Dunstan v McKeown and Anor (Civil Dispute)
[2018] ACAT 79
•2 August 2018
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
DUNSTAN v MCKEOWN & ANOR (Civil Dispute) [2018] ACAT 79
XD 371/2017
Catchwords: CIVIL DISPUTE – conditional contract for legal services in unsuccessful civil litigation – whether client can claim against barrister for refund of 40% of fees – solicitor added as a respondent, but provided limited evidence – solicitor sought orders for repayment from barrister only if the solicitor was found to owe a debt to the client – contract was between solicitor and barrister, not with client – privity of contract applies, and facts did not support any exception such that client can enforce contract against the barrister – equitable set-off by barrister for unpaid fees found proved in part, but no remedy ordered given client’s claim dismissed – orders sought by the client to direct that the solicitor enforce the contract dismissed due to lack of evidence, and given the barrister’s successful set-off-orders sought by the solicitor to be indemnified by the barrister for any debt he might be found to owe to the client dismissed given the client’s application dismissed
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 22, 23
Legal Profession Act2006 ss 283, 289
` Magistrates Court Act 1930 ss 258, 259
Subordinate
Legislation cited: ACT Civil and Administrative Tribunal Procedural Directions 2010 (No 1) s 34.3
Cases cited:Byrnes v Kendle (2011) 243 CLR 253
Commonwealth v Verwayen (1990) 170 CLR 394
Grant v NZMC Ltd [1989] 1 NZLR 8
Jones v Dunkel (1959) 101 CLR 298
Keesing v Adams [2010] NSW SC 336
Leo Dimos T/A Leo Dimos and Associates v Nick Hanos (2001) VSC 173
Markell & Anor (No 2) [2015] FamCA 856
Marks v CCH Australia Ltd [1999] 3 VR 513
Re Emilco Pty Ltd (2002) 20 ACLC 388
Roland Ofria v Robert William Camerron CA 40804/07
National Australia Bank Ltd v Idoport Pty Ltd [2007] NSWSC 1349
Sadat v Taneski [2018] ACAT 39
Trident General Insurance Co Ltd v McNeice Brothers Pty Ltd (1988) 165 CLR 107
Walton Stores Ltd v Maher (1988) 164 CLR 387
List of
Texts/Papers cited: Bernard Cairns, Australian Civil Procedure (Thomson LawBook Co, 7th ed)
Tribunal: Senior Member L Beacroft
Date of Orders: 2 August 2018
Date of Reasons for Decision: 2 August 2018
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 371/2017
BETWEEN:
COLIN DUNSTAN
Applicant
AND:
CHRISTOPHER MCKEOWN
First Respondent
RON CLAPHAM
Second Respondent
TRIBUNAL:Senior Member L Beacroft
DATE:2 August 2018
ORDER
The Tribunal orders that:
1.The applications by the applicant against the first respondent and the second respondent are dismissed.
2.The application by the second respondent against the first respondent is dismissed.
3.The application by the first respondent for a set-off is dismissed.
………………………………..
Senior Member L Beacroft
REASONS FOR DECISION
1.The reasons for the order set out above are set out in this document.
2.This is an application by Colin Dunstan (Mr Dunstan or the applicant) against Christopher McKeown (Mr McKeown or the first respondent) and Ron Clapham (Mr Clapham or the second respondent) for a refund of a portion of fees paid to Mr McKeown. Mr McKeown is a barrister who represented Mr Dunstan in Supreme Court civil proceedings in 2013-2014. Mr Dunstan raised no concerns about the quality of services provided by each of the respondents or the reasonableness of the fees charged.[1] The dispute is about whether 40 percent of fees paid to Mr McKeown is refundable to Mr Dunstan now that Mr Dunstan has exhausted all avenues of appeal and it is clear that he has lost his case.
[1] Transcript of proceedings 15 November 2017, pages 5, 12
3.During the proceedings Mr Dunstan, and the first and second respondents, made further applications, which are set out in these reasons.
4.Given the nature of the dispute, the ACT Civil and Administrative Tribunal (the Tribunal) has jurisdiction to hear the matter.[2]
[2] Sadat v Taneski [2018] ACAT 39 at [14]-[17]
5.The issues in this matter are:
(a)Who are the parties to the cost agreements, and what are the terms?
(b)What remedies are appropriate, and against who?
(c)Are there grounds for a set-off that Mr McKeown claims?
Background
6.Mr McKeown was approached in mid-2013 by junior counsel, Mr Tim Crispin, and Mr Dunstan to be lead counsel representing Mr Dunstan in a complex civil hearing starting in the near future, in late August 2013.
7.On 30 July 2013 Mr Dunstan emailed Mr Clapham[3] stating that he had received a cost agreement from Mr McKeown. He then asked Mr Clapham to sign the agreement and send it back to Mr McKeown. In this email Mr Dunstan extracted some of the text of an email he received earlier that day from Mr McKeown, quoting Mr McKeown as follows:
I attach my costs agreement in this matter. It is with Ron Clapham so you should ask him to sign it and then forward a copy to me…While the agreement is technically with Ron I imagine he will require you to make the mentioned payments and maintain the required balance.
[3] Attachment 1 to the civil dispute application
8.As requested by Mr Dunstan, Mr Clapham signed and returned the cost agreement to Mr McKeown on 31 July 2013 (first costs agreement). Mr Dunstan paid the required sum into Mr McKeown’s advance account in compliance with clauses in the first costs agreement, and McKeown began work on the matter.
9.The first costs agreement is what is commonly referred to as a conditional costs agreement (refer Legal Profession Act 2006, section 283). Clause 6 of the first costs agreement states:
I further agree to accept this brief on the basis of a 40% speculation. This is if the client is not successful in obtaining any settlement or any judgment in his favour with or without costs, I only expect to be paid for 60% of my fees. If my advance account in this matter has a positive balance at the conclusion of this matter I will refund that balance to the client.
10.On 13 August and 15 September 2013 McKeown sent invoices to Mr Dunstan which Mr Dunstan paid in full. Mr Dunstan raised no issues when paying the invoices but asked for itemised accounts which Mr McKeown provided.[4] Mr McKeown sent these invoices to Mr Clapham on 16 September 2013, after they had been paid by Mr Dunstan.[5]
[4] Witness statement of Chris McKeown at [7]
[5] Attachments 2 and 6, summary statement of applicant, exhibit A3
11.On 14 September 2013 Mr Dunstan wrote to Mr Clapham asking him to forward an email to Mr McKeown terminating the first costs agreement. Mr Clapham sent an email to Mr McKeown on 15 September 2013, terminating the first costs agreement, citing financial burdens by Mr Dunstan as the cause of the termination.
12.On 18 September 2013 Mr McKeown wrote the following email in response to Mr Clapham:
Ron,
This matter is causing me some grief and disappointment – if it assists the client I am prepared to conclude this matter on a spec basis on the full current Supreme Court rate.[6]
[6] Attachment 7, summary statement of applicant, exhibit A3
13.The same day Mr McKeown received an email from Mr Clapham stating, “Colin has instructed me to thank you profusely for this gesture and to gratefully accept.”[7] This latter communication settled a second costs agreement.
[7] Mr McKeown’s summary statement dated 22 May 2017
14.Under this second costs agreement, commonly referred to as a ‘no win, no pay’ agreement, Mr McKeown continued to do the work for Mr Dunstan. He sent Mr Clapham a third invoice for fees (in the sum of $19,800 (including GST), dated 3 March 2014), for payment by Mr Dunstan in case the matter was successful. This invoice has not been paid.[8] However, the case in the Supreme Court was not successful. Mr McKeown, Mr Dunstan and Mr Dunstan’s new solicitor Darryl Perkins had negotiations about Mr McKeown conducting an appeal[9], however there was no agreement reached. Mr McKeown did no further work on Mr Dunstan’s matter.
[8] Mr McKeown’s summary statement dated 22 May 2017
[9] Transcript of proceedings 15 November 2017, page 23
15.An appeal and other avenues for relief were pursued by Mr Dunstan, and none were successful. Mr Dunstan unsuccessfully pursued action in the High Court of Australia where he was unsuccessful. Mr Dunstan then sought redress from the Office of the High Commissioner for Human Rights in Geneva and ultimately received a letter from that office dated 24 January 2017 advising he had no remedy before that body.[10]
[10] Attachment to applicant’s submission dated 29 November 2017, filed pursuant to the Tribunal’s order of 15 November 2017
16.By a letter dated 22 February 2017 Mr Dunstan advised Mr McKeown that “the appeal avenues to overturn the decision in the ACT Supreme Court…have all been unsuccessful.” He requested that Mr McKeown “refund the amount paid that exceeds 60% of your fees in accordance with clause 6 of the [first] cost agreement.”[11]
[11] Attachment 5 to the civil dispute application
17.In reply to this letter Mr McKeown emailed Mr Dunstan on 1 March 2017 stating amongst other things:
…The hearing in the Supreme Court…ran for 8 days…After those 8 days you approached me and said you could not afford to go on briefing me. At this point I sent you a fee note (13 August 2013) which was paid in full from my advance account in the sum of $16,500 and without demur from you. and a second memo was sent to you (10 September 2013)…I agreed to stay in your matter if my fees were paid in full. The 10 September 2013 fee note was in the sum of $41,159.98. This was paid from my advance account and directly by yourself on 13 September 2013 in the sum of $23,159.98. My fees at that point fully paid at 100% of their rate notwithstanding clause 6 of my cost agreement…Because of this I agreed to continue in your matter on a spec basis
…I thought it appropriate to issue your solicitor with a fee note which I did in the sum of $19,800. Given your unsuccessful appeals I will not be paid for this work.
Further, clause 4 of my cost agreement invites any objections to my memo of fees to be made within 7 days. Correctly, if I may say so, you made no objections
…I have worked extremely hard for far less than I would normally charge. Work was done on a speculative basis and went unpaid. In these circumstances I do not see how clause 6 of my costs agreement could require me to refund some of what was paid.[12]
[12] Attachment 6 to the civil dispute application
18.Mr Dunstan replied:
…the expense of the first 8 days of the hearing before Burns J was stressful [we] obtained agreement from Timothy Crispin to complete the matter alone.
It was only after your offer to complete the matter on a 100% speculation basis that we did not proceed with our agreement we’d reached with Timothy Crispin.
There was no objection to your fees under clause 4 as you say. My request is only in connections with clause 6.
I have been most unwilling to proceed with this request until the exhaustion of appeal avenues.
It had remained my hope to obtain a fair decision and hence an order for costs with which to recompense you for the work done on a 100% speculation basis.
…[13]
The proceedings
[13] Attachment 7 to the civil dispute application
19.On 31 March 2017 Mr Dunstan filed a civil dispute application in the ACAT against Mr McKeown seeking $23,064.00, plus re-imbursement of the $145 filing fee and interest from 24 March 2017 on the grounds that “Under our costs agreement for legal services by Mr McKeown clause 6 provides for the refund of 40 percent of fees paid in the event that no settlement or judgement in my favour is obtained.”
20.On 28 April 2017 Mr McKeown filed a response disputing liability. In his ‘Defence to Claim’ Mr McKeown said:
1. The Respondent entered the cost agreement (the agreement) with the Applicant’s solicitor Ron Clapham (the Solicitor).
2. It was a term of the agreement the Respondent provide legal services for the Applicant.
3. The Respondent denies he entered the agreement with the Applicant as alleged.
…
6. The Respondent rendered two accounts to the Solicitor, the first for $16,500 and the second for $41,159.98 (the accounts) relating to the hearing.
7. The accounts were paid in full without a 40% reduction.
8. The Solicitor nor the Applicant disputed the accounts, nor were the two payments made subject to any conditions.
9. The Respondent denies it was a term of the agreement that the Respondent would refund the Applicant any amount relating to the accounts paid.
10 The Respondent agreed with the Solicitor to provide legal services for the Applicant for the two days (the further legal services) on a full speculation basis (the further agreement).
