Computer Accounting & Tax Pty Ltd v Bowen Buchbinder Vilensky
[2009] WASC 171
•19 JUNE 2009
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: COMPUTER ACCOUNTING & TAX PTY LTD -v- BOWEN BUCHBINDER VILENSKY [2009] WASC 171
CORAM: MURPHY J
HEARD: 15 MAY 2009
DELIVERED : 19 JUNE 2009
FILE NO/S: CIV 1451 of 2009
BETWEEN: COMPUTER ACCOUNTING & TAX PTY LTD
Plaintiff
AND
BOWEN BUCHBINDER VILENSKY (A FIRM)
Defendant
Catchwords:
Solicitors' costs agreements - Whether unreasonable - Discretionary considerations - Delay in making application to set aside - Relevance of principles of affirmation or election
Legislation:
Legal Practice Act 2003 (WA) (repealed)
Result:
Plaintiff fails in application to cancel two costs agreements
Orders to reduce the amount payable under one of the costs agreements
Category: B
Representation:
Counsel:
Plaintiff: Ms K A Vernon
Defendant: Ms M L Coulson
Solicitors:
Plaintiff: Chris Stokes & Associates
Defendant: Bowen Buchbinder Vilensky
Case(s) referred to in judgment(s):
Alman v MacDonald Rudder [2001] WASC 65
Alman v MacDonald Rudder [2001] WASCA 375
Bradley West Clarke List v Keeman [1998] ANZ ConvR 77
Brown v Talbot & Olivier (1993) 9 WAR 70
Cerini v McLeods (a firm) [2004] WASC 45
Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133
Computer Accounting and Tax v Professional Services of Australia Pty Ltd [2008] WASC 133 (S)
Duckworth v Chopra [2001] WASC 146
Harrison v Hocking [2000] WASC 188
Ilio Chris Rapoff v MacDonald Rudder (Unreported, WASC, Library No 8353, 6 July 1990)
Jovetic v Stoddart & Co (1992) 7 WAR 208
Law Society of New South Wales v Foreman (1994) 34 NSWLR 408
Maguire v Makaronis (1997) 188 CLR 449
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
Sargent v ASL Developments Ltd (1974) 131 CLR 634
Spellson v George (1992) 26 NSWLR 666
Stephenson v Conway‑Cook [2008] WASC 137
Stoddart & Co v Jovetic (1993) 8 WAR 420
The Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Webb v Malcolm J Bateman & Co (Unreported, WASC, Library No 6305, 27 May 1986)
MURPHY J:
Introduction
The plaintiff applies by summons dated 6 March 2009 to set aside two costs agreements, entered into in March 2007, with its former solicitors, the defendant, pursuant to s 222 of the Legal Practice Act 2003 (WA) (repealed) (the Act). One costs agreement relates to an action in this court which was heard by Simmonds J over the course of approximately 12 days in late 2007 and which concluded on 29 February 2008. Justice Simmonds published his reasons for judgment on 9 July 2008: Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133. I will refer to that matter as the 'Banning Matter' and the costs agreement relating to it as the 'Banning Costs Agreement'. The plaintiff, according to its counsel, obtained judgment in the Banning Matter for approximately $1 million. It subsequently applied for special costs orders in respect of which application it achieved considerable (but not complete) success: Computer Accounting and Tax v Professional Services of Australia Pty Ltd [2008] WASC 133 (S). According to the reasons for judgment, the special costs orders were applied for and obtained on the basis that the work undertaken was of unusual difficulty, complexity or importance.
The second agreement relates to an appeal to the District Court from a decision in the Magistrates Court. I will refer to that matter as the 'Penrose Matter' and the costs agreement relating to it as the 'Penrose Costs Agreement'.
The plaintiff relies on two affidavits sworn by Ms Frigger on 16 March 2009 and 15 April 2009 respectively. The defendant relies upon the affidavit of Mr Vilensky sworn 24 March 2009. Mr Vilensky was the partner of the defendant responsible for the carriage of the plaintiff's matters. There is much in common, or at least uncontroverted, in the affidavits, although there are some key issues of disputed fact. Neither counsel cross‑examined on the affidavits. The following section deals principally with the undisputed facts.
The history of the plaintiff's retainer of the defendant
Between July 2005 and February 2007, the plaintiff, through Ms Frigger, had used other solicitors to conduct the Banning Matter. Ms Frigger had also retained those other solicitors, since inception, in relation to the Penrose Matter. By February 2007 Ms Frigger sought to instruct new solicitors. The other solicitors exercised a lien regarding claims for unpaid fees. Counsel who had initially been retained by the other solicitors in the Banning Matter recommended that the plaintiff see the defendant.
By that stage, the Banning Matter had been listed for trial for six days commencing on 7 May 2007. The previous solicitors had given Ms Frigger a costs estimate for the trial of $68,000.
On 28 February 2007 Ms Frigger of the plaintiff had a meeting with Mr Vilensky and his assistant solicitor, Mr Blandford, of the defendant. There is a dispute about what occurred at that meeting and I will return to this topic more fully later. At this point, I note that it is common ground that the plaintiff sought to retain the defendant with respect to the Banning Matter, the Penrose Matter and with respect to an action by the Legal Practice Board against the plaintiff.
After the meeting on 28 February 2007, the plaintiff received from the defendant three letters, each dated 28 February 2007, each of which enclosed a document entitled 'Section 221 Legal Practice Act 2003 Retainer Agreement' (retainer document). Two of these letters with its retainer document are in evidence. One relates to the Banning Matter and the other relates to the Penrose Matter. The letter and retainer document for the Banning Matter and the Penrose Matter evidence respectively the terms of the Banning Costs Agreement and the Penrose Costs Agreement. The letters and each retainer document are, relevantly, in identical terms save in two respects. First, each has its own heading indentifying the name of the particular matter. Secondly, the retainer document forming part of the Banning Costs Agreement, under the heading 'Money On Account', referred, in cl 5, to a payment of $30,000 into the defendant's trust account, whereas in the corresponding part of the Penrose Costs Agreement, the word 'Nil' appears in relation to that provision. Each letter says that 'the relevant Court Scale of Costs' is enclosed. I will return to the terms of the costs agreements later. I note in the meantime that there is an issue of fact as to whether the defendant enclosed, with the letters, any court scales of costs.
Ms Frigger of the plaintiff quickly reviewed the letters and the enclosed retainer documents, which appeared to her to be standard form agreements. She was very busy at that time with her accounting practice and with the conduct of four sets of legal proceedings. She signed the Banning Costs Agreement and the Penrose Costs Agreement on 6 March 2007. At the end of the retainer document in the Banning Costs Agreement she completed a credit card authorisation form for $25,000 and at the end of the retainer document in the Penrose Costs Agreement she completed a credit card authorisation form for $2,500. I infer that Ms Frigger also completed a credit card authorisation form for the Legal Practice Board action in the sum of $2,500.
Before returning the signed costs agreements to the defendant, Ms Frigger wrote to Mr Blandford on 2 March 2007 in the following terms:
RE: SUPREME COURT NO 2265 of 2006
Please reply to the attached letter from O'Toole [the solicitor on the other side] as follows:
1.The property, the subject of the dispute, is owned by the Plaintiff in its own right. Although the Friggers intended to contribute it to their super fund, they did not do so when they realised it was a poor investment.
2.No grounds exist for the Plaintiff to provide security of costs to the Defendant pursuant to Order 25 of the RSC, and any such application will be opposed.
RE: DISTRICT COURT APPEAL NO 77 OF 2006
Attached is the notice of the hearing on Tuesday, 6 March 2007 at 10.30 am.
At the hearing, you will need to request leave to amend the notice of appeal, pursuant to the minute already filed. Grounds for this request:
1.The Plaintiff was self‑represented at the trial in the Magistrates Court.
2.When the original Notice of Appeal was filed, transcripts of the trial were not available.
3.Costs orders in the Magistrates Court were only handed down on 9 January 2007.
4.Although solicitors Lewis Blyth & Hooper advised me on 21 November 2006 that they were preparing the amended notice of appeal, and despite my several reminders to them to complete it during January, only when I threatened to find a new solicitor end January, was it completed on 11 February 2007. I had no control over the lateness of the document, and have since appointed a new solicitor
RE: YOUR APPOINTMENT AS MY SOLICITOR
I am in the process of getting a complete file for both above matters, which will be delivered to your office early next week, together with a cheque for $30,000 on trust. Could you please do the above two jobs even though I have not signed your cost agreements? Thanks.
In response, on 7 March 2007, Mr Vilensky wrote to Ms Frigger in, relevantly, the following terms:
Firstly, unless otherwise agreed, can you please address all further communications in all matters for my attention.
Secondly, in relation to the above action (as well as in relation to the District Court appeal) it is important that you return to us the signed Retainer Agreements sent to you recently as well as pay to us the sum of $30,000 on account of costs. Unless and until we receive the signed Retainer Agreements as well as your payment, we will not be doing anything further and will not file formal notices of our firm's appointment as solicitors of record on behalf of Computer Accounting and Tax Pty Ltd.
Also, until we are officially appointed as your solicitors of record, we will not be in a position to respond to the letter from O'Toole & Oprandi dated 26 February 2007 sent to Lewis Blyth & Hooper.
Consequently, if you have not already done so, can you please return the signed Retainer Agreements to us, together with your cheque in the sum of $30,000.
On 9 March 2007 Ms Frigger delivered to the defendant's office the signed costs agreements with credit card authorisations totalling $30,000. She also delivered a chronology of events in relation to the Banning Matter with relevant documents pertaining to that chronology, four additional copies of those documents, and a CD containing all relevant documents prepared by her previous solicitors. She also informed the defendant that she would deliver a file with the Penrose Matter documents the following week.
In an email of the same date, Ms Frigger also provided instructions in relation to the conduct of the Banning Matter in the following terms:
Please be advised that of the three valuations I was waiting for, I have received two. The valuation for 'loss of opportunity' claim is in draft form and will be forwarded to you by Monday, I hope.
In your letter to O'Toole [the solicitor on the other side], in addition to reply to their letter, please ask for discovery of 'pre‑lease agreement' referred to in a letter from Northdown Enterprises to the Defendant dated 27 February 2002.
Please liaise with [counsel] regarding what, if any, amendments, need to be made to the Statement of Claim. The current one is on the CD for your use.
The defendant sent accounts to the plaintiff on 30 March 2007 for each of the Banning and Penrose Matters. The amount charged for costs and disbursements, excluding counsel's fees, in the Banning Matter for the period 28 February ‑ 30 March 2007 was approximately $15,500. The amount charged for the Penrose Matter for the same period was approximately $2,100. The defendant applied part of the $30,000 held on trust to cover each of the accounts.
On or about 18 April 2007 Mr Vilensky spoke to Ms Frigger about various matters, including fees. His file note records, relevantly:
I told [Ms Frigger] that she had only paid us $30K in fees and I had originally asked for $75K. I would be asking her for more fees between now and the trial to cover our fees and counsel fees. She had no problem with this.
On 30 April 2007 the defendant sent further accounts to the plaintiff in each of the Banning and Penrose Matters. The account in the Banning Matter, excluding counsel's fees, was for approximately $48,000, to which the defendant applied approximately $10,000 from trust. In addition, counsel rendered an account for approximately $14,000, and sent it to the defendant for payment by the plaintiff.
Also on 30 April 2007, Mr Vilensky wrote to Ms Frigger in the Banning Matter and said, amongst other things:
I am writing to you in relation to the payment of fees and disbursements to our firm in relation to the above matter.
You will recall that at our very first meeting I asked you to pay into our firm's trust account the sum of $75,000 on account of fees and disbursements. You indicated that at that time you were unable to pay the sum of $75,000 in full but were in a position to pay $30,000. I indicated to you that it was in order for you to pay the sum of $30,000 but that prior to the trial, we would require a further payment on account of fees and disbursements, in particular in relation to Counsel's fees. I indicated to you that Counsel's fee for a six day trial was likely to be in the region of $45,000.
