Solomon Brothers (a firm) v WILLIAMS - [2002] WADC 48

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: SOLOMON BROTHERS (a firm) -v- WILLIAMS & ORS [2002] WADC 48

CORAM: DEPUTY REGISTRAR HEWITT

HEARD: 25 FEBRUARY 2002

DELIVERED : 12 MARCH 2002

FILE NO/S: CIV 1217 of 2001

BETWEEN: SOLOMON BROTHERS (a firm) (ACN 008 667 650)
Plaintiff
AND
RUTH EILEEN WILLIAMS
GALE CURTIS WILLIAMS
MARK CURTIS WILLIAMS
Defendants

Catchwords:

Practice - Western Australia - Application to set aside default judgment - Entitlement of solicitor to his fees - Costs agreements

Legislation:

Legal Practitioners Act 1893

Result:

Judgment set aside

Representation:

Counsel:

Plaintiff: Mr D H Solomon
Defendants: Mr J R B Ley

Solicitors:

Plaintiff: Solomon Brothers
Defendants: O'Connor Partners

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Benecke v National Australia Bank (1993) 35 NSWLR 110
Bowen v Stott [2001] WASC 219
Eng Mee Yong v Letchumanan [1980] AC 331
Evans v Bartlam [1937] AC 473
Mann v Carnell [1999] HCA 66
Miller v M (Murray) Franconi & Associates [2000] WASC 175
Palmer v Prince [1980] WAR 61
Rapoff v Rudder; unreported; SCt of WA; Library No 8353; 6 July 1990
Rawson v Samuel (1841) Cr & Ph 161
Rolland v Bank of Western Australia Ltd, unreported; FCt SCt of WA; Library No 980498; 3 September 1998
Silverstone Holding Pty Ltd v Edward [2000] WASC 290
Tay Bok Choon v Tahansan Sdn Bhd [1987] 1 WLR 413
Weng Ge Lou v Christianos, unreported; FCt SCt of SA; 1050 of 1980; 10 April 1990

