Burbidge v Wolf

[2008] NSWSC 60

CITATION:	Burbidge v Wolf [2008] NSWSC 60 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	23 November 2007, 3 December 2007
JUDGMENT DATE :	11 February 2008
JUDGMENT OF:	Nicholas J
DECISION:	Par 73
CATCHWORDS:	EQUITY – outstanding professional fees – whether proceedings for recovery of costs under Legal Profession Act 1987 or for breach of trust or restitution – whether trust established – whether compliance with requirements for disclosure – compliance mandatory – whether statutory immunity established
LEGISLATION CITED:	Bankruptcy Act (Cth) 1966 Legal Profession Act 1987 Legal Profession Regulation 2002
CATEGORY:	Principal judgment
CASES CITED:	Conder v Silkbard [1999] NSWCA 459 Coshott v Lenin [2007] NSWCA 153 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22 Koutsourais v Metledge & Associates [2004] NSWCA 313 Kelly v Hogan [2004] NSWSC 238 Rahnam Investments Pty Ltd v Esplin [2004] NSWSC 529 Wentworth v Rogers [2002] NSWSC 709 Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474 Zizza v Seymour [1976] 2 NSWLR 135
PARTIES:	Richard John Burbidge - plaintiff Freya Wolf - defendant
FILE NUMBER(S):	SC 1343/06
COUNSEL:	F Corsaro SC/A C Casselden - plaintiff M Christie/V Culkoff - defendant
SOLICITORS:	Hicksons - plaintiff Steven Klinger - defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Nicholas J

11 February 2008

1343/06 Burbidge v Wolf

JUDGMENT

1 His Honour : These proceedings arise from a dispute between the plaintiff, one of Her Majesty’s Counsel, and the defendant, wherein she denies liability for the payment of his unpaid professional fees.

2 In November 2002 the defendant, by her then solicitors, Mr Malcolm Johns and Mr George Mallos, of the firm Malcolm Johns & Company (collectively referred to as Johns), retained the plaintiff and junior counsel on a contingency basis to appear for her as plaintiff at the trial of her medical negligence action in the District Court of New South Wales (no. 6782/01) against Dr Norman Olbourne and North Shore Private Hospital as defendants. The hearing took place between 7 and 16 April 2003 before Herron DCJ. On 8 May 2003 a verdict for the defendant was entered against Dr Olbourne in the sum of $292,536.73, and a verdict for North Shore Private Hospital was entered against the defendant. Dr Olbourne was ordered to pay the defendant’s costs.

3 The plaintiff was subsequently retained by Johns to appear for the defendant on Dr Olbourne’s appeal. The appeal was heard by the Court of Appeal on 11 March 2004, and was dismissed with costs.

4 In these proceedings the plaintiff seeks to recover an amount which represents the balance of the outstanding professional fees owing to him. By his amended statement of claim he claims the following relief:
“1.1 A Declaration that the Defendant holds $34,949.44 received by her from the insurer of Dr Norman Olbourne on trust for the Plaintiff.
1.2 Damages in the sum of $34,949.44 for breach of trust.
1.3 In the alternative an order that the Defendant pay to the Plaintiff the sum of $34,949.44 on restitutionary principles.”

He also claims interest and costs.

5 The pleading includes the following particulars:
“20. the Defendant has declined to acknowledge the said trust and has failed to pay the Plaintiff his unpaid professional fees of $34,949.44. The sum of $34,9494.44 remains in trust and the sum of $53,000.00 plus accumulated interest received by the Defendant remains imbued with a trust. The Defendant now refuses to pay the sum of $34,949.44 to the Plaintiff.
…
24. The Defendant accepted the benefit of the Plaintiff’s services in both the District Court and the Court of Appeal, and received from Dr Olbourne’s insurer sums of money in consequence.

[Particulars of sums received were stated]
25. Of the said sums, $370,000.00 was paid to the Defendant on behalf of Dr Olbourne to provide to the Defendant a fund from which to meet her liability for legal costs and disbursements, to the extent that Dr Olbourne was required to do so by the costs orders of the District Court and the Court of Appeal (“the Fund”).
26. The Fund included a sum of $44,924.44 then owing by the Defendant to the Plaintiff in respect of his said services.
27. On 28 February 2005 the Plaintiff was paid a sum of $9,975.00 by the said Malcolm Johns, but has otherwise received no sum in reduction of his outstanding fees, whereby the sum of $34,949.44 remains outstanding.
28. In the circumstances the Defendant has refused to pay the sum of $34,949.44 owing to the Plaintiff for legal services provided by the Plaintiff to the Defendant and it would be unjust and unconscionable for the Defendant to retain the benefit of those services and the benefit from the Fund which she has accepted at the expense and to the detriment of the Plaintiff.”

