Rigoli Lawyers and Arman
[2009] FamCA 42
•3 February 2009
FAMILY COURT OF AUSTRALIA
| RIGOLI LAWYERS & ARMAN | [2009] FamCA 42 |
| FAMILY LAW – COSTS – Solicitor’s lien – Costs dispute – Extension of time |
| Family Law Act 1975 (Cth) |
| Bolger and Bolger (1985) FLC 91-646 Chester v Cassidy Gisborn Howlin (1995) FLC 92-556 Cosgriff v Issac Brott and Co [2008] VSC 515 Gallo v Dawson (1990) 93 ALR 479 Gamlen Chemical Co (UK) Ltd v Rochem Limited and Ors (1980) 1 All ER 1049 Hughes v Hughes [1958] All ER 179 Re Weedman and Ors [1996] FCA 1112 Stark v Dennett [2008] QCA 50 Strudwick and Johnson (1996) 20 Fam LR 789 |
| APPLICANT: | Rigoli Lawyers |
| RESPONDENT: | Mr Arman |
| FILE NUMBER: | MLC | 3450 | of | 2007 |
| DATE DELIVERED: | 3 February 2009 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 23 January 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Moisidis |
| SOLICITOR FOR THE APPLICANT: | Rigoli Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Goldsmith |
| SOLICITOR FOR THE RESPONDENT: | Goldsmiths Barristers and Solicitors |
Orders
That upon the written undertaking by Goldsmiths Lawyers to Rigoli Lawyers that they will:
(a)Hold all papers and documents delivered to them by Rigoli Lawyers pursuant to this order subject to the lien of Rigoli Lawyers for costs;
(b)Afford Rigoli Lawyers and any professional person acting on their behalf, reasonable access to the said papers and documents for the purposes of preparing itemised accounts as otherwise required by these orders; and
(c)Afford Rigoli Lawyers reasonable access to the papers and documents for the purposes of any other litigation arising as between the husband and them; and
(d)Redeliver the said papers and documents to the said Rigoli Lawyers after the conclusion of the costs dispute and the pending appeal to the Full Court,
the said Rigoli Lawyers so soon as may be reasonably practicable hereafter, deliver to Goldsmith Lawyers all papers in this action and other documents in their custody or power belonging to the husband.
That the husband have leave to serve notice by 4.00pm on 12 February 2009 his request for itemised invoices in accordance with the Family Law Rules to Rigoli Lawyers.
That subject to the orders that follow, all proceedings as between Rigoli Lawyers and the husband be otherwise dismissed.
That should any party desire to make any application for costs arising out of these orders, they do so by written submission including as to quantum of such costs by filing them with my Associate by email and served upon the other party by no later than 4.00pm on 12 February 2009.
That the recipient of any such application for costs may file and serve any submission in reply by 4.00pm on 23 February 2009, such submission being provided to my Associate at the email address shown above.
That any such application for costs be determined in chambers.
I certify that it was appropriate for the parties to be represented by counsel and a solicitor acting as counsel.
IT IS NOTED that publication of this judgment under the pseudonym Rigoli Lawyers & Arman is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 3450 of 2007
| RIGOLI LAWYERS |
Applicant
And
| MR ARMAN |
Respondent
REASONS FOR JUDGMENT
The issues
There are two issues involved in this dispute between Mr Arman (“the husband”) and his former lawyers Rigoli and Associates (“the lawyers”). The first is whether the lawyers can retain their file when they have not been paid by the husband. The second is whether the husband can seek comprehensive and itemised accounts concerning fees charged when, on the face of the invoices, he is out of time to make that request.
The lawyers represented the husband in a property and parenting dispute which resulted in a judgment being delivered by me on 31 October 2008.
The husband left the lawyers and obtained advice from the legal practitioner who has represented him in this dispute. There was some debate about when the husband left the lawyers but in my view, nothing turns on that.
