Frigger v Mervyn Jonathon Kitay in His Capacity as Liquidator of Computer Accounting and Tax Pty Ltd (in Liq) [No 10]

[2016] WASC 63

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   FRIGGER -v- MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQ) [No 10] [2016] WASC 63

CORAM:   LE MIERE J

HEARD:   13 MAY 2015

DELIVERED          :   23 MARCH 2016

FILE NO/S:   CIV 2765 of 2010

MATTER                :Section 78 of the Trustees Act 1962 (WA) and Section 1321 of the Corporations Act 2001 (Cth)

BETWEEN:   ANGELA CECILIA THERESA FRIGGER

ANGELA CECILIA THERESA FRIGGER AND HARTMUT FRIGGER IN THEIR CAPACITIES AS TRUSTEES OF THE FRIGGER SUPERANNUATION FUND
HARTMUT HUBERT JOSEF FRIGGER
Plaintiffs

AND

MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQ)
First Defendant

COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQ)
Second Defendant

Catchwords:

Application to restrain law firm from acting - Whether personal, financial or professional interest prevents representation - Delay or laches - Turns on own facts

Legislation:

Trustees Act 1962 (WA)

Result:

Application dismissed

Category:    B

Representation:

Counsel:

Plaintiffs:     In person

First Defendant              :     Mr M L Bennett

Second Defendant         :     Mr M L Bennett

Solicitors:

Plaintiffs:     In person

First Defendant              :     Holborn Lenhoff Massey

Second Defendant         :     Holborn Lenhoff Massey

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

Clay v Karlson (1997) 17 WAR 493

Computer Accounting & Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133

Computer Accounting & Tax Pty Ltd v Professional Services of Australia Pty Ltd [No 3] [2010] WASC 2

Frigger v Mervyn Jonathon Kitay in his capacity as liquidator of Computer Accounting & Tax Pty Ltd (in liq) [No 7] [2014] WASC 441

Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Accounting & Tax Pty Ltd [No 3] [2010] WASC 93

Professional Services of Australia Pty Ltd v Computer Accounting & Tax Pty Ltd [2010] WASC 38

Professional Services of Australia Pty Ltd v Computer Accounting & Tax Pty Ltd [No 2] [2009] WASCA 183

Professional Services of Australia Pty Ltd v Computer Accounting & Tax Pty Ltd [No 2] [2009] WASCA 183(S)

Professional Services of Australia Pty Ltd v Computer Accounting & Tax Pty Ltd [No 4] [2015] WASCA 253

Vakauta v Kelly [1989] HCA 44; (1989) 167 CLR 568

1. LE MIERE J:  The plaintiffs, Mr and Mrs Frigger, are shareholders in and directors of the second defendant, Computer Accounting & Tax Pty Ltd (CAT).  The first defendant, Mr Kitay, is the liquidator of CAT.  The defendants are represented in this proceeding by Mr Lenhoff and his firm, Holborn Lenhoff Massey.  The plaintiffs seek orders restraining Holborn Lenhoff Massey from acting for the defendants in this proceeding.  Before addressing the issues in this proceeding it is convenient to refer to some of the numerous proceedings in this court in which the plaintiffs and the defendants have been involved and in which Holborn Lenhoff Massey have acted as solicitors.

CIV 2265 of 2006

1. CAT commenced proceedings in this court against Professional Services of Australia Pty Ltd (PSA) and Mr Martin Banning claiming damages for negligent misstatement, deceit and misleading or deceptive conduct (CIV 2265 of 2006).  After a trial lasting 11 days Simmonds J entered judgment in favour of CAT for sums totalling $967,202.50 with interest and costs:  Computer Accounting & Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133.

DOCA

1. Mr Banning died after judgment was delivered.  His estate (Banning) and PSA appealed against the judgment at first instance (CACV 764 of 2008).  Their application for a stay of the judgment was unsuccessful.  PSA went into administration before the judgment debt was paid.  A deed of company arrangement (DOCA) was made in the administration.  Under the DOCA, CAT would be paid the sum of $1,106,027.26 and interest on that sum and if the appeal in CACV 76 of 2008 resulted in a reduction in the judgment, the reduction was to be repaid to Banning Holdings Pty Ltd.  CAT was paid $1,165,661.54.  CAT paid those funds to Mr and Mrs Frigger.  Mr and Mrs Frigger say that it did so under a contract between them and CAT under which Mr and Mrs Frigger paid the legal costs of the proceedings and any judgment sum was to be paid to Mr and Mrs Frigger. 

