Re: Boulton Cleary & Ors. and NAD Inv
[1997] QSC 180
•6 October 1997
IN THE SUPREME COURT
OF QUEENSLAND
Brisbane O.S. No.7268 of 1997
Before the Hon. Mr Justice Shepherdson
[re: Boulton Cleary & Ors. and NAD Inv]
IN THE MATTER of the Legal Practitioners Act 1995
and
IN THE MATTER of a bill of costs between Boulton Cleary & Kern and Ernst & Young
and
IN THE MATTER of NAD Investments (NQ) Pty Ltd
REASONS FOR JUDGMENT - SHEPHERDSON J.
Judgment Delivered 6 October 1997
CATCHWORDS: COSTS - taxation - Legal Practitioners Act 1995 s.13 - whether applicant entitled to apply for a reference for taxation.
Counsel:D Bates for the applicant
A Morris QC for the respondent
Solicitors:McCullough Robertson for the applicant
Dunhill Madden & Butler town agents for Boulton Cleary & Kern for the respondent
Hearing Date: 29 September 1997
IN THE SUPREME COURT
OF QUEENSLAND
Brisbane O.S. No.7268 of 1997
Before the Hon. Mr Justice Shepherdson
[re: Boulton Cleary & Ors. and NAD Inv]
IN THE MATTER of the Legal Practitioners Act 1995
and
IN THE MATTER of a bill of costs between Boulton Cleary & Kern and Ernst & Young
and
IN THE MATTER of NAD Investments (NQ) Pty Ltd
REASONS FOR JUDGMENT - SHEPHERDSON J.
Judgment Delivered 6 October 1997
NAD Investments (NQ) Pty Ltd has applied for an order that this Court refer for taxation a solicitors’ bill of costs prepared by Boulton Cleary & Kern. The application is opposed and it is necessary to recite the history of events leading to the present application.
On 22 May 1995 Richard John Dennis and Richard William Buckby, official liquidators both of Ernst & Young were appointed administrators of the applicant pursuant to the provisions of the Corporations Law.
Their appointment arose from litigation between the applicant and Daikyo (North Queensland) Pty Ltd (“Daikyo”). The applicant and Daikyo had been involved in a development of certain land north of Cairns but that development ended in dispute and court action. The applicant obtained a judgment against Daikyo in the Supreme Court of Queensland. Daikyo having unsuccessfully sought a stay paid the judgment sum and appealed successfully to the Queensland Court of Appeal who ordered that the judgment be set aside. When Daikyo demanded repayment of moneys which it had paid pursuant to the original judgment the applicant did not have the funds and thus the appointment of Messrs Dennis and Buckby as administrators came about.
A deed of company arrangement was executed by the applicant, the administrators and others and pursuant to the deed certain payments were made. The administration and the deed came to an end on 6 June 1997. During the course of their administration the administrators had engaged Boulton Cleary & Kern (“BCK”) as independent solicitors to advise them in relation to the administration of the applicant. Between 22 August 1995 and 19 May 1997 (both dates inclusive) BCK rendered lump sum bills for varying amounts totalling in all $102,451.62. The total fee components in these bills was $74,463.41 and the total outlays component was $27,988.21. An affidavit of Jeffrey Keith Guy a member of BCK read before me shows that on 10 June 1997 BCK rendered a further lump sum bill to the deed administrators encompassing work from 19 May 1997 until 5 June 1997 - this bill totalled $3,243.11 and was paid on 16 June 1997.
KEL Builders (Qld) Pty Ltd (“KEL”) was a party to the deed of company arrangement under which the administrators operated - and the directors of the applicant are also directors of KEL. During the administration KEL applied to the Supreme Court seeking, inter alia, a review of the remuneration of Dennis and Buckby the administrators under the deed. This application was returnable on 12 May 1997 and Buckby asked BCK to prepare a detailed bill of costs. That bill, a copy of which is before me and is entitled “bill of solicitor and client costs on time costing basis” was addressed to Messrs Ernst & Young. At the commencement of the bill the hourly rates for Mr Kern, Mr Guy and Mr Overland were set out. Both Messrs Kern and Guy are and were partners of BCK. This particular bill of costs is described as “the first bill”. It is dated 29 May 1997.
