Deutsch v Gleeson
[2016] VSC 49
•12 February 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COSTS COURT
S CI 2015 5159
| ERWIN DEUTSCH | Plaintiff |
| v | |
| PHILLIP GLEESON | Defendant |
---
JUDGE: | WOOD AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 29 January 2016 | |
DATE OF JUDGMENT: | 12 February 2016 | |
CASE MAY BE CITED AS: | Deutsch v Gleeson | |
MEDIUM NEUTRAL CITATION: | [2016] VSC 49 | |
---
Application to review legal costs pursuant to s 3.4.38(5) of the Legal Profession Act 2004 –Standing of applicant - Res judicata – Issue estoppel
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W Smith | KWS Legal |
| For the Defendant | Mr P Lovell | Gleeson & Co |
HIS HONOUR:
On 1 October 2015 the applicant filed a Summons for Taxation to review the legal costs incurred while the respondent was acting for the applicant in proceeding
S CI 2008 5515 (‘the substantive proceedings’). Any entitlement to review would arise pursuant to section 3.4.38 of the Legal Profession Act2004 (‘the Act’).
The matter came before Judicial Registrar Gourlay on 24 November 2015. On that occasion the respondent raised the issue of the applicant’s right to review having regard to the terms of an order of Hargrave J. That order was subsequently set aside by the Court of Appeal with the consent of the parties to the substantive litigation. The consent of the respondent was not obtained or deemed necessary. Before the Judicial Registrar the respondent also flagged the issue of whether the applicant was out of time to review costs. An order was made for the respondent to advise the applicant of all preliminary issues to be raised (in addition to the issue of the effect of the order of Hargrave J) by 22 January 2016. In compliance with that order the respondent produced a list of five questions dated 31 December 2015. A copy was filed on 7 January 2016.
On 29 January 2016 a hearing occurred in relation to these preliminary questions which potentially impact on the applicant’s standing and capacity to seek review. At the hearing the respondent changed position on two issues. The previously flagged argument that the applicant was out of time to review costs was not to be pursued. The second was a retreat from a position conveyed in correspondence between the parties and an affidavit of the respondent that the applicant had been provided with a bill of costs. I reserved my decision at the conclusion of the hearing in relation to the preliminary questions and now publish my decision and reasons.
Preliminary Questions
There are five preliminary questions identified by the respondent for determination.
First, do the findings of Hargrave J in Robert Deutsch & Ors v Erwin Deutsch & Ors (2014) VSC 494 and/or Order 6 of the orders of Hargrave J made on 2 October 2014 in proceeding No S CI 2008 5515 prevent the applicant from reviewing the legal costs of the respondent (including counsel fees) pursuant to section 3.4.38 of the Legal Profession Act 2004?
Secondly, does payment of the legal costs of the respondent (including counsel fees) pursuant to Order 6 of the abovementioned Orders prevent the applicant from reviewing the legal costs of the respondent (including counsel fees) pursuant to the Legal Profession Act 2004?
Thirdly, do the consent orders of the Court of Appeal in proceeding No S APCI 2014 0133 made 18 May 2015 allow the applicant to review the legal costs of the respondent (including counsel fees) pursuant to section 3.4.38 of the Legal Profession Act 2004 notwithstanding:
(a) the findings and/or order 6 of Hargrave J; or
(b) the payment of the respondent’s legal costs and counsel fees; or
(c) the respondent and counsel not having been notified of the intended making of the consent order; or
(d) any other reason.
Fourthly, is the applicant estopped or otherwise prevented from reviewing the legal costs of the respondent (including counsel fees) pursuant to section 3.4.38 of the Legal Profession Act2004?
Fifthly, should the applicant and/or his lawyers, KWS Legal, be ordered to make his/its appeal file available for inspection by the respondent to assist in, or enable the answering of the above questions?
Background and analysis
The applicant relies on three affidavits[1] and the respondent relies on two affidavits.[2] Both parties also filed written submissions at the hearing.
[1]Two affirmed by the applicant on 1 October 2015 and 17 November 2015 and one affirmed by his current solicitor, Harriet Warlow-Shill on 26 October 2015.
[2]Sworn by the respondent on 23 October 2015 and 4 November 2015
The only contentious issue arising from the affidavits which was potentially relevant to the preliminary questions was whether a bill of costs was ‘given to …’ the applicant in August 2014 by the respondent because the respondent deposed that it was, and the applicant deposed that it was not received. Given the new position adopted by the respondent and referred to in paragraph 3 above there are effectively no disputed facts that are relevant to the preliminary questions.
The respondent’s arguments can be distilled to three main issues. First, when making the order in the substantive proceedings on 2 October 2014 that the trustee pay the respondent’s legal costs pursuant to Irrevocable Orders to Pay (‘Charges’) Hargrave J in effect reviewed and fixed these costs thereby ousting the applicant’s right to review them under the Act. Secondly, the Charges executed by the applicant were documents that stood alone, completely separate to the Costs Agreement executed between the applicant and respondent and, when properly construed, amounted to waivers of the applicant’s rights to review costs under the Act. Thirdly, whether the applicant is estopped from exercising those review rights under the Act.
The applicant was one of multiple defendants in the substantive proceedings. Hargrave J delivered a judgment and made orders on 2 October 2014 to finalise the proceedings.[3] One of the orders made on that day[4] was to the effect that the trustee holding moneys on behalf of parties, including the applicant, pay the sum of $176,560.51 from the trust assets ‘in satisfaction of the charge granted by (the applicant) over his share in the remaining trust assets to secure his unpaid legal costs of the proceeding’. There is no dispute that the sum comprised the respondent’s unpaid legal costs of $140,885.51 and counsel’s unpaid fees of $35,675.[5]
[3]Robert Deutsch & Ors v Erwin Deutsch & Ors (No 3) (2014) VSC 494 (‘the judgment’).
[4]Paragraph 6 of the order.
[5]Paragraph 54 of the judgment.
Hargrave J heard argument and concluded in the judgment[6] that the applicant’s arrangements with the respondent and counsel (constituted by the Charges) gave rise to an equitable charge over the applicant’s adjusted entitlement to receive one half of the remaining trust assets. His Honour therefore made the order in the terms referred to above.[7] There was no analysis of the quantum of these figures by His Honour in the judgment. His Honour accepted that there were unpaid fees claimed, and merely dealt with the validity and effect of the charge, and then directed payment of the unpaid costs claimed.
[6]Paragraphs 47 to 55 of the judgment
[7]Paragraph 13 of these reasons.
There is nothing in the judgment to suggest these costs were ‘fixed’. There is no doubt His Honour had the power to fix a gross sum for costs of a party in a proceeding on an inter partes basis as a substitution for taxation.[8] However, all he was doing here was ordering payment from a fund under the control of a trustee. He was not determining the final cost liability of one of the parties in the substantive litigation (in this instance the applicant) to his own legal representatives in substitution for any right the applicant had in his capacity as client under the Act. It is well accepted that the Act is consumer protection legislation and is a discrete scheme to deal with the review of such costs.
[8]Rule 63.07(2)(c) Supreme Court (General Civil Procedure) Rules 2005
There is nothing to suggest His Honour was ‘capping’ costs pursuant to the CivilProcedure Act 2010.[9] Further, payment of legal costs under the Act does not prevent review, and in fact the Act provides that payment is consistent with maintaining the review right.[10] His Honour did not express a view that the costs were reasonable or use any language to suggest the order was to have the effect of extinguishing any other rights the applicant may have. It is trite to say, but His Honour would have used clear language to identify what power he was exercising if he ‘fixed’ those costs and would have made it clear that the effect was to extinguish review rights under the Act.
[9]Section 65C(2)(d)
[10]Section 3.4.38(3) of the Act
As to the arrangements between the applicant and the respondent there is no issue that there was a Costs Agreement in place. It was signed by the applicant on 6 February 2014 and, consistent with the Act, it includes a reference to the applicant’s right to seek a review of legal costs by the Supreme Court. The two additional Charges (each entitled ‘Irrevocable Order to Pay’) were signed and dated the same day. They constitute the Charges dealt with by His Honour. One relates to the respondent’s entitlement to legal costs and the other to counsel’s entitlement. As stated above, there is no language in the judgment to indicate these documents constitute a bar to review under the Act. The judgment merely deals with the characterisation of the documents signed and the mechanics of payment of outstanding legal costs.
As stated above, the Act specifically provides that a review can occur under the Act even if costs are paid. The Act also states that these review rights cannot be contracted out of in a Costs Agreement.[11]
[11]Section 3.4.26(5) of the Act.
The respondent argues that the Costs Agreement and the Charges are quite separate documents and the legal effect of the Charges was to waive review rights under the Act. There is no reference to review rights under the Act, and the respondent relies on the absence of reservation of those rights in the documents. The Charges provide for payment of future legal costs on demand, which is said to make it clear that the applicant has waived rights to any review of costs.
The applicant relies on the text of the Charge, the absence of reference to rights of review, and any valuable consideration, to argue that the Charges were part of the Costs Agreement. Further, the Costs Agreement makes reference to the Charge in favour of the respondent directed to the trustee under the heading ‘Billing Arrangements’. It still provided in effect that the applicant’s liability to pay costs in full remains and that anything recovered from the trustee will reduce that amount. The Costs Agreement (signed and dated the same day as the Charge) refers to the applicant’s right to have costs assessed by the Supreme Court for the fairness and reasonableness under the heading ‘Your right to fair and reasonable costs’.
