Steicke v Pederick
[2017] SASC 98
•3 July 2017
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
STEICKE v PEDERICK & ANOR
[2017] SASC 98
Judgment of Judge Dart a Master of the Supreme Court
3 July 2017
PROFESSIONS AND TRADES - LAWYERS - DUTIES AND LIABILITIES - SOLICITOR AND CLIENT - RETAINER - CHALLENGING RETAINER
Applicant sought to set aside retainer on the basis that its terms were not fair and reasonable.
Held: retainer was fair and reasonable - taxation to proceed based on the terms of the retainer agreements.
Legal Practitioners Act 1981 s 42, referred to.
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; Brown & Ors v Talbot & Olivier (1993) 9 WAR 70; Clare v Joseph [1907] 2 KB 369; McNamara Business & Property Law v Kasmeridis & Anor (2007) 97 SASR 129; Steicke v Donaldson Walsh Lawyers [2010] SASC 188, considered.
STEICKE v PEDERICK & ANOR
[2017] SASC 98
This is an application for a taxation of costs pursuant to s 42 of the Legal Practitioners Act 1981 (“LPA”). The work performed by the respondent legal practitioner was carried out between 2008 and 2011. The significant amendments to the LPA, which came in to effect on 1 July 2014, have no application in respect of this taxation.
These reasons deal with some preliminary points raised by the applicant, who was a client of the respondent. The respondent acted for her in long-running Family Court proceedings and was one of a number of lawyers to do so. Due to the nature of the preliminary points sought to be agitated by the applicant, I directed that she file points of claim. The respondents subsequently filed points of defence. These reasons deal with the question of whether two particular written retainers should be rescinded or varied. The applicant asserts that the written retainers are not fair and reasonable.
The operative provision of the LPA is s 42, which at the relevant time provided as follows:
42—Costs
(1)On the application—
(a)of a person claiming to be entitled to legal costs; or
(b)of a person who is liable to pay, or who has paid, any legal costs,
the Supreme Court may tax and settle the bill for those costs.
(1a)The Supreme Court's power to tax and settle a bill of costs (but no other power of the Supreme Court under this section) may, subject to any rule, order or direction of the Court, be exercised by the Registrar of the Court.
(1b)Subject to the rules of the Supreme Court, an appeal lies to a judge against a decision of the Registrar pursuant to subsection (1a).
(2)Where an application has been made under subsection (1), the Supreme Court may—
(a)restrain a person claiming to be entitled to the costs from commencing an action for recovery of the costs; or
(b)stay any proceedings for recovery of the costs.
(3)The Court may, on taxation of a bill of costs under this section—
(a)order the refund of any amount overpaid; or
(b)where the proceedings have been instituted by the person seeking recovery of the costs—order payment of legal costs in accordance with the taxed bill.
(4)The Board may institute proceedings for the taxation of legal costs under this section on behalf of a person who is liable to pay, or has paid, the legal costs and must institute such proceedings if ordered to do so by the Tribunal.
(5)Any court in which proceedings for the recovery of legal costs have been instituted may order the plaintiff to apply to have the legal costs taxed in accordance with this section, and may adjourn the proceedings until the taxation has been completed.
(6)A legal practitioner may make an agreement in writing with a client for—
(a)payment of a specified amount by way of legal costs (which may—but need not—consist of a daily, hourly or other time-related rate for professional work carried out by the legal practitioner on the client's behalf); or
(b)payment of legal costs in accordance with a specified scale; or
(c)subject to any limitations imposed by the Society's professional conduct rules or the regulations—payment of a contingency fee to be calculated on a basis set out in the agreement on fulfilment of a condition stated in the agreement.
(7)The Supreme Court may, in proceedings under this section, rescind or vary an agreement under subsection (6) if it considers that any term of the agreement is not fair and reasonable.
There are two written retainers which fall within the provisions of sub-s (6) of s 42. The first of those is dated 10 April 2008 and the second is dated 15 February 2010. The Court’s jurisdiction to rescind or vary the retainers, provided in sub-s (7), is potentially enlivened.
The approach to be adopted in respect of the question of fair and reasonable
In the Full Court decision of McNamara Business & Property Law v Kasmeridis & Anor[1] Doyle CJ considered the approach to be adopted in respect of s 42(7) of the Act. He said as follows:[2]
The South Australian provision is expressed slightly differently from the English model and from other legislation. It requires the Court to consider not whether the agreement is fair and reasonable, but whether “any term of the agreement is not fair and reasonable”. In the present case the difference of expression is not material.
