Portuguese Cultural and Welfare Centre v Talbot Olivier Pty Ltd [No 2]
[2015] WASC 54
•13 FEBRUARY 2015
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: PORTUGUESE CULTURAL AND WELFARE CENTRE -v- TALBOT OLIVIER PTY LTD [No 2] [2015] WASC 54
CORAM: CORBOY J
HEARD: 7 OCTOBER 2014
DELIVERED : 13 FEBRUARY 2015
FILE NO/S: LPA 14 of 2012
BETWEEN: PORTUGUESE CULTURAL AND WELFARE CENTRE
MANUEL ERMIDA MOLEIRINHO
ELSA BASILIA MOLEIRINHO
ApplicantsAND
TALBOT OLIVIER PTY LTD
Respondent
Catchwords:
Costs - Application to cancel costs agreement as unreasonable - Legal Practice Act 2003 (WA), s 222 - The circumstances in which agreement made - Guarantee purportedly given to secure legal practitioner's costs - Turns on its own facts
Legislation:
Legal Practice Act 2003 (WA), s 222
Result:
Application to cancel costs agreement allowed
Category: B
Representation:
Counsel:
Applicants: Self-represented (Mr Moleirinho)
Respondent: Mr J W Daly
Solicitors:
Applicants: In person
Respondent: Talbot Olivier
Case(s) referred to in judgment(s):
Computer Accounting & Tax Pty Ltd v Bowen Buchbinder Vilensky [2009] WASC 171
Frigger v Shepherd [2014] WASC 477
Moleirinho v Talbot Olivier Lawyers Pty Ltd [2014] WASCA 65
Portuguese Cultural and Welfare Centre v Talbot Olivier Pty Ltd [2013] WASC 91
Prees v Coke (1871) 6 Ch Ap 645
Westmelton (Vic) Pty Ltd v Archer [1982] VR 305
CORBOY J:
The proceedings
The applicants, Mr and Mrs Moleirinho, applied for three costs agreements to be reviewed and cancelled under s 222 of the Legal Practice Act 2003 (WA) (the LP Act). The agreements were made between the Portuguese Cultural and Welfare Centre Inc (PCWC) and the respondent, Talbot Olivier Pty Ltd. The applicants signed one or more of the costs agreements and personally guaranteed payment of fees and disbursements incurred on behalf of PCWC.
The applications were heard by Hall J. His Honour indicated that there had been difficulties in determining the issues sought to be raised by the applicants. However, his Honour found that the circumstances in which the applications were made were that:
(a)PCWC operated a community radio station under a licence issued by the Australian Broadcasting Authority and subsequently, the Australian Communications and Media Authority (ACMA). ACMA refused to renew the licence in 2007 and PCWC sought advice from the respondent. Mr Moleirinho and his son were primarily responsible for instructing the respondent. They had at times been officeholders with PCWC.
(b)A costs agreement was made between PCWC and the respondent on 30 January 2008 (the First Costs Agreement). The primary purpose of the agreement was to engage the respondent to provide advice on a preliminary view expressed by ACMA that PCWC's radio station licence should be cancelled.
(c)PCWC and the respondent entered into a further costs agreement in about mid March 2008 (the Second Costs Agreement). The agreement was made after ACMA had decided to cancel PCWC's licence (although a temporary licence had been granted until 31 July 2008).
(d)PCWC and the respondent entered into a third costs agreement on 20 March 2008 (the Third Costs Agreement). This agreement was made after the members of PCWC had resolved to apply for an order for review of ACMA's decision under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act).
(e)The applicants made a number of complaints about the costs agreements, including that the respondent had undertaken work that had not been agreed to and was unnecessary; work had been performed incompetently; and the Third Costs Agreement had been signed in circumstances where PCWC was under pressure as 20 March 2008 was the last day on which the application to the Federal Court could be filed under the ADJR Act. Further, Mr Moleirinho alleged that he had signed the Third Costs Agreement on behalf of his wife without her authority and at the urging of a lawyer employed by the respondent, Mr Smith.
Hall J held that the question of whether the respondent had performed work that was unnecessary or outside the scope of PCWC's instructions should be determined on a taxation. His Honour further held that there was no sworn evidence to support the allegations that the Third Costs Agreement had been signed under duress and without Mrs Moleirinho's authority. Mr Moleirinho had filed a document headed 'Affidavit verifying lists of documents' but that had not contained evidence. He had also filed a document that included a chronology and a number of paragraphs appearing under a heading, 'Submission'. His Honour considered that the document contained assertions rather than evidence.
