Global Future Solutions Pty Ltd v Matthew Sulman & Associates
[2013] QCAT 409
•1 August 2013
| CITATION: | Global Future Solutions Pty Ltd v Matthew Sulman & Associates [2013] QCAT 409 |
| PARTIES: | Global Future Solutions Pty Ltd (Applicant) |
| v | |
| Matthew Sulman & Associates (Respondent) |
| APPLICATION NUMBER: | OCL143-11 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | 29 April 2013 |
| HEARD AT: | Brisbane |
| DECISION OF: | Justice Alan Wilson, President |
| DELIVERED ON: | 1 August 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | Application refused. |
| CATCHWORDS: | PROFESSIONS AND TRADES – LAWYERS – REMUNERATION – COSTS AGREEMENTS –DUTY OF DISCLOSURE – where s 308 of the Legal Profession Act 2007 provides that law practice must disclose an estimate of the total costs, or a range of estimates of the total legal costs and an explanation of major variables affecting calculation of costs – where applicant seeks to set aside costs agreement for non-compliance with s 308 – where disclosure notice provided monthly estimate calculable by reference to fees charged against retainer – whether proper disclosure under s 308 – whether fair or reasonable to set aside costs agreement PROFESSIONS AND TRADES – LAWYERS – REMUNERATION – COSTS AGREEMENTS –ACCEPTANCE – where s 303 of the Legal Profession Act 2007 provides that client may accept, in writing or by other conduct, a written offer – where offer must clearly state the type of conduct that will constitute acceptance – where respondent’s offer provided ‘giving me instructions after receiving these documents’ would constitute acceptance – where applicant instructed respondent to undertake legal work on its behalf – where applicant contends there was no valid costs agreement – whether applicant accepted respondent’s offer – whether valid costs agreement Legal Profession Act 2007 (Qld), s 299, s 302, s 303, s 308, s 322, s 328 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr Bruce Smyth, director (by telephone) and Ms Andrea Avila and Mr Andrew Nicholls (employees) appeared for the applicant Global Future Solutions Pty Ltd |
| RESPONDENT: | Mr M Sulman, solicitor, appeared on his own behalf for the respondent |
REASONS FOR DECISION
Global Future Solutions Pty Ltd (GFS) is an Australian company. It operates in the fields of bio-medics and, according to one of its own publications ‘… utilises green chemistry to create and distribute economically priced, non-toxic and sustainable antibiotic, antibacterial and enzyme products throughout the world’.[1]
[1] Statement of Paul Geoffrey Smyth 20 January 2012, page 1 para 2.
Before June 2011 Mr Bruce Smyth was the managing director of GFS but, when he was declared bankrupt on 8 June 2011, that position was assumed by his brother Paul Geoffrey Smyth.
GFS has a number of ‘related entities’ including Global Fodder Solutions Pty Ltd (Fodder), Global Food Sustainability Pty Ltd and GFS Corporation Aus Pty Ltd. Mr Paul Smyth is still a director of all these companies except Fodder, which is in liquidation.
Mr Sulman is a solicitor and the principal of Matthew Sulman & Associates. His firm was first retained by GFS and Fodder and Mr Bruce Smyth in late 2008 to undertake legal work to secure patent and intellectual property protection for systems the GFS Group was developing. It is not in dispute that after that date Mr Sulman undertook work for Bruce Smyth and Paul Smyth and some 18 companies and trusts associated with GFS including advice work, filing patent and trademark specifications, reviewing licensing agreements, and registering company business names.
It is also not in dispute that the work was done pursuant to a costs agreement between those clients and Mr Sulman in 2008.
It is also not in dispute that the rate at which Mr Sulman would be paid for his work was reviewed, by agreement, in 2010 and a new costs agreement was executed by Mr Bruce Smyth; nor that, in April 2011 Mr Sulman caused statutory demands to be served upon GFS, Fodder and another company in the group for outstanding fees he was claiming from them. He also served Bruce Smyth and Paul Smyth with a draft claim and statement of claim relating to costs which, Mr Sulman alleged, were owed.
Subsequently, Mr Sulman says (and Paul Smyth does not dispute) there were discussions between them about future legal work the GFS Group would require, and Mr Sulman expressed an interest in doing that work and also said that he would be prepared to reduce his hourly rate.
On 30 May 2011 Mr Sulman sent Paul Smyth an email to which was attached a Disclosure Notice under s 308 of the Legal Profession Act 2007 (Qld), a costs agreement, and a letter dated 30 May 2011 addressed to “Mr Paul Smyth, Global Future Solutions Pty Ltd”.