The hearing initially began on 7 January 2009 when the husband was represented by Mr Goldsmith and the lawyers were represented by counsel. It would not be unkind to say that the lawyers were not properly prepared that day and, over the opposition of Mr Goldsmith, I adjourned the husband’s application on the request of counsel for the lawyers to enable them to be so properly prepared. I ordered the lawyers to pay the husband’s costs thrown away.
Since then, each party has filed a further affidavit. The matter otherwise proceeded on submissions.
The husband’s position
The nub of the husband’s application is that the lawyers terminated their retainer and as such, he should be entitled to his file. He says that the lawyers may retain their lien over the file but he wants his current practitioner to have possession of it.
The husband has appealed against my substantive property and parenting orders and now also has a costs dispute with the lawyers.
The lawyers’ position
The lawyers say the husband terminated the retainer by his conduct and as such, they should not have to hand over the file. In relation to the costs dispute, they point to the rules of the court and say that the husband was provided with interim invoices marked with a warning about time constraints about complaints as to their charges and he is now well out of time. The lawyers say my discretion should not be exercised in the husband’s favour.
The Facts
The husband attended at the offices of the lawyers on 31 October 2008 to discuss the substantive parenting and property judgment. The husband says he continued to believe that they were his solicitors. The lawyers say that as at that date, the husband was already seeking advice from his current legal practitioners. I accept the lawyer’s position on that, having regard to the facts that will follow.
On 31 October 2008, the lawyers wrote a letter in the following terms:
Our office has a concern that various conflicts of interest have arisen which will require us to cease acting on your behalf. One example is that you intimated today that Ms Lanham’s advice to you early on in the proceedings was that you were guaranteed of getting shared care which is incorrect…Further, in August 2008 both the writer and counsel Mr Werner gave you stern warnings about proceeding with your application based on the final orders you insisted you should be entitled to have made in your favour. Against our advice you failed to instruct us to amend your application to one of contact instead of shared care and further you failed to instruct us to put forward reasonable property settlement offers based on your wife having residence of the children. In the event no dispute arises it still appears appropriate in all the circumstances that we cease acting.
In her affidavit filed 24 December 2008, Ms Rigoli the principal of the lawyers (“the lawyer”), said that on 31 October 2008, the husband insisted that he wanted her to go through the final orders with him in detail rather than simply collecting a copy of the judgment from her office. She said that in the conference that then occurred, she told him that she did not do appeal work and that he would have to get someone else to represent him or do it himself. She also told him that all attendances by him upon her office would continue to be charged for. She said she then discussed the question of the real estate agent to be appointed for the purpose of the final orders that I had made. However, the lawyer also told him that she was happy to represent him in any application arising out of the trial concerning costs. He in turn according to the lawyer, said it would be “more practical” that his new solicitors who were to handle the appeal could also handle any costs application.
On the face of those facts, there would appear to be nothing unusual about the relationship between the lawyer and client. However, the affidavit of the lawyer went on to say that in the previous year, the husband had often mentioned to her and her staff that he was getting second opinions from other legal practitioners just to see that her firm was representing him correctly. Notwithstanding those statements by the husband during that period of time, the lawyer continued to act for him.
On the afternoon of 31 October 2008, the husband telephoned on at least two further occasions and this time requested itemisation of his accounts and confirmed that he had other solicitors acting for him in respect of appealing against the final orders. The lawyer then said that the husband alleged that one of the employee lawyers had given him a quote for what the proceedings would cost and that she had also promised him that he would not get a result in the parenting proceedings less than shared care. The lawyer then added that whenever these statements were made, she and the employee had invited the husband to go elsewhere if he was not satisfied with how they were handling the matter but he always insisted on retaining the services of the lawyer.
The husband filed an affidavit on 22 January 2009 and denied that many of the things said by the lawyer were true.
On the evidence however, the only conclusion that one could draw is that throughout the long history of the association between the lawyer and the husband, they had never taken him seriously about getting alternative advice and notwithstanding he wanted to appeal, and their indication that they did not undertake appellate work, they were still on the face of it, prepared to continue to act for him.