On 5 June 1997 a meeting of creditors of the applicant was held. Prior to the meeting Buckby referred the first bill to Gadens Ridgeway Solicitors for independent advice in respect of the bill. Buckby received a letter dated 4 June 1997 from Gadens Ridgeway and a photocopy of that letter is before me. It is not necessary to refer to that letter in detail other than to note the following:-
(a)the letter is an advice concerning the legal fees of BCK following Gadens Ridgeway having examined the itemised first bill as well as certain other material.
(b)the letter includes the following:-
“Without the benefit of perusing Boulton Cleary & Kern’s files it is difficult to come to a definitive view as to whether the fees charged are fair and reasonable.”
(c)a number of preliminary comments were made concerning procedures for recovery of legal costs with references to the Legal Practitioners Act 1995 and issues which Gadens Ridgeway said must be considered in assessing whether a solicitor should be entitled to the fees claimed.
Although the advising solicitors considered the level of fees charged to be “probably on the higher end of the range of what would be considered fair and reasonable” the solicitors did not think the quantum to be unreasonable and concluded they could not recommend seeking a taxation of the bill and considered that the administrators would be justified in accepting the first bill. In reaching that conclusion the writer of the letter Mr Greg Rodgers expressly relied in part on his extensive experience in insolvency matters, especially in relation to matters involving part 5.3A of the Corporations Law.
It is not necessary for me to make any further comment concerning the contents of that advice.
At the meeting of creditors held on 5 June 1997 the letter from Gadens Ridgeway was tabled for perusal by any creditor present and the chairman of the meeting, Mr Buckby, read out extracts of the letter. The minutes of that meeting confirm the last two mentioned matters and went on:-
“The Chairman advised that the Administrators had investigated the matter and were satisfied that the quantum of fees represented a reasonable cost. Notwithstanding, the Chairman advised that the directors were still available to challenge the quantum of fees themselves.”
I pause to say that the application now before me has resulted from such a challenge.
Before leaving the first bill, I note that it was delivered at $107,459.86 particularised as follows:-
“Professional fees in accordance with time recording $80,416.70
Add disbursements $27,043.16"
By letter dated 5 June 1997 Dennis, one of the administrators, wrote to Mr Keith Kern a partner in Boulton Cleary & Kern which read:-
“I refer to your Bill of Costs submitted in relation to the above matter and confirm that following receipt of independent legal advice the Administrators are justified in accepting your bill.”
Following a request from Drew Adrian Kellahan the commercial manager of the applicant, BCK prepared the bill of costs which is the subject of the present application. That request was for a bill of costs in taxable form on the basis that the applicant was a party liable to pay the bill although not the party chargeable with payment of the bill. I shall call it “the second bill”. It is entitled “Bill of Solicitor and Client Costs in accordance with the Supreme Court scale of costs applicable from time to time”. This bill was received by the applicant on 17 July 1997. The second bill has been prepared on a different basis from the first bill. It has been delivered at $121,544.61 made up as follows:-
Professional fees $95,491.90
Disbursements $26,052.71
The second bill includes one charge of $46,490 representing in effect care and consideration. This particular item is equal to 100 per cent of the item charges claimed in the bill.
The second bill is not addressed to any person. This is not an important matter because in terms of the Deed of Company Arrangement the applicant indemnified the administrators for “all liabilities incurred by the Administrators since the appointment and in the course of the administering of this Deed . . . ”.
The application before me is based primarily on s.13 of the Legal Practitioners Act 1995 which relevantly reads:-
“Third parties applying for taxation
13(1) Where any person not the party chargeable with any such bill within the
meaning of sections 5 to 12 shall be liable to pay ... such bill ... to the party chargeable with such bill as aforesaid it shall be lawful for such person ... to make such application for a reference for the taxation and settlement of such bill as the party chargeable therewith might make
(2) And the same reference and order shall be made there upon and the same course pursued in all respects as if such application was made by the party so chargeable with such bill as aforesaid.”
In my opinion the applicant was not and is not the party chargeable with the second bill but is a party liable to pay that bill by virtue of the indemnity given in the deed of company arrangement. In my view the applicant is entitled to apply for a reference for taxation and settlement of the second bill and to make that application under s.13. If I should be wrong in that view and the applicant is the person chargeable with the bill then if I were acting under s.8 of the Legal Practitioners Act 1995 I would hold that the applicant is entitled to apply to have the bill referred to be settled and taxed by the taxing officer.