6 The defendant denies liability principally on the ground that the plaintiff is precluded from maintaining these proceedings by reason of his failure to comply with the requirements of the Legal Profession Act 1987 (the Act) as to disclosure of costs of the provision of legal services, and for the giving of a bill of costs. She also denies the existence of the trust claimed by the plaintiff, and that there is any entitlement to recovery on restitutionary principles.

7 Also before the court is the defendant’s notice of motion, filed 22 September 2006, in which she appeals against the orders of McLaughlin AsJ made 30 June 2006 that her application for summary dismissal of the plaintiff’s claim be dismissed, and that she pay the plaintiff’s costs thereof.

Background

8 By letter of 3 December 2002 to Johns, the plaintiff set out details of the fees he proposed to charge for acting for the defendant in the action. He advised that he was undertaking the matter on a contingency or speculative basis, and that his fees represented his usual fees with a 25% premium as provided under the Act. He stated an estimate of the likely

amount of the legal costs to be provided to be between $60,000 and $65,000 plus GST. The letter included the following:

“ Request for detail
The memorandum of fees which I render will be in accordance with this fee agreement in the traditional format. Regulation 45 of the Legal Profession Regulations sets out certain matters to be included in a bill of costs for the purposes of section 193(1) of the Act, which relates to bills of costs rendered by practitioners to clients.
It is my view that s193 and reg.45 do not have any operation in respect of bills of costs rendered by a practitioner to another practitioner. Should you wish any further detail within a reasonable time after receipt of my memorandum of fees, (say 3 weeks) I shall be happy to provide it. In the absence of any such request, any obligation to comply with reg.45, should it exist, will be deemed to be waived.”

9 On 17 April 2003, after the District Court hearing, the plaintiff sent Johns a memorandum of fees for the amount of $116,631.25 including GST. The information consisted of details of his services, and the fee in each case.

10 On 23 May 2003, Herron DCJ granted Dr Olbourne a stay of proceedings for 28 days conditional upon payment to the plaintiff of the sum of $125,000. On 18 June 2003 this sum was sent to Johns by Dr Olbourne’s solicitors, Ebsworth & Ebsworth (Ebsworth).

11 In his letter of 29 July 2003 to the defendant Johns recorded, in effect, that there was no fee agreement with her. He enclosed the firm’s bill of costs dated 22 July 2003 and a letter dated 25 July 2003 which contained details of a proposed fee agreement for acting on the appeal.

12 By letter of 26 November 2003 to the plaintiff, Johns stated that notwithstanding the terms of the contingency agreement, the defendant would make an advance payment to him and junior counsel to be deducted from any fees to which they became entitled, and to be refunded if the verdict was set aside.

13 On 16 December 2003 the defendant paid the plaintiff direct the sum of $30,000.

14 On 29 March 2004, after the hearing of the appeal, the plaintiff sent Johns a memorandum of fees for the amount of $69,712 including GST. The information consisted of details of his services referable to the preparation and conduct of the appeal, and the fee in each case. On the same day the plaintiff sent an account rendered for the total amount of $156,243.75, being the total of fees charged for the trial and the appeal less the $30,000 received in part payment.

15 On 6 May 2004 Dr Olbourne’s appeal was dismissed with costs.

16 On 11 May 2004 the plaintiff sent an account rendered for his fees, including an interest component of $9,832.08.

17 On 24 May 2004 Ebsworth sent Johns the balance of the verdict and interest in the sum of $152,700.14.

18 On 2 June 2004 Johns submitted to Ebsworth an assessment of costs and disbursements, which included the plaintiff’s fees according to his memoranda of 17 April 2003 and 29 March 2004.

19 By her email of 4 June 2004, the defendant instructed Johns not to make any payments “… until the costs have been agreed to and approved by the court appointed assessor”.

20 On 11 June, 25 June and 9 July 2004 the plaintiff sent accounts rendered to Johns claiming fees in the sum of $156,243.75 and interest.

21 On 12 July 2004 Johns sent the plaintiff a cheque for $126,063.75 in part payment. The balance of fees and interest claimed by the plaintiff was the sum of $42,175.41. The payment was made contrary to the defendant’s instructions.