However, on the afternoon of 31 October 2008 after the telephone calls to which I have referred, the lawyers wrote to the husband canvassing the matters relating to the appeal and the cost invoices that had been earlier discussed. They then said in the letter:
We advise our office has a concern that various conflicts of interest have arisen, which will require us to cease acting on your behalf.
The letter went on to say that the husband had “intimated” that an employee of the lawyer had guaranteed him of getting shared care and that contrary to their advice, he had failed to instruct them to amend his application to one of “contact” instead of “shared care” and also failed to put forward a “reasonable property settlement” offer. The letter went on to say:
In the event no dispute arises it still appears appropriate in all circumstances that we cease acting.
The letter of 31 October 2008 seems to me to be at odds with some of the statements made by the lawyer. For example, in the affidavit she referred to the fact that the husband “alleged” that the employee solicitor had “promised him” certain things whereas in the letter, she wrote to the husband saying that he had “intimated” certain things.
The conclusion therefore to be drawn from the combination of the letter and the affidavit is that the lawyers were no longer happy to act for the husband. Their reference to a conflict of interest however is a little more difficult to follow. What is however abundantly clear, the husband was already obtaining the advice of another firm of legal practitioners in respect of the matters about which the lawyers had been involved up until that point in time.
The law relating to the lawyers’ file
As a general principle, depending on who terminated the relationship and why, a solicitor would usually be entitled to an equitable lien over their file pending the payment of outstanding fees.
A solicitor who is discharged otherwise than for misconduct, is entitled to maintain a possessory lien over the file until his or her fees have been paid and a solicitor who terminates the relationship for reasonable cause will be entitled to retain their lien but the Court will, in order to save proceedings from catastrophe, oblige the solicitors to hand over the file to the new solicitors subject to an undertaking to protect the first solicitor’s lien.
There is obviously a difference between an equitable lien and a possessory lien. Here, the husband says that he does not dispute the lien generally but maintains the lawyers cannot be entitled to any possessory lien over the file.
There are three questions that must be asked in a case such as this. The first is did the original solicitors discharge the client or did the client discharge the solicitors? The second question is if the original solicitors discharged the client, was there reasonable cause for the solicitors to do so? The third question depends upon the first and the second answers. If there was a reasonable cause for the solicitors to discharge the client, and the solicitors did do so, should the Court impose terms on the delivery of the client’s papers and documents by the original solicitors to the new solicitor other than the term which requires the new solicitor to undertake to preserve the lien of the original solicitors?
In Hughes v Hughes [1958] All ER 179, the English Court of Appeal set out the general principle relating to the retainer of a solicitor as follows:
There is no doubt that a solicitor who is discharged by his client during an action otherwise than for misconduct can retain any papers in the cause in his possession until his costs have been paid…the litigant need not change his solicitor without good cause. It would be odd if he were, in effect, able to get solicitor’s work done for nothing by the simple expedient of changing his solicitor as often as he chose, leaving a trail of unpaid costs in his wake and demanding the papers without payment when he had no just cause to complain of the conduct of the solicitors instructed and discarded.
In Gamlen Chemical Co (UK) Ltd v Rochem Limited and Ors (1980) 1 All ER 1049 again, the English Court of Appeal restated the principle. There they held that there is an overriding principle that a solicitor who discharges himself is not allowed to exert his lien over the client’s file so as to interfere with the course of justice. The Court held that in those circumstances there was a qualified lien and the solicitors would ordinarily be subjected to a mandatory order obliging the handing over of the papers to a new solicitor provided that that solicitor undertook to preserve the lien. That particular case revolved around a dispute between solicitor and client over fees. The solicitors wrote to the client saying that if the fees remained unpaid, they would issue a summons for them to be removed from the court record as acting for the client. When the fees remained unpaid, that is exactly what the solicitors did. A new firm of solicitors acting for the client then sought for the file to be released to them. The Court of Appeal held that the proper inference was that the original solicitors had discharged themselves because of issuing the summons to be released from continuing to act. Templeman LJ at 1058 said:
If before the action is ended the client determines the retainer, the solicitor may, subject to certain exceptions not here material, exercise a possessory lien over the client’s papers until payment of the solicitor’s costs and disbursements.
