KENDOR Holdings Pty Ltd v The Official Trustee in Bankruptcy - [1999] WASC 6

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: KENDOR HOLDINGS PTY LTD & ANOR -v- THE OFFICIAL TRUSTEE IN BANKRUPTCY & ORS [1999] WASC 6

CORAM: KENNEDY J

HEARD: 17 MARCH 1999

DELIVERED : 24 MAY 1999

FILE NO/S: CIV 1924 of 1993

BETWEEN: KENDOR HOLDINGS PTY LTD (ACN 009 071 881)
MAUDE EDNA STAMMERS
Applicants
AND
THE OFFICIAL TRUSTEE IN BANKRUPTCY
First Plaintiff
TERRENCE JOSEPH STAMMERS
ELMO NOBLE THOMPSON
ROBERT JOHN THOMPSON
ELIZABETH LEWIN IVES
Second Defendants

Catchwords:

Costs - Originating summons - Application to tax solicitor and client costs upon the basis that the proceedings were an action - Order increasing item in Fourth Schedule of Supreme Court Rules for originating summons to $12,000 - Turns on own facts

Legislation:

Nil

Result:

Item for originating summons in Fourth Schedule of Supreme Court Rules increased to $12,000

Representation:

Counsel:

Applicants:     Mr A J N Aristei
First Plaintiff                :     Ms P M Edward
Second Defendants       :     Ms P M Edward

Solicitors:

Applicants:     B W Duckham & Co
First Plaintiff                :     Murie & Edward
Second Defendants       :     Murie & Edward

Case(s) referred to in judgment(s):

Collins v Westralian Sands Ltd (1993) 9 WAR 56
Cruickshank v Producers Markets Co-operative Ltd [1960] WAR 184
FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268
Schmidt v Gilmour [1988] WAR 219

Case(s) also cited:

Allied Pacific Investments Ltd (In liq) v Melsom, unreported; SCt of WA (Wallwork J); Library No 920437; 14 September 1992
Esther Investments Pty Ltd v Markalinga Pty Ltd (1992) 8 WAR 400
Friedman v Barfield, unreported; SCt of WA (Parker J); Library No 970651; 13 November 1997
Lewandowski v Lovell, unreported; FCT SCt of WA; Library No 960310; 14 June 1996
Martin-Smith v Woodhead [1990] WAR 62
McLean v Kerville, unreported; FCt SCt of WA; Library No 6455; 1 October 1986
Ratnam v Cumarasamy [1965] 1 WLR 8
Way v Swan Television (1991) 5 WAR 323

