Hall v Barrak
[2009] NSWDC 271
•16 October 2009
CITATION: Hall v Barrak [2009] NSWDC 271 HEARING DATE(S): 20-23 April 2009
JUDGMENT DATE:
16 October 2009JURISDICTION: District Court - Civil JUDGMENT OF: Sidis DCJ DECISION: 1. Verdict for the defendant on all of the claims.
2. The plaintiffs are to pay the defendant’s costs of the proceedings. This order is suspended for seven days to allow the parties to list the matter for further argument on the matter of costs if required.
3. The exhibits will be retained for 28 days.
4. My reasons are publishedCATCHWORDS: Claim for payment of fees for legal services - Guarantee - Indemnity - Credit - Agency LEGISLATION CITED: Legal Profession Act 1987 PARTIES: Trevor Hall (First Plaintiff)
HAL Lawyers, a trading name and legal practice of Robert Haralovic (Second Plaintiff)
Bob Wilson & Associates, trading name and accountancy practice of Bob Wilson (Third Plaintiff)
Benjamin Barrak (Defendant)FILE NUMBER(S): 3387/07 SOLICITORS: Hall Partners (Frist, Second and Third Plaintiffs)
Barrak Lawyers (Defendant)
JUDGMENT
1 The plaintiffs in this matter claimed against the defendant for the payment of fees for legal and accounting services they provided for the purposes of litigation in which the defendant, although not a party, was involved in various capacities.
2 The first plaintiff, Trevor Hall, formerly practised as a barrister and currently practises as a solicitor under the name Hall Partners Pty Limited. He claimed for legal services provided as a barrister up to 30 June 2005.
3 The second plaintiff, Robert Haralovic, practises as a solicitor under the name Hal Lawyers. He claimed fees due to his firm for legal services provided by Cameron Khosravi, whom Mr Haralovic said he employed as a solicitor at all relevant times and by Mr Hall whom he said he employed as a solicitor between 1 July 2005 and 30 June 2007.
4 The third plaintiff, Robert Wilson, is an accountant. The fourth plaintiff, Robert Wilson and Associates Pty Limited, is the corporate entity through which Mr Wilson operates his accountancy practice. Their claims were for the work undertaken by Mr Wilson in providing expert accounting opinion.
5 The defendant, Benjamin Barrak, is a solicitor who practises under the name Barrak Lawyers at Parramatta.
6 The litigation in which the plaintiffs claimed to have earned fees was lengthy and complex. The clients of the plaintiffs were Mr Ghassan (Gus) Fares, Landmark Building Developments Pty Limited and Parramatta Design & Development Pty Limited. Disputes arose between parties to a joint venture at Nelson Bay that resulted in litigation involving the clients in the Supreme Court of New South Wales and the Federal Court of Australia. The Federal Court proceedings involved Mr Fares and Parramatta Design & Development. They progressed from the trial judge to the Federal Court of Appeal and the High Court. They were decided against Mr Fares and Parramatta Design & Development with the result that the Supreme Court proceedings were abandoned.
7 Significant sums were incurred in legal expenses. Sums referred to in evidence varied between $400,000 and $600,000. Mr Fares became bankrupt and Landmark and Parramatta Design & Development went into liquidation.
8 Mr Hall’s initial instructions concerning the litigation were provided by Mr Barrak in mid 2003.
9 In the course of the first instance proceedings in the Federal Court the trial judge, Justice Conti, raised the question of whether Mr Barrak’s interests were conflicted, since he was also a witness in the proceedings. As a result another legal firm, Proctor & Associates, took over the litigation as the solicitors on the record. This change took place in March 2004.
10 In about February 2006, shortly prior to the hearing of the High Court appeal, instructions were transferred to Hal Lawyers.
11 The plaintiffs claimed their unpaid fees from Mr Barrak, each alleging that he guaranteed payment of their fees or, alternatively, represented that he would accept personal liability for fees unpaid by the clients.
The claims by Mr Hall12 It was not disputed that all of the fees for which Mr Barrak might have been responsible when he was the solicitor on the record in the litigation were paid.
and Mr Haralovic
13 The issues arising out of these claims were:
1 The extent to which the evidence supported the allegation that Mr Barrak accepted personal liability for the unpaid fees of Mr Fares, Landmark and Parramatta Design & Development, either by way of guarantee or representation.
2 If there was evidence to support a guarantee, whether the necessary steps were taken to recover the debt from the primary debtors in order to permit the enforcement of the guarantee.
3 The extent to which the accounting materials relied upon by Mr Hall and Mr Haralovic should be accepted as evidence of invoices issued or fees earned for which Mr Barrak was personally responsible.
