Luu v Sykes - [2009] SASC 232

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
LUU & ANOR v SYKES & ANOR
[2009] SASC 232
Judgment of The Honourable Justice Anderson
14 August 2009
PROFESSIONS AND TRADES - LAWYERS - REMUNERATION - BILLS OF COSTS - ACTIONS TO RECOVER COSTS
PROFESSIONS AND TRADES - LAWYERS - DUTIES AND LIABILITIES - SOLICITOR AND CLIENT - NEGLIGENCE - IN RELATION TO LITIGATION
Appellants were the clients of the respondents who are legal practitioners – respondents sued in Magistrates Court to recover unpaid fees – appellants made a counterclaim for damages for professional negligence as first respondent ceased to act for them during a trial – magistrate found for the respondents and dismissed the appellants’ counterclaim – whether appellants were aware of Costs Agreement with the respondents – whether appellants in breach of agreement – whether first respondent breached his duty of care to the appellants in ceasing to act for them.
Held: Appellants were aware of Costs Agreement with the respondents – appellants in breach of Costs Agreement – first respondent did not breach his duty of care to the appellants in ceasing to act for them – appeal dismissed.

LUU & ANOR v SYKES & ANOR
[2009] SASC 232
Magistrates Appeal: Civil
ANDERSON J.
Introduction

The appellants in this matter were formerly clients of the respondents who are legal practitioners practising under the name Sykes Bidstrup.
Unfortunately the dispute in this matter dates back to professional services rendered by Sykes Bidstrup to the appellants in November and December 1997.
The respondents sued in November 2003 for legal fees which they claimed were owing to them by the appellants. They were successful in their action before a magistrate. The appellants counterclaimed in that action and were unsuccessful. This is an appeal from the decision of the magistrate to award the respondents the amount of their costs plus interest.
Mr and Mrs Luu represented themselves in the appeal. Mr Luu made oral submissions on behalf of both appellants. They also filed extensive written submissions.
Background
The circumstances leading up to the present dispute involved an action in the District Court between the Australian Mutual Provident Society (“AMP”) as plaintiff and the appellants, together with a company operated by them called Kien Dan Luu Pty Ltd (“KDL”) as defendants.
It is not necessary to go into the details of that action but the appellants had previously been in a contractual arrangement with AMP whereby KDL had borrowed money from AMP. As a result of a disagreement between Mr Luu and AMP, AMP took action to recover the amount of the loan. That action was commenced in the District Court on 11 November 1996. The matter came on for hearing before Judge Pirone on 20 August 1997. It was then adjourned to Tuesday 4 November 1997.
In the meantime the appellants had contacted the firm Sykes Bidstrup, and Mr Sykes had conferred with and advised the appellants. He was engaged to represent them in the trial. Mr Sykes required a costs agreement to be signed by the appellants. They signed the agreement which required them to provide funds in advance to cover the anticipated legal fees and disbursements which would be incurred. The agreement provided that if there were insufficient funds to cover the anticipated fees and disbursements, the solicitors could cease to act.
Mr Sykes represented the appellants when the matter resumed before Judge Pirone on 4 November 1997. He rendered professional services by acting as counsel and by advising and conferring with the appellants. Fees were incurred and eventually there was no money in the trust account to cover those outstanding fees. Mr Sykes requested that the appellants provide further funds. No funds were provided.
Solicitors ceased to act
On 4 December 1997 Mr Sykes advised Judge Pirone that he would have to withdraw from the case. Mr Sykes explained that because of client confidentiality he was not able to discuss the basis of his withdrawal. Judge Pirone made some remarks which unfortunately have been the basis of the appellants’ continuing insistence that they are not liable for the fees of Mr Sykes. The judge was effectively insisting that Mr Sykes remain as counsel and was refusing to release him as counsel.
Mr Sykes then briefed Mr Whitington QC to address Judge Pirone. Following discussions between the judge and Mr Whitington, all of which are recorded in the transcript, the judge finally indicated that he acceded to Mr Sykes request and declared that Sykes Bidstrup were no longer acting for the appellants.
As I say, it is unfortunate that the appellants have selected some of the statements made by Judge Pirone to indicate that because the judge expressed some disappointment at Mr Sykes’ withdrawal, Mr Sykes was in breach of his duty of care to act professionally. That is the main theme of the appellants’ argument, namely, Mr Sykes was negligent in failing to continue to act for them.
Following his withdrawal from the case, Mr Sykes forwarded an account for his outstanding fees for November and December 1997 in the sum of $13,750. The judge granted an adjournment after Mr Sykes’ withdrawal, and the appellants then retained Norman Waterhouse as solicitors.
Judge Pirone later found that the corporate defendant KDL was liable to repay money loaned to it by AMP in the amount of $19,144 and that the personal defendants were liable as guarantors for the loan. On the defendants’ counterclaim, the judge found AMP liable to pay KDL $34,138 for breach of contract and $600 to the personal defendants for damages arising out of the termination of a mortgage with AMP. The judge found that the personal defendants were not entitled to damages for personal injuries that arose from AMP’s breach of contract.
The appellants then appealed to the Full Court claiming that their award of damages was inadequate. They also appealed the decision to dismiss their claim for damages for personal injury. AMP cross-appealed against the finding that it was in breach of contract and against the assessment of damages. The appeals by KDL and the appellants and the cross-appeal by AMP were dismissed by the Full Court. KDL then sought leave to appeal to the High Court, but leave was refused.
The costs agreement
After Mr Sykes became involved in the District Court action he wrote a letter to the appellants dated 14 October 1997. In the letter he discussed the likely costs of the action, although he had no accurate information at that stage as to the likely duration of the trial. He had not been provided with the earlier transcripts of evidence. He made the point that he could not estimate costs accurately.
Enclosed with the letter of 14 October 1997 was the costs agreement dated 31 October 1997. This was signed by the appellants, although they claim they never received the letter. The magistrate set out the relevant terms of the costs agreement in his reasons at [24]-[27] as follows:
[24]Clause 2 is to the effect that Mr and Mrs Luu agree that they were obliged to pay in advance, from time to time, upon request, sufficient moneys to cover anticipated fees and disbursements.
[25]Clause 4 was in these terms:-
‘If at any time there are in the opinion of our solicitors insufficient moneys or inadequate security to cover anticipated fees and disbursements our solicitors may cease to represent us until we have paid to them such further sums and provided such security as may be required of us.’
[26]Clause 5 provided:-
‘Fees and disbursements may be billed to us on an interim basis and at such intervals as our solicitors may require.’
[27]Clause 6 provided:-
‘If at any time there shall be fees due but unpaid default interest may be charged at ten per centum (10%) per annum.’
Mr Sykes wrote again on 29 October 1997. He refers to a conference he had held with the appellants the previous day. He gave certain advice in the letter and enclosed a tax invoice for an interim amount of $3,635.56. He also enclosed a trust account statement acknowledging that $3,000 had been paid by the appellants.
Mr Sykes continued to provide tax invoices as the work was done. Further amounts were paid into the trust account by the appellants and acknowledged by trust account statements. These amounts were to cover work done by Mr Sykes prior to the trial resuming before Judge Pirone.
Mr Sykes then continued to appear as counsel for the appellants even though no payments had been made into the trust account as required by the costs agreement. In his evidence, Mr Sykes detailed the work performed by him for which he was not paid. The last payment into the trust account was on 5 November 1997.
The trial was adjourned on 7 November to recommence on 13 November 1997. Mr Sykes appeared as counsel between 13 November and 5 December 1997 and his fees for counsel work, conferences and preparation totalled $13,750, which is the amount claimed in the summons.
On 3 December 1997 Mr Sykes said he gave Mrs Luu a letter dated 2 December 1997 at the court. It was in this letter that he advised the appellants that he could not continue to act in the absence of funds. He advised that his representation would cease on 5 December 1997. The appellants denied receiving the letter.
The magistrate’s findings
In the trial before the magistrate, Mr Sykes gave evidence about the agreement entered into between his firm and the appellants. The magistrate said that he was very impressed with the evidence of Mr Sykes. He also found that Mr Sykes’ evidence was supported by the various documents which were tendered as exhibits during the hearing. By contrast, the magistrate said that he was not impressed at all with the evidence of either of the appellants. He said at [80]-[82]:
[80]I think that the truth of the matter is that, and possibly being as kind to them as I feel is appropriate, they simply have misapprehended, misunderstood, misinterpreted or mis-comprehended many of the aspects of what has occurred, particularly in the District Court action.
[81]They each seem to have a steadfastly held, unshakeable belief that Mr Sykes had breached a duty of care, that he had done the wrong thing and had let them down badly.
[82]Their evidence, given from memory as to various statements that were made, particularly by Judge Pirone and before Judge Pirone, does not stand up in many respects when compared to the record of the transcript in the District Court.
In relation to the appellants’ failure to pay Mr Sykes’ fees, His Honour said:
[91]My impression is that for whatever reason, Mr and Mrs Luu have refused or declined to acknowledge, now, the reality that they had not been able to meet the requirements of Mr Sykes as to the payment of funds to secure fees and that those requirements were validly made pursuant to the Costs Agreement.
[92]To the extent that, in their evidence before me, they denied having any such knowledge of that being an issue between them and Mr Sykes in December 1997, I totally reject that contention. It is clear from the transcript, parts that I have quoted, and from the letter of the 2 December 1997, which, as I say, I find beyond doubt was given to Mrs Luu on the morning of the 3 December 1997, that they were then well aware of the fact that it was an issue between themselves and Mr Sykes.
[93]It is, I think, extremely illustrative of the lack of validity in the position now of Mr and Mrs Luu that when they had the opportunity to protest to Judge Pirone about Mr Sykes’ application to be released as their solicitors, they did not say one word in opposition to that intention.
That last comment by the magistrate is particularly pertinent. I agree with the comment. The appellants appear to have attempted to build up a case which is not related to the realities of what occurred at the time Mr Sykes represented them.
The appellants, before the magistrate, also alleged mala fides by Mr Sykes. That was apparently because the claim for the fees resulting from the alleged breach of contract by the appellants was not made until just before the statutory time limit of six years expired. The magistrate found that Mr Sykes had said that he was content to wait for payment, as he was requested to do by the appellants, so that the matter could be finalised as between them and AMP. In the meantime, Mr Sykes said, and the magistrate accepted, that Mr Luu had assured Mr Sykes that he would be paid when the matter was finalised. Again, this is relevant as to the appellants’ conduct at the time and quite inconsistent with their present argument.
In analysing this part of the claim by the appellants the magistrate said:
[98]… Accepting that evidence, of course, puts to bed again, the contention now of Mr and Mrs Luu that they, firstly, were at any time dissatisfied with the services of Mr Sykes. Not only is there that evidence that I have just mentioned to assist me in coming to that view, but there is also the evidence that after December 1997, Mr and Mrs Luu, in fact, consulted Mr Sykes, I think, on another two occasions, and the proof of that is in the documents in the exhibits where small accounts were rendered for some brief advice and paid for by Mr and Mrs Luu. It is simply inconceivable that, on the one hand, they could have genuinely held the view that Mr Sykes had let them down badly, to the extent even of, in effect, ruining their prospects of successful outcome with the AMP and, at the same time, have returned to Mr Sykes on two occasions for his further advice. Those two things just don’t stand together.
Again I agree with the magistrate. His reasons are comprehensive and persuasive. This analysis shows how the appellants are now attempting to argue a case quite inconsistent with their conduct at the time.
The magistrate found that the respondents were entitled, because of the costs agreement with the appellants, to judgment in the sum of $28,886.30 comprising $13,750 by way of the unpaid fees, $15,057.19 by way of entitlement to interest, and a further amount of $79.11 for interest pursuant to the Rules of Court up to and including 3 December 2008. The respondents were also awarded their costs of the action. The magistrate also dismissed the counterclaim. I will deal with the counterclaim shortly.
Appellants’ argument on appeal
As I have indicated, the appellants have left no stone unturned in their efforts to avoid payment of the amount of fees they incurred through Mr Sykes’ work on their behalf in the action involving AMP. That work was, on the magistrate’s finding, productive and helpful in advancing the appellants’ cause.
The appellants filed a long and detailed outline of argument, together with a chronology and an affidavit relating to their contentions. In addition, the appellants, through Mr Luu, made detailed submissions before me.
I attempted to summarise for Mr Luu, because of possible communication difficulties he had in expressing his actual points, what I thought his arguments were. Although Mr Luu, both in his written outline and his oral argument, dealt with several other matters, he agreed with me, after my attempt to summarise his arguments, that the arguments he had presented were as follows:
1.Mr Sykes had no entitlement to withdraw from the case when he did. In withdrawing he was negligent and breached his duty of care to Mr and Mrs Luu.
2.The Luus did not receive a written account or letter relating to the payment of fees on 2 December 1997 from the respondents. Accordingly Sykes Bidstrup’s claims for fees were all made orally rather than in writing.
3.Mr Sykes was not bona fide in that he did not give a genuine reason for withdrawing from the case.
4.The magistrate did not properly deal with Mr and Mrs Luu’s counterclaim for the loss of a chance to accept a $50,000 offer made to them in the District Court action by AMP.
5.Likewise he failed to deal with the claim for $7,000 in fees paid to solicitors retained after Mr Sykes was allowed to withdraw from the case.
6.The magistrate was wrong in awarding an amount for interest because of delays caused by the respondents’ actions.
7.Mr Luu also argued that the appellants had suffered a loss of reputation.
Mr Luu agreed with me that they were summaries of the arguments that he was presenting. I understand the difficulties of a litigant in person. The matters not included in my summary were peripheral at best and could not have affected the outcome. Each of the matters summarised above has been dealt with comprehensively by the magistrate. I have no hesitation in saying that I agree with the magistrate’s reasons for finding in favour of the respondents on each of those points. I will elaborate briefly.
In answer to the allegation of breach of duty of care, the whole of the evidence in my view supports the findings of the magistrate. The evidence shows that Mr Sykes acted professionally and responsibly at all times. The comments, some of which were taken in isolation, made by the judge at the trial, have created a false impression upon the appellants which appears to be the basis of their case. They have decided to run with some of the isolated comments of the judge without giving proper regard to the whole of the context in which those comments were made. In any event, none of the comments made by the judge support any breach of duty by Mr Sykes. There was no breach of duty.
The magistrate’s findings as to the delivery of the costs agreement (exhibit P2) and the delivery of the letter of 2 December 1997 (part of exhibit P5) are very specific. These findings are based to a large extent on the magistrate’s acceptance of the evidence of Mr Sykes and his rejection of the evidence of the appellants. His Honour found that the costs agreement and the letter referred to above were both given to the appellants despite their refusal to acknowledge such. In my view, the magistrate was clearly entitled to make the findings which he did and it has not been shown that those findings are wrong.
There is really no need to deal with the alleged lack of bona fides by Mr Sykes as this is covered generally by the magistrate’s findings as to Mr Sykes’ involvement in, and later departure from, the trial. Far from suggesting any lack of bona fides, the whole of the evidence supports the magistrate’s view that Mr Sykes acted at all times in a highly professional manner.
There is nothing that I can add to the reasons of the magistrate concerning the alleged loss of a chance to accept a settlement offer of $50,000. The offer was made and rejected by the appellants prior to the appellants’ engagement of the respondents as their solicitors. I have already indicated that I agree with the magistrate’s comments in relation to the damages claimed for fees paid to the solicitors who replaced Mr Sykes. Likewise I agree with the magistrate in awarding interest and rejecting the appellants’ argument that there should be no interest because of delays caused by the respondents.
Finally, the magistrate deals with the claim made by the appellants for loss of reputation which the magistrate rejected. He said at [117]:
[117]There is simply not a skerrick of evidence to suggest any loss of reputation and good name of Mr and Mrs Luu has come about through any neglect or default of Mr Sykes.
Once again, I agree with the magistrate.
Appellants’ counterclaim
In the proceedings under appeal, the appellants counterclaimed as follows:
1.A refund of the costs paid to the respondents in October and November 1987 in the amount of $8,000.
2.A refund of fees paid to the solicitors Norman Waterhouse in the amount of $7,000.
3.Loss of the appellants caused by the respondents’ mishandling of the case amounting to $50,000. This is because it was the upper limit of an AMP settlement offer during the trial.
4.Damages as a result of loss of reputation and name.

The actual counterclaim was limited to $40,000 because of the jurisdictional limit of the Magistrates Court. The counterclaim was out of time. There was no application for an extension of time.
The magistrate deals in detail with each item of the counterclaim made by the appellants. He rejected the appellants’ claim for reimbursement of the $8,000 they paid in fees to the respondents and their claim for $7,000 for fees paid to the solicitors they retained after Mr Sykes’ withdrawal. The magistrate rejected the third part of the appellant’s counterclaim, being $50,000 for the alleged mishandling of the case by the respondents that led to the rejection of a settlement offer by AMP in that sum. The magistrate clearly stated that there was no mishandling of the case by the respondents, and that Mr Luu acted alone in rejecting that offer. I agree in all respects with the comments made by the magistrate in relation to those claimed items.
Conclusion
The magistrate was faced with two competing versions of the relevant events. He has seen and heard the witnesses. He has believed Mr Sykes and disbelieved Mr and Mrs Luu. It has not been shown that he has erred in any respect in the findings he has made.
This appeal is another chapter in the continued attempts by the appellants to argue that they are not liable to pay their legal fees. There is no merit in any of the matters argued by Mr Luu on behalf of the appellants. The magistrate has comprehensively dealt with all the arguments. I therefore dismiss the appeal.