Piper Alderman (A Firm) v Australian Medic-Care Company Ltd

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
PIPER ALDERMAN (A FIRM) v AUSTRALIAN MEDIC-CARE COMPANY LTD & ANOR
[2011] SASC 234
Judgment of The Honourable Justice Stanley
21 December 2011
PROFESSIONS AND TRADES - LAWYERS - SOLICITOR AND CLIENT - RETAINER
Plaintiff's application for an adjudication of its claim that the defendants were liable to pay legal costs to the plaintiff - defendants challenged the plaintiff's entitlement to payment of legal costs on the basis that there was no written agreement or in the alternative, the terms of the agreement were unfair or unreasonable - pursuant to r 16 of the Supreme Court Civil Rules 2006 the proceedings were referred by a Master of this Court for determination of the defendant's claims - whether there was an agreement in writing between the plaintiff and the defendants for payment of legal costs on a time-costing basis - if there was an agreement, whether a term, or terms of the agreement were not fair or reasonable.
Held: there was an agreement in writing as required by s 42(6) of the Legal Practitioners Act 1981 (SA) - emails between the parties found to be written confirmation of the existence of an agreement - written agreement for payment of legal costs on a time related rate - no terms of the agreement were unfair or unreasonable.
Proceedings referred back to Judge Lunn for hearing and determination of outstanding issues.
Legal Practitioners Act 1981 (SA) s 42(1)(a), s 42(6), s 42(6)(a), s 42(7); Supreme Court Civil Rules 2006 (SA) r 16, r 261, r 272, referred to.
McNamara Business Law v Kasmeridis (2005) 92 SASR 382; McNamara Business & Property Law v Kasmeridis (2007) 97 SASR 129, applied.
Graziano v Graziano [2010] SASCFC 76; County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193, discussed.
ABC Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; Commonwealth Bank v Carotino [2011] SASCFC 110; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-82) 149 CLR 337, considered.

PIPER ALDERMAN (A FIRM) v AUSTRALIAN MEDIC-CARE COMPANY LTD & ANOR
[2011] SASC 234
Civil
STANLEY J:
Introduction

The plaintiff is a firm of solicitors (“Piper Alderman”). It acted for the defendants in a long and complex action in the Federal Court of Australia, South Australian registry.
Pursuant to s 42(1)(a) of the Legal Practitioners Act 1981 (SA) (“the Act”) and r 272 of the Supreme Court Civil Rules 2006 (“the Rules”) Piper Alderman applied for an adjudication of its claim that the defendants were liable to pay legal costs to the firm. The taxation came before his Honour Judge Lunn.
In the course of the proceedings it became apparent that the defendants challenged the firm’s entitlement to payment of legal costs on two grounds. First, on the basis that there was no agreement in writing between Piper Alderman and the defendants for payment of legal costs on a time-costing basis pursuant to s 42(6) of the Act. Secondly, in the alternative, if there was such an agreement in writing, the defendants sought an order by the Court, pursuant to s 42(7), rescinding the agreement on the basis that a term or terms of the agreement were not fair and reasonable.
Pursuant to r 16 of the Rules his Honour Judge Lunn referred the proceedings for hearing and determination by me.
At the trial Dr Keung, the second defendant and controlling mind of the first defendant, appeared for the first defendant by permission of the Court.
The trial proceeded on affidavits.
Much of the affidavit material sought to be relied on by the defendants was rejected as irrelevant. This was because they sought, in the course of proceedings, to agitate allegations of negligent, improper or unsatisfactory conduct on the part of their solicitors. Such conduct, if it occurred, about which I say nothing, has no bearing on the two issues which the Court had to decide.
In the course of the hearing, I admitted paragraphs 16 – 42 of the affidavit of Dr Keung of 2 August 2011 de bene esse. I did so because the defendants submitted that the matters set out in those paragraphs of Dr Keung’s affidavit were somehow relevant to the issues in the proceedings because those matters somehow related to the draft letters of engagement put forward by Piper Alderman to the first defendant, Australian Medic-Care Company Ltd (“AMC”) in the last part of 2009 and early 2010. I admitted the paragraphs, over objection by Piper Alderman at the time, as I could not understand properly the basis of the defendants’ argument as to the relevance of the paragraphs and I wanted the opportunity to consider the objection further. Having done so, I am satisfied that the paragraphs are irrelevant to the issues which fall for decision for the reasons set out in the preceding paragraph. I uphold the objection to paragraphs 16 – 42. They will not be admitted.
Was there a costs agreement in writing?
Section 42(6)(a) of the Act permits a legal practitioner to make an agreement in writing with a client for 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).