4 The position of Cameron Khosravi and the entitlement of Mr Hall or Mr Haralovic to claim the fees generated by the legal services he performed.
5 The agency arrangements, if any, under which Mr Haralovic or Hal Lawyers provided legal services.
6 The applicability of the requirements of the Legal Profession Act 1987 and whether failure to comply with those requirements prevented Mr Hall or Mr Haralovic from recovering their fees.
Guarantee/Representation
14 The same evidence was relied upon to support both the claimed guarantee and representation.
15 The claim was that Mr Barrak repeatedly stated between 2003 and 2006 that he would pay the fees of everyone involved in the litigation. Mr Hall’s evidence was replete with instances in which Mr Barrak said words to the effect:
… I will meet all your legal fees i and … At the end of the day, I will pay everybody’s fees. I guarantee to pay everybody’s fees ii and … I am going to pay everyone’s fees, but firstly Mr Fares is responsible for payment of fees. If Gus can’t pay, then I will pay. iii
16 In evidence to the Court, Mr Hall referred to meetings at which similar statements were made in the presence of others. He spoke of a meeting of unspecified date attended by Mr Haralovic at which, having been warned by Mr Haralovic about the pitfalls of litigation, Mr Barrak responded:
At the end of the day I am responsible for the fees in these matters. I will pay everybody’s fees. iv
17 Mr Haralovic’s affidavit evidencev referred to three or four meetings with Mr Barrak. The only meeting to which he was able to put a date was on or about 21 April 2004, that is, after Proctor & Associates took over as solicitors on the record. He said he did not keep diary notes of these meetings.
18 Mr Haralovic claimed that at each of the meetings he warned Mr Barrak about the extent to which costs in litigious matters could escalate beyond expectations. He said that on each occasion Mr Barrak responded with words to the effect that he should not worry because he would pay everyone’s fees if necessary.
19 Mr Barrak denied any memory of the meeting of 21 April 2004. He denied any conversations with Mr Haralovic in the terms alleged. He said he met Mr Haralovic on one occasion only by coincidence when he was attending Mr Hall’s chambers. He said Mr Haralovic was casually dressed at the time and they engaged in casual conversation only.
20 He denied that he ever received invoices by facsimile or email from Hal Lawyers as claimed by Mr Khosravi. He said he would have been concerned if he received such invoices.
21 Mr Hall said that at a meeting with his Honour the late Judge Donovan, QC, when he was in practice at the Bar, Mr Barrak said:
I am responsible for everybody’s fees. I will be paying everybody’s fees. vi
22 He produced in support of this evidence a draft affidavitvii of Judge Donovan.
23 Mr Hall was emphatic in asserting that these statements were made repeatedly by Mr Barrak.
24 Equally emphatically, Mr Barrak denied having made any such statement. Mr Barrak agreed that he provided financial assistance to Mr Fares in meeting the costs involved in the litigation when Mr Fares’ personal resources were exhausted. He claimed to have assisted Mr Fares to the extent of about $180,000. He agreed also that he assisted Mr Fares with legal issues. He said he did this as a friend, not as a solicitor.
25 Mr Barrak stated that he made no direct payments to Mr Hall, Proctor & Associates or any other solicitor or barrister. There was no evidence to indicate that he did so.
26 There were a number of problems facing Mr Hall and Mr Haralovic in establishing this part of their claims.
27 There was no written agreement or deed of guarantee with Mr Barrak.
28 No costs disclosure document was issued by Mr Hall to Mr Barrak or to Mr Fares, Landmark or Parramatta Design & Development. No costs agreement was entered into between Mr Hall and any of these parties.
29 Hal Lawyers issued two documentsviii titled Standard Costs Disclosure in February 2006. They related to the High Court appeal and the Supreme Court proceedings. None of the invoices that are the subject of these proceedings related to legal services performed after 20 February 2006.
30 When Mr Hall sought to obtain agreement in writing through a deed that he produced in February 2006, both Mr Fares and Mr Barrak declined to sign it. Both rejected the proposition that the payment of the fees for which Mr Fares was personally responsible or those of Landmark or Parramatta Design & Development was to be guaranteed by Mr Barrak.
31 Mr Hall claimed support from Mr Proctor because he signed the deed issued in February 2006. There was no evidence from Mr Proctor in these proceedings. In the absence of that evidence, I was left to speculate on the reasons he signed the deed.
32 Mr Hall and Mr Haralovic continued to act notwithstanding that the 2006 deed was rejected by Mr Barrak. There was evidence that a special arrangement was entered into between Mr Fares and Hal Lawyers to deal with the fees incurred in relation to the High Court appeal. There was evidence that separate costs agreements were entered into with the senior and junior counsel who were engaged from time to time during the course of the litigation. There was no evidence that Mr Barrak guaranteed the payment of those fees.