In that setting I consider that this Court should, as I have already said, follow the approach taken by the English cases, and the approach taken in other Australian jurisdictions under similar legislation. It is for the practitioner to show that the agreement is fair and reasonable, if the client raises a challenge on those grounds and those terms are to be applied in the manner indicated by Lord Esher in the passage set out above.
The factors to be taken into account when deciding whether an agreement is fair and reasonable will depend upon the circumstances of the case. It is neither practical nor desirable to try to set out a standard list of relevant matters. The relevant matters will vary according to the scope of the retainer; the terms of the agreement; the kind of legal work undertaken; the client’s knowledge and circumstances, and, no doubt, other circumstances.
However, the cases emphasise as a basic consideration the question of whether the client’s decision to agree to the terms of the costs agreement was a free and informed choice, the client having been given the advice that would give the client a fair understanding of the operation and effect of the costs agreement: see, for example, Brown v Talbot & Olivier (1993) 9 WAR 70 at 77; Law Society of NSW v Foreman (1994) 34 NSWLR 408 at 435-437 Mahoney JA.
This is not surprising, having regard to the foundation on which the Court’s inherent power over solicitors and costs agreements is based: see Clare v Joseph (above). The cases have emphasised the fiduciary nature of the solicitor and client relationship, and the importance of the solicitor dealing with a potential conflict between the solicitor’s interests and the solicitor’s duty to the client by making full disclosure to the client.
Although I do not think it helpful to attempt to state a standard list of relevant matters to be considered, some helpful guidance is to be found in the decision of Ipp J in Brown v Talbot & Olivier at 77-78 (dealing with the question of fairness) and at 80-81 (dealing with the question of reasonableness) and in the decision of Fryberg J in Re Morris Fletcher and Cross’ Bill of Costs [1997] 2 Qd R 228 at 243-244, where there is a particular focus on the costs agreement providing for time charging. However, it should be noted that in each case the legislation was different from the Act.
[1] (2007) 97 SASR 129.
[2] McNamara Business & Property Law v Kasmeridis & Anor (2007) 97 SASR 129 at [25]-[30].
As can be seen, much depends on the circumstance of a particular case and there is no necessarily standard consideration.
The supervision by courts of the basis on which a solicitor is entitled to charge for his/her services has a long history. In Clare v Joseph[3] Fletcher Moulton LJ said, when discussing the relevant provisions of the Attorneys and Solicitors Act 1870 (UK):
It is to be remarked in the first place that this is a purely enabling, and not a disabling, section, and the court would not, unless forced to do so, construe such a section so as to take away or alter powers already in existence, except indeed by extending them. Let us now consider the state of the law on this subject at the date of the coming into operation of the Act of 1870. At that date agreements between a solicitor and his client as to the terms on which the solicitor’s business was to be done were not necessarily unenforceable. They were, however, viewed with great jealousy by the courts, because they were agreements between a man and his legal adviser as to the terms of the latter’s remuneration, and there was so great an opportunity for the exercise of undue influence, that the courts were very slow to enforce such agreements where they were favourable to the solicitor unless they were satisfied that they were made under circumstances that precluded any suspicion of an improper attempt on the solicitor’s part to benefit himself at his client’s expense.
[3] [1907] 2 KB 369 at 376.
The statutory provision in s 42 of the LPA has the same objective in mind. That is, the statute provides the Court with the basis on which to supervise the arrangements entered into between solicitor and client to ensure that they are proper in all the circumstances.
In Brown & Ors v Talbot & Olivier[4] Ipp J was considering the relevant Western Australian statute. He was considering, first, the question of fairness in respect of a retainer. His Honour said as follows:[5]
[4] (1993) 9 WAR 70.
[5] Brown & Ors v Talbot & Olivier (1993) 9 WAR 70 at 77.
In my opinion, ordinarily, the material circumstances which might influence a client in deciding whether or not to enter into an agreement entitling his or her solicitors to depart from the scale, and which should expressly be disclosed to the client, include the following:
(a) The fact that the remuneration of solicitors was governed by statutory scales which limited the amount of solicitors’ and counsel’s fees which could be recovered, irrespective of the amount of time devoted by the solicitors to the proceedings: cf Jovetic v Stoddart & Co.
(b) The fact that the scales limited both the costs which the client could recover from the opposing party to the proceedings (if the client were to succeed in the case), and the costs recoverable from the client by the client’s solicitors: cf Jovetic v Stoddart & Co.