Piper Alderman claims that such an agreement in writing was made with the defendants. It principally relies upon the contents of an email from Mr Tony Abbott, a partner of Piper Alderman, to Dr Keung of 4 August 2009.
The defendants deny that there was an agreement in writing between Piper Alderman and them providing for time-costing for the legal work performed by the firm in respect of the Federal Court proceedings.
In McNamara Business Law v Kasmeridis[1] the Full Court considered the construction of s 42(6) of the Act and, in particular, its requirement that any agreement between a legal practitioner and his or her client be “in writing”. The Court said:[2]
The statutory requirement that an agreement be made in writing is sufficiently satisfied if there is written confirmation of the existence of an agreement. This accords with the view adopted by the judge that an email sent by the respondents to the appellant acknowledging their acceptance of the terms of the retainer agreement would have sufficed for the purposes of s 42(6). In effect, on the interpretation advanced by the clients, had the telephone conversation between Mr Kasmeridis and Mr Viscariello on 9 February 2004 been an email exchange, and accordingly in visible written form, the terms of s 42(6) of the Legal Practitioners Act would have been satisfied. The appellant would have been able to rely upon the retainer agreement when preparing its account. Such an interpretation does not rest in logic. Why should an email exchange be reliable evidence or in any event more reliable than other evidence of agreement?
The retainer agreement itself was in writing. The terms of that agreement were in writing. There is evidence that the clients had orally accepted those terms. In addition, there is evidence that the respondents' oral acceptance of the retainer agreement was in fact recorded in writing. This latter written record was not in our view essential in order to comply with s 42(6).
Section 42(6) of the Legal Practitioners Act should not be construed to require a client's acceptance of a costs agreement to be in a written form. The legislative history of the provision, the common law concerning written agreements, the definition of "writing" in the Acts Interpretation Act, the protection offered by equity and the overriding protection offered by s 42(7) provide overwhelming support against such a construction.
[1] (2005) 92 SASR 382.
[2] (2005) 92 SASR 382 at 398 [61] - [63].
The onus of establishing an agreement was made in writing in accordance with the terms of s 42(6) rests on Piper Alderman. This onus is to be discharged having regard to the nature of the fiduciary relationship and the circumstances of dependence and vulnerability that may exist.[3]
[3] McNamara Business Law v Kasmeridis (2005) 92 SASR 382 at 398 [64].
Piper Alderman’s case is that an agreement in writing satisfying the requirements of s 42(6) is constituted by an exchange of emails between the parties on 4 August 2009.
To understand Piper Alderman’s case it is necessary to refer to some matters of background.
The second defendant, Dr Keung, is the Hong Kong based controller of the first defendant. Wilkinson & Grist are Hong Kong solicitors who formerly acted for the defendants in relation to a dispute between the first defendant, AMC, and Hamilton Pharmaceuticals Pty Ltd (“Hamilton Pharmaceuticals”) relating, inter alia, to a distribution agreement between them. On 23 March 2006 Wilkinson & Grist entered into a retainer agreement with Piper Alderman for the firm to act for AMC in proceedings between AMC and Hamilton Pharmaceuticals in the Federal Court which were being conducted through its South Australian registry. The retainer was in writing and included a provision that Piper Alderman would charge for its services on a time cost basis plus disbursements. That retainer was terminated on 20 April 2009. It was terminated by letter from Wilkinson & Grist to Piper Alderman. This was at a time after the conclusion of the trial in the Federal Court but prior to delivery of judgment.
On 12 May 2009 Mr Abbott, for and on behalf of Piper Alderman, wrote to the defendants inquiring whether the defendants wished to instruct Piper Alderman in relation to the Federal Court proceedings. The letter noted that Piper Alderman had not heard from Wilkinson & Grist since their letter of 20 April 2009 terminating the engagement of Piper Alderman in the Federal Court proceedings.
Relevantly, the letter continued:
If AMC and Dr Keung wish to instruct this firm in the place of Wilkinson & Grist, so that AMC and Dr Keung would be our clients, we would need to consider the terms on which we would be prepared to accept those instructions from a new client. As a minimum, those terms would include:-
1.Signed acceptance of our current standard Terms of Engagement – a copy is enclosed;
2.Payment of monies into trust to cover the estimated costs of future work we might be required or requested to carry out, but with an understanding that such estimate was not a quote or final and binding fixed figure;
3.The personal guarantee of all shareholders of AMC for these future costs of AMC;
4.To the extent that Wilkinson & Grist do not pay or make to us a satisfactory proposal for payment of the current indebtedness within a reasonable time, a proposal for payment of the outstanding indebtedness and for securing that payment in a manner which is satisfactory to us.
As indicated in the letter, there was attached a document entitled “Terms of Engagement”. The terms of that document included the following:
1.     Fees
We charge for our services on a time cost basis, unless some other basis is agreed, plus expenses described in s 2.
