Equuscorp Pty Ltd v Wilmoth Field Warne

[2008] HCATrans 211

[2008] HCATrans 211

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M6 of 2008

B e t w e e n -

EQUUSCORP PTY LTD

Applicant

and

WILMOTH FIELD WARNE (A FIRM)

Respondent

Office of the Registry
  Melbourne  No M161 of 2007

B e t w e e n -

DATIVA GETZLER

First Applicant

KOMPOT PTY LTD

Second Applicant

and

COADYS (A FIRM)

Respondent

Applications for special leave to appeal

GLEESON CJ
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 23 MAY 2008, AT 12.07 PM

Copyright in the High Court of Australia

__________________

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend, MR S.J. MAIDEN, for the applicant in first case.  (instructed by Phillip Kotsanis)

MR R.M. GARRATT, QC:   If the Court please, I appear with my learned friends, MR M.K. MOSHINSKY, SC and MR M.I. BORSKY, for the respondent in the first of those matters.  (instructed by Wilmoth Field & Warne)

MS H.M. SYMON, SC:   May it please your Honours, I appear with my learned friend, MS A.L. ROBERTSON, for the respondent in the second matter.  (instructed by Pushpa Hettiarachi and Associates)

MR P.L. EHRLICH:   May it please the Court, I appear for the applicant in the second matter.  (instructed by Wisewoulds)

GLEESON CJ:   Thank you.  Mr Walker, just for the purpose of arranging the order of submissions, do these two cases stand or fall together? 

MR GARRATT:   In our submission, we would say no, your Honour.  We would say that your Honours might refuse special leave in our case because there are other matters which would make this, for example, not a proper vehicle

GLEESON CJ:   And on the point of principle about construction of the legislation. 

MR GARRATT:   As to that point, they stand on same footing.

GLEESON CJ:   All right.  We will hear Mr Walker and then Mr Ehrlich.  Then we will hear Mr Garrett and Ms Symon.  Yes, Mr Walker.

MR WALKER:   Your Honours, the main point does concern a matter which appears in State legislation.  However, as a matter of observable fact supported by the table of legislation, including inchoate legislation, annexed to our submissions, your Honours have seen that the critical expression “otherwise payable” as requiring the relevant comparison for the purposes of regulating so‑called uplift fees is a well‑known national phenomenon. 

GLEESON CJ:   That is the section 98 point?

MR WALKER:   Yes, your Honour.

GLEESON CJ:   On the section 98 point, there have been divided opinions in this litigation.  On the section 99 point, everybody is in agreement and is against you, is that right?

MR WALKER:   Yes.

GLEESON CJ:   Then there is a section 102 point that only arises if you win either 98 or 99? 

MR WALKER:   Quite so.  It is the section 102 point that gives rise to an argument that is dubbed “estoppel”.  In our submission, it is nothing other than a section 102 point.  It is a question of what does the statute do, what does it permit, what does it not permit?  That is all involved in statutory interpretation. 

In relation to section 99, about which I do not want to spend much time in address, may I say this.  Its virtue, if it has any, in the special leave application is that it is a provision closely connected as part of a scheme for what as I say is ostensibly State but is in reality a national model form of regulating the business affairs of legal practitioners in ways that formally were left to the inherent jurisdiction in supervision of its officers of Supreme Courts. 

It is thus important legislation, not just for the profession, far from it, only for the profession, it is important for all those who enter into what might be called business relations, concerning the business, the deriving of revenue by lawyers for the conduct of legal practice and the provision of legal services. 

GLEESON CJ:   But in relation to the agreements that we are concerned with in this case, how was the amount payable to the legal practitioner calculated by reference to the amount of the award or settlement? 

MR WALKER:   The section 99 point is and is only the way in which there could not be exposure in the event of success beyond that which was actually received.  It is only in that sense that your Honours have seen explained on page 205 of the application book, paragraphs 33 and 34, particularly line 30:

The amount of the cap is set by reference to the amount of the award.  Even in circumstances where the award is more than sufficient to pay all of WFW’s “normal” rate fees, –

which is the success rate fee –

reference must be had to the award to determine that is so.

That is the entirety of the argument in relation to the application of section 99.

GLEESON CJ:   On the previous occasions that you have run up that flat, nobody has saluted. 

MR WALKER:   That is right.  I do not wish to say more about it.  Section 98 is my main point.  Section 98, in our submission, has, as I say, at its heart an expression which appears to be in plain English.  In our submission, this is not a case where it would fall to the court, as it were, to criticise the use that has been made, it would appear, repeatedly by parliaments in the country of that verbal formula.  “Otherwise payable” did not appear to be words which are obscure or ambiguous. 

In this case, it is to be recalled, in terms of its suitability as a vehicle for the argument about meaning, that the following is true.  There were two contingencies that I might summarise as being success or otherwise; or otherwise, that which was payable was set as a certain rate, 60.  For success, that which was payable was set as another rate, 400.  That was it.  Nothing else was ever in any contingency payable. 

GLEESON CJ:   It turns, does it not, on whether the expression “on the successful outcome of the matter” qualifies what goes immediately before it or everything that goes before it?

MR WALKER:   Your Honour is referring in particular to section 98(1)?

GLEESON CJ:   Yes.

MR WALKER:   May we point out that when it comes to the prohibition by way of cap on uplift in subsection (3), the phrase simply appears as it does “otherwise payable” and one sees that the comparison is an arithmetic one requiring a comparison with what will be paid according to the stipulation putatively to be controlled by this cap, depending upon the numbers, on the successful outcome of any matter involving litigation.  Success, in our submission, tends to be dichotomous, that is, it is either successful or not.  In particular, there is nothing in the provisions of section 98 that contemplates by any benchmark, by anything truly normal, ordinary or usual, in particular, gone is the court discipline of so‑called scales, this is now to be left in negotiations subject to statutory limit. 

