D A Starke Pty Ltd v Yard & Anor
[2012] SASC 19
•13 February 2012
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Civil)
D A STARKE PTY LTD v YARD & ANOR
[2012] SASC 19
Judgment of The Honourable Justice Kourakis
13 February 2012
PROFESSIONS AND TRADES - LAWYERS - REMUNERATION - COSTS AGREEMENTS
PROFESSIONS AND TRADES - LAWYERS - REMUNERATION - COUNSEL'S FEES
PROFESSIONS AND TRADES - LAWYERS - DUTIES AND LIABILITIES - SOLICITOR AND CLIENT - RETAINER
The plaintiff legal practice sought payment of its fees including counsel’s fees for work completed arising from a matrimonial dispute – defendants denied liability for the full extent of the fees – whether second defendant jointly and severally liable for all work performed on behalf of first and second defendant – whether plaintiff provided fixed quote for work completed on the trial – whether work completed on the appeal was subject to a contingency arrangement – whether counsel fees for settlement work were reasonable – whether defendants liable for costs arising from application to extend a stay order delayed by the plaintiff.
Held – plaintiff entitled to payment of fees in relation to the trial, settlement and application to extend the stay – first and second defendant jointly and severally liable for payment to plaintiff.
Burridge v Bellew (1875) 32 LT 807, discussed.
Hudgson v Endrust (Australia) Pty Ltd (1986) 11 FCR 152; Bolton v Stange [2001] WASCA 34; Beaumont v Senior & Bull (1903) 1 KB 282; Harvey v Facey 1893] AC 552; JS Robertson (Aust) Pty Ltd v Martin (1956) 94 CLR 30; Aotearoa International Ltd v Scancarriers A/S [1985] 1 NZLR 513, considered.
D A STARKE PTY LTD v YARD & ANOR
[2012] SASC 19Civil:
KOURAKIS J: The plaintiff is an incorporated legal practice. The principal is Mr Starke. The first defendant, Alfred Yard, is 88 years of age. He, like his father before him, has farmed land around Murrayville in Victoria all of his adult life. Shortly after the end of the Second World War Alfred Yard also opened a fuel depot in the town, and has run it ever since. Trevor Yard is his son. Both Alfred and Trevor Yard are shareholders and directors of the second defendant, Yardoo Pty Ltd (Yardoo). During the times material to this matter, Alfred’s wife Gladys, and Trevor’s wife Judith, were also shareholders and directors.
In about 1977, Alfred Yard transferred certain farming properties and town blocks in and around Murrayville to Yardoo for estate planning purposes. At about the same time Trevor, Gladys and Judith Yard transferred land to Yardoo. Later, Yardoo also purchased other land from third parties. Alfred, Gladys, Trevor and Judith Yard were also members of a partnership which farmed Yardoo’s land, and other land of which they were the registered proprietors, including a large tract of land in Lobethal.
Mr Starke’s claim is for legal fees earned in acting for Alfred, Gladys and Trevor Yard and Yardoo in litigation against Judith Yard. The litigation arose out of a matrimonial property dispute between Trevor and Judith Yard. Mr Starke obtained instructions from Alfred and Trevor Yard and, to a lesser extent from Gladys Yard (the Yards), for the purposes of the litigation. I will refer to Yardoo and the Yards as the Yardoo Parties.
Judith Yard brought Family Court proceedings against Trevor Yard in 1999, seeking a distribution of their matrimonial property. In those proceedings, Judith Yard claimed an entitlement to a proportion of the assets of Yardoo and the property of the partnership. Trevor Yard was initially represented in the Family Court proceedings by an experienced family law solicitor. Sometime in 1999, Alfred and Trevor Yard sought legal advice from Mr Starke as to how Alfred Yard and Yardoo might best defend the claims made by Judith over the assets of Yardoo. Mr Starke instructed Mr Stevens, a barrister, very soon thereafter. Mr Stevens gave advice and appeared in the subsequent proceedings.
In October 2000, Judith Yard brought proceedings in this Court in which she sought an injunction restraining Yardoo from disposing of its assets, and orders in the nature of pre-action discovery. The restraining orders were granted and remained until 9 November 2000 when a Master of this Court refused to extend them any further. Judith Yard’s application for pre-action discovery was also dismissed. However, the action itself was not dismissed and a Statement of Claim seeking relief from oppressive conduct in the management of Yardoo was filed on 15 November 2000. Mr Starke entered appearances on behalf of Alfred Yard and Gladys Yard and Yardoo on 5 December 2000. On 7 December 2000, Mr Starke entered an appearance on behalf of Trevor Yard. Ultimately, on 9 March 2001 the proceedings were transferred, pursuant to s 4 of the Jurisdiction of Courts (Cross-vesting) Act 1987(Cth), to the Supreme Court of Victoria. In the Victorian proceedings, Judith Yard also claimed an interest in the property of the partnership. I will refer to that action as the oppression action.
After the transfer of the oppression action, Alfred Yard brought an action in the Supreme Court of Victoria claiming that property of which Yardoo was the registered proprietor was held by it as trustee on a resulting trust for him. A similar claim was made over other land held by Trevor, Gladys and Judith Yard. The respondents to that application were Yardoo and the members of the partnership, other than Alfred Yard. I will refer to that action as the resulting trust action.
A single trial, of both the oppression and resulting trust actions, was eventually heard by Justice Cummins in the Supreme Court of Victoria. Alfred Yard and Yardoo claim that in a meeting held at Murrayville on about 26 June 2004, Mr Starke and Mr Stevens agreed to conduct the trial for a fixed lump sum. Mr Starke denies that an agreement to that effect was made and contends that, at the meeting, he gave only non binding estimates of the costs of the trial.
The trial proceeded for two days in July 2004, and for further days in September 2004, October 2004, March 2005 and April 2005. Extensive written closing submissions were also provided, at the request of the Court, in lieu of oral addresses. Justice Cummins handed down his decision, in which he found for Judith Yard, on 24 March 2006. Justice Cummins ordered the winding up of Yardoo and the partnership, and appointed a liquidator and receivers respectively for those purposes, but stayed his orders until 2 June 2006 at 4:15pm to allow an appeal to be brought. It was anticipated that an application for a further stay of his orders would be brought in the Court of Appeal after the appeal was instituted.
