Brokate v Sloan Legal - [2013] SASC 87

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
BROKATE & ANOR v SLOAN LEGAL
[2013] SASC 87
Reasons of Judge Dart a Master of the Supreme Court
5 June 2013
PROCEDURE - COSTS - TAXATION
Application for taxation of costs pursuant to Legal Practitioners Act 1981 - whether applicants have standing - meaning of "liable to pay or has paid".
Legal Practitioners Act 1981 s 42, referred to.
Andrew Koh Nominees Pty Ltd v Receiver & Manager of the Balneum Joint Venture (2007) 33 WAR 561; Debney v Semerdziev [1982] 2 NSWLR 391, applied.
Equuscorp Pty Ltd v Short Punch & Greatorix [2001] 2 Qd R 580, not followed.

BROKATE & ANOR v SLOAN LEGAL
[2013] SASC 87
JUDGE DART:

This is an application made pursuant to s 42 of the Legal Practitioners Act 1981 (SA) (“the LPA”) for the taxation of solicitors’ fees. The applicants are not, and never have been, clients of the solicitor. They are the registered proprietors and mortgagors of land at 6 North Terrace, Bute (“the land”). They are elderly and were represented at the hearing of this preliminary matter by their son-in-law.
Background matters
At the relevant time the applicants had mortgaged their land to RMD Pty Ltd and Ms Pamela Duffy. The mortgage was for a fixed term which expired in 2009. The terms and conditions of the mortgage were those contained in the Law Society Standard Terms and Conditions for Mortgages Number 8367687 (“the Standard Terms”).
The Standard Terms provided that in the event the mortgagees were to take enforcement proceedings, the expenses reasonably incurred in doing so became a debt due from the mortgagors and were included in the definition of mortgage monies.[1]
[1] Standard Terms and Conditions clause 30.
The applicants defaulted under the mortgage and the mortgagees commenced enforcement proceedings.[2] The proceedings were commenced following the failure of the applicants to comply with the Notice of Default served on them on or about 2 May 2012. The Court made an order for possession of the land on 21 November 2012.
[2] Action number SCCIV-12-1033.
Thereafter the applicants were able to refinance and put themselves into a position to discharge the mortgage debt. The enforcement expenses were paid under protest.
This application
The applicants complain that the enforcement expenses charged by the mortgagees were excessive.
In particular they complain of two matters which are:
1Legal fees in the amount of $5800.85 charged by the respondent to the mortgagees.
2An amount of $2200 in default fees charged by Eastern Equity, the broker of the mortgagees.
As mentioned, the application is made pursuant to s 42 of the LPA which provides:
42—Costs
(1)On the application—
(a)of a person claiming to be entitled to legal costs; or
(b)of a person who is liable to pay, or who has paid, any legal costs,
the Supreme Court may tax and settle the bill for those costs.
(1a)The Supreme Court's power to tax and settle a bill of costs (but no other power of the Supreme Court under this section) may, subject to any rule, order or direction of the Court, be exercised by the Registrar of the Court.
(1b)Subject to the rules of the Supreme Court, an appeal lies to a judge against a decision of the Registrar pursuant to subsection (1a).
(2)Where an application has been made under subsection (1), the Supreme Court may—
(a)restrain a person claiming to be entitled to the costs from commencing an action for recovery of the costs; or
(b)stay any proceedings for recovery of the costs.
(3)The Court may, on taxation of a bill of costs under this section—
(a)order the refund of any amount overpaid; or
(b)where the proceedings have been instituted by the person seeking recovery of the costs—order payment of legal costs in accordance with the taxed bill.
(4)The Board may institute proceedings for the taxation of legal costs under this section on behalf of a person who is liable to pay, or has paid, the legal costs and must institute such proceedings if ordered to do so by the Tribunal.
(5)Any court in which proceedings for the recovery of legal costs have been instituted may order the plaintiff to apply to have the legal costs taxed in accordance with this section, and may adjourn the proceedings until the taxation has been completed.
(6)A legal practitioner may make an agreement in writing with a client for—
(a)payment of a specified amount by way of legal costs (which may—but need not—consist of a daily, hourly or other time-related rate for professional work carried out by the legal practitioner on the client's behalf); or
(b)payment of legal costs in accordance with a specified scale; or