GLEESON CJ:   But whatever they are saying, and this is the matter of dispute, subsection (3) and subsection (1) are talking about the same thing, are they not? 

MR WALKER:   Yes.  They are permitting something about which there may have been legal doubt.  They are stipulating in subsection (2) the only way in which it may be stipulated, it is a percentage, and in subsection (3) they are discretely prohibiting the stipulation for a premium other than as specified by percentages, et cetera, where 25 per cent is provided as a ceiling, “of the costs otherwise payable”. 

The Court of Appeal has read the statute by inserting after that phrase in subsection (3) the phrase that one found in subsection (1).  It had the absurd, entirely fictitious result in this case that one was to suppose that there was something payable in the event of success under this agreement less than that which was stipulated.  That is not true.  There was never a rate stipulated to be payable without premium in the event of success.  These parties chose, the solicitors no doubt devised on advice, an agreement which did not posit any rate at which any costs would ever be payable in the event of success other than that which they name, 400. 

“Otherwise payable”, in our submission, looks to the contingency upon which an uplift is to be available at all.  You earn your uplift by achieving a certain result.  If you do not achieve that result, that is what is “otherwise payable”.  Where there are only two events contemplated, one, by the statute and, two, by the agreement, then the statutory text as applied to the particular agreement combined powerfully, in our submission, to exclude the possibility of a notional, fictitious and, indeed, counterfactual figure which could not be identified on the facts of this case, namely, something payable on success which you cannot find in the agreement.

GLEESON CJ:   Does your argument interpret subsection (1) as though there were a comma after the word “premium” and a comma after the word “agreement” in the third line?  In other words, do you read it as saying:

A conditional costs agreement may provide for the payment of a premium –

what do you mean be “premium”?  Answer –

premium on the legal costs otherwise payable under the agreement –

when –

on the successful outcome of the matter in the respect of which the amendment is made.

MR WALKER:   Yes.

GLEESON CJ:   That is the way you interpret it? 

MR WALKER:   Yes.  We are bound to put it that way because the premium is for successful outcome.  The extrinsic material, the very long lead up, none of which is decisive of course, to which we have referred in our written submissions, by law reform authorities and the like make it plain that there was a cautious venturing being essayed by Parliament into the notion of some further financial incentive necessary for access to justice and related policy matters to be served by permitting a so‑called premium and to be defined as available on successful outcome.

GLEESON CJ:   As I understand it, you call in aid, in support of the interpretation that has just been given, the punctuation in subsection (3)?

MR WALKER:   Yes, your Honour.  In our submission, were it otherwise, in the way we tried to put in writing, the most hollow compliance with the provisions of section 98 could be brought about by the stipulation in an agreement of something within the desired margin, 25 per cent, as being the amount which would otherwise be payable.  But, of course, that phrase would then be used as if it really meant, “Would be payable if our agreement was different from the agreement which we in fact have made, because the agreement which we in fact have made is that upon successful outcome you will pay 400”. 

If a party goes to the trouble of ensuring that a close enough number, say 399, is inserted in the clause that says, and if it were not 400 by way of premium, it would have been 399 sans premium, that it escapes scrutiny under section 98, leaving standing in a case such as the present the $60 with which they were content in the event of no success as being (a) a stark contrast in quantitative terms, and (b) apparently, a regulatory irrelevance. 

It has been said against us that the Court of Appeal has convincingly demonstrated that the difficulty with our approach is that it does not take account of what happens when zero is the figure to be paid in the lack of success.  As we have tried to point out in our written submission, not at all.  That self‑evidently serves as parliamentary intention to ensure that there is not a drug on the market for truly speculative actions of a kind that this Court had long ago approved.  Truly speculative actions where it is no win, no fee. 

With premium arrangements, so‑called uplift arrangements, a market permitted and to a degree regulated by Parliament, an obvious risk in terms of the social mischief apparently being directed at by Parliament was the true speculative actions, no win, no fee, would cease to have any attraction.  Particularly, if the argument put against us be correct, whereby in fact it is going to be very easy to have very high success premiums. 

GLEESON CJ:   What was the legislative policy behind this, Mr Walker?  If you accept true speculative actions, then you give the lawyers, in the case of a true speculative action, a financial interest in the outcome of the proceedings? 

MR WALKER:   Yes. 

GLEESON CJ:   If you are willing to accept that, why do you limit the amount of uplift?  I mean, they are getting 100 per cent uplift in the case of a true speculative action. 

MR WALKER:   Yes.  It is to be recalled that in Clyne’s Case, of course, conditions for the judicial approval of the practice, which was not seen by the Court as new or breaking new ground, but as putting a badge of approval on a long‑established and venerable practice, required not only the lawyer’s engagement as to the reasonableness of the action to be supported – if we put that to one side at the moment, that is looked after by other statutory provisions nowadays – they also required that there not be, as it were, gouging. 

GLEESON CJ:   Was this a legislative response to that series of cases in New South Wales in the 1960s or did it come much later than that?  Do you remember, there were a series of ‑ ‑ ‑

MR WALKER:   Veron is one.

GLEESON CJ:   Yes.

MR WALKER:   Yes, it is.  It can be seen from the travaux, which are very long in gestation, that that was an historical juncture which engaged the concern of would‑be reformers.  It is not easy to trace this through directly.  In answer to the Chief Justice’s question we would venture this, that these statutory provisions are, as I said earlier, a somewhat cautious implementation of what had been proposed, namely, that access to justice could be enhanced by providing more financial incentive for cases to be taken on which would otherwise perhaps not be funded by reason of the impecunious nature of the would‑be client and that the risk of non‑recovery of costs in unsuccessful cases in a swings and roundabouts fashion was to be rewarded by this cautious permission to charge a premium or uplift.

GLEESON CJ:   Is part of this legislative scheme in addition to, or, as it were, hanging over section 97 – and I realise we are not now concerned with section 97 – in addition to what is built in in subsection (5) are ethical considerations concerning the amount of fees that can be charged?

