Chan v Batemans
[2009] WASC 177
•23 JUNE 2009
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: CHAN -v- BATEMANS [2009] WASC 177
CORAM: MASTER SANDERSON
HEARD: 4 & 5 FEBRUARY 2009
DELIVERED : 23 JUNE 2009
FILE NO/S: CIV 1776 of 2008
BETWEEN: KHENG SU CHAN
Plaintiff
AND
BATEMANS (ABN 30 292 470 815)
Defendant
Catchwords:
Costs - Application to have two costs agreements cancelled - Turns on own facts
Legislation:
Nil
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff: Mr B G Grubb
Defendant: Mr D J Garnsworthy
Solicitors:
Plaintiff: Metaxas & Hager
Defendant: Batemans
Case(s) referred to in judgment(s):
Brown v Talbot & Olivier (1993) 9 WAR 70
Cerini v McLeods (a firm) [2004] WASC 45
Harrison v Hocking [2000] WASC 188
Jovetic v Stoddart & Co (1992) 7 WAR 208
MASTER SANDERSON: By originating motion filed 30 June 2008, the plaintiff sought the following orders:
1.The costs agreements between the plaintiff and the defendant made on or about 16 January and 19 May 2006 be referred to the court for review pursuant to section 222(1) of the Legal Practice Act 2003; and
2.The defendant pay the costs of this application.
Although the originating motion does not say as much, what the plaintiff actually seeks to do is have the two costs agreements cancelled. That has consistently been held to be the outcome of a finding that a costs agreement was unreasonable under the provisions of s 222(1) of the Legal Practice Act 2003 (WA). There are three categories of agreement that are likely to be cancelled. First, those that are unreasonable in the circumstances of their creation. Second, those that are unreasonable in their terms. Third, those that are unreasonable in their effect upon the client. Each of these three categories may be considered separately, as a whole, or linked by reference to one another. These principles were set out by Seaman J in Jovetic v Stoddart & Co (1992) 7 WAR 208.
Any costs agreement which does not fully disclose the limits and benefits of the statutory scale and the effect and consequences of the proposed agreement, will be regarded as unreasonable and cancelled. The statement of principle set out by Ipp J in Brown v Talbot & Olivier (1993) 9 WAR 70, has consistently been followed. This decision dealt with s 59(5) of the Legal Practitioners Act 1983 (WA) (repealed), an Act that was replaced by the Legal Practice Act 2003. The fact of the new Act is of no consequence save in one respect which I will mention below. Both parties accepted the principles set out in Brown apply to this application. His Honour put the position this way:
In my opinion, ordinarily, the material circumstances which might influence a client in deciding whether or not to enter into an agreement entitling his or her solicitors to depart from the scale, and which should expressly be disclosed to the client, include the following:
(a)The fact that the remuneration of solicitors was governed by statutory scales which limited the amount of solicitors' and counsel's fees which could be recovered, irrespective of the amount of time devoted by the solicitors to the proceedings;
(b)The fact that the scales limited both the costs which the client could recover from the opposing party to the proceedings (if the client were to succeed in the case), and the costs recoverable from the client by the client's solicitors;
(c)The principles underlying the charging of fees under the scales, and also the basis of the proposed charging under the contemplated agreement;
(d)Estimates, if they could reasonably be made, of the approximate amount of the solicitors' fees and counsel's fees (as between solicitor and client) which would be recovered on taxation under those scales, and the approximate amount recoverable under those scales from the opposing party ‑ if the client were to be successful;
(e)An estimate, if that were reasonably possible, of the amount which the client would have to pay the solicitors under the proposed agreement if the litigation were to prove successful (and costs were to be recovered from the opposition) and, also, the amount which the client would have to pay if the litigation were to be unsuccessful;
(f)Whether (if it were not reasonably possible to give estimates of the kind referred to in sub-paragraphs (d) and (e) above) there was a real risk of the costs under proposed agreement being more, and significantly more, if that were the case ‑ than under the appropriate scale (77 ‑ 78).