22 On 13 July 2004 Johns sent the defendant a copy of the plaintiff’s memoranda of fees of 17 April 2003 and 29 March 2004. This was the first time she received these documents.

23 In her letter of 14 July 2004 to Johns, the defendant expressed her objection to the payment to the plaintiff contrary to her instructions. She instructed that the monies received from Ebsworth be paid to her less amounts payable to junior counsel and for approved outgoings.

24 On 15 July 2004 the plaintiff sent Johns a memorandum of fees. It consisted of details of his fees for drafting submissions for an indemnity costs application in the sum of $2,475 including GST, and an account rendered for the amount of $42,175.41, which amounts totalled the sum of $44,650.41.

25 On about 10 September 2004 Johns ceased to act for the defendant. She subsequently retained Mr Steven Klinger, solicitor, to act for her.

26 In his letter of 23 September 2004 to Ebsworth’s costs assessors, Mr Klinger offered to accept the sum of $395,000 in settlement of the defendant’s costs

and disbursements. The letter specified various matters for consideration, including the following:

“5. It is clear that the bulk of the costs in the proceedings are costs for Counsel, totalling $278,650.75. Of this amount the sum of $186,063.75 is payable to Mr RJ Burbidge QC, who conducted the matter on a contingency basis and was accordingly entitled to the 25% mark up. Rarely are such costs discounted significantly, if at all, on a proper assessment.”

27 On about 20 October 2004 the costs assessors agreed to payment of the sum of $350,000 for the defendant’s costs and disbursements. The defendant directed that this amount be paid to Mr Klinger.

28 In his letter of 25 October 2004 to Johns, the plaintiff stated the following:
“As requested I confirm that my contractual arrangement for fees are with your firm, and that I look to you for their payment.
Also, as requested I attach hereto an account showing the amount outstanding calculated in accordance with our fee agreement.”

The enclosed account claimed outstanding fees and interest in the sum of $45,473.96.


29 On about 26 November 2004 Ebsworth paid the defendant’s costs and disbursements by a cheque to her for $250,000 and a cheque to Mr Klinger for $93,000. This last amount was placed in a controlled monies account pending resolution of Johns’ claim for a lien in that amount, which included fees claimed by the plaintiff in the sum of $45,473.96.

30 On about 14 February 2005 Johns’ claim was settled. Relevantly, he accepted payment of $40,000, and agreed to indemnify the defendant for any monies owing to counsel. The balance held in the controlled monies account was to be paid to the defendant.

31 By letter of 15 February 2005 to Johns, the plaintiff advised that he would accept $40,000 in final settlement of his fees if paid immediately.

32 By letter of 28 February 2005 to the plaintiff, Johns disputed entitlement to the fees claimed. He enclosed a cheque in the sum of $9,975 in final settlement of the plaintiff’s fees, which the plaintiff banked.

33 On 15 March 2005 the plaintiff sent Johns an account claiming outstanding fees and interest in the sum of $37,780.24.

34 On 9 April 2005 the plaintiff commenced proceedings against Johns in the Local Court (no. 5037/05) for recovery of fees in the sum of $37,780.24, and interest. Johns filed a defence and cross-claim. The proceedings were dismissed at a call-over on 11 August 2005 as the plaintiff declined to proceed further by reason of Mr Johns’ involvement in proceedings under the Bankruptcy Act 1966 (Cth).

35 By letter of 14 December 2005 to the defendant, the plaintiff’s solicitors demanded payment of his fees. It included the following:
“We act for Mr RJ Burbidge of Queen’s Counsel who is currently owed the sum of $39,330.98 in accordance with the Memorandum of Fees attached. As you are aware, costs in your favour were awarded following dismissal of the appeal against your verdict. From our enquiries it seems that you retained Mr Steven Klinger to recover those costs, which were negotiated at a figure of $350,000. Those costs included our client’s fees, and accordingly the sum received, whether by Mr Klinger or yourself is impressed with a trust to meet those fees (so far as they are outstanding) in accordance with the principles set out in Barclays Bank Ltd v Quist Close Investments Ltd [1970] AC 567 [sic]. If those monies were received by Mr Klinger and on-paid to you they remain impressed with the trust and are repayable by you. Our client is entitled to interest on outstanding fees in accordance with the Fee Agreement negotiated by Mr Johns on your behalf.
Our client has not been paid any part of the $350,000 paid by the defendant’s insurer. As we are uncertain whether the monies were received by Mr Klinger or yourself we have written to Mr Klinger in terms similar to this letter.
Should the monies outstanding to our client not be paid to us on or before the 9th January next we are instructed to take action in the Equity Division of the Supreme Court to recover the sum outstanding.”