…
The solicitor himself may determine his retainer during an action, for reasonable cause, such as the failure of the client to keep the solicitor in funds to meet his costs and disbursements; but in that case the solicitor’s possessory lien, ie his right to retain the client’s papers of any intrinsic value or not, is subject to the practice of the court which, in order to save the client’s litigation from catastrophe, orders the solicitor to hand over the client’s papers to the client’s new solicitors, provided the new solicitors undertake to preserve the original solicitor’s lien and to return the papers to the original solicitors for what they are worth, after the end of the litigation.
In addition to those comments, Templeman LJ said that in respect of the possible exceptions to the general rule, much would depend on the nature of the case, the stage at which the litigation had reached, the conduct of the solicitor and the client and finally, the balance of hardship which might result from the order.
In Chester v Cassidy Gisborn Howlin (1995) FLC 92-556 Moss J decided that the client had determined the retainer and as there were no assertions made by the client about any just cause for so doing, the solicitors were entitled to assert a lien in respect of their file. Counsel for the lawyers before me pointed to that as indicative of the principle that should be applied in this Court. The difficulty with that submission is that Chester’s case was determined entirely on its facts.
In Bolger and Bolger (1985) FLC 91-646 Buckley J held that a solicitor discharged by his client otherwise than for misconduct cannot be compelled to hand over the file for so long as the costs remained unpaid. His Honour applied Gamlen. That case too was decided upon its particular facts.
A careful analysis of this particular sort of problem was undertaken by Drummond J in Re Weedman and Ors [1996] FCA 1112. There, the court was looking at something akin to the analysis that would be undertaken about whether a commercial contract had been terminated by repudiatory conduct. His Honour said:
The critical question whether it is the solicitor or the client who has terminated a retainer is not to be answered by a nice evaluation of who acted first or by an exact analysis of the language used by each party at various times, in isolation from the overall context of the dealings between the parties especially when, as here, it appears both were aware of the consequences of being the party who determines the retainer and both were, at relevant times, choosing their words with care. It is the substance of the matter that is important.
There is an inference that I could draw in the husband’s case that the lawyers perceived the husband was attacking their credit by suggesting that they had not delivered what they had promised. On the limited facts which were untested by cross-examination, it is hard for me to know exactly what was said by the lawyer or more importantly, what the husband believed. I do not accept that the husband had any justification for maintaining a belief about any promise of shared care particularly having regard to the letter dated 31 October 2008 which refers to a discussion in August 2008 involving counsel who ultimately appeared at the trial. In addition, I have the uncontroversial evidence from the lawyers that they told the husband that they did not do work in relation to appeals. I respectfully agree with Drummond J that in a case like this, the question of who terminated the retainer is not easily answered by either who acted first or an exact analysis of language.
In a more recent decision, Keane JA in Stark v Dennett [2008] QCA 50 said that any intention to determine the relationship between solicitor and client must be clear, definite and precise. His Honour said:
A solicitor who agrees to conduct an action is regarded as having entered into an entire contract to carry the litigation through to its end. If a client is to be regarded as having terminated such a retainer, a clear indication of his or her intention in that regard is required.
In addition to a very clear intention to terminate a retainer, one must look carefully at the terms of the retainer in the first place. In this case however, the terms of the agreement are anything but clear. If anything, they are set out in such a way that subjective decisions by either lawyer or client could be made quite easily. The costs agreement between the husband and the lawyers is therefore not particularly helpful.
