McNamara Business & Property Law v Kasmeridis
[2005] SASC 269
•22 July 2005
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
MCNAMARA BUSINESS & PROPERTY LAW v KASMERIDIS & ANOR
Judgment of The Full Court
(The Honourable Justice Gray, The Honourable Justice Sulan and The Honourable Justice Layton)
22 July 2005
PROFESSIONS AND TRADES - LAWYERS - SOLICITOR AND CLIENT - RETAINER
STATUTES - ACTS OF PARLIAMENT - INTERPRETATION
EQUITY - GENERAL PRINCIPLES - FIDUCIARY OBLIGATIONS - GENERAL PRINCIPLES
Appeal from decision of single Judge upholding decision of Master - Judge held that retainer agreement between solicitors and clients was not concluded in writing and therefore did not fall within the terms of section 42(6) of the Legal Practitioners Act 1981 (SA) and did not bind the clients - appeal on grounds that Judge erred in holding that the retainer agreement did not constitute an agreement made in writing within the meaning of section 42(6).
Discussion of general principles regarding retainer agreements between solicitor and client - consideration of principles of statutory interpretation - legislative history of Legal Practitioners Act - discussion of fiduciary obligations owed by solicitors to their clients.
Appeal allowed - matter remitted to Master for further hearing and determination.
Legal Practitioners Act 1981 (SA) s 42; Supreme Court Rules 1987 (SA) r 95.15(b); Acts Interpretation Act 1915 (SA) s 4; Legal Practitioners Act 1936-1972 (SA) s 21; Legal Practice Act 1996 (Vic) s 96; Legal Profession Act 2004 (NSW) s 332; Law of Property Act 1936 (SA) s 26; Acts Interpretation Act 1901 (Cth) s 15AB, referred to.
O'Young v Walter Reid & Co (1932) 47 CLR 497; Wong v Kelly (1999) 154 FLR 200; Heppingstone v Stewart (1910) 12 CLR 176; Re a Firm of Solicitors [1995] 3 All ER 482; Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1; Owen v South Australia (1996) 66 SASR 251; Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355; Maguire v Makaronis (1996) 188 CLR 449; Tyrell v Bank of London (1862) 10 HLC 26; 11 ER 934; Nocton v Lord Ashburton [1914] AC 932; Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; Haywood v Roadknight [1927] VLR 512; Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297; Attorney-General v Prince Ernest Augustus of Hanover [1957] AC 436; K & S Lake City Freighters Pty ltd v Gordon & Gotch Ltd (1985) CLR 309; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384, considered.
MCNAMARA BUSINESS & PROPERTY LAW v KASMERIDIS & ANOR
[2005] SASC 269Full Court Gray, Sulan and Layton JJ
THE COURT
Introduction
This appeal concerns the construction of section 42(6) of the Legal Practitioners Act 1981 (SA) and addresses circumstances in which a solicitor may enter into an agreement with a client with respect to professional charges.
The full terms of section 42 are as follows:
(1) On the application—
(a)of a person claiming to be entitled to legal costs; or
(b)of a person who is liable to pay, or who has paid, any legal costs,
the Supreme Court may tax and settle the bill for those costs.
(1a)The Supreme Court's power to tax and settle a bill of costs (but no other power of the Supreme Court under this section) may, subject to any rule, order or direction of the Court, be exercised by the Registrar of the Court.
(1b)Subject to the rules of the Supreme Court, an appeal lies to a judge against a decision of the Registrar pursuant to subsection (1a).
(2)Where an application has been made under subsection (1), the Supreme Court may—
(a)restrain a person claiming to be entitled to the costs from commencing an action for recovery of the costs; or
(b)stay any proceedings for recovery of the costs.
(3) The Court may, on taxation of a bill of costs under this section—
(a)order the refund of any amount overpaid; or
(b)where the proceedings have been instituted by the person seeking recovery of the costs—order payment of legal costs in accordance with the taxed bill.
(4)The Board may institute proceedings for the taxation of legal costs under this section on behalf of a person who is liable to pay, or has paid, the legal costs and must institute such proceedings if ordered to do so by the Tribunal.
(5)Any court in which proceedings for the recovery of legal costs have been instituted may order the plaintiff to apply to have the legal costs taxed in accordance with this section, and may adjourn the proceedings until the taxation has been completed.
(6) A legal practitioner may make an agreement in writing with a client for—
(a)payment of a specified amount by way of legal costs (which may—but need not—consist of a daily, hourly or other time-related rate for professional work carried out by the legal practitioner on the client's behalf); or
(b)payment of legal costs in accordance with a specified scale; or
(c)subject to any limitations imposed by the Society's professional conduct rules or the regulations—payment of a contingency fee to be calculated on a basis set out in the agreement on fulfilment of a condition stated in the agreement.
