Gray v Lavan (A Firm)
[2025] HCATrans 56
[2025] HCATrans 056
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Perth No P7 of 2025
B e t w e e n -
BRUCE NATHANIEL GRAY
Appellant
and
LAVAN (A FIRM)
Respondent
GAGELER CJ
GORDON J
EDELMAN J
JAGOT J
BEECH‑JONES J
TRANSCRIPT OF PROCEEDINGS
AT PERTH ON WEDNESDAY, 13 AUGUST 2025, AT 10.01 AM
Copyright in the High Court of Australia
MR J.P. MOORE, KC: If the Court pleases, I appear with MS F.J. MAHER and MR J.A.G. McCOMISH for the appellant.
(instructed by Williams + Hughes)
MR B.W. WALKER, SC: May it please the Court, I appear with my friends MR S.G. STEWART and MR A.M. KHADRA for the respondent.
(instructed by Popperwell & Co)
GAGELER CJ: Thank you, Mr Walker. Mr Moore.
MR MOORE: Thank you, your Honour. Your Honours, can we start with a general observation, and it is this: for centuries, courts have observed a supervisory jurisdiction inherent and then later statutory over solicitors as officers of the court. That supervisory jurisdiction has always included a review of costs charged to clients by solicitors and their assessment for fairness and reasonableness.
The general question at issue in this appeal is whether the purpose of that jurisdiction, being to ensure that solicitors as officers of the court are remunerated properly and no more, requires solicitors found to have charged more than is proper refund the excess to the client with interest so as to account for the time between the client’s payment and the solicitor’s refund.
GAGELER CJ: I thought your case was a common law case?
MR MOORE: It is, and it is put in the context of the jurisdiction in this case having been engaged to assess costs. The common law claim for ‑ ‑ ‑
GAGELER CJ: The claim could be brought in a court of lower jurisdiction, depending on the quantum.
MR MOORE: Yes, and nothing I have said is intended to cut across the common law nature of the claim, it is just to place the claim in the context of what courts have done for a very long time.
GAGELER CJ: You will be taking us to the contract and the statute?
MR MOORE: Yes.
GAGELER CJ: Good.
MR MOORE: Yes. The first issue I wish to address – and I will divide my time into three issues: the first is the construction of the settlement agreement that gave rise to a refund of costs to my client, Dr Gray; the second is the availability of alternative claims to recover overpaid legal costs, and it is in that context I will take the Court to the contract between Lavan Legal and Dr Gray; and the third is the availability of interest in a restitutionary claim at common law.
Can I turn first, then, to the settlement deed to seek to make good the proposition that the deed of settlement put Dr Gray and Lavan Legal in precisely the same position that they would have been in had the taxation been taken to its conclusion, with the same result – the refund of $900,000 of fees found to have been overpaid as not fair or reasonable.
The settlement agreement is in the appellant’s book of further materials at page 70. That is an unsigned copy – more legible copy – of what appears at page 47 but, if it is convenient, I will use the unsigned copy because it is easy to read. The recitals on page 72 set out the background to this second of two settlement agreements, and they say that:
Lavan provided legal services to Gray and rendered invoices –
Then:
Disputes arose . . . in relation to the . . . services, payment of Lavan’s invoices, and taxation of Lavan’s fees and disbursements.
And there were a number of disputes claims going both ways. Then, by the first settlement agreement – called the “2015 Settlement agreement” – some of those disputes were resolved, leaving only two disputes to remain:
the taxation of the Bills –
that had been – the fees that had been paid and, to the extent that that gave rise to a refund of what we call overpaid fees, whether there was interest owing on those fees called:
the Interest Dispute.
This deed resolved the taxation dispute and left only the interest dispute. And what it did is to obviate the need to go through a formal process of taxation by clause 2 on page 74, which was to require Lavan to pay what is called the “Taxation Settlement Sum” of $900,000 in three tranches. And in clause 3 ‑ ‑ ‑
GORDON J: Before you leave clause 2, that was without admission.
MR MOORE: I am sorry?
GORDON J: Under clause 2, the agreement was without admission.
MR MOORE: Yes, subject to what follows in the settlement agreements. And, critically, what follows in the settlement agreement is in clause 3.1, which records the parties’ agreement and acknowledgement that:
(a)the Taxation Settlement Sum represents the amount that would have been ordered to be refunded to Gray by Lavan if there had been a taxation of the Bills;
(b)the Taxation Settlement Sum does not include interest;
(c)Gray claims that he is entitled to . . . interest on the Taxation Settlement Sum –
The amount of fees paid that is coming back to Dr Gray – $900,000:
(d)Lavan disputes that it has any liability to pay interest to Gray on the –
refunded portion, and (e), that dispute, the disputed entitlement, remains in issue between the parties, and then the rest of the deed of settlement sets out a process for giving Dr Gray the right to commence the interest dispute action to assert his right, denied by Lavan, to interest on the refunded portion.
In clause 3.3, the parties then set out how interest would be calculated if there was a right to interest based upon the net amount of fees being deemed to have been the subject of this taxation, and for the purposes of that interest calculation:
it is agreed that the date of the taxation at which the Taxation Settlement Sum would have been ordered –
going over to page 76:
is the date the final tranche . . . is paid.
So, the parties agreed to treat the $900,000 as the amount that would have been ordered to be refunded to Dr Gray, that order being treated as having been made on the last date for the third installment of $300,000 dollars.
Then the parties pleaded the effect of the settlement deed, insofar as taxation was concerned, in their pleadings at first instance below, and in this further book of materials at page 98, one finds Dr Gray’s claim for interest – statement of claim – and in paragraph 13 on page 103 it is pleaded that:
In the premises, the effect of the entry into the 2018 Settlement Deed –
which is the one I have just taken the Court to:
was that the parties agreed to proceed:
13.1as if there had been a taxation of the Bills –
and:
13.2on the basis that a taxing officer had certified that Dr Gray had overpaid the Taxation Settlement Sum to Lavan.
And then on page 115, one finds a page of Lavan’s defense, where:
Lavan admits paragraphs . . . 13 of the statement of claim.
So, in that context, given the clear terms of the settlement agreement and given the parties’ express acceptance of the effect of that settlement agreement in their pleadings at first instance, in our submission, there could be no doubt that the effect of entry into that settlement agreement was intended to and did have the legal effect of putting Dr Gray in exactly the same position as any client who has a solicitor’s bill of costs taxed.
The result of which reveals that the client has paid more than is assessed as fair and reasonable, giving rise to a requirement for the solicitor to refund the overpaid amount.
EDELMAN J: That was intended to do so from that time.
MR MOORE: Yes.
EDELMAN J: Not from some earlier time.
MR MOORE: No, exactly. So, it sets up what we have called, and others have questioned, but what we have called the deemed taxation – an actual taxation, just as the deemed taxation in this case, requires a refund of amounts that are found to have been overpaid, overpaid in a sense that they are more than is fair and reasonable according to the court’s assessment.
It does not mean “overpaid” in the sense of there was not at the time of payment, originally, when the bills were sent and the fees paid, costs paid, it does not mean an overpayment at that time. We accept, and it is a necessary premise of our case, that there was an obligation to pay the invoices as invoiced.
BEECH-JONES J: Under the contract?
MR MOORE: Yes, under the contract.
EDELMAN J: But you say that contract was conditional ‑ ‑ ‑
MR MOORE: Yes.
EDELMAN J: ‑ ‑ ‑ upon a deemed taxation, or subject to a deemed taxation that might occur between the parties under some terms of a hypothetical settlement agreement.
MR MOORE: No, it was subject to an actual taxation – the client’s right, expressly acknowledged in the contract, as we will see in a moment – subject to the client’s right to have costs taxed.
BEECH-JONES J: When you say, “subject to”, do you mean “subject to” in the sense of that is an assumption or a foundation, or “subject to” in the sense of this legal obligation to pay under the contract could be later superseded by another legal obligation, say, under the Legal Practice Act?
MR MOORE: If I have understood your Honour’s question correctly, it is the former. It is not a contractual term that gives rise to a contractual right to repayment if a taxation later determines, no ‑ ‑ ‑
BEECH-JONES J: No, under the original – you say, the agreement in the contract was “subject to”, effectively, let us just say “a taxation” under the Act.
MR MOORE: Yes, yes.
BEECH-JONES J: That could – I am not sure what that means, if that means the right to get the money on the part of the solicitor is predicated on, somehow qualified – it is a precondition to it – or to say “subject to” means you have this legal obligation now, but things might change in the future.
MR MOORE: The latter.
GAGELER CJ: So, first there is an unconditional contractual obligation to pay, and then it is superseded by a statutory right to receive repayment of a certain part of the sum that had been previously paid.
MR MOORE: Yes. We would not put the proposition that there was an unconditional right to be paid.
EDELMAN J: Your case has to be that it is, effectively, a condition subsequent.
MR MOORE: Yes.
GORDON J: To put it in layman’s terms, I enter into a contract between a solicitor and a client knowing that there is a statutory right or a statutory mechanism to have any bills delivered by the solicitor taxed.
MR MOORE: Yes, that is right.
GORDON J: And the character of that is – as I understand your answer to Justice Edelman – a condition subsequent.
MR MOORE: What we would put the proposition in terms of is equivalent to the basis of the payment in Roxborough. Roxborough was a contract that required payment of the invoiced amounts, which included the tax. There was no doubt that that right was obtained and fully enforceable when the invoices were sent and when they were paid. But ‑ ‑ ‑
EDELMAN J: I am not sure that is right, actually. If the amount had been sued upon for payment of the taxation as a debt, that could have been met by a defence that the amount should not be payable because the underlying basis of it is contrary to section 90 of the Constitution.
BEECH-JONES J: It was always void. There was never a legal obligation to pay the tax.
MR MOORE: Your Honours, in my submission, until it had been declared that the tax was unconstitutional, as a matter of contract, that tax had to be paid. There was a debt. The fact that it was open to the plaintiff in Roxborough to themselves take action to have declared the debt unconstitutional does not mean that the contract did not operate to impose an extant legal obligation that was enforceable then and there. There can be a right in contract ‑ ‑ ‑
BEECH-JONES J: Roxborough – I think we may be at cross‑purposes. The tax was always – for want of a better phrase – void. The contractual right may have been enforceable, but because the tax was always void, the basis for the contractual right never existed. Is that not right?
EDELMAN J: So, an enforceable claim that had been brought could be met by a defence that there is no basis for this claim, we do not need to pay it.
MR MOORE: That would have been the case if the retailers had themselves taken action and resisted the claim on that basis, but, just as in any case in which there is a subsequent failure of basis, that does not deny, in my respectful submission, the contractual enforceability of the requirement to pay at the time the invoice is issued. There are many contacts where payments are made in advance ‑ ‑ ‑
EDELMAN J: A contract with a condition subsequent is a classic example of that. When the condition subsequent fails, the obligation fails. But you have to say here that the condition subsequent is not just a taxation, you have to say it is subject to a condition subsequent of some anticipated deemed taxation that occurs as a result of a negotiated settlement agreement.
MR MOORE: We do say that. We do say that this client, by entering into the settlement agreement and bending over backwards to ensure that the client is not prejudiced by not following through the taxation to its ultimate conclusion, is placed in exactly the same position as any client who has costs taxed.
So, that is our first proposition, that as a matter of contract the parties plainly intended to – and has been admitted by Lavan in its defence – put Dr Gray in exactly the same position as if he had followed through the process of taxation and then the taxation officer had determined fees had been overpaid compared to what is fair and reasonable. So, that is the first proposition.
The second proposition is that if that is accepted, then Dr Gray, just like any client who pursues a taxation to that conclusion – overpaid fees, more than fair and reasonable – has alternative rights to recover the overpaid sum. One statutory or inherent – and that is why I started with the inherent jurisdiction of the court to review costs, this is not only a statutory regime to assess costs. Courts have inherent jurisdiction to do that as well.
So, any client who follows either the statutory procedure or invokes the court’s inherent jurisdiction, we say, has claims to recover costs that are properly characterised as a claim in restitution for ‑ ‑ ‑
EDELMAN J: And when would that arise?
MR MOORE: At the moment the court determines that the fees have been overpaid, in our submission.
EDELMAN J: You would presumably have to go further and say: or at the moment at which it is agreed that a court would determine.
MR MOORE: Yes, exactly.
EDELMAN J: How did that then get you interest leading up from the time of payment right up to that moment?
MR MOORE: Because there is a wealth of authority – and I will take your Honours to it in a moment – to support the general proposition that where there is a failure of a basis of a previous payment, interest ought be calculated from the date of payment, not the date the basis fails.
GAGELER CJ: Sorry, I am getting confused about the alternative rights to recover that you are speaking of. Can you just be precise about what they are and their source, please?
MR MOORE: Yes. The payments of legal costs are made on a basis that those costs are enforceable and the right to retain those costs remains a legal right. That basis fails when a court assesses the costs for fairness and reasonableness and determines that there has been an overpayment. In the old language, there is a failure of consideration at that point in respect of a severable portion, being the overpaid amount.
GAGELER CJ: So, you are saying that that gives rise to a common law claim in restitution.
MR MOORE: Yes.
GAGELER CJ: Which arises when?
MR MOORE: When the court determines that costs have been overpaid in a particular amount.
GAGELER CJ: All right. That is where the cause of action is complete.
MR MOORE: Yes.
GAGELER CJ: And you say that interest is available on that cause of action from an earlier date.
MR MOORE: Yes.
EDELMAN J: That is the bit that I cannot understand at the moment. If you are entitled to the money up until that date, there is an entitlement to it. Yet, you say that you have to pay interest as restitution for the opportunity you have had to use – money to which you were entitled.
MR MOORE: Because the entitlement the law treats as always conditional. In our submission, the law treats solicitors’ fees as received conditionally, subject to the client’s inherent and statutory right to have the courts review those fees for fairness and reasonableness.
GAGELER CJ: Can you point to any case in which interest has been held to be available at common law or under statute for a period before a cause of action has arisen?
MR MOORE: Yes. In our oral outline of submissions – so, you could group the cases into two. One is the reversal of judgment cases, where there is an obligation to pay a sum determined by a trial court as owing to a party, that sum is paid, on appeal there is a reversal of the judgment and the right to recover the judgment sum springs up on the date the Court of Appeal hands down its decision.
EDELMAN J: But that is not because the payment was made conditionally, that is because the payment failed right from the moment that the erroneous judgment was given.
MR MOORE: Yes, so the rationale given for interest, as analysed in Heydon’s Case by President Mason, was to look at all of the cases in which a payment was made pursuant to an obligation that existed at the time and then later recovered. It was not only judgment reversal cases, there were other cases as well.
We have listed in a footnote at the end of our oral submissions a whole series of cases where payments were made pursuant to contracts which became unenforceable later, either because they were rescinded or because they were terminated, and we could add to that category, or because they were frustrated.
So, in each of those three situations, there was a contractual right and a contractual obligation to make a payment at a prior point in time. The right to recover that payment sprung up later: when the contract was frustrated, when the contract was terminated or when the contract was rescinded. In each one of those cases, the Court held that the payment could be recovered with interest calculated from the date of payment, not simply from the date the cause of action to recover the payment arose.
President Mason in Heydon’s Case discusses a number of those decisions. We rely upon them for the general proposition that the law’s experience is that a payment can be recovered in circumstances which would now be described, in our respectful submission, as a failure of basis case with interest not simply from when the basis fails but from the date of payment.
I will come back to those cases, if I might, in a moment, but can I first just address one point, lest it be put against me. It is true that the Legal Practice Act gives a statutory right to recover overpaid costs. In this Court’s decision in Redland City Council v Kozik, the majority said, at paragraph [151]:
if there is a statutory right of recovery then that right will usually apply to the exclusion of any common law claim for restitution. For instance, in Commonwealth v SCI Operations Pty Ltd, it was held that the particular statutory right of recovery could “neither be cut down nor enlarged by resort to the general law or to restitutionary principles” and that the restitutionary principles could not “override statute by claiming a superior sense of injustice to Parliament’s”.
That latter aspect is certainly put against us. We say two things about that proposition. The first is that it is a general rule, as evident by the use of the word “usually” in the passage I have recited. The second is that the principle is applicable where, as in Commonwealth v SCI Operations, the right of recovery is wholly based in statute and has, quote, “no counterpart in the general law”, end quote. The quoted remarks being those of Justice Gaudron in SCI Operations at 44, being the passage quoted by the majority in Redland.
In SCI, the right to recover the tax overpaid was based wholly in statute. There was no counterpart in the general law to the recovery of taxes found to have been overpaid. But in our submission, the recovery of overpaid legal costs is not simply a statutory right. Courts have exercised inherent jurisdiction to review clients’ charges by its officers for a long time. That was recognised by the Court of Appeal in this case. In the core appeal book, at page 38, at the bottom of paragraph 12, the President and Justice Mitchell said:
As Parker J recognised in Pryles & Defteros (a firm) v Green, the statutory scheme in the predecessor provisions to those in pt 13 of the Legal Practice Act was dependent upon, and complementary to, the court’s inherent jurisdiction with respect to the remuneration of its practitioners. That jurisdiction existed even where the client had agreed to excessive charges as a matter of contract. This was also the position under pt 13 of the Legal Practice Act.
Then, skipping down to the middle of paragraph 15, their Honours said:
However, s 215(3) provided that nothing in s 215(1) was to be construed as limiting the power of a court, a judicial officer or a taxing officer of a court to determine, in any particular case before that court or judicial officer, the amount of costs allowed. The amount of costs to be allowed, in any particular case, pursuant to s 215(3) would appear to be those costs which, in the view of the taxing officer, constituted reasonable charges in respect of work reasonably undertaken.
Justice Dixon in this Court, in Woolf v Snipe – which we have quoted in our written submissions – also emphasised the inherent jurisdiction to review solicitors’ costs sitting alongside the statutory jurisdiction.
So, recovery of excessive legal costs charged by solicitors is not exclusively a creature of statute. The statutory regime does have a counterpart in the general law, and that sets it apart from the situation in Commonwealth v SCI Operations. Moreover, the focus of the Legal Practice Act ‑ ‑ ‑
BEECH-JONES J: Mr Moore, that is an inherent power of justices of the Supreme Court?
MR MOORE: Yes.
BEECH-JONES J: Does that qualify as “a counterpart in the general law”? That right does not exist in, say, the district court or the local court?
MR MOORE: I think that is probably right, your Honour, yes.
BEECH-JONES J: Put another way, why does the presence of that mean that the moneys had and received count can sit alongside and perhaps potentially undermine the statutory scheme, including the statutory scheme for interest?
MR MOORE: Because we say that if the elements of a restitutionary common law money had and received claim can be made out, the existence of the statutory scheme does not exclude the money had and received claim because the statutory scheme is not dealing with a subject matter that is only statutory. So, I am not saying that the inherent jurisdiction itself, ipso facto, establishes a money had and received claim. I say that for other reasons. I am just saying that, unlike SCI Operations, we are not dealing with a right of recovery that exists wholly and solely in statute. That is the only point I am seeking to make now.
GAGELER CJ: Your common law claim has as one of its necessarily pleaded elements the certification by a taxing officer of overpayment, does it not?
MR MOORE: Certification or a finding of an amount that is fair and reasonable.
GAGELER CJ: It is a very odd situation that you say you have a common law claim, an element of which is a step provided for by statute, and yet you say that the statutory means of enforcing that step can be ignored in favour of pursuing the common law alternative.
MR MOORE: Well, we would answer that by making this observation. Suppose a situation where the solicitor says: I have done $4.5 million worth of work for you, you have only paid me $3.6 million, I want the other $900,000; the client invokes the inherent jurisdiction of the court to assess those costs claimed for fairness and reasonableness; the court, exercising its inherent jurisdiction, determines that for the work that was performed reasonably, the reasonable charge is $3.6 million, the amount that has already been paid.
So, that is outside of the statute, outside of any determination that there has been an overpayment, because the amount paid equals the amount that is found to be proper and reasonable. What does that do to the balance of the contract? The contract says: pay invoices that I have issued for work that I have performed for you to the extent of $4.5 million. The answer, in our respectful submission, is the court’s decision renders that contract unenforceable.
BEECH-JONES J: Is that because of the merger?
MR MOORE: We would say not, your Honour. We would say that the court’s – if, outside of a claim to recover the $900,000, so, before the solicitor had sued for the $900,000, the client goes to court and says please tax all of these $4.5 million worth of invoices I have received, and the court determines that it will exercise that inherent jurisdiction and it concludes that $3.6 million is only the fair and reasonable charge, we would say that renders the contract unenforceable for a severable portion.
EDELMAN J: It is not even unenforceable, it is that there is no longer an obligation because, on your submission, the obligation was always subject to a condition subsequent that the money is properly found on a proper taxation to be due; and if the proper taxation finds that that excess is not due, it is just not owing. It is not a question of whether you can enforce an existing obligation, the obligation just no longer exists.
MR MOORE: Well, in our respectful submission, your Honour, in many circumstances where – a condition subsequent is probably the best example, but there can be contracts where an amount that is paid on a particular basis is enforceable the date the invoice is issued and can be sued upon, and there would not be a defence to having to pay it.
So, the amount is enforceable. But once the relevant basis fails or the condition subsequent comes to fruition, that is, in this case, assessed not to be fair and reasonable for a particular portion, we would say that what was enforceable and could be enforced in a court of law ceases to be enforceable and cannot be enforced in a court of law. That is the critical difference.
Previously, if you go to court and get a judgment, say pay this sum, now they cannot. And, in our respectful submission, that is a state of affairs that the payments were premised on not in a contractual sense but having regard to the objective dealings between the parties and what they said to each other at the time, it is a state of affairs that formed the premise of the payments that were demanded and paid, subject to a right to have these costs taxed for fairness and reasonableness.
So, in our respectful submission, on the existing authorities in this Court, Redland included, the word “consideration” in the context of failure of consideration means:
a basis, purpose or condition for a transaction by which one party confers a benefit on another.
And in this case, as the Court of Appeal itself observed, Justice Vandongen in particular at 178 to 179:
it may be readily inferred that –
both Dr Gray and Lavan:
appreciated that –
Dr Gray:
had a right . . . to have the reasonableness and fairness of the costs charged –
and paid reviewed, and that right was referred to in a predecessor to the relevant costs agreement. And that is in the appellant’s book of further materials at page 8. So, this is part of a letter between the previous solicitors for Dr Gray, the same principal, Bennett, before Lavan came on the scene. The parties below agreed that the terms of the informal contract between Lavan and Dr Gray were materially equivalent to the terms that we see in this written costs agreement between Bennett & Co and Dr Gray.
GAGELER CJ: I am sorry, where is that?
MR MOORE: It starts at page 4 of the appellant’s book of further materials.
GAGELER CJ: What part of the document is it?
MR MOORE: Page 8 of this letter, under the heading “Billing arrangements”. The last sentence says:
You should be aware that the Legal Practitioners Act gives you the right to have the Costs Agreement and our invoices reviewed for their fairness and reasonableness even though you have signed the Costs Agreement.
Then, relevantly also in another document, they recorded the arrangements between Bennett & Co and Dr Gray, commencing at page 15. I am sorry, it is enclosed with that letter – I am grateful to my friend – enclosed with that letter is the costs agreement itself, and that commences at page 15. Down the bottom, one sees:
Accounts are rendered on a regular basis, usually monthly. Each account rendered to you by the Firm entitles you to exercise any of your statutory rights either to have the account itemised or taxed and you must do so within 30 days of receipt of each account.
The Firm acknowledges your right to require the Firm to itemise each account for taxation even if you decide to exercise your statutory rights only on receipt of the final account issued by the Firm.
GAGELER CJ: So, there is agreement, is there, that they are the terms to be taken to be part of the retainer in this case?
MR MOORE: Yes, the informal retainer, yes. Based upon words and conduct, the parties agreed that it incorporated these terms.
GAGELER CJ: So, this leads you to the first way of describing the basis for the payment that you have in paragraph 5 of your outline.
MR MOORE: Yes.
GAGELER CJ: How do you say there has been – if that is the way you couch the basis of the payment, how has there been a failure of that basis? Has it not just been a working out of the basis?
MR MOORE: Your Honour, of course, it depends upon how the basis is characterised.
GAGELER CJ: Well, I am looking at your first characterisation.
MR MOORE: Yes.
GAGELER CJ: If you take that characterisation and you take your first proposition that the deed is to be treated as producing the equivalent of a statutory taxation, has there not just been a working out of the basis upon which the payment was made?
MR MOORE: That is one way to characterise what has happened. We would put it differently, in terms that we had in paragraph 5 of our oral outline. The right to retain the fees existed and depended upon any such assessment concluding that the amount charged was fair and reasonable.
So, that right objectively construed the events between the parties revealed that the basis was the right to retain the fees was contingent upon and depended upon any assessment that took place determining that they were fair and reasonable. In other words ‑ ‑ ‑
GAGELER CJ: I am sorry, what do you mean by “right”? Is this a contractual right or are you using the word “right” in some different sense?
MR MOORE: The contractual right necessarily ends and any right to retain the fees, contractual or otherwise, also ends if they are determined not to be fair and reasonable. So, the solicitor has a right to be paid, has a right to retain, but the state of affairs might alter in the future because that right comes to an end.
BEECH‑JONES J: Is that not: I just get paid now, but I might have to pay some other money back in the future? No, you are not putting it aside, it is not a fund.
MR MOORE: No.
BEECH‑JONES J: So, we are just talking about right to retain.
MR MOORE: Yes.
GORDON J: So, there is no assessment. The right is a right to retain.
MR MOORE: Yes, correct. I accept that. Yes. If there is no assessment that the fees are not fair and reasonable to some extent, there is a right to ‑ ‑ ‑
GORDON J: Under the statute, there is a limitation period for the bringing of a taxation.
MR MOORE: Yes, there is.
GORDON J: So, is your case that the right to retain – or that this, the way you put it in paragraph 5(1), is a right to retain dependent upon that time period?
MR MOORE: Yes, although there is jurisdiction to extend that time period, which was exercised in this case, initially contested by Lavan when the jurisdiction was exercised to extend the time, but that dispute about whether or not time should be extended was resolved by Lavan agreeing not to challenge the extension.
GORDON J: And that limit is a limit only to be found in statute, in the way you just described?
MR MOORE: Probably not, because in our submission, the court would retain inherent jurisdiction to review costs, although it is difficult to imagine situations where the jurisdiction would be exercised other than in circumstances where the statute would permit an extension. So, the court would have jurisdiction, but it might not exercise it because of the passage of time between payment and challenge.
BEECH‑JONES J: I think Justice Edelman has put to you the possibility of having conditions subsequent. So, you had an obligation to pay which is dependent upon a condition subsequent which, if it is not fulfilled, means you have to repay. You do not seem to have been embracing that with any great enthusiasm. Is that because, on that basis, it still could not be said that until that condition was invalidated there would be any interest?
MR MOORE: I think that is probably right, your Honour, that is why I am not embracing it, because it leaves the parties to be dealt with entirely within the four walls of the contract. In our respectful submission – so, effectively, if that was the contract, the parties would contract out of any other restitutionary claim and any other ability to recover interest.
And there are cases like that where there is a settlement agreement: I will pay you some money now, but we will go and get an auditor to review how much I am owed and if the auditor finds I have paid too much, pay it back. That happened in a case, and the claimant sought interest. And the court said, I would have given you interest but you have contracted out – you have dealt with this topic, this very topic, as a matter of contract, so there is no restitutionary right to interest, your case is entirely within contract.
So, the large question before this Court is important in this respect: are clients to be taken to have contracted out of any entitlement to a claim in restitution, including restitutionary interest, by terms that we see before us now?
GORDON J: By those terms, do you mean the original contractual terms?
MR MOORE: Yes.
GORDON J: Or do you mean the original contractual terms plus complicated by the settlement deed?
MR MOORE: Either, in ‑ ‑ ‑
GORDON J: You have to overcome both, do you not?
MR MOORE: Yes, I accept that. We cannot contract out by the settlement deed, in our respectful submission, because the one thing it bent over backwards to do was to preserve any right to claim interest.
EDELMAN J: I think you are running together two different questions. One question is: what was the basis, condition, consideration for the payments? That, at least on your submission, as I understand it, is entirely a contractual question. One does not need to look beyond the terms of the contract to work out either the express terms of the earlier contract, which become part of the informal contract, or the terms of the informal contract to say that, well, this money was paid on the condition that it would potentially be subject to a taxation.
But it is a different question whether or not, that having occurred, the contract also excludes – the four walls of the contract also exclude any subsequent restitutionary rights that arise consequent upon a failure of that condition or the condition itself materialising.
MR MOORE: Yes. Well, in the latter respect, in our respectful submission, this contract on its proper construction could not be and ought not be held to exclude any restitutionary rights or interest.
EDELMAN J: Otherwise, every case involving a condition subsequent would prevent a claim for restitution of money that is paid pursuant to a condition.
MR MOORE: Yes, I agree. If the condition subsequent is squarely written into the contract – if this happens, we will repay $X – then the parties have contracted out of any potential claim. In my respectful submission, this “Client/Solicitor Costs Agreement” cannot possibly be construed, and ought not be construed, as having the same effect.
That is, the solicitor telling the client: I am going to bill you costs and you have to pay them along the way, you have a right to at the end of the case – which might be, as this case says, on the final account, years away – you have a right to have all of my fees assessed for fairness and reasonableness, that process might require me to pay you, client, $900,000, determined not to be fair and reasonable, but let us be clear, all you get back is the $900,000, which might be worth an awful lot less then than it is when you paid them to me.
That is between sophisticated commercial parties who expressly deal with a condition subsequent in the four walls of their contract. That is what they do agree. But in this case, that is certainly what Dr Gray did not agree to, because otherwise he would have been giving a solicitor a fiduciary, a very real benefit. The time value of money, one sees from the calculations in this case, can be substantial. Substantial difference between paying $900,000 10 years ago and getting it back today.
If the contract was interpreted – these new words referencing the right to have costs assessed for fairness and reasonableness were interpreted to have that effect, the fiduciary would be obtaining a benefit from the client, we would say, without the fully informed consent of the client. Now, that is not to say that they are acting in breach of fiduciary duties, it is saying that without the ability to recover interest, that is the result. A fiduciary will have obtained a real benefit – the time value of money – without the fully informed consent of the client.
That is why we say this case cannot be regarded as simply a contract case and as incorporating a contractual condition subsequent. It is a condition referred to but not contained in the contract. It is not a contractual condition, it is a basis of payment that existed between the parties on an objective analysis of their dealings.
GAGELER CJ: Can I perhaps go back to the terms of the retainer that you referred us to at page 8, just to understand the entire landscape? There is a reference there to the Legal Practitioners Act.
MR MOORE: Yes.
GAGELER CJ: We have been given a copy of the Legal Practice Act. Is that the same thing?
MR MOORE: It is. I think I am right in saying that that is a misnomer in the letter.
GAGELER CJ: I see. And, within the Legal Practice Act, would you refer us to the critical provisions, please?
MR MOORE: Yes.
EDELMAN J: The Legal Practice Act was repealed and replaced by the Legal Practitioners Act, was it not?
MR MOORE: Yes. I think there was a transitional provision in the latter that had the effect that, for this case, it is the Legal Practice Act that continued to apply. The Legal Profession Act 2008, I am told, was the latter Act, but maintained the Legal Practice Act 2003. The Legal Practice Act2003 is in tab 3.
GAGELER CJ: So, just to be clear, we read the reference on page 8 to the Legal Practitioners Act as a reference to the Legal Practice Act 2003?
MR MOORE: Correct.
GAGELER CJ: All right, thank you. Then, within the Legal Practice Act2003, where do we go?
GORDON J: The entitlement to remuneration starts in Division 2 of Part 13.
MR MOORE: Yes.
GORDON J: Is that what we want?
MR MOORE: The taxation was developed – is in Part 13 of Division 3.
GORDON J: The reason why I wonder whether we do not need to start at section 221 is because it talks about costs agreements.
MR MOORE: Yes.
GORDON J: It sets up the framework, does it not, under which these costs agreements are entered into?
