Shillington v Harries
[2013] NSWSC 1202
•21 August 2013
Supreme Court
New South Wales
Medium Neutral Citation: Shillington v Harries [2013] NSWSC 1202 Hearing dates: 15 and 28 March 2013 Decision date: 21 August 2013 Before: Latham J Decision: (1) The costs of the first plaintiff and the second plaintiff in these proceedings be paid from the fund held by them on trust pursuant to the orders made by the Family Court of Australia in matter number (P)SYC C5110/2008 on 11 March 2011, 23 November 2011 and 30 November 2011 ("the trust fund").
(2) Richard Harries reimburse to the trust fund the amount paid under order (3) above.
(3) The determination of the costs assessor of 12 June and 25 August 2012 be quashed.
Catchwords: SUMMONS - summons seeking declaration - plaintiffs are trustees of trust to which defendant is beneficiary - whether beneficiary is "client" of trustee for purposes of Legal Profession Act 2004 - whether beneficiary is "third party payer" of trustee for purposes of Legal Profession Act 2004 - nature of beneficiary's obligation to pay costs of trustee is equitable not legal - distinction between "legal obligation" to pay and "liability to pay" costs - defendant not a "client" for purposes of Legal Profession Act 2004 - defendant not a "third party payer" for purposes of Legal Profession Act 2004 Legislation Cited: Conveyancing Act 1919
Legal Profession Act 1987
Legal Profession Act 2004
Legal Profession Act 2007 (Qld)
Parliamentary Contributory Superannuation Act 1971Cases Cited: Amos v Ian K Fry & Co. [2010] QCA 131
Balkin v Peck (1998) 43 NSWLR 706
Boyce v McIntyre [2009] NSWCA 185
Claudio Grizonic v Suzanne Ranken Suttor & Ors
Dawn Wade v Suzanne Ranken Suttor [2001] NSWSC 471
Griffiths v The Trustees of the Parliamentary Contributory Superannuation Fund [2012] NSWCA 231
Hardoon v Belilios [1901] AC 118
IW v City of Perth [1997] HCA 30; (1997) 191 CLR 1
Legal Services Commissioner v Wright [2010] QCA 321
Norrie v NSW Registrar of Births, Deaths and Marriages [2013] NSWCA 145Category: Principal judgment Parties: Michael Shillington (1st Plaintiff)
Michael Crowley (2nd Plaintiff)
Richard John Harries (Defendant)Representation: Counsel
M Castle (Plaintiffs)C Bolger (Defendant)
Solicitors
Hicksons (Plaintiffs)Lee Dalton & Associates (Defendant)
File Number(s): 2012/00291023-1
Judgment
The plaintiffs in this matter, Michael Shillington (the first plaintiff) and Michael Crowley (the second plaintiff), are trustees pursuant to a Family Court appointment in respect of the sale of two rural properties in NSW. Mr Shillington is a solicitor and Mr Crowley is an accountant.
The defendant, Richard John Harries, is the respondent husband to Family Court proceedings commenced by his former wife. The defendant was the owner, together with his two sisters, of the two subject properties. The defendant instructed the firm Lee Dalton and Associates to act for him in relation to the family law proceedings.
The first plaintiff's firm, Whiteley, Ironside and Shillington, carried out the legal work associated with the performance of the plaintiffs' obligations under the terms of the trust.
Following the sale of the properties, the plaintiffs informed the defendant's solicitors on 1 November 2011 that the proceeds of sale would not be distributed pending a resolution of a dispute concerning the trustees' costs and clarification of the correct interpretation of the Court's orders. The defendant had previously entered into a contract to purchase a farming property in Queensland and was pressing the plaintiffs to distribute the proceeds of sale so that he could complete the settlement. The defendant instructed his solicitor to advise the plaintiffs that they would be held personally liable for any damages arising out of a delay in settlement.
On 22 November 2011, the plaintiffs instructed a firm of solicitors, Hicksons Lawyers, to act for them in Family Court proceedings brought by the defendant to enforce distribution of the funds and to have the plaintiffs removed as trustees, among other proposed remedies.
On 23 November 2011 orders were made in the Family Court clarifying the extent of the respective interests in the properties and directing the distribution of the proceeds of sale, but for $150,000.00 which was to be retained by the plaintiffs pending further orders. Any further application by a party to these proceedings was to be brought by 29 November 2011.