(7)The Supreme Court may, in proceedings under this section, rescind or vary an agreement under subsection (6) if it considers that any term of the agreement is not fair and reasonable.
It might be suggested that the issue raised by this appeal is simply a question of statutory construction, readily resolved by having regard to the purpose and history of the legislation. That purpose, it is said, is to allow agreements as to costs to be concluded between solicitor and their client in circumstances that guarantee fairness. The legislature, in adopting such provisions, did not intend to address the manner of making contracts other than the requirement that the terms of the agreement as to costs be in writing.
Legislative history supports this suggestion. The words of the progenitor section, which specifically required that a contract between solicitor and client be signed by the party to be charged, have been removed from the wording of the current legislation.
If this approach is adopted, it follows that the case law expounding upon other legislative provisions, from different eras and different jurisdictions, has little relevance to the interpretation of the provision presently in issue, section 42(6) of the Legal Practitioners Act.
This approach is of considerable appeal. However, it is necessary to address the arguments that were put to the court in their entirety before reaching a final view.
The Facts
In early 2004, Harry and Vicky Kasmeridis, the clients and respondents, engaged the appellant, McNamara Business & Property Law, a firm of solicitors, to act on their behalf in an application to set aside a default judgment entered in proceedings in the Magistrates Court.
On 5 February 2004 the solicitors wrote to the clients enclosing a copy of the solicitors’ terms of engagement and schedule of fees, which together comprised their proposed retainer agreement. The stated purpose of the letter was to set out the terms upon which the solicitors would act for the clients. It read:
Thank you for instructing us to act on your behalf. The purpose of this letter is to set out the terms on which we will act for you.
Enclosed are our Terms of Engagement and Schedule of Fees which together with this letter, set out the relevant terms and conditions on which we will act for you. Please note that our Terms of Engagement, Schedule of Fees and this letter constitute a solicitor and client agreement between you and this firm for the purposes of the Legal Practitioners Act 1981.
Please also note that these terms and conditions will apply to all matters in respect of which we accept instructions from you or act on your behalf unless mutually agreed to the contrary in writing. This will include any matter in which we act for a related body corporate of you, or for any person, corporation, trust or other party on whose behalf you instruct us.
Please contact us to discuss any aspect of this letter and the Terms of Engagement if you have any queries.
Included in the proposed retainer agreement were the following clauses:
Each solicitor/staff member is assigned an hourly rate determined by seniority, experience, and expertise, and is required to keep detailed records of all time spent on the matter. The present hourly rates are quoted in the attached schedule. Services charged include interviews, preparing or reading documents, correspondence, negotiations, telephone calls, meetings, attending in Court, research of other matters and other relevant work.
…
The client agrees and expressly authorises the solicitors to assign solicitors, staff members or counsel to work on the matter as and when required; to engage and obtain any reports from experts; to engage barrister/s and incur any unusual disbursement/s the solicitors consider necessary for the proper conduct of the matter.
The client is aware and has been advised that the fixed amount charged or rate payable may exceed the rates set by the relevant Court or other scale and may care to seek independent legal advice concerning this aspect or any part of this agreement.
The client agrees to pay the solicitors’ accounts including interim accounts received within 14 days of presentation. The client agrees to pay or reimburse the solicitors for any GST payable in respect of the fees and disbursements. Interest at the rate of 10% per annum is payable on all accounts unpaid for 14 days or more after presentation.
The client agrees to pay monies for anticipated legal services or disbursements into the solicitors’ Trust Account as and when requested.
…
The client is aware and has been advised that any costs received from other parties in a litigious matter (called “party/party costs”) may not cover all of the solicitors’ costs and disbursements incurred (called “solicitor/client costs”) and the client will have to meet the difference in these costs from the client’s own pocket if this occurs.
…
The client is personally liable for the solicitors’ costs and disbursements even if the matter involves the solicitors acting for other person/s and/or organisations.
…
Any special conditions on the Retainer Agreement will comprise part of these terms.
The schedule of fees relevantly provided:
Client: Harry Kasmeridis
Fees for Legal Services
The current hourly rates (including GST)
Solicitors $200.00
Paralegals $150.00
We reserve the right to charge a premium where your matter requires particularly urgent attention or involves excessive out-of-hours work. Please note that the amount to be charged is not calculated by direct reference to court scales and may exceed the rate set by such scales.
Expenses
In addition to the fees set out above, you are required to pay any expenses we incur on your behalf in connection with your matter. Expenses include such things as court fees, Lands Titles Office fees, stamp duty, company and other searches, barrister’s fees, courier charges, expert’s fees, postage and telephone charges.
…
The solicitors apparently intended that the retainer agreement would form an agreement in writing for the purposes of section 42(6) of the Legal Practitioners Act.
On 9 February 2004, Mr Viscariello, the practitioner within the solicitors’ firm with conduct of the matter, had a telephone conversation with Mr Kasmeridis during which, according to the affidavit of Mr Viscariello, Mr Kasmeridis orally accepted the retainer agreement:
On 9 February 2004 I had a telephone conversation with the first respondent Harry Kasmeridis, at which time [the] first respondent confirmed that he had received our letter dated 5 February 2004 and that he had read our firm’s Retainer Agreement and that he, acting for and on behalf of himself and for and on behalf of the second respondent, accepted the Retainer Agreement and he then proceeded to give me further urgent instructions with respect to the future conduct of the matter including in relation to my previous recommendation to [the] first respondent, that I engage counsel, namely Robert W Sallis in this matter.
Mr and Mrs Kasmeridis did not acknowledge their acceptance of the retainer agreement in writing by signing the document.
The solicitors submitted that the Full Court should receive further evidence on appeal pursuant to rule 95.15(b) of the Supreme Court Rules. That evidence was in the form of a further affidavit of Mr Viscariello, which exhibited a contemporaneous written note made by Mr Viscariello said to record the oral acceptance of the retainer agreement by Mr Kasmeridis on behalf of both himself and Mrs Kasmeridis. The application was not opposed. The Court received the affidavit of Mr Viscariello.
The hand-written file note recording Mr Viscariello’s conversation with Mr Kasmeridis on 9 February 2004 was accepted into evidence by the Court. The note records the following:
TA … re instructions … said got the RA & all ok. Go ahead. Must save house do whatever it takes. I should get R Sallis to act.
The note is significant for two reasons. It is a written record of the solicitors that the clients had agreed to the terms of the retainer agreement. This is not to say that it satisfies the requirement in section 42(6), although in the circumstances it may have. The note also allows an understanding of the circumstances in which the solicitors were engaged to act and in which the clients agreed to the terms of the retainer agreement. The clients were at risk of losing their home and immediate action was required to address that risk.
On 24 February 2004 the solicitors rendered an account to the clients for $20,613.50 (inclusive of barrister’s fees and disbursements). On 23 April 2004 the clients applied, pursuant to section 42(1) of the Legal Practitioners Act, for a taxation of the solicitors’ costs. On 28 June 2004 in response to a direction from the court, the solicitors filed a bill of costs in taxable form. That bill was prepared using rates set out in the schedule of fees contained in the retainer agreement.
On 13 July 2004 the clients filed a notice of dispute in relation to the amounts claimed in the bill of costs. They submitted that the Master should refuse to tax the bill of costs that had been lodged, and should instead direct the filing of a bill of costs prepared in accordance with the appropriate scale pursuant to the Supreme Court Rules. It was said that no written fee agreement had been concluded between the parties in accordance with section 42(6). The Master ordered:
Fresh bill to be served and filed based on the usual scale of costs. I note that the present bill is a time cost one and as presently advised I am not satisfied that an agreement in writing has been achieved by the solicitors. It is for that reason that I am directing a fresh bill.
Decision under Appeal
The solicitors brought an appeal against the decision of the Master to a Judge of this Court.[1] The learned Judge summarised the complaints brought by the solicitors under three heads:
-the Master should have found that an agreement in writing had been made between the solicitors and the clients;
-the Master denied the appellant procedural fairness in allowing the argument as to the existence of an agreement in writing to take place, and requiring it to be completed, at a time when counsel appearing for the solicitors was unprepared for that argument;
-the Master’s reasons were inadequate.
[1] McNamara Business & Property Law v Kasmeridis (2004) 90 SASR 151.
The Judge dismissed the appeal. In relation to the first complaint, the Judge found that in the circumstances, a written agreement between the parties within the meaning of section 42(6) had not been made. The clients had not indicated by any form of writing their acceptance of the offer. As such, the Judge reasoned that the terms of section 42(6) had not been met:[2]
...s 42(6) is to be understood as though it read “the practitioner may make, in writing, an agreement with the client”. In this way effect is given to all words in s 42(6), and in particular to the requirements for the making of the agreement which it contains.
Where two parties agree orally that the terms of their agreement are those contained in a specified document, they do not, in my opinion, make an agreement in writing. Rather, they make an oral agreement with a term of that oral agreement being that the written terms contained in the specified document form part of their agreement. One can say, sensibly, that they have an agreement in writing but not that they have made an agreement in writing.
…
One can say, as did Evatt J in O’Young v Walter Reid & Co that when a signed offer is accepted orally, the writing constitutes a written agreement, but that falls short of a conclusion that the parties have made an agreement in writing. That which the parties have agreed upon may be in writing without the parties having made an agreement in writing.
In dismissing the appeal, the Judge interpreted the terms of section 42(6) as requiring not only that the terms of the agreement be in writing but that acceptance of the agreement also be in written form.
[2] (2004) 90 SASR 151 at [23]-[24].