In my view the documents when read together are consistent and merely provide a mechanism for payment by the trustee on demand (the Charge) while still preserving the applicant’s right of review (the Costs Agreement). To argue that a document reciting a right conferred by Statute that cannot be waived by that document, is legally (and only impliedly) removed by a separate document executed at the same time is too artificial. The documents need to be read together and they both constitute the contractual arrangements between the parties. The Charge therefore must be read down to comply with the law, and be read beneficially for the client. The documents when read together deal with the mechanics of payment of part or all of the legal costs only. To give precedence to an implied waiver of important statutory rights which would be inconsistent with the explicit preservation of those rights in the Costs Agreement executed at the same time is untenable.
The respondent argues that the Charge should be characterised as a representation which the respondent relied upon to his detriment and the applicant has acted unconscionably by demanding an itemised bill and review in these proceedings.[12]
[12]Legion v Hately (1983) 152CLR 406 at 438 to 439, Waltons Stores v Maher (1988) 164 CLR 387 at 428 to 429 and Commonwealth v Verweyan (1990) 170 CLR 394 at 500.
The applicant relied upon authorities that dealt with issue estoppel and res judicata and submitted that the facts in this matter fell outside any of the principles established in these authorities.[13] The applicant also relied upon authorities that posited that an equitable charge and a fruits of litigation lien were analogous and that a right to review costs was not affected.[14]
[13]Dow Jones and Company Inc v Gutnick 92002) 210 CLR 575 at 604[36], DA Christie Pty Ltd v Baker (1996) 2 VR 582 at 603[20], Sgargetta v National Australia Bank (2015) VSCA 289at [24], Blair v Curran (1939) 62 CLR 464, and Kuligowski v Metrobus (2004) 220 CLR 363 at 369.
[14]Firth v Centerlink (2002) 55 NSWLR 451 at [35(f)] and Ex parte Patience; Makinson v Minister (1940) 40 NSWSR 96 at 100 and 108 to 109.
The wording of the Charge, or any conduct of the applicant, does not constitute a representation or any basis to trigger estoppel grounds. The judgment (and order) of Hargrave J did not make findings as to the reasonableness of legal costs or ‘fix’ them so as to trigger issue estoppel or res judicata principles. His Honour merely construed the documents as constituting a Charge which applied to the fund of the trustee and the order facilitated payment of legal costs said by the respondent to be owing to the respondent. There was no finding that the quantum was reasonable or that review rights were extinguished. Consistent with this analysis the Associate to His Honour sought an up to date figure from the respondent in an email on 29 September 2014,[15] that is, between the last date of hearing when judgment was reserved (17 September 2014) and the publication of date of judgment and the making of the order (2 October 2014). The figure was merely added to the judgment without the parties being asked to address the reasonableness, or otherwise, of the additional figure. This gives credence to the conclusion that His Honour was not addressing the issue of the level of quantum.
[15]See exhibit ‘PTG 4’ to the affidavit of the respondent sworn 23 October 2015.
The respondent did not pursue the previously flagged position that the applicant was out of time to review costs. For the sake of completeness, and to confirm that the applicant has standing on that basis I will briefly deal with the issue. The Act provides that application must be made within 12 months. Time runs from when the bill is given, or a request for payment is made, or the costs are paid if neither a bill was given nor a request was made.[16] The earlier of the three events can be the trigger.[17] The costs were paid on 3 October 2014, the day after the order of His Honour. If that was the triggering event the Summons is within time as it was filed on 1 October 2015.
[16]Section 3.4.38(5)(a) & (b) of the Act
[17]Viscarello v Oakley Thompson & Co Pty Ltd (2012) VSC 35 at paragraphs 12 to 14.
The respondent’s new position is that the applicant was not given a bill on 18 August 2014 in the email sent by the respondent to the applicant.[18]. If that was a bill of costs that bill must have only been an’ interim’ bill for reasons that follow, and in reality time runs from a ‘final’ bill for the purposes of review.[19] The bill was interim because the email states the bill does ‘not include disbursements’, and further the bill (exhibited by the respondent[20]) is for $139,235.51 and only represents work up to 19 June 2014. The respondent’s affidavit of 23 October 2015 exhibits[21] the email from the Associate to Hargrave J dated 29 September 2014 requesting the up to date figure for the respondent’s unpaid costs. On 30 September 2014 the respondent replies by adding $1,650 to the previous figure. The sum of $1,650 is said to represent costs for work performed up to 19 September 2014, thereby taking the total to $140,885.51. That total formed the basis of the total in His Honour’s order on 2 October 2014. The bill of 18 August 2014 cannot therefore be characterised as a final one. It is only an interim one. In any event, the respondent has now adopted the position that this was not a bill of costs within the definition of the Act.
[18]See exhibit ‘ PTG 3’ to the respondent’s affidavit sworn 23 October 2015.