The subject shown in the header to the email was ‘GFS Retainer’. The email said:
As discussed, retainer for GFS is attached. $5K payable at commencement of each month to be applied against my professional fees and outlays/disbursements as they arise. Fees will be charged at $300.00 per hour plus GST (as opposed to the current agreement of $400.00 per hour plus GST).
The accompanying letter was addressed to ‘Paul Smyth, Global Future Solutions Pty Ltd’. It is headed ‘Re: GFS – General Retainer’ and refers to an enclosed disclosure notice, and costs agreement. It goes on to say:
Enclosed is my offer to enter into a Costs Agreement which you may accept by any one of the following ways:
·Signing and returning a copy of the Costs Agreement;
·Giving me instructions after receiving these documents; or
·Oral acceptance.
If you accept this offer you will be regarded as having entered into a Costs Agreement. Whilst not essential, I would appreciate you returning signed copies of the Disclosure Notice and Costs Agreement at your earliest convenience.
The Disclosure Notice has a header apparently addressed to ‘Paul Smyth, Bruce Smyth & Global Future Solutions Pty Ltd’. It is headed ‘Re: GFS – General Retainer’.
The attached costs agreement shows, on its first page, that it is between Matthew Sulman & Associates on the one hand and ‘Bruce Smyth of Global Future Solutions Pty Ltd’ and ‘Paul Smyth of Global Future Solutions Pty Ltd’ on the other.
It does not appear the costs agreement was ever signed by Paul Smyth or Bruce Smyth, or GFS. The only signature appearing on any copy of the document provided to the Tribunal is that of Mr Sulman.
After the disclosure notice and costs agreement were sent, GFS gave instructions to Mr Sulman to undertake legal work. Mr Bruce Smyth filed a statement in the Tribunal dated 20 January 2012 in which he admits that Mr Sulman provided legal services to GFS, and its related entities.[2] He also acknowledges receipt of the email, the letter, the disclosure notice and the costs agreement.[3]
[2] Paras 7 and 8.
[3] Paras 15 and 16.
In a statement filed in the Tribunal and dated 10 April 2012 Mr Paul Smyth says that after conversations in May 2011 with Mr Sulman ‘… we would start putting $5,000.00 per month into his trust account as a sign of good faith which was to be used solely for the Applicant’. The applicant referred to is GFS.
In his oral evidence Mr Paul Smyth agreed that after the disclosure notice and costs agreement were sent by Mr Sulman, GFS did instruct Mr Sulman to undertake legal work.
Notwithstanding these events and circumstances GFS has applied for orders under s 328 of the LPA – first, for a declaration or order that there is no valid costs agreement between GFS and Mr Sulman or, in the alternative, that any costs agreement be set aside under s 328 because of Mr Sulman’s failure to make proper disclosure under s 308.
Those sections appear in Chapter 3 Part 3.4 of the LPA, the main purposes of which are (relevantly) to provide for law practices to make disclosures to clients regarding legal costs, to regulate the making of costs agreements relating to legal services, to regulate the billing of costs for legal services, and to provide a mechanism for the assessment of legal costs and the setting aside of particular costs agreements.[4]
[4] LPA s 299.
This part of the LPA applies if the client instructs a law practice.[5] It also applies either by agreement, or at the election of the client: under s 303 it applies if the client accepts, in writing or by other conduct a written offer to enter into an agreement. The section requires that the written offer must clearly state what it is, and that the client may accept it either in writing, or by other conduct, and must stipulate the type of conduct that will constitute acceptance.
[5] Ibid s 302.
Section 308 sets out the nature of the disclosure which a lawyer must give to a client, including the basis upon which legal costs will be calculated and an estimate of the legal costs ‘if reasonably practicable or, if that is not reasonably practicable, a range of estimates of the total legal costs and an explanation of the major variables that will affect the calculation of those costs’.[6] That disclosure is not required if, however, the client is a sophisticated client[7] - e.g. a public company or a large proprietary company, or a proprietary company formed for the purpose of carrying out a joint venture.
[6] Ibid s 308(1)(c).
[7] Ibid s 300.
Mr Sulman contends that GFS is a ‘sophisticated client’. The evidence does not, however, conclusively establish whether GFS is properly categorised, under s 311, in that fashion. While it appears to have a large number of issued shares and shareholders, the evidence about its current status and whether it falls within one of the terms used in s 300 is equivocal. As will be seen the question is not, in any event, determinative.
Under s 322 a costs agreement made between a client and a law practice may consist of a written offer that is accepted in writing, or by other conduct. The offer must clearly state that it is an offer to enter into a costs agreement; that it can be accepted in writing or by other conduct; and, the type of conduct which will constitute acceptance.
Under s 328 the Supreme Court or QCAT may order that a costs agreement be set aside if satisfied that it is not fair or reasonable. That is the basis of GFS’s second application.