We now require from you an immediate further payment into our trust account of $75,000. This amount is intended to cover Counsel's fees in relation to the trial itself and also our fees. In relation to our fees, I confirm that I will sit down with you at the end of the matter (or at any other time convenient to you) to discuss these issues with you, so that you do not have any perception that you are paying for any duplication of services (which you are certainly not) and to make sure you understand and are generally satisfied with the total amount billed. You can rest assured that common sense will always prevail with me when it comes to sitting down with a client and discussing the question of fees. But either way the moneys must be paid.
On 2 May 2007 Ms Frigger replied:
I am not happy with the way you have changed the course of events regarding two affidavits I have sworn. After the first hearing of the security of costs, [counsel] clearly stated I should write my own affidavit - which I did. In that I clearly state that I purchased the property for the company, and intended to contribute it to the Frigger Super Fund. But you were not happy with my affidavit, and changed it again. You only sent me your affidavit at 3.30 pm, and it was to be filed and served by 4 pm. The wording of your affidavit is entirely different to the one I prepared. You sent it as a PDF document (although it was prepared as a Word document), so I was unable to change it! I believe you are 'covering yourself' with the contents of your email below. I will show a copy of the affidavit I prepared to [counsel] when I next meet him.
To set the record straight, the company purchased the property. We intended to contribute it to the Frigger Super Fund. This intention was shown in some documents lodged by the plaintiff in the Penrose case. But the transfer never took place. No second 'Land Transfer' has ever been executed or lodged. I stated that I 'reversed' the transaction, this is an accounting term which means that the accounting record was 'cancelled'. I have never claimed the transaction as a deductible contribution.
In my second affidavit I prepared, I clearly stated that the financial statements filed with the application for refund of fees in the District Court was specifically and only in relation to the transaction, the subject of the proceedings. This in fact was written on the application itself. This is how the District Court registry staff explained it to me. For some reason you removed that statement from the affidavit you prepared. [It's] no wonder Judge Le Miere could not understand why I had provided no explanation as to why the Edward Street property was not in these financial statements.
In the security of costs hearing, Judge Le Miere clearly found that the plaintiff owned the Armadale property. The Defendant's solicitor also stated that the Plaintiff could borrow against its two real estate assets in order to secure costs. So where is the argument?
In relation to your fax regarding costs:
1.I have always paid [counsel's] accounts directly to his bank account, and I shall continue to do so.
2.I shall pay David Liggins accounts directly to his bank account, as I have already done for another valuation he prepared for me.
3.I am not prepared to pay $75,000 to your trust account. I have already stated I am unhappy with the first bill you have sent me in these proceedings, and you stated you would give me a discount. I have also stated that I intend to have it taxed. I am entitled to receive a monthly bill from you, which I shall pay according to the terms of the retainer.
4.I have spoken [sic] the Court Technology Officer, who advised that it will cost a total of $3000 for a 6‑day trial transcript, with a deposit upfront of $2200. I will deliver a cheque for this amount, and I ask that you request in writing for such a transcript be delivered electronically at the end of each day, to enable both [Mr Blandford] and [counsel] to get a copy.
It is to be noted that Ms Frigger did not dispute Mr Vilensky's version of the discussion of fees at the 28 February 2007 meeting.
On the first day of the trial, 7 May 2007, the Banning trial was adjourned.
On 13 May 2007 Ms Frigger wrote to Mr Vilensky and said, amongst things, in relation to the Banning Matter:
…
2.Why have you not consulted me before proposing the new 'trial orders'. I do not agree that we have to delay the trial until it suits the Defendant. I thought that the dates for the [trial] orders would be complied with as they were, giving the extra four days that the Defendant was allowed to file their documents. I do not agree with the proposed new trial orders you have filed without consulting me first. I thought that we would seek to get trial dates in June or July. What has happened here?
As you have already charged me for complying with the trial orders dated 21 February 2007, I will not be paying for them to be complied with again.
I again advise that I require your latest bill to be taxed, as I am alarmed at the fees charged therein. I have already advised you that I will not be paying for 35.4 hours to prepare my witness statement, which witness statement was already prepared and was only changed 'cosmetically' by [Mr Blandford]. I am yet to analyse the balance of the bill, but will do so when I can 'breathe' again. The disbursements charged do not form part of the retainer agreement.
I still do not understand why three members of your staff need to attend Court, and why both you and [Mr Blandford] had to attend with [counsel] at the Defendant's offices. I accept that this was for training purposes and will not be charged to my account.
On 15 May 2007 counsel rendered a fee in the Banning Matter for approximately $30,000 which was forwarded to the plaintiff for payment.
On 31 May 2007 the defendant rendered a further bill for costs and disbursements in the Banning Matter, excluding counsel's fees, for approximately $41,000.
On 25 June 2007, Ms Frigger wrote to the defendant contending that she was being overcharged and wished to inspect all the defendant's files and timesheets in relation to her matters. She said:
…
I have a genuine problem with your bills, as I have found numerous errors on them. Also, I need to satisfy myself that I have been provided with legal services worth $132,549 in the Banning matter since you took over the matter. This covers a security of costs application, two witness statements, compilation of trial bundle, one day of trial from 10.37‑1.15 and 2.30‑2.53 (7/5/07), one chamber hearing on 3/5/07 from 2‑5 pm, one directions hearing (14/5/07). I have sufficient proof that [Mr Blandford] is over‑charging me, and to this end I wish to inspect your files and time sheets from which these bills have been prepared. I would like to visit your offices at 11 am tomorrow Tuesday 26 June for this purpose. I have checked the Supreme Court file in order to satisfy myself as to what work has been done. As I do not believe that legal services worth $132,549 have been provided (~400 hours), I think we have no alternative but to get a taxing officer to form an opinion.
…
She also said, in response to Mr Vilensky's statement that a large amount of work had been done in a claim worth more than $1 million:
I was unaware that [sic] amount of legal costs are in proportion to the value of a claim. I am aware that the same schedule of costs is used in the District Court and the Supreme Court.
In the same letter, Ms Frigger said in relation to another matter, described as the 'Forbes Matter', on which the defendant was also then apparently engaged:
[The defendant's assistant solicitor] could not tell me how many hours she would spend preparing a bill of costs … I have attended many taxations and I know that you have not provided legal services worth this much.
Ms Frigger attended the defendant's office on 3 July 2007 where she was shown timesheets relating to her matters. She says that she was not given access to the files. The defendant denies this.
On 5 July 2007 Ms Frigger sent a reasonably lengthy letter to Mr Vilensky referring to her attendance at his offices on 3 July 2007 and elaborating in detail on various concerns she said she had about the defendant's charges and the costs agreements into which she caused the plaintiff to enter. Amongst other things she said:
…
3.You were unable to explain in tax invoice ref DV 17561/35139, under the heading 'Disbursement', there is a charge of $1060.95 for emails although only 45 emails were sent, and the Schedule shows a charge of $1 for each email sent. You also informed me that this charge is not a 'disbursement', as you have paid no third party $1060.95 for emails sent by your firm.
4.Similarly, for the 'service fee' of $1851.37, you were unable to explain what this is for, but confirmed that no third party had been paid this 'disbursement'. The same comments apply for the photocopying and printing charges.
5.At no time during our first meeting did you explain the above to me. You requested a $75,000 deposit, and I believed this was the 'reasonable estimate' referred to in para 1(f) of the retainer agreement, for legal services up to and including a 6‑day trial plus Penrose and Legal Practice Board matters.
6.From the time you took over the care and conduct of the Banning matter you have billed me, together with counsel fees, in excess of $133,000. At no time did you advise me that your estimate of $75,000 would be exceeded. Only 1 day of the trial took place and the trial had to be adjourned to November 2007, because you failed to properly supervise, and ensure that the trial orders, which I handed to you on the first day I met you, were complied with by your junior solicitor, Mark Blandford. Based on Supreme Court schedule of costs, for the work that was done, the maximum that would be allowed should the plaintiff win is $86,000.
7.In regards to the Penrose matter, since I delivered the relevant documents to your office late February 2007, no progress of the matter had been made by your staff member Mark Blandford, although there has been three directions hearings. Only since I delivered a 'brief' to your office for a barrister, has progress been made. In addition, I observed Mark was in court at 9.30 am for a court hearing which was scheduled to commence at 10.00 am. Because you have allowed your junior solicitor to deal with this file without any supervision, I have lost valuable time, as well as unnecessary fees.
8.As I have already advised you it is unnecessary for more than one solicitor to attend court, I therefore will not pay for more than one solicitor's attendance at court. I understand that counsel requires the assistance of one solicitor at trial.
9.Based on the above, the plaintiff and I reserve our right to submit the costs agreements to a judge in the Supreme Court to check if they are reasonable.
10.I also give you notice that I intend to have all your bills of cost taxed. However, for expediency, I believe it will be beneficial to both parties to wait until the various proceedings have been concluded.
11.I have checked the bill in the Banning matter for May 2007, and calculate that an amount of $25,095 is owing, but only if the retainer agreement is found to be reasonable as outlined in para 8 above. I agree to pay this amount in order for you to continue with the conduct of this matter and authorise you to deduct this amount … on Thursday 12 July 2007.
It may be noted that Ms Frigger did not suggest that Mr Vilensky had said, at the meeting on 28 February 2007, that the figure of $75,000 was an estimate of the total costs of the Banning Matter, or that he had said it was an estimate of costs for all three matters. Rather, she said in this letter that she formed a belief about the figure of $75,000 being an estimate after reading par 1(f) of the retainer document.
The defendant did not reply to Ms Frigger's letter of 5 July 2007. Ms Frigger says that in the absence of a reply, she concluded that the defendant had agreed to defer any taxation of the defendant's costs to the end of the proceedings in the Banning Matter.
According to a letter from the defendant's solicitors dated 11 June 2008 (referred to later in these reasons) the defendant also rendered an invoice for fees of approximately $25,000 on 12 July 2007. The plaintiff does not depose to receiving a bill of that date and the defendant does not depose to having sent one. Also, the defendant's bill of 29 August 2007, which both parties concede was sent, referred to below, covered a period including 1 June ‑ 18 July 2007. Nothing material turns on this apparent discrepancy.
On 29 August 2007 the defendant rendered further bills in each of the Banning and Penrose Matters. The former was for approximately $6,000 and the latter was for approximately $11,000.
On 28 September 2007 the defendant rendered a further bill in the Banning Matter for approximately $8,000.
On 31 October 2007 the defendant rendered a further account in the Banning Matter for approximately $57,000, to which it applied approximately $14,000 from trust. The bill recorded that there was also approximately $14,000 outstanding from previous accounts.
The trial in the Banning Matter resumed on 2 November 2007 and ran to 9 November 2007, when it was adjourned. On 16 November 2007, counsel rendered an invoice for fees of approximately $57,000 which was passed on to the plaintiff for payment.
On 19 November 2007 the defendant wrote to the plaintiff concerning the payment of counsel's fees in the Banning Matter. On or about 23 November 2007 Ms Frigger provided the defendant with a written credit arrangement to pay $15,000 per month. There was also some arrangement for the defendant to accept a reduction in the total amounts charged. Neither the defendant nor the plaintiff deposes, in this application, to the detail of these arrangements.
The Banning trial resumed on 28 November 2007 and continued over a further three days up to and including 10 December 2007, when it was adjourned to 29 February 2008.
On 30 November 2007 the defendant rendered a further account, excluding counsel's fees, in the Banning Matter for approximately $69,000. The bill indicated that there remained approximately $57,000 outstanding from previous accounts.
On 11 December 2007 counsel in the Banning Matter rendered a further invoice for approximately $27,000, which was forwarded to the plaintiff for payment.
On 30 January 2008 Ms Frigger sent the defendant's office an email which said, in effect, that unless an agreement could be reached to reduce the total bills, she would require the defendant to lodge all the bills for taxation in the Supreme Court by a registrar. She said that she had already given the appropriate notices of taxation.
