Jones v Brian K Deegan & Associates - [2011] SASC 44

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
JONES v BRIAN K DEEGAN & ASSOCIATES
[2011] SASC 44
Reasons of Judge Withers a Master of the Supreme Court
31 March 2011
PROCEDURE - COSTS
Application re validity of Retainer Agreement.
Legal Practitioners Act 1981 (SA) s 42(6), s 42(7), referred to.
McNamara Business & Property Law v Kasmeridis & Anor (2005) 92 SASR 382; McNamara Business & Property Law v Kasmeridis & Anor (No 2) (2007) 97 SASR 129, [2007] SASC 90, applied.
Catto & Ors v Hampton Australia Limited (In liquidation) & Ors (2007) 251 LSJS 164, [2007] SASC 360; Catto & Ors v Hampton Australia Limited (In liquidation) & Ors (2008) 257 LSJS 245, [2008] SASC 231, considered.

JONES v BRIAN K DEEGAN & ASSOCIATES
[2011] SASC 44

JUDGE WITHERS. The plaintiff by letter application filed 13 September 2010 sought that the costs charged to him by the defendant solicitors be fixed by the Court. He also sought that a Retainer Agreement signed by him on 6 April 2010 be set aside in accordance with the provisions of s 42(7) of the Legal Practitioners Act 1981 (SA). His letter asserts that he attached a copy of the invoice provided to him but the only document accompanying his letter was a copy of the Retainer Agreement.
On 21 September 2010 the plaintiff filed an affidavit sworn on 8 September 2010 in support of his application. Therein he noted that the costs related to a matter in the Federal Magistrates Court. He attested that his first approach to Mr Deegan was by telephone on 1 April 2010 but that as Mr Deegan was away for Easter he saw him on 6 April 2010 shortly prior to a Court appearance due on 8 April 2010. He acknowledged in his affidavit that he signed a Retainer Agreement that day with a lady present. She subsequently proved to be Ms Kate Smith, a lawyer employed by the defendant. He attests that he then provided full instructions and details. He attests that Mr Deegan told the Magistrate on 8 April 2010 that he needed a five week adjournment.
The plaintiff complained that in his discussions with Mr Deegan or Ms Smith it was never raised that the solicitor intended the agreement to have a retrospective operation. He attested that if he had understood that then he would not have signed the agreement. The plaintiff expressed dissatisfaction with the advice and services offered by the solicitor and the way in which he went about managing the matter. He asserted that the hourly rate of $350.00 set out in the Retainer Agreement was therefore unjustified. These matters caused him to terminate the retainer shortly after 17 April 2010 when an appointment he had requested had not been made. He thereafter instructed another solicitor.
The solicitor filed an affidavit in response on 27 October 2010 – FDN 4. He disputed the matters in the affidavit of the plaintiff. He asserted that the costs related to complex matters in the Federal Court.
Mr Deegan attested to some telephone calls or communications commencing on 20 March 2010 when a text message was sent to his telephone requesting legal assistance. This was the initial contact from the plaintiff. He then asserted that the next contact was late in the day either on Monday, 22 March 2010 or Tuesday, 23 March 2010 when he received a telephone call from a Mr Neville Jordan on behalf of the plaintiff. He attested that he made no notes as he regarded the call as being of an introductory nature.
After a discussion with Mr Jordan on either 22 or 23 March 2010 the telephone was passed to the plaintiff who then advised Mr Deegan that the plaintiff’s son was the subject of a Federal Court order relating to residency with which order the plaintiff did not wish to comply. Mr Deegan says he was told that there was an application by the mother in relation to an alleged contempt of Court by the plaintiff. It had been listed for 8 April 2010. A second matter affecting the plaintiff related to an appeal against the residency order, and a third matter related to child support.
Mr Deegan attested that the plaintiff had told him that he had approached a number of law firms who had refused to accept instructions from him. He says that there was then a three-way discussion between him and the plaintiff and Mr Jordan during which he informed them that he had not been involved with a contempt of Court charge before and thus he would need to research the law and to obtain the assistance of senior counsel both at the plaintiff’s expense. He attested that he told them that his fees would be $350.00 per hour plus GST and gave an estimate of approximately $5,000.00 to perform the work. Mr Deegan said that before he would file a notice of address for service he required the plaintiff to enter into an agreement with him and to place monies into his trust account.
