Nicholl and Co Pty Ltd v Turner
[2015] ACTSC 42
•3 March 2015
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Nicholl & Co Pty Ltd v Turner & Anor |
Citation: | [2015] ACTSC 42 |
Hearing Date(s): | 25 February 2015 |
DecisionDate: | 3 March 2015 |
Before: | Mossop M |
Decision: | 1. The proceedings are permanently stayed. 2. There is no order as to costs of the proceedings. 3. Liberty is granted to either party to apply within 7 days to seek a final order different to that in order 1, which liberty may be exercised by giving notice by email to my associate (copying in each other party). |
Category: | Principal Judgment |
Catchwords: | STATUTES – Interpretation – legal words and phrases in Legal Profession Act 2006 (ACT) s 304: “consumer dispute” and “are or have been” – effect of s 304 on the entitlement of a solicitor to have costs assessed PROCEDURE – Costs – costs assessment – whether the making of a complaint to the Law Society operates to stay costs assessment proceedings – whether proceedings to recover costs may be brought – Legal Profession Act 2006 (ACT) ss 304, 409 |
Legislation Cited: | Court Procedure Rules 2006 (ACT) Legal Profession Act 2006 (ACT) |
Cases Cited: | Fazzolari v Parramatta CC (2009) 237 CLR 603 Law Society ACT v Goodman Law (2013) 279 FLR 383 |
Texts Cited: | D Pearce & R Geddes Statutory Interpretation in Australia (8th ed) (LexisNexis Butterworths, 2014) Australasian Parliamentary Counsel's Committee, Legal Profession – Model Laws Project Model Bill (2nd ed, August 2006) |
Parties: | John Nicholl & Co Pty Ltd T/AS Nicholl & Co (Plaintiff) Donald Frederick Turner (First Defendant) Susan Jane Turner (Second Defendant) |
Representation: | Counsel: Mr J Nicholl (Plaintiff) Mr R Travers (Defendants) |
| Solicitors: Nicholl & Co (Plaintiff) Colquhoun Murphy (Defendants) | |
File Number(s): | SC 352 of 2014 |
Introduction
The plaintiff is attempting to recover fees said to be owed by the defendants, former clients of the plaintiff. The defendants are presently resisting the recovery of those fees.
After an application was filed for the assessment of the costs charged by the plaintiff, the first defendant made three complaints to the Law Society, including complaints relating to the costs that he was charged. The issue in these proceedings is whether s 304 of the Legal Profession Act 2006 (ACT) (LPA) means that the assessment of the costs cannot proceed.
Background
The defendants engaged the plaintiff to provide legal services in relation to a dispute with a bank. Proceedings were subsequently commenced by the plaintiff in the Magistrates Court to recover unpaid fees from the defendants. Those proceedings were ultimately discontinued. On 7 August 2014 the plaintiff applied by originating application for an assessment of its costs pursuant to Division 3.2.7 of the LPA. The filed documents were sent by email to the defendants on 11 August 2014. By letter dated 18 August 2014 the defendants made a complaint by letter to the Law Society of the ACT. That letter contained some complaints in relation to costs. A further complaint was given to the Law Society by letter dated 2 September 2014. That letter included a complaint that the plaintiff was relying upon a bill drawn in accordance with a scale of costs rather than in accordance with the rate set in the fees agreement between the parties. A third complaint was made by letter dated 3 October 2014 relating to the commencement of Magistrates Court proceedings by the plaintiff in circumstances where costs had not been assessed.
The position adopted by the Complaints Committee of the Law Society in relation to the first complaint was that because there were proceedings on foot in the Supreme Court, namely, the proceedings seeking assessment of costs, it was not appropriate to consider the complaint of the defendants. As a result, the Law Society indicated that it would not commence an investigation at that time. In response to the second complaint the Law Society, in its letter dated 9 September 2014, adopted the same position.
In a further letter dated 16 September 2014 to the Law Society, the first defendant referred to the operation of s 304 of the LPA and requested that the Law Society “take [his] complaint seriously” or “please explain to [him] exactly and pursuant to what authority [the Law Society] will continue to ignore [his] complaint”.
In a letter dated 23 September 2014 addressed to the first defendant the Law Society’s Professional Standards Manager, Mr Reis, quoted the terms of s 304(1) and continued:
The provision suggests that costs assessment cannot be sought in circumstances where a complaint is or has previously been subject of a complaint. The material provided by you indicates that the application for assessment was lodged on 7 August 2014. Your complaint to the Law Society was written on 18 August 2014. In other words your complaint post-dated the application for assessment and does not fall within the proscription in section 304(1).
In October 2014 the plaintiff wrote to the Registrar of the Supreme Court indicating that the position of the Law Society remained that it did not propose to consider the complaint or otherwise deal with it until the Supreme Court proceedings were resolved.