33 I had severe reservations concerning the credit of both Mr Hall and Mr Haralovic.
34 Mr Hall’s evidence indicated a capacity to arrive at legal conclusions that suited his purpose but that were not available on the evidence. Examples were:
1 He claimed the 2006 deed as evidence of the liability claimed against Mr Barrak because it was signed by everyone, including Mr Proctor, except Mr Fares and Mr Barrak. This claim was made despite the clear indications of Mr Fares and Mr Barrak that they did not accept its terms.
2 He claimed that costs disclosure documents issued by Hal Lawyers in 2006 were costs agreements when they were signed only by Mr Haralovic and not by Mr Barrak or any other of the parties to which they were addressed.
3 Mr Hall relied on a response from Mr Barrak to his email ix sent at 10.31 pm on 13 May 2005 which, relevantly, read:
…I am prepared, to the extent necessary, to carry the matter for the intervening period, subject that post the wash-up of everything the fees will be addressed, either by Gus in the first instance or you in the second instance.
The email x from Mr Barrak read: Thanks. See you Monday . This email, however, was sent earlier, at 10.06 pm on 13 May 2005, and was clearly a response to an email from Mr Hall concerning a meeting to be held on the following Monday.
35 Both Mr Hall and Mr Haralovic claimed that a junior solicitor, Cameron Khosravi, was employed by Hal Lawyers when the evidence clearly indicated that Mr Khosravi was employed by Mr Hall’s company, Legal & Accounting Services Pty Limited. This aspect of the claim is dealt with in greater detail later in these reasons.
36 They did not explain why some accounts, which appeared to have been paid, were sent to Proctor & Associates whilst those that were the subject of this claim were addressed to Barrak Lawyers or to Mr Barrak personally at a time when he was not a party to the litigation and therefore not a client and not the solicitor on the record. Both Mr Hall and Mr Khosravi insisted that the accounts were dispatched to Mr Barrak on the dates on which they were prepared. Mr Barrak denied ever having received them. Mr Haralovic appeared to have little knowledge about the issuing of the invoices. He left that task to Mr Khosravi under the supervision of Mr Hall.
37 Although it was claimed in submissions to be the best evidence available, I did not consider that I could attach any weight to the affidavit drafted for signature by his Honour Judge Donovan. It was not signed by Judge Donovan and it was not possible for Mr Barrak to cross examine his Honour on the document. The author of the handwritten notes that appeared on the document could not be confirmed. Against that part of the affidavit that was critical to the claim, paragraph 11, was handwritten: I will need these details. The same words were written against paragraph 12 where reference was made to a chronology, missing from the document in evidence, to be annexed as ‘A’ to the affidavit.
38 Mr Proctor was said to have been present at a meeting that took place on 27 April 2004 in Judge Donovan’s chambers but no evidence was provided by him to confirm the details set out in paragraph 11 of the affidavit. It was apparent that Mr Proctor was still in practice and apparently available to provide evidence. The absence of evidence from him was left without explanation. I drew the inference that his evidence would not have assisted Mr Hall or Mr Haralovic on this aspect of their claims.
Enforceability of the Guarantee
39 Mr Hall and Mr Khosravi stated that they sent the invoices that were the subject of the claim to Mr Barrak on or about the dates that appeared on them. They were not sent to Proctor & Associates, Mr Fares, Landmark or Parramatta Design & Development.
40 On this basis it was argued for Mr Barrak that, until a claim was made on those principally liable for the debt, the primary liability of the principal debtor was not established and default on the part of the principal debtor was not established. In such circumstances, it was argued, liability could not be asserted against the alleged guarantor. Support for this proposition was said to be found in the text The Modern Contract of Guaranteexi.
41 Mr Hall and Mr Haralovic did not take issue with this proposition. Rather, it was argued that the promise given by Mr Barrak was in the nature of an indemnity so that it was not necessary to make demand on the principal debtors.
42 The difficulty with this proposition was that it was never claimed that Mr Barrak offered them an indemnity in respect of their fees. Throughout his emails and in his evidence to the court, Mr Hall stated that Mr Barrak promised to pay fees on the basis that, when the resources of the parties to the litigation were exhausted, he would pay them. Mr Haralovic gave substantially the same evidence.