When the matter was returned to the Family Court on 30 November, these orders were continued, subject to any further application by 17 January 2012. No further applications were made.
On 9 February 2012, the defendant filed an application for an assessment of costs against the plaintiffs, ostensibly on the basis that the defendant was a "client". The plaintiffs objected to the application on the basis that the defendant lacked standing, in that he was neither a "client" nor a "third party". A costs assessor appointed to deal with the application sought further submissions from the defendant. The defendant's submissions of 2 May 2012 claimed that he was a "third party payer".
In June 2012 the costs assessor determined that the defendant was a third party payer and that an assessment of the costs of the legal services provided by Mr Shillington's firm and by Hicksons Lawyers could be made. The costs assessor accepted that there was no jurisdiction to assess costs incurred as a result of the provision of services by the second plaintiff, which were accountancy services. The assessment was withheld pending proceedings in this Court.
The summons filed on 18 September 2012 by the plaintiffs sought a declaration that the defendant is not a "client" or a "third party payer" pursuant to the Legal Profession Act 2004 (the Act) with respect to legal services carried out by the first plaintiff's firm and Hicksons Lawyers. That summons was amended at the hearing to add proposed declarations (3, 4 and 5) to the effect that the costs of the services provided by the second plaintiff are not legal costs and that the defendant is not a client or a third party payer in respect of them. The defendant maintains that these additional declarations are unnecessary. In any event, they are not in dispute.
In order to appreciate whether the defendant may be characterised as a client or a third party payer, it is necessary to have regard to the history of the legislation and to the fact that the Act was the response to a proposal for a national scheme.
The History of the Legal Profession Act 2004
The Legal Profession Act 1987 did not define "client", although s 199(4) of that Act provided that for the purposes of an application for an assessment of costs, a "client" included any person who was a party to a costs agreement relating to legal services, any person, being a lessee under a lease, who was given a bill of costs concerning legal services relating to the preparation of a lease, and any person, being a mortgagor under a mortgage, who was given a bill of costs concerning legal services relating to the preparation of the mortgage.
The Legal Profession Act 2004 commenced on 1 October 2005. It was based upon Draft Model Provisions arising out of the Legal Profession Model Laws Project instigated by the Standing Committee of State and Commonwealth Attorneys-General (SCAG). The Act defined "client" in s 4 to mean :-
A person to or for whom legal services are provided, and includes a person who is legally liable to pay for the services even if the services are not provided to or for that person.
Section 350 extended the definition of client for the purposes of determining who may apply for an assessment of costs. That section relevantly provided :-
1) A client who is given a bill may apply to the Manager, Costs Assessment for an assessment of the whole or any part of legal costs.
(2) ................................................................
(3) .................................................................
(4) ................................................................
(5) ................................................................
(6) In this section:
"client" includes the following:
(a) a person who has been given a bill by a law practice (other than a person who is acting merely in the capacity of agent or a similar capacity, for example, a courier),
(b) a person who has paid legal costs,
(c) a person (other than a person who was given a bill) who is liable to pay legal costs,
(d) an executor, administrator or assignee of a person referred to in paragraph (a), (b) or (c),
(e) a trustee of the estate of a person referred to in paragraph (a), (b) or (c),
(f) a person interested in any property out of which a trustee, executor or administrator who is liable to pay legal costs has paid, or is entitled to pay, those costs.
Thus, as at 2005, the defendant would have been entitled to apply for an assessment of costs on the basis that he came within s 350(6)(f).
In 2006, the Act was amended following the release of a further Draft Bill by SCAG. The Draft Bill introduced, and the NSW Act adopted, the term "third party payer" and restricted the definition of "client" to a person to whom or for whom legal services are or have been provided (ss 4 and 349A). The words "and includes a person who is legally liable to pay for the services even if the services are not provided to or for that person" omitted from the definition of "client" in s 4 were effectively re-instated in a more comprehensive form in the new provision, s 302A, which defined "third party payer".
Section 302A of the 2006 Act provides :-
(1) For the purposes of this Part:
(a) a person is a "third party payer", in relation to a client of a law practice, if the person is not the client and:
(i) is under a legal obligation to pay all or any part of the legal costs for legal services provided to the client, or
(ii) being under that obligation, has already paid all or a part of those legal costs, and
(b) a third party payer is an "associated third party payer" if the legal obligation referred to in paragraph (a) is owed to the law practice, whether or not it is also owed to the client or another person, and
(c) a third party payer is a "non-associated third party payer" if the legal obligation referred to in paragraph (a) is owed to the client or another person but not the law practice.
