McMurphy and G and G (A Law Firm)
[2010] FamCA 1032
•19 November 2010
FAMILY COURT OF AUSTRALIA
| MCMURPHY & G AND G (A LAW FIRM) | [2010] FamCA 1032 |
| FAMILY LAW – COSTS – COSTS AGREEMENT – Setting aside where agreement not fair and reasonable – Costs Assessment Order – Setting aside where unfairly obtained |
| APPLICANT: | Ms McMurphy |
| RESPONDENT: | G and G Law Firm |
| FILE NUMBER: | MLC | 4782 | of | 2010 |
| DATE DELIVERED: | 19 November 2010 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Justice Cleary |
| HEARING DATE: | 9, 10 and 11 August 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Dickson |
| SOLICITOR FOR THE APPLICANT: | Schetzer Constantinou |
| COUNSEL FOR THE RESPONDENT: | Mr Ham |
| SOLICITOR FOR THE RESPONDENT: | G and G Law Firm |
Orders
That the Costs Agreement between Ms McMurphy and G and G Law Firm dated 28 September 2007 be set aside
That the time to apply to set aside a Costs Assessment Order pursuant to clause 6.39 of schedule 6 be extended pursuant to rule 1.14(1) to 3 August 2009.
That the Costs Assessment Order dated 8 April 2009 be set aside.
That the Respondent make available by 4.00 pm on Friday 26 November 2010 for collection by the Applicant or her agents all files in relation to the matters of the Applicant.
That should either party wish to make an application for costs and/or reserved costs, arising out of these Orders that party should do so by written submission including quantum of costs, filed with my associate by email and served upon the other party by no later than 4.00 pm on 3 December 2010.
That the other party to such application for costs may file and serve any submission in reply by email to my associate and served upon the other party by 4.00 pm on 17 December 2010.
That any application for costs be determined in chambers.
That all proceedings be otherwise dismissed and removed from the list of cases
IT IS NOTED that publication of this judgment under the pseudonym McMurphy & G and G (A Law Firm) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: MLC 4782 of 2010
| MS McMURPHY |
Applicant
And
| G AND G LAW FIRM |
Respondent
REASONS FOR JUDGMENT
Background
The Applicant, Ms McMurphy (“the Applicant”) was a client of the firm, G and G Law Firm (“the Respondent”) between September 2007 and March 2009.
This is a dispute between the Applicant and the Respondent, whose principal is Mr G (“Mr G”).
The applications are:
a)To set aside a Costs Assessment Order obtained by the Respondent including an Application to extend time to make the Application to set aside; and
b)To set aside a Costs Agreement between the Applicant and the Respondent.
The matter was heard over three (3) days and the material relied on by each of the parties is as follows:
The Applicant
a)Amended Initiating Application filed 3 August 2009;
b)Affidavit of Mr J McMurphy filed 3 August 2009;
c)Affidavit of Mr J McMurphy sworn on 4 September 2009 and filed on 15 September 2009;
d)Affidavit of Ms McMurphy sworn on 31 July 2009 and filed on 3 August 2009;
e)Affidavit of Ms McMurphy sworn and filed on 15 September 2009;
f)Affidavit of Ms McMurphy sworn on 29 January 2010 and filed on 8 February 2010;
g)Affidavit of Peter Trimbos sworn and filed on 26 July 2010; and
h)Affidavit of Ms R sworn and filed on 5 August 2010.
The Respondent
i)Amended Response to Initiating Application filed 21 August 2009;
j)Affidavit in respect of Costs Assessment Order sworn on 3 April 2009 and filed on 6 April 2009;
k)Affidavit of Mr G sworn on 3 July 2009 and filed on 6 July 2009;
l)Affidavit of Mr G sworn on 18 August 2009 and filed on 19 August 2009;
m)Affidavit of Mr G sworn on 22 September 2009 and filed on 25 September 2009;
n)Affidavit of Mr G sworn on 22 March 2010 and filed on 25 March 2010;
o)Affidavit of Mr G sworn and filed on 26 July 2010; and
p)Affidavit of Mr G sworn and filed on 3 August 2010.
History of events
First meeting/Costs Agreement and Related documents
On 25 September 2007 the Applicant attended the offices of the Respondent for advice.
On a date prior to September 2007 the Applicant had instructed a solicitor, Mr B, in family law proceedings with her former husband. The Applicant says she did not have a Costs Agreement with Mr B.
By the date of the first meeting with the Respondent, the Applicant was being pressed by Mr B for outstanding fees of about $10,000 for professional fees and $1,800 for counsel’s fees.
The Applicant did not have assets other than her interest in the former matrimonial home and some limited funds in the bank. She spoke to a friend who recommended Ms P, a solicitor employed by the Respondent. In her first affidavit the Applicant says she attended the offices of the Respondent on 25 September 2007, that she initially met with Ms P who she thought was going to be the solicitor with the conduct of her matter. However, at the conclusion of the discussion, Mr G came into the room and Ms P said that he would be the solicitor with the carriage of the matter.
The evidence of the Applicant is that both solicitors, Mr G and Ms P, advised her to leave her current solicitor, Mr B, and gave her numerous reasons why it would be wise to do so.[1] The advice of Ms P was that the Applicant should:-
“Get Mr [B] to stop acting for me that same day.”
The Applicant says she was “scared off” continuing to use Mr B and became concerned about further fees he might charge. Significantly, the Applicant says she told both solicitors that she did not have funds to pay them on a regular basis and was advised, she says, that the solicitors accepted that the fees would be paid “at the end of my matter”.
[1] Affidavit of the Applicant filed 3 August 2009 para 32
The Applicant says that when he was told that the former matrimonial home was in Ms McMurphy’s sole name, Mr G said:-
“I’m liking this. This is good.”
The Applicant said Mr G then went on to say that his fees would be secured over the former matrimonial home, that he would be paid at the conclusion of the matter when the house was sold and that he said words to her to the effect that:-
“I would not have to worry about any fees or costs until the matter was concluded.”
The Applicant says that Mr G then left the room. She was handed what she described as a Costs Agreement and Disclosure Statement.[2] She said she flicked through the documents, scanned through them, and that after one hour of being in the meeting she felt emotionally tired and exhausted. She gives evidence of a conversation between herself and Ms P where Ms P told her she didn’t have to worry about those documents in the following words:-
“Don’t worry about this right now because you don’t have to pay anything now. We will secure the funds over your house. You don’t have to pay until the end.”
Ms P is then said to have advised that the then current solicitor of the Applicant charged about $65.00 an hour more than Mr G. The Applicant asserted that Ms P then took out three files of other clients who were said to have been prior clients of Mr B who had transferred to the Respondent. Ms P is said to have asserted that the total fees of the Respondent in those matters were one third of the fees of Mr B. Commenting on one of those files, Ms P apparently said that Mr B had charged that particular client about $400,000 whereas the Respondent charged the client about $60,000. The Applicant said by this time she felt scared about Mr B continuing to represent her. Other than that conversation, the Applicant says that neither Ms P nor Mr G explained the Costs Agreement to her. She says she was not advised that under the Costs Agreement fees would be significantly higher than scale fees and that there were no other discussions between herself and either of the solicitors in relation to the Costs Agreement and Disclosure Statement. She denies being advised to seek independent legal advice in relation to the charge on her house or the Costs Agreement.
[2] Affidavit of the Applicant dated 3 August 2009 para 44
In her oral evidence the Applicant said she believed she had signed on that first day a caveat for the charge over her home to secure legal fees, an authority to collect her file from solicitor, Mr B, and that she had received the Costs Agreement later. I will refer to that more fully in relation to the oral evidence of the Applicant. In her first affidavit filed 3 August 2009 the Applicant says she believed that she had signed that Costs Agreement at that time, namely, 25 September 2007.
An affidavit was filed by the Respondent on 6 April 2009. This is an affidavit that was filed in support of an application for a Costs Assessment Order. That affidavit annexes the following documents:-
a)a letter from the Respondent dated 25 September 2007 to the Applicant which referred to annexures to that letter as follows:-
i)disclosure statement pursuant to Part 3.4 of the Legal Professional Act 2004;
ii)costs notice pursuant to Chapter 19 of the Family Law Rules;
iii)solicitor/client Costs Agreement;
iv)a duplicate copy of the letter; and
v)stamped self addressed envelope.
The content of that letter requires careful consideration. It was written on the day of the first conference. The first sentence is as follows:-
“We refer to our conference on instant date 25 September 2007 and thank you for your instructions to act on your behalf. You will not be charged for this conference.”
Accordingly, the letter is apparently a confirmation of the Applicant having given instructions to the solicitor to act on her behalf. The letter goes on to say that its contents are:-
“... of an administrative nature and you will not be charged for it. If it appears bland and impersonal please accept our sincere apologies however it is imperative (as a client) that you are apprised of your legal rights and understand the nature of the contract of service which you propose to enter with this firm and [Ms P] (as your legal advisor).”
I note that this represents a confirmation of the fact that the expectation of the Respondent was as the Applicant stated it, that Ms P would be the solicitor with the conduct of her matter. The Applicant is asked to read the documentation carefully and contact Ms P if she had any enquiries. The next paragraph says this:-
“You should be aware that there are other legal practitioners who may charge less than $375.00 per hour plus GST. If you want to take the opportunity to interview other legal practitioners to ensure that you are happy with the service you are entitled to receive please do not hesitate to contact the Law Institute of Victoria on 9607 9311.”
I note that this sentence is rather difficult to understand and does not appear to be clear advice that the Applicant may wish to seek legal advice before entering into a Costs Agreement with the Respondent.
The letter then goes on to set out the method by which the Applicant would be billed. In particular, it stated that accounts would be rendered periodically, usually monthly, accounts would need to be paid within 14 days of the date of the bill and if any account remained unpaid 30 days after the date of receipt, interest could be charged on the amount unpaid under the Penalty Interest Rates Act, at that time 11%. Clearly the letter was not personalised to meet the agreement that had been reached between the Applicant and the Respondent about the payment of her fees. It is not disputed that an agreement was entered into, that the Applicant’s legal fees and disbursements could be paid from the proceeds of the sale of the matrimonial home. However, there is no reference in this first letter to that agreement which went to the heart of the reason for the Applicant changing solicitors. That is, she had felt unable to continue with the solicitor who expected to be paid as accounts were rendered because she was without funds to do so. Accordingly, the offer by the Respondent for payment to be at the end secured by a caveat on her house was central to the agreement.
In my view, the Applicant would have been entitled to regard this letter as a form letter of general information which was not specific to her situation. There was, however, one element of the letter which had been personalised. On page 5 there is this statement:-
“We have sent a letter to Mr [B] on your behalf and enclose herewith a copy for your records. We shall advise you once we have received a response from him.”
The Respondent confirmed during his oral evidence that a letter had gone out to Mr B, solicitor, to the best of his knowledge, on that day. In summary, the letter of 25 September 2007 was both a form letter which did not truly reflect the agreement which had been discussed between the parties but was also a letter confirming that steps had been taken to terminate the professional relationship between the Applicant and her previous solicitor in anticipation of the file being taken over by the Respondent. The Applicant apparently signed the document on 26 September 2007. There is a date stamp on the letter of 28 September 2007 which suggests, although I am not in a position to make a finding about it, that it was received back in the office of the Respondent on that date.
The other documents annexed to that letter were of varying significance. The disclosure statement made under the Legal Profession Act did not particularly relate to the family law proceedings that were to be taken over. Mr G, in his oral evidence, suggested that the need to send the disclosure statement was against the possibility that the firm would be acting in State proceedings, for instance, in relation to domestic violence orders. This document made fee disclosures similar to those contained in the solicitor/client Costs Agreement but it was not the same in every respect. For instance, in the disclosure statement under the heading on page 3:-
“Counsel’s fees and out of pocket expenses to the firm
The firm is authorised to retain Counsel (other than senior Counsel) to appear, advise and/or draw and/or settlement documents and you will be advised, in writing of the costs associated therewith for which the client is solely responsible.”
In the Costs Agreement there was at paragraph 18:-
“It may be necessary for us to engage on your behalf the services of another lawyer/barrister to provide specialist advice or service including advocacy services. We will consult you as to the terms of that lawyers engagement and we may require you to enter into a fee agreement directly with the other lawyer or you will be asked to enter into a fee agreement directly with the other lawyer.”
There was an invitation in the disclosure statement for the client to negotiate a Costs Agreement with the firm inviting her to make a written offer as to her preferred terms and conditions. There was also material about billing arrangements, page 3, and “our accounts”, page 4, which were again inconsistent with the terms that had been discussed with the client. In the letter to which these documents were annexed, that is the letter of 25 September 2007, there was no clear advice that allowed the Applicant to understand which of the two documents, that is the disclosure statement and the solicitor/client Costs Agreement, would be binding on her and further, there was information in the letter itself which was inconsistent with the information contained in both those documents in relation to billing and payment. Attention was not drawn to the note on page 2 of the Family Court of Australia Costs Notice which states as follows:-
“If you have a written Costs Agreement your rights may differ from those set out in this brochure. You should read your Costs Agreement and obtain independent legal advice.”
Given the amount of information that was provided to the Applicant within the Disclosure Statement, the Costs Notice and the Costs Agreement it would have been exceptionally difficult for the Applicant to have understood what the real proposal being put to her was.
The Costs Agreement itself was a simpler document. It is dated 28 September 2007. There is some dispute as to where and in what circumstances the document was dated and signed. The Applicant in her first affidavit at paragraph 52 said she believed that she had signed the Costs Agreement at that time. It seems unlikely that this was so. The Costs Agreement itself set out a schedule of legal fees charged by the Respondent in paragraphs 1 to 6, provided an hourly rate for other professional time in paragraphs 7 and 8 and set out the fees for expenses and disbursements in paragraphs 9 to 12. In relation to accounts there was provision in paragraph 15 as follows:-
“Should you fail to pay the full amount of any account (including any interim account) by the due date we may charge you interest on the amount outstanding for the period beginning 30 days after the account is issued until payment in full at the rate set by the Penalty Interest Rate Act 1983 or in the case of family law matters in accordance with the Family Law Rules 2004.”
Again, and most significantly since this was the binding document, there was no express statement in this document that it was the intention of the Respondent to charge interest on each account for the period beginning 30 days after the account was issued. There was no clear explicit statement to the effect that:-
(i) bills would not need to be paid until the conclusion of proceedings;
(ii)nevertheless interest would accrue on each account and would also be payable at the conclusion of proceedings
Paragraph 17, account procedures, is as follows:-
“We may send you a bill of our charges and expenses:-
(a)when the work is completed and/or you can request to have monthly or quarterly accounts sent to you:
(b)we may ask you to pay us an amount to enable payment of expenses.”
Under the heading “In family law matters” there are these statements (the second and third statements were duplicated and I do not repeat them here):-
“You have received the Costs Notice pursuant to Chapter 19 of the Family Law Rules 2004 and you have received the Disclosure Statement pursuant to s.3.4.9 of the Legal Profession Act 2004 and you have the right to negotiate a Costs Agreement with [G and G Law Firm].”
This reference to the other documents could only confuse as to whether those documents were said to form part of the Costs Agreement and how the matter was to be dealt with when there was a conflict between documents.
The final section of the Costs Agreement headed “security for legal costs” is as follows:-
“That in consideration of you accepting the retainer and providing services hereinbefore referred to and to secure payment of all reasonable legal costs incurred arising from this agreement I [Ms McMurphy] hereby grant to [Mr G] an equitable charge in relation to all my right title and interest and equity in any property real or personal in which I have an interest whether registered in title legal equitable beneficial or otherwise and provide my irrevocable consent to lodge a caveat in respect of such property pursuant to the equitable charge thereby granted.”
This statement was a very broad security which enabled any property, real or personal, to be secured for costs and again, there was no reference to the fact that not only legal costs but accrued interest was intended to be secured by the charge.
Further, in her affidavit filed 3 August 2009, the Applicant says in paragraph 54 that on the following day, that is 26 September 2007, she received a Costs Agreement, Disclosure Statement and Costs Notice under cover of a letter from the Respondent dated 25 September 2007. Clearly, the Applicant believes that she had signed a document on the day of first interview and that she received the letter with the annexures which I have referred to above on the following day. Again, this is consistent with her oral evidence where she said:-
“I believe I signed a caveat on the day and an authority to collect my file from [Mr B] and I received the Costs Agreement later.”
I accept the evidence of the Applicant as to having received the Costs Agreement under cover of the letter dated 25 September 2007 and I find that although the Applicant believed on 31 July 2009, when she swore her affidavit, that she had signed the Costs Agreement on 25 September 2007 (the day of first interview), by the time of giving her oral evidence on 9 August 2010 and having read all of the material, she came to understand that the Costs Agreement was not one of the documents that she signed on that first day.
In paragraph 55 of her affidavit filed 3 August 2009, the Applicant refers to having noticed the costs estimate in the document of $5,000 to $75,000. In fact the costs estimate, which is uncontested, is contained in the Disclosure Statement under the Legal Profession Act and not in the Costs Agreement itself. The estimate is contained on page 4 of the Disclosure Statement. It says this:-
“We estimate that the total legal costs and expenses/disbursements for the work which you have retained us to do will be E$5,000 to $75,000. We can provide you with a more accurate estimate after we have taken instructions from you to ascertain the ambit of the disputation/conflict. If the matter is resolvable without recourse to litigation and in circumstances whereby both you and your husband agree to settle the issues between you then costs would be significantly reduced.”
There is then a further statement:-
“This estimate is made up as follows:-
Legal costs E$5,000 to $75,000
In office expenses/disbursements E$50 to $5,000
Out of office expenses depending on
whether counsel was briefed to appear
and the amount of days counsel was
required before the court E$50 to $50,000”
I take this estimate to mean that at its highest costs and disbursements were estimated to be $130,000. This is not explicitly stated and is not referred to at all in the Costs Agreement.
In paragraph 57 of her August 2009 affidavit the Applicant says:-
“If I was advised that my fees under the [G and G Law Firm] Costs Agreement would be in the vicinity of $100,000 I would have sought a second opinion from another family law lawyer.”
I consider that the estimate was confusing in the way that it was stated and laid out, that the Applicant did not understand the range of the estimate, or that the estimate formed no part of the Costs Agreement that she was being asked to enter into. These matters are in addition to the ambiguity about her obligation to pay interest.
Fees Rendered
Between 27 November 2007 and 23 March 2009 the Respondent sent invoices for costs and disbursements as follows:-
(i) 27 November 2007 $42,032.23
(ii) 15 January 2008 $14,053.05
(iii) 26 February 2008 $15,479.54
(iv) 24 April 2008 $15,173.71
(v) 24 September 2008 $63,301.12
(vi) 6 November 2008 $21,048.34
(vii) 26 November 2008 $7,244.00
(viii) 28 January 2009 $26,872.96
(ix) 2 March 2009 $2,782.01
(x) 23 March 2009 $1,904.96
(xi) 23 March 2009 $2,782.01
All but one of these invoices was an itemised costs account. The invoice of 24 September 2008 was a lump sum bill. Contained within the invoice was a statutory notice pursuant to the Legal Profession Act Part E and a Costs Notice in Part F. Included within the Costs Notice was this statement:-
“Itemised legal costs account requested within the prescribed time is provided free of charge to you. Requests outside the prescribed time will generate a fee equal to 14% of the total of the account.”
I will come back to that inclusion later in this judgment.
Concerns about costs raised by the Applicant
The Respondent asserts that on 3 December 2007 a letter was sent to the Applicant providing an updated estimate of costs. The Applicant denies receiving this letter
In about February 2008 the Applicant says when her fees had reached about $70,000 she began asking the Respondent about future costs and expressing her concern at the level they had already reached. She did so, she says, on many occasions. The Applicant says in paragraph 73 of her affidavit of 3 August 2009 that Mr G’s replies were as follows:-
“I have no idea what your costs are. I don’t have anything to do with it but don’t you worry. The longer this takes the more your house goes up in value and the better off you are. Your husband is paying the mortgage and your bills. The longer we drag this out the more your husband pays off. He is paying your bills, don’t you worry.”