In Cosgriff v Issac Brott and Co [2008] VSC 515 an unusual circumstance occurred. The plaintiff was represented by Issac Brott and Co. Mr Brott had his practicing certificate cancelled for misconduct. A practitioner announced a willingness to continue to act on behalf of the plaintiff and her file was transferred to that particular firm. The plaintiff however went and obtained another firm to act for her and sought that the file be released to them. The firm that had taken over the file from Issac Brott and Co argued that there was a possessory lien over the file in respect of outstanding legal fees. The matter came on for hearing before Byrne J. His Honour dealt with the legal principles reciting some of the matters that I have set out above. He then went on to say:
Whether it is the client or the solicitor which terminates the relationship is to be resolved in a practical way.
His Honour said that it was an equitable power that he was exercising and he had to have regard to discretionary factors relating to all of the circumstances of the case. I agree.
The husband argues that he was continuing to retain the lawyers to act for him notwithstanding he was also pursuing advice from another legal practitioner. The assertion by the lawyers is that the husband’s statements about what he was promised and them not delivering on that promise was in their view creating a conflict of interest if they continued to act. In addition, the lawyers say that as the husband had challenged their costs, they should no longer act for him. They say that that conduct by the husband is such that I should conclude that it was the husband who terminated the retainer. It is hard for me to draw any other conclusion than that the husband was seeking advice from another legal practitioner about the matter generally and not just in relation to the appeal point. There were clearly questions about the appropriateness of costs and the fact that the husband had not taken any notice of their advice. It is clear from the evidence and in particular the lawyer’s correspondence, they were aware that the husband was obtaining advice elsewhere at various times and he was not particularly interested prior to the commencement of the substantive trial in following their advice. Despite that, they continued to act for him without doing more than suggesting at that time that he should retain other practitioners.
Counsel who originally appeared on 7 January 2009 suggested that it might be possible to infer that the retainer related only to the property and parenting disputes up until the point that judgment was delivered and that the retainer came to an end on the delivery of judgment. There is no evidence that that inference could be drawn and it is certainly not apparent from any words in the cost agreement.
It is a fundamental tenet of a solicitor and client relationship that there be trust in the solicitor by the client. It is now asserted by the lawyers that all of that trust had evaporated when the husband was reading the substantive judgment with them and he raised all of the issues to which I have earlier referred.
On any view, the husband was a difficult client for them to manage and the only reasonable inference I can draw is that they had had enough and wanted to end their association with him. I do not accept that there was any conflict of interest. I do not accept that the husband by his conduct terminated the retainer having regard to the fact that the lawyers had allowed that sort of conduct to pervade the whole case. In those circumstances, I find that it was the solicitors who discharged the client rather than the other way around.
That then leads to the second question of whether there was a reasonable cause for the solicitors to discharge the client. Most of the authorities in relation to what is reasonable relate to the failure to keep a solicitor in funds. In my view, if a client ceases communicating with a practitioner by which I mean not responding to requests for instructions or the payment of funds, subject to the terms of any relevant costs agreement, the legal practitioner would have good cause and hence reasonable cause, to cease acting. If a client told a solicitor that he or she was having that solicitor’s advice reviewed by another practitioner, that would not necessarily give rise to a loss of trust and it would not necessarily entitle the solicitor to terminate the relationship. However, if a client directly told his or her practitioner that he was seeking to engage other solicitors to act for him in respect of that particular matter, there would be good cause subject to giving reasonable notice of the dilemma, for the legal practitioner to indicate that they were no longer prepared to act on the basis that their services were effectively being or about to be, terminated. In that circumstance, a practitioner would have a reasonable cause to terminate the relationship.
In this case, the husband told the solicitors indirectly that he was having another solicitor act for him albeit in relation to matters arising out of the substantive proceedings. The husband did not see the proceeding as ended with the judgment nor in my view, could the lawyers generally suggest that that was the case. There were many things that would have still been required to be completed and the inference I have drawn from the evidence is that the husband intended a new firm to take over those matters. In this case therefore, I am satisfied that the lawyers understood that the husband had engaged other solicitors to take over the care of the matter and that they had reasonable cause to therefore terminate the relationship. As Byrne J said in Cosgriff v Issac Brott and Co, the matter had to be looked at in a practical way and as Drummond J said in Re Weedman and Ors, one has to look at the whole of the circumstances. In my view, that whole picture shows that the lawyers understood that their services were no longer required in respect of the whole matter.