(c)subject to any limitations imposed by the Society's professional conduct rules or the regulations—payment of a contingency fee to be calculated on a basis set out in the agreement on fulfilment of a condition stated in the agreement.
(7)The Supreme Court may, in proceedings under this section, rescind or vary an agreement under subsection (6) if it considers that any term of the agreement is not fair and reasonable.
It is clear that the Court cannot, on this application, review the costs charged by Eastern Equity. Those costs do not relate to legal fees and nor was the person charging those fees a legal practitioner. An application pursuant to the LPA is quite narrow and necessarily restricted to the amounts charged by a legal practitioner.
The respondent has taken a preliminary point. It says the applicants have no standing to request a taxation of the fees it charged its client. It says that the applicants were not persons liable to pay or who have paid any legal costs; rather they have merely paid the expenses of the mortgagees.
The preliminary point that needs to be determined, therefore, is whether the words “a person who is liable to pay or who has paid” contained in s 42(1)(b) of the LPA are broad enough to extend to a person who is not the client of the solicitor whose bill is sought to be taxed.
There is a considerable amount of authority on the question of the right of a third party to have a solicitor’s bill taxed. Each of those authorities deals with particular statutory regimes. Some of the statutory regimes anticipate a taxation by a person other than a solicitor’s client. However, all of the relevant statutes contain the criterion “a person who is liable to pay or who has paid”.
There is some support for the respondent’s position. The Queensland Court of Appeal in Equuscorp Pty Ltd v Short Punch & Greatorix[3] had to consider the term “liable to pay” in relation to a request to tax a bill under the relevant Queensland legislation.
[3] [2001] 2 Qd R 580.
In Equuscorp the applicant was a unit holder in a unit trust. The manager of the trust had, quite properly, engaged solicitors to conduct some business on behalf of the unit trust. The unit holders had an obligation to reimburse the manager for those legal costs, but complained about the amount of the costs. They sought a taxation.
The Court took a narrow view of the words “liable to pay”. The Court held that the term “liable to pay” carried the usual meaning of “responsible in law” and a person liable to pay was a person against whom the payment of the costs could be enforced.[4] As the unit holder was not a person against whom the obligation to pay the solicitor’s costs could be enforced, the Court held that the unit holder was not a person liable to pay. Accordingly, it had no right to a taxation of the bill.
[4] Ibid, at 582.
However, there are other cases which take a broader view of the term “liable to pay or who has paid”.
One of those is the New South Wales Court of Appeal judgment in Debney v Semerdziev.[5]It dealt with a claim by a second mortgagee to have the legal costs of the first mortgagee taxed. It was argued that the second mortgagee was not “a person liable to pay or who has paid” the relevant costs.
[5] [1982] 2 NSWLR 391.
The Court held that because the legal costs came out of the proceeds of the sale of the mortgaged property, that in substance it was the second mortgagee’s money that was used to pay those costs.[6] That meant it had paid the costs and accordingly it was entitled to request a taxation.
[6] Ibid, at 394.
For all practical purposes, the position of a mortgagor is the same as that of a second mortgagee.
The Court of Appeal in Western Australia in Andrew Koh Nominees Pty Ltd v Receiver & Manager of the Balneum Joint Venture[7] considered the judgments in both Equuscorp and Debney. It preferred the Debney approach and held that a person will be liable to pay costs if the person’s property may lawfully be applied in paying the legal fees in a bill of costs or in reimbursing another person for legal fees in a bill which the other person has paid to the relevant practitioner.[8]
[7] (2007) 33 WAR 561.
[8] Ibid, at [34].
In my opinion, the broader approach taken in both Debney and Andrew Koh is the correct approach to follow. The relevant provisions of the LPA are remedial in nature and permit the Court to supervise the conduct of its officers. Unless it is otherwise unavoidable, the Court should not interpret the provision in a way which will have the practical effect of reducing its capacity to supervise the conduct of its officers.
The applicants have paid the legal fees of the respondent. Those fees were simply added to the mortgage debt and paid to discharge the mortgage. As persons who have paid legal costs, they are entitled to request a taxation of those costs.