Russell v. Kyloe Pty Ltd & Anor
[2007] QDC 318
•23 November 2007
DISTRICT COURT OF QUEENSLAND
CITATION:
Russell v Kyloe Pty Ltd & Anor [2007] QDC 318
PARTIES:
STEVEN CHARLES RUSSELL
Plaintiff
AND
KYLOE PTY LTD
First Defendant
AND
KEVIN JAMES MCCANN
Second Defendant
FILE NO/S:
BD1047/07
DIVISION:
PROCEEDING:
Application
ORIGINATING COURT:
District Court, Brisbane
DELIVERED ON:
23 November 2007
DELIVERED AT:
Brisbane
HEARING DATE:
17 July 2007
JUDGE:
McGill DCJ
ORDER:
Application dismissed
CATCHWORDS:
LEGAL PRACTITIONERS – Solicitor and Client – costs – client agreement – scope of agreement – whether consistent with schedule to Act
Queensland Law Society Act 1952 s 48.
ASIC v Atlantic 3 Financial (Aust) Pty Ltd [2006] QCA 540 – cited.
ASIC v Atlantic 3 Financial (Aust) Pty Ltd [2006] QSC 152 – followed.
Casey v Quabba [2007] 1 Qd R 297 – cited.
Casey v Quabba [2005] QSC 356 – cited.
Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 – applied.
Dibb v Hopgood Ganim [2001] QDC 153 – cited.
Heraldv Worker Bee (Brisbane) Pty Ltd [2004] 2 Qd R 263 – cited.
Jezer Construction Group Pty Ltd v Conomos [2004] QSC 440 – distinguished.
Loftus v Roberts (1902) 18 TLR 532 – cited.
Meehan v Jones (1982) 149 CLR 571 – cited.
National Australia Bank Ltd v Clanford Pty Ltd [2002] QSC 361 – distinguished.
Queensland University of Technology v Project Construction (Aust) Pty Ltd [2003] 1 Qd R 259 – applied.COUNSEL:
C. A. Wilkins appeared for the plaintiff
S. J. Williams appeared for the defendants
SOLICITORS:
Russell & Company for the plaintiff
N. R. Barbi Solicitor for the defendants
This is an application for summary judgment under rule 292 in an action by a solicitor for legal costs. The plaintiff sued on a client agreement dated 20 May 2005. The defendants admit that they executed the client agreement, and that it contained the terms pleaded by the plaintiff, but allege that the client agreement is void under s 48F of the Queensland Law Society Act 1952 (“the Act”), on the ground that it did not comply with s 48 of that Act. If that is correct, the plaintiff is not entitled to recover in accordance with the client agreement, though the plaintiff is still entitled to claim remuneration for legal work done for the defendants pursuant to s 48I(1)(b) or (c) of the Act.
It is not disputed by the plaintiff that the effect of s 48F is to render the costs agreement void, as is clear on the authorities.[1] What matters is whether the agreement complies with s 48, not whether the solicitor has complied with that section.[2] There was no specific reliance, in support of this application, on two agreements pleaded, to pay particular amounts towards the costs; one of those requirements is disputed by the defendants. In order to understand the dispute, it is necessary to provide some background information.
[1]Casey v Quabba [2007] 1 Qd R 297; ASIC v Atlantic 3 Financial (Aust) Pty Ltd [2006] QCA 540.
[2]Heraldv Worker Bee (Brisbane) Pty Ltd [2004] 2 Qd R 263 at 266 per Fryberg J.
Background
By a letter dated 10 May 2005 the ACCC sought information from the defendants.[3] The defendants consulted the plaintiff, and on 20 May 2005 executed the client agreement on which the plaintiff sues. The agreement[4] provided in clause 1.1:
“The client retains the firm to render the legal services, which are:
To respond to the ACCC letter of 10 May 2005.
Such other services which are, in the opinion of the firm, reasonably necessary for that purpose or which are, in the opinion of the firm, incidental thereto.”
[3]Affidavit of McCann filed 11 July 2007 para 3
[4]Affidavit Hancock filed 29 June 2007 Exhibit RGH‑1.
The agreement identified the lawyers who will render the service, and the rates of charge of the various individuals identified, which were said to be net of GST, and it was said that the rates may be increased or decreased by the firm at its discretion from time to time, subject to notice of any change in the hourly rate being given to a client: clause 3.4. There was a reference to charges other than professional services, and to GST. Clause 6.1 provided:
“The firm estimates that the total of the professional fees and disbursements to discharge the retainer set out in clause 1 is $5,000, exclusive of GST. The GST payable on the supply and rendering of the firm’s professional fees should be added to this estimate.”
Clause 6.2 went on to say the firm was not bound by the estimate and that it was not a fixed quote.[5] Clause 7 provided that the client was required to deposit $5,000 with the firm’s trust account to be held on account of its professional fees and disbursements, and that the firm may require the client to deposit further sums in the future.
[5]See also Exhibit RGH‑1 pages 24-26.
The plaintiff provided advice in relation to the letter from the ACCC.[6] In June 2005 the defendants say that an account for $6,140.70 was rendered to the defendants in respect of this, and has been paid.[7] In about July 2006, the ACCC instituted proceedings against the defendants in the Federal Court.[8] The defendants defended those proceedings,[9] and the plaintiff provided legal services in connection with the defence of the proceeding, but no new client agreement was entered into, nor was there any express variation of the retainer under the existing client agreement. The amount ultimately billed by the plaintiff was well in excess of the estimate; the amount claimed in the action was $91,059.56,[10] and the statement of claim gave credit for partial payments in respect of memoranda of accounts totalling $149,736.65. The defence, among other things, alleged that the amount claimed by the plaintiff was excessive. There has been no assessment under the Act of the plaintiff’s costs, but that does not in itself prevent the defendants from disputing the claim on this ground in this proceeding.[11]
[6]A response was provided on 3 June 2005. Affidavit of McCann para 13.
[7]Affidavit of McCann para 7; affidavit of Hancock filed 29 June 2007 para 5.
[8]Affidavit of Hancock para 6(b).
[9]Which went to trial in February 2007; Affidavit of Mawson filed 29 June 2007 para 9.
[10]This included $2,883.38 which related to something else, and has since been paid: Affidavit of Mawson filed 29 June 2007 para 13.
[11]Dibb v Hopgood Ganim [2001] QDC 153 at [31] to [36].
Defendants’ arguments
In these circumstances, the defendants assert that the agreement failed to comply with s 48 in three respects: there was a failure to comply with subsection (2), in that the agreement entered into did not identify in clear, plain language the work that the practitioner was to perform other than in respect of the original advice given. Second, it was said that there had been a failure to comply in that the client agreement did not give an estimate of the total amount of fees and costs likely to be payable for the work, or a range of estimates and an explanation of significant variables that will affect the calculation of the amount, as required by clause 11 of the schedule; s 48(5) provides that the client agreement must not be inconsistent with the notice in the schedule, so presumably if the client agreement did not do what clause 11 said it would do, the client agreement did not comply with s 48 of the Act.
The defendant did acknowledge that other estimates had subsequently been given by email, but it was submitted that the requirement of s 48 and the schedule was that the estimate be included in the client agreement when it was entered into, and the requirement that the client agreement be entered into within a reasonable time of starting the work meant that it was not open to provide an estimate months or even years after the agreement had been entered into. It was also submitted that the first estimate of the legal costs of a trial of the proceeding in the Federal Court was not given until December 2006, which was not within a reasonable time of the commencement of the litigation.
Third, it was alleged there was a failure to comply with clause 18 of the schedule, which provides:
“If the work involves or is likely to involve litigation, this client agreement must include an explanation and estimate of the range of costs you may recover from another party if you are successful or you may be required to pay the other party if you are not successful.”
Clause 11 of the retainer provided in the following terms:
“11.1The client acknowledges that if he is not successful in the litigation or dispute the subject of this retainer, he may be ordered to pay another party’s fees and disbursements.
11.2The firm estimates that the total of the fees and disbursements which would be the subject of such an order would be between one-half and two-thirds of the firm’s total fees and disbursements charged to the client.
11.3The client also acknowledges that he may be ordered from time to time to pay another party’s costs of and incidental to interlocutory proceedings in the dispute or litigation; and that the client’s failure to provide documents and give prompt and accurate instructions to the firm in relation to the matter may result in such orders being made.”
In relation to this, it was submitted that it did not provide a meaningful estimate, because it provided a figure calculated by reference to something which was unknown and, on the face of the client agreement, unknowable at the time the client agreement was entered into.[12]
[12]This followed from the fact that under clause 6.2 the firm was expressly not bound by the estimate in the client agreement, from the provision in clause 3.1 that the firm would charge professional fees calculated at an hourly rate for the time spent by the lawyers on the provision of the legal services, and for other fees, costs and charges incurred or made by the firm under clause 4, and from the general nature of legal work.