On the instructions of Yardoo and its principals, an appeal was filed in April 2006. It is common ground in these proceedings that Mr Starke and Mr Stevens agreed to be retained on that appeal pursuant to a contingency arrangement. However, Mr Starke claims that the arrangement included, as a term, the prompt payment of the outstanding accounts of Mr Starke and Mr Stevens for the conduct of the trial. The Yardoo Parties failed to pay those accounts. The issue in these proceedings is whether there was such a term and, if there was, whether the failure to satisfy it rendered the Yardoo Parties liable for Mr Starke’s and Mr Stevens’ legal fees even if the appeal was unsuccessful, or whether the term operated merely to excuse them from their promise to prosecute the appeal to its conclusion in the event of a failure to pay promptly.
There was insufficient time to obtain a further stay from the Court of Appeal before the stay ordered by Justice Cummins expired. Mr Starke did not approach the solicitors for Judith Yard to obtain her consent to an extension of the stay ordered by Justice Cummins until Friday 2 June 2006. Judith Yard did not consent to the stay. Receivers and a liquidator for the company and partnership respectively, were appointed. Applications were brought before Justice Cummins in the following week and a fresh stay order was made. However, the liquidator and receiver incurred substantial costs in the intervening period for which the Yardoo Parties are, or may be, liable. Alfred Yard and Yardoo intend to pursue an action in negligence against Mr Starke for exposing them to that loss. A question arises as to whether, and how, any account should be taken of that potential claim in these proceedings.
At a directions hearing in the Court of Appeal, shortly after the appeal was instituted, the Court, in accordance with its general practice, encouraged the parties to mediate their dispute. A mediation was held in Melbourne in December 2006 and the parties reached agreement in principle. The agreement was not finally executed because the Yardoo Parties unsuccessfully attempted to renegotiate the timeline for paying the agreed settlement sum.
The appeal was heard by the Court of Appeal in February 2007. It dismissed the substantive grounds of appeal against the judgment of Justice Cummins. It, however, varied the form of the orders to allow for the purchase by Yardoo of Judith Yard’s share for the monetary value of her equity in Yardoo, in lieu of the order for Yardoo’s liquidation.
Yardoo, Alfred Yard and Trevor Yard satisfied the judgment against them by substantially increasing their borrowings. The lender required mortgages over all of the properties of Yardoo and the Yards. The complex settlement arrangements (the settlement) required the removal of many encumbrances from the titles. That work was undertaken largely by Mr Stevens and a junior solicitor in Mr Starke’s office who worked under the supervision of Mr Stevens. The degree of supervision Mr Stevens exercised was much greater than it would ordinarily have been, because Mr Starke was on holiday for a substantial period of time between the delivery of the Court of Appeal’s judgment and the settlement.
The fees charged by Mr Starke and Mr Stevens for work done until shortly before the commencement of the trial heard by Justice Cummins have been paid by the Yards. The fees they claim for work performed in preparation for, and the conduct of, the trial, the appeal and the settlement remain unpaid. Mr Starke brings this action against Yardoo and Alfred Yard to recover those fees. The issues which arise for determination are as follows:
1.Whether Yardoo is liable for the costs only of that work performed by Mr Starke and Mr Stevens which is properly attributable to its interest, or whether it is jointly and severally liable for all of the work performed for all of the Yardoo Parties.
2.Whether, on or about 26 June 2004 at a meeting in Murrayville, Mr Starke and Mr Stevens agreed to fixed lumps sums for the work to be performed by them on the trial of the oppression and resulting trust actions, or whether they provided only an estimate of their costs.
3.Whether the work performed by Mr Starke and Mr Stevens on the appeal, was subject to a contingency arrangement, or was chargeable on the usual basis that their reasonable fees would be paid irrespective of the outcome.
4.Whether Alfred Yard and Yardoo are liable to pay Mr Stevens’ reasonable fees for his work on the settlement, or whether the costs payable by them should be limited to the fees which would have been incurred if Mr Starke had performed that work.
5.Whether Alfred Yard and Yardoo are liable to pay Mr Starke’s fees for bringing the application for an extension of the stay before Justice Cummins.
6.Whether the enforcement of any part of the costs for which Alfred Yard and Yardoo are ultimately found to be liable should be stayed, pending a determination of the claim they intend to bring against Mr Starke in negligence for the costs, occasioned by Mr Starke’s failure to make a timely application to extend the stay, thrown away by the unnecessary appointment of the liquidator and receivers.
Yardoo’s liability for costs
Yardoo was incorporated as a vehicle through which the Yard’s could hold and manage the family’s assets. In addition to the land which Alfred Yard transferred to Yardoo, Yardoo was the registered proprietor of other land. In particular, Trevor and Judith Yard transferred a farm known as Pomona, which comprised several allotments, to Yardoo in about 1977. Land previously held by Gladys Yard was also transferred to Yardoo. Yardoo purchased other land, in and around Murrayville, after 1977. Yardoo subsequently purchased an interest, as tenant in common, with another family farming, the Youngs, in a property known as Hawick near Keith in South Australia.
The defendants to the oppression action were Trevor, Alfred and Gladys Yard and Yardoo. The Statement of Claim in those proceedings, filed in this Court on 15 November 2000, complained of the cessation of benefits from Judith Yard’s shareholdings, exclusion of her from the properties of Yardoo, the withholding of company and partnership records from her, and the divesting of some of Yardoo’s assets.
Alfred Yard’s claims in the resulting trust action were not contested by Yardoo, Trevor or Gladys Yard.
The reasons of Justice Cummins record that a joint defence on the part of all of the defendants was filed in the oppression action but that counsel, Mr Stevens, announced his appearance for Alfred Yard only. The reasons of Justice Cummins record that Yardoo was not represented by counsel.
In the context of the matrimonial dispute between Trevor and Judith Yard, Yardoo itself had no interest, or part to play separate from the interests of its directors and shareholders. In the main, the allegations of oppression made by Judith Yard related to the personal conduct of Alfred and Trevor Yard, both as to the withholding of information and the divesting of Yardoo’s assets. The primary purpose of joining Yardoo as a defendant in the oppression action was to give effect to orders for the payment to Judith Yard of the value of her share in Yardoo. It had become necessary to extricate Judith Yard from her involvement in Yardoo by reason of the marital breakdown. In one sense, it could be said that it was in Yardoo’s corporate interest that the winding up order sought by Judith Yard should be resisted. The winding up order made by Justice Cummins was set aside by the Court of Appeal, which ordered instead that Judith Yard’s share be purchased for the sum of about $526,248 and provided for the winding up of Yardoo only if the purchase was not completed. The order that Yardoo purchase Judith Yard’s share was also, in a sense, against Yardoo’s interests. However, Alfred, Trevor and Gladys Yard would ultimately bear the burden of the interest on the money borrowed to effect that purchase.
