De Mol v WHL Legal Pty Ltd - [2017] WASC 354

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: DE MOL -v- WHL LEGAL PTY LTD [2017] WASC 354

CORAM: TOTTLE J

HEARD: 15 & 22 JUNE 2017

DELIVERED : 8 DECEMBER 2017

FILE NO/S: CIV 3037 of 2016

MATTER :Section 288 of the Legal Profession Act 2008 (WA)

BETWEEN: STEVEN DE MOL
First Plaintiff
DE MOL INVESTMENTS PTY LTD
Second Plaintiff
AND
WHL LEGAL PTY LTD
Defendant

Catchwords:

Solicitors' cost agreement - application to set aside costs agreement - Whether the agreement is not fair or reasonable - Failure to provide written estimates of costs in accordance with disclosure requirements under Legal Profession Act 2008 (WA) - Where client experienced in litigation - Application dismissed

Legislation:

Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (WA)
Legal Practitioners (Supreme Court) (Contentious Business) Determination 2014 (WA)
Legal Profession Act 2008 (WA), s 260, s 262, s 268, s 288

Result:

Application dismissed

Category: B

Representation:

Counsel:

First Plaintiff                  :     Ms M L Coulson
Second Plaintiff             :     Ms M L Coulson
Defendant:     Mr D J Garnsworthy

Solicitors:

First Plaintiff                  :     Coulson Legal
Second Plaintiff             :     Coulson Legal
Defendant:     DWL Legal

Case(s) referred to in judgment(s):

Frigger v Shepherd [2014] WASC 477
Rodgers v De Mol Investments Pty Ltd [2016] WASC 151
TOTTLE J:

Introduction

The plaintiffs have applied to set aside two client retainer agreements made with their former lawyer, the defendant, an incorporated legal practice. The application is made pursuant to s 288(2) of the Legal Profession Act 2008 (WA) (the LPA).
The first agreement was made in July 2013 (the 2013 Agreement) between the second plaintiff, De Mol Investments Pty Ltd (DMI) and the defendant pursuant to which the defendant acted for DMI in an action brought in this court by Mr Lyndon Rodgers and Mrs Roberta Rodgers in respect of damage to a property they owned in Beaufort Street, Mt Lawley, Perth. The claim made by the Rodgers gave rise to cross-claims between DMI and a co-defendant, Jamac Constructions Group Pty Ltd (Jamac), and other parties subsequently joined as either defendants or third parties. DMI is owned by the first plaintiff, Mr De Mol.
The second agreement was made in October 2015 (the 2015 Agreement) between Mr De Mol and the defendant pursuant to which the defendant acted for Mr De Mol in relation to claims brought against him in respect of personal guarantees given to suppliers of a business formerly conducted by HVLV Pty Ltd (in liquidation). Mr De Mol had owned HVLV sometime before it went into liquidation. Mr De Mol also sought advice and assistance from the defendant in relation to his rights to seek an indemnity from AIG Australia Ltd, and a co-insurer Dual Australia Ltd, under a directors and officers insurance policy.
The legal practitioners who performed the work under the agreements were Mr David Williams, Ms Nicole Levy and Ms Anna Chacko. Mr Williams and Ms Levy were directors of the defendant. Counsel was briefed by the defendant to provide advice in the course of the Rodgers proceedings and to appear on DMI's behalf at trial.
The relationship between Mr De Mol, DMI and the defendant came to an end in about May 2016. Mr De Mol and DMI made an application under the LPA for the assessment of the bills of costs rendered by the defendant. The defendant opposed the application.
On 25 November 2016 Mr De Mol and DMI commenced these proceedings by originating summons seeking orders setting aside the agreements. In the current proceedings, in addition to opposing the application to set aside the agreement, the defendant has applied by chamber summons for orders lifting the limits on the costs that it would be entitled to recover from DMI in respect of the Rodgers proceedings pursuant to the applicable costs determinations[1] if the 2013 Agreement is set aside.
[1] Legal Practitioners (Supreme Court)(Contentious Business) Determination 2012 (WA); Legal Practitioners (Supreme Court)(Contentious Business) Determination 2014 (WA).

The evidence

In support of their application the plaintiffs relied upon affidavits sworn by Mr De Mol on 25 November 2016 and 7 April 2017. Mr De Mol attached to his affidavit of 25 November 2016 copies of the agreements and copies of 'costs disclosure statements' and 'fact sheets' which were sent to Mr De Mol along with the agreements. Mr De Mol also attached to his affidavit copies of the invoices rendered by the defendant and correspondence exchanged between Herbert Smith Freehills, new lawyers instructed by DMI, and the defendant once the dispute about costs had arisen. The plaintiffs also relied upon an affidavit sworn by Mr Christian Rogers sworn on 11 April 2017. Mr Rogers is a solicitor and his evidence responded to an allegation made by Mr Williams in his affidavit evidence to the effect that Mr Rogers had provided Mr De Mol with advice and assistance in relation to the Rodgers proceedings.
The defendant relied upon an affidavit sworn by Mr Williams in these proceedings on 30 March 2017 and on an affidavit sworn by him on 22 November 2016 in the application for assessment of the defendant's bill of costs. Mr Williams attached to his affidavits substantial volumes of correspondence as well as other documents brought into existence in the course of the Rodgers proceedings and, to a lesser extent, in the course of dealing with the personal guarantee claims.
Mr De Mol and Mr Williams were cross-examined. In the course of setting out my factual findings I identify aspects of Mr De Mol's evidence which were unsatisfactory and which have led me to conclude that his evidence was unreliable.
Although there was one aspect of Mr Williams' evidence which I found surprising, being his failure to confirm important elements of his discussions about costs in writing, which necessitated close consideration of whether the discussions took place as recounted by Mr Williams, I accept his evidence as reliable. Where there were conflicts in the evidence I prefer that of Mr Williams.

The facts

The facts as I find them are set out in the following paragraphs. I have included in my findings some detail about the Rodgers litigation and the personal guarantee claims and have referred to various communications exchanged between Mr De Mol and Mr Williams, Ms Levy and Ms Chacko. My findings, however, are intended to do no more than provide an overview of the disputes and to identify important communications that have some relevance to the agreements and costs. There were a great many more communications exchanged between the parties than the small number to which I have referred.

The dispute with the Rodgers and DMI

In 2008 DMI purchased property in Mount Lawley. It wished to develop the property by constructing a four level building with two levels of underground parking. In January 2010, it signed a building contract with Jamac for the construction work required for the development. It was a term of the contract that Jamac would procure comprehensive insurance to respond, amongst other things, to claims of damage to adjacent buildings. Using an insurance broker, Aon Risk Services Australia, Jamac obtained an insurance policy from Allianz Australian Insurance Ltd naming DMI as co-insured. Excavation and sheet piling work commenced and damage was sustained to a building on an adjacent property, 612 Beaufort Street owned by Mr and Mrs Rodgers. It was alleged by Mr and Mrs Rodgers that the damage was caused by vibration and piling undertaken for DMI's development.
In September 2010 Mr and Mrs Rodgers commenced proceedings against DMI and Jamac. DMI instructed solicitors other than the defendant to represent it in the proceedings brought by the Rodgers. A costs agreement was made with those solicitors. The costs agreement provided for costs to be charged by reference to hourly rates rather than the applicable costs determination. The agreement stated that in the absence of an agreement a costs determination would govern the recovery of costs. In late 2010 DMI made a claim under the Allianz policy but an indemnity was denied on the basis that the damage suffered by the Rodgers' property fell within an exclusion in the policy.
Disputes also arose between DMI and Jamac. Another firm of solicitors represented DMI in relation to those disputes and DMI incurred legal costs of nearly $200,000 dealing with those disputes.
By mid‑2013 in addition to the legal costs incurred dealing with the dispute with Jamac, DMI had incurred legal costs of approximately $238,000 defending the Rodgers proceedings.[2]

The 2013 Agreement

[2] ts 77.