The Judge reasoned that although it was not necessary for the purposes of section 42(6) that the agreement contain the signature of the clients, some form of written acceptance on their part was necessary:[3]
The traditional way by which an agreement in writing to be bound was indicated was the placing of a signature on the document containing the terms of the agreement. However, in my opinion, that need not be the only way. A signature is not critical. What is important is that the acceptance of the terms be in writing.
[3] (2004) 90 SASR 151 at [19].
Section 4 of the Acts Interpretation Act 1915 (SA), defines “writing” as “any visible form in which words may be reproduced or represented”. On the basis of this definition, the solicitors submitted to the Judge that, as there were forms of reproducing words in which a signature would not be possible, it was inappropriate to construe the expression “agreement in writing” as referring only to a document that had been signed. The Judge considered this submission to have some force but found that, in any event, it did not assist the solicitors:[4]
As noted above, in my opinion, the signing of a document is not the only way by which a party may, in modern times, indicate its accession to the terms of a document. But in this case the respondents had not indicated by any form of writing at all their acceptance of the terms proposed by the appellant.
[4] (2004) 90 SASR 151 at [29].
Having concluded that a signature of the client was not necessarily required for the purposes of section 42(6), the Judge continued:[5]
…it does not follow that because a signature is not required, Parliament intended that an agreement in writing could be made without there being any written indication of acceptance of the terms of the agreement by the client. Furthermore, the technique of construing one statute by contrasting it with the language used in another is of doubtful validity. In each case, it is the words actually used which are to be construed.
The Judge accordingly concluded that the Master was correct in finding that:[6]
while there had been an oral communication of acceptance of the terms of engagement only, the parties had not, for the purposes of section 42(6), made an agreement in writing.
[5] (2004) 90 SASR 151 at [30].
[6] (2004) 90 SASR 151 at [31].
The Judge noted that the decision of the Master, and, therefore, also his decision, were supported by a long line of authority:[7]
[7] (2004) 90 SASR 151 at [13]-[18] (footnote omitted).
That authority, in relation to the English and interstate counterparts of s 42(6), establishes that for a legal practitioner and a client to make an agreement in writing, the parties must show, by writing, their accession to the written terms. Usually accession to the agreement will be indicated by a signature, but that may not be the only means by which such accession can be indicated.
A number of the English decisions have considered s 4 of the Attorneys and Solicitors Act 1870 (UK) which provides that “an Attorney or Solicitor may make an agreement in writing with his client” respecting the remuneration of an attorney or a solicitor. In Re Lewis; Ex parte Munro [1876] 1 QBD 724 at 726-727 Lord Coleridge CJ said:
…an “agreement in writing” within s 4 must be an agreement by both parties, and both parties must sign their names upon the agreement. One reason for holding this to be the construction of the section is that otherwise it would always be possible for a solicitor to place a document signed by himself only and containing terms favourable to him before a client, and then to content that the client was bound by it.
In Re Raven; Ex parte Pitt (1881) 45 LT 742 at 743 Fry J said:
The words of the Act are “an agreement in writing”. What is an agreement in writing? It must be a document which shall show all the terms of the bargain between the parties and show by writing the accession of both parties to those terms. [emphasis added]
A similar view was taken in Clare v Joseph [1907] 2 KB 369 at 374 by Lord Alverstone CJ who said:
The scheme of the section is that it empowers a solicitor to enter into such an agreement with his client … when this agreement has received the client’s signature it comes within the machinery provided in the latter part of the Act.
Re Raven and Pontifex v Farnham were applied by Lord Denning MR, writing the judgment of the Court of Appeal, in Chamberlain v Boodle & King (a Firm) [1982] 1 WLR 1443. Lord Denning went on to say:
It seems to me that an agreement in writing can be contained in letters. But the letters ought at least to be signed by the client if he is to be deprived by the agreement of his right to tax.
A similar view has been taken in Australia. In Jovetic v Stoddart & Co (1992) 7 WAR 208 at 218, Seaman J held that the solicitor and the client must both join by writing in some document or documents which constitute the agreement. In that case, as the solicitor had not signed or indicated by any other means in writing his accession to the agreement, it did not have effect under the Western Australian counterpart of s 42(6). In Re Walsh Halligan Douglas’ Bills of Costs [1990] 1 Qd R 288, Dowsett J, in circumstances which are factually analogous to those of the present case, was not prepared to find that there was an agreement in writing since there was no document evidencing the acceptance by the client of the terms of the proposed agreement.
In relation to the second complaint, the solicitors submitted that they had been taken by surprise by the objection to the bill of costs being taxed using the charges set out in the retainer agreement. Mr Viscariello, upon being made aware of the objection in the Master’s chambers, applied for an adjournment to prepare argument. The Master refused the application. The Judge considered that in the circumstances, the Master should have allowed an adjournment:[8]
Given that he was taken by surprise, Mr Viscariello should have been given the opportunity to present a full argument. Had the adjournment been allowed, the respondents would not have suffered any prejudice which could not have been cured by an order for costs.