(c) The principles underlying the charging of fees under the scales, and also the basis of the proposed charging under the contemplated agreement.
(d) Estimates, if they could reasonably be made, of the approximate amount of the solicitors’ fees and counsel’s fees (as between solicitor and client) which would be recovered on taxation under those scales, and the approximate amount recoverable under those scales from the opposing party – if the client were to be successful: cf Jovetic v Stoddart & Co; Burgess v D’Alessandro & Associates (unreported, Supreme Court, WA, Library No 2278/91, 6 May 1992).
(e) An estimate, if that were reasonably possible, of the amount which the client would have to pay the solicitors under the proposed agreement if the litigation were to prove successful (and costs were to be recovered from the opposition) and, also, the amount which the client would have to pay if the litigation were to be unsuccessful: cf Jovetic v Stoddart & Co.
(f) Whether (if it were not reasonably possible to give estimates of the kind referred to in subpars (d) and (e) above) there was a real risk of the costs under proposed agreement being more – and significantly more, if that were the case – than under the appropriate scale.
The applicant had other solicitors acting for her in the Family Court proceedings prior to entering into a retainer with the respondents. The history of the litigation is described in an earlier judgment of this Court, Steicke v Donaldson Walsh Lawyers.[6]The applicant had solicitors acting for her both in Adelaide and Hong Kong in the Family Court proceedings, which had been running for a number of years before the applicant signed the first of the subject retainers.
[6] [2010] SASC 188.
The 2008 retainer
The 2008 retainer comprised three principal documents. The first was a letter from the respondents to the applicant dated 10 April 2008. The letter enclosed terms of engagement and a schedule of fees and documents. The applicant signed the 2008 letter on or about 15 April 2008, by which she affirmed that she had read and understood the retainer documents and acknowledged that the respondents had recommended she obtain independent legal advice as to their terms and effect.
In Australian Broadcasting Commission v Australasian Performing Right Association Ltd Gibbs J said: [7]
It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of anyone part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another.
Thus it is that the three separate documents together comprise the 2008 retainer. When considering whether any term of the agreement is not fair and reasonable, the documents must be considered as a whole.
[7] (1973) 129 CLR 99 at 109.
The question in respect of the 2008 retainer, and for that matter the 2010 retainer, is simply whether the terms are fair.
The principal complaints in respect of the 2008 retainer are set out in the following paragraphs of the Points of Claim:[8]
[8] Applicant’s Points of Claim filed on 28 July 2016 (FDN20).
23.The 10 April 2008 Letter also has terms to the following effect in the third section entitled “3. Fees based on time”:
23.1.Charges are based on time (one unit equal 6 minutes or part thereof);
and
23.2. Charges will differ at times from the Courts’ Scale method of charging, which is on a task by task basis.
24.The 2008 Terms Document also has terms to the following effect in the first section entitled “1. Fees”:
24.1. Fees for individual items of work shall be charged in minimum 6 minute units, at one tenth of the relevant hourly rate; and
24.2. The charge for an item of work shall be rounded up to the nearest 6 minute unit.
…
26.The terms referred to in paragraphs 23 and 24 above are inconsistent with, different from confusing and/or contrary to other terms that are referred to in paragraphs 18 to 22 inclusive above.
Particulars
26.1. The terms referred to in paragraphs 23 and 24 above purport to have a different effect in relation to the calculation of fees that may be charged than the terms referred to in paragraphs 18 to 22 above in that:
(A)The terms referred to in paragraphs 23 and 24 above purport to provide for a regime for calculating fees on the basis that:
(A)(1)A separate monetary charge will be made for each task whenever 2 or more tasks are performed together or consecutively;
(A)(2)The time taken to perform each separate task will be deemed to be in a minimum of 6 minutes;
(A)(3)The amount of time that will be multiplied by the applicable hourly rate in relation to each task will be calculated on the basis of units of 6 minutes.
(B)The terms referred to in paragraphs 18 to 22 above have the effect that:
(B)(1)When one task is performed, the actual time taken is used to calculate fees;
(B)(2)When 2 or more tasks are performed together or consecutively, the actual aggregate amount of time taken to perform all of the tasks is used to calculate fees.
…
31.In the premises there are terms in the 10 April 2008 Letter, the 2008 Terms Document and/or the 2008 Schedule of Fees that are not fair and reasonable within the meaning of section 42 of the Legal Practitioners Act (South Australia).
Particulars
31.1. There are terms that have meaning and/or effect that are inconsistent with, different from, confusing and/or contrary to other terms. Refer to paragraph 26 above.
