Orio Holdings Pty Ltd v Costi & Co - [2008] SASC 218

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master)
ORIO HOLDINGS PTY LTD & ANOR v COSTI & CO
[2008] SASC 218
Judgment of The Honourable Justice Vanstone
12 August 2008
PROFESSIONS AND TRADES - LAWYERS - SOLICITOR AND CLIENT - RETAINER
Application by solicitors to review costs order by a Master - review by Master purportedly dispensed with and referred to single judge - whether Master was correct in holding there was no costs agreement in writing between solicitor and client. Held: matter referred back to the Master for the making of further findings.
Supreme Court Rules 1987 r 101.21; Supreme Court Rules 2006 r 271, r 272, r 117, r 278; Legal Practitioners Act 1981 s 42(6), referred to.
McNamara Business & Property Law v Kasmeridis & Anor (2005) 92 SASR 382; Law Society of South Australia v Jordan (1998) 198 LSJS 434; Meerkin v Apel & Rossett Pty Ltd [1998] 4 VR 54; Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153; Hendriks v McGeoch [2008] NSWCA 53; Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523, applied.
Orio Holdings Pty Ltd v Costi (No 1) [2007] SASC 403, discussed.
Australian Coal and Shale Employees Federation v Commonwealth (1953) 94 CLR 621; Cachia v Westpac Financial Services Ltd [2003] FCA 817, considered.

ORIO HOLDINGS PTY LTD & ANOR v COSTI & CO
[2008] SASC 218
Appeal from a Master

VANSTONE J: In the year 2004 the defendant solicitors acted for the plaintiff clients in seeking an interim injunction and in prosecuting the associated action. Late in the year the client settled the action without involvement of the solicitors. A dispute arose as to the solicitors’ fees. The clients applied to this court for a taxation. After a hearing of some two and a half days a Master determined a preliminary issue, namely whether there was an agreement in writing between the parties for payment of costs on a specified scale. The Master determined that issue against the solicitors and gave comprehensive reasons for that decision: Orio Holdings Pty Ltd v Costi (No 1) [2007] SASC 403.
To crystallise the ruling so as to enable a review, the Master required the solicitors to file a preliminary schedule of costs, at the same time ordering that “notice of dispute to any such preliminary bill of costs is dispensed with”. When the bill, containing a single item was filed, he reduced the amount claimed in accordance with the reasons. The rate per hour for the solicitors’ attendance upon the client was reduced from $300 to $180, the latter amount reflecting the Supreme Court scale. That was done on 3 April without requiring further attendance of counsel. The orders made on that occasion were:
1.Adjudicated upon an interim provisional costs order under 6R 271(4) made for amount at which this Partial Schedule is cast.
2. Review by Master dispensed with.
The solicitors sought a review of the costs order. Pursuant to Rule 278(3) Supreme Court Rules 2006 a review of a provisional costs order is, initially, in the form of a reconsideration by the same, or another Master. As noted, the Master purported to dispense with that step. Accordingly, the review was referred to a single judge.
Was the Master able to dispense with a review?
The first question is whether it was open to the Master to dispense with a reconsideration of his provisional order. It is clear that the plan determined upon on all sides was that an order would be made expeditiously so that a judge could review the question of whether a costs agreement had been entered into. It was envisaged that, later, a full bill of costs could be filed and adjudicated upon with the benefit of the resolution of the review.
There is a general power residing in a judge or master to dispense with compliance with the Rules of Court: Rule 117(2)(a). The difficulty in employing such a rule for the purpose of dispensing with the Master’s reconsideration is that the right of review to a judge is from the “decision on review”: Rule 278(5). It would seem that the purpose of allowing for a reconsideration is to enable the parties to bring to the Master’s attention any fresh matter bearing on the adjudication, or to point out any suggested error made in the course of the taxation. It can readily be seen that such a purpose had little relevance in the instant case, as the only question for determination had been decided after an extensive hearing. Whilst it would have been open to the Master to change his mind about one or more of the issues, it was highly unlikely that he would do so.
The terms of the order made by the Master on 3 April 2008, from which this review comes, suggest that the Master might have treated the process which he undertook as being a review of an interim provisional order, rather than the making of a provisional order itself. I am not sure about that. If that is so, then at least it could be said that the foundation for this review is established. In my view there are unsatisfactory aspects of the process that has been followed in this matter, but, as I said, it is easy to understand the motivations of those concerned. In the circumstances, I am prepared to treat the matter as properly before me for a review pursuant to Rule 278(5).
I take the hearing before me to be in the nature of a rehearing on the papers rather than a review de novo. Doyle CJ held so in Law Society of South Australia v Jordan (1998) 198 LSJS 434 in relation to the forerunner of Rule 278, being Rule 101.21(2) Supreme Court Rules 1987. That rule provided that the court would not receive fresh evidence on a review unless ordered by a judge. The current rule omits that stipulation. I do not see that as a relevant difference. The approach taken in Jordan corresponds to the position under the Federal Court and High Court Rules: Cachia v Westpac Financial Services Ltd [2003] FCA 817; Australian Coal and Shale Employees Federation v Commonwealth (1953) 94 CLR 621.