Our fees are therefore the product of the hours work multiplied by the hourly rates of the people who did the work.
Hourly rates vary depending on the level of expertise of the person involved. Current rates of charge are referred to in the individual letter of engagement.
Unusual or overtime support staff engaged specifically because of the requirements of the matter will be charged for additionally.
Fees for additional items of work shall be charged at minimum six minute units. The charge for an item of work shall be rounded up to the nearest six minute unit.
Our rates of charge for time spent, and for some expenses, are different from the rates set out in the scale of fees published by the Court in which your action is being pursued (or the Supreme Court, where the matter does not involve litigation). In some cases our rates will result in a higher charge than if the Court’s scale of fees were used.
Our hourly rates shall be adjusted in June of each year, having regard to changes in costs and market conditions.
2.     Expenses
In addition to our fees we charge you for the out-of-pocket expenses incurred by us or paid on your behalf (also called “disbursements”). Interstate and international telephone calls and courier fees are charged at the cost to us. There is no charge for local telephone calls.
Charges for facsimile transmissions and photocopying are based on the number of pages sent or copied.
Where we provide video facilities at the request of a client then we will render an additional charge per hour, to cover the costs of equipment, use of rooms and other facilities. Direct costs rendered by any tele-communications carrier resulting from video conferencing will be charged at the cost to us.
The rates of charge are set out in the letter of engagement which accompanies these terms. These charges may change from time to time.
…
4.     Cost Estimates
The total cost of the fees and expenses to complete any matter will vary depending on the extent of the work required to obtain the best result, the approach and attitude of any other party and other factors. These cannot be predicted accurately in advance.
Therefore any estimate given is not a fixed quote unless expressly so stated.
…
7.     Payment Terms
It is a condition of the engagement that our accounts are paid within 14 days of receipt by the client. If not so paid, in addition to any other remedy, we may cease acting.
If our accounts are not paid within 14 days, we shall be entitled to charge interest on the account at 10 percent per annum, accruing daily from the date of the invoice.
On 15 June 2009 Piper Alderman sent a further letter to the defendants referring to its earlier letter of 12 May 2009 and indicating a preparedness on the part of the firm to accept the defendants’ instructions, in place of Wilkinson & Grist, to continue to represent the defendants in the Federal Court proceedings on the basis of nine prescribed terms, which it is unnecessary to particularise.
On 30 June 2009 Dr Keung replied raising certain queries in relation to the terms under which Piper Alderman was prepared to act as set out in its letter of 15 June 2009.
Mr Abbott, on behalf of Piper Alderman, responded by email to Dr Keung on 23 June 2009 in the following terms:
Dear Dr Keung
Thank you for your email. I have been away for a week so have not been able to respond until now.
What is required first is for AMC and you to say whether or not AMC and you are prepared to retain Piper Alderman for future work on the terms set out in paras 1-9 inclusive of our letter of 15 June. I think the terms are reasonable in the circumstances. If we cannot agree these terms we will have to cease acting.
We do not want to have to do this, and we did not want this situation to come about, and we did not bring it about. The situation has been precipitated only because of Wilkinson & Grist’s sudden termination of their retainer of us. If we are asked to continue to act on AMC’s and your retainer alone, it is necessary to agree new terms. Some of the terms are prompted by matters you have mentioned in correspondence.
If we agree terms I will if you request respond to the assertions in your email with which I disagree.
I do hope we can agree these terms.
Regards
On 4 August 2009 Dr Keung sent an email to Mr Abbott. In the email Dr Keung advised Mr Abbott that the directors of AMC had instructed him to get a lawyer or Ian Robertson SC to review the terms of engagement proposed in Piper Alderman’s letter of 15 June 2009. Relevantly, the email contained the following:
Before we can reach an agreement please continue to act according to our previous terms as well as promises and we shall pay $20,000 as a trust in the account of Piper-Alderman as requested.
…
Finally I hope you can continue to act for AMC at least until the declaration of judgment in view of the common interest of all parties. I shall discuss with you about the new terms in your office during the last week of August. I presume you are not pressing me to perform the role of counsel in front of Justice Finn due to limited time and smile again [sic].
Later the same day Mr Abbott responded to Dr Keung by email. He said:
Dear Dr Keung
Thank you for your email of 4 August.
…
First, in relation to numbered paragraph 1 of your letter of 3 August attached to your email of 4 August, please confirm as soon as possible, and ask Wilkinson & Grist to confirm as soon as possible, if you and they wish Wilkinson & Grist to reinstruct us for future work in the proceedings.