Accordingly, the application in respect of each of the costs agreements was dismissed: Portuguese Cultural and Welfare Centre v Talbot Olivier Pty Ltd [2013] WASC 91. The applicants appealed from that decision: Moleirinho v Talbot Olivier Lawyers Pty Ltd [2014] WASCA 65.
The Court of Appeal concluded that Mr Moleirinho had intended to verify on oath the statements made in the 'submission' document by the affidavit that he had sworn. As Hall J had noted, some parts of the document comprised assertions rather than evidence. However, other parts of the document contained statements that did constitute evidence. The respondent did not object to the form of the affidavit and had accepted that it was an attempt to verify statements made in the submission document. The Court of Appeal considered that either the submission document should have been treated as evidence or Mr Moleirinho should have been given an opportunity to cure any defect in the form of his affidavit.
The Court of Appeal also held that the question of whether the Third Costs Agreement was unreasonable was not to be solely determined by considering whether it had been executed under duress. The question was, more broadly, whether the agreement was unreasonable in all of the circumstances.
Accordingly, the Court of Appeal dismissed the applicants' appeal in relation to the First and Second Costs Agreements but held that the application in relation to the Third Costs Agreement should be further considered and determined. The application was remitted to a single judge of the General Division to determine whether the Third Costs Agreement should be cancelled under s 222 LP Act. The Court of Appeal noted, in remitting the application, that the respondent had not been given an opportunity to file an affidavit in answer to Mr Moleirinho's allegations concerning the circumstances in which the Third Costs Agreement had been made.
I have concluded that the Third Costs Agreement should be cancelled under s 222 LP Act. I will order that the costs reasonably incurred by the respondent for work performed on and from 20 March 2008 shall be taxed according to the applicable Legal Costs Committee determination(s).
The LP Act
Section 221 LP Act permitted a legal practitioner to make a written agreement with a client in respect of the amount and manner of payment for 'the whole or any part or parts of any past or future services, fees, charges or disbursements in respect of business done or to be done by the legal practitioner'. Section 222 provided that:
(a)a client could apply for a review of a costs agreement;
(b)the court would make such order as to the proceedings on review as it thought fit;
(c)the court could reduce the amount payable or cancel the costs agreement if the agreement was, in the opinion of the court, unreasonable – costs might then be taxed 'in the ordinary way' if the agreement was cancelled.
The respondent did not contend that the applicants were not its client for the purpose of s 221 and s 222. Neither party argued that the court should simply reduce the amount payable to the respondent if the Third Costs Agreement was found to be unreasonable within s 222.
The conduct of the hearing
Directions were made, on the matter being remitted, for the respondent to file and serve by affidavit any evidence on which it relied in answer to the applicant's application in respect of the Third Costs Agreement. That direction was expressly made on the basis that the applicants' submission document would be received as evidence insofar as it contained statements of fact.
The respondent filed and served an affidavit made by Brendan Hamish Taylor. Mr Taylor was the managing principal of the respondent at the time that the Third Costs Agreement was made.
The applicants were given an opportunity to file and serve an affidavit in reply to Mr Taylor's affidavit. However, they chose not to do so and the hearing proceeded on the basis of the evidence contained in the applicant's submission document and Mr Taylor's affidavit and without either party seeking to cross‑examine on that material. The applicants were also given an opportunity to provide further documents following the hearing. However, the documents that they provided were either copies of documents annexed to Mr Taylor's affidavit or were irrelevant to the issue to be determined on the Third Costs Agreement.
The evidence
Mr Moleirinho's 'submission document'
It is necessary to identify those parts of Mr Moleirinho's submission document that contained statements of fact rather than mere assertions.
I consider that the statements that appeared under the heading 'Chronology', together with the statements made in pars 1 ‑ 35 of the submission document contain some factual statements. However, some of the matters stated in those paragraphs were properly to be characterised as submissions. More frequently, factual statements were mixed with inadmissible conclusions or characterisations of the respondent's conduct that were argumentative and did not constitute evidence.
It is not helpful to go through the submission document line by line identifying each statement that can be received as evidence. Rather, what follows is a summary of the allegations made by Mr Moleirinho about the circumstances in which the Third Costs Agreement was made which has been drawn from those statements made in the submission document that I regard as comprising evidence. The summary has been derived from material that has been expressed in both an admissible and inadmissible form, and the matters summarised necessarily paraphrase Mr Moleirinho's statements. The summary is intended to identify those allegations of fact that I consider can be extracted from the submission document, which are relevant to the Third Costs Agreement and which I have received as evidence regardless of the form in which the statement has been expressed:
(a)In January 2008, the respondent, acting for PCWC, commenced working on an application to review ACMA's decision to cancel the radio station licence (par 15).
