Swaab v Sayed
[2013] NSWSC 887
•01 July 2013
Supreme Court
New South Wales
Medium Neutral Citation: Swaab v Sayed [2013] NSWSC 887 Hearing dates: 1 July 2013 Decision date: 01 July 2013 Jurisdiction: Equity Division Before: Kunc J Decision: Declaration granted
Catchwords: LEGAL PRACTITIONERS - costs - whether costs agreement accepted by conduct - declaration agreement created equitable charge Legislation Cited: Legal Profession Act 2004 (NSW) Cases Cited: Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Category: Principal judgment Parties: Plaintiffs: Fredrick Swaab and 6 others Representation: Counsel:
Mr L. Livingston
Solicitors:
Swaab Attorneys for the plaintiffs
File Number(s): 2013/64071 Publication restriction: No
EX TEMPORE Judgment
Summary
The plaintiffs ("Swaab") are a firm of solicitors. The defendant ("Mr Sayed") was once their client. Swaab seek declarations that they have the benefit of an equitable charge over Mr Sayed's property to secure fees and other costs which he owes him. They are entitled to that relief.
Notice to Mr Sayed
There was no appearance today for Mr Sayed, whose name was called outside Court at the start of this morning's hearing.
I am satisfied that Mr Sayed had notice of today's hearing by reason of correspondence which Swaab sent to him on 15 May 2013 to a facsimile number and email address, both of which on the evidence belonged to Mr Sayed.
The facts
The National Australia Bank (NAB) commenced proceedings for possession of the land contained in certificate title folio identifier 3/1017140, known as xxxxxxxx Woonona in the State of New South Wales (the "Land") which was owned by Mr and Mrs Sayed.
In November 2011, Mr Sayed approached Swaab for legal assistance in relation to NAB's possession proceedings.
On 7 November 2011, Swaab e-mailed to Mr Sayed a "Client Pack" which included a document entitled "our General Terms of Business" (the "Terms").
The relevant parts of the Terms are:
The Legal Profession Act (NSW) 2004 (the Act) requires us make [sic] various disclosures including disclosing the terms upon which we provide our services. The following general terms, when read together with our engagement letter (which sets out the scope and estimated cost of the work you require us to perform), will constitute our offer to provide you with legal services and our offer for you to enter into a costs agreement with us.
...
2. Acceptance of engagement
When you receive our engagement letter, you may enter into a costs agreement with us orally or in writing or by signing and returning the engagement letter to us. If you do not provide us with your written objection to our offer to provide you with legal services and continue to instruct us, we will assume that the terms of our offer are accepted and we will provide our services on these terms and those in the engagement letter. Upon acceptance you agree to pay for our services on these terms.
...
12. Caveat.
If costs are outstanding to the firm by you, you grant us an equitable interest in any real property (to the extent it is owned by you) which entitles the firm to lodge a caveat over that real property to secure the repayment of the sum of those outstanding costs, any interest charged in accordance with these terms (or interest otherwise payable under law) and any costs incurred when seeking to recover those costs and interest, and you also grant us a mortgage or a charge over any real property to the extent it is owned by you to secure the recovery of those costs and interest.
On 10 November 2011 Swaab sent their engagement letter (the "Letter") to Mr Sayed. The Letter included these provisions:
This letter should be read in conjunction with our "General Terms of Business" which were ... provided to you with our email of 7 November 2011. This letter and our General Terms of Business constitute our disclosure pursuant to the Legal Profession Act 2004 and our offer to provide you with legal services and our offer for you to enter into a costs agreement with us.
...
9. Acceptance of our offer to provide legal services and terms
Whilst as noted in our General Terms of Business, you accept our offer to provide legal services and enter into a costs agreement with us by continuing to instruct us, we ask you to sign and return a copy of this letter to confirm your acceptance of our offer and terms.
...
Acceptance
I accept the terms set out in your General Terms of Business (copy of which I have received) and the above terms.
Bilal Sayed
Date:"
Swaab never received an executed copy of the Letter from Mr Sayed.
Between 7 November 2011 and 30 July 2012 Swaab performed legal work for Mr Sayed and rendered invoices. Mr Sayed made some payments to Swaab. On more than one occasion during that period he was reminded, in writing, that Swaab's services were being provided in accordance with the Terms.
On 29 January 2013 Swaab commenced proceedings against Mr Sayed by statement of claim in the Local Court to recover fees which they alleged were owing.
On 5 February 2013 Swaab lodged a caveat over the land (the "Caveat"). The nature of the estate or interest claimed in the Land in the Caveat was described as "equitable interest" by virtue of two instruments specified, namely the Terms and the Letter. The facts recited in the Caveat said to give rise to the caveatable interest were "pursuant to the instruments entered into by the caveator and registered proprietor, the registered proprietor granted the caveator an equitable interest in the charge over the Torrens Title in the event of unpaid costs to the caveator. This event occurred".
On 13 February 2013 Mr Sayed filed a defence in the Local Court proceedings which included these denials:
2. The defendant denies that he entered into a formal agreement as the plaintiff states, further the plaintiff has not provided a signed copy of the agreement when asked to provide better & further particulars.
