Catto v Hampton Australia Limited (in Liquidation)
[2007] SASC 360
•11 October 2007
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
CATTO & ORS v HAMPTON AUSTRALIA LIMITED (IN LIQUIDATION) & ORS
[2007] SASC 360
Reasons of Judge Lunn a Master of the Supreme Court
11 October 2007
PROCEDURE - COSTS
Order for plaintiffs to pay the defendants' costs of action on an indemnity basis - defendants alleging agreement with their solicitors entitling them to charge on time costing basis - held plaintiffs entitled to raise ss 42(6) and (7) of Legal Practitioners Act to contest costs charged on a time costing basis - held with minor exception no sufficient agreement in writing to satisfy s 42(6) - what constitutes such an agreement in writing - variations of such agreements - proof of such agreements by secondary evidence - recovery of charges of interstate solicitors for work done in the action.
CATTO & ORS v HAMPTON AUSTRALIA LIMITED (IN LIQUIDATION) & ORS
[2007] SASC 360Reasons on rulings on time charging.
JUDGE LUNN: After a long trial, on 8 September 2004 Justice Vanstone ordered, inter alia:
4All the plaintiffs and Robert John Charles Catto in his own right pay the costs of the first, second and third defendants in defending the claims, inclusive of costs reserved, on an indemnity basis.
The expression “indemnity basis” is to be interpreted in accordance with R101.07(6) of the 1987 Rules which provided:
In any rule or order unless the contrary meaning is indicated by the context or other factors:
…..
(d)Costs as between solicitor and own client, or a like expression, means costs as a complete indemnity against the costs incurred by the party in respect of the litigation provided that they are not to include any amount shown by the party liable to pay them to have been incurred unreasonably in the interests of the party incurring them;
(e)Indemnity costs, or a like expression, mean the same as costs as between solicitor and own client.
On 2 April 2007 the first and third defendants (collectively referred to as “Hampton”) took out an application seeking a determination of the proper procedure for the taxation of the costs under the order, and in particular whether it should proceed on a time costing basis or in accordance with the applicable Supreme Court scales of costs. There was also a similar issue raised for the second defendant (“KLV”), but it did not issue any application. Ultimately the parties agreed on a statement of preliminary issues on which I was asked to rule before any taxation proceeded further. All parties agreed to my giving such a ruling without any further interlocutory steps being taken by any party. However, if any party wishes to contest my rulings before the conclusion of the taxation, it will be necessary first to provide a suitable foundation for an appeal or a case stated.
On 23 August 2006 KLV had lodged a bill of costs for taxation prepared on a time costing basis and claiming costs and disbursements totalling $624,119. Hampton has served a short form bill of costs, also prepared on a time costing basis, seeking $686,704, but it has not lodged any bill in taxable form.
All defendants alleged that they had agreements with their respective solicitors for those solicitors to be entitled to charge them at rates per hour for work done by them and their staff in relation to the action. They contend that the order for indemnity costs made by Vanstone J entitles them to recover what they have paid to their solicitors under those agreements. The plaintiffs, inter alia, dispute that there are any valid time costing agreements and say that the costs payable should be assessed on the applicable Supreme Court scales. In particular, the plaintiffs submit that they are entitled to utilise the following provisions in s42 of the Legal Practitioners Act 1981:
42(1) On the application –
…..
(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.
…..
(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
…..
(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.
The defendants contend that the operation of s 42(6) and (7) is confined to solicitors and their immediate clients and does not extend to strangers to the retainer between solicitor and the client. It is convenient to deal with this point first.
By the definition of “indemnity costs” in R 101.07(6)(d) and (e), as quoted above, such costs are limited to those “incurred by the parties”. This means costs for which parties are legally liable to their solicitors, but not costs which they have paid to their solicitors for which they were not legally liable: R v Miller [1983] 3 All ER 186. Therefore, the order of Vanstone J does not encompass costs which may have been paid by the defendants to their solicitors, but which they were not legally liable to pay to them. This is consistent with the wider principle that any costs recoverable under an order for costs cannot extend beyond those costs which the clients are legally liable to pay to their solicitors: General of Berne Insurance Co v Jardine Reinsurance Management Ltd [1998] 2 All ER 301 at 308 and 312; Browne v Barber [1913] 2 KB 553 at 580; Rigney v Prestwood (1985) 122 LSJS 224. As Griffiths CJ said in Irving v Gagliardi (No 2) (1895) 6 QLJ 200:
There is no doubt that, as a general rule, costs are given by way of an indemnity. For instance, it has been held that if, by reason of the operation of some statutory prohibition, the successful party is not liable to pay his own solicitor any costs, he cannot recover any costs from the opposite party.