(2) The legal obligation referred to in subsection (1) can arise by or under contract or legislation or otherwise.
(3) A law practice that retains another law practice on behalf of a client is not on that account a third party payer in relation to that client.
In addition, s 350 of the Act was amended to reflect the introduction of the concept of "third party payer". In lieu of the previous provision, s 350 now relevantly provides :-
1) A client may apply to the Manager, Costs Assessment for an assessment of the whole or any part of legal costs.
(2) A third party payer may apply to a costs assessor for an assessment of the whole or any part of legal costs payable by the third party payer.
(3) ..................................................................
(3A) ................................................................
(4) ..................................................................
(a) ...........or
(b) ........................................... ......................
(5) ..................................................................
(a) ..........................or
(b) ..................................................................
(6) If the third party payer is a non-associated third party payer, the law practice must provide the third party payer, on the written request of the third party payer, with sufficient information to allow the third party payer to consider making, and if thought fit to make, an application for a costs assessment under this section.
(7) If there is an associated third party payer for a client of a law practice:
(a) nothing in this section prevents:
(i) the client from making one or more applications for assessment under this section in relation to costs for which the client is solely liable, and
(ii) the associated third party payer from making one or more applications for assessment under this section in relation to costs for which the associated third party payer is solely liable,
and those applications may be made by them at the same time or at different times and may be dealt with jointly or separately, and
(b) the client or the associated third party payer:
(i) may participate in the costs assessment process where the other of them makes an application for assessment under this section in relation to costs for which they are both liable, and
(ii) is taken to be a party to the assessment and is bound by the assessment, and
(c) the law practice:
(i) must participate in the costs assessment process where an application is made under this section by the associated third party payer in the same way as the practice must participate in the process where an application is made under this section by a client, and
(ii) is taken to be a party to the assessment and is bound by the assessment.
(8) If there is a non-associated third party payer for a client of a law practice:
(a) nothing in this section prevents:
(i) the client from making one or more applications for assessment under this section in relation to costs for which the client is liable, and
(ii) the non-associated third party payer from making one or more applications for assessment under this section in relation to costs for which the non-associated third party payer is liable,
and those applications may be made by them at the same time or at different times but must be dealt with separately, and
(b) the client:
(i) may participate in the costs assessment process where the non-associated third party payer makes an application under this section in relation to the legal costs for which the non-associated third party payer is liable, and
(ii) is taken to be a party to the assessment and is bound by the assessment, and
(c) the law practice:
(i) must participate in the costs assessment process, and
(ii) is taken to be a party to the assessment, and
(d) despite any other provision of this Division, the assessment of the costs payable by the non-associated third party payer does not affect the amount of legal costs payable by the client to the law practice.
(9) In this section:
"client" includes the following:
(a) an executor or administrator of a client,
(b) a trustee of the estate of a client.
"third party payer" includes the following:
(a) an executor or administrator of a third party payer,
(b) a trustee of the estate of a third party payer.
The omission of s 350(6)(f) in the 2004 Act from the 2006 Act arguably evinces an intention to exclude beneficiaries from making applications for assessment of costs. Unless an applicant is either a client or a person who is under a legal obligation to pay legal costs (by the operation of contract, legislation or otherwise) or an executor, administrator or trustee of either of those persons, there is no entitlement to an assessment on the face of the legislation.
Every Australian jurisdiction, except South Australia, has adopted the concept of "third party payer", consistent with the Legal Profession Model Laws.
Is the Defendant a Client ?
The plaintiffs were appointed as trustees by the Family Court pursuant to s 66G of the Conveyancing Act 1919. By the terms of the orders of 11 March 2011, the properties were vested in the plaintiffs for the purposes of sale and for the discharge of various charges and indemnities from the proceeds of sale. The first plaintiff's firm, Whitely, Ironside & Shillington, carried out all necessary legal work associated with those responsibilities. Invoices were issued on that firm's letterhead to the trustees on 29 September, 27 October, 16 November and 7 December 2011.
The plaintiffs submit that the legal services carried out by the first plaintiff's firm arose entirely out of the plaintiffs' obligations as trustees pursuant to the Family Court orders. They were not services provided to or for the defendant, they were services provided to or for the plaintiffs as trustees of the trust. The defendant did not request the provision of legal services, or personally retain the first plaintiff's firm, or give instructions to that firm. The defendant retained his own solicitors, Lee Dalton and Associates. Moreover, the defendant acknowledged within his application for a costs assessment that Whitely, Ironside and Shillington were the solicitors for the plaintiffs.