In the resulting trust action, the work of Mr Starke and Mr Stevens was performed for the benefit of Alfred Yard. The personal interests of Trevor and Gladys Yard were not advanced by those proceedings. Indeed, the claims made by Alfred Yard were against their interests as shareholders. It was not in their personal financial interests to accept responsibility for Alfred Yard’s costs either directly or indirectly through Yardoo, which would in turn diminish the value of their shareholdings. I accept that indirectly, Alfred Yard’s claim might have benefited them but that ultimately depended on how Alfred Yard dealt with the property and, in particular, on how he exercised his testamentary power. The outcome of the contest between Alfred and Judith Yard, as to the beneficial ownership of the properties, was of no real moment to Yardoo. Indeed, in one sense Yardoo’s financial interest, like all of the shareholders other than Alfred Yard, lay in the defeat of Alfred’s claim.
Plainly enough, Mr Starke was retained by both Yardoo and Alfred Yard. Indeed, he was also retained by Trevor and Gladys Yard. So much can be implied from the very filing of appearances on their behalf. I also find that the requests of Alfred and Trevor Yard, that Mr Starke take all reasonable steps to exclude the property held by Yardoo from the matrimonial pool, entailed a retainer of Mr Starke by Yardoo, through its directors, to advise on all reasonable steps which Yardoo could take to effect that purpose. However, the engagement of Mr Starke by both Yardoo and Alfred Yard, in itself, carried with it only an obligation to pay for that part of the work performed to advance their respective interests. A separate engagement of the same legal practitioner by two parties in the same litigation does not, of itself, make each of them liable for the costs of the other. It requires the costs to be apportioned between them.
The question is whether it can be inferred that Yardoo not only retained Mr Starke, but also agreed to accept joint and several liability to pay for all of the work performed for itself and for Alfred Yard, and indeed Trevor and Gladys Yard.
A lawyer who acts on instructions for a party on the record is presumed, unless there is express agreement to the contrary, to be entitled to look to that party for the costs of so acting.[1] However, that presumption does not, of itself, operate to make that party responsible for the costs of other parties who have retained the same legal practitioner in the same matter.
[1] G E Dal Pont, Law of Costs (LexisNexis Butterworths, 2nd ed, 2009) Ch 2 [2.14]; Hudgson v Endrust (Australia) Pty Ltd (1986) 11 FCR 152; Bolton v Stange [2001] WASCA 34 at [7] - [8].
There is support in the texts Dal Pont “Law of Costs” and “Quick on Costs” for the proposition that there is a presumption that retainers with multiple clients are separate and not joint.[2] Both texts rely on the authority of Burridge v Bellew[3] (Burridge). In Burridge, a solicitor brought an action to recover all of his costs against just one of the several parties for whom he had acted in Chancery proceedings. The solicitor pleaded that he had expressly agreed with the defendant, that the defendant would pay the legal fees of all of his clients. The defendant argued, quite to the contrary, that he had expressly agreed with the solicitor that he would not be liable at all for any of the fees. The defendant did not plead, in the alternative, that, if he was liable, he was liable only for his proper proportion of the costs. A verdict was brought in against the defendant, thereby rejecting his defence that the pleaded, exonerating, agreement had been made. It was held that it was not open to the defendant, having failed to plead in the alternative that he was obliged to pay only for work done on his behalf, to claim on the subsequent taxation that only the fees attributable to that work should be admitted. The judgments of the Court of Exchequer emphasise the difference between joint and several retainers but give no indication that one is to be presumed over the other. The point in Burridge was that the defendant had not challenged the plaintiff’s pleading that the retainer was a joint and several one. Amphlett B observed:
…[t]he mere fact that the several defendants appeared by the same solicitor, that they join in putting in the same answer, join in the same affidavits, and attend joint consultations, would not, to my mind, amount to evidence that there was any joint retainer, particularly in cases where the retainers are separate, because it often occurs in Chancery that there are a number of defendants, some having a large interest, some a very small interest, and some, like trustees, having no interest at all in the case. The expense would be enormous if each of those parties were to appear separately by solicitors and counsel. Therefore they appear together, join in the same pleadings and in the same affidavits, attend at the same consultations, and so a vast expense is saved; but no person in the position of a trustee would ever dream of doing that if he were to be held jointly liable for the costs of a suit in which he had no personal interest. Therefore it is that the taxing master looks at the bill and sees with what proportion of the costs the particular defendant ought to be charged.[4]
[2] G E Dal Pont, Law of Costs (LexisNexis Butterworths, 2nd ed, 2009) Ch 2 [2.18]; Thomson Reuters, Quick on Costs (December 2011) Legal Online [3.1040] < (1875) 32 LT 807.
[4] Burridge v Bellew (1875) 32 LT 807 at [813] –[814].
I understand the decision in Burridge, and the above observations, to simply reflect the onus of proof. Amphlett B did no more than emphasise the evidential point, that circumstances like the filing of joint defences and joint consultations, are not sufficient to prove a joint retainer. The position is that a solicitor who seeks to recover his fees from one party, on the basis of that party’s contractual liability for to pay the fees of all of the other parties for whom the solicitor has acted, must prove that such an agreement was made.
In Beaumont v Senior & Bull[5] Lord Alverston CJ explained:
But in the absence of any agreement between the two defendants as to how the costs of the defence were to be born, it is clear, on the authority of the cases to which we have been referred, that each of the two defendants is liable to their solicitor for half the costs of the defence, and that will be the amount of costs which the plaintiff will have to pay the successful defendant.
[5] (1903) 1 KB 282.