The evidence going to the disputed issue
It appears to have been common ground that Mr Costi, the principal of the defendant solicitors, and Mr Psevdos, on behalf of the plaintiff client, first discussed the subject matter of the litigation on 1 April 2004. The solicitor said in evidence that by the end of 1 April the client had “made it clear” that he wanted him to act and this was in the context of the solicitor referring to his rate as being $300 per hour plus GST. The solicitor had acted for the client in other matters. The client said that on those occasions a fixed price for the work had been agreed between them, and that was done on the basis of a rate for the solicitor’s work of $300 per hour plus GST applied to an estimate of the number of required hours.
The Master accepted that on 22 April the solicitor generated a draft retainer agreement which comprehensively dealt with the manner in which the client would be charged for the legal services to be provided. There was a dispute as to whether that draft agreement, or any other, was ever given to Mr Psevdos. The solicitor’s evidence was that on that day, in conference with the client, he followed his usual practice of explaining the contents of the document. The solicitor claimed that on 23 April he gave the client a copy of a revised agreement (with two introductory paragraphs added), in the form of a letter, at a meeting between them at the client’s office. He said the client orally agreed to it. The document made provision for the client to sign, but was unsigned.
The client’s evidence was that he never saw either document. Indeed, although he acknowledged seeing the solicitor on 22 April, he denied that any meeting took place between them on 23 April. He said he was not even in his office on that day. He said that in discussions over a period of a few weeks, he and the solicitor agreed on a fixed fee of $12,000, plus GST, which was arrived at by multiplying an estimate of 40 hours work by $300 per hour, plus an amount for court attendances.
The solicitor contended that the 23 April document conformed with s 42(6) of the Legal Practitioners Act 1981. That subsection provides:
42—Costs
…
(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 fulfillment of a condition stated in the agreement.
The solicitor’s position was that the 23 April document was an agreement in writing specifying the amount to be paid by way of legal costs in accordance with a scale which was specified. The Full Court has held that the requirements of that section are met if the terms of the retainer agreement are in writing, or there is written confirmation of the existence of an agreement, and the terms of it are agreed to, orally, by the client: McNamara Business & Property Law v Kasmeridis & Anor (2005) 92 SASR 382 at 398.
The solicitor claimed that on 23 April the client accepted the terms of the written document, both orally to the solicitor himself and, additionally, at about the same time, or perhaps a few days later, orally to the solicitor’s secretary. The secretary gave evidence supporting the latter contention. The Master rejected the evidence of the solicitor’s secretary and it was not suggested that I should revisit that finding.
The Master found that the solicitor gave the unsigned retainer agreement, in its final form, to the client. He said it was “highly plausible” that it was given to the client on “about 22/23 April”. As regards the suggested oral acceptance expressed to the solicitor, the Master found that on the solicitor’s own evidence, the dealings between the solicitor and client did not rise to the level of an agreement, because the solicitor’s evidence was that “he was prepared to give [the client] some time to consider it before he finally had to accept it or reject it”: at [21]. That finding was contrary to the solicitor’s position, which was that an agreement had been struck, but the affixing of the client’s signature to the document was to be delayed, in case the client wished to “change his mind”. The solicitor said that at this early stage of the matter he would not have held the client to that agreement had he wished to walk away from it. Accordingly, on the Master’s interpretation, there was, as a matter of law, no agreement. Because of this finding the Master found it unnecessary to deal further with the events of 23 April, in particular whether the client orally agreed to its terms.
The solicitor also relied on acceptance of the terms of the written agreement by the client’s conduct. Argument before me focussed on this contention. The Master observed that there was a lack of particularity in the solicitor’s submissions as to the conduct constituting acceptance. However, before me, it was made clear that the conduct comprised the continuation of instructions to act.
It was submitted that Mr Costi’s clear stance throughout was that he would only act on the basis of the terms contained in the agreement. If that were so, then counsel submitted the continuation of instructions would unequivocally mean an acceptance of the only offer presented to the client. It was argued that the Master fell into error in finding that there was always a retainer from the client, and that the only question was as to its terms. It was said that this error led the Master to look for “conduct of the [clients] which is unequivocally referable to them having accepted the terms of the written retainer agreement as distinct from what would be consistent with the alternative oral/implied retainer”: at [26]. Using this analysis the Master found that the fact that the clients continued to instruct the solicitors was neutral as to the competing versions. Finding no other conduct of an unequivocal character, the Master determined that the costs should be taxed on the basis of the Supreme Court scale.
Analysis
I consider that the Master was entitled, on the solicitor’s own evidence, to find that from 1 April it was agreed between the solicitor and the client that the solicitor would act in the application for an injunction. Irrespective of whether there had been a discussion about the terms of the retainer, it is not suggested that any writing, containing terms, was produced until 22 April. In my view the Master was correct in finding that from the beginning of April the solicitor was acting for the client in the matter and the only question was whether an agreement complying with s 42(6) Legal Practitioners Act would be entered into. If it were not, then necessarily, the price of work done and the extent of items for which a charge could be made would be determined by reference to the Supreme Court scale. The real question to be determined was whether the solicitor had proved that the 23 April document had been accepted by the client.
