FLINT & NETTLE (Civil Disputes)

[2010] ACAT 66

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

DENISE FLINT & GRAEME C. NETTLE  (Civil Dispute) [2010] ACAT 66

AA 3 of 2009

Catchwords:             CIVIL DISPUTE – refusal to pay the solicitor’s costs – the issue of until when does the Legal Practitioners Act 1970 (repealed) apply to solicitors’ costs – penalty interests charged by the vendor for delay in settlement of property transaction – onus of proving negligence on the part of the solicitor – costs of expert witnesses and section 48 of the ACT Civil and Administrative Tribunal Act 2008.

List of legislation:     Legal Practitioners Act 1970 (repealed), part 15, and ss.177, 178, 180, 181-186, 188

Legal Profession Act 2006, part 3.2, and ss.229 and 292

ACT Civil and Administrative Tribunal Act

2008,
ss.48, 82(b)

Legal Profession Amendment Regulation 2007 (No. 1)

Legal Profession Amendment Regulation 2007 (No. 2)

List of cases:             Leeper v. The Primary Producers Bank of Australia Ltd (in voluntary liquidation) (1935) 53 CLR 250

Watman & Morgan v ACT Planning and Land Authority [2010] ACAT 25

List of Texts/Papers: G Dal Pont, Riley’s Solicitors Manual, online at [18,000.5]

Butterworths, Halsbury's Laws of Australia, online, at 250-1025 and 250-1030

Tribunal:           Professor. P. Spender, Presidential Member

Ms J David, Senior Member

Mr C G Chenoweth, Member

Date of Orders:  30 September 2010
Date of Reasons for Decision:         30 September 2010

AUSTRALIAN CAPITAL TERRITORY            )
CIVIL & ADMINISTRATIVE TRIBUNAL       )          AA 03 of 2009

BETWEEN:

DENIS FLINT

Appellant

AND:

GRAEME C. NETTLE & ASSOCIATES

Respondent

TRIBUNAL:   Professor. P. Spender, Presidential Member

Ms J David, Senior Member

Mr C G Chenoweth, Member

DATE:  30 September 2010

ORDER

1.The appeal is dismissed.

2.The cross-appeal is dismissed.

………………………………..

Mr C G Chenoweth, Member
for the Presidential Member

REASONS FOR DECISION

Nature of Appeal

1.In this appeal the Appellant is a real estate agent and the Respondent is a solicitor. There is also a cross-appeal by the Respondent against the Appellant for expert witnesses costs incurred in the hearing at first instance (“the original hearing”). To avoid confusion in this decision, this Tribunal (“the Appeal Tribunal”) will refer to the Appellant as "the agent" and the Respondent as "the solicitor".

2.The appeal is from a decision of the ACT Civil and Administrative Tribunal ("the Original Tribunal ") dated 17 February 2009. The case arose from a transaction in which the solicitor acted for the agent when she purchased a block of land in O’Malley A.C.T. The agent had refused to pay the solicitor’s bill. The solicitor had exercised a lien for unpaid costs over a cheque that he had received on the agent’s behalf. The Original Tribunal gave judgment for the solicitor in the sum of $4,718 (inclusive of costs) plus interest before and after judgment. The order dismissed a counterclaim by the agent, and also directed that a bank cheque held by the solicitor be refunded to the agent within seven days after payment of the amount owing to him. The agent was allowed 28 days to pay.

3.The Original Tribunal gave detailed reasons for its decision, following a hearing in which both parties gave evidence and expert witnesses were called for the solicitor.

4.The agent appealed the decision by notice of appeal dated 26 March 2009. The grounds of appeal were extensive (although to some extent the grounds duplicated each other), and the notice of appeal provided additional evidence not presented at the original hearing. The grounds of appeal may be summarised as follows:

a)The legal fees charged by the solicitor to the agent in the conveyancing matter were excessive and because she had not been informed of the substantial change in the fees from previous matters in which she had instructed the solicitor, she had a reasonable expectation that she would be charged a much lower fee;

b)The solicitor was negligent in not informing the solicitors for the vendor of land on behalf of the agent that she was unable to make a settlement date;

c)The agent had incurred costs because the solicitor had exercised a lien over monies received by him in his capacity as a solicitor;

d)The costs should not have been taxed in accordance with the provisions of the Legal Practitioners Act 1970 (“the Old Act”) but should have been subject to the requirements of the Legal Profession Act 2006 (“the LP Act”).

