Koutsourais v Metledge & Associates

[2004] NSWCA 313

CITATION:	KOUTSOURAIS & ANOR v METLEDGE & ASSOCIATES [2004] NSWCA 313
HEARING DATE(S):	07/09/2004
JUDGMENT DATE:	23 November 2004
JUDGMENT OF:	Beazley JA at 1; Hodgson JA at 12; Bryson JA at 13
DECISION:	Appeal allowed: costs orders: see [12]
CATCHWORDS:	LEGAL PROFESSION - Costs - solicitors Legal Profession Act 1987 s.192 requires Bill of Costs to be given to client at least 30 days before action to recover - solicitor made informal claims without complying bills against 2 clients, one a company and one who was principal of the company - after disputes and service of Statutory Demand on company, parties agreed that the company (not the individual) would pay all the costs by instalments and solicitor would not proceed with winding-up - later the solicitor sued the company for money payable under that agreement - HELD (by majority) the claim retained character of claim for costs and ws barred by s.192.
LEGISLATION CITED:	Legal Profession Act 1987 s.192, s.209C Legal Practitioners Act 1898 s.21 Local Courts (Civil Claims) Act 1970 s.69 Solicitors Act 1891 (Queensland) s.3 Supreme Court Act 1970 s.101(1)(a), s.118(4) Supreme Court Rules 1970
CASES CITED:	British Russian Gazette Ltd v. Associated Newspapers Ltd (1933) 2KB 616 Callisher v Bischoffsheim (1870) LR 5 QB 449 Conder v Silkbard Pty Ltd [1999] NSWCA 459 Connolly Suthers v Frost [1995] 2 Qd R 117 Dodd v Gillis (1989) 16 NSWLR 623 McDermott v. Black (1940) 63 CLR 161 Mitchell (1997) 160 ALR 161 Morris v. Baron [1918] AC 35 Udovenko v. Mitchell (1997) 160 ALR 161
PARTIES :	Manuel Koutsourais - 1st Appellant Bambakit Pty Ltd - 2nd Appellant Mary Metledge t/as Mary Metledge & Associates - Respondent
FILE NUMBER(S):	CA 40500/2003
COUNSEL:	T. Tzovaras (Sol) - Appellant A. Blank - Respondent
SOLICITORS:	Tzovaras Legal, Sydney - Appellant M.R. Barbar & Associates, Marrickville - Respondent

LOWER COURTJURISDICTION:	Supreme Court - Common Law Division
LOWER COURT FILE NUMBER(S):	12925 of 2002
LOWER COURT JUDICIAL OFFICER :	Grove J and Master Malpass

40500/2003

BEAZLEY JA
HODGSON JA
BRYSON JA

TUESDAY 23 November 2004

KOUTSOURAIS & ANOR v. MARY METLEDGE & ASSOCIATES

Judgment

1 BEAZLEY JA: I agree with the Orders proposed by Hodgson JA and with his reasons save that I do not consider it necessary to express an opinion as to when proceedings might not be proceedings for recovery of costs: see para 11.

2 HODGSON JA: The circumstances of this appeal and the issues are set out in the judgment of Bryson JA, and I will not repeat them. However, I respectfully disagree with Bryson JA's conclusion, for the following reasons.

3 The question before the Magistrate was whether the proceedings were "proceedings for the recovery of costs by a solicitor" within s.192 of the Legal Profession Act 1987. If they were, it was common ground that a bill of costs had not been given to Bambakit Pty. Limited (Bambakit), so that the proceedings were not maintainable.

4 Before the Magistrate, the solicitor claimed that the contract sued upon was not the contract pursuant to which an entitlement to costs arose, and that accordingly the proceedings were not proceedings for the recovery of costs. It appears that the Magistrate upheld that submission; but it does not appear that in doing so he addressed the question whether, even accepting that the contract sued upon was not the contract pursuant to which the entitlement to costs arose, the proceedings nevertheless amounted in substance to proceedings for the recovery of costs by a solicitor. This in my opinion is a question concerning the sufficiency of the connection between legal costs and the proceedings, which in cases such as the present is a difficult question of degree; and in my opinion the Magistrate erred in law in not addressing it, or at least in giving no reasons on the matter.

5 It seems clear that the solicitor's claim for costs was originally for $21,255.00, some payable by Mr. Koutsourais and some by Bambakit. $11,857.00 of this was paid; and as I understand it, it was not identified by whom or in reduction of whose costs this amount was paid. In the result, $9,398.00 was left outstanding; and despite the lack of identification concerning the previous payments that I have referred to, it appears to have been accepted that some of this $9,398.00 was properly attributable to Mr. Koutsourais and some to Bambakit, in proportions that were not identified.