In his email to the solicitor for the plaintiff dated 11 November 2014 Mr Reis said:
Mr Travers [the solicitor acting for the defendants] is of the view, and I accept s 304 is open to such an interpretation, that notwithstanding an application to have costs assessed has already been filed with the Supreme Court the lodging of a complaint precludes the parties from the right to have costs assessed on either party’s application, The only entity permitted in those circumstances is the Law Society (s 409 of the LPA).
I nevertheless remain of the view that s 304 is equally capable of an interpretation, and a must [sic] more consistent one, that parties in a costs dispute are precluded from applying for assessment once a complaint is made if an application has not already been filed with the Court. The preclusion does not apply if an application for assessment is filed before the complaint is made. This is supported by the words “are or have been” the subject of a complaint. In other words a party’s right to have costs assessed remains provided that there is not already a current complaint is being investigated or has previously been a complaint made and the investigation completed.
The latter interpretation, in my respectful view, maintains a party’s essential right under the LPA to file for assessment of costs. The interpretation that arbitrarily overturns this right notwithstanding the complaint might well have no substance or in the worst case being mischievous should not be favoured. Such an interpretation does not support the proper administration of justice and could in the extreme amount to an abuse of process.
I therefore maintain my view that provided a party in dispute over costs has filed for assessment prior to the lodgement of a complaint with the Law Society s 304 does not apply to prohibit the maintenance of that right to see the assessment to conclusion or settlement.
Because of the issue in relation to the operation of s 304, on 3 December 2014 the proceedings now before me were referred to a judicial officer by a Deputy Registrar under r 6255 of the Court Procedure Rules 2006 (ACT) (Rules).
Section 304
Section 304 of the LPA provides:
304Legal costs subject to consumer dispute not assessable
(1)Despite anything to the contrary in this part, legal costs that are or have been the subject of a consumer dispute under chapter 4 (Complaints and discipline) must not be the subject of a costs assessment under this division.
(2)This section is subject to section 409 (Referral of matters for costs assessment—complaint investigation).
The following aspects of s 304 should be noted:
(a)the provision prevails over “anything to the contrary” in Part 3.2 “Costs Disclosure and Assessment” of the LPA;
(b)“consumer dispute” is not a defined term;
(c)Chapter 4 “Complaints and discipline” (particularly Part 4.2) permits complaints to be made in relation to Australian legal practitioners and “solicitor employees” (another undefined term);
(d)the provision applies where the legal costs “are or have been” the subject of a consumer dispute;
(e)the section is subject to s 409 which is a provision in Chapter 4, Part 4.4 which deals with the investigation of complaints by, relevantly, the Law Society.
Submissions of the parties
The plaintiff, in effect, adopted the position articulated by Mr Reis of the Law Society. While recognising the force of the words of the section it submitted that an interpretation should not be adopted which would make any potential recovery of its fees subject to a decision of the Law Society as to whether or not to refer a matter to the Supreme Court for assessment. It suggested that such an interpretation would involve depriving it of vested rights and that it should not be adopted. It emphasised the difficulties facing a solicitor attempting to recover fees arising from a complaint being made after an application for assessment was made.
The defendants submitted that the words of the provision had the effect that where a complaint had been made under Chapter 4 relating to costs s 409 was the only means by which costs could be assessed. They submitted that the solicitor retained the right to enforce the costs agreement as if it was a contract subject to any other provision of the LPA that inhibited that entitlement.
Consideration
As I pointed out in Law Society ACT v Goodman Law (2013) 279 FLR 383 at [52], the LPA, in the form that it was after the Legal Profession Amendment Act 2007 (ACT), is based upon the 2nd edition of the Legal Profession – Model Laws Project Model Bill (Model Bill) prepared by the Parliamentary Counsel’s Committee (PCC) and published in August 2006 (see the explanatory memoranda for the Legal Profession Bill 2006 (ACT) and Legal Profession Amendment Bill 2007(ACT)). The terms of s 304 in particular mirror the terms of clause 3.4.51 of the Model Bill. This case illustrates some of the hazards that are created by the adoption of a complex model bill such as that prepared by the PCC.
The concept of a “consumer dispute” is not a defined term in the LPA. Under the Model Bill there were two optional sets of provisions relating to mediation of complaints, only one of which included, and therefore defined, the term “consumer dispute”: see Model Bill Part 4.5. The term was not elsewhere defined in the Model Bill. The provisions incorporated in the LPA (ss 401-405) picked up the mediation regime provided for in the Model Bill which did not include a definition of “consumer dispute”. This contrasts, for example, with the Legal Profession Act 2004 (NSW), which adopted the option from the Model Bill that included a definition of “consumer dispute” (see s 514).
