Anna Carr as administratrix of the estate of Giuseppe Larussa v Larussa Pastoral Holdings Pty Ltd as former trustee of the Larussa Pastoral Trust [No 3]
[2022] WASC 139
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: ANNA CARR as administratrix of the estate of GIUSEPPE LARUSSA -v- LARUSSA PASTORAL HOLDINGS PTY LTD as former trustee of THE LARUSSA PASTORAL TRUST [No 3] [2022] WASC 139
CORAM: CURTHOYS J
HEARD: 2 SEPTEMBER 2021
DELIVERED : 27 APRIL 2022
FILE NO/S: CIV 2162 of 2016
BETWEEN: ANNA CARR as administratrix of the estate of GIUSEPPE LARUSSA
Plaintiff
AND
LARUSSA PASTORAL HOLDINGS PTY LTD as former trustee of THE LARUSSA PASTORAL TRUST
First Defendant
LARUSSA CUSTODIAN SERVICES AUSTRALIA PTY LTD as trustee of THE LARUSSA PASTORAL TRUST
Second Defendant
TONY LARUSSA
Third Defendant
Catchwords:
Costs - Indemnity principle - Failure of law practice to give notice of intention to provide legal services - Whether liability of client precluded - Whether law practice precluded from enforcing client's debt
Legislation:
Legal Profession Act 2008 (WA), s 102, s 268, s 448
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | S Penglis SC |
| First Defendant | : | No appearance |
| Second Defendant | : | No appearance |
| Third Defendant | : | M Curwood SC |
Solicitors:
| Plaintiff | : | Cornerstone Legal |
| First Defendant | : | No appearance |
| Second Defendant | : | No appearance |
| Third Defendant | : | Corporate Counsel Lawyers |
Cases referred to in decision:
Hancock Prospecting Pty Ltd v Hancock (No 3) [2016] WASC 423
CURTHOYS J:
Introduction
On 7 July 2016, the plaintiff, Anna Carr, issued a writ against the defendants in this court.
On 23 December 2019, following a trial, the action was dismissed.
On 10 March 2020, the court made the following orders as to costs:
(1)The plaintiff do pay the first and second defendants' costs of these proceedings to be taxed as one bill.
(2) The plaintiff do pay the third defendant's costs of these proceedings to be taxed.
(3) The payment of the third defendants' costs by the plaintiff in these proceedings be stayed until further order of this Court.
(4) There be liberty to apply.
On 5 December 2020, the third defendant, Tony Larussa, filed a draft bill of costs for just under $300,000.
Carr objects to Larussa's bill of costs on the basis that the law practice representing Larussa at trial, Garde-Wilson Lawyers, contravened s 102(2) of the Legal Profession Act 2008 (WA) (the Act) and that, consequently, any debt between Larussa and the firm is extinguished.
Carr seeks an order that Larussa be restrained from proceeding to have assessed by this court any cost or disbursement incurred or paid by Larussa for anything done by Garde‑Wilson Lawyers in contravention of s 102(2) of the Act.
Larussa's representation by Garde-Wilson Lawyers
On 19 July 2019, Larussa filed a notice of change of representation appointing Garde-Wilson Lawyers of Level 40, 140 William Street Melbourne, Victoria 3000, as Larussa's solicitors. The postal address was stated as Level 28, 140 St Georges Terrace Perth, WA 6000. The notice was signed by Zarah Garde‑Wilson.
Garde-Wilson Lawyers is the trading name of an incorporated legal practice, Tabforce Pty Ltd (Tabforce). The sole director and office holder of Tabforce is Zarah Garde-Wilson. Ms Garde-Wilson was admitted to practice as a legal practitioner in Victoria on 5 August 2002. In 2017, she commenced providing legal services through Tabforce. Tabforce does not employ any legal practitioners.[1]
[1] See Affidavit of Zarah Garde-Wilson affirmed 27 July 2021.
It is not in issue that Tabforce engaged in legal practice in Western Australia in acting for Larussa in this action.
It is not in issue that Tabforce did not give notice to the Legal Practice Board (the Board) to start providing legal services under s 102(1) of the Act until after the completion of the trial of the action in this court.
Larussa has paid all the invoices rendered to him by Tabforce for legal services and disbursements relating to this action.[2]
[2] See Affidavit of Tony Larussa affirmed 27 July 2021.
The issue
The issue is whether on the proper construction of s 102 of the Act:
(a)liability on the part of Larussa to Tabforce is precluded; or
(b)Larussa's debt arose but Tabforce is precluded from enforcing it.
The indemnity principle
In Hancock Prospecting Pty Ltd v Hancock (No 3),[3] Pritchard J explained the indemnity principle:
The rationale for the usual rule that an unsuccessful party should pay the party-party costs of the successful party to an action is that it is just and reasonable that the party who has caused the other party to incur the costs of litigation should reimburse that party for the liability incurred in respect of those costs. In other words, costs are awarded to indemnify the successful party for their liability for costs - a principle known as the indemnity principle - rather than to punish the unsuccessful party, or to reward the successful party.