11. It was a term of the further agreement that the Respondent’s legal fees to date be fully paid.
12. A third account for $19,800 was rendered by the respondent to the Solicitor for the further legal services which has not been paid.
13. The Respondent undertook 69 units of work for the hearing at an hourly rate of $440 including GST, totalling $3036, for which an account has not been rendered.
14. Further, and in the alternative, if there is any amount due to the Applicant which is denied the Respondent seeks to set off the sum of $22,836 against the amount claimed by the Applicant.
21.The matter was listed for a conference on 29 May 2017. The matter did not settle at that conference.
22.On 5 July 2017 Mr Dunstan filed an application for interim or other orders seeking to add Ron Clapham, the solicitor, as an applicant and that Mr Dunstan may conduct the proceedings in Ron Clapham’s name. His application stated:
…
I request Ron Clapham be joined as an applicant so that I may conduct the application in his name to recover a sum paid by me under a conditional cost agreement with the Respondent...
I have written by email to Ron Clapham requesting his consent to be joined as an Applicant and that I conduct the proceedings. In his email response Ron Clapham writes that he does not object to the requested joinder and for me to conduct the proceedings personally.
23.The matter was listed for an interlocutory hearing on 10 July 2017 before me to determine whether Mr Clapham should be joined as an applicant. I reserved that decision and then handed down orders on 13 July 2017. Those orders were to dismiss the application for interim or other orders, but the orders stated that the applicant was at liberty to join Mr Clapham as the second respondent by filing an amended civil dispute application (under section 23 ACT Civil and Administrative Tribunal Act 2008)[14]. Further orders were then made for the filing and serving of documents and the matter was listed for hearing.
[14] Transcript of proceedings 13 July 2017, pages 2-3
24.On 10 August 2017 Mr Dunstan filed an amended civil dispute application naming Ron Clapham as the second respondent. Mr Dunstan also sought orders that in effect would require Mr Clapham to take steps to recover any funds owed to him by Mr McKeown under the first cost agreement, and that these funds would be then refunded to Mr Dunstan.[15]
[15] Applicant’s civil dispute application filed 10 August 2017
25.On 21 August 2017 Mr Clapham emailed the registry to advise:
…I will not be taking an active part in the proceedings. I will of course promptly comply with any written orders of the tribunal.
26.In a document that was co-signed by Mr Clapham and filed in response to Tribunal orders[16], Mr Dunstan explained that Mr Clapham and he were long-standing “friends”; that Mr Clapham had provided the applicant with legal assistance “without charge” and with no written agreement; that Mr Clapham had provided this assistance since 2010 and had assisted Mr Dunstan find and brief the junior barrister, Mr Crispin; and that Mr Dunstan had undertaken to “pay the bills and charges” associated with Mr Crispin’s brief.
[16] Applicant’s submission dated 29 November 2017, filed pursuant to the Tribunal’s order of 15 November 2017
27.In his oral evidence Mr Dunstan confirmed the arrangement with Mr Crispin as set out in paragraph 26 above, and he also stated that Mr Clapham had engaged Mr Crispin, not Mr Dunstan.[17] Also, when Mr Dunstan was asked about the arrangement or any costs agreement between himself and Mr Clapham in relation to the Supreme Court matter which Mr McKeown was briefed in, he stated that the arrangement between he and Mr Clapham was on the same basis as they had for previous legal proceedings and not in writing.[18] Dunstan’s oral evidence was that the agreement with Mr Clapham included that Mr Dunstan would “pay automatically” any disbursements that Mr Clapham had.[19]
[17] Transcript of proceedings 15 November 2017 page 42
[18] Transcript of proceedings 15 November 2017 pages 16, 31
[19] Transcript of proceedings 15 November 2017 pages 15-17, 30-31
28.The hearing in this matter took place on 15 November 2017. Mr Dunstan represented himself, accompanied by his wife. Mr McKeown was represented by Mr Greg Stretton SC of counsel, instructed by Mr Joseph Tallarita, solicitor. Mr Clapham did not appear, give oral evidence or submit a witness statement. By the date of the hearing various documents had been filed and served by each party, as summarised above. At the hearing various exhibits were accepted into evidence.
29.At a prior directions hearing the Tribunal had ordered the applicant to notify Mr McKeown of documents in his possession so that Mr McKeown could obtain the brief and related files he had returned when he had stopped acting for Mr Dunstan.[20] Mr Dunstan stated in his oral evidence that he had provided electronically any material he could locate to McKeown’s solicitor and that Mr McKeown had chosen not to file this with the Tribunal as evidence in this case. During the hearing Mr McKeown’s representatives confirmed that they did not file the material with the Tribunal, but that what Mr Dunstan had provided to them was not all of the material returned by McKeown to Mr Dunstan.[21]
Applicant’s contentions
[20] Order of Senior Member Herrick, 29 May 2017
[21] Transcript of proceedings 15 November 2017 pages 38-41
30.The applicant presented various arguments in the alternative. He contended that his solicitor, Mr Clapham, “entered into the [first] agreement on behalf of and at the request of [Mr Dunstan]”[22]. He alternatively contended that both the costs agreements were between the applicant and Mr McKeown, despite the signatories to the first costs agreement being Mr Clapham and Mr McKeown, and the emails about the second costs agreement being between Mr Clapham and Mr McKeown. In regard to his contentions about the first costs agreement – he pointed to some features of the history and implementation of that costs agreement to support his argument: Mr Clapham was not an active participant in negotiating it[23], “there was little doubt that [Mr Dunstan] was the person responsible for meeting all of the obligations that were imposed by that agreement”, and invoices were sent by Mr McKeown first to Mr Dunstan, rather than Mr Clapham, and it was Mr Dunstan who then paid Mr McKeown.[24] He contended that “by his actions [Mr McKeown] entered into an implied cost agreement with [Mr Dunstan] on the same terms as those of the written agreement he made with [Mr Clapham]”[25].