Notwithstanding that the legislature did not recognise that it was excluding from the LPA the definition of a term used in a provision of the Model Bill that was to be included in the Act, it is necessary to give some meaning to the words actually used in s 304. Given that “consumer dispute” can be given a meaning that makes sense in context, it would not be appropriate to simply say that, because of the absence of a definition that should be there, the provision should be given no operation. In those circumstances, “consumer dispute under chapter 4 (Complaints and discipline)” should be interpreted as a compound phrase referring to complaints made by a consumer of legal services under Chapter 4. So interpreted it includes the complaints made by the defendants which, at least in part, had as their subject legal costs charged by the plaintiff.
Section 304 has the effect of preventing assessment whenever the legal costs “are or have been” the subject of a consumer dispute under Chapter 4. The reference to “are or have been” does not limit the circumstances in which the costs “must not be the subject of a costs assessment” to those where a complaint is made prior to the application for assessment being made. Rather, it has the effect that if the legal costs have ever been subject to a complaint or at any time prior to the conclusion of the assessment are subject to a complaint, then the assessment must not proceed.
A temporal qualification upon the complaints which would prevent assessment might have been incorporated into the section if it had provided “must not be the subject of an application for costs assessment under this division”. That would have precluded an application for costs assessment being made where there was or had been a complaint but would not prevent an assessment continuing if a complaint was made after the application for assessment. However, the section does not so provide. Instead it simply says, “must not be the subject of a costs assessment”. A “costs assessment” incorporates the whole process of an assessment from the filing of an originating application for costs assessment under r 3621 to the conclusion of the process in accordance with the directions of the registrar under r 3623 and ss 299-300B of the LPA. The terms of s 304 are sufficient to prohibit that process at any point. As a consequence, I do not accept the position articulated in the correspondence by the Law Society and I accept the submissions of the plaintiff that the subsequent filing of a complaint to the Law Society has the effect of preventing the assessment process from proceeding.
In reaching that conclusion I have not ignored the principle, relied upon by the plaintiff, that some care should be taken in interpreting statutes so as not to infringe upon vested proprietary interests: see Fazzolari v Parramatta CC (2009) 237 CLR 603 at [41]-[45]; D Pearce & R Geddes Statutory Interpretation in Australia (8th ed) (LexisNexis Butterworths, 2014) at [5.22]. I do not consider such a principle is of significance in the present context where the entitlement of lawyers to recover fees from clients is significantly qualified by a range of restrictions designed to protect their clients. Although the LPA states that a fees agreement may be enforced “in the same way as any other contract” (s 286(1)), that is expressly made subject to Divisions 3.2.5 and 3.2.7 of the LPA, that is, the parts of the Act dealing with costs agreement and costs assessment. Section 304 falls within Division 3.2.7. In my view effect must be given to the reasonably plain words of s 304 which, in any event, do not destroy any vested proprietary interest that the plaintiff has but simply further qualify a particular entitlement of the lawyer under the statute, namely, to have costs assessed.
Section 304(2) makes it clear that the prohibition in s 304(1) is subject to s 409. Section 409 is in the following terms:
409Referral of matters for costs assessment—complaint investigation
(1)For investigating a complaint, the relevant council for an Australian legal practitioner may refer a matter to the Supreme Court for an assessment of costs charged or claimed by the practitioner.
(2)The referral may be made outside the 12-month period mentioned in section 294A (5) (Application by client or third party payer for costs assessment).
(3)In deciding whether to refer a matter for a costs assessment, the relevant council must consider whether the client was aware of the client’s right to apply for an assessment within the 60-day period and, if the client was aware, whether the referral may cause significant injustice to the legal practitioner.
(4)Subject to this section, division 3.2.7 (Costs assessment) applies to the costs assessment as if the relevant council were a client of the practitioner..
(The reference in s 409(3) to “the 60-day period” appears to be a reference to the 60-day period referred to in s 295, during which an application for a costs assessment by a law practice retaining another law practice may be made.)
The effect of s 409 is to empower, but not compel, the Law Society to initiate a costs assessment process when dealing with a complaint. Such an assessment may be significant because the Law Society has the capacity, if it summarily concludes the complaint procedure under s 413 of the LPA, to make a compensation order under Part 4.8 if the complainant has requested a compensation order. A compensation order may include “an order that the practitioner cannot recover or must repay all or a stated part of the amount charged to the complainant by the practitioner in relation to stated legal services”: s 442(2)(a). Similarly, if the Law Society makes an application to the ACT Civil and Administrative Tribunal (ACAT) under Part 4.7 of the LPA then the ACAT has the power to make a compensation order if it has found a person guilty of unsatisfactory professional conduct, professional misconduct or unsatisfactory employment conduct in relation to a complaint: s 444(1). Finally, an assessment may be significant because it leads the Law Society to the conclusion that the complaint must be dismissed under s 412 of the LPA.