The appeal

1. The appeal was successful.  The judgment in favour of CAT was set aside and instead judgment was entered in favour of CAT for a significantly reduced amount:  Professional Services of Australia Pty Ltd v Computer Accounting & Tax Pty Ltd [No 2] [2009] WASCA 183.

2. The events leading to the making of the orders to give effect to the judgment of the Court of Appeal are summarised in the recent Court of Appeal judgment in Professional Services of Australia Pty Ltd v Computer Accounting & Tax Pty Ltd [No 4] [2015] WASCA 253. At the time, that the reasons of the Court of Appeal were published in 2009, orders were made by consent setting aside the judgment at first instance and instead entering judgment in favour of CAT in the reduced amount. Directions were made for the exchange of written submissions in relation to outstanding matters that remained in contention, with a further direction that those matters would be resolved on the papers.

3. As the amount for which judgment had been entered at first instance had been paid, one of the issues addressed in the written submissions served by the parties concerned the orders that should be made by the court with respect to repayment of the amount by which the judgment at first instance exceeded the amount for which judgment was entered on appeal.  In written submissions served on behalf of CAT it was asserted:

   The Deed of Company Arrangement stipulates that any reduction in the judgment sum on Appeal is to be paid to Banning Holdings Pty Ltd and is to be off set against the respondents' costs.

   Written submissions were served on behalf of PSA and Banning.  Those submissions were prepared and filed by Holborn Lenhoff Massey.  They were settled and signed by Mr Hershowitz of counsel.  Those submissions made no reference to the DOCA stipulation that any reduction in the judgment sum on appeal was to be repaid to Banning Holdings.  The effect of the submissions was that the reduction in the judgment sum should be repaid to the appellants, that is PSA and Banning. 

4. The court published supplementary reasons:  Professional Services of Australia Pty Ltd v Computer Accounting & Tax Pty Ltd [No 2] [2009] WASCA 183(S). The court made orders requiring CAT to repay to PSA and Banning the amount by which the sum it had received exceeded the sum for which judgment was entered on appeal, together with interest on that amount (the Repayment order).

5. PSA and Mr Banning were represented in CIV 2265 of 2006 up to and including the delivery of judgment by solicitors other than Holborn Lenhoff Massey.  Mr Lenhoff and Holborn Lenhoff Massey took over conduct of the action and the appeal on behalf of PSA and Banning after judgment had been entered at first instance.

Plaintiffs say Repayment order wrong

1. Mr and Mrs Frigger assert that the Repayment order of the Court of Appeal is contrary to the terms of the DOCA.  In July 2015 Mr and Mrs Frigger applied for leave to be heard and for the Repayment order to be set aside.  On 10 December 2015 the Court of Appeal dismissed the application:  Professional Services of Australia Pty Ltd v Computer Accounting & Tax Pty Ltd [No 4] [2015] WASCA 253.

2. Mr and Mrs Frigger assert that the conduct of Mr Lenhoff and Holborn Lenhoff Massey in relation to the written submissions of PSA and Banning to the Court of Appeal, which they assert are wrongful submissions, resulted in the Court of Appeal wrongly making the Repayment order.  They do so notwithstanding that CAT made submissions to the Court of Appeal and that Mr and Mrs Frigger were responsible for conducting the proceedings and the appeal on behalf of CAT and gave all relevant instructions to the lawyers acting on behalf of CAT.

CAT wound up

1. The decision of the Court of Appeal was delivered on 23 October 2009.  On the same day Mr and Mrs Frigger lodged a charge at ASIC against CAT dated 10 September 2009 to secure a debt allegedly owed by CAT to Mr and Mrs Frigger (the Charge). 

