Gregory v Legalese Pty Ltd - [2016] SASC 184

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
GREGORY v LEGALESE PTY LTD
[2016] SASC 184
Judgment of The Honourable Justice Nicholson
14 December 2016
MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT
PROFESSIONS AND TRADES - LAWYERS - DUTIES AND LIABILITIES - SOLICITOR AND CLIENT - RETAINER - CHALLENGING RETAINER
Appeal from a decision of a Magistrate who was required to determine the terms of a retainer, if any, entered into by the appellant with respect to legal services provided by the respondent. A primary issue before the Magistrate was whether the parties had agreed that legal costs incurred were only to be payable on a contingency basis. The Magistrate concluded that the retainer entered into by the parties was as recorded in a costs agreement dated 4 April 2011 as varied by a letter dated 1 June 2011 advising of a change in hourly rates. The Magistrate held that the retainer was not a contingency based arrangement.
Held:
1. Appeal dismissed.
2. The Magistrate’s orders remain undisturbed.
3. The matter is remitted to the Supreme Court Master to continue and complete the adjudication process in light of these reasons.
Magistrates Court Act 1991 s 19, s 40, referred to.
CSR Ltd v Della Maddalena [2006] HCA 1, (2006) 224 ALR 1; Fox v Percy [2003] HCA 22, (2003) 214 CLR 118, considered.

GREGORY v LEGALESE PTY LTD
[2016] SASC 184
Magistrates Appeal: Civil
NICHOLSON J.
Introduction

This is an appeal from a decision of a Magistrate who was required to determine the terms of a retainer, if any, entered into by the appellant, with respect to legal services provided by the respondent. A primary issue before the Magistrate was whether the parties had agreed that legal costs incurred were only to be payable on a contingency basis.
On 31 May 2012, the respondent, an incorporated legal practice trading as Peter Scragg & Associates, filed a claim in the Magistrates Court to recover a debt of $10,733.45 said to be owed to the respondent for the provision of legal services to the appellant. The appellant had obtained the legal assistance of the respondent’s principal lawyer, Mr Scragg, in respect of an application to the Registrar-General concerning a proposed land division of her property in southern Adelaide. Prior to meeting with Mr Scragg, the appellant had received the requisite planning approval for the land division but a dispute had arisen over obtaining the necessary consents for a proposed Land Management Agreement and Encumbrance (LMA).
On 11 November 2013, a default judgment was entered on behalf of the respondent following a dismissal of the appellant’s application to adjourn the trial. However, on 23 April 2015, the appellant succeeded in having the default judgment set aside.
On 23 September 2014, and prior to the setting aside of the default judgment, the respondent filed an application in the Supreme Court for an assessment of legal costs in reliance on the default judgment. A Master commenced the adjudication process. However, on 27 August 2015, the default judgment having by then been set aside, the Master transferred the Supreme Court proceedings to the Magistrates Court, pursuant to section 19 of the Magistrates Court Act 1991, for the purpose of determining the terms of the retainer.
The trial commenced in the Magistrates Court on 13 October 2015. The appellant contended that she had rejected a costs agreement sent to her by the respondent and that the agreement reached between the parties was to the effect that she was to be liable for the respondent’s fees only on a contingency basis. They were to be paid only from the proceeds of a land sale should her application for a land division be successful. However, the respondent relied on the terms of a retainer document headed “Legal Costs Agreement and Disclosure Statement” sent to the appellant on 4 April 2011 (“the April Costs Document”). The appellant received the April Costs Document on or about 7 April 2011. The respondent contended that the terms of its retainer remained unconditional at all times.
At no time did the appellant provide the respondent with a signed April Costs Document. However, after receiving the April Costs Document she continued to engage the respondent to provide legal services notwithstanding that she raised various objections or concerns from time to time about fees charged.
The trial proceeded in the ordinary civil claims jurisdiction of the Magistrates Court. However, it proceeded in a quite unorthodox fashion more suited to an exercise of the small claims jurisdiction. The appellant represented herself and Mr Scragg, being the solicitor with whom the appellant primarily dealt, represented the respondent. At the outset the appellant was sworn and Mr Scragg gave an affirmation. The trial then ensued very much as a three way conversation between the bench and the parties. Both gave their evidence (the appellant substantially by reference to affidavits previously filed) interspersed with submissions and cross-examination of each other and by the Magistrate.
It has not been easy to discern what was before the Magistrate by way of sworn evidence as opposed to submission and on what basis some of the apparent evidence was received. There are advantages to the orthodox trial procedure that has served courts in this country well for the last 150 years or so.
The Magistrate’s findings
The Magistrate found that the respondent did not agree to act for the appellant on a contingency basis and that the terms of the retainer were as set out in the unsigned April Costs Document[1] as varied by a letter of 1 June 2011 notifying of hourly rate increases.[2] The Magistrate found, based on the totality of the evidence, that he was unable to accept the appellant’s contention that the retainer was contingency based.
[1]    Page 12 of exhibit LG1 to the appellant’s affidavit sworn 20 August 2015 in Supreme Court proceedings 1298 of 2014 (FDN 6).
[2]    Page 49 of exhibit LG1 to FDN 6.
After delivering his reasons for judgment on 24 November 2015,[3] the Magistrate made the following orders.
1.The terms of the applicant’s [sic] retainer are as set out in the agreement appearing on page 12 of the Exhibit LG1 of the affidavit of the defendant sworn on 20 August 2015 as varied by the memorandum at page 49 of the exhibit.