Similarly, the defendant acknowledged in the application that he had "no retainer with Hicksons Lawyers". The application asserts that the plaintiffs "unilaterally changed firms [from Whitely, Ironside and Shillington] to that of Hicksons Lawyers", yet this statement seemingly fails to appreciate that the engagement of Hicksons Lawyers by the plaintiffs was necessitated by the proceedings brought by the defendant on 23 November 2011. Be that as it may, the defendant cannot and did not claim that he is a client of Hicksons Lawyers.
The defendant's argument is that the Act is beneficial legislation designed to protect clients and the general public. It is submitted that Part 3.2 "Costs disclosure and assessment" in particular ought be interpreted with that purpose in mind.
Further, the defendant submits that the definition of "client" does not exclude beneficiaries from the costs assessment scheme and that the change in the definition from the 2004 Act was an attempt to broaden the class of persons to whom Division 11 of Part 3.2 headed "Costs assessment" applies.
The defendant contends that the definition of "client" for the purposes of Division 11 Part 3.2 of the Act is sufficiently broad to encompass beneficiaries, in that the legal services obtained by the plaintiffs as trustees are ultimately for the benefit of, or in respect of the trust which is held for the beneficiaries, of which the defendant is one. The trustees have both legal and fiduciary obligations to the beneficiaries, which oblige them to act on behalf of the beneficiaries. It is submitted that a significant consideration is the fact that ultimately, the cost of the legal services are indirectly borne by the beneficiaries, in so far as the legal costs are paid out of the funds held in trust. In those respects, it is said that the defendant is a person "for whom legal services are or have been provided".
Accepting for present purposes that the legislation is beneficial, it is nonetheless important to bear in mind that a "fair, large and liberal" (see IW v City of Perth [1997] HCA 30; (1997) 191 CLR 1 at 12 per Brennan CJ and McHugh J, 39 per Gummow J) interpretation of beneficial legislation :-
is not a passport to an "unreasonable or unnatural" construction of the statutory language. The essential question is the meaning of the relevant words used by Parliament: Victims Compensation Fund v Brown [2003] HCA 54; 201 ALR 260, at [33], per Heydon J (with whom McHugh ACJ, Gummow, Kirby and Hayne JJ agreed).
Norrie v NSW Registrar of Births, Deaths and Marriages [2013] NSWCA 145 at [264] per Sackville AJA.
Meagher JA in Griffiths v The Trustees of the Parliamentary Contributory Superannuation Fund [2012] NSWCA 231, when dealing with the interpretation of a beneficial provision of the Parliamentary Contributory Superannuation Act 1971, said (McColl JA and Campbell JA agreeing) :-
10The function of a court, when construing a statute, is to give effect to the will of Parliament as expressed in the law. That task must begin with a consideration of the relevant text and have regard to its context. That "context" includes not only other provisions of the same statute but also the existing state of the law, other statutes in pari materia, and any mischief which it can be discerned, by those and other legitimate means, the provision was intended to remedy: CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; 187 CLR 384 at 408; Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at [69]; Network Ten Pty Ltd v TCN Channel Nine Pty Ltd [2004] HCA 14; 218 CLR 273 at [10]-[11]; Northern Territory of Australia v Collins [2008] HCA 49; 235 CLR 619 at [99]; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) [2009] HCA 41; 239 CLR 27 at [47]; Saeed v Minister for Immigration & Citizenship [2010] HCA 23; 241 CLR 252 at [31]-[34]. However, historical considerations and extrinsic materials cannot be relied upon to displace the clear meaning of the text. That remains so even if the secondary material suggests that, through oversight or inadvertence, the intention of the Parliament has not been translated into the text of the law: Re Bolton; Ex parte Beane [1987] HCA 12; 162 CLR 514 at 518; Newcastle City Council at 113; Nominal Defendant v GLG Australia Pty Ltd [2006] HCA 11; 228 CLR 529 at [22]; Northern Territory of Australia v Collins at [99]; Alcan (NT) Alumina at [47]; Saeed v Minister for Immigration & Citizenship at [31]-34]; Harrison v Melhem [2008] NSWCA 67; 72 NSWLR 380 at [12], [172], [191], [192].
