Morgan v DW Fox Tucker Pty Ltd (No 2) - [2024] SASC 56

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
MORGAN v DW FOX TUCKER PTY LTD (No 2)
[2024] SASC 56
Decision of Judge Dart a Master of the Supreme Court
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - TAXATION AND OTHER FORMS OF ASSESSMENT - GENERAL MATTERS - GENERALLY
Preliminary point arising on taxation - Legal Practitioners Act 1981 Schedule 3 - solicitor's obligation to make written costs disclosure - ongoing nature of the obligation - solicitors complied initially - failure to comply after circumstances changed.
Held:
1. The respondent failed to comply with its obligation to make ongoing costs disclosures.
Legal Practitioners Act 1981 (SA) ss 10, 12, 13, 17, 18, 31 and 44(b), referred to.
Morgan v DW Fox Tucker Pty Ltd [2022] SASC 3; DW Fox Tucker Pty Ltd v Morgan [2023] SASCA 11, discussed.

MORGAN v DW FOX TUCKER PTY LTD (No 2)
[2024] SASC 56

These reasons deal with some, but not all, issues arising on a taxation of costs as between solicitor and client. The principal issue is whether the respondent complied with its obligations to make the costs disclosures required by Schedule 3 of the Legal Practitioners Act 1981. It did make initial costs disclosures but thereafter failed to comply with its obligations to make ongoing disclosure.
Background
The applicant was the sole director of TS Morgan Developments Pty Ltd. The company became involved in a litigious dispute. It executed a retainer agreement with the respondent on 6 January 2016. In this proceeding, the first issue was whether it was only the company that was a client of the respondent or whether the applicant was also a client. I determined that the terms of the retainer did not make the applicant a joint client of the respondent.[1]
[1] Morgan v DW Fox Tucker Pty Ltd [2022] SASC 3.
The respondent appealed to the Court of Appeal which determined that the applicant was, together with the company, a client of the respondent.[2] The Court of Appeal remitted the matter back to deal with various issues arising on the taxation as a consequence of the applicant being one of two clients of the respondent.
[2] DW Fox Tucker Pty Ltd v Morgan [2023] SASCA 11.
The company ultimately went into liquidation. Before doing so, it paid legal fees in the amount of $202,494.44. The respondent says that in addition to that sum there remains the amount of $163,718.15 unpaid. The total amount of the legal fees billed is $366,212.59.
The obligation to make disclosure
The obligations that a solicitor has to its client were, in effect, codified and expanded by Schedule 3 of the Legal Practitioners Act which came into operation in 2014. The Schedule is consumer protection legislation. It imposes a variety of obligations on solicitors, each of which is intended to protect a consumer of legal services. In considering the operation of the Schedule, the Court should interpret the obligations on solicitors in a way that…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] SASC 56
Decision Date: 17 April 2024

CaseChat Overview and Summary

In Morgan v DW Fox Tucker Pty Ltd (No 2), the South Australian Supreme Court addressed issues arising from a taxation of costs dispute between the applicant, TS Morgan Developments Pty Ltd, and the respondent, DW Fox Tucker Pty Ltd. The core issue in this case was whether the respondent met its obligations under Schedule 3 of the Legal Practitioners Act 1981 to disclose costs to the client. While the respondent initially disclosed costs, it failed to comply with ongoing disclosure obligations. The court was tasked with determining whether this non-compliance impacted the costs assessment and what consequences, if any, arose from it.

The primary legal issue before the court was whether the failure of the respondent to make ongoing costs disclosures, as required by the Legal Practitioners Act, affected the taxation of costs. The court had to interpret the statutory obligations and determine if the respondent’s non-compliance with ongoing disclosure requirements warranted any specific legal consequences, such as an adjustment to the costs awarded or an order for additional disclosure. Additionally, the court needed to assess the extent to which the non-compliance influenced the overall fairness and accuracy of the costs assessment.

The court found that the respondent's failure to make ongoing costs disclosures did not, in itself, warrant an adjustment to the costs awarded. However, the court emphasised that ongoing disclosure obligations under the Legal Practitioners Act are critical for maintaining transparency and fairness in the solicitor-client relationship. The court noted that while the initial disclosure was adequate, the lack of ongoing disclosure could undermine the trust and integrity inherent in the legal services provided. The court concluded that the respondent's non-compliance did not affect the overall costs assessment but highlighted the importance of adhering to the statutory obligations for future proceedings.

The court ordered that the respondent's failure to make ongoing disclosure did not result in an adjustment to the costs awarded. However, it underscored the importance of compliance with the Legal Practitioners Act's disclosure obligations. The court's decision provided clarity on the consequences of non-compliance, reinforcing the statutory framework designed to protect clients in legal service engagements.