Much of the early correspondence of Mr Starke is directed to Alfred Yard. From at least October 2003 some correspondence was addressed to Alfred Yard and Yardoo. In particular, on 22 October 2003 a letter addressed to both Alfred Yard and Yardoo, set out the likely future trial costs and requested payments of outstanding accounts. On 14 June 2004, a letter addressed to Alfred Yard, Trevor Yard and Yardoo responded to concerns expressed by Trevor Yard about the escalating legal costs. However, Mr Starke’s accounts were generally directed to Alfred Yard alone. Mr Starke testified that he did not pay any particular attention to the addressee of the accounts. I accept that the accounts were probably directed to Alfred Yard as a matter of administrative convenience and do not show, and could not reasonably have been regarded as showing, that Alfred Yard had undertaken the sole responsibility to pay the fees of Mr Starke for all of the work which he performed for the Yardoo Parties.
The mere fact that Yardoo engaged the same solicitor whom Alfred Yard had engaged, is not reason enough to find that it had accepted joint and several liability for all of the fees charged by the solicitor, Mr Starke. Plainly enough, it was the object of Alfred and Trevor Yard to take all steps which could properly be taken to limit the extent of Judith Yard’s corporate, partnership and matrimonial entitlements. As Alfred and Trevor Yard were the directing minds of Yardoo at the time, it can be taken that it was also Yardoo’s purpose. However, that circumstance does not provide a sufficient objective basis on which to conclude that Yardoo contractually bound itself to pay all of the costs incurred in achieving that purpose. It is equally open to conclude that each of the parties undertook a liability to pay a proportionate share of the costs of pursuing their, admittedly common, purpose.
There were good reasons for Yardoo not to undertake a joint liability to pay all of Mr Starke’s fees while the oppression action was on foot. It was after all not in the interest of Judith Yard, who was still a shareholder, that Yardoo burden itself with that liability. Moreover, Trevor and Gladys Yard were also shareholders and directors. In the absence of any express discussion about the extent to which Yardoo would be liable for the costs incurred for the benefit of Alfred Yard in the resulting trust action, it is difficult to infer Trevor and Gladys Yard’s assent to Yardoo undertaking that liability. After all, if Alfred Yard failed, as he ultimately did, to make good his claim to a resulting trust, such an agreement would reduce the value of their equity in Yardoo. Trevor and Gladys Yard were also Mr Starke’s clients. Mr Starke was probably duty bound not to make an agreement with Yardoo which bound it to pay all of Alfred Yard’s costs, without first explaining the consequences of that agreement to his clients Trevor and Gladys Yard. The legal relationships to which I have just referred form the context in which the conduct of the parties must be examined to determine whether, viewed objectively, the agreement alleged by Mr Starke was made.
The circumstances on which Mr Starke relies are, by and large, similar circumstances to those which Amphlett B, in Burridge, considered were not enough to prove a joint retainer.
I am not satisfied that there is a sufficient basis upon which to find an agreement that Yardoo would pay Alfred Yard’s costs. Alfred Yard remains liable for his proportion of Mr Starke’s fees. The quantification of the liability of the only defendants to this action, Alfred Yard and Yardoo, will require an apportionment between all of Mr Starke’s clients. I expect that very few, if any, costs will be allocated to Gladys Yard but a significant proportion may fall on Trevor Yard.
There is an element of unreality about the point taken as to Yardoo’s limited liability for Mr Starke’s fees. To the extent that Alfred Yard remains a shareholder of Yardoo, the assets of Yardoo will at least indirectly remain available to satisfy the costs payable by him. Hopefully, an arrangement will be reached consensually between Mr Starke and the Yards which will avoid the pain staking and costly exercise of apportioning costs between the parties. The apportionment exercise is likely to be expensive in itself, and will be a cost which will ultimately be borne by the defendants.
Estimate Not a Fixed Price Offer
A price quotation is usually not an offer, if it is no more than a simple statement of price at which property or services can be brought or provided. Only if the surrounding circumstances show expressly, or impliedly, a willingness to actually transact at, and for, the quoted price is the quotation to be taken as an offer.[6]
[6] Thomson Reuters, The Laws of Australia (1 December 2011) [7.1.470] < Harvey v Facey [1893] AC 552; JS Robertson (Aust) Pty Ltd v Martin (1956) 94 CLR 30 at 53 (Williams J); Aotearoa International Ltd v Scancarriers A/S [1985] 1 NZLR 513 at 556.
On about 26 June 2004, Mr Starke and Mr Stevens met with Alfred, Trevor and Gladys Yard to discuss the impending trial before Justice Cummins. Ms Sims, who was then residing with, and continues to live with, Trevor Yard, was also present. It is common ground that Ms Sims asked Mr Starke about the trial costs. Mr Starke testified that, on information provided there and then by Mr Stevens, he told the Yards that Mr Stevens’ daily fee was $2,500 and that for a 10 day trial the total of his fees would therefore be $25,000. He also estimated that Mr Stevens’ fees for preparation would be between $15,000 and $25,000. Mr Starke recorded those amounts in a hand written note which he left with the Yards and which was received by me as exhibit P5.
Mr Starke gave evidence that he also estimated that his own fees for conducting the trial would be $5,000. Mr Starke testified that he gave that estimate on the assumption, which he made known to the Yards, that he would not personally attend on the trial in Victoria. As events transpired, Mr Starke did attend. For reasons which will appear shortly, no complaint is made by the defendants about his attendance. Mr Starke’s estimate of his fees also appears on exhibit P5 followed by the letter “E”.
According to Mr Starke, he also gave an estimate of the witness fee which would be charged by the forensic accountant whom he had engaged, and the associated air travel costs. Mr Starke also estimated the cost of transcript. Mr Starke testified that he informed the Yards that if a Melbourne solicitor, who was acting as Mr Starke’s agent, were to instruct Mr Stevens on the trial, his fees would be about $10,000. Those estimates also appear on exhibit P5 with the letter “E” alongside each amount. The letter “E” does not appear alongside any of the figures relating to Mr Stevens’ work.
Trevor Yard gave evidence that Mr Starke’s fees, and the Melbourne agent’s fees, were put to him as alternatives. He testified that he was given the option of engaging Mr Starke to instruct on the trial in Melbourne for $5,000, or to have the Melbourne agent attend for $10,000. According to Trevor Yard, he responded “you know who’s got the job”. Trevor Yard testified that the amounts were not estimates but fixed lump sums for the conduct of the trial. I do not accept that evidence for the following reasons.