5.The agent also alleged that she was not provided with an opportunity to put forward her case in full at the hearing before the Original Tribunal and that as the Original Tribunal did not have a copy of the LP Act at the hearing, the proceedings were unfair.

6.The agent sought a declaration that she was entitled to payment from the solicitor of $4039.12, incurred by her as interest and costs for the late settlement of the purchase. She also claimed approximately $400 interest that she had lost because the solicitor exercised a lien over the cheque. She sought an order that she pay only a "fair and reasonable charge" for the conveyancing transaction.

7.The solicitor lodged a cross-appeal against the decision refusing the witness expenses incurred in the original hearing.

Background.

8.Where an appeal is lodged within the Tribunal, the Appeal Tribunal may, pursuant to section 82(b) of the ACT Civil and Administrative Tribunal Act (“the ACAT Act”), deal with the appeal either as a new application or as a review of all or part of the original decision. On 16 April 2009 Appeal President Stefaniak ordered that the appeal should proceed utilising the transcript of the earlier hearing. President Stefaniak also gave leave to the agent to call a witness who had not been available at the original hearing.

9.In the present case, the agent wished to introduce new evidence on one aspect of the matter – that is, whether the company selling her the land would have allowed further time to settle beyond the agreed date, which would have avoided to the imposition of additional or penalty interest. This witness had not been able to give evidence at the original hearing and the Appeal Tribunal therefore decided that the witness should be able to give fresh evidence at the appeal hearing.

10.At the original hearing, an expert costs assessor, Mr Michael Scott, and an experienced conveyancing solicitor, Mr Ross Watch, had given evidence for the solicitor. Neither party in the appeal sought to call these witnesses again.

11.The conveyancing transaction was lengthy and complex, partly because the agent was personally conducting the negotiations with the vendor company through the son of one of the directors of the vendor company, and because the agent was also dealing with a number of potential lenders in an attempt to get the best financing deal. No costs agreement had been entered into between the agent and the solicitor.

12.Ultimately a notice to complete was served by the vendor. The sale was settled. When this occurred, the solicitor sent a bill for $1,900.00 for professional costs. The agent sent back a cheque for $950.00, which was returned. The solicitor then had a bill of costs prepared and taxed. It was taxed at the sum of $4,597.00. The solicitor then started proceedings to recover the taxed costs.

Recovery of Costs.

13.A substantial issue in the appeal was whether the costs charged by the solicitor to the agent for the conveyancing transaction were assessable and recoverable pursuant to the provisions of the Old Act, or whether the provisions of the LP Act should apply in relation to the assessment and recovery of costs.

14.The provisions of the Old Act governed the rights and obligations of solicitors and clients in relation to the recovery of costs up until the introduction of the LP Act. They are radically different in operation and there are significant differences in the way in which a practitioner may recover legal costs.

15.Part 15 of the Old Act governs the recovery of costs. Section 178 requires that there could be no action by a solicitor for the recovery of costs until one month after a detailed or itemised statement was delivered to the client. Section 177 sets out the contents of this itemised statement. The statement was required to show each item of costs or disbursements claimed by the solicitor and the statement must have been signed by the solicitor personally or a partner or employee of the solicitor.

16.Section 180 of the Old Act provided that a person who had received an itemised statement from a practitioner had the right within one month after delivery of the statement to give notice to the registrar of the Supreme Court and to the practitioner that the person wished to have the amount payable determined by taxation of costs. While the registrar had the authority to extend the time for the giving of notice, this was not to be done unless the registrar was satisfied that it was not practicable for notice to have been given within one month after the delivery of the statement.

17.Sections 181 – 186 of the Old Act dealt with the procedure for taxation of costs. Under section 185, if a taxation was requested the registrar was to give a certificate following the taxation as to the amount payable, and this amount was recoverable as a debt by the legal practitioner under section 188.