The qualification to this statement of principle relates to the fact that the scale as it applied in 1992 when Brown was decided has changed. When the costs agreements in this action were signed the allowances in the 2004 and 2006 determinations were not conditioned by the value of the subject matter. The relevant determinations make a feature of time spent whereas that was not the case in the scale applicable when Brown was decided. Further, at the time Brown was decided, the scale did not contain any comparable item to items 13 or 32 of the relevant scale: see Cerini v McLeods (a firm) [2004] WASC 45.
A written costs agreement in relation to costs which would be governed by a determination of the Legal Costs Committee will be unreasonable if the solicitor does not make a full and frank disclosure of how the agreement might benefit or disadvantage a client by comparison with the costs determination: see Harrison v Hocking [2000] WASC 188. However, the relative sophistication of the client is a factor in determining what advice needs to be given to the client. In Cerini, Pullin J put the position this way:
The question is, however, whether the fact that the plaintiff was a man with such experience, is of any relevance to the present issue. A client's level of business experience or sophistication may be relevant where some advice has been given about the difference between charges which may be made under the Supreme Court Scale compared with the charges which may be made under a costs agreement. A client of limited experience or sophistication requires more by way of explanation than a client who is experienced in business and is likely to understand the differences from a very brief explanation.
In this case, however, no advice was given about the content of the Scale or about how charges under the Scale compared with charges to be made under the terms of the Agreement, and so on that point the plaintiff's business experience and his level of understanding is irrelevant. It is relevant to the issue about the 'effect' of the Agreement and the issue about the plaintiff's understanding of other terms of the Agreement which I refer to at the end of my reasons [37] ‑ [38].
It is convenient then to turn to the facts of this case. The originating motion when filed was supported by an affidavit of the plaintiff sworn 30 June 2008. The plaintiff says that she retained Malcolm James Bateman in or about early 2006. (The defendant in these proceedings is the firm of Batemans. In fact Mr Bateman is a sole practitioner. Throughout these reasons I will refer to 'Mr Bateman'. When I do so I will, where the sense requires, also be referring to the defendant.) The plaintiff says that she consulted Mr Bateman about an application for leave to issue proceedings under the Inheritance (Family and Dependants Provision) Act 1972 (WA).
The plaintiff then says (par 3):
In or about January 2006, I attended Mr Bateman's office located at 1st Floor Commonwealth Bank Building, 86A Barrack St and met Mr Bateman. At this meeting Mr Bateman stated to me in effect that he would not perform any further legal work for me unless I executed a costs agreement that he had prepared.
The plaintiff annexes a copy of that costs agreement to her affidavit. The agreement is dated 16 January 2006. It is unremarkable in its terms. Attached to the agreement is a schedule. The schedule is essentially directed at the charges which would be levied by the practitioner for acting for the client. For instance item 1 of the schedule is referred to as 'Solicitors' Office and Court Time'. The charge is said to be $29 'per unit of 6 minutes or any part thereof'. Item 10 of the schedule is headed 'Estimate of Costs'. Under that heading there appears the word 'Approximately' but nothing else. In other words the agreement did not contain any estimate of costs.
Also attached to the agreement is the 'Legal Practitioners (Supreme Court) (Contentious Business) Determination 2002'. This determination was made by the Legal Costs Committee and sets out the maximum charges that a practitioner may levy a client. The actual content of this determination is not relevant for present purposes. However, it is important to note that the document which was annexed to the costs agreement was the 2002 determination.
Throughout the affidavits this agreement of 16 January 2006 is referred to as the 'First Costs Agreement'. I will refer to it in these terms.
The plaintiff then says that in or about April of 2006 she retained Mr Bateman in relation to proceedings she was contemplating against a former business associate. She says that in or about May 2006, she again attended Mr Bateman's office and was advised that Mr Bateman would not continue to act for her unless she executed a further costs agreement. This agreement which is referred to as the 'Second Costs Agreement' (once again terminology which I will adopt) appears as annexure KSC2 to the plaintiff's affidavit.