DEPUTY REGISTRAR HEWITT: The matter for determination is the defendants' application to set aside a default judgment which was entered against the defendants on 11 September 2001. That default judgment was entered due to the failure of the defendants to file a defence within the time stipulated by the Rules. The reason for that failure has been explained by the solicitor representing the defendants in the action to be due to the fact that documents served upon him by the plaintiff became intermingled with other documents and misfiled as a consequence of which the defence was not filed in time and a default judgment was entered.
Prior to these events the defendants' solicitor had been put on notice of the fact that strict compliance with the requirements of the Rules would be required and additionally there is testimony by the solicitor handling the matter on behalf of the plaintiff that he attempted to ring the defendants' solicitor, and left a message for him to return the call without response.
I am well able to understand how such an administrative mishap may happen in a solicitor's office and I am satisfied that a sufficient explanation has been given for the failure to file a defence and I now turn to consider the merits of the proposed defences.
The plaintiffs are solicitors and the defendants their former clients for whom they acted in a number of actions in the District Court and in the Supreme Court including appeals within both of those courts and in particular an appeal from a decision of a Judge of this court to the Full Court of the Supreme Court.
In order to succeed it is necessary for the defendants to establish that they have a defence on the merits. I will therefore deal with the proposed defences which have been advanced.
The first proposed defence is that the solicitors were negligent in conducting proceedings on the part of their clients as a consequence of which they have a cross claim which could be pleaded as an equitable set off in defence of the claim for fees.
As far as I can see the entire basis of this proposition is the assertion by the solicitor acting for the defendants that he has reviewed the files and has formed the opinion that the solicitors were negligent in their conduct of the proceedings and in giving advice in regard to certain security documents.
To my mind it is not irrelevant that solicitor was the party whose neglect allowed these default judgments to be entered. There are no factual materials supplied upon which I could reach any conclusion as to whether or not the solicitors were negligent in the conduct of the case on behalf of their clients. True it is they suffered a number of reverses in the conduct of the various proceedings but nonetheless they have had some successes and in the absence of the specific evidence necessary to support a proposition of negligence I am not satisfied that the bald assertion by the solicitor representing the defendants that in his view negligence was present is sufficient to demonstrate that proposition to any standard at all. Accordingly insofar as the defendants rely upon that proposition it does not in my view establish a sufficient ground for setting aside the default judgment.
The next proposition is that the solicitors acted in the face of a conflict of interests in a manner which adversely affected their clients. That proposal related to a Supreme Court action which had been commenced against the first and second named of the present defendants by Westfarmers Dalgety Limited. The plaintiff in that action was seeking to enforce various security documents which had been executed by the first and second named defendants and the defence which was filed by the solicitors in answer to that case included a proposition that Westfarmers Dalgety Limited had failed to advise the first and second named defendants of the need to obtain independent legal advice concerning the various security documents and other related documents which they proposed to enter into.
Shortly after that defence was filed a reply was lodged alleging that legal advice had in fact been received and on further checking the solicitors became aware of the fact that the necessary advice had been sought and supplied by their firm on an earlier occasion by a solicitor other than the solicitor handling the case in question. The solicitors thereupon notified the clients of the potential of a conflict of interest. It is alleged that the failure of the solicitors to properly appreciate the situation at an earlier stage led to damage being suffered by the clients in those proceedings.
Whilst on the facts as I have recounted them one can imagine some dislocation which was the result of these events it is difficult to accept that significant loss flowed by virtue of them and there is nothing in the way of evidence which would allow me to draw any confident conclusion that compensible damage was suffered by the first and second named defendants as a consequence of the failure of the solicitors to appreciate their earlier role in the relevant transaction. Therefore insofar as the defendants raise as a potential defence a cross claim capable of operating as an equitable set off based upon the conflict of interest issue I consider there is no proper basis upon which I could reach a conclusion that these matters set out a potential defence.
The final matter which has been raised relates to the nature of the plaintiff's entitlement to claim. Paragraph 5 of the statement of claim is couched in the following terms:
"5By agreement made between the plaintiff and the defendants in or about July 1998 (the 'Retainer'), the parties agreed, inter alia:
5.1the plaintiff was retained by the defendants to provide legal professional services to the defendants with respect to matters arising out of a dispute between the defendants on the one hand and Geoffrey Ormond Grainger and Joan Harrington Grainger (together the 'Graingers') on the other hand relating to a property then owned by the Graingers in Western Australia and comprising Kent Locations 1658 and 1659 near Jerramungup (the 'Services') ;
5.2the defendants would pay the plaintiff for the provision of the Services pursuant to accounts to be rendered from time to time.
PARTICULARS
AThe Retainer was party in writing, partly oral, partly implied.
BIn so far it was in writing, it included a letter from the plaintiff to the first-named and second-named defendants dated 28 July 1998 in which the plaintiff agreed to provide the Services for its professional fees.
CIn so far as it was oral, the Retainer was constituted by discussions by telephone and in person between on the one hand the plaintiff represented by Brett Dingli, Valeria Totino and Mark Blundell, and on the other hand by each of the defendants. Such discussions took place on and after July 1998 in the course of the defendants' ongoing instructions to the plaintiff.
DIn so far as it was implied, the retainer was implied from the plaintiff having acted for, and then continuing to act for the first-named and second-named defendants in other proceedings, namely Supreme Court proceeding CIV 1646 of 1994 with respect to which the plaintiff and the first- and second-named defendants entered into a written costs agreement dated 28 August 1997. Pursuant to that costs agreement, the plaintiff rendered accounts to the first- and second-named defendants for the plaintiff's professional legal services from time to time at the rates set out in the costs agreement and which arrangement was ongoing in June 1998, continuing until the conclusion of that matter in October 1998."