31.2. The effect of the 10 April 2008 Letter, the 2008 Terms Document and the 2008 Schedule of Fees in relation to fees and disbursements that may be charged for the types of electronic communication referred to expressly in the 2008 Schedule of Fees is that:
(A)2 separate charges will be made for all time spent by Ms Pederick, a lawyer and/or a paralegal clerk in relation to:
(A)(1)Producing facsimile transmissions and emails on the one part and sending them; and
(A)(2)Receiving facsimile transmissions and emails on the one part and reading them;
(B)The 2008 Schedule of Fees document purports to state the effect of any agreement or agreements that Ms Pederick and/or Pederick Lawyers had with 3rd parties in relation to the basis upon which such 3rd parties charge for certain types of electronic communication; and
(C)The monetary amount specified in the 2008 Schedule of Fees for the amounts agreed with and/or charged by 3rd parties:
(C)(1)Grossly overstates the amount and/or charge basis of such 3rd parties;
(C)(2)Misrepresents the charge basis of such 3rd parties substantially by overstating their charge basis.
(C)(3)Ms Steicke is unable to provide further particulars of the allegations in the above subparagraphs until Ms Pederick discloses documents showing the charge basis of the relevant 3rd parties.
The first complaint of the applicant is that it is said there is inconsistency or confusion between the basis of charging set out in the 2008 letter and the 2008 terms document. The respondent clearly indicated to the applicant the hourly rate she proposed to charge for carrying out legal work on her behalf. The terms document makes clear that the hourly rate was to be measured in units of 6 minutes. Such a method of charging has been common since last century. The Supreme Court Scale itself has, for a number of years, provided for the charging by solicitors for their work in 6 minute units. Such an approach cannot be regarded as controversial or unfair.
What the applicant asserts is there is a difference between the outcome when two or more tasks are performed at the same time and the outcome when one task is performed using the actual time taken. The first thing to say is that it is necessary to remember the purpose of the jurisdiction given to the Court by s 42(7) is to ensure that a solicitor does not take advantage of a client and charge excessively for work. The applicant does not point to any unfairness in the way that the respondent actually performed work and charged for it. The complaint appears to be more theoretical than practical.
The first respondent’s contention is there is in fact no inconsistency. She points out that a practitioner has two obligations in respect of a retainer. The first is to advise the client that the basis on which it is proposed to charge differs from the applicable Court scale and to explain that difference. The other obligation is to explain fully the manner in which charging is to be made. They are different obligations. I am not satisfied there is any unfairness in the terms of the retainer or the way it is structured. Further, if a retainer could be interpreted in a way that acted fairly, but also in a way that might be unfair to a client, it can reasonably be expected on a taxation of costs that a Court would insist on fees being charged in a manner that was fair to the litigant. That provides appropriate protection to the client.
The second complaint in respect of the first retainer relates to the charging for disbursements or out of pocket expenses. The applicant says there is a potential for over-charging and double-handling. The issue relates to the basis on which charging was to be made for sending and receiving facsimile transmissions and emails and reading those documents. The retainer also talks about costs incurred with third parties in relation to electronic communications.
Again, the applicant does not point to any unfairness in the way that the respondent actually charged for the work carried out. Again, it seems more theoretical than real. What the retainer does is make clear that there will be a charge for professional work involved. That might include, for example, a solicitor perusing a letter received electronically etc. Separately, there will be a process fee for sending and receiving information electronically. They are separate items and there is no proper basis to say there is any over-charging or double-handling mandated by the terms of the retainer.
The fixed process charges set out in the retainer are less than the equivalent charges in the Supreme Court Scale. That suggests no unfairness or improper conduct by the solicitor in charging on the basis of the retainer.
In my opinion, the 2008 retainer is orthodox in its terms and there is no proper basis on which to assert any unfairness. I decline to vary the retainer.
The 2010 retainer
The second retainer was entered into in 2010. The principal reason for it appears to be that the first respondent carried on a legal practice until December 2009 in her own name and, from January 2010, the second respondent, an incorporated body, carried on the practice.
The 2010 retainer is comprised of a letter dated 15 February 2010, a terms document and a schedule of fees document. The 2010 retainer was intended to be a substitute for the earlier retainer.
The complaints of the applicant in respect of the 2010 retainer are summarised in paragraph 59 of the Point of Claim, which provides as follows:
59.In the premises there are terms in the 15 February 2010 Letter, the 2010 Terms Document and/or the 2010 Schedule of Fees that are not fair and reasonable within the meaning of section 42 of the Legal Practitioners Act (South Australia).