It has been held that in determining whether there has been acceptance by conduct of a written offer, the courts are to consider whether a reasonable person, viewing the circumstances and conduct of both parties, would conclude that there was an understanding or agreement: Meerkin v Apel & Rossett Pty Ltd [1998] 4 VR 54 at 62 per Charles JA, Callaway and Batt JJA agreeing; Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153 at 179 per Heydon JA. It is necessary to make an objective assessment of the state of affairs between the parties: Hendriks v McGeoch [2008] NSWCA 53 per Giles JA at [11].
Counsel for the solicitors likened the situation here to that applicable in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 where it was held at 535 by McHugh JA, Samuels JA agreeing, that:
… where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms.
Having regard to the fiduciary relationship between solicitor and client and the requirements of s 42(6) Legal Practitioners Act, a court might be slower to draw an inference of acceptance in this situation than where, as in Empirnall, parties came to the negotiating table on an equal footing.
I have reached the opinion that the way in which the Master disposed of this difficult matter is unsatisfactory. I do not think it is sufficient in all the circumstances of the matter to simply characterise the solicitor’s account of the way the matter was left between the two men on 23 April as one amounting to something less than an agreement; in effect, to infer that the agreement remained subject to execution of the document. That was not the solicitor’s evidence and, on the bare facts as recited, that result was not dictated.
The Master’s conclusion in this regard led him to go no further in examining the competing versions of the events of 22 and 23 April. In my view, it is necessary to have the benefit of whatever findings the Master is able to make about such dealings as there were, in order to resolve this aspect of the matter. Too much turns on the history of the dealings between the solicitor and client and in what was said on the occasion when, as the Master found, the written agreement was handed to the client, to admit of such a simple analysis. Similarly, the weight to be attached to the fact that the agreement remained unsigned is very much a function of the way in which the matter of the agreement was left on 23 April. If the two men discussed the agreement on about 23 April, was there an expectation on either side that the issue would be raised again? Was it understood that, absent any question being raised by Mr Psevdos, the terms of the document would apply? Whether the arrangement was as straight-forward as now argued by the solicitor, or whether there was an understanding that the solicitor had been retained by the client and that the manner of charging would be addressed at a convenient time, turns on the conversations on the topic between the two men.
Much the same can be said of the appellant’s argument that he was only ever prepared to act on the basis of the written terms and the fact that the client continued to instruct him indicated acceptance of those terms. Unless there are findings as to what was said between the two men and how the matter was left when the document was handed to the client, it is not possible to evaluate this argument. Then again, the weight to be attached to the fact that the solicitor’s practices in rendering accounts after 23 April were not in accordance with the terms of the written document is hard to assess without greater insight of what went before. Indeed, as to the way that invoices were raised and paid, neither side seems to have had regard to the written document.
I note the Master’s finding that the client always expected that the solicitor would charge at a rate of $300 per hour, consistent with their earlier dealings. His evidence was that he had not, at that stage, heard of the Supreme Court scale and therefore none of his negotiations were aimed at restricting the solicitors to charges provided there.
The Master made quite disparaging assessments of the credibility of all the witnesses before him. I appreciate that especially where there were such fundamental differences between the accounts of the solicitor and client in relation to the written agreement, the making of firm findings about the matter would have been extremely difficult. Nonetheless, I do not think that the way in which the Master resolved the matter was open to him. In reviewing this decision I have been impeded by the lack of findings.
I have considered whether I am in a position to determine the matter myself, based on the findings as made and the evidence given. One approach would be to say that since the Master was not satisfied of the making of an agreement in writing, then the solicitors must fail. The difficulty with that course is that the Master specifically drew short of making findings on the solicitor’s evidence that the agreement was orally accepted, preferring to focus on the evidence going to the reason why the document remained unsigned on 23 April. But in my view it was necessary to make findings as to the thrust of the whole range of discussions from 1 April onwards, if such findings could be made. It may be a short step from that to conclude that he was not satisfied by any other evidence which would have proved an agreement in writing, but the Master did not choose to approach the matter in that way. There may well be unfairness to the solicitor in drawing inferences from the Master’s equivocality over other, more specific, items of evidence. In the end the matter turns on an assessment of credit and I am unable to determine it.
Unfortunately I consider that the only course open to me is to refer the matter back to the Master for more explicit findings on the topic of when the solicitor was retained and under what (if any) specific terms; what, if any, discussions took place on (or before) 23 April about the written contract and how the matter of the terms of the retainer was left between them on that day. It may well be that in the state of the evidence the Master may not feel able to make further findings. In that event it is quite likely that the solicitors’ case on the agreement will fail.

I make the following order:
1.refer the matter back to the Master for the making of further findings on the questions of at what stage and in what form the solicitors were retained; as to how the matter was left between the two men on or about 23 April; as to what, if any, inferences should be drawn from the facts that the written agreement remained unsigned and that the client continued to instruct the solicitors; whether the written retainer agreement was accepted, orally, by the client.