The plaintiff’s claim and the statutory provisions

36 The preliminary and central question for decision is whether these proceedings are proceedings for the recovery of costs against the client within s 174(1)(e), s 182(2) and s 192(1) of the Act as set out below. If they are of this kind the provisions of the Act concerning the charging and recovery of legal costs will apply.

37 In Koutsourais v Metledge & Associates [2004] NSWCA 313, par 4 and par 9, Hodgson JA (Beasley, Bryson JJA agreeing) held that the task for the court is to determine whether the proceedings amount in substance to proceedings for the recovery of costs by a (barrister or) solicitor. His opinion was that this is a question concerning the sufficiency of the connection between the legal costs and the proceedings, which sometimes will be a difficult one of degree. Alternatively, the question may be posed: can it be said that the proceedings are not proceedings for the recovery of costs?

38 The plaintiff’s claim may be briefly summarised. He seeks a declaration that the defendant holds $34,949.44 received by her from Dr Olbourne’s insurer on trust for him and, by reason of her refusal to pay his fees, claims damages equivalent to the amount of the unpaid fees for breach of trust. It was explained that the trust arose as a result of the payment of the sum of $350,000 in settlement of the defendant’s claim for costs and disbursements, of which a component was an amount referable to the plaintiff’s fees. In negotiations for the settlement of this claim, in his letter of 23 September 2004 Mr Klinger had represented to Ebsworth’s costs assessors that the costs included an amount payable as fees to the plaintiff. It was put that, in circumstances where the defendant received an amount which included the plaintiff’s outstanding fees which she now denies are owing, a court of equity would regard her denial as unconscionable and would find that she holds those fees upon a constructive trust for the plaintiff. Alternatively, it was claimed that in the circumstances it was unconscionable for the defendant to withhold payment of the fees and, having regard to restitutionary principles, the court should order her to pay him.

39 In short, senior counsel for the plaintiff submitted (T p 38) that the claim was not one for the recovery of costs but one “… based on trust, or in restitution, which doesn’t come within the ambit of the Act, in any event”.

40 However, in my opinion, these proceedings, in substance, are proceedings for the recovery of costs for legal services against the defendant. This is evident from a reading of the amended statement of claim as a whole and of the pleaded particulars, for example, pars 20, 24-28. The particulars are consistent with the terms of the letter of demand of 14 December 2005 from the plaintiff’s solicitors to the defendant in which proceedings to recover the sum of $39,330.98, described as the sum outstanding under the plaintiff’s memorandum of fees, were threatened. I am at a loss to see how the proceedings can be found to be otherwise. The plaintiff’s submissions to the contrary must be rejected.

41 The scope of the statutory immunity of a person under s 182(2) and s 192(1) extends to all proceedings which are, in substance, proceedings for the recovery of costs. It follows that if the proceedings are of such kind, the immunity operates irrespective of the nature of the cause of action upon which the claim is based, or of the form of relief sought. In Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474 par 150, Basten JA said that in such proceedings recovery cannot arise without compliance with the statutory scheme. He continued:
“150 … Section 192 … deals not with the entitlement, but the right to take proceedings for recovery of costs. As noted above, in the absence of disclosure, there is no right in a lawyer to recover, and no obligation of a client to pay, costs, absent assessment: s 182(1).”

42 Accordingly, it does not seem to me that the plaintiff can circumvent the immunity by claiming that the defendant’s liability to pay his fees arose under a trust, or that, in the circumstances, it was unconscionable for her to refuse to pay.

43 The question whether or not the plaintiff is precluded from commencing or maintaining these proceedings requires consideration of the arrangements he made for his fees for acting for the defendant against the background of the provisions of Pt 11 of the Act. This is a case in which there was no costs agreement between the plaintiff and the defendant, and no bill of costs was given by the plaintiff to her. Because the plaintiff was retained on behalf of the defendant by Johns as the instructing solicitor, it is necessary to refer to the provisions which are directed to that relationship. The relevant provisions are:
“ 174 Clients’ rights under Part
(1) This Part gives the following rights to any client of a barrister or solicitor:
(a) the client is to be given information about how a barrister or solicitor will charge for costs for legal services and an estimate of the likely cost of legal services (Division 2),

