Rudstein Kron Lawyers v Pisanelli & Ors
[2003] VSCA 166
•24 October 2003
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 6785 of 2001
| RUDSTEIN KRON LAWYERS | |
| Appellant | |
| v. | |
| MARIE PISANELLI & ORS | Respondents |
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JUDGES: | PHILLLIPS, BUCHANAN and CHERNOV, JJ.A. |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 24 October 2003 |
DATE OF JUDGMENT: | 24 October 2003 |
MEDIUM NEUTRAL CITATION: | [2003] VSCA 166 |
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Courts – Practice and procedure – Costs – Costs agreement in vague terms – Whether taxation required of bill of costs – Proceeding to enforce “fruits of litigation lien” – Whether precluded until taxation completed – Supreme Court Act 1986 ss.101, 115.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr R. Boaden | Rudstein Kron Lawyers |
| For the 1st named Respondent | In Person | |
| For the 2nd and 3rd named Respondents | No appearance |
PHILLIPS, J.A.:
This is an appeal against an order made in the County Court on 4 July 2001, whereby a judge dismissed an application made by the appellants, a firm of solicitors, in relation to the costs of their having acted as solicitors for the first respondent in a proceeding which Ms Pisanelli had brought in the County Court against the second respondent, a doctor, for damages for negligence. The proceeding against the doctor was commenced by County Court writ number 1999/4755. The matter was listed for trial on 21 May 2001 and on that day a compromise was reached between the plaintiff and the defendant, through their respective solicitors, involving the payment by the defendant of a substantial sum for the benefit of the plaintiff. It is claimed by the appellants that in February 2000, and then again in June 2000, Ms Pisanelli had signed a formal costs agreement with them as the solicitors she had retained to act for her in the proceeding against the doctor; and I refer in particular to para.3 of the affidavit of Magda Kron sworn on 28 June 2001 and the exhibits MK1, MK2 and MK3. It appears from what we have been told today, orally from the Bar table by Ms Pisanelli, that she disputes that it is her signature that appears on the documents.
On 14 June 2001, nearly a month after settlement, a number of things happened. First, the appellants were told by Messrs John Ball & Sons, the solicitors for the defendant doctor, that Ms Pisanelli had contacted them directly to request that the sum to be paid in settlement should be released to her, not the appellants. At the same time, Ms Pisanelli terminated the appellants' retainer and the appellants filed notice of ceasing to act. On 22 June, solicitors acting on behalf of the appellants sought an undertaking from the doctor's solicitors, John Ball & Sons, that the settlement sum would not be paid directly to Ms Pisanelli.
On 25 June 2001, the appellants sent Ms Pisanelli a signed copy of an itemised bill of costs, an earlier one not having been signed by inadvertence. The total amount claimed was $51,346.42, consisting of $27,500 for professional costs and $23,846.42 for disbursements including counsel's fees.
On 28 June, the appellants filed in the County Court proceeding Pisanelli v. McManamny a summons seeking these orders:
“1.That the Defendant or his Solicitors retain out of the monies to be paid pursuant to a compromise achieved on 21 May 2001 a sum sufficient to pay the costs and disbursements properly incurred by the Applicant [that is, the present appellants] in the course of conducting this action on behalf of the Plaintiff [now the first respondent] and the costs of this Application.
2.An Order that such sum, together with a sum sufficient to cover the costs of this Application, be paid into court or, alternatively, to the applicant herein.”
That summons was made returnable in the Practice Court on 4 July 2001. On 2 July, Ms Pisanelli issued a summons for taxation, returnable on 7 August 2001. The doctor himself issued a summons, also returnable on 4 July 2001, seeking directions as to payment of the settlement sum.
On 3 July 2001, Allan McMonnies, a solicitor in Geelong, informed the appellants that he was now acting for Ms Pisanelli and he enclosed the summons for taxation by way of service. On 4 July, the appellants' summons came on for hearing before His Honour Judge Ostrowski and was dismissed with costs. His Honour held that the application constituted a proceeding to recover the costs, the subject of the bill, and was thus a proceeding within s.115(3) of the Legal Practice Act 1996; and that being so, the proceeding could not be commenced, by virtue of s.115(3), until taxation of the bill had been completed. At the same time, on 4 July 2001, his Honour dismissed the application made by the doctor himself. There has been no appeal by the doctor against the dismissal of his summons.
