Pederick Lawyers P/L v Pomeroy - [2019] SASC 81

SUPREME COURT OF SOUTH AUSTRALIA
(Applications Under Various Acts or Rules: Civil)
PEDERICK LAWYERS P/L v POMEROY
[2019] SASC 81
Judgment of The Honourable Justice Stanley
23 May 2019
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - MOTIONS, INTERLOCUTORY APPLICATIONS AND OTHER PRE-TRIAL MATTERS
Application for an adjudication of costs pursuant to clause 37(5) of Schedule 3 to the Legal Practitioners Act 1981 (SA).
In 2013 the plaintiff brought proceedings in this Court against the defendant for recovery of moneys it alleges are owed for legal costs. The Public Trustee was appointed as litigation guardian for the defendant on 18 November 2015. The defendant’s litigation guardian admitted liability for legal costs on 2 October 2018. The dispute between the parties is now confined to the quantum of those costs. The defendant brought an application for an adjudication of costs on 5 December 2018. It is not in dispute that the application is out of time.
Held:
1. The issue of the quantum of costs only became relevant in late 2018 when the Crown Solicitor commenced acting for the litigation guardian and the liability for costs was admitted. The defendant then acted promptly in applying for an adjudication. This provides a satisfactory explanation for the delay.
2. The application for adjudication of legal costs is granted.
Legal Practitioners Act 1981 (SA) Schedule 3, clause 37(4)(a) and 37(5); Supreme Court Civil Rules 2006 (SA) r 4, r 79(3), referred to.
Frigger v Murfett Legal Pty Ltd [2012] WASC 447; Golden Destiny Investments Pty Ltd v McCrohan Bergseng Partners Trading as MBP Legal [2016] NSWSC 1639; Harvey v Goodman Law Pty Ltd [2011] NSWSC 340; Iloski v Boutique Lawyers Pty Ltd [2016] VSC 349, applied.
Hollidge v Pomeroy & Ors [2014] SASC 45, discussed.
Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389; Jones v Dunkel (1959) 101 CLR 298; Milliman v Rochester Railway Company 39 NYS 274 (1896); Renshaw v Queensland Mining Corp Ltd (No. 2) [2016] FCA 1482, considered.

PEDERICK LAWYERS P/L v POMEROY
[2019] SASC 81
Civil
STANLEY J.
Introduction

This is an application by the defendant pursuant to clause 37(5) to Schedule 3 of the Legal Practitioners Act 1981 (SA) (the Act) for a determination that it is just and fair for an application for adjudication of legal costs be dealt with by the Court, notwithstanding that it is made out of time. The application was made on 5 December 2018.
Pursuant to clause 37(4)(a) of Schedule 3 to the Act, applications for adjudication must be made within six months after the bill was given or the request for payment made.
The plaintiff conducted an incorporated legal practice. In 2011 and 2012 it acted for the defendant in a dispute over his father’s estate. The plaintiff was retained pursuant to a retainer agreement dated 14 July 2011. Invoices for legal costs were rendered during the period from mid-July 2011 until early December 2012.…

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: [2019] SASC 81
Decision Date: 23 May 2019

CaseChat Overview and Summary

In the case of Pederick Lawyers P/L v Pomeroy, the applicant, Pederick Lawyers, sought an extension of time to apply for an adjudication of legal costs in relation to a probate matter. The respondent, Pomeroy, opposed the application on the basis that the application was made well beyond the six-month period prescribed by statute. The primary legal issue for the court to decide was whether it was just and fair to grant the extension of time for the application for adjudication of costs, despite the significant delay in bringing the application.

The court considered several factors in its reasoning, including the length of the delay, the reasons for the delay, and the interests of both parties. The delay in this case was substantial, with the application being made between five years and four months to six years and eight months after the expiry of the six-month period. The court noted that the length of the delay was a significant factor weighing against granting the extension of time. However, the court also considered the reasons for the delay, which included the defendant's serious psychiatric illness and the appointment of a litigation guardian. The court accepted that the defendant's disability provided a satisfactory explanation for the delay.

The court also considered the interests of both parties in its decision. While the plaintiff argued that granting the application would occasion significant prejudice, the court found that the adjudication would be largely document-based and that the defendant was likely to succeed in having the costs reduced by at least $23,000. The court concluded that granting the application was just and fair in the circumstances, and accordingly, granted the application for an adjudication of legal costs.

In summary, the court granted the application for an adjudication of legal costs despite the significant delay in bringing the application, finding that the reasons for the delay and the likely outcome of the adjudication justified exercising its discretion in favour of the defendant. The court's decision highlights the importance of considering the principles and factors relevant to the exercise of discretion in such cases.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The discretion is to be exercised judicially. The authorities have developed a body of organising principles pursuant to which the discretion is to be exercised. They are:1.The applicant bears the onus of establishing that it is just and fair for the application to be dealt with after the expiry of the six-month period prescribed by clause 37(4)(a) of Schedule 3 to the Act.[1]2.The relevant test is whether it is “just and fair” for the application for adjudication to be dealt with after the six-month period “having regard to the delay and the reasons for the delay”.[2] The length of the delay is relevant: whether it is short or significant.[3] Further, the delay in bringing the application must be satisfactorily explained.[4]3.Fairness and justice require a consideration of the interests of both the applicant and the respondent, not merely the interests of the applicant.[5]4.Actual prejudice occasioned to the practitioner if the application were granted is relevant. In addition, there is presumed prejudice to a practitioner if there is delay in, or postponement of, the payment of anything which the practitioner may become or remain entitled to be paid as costs by a client in accordance with the bill of costs.[6] In addition, there is other presumptive prejudice occasioned by the effluxion of time due to the loss of evidence and the oppressive nature of proceedings brought out of time. Further, legal practitioners are entitled to assume that applications for adjudication will not be brought after six months, and that they can proceed to arrange their affairs accordingly. It is possible that a delay in seeking an assessment may prejudice a legal practice because memories may fade and the relevant legal personnel may move on to other positions.[7]5.Whether or not there is any evidence clearly showing overcharging.[8]6.Knowledge of an applicant’s rights to apply for an adjudication, including knowledge of the limitation period, is a relevant consideration, as is absence of such knowledge.[9]7.Whether the applicant has been represented by other solicitors after the bills the subject of the proposed adjudication were rendered and whether or not the applicant sought or was given advice about applying for an adjudication of costs.[10][1] Harvey v Goodman Law Pty Ltd [2011] NSWSC 340 at [13].[2] Harvey v Goodman Law Pty Ltd [2011] NSWSC 340 at [13].[3] Frigger v Murfett Legal Pty Ltd [2012] WASC 447 at [32].[4] Golden Destiny Investments Pty Ltd v McCrohan Bergseng Partners Trading as MBP Legal [2016] NSWSC 1639 at [35], [37] and [46].[5] Iloski v Boutique Lawyers Pty Ltd [2016] VSC 349 at [13].[6] Harvey v Goodman Law Pty Ltd [2011] NSWSC 340 at [13].[7] Golden Destiny Investments Pty Ltd v McCrohan Bergseng Partners Trading as MBP Legal [2016] NSWSC 1639 at [44]; Iloski v Boutique Lawyers Pty Ltd [2016] VSC 349 at [14]; Frigger v Murfett Legal Pty Ltd [2012] WASC 447 at [26].[8] Golden Destiny Investments Pty Ltd v McCrohan Bergseng Partners Trading as MBP Legal [2016] NSWSC 1639 at [42]; Frigger v Murfett Legal Pty Ltd [2012] WASC 447 at [30] and [32].[9] Golden Destiny Investments Pty Ltd v McCrohan Bergseng Partners Trading as MBP Legal [2016] NSWSC 1639 at [32] and [46].[10] Golden Destiny Investments Pty Ltd v McCrohan Bergseng Partners Trading as MBP Legal [2016] NSWSC 1639 at [34]; Iloski v Boutique Lawyers Pty Ltd [2016] VSC 349 at [13].The evidence