KENNEDY J: This is an application by B W Duckham & Co, who were, at the material times, the solicitors for the plaintiffs. They seek an order in relation to the proceedings herein that they be entitled to have their solicitor and client costs taxed as in an action. Further or other orders, as appropriate, are also sought by them.
The proceedings relate to the K Stammers Family Trust, which was created by deed, dated 28 February 1972, made between the second plaintiff, Maude Edna Stammers, as settlor, of the one part and K Stammers Pty Ltd, Doris Lewin Stammers and Edward Henry Foley, as trustees, of the other part. Subsequently, there were various changes in the trustees of the trust until ultimately the first plaintiff was appointed by deed dated 9 August 1983 to be the sole trustee.
By cl 1 of the trust deed, the date of distribution was 31 December 1991 "or until twenty years from the death of the last survivor of the descendants now living of his late Majesty King George VI whichever shall be the shorter period", with the proviso that "the trustee" be empowered at any time in his absolute discretion to resolve that the date of distribution should be such earlier date as should be nominated by him.
The original application by the first plaintiff was for an order approving a deed of variation of the K Stammers Family Trust or, in the alternative, an order interpreting the trust. The relief sought was subsequently varied to seek an order that the trust deed be rectified in cl 1 by the deletion of the year 1991 and the substitution therefor of the year 2052.
The beneficiaries of the trust were joined as defendants. One of the original defendants, Mr W K Stammers, had become bankrupt some three months prior to the originating summons being issued, a fact which was known to the applicants and their solicitors at the time the proceedings were instituted. The Official Trustee in Bankruptcy was substituted as a defendant in place of Mr W K Stammers when the implications of his bankruptcy were appreciated.
The application for the rectification of the deed was opposed by the Official Trustee in Bankruptcy. At the hearing, he was represented by both senior and junior counsel, who argued that there was no power to rectify a deed creating a voluntary settlement. In the alternative, they argued that the application failed on the facts. In furtherance of their alternative argument, an order for the cross‑examination of the various deponents on their affidavits was obtained. The second defendants were represented, and they supported the application by their oral and written submissions, and a number of affidavits were filed on their behalf.
On 22 November 1994, I dismissed the plaintiffs' application, although I found in favour of them with respect to the power to order rectification of a voluntary settlement in an appropriate case. I ordered that the first plaintiff, the trustee, pay the first defendant's costs to be taxed, with liberty to him to apply for costs against the second plaintiff. In view of the fact that the second defendants had supported the unsuccessful application, no order for costs was made in their favour. The effect of the order was that the first defendant's costs fell to be taxed under item 21 in the fourth schedule to the Rules of the Supreme Court – "Originating motion or originating summons or petition". The relevant allowance under Item 21, at the time, was $300 to $6000, with a proviso, however, that the court might direct that the costs of the parties, or any of them, be taxed as in an action.
Nearly three and a half years after the judgment was handed down, by summons dated 18 June 1998, B W Duckham & Co sought orders that they "be entitled to solicitor and client costs upon the basis that these proceedings were an action" and for such further or other order as should be appropriate. Provision was also sought to be made for the costs of the present application.
By O66 r20(4) it is provided as follows:
"The costs of the solicitor for the unsuccessful party as against his client shall be on the same basis as the costs of the successful party unless the Judge at the trial or in chambers orders otherwise: Provided that the client or the solicitor may, at any time within 6 calendar months from the date of judgment, apply to a Judge for an order that such costs be fixed on some other basis."
By O66 r12(1) it is provided as follows:
"Where the Court is of opinion that a Special Order as to costs should be made by reason of the unusual complexity or importance of the case or for any other good or sufficient reason the Court may order that any particular allowances in any relevant scale be raised or a limit removed and in giving any such direction the Court may fix a limit within which the Taxing Officer may allow such costs."
At all material times, Mr B W Duckham the principal of the applicant firm, together with Mr P L Hesford, an accountant, were the directors of the first plaintiff, the trustee of the K Stammers Family Trust.
On 29 November 1994, seven days after the delivery of judgment herein, Mr Duckham's firm wrote to the first plaintiff, care of Mr Hesford, purporting to confirm a retainer agreement containing specified charges for work done by his firm. Mr Hesford, as a director of the first plaintiff, signed a memorandum accepting that Mr Duckham's firm had been so retained. It is noted that the parties charged, being the beneficiaries of the K Stammers Family Trust, were not informed of the existence of the agreement until October 1997. It was not in dispute that the retainer agreement was only entered into after judgment had been delivered by me.
On 14 May 1998, Templeman J held that the retainer agreement did not fall within s59(1) of the Legal Practitioners Act 1893. He further held that, if the agreement did fall within the section, it should be cancelled on the ground that it was unreasonable. That decision resulted in the present application being made by B W Duckham & Co.
It is claimed on behalf of B W Duckham & Co that the counsel fees incurred and paid by the firm with respect to the proceedings amounted to $6,400, which more than exhausted the limit of $6000 in Item 21. Counsel's notes of his fees were not tendered in evidence.
B W Duckham & Co have rendered three memoranda of costs and disbursements which, they claim, relate to "services rendered almost exclusively applicable to the within proceedings". These memoranda claimed costs and disbursements as follows:
"19 August 1993  $4,921.40
6 April 1994  $10,934.30
6 September 1994  $10,906.00"
These costs and disbursements have all been paid.
The memoranda are not in such a form as to enable me to make any adequate assessment of the value of the work performed by B W Duckham & Co. They are not detailed bills of costs and it is apparent, as indeed the solicitors concede, that they contain items which are not relevant to the present proceedings.
There is also a document, dated 24 July 1998, before me, headed "Work done in regard to Supreme Court Proceedings CIV 1924 of 1993". In that document, 86.7 hours are claimed, which hours, it is said, were "spent almost totally on the within proceedings". A brief check of the work allegedly performed, as set out in the document, indicates that 7.2 hours had been spent on this matter up to the time when the first memorandum of fees and disbursements was rendered on 19 August 1993. Applying the rate which is claimed, $235 per hour, to 7.2 hours, the costs should amount to $1692. The memorandum of costs claimed $3500 for solicitors' fees. Furthermore, I do not accept an hourly rate of $235 for all of the work performed as being reasonable. Nor do I accept, on the material before me, that the solicitors' fees sought are reasonable. The application was not particularly complex, either as to the law or the facts. In the end, the claim failed simply because the settlor's evidence, which, understandably, was very brief, was incapable of sustaining the plaintiffs' claim.
The client of B W Duckham & Co was Kendor Holdings Pty Ltd. The beneficiaries were not the clients, although, no doubt, the firm, and Mr Duckham in particular, had certain obligations towards them. It is apparent that the amount of the costs and disbursements was accepted by Mr Hesford without seeking any independent advice.
As matters now stand, unless an order is made lifting the limit on item 21, B W Duckham & Co may not be entitled to any costs and they will therefore be required to repay the whole of the amounts which they have already received by way of their own costs. This would, in the circumstances, in my view, be an unfair result, particularly in a case where the beneficiaries of the trust, with the exception of the bankrupt beneficiary, supported the application for rectification and were represented at the hearing in order to provide that support. But the amount of their costs is another matter.
In order to succeed in the application, the first hurdle which B W Duckham & Co must surmount is that of the time limit in O 66 r 20(4). The delay has largely been caused by reason of the applicants having sought, quite misguidedly, to rely upon a defective costs agreement. But it also appears that the beneficiaries have, in the interim, been challenging various costs charged by and paid to the firm and requiring that they be taxed. It is of concern that the firm has charged, and received, fees to which it was not entitled at the time. But, on the other hand, it does appear unreasonable that they should receive nothing for their own work in bringing an action for the benefit of the beneficiaries and with the support of all the beneficiaries save one. It is noted that the fees charged by senior counsel for the Official Trustee in Bankruptcy amounted to $8700 and that his solicitors had sought payment of their own costs and disbursements in the sum of $2500, notwithstanding that his total costs were ultimately agreed on a party and party basis at $6000.
The discretion to extend time is a broad one, although it must be exercised with caution – see FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 per Wilson J at 283. Not without some hesitation, I have reached the conclusion I should grant the extension of time sought by counsel for B W Duckham & Co to enable this application to be made.
So far as the application itself is concerned, I can find no justification for directing that the costs be taxed as in an action. The fact that a pro forma bill of costs submitted by the applicants produced a total of $72,240 indicates that it would be quite wrong to accept the costs of an action as the basis for the applicants' costs, notwithstanding their somewhat inconsistent indication that they did not seek this amount. Having regard to the nature of the relief sought, the proceedings were initially instituted, quite properly, by way of originating summons. When the application was amended to seek rectification, in my view, it was entirely reasonable to continue the proceedings by way of originating summons. Although factual issues arose in addition to the question of law as to whether the court has power to rectify a voluntary settlement, the case did not require the prolonged examination of witnesses. Indeed, the time taken for cross-examination was relatively brief, and the factual issues were quite narrow. In the circumstances, I am of the view that the appropriate course is to increase the limit of item 21.
In Cruickshank v Producers Markets Co-operative Ltd [1960] WAR 184 , Virtue J said at 193 of the earlier provisions:
"There is power under the rule to increase the allowance, or to direct taxation on the special scale with or without limits. This is clearly a power which the court should use sparingly, having regard to the principle which is manifestly in the new scale that the substantial rewards to which practitioners are entitled where the amount at stake is considerable should compensate for possible inadequacy of the award when it is small."
As Ipp J observed in Collins v Westralian Sands Ltd (1993) 9 WAR 56 at 65, this principle has been aptly described as 'the swings and roundabouts' costs rule. He pointed out that the rules were subsequently amended with the intention of enlarging the scope of the discretion to increase any particular allowances in the scale, so that not only was the court empowered to make a special order by reason of the unusual complexity or importance of the case, but also "for any other good or sufficient reason". There is no reason why the amount of work involved in preparation cannot of itself constitute a good and sufficient reason to increase the allowance provided under the scale – see Schmidt v Gilmour [1988] WAR 219. This is subject to the proviso that the work performed was reasonably required for the proper presentation of the case.
The difficulty which I then face is in fixing a maximum figure. In my view, having regard to the nature of the principal application, the fees sought are excessive, whether or not the hours claimed are correct. The case itself, as I have indicated, was not one of unusual complexity. It was a case in which a barrister was engaged from the earliest stage and it is to be expected that, in a case of this nature, the majority of the work would have been performed by him. In the circumstances, I consider it appropriate to increase item 21 to the sum of $12,000. It needs no emphasis that this merely provides an upper limit to the costs. The Taxing Officer will still be required to be satisfied that the final figure which is arrived at is justified.