On 6 July, the appellants sought to avoid the cost of appealing against the order dismissing their summons of 28 June 2001, by reaching agreement, if they could, with the parties to the proceeding over the payment of their costs, or alternatively, by obtaining some sort of unequivocal undertaking that an interpleader application would be made. Not surprisingly, Messrs John Ball & Sons informed the appellants that their client, the doctor, was not prepared to incur any further costs in relation to the dispute that had arisen between Ms Pisanelli and her former solicitors. Mr McMonnies, by then the solicitor acting for Ms Pisanelli, replied that he saw “no reason why the settlement proceeds should not be paid direct to [Ms Pisanelli] at this stage".
On 18 July, application for leave to appeal was filed and served and on 27 July 2001 that application was granted. At the same time the Court of Appeal made an order in these terms:
"That the sum of $51,346.42 out of any money paid by [the doctor] to Marie Pisanelli's solicitors pursuant to the terms of settlement dated 30 May 2001 in County Court proceeding [number 1999/4755] be retained by the said solicitors in an interest bearing trust account until-
(a) the hearing and determination of the appeal;
(b) further order; or,
(c)the written agreement of Rudstein Kron Lawyers and Marie Pisanelli to the release of that sum together with accrued interest".
On 2 August 2001, we were told by Mr Ruskin this morning, the doctor paid the settlement sum to Mr McMonnies who, to this day, holds the sum awaiting the result of the appeal or further order. Agreement between the parties has hitherto not proved possible. On 10 August the appellant served notice of appeal.
On 31 August 2001, the Taxing Master adjourned Ms Pisanelli's summons for taxation on the ground that "there is no admissible evidence of costs agreement" and that "there are apparently other but unidentified proceedings affecting/concerning the costs claimed by the defendant". (I should interpolate that Ms Pisanelli's summons was headed matter No.3505 of 2001 in the Supreme Court between herself, as plaintiff, and Rudstein Kron Lawyers, as defendant.) On 31 August, the summons for taxation was adjourned sine die, with liberty to apply. On 26 September 2001, the summons for taxation coming on for further hearing, the Taxing Master dismissed the summons with costs. Apparently he did so on the ground that taxation was inappropriate because Ms Pisanelli had had a valid costs agreement with her solicitors at the time.
On 8 October 2001, Ms Pisanelli became bankrupt and on 27 November the appellants received a letter from Ms Pisanelli's trustee in bankruptcy stating that "the Trustee has no interest in the said [settlement] sum". In the meantime, Ms Pisanelli had lodged a complaint against the appellants with Victorian Lawyers RPA, who informed her on 24 April 2002 that it had determined to take no further action. Her subsequent request to the Legal Ombudsman to review that decision met with a like result on 11 October 2002.
On 19 February 2003, Mr McMonnies filed and served a summons seeking leave to file notice of ceasing to act. It appears likely that Mr McMonnies had lost contact with Ms Pisanelli some months previously and on 14 March he was granted leave to file notice of ceasing to act upon his filing an affidavit of service upon Ms Pisanelli. Mr McMonnies purported to file such an affidavit fairly promptly, and although its sufficiency drew adverse comment later from this Court, it is fair, I think, to conclude that by 14 March 2003, at the latest, Mr McMonnies had in fact ceased to act for Ms Pisanelli. On 17 April 2003, Messrs John Ball & Sons wrote to the Registrar of the Court of Appeal stating formally that they did not consider that the doctor's presence at the hearing of the appeal was necessary and that their client would play no further role in the dispute the subject of the appeal. They sought the right only to address on costs after the hearing and determination of the appeal otherwise.
On 22 April 2003, the appellants sent a letter to the Court of Appeal declaring that they were unable to locate Ms Pisanelli for the purpose of serving documents. By this stage, there was no solicitor on the record, or so it would seem, and on 29 April the matter was mentioned before the Court of Appeal in order that directions might be given, the date for which the appeal had been fixed for hearing looming large at that stage. The hope, expressed from the Bench on 29 April that Mr McMonnies might be persuaded to commence interpleader proceedings in the County Court, led to nothing and so on 22 July 2003 the appellants issued a summons seeking more specific directions for the prosecution of the appeal and, if necessary, an order for substituted service. On 1 August, the return date of that summons, Ms Pisanelli appeared before the court in person and the appeal was fixed for hearing on 24 October 2003, to allow her sufficient time to engage a solicitor as she said that is what she wanted to do. At the same time, and with her consent, Ms Pisanelli was served by the appellants with the summaries and an outline of their submissions.
On 7 October, the appellants received notice of appointment of practitioner from Davies Maloney, acting for Ms Pisanelli. On 9 October, the appellants finally issued a summons seeking to join Mr McMonnies as party to the appeal, no doubt in anticipation of an order, should they succeed on the appeal, that he pay them sufficient from the settlement sum to cover their claim for costs. That summons was made returnable on 24 October and so we have that summons, as well as the appeal, now before us. In the meantime, Mr McMonnies had signified his consent to being joined, albeit on terms agreed by the appellants. Ms Pisanelli has appeared today before the Court, but she appears unrepresented, having instructed Davies Maloney no longer to act for her and on 22 October last, Davies Maloney, as solicitors on the record for Ms Pisanelli, sought leave under Rule 20.03(4) to file notice of ceasing to act.
Thus, when the appeal was called on for hearing this morning, a number of ancillary matters fell for determination. First, there was the application just mentioned by Davies Maloney. We granted the solicitors leave to file notice of ceasing to act. Despite application by Mr Cantor, who appeared to prosecute that application, we made no order for the costs of the application itself. After all, the application was the direct product of Rule 20.03 in consequence of Ms Pisanelli's decision to terminate the retainer, as was her right.
Secondly, there was the application by the appellants to join Allan McMonnies as a further respondent to the appeal. There being nothing said against that course, that application too was granted this morning on terms that the notice of appeal be amended this day to reflect the addition of the further party, Mr McMonnies having agreed to the joinder.
Thirdly, we heard from Mr Ruskin on the question of the doctor's costs. I am not altogether clear, even now, why Mr Ruskin, who appeared with Mr Gronow, considered that the application had to be made today instead of at the conclusion of the appeal as previously foreshadowed in the correspondence. Nonetheless, we heard him early in the piece in order, we hoped, to save any further costs. Mr Ruskin put his argument that the doctor should have his costs, having been joined as a party to the appeal, but it will be obvious from the foregoing that any claim by the doctor for costs is difficult to sustain beyond the making of the Court of Appeal's order on 27 July 2001 and the subsequent payment by the doctor of the settlement sum under cover of that order to Mr McMonnies as the then solicitor for the first respondent. At that point, the doctor seems to me to have ceased to have had any personal interest in the outcome of the continuing dispute over payment to the appellants of the costs they claimed for having acted for Ms Pisanelli in the proceeding against him. The doctor's concern was only as to the payment of the settlement sum and that payment was achieved on 2 August 2001 under cover of the Court of Appeal's order of 27 July. No complaint was made in respect of the payment to Mr McMonnies and no relief of any kind is sought against the doctor on this appeal.
Having heard the argument from Mr Ruskin this morning, we expressed no final view on it, deferring any question of costs until the determination of the appeal. Suffice it to say that, subject to the foregoing, Mr Ruskin sought an order for costs against the first respondent if the appeal was successful and against the appellants if the appeal failed. I think in argument he accepted that those costs could not fairly be sought beyond 2 August 2001. He was given liberty to make further application (in respect of the costs below) if application became appropriate, but otherwise counsel were excused from further attendance, as was their client, unless that attendance was required by notice from the Registry.
With that said, I turn to the substantial issues raised by the appeal and the orders made in the County Court on 4 July 2001 dismissing the appellants' summons of 28 June 2001, with costs. As already mentioned, the judge rejected the appellants' application because, as he saw, s.115(3) of the Legal Practice Act precluded the claim until completion of the taxation of the bill of costs.
Mr Boaden, in his helpful outline of submissions, identified two main points. First, he contended, the existence of the costs agreement between Ms Pisanelli and her then solicitors, the appellants, made taxation irrelevant and he pointed in this regard to s.101(2) of the Act as containing an implication to that effect where, as here, the costs agreement speaks of payment for services rendered by the hour and not by reference to a practitioner remuneration order or a scale of costs of a court or tribunal.
Section 101 commences in this fashion:
“(1)Subject to this Division and Division 4, a costs agreement may be enforced in the same way as any other contract.
(2)To the extent that it provides for legal costs to be paid according to a practitioner remuneration order or scale of costs of a court or tribunal, a costs agreement is subject to assessment under Division 5."
Assessment is the more recent word used by statute to encompass what used to be called the taxation of costs. Division 5 provides for taxation of a solicitor's bill.