(b)The Second Costs Agreement was signed by the applicants on 13 March 2008 (par 17).
(c)PCWC received a letter of advice from the respondent on 19 March 2008. Mr Moleirinho understood that the effect of the advice was that there were no grounds for an appeal from ACMA's decision (par 21). The advice referred to another decision by ACMA to cancel a radio station licence but Mr Moleirinho considered that the decision was not comparable with PCWC's case (par 18). He also considered that the advice demonstrated that the respondent did not understand the reports that ACMA had made in relation to the licence (par 19 and par 19).
(d)PCWC received a further costs agreement on 20 March 2008, accompanied by a request that the agreement be signed and returned that day as 20 March was the last day for filing an application in the Federal Court to challenge ACMA's decision. The costs agreement was in Mr Moleirinho's letter box when he arrived home at 2 pm that day. He contacted the committee of PCWC who advised him to proceed with 'the application' (par 21).
(e)Mr Moleirinho found the situation confusing as 'on one hand Talbot Olivier was advising PCWC that there was no case against ACMA then on the other hand pressured PCWC Committee to sign the engagement between PCWC and Talbot Olivier so as to file the application in court' (par 21).
(f)There was only one hour available between receiving and submitting the agreement. That was insufficient time to read the agreement and 'check … its contents properly' (par 22).
(g)Mrs Moleirinho was away in Mandurah that day. Mr Smith insisted that the agreement had to be signed by the chairman and secretary of PCWC and he suggested that Mr Moleirinho sign on behalf of Mrs Moleirinho 'pp Elsa Moleirinho'. Mr Moleirino trusted Mr Smith and followed his instructions (par 23).
(h)The respondent filed the application in the Federal Court on 20 March 2008. In doing so, the respondent ignored PCWC's instructions to file an application in the Federal Magistrates Court. It would have been less expensive to file an application in that court and the application would have been dealt with more expeditiously (par 24).
(i)PCWC terminated the respondent's instructions and engaged new lawyers. The application was subsequently discontinued (par 25). (It is not apparent when this occurred.)
(j)There was a breakdown in the relationship between PCWC and the respondent. PCWC's instructions were not properly considered and acted upon as a result (pars 26 and 27).
(k)PCWC engaged a consultant in February 2008 to assist with its administration. The respondent undertook work that was not of a legal nature and had been, or was to be, performed by the consultant. There was a duplication of work and cost as a result (par 29).
The respondent's evidence
Mr Taylor produced a number of documents created between 19 and 26 March 2008. In summary, those documents recorded that:
(a)Mr Smith spoke to Mr Moleirinho by telephone on 19 March 2008 to advise that the respondent would shortly send a letter of advice to him. The call was recorded in a diary note as having commenced at 6.03 pm ('BHT‑1').
(b)Mr Smith sent an email to Mr Moleirinho at 7.20 pm, 19 March 2008. The email attached the respondent's letter of advice. It also stated that Mr Smith would contact Mr Moleirinho the next morning to 'discuss the Committee's resolution in response to the attached advice' ('BHT‑2').
(c)The letter of advice from the respondent to Mr Moleirinho recorded that on 9 March 2008, the committee and management of PCWC had resolved to engage the respondent to provide advice with respect to whether PCWC should seek a review ACMA's decision to cancel the radio station licence. The letter of advice stated that the decision of ACMA was made on 24 January 2008. It further stated that ACMA had granted PCWC a temporary community broadcasting licence on 31 January 2008. That licence was due to expire on 31 July 2008 ('BHT‑3').
(d)The advice stated that the grounds on which PCWC could apply for a review were not strong; that it was recommended that PCWC work with consultants to overcome corporate governance problems that had been raised by ACMA; and that it apply for a new long term licence prior to the expiration of the temporary licence in July 2008. The respondent noted that the Federal Court had made an order for costs against a community radio station that had unsuccessfully applied for a review of a licensing decision made by ACMA on grounds that were said to be similar to those available to PCWC ('BHT‑3').
(e)The advice also stated that any application for a review order under the ADJR Act had to be filed in the Federal Court on 20 March 2008.
(f)A meeting of the members of PCWC was held on the evening of 19 March 2008 for the purpose of discussing the advice provided by the respondent. Minutes of the meeting that were signed by Mr Moleirinho ('BHT‑4') recorded that:
Talbot Olivier states that the grounds open for review to PCWC are not strong. It was discussed that decision was based on the recent outcome from a similar case with Bankston.