(b) the client need not pay the barrister’s or solicitor’s bill until it has been assessed by a costs assessor if the client is not given the information about how costs will be charged (Division 2),
…
(d) the client is not liable to pay interest on unpaid costs unless notice that interest will be charged is set out in the bill of costs (Division 4),
(e) proceedings against the client for the recovery of costs cannot be brought unless a bill of costs in the proper form has been given to the client and at least 30 days have passed (Division 5),
…
176 Obligation to disclose basis of costs to instructing practitioner
(1) A barrister or solicitor who is retained on behalf of a client by another barrister or solicitor must disclose to that other barrister or solicitor in accordance with this Division the basis of the costs of legal services to be provided to the client by the barrister or solicitor.
(2) The following matters are to be disclosed to the other barrister or solicitor:
(a) the amount of the costs, if known,
(b) if the amount of the costs is not known, the basis of calculating the costs,
(c) the billing arrangements,
(d) any other matter required to be disclosed by the regulations.
177 Obligation to disclose estimated costs
…
(2) A barrister or solicitor who is retained on behalf of a client by another barrister or solicitor must disclose to that other barrister or solicitor in accordance with this Division an estimate of the likely amount of the costs of legal services to be provided to the client by the barrister or solicitor, if the amount of the costs is not disclosed under section 176.
(3) A barrister or solicitor who has disclosed to a person an estimate of the likely amount of the costs of legal services is to disclose to that person any significant increase in that estimate.
…
182 Effect of non-disclosure of matters related to basis of costs
…
(2) A barrister or solicitor who fails to make a disclosure in accordance with this Division of the matters required to be disclosed by section 175 or 176 in relation to costs may not maintain proceedings for the recovery of the costs unless the costs have been assessed under Division 6.
…
189 Rights may not be waived
(1) Any provision of a costs agreement or other agreement that is inconsistent with this Division is void to the extent of the inconsistency.
(2) In particular, any provision of a costs agreement or other agreement that purports to waive rights to an assessment of costs under this Part, or the right to receive a bill of costs in the form required for assessment under this Part, is void.
…
192 Bill of costs to be given before costs can be recovered from client
(1) Proceedings for the recovery of costs by a barrister or solicitor for providing legal services must not be commenced or maintained against any person unless at least 30 days have passed since a bill for those costs was given to the person in accordance with this Division.
(2) The Supreme Court may make an order authorising a barrister or solicitor to commence or maintain proceedings against a person sooner, if the Supreme Court is satisfied that the person is about to leave New South Wales.
…
193 Form of bill of costs
(1) The regulations may make provision for or with respect to the form of, and the particulars to be included in, bills of costs.”
Legal Profession Regulation 2002:

“ 45 Particulars in bill of costs
(1) For the purposes of section 193 (1) of the Act, the following particulars are to be included in a bill of costs:
…
(c) any intended claim for interest under section 190 of the Act if the costs are not paid (including the rate of interest),
(d) a statement:
…
(ii) in a case where the bill of costs is given by a barrister or solicitor who was retained by another barrister or solicitor to act on behalf of a client and the bill of costs is given to that other barrister or solicitor—that the barrister or solicitor who is given the bill of costs may apply to have the costs assessed under Part 11 of the Act within 30 days after the bill of costs is given …”

44 Section 182(2) makes it clear that where a barrister has not made disclosure of the matters required to be disclosed by s 176 and reg 45 (including such matters as the basis of calculating costs, billing arrangements, any intended claim for interest, and notice of the solicitor’s right to apply for an assessment of costs) proceedings for recovery of the costs may not be maintained unless the costs have been assessed ( Kelly v Hogan [2004] NSWSC 238, par 35). The provision operates as a bar to recovery pending assessment. Further, in Wentworth v Rogers [2002] NSWSC 709, (“ Wentworth 2”) Barrett J said (par 21) “ … The consequence of failure by a lawyer to comply with the disclosure requirements is that the lawyer has no right to recover costs (and the client has no obligation to pay them) unless the costs have been assessed under Div 6 of Pt 11. This is the effect of s 182”.

45 Interest on unpaid costs may not be charged unless the bill of costs contains a statement, presumably under reg 45(1)(c), that interest is payable and of the rate of interest (s 190(2)).