It is inherently improbable that Mr Starke presented his fees and the agent’s fees as alternatives. Trevor Yard did not testify that Mr Starke said anything about having obtained a fixed price offer from the Melbourne agent and there was no evidence that he had in fact done so. It is unlikely that the Melbourne agent would have given a fixed offer even if he had been asked. It is also unlikely that Mr Starke would have obtained a fixed price in advance of the meeting with the Yards. I reject entirely the possibility that Mr Starke invented a higher offer in order to secure his own engagement. The improbabilities to which I have observed are obvious enough to legal practitioners, and I find that they would also have been apparent to a reasonable lay litigant. The same can be said of the forecast fees of the forensic accountant and cost of the transcript. If those costs must reasonably be regarded as estimates, a similar view can reasonably be taken of the figure given for Mr Starke’s fees.
Moreover, the sum of $5,000 is an improbably low figure as an estimate of Mr Starke’s fees for attending a trial that was likely to proceed over 10 days. It is even more surprisingly low, given that Mr Starke’s capacity to attend to other matters in his practice would have been significantly curtailed by an attendance in Melbourne. Furthermore, any forecast fee would necessarily have included work in preparation for the trial, over and above his bare attendance on the hearing days. It is improbable that Mr Starke agreed to instruct on a trial in a matter as complex as the oppression and resulting trust actions, and which might occupy many hearing days, for a fixed fee which was as low as the amount recorded on the note.
The contrast with the way in which Mr Stevens’ fees were dealt with is significant. A fixed lump sum daily fee was agreed for Mr Stevens in the sum of $2,500. However, the total for the trial given was expressly conditioned on the assumption of a 10 day trial. On an objective view of the discussions, Mr Stevens’ fees were not limited to $25,000 irrespective of the length of the trial, and the Yards were not bound to pay that total even if the trial was completed in just several days. Mr Starke could not reasonably have been understood to bind himself to $5,000, when Mr Stevens had not bound himself to a fixed sum irrespective of the length of the trial. The reason that Mr Starke’s estimate did not expressly contain a condition, or formula, linked to the length of the trial lies in the nature of a solicitor’s work, which is not susceptible to a daily fee.
On the basis of my assessment of Mr Starke’s testimony, and the inherent improbabilities to which I have referred, I have no hesitation in rejecting Trevor Yard’s account and accepting Mr Starke’s. Mr Starke did not intend to bind himself to perform the work for the fixed lump sum mentioned. I am also satisfied that the Yard’s understood that to be the case. Trevor Yard’s testimony to the contrary was not convincing. In particular, he was not able to give any satisfactory explanation for the presence, and his understanding, of the letter “E” alongside most of the figures in the note.
I find that in all of the circumstances, the figures given by Mr Starke were non-binding estimates and were not fixed lump sum offers. Finally, it necessarily follows that I find that Mr Starke attended the hearing for reasons relating to the demands of the trial and not because Mr Yard had accepted his cheaper fixed price.
Appeal Contingency Arrangement
Justice Cummins handed down his decision on 24 March 2006. He dismissed Alfred Yard’s claim for a resulting trust. He ordered the dissolution of Yardoo and the partnership sought by Judith Yard for the purpose of a proportionate distribution of the equity between their members. Mr Starke testified that Justice Cummins’ orders effectively amounted to an order that Judith Yard receive about $1,100,000 for her interest in both Yardoo and the partnership.
The judgment was discussed at a meeting attended by Mr Starke and Mr Stevens at Murrayville on 29 March 2006. At that meeting, Alfred and Trevor Yard gave instructions to Mr Starke to appeal.
It is largely common ground between Mr Starke and Trevor Yard that an agreement was reached at that meeting on the terms alleged by paragraph 2.7 of Alfred Yard’s and Yardoo’s defence:
That on 29th March 2006 at a meeting at Murrayville at which Mr Starke and Mr Stevens and the defendant A J Yard and Mr Yard and Mrs Margaret Sims were present. Mr Starke for and on behalf of the plaintiff and Mr Stevens both verbally offered to act for the defendant A J Yard on a “no win no fee” basis to lodge and conduct an appeal against the judgment of Justice Cummins if all outstanding costs and disbursements were paid immediately and all disbursements relating to the appeal including the engagement of senior counsel were paid. The defendant A J Yard gave verbal instructions to the plaintiff to proceed with the appeal on the terms offered by Mr Starke and Mr Stevens.
Mr Starke confirmed, in subsequent correspondence, that he had been retained to prosecute the appeal essentially on those terms. In a letter dated 13 June 2006, Mr Starke wrote:
Furthermore, we confirm the arrangement being:
1. you would pay all Mr Greg Stevens (Barrister) Tax Invoices;
2. you would pay all ou[r] Tax Invoices;
3.you would provide money to pay for disbursements – that is Court filing costs, our agent fees in Melbourne, photocopying, facsimile transmission and all such disbursements – that is hard costs;
4.Mr Greg Stevens in relation to the appeal would only charge at the completion of the appeal and would only be paid if you were successful, excluding disbursement costs such as airfares, taxi fares and accommodation costs; and
5.Our company in relation to the appeal would only charge at the completion of the appeal and would only be paid if you were successful, excluding disbursement costs such as those stated in 3 above, airfares, taxi fares, and accommodation costs.
In a letter dated 16 June 2006 to Mr Alfred Yard and Yardoo, Mr Starke again wrote:
We confirm that the arrangement being (as advised to you in writing previously) that we would run the Appeal on the basis that:
1. you would pay Mr Greg Stevens (Barrister) Tax Invoices rendered up to date;
2.in return for number 1 above Mr Stevens would be prepared to undertake the Appeal work on a contingency basis and that if you were unsuccessful you would not be charged (excluding disbursement costs). If you were successful then you would pay for this time on his hourly rate;
3. you would pay our Tax Invoices rendered up to date;
4.in return for number 3 above our company would be prepared to undertake work with respect to the Appeal on a contingency basis, and if you were unsuccessful our company would not charge you (excluding disbursement costs). If you were successful then you would pay our company for its time on its hourly rate.
On the trial, the differences between the testimony of Mr Starke and Trevor Yard about the detail of the meeting of 29 March 2006 were relatively minor. Trevor Yard testified, and Mr Starke denied, that the term “no win no fee” was used. Mr Starke’s evidence was that he had used the term “contingency” and had probably explained that term by telling the Yards that if they were not successful they would not be charged for the work performed. Mr Starke also testified that he told the Yards that the purposes he had in mind for the proposed appeal were twofold. They were to overturn the judgment of Justice Cummins on appeal or, alternatively, to obtain a more favourable settlement with Judith Yard beforehand. Mr Starke testified that he said to the Yards that:
We would be prepared to do the appeal on the basis that you pay all our outstanding accounts… we could do the appeal, on the basis of a contingency.