On 31 January 2008 Mr Vilensky wrote to Ms Frigger and said, inter alia:
…
There have been a few difficult moments when we have argued over fees. But you have always seen the bigger picture. I am asking you to do so again now [Ms Frigger]. BBV has been very reasonable regarding fees over the past year or so. We have given you big discounts (at a cost to us) and generous payment terms free of interest. If our bills are taxed they will be done in accordance with the Retainer Agreement‑ ‑and all discounts will be written back. In other words you must realize that there is a real risk to you that on taxation you could end up paying more‑ ‑and immediately with interest. We cannot continue to properly represent the interests of a client who wants our solicitor client bills to be taxed. All bets are off once a bill goes to taxation.
We [have] never billed you for unnecessary work‑ ‑only for work done necessarily and in your best interests. Our fees are in accordance with our [firm's] Retainer Agreement that you agreed to. And a lot of my time has not been billed to avoid duplication. Even though I have spent many hours on the matter behind the scenes and could have charged for those hours. We have been fair and decent [Ms Frigger]. [Let's] not spoil the relationship now ‑ ‑to your detriment. If you force us into taxation we will be ready to do so ‑ ‑no problem. But you will not be the winner from that process [Ms Frigger]. I think you must know that. The consequences for you of a taxation of our [firm's] costs will not be to your advantage. You must realize that you are better off on the current arrangements.
On 31 January 2008 the defendant sent a further account to the plaintiff in the Banning Matter for approximately $48,000, excluding counsel's fees. Counsel rendered a separate account for approximately $7,000 which was sent to the plaintiff for payment.
The last day of the Banning Matter trial, involving closing submissions, was on 29 February 2008. On that day the defendant rendered a further account in the Banning Matter to the plaintiff for approximately $35,000. The bill stated that there was an amount of approximately $125,000 outstanding from previous accounts. Counsel rendered an invoice for fees on 4 March 2008 for approximately $26,000, which was sent to the plaintiff for payment.
In relation to the Penrose Matter, the defendant rendered a final bill on 25 February 2008 for approximately $2,400. Counsel in that matter (different from the counsel in the Banning Matter) rendered a separate account, dated 25 January 2008, for approximately $1,800, which was sent to the plaintiff for payment.
On 12 March 2008 Ms Frigger emailed Mr Vilensky in the following terms:
1.Neither Hartmut, I or Computer Accounting & Tax Pty Ltd will comply with your demands for further funds.
2.Our offer to wait until judgment before any further action is taken in regards to costs will be withdrawn, should you take the steps you have indicated in your email.
3.We will fight any application by you to get off the record before judgment is handed down in this matter.
4.We note your refusal to extract orders, as ordered by Justice Simmonds on 29 February 2009. Obviously your email of 4 March 2008 contained several lies.
5.There has been no repudiation of the retainer agreement by the CAT Pty Ltd. The written credit arrangement made on 23 November 2007 is currently up to date. Our payments of $15,000 per month are paid in full until April 2008 and for half of May 2008.
Mr Vilensky's reply of the same date, 12 March 2008, was in these terms:
My reply to your email is as follows:
1.Noted. Please however note that I am not 'demanding further funds' but requesting payment of what is lawfully due and payable by you/CAT to our firm.
2.I consider your statement that you will 'take further steps in regard to costs' only when the judgment is handed down as a meaningless gesture. What does it mean? That you will only decide to pay more money if you are happy with the judgment? And how much? And when? Sorry [Ms Frigger] but that's not good enough. In fact it is completely unacceptable and a breach of the terms of the Retainer Agreement. I don't care if you withdraw the 'offer' now because it is not an offer. In any event the so‑called 'offer' has been rejected by us. So there is nothing to withdraw anyway. As I said in my last email your decision to withhold the payment of further fees is a repudiation of the Retainer Agreement which we have accepted. So now we are left with no option but to get off the record and sue for our fees. Also don't ever threaten me with anything. I do not take kindly to threats.
3.Noted. And good luck. But we are proceeding anyway as your attitude has left us with no other option. If you think we are going to just sit around indefinitely doing nothing in the hope you will pay us you are mistaken. Or you have misread the situation. And who do you think is going to act for you in an appeal whether opposing an appeal or prosecuting one.
4.I did not lie. I stopped what we were in the process of doing. We don't work for nothing.
5.This is complete nonsense. You deliberately canceled the March 2008 payment of $15K in breach of the agreement we had. A generous agreement too I might add which is now at an end. Contrary to what you assert your payments are not up to date. In fact you are in arrears. In any event the instalment deal was only until the trial ended which was on 29 February 2008. So please don't insult us further by pretending that you are paid up until the middle of May 2008.
[Ms Frigger] it beggars belief that after all you have gone through and after all we at BBV (and [counsel]) have done for you, you would actually self destruct right now. And potentially put yourself from a position of relative strength into a vulnerable and insecure position. For what [Ms Frigger]? Money? You knew at all times what was involved and how much it was costing and going to cost. What you have actually done in a manner of speaking is to bite the hand that feeds you. You have completely betrayed our trust in you. Ask yourself if you are remotely likely to benefit from this at the end of the day. What is about to happen will not be pleasant [Ms Frigger]. And we are going to seek all our costs from you also‑ ‑over and above what you already owe. Is your decision not to pay us really worth the consequences.
Believe me the actions we will take to recover our money is not our preferred option. But we are a business and expect to be paid when we work for people. You have let us down and have reneged on the terms of the Retainer Agreement. So we must take steps to protect our interests.
In any event it is clear there is a complete breakdown of trust in the relationship of solicitor and client between us.
I am prepared to give you one final opportunity to change your position [Ms Frigger]. Because I don't think you and Hartmut are thinking clearly right now (of course I may be wrong). If you agree to pay us $100k and do actually pay this sum plus all outstanding fees owing to [counsel] by 5 pm on Monday 17 March 2008 we will not take the actions threatened. But I need to know what your decision is by 5 pm tomorrow (Thursday) - ‑failing which I am proceeding with my threatened course of action without further notice. And the cards will fall as they do.
Remember [Ms Frigger] once we commence our application there is no turning back whatever the outcome. I urge you to reconsider your position. But at the end of the day that decision is yours only to make.
Ms Frigger on behalf of the plaintiff, in her affidavit in this application, referred to that email and says:
The plaintiff had paid the defendant and counsel $277,000 for the Banning proceedings. My estimate of the Supreme Court Scale maximum allowance is $160,000 to $175,000. The plaintiff had no alternative but to appoint a new solicitor.
I interpolate here that in its application for special costs orders in the Banning Matter proceedings, the plaintiff was represented by the solicitors on the record for it in this application.
It is apparent from the invoices attached to Ms Frigger's affidavit that the bulk of the fees rendered to the plaintiff, by both the defendant and counsel, related to work done after the adjournment of the trial on 7 May 2007. Overall, the fees were substantial.
The history of the plaintiff's application for taxation and to set aside costs agreements
On 17 March 2008 there was a discussion between Ms Frigger and Mr Vilensky concerning a proposal that Ms Frigger made in relation to the plaintiff paying taxed costs plus 30% in respect of the plaintiff's legal fees. The precise terms of that discussion are in dispute but the differences are not, in my view, presently material.
On 17 March 2008 Mr Vilensky wrote to Ms Frigger and said, inter alia:
…
5.It is obvious that there has been a complete breakdown of trust in the relationship between you and our firm to the point where we can no longer continue to act for CAT. We will now be making the necessary application to withdraw as the solicitors of record for CAT in the above matter and taking further steps to recover our fees.
6.You have indicated that you propose to brief solicitors to set aside our firm's Retainer Agreement based on your allegations that we have breached the terms of the same. I deny that we have in any way breached the terms of our firm's Retainer Agreement in any material respect and reject your allegations that we have done so. You are of course at liberty to take whatever action and seek whatever advice you deem appropriate. Needless to say we will oppose any application on your part to set aside the Retainer Agreement. We consider the Retainer Agreement to be valid, binding and enforceable and any action on your part to set it aside will be opposed.
I infer from the above communication that the plaintiff through Ms Frigger had indicated that it would brief new solicitors to set aside the Banning Costs Agreement.
In May 2008 there was correspondence between the plaintiff and the solicitors whom the defendant had appointed to act for them in relation to the fee dispute. The defendant's solicitors suggested an informal mediation, which was rejected by the plaintiff.
On or about 11 June 2008, the defendant appointed new solicitors (the ones on the record in this application) to act for them in relation to the fee dispute with the plaintiff. By letter dated 11 June 2008, the defendant's solicitors stated that the plaintiff's request for taxation was dated 30 January 2008 and that this only entitled the plaintiff to require a taxation of the bills dated 31 January 2008 and 29 February 2008 but that, without admission, the defendant was also prepared to tax the bill dated 30 November 2007. The letter also stated that the bills would be prepared for taxation under the Banning Costs Agreement, which, the letter contended, was a valid and binding agreement. The letter also stated that preparation of the bills for taxation would be time consuming and the bill of costs for taxation should be available within six weeks. The effect of the letter was to indicate that none of the defendant's bills in the Banning Matter for the period March ‑ October 2007 inclusive would be taxed, and that the bills dated 30 November 2007, 31 January and 29 February 2008 would be prepared for taxation in accordance with the Banning Costs Agreement.
On 11 June 2008 Ms Frigger of the plaintiff replied by email. She contended that it was obvious that the defendant's new solicitors had not been provided with other notices that she had given requiring bills to be taxed and said that:
Should your client file their 'selected' bills for taxation, my company will apply for the retainer agreement to be set aside.
On 1 July 2008 the defendant's solicitors responded to Ms Frigger's email of 11 June 2008. The letter rejected the plaintiff's contention that there had been other valid requests for taxation prior to 31 January 2008. On the question of the plaintiff's proposal to set aside the Banning Costs Agreement, the letter said, in effect, that the plaintiff should bring any application, if deemed appropriate, but that time is a factor and that any application should be brought promptly.
On 11 July 2008 the plaintiff applied (by Ms Frigger, the plaintiff not then being represented by any solicitors) in this court in proceedings designated LPA 36 of 2008, for a determination that the plaintiff had made valid requests under s 227 of the Act for the bills in the period March ‑ October 2007 to be taxed, alternatively for orders under s 229 of the Act enlarging the time to make such requests for taxation. On 26 August 2008, Acting Registrar Christo made certain programming orders in LPA 36 of 2008, leading to a special appointment for the hearing of the plaintiff's application on 26 November 2008. Those orders were amended on 30 September 2008, by extending the time for various steps to be taken, and the special appointment was re‑scheduled for 18 December 2008.
On 6 October 2008 the defendant filed a bill of costs for taxation in LPA 36 of 2008, in respect of legal fees covered by the bills in the Banning Matter dated 30 November 2007, 31 January 2008 and 29 February 2008.
On 2 December 2008 there was a directions hearing at which the plaintiff was represented by a solicitor (not being the solicitors on the record now). On that day the Registrar ordered:
1.The [plaintiff] have leave to file and serve, by 9 December 2008, any substituted affidavit and submissions in support of the application to enlarge time.
2.The Practitioner may, by 16 December 2008, file and serve any further responsive affidavit and submissions.
3.The Practitioner have any costs thrown away by reason of the filing, by the [plaintiff] of any substituted affidavit and submissions.
4.By 5 December 2008, the [plaintiff] is to advise the Court and the Practitioner whether it consents to a provisional assessment of the Practitioner's Bill of Costs dated 6 October 2008.
5.If the [plaintiff] does not consent to a provisional assessment of the Practitioner's Bill of Costs the [plaintiff] will, by 16 December 2008 file and serve a schedule setting out:
(i)Which items in the Bill of Costs are agreed.
(ii)Which items in the Bill of Costs are contested.
(iii)The amount which the [plaintiff] contends should be allowed for each contested item, and;
(iv)Its reasons for (ii) and (iii) above.
6.The hearing in this matter listed at 9.30 am on 18 December 2008 be relisted to 10 am on that day.
7.The Practitioner have the costs of today fixed at $400.00 to be paid by the [plaintiff] by 16 December 2008.
On 18 December 2008, following a hearing at which the plaintiff was legally represented, the learned Registrar held that two bills, namely those of April and May 2007, had been the subject of valid requests for taxation, and did not require an order for enlarging time. He otherwise dismissed the plaintiff's application of 11 July 2008.