The committee discussed that this situation though similar is different and that the course of natural justice to the PCWC has been denied and committee motion to continue with the appeal.
The copy of the minutes produced by Mr Taylor bears a facsimile imprint indicating that the minutes were transmitted from 'PCWC documents' at 4:06 pm on 20 March 2008.
(g)Mr Smith sent an email to Mr Moleirinho at 3.15 pm on 20 March 2008 attaching a letter of engagement to be entered into between PCWC and the respondent. The covering email stated that the engagement was for the respondent to act for PCWC in relation to the application for an order of review of ACMA's final decision, the application to be filed in the Federal Court shortly. The email concluded, 'Once you have signed the attached letter, please arrange for Elsa and yourself to sign the letter on page 7 and then return that page to our office by facsimile transmission' ('BHT‑5'). The copy of the Third Costs Agreement produced by Mr Taylor (and as exhibit in the hearing before Hall J) did not carry any indication of when and how it was sent.
(h)The respondent advised Mr Moleirinho by letter dated 26 March 2008 that it had filed an application in the Federal Court for a review of the final decision of ACMA on 20 March 2008 ('BHT‑7').
As has been noted, Mr Taylor's affidavit did not disclose when Mr Moleirinho returned the letter of engagement to the respondent. Further, Mr Taylor did not give any evidence in addition to producing the documents that were annexed to his affidavit other than to confirm that Mr Smith had been a solicitor employed by the respondent at the relevant time. There was no evidence given by Mr Smith and there was no explanation for why he had not made an affidavit.
Relevant principles
The Court of Appeal identified various principles in Moleirinho relevant to the determination of an application under s 222 LP Act (at [30] ‑ [33]):
(a)The applicant carries the onus of proving that a costs agreement is unreasonable.
(b)The circumstances in which a costs agreement will be unreasonable within the meaning of s 222 are not susceptible to precise definition. The legislative intent in using the word 'unreasonable' can be unduly restricted by the use of synonyms and definitions.
(c)The importation of equitable concepts such as duress and undue influence are also apt to deflect from the statutory language.
(d)'Without attempting to be exhaustive, a costs agreement may be unreasonable because of the circumstances in which it came into existence, because the terms were unreasonable, or because the effect on the client was unreasonable'.
A solicitor could enforce a costs agreement at common law if the court was satisfied that the agreement was fair and reasonable. The right to enforce a costs agreement subject to the requirements of fairness and reasonableness was first given statutory effect in England in 1870. The requirement for fairness was concerned with the manner in which the agreement had been obtained - whether the client fully understood and appreciated the effect of the agreement. The requirement of reasonableness was concerned with the terms of the agreement: see generally, Frigger v Shepherd [2014] WASC 477 [24] ‑ [26] (Jenkins J).
Although s 222 LP Act only refers to reasonableness, as the Court of Appeal noted in Moleirinho, a costs agreement may be unreasonable because of the circumstances in which it was made. Murphy J explained in Computer Accounting & Tax Pty Ltd v Bowen Buchbinder Vilensky [2009] WASC 171 that:
For the purposes of s 222, an agreement may be unreasonable because of the circumstances under which it came into being, or because its terms are unreasonable, or because the effect on the client is unreasonable. Consideration of whether an agreement is unreasonable or not is not confined to those three categories. Also, it may be in a given case, that, if each of the three categories is looked at in isolation, none independently leads to a conclusion of unreasonableness, however when looked at as a whole, or in combination with other circumstances, the agreement might be regarded as unreasonable. Similarly, even if in one of those three categories, the agreement appeared unreasonable, it may nevertheless be regarded as not unreasonable when all the circumstances are considered as a whole. See Jovetic v Stoddart & Co (1992) 7 WAR 208; Stoddart & Co v Jovetic (1993) 8 WAR 420; Brown v Talbot & Olivier (1993) 9 WAR 70, 75; and Duckworth v Chopra [2001] WASC 146 [29] - [30].
In relation to the first of the three categories referred to above, ie the circumstances under which the agreement came into being, particular attention is paid to the solicitor's position as a fiduciary.
The solicitor is 'classically' a fiduciary to the client and, as such, owes fiduciary duties to the client: Maguire v Makaronis (1997) 188 CLR 449, 463.
Solicitor's obligations ordinarily or at least frequently involve:
1.ensuring that the client, because of independent advice or otherwise, does not enter into an agreement with the solicitor in reliance upon the trust or confidence arising from the relationship between the solicitor and client;
2.full and frank disclosure to the client of all information known to the solicitor which the client should know;
3.if there be aspects of a contract in respect of which the solicitor may be in a position of advantage vis-à-vis the client, those must be clearly brought to the client's attention so that the client can properly decide, in an informed way, whether to enter into the contract.
See: Law Society of New South Wales v Foreman (1994) 34 NSWLR 408, 435 - 436.
These general obligations also apply to the solicitor entering into a costs agreement with the client, particularly where the costs agreement provides for the payment of fees other than in accordance with a usual or statutory scale: Law Society v Foreman (436); Brown v Talbot & Olivier (77).
In the fiduciary context, what is required for a fully informed consent is a question of fact in all the circumstances of the case and there is no precise formula which will determine in all cases if fully informed consent has been given: Maguire v Makaronis (466); Law Society v Foreman (435); Spellson v George (1992) 26 NSWLR 666, 669 - 670, 673 - 675, 680.
In Brown v Talbot & Olivier, Ipp J considered that material circumstances which would 'ordinarily' require disclosure to a client are:
(a)The fact that the remuneration of solicitors was governed by statutory scales which limited the amount of solicitors' and counsel's fees which could be recovered, irrespective of the amount of time devoted by the solicitors to the proceedings.
(b)The fact that the scales limited both the costs which the client could recover from the opposing party to the proceedings (if the client were to succeed in the case), and the costs recoverable from the client by the client's solicitors.
(c)The principles underlying the charging of fees under the scales, and also the basis of the proposed charging under the contemplated agreement.
(d)Estimates, if they could reasonably be made, of the approximate amount of the solicitors' fees and counsel's fees (as between solicitor and client) which would be recovered on taxation under those scales, and the approximate amount recoverable under those scales from the opposing party - if the client were to be successful.
(e)An estimate, if that were reasonably possible, of the amount which the client would have to pay the solicitors under the proposed agreement if the litigation were to prove successful (and costs were to be recovered from the opposition) and, also, the amount which the client would have to pay if the litigation were to be unsuccessful.
(f)Whether (if it were not reasonably possible to give estimates of the kind referred to in subpars (d) and (e) above) there was a real risk of the costs under the proposed agreement being more - and significantly more, if that were the case - than the appropriate scale (77 - 78) [83] ‑ [89].
The circumstances in which the Third Costs Agreement was made
The costs agreements
A circumstance that is relevant to the making of the Third Costs Agreement is that PCWC had entered into two previous agreements with the respondent. Mr Moleirinho had signed both of those agreements; Mrs Moleirinho had signed the Second Costs Agreement. They had both signed the agreements as the 'authorised representative' of the client.
Each costs agreement comprised a letter addressed to Mr Moleirinho as president of PCWC and described as a letter of engagement; a schedule of fees and expenses and a standard form document headed 'Our terms of engagement'. The letter of engagement in each instance identified the scope of the work to be performed under the agreement; the persons who were to carry out the work and their hourly charge‑out rate; and the estimated costs of the work to be undertaken.
The Second Costs Agreement stated that the scope of work to be performed was:
(a)drafting a letter of advice on the grounds on which PCWC could apply to the Federal Court for a review of the decision by ACMA to cancel the radio station licence and advising on the prospects of success;
(b)if PCWC elected to proceed with an application:
(i)drafting the application;
(ii)drafting supporting documentation for the application;
(iii)'attendance on lodging the documents referred to in [(b)(i) and (ii)] above at the Federal Court'.
The estimated cost of the work to be performed under the Second Costs Agreement was $11,000 excluding GST (the estimate for the legal costs to be incurred under the First Costs Agreement was $4,400, inclusive of disbursements but excluding GST).
The Third Costs Agreement stated that the scope of work to be performed comprised:
(a)preparing and filing a Form 56 application for an order of review under the ADJR Act;
(b)generally acting for PCWC in relation to the application.
The estimated cost of the work to be performed under the agreement was $30,000 to $45,000, plus $2,000 to $3,000 in disbursements. The estimates excluded GST but included counsel fees for a one‑day hearing. The letter indicated that the likely costs of the work to be performed would be approximately two‑thirds of the amount to be charged by the respondent if the Legal Costs Committee scales applied.
The letters of engagement forming part of the Second and Third Costs Agreement included a statement that:
The fees provided by the statutory scales (which would apply if we did not make this costs agreement) are, in general, lower than our fees based on hourly rates. Accordingly, the remuneration to which we are entitled under this costs agreement may be considerably greater than the amount we would be entitled to recover if the statutory scale applied.