The plaintiff disputes that recollection. He attests in his affidavit filed on 25 February 2011 – FDN 8 – that he expected that the contempt matter would be resolved and that there was therefore no point in him providing the instructions suggested. There was considerable dispute between the plaintiff’s version of events contained in his affidavit of 25 February 2011 and the solicitor’s version of events contained in his affidavit filed on 27 October 2010. At argument the solicitor did not seek to cross-examine the plaintiff on his affidavit.
The plaintiff briefly cross-examined the solicitor on his affidavit but only essentially as to whether or not there had been a telephone call from him to the solicitor from gaol whilst the plaintiff was incarcerated for contempt.
Accordingly, the Court is left in a situation where there is conflicting evidence before it and where the parties have conducted the matter in a manner such that there has been very little opportunity to assess the credibility of the witnesses. No contemporaneous documents or notes were provided to support either version of events.
In Catto & Ors v Hampton Australia Limited (In liquidation) & Ors (2007) 251 LSJS 164, [2007] SASC 360, his Honour Judge Lunn had cause to comment on this type of circumstance. While his Honour’s decision was overturned by the Full Court in the matter of Catto & Ors v Hampton Australia Limited (In liquidation) & Ors (2008) 257 LSJS 245, [2008] SASC 231, that was on other grounds and no criticism was made of his general comments to which I now make reference.
His Honour said at [10] in considering retainers:
[10] The onus is on the defendants [solicitors] to establish all of the relevant terms of the retainer upon which they rely: McNamara v Kasmeridis (No 1), Full Court, (2005) 92 SASR 382 at [64] (“Kasmeridis No 1”) and Pirone v Craig J Roberts, above. Where there is a dispute between a solicitor and the client about the existence or the terms of an oral retainer the Court may give some preference to the client’s evidence: Murphy v Liesfild [1930] VLR 142, (1930) 36 ALR 94; Griffiths v Evans [1953] 2 All ER 1364. This is because solicitors are expected to document properly a contract with their own clients, and particularly where the terms are to their own financial advantage. Courts have traditionally been cautious in their approach to enforcing time charging agreements made between solicitors and their own clients: Kasmeridis No 2 below at [31].
In circumstances such as these where the solicitor relies on an oral retainer to justify charging for work done prior to a written retainer being entered into the onus is on the solicitor to establish on the balance of probabilities the existence of that oral retainer or instructions. In this case there are contradictory allegations between the plaintiff and the solicitor. The solicitor has not established on the probabilities that an oral retainer or agreement existed as he asserts. His affidavit is based on recall. There were no notes at the time. He describes the 22 March 2010 telephone call as being of an introductory nature and hence he made no notes. He recalls what appears to be lengthy discussions with Mr Jordan and Mr Jones. He recalls that he generally did not agree with the approach that they were taking. He says in paragraphs 3.2.12 and 3.2.13 of his affidavit – FDN 4 – that towards the end of the conversation on 22 or 23 March 2010 he informed Mr Jones and Mr Jordan that he was far from persuaded that their view was correct and that if he were to accept instructions he would not be prepared to act in a passive role and it would be a condition of his involvement that he would prepare all documents and if counsel was retained that he would have full consultation with him. In paragraph 3.2.13 he says that Mr Jones agreed to his conditions and told him he wanted him to act and that he had then agreed to act in relation to the wife’s application for contempt. He tentatively ruled out 8 April 2010 from his diary.
Mr Jones says in response to those assertions in his affidavit filed on 25 February 2011 – FDN 8 – that at that time of initial contact with Mr Deegan he did not know about the hearing on 8 April 2010 and did not tell Mr Deegan as to same. At that time he expected that at a hearing on 26 March 2010 his submissions would be accepted and the contempt charge would not proceed. He attested that he had asked Mr Deegan to represent him generally in his matters but that Mr Deegan had said that being solicitor on the file would be subject to him being able to brief counsel to take up the matter. At about 5.00 pm on 25 March 2010 in a telephone conversation Mr Deegan had advised Mr Jones he was unable to obtain counsel and therefore would not file a notice of acting.
Papers were delivered to Mr Deegan’s letterbox relating to the hearing on 26 March 2010. These were said to be relevant to the hearing that Mr Jones attested Mr Deegan said he would not be involved with.
Mr Jones then attested that on 26 March 2010 he attended before a Federal Magistrate and that contrary to his expectations and argument he was imprisoned for contempt and remained in prison for six days. Mr Deegan attests that after receiving documents on 26 March 2010 he had commenced work on an appropriate response for Mr Jones to his wife’s application for contempt. He notes that application was due to be heard on 8 April 2010 and that Mr Jones had been imprisoned for contempt on 26 March 2010.