2. On 10 December 2009, on the application of PSA and Banning, Simmonds J made freezing and ancillary orders against Mr and Mrs Frigger restraining them from, amongst other things, taking any steps to enforce the payment to them of any amount claimed to be owing to them by CAT pursuant to the Charge or otherwise:  Computer Accounting & Tax Pty Ltd v Professional Services of Australia Pty Ltd [No 3] [2010] WASC 2.

3. On 16 December 2009 PSA served on CAT a statutory demand for the sum of $800,917.08 said to be owing to PSA pursuant to the Court of Appeal orders.  CAT did not comply with that demand or with a statutory demand for a debt of $18,247.59 said to be owing to Mr Forbes served on 1 December 2009.  PSA applied for the appointment of a provisional liquidator.  On 21 January 2010 Simmonds J appointed Mr Kitay as the provisional liquidator of CAT:  Professional Services of Australia Pty Ltd v Computer Accounting & Tax Pty Ltd [2010] WASC 38. On 6 May 2010 Master Sanderson determined the application of PSA and Banning that CAT be wound up. In his reasons for judgment the Master said that Mr Kitay swore in affidavits before the court that his investigations indicated CAT was insolvent, that CAT was indebted to PSA and Banning in an amount of over $800,000 and did not have the capacity to make that payment. The Master found that CAT was insolvent and ordered that CAT be wound up and appointed Mr Kitay liquidator: Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Accounting & Tax Pty Ltd [No 3] [2010] WASC 93.

4. Mr Lenhoff and Holborn Lenhoff Massey acted for PSA in relation to the statutory demand, the freezing orders and the winding up of CAT.  Mr and Mrs Frigger allege that Mr Lenhoff, on behalf of PSA, took all of these actions knowing that PSA was not entitled to repayment of part of the judgment sum because the terms of the DOCA provided that any repayment was to be made to Banning Holdings.

This proceeding

1. Among the assets of CAT that may be available for the benefit of its creditors are: land situated at Edward Street and Pier Street, Perth (the Perth property), land situated at Armadale (the Armadale property) and a term deposit at St George Bank (the Term Deposit).  CAT is the registered proprietor of the Perth property and the Armadale property and the Term Deposit is in its name.  The plaintiffs, however, claim that the two properties are held on trust for them, either as the beneficiaries of a resulting trust or as the beneficiaries of a self‑managed superannuation fund.  The first plaintiff, Mrs Frigger, says that she is the owner of the funds in the Term Deposit. 

2. In 2010 the plaintiffs commenced these proceedings by originating summons.  On 4 January 2010 a substituted summons was filed seeking:

   (1)an order pursuant to s 78 of the Trustees Act 1962 (WA) that the Perth property and the Armadale property vest in Mr and Mrs Frigger in their capacity as trustees of the superannuation fund;

   (2)a declaration that the defendants have no right, title or interest in the Term Deposit; and

   (3)orders regarding the plaintiffs' entitlement to the repayment of a taxing fee.

   A registrar subsequently ordered that the matter proceed as if commenced by writ of summons and ordered pleadings.  The plaintiffs filed a statement of claim which has subsequently been amended and reamended. 

3. In their reamended statement of claim, filed on 25 October 2012, the plaintiffs advanced the contention that they paid the purchase price for each of the Perth property and the Armadale property on a mutual understanding with CAT that the company would hold the beneficial interests in each property for the benefit of Mr and Mrs Frigger.  The plaintiffs say that Mrs Frigger advanced the funds for the Term Deposit.

4. The defendants filed a defence and counterclaim which was subsequently amended.  On 8 July 2014 the defendants filed a reamended substituted defence and counterclaim.  The effect of the defence is that:

   (1)CAT owns the Perth and Armadale properties in its own right;

   (2)alternatively, if CAT owned those properties or other property as a trustee, it is entitled to be indemnified or exonerated out of the trust property with respect to debts, liabilities, costs and expenses it incurred in connection with, or in or about the execution of, trust powers, and that right is an asset available for the creditors of CAT;

   (3)the two specific amounts claimed by Mrs Frigger (Term Deposit and the taxing fee) which were paid by Mrs Frigger, were loans to CAT and Mrs Frigger is an unsecured creditor for those amounts. 