Scope of the retainer
In relation to the first proposition, the plaintiff’s submission was that the defence of the proceeding was within the terms of the retainer, in that it was a provision of legal services incidental to the response to the ACCC’s letter of 10 May 2005, in the opinion of the plaintiff. The plaintiff has sworn that in his view the defence of the proceedings was incidental to responding to the letter.[13] It was submitted that it as not uncommon for one client agreement to cover a variety of work. In National Australia Bank Ltd v Clanford Pty Ltd [2002] QSC 361 there was a general retainer which operated as a master client agreement which was in very general terms, though obviously the terms of the agreement in that case were intended to apply generally to whatever work was subsequently done. In Jezer Construction Group Pty Ltd v Conomos [2004] QSC 440 there was said to be a retainer to do work involving “taking all steps as were reasonable and necessary to defend demands and proceedings against the applicants, to promote and maintain proceedings for the recovery of monies owing to the applicants and to carry out such further or other instructions as may be delivered by the applicants from time to time.”
[13]Affidavit of Russell filed 16 July 2007 para 4.
It seems to me, however, that the difficulty with this argument is that it depends on the generality of the particular retainer which was given in those cases. Obviously a retainer may be given in very general, or very specific, terms, and effect must be given to the terms used in a particular retainer. In the present case, at least on the face of it, the express retainer was quite specific. The plaintiff seeks to come within the terms of the express retainer only on the basis that defending legal proceedings brought 12 months later by the ACCC against the defendants is somehow “incidental” to the formulation of a response to a letter. The proceedings were not unconnected with the letter; the subject matter of the letter was also the subject matter of the proceedings, and one could say that there was at least this relationship between the proceedings and the response to the letter in May 2005, that the response was insufficient to persuade the ACCC not to take proceedings of the kind that were taken against the defendants. It does seem to me, however, that to describe the defence of those proceedings as being somehow incidental to assisting in the response to the letter is not consistent with my understanding of the ordinary use of that term.
The plaintiff relies on the proposition that under the retainer what was required was that the character of being “incidental” was to be satisfied according to the opinion of the plaintiff. If that meant that the plaintiff had an unfettered right to pronounce anything as incidental to the work expressly identified in the retainer, it seems to me that that would run into difficulties with the ordinary law of contract in relation to uncertainty.[14] At the very least, there would surely have to be an implied obligation on the plaintiff to act honestly in forming an opinion as to whether the work was incidental, and it must be at least arguable that the opinion of the plaintiff must be a reasonable one,[15] so that it would be open in the present case for the defendants to dispute the existence of the connection on the basis that there were not reasonable grounds for forming that opinion.
[14]Loftus v Roberts (1902) 18 TLR 532.
[15]See Meehan v Jones (1982) 149 CLR 571 at 578, 588-9.
But it seems to me that it is unnecessary to go beyond the statutory requirements in s 48(2)(a) that the client agreement must specify the work the practitioner or firm is to perform. In my opinion, a provision drafted in the present terms would not satisfy that requirement if on its true construction it meant that the capacity of the plaintiff to form an opinion as to the question of whether the work was incidental was unfettered, and arguably it would not be satisfied even if the plaintiff was required to form that opinion honestly, or on reasonable grounds. It seems to me that it must be at least arguable that the mere fact that whether the services are included in the retainer depends to some extent on the opinion of the plaintiff means that the work required to be done under the client agreement has not been “specified”.
The whole point of a legislative requirement like s 48(2) is to define specifically what it is that the solicitor is to do for the client, and it must be inconsistent with that objective to give the solicitor some independent discretion, not as to how those legal services are to be provided, but as to the scope of the legal services to be provided. At least this would be the case where the starting point is specific legal work. Of course, if the parties make an agreement which in terms provides that it applies to whatever legal work the client asked the solicitor to do, then that has been specified, but it seems to me that to interpret s 48(2) in a way which would enable the requirement of that subsection to be satisfied by a retainer which covered any legal work which in the solicitor’s opinion ought to be done for the client would not be to give a purposive construction to the legislation. In any event, it seems to me that such a proposition is at least arguable.