There is then a disputed telephone call from Mr Jones to Mr Deegan from prison. Mr Jones says such a call did not occur. After the argument in this matter he approached the Court to seek the issue of a subpoena or an order to the prison authorities to produce telephone records which he said would establish that event. Mr Deegan also approached the Court with a suggestion that he thought perhaps he should file an affidavit in response to the affidavit of Mr Jones. No application to re-open the hearing was issued by either party.
Mr Deegan did file an affidavit on 3 March 2011 some fifteen days after the hearing and without the Court’s permission or the plaintiff’s consent. I therefore have no regard to the content of that affidavit in reaching this decision. Having read the affidavit it would not in any event alter my conclusions. Mr Jones later complained about the filing of that affidavit by Mr Deegan. As I have decided not to have regard to the content of that affidavit because it was filed after the hearing without permission or consent it is unnecessary to further consider Mr Jones’ complaint. Both parties had ample opportunity to prepare their cases before argument on 16 February 2011 and no justification has been demonstrated for receiving further evidence after the conclusion of that hearing.
When he was cross-examined by Mr Jones as to the telephone call from the gaol, Mr Deegan’s evidence was that he certainly did receive one call from him in prison. He described the call as “You were rather jovial, shall I say. You told me that you had been gaoled. You told me that it wasn’t so bad after all. That you could – the food wasn’t so bad. You told me that life wasn’t so bad there. We had a discussion about that and I reiterated to you that you were taking the wrong avenue with respect to your child”. Mr Deegan subsequently confirmed that he had made no note of the conversation and rendered no charge for it.
Mr Jones’ submission is that it is unbelievable that if Mr Deegan was acting for him and knew that he was in prison that he would not make any effort or give any advice as to how he might address that situation.
Mr Jones was released from prison on 31 March 2010 and engaged another solicitor, Ms Litchfield to represent him. He says that she “turned out to be a disaster” and that he then approached Mr Deegan again. He had a discussion with Mr Deegan on 1 April 2010 (Easter Thursday) about him acting. Mr Jones says that he was told to contact Mr Deegan on 6 April 2010 after Easter. Mr Jones did that and signed the Retainer Agreement on 6 April 2010 and paid $5,000.00 into Mr Deegan’s trust account. Mr Jones asserts that this is when the retainer commenced, if at all, and not before.
Mr Deegan tendered two documents in support of his contention that a retainer commenced before 6 April 2010. What the documents tend to support is his belief that there was a retainer before then but not necessarily the existence of a retainer. The documents were a printout of a Family Court of Australia - Full Court decision in Kendling & Anor & Kendling (Contempt) [2008] FamCAFC 154, printed out on 26 March 2010, and a Family Court printout of orders made by Federal Magistrate Lindsay on 9 March 2010. The date of that printout was not apparent.
The onus is on the solicitor to establish any oral or written retainer. I am not satisfied on the material presented that there was any retainer prior to 6 April 2010 that would support any time charging regime. Nor am I satisfied on the evidence that there was any retainer or instructions accepted prior to 6 April 2010 which would justify the solicitor performing work and charging costs to the plaintiff notwithstanding that it seems that some work was performed. Rather it seems that there had only been preliminary contact and discussions.
The plaintiff seeks that the retainer be set aside pursuant to s 42(7) of the Legal Practitioners Act and relies on McNamara Business & Property Law v Kasmeridis & Anor (No 2) (2007) 97 SASR 129, [2007] SASC 90 to support that application. Section 42(7) of the Legal Practitioners Act is in the following terms:
(7)The Supreme Court may, in proceedings under this section, rescind or vary an agreement under subsection (6) if it considers that any term of the agreement is not fair and reasonable.
Section 42(6) provides as follows:
(6)A legal practitioner may make an agreement in writing with a client for—
(a)     payment of a specified amount by way of legal costs (which may—but need not—consist of a daily, hourly or other time-related rate for professional work carried out by the legal practitioner on the client’s behalf); or
(b)     payment of legal costs in accordance with a specified scale; or
(c)     subject to any limitations imposed by the Society’s professional conduct rules or the regulations—payment of a contingency fee to be calculated on a basis set out in the agreement on fulfilment of a condition stated in the agreement.
