Dart Mining Nl v Foster Nicholson Jones

[2016] VSC 836

IN THE SUPREME COURT OF VICTORIA

AT MELBOURNE
COSTS COURT

S CI 2015 05737

DART MINING NL	Applicant
v
FOSTER NICHOLSON JONES (ABN 58 133 023 426)	Respondent

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JUDGE:	Wood AsJ
WHERE HELD:	Melbourne
DATE OF HEARING & DECISION:	27 June 2016
DATE OF REASONS:	30 June 2016
CASE MAY BE CITED AS:	Dart Mining NL v Foster Nicholson Jones (ABN 58 133 023 426)
MEDIUM NEUTRAL CITATION:	[2016] VSC 836

REASONS FOR DECISION

APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr J White	Cooper Grace Ward
For the Respondent	Ms D Paver	Debra Paver

HIS HONOUR:

1. This proceeding relates to legal costs charged for work performed by the respondent. The applicant seeks to review the costs pursuant to the Legal Profession Act 2004 (‘the Act’). The Summons was filed 6 November 2015 and attaches a number of invoices claiming gross sums. They are divided into five groups, the first four of which, designated (a) to (d), totalling $91,146.07, are not relevant to these reasons. There is no dispute as to the applicant’s standing to seek to review those costs. The fifth group, designated (e), contains ten gross sum invoices dated between 3 March 2014 and 14 August 2015 totalling $149,894.53. They are all headed ‘General Advice’ and were managed under one file by the respondent.

1. A preliminary issue has arisen in relation to this fifth category. The question is whether the ‘General Advice’ file constitutes one retainer to provide general advice from time to time when matters arose or whether there are separate retainers for discrete issues which arise from time to time and are just conveniently run under the ‘General Advice’ file. I determined this issue at a hearing on 27 June 2016 and now publish my reasons.

1. The determination of this issue settled any controversy about whether the applicant is out of time to review some of the legal costs in group (e) as a result of the provisions in section 3.4.38(5) of the Act on the basis that final bills were rendered prior to 6 November 2014.

1. There are three affidavits filed. The respondent relies on affidavits of Leath John Nicholson and John Cornelius both sworn 7 April 2016. Mr Cornelius was the interim CEO of the applicant at the time the respondent was engaged to perform work for the applicant and was intimately involved in discussions and negotiations. In actual fact he supports the respondent’s position in relation to the issue that falls to be determined.

1. The applicant relies on an affidavit of James Chirnside sworn 21 June 2016. He is described as the Managing Director of the applicant and the affidavit merely identifies aspects of the documentation relied upon which are relevant to the applicant’s legal argument. He does not challenge the facts contained in the respondent’s affidavits. A paragraph which merely conveyed a legal conclusion was struck out at the hearing on 27 June 2016.[1]

   [1]Paragraph 7 of the affidavit.

1. Both parties filed written submissions dated 22 June 2016. The applicant contends there is an onus on the respondent to establish the existence and scope of each separate retainer and that this had not been established. Further, that all work fell within the separate headings in ‘Services to be Provided’ identified in the document headed ‘Retainer Agreement Non Litigation’ as the likely areas where work would be required. Therefore it was one retainer.

1. In essence I accept the respondent’s position as conveyed in the written submissions. The uncontested evidence establishes that the work performed by the respondent across a number of areas was managed within one file with all that work being invoiced within one bill from time to time, rather than separate bills for each matter, and further that this arrangement was at the applicant’s request. The applicant’s own CEO at the relevant time did not regard there being one retainer in relation to bills in group (e), but a series of discrete retainers. 

1. The word ‘matter’ is not defined in the Act, but reference is made to ‘matter’ in the Act (eg s3.4.6, s3.4.7, s3.4.8) and when instructions were first received in a matter determines which Act applies (see Schedule 2, section 3.1 in the Transitional Provisions). In my view the ‘matter’ as contemplated by the Act in this case is not one matter described as ’General Advice’ containing a number of quite distinct and stand alone areas of work.