Second, we of course do not mind if you communicate to Ian Robertson and/or Anne Barnett direct and ask them whether they would be prepared to accept instructions from AMC or you, or Wilkinson & Grist, for the purposes of any future work required. Please note that until such time as all our costs are paid or satisfactorily secured, we will however maintain our lien on documents that we hold and that they are likely to require for the purposes of acting for you, and see my comments in para 3.2)(c) below. …
As it appears that we are unlikely to be able to settle the question of future representation on the terms of our letter of 15 June 2009, whether in the next few days if at all, I look forward to receipt of:-
§$20,000 which as an interim measure we will hold in trust against any future work which we are required by the Hamilton proceedings to do for you or AMC and which you request and we agree to do. I shall accept this on the interim basis that it is pursuant to our normal terms of engagement only, pending your and our consideration of the terms set out in our letter of 15 June 2009 and your response.
§The further monthly instalment of $30,000 for August in respect of the past indebtedness when Wilkinson and Grist were our client.
I agree that a face to face meeting would be helpful to sort out any differences and for us both to determine whether we are prepared to instruct and to provide future representation in the proceedings.
…
3.Although I think I have explained this in previous communications, I repeat, because you appear to be labouring under some misconceptions, that the future course of the proceedings is likely to be:-
…
3.2It is not correct that “the only procedure left is the verdict.” AMC’s future legal involvement is not simply waiting for judgment. If that were all there would be no need for AMC to be much concerned about future representation. In fact, depending on the findings in the judgment, there will then almost certainly be the following further subsequent interlocutory proceedings occurring shortly after the judgment, apart from any appeal which Hamilton or AMC may wish to lodge to the appeal court (which must be done 21 days from final order, and which would require substantial work):-
…
(c) If AMC is successful and the Judge does not assess all the damages, but for example wants further evidence or a further assessment (and Ian Robertson did submit that if the Judge finds breach of copyright then there should be a further assessment of damages), then there will be orders for that assessment, which might include further evidence being filed and setting a date for the assessment some time in the future.
…
I look forward to hearing from you and receiving the sum of $50,000. If this is not received, we will have to review the situation again.
On 10 August 2009 the first defendant deposited $50,000 into Piper Alderman’s trust account.
On 17 August 2009 Mr Abbott emailed Dr Keung advising that $30,000 of that deposit would be used to reduce the current indebtedness of Wilkinson & Grist, and the balance held against any future costs that would have to be incurred before the question of future representation could be finalised.

The Federal Court delivered judgment on 31 October 2009. An argument in respect of the costs of the trial was listed for 20 November 2009.
On 2 November 2009 Mr Abbott, for and on behalf of Piper Alderman, emailed Dr Keung advising of further steps that were required to be taken in relation to the matter. The email included the following:
In the meantime however, as we have utilised since 20 April and prior to judgment more of the $20,000 than anticipated, as set out in our account of 27 October (invoice 239681) sent to you last week, could you please as a short term measure [put us] in funds for a further $20,000 to be held in trust against future work in the next three weeks or so…
It appears that on 12 November 2009 AMC deposited $25,000 in Piper Alderman’s trust account to meet ongoing costs.
On 19 November 2009 Mr Abbott emailed Dr Keung advising that total charges accrued to date on the firm’s normal method of charging (not party and party costs) and unbilled were by then about $75,000. Mr Abbott estimated a further $7,500 in work would be undertaken by the conclusion of the hearing on 20 November 2009.
The above by no means represents the full extent of the correspondence between the parties during this period. It does reflect the critical dealings between the parties however, in relation to the issues which I must decide.
It is sufficient for the purposes of this judgment to note that neither Dr Keung nor AMC ever agreed to the terms set out in Piper Alderman’s letter of 15 June 2009. On 16 February 2010 Piper Alderman filed in the Federal Court a notice of ceasing to act.
Accordingly, it is apparent that after the termination of Wilkinson & Grist’s engagement of Piper Alderman to act in the Federal Court proceedings between AMC and Hamilton Pharmaceuticals on 20 April 2009, Piper Alderman took steps to agree a new retainer direct with Dr Keung and AMC. The basis of this retainer was set out in the letter of 12 May 2009 and the attachment thereto. That letter did not include a schedule of fees, however, a schedule of fees was sent to the defendants by way of draft retainer agreements of 10 July 2009, 15 July 2009 and 29 July 2009, all of which were emailed to the defendants.
While this was occurring, Piper Alderman remained on the record as the local solicitors acting for AMC in the Federal Court pending negotiation of a new retainer with the defendants.
In my view an agreement was made between Dr Keung on behalf of himself and AMC with Mr Abbott on behalf of Piper Alderman, on 4 August 2009, that Piper Alderman would act for the defendants in relation to the Federal Court action between AMC and Hamilton Pharmaceuticals on an interim basis as set out in writing in the respective emails of 4 August 2009.