…
The application of the indemnity principle means that a party (the client) who does not have a liability to his or her solicitors for costs cannot recover costs against an unsuccessful party to the litigation.
The indemnity principle is flexible and is designed to allow for a just and fair result. Accordingly, if the client and his or her solicitor reach an agreement that the client will not have to pay the solicitor's costs, the client cannot obtain an award of costs against an unsuccessful party in litigation. Similarly, if the liability of the client to the solicitor is limited, the quantum of costs that can be recovered from the unsuccessful party is also limited to that amount. (footnotes omitted)
[3] Hancock Prospecting Pty Ltd v Hancock (No 3) [2016] WASC 423 [16], [18] - [19].
Pritchard J further observed that the operation of the indemnity principle may be affected by statute. Her Honour identified a distinction between a statutory provision that precludes the liability of a client to their solicitor and one that merely precludes the solicitor from enforcing the client's debt.[4] That distinction can be expressed as follows:
(a)if a provision disentitles a solicitor to charge the client for the legal work undertaken on the client's behalf, or precludes or extinguishes any liability on the client's part, the client will not be entitled to recover costs from the unsuccessful party;
(b)if a provision does not extinguish the client's debt, but merely precludes the solicitor from enforcing it, then provided that the costs have already been paid by the client, the client will be entitled to enforce a costs order against the unsuccessful party to the litigation.
[4] Hancock Prospecting Pty Ltd v Hancock (No 3) [20].
The legislation
Section 102 of the Act provides:
Notice of intention to start providing legal services
(1)Before a corporation starts to engage in legal practice in this jurisdiction, the corporation must give the Board written notice, in the approved form, of its intention to do so.
(2)A corporation must not engage in legal practice in this jurisdiction if it is in default of this section.
Penalty: a fine of $25,000.
(3)A corporation that starts to engage in legal practice in this jurisdiction without giving a notice under subsection (1) is in default of this section until it gives the Board written notice, in the approved form, of the failure to comply with that subsection and the fact that it has started to engage in legal practice.
(4)The giving of a notice under subsection (3) does not affect a corporation's liability under subsection (1) or (2).
(5)A corporation is not entitled to recover any amount for anything the corporation did in contravention of subsection (2).
(6)A person may recover from a corporation or a legal practitioner associate of the corporation, as a debt due to the person, any amount the person paid to or at the direction of the corporation for anything the corporation did in contravention of subsection (2).
Division 3 of the Act relates to costs disclosure.[5]
[5] Division 3 of the Act comprises s 260 - s 270.
Section 260 of the Act provides extensive provisions for the disclosure of information relating to costs to clients.
Section 268 of the Act provides for the effect of a failure by a law practice to disclose to a client or associated third party payer any matters relating to costs under div 3 of the Act:
(1)If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed, the client or associated third party payer (as the case may be) need not pay the legal costs unless they have been assessed under Division 8.
(2)A law practice that does not disclose to a client or an associated third party payer anything required by this Division to be disclosed may not maintain proceedings against the client or associated third party payer (as the case may be) for the recovery of legal costs unless the costs have been assessed under Division 8.
(3)If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed and the client or associated third party payer has entered a costs agreement with the law practice, the client or associated third party payer may also apply under section 288 for the costs agreement to be set aside.
…
(7)Failure by a law practice to comply with this Division is capable of constituting unsatisfactory professional conduct or professional misconduct on the part of any Australian legal practitioner or Australian‑registered foreign lawyer involved in the failure.
Section 448 of the Act provides for the power to make a compensation order. A compensation order is an order made to compensate a person for loss suffered because of conduct of an Australian legal practitioner that is the subject of a complaint by that person or is investigated by the Legal Profession Complaints Committee of its own initiative.[6]
[6] The Act s 448(1).
On the face of it, s 102 of the Act is directed to the conduct of a corporation such as Tabforce. Subsection 102(2) imposes a potential penalty for a failure to give notice. Subsection 102(5) prevents a corporation from recovering any amount for anything done in contravention of s 102(1). Subsection 102(6) gives a right of recovery to a client for funds paid when a corporation was in breach of s 102(1).
The penalty under s 102(2), the bar to recovery under s 102(5), and the client's right of recovery under s 102(6) are directed at penalising the corporation, not the client. To the extent that Larussa chooses not to exercise his right under s 102(6) is ultimately his decision. There is no legal reason precluding him from doing so. The fact that he has sworn on affidavit that he will not seek to recover the funds is irrelevant.
