenna’s failure to provide an itemised bill in the period promised by him on a number of occasions. Further, while the summons of 15 June 2015 was not an application to review costs as such, it did put Mr Kenna formally on notice that the question of his costs was likely to be the subject of litigation. Also, the statement attached to the tax invoice was incorrect regarding the time within which Able was entitled to make an application for a review of Mr Kenna’s costs, and, given that Able was unrepresented between late 2013 and early 2015, it is understandable that Able would await the provision of an itemised bill to challenge the quantum of Mr Kenna’s claim for costs.

I agree that, if Able is entitled to seek a review of Mr Kenna’s costs, the prejudice to Able of being denied an extension of time outweighs the prejudice to Mr Kenna of granting an extension of time. It is correct that Mr Kenna has demonstrated the utmost forbearance in his dealings with Able, to Able’s advantage and Mr Kenna’s detriment, no doubt because of the longstanding personal relationship with the Rossignoli family, but perhaps also for pragmatic reasons, given his knowledge of Able’s and Mr Rossignoli’s financial circumstances. It is true that the task of preparing an itemised bill and defending a review may well be costly and onerous. However, if Mr Kenna is right, and he is entitled to fees in the order of $1.3‑$1.5 million in relation to the Western Australian matters, an itemised bill will confirm this, and no doubt there may well be adverse consequences for Able should it pursue the matter further.

However, the prejudice to Able of denying an extension of time would be substantial. The sum of $1 million may well be justifiable, but it is a large sum, considering it is exclusive of counsel’s fees and fees paid to interstate practitioners. Mr Rossignoli’s evidence is that it was the largest account Able had ever received. While it is not necessary for me to make any findings as to whether Mr Kenna breached his disclosure obligations under the LPA and what the consequences of those breaches might be, there at least seems to be an arguable case that he did. In the absence of any accord and satisfaction, Able ought not be shut out of its rights of review.

Accordingly, if I had not found that Able was precluded from its rights of review by reason of an accord and satisfaction, I would have made the following orders:

(a) Mr Kenna provide Able an itemised bill with respect to the Western Australian matters within sixty days; and

(b) Provided that any application for review under s 3.4.38(1) of the LPA is made within sixty days of the provision of an itemised bill, I declare that it would be just and fair for the application to proceed.

However, given that I have found that there was an accord and satisfaction, I would dismiss Able’s summons filed 15 June 2015, and hear from counsel on the form of orders and the question of costs.

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[2016] VSC 96

17 March 2016