Section 42(6) of the Legal Practitioners Act was considered by the Full Court in the matter of McNamara Business & Property Law v Kasmeridis & Anor (2005) 92 SASR 382. In [61] to [65], the Court concluded as follows:
[61] The statutory requirement that an agreement be made in writing is sufficiently satisfied if there is written confirmation of the existence of an agreement. This accords with the view adopted by the judge that an email sent by the respondents to the appellant acknowledging their acceptance of the terms of the retainer agreement would have sufficed for the purposes of s 42(6). In effect, on the interpretation advanced by the clients, had the telephone conversation between Mr Kasmeridis and Mr Viscariello on 9 February 2004 been an email exchange, and accordingly in visible written form, the terms of s 42(6) of the Legal Practitioners Act would have been satisfied. The appellant would have been able to rely upon the retainer agreement when preparing its account. Such an interpretation does not rest in logic. Why should an email exchange be reliable evidence or in any event more reliable than other evidence of agreement?
[62] The retainer agreement itself was in writing. The terms of that agreement were in writing. There is evidence that the clients had orally accepted those terms. In addition, there is evidence that the respondents’ oral acceptance of the retainer agreement was in fact recorded in writing. This latter written record was not in our view essential in order to comply with s 42(6).
[63] Section 42(6) of the Legal Practitioners Act should not be construed to require a client’s acceptance of a costs agreement to be in a written form. The legislative history of the provision, the common law concerning written agreements, the definition of “writing” in the Acts Interpretation Act, the protection offered by equity and the overriding protection offered by s 42(7) provide overwhelming support against such a construction.
[64] It is to be borne in mind that the onus of establishing that an agreement was made rests on the solicitors. This onus is to be discharged having regard to the nature of the fiduciary relationship and the circumstances of dependence and vulnerability that may exist. In the present case, the clients’ anxiety about the loss of their home is a circumstance that would call for careful scrutiny of the relevant events in determining whether an agreement was made.
[65] In the event of there being any unfairness in the process followed or in the terms agreed, the court’s powers of intervention pursuant to s 42(7) or pursuant to its equitable jurisdiction could be invoked. In this way the necessary protection may be provided to the clients.
There is no doubt that there is an agreement in writing between the plaintiff and the defendant and that at the time of entering into the agreement the plaintiff was provided with advice by a solicitor in the employ of the defendant, namely Ms Kate Smith. In her affidavit filed on 3 December 2010 – FDN 5 – Ms Smith sets out what she believed would have been her conversation with the plaintiff as it followed her usual practice. Mr Jones does not challenge Ms Smith’s recollection which is essentially contained in paragraphs 6, 7 and 8 of her affidavit. These are as follows:
6.I have a rehearsed introduction to and explanation of the retainer agreement – what it is and why we are required to have it. I say words to the effect of the following:
This is what’s called a retainer agreement. It is a document that we are required by law to have. It’s an agreement between you and our firm, so that everyone is on the same page and each of us knows what is to be expected from the other. It sets out that we will perform the work for you, and our costs structure, so that you are fully aware of the way we charge. It is an agreement also that you will pay us for the work we perform – and you will see also that it talks about the trust account. That is an account into which you deposit money to cover our legal fees and other costs such as counsel fees. We can’t touch that money until we have performed the work, rendered you an account, and you’ve had the chance to look at that account.
It’s really important that you read the retainer agreement carefully, and understand it. So take your time now – I am in no hurry and there is no rush, or if you’d feel more comfortable taking it away and considering it in your own time, that’s fine too. If you have any questions, please ask me.
7.Once the client has read the agreement, I then ask the client if they have any questions about any part of the document. Sometimes, a client will say to me, “It’s ok, I’ll just sign it” – and I will stop them and say, “No, it’s really important that you read it and understand it. Don’t ever sign anything without reading it first! If you’d like to take it away to read it, like I said, we have no problem with that. And if you have any question at all, please ask.”
8.Mr Jones signed the retainer agreement following our discussions on that day.

I am satisfied that the Retainer Agreement in writing was entered into on 6 April 2010 within the terms of s 42(6) of the Legal Practitioners Act and unless it should be set aside or varied pursuant to s 42(7) was binding on the practitioner and the plaintiff for any work performed thereafter.