However, the Judge took the view that as the solicitors had been able to present their full argument on appeal, it was unnecessary to say anything further in relation to this complaint.
[8] (2004) 90 SASR 151 at [33].
Finally, the Judge concluded that although the Master’s reasons were brief, the rationale underpinning his decision was clear and accordingly the reasons were adequate.
The Appeal
Two grounds of appeal were advanced:
-that the Judge erred in holding that a written fee agreement presented by a solicitor to a client and accepted by that client in the circumstances of the present case did not constitute an agreement made in writing within the meaning of section 42(6) of the Legal Practitioners Act so as to be enforceable; and
-that the Judge erred in holding that a written fee agreement presented to a solicitor by a client and accepted by that client other than in writing did not constitute an agreement made in writing within the meaning of section 42(6) of the Legal Practitioners Act so as to be enforceable.
Counsel for the clients submitted that the line of authority cited by the Judge in support of his and of the Master’s decision should be applied by this Court, and that the Judge’s decision should be upheld. It was said that an agreement in writing within the terms of section 42(6) of the Legal Practitioners Act arises only if the practitioner and the client join, by writing, in some document or documents which constitute an agreement and the agreement is sufficiently specific so as to adequately inform the client of the terms upon which the solicitor agrees to act. It was said that whilst the placement of the signatures of the parties to the agreement was no longer a requirement, the phrase “agreement in writing” denotes an agreement the terms of which have been accepted in writing. In particular, counsel for the clients argued that oral acceptance, regardless of how that oral acceptance is conveyed, recorded or evidenced of terms that have been reduced to writing, even where those terms are clearly spelled out in a document, is insufficient. There must, it was said, be a document evidencing an acceptance of the terms.
It was further submitted that the solicitors failed to meet their obligations to the client in the terms of the retainer agreement. It was said that no estimate of fees was provided at any time to the clients. In addition, it was said, the retainer agreement lacked specificity in relation to the fees charged for professional legal services. It was also contended that, in particular, the concept of time costing was not explained to the clients.
Counsel for the clients contended that an interpretation of section 42(6) that permitted anything other than that acceptance of a retainer agreement must be made in writing would be contrary to public policy interests reflecting the duty of the practitioner to the client.
Retainer Agreement
“Retainer” is a term used to “describe a contract between a solicitor and client for the provision of legal services”.[9] There can be no retainer unless the elements of a contract are present, principally consensus between the parties. Like other contracts, the terms of the retainer, express and implied, determine the nature and scope of the contractual rights and obligations that apply to the relationship.
[9] Wong v Kelly (1999) 154 FLR 200 at 206.
Generally, the common law regards an agreement as being “in writing” if its full terms have been reduced to writing, even if it has not been signed by the parties.
It has been held by the High Court that, if a contractual offer containing the terms of a contract is made in writing and is orally accepted, the offer is to be regarded as a written contract for the purposes of the relevant statute.
In Heppingstone v Stewart,[10] Griffiths J observed:[11]
[I]t cannot be disputed that a written offer, containing all the terms of a proposed contract, may be accepted verbally, and if it is accepted verbally, then there is a complete contract satisfying the Statute of Frauds.
Barton J said:[12]
It is plain that the document in question was not until acceptance a binding agreement. It was only an offer to make one. But the acceptance of the offer, even if merely verbal, converted it into a binding contract of which every term was in writing.
[10] (1910) 12 CLR 126.
[11] (1910) 12 CLR 126 at 131.
[12] (1910) 12 CLR 126 at 135-136.
In O’Young v Walter Reid & Company Ltd[13] Dixon J observed:[14]
[I]t could not be said that a contract existed but was unenforceable for want of a sufficient writing. For the only contract offered by the intending guarantors would be in writing, and it would be immaterial that the creditor’s simple assent or acceptance was not also expressed in writing
Evatt J expressed the following view:[15]
A memorandum may be sufficient to satisfy sec. 4 of the Statute of Frauds although it is signed by the person to be charged before the agreement is concluded by verbal acceptance. When the signed offer is accepted by parol, such writing is not merely a memorandum or note of the agreement, it is “the agreement” itself “in writing and signed by the party to be charged therewith”.
[13] (1932) 47 CLR 497.
[14] (1932) 47 CLR 497 at 508.
[15] (1932) 47 CLR 497 at 513.
Statutory requirements that retainer agreements be in writing have as their historical base the fiduciary relationship between solicitor and client and the recognition of the need to address the vulnerability of the client to the solicitor.
The retainer in the present case attracts to the relationship the fiduciary duties that are inherent in a solicitor-client relationship.[16] The principles of equity and the common law are available to protect a client against any unfairness in an agreement.
[16] Re a Firm of Solicitors [1995] 3 All ER 482 at 490; Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at 55.