The fact of the agreement is evidenced by the two emails and by the subsequent payments of $20,000 and $25,000 by AMC to the Piper Alderman trust account in part performance of the agreement. I am entitled to have regard to the fact of this payment as evidence of the fact of the agreement. There is no doubt that a court can consider evidence of subsequent conduct on a part of parties to determine the issue of whether a contract has come into existence.[4]
[4] ABC Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 547-548; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 163-164; Commonwealth Bank v Carotino [2011] SASCFC 110 at [86].
The agreement was for Piper Alderman to continue to act in connection with the Federal Court action in accordance with either Piper Alderman’s “normal terms of engagement” or the “previous terms” which had been agreed between Piper Alderman and Wilkinson & Grist pursuant to which Piper Alderman acted in the Federal Court action for AMC.
Whichever was the case makes no material difference as either included a term for charging on the basis of time costing plus disbursements. These terms were set out in the attachment to the Piper Alderman letter to the defendants of 12 May 2009 and in the original retainer agreement contained in the Piper Alderman letter to Wilkinson & Grist of 23 March 2006.
I reject the submission put by Dr Keung on behalf of the defendants, that any agreement relied upon by Piper Alderman was void for uncertainty because the email of 4 August 2009 from Mr Abbott to Dr Keung failed to state expressly what was meant by the “normal terms of engagement”.
In my view, there was no uncertainty as to what this meant. On the contrary, the earlier email of the same day from Dr Keung referring to “our previous terms” evidences an objective common understanding of the basis upon which the parties were negotiating, namely, the same basis on which professional work had been charged by Piper Alderman in the Federal Court action pursuant to the Wilkinson & Grist retainer, i.e. time costing plus disbursements.
Mr Blight, counsel for the plaintiff, submitted that this was plain as there was no evidence that Dr Keung or AMC subsequently queried what was meant by the expression “normal terms of engagement” before making either of the subsequent payments of $20,000 and $25,000 into Piper Alderman’s trust account. This submission raises an interesting question.
The conventional principle is that it is impermissible to use evidence of post-contractual conduct by a party in order to construe the meaning of words in a contract.[5] The rationale for this principle lies at the heart of the objective theory of contract. Post-contractual conduct is evidence of the subjective understanding of a party to the contract not of the objective intentions of the parties at the time the contract was formed. However, as the Full Court recently has observed in Graziano v Graziano,[6] that principle does not preclude the use of evidence of the subsequent conduct of parties to establish the terms of their agreement.[7] White J cited with approval[8] the judgment of Spigelman CJ in County Securities Pty Ltd v Challenger Group Holdings Pty Ltd[9] where the Chief Justice said:[10]
Where what is in issue is the identification of the subject matter of the contract, or the identification of necessary terms which were not the subject of express provision in a contract not reduced to writing, then consideration of post contractual conduct does not contravene the reasons underlying the principle.
… In my opinion, subsequent conduct, especially how a contract for purchase and sale was settled, is relevant, on an objective basis, to the identification of the subject matter of the contract or the determination of necessary terms, as distinct from deciding the meaning of words.
[5] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-82) 149 CLR 337 at 348.
[6] [2010] SASCFC 76 per White J (Anderson and Peek JJ agreeing).
[7] [2010] SASCFC 76 at 13 [59].
[8] [2010] SASCFC 76 at 13 [59] (Anderson and Peek JJ agreeing).
[9] [2008] NSWCA 193.
[10] [2008] NSWCA 193 at [20] – [21].
White J went on to say:[11]
[11] [2010] SASCFC 76 at 13 – 14 [60] – [61] (Anderson and Peek JJ agreeing).
Further, the principle that parties' subsequent conduct may not be used in construing the terms of their agreement applies with less rigour, at least in the United Kingdom, in the case of contracts made by informal means. In relation to such cases, Lord Hoffmann said in Carmichael v National Power PLC:
“This austere rule would be orthodox doctrine in a case in which the terms of the contract had been reduced to writing. But I do not think that it applies to a case like the present. In a case in which the terms of the contract are based upon conduct and conversations as well as letters, most people would find it hard to understand why the tribunal should have to disregard the fact that Mr Lovatt and Mrs Carmichael both agreed that the C.E.G.B. were under no obligation to provide work and the applicants under no obligation to perform it. It is, I think, pedantic to describe such evidence as mere subjective belief. In the case of a contract which is based partly upon oral exchanges and conduct, a party may have a clear understanding of what was agreed without necessarily being able to remember the precise conversation or action which gave rise to that belief. ... But the terms of the engagement must have been discussed and these conversations must have played a part in forming the views of the parties about what their respective obligations were.
