O'Neill & Tegg (a Firm) v Harris

[1996] QSC 3

IN THE SUPREME COURT

OF QUEENSLAND  Writ No. 449 of 1995

Brisbane

Before the Honourable Justice Fryberg

[O'Neill & Tegg (a firm) v. Harris & Anor.]

BETWEEN:
  O'NEILL & TEGG (a firm)
  Plaintiff
AND:

JOHN K.HARRIS

First Defendant
AND:
  GARRY FREDERICK FLETCHER
  Second Defendant

REASONS FOR JUDGMENT - FRYBERG J.

Judgment delivered 7th February 1996

CATCHWORDS:       Professions and trades - Lawyers - Duties and liabilities - To third parties - Undertaking.

COUNSEL:M. Jarrett for the Plaintiff

D. Lewis for the First Defendant

SOLICITORS: O'Neill & Tegg for the Plaintiff

John K. Harris for the First Defendant

HEARING DATE:      5th September 1995

IN THE SUPREME COURT

OF QUEENSLAND  Writ No. 449 of 1995

Brisbane

Before the Honourable Justice Fryberg

[O'Neill & Tegg (a firm) v. Harris & Anor.]

BETWEEN:
  O'NEILL & TEGG (a firm)
  Plaintiff
AND:

JOHN K.HARRIS

First Defendant
AND:
  GARRY FREDERICK FLETCHER
  Second Defendant

REASONS FOR JUDGMENT - FRYBERG J.

Delivered the 7th day of  February, 1996

This matter came before me in chambers on 5th September 1995.  Only the plaintiff and the first defendant appeared.  I gave reasons for judgment on that day.  I held that the plaintiff was entitled to an order for payment of money by the first defendant pursuant to the latter's undertaking as a solicitor.  Under the terms of the undertaking the amount to be paid was a matter for calculation, a calculation which involved a number of elements.  At a late stage of the proceedings, counsel for the first defendant challenged two elements in the calculation.  I adjourned the matter to allow counsel to place before me brief written submissions on these matters and also on costs.  Unfortunately by the time these submissions were received I was engaged in other work which prevented my dealing with the matter immediately. 

The plaintiff and the first defendant are solicitors.  The first defendant's undertaking was provided as part of an agreement between him and the plaintiff.  At the time of the agreement the first defendant was acting as solicitor for the second defendant in the conduct of several District Court personal injuries actions.  The plaintiff had been acting for the second defendant but had terminated its retainer some time previously.  Before me it was accepted that the plaintiff was perfectly entitled (if not obliged) to do so in the circumstances which had arisen.  Under the agreement, in return for the first defendant's undertaking, the plaintiff delivered its files in respect of the actions to the first defendant.

During the time the second defendant retained the plaintiff, he borrowed $8,000 from Westpac Banking Corporation to finance the actions.  The plaintiff guaranteed this loan.  The undertaking made provision for payment of the plaintiff's bill, the first defendant's bill and repayment of the Westpac loan from the proceeds (if any) of the actions.  It was in the following terms:

"In accordance with the terms of the agreement between the parties I hereby undertake that from moneys held in my trust account in relation to any award of damages and costs, I shall make payment to yourselves but without prejudice to any claim of my own firm for costs in the matter, your reasonable and proper costs to date in all matters in which you have been instructed by Mr Fletcher as agreed upon, or if not agreed upon as taxed, together with any amount which is then due and owing to the Westpac Banking Corporation in relation to a litigation loan obtained by the Plaintiff through your firm for the purposes of pursuing the abovementioned matters.  This undertaking is limited to such moneys as are received into my trust account.

In the event that insufficient moneys are received into my trust account to cover the costs and outlays of my firm and yourselves and the litigation loan in respect of the abovementioned actions only, then such shall be paid on a pro-rata basis from moneys received."

The actions were to some degree successful and a total of $73,056.75 was received into the first defendant's trust account for damages and costs.  Unfortunately, by the time this had occurred, a considerable amount of interest had accrued on the Westpac loan.  By September 1995, when the application was heard, Westpac was claiming $31,952.41.  The funds in trust were insufficient to pay that amount and all of the solicitors' fees and outlays, at least when assessed on a solicitor and client basis.  A dispute arose as to the proper interpretation of the undertaking in these circumstances.  On 9th May 1995 the Court declared by consent:

"Upon the true construction of the agreement ... the plaintiff and the first defendant are entitled to be paid such of their reasonable and proper party and party costs and outlays in the matters ... as are due and owing to them and Westpac Banking Corporation is entitled to be paid such proportion of the indebtedness of the second defendant to it as relates to the matters ... as is due and owing to it by the second defendant from the proceeds of the awards of damages and costs received by the first defendant in the matters ... on a pro-rate basis."

The declaration was insufficient to resolve the dispute between the solicitors.  The first defendant paid the plaintiff nothing.  Consequently the matter was brought before me upon a motion for judgment.  The first defendant argued that the undertaking was unenforceable and that the Court in any event had no jurisdiction in the matter.  In the judgment which I delivered on 5th September 1995 I rejected those arguments.  There remained disputes as to the amount of each solicitor's bill.  One of these disputes, relating to the amount to be allowed for preparation of bills of costs, I resolved in the same judgment.  The two late matters remained.  The first was, how much should be allowed to the plaintiff for the general item popularly known as "care and consideration";  the second involved the amount to be allowed to the first defendant for counsel's fees.

Although the solicitors' bills were never actually taxed (agreement having been reached with the defendant or defendants responsible for paying them) they were submitted to an independent costs assessor for preparation in taxable form.  The assessor prepared such bills in each of the two actions to which the present dispute relates[1] in late 1994 or early 1995.  In each case the bills were prepared for the whole action but the contributions of the respective solicitors can be determined by reference to item numbers in the bills[2].  Both based their claims on these bills, although the first defendant made the further claim in respect of counsel's fees.

[1]      I shall follow the parties in calling these "the Hutchinson action" and "the Vickers action" after the defendants in the actions.

[2]      Exhibits K1 and K2 to the affidavit of K.J. O'Neill filed on 18th April 1995.

Care and consideration

The plaintiff claimed $9,236.04 in respect of the Vickers action and $10,514.19 in respect of the Hutchinson action[3].  Those amounts included $1,500.00 and $1,800.00 respectively for "instructions generally, and to brief counsel including all attendances on and correspondence with client and his witnesses; all necessary perusals together with all necessary attendances and perusals not specifically referred to herein, care and consideration (Item 27)".  They were admittedly to be reduced by $2,346.50 and $1,927.30 respectively to avoid what the plaintiff called "double dipping". 

[3]      Exhibit E to the affidavit of K.J. O'Neill filed 23rd August 1995 and Exhibits M4 and M5 to the affidavit of the same deponent filed on 18th April 1995.

The first defendant accepted the correctness of these claims in all respects except the amounts claimed under the heading just quoted.  He argued that the allowance under that heading should be $828.00 in the case of the Vickers action and $1,012.70 in the case of the Hutchinson action.  Those figures were derived by calculating 36% of the total amount allowed for care and consideration in the Vickers bill ($2,300.00) and 38% of the same item in the Hutchinson bill ($2,665.00).  Neither solicitor challenged the total amount allowed in each bill.  The percentages were based on letters written to the first defendant by the costs assessor in December 1994 in which it was asserted that "as a proportion of the total costs of the bill as it now stands, O'Neill & Tegg's costs appear at approximately" 36% and 38% respectively.  How those percentages were calculated I do not know.  They do not appear to be consistent with any of the figures placed before me.  Moreover I do not follow the logic of using them to determine the respective solicitors' share of the item allowed for care and consideration when the very same letters expressly allow different (and larger) amounts for that item[4].  The letters in fact suggest $1,050.00 and $1,300.00 as the amounts to be allowed to the plaintiff for care and consideration but how those figures are derived is not explained either.

[4]      Exhibits R and S to the affidavit of J.K. Harris filed on 5th May 1995.

Neither party propounded in argument before me any principle by which the total allowed in each action for care and consideration should be apportioned between the two firms.  In the absence of any better suggestion it seems to me that the proper approach is to apportion the amounts in accordance with the amounts allowed to each firm for the balance of their professional costs (i.e. excluding outlays and costs of taxation).  Those amounts are as follows:

Vickers action

$	%
O'Neill & Tegg - Items 1- 692	4,146.14	63.0
John K. Harris - Items 693 - 1197	2,434.67	37.0
6,580.81	100.0

Hutchinson action

$	%
O'Neill & Tegg - Items 1- 705	5,315.66	65.9
John K. Harris - Items 706 - 1235	2,749.37	34.1
8,065.03	100.0

Applying those proportions to the amounts allowed for care and consideration  in each bill, the result is:

Vickers action

O'Neill & Tegg 63% of $2,300.00 = $1,449.00

John K. Harris  37% of $2,300,00 = $851.00

Hutchinson action

O'Neill & Tegg 65.9% of $2,665.00 = $1,756.00

John K. Harris  34.1% of $2,665.00 = $909.00

Counsels' fees - second defendant

Late in the hearing, and without any evidentiary support, the second defendant by his counsel alleged that the bills of costs were deficient in that they did not include substantial amounts outlaid as fees to counsel by the first defendant, being amounts properly allowable as party and party costs.  This occurred, I was told at first, because two counsel had been engaged and costs assessors did not normally include fees for two counsel.  Since the circumstances were such that it may have been proper to have allowed two counsel, I permitted further oral evidence to be led on the topic.  Mr. Harris gave that evidence and was cross-examined.  That process made it plain that in fact the assessor had included two counsel engaged by the first defendant.  However Mr. Harris persisted in his assertion that he had in fact paid counsels' fees in a sum in excess of $21,000.00.  Support for this assertion was contained in his trust account ledger cards[5].  The amount in fact allowed in the bills of costs for counsels' fees was $11,563.00.  Mr. Harris was unable to identify why there was such a large discrepancy between what was paid and what was allowed - he said that he did not have his records at Court.  He rejected the suggestion that the difference represented the difference between party and party and solicitor and client fees.  However he could not explain the discrepancy and he admitted that he was not experienced in the preparation of bills of costs.