That then requires me to turn to the third question. The authorities such as Hughes and Hughes refer to a client suffering a “catastrophe” in the sense of “irreparable harm” to the litigation if denied the papers. The third question highlights the discretionary nature of the decision to be made. To simply decide that the litigation would be a catastrophe without the papers or that the client would suffer irreparable harm sets a very high bar which in my view is not appropriate when many factors have to be taken into account in the exercise of a discretion. Counsel for the lawyers pointed to the fact that the husband and his new solicitors had access to the court file simply by filing a Notice of Address for Service. That would give them access to not only the court documents filed but also the judgment. The internet would also provide access to the judgment as well. The court file, as with the lawyer’s file, would not contain the transcript if that was (as it is) necessary for the appeal. What would not be available from all of those sources is the correspondence between parties nor would any professional reports, advices of counsel, instructions of the husband in writing or proofs of evidence relating to witnesses who were not called upon to participate in the trial. It may very well be that those matters contain significant information without which, the husband may not be able to get competent advice on the likelihood of success of his appeal including the prospect of being able to call further evidence upon an appeal.
In addition to the appeal point, various orders I made required the parties to implement various financial outcomes and other things. Those issues may require a new practitioner to have access to the lawyer’s file. That is particularly so if the legal practitioners for the opposite side would not be prepared or willing to incur costs on the part of their client to provide such information as might be necessary for the new solicitors to be involved. A similar problem might arise in respect of a new firm of solicitors preparing any costs submissions on behalf of the husband. They would not have access to information that might satisfy some of the questions under s 117(2A) of the Family Law Act 1975 (Cth) (“the Act”).
Thus, for the lawyers to simply point to the fact that the husband could obtain the transcript or search the file is not entirely helpful.
In my view also, in the exercise of discretion, the Court is obliged to take into account that this is a matter involving family issues which means that it is a little less “clinical” than might otherwise be the case in a civil dispute. There are children involved as well as financial issues that affect children. The husband has indicated as part of his intention to appeal against my decision that he disputes the amount of time that he has with his children. It is possible that the lawyer’s file contains material outside of the court documents that may affect his prospects on appeal.
A very important aspect of the exercise of discretion is the fact that the lawyers indicated to the husband that they did not do appellate work and encouraged him to either do the appeal himself or get alternative advice. Whilst to some extent I am entitled to take into account the fact that they did not believe he had any prospects, they did encourage him to get advice from someone else who on any view, would be hamstrung by not having access to all of the things that I have just mentioned. I stress again that it may be that the sorts of things that I have given as examples may not in fact exist within the lawyer’s file. It seems to me important that the lawyers were directing him to someone other than themselves.
A second important factor in the exercise of the discretion is that the lawyers knew they could not be paid immediately. Not only was the trial conducted on the basis that they were to be paid out of the proceeds of the sale of a home but the very costs agreement to which I shall refer below noted that there was to be a “deferred” payment of their fees.
Counsel for the lawyers indicated to me that one of the matters that I should take into account was the hardship caused to the lawyers by the loss of their file. I reject that. They have not lost their right of action against the husband nor their caveated interest which will require attention at the time of the settlement of the sale of the home. There is no argument in this case that they have not lost their equitable lien.
I could not say that it would be a “catastrophe” or that there would be “irreparable harm” to the husband’s appeal by not having the file but I find that that standard is too high in family law matters if there is to be a general discretion. In my view the better standard is that if in family law matters, a court may not have access to all of the material necessary to enable it to make a finding as to what was in the best interests of children or as to what was just and equitable in a financial matter, the litigant is significantly disadvantaged. The very basis of parenting and financial matters under the Act relies on the exercise of discretion and a court must have access to all of the possible information it can to be able to exercise that discretion properly.
In my view therefore this is a case in which the husband should have access to the file and I propose to order accordingly.