In relation to the defendant's bill of costs dated 6 October 2008, also on 18 December 2008, the Registrar extended time for the plaintiff to comply with order 5 of the directions made on 2 December 2008, to 21 January 2009, and ordered that the bill of costs dated 6 October 2008 be listed for determination in the period 9 ‑ 13 March 2009.
On 27 January 2009 the plaintiff filed a summons seeking to extend time within which to appeal the Registrar's decision of 18 December 2008, which application was subsequently (on 24 March 2009) dismissed.
On 5 March 2009, at a directions hearing in LPA 36 of 2008, the Registrar, in effect, ordered that, pursuant to O 66 r 44, Ms Frigger be granted leave to represent the plaintiff on the taxation of the bill of costs filed by the defendant on 6 October 2008, and that the taxation be conducted on the basis that the whole of the period covered by the bill be subject to the Banning Costs Agreement.
On 6 March 2009, the Friday immediately before the scheduled commencement, on Monday 9 March 2009, of the hearing of the taxation of the defendant's bill dated 6 October 2008, the plaintiff filed this application and the hearing for taxation was consequently vacated.
The costs agreements
Each of the letters forming part of the Banning Costs Agreement and the Penrose Costs Agreement respectively included the following:
Thank you for considering retaining us to represent you in relation to your above matter. This letter and the enclosed agreement confirm the basis upon which the firm is prepared to act for you and the way in which we charge for work done on your behalf.
Each case is unique in its preparation and presentation. It is therefore not possible for us to furnish an accurate quotation of how much it will cost for us to represent you. The overall cost will be directly related to the complexity of the case, the time spent in preparing and presenting it, the work carried out on your behalf, and the out‑of‑pocket expenses (called disbursements) incurred. These matters are also likely to be affected by the attitude which any other parties whom we have to deal with take to the matter, and by the way the case is handled by their solicitor.
You will almost certainly want to know how much the costs are as the case progresses. For this reason we will bill you on a regular basis. This will permit you to monitor the cost and assess the extent of your liability to the firm on an ongoing basis. If the matter proceeds to litigation, we will, from time to time, provide you with an estimate of what the costs will be up to the conclusion of the 'next stage' of the proceedings. We stress, however, that these can only be estimates. The combined effect of regular interim billing and these estimates should enable you to gauge the cost as the matter progresses.
The Legal Practitioners Act requires that if we propose to charge a client otherwise than in accordance with the relevant Court Scale of Costs, we must enter into a costs agreement with that client. Since our charges exceed those provided for by the scale, we enclose our costs agreement and the relevant Court Scale of Costs. If you have any questions about the document or any aspect of our fees policy, please call us and we will discuss the matter at no cost to you.
Our charge out rate is based on time units of 6 minutes. Where a time rate applies, the rate varies depending upon who does the work. In this way, we are able to organise our work efficiently, so that work which does not need a partner's attention can be handled by a qualified solicitor or clerk. Of course, all work is performed under the ultimate supervision of a partner. In your case the solicitor handling your matter is David Vilensky. This method of time costing applies to all attendances, such as conferences, telephone calls, attendances at court and travelling and waiting time.
Non professional time (which is charged at a lesser rate) includes time spent by a law clerk, secretary or administrative assistant in relation to some of the tasks lawyers do, and also responsibilities normally undertaken by clerks or administrative assistants such as filing and serving documents, searching records, making enquiries and delivering documents.
The prepayment referred to in the costs agreement is an initial payment intended to put us in funds so that we can commence work on your case. It will be held in our Trust Account and funds will only be transferred to the firm's General Account after we have sent you a bill. If (as is likely if the matter proceeds to Court) the advance is insufficient to cover our costs, we will ask that it be topped up from time to time. The amount required to be paid will depend upon our estimate of costs to take the matter to the conclusion of the next logical stage in the proceedings. Of course, if our costs do not exceed the advance, we will promptly refund the balance to you upon completion of the matter.
…
The costs agreement was prepared by this firm and confers a financial benefit on the firm. While we are happy to answer any further questions you may have about it, you are entitled to obtain independent legal advice from another solicitor as to its legal and practical nature and effect, and as to whether or not it is in your interests to sign it. It is in your interests to obtain such advice.
If, having read the costs agreement carefully and obtained any independent advice you require, you wish to proceed, would you please sign the agreement on each page and return it to us. We will then sign the agreement and return a completed copy to you for your records. UNTIL WE ARE FORMALLY RETAINED BY RECEIVING THE SIGNED AGREEMENT AND REQUIRED PAYMENT ON ACCOUNT OF COSTS FROM YOU, WE CANNOT ACT OR TAKE ANY STEPS ON YOUR BEHALF.
The retainer document enclosed with each letter included the following terms:
1.Acknowledgments
By this Agreement I acknowledge:
(a)That I have read, understood and received a copy of this Agreement;
(b)If this Agreement is in respect of a litigation matter, I agree that I have received from you a copy of the relevant Court or other scale of charges applying to this matter;
(c)The charges set out in the Schedule of this Agreement ('the Schedule') in most cases, will be higher than the rates set out in either the Solicitors' Remuneration Order or the relevant Determination of the Legal Costs committee, which comprises the relevant Court scale or in cases of federal law according to the recommendations of the Federal Costs Advisory Committee;
(d)The scales determined by the Legal Costs Committee and the Judges of Federal Courts:
(i)Limit the costs a solicitor can receive in the absence of a written agreement;
(ii)Determine the costs payable by the client to the solicitor or payable by the losing party to the winning party despite the amount of time spent by the solicitor and/or the barrister working on my case.
(e)The scales limit the amount of costs I can recover from the other party if I am successful and limit the amount that I will have to pay to the other party if I am not successful in my case.
(f)On the information presently available to you, I agree that you have given me a reasonable estimate of the amount of your costs and Counsel fees which may be recovered on taxation under the relevant scale or that I may have to pay if my case is not successful. I understand that this is an estimation and not a quotation offered by you to me about my costs.
…
(i)That you have told me I can obtain independent legal advice about the meaning and effect of this Agreement and that it is in my interests to seek that advice.
…
3.Charges according to the Schedule to this Agreement
(a)I agree that you have told me your charges for all services rendered by you and your firm in relation to this Agreement are calculated in units of six minutes. If the time spent supplying the relevant service is less than six minutes then the costs that I am to pay are calculated on a unit of six minutes regardless of the time actually taken to render that service. If more than six minutes is spent then the calculation is made on the next highest level (for example if ten minutes is spent preparing a letter then the charges are calculated for two units namely twelve minutes)
…
5.Money On Account
I agree to pay $30,000.00 [in the Banning Matter] into your trust account simultaneously with my execution and return of this Agreement for the purpose of meeting your anticipated costs and expenses. I understand that you may ask me to pay further amounts towards those [costs] and expenses including counsel's fees and I agree to do so within seven days of the date of such written request. Details of your payment options for this requested payment is attached for your convenience.
…
8.Costs awarded by the Court
I understand that if I am successful in my case, the other party may be required to make a payment towards the costs of taking my case to Court. I further understand that you have told me that any payment by the unsuccessful party may not be enough to meet all the costs and expenses that I owe to you. I agree that you may receive the legal costs awarded to me and deduct those costs from any amounts that I owe to you concerning these proceedings.
9.Counsel
(a)I agree that you may, subject to my approval, instruct Counsel to:
(i)advise on the law and the facts;
(ii)prepare any necessary documents including pleadings;
(iii)appear in Court or at a hearing as my representative.
(b)I further agree that you may negotiate the appropriate fee to Counsel. I understand that you will then obtain my approval excepting emergencies, before agreeing the fee with Counsel.
(c)I further understand that you have told me that the costs charged by Counsel must be met by me and may not be fully recoverable or recoverable at all from the other party whatever the outcome of the case. I understand that any difference between those fees and the amount recoverable will be payable by me to you.
10.Money held in Trust
I authorise you to withdraw and pay funds held from time to time in your trust account including any moneys recovered in settlement of my action for the following:
(i)Expenses properly incurred by you in the conduct of my matter;
(ii)Costs that may be due and payable by me to you;
(iii)Any other expenses for which I am responsible including counsel's fees
…
13.Ceasing to act - Solicitor
(a)I understand that you may cease acting on my behalf if:
(i)I have not performed any of the obligations required under this Agreement.
(ii)I have not given you adequate instructions within a reasonable time of being asked to do so;
(iii)In your opinion it appears that mutual confidence and trust no longer exists between us;
(iv)In your opinion, continuing to represent me may place you or another member of your firm in breach of the Professional Conduct Rules or ethics governing legal practice in Western Australia.
…
…
15.Statement of Rights
I acknowledge that:
(a)This Agreement may be reviewed by a Judge of the Supreme Court and that the Judge can vary or cancel the Agreement;
(b)I have the right within thirty days of any account to ask you to give me a detailed account and within a further thirty days of receiving that account, to ask you to lodge the account for taxation in the Supreme Court of Western Australia;
(c)I have received attached to this Agreement a copy of the relevant scale of costs applying to the jurisdiction in which the proposed action is to be taken;
(d)You have explained to me that I have the right to apply for Legal Aid but that you as my solicitor are not bound to accept an assignment of Legal Aid is granted.
The attached schedule set out various rates for practitioners of different seniorities. The rate for a 'Partner' was given as a range of $290 ‑ $360 per hour excluding GST. The rate for a 'Senior Solicitor' was given as a range of $250 ‑ $290 per hour excluding GST. The rate for a 'Junior Solicitor' was given as a range of $210 ‑ $250 per hour excluding GST.
The competing versions of the 28 February 2007 meeting
The plaintiff's version of events in relation to the meeting on 28 February 2007 is set out principally in pars 13 ‑ 19 of Ms Frigger's affidavit of 16 March 2009 as follows:
…
13.I began the meeting by [outlining] the Banning Action to him. I presented him with a bundle of documents, including the trial orders. I told him what I understood needed to be done pursuant to the trial orders. I also told him that a security of costs application had been foreshadowed.
14.I don't recall a long discussion about this matter and I accordingly concluded that he had already been briefed by [counsel].
15.I then explained the other two matters for which I required his firm's services:
15.1An action by the Legal Practice Board against the plaintiff
15.2The Penrose Appeal
16.I outlined both of these matters at some length and he and Mr Blandford asked me a number of questions about them.
17.I had already received Lewis Blyth & Hooper's costs notification of $68,000 for a six day trial. Mr Vilensky told me he required $75,000 which he said was to cover his firm's fees and counsel's fees for the forthcoming 6‑day trial. I accepted the estimate as it was close to the $68,000 estimate given to me by Lewis Blythe and Hooper in the Costs Notification. He asked me for a cheque for the $75,000. At that time the trial was to commence on 7 May 2007. He said that because the trial was so near, he required immediate payment. I told him I could not afford to pay the whole sum immediately, but could pay $30,000 and he agreed to accept that amount. Mr Vilensky also said he would post to me the costs agreement or contract for each of the three matters.
18.There was no discussion about costs.
19.To my recollection Mr Vilensky then left the conference room and I had a further discussion with Mark Blandford about the Penrose appeal.
20.The whole meeting lasted about 2 hours.
Ms Frigger's evidence contains conflicting versions as to her state of mind in relation to the figure of $75,000.
Ms Frigger said in her affidavit dated 15 April 2009 at par 8.5:
I understood and accepted the $75,000 as the reasonable estimate of the legal costs to be incurred for the work I understood remained to be done by the defendant and counsel leading up to and including a 6 day trial, which at that stage was scheduled to commence on 7 May 2007.
In her letter dated 5 July 2007 she said (at point 5) that she believed that the sum of $75,000 was the 'reasonable estimate' for services referred to in par 1(f) of the retainer document 'for legal services up to and including a 6 day trial plus Penrose and Legal Practice Board matters'. Paragraph 1(f) of the retainer document referred to a reasonable estimate of costs and counsel's fees which may be recovered on taxation under the relevant scale, and that such amount was not offered as a quotation.