1. In the affidavit of Mr Nicholson it is stated that when first consulted the applicant’s representatives , including Mr Cornelius, stated ‘that they could not be sure exactly what legal matters would be involved but they said they expected they would include....’[2]. A list of general topics were then deposed to and it is clearly not expressed to be exhaustive. They included topics as broad and uncertain as ‘dispute resolution’, general ASX/ASIC advice’, and Employment/Consultancy Agreements’. Consistent with that evidence of the conversation, the respondent’s letter of 14 February 2014 enclosing the proposed Retainer Agreement also states they are the types of legal services that ‘we believe are likely to be required by the Company’.[3]

   [2]Paragraph 4 of the affidavit.

   [3]Exhibit ‘LJN 1’.

1. In my view to describe them all under one ‘umbrella’ as one matter is too artificial and commercially unrealistic. The practical effect of the applicant’s submission would be that, say if discrete advice on ASIC policy was given at one point and a final bill rendered (in relation to that advice), then years later a completely unrelated dispute resolution matter arose (which turned out to be the final piece of work performed by the respondent for the applicant) then the bill in that matter would potentially provide an opportunity to attempt to categorise the ASIC advice bill as an interim one under the ‘General Advice’ retainer and ‘piggy back’ that, and any other bill on unrelated completed matters, onto the review of the dispute resolution one.

1. This would be also contrary to the intention of the Act which is to encourage review of interim and final bills in a ‘matter’ within 12 months of the final bill,[4] by sophisticated clients.[5]

   [4]Section 3.4.37.

   [5]Section 3.4.38(6)(a).

1. The broad categories were expressed to be likely areas of work, and were not exhaustive which is much less certain than the usual basis that a lawyer would be retained to act. The Retainer Agreement refers to the respondent’s intention to provide an estimate before each ‘discrete item of work’. The affidavit evidence confirms that this is what occurred. In reality, in order to comply with disclosure obligations a lawyer in the position of the respondent would have had to have regard to each request for work as a discrete retainer. The applicant was a sophisticated client under the Act so there was no obligation to provide disclosure but the evidence establishes that in relation to estimates, that is what occurred in practice before each category of work commenced, ie, specific identification of the work to be done and an estimate provided for that category of work.

1. There is no dispute that a Costs Agreement and the terms of a retainer do not have to be contained in one document.[6] The overall evidence establishes that the Agreement defined the basis for charging for future work. The respondent contends that the document is a Costs Agreement for the purpose of the Act.[7] Discrete retainers for specified work were flagged and required for that document to have work to do.  

   [6]See section 3.4.19

   [7]Written submissions at par.14.

1. The answer to the preliminary issue is that there were separate retainers for discrete issues. On the balance of probabilities the contracting parties intended this to be so, but the test is an objective one to be determined largely on the facts but the same conclusion is reached on that basis.

1. The coversheet of the document headed ‘Retainer Agreement’ refers to the eight general topics where work is likely to be required. The word ‘including’ suggests other future work, not yet identifiable and specified, was contemplated which was to be part of the same general retainer and charging regime. The services articulated in the coversheet are described as being in relation to ‘matters’ (plural). The applicant’s position is that all the work in the ‘General Advice’ file is in effect one ‘matter’, in order for bills for completed and billed work prior to November 2014 to be classified as interim to a final bill.

1. The applicant was critical of the affidavit evidence of the respondent in oral submissions at the hearing. For example, the absence of sufficient file notes exhibited, or in existence on inspection in relation to estimates said to be given  in relation to the 47 matters. However, the deponents were not cross-examined and the applicant was not able to adduce evidence contradicting their former CEO or the respondent in their affidavits.