[22] Summary statement of applicant dated 22 May 2017
[23] Transcript of proceedings 15 November 2017 page 17
[24] Transcript of proceedings 15 November 2017 page 13
[25] Applicant’s civil dispute application, 10 August 2017
31.Mr Dunstan contended that he was entitled to obtain his orders for reimbursement under the “doctrine of subrogation” such that Mr Dunstan can “stand in the shoes” of Mr Clapham and enforce Mr Clapham’s rights, in accordance with Trident General Insurance Co Ltd v McNeice Brothers Pty Ltd (1988) 165 CLR 107 (Trident).
32.Mr Dunstan contended that if he was wrong about the agreement being between Mr McKeown and himself, then he sought orders that in effect required Mr Clapham to do all that is necessary to seek the refund of 40% of the payments made by Mr Dunstan and to then “refund them” to Mr Dunstan.[26]
[26] Applicant’s civil dispute application dated 10 August 2017
33.Mr Dunstan contended that he waited until February 2017 to seek a refund of some of the fees he had paid from Mr McKeown, under clause 6 of the first costs agreement, because it was only then that he knew he had lost his case having exhausted all legal avenues. He confirmed that he had not raised any issues with paying the two invoices under the first costs agreement that he received from Mr McKeown and that he paid promptly in full. He explained that he understood that the first cost agreement required him to do so or suffer certain adverse consequences under the contract[27], and that the 40% discount would be applied when the success of his case was confirmed.[28] He stated that the plain words of clause 6 are consistent with his interpretation that until he knew if the case was successful he couldn’t claim back the 40% part of his payments for fees, that is, the clause says “if the client is not successful…” rather than words such as “until the client is unsuccessful…”[29] Mr Dunstan contended that the invoices he was sent by McKeown did not provide any information to suggest that Mr Dunstan’s understanding of the contract was wrong, and Mr Clapham did not say anything to Mr Dunstan that suggested his interpretation was wrong.
[27] Summary statement of applicant dated 22 May 2017
[28] Transcript of proceedings 15 November 2017 pages 24-25
[29] Mr Dunstan’s statement dated 1 November 2017
34.In his oral evidence Mr Dunstan stated that he had been legally represented or been self-represented in many proceedings. He stated that until this matter before the Tribunal he had no prior experience with a conditional costs agreement.[30]
[30] Transcript of proceedings, 15 November 2017 pages 21-27
35.The applicant denied that the first cost agreement was varied, specifically that it was varied such that clause 6 no longer applied, as contended by Mr McKeown. Mr Dunstan contended that there was only one conference during the time when this variation was allegedly made, on 12 August 2013, and no such agreement was made – he noted that the itemised invoices from Mr McKeown supported his evidence on this point.[31] He noted Mr McKeown’s email to him when he first started work that asked him to limit communications with him unless Mr McKeown initiated it[32]; that communications were either in writing or by email or done at the one conference; and that Mr McKeown had not provided as evidence any written communications or notes that the variation was agreed.[33] Also Mr Clapham was at the conference on 12 August 2013, and there is no evidence that Mr Clapham knew of any variation.[34]
[31] Attachment 6, applicant’s summary statement dated 22 May 2017
[32] Email from Mr McKeown dated 30 July 2013
[33] Transcript of proceedings 15 November 2017 pages 12-13, 26-27
[34] Transcript of proceedings 15 November 2017 page 27
36.Mr Dunstan denied that the alleged variation was raised with him when the second agreement was reached, and he contended that the only terms of that agreement were those as set out in the email to Mr Clapham dated 18 September 2013 (refer to paragraph 12 above)[35]. Mr Dunstan denied that Mr McKeown negotiated a term of the second agreement that it was conditional on the fees of the first agreement being paid in full. He referred to emails from Mr McKeown to Mr Clapham dated 3 March and to Mr Dunstan dated 1 and 9 October 2014, that only refer to Mr McKeown’s expectations and issues regarding the second agreement and they make no reference to any aspects of the alleged variation to the first agreement.[36] He also referred to his email to Mr McKeown dated 7 October 2014 where he stated the second agreement to be as follows: “I think Ron said you’d agreed to continue after the first 8 days of the hearing on the basis that you would accept the costs recovered from the Commonwealth if I was successful.”[37] In any case, Mr Dunstan contended that under the Legal Profession Act2006 any variation to the costs agreement had to be in writing and certain procedures followed, which were not done.[38]
[35] Applicant’s summary statement dated 22 May 2017, see attachment 7
[36] Applicant’s summary statement dated 22 May 2017, attachments 8 and 12
[37] Applicant’s summary statement, 22 May 2017, attachment 13
[38] Applicant’s outline of submissions dated 9 July 2017, pages 4-5; exhibit A2 – ‘Extracts and comments on Legal Profession Act’
37.He contended that if the Tribunal accepted Mr McKeown’s contention that the contract was between Mr Clapham and Mr McKeown, then Mr McKeown cannot contend that Mr Dunstan agreed to a variation to the cost agreement.[39] If the Tribunal finds that the contract was between Mr Clapham and Mr McKeown, the applicant contended that the Tribunal could make an order that Mr Clapham enforce the contract and that McKeown indemnify Mr Clapham.[40]
[39] Applicant’s submission dated 29 November 2017
[40] Applicant’s submission dated 29 November 2017
38.He contended that he had fully paid all invoices he was liable to pay Mr McKeown; that any unbilled work by Mr McKeown was not shown in the invoices he paid; and since he had not been billed for those amounts Mr McKeown was not able to claim payment in the Tribunal proceedings (referring to section 289 of the Legal Profession Act2006), contrary to Mr McKeown’s claims under his equitable set-off.[41]
First respondent’s (Mr McKeown’s) contentions
[41] Applicant’s summary statement dated 22 May 2017; Applicant’s outline of submissions, dated 9 July 2017, page 5
39.Mr McKeown did not take issue with the costs agreements being contracts, the contested issues were about who the contracts were between and what were their terms.[42] He referred to the test summarised in the case of Keesing v Adams [2010] NSW SC 336 at [54]: “Ultimately, the question…is not what [is] believed…but what the impartial, informed observer present at that conference and knowing the surrounding events known to both parties would have concluded”, also referred to as the ‘fly on the wall’ test.[43] He referred also to the case of Leo Dimos T/A Leo Dimos and Associates v Nick Hanos (2001) VSC 173 [70, 89], which states that the issues of who the contracting parties are and the nature and terms of the contract are “to be determined in accordance with the common law” and “are all questions of fact to be determined on an objective basis.”[44]
[42] Transcript of proceedings 15 November 2017 pages 6-7
[43] Transcript of proceedings 15 November 2017 page 79
[44] Transcript of proceedings 15 November 2017 page 79
40.He contended that the evidence supported his contention that the first and second contracts were with Mr Clapham: Mr Clapham not Mr Dunstan engaged Mr Crispin the junior barrister, and in a similar manner Mr Clapham not Mr Dunstan was the signatory on the first contract with Mr McKeown; the first cost agreement’s use of “you” clearly refers to Mr Clapham, the solicitor, and part of the header to that cost agreement refers to a section of the Legal Profession Act2006 which relates to contracting between legal practices. He also contended the key communications including the email terminating the first contract and the email agreeing to the second contract were from Mr Clapham to Mr McKeown; it was Mr Dunstan who decided to email Mr Clapham in order for Mr Clapham to terminate the first agreement by then emailing Mr McKeown; the invoices were all addressed to Mr Clapham and provided to Mr Clapham by Mr McKeown, albeit after Mr Dunstan had paid them, so in this sense Mr McKeown accounted to Mr Clapham[45].
[45] First respondent’s final submissions dated 14 December 2017; first respondent’s statement of agreed and contested issues and facts, dated 18 October 2017
41.Regarding Mr Dunstan’s argument that the Trident case supported the applicant’s right to enforce clause 6 of the first contract, even if he wasn’t a party, Mr McKeown contended as follows: he distinguished the case of Trident in that it concerned an insurance arrangement, and also referred to the case of Byrnes v Kendle (2011) 243 CLR 253 which stated that “The fundamental rule of interpretation … is that the expressed intention of the parties is to be found in the answer to the question, ‘What is the meaning of what the parties have said?’, not to the question, ‘What did the parties mean to say?’.”[46] On the basis of this case law, Mr McKeown sought to emphasise that the test is what are the objective intentions not the subjective views of the parties about a contractual arrangement, in particular about whether the parties intended to create a trust with a third party. Mr McKeown also argued that the contracts in this case should be interpreted applying the usual principles of construction which include the “principle of privity of contract, that is that only a party to a contract can sue on it.”[47]
[46] Byrnes v Kendle (2011) 243 CLR 253 at [53]
[47] Transcript of proceedings 15 November 2017 page 85; statement Chris McKeown, filed 3 November 2017
42.Mr McKeown said that the way clause 6 of the first costs agreement was expected to work in his view was that he would issue an invoice for the full amount and Mr Dunstan would only pay 60% of that sum. He contended that clause 6 was not ambiguous, that therefore nothing further needed to be stated on the bill about clause 6, and that “when you look at the wording of clause 6, you’ll see there that I only expect to receive payment of 60 per cent”[48]. He stated that any duties of disclosure about the costs agreement to Mr Dunstan under the Legal Profession Act2006 rested with Mr Clapham because the agreement was made between two law practices and not with the client. While Mr McKeown stated that he didn’t know what Mr Clapham had said to Mr Dunstan in this regard[49], he relied on Mr Clapham to have made the necessary disclosures to the client. For this reason, Mr McKeown stated that he had simply made the costs agreement available to Mr Clapham and not expanded any further on the agreement to Mr Clapham, for example about clause 6.[50]
[48] Transcript of proceedings 15 November 2017, pages 63 - 64
[49] Transcript of proceedings 15 November 2017, page 66-68
[50] Transcript of proceedings 15 November 2017, page68
43.Mr McKeown contended that the first cost agreement was varied such that clause 6 no longer applied:
I remember him [Mr Dunstan] sitting in front of me, and I think his wife was there, but I’m vague on it, and saying, ‘Look, I can’t give you 40 per cent reduction. It’s too complicated. It’s taking too much time and seriously this is not guaranteed of a success. It’s a good case, but it’s not guaranteed of a success’. And my memory is he sort of waved his hand saying ‘That’s all right. Were just so grateful you’re in the case’. Now I didn’t make any notes of it. I didn’t even record it in a damn file that I kept my conference with and I regret it deeply, but my relationship with Mr Dunstan was harmonious.[51]
[51] Transcript of proceedings 15 November 2017, page 47
44.He argued that as a result of the latter discussion, “the 60% fee had been replaced with a full fee which was confirmed when the fees were paid”[52].