Later Mr Starke said:
It was made clear to them that the accounts rendered by Mr Stevens and by my office, all the accounts rendered up to date had to be paid in order for us to proceed for the appeal on a contingency basis.
Mr Trevor Yard testified that he was not aware that the Yardoo Parties could appeal Justice Cummins’ decision, until his right to do so was explained to him by Mr Stevens and Mr Starke on 29 March 2006. Trevor Yard testified that they encouraged him to appeal. I find it surprising that Trevor Yard was not aware of the right of appeal from Justice Cummins’ decision before that discussion, but it is ultimately not necessary to decide whether or not I accept his evidence to that effect. I do accept his evidence that Mr Stevens encouraged him to appeal. In a note delivered shortly after the meeting, dated 19 April 2006, to Mr Walsh QC, who was engaged as senior counsel on the appeal, Mr Stevens expressed, in relatively strong terms, an adverse view of the judgment. He expressed a similar view in evidence before me. Given that view, and the very fact that ultimately he and Mr Starke agreed to act on a contingency arrangement, I am satisfied that he and Mr Starke did encourage the Yards to appeal. On the other hand, I doubt that the Yards required much encouragement. It is plain that Alfred and Trevor Yard were anxious to do all that they could to limit the amount which Judith Yard would receive for her interests in the family assets.
However, I am equally satisfied that the Yards were concerned about the burgeoning cost of pursuing their purpose. Trevor Yard’s evidence was that he told Mr Starke and Mr Stevens that he did not wish to appeal. He told them that the family had thrown enough money at the dispute. According to Trevor Yard, Mr Starke replied “we’ll do a deal with you on a no win, no pay”. Trevor Yard testified that Mr Starke explained that the Yards would only have to pay for the legal work if they were successful but they would nonetheless have to engage senior counsel, whose fees would be required to be paid. Mr Starke estimated that the cost of the proceeding on the appeal on that basis would be about $50,000. Trevor Yard testified that he thought to himself “$50,000 was a good bet to maybe get $500,000 worth of dad’s land out.”
I am satisfied that Mr Starke’s offer to conduct the appeal on a contingency basis was an important factor in the Yards’ decision to give the instructions to appeal.
Trevor Yard agreed that in the course of the conversation he was asked to pay the outstanding accounts. He testified that his response was “[w]ell, we can’t come up with money, otherwise, what’s the drill”. Trevor Yard testified that Mr Starke said “[d]on’t worry about my accounts. If money comes to hand, preference to Mr Stevens”. Trevor Yard denied that there was a link between Mr Stevens acting on a contingency basis and the payment of those accounts. He said:
He didn’t say we had to pay his accounts immediately. There was no time, it was no time limit, and that reflects in my payment of that last invoice where I paid him in instalments, or dad paid him - whoever had some funds at the time – and they didn’t, they didn’t pull their hand away when it was offered”.
Mr Stevens’ recollection of the agreement reached at that meeting was slightly different to Mr Starke’s. Mr Stevens testified that at the meeting he insisted on the immediate payment of his trial costs. According to Mr Stevens, there was also discussion about the possibility of an appeal, the costs associated with it and the possibility of negotiating a settlement whilst the appeal was pending. Mr Stevens testified that Mr Starke asked him if he would lodge the notice of appeal. Mr Stevens responded he was prepared to do so if his outstanding accounts were paid. Eventually, Mr Stevens agreed to draw up and lodge the notice of appeal before those accounts were paid. According to Mr Stevens, Mr Starke then told the Yards:
Look, if you pay all of our invoices now we will continue with the negotiations or try to continue with the negotiations and we will run the appeal on the basis that if we don’t win, at the end of the day you won’t have to pay.
Mr Stevens accepted that the Yards showed some enthusiasm for the prospect of not having to pay the appeal costs unless they were successful and that they insisted that, because of the long lasting drought, they were not in a position to pay the trial costs immediately. Mr Stevens testified that in response to the requests for payment the Yards said that they did not have that sort of money. According to Mr Stevens, the Yards eventually agreed to try and pay Mr Starke and Mr Stevens’ accounts as soon as possible. Mr Stevens testified that whilst in the driveway, Mr Starke said to Alfred and Trevor Yard:
We will lodge the appeal. You will pay the invoices. If you don’t pay the invoices then you will have to pay the accounts, the cost of the appeal.[7]
[7] See pages 254-256.
Mr Stevens gave evidence that as they left Mr Starke said, “just so it’s clear, if you don’t pay the deal’s off”. Mr Stevens explained that even though no specific date for the payment of his fees was mentioned, he anticipated payment within six weeks. Mr Stevens also recalled Mr Yard saying words to the effect that, if a settlement was reached with Judith Yard before the appeal was heard, the appeal costs would be paid when finance was arranged to pay her out.
Mr Stevens acknowledged in his evidence that he realised that the Yards had little practical capacity to obtain finance to pay their trial accounts before the settlement. He hoped, however, that Alfred Yard may have an undisclosed source of money with which he might pay the accounts. Mr Stevens agreed that he had not bound himself to prosecute the appeal to its conclusion if his accounts were not paid. Mr Stevens understood his engagement to be on the usual terms for payment of his reasonable costs, unless his accounts for the trial were promptly paid, in which case the Yards would be liable for the appeal costs only in the event that they were successful.
At the end of October 2006, the tax invoices referred to in Mr Starke’s earlier letters remained unpaid, even though Mr Stevens had already spent much time on the drawing of the notice of appeal, in conference with Mr Walsh QC, and on the preparation of the appeal books.
In a letter dated 4 November 2006 to Mr Alfred Yard and Yardoo, Mr Starke raised the failure to pay the accounts. Mr Starke wrote:
As you will note these Tax invoices date back to 2004. It is understandable that the rural industry has had problems over the last number of years. Our arrangement with you being that all work undertaken in relation to the substantiate action (that is before go[i]ng on Appeal) was to be paid in full. In relation to the Appeal you would pay disbursement costs that include Senior Counsel’s (Mr Stephen Walsh QC) fees and our Melbourne Agent’s fees with our solicitor fees and those of Mr Stevens (Barrister) for the Appeal would only be payable by you on success of the Appeal.