[19]See 3.4.37(2) of the Act and Collection Point Pty Ltd v Cornwalls Lawyers Pty Ltd (2012) VSC 492.
[20]‘PTG 2’ to the affidavit of 23 October 2015.
[21]See Exhibit ‘PTG 4’ to the respondent’s affidavit sworn 23 October 2015.
The total of $140,885.51 was clearly discussed before Hargrave J but there is no evidence before me that this figure was ever put in the form of a bill that complies with the Act[22] and was given to the applicant. Therefore the only evidence before the Court is that the first of the three possible triggering events referred to in section 3.4.38 of the Act, and referred to in paragraph 25 above, is the payment on 3 October 2014. The Summons is therefore within time.
[22]Sections 3.4.34 & 35 of the Act.
A potentially complicating factor arises from the fact the applicant appealed the judgment of Hargrave J in proceeding S APCI 2014 0133. This appeal was sent to mediation and the matter resolved.[23] Sometime after the mediation the parties to the substantive litigation filed a consent order in the Court of Appeal proceeding. The Court was constituted by Tate, McLeish and Robson JJA. The order was made on 18 May 2015 and in addition to dealing with the appeal, paragraph 6 of the order of Hargrave J was set aside by that order. The respondent and counsel were not on notice about that event.
[23]I was the mediator but neither party takes issue with me dealing with this matter.
The effect of the Court of Appeal order is only relevant if the order of Hargrave J had the effect of precluding the applicant from reviewing the costs. For the reasons articulated, the position remains the same irrespective of whether paragraph 6 of His Honour’s order was, or was not, set aside as that order did not impact on the applicant’s standing to seek review of the costs under section 3.4.38 of the Act.
Conclusions
There was nothing in the judgment or order of Hargrave J which means there has been a determination as to the quantum of the respondent’s costs, such that the applicant’s review rights under the Act have been extinguished. The setting aside of the order by the Court of Appeal, with or without notice, to the respondent becomes irrelevant.
The Charges cannot be construed as constituting a waiver of review rights by the applicant under the Act.
There is no basis to find that the applicant is estopped from reviewing the costs, or any basis for applying the principles of res judicata.
The triggering event for time to run was payment on 3 October 2015 as there is no evidence to establish that a demand for payment was made or a final bill as defined by the Act was given prior to 1 October 2014. The summons is therefore within time.
The inspection of the solicitor for the applicant’s Court of Appeal file is not germane to the preliminary questions and the answers.
Answers to preliminary questions
1. QUESTION : Do the findings of Hargrave J in Robert Deutsch & Ors v Erwin Deutsch & Ors (2014) VSC 494 and /or Order 6 of the orders of Hargrave J made on 2 October 2014 in proceeding No S CI 2008 5515 prevent the applicant from reviewing the legal costs of the respondent (including counsel fees) pursuant to section 3.4.38 of the Legal Profession Act 2004 ?
ANSWER : NO
2. QUESTION : Does payment of the legal costs of the respondent (including counsel fees) pursuant to Order 6 of the abovementioned Orders prevent the applicant from reviewing the legal costs of the respondent (including counsel fees) pursuant to the Legal Profession Act 2004 ?
ANSWER : NO
3. QUESTION : Do the consent orders of the Court of Appeal in proceeding No S APCI 2014 0133 made 18 May 2015 allow the applicant to review the legal costs of the respondent (including counsel fees) pursuant to section 3.4.38 of the Legal Profession Act 2004 notwithstanding:
(a) the findings and/or order 6 of Hargrave J; or
(b) the payment of the respondent’s legal costs and counsel fees; or
(c) the respondent and counsel not having been notified of the intended making of the consent order; or
(d) any other reason ?
ANSWER : THE SETTING ASIDE OF THE ORDER BY THE COURT OF APPEAL IS IRRELEVANT TO THE APPLICANT’S ENTITLEMENT TO REVIEW COSTS BECAUSE THE JUDGMENT AND THE ORDER OF HARGRAVE J DID NOT EXTINGUISH THE APPLICANT’S REVIEW RIGHTS UNDER THE ACT.
4. QUESTION : Is the applicant estopped or otherwise prevented from reviewing the legal costs of the respondent (including counsel fees) pursuant to section 3.4.38 of the Legal Profession Act 2004?
ANSWER : NO
5. QUESTION : Should the applicant and/or his lawyers, KWS Legal, be ordered to make his/its appeal file available for inspection by the respondent to assist in or enable the answering of the above questions?
ANSWER : NO
Future issues to be addressed
The issues to be dealt with consequent to these reasons are the costs of the hearing in relation to the preliminary questions, release or inspection of any documents in the possession or control of the applicant that the respondent requires to prepare an itemised bill, and a timetable for the provision of the itemised bill, objections and listing of the taxation.
0
10
0