There is no direct authority on whether the party which is subject to an order for payment of solicitor and own client costs of another party can invoke s 42(6) and (7) to limit the amounts for which it is liable. The plaintiffs’ counsel cited Casey v Quabba, Court of Appeal of Queensland, [2006] QCA 187, in support of the proposition. That case is some support for it, but it was decided in a markedly different statutory context. In any event the proposition should be upheld as a matter of principle. It would be theoretically possible for a party having the benefit of an order for indemnity costs to tax those costs against another party on a time costing basis based on an agreement between the party and its solicitor (eg Renton Resources Pty Ltd v Johnson Winter & Slattery (2005) 240 LSJS 434), but not to be able to recover those costs because of the impecuniosity of the party ordered to pay them, and then for the client to invoke s 42(7) and (8) in answer to a claim by the solicitor to recover the costs from it. It would be improper for solicitors to be able to recover a larger amount from the party subject to the costs order than it could recover from their own clients. I rule that the plaintiffs can avail themselves of s42(6) and (7), and any equivalent equitable principles, in contesting their liability for costs under the order of Vanstone J. I do not accept the submission of the defendants that the plaintiffs’ interests are sufficiently protected by the rider to R 101.07(6)(d) about unreasonably incurred costs.
Indemnity Costs for Hampton
S 42(6) stipulates that “a legal practitioner may make an agreement in writing with a client”. The “may” in sub (6) is imperative and does not allow an agreement in terms of subs (6)(a) for time based charges to be made other than in writing: Civil Procedure SA, Vol 2, [23,920.5]. I am not aware of any direct authority to this effect, but it is implicit in the reasons in Renton’s case and Pirone’s case mentioned below. If it were otherwise, the requirement of writing would be pointless. Counsel for the defendants referred to authorities that a retainer for a solicitor need not be in writing. The mandatory effect of subs (6) is not contrary to those authorities, but it means that that part of the retainer agreement which deals with a solicitor’s right to charge on a time-costing basis must be in writing. The writing referred to in subs (6) must be sufficient to constitute the essential terms of a legal agreement for the solicitor to be paid its costs in this manner. This is implicit in the following passage from the reasons of the Full Court in Renton’s case at 439:
….. counsel for the respondent, when asked to point to the terms of the suggested second agreement, said that they were:
(a)JWS would not prevent counsel from continuing to act;
(b)An outstanding indebtedness was acknowledged;
(c)JWS would provide assistance in the changeover;
(d)Documents would be made available;
(e)The terms of the agreement would be confirmed.
The articulation by Mr Howard of the terms of the second agreement makes no reference to the appellants’ request that the moneys received be used to settle disbursements. He suggested that this clause was severable from the agreement.
Section 42(6) requires an agreement in writing for the payment of a specified amount by way of legal costs. The question of what was an agreement in writing for these purposes was discussed by Fry J in Re Raven: Ex parte Pitt (1888) 45 LT 742 at 743 as follows:
What is an agreement in writing? It must be a document which shall show all the terms of the bargain between the parties and show by writing the accession of both parties to those terms.
This passage was cited and applied by White J in McNamara Business and Property Law v Kasmerides (2004) 90 SASR 151.
In my view the terms which have been articulated by Mr Howard have not all been reduced to writing in the emails alleged to constitute the second agreement. At best, many of the terms would have to be implied. Further, the second agreement does not stand alone and is dependent upon the existence of the retainer agreement even to make sense of the matter which is being referred to. There also appears to be uncertainty about whether one of the conditions which has been set out in one of the relevant emails allegedly forming the documentation of the second agreement, was part of the terms of that agreement. Item 2 of the email of Mr Renton of 21 June 2002 refers to monies being used to settle disbursements and adds the words “as discussed”, which terms have clearly not been reduced to writing and would require oral evidence.
Having regard to these matters I do not consider that “all the terms of the bargain between the parties” as referred to by Fry J, have been reduced to writing as is required by s 42(6) of the Act. …..
To similar effect is the following passage from the reasons of Layton J in Pirone v Craig J Roberts, 11 May 2006, Judgment No (2006) SASC 134:
39….. I have considered whether the letter of 20 December 2001 itself represents an agreement in writing for the purposes of s 42(6) of the Act. While it is not disputed that the defendant received that letter, the conditions described in the letter are not sufficiently particular to constitute a written retainer agreement between the parties. The absence of any term relating to the basis on which the plaintiff would charge the defendant for legal services, such as the conditions upon which the plaintiff could charge costs and the amount of any such costs or scale for their calculation, is an impediment to such an agreement.
40Accordingly, it seems to me that the requires of s 42(6) have not been complied with. …..
This does not mean that there cannot be some implied terms in such an agreement, but the essential terms have to be in writing.
In Kasmeridis (No 1) below at [32] the Full Court said:
Generally, the common law regards an agreement as being “in writing” if its full terms have been reduced to writing, even it if has not been signed by the parties.
The onus is on the defendants to establish all of the relevant terms of the retainer upon which they rely: McNamara v Kasmeridis (No 1), Full Court, (2005) 92 SASR 382 at [64] (“Kasmeridis No 1”) and Pirone v Craig J Roberts, above. Where there is a dispute between a solicitor and the client about the existence or the terms of an oral retainer the Court may give some preference to the client’s evidence: Murphy v Liesfild [1930] VLR 142, (1930) 36 ALR 94; Griffiths v Evans [1953] 2 All ER 1364. This is because solicitors are expected to document properly a contract with their own clients, and particularly where the terms are to their own financial advantage. Courts have traditionally been cautious in their approach to enforcing time charging agreements made between solicitors and their own clients: Kasmeridis No 2 below at [31].
The primary issue here is whether Hampton has established an agreement in writing with its solicitors (“Thomsons”) which discloses in its written terms the essentials for an agreement for time-charging within subs (6)(a). There is no doubt that there was a retainer between Thomsons and Hampton: the issue is whether there were written terms in it which legally authorised Thomsons to charge on a time-costing basis.
The evidence on the point is sparse and unsatisfactory. It is contained in the affidavits of Mr Proudman and Ms Vozzo, who were solicitors involved in the matter for Hampton, and Mr Lewis, who was an employee of the liquidator of Hampton. No agreement in writing was ever entered into between Hampton or its liquidator dealing with the charges of Thomsons. Mr Proudman deposed that a general letter of engagement had been sent by Thomsons to the accounting firm of which the liquidator of Hampton was a member. Mr Lewis had no knowledge of such a document and no copy could be produced despite extensive searches for it. All that could be put forward was a pro forma agreement and its schedule which were prepared in November 1993 and which may have been the document referred to by Mr Proudman, but no deponent pledged his or her oath that this was the operative document between Thomsons and Hampton.
The relevant parts of the pro forma document were:
SOLICITOR AND CLIENT AGREEMENT
I, ……………….. (“the Client”) HEREBY AGREE that:
1I desire Thomsons, Barristers & Solicitors …………….. (“Thomsons”) to act for me as my solicitors and I agree to be bound by the Terms of Engagement contained in Annexure “A” (“Terms of Engagement”)
2Thomsons, Barristers & Solicitors shall be entitled to charge me for the services rendered to me in carrying out their engagement on the hourly rates as set out in the Terms of Engagement for its partners, associates, solicitors, law clerks and land brokers together with any internal charges, external charges, out of pocket expenses, agents and counsel fees so incurred.
…..
ANNEXURE A
THOMSONS
BARRISTERS & SOLICITORS
Terms of Engagement
These are the terms of engagement between Thomsons Barristers & Solicitors (“Thomsons”) and the Client.
1Services.
The client engages Thomsons to perform legal services of the scope, nature and duration as agreed from time to time (“the Services”).
…..
9Fee
Thomsons charges hourly fees for the Services at the following rates, or at rates notified to the Client from time to time:-
Partner- $180/$250 (depending upon experience of partner and
Degree of difficulty associated with the matter).
Associate- $160/$180 (depending upon experience of associate)
Salaried solicitor - $100/$160 (depending upon experience of solicitor)
Land Broker - $125
Law Clerk- $80/$100 (depending on experience of law clerk)
Thomsons time recording system is based on a minimum recording unit of 6 minutes and all charges will be calculated on that basis.
10Internal Charges
Thomsons may recover internal charges incurred in supplying the Services as follows, or at rates notified to the Client from time to time:-
10.1photocopying or laser printing, at the rate of $0.60 per page regardless of volume;
10.2STD telephone calls, at the rate of $1.00 per minute and ISD telephone calls, at the rate of $3.00 per minute;
10.3local and interstate outgoing facsimiles, at the rate of $1.75 per page and overseas outgoing facsimiles, at the rate of $3.50 per page and all incoming facsimiles, at the rate of $0.50 per page;
10.4document binding, at the rate of $5 per document; and
10.5folders and dividers, at cost to Thomsons.