18.The procedure for taxation under the Old Act relied upon the client giving a notice within one month after delivery of a detailed statement. If this notice was not given, then the legal practitioner was entitled to take action to enforce the costs by a process of debt recovery.

19.The LP Act contains different provisions for the recovery of costs. Under part 3.2 of the LP Act, a legal practitioner is required to give notification of the likely costs to a client at the beginning of the retainer and the LP Act requires that a costs agreements or a costs disclosure letter to be given to the client. The LP Act introduced new provisions in section 292 about the provision of itemised bill of costs and the recovery of those costs, and there are additional provisions for costs assessment under division 3.2.7 that go beyond the provisions in the Old Act.

20.The LP Act partly commenced on 1 July 2006, but the provisions relating to costs did not apply as of that date. As notified on 21 June 2006, the LP Act contained a transitional chapter, commencing at section 607. The effect of section 607(2) was to exempt a matter from the provisions of part 3.2 of the LP Act where the clients of the law practice first instructed the law practice in relation to the matter before 1 January 2007.

21.The Legal Profession Amendment Regulation 2007 (No. 1) deferred the commencement of the provisions relating to costs and costs disclosure in part 3.2 from 1 January 2007 to 1 July 2007.The Legal Profession Amendment Regulation 2007 (No. 2) further deferred the commencement of these provisions to 1 October 2007. The explanatory statement circulated by the Attorney-General with the regulation, stated:

"The Legal Profession Regulation 2006 commenced on 1 July 2006. Numerous provisions of the model legal professional regulations were not implemented at that time, either because certain policy matters had not been settled or because the commencement of relevant parts of the Act was postponed to a later date.

The provisions relating to that the postponement are found in chapter 10 of the Act. Within that Chapter, section 605 deals with the operation of part 3.1 of the Act which relates to trust money and controlled moneys. Section 606 to 608 deal with the operation of part 3.2 of the act, which relates to costs and, in particular, to costs disclosure.

This amending regulation changes the date of commencement of part 3.1 and 3.2 of the Act from 1 July 2007 to 1 October 2007, to allow the ACT legal profession adequate opportunity to effectively implement the new trust account management and costs disclosure requirements in the act.

The changes to commencement dates effectively postpone the obligation on legal practitioners to meet more stringent requirements in relation to the provision of advice about costing of legal matters and the maintenance of solicitors’ trust accounts. Because the delay will allow the legal profession adequate time to make practitioners aware of the processes required to meet that obligation, it is in the interests of those practitioners’ clients that the amendment is made."

22.The effect of these statutory provisions is that where a client instructed a practitioner prior to 1 October 2007 in relation to a matter, the costs obligations and recovery provisions of the Old Act applied.

23.Paragraph 13 of the reasons for decision of the Original Tribunal indicates that the solicitor initially received instructions to act on the conveyancing matter through the listing agent on 2 March 2007, with the matter being finally completed on 5 November 2007. As the date of first instructions was prior to 1 October 2007, the Old Act provisions relating to costing apply, and the provisions of the LP Act are not relevant to this transaction.

24.During the course of the appeal hearing, the agent referred to the situation under the New South Wales legislation governing legal practitioners, without being specific. The provisions of the New South Wales legislation have no relevance to a transaction undertaken in the ACT, where either the Old Act or the LP Act govern the obligations of the parties.

25.Amount of Costs.

26.At the hearing below, the Original Tribunal concluded (at paragraph 62 of the decision) as follows:

"On all the evidence, this was not a simple conveyance and I was satisfied that [the solicitor’s] original account that he rendered to [the agent] was more than reasonable in the circumstances. The fact is confirmed by the significant increase in the bill, once the file was fully taxed by Mr Scott. I also believe that the decision to have the bill drawn in taxable form was the correct decision and the only one open to [the solicitor] apart from accepting the cheque forwarded by [the agent]. I also note that at the time of my decision, that it had been open to [the agent] to have Mr Scott's bill taxed by an officer in the Supreme Court. She had not availed herself of that opportunity. I had no alternative in the circumstances but to order that [the agent] was liable for the full amount of [the solicitor’s] claim and I entered judgment accordingly..."