MR WALKER:   If I have understood your Honour’s reference to hanging over correctly, it is certainly the case that section 98 and cognate provisions are to be seen as legislative provision in areas which formerly were governed, if that be the correct word, by the ultimate supervision of Supreme Courts who were then, originally, admitting authorities, as well as by professional bodies ultimately under, again, the supervision of the Supreme Courts.

In our submission, notions of a proper fee, which can be found explicitly in earlier ethical discussions, have to be seen historically as also being hand in hand with court scales.  Neither finds any overt, and we would say nor does it find any implicit reflection, in the arithmetic approach taken in section 98, rather, section 98 addresses the question, you may now stipulate for different financial outcomes depending whether you succeed or not.  In other words, it is not just a matter of speculative fee, no win no fee, “I won’t charge you if you don’t win”.  Now it is, “I can charge a premium depending upon successful outcome”. 

It is in that guise that we submit that the only linguistic way available to apply section 98 is to look for the comparison which the purpose of these provisions calls up.  The comparison is between what is payable, a word of art, not only for lawyers but in terms of business and this is about the business of lawyers, what is payable in the event of success for outcome, that which entitles you to the premium, and that which is “otherwise payable” and it is not possible, linguistically, in our submission, to have distorted “payable” into a state of affairs by which a figure – in this case never stipulated, in any other case purely fictitious – would never come to

be required by matter of obligation to pass form one party to another.  In other words, it would never be payable. 

The Court of Appeal’s decision can neatly be summarised as to its important error, which for national reasons ought to be addressed by this Court, as having brought about the remarkable and absurd situation that a figure is selected as money between solicitor and client never to be paid, on no stipulation between them in their negotiated agreement ever calling for payment which nonetheless provides the all important comparator for what Parliament intended obviously to be an operative ceiling provision, considering it sufficiently important that upon application of what appears to be an arithmetic approach, which surely depends upon figures to be found in the agreement and not by some notional invention of something not payable, then upon application of that arithmetic formula calling for the condign sanction of section 102.

That leads to what my learned friend has suggested might distinguish ours from the other applicant for special leave.  Section 102 comes up if we win section 98 and sections 97, 98, 99 and 102 will all fall to be contextual to each other.  That is why section 99 pace but faintly pressed today ought to go up as well.  Section 102, as a matter of interpretation, is right for decision here.

GLEESON CJ:   Thank you, Mr Walker.  Yes, Mr Ehrlich.

MR EHRLICH:   Your Honour, in answer to your question about speculative fee agreements and uplift agreements, there are vices associated with conditional uplift agreements that are not found in traditional no win, no fee agreements and those are highlighted in the quotes in the application book, your Honours, particularly the quote from Professor Dal Pont at page 90.

GLEESON CJ:   What do you understand to be the difference between your case and Mr Walker’s?

MR EHRLICH:   The only difference between my case and Mr Walker’s case is that I have a pure legal construction case.  I am not infected by the estoppel argument.  So, there are no factual disputes between the parties in my case that might make it an inappropriate vehicle.

GLEESON CJ:   Have you an argument about section 99 also?

MR EHRLICH:   I do have an argument about section 99 and also about section 102 but those are pure construction arguments, your Honour.

GLEESON CJ:   What is your argument about section 98 if it is not a pure construction argument?

MR EHRLICH:   The simple issue in relation to section 98 is, what is the effect of the word “otherwise”?  If the Court of Appeal was correct, their analysis stands correct if you take the word “otherwise” out of section 98(1).  One is driven to the same result that the Court of Appeal ‑ ‑ ‑

GLEESON CJ:   Mr Ehrlich, what is the reason for a change in the concluding words of section 98(3) as compared with subsection (1)?  Subsection (1) talks about “the matter in respect of which the agreement is made” and subsection (3) talks about “any matter involving litigation”.  What is the idea behind that change?

MR EHRLICH:   The distinction there, your Honour, is that what section 98 provides for is that in litigation matters you may only have a premium of 25 per cent.  In non‑litigation matters, such as a law firm acting in a major takeover, the premium is unregulated.  If the Court of Appeal was correct on its three‑tier analysis ‑ ‑ ‑

GLEESON CJ:   I am sorry, could you say that again, please?

MR EHRLICH:   I am sorry, your Honour.  What section 98 provides for is that in a matter involving litigation you are limited to a premium of 25 per cent.  It therefore states that in a matter not involving litigation, such as a purely commercial matter or, say, a takeover, the law firm is not restricted to a 25 per cent premium.  That is why it talks about “any matter involving litigation”.

GLEESON CJ:   I had missed that point.  I had not realised that subsection (1) is concerned with conveyancing matters, for example.

MR EHRLICH:   Yes, your Honour, but it is a very important distinction for this reason.  It means, your Honour, that by use of differential rates solicitors can also blow a side wind through that restriction because they can simply say in a litigation matter, “$100 if we win, $200 if we lose”.  That is in economic terms a 100 per cent premium.  That means they can achieve in litigation matters the same effective premium that they can obtain in long litigation matters.

That is another reason, your Honour, for determining the word “otherwise” in section 98(1) as qualifying the phrase that comes after it, and, as I said earlier, your Honour, if one takes the word “otherwise” out of section 98, the Court of Appeal’s analysis stands, which means that the use of the word “otherwise” on a Court of Appeal’s reasoning is otiose; it has no work to do.  In my respectful submission, what it otherwise does is it is used by way of distinguishing the circumstances in the phrase that follows it, which is success, by simply stating the other side of that coin which is failure and that is the use of the word ‑ ‑ ‑

GLEESON CJ:   It is subsection (3) not subsection (1) that is directly applicable to these cases, is that right?

MR EHRLICH:   Subsection (3) is directly applicable to this case, yes, your Honour.

GLEESON CJ:   In fact, subsection (1) is purely permissive.