I should at this stage say that the evidence before me shows that on 4 August 1997 the filing clerk employed by the applicant’s solicitors attended at the Supreme Court Registry to file the second bill of costs for taxation but for some reason (which is unnecessary to discover) staff at the Registry refused to accept the bill and appoint a date for a directions hearing. Thus, the summons now before me was filed on 15 August 1997. Obviously the attempt to obtain an appointment for taxation was made to enable s.7 of the Legal Practitioners Act to operate - the appointment for taxation could then have been obtained as of course and without the order of a Judge.
I should say that at one stage the respondent referred me to s.16 of the Legal Practitioners Act 1995 which relevantly reads:-
“Taxation of bill after payment
16(1) The payment of such bill as aforesaid shall in no case preclude the court or judge from referring such bill for taxation if the special circumstances of the case shall in the opinion of such court or judge appear to require the same upon such terms and conditions and subject to such directions as to such court or judge shall seem right.
(2) However, the application for such reference be made within 12 calendar months after payment.”
In my view this section has no application - the payments which were made by the administrators were made under lump sum bills and there has been no payment made under the second bill. Thus the matter of special circumstances does not enter the picture.
Mr Bates, counsel for the applicant relied on affidavits of two solicitors who are specialists in the area of legal costing. The first is Ivan Anthony Garrett of Brisbane. He makes a number of criticisms.. His major criticism is directed to the item charged for care and consideration. He points out this amount is 100 per cent of the item charges in the bill and in his opinion this is excessive. He says “I would anticipate that on a solicitor and own client taxation that the loading for care and consideration should be in the vicinity of 25-30% of the items charges claimed in the bill.” I do not repeat his other criticisms. Mr James McLellan describes himself as having practised as a legal cost consultant for 14 years. He swears that in his experience he has never known a care and consideration component of a bill to be allowed in excess of 40% of the professional costs (disbursements not included) claimed in the bill of costs for the type of work involved in this matter.
Mr Morris QC, for the respondent has urged me to ignore the opinions of Messrs Garrett and McLellan and instead consider matters raised in the evidence before me, which, he submitted, show in effect the difficult tasks confronting the solicitors whose advice was sought by the administrators; he argued that these matters show that in effect the quantum of the second bill was not “redolent of overcharging” as claimed by the applicant. He relies on a photocopy of an affidavit of John David Powell a member of the firm of Clayton Utz who acted for Daikyo and sworn on 21 June 1995. Powell has sworn that on 3 May 1995 he caused to be forwarded to the present applicant by prepaid post a statutory demand for payment of debt pursuant to s.459E of the Corporations Law - this was after he had been told by the applicant’s solicitor that the applicant would have difficulty paying the $156,000 judgment debt. Powell swore that he would have expected that in the ordinary course of post the statutory demand and letter would have reached the applicant by 5 May 1995. A letter dated 9 May 1995 from the applicant’s solicitors stated that on that morning they had been advised by the firm of accountants at whose premises was the registered office of the applicant that the demand had been received there on that morning.
Powell’s affidavit has exhibited to it a schedule of deeds and agreements which he swore he received from one of the administrators - Dennis. Mr Morris has referred to these deeds many of which bear dates 8 May 1995 and their purposes; he also submitted in effect that there was a sinister connotation to be placed on the receipt of the notice of demand after the deeds and agreements were entered into.
The prime argument addressed to be by Mr Morris is to the effect that the directors of the applicant have, through their interests in other companies been involved in a number of the deeds received from Dennis and exhibited to Powell’s affidavit, that their involvement shows they entered into extraordinary transactions and that their behaviour is such that in the exercise of my discretion, I should not refer this bill of costs for taxation.
He points to these various agreements copies of which are exhibited to Powell’s affidavit as indicating documents and transactions which BCK, in the course of advising the administrators, had to consider. He has submitted that the situation was complex.
In my view the matters on which Mr Morris and the Bates has addressed me are best left for the adjudication of the taxing master.
I therefore refer for taxation the bill of costs of Boulton Cleary & Kern which is headed with the name of the applicant and entitled.
“Bill of solicitor and client costs in accordance with the Supreme Court scale of costs applicable from time to time.”
I order the respondent to pay the applicant’s costs of and incidental to this application to be taxed.
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