Ms Frigger also said at par 22 of her affidavit of 16 March 2009:
I signed the Banning agreement on 6 March 2007 on the basis that I had been quoted the lump sum of $75,000 for the 6‑day trial. I also signed the other agreements on the same day. I made copies of the agreements for myself.
Mr Vilensky's version of events is set out in his affidavit sworn 24 March 2009 in pars 9(b), 9(c) and 20 as follows:
…
(b)On or about 28 February 2007, at the commencement of the solicitor and client relationship, I had a meeting with Ms Frigger on behalf of the plaintiff ('the Initial Meeting'). Following the Initial Meeting, the defendant provided the plaintiff with the following documents by post:
(i)An explanatory letter in relation to the Banning Action dated 28 February 2007 regarding, inter alia, costs, enclosing and explaining the terms and effect of the First Costs Agreement ('the Explanatory Letter') (See: Annexure ACTF 1 of Ms Frigger's Affidavit);
(ii)An explanatory letter in relation to the Penrose Appeal dated 28 February 2007 regarding, inter alia, costs, enclosing and explaining the terms and effect of the Second Costs Agreement (See: Annexure ACTF 2 of Ms Frigger's Affidavit); and
(iii)The relevant Scale of Costs, namely the Legal Practitioners (Supreme Court) (Contentious Business) Report and Determination 2006, a true copy of which is annexed, marked 'DV‑1'.
(c)In addition, during the Initial Meeting, at which Mr Blandford, an employed solicitor who is no longer in the employ of the defendant, was also present, I explained verbally the matters described in the Explanatory Letter, in particular:
(i)That it is impossible for the defendant to furnish the plaintiff with an accurate quotation of how much the trial will cost;
(ii)That regular bills would be provided to enable the plaintiff to monitor the [actual] costs incurred;
(iii)That the charges rendered by the defendant significantly exceed scale; and
(iv)That the prepayment of $75,000 is an initial payment to enable the defendant to commence work on the case, and that from time to time the defendant would seek additional funds; and
(v)That the plaintiff is encouraged to seek independent legal advice, as the Agreements confer a benefit on the defendant.
…
20.In response to paragraph 13 of Ms Frigger's Affidavit, my notes of the Initial Meeting confirm that a number of different matters were discussed at the Initial Meeting, including the question of fees that the plaintiff would be required to pay as part of the engagement process. I informed Ms Frigger that the plaintiff would be required to sign the Agreements which would be sent out to her with the Explanatory Letter and would also be required to pay the sum of $75,000 into the defendant's trust account on account of the costs that would be incurred in relation to the services that the defendant would provide to the plaintiff to progress the matter to trial. I informed Ms Frigger that all aspects of fees to be incurred would be explained not only in the Agreements, but in the Explanatory Letter. Ms Frigger informed me that the plaintiff was not in a position to pay the defendant the sum of $75,000 immediately, but was in a position to pay a lower sum of $30,000, which I agreed to accept at that stage. I did not inform Ms Frigger that the sum of $75,000 that I had requested be paid would be all that would be required to be paid by the plaintiff up to and including the trial including Counsel's fees. I am an experienced commercial litigation solicitor and am fully aware of the significant costs incurred in Supreme Court trials, in particular in matters where witness statements and expert witnesses are required and Counsel has been briefed. Ms Frigger's recollection of that discussion to the effect that the $75,000 referred to was meant to cover all of the costs to be incurred including the trial is completely mistaken and is a figment of her imagination. It is also not supported by the First Agreement and the Explanatory Letter.
Whilst Mr Vilensky deposed that his notes of the meeting 'confirm' the matters to which he deposes, he did not produce his notes.
Findings of fact in relation to entry into costs agreements
As neither party was cross‑examined on their affidavits, I have been guided in my findings by pertinent uncontroverted statements in the affidavits which appear not inherently improbable, and by the correspondence exchanged between the parties in 2007 and early 2008, where they contain admissions against interest, or where a party, at a reasonably contemporaneous time, has recounted a version of facts or circumstances which went unchallenged at the time and which, had it been erroneous, could reasonably have been expected to be challenged. Where I have drawn inferences about the knowledge and experience of the plaintiff from the plaintiff's correspondence, I have inferred that the plaintiff had the knowledge and experience as at 6 March 2007. I have done this both from the uncontroverted fact that Ms Frigger was managing four pieces of litigation as at 6 March 2007, and from the fact that the knowledge and experience she displayed in correspondence is of a nature that one would expect it to have been acquired over a period of time, and not to have been freshly acquired after 6 March 2007.
In relation to the plaintiff, I make the following findings. I find that Ms Frigger was its controlling mind and will, and that she was an accountant and, by that reason, had a familiarity with finance and business affairs. She was a shrewd and capable person, as evidenced by her robust and intelligent communications with the defendant, and her ability to manage an accounting practice at the same time as managing four pieces of litigation. Her management of four pieces of litigation meant that she had considerable experience in the process and procedure of litigation generally. This is evidenced, for example, by her written communications with the defendant, including her letter to Mr Blandford, dated 2 March 2007, directing the nature and terms of a response to the solicitors on the other side in the Banning Matter in relation to certain matters including security for costs, and her instructions regarding amendments to the notice of appeal in the Penrose Matter. The fact that she wrote that letter in those terms before retaining the defendant, and the tenor and content of her subsequent communications with the defendant, also indicate that she was a person who had no reticence in, and indeed a considerable familiarity with, communicating with lawyers. Ms Frigger was also familiar with solicitors' costs agreements. She recognised the defendant's costs agreement to be of a 'standard form'. She says she had attended many taxations. It is to be inferred from her experience and her calculations of costs under the scale, that she was familiar with the nature and purpose of taxation and the nature and purpose of the Supreme Court scale of costs in relation to legal fees in litigation matters, both in respect of fees chargeable to a client and legal fees recoverable by a client from the other party if the client is successful in the action. She also knew that the client had a right to apply to the court to set aside a written costs agreement and that, unless the costs agreement were set aside, any taxation would proceed by reference to the costs agreement.
In relation to the meeting on 28 February 2007, I make the following findings. Ms Frigger outlined the nature of the three matters for which she wished to retain the defendant. She told Mr Vilensky that the Banning Matter was listed for a six day trial in May 2007. She gave him a copy of the orders for trial in the Banning Matter, and told him what she understood had to be done pursuant to the trial orders. She told him that the defendant in the Banning Matter had foreshadowed a security for costs application. The discussion about the Banning Matter was brief. She outlined at some length the nature of the Legal Practice Board matter and the Penrose Matter. There was also a discussion as to fees. Mr Vilensky told Ms Frigger that he was prepared to act in all three matters but would require that, for each matter, his firm's standard costs agreement be entered into. He said that he would send the costs agreements to her for her review. He said that he would require $75,000 to be paid into trust on account of costs and disbursements. He said counsel's fees for a six day trial would likely be in the region of $45,000. Ms Frigger said that she could not then afford the full $75,000 but could afford to pay him $30,000 at that time. Mr Vilensky agreed to this as an interim measure but said that prior to trial he would require a further payment on account of fees and disbursements, in particular in relation to counsel's fees.
I further find that on or about 6 March 2007, Ms Frigger read the Banning Costs Agreement and the Penrose Costs Agreement quickly, but sufficiently carefully to understand the nature, basis and terms of the defendant's charges, and that there were no caps applicable as would otherwise operate under the Supreme Court scale.
I also find that prior to a review of the papers, which he did not receive before the plaintiff entered into the costs agreements, Mr Vilensky was not in a position reasonably to provide an estimate of his firm's fees under the proposed Banning Costs Agreement, and that he did not tell Ms Frigger at the meeting that $30,000 represented his estimate of his firm's fees for a six day trial. However, I find that from Mr Vilensky's comments on 28 February 2007 regarding counsel's fees, and from the advice from her previous solicitors of estimated costs of $68,000, Ms Frigger assumed or understood in her own mind on 6 March 2007 that a six day trial including counsel's fees in early May 2007 would likely cost in the order of $75,000. That is consistent with her evidence in par 8.5 of her affidavit of 15 April 2009.
I further find, as a matter of inference from her general acumen and experience, and from the terms of the Banning Costs Agreement, that Ms Frigger nevertheless understood that ultimately the plaintiff's costs under the agreement would be a product of the complexity of the matter and amount of time spent by the defendant in preparing and presenting the case for trial.
In relation to whether the defendant sent to the plaintiff the Supreme Court cost scale, Ms Frigger's evidence is that it was not enclosed with the defendant's letters dated 28 February 2007. Mr Vilensky's evidence is that he did send the Legal Practitioners (Supreme Court) (Contentious Business) Report and Determination 2006 (the Scale) to the plaintiff under cover of his letters dated 28 February 2007, and that his usual practice was to do so. Mr Vilensky is an experienced litigation solicitor whose firm's costs agreements, by their terms, are designed to provide such information to the prospective client. The plaintiff's correspondence dated 5 July 2007 at par 6 is consistent with it having received the Scale from the defendant, or otherwise having access to it. Further, in none of the considerable correspondence from the plaintiff in 2007 and 2008, did Ms Frigger contend that she did not receive the Scale. I find it more probable than not that she did receive it. If I am wrong in this finding I find, nevertheless, that the plaintiff has not proved on the balance of probabilities that she did not receive the Scale from the defendant. I further find, as indicated earlier, that the plaintiff, through Ms Frigger, was at all material times aware of the existence of the Scale and of its nature and purpose in any event.
Section 222 of the Act and relevant principles
Section 222 of the Act provides as follows:
(1)A costs agreement may be reviewed by the Supreme Court upon application by summons or on a reference under section 235(2).
(2)If, in the opinion of the Supreme Court, the costs agreement is unreasonable -
(a)the Supreme Court may reduce the amount payable or cancel the costs agreement; and
(b)the costs may be taxed in the ordinary way.
(3)The Supreme Court may make such order as to the costs of and relating to the review, and the proceedings on the review, as the Court thinks fit.
The relevant principles in relation to applications under s 222 of the Act are not in dispute.
For the purposes of s 222, an agreement may be unreasonable because of the circumstances under which it came into being, or because its terms are unreasonable, or because the effect on the client is unreasonable. Consideration of whether an agreement is unreasonable or not is not confined to those three categories. Also, it may be in a given case, that, if each of the three categories is looked at in isolation, none independently leads to a conclusion of unreasonableness, however when looked at as a whole, or in combination with other circumstances, the agreement might be regarded as unreasonable. Similarly, even if in one of those three categories, the agreement appeared unreasonable, it may nevertheless be regarded as not unreasonable when all the circumstances are considered as a whole. See Jovetic v Stoddart & Co (1992) 7 WAR 208; Stoddart & Co v Jovetic (1993) 8 WAR 420; Brown v Talbot & Olivier (1993) 9 WAR 70, 75; and Duckworth v Chopra [2001] WASC 146 [29] ‑ [30].
In relation to the first of the three categories referred to above, ie the circumstances under which the agreement came into being, particular attention is paid to the solicitor's position as a fiduciary.
The solicitor is 'classically' a fiduciary to the client and, as such, owes fiduciary duties to the client: Maguire v Makaronis (1997) 188 CLR 449, 463.
Solicitor's obligations ordinarily or at least frequently involve:
1.ensuring that the client, because of independent advice or otherwise, does not enter into an agreement with the solicitor in reliance upon the trust or confidence arising from the relationship between the solicitor and client;
2.full and frank disclosure to the client of all information known to the solicitor which the client should know;
3.if there be aspects of a contract in respect of which the solicitor may be in a position of advantage vis‑à‑vis the client, those must be clearly brought to the client's attention so that the client can properly decide, in an informed way, whether to enter into the contract.
See: Law Society of New South Wales v Foreman (1994) 34 NSWLR 408, 435 ‑ 436.
These general obligations also apply to the solicitor entering into a costs agreement with the client, particularly where the costs agreement provides for the payment of fees other than in accordance with a usual or statutory scale: Law Society v Foreman (436); Brown v Talbot & Olivier (77).