MR EHRLICH:   Yes, purely permissive.  Can I put it this way, your Honour, if the Court of Appeal’s analysis holds true, a firm of solicitors who enter into a tripartite agreement which says $100 in failure, $200 in success, plus a premium of 50 per cent, taking the total to $300, breaches the Act, but that same firm of solicitors can simply avoid the whole regulatory regime by simply saying the base rate is $100 and the success rate is $300.  The same identical economic effect.  According to the Court of Appeal the first is unlawful, the second is not.

That cannot, in my respectful submission, be the intention of the Parliament.  Your Honour, prior to the introduction of this Act, contingent fee agreements, leaving aside the issue of Clyne’s Case and no win, no fee agreements, were unlawful in Victoria by virtue of section 65(1) of the Supreme Court Act.  All contingent fee agreements in Victoria were unlawful.  There is nothing in any of the material, extrinsic material, the explanatory memorandum, that would suggest that the Parliament was intending to blow a typhoon through that regime.  The contrary is so. 

It was, in my respectful submission, seeking to impose a very conservative proviso on solicitors.  It was saying, “You are entitled to an uplift agreement but the premium must not be more than 25 per cent”.  There is nothing in the extrinsic material that would suggest that the side wind or typhoon, as I have suggested, your Honour, was intended. 

There is another example, your Honour, which shows, with respect, the incorrectness of the Court of Appeal’s analysis and it is this.  Assume a firm of solicitors enters into a fee agreement with a rate of $100 per absent success and says that, “In the event of success, we may have a premium of 100 per cent” so it does not use differential rates at all, that is still a premium, your Honour, but it shows graphically that the word “otherwise” must be a reference to the fees payable, absent success, because there are no three tiers.  It can only be the amount payable absent success and the amount payable upon success. 

In my respectful submission, that example shows the fallacy of the argument as argued in my learned friend’s submissions.  My learned friends in their reply seek to deal with that example by saying that such an agreement is, in fact, not a conditional costs agreement at all.  That cannot be right.  It is plainly a contingent fee agreement and conditional costs agreement.

Your Honour, the policy ground in these matters is simply to restrict contingent fee agreements to 25 per cent.  If the Court of Appeal was correct, contingent fee agreements may now be used by way of differential rates to obtain any premium that the solicitors are able to strike a bargain with their clientele.

GLEESON CJ:   I am sorry, we are not talking about contingent fee agreements at the moment, we are talking about conditional costs agreements.

MR EHRLICH:   But a conditional costs agreement is a contingent fee agreement because it is defined to include the payment of costs that may be payable on a contingency in section 97(1), your Honour.  A conditional costs agreement is defined as involving a contingency.  The vice associated with contingent fee agreements of this kind is identified by Professor Dal Pont.  It is on page 90 of the application book.  What Professor Dal Pont says is that:

Conversely, under a speculative or uplift fee agreement, there is an incentive for lawyers to increase their costs so as to increase their (success) fees, a factor which does not operate in the case of percentage fee agreements.

That is the vice that is associated with an uplift agreement.  There is another vice associated with uplift agreements, your Honour, that is not found in pure no win, no fee agreements and it is the other side of the coin.  It is the temptation not only to increase their costs so as to increase their success fee, but to increase their costs so as to ameliorate the discount they are providing to their client.

GLEESON CJ:   What do you say about paragraphs 115 and 116 on page 179 of the application book?  The court is there suggesting what it says is an absurdity in the argument for which your side of the record is contingent.

MR EHRLICH:   Your Honour, I say this.  One does not test legislation, with respect, by looking at what I would call an absurd example.  Solicitors do not charge $1 an hour as a base rate and then seek to have a $1,000 an hour success rate.  What this legislation is saying to solicitors is this, “You may have no win, no fee agreements or you may have uplift agreements, but if you choose to have an uplift agreement where you get paid some base rate no matter the outcome, that is a matter for you to determine what that base rate is.  You are limited to a premium of 25 per cent on that amount.”

GLEESON CJ:   That would apply whether you were charging an hourly rate or whether you were charging a lump sum, presumably?

MR EHRLICH:   Yes, your Honour.  So, with the greatest respect to the Court of Appeal, it is an incorrect way of approaching this Act because solicitors do not charge base rates of $1 per hour.  The relationship with no win, no fee agreements, the answer to that is simple.  That is what the statute provides.  But, as I say again, your Honours, there are vices associated with uplift agreements which are not found in no win, no fee agreements.  In relation to no win no fee agreements, the Victorian legislature was giving effect to Clyne’s Case, as Mr Walker alluded to in his submissions. 

Even in relation to no win, no fee agreements, this brings one to section 99 and the point that is made about section 99 is this.  What it is saying, in my respectful submission, to solicitors is that, “You may have a no win, no fee agreement and you may have a speculative fee agreement, but you must not set success by reference to the amount of the judgment that might be obtained”.  Then what subsection (2) says is that subsection (1) does not apply to the extent that scale is chosen.  In my respectful submission, what that is doing is saying to solicitors in a traditional client arrangement, “You may have a no win, no fee agreement and you may tie success to the amount of the judgment award received, but in those circumstances you are limited to scale.  Once you tie success to an amount of the judgment, or calculated by reference to the amount of the judgment, you are limited to scale or you are in  breach of the Act.”  In my submission, it is a code that operates.  Your Honour, would it be convenient to deal with the section 102 point very briefly?

GLEESON CJ:   Yes.

MR EHRLICH:   The point about section 102 is really quite straightforward.  What section 102 says is that if you breach the provisions of this Division, other than sections 97(5), 98(3) or section 99, you can still recover your fees pursuant to the statutory quantum meruit in section 93. 