The evidence of a party as to what the terms he understood to have been agreed is some evidence tending to show that those terms, in an objective sense, were agreed. Of course the tribunal may reject such evidence and conclude that the party misunderstood the effect of what was being said and done. But when both parties are agreed about what they understood their mutual obligations (or lack of them) to be, it is a strong thing to exclude their evidence from consideration. Evidence of subsequent conduct which would be inadmissible to construe a purely written contract ... may be relevant on similar grounds, namely that it shows what the parties thought they had agreed.”
Subsequent conduct may be used in this context in a retrospective manner. That is to say, it may be used in order to understand the meaning of the language used by the parties in their communications and in particular, in determining whether that language expressed, objectively, an intention to be bound. Gleeson CJ described this usage in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd when he said:
“[I]t is proper to have regard to communications between the parties subsequent to the date of the alleged contract to the extent to which those communications throw light upon the meaning of the language which is being considered for the purpose of determining whether it expresses an intention one way or the other upon the critical matter. At the least, such subsequent communications will often form part of the context in which the particular exchanges in question are to be evaluated.”
(Footnotes omitted)
Notwithstanding the recognition that the principle prohibiting the use of post-contractual conduct in establishing the terms of a contract is not inflexible, I do not consider it permits regard to be had to the conduct of the defendants in failing to query, subsequent to 4 August, the meaning of the expression “normal terms of engagement” in determining the meaning of that expression. That would offend the prohibition on using post-contractual conduct to determine the meaning of words. Nonetheless, I am satisfied, for the reasons explained above, that the parties were ad idem that the agreement of 4 August included a term as to the basis upon which Piper Alderman’s professional work would be performed on the interim basis, and, that that term was time costing plus disbursements.
I also reject any argument propounded on the basis that the agreement was void for uncertainty because confusion was created by the provision to the defendants of a series of draft retainer agreements on 10 July, 15 July and 29 July 2009. Each of those documents expressly provided in clause 5.1 that services would be charged on a time costs basis plus disbursements.[12] Those terms remained unchanged throughout each revision of the draft document and were substantially the same as the provision in the final paragraph of clause 1 of the “Terms of Engagement” document relating to fees annexed to Piper Alderman’s letter to the defendants of 12 May 2009, and identical to the terms of clause 3.1 of Piper Alderman’s letter of retainer to Wilkinson & Grist of 23 March 2006.
[12] Although I note a typographical error in each of the drafts, in that in clause 5.1 refers to Piper Alderman charging on a time cost basis, “plus expenses described in section 4” (emphasis added). In fact the reference should have been to section 6. The defendants did not complain about this and I do not consider it causes any uncertainty.
Accordingly, I find there was an agreement. Further, I am satisfied that it was an agreement in writing as required by s 42(6). As the Full Court said in Kasmeridis,[13] s 42(6) is not to be construed so as to require a client’s acceptance of a costs agreement to be in a written form. It is sufficient if there is a written confirmation of the existence of an agreement. Here there is an exchange of emails which evidences the agreement between the parties that Piper Alderman would act in the Federal Court action between AMC and Hamilton Pharmaceuticals on its normal terms of engagement pending the parties agreeing on the terms Piper Alderman were insisting upon as a retainer agreement. The normal terms of engagement were apparent from other documents. The normal terms of engagement included charging on a time cost basis plus disbursements.
[13] (2005) 92 SASR 382 at 398.
Were the terms of the cost agreement fair and reasonable?
In McNamara Business & Property Law v Kasmeridis[14] Doyle CJ, with whom Gray and David JJ agreed, held that the fairness and reasonableness of an agreement for the purposes of s 42(7) is to be determined at the time at which the agreement was made, having regard to the circumstances in which it was made and to the retainer in connection with which it was made.[15]
[14] (2007) 97 SASR 129.
[15] (2007) 97 SASR 129 at 141 [45].
The Chief Justice addressed the meaning of the expression “fair and reasonable” as follows:[16]
The concept of an agreement being fair and reasonable is deceptively simple. In Re Stuart; Ex parte Cathcart [1893] 2 QB 201 Lord Esher MR, in a passage often cited with approval, summarised the position. He is referring to s 9 of the 1870 Act, one of the provisions to which I just referred. He said (at 204-205):
“ ... By s 9 the Court may enforce an agreement if it appears that it is in all respects fair and reasonable. With regard to the fairness of such an agreement, it appears to me that this refers to the mode of obtaining the agreement, and that if a solicitor makes an agreement with a client who fully understands and appreciates that agreement that satisfies the requirement as to fairness. But the agreement must also be reasonable, and in determining whether it is so the matters covered by the expression “fair” cannot be re-introduced. As to this part of the requirements of the statute, I am of opinion that the meaning is that when an agreement is challenged the solicitor must not only satisfy the Court that the agreement was absolutely fair with regard to the way in which it was obtained, but must also satisfy the Court that the terms of that agreement are reasonable. If in the opinion of the Court they are not reasonable, having regard to the kind of work which the solicitor has to do under the agreement, the Court are bound to say that the solicitor, as an officer of the Court, has no right to an unreasonable payment for the work which he has done, and ought not to have made an agreement for remuneration in such a manner ...”