   The defendants advance other pleas including a claim based on estoppel by representation and an estoppel arising by law by reason of curial determinations in other proceedings.  The defendants put forward other claims by way of defence, and by counterclaim claim damages against Mr and Mrs Frigger for breach of duty as a result of which the company has suffered loss and damage relating to the operation of the service station business situated on the Armadale property.

5. On 22 July 2014 the plaintiffs filed a substituted reply and defence to counterclaim.  The defendants applied to strike out the amended pleading, or parts of it, on the grounds that it failed to disclose a valid defence to the counterclaim, may prejudice, embarrass or delay the fair trial of the action and was otherwise an abuse of process.  Paragraphs 14 to 20, 27 and 29, and the challenges to those pleadings, are relevant to the present application.

6. In pars 14 to 20 the plaintiffs pleaded as follows.  PSA went into administration before the judgment debt in CIV 2265 of 2006 was paid.  The DOCA was made in the administration.  Under the DOCA, CAT would be paid the sum of $1,106,027.26 and interest on that sum and if the appeal in CACV 76 of 2008 resulted in a reduction of the judgment, then the reduction was to be repaid to Banning Holdings.  CAT was paid $1,165,661.54 and received no further payments under the DOCA.  CAT paid those funds to Mr and Mrs Frigger under the contract between them.  The Court of Appeal subsequently reduced the judgment debt and made orders requiring CAT to repay part of the judgment sum (par 23).  The judgment and orders of the Court of Appeal are contrary to the terms of the DOCA and therefore PSA and Banning had no right to apply for a liquidator to be appointed to CAT because CAT was entitled to retain the judgment sum pursuant to the DOCA (par 27).  The plaintiffs submitted that those pleadings were a defence to the defendants' claim under the trustee's right of indemnity and exoneration. 

7. Allanson J, who is the case manager of this proceeding, struck out pars 14 to 20 and 27:  Frigger v Mervyn Jonathon Kitay in his capacity as liquidator of Computer Accounting & Tax Pty Ltd (in liq) [No 7] [2014] WASC 441 (Frigger v Kitay [No 7]).  His Honour said:

   The defendants claim the right of indemnity as an asset in the liquidation. If the company held property in trust, it may be entitled to be indemnified from those trust assets against expenses for which it became liable in conducting the business of the trust. For the purpose of enforcing the indemnity, it possesses a charge or right of lien over those assets … The right of indemnity gives a beneficial interest in the assets of the trust which passes to the liquidator and is property of the company in the liquidation … The fact that Professional Services Australia or the estate of Mr Banning may be able to prove debts in the liquidation of the company does not make the claim to that right a claim 'on behalf of' either or both of them. No question of assignment by Banning Holdings of the amount ordered to be paid by the Court of Appeal arises [33].

   Allanson J held that pars 14 to 20, 27 and 29 are immaterial and irrelevant and struck them out.  His Honour also held that par 27 was an abuse of process to the extent that it is a collateral challenge to earlier decisions of the court.  Allanson J said that while the plaintiffs would generally have leave to replead, any plea that challenges the decision of the Court of Appeal or the decision to wind up CAT will inevitably be challenged and will be struck out.

Plaintiffs' arguments

1. The plaintiffs advance three grounds in support of their application.  The first is that Mr Lenhoff will be a material witness in this proceeding.  The second is that Mr Lenhoff and his firm have a financial or personal interest in this proceeding or the result of this proceeding.  The third is that by representing CAT in this proceeding Mr Lenhoff has a conflict of interest and duty.  During the hearing of this application I attempted to elicit from Mrs Frigger the basis of the alleged conflict of interest and duty.  It appears that the plaintiffs' allegation is that Mr Lenhoff has a conflict of interest and duty because he will be a witness in the proceeding and has a financial or personal interest in the proceeding.  Therefore, the plaintiffs' third ground adds nothing to their first and second grounds.