In our submission, section 93(c) plainly encompasses disbursements and counsel fees within its ambit.  It could not do otherwise.  It says, “according to the reasonable value of the legal services provided” and it states that “Legal costs are recoverable” at the commencement of the provisions and “legal cost” is defined to include disbursements.  But what

section 102(3) then goes on to say is that if you have breached sections 97(5), 98(3) or 99 you are:

not entitled to recover any amount in respect of the provision of legal services in the mater to which the costs agreement related and must repay any amount received in respect of those services to the person from whom it was received.

We say, just as a matter of obvious statutory interpretation, what that must be saying is you do not get the statutory quantum meruit under section 93 at all, which must mean you do not get disbursements, you do not get counsel fees and to the extent you have those, you have to repay them.  It is draconian, your Honour.  We put it this way, that what this Act is doing is speaking to solicitors and saying to solicitors, “You are entitled to enter into economic joint ventures with your clients on very prescribed and on a very limited basis.  If you fall foul of the Act that talks to you and regulates your conduct, there are serious consequences.  One of the consequences is that your client pays nothing and you in effect indemnify your client all the costs of the litigation which you unlawfully entered into a joint venture with your client in respect of”.

So we say in relation to the counter‑claim that was dismissed at first instance and we were not successful below in respect of that we are entitled not only if we succeed on the section 97 argument or the section 99 argument, that we are also entitled to have paid back all of the legal fees and all of the disbursements already paid.  If it pleases the Court.

GLEESON CJ:   Yes, thank you, Mr Ehrlich.  Yes, Mr Garratt.

MR GARRATT:   If the Court please, the special leave application in our case should be refused for three main reasons.  The first is that the special leave questions in our case, or three of them, relate to the 1996 Victorian Act which has been repealed.  The first and second of them concerns statutory questions of construction in 98 and 99.  Those provisions have since been recast differently in the 2004 Act.  There are no other cases under the 96 Victorian Act for which the resolution of the questions by this Court which is sought would be helpful and no case, to our knowledge, has arisen under the 2004 Act which raises like issues.

GLEESON CJ:   Where can we conveniently see the 2004 Act?

MR GARRATT:   Your Honour, we have delivered to the Court copies of some limited additional materials.

GLEESON CJ:   Yes, tab 2.  Can you just show us how that Act would deal with the kind of problem that arises in this case?

MR GARRATT:   Your Honour, I think, might be looking at the application book in the other proceedings.

GLEESON CJ:   Yes, but I presume it is the same Act.

MR GARRATT:   It is the same Act, it is just I do not have that tab in front of me, so if your Honour would bear with me.

GLEESON CJ:   I am obviously looking at Ms Symon’s document.

MR GARRATT:   Your Honour will see that now in the 2004 Act there is a definition of “uplift fee” which is on page 267 at the bottom of the legislative material page.  There is now a definition of “uplift fee”.  In the previous legislation of the 1996 Act there is no definition of “uplift fee”.

GLEESON CJ:   Does not the language of the definition of “uplift fee” reflect the language of the old section 98?

MR GARRATT:   No, it does not.

GLEESON CJ:   Just point out the difference.

MR GARRATT:   The old section is cast in terms of the concept of a premium.  You will find no reference to that here.

GLEESON CJ:   Here the word is an addition.

MR GARRATT:   It is additional costs.  Different words have been used, and, as well, if your Honours would permit me, the definition of “uplift fee” does not contain the words “legal costs otherwise payable”.

GLEESON CJ:   Would your agreement, that is the agreement that we are concerned with here, involve an uplift fee within the meaning of that definition in the 2004 Act?

MR GARRATT:   No, and it did not under the 1996 Act either.

GLEESON CJ:   For the same reason?

MR GARRATT:   The provisions are different but one reaches the same result by applying those provisions.

GLEESON CJ:   If it is the same reason, then that rather takes away the force of your argument that the importance of the point disappears because of the amendment to the legislation, does it not?

MR GARRATT:   Your Honour, it is true that the same result is reached under the 2004 Act as under the 1996 Act if one applies it to the deed of costs but that is simply because the wording has that result in each case.

GLEESON CJ:   Let me put it another way.  If Mr Walker and Mr Ehrlich’s argument about section 98 is right, then the same argument would apply, would it not, to the 2004 Act?

MR GARRATT:   No.  They might try to contrive that it would apply but, in our submission, the language is quite different and the concept is different.

GLEESON CJ:   It is the meaning of the expression “quite different” that I am interest in.  Your agreement does not contravene section 98, you say?

MR GARRATT:   No, that is right.

GLEESON CJ:   For what reason precisely?

MR GARRATT:   Your Honour, it is permitted by section 97 and section 98.  If I could take your Honours to 97 for a start.  Your Honours are approaching this at the moment purely on a textual approach, which I am going to go to, but let me explain that it was an argument without context which succeeded before Justice Byrne.  The Court of Appeal looked at the statutory context, including the working paper, and your Honours have not been referred to any contextual matters thus far today and it is the contextual matters which put it beyond doubt, but just looking at the text of the legislation for a moment, what your Honours see in 97 is that:

A costs agreement may provide that the payment of some or all of the legal costs is contingent on the successful outcome of the matter –

So, a costs agreement can provide for a differential way in excess of 25 per cent.  It is not concerned with differential section 97.

GLEESON CJ:   It can provide that you do not get paid anything at all unless you ‑ ‑ ‑

MR GARRATT:   Or anything at all.  Absolutely.  It is simply not concerned with differentials between the two or three or five scales that you might have.  Section 98 is dealing with another subject matter.  It is dealing with the introduction by way of liberalisation for the first time of uplift fees which had previously not been permissible and they are for a premium on the costs payable on success.  It is a different subject matter altogether but it says that where you have success, you may have a premium as well.  So, for example, if you are acting in a takeover and you bring about a successful result within a certain period or a successful result which involves getting in 90 per cent of the capital or the like, you may stipulate for a reward.

Therefore, it is simply not correct to say, as my learned friends want to say, that the word “otherwise” has no work here.  The word “otherwise” has lots of work to do.  It contemplates, for example, the base upon which, as the Court of Appeal said, a premium might be paid.  If you get this takeover in within a certain period or you are getting 90 per cent of the capital you can be rewarded under the agreement by getting more than what you would have got if you only got in 85 per cent of the capital.

GLEESON CJ:   Mr Garratt, is this a convenient time to adjourn?

MR GARRATT:   Yes, if your Honour pleases.

GLEESON CJ:   We will adjourn now until 2.00 pm.

AT 12.53 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.00 PM:

GLEESON CJ:   Yes, Mr Garratt.

MR GARRATT:   Before lunch, your Honour, we were looking at some provisions of the 2004 Act and I should just finish off some points on that, first.  The definition of “uplift fee” in the 2004 Act is in different terms. We have noticed the use of the word “additional” and no use of the word “premium”.  Another difference is there is not in the definition a reference to “legal costs otherwise payable” which seem, from my learned friend’s argument, to be the linchpin words upon which he would fasten.  The other point to note about the 2004 Act is its invalidating provision, the counterpart, if you like, of section 102 of the 1996 Act, does not strike down anything more than the uplift fee itself.

GLEESON CJ:   I would understand your reading of the definition of “uplift fee” in the 2004 Act to be that it simply makes a little plainer that which you say these corresponding words meant in the legislation with which we are concerned?

MR GARRATT:   Certainly, your Honour.

GLEESON CJ:   I should have thought that the word “additional” in that definition of “uplift fee” means additional to what is payable on a successful outcome?

MR GARRATT:   Yes, that is so, your Honour.  There is no punctuation that needs to be seen to be put into the other provision in order to contrive the meaning which my learned friend contends.

GLEESON CJ:   I do not want to go back too far into history, Mr Garratt, but I cannot help wondering whether these concepts of uplift and the like were not, as it were, invented by people who thought in terms of scale fees and were thinking that, for example, a common kind of contingency arrangement was that you got nothing if you lost and you got the scale fees if you won.

MR GARRATT:   Yes.  Your Honour has not been taken to any context and I will do that shortly and this part of the discussion is, frankly, as my learned friend’s submission were, solely on the basis of text devoid of context and the difference is quite important. 

Finishing off on this point, though, we would say that the construction of the repealed Act will not afford a binding precedent for the interpretation of the successor Act in Victoria or anywhere else in the country and we would say, with respect, that it is not appropriate for this Court to express opinions as to how comparable provisions of the 2004 Act or other Acts might be construed if and when some case on them comes forward.

In other words, if special leave is given, it will be about the construction of a repealed Act essentially with no wider ramification, which is why the answering of questions with respect to that Act does not raise, in our submission, any question of general public importance.  Our second main ground for contending that special leave ought be refused is that the decision of the Court of Appeal below was manifestly correct.  If I could invite your Honours to take up the decision at page 171 of the application book I will just draw these aspects to your Honours’ attention. 

Starting at paragraph 101, the court embarks upon a careful and, we would say, orthodox approach.  It first summarises the contentions of the parties in 101 and 102.  In 103 it addresses itself to the correct principles.  It observes that one must start with “context” and the High Court has said this many times.  It then goes on to deal with those matters of context, to which I will return, and after dealing  with those matters in the paragraphs which span up to 110, the court then turns to the statutory scheme of the three sections in the light of the context and then after 113, the court to consider the consequences of adopting different constructions and concludes at 115 and 116 that the construction for which Equus contends produces results which suggests it is incorrect.

They then observe, addressing the pure textual aspect of the matter, at 118 that the natural meaning of the words is as they ultimately find.  We do not see in our learned friend’s material any challenge to the natural meaning of 98(1) being as the court holds.  They then observe that it is important to put aside notions such as usual, normal, ordinary or standard fees and observe this other paradox of the construction for Equus contends which is that if Equus were right, 98(1) would be wholly unnecessary.  I will come back and explain why that is so.

Taking all those matters into account, they then observe that the purpose of the reform to widen access to justice is promoted by the interpretation they give but somewhat thwarted by the interpretation which Equus would give and the issue of uniformity is a matter also to be drawn into the equation.  Accordingly, what one sees the Court of Appeal doing is embarking upon an interpretative analysis which cannot be faulted and which our learned friend’s do not fault in their submissions as a process of analysis.

Looking at the sections, which can be conveniently seen at page 167 in the application book, one has this.  Section 97 addresses the category of what is called there a “conditional costs agreement”.  It provides in subsection (1) that:

A costs agreement may provide that the payment of some or all of the legal costs is contingent on the successful outcome of the matter –

The section continues in subsection (4) to identify what the requirement for such an agreement is.  It is namely that the agreement:

(a)must set out the circumstances that constitute a successful outcome of the matter; and

(b)may exclude disbursements –

Then in subsection (5) the criterion for legality is that:

A legal practitioner or firm must . . . has a reasonable belief that a successful outcome of the matter is reasonably likely.

Those other criteria for a conditional costs agreement, there can be a divergence of any magnitude between the fees payable absent success and the fees payable on success, many hundreds of per cent, many different levels of scale, if one wants.  One notes immediately that section 97 does not talk in terms of premium.  That divergence is not a premium within the concept of section 97.

Section 98 then takes up – and I am addressing this matter just textually – a different theme which is the payment of a premium on the legal costs otherwise payable.  Subsection (1), as we have observed and the Court of Appeal below observed, naturally reads the way we would read it.  To contrive the other meaning, one has to either introduce commas or use the subsequent subsections to read down or change the meaning of section 98(1) but one asks, why would one do that?  The draftsman begins with a permissive provision in subsection (1) on the basis of which two other provisions which are supplemental, which in any event build upon that foundation provision, produce different outcomes of different consequences.  Different matters are addressed.