43 Further, it was not pleaded that Mr Barrak agreed to indemnify the plaintiffs.
The Invoices
44 Mr Barrak said that he had not seen any of the invoices that were the subject of the claim until they were produced for the purposes of these proceedings. He said he did not pay any invoices produced in the course of the litigation. He gave money to Fares to assist him in paying accounts. Mr Fares said he paid sums of money to Mr Proctor and to senior and junior counsel when invoices were presented or he provided funds to Mr Proctor when requested to do so. This evidence was not challenged.
45 There were many anomalies in the accounting materials that were in evidence.
46 The invoices that were exhibited to Mr Hall’s affidavitxii were clearly not those that were originally issued.
47 Some were issued on the letterhead of Trevor Hall, Barrister, others on the letterhead of Hal Lawyers, others on the letterhead of Hall Partners Pty Ltd.
48 Some of the invoices issued on the letterhead of Hal Lawyers showed the address at 28/193 Macquarie Street, Sydney. Others bore the address 34 Wymston Parade, Abbotsford. It was agreed that all of the work for which payment was claimed was undertaken at 28/193 Macquarie Street. There was no explanation for invoices bearing the Abbotsford address.
49 Each account was dealt with by two documents. There was a short summary on which the ABN appeared as 42 091 847 997. This was said to be an internal accounting record that was not sent to Mr Barrak. The ABN was identical to that appearing on the letterhead of Legal & Accounting Services Pty Limited, a company owned and controlled by Mr Hall.
50 The second document was the invoice itself. Not only did the letterheads on those invoices vary, the ABNs also differed. Two ABNs appeared on those published on the letterhead of Hal Lawyers. One appeared under the firm’s name and another under the heading on the invoice. The second of these numbers was identical to that on the letterhead of Mr Hall, barrister. An entirely different ABN appeared on those invoices printed on the letterhead of Hall Partners.
51 There was no adequate explanation of the circumstances in which the ABN for Legal & Accounting Services appeared on summaries of invoices issued by Hal Lawyers or in which Mr Hall’s ABN appeared on Hal Lawyers’ invoices.
52 Mr Hall identified a number of errors appearing in the invoices. He said it was a mistake to issue invoices to Proctor & Associates up to November 2004 and to send copies only to Mr Barrak. A number of invoices printed on the letterhead of Hal Lawyers inadvertently related to charges for work Mr Hall undertook as a barrister prior to 1 July 2005 and the claim for those charges was subsequently abandoned. The printing of invoices on Hall Partners’ letterhead for work undertaken before 1 July 2007 was said to be another error.
53 The only explanation provided for any of these anomalies was that no hard copies of the invoices were retained at the time they were issued and that those in evidence were reprinted from records stored in a computer that used a particular type of accounting software.
54 In the deedxiii authored by Mr Hall in February 2006 it was stated that he and Hal Lawyers had issued invoices to Landmark and Parramatta Development & Design. No reference was made in the deed to the numerous invoices allegedly issued in 2004 and 2005xiv to Mr Barrak.
55 The claim that invoices were issued to Proctor & Associates by mistake was inconsistent with the some of the provisions of this deed.
Recital 2 Trevor Hall was prior to 1 July 2005 practising as a barrister in Sydney on instruction from Proctor and Associates Solicitors to appear as junior counsel in the above stated matters;
Recital 4 Hall has from the 1 July 2005 continued to appear and assist Proctor in respect of the foresaid matters, ostensibly as “agent solicitor” of Proctor.
Clause 19: Hall and HAL have at all material times with respect to amounts claimed as due and owing under this deed, accepted their instructions from the Firm of solicitors Proctor and Associates;
56 These provisions indicated that, at least up to February 2006, Mr Hall understood that he had been retained by Proctor & Associates before and after 1 July 2005, initially as junior counsel and subsequently as solicitor agent, so that the addressing of invoices to Proctor & Associates appeared to be entirely appropriate.
The position of Mr Khosravi
57 Much of the difficulty in explaining the role of Hal Lawyers stemmed from the circumstances in which Mr Khosravi performed legal services.
58 Mr Hall and Mr Haralovic claimed that Mr Khosravi was employed by Hal Lawyers. Mr Haralovic also claimed that Hal Lawyers operated an office from 29/193 Macquarie Street, an office suite that interconnected with suite 28 in which Mr Hall’s chambers were located. Mr Hall and Mr Khosravi continued to work at this address after Mr Hall took up employment with Mr Haralovic on 1 July 2005.
59 It became glaringly obvious that these claims were completely fictitious. Mr Khosravi occupied a desk in the premises at 128 Macquarie Street. Neither Mr Haralovic nor Hal Lawyers held a lease of the premises in which Mr Khosravi worked. Neither paid rent for the space occupied by him. They paid none of the overheads pertaining to those premises.