Particulars
59.1. There are terms that have meaning and/or effect that are inconsistent with, different from, confusing and/or contrary to other terms. Refer to paragraph 51 above.
59.2. The effect of the 15 February 2010 Letter, the 2010 Terms Document and/or the 2020 Schedule of Fees in relation to fees and disbursements that will be charged for the types of electronic communication referred to expressly in the 2010 Schedule of Fees is that:
(A)2 separate charges will be made for all time spent by Ms Pederick, a lawyer and/or a paralegal clerk in relation to:
(A)(1)Producing facsimile transmissions and emails on the one part and sending them; and
(A)(2)Receiving facsimile transmissions and emails on the one part and reading them;
(B)The 2010 Schedule of Fees document purports to state the effect of any agreement or agreements that Ms Pederick and/or Pederick Lawyers had with 3rd parties in relation to the basis upon which such 3rd parties charge for certain types of electronic communication; and
(C)The monetary amount specific in the 2010 Schedule of Fees for the amounts agreed with and/or charged by 3rd parties:
(C)(1)Grossly overstates the amount and/or charge basis of such 3rd parties;
(C)(2)Misrepresents the charge basis of such 3rd parties substantially by overstating their charge basis.
(C)(3)Ms Steicke is unable to provide further particulars of the allegations in the above subparagraphs until Ms Pederick and/or Pederick Lawyers disclose documents showing the charge basis of the relevant 3rd parties.
The complaints in respect of the second retainer are much the same as in respect of the first retainer. There is a complaint in respect of what is said to be an inconsistency between the letter and the terms document. For the reasons set out above, I do not think there is any such inconsistency and, again, there is no complaint from the applicant about the manner in which the charging was made by the respondent. As mentioned above, any potential unfairness, if it arose because of inconsistency between documents, can be dealt with during the taxation.
The 2010 retainer does introduce an additional method of charging. Rather than all work being charged purely on a time basis, there is also a fixed cost element for the production of letters and documents. That is, charging for a document by the size of the document rather than the time taken to produce the document. The proposal provides for costing based on folios. That is no longer a method found in the Supreme Court Scale, however it is historically the way solicitors charged for the preparation of documents. The applicant says that the terms are unclear. Going back to the touchstone, there appears to be nothing unfair or unreasonable about the introduction of a fixed fee approach to the charging for documents. The explanation in the retainer is clear.
The respondent submits that in fact the change was of benefit to the applicant because the fixed fee amount to be charged for the preparation of documents was less than the amount in the Supreme Court Scale. In the usual course, it was also likely to be less than if the production of standard documents was charged for on a time basis. I accept that submission. That undercuts the idea that this particular term of the retainer is unfair.
The applicant also complains about the charging for out of pocket expenses and disbursements. Again, I find there is no unfairness in the way that the respondent proposed to charge, or in the explanation given in the documents.
The applicant also contended that the respondent owed a fiduciary or other duty to explain the material differences between the 2010 and 2008 retainers. In my opinion, given the reasonably clear way in which the basis for charging was set out in the 2010 retainer documents, if such a duty exists, it was complied with.
In the circumstances, there is no basis pursuant to s 42(7) to set aside either the 2008 or the 2010 retainer. The taxation is to proceed based on the retainers executed by the applicant.
Failure to attend
The applicant was unrepresented on the day the hearing proceeded in this matter. When the matter was listed, the argument was listed at a time suitable for her solicitor and counsel. Their retainer apparently came to an end about six weeks before the argument. The applicant sent an email to the Court on the eve of the argument with an affidavit of her mother, which was in effect an application for an adjournment. The affidavit was difficult to follow, as it seemed to refer to other actions.
The applicant has changed solicitors in this matter on quite a number of occasions.
The basis of the application for adjournment was that the applicant was overseas and unable to attend. It could have been made prior to the applicant going overseas. It appears from the evidence that planning for the trip had been going on for about a month prior to the hearing. The matter was listed for legal argument. It was not necessary for the applicant to attend in person. There was no affidavit put forward by the applicant as to the circumstances by which she became unrepresented or why she had not arranged alternative representation. The Court has never had any explanation as to why there has been frequent changes of solicitors. This taxation commenced in 2014 and needs to be brought to a conclusion. In my view, there was no proper basis to adjourn the matter and it proceeded in the absence of the applicant.
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