Legal principles

1. This court has power to restrain lawyers from acting for clients so as to ensure that the administration of justice is not brought into disrepute by the conduct of the practitioners.  The justification for intervention by the court in applications of this kind has been put on a number of bases.  The basis which is relevant in this application and is relied upon by the plaintiffs is the court's control over the conduct of solicitors as its officers.  The court may restrain solicitors from acting for a client in proceedings when the court, acting under its inherent supervisory jurisdiction, considers that it is necessary to do so in order to ensure the due administration of justice.  The court might exercise this control in the event of a lawyer proposing to act but having a personal interest, because for instance he or she is closely related to the client or has a financial or professional interest in the outcome of the proceedings or where he or she is likely to be called as a witness, such that he or she is unable to give the court the independent and uninvolved assistance which it expects.  For example, in Clay v Karlson (1997) 17 WAR 493 Templeman J ordered a solicitor to cease acting for an executor and beneficiary supporting a will where there was an allegation that the firm had been negligent in drawing up a codicil to the will and where the partner involved was likely to be called as a witness.

Mr Lenhoff not likely to be called as witness

1. In the course of the hearing of this application I pressed Mrs Frigger to identify the issue in relation to which Mr Lenhoff will be a witness.  Mrs Frigger identified the issue to be, who was the owner of the right of repayment of the reduction in the judgment sum ordered by the Court of Appeal (ts 303).  The Repayment order made by the Court of Appeal requires the repayment of the reduction in the judgment sum to be paid to PSA and Banning.  Mrs Frigger submitted that that order was incorrect.  Mrs Frigger further says that it was incorrect because all of the evidence which should have been put before the Court of Appeal was not before the court and Mr Lenhoff is responsible for that.

2. The plaintiffs cannot maintain in this proceeding that the Repayment order was wrong and that the repayment of the reduction in the judgment sum ordered by the Court of Appeal should not be paid to PSA and Banning.  That is a collateral attack upon the orders of the Court of Appeal.  It is a collateral attack notwithstanding that it is made on the basis that all of the information that should have been before the Court of Appeal was not before the court. 

1. It appears that the plaintiffs also say that CAT was not insolvent and should not have been wound up because the Repayment order was wrong.  That is a collateral attack upon the decision of Master Sanderson, who decided that CAT was insolvent and that CAT should be wound up.

2. The case manager of this proceeding, Allanson J, has stated that any pleading by the plaintiffs that challenges the decision of the Court of Appeal or the decision to wind up CAT will inevitably be struck out:  Frigger v Kitay [No 7]. 

Mr Lenhoff has no personal or financial interest in the proceeding

1. The plaintiffs submit that Mr Lenhoff and his firm have a financial or personal interest in the outcome of this proceeding.  The plaintiffs appear to put that argument in different ways.  First, they say that PSA and Banning will not have the capacity to pay Holborn Lenhoff Massey's outstanding legal fees in respect of previous proceedings unless they receive a sufficient dividend from the winding up of CAT and that will only occur if the defendants are successful in this action.  It is not necessary to consider that argument because there is no, or no sufficient, evidence to prove the allegation.

2. Secondly, the plaintiffs say that the litigation funder who has agreed to meet the defendants' legal costs of this proceeding is insolvent and Mr Lenhoff and his firm will only recover their fees for acting for the defendants in this action if the defendants are successful.  There is no, or no sufficient, evidence of those allegations.  Furthermore, the mere fact that a solicitor is only likely to be paid his legal fees if his client is successful in the action is not a sufficient ground for restraining the solicitor from acting.

3. Thirdly, the plaintiffs appear to argue that Mr Lenhoff has a personal or professional interest in this proceeding because his conduct will be scrutinised at trial.  The conduct referred to appears to be his failure to put before the Court of Appeal evidence of the DOCA and the fact that the repayment of the reduction in the judgment was to be paid to Banning Holdings, not PSA and Banning, and further his conduct in issuing a statutory demand on behalf of PSA and prosecuting the winding up proceedings on behalf of PSA when he knew that PSA was not entitled to payment of the amount under the Repayment order.  Those matters are not in issue in this proceeding.  Any attempt to argue those matters, or to lead evidence in support of those contentions, on the ground that they go to the plaintiffs' contentions that the Repayment order should not have been made and CAT was not insolvent and should not have been wound up will not be permitted.

Delay in bringing application to restrain lawyers

1. In Vakauta v Kelly [1989] HCA 44; (1989) 167 CLR 568, 579 Dawson J observed that:

   Where a party in civil litigation, being aware of the circumstances giving rise to a right to object, allows the case to continue for a sufficient time to show that he does not presently intend to exercise that right, he may be held to have waived it.

   A court should be slow to invoke the doctrines of laches or delay as a discretionary bar to proceedings involving a breach of fiduciary duty or where there is a real risk of misuse of confidential information.  However, if a party has a genuine concern about a lawyer acting against him or her, the party must take the point at the earliest opportunity.  If they do not do so, then they are possessed of a weapon which can later be used as a tactic at some point in the proceedings convenient to their position.

2. On 16 April 2012 the plaintiffs' solicitor wrote to Mr Lenhoff stating that his clients believed that it was improper for Mr Lenhoff to act for Mr Kitay in this action.  That view was said to be based on:

   (1)Mr Lenhoff's past and continuing retainers to PSA and Banning which placed him in the position of having to act in the interests of both the liquidator and his liquidation of CAT and the interests of his original clients in circumstances in which it is by no means clear that these parties' interests coincide; and

   (2)the fact that the reasons for the liquidation of CAT, and Mr Lenhoff's role in seeking that liquidation, including the statements he made in the course of other proceedings to practitioners representing Mr and Mrs Frigger as to Mrs Frigger's character and bone fides, will in all likelihood be the subject of evidence in the current proceedings.

   The plaintiffs' solicitor invited Mr Lenhoff to withdraw from his retainer with Mr Kitay and said that if he did not do so within 14 days then his clients reserved their right to apply by originating summons for orders restraining Mr Lenhoff from continuing to act.  Mr Lenhoff did not accede to that request.  Mr Lenhoff continued to represent Mr Kitay.  The plaintiffs did not apply to restrain Mr Lenhoff and his firm from acting for Mr Kitay until 3 March 2015 - a delay of almost three years.  During that period Holborn Lenhoff Massey undertook substantial legal work on behalf of Mr Kitay and therefore incurred substantial costs for carrying out that work.  I might refuse to grant injunctive relief on the ground of delay if the plaintiffs had established that Mr Lenhoff is likely to be a material witness in this proceeding or that he and his firm have a personal, financial or professional interest in the outcome of these proceedings which prevents or impedes Mr Lenhoff or his firm from carrying out their duty to the court or which would bring the administration of justice into disrepute.  The plaintiffs have failed to prove those assertions and it is unnecessary to consider whether relief should be refused on discretionary grounds.

Conclusion

1. The plaintiffs' application will be dismissed.

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION: FRIGGER -v- MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQ) [No 10] [2016] WASC 63 (S)

CORAM:   LE MIERE J

HEARD:   ON THE PAPERS

DELIVERED          :   3 MAY 2016

FILE NO/S:   CIV 2765 of 2010

MATTER                :Section 78 of the Trustees Act 1962 (WA) and Section 1321 of the Corporations Act 2001 (Cth)

BETWEEN:   ANGELA CECILIA THERESA FRIGGER

ANGELA CECILIA THERESA FRIGGER AND HARTMUT FRIGGER IN THEIR CAPACITIES AS TRUSTEES OF THE FRIGGER SUPERANNUATION FUND
HARTMUT HUBERT JOSEF FRIGGER
Plaintiffs

AND

MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQ)
First Defendant

COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQ)
Second Defendant

Catchwords:

Costs - Self-represented solicitor and engaged counsel - Fixing costs - Turns on own facts

Legislation:

Legal Profession (Supreme Court) Contentious Business Determination 2014

Result:

Plaintiff pay costs of the defendant fixed

Category:    B

Representation:

Counsel:

Plaintiffs:     No appearance

First Defendant              :     No appearance

Second Defendant         :     No appearance

Solicitors:

Plaintiffs:     In person

First Defendant              :     Holborn Lenhoff Massey

Second Defendant         :     Holborn Lenhoff Massey

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

Dobree v Hoffman (1996) 18 WAR 36

Frigger v Mervyn Jonathon Kitay in his capacity as liquidator of Computer Accounting & Tax Pty Ltd (In liq) [No 10] [2016] WASC 63

