Johnson Winter & Slattery v MP Investments Nominees Pty Ltd

[2013] SASC 157

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

JOHNSON WINTER & SLATTERY  v  MP INVESTMENTS NOMINEES PTY LTD

[2013] SASC 157

Reasons of Judge Dart a Master of the Supreme Court

14 October 2013

PROCEDURE - COSTS - TAXATION

Interim allocaturs - application under 6R 274(2)(b)(ii) for interim allocatur pending finalisation of taxation - held interim order for payment on account of the costs to issue for $200,000.

Legal Practitioners Act 1981 s 42; Supreme Court Civil Rules 2006 r 274, referred to.
Russo v Buck & Ors (No 5) [2010] SASC 27, applied.
Re Blyth and Fanshawe (1882) 10 QBD 207, considered.

JOHNSON WINTER & SLATTERY  v  MP INVESTMENTS NOMINEES PTY LTD
[2013] SASC 157

JUDGE DART:

1. The plaintiff in these proceedings is a firm of solicitors which sues the defendant, a former client, for unpaid fees. The matter has now evolved into an application to tax those costs pursuant to the provisions of s 42 of the Legal Practitioners Act 1981. 

2. By application FDN22 the plaintiff sought, inter alia, the issuing of an interim allocatur in relation to the unpaid costs.  For the reasons that follow this is an appropriate matter in which to issue an interim allocatur.  An interim allocatur in the amount of $200,000 (inclusive of GST) should issue.

   Background

3. The plaintiff acted for the defendant in relation to a dispute in respect of a building at Lonsdale Street in Melbourne.  In broad terms it was in the nature of a lease dispute.  The defendant, the owner of the building, sought to terminate the entitlements of Oaks Hotels and Resorts Pty Ltd with respect to management of the building.

4. Instructions were provided to the plaintiff by the then sole director and shareholder of the defendant, Mr Patrick Farrugia, a former solicitor.  There were three sets of proceedings between mid-2010 and May 2011 in the Supreme Court of Victoria.  There were also two mediations, the second of which resolved the dispute between the defendant and Oaks Hotels and Resorts Pty Ltd.

5. The proceedings in this Court were commenced in February 2012.  A significant early issue in the proceedings was the terms of the retainer between plaintiff and defendant.  That matter was listed for trial before Stanley J in May of this year.  The parties resolved the issue prior to the hearing.  On 3 May 2013 Stanley J made orders by consent, which were as follows:

   By consent the Court:

   1.     DECLARES that:

   (a)     the accounts issued by the Plaintiff in relation to the work performed in the period 17 June 2010 to 18 November 2010 are subject to the rates prescribed in the Supreme Court of South Australia scale (other than the amounts included in those accounts by way of disbursement for counsel fees, which are payable in the amounts paid by the Plaintiff to counsel); and

   (b)     the accounts issued by the Plaintiff in relation to the work performed after 18 November 2010 are subject to the terms of the retainer agreement signed by the Defendant on or about 18 November 2010 and referred to in paragraph 21 of the Statement of Claim; and

   2.     ORDERS that:

   (a)     the Defendant pay the Plaintiff's costs of this action to 15 April 2013 insofar as they relate to the issues relevant to the declaratory relief referred to in paragraph 1, to be taxed or agreed.

6. As the orders disclose, the taxation is to proceed on two separate bases.  The earlier accounts are to be taxed by applying the rates in the applicable Supreme Court Scale.  The balance of the accounts are to be taxed in accordance with the terms of the written retainer agreement executed on about 18 November 2010.  The retainer agreement provides for hourly rates significantly higher than provided in the Supreme Court Scale.  It requires invoices to be paid within 30 days and provides a contractual entitlement to interest on unpaid invoices. 

7. As a result of the consent order of Justice Stanley the claim of the plaintiff has been reduced to reflect the fact that part of the fees are to be recovered on the basis of the rates in the Supreme Court Scale.  The amount now claimed is $1,264,976.81.  Those fees relate to invoices sent in 2010 and 2011.  The amount claimed does not include GST.  When that is added, as it must be, the amount now claimed is $1,391,452.  Of that amount the defendant has paid $547,821.83.  If interest is added to the amount claimed by the plaintiff, the difference between what is claimed and what has been paid is approximately $1,000,000.