MR MOORE: Yes, and just to be clear, this was not a costs agreement within the terms of the Legal Practice Act because it was not in writing. So, when section 221 says:
A legal practitioner may make a written agreement –
it was agreed by the parties below that as between Lavan and Dr Gray, there was no written costs agreement.
GORDON J: Your point to take from that is that it recognises that you can have arrangements for the payment of fees for remuneration for legal services done that is not covered by Division 2?
MR MOORE: Yes, correct.
GORDON J: Thank you.
MR MOORE: That was agreed below, as well.
GORDON J: Then you go to Division 3, about taxation.
MR MOORE: Correct.
GORDON J: So, that can apply to both?
MR MOORE: Yes, correct.
GORDON J: So, it can apply to costs agreements which are in a written form, to be found in Division 2, and to non‑written legal costs agreements of the kind that you have here.
MR MOORE: Yes, correct. Then the right to request a bill of costs of detailed items is in 231.
GAGELER CJ: Sorry, what section?
MR MOORE: Section 231, on page 175. Then 232:
notice of intention to tax –
And then 235 is the distinction between a written costs agreement and an unwritten one:
Effects of costs agreement
(1)When taxing an itemised bill of costs a taxing officer must give effect to any costs agreement –
that means written costs agreement. And so, that section did not apply in this case. And then 238, the process of taxation, and then 240 is the result of the statutory taxation certifying:
in writing the amount . . . allowed by the taxing officer.
GORDON J: In 240(3) it talks about the effect of the certificate giving rise to interest.
MR MOORE: Yes, from that date onwards. And the question – one question before the Court in this case is whether that operates to the exclusion of any right to interest on a restitutionary basis.
GORDON J: And then 243.
MR MOORE: Yes. That is a statutory enforcement mechanism, we would say, if it is taxed and the result is that more has been paid:
than the amount authorised by the taxation . . . the person charged has a claim . . . which may be certified and enforced under section 240 –
GORDON J: One of the arguments that is put against you is that this statutory regime, and in particular – I do not identify all of the provisions, but let just take sections 240 and 243 – reflects a statutory balancing of interests where some people lose and some people gain, i.e., you can only get entitlement to interest from judgment as if it is a judgment, et cetera, et cetera. Are they are cutting across the argument which you are putting to us?
MR MOORE: That argument is put against me, and in our respectful submission, for the same reasons that the entitlement of simple interest in Hungerfords was not held to exclude the right at common law to compound interest, because it was not intended to be a code on interest. We say that provision likewise is not intended to be a code for interest, and if there is a restitutionary right to interest for a common law claim, in our submission, that section does not exclude it.
One can ask, rhetorically, why – we would not see that as a balancing of interests. This case is a good example. If a client is found to have been grossly overcharged, contractually allowed but grossly more than is fair and reasonable, and the process of taxation reveals that, one asks, rhetorically, why would Parliament intend to exclude any right for the client to obtain interest between the date of payment and the date of recovery, thereby leaving the solicitor with a windfall, the benefit of, effectively, an interest‑free loan, which might be in a large amount, for a long period of time?
GAGELER CJ: The “interest” that is referred to in section 240(3) is interest on the judgment, which I take is provided for in a provision of the Supreme Court Act, is it?
MR MOORE: Yes, yes. And 240 again uses that permissive language, 240(3):
A certificate . . . may be enforced . . . as if it were a judgment of the Supreme Court for the payment of the amount mentioned in the certificate.
GORDON J: And it works both ways. It works whether there is a payment to be made by the solicitor back to the client or from the client back to the solicitor.
MR MOORE: Yes, I accept that. Often, client costs agreement will provide for interest payable to the solicitor on unpaid fees.
EDELMAN J: And the interest that is provided for by section 240(2) and 240(3) is simple interest.
MR MOORE: Correct.
EDELMAN J: Is that not part of the answer to your rhetorical question? If Parliament was very concerned with solicitors obtaining the full value of the use of clients’ money, they would not have ordered only simple interest, certainly from the date of the certificate. Parliament is, by that provision, giving part of the benefit of the use of money to the solicitors.
MR MOORE: Only from that date onwards.
EDELMAN J: Which is the very date at which it is has been determined that there is an overpayment.
MR MOORE: Yes, exactly. And so, the client is fully informed of its rights in relation to the period from that date in the future. If it takes time for the client to enforce the judgment, for whatever reason, the client knows that it will get interest – albeit only simple interest – from that date onwards.
But the client is never told in the costs agreement anything about interest at all. It seeks restitution of what is later found to be overcharged fees. The client never agreed to not have a claim for interest, and commercial reality, as I will take the Court in a moment, the cases say commercial reality in claims for restitution demands compound interest.
BEECH-JONES J: Your claim for interest takes as a predicate that your deed effectively equates to findings or certificates under 243 and 240 for overpayment. Is that right?
MR MOORE: Correct.
BEECH-JONES J: If you had a different case, where you had said they charged us for work they did not do, it was not payable under the contracts, you could invoke this regime and get it. You could also perhaps sue for moneys had and received, but not by invoking anything about the effect of the scheme, but by simply saying: the money you got that we paid you were never entitled to under anything. And, arguably, your claim for interest might arise. But are you not invoking the scheme on the one hand but cutting across its interest provisions on the other?
MR MOORE: Only if the scheme is interpreted as excluding a common law right to interest. So, if it is interpreted in that way, yes, we are ‑ ‑ ‑
GAGELER CJ: You rely on the event that is referred to in section 240(1) occurring, or being deemed to occur, to get your common law claim.
MR MOORE: Yes.
GAGELER CJ: And you want to give that event common law consequences that are quite different from the statutory consequences.
MR MOORE: They are in addition to the statutory consequence.
GORDON J: I do not know about that. I had understood your submission was that, consistent with the questions just put to you by the Chief Justice and Justice Beech-Jones, that in a sense you are relying upon, in effect, a deemed certificate and, in effect, contending that a deemed certificate somehow invalidated the retainer.
MR MOORE: Yes, we do say that.
GORDON J: And so, one of the reasons why I think the questions being are really critical, because that is not only just construction of the relevant documents, but one is really looking at the Legal Practice Act and looking to see what, in effect, that Legal Practice Act does, because it is an essential plank of your argument.
MR MOORE: Yes, I fully accept that.
GORDON J: So, for me, I have an issue – and I speak only for myself – about – that there is a statutory scheme being set up that you invoke. It is a statutory scheme which on its terms does not – at least, subject to what you might say – appear to me to invalidate that retainer at all in the way that you would contend and, in a sense, has its own structures – especially in 240 and 243 – about the way in which interest is going to be dealt with once there is a certificate.
So, it sets up a framework, which is a balancing of interests, having looked at it, picks a point in time, picks the way in which interest will be imposed and from when it will be imposed. For me, they are the difficulties at the moment.
MR MOORE: Yes, I understand those propositions and acknowledge that those propositions are put against us. We say two things in response. On invalidation, it is a necessary consequence of any taxation, inherent or statutory, that the contractual obligation is invalidated to the extent of what is determined to be an overpayment.
JAGOT J: Well, I have that anterior issue, which – I am struggling to see how a contractual fiction as between the parties has any operation back on the validity, if you put it that way, of the payment or anything that happened earlier. To me, it is – leaving aside that you are invoking the statute – truly a fiction. It is as if, deeming, by contract between the parties.
MR MOORE: Yes.
JAGOT J: It says nothing about any – that on and from that fiction, there is to be, as between you, a certain assumed state of affairs.
MR MOORE: Yes.
JAGOT J: But how does that reach back at all?
MR MOORE: We do embrace the notion, because it is the parties’ agreement, that this is in a sense a fiction. There was no taxation process that went to its end conclusion, we accept that.
JAGOT J: I mean, it could have been done differently, for example. For example, there could have been an undisputed bill of costs or whatever filed to get a certificate, and it would then genuinely be a taxation, and whatever legal effect that had, it would have. And then you would be in the realm of the statute.
MR MOORE: Yes.
JAGOT J: But it is just – I am not saying “just”, I mean, it has effect between you, but how does it do anything retrospectively? It just takes an agreement as it exists at the date of the settlement deed and, prospectively, certain consequences attach. It has really got nothing to do with the statute at all.
MR MOORE: Well, what we say is building upon the fiction that the parties have agreed to treat themselves as bound by, as if a taxation had concluded the amount was overpaid and was to be refunded, we then say, well, if that had happened as the parties agreed, it must be treated as having happened.
JAGOT J: Is that a version of wanting to bake your fictional cake and then eat your fictional ‑ ‑ ‑
MR MOORE: Well, if a client – we fully accept that if we are in the position of being a client who does achieve an actual taxation that determines an amount that has been overpaid and that client would not be entitled to interest, then we lose our interest claim. We ‑ ‑ ‑
GAGELER CJ: We – I am sorry, Mr Moore, please finish your answer.
MR MOORE: But we say that that is not the conclusion, because the contract becomes unenforceable to the extent of the overpayment.
GAGELER CJ: We will take the morning adjournment.
AT 11.19 AM SHORT ADJOURNMENT
UPON RESUMING AT 11.35 AM:
GAGELER CJ: Mr Moore.
MR MOORE: Your Honours, can I just make some observations about the Legal Practice Act 2003 and contrast that with the position under the Legal Profession Act 2008. The scope of the legislation governing charging and recovery of legal costs in 2003 is much narrower than the position in 2008 and, in particular, under the 2003 Act, the contractual rights of the parties remain, unlike the position in 2008 ‑ ‑ ‑
GAGELER CJ: Sorry, I am getting a little confused about the timing here. At the time of the retainer being entered into and the amounts paid, was it the 2003 Act that prevailed?
MR MOORE: Yes.
GAGELER CJ: All right. And then what happened?
MR MOORE: Then the taxation process was invoked and the transitional provisions in the 2008 Act said that the 2003 Act continued to apply to this case.
GAGELER CJ: Right. So, why do we need to know about the 2008 Act?
MR MOORE: I am just contrasting the scope of the legislation as being narrower and, in particular, maintaining the ability, for example, of a solicitor, to recover the contractual enforceability of an unwritten costs agreement. Under section 287 of the 2008 Act, an unwritten costs agreement is void and it permits recovery of legal costs under a specific regime only and not otherwise, so there is no contractual right at all. So, the scope – 2003, by contrast does not make void or invalidate the unwritten contracts.
So, that is an example of the scope of this legislation being narrower than in 2008. We say that that shows the legislation is premised upon general law rights remaining, contractual claims – which I have mentioned – the ability to recover costs or other losses for breach of fiduciary duty are unaffected. And we say that money had and received claims if otherwise available to recover costs is also unaffected.
Can I just return then to the point about simple interest only being given by the statute once a taxation determination reaches the conclusion that costs have been overpaid. That might well give an incentive to a client to enforce the judgment promptly, to put the money to better use than simple interest. But it says nothing, in our respectful submission, about the client’s prior rights if otherwise available at general law to restitutionary interest, which we say ought be regarded as compound.
Then, can we just give the case citation that I think I mentioned before of a settlement agreement not being provided for excluding a right to interest. That is Lahoud v Lahoud – it is mentioned in the judgment below at core appeal book page 23. That is the decision I mentioned before, where a disputed amount was paid, under a deed of settlement providing for an audit, it came back ‑ ‑ ‑
GORDON J: This is the New South Wales Supreme Court decision, [2010] NSWSC 1297?
MR MOORE: Yes, it is.
GORDON J: Which part do you rely upon?
MR MOORE: It is just to show that settlement agreements will often – it cannot be said, as the trial judge said below, that if this settlement agreement in this case permits the client to not only recover the sum that was agreed to repaid but interest, then the same could be said about any settlement agreement.
The trial judge reached that view, and we say that that is contrary to how settlement agreements normally operate, and Lahoud v Lahoud is a specific example – settlement agreement to pay a particular sum of money that might come back on a particular event, said nothing about interest, held to exclude any interest, including interest on a restitutionary basis.
Contrast this case, where, as I have said, the parties bent over backwards to not exclude any right to claim restitutionary interest. Could I then ask your Honours to turn – still on this second point that a client has a money had and received claim for overpaid legal costs – to Pavey & Matthews, which is volume 5 of the joint authorities, tab 16.
It is just some passages from Justice Brennan’s reasons that I wish to highlight. This is the interplay between a claim at common law, the money had and received, and a contractual regime. At page 234, page 1369 of the joint book of authorities, Justice Brennan said in the last paragraph:
A contract cannot be implied from the facts of a case –
we are talking about the old law when money had and received was by implied contract:
while another contract between the parties on the same matter is subsisting.
Then, this notion of the “subsisting” contract is repeated on page 1370, 235 of the Commonwealth Law Reports, second‑last paragraph:
It follows that if a claim in indebitatus assumpsit founded on a debt arising out of a subsisting contract cannot be pursued by reason of the Statute of Frauds, no contract cannot be implied –
and the same notion appears again at page 237, of:
no quasi‑contractual obligation arises when there is a subsisting contractual obligation governing the same subject matter.
BEECH-JONES J: Whereabouts on page 237 did you ‑ ‑ ‑
MR MOORE: I am sorry. On 237, it is the large paragraph commencing with:
Here his Lordship –
and about a third of the way through that paragraph is a sentence commencing:
The principle is that no quasi‑contractual obligation arises when there is a subsisting contractual obligation governing the same subject matter.
GORDON J: At the foot of that paragraph, it says:
When a subsisting contract provides, expressly or impliedly, for renumeration to be paid, the performance of that contract cannot give rise to a quasi‑contractual right to renumeration.
MR MOORE: Yes, and that is because that contractual obligation subsists. And we say if there is that subsisting obligation, then a quasi‑contractual – what might now be said to be in a restitutionary claim of unjust enrichment – cannot interfere with that subsisting contractual right. That is why we have emphasised, in our submission, the consequence – the legal consequence of a taxation finding that fees have been overcharged and overpaid. The legal consequence is that obligation to pay is no longer subsisting.
BEECH-JONES J: Which obligation? The obligation to under the ‑ ‑ ‑
MR MOORE: Contract.
BEECH-JONES J: Of the retainer?
MR MOORE: Yes.
GAGELER CJ: Even if it has been discharged by performance?
MR MOORE: Yes.
GAGELER CJ: Is it meaningful to even speak in those terms, if it has been discharged by performance?
MR MOORE: Well, one compares the situation if it has not been discharged by performance, and that is the example I gave before of the client, having been billed $4.5 million, has only paid $3.6. There is a subsisting contractual obligation to pay the balance unless and until the taxation process concludes fair and reasonable charges is only $3.6.
GAGELER CJ: Let us drill down on this. You say the legal consequence of certification under section 240(1) is that the contractual obligation to pay no longer exists. Is that right?
MR MOORE: Correct.
GAGELER CJ: Now, the legal consequence, is that a statutory consequence or does it have its source in some other kind of law?
MR MOORE: It is a general law obligation, yes.
GAGELER CJ: So, it is, as a matter of general law, the statute has this effect on the contract?
MR MOORE: Yes.
GAGELER CJ: All right. So, what is the general law principle that you rely upon for that proposition?
MR MOORE: The fact that solicitors’ charges under contract are always governed and subject to the jurisdiction of the court, inherent or statutory, to have costs assessed for fairness and reasonableness. It is an inherent part of our legal system that contractual provisions cannot operate and do not operate contrary to the exercise of that inherent jurisdiction or statutory jurisdiction, and the example I gave shows that that must be so. The solicitor cannot sue for unpaid fees under contract if the amount unpaid is determined not to be fair and reasonable.
BEECH-JONES J: In that example, the solicitor would be suing for an amount contrary to what was certified under 240.
MR MOORE: Yes, if the statutory process was followed to its end conclusion.
BEECH-JONES J: All right. And on your deed, they would be suing for an amount that was inconsistent with the parties’ rights as established under the deed?
MR MOORE: Yes.
BEECH-JONES J: So, that would – it would either be the certificate – the operation of the statute or the operation of the deed that would cut across the contractual rights, would it not?
MR MOORE: Yes.
BEECH-JONES J: But not some broader general law principle beyond that. The statute in one case, the deed in the other.