2.The matter is returned to the Supreme Court for further consideration of the taxation of costs.
3.The defendant is to pay the plaintiff’s costs of the hearing on 13 October 2015. The question of the further costs of and incidental to the proceedings are reserved.
[3] Legalese v Gregory, Judgment of Magistrate S H Milazzo, 24 November 2015, AMCCI-12-1989 (Magistrate’s reasons).
The appeal
On 15 December 2015, the appellant filed her notice of appeal to this Court. It contains the following grounds.
1.The Magistrate erred in fact and in law in finding (at [3]) that the appellant accepted the terms and conditions of an agreement forwarded to her by the respondent on 4 April 2011.
2.The Magistrate erred in fact and law in finding (at [3]) that the acceptance of the agreement referred to at [3] was not in dispute.
3.The Magistrate erred in fact (at [13]) in not taking into account, or by improperly weighting, the surrounding circumstances of significance to the matters in dispute (see at [14]-[20]).
4.The Magistrate erred in fact and law in finding (at [20]) that none of the monthly accounts were disputed and at no time did the appellant remind Mr Scragg of her arrangement with him.
5.The Magistrate erred in fact and in law in finding (at [21]) that the terms Mr Scragg’s retainer are as set out in the agreement appearing at p.12 of Exhibit LG1 to the appellant’s affidavit sworn on 20 August 2015 and as varied by the memorandum at p.46.
The appeal comes to this Court pursuant to section 40 of the Magistrates Court Act 1991 and is an appeal by way of rehearing. For this purpose, I have undertaken a review of the trial evidence and the Magistrate’s reasons. The role of the appellate Judge in this respect has been described by Kirby J in the following terms.[4]
[T]he appellate court is obliged to conduct a thorough examination of the record and a real rehearing. It is not confined to reconsideration of the record in order to correct errors of law, although that will certainly be encompassed in such an appeal. It is required to consider suggested errors of fact-finding. Experience teaches that many errors of this kind arise at first instance, more perhaps than errors of law. Having conducted a rehearing as so described, the appellate court is obliged to “give the judgment which in its opinion ought to have been given in the first instance”. This involves, where, as here, there is no jury, conducting a thorough review of the primary judge’s reasons and engaging in the tasks of “weighing conflicting evidence and drawing of inferences and conclusions”.
[citations omitted]
Of course, the usual advantages enjoyed by the Magistrate obtained from having heard and seen the witnesses give their evidence must be respected in the manner and subject to the constraints identified by Gleeson CJ, Gummow and Kirby JJ in Fox v Percy.[5]
[4] CSR Ltd v Della Maddalena [2006] HCA 1; (2006) 224 ALR 1 at [16].
[5] [2003] HCA 22; (2003) 214 CLR 118 at [23], [25]-[29] and [41].
Chronological account of the parties’ interactions
It is convenient at this point to provide a chronological outline of the more significant documentary and oral evidence that was before the Magistrate at trial. What follows is a summary of broadly non-contentious matters apart from those aspects where a dispute on the evidence is so identified.
Mr Scragg first contacted the appellant by telephone to discuss her desire to procure the LMA on 2 March 2011. He initiated this contact following a discussion he had had with a mutual friend of the appellant. In the initial phone conversation, Mr Scragg and the appellant discussed the LMA, the submissions the appellant was required to provide to the Registrar-General and the advice she had received from her current solicitor. Mr Scragg recommended that the appellant obtain a second opinion and advised her that he could obtain such from a recommended senior counsel. Mr Scragg suggested that the appellant provide him with relevant documents so that he could obtain a quote from counsel. According to the appellant she raised concerns as to her limited financial capacity with Mr Scragg during this phone call. Nevertheless, the appellant provided Mr Scragg with the requested documentation by email dated 2 March 2011.
On 3 March 2011, Mr Scragg telephoned the appellant to discuss the legal advice she had obtained, to that point, from other lawyers. He asked the appellant to provide him with further documents. By a lengthy email dated 3 March 2011, the appellant provided to Mr Scragg numerous documents.
The next day, 4 March 2011, Mr Scragg telephoned the appellant to confirm his recommendation that she obtain an opinion from counsel. Mr Scragg advised the appellant that such an opinion could be obtained for $2,000 plus $200-$300 for Mr Scragg to prepare the brief for counsel. The appellant agreed to proceed on this basis but indicated that, because of her financial concerns, she needed to be able to pay the fees with a credit card.
The next event of significance was a text message exchange between the appellant and Mr Scragg on 17 March 2011.
MR SCRAGG: Hi Louise.
I can’t find the court case you referred to. Anyway you should instruct me to get an opinion from [senior counsel]. The point is there to argue. Most likely it is how we do so. It may even be that you have a claim for compensation from the council or the government.
It will cost 200 to 300 to get the brief ready. I expect [senior counsel] will cost about $2000.
Please let me know.
Peter
MS GREGORY: Hi Peter thanks for the text. Thought we had sent it already!...but will give you a call to see you [sic] thoughts now you have read the stuff. I asked for a 30 day extension to reply to the RG from the 10th of March to obtain legal opinion which has been granted. I have a copy of the case, sorry I should have emailed it. Will do so now. Regards Louise.
MR SCRAGG: Great. Can’t wait to see the case Peter.