11External Charges
Thomsons may recover external charges incurred on behalf of the Client, such as:-
11.1government lodgement fees;
11.2stamp duty;
11.3courier charges; and
11.4postage for local ordinary mail items, at the rate of $0.60 per item and for all other items of mail, at cost to Thomsons;
11.5barristers fees;
11.6support staff overtime (but only if incurred specifically by reason of the requirements of the matter).
12Barristers Fees
Where it is necessary to engage counsel to act, in order to obtain counsel with an adequate degree of competence, it may be necessary to agree to pay such counsel amounts greater than those set forth in the Supreme Court guide to counsel fees and thus greater than those likely to be recoverable from other parties to litigation in the event of success therein. The Client acknowledges this, and undertakes to pay counsel fees at going commercial rates for the services of counsel of the required degree of seniority.
13Accounts
Thomsons may render an account for fees and disbursements on a calendar monthly basis, unless otherwise agreed, and reserved the right to require payment in advance in cases which Thomsons deems appropriate.
…..
18Independent Legal Advice
The Client acknowledges that it is aware that it is entitled to seek independent legal advice as to entering into these terms of engagement and has either obtained such advice or elected not to do so.
The rates stated in Annexure A were those applicable in 1993. From the short form bill of costs of Hampton, which relates to work from 1998 onwards, it is clear that amounts considerably in excess of those in paragraphs 9 and 10 have been charged by Thomsons. (Those rates are also generally substantially in excess of what would have been payable under the applicable Schedules to the Supreme Court Rules if the costs were not to be governed by a special agreement). There is no evidence that Thomsons ever communicated to Hampton that there was any increase in their time-costing charge-out rates, although the short form bill shows that there were some such increases in the course of the action.
An essential term in any time-based charging agreement within subs (6)(a) is the amount per hour being charged for various classes of work. There is no sufficient evidence to show on the balance of probabilities that the rates charged by Thomsons in its periodic accounts to Hampton (which are annexed to the short form bill) were the subject of any agreement in writing which would satisfy subs (6)(a). For this reason alone Hampton did not incur any liability to Thomsons to pay legal costs based on time-charging.
I briefly deal with a number of other aspects of Hampton’s claim. Clause 9 of Annexure A, which referred to “or at rates notified to the client from time to time”, (which were always increases), would be set aside under subs (7) as unfair and unreasonable. Solicitors cannot reserve to themselves the right to increase their time charges as they see fit. If there is to be an increase, it must be by either a new agreement or a variation agreement in which all the considerations of fairness and reasonableness have to be re-visited.
Clause 18 of the Annexure A properly refers to the client being informed that it is entitled to seek independent advice and is an acknowledgement that the client has either obtained it or has waived its right to do so. As the terms of the agreement are clearly for the financial benefit of the solicitors the client cannot rely on the solicitors acting in the client’s best interests in stipulating the amounts to be charged or in the scope of the work for which charges can be made. (The short form bill for Hampton shows that Thomsons have charged, apparently as services, for various types of work such as “legal research”, “consideration of issues”, “consideration of litigation” which would not usually be chargeable under the Court scales). The solicitors had an obligation to point out this potential conflict of interest to Hampton to ensure that it either obtained independent legal advice or waived its right to do so with knowledge of the potential conflict: McNamara Business Law v Kasmeridis (No 2), Full Court, 16 March 2007, [2007] SASC 90 (“Kasmeridis No 2”). Mr Lewis deposed that neither he nor the liquidator of Hampton had ever seen Annexure A. There is no suggestion that Hampton had obtained independent legal advice or that it had waived its right to do so with knowledge of the potential conflict and its implications.
On the analogy of cases under the Statute of Frauds the loss or destruction of an agreement in writing which would satisfy subs (6)(a) could be overcome by adducing proper evidence of its prior existence and secondary evidence of its contents: Giasoumi v Hutton [1977] VR 294. However, such a lost document could only be established by secondary evidence if that evidence of its contents was clear and satisfactory: Mack v Lenton (1993) 32 NSWLR 259. Here there is no sufficient evidence either that such a document ever existed, or, if it did exist, the charge out rates provided in it are those now sought by Hampton against the plaintiffs.