27.In her grounds of appeal, the agent claimed that the fees were excessive and that she had not been informed of the prospect of a substantially larger fee for this matter than she had been charged in previous matters by the solicitor. At the hearing of the appeal, the agent argued that in previous conveyances the solicitor had undertaken the work for charges which were much less, so she thought the previous practice would apply. In fact, the rendered fees of about $1900 were almost double what she had expected from her past experience. The agent stated that the solicitor’s secretary had advised that the fee would be $925, prior to the agent instructing the solicitor. It was for this reason that the agent sent the solicitor a cheque for $995 in payment of the rendered fees. The agent also submitted that the "usual" Canberra fee for a basic conveyance was between $800 and $900. The taxed bill of $4,597 was significantly larger than even the fee for a commercial building conveyance in Canberra.

28.

In response, counsel for the solicitor submitted that the fees arose as a result of a bill of costs properly prepared in taxable form by an experienced costs assessor. When the agent was sent this bill of costs she was also sent a pamphlet which set out her rights including the right to have the bill taxed. The agent chose not to do so, and therefore the solicitor was entitled to recover this fee. The solicitor’s counsel further argued that it was not the Tribunal's role to attempt to assess legal costs where they have been determined by proper processes under the Old Act. The bill reflected reasonable charges for costs in the circumstances of a complex matter, as is demonstrated by the expert evidence of both Mr Scott and Mr Watch.

29.Having considered the evidence, the Tribunal is satisfied that while the fees are at the high end of the range for conveyances in the Australian Capital Territory, given the circumstances of the transaction, including the delays and length of time involved, together with the various negotiations that were accommodated and the necessity to prepare a bill of costs in taxable form, there is no reason why those costs should not be recovered from the agent. This ground of the agent’s appeal therefore fails.

30.While it is true that some conveyancing transactions proceed smoothly and others do not, requiring extra time and effort by the solicitor to complete the matter, unless there has been a clear agreement at the start as to a fixed sum payable without qualification or provision for extras, then the appropriate basis for determining costs is either by discussion and agreement between the client and the practitioner, having regard to the length and complexity of the matter, or in the absence of agreement by the delivery of an itemised bill of costs and subsequent taxation if required. There is no evidence before the Tribunal or any evidence in the hearing below that would indicate that costs were fixed between the parties.

Claim of Negligence.

31.The agent claimed that the solicitor had been negligent in the conduct of the matter, as a result of which she had incurred extra costs. The alleged negligence was that the solicitor had failed to communicate with the solicitors for the vendor company, particularly about the steps that the agent was taking, which would have persuaded the vendor company not to charge penalty interest.

32.In support of this argument, the agent called Mr Constantinos Nikias as a witness. He was a director of the vendor company, along with 6 other directors. He did not hold a majority interest in the company, in fact there were 7 separate interests represented in the company. The company was undertaking a substantial land redevelopment and sale, of which the land purchased by the agent formed part.

33.Mr Nikias gave evidence that he was a friend of the agent. She had prepared a statement which he had signed outlining communications between herself and his son, which indicated that if she had needed further time to settle the transaction, then Mr Nikias could have arranged this. The statement also alleged that the reason for the issue of the notice to complete was the alleged failure of the the solicitor to give notice to the vendor’s solicitors. The statement was annexed to the notice of appeal.

34.Although Mr Nikias may have been well disposed towards the agent, as one director out of seven, he was in no position to bind the vendor company to extend time beyond the period specified under the contract or to waive interest. Had he been as persuasive with the vendor's board as the agent sought to make out, then the company could have waived or refunded the money that had been charged under the contract. The evidence indicates that the company was entitled to charge this amount, and it did so. The failure to waive or refund this amount indicates that what Mr Nikias may have hoped to persuade his fellow directors to do, did not come to pass.

35.Mr Watch gave expert evidence before the Original Tribunal.  He concluded that nothing the solicitor did was other than what a competent and prudent solicitor would do in these circumstances.