6 Statutory demands were served on Bambakit, apparently for $9,398.00. The agreement found by the Magistrate was to the effect that, in consideration of the solicitor not proceeding on the statutory demands, Bambakit would pay $9,398.00 plus interest at 12% per annum, by instalments of at least $1,000.00 per month, and that in default of payment of any instalment, the whole amount would immediately be payable by Bambakit.

7 Bryson JA has accepted that this agreement was an accord and satisfaction, in the sense that the solicitor accepted Bambakit's promise in satisfaction of existing obligations, rather than merely agreeing to accept performance of the new agreement in satisfaction of the existing obligations: cf. McDermott v. Black (1940) 63 CLR 161 at 183-5. The circumstance that there was clear identification of Bambakit as the entity liable for the whole, and the consequent implied discharge of Mr. Koutsourais in respect of any costs he might otherwise have been liable for, supports this view; and I agree with it.

8 I will proceed also on the basis that the solicitor gave good consideration for this agreement, accepting that she was not inhibited by s.192 from issuing the statutory demand for costs, or threatening to commence winding-up proceedings. I think the better view is that to issue a statutory demand is not to commence proceedings, and that winding-up proceedings would not be proceedings for the recovery of costs. In any event, I would accept that the solicitor had a bona fide belief that she was entitled to do these things, and that would be sufficient for consideration.

9 So the question is, did this accord and satisfaction mean that proceedings to enforce it were not proceedings for the recovery of costs. In my opinion, this accord and satisfaction was insufficient to have that effect, for these reasons. First, the amount to be paid was still the precise amount claimed for costs. Second, the entity identified as liable for the whole was one of two entities which were together previously liable for the whole of the costs, albeit in undetermined shares. In my view, in substance it was still the recovery of costs that was being sought in the proceedings.

10 In my opinion, this case is distinguishable from Connolly Suthers v. Frost 2 QdR 117. In that case, it was conceded that the Queensland equivalent of s.192 had no application. This is understandable, where the contract sued upon was twice removed from the contract pursuant to which the solicitor became entitled to costs; and the contract actually sued on was a compromise of litigation that had actually been commenced.

11 In my opinion, factors which would tend to make proceedings ultimately based, at least in part, on a lawyer's entitlement to costs, other than proceedings for recovery of costs, would include: a compromise of previous legal proceedings; a compromise involving other matters as well as costs; a compromise accepting in respect of costs a substantially lesser sum; and legal advice to the client at the time of the compromise. Each and all of these factors would in my opinion tend towards changing the character of proceedings based on the compromise from being proceedings for the recovery of costs. None of these factors was present in this case.

12 For those reasons, I would propose the following orders:

1. Appeal from Master Malpass allowed with costs.
2. Respondent to have a certificate under the Suitors Fund Act if otherwise entitled.
3. Set aside judgment of the Magistrate, and in lieu thereof judgment for the appellant with costs.
4. Set aside orders of Master Malpass and respondent to pay appellant's costs of the proceedings before Master Malpass.
5. Appeal from Grove J dismissed, with no order as to costs.

13 BRYSON JA: This appeal follows a remarkably elaborate chain of litigation in a dispute in which the respondent Ms Metledge a solicitor recovered judgment for $9,398 with costs against the second appellant Bambakit Pty Ltd in the Local Court at Burwood on 12 August 2002. No judgment was given against Mr Koutsourais, but superfluously he has been named as an appellant at every stage. The appellants appealed to the Supreme Court by Summons filed on 25 October 2002. The right of appeal is conferred by the Local Courts (Civil Claims) Act 1970 s.69, and subss.(1) and (2) are in these terms:

69 Appeal

(1) Subject to subsection (2), all judgments and orders of a court exercising jurisdiction under this Act shall be final and conclusive.

(2) A party to proceedings under this Act who is dissatisfied with the judgment or order of the court as being erroneous in point of law, may appeal to the Supreme Court therefrom.

14 The appeal was heard in the Common Law Division and came before Master Malpass on 12 March 2003. Master Malpass dismissed the Summons on 28 March 2003, for reasons stated in his judgment on that day. The appellants appealed to a Judge; that appeal was heard before Michael Grove J on 12 May 2003 and dismissed on 19 May 2003 for reasons then published. This appeal is brought from the decisions of the Master and of Grove J, by leave granted by Sheller and Hodgson JJA on 12 December 2003. Bambakit Pty Ltd is now in liquidation, and Mr Koutsourais has been authorised by its liquidator to conduct the appeal on its behalf.

15 There has been no conferral of power upon Masters to hear appeals from Local Courts and there is no record of an order referring the proceedings to the Master. Grove J was of the view that “[11] A judgment which has effect as a judgment of the Court in the Division pursuant to s.118(4) is not, in my view, a ‘decision of the Master’ within the meaning of that expression in Supreme Court Rules 1970 Pt.60 r.10” and that for that reason appeal did not lie to a judge of the Common Law Division, but was assigned to the Court of Appeal by s.101(1)(a) of the Supreme Court Act 1970. Although Grove J expressed views on other issues, he dismissed the appeal on the ground that it was incompetent. The Court of Appeal granted leave to appeal from the decisions of the Master and also of Grove J, and extended time for appeal to the Supreme Court to the date on which the Summons was filed.

16 Neither party to the appeal challenged Grove J’s conclusion that the Master’s decision was given effect as a decision of the Common Law Division by s.118(4) of the Supreme Court Act 1970. The question whether appeal lay from the Master to a single Judge does not now call for decision.

17 The appellant contends to the effect that the decision of the Local Court was erroneous in point of law in that it did not give effect to s.192 of the Legal Profession Act 1987, which provides:

192 Bill of costs to be given before costs can be recovered from client

(1) Proceedings for the recovery of costs by a barrister or solicitor for providing legal services must not be commenced or maintained against any person unless at least 30 days have passed since a bill for those costs was given to the person in accordance with this Division.

(2) The Supreme Court may make an order authorising a barrister or solicitor to commence or maintain proceedings against a person sooner, if the Supreme Court is satisfied that the person is about to leave New South Wales.

18 Particulars of the claim given when proceedings in the Local Court were commenced indicated that Ms Metledge sued the defendants for the amounts of solicitor’s costs in several accounts rendered, in some cases to Mr Koutsourais and in some cases to Bambakit: claims for money payable for work and labour being legal professional services. However at the hearing before Mr W. Pierce, Magistrate, the case was not presented in that way and the learned Magistrate’s decision does not relate to a claim for work and labour.

19 A transcript record of observations made by counsel for Ms Metledge when opening the case at the beginning of the hearing on 10 December 2001, is as follows:

BLANK: Your Worship, our case is this: the plaintiff is a solicitor who, between 1992 to 1995 provided certain legal services to the first and second defendant and rendered accounts to those parties which totalled $21,255. We say that in July 1996 the second defendant acknowledged that it was indebted to our client in an amount of $9398 because payments had been made bringing the debt down from $21,255. That in consideration for the plaintiff forbearing taking action against the second defendant, the second defendant agreed to reduce the amount of $9398 by instalments of $1000 per month. We say this agreement was arrived at orally although a subsequent written document was prepared but not signed.
At the end of the day we are going to be asking the Court to find that there was an agreement entered into in 1996 with the second defendant, wherein it acknowledged an indebtedness of $9398, and agreed to reduce that debt by payments of $1000 per month. It has breached that agreement and the full amount is therefore outstanding.
BENCH: Did that agreement in July 1996 provide that if there was default that the whole would immediately fall due and owing?
BLANK: Yes, it did.
BENCH In its oral terms and also in the draft.
BLANK: In the oral terms and in the draft prepared. In any event, your Worship, by this time all the instalments would be due and that really is the essence of our case.

20 It became clear in the conduct of the case that the defendants relied on s.192 of the Legal Profession Act 1987 as a defence to the proceedings. If compliance with subs.192(1) is necessary, it has not been complied with, as Ms Metledge did not give bills to the defendants at least 30 days before commencing the proceedings, and there has been no order authorising her to commence proceedings sooner. In connection with this defence the learned Magistrate referred to Connolly Suthers v. Frost [1995] 2 Qd R 117. Whether s.192 would prevent Ms Metledge from succeeding was referred to as a preliminary point.

21 When Ms Metledge was giving oral evidence in chief (t.7 and 8) her attention was directed to a letter at pp59 and following of a bundle of documents; the letter later became Exhibit 9. Her evidence was as follows:

Q. Ms Metledge, can you just recount to us what conversations you had, what words were used with Mr Koutsourais and when?
A. In relation to this letter?
Q. In relation to this letter or the coming into existence of this letter.
A. The coming into existence of this letter was an agreement I had with him that he would make instalment payments.
Q. Did you have a conversation with him in that regard?
A. Yes.
Q. Can you tell us abut that conversation, what he said and what you said?
A. Well, there were actually two conversations; one early on when the – early on in I think ’94 when the bankruptcy proceedings had completed. He’d asked me if I could wait a little while for his money to be paid because his business was going not too well and he couldn’t borrow any money. I said, “Yes, of course, provided you make some payment,” because he was at that time the fiance of my best friend. Then subsequently there was a matter with his son in the Local Court. No mention was made of money. I didn’t ask for money although I rendered a bill, but I knew his financial situation so I said nothing. But then sometime after that there was another major matter with I think the Permanent Trustee where they were going to foreclose and there [were] proceedings on foot and that was the bill for the $6014. At the conclusion of that matter Manuel had agreed that he would pay me a lump sum and then monthly instalments which he started to do but then stopped. Then I wrote this letter to him and then as a result we had a conversation. I can’t remember whether – I can’t remember whether he range me or I telephoned him but he promised that this time he would definite – to withdraw the – to not go ahead with the winding up and to draw up an agreement. Well, he didn’t actually say, “Draw up an agreement.” He agreed that he would this time make payments continually and on time and I had said to him, “Well, Manuel, I don’t trust you any more I need to be paid interest as well. I have foregone the interest all this time. Are you prepared to sign an agreement to that effect?” He said, “Yes.” I drafted what we had discussed in the agreement, typed it up, faxed it to him, rang him, he approved it and he said he would come to sign it but he never did.

22 Later Ms Metledge’s attention was directed to a document at p.54 of the Bundle. Her evidence proceeded:

Q. Can you tell us how this particular document came into existence?
A. Yes. After I served the first – I served two statutory demands – I can’t recall whether it was the first statutory demand or the second but I think it was the second statutory demand because he didn’t comply with the first. Again, as I say, I really did not want to wind him up. I knew he was in financial difficulty and I didn’t want to cause him anxiety over money although I did want to be paid. So we agreed – I can’t remember if I rang him or he rang me but we agreed that in order for me to forego the winding up proceedings, which I was entitled to do, he would make payments towards the principal. We agreed this verbally on the phone. He’d pay me 12 per cent per annum, monthly instalments to be on the 1st of the month so I could keep a tally of them and interest of 12 per cent. In the event that they were seven days late I could claim the 12 per cent. In the event that they were 14 days late the total debt became due and payable and I could proceed with the winding up.
Q. Was this document provided to Mr Koutsourais?
A. Yes. I faxed the two pages. It comprises two pages. I faxed those two pages to him, he agreed with them, and he said he would come over and sign them but he never did.
Q. Did you ever follow that up?
A. I can’t recall, I’m sorry.
Q. You mentioned just now two statutory demands. We’ve tendered one.
A. Forgive me, there is something. Yes, I did follow it up. I just recalled. I did follow it up because one of his solicitors then said it’s not Bambakit that owes the debt it’s Manuel so then there became a dispute as to who owed the bill but Manuel wanted Bambakit to owe the bill. So, yes, I did follow it up.

23 Copies of two statutory demands were admitted in evidence.

24 Ms Metledge also gave evidence that at the time of telephone conversation on 17 July 1996 she typed a file note which recorded the conversation. She gave evidence about the contents of the file note at transcript 13 and 14:

BLANK: Q. Can you perhaps read that note?
A. Yes. “17 July ’96 2.40 to 2.45,” that’s pm, “Agreed on terms to be paid by Bambakit, this time with 12 per cent interest per annum and minimum payment $1000 per month.” Sorry, your Worship, am I going too fast?

BENCH: No, that’s all right.

A. “The interest to capitalise and”, I haven’t got form but it should be form “part of the debt to be paid by bank cheque,” because it was written in a hurry. “If not paid within seven days then whole debt with interest payable immediately without formal demand. If not paid within 14 days then can wind up company without notice and notice can’t be disputed. He will come in and pay $1000 first payment and $94 interest and sign agreement.” Then on the same date, “Faxed two pages to Manuel,” I haven’t got a time but I presume it was in between because then my next entry is 2.50 to 3 o’clock, “Telephone out Manuel, he received agreement and it’s okay and he agrees with the terms. Told him I want payment to start immediately, no more games, or I would wind up company without hesitation after waiting for my money for so long. He promised he would come in and sign agreement that evening and pay $1094 and not miss any payments in future. He apologised for problems and said he was being wrongly.” I think that on my file [note] I definitely recall saying, “being wrongly advised by his solicitor.” It mustn’t have come up on this photocopy.

25 After some argument on 7 February 2002 the second hearing day the learned Magistrate said:

BENCH: I am against you on that preliminary point. I think Ms Metledge can sue for the amount she sues for based on a compromise that was reach in the way that we described. We now have to set the matter down to resolve the factual and any other legal issues you might have in the matter.

26 At that stage the Magistrate was dealing on a hypothetical basis with the availability of the defence, and he had not made any finding of fact.

27 The proceedings were then adjourned part heard to Thursday 23 May 2002 when submissions on the facts were made. There is no transcript before the Court of Appeal of those submissions, but the Magistrate’s Reasons for Decision published on 12 August 2002, show that the contentions relating to the facts were elaborate; there were a number of significant points at which the facts as put forward in evidence for Ms Metledge and for Mr Koutsourais and Bambikit were altogether inconsistent.

28 In the opening paragraphs of the Reasons for Decision the Magistrate said among other things:

Ms. Metledge sues on what she says was an agreement made on the telephone of on 17th July, 1996, whereby the first defendant as managing director bound Bambakit Pty. Ltd. to be liable for the cost of the legal work performed over the preceding years. Whether the conversation by which this agreement is said to have been made ever occurred is disputed.
…
Earlier this year I gave a decision on the preliminary question whether the Legal Practitioners Act prevented the plaintiff from suing for lack of delivery of an itemised account within the requisite period. I accepted that the oral agreement, if it occurred, founded a fresh cause of action, and that it was possible for the plaintiff to sue on that agreement notwithstanding a lack of compliance with the Act.
…

29 At p.3 of the Reasons for Decision the Magistrate said:

The disputed oral agreement of 17th July, 1996
The plaintiff says that she spoke to the first defendant on the telephone, and obtained his agreement for Bambakit to make it liable for the cost of the work done by her, and that she faxed him a form of agreement for execution by Bambakit.
Did this event really occur? The first defendant says it is an invention after the event. The plaintiff says it happened, and that it was the culmination of many attempts to get the first defendant or Bambakit to honour promises of payment. Effectively, she says that she was at her writs’ end and threatened to wind up Bambakit unless there was a signed agreement making it responsible and agreeing to pay interest. There was, in the raising of the oral telephone agreement, no suggestion of any difficulty such as an ‘agreement to agree’. If the conversation occurred it was a final agreement and bound Bambakit, and the written document faxed through was merely confirmation.
The parties are diametrically opposed, and one of them must be untruthful. The difficulty is to know which. Credit questions are therefore paramount. As best I can, I now attempt to identify some of the credit issues.

30 The Magistrate went on to review the evidence, accepted the evidence of Ms Metledge, including evidence which shows that the total of the amounts agreed to be paid was $9,398; and gave judgment accordingly.

31 The agreement which the Magistrate found and enforced can be understood from the evidence and the Magistrate’s acceptance of it. In the telephone conversation on 17 July 1996 between Ms Metledge and Mr Koutsourais, who was the principal of Bambakit, it was agreed that Bambakit would pay the amount of several claims for costs which Ms Metledge had made, some against Mr Koutsourais and some against Bambakit, totalling $9,398, with interest at 12% per annum and minimum payments of $1,000 per month, interest to be capitalised, part of the debt to be paid by bank cheque, and if an instalment was not paid within 7 days then the whole debt with interest to be payable immediately without formal demand. If an instalment was not paid within 14 days, then Ms Metledge could proceed to wind up Bambakit without notice, and the statutory demands would not be disputed. Mr Koutsourais was to come into Ms Metledge’s office, pay $1,000 as a first payment and $94 interest and sign a written confirming agreement. In consideration of Bambakit agreeing to these arrangements, Ms Metledge agreed to take no further action on the two statutory demands which had already been served.

32 Although Mr Koutsourais agreed in the telephone conversation to sign a confirming written agreement, and Ms Metledge prepared the form of that agreement, it was never in fact signed.

33 The elements of the agreement which constituted consideration were on the one part that Bambakit promised to pay, by instalments, $9,398, with interest, which sum was greater than the earlier claim against it for costs, and on the other part Ms Metledge agreed to accept that the total of the claim would be paid by Bambakit (although part of the claim was against Mr Koutsourais and part against Bambakit), that payment would be made by instalments (although she claimed it was due immediately) and that she would forbear to take any further the winding up proceedings (which could have been brought as the statutory demands had not been set aside by court order). There was consideration moving from and to each party, and the agreement was enforceable, unless s.192 prevented enforcement. Counsel for Ms Metledge submitted, correctly and without contention by the solicitor for Bambakit, that forbearance to continue a claim or suit is good consideration if there is a bona fide belief in the liability asserted, even if in fact the claim is bad in law. Counsel supported this proposition by referring to Callisher v Bischoffsheim (1870) LR 5 QB 449 and other authorities.

34 The appellant’s solicitor contended that if a compromise agreement was allowed to operate outside s.192 it would be very easy for s.192 to be abused and circumvented by solicitors making arrangements for instalments and avoiding an obligation to give a bill. It was contended that that would strike at the public purpose of the legislation and at its protection of the rights of clients; those rights are extensively protected by other provisions of the Legal Profession Act 1987, and it was contended that s.192 should not be understood in a way which easily defeats those rights.

35 On behalf of Bambakit it was also submitted to the effect that Ms Metledge was prevented by s.192 from suing for moneys payable by Bambakit under the agreement of 17 July 1996, having regard to the terms of the agreement and the circumstances in which the agreement was made. The contention was to the effect that the proceedings in the Local Court were “Proceedings for the recovery of costs by a …solicitor for providing legal services…” within the meaning of subs.192(1), and had the character of being proceedings for the recovery of costs notwithstanding the terms of the agreement and the circumstances in which Bambakit had become liable for payment of $9,398 by instalments.

36 In support of this submission the appellant’s solicitor referred to Conder v Silkbard Pty Ltd [1999] NSWCA 459. In that case solicitors sued in 1995 to recover about $30,000 costs plus interest, after rendering accounts for costs in the year 1990-1991. Mr O’Connor had the effective management of Silkbard and he formed the opinion when the accounts were rendered that the charges were fair and reasonable for the work undertaken; and Silkbard made provision for the costs and interest in its accounts for two financial years. In June 1994 it was agreed or arranged between the solicitors and Mr O’Connor on behalf of Silkbard that the solicitors would perform further legal work for Silkbard provided that Silkbard agreed to make monthly payments of $4,000 in reduction of the outstanding accounts. At the end of 1994 control of Silkbard passed from Mr O’Connor to Mr Field. No further payments were made and in 1995 the solicitors commenced proceedings for recovery of the accounts rendered in 1990-1991 plus interest. The claim was expressed as a claim for money payable on accounts stated, alternatively as a claim for instalments under the agreement for payment by instalments made in June 1994. Silkbard relied on subs.192(1), which had not been complied with. Silkbard asked the Court to order the solicitors to deliver a bill under s.209C of the Legal Profession Act 1987. On behalf of the solicitors it was argued that if the Court should exercise its discretion under s209C against ordering the solicitors to give a bill, the solicitors could recover costs without giving a bill as required by subs.192(1).

37 Beazley JA rejected this argument and said:

[29] In my opinion, the appellants’ argument is quite misconceived. There is no interdependence between s.192(1) and s209C. The terms of s.192(1) are mandatory. Proceedings for the recovery of legal costs must not be commenced unless a bill is given to the client at least 30 days beforehand. Failure to comply with s.192(1) is a defence to an action brought by a solicitor to recover legal costs claimed to be owing to the solicitor: Zizza v Seymour [1976] 2 NSWLR 135.

38 Beazley JA went on to comment in para [30] on the strict nature of the requirement of subs.192(1), as illustrated by Udovenko v Mitchell (1997) 160 ALR 161, in which a default judgment obtained without complying with subs.192(1) was reopened in bankruptcy proceedings. Meagher JA agreed with Beazley JA while Fitzgerald JA reached the same conclusion for reasons more shortly stated.

39 In my opinion the claim in Conder v Silkbard Pty Ltd differs from the present claim in significant ways. The claim was presented alternatively on the basis of accounts stated, and on the basis of an agreement made in June 1994 to pay the accounts rendered by instalments, and to pay the balance on failure to pay an instalment. I cannot see that the June 1994 agreement was an agreement for consideration on which a claim for recovery of money could be based, as the agreement of Silkbard to pay the debt by instalments was not in any sense a compromise of a claim. There was no element in the facts of Silkbard similar to Bambakit’s undertaking to pay a larger amount than the accounts which had been rendered to it, including the amounts of accounts rendered to Mr Koutsourais for which Bambakit had no possible liability except under its agreement to pay by instalments. Udovenko v Mitchell turns on special considerations affecting bankruptcy jurisdiction, where there is wide power to investigate and determine the true basis of a debt, even if its nature has been altered by merger into a judgment.

40 In Conder v Silkbard Pty Ltd very little, nothing in substance, had happened which changed the nature of the claim made by the solicitors from its original nature as a claim for payment of costs in accordance with accounts rendered. So far as appears the only basis of the claim for accounts stated was an acknowledgement of liability. Connolly Suthers v Frost [1995] 2 Qd R 117 was not referred to by Beazley JA or by Fitzgerald JA, and in my opinion the facts in Silkbard did not present the issue on which Connolly Suthers v Frost is important.

41 I note Dodd v Gillis (1989) 16 NSWLR 623, a decision on s.21 of the Legal Practitioners Act 1898 (now repealed) which was generally similar to s.192. Yeldham J held that solicitors could sue for fees without complying with s.21 where the client had expressly waived the protection given by s.21, and held that there had been a waiver where lump sum bills were delivered followed by accounts stated and the bills were acknowledged by the client as reasonable and as duly payable. Yeldham J also said, obiter, to the effect that a solicitor may sue for fees without compliance with s.21 where there is a legally binding contract between the solicitor and the client whereby the client has agreed to pay a lump sum to work done, or for work to be done. (I would think that the last two situations are different from each other). Beazley JA did not consider the application of Dodd v Gillis to subs.192(1) as it had not been suggested by the appellants that there had been any waiver of the right to a bill conferred by subs.192(1). There is no indication in the judgments in Conder v Silkbard Pty Ltd that the solicitors contended that expressing their claim as a claim for accounts stated was significant for deciding whether subs.192(1) applied. There is nothing in the facts of the present case which could support a contention that the entitlement to a bill of costs referred to in subs.192(1) had been expressly waived, the situation contemplated in Yeldham J’s dictum in Dodd v Gillis. There was no claim and no basis for a claim that Bambakit waived its right to a bill, and the Magistrate did not act on that basis.

42 Connolly Suthers v Frost is a decision on s.3 of the Solicitors Act 1891 (Q) which takes quite a different form to subs.192(1). Section 3 provided to the effect that a solicitor may make an agreement in writing with his client respecting the amount and manner of payment for services, and when the agreement is made in respect of business done in an action in Supreme Court the solicitor is not to receive the amount payable in the agreement until the agreement has been examined and allowed by the taxing officer, who may require the opinion of the Court or Judge to be taken. The solicitor performed legal work for a client and for associated entities, and was not paid, and the solicitor and the client entered into a deed in which the client acknowledged that certain amounts were presently due and payable and guaranteed payment on a stated date. Part of the work was done for the client and part for associated entities, and the client guaranteed payment of the whole amount, including costs for work done for the client and costs for work done for associated entities. On the stated date payment was not made, the solicitor sued and the proceedings were compromised when the solicitor, the client and one of the associated entities entered into a further deed providing for making payments and giving security. Later the solicitor sued on the deed of compromise and succeeded.

43 The Court of Appeal of Queensland held to the effect that the promise to pay in the deed of compromise bore the character of part of the total promises made to compromise the action, and the promise did not have the character of payment for legal services; hence the claim was no longer within the provisions of the Solicitors Act 1891 including s.3. The Court of Appeal (Fitzgerald P, Davies JA, Williams J) said at page 119:

119. It is accepted by the appellant that unless the deed of compromise was an agreement within the terms of s3, the appeal must fail. It may be assumed for the purpose of considering this question that the appellant was, at the time the deed was entered into, a client of the respondent for the purpose of that section. The question is whether the deed was an agreement respecting the amount and manner of payment for ... services, fees, charges, or disbursements ...".
Read literally and in isolation from their context, it might be possible to construe the words which we have quoted to mean that any connection between the agreement and the amount and manner of payment of fees might be sufficient to bring the agreement within s3. There is undoubtedly some connection in the present case. That is that the amount the subject of the deed of compromise is the amount sued on in the earlier District Court action, that amount is the amount agreed to be paid under the deed of guarantee and that amount in turn is the amount agreed between the parties as payable in respect of the respondent's claim for fees.

44 At line 50, the Court said of the deed of compromise “The obligations which it stated were entirely new.”

At 120, the Court of Appeal said:

Even if it was correct to describe the deed of guarantee as an agreement within s3, we do not think it correct to so describe the deed of compromise. The "moneys owing", payment of which, by the deed of guarantee, the appellant guaranteed were described in that deed as moneys owing for fees rendered for professional services.
By contrast, the payments agreed to be made under the deed of compromise, together with the securities agreed to be given under that deed, were of a different character. They were promised in compromise of the action brought on the deed of guarantee, the respondent on its part agreeing to discontinue that action. Though the amounts of the payments promised were the same as the amounts under the deed of guarantee, though payable at different times, the promise to pay them bore the character of part of a total promise made to compromise an action. Consequently the payments did not have the character of payments for past legal services and consequently were not payments for fees, charges or disbursements within the meaning of that term in s3.

45 In effect the Court of Appeal held that the arrangements for repayment in two succeeding deeds had the effect that the obligation to make a repayment in the second deed, the deed of compromise, did not have the character of obligation to make payment for past legal services.

46 In Conder v Silkbard Pty Ltd the Court of Appeal did not address any contention to a similar effect that the obligation and the proceedings had lost the character of proceedings for the recovery of costs by solicitors providing legal services; and I am of the view that, on the facts of Conder v Silkbard Pty Ltd, such consideration was not required. The facts were quite different to the facts in Connolly Suthers v Frost.

47 The appellant’s solicitor sought to distinguish Connolly Suthers v. Frost on the ground that the Queensland legislation is quite different (as it is) and also on the ground that the succession of two deeds of guarantee and compromise distinguishes the facts relating to the character of the claim from the present case.