In my view, the clear meaning of the text of the legislation, in particular ss 4 and 349A, do not permit the defendant to be characterised as a "client" of Whitely, Ironside & Shillington or of Hicksons Lawyers. The legal services that were provided by Whitely, Ironside & Shillington and by Hicksons Lawyers were provided to the plaintiffs pursuant to the statutory trust. They were not provided to the defendant and they were not provided for the defendant.
I do not accept the proposition implicit in the defendant's submissions that the plaintiffs engaged either firm on behalf of the beneficiaries. The primary obligation on the plaintiffs under the trust was the obligation to deal with the trust property for the benefit of the beneficiaries. The engagement of both firms of solicitors by the plaintiffs was an essential step in carrying out that obligation. However, the beneficiaries played no part in retaining those firms or in providing instructions to them.
Whilst the criteria "obligation to pay" is central to the definition of "third party payer", it also underpins the definition of "client". It is clear that, prior to the introduction of s 302A, "client" was premised upon a legal liability to pay for legal services, either because the services were provided to or for that person, or for some other reason. The defendant was not legally liable for the legal costs incurred by the plaintiffs as trustees. No invoices issued to him and no proceedings for the recovery of costs, as a debt owing to the legal firms, could be taken against him.
Is the Defendant a Third Party Payer ?
As I have already noted, the touchstone of the definition of "third party payer" is a legal obligation to pay all or part of the legal costs incurred by the client. The plaintiffs maintain that the legal obligation to pay the costs of Whiteley, Ironside and Shillington and of Hicksons Lawyers fell on the trustees and remains there. In the absence of any legal obligation on the defendant to pay any of those costs, it is submitted that he cannot come within the definition of "third party payer" or "associated third party payer" or "non associated third party payer."
The defendant submits that the beneficiaries of the trust are, at the very least, "non associated third party payers" because they owe a legal obligation to the trustees (the clients) to pay the legal costs. This argument is premised on the fact that the legal costs are payable from the proceeds of sale held on trust for the beneficiaries.
The argument goes further, by way of reliance upon the fact that the relevant "legal obligation" may be created by the operation of contract, legislation or otherwise (s 302A(2)). The defendant ultimately submits that, because he, as a beneficiary, effectively indemnifies the plaintiffs against any loss arising out of the expenditure of costs legitimately incurred in the administration of the trust, his legal obligation to pay those costs is recognised by the words "or otherwise" : see Claudio Grizonic v Suzanne Ranken Suttor & Ors. ; Dawn Wade v Suzanne Ranken Suttor [2001] NSWSC 471 at [56] to [58].
There is, in my view, a relevant distinction between a legal obligation, as that term is used in the Act, and an equitable obligation arising out of the indemnification by the beneficiaries of a trust with respect to the reasonably incurred expenses of the trustees. In Hardoon v Belilios [1901] AC 118, Lord Linley explored the basis of such an indemnity in the following terms :-
... the plainest principles of justice require that the cestui que trust who gets all the benefit of the property should bear its burden unless he can show some good reason why his trustee should bear them himself. The obligation is equitable and not legal, and the legal decisions negativing it, unless there is some contract or custom imposing the obligation, are wholly irrelevant and beside the mark. (italics not in original)
See also Balkin v Peck (1998) 43 NSWLR 706 at 711 - 712.
I am not persuaded by the defendant's submission that "otherwise" is capable of comprehending other than legal obligations. To adopt such a construction would seem to me to ignore the context within which the term appears, in particular, the deliberate omission from the Act in 2006 of an express provision recognising the right of a beneficiary to apply for an assessment of legal costs paid out of the assets of a trust.
Furthermore, the beneficiaries have not indemnified the trustees in respect of legal costs incurred by the trust, in circumstances where the Family Court orders provided that the costs of the trustees were to be met from the proceeds of sale and an amount of $150,000.00 was quarantined from the proceeds of sale for that purpose. Any right to an indemnity that may have existed is not enforceable unless the trust funds are insufficient to indemnify the trustees : Hardoon v Belilios ; Balkin v Peck
To the extent that the defendant relies upon Ipp JA (MacFarlan JA and Hoeben J agreeing) in Boyce v McIntyre [2009] NSWCA 185 at [22], his Honour was merely observing (correctly) that :-
.......... the introduction in 2006 of the non-associated third party payer provisions in the Legal Profession Act in 2006 can be seen as being for the purpose of consumer protection. In particular, the introduced provisions afford protection to persons who agree, in effect, to indemnify other parties (such as lessors and mortgagees) in respect of legal costs for services rendered to those other parties.