36.On appeal, the agent bears the onus of persuading the Appeal Tribunal that the decision below on this point should not be upheld. The evidence does not support the proposition that the conduct or failure of the solicitor caused damage to the agent which she would have been able to avoid had the solicitor acted properly. Accordingly the appeal on this ground also fails.

Retention of the cheque – lien.

37.A retaining or general lien gives solicitors the right to retain, until all their costs and charges as solicitors are paid, all documents or other chattels (including money) that are the property of a client that have lawfully come into the solicitors’ possession in their capacity as the client’s solicitors (G Dal Pont, Riley’s Solicitors Manual, online at [18,000.5]; Leeper v. The Primary Producers Bank of Australia Ltd (in voluntary liquidation) (1935) 53 CLR 250 at 256). This lien extends to cheques and bills of exchange which properly come into the hands of the solicitor (Halsbury's Laws of Australia, online, at 250-1025 and 250-1030). It should also be noted that under section 229 of the LP Act, a solicitor may exercise a lien over moneys paid into a general trust account.

38.The agent was not able to point to any authority that supported a proposition that the solicitor did not have a lien over the cheque for unpaid costs. Accordingly this ground of the appeal also fails.

Cross appeal for costs.

39.The solicitor lodged a cross-appeal dated 5 May 2009. In it, the solicitor sought an order from the Appeal Tribunal that he be awarded the expert witnesses’ costs incurred at the initial hearing, together with any other order that the Appeal Tribunal considered appropriate. In support of the requested orders, the notice of cross-appeal stated the following:

"Given that there are no provisions barring the award of costs for witnesses expenses, it seems unduly harsh that the Cross-Appellant was not awarded those expenses at the initial hearing, given that the Cross-Appellant was successful at that hearing."

40.The general provision relating to costs of proceedings is set out in section 48 of the ACAT Act. The section provides:

" (1) The parties to an application must bear their own costs unless this act otherwise provides or the tribunal otherwise orders.

(2) However --

a) if the tribunal decides an application in favour of the applicant -- the tribunal may order the other party to pay the applicant the filing fee for the application; or

(b) if the tribunal considers that a party to an application caused unreasonable delay or obstruction before or while the tribunal was dealing with the application -- the tribunal may order of the party to pay the reasonable costs of the other party arising from the delay or obstruction; or

(c) subject to section 49, if a party to the application contravenes an order of the tribunal -- the tribunal may order the party to pay the costs or part of the costs of the application to the other party."

41.The Tribunal is of the view that the general policy stated in section 48(1) requires that each party is pay their own costs, including the costs of any witness or expert considered necessary to prove that party's case, unless the circumstances of the case bring it within the grounds specified in section 48(2) (see generally Watman & Morgan v ACT Planning and Land Authority [2010] ACAT 25). The Original Tribunal ordered the agent to pay the solicitor the filing fee of $108, in accordance with section 48(2)(a). In the present case, the Appeal Tribunal is not satisfied that any of the grounds in section 48(2)(b) or 48(2)(c) have been activated. Accordingly, the cross-appeal for costs is dismissed.

………………………………..

Mr C G Chenoweth, Member,
for the Presidential Member

PUBLICATION DETAILS

TO BE PUBLISHED

To be completed by Tribunal Staff

PART A

FILE NUMBER:	AA 3 of 2009
PARTIES, APPLICANT:	DENISE FLINT
PARTIES, RESPONDENT:	GRAEME C. NETTLE
COUNCEL APPEARING, APPLICANT	N/A
COUNCEL APPEARING, RESPONDENT	N/A
SOLICITORS FOR APPLICANT
SOLICITORS FOR RESPONDENT	ROD J BARNETT
TRIBUNAL MEMBERS:	PROFESSOR SPENDER, MS DAVID MR CHENOWETH
DATES OF HEARING:	24 JULY 2010
PLACE OF HEARING:	CANBERRA

PART B

RECOMMENDATION:

FULL REPORT ( )        CASE NOTE ( )        UNREPORTED DECISION ( )

COMMENTS: