Alman v Macdonald Rudder (A Firm) - [2001] WASCA 375

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE FULL COURT (WA)

CITATION: ALMAN -v- MACDONALD RUDDER (A FIRM) [2001] WASCA 375

CORAM: MURRAY J
ANDERSON J
STEYTLER J

HEARD: 18 OCTOBER 2001

DELIVERED : 28 NOVEMBER 2001

FILE NO/S: FUL 55 of 2001

BETWEEN: WARREN STANLEY ALMAN
Appellant
AND
MACDONALD RUDDER (A FIRM)
Respondent

Catchwords:

Legal practitioners - Remuneration - Written "litigation retainer agreement" with client as to costs - Application to Supreme Court to review agreement pursuant to s 59 Legal Practitioners Act 1893 - Whether agreement unreasonable - Judge's discretion to vary or cancel agreement in circumstances where agreement found to be unreasonable - Turns on own facts

Legislation:

Interpretation Act 1984, s 56

Legal Practitioners Act 1893 (WA), s 59(5)

Result:

Appeal dismissed

Category: B

Representation:

Counsel:

Appellant: Mr S V Forbes
Respondent: Mr I A Morison

Solicitors:

Appellant: Paiker & Overmeire
Respondent: Jeremy Malcolm

Case(s) referred to in judgment(s):

Harrison v Hocking [2000] WASC 188

Case(s) also cited:

Barfield v Friedman, unreported; SCt of WA (Parker J); Library No 970441; 5 September 1997
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Brown v Talbot & Olivier (1993) 9 WAR 70
Burgess v D'Alessandro & Associates, unreported; SCt of WA (Anderson J); Library No 920256; 6 May 1992
D'Alessandro & D'Angelo v Bouloudas (1994) 10 WAR 191
Dala Transport v Corrs Chambers Westgarth, unreported; SCt of WA (Registrar Watt) LPA 89 of 1999; 25 February 2000
Hay v Butler & Crooks (a firm) (1991) 7 WAR 333
Jovetic v Stoddart & Co (1992) 7 WAR 208
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
Retail Equity Pty Ltd v Murie & Edward, unreported; SCt of WA (White J); Library No 940163; 31 March 1994
Stobbart v Mocnaj [1999] WASC 252
Stoddart & Co v Jovetic (1993) 8 WAR 420
Webb v Malcolm J Bateman & Co, unreported; SCt of WA (Franklyn J); Library No 6305; 27 May 1986

MURRAY J: I have had the advantage in this case of reading in draft the reasons for decision to be published by Steytler J. I am in substantial agreement with them and I concur in his Honour's view that the appeal should be dismissed. In my view also, it is unnecessary to consider issues raised by the respondent in its notice of contention.
I would make only one point. The Legal Practitioners Act 1893 (WA) s 59(5) provides:
"An agreement made under subsection (1) maybe reviewed by the Supreme Court or a Judge thereof upon application by petition or summons, and if in the opinion of the Court or Judge the same is unreasonable the amount payable may be reduced or the agreement cancelled and the costs taxed in the ordinary way, and the Court or Judge may also make such order as to the costs of and relating to such review, and the proceedings thereon, as to the said Court or Judge may seem fit."
The parties in this case argued the application made under s 59(5) before Wheeler J on the basis that the subsection confers a discretion upon the Court whether or not it will reduce the amount payable under or cancel a costs agreement, even though upon its review it is found to be unreasonable. In giving her reasons for dismissing the application to review the costs agreement at [2001] WASC 65 par [18], Wheeler J said:
"I accept that there is a discretion pursuant to s 59 of the Legal Practitioners Act, so that the Court might decline to cancel the agreement even if of the view that it was unreasonable. The word 'may' in s 59(5) points to this conclusion. So too, in my view, does the great variety of circumstances in which agreements may come to be seen as 'unreasonable'. While it appears to me that the purpose of s 59, in ensuring that legal practitioners comply strictly with their fiduciary duties in entering into agreements with clients, is of paramount importance, I do not think that an intention is displayed either in the terms of s 59 or in its context which requires agreements to be set aside wherever the Court forms the view that they are unreasonable, notwithstanding what may have passed between the parties in the meantime."
As Steytler J observes, the Interpretation Act 1984 (WA) s 56(1) provides that:
"Where in a written law the word 'may' is used in conferring a power, such word shall be interpreted to imply that the powers so conferred may be exercised or not, at discretion."
However, it is not of course considered that the word "may" when so used is always to be so interpreted and it is well understood that the word may simply provide a power to be exercised, often upon the satisfaction of statutory preconditions.
Wheeler J referred to the decision of Hasluck J in Harrison v Hocking [2000] WASC 188. In that case, at par [80], his Honour simply said:
"In the absence of any prescribed time limit for reviewing an agreement, it would seem, at a first glance, that a costs agreement could be reviewed many years after the services had been provided. One notices, however, that the relief available is discretionary. If a review is undertaken and the agreement is found to be unreasonable, the amount payable 'may' be reduced or the agreement cancelled, and the costs taxed in the ordinary way."
Wheeler J went on to discuss the agreement and the circumstances in which it was made. Her Honour said that there were aspects of the agreement "which may be considered to be unsatisfactory". She said it, and an accompanying letter sent by the respondent to the appellant, "might arguably be unreasonable". Her Honour went on to note that, as the agreement provided for costs which might be taxed under it at a little over twice the amount which would be the maximum payable under the scale fixed by the relevant costs determination without regard for the agreement, that "tends to suggest that the effect of the agreement upon the client is unreasonable, so that the agreement could be regarded as unreasonable…" Her Honour summarised that conclusion by saying that, "it appears to me that the amount of the bill arrived at pursuant to the costs agreement is, prima facie, unreasonable and so the agreement may be regarded as unreasonable in its effect upon the client, because it permits that result."
However, her Honour dismissed the application despite the expression of those, at least tentative, conclusions because she considered that the agreement was "not so unfair in its effect upon the client that it should be set aside notwithstanding the unfairness to the firm which would be involved in that course." Her Honour had regard to the considerations concerning the circumstances in which the consent orders were made, the lack at that time of any suggestion that the appellant might seek to have the costs agreement reviewed under s 59(5), and his unexplained delay in seeking to take that course in circumstances where the respondent had agreed to the compromise of the litigation by way of the consent orders on the basis that it received security for the payment of its costs, to be taxed under the agreement, and the appellant received the benefit of the capacity to tax the costs afforded by the respondent's consent to that course, without which the appellant may well not have been able to obtain the necessary extension of time.
In those circumstances, it is not clear to me that Wheeler J in fact determined the application by exercising a discretion whether or not to cancel the agreement. The considerations which moved her Honour were not only those concerned with the reasonableness of the agreement, but also the circumstances in which it was entered into and in which the application for review was made. Her Honour expressed firm conclusions about the latter considerations and expressed tentative views as to the reasonableness of the agreement.
I have mentioned that the parties were ad idem in approaching the matter, both before Wheeler J and this Court, upon the basis that there was a discretion to reduce the amount payable under the agreement or cancel it. No argument was therefore presented to the Court upon that question. For myself, I am far from being persuaded that there is a discretion where a costs agreement is found to be unreasonable, whether or not to reduce the amount payable under it or cancel it.
I would, as at present advised, have no doubt that where the word "may" is first used in the subsection it imports a discretion to review. In that regard, questions of delay and the circumstances in which the application for review is made, as well as questions concerning the circumstances in which the costs agreement was entered into or dealt with as between the parties after it was made, would in my view be relevant to determine how the discretion to review was to be exercised.
As at present advised, I would interpret the word "may" where secondly used in the subsection as importing a power which is to be exercised in a case where a review of an agreement is undertaken and where it is found to be unreasonable in the broad terms supported by the decided authorities. Then it seems to me, at least tentatively, that it may well be that the decision to be made by the Court is not whether or not to make an order reducing the amount payable under the agreement or cancelling it, but only as to which course should be taken.