In the fiduciary context, what is required for a fully informed consent is a question of fact in all the circumstances of the case and there is no precise formula which will determine in all cases if fully informed consent has been given: Maguire v Makaronis (466); Law Society v Foreman (435); Spellson v George (1992) 26 NSWLR 666, 669 ‑ 670, 673 ‑ 675, 680.
In Brown v Talbot & Olivier, Ipp J considered that material circumstances which would 'ordinarily' require disclosure to a client are:
(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 reasonable possible to give estimates of the kind referred to in subpars (d) and (e) above) there was a real risk of the costs under proposed agreement being more - and significantly more, if that there the case - than the appropriate scale (77 ‑ 78).
Insofar as the third circumstance mentioned by Ipp J refers to the principles underlying the charging of fees under the scales, it is to be recalled that, at that time, the major item 'getting up case for trial' allowed costs on an ad valorem basis. Since 1 February 1997, however, the Legal Costs Committees' Determination reflects the fact that the costs of legal services provided in relation to Supreme Court and District Court actions are in the main calculated by reference to the time reasonably spent in the provision of those services, and by applying to that time a reasonable hourly rate, that rate varying according to the seniority and experience of the practitioner and the complexity of the case. See the history of the scales of costs outlined by Pullin J (as his Honour then was) in Cerini v McLeods (a firm) [2004] WASC 45 [23] ‑ [31] (although that case dealt with item 26 which is not relevant for present purposes); and Seaman, Civil Procedure Western Australia [66.0.3A].
The Scale since 1 February 1997 for the most part still caps fees, as explained by Pullin J in Cerini v McLeods:
… unless special orders for costs are made, the items in the Scale relating to the work performed in relation to the litigation, will be capped. Thus the charge for work involved in preparing a statement of claim cannot exceed a specified amount, whereas under a time cost agreement, costs could exceed the specified amount. A client in those cases needs to be told that there may be solicitors who would do the work and charge pursuant to the Scale, and that costs under the agreement may exceed the Scale allowance. The existence of the Scale will impact on the amount which the client will have to pay his solicitor, and will impact on what may be recovered from the other party in the event of success [22].
In relation to the fourth matter referred to by Ipp J, the Scale applies to both solicitor/client costs and to party/party costs. The former may, nevertheless, exceed the latter on a taxation under the Scale by the operation of cl 9(2) of the Scale, which provides that item 32 ('other work') applies only to solicitor/client costs or if costs are awarded on an indemnity basis, and not between party and party unless the court otherwise orders. The former may also exceed the latter as explained by Pullin J in Cerini v McLeods:
… an item of work may be reasonable as between solicitor and client but not between party and party. For example, in a hypothetical case, a client may demand a second or third opinion from counsel on the merits of the claim. The costs of doing so would be recoverable on a solicitor/client taxation but not on a party/party taxation … [54].
See also in this regard Rules of the Supreme Court O 66 r 11(3).
In relation to disclosure generally, a solicitor just instructed may not be in a position to give the estimates referred to by Ipp J in Brown v Talbot & Olivier: Cerini v McLeods [54]; Stephenson v Conway‑Cook [2008] WASC 137 [101].
Further, whether the express disclosure of all the matters identified by Ipp J, and mentioned by Pullin J, is required in any particular case, must, in my view, be dependent on a consideration of all of the circumstances of the particular case. As Mahoney JA in Law Society v Foreman observed:
[I]f costs agreements of this kind are to be obtained from clients, it is necessary that the solicitor obtaining them consider carefully her fiduciary and other duties, that she be conscious of the extent to which the agreements contain provisions which put her in a position of advantage and/or conflict of interest, and that she take care that, by explanation, independent advice or otherwise, the client exercises an independent and informed judgment in entering into them (437). (emphasis added)
For example, the sophistication or business experience of the client may be relevant to the content and scope of disclosure by the solicitor: Cerini v McLeods [37]; Bradley West Clarke List v Keeman [1998] ANZ ConvR 77, 79 ‑80. Similarly, if the client were, for example, a solicitor himself or herself, the content and scope of disclosure would, in my view, ordinarily be different from that required for an ordinary lay client.
Also, the client's personal knowledge and experience of litigation and what it entails, and of the bases upon which solicitors commonly charge fees, and of the existence, nature and purpose of court scales in relation to fees, and of the nature and purpose of taxation of costs, and the recency and currency of the client's knowledge and experience of such matters, may, depending on all the circumstances, be relevant to a consideration of the scope and content of disclosure required in a particular case in order for the client to exercise an independent and informed judgment about whether to enter a costs agreement.
It was accepted by counsel for the plaintiff that an applicant for review under s 222 of the Act bears the burden of proving that the costs agreement is unreasonable. See Jovetic v Stoddart (220, 222); Stoddart v Jovetic; and Harrison v Hocking [2000] WASC 188 [92].
Further, both counsel proceeded on the basis that the court has a discretion under s 222 to decline relief under s 222 where there has been inordinate delay, in accordance with the principles referred to by Hasluck J in Harrison v Hocking [81]. In that case, his Honour said he was prepared to assume that the relevant criteria resembled those enunciated in Webb v Malcolm J Bateman & Co (Unreported, WASC, Library No 6305, 27 May 1986) (Franklyn J), in relation to the power to extend time for taxation. Those criteria were summarised in Harrison v Hocking at [65] by Hasluck J. His Honour noted that they were to be assessed in the broader context of protecting the client against excessive charges, whilst at the same time imposing time limits to prevent the client taking advantage to delay the obligation to pay proper costs, and to avoid frivolous objections. The factors to be taken into account were said to include the reasons for the delay; whether there were reasons for considering that a refusal to enlarge time might result in injustice to the client; whether there was evidence suggesting that the bill might be excessive; the nature and degree of prejudice to the practitioner; and the practitioner's reasons for opposing the enlargement, it being important to ensure that the practitioner, as an officer of the court, is seen to be acting honestly and ethically.
Both Hasluck J in Harrison v Hocking and Wheeler J (as her Honour then was) in Alman v MacDonald Rudder [2001] WASC 65, considered that there was a discretion to refuse relief even if the court found the costs agreement to be unreasonable. In the latter case, the discretionary consideration involved unfairness to the practitioner. The majority on appeal in Alman v MacDonald Rudder [2001] WASCA 375 referred, without disapproval, to this approach to discretion taken by Wheeler J in Alman v MacDonald Rudder and Hasluck J in Harrison v Hocking. Murray J, however, expressed some doubt as to this approach and, as I understand it, said that discretionary considerations arise at an anterior point, being the point at which the court is asked to review the costs agreement. His Honour said:
I have mentioned that the parties were ad idem in approaching the matter, both before Wheeler J and this Court, upon the basis that there was a discretion to reduce the amount payable under the agreement or cancel it. No argument was therefore presented to the Court upon that question. For myself, I am far from being persuaded that there is a discretion where a costs agreement is found to be unreasonable, whether or not to reduce the amount payable under it or cancel it.
I would, as at present advised, have no doubt that where the word 'may' is first used in the subsection it imports a discretion to review. In that regard, questions of delay and the circumstances in which the application for review is made, as well as questions concerning the circumstances in which the costs agreement was entered into or dealt with as between the parties after it was made, would in my view be relevant to determine how the discretion to review was to be exercised [9] ‑ [10].
In this case and perhaps many cases, it seems to me that in practical terms, the outcome of the application of discretionary considerations is likely to be the same, whether they are considered and applied at the outset in determining whether to undertake the review, or at the point of considering whether to grant relief having undertaken the review.
I would add that in considering discretionary factors such as the client's reasons for delay in applying for review, and unfairness to the practitioner, the conduct and consequences of the client requiring and pursuing taxation in accordance with a written costs agreement, with full knowledge of the statutory right to set aside that costs agreement, would, in my view, ordinarily be of considerable significance. The reasons for this are discussed further below.
Time for bringing an application under s 222
A bill of costs may be reviewed under s 222 upon application by summons, or by a reference from a taxing officer under s 235(2): s 222(1).
No time limit is prescribed in the Act for bringing an application for review under s 222. However, s 222 is part of a legislative framework concerning legal practitioners' costs and must be considered in its legislative context.
The starting point is, relevantly, s 221, which provides that a practitioner may enter into a written costs agreement with the client. By s 230 a legal practitioner must first serve a bill of costs before he or she can sue to recover fees. By s 231 the client may require the practitioner to serve a bill containing detailed items. By s 232(3)(a) of the Act, within 30 days of service of an itemised bill, the client may give the practitioner written notice of intention to have it taxed, and by s 232(3)(b), upon service of that notice the client may have the bill taxed by the taxing officer. By s 237, within one month after service of the notice, the practitioner must lodge the bill with the taxing officer and serve the party charged. Upon a bill of costs being lodged, the taxing officer may appoint a time for taxation: s 238. Section 235(1) provides that, when taxing an itemised bill of costs, a taxing officer must give effect to any costs agreement made as to the costs specified in the bill. Section 229 of the Act empowers the taxing officer to enlarge the time for taking any step. This includes enlarging time for the client to serve notice requiring taxation under s 232(3).
By s 235(2) a taxing officer, at the request of the party charged (usually the client), may refer any costs agreement made as to the costs specified in the bill to the Supreme Court, for review of the agreement under s 222.
If, upon review under s 222, a costs agreement is cancelled, then the foundation for the recovery of costs by the practitioner pursuant to the account previously rendered has been removed. In that event, it is not until a fresh account has been submitted to the client that time begins to run against the client to have it taxed. On the other hand, if the review does not lead to a cancellation of the costs agreement, the taxing officer must proceed with the taxation and deal, if relevant, with any application for an enlargement of time: see Harrison v Hocking [112] ‑ [113]. Where the court has already considered delay in the context of a s 222 review, the taxing officer would no doubt be guided by the court's consideration of that issue when coming to deal with any application to enlarge time for taxation.
It can be seen from the foregoing that the client's right to have a bill taxed, where a costs agreement subsists, is a right to have costs taxed in accordance with the agreement. Generally speaking, the client has an alternative, and inconsistent, right to have the costs agreement set aside. Under the general law, the exercise of a private right inconsistent with, and alternative to, another private right, done with knowledge, would result in a loss of the other right by waiver or election: Sargent v ASL Developments Ltd (1974) 131 CLR 634, 641; The Commonwealth of Australia v Verwayen (1990) 170 CLR 394, 406 ‑ 407, 421, 449 ‑ 450, 467, 481. Simiarly, under the general law, the right to avoid a contract may be lost by the operation of cognate doctrines such as acquiescence and affirmation: Meagher R P, Heydon J D, Leeming M J, Equity - Doctrines and Remedies (4th ed, 2002) [36‑060].
These general law doctrines would not, in my view, directly apply to prevent a client from seeking review under s 222 where the client, with knowledge of their rights under s 222, has nevertheless served notice to have a bill taxed where there is a subsisting costs agreement. That is because the client's right under s 222 is a statutory right under legislation which serves a broad public interest, and because s 235(2), in effect, expressly contemplates that a client may seek to have a costs agreement set aside once taxation has been required. Under s 235(2), a taxing officer has a discretion, but it is not obliged, to refer a costs agreement to the court for review at the request of the party charged.
Nevertheless, in my opinion, these general law principles relevant to a party's right to avoid a contract afford guidance for, but do not dictate, the exercise of the statutory discretion conferred on the taxing officer under s 235(2), and the exercise of discretion by the court under s 222: cf Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, 535.
Principles of election and affirmation operate in the analogous area where the client, having elected to have a bill taxed, is precluded from denying a retainer as to the whole of the bill. In Ilio Chris Rapoff v MacDonald Rudder (Unreported, WASC, Library No 8353, 6 July 1990) Franklyn J said:
In my view it is clear on the authority of Re Herbert (supra) and on the provisions of the Legal Practitioner's Act and O 66 of the Rules of the Supreme Court that, having received the bill and elected to have it taxed, it is not open to the client to deny a retainer as to the whole of the bill as opposed to part or parts thereof.