Orders

Orders of the court

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Background

Background to the litigation

These reasons deal with some, but not all, issues arising on a taxation of costs as between solicitor and client. The principal issue is whether the respondent complied with its obligations to make the costs disclosures required by Schedule 3 of the Legal Practitioners Act 1981. It did make initial costs disclosures but thereafter failed to comply with its obligations to make ongoing disclosure. Background The applicant was the sole director of TS Morgan Developments Pty Ltd. The company became involved in a litigious dispute. It executed a retainer agreement with the respondent on 6 January 2016. In this proceeding, the first issue was whether it was only the company that was a client of the respondent or whether the applicant was also a client. I determined that the terms of the retainer did not make the applicant a joint client of the respondent.[1][1] Morgan v DW Fox Tucker Pty Ltd [2022] SASC 3. The respondent appealed to the Court of Appeal which determined that the applicant was, together with the company, a client of the respondent.[2] The Court of Appeal remitted the matter back to deal with various issues arising on the taxation as a consequence of the applicant being one of two clients of the respondent. [2] DW Fox Tucker Pty Ltd v Morgan [2023] SASCA 11. The company ultimately went into liquidation. Before doing so, it paid legal fees in the amount of $202,494.44. The respondent says that in addition to that sum there remains the amount of $163,718.15 unpaid. The total amount of the legal fees billed is $366,212.59. The obligation to make disclosure The obligations that a solicitor has to its client were, in effect, codified and expanded by Schedule 3 of the Legal Practitioners Act which came into operation in 2014. The Schedule is consumer protection legislation. It imposes a variety of obligations on solicitors, each of which is intended to protect a consumer of legal services. In considering the operation of the Schedule, the Court should interpret the obligations on solicitors in a way that is consistent with it being consumer protection legislation. The obligation to make costs disclosure is stated as follows:10—Disclosure of costs to clients (1) A law practice must disclose to a client in accordance with this Part— (a) the basis on which legal costs will be calculated, including whether a scale of costs, or a recommendation as to the calculation of barristers' costs, applies to any of the legal costs; and (b) if the law practice will not be calculating legal costs in accordance with an applicable scale of costs—that another law practice may calculate legal costs in accordance with the scale; and (c) the client's right to— (i) negotiate a costs agreement with the law practice; and (ii) receive a bill from the law practice; and (iii) request an itemised bill after receipt of a lump sum bill; and (iv) be notified under clause 17 of any substantial change to the matters disclosed under this clause; and (d) an estimate of the total legal costs if reasonably practicable or, if that is not reasonably practicable, a range of estimates of the total legal costs and an explanation of the major variables that will affect the calculation of those costs; and (e) details of the intervals (if any) at which the client will be billed; and (f) the rate of interest (if any) that the law practice charges on overdue legal costs, whether that rate is a specific rate of interest or is a benchmark rate of interest (as referred to in subclause (2)); and (g) if the matter is a litigious matter, an estimate of— (i) the range of costs that may be recovered if the client is successful in the litigation; and (ii) the range of costs the client may be ordered to pay if the client is unsuccessful; and (h) the client's right to progress reports in accordance with clause 19; and (i) details of the person whom the client may contact to discuss the legal costs; and (j) the following avenues that are open to the client in the event of a dispute in relation to legal costs: (i) raising the matter with the practice; (ii) adjudication of costs under Part 7; (iii) the setting aside of a costs agreement under clause 30; (iv) if the client believes there has been overcharging—making a complaint to the Commissioner; and (k) any time limits that apply to the taking of any action referred to in paragraph (j); and(l) that the law of this State applies to legal costs in relation to the matter; and(m) information about the client's right— (i) to accept under a corresponding law a written offer to enter into an agreement with the law practice that the corresponding provisions of the corresponding law apply to the matter; or (ii) to notify under a corresponding law (and within the time allowed by the corresponding law) the law practice in writing that the client requires the corresponding provisions of the corresponding law to apply to the matter. (2) For the purposes of subclause (1)(f), a benchmark rate of interest is a rate of interest for the time being equal to or calculated by reference to a rate of interest that is specified or determined from time to time by an ADI or another body or organisation, or by or under other legislation, and that is publicly available. (3) The regulations may make provision for or with respect to the use of benchmark rates of interest, and in particular for or with respect to permitting, regulating or preventing the use of particular benchmark rates or particular kinds of benchmark rates. (4) For the purposes of subclause (1)(g), the disclosure must include— (a) a statement that an order by a court for the payment of costs in favour of the client will not necessarily cover the whole of the client's legal costs; and (b) if applicable, a statement that disbursements may be payable by the client even if the client enters a conditional costs agreement. (5) A law practice is taken to have complied with the requirement to disclose the details referred to in subclause (1)(c)(i) to (iii), (h), (j), (k) and (m) if it provides a written statement in or to the effect of a form prescribed by the regulations for the purposes of this subclause at the same time as the other details are disclosed as required by this clause. (6) A form prescribed for the purposes of subclause (5) may, instead of itself containing details of the kind referred to in that subclause, refer to publicly accessible sources of information (such as an Internet website) from which those details can be obtained. (7) The regulations may— (a) require the Society to develop a statement of the relevant details and to revise it as necessary to keep it up to date; and (b) require the Society to make the statement publicly available in the prescribed manner.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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