On 16 December 2008, the husband sought an order that the lawyers provide itemised accounts in relation to work undertaken prior to 5 August 2008 and to the extent necessary, an extension of time be granted so that the issue of costs could be resolved. Other orders were also sought but they were not argued.
Chapter 19 of the Family Law Rules 2004 sets out the procedures in relation to litigants disputing and claiming costs. The relevant parts of the Chapter are as follows:
19.20
Request for itemised costs account
A person who has received an account (except an itemised costs account) and wants to dispute the account, or any part of it, must, within 28 days after receiving the account, request the lawyer who sent it to serve an itemised costs account for the whole or part of the account disputed.
19.21
Service of lawyer's itemised costs account
(1) A person entitled to party and party costs must serve an itemised costs account on the person liable to pay the costs within 28 days after the end of the case.
Rule 19.22 sets out what an itemised account must specify.
In an affidavit filed 24 December 2008 by Jodie Maree Lanham, the lawyers’ costing schedule was exhibited. The first account apparently sent to the husband was on 23 March 2007 and then there was a variety thereafter up until 30 June 2008. There were 17 invoices in all. Some payments were made by the husband. There has been no dispute between the husband and the lawyers about itemisation of invoices subsequent to August.
This is a discrete dispute about the period prior to that relating to the 17 invoices to which I have just referred. The lawyers’ position is that the husband is out of time and the husband says that he should be given an extension of time if it is required.
The husband and the lawyers contracted with each other for the lawyers to provide the husband with legal services. The disclosure statement and cost agreement is dated 22 January 2007. It sets out a number of important details. The first is that the terms of engagement and payment terms were to be a “deferred payment”. That was clearly intended to be a payment to the lawyers of their costs on the sale of the house, refinancing or property settlement provided that an equitable charge was signed. In this case, as I understand it, there is no dispute that the husband signed an equitable charge and a caveat was lodged.
In the body of the terms of engagement, the agreement signed by the husband said that if a deferred payment was agreed and the lawyers did not receive payment within two months of any account being rendered, there was a discretionary loading fee of between 5 per cent and 15 per cent upon each bill rendered to take into account the amount of time that the lawyers had to wait for payment. I am not at all clear on whether that had occurred. Whilst I appreciate that lawyers are not to act as bankers for a client, it would seem extraordinary for there to be a “discretionary loading fee” in circumstances where there is an agreement that the lawyers will wait until the conclusion of the case to be paid. That is not a matter for me in these proceedings.
The agreement then set out the various estimates for legal costs none of which is relevant for the purposes of my determination. What is then set out however, is the way in which legal costs were to be calculated. The Schedule “D” is quite precise. There is nothing in that part of the agreement that refers to any loading for what has traditionally been known as care, skill and attention. I do note that such a loading was in fact made on one of the invoices.
The heading to the agreement notes that it is a “family law matter” and it has a warning at the end of the section relating to estimated costs that many things will affect the range of ultimate legal expenses.
There is no suggestion the agreement is invalid. Mr Goldsmith on behalf of the husband conceded that the issue was a matter for determination based on discretion. He pointed to the fact that on 19 September 2008, the lawyers wrote to the husband indicating that they had already written to him stating that the costs of trial “preparation” from that date onwards were estimated to be $3000 to $6000 plus barristers’ fees. When the termination of the retainer occurred on 31 October 2008, the letter indicated that the outstanding fees payable up to 22 October totalled $67,933. The two amounts may have nothing to do with each other because the larger amount clearly relates to all outstanding and accruing bills rather than just the preparation period from shortly prior to trial. However it is said by the husband that this large bill warrants an examination of a whole series of matters prior to the period commencing August 2008.
Counsel for the lawyers pointed to the fact that every one of the invoices had a warning attached to it that if the husband disputed the bill, he could seek information about it including an itemised account but I take into account that the husband had understood he would not pay until the end of the case.
Nothing in the rules gives guidance as to how that power should be exercised. Authorities relating to discretion can do no more than provide consideration of what is to be taken into account.