[52] First respondent’s final submissions dated 14 December 2017
45.Mr McKeown stated that Mr Clapham was not present at the latter discussion[53] and that he, Mr McKeown, did not personally communicate this variation to Mr Clapham because “it didn’t become an issue…so far as I was concerned everything was ad idem”[54]. However he argued that Mr Clapham was an active instructing solicitor, was the other party to the first contract, and Mr Clapham never raised an issue about the 40% refund the applicant now claims is due even when Mr Clapham terminated that contract due to financial hardship faced by Mr Dunstan.[55]
[53] Transcript of proceedings 15 November 2017 page 53
[54] Transcript of proceedings 15 November 2017 page 65
[55] First respondent’s final submissions dated 14 December 2017
46.In the alternative, Mr McKeown argued that if the Tribunal finds that the first contract was with Mr Dunstan and it was not so varied, then Mr Dunstan and Mr Clapham are “estopped” from now claiming a refund: “The applicant in fact chose not to object and proceeded to pay the 100% of the fee note thereby ignoring the expectation of the first respondent [Mr McKeown] to only be paid 60% of the fee note.”[56] Mr McKeown referred to Walton Stores Ltd v Maher (1988) 164 CLR 387.[57]
[56] First respondent’s statement of agreed and contested issues and facts dated 18 October 2017
[57] Transcript of proceedings 15 November 2017 page 81
47.The first respondent submitted that if the Tribunal finds that there was a contract between the applicant and the first respondent then the first respondent claims a set-off in the total amount of $22,836. He cited Cairns (2007, 7th ed)[58] which defines a set-off as: “a defence that precludes the plaintiff enforcing the claim, either in full or part. A counter claim is a separate proceeding in its own right. Where a counterclaim is pleaded it proceeds against the plaintiff in the same way as if the plaintiff had been sued by the defendant in a separate proceeding. If the plaintiff discontinues the proceedings a set-off comes to an end.[59]
[58] Bernard Cairns, Australian Civil Procedure (Thomson LawBook Co, 7th ed)
[59] First respondent’s final submissions dated 14 December 2017, page 2 quoting Bernard Cairns, Australian Civil Procedure (Thomson LawBook Co, 7th ed), page 198
48.He explained that in his bills under the first contract :“I did not record the work I did on this matter on the file correctly…there were many conversations and hours spent that I have not recorded…So I have undercharged him that amount.”[60] He admitted that he had not billed for this amount. He claimed $3,036 on this basis.[61] Additionally, he claimed as part of the equitable set-off the unpaid invoiced bill of $19,800 under the second ‘no win no pay’ contract.[62]
[60] Transcript of proceedings 15 November 2017, page 50
[61] Statement of Chris McKeown filed 3 November 2017
[62] Transcript of proceedings 15 November 2017 page 83; statement of Chris McKeown, filed 3 November 2017
49.Mr McKeown referred to the case of National Australia Bank Ltd v Idoport Pty Ltd [2007] NSWSC 1349 [Young CJ at 51]: “where set-off is alleged, it is usually necessary to examine the pleadings and facts with care and precision to see whether the set-off in issue arises out of contract, or under some principle of circuity of action or otherwise at law, or under statute or as a matter of equity.”[63] Mr McKeown claimed the setoff “on an equity basis”, arguing as follows:
[Mr McKeown] believed that because his fees had been paid in full and was not looking at a proposition of a refund years later, he could agree to do work on a no fee if there was no win. Additionally, as is seen from the time costings presented to the Applicant and the Second Respondent, the First Respondent [Mr McKeown] did not fully charge the Applicant for the work done. The First Respondent accepted that he had been paid the amount he billed for even though it is seen that he had undercharged. However, if the Applicant is now permitted to recover against the First Respondent in an action which in no way was communicated or contemplated by the First Respondent, it is fair that there be a set off to the amount sought by the Applicant.[64]
Second respondent’s (Mr Clapham’s) contentions
[63] First respondent’s final submissions dated 14 December 2017, page 2
[64] First respondent’s final submissions dated 14 December 2017, page 2
50.Mr Clapham provided no witness statement, gave no oral evidence and did not appear at any of the hearings during the proceedings before the Tribunal. He co-signed a document filed by Mr Clapham in response to Tribunal orders, as explained in paragraph 26 above.[65] Neither party subpoenaed Mr Clapham to give evidence.
[65] Applicant’s submission 29 November 2017
51.Mr Clapham applied to the Tribunal for orders that in effect sought to have Mr Clapham indemnified by Mr McKeown for any debt to Mr Dunstan that Mr Clapham might be found to owe, “on the grounds of equity”.[66]
Findings
[66] Application for interim or other orders, by the second respondent, Mr Clapham, filed 5 October 2017
52.The Tribunal finds that there were two cost agreements, and that they were contracts. The weight of the evidence leads the Tribunal to find that both contracts were between Mr Clapham and Mr McKeown, and there were no implied contracts between Mr Dunstan and Mr McKeown and that Mr Clapham did not act as agent for Mr Dunstan in these contracts. The Tribunal is persuaded by the submissions on this issue by Mr McKeown (summarised at paragraphs 39- 49). Although Mr Dunstan paid the bills under the first contract directly to Mr McKeown, this does not mean that the contract was between those parties, just that the parties to the contract agreed to this payment arrangement.[67] In the absence of contrary evidence, the Tribunal concludes that Mr Clapham agreed to the first and second contracts as a party, and Mr Clapham, not Mr Dunstan, became personally liable for obligations under that contract.[68] It was for this reason that Mr Clapham had a separate oral agreement with Mr Dunstan that Mr Dunstan pay any disbursements, which would include barristers’ fee.
[67] Roland Ofria v Robert William Camerron CA 40804/07
[68] Keesing v Adams [2010] NSW SC 336; Markell & Anor (No 2) [2015] FamCA 856
53.On the issue of the terms of the contract, if applying the usual principles of contract law only the Tribunal finds that the terms of the first contract are as set out in the written agreement, and a variation to clause 6 cannot be established. It further finds that, the terms of the second contract are as set out in the email dated 18 September 2013[69], and the suggested term that Mr Dunstan would not seek any refund due under clause 6 of the first contract cannot be established.
[69] Summary statement of applicant, attachment 7, exhibit A3
54.If the usual principles of contract are applied to all parties, then a consequence of the above findings is that Mr Dunstan, in not being a party to either costs agreement, cannot as a matter of law pursue repayment of fees he says are due under the first contract. The doctrine of privity of contract is that only the parties to the contract can sue or be sued. Mr Clapham, being the solicitor party to the contract, could pursue a refund of fees. But the Tribunal notes that Mr Clapham did not seek such an order unless he was found to be indebted to Mr Dunstan (refer to paragraph 51). In any case, the Tribunal finds that in the absence of evidence from Mr Clapham, the Tribunal has insufficient evidence to support an order against Mr McKeown to refund to Mr Clapham 40% of the fees paid under the first costs agreement. This leaves the Tribunal with a situation where if the usual principles of contract law are applied then no party can obtain the remedies they seek. Each party contended that equity requires the Tribunal to make the orders they each seek, and the application of equity principles is therefore considered below.