The defendant relies on the plaintiffs engagement letter paragraph (9) and the Legal Profession Act 2004 Part 3.2 section 304 (2A) (c) by where the plaintiff stipulates that a signature is required to confirm the acceptance of the offer and terms.
3. The defendant does not dispute that the plaintiff performed legal work during 7th November 2012 to 30th July 2013, but disputes he is bound to the terms of the agreement.
Mr Sayed also caused a lapsing notice to be issued in relation to the Caveat.
By summons filed on 1 March 2013, Swaab commenced the present proceedings seeking orders for the extension of the Caveat and final relief in the nature of declarations concerning the equitable charge to which Swaab said they were entitled in relation to their unpaid fees and other costs.
On 6 March 2013 (in the absence of Mr Sayed, but in circumstances where the Court was satisfied that steps had been taken to bring the proceedings to his notice) Justice Nicholas made orders, inter alia, extending the Caveat until further order and providing for the proceedings to continue by way of pleadings.
On 12 March 2013 Swaab filed their statement of claim in these proceedings.
Mr Sayed has not filed a defence to the statement of claim.
NAB has obtained an order for possession of the Land. Orders were made in the Court of Appeal on 18 March 2013 for the possession order to be stayed conditional upon a notice of appeal being filed no later than 20 March 2013. There is no evidence before me whether that was done. Accordingly, I do not know whether or not NAB's order for possession continues to be stayed or not.
Mr Sayed remains indebted to Swaab in respect of unpaid fees, disbursements and interest in the sum of $46,847.05.
I am informed by Mr L. Livingston of Counsel, who appeared for Swaab, that it is likely that the Local Court proceedings will now not be pressed. Swaab are considering whether they will have their fees assessed and thereby ultimately obtain a certificate of determination which, on filing, will have the effect of a judgment against Mr Sayed (see s 368(5) Legal Profession Act 2004 (NSW) (the "Act")).
Mr Sayed is bound by the Terms and Letter
It is necessary for the Court to consider the two defences apparently sought to be raised by Mr Sayed to the present claim by reference to his defence in the Local Court proceedings.
The first defence appears to suggest that no costs agreement arose between himself and Swaab because paragraph 9 of the Letter invited Mr Sayed to return a signed copy, which he never did. Mr Sayed refers to section 304(2A)(c) of the Act. This provides:
(2) For the purposes of subsection (1) (c), the client may:
(a) accept, in writing or by other conduct, a written offer that complies with subsection (2A) to enter into an agreement with the law practice that this Part is to apply to the matter, or
(b) notify the law practice in writing that the client requires this Part to apply to the matter.
(2A) An offer referred to in subsection (2) (a) must clearly state:
(a) that it is an offer to enter into an agreement that this Part is to apply to the matter, and
(b) that the client may accept it in writing or by other conduct, and
(c) the type of conduct that will constitute acceptance.
That defence must fail. It is clear that for a costs agreement to arise between Swaab and Mr Sayed in accordance with the documents provided by Swaab to Mr Sayed, returning a signed copy of the Letter was only one way in which that could be done. So much is in fact made clear by s 304(2A)(c) of the Act.
Mr Sayed's second defence is to dispute that he is bound at all to the terms of the costs agreement. I disagree.
As contemplated by s 304(2A)(c) of the Act, Clause 2 of the Terms specifies how the engagement of Swaab could be accepted. While it is perhaps not as clear as it might otherwise be, in my view on its proper construction clause 2 of the Terms is to be understood as providing for acceptance of the engagement to be evidenced by, inter alia, instructions continuing to be given by Mr Sayed after he had received the Letter. That is precisely what occurred.
The ultimate issue in a case such as this is "whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted": Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 535E per McHugh JA (as his Honour then was); Samuels JA agreeing.
There is no doubt that a reasonable bystander would regard Mr Sayed's conduct of continuing to instruct Swaab and, from time to time, paying some of their invoices, as signalling that the offer set out in the Terms and the Letter had been accepted by him, notwithstanding that he never returned an executed copy of the Letter to Swaab.
Accordingly, the Court finds that Mr Sayed is bound by the costs agreement with Swaab, the terms of which are evidenced by the Terms and the Letter.
Declaration should be made
Whether or not the Court should make a declaration is a discretionary matter. Having established the right which Swaab seeks to vindicate by the declarations sought, the question arises whether the court, in its discretion, should make those declarations. The question of whether or not it would be useful for those declarations to be made is relevant to the exercise of that discretion.
There is utility in confirming Swaab's equitable charge by making the first declaration sought. Doing so will resolve the live legal issue raised by Mr Sayed in his defence in the Local Court proceedings. Furthermore, there does appear to be some likelihood that in due course NAB will be enforcing its interest as mortgagee over the Land, at which point Swaab will no doubt be seeking to claim their outstanding fees, if there is anything left once NAB have paid out their debt.
In those circumstances it will obviously be of assistance to Swaab in their dealings with Mr Sayed and NