Mavaddat v Lee
[2013] WASC 224
•6 JUNE 2013
MAVADDAT -v- LEE [2013] WASC 224
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 224 | |
| Case No: | CIV:2415/2012 | 6 MAY 2013 | |
| Coram: | MASTER SANDERSON | 6/06/13 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| A | |||
| PDF Version |
| Parties: | MICHAEL MOOJAN MAVADDAT KYUNG HEE LEE STABLES SCOTT SOLICITORS (A FIRM) |
Catchwords: | Costs Party liable to pay costs on an indemnity basis Party liable seeking to set aside costs order between solicitor and client |
Legislation: | Nil |
Case References: | Catto v Hampton Australia Ltd (In liq) [2008] SASC 231 Woolf v Snipe (1933) 48 CLR 677 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
KYUNG HEE LEE
First Defendant
STABLES SCOTT SOLICITORS (A FIRM)
Second Defendant
Catchwords:
Costs - Party liable to pay costs on an indemnity basis - Party liable seeking to set aside costs order between solicitor and client
Legislation:
Nil
Result:
Application dismissed
(Page 2)
Category: A
Representation:
Counsel:
Plaintiff : Ms M L Coulson
First Defendant : Mr D J Garnsworthy
Second Defendant : Mr D J Garnsworthy
Solicitors:
Plaintiff : Coulson Legal
First Defendant : Stables Scott
Second Defendant : Stables Scott
Case(s) referred to in judgment(s):
Catto v Hampton Australia Ltd (In liq) [2008] SASC 231
Woolf v Snipe (1933) 48 CLR 677
(Page 3)
1 MASTER SANDERSON: This application concerns an important question to do with the rights of a party against whom an indemnity costs order has been made. It does so in the context of the Legal Practitioners Act 1893 (WA). But that fact does not alter the general effect of this decision.
2 The facts are straightforward and uncontroversial. The plaintiff and the first defendant engaged in litigation. The matter went to trial and was 17 days between November 2004 and January 2005. The present first defendant was successful. Costs were awarded in his favour. The costs order was in the following terms:
Except as hereinafter provided all costs due from the Defendant to the Plaintiff be taxed on an indemnity basis such that the Defendant pay all the costs incurred by the Plaintiff except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that subject to the above exceptions, the Plaintiff be completely indemnified by the Defendant for her costs.
3 In March of 2012 the second defendants, as solicitors acting for the first defendant, lodged a bill for taxation in an amount of $510,713.84. The costs claimed are the costs incurred by the first defendant under a costs agreement dated 3 June 2002 entered into between the first defendant and the second defendant. A copy of that costs agreement appears an annexure MMM 6 to the affidavit of the plaintiff sworn 21 August 2012. By originating summons dated 21 August 2012 the plaintiff seeks orders including the following:
1. the Costs Agreement entered into between the First Defendant and the Second Defendant dated 3 June 2002 be set aside pursuant to s 59(5) of the Legal Practitioners Act 1893; and
2. the Second Defendant reissue all accounts rendered to the First Defendant in accordance with the applicable Supreme Court legal costs determinations.
4 Section 59 of the Act is in the following terms:
Agreements as to costs
(1) A practitioner may make a written agreement with any client of that practitioner respecting the amount and manner of payment for the whole or any part or parts of any past or future services, fees, charges, or disbursements in respect of business done or to be done by such practitioner, either by a gross sum or otherwise howsoever.
(Page 4)
- (2) An agreement made under subsection (1) excludes any future claim of the practitioner in respect of any services, fees, charges, or disbursements in relation to the conduct and completion of the business in reference to which the agreement is made, except such as are excepted by the agreement.
(3) A client who enters into an agreement made under subsection (1) shall not be entitled to recover from any other person, under any order, judgment, or agreement for the payment of costs, any costs which are the subject of that agreement beyond the amount payable by the client to the practitioner under that agreement.
(4) No such agreement shall exempt the practitioner from liability for negligence.
(5) An agreement made under subsection (1) may be reviewed by the Supreme Court or a Judge thereof upon application by petition or summons, and if in the opinion of the Court or Judge the same is unreasonable the amount payable may be reduced or the agreement cancelled and the costs taxed in the ordinary way, and the Court or Judge may also make such order as to the costs of and relating to such review, and the proceedings thereon, as to the said Court or Judge may seem fit.
5 On behalf of the defendants it was contended s 59 did not provide a third party in the plaintiff's position with a right to attack the validity of any costs agreement. Counsel referred by way of contrast to the definition of 'third party payer' found in s 253 of the Legal Profession Act 2008 (WA). He submitted no such concept was embodied in the 1893 Act and it was therefore not open to the plaintiff to bring the present application. In response, counsel for the plaintiff made two submissions. It was submitted the language of s 59 is sufficiently broad to allow someone in the plaintiff's position to claim the costs agreement ought be set aside. While the issue was not directly addressed there was certainly nothing in the wording of the section which would prevent a wide interpretation. Second, counsel submitted the court could in its inherent jurisdiction review the costs agreement and if it considered the agreement was unreasonable set it aside.
6 Given there can be very few cases left which would be covered by the 1893 Act it is unnecessary to make a final determination on the ambit of s 59. What is clear is the section is not intended to be a code. It is well established the court has jurisdiction over solicitors extending to matters of costs. This was put clearly by Dixon J in Woolf v Snipe (1933) 48 CLR 677, 678 - 679 where his Honour said:
(Page 5)
- First, a jurisdiction exists founded upon the relation to the Court of attorneys and solicitors considered as its officers. This jurisdiction, commonly called the general jurisdiction of the Court, enables it to regulate the charges made for work done by attorneys and solicitors of the Court in that capacity, and to prevent exorbitant demands. That such a jurisdiction was exercised by the Court of Chancery was never doubted. (See Beames, Doctrine of the Courts of Equity with respect to Costs (1840), pp 168 et seqq; Bignol v Bignol [1]; In re Barker [2].) The Courts of law appear to have exercised a like jurisdiction (Ex parte Bearcroft [3]; Anon [4]; R v Bach [5]; Wilson v Gutteridge [6]; and compare In the Matter of Aitkin's Executors [1]), but the existence of the authority was disputed by the Court of King's Bench in Dagley v Kentish [2], and for a few years it fell into disuse: see the argument of Jervis in Williams v Griffith [3], in which case the decision in Dagley v Kentish was questioned by Alderson B, and compare Cowdell v Neale [4]. After the Judicature Act the existence of the Court's general jurisdiction was completely established (In re Johnson and Weatherall [5]; Storer & Co v Johnson and Weatherall [6]).
Second, when a contested claim for costs comes before the Court it has jurisdiction to determine by taxation or analogous proceeding the amount of costs. (See In re Park; Cole v Park [7]; In re Foss, Bilbrough, Plaskitt & Foss [8]; Jones & Son v Whitehouse [9].)
Third, there is a statutory jurisdiction derived at first from 2 Geo II c 23, and afterwards from 6 & 7 Vict c 73, secs 37-43, the provisions of which form the foundation of Part V of the New South Wales Legal Practitioners Act 1898 and of Division 2 of Part VIII and sec 92 of the Victorian Supreme Court Act 1928. Under these provisions a solicitor may obtain an order for taxation of his bill (sc, after the expiration of a month from its delivery), but the Court has no general jurisdiction to refer a solicitor's bill to taxation upon his own application (Sayers v Walond [10]).
7 It is the case that none of the ancient authorities quoted by his Honour deal with the question of a third party's rights where there is a contract between client and solicitor. But the broad scope of the jurisdiction outlined by his Honour would, it seems to me, allow for an application such as the one presently brought by the plaintiff.
8 Assuming then there is jurisdiction to review a costs agreement between the first and second defendant in the circumstances of this case, the question is whether or not that jurisdiction should be exercised. Counsel for the plaintiff approached the matter on the basis the plaintiff had the same rights with respect to the second defendant and the costs agreement as the first defendant. There is no doubt if the first defendant had at some stage decided she was dissatisfied with the costs agreement entered into with the second defendant she could have applied to the court
(Page 6)
- to have the agreement set aside. In my view, there is no reason to suppose the plaintiff as a stranger to the costs agreement entered into by the first and second defendants has precisely the same rights as the first defendant.
9 There have been a number of cases in various Australian jurisdictions where a third party who is liable to pay costs has called into question the liability of the party with the favourable costs order to actually pay the costs of their solicitors. The only intermediate appellate court authority on this point is the South Australian decision of Catto v Hampton Australia Ltd (In liq) [2008] SASC 231. The matters in issue in that appeal were set by White J (with whom other members of the court agreed). His Honour put the position as follows:
Following a substantial civil trial in this Court, a judge dismissed the plaintiff's claims: Catto and Ors v Hampton Australia Ltd (In Liq) and Ors (No 3) [2004] SASC 242; (2004) 89 SASR 234. The judge ordered that the defendants should have their costs of the trial on an indemnity basis. These appeals concern the basis upon which a master should carry out the adjudication of those indemnity costs.
The principal question is whether the indemnity costs to which the defendants are entitled are the amounts which they actually expended in defending the plaintiffs' claims, or are only those amounts which their respective solicitors could have enforced in an action against them, ie, the amounts which they were legally obliged to pay. The defendants (who are the present appellants) contend for the former, and the plaintiffs (the present respondents) for the latter. If the plaintiffs' submission is accepted, there is then an issue as to whether subs 42(6) and (7) of the Legal Practitioners Act 1981 (SA) (LPA) have the effect that the costs arrangements between the defendants and their respective solicitors were unenforceable. Finally, there is an issue as to whether the master was correct in holding that the amounts paid by the second defendant to one of its firms of solicitors could not be recovered at all because at relevant times those solicitors did not have an entitlement to practise the law in South Australia [3] - [4].
10 It is apparent from the way his Honour set out the matters at issue there was a real question as to whether or not there was a statutory provision which prevented the solicitors acting for the client with a favourable costs order recovering fees from their client. It seems all of the cases referred to by counsel for the plaintiff involve a similar question. Counsel was not able to point to any authority where a party subject to an indemnity costs order could attack the costs agreement between the solicitor and client, as it were, at large.
(Page 7)
11 In an area such as this it is unwise to seek to lay down what might be seen as a definitive statement of principle. However, absent some statutory prohibition against a solicitor enforcing a costs agreement against his client, I would see it as being only in the most exceptional cases where a court would step in and set aside the costs agreement thus interfering with the contractual relationship between solicitor and client.
12 The dangers of such a course can be illustrated in this way. A client may be perfectly content with the costs agreement he has entered into with his solicitor. It may be the solicitor did not take all steps necessary before the costs agreement was entered into such that if the client chose to do so he could have the agreement set aside. But such agreements are not void ab initio. They may be set aside by the court. So potentially if the application of the third party liable to make payments of costs was successful a contractual arrangement between solicitor and client which satisfied both could be undermined.
13 That is not to say a party facing an indemnity costs order is at the mercy of any contractual relationship entered into between a party and his solicitor. The indemnity costs order is invariably qualified by the phrase 'save for those costs unreasonably incurred' or the equivalent. That is the case here. There is nothing to stop a taxing officer looking at a costs agreement on which an indemnity costs claim is founded to determine whether it is reasonable. For instance, if the hourly charge out rate for a partner, solicitor or other member of the firm was clearly out of step with the norm then it would be reasonable for the taxing officer to conclude some of the costs claimed had been unreasonably incurred. Equally, if the taxing officer determined more work had been done than was necessary it would be open to him to reduce the bill accordingly. After all, the party facing payment of indemnity costs has no contractual relationship with the solicitor who undertook the work. Any difference between the costs allowed on taxation and those paid by the client to the solicitor would be a matter between the solicitor and client.
14 There is one further matter which arises out of the Catto decision. White J concluded if costs had been paid by the client to the solicitor prior to the challenge being brought by the party burdened with the indemnity costs order then the costs had been 'incurred' and there was no basis for concluding otherwise. In this case, the affidavit evidence filed on behalf of the first and second defendants shows the costs have been paid. Based upon what has come to be called the 'Catto principle' it is not now open to the present plaintiff to attack the basis on which the costs were calculated.
(Page 8)
- The opportunity to do so has been lost by virtue of the fact the costs have been 'incurred'.
15 There seems to me to be some logical difficulty about that conclusion. For instance, it ignores the fact the liability is to pay the costs 'reasonably' incurred rather than the costs 'actually' incurred. Applied literally, it would mean there was no role for a taxing officer. Be that as it may, the Catto decision is of an intermediate appellate court and should be followed. In this case, it is not decisive but I do think its effect is to shut out the plaintiff's claim.
16 The originating summons will be dismissed. The plaintiff ought pay the defendants' costs of the summons including reserved costs.
0
3
1