1. The respondent relied on case law in support of their argument that the arrangements were legitimate and that within a general retainer there could be final bills for discrete legal services provided. [8] In Tabtill No 2 Pty Ltd & Ors v DLA Phillips Fox (afirm) & Anor[9] Applegarth J stated - ‘The client agreement and the instructions recorded in it may govern the legal services that are to be provided, and constitute what might loosely be described as a general retainer to undertake the legal work that might be required from time to time in respect of a general matter, such as a nominated proceeding or a dispute. In addition to that agreement, which may govern the costs that will be billed, there may be specific retainers that are the subject of specific instructions.’[10]

   [8]See Mackie & Staff Pty Ltd v Khor & Burr [2013] VSC 696 at [29] and Turner v Mitchells Solicitors andBusiness Advisers Qld [2011] QDC 61 at [13.

   [9][2012] QSC 115

   [10]Paragraph [62]

1. The applicant relied on a passage from a Canadian case - Re LadnerDowns and Crowley[11] which deals with a solicitor’s attempt to benefit himself at the client’s expense in the context of an entire contract scenario and that the onus is on the solicitor to establish that the client had full knowledge when making a bargain to give up his right to tax.

   [11][1987] 41 DLR (4^th) 403 at 423

1. The respondent in oral submission relied on that same Canadian case and a passage which summarises Kay LJ in Romer & Haslam[12] where it was said to be legitimate for a solicitor to recover costs for parts of  an entire retainer where there are natural breaks in an entire retainer and the delineation in work tasks is sufficiently discrete for this to be identified.[13] The respondent also relies on another section of the Re Ladner[14] where Fenton Atkinson J is quoted from JH Miller & Son v Percy Bilton Ltd[15] where he stated -  ‘It was an agreement to employ solicitors in work of a certain class, which might extend over a period of years and involve legal work of various kinds, but it was a clear contemplation on both sides that bills would be rendered and paid as matters proceeded; there would be no question of the solicitors having to wait for payment until they completed the whole of the lettings of these flats; and of course the client would be getting benefit as matters proceeded’.

   [12][1893] 2 QB 286

   [13]Re Ladner at page 418

   [14]At pages 419-420

   [15][1966] 2 All ER 894 at 899

1. The respondent also relies upon the giving of separate estimates as being consistent with separate retainers as was the creation of separate costs agreements on substantial matters (see paragraphs (a) to (d) in the Summons). It was submitted that in the marketplace sophisticated clients do not want multiple costs agreements and separate bills where there is a general retainer of a firm. It was submitted that the client was in a superior bargaining position and the respondent complied with the applicant’s request for multiple topics to be handled and billed in one file for their own convenience. The applicant was said to be in a superior bargaining position. The negotiation of a 15% discount from the usual hourly rates for this ‘General Advice ‘ file was evidence of this.

1. The only evidence adduced by the applicant contains observations by the Managing Director about the documentation as he was not involved in the negotiations. The Agreement identifies some work which is ‘likely’ to be required in the future. It is not an exhaustive list. The Agreement contains the costing arrangements for a general retainer of the respondent for general advice in the future. Specific instructions for discrete matters in the future would be necessary and constitute separate retainers for each subject matter.

1. As a result the applicant is out of time to review some of the costs identified below.

1. A practical problem arises as the gross lump sum bills produced contain a mixture of work. By that I mean work that falls into different discrete retainers is contained within more than one bill to varying degrees. An analysis of when a ‘final bill’ has been rendered in relation to particular retainers is necessary to determine if the applicant is out of time to review that particular work category.

1. Exhibit ‘LJN 3’ contains 47 categories of work identified by Mr Nicholson with a description of the nature of the work and date range for the work. Exhibit ‘LJN 4’ contains the bills with an identification made by Mr Nicholson against each item as to which of the 47 categories the item falls into to. This evidence and analysis is unchallenged by the applicant.

1. Categories 1 to 14 contain work completed before 6 November 2014 where the billing occurred in relation to some of this work in the bills dated 3 March 2014, 1 April 2014, 19 June 2014, 1 August 2014, 11 September 2104, with the final bill in relation to any of this work being 9 October 2014. No work or billing has occurred after 6 November 2014 in relation to these categories. The applicant is therefore out of time to review the work in those categories.

1. Category 15 describes work performed between 22 May 2014 and 6 February 2015. The work on that last day is contained in the bill of 12 June 2015 so that is the final bill. The applicant is within time to review all work in category 15 as the Summons was filed within 12 months of that bill.