[16] (2007) 97 SASR 129 at 137 [22].
In deciding whether a costs agreement is “fair and reasonable” the Court is to have regard to all relevant circumstances. As the Chief Justice noted in Kasmeridis it is therefore difficult to lay down any general rules.[17]
[17] (2007) 97 SASR 129 at 139 [32].
Further, the Chief Justice said:[18]
It is not possible for the court to lay down guidelines in advance determining what provisions of a costs agreement will be fair and reasonable, and what rates of charging will be reasonable. The nature of the decision which the court makes is such that it can be made only in the light of the circumstances of the particular case.
[18] (2007) 97 SASR 129 at 145 [78].
Dr Keung, on behalf of himself and AMC, initially submitted that the agreement was unfair or unreasonable only on the basis that the agreement made provision for payment of interest on overdue accounts for costs and disbursements without explaining that there was an obligation to pay a higher rate of interest than provided for under the Rules.
As set out above, the normal terms of engagement as contained in the document entitled “Terms of Engagement” annexed to the letter from Piper Alderman to the defendants of 12 May 2009 provided, in clause 7, that if accounts were not paid within 14 days the firm was entitled to charge interest on the account at 10 per cent per annum accruing daily from the date of the invoice.
Mr Blight sought to meet the defendants’ submission on the basis that there was in fact no obligation to pay a higher rate of interest than provided for in the Rules. He submitted that the interest rate prescribed at the relevant time by r 261 of the Rules, from 1 October 2008 to 30 June 2010, was 10 per cent per annum, precisely the same interest rate as prescribed in the “Terms of Engagement” document.
Strictly speaking, this submission is not a direct answer to the defendants’ argument. The argument is that the agreement with respect to interest was unfair and unreasonable as there was no explanation that there was an obligation to pay a higher rate of interest than provided for under the Rules.
The fact is the terms of clause 7 merely point out that the relevant rate of interest which the firm was entitled to charge on unpaid invoices was 10 per cent per annum accruing daily. There was no reference at all to the Rules and the fact that the Rules made specific provision for charging interest at a prescribed rate and that the rate of 10 per cent prescribed by the agreement might differ from the rate prescribed by the Rules.
Nonetheless, I do not consider that the terms of the agreement were unfair or unreasonable having regard to all relevant circumstances. Plainly, it is a relevant circumstance that at the time the agreement was made the relevant rate under the Rules was the same as the rate prescribed by the agreement. In those circumstances I do not consider that the terms of the agreement are unfair or unreasonable for this reason.
At trial, Dr Keung, on behalf of himself and AMC, sought to propound an additional ground upon which the defendants asserted the costs agreement was unfair and unreasonable. They submitted that the terms of the agreement were not fair or reasonable because there were no cost estimates or that there was a failure to give notice when the fees for the work performed pursuant to the agreement exceeded the amount paid into trust.
I reject these submissions.
First, the agreement did make provision for cost estimates. Both the “Terms of Engagement” document annexed to the Piper Alderman letter to the defendants of 12 May 2009 and the original retainer letter from Piper Alderman to Wilkinson & Grist of 23 March 2006 make provision for cost estimates. I have set out the provision in relation to cost estimates in the “Terms of Engagement” document of 12 May 2009 earlier in these reasons.
The original retainer letter from Piper Alderman to Wilkinson & Grist of 23 March 2006 provided as follows in clause 6:
6. Cost Estimates
6.1Your fees and expenses to be incurred with us in carrying out your instructions, subject to the factors set out below, are estimated as follows (exclusive of GST):
(a)for our initial advice on the prospects of success, $1,000;
(b)for drafting and issuing proceedings, if instructed to do so, $2,000; and
(c)for disbursements for issuing proceedings (court fees), approximately $500, although this figure may vary with the jurisdiction in which proceedings are issued.
6.2We emphasise that the estimate is just that, a preliminary estimate. It is not a quote or a fixed minimum charge. The actual costs will be based on the work actually done and the expense actually incurred. Costs may vary depending on the extent of the work required to obtain the best result, the approach and attitude of any other party and other factors. These matters cannot be accurately determined in advance. Nevertheless, on the information we have to date, and in our experience, the estimate given seems reasonable.