60 The evidence clearly established that Mr Khosravi was in fact employed by Legal & Accounting Services Pty Limited and his salary was paid by that company, either directly or by reimbursement to Hal Lawyers.
61 A letterxv dated 5 May 2003 was said to be the letter of engagement issued to Mr Khosravi by Hal Lawyers. It contained a number of errors concerning its date and the date from which Mr Khosravi was allegedly employed.
62 Mr Haralovic’s evidence concerning this letter was incoherent. The second page of the letter was dated 5 May 2004. Mr Haralovic initially said the correct date was 2004 but later said that the letter was written in 2003. The letter spoke of employment effective from 1 May 2004. Mr Haralovic said the reference in the letter to Hal Lawyers agreeing to supervise Mr Khosravi from 29 October 2004 was a mistake and it should have read 29 October 2003. Mr Khosravi stated that he was employed from October 2003.
63 A reference in the letter to Hal Lawyers having taken premises at Suite 22, 193 Macquarie Street was another mistake. He said the firm never occupied suite 22 but occupied suite 28 with an interconnecting door to suite 29. I have already noted Mr Haralovic’s evidence that there was no lease to him or his firm of the premises and no rent or outgoings paid. In such circumstances, it could not be said that premises were taken. Suite 28 was the office from which Mr Hall practised as a barrister until 1 July 2005.
64 A letterxvi dated 14 April 2004 from Legal & Accounting Services to Mr Haralovic purported to deal with the employment by Mr Haralovic or Hal Lawyers of Mr Khosravi from 1 May 2004. It provided that Hal Lawyers were to pay Mr Khosravi’s wages. Legal & Accounting Services was to maintain a valid workers compensation policy and indemnify Hal Lawyers in respect of liability for tax deduction instalments, superannuation and workers compensation in respect of Mr Khosravi. Legal & Accounting Services was to credit Hal Lawyers’ bank account monthly with the sum of $2,911.67, an amount equal to Mr Khosravi’s net monthly salary.
65 It was clear that the supervision, if any, provided by Mr Haralovic of Mr Khosravi’s legal services could have been rudimentary only and that Mr Hall was closely involved in Mr Khosravi’s supervision and the day to day direction of his work. This supervision was so close that the invoices rendered by Hal Lawyers prior to 1 July 2005 referred the addressee to Mr Hall in the event of inquiry.
66 The most significant evidence on this topic was the letterxvii dated 11 October 2004 written by Mr Hall to the NSW Bar Association in response to a complaint relating to Mr Khosravi’s employment status. The complaint was that Mr Hall employed Mr Khosravi as a legal practitioner, that he rendered tax invoices for work done by Mr Khosravi and received fees for work done by him as a solicitor.
67 The response included the following:
1 …Mr Khosravi has been, upon its proper construction, employed by the company Legal & Accounting Services Pty Limited, of which Mr Hall was a director. … and … It can not be said on a proper construction of the employment relationship concerning Mr Khosravi that he was employed by Mr Hall but rather that he was employed by Legal & Accounting Services Pty Limited.
2 Wages were paid either by Legal & Accounting Services or Mr Haralovic, trading as Hal Lawyers. Group tax instalments and workers compensation payments were paid by Legal & Accounting Services.
3 Although in an earlier letter Mr Hall informed the Bar Association that he for some time employed Mr Khosravi and then entered into an arrangement with a firm of commercial lawyers in Sydney for a partner to supervise him:
I wish to state that the reference to ‘employed’ in this letter must be read as a reference to ‘employed’ in a general sense and that the employer of Mr Khosravi was, at all material times, the company Legal & Accounting Services Pty Limited.
4 The letter then goes on to state that the work that Mr Khosravi did as an employed solicitor he did
… as the employed solicitor of Mr Robert Haralovic, the principal solicitor for Hal Lawyers. Of this matter, there can be and is, I trust, is (sic) no objective contest.
68 It was not explained how Mr Khosravi could be the employed solicitor of Hal Lawyers when he was employed by Legal & Accounting Services.
69 As to the receipt of fees, the letter contained confused information concerning a method in which invoices for fees were sent, presumably by Mr Hall, for the work and services performed by Mr Khosravi, that provided reimbursement to Legal & Accounting Services for the expenses incurred in meeting its obligations to pay wages and salary directly and more recently via remittance of payments to Mr Haralovic.
70 The letter then went on to state:
Legal & Accounting Services Pty Limited was by agreement with Hal Lawyers entitled to retain the funds acquired by it in respect of the provision of legal services by Mr Khosravi who was at all material times the employed solicitor of Hal Lawyers. To this extent the issuing of tax invoices by Hall was, in reality, little more than a form of debt factoring arrangement in which monies derived as fee income by Mr Khosravi in his capacity as the employed solicitor of Hal Lawyers were and are remitted to the account of Legal & Accounting Services Pty Limited in accordance with what is believed to be the lawful entitlement of the corporation to receive the said sums.