1. Categories 16 to 23 contain work completed well before 6 November 2014 where billing occurred in relation to at least some of this work in bills dated 1 April 2014, 1 August 2014, and the final one on 11 September 2014. The applicant is out of time to review that work.  

1. Category 24 describes work performed between 1 September 2104 and 24 October 2014. The work on that last date is contained in the bill of 14 November 2104 so that is the final bill. The applicant is within time to review all work in category 24 as the Summons was filed within 12 months of that bill.

1. Category 25 describes work performed between 2 October 2104 and 2 November 2014. The last entry in a bill in relation to that category appears to be on 27 November 2014 and is contained in the bill dated 11 February 2015. The applicant is within time to review work in category 25.

1. Category 26 describes work between 4 October 2014 and 30 October 2014. However, the last entry in a bill in relation to that category appears to be on 5 November 2014 and is contained in the bill of 14 November 2014, so that is the final bill in relation to the category. Therefore the applicant is within time to review that work as the Summons was filed within 12 months of the final bill.

1. Category 27 describes work between 11 September 2014 and 19 September 2014. The final bill for this work was 9 October 2014 so the applicant is out of time to review this work category.

1. Category 28 describes work between 22 September 2014 and 3 October 2014. The last entry in a bill for this work in this category appears to be on 9 October 2014  and is contained in the bill of 14 November 2014. The applicant is within time to review work in category 28.

1. Category 29 describes work from 25 September 2014 to 1 October 2014 and Category 30 describes work from 29 September 2014 to 30 September 2014. Category 31 describes work on 1 October 2014. The applicant is out of time to review the work in these three categories as it was all billed prior to 6 November 2014.

1. Work in categories 32 to 47 is all contained in bills dated after 6 November 2014 so can be reviewed.

1. The applicant in oral argument queried the accuracy of the table and designation of category numbers against work in the gross bills which might appear to be out of time. The respondent argued that Mr Cornelius agreed with the categories and analysis. His affidavit refers to a table and annotations made on bills by Mr Nicholson but does not depose that exhibits ‘LJN 3’ and ‘LJN 4’ were the actual documents he had seen. The applicant’s representative has inspected documents of the respondent and gave examples where categories of work might be excluded as being out of time in the ‘General Advice’ bills but which were part of the topics of work which will be taxed as part of paragraphs (a) to (d) of the Summons. This was evidence from the bar table and the applicant had the opportunity to file affidavit evidence about this aspect and failed to do so. I have to accept the accuracy of the table and annotations of Mr Nicholson for the moment as this is the only evidence on the point and it is uncontested.

1. The applicant’s concern is that the respondent would omit work from the itemised bill which should be included. This would be a matter for argument at taxation. The respondent quite properly conceded that if this were to be apparent at the time then the 15% discount would apply to this earlier work conducted before the relevant Costs  Agreement came into existence if there was a nexus with the work taxed as part of (a) to (d).

1. A cursory analysis of the number of categories that are out of time, and a separate analysis of the number of attendances in the gross bills that equate to the categories, suggests that less than 50% of both the categories and the attendances in the gross bills are out of time. In reality therefore the applicant has standing to review around 70% of the total costs of $241,040.60.

ORDERS MADE ON 27 JUNE 2016

1. Paragraph 7 of the order of Judicial Registrar Gourlay made 9 February 2016 be vacated.

2. The respondent draw itemised bills in relation to work in categories 15, 24, 25, 26, 28, and 32 to 47 inclusive as described in exhibit ‘LJN 3’ to the affidavit of Leath John Nicholson sworn 7 April 2016, and in relation to paragraphs (a) to (d) inclusive contained in the Summons filed 6 November 2015, by 7 September 2016.

3. The applicant file and serve Notices of Objections in relation to the bills by 1 October 2016.

4. Taxation be listed for mention in the call over on 11 October 2016.

5. The applicant pay the respondent’s costs of the preliminary issue on a standard basis.