Carr's submissions
Carr submitted that on a proper construction of s 102 of the Act, the debt between Larussa and Tabforce is extinguished, and that Tabforce is not merely precluded from enforcing payment for legal services.[7] Carr argues that the Act supports this submission in the following respects:[8]
(1)section 102(2) of the Act prohibits a corporation from engaging in legal practice, not just charging or enforcing payment. In other words, the gravamen of this section is not the charging or enforcement of fees in the event of default of the section, but a prohibition in performing any legal work within the jurisdiction;
(2)contravention of s 102(2) of the Act constitutes an offence;
(3)against that background, it is erroneous to suggest that s 102(5) of the Act is limited to enforcing the payment of legal fees rather than a prohibition on charging for work done by the legal practice where that work is done in contravention of s 102(2). It is highly unlikely that the legislature intended that a corporation engaging in legal practice in contravention of s 102(2) could render invoices for legal work undertaken by that practice, but simply prevent enforcement of invoices. The former is perfectly symmetrical with s 102(1) and s 102(2) while the latter is not;
(4)the matter is put beyond doubt by s 102(6), which provides that any person may recover 'as a debt due to the person' for 'any amount the person paid to or at the direction of the corporation for anything the corporation did in contravention of s 102(2)'. The fact that there is express provision for the recovery of any moneys paid, and on the basis of 'a debt due', reinforces the proposition that the clear intention, purpose and effect of s 102 is to extinguish any liability as between a legal practice and its client with respect to work done in contravention of s 102(2).
[7] Plaintiff's outline of submissions dated 30 August 2021 [3] (Plaintiff's Submissions).
[8] Plaintiff's Submissions [4].
Larussa's submissions
Larussa submitted that on its construction of s 102, the Act does not extinguish the client's debt but merely precludes the incorporated legal practice from enforcing it in certain circumstances. Further, provided that the costs have already been paid by the client, which is the case on the part of Larussa, the client will be entitled to enforce a costs order.[9]
[9] Third defendant's submissions in opposition to plaintiff's application dated 27 July 2021 [18] (Third Defendant's Submissions).
Larussa argued that s 102 of the Act must be read having regard to the purposes of pt 7 of the Act.[10] Section 97 of the Act states that the purpose of pt 7 is to regulate the provision of legal services by corporations in the jurisdiction and to regulate the provision of legal services in conjunction with the provision of other services whether by a corporation or persons acting in partnership with each other.
[10] Third Defendant's Submissions [11].
Larussa's construction of s 102 was that the section does not contain a protection for a third party such as Carr and that the right of recovery under s 102(6) is merely discretionary at the option of the client of the incorporated legal practice. The word 'recover' as it appears in s 102 was said not to prohibit the acceptance of a payment by an incorporated legal practice by its client but is directed to a situation where a corporation commences legal proceedings against a client to recover legal costs where the client disputes liability.[11] Accordingly, Larussa argued that the section in no way precludes a client who has incurred and paid costs to an incorporated legal practice from recovering those costs under an order of the court that another party pay the client's costs.[12]
[11] Third Defendant's Submissions [12].
[12] Third Defendant's Submissions [13].
Further, Larussa emphasised the importance of following the indemnity principle which is such that a litigant who has incurred costs is entitled to recover those costs from the unsuccessful party pursuant to any order for costs made by the court.[13] He asserted that the principle does not extend to or mean that the successful party cannot recover his costs merely because that party may be relieved from the obligation of doing so.[14] The rule with respect to the indemnity principle was said to be that even if a solicitor could not have enforced a claim for costs, a litigant is entitled to recover costs if those costs have been paid in connection with the litigation.[15]
[13] Third Defendant's Submissions [13].
[14] Third Defendant's Submissions [17].
[15] Third Defendant's Submissions [19].
Analysis
The language of s 102 of the Act contrasts with s 268 of the Act. Section 268 specifically provides that the right to enforce costs is suspended until the provisions of the Act are complied with.
The right to costs is not extinguished by reason of a failure to comply with s 268.
Under s 102 the right to enforce costs does not arise until notice is given. Nothing in the Act gives a retrospective right to fees for work undertaken in breach of s 102. Tabforce finds itself in the position that by virtue of s 102 it is not entitled to charge Larussa for the legal work undertaken on Larussa's behalf. It follows that the application of the indemnity principle means that Larussa, who does not have a liability to Tabforce for costs, cannot recover costs against Carr, the unsuccessful party to the litigation.
The fact that the language of s 268 was not used in relation to a failure to comply with s 102(1) strongly suggests that the effect of s 102 was not intended to be merely suspensory.
I do not accept the submission that the absence of any language equivalent to s 448 of the Act, which concerns compensation orders, leads to a conclusion that a right to fees exists under s 102. Section 448 provides for a range of options for remedies, including repayment of compensation. It does not deal with the charging of fees. It is not a prohibition against the original charging of fees.
I do not find cases from other jurisdictions such as those dealing with s 209 of the Supreme Court Act 1995 (Qld), useful beyond broad statements of principle as identified by Pritchard J. Section 102 is a unique provision. Cases from other jurisdictions on other sections are not helpful. As Carr submitted, unlike in all other cases, the legal practitioner is not entitled to retain moneys paid to them for their work as the same is made recoverable by the client 'as a debt due to that person'.[16]
[16] Plaintiff's submissions in reply dated 1 September 2021 [3].
I find that by reason of s 102 of the Act liability on the part of Larussa to Tabforce is precluded.
I will hear from the parties as to the appropriate orders to give effect to these reasons.
The parties should file a minute of consent if one can be agreed. If not, they should each file a minute of the orders they seek.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SB
Associate to the Honourable Justice Curthoys
27 APRIL 2022
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