That agreement is dated 19 May 2006. The agreement itself is in precisely the same terms as the First Costs Agreement. This time the estimate of costs being item 10 in the schedule is given as 'Approximately $40,000'. Once again the 2002 determination is attached to the agreement.
In her affidavit, the plaintiff does not actually give detailed evidence of the circumstances of her signing these two agreements. By par 6 of her affidavit, she says she was not given any advice or information about certain matters. For instance she says she was not advised that Mr Bateman's hourly rate under the agreement exceeded the hourly rate for a solicitor of his experience under the statutory scale. She then goes on to say (in par 7):
As at the time of signing the First and Second Costs Agreements I was not given any opportunity to read the agreements, the agreements were not explained to me, I was not given a copy of the agreements after signing them, I was not aware of my right to require a solicitor to tax an invoice to me, I was not aware of the content of the statutory scales, I had no understanding of the process by which a solicitor's costs were taxed (whether they were costs billed to the client or costs payable by the other party), I had no knowledge of any of the matters in paragraph 6 above and I assume that whatever I paid my solicitor for his services I would recover if I was successful.
The plaintiff says she has been sued in the Perth Magistrates Court for payment of invoices rendered under the costs agreements. It was after that suit was issued that she sought this review.
In answer to the plaintiff's affidavit, Mr Bateman swore an affidavit on 18 July 2008. That affidavit gives a much more detailed account of Mr Bateman's interaction with the plaintiff. He says he was first consulted by the plaintiff on 28 February 2005. That was in relation to an action the plaintiff had taken out against the State of Western Australia alleging wrongful arrest. She also instructed Mr Bateman in two other matters. Mr Bateman says the plaintiff advised him that prior to instructing him (Mr Bateman) the plaintiff had engaged a number of other firms. She had engaged Messrs Cannon Bowden in relation to the wrongful arrest matter. She had instructed Hammond Worthington and Clayton Utz with respect to the inheritance matter. She also advised Mr Bateman that she regarded the costs charged by Messrs Clayton Utz as unreasonable. She said she had been sued in the District Court by Clayton Utz for her fees but that case was now settled.
Mr Bateman says that despite having discussed the inheritance matter with him at the first consultation, it was not until 8 November 2005 that the plaintiff gave him instructions to issue proceedings. As to the First Costs Agreement, Mr Bateman says the plaintiff was given a covering letter and the costs agreement on 16 January 2006. Appearing as annexure MJB6 to Mr Bateman's affidavit is a copy of that covering letter. It is indeed dated 16 January 2006. Mr Bateman says that the signed agreement was returned to him on 20 February 2006 when the plaintiff attended his offices.
In relation to the Second Costs Agreement, Mr Bateman says this was sent to the plaintiff on 12 May 2006. On 16 May 2006, he says he sent 'the usual proforma covering letter' to the plaintiff explaining the costs agreement. That letter is in identical terms to the letter of 16 January 2006. Some comment about these two letters is necessary. First, the letters cover all of those matters referred to by Ipp J in the Brown decision. By way of example, the fact that the remuneration of solicitors is governed by statutory scales is specifically mentioned. In my view the letter itself provides the client with all information necessary to allow an informed decision to be made as to whether or not to enter into the costs agreement.
In his submissions, counsel for the plaintiff challenged this conclusion. For instance, he submitted that the principles underlying the charging of fees under the scale and the basis of the proposed charging under the contemplated agreement were not explained. In my view both matters are adequately covered. Mention is made of the fourth schedule and a copy of that document is said to be enclosed with the agreement. It is not incumbent upon a solicitor to explain the statutory framework and why it is that lawyers' charges are regulated. He is simply required to bring to the attention of the client the fourth schedule and to advise that in the absence of a costs agreement, it would cover the charges as between solicitor and client. With respect to the costs agreement itself he is then required to go on and explain how the charges are calculated. That is done in the agreement. The so‑called 'time costing' system is to be used. Any client should be capable of understanding what that involves ‑ it is apparent from a reading of the attachment to the costs agreement.