On 22 March 2011, Mr Scragg telephoned the appellant to confirm that counsel would be able to provide the opinion as requested but that counsel also wished to address an additional issue. Mr Scragg confirmed that counsel’s fee would be $2,000 and asked the appellant to provide further documents electronically and to prepare a folder of documents for counsel. The appellant sent copies of the further documentation to Mr Scragg by email on 22 and 23 March 2011.
The appellant met with Mr Scragg and senior counsel on 25 March 2011. This was the first time the appellant had met Mr Scragg. Counsel asked to inspect the property and this was arranged for 29 March 2011. According to the appellant she told Mr Scragg after the meeting and at the property view on 29 March 2011 that counsel was only to address a specific issue concerning the LMA.
By invoice dated 31 March 2011, Peter Scragg & Associates rendered an account for $3,945.37 (including GST). The invoice included charges for various attendances on counsel and on the appellant from 3 March 2011 to 31 March 2011 and for various SMS text communications. The invoice included a statement of charge rates and the following text: “Please note that our payment terms are strictly 14 days from the date of invoice”. The invoice stated that payment was due by 15 April 2011.
According to the appellant, she did not receive this invoice until 5 April 2011 which was when she first became aware of the respondent’s charge rates for the provision of legal services. According to Mr Scragg this first account covered work done in order to obtain an understanding of the matter.
The appellant spoke with Mr Scragg on 1 April 2011, the day after the invoice had been raised but before it had been received. The discussion addressed questions that counsel had raised. Mr Scragg asked the appellant to prepare an updated brief of documents for counsel to which she attended.
The respondent did not provide the appellant with any form of costs agreement until he sent her the April Costs Document, a month after it had commenced acting and after it had issued the 31 March 2011 invoice. That document contained an estimate of anticipated legal costs in the amount of approximately $8,000 to $15,000. It also contained the respondent’s charge rates and the following statement.
You may accept the costs agreement by signing and returning the copy of this document, or by continuing to give instructions to us in this matter.
As earlier indicated, the appellant did not receive the April Costs Document until 7 April 2011.
Mr Scragg contacted the appellant by text message in order to follow up the written brief that was to be prepared for counsel. The following exchange took place between 10 April 2011 and 11 April 2011.
MR SCRAGG:      Still waiting
MR SCRAGG:      Hi Louise still waiting
MS GREGORY:    I got your account and went into panic mode. I prepared a huge folder of documents and a 20 page brief for you and I’m trying to work out if      I can afford for you to read it!
MR SCRAGG:    I am in court at the moment. I will call you later. We are almost at the end of stage one. The point where we can establish a case. That is the    point where you can go forward.
All [senior counsel] really needs is the full title history. It is a big and difficult job     but if we succeed there is very significant benefits.
If you dont succeed this time when do you?
To me it looks a bit like now or never.
What will the council do if you fail this time? They will probably ask you not to bother then again.
Peter
The Magistrate raised with the appellant that there had been no discussion of the April Costs Document during this text message exchange and notwithstanding that she had received it in the days preceding. However, according to the appellant there had also been a discussion with Mr Scragg on the telephone.
MAGISTRATE:    These [text] communications took place on the 11th, there is no argument about the fee agreement, no suggestion that if the matter does move forward you shouldn’t pay the fees in the agreement.
MS GREGORY:    Yes, no, well, let me get the yes and no right there. That is not correct. I actually did refute the fee agreement in that discussion there, it is dealt with through from items 53 to 62 [of her affidavit]. I summarise the items that were discussed in that discussion of 11 April with Mr Scragg and I also have file notes at p.22 of my book. I have my file notes in relation to that day. Basically I rejected the legal costs agreement sent to me I was actually quite shocked that it suggested that fees of $8-15,000.
MAGISTRATE:    Why not mention that in one of the SMS communications then so it is in writing.
MS GREGORY:    The SMS that I sent Mr Scragg says ‘You said that you were going to look at it as you quoted’. So if we look at p.25 of the SMS’s that we have just dealt with, I do sort of refer back to that. So I do refer back to it there.
MAGISTRATE:    So, he says, ‘Can we please have our account paid. You said you were going to look at it as you quoted 200 and 300’ etc etc. Well with, does that support a suggestion that you asked him to look at it.
MS GREGORY:    Yes.
MAGISTRATE:    But there is not much support for the suggestion that his fee agreement wouldn’t apply.
MS GREGORY:    Well, during the discussion on 11 April Mr Scragg said that he was expecting the opinion of counsel to be completed soon and that he wanted to wait until that opinion was prepared. He wanted to present that to me and discuss a method by which he would actually be acting for me because my concern was that he was suggesting fees of $8-15,000. Fees to be paid within 14 days. All that sort of thing and a legal costs agreement to engage him as a solicitor as such as opposed to someone who was, as a friendly favour just simply charging me two to three hundred dollars which I agreed at $300 to obtained a second opinion for me from counsel which would be $2,000 which I would then be using to supplement my application which was being dealt with by [former solicitor].
According to the appellant, in a telephone conversation with Mr Scragg on or about 11 April 2011, the following issues were canvassed.[6]
… I queried the account issued to me on 31 March 2011 for $3,945.37 and reminded Mr Scragg that he and I agreed that he would obtain the opinion of counsel on my behalf for a fee of only $200 to $300. Mr Scragg said words to the effect that he would ‘…look at the account…’ and ‘…not to worry about the account…’.