MR MOORE: Well, one asks what would the position be if, rather than the statute being involved, the inherent jurisdiction to review solicitors’ costs was invoked? The outcome would be precisely the same, in our respectful submission. The client has the option, open on the authorities, including the Court of Appeal on this case, to invoke the inherent jurisdiction, with the consequence that the court can supervise its officers by reviewing fees charged and determining that some part is not enforceable. Absent statute, that must be the legal effect of the court exercising its inherent jurisdiction.
If that proposition is accepted, then one asks: why is the position any different under the statute? The statutory review process, complementary to and depending upon the inherent process, should not be concluded to have any different outcome. The outcome, as a matter of general law and inherent part of our legal system, is that the court has the power to invalidate and render unenforceable what was previously an enforceable legal contractual right.
BEECH-JONES J: If you had a taxation of an interim bill and the court, either under this statute or this, comes in and said: here is the certificate, that is the amount owing, and then the next day, the solicitor does another piece of work in the same case, the obligation under the retainer still exists, does it not?
MR MOORE: Yes, to pay the next bill? Yes.
BEECH-JONES J: To pay the next bill.
MR MOORE: Yes, I accept that.
BEECH-JONES J: The obligation does not go away?
MR MOORE: No, no.
GAGELER CJ: Whether you go the inherent jurisdiction route or the statutory route, the result is either a judgment or a deemed judgment of the Supreme Court.
MR MOORE: It is.
GAGELER CJ: The question may be: what are the rights that emerged in the judgment?
MR MOORE: Yes, but it would have a legal consequence even if the contract was not sought to be enforced in that proceeding. It was the client’s action to invoke the inherent jurisdiction of the court to assess unpaid invoices. A consequence of the court concluding what the fair and reasonable charges are must necessarily be, in our submission, that the contract is no longer enforceable to the extent of the court’s determination.
BEECH-JONES J: The alternative would be that the rights of the parties as to how much is owing from X to Y emerges in the judgment – that the obligations continue to subsist in respect of future rights. That would be the doctrine of merger that does that, or estoppels or other kinds of aspects of a judgment.
MR MOORE: Yes, but even if that is the conclusion, in our submission, conceptually, that is the same result as what happened in Roxborough. There was a contractual obligation, it was no longer enforceable.
GORDON J: But that is the question I am not clear about – it is the last bit – because your argument is predicated on an essential proposition that, whether it is inherent or statute, the judgment – whatever its nature – gives rise to a consequence that invalidates the retainer.
MR MOORE: To a severable portion.
GORDON J: That is the bit, just for my part, I think is the difficulty at the moment, for the reasons Justice Beech‑Jones put to you in relation to interim, past and future and, second, because of the nature of the contractual relationships which are identified in this case, recognising that there is this potential for – which is ultimately acted upon in different ways – for there to be taxation.
MR MOORE: Yes. If I have put the proposition as broadly stating that the entire contract is invalidated ‑ ‑ ‑
GORDON J: No, no, to be fair, I think you have put it on the basis that it is the portion that is the subject of the determination, by judgment or otherwise, that it was not fair and reasonable.
MR MOORE: Yes.
GORDON J: That is the amount.
MR MOORE: Yes.
GORDON J: I understand the argument.
MR MOORE: Yes. So, it is only to that extent that there was once a contractual obligation, but after taxation, that particular contractual obligation is invalidated and is unenforceable.
GAGELER CJ: I do not really understand what the word “invalidated” means in this context.
MR MOORE: It means to render unenforceable. It is no more than that, although it is a particularly important and large consequence. The obligation becomes unenforceable. So, whether it is put as a conditional payment – condition being that the right to retain depended upon assessment of fairness and reasonableness – or as a state of affairs, legal enforceability, that fails to sustain itself. On either basis, in our respectful submission, there is a claim for money had and received to recover the sum found to have been overpaid.
So can we just say, briefly, a couple of points in response to what is put against us. Firstly, it is suggested that that would upset the contractual obligation of risk. That is, indeed, a matter emphasised in some decisions, and is sought to be emphasised by Lavan here. In our respectful submission, there is no such allocation of risk.
The contract, with its reference to a right to have costs assessed – fairness and reasonableness –cannot be regarded as allocating the risk to the client that when fairness and reasonableness determine that money is to be repaid, potentially a long time after payment, then only the nominal sum will be repaid. The true proposition is that the contract simply did not deal with that potential outcome and therefore there was no contracting out of any right to mount a claim in restitution that brings with it, in our submission, a right to interest.
Then there is the notion that for failure of consideration there need to be a total failure. In our submission, the proper question is whether consideration was received for the payments sought to be recovered – David Securities at 383 use that very language, and the Supreme Court of the United Kingdom in Barnes v Eastenders said that:
Modern authorities show that the courts are prepared, where it reflects commercial reality, to treat consideration as severable.
Here, the basis of the dealing between the parties was that consideration could be severed between what was proper and what was not, the parties expressly adverting to that possibility in their dealings.
BEECH-JONES J: On your case, when was the interest payable from?
MR MOORE: It became payable on the date of the deemed taxation; it is calculated from the date of payment of the original legal fees.
BEECH-JONES J: And when was that? Because this is a $900,000 out of, as I understand it, a group of invoices paid over years.
MR MOORE: Yes, but the agreed facts between the parties – and I will have my junior turn them up – recorded that the parties were content to treat the $900,000 as being paid on the last time a payment was made. So, in some cases it might be a complicated exercise to work out, but in this case, we offered and the proposition was accepted that the $900,000, if the interest was payable, was calculated from the date of payment, the date of payment being the last day that payment was made, on 30 June 2008.
So, that is in the core book, that is the statement of agreed facts – sorry, it is not the core book, it is the appellant’s book of further materials on page 124, at paragraph 13. The actual legal costs were paid between 2006 and 2008 ‑ ‑ ‑
BEECH-JONES J: This $900,000 was not referable to a particular invoice or invoices?
MR MOORE: Correct, correct. But the parties ‑ ‑ ‑
EDELMAN J: Justice Vandongen records that agreement at core appeal book 57, footnote 37.
MR MOORE: Thank you, your Honour. Just to conclude that second point, I said that in David Securities, when a defence of good consideration was raised, the High Court answered by saying the relevant question is: was there any consideration received for the payment sought to be recovered?
In this case, we say, with the benefit of hindsight it can now be seen that for the legal services provided, the solicitor is entitled only to, here, 3.6 million. For the additional $900,000, it can now be seen that Dr Gray received nothing. That is another way of saying for the severable proportion of the fees, or the severed proportion of the fees, there has been a total failure of consideration.
Can I turn then, lastly, to the third proposition, which really combines two points, because the cases that we wish to refer to deal with both of them. The first point is, if there is a right to restitution to recover money paid, interest is an essential component of that right, without which the remedy of restitution is incomplete and justice is not done – point one. Point two, commercial reality demands that the interest be compounded.
EDELMAN J: And retrospectively.
MR MOORE: Yes.
GORDON J: To date of payment.
MR MOORE: Yes. Just as in all of the frustration cases, termination cases, rescission cases.
GAGELER CJ: This is your footnote?
MR MOORE: Yes.
GAGELER CJ: I have not looked through all of those cases, but are they based on the notion that the contract in question is void ab initio?
MR MOORE: No. Some of them are, in the sense of rescinded ab initio – not void ab initio but rescinded ab initio. Some of them are in that category, but others are not, they are simply termination cases.
EDELMAN J: But they are statutory interest cases – the termination ones. None of them are claims for restitutionary interest.
MR MOORE: The interest claimable from the date of payment might have used the statutory rate but – I will stand corrected – the actual award of interest was at general law, because the statutes, I think I am correct in saying, all provide for interest to run from the date of the cause of action. The cause of action does not arise until well after the payment – date of termination, date of frustration, date of rescission, date of other form of avoidance.
GAGELER CJ: You have about 20 cases there. You might just tell us the best one for you.
EDELMAN J: The best one on termination or frustration.
GAGELER CJ: Frustration would assist the most, yes.
MR MOORE: Would your Honour give me one moment?
GAGELER CJ: You can take it on notice.
MR MOORE: Yes, can I take that on notice, your Honour?
GAGELER CJ: Yes.
MR MOORE: Your Honours, some general propositions which we say are supported by authorities. The purpose of a claim in unjust enrichment is to restore the parties to their pre‑transfer or payment position. Many cases – for one, Investment Trust Companies and Her Majesty’s Revenue [2018] AC 275, at 42 of the Supreme Court of the UK, and there are many cases to the same effect.
To restore the parties to their transfer position requires account be taken of the time value of money, hence that requires interest as an essential component of the award of restitution, not an additional award of interest on top of restitution. Both economic reality and general principles support the conclusion that the interest be calculated on a compound basis so as to return the full value of what was paid.
We draw an analogy with the Court’s assessment of compensation in Hungerfords v Walker, where the common law’s reluctance to award interest as compensation was held to be unprincipled and should no longer be followed. Chief Justice Mason and Justice Wilson, at 150, remarking that:
The disdain of the common law for interest, especially compound interest, is a “relic from the days when interest was regarded as necessarily usurious” –
and their Honours said, at 148, that there should be a:
logical development of fundamental common law principle so as to accord with commercial reality –
Justices Brennan and Deane also said that the reluctance to award interest was contrary to principle and commercial reality. We say the same proposition applies here.
The reluctance of the common law to award interest as part of a restitutionary award should be held to be unprincipled, it should no longer be followed, and to restore the payment in real terms requires interest to account for the time value of money and that the failure to do so defies commercial reality. In Hungerfords, Chief Justice Mason and Justice Wilson said, in remarks that we would adopt here, at 149:
The award of interest was of necessity compound interest. Simple interest would not reflect accurately the extent of the respondents’ loss. Simple interest almost always undercompensates the injured party’s true loss.
Those remarks, although concerned with loss, can equally apply, in our submission, to the benefit.
GAGELER CJ: A Hungerfords v Walker claim is for damages which need to be pleaded and proved.
MR MOORE: Correct, yes.
GAGELER CJ: So, we are not concerned with really the same concept, are we, here, with the restitutionary claim.
MR MOORE: No.
GAGELER CJ: So, how do you put it in terms of restitution? It is not disgorgement of the defendant’s gain, is it?
MR MOORE: No.
GAGELER CJ: Because you are not saying you inquire into what has happened. So, how do you put it?
MR MOORE: We put it on the basis that the benefit that is transferred must be valued to reflect commercial reality and the proposition that money has a time value.
EDELMAN J: The opportunity to use, not the actual use, that you rely on?
MR MOORE: Yes, exactly. That benefit necessarily comes with any payment of money. The opportunity to use it reflects its time value. To get back, 10 years later, the nominal amount that was paid by mistake or on a basis that fails 10 years previously is not to achieve restitution. In real terms, only part of the benefit that was transferred to the recipient would be recovered if that was the outcome.
EDELMAN J: Subject to the cases or the best case that you are going to refer to, there is a little bit of difficulty with saying that there is unjust enrichment by having the opportunity to use money for a period of time during which the defendant was entitled to use that money. Contractually entitled, on your case, to use that money; to have and to use it.
MR MOORE: Yes, but if that contractual entitlement is affected by a basis or a condition that attached to the payment, then one can see that there was never an unconditional accrued right that could never be interfered with. In hindsight, although contractually enforceable in the interim – in hindsight, in a real practical sense, one can see and say quite fairly that the defendant ought never to have received that.
Not to say that they did not have a contractual right to receive it; not to say that there was not a contractual obligation at the time, but particularly in this context – overcharged solicitor’s fees – in a real practical sense, one can say that, despite the terms of the contract operating with full force in the interim, it can now be seen that the solicitor ought not to have received that money.
BEECH‑JONES J: Does this entitlement to either – I will not use the word “entitlement” – does this approach to compound or even simple depend on the character of the parties? I realise you say it does not include their actual use but – so that if this was a consumer, or to get back the recovery, say, from consumers or by them – would we be talking about the commercial reality of compound interest?
MR MOORE: Perhaps not, and I think your Honour is quite right, with respect. The valuation of the benefit that is transferred might well, in other contexts, take into account the character of the parties. If the recipient was a charity, not making commercial use of funds mistakenly paid or on a basis that fails, the value of the opportunity to use that money might well, in that context, not be reflected by an award of compound interest.
But here, we have a commercial party, Lavan Legal, operating a business for profit, who can readily be inferred used the overpaid amounts in its business. And in that context, commercial reality would not interfere with the ordinary notion that in commerce interest is compounded.
EDELMAN J: You rely on an analogy with chattels – a mistaken transfer of a chattel for two years.
MR MOORE: Yes.
EDELMAN J: It is well established that, for that period, a recipient has to pay for the value of the opportunity to use that chattel, even if the recipient does not actually use it for the two years.
MR MOORE: Correct. We do. And that analogy ought to be applied equally to money. The analogy in your Honour’s example also opens up the prospect that the defendant can resist a claim for interest if it can establish a change of position. If its restitutionary claim is accepted to exist, then it comes with restitutionary principles, one of which is the recipient has available to it the defence of change of position.
So if – your Honour’s example – relying upon the good faith of the transfer, the recipient acted in such a way that it did not use the money or the chattel for profit and would suffer a detriment if it now had to pay compound interest, then that defence can be run and argued. But the analogy with chattels we adopt with respect and say the same principles ought to apply to money.
Your Honours, there is a lengthy discussion of the cases that was undertaken by President Mason in Heydon’s decision, recording what his Honour had previously set out in National Australia Bank v Budget Stationery – that is in the joint book of authorities in volume 6, tab 21. So, in Heydon’s decision on page 603, paragraph 14 is the commencement where his Honour records the:
right to restitution with respect to moneys paid –
pursuant to a judgment:
later set aside –
with interest. It, at paragraph 14:
exists at common law –
based upon principles of unjust enrichment. Then there is a reference over the page to the notion that:
the common law does not allow interest on recovery of money in claims for debt and damages –
but his Honour noted that:
there are many cases of undoubted authority where this has happened.
It then sets out what his Honour said in National Australia Bank v Budget Stationery, and there is a long description of some of the cases, which we would commend to your Honours. I particularly draw attention to, over the page at 605, where six lines from the top your Honours see the passage:
where a contract has been discharged for breach, repudiation or in exercise of a contractual right –
skipping one sentence:
In all of these cases, interest was awarded at common law and computed from the date of receipt of moneys ordered to be repaid, even where (in cases unlike the present) the restitutionary cause of action leading to the obligation to repay the ‘principal’ may have arisen later. Thus, it is well established that where a contract is terminated for breach by the vendor, the purchaser will recover the deposit together with interest from the date of original payment, even though termination does not operate ab initio –
And that is an example, we would say, of the common law awarding interest on restitutionary principles from the date of payment even though the cause of action to recover the deposit accrued later ‑ ‑ ‑
EDELMAN J: Was there any argument in any of those cases about whether the time for payment of interest should be the date of payment or the date of termination?
MR MOORE: Your Honour, I cannot answer that question as I stand here now, but his Honour regarded the result as evidently just and consistent with principles by remarking that:
these cases proceeded upon the obvious principle that, when A retains money owned by or owing to B over a period of time, A derives a benefit (at B’s expense) usually measurable by what A would have had to pay in the market to borrow that sum for that period. Since this benefit is derived without justification and at the expense of the person to whom the principal sum was due –
And then ‑ ‑ ‑
GAGELER CJ: It is difficult to apply that explanation to a case of termination.
MR MOORE: Your Honour, it is in literal terms, the money retained in the meantime was not “owned by or owing to” the payer in the interim period. Nonetheless, those cases have awarded interest from the date of payment, including in cases of termination. They must, in my respectful submission, have proceeded upon the sort of principle that President Mason articulated, to ‑ ‑ ‑
BEECH-JONES J: I suppose, where a contract is terminated for breach by the vendor, that is before settlement, so the whole thing is effectively gone. There might be other contracts where you get termination for breach, but you cannot say that the whole contract has failed. So, it may all depend on context.
MR MOORE: Yes, but the termination case before settlement does not operate ab initio.
GAGELER CJ: It may also depend on the nature of the deposit.
MR MOORE: Yes. And then, adopting the chattel analogy or land analogy at the end of the next paragraph, President Mason quotes the leading text on petitions of right:
‘As interest may be considered as the “mesne profits” of money in the same as rent is of land, it is not, perhaps, too much to consider it amenable to the same rules as regulate the repayment of mesne profits of land’ –
Of the cases we have given you in that lengthy footnote, Chow v Yang [2010] SASC 96 at 33, there was some argument about when – I am sorry, with Lexane, which is in the footnote, third line from the bottom, there was, I am told, argument in that case about when interest should run from on the pages we have annotated. That was a termination case in which there was argument about when interest should run from and the court ordered interest from the date of payment.
Although I accept, of course, the proposition that the award in Hungerfords was of a different nature to the remedy of restitution, nonetheless, it is relevant to note the passage at page 147 of that decision, and I will take your Honours to it. It is in volume 5, tab 12, page 147. The last paragraph is the section that I think I mentioned earlier today, that:
legislative intervention in the form –
of a section that allowed interest, simple interest:
precludes further development of common law –
That proposition was rejected:
The section is not intended to erect a comprehensive and exclusive code governing the award of interest. It is a provision intended to provide a plaintiff with some protection against the late payment of damages. The section does not attempt to regulate the measure of compensation to be awarded for a specific head of loss.
And the sections expressly anticipate that there might be interest recoverable other than under the statute. One of those sections is reflected in the Supreme Court Act 1935 in the book of authorities at section 32.
GAGELER CJ: So, where are we? Section 72?
GORDON J: Section 32.
MR MOORE: Section 32(2)(b) says that:
This section does not —
. . .
(b)apply in relation to any debt upon which interest is payable as of right whether by virtue of any agreement or otherwise –
That reflected the scope of the language in Hungerfords. One of the sections cited by his Honour for the proposition that interest under the legislation was not intended to be a code.
GAGELER CJ: Do you know where the post‑judgment interest provisions is? You could perhaps take that on notice as well.
MR MOORE: Could I just take that on notice, your Honour?
GAGELER CJ: Yes.
MR MOORE: Probably is in a different Act, so I have asked my learned junior to pull it up. Finally, on this topic of whether, if there is a common law restitutionary claim to restitution, it is a necessary part of that award that the court exercised its power to award interest for the whole period that the claimant is out of its money. I will need to address your Honours on the three decisions of the ultimate appellate court in the United Kingdom – Westdeutsche, Sempra and Prudential.
Each one of those three cases involved a situation where interest was payable on the common law claim for the whole period that the claimant was out of its money but the statutory right to interest was simple only and the legislation said that interest on interest was not to be awarded. Despite that availability and that statute, two members of the House of Lords in Westdeutsche and three in Sempra held that compound interest should be awarded. In Westdeutsche the majority said that it:
would be usurping the function of Parliament if –
the court were in equity to award compound interest in aid of the bank’s common law claim for repayment of the principal sum. And the reason the court in Westdeutsche was looking only in equity was because it was conceded by the claimant in that case that compound interest was not available at common law.
Three members of the House of Lords said it would usurp Parliament’s role if a court in equity were to award compound interest. We say three things about that case. The first I have mentioned, that there was a concession that compound interest could not be claimed at common law.
Second, the proposition that motivated the majority to reach the conclusion it did – namely, that the general law should not be developed to permit compound interest because of legislative intervention – is a proposition that is inconsistent with the reasoning in Hungerfords, albeit in a different context. That reasoning being that the right to simple interest under statute did not operate as a code and ought not, and did not, impede the development of general law principles.
The third thing is that, in our respectful submission, the reasoning of the minority in Westdeutsche is, with respect, far more persuasive and reflective of principles in Australia, and we commend to your Honours the passages – and I will not take your Honours to them – at 691, where Lord Goff said that without a complete remedy incorporating compound interest, the defendant would:
retain part of the enrichment which it has unjustly enjoyed.
And that:
Full restitution requires . . . compound interest –
At 719, Lord Woolf endorsed the remarks of Justice Hobhouse that:
Simple interest does not reflect the actual value of money.
Returning again to Lord Goff at 696:
I start with the position that the common law remedy is, in a case such as the present, plainly inadequate, in that there is no power to award compound interest at common law and that without that power the common law remedy is incomplete.
At 697, it is:
a thoroughly desirable extension of the jurisdiction, consistent with its underlying basis that it exists to meet the demands of justice. An action of restitution appears to me to provide an almost classic case in which the jurisdiction should be available to enable the courts to do full justice.
And at 720, Lord Woolf:
Any other decision would be inconsistent with the court’s ability to grant full restitution.
Then we have Sempra. In that case, the claim was only for the interest, the principal sum had already been accounted for. So, just like this case, a claim where interest only was in issue. The defendant accepted that interest was to be paid but claimed it should only be simple. Three members of the House of Lords said that interest was necessarily to be compounded. First, Lord Hope, at 32, invoked the analogy of the use of property:
as in cases of property other than money where the claim includes restitution for the value of the use of the asset that was transferred, subtraction of the enrichment from the defendant includes more than the return of the money that was transferred at its nominal or face value.
And there is ample authority about the opportunity to use property involving land or chattels or, even in Blake, confidential information. Then, at 33, Lord Hope said that:
Simple interest is an artificial construct which has no relation to the way money is obtained or turned to account in the real world.
At 41:
the obvious reason for awarding compound interest is that it reflects economic reality . . . Computation of the time value of the enrichment on the basis of simple interest will inevitably fall short of its true value.
Then similar passages at 52, 92 and 102, and in 112, Lord Nicholls saying:
An award of compound interest is necessary to achieve full restitution and, hence, a just result.
Lord Walker agreed with Lord Hope and Lord Nicholls in holding that compound interest should be awarded – see 178 and paragraph 183.
GAGELER CJ: Mr Moore, none of this is binding on us.
MR MOORE: No.
GAGELER CJ: We have conflicting authority, it is really just the ideas that we need from you – the gist of it, the main point.
MR MOORE: Yes. Can I just say two things about Prudential. The idea that led to the Supreme Court in that case overruling Sempra in a situation of fiscally extraordinary circumstances – millions of dollars having to be paid by the Revenue if compound interest was awarded – there were several reasons given for overruling it. One was there was a specific statutory scheme for overpaid tax that excluded compound interest.
EDELMAN J: There was one point of principle that was given, independent of statute, and that was it was said that the payment of a capital sum was a single benefit, and it did not include – or it brought within it the value of the use of the money ‑ ‑ ‑
MR MOORE: Yes, exactly.
EDELMAN J: ‑ ‑ ‑ and that has been fairly heavily criticised.
MR MOORE: Yes, and we seek to criticise that notion here. The reasoning being that the cause of action arose at the moment the money was paid – for example, paid by mistake – and there is no cause of action to recover interest as a separate remedy. Accordingly, the Supreme Court said that the “at the expense of” element of a claim in unjust enrichment was not satisfied.
We say in relation to that idea that that is a sufficient reason in and of itself, putting to one side the other reasons for overruling Sempra, but that reason is unprincipled, in our respectful submission, and it ought not be adopted by this Court. Firstly, it treats the element of “at the expense of” and the principles of unjust enrichment as capable of direct application, which is contrary to the authority in this Court – Redland at [180].
Secondly, as commentators have criticised, the notion that there was only one thing transferred and interest is not part of the restitution is artificial. It is artificial to conclude that the opportunity to use the money paid by the defendant to the defendant was not a benefit obtained at the expense of the plaintiff in the sense that it came from the plaintiff pursuant to a transaction directly with the defendant. It is a necessarily inherent part of the payment of money that a restitutionary claim to recover that money must take into account, in our submission, its time value.
To ignore that reality is inconsistent with the reasoning in Hungerfords and inconsistent with all of the cases, including those passages in Sempra and in Westdeutsche which were not criticised by Prudential about commercial reality, complete restitution, a just result, all of those passages supporting the proposition that in order to reverse the benefit obtained at the expense of the plaintiff, restitution must come with interest to reflect the time value of money.
It is inconsistent with Hungerfords because Chief Justice Mason and Justice Wilson at 144 dealt with that very argument. There is a cause of action to recover damage when damage is suffered by the wrong of the defendant. There is no further wrong committed by the defendant on account of the delay in compensating the plaintiff between the initial damage and the award of damages by the court. As Chief Justice Mason said:
But the problem is not concerned with finding a cause of action; rather it is a problem of defining the limits of recoverable damages for an established cause of action.
And we say the same principle applies here. There is a cause of action to recover a mistaken payment. One must define the recoverable restitution to reflect the defendant’s enrichment by reason of that payment.
In any event, that reasoning, based upon the moment the cause of action arises, thereby excluding any claim for interest because it is simply a delay in the defendant repaying the money, cannot apply in a case such as the present, based upon failure of consideration. In a mistaken payment case, the cause of action arises on the date of payment. The Supreme Court in Prudential would say the delay between that moment and judgment is to compensate the plaintiff for a failure to pay at that moment. But here, there is no cause of action until the basis fails.
But if your Honours accept the proposition advanced by President Mason in Heydon, and reflected in the cases we have given you, that interest to effect full restitution must be calculated from the date of payment, even when the cause of action arises later, then the analysis in Prudential simply cannot apply to reject the proposition that full restitution requires interest for the entire time that the plaintiff was out of pocket.
EDELMAN J: One of the cases that you have referred to, the Lexane Case, refers to Justice Dixon’s judgment of McDonald v Dennys Lascelles. Justice Dixon says:
“The very idea of payment –
talking about a payment that is made subject to a condition subsequent:
falls to the ground when both have treated the bargain as an end; and from that moment the vendor holds the money advanced to the use of the purchaser” –
You have to say that is wrong, do you not?
MR MOORE: Only – it can be correct to the extent that, prior to that moment, there was no claim that the vendor held the money to the use of the plaintiff. The question is, when the claim arises, what is the remedy? Restitution. What is the quantum of the remedy? It must take into account the time value of money. So, we would not say necessarily at all what Justice Dixon said is incorrect.
GAGELER CJ: Well, Mr Moore, we have reached the luncheon adjournment.
MR MOORE: Yes.
GAGELER CJ: Have we completed your submission?
MR MOORE: I just have one more point to make.
GAGELER CJ: You should make it, I think.
MR MOORE: Yes. It adopts, with respect, the proposition put by Justice Edelman in Northern Territory v Griffiths at 339.
BEECH‑JONES J: In what, sorry?
MR MOORE: Northern Territory v Griffiths, joint book of authorities volume 5, tab 15, at 339. That case involved a claim for interest, but in a vastly different context of native land title compensation. His Honour said that:
A third issue –
if interest is properly claimable:
is any incongruity that would arise by, on the one hand, not subjecting the defendant to a prima facie obligation to restore the value of the opportunity to profit from the use of money received by unjust enrichment yet, on the other hand, recognising a defence to the extent that the money is used unprofitably.
We adopt, with respect, that analogy. If a defendant is able to invoke a change of position defence to say it ought not account for the time value of money because of the way the money in question was used on the faith of the receipt, then when such a defence is not open – and, indeed, the inference is that the money was used profitably, for example, in a business – it is incongruous not to award the plaintiff interest as part of restitutionary remedy to reflect the time value of money.
On the notice of contention, we rely on our written submissions.
GAGELER CJ: Thank you. We will take the luncheon adjournment.
AT 12.46 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.15 PM:
GAGELER CJ: Mr Walker.
MR WALKER: May it please the Court. Your Honours, the course I intend to follow, after some opening remarks concerning the costs agreement, the settlement agreement and the regime for taxation, is briefly to encapsulate our responses to our friends’ propositions set out in the order of their outline, before I resume to deal with what is left, then, of our propositions.
Your Honours are familiar with the basic documents governing this case. Starting at page 15 of the appellant’s book of further materials commences the costs agreement, next to the retainer to which you were taken by my friend. My friend, fairly, has drawn to your attention matters that are important for our argument.
At the foot of page 15, clause 5, of which you were familiar, prompting, were it necessary, a reference to that which had already been noted in the level of retainer. Namely, the statutory rights of taxation. The consequences of a non‑payment in response to an invoice or to a bill of costs can be seen, for example, in page 16, clause 7, and clause 15.
The nature of the costs agreement was that it prescribed – that is, agreed – rates by reference to time and, indeed, to the extent of detail of named individuals. You will see that on page 19. That then leads to the regime for taxation to which I need to draw attention, which is brought up by those references. In volume 1 of the authorities at tab 3, you will find the Legal Practice Act2003, to which references have already been made.
It is in Part 13 of that Act that you find all the matters relevant to this argument. Could I, in Division 1, draw to attention that the elaborate machinery for making so‑called determinations – which your Honours can and should treat as equivalent to what used to be called scales – results, under section 215(1), to those determinations providing the scales by which one regulates:
the taxation of bills of costs –
So, that is important to bear in mind, given the language with which the deemed taxation has been accompanied in our friends’ argument. Under section 215(2), you see that a determination is apt to be departed from according to the circumstances of the case, including using language which is at least a century old, to my knowledge:
unusual difficulty, complexity or importance –
Now, all of that informs the notion of reasonableness with which perhaps a more parlance you will see reflected in the way Justice Vandongen describes the process of a taxation under the later provisions of the Act. My point, of course, is that it is by no means obvious, when work is done and a bill of costs is delivered for it, that there will be anything defective by way of excess in that bill of costs until after those assessments have been made.
Then comes the provision upon which our learned friends rely: section 215(3), which says of subsection (1), which concerns the regulation of taxation by the determinations – which itself is subject to subsection (2) – that that will not:
be construed as limiting the power of a court –
and obviously there is an assumption correctly made there that there is such a power:
to determine in any particular case before that court . . . the amount of costs allowed.
Probably that is referring to costs in and concerning the case before the court, and that is a familiar approach by courts, inherently or otherwise, and your Honours are well familiar with the device to be found in various courts statutes in this country nowadays expressly authorising and, in some cases, encouraging lump sum costs determinations; the kind of summary determination so as to avoid the pain of a taxation.
Now, what we would say is that, against the repeated and apparently multivalent reference to “inherent jurisdiction” in our friends’ argument, it should not be supposed that there is, so to speak, an inherent jurisdiction that condescends to what I am going to call taxation. Taxation ought to be understood as being done by certain officers pursuant to certain procedures which involve matters of a good order in terms of time, and matters of procedural fairness and the like, and produces something which may then be enforced through the machinery of the court, to which I am going to come.
It should not be assumed that there is in parallel – as it were, subterranean – an inherent jurisdiction to do all of that still continuing. In any event, any inherent jurisdiction would be in the interests of justice; could not be any other way. That indeed is the wellspring of an inherent jurisdiction in the superior court, and, in our submission – unremarkably –that one would hesitate long before regarding a parliamentary provision of a facility, for example, for disputes between solicitors and clients about fees, thinking long and hard before regarding it as being in the interests of justice to depart from the outcome of that kind of procedure.
I am going to return to that general consideration in later context a bit further on. We then come to costs agreements, which, as my friend points out, does not have direct application in this case. To put it another way, a costs agreement within the meaning of section 221 is only a subset of the costs agreements that may exist and, within the ambit of this Act, be enforced between solicitors and clients.
It is only a costs agreement within the meaning of section 221 which has a requirement of writing. It is only one of those which will produce the effect to which reference needs to be made in section 235(1) which, as you can see, subject to the important subsection (2), binds a taxing officer to:
give effect to any costs agreement made as to the costs specified in the bill.
That, classically, would include rates. That is the main effect – whether it be advantage or not depends on who you are – of there being a written costs agreement. But at the time of this statute, there was nothing infirm, legally, about making a costs agreement orally – in this case, orally – by adoption, it was held, of the elaborate written agreements to which reference has been made, they being only the source of evidence for what the oral agreement imposed by way of agreed terms.
Your Honours will see – and this is the point of the exception to section 235 in its subsection (2) – that costs agreements, even the written ones, can be reviewed under section 222, and they can be reviewed for what is called unreasonableness. You will see that under subsection (2). You will see under section 224 that, in any event, written costs agreements – that is, the costs agreements binding in a taxation subject to commencing a review – may cease to be of effect and become “void” – to use the language of section 224 – in the events there noted.