In [45] of the decision of Doyle CJ in Kasmeridis (No 2) (supra), his Honour said:
[45] The Master took an approach that I consider to be correct, applying the principles stated in Re Stuart, and applying those principles to the circumstances at the time the agreement was made. That approach has the support of an earlier decision of this Court in Renton Resources Pty Ltd v Johnson Winter & Slattery [2005] SASC 231 at [45]-[46]. The manner in which the matter in hand unfolded, and how the solicitor actually charged for the work done, is not directly relevant to the question of whether the agreement is fair and reasonable. In some circumstances what later occurred might throw some light on aspects of a costs agreement. But in principle the fairness and reasonableness of the agreement is to be determined at the time at which it was made, having regard to the circumstances in which it was made, and to the retainer in connection with which it was made.
The principles in Re Stuart are described in [22] of Doyle CJ’s judgment, where he says:
[22] The concept of an agreement being fair and reasonable is deceptively simple. In Re Stuart; Ex parte Cathcart [1893] 2 QB 201 Lord Esher MR, in a passage often cited with approval, summarised the position. He is referring to s 9 of the 1870 Act, one of the provisions to which I just referred. He said (at 204-205):
… By s 9 the Court may enforce an agreement if it appears that it is in all respects fair and reasonable. With regard to the fairness of such an agreement, it appears to me that this refers to the mode of obtaining the agreement, and that if a solicitor makes an agreement with a client who fully understands and appreciates that agreement that satisfies the requirement as to fairness. But the agreement must also be reasonable, and in determining whether it is so the matters covered by the expression “fair” cannot be re‑introduced. As to this part of the requirements of the statute, I am of opinion that the meaning is that when an agreement is challenged the solicitor must not only satisfy the Court that the agreement was absolutely fair with regard to the way in which it was obtained, but must also satisfy the Court that the terms of that agreement are reasonable. If in the opinion of the Court they are not reasonable, having regard to the kind of work which the solicitor has to do under the agreement, the Court are bound to say that the solicitor, as an officer of the Court, has no right to an unreasonable payment for the work which he has done, and ought not to have made an agreement for remuneration in such a manner …
No particular complaint is made as to the fairness of the way in which the agreement was entered into and in light of the affidavit of Ms Smith I find that the manner in which the agreement was entered into in the circumstances of this matter was essentially fair.
The complaint made by the plaintiff is that the charge out rate of $350.00 per hour plus GST for Mr Deegan was unreasonable. The scale rate for solicitors in the Supreme Court at the time the agreement was entered into was $288.51 per hour. Accordingly, the “mark up” over that rate was just over $60.00. The fact that the solicitor’s account I am told was subsequently based on an hourly rate of $300.00 rather than $350.00 is a matter that the Court cannot take into account in considering this aspect. However, my view of the matter is that because of the background circumstances, the urgency, and the instructions to pursue a course about which the solicitor was uncomfortable, the mark up required was not unreasonable and does not offend the provisions of s 42(7) of the Legal Practitioners Act.
I am satisfied that the plaintiff well understood the agreement into which he was entering and as at 6 April 2010 was prepared to be bound by that agreement. The fact that the plaintiff may have subsequently become dissatisfied with the services rendered by the solicitor does not affect the fairness and reasonableness of the agreement of 6 April 2010.
In Norman’s Legal Costs South Australia, the learned author notes at [52,001]:
The court [Federal Magistrates Court] deals with costs as between party and party. Costs disputes between lawyer and client are regulated by the Acts and Rules applying in the state or territory where the lawyer is practising. There is no provision for a taxing officer to tax lawyer/client costs in the Federal Magistrates Court.
Accordingly, the scale of costs to be applied to any work done by the solicitor for the plaintiff that is not covered by the Retainer Agreement is the Supreme Court First Schedule costs scale.
For the foregoing reasons, I find:
1.That the Retainer Agreement of 6 April 2010 complied with s 42(6) of the Legal Practitioners Act and was fair and reasonable for the purpose of s 42(7) of that Act.
2.That I am not satisfied on the evidence that there was a concluded oral retainer or instructions to act between the plaintiff and the defendant prior to 6 April 2010 or that the 6 April 2010 retainer applies to work performed before that date.
3.Costs of the argument as to the retainer reserved.
4.I will give the parties an opportunity to consider these reasons before providing further directions for the future conduct of this matter.
I again note in passing that neither party has provided the Court with a copy of the invoices rendered by the defendant to the plaintiff for his services. A copy of the original invoice(s) rendered together with a copy of any revised invoice reflecting these reasons is to be provided to the Court as exhibits to an affidavit of the solicitor to be filed within 21 days.
I am delivering these reasons by email with the consent of the parties.
Further consideration adjourned to 9.30 am on Tuesday, 10 May 2011.