55.The Tribunal’s power to make orders under equity stems from section 22 of the ACT Civil and Administrative Tribunal Act 2008. This section states that the Tribunal has, in relation to civil disputes, the same jurisdiction and powers as the Magistrates Court under part 4.2 of the Magistrates Court Act 1930, subject to monetary jurisdictional limits.
56.Section 258(1)(a) of the Magistrates Court Act 1930 states that the Magistrates Court may grant any relief, redress or remedy or order that the Supreme Court may grant in a similar action. Section 259 further states that “in any proceeding in the Magistrates Court, if there is a conflict between the rules of equity and the rules of common law, the rules of equity prevail.
57.Mr Dunstan is not a party to the two contracts however he paid the fees in consideration for them. There is some basis in equity for him seeking enforcement of the first contract, despite being a third party to the contract. However, the facts in this case do not support such a conclusion.
58.In this case the relevant contracts were not insurance contracts, as was the case in Trident. This is a decisive distinguishing fact in the Tribunal’s view, between this case and the circumstances in Trident. Even if this latter distinguishing fact is put aside, Mr Dunstan has not met the onus of showing that equity can put aside the principle of privity of contract in the circumstance of his case. The Tribunal reaches this conclusion from considering case law summarised in paragraph 59 below. The case law highlights the critical importance of considering whether there is evidence in written pre-contract or contract documents about an intention to create a trust, and such evidence is absent in this case.
59.While the doctrine of privity of contract means the parties to the contract only can sue or be sued, the beneficiary of a trust may enforce a trust despite not being a party. In Trident Deane J at [147-148] stated: “…equity’s requirement of an intention to create a trust will be at last prima facie satisfied if the terms of the contract expressly or impliedly manifest that intention as the joint intention of [the contracting parties].” In Trident the insurance contract itself provided evidence of an “intention on the part of [both parties to the contract] that the policy will indemnify as well those with whom the assured contracts [the plaintiff sub-contractor] for the purposes of the venture covered by the policy”[70]. Gaudron J in Trident referred to the need to ensure that the application of contract law didn’t lead to the “unjust enrichment” of a party to the contract at the expense of a third party: “to the extent that the promise is not fulfilled and the non-fulfillment does not attract proportional legal consequences.”[71] Similar to Trident, in the case of Re Emilco Pty Ltd (2002) 20 ACLC 388, 391-392 the court found an intention to indemnify the third party -again this finding was based on written evidence, a clause in a written assignment between the third party and one of the contracting parties. In a later case, Marks v CCH Australia Ltd [1999] 3 VR 513, 532, the terms of the written contract weighed against an inference that the plaintiff in that case, a third-party being the person employed as a result of the contract between the two contracting parties, was intended to have the benefit of the promisor’s promise.
[70] Trident per Toohey J at [27]
[71] Trident per Gaudron J at [9-10]
60.A complicating circumstance in the proceedings before the Tribunal was that Mr Clapham made bare submissions and gave no oral evidence and submitted no written submissions. Either party could have subpoenaed Mr Clapham, and did not. In accordance with the rule in Jones v Dunkel (1959) 101 CLR 298, an unfavourable inference can be drawn by the Tribunal if the evidence otherwise provides a basis on which that unfavourable inference can be drawn. Mr Dunstan has the onus to prove he can enforce the contract – but he didn’t subpoena Mr Clapham and Mr Clapham’s evidence would have been very relevant. The Tribunal finds that the weight of the evidence is that the parties to the contract intended the benefit of the first and second contracts to be with Mr Clapham alone, as the solicitor who had carriage of the matter, and there was no intention to create a trust with Mr Dunstan. Also relevant to this finding is that in this case Mr McKeown has not been unjustly enriched, given the findings set out below regarding his claim for a set-off (see paragraphs 60-65).
61.In any case, even if I am wrong and the facts do support a conclusion that Mr Dunstan can enforce the first contract, the Tribunal finds that the set-off claimed in equity by Mr McKeown is made out in part, in the sum of the billed but unpaid amount of $19,800. The Tribunal disagrees with Mr McKeown that as part of the equitable set-off he can include the unbilled sum of $3,036. Even on McKeown’s own argument, the assumption he relied on in entering the second contract was that the billed fees under the first costs agreement would be fully paid, not additional unbilled fees. In any case it seems contrary to equity to allow the payment of unbilled fees in this case, especially considering the clear wording of section 289 of the Legal Profession Act2006. The reasons for the Tribunal finding in favour of the equitable set-off for the billed unpaid invoice are set out below.
62.The ACAT Procedural Directions allows for a set-off to be claimed in tribunal proceedings even if there is no counter-claim.[72] Equitable set-off extends to situations such as in this case where it is raised as a defence to the claims of a third-party to a contract. It differs from a cross-claim as Mr McKeown explained in the proceedings, and has been described as follows:
Equity would…allow a set-off where it would be inequitable or unconscionable to allow the plaintiff to proceed without bringing to account some claim by the defendant which was sufficiently linked to that made by the plaintiff…It is neither necessary, nor decisive, that claim and [cross-claim in the form of a set-off] arise out of the same contract.[73]
[72] ACT Civil and Administrative Tribunal Procedural Directions 2010 (No 1) section 34.3
[73] Grant v NZMC Ltd [1989] 1 NZLR 8 at 11
63.Evans (2012 at 293[74]) summarises equitable estoppel following the Walton case and the later case of Commonwealth v Verwayen (1990) 170 CLR 394 that confirmed it, as follows:
Equity will come to the relief of a plaintiff [in this case Mr McKeown the first respondent] who has acted to his or her detriment on the basis of a basic assumption in relation to which the other party to the transaction has played such a part in the adoption of the assumption that it would be unconscionable of that other party to ignore the assumption. In that sense, equitable estoppel is based on relief against unconscionable conduct [relying on Walton, per Mason CJ and Wilson J at 404-405]…Brennan J placed emphasis on the detriment which the plaintiff would suffer if the expectation or assumption remained unfulfilled. The extent of the detriment which the plaintiff has suffered or might suffer, is obviously relevant to establishing one element of the cause of action in the first place; and second, as a factor in determining whether it is unconscionable in the circumstances for the defendant to insist on its strict rights.