The building block is subsection (1).  To use (2) and (3) to change the meaning of (1) is not what one would except as a matter just of drafting.  To use (2) or use (3), in particular, to entirely change the meaning of 97 is utterly unorthodox.  In other words, the reading which our learned friends would put on this, take subsection (3), and say, well, the different between fees, absent success and on success, can never be greater than 25 per cent in a litigious matter.  Accordingly, what section 97 authorises is cut down even though section 97 does not say “subject to section 98” and as the Court of Appeal averred, if you go that far, what is the point of 98(1) at all?  It serves no purpose at all.

GLEESON CJ:   It is my recollection, but this may be contradicted by what appears in the Sackville Report, that that word “uplift” came out of the United Kingdom about 20 years ago and I had a recollection that when it was used in the United Kingdom it meant the sort of thing you are using it to mean, that is to say, an amount over and above what, if I can use this expression, would ordinarily be payable in the case of a successful party.

MR GARRATT:   And when one goes to the context materials your Honour sees exactly that that is what the working party intended.  Your Honours have a short extract in the additional materials which I would ask your Honour to take apart.  They are the materials which are themselves referred to in the court’s reasons that we have just quickly gone through.  Your Honour will see the fourth item in the bundle is an extract from the working party report.  It begins at page 104:

Three types of arrangements are commonly referred to under the umbrella of contingency fees.  In each type of arrangement, a client who pursues a claim for monetary compensation pays nothing to his or her solicitor (except perhaps for disbursements) if the claim is unsuccessful.  If the claim is successful:

·in a speculative fee arrangement – the client pays the usual fee –

that is the no win, no fee basis –

·in an uplift fee arrangement – the client pays the usual fee plus an agreed flat amount or a percentage “uplift” on the usual fee; and;

·in a percentage fee arrangement – the client pays a percentage (whether fixed or on a sliding scale) of the amount payable under the judgment –

perhaps pursuant to a sliding scale.  Unambiguously, in this respect, “uplift fee” means and can only mean a premium payable on the fee on success.  The working party then went through in their discussion on the next page the position in South Australia, New South Wales, the United Kingdom.  Your Honour has referred to the United Kingdom.  One sees that in 9.7.2 in the last sentence.  They then at the end of their discussion reach the position that first a “Ban on percentage fees should remain” – that is the section 99 fee – but, “Uplift fees up to a specified maximum should be permitted”.  That one sees at the foot of 106. 

I do not need to go further into the discussion because it is to the same effect, uniformly.  When one looks at the context it is unambiguously clear that the interpretation found by the Court of Appeal is correct.  The other material which the Court of Appeal looked at was the New South Wales Act and one sees the court looking at that in 109 where the court sets out the provisions of the 1993 Act, as amended.  One sees there provisions which make it abundantly clear that the premium is on the success fee.  It could not be otherwise.

GLEESON CJ:   Thank you, Mr Garratt.  I think your red light is on.

MR GARRATT:   I apologise, your Honour.

GLEESON CJ:   Some counsel have developed a technique of breathing through their ears so that they can avoid the consequences of this.

MR GARRATT:   Your Honour, I did not realise my lunch counted.

GLEESON CJ:   Yes, Ms Symon.

MS SYMON:   If the Court pleases.  The flaw in the applicant’s argument here is that it collapses the notion of the contingency that one finds in section 97 with the notion of the premium that one finds in section 98 with the effect of nullifying the operation certainly of section 98 and probably of section 97.  That appears from the language of the sections and the structuring of the sections and one does not need to go beyond that once one understands the language and the structuring and that section 98 in fact builds on section 97 a lot of the focusing on particular phrases falls away.

One must start with section 98 and observe that section 98 applies only by its opening words in section 98(1) to “A conditional costs agreement”.  So before one can commence to understand section 98(1), one has to go back to section 97 to understand what is a “conditional costs agreement” because that is where that term is defined.  Section 97(1) critically provides that:

A costs agreement may provide that the payment of some or all of the legal costs is contingent on the successful outcome –

not only all of the legal costs, that is, it provides for a no win, no fee situation, but it also provides, and critically in these cases, that a costs agreement may provided that payment of some of the legal costs is contingent on a successful outcome. 

So in the case in which Ms Robertson and I appear, one finds that payment of some of the legal costs is contingent on success.  $100 per hour is payable, in any event, under clauses 4.2 and 4.3 of the agreement in question in our case and a maximum of $440 per hour is payable in the event of a successful outcome.  So, in the event, a maximum of $330 per hour is contingent on the successful outcome, whilst $100 per hour is not, that is, some of the legal costs are contingent on the successful outcome.  The difficulty with the argument that is being put against us is that the term in section 98(1):

legal costs otherwise payable under the agreement on the successful outcome of the matter –

is read at one and the same time as being the premium which is the subject of attack but once one understands section 97, one also sees that it is at the same time the same amount which is contingent on success.  Once one understands that the conditional costs agreement is an agreement which allows for some amount to be contingent on success, then necessarily section 98 has to deal with a premium over and above the contingent amount.  It cannot at the same time be the contingent amount which is what the argument amounts to in circumstances where the contingent amount is part of the amount which is defined by the conditional costs agreement.

The result then is that in collapsing the contingency and the premium, ultimately the contingency is lost because here the result that is argued is that the premium is on an amount which is not contingent on success, that is, the premium is said to be on the base rate of $100 per hour.  The contingency is lost then and at the end of the day one does not have a conditional costs agreement.  Section 98 cannot apply to an agreement which sets a base rate and a premium, it can only apply to an agreement which, in the first place, provides for an amount contingent upon success and the base rate in these agreements is payable, in any event.

We say when one understands that structuring and starts at section 97 and walks through and understands the significance of the word “some” in section 97(1) and that section 98 builds on section 97 because it only applies to conditional costs agreement, then the difficulties in the language fall away.  It is also the point and the structuring of the language which underpins the discussion in the Court of Appeal’s judgments on an arithmetical basis, that is, the arithmetic which is produced by the arguments which ignore the operation of section 97 and the way section 98 builds upon it produce silly and inconsistent results.