Huntingdale Village Pty Ltd v Corrs Chambers Westgarth [2011] WASC 44

London Scottish Benefit Society v Chorley (1884) 13 QBD 872

Soia v Bennett [2014] WASCA 27; (2014) 46 WAR 301

LE MIERE J: 

Judgment dismissing application to restrain Holborn Lenhoff Massey acting

1. The plaintiffs applied for orders restraining Holborn Lenhoff Massey (HLM), a firm of lawyers, from acting for the defendants in this proceeding.  I dismissed the application:  Frigger v Mervyn Jonathon Kitay in his capacity as liquidator of Computer Accounting & Tax Pty Ltd (In liq) [No 10] [2016] WASC 63.

Costs application

1. HLM apply for orders that the plaintiffs pay their costs and that the costs be fixed.  The plaintiffs resist an award for costs in favour of HLM on the ground that no profit costs should be allowed to a self‑represented legal practitioner.  Furthermore, the plaintiffs say that if the court awards costs to HLM it should not fix those costs.

Self‑represented solicitor entitled to professional costs

1. HLM acted as solicitors in their own litigation.  HLM engaged Mr Bennett as counsel.  The plaintiffs say that solicitors who represent themselves in their own litigation are not entitled to profit costs.  The plaintiffs rely upon the decision to that effect by the Full Court in Dobree v Hoffman (1996) 18 WAR 36 which I followed in Huntingdale Village Pty Ltd v Corrs Chambers Westgarth [2011] WASC 44. In Soia v Bennett [2014] WASCA 27; (2014) 46 WAR 301 the Court of Appeal held that the Full Court decision in Dobree v Hoffman was wrong and should not be followed.  The Court of Appeal held that the exception to the general rule that a successful litigant in person may not recover costs for time spent in conducting litigation that was introduced by London Scottish Benefit Society v Chorley (1884) 13 QBD 872 applies when the successful litigant in person is a solicitor who acted on his or her own behalf. I am bound to follow that decision. Accordingly, HLM may recover their costs in acting for themselves and in retaining counsel to act for them.

Costs follow the event

1. The general rule is that costs follow the event, that is a successful party is awarded costs against the unsuccessful party.  In this case there is no reason to depart from the general rule.  The plaintiffs should pay HLM's costs.

Fixing costs

1. The court has a broad discretion to fix costs and will do so where that will avoid undue delay and expense and the court is able to fix costs on a reliable basis.  Practice Direction 4.7.1 provides that as a general rule where an order for costs is to be made against a party in interlocutory proceedings, the costs will be fixed and ordered to be paid forthwith or by a particular date. 

2. It is appropriate to fix costs in this case.  Although the application was brought in the course of proceedings between the plaintiffs and the defendants, the decision dismissing the application finalises the matter as between the plaintiffs and HLM.  HLM have provided material to the court which enables it to fix the costs and thereby simplify the resolution of the matter and avoid the trouble and expense of assessment by a taxing officer.

Scale costs

1. The applicable item on the Legal Profession (Supreme Court) Contentious Business Determination 2014 is Item 10 - proceedings in chambers.  The maximum amount allowable is $11,550 with an allowance of $473 for attending on a reserved judgment in chambers. 

Costs incurred by HLM

1. In his affidavit sworn 22 March 2016 Mr Lenhoff says that the value of his time spent on this matter, at a charge out rate of $450 per hour, is $24,345.  Mr Lenhoff is informed by Mr Bennett that the value of Mr Bennett's time exceeds $15,000. 

Costs fixed

1. Mr Lenhoff says that in view of the nature of the allegations made against his firm he determined that it was necessary to ask independent counsel to appear on behalf of himself and his firm.  I agree.  It was necessary in this case for independent counsel to be briefed.

2. I accept that Mr Lenhoff devoted substantial time to this application.  I consider that it is appropriate to allow HLM the maximum amount allowed under the Scale for proceedings in chambers and to make a separate allowance for counsel's fees.  I will allow HLM's costs in the sum of $11,550 together with an allowance of $473 for attending on a reserved judgment and $15,000 for counsel fees.  Accordingly, the appropriate order is that the plaintiffs pay HLM's costs fixed in the sum of $27,023.