In July 2013 Mr De Mol approached Mr Williams for his assistance in relation to the Rodgers proceedings. Mr Williams had been recommended to Mr De Mol as a lawyer who had experience in insurance law. Mr De Mol met Mr Williams and Ms Levy at the beginning of July 2013. Following that meeting, Ms Levy sent an email to Mr Williams on 4 July 2013. In that email Ms Levy said that the defendant would be able to assist Mr De Mol in relation to the Rodgers proceedings and that she would provide him with a retainer agreement setting out the terms of the proposed engagement. Ms Levy stated that the defendant would review Mr De Mol's file in its entirety for a flat fee of $15,000 with a view to providing advice in relation to indemnity, liability and recommendations for the future management of the claim.[3] Ms Levy said that she would request a meeting with counsel to discuss the claim and, in particular, the prospects of obtaining an indemnity or some other recovery from Allianz or Aon.
[3] Contrary to DMI's submissions the $15,000 was not an estimate of the costs of defending the action.
When the 2013 Agreement was sent to Mr De Mol it was accompanied by a costs disclosure statement and a fact sheet entitled Legal Costs - Your Right To Know. The fact sheet contained statements about clients' rights to the effect of the statements contained in form 2 of the Legal Profession Regulations 2009 (WA) (reg 80(1)). Mr De Mol signed the 2013 Agreement on 5 July 2013.
The 2013 Agreement comprised standard terms and a schedule setting out particular information relevant to the work to be undertaken by the defendant. The standard terms provided that the defendant would charge for its work by reference to the time spent working on the matter (cl 2.1 and cl 2.2). Clause 2.3 stated:
2.3Fees Estimate
You will be given an estimate of the total legal costs if reasonably practicable or, if that is not reasonably practicable -
(a)a range of estimates of the total legal costs; and
(b)an explanation of the major variables that will affect the calculation of those costs.
Clause 3.5 stated:
3.5Other Party(s) Costs
In addition to costs that you will incur by engaging our services you should also be aware that should the matter involve court proceedings and you are ultimately unsuccessful, then you may be required to pay the other party(s) costs. We can give you only a very broad estimate of this potential liability, if you wish.
Clause 3.6 stated:
3.6Recovering Costs
Depending upon the nature of the work we do for you, there may be an opportunity to recover some or all (in rare circumstances) of your costs. Our ability to recover costs is always dependent upon the ability of the other party to pay. We set out our advice concerning the possibility of recovering costs in this matter at Item 8 of the Schedule.
Relevantly the schedule stated:
1.Scope of Services
The scope of the-work which is to be done and the services to be provided to you are as follows:
We will review all materials relating to the claim by Mr and Mrs Rodgers for alleged damage sustained to their property located at 612 Beaufort Street, Mount Lawley, WA with a view to providing advice as to indemnity, liability and management of the claim as well as the proceedings commenced in the Supreme Court of WA (CIV 2192 of 2010).
We will also brief and arrange a meeting between yourself and Mr Paul Mendelow (Barrister) to discuss your prospects of successfully prosecuting AON and/or Allianz on the question of indemnity.
At this stage, we have not been instructed to take over the conduct of the claim. We will await further advice from you in that regard.
2. Handling the Matter
(a) Our current approach to handling the matter is as follows:
(i)To review the materials and determine whether there is a possible claim for indemnity against Allianz and/or AON for failure to ensure that proper insurances had been arranged for the project;
(ii) To arrange a meeting between yourself and Mr Paul Mendelow to discuss the prospects of a claim for indemnity against Allianz and/or negligence against AON and otherwise obtain advice as to the ongoing management and resolution of the claim.
(b) Alternative courses of action which could be taken include:
At this stage, there are no alternative courses of action to be taken, subject to receiving further instructions from you to take over the conduct of the claim generally.
(c) Likely outcome(s):
We suspect that ultimately, proceedings will need to be issued against AON and Allianz (which will need to be done reasonably quickly given the late stage of the Supreme Court proceedings) and then further Mediation (preferably before a Judge of the Supreme Court) be programmed to see whether a resolution can be reached between all of the parties.
(d) Fees Estimate:
As discussed, we will charge a flat fee of $15,000.00 to review the materials and provide an advice regarding indemnity, liability and future management of the claim.
We estimate a further $10,000.00 for Mr Mendelow's involvement.
3.Persons Involved in your Matter
(a) As best we can tell at the moment, the following people will work on your matter:

Name

Hourly Rate

David Williams

$360.00

Nicole Levey

$360.00

(b) The supervising Director (where appropriate) will be:
David Williams

4. Time
(a)Your expectations and requirements, as advised to us, are: as soon as possible
(b)Our estimate: Between 6-8 weeks (depending on the availability of Mr Mendelow).

It was not in dispute that the hourly rate to be charged by Mr Williams and Ms Levy was lower than the maximum hourly rate specified in Table A of the Legal Practitioners (Supreme Court)(Contentious Business) Determination 2012.[4]
[4] The maximum hourly rate for a senior practitioner was $451 inclusive of GST.
The costs disclosure statement repeated some of the information contained in the 2013 Agreement to the effect that the defendant would charge for its work on the basis of hourly rates. Under the heading 'Basis for calculating fees' the following statements were made about scales of costs:
In some (but not all) areas of law, a scale of costs is published by the Legal Costs Committee detailing the costs that legal practitioners may charge for professional services. We will provide a copy of any relevant scale upon request.
A scale of costs, to the extent it may apply, in most but not all matters, would result in the legal fees being lower than the fees that will be charged using our standard hourly rates. In some matters the scale of costs applicable may result in the legal fees being higher than the fees that could be charged using our standard hourly rates.
If there is an applicable scale of costs and we are entitled to charge more for certain items of work under the applicable scale of costs and under any written costs agreement we enter into, then we reserve the right to use the applicable scale of costs either in whole or in part (where applicable) as a basis of calculating our legal costs.
Under the heading 'Other matters required by law to be disclosed' the statement recorded:
The fees chargeable by us may be higher than the fees chargeable under the applicable scale (if any).
And:
In relation to litigation:
(i)if successful in a Court or Tribunal in which an applicable scale applies:
(A)the successful party, subject to the Court's or Tribunal's discretion, may be entitled to an order for costs against the unsuccessful party;
(B)but any costs awarded to the client in litigation are unlikely to fully reimburse the client for the total expenditure incurred on legal costs payable to us;
(ii)if the client is unsuccessful, the successful party will usually be entitled to an order for costs against the client.
The 'fact sheet' included the following statements:
5.Your right to be notified of any substantial change to estimate of costs and other matters disclosed to you when retaining the law practice
It is difficult to predict the exact cost of litigation in advance. The cost of court proceedings can vary depending on a number of factors including the actions of the other party which cannot be anticipated.
Your lawyer must give you an estimate of the costs to be charged to you, the costs you are likely to get back if you win and the costs you are likely to pay if you lose, but generally your lawyer will not be able to tell you these exact costs at the outset.
If there is a substantial change to anything that your lawyer has told you, your lawyer must tell you of the changes as soon as it is reasonably practical for your lawyer to do so (section 267 of the Act).

Mr De Mol's evidence about the 2013 Agreement

In his affidavit sworn on 25 November 2016 Mr De Mol deposed that:
(i)'on many repeated occasions during the course of the matter, Mr Williams gave me assurances (using the word 'guarantees') that, in relation to the Rodgers matter, all of the legal costs incurred by me and the Second Plaintiff would be paid back by one or multiple insurers' (par 11);
(ii)Mr Williams did not provide him with any explanation about costs (par 17);
(iii) he found the clauses in the agreement governing when invoices were payable confusing (par 18); and
(iv)he had concerns about the joinder of many parties to the litigation and was unable to keep up with or comprehend the defendants' strategy (par 16).

Mr De Mol did not read the 2013 Agreement

In cross-examination Mr De Mol was asked whether he had read the 2015 Agreement before signing it and he answered:
I would say without a word of exaggeration I probably signed 500 to a thousand documents for Mr Williams. 90 per cent of them - 99 per cent of them I wouldn't have read.[5]
[5] ts 43.5. I do not accept that Mr De Mol was asked to sign 500 or 1,000 documents for Mr Williams. Notwithstanding his disclaimer Mr De Mol was exaggerating..
Although the question was directed to the 2015 Agreement I infer from Mr De Mol's response, which was not limited in its terms to the 2015 Agreement, that he did not read the 2013 Agreement before he signed it. The issue was revisited in re-examination as follows:
COULSON, MS: Mr De Mol, you say you didn't read the ‑ sorry, that you didn't read the costs agreement when it was originally given to you. You said during cross-examination that you're a busy man, that you have ‑ at the time, you had hundreds of employees. What was important to you in deciding whether to proceed to instruct the defendant, WHL Legal?‑‑‑I was ‑ I was advised that he was an insurance lawyer and therefore a specialist in his field. For me, I ‑ I had to be reliant on the fact that he knew what he was doing, and he was ‑ he was working in my best interest to ‑ to settle it. So as far as what I would instruct him, I don't know if I so much instructed him as I so much went along with what he was doing.
It was not to Mr De Mol's credit that he did not disclose in his affidavit that he did not read the 2013 Agreement before signing it.