However, as I have said, the parties did not proceed upon that basis before Wheeler J or before this Court. The matter has not been argued and I wish only to make it clear that for myself I would reserve for another day a final decision upon this question. It matters not in the context of the appeal which way s 59(5) is approached. For the reasons given by Steytler J I consider that the judgment of Wheeler J should be upheld and the appeal should be dismissed.
ANDERSON J: I have had the advantage of reading in draft the judgment of Steytler J with which I entirely agree. I do not wish to add anything to what his Honour has said.
STEYTLER J: On 19 October 1998 the appellant received a bill from his solicitors for $35,786.66. He did not pay it. In May 1999 his solicitors (the respondent firm) issued a writ in the District Court claiming payment. In its statement of claim the respondent alleged (as had been the fact) that it had been instructed to advise and represent the appellant in respect of a personal injuries claim. It also alleged that the appellant had entered into a written "litigation retainer agreement" with it on 30 August 1993. It said that it had done what it had been instructed to do and that it was entitled, under the terms of the litigation retainer agreement, to be paid.
The appellant retained new solicitors. He then filed a defence and counterclaim. In it, he admitted entering into the litigation retainer agreement. He also admitted receiving the bill. However, he said, the respondent was "required to properly advise …" him in respect of his personal injuries claim and it had not done so. He said that the respondent could not claim payment from him in these circumstances. He counterclaimed for damages arising from what, he said, was the respondent's negligence.
The appellant settled his personal injuries claim. He also became involved, through his new solicitors, in negotiations with the respondent in respect of the action commenced by it. These culminated in the making of consent orders on 6 April 2000.
On 4 April 2000, shortly before these consent orders were made, the appellant prepared, by his solicitor, a minute of proposed amendments to his defence and counterclaim. In that document he alleged that his retainer of the respondent "was both written and oral". He said that the written part comprised the litigation retainer agreement dated 30 August

1993. The oral part, he said, was comprised by a telephone discussion between himself and a solicitor employed by the respondent. He alleged that he was told, by that solicitor, that the respondent would not render any accounts until the conclusion of the litigation. It would then deduct the amount of the legal fees payable to it from any award or settlement which the appellant might ultimately receive in respect of his personal injuries claim. That being so, he said, it could not, under the contract, claim any legal fees from him until that time. He also pleaded, in the alternative, that what he was told by the respondent amounted to a representation by which he was induced to enter into the litigation retainer agreement. Then, in another paragraph of his amended defence, the appellant said that the retainer agreement was an entire contract and that it had been repudiated by the respondent. This, he said, was because the respondent had required him to pay costs before the conclusion of the matter and had removed itself from further representing him when he did not do so. In his counterclaim he contended, somewhat surprisingly in view of his plea of repudiation, that he was entitled to have the litigation retainer agreement rectified so as to embody a term to the effect that the respondent could not render any accounts until the conclusion of the litigation.