The Applicant further asserts that it was not until March 2009 that she was advised by the Respondent to raise any concerns she had about costs with Ms P.
The Respondent asserts that on 1 October 2008 a letter was sent providing a further updated estimate of costs. The Applicant denies receiving this letter.
Family Law Proceedings
In December 2008 the McMurphy family law proceedings were settled in a mediation.
In March 2009 the Applicant was asked to sign a financial agreement pursuant to s 90D o the Family Law Act. The Applicant says she was unable to calculate what fees were owed by her to the Respondent at that time and she was likewise unable to work out what she would have in hand after fees were paid from her share of the net proceeds of sale. She objected to signing the Financial Agreement.
In late March 2009 the Applicant withdrew her instructions to act from the Respondent. The Applicant instructed another firm of solicitors to act for her in the settlement of the sale and to address the issue of costs. The Respondent advised the newly appointed lawyers that outstanding legal costs were $238,143.18. Further, that net to the Applicant would be $90,000 from the proceeds of sale.
The Applicant says that her new lawyers advised her that she could seek an assessment of the Respondent’s costs, however, she had concerns that the delay that might be caused by seeking the assessment could put the settlement of the sale of the former matrimonial home at risk. She accordingly agreed to the stated fees being paid out of the proceeds of settlement. There were negotiations on behalf of the Applicant in relation to the fees. Copies of letters dated 2 April 2009, 29 April 2009 and 20 May 2009 form annexure “KAM 8” to the affidavit of the Applicant filed 3 August 2009. The second and third of the letters refer to the fact that there has been no response to earlier correspondence other than an email, apparently received from Ms P, dated 15 May 2009. The only formal response was a letter dated 25 May 2009 from the Respondent to T Firm confirming settlement details.
Obtaining of Application for Costs Order
On 3 April 2009 Mr G swore an affidavit in support of an application for a Costs Order.
On 8 April 2009 Registrar Riddiford made a Costs Assessment Order in the sum of $234,317.83.
Settlement of the sale of the home took place on 29 May 2009 with the Applicant formally protesting the fees and interest claimed.
On 11 June 2009 T Firm forwarded an authority from the Applicant for the release of her file from the Respondent. The Respondent declined to release the file. The Respondent continued to decline to release the file asserting a lien.
On 25 June 2009 the Respondent sent a letter to the Applicant which included this paragraph:-
“Your client has foreshadowed that she is disputing the costs notwithstanding that a costs order has been made by the Costs Registrar of the Family Court of Australia, Registrar Riddiford.”
The evidence of the Applicant is that she had not known until the advice to her solicitors in that letter that a Costs Assessment Order had been obtained by the Respondent. I have accepted the evidence of the Applicant on this point.
Application to Dispute Costs and to Set Aside Costs Agreement
The Applicant made an application to the Court on 25 June 2009 seeking final orders as follows:-
1.The time to serve a notice disputing itemised costs account be extended pursuant to Rule 1.14(1) to a date to be determined by this Honourable Court.
2.The purposed Costs Agreement between the Applicant and the Respondent be set aside.
3.The Respondent pay the Applicant’s costs of the initiating application.
Notice of Discontinuance
The interim orders sought were that the Applicant’s application to extend the time for serving a Notice Disputing Itemised Costs account be stayed until her application for the purported Costs Agreement to be set aside is determined. A response was filed on 6 July 2009.
On 27 July 2009 there was a directions hearing before Registrar Field when directions were made for the preparation of the matter for hearing.
On 14 December 2009 a Notice of Discontinuance was filed on behalf of the Applicant which related to the substantive proceedings. Unfortunately for the Applicant, this Notice inadvertently and incorrectly referred to the whole of the proceedings being discontinued. I will refer to this matter again in considering the evidence that was given in the proceedings.
On 24 February 2010 the situation was rectified. By consent, that Notice of Discontinuance filed on 14 December 2009 and the subsequent Notice of Discontinuance filed by the Respondent on 18 January 2010 were set aside. The Applicant’s Amended Initiating Application filed on 3 August 2009 and the Respondent’s Amended Response to an Initiating Application filed on 21 August 2009 were reinstated. Leave was granted in respect of subpoenae. The matter was listed for a final hearing before an interstate Judge. Costs were reserved for determination by the Trial Judge.
On 24 March 2010 the matter came before His Honour Justice Cronin who made the following Orders:-
1.That the Respondent deliver the file of the Applicant save for parts which are subject to legal professional privilege to the subpoena clerk of the registry of the Family Court of Australia at Melbourne by 4.00 pm on 30 March 2010 such delivery to be at his expense.
2.That the file remain in the custody of the court until 12 noon on 9 April 2010 whereupon an agent of the Respondent may collect it from the subpoena clerk.
3.That during the period between 30 March 2010 and 9 April 2010 the wife and her advisors have liberty to inspect the file in the subpoena section of the registry but not be permitted to remove the file from the registry.
4.That the Applicant and her advisors have liberty to photocopy the file.
5.That the Applicant have liberty to seek an extension of time by agreement in writing and failing agreement as may be determined by a hearing made by arrangement with my Associate.
6.That the costs of both parties including the expenses incurred by the Respondent for the delivery and collection of the file be reserved to the Trial Judge.
7.That without admission by the Respondent that there was a basis to so issue it otherwise the subpoena issued by the Applicant on 10 March 2010 is satisfied.
On 12 June 2010 a Registrar set the matter down for final hearing.
The Evidence
At the commencement of the hearing counsel handed up a document titled “List of questions for Trial Judge” which had been jointly prepared. Those questions were as follows:-
“1.The the (sic) Costs Agreement comply with the Family Law Rules:
(a)is it fair & reasonable; and
(b)does it otherwise comply with Schedule 6 of the FLR?
2.Was [Ms McMurphy] subject to undue influence in entering the Agreement?
[IF THE AGREEMENT IS INVALID, THE COSTS ASSESSMENT ORDER IS INVALID]
IF THE AGREEMENT IS VALID
3.Did [Ms McMurphy] receive the Costs Assessment Order prior to 15 July 2009?
4.Should [Ms McMurphy] be given an extension of time to challenge:
(a)the CAO (if it is found that she received it prior to July 2009)?
(b)the bills (which fall into 3 categories)?
(i)itemised and received
(ii)non-itemised and received
(iii)interest bill (and not to be received)
(whether the challenge involves requesting that a bill be itemised on disputing a bill already itemised)
5.Was the Costs Assessment Order validly obtained in that
(a)counsel’s fees were not paid at the time?
(b)can a non-itemised bill be the subject of a Costs Assessment Order?
The file of the Respondent in relation to family law proceedings was present at Court. Counsel for the Respondent advised that there was no relevant trust ledger and, further, that the office account of the Respondent and the personal account of Mr G were one and the same. There was an assertion by counsel for the Respondent that all relevant counsel had been paid other than Mr Brown SC. Later evidence did not bear that assertion out.
Ms McMurphy (“the Applicant”)
The Applicant gave clear focused evidence. Her delivery suggested that she felt bitterly disappointed with the legal services she had obtained from the Respondent and that she was pursuing the matter, not only with a view to having costs reduced, but because of her level of dissatisfaction. However, she was willing to make concessions. The proposition was put to her that her recollection of the day of 25 September 2007 at her first meeting with the Respondent was not very good at all. The Applicant said that she had been under a lot of stress but she believed that her recollection was good. The proposition was put that she was totally wrong about when she had signed the Costs Agreement. Her answer was:-
“I suppose, maybe I made a mistake.”
She conceded that she had been unhappy with her prior solicitor, Mr B. She said she had asked a friend for a referral and had been referred to Ms P, solicitor employed by the Respondent and not Mr G himself. She agreed that she had received the letter of 25 September 2007 and the annexed documents. She was asked whether she had read them carefully and she said:-
“As carefully as I could at that stage of my life.”
She also said:-
“I have received so many documents from Mr [G]. His stuff is very confusing.”
In my view, this is an accurate assessment of the events of the first three or four days of the professional relationship between the Applicant and the Respondent.
The Applicant was at times inclined to answer questions with “okay” or “yes” in circumstances where I was not entirely sure whether she was simply acknowledging that she understood the question rather than giving an affirmative answer. One example of that is as follows:-
Q:“It was set out in the agreement the hourly rate and the cost of various activities. It was made clear to you that it was different to the family law scale of charges.”
A:“Okay.”
Q:“Independent legal advice was referred to in the Costs Notice?”
A:“Yes.”
Q:“You made an election not to do so?”
A:“Yes.”
Q:“You received all invoices bar one
A:“Yes.”
Q:“Your vengeance against Mr [G] is extreme?”
A:“Yes.”
Q:“Do anything in your power to end his career?”
A:“Yes.”
Q:“You received the various bills approximately monthly or thereabouts?”
A:“Yes.”
Q:“Aware of what was being charged?”
A:“Yes.”
Q:“Clear on the bills that there was accumulative total?”
A:“Yes.”
However, these quick monosyllabic answers, angry in tone, were not given in relation to issues where the Applicant was really prepared to stand her ground. For instance, the proposition was put to her that she had been advised that she could contact the Victoria Law Institute to interview other lawyers and that she had been pointed to three places for more information. Her answer was:-
“Excuse me.Three places. Were there other firms there?”
In a similar vein, a proposition was put to her:-
Q:“You were aware that there was interest to be charged on the accounts?”
A:“No, I was not aware of that.
Q:“It was made clear that there’d be interest.”
A:“He was holding my home on caveat and said you can pay at the end.”
Q:“You agreed to pay interest?”
A:“I signed it. I suppose I did.”
Q:“You were told the interest rate was 11%?”
A:“I wasn’t told that. I would have done everything differently.”