The result of which will be the same as a review by the Supreme Court for unreasonableness – see section 222(2)(b) in particular, and section 224(2)(b). So, if that happens, the taxation will proceed – if there are determinations, they may or may not govern – as if the costs agreement had never been made. That then leads to what happens upon taxation.
The statute – and it is not alone in relation to court costs statutes – is quite sparse on what substantively the taxing officer has to take into account, and we simply commend, with respect, the elaborate explanation in Justice Vandongen’s reasons in the Court of Appeal, which I think is common ground between the parties – relates in particular to the two aspects which will dominate a taxation.
I suppose there are three, but the first is disappointing to contemplate: was the work claimed to have been done, done? But the second is: it had not been done, was it – to use the parlance – reasonable to have done it? No doubt, in examining that in any particular case, that the client asked for it to be done might well be factually conclusive even if, after the event, it seems to have been – to put it mildly – a luxury.
Then comes the one about which people tend primarily to think, but it is by no means inherently the main exercise, and that is the reasonableness of the sum, whether by reference to the rate – if it is time‑charged, as is mostly the case – or whether the hours are excessive, in the sense that it should have been done more quickly. All of those are inquiries which are apt to be made and, in some case – as the statute contemplates – are at least formally expected to be made before all the work under the retainer has been done or before the payment has been made – or, at least, before all the payment has been made.
The system provides – in other words – for a taxation, whether or not there has been full or partial payment of a bill, as it should. You will recall the provisions drawn to your attention about the 30‑day limit for seeking an itemised bill and then a 30‑day limit for seeking a taxation. Both of those subject to extensions which can be claimed, and all of them being contemplated as, perhaps, all in the wash‑up of the final bill.
Obviously enough, a dispute between client and solicitor about the amount of the last invoice may or may not make their relations more cordial, in terms of work thereafter, and may or may not give rise to the unilateral right under this retainer of the client to terminate or, perhaps, a solicitor to say: I have not been paid, I do not have to continue.
That is a reason – a good reason, of self‑interest – why a taxation may not ensue after every invoice where you say: why was this done, or why did it take so long, or should it have been done by a principal, charged out at that rate, for example. So, the taxation will proceed with whatever bill of costs is before the taxing officer, pursuant to the procedures which commence with section 230, and continue thereafter.
You have had your attention drawn to their main provisions. I do not need to stay on them. You will see that there is an impact on civil litigation under section 236, by which a power in effect of a special stay is granted for litigation seeking the recovery of costs. Then we come to section 240, with which, of course, your Honours are very familiar. The nature of what the taxing officer is to certify is, as I say, more fully dealt with by Justice Vandongen’s reference in his Honour’s paragraph 174 in the core appeal book, page 77, to the consideration of those matters in Pryles & Defteros v Green.
Under section 240, that which is certified, as I say, will be in most cases the same sum, whether there has been a payment in full or in part or not. Under section 240(2), picking up evocative language, it is:
binding and conclusive on both parties.
Now, that is subject to 242, which does not affect things, either in this case or generally. Under subsection (3), one sees that account is taken of the fact that in many cases the effect of the taxation will be to show that one party or another, client or solicitor, has to pay. To use the language of subsection (3), is:
liable to pay –
That, of course, does not mean an all or nothing contest, far from it. The nature of the really quite fine‑grained taxation of an itemised bill of costs may well mean that the client pays in part, disputes the balance, seeks taxation – the taxing officer says: well, you should pay more than you have paid, but you do not have to pay as much as the bill requires. In other words, partial success on the taxation for both client and solicitor.
The perfectly sensible possibility to contemplate, but there will be only one of the parties who, on that illustrative balancing exercise, will be liable to pay. Given the possibilities: complete failure by the client on taxation, complete success by the client on taxation – perhaps more likely something in between, with correlative success or failure for the solicitor – and commercially, of course, with an infinitely variable number of possibilities as to whether there has already been enough payment, all of that will produce – clearly from the taxation and from what is known about payment – a party liable to pay.
With all of those possibilities, Parliament has provided that the party liable to pay must pay interest on the certificate, which, as my friend properly puts, is simple interest and from the date of the certificate. That, in our submission, provides a regime which reflects the fact that if a client is concerned to, he, she or it may seek taxation invoice by invoice at fairly rapid clip 30 days after delivery, et cetera. Obviously, in the interest of the administration of justice for such matters to be attended to sooner rather than later. This case, I am afraid, stands as a bit of a death’s‑head exception to that aspiration.
Now, we come to section 243, which in a sense is a little puzzling as to why it is not part of section 240, but that does not matter; it is there and it is important. The premise of section 243 is that a bill of costs has been taxed. So, if a bill of costs is taxed and furthermore, that there is “a result” by which:
the amount which has been paid or deducted –
which I think is a reference to trust monies:
is more than the amount authorised by the taxation –
Now, your Honours ought to bear in mind that “authorised by the taxation” is a state of affairs which can only be known as a result of the taxation, and probably also can only be known as a result of taxation including taking into account what has already been paid. Then:
the person charged –
a term of art which described the client in most cases:
has a claim for repayment which may be certified and enforced under section 240 as though allowed under that section.
A difficult phrase entirely exactly to parse, but its meaning is tolerably obvious. It means that the amount of the excess can be included in a certificate which is binding and conclusive and which is thereafter susceptible of enforcement as a judgment of the Supreme Court. That is, obviously, a most salutary facility for Parliament to have provided.
In particular, it does not involve the breaking over as a matter of unregulated contract, which is the case between the parties before your Honours. That is, a contract which is not a cost agreement within the meaning of the statute does not have the prima facie paramountcy in a taxation. So, there does not need to be a breaking over allegations of breach or underperformance or the like.
In particular, there does not need to be anything in the nature of a supposed restitution case. Rather, there is a taxation by reference to a standard which Parliament regards as appropriate – namely, what the taxing officer regards as proper to be allowed – and enforcement of the sums due in light of the payment history as a result. There really cannot be any doubt in this case, then, as to what was being agreed by the settlement agreement with which you are familiar.
Can I take you in the fair copy of it, in the book of further materials at page 75, and in particular to clause 3.1. As part of the rather elaborate succession of compromise agreements between these parties, the one that has application to the current dispute is surely affected by the provisions of 3.1, in particular (a), which says of the $900,000 called – though I do not really say the title should be given any particular meaning:
the Taxation Settlement Sum –
It says of that sum that it:
represents the amount that would have been ordered to be refunded to Gray by Lavan if there had been a taxation of the Bills –
Hence the fiction to which useful reference has been made, and I will adopt that expression. In (b), the state of affairs which left live the so‑called interest dispute is explained, because that $900,000:
does not include interest –
Then, as my friend has already pointed out, the existence of that dispute is laid out. Could I note that on page 73, you will see, with respect to the interest claim – which is excluded by the definition of “further claims” –item (b)(iii) from the releases – you will see that that has a very comprehensive description of the juristic means by which what we are to understand by the word “interest” might be claimed, and we will cover the panoply of possibilities. Under clause 3.3, at the foot of page 75, your Honours will see a continued and particular use of the fiction:
for the purposes of the Interest Dispute Action –
if that commences. In particular, 3.3(c), to which my friend has already drawn attention, says that:
for the purposes of the –
the dispute about interest:
the date of the taxation at which the Taxation Settlement Sum would have been ordered to be refunded –
so, supplying a further attribute to the fiction:
is the date the final tranche of –
that sum:
is paid.
So, it produces – no doubt, deliberately by choice of the parties – the otherwise odd notion that the taxation which produces a liability to pay by way of refund occurs after – immediately after – all the refund has been paid.
By the way, the expression is “is paid” at the end, not: is to be paid. So, it is looking to the final performance of the three instalments that you would have seen in clause 2(a), on page 74. Now, there is no accident about that. So, the liability to pay does not come into existence under the fiction until the liability under the contract – see 2(a) – has been performed. Then, and only then, there comes into existence a liability to refund. What is that for the purpose of? The interest claim, which we say cannot be made, is valueless, and which they say have substance.
But they agreed, in this compromise, that they would proceed in their interest plan on the basis that a liability to repay on our part, fictionally – fictitiously – arose only after in fact we paid the whole of the amount which, fictitiously, was to be regarded as the excess to which that liability to refund applied. That, in our submission, is extremely tailor‑made and obviously serves the purposes of the parties who surely by then were wary of dispute and were compromising. This was iterative compromising over a number of years.
BEECH-JONES J: But, Mr Walker, the effect of that is to prevent interest being born under 240(3), as I understand it.
MR WALKER: Yes, yes, but it would be zero, because all the money had been paid.
BEECH-JONES J: Yes, on that very day.
MR WALKER: Well, the legal incident before, I think.
BEECH-JONES J: Yes. Is there any more of significance on that?
MR WALKER: I am so sorry, your Honour?
BEECH‑JONES J: Was there anything further in the significance of that?
MR WALKER: No, that is it.
GORDON J: The other significance is the reverse, though, is it not? That is that, contractually, the parties could have agreed back under their original terms for the payment of interest on particular terms, and that would have bound the parties.
MR WALKER: Absolutely, yes.
GORDON J: And so, the flipside of it is that because we know, because the Act identifies that they can agree other things and they are bound by the terms of that contract, whether it is to rates, interest payments dates, or the like.
MR WALKER: Yes. What your Honour says is, with respect, very important for our argument about the non‑subordinate in that row of contract. Various references were made by my friend to the ways in which restitutionary claims, so-called, may arise in relation to contracts. I do not want to exhaust all of that or cover all of that, but one of them was the familiar case of a deposit under an executory contract which goes off.
Now, if the contract, as you can still see with real estate contracts from time to time – particularly commercial ones – if the contract makes elaborate provision for use of deposit moneys before they are applied to the purchase sum, upon completion, or are required to be returned, upon failure, then that contract will govern. Sometimes those terms, with certain commercial parties, will include, for example, that deposit moneys are not held on trust, they are the funds of the payee who may use them as he, she or it likes.
More commonly you will see, in more modest transactions, deposit moneys being held pursuant to a regime for, say, investment, in an agreed interest-bearing deposit, for example. Those are the contract provisions that will then govern enjoyment of the use of those deposit moneys, pending knowledge whether they are going to be applied towards payment of the price, which of course will be to the benefit of the payee, or whether they will need to be returned to the payer, because the contract goes off in such a way as not to produce another – contractually or otherwise – forfeiture of the deposit.
Now, that is a mundane example where, in our submission, the notion that the law of restitution, or any particular aspect of it, would be thought likely to produce some alteration of the agreed regime between the parties as to the enjoyment of the money, or the safekeeping of the money, or the ultimate destination of the money, depending upon future events which may be anticipated. None of that is conditional in a sense that I think informed a part of our friends’ argument.
Of course, as a matter of ordinary English, it is conditional in the same way that every provision we make for the future is conditional. That is, contingencies of the unknown future will always determine the ultimate efficacy of arrangements we make enforceable by law. That is unremarkable and does not assist in assessing the question whether or not the circumstances are such as to give rise to a claim, whether it be for money not received, or money held for the use of, or some other locution by which a restitutionary claim may be expressed.
In this case – as your Honours appreciate – there cannot be any doubt but that the contract called – that is, the costs agreement – for payment of the invoices according to the sums claimed in the invoices. In almost the same breath, it reminded the recipient of those invoices that she would be entitled to seek their taxation or itemising if they were not itemised, and on a fairly short tether: 30 days. There cannot be any doubt that that was not a conditional obligation, in terms of the obligation to pay on the invoice.
There might have been a conditionality if she sought taxation before payment, was sued in a recovery action, and there might be a condition expressed by reference to the possibility of the taxing officer asserting the statutory stay of the recovery proceedings, which obviously would be a condition concerning an obligation to pay. You will not have to pay, pending determination of the taxation and then the effect that would have upon the recovery action, but that says nothing about the case concerning the availability of what is called – in our submission, tendentiously – restitutionary interest. That seems to be the nature of the claim against us.
If I may then quickly track what we say, against that framework, is the proper response to the propositions addressed by my friend. As to number 2, which refers to the fiction, one thing that the fictious taxation does not reveal to you is anything about how that 900 comes about. You do not know whether it is work not done, work done that was not necessary, work done that took too long or work done charged at a rate which was excessive.
You do not know about any of those things, just as you do not know about when those supposed deficiencies, or differences, between the taxing officer’s perception of what was reasonable and the solicitor’s perception of what was reasonable appeared. You do not know anything about it.
What you do know is that the parties adopted, fictitiously, the mechanism by which, upon payment of the last instalment of the $900,000, thereupon there would come into existence a fictitious certificate as between them regulating their financial relations, upon which interest would run. That, in our submission, is an answer to that proposition number 2, that that does not take them anywhere concerning any, as it were – going back on the basis of that fiction – to any earlier time.
The fiction – particularly the agreed fact to which your attention was drawn – by which the payment of the last invoice – that is, the last invoice paid – was to be treated as of the date when the $900,000 was paid, rather than raking back over and going through the taxation that never actually occurred. The combination of those matters, in our submission, absolutely defeats the proposition that there is any date of any kind, anywhere, upon which you could genuinely say that this was a cost sought – a fee sought – and paid, which was more than fair and reasonable. It is simply impossible.
EDELMAN J: The 30 June 2008 fiction paper you are referring to ‑ ‑ ‑
MR WALKER: Yes, yes.
EDELMAN J: ‑ ‑ ‑ that is not a fiction that came from the agreement, though, that was a separate ‑ ‑ ‑
MR WALKER: It is a separate agreed fact in the litigation.
EDELMAN J: Yes.
MR WALKER: Your Honours were taken to it and, as explained to me, it was in order to save the tedium of taxing. I suppose that made sense when you are compromising a taxation dispute, but what that fiction does not permit you to do is to say anything about some earlier date in particular than that date upon which there should have been a determination that something had been done which is not fair and reasonable in an excess.
Now, that is not so much a cost, but just tied up with – entailed in – the agreed fact that that was to be treated as that is when the excess payment was made – that last payment by the client. Now, what I have just said, of course, addresses, then, this question of the last part of that proposition 2:
thus giving rise to a requirement for the solicitor to refund the overpaid amount –
That, with respect, is simply wrong, with respect to that date of payment.
BEECH-JONES J: Which date of payment?
MR WALKER: The date of payment being the agreed fact, 30 June 2008.
BEECH-JONES J: I see. Yes.
MR WALKER: It is that simply does not give rise to a requirement to refund. The requirement to refund comes from the fictitious certificate, which is granted, fictitiously, the instant after the last of the money has been in fact refunded.
GORDON J: Is it the certificate or just the terms of deed taken as a whole?
MR WALKER: I am so sorry, your Honour?
GORDON J: Is it the certificate – it may not matter, it is just the terms of the settlement deed create the entitlement to occur at a particular time in a particular way.
MR WALKER: That is right, but this proposition against us, we think, is calculated to say: no, the interest should run from when the 900,000 was paid. It is fictitiously treated as that is the first time there was an overpayment, and that if there is interest in question, then – we should not be taking as agreeing there is interest in question, but if there is interest in question, that is the date from which it should run. That makes no sense whatever because this whole thing is on a construct of a certificate upon which interest does indeed run, but only from the date of the certificate.
BEECH-JONES J: So, the purpose of that submission is you are buying into the universe that treats this as though it was a certificate as opposed – the deed puts us into a hypothetical taxation, as it were.
MR WALKER: I do not buy into there was a certificate. There was never a certificate.
BEECH-JONES J: You are just doing that for the purpose of this submission.
MR WALKER: That is right. Let me make it crystal clear – I hope I will not depart from this – we say the whole of this case is contract. There is more than one contract, but the one we care about is the deed of settlement.
JAGOT J: Where do you even get your fictitious certificate from?
MR WALKER: That is from the – I am regretting I ever went that far, your Honours – that comes from ‑ ‑ ‑
GORDON J: I think it was just a stay in action.
MR WALKER: It comes from clause 3. Does your Honour see ‑ ‑ ‑
BEECH-JONES J: Is it the pleading, as well?
MR WALKER: Yes.