This passage ought be understood against the background of that case. It was not in issue that the respondent was a non-associated third party payer. At [19], Ipp JA commented that :-
The point to be noticed about a "non-associated third party payer" is that such a person, while being under legal obligation to pay "legal costs" for legal services provided to the client, owes no legal obligation to the law practice that provided the legal services.
(italics not in original)
In Boyce v McIntyre, the respondent had contracted under a sublease to pay the legal costs of the lessor. The lessor had entered into a costs agreement with the applicants' firm. The respondent was therefore under a legal obligation to pay the legal costs of the client. It is in that context that Ipp JA referred to an "effective indemnity".
Here, there is no legal obligation on the part of the defendant to pay the trustees' legal costs. The Family Court orders did not impose an obligation on the defendant or the other beneficiaries to pay the legal costs of the trustees. The fact that the legal costs are payable out of the monies held in trust does not create a legal obligation in the beneficiaries to pay those costs.
A consideration of decisions in other jurisdictions where the model legislation applies reinforces the conclusion that the defendant is not a third party payer or any subsidiary of that category. The following cases discuss the meaning of "third party payer" for the purposes of an application for assessment of legal costs.
In Amos v Ian K Fry & Co. [2010] QCA 131, Edward and Leonard Amos had been appointed executors and trustees of their late father's estate. They were, together with their sister, residual beneficiaries of that estate. The brothers fell into dispute, which ultimately resulted in the removal of Edward as executor and trustee of the estate, together with an undertaking that he would not commence any further proceedings without leave of the court. Edward broke that undertaking by commencing proceedings in relation to the costs associated with the property.
Leonard brought proceedings to restrain his brother from commencing or continuing proceedings with respect to the property. Douglas J made orders in favour of Leonard, together with three orders as to costs, namely that Edward was to pay to Leonard the costs of the administration of the estate arising out of vexatious correspondence, that Edward was to pay Leonard's costs incidental to the court proceedings and Leonard's solicitor was authorised to deduct those costs from Edward's share of the estate, and a further order allowing the deduction of costs relating to the sale of the property by Leonard's solicitor, Ian K Fry and Company, from Edward's share of the estate.
Edward commenced fresh proceedings against the solicitor for the assessment of all the invoices issued by that solicitor in the administration of the estate. Lyons J dismissed those proceedings. Edward Amos appealed. Edward Amos contended that he had a legal obligation to pay the costs as a result of the orders of Douglas J and by those orders, he became a third-party payer. This was said to be because his share of his father's estate was not distributed to him but went to pay the trustees' solicitor's costs.
Leonard Amos sought to permanently stay the appeal. That application was heard by White JA who held that Lyons J was correct to dismiss the proceedings on the basis that Edward Amos was not a third party payer because he had no obligation to pay the costs relating to the administration of the estate (as distinct from the obligation he had to pay the costs the subject of the court orders). It was noted that the solicitor could not recover those costs from Edward Amos as a beneficiary.
White JA had regard to the terms of the statute, in particular the definition of "third party payer" in s 301 of the Legal Profession Act 2007 (Qld) (in the same terms as s 302A of the New South Wales Act) and determined that Edward Amos was not legally liable to pay the respondent solicitor's costs. In particular, his status as a beneficiary was not altered by the orders of the court previously made. White JA found that Edward Amos had no standing to bring the proceedings.
Edward Amos sought leave to appeal to the High Court. On 22 September 2010 Hayden and Bell JJ refused leave in the following terms :-
White JA dismissed the appeal on the ground that the order sought by the applicant was sought against the solicitor who had charged the legal expenses ; the correct defendant was the executor, not the solicitor. Hence the applicant had no standing to bring the proceedings. There were no prospects of success in the application.
In Legal Services Commissioner v Wright [2010] QCA 321, the Legal Services Commissioner appealed a refusal to declare that a person referred to in the proceedings as Ms A was a client or a third-party payer under the Legal Profession Act 2007 (Qld).
As a result of proceedings taken in the District Court with respect to the sale of property, jointly owned by Mr A and Ms A, orders were made, including that Ms Wright, solicitor, would act for Mr A in the sale of the property. Further, it was ordered that Mr A and Ms A would ensure that all costs, commissions and expenses of the sale, the amount required to discharge the mortgage, and all outstanding rates and charges be paid from the proceeds of sale. Relevantly for present purposes, there was an order that Mr A and Ms A cause the balance of the proceeds of sale to be divided 75% to Ms A and 25% to Mr A by way of payment into the trust account of a firm of solicitors and into the trust account of D M Wright and Associates Solicitors.