If you are successful in these proceedings, you may recover some costs from the other side equal to the scale fees for the work done. If you are unsuccessful, you may be liable to some costs of the other side, equal to the scale fees for the work done.
The letters of engagement also stated that:
By signing this letter we acknowledge that we have received a copy of it, and that we have read, understood and accept its contents, including the schedule of fees and expenses and the terms of engagement.
If instructing on behalf of a company or other entity, we confirm that we are duly authorised to do so and guarantee payment of fees and disbursements as referred to herein.
That statement appeared immediately above a part of the document that provided for two 'authorised' representatives to sign on behalf of PCWC. The references to 'we' in the statement reproduced immediately above were to the authorised representatives who signed the letter of engagement.
The applicants did not make any allegation before Hall J or in the Court of Appeal concerning the circumstances in which the First and Second Costs Agreements were made nor did they suggest that they did not understand the terms and effect of those agreements.
Two matters may be noted about the Third Costs Agreement. First, it is not clear why the scope of the work to be performed included preparing and filing a Form 56. That form was the form then prescribed by the Federal Court Rules for an application for an order for review under the ADJR Act. The scope of work to be performed under the Second Costs Agreement included drafting the application and supporting documents and 'lodging' those documents at the Federal Court. This is relevant not so much to the possibility of duplication but rather, to the applicants' complaints about the time allowed to review the Third Costs Agreement and the circumstances in which the agreement was allegedly signed on behalf of PCWC.
Second, the estimated cost of the work to be performed under the Third Costs Agreement was significantly higher than the costs estimated under the First and Second Costs Agreements. Further, the Third Costs Agreement was intended to cover the entire review proceedings. The costs of the proceedings were susceptible to change according to the response of ACMA and to interlocutory developments. Those matters had implications for PCWC and the applicants as prospective guarantors.
The timing of the Third Costs Agreement
The respondent cannot be criticised for providing its advice on a possible challenge to ACMA's decision late on 19 March 2008, given that the Second Costs Agreement was only made on 13 March (according to Mr Moleirinho's submission document). However, the respondent ought to have appreciated that it was unlikely that the members of PCWC would be in position to make a fully considered decision regarding the merits of an application under the ADJR Act so quickly after its advice had been provided having regard to the complexity of the issues involved. Further, the advice recommended against making an application. In those circumstances, a prudent solicitor would, in my view, have sought to ensure that the members of PCWC fully understood the advice that had been given and the consequences of commencing proceedings. That would include providing further advice on the decision that the respondent regarded as being comparable and which the members of PCWC had apparently thought could be distinguished.
There was, of course, a time constraint – it was said that any application to be made under the ADJR Act had to be filed on 20 March. However, the Second Costs Agreement covered the preparation and filing of that application. Accordingly, I am unable to see why it was necessary for the Third Costs Agreement to be made before the application could be filed. No doubt it would have been desirable for representation in the proceedings to be finalised before the application was filed in the Federal Court. However, the respondent was apparently content to file an application in the Federal Court under the Second Costs Agreement leaving the terms on which representation would be provided in the proceedings to be agreed.
The applicants' position as prospective guarantors
Legal practitioners are, of course, entitled to secure payment of their fees. However, a significant feature of the letter of engagement forming part of each of the respondent's costs agreements was the acknowledgement by each person who signed as an 'authorised representative' on behalf of a company 'or other entity' that they would personally guarantee payment of the fees and disbursements incurred pursuant to the agreement. The letters of engagement did not suggest that the applicants should obtain independent legal advice in relation to the guarantees that they were required to provide as a condition of each costs agreement.
As has been noted, the Court of Appeal in Moleirinho cautioned against attempts to import into s 222 LP Act equitable doctrines such as duress and undue influence [32]. The question to be determined under s 222 is, of course, whether the costs agreement was, in all the circumstances, unreasonable and not whether the practitioner has engaged in some form of unconscientious conduct. However, the fiduciary duties owed by legal practitioners to their clients and the requirement that practitioners conduct their business dealings in a manner that is consistent with their professional obligations are matters that are relevant to determining whether a costs agreement is reasonable. That must be so once it is accepted that a costs agreement may be unreasonable within the meaning of s 222 LP Act because of the circumstances in which it was made.