Section 42
The Legislative History
The progenitor to section 42(6) is section 21 of the Legal Practitioners Act 1936-1972 (SA). That section provided:
Any legal practitioner may make an agreement for the payment of any sum of money for the performance, conduct, or management of any work or business by that practitioner and any agreement so made shall be valid and binding upon the parties thereto: Provided that every such agreement shall be in writing, and signed by the party to be charged thereby, or by his agent duly authorized to sign it, and shall be for the payment of a certain amount, whether the work or business is brought to a successful issue or not..[17]
[17] This was also said to contrast with section 26(1) of the Law of Property Act 1936 (SA) which expressly provides that a written agreement must be signed:
No action shall be brought upon any contract for the sale or other disposition of land or of any interest in land, unless an agreement upon which such action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some person thereunto by him lawfully authorised.
When the 1981 Legal Practitioners Act gained assent on 25 June 1981, section 42(6) read:
Notwithstanding the foregoing provisions of this section, a legal practitioner may make an agreement in writing with a client for the payment of a specified amount by way of legal costs, or of legal costs in accordance with a specified scale.
It is to be observed that when the Legal Practitioners Act 1981 was introduced and substituted for the earlier Act, the words “… and signed by the party to be charged” were removed. However, the remainder of the provision was largely unchanged as to its substantive effects. Section 42(6) was subsequently amended to its present form in 1993.
The fact that a new subsection was introduced in 1981 replacing the earlier subsection suggests that legislative change was intended. The change in the wording of the section, and in particular the deletion of the words, “and signed by the party to be charged”, provides strong support for the solicitors’ contentions.
The history of the South Australian legislation does not appear to have been drawn to the attention of the courts below. An understanding of the historical development of the legislation allows “the long line of case law” referred to by the Judge to be distinguished. It also allows the South Australian legislation to be understood to be substantially comparable in its effect to legislation in Victoria and New South Wales. [18]
A Purposive Approach
[18] Legal Practice Act 1996 (Vic), section 96:
In presenting the Legal Practitioners Act Amendment Bill 1981 to the Legislative Council, which introduced section 42, the Attorney-General made it clear that the underlying purpose of the legislation was to ensure that the high standards of the legal profession were maintained. This was in part in recognition of the fiduciary obligations owed by solicitors to their clients. The Attorney’s speech included the following:[19]
The Bill is designed to promote sound and reasonable regulation of the practice of the law and to ensure the accountability of the profession to the public. That has always been central to the ethics of the legal profession, whose standards have always been high. Self-regulation has been conscientiously practised by the profession, but in recent times the profession has recognised some difficulties emerging.
The profession also recognises that although self-regulation is an important principle the community at large has a right to expect an independent involvement that will be adequate to assure the public that its interests are protected – in other words, “justice must not only be done but be seen to be done”. The Government shares this view. It is in this context, therefore, that this Bill must be viewed.
[19] South Australia, Parliamentary Debates, Legislative Council, 5 March 1981, 3548 (Trevor Griffin, Attorney-General).
As earlier observed, section 42(6) of the Legal Practitioners Act was subsequently amended in 1993. However, nothing turns on that amendment for present purposes.
The Acts Interpretation Act 1915 (SA), unlike its counterparts in every other State, does not have an equivalent provision to section 15AB of the Acts Interpretation Act 1901 (Cth). This is the section that permits the use of extrinsic materials to aid in interpretation where a provision is ambiguous or otherwise unclear.
However, it is clear from Owen v South Australia[20] that reference may be made to reports of parliamentary debates both to ascertain the mischief and to discern the underlying legislative purpose.[21]
[20] (1996) 66 SASR 251.
[21] (1996) 66 SASR 251 at 255-256.
The modern approach to statutory interpretation was addressed by the High Court in Project Blue Sky v Australian Broadcasting Authority[22] by McHugh, Gummow, Kirby and Hayne JJ in the following terms: [23]
The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined "by reference to the language of the instrument viewed as a whole". In Commissioner for Railways (NSW) v Agalianos, Dixon CJ pointed out that "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed". Thus, the process of construction must always begin by examining the context of the provision that is being construed.
[22] (1998) 194 CLR 355.
[23] (1998) 145 CLR 355 at 381–389 (footnotes omitted).
Section 42(6) is to be interpreted against the background that its terms were designed to promote sound and reasonable regulation of a profession that owes fiduciary duties to clients. The subsection, by its very terms, acknowledges that it is addressing an aspect of the relationship of solicitor and client. That relationship carries accepted obligations of confidence, trust and dependence. The section is not to be construed as taking away the protection provided to a client by the common law.
Fiduciary Relationship
The relationship between solicitor and client has traditionally been recognised as a relationship which gives rise to fiduciary duties.[24] Over a century ago Lord Westbury LC observed:[25]
There is no relation known to society, of the duties of which it is more incumbent upon a court of justice strictly to require a faithful and honourable observance, than the relation between a solicitor and client.