Agency
71 Mr Haralovic claimed that through Hal Lawyers he acted as agent for Proctor & Associates in the litigation both before and after 1 July 2005.
72 Mr Barrak denied that he retained Hal Lawyers as agents for his firm when he was on the record in the litigation. He said he had no need for an agent who was based at Abbotsford.
73 The only conversation with Mr Barrak to which Mr Haralovic could put a date was that alleged to have taken place on 21 April 2004, after Proctor & Associates were on the record. There was thus no evidence to suggest that Mr Barrak personally engaged Hal Lawyers as agents for his firm.
74 Mr Haralovic alleged that at this meeting Mr Barrak stated that Mr Hall would work on the litigation with Mr Khosravi assisting him as a solicitor. Mr Barrak denied any such conversation. He said he thought Mr Khosravi was a clerk in Mr Hall’s office.
75 Mr Fares denied that he met with Mr Haralovic for the purposes of the litigation and denied that he made any payment to Hal Lawyers.
76 There was no evidence from Mr Proctor or any other solicitor working within Proctor & Associates to confirm an agency arrangement with Hal Lawyers. Mr Haralovic in fact denied any knowledge of the arrangements under which Mr Khosravi, allegedly his employed solicitor, undertook work for Proctor & Associates. He said that Mr Khosravi worked in the same office as Mr Hall and he left it to Mr Hall to direct Mr Khosravi on what was to be done and to attend to his day to day supervision. He said he thought there was an agency arrangement with Proctor & Associates but he did not know the circumstances in which that firm arranged to use Mr Khosravi’s services.
77 Mr Haralovic’s attempts to recollect and explain the nature of the relationship between his firm and that of Proctor & Associates became increasingly incoherent as his evidence proceeded.
78 There was no explanation of why, if Hal Lawyers was acting in an agency capacity for Proctor & Associates, the invoices upon which the claim was based were directed to Mr Barrak.
79 From 1 July 2005 Mr Hall ceased to practice as a barrister. He claimed that he was employed as a solicitor by Mr Haralovic or Hal Lawyers although he continued to practice from 28/193 Macquarie Street. There was no evidence of who actually employed Mr Hall or whether Mr Khosravi was from that date transferred to the direct employment of Hal Lawyers.
80 The reality was, however, that Mr Hall and Mr Haralovic entered into a profit sharing arrangement under which Mr Hall retained the fees that he generated through the legal services that he provided.
81 It was clear that after 1 July 2005 Mr Hall continued to have considerable input as solicitor advocate working under the auspices of Hal Lawyers and that in February 2006 Hall Lawyers replaced Proctor & Associates as solicitors on the record for the purposes of the High Court appeal. Mr Fares agreed that he instructed Proctor & Associates to retain Mr Hall as their agent.
82 The deed that Mr Hall prepared in February 2006 made no reference to any involvement by Hal Lawyers prior to 1 July 2005.
The Legal Profession Act 1987
83 It was not disputed that this Act applied during the period covered by the invoices.
84 The issue was whether there was any obligation to pay the fees generated by the legal services in the absence of assessment under Division 6 of the Actxviii when no written disclosure or estimate of costs was provided. Further, under the Act, proceedings for the recovery of costs could not be maintained against any person until 30 days after the bill for those costs was issued to that personxix.
85 The argument was that, since the costs that were the subject of the claim were allegedly incurred during the period that Mr Proctor was the solicitor on the record, Mr Hall and Mr Haralovic were obliged to disclose or provide an estimate of costs or enter into costs agreements with Mr Proctor. This was not done. Mr Proctor was not billed for the costs of the legal services that were the subject of their claims, the invoices allegedly having been sent directly to Mr Barrak.
86 Mr Hall and Mr Haralovic conceded that disclosure was not provided as required by the Act. Their response on this issue was:
2 Mr Barrak did not consider that Mr Proctor was liable for the costs claimed. In this respect my attention was drawn to the email xx from Mr Barrak to Mr Hall in which he said that the issue of fees was personal to Gus, Trevor and me . The submission went on to assert that therefore Mr Fares, Landmark and Parramatta Design & Development were primarily liable and that Mr Barrak guaranteed their liability. If that were the case, in my view, in order to comply with the provisions of the Act, it would be necessary to make disclosure to Mr Fares, Landmark and Parramatta Design & Development and to forward the invoices to them. This was not done.1 Mr Barrak was a third party payer , that is, he undertook primary responsibility for payment of the costs of the legal services provided and the Act did not extend to a third party payer.