The test for an application under r 292 is that identified in Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 by Williams JA. Insofar as Chesterman J went further in Gray v Morris [2004] 2 Qd R 118, in my opinion that did not represent the opinion of the court, or a majority of the court in that decision.[16] It is clear from Salcedo, and Queensland University of Technology v Project Construction (Aust) Pty Ltd [2003] 1 Qd R 259, that it is not necessary to satisfy the GeneralSteel[17] test which is appropriate on an application to strike out a pleading, and that the question is whether there is a real as opposed to a fanciful prospect of success, and whether there is no need for a trial of the action.
[16]It seems to me that his Honour acknowledged this himself subsequently in Jessup v Lawyers Private Mortgages Ltd [2006] QSC 3.
[17]General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125.
It seems to me that in the present case the defendants must have some real prospect at a trial of succeeding in persuading the trial judge that the client agreement entered into in the present case did not cover the work subsequently done by the plaintiff in connection with the defence of the proceedings in the Federal Court, so that in those circumstances it is not open to the plaintiff to claim remuneration in respect of that work under the client agreement. It seems to me that strictly speaking this does not arise out of any breach of s 48(2) of the Act; the client agreement was valid and effectual so far as it related to the work which fell within it, but on this view of the matter it is simply not correct to say that the client agreement covers all of the work done, and in particular the work done in connection with the defence of the Federal Court proceeding. The position in relation to that work is simply that there was no applicable client agreement; s 48 was not complied with at all, and the plaintiff is confined to the alternative remedies available under s 48I referred to earlier.
Clause 11
In view of this conclusion, it is not necessary for me to say much more about the other grounds advanced by the defendant. As to the allegation that there was failure to comply with clause 11, I think it is correct to say that in the present case it is the first dot point of clause 11 which applies. There is at the present time no reason to doubt that the estimate given was a genuine estimate for the fees and costs likely to be payable for the work. The solicitor who gave the estimate swore that litigation was not in contemplation at that time,[18] and the fact that the estimate ultimately proved to be wrong does not mean that the estimate ceased to be an estimate, or that there was a failure to comply with the requirements of clause 11.[19]
[18]Affidavit of Hancock filed 29 June 2007 para 4.
[19]Jezer Constructions Group Pty Ltd v Conomos (supra); Casey v Quabba [2005] QSC 356 at [41];
The difficulty of course is that I take the view that the client agreement only applied to the work done in connection with the response to the letter.[20] In circumstances where litigation is not contemplated it would not be helpful or realistic to get an estimate which was based on the assumption that the costs ought to include an allowance for the defence of some possible future litigation not then in contemplation; indeed, I cannot imagine how any sort of sensible estimate of such costs could possibly be given. But this merely emphasises that it is unrealistic to treat this as a retainer extending to the defence of legal proceedings not then in contemplation by the parties.
[20]I take it from Mr Russell’s affidavit (filed 16 July 2007 para 3) that there were actually two responses to the letter, since he referred to a further response to the letter, as something separate from defending the proceedings commenced by the ACCC; it is not necessary to decide with the “further response” was within the terms of the retainer. See also Hancock para 6(a).
Clause 18
With regard to the third proposition, I doubt whether it is still arguable that the terms in which the client agreement in the present case purported to give an estimate of the costs that may be payable to another party in the event of litigation did not comply, in view of the similar clauses which were held to comply with clause 18 in ASIC v Atlantic 3 Financial (Aust) Pty Ltd [2006] QSC 152,[21] and in Jezer Construction Group Pty Ltd v Conomos (supra).[22]
[21]This aspect of the decision was not challenged on the appeal: [2006] QCA 540.
[22]The other limb of clause 18 was covered in essentially the same way by clause 3.10 of the client agreement.
Conclusion
In these circumstances, the application must fail and is dismissed. The particular matter on which the defendant succeeded was I think in substance raised by para 3 of the amended defence filed 11 July 2007, after the application was filed, and the application should not have been pursued beyond that point. It seems to me that the defendants did not raise the arguable defence in the original defence attached to the notice of intention to defend filed 23 May 2007, but it was really a matter for the plaintiff to show that the client agreement covered all the work done, and the plaintiff has failed to do that. Quantum was always in issue on the pleadings. The application did not turn on any affidavit material which may at a trial prove to be false. There is also the consideration that the allegation that the amount claimed by the plaintiff is excessive remains unresolved, although there were no submissions made to me specifically referring to this point. In these circumstances, the application probably should not have been made, and should not have been pursued once the defence was amended. Subject to further submissions, costs should follow the event, and I will order the plaintiff to pay the defendants’ costs of and incidental to the application.
0
9
1