Having said all of that, it is correct to say there were deficiencies in the information provided by Mr Bateman to the plaintiff. In both letters in the penultimate paragraph, there is space for an estimate of costs to be provided. In the letter of 16 January 2006 that space was left blank. It was filled in, in the later letter. Both letters had attached to them a copy of the 2002 determination of the Legal Costs Committee. This was the wrong determination. As at the date both letters were sent, the applicable determination was the 2004 determination. It was accepted by Mr Bateman that the wrong determination was attached to both costs agreements.
It is important to note it is Mr Bateman's evidence that both costs agreements with the covering letters were posted to the plaintiff. When they were posted they had been signed by Mr Bateman. He says the agreements were returned to him personally by the plaintiff. The first agreement was returned to him on 20 February 2006 and the second agreement was returned to him on 1 June 2006.
It was part of the defendant's case that the plaintiff was a relatively sophisticated person who well understood legal proceedings. On behalf of the plaintiff it was said this was not the case. But the evidence on this point is all one way. The plaintiff is a qualified medical practitioner who, although not practising at present, has in the past worked as a general practitioner. She has from time to time been involved in business transactions. She clearly has experience in litigation. She was sophisticated enough to produce a proof of evidence which appears as annexure MJB1 to Mr Bateman's affidavit of 18 July 2008. While that proof of evidence might not satisfy a practising solicitor, it demonstrates an understanding of what is involved in litigation and how a party's case is to be presented. Insofar as it is relevant to this application, I am satisfied the plaintiff is well able to understand what a costs agreement involves and how her rights and obligations are affected by such an agreement.
Mr Bateman swore a further affidavit on 1 August 2008. This affidavit deals with the fact that the estimate of fees in the letter of 16 January 2006 and in the costs agreement was left blank. In fact the copy of the covering letter of 16 January 2006 which appears as annexure MJB6 to Mr Bateman's first affidavit, has written in, in handwriting ‑ and it was Mr Bateman's handwriting ‑ the amount of $40,000. There is an initial in the margin. In the body of the affidavit itself, there is no mention of the fact that this handwriting was not in the letter when it was sent to the plaintiff. Mr Bateman's second affidavit was directed at explaining this omission.
Mr Bateman says that after he was initially instructed by the plaintiff, she passed on to him some 21 separate matters where she required representation. Mr Bateman says that under pressure of work, he inadvertently overlooked preparation of costs agreements for some of these matters. He further says that he invariably inserts an estimate of $40,000 in most litigation matters, presumably, because experience showed that was a reasonable place to start with costs. Mr Bateman says it was not until he had issued proceedings against the plaintiff in the Magistrates Court for the recovery of his fees that it was pointed out to him that the estimate had been left blank. He says thereafter he reviewed his files and wrote in the amount of '$40,000' in the only copy of the document he had. He said he took this step of effectively amending the document 'as an aide memoire of what should have been there in the first instance'.
It has to be said that this is all rather strange. It is difficult to see what purpose could have been served by writing in the words '$40,000' in Mr Bateman's copy of the letter. It was already apparent to the solicitor representing the plaintiff that in the document sent to the plaintiff the estimate was left blank. How writing in these words could possibly assist Mr Bateman's memory was not explained in the affidavit, or elsewhere in the evidence. I will have more to say about this matter later in these reasons.
The defendant also relied on an affidavit of Angelica Reemeyer sworn 8 August 2008. Ms Reemeyer says she is the office manager for Mr Bateman's firm and is his sole employee. She is responsible for typing all documents and correspondence. She says Mr Bateman personally does not type documents or letters. He dictates the documents and correspondence which are typed by Ms Reemeyer, passed on to Mr Bateman and then having been checked, dispatched by her.