Counsel for the plaintiffs also took points about any agreement being void for uncertainty and not being made with the actual client, but I need not pursue them.
Accordingly, I rule that there is no proper basis to tax the indemnity costs of Hampton on a time-costing basis and its bill of costs is to be lodged in a form which enables a convenient taxation of it to be carried out under the applicable schedules to the Supreme Court Rules 1987.
Indemnity Costs for KLV.
KLV was a wholly-owned subsidiary of Normandy Mining Limited (“Normandy”) (now Newmont Australia Limited). Normandy provided the administration for the affairs of KLV. Shortly before this action was commenced Normandy gave a general retainer to a Melbourne legal firm, Andersens Legal (“Andersens”). Pursuant to this retainer Andersens were instructed to act for KLV in defending this action. This work at Andersens was primarily done by Andrew Corletto, who had been a legal practitioner admitted in South Australia, but who at the time when Andersens were representing KLV did not hold a current South Australian Practicing Certificate. Andersens engaged the South Australian legal firm of Piper Alderman (“Pipers”) to do some work in KLV’s defence of the action. The terms of Piper’s retainer in the matter were contained in a letter dated 4 December 1997 from them to Andersens which Andersens accepted in writing.
In about late 1999 or early 2000 Mr Corletto left Andersens and became part of the South Australian legal practice of Kelly & Co (“Kellys”). As a consequence in early 2000 Kellys took over the defence of the action for KLV and Pipers were no longer involved. On 23 August 2006 Kellys lodged a bill of costs for taxation pursuant to the order of Vanstone J for the work done by Andersens and Kellys. This bill was prepared on a time-charging basis which is challenged by the plaintiffs. The charges of Pipers are shown as disbursements incurred by Andersens. It is convenient to deal with the issues relating to KLV in five separate categories.
The charges of Andersens up to 16 September 1999.
This was work done by solicitors in Victoria who did not have a legal right to practise in this State. The charges made by Andersens for work done by them in this period were not “costs” for the purposes of the order of Vanstone J: Santos Ltd v Delhi Petroleum Ltd, Bleby J, 30 June 2005, Judgment No [2005] SASC 242 (“Santos v Delhi”). (I indicated that I was bound by this decision, but the defendants’ counsel said he may wish to challenge it if the matter went further). Accordingly, items 1-140 of the bill of KLV are to be disallowed.
The charges of Pipers up to 16 September 1999.
Although counsel for KLV contended to the contrary, the letter of 4 December 1997 from Pipers to Andersens makes it quite clear that Pipers were acting as the agents of Andersens and not as a principal solicitor for KLV. Accordingly, as Piper’s charges for work in this period could only be recoverable as a disbursement incurred by Andersens they are not recoverable as “costs” under the order of Vanstone J because Andersens’ costs are not recoverable: Santos v Delhi. From the information before me it is not possible for me to dissect at present what part of the charges of Pipers relate to work done before and after 16 September 1999.
The charges of Andersens after 16 September 1999 until the handover to Kellys.
After the proclamation of the amendments to the Mutual Recognition Act 1993, which took effect on 16 September 1999, Andersens were able to carry on legal practice in South Australia and could recover proper costs for work done by them after that date. The charges made by Andersens for such work claimed in the bill of costs were on a time-charging basis said to have been agreed with Normandy. No document in writing for such time-charging could be put in evidence. Thus for similar reasons to those given above for Hampton and Thomsons those costs for work done by Andersens can only be taxed on the applicable Schedules to the South Australian Supreme Court Rules. Such items in the bill of costs claimed on a time-charging basis are to be struck out and a bill lodged for such work which is taxable under the applicable Supreme Court Schedules.
The charges of Pipers after 16 September 1999.
The letter of 4 December 1997 from Pipers to Andersens constitutes a sufficient agreement in writing for the purposes of s 42(6)(a). As the agreement was made with Andersens who were a firm of solicitors, and who therefore were presumed to understand the implications of time-based charging, there is no ground made out on the evidence to set aside or vary that agreement with Pipers under s 42(7). Accordingly, I rule that, subject to any other grounds of objection, KLV is entitled to recover the charges of Pipers for this period on a time-charging basis. As far as I am aware no bill in taxable form for those charges has been lodged, but that will be necessary for their taxation.
The charges of Kellys on a time-costing basis.