In that discussion Mr Scragg advised me that counsel opinion was now largely completed, requiring only my updated brief for finalisation. Mr Scragg advised me that counsel opinion would now be ‘closer to $3,000’. I instructed Mr Scragg to ensure that counsel opinion did not exceed $3,000 as, provided that I could pay counsel’s fee by credit card as previously arranged, this was the maximum I could pay for counsel.
In that discussion I also queried the LCA [legal costs agreement] sent to me and Mr Scragg told me that the LCA was ‘…only a standard agreement sent by his office…’ and that it did not reflect the terms which Mr Scragg proposed to offer on behalf of Legalese.
I queried the fee estimate of $8,000 to $15,000 as to how Mr Scragg arrived at such a figure. Mr Scragg told me that he had extended the legal work being undertaken for me in order to establish a cause of action. I advised Mr Scragg, again, that I did not have the financial capacity to fund any cause of action he was proposing.
Mr Scragg proposed that this be under an arrangement, for and on behalf of Legalese, whereby he (Mr Scragg) would undertake further legal work for me and that the account of Legalese could be paid from the proceeds received at settlement on the sale of a certain proposed allotment of real property, the subject of my current land division. Mr Scragg did not advise me in this discussion what this proposed cause of action would be, or what the further work would be, other than to say that counsel had devised a method by which I would obtain the necessary consent for my land division and asked that I await finalisation of counsel opinion at which time he would provide to me with the full details of his proposal.
I asked Mr Scragg whether he would send me a further proposed retainer agreement that properly set out the terms and Mr Scragg replied with words to the effect, ‘No. The office knows the arrangement I have with you’.
[6] This comes from an affidavit of the appellant that was before the Magistrate although it is unclear on what basis.

According to the appellant’s oral evidence, as at 11 April 2011, she had rejected the respondent’s proposed fee agreement with Mr Scragg, because it did not reflect their agreed arrangement. Further, when she spoke with Mr Scragg on 11 April, he “immediately withdrew his legal agreement” and she did not, thereafter, have any concerns about the fee agreement.
On 29 April 2011, the following text message exchange took place.
MR SCRAGG:      Are you free to see [senior counsel] at 4pm on Monday. He has finished the job
MS GREGORY:    Yes I just spoke to him myself!
MR SCRAGG:      Lock it in then. Also can we please have our account paid.
MS GREGORY:    You said you were going to look at it as you quoted $200-$300 to instruct [senior counsel] and $2k for [senior counsel’s] opinion and your account was a blow out at $4k and also not to worry about it!
MR SCRAGG:    This has become a major job. As I explained a lot of work has to be done before the case can even commence. That work has been done.         [senior counsel] fee is $3,300. He had done at least twice that. His opinion is positive.
The fee of $300 was an estimate based on a simple issue.
As I advised you we were prepared to accept a part payment of our account. We have never waived our right to the fee that we have claimed. If we are not to be paid at a reasonable rate then we will not do the job.
MS GREGORY:    The only items I disagreed with on the account were the site visit as I saw this as social on our part and the text message quoting the job but in fairness to everyone this is something we should sit down and discuss. The balance is fair it just took me by surprise. How about I come and see you Monday.
According to Mr Scragg, by the time he received senior counsel’s opinion, “[Mr Scragg] had done a lot more work than the fee that he had charged”. Further, the position set out in the text message exchange “has always been [his] position”.
When questioned by the Magistrate about Mr Scragg’s communications on 29 April 2011, the appellant said that she was “quite concerned” at the “tone” of Mr Scragg’s message and feared that a disagreement would erupt. In order to avoid any embarrassment, she attempted to “placate” Mr Scragg and arrange for a face to face meeting. She did not believe at this point that Mr Scragg was going to act for her on an on-going basis.
On 30 April 2011, the respondent issued a further invoice for $1,031.54 covering various attendances including by Mr Scragg on counsel and the appellant. The invoice was accompanied by a “Statement” dated 30 April 2011 which identified the balance brought forward from the statement dated 31 March 2011 together with the 30 April 2011 amount of $1,031.54 as due and payable (total $4,976.91). The statement includes the text “a friendly reminder your account is overdue”.
The events of 2 May 2011 are central to the parties’ respective positions. On that day, the appellant and Mr Scragg met at a coffee shop prior to a further meeting with senior counsel. According to the appellant, she complained about the latest invoice and statement and informed Mr Scragg that she did not have the financial capacity to pay the amount said to be due.
Mr Scragg provided the appellant with the written opinion of counsel and asked her to read the opinion before discussing matters relevant to the invoice. It was then, according to the appellant, that Mr Scragg offered to do the legal work based on the written opinion and on the basis that the respondent would be paid from monies received on settlement of the sale of a proposed allotment of land the subject of the LMA.
The appellant contends that Mr Scragg also advised the appellant that he would review the charges on the 31 March invoice and that the fee for senior counsel would be $3,000. The appellant agreed to pay this.
According to the appellant, after meeting with counsel on 2 May 2011, and whilst walking to Mr Scragg’s car in Pirie Street, she sought an assurance from Mr Scragg that she would not be indebted to the respondent should she not succeed in her proposed court action. Mr Scragg “assured [her]” that the proposed action would be successful and she would not be indebted for the respondent’s fees in the event her proposed legal action failed. Mr Scragg also assured the appellant that the proposed defendants would provide the necessary consents for the land division once they were provided with a draft of the claim, prior to the claim being filed. The appellant had a hand-written note to this effect upon which she sought to rely. The appellant’s reliance on notes said to be a record prepared by her of her interactions with Mr Scragg is dealt with below.