[74] Michael Evans (2012). Equity and Trusts (LexisNexis 3rd ed), pages 293-294
64.The Tribunal finds that Mr McKeown has made out his claim for equitable estoppel, the elements of which are set out in the Waltons case. The Tribunal considered each of these elements and finds they are met. The Tribunal is satisfied that Mr McKeown did have a conversation with Mr Dunstan about a variation to the first cost agreement about clause 6 not applying (see paragraph 43 above); that Mr McKeown thought this was agreed; that Mr Dunstan’s conduct led him to continue to think this was agreed; that in these respects Mr Dunstan played a part in Mr McKeown holding an assumption that clause 6 of the first costs agreement would not apply; and that this assumption by Mr McKeown was a major basis for the offer Mr McKeown made under the second contract being ‘no win-no fee’. As a matter of equity the Tribunal finds in favour of Mr McKeown’s submission that “it was a term of the further agreement [the second cost agreement] that the Respondent’s legal fees to date be fully paid”, as Mr McKeown stated in the first respondent’s response, dated 28 April 2017.
65.Key matters that lead the Tribunal to this conclusion are set out in paragraphs 44-49 above. The Tribunal was also persuaded by the matters set out in paragraphs 66-68 below.
66.Not all communications relevant to the issues were before the Tribunal, and this is not a trivial issue. This gap in documented evidence has come about partly because of the urgency of the brief to Mr McKeown, the passage of time since the costs agreements were negotiated, and due to the fact that Mr McKeown returned his brief and associated files to Mr Dunstan and only part of that material has been available to Mr McKeown for the proceedings (see paragraph 29 above). The Tribunal finds that there were more communications between Mr Dunstan and McKeown than are documented and/or before the Tribunal, indeed this is not disputed. For example, Mr Dunstan said in his oral evidence that he was explicitly told not to bring his wife to the conference on 12 August 2013[75], yet this is not confirmed in any of the written evidence before the Tribunal. It demonstrates that undocumented communications occurred, even by Mr Dunstan’s evidence. This fact supports Mr McKeown’s evidence that “there were many conversations and hours spent that I have not recorded.”[76] The Tribunal accepts that one of those undocumented communications concerned clause 6 not applying
[75] Transcript of proceedings 15 November 2017, page 26
[76] Transcript of proceedings 15 November 2017, page 50
67.After the conversation that Mr McKeown had with Mr Dunstan about clause 6 not applying, the Tribunal accepts that it is likely that there was no further discussion between Mr McKeown and Mr Dunstan or Mr Clapham to clarify the outcome of this discussion. All parties were under pressure due to the time pressures of the litigation. Conduct that involves silence or acquiescence is not easily found to be the basis of a promise by conduct or ‘unconscionable conduct’. However in this case the Tribunal finds that given the facts of the case including the sophistication of Mr Dunstan and that he was represented by an experienced solicitor, the conduct of Mr Dunstan and Mr Clapham subsequent to the initial conversation about clause 6 between Mr McKeown and Mr Dunstan further contributes to a finding that there was a promise that clause 6 did not apply. Mr Dunstan was represented by a solicitor, Mr Clapham, who would in the normal course of events have had knowledge and experience with conditional agreements. It was his solicitor who had a responsibility to make necessary disclosures to Mr Dunstan about the nature of the conditional contract, its termination and the second contract. Mr Dunstan raised no complaints about Mr Clapham in regard to inadequate disclosures. While Mr Dunstan did not have experience with a conditional agreement, he was an experienced client in litigation and therefore had considerable knowledge of the time and cost associated with complex legal work and the extraordinary value of the second contract, being ‘no win-no fee’.
68.Mr Dunstan says he didn’t raise his claim with Mr McKeown until 2017 when he thought it was clear that his case was unsuccessful. However, it is nonetheless surprising and significant given his attention to detail and experience in litigation that he, and Mr Clapham, didn’t even raise the possibility of a refund of 40% of the fees paid to McKeown during the written communications with Mr McKeown about costs agreement issues in 2013. The Tribunal observed during the proceedings that Mr Dunstan is a person with exceptional attention to detail, yet the question of a possible refund for 40% of the fees was not raised by Mr Dunstan with Mr McKeown even when Mr Clapham terminated the first costs agreement and agreed to the second one.
69.The extent of detriment suffered by Mr McKeown, as a result of his reliance on the assumption that clause 6 was agreed to no longer apply, is another element of why the Tribunal finds that the equitable set-off is made out in this case. Mr McKeown’s detriment is almost the full sum of the claim that Mr Dunstan seeks to enforce under the first contract.
70.Given the Tribunal’s findings set out in paragraphs 52-70 above, the applications by Mr Dunstan are dismissed. Given the nature of a set-off, that it only prevails if the applicant is successful in obtaining their orders, Mr McKeown’s set-off is dismissed. Mr Dunstan’s application to have the Tribunal direct that the Mr Clapham enforce the contract is dismissed due to a lack of evidence, and in any case McKeown’s successful set-off defeats such a claim. The application by Mr Clapham to be indemnified by Mr McKeown for any debt he might be found to owe to Mr Dunstan is dismissed, given Mr Dunstan’s application is dismissed
………………………………..
Senior Member L Beacroft
HEARING DETAILS
FILE NUMBER:
XD 371/2017
PARTIES, APPLICANT:
Colin Dunstan
PARTIES, FIRST RESPONDENT:
Christopher McKeown
PARTIES, SECOND RESPONDENT
Ron Clapham
COUNSEL APPEARING, APPLICANT
N/A
COUNSEL APPEARING, FIRST RESPONDENT
Mr G Stretton SC
COUNSEL APPEARING, SECOND RESPONDENT
N/A
SOLICITORS FOR APPLICANT
N/A
SOLICITORS FOR FIRST RESPONDENT
Joseph Tallarita
SOLICITORS FOR SECOND RESPONDENT
N/A
TRIBUNAL MEMBERS:
Senior Member L Beacroft
DATES OF HEARING:
15 November 2017
0
11
0