3 Assuming Mr Barrak was under a liability secondary to that of Mr Proctor, the exemption provided for in s 180 of the Act applied on the basis that … it would not be reasonable to be required to make disclosure.
87 In respect of Mr Hall, it was argued that he complied with Rule 114 of The New South Wales Barristers’ Rules that provided:
114. (1) It would not be reasonable for a barrister to be required to make a disclosure under section 176 and under sub-section 177(2) of the Legal Profession Act when:
(a) the barrister has, whether or not in relation to the legal services to be provided to the client by the barrister, given to the solicitor on whose instructions the barrister is acting in writing a statement which remains current and which indicates the basis upon which the barrister charges and his or her rate or rates;
(b) the barrister proposes to charge and does charge for those services in accordance with that basis and rate or rates.
88 It was argued that Mr Hall issued to Mr Proctor invoices, that were paid, that were in writing and specified an hourly rate that remained unchanged throughout the period in which he was engaged. On this basis, there was compliance in respect of subsequent invoices.
Findings
Guarantee/representation
89 In order to succeed on this issue it was necessary that Mr Hall and Mr Haralovic persuade me that I should prefer their evidence to that of Mr Barrak. Having regard to the shortcomings in their evidence on a number of the issues, I was persuaded that Mr Barrak’s evidence, although not entirely satisfactory, was to be preferred.
90 I find that in all probability, Mr Hall, as was his practice, drew from Mr Barrak’s provision of financial assistance to Mr Fares a legal conclusion that was not available, namely, that Mr Barrak undertook personal liability, whether by way of guarantee or representation, for the payment of those fees that were not paid by Mr Fares, Landmark or Parramatta Design & Development.
91 I find that Mr Barrak did not guarantee payment of any liability incurred by Mr Fares, Landmark or Parramatta Design & Development for the payment for legal services provided by Mr Hall or Mr Haralovic or through Hal Lawyers.
92 I find that Mr Barrak did not represent that he would pay for the legal services provided to Mr Fares, Landmark or Parramatta Design and Development.
Enforceability of the Guarantee:
93 Were I to have accepted that there existed a guarantee in respect of those liabilities, it was apparent that Mr Hall and Mr Haralovic failed to take the steps necessary to permit them to call upon Mr Barrak as the guarantor.
The Invoices:
94 The anomalies in the evidence surrounding the issuing of the invoices were significant.
95 The explanation that the appearance of the invoices was the result of the software program used to produce them might be acceptable if the invoices were consistently printed on the same letterhead, if the ABNs were identical and matched those of the issuing parties and if there was a rational explanation for the changed invoicing arrangement. When these anomalies were considered with the evidence of Mr Barrak that he never in fact received the invoices in question, I was left with the distinct impression that they were engineered or
re-engineered to suit the purposes of the current litigation.
96 This impression was enhanced by the provisions of the deed issued by Mr Hall in February 2006 and the glaring absence of reference in the deed to the numerous invoices alleged to have been issued to Mr Barrak in 2004 and 2005.
97 I preferred the evidence of Mr Barrak that he did not receive the originals of the invoices that were exhibited to Mr Hall’s affidavit.
Mr Khosravi:
98 Any suggestion that Mr Khosravi was employed by Hal Lawyers or Mr Haralovic and seconded to Legal & Accounting Services or Mr Hall could not be sustained since Legal & Accounting Services effectively employed him.
99 Any suggestion that Mr Khosravi was seconded to Hal Lawyers or Mr Haralovic by Legal & Accounting Services could not be sustained since Legal & Accounting Services received payment for the work undertaken by Mr Khosravi and effectively met all of the expenses relating to his employment.
100 I find that the claim that Mr Haralovic or Hal Lawyers that they employed Mr Khosravi was a sham and that Mr Khosravi was employed by Legal & Accounting Services. It follows that none of Mr Hall, Mr Haralovic, or Hal Lawyers, was entitled to invoice for the fees generated by the legal services that Mr Khosravi performed in respect of the subject litigation.
Agency:
101 The evidence did not support the claim that Mr Haralovic or Hal Lawyers acted in any agency capacity prior to 1 July 2005.
102 There was evidence of arrangements with Proctor & Associates under which Mr Hall was retained as junior counsel up to 30 June 2005 and as solicitor advocate while employed by Hal Lawyers thereafter. Accounts for his services should properly have been directed to Proctor & Associates.
103 In the light of my earlier findings, there was no basis established upon which Mr Barrak could be held to be personally liable for fees generated by the legal services provided by Mr Hall under these arrangements with Proctor & Associates.