GORDON J: Clause 3 says nothing more, does it, than:
the . . . Sum represents the amount –
as if:
there had been a taxation of the Bills –
MR WALKER: It is the “as if” that gives rise to the deemed – the fiction, is what I am talking about. So, in answer to Justice Jagot ‑ ‑ ‑
JAGOT J: Is it just 3.1 ‑ ‑ ‑
MR WALKER: ‑ ‑ ‑ where do I get it from? It comes from 3.1(a) and 3.3(c), which actually refers to an order for refund, which can only be understood as being the effect of a certificate. That is the combination of section 240 and section 243.
JAGOT J: No, I see. It is pitched a little high. I mean, the obligation to pay is 2(a), really.
MR WALKER: The contract has at its heart 2(a).
JAGOT J: Yes, that is what I am saying. It is ‑ ‑ ‑
MR WALKER: We were not agreeing to pay interest. Very elaborately, the parties, in effect, said, as part of their compromise: let us have some more disputes and let us have a dispute about interest. They adopted what I suppose I should continue to call a fiction to govern that part of any further dispute which would determine interest, and they said the 900 is to be treated as the result of a taxation, and the result of the taxation being that that is the refund but that that would not have happened until the 900 has all been paid.
That is unmistakenly calling in aid, for the purposes explicitly of the interest dispute, a regime which would not – see interest under the statute – run until after all the money had been paid. So, you can have the interest, but it will be zero because there was no principal sum.
JAGOT J: I suppose the words at 3.3:
as permitted by and provided for in this Deed (but not otherwise) –
I guess where that comes to my sort of fictional cake and eating it, but ‑ ‑ ‑
MR WALKER: Your Honour, I should not be taken as resisting your Honour’s raised eyebrows about this notion of a fiction, and I certainly am not proposing that this drafting be emulated, but the meaning is tolerably plain, surely. We are going to deal with the interest dispute as if I had got a certificate showing that you have 900,000 in excess.
You have paid it back, and upon you paying it back, now we will settle down to another round of litigation as to whether or not I get by some means – by any means, according to the definition – available – I get interest. It is against that setting that I say this whole case yields – and yields as it should – to the contract by which the parties governed their relations about the grievance about concerning fees; we wanted more, they wanted to pay less.
In our submission, to adopt and adapt the language of authorities that I do not need to go to, and are in both our submissions as it happens, there is no need to go outside contract to regulate the question of interest because, by definition, by adopting this convention between the parties of a certified excess under the Act under taxation, they have disposed of the question of interest. That is the first point.
However, if I need to go down a track which is not just purely contractual, that is when I come to the point of saying, but if we are talking about interest in the ordinary familiar sense, before we come to the perhaps unnecessary‑to‑determine question of so‑called restitutionary interest – if we are just talking about ordinary interest under the ordinary court statutes for judgments for the payment of money, the recovery of money – section 32 in this State, section 94 in New South Wales – if we are talking about that, then the familiar proposition, apart from the explicit banning of interest on interest – the familiar proposition, it comes from – it is pre‑judgment – in effect the accrual of the cause of action, which is treated as a matter of the policy of the law as the time – however unofficially – from which it can be said that the now unsuccessful defendant was liable to pay the litigation, simply working out that and establishing it.
That, we understand, is the reason why our friends go down the path of trying to identify a time earlier than the day after they got all their money in order to get some substance in their interest claim. The first point I have made is, well, you cannot go back to dates that we do not know anything about, because you never established anything, and we never admitted anything. Namely, the times when we either did work we should not have done, did not do it at the speed which we should have done, or charged more than we should have, for example.
GAGELER CJ: Mr Walker, I thought I heard this morning that the appellant’s case, which was being put on the basis of the cause of action, did not arise or was not completed until the date of the deemed certification.
MR WALKER: I think I agree. That is what we understand and that is why we say there is just no basis for positing ‑ ‑ ‑
GAGELER CJ: You are not using that word in a technical sense.
MR WALKER: I am so sorry, I did. There was a failure of consideration on my part, your Honour. Let me start all over again. There is no way, either under the contract – I will leave that to one side at the moment – or under restitutionary notions, to posit that there was a cause of action for recovery of what I am going to call the principal sum. In other words, the sum upon which the claim interest is calculated.
It cannot be said that there was a time when that accrued earlier than, as it happens, the instant after it was fully paid. That is because the parties, no doubt with sophisticated advice on both sides, deliberately adopted this two‑hand ready facility of the statutory notion of a certificate of taxation.
EDELMAN J: It may be difficult to say that that accrued even after the ‑ ‑ ‑
MR WALKER: I could not agree more, yes. In fact, we are now talking absurdities – it sounds like the chapter Jonathan Swift did not write – because there could not be a serious debate about a claim against something you have already got by way of money.
BEECH-JONES J: But you are saying the contrast might be if you had a deed where it had recital: we agreed we charged you too much on 30 June 2008.
MR WALKER: Yes. And now we are just working out the interest. We would deny that there was any interest, just as we had agreed to a compromise on a dispute where we said we were owed more and they said we were owed less and they had paid more than they should have.
BEECH-JONES J: But this point is: look, we never owed the money at an earlier date, we did not have to pay interest at an earlier date.
MR WALKER: So, in terms of taking their fiction, building on the fiction, as was suggested earlier, then one thing is clear: there cannot be any date earlier than the conventional date pursuant to the agreed fact for the litigation of 30 June 2008. But that is just not a candidate at all for any restitutionary cause of action because, upon payment under the costs agreement – under the retainer agreement and the costs agreement – upon payment of that money, it could not be said that there was no right to retain, to use one of the locutions that might be deployed in this area.
It could not be said because they were obliged to pay it to us, not by way of an immediate boomerang back to them, but by way of us having a right to treat it as our own, do with it what we will, use it wisely or not, unless and until and only to the extent that it was held in a taxation that we had been overpaid, upon which we would be required, as we acknowledged, to make refund with interest. Assuming prompt payment, the interest would not be very much.
So, it just cannot be said that, retrospectively, once the contingency of a successful taxation had occurred – successful to the client – it cannot be said that that means that what had been unavailable, a cause of action on the day of payment of the principal, suddenly came to be treated as if it had always been available, including from that date. That, in our submission, belies the very notion of subsequent events – and again I am going to ring the changes on some of the phrases – destroying the basis, et cetera, et cetera, upon which a payment had been made.
Now, the classic example – because it has both instalment obligations discharged by performance and ultimate executory obligations frustrated by events – the classic example is the instalment contract for the conveyance of property. As we apprehend it, the passage to which your Honour Justice Edelman drew attention in the classic discussion that dispelled for Australia the heresy not dispelled in England until Johnson v Agnew, in McDonald v Dennys Lascelles, that classic passage of course makes the obvious point that the right to get the money properly paid in response to an obligation to pay it back later only arises when that later event destroys, to use the jargon, the basis of the payment.
EDELMAN J: It would be different if the rescission fallacy still persisted.
MR WALKER: Exactly. That was quite a pointed way for his Honour to point out that orthodoxy – he was not inventing law – that orthodoxy required an understanding that the contract remains in existence to govern relations even after a termination, which is not a rescission ab initio, for example. Now, we do not have any difficulty with the notion of restitution, perhaps money held to the use of, being used to recover a deposit or an instalment of a contract that goes off without rescission ab initio.
Many such a contract that I have advised on provides for that by contract, just as they provide by contract, could you please not mingle it with your TAB account. In our submission, those are matters which can comfortably be left to contract where contract has been used by the parties and then, when it is simply a matter of the parties having, perhaps naively, drawn their contract on the basis that it is bound to be discharged by a complete performance, then in that case and for obvious good supplementing reasons, restitution provides a remedy. But it will provide a remedy that becomes available if and only if the unlooked-for event of a failure to complete arises.
Now, we do not have to and we should not have to continue this disposition in terms of void contracts. In particular, criminally illegal contracts, which have their own residences when it comes to the notions of restitution. We certainly do not have to go into the – I will call it –specialised area much affected by particular statutes of either invalid or overpaid taxes, and in particular we are not talking, with respect, about a case of payments by mistake. There is absolutely no mistake in the client paying the invoiced amounts. That was their contractual obligation.
So, that brings me to some of the language that you will find in the propositions to which I now turn, I hope, more briskly. In proposition 3, that, in our submission, may or may not be a generally correct proposition but it has no application of any use in this case. We know what the claim was here: this is a claim for what is called restitutionary interest in the face of a contract.
In proposition 4, the notion of failure of basis is, in our submission, utterly alien to this case. There was no failure of the basis upon which the money was paid. It has not been mentioned by our friends, so they have not contradicted it, over and above all reference to basis or consideration, failed or otherwise, wholly or partially, is this fact: we did all the work, there is no work undone, there is no work charged for which was not done. We had the capacity to charge in advance, but as it happens, we also charged for work done, as the contract prefers.
So, there is no possibility of saying you did not do the work for which I paid the money at the agreed rate. The basis of the payment, if you are concentrating on payment – which you should – the basis of the payment never failed. It is not to be forgotten that in Roxborough, Rothmans had hung on to the money which had been paid to them on account of the unlawful excise. That was a case about the money that was sitting in our bank account coming from the tobacconists which did not need to be – I suppose, except by way of a donation – should not be given to the State, because the State had no right to it – Ha’s Case.
So, there is just nothing analogous to that failure of basis. The basis of charging separately, as it was on the invoices, to the tobacconists for the franchise fee, the basis was that that would be remitted. It was not remitted. In many ways, the competition was between the wholesaler – who would receive money on accountable tax, who no longer had to remit the tax – and tobacconists who sold the tobacco charging customers a mark‑up that included recovery of the tax, and the latter was roundly rejected as a reason to refuse restitution.
The choice in that case arose from something which was a striking destruction of the basis upon which the amount on account of the franchise fee had been paid. The basis of that payment was it would be remitted on behalf of the tobacconists. That was defeated, and defeated so palpably as us –the wholesalers, hanging on to the money. In our submission, one inquires in vain as to what aspect of our present case resembles that in any regard.
GORDON J: This submission of no failure of basis or consideration, is that also an answer to paragraph 9 of the applicant’s ‑ ‑ ‑
MR WALKER: Yes, it is, yes, it is. As you know, there are a number of phrases used – they probably all have the same core meaning ‑ ‑ ‑
GORDON J: Yes.
MR WALKER: ‑ ‑ ‑ and they get the same core response. The notion of a condition not being fulfilled or a contemplated state of affairs having disappeared is, if I may say so, utterly inapt for the present case. What happened was contemplated, and what happened was a promise was performed. That is, upon the fictitious certificate being granted, naturally, they get the money back.
In proposition 5, I have already probably said enough as to why this is not, in any useful sense, conditional. It certainly is not what I might call a sum fixed with anything in the nature, say, of a resulting trust. It is certainly not a sum fixed with any intended use, such as receipt of moneys to be remitted on account of the tax.
In our submission, the right to retain the fees – which is referred to in proposition 5 – is simply the correlative of the obligation of the client to have paid those fees in those sums, a contractual obligation which entitled us to keep and disperse and use that money as our own with a correlative obligation in the future, imposed by statute and recognised by contract, that we would, obviously, refund if that was the outcome of the statutory process.
GAGELER CJ: Mr Walker, can I just understand what you say is the relationship between the accrued statutory rights to receive payment and keep the payments and the certificate under section 240.
MR WALKER: I may have missed – in the beginning of your Honour’s question, you talked about the accrued statutory right?
GAGELER CJ: I am sorry, if I said “statutory”, I meant contractual.
MR WALKER: Thank you, yes.
GAGELER CJ: The contractual right under the retainer to seek payment, to receive the payment and to keep it. And then the certification under section 240, does it impact in any way on the accrued statutory right?
MR WALKER: Contractual right?
GAGELER CJ: I am sorry, I keep saying that – contractual right.
MR WALKER: Yes, it does.
GAGELER CJ: In what way?
MR WALKER: The first thing is, you cannot contract out of taxation. The second is, the contract – the combination of the letter and the costs agreement ‑ ‑ ‑
GORDON J: Sorry, I did not hear what you just said then.
MR WALKER: The second is that the contract – that is, the combination of the letter and the costs agreement – contemplates that there may be taxation and that they have rights of taxation, which obviously, include, depending upon the outcome of the taxation, refund – I think that is my answer.
So, the relation is first, the statute applies because it is a statue, and second, the contract explicitly recognises that possibility. Indeed, the way in which it recognises the possibility strengthens our proposition, if there could be any doubt about it – that the client had an obligation under the contract to pay the invoiced amount. They would not discharge that by paying an amount which they said: I reckon, come the day, this will be assessed at 85 per cent of what you have claimed. That would have been a breach of contract by them.
EDELMAN J: But, conceptually, is there any difference between seeing the nature of that obligation – I mean, any different terms from the description that Justice Dixon gives in McDonald v Dennys Lascelles – it is a contractual obligation to pay which is subject to a condition subsequent – here, it is a condition subsequent satisfied by statute, but a condition subsequent that could destroy the right to retain the money?
MR WALKER: That is right. The word “destroy” is perhaps overwrought, with respect.
EDELMAN J: Yes.
MR WALKER: It is simply that the contractual arrangement says you pay me now, and there may come a time in the future, upon the coming into being of certain states of affairs, where I will have to pay you back some of it or even all of it. That is actually not a contract having its basis, whatever that means, destroyed.
Certainly, it is not a contract being invalidated, whatever that may mean. And it is undoubtedly not the contract being unenforceable. It is the contract operating according to its tenor, and when all of those things happen, you say this contract is operating, and if there had been resistance overcome in litigation, you would say that is the way the contract is enforced.
BEECH-JONES J: Mr Walker, your opponent gives the example of where there is a certification that, say – I think the example was $3.6 million is owing, and even though, under the contract, $4.5 million may have been incurred, and you have already paid, say, $3.6, and he says, well, the lawyer cannot sue for the $900,000, and he says, rhetorically, what is the basis of that? Has the certificate not, as it were, destroyed the contractual right to recover the remaining $900,000? How do you say 240 deals with that? Is it something from the words “binding and conclusive”?
MR WALKER: Yes.
BEECH-JONES J: But binding and conclusive as to what? As to how much is owing?
MR WALKER: Yes. Hence the word “liable” in the next subsection.
BEECH-JONES J: Right. And that subsumes the contractual – it does not destroy it, but it just ‑ ‑ ‑
MR WALKER: Supersedes it.
BEECH-JONES J: It supersedes it.
MR WALKER: Sits on top of it.
GORDON J: Qualifies it.
MR WALKER: Qualifies it, yes.
GORDON J: Qualifies it because it says the obligation still exists, but I am going to modify or qualify the extent to which the obligation is owed.
MR WALKER: That is right. Exactly.
GORDON J: But you say there is no ongoing destruction, because there cannot be.
MR WALKER: No. If this had happened on a monthly invoice – and the amounts, I hope, would be less than that for a month – there is no – you would not have to novate the contract, it would just continue to operate for the next month and to regulate the payment of money for work done.
So, the relation is such that, in the example your Honour was recalling, if there had been a certificate issue saying 3.6 is the most that can be got, and we had an extant invoice for 4‑point‑whatever, the short answer is it is binding and conclusive that we can get no more than 3.6, just as if we had in fact been paid – I think, what was it, the 4.5 – if we had in fact been paid the 4.5 upon the certificate of taxation, then we would be bound to have paid back 900.
None of that says anything about either dates of accrual or nature of a claim. In each case, it is a combination of contractual rights and obligations as modified – as happens very often – by statute. That is the simple position, and it does not call for anything restitutionary at all. And it would be wrong in principle to intrude restitution.
May I ask, I think facetiously and I hope rhetorically, are we going to contemplate a change of position for a solicitor who has been held under a certificate to have overcharged – sorry, I have spent it all, and furthermore, I spent it on a yacht that has depreciated the instant it got in the water? Your Honours, that is just an intolerable proposition, that you would intrude the machinery which is arising from mostly non‑consensual relations or involuntary relations into a place entirely occupied and fully stipulated by the parties and their agreement.
Your Honours, proposition 5 also includes this notion of legal enforceability of the retainers. For the reasons I have already put, that is another of these variation phrases that has no footing either in principle or on the facts of this case. The contract is not impugned by there being a taxation, which it contemplates, nor by the taxation turning out adversely to the solicitor. It was always subject to it. It always, as it happened, though this was unnecessary, explicitly recognised that.