I find that the witness was conceding that she had received documents that stated certain things and that she may have misinterpreted or overlooked some of those statements particularly with her answer to the question that she had agreed to pay interest:-
“I signed it so I suppose I did.”
In my view this response reflected her immense frustration that her solicitor had not explained to her the implications of the documents that he had been sending and significantly the consequences of the documents not reflecting the agreement that she thought was in place between the parties. That is, that she could ‘pay at the end’ and if there was any discussion about costs to be had that was the time for it. This is clear from the following exchange-
Q:“You knew you were expected to pay within 14 days (of the receipt of the bill.”
A:“His selling card was I would not have to pay until the end.”
A similar answer was:-
A:“He said ‘you won’t have to pay until it’s over’.”
The Applicant disputed that her concern about fees only arose when the house was sold. She conceded that she had been aware of being able to challenge accounts throughout. However, I accept that she was adopting a wait and see principle, and believed that none of the regular billing applied to her because of the agreement. In answer to the proposition that she had not complained about the bills as they arrived, the Applicant asserted very strongly, that she had on every occasion spoken to the solicitor about the “horrendous bills”.
The Applicant said:
Q:“You were aware of your rights?”
A:“Now I do.”
Q:“Your rights appeared on every bill.”
A:“Yes.”
Q:“You were happy to have Mr [G] go on acting for you?”
A:“I was in denial. I was getting through each day with my little boys. I was still medicated.”
The Applicant also said:-
“I would have done everything differently. I made a huge mistake.”
I note that the Respondent was well aware that the Applicant changed solicitors because she had not been in a financial position to pay fees and disbursements as they fell due and that she had entered into an agreement which involved a charge over her home so that fees could be paid at the end.
The Applicant denied that she had received correspondence from Mr G in relation to the Costs Assessment Order obtained against her. She did not accept that she had been advised by the Court that a letter had been forwarded to her. Her evidence was that the Registrar had asked her had she moved and she agreed she had. The Applicant could not account for why she did not receive the letter about the Costs Assessment Order. She was also asked a series of questions about the itemised accounts that went out, being all but one of the 11 invoices:-
Q:“You were aware of your rights to ask for itemised accounts?”
A:“Yes.”
Q:“You elected not to seek an itemised account?”
A:“You are correct.”
I find that the Applicant at all times held the belief that the question of costs would be addressed when the proceedings were concluded, that is, after the house had been sold. I find that she was justified in believing that the bills, which said that she had a certain number of days to pay and a certain number of days to request an itemised account, simply did not apply in her particular circumstances. It was not unreasonable for her to hold this view.
The Applicant was adamant that she had not received notices in respect of her costs before each court event. Her answer:-
“I did not receive those notices before each court event. I will stand by that.”
I accept the evidence of the Applicant who, in my view, did her best to answer each question honestly and straightforwardly.
The Applicant was concerned about costs throughout. She agreed that she was worried about what was happening in the worldwide economy and was conscious of the costs she would have to pay. The Applicant conceded that Ms Benjamin of counsel had appeared for her on most occasions and her daily rate of $1,500 was something that she had approved. However, when she was asked whether she has approved fees for other counsel she was resolute:-
“No didn’t.I never knew why I was coming to court.”
She agreed that she had authorised the engagement of Mr Brown SC for a relocation hearing but she said she was never advised as to how much his fees were going to be. She simply knew it was going to be more than Ms Benjamin. She rejected the proposition that she knew it would be $6,600 per day. She denied that the Respondent had told her Mr Brown’s daily rate.
The Applicant was pressed on the issue as to whether she had been advised of the fees of other junior counsel who had appeared. Her answer was certainly “no” to Mr Cantwell since she had not known he was going to be at Court.
In relation to the line of questioning that the Applicant had allowed the Respondent to go on acting for her, she agreed she had. This question was put:-
Q:“You knew all the way through that the time to question the bill was at that time?”
A:“I would have done things so much differently.”
I accept, as stated previously, the Applicant felt that she was not free to move in the situation and was particularly concerned not to cause the settlement of the sale of the home to come undone. She agreed that she had offered to pay $100,000 in total in costs.
Counsel for the Respondent put the proposition to the Applicant that she had suggested a cap of $200,000 on the fees. The Applicant responded that that suggestion had come from Mr G. She was not challenged about that.
I find that the Applicant was an honest witness. Many of her answers were fuelled by anger which, as referred to earlier, led her to perhaps make more concessions than she intended. More than once she said words to the effect:-
“I would have done things so much differently.”
I formed the view, that as much as she was angry with the Respondent, she was angry with herself for having got into the position she did.
In re-examination the Applicant was asked whether she had a Costs Agreement with her previous solicitor, Mr B, and she said she had not and, in fact, had never seen a Costs Agreement before. This evidence is of some significance. The Respondent had an obligation to sit with the Applicant and explain to her the consequences of his Costs Agreement and how the particular agreement, where she paid at the end with fees secured by way of caveat, would work. In the alternative, the Respondent should have written a letter, which was personal to her, setting out the mechanics of the agreement with the formal Costs Agreement reflecting that information. I find that the Respondent failed to be fair to the Applicant in entering into the agreement.
Paul Holmes (Barrister’s Clerk)
Mr Holmes gave evidence that fees were still outstanding to a barrister on his list and that a letter dated 17 November 2009 from the Respondent to himself had enclosed an outstanding tax invoice in the matter of McMurphy but there had been no accompanying cheque.[3] He confirmed that another barrister had been paid an outstanding balance of $7,550 on 28 July 2010. [4] No interest was paid in respect of these fees or for previous fees rendered in the matter by this barrister. I will come back to that matter later.
[3] Exhibit 6
[4] Exhibit 5
Peter Trimbos (Solicitor)
Mr Trimbos gave evidence and was cross examined. He had been admitted as a solicitor in 2004 and had worked for a large family law firm in Melbourne between 2002 and 2006, including a period of Articles, exclusively in family law and de facto law work. Mr Trimbos left the firm in December 2006 for family reasons. From February 2007 he became a costs lawyer and has continued in that work practicing in costs law, preparing bills of dispute and attending taxations.
In paragraph 18 of an affidavit sworn 3 August 2010 the Respondent said this:-
“I am informed that he (Peter Trimbos) left the employment of Taussig Cherrie on 21 December 2006, when his contract was not renewed.”
There was an annexure referred to in this paragraph, “WJG 1”, which was a letter from Taussig Cherrie & Associates dated 30 July 2010. To the extent that there was an inference in that statement by Mr G that Mr Trimbos had ended his employment with Taussig Cherrie & Associates on unsatisfactory terms, Mr Trimbos rejected that inference. I refer to that issue again in relation to the credit of Mr G.
Mr Trimbos was cross examined as to the reasonableness of the Costs Agreement between the Respondent and the Applicant. He said he did not criticise the hourly rate of $375.00. Mr Trimbos commented on Mr G charging by the page when reading, drawing or perusing documents. He gave evidence that the reasonableness of that depended on many factors such as spacing, font size and the nature of the documents, that is, it did not contain substantive material but instead provided format material. In the view of Mr Trimbos it was unreasonable to charge at the rate which Mr G did, which was $71.50 for 200 words over the totality of documentation. I accept that view.
Mr Trimbos was unshaken in relation to the detailed evidence that he had given in his affidavit sworn 26 July 2010, paragraphs 6 to 114. His central criticism of the Costs Agreement was that it allowed Mr G to charge the full rate for every page of every document, including format material. For instance, pre-printed information on a subpoena. Further, on the evidence of this witness, every page of every document could be treated the same however many words there were on it.
The proposition was put to Mr Trimbos that the photocopying rate of $3.30 per page was reasonable. Mr Trimbos rejected this proposition and said that the scale fee of $0.50 per page included the time taken in preparation of the document for copying and for putting documents back in order after copying. I accept that a charge rate of almost seven times the scale fee was unreasonable.
Mr Trimbos freely made concessions about those aspects of charging which appear to be reasonable. His criticisms, as contained in his affidavit, related to the following matters.
Drawing and/or redrawing documents
Clause 1: drawing and or redrawing documents or any part thereof:-
a)court documents or any part thereof: $65 per page or any part thereof;
b)other documents: $65 per page or any part thereof.
(and inferentially plus GST).
Clause 1 of the Costs Agreement provided for drawing and redrawing of documents charged at the rate of $65.00 per page or part thereof plus GST, that is to say $71.50 per page or part thereof. This fee applied with no regard to the number of words on the page. The agreement allowed for the Respondent to charge the same rate for a document two full pages in length as a document with two pages but with few words only on the second page.
By contrast, clause 6.43 of the Family Law Rules provides that costs should be charged in proportion to actual number of words or time spent. Further, the Respondent’s Costs Agreement could charge for redrawing a page or redrawing one sentence in a court document at the same rate. Mr Trimbos gave an example that this permitted the Respondent to amend three separate sentences on three separate pages in a court document and charge three amounts of $71.50 for the exercise. I accept that such a provision fails to take into account or reflect the quantum of work undertaken. I find it to be unreasonable.
The Costs Agreement allowed the Respondent for drawing that part of a document with format material. Mr Trimbos said, in practical terms, that meant that the Respondent could charge the same rate for inserting a client’s name and biographical details on the front page as could be charged for the substantive parts of the form. This is, in my view, unreasonable. By contrast, clause 6.42 of the Schedule of the Family Law Rules provides that a solicitor cannot charge for drawing the parts of the document that are part of an approved form.
The Costs Agreement provided for the Respondent to charge $71.50 for drawing part of a page of a document less than 100 words in length. By contrast, the Family Law Rules scale provides for drafting to be charged at the rate of $16.50 per 100 words. This is particularly significant where clause 1 of the Costs Agreement did not differentiate between the hourly rate applied for work undertaken by the principal solicitor, Mr G, and his employed solicitors. Accordingly, $71.50 could be charged for drawing and redrawing documents or any word or part of them per page irrespective of the experience and expertise of the solicitor undertaking the work.
Engrossing (typing) and/or re-engrossing documents
Mr Trimbos made the same point, that the rate for engrossing and re-engrossing made no allowance for the quantum of work undertaken. Mr G or his employed solicitors or clerks could charge the same rate for engrossing a document two full pages in length and engrossing a document which runs for two pages but the second only has one sentence in it. Further, the Respondent could charge $38.50 for engrossing one sentence in an amended court document and for amending three sentences on three separate pages within the document, being a total of $115.50 for engrossing the three amended sentences. I accept that this falls outside the parameter of what could legitimately be regarded as reasonable.
Further, the term ‘engrossing’ refers to the typing of the document onto a page. The Costs Agreement provides for the Respondent to charge for ‘re-engrossing or retyping’. The agreement allows where one page of a multipage document is amended, for the charging of the full engrossing rate of $38.50 for the amended page and for all other pages in the document not amended. I accept that this is unreasonable.
By contrast, Mr Trimbos said on a taxation of costs, solicitors may only recover their costs of engrossing part of a document once.
Drafting and typing letters
Clause 3:-
a) circular short letter (up to 50 words in length): $30
b) any other letter: $65 per 100 words
(and inferentially plus GST).
The evidence of Mr Trimbos is that the family law scale for drafting and producing letters is $18.90 per 100 words. Accordingly, the rate in the Costs Agreement is 3.8 times the scale rate. Especially in the circumstance where the agreement provided this rate irrespective of the experience and expertise of the solicitor, I accept that this was an unreasonable rate to charge.
Perusing court documents
Clause 5:-
a) perusing, reading and considering documents:-
i) for each page of a court document: $30
ii) any other documents: $20 per page
(and inferentially plus GST).
Again, the evidence of Mr Trimbos was that it was unreasonable to charge $33.00 for perusing part of a page regardless of the number of words on the page and without reference to the nature of the work undertaken. Further, the agreement allows the Respondent to charge for perusing the parts of a court document that are part of an approved form. Such a charge cannot be made under the Family Law Rules clause 6.42(2). The charging rate is 4.3 times the scale rate per page for perusing documents. I accept that it is unreasonable, especially again where there is no distinction drawn between the experience of practitioners.
Scanning of documents
Clause 6:-
a)scanning of documents where perusal is not necessary: $10 per page.
The evidence of Mr Trimbos was that the application of this clause, in one example, enabled the Respondent on 23 November 2007 to charge the Applicant $2,733.50 inclusive of GST for Mr G to scan 497 pages of time sheets relating to the former husband of the Applicant. This would be the equivalent of 6.6 hours of Mr G’s time at his hourly rate. I accept that it is inherently unreasonable in a category where scanning is distinguished from a situation where perusal is necessary, for fees to have been charged at that rate.
It is in these five clauses, that is 1 – 4 and 6 and in clause 9 that unreasonable provision for charging was made and indeed unreasonable fees have been charged. There is also an element of unfairness in the way these charges were laid out so that it would have been extremely difficult for any client to know in advance the kind of costs that would be generated by the ordinary production and reading of documents in the course of the matter.
In paragraph 79 of his affidavit Mr Trimbos notes that a total of $3,322.00 was charged for the preparation of a Family Court Financial and Parenting Questionnaire. This equated to eight hours of time. I consider it highly unlikely that eight hours of work by an experienced senior practitioner could be required to produce the Parenting and Financial Questionnaire. The fees were generated by the mechanisms in clauses set out above which permitted unreasonable fees for perusing, drawing, engrossing and re-engrossing.
In paragraphs 83 to 87 of his affidavit, Mr Trimbos raises an example of photocopying fees. On 28 November 2008 the Applicant was charged $4,128.30 for photocopying 1,251 pages of documents to be included in the brief to Mr Holmes of counsel. I accept that this was unreasonable as to costs given that at scale $625.50 could have been charged. Further it was unreasonable given that Mr Holmes was the fourth barrister to have been briefed in the matter and undoubtedly, as Mr Trimbos says, documents from previous briefs could have been used.
The affidavit of Mr Trimbos is replete with examples of the fee agreement giving rise to unreasonable charges. The focus of his cross examination, other than an attack on his qualifications, centred around the inherent reasonableness of the hourly rate charged by Mr G. Mr Trimbos suggested that the hourly rate at least for a practitioner as senior as Mr G was not unreasonable. His criticisms were related to other matters.
Ms R
Ms R swore an affidavit on 5 August 2010. She is a psychologist by occupation. She was not challenged on her assertion that she did not know the Applicant and had never spoken to her or met her. Her evidence related to her dealings with the Respondent in 2005 and 2006. In short, her evidence was that she had been charged $126,000 in legal fees. She challenged the quantum of those fees with Ms P, solicitor. In June 2006 she reached an agreement that a discount of $25,256.69 would be applied to all invoices and that she would pay $100,000 in full and final satisfaction of the account.
Annexure “A” to her affidavit is a copy of the account ledger from the Respondent. There is an entry on 22 June 2006:-
“write off as agreed $25,256.69 and shortly thereafter a payment of $100,000.”
Ms R says that she subsequently received an email from Ms P indicating that she was not authorised to have given the discount which had been “reversed by Mr [G]”. Ms R said that the solicitor, Ms P, had said she would “never go back on my word to you” and that she had paid for “the outstanding fees” herself.
Annexure “B” to the affidavit is an email, said to be from Ms P, to Ms R on 14 July 2006, in the terms discussed. There was also an email from Ms P on the same day, 14 minutes prior to the one to Ms R, to a Mr AY at the National Australia Bank requesting a redraw on the P Family housing loan for $25,265.69 to go to an account number in the name of the Respondent with the stated file reference.
Cross examination of Ms R extended only to the friendly relationship she had with Ms P and that they had had, on the evidence of the witness, one dinner together and Ms R said she had travelled to Bali at the expense of Ms P. However, there was no attack on the evidence of Ms R and I will return to this matter in relation to the credit of Mr G.
Mr G
Principal Solicitor of the Respondent (“Mr G”)
Counsel for the Respondent opened to advise the Court that there had been a miscalculation of interest and that there was a refund due by the Respondent to the Applicant of $7,052.23.
Mr G was extensively cross examined in relation to different areas which I set out below.
Payment by Ms P, solicitor
Mr G was asked whether he had a record of the payment by Ms P, solicitor, to him in respect of the discount that she had offered to Ms R. Mr G said he did not. When asked whether he had letters or emails on the subject he replied that he could not type or operate a computer and that he had never sent an email in his life.
Cross examination came back to this topic of the $25,000 plus that Ms P apparently paid to the Respondent by drawing on her own home loan. On more than one occasion Mr G said he could not recall the incident and was not prepared to concede that the money had been paid in 2006. Ultimately, it was submitted on behalf of the Applicant that the evidence of Mr G was incredible in this regard. It certainly seems so. It was a most unusual situation where an employed solicitor was put in the position of offering a discount to a client, then withdrawing it when her principal solicitor told her she had acted without his authority, that Ms P then raised the money herself and paid it in reduction of the account of the client. In my view the situation would have been a distinctly memorable one for both Ms P and Mr G. Ultimately, bank statements were provided which confirmed that an amount of $25,256.69 had been paid from the account of Ms P on 14 July 2006 to the account of Mr G, namely his office account, and the reference number for the payment was the reference number that had been ascribed to the matter of R.[5]
[5] Exhibits 12 and 9
Mr G had been asked to produce his bank statements. His answer was extraordinary. He said he did not know how to access his own bank statements. He also said he would be unable to obtain bank statements over the luncheon adjournment because he would have to travel back to his office and arrange for somebody to do it. There would not be sufficient time. Mr G was directed by me to produce the bank statements and he did. The connection between the payment out of the stated sum and the receipt into the office account was then made. Even so, Mr G remained unwilling to concede that he remembered the incident or that it had any particular significance for him. I do not accept this evidence. I consider Mr G was making every effort to avoid conceding that this incident had occurred and only admitted it when confronted with the documents which represented the paper trail for the payment.
I note that on the one hand Mr G said he did not have any trouble providing bank statements. On the other he said he did not know his own bank account numbers, although he knew he had two bank accounts. He declined the request to give the solicitor for the Applicant authority to obtain his bank statements.
Mr G knew, having read the affidavit of Ms R, that annexure “D” to that affidavit was an email, said to be from himself to Ms R which includes the following statement:-
“As a result of some discussions between yourself and [Ms P] the second last invoice which was for $25,256.69 has been dealt with internally at no cost to you.”
He then goes on to say that further fees have been incurred and I note the closing paragraph which states as follows:-
“I am also mindful that the more family reports I can refer to you and encourage colleagues to do likewise the quicker your financial position will improve.”
It seems likely that this is a reference to Mr G referring clients of his to Ms R in her professional capacity as a psychologist. It does Mr G no credit that in the witness box he was unwilling to immediately concede the incident of the “reversed discount”.
The proposition was put to Mr G that he would have noticed a $25,000 deposit in his account, that he had said to Ms P that she had to fix the matter (with Ms R). Mr G thought he may have said that. He then said that he had never checked as to whether the amount had been paid into the account and that he had forgotten about it until he had read the affidavit of Ms R.
Mr G was asked whether he accepted that Ms P had paid the money:-
A: “No. She said she was going to pay it. Doesn’t mean she did it.”
Q: “[Ms P] might have repaid you?”
A: “Yes, she might have.”
Q: “Not a significant matter to you?”
A: “It occurred a long time ago. It’s been dealt with. It’s years ago.”
Mr G was then taken to the bank statements I have referred to earlier in this evidence and finally conceded the payment:-
“Based on those documents, yes.”
I do not accept any of the evidence of Mr G about this matter of the retracted discount, other than the concession set out immediately above.
Barristers’ fees
Mr G was questioned about exhibit 6 which was a file copy letter dated 17 November 2009 to Paul Holmes, barristers’ clerk. Mr G said he had found the copy letter and did not know if it had been sent. He was unable to produce any record of payment of the account and effectively conceded that the account remained unpaid.
Mr G was cross examined about payment of counsel once he himself had been paid his full fees of $238,143.18 on 29 May 2009 from the proceeds of sale of the McMurphy family home. He said it was his belief that counsel had been paid. He was asked to make an enquiry about copies of statements and said he would. Mr G then gave evidence that he had put the cheque into his personal account in his own name. He said the cheque, or a large portion of it, was put into his office account. I note that the opening statement of counsel for the Respondent was that the office account and the personal account of Mr G was the same.
Mr G was asked about banking the cheque into his personal account when part of the money was for counsel’s fees. His response was:-
“It’s not trust money.”
He was asked why Mr Brown SC had not been paid. The response was that the Applicant had objected to Senior Counsel’s fees:-
“The fees are in dispute. The quantum of fees.”
This did not, in my view, represent a frank and direct response.
Mr G went on to say that in relation to other counsel, his client (the Applicant) had objected to the totality of the bills:-
“Those barristers had not made costs disclosures so their fees were in dispute. They would require refund.”
This was a completely inadequate explanation for why funds had been received for the payment of counsel and counsel had not then been paid.
The proposition was put to Mr G that his position had been, at the commencement of the hearing, that everyone bar Mr Brown SC had been paid. He said that had been his belief. I draw from that that he had not checked his own accounts before instructing counsel to make that statement.
In response to the proposition that he had paid what was outstanding to Ms Benjamin of counsel a week before the hearing, Mr G’s response was that Ms Benjamin had made a request for payment. She had agreed to wait but then he had decided to pay her. Counsel for the Applicant had put the proposition:-
“Was it just a coincidence that you paid Ms Benjamin within a week of getting a Notice to Admit Facts?”
In fact, a further question was put:-
Q: “You didn’t pay because of the costs dispute?”
A: “Yes.”
Q: “Paul Holmes sent you reminders?”
A: “I don’t recall receiving reminders.”
Q: “Do you keep an eye on these things?”
A: “No.”
Q:“Would it trouble you to have fees outstanding when you already had the money?”
A:“No.”
Q:“You received money May 2009?”
A:“Yes.”
Q:“Ms Benjamin was paid in July 2010?”
A:“Yes.”
When Mr G was pressed about this issue of holding money for barristers, his answer was:-
“Depends on how much pressure they put on.”
I had the very clear impression that Mr G was retaining the funds for payment of counsels’ fees until, at best, he was forced to pay them.
Of even greater concern in relation to the credit of Mr G is the response to this question:-
Q:“How much of the interest charged for the barrister was paid onto the barrister?”
A:“None.”
Q:“Some of them were paid interest?”
A:“I didn’t know about that.”
Q:“You charge 10% on barristers’ fees. You get to keep it.”
A:“When you put it that way it doesn’t sound appropriate.”
Mr G elaborated:-
“No advantage to me in keeping the interest payment. It’s a huge cost to carry a client with such costs.”
I infer from this answer that Mr G felt no compunction about retaining the interest. He appeared to also feel considerable bitterness about “carrying” the Applicant during the course of her proceedings and perhaps saw the interest on counsels’ fees as some form of compensation for himself for having done so.
The evidence of Mr G in relation to the matter of counsels’ fees, of receiving the funds and not paying the fees, and of charging interest but not always passing the interest on, is adverse to his credit.
Costs Notices
Mr G said that Costs Notices were given, generally at the court event by him personally or sometimes they were faxed.
He was asked about the procedure with the mail. Mr G asserted that two letters were dictated by him on 3 December 2007 and 1 October 2008 updating advice on costs for the Applicant. These letters were referred to by Mr G in his affidavit of 3 April 2009 in support of the Costs Assessment Order. He was asked whether he had seen those letters. He said, yes, he had signed them and in respect of the letter of 3 December 2007, on that occasion the letter and Disclosure Statement had been signed and sent. The relevant mail book was produced. There was no letter for 3 December 2007 in the mail book. The closest entries were 6 December and 7 December 2007[6]. It is of course impossible to know what that correspondence was.
[6] Exhibit 7
Likewise, Mr G gave evidence that in respect of the letter of 1 October 2008 he had entered the letter himself and placed it in the box that evening. There was no entry in the Respondent’s mail book for 1 October 2008. The nearest entry was on 3 October 2008.[7] On having this matter drawn to his attention, Mr G answered that the entry in the outgoing mail book on 3 October 2008 was:-
“Obviously the letter prepared in draft earlier.”
Mr G seemed untroubled by the conflict in his own evidence. This evidence supports the proposition that the letters were not sent and received.
[7] Exhibit 8
Costs Agreement
Mr G was taken through, at some length, the charges that were included in his bills based on the clauses of the Costs Agreement. His answers about the costs varied from:-
“The outcome was marginally higher than scale” to “it works out to about 10% more than scale”
In response to one question about scanning, he said:-
“The scanning rate is 30% less then on scale. Bank documents have very little detail. Trust documents intense detail.”
I formed the impression that Mr G took the view that it was a matter of swings and roundabouts for him with an averaging over all clients of documents that were genuinely time consuming from those that contained scant content.
In relation to the question about photocopying at $3.30 per page, Mr G said he thought that compared favourably to other jurisdictions and went on to say, inexplicably:-
“It’s a very expensive machine. It justifies a higher rate.”
The proposition was put to him that the duplication of photocopying of briefs was unreasonable. His response was that such briefs were “wet, marked”, “you can’t reuse them”, “we usually re-prepared”.
First meeting with Applicant
Mr G said that he was present at the first meeting on 25 September 2007. In answering a question about Ms P having the same charge out rate as himself, Mr G said that the Costs Agreement in which Ms P was included was not an agreement specific to the Applicant and was for all jurisdictions and all clients. This evidence is consistent with my own observation that the Costs Agreement had not been tailored to meet the particular circumstances of the Applicant.
Mr G said he could not remember a letter being prepared to Mr B requesting the transfer of the file because he was not there when that happened. He, however, conceded that the letter had been faxed on that day and that a document going out from his firm is “probably/generally my responsibility, yes.”
The proposition was put that the die was cast by 25 September 2007, “Mr [B] was out, [G and G Law Firm] was in”. Mr G did not acknowledge that the Applicant had committed herself to the firm on that day. The question was put:-
Q:“You say you weren’t retained until you got the Costs Agreement back but there are attendances by you from 25 September on?”
A:“Yes, well, I could charge retrospectively.”
I find that there had been an acceptance by the Applicant on 25 September 2007 that she was instructing the Respondent and that the “paper work” was in the nature of a formality as the letter itself suggested:-
“We note that the contents of this letter are of an administrative nature and you will not be charged for it. If it appears bland and impersonal please accept our sincere apologies.”
Mr G was dismissive of the notion that sending out a letter with a Costs Agreement and a disclaimer under the Legal Profession Act might cause confusion between the Legal Profession Act and the Family Law Act. There was no satisfactory answer to the question as to whether Mr G had drawn the attention of the Applicant to the distinction between the two Costs Agreements. The proposition was put on behalf of the Applicant that there was no reference in the covering letter to obtaining independent advice before entering into the agreement. Mr G pointed to a note on page 2 of the Family Court Costs Notice. The note is as follows:-
“If you have a written Costs Agreement your rights may differ from those set out in this brochure. You should read your Costs Agreement and obtain independent legal advice.”
I find that this was inadequate advice in these particular circumstances. The intention of Mr G clearly was to charge interest on his own costs and on counsels’ fees and allow it to accrue. Further, the method of costing the creation and perusal of documents allowed for double counting in some situations. An explicit reference to these matters and a recommendation for independent legal advice would have been the fair course. The Costs Agreement after all is not simply the name of a document but must represent a meeting of minds about what is intended. I do not consider that the Applicant was given the proper opportunity to fully understand what was proposed and that the Costs Agreement itself was an inadequate guide to how the matter would be approached.
As I have said earlier in this judgment, central to the Agreement was that the Applicant would be able to pay her costs at the conclusion of the matter when the former family home was sold. Mr G was cross examined about this:-
Q: “You knew [Ms McMurphy] couldn’t pay?”
A: “Yes.”
Q: “On each bill a discount was offered for payment within 14 days.”
A: “Yes.”
Q: “Why?”
A: “Peoples circumstances change all the time.”
I do not accept that this was a straightforward response. Mr G was well aware of the circumstances of his client, she having come to him on the basis that she could not afford to pay costs with her current solicitor as the matter progressed. She agreed to a Charge over her home to ensure that her costs would be paid at the end. It was her only basis for payment. Mr G was well placed to know that her circumstances were not changing other than the fact that she was becoming deeper in debt to him. I find it probable that Mr G sent out interim bills in the ordinary way simply to comply with the Rules in order to charge interest and to obtain a Costs Assessment Order if and when he chose to do so.
Mr G was asked about the entry in the statutory Costs Notice, earlier referred to in this judgment, which states as follows:-
“Itemised legal costs account requested within the prescribed time is provided free of charge to you. Requests outside the prescribed time will generate a fee equal to 14% of the total of the account.”
Mr G said this was a positive encouragement to bring the request within time. He agreed that there had been no reference to it in the Costs Agreement but was defensive of the additional charge of 14% of the total:-
“Well there is a cost preparing the bills.”
The proposition was put to Mr G that it was a variation to the Costs Agreement, varying the client’s right to ask for an itemised bill and giving the solicitor the right to charge a fee out of time:-
Q: “Why put it in?”
A:“Probably doesn’t need to say that. I’ve explained what it’s there for.”
I do not accept the evidence of Mr G that the statement referred to was simply an inducement to clients to bring forward as quickly as possible their requests for an itemised account.
In paragraph 22 of his affidavit sworn 19 August 2009, Mr G says this:-
“Annexed to each account rendered to [Ms McMurphy] was a Costs Notice pursuant to Rule 19.”
A copy of the Costs Notice was annexed as “WJG-2”.
Paragraph 23 of his affidavit began:-
“The Costs Notice provides ...”
There was then an excerpt from the Chapter 19 Costs Notices being four paragraphs from that notice. The only paragraph from the quoted section that was omitted was the controversial one:-
“Itemised legal costs account requested within the prescribed time is provided free of charge to you. Requests outside the prescribed time will generate a fee equal to 14% of the total of the account.”
This omission is of significance. I consider that this was a deliberate omission so as not to draw attention to the inherent unfairness of the penalty clause. I consider that the penalty clause was used by the Respondent, not as an inducement but as a useful threat of financial penalty. I consider the credit of Mr G adversely affected by the omission of that paragraph, as quoted above, and the explanation for its inclusion in the first place as unsatisfactory.
Provision of the Costs Notices
Mr G said he did not cost files himself, he did not read the bills and in answer to the question on whether he was satisfied with himself that the bill accorded with the agreement his answer was:-
“I have people more skilled in these things than me.”
He said he did not operate a computer, however, he said that he on every occasion faxed the Costs Notice to the Applicant or handed them to her.
The Applicant had signed the first Costs Notice. The proposition was put that the purpose of clients signing Costs Disclosures was so that when there was a dispute there was evidence of their knowledge. Mr G agreed. He also agreed that a fee had been charged for the preparation of one Costs Notice on 1 December 2008, a fee of $500. When asked why a fee had been charged for that Costs Notice the answer was:-
“I didn’t prepare the bill.”
In view of the above evidence and, more broadly, because of the findings I have made about credit, I accept the evidence of the Applicant that she received two Costs Notices only and that a Costs Notices was not faxed or handed to her on every occasion as stated by Mr G.
Disputes with clients
The proposition was put to Mr G that if a client wanted a bill taxed, his Costs Agreement would allow him to stop work on the file and, in the case of the Applicant, if he had stopped working on her file she would have been left stranded (on account of not having paid her fees). The answer to this was “yes”.
I note that when Mr T, solicitor, took over the matter from the Respondent, the files of the Applicant were not provided to Mr T. The Respondent had security, in the form of a caveat, a request had been made for the files and the answer was “no”. The explanation of Mr G for this decision was:-
“That was my judgment at the time”.
Costs Assessment Order
Mr G agreed that he had not sent the Applicant’s new solicitors, T Firm, a copy of the Costs Assessment Order and that he had not referred to it until his letter of 25 June 2009. He did not actually send a copy of the order to T Firm until 15 July 2009.
Despite being fully paid on 29 May 2009, Mr G continued to retain the file on the stated basis that he needed to have it costed and photocopied. The Respondent did not produce the file to the Court. The explanation of Mr G for this was:-
“Anyone could do something, anyone could take copies of it.”
He said he could not have copied it and handed over the original file because of the huge amount of money involved in copying it. He said he did not know what was in the file which was produced for these proceedings because he “hadn’t looked at it”. He retained the file because anyone could remove documents from the file. He felt there could be serious charges of misconduct. Mr G conceded that, with the benefit of hindsight, it would have been better to have handed the file over. This is a significant understatement.
The evidence of Mr G was that he had sought a Costs Assessment Order in April 2009 because he:-
“.. apprehended a dispute over fees.”
This question was put:-
Q:“You say you’d served the bills, you had a caveat, the house had been sold, you did not have anything further to do?”
A:“Yes.”
Q:“Why did you do it then?” (that is, seek the Costs Assessment Order)
A:“It would have made it more difficult for the client to apply to set aside the Costs Agreement.”
In my view this evidence represents an admission by Mr G that he had sought a Costs Assessment Order on a tactical basis. He well knew that the client had not been in a position to pay the costs. Further, in his affidavit of 6 April 2009 in support of his application for a Costs Assessment Order, there is, amongst others, this statement in paragraph 9:-
“that the accounts are rendered on 14 day terms and provide a discount if they are paid within 14 days of the date rendered.”
Nowhere in that affidavit is a reference to the fact that there was an agreement between the Applicant and the Respondent that she would not pay any costs until the sale of the matrimonial home. This is a serious matter. Mr G clearly put his own personal interests ahead of his obligation to the client in taking this step and he did not make every effort to ensure that the client knew of his intention to obtain the order. I accept the evidence of the Applicant that she did not know that the order had been made until after the event.
Mr G said he did not have an incoming mail book. He said he did not receive the letter from T Firm of 2 April 2009. He said he did not provide a copy of the Costs Assessment Order to the new solicitors because they weren’t on the record. This proposition was put by counsel for the Applicant:-
“You remain silent so you could say ‘I’ve served it out of time, too bad, so sad [Ms McMurphy].’”
The response to this was non responsive:-
“They knew of the existence of the order from 25 June 2009.”
Mr G agreed that there had been one other case (reported) where he had made the assertion that mail had gone out to a client who said she had never received it. Mr G denied that getting the Costs Assessment Order was to enhance his own rights. This is in direct conflict with his own evidence that it would have made it more difficult for the client to apply to set aside the Costs Agreement once he had the Costs Assessment Order.
There was no convincing explanation for why an interest bill was sent separately on 24 February 2009 and in any event, the Applicant says she did not get that letter enclosing the interest bill. Mr G said that he had read what the Applicant had said about that and conceded that he probably couldn’t dispute that she did not get the interest bill. He agreed that in February 2009 he had become “fed up” with carrying clients:-
“I looked at clients funding their matters, not me.”
It was conceded by Mr G that on 12 February 2009 an email was sent from his office to a bank officer in relation to family law litigation. There is a reference in that email to the Applicant’s case as well as “several resolved or near resolved family court cases”. It appeared to be in the nature of a general enquiry about providing litigation funding to clients to the mutual advantage of the solicitor and the bank. There is a reference to this in the affidavit of Mr Trimbos in paragraphs 111 and 112 of the affidavit. The Applicant was charged a total of $486.20 for the forwarding of this email and for the preparation by Mr G of a current position statement on her behalf which was sent to the bank. This work was not done on behalf of the Applicant and was not, in any sense, in her interests. I consider the Respondent’s credit adversely affected by this matter.
Appeal by the Respondent against compliance with a subpoena
Mr G said he had appealed against a subpoena and that this appeal was outstanding before His Honour Justice Cronin. He appealed because the subpoena had not been served by hand and it was inappropriate for one party to subpoena another. The proper process was a request to produce. He then conceded that he himself had served a subpoena on his former client seeking all documents from her solicitors and that he had not asked for production of those documents before service of the subpoena. Mr G said, when he thought about it, that was right and that he had used the subpoena process to ask for the documents. This evidence did not inspire confidence about the tactics of the Respondent in these proceedings.
Notice of Discontinuance
Solicitors on behalf of the Applicant had mistakenly and incorrectly filed a Notice of Discontinuance of the proceedings when only one aspect of the proceedings was sought to be discontinued, not the costs aspect. Mr G agreed that he had received letters saying that the Applicant wished to continue with the costs dispute. He had received a letter from the Court on 23 December 2009 and a fax from the solicitor on 24 December 2009, annexures “B” and “E” to the affidavit of the Applicant sworn 29 January 2010 and filed 9 August 2010.
Mr G said he was not sure of the status of the practitioner and had not agreed. The relevant practitioner had written on 11 January 2010 setting out the mistake with the Discontinuance. Mr G still declined to accept that the discontinuance was a mistake and did not consent to the proceedings being restored. In the witness box Mr G said this:-
“I don’t accept that it was a mistake. Could have been a whole range of explanations. Change of lawyer.”
On 14 January 2010 Mr G wrote to the Court stating that he did not consent to the proceedings being restored and seeking costs. Ultimately, however, these proceedings were restored.
I consider that it was obvious to Mr G that there had been a mistake, given the correspondence from the Court, the instructing solicitor and the solicitor who had filed the Notice of Discontinuance. The response of Mr G was tactical. His unwillingness to concede in the witness box that there had been an obvious mistake did him no credit.
Method of charging
Mr G conceded that he charged an hourly rate plus a per page rate “when it was necessary”. I infer that Mr G was the sole arbiter of when it was necessary to charge an hourly rate, plus a per page rate, for the preparation of affidavits. He conceded that the jurat page on affidavits was always a separate page. He denied that that was done consciously, conceded that it gave him an extra $100 per page and gave as an explanation that things were set up like that on the computer. He agreed that there was a word count on every letter, including address line and date.
Monies held for barristers’ fees
Mr G asserted that he was not obliged to hold monies paid to him on account of fees for barristers held in trust. I asked him to obtain a ruling from his professional association in that regard. Subsequent to the hearing of this matter documents were provided to me in relation to that ruling. In the circumstances I will mark those documents as exhibit 14, they being:-
a)emails between counsel for the Applicant and Mr Dunn at the Law Institute of Victoria referring to a telephone conversation on 12 August 2010,
b)letter dated 12 August 2010 from G and G Law Firm to the Law Institute of Victoria,
c)letter dated 13 August 2010 from the Professional Standards Division of the Law Institute of Victoria to G and G Law Firm;
d)letter dated 18 August 2010 from Schetzer Constantinou Lawyers to Counsel for the Applicant;
e)email dated 18 August 2010 from Counsel for the Respondent to my Associate.
I note that monies representing unpaid counsels’ fees are now said to be held in trust by the Respondent.
Submissions
Submissions were made by both parties and I was directed by Counsel for the Applicant to the authorities, including Canadian authorities, which I had the benefit of reading.
The Respondent
It was put on behalf of the Respondent that the Costs Agreement was both fair and reasonable:-
· Fair because the Rules had been complied with, advice had been given to obtain independent legal advice, that the Applicant conceded that her memory of events was not good, that nothing could have been clearer than the disclosure made in the letter of engagement of 25 September and the Costs Agreement itself dated 28 September 2007.
· Reasonable because the Applicant was aware of her costs being around $200,000, that bills were sent regularly, that interest was set out in the agreement and each of the bills, that the comparison by Mr Trimbos of the accounts with the family law scale was not relevant, that the Applicant had previously had the experience of being unhappy with a solicitor and knew what to do, and that there had been no undue influence.
It was conceded on behalf of the Respondent that if the Costs Agreement was invalid the Costs Assessment Order should be set aside.
It was also conceded that one of the bills in the sum of $63,301.12 had not been itemised and that the interest bill sent in February 2010 had not been received. There was a confirmation of the concession that the ultimate bill had been miscalculated and that $7,900.43 should be repaid.
I asked Counsel for the Respondent what significance attached to:-
a)an agreement between the parties that costs would be paid on settlement; and
b)bills being sent out referring to payment within 14 days.
Counsel submitted that the apparent inconsistency made no difference. I do not accept that submission.
I do accept the evidence of the Applicant that she thought she could challenge the bills at the end. For it to be otherwise, in my view, the Respondent should have clearly stated that although there was an agreement between the parties for all costs to be paid at the conclusion of the sale of the family home, it was a matter for the Applicant to challenge the bills along the way. She should also have been advised that the solicitor would be free to obtain a Costs Assessment Order against her despite the agreement that she need not pay costs until the end, on the basis of unpaid costs.
It was submitted that in respect of counsels’ fees the Applicant knew that the fees of senior counsel would be more. I accept that the Applicant undoubtedly knew that the fees for senior counsel would be more than for junior counsel. I do not accept that she knew the full extent of the fees to be charged.
The Applicant
Submissions on behalf of the Applicant were that the Applicant made concessions readily and appropriately. She corrected her first affidavit and conceded two court notices had been received. I accept that submission.
A submission was made that the evidence of the Respondent in relation to the $25,256.69 paid back by Ms P in respect of the R matter was incredible. First that Mr G was unable to recall the issue and the payment. Next that Ms P, solicitor, did not mention the payment by her at a time when the Respondent was poised to apply for a Costs Assessment Order against Ms R. I accept that submission. I also again note that Ms P, who is apparently still employed by the Respondent, was not on affidavit and was not asked to give evidence. I therefore infer that any evidence given by Ms P would not have assisted the position of the Respondent. I accept, as was proved by the documents, that the payment was made, and I do not accept that Mr G was unsure whether the payment had been made until he saw the documents and that he did not remember the incident.
In relation to the Costs Agreement, as to fairness it was put on behalf of the Applicant that the circumstances of entering into the Agreement had not been fair. There had been insufficient regard to the option of independent legal advice. That reliance on the short note referring to independent legal advice in the court based documents was inadequate and that what had been discussed in conference as to costs and to the need for legal advice, had not been contained in the letter. I accept that submission. Even in its own terms the letter was more in the nature of a form letter. I also accept the submission that the authority to terminate the instructions of Mr B, having been given on the first day, put the client in the position where she was without legal advice. As to reasonableness, the evidence of agreements relied on by other solicitors in the family law was relied on, including the evidence of the former husband of the applicant. In none of the other Costs Agreements did solicitors charge six times over the scale rate for photocopying nor did they charge per word, including for standardised or format material. There was also a reference to aspects of double charging on a hourly rate and a per page basis and the evidence of Mr G:-
“The Costs Agreement allowed me to charge both.”
The effect of the agreement in practice was that, on at least one occasion, Mr G prepared an affidavit charging on a per page basis and also charged on the hourly rate.
Submission was made that Mr Trimbos was attacked as to his credit but unshaken in cross examination. I accept that submission.
In relation to the Costs Assessment Order, it was submitted that the Applicant says she did not receive it and I shall accept her on that point. Mr G asserts that he sent a letter. Given the state of the Respondent’s mail book, I consider it would be quite impossible for the Respondent to know, reliably, all correspondence that had flowed out of the office on any particular day. I make that finding particularly as Mr G’s assertions about two other letters on updated costs estimates, that he said he had sent out on named dates, were not referred to in the mail book on the relevant days.
I was asked to consider the significance of Mr G’s explanation for obtaining the Costs Assessment Order, that is that if he got such an order it would be difficult for his former client to set aside his Costs Agreement. However, I consider that the Costs Assessment Order should be set aside in any event having been obtained on the basis of an affidavit which failed to disclose that there was an agreement that costs would not be paid until after the sale of the former family home of the Applicant.
It was submitted that the Respondent had adequate security for payment of his costs by the lien over the Applicant’s property. There were submissions on interim accounts. I give some weight to the submission. The reasoning of the Ontario Supreme Court in the matter of Minkarious v Abraham, Duggan[8] is persuasive. Clients cannot be expected to bring assessments on interim bills given the potential damage to the professional relationship. However, in this matter I have found that the Applicant believed that costs would be discussed after the sale of her home, in any event.
[8] Ontario Court (General Division), Edythe MacDonald J November 15, 1995
I was also asked to take into account the fact that counsel had effectively been paid by the Applicant but Mr G had chosen not to pay all counsel promptly and not to pass on the interest he had charged on their fees. I do take those matters into account in relation to the credit of Mr G in the matter.
Conclusion
The true nature of the Costs Agreement of the Applicant with the Respondent was that costs would be payable at the end of her family law matter or when the sale of the family home was settled, whichever was the sooner. The evidence of the Applicant, both in her affidavit and orally, was that the drawcard for her in signing up with the Respondent was that the solicitor knew she had no present funds to pay legal costs and that she could therefore pay at the end. The evidence of the Respondent was that he had taken a caveat over the McMurphy family home to secure his costs in the knowledge that he was most unlikely to be paid before that property was sold. In answer to my question to Mr G at the conclusion of his evidence:-
Q: “When did you expect to be paid?”
A: “When [Ms McMurphy] received her property settlement.”
Accordingly, it was quite clearly not the case that the Applicant had failed to pay costs as and when they fell due as stated in the application for a Costs Assessment Order. The property had been sold in March/April 2009. The conveyance was uneventful. Settlement loomed at the time when the Costs Assessment Order was sought. In my view the Respondent moved to obtain a Costs Assessment Order for the reason he gave in the following exchange:-
Q: “Getting the costs assessment order was to enhance your rights?”
A: “I absolutely deny that.”
“The costs assessment order would make it more difficult for the client to set aside the Costs Agreement.”
The Costs Agreement itself is at the heart of the problem. It did not, in a personal tailored way, reflect the true agreement between the parties. Likewise, the interim costs bills did not reflect the truth of the agreement. There were no words to the following effect:-
“you will be paying at the end so, either, you can disregard these bills or you must dispute these bills even though you won’t be paying until the end. You are not required to pay these bills at this time. They are for your information.”
and/or
“You are not required to pay these bills at this time but I do require you to dispute them within the required period.”
and
“Interest will accrue on these bills until they are paid.”
This lack of clarity was an unfairness that was part of the agreement from the beginning and gave rise to, what I find to be a reasonable assumption by the Applicant, that she would be entitled to challenge the bills and any aspect of them, including interest, at the end.
I find that the Applicant was not advised that interest would become payable as each bill was rendered and that she would not have entered into the Costs Agreement had she known that this would be the case.
Further, a projected estimate was included of her costs which was presented in a confusing way. I find that the Applicant believed that she had been given an estimate of costs up to $75,000 and I accept her evidence that had the estimate been more than $100,000 she would have sought to instruct a different solicitor. I find that the Applicant had no expectation that her fees would include a significant interest component and would amount to $238,000.
The Costs Agreement, in my view, was not fair and reasonable. The form of the agreement was misleading. The amounts, although the hourly rate may have been fair in the market, did not represent the true picture of what would be charged in respect of each piece of work undertaken. It was not fair to the Applicant to:-
a)act immediately to terminate the instructions of her current solicitor;
b)to provide her with three competing documents as to what was to be charged;
c)provide any costs estimate contained in a document that was not the binding Costs Agreement; and
d)to fail to mention in any document that the Applicant was not obliged to pay any fees and disbursements until after the sale of her matrimonial home.
There was also the issue of the Applicant having an expectation that she would deal with Ms P, an employed solicitor. This was a significant matter in terms of costs and I do not consider that it was made clear to the Applicant that she would be paying the higher rate for the services of Mr G throughout. Ms P did not give evidence in the proceedings and I am therefore entitled to infer that her evidence would not have assisted the Respondent’s case.
The Costs Agreement was not reasonable in that it was insufficiently specific for the Applicant to form a true expectation of her liability. There was an excessive charge in respect of routine tasks and an excessive charge for considering documents, some of which were drawing documents or reading documents which were routine or form. There was an open ended power to engage counsel and the work itself being undertaken was not especially complex. The prospect was raised of the Applicant making an application to return to her home in the United States of America but in any event the matter was settled in mediation before that issue was litigated. In paragraph 58 of her affidavit filed on 3 August 2009, the Applicant set out individual costs that she was charged which include a sum of $14,811 plus GST for photocopying 4937 pages during the retainer, save for the period covered by the invoice dated 24 September 2008.
The trouble with the Costs Agreement was that it enabled charging for the specific aspects for preparing and perusing documents as well as a charge for an hourly rate. I am satisfied that the Costs Agreement was not only unfair but inherently unreasonable.
The Applicant has applied pursuant to rule 1.14 of the Family Law Regulations to extend the time to apply to set aside a Costs Assessment Order made pursuant to Clause 6.39 of Schedule 6. The extension of time being until 3 August 2009. For reasons I have given I have granted the Application for Extension of time.
The Applicant then applies to set aside the Costs Assessment Order made 8 April 2009. For the reasons I have stated I have granted that application.
I have found that there are reasons for the failure of the Applicant to object to the preliminary assessment amount and to the Order. Even so, I must consider the question of prejudice to the Respondent. If there is prejudice it is slight. I accept the submission on behalf of the Applicant that the Respondent has had the benefit of having been paid in full. At worst the Respondent will have to repay to the Applicant a part of the money that has now been held for more than a year.
In terms of relative prejudice I accept the submission that the Applicant has been severely prejudiced by not being able to tax her bills.
In any event, having found that the Costs Agreement should be set aside then the Costs Assessment must be set aside.
I consider that the Costs Agreement dated 28 September 2007 between the Applicant and the Respondent should be set aside and I have made orders accordingly. If there continues to be a dispute about costs the matter will be dealt with by the Costs Registrar.
I certify that the preceding one hundred and seventy seven (177) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cleary delivered on 19 November 2010.
Associate:
Date: 19 November 2010
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