[5]      Exhibit T to the affidavit of J.K. Harris filed 5th May 1995.

The evidence before me does not permit a conclusion that any amount greater than that allowed in the bills of costs was recoverable by the second defendant for counsels' fees on a party and party basis.  There is no reason at all not to accept the work of the independent assessor, which the parties themselves have used as the basis of every other claim in the matter.  It appears that the actions were actions to recover sums in excess of $50,000.00 so that counsels' fees would not have been limited by any particular scale in the District Court.  However in both actions the amounts recovered were under $50,000.00.  The consequence of this was that counsels' fees fell to be assessed on the scale appropriate to that recovery when assessed on a party and party basis, although on a solicitor and client basis they were allowable in a much larger amount.  That probably accounts for much of the difference.  Whatever the explanation, there is no material before me which would warrant increasing the amount allowed on a party and party basis for counsels' fees in the bills of costs.   I am not prepared to allow any greater amount to the first defendant for this item in the pro-rata calculation.

The amounts claimable by the solicitors on a party and party basis

In the light of the foregoing findings, the solicitors' costs on a party and party basis are as follows:

O'Neill & Tegg

Vickers action - Items 1 - 692	$	$
Professional costs	4,146.14
Outlays	3,597.77
7,743.91
Less "double counting"	2,346.50	5,397.41
Vickers action - Item 1198 (share)	1,449.00
Hutchinson action - Items 1 - 705
Professional costs	5,315.66
Outlays	3,406.40
8,722.06
Less "double counting"	1,927.30	6,794.76
Hutchinson action - Item 1236 (share)	1,756.00
Preparation of bills of costs (half share)	3,100.00
18,497.17

John K. Harris

Vickers action - Items 693 - 1197	$	$
Professional costs	2,434.67
Outlays	6,714.95	9,149.62
Vickers action - Item 1198 (share)	857.00
Hutchinson action - Items 706 - 1235
Professional costs	2,749.37
Outlays	6,786.05	9,535.42
Hutchinson action - Item 1236 (share)	909.00
Preparation of bills of costs (half share)	3,100.00
23,551.04

The Westpac Claim

At the time of the hearing the amount claimed by Westpac was $31,952.41.  In November 1995 the first defendant, with the consent of the plaintiff, settled the Westpac claim for $27,610.41.  This settlement has two consequences.  First, the total claims against the fund have been reduced.  Second, it is no longer necessary to make an award to the plaintiff on the basis of the plaintiff's indemnifying Westpac. 

Claims against the trust funds

The total claims on a party and party basis upon the trust funds held by the first defendant are therefore:

$
O'Neill & Tegg	18,497.17
John K. Harris	23,551.04
Westpac Banking Corp.	27,610.41
69,658.62

As that calculation demonstrates, the total of the claims is less than the amount held in trust.  This means that the undertaking, interpreted in accordance with the consent declaration of 9th May 1995, requires the first defendant to pay the plaintiff 100% of the plaintiff's claim as assessed above.  It was not suggested to me on behalf of the plaintiff that the declaration could be set aside, nor that the interpretation of the undertaking in the circumstances as I have found them to be should be any different from what is embodied in the declaration.  The amount of the "surplus" is insufficient to warrant reopening the hearing.  There has been no claim for interest.

Costs
           As best I can tell from the file, each party achieved a degree of success, but neither was completely successful, in the contentions which they were urging prior to the determination of the motion which resulted in the declaration of 9th May 1995.  There should be no order as to the costs of and incidental to that motion.  Otherwise, the plaintiff has been successful in the action, and on almost every issue argued before me.  Nothing in the submissions as to costs placed before me on behalf of the first defendant persuades me that there are grounds from departing from the usual rule that costs follow the event.  Subject to the order to which I have just referred, the first defendant should pay the plaintiff's costs of and incidental to the action to be taxed.

Order
           Order that the first defendant pay the plaintiff the sum of $18,497.17.  No order as to the costs of and incidental to the motion filed on 18th April 1995 and determined on 9th May 1995.  Otherwise, order the first defendant to pay the plaintiff's costs of and incidental to the action to be taxed.