Mr De Mol's evidence about confusion misleading

Mr De Mol's affidavit evidence about the provisions of the agreements which he found confusing was as follows:
18.I also found the Costs Agreements confusing, for the following reasons:
18.1.Clause 3.2 of the Retainer states that "accounts are payable on receipt but it is satisfactory if they are paid by the 25th day of the next month". However, under clause 3.3 of the Retainer, it is stated that interest will be charged if an account is unpaid for more than 30 days. This statement is reiterated at clause 8(j) of the Disclosure Statement. Clause 3 of the Disclosure Statement states that payment of an invoice is due by the 25th day of the next month, however does not mention that accounts are payable on receipt. Finally, the payment terms on the accounts rendered by the Law Practice are 30 days.
18.2.Clause 8(d) of the Disclosure Statement states that a client may request an itemised account within 30 days of receiving a lump sum account. However, clause 3 of the Factsheet states that it is recommended that the client request an itemised account within 30 days, however, there is no requirement to do so.
In cross-examination Mr De Mol said that it was only after the dispute had arisen and the terms of the agreements had been explained to him that he found them confusing.
Mr De Mol's evidence that he found the agreements confusing was intended to convey the impression that he found them confusing either at the time he was asked to sign them or in the course of the retainer. That impression was misleading and once again it is not to Mr De Mol's credit that he did not make it clear that his confusion arose only after the dispute arose.

Mr De Mol did not want an explanation of the 2013 Agreement

In his affidavit sworn on 30 March 2017 Mr Williams deposed that:
[8.6]When he was to be provided with the first costs agreement I asked the First Plaintiff whether he wanted me to explain or discuss the agreement with him. He told me it was unnecessary as he wanted a second opinion on his case only for a fixed flat fee and that he had been referred to me by Julian Baran who attended our first meeting on 1 July 2013. He was more concerned with the level of the charge out rate than any other matter and with the amount of fees he had been charged by Avon Legal. I discussed and agreed with him what I described to him as an "insurance rate" which was a lower hourly rate. He told me he had signed many retainer agreements before and that I should send him our standard retainer for his consideration and return. He did not need any advice from me about the retainer nor its terms and he told me so at the time of that first meeting.
And of a meeting held on 1 August 2013 he deposed that:
[8.10]At that meeting there was further discussion about costs. The First
Plaintiff told me that provided the hourly rates were maintained then he was happy to instruct the Respondent to take over conduct of the matters in accordance with the terms of the First Costs Agreement. He told me he did not need any advice about the terms of the Agreement as he had considerable experience in dealing with lawyers and knew how they charged him. He was at pains to tell me about Avon Legal and what they had charged him for the conduct of the matter prior to my involvement and wanted to make sure the matter was handled now by a law firm that had specific experience in insurance matters.
Mr De Mol denied that he had told Mr Williams that he did not require an explanation of the fee structure or retainer and said that he was assured by Mr Williams that 'we would recover all of our costs from one or several of the insurers'.[6] I am satisfied that the conversations took place as Mr Williams deposed. Mr De Mol was an experienced businessman and his prior experience of litigation coupled with the fact that he did not read the agreements before signing them suggests that he did know how lawyers charged. I find that Mr De Mol knew that it was the practice of litigation lawyers to charge fees on a 'time costs' basis. I also find that when he instructed the defendant Mr De Mol knew that DMI would incur substantial fees continuing to defend the Rodgers claims and pursuing its claims against the other parties. Against that background it was likely that he told Mr Williams that he did not require any explanation of the agreement.

Mr Williams did not guarantee that all DMI's costs would be recovered from insurers

[6] ts 42.9.

I do not accept that Mr Williams assured or guaranteed Mr De Mol that all DMI's costs would be recovered from one or more of the insurers. It is entirely possible that Mr Williams told Mr De Mol that the objective of the strategy he proposed was to obtain recovery of DMI's legal costs from one or more insurers as that was ultimately what DMI sought to achieve. My reasons for concluding that Mr Williams did not provide the assurance or guarantee alleged by Mr De Mol are threefold. First, I am not prepared to rely on Mr De Mol's evidence. Second, in the course of the Rodgers litigation Mr De Mol was advised in writing about his potential exposure to costs and the existence of the risks that he would not be able to recover all his costs and that he might be liable to pay the costs of other parties. At no stage did Mr De Mol complain that the position being explained to him in writing was inconsistent with the assurances that Mr Williams had given him. Third, experienced litigation practitioners are aware that litigation involves risk and that the outcome of very few cases can be predicted with certainty. I think it is inherently improbable that an experienced litigation practitioner such as Mr Williams would make statements to the effect that all DMI's costs would be recovered from the insurers. In this respect it must also be borne in mind that Mr De Mol says that the assurance or guarantee that DMI would recover all its costs was first given at a meeting held in early August 2013 at which date, as evidenced by the contemporaneous correspondence, Mr Williams did not have all the materials required to make an assessment of DMI's position.

The state of the Rodgers proceedings in 2013 and DMI's strategy

In July 2013 the Rodgers proceedings were being managed by Kenneth Martin J in the Commercial and Managed Cases List. DMI and Jamac were the defendants. Pleadings had closed. Discovery had been given and the next step was to obtain trial directions. The amount being claimed by the Rodgers was over $5.5 million and they were seeking aggravated and exemplary damages and interest.
The strategy discussed between Mr Williams, Ms Levy and Mr De Mol for dealing with the litigation involved as one of its elements increasing the number of parties who might be liable to meet the Rodgers claims. In his oral evidence Mr De Mol said that he understood the strategy.[7] More particularly, as Mr De Mol put it in an email sent to Mr Williams, Ms Levy and Mr Mendelow on 27 October 2015:
the end game was always to get an insurer on the hook … [8]
[7] ts 66.9, 50.5.
[8] Affidavit of Mr Williams filed 30 March 2017, attachment DWW2, 55.
Thus, I do not accept Mr De Mol's evidence that he was concerned about the joinder of additional parties to the litigation or that he was unable to keep up with or comprehend the strategy. Additionally, the impression I formed of Mr De Mol was that he was a successful and confident businessman. He had a robust manner. I am sure that if he had any difficulty understanding strategy he would have raised those difficulties with Mr Williams.
On 13 August 2013 Mr Williams sent an email to Mr De Mol recording that he had received two lever arch files of court documents and expressing concerns as to whether DMI would be able to comply with directions that had been made by the court. Mr Williams wrote:
[G]iven I don't have the file and there are a further 30 lever arch files to come there is no way we can properly comply with the existing orders made about discovery let alone get the matter ready for trial dates to be set. We need to apply to extend time on the existing orders.
I have spoken to Paul Mendelow about what I have received and he shares my concerns. I have tentatively booked him to do the hearing on 26 September 2013 subject to your instructions. I have also booked a day with him on 18 September 2013 for him to settle the amended pleadings and any applications to join parties. This does not give us much time before 26 September 2013 but it is Mr Mendelow's first available dates. He is unavailable until 13 September 2013 on other matters in any event. Mr Mendelow's best estimate on counsel's fees to attend to these matters is around $12 - $15K alone.
In short, this matter will require a significant amount of work to be done at very very short notice by us. We need to urgently meet or talk to you for instructions now …
By its express terms the work to be undertaken by the 2013 Agreement was limited to reviewing DMI's position and providing advice on the potential for claims against Allianz and Aon. A further costs agreement governing the defendants' conduct of the Rodgers litigation was not made but I accept Mr Williams' evidence that at the meeting held on 1 August 2013 it was agreed that the terms of the 2013 Agreement would apply to the defendant's representation of DMI in the litigation itself. In any event the parties certainly proceeded on this basis and the fact that DMI applied to set the 2013 Agreement aside suggests it accepted that its terms governed the work undertaken by the defendant in relation to the Rodgers litigation.
On 1 August 2013 Mr Williams, Ms Levy and Mr De Mol met with counsel. Following that meeting, on 5 August 2013, Ms Levy sent an email to Mr De Mol listing the steps that had to be taken in the immediate term and those that had to be taken in the intermediate term. Ms Levy recorded:
We confirm that there is a substantial amount of work to be performed with respect to this matter and applications at this late stage are likely to be vigorously contested and objected to by the Plaintiff. As discussed with you, Nicole Levy and David Williams of this office will attend to all substantive matters, however, where required, we will continue to brief Mr Mendelow to settle pleadings, provide advice as to the continued management of the claim, and attend court appointments where the matters are sufficiently complex to warrant it.
Amongst the steps to be taken in the intermediate term were applications for leave to join Allianz, Aon, GFWA (the sheet piling subcontractor) and another company involved in the development project.

The rendering of invoices

The defendant sent monthly invoices to DMI for its services. The accounts were accompanied by detailed statements itemising the work done and how much time had spent on each task. When asked in cross‑examination whether he read the accounts sent by the defendant Mr De Mol said:
- No. At that point I had 200 staff ‑ 220 staff to bother about. My PA paid those accounts till we got short on money and then ‑ and then started to question me how many more were going to come in. I ‑ I wasn't sure. That's when I raised a concern. Probably, it was at that point I realised how much we had spent, and I began to question David Williams.
When was it you realised how much you had spent?‑‑‑I can't remember a specific time.
Was it in 2015?‑‑‑I would say it was probably three quarters of the way through the case not knowing the date, but probably three quarters of the time through the case.
So three quarters of the way through the case you didn't know how much you had spent?‑‑‑I wasn't aware. We – we never received a running tally from WHL about what we had spent to date. No. We got individual accounts for 20, 50, 30.
So you agree that you didn't tally up what you had spent?‑‑‑The ‑ the office did. The office did.
Didn't they tell you how much you had spent?‑‑‑Well, I assume they thought I knew what I was doing, so it wasn't until we started to run short of money that ‑ that we realised it was a bigger problem than what it was.
So you had no idea what you had been spending until about three quarters through the case?‑‑‑Well, I was aware we had spent a lot of money.
TOTTLE J: When you say 'a lot of money' ‑ I mean obviously that covers an entire range, Mr De Mol. Could you help me by what you describe as a lot of money in this context?‑‑‑You know, I would have thought hundreds of thousands of dollars was a lot of money.
I infer from this evidence and from DMI's previous expenditure on costs that when DMI embarked on the litigation strategy to which I have referred Mr De Mol knew that pursuing the strategy would involve expenditure of hundreds of thousands of dollars.
The contemporaneous documents suggest that Mr De Mol was aware of the costs being incurred by DMI as they were incurred. On 4 November 2013 Mr Williams sent an email to Mr De Mol advising that the defendant's accounts had been outstanding for more than 30 days and that a larger account was about to be rendered for work done 'getting the matter back on track'. Mr De Mol responded by email on the same day, writing:
Thanks Dave, must admit opened the account and went straight to the bottle of red wine!! Mate it got up there real quick we should have a system where we are all aware of the running account so there is no surprises I suppose the result will determine value for money?. Will get some dollars over to you today …
In his oral evidence Mr Williams said that when Mr De Mol attended meetings he 'always had a print-out of exactly how much he had incurred and he would often give that print-out, whether it be to the plaintiff lawyer, to one of the other lawyers, to tell everybody his story and what had happened to him and how much it had cost him.'[9] I accept Mr Williams' evidence that it was Mr De Mol's practice to maintain a record of DMI's expenditure on legal costs. It accords with my expectation that a person in Mr De Mol's position would know how much his company had spent on legal fees at every stage of the litigation process.
[9] ts 93.6.
On 3 December 2013 Mr Williams sent Mr De Mol counsel's retainer agreement and asked for his confirmation that he agreed with its terms. On 5 December 2013 Mr De Mol replied, confirming that he accepted the terms of counsel's retainer.
In the course of 2014 MJCE Pty Ltd and GFWA Contracting Pty Ltd were joined as third and fourth defendants to the Rodgers action. GFWA was also joined as the first third party and the Bollig Design Group, Allianz Australia Insurance Ltd, Aon Risk Services Ltd and QBE Underwriting Ltd were joined as the second, third, fourth and fifth third parties respectively.
On 19 March 2014 the Rodgers' solicitors served an expert report setting out the loss and damage claimed by them. Mr Williams forwarded the report to Mr De Mol noting that the Rodgers claim for loss and damage was $6,444,500.
A mediation was held on 18 November 2014. By that stage DMI was litigating with five other parties and in effect running five different cases: DMI was defending the Rodgers claim; it was defending Jamac's claim against it for an indemnity in respect of the Rodgers claims and prosecuting its claim for an indemnity against Jamac; and, it was pursuing its claims against Allianz, QBE and Aon.
On 25 November 2014 Ms Levy sent an email to Mr De Mol reporting on the mediation. Ms Levy referred to the terms of a possible offer to settle the Rodgers claims. She also noted that if the matter proceeded to trial there would be significant costs of $300,000 to $400,000 for each party. In the course of discussing the settlement possibilities, Ms Levy observed:
However, commercial consideration needs to be given in relation to the possibility of the matter not resolving but you facing potentially a four-week trial. Whilst we consider that there are good claims against the insurers, we can offer no guarantee that they will be successful and even if you are successful against one, you will be liable to pay the costs of any party against whom you have issued proceedings and not been successful. These costs will not be insignificant.
Ms Levy recommended making an offer and stated:
[T]he significance of submitting an offer cannot be emphasised sufficiently…
Mr De Mol responded to Ms Levy's email with his own email in which he stated, amongst other things:
Send the offer if he settles and he won't I will cop the 230K … if nothing else as you say it protects us against cost. On my return I would like to discuss how as we agreed was our plan I step out of this and let the insurer fight the case …
Ms Levy responded by email on 26 November 2014, referring to the complexity of the litigation and to the fact that she, Mr Williams and counsel remained of the view that an offer should be made sooner rather than later to protect DMI's ongoing costs. Mr De Mol responded to that email with a further email of his own on 26 November 2014, stating, amongst other things:
I understand the issues involved and agree an offer should be made now …
The action did not, however, settle in 2014. The exploration of settlement possibilities continued in 2015. In May 2015, Ms Levy prepared draft settlement letters addressed to Allianz and QBE. In an email to Mr De Mol sent on 12 May 2015, Ms Levy stated that whilst DMI could rely upon the draft settlement letters to make an application for indemnity costs but noted that if the settlement offers were rejected there was a real prospect that DMI would not be entitled to indemnity costs.
On 4 June 2015, Mr Williams wrote to Mr De Mol in relation to the possibility of settling with some of the parties. Mr Williams wrote:
I think the position is solid now and gets better the closer we get to trial but you need to be sure that you want to risk further costs and go on to trial. I have told you from the beginning that on the merits you have a very good case. That has not changed. It's just getting the insurers on board which has started with Allianz now
…
That said your case is strong but I have seen the best of cases in litigation fail as it will all come down to judge's final decision on all the evidence. With so many parties to this and his natural sympathy to Rogers' plight there is always the attraction to the easy way out and the wisdom of Solomon mentality occurring. That should not happen … but we cannot tell you there is no risk going on.
On 5 June 2015, Ms Levy sent an email to Mr De Mol in which she advised him that, even if DMI was successful in his claim against Allianz, it would not recover all of its costs incurred to date. In the same email she commented on how she considered the trial judge would assess one of DMI's expert witnesses and observed:
However, trials are unpredictable as are witnesses, particularly under cross‑examination. As David mentioned in his earlier email to you yesterday, there can never be any certain outcome at trial and all litigation carries some degree of risk. Therefore, if a commercial resolution is open, serious consideration ought to be given to it. However, there will become a point where it is no longer commercial to settle. Having said that, your position with respect to costs (given that not all of them will be recoverable from the insurers) remains unprotected until an offer is put to the Plaintiffs.
In the email Ms Levy asked:
Am I correct in understanding that you no longer wish to put a proposal to Allianz for the purposes of trying to put a combined settlement offer to the Plaintiffs
Mr De Mol replied by email on 6 June 2015 and stating that as he saw it there were two courses of action. The first being that Mr Williams and counsel should meet with Aon and '…negotiate between them an [sic] Allian[z] to a more palatable outcome for my reimbursement of spent fees to date and that they cover my cost/liability moving forward.' This email suggests that Mr De Mol was not proceeding on the premise that one or more insurers would pay all DMI's legal fees at the conclusion of the case.

Discussions for settlement and preparation for trial continued throughout 2015.
On 20 October 2015 Mr Levy sent an email to Mr De Mol in which she recorded that they had recently met with counsel to discuss the matter and, in particular, the potential resolution of the Rodgers claims 'as well as a costs benefits and risk analysis of the claim'. In the email Ms Levy noted that Mr De Mol had concerns 'regarding ongoing costs with respect to the matter' and that he had requested that the defendant 'undertake the bare minimum of work to preserve those costs'. Ms Levy then set out in summary form the risks associated with the plaintiff's claim, the cross-claims between DMI and Jamac, the claim against Allianz, the claim against Aon and the claim against QBE. She then commented on costs issues in more detail, stating:
Outcome Risks
There are a variety of outcomes that might eventuate with respect to the various claims and it is important that you have an idea of what these may be and the cost ramifications in respect of the various scenarios. As a general rule, costs will follow the event - so where you have been successful in your claim, you will be awarded costs on a party/party basis and where you have been unsuccessful, you will be required to pay the successful party's costs on a party/party basis. Party/Party costs means that the costs recoverable are those as prescribed by the Supreme Court Scale of Costs - which specifies the rates applicable for practitioners and the maximum costs allowable in respect of certain events associated with the proceedings. This means that there will very likely be a shortfall between the costs actually incurred by a party and those to which it is ultimately entitled to recover - unless some agreement can be reached without proceeding to taxation.
In terms of the potential outcomes, the following scenarios are all possibilities:
•Plaintiffs fail against DMI - In the event that this occurs, you will be liable for the costs of Jamac, Allianz, Aon and QBE on a Party/Party basis;
•Plaintiffs succeed against DMI and DMI fails in all third party claims against Aon, Allianz and QBE - In the event that this occurs, you will be liable for the Plaintiffs' costs on a party/party basis as well as the costs of Allianz, Aon and QBE on a party/party basis;
•Plaintiffs succeed against DMI and DMI succeeds against Allianz - In the event that this occurs, you will be liable for the Plaintiffs' costs on a party/ party basis as well as the costs of Aon and QBE on a party/party basis. However, in the event that you are successful against Allianz, you will be entitled to indemnity under the Policy in respect of avoidable loss and should therefore be entitled to your legal costs incurred in defending the Plaintiffs' claim as well as prosecuting the claim against Allianz on a party/party basis. You may also be entitled to recovery of your legal costs in prosecuting the claims against Aon and QBE on a party/party basis. However, if you fail against those two parties, there is no certainty the Court will order Alianz is bound to indemnify you in respect to those costs. Further any recoverable costs will be limited to those costs as they relate to the avoidable loss only;
•Plaintiffs succeed against DMI and DMI fails against Allianz and QBE but succeeds against Aon- In the event that this occurs, you will be liable for the Plaintiffs' costs on a party/party basis as well as Allianz's and QBE's costs on a party party basis. However, you will be entitled to recover your legal costs incurred in defending the Plaintiffs' claim and prosecuting the claim against Aon, and may be entitled to your legal costs of prosecuting the claims against Allianz and QBE a party/party basis. However, again, any recoverable costs will likely be limited to those costs in respect of the avoidable loss only;
•Plaintiffs succeed against DMI and DMI fails against Allianz and Aon but succeeds against QBE- In the event that this occurs, you will be liable for the Plaintiffs' costs on a party/basis as well as the costs of Allianz and Aon on a party/party basis. However, you will be entitled to recover your legal costs in respect of defending the Plaintiffs' claim and prosecuting the claim against QBE, and may be entitled to recover your legal costs of prosecuting the claims against Allianz and Aon from QBE on a party/party basis. There is no certainty that the Court will order QBE to pay the costs of the proceedings against Allianz and Aon (and in such an event you could be left facing payment of those costs). However, once again, any recoverable costs will be limited to those costs in respect of the avoidable loss only.
•The Plaintiffs succeed against DMI but DMI fails in its claim against Jamac - In the event that this occurs, you will be liable for the Plaintiffs' costs on a party/party basis as well as Jamac's costs on a party/party basis insofar as they relate to the unavoidable loss only; and
•The Plaintiffs succeed against DMI and DMI succeeds in its claim against Jamac - in the event that this occurs, you will be liable for the Plaintiffs costs on a party/party basis, however, you will be entitled to your costs from Jamac on a party/party basis insofar as they relate to the avoidable loss only.
It should be noted here that in light of proportionate liability, it may be that any costs ultimately payable to the Plaintiffs by DMI will be apportioned in accordance with any apportionment of liability ultimately attributed to DMI at trial. The balance of the Plaintiffs' costs will be borne by the remaining parties whom are determined liable to the Plaintiffs.
Whatever the outcome, given the number of parties involved and the fact that the matter is listed for a three week trial, the costs incurred by everyone, including their respective Counsel fees, will be very significant. Bearing this in mind, and having regard to the brief risks analysis referred to above, we consider that the time has come to look at putting an open settlement offer to the Plaintiffs.
If as Mr De Mol maintained in his evidence that he had received a guarantee from Mr Williams that DMI would recover all its costs from an insurer, then it would have been obvious to him on reading the risk analysis provided by Mr Levy that what he had been told by Mr Williams was not correct and I would have expected him to have complained but he made no complaint.
In November 2015 Mr De Mol retained Mr Konrad de Kerloy of Herbert Smith Freehills for a second opinion on the litigation and to assist in the settlement process.
On 26 November 2015, Mr Williams wrote to Mr De Mol by email about one of the personal guarantee matters. He stated:
Steve If you want the matter to be given to Konrad then please tell us. We have no issue with it.
Mr De Mol replied by email of the same date as follows:
Hi Dave nope you will finish these claims … I'm assuming you are feeling unloved at the moment? Don't panic. So is my wife organised lunch next week I have spent a fortune with WHL plus need a 3rd party confirmation I will not be left at the altar …
Neither the tone nor the content of this email suggest that Mr De Mol did not understand the litigation strategy that was being followed or that he lacked confidence in Mr Williams.
In late January 2016, QBE and Allianz filed amended defences to the claims being advanced by DMI. On 28 January 2016, Ms Levy sent an email to Mr De Mol, commenting in detail on the amendments and the impact of them on settlement possibilities. She observed that the matter 'continues to change on a day to day basis with new evidence emerging constantly'. In February 2016 settlement discussions continued but ultimately were unsuccessful.
On 2 March 2016, the trial commenced.
After two and a half days of trial the Rodgers claims had reduced to something in the order of $300,000 plus interest. On the third day of the trial the Rodgers claims were settled for $300,000. One issue remained outstanding, however, that was Aon would not agree to DMI having leave to discontinue its claim against Aon without payment of Aon's costs. That issue was heard and determined by Kenneth Martin J.[10] His Honour held that DMI should be permitted to discontinue without payment of Aon's costs. In the course of reasons given for that decision, his Honour described the Rodgers proceedings as 'highly complex, highly expensive multi-party litigation' and as highly expensive to run, litigate and resolve. In his Honour's assessment, DMI had acted reasonably in joining Aon as a third party in circumstances in which it had also pursued Allianz as a third party, with that claim being compromised by Allianz on the basis of a payment of $240,000.
[10] Rodgers v De Mol Investments Pty Ltd [2016] WASC 151.
In his affidavit of 25 November 2016, Mr De Mol stated that he confronted Mr Williams on 4 March 2016 and that he was incensed that Mr Williams had not been present in court at a critical time in the settlement discussions. Mr De Mol stated that he told Mr Williams that his:
repeated assurance that all of costs would be paid the insurers [sic] was plainly incorrect
and accused Mr Williams of lying to him and deceiving him. Mr De Mol stated that Mr Williams responded with words to the effect that he, Mr De Mol, should sue him, but that he would look into it and understood Mr De Mol's predicament. Mr De Mol said that Mr Williams then informed him that 'he was conflicted to represent me after the conversation'.
Whatever was said by Mr De Mol in the conversation that he said took place on 4 March 2016 (about which it is not necessary for me to make findings) I do not accept that Mr De Mol genuinely believed that Mr Williams had lied to him. On 13 April 2016 Mr De Mol sent an email to Mr Williams seeking the defendant's assistance in obtaining the removal of a caveat lodged against Mr De Mol's title to a property. Seeking a lawyer's assistance in a new matter is entirely inconsistent with a belief that the solicitor has lied and deceived the person giving instructions in an earlier matter. It is extremely unlikely that Mr De Mol would have instructed Mr Williams to assist him in the caveat matter if he believed that Mr Williams had lied to him.
There is a further factual issue to resolve that does not fit neatly into the preceding chronological account of the Rodgers litigation. In his affidavit sworn on 30 March 2017 Mr Williams deposed that he had continuous discussions with Mr De Mol about legal costs. In his oral evidence in response to questions from me as to why Mr Williams had not been able to provide Mr De Mol with 'ballpark' figures for the daily costs of a trial and the costs of preparing for trial, Mr Williams gave evidence to the effect that he did not put a 'calculated number on it' because it was not practicable, 'given the moving feast I had to deal with and the changes in the litigation throughout'. Mr Williams said that he had multiple meetings with Mr De Mol 'where various figures were bandied around'. As to the question of what the figures were, Mr Williams said:
They were extremely rough and saying 'this is the best guess if it's this many weeks of trial. If it's this many weeks - and we have Paul Mendelow's hourly rate and daily rate and we used our figures as roughly about the same and talked in very generalised terms because he just wanted ballpark figures given to him, not specifics in the context of those discussions because he knew where it was at. When he attended meetings, he always had a printout of exactly how much he had incurred and he would often give that printout, whether it be to the plaintiff lawyer, to one of the other lawyers, to tell everybody his story and what had happened to him and how much it had cost him.
It is surprising that an experienced lawyer such as Mr Williams did not confirm the critical elements of what he said was discussed with Mr De Mol about figures in writing to Mr De Mol. That said, I am satisfied that those discussions took place. My reasons are as follows. First, I accept Mr Williams as a truthful witness. Second, it is clear from the various emails sent by Mr Williams and Ms Levy to Mr De Mol that they were aware of his concerns about costs and that they were alive to the need to advise Mr De Mol about the costs consequences that might flow from the different possible outcomes. Face to face discussions of the nature described by Mr Williams were likely to flow from the advice given on those issues given their central importance to Mr De Mol. It was thus likely that there would have been discussions on the topic and because in my assessment Mr De Mol's preferred method of communication was face to face I think it likely that the discussions were face to face discussions.

2015 agreement

In early July 2015, Mr Rogers, at Mr De Mol's request, briefed Mr Williams about claims being made against Mr De Mol on personal guarantees given by him to suppliers of HVLV. On 6 July 2015, Mr Rogers sent Mr Williams a brief email outlining the nature of the problem. It appeared that Mr De Mol had received three court summonses and that his attempts to persuade AIG to provide an indemnity pursuant to the relevant directors and officers insurance policy had so far been unsuccessful. AIG had directed Mr De Mol to use one of its panel solicitors to respond to the personal guarantee claims pending a decision as to whether an indemnity would be given. The panel solicitors' costs were, however, to be met by Mr De Mol in the interim. It also appeared from subsequent correspondence that Dual Australia Ltd was a co‑insurer.
Mr Rogers in his initial email suggested that there were, in fact, two claims in respect of which proceedings had been commenced: a claim by Burwell Technologies Pty Ltd for $8,081 commenced in the Local Court in New South Wales and a claim for $76,899 by CSR Building Products Ltd. Mr Williams sought assistance from Ms Levy and Ms Chacko in dealing with the personal guarantee claims. On 14 July 2015 Ms Chacko sent an email to Mr De Mol recommending that solicitors in New South Wales be instructed to act as agents to deal with the Burwell Technologies claim. Shortly after the initial instructions, further claims were made. These were a claim by Phoenix Steel Sales Pty Ltd for $10,018, made in the Magistrates Court and a claim by DLL Financial Solutions Partners for $14,388. It appears that a claim was also made by a company known as Stratco Pty Ltd.
The defendant rendered an invoice for work done in relation to these claims on 24 August 2015 for a total of $18,523.55. This included disbursements of $1,679.77.
Ms Levy negotiated with AIG's solicitors and an offer of settlement was made by them in September 2015.
A further invoice for a total of $4,274.60 was rendered on 24 September 2015.
On 12 October 2015, the 2015 Agreement was sent to Mr De Mol. The 2015 Agreement took the same form as the 2013 Agreement and was accompanied by a costs disclosure statement and fact sheet in identical terms to those which had accompanied the 2013 Agreement. The 2015 Agreement differed from the 2013 Agreement in that Mr De Mol was the client and the terms of the schedule were different. Relevantly, the schedule stated:
SCHEDULE
1.Scope and Services
The scope of the work, which is to be done and the services to be provided to you are as follows:
We will review all materials relating to various claims made against you by the following creditors: Stratco Pty Ltd, Phoenix Pty ltd, Burwcll Technologies, CSR Building Products Limited, and DLL Financial Solutions Partner, with a view to providing advice as to liability as well as proceedings commenced by the creditors.
We will also ascertain whether there is any basis to seek an indemnity under the Directors and Officers Policy (AIG Policy No. 8896544-DO, D/O -25589-AIG and 107003) with AIG/Dual as well as other avenues of recovery,
We will otherwise seek to defend the claims and prosecute any insurance claim in respect of those claims.
2.Handling the Matter
(a)Our current approach to handling the matter is as follows:
(i)Seek to resolve the various creditor claims for the best possible commercial outcome and in the interim, take steps to defend, on your behalf, the above proceedings and demands brought by the above creditors;
(ii)Review the materials and determine whether there is a possible claim for indemnity against AIG/Dual under the Directors and Officers Policy;
(iii)If we consider there to be a claim for indemnity under the Policy, we will notify AIG/Dual of the various claims made against you and of your intention to seek an indemnity from AIG/Dual under the Policy. We will endeavour to negotiate a settlement with the insurers or, in the event that a settlement cannot be achieved, issue and prosecute third party proceedings against AIG/Dual;
(iv)Arrange a meeting with AIG/Dual to ascertain whether they will make a contribution of settlement towards the claims made against you;
(v)explore other avenues of recovery.
(b)Alternative courses of action which could be taken include:
At this stage, there are no alternative courses of action to be taken.
(c)Likely outcome(s):
We are hopeful that a commercial resolution can be reached with the insurers and the various creditors on the best commercial terms. In the event that settlement cannot be achieved, we expect that you will be required to defend the current claims and demands from the creditors and otherwise issue proceedings against AIG/Dual to encourage them to make a contribution towards settlement of the above claims.
(d) Fees Estimate: Between $15,000,00 to $35,000,00 depending on whether the claim is litigated.
The schedule also specified hourly charge out rates for Mr Williams, Ms Levy and Ms Chacko. These were lower than the maximum hourly rates specified in Table A of the Legal Practitioners (Supreme Court)(Contentious Business) Determination 2014.[11]
[11] The maximum hourly rate was $473 inclusive of GST.
On 12 November 2015, Ms Levy sent an email to Mr De Mol in which she advised that Mr De Mol should make a counter offer to AIG and Dual offer and noted that since the September 2015 offer two further claims had been made against Mr De Mol, one from Coates Hire in the amount of $229,367.89 and one from Industrial Progress Corporation Pty Ltd. The latter claim was for $5,612.44. Mr de Mol decided that Mr de Kerloy should act for him in relation to the Coates claim. A counter offer was made to AIG's solicitors in November 2015.
On 27 November 2015 Ms Levy advised Mr De Mol by email that the general rule as to costs recovery in civil claims in the Magistrates Court was that there was no recovery of lawyers' costs if the claim was less than $10,000.
In early December 2015 Mr De Mol instructed Ms Levy to make a claim under the directors and officers policy in respect of an outstanding tax debt of HVLV which was being claimed from him by the Australian Taxation Office. In an email sent on 4 December 2015 Ms Levy acknowledged Mr De Mol's instructions and referred to the dispute with AIG and Dual as 'a moving feast'.
Two of the personal guarantee claims were settled. The claim brought by Burwell Technologies proceeded to trial in the Local Court of New South Wales and judgment was entered in favour of Burwell Technologies.
A proposal to refer the dispute with AIG and Dual to arbitration was developed by Mr de Kerloy and an arbitration agreement prepared. Ms Levy continued to correspond with Mr De Mol in relation to the conduct for claims and the possibility of a settlement with AIG and Dual.
Between 24 October 2015 and 20 May 2016 the defendant rendered bills totalling $37,989.70.

The statutory framework

Part 10 of the LPA regulates the disclosures that law practices must make to clients regarding legal costs, the making of costs agreements in respect of legal services, the billing of costs for legal services and provides a mechanism for the assessment of legal costs and the setting aside of certain costs agreements, s 251.

Section 252 of the LPA defines a 'costs agreement' as an agreement about the payment of legal costs.
Section 288(2) of the LPA provides that on application by a client (a person to whom or for whom legal services are or have been provided) the Supreme Court may order that a costs agreement be set aside if satisfied that the agreement is not fair or reasonable.
Section 288(3) identifies a number of matters that may be taken into account by the court in determining whether or not a costs agreement is fair or reasonable. It states:
(3)In determining whether or not a costs agreement is fair or reasonable, and without limiting the matters to which the Supreme Court can have regard, the Supreme Court may have regard to any or all of the following matters ‑
(a)whether the client was induced to enter into the agreement by the fraud or misrepresentation of the law practice or of any representative of the law practice;
(b)whether any Australian legal practitioner or Australian‑registered foreign lawyer acting on behalf of the law practice has been found guilty of unsatisfactory professional conduct or professional misconduct in relation to the provision of legal services to which the agreement relates;
(c)whether the law practice has failed to make any of the disclosures required under Division 3;
(d)the circumstances and the conduct of the parties before and when the agreement was made;
(e)the circumstances and the conduct of the parties in the matters after the agreement was made;
(f)whether and how the agreement addresses the effect on costs of matters and changed circumstances that might foreseeably arise and affect the extent and nature of legal services provided under the agreement;
(g)whether and how billing under the agreement addresses changed circumstances affecting the extent and nature of legal services provided under the agreement.
Division 3 of pt 10 of the LPA regulates costs disclosure. Relevantly, s 260 states:
260. Disclosure of costs to clients
(1)A law practice must disclose to a client in accordance with this Division ‑
(a)the basis on which legal costs will be calculated, including whether a costs determination applies to any of the legal costs; and
(b)the client's right to ‑
(i)negotiate a costs agreement with the law practice; and
(ii)receive a bill from the law practice; and
(iii)request an itemised bill after receipt of a lump sum bill; and
(iv)be notified under section 267 of any substantial change to the matters disclosed under this section;
and
(c)an estimate of the total legal costs if reasonably practicable or, if that is not reasonably practicable ‑
(i)a range of estimates of the total legal costs; and
(ii)an explanation of the major variables that will affect the calculation of those costs;
and
(d)details of the intervals (if any) at which the client will be billed; and
(e)the rate of interest (if any) that the law practice charges on overdue legal costs, whether that rate is a specific rate of interest or is a benchmark rate of interest (as referred to in subsection (2)); and
(f)if the matter is a litigious matter, an estimate of ‑
(i)the range of costs that may be recovered if the client is successful in the litigation; and
(ii)the range of costs the client may be ordered to pay if the client is unsuccessful;
and
(g)the client's right to progress reports in accordance with section 269; and
(h)details of the person whom the client may contact to discuss the legal costs; and
(i)the following avenues that are open to the client in the event of a dispute in relation to legal costs ‑
(i)costs assessment under Division 8;
(ii)the setting aside of a costs agreement under section 288;
(iii)making a complaint under Part 13;
and
(j)any time limits that apply to the taking of any action referred to in paragraph (i); and
(k)that the law of this jurisdiction applies to legal costs in relation to the matter; and
(l)information about the client's right ‑
(i)to accept under a corresponding law a written offer to enter into an agreement with the law practice that the corresponding provisions of the corresponding law apply to the matter; and
(ii)to notify under a corresponding law (and within the time allowed by the corresponding law) the law practice in writing that the client requires the corresponding provisions of the corresponding law to apply to the matter.
Section 262 of the LPA provides how and when disclosure must be made. Section 262(1) states that disclosure under s 260 must be made in writing before, or as soon as practicable after, the law practice is retained in the matter.
Section 263 of the LPA provides for various exceptions to the requirement for disclosure but it is common ground that none of those apply in the present case.
Section 268 of the LPA stipulates the effect of failure to make disclosures required by div 3. By s 268(3), if a law practice does not make the disclosures required by div 3 to a client, the client may apply under s 288 for the costs agreement to be set aside.
The principles governing the application of pt 10 of the LPA, like provisions in legislative predecessors to the LPA and the common law principles were summarised by Jenkins J in Frigger v Shepherd.[12] These are the principles that I apply in this case. It is unnecessary to repeat them in this judgment.
[12] Frigger v Shepherd [2014] WASC 477 [22] ‑ [32].

Plaintiffs' submissions

The plaintiffs' closing submissions focussed on the 2013 Costs Agreement. In outline it was submitted that the 2013 Agreement was not fair or not reasonable for the following reasons:
(i)The defendant failed to advise DMI about the existence of costs determinations and thus failed to comply with s 260(1)(a) of the LPA. In relation the Rodgers proceedings, DMI says that the defendant should have advised it of the existence of the Legal Practitioners (Supreme Court)(Contentious Business) Determination 2012 and that Mr Williams should have explained to Mr De Mol the effect of that determination.
(ii)Even though Mr De Mol's evidence was that he did not read documents, it was the defendant's obligation to ensure that he understood the position as to costs and that, thus, Mr Williams ought to have provided an oral explanation of the matters which were the subject of the disclosure requirements. Instead of providing an oral explanation of the structure and operation of the costs determination, Mr Williams assured Mr De Mol that any money expended on legal costs would be recovered at the conclusion of the matter and that Mr De Mol continued to instruct the defendant on the basis of that assurance.
(iv)The defendant failed to provide estimates of the legal costs as required by s 260(1)(c) of the LPA. Mr Williams' evidence that it was not 'reasonably practicable' to provide estimates was, it was submitted, incredulous as estimates are commonly given in all types of litigation. It was also submitted that defendant had failed to provide a range of estimates together with an explanation of the variables. It was submitted that it was not open to the defendant to 'bypass' the disclosure requirements because of difficulty in complying with them. DMI drew attention to the fact that a legal practice was required to give disclosure of cost estimates. The requirement was not conditioned by whether the client wished to have the estimates.
(v)The defendant had failed to provide an estimate of the range of costs that might be recovered by DMI if it was successful in the litigation and the range of costs that it might be ordered to pay if it was unsuccessful in the litigation and thus breached the obligation contained in s 260(1)(f) of the LPA.
(vi)The impact on DMI of the failure to provide adequate estimates of costs in accordance with the disclosure requirements was that it proceeded to instruct the defendant to 'persist with the litigation' and thereby expend more than $900,000 on legal costs in relation to 'a claim potentially worth $300,000'. It was submitted that had adequate estimates been provided, 'Mr De Mol …would never have proceeded with the litigation, as to do so was 'plainly uncommercial'.
(vii)The law of costs is guided by the 'overarching concept of proportionality' and it was clear that Mr Williams did not understand the concept.
(viii)Ms Levy's emails in which she provided advice in relation to costs were inadequate to effect disclosure because they occurred late in the litigation and 'at a time when the plaintiff had already embarked on a costly crusade'. It was submitted that late disclosures are no cure for non‑disclosure at an appropriate early stage of litigation and that, in any event, the emails did not attribute dollar values to the costs.
Whilst neither argument was abandoned DMI did not press the argument that the 2013 Agreement was confusing nor did it press the argument that the 2015 Agreement was not fair or reasonable.