6.3The above estimate only refers to your costs with us. Additionally, if proceedings are issued, the Court, in circumstances which we can explain, may order you to pay other moneys, including the costs of other parties.
6.4Your costs with us are payable by you according to our payment terms whether or not you may, if successful in your action, have some right to recover costs from another party or parties. Also, you should note that even if the other party to litigation is ordered to pay your costs of the action, this will very likely cover you (assuming the other party pays what is ordered) for approximately two thirds of the costs you will have incurred with us under our terms of engagement.

In this context it is important to bear in mind that the issue for the Court is whether the terms of the agreement are fair and reasonable not whether the way in which the agreement was subsequently applied can be characterised as fair and reasonable. As the Chief Justice noted in Kasmeridis[19] the fairness and reasonableness of the agreement is to be determined at the time at which it was made. Whether the firm subsequently provided cost estimates in accordance with the cost agreement made between the parties on 4 August 2009 is not a matter which falls for decision by me in this matter. I say no more about it other than to observe that on the evidence the firm did give cost estimates along the way.[20]
[19] (2007) 97 SASR 129 at 141 [45].
[20] Exhibit P1, Volume 1, p 260.
Secondly, the argument that the firm failed to provide notice to the defendants when the fees for the work performed had exceeded the amount paid by the defendants into the firm’s trust account on account of future costs, is a submission that cannot be accepted. It is an argument that is not reflected in the terms of the costs agreement itself. The requirement that a payment of $20,000 be made into trust against any future work was a precondition for the firm continuing to act, even on an interim basis, pending the negotiation of an acceptable retainer agreement. It was not a term of the agreement that Piper Alderman would put the defendants on notice when it had done work in excess of that amount or any other amount which was placed in trust on account of future work.
While it can be envisaged that the terms of a cost agreement could be found not to be fair and reasonable on the basis of the absence of a particular term from the agreement, which fairness and reasonableness would require be included, I do not consider that this is such a case.
There was nothing in the circumstances in which the agreement was made or in relation to the matter in respect of which it was made that would require such a term in the agreement.
True it is, that this was an agreement to pay costs in respect of litigation in the Federal Court which had already been underway for three years and which had proved lengthy, complex and extraordinarily costly, but the requirement by the firm that it would only continue to act in the matter on behalf of the defendants upon payment into its trust account of $20,000 was not an indication either that $20,000 would be sufficient to cover all future work in the matter or that it would give the defendants notice before it did any further work beyond the work to the value of the amount paid into trust on account of fees for future work.
In any event, whether, even if such a term or terms had been agreed, they were contravened, is not relevant to the issue of whether a term of the agreement was not fair and reasonable at the time of the making of the agreement.
Finally, after judgment was reserved, the defendants filed a written submission in reply to a written submission made by Piper Alderman at trial. I gave the defendants leave to do so nunc pro tunc. Further, I gave leave to Piper Alderman to respond.
The defendants put a new submission in relation to s 42(7). They argued that the costs agreement was not fair and reasonable because Piper Alderman imposed undue influence or pressure on AMC to enter into the agreement. The basis of this allegation was that AMC was under pressure to agree to the interim costs agreement of 4 August 2009 under the threat that Piper Alderman would cease to act, in circumstances where the judgment in the Federal Court action was pending and Dr Keung was in Hong Kong. The defendants argue that in the circumstances they had no choice but to enter into the interim agreement and pay $20,000 into Piper Alderman’s trust account.
I reject this argument. In my view, the conduct of Piper Alderman was not unfair or unreasonable. The position was that Piper Alderman were the solicitors of record in respect of the Federal Court action. That situation resulted from the retainer between Piper Alderman and Wilkinson & Grist. That retainer had been terminated on 20 April 2009. Piper Alderman remained the solicitors on the file pending entry into a new retainer agreement with the defendants in respect of the Federal Court action. If a retainer agreement could not be concluded, Piper Alderman had no choice but to get off the file. Neither the fact of an “ultimatum” to the defendants that the position in relation to a retainer agreement between Piper Alderman and the defendants had to be concluded sooner rather than later even if only on an interim basis, or the requirement that money be placed in trust in respect of such a retainer was unfair or unreasonable in these circumstances.
Conclusion
I find there was an agreement in writing between the parties for payment of legal costs on a time related rate for professional work carried out by Piper Alderman on the defendants’ behalf.
Further, I do not find that any term of the agreement was not fair and reasonable within the meaning of s 42(7) of the Act.
In the circumstances I refer the proceedings back to his Honour Judge Lunn for hearing and determination of any outstanding issues in the matter.

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Legal Principle Established