When s 304 is considered in combination with the complaint provisions in Chapter 4, the effect of the LPA is to ensure that complaints made by clients about costs are dealt with in accordance with the complaint process set out in Chapter 4 of the LPA and, where that process has been enlivened, it is to operate in preference to any assessment taking place outside that process.
However, although there is a prohibition on the legal practitioner starting a proceeding to recover the legal costs until the costs assessment has been completed: s 298(b), there is no prohibition on recovery of costs while a complaint is being dealt with by the Law Society. Thus, the position appears to be as follows.
(a)If an application for costs assessment is made then proceedings may not be started to recover the legal costs until that process is completed: s 298.
(b)However, if a complaint is or has been made then an application for cost assessment cannot be made and an assessment cannot be completed: s 304.
(c)There is no statutory restriction on proceedings being commenced to recover costs merely by reason of the existence of a complaint.
(d)Thus, the making of a complaint protects the client by preventing the solicitor from applying for costs to be assessed but not from the lawyer commencing proceedings to recover costs relying on the costs agreement in the same way as any other contract: s 286 (1).
(e)However, the proceedings may be ineffective to recover costs if there has been a failure to disclose anything required by Division 3.2.3 of the LPA: s 277.
(f)If s 277 applies then costs can only be recoverable if they have been assessed under Division 3.2.7.
(g)However, assessment under Division 3.2.7 is not available if there has been a complaint or a complaint is on foot.
Thus, it is at least theoretically possible for a legal practitioner to be unable to recover any costs in circumstances where a complaint about those costs has been made to the Law Society and dismissed without a referral for assessment under s 409, and there has been some non-compliance with Division 3.2.3. While this scenario would render the effect of a failure to disclose even more dramatic than the effect provided for by s 277, it appears to me to follow from the interaction of the various provisions of the LPA. Notwithstanding that this appears to be an anomalous result that does not, in my view, provide a proper basis for departing from the reasonably straightforward text of s 304. It does, however, emphasise the great significance of s 409 for the recovery of legal fees by practitioners where those fees are subject to a complaint by the Law Society. It means, as the plaintiff submitted, that practitioners seeking to recover fees that have been the subject of a complaint are very much dependent upon the decision of the Law Society to exercise the power under s 409.
In the light of my conclusion above, because of the operation of s 304 of the LPA, the costs assessment cannot proceed. Section 304 does not operate for a limited period but continues to operate even after the “consumer dispute under chapter 4” has been finalised. Given that the proceedings were regularly commenced and have only been brought to a halt by the subsequent operation of a statutory provision, in my view the appropriate order is that the proceedings commenced by the plaintiff’s originating application seeking costs assessment be permanently stayed. As the plaintiff pointed out, this has the potential to create anomalies if, for example, a complaint is made and then withdrawn prior to any referral under s 409, but it is an interpretation most consistent with the words of s 304. As the parties made only limited submissions on the form of final order that should be made and, in case any party wishes to submit that the appropriate order is that the proceedings be dismissed, I will grant liberty to apply to make submissions as to the form of final order that should be made.
In relation to costs the plaintiff submitted that in any event it was appropriate that there be no order as to costs. It pointed to the position adopted by the Law Society in relation to the complaint and the operation of s 304. It submitted that, one way or another, this was an issue that had to be resolved to permit either the assessment to proceed or the complaint to be dealt with by the Law Society. The defendants, on the other hand, sought costs of the referral by the Deputy Registrar if s 304 prevented the assessment from continuing. The defendants have been substantially successful in relation to these proceedings. While clearly the difficult position in which the plaintiff has found itself arises from the position taken by the Law Society, at least by the time of the referral the legal question was clearly defined and the plaintiff took a positive position on that legal issue. In my view, the compensatory nature of a costs order would ordinarily make it appropriate that the plaintiff pay the defendant’s costs of the referral. However, in the present case, notwithstanding the defendants’ success I will depart from that approach because of the history of the matter, particularly because the complaint made to the Law Society was made:
(a)more than two years after the defendants themselves suggested that the plaintiff have the bills assessed;
(b)well after the conclusion of the Magistrates Court proceedings in July 2013; and
(c)only after an application for assessment of costs was filed.
Therefore, the orders of the Court are:
1. The proceedings are permanently stayed.
2. There is no order as to costs of the proceedings.
3. Liberty is granted to either party to apply within 7 days to seek a final order different to that in order 1, which liberty may be exercised by giving notice by email to my associate (copying in each other party).
| I certify that the preceding twenty-eight [28] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Master Mossop. Associate: Date: 3 March 2015 |
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