The Legal Profession Act:
104 The preconditions provided for in the Act to permit recovery of the fees claimed were not complied with.
105 The billing arrangement relied on in these proceedings was not that which was initially entered into with Mr Proctor. Under that arrangement invoices were directed to Mr Proctor with copies to Mr Barrak. The arrangement was subsequently changed so that the invoices were allegedly directed to Mr Barrak. There was no evidence that the written statement required by Bar Rule 114 was ever provided to Mr Barrak. It could not be argued that agreement to the rates at which Mr Hall charged could be inferred from payment of the invoices by
Mr Barrak, because he paid none of them.
106 It was also argued that this was an arrangement between lawyers who knew each other and who had existing relationships. Even if correct, which it clearly was not in the case of Mr Haralovic and Mr Barrak, this argument could not, in my opinion, be relied upon to maintain the proposition that those existing relationships rendered it unreasonable to give written disclosure to Mr Proctor or to Mr Fares, Landmark and Parramatta Design & Development.
The claim by Mr Wilson and Bob Wilson and Associates Pty Limited
107 Mr Wilson and his company claimed the sum of $12,000 for the cost of his services in providing expert accounting opinion in the claims.
108 Mr Wilson’s evidence was that he received instructions directly from Mr Barrak, meeting him initially at his company’s offices and subsequently in Mr Barrak’s home office. The letter of instruction was written on the letterhead of Proctor & Associates.
109 Mr Wilson stated that Mr Barrak initially told him to send accounts to him but to issue them to Proctor & Associates. When he attempted to follow up payment of his accounts Mr Barrak said:
Send the accounts to Mr Proctor, I will make sure it gets paid. For taxing for costs, it must go to Proctor. xxi
110 The account was dated November 2004, addressed to Proctor & Associates and at the foot marked for the attention of Mr Barrak c/- Banlaw, 88 Sorrell Street, North Parramatta, NSW 2151. Mr Wilson stated that he did not send the account to Proctor & Associates and that he posted it to Mr Barrak. It was never sent to Mr Barrak by electronic means.
111 Mr Barrak denied ever having received the account. He said there was at this time no entity named Banlaw. He incorporated a corporation in the name of Barlaw in 2008 and prior to that he maintained an email account in the name Barlaw. Mr Barrak said that 88 Sorrell Street was not the correct address. Although he owned this property he did not occupy it. At the relevant time he occupied premises at 97 – 99 Sorrell Street. Mr Wilson agreed that he received no acknowledgment of receipt of the invoice from Mr Barrak.
Findings
112 Mr Wilson gave his evidence in a straightforward manner and I accepted that it was truthful. There were three difficulties with that evidence:
1 He was initially directed to send his account to Mr Barrak. It was incorrectly addressed and there was no evidence that it was ever received by him.
3 The words used by Mr Barrak that he would see that the account was paid did not represent that Mr Barrak personally would pay the account or guarantee its payment.2 He was subsequently directed to send the account to Proctor & Associates but he did not do so.
113 The most that could be said was that Mr Barrak failed to honour the representation that he would see to it that the account was paid. This representation was obviously conditional upon the delivery and receipt of the account as directed. In the absence of evidence of receipt, it was not possible to find that Mr Barrak failed to honour the obligation.
114 Further, to establish that the representation allegedly made by Mr Barrak was misleading or deceptive, it would be necessary to show that it induced Mr Wilson and Bob Wilson & Associates to provide accounting services. Mr Wilson’s evidence indicated that the representation was made after those services were provided.
ORDERS
115 Verdict for the defendant on all of the claims.
116 The plaintiffs are to pay the defendant’s costs of the proceedings. This order is suspended for seven days to allow the parties to list the matter for further argument on the matter of costs if required.
117 The exhibits will be retained for 28 days.
118 My reasons are published.
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Hall affidavit 15.7.2008, pp 26
Ibid, pp 30
Ibid, pp 53
Transcript 34.36
Haralovic affidavit 12.3.2008, pps 5, 8 and 9
Transcript 36.10
Exhibit A
Hall affidavit, 15.7.08, TH-3, 18027
Ibid, TH-1, 62
Ibid, TH-1, 62
O’Donovan & Phillips, The Modern Contract of Guarantee, 3rd Edition, p.9
Annexure A to Hall affidavit, 27.1.09
Hall affidavit 15.7.08, TH-3.12, pp 12
Exhibit B
Exhibit 3
Exhibit 4
Exhibit 1
Legal Profession Act, Part 11
Ibid, s 192
Hall affidavit 15.7.08, TH-1, p.87(94)
Wilson affidavit, pp 13
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