Section 65 ‑ s 71 of the Legal Practitioner's Act, like O 66 r 32 ‑ r 56, are concerned with assessing the amount properly payable in respect of services effected by a solicitor for his client pursuant to a retainer, not to determining whether there was a retainer. When a client requires the bill rendered for such services to be taxed, it seems to me that he admits the existence of a retainer but desires to be assured that he is being charged only what is appropriate to the services rendered pursuant to the retainer and/or that he is not being charged for matters which do not fall within the retainer. Consequently when, instead of disputing liability for the bill, he requests taxation and objects to the whole bill as the client in this case does, he cannot object to the existence of a retainer, and the taxing officer is entitled to assume that the retainer exists and to determine what is the appropriate charge for the services rendered pursuant to it (12 ‑ 13).
There may also be a question as to whether, on the proper construction of the Act, a party charged who has received an itemised bill of costs prepared in accordance with a subsisting costs agreement and who has given notice requiring it to be taxed under s 232(3) and who has, pursuant to that request, been served with a bill of costs which has been lodged for taxation, may seek a review under s 222 other than by referral from the taxing officer under s 235(2). That point was not, however, argued and I will assume for present purposes that the party charged may apply for review by summons even after that party has commenced a taxation process which is required by s 235(1) to be conducted in accordance with the written costs agreement.
The plaintiff's contentions in relation to the Banning Costs Agreement
The plaintiff submits that the terms of the Banning Costs Agreement per se are not unreasonable. However, it is submitted on behalf of the plaintiff that the agreement is unreasonable in its formation due to non‑disclosure, and that in the absence of proper disclosure, the effect of the terms of the agreement on the plaintiff render it unreasonable.
The allegations are summarised in the following extract from the plaintiff's written submissions:
…
27.The costs agreement appears to satisfy the first 2 circumstances and part of the third established in Brown v Talbot & Olivier but then fails to address the remaining matters at all.
28.The Banning costs agreement fails to disclose:
28.1.the principles underlying the charging of fees under the scales so that the plaintiff could then consider the benefits or otherwise of the proposed charging regime under the costs agreement;
28.2.estimates, which could reasonably have been made, of:
28.2.1.the approximate amount of the solicitors' fees and counsel's fees which would be recovered on taxation under those scales; and
28.2.2the approximate amount recoverable under those scales from the opposing party, if the client were successful;
28.3.an estimate, which should have been reasonably possible, of:
28.3.1.the amount which the client would have to pay the solicitors under the proposed agreement if the litigation were successful (and costs were recovered from the opposition); and
28.3.2.the amount which the client would have to pay if the litigation were unsuccessful;
28.4.whether there was a real risk of the costs under the proposed agreement being more - and significantly more, if that were the case, than under the appropriate scale, which they ultimately appear to have been.
29.Although there is a dispute between the parties as to whether the relevant costs scale was enclosed with the Banning costs agreement, the absence of the type of estimates referred to in Brown v Talbot & Olivier deprived the plaintiff of the information necessary to assess the benefit of entering into the Banning costs agreement.
30.The plaintiff was not given any or any sufficient explanation of the effect of the defendant's proposed charging regime and the impact of the relevant costs scale on the plaintiff's liability to the defendant. The generalised warnings in the costs agreement will never be sufficient when the claim for costs exceeds the relevant costs scale by a significant amount, as appears to be the case here.
31.The terms of the Banning costs agreement per se are not unreasonable, but in the absence of proper disclosure, the effect of those terms on the plaintiff render it unreasonable.
The defendant's contentions
On behalf of the defendant, it is contended, in substance that:
(a)the requirements of disclosure were less stringent in the case of the plaintiff having regard to Ms Frigger's experience in legal matters and in financial and business matters;
(b)estimates of the kind referred to by Ipp J in Brown v Talbot & Olivier could not reasonably have been given by Mr Vilensky at the time the plaintiff entered the costs agreements;
(c)the plaintiff has not shown that the effect of the Banning Costs Agreement was unreasonable, especially bearing in mind that:
(i)at all material times the plaintiff understood how it would operate by reference to complexity, work done and time charging;
(ii)the Banning Matter was a substantial case in which the plaintiff recovered a substantial verdict, and costs will inevitably be considerable in such matters;
(iii)the plaintiff applied for and obtained special costs orders reflecting the unusual difficulty, complexity or importance of the case;
(iv)the defendant has provided discounts on fees, sometimes in excess of $6,000 and has not charged interest on outstanding fees;
(d)the plaintiff has unreasonably delayed in applying to set aside the agreements under s 222 and the defendant has suffered prejudice in that:
(i)the bill of costs dated 6 October 2008 was prepared and filed for taxation in LPA 36 of 2008 on the basis of the Banning Costs Agreement;
(ii)the proceedings in LPA 36 of 2008 have been heard and determined.
Resolution of the application in respect of the Banning Matter
In relation to the first category mentioned in Jovetic v Stoddart, the plaintiff's first complaint is that there was a failure to disclose the principles underlying the charging of fees under the court scales so that the plaintiff could consider the benefits or otherwise of the proposed charging regime under the Banning Costs Agreement. Insofar as this ground relies upon the third point mentioned by Ipp J in Brown v Talbot & Olivier, as I have indicated earlier, there has been a change, since that case, in the principles underlying the relevant court scales. The Scale now reflects the fact that costs are in the main calculated by reference to time reasonably spent, by applying a reasonable hourly rate, subject to caps with respect to maximum allowances. Further, I have found that the plaintiff, through Ms Frigger, had the Scale available to it and was familiar with the nature, purpose and application of the Scale. With that familiarity, and having regard to my other findings concerning the plaintiff's experience in litigation and taxation of costs, in my opinion, the plaintiff understood the principles underlying the Scale and was in a position to consider those principles when considering the proposed charging regime under the Banning Costs Agreement.
The second allegation of non‑disclosure is that the defendant failed to disclose the approximate amount of the solicitors' fees, and counsel's fees, which would be recovered on taxation under the Scale, and the approximate amount recoverable under the Scale from the opposing party if the plaintiff were successful. In my opinion, as at 28 February 2007, Mr Vilensky was in a position to give some broad and preliminary prospective estimate of the amount recoverable under the Scale for getting up and for the trial for six days. The estimate could only have been preliminary pending a review and consideration of the papers, but, as the case had been listed for trial for a known period, some broad estimate of the amounts allowable under the Scale for getting up and for the trial could have been assayed, subject to stated assumptions.
Given, however, Mr Vilensky's lack of instructions and unfamiliarity with the case, including the work done generally prior to his engagement and in particular the work undertaken by his predecessors, he was not, in my view, in a position on 28 February 2007 to estimate costs recoverable under the Scale in the matter prior to then. He was thus not in a position to estimate the total costs of the litigation recoverable from the other side under the Scale if the plaintiff eventually won the case, or the total costs payable in the litigation to the other side under the Scale if the plaintiff lost the case.
The third allegation of non‑disclosure is that the defendant failed to provide an estimate of the amount which the client would have to pay under the proposed Banning Costs Agreement if the litigation were successful and costs were recovered from the opposition, and the amount which the client would have to pay if the litigation were unsuccessful. On 28 February 2007, Mr Vilensky had not received the papers, he had not seen the scope and nature of work carried out by his predecessors, and he had not been fully apprised of the matter. As the Banning Costs Agreement provided for time‑charging without reference to the maximum allowances under the Scale, I do not consider that he was in a position to provide an estimate of his firm's and counsel's fees under that agreement for a six day trial in May 2007. Accordingly, Mr Vilensky was not, in my opinion, in a position to provide the estimates contended for by the plaintiff, insofar as they involve an estimate of the costs that would be incurred under the Banning Costs Agreement. I have already indicated above the extent to which, in my view, Mr Vilensky could have provided some broad and preliminary estimate of prospective costs for a six day trial in May 2007 under the Scale.
The plaintiff then alleges that if the defendant could not provide estimates of such costs, it was required to disclose that there was a real risk of the costs under the proposed agreement being more - and significantly more - than under the Scale, and that the defendant had failed to disclose that fact. I find that Mr Vilensky did not tell Ms Frigger in terms, prior to the plaintiff's entry into the Banning Costs Agreement, that there was a real risk that costs under the agreement could be significantly more than costs under the Scale.
The facts that Mr Vilensky did not give a broad preliminary estimate of prospective costs under the Scale for a six day trial in May 2007, or say in terms that costs may be significantly more under the Banning Costs Agreement than under the Scale, are not, in my view, determinative as to whether the agreement was unreasonable in its formation in all the circumstances. In this regard I consider the following further factors to be relevant. I have found that the plaintiff, through Ms Frigger, understood that the costs charged to the plaintiff under the Banning Costs Agreement would be a product of the complexity of the matter and the work done in the litigation, without any cap. The letter dated 28 February 2007 also informed the plaintiff that the defendant's charges exceeded the Scale and the retainer document indicated that costs recovered from the unsuccessful party may not be enough to meet the plaintiff's costs to the defendant. The plaintiff was also advised, in the letter of 28 February 2007, that the Banning Costs Agreement conferred a financial benefit on the defendant, and that it was in the plaintiff's interest to obtain independent advice before signing it. The plaintiff, through Ms Frigger, could not be characterised as a vulnerable lay client. The fact that the plaintiff does not take issue with the defendant's disclosure with respect to the first two circumstances referred to by Ipp J in Brown v Talbot & Olivier is also significant, as is the fact that the terms of the Banning Costs Agreement, including its hourly rates and basis for charging, were made known to Ms Frigger, and are not regarded by the plaintiff as unreasonable.
Taking everything into account, I am not satisfied that the plaintiff was deprived of information necessary to enable it to assess, and make an informed decision about, the benefit or otherwise of entering into the Banning Costs Agreement. Accordingly, I do not consider that the plaintiff has shown that the Banning Costs Agreement was unreasonable in its formation.
Furthermore, insofar as Ms Frigger assumed that costs would likely be in the order of $75,000, that assumption applied on the basis that there was approximately two months available for trial preparation leading to a six day trial in early May 2007. As events shortly transpired, the plaintiff's case ceased to be one which could be tried in six days in early May 2007. The plaintiff knew this by early May 2007. In the scheme of this retainer, the plaintiff's assumption was relatively short‑lived, and the bulk of the fees related to work undertaken by the defendant after the first adjournment of the trial in early May 2007. Moreover, these matters, together with the other matters referred to below, indicate in my view that even if the Banning Costs Agreement were to be regarded as unreasonable in its formation, that aspect should not be viewed in isolation, and does not warrant a finding that the agreement is unreasonable for the purposes of s 222, having regard to the circumstances as a whole.
In relation to the second category mentioned in Jovetic v Stoddart, as noted above, the plaintiff does not contend that the terms of the Banning Costs Agreement are themselves unreasonable, and no challenge is made to the reasonableness of the hourly rates provided for in the schedule to the Banning Costs Agreement, or to the term that work would be charged on the basis of time actually spent.
In relation to the third category, the plaintiff nevertheless contends that in the absence of proper disclosure, the effect of the terms of the Banning Costs Agreement on the plaintiff renders it unreasonable.
The plaintiff has failed to satisfy me that the effect of the Banning Costs Agreement is unreasonable in the circumstances. First, it is accepted that the rates and basis for charging are not unreasonable. In these circumstances any over‑servicing or unnecessary time spent on the work will still be scrutinized by the taxing officer in taxing a bill by reference to the costs agreement. The bills to be taxed cover most of the time and cost leading up to and including the first day of the trial in May 2007, and the costs in respect of the period of the resumed trial in late 2007 and February 2008. Secondly, according to Ms Frigger, in par 49 of her affidavit of 16 March 2009, all counsel's bills are to be taxed in the taxation in LPA 36 of 2008. Mr Vilensky suggests that counsel's fees in the period covered by the valid requests for taxation will be taxed. Either way, there will be substantial bills of counsel taxed. Thirdly, whilst Ms Frigger has, for the purpose of this application, stated that in her view the defendant's costs under the Scale would be taxed at $160,000 ‑ $175,000, and whilst I accept that Ms Frigger is sufficiently experienced to provide such an opinion, the opinion lacks cogency as no draft bill has been prepared, and no reasoning process for the opinion has been demonstrated: cf Alman v MacDonald Rudder (at first instance) [27]; Cerini v McLeods [19].