In his evidence, Mr Scragg denied agreeing to any such proposal. He had no recollection that this meeting occurred. If there had been a meeting at or about this time, it would have been “the most perfunctory of meetings” and “of no substance”. Mr Scragg had no record of any contact with the appellant on 2 May 2011.
Mr Scragg gave this evidence.
I deny any suggestion that I entered into any form of contingency arrangement or that I entered into any arrangement which wasn’t as documented and I would never enter into a contingency arrangement in relation to a complex matter involving the application…
He stated that if any such arrangement had been made, it would have been recorded in writing. Mr Scragg also said that if he had agreed to a contingency arrangement, he would have charged the appellant double his usual rate, as was his normal practice.
The Magistrate put to the appellant that her text message communications with Mr Scragg did not appear to support a conclusion that she had not agreed to the respondent’s fees. The appellant responded as follows.
I ultimately on 2 May accepted his fee but based on an arrangement.
Further, the appellant agreed that the 2 May 2011 contingency arrangement was never put in writing by Mr Scragg and there was no communication from her to Mr Scragg confirming any such agreement. As it happens, the appellant also accepted during the hearing on the appeal that she had agreed to pay the respondent’s usual charges provided it was for work she requested or required him to do. Her central complaint before the Magistrate and on appeal remained as to the asserted oral variation to the effect that a contingency arrangement applied.
On 2 May 2011, senior counsel issued an invoice to Mr Scragg for counsel fees in the amount of $3,850 (inclusive of GST). The appellant met with Mr Scragg and senior counsel on 5 May 2011 in order for counsel to deal with some questions that the appellant wished to raise concerning the written opinion, and to finalise the draft statement of claim. Just prior to the meeting, Mr Scragg provided the appellant with counsel’s invoice for $3,850.
A week later, on or about 9 May 2011, Mr Scragg informed the appellant that he had served the notice of action and the draft statement of claim on the defendants’ solicitors.
On 1 June 2011, the respondent sent the appellant a letter notifying her of an increase in charge rates to come into effect as at 1 July 2011.
Between 21 June 2011 and 30 September 2011, Mr Scragg engaged in negotiations on behalf of the appellant with the defendants’ solicitors. Mr Scragg forwarded relevant correspondence to the appellant by email.[7] The appellant and Mr Scragg also communicated by text message between 12 August 2011 and 26 August 2011 in order to arrange a meeting and deal with other matters. The appellant and her son met with Mr Scragg on 26 August 2011 and the appellant raised a number of concerns with Mr Scragg. According to the appellant, Mr Scragg assured her that she would be able to obtain the consents necessary for her proposed LMA to proceed.
[7] Mr Scragg forwarded emails to the appellant on 22 June 2011, 12 August 2011, 19 September 2011 and 23 September 2011.
The appellant continued to receive statements and invoices for the respondent’s services. She was invoiced $1,755 on 30 June 2011, $718.67 on 29 July 2011, and $1,098.16 on 31 August 2011. Each accompanying statement carried forwarded the amount due from the previous month and itemised the latest invoice.
The appellant’s claim could not be resolved with the proposed defendants and she instructed Mr Scragg to file the statement of claim. On 23 September 2011, Mr Scragg advised the appellant that the claim would be filed in the Supreme Court, not the District Court, and, as such, the amount currently held in the respondent’s trust account was insufficient to pay the Supreme Court filing fee. The appellant paid $3,000 to the respondent’s trust account in order to meet the balance of the filing fee and the balance due for counsel fees. For reasons not entirely clear on the evidence, Mr Scragg did not file the statement of claim.
On 30 September 2011, the respondent issued a further invoice for $1,626.52 and statement to the appellant. As at 25 October 2011, the respondent’s trust account ledger for the appellant showed $3,000 had been credited to the appellant’s trust account for “disbursements & legal fees”. The same ledger shows that $874.00 was debited from the account on 10 November 2011 to pay the respondent for legal fees due.
On 18 November 2011, Mr Scragg informed the appellant that the respondent would no longer be acting for her. Mr Scragg said in evidence that the appellant had been abusive and aggressive towards him. An invoice dated 30 November 2011 (for $911.14) identified that the final task conducted by the respondent on the account occurred on 18 November 2011. It is clear that the professional relationship between the appellant and the respondent ceased as at 18 November 2011.
On 20 December 2011, the respondent issued a statement recording the amount due on the appellant’s account of $12,151.34. This statement includes a label stating “Any reason? For this overdue account? If not please send us a cheque”. According to Mr Scragg, he never received a response to the 20 December 2011 statement. According to the appellant, she was in Tasmania at the time.
The Magistrate asked Mr Scragg why he continued to work for the appellant while not being paid. According to Mr Scragg, the appellant had told him that she did not have a regular income and he agreed to allow her credit to assist her. His evidence was to the effect that once the subdivision took place and the anticipated block of land became available for sale, he would be paid everything due. However, she was to make periodic payments against the balance of the account until the account was finalised. He had not insisted on her paying the amounts due at an earlier time because he knew she had no income. During cross-examination by the appellant, Mr Scragg said:
You asked me for time to pay and I said provided you make regular monthly instalments you can have time to pay. You didn’t do so, my associate rang you, got on to your back, you started making payments and then the matter blew up.