Ms Reemeyer details the way in which costs agreements are handled by the firm. Essentially a master copy or precedent is available and she fills in the necessary compartments on instructions from Mr Bateman. Mr Bateman checks the document and then Ms Reemeyer posts it. She says that was done in this case. She suggests the omission of the estimates in both the covering letter and the deed were a result of pressure of work.
Mr Bateman swore a further affidavit on 30 September 2008. This affidavit deals in the main with the progress of the dispute between the plaintiff and the defendant and the interaction between the plaintiff's solicitor and Mr Bateman. It does not really take the matter much further. For the purposes of this application, the deficiencies in the documents supplied by Mr Bateman to the plaintiff are agreed.
There is one further affidavit of Mr Bateman sworn 10 October 2008. That affidavit deals with a specific point of no real relevance to the present application.
The plaintiff filed a supplementary affidavit sworn 1 September 2008. This affidavit deals with Mr Bateman's affidavit of 1 August 2008 and the affidavit of Ms Reemeyer. The plaintiff repeats that she never received from the defendant copies of the covering letters nor the two costs agreements. She says these were executed by her during attendances at the defendant's office. Further, she says that the costs agreements were never explained to her. In this affidavit she does not say whether or not she read the costs agreements and understood their contents. It is reasonable to assume then that she maintains the position put in her first affidavit that she was given no time to read the agreements and was not fully aware of their contents.
Each of the parties to this action and Ms Reemeyer were cross‑examined on their affidavits. Watching her in cross‑examination I formed an unfavourable impression of the plaintiff. She was careful to attempt to portray herself as unsophisticated in matters of commerce and lacking language skills. She answered straightforward questions put to her by counsel in a way that was self‑serving and evasive. Based upon my observations of the plaintiff and the way she gave her evidence, I am not satisfied she was a witness of truth.
The cross‑examination of Mr Bateman focussed heavily on why it was that the estimate of costs was omitted from the covering letter and First Costs Agreement. Counsel also questioned Mr Bateman closely on why the handwritten figure of '$40,000' was put in the letter subsequent to it being sent. In the end, I was not satisfied that Mr Bateman provided an adequate explanation as to why he wrote in the figure. However, I am prepared to accept that the estimate of costs was omitted as an oversight and due to pressure of work. I accept Mr Bateman's evidence that invariably he put the figure of $40,000 in the costs estimate. It is not unreasonable for a practitioner at the commencement of litigation, when he is unsure of the extent of the litigation or of the way in which it will evolve, to simply settle on a figure. In this day and age an estimate of $40,000 might be thought to be on the low side. But I am satisfied that Mr Bateman believed it was a reasonable estimate to give to a litigant commencing proceedings.
I also accept the costs agreements in both instances were posted to the plaintiff and were returned to Mr Bateman at a later date. I have reached this conclusion largely based on the evidence of Ms Reemeyer. Ms Reemeyer is a legal secretary and office manager instantly recognisable to lawyers of a certain age. She struck me as both efficient and a woman of complete integrity. She gave her evidence in a straightforward manner. It was put to her that she could not specifically remember posting these letters and costs agreements to the plaintiff. She agreed that she could not remember these letters specifically. But she was quite sure that she would have followed her normal practice. I accept that evidence.
In assessing Ms Reemeyer as a witness I want to make it plain that I am not doing so on the basis that she was likely to conform to a stereotype. Under cross‑examination she was calm, direct and careful in her answers and did not evade the questions put to her. I was impressed by her honesty.
In the end, so far as the circumstances of the signing of these agreements are concerned, it is a matter of settling upon the evidence led on behalf of the plaintiff or on behalf of the defendant. The respective versions of the facts are irreconcilable. On balance, I am satisfied that the defendant's version is to be preferred. In large measure, this is based upon my assessment of Mr Bateman and Ms Reemeyer as witnesses and the adverse view that I formed of the plaintiff under cross‑examination. There is nothing in the affidavit evidence of any of the parties which is inherently incredible or which would undermine their respective positions.
As I understand the plaintiff's case, it really comes down to this. The costs agreements are unreasonable for any one or a combination of the following reasons.