46 The effect of s 192(1) was considered in Conder v Silkbard [1999] NSWCA 459 in which Beasley JA (par 27) held that it required a barrister or solicitor to deliver a bill of costs to a client at least 30 days before commencing action for the recovery of legal costs charged to the client. Her Honour said:
“29 … The terms of s 192(1) are mandatory. Proceedings for the recovery of legal costs must not be commenced unless a bill is given to the client at least 30 days beforehand. Failure to comply with s 192(1) is a defence to an action brought by a solicitor to recover legal costs claimed to be owing to the solicitor: Zizza v Seymour [1976] 2 NSWLR 135 … There is nothing in the (Act) (apart from s 192(2) which does not apply here) which excuses the failure to give a bill at least 30 days before the commencement of proceedings for the recovery of costs. Moffitt P in Zizza v Seymour at 137 is very much in point:
‘The defect in [the solicitor’s] case, by reason of the absence of a proper bill, could, not be corrected by delivery of a bill after the commencement of proceedings. The client or party to be charged is entitled to have the proper bill before the proceedings against him are commenced.’”
(See also Fitzgerald JA pars 42, 43 and Wentworth 2, par 28.)

47 In Zizzav Seymour [1976] 2 NSWLR 135 Moffitt P (p 139) said:
“… The relevant provisions are designed to make the client or person to be charged, properly aware of, and have time to consider, the amount of the solicitor’s charges. He is then better able to make decisions as to payment of the bill, or having it taxed …
The defence under (the section) does not depend upon the client claiming the solicitor’s charges are excessive. The requirements of the section are designed to provide the client with the material and time to enable him to form an opinion, with or without advice, whether the bill is excessive before he is faced with legal proceedings.”

48 A costs agreement is void if not in writing (s 184(4)). A costs agreement may be made under which payment is contingent on the successful outcome of the matter in which the legal services are provided (s 186(1)), and may provide for the payment of a premium on those costs otherwise payable (s 187(1)).

49 A client who is given a bill of costs may apply to the proper officer of the court for an assessment of those costs (s 199(1)). A similar application may be made by an instructing practitioner for an assessment of the bill of costs given by the barrister or solicitor retained (s 200(1)).

Determination

50 Analysis of the documents shows, and it appeared to be common ground, that there was no costs agreement between the plaintiff and the defendant, and no disclosure of fees was made by the plaintiff to the defendant, and no bill of costs for his services was given by the plaintiff to the defendant as provided by the Act, or at all. As stated in his letter of 25 October 2004 to Johns, the plaintiff’s contractual arrangements for fees were made with Johns, and he looked to the firm for payment.

51 The plaintiff gave Johns memoranda of fees dated 17 April 2003, 29 March and 15 July 2004. He sent accounts rendered to Johns in May, June and July 2004, and on 15 March 2005. A copy of the memoranda of 17 April 2003 and 29 March 2004 was sent to the defendant by Johns on 13 July 2004. The plaintiff accepted (T pp 39, 40) that none of these included the statement required under reg 45(1)(d)(ii) to the effect that Johns may apply to have the costs assessed under Pt 11 of the Act within 30 days after the bill of costs (or memorandum) is given.

52 Under s 192(1), the question is whether a bill for the costs which are sought to be recovered in these proceedings was given to the defendant in accordance with Div 4 of Pt 11. Such a bill must include the particulars required by reg 45 (s 193(1)). The authorities say that compliance is mandatory and strict. By reason of the omission of the statement under reg 45(1)(d)(ii) from the plaintiff’s memoranda to Johns none was a bill of costs capable of complying with s 192(1). The defendant submitted that the inevitable consequence is that the plaintiff is barred from recovering the costs he claims in these proceedings.

53 Also omitted from the plaintiff’s memoranda was a notice that interest would be charged on unpaid costs, a particular required under reg 45(1)(c). Accordingly, the defendant is not liable to pay interest (s 174(1)(b), s 190(2)).

54 Although irrelevant, I observe that none of the bills of costs given to the defendant by Johns included a statement required under reg 45(1)(c) and reg (d)(i), and was, therefore, non-complying.

55 An additional ground of challenge to the plaintiff’s entitlement to maintain these proceedings was based on the provisions of Div 2 of the Act relating to the disclosure of matters relating to costs.

56 By s 176(1) the plaintiff was under a mandatory requirement to disclose to Johns, as the instructing solicitor, the basis of the costs of the legal services to be provided to the defendant. The matters for disclosure include those required by reg 45 (s 176(2)(d)). The disclosure must be in writing and made separately, or in a costs agreement (s 179).