On 1 February 2012, the respondent sent a letter of demand and statement documenting the amount of $12,151.34 alleged to be due to the respondent. As at 3 February 2012, the respondent’s trust account ledger for the appellant recorded that the respondent transferred the remainder of the funds held on the appellant’s account, being $2,126.00, for “legal fees due”. A note on the ledger records that a copy of the trust account was sent to the appellant on 3 February 2012.
On 23 February 2012, the appellant sent a letter to the respondent which omitting formal parts was in the following terms.
I note your letter of demand and statement of invoices dated 1 February 2012.
My agreement with Peter was that the fees would be on a contingency basis with payment of fees accrued to be made from the proceeds of sale of the allotment created, save and except an initial $3,000 contribution and court lodgement fees at commencement of proceedings.
The payment of $3,000 was to be allocated as $1,000 fees to Peter, and $2,000 fees to [senior counsel] and payment was made by myself on 12 May 2011.
[Senior counsel] fees were anticipated to be $2,000, however came to $3,850 and it was agreed the balance would be paid from the proceeds of sale of the allotment created.
A further payment of $500 was made on 6 September 2011 by myself to be allocated to fees to [senior counsel].
A further payment of $3,000 was made on 6 October by myself to be allocated as $2,126 Supreme Court Lodgment Fees and $874 fees to [senior counsel].
On 18 November 2011 Peter advised he was no longer willing to act on a contingency and withdrew from the matter advising me to find new solicitors to handle the matter. This process has been made difficult by Peter’s refusal to return my original documents to me and subsequent continued termination of my phone calls and refusal to allow me access to his offices to discuss the progress made in the matter.
I find it inappropriate and inaccurate to demand payment of fees rendered when the contract of payment was based on contingency from the sale of the allotment created excluding the services of [senior counsel], an initial $1,000 and any court fees.
I also note funds I have paid have been misappropriated, this is highly irregular. I trust your office will return to a professional standard before continuing with this matter.
Mr Scragg responded by letter dated 15 March 2012. In this letter, he denied ever conducting the appellant’s matter on a contingency basis and asserted that the fees were to have been paid in full, irrespective of whether or not the appellant was successful. Mr Scragg also noted his firm’s usual practice to charge double the standard fee if accepting instructions on a contingency basis. Mr Scragg also identified the reasons why he had ceased acting.
The appellant responded to Mr Scragg by letter dated 20 March 2012. In this letter, she maintained that the “arrangement was clear and simple and proposed by [Mr Scragg]; the fees would be taken from the proceeds of the allotment created”. She denied any abusive behaviour on her part.
The respondent’s claim in the Magistrates Court to recover the alleged debt was filed on 31 May 2012.
The issue to be determined
I have set out at some, and perhaps unnecessary, length a chronology of the parties’ more significant interactions. The manner in which the parties’ professional relationship was conducted was, in a number of respects, not entirely satisfactory. However, it is important to keep in mind the issue that was to be determined by the Magistrate and the subject of the appeal to this Court. That issue is as to the terms of the respondent’s retainer and whether they included an oral term that the appellant’s liability for the respondent’s costs was conditional on her succeeding with her proposed LMA. That issue is to be determined on the basis of an objective understanding of the parties’ words and conduct via a vis each other at the time the appellant agreed to engage the respondent’s services and at the time of any later material variation apparently agreed to.
The starting point is the April Costs Document sent by the respondent to the appellant on 4 April 2011. The fact that the appellant continued to engage and accept the respondent’s legal services, without more, was an acceptance of the terms set out in that document. Further, the appellant had received the respondent’s first invoice (dated 31 March 2011) on or about 5 April 2011. She acknowledged during the appeal hearing that she did not object to Mr Scragg’s hourly rate as set out in that invoice. The question before the Magistrate comes down to the issue of whether or not any of the parties’ interactions thereafter evinced an (objectively discernible) intention by the parties to the effect that any liability for costs incurred was to be conditional in the manner asserted by the appellant.
The appellant’s notes
At trial, the appellant sought to rely on a comprehensive and detailed series of notes said by the appellant to have been made by her as a record of various interactions she had with Mr Scragg. The respondent objected to the notes being admitted into evidence and cross-examined the appellant with respect to the notes, including in relation to which, if at all, they were made contemporaneously with the events of which they purport to be a record.
Nevertheless, the respondent did not object to the notes being before the Magistrate as a statement of the appellant’s evidence. At the conclusion of the cross-examination of the appellant on the voir dire, the Magistrate did not rule as to the admissibility or use of the notes.
In the circumstances of this matter, the notes were potentially relevant for any of three purposes: first, whilst not admissible as evidence of the facts recorded they may have been available for the appellant to refresh her memory of events if the requirements for refreshment of memory had been satisfied on the evidence; second, they may have been available to attack the appellant’s credibility on the basis, as the respondent asserted, that the notes were brought into existence at a later date and in an effort to provide reconstructed support for the appellant’s claim; third, in the event of an allegation against the appellant of recent invention the notes may have been of assistance to rebut such an allegation if contemporaneity could be established.
The Magistrate does not appear to have made a conclusive finding as to the admissibility or reliability of the appellant’s notes or as to any use to which he put them.
Resolution of the appeal
The Magistrate’s findings, as to the notes and as to the ultimate issue, were as follows.[8]
[8] Magistrate’s reasons at [10]-[21].