Its first, however, is advanced on the basis that it was never a party to a costs agreement with Mr Sulman. Under s 322(1) a costs agreement may be made between a ‘client and a law practice retained by the client’. Part 3.4 of the LPA provides a statutory code surrounding agreements of this kind. Nothing in it purports to import elements of the law of contract. In light of the fact that, as both Bruce Smyth and Paul Smyth have conceded, GFS did instruct Mr Sulman after he sent the costs agreement, the only question is whether or not there was a costs agreement between a client GFS, and Mr Sulman.
The costs agreement itself purports to be between Bruce Smyth and Paul Smyth, each ‘… of Global Future Solutions Pty Ltd’ and GFS’s argument hinges entirely on that fact. It ignores, however, the accompanying email, Mr Sulman’s letter, and the disclosure notice, all of which make it clear that GFS is either the client, or one of the clients. In particular, the headings in the letter and the disclosure notice – ‘GFS – General Retainer’ make it inconceivable that Bruce Smyth and Paul Smyth could not have understood that GFS was the client. The first ground of the application is, then, without substance.
The second relies upon non-compliance with s 308 and, in particular, the alleged absence of an estimate in the costs agreement of the total legal costs or, as s 308(1)(c) says, if that is not reasonably practicable then a range of estimates of the total legal costs and an explanation of the major variables that will affect the calculation of those costs.
Clause 2.4 of the costs agreement sets out the work to which it is said to relate – drafting patent, trademark and design specifications and filing associated applications; providing ‘general services’ as requested from time to time; providing legal services in litigation and advocacy work – again, as requested from time to time; and, providing advice work including contract negotiation, drafting and advice. The rates of charging are set out in clause 3.
The disclosure notice sets out the rights of the client, in compliance with the LPA. Clause 2 (‘How this practice charges’) sets out the rate of charging. Clause 3 (‘Estimate of your costs’) says, relevantly:
It is not possible at this time to provide an accurate estimate of the total costs. Below is this practice’s estimate of the range of total costs (excluding GST) provided for different stages. There may be a number of stages in your matter, which will vary according to its complexity, but may broadly be divided into:
· STAGE 1
Estimate of Costs
Take instructions from client and advising in respect of protecting the intellectual property rights in the antimicrobial solution developed and marketed by you and associated entities and including any further technology or method developed or licensed by you and used by your company or companies; including litigation against Chatfield and Germ Solutions
$5,000 per month retainer paid into our trust account to cover our professional fees and disbursements as they arise – client will be advised in relation to actual costs which may from time to time exceed the $5,000 retainer. In the case that we do not perform $5,000 worth of services in any monthly period we shall retain any monies in trust to meet our accounts as they arise.
· STAGE 2
To be advised
To be advised
These estimates are made on the information available at this time and the estimates will probably change when more information is available to this practice. The major factors which will affect the estimates are:
·The manner in which the opponent or the solicitors are prepared to conduct the matter;
·The extent and nature of the client’s instructions;
·The manner and efficiency with which the client provides instructions to the practice.
·The stage at which the matter is resolved.
In light of the nature of the retainer it is, again, inescapable that any more precise estimate is impossible. GFS and Paul Smyth knew that: in his statement, Mr Paul Smyth says:
20.On or about 19 May 2011 Mr Sulman was invited to meet with myself, Bruce … at our office in Murarrie.
21.The purpose of the meeting was to let Mr Sulman know that we had a lot of work coming up and we wanted to know if he was capable of doing the work we required and that his expertise were at the level required for what we were about to embark on.
…
24.On the basis of Mr Sulman’s undertaking that he had the legal expertise, skills and knowledge to attend to the matters we required, we verbally agreed on a fee of $300.00 per hour for his time and that we would start putting $5,000.00 per month into his trust account as a sign of good faith which was to be used solely for the applicant.
This costs agreement was, on its face, intended to reflect the circumstances described by Paul Smyth – i.e. that a variety of different kinds of work would be required for GFS and its related entities but the precise nature of that work and the costs associated with it were unknown and unpredictable. The disclosure notice and the costs agreement comply with all elements of s 308 except, the applicant says, for the requirement that it be provided with a range of estimates of the total legal costs. The agreement provided, however, for an estimate on, in effect, a monthly basis calculable by reference to the fees charged against the retainer of $5,000.00 per month. The disclosure notice contained an appropriate warning that estimates may change, and the factors that would bring that about and, also, the client’s right to end the engagement at any time by written notice.[8]
[8] Disclosure Notice, clause 7.1.
In my view the disclosure notice and the costs agreement satisfy the requirements of s 308 and the application to set it aside under s 328 on the basis that it is not fair and reasonable should be refused.
The application by GFS is dismissed.
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