Decision

Reasons for decision

STANLEY J

I accept that there is no evidence clearly showing overcharging. Nonetheless, Mr Arnold in his report accepted that it is likely that there would be a reduction in the costs charged upon an adjudication. He allowed a sum of over $23,000. While this was a relatively small percentage of the overall charges, it is nonetheless a substantial sum. I consider it is likely that the defendant would succeed in an adjudication to the extent of obtaining a reduction of at least this amount.Conclusion This application is finely balanced. The length of the delay is a significant factor weighing against allowing the application. However, that is only one factor that the Court must weigh in the exercise of the discretion. This is an unusual situation where the defendant is and has been for a long period of time under a disability. While the order appointing a litigation guardian in the probate action was not made until March 2014, I note that the application was brought on 25 October 2012.[17] I am prepared to infer that the defendant was under a disability from that time. The nature of that disability is a serious psychiatric illness. I accept that disability impaired the defendant’s capacity to make decisions about this action prior to the appointment of the litigation guardian on 18 November 2015.[17] Hollidge v Pomeroy & Ors [2014] SASC 45 at [15]. Thereafter, the defence of the action was conducted on the sole basis that the retainer agreement was unenforceable because of the defendant’s lack of capacity to have entered into it. That remained the position until late 2018 when liability for costs was admitted. The defendant then acted promptly in applying for an adjudication. As I have indicated, I consider this provides a satisfactory explanation for the delay. Notwithstanding the absence of clear evidence of overcharging, the costs charged are very high, and there is evidence that it is likely the defendant will succeed on an adjudication in having those costs reduced by at least $23,000. In my view that supports granting the application. While I accept that allowing the application to be dealt with will occasion some prejudice to the plaintiff, the adjudication will be largely document based. While an adjudication will prolong the stress and anxiety experienced by Ms Pederick, that will be ameliorated by the engagement of a costs expert. In the end, however, I consider granting the application to be just and fair. In these circumstances, that is the price to be paid by the plaintiff so that justice can be done. However, the position of the plaintiff is protected to some extent by the power of the Court on an adjudication to award interest.[18] [18] Clause 49 of Schedule 3 to the Act. Accordingly, I would grant the application for an adjudication of legal costs.

Ratio Decidendi

Legal Principle Established

Established by: STANLEY J

Ms Pederick deposed to a number of matters which she contends constitute actual prejudice which would result from any order permitting adjudication to occur. First, she has retired from legal practice over three and a half years ago. The files in relation to this matter, which are voluminous, have been placed in storage. Second, the practice no longer employs any staff, apart from Mr John Pederick, a solicitor whose role now is to conduct this litigation and to attend to incidental matters with respect to winding up the practice. Third, the employees of the plaintiff who were involved at the time and had knowledge of the defendant’s estate matter are no longer available, having long since moved on to other employment, or overseas. Ms Pederick says the plaintiff would need to employ staff to assist Mr Pederick on any adjudication. Fourth, the delay in resolution of this matter causes Ms Pederick considerable anxiety and stress. The work the plaintiff would have to perform in an adjudication so long after the work was done would be costly and time consuming, as Ms Pederick’s recollection of events has faded. This is aggravated by the absence of other employees who assisted her during the relevant period of 2011 and 2012. There would be a great deal of work required to go through numerous archive boxes and hundreds of pages of old files for the purposes of an adjudication. That would not be avoided even if a cost expert was engaged to assist and represent the plaintiff in any adjudication. Fifth, Ms Pederick cares for her aged and infirm mother. Her capacity to do so would be reduced by the work required if any adjudication was ordered. Sixth, an award of costs or interest would not adequately compensate Ms Pederick for the prejudice which an order for adjudication would occasion.Consideration Whether to grant an extension of time is a discretionary decision. It requires the consideration and weighing of the principles identified above. Ultimately, it is a question of determining whether it is fair and just in the particular circumstances of the case for the application for adjudication to be dealt with notwithstanding the expiry of the six-month period. It is for the defendant to persuade the Court it should do so. The principal considerations are the delay and the reasons for the delay. In this case the delay is significant. It is at least five years and four months and up to six years and eight months since the expiry of the six-month period. The length of the delay is to be assessed by reference to the period permitted for the bringing of an application for adjudication of legal costs i.e. six months. On any view, the delay is very substantial. That is plainly a factor weighing heavily against the exercise of the discretion in the defendant’s favour. The plaintiff submits that the defendant has failed to provide a satisfactory explanation for the length of the delay. It says there are a number of matters relevant to the failure of the defendant to provide a satisfactory explanation for the length of the delay. The plaintiff submits that the retainer agreement between the parties disclosed the defendant’s right to an adjudication of costs. However, there is no evidence that the defendant was given notice of the period within which an application for adjudication had to be made. While in 2014 a Master of this Court raised the question of taxation of costs with the defendant, this was at a time before the appointment of a litigation guardian. New solicitors commenced acting for the defendant in mid-2015 and remained on file until September 2018. The plaintiff submits that those solicitors were aware that no application for an adjudication or taxation had been made. That may be accepted but at that time the basis of the dispute was the anterior and fundamental question of whether there was any liability for those costs rather than the quantum of those costs. In those circumstances it would have been illogical and inconsistent for an application to be made for an adjudication.