57 The defendant submitted that as neither the plaintiff’s letter of 3 December 2002 nor his memoranda included the reg 45(1)(d)(ii) statement, s 182(2) operated to bar the plaintiff from maintaining these proceedings unless the costs had been assessed. It was submitted that the consequence of failure by a practitioner to comply with the disclosure requirements is that the practitioner has no right to recover costs unless the costs have been assessed under Div 6 of Pt 11 ( Wentworth 2 , par 21; Kelly , par 35; Wentworth v Rogers (2006) 66 NSWLR 474, pars 112, 137). Further, if there has been relevant non-disclosure, a client need not pay the practitioner’s bill until it has been assessed (s 174(1)(b)).

58 In response, the plaintiff submitted that compliance with reg 45 had been waived. Reliance was placed on the following statement in his letter of 3 December 2002 to Johns:
“It is my view that s193 and reg.45 do not have any operation in respect of bills of costs rendered by a practitioner to another practitioner. Should you wish any further detail within a reasonable time after receipt of my memorandum of fees, (say 3 weeks) I shall be happy to provide it. In the absence of any such request, any obligation to comply with reg.45, should it exist, will be deemed to be waived.”

59 Reliance was also placed on evidence that Johns had been instructed to retain the plaintiff after a draft costs proposal of 26 November 2002 containing a similar statement had been provided to the defendant. It was put that, in the circumstances, the defendant and Johns, as her solicitor, knew of the statement and, by their silence, should be taken to have accepted what it proposed.

60 In my opinion, the plaintiff’s submission fails. Let it be assumed, without deciding, that the defendant and/or Johns agreed to waive the plaintiff’s obligation to comply with reg 45. Plainly such an agreement was one by which he would be relieved from compliance with his statutory obligations under s 176(2)(d) to disclose the matters required by reg 45, or to give a bill of costs in the required form. In my opinion any such agreement was void under s 189(1) because inconsistent with Div 3, and void under s 189(2) because it purports to waive the right to receive a bill of costs in the form required for assessment. In any event, the evidence relied upon by the plaintiff does not support a finding that the defendant, in the circumstances, had given up her statutory rights and immunities which would be enlivened by non-compliance with reg 45.

61 For these reasons, I accept generally the defendant’s submissions. I hold that the plaintiff has no right to take these proceedings for the recovery of costs against the defendant, and, absent assessment, the defendant is under no obligation to pay them.

62 My conclusion makes it unnecessary to determine whether the plaintiff’s claims are otherwise well founded. Nevertheless, in deference to the parties’ submissions I make some brief observations about them.

63 I have referred earlier (par 38) to the circumstances in which the trust is said to arise. The negotiations for the defendant’s costs commenced with the letter of 2 June 2004 from Johns to Ebsworth which included a detailed assessment of costs and disbursements in the sum of $440,829.79, including the plaintiff’s fees according to his memoranda of 17 April 2003 and 29 March 2004 in the total sum of $186,063.75. On 4 June 2004 the defendant instructed Johns not to make any payment of these costs pending agreement and assessment. Then followed correspondence in which Ebsworth sought, and were given, further information for the purposes of assessment. On 31 August 2004 Ebsworth’s costs assessors offered the sum of $310,000 in settlement of the claim. In response, on 23 September 2004, Mr Klinger proposed settlement in the sum of $395,000. In support, he invited consideration of a number of matters which included the reference to the plaintiff’s fees in the context of the statement: “[it] is clear that the bulk of the costs in the proceedings are costs for Counsel, totalling $278,650.75”.

64 Agreement was reached in the sum of $350,000 of which, on about 26 November 2004, $250,000 was paid to the defendant and $93,000 to Mr Klinger. From the sum held by him Mr Klinger settled Johns’ claim for payment of fees which included those claimed by the plaintiff, by the payment of $40,000.

65 The documents show that, at least, from 4 June 2004 the defendant did not accept liability to pay the plaintiff’s, and other, fees, unless assessed and agreed. In the circumstances, there is nothing which shows that costs were paid or received with the intention that the amount claimed by the plaintiff, or any amount, would be held by the defendant on the plaintiff’s behalf. The payments to the defendant and to Mr Klinger did not identify any amount as referrable to the plaintiff’s fees. The only conclusion open is that the amount was paid and received for the defendant’s use. Her entitlement to spend it as she saw fit was unqualified. In my opinion, there is simply no evidentiary basis for finding the existence of a trust, constructive or otherwise, as alleged by the plaintiff, or that the defendant owed a fiduciary duty to the plaintiff to pay the fees claimed by him.