The structuring of the sections also reflects the three kinds of agreement – and this was touched on by my learned friend, Mr Garratt – that one sees in the extrinsic materials that refer to three types of agreement, a speculative fee agreement which one sees in section 97 separately, an uplift fee agreement which one sees in section 98 and, thirdly, an agreement of another kind, the contingent fee agreement that one sees in section 99.  But at the end of the day, the extrinsic materials provide an in principle discussion of those kinds of arrangements but do not help with what constitutes agreements of the kind discussed and for that one has to go to the language of the Act which consistently reflects the three kinds of arrangements and reflected in the material but one needs to engage with the language to understand a particular agreement in the context of the Act.

If I could simply adopt my learned friend Mr Garratt’s argument that this is not an appropriate vehicle for a special leave application on any wider view.  One might, of course, say that arrangements between solicitors and their clients are a matter of general concern but, as my learned friend, Mr Garratt pointed out, the construction of agreements based in language which no longer appears in the current legislation makes this an inappropriate vehicle, particularly given the focus in the arguments on the other side of the Bar table on the very particular phrase used in section 98(1) “otherwise payable”.

If I could briefly say something about section 102 and it is only this, if the Court pleases.  The Court of Appeal in its judgment at paragraph 38 at page 67 of the application book made a distinction between the language of section 102(2) which refers to “legal costs” and the narrower language used in section 102(3) “legal services”.  It is our submission that when one looks at the summary of argument and the matters raised by the applicant here, the distinction made in the language and the importance of the distinction in that language attached by the Court of Appeal simply is not addressed.  So the argument that the Court heard this morning does not address the reasoning which the Court of Appeal based its determination on when one comes to 102.  If the Court pleases.

GLEESON CJ:   Thank you, Ms Symon.  Yes, Mr Walker.

MR WALKER:   Your Honours, the repeal of the 1996 Act, the enactment of the 2004 Act, makes no difference to the usefulness of a determination were special leave to be granted.  For a start, one notes that under the 1996 Act the heading of section 98 which related to premiums was itself “Uplifted fees”.  We would respectfully urge that the Court proceed on the accuracy of the Chief Justice’s recollection.  “Uplift” is a phrase from abroad from an earlier time and unquestionably refers to an increment over and above a benchmark not found in this statute.  Historically that is what it meant.  Politically that is what it meant.  The politics of regulation of the legal profession, which are what my learned friend, Mr Garratt, calls the context of this legislation is extremely long gestation travaux preparatoire indeed and does not produce explanation for the precise language of the statute. 

What we have now is a suite of local legislation, virtually national in effect, all of which still currently use the expression “otherwise payable”.  Your Honours will have seen that “otherwise payable” appears at the core of the 2004 provisions which we have tried to tabulate in our submissions.  It is now found in paragraph 3.4.28(4)(b), namely:

the uplift fee must not exceed 25 % of the legal costs (excluding disbursements) otherwise payable. 

So that the same requirement to locate where one finds stipulation for payment at a rate which can be compared arithmetically to produce compliance or not with a 25 per cent cap is required under the 2004 Act in Victoria as it was under the 1996 Act.  That is precisely the point that we would seek the Court to entertain in relation to the 1996 Act and, in our submission, it is unimaginable that when words of that kind have been verbatim reused in re‑enacted legislation that there would not be most

useful precedential authority given to a decision on what is dismissively called repealed legislation. 

The same is true, of course, of the definition of “a conditional costs agreement” which one finds in the definition section 3.4.2 of the 2004 Act in Victoria – again we have tabulated the relevant extract – which uses precisely the same language for the critical expressions as does subsection 97(1) of the 1996 Act.  It is for those reasons, in our submission, that the main argument, the section 98 argument, is as useful now for ongoing understanding of the national scheme as it would be if the 1996 Act had never been repealed. 

Next, in relation to section 102, it is true that there is a different effect in terms of what one losses for non‑compliance in relation to the whole paid or simply the uplift component paid, but the importance of examining the power of the statutory provisions rendering void the agreement and requiring re‑payment of some or all of the amounts paid under it, is utterly unchanged as between the 1996 regime and the 2004 regime.  For those reasons, in our submission, the case presents an important issue which would be most useful and important for ongoing conduct under a number of statutes around the country.  May it please the Court.

GLEESON CJ:   Mr Ehrlich.

MR EHRLICH:   Thank you, your Honours.  Your Honours, section 3.4.28 of the 2004 Act is for all intents and purposes identical in phrase to section 98 (1).  It says, “on the legal costs” – there are some words in brackets which are not plainly relevant – “otherwise payable under the agreement on the successful outcome of the matter”.  My respectful submission, that is identical phrasing for the purposes of the application.

Your Honours, my learned friend said that the Act only applied to a premium paid on top of the contingency.  That premium depends upon the very same contingency, that is, success.

GLEESON CJ:   But you pointed out that your argument eliminates the contingency or at least reduces the permissible contingency, the 25 per cent.

MR EHRLICH:   It does, your Honour.  It says, if you pick a base rate, no matter, then you live with a premium of 25 per cent.  Otherwise you are left with a situation where you have a contingency on a contingency or a premium on a premium and by use of differential rates, the 25 per cent prohibition is absolutely removed and will not trap any solicitor save the unwary one.

GLEESON CJ:   That means that the expression “some or all” in section 97(1) means 25 per cent?

MR EHRLICH:   Yes, your Honour.  You are limited to a premium of 25 per cent for litigious matters.  Thank you, your Honours.

GLEESON CJ:   We think there are insufficient prospects of success of appeals in these matters to warrant a grant of special leave and the application in each case is dismissed with costs.

MR WALKER:   If it please the Court.

AT 2.30 PM THE MATTERS WERE CONCLUDED