I have earlier mentioned that, two days after the filing of this document, consent orders were made in the proceedings. These were to the effect that:
(a)the appellant should at once apply, with the consent of the respondent, for an extension of time within which to tax the respondent's bill dated 19 October 1998;
(b)upon an extension being granted, the appellant should forthwith ask the respondent to tax its bill and the respondent should thereupon do so;
(c)the appellant should pay the respondent interest on the sum found to be payable on taxation;
(d)the appellant would, from money to be received by him in respect of his personal injury claim, pay $38,500 into Court to satisfy any sum to which the respondent might become entitled as against the appellant; and
(e)the costs of the application were to be reserved.
During the course of the negotiations which preceded the making of the consent orders, no‑one suggested that the appellant might ask the Supreme Court to review the litigation retainer agreement. That court had the power to do so under s 59 of the Legal Practitioners Act 1893. That section provides that an agreement as to costs "may be reviewed by the Supreme Court or a Judge thereof" upon application, and that, if the agreement should be found to be unreasonable, "the amount payable may be reduced or the agreement cancelled and the costs taxed in the ordinary way …"
As matters turned out, the appellant did apply to a Judge of the Supreme Court to have the agreement reviewed. He contended, on various grounds, that the agreement was unreasonable. He sought, amongst other things, an order cancelling the agreement, or one reducing the amount payable under it. The respondent objected. It said that it was too late for the appellant to bring an application of this kind. It contended that its action against the appellant had been compromised upon the basis that its bill should be taxed as being governed by the agreement.
These issues were ventilated before the Judge below. She found that neither the consent orders, nor any agreement between the parties, precluded the appellant from bringing his application to have the agreement reviewed.
The appellant contended that the agreement should be set aside for a number of reasons. One was that he had been misled at the time of entering into it. Another was that the agreement had failed to disclose matters which, on the authorities, should have been disclosed by it. A third was that various circumstances which had affected him at the time of entering into the agreement made it unreasonable for him to be bound by it. Her Honour found that none of these contentions had been made good by the appellant. However, she said, because no more than $17,000 would have been payable by the appellant if the costs had been taxed in the ordinary way and in the absence of the litigation retainer agreement, the agreement, which allowed a bill of more than double that amount, was unreasonable in its effect upon the appellant.
Notwithstanding this, her Honour was not prepared either to cancel the agreement or to reduce the amount payable under it. She said that she had, under s 59 of the Act, a discretion whether or not to do either of these things even though she had found the agreement to be unreasonable (see, in this respect, s 56 of the Interpretation Act 1984 and Harrison v Hocking [2000] WASC 188, par 80). She exercised her discretion against the appellant. This, she said, was because it would be unfair to do otherwise. She pointed out that the respondent had agreed to the making of the consent orders, including that by which it consented to the extension of time for taxation of the bill, "on the basis that the costs agreement which the … [appellant] now seeks to set aside was to be relied upon for the purposes of taxation". She said also that nothing had been put before her to explain the delay in seeking to set the agreement aside. In those circumstances, she said, it was her view "that the agreement is not so unfair in its effect upon the … [appellant] that it should be set aside notwithstanding the unfairness to the … [respondent] which would be involved in that course". She consequently dismissed the appellant's application.
It is against this decision that the appellant has appealed.
The grounds of appeal traverse many issues. However, it can be said of them, without doing too much injustice to them, that they come down to these four propositions:
(a)Her Honour should have found that the litigation retainer agreement was unreasonable for additional reasons, being that:
(i)it was misleading;
(ii)it failed to give any adequate estimate of the costs likely to be incurred;
(iii)insofar as an estimate was given, it was so far off the mark as to indicate the unreasonableness of the effect of the agreement;
(iv)it failed to disclose "the limits and benefits provided by the scale" which would apply upon a taxation in the ordinary way; and
(v)the circumstances in which the agreement was made were unreasonable.
(b)In these circumstances, and even on the more limited finding of unreasonableness made by her Honour, the agreement should have been cancelled.
(c)Her Honour erred in finding that the respondent had, in agreeing to consent to the application for an extension of the time within which to tax the bill, given away a right of some value.
(d)There having been a conflict of fact as regards the negotiations which led up to the making of the consent orders, her Honour should have acceded to a motion (which had been unsuccessfully moved by the appellant at the hearing before her Honour) that the matter be adjourned for the hearing of oral evidence and the cross‑examination of witnesses.
I am not persuaded that there is anything in these grounds which justifies any interference with her Honour's exercise of discretion.
As to the first two propositions advanced on behalf of the appellant, the litigation retainer agreement was not a model which ought, in my opinion, be aspired to. Her Honour found that a question arose whether its heading and format was such as to make it misleading (albeit she was not prepared to find that the appellant had been misled) and the respondent undoubtedly gave no adequate estimate of the costs likely to be incurred if, indeed, it gave an estimate at all. Moreover, while it did disclose the fact of the "scale", and that the rates set out in the agreement were, "in most instances", higher than those under the scale, it also provided for some quite extraordinary charges (which were not identified as such), as, for example, one of $16.50 per page, or part thereof, for the typing of letters, including all drafts. Consequently, it might be arguable that the agreement should have been found to have been unreasonable upon one or more of these grounds also, or even upon the ground, rejected by her Honour, that the circumstances in which the agreement was entered into were unreasonable. The appellant had said, in this respect, that he had been in pain and using medication and that he had needed an explanation of the effect of the agreement but that none was offered.