66 The claim to be a beneficiary under a trust was essentially based on the notion of “unconscionability”. In his written submissions (par 7) the plaintiff put: “… the circumstances by which the Plaintiff received payment of an amount from the Insurer, including the Plaintiff’s outstanding fees, which the Defendant now denies owning, are such that a court of equity will regard it as unconscionable for the Defendant to continue to assert that the Plaintiff has no interest in monies received by her from the Insurer to satisfy her obligations to the Plaintiff”.

67 The concept of “unconscionability” in the way it was raised as an issue in these proceedings was considered in Rahnam Investments Pty Ltd v Esplin [2004] NSWSC 529 by Barrett J who said:
“61 Similarly the assertions made by Rahnam that a constructive trust arises fails for lack of ‘proximity’, for want of a better term, between the parties. Rahnam seeks to bring its claim under the general rubric of “unconscionability”. But to say, in isolation, that particular conduct is “unconscionable” leads nowhere. As the High Court has emphasised most recently in Australian Broadcasting Commission v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 and Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 77 ALJR 926, “unconscionability” is a characteristic of action or inaction which may preclude assertion of or reliance on legal rights in circumstances where equity has the capacity, in any event, to intervene. It is not itself a cause of action or an independent basis for intervention. In the present case, the capacity of equity upon which Rahnam seeks to rely is the capacity to find or impose a constructive trust under Guimelli v Guimelli principles as an instrument for redressing unconscionability. For reasons I have given, Rahnam’s attempt in that direction fails.”

68 Unconscionability of itself provides no basis for equity to intervene. As I have found, the costs were paid and received for the defendant’s own use. The plaintiff’s claim on this ground cannot succeed.

69 For the same reasons the claim based on the notion of unjust enrichment must fail. The plaintiff submitted that in circumstances where the defendant denied the existence of any binding agreement to pay the plaintiff’s outstanding costs it was unconscionable for her to enjoy the payments in circumstances in which it was not specifically intended or specially provided that she should so enjoy them.

70 In Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22 the High Court held:
“150 First, whether enrichment is unjust is not determined by reference to a subjective evaluation of what is unfair or unconscionable: recovery rather depends on the existence of a qualifying or vitiating factor falling into some particular category[124]. In David Securities Pty Ltd v Commonwealth Bank of Australia [125], Mason CJ, Deane, Toohey, Gaudron and McHugh JJ gave as instances of a qualifying or vitiating factor mistake, duress or illegality. No such factor was identified in the present case by the Court of Appeal beyond what was identified as the breach of fiduciary duty by Mr Elias and by Farah[126]. But Mrs Elias and her daughters owed no fiduciary duty to Say-Dee. Further, principles respecting fiduciary duty have been said to be foreign to unjust enrichment notions because the unjust factors are commonly concerned with vitiation or qualification of the intention of a claimant[127].
151 Unjust enrichment is not a "definitive legal principle according to its own terms" …”

(See also Coshott v Lenin [2007] NSWCA 153, par 8.)


71 The plaintiff does not rely on a claim in contract. As I understood the particulars pleaded in the amended statement of claim and the plaintiff’s submissions, what was asserted was, in effect, a free standing cause of action based on the matters relied upon in support of the claim under a trust, and for the intervention of equity on the ground of unconscionability. As no independent basis has been propounded for restitution under this head, in my opinion it is entirely without foundation and cannot succeed.

The defendant’s notice of motion

72 The defendant’s notice of motion of 22 September 2006 was but briefly referred to during the hearing (T pp 25-27). Orders sought included an order extending time for the institution of an appeal from the decision of McLaughlin AsJ on 30 June 2006, that the appeal be determined at the same time as the hearing of these proceedings, and that the orders made be set aside. Senior counsel for the plaintiff indicated the claims were opposed. The motion was then put aside. Counsel for the defendant was invited to return to it at the end of the hearing (T p 27), but this did not happen. No further mention was made of the matter by counsel for either party. As the notice of motion did not proceed the proper order to make is that it be dismissed.

Conclusion

73 For the above reasons I propose to order that the proceedings, and the defendant’s notice of motion, be dismissed. I direct the parties to bring in short minutes of orders to give effect to these conclusions, and for disposal of the proceedings.

74 Failing agreement, the parties should have the opportunity to put submissions on any issues as to costs. Arrangements for re-listing of the matter should be made with my associate before 4pm 22 February 2008.


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09/04/2008 - Qualification to reference regarding bankruptcy proceedings. Amended in accordance with Order made on Wednesday, 9 April 2008 - Paragraph(s) [34]