I do not believe that Ms Gregory was suggesting that the notes were not compiled in Mr Scragg’s presence. It follows that they were made at a later time and I so find. This leaves open the question of exactly when the notes were prepared. Mr Scragg, I think, would like the Court to determine that the notes were prepared solely for the purposes of this action.
The notes comprise some 20 pages and are written in small hand. I would be surprised if the entire set of notes was completed after the current proceedings were issued. It would not, however, be a significant task to re-write a single page and it is entirely possible that the page containing the notes of the events of 2 May were altered.
There was nothing in Ms Gregory’s demeanour or in the manner in which she gave evidence which of itself, lead me to believe that she was not being truthful. However, I simply cannot determine when the notes were prepared or indeed whether the relevant page was subsequently redone and the note of Mr Scragg’s offer inserted.
Ultimately these issues are secondary to the principle [sic] question for me to determine which is whether or not the note is accurate. For me to determine that question on the balance of probabilities I must look at all the surrounding circumstances. The following matters are of significance.
In his SMS message on 29 April, Mr Scragg was adamant that he would not act for Ms Gregory if he was not to be paid a reasonable rate. Ms Gregory responded to this by observing: ‘... The balance is fair it just took me by surprise.’
As Ms Gregory notes in her affidavit, the allotment to be sold was a proposed vacant allotment which would only be created if the Supreme Court action resolved in her favour. Mr Scragg gave no guarantee that this would occur and he must have been conscious of the real possibility that the action might fail.
There is an absence of any written communication at all referencing the alleged agreement. From Mr Scragg’s point of view, this is very surprising because given the matters referred to in the previous paragraph I would have anticipated that Mr Scragg would have confirmed his offer in a letter suggesting amended terms of retainer to deal with the possibility that the legal action might not succeed.
From Ms Gregory’s perspective, Mr Scragg’s offer represented a significant softening of the position he took on 29 April. It is curious that she did not confirm his revised position either in a letter or in an SMS communication. The latter was easily achieved and might, for example, have taken the form of a ‘thank you’ styled SMS.
Mr Scragg forwarded further accounts for legal work on 30 April 2011 and 31 May 2011. These accounts note that they are payable within 14 days, a claim quite at odds with Ms Gregory’s claimed agreement although not of itself, conclusive of its non-existence.
In para. 126 of her affidavit Ms Gregory makes the point that a sticker on a statement dated 30 December 2011 for accumulated fees enquires:
Any reason for this overdue account? If not please send us a cheque.
She notes that no other monthly statement had a reminder sticker.
Whilst this observation is accurate the fact remains that none of the monthly accounts were disputed and at no time did Ms Gregory remind Mr Scragg of her supposed arrangement with him. She did not reference the alleged agreement in response to the sticker’s enquiry.
Based on the totality of the evidence, I am not able to accept Mr Gregory’s claim that Mr Scragg agreed to act for her on a contingency basis. I find that the terms of Mr Scragg’s retainer are as set out in the agreement appearing at p.12 of Exhibit LG1 to Ms Gregory’s affidavit sworn 20 August 2015 and as varied by the memorandum at p.49.

Whilst the Magistrate failed to fully address the potential uses of the appellant’s note of 2 May 2011, the notes were before his Honour and he made no findings adverse to the appellant’s credit with respect to how and when the notes came into existence. As it happened, the appellant’s evidence was given with the assistance of her notes including that for 2 May 2011.
I refer to the concessions made by the appellant at trial and on appeal identified in paragraph [39] above. These concessions are consistent with the evidence of the parties’ interactions on this topic. I see no basis to reject the Magistrate’s conclusion that the terms of the retainer were as recorded in the April Costs Document as varied by the letter of 1 June 2011. Ultimately, the issue before the Magistrate was whether the appellant’s account of a conversation with Mr Scragg on 2 May, as to an undertaking to act on a contingency basis, was a reliable account. On this critical issue, the Magistrate did not accept her evidence and preferred that of Mr Scragg.
On my review of the evidence before the Magistrate it was open to his Honour to reach the conclusion he did, namely, that he was not persuaded that Mr Scragg agreed to act on a contingency basis. The Magistrate had the usual advantages of having heard and seen the appellant and Mr Scragg give their evidence. Even if the appellant’s note is accepted as providing a relatively contemporaneous account[9] it could not be said that the Magistrate’s conclusion was contrary to incontrovertible facts or uncontested testimony, glaringly improbable or contrary to compelling inferences available from other evidence.[10]
[9] It must have been made some time later than the time of the asserted conversation which according to the appellant occurred in Pirie Street on the way to Mr Scragg’s car.
[10] Fox v Percy [2003] HCA 22; (2003) 114 CLR 118 at [28]-[29].
Furthermore, the proposition that a solicitor would enter into a contingency fee arrangement for this type of quite complex commercial matter, the outcome of which would be difficult to predict with certainty, is not intrinsically likely. This consideration carries significant force in the absence of any suggestion that there was to be an uplift to the respondent’s usual fees which is a very common element of contingency fee arrangements. According to Mr Scragg, his firm usually charged double its standard fee when agreeing to act on a contingency basis. There is no reason not to accept that evidence. This is done in order to accommodate the risk that a contingency does not eventuate. Logically, a law firm willing to do an appreciable amount of contingency fee work will have to allow for wins and losses in order to come out at least even if not ahead over time. It is even less likely that such an arrangement would be entered into on the run while walking to the car in Pirie Street.