8. The defendant went into receivership for a period in 2012 and then refinanced.  Representatives of the new mortgagee have been appointed directors of the defendant.  Mr Farrugia ceased to be a director or secretary of the defendant earlier this year.

   Consideration

9. The Court has power to issue an interim allocatur.  The power to do so is found in Supreme Court Civil Rule 274 which provides:

   (2)     The Court has—

   …

   (b)     the following special powers—

   (i)the Court is not bound by the rules of evidence but may decide questions by estimation or in any other way that may be expedient in the circumstances;

   (ii)the Court may make interim orders

10. In Russo v Buck & Ors (No 5)[1] Judge Lunn considered the operation of the rule.  His Honour held that where there is likely to be a substantial delay in adjudicating on the costs, it is appropriate to make an order for the immediate payment of an amount on account of costs payable for those costs which appear to be beyond any reasonable dispute.[2]  Judge Lunn ordered that an interim allocatur issue in an amount equal to 50 per cent of the claim for costs.

    [1] [2010] SASC 27.

    [2] Supra, at [14].

11. In this matter the plaintiff seeks the issuing of an interim allocatur in an amount of $500,000, being about 50 per cent of the unpaid fees still outstanding.  If an allocatur was issued in that amount, when one adds the amount already paid, the plaintiff would be securing payment of approximately two thirds of its claim for costs.

12. The defendant on the other hand says that no interim allocatur should be issued because the Court cannot be satisfied that after the taxation of the costs there will be any amount owing other than that which has already been paid.

13. The plaintiff has filed a long form bill seeking payment of its costs.  The defendant has filed a notice of dispute.  The defendant’s notice of dispute only concedes items amounting to approximately $300,000, which is less than their client has already paid.  The taxation is likely to be protracted and difficult.

14. The defendant advances four principal arguments as to why the amount claimed will not ultimately be awarded by the Court.  They were that:

    1.In relation to counsel fees the principle in Re Blyth and Fanshawe (1882) 10 QBD 207 applies. Any counsel fees, to the extent that they were unusual in amount, should be reduced.

    2.An excessive number of counsel were engaged in the matter.

    3.The letter of retainer requires work to be carried out by people of the appropriate seniority and that was not done.

    4.     The time spent on various tasks was excessive.

15. The plaintiff put arguments against each of the defendant’s contentions based on the terms of the retainer.[3]  It does not matter for present purposes which of the parties is correct in their contentions, other than in a very general way.  The Court has to be satisfied that if it makes an order authorising the issuing of an interim allocatur that the amount which it is issued for is an amount which will be owing to the plaintiff in any event at the end of the taxation.  If that is able to be done, there is no reason why the plaintiff should be kept out of its money. 

    [3]    Affidavit of Eve Danielle Thomson, sworn 12 September 2013, Exhibit “EDT5” (FDN27).

16. Paradoxically, the argument advanced by the defendants as the reason why an interim allocatur should not be issued assists in satisfying the criteria in Russo v Buck (No 5).  It is clear that because of the wide-ranging arguments to be put by the defendant, the taxation will be protracted and difficult.  It will take some time to resolve.  Thus, the issuing of an interim allocator becomes a serious consideration.

17. The arguments advanced by the defendant show that the Court should be cautious because the final outcome of taxation cannot be known with complete certainty at the moment.  However, I am satisfied that it is appropriate in this matter to issue an interim allocatur for the reasons set out by Judge Lunn in Russo v Buck (No 5). There is no need for the plaintiff to be kept out of monies which are undeniably due to it.

18. The question for the Court is what would be an appropriate amount that fairly balances the rights of both parties.  I have decided that the interim allocatur should be for the amount of $200,000. Assuming the allocatur is paid, the defendant would have paid the sum of $747,821.83.  The claim of the plaintiff, with interest, is approximately $1.5 million.  In my opinion, it is beyond reasonable dispute that the plaintiff will receive on a taxation at least the amount already paid and the amount in the interim allocatur.

19. I make the following orders:

    1That an interim allocatur for payment is to issue in favour of the plaintiff against the defendant on account of costs payable to them in the amount of $200,000 inclusive of GST.

    2The question of costs of the application FDN22 is reserved.