Prima facie the entitlement of a solicitor engaged in litigation to fees for his services is in accordance with determinations by the Costs Committee appointed under the provisions of the Legal Practitioners Act. There is however provision for a solicitor and client to enter into an agreement to provide an alternative basis for remuneration and in the event that such an agreement is entered into the solicitor is entitled to charge according to that agreement in lieu of the relevant scale (certain exceptions exist in regard to particular kinds of litigation). Section 59 of the Legal Practitioners Act establishes the basis upon which a costs agreement may be created and subsection 1 of that section is in the following terms:
"A practitioner may make a written agreement with any client of that practitioner respecting the amount and manner of payment for the whole or any part or parts of any past or future services, fees, charges, or disbursements in respect of the business done or to be done by such practitioner, either by a gross sum or otherwise howsoever."
Insofar as the retainer pleaded in par 5 might be said to be a costs agreement in my view it clearly does not comply with the requirements of the section which are imperative in requiring such an agreement to be in written form. In the present case the agreement between these parties is partly in writing, partly oral, and partly implied. It is therefore not possible for that agreement to be construed as a costs agreement under the terms of the Legal Practitioners Act.
It is also clear that the agreement contained a basis of charge under the terms of which the solicitor calculated the amounts due by the client and rendered accounts from time to time during the course of the litigation and other matters for which the solicitors were retained.
That is not the end of the matter however because it has been argued by the solicitors that they do not rely on the agreement being a costs agreement within the meaning of the Legal Practitioners Act but simply a retainer. The argument is that there is no evidence at all presented by the defendants to indicate that the charges which have been levied exceed those which would have been payable if they had been calculated pursuant to the Costs Committee determination. In my view it is not necessary for the defendants to demonstrate they have been overcharged (although they may have been as is discussed later). It is sufficient to show that they have been charged costs calculated in a way which does not accord with the statutory scheme governing solicitors fees in order to raise a triable issue. Furthermore it appears from a letter dated 19 February 2001 exhibited to the affidavit of Mark Curtis Williams sworn on 3 January 2001 that the charges levied by the solicitors to their clients included charges of $300 per hour for a partner. Under the relevant determinations of the Costs Committee certain hourly rates are used as a basis to calculate maximum charges for certain tasks. The maximum hourly rate used by the Committee in making those calculations is $270 per hour. The general thrust of the Costs Committee determination has been that the scales should be reflective of the general practice within the legal community to make hourly charges. It appears to me that if the solicitors were charging at hourly rates which differ from those used by the Costs Committee that there would almost inevitably be a discrepancy between the account rendered by the solicitors and that which would properly be recoverable from the client under the scale. The maximum which a solicitor would be entitled to charge a client would have to be determined by the amount of time spent by that solicitor and the maximum hourly rate permitted by the Costs Committee scales. Potentially at least the costs rendered by these solicitors exceeded that amount. It is impossible to quantify the effect that the difference between the maximum permissible hourly rate and the hourly rate charged by the solicitors might have had on the information before me and it could be considerable or it could be of little moment. Suffice it to say that I regard this as a triable issue which goes to the root of the plaintiff's claim against the defendants and entitles the defendants to a trial.
There is however a further point and that relates to the claim against the third named defendant. The third named defendant was not a party to all of the proceedings in which the solicitors acted and there were proceedings in the Supreme Court in which only the first and second named defendants were parties.
The solicitors appear to have rendered accounts without distinguishing the litigation in which the relevant costs were incurred. I have also received an indication that part of the costs related to conveyancing matters which again solely concerned the first and second named defendants. Having carefully read the terms of the agreement upon which the plaintiff sues I am quite unable to see any basis upon which the solicitors were ever entitled to render an account which would be payable by the third named defendant in relation to work undertaken in litigation for which he was not a party. Furthermore the accounts are not addressed to him and therefore do not satisfy the prerequisite required under the Legal Practitioners Act before a solicitor can sue for his fees.
I do not have all the accounts upon which the plaintiff sues before me and I can only conjecture as to the manner in which they have been drawn up but it is clear they charged fees for all of the work being undertaken by the solicitors for the Williams family (including the third named defendant) without any attempt to separate between the liability of the individuals for various work which had been performed. Therefore insofar as the solicitors have obtained a judgment against the third named defendant it appears that he has a clear defence in that he has been charged for work which was not undertaken for him and for which he was not responsible.
The next matter concerns the practice of the plaintiff to issue monthly accounts. Although contested by the defendant my view of the law is that unless he has entered a costs agreement with his client which so provides prima facie a solicitor's retainer is an entire contract and his entitlement to payment only arises when the retainer is complete (see Quick on Costs 3.1150 and 3.1160 and the cases there cited).
Interim bills in litigation which is difficult or protracted may be permissible and a solicitor may be able to tender an interim bill at an appropriate time (see Quick on Costs, par 3.1220 and the cases there cited). Generally an interim bill, if one is permitted at all, may be delivered when a distinct portion of the litigation is completed.
In the present case the solicitors simply sent monthly lump sum accounts to their client. In my view that raises the issue of whether as a matter of law they were entitled to do so, whether the client was obliged to pay, and whether the solicitor was entitled to charge interest on the overdue account, which they did in this case. It might be said that even if individual interim accounts were not separately enforceable upon the solicitors ceasing to act they would be entitled to take proceedings for recovery of the aggregate of the various fees comprised in those interim accounts. That might well be so however included in the judgment in this case is a charge for interest calculated from the date of the various accounts. If the clients were not obliged to pay those accounts when they were rendered but only when the solicitor ceased to act then the judgments entered would be for amounts in excess of the obligations of the defendants to pay and would therefore be liable to be set aside.
For these reasons I have concluded:
(a)The failure to file a defence within the time required has been adequately explained;
(b)The defendants have shown defences on the merits in respect of the plaintiff's claim.
and I shall set aside the judgments entered.