A contract of guarantee may, of course, be avoided where a guarantor is induced to enter into the contract by the undue influence of the creditor. A presumption of undue influence will arise from certain relationships, including the relationship between solicitor and client: see, for example, Westmelton (Vic) Pty Ltd v Archer [1982] VR 305. The Full Court of the Supreme Court of Victoria said in that case:
In some cases of confidential relationship, and the relationship of solicitor and client is one of them, where the person (whom we shall call the confidant) in whom the confidence is reposed by the other person has dealings with that other person, the court views the transactions with suspicion, and applies a presumption that the other's will was unduly overborne by the confidence he placed in the confidant, and the court imposes a burden on the confidant to prove that in all the circumstances the dealings were at arm's length and that the other's will was in no way overborne by the relationship of confidence. Other rules that have been formulated are for the most part sub-rules of this rule as applicable to particular circumstances. The extent and weight of the burden cast upon the person in whom the confidence was reposed, and the matters (where the presumption applies) of which the court will require to be satisfied before it will regard the presumption as having been negatived, must vary enormously with all the circumstances of the case, and it is pointless as well as unjustified in law to attempt to lay down any particular requirements for all cases, or indeed any classes of case, because the circumstances and the requirements will vary infinitely with the infinite variety of human affairs. The general rule above stated is applicable to all cases of solicitors dealing with clients (312 ‑ 313).
PCWC was the respondent's client. As I have noted, the respondent has not contended that the applicants were not its clients also for the purpose of s 222 LP Act. In any event, apart from the established categories of relationships of influence, it is open to one party to a contract of guarantee to prove a special relationship of influence, ascendancy or trust arising from the peculiar features of the antecedent relationship between the parties to the contract: see O'Donovan and Phillips, Modern Contract of Guarantee (loose leaf) [4.1860]. Further, a presumption of undue influence may, in my view, arise not just when a solicitor transacts with a client but also as a result of business and quasi-professional dealings with third parties: see, for example, Prees v Coke (1871) 6 Ch Ap 645 and G E Dal Pont Law of Costs (3rd ed 2013) at [4.34].
The presumption is, of course, rebuttable upon the party presumed to be in the dominant position showing that undue influence was not, in fact, exerted. The presumption may be negated by showing that the contract of guarantee was made as a result of the guarantor's will and that the nature, effect and consequences of entering into the transaction were understood.
The execution of the agreement
Mr Moleirinho alleges that Mrs Moleirinho was in Mandurah on 20 March 2008; that he was not authorised to sign the costs agreement on her behalf; that Mr Smith knew of those matters and that he was advised to nevertheless sign the agreement on her behalf. The costs agreement bears Mrs Moleirinho's name as an authorised representative of PCWC but her 'signature' is preceded by 'p.p.' and the 'signature' is plainly different to that appearing in the letter of engagement forming part of the Second Costs Agreement. Mrs Moleirinho's 'signature' and the writing of her name is seemingly in the same hand as Mr Moleirinho's signature and the writing of his name.
Hall J noted that Mrs Moleirinho had not given evidence at the hearing of the applicants' applications and he found it 'difficult to believe' that the agreement had been signed without her authority. However, the Court of Appeal observed that it was not apparent why Mr Moleirinho's allegations should not be accepted in the absence of evidence to the contrary from the respondent. The respondent did not present evidence to directly contest Mr Moleirinho's allegations despite the Court of Appeal's observations and notwithstanding that it had been given an opportunity to do so. The respondent did not explain why Mr Smith did not make an affidavit.
In those circumstances, I accept Mr Moleirinho's evidence and make findings in terms of his allegations about the provision and signing of the Third Costs Agreement as summarised immediately above.
There was a possible difference between Mr Moleirinho's evidence as to when and how he received the costs agreement and the documents annexed to Mr Taylor's affidavit (at about 2 pm in the letter box according to Mr Moleirinho; the documents annexed to Mr Taylor's affidavit indicate that a copy of the agreement was sent by email at about 3:15 pm). However, that difference is of no consequence. The applicants' complaint is that Mr Moleirinho and PCWC were placed under pressure to sign the agreement that day and without sufficient time to properly review the contents of the agreement. The respondent's email suggested urgency – Mr Moleirinho was requested to transmit the execution page back to Mr Smith.
It is also apparent that Mr Smith did not know that Mrs Moleirinho was unavailable to sign the agreement at the time that he sent his email. However, that is not inconsistent with Mr Moleirinho's evidence – it is possible that Mr Moleirinho telephoned Mr Smith after receiving the email to inform him that Mrs Moleirinho was unavailable and that it was in that conversation that he was advised to sign on behalf of Mrs Moleirinho.