The fact that the appellant, who on her evidence took extremely lengthy and detailed notes of her interactions with the respondent, put nothing in writing to the respondent (not even by way of text message) to confirm the contingency arrangement said to have been reached is telling. For this reason the intrinsic unlikelihood of the arrangement contended for by the appellant assumes greater significance.
Unfortunately, the way in which the parties dealt with each other created a fluid situation with significant scope for confusion. I have little doubt that Mr Scragg, throughout, encouraged the appellant to proceed with the matter confident in the strength of her claim, particularly after having received senior counsel’s advice. Mr Scragg was prepared to allow payment of his legal fees to be deferred and, if possible, to be met, at least in part, by way of periodic payments over time, optimistic that when the matter was successfully finalised, the appellant would be in a position to discharge any balance due. I accept that Mr Scragg encouraged the appellant to believe that all would be well in the end in this respect albeit whilst still seeking some form of periodic payment.
However, an assurance that he would, if necessary, wait until the end of the matter to be paid is quite different from an undertaking that the fees would be payable only on condition that there were to be a successful outcome to the matter. It is this aspect of the appellant’s evidence that the Magistrate refused to accept and for the reasons given I find no basis on which his rejection of the appellant’s evidence ought to be overturned. I see no reason to interfere with the orders made by the Magistrate.
An end note
During the oral submissions on appeal, Mr Scragg advised from the bar table that he had been informed by the appellant that the subdivision had proceeded and that she had, in fact, sold the relevant property the subject of the LMA and received the sale proceeds. The appellant, also from the bar table, confirmed this. The following exchange occurred:
MR SCRAGG:    Yes, exactly, and the other thing I will just note, apparently, Ms Gregory has got her block of land and she has sold it, so the contingency that she claims excludes her from liability, I found out this morning from her, has in fact occurred, so we are not dealing with something that never occurred. She has divided the land off and she has sold it, so even if we argue to a contingency, that contingency has been fulfilled.
HIS HONOUR:    Where does that take us? Let's assume that's right. It's not before me in an evidentiary way but let's assume that it either has happened or at some point the land will be sold.
MR SCRAGG:    I'm instructed it has been sold.
HIS HONOUR:    And the contingency has been satisfied.
MR SCRAGG:    Yes, the proceeds have been received. The land has been sold and the proceeds have been received. I'm informed by Ms Gregory not instructed.
HIS HONOUR:    Ms Gregory, why wouldn't that mean that you become liable to pay Mr Scragg's fees?
MS GREGORY:    I did tell Mr Scragg today that that had occurred I'm quite open about that. Because Mr Scragg withdrew from the matter in November 2011 I have gone on and managed to actually achieve my division. Prior to Mr Scragg coming in and proposing this particular course of action I had a cause of action in process to achieve, I had to achieve on land division. I had achieved the council approval and the obstacle that I had was before the registrar. So Mr Scragg withdrew on the 18th -
HIS HONOUR:    Ms Gregory, you're going to invite another claim by Mr Scragg aren't you? Even if you were to succeed -
MS GREGORY:    Yes.
HIS HONOUR:    - he's going to commence or amend his proceedings to say well, the contingency has been satisfied, I can't argue about that now, and you're going to have another claim or an amended claim that even on your own case you owe him some money.
MS GREGORY:    My affidavit answers the fact that my argument is that Mr Scragg withdrew from the matter. Mr Scragg didn't conclude the matter.
HIS HONOUR:    That's another argument for another day because all that trial is concerned is what was the agreement between you and the judge has found that it was the retainer. If it's not the retainer but it is as you say a deferred or contingent payment a question then arises as to whether there was another contingency and that is that Mr Scragg complete the transaction. There's no evidence dealing with that issue and then the other issue would be even if that were so surely either party to such an arrangement has a right to withdraw from the arrangement if the arrangement becomes unworkable, personality conflict and that generates a major factual inquiry which hasn't been embarked upon. See where we go. So anyway, I can accept what Mr Scragg has told me that the matter has been completed as it were and you've sold the property.
MS GREGORY:    Yes, the plan has been deposited and the block of land in question has been created and it's been sold.
HIS HONOUR:    And sold?
MS GREGORY:    And sold.
HIS HONOUR:    And settled?
MS GREGORY:    And sold and settled, yes.
HIS HONOUR:    So you've recovered proceeds from that block of land.
MS GREGORY:    The bank's got them.
HIS HONOUR:    I'm sure. Everybody has a bank but you've recovered proceeds.
MS GREGORY:    Yes, thank you.
It would appear, that even if the appellant’s contention as to the existence of the contingency arrangement were to be accepted, the contingency has now been satisfied.
Conclusion
I dismiss the appeal. This resolution of the appeal does not mean that the respondent is necessarily entitled to recover all of the amount as claimed. By continuing to engage the respondent the appellant accepted the April Costs Document as the terms of the retainer and its subsequent variation by the letter of 1 June 2011. As decided by the Magistrate and confirmed by me on appeal, the retainer was not subject to any contingency arrangement. Whether or not the retainer, as varied, properly supports the outstanding fees charged and still claimed by the respondent will be a matter to be determined by the taxing Master. I make the following orders:
1.Appeal dismissed.
2.The Magistrate’s orders remain undisturbed.
3.The matter is remitted to the Supreme Court Master to continue and complete the adjudication process in the light of these reasons.
I will hear the parties on the costs of the appeal.