D A Starke Pty Ltd v Yard & Anor (No 2) - [2020] SASC 81

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
D A STARKE PTY LTD v YARD & ANOR (No 2)
[2020] SASC 81
Judgment of Judge Bochner a Master of the Supreme Court
14 May 2020
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS
Application of Bell Lawyers Pty Ltd v Pentalow & Anor to incorporated legal practices - "the Chorley exception" - application considered on the papers.
Supreme Court Act 1935 ; Legal Practitioners Act 1991 , referred to.
Bell Lawyers Pty Ltd v Pentelow & Anor [2019] HCA 29; United Petroleum Ltd v Herbert Smith Freehills [2020] VSCA 15; McIlraith v Ilkin & Anor [2007] NSWSC 1052; Guss v Veenhuizun (No 2) (1976) 136 CLR 47, considered.

D A STARKE PTY LTD v YARD & ANOR (No 2)
[2020] SASC 81
Introduction

On 4 September 2019, the High Court of Australia delivered its decision in Bell Lawyers Pty Ltd v Pentelow & Anor (“Bell Lawyers”).[1] By this decision, the Court made it clear that “the Chorley exception” is not part of the common law of Australia, in respect of either barristers or solicitors. The Court said, at [1] – [3]:
As a general rule, a self‑represented litigant may not obtain any recompense for the value of his or her time spent in litigation. Under an exception to the general rule, a self‑represented litigant who happens to be a solicitor may recover his or her professional costs of acting in the litigation. This exception is commonly referred to as "the Chorley exception", having been authoritatively established as a "rule of practice" by the Court of Appeal of England and Wales in London Scottish Benefit Society v Chorley.
One issue raised by this appeal is whether the Chorley exception operates to the benefit of barristers who represent themselves. Another, more fundamental, issue is whether the Chorley exception should be recognised as part of the common law of Australia.
The Chorley exception has rightly been described by this Court as "anomalous". Because it is anomalous, it should not be extended by judicial decision to the benefit of barristers. This view has previously been taken by some courts in Australia. Dealing with the matter more broadly, however, the Chorley exception is not only anomalous, it is an affront to the fundamental value of equality of all persons before the law. It cannot be justified by the considerations of policy said to support it. Accordingly, it should not be recognised as part of the common law of Australia.
(citations omitted)
[1] [2019] HCA 29.
The Court did not decide the question whether an incorporated legal practice, through which a sole practitioner operates his or her practice, should be able to obtain a costs order for work performed by its sole director and shareholder, or its employees.[2]
[2] [2019 HCA 29 at [53].
Background
The background to this litigation is set out in my judgment delivered on 16 January 2020.[3] I do not repeat it here,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] SASC 81
Decision Date: 14 May 2020

CaseChat Overview and Summary

The case of D A Starke Pty Ltd v Yard & Anor (No 2) involved a dispute over legal fees and disbursements between the plaintiff, D A Starke Pty Ltd, and the defendants, Alfred Yard and Yardoo Pty Ltd. The plaintiff sought to recover its fees and disbursements from the defendants, which were incurred during a number of actions that the plaintiff's sole director, Mr Starke, had represented the defendants in. The plaintiff was successful in its claims and was awarded costs of the recovery action. The primary issue in this case was whether Mr Starke could recover the fees incurred by him in the recovery action, given the decision in Bell Lawyers Pty Ltd v Pentalow & Anor. Specifically, the court had to determine if the Chorley exception, which allows a legal practice to recover its own costs when acting for itself, applied to incorporated legal practices.

The court found that the plaintiff had failed to provide evidence of an arm's length arrangement between itself and Starke Legal, as required by the decision in Bell Lawyers. The court rejected Mr Starke's submission that the work carried out to recover disbursements was not for the benefit of the plaintiff, as it was directly to the benefit of the plaintiff who carried the liability to pay the accounts. The court also noted that while United Petroleum was not binding, it was highly persuasive, and it would be unusual for a judicial officer to depart from its decision. The court concluded that the abolition of the Chorley exception did not apply to incorporated legal practices, and thus Mr Starke was not entitled to recover the fees incurred by him in the recovery action.

The final orders of the court were that the application by Mr Starke to recover the fees incurred by him in the recovery action was dismissed, and that the defendants were to pay the plaintiff's costs of the application.

Orders

Orders of the court

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Background

Background to the litigation

The Court did not decide the question whether an incorporated legal practice, through which a sole practitioner operates his or her practice, should be able to obtain a costs order for work performed by its sole director and shareholder, or its employees.[2][2] [2019 HCA 29 at [53].Background The background to this litigation is set out in my judgment delivered on 16 January 2020.[3] I do not repeat it here, except to note that, from the late 1990’s, Mr Starke, through his corporate entity, D A Starke Pty Ltd, acted for Alfred Yard, Trevor Yard, Gladys Yard and Yardoo Pty Ltd (or a combination of them) (“the various defendants”) in a number of actions. After the finalisation of these claims, the various defendants refused to pay a significant portion of Mr Starke’s fees and disbursements.[3] [2020] SASC 3. In this action, D A Starke Pty Ltd sued Alfred Yard and Yardoo Pty Ltd for its fees and disbursements. I will refer to this action as the recovery action. D A Starke Pty Ltd was largely successful in the recovery action, which went to trial in October 2011, with judgment being delivered in February 2013. D A Starke Pty Ltd was also awarded the costs of the recovery action. Throughout, I will refer to D A Starke Pty Ltd as the plaintiff, where it is necessary to differentiate it from Mr Starke personally. Ultimately, five allocaturs were issued. Some of these related to the costs of the actions wherein Mr Starke represented the various defendants. Others related to the recovery action. Two related to the fees of counsel, Mr Stevens, which Mr Yard and Yardoo required to be separately taxed. Two related to costs incurred by Mr Starke in respect of proceedings brought for contempt by him against various of the defendants. A question has now arisen as to the extent to which Mr Starke is entitled to recover the fees incurred by him in the recovery action. The issue in dispute is whether the fees incurred by him are caught by the decision in Bell Lawyers.Mr Starke’s representation in the recovery action Mr Starke says that for the period 3 June 2009 to 18 January 2015, the plaintiff represented itself.[4] During this time, the plaintiff retained Mr Cogan, a costs expert, to assist him with the recovery action. For the trial of the recovery action, the plaintiff retained counsel from the independent bar.[4] FDN 126 at [8]. On 19 January 2015, Mr Starke’s legal practice was transferred from the plaintiff to Starke Legal Pty Ltd (“Starke Legal”). He says that, from this point, Starke Legal represented the plaintiff.[5] He says that there was a proper arm’s length arrangement between the plaintiff and Starke Legal, by which the plaintiff retained Starke Legal to act for it. [5] FDN 126 at [21]. Mr Starke says that he was the only solicitor employed by the plaintiff, although it made use of contract paralegals, solicitors and book keepers as required.[6] He says that he is Starke Legal’s sole director, secretary and shareholder, and that it employs three full time solicitors, support staff and contractors.[7] Starke Legal engaged contractors and deployed its own staff to work on the recovery action.[8] He says that Starke Legal is charging the plaintiff the firm’s usual rates for the work performed.[9][6] FDN 126 at [11].[7] FDN 126 at [23].[8] FDN 126 at [26].[9] FDN 126 at [31].The plaintiff’s position

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Finally, I note that submissions have been filed on behalf of Mr Stevens in relation to the application of Bell Lawyers to the recovery of his fees. These submissions appear to have been prepared in the context of FDN 128. As that application has been dismissed by consent, I do not consider those submissions further.Consideration It is necessary, first, to deal with a number of the plaintiff’s submissions. Firstly, the plaintiff has provided no evidence of an arm’s length arrangement between it and Starke Legal. He has not provided a retainer agreement, invoices or evidence of any payment by the plaintiff of fees rendered by Starke Legal. It is no more than assertion by Mr Starke that such an arrangement exists. Secondly, I reject Mr Starke’s submission that the work carried out to recover disbursements was not for the benefit of the plaintiff. This is patently incorrect. Mr Cogan’s and Mr Stevens’ retainers were with the plaintiff; it is the plaintiff who carries the liability to pay their accounts, regardless of whether it recovers any of those fees from the defendants. Thus, the work carried out to recover disbursements is directly to the benefit of the plaintiff. The same applies for any other disbursements. The work carried out to recover disbursements is in the same category as the work carried out to recover legal fees. Thirdly, while the plaintiff may be correct, in a strict sense, that the decision in United Petroleum is not binding on this Court, this submission ignores the fact that it is highly persuasive, and that it would be most unusual for a judicial officer in my position to depart from a decision of a Court of Appeal in a matter such as this. Fourthly, I have had difficulty understanding the plaintiff’s submission in relation to consideration of the costs legislation and rules in South Australia. It did not point to the particular provisions of the Supreme Court Act, the Legal Practitioners Act or the Supreme Court Civil Rules that it wished me to consider. I also do not understand the submission that there is nothing in those acts or rules “to displace the findings of the High Court in respect of the subject practice company”. I understand this to mean that there is nothing in the Supreme Court Act, the Legal Practitioners Act or the Supreme Court Rules which would mean that the abolition of the Chorley exception did not apply to incorporated legal practices; that is, the abolition of the Chorley exception is not prevented from applying to incorporated legal practices by the operation of any local laws or rules. However, in the context of this matter, I assume that I cannot be correct in this understanding. The only submission of the plaintiff with any merit is the submission that United Petroleum must be distinguished from the present case as it relates only to partnerships. In McIlraith v Ilkin & Anor,[13] (“McIlraith”) Brereton J considered the situation where a solicitor sought costs where the solicitor acting for him was a solicitor corporation of which he was the director. At [12], Brereton J said:… I have attributed no significance to this distinction, and proceed on the basis that Mr Ilkin is to be regarded as having acted as his own solicitor.[13] [2007] NSWSC 1052.