Fourthly, the circumstances relevantly include the special costs orders which were obtained from Simmonds J on the grounds of unusual difficulty, complexity or importance. Justice Simmonds held that special costs orders should be made to allow taxation to proceed:
(a)without reference to the hours upper limit imposed by the item 1(b) of the Scale in relation to aspects of amendments to the plaintiff's statement of claim;
(b)without reference to the hours upper limit imposed by Scale item 16 in relation to six items of getting up;
(c)without reference to the upper limit imposed by Scale item 10(a), in relation to security for costs and for an uplift of the maximum daily rate for counsel used to calculate Scale item 10(a);
(d)in respect of the trial itself, without reference to the upper limits imposed by items 19(a) and 19(c) in the Scale, and with an uplift of the maximum daily rate for counsel used to calculate those upper limits, as well as an uplift in the number and length of the days allowed for by those items, and without reference to the hours on trial days, which Scale item 19(e) might otherwise set as the upper limit;
(e)in relation to closing submissions on 29 February 2008, without reference to the upper limit imposed by Scale item 19(c) and with an uplift of the maximum daily rate for counsel used to calculate that upper limit, and without reference to the hours on that trial day which Scale item 19(e) might otherwise set as the upper limit;
(f)without reference to the upper limit imposed by Scale item 10(a) in respect of a freezing order application, and with an uplift of the maximum daily rate for counsel used to calculate the limit in Scale item 10(a), and for an uplift of the number of days provided for in that item; and
(g)in respect of a directions hearing on 29 October 2007, without reference to the upper limit imposed by Scale item 10(a) and with an uplift of the maximum daily rate for counsel used to calculate the upper limit in item 10(a) and an uplift for the number of days provided for in that item.
See Computer Accounting and Tax v Professional Services (S) [171], [175], [177], [187], [192], [195], [202], [204], [205], [210], [213], [218], [220], [227].
The plaintiff has not adduced evidence of the likely effect of the special costs orders on the amount recoverable by the plaintiff from the opposing party in the Banning Matter: cf Alman v Macdonald Rudder (at first instance) [27]; Cerini v McLeods [19].
Fifthly, the scope of the case in the Banning Matter clearly changed within a couple of months of the retainer and the plaintiff was kept abreast of costs by the process of regular interim billing: cf Cerini v McLeods [57]. I note here that counsel for the plaintiff suggested that even allowing for the extended scope of the litigation from the original six day trial, the consequence should be that for a 12 day trial, the figure of $75,000 should be doubled to ascertain a reasonable estimate of fees, and that even on that basis, the defendant's charges were substantially more than the hypothetical figure of $150,000 that would be derived from doubling $75,000. I am unable to accept this argument. Without an assessment of the amount of work involved following the adjournment of the trial in May 2007, and up to the closing submissions in February 2008, it cannot, in my view, be assumed that there is a simple arithmetical relationship of the kind posited.
Accordingly, overall, the plaintiff has not satisfied me that the effect of the Banning Costs Agreement is such in that it operates unreasonably in all the circumstances.
Furthermore, and in any event, this is a case where I consider that the discretionary considerations are sufficient to preclude the plaintiff from obtaining a cancellation of the Banning Costs Agreement under s 222 of the Act. Here, the plaintiff, through Ms Frigger, knew from the time it entered into the Banning Costs Agreement of its right to have the agreement set aside. Disputes with the defendant regarding fees emerged within a couple of months of the plaintiff entering into the Banning Costs Agreement. Alive to its rights, the plaintiff through Ms Frigger, in the letter dated 5 July 2007, said 'the plaintiff and I reserve our right to submit the costs agreements to a judge in the Supreme Court to check if they are reasonable'. Despite this, no application was made under s 222, the defendant continued to act and render invoices pursuant to the Banning Costs Agreement, and arrangements were entered into in November 2007 for the plaintiff to pay a fixed monthly amount in respect of costs.
In January 2008, the plaintiff, knowing that any taxation would be in accordance with the Banning Costs Agreement whilst it subsisted, nevertheless required all the defendant's bills to be lodged for taxation and contended that relevant notices for taxation had been given. The defendant, by its solicitors, accepted in the letter dated 11 June 2008 that two of the bills had been the subject of timely notification requiring taxation. The defendant also agreed to tax a third bill. These three bills covered the period 1 November 2007 ‑ 29 February 2008, namely the period covering the resumed trial of the matter after its adjournment in May 2007. The plaintiff's response was, in effect, to say that it would apply to set aside the Banning Costs Agreement if the defendant did not agree to have all its bills taxed. The defendant refused, and invited the plaintiff to apply for review without further delay. The defendant did not do so.
Instead, in July 2008, the plaintiff applied to this court to vindicate its position that the other accounts, which the defendant had refused to have submitted to taxation on the grounds that they were out of time, had been the subject of valid notices under s 232(3) of the Act. Those proceedings were contested and were on foot for over six months. They resulted in partial, but important, success for the plaintiff in that the Registrar determined that two other accounts of which the plaintiff sought taxation, the accounts of April and May 2007, had been the subject of valid notices under s 232(3). The plaintiff then sought an extension of time to appeal the Registrar's decision, which was subsequently dismissed. In the same taxation proceedings, the plaintiff sought orders which resulted in the Registrar ordering that the bill of costs dated 6 October 2008 be taxed in accordance with the Banning Costs Agreement.
After all these claims for and in relation to taxation had been pursued, on the eve (as it were) of the taxation of the bill of costs dated 6 October 2008, the plaintiff changed tack and applied to have the Banning Costs Agreement set aside.
In my opinion, these circumstances indicate a deliberate and prolonged course of conduct by the plaintiff designed to achieve a taxation of all of the defendant's bills in accordance with the Banning Costs Agreement. Equally, they provide evidence of a long standing and deliberate decision not to apply for review under s 222 until the eve of the hearing of the taxation for the bill of costs dated 6 October 2008, covering the overwhelming part of the trial period. The plaintiff's counsel, from the bar table, stated that it was reasonable to defer any application to set aside the costs agreement on the basis that until an extension of time had been granted by the taxation officer to tax the bills, there was no point in applying for a review under s 222. For the reasons given earlier in the section of these reasons dealing with 'Time for bringing an application under s 222', this submission is in my opinion erroneous. If there is an intention to apply under s 222, there is no point in delaying that application in order to first obtain an extension of time to give notice to have bills rendered pursuant to a costs agreement taxed. In any event, it is not an explanation given by the plaintiff in Ms Frigger's affidavits. Ms Frigger has said in her affidavit that she believed, following the letter of 5 July 2007, that the defendant had agreed to defer any taxation of the defendant's costs to the end of the proceedings in the Banning Matter. She does not depose, however, to any belief that the defendant had agreed that she could delay the bringing of any application under s 222 to vitiate the Banning Costs Agreement. Nor could that proposition be realistically advanced, at least after 1 July 2008, in the light of the defendant's solicitors' letter dated 1 July 2008.
In my opinion, the plaintiff has not provided any or any proper explanation, on affidavit, as to why, in these circumstances, it delayed in applying for a review under s 222.
In reaching this conclusion, I have considered whether the defendant, by its own conduct, has caused or contributed to the plaintiff not applying for a review prior to 9 March 2009. In this regard I have paid particular attention to the defendant's communications dated 31 January 2008 and 12 March 2008, significant parts of which are, in my view, not appropriate either in tenor or in language from a person occupying the fiduciary position of a solicitor. Nevertheless, I am satisfied that those communications did not influence the plaintiff in adopting the deliberate course of action which it has taken.
I am also satisfied that the defendant will suffer prejudice in that were the Banning Costs Agreement to be set aside under s 222, the time and cost expended in the preparation of the bill dated 6 October 2008 will be lost. There was no direct evidence of the time and expense involved, but, in my view, I can take judicial notice that it is likely to be have been significant.
Resolution of the application in respect of the Penrose Matter
Very little time or material in this application was devoted to the Penrose Costs Agreement.
Ms Frigger outlined her complaints in relation to this matter in pars 53 and 54 of her affidavit of 16 March 2009:
Although the amount claimed by [the defendant] is a relatively small amount of approximately $4,500 the circumstances surrounding the entry into the agreement and its terms and effect on the plaintiff is the same as outlined above.
In the above circumstances I believe that the circumstances in which the agreements were entered into, and their terms and effects, are all unreasonable. I also believe the agreements ended on 31 December 2007, before the various proceedings had been completed. I humbly beseech this Court to cancel the agreements and order the bills be taxed in the ordinary way.
The figure of $4,500 referred to by Ms Frigger, appears to be intended to represent costs in the Penrose Matter totalling $4,213.46 in respect of the defendant's invoice dated 25 February 2008 and counsel's invoice dated 25 January 2008, which were the subject of cost recovery proceedings commenced against the plaintiff in the Magistrates Court of Western Australia on 16 December 2008.
I infer that the plaintiff has paid, or there has been a compromise of, the earlier accounts rendered by the defendant in the Penrose Matter other than the ones the subject of proceedings in the Magistrates Court.
The defendant's invoice dated 25 February 2008 relates to the attendance at the District Court to take judgment in the appeal, and to subsequent communications with Ms Frigger, the other side and counsel. I will refer to this invoice and counsel's invoice dated 25 January 2008 as 'the outstanding Penrose bills'.
I have recounted earlier in these reasons the evidence and my findings, as to the circumstances of the entry into the Penrose Costs Agreement and the bills rendered pursuant to it, save for one matter indicated below.
It is not suggested by Mr Vilensky that he enclosed under cover of his letter dated 28 February 2007 in the Penrose Matter, the relevant scale for the matter being the Legal Practitioners' District Court Appeals (Contentious Business) Determination 2006 (the District Court Appeal Scale). I find that the plaintiff did not receive the District Court Appeal Scale. Further, there is no evidence that Ms Frigger's experience extended to familiarity with the District Court Appeal Scale, as opposed to the Scale.
Accordingly, I find that the plaintiff was not armed with sufficient information to enable it to make a fully informed decision as to the merits or otherwise of entering into the Penrose Costs Agreement. I consider that it was unreasonable in its formation.
The plaintiff does not allege that the terms of the Penrose Costs Agreement were unreasonable. The plaintiff nevertheless contends that the effect of it was unreasonable, particularly having regard to the non‑disclosure of material information.
In relation to discretionary considerations, the defendant has not submitted that it would be prejudiced if the Penrose Costs Agreement were set aside under s 222. Nor does it contend that the plaintiff has sought taxation of the costs rendered under the Penrose Costs Agreement, or that the costs under the Penrose Costs Agreement form part of LPA 36 of 2008.
On the other hand, the District Court appeal in the Penrose Matter was heard on 21 August 2007. Having paid or compromised the earlier accounts which were issued some two years ago under the Penrose Costs Agreement, without seeking to set aside the agreement, again, in my view, there has been no adequate explanation by the plaintiff for the delay in making this application, at least with respect to the accounts already paid or compromised.
Nevertheless, I have found a lack of material disclosure in the argument's formation, and there are no other circumstances relevant to this matter which would tend to indicate that, despite the material non‑disclosure, the agreement is not unreasonable. Accordingly, in my view, the Penrose Costs Agreement can be regarded as unreasonable. In all the circumstances it seems to me that it should not be cancelled ab initio, having regard to the matters referred to in the preceding paragraph, but I would be prepared, pursuant to s 222(2), to reduce the amount payable under it by making orders to the effect that it does not apply to the outstanding Penrose bills, leaving those bills to be taxed under the District Court Appeal Scale.
Conclusion
The plaintiff fails in its application with respect to the Banning Costs Agreement. The plaintiff also fails in its application to set aside the Penrose Costs Agreement.
The plaintiff is, however, entitled to orders along the lines indicated above in respect of the Penrose Costs Agreement.
I will hear the parties as to the formulation of final orders and costs.
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