1.The letter accompanying the costs agreements was inadequate because it did not address all of the matters referred to by Ipp J in Brown.
2.The costs agreements were not adequately explained to the plaintiff before she signed them and she was not given the opportunity to read them and digest their contents.
3.So far as the First Costs Agreement was concerned, there was a failure to give an estimate of the costs in the covering letter and in the First Costs Agreement itself, and that made reliance on the First Costs Agreement unreasonable.
4.Both costs agreements had annexed to them the wrong cost determination such that the agreements were misleading, making reliance upon them unreasonable.
Before dealing with these matters in turn, I should make some general comments about the respective responsibilities of the parties. The authorities make it plain that a solicitor has a heavy obligation to adequately explain to a client what is involved in a costs agreement, what the client's liabilities might be under the costs agreement and so on. But that does not in my view mean that the client is entitled to approach the engagement of a solicitor with his eyes closed. Every client knows a solicitor will charge for his services. There is a responsibility on the part of the client to find out how these charges will be rendered and what the cost of taking a particular action might be. The extent to which an explanation on the part of the solicitor might be required, must necessarily be dependent upon who the client is. For instance, a client who is injured in a motor vehicle accident, and who has never before consulted a lawyer, clearly needs to have explained to him what is involved, how the charges will be rendered and all other relevant matters.
But the plaintiff was not in that position. She had actually been involved with litigation brought by her former solicitors in relation to costs. When she consulted Mr Bateman, she must have been acutely aware that the solicitor's charging regime could have significant consequences. But even accepting everything the plaintiff says, she appears to have taken no steps at all to clarify with Mr Bateman how he would charge her. She seems to have blundered into the arrangement without any due regard to her own interests. This fact must I think be borne in mind when assessing whether or not these agreements can be regarded as unreasonable.
Dealing then with the plaintiff's first complaint, as I have indicated above, I am satisfied the covering letter was adequate. Doubtless some improvement was possible. But the letter would, in my view, have alerted a person of the sophistication of the plaintiff, to all matters relevant in her deciding whether or not to sign the costs agreement. It invited her to obtain independent advice. It referred to the scale. In all the circumstances, a person such as the plaintiff reading that letter and having doubts about the way in which Mr Bateman would charge for his services could have moved to protect her position.
It may well be that the plaintiff did not in fact read the letters or the costs agreements. In fact, that was her evidence. I am satisfied the letters and the costs agreements were sent to her and she returned the agreements to Mr Bateman in person. That does not mean she read either the covering letters or the agreements. But she acknowledged in writing that she had done so. Mr Bateman was entitled to rely upon that written acknowledgement. In my view he was under no obligation to undertake any further explanation of his contractual position in the basis of his charging with the plaintiff.
As to the second point, it was a regrettable oversight on Mr Bateman's part not to have included the estimates in his covering letter and the First Costs Agreement. However, if it was the case that the plaintiff did not read either document, then the fact the estimates were not there, could not have had any affect on her signing the documents. If she did read both documents and still signed the First Costs Agreement, then she obviously did not regard the failure to provide the estimate as of such significance as to warrant further consideration. Moreover, even if a figure had been in either or both documents, someone in the position of the plaintiff must have been aware that it was no more than an estimate. It was given early on in proceedings before there was any real idea of how the action would develop. The failure to provide an estimate was not, in my view, a fact that makes reliance upon the First Costs Agreement unreasonable.
Finally, there is the inclusion of the incorrect determination. If the plaintiff read the documents and looked at the determination, she might well have concluded that, the costing regime that Mr Bateman was proposing, was more than was actually the case under the relevant determination. The costs scale under the 2004 determination was higher than the costs scale under the 2002 determination. By providing the earlier determination, Mr Bateman exaggerated the differential. Thus he inadvertently provided the plaintiff with a greater warning than was warranted.
In my view in all the circumstances, reliance upon the two costs agreements is not in this case unreasonable. I would dismiss the plaintiff's application. I will hear the parties as to costs.
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