48 Where an agreement is made that a claim will be satisfied by payment by instalments, or (it may be) with interest, the effect which the agreement has on the previously existing obligation depends on the terms of the instalment agreement. It may be that the terms are such that a previously existing obligation continues in effect, and the terms of the instalment agreement relate only to the manner of payment and do not alter the character of the earlier obligation. It may be however that a further promise to pay a sum of money, and to pay it by instalments, comes into existence, with express or implied terms which show that the previously existing obligation no longer exists, as it has gone out of existence by merger and has been replaced by a further promise, for consideration, to pay a sum of money, and (it may be) to pay it by instalments and with interest. The terms of the instalment arrangement must be known if it is to be seen whether there is a fresh obligation, and whether the arrangement for instalments is made for consideration and creates a fresh enforceable obligation, or alternatively whether the previous promise continued in existence, and was affected in some way such as being acknowledged, agreed to be paid by instalments or otherwise. Everything depends on the terms of the arrangement.

49 The workings of the law in this area, and some of its history, are stated in British Russian Gazette Ltd v. Associated Newspapers Ltd (1933) 2KB 616 by Scrutton LJ at 643 to 645. His Lordship in illustration said, at 644: “Lord Atkinson’s statement in Morris v. Baron [1918] AC 35, a case on the Statute of Frauds, having a very remote connection with accord and satisfaction, is to the same effect. ‘If, however, it can be shown that what a creditor accepts in satisfaction is merely his debtor’s promise and not the performance of that promise, the original cause of action is discharged from the date when the promise is made’.” See too on the history of the law in this area, McDermott v. Black (1940) 63 CLR 161 at 183-185 (Dixon J).

50 In my opinion the agreement of 17 July 1996 had the meaning and effect that Bambakit promised to pay the whole $9,398, a different and larger amount than the accounts which had been rendered to it for legal costs, for the consideration stated earlier; and from then on the claim against Bambakit was a claim for enforcement of the promise made on 17 July 1996; the fact that a new promise for consideration had been given and was being enforced and the fact that the amount to be paid was greater than the amount earlier claimed against Bambakit demonstrate that a new cause of action for enforcement of a new contractual promise had come into existence, that the previous obligations had gone out of existence, and the action of the Local Court was based on enforcement of that new promise, and not of the earlier claims for costs against Mr Koutsourais and against Bambakit.

51 The difference goes deeper than different expression in pleadings, no longer a claim for money payable for work and labour but a claim for enforcement of a contractual promise given for consideration; the underlying obligations are completely different. I do not think however that a claim by a solicitor loses its original character as “Proceedings for the recovery of costs … for providing legal services” in all circumstances in which a client accepts that costs are payable and brings a new cause of action into existence, for example a cause of action on accounts stated, or where the client makes a fresh promise to pay in consideration of a forbearance to sue. Identification of a claim as “Proceedings for the recovery of costs … for providing legal services” may continue and persist after some such change in the cause of action by which the claim is to be enforced. Subsection 192(1) does not make the pleadings the means of characterisation of the nature of the claim, and subs.192(1) would be far more fragile than the legislature is likely to have intended if that would happen according to its true meaning. The characterisation required by subs.192(1) is to be arrived at by considering the substance of the proceedings and what is claimed to be recovered in them, and the inquiry can extend further back into the history of the parties’ relationship than the last agreement they made relating to payment.

52 In my opinion, upon the facts which the Magistrate must be taken to have found, Bambakit’s promise to pay had altogether lost the character of an obligation to pay costs for providing legal professional services by the course of events which led up to the agreement of 17 July 1996 and by the terms of the agreement itself. Bambakit promised payment of claims made not only against itself but also against Mr Koutsourais, and promised payment of the total sum, by instalments, and although some of the factors in the calculation of the total sum were claims for costs against Bambakit there were also other factors which were not, but were claims against Mr Koutsourais for which Bambakit had no conceivable liability. A new array of obligations, considerations, advantages and burdens came into existence in substitution for the previous claims for costs. With this arrangement came a new manner of expression of the cause of action, a new basis on a promise made on 17 July 1996, and a new accrual date for the operation of the Limitation Act. It was not possible to give Bambakit a bill for legal costs in accordance with subs.192(1); much of the legal work was not done for Bambakit. These changes were so extensive that, in my opinion, the claim which was put forward for adjudication by the Magistrate did not have the character of proceedings which, under subs.192(1) must not be commenced or maintained unless a bill has been given.

53 In my opinion there is no error of law in the Magistrate’s decision, and the appeal should be dismissed with costs.

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Last Modified: 11/29/2004