O'Brien Lawyers v McGrath
[2011] VCC 1342
•27 September 2011
IN THE COUNTY COURT OF VICTORIA
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL
GENERAL DIVISION
Case No. CI-11-02073
| DENIS JAMES O’BRIEN trading as O’BRIEN LAWYERS | Plaintiff |
| v | |
| SHANE WILLIAM THOMAS McGRATH | Defendant |
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| JUDGE: | HIS HONOUR JUDGE GINNANE |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 28 July 2011, 24 August 2011, 14 September 2011 |
| DATE OF JUDGMENT: | 27 September 2011 |
| CASE MAY BE CITED AS: | O’Brien Lawyers v McGrath |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1342 |
REASONS FOR JUDGMENT
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Catchwords: PRACTICE and PROCEDURE - default judgment – application to set aside- explanation for delay - prompt action- arguable defence – legal costs - compliance with statutory requirements - application granted - Legal Profession Act 2004 ss 3.4. 33,.34, and 38 and County Court Civil Procedure Rules 2008 Rule 21.07
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M O’Brien | O’Brien Lawyers |
| For the Defendant | In person | |
| HIS HONOUR: |
1 The plaintiff, a solicitor, commenced action on 10 May 2011 against the defendant, for sums owing in connection with Family Court proceedings in which he acted for the defendant, for his professional fees, disbursements, counsels’ fees, and goods and services tax, as detailed in a tax invoice to the defendant dated 6 May 2010 in respect of his outstanding fees of $89,140.73 plus interest of $5414.39, a tax invoice dated 23 March 2009 in respect of senior counsel’s outstanding fees of $88,440.00 plus interest of $9,544.25 and a tax invoice dated 4 April 2008, in respect of junior counsel’s fees of $5,480 plus interest of $712.21.
2 The plaintiff filed an affidavit of service on 27 May 2011 showing that service had occurred on 24 May 2011.
3 On 30 May 2011 the defendant entered an appearance.
4 On that same day, the Court issued a notice, fixing an administrative mention for 25 July 2011.
5 On 4 July 2011 the plaintiff entered a default judgment for debt against the defendant in the sum of $209,015.92, being $204,381.40, plus interest of $3,116.12 and costs of $1,518.40.
6 On 4 July 2011, i.e. the same date the default judgment was entered, the defendant filed a summons seeking to set aside the default judgment. In the supporting affidavit the defendant gave the following reasons for failing to comply with the 30-day deadline to file a defence. Firstly, he was unaware of that deadline. Secondly, his farming commitments made it impossible. He stated that he was a farmer representing himself, and that he had lodged a notice of appearance. He stated that his focus had been one hundred per cent on living at Minyip, which apparently is not his usual residence, and on a farm-cropping program and baiting mice to ensure crop survival. The administrative mention was fixed for 25 July 2011, which was the date he was “working toward” for his defence. Cropping was due to be completed on 29 June 2011. He stated that there was no mention of time frames in the paperwork, which he received for filing a defence, as there had been in the documents that he received relating to the filing of the notice of appearance.
7 The plaintiff apparently sent a letter dated 29 May 2011 informing the defendant of his intention to enter default judgment against him unless he filed a defence by Friday, 1 July. The letter also informed him of the 30-day deadline. He did not receive this letter until he arrived back at his Horsham residence on Sunday, 3 July 2011.
8 In response to the defendant’s affidavit, the plaintiff filed an affidavit stating that he did not receive a request from the defendant for an itemised bill, an application to the costs court for review, or any application pursuant to the costs agreement. He stated that he had been acting for the defendant for four years.
9 The matter was adjourned when it first came before the Court, with the defendant being given the opportunity to file an affidavit as to the merits of his defence.
10 He did this by, in effect, exhibiting a large amount of correspondence and documents relating to his Family Court proceedings. The affidavit merely stated that “the information provided by me in this my affidavit of defence and annexed documents is true and correct”. The exhibits were contained in an arch-lever folder with some 170 pages purporting to be exhibits to the affidavit. These indicated his dissatisfaction with the way in which, in his opinion, the proceeding had been conducted.
11 In response, the plaintiff filed an affidavit sworn 17 August 2011 contending that the defendant’s material did not provide a defence. The affidavit also commented on aspects of the defendant’s behaviour in the conduct of the Family Court proceedings, and the difficulties the plaintiff had in dealing with him.
12 When the proceeding was relisted on 24 August 2011, following matters I raised, discussion ultimately centred on whether the bill, or bills, on which the plaintiff sued complied with the requirements of the Legal Profession Act 2004. Those provisions are as follows:
“Legal costs cannot be recovered unless bill has been served
3.4.33. Legal costs cannot be recovered unless bill has been served
(1) A law practice must not commence legal proceedings to recoverlegal costs from a person until at least 65 days after the law practice has given a bill to the person in accordance with sections 3.4.34 and 3.4.35.
Note Section 4.3.2 prohibits a law practice from commencing proceedings if it has received notice of a civil complaint regarding the legal costs.
(2) A court of competent jurisdiction may make an order authorising a law practice to commence legal proceedings against a person sooner if satisfied that–
(a) the law practice has given a bill to the person in accordance with sections 3.4.34 and 3.4.35; and (b) the person is about to leave this jurisdiction. (3) A court or tribunal before which any proceedings are brought in contravention of subsection (1) must stay those proceedings on the application of a party, or on its own initiative.
(4) This section applies whether or not the legal costs are the subject of
a costs agreement.... Notification of client’s rights
3.4.35. Notification of client’s rights
(1) A bill must include or be accompanied by a written statement setting
out–
(a) the following avenues that are open to the client in the event of a dispute in relation to legal costs– (i) costs review under Division 7;
(ii) the setting aside of a costs agreement under section 3.4.32; (iii) making a complaint under Chapter 4; and
(b)
any time limits that apply to the taking of any action referred to in paragraph (a).
(2) Subsection (1) does not apply in relation to a sophisticated client. (3) A law practice is taken to have complied with the requirement to provide the written statement referred to in subsection (1) if it provides a written statement in or to the effect of a form prescribed by the regulations for the purposes of this subsection.
(4) A regulation prescribing a form for the purposes of subsection (3) may provide for the form to refer to fact sheets or other documents (whether as current at the time the regulation commences or any earlier time or as in force for the time being) that contain details of the kind referred to in subsection (1).
(5) The regulation may–
(a)
require the Commissioner to produce and maintain fact sheets or other documents that are referred to in the form and to make them available on the Internet; and
(b)
require the fact sheets or other documents to be developed in consultation with the professional associations.
...
Application by clients or third party payers for costs review
3.4.38. Application by clients or third party payers for costs review
(1) A client may apply to the Costs Court for a review of the whole or
any part of legal costs.(2) A third party payer may apply to the Costs Court for a review of the
whole or any part of legal costs payable by the third party payer.(3) An application for a costs review may be made even if the legal
costs have been wholly or partly paid.
(4) If any legal costs have been paid without a bill, the client or third
party payer may nevertheless apply for a costs review.
(5) An application by a client or third party payer for a costs review
under this section must be made within 12 months after–
(a)
the bill was given or the request for payment was made to the client or third party payer; or
(b)
the costs were paid if neither a bill was given nor a request was made.
...”
13 The period fixed in s 3.4.38 was extended from 60 days to twelve months by the Legal Profession Amendment Act 2007 that took effect on 9 May 2007. I consider that it is likely that the new time period applied to the bill of costs dated 6 May 2010, even if it includes some costs, earned or incurred prior to the commencement of the amendment.[1]
[1] Interpretation of Legislation Act 1984 s14 (2); Yrttiaho v Public Curator (Qld) (971) 125 CLR 228 and McKain v R W Miller & Co (SA) Pty Ltd (1992) 174 CLR 1
14 A form was prescribed for the purposes of s 3.4.35 (3) by the Legal Profession (Further Amendment) Regulations 2007 Reg 5 and Form B4. That form set out avenues available “if you are not happy with this bill” including “having our costs assessed” and then stated:
“Time limits apply to the avenues for resolving costs disputes.”
15 The only one of the plaintiff’s legal bills in evidence was that dated 6 May 2010, as amended on 20 May 2010 to correct a miscalculation. It did not follow that form. It carried the following endorsement at the foot of the bill, which was on the 34th page of the bill:
“Pursuant to the Legal Profession Act 2004 you have the right to have the above costs reviewed, to set aside a costs agreement (if any) and to make a complaint under the Act. Such action must be taken within sixty (60) days of this account. Under the provisions of the Legal Profession Act 2004 and Legal Profession Regulations 2007, from 6 December 2007, legal practitioners may charge interest on accounts which are unpaid for thirty (30) days at a rate of 2% higher than the Cash Rate Target, as fixed by the Reserve Bank of Australia, as at the date of the invoice. Invoices issued before this date incur interest at the Penalty Interest Rate.”
16 The bill dated 6 May 2010, as amended on 20 May 2010, appears to have included most of senior and about half of junior counsel’s fees, which in the statement of claim were pleaded to have been claimed in the earlier bills of 23 March 2009 and 7 April 2008. It was not suggested that those earlier bills contained a different form of endorsement to that of 6 May 2010.
17 After the Court raised the fact that the bill did not appear to contain the required endorsement, Mr McGrath maintained that if he had known there was a 12-month period of review he would have sought a review. The plaintiff filed an affidavit disputing this contention, noting that he had never previously requested a review.
18 On an application to set aside a judgment in default of defence, the key questions guiding the exercise of the Court’s discretion under Rule 21.07 are whether the defendant has provided an explanation for the failure to file a defence, whether the defendant has acted promptly when he became aware of the default and whether there is any arguable defence providing a reason for the judgment being set aside and the proceeding going to trial.
19 All that the defendant needs to establish is an acceptable explanation for the default, prompt action when he became aware of the default judgment and an arguable defence.
20 The defendant has established each of these matters.
21 A combination of the fixing of the administrative mention on 25 July 2011 and the fact that the defendant did not receive the plaintiff’s letter until 3 July 2011 explain the failure to file a defence.
22 The defendant then acted promptly in applying to set it aside.
23 In my opinion it is arguable that the bill of 6 May 2010 did not contain the endorsement required by s.3.4.38. That omission provides an arguable defence. As previously stated it was not suggested that the earlier invoices of 23 March 2009 or 7 April 2008 contained a different form of endorsement
24 It is inappropriate on this application for much more to be said about the prospects of the defence, based on non-compliance with s 3.4.38 succeeding. Questions concerning the intent of the statute, as to the effect of non- compliance and whether the defendant’s inaction in seeking to have the bill reviewed the bill has any bearing on the defence are not to be answered at this stage.
25 Section 3.4.33 (3), which is set out above, is a provision of significance in determining that this proceeding should go to trial.
26 I d not consider that the defence should only be set aside on terms such as the payment of the sum claimed into Court. The defendant has an arguable defence which in accordance with the usual practice entitles him to have a trial of the proceeding.
27 It is appropriate in the exercise of the discretion to set aside the default judgement and allow the proceeding to go to trial.
28 The Court therefore orders that the judgment entered in default of defence on 4 July 2011 be set aside.
29 I will hear the parties about costs and further directions.
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