Now it is the fact that the costs agreement relied upon in this instance does not refer to a practitioner remuneration order or a scale of costs. The costs agreement (which is Exhibit MK1, in the early form, and, in the later form after introduction of the GST, Exhibit MK2 to the affidavit of Magda Kron sworn on 28 June 2001) states that liability for professional fees is expressly made conditional upon success, including acceptance of an offer of settlement. Professional fees, it is said there, will be calculated according to hourly rates, which "vary with the type of work and the experience of the lawyers involved". It is declared that the client had "already been advised of hourly fees by letter" and that "in any particular matter we may adjust our charges to account for skill, care, responsibility or urgency of the matter or for unwarranted time spent on the matter". As for billing arrangements, it is said in terms that if the client is successful "you will be sent a bill for your legal costs at the conclusion of the matter", and if the bill remains unpaid for 30 days, interest may be charged. It is said under the heading "Your rights" that "When we request payment for your service, we must provide you with a bill of costs" and, "except in accordance [with the Legal Practice Act] we cannot commence legal proceedings to recover unpaid costs from you unless a proper bill remains unpaid 30 days after you receive it". This was the agreement which the solicitors allege was signed by Ms Pisanelli (although, as I have already said, she now claims to dispute the signature).
It may be questioned whether the costs agreement I have just described is sufficiently certain in any event to be enforceable "in the same way as any other contract", which is the provision made by s.101(1). As at present advised (and we have not heard argument on it), I should have thought that s.101 had in mind a contract which was a good deal more specific as to the sums payable than the very vague form of agreement in use here. But however that may be, when the appellants delivered to Ms Pisanelli the bill of costs, which is Exhibit MK10 to the affidavit of Magda Kron sworn on 28 June 2001, the bill commenced with these words:
"TO our costs for professional services rendered since commencement on 15 February 2000 in connection with the above matter, in accordance with Scale D of the County Court Scale of Costs. ...."
That such a bill, costed in such a fashion, was put to the client seems to me to be fatal to the argument that taxation was inappropriate by reason of the costs agreement. If the costs agreement itself justified the delivery of such a bill, taxation was surely permitted by s.101(2), for the costs agreement must presumably then be taken to provide for payment according to a scale of costs (in as much as the bill itself appeared so to declare). If the costs agreement did not justify the delivery of such a bill, then the solicitors were not relying upon the costs agreement at all. Either way taxation was required under s.115, at the instance of Ms Pisanelli, before a proceeding could be commenced to recover the legal costs. That is at least in line with His Honour's conclusion, that taxation was necessary, and I think, with respect, that the Taxing Master was in error in rejecting Ms Pisanelli's application to tax because of the so-called costs agreement.
That brings into play s.115(3) upon which Mr Boaden's second argument turned. That subsection reads as follows:
"If an application is made under sub-section (1) -
(a)the assessment must take place without any money being paid into court; and
(b)the legal practitioner or firm must not commence any proceedings to recover the legal costs the subject of the bill of costs until the assessment is completed."
Mr Boaden contended that the application by summons filed on 28 June 2001 was not a proceeding to recover costs within the meaning of s.115(3), but merely a proceeding to enforce what he called the "fruits of litigation lien" which solicitors in the position of the appellants are said to have over the settlement sum which the litigation has produced through their efforts in acting for the plaintiff. The existence of that so-called lien, though miscalled, is well established by the cases. See Ex Parte Patience; Makinson v. The Minister[1]; Color Point Pty Ltd v. Markby’s Communication Group Pty Ltd[2], and Carew Counsel Pty Ltd v. French[3]. See also Worrell, (as trustee of the estate of Wedgewood) v. Power[4], a decision of the Full Federal Court.
[1](1940) 40 S.R. (NSW) 96 at 99 to 100.
[2](1998) 1516 FCA (27 November 1998, Weinberg, J., unreported).
[3][2002] 4 V.R. 172 at paras. 31-35.
[4](1993) 118 A.L.R. 237.
I agree with Mr Boaden that a proceeding designed merely to enforce such an equitable charge over the settlement sum might itself fall short of a proceeding to recover the costs. Here the summons sought an order that the amount in dispute be retained out of the settlement sum and paid into court, no doubt pending resolution of the dispute that was continuing over quantum of costs; and had the summons stopped there, I think that Mr Boaden's argument would have to be accepted. To that extent the summons was a proceeding not to recover the costs said to be owing, but merely to put in place a holding position so that the resolution of the continuing dispute between Ms Pisanelli and her former solicitors would not be rendered nugatory by the payment of the settlement sum directly to Ms Pisanelli and its dissipation by her. After all, Ms Pisanelli was made bankrupt on 8 October 2001.