KLV sought to satisfy the requirement of s 42(6) for an agreement in writing by reference to a document entitled ‘ Terms of Engagement’” signed the Group Legal Counsel for Normandy on 21 October 1999. The relevant parts of that document are as follows:
Kelly & Co
Terms of Engagement
Client Name: Normandy Mining Limited
…..
Brief Outline of To defend District Court proceedings issued by former
Instructions Employee
Stage of Cost Item Estimated Fee
Initial Estimate of Costs Filing of Defence $2,500.00
(if appropriate) To Conciliation Conference $1,500.00
…..
Hourly Fee - Partners $220-$250
- Senior Associates $190-$210
- Associates $180
- Other Solicitors $145-$165
- Para Legals $100
…..
14/09/1999 (Signed PJW)
Kelly & Co agreed to act for you in respect of this matter and any subsequent matters on the following terms:-
1We undertake to carry out your instructions.
…..
3You agree to pay for all work done and expenses incurred by us in accordance with the charges specified in the agreement.
…..
6We may charge a file administration fee of $30.00 per file to cover general office and administration costs.
…..
Review
The rates set out in this agreement are subject to review from time to time. When increases incur you will be notified by letter of the increased rate of charge. Unless, within 14 days after posting you a letter notifying you of such increases, you terminate the agreement, you will be deemed to have agreed to the new costs.
…..
Dated this 21st October 1999
Signature: Peter J Watson
Print Name: PETER WATSON
Group Legal Counsel
…..
On 13 December 1999 Kellys wrote to Mr Watson of Normandy as follows:
Terms of Retainer
I refer to our recent discussion.
I confirm that our firm is prepared to undertake work for Normandy on the basis that we will not charge you for any internal overhead disbursements such as photocopying and phone/fax …..
The subject matter of the document of 21 October 1999 is litigation in the District Court between Normandy and a former employee. It does not expressly refer to this action. Counsel for KLV relied upon its reference to “and any subsequent matters”. I do not consider that this should be interpreted any more widely than to be subsequent matters consequent upon, or related to, the District Court proceedings in question. As stated earlier solicitors have an obligation to document their time-charging agreements properly and unambiguously. It is not a document which is appropriate for any litigation whatsoever in which Normandy was instructing Kellys to act. If it was meant to apply to litigation in a different court, and between other parties, it should have expressly said so. The estimates, which were properly given, in no way can relate to this action. Kellys are not discharging their fiduciary duties to Normandy in respect of time-based charges in a Supreme Court action by a document in this form. The letter of 13 December 1999 indicates there was some further negotiation about the terms upon which Kellys could charge for work done for Normandy. There is no evidence that the subject matter of that letter was related to the proceedings which were the subject matter of the document of 21 October 1999 or of this action. I do not accept that the document of 21 October 1999 satisfies the requirements of s 42(6) for an agreement “in writing” to make KLV legally liable to Kellys for time-costed charges for this action.
Counsel for the plaintiffs also took the point that the document of 21 October 1999 was entered into between Normandy and Kellys, apparently in respect of Kellys acting in proceedings for Normandy. He submitted that it was not shown to be an agreement which bound KLV. The evidence goes no further than that KLV was a wholly owned subsidiary of Normandy and that Normandy handled its administration. There is no evidence as to who the directors of KLV might have been and whether they had duly authorised the time-based costing charges with knowledge of Kellys potential conflict of interest and the matters necessary to take a proper commercial decision on the point.
On 3 April 2001 Kellys wrote to Normandy advising that their hourly charge-out rates were being increased as from 1 April 2001. That letter set out a significant increase in the charge-out rates. The document of 21 October 1999 purported to give Kellys the right so to increase their rate of charges. I repeat what I said earlier about a similar provision in the pro forma agreement of Thomsons and why I did not consider it to be effective. Similar comments apply here. The provision that Normandy would be deemed to have agreed to the new costs in the absence of termination of the agreement within 14 days does not create a binding contract: Felthouse v Bindley (1862) 142 ER 1037.
On 1 February 2005 Kellys wrote to Normandy (now Newmont) setting out new terms of engagement and increased rates of hourly charges. Apart from the items for the taxation of the costs all of the work claimed in the bill of costs of KLV was done before these new terms of engagement were sent. As the bill of costs of 23 August 2006 up to that point is to be struck out these new terms of engagement are not relevant to what I now have to decide.
I rule that apart from Pipers’ costs after 16 September 1999 KLV does not have the right to have its indemnity costs under the order of Vanstone J taxed on a time-charging basis and they are to be taxed in accordance with the applicable Schedules to the Supreme Court Rules.
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