However, the fact is that her Honour did find that the agreement was unreasonable. Whether she found it, or should have found it, to be unreasonable on one, or two or more grounds seems to me not to matter at all when regard is had to the way in which she exercised her (admitted) discretion. Her starting point was, as I have said, that the agreement was unreasonable because it enabled the respondent to charge the appellant more than double the maximum amount which he could have been charged under the scale. The other aspects of unreasonableness contended for, if they existed, had precisely the same result. However, her Honour considered that even that unreasonable result should not see the agreement set aside, or the costs reduced, because this would, in the circumstances to which she referred, be unfair.
The appellant had, by the date of the consent orders, been represented by new solicitors for almost a year. Almost eight months had passed since he had filed his defence and counterclaim. Nothing had been said by him, whether in that document or anywhere else, to suggest that he was even contemplating applying to the Supreme Court to have the litigation retainer agreement reviewed. Moreover, as I have said, only two days before the making of the consent orders his lawyers prepared a minute of an amended defence and counterclaim which, after admitting the fact of the litigation retainer agreement (albeit it was now said to be partly written and partly oral), relied upon it, in that there was a counterclaim for rectification of it. In those circumstances it was hardly surprising that the respondent assumed, at the time of agreeing to the consent orders, that the bill would be taxed pursuant to the terms of the litigation retainer agreement.
It follows, in my opinion, that the first two propositions provide no sufficient basis for upsetting her Honour's exercise of discretion.
The appellant, in the third of his four propositions enunciated above, contends that her Honour was in error in finding that the respondent had, in agreeing to consent to the application for an extension of time within which to tax the bill, given away a right of some value. However, it seems to me that her Honour was entitled to arrive at the conclusion reached by her. The appellant was, by then, more than a year out of time to have his bill taxed. He could not have been confident that, in the absence of consent, an extension of time would be granted. He had, as her Honour remarked, offered no explanation for his delay. I have mentioned that he had, over most of the period of the delay, been represented by his new solicitors.
That brings me to the fourth proposition. The conflict of fact which, the appellant contends, might have been explored by oral evidence and cross‑examination after an adjournment, related to the terms of the settlement which resulted in the consent orders. However, all that was put up by the appellant in that respect was that the "entire agreement" which was reached on 6 April 2000 was "contained in the consent order[s]" and that it was not a concluded settlement of all matters raised in the District Court proceedings, but "was only a manner to establish the quantum of the … [respondent's] claim against … [the appellant]." So much was plain from the affidavit sworn by the appellant's solicitor which was filed in the proceedings. The Judge below having found that the appellant was not precluded from bringing his application by the consent orders, or by any agreement between the parties, nothing turns upon the fact that her Honour refused the motion for an adjournment to enable the applicant further to explore this issue.
It follows, from what I have said, that none of the four propositions to which I have referred has been made good.
I would consequently dismiss the appeal.
That conclusion makes it unnecessary for me to consider issues which were raised by the respondent in a notice of contention filed by it.