Disposition

I am not satisfied that the 2013 Agreement was not fair or reasonable. My reasons for coming to this conclusion overlap and they must be considered in combination. They are as follows.
First, whilst the defendant was required to disclose to DMI that the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 applied to the costs that a legal practitioner was permitted to charge for work done for the purposes of Supreme Court proceedings in the absence of a costs agreement and it failed to do so, a failure to disclose the existence of a costs determination does not of itself render a costs agreement not fair or not reasonable. The significance of the non-disclosure and any consequences flowing from it must be assessed in the context of the relationship between the client and the legal practitioner.
The costs disclosure statement did explain that 'scales of costs' applied in some but not all areas of the law but omitted to state that the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012, in fact, applied.
The defendant was taking over the conduct of existing litigation from solicitors who had advised DMI that an applicable costs determination applied. Mr De Mol did not read the 2013 Agreement or the costs disclosure statement. He did not do so because he was an experienced businessman confident in his knowledge of how lawyers charged fees. In those circumstances I do not attach the weight that might otherwise be attached to a failure to disclose the existence of an applicable costs determination.
DMI's answer to the point that Mr De Mol did not read what was sent to him was to the effect that Mr Williams should have provided an oral explanation. This ignores that there was no reason why Mr Williams should have known, or even suspected, that Mr De Mol had not read the 2013 Agreement or the disclosure materials.
Second, the terms of the 2013 Agreement were not inherently unfair or unreasonable. They were not oppressive or unusual. The stipulated hourly rates were not excessive. By comparison with the maximum hourly rates allowable under the costs determination, they were modest.
Third, I am satisfied that the terms of the 2013 Agreement that entitled the defendant to charge on the basis of the time spent working on the matter, as opposed to by reference to the items in the costs determination, did not have the consequence of making the agreement not fair or reasonable in its operation. This is because I am satisfied that had the defendant been obliged to charge in accordance with the costs determinations it would have been entitled to a special costs orders lifting or removing the limits in the determinations. The defendant was required to conduct what were in effect five separate actions with five different parties. On the basis of the observations of Kenneth Martin J about the issues in the litigation (his Honour described the pleadings as 'highly complex') and on the basis of my assessment of the documents attached to Mr Williams' affidavits I am satisfied that the costs that would have been allowed under the costs determination were inadequate and that the inadequacy flowed from the complexity of the matter.[13]
[13] See s 28(2) of the LPA.
Fourth, it was not reasonably practicable for the defendant to have provided DMI with an estimate of the total legal costs when it was first retained to represent DMI in the Rodgers proceedings. At that stage it had just been instructed and it did not have the files. Mr Williams and Ms Levy required time to assess the state of the files and work out what needed to be done to advance DMI's position.
Fifth, whilst the defendant's failure to provide in writing a range of the estimates of the total legal costs, an explanation of the major variables affecting the calculation of those costs and the failure to provide estimates of DMI's potential recovery of costs and its potential exposure to adverse costs orders is unsatisfactory, I am satisfied that this failure did not have the effect of making the 2013 Agreement not fair or reasonable.
Given the complex nature of the litigation and its evolving nature it may have been a difficult task for the defendant to provide a range of the estimates of the total legal costs and an explanation of the major variables affecting the calculation of those costs. That said, litigation lawyers are capable of providing estimates of the ranges of total costs in difficult and complex litigation together with an explanation of the variables based on past experience and taking into account current charge out rates and relevant features of the litigation, such as the complication of third party proceedings. Inevitably there will be areas of uncertainty as to the amount of the work that will be required because of the difficulty in predicting how the other party or parties will approach the litigation and other imponderables. These uncertainties can be accommodated by expanding the range of the estimates and by appropriate qualifications reflecting the uncertainties. It must be remembered that what is required is 'estimates'. Likewise, based on experience and familiarity with the costs determinations, litigation lawyers are capable of estimating the amount of a client's expenditure on legal costs that might be recovered from the unsuccessful party and what might be recovered from the client in the event of an adverse costs order.
In assessing the significance of the failure to provide written cost estimates I take into account that Mr De Mol was an experienced businessman with experience of instructing lawyers in litigation. He knew the basis upon which lawyers charged fees. DMI had instructed its former solicitors to act for it in the Rodgers litigation on a time cost basis. Of much greater significance, however, is Mr De Mol's knowledge of the very significant costs, over $430,000, the litigation and the related dispute with Jamac, had generated since its inception. Mr De Mol knew the litigation strategy that DMI was to follow would involve the joinder of other parties and he knew that this would increase, significantly, the already substantial costs incurred by DMI. This was reinforced by the accounts rendered by the defendant and the emails sent to him by Mr Williams and Ms Levy in the first six months of the retainer. It was further reinforced to Mr De Mol by Ms Levy's email report of the November 2014 mediation that a trial would cost each party involved ‑ including DMI ‑ $300,000 to $400,000.
There are three further matters that bear directly upon my assessment of the significance of the failure to make the required estimates in writing.
First, DMI was a defendant. It was not in the position of a plaintiff making a cost benefit assessment about whether to commence proceedings. I do not accept the submission that had the defendant provided an estimate that forecast the actual amount billed by the defendant (inclusive of disbursements) the defendant would not have 'persisted with the litigation' or embarked on the 'costly crusade'. The submission rests on the false premise that DMI could have 'opted out' of the Rodgers proceedings. Claims brought by plaintiffs with unrealistically high expectations of the compensation to which they are entitled are notoriously difficult. Faced with such a claim a defendant has no option other than to continue to defend the claim unless it is prepared to settle on the plaintiff's (unrealistic) terms. In this case there is no evidence that the possibility of settling the Rodgers claim for $300,000 existed until the third day of the trial. The submission that in recommending and adopting the strategy of joining further parties to the litigation Mr Williams demonstrated that he lacked an understanding of the concept of proportionality lacks merit. It was a submission made with the benefit of hindsight and without appropriate recognition of the underlying objective of the strategy which was to lay-off the risk of a claim of over $5.5 million to a wider group of parties including insurers.
The second matter is that Mr Williams discussed costs with Mr De Mol on a face to face basis. I am satisfied that these discussions informed Mr De Mol of the significant costs that would be incurred if the litigation proceeded to trial and of course, these discussions took place against the background of Mr De Mol knowing how much the litigation had cost DMI.
The third matter is Mr Williams and Ms Levy provided clear and cogent written advice to Mr De Mol on DMI's position in relation to costs at critical times, after the November 2014 mediation, in May 2015 and October 2015. Whilst the advice provided did not specify the quantum of costs that did not diminish its significance because Mr De Mol knew how much he had spent and had been told that a trial would cost each party $300,000 to $400,000 and Mr Williams had discussed figures with him.
Sixth, for the reasons already given I am satisfied that Mr Williams did not provide assurances to Mr De Mol that all DMI's costs would be recovered from insurers.
Although in the particular circumstances of this case I have held that the failure to comply with the disclosure requirements does not render the 2013 agreement not fair or reasonable legal practitioners who did not comply with those requirements should draw no comfort from this decision. The requirements contained in pt 10 of the LPA are mandatory. Compared to many of the intellectual challenges confronted by lawyers in the context of litigation, complying with the disclosure requirements, even in complex cases, is not difficult, though in some instances it may be time consuming. The disclosure requirements are there to protect clients, but compliance with them also protects legal practitioners from allegations made by clients disappointed with the outcome of litigation, who are apt to forget cautionary advice about costs given by word of mouth.

2015 Agreement

I am satisfied that the 2015 Agreement was not unfair or unreasonable for the following reasons.
First, the work to be undertaken under the 2015 Agreement involved a range of different types of legal work: advice about Mr De Mol's rights to an indemnity under the directors' and officers' policy and assistance in negotiations with AIG and Dual; advice about the personal guarantee claims; and, representation in the proceedings brought by the creditors. One of the proceedings was in New South Wales. Some of the other proceedings were brought in the Magistrates Court and some in the District Court. The hourly rates for work undertaken by Mr Williams, Ms Levy and Ms Chacko were lower than the hourly rates in any applicable costs determination (no costs determination governed the costs of the defendant's agent in New South Wales).

Second, a fee estimate was included in the schedule to the 2015 Agreement - 'between $15,000 to $35,000 depending on whether the claim is litigated'. This is an estimate of future costs and does not include the costs charged in August and September 2015. The costs actually charged under the 2015 Agreement in the period between October 2015 and June 2016 were $37,989. Thus the estimate was exceeded by a relatively small amount. It could not be said that the estimate was unrealistic and that on thus there had been a failure to make the required disclosure.
Third, whilst in relation to the claims that had given rise to proceedings, no estimates were provided of the range of costs that may be recovered if Mr De Mol was successful and no estimate of the range of costs he might be ordered to pay if he was unsuccessful, given the number of different proceedings I do not think that this is sufficient to render the 2015 Agreement unfair. Moreover, as I have already noted Ms Levy did advise Mr De Mol that costs were ordinarily not awarded in respect of claims of less than $10,000 in the Magistrates Court.
Fourth, there was nothing inherently unfair or unreasonable in the terms of the 2015 Agreement.
For the reasons given I dismiss the application and I will hear the parties on costs.

Name	Hourly Rate
David Williams	$360.00
Nicole Levey	$360.00