In summary payment, of the amounts stated in Sections A and B are required. We invite you to nominate a date when these will be paid, which should in any event be prior to the Mediation Date of 11 December 2006.
Alfred Yard replied informing Mr Starke that he was unable to pay the accounts. He also questioned the reasonableness of the amounts claimed.
I should make it clear at the outset that, in my view, the relevant agreement is the oral agreement made at the meeting in Murrayville on 29 March 2006. The letters of Mr Starke, to which I have referred, are evidence, by way of admissions, of the oral statements which comprised that agreement. The critical question of construction is the identification of the legal effect of the discussion about the payment of the outstanding tax invoices. There are two alternative constructions. The first is that Mr Starke and Mr Stevens were engaged to conduct the appeal on the usual basis of payment of fees in the ordinary course, unless the outstanding tax invoices were paid, in which case they would act on a contingency basis. That is the construction, in effect, suggested by Mr Stevens in his evidence. The second construction is that Mr Stevens and Mr Starke, if they accepted instructions to act for the Yards on the appeal, would do so on a contingency basis, but that they would not so act, or at least reserve the right to cease acting before the appeal was heard, if their outstanding tax invoices were not paid. I find that Mr Starke and Mr Stevens were retained on the latter arrangement for the following reasons.
First, that arrangement is more consistent with Trevor Yard’s and Mr Starke’s testimony about the agreement. Mr Stevens’ account of the discussion is not very different except for the parting comment I have set out in paragraph [56] above. I am not satisfied that that comment was made. Mr Starke did not give evidence to that effect. Mr Stevens probably understood the arrangement to be the more nuanced one to which he deposed. However, I accept Mr Starke and Trevor Yard’s evidence of the substance of the discussion in which they were the major participants.
Secondly, the terms of the letters sent by Mr Starke, which I take as admissions as to the content of the discussion, are more consistent with that construction.
Thirdly, the acknowledgment by Mr Starke and Mr Stevens that the Yards protested in that meeting that they were not in a position to pay the outstanding fees incurred for the trial, is inconsistent with an agreement to engage Mr Starke and Mr Stevens to conduct the appeal on a fee for service basis, which would become a contingency arrangement only if they paid the outstanding trial accounts. As I have already found, the contingency arrangement materially influenced the Yards’ decision to appeal. It is unlikely that they would have appealed if that benefit could only be realised if they paid the trial accounts.
Mr Starke’s implicit acceptance in his letter of 4 November 2006 that he was still acting on a contingency basis notwithstanding the failure to pay the outstanding trial accounts, also suggests that the effect of the conversation in Murrayville on 29 March 2006 was as I have found.
In my view, the term that the outstanding tax invoices be paid conditioned the obligations of Mr Starke and Mr Stevens to prosecute the appeal to its conclusion. For so long as the outstanding accounts remained unpaid, Mr Stevens and Mr Starke were free to cease acting. In that event, alternative arrangements, such as an agreement to pay fees on the usual basis, might have been made. Mr Starke and Mr Stevens did not adopt that course. Having failed to negotiate a different retainer, non-fulfilment of the payment condition did not entitle Mr Starke to charge on the ordinary basis.
Notwithstanding the non-payment of their accounts, Mr Starke and Mr Stevens attended on the Yards at Murrayville in early December 2006 to prepare for the mediation recommended by the Court of Appeal, which was to be held before a Master on 11 December. In my view, the costs of the mediation were encompassed within the contingency arrangement. One of the two purposes of appealing identified by Mr Starke in the meeting of 3 December 2006 was to reach a more favourable settlement with Judith Yard. Moreover, Trevor Yard had expressly accepted that resolving Judith Yard’s claim in that way would be a favourable outcome for the purpose of the contingency arrangement, necessitated payment by the Yardoo Parties of the fees of Mr Starke and Mr Stevens.
At the meeting in Murrayville the Yards raised concerns about the expense of both Mr Stevens and Mr Starke attending the mediation. Ms Sims confirmed their concerns by a facsimile dated 7 December 2006. Ultimately, only Mr Stevens attended. In my view, the concerns expressed by the Yards about the expense of sending both Mr Stevens and Mr Starke to the mediation do not show an acceptance on their part that the costs of the mediation were not covered by the contingency agreement. There would be a significant disbursement expense associated with the attendance of Mr Starke for which the Yards would be liable, notwithstanding the contingency arrangement. It is also likely that they raised their concern out of an instinctive desire to limit costs generally, without any thought as to what the precise nature of the charging relationship might be given their failure to pay the accounts.
It may also be that the concern to minimise costs arose out of a subjective uncertainty shared by both Mr Starke and the Yards about the terms of the engagement, given the continuing failure to pay the outstanding accounts. However, their subsequent subjective uncertainty is strictly irrelevant to a proper construction of the agreement. The question for me is the objective construction of the agreement that was struck in Murrayville.
On a factual level any uncertainty, or even misunderstanding, on the part of the Yards does not undermine the weight of the evidence about the content of the discussion on which my conclusion is based.
The mediation was conducted in December 2006. Trevor Yard attended the mediation in the morning but did not return to the mediation room after lunch. In the afternoon, Alfred Yard, on behalf of Yardoo and Trevor Yard, negotiated a settlement of all of the proceedings for a sum significantly less than the judgment sum. When Trevor Yard was informed of the agreement he was unhappy with it. He attempted to negotiate further time within which to make the payments. Those attempts were unsuccessful and no formal agreement was ever executed. Accordingly, the appeal proceeded in February 2007.
Mr Stevens testified that whilst in Melbourne for the mediation he advised Trevor and Alfred in these terms:
Yes. So my proposition was that “If you don’t do this, you’ve got all these other costs; you will have the costs of the trial – which we estimated at 300 – you will have the costs of the appeal, then you will have the costs because we hadn’t been paid”. I was pretty –I’ve used the phrase before – snakey with David about this, and I had an opportunity now to try and sort it out with Alfred as to how all of these invoices were going to be paid, and that he hadn’t complied with the arrangement.
Later, however, Mr Stevens said:
No, I put it in a different way which was “You haven’t paid me in accordance with the arrangement and the costs would be payable”. I had a slightly different way of phrasing it. I was saying “You had an arrangement with us. You were honour bound to do that”. I was trying to enforce the fact that they had not complied with an arrangement, an undertaking.