In Strudwick and Johnson (1996) 20 Fam LR 789 Lindenmayer J said that there was no proper basis upon which to restrict the power to extend the time as set out in the rules and that the discretion was a wide one. He pointed to the fact that one had to look at the delay and see what the explanation for it was and what hardship would be suffered if an extension was not granted. His Honour also raised the question of prejudice.
In Gallo v Dawson (1990) 93 ALR 479, a litigant had brought an action in the High Court naming Dawson J as the defendant. She was well out of time. She sought an extension of time. McHugh J said that the object of the rule relating to time was to ensure that rules which fixed times did not become instruments of injustice. He said that the discretion to extend time was given for the sole purpose of enabling the court to do justice between the parties. His Honour then said:
This means that the discretion can only be exercised in favour of an applicant upon proof that strict compliance with the rules will work an injustice upon the applicant. In order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences of the parties of the grant or refusal of the application for extension of time.
His Honour went on to say that when the application related to time to file an appeal, it was always necessary to consider the prospect of the applicant succeeding in that appeal. There are distinct similarities with the position here.
In line with the authorities therefore it is important to look at what has occurred here. The proceedings have been protracted and have involved considerable work by the lawyers. However at all times, both lawyers and the husband understood that there was to be no payment until the conclusion of the proceedings. The purpose of the bills on an interim basis was, according to the cost agreement, to enable the husband to know what sort of costs he was incurring as the case went along. Unlike a situation where invoices were rendered and payment not made when due, this is a case where the lawyers were quite content to wait for their payment. To argue that they suffer some prejudice seems to be somewhat artificial. That is particularly so in circumstances where their own cost agreement provided them the opportunity to put a 5 per cent to 15 per cent loading for having to wait for their money. To be clear, it seems that did not happen in this case although there is, as I said, the question of the 10 per cent loading on at least one invoice for “skill, care and attention”.
As part of the discretionary process I take into account that what has now caused this dispute is, effectively, a falling out between the lawyers and the husband. It was quite clear according to the cost agreement that the lawyers were never going to be paid until the end and the interim invoices were in reality simply notices as to costs accrued. I have no hesitation in saying that they were technically invoices but in respect of the exercise of discretion, I am entitled to treat them more as notices as to costs incurred rather than formal invoices for the purposes of the Family Law Rules. As such, I see no prejudice in respect of the payment to the lawyers in now having to itemise the work that they did.
It is also important as part of the exercise of discretion to take into account what would happen if the extension of time was refused. In reality, it would simply mean that the husband could not challenge not only whether the work was done but whether it was done reasonably and properly in the circumstances. That in my view could work a serious injustice to the husband if, in reality, he has any cause for complaint. However, it seems to me that he has significant risks having regard to the fact that the evidence of the lawyers is that he was checking on them at various times and continued to instruct them. Whilst that is a discretionary factor on both sides, it seems to me to favour the husband more than it does the lawyers.
Ultimately, I am also obliged to take into account the prospect of success if time was extended. I have no indication one way or the other whether the husband will be successful or not. However, the lawyer in filing the affidavit made clear that there are substantial notes for the “protection” of the firm and as such, the records of what was done should not be difficult to itemise. The lawyer made the complaint that the husband was a persistent caller and as such, it is possibly open to the husband to argue that notwithstanding his pedantic attitude of discussing all issues, what the lawyers did by continuing to note his instructions without warning him of the waste of his time, might amount to an unnecessary incurring of costs. On that basis if so, the husband may very well succeed on a cost dispute.
This is a case where I should err on the side of caution and grant the indulgence to the husband. Having regard to the way in which the litigation has been conducted before me, he must be conscious of the risks that he runs if he is unsuccessful on challenging the costs accounts. Accordingly, I will make orders.
At the conclusion of argument, I also indicated that I would make orders in respect of the costs of these proceedings arguable by written submission and the determination of that issue in chambers. I propose to make those orders as well.
I certify that the preceding Seventy (70) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin
Associate:
Date: 3 February 2009
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