Neither can we or should we observe is this a case of payments having been made under protest. On the record before you, there is simply no place for anything other than the simple proposition that the payments were made because there was an obligation to have paid them, which carried with it the correlative right to receive the payment and the right to use it as considered appropriate.
In proposition 6, you see again the concepts and words of invalidity being played with. In my submission, neither of them has any purchase here. No part of this contract became unenforceable. All that happened was there was a binding and conclusive – this is on the fiction – a binding and conclusive determination that the extent of the payment was 900,000 short of what in fact had been received. Far from rendering the contract unenforceable, it is enforcing the terms of the contract pursuant to its explicit recognition of the possibility of refund under a certificate.
Proposition 7, the first sentence may be accepted happily. The second sentence is, in submission, completely foreign to the proper discourse in this area. The state of affairs which is the contractual obligation to pay – again, to use this voguish language – of course it sustained itself, you had to pay, and you had to pay even though it was for work which a taxing officer may later say has been either wrongly done or overcharged or the like. We maintain the appropriateness of the notion of contractual allocation of risk, that is precisely the outcome of the parties’ choosing, bearing in mind, of course, that interest may run one way or the other, depending upon the outcome of that taxation.
As to proposition 9, the notion that the client has not received consideration because it turns out that a taxing officer thinks some fees are not reasonable does not withstand scrutiny. No one says the work was not done. No one says the value to the client – that is, of the work – was not received in terms of the work being done. And it does not follow that because there is a moderation of a fee, that the performance for which the fee was paid has failed or not been received in any sense. The result of the taxation is not to require further work to be done by pointing out a deficiency in the performance of the service. That is a different kind of cause of action not relevant in this dispute.
In particular, it is not anything like Roxborough in terms of the apportionable or severable understanding. In this case we cannot – the fiction will not enable you to – say what part of the fee for work done on 6 September 2005 was excessive, because that is what you would have to descend to if you were going to talk about apportionable or severable parts of the consideration.
So, attendance at a directions hearing, you should not have set a partner, there should not have been a rate for two hours when one hour would do. That is the kind of detail that taxation would involve and, in our submission, the notion that that would attract the grand notion of not having received consideration even though all they were meant to do was to go to the directions hearing is quite unrealistic. In our submission, it is rather introducing of the significance in principle of the structure of a restitutionary claim.
Now, your Honours, at that point, can I turn to this question of interest, including the sub‑question of compound, because that is our friends’ proposition 10. The difficulty, obviously, with the first sentence of 10 is that it elides what we would submit it still a meaningful distinction between restitution of payments – for some reason that makes that appropriate – and compensation for a wrong.
It is why Hungerfords v Walker really may be a distant sound in the background, but it cannot possibly be the main melody for this approach in principle. Hungerfords v Walker is about Hadley v Baxendale translated in to replace Victorian commercial milieu. Not that one can really notice from the history that the Victorians were not astute to the value of money, but it has to be said that the detection of an outdated approach to the time value of money in Hungerfords v Walker is entirely driven by an understanding of Hadley v Baxendale.
Proposition 11, I can deal with quickly and we will come back to these matters. We do not have to descend – or we do not have to go into the territory of talking about the statute being a code. In this case, we have the surely conclusive fact that it has been invoked by the opposing party. They are the ones who have our agreement that this matter is to proceed on the basis of a conventional stipulation – a fiction, if you like – that there will be a certificate – 900,000 excess – coming into effect as soon as that 900,000 has been paid.
All, knowingly, in the context of a dispute as to the availability of interest, in our submission, that section 140 be regarded as governing to interest should not be regarded as, in any sense, inappropriate. It does not require the reading of a code. It simply says you have invoked the statute. The statute comes with its provision for interest.
So, it does not involve any analogy with the reasoning in Hungerfords v Walker, which, after all, said: why would you use the statutory provision for pre‑judgment interest designed to address the perceived inadequacy of the then understood common law as to no damages by way of time value of money or use of funds? Why would you use that as a reason to preclude a claim for which evidence is led to show that, by reason of not being money, further expenditure – which would not otherwise have been required by way, say, of paying interest on borrowings – was incurred. That is the reasoning in Hungerfords v Walker.
There is nothing in this case that suggests, at all, that a perfectly lawful agreement for the payment of invoices, as they are issued for work as it is done, falls into a category where some general dictate of justice – I think a lay sense of justice – would require that there be interest from a date that turns out to be the very date when the contract called for the money – lawfully and enforceably – to be paid on a basis that it would be held, perhaps, forever. That is, would never need to be reimbursed.
Proposition 12 concerns a matter, in our submission, of comparative law of absolutely no assistance in this case. We rely upon what we have written. We, with great respect, suggest that the notion that there would be – in the differing contexts shown by those three cases which, we know as a matter of stare decisis, are to be treated as all directed at supposedly the same propositions – the notion that that has anything to do with the simple case presented here of payments made under a contract as required by a contract which continues in force – full force, even though it is fully performed – it still continues to be the contract by which rights and obligations are measured.
The notion that those other rather special reimbursement cases can throw any light on it is, in our submission, wrong and should not be attempted. Proposition 13 we understand to be said to follow from a combination of matters I have already addressed. Footnote 1 is an unusual footnote in an outline. It has some but not all of the authorities which were written in our friends’ written submissions, and – I think I am right – it has none of them in the book of authorities.
Inquiry was made of our friend to which the answers Lexane v Highfern and Chow v Yang were supplied. Neither of those, with respect, support the notion that interest ought to be awarded from a date when the money paid was required properly to be paid by contractual obligation which remains an obligation retrospectively as it was prospectively. It was always and remains the case that the money was required to be paid when it was paid. In any event, that footnote starts with, and I am promising description of:
cases involving the recovery of payments made under a contract that became unenforceable through termination or recission –
It need hardly be said that, if you added frustration to that – it need hardly be said that that just has nothing in common with what has occurred in our case. With respect to the cases – of which Heydon is the obvious example – in which courts of appeal have attended to the greatly regrettable positions that arise upon a reversal of a first instance judgment under which money has been paid – regrettable in the sense that it is difficult to understand how there could be any principle of resistance – they are surely to be seen, in a sense, as sui generis.
Let me explain: they are another case, surely, where the notion of change of position would be a pretty alarming development in answer to a plain vanilla restitution case to get back the damages that I paid that it turns out I did not have to pay. Now, I know the courts have tools like stays of execution or interlocutory restraints on expenditure, but, with respect, that cannot be an answer.
Surely this is simply an aspect – and maybe there is an inherent jurisdiction or implied – of what an appeal does, which is to identify error and to reverse an outcome, and in order to reverse the outcome, in the administration of justice that is real, not hollow, there obviously has to be an acceptance by and an observance by the party that has failed to maintain the benefit of the judgment of disgorging everything that it has obtained as a result of that judgment. Those cases, in our submission, really will not assist in any respect.
If your Honours will just excuse me. Could I then, I think very quickly, pick up the thread in our outline propositions. I do not need to say anything more about 1, but can I add to the last sentence: we note there is no claim against us as a fiduciary. References to that should be put to one side. Similarly, there is no claim against us, framed in whatever way equity might see it framed, of the client having suffered from a lack of information, either uninformed or not fully informed consent or assent.
But there is no attack on the contract, there is no attack on the honesty of invoices, there is no mistake alleged and there is no claim, with respect, framed which would give rise to a concern in equity. That does not mean that that might not have occurred to pleaders as they face this dispute, but the fact is they did not persist in it.
In proposition 2, in relatively safe terms, simply cite a recent and orthodox generalisation. I do not want to elaborate further on it. In proposition 3, we seek to make good the point, demonstrated by cases to which we have drawn attention in our written submissions, that even a contract enforceable, say, for a statutory – unenforceable for statutory reasons, which has been fully performed on the part of the party who has either paid or in some cases is seeking payment, falls to be considered as a case where that party has done everything called for by the contract from them.
Which, of course, depending upon the statute in particular, if there has been a statute responsible for unenforceability, it will cast a light on either the right to refund or the obligation to pay of the party that received that value. Quantum merits in certain cases of contractual unenforceability are, of course, a good example of that.
JAGOT J: Is there a “not” missing in the first line of 4?
MR WALKER: I am so sorry, your Honour, in which sentence?
JAGOT J:
The asserted basis, that the respondent was entitled to charge and retain, is not made –
Is it the asserted basis by the appellant that the respondent was not entitled to charge and retain the money? Is that what you are ‑ ‑ ‑
MR WALKER: I think your Honour is right. There needs to be a “not” somewhere. Can I reframe it? I apologise.
JAGOT J: I think there just might be a “not” belonging before the “entitled”, on one view, but that is all am I reading, that the asserted basis is that of the appellant, that you were not ‑ ‑ ‑
MR WALKER: I think the basis asserted to have been destroyed, namely that the respondent was entitled to charge and retain. That is how it should read.
JAGOT J: The asserted basis – the destroyed ‑ ‑ ‑
MR WALKER: The assertion is my friends’; the basis is ours. Namely, we were entitled to charge and retain. It was not destroyed; it remains in effect. I have already said what I wanted to say, in answer to our friend, otherwise in relation to proposition 4. Proposition 5, similarly, I have said what I want to say about it, not only in writing, but in what I have said in answer to our friends’ proposition.
In proposition 6, we obviously take up the cudgels of this basis. Look, if this is restitution, it is not of everything you paid us. It proceeds bit by bit according to this notion of excessive invoices. If that is going to be divisible, and that is one way in which it can be divisible – see Roxborough, look at the invoices – none of that is available in this case.
There was simply under the contract – clause 2 – an agreement for 900,000 to pay without admissions, and then this convention for the further prosecution of the so‑called interest claim. Proposition 7 is important, in our submission, as a matter of principle. For the reasons I have earlier put, it probably does not arise in this case.
GORDON J: That is the Prudential analysis, is it not?
MR WALKER: Yes, it is the – well, I think yes is the proper answer, but that does not mean one would embrace everything in Prudential, including the notion of “independent” or “extra”. Those seem to be just different ways of describing the same thing.
When I get money, I get everything that I can do with money. So, we are not associating ourselves with the whole of the language, but the concept that it is the money received which is the object of restitution is, in our submission, important to observe, particularly if, as we would urge, it means that you can observe the doctrinal difference between a compensatory claim – Hungerfords v Walker – and a restitutionary claim, particularly when we know – with respect to restitutionary claims – that
there are court statutes for pre‑judgment. That is, from the equitable cause of action.
I do not wish to add, then, to what we have written for proposition 8, in that regard. Proposition 9, I have already fully elaborated, so far as I wish to in answer to our friends’ submissions. Paragraph 10, lest there be any doubt, we do understand that the notion is that there can be a reaching back in time even without identifying how, at the earlier time, there was a cause of action. Pre‑judgment interest is one thing; pre‑grievance interest is, in our submission, many steps too far.
Proposition 11 ties equity’s tenderness for certain classes as at least part of the explanation for equity’s approach to compound interest. It means that is not available as an explanation for compound interest in this case, just as damages – Hungerfords v Walker – is not available as an explanation.
EDELMAN J: Although there was a count of interest as an independent indebitatus assumpsit.
MR WALKER: Yes, but that is not what is claimed in this case. May it please the Court.
GAGELER CJ: Thank you, Mr Walker. Mr Moore.
MR MOORE: Thank you. Very briefly, the consequences of non‑payment of legal costs were adverted to by my learned friend, but one consequence not noted appears on page 15 of the appellant’s book of further materials. That is that the contract imposes an obligation to pay interest on unpaid fees.
If there is a process of taxation on inherent or statutory, the result of which the client is found to owe fees, the statutory regime does not destroy the solicitor’s contractual right to interest on the amounts unpaid. That shows that the Act is not an exclusive code for interest dealings between client and solicitor.
BEECH‑JONES J: They are not saying it is an exclusive code.
MR MOORE: No.
BEECH‑JONES J: They are saying you invoked the Act.
MR MOORE: Yes.
BEECH‑JONES J: So, you are stuck with what it says about interest on overpaid.
MR MOORE: Yes.
BEECH‑JONES J: Not that everyone is, but you are. That is how I understand it.
MR MOORE: Yes, I understand, and our response to that proposition is, even if it is only the Act that is invoked by the client, the Act does not exclude general law rights including to interest. We give as one example the solicitor’s right. If the solicitor invokes a taxation of fees, the result of which shows that the client still owes money, the solicitor gets two lots of interest: one, the statutory interest from the date of the certificate; and two, the contractual interest from the date on which the payment was originally due.
BEECH‑JONES J: But what if the general law rights are dependent on the statute, which is what your entire claim for moneys had and received is based on a notional certificate, as opposed to just a claim independent of the Act.
MR MOORE: Yes, in our submission, the Act does not exclude and does not destroy any common law general right to recover overpaid fees once a determination is made. I understand your Honour’s point, which is that there is a difference between the solicitor invoking a taxation and a client, but that difference does not have the outcome that our learned friends submit.
There was then the suggestion that, under this settlement agreement, one does not know what work was performed that would be determined to be unreasonable or took too long or what rates were too high. None of that matters in circumstances where the necessary result of the deemed taxation is that the solicitor has been overpaid. That is what the parties agreed in their pleadings – appeal book further material 103.
There was then quite a detailed analysis on the terms of the settlement deed showing to the effect that the deemed taxation order – solicitor, you have been paid too much – occurs on the same date as the last payment. I think the proposition was put: the instant after the last payment was made, this deemed taxation occurs.
There are two things about that. The agreement just says same date, it does not say if it matters – and it does not – it does not say which one comes first, but the substantive point is the deed plainly put, and it was intended to put, the parties in the position that they would be in, had the taxation process followed to its natural conclusion. Our learned friend said at the end of his description of the effect of the settlement deed that – and I think I took this note down right – the parties “disposed of the question of interest”.
That is the one thing this deed did not do: to dispose of the claim for interest, if there is such a claim available to clients who have been found to have been overcharged and overpaid. The fact that the agreement between solicitor and client might be said to have contemplated a taxation result requiring refunds as overpaid charges does not mean that there cannot be a failure of a non‑promissory event, and thus a failure of consideration.
We are not in a world of frustration where we ask: was this in contemplation of the parties? A failure of basis claim can be made out, even if it is arguable that the basis that fails in the future could potentially have been foreseen by the parties. That is not the relevant question when a claim for restitution is made. It was then suggested that the contractual terms between client and solicitor were to the effect that: you pay me now, but I may have to pay you back later on if costs are taxed off, and I will. That is why my friend says this whole case is a case in contract.
In our respectful submission, the proper construction of the retainer agreement contains no such term, the effect of which would be for the client to contract out of a restitutionary claim in circumstances where fees are found to have been overcharged. There was, in this contract, simply an advertence to – and the contract simply informing the client of its rights to approach the court, there was no contractual requirement of the solicitor to repay. It is an external event, an event external to the contract that gave rise to the obligation of the solicitors to pay, it is not an obligation within the contract.
My learned friend said no one says the value of the work done was not received. We agree, but the value of the work – we now know, and it is agreed – is $900,000 less than was paid. It is that difference between value given and value received, in the circumstances of this case, that gives rise, in our respectful submission, to the claim for restitution of the difference.
The reversal of judgment cases are put to one side as sui generis. The problem about that is that they are explained in – by President Mason – general restitutionary terms, not about something specific and special about reversal of judgment cases. In any event, this case is also sui generis. It is a case about overcharging solicitors and overpaying clients.
The solicitor being an officer of the court and in a fiduciary position to the clients, who never gave fully‑informed consent to the real practical benefit that my learned friend accepts exists: the opportunity to use money
that is paid but then later refunded. In that special circumstance, the law ought be, even if sui generis, that the solicitor must account to the person to whom the solicitor rose fiduciary obligations by not just paying overcharge fees and a nominal sum, but with interest.
Those are my submissions.
GAGELER CJ: Thank you, Mr Moore. The Court will consider its decision in this matter and will adjourn until 9.30 am tomorrow.
AT 3.51 PM THE MATTER WAS ADJOURNED
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