[24] Maguire v Makaronis (1996) 188 CLR 449.
[25] Tyrell v Bank of London (1862) 10 HLC 26 at 44; 11 ER 934 at 941.
Among the fiduciary duties owed by a solicitor is the duty to make full disclosure. As observed by Dal Pont:[26]
A primary obligation of the lawyer is to reveal all material information that comes into her or his possession which is concerned with the client’s affairs.
[26] G E Dal Pont, Lawyers’ Professional Responsibility in Australia and New Zealand (2nd ed, 2001) at 151.
The classical formulation of the duty of disclosure owed by a person occupying a fiduciary position involves a duty to disclose all relevant interests that they may have in conflict with the interests of the person to whom the obligation is owed.[27]
[27] Nocton v Lord Ashburton [1914] AC 932.
The duty of disclosure owed by a solicitor is important because of the vulnerability of the client to the solicitor. Vulnerability was discussed in Hospital Products Ltd v United States Surgical Corp[28] where Mason J observed that as a consequence of the power of a fiduciary to affect a beneficiary’s interests:[29]
The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.
The protection of the vulnerable was a feature of fiduciary obligations emphasised by Dawson J:[30]
There is, however, the notion underlying all cases of fiduciary obligations that inherent in the nature of the relationship itself is a position of disadvantage or vulnerability on the part of one of the parties which causes him to place reliance upon the other and requires the protection of equity acting upon the conscience of that other.
[28] (1984) 156 CLR 41.
[29] (1984) 156 CLR 41 at 97.
[30] (1984) 156 CLR 41 at 142.
In the present case, vulnerability is derived not only from the inherent nature of the relationship between solicitor and clients, but also from the factual matrix. The clients, facing the possible loss of their home, sought urgent legal advice and assistance. In the circumstances, the clients were not concerned with the manner in which the advice and assistance were to be obtained. It was the solicitors’ duty not to take advantage of this situation by failing to adequately inform the clients of all matters relevant to the proposed retainer agreement.
In Haywood v Roadknight[31] the Full Court of the Supreme Court of Victoria described the duty of disclosure in the following terms:[32]
Where the relationship of confidence exists it is incumbent on the person in whom the confidence is reposed to satisfy the Court that he has put himself “at arm’s length” to his client; … He must furnish his employer with all the knowledge he himself possessed … and he must give “as ample and correct advice and information to his client as he would have done if his client had been dealing with a third person”: Cane v Allen [[1814] 2 D & W 289] … And the onus is no light one. “He must show to demonstration, for that must not be left in doubt, that no industry he was bound to exert would have got a better bargain”: Gibson v Jeyes [[1801] 6 Ves 266 at 271]; and where the Judge hearing his evidence is unable to accept it, he will fail …
The Rules of Professional Conduct & Practice embody these principles:
Practitioners should serve their clients competently and diligently. They should be acutely aware of the fiduciary nature of their relationship with their clients, and always deal with their clients fairly, free of the influence of any interest which may conflict with a client's best interests. Practitioners should maintain the confidentiality of their clients' affairs, but give their clients the benefit of all information relevant to their clients' affairs of which they have knowledge. Practitioners should not, in the service of their clients, engage in, or assist, conduct that is calculated to defeat the ends of justice or is otherwise in breach of the law.
[31] [1927] VLR 512.
[32] [1927] VLR 512 at 521.
In the present case the solicitors were entering into a contract with the clients. The solicitors were seeking more favourable terms of retainer than would otherwise be available. The solicitors were seeking authority to be paid above scale professional fees for the work of qualified legal practitioners as well as clerks working on the clients’ matters. For work performed in the circumstances of urgency or during out-of-hours attendances, the right to charge an open-ended premium was stipulated. Other terms favourable to the solicitors were stipulated. The solicitors were in a position of conflict.
The principles that govern fiduciary relationships required full disclosure by the solicitors of all relevant information so that the clients could make an informed decision about the proposed terms of the retainer.
Section 42(7)
The construction of legislative provisions should always involve a consideration of their context.[33] To read an individual section
in isolation from the enactment of which it forms a part is to offend against the cardinal rule of statutory interpretation that requires the words of a statute to be read in their context.[34]
This well-established principle of statutory construction[35] requires not only that the words of each section be construed in light of the Act as a whole, but also that the result when the Act is applied to a specific situation be taken into account.
[33] Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 304 (Gibbs CJ); Attorney-General v Prince Ernest Augustus of Hanover [1957] AC 436 at 461 and 473.
[34] K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309 at 315 (Mason J).
[35] The statement of Mason J is consistent with the four majority judgments in K & S Lake City Freighters: at 312 (Gibbs CJ); at 319 (Brennan J); at 321 (Deane J with whom Dawson J agreed) and was cited with approval by the joint judgment of Brennan CJ, Dawson, Toohey and Gummow JJ in CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408.
Accordingly, when interpreting section 42(6) of the Legal Practitioners Act, it is relevant, and indeed necessary, to consider the impact of section 42(7), particularly given that both are subsections to the same section.
The presence of the provision empowering the court to set aside retainer agreements in the event of unfairness directly following the section containing the requirement that a retainer agreement be in written form naturally diminishes the need for the clients’ agreement to be in writing
Conclusion
As observed by the Judge under appeal, the definition attributed to “writing” by the Acts Interpretation Act 1915 (SA) is that writing “includes any visible form in which words may be reproduced or represented”.
In the context of forming agreements, this definition encompasses the situation where a document is physically signed by parties to acknowledge their acceptance of its terms, but also extends beyond this method of entering into a contract.
The statutory requirement that an agreement be made in writing is sufficiently satisfied if there is written confirmation of the existence of an agreement. This accords with the view adopted by the Judge that an email sent by the respondents to the appellant acknowledging their acceptance of the terms of the retainer agreement would have sufficed for the purposes of section 42(6). In effect, on the interpretation advanced by the clients, had the telephone conversation between Mr Kasmeridis and Mr Viscariello on 9 February 2004 been an email exchange, and accordingly in visible written form, the terms of section 42(6) of the Legal Practitioners Act would have been satisfied. The appellant would have been able to rely upon the retainer agreement when preparing its account. Such an interpretation does not rest in logic. Why should an email exchange be reliable evidence or in any event more reliable than other evidence of agreement?
The retainer agreement itself was in writing. The terms of that agreement were in writing. There is evidence that the clients had orally accepted those terms. In addition, there is evidence that the respondents’ oral acceptance of the retainer agreement was in fact recorded in writing. This latter written record was not in our view essential in order to comply with section 42(6).
Section 42(6) of the Legal Practitioners Act should not be construed to require a client’s acceptance of a costs agreement to be in a written form. The legislative history of the provision, the common law concerning written agreements, the definition of “writing” in the Acts Interpretation Act, the protection offered by equity and the overriding protection offered by section 42(7) provide overwhelming support against such a construction.
It is to be borne in mind that the onus of establishing that an agreement was made rests on the solicitors. This onus is to be discharged having regard to the nature of the fiduciary relationship and the circumstances of dependence and vulnerability that may exist. In the present case, the clients’ anxiety about the loss of their home is a circumstance that would call for careful scrutiny of the relevant events in determining whether an agreement was made.
In the event of there being any unfairness in the process followed or in the terms agreed, the court’s powers of intervention pursuant to section 42(7) or pursuant to its equitable jurisdiction could be invoked. In this way the necessary protection may be provided to the clients.
To take one example, the provision in the present case for the solicitors to be entitled to charge an open-ended premium for urgent or out-of-hours work could be said to be unfair, unreasonable and unconscionable in the circumstances. Such a term, if it formed part of a retainer, was accepted by counsel for the solicitors to be unenforceable. Such a term was accepted to be unfair and unreasonable as it would allow the solicitors to charge in respect of work undertaken without limit. Counsel was left to contend that such a clause would be severable. This provision and other questions arising on the terms of the retainer will need to be explored in proceedings other than on this appeal.
The appeal should be allowed. The matter should be remitted to a Master for further hearing and determination. The Master will address, if the issue arises, whether there was a section 42(6) agreement and whether, if an agreement was made, relief pursuant to section 42(7) should be granted.
(1) A cost agreement may be made –
(a) between a client and a legal practitioner or firm retained by the client; or
(b) between a client and a legal practitioner or firm retained on behalf of the client by another legal practitioner or firm; or
(c)..between a legal practitioner or firm and another legal practitioner or firm that retained that practitioner or firm on behalf of a client.
(2) A costs agreement must be written or evidenced in writing.
(3) A costs agreement may consist of a written offer that is accepted in writing or by other conduct.
Legal Practice Act 2004 (NSW), section 322:
(1)..A costs agreement may be made:
(a) between a client and a law practice retained by the client, or
(b) between a client and a law practice retained on behalf of the client by another law practice, or
(c) between a law practice and another law practice that retained that law practice on behalf of a client.
(2) A costs agreement must be written or evidenced in writing.
(3) A costs agreement may consist of a written offer in accordance with subsection (4) that is accepted in writing or by other conduct.
Note:Acceptance by other conduct is not permitted for conditional costs agreements—see section 323(3)(c)(i).
(4) The offer must clearly state:
(a) that it is an offer to enter a costs agreement, and
(b) that the client may accept it in writing or by other conduct, and
(c) the type of conduct that will constitute acceptance.
(5) A costs agreement cannot provide that the legal costs to which it relates are not subject to costs assessment under Division 11.
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