Ms A sought an itemised bill of the costs from D M Wright and Associates on the basis that she was a third-party payer. The solicitor declined on the basis that she was not a third-party payer.
In the Court of Appeal, Holmes, White and McMurdo JJA found that Ms A was a third-party payer on the basis that the court order imposed upon Mr A and Ms A jointly an obligation to pay the costs. McMurdo JA (Holmes J and White JA agreeing on this aspect) held at [31] :-
The obligation of Ms A to cause the proceeds of sale to be paid in various ways according to the order, was enforceable against her. .... the legal obligation to cause the proceeds of sale to be applied in accordance with the order had its basis and thereby its enforceability primarily from the force of the order itself, as well as its contractual force. It was thereby an obligation enforceable not only by a money claim, but also by proceedings to compel compliance with the Court's order.
In the course of McMurdo JA's judgment (White JA agreeing), the distinction between a "legal obligation" to pay costs and a "liability to pay" costs was reinforced. McMurdo JA said at [27] and [28] :-
Unambiguously, s 301 requires the existence of a legal obligation to pay the costs. As the judgments in [earlier cases] specifically recognised, a person might have been "liable to pay" the costs in the relevant sense whilst not being under a legal obligation to pay them. .... what must be considered now are the terms of the present statute which in my view cannot be construed, in its requirement for a legal obligation to pay the costs, as including a case where there is no such obligation.
.... there are likely to be many cases where the burden of a lawyer's bill will fall to a substantial extent upon someone other than the client and who therefore has more than an academic interest in having the costs assessed. But where the line is to be drawn, in defining who apart from the client should be entitled to an assessment, has been decided by the Parliament in unambiguous terms : it is according to the existence or otherwise of a legal obligation to pay the costs.
McMurdo JA went on to note that the decision of Amos was correctly decided. White JA also confirmed that the analysis in Amos was premised upon the fact that the applicant was seeking to have the whole of the trustees' costs assessed, not that part of the costs which he was legally obliged to pay by virtue of the court orders.
Huntingdale Village Pty Ltd v Mallesons Stephen Jacques [2013] WASC 48 concerned an application for summary dismissal of proceedings brought by the plaintiff companies seeking to have themselves declared third-party payers. The application was refused, simply on the basis that the defendant had not established that there was no real question to be tried with the requisite degree of certainty. In dismissing the application, Le Miere J referred to the West Australian case of Andrew Koh Nominees v Receivers & Managers of the Baleum Joint Venture [2007] WASCA 152, a decision which turned upon differently worded legislation which required a finding of "liability to pay". His Honour declined to consider whether the existence of an indemnity arising out of the loan documents was equivalent to a legal obligation to pay costs. In those circumstances, this decision is of little assistance.
In summary, the defendant was not under any legal obligation to pay the costs relating to the administration of the trust. The defendant does not contend that any part of the orders made by the Family Court imposed upon him an obligation to pay the legal costs of the trustees. The defendant is not a third-party payer or non associated third-party payer.
I make the following declarations :-
(1) That for the purposes of the Legal Profession Act 2004 Richard Harries is not a client in respect of the work referred to in the Application by Client for Assessment of Costs filed 9 February 2012 Assessment Number 2012/42817 performed by Michael Shillington, Whitely Ironside and Shillington, or Hicksons.
(2) That for the purposes of the Legal Profession Act 2004 Richard Harries is not a third-party payer in respect of the work referred to in the Application by Client for Assessment of Costs filed 9 February 2012 Assessment Number 2012/42817 performed by Michael Shillington, Whitely Ironside and Shillington, or Hicksons.
I make the following orders :-
(1) That the costs of the first plaintiff and the second plaintiff in these proceedings be paid from the fund held by them on trust pursuant to the orders made by the Family Court of Australia in matter number (P)SYC C5110/2008 on 11 March 2011, 23 November 2011 and 30 November 2011 ("the trust fund").
(2) That Richard Harries reimburse to the trust fund the amount paid under order (3) above.
(3) That the determination of the costs assessor of 12 June and 25 August 2012 be quashed.
Decision last updated: 05 September 2013
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