Conclusion
In my view, the Third Costs Agreement was unreasonable and should be cancelled under s 222 LP Act, having regard to the combined effect of the following circumstances:
(a)The agreement provided for some work that was the subject of the Second Costs Agreement – the preparation and filing of the application for an order for review under the ADJR Act.
(b)The agreement was either delivered to Mr Moleirinho's house or sent to him by email mid‑afternoon on 20 March 2008. His evidence was to the effect that he understood that the agreement had to be signed before the respondent would file the application in the Federal Court. He had been advised that the application had to be filed that day.
(c)Although the agreement was similar in form to the First and Second Costs Agreements and incorporated many of the terms that appeared in those agreements, and although PCWC had resolved the previous night to proceed with a challenge to ACMA's decision:
(i)There was no need for the costs agreement to be made on 20 March and before the application was filed in the Federal Court as the Second Costs Agreement provided for those steps to be taken.
(ii)The Third Costs Agreement provided for the costs of the entire proceedings in the Federal Court (it is not apparent why the application was filed in the Federal Court rather than the Federal Magistrates Court; the respondent noted in its advice that the application could be filed in either court and recommended that proceedings be taken in the Federal Magistrates Court to reduce costs and expedite the determination of the review application). The amount of estimated costs was likely to be significant to an unincorporated association and to the applicants as the authorised representatives and prospective guarantors.
(iii)PCWC had only received the respondent's advice the night before. The respondent had recommended against commencing proceedings. It was likely that the members present at the meeting did not fully understand the advice having regard to the terms of their resolution and the issues involved.
(iv)PCWC and Mr Moleirinho were only given a very short period of time within which to consider the costs agreement. In particular, there was no time to seek independent advice about the terms of the agreement and more particularly, the reasonableness of the proposed charge out rates and cost estimates (especially in circumstances where the costs that had been actually charged by the respondent had been significantly greater than the estimates contained in the First and Second Costs Agreements).
(d)Mr Moleirinho signed the agreement on behalf of Mrs Moleirinho when he was not authorised to do so. Mr Smith knew that Mrs Moleirinho was unavailable and suggested that Mr Moleirinho sign the agreement on her behalf.
(e)The respondent dealt with Mr Moleirinho for the purpose of obtaining instructions and giving advice so that it had apparently established a personal relationship with him in relation to advising on ACMA's decision to revoke PCWC's radio station licence. Further, PCWC was an unincorporated association with, it might be inferred, limited financial resources (there is no evidence that any inquiry was made by the respondent about the capacity of PCWC to meet the costs of pursuing an application under the ADJR Act independently of the guarantees to be provided by the applicants). The relationship between PCWC, Mr Moleirinho and the respondent was, in my view, so closely connected that a presumption of undue influence arose against the respondent and in favour of Mr Moleirinho (and, in all of circumstances, Mrs Moleirinho as a proposed guarantor had she actually signed the Third Costs Agrement). That is especially as the guarantee was contained in the letter of engagement and the authorised representatives were required to assume the obligation of guaranteeing the respondent's fees and expenses on signing the letter on behalf of the unincorporated client.
(f)The applicants were not advised to seek independent legal advice in relation to the costs agreement and the guarantees that they were required to give.
The Third Costs Agreement satisfied the disclosure requirements identified by Ipp J in Brown v Talbot & Olivier. However, in the circumstances referred to above the respondent did not, in my view, discharge its obligations to PCWC to ensure that it did not enter into the Third Costs Agreement in reliance upon the trust or confidence arising from the relationship between the solicitor and client: refer Computer Accounting & Tax v Bowen Buchbinder Vilensky. PCWC was not given a reasonable time within which to consider the terms of the agreement and to make a fully informed decision about whether to proceed with the agreement having regard to the matters identified above. The Third Costs Agreement was unreasonable within the meaning of s 222 LP Act for that reason.
Further, the applicants were not given a reasonable time within which to make a fully informed decision about whether they should guarantee payment of the respondent's costs. Mrs Moleirinho was not informed about the terms of the agreement until after it had been purportedly made. Mr Moleirinho was improperly advised to sign the document on her behalf when he was not authorised to do so. Plainly, it was to the advantage of the respondent that the agreement should be made and that it should incorporate the personal guarantees sought from the 'authorised representatives'. In my view, a presumption that Mr Moleirinho was unduly influenced to enter the agreement arises. That presumption has not been rebutted. Those matters provide further reasons why the Third Costs Agreement was unreasonable within the meaning of s 222.
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