But the summons did not stop there. It went further and sought an order in the alternative for payment of the sum so retained "to the applicant", that is to say, the present appellants. In that respect the summons was, I think, a proceeding to recover the sum for costs, albeit out of the settlement sum and in reliance upon the so-called "fruits of litigation lien". The judge so held and, with respect, I think that he was clearly right in relation to the alternative claim. In respect of the alternative claim, for payment to the appellants, taxation had to be completed according to s.115(3) before the proceeding (brought by summons) could be commenced.
It seems to me, however, that that did not justify the order for dismissal of the summons altogether. The appellants were making two claims in their summons, not one, and the first, the claim for retention of the sum in dispute out of the settlement sum and for payment of the sum so retained into court, did not fall foul of s.115(3) as I have attempted to explain. Accordingly, with respect, I think that his Honour ought to have made the first of the orders sought (for payment into court) or something to like effect, in order to establish a holding position. Of course, since the matter was determined in the County Court, the Court of Appeal, by its interlocutory order of 27 July 2001, has brought about just such a holding position but, as that ends with the determination of the appeal, I think that, if we were to allow the appeal today and set aside the order made below, we should ourselves make, by way of substitution, an order in not dissimilar terms to that made by the Court of Appeal in order to maintain the holding position while taxation takes place.
For the reasons already given, it seems to me that Ms Pisanelli is entitled to have the bill of costs delivered to her taxed, or, to use the modern term, assessed by the Taxing Master. Mr Boaden, I think, accepted as much in the course of argument. Ms Pisanelli, who addressed us herself and whose partner, Mr Kotantonis, was at her request permitted to address us on her behalf, still seeks taxation. That was her position on 2 July 2001 when she took out the summons for taxation and, as I understood what she told us this morning, it was still her position today. Thus, it seemed to me that a holding position while taxation took place would be acceptable to both sides.
Indeed, both sides were pressing us during argument to take whatever steps we could to save any further cost and expense in what has proved already to be unduly costly and time consuming for all parties and, accordingly, we considered making an order, by consent, under s.116 of the Legal Practice Act that the bill be taxed and making a further order, by consent, that upon completion of the taxation, such sum as was allowed on taxation for costs as claimed by the appellants and, if any, for the costs of the taxation, should be paid, with any interest thereon, by Mr McMonnies out of those moneys paid to him by the doctor and held by him in an interest-bearing account under cover of the order made by the Court of Appeal on 27 July. By means of such orders, I should have thought, the parties could have been saved any further attendance on this appeal and the matter could have reached finality by the quickest possible route.
At the conclusion of argument before lunch, we stood the matter down until 2.30 with a view to preparing the reasons which I have just read. When we re-entered court we sought the consent necessary for the making of the order for taxation under s.116; for it is a power committed by the Act to “the Supreme Court” and by that we understand is meant the Trial Division. While no doubt we could make the order by consent, that consent was not forthcoming. Ms Pisanelli was reluctant to consent to such a step and about that I say nothing by way of criticism; Ms Pisanelli is not a lawyer, she appears here in what are no doubt intimidating circumstances, to make such case as she can, and we understand that she feels herself not in a position to give the consent which was sought. So be it. In those circumstances, it seems to me that the best course is for us simply to adjourn the
further hearing of the appeal with a view to our making orders at a later stage as and when they become appropriate.
Taxation of the bill of costs is obviously the next step, if what I have so far said meets with the approval of the other members of the Court. In order to obtain taxation, it will be necessary now, as Ms Pisanelli's summons was dismissed by the Taxation Master, for the solicitors themselves to make application for an order to that effect, presumably under s.116 of the Legal Practice Act. I think that at this stage Mr Boaden sees no reason why that application could not be made. If that application is granted, taxation should prove possible of the bill of costs delivered some time ago by the solicitors to Ms Pisanelli. Upon completion of the taxation (assuming that taxation follows) it will be time enough for us to consider final orders in the disposition of the appeal. In the meantime, the holding position created by the Court of Appeal order made on 27 July 2001 will continue to run and Mr McMonnies will continue to hold the moneys paid to him by the doctor by way of settlement.
Thus, for these reasons, which should serve to record the stage now reached on the appeal, I think that the Court should adjourn the further hearing of the appeal. Given past events, I would adjourn it to a date to be fixed.
BUCHANAN, J.A.:
I agree with the course proposed by Phillips, J.A. and for the reasons he has stated.
CHERNOV, J.A.:
I also agree.
(Discussion ensued.)
PHILLIPS, J.A.:
The order of the Court is that the further hearing of this appeal is adjourned to Friday, 12 December 2003. The costs of today are reserved.
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