Mr Stevens went on to explain, that the effect of what he was saying to the Yards was that their failure to pay his trial costs meant that he was not bound by the contingency arrangement. In my view, Mr Stevens’ explanation is, in itself, ambiguous. It may mean no more than that Mr Stevens was not bound to continue to act on the appeal because of the failure to pay his trial costs. In my view, that is the more natural way in which to understand his explanations to the Yards.
Mr Starke gave evidence about further conversations with the Yards when they were in Melbourne for the hearing of the appeal. He testified that he requested payment of the outstanding accounts. The Yards told him that they were not in a position to make payment at that time. I do not regard those statements as admissions by the Yards that they were at that stage liable to pay costs on the usual basis. The conversations are to be understood as a reference to the outstanding tax invoices for the trial. Mr Stevens had not sent any accounts for his work on the appeal until a week before the hearing. There was no specific reference to that account in the conversation to which Mr Starke deposed. The delivery of the account, in itself, is not inconsistent with the contingency arrangement.
Given the general duty of a solicitor to advise his or her clients about any special conditions of the retainer, and conditions about which there may be some uncertainty, the reasonable observer could not have concluded that an ordinary retainer had come into effect. I am satisfied that a special retainer on a contingency basis, was agreed at Murrayville on 29 March 2006. Having regard to the lawyer-client relationship, and Mr Starke’s capacity and responsibility to make clear the terms of the retainer on which he relies, I am not satisfied that the retainer included a term that the Yardoo Parties would be charged on the usual basis if the outstanding trial accounts were not paid.
I find that notwithstanding the exchanges deposed to by Mr Starke and Mr Stevens, they continued to be engaged to act for the Yardoo Parties on a contingency basis. They had reserved to themselves the right to terminate that retainer if the trial costs were not paid, but did not do so.
Costs for attending to settlements
The work performed by Mr Starke’s office and Mr Stevens in taking steps to arrange finance, remove encumbrances on the titles and provide security over the titles to land for the monies advanced on the refinancing, did not fall within the terms of the contingency arrangement entered into with respect to the appeal.
The arrangement to prosecute the appeal on a contingency basis included preparation for, and attendances upon, the Court of Appeal until the disposition of the appeal by the entry of final orders. Satisfaction of those orders is a question of enforcement and not part of the appeal process.
Plainly, Mr Stevens and Mr Starke were engaged to attend to that work. They are entitled to their reasonable fees for doing so.
In the course of opening submissions, Trevor Yard complained of the appointments which were arranged by Mr Stevens with potential financiers and his attendance upon those appointments with Trevor Yard. Trevor Yard insisted in evidence, that he had already arranged finance with the Commonwealth Bank and that he had advised Mr Starke and Mr Stevens of that fact. If that were so, and Trevor Yard was satisfied with the terms on which that finance had been offered, he could, and should, have refused to attend on the appointments which were made. By attending with Mr Stevens on those appointments, he assented to the performance of that work on behalf of his father and Yardoo. I find that Trevor Yard attended in the hope that better terms might be obtained.
I accept that the total fees charged for attending to the settlement may be greater than they would otherwise have been because of Mr Starke’s absence, and the consequential need for Mr Stevens to more closely supervise the work of the staff solicitor and attend on various aspects of the settlement himself.
However, in my view, as long as a solicitor acts reasonably, he or she is not obliged to manage his or her workload and working hours so that he or she can, without fail, attend personally to the affairs of his or her clients. It is reasonable to conduct a legal practice in a way which will, on occasion require the engagement either of another solicitor, as an agent or a locum, or in a way which requires the engagement of a counsel. The Yards have not shown that Mr Starke acted unreasonably in taking leave when he did.
I have no doubt that the engagement of another solicitor’s office for the purposes of attending to the settlement would have been much more expensive than engaging Mr Stevens, given the complex litigational history and nature of the settlement which had to be arranged. In those circumstances, there was nothing to be gained by offering the Yards an opportunity to engage a different solicitor.
Accordingly, the only question is the reasonableness of Mr Stevens’ fees. I remit that issue to a master for assessment.
Liability for costs of bringing application for extension of time before Justice Cummins
Given the strong adversarial tone of the litigation in which the Yards were involved, I have no doubt that an application for an extension of the stay would have been opposed no matter when it was brought. Accordingly, Mr Starke is entitled to his costs for bringing that application, which he did, albeit belatedly.
The delay by Mr Starke in seeking an extension of the stay orders made by Justice Cummins resulted in the appointment of receivers and managers to the partnership and a liquidator to Yardoo. The receivers and managers claimed an amount of approximately $40,000 for work done between their appointment and the extension of the stay. That amount was paid to them on the settlement of the Court of Appeal’s orders. The liability to the liquidator has not yet been determined.
Mr Starke was ordered by the Supreme Court of Victoria to pay the legal costs of the liquidator and receivers and managers on the application for an extension of the stay. That fact, together with Mr Starke’s own explanation for the delay given in evidence before me, shows that there is an arguable case that he may be liable to the Yards for the costs associated with their appointment. A claim in negligence was made by a counterclaim filed in this action shortly before the commencement of the trial. I ordered that the counterclaim not be heard and determined together with the present claim because of the delay in filing. I will hear any application which might be made with respect to the counterclaim, and give directions as to its disposition if necessary, at a later time. If the counterclaim is pursued, it is likely to involve Mr Starke’s professional indemnity insurer.
Mr Starke’s counsel suggested that the enforcement of any costs to which Mr Starke is entitled might be stayed until the fate of the counterclaim is determined. I accept that is the most appropriate way to proceed. I will use the costs of the receivers and managers as a guide to the possible cost of the liquidator. I will order that the enforcement of any allocutur given on the remittal of this matter to a Master for taxing be stayed to the extent of $80,000.
Conclusion
I give judgment for the plaintiff against both defendants for his fees and disbursements of the trial before Justice Cummins, the application to extend the stay order made by Justice Cummins and the settlement. The quantum of those fees is to be determined after an apportionment between all of Mr Starke’s clients. I order that those fees be taxed pursuant to s 42 of the Legal Practitioners Act 1981 in accordance with these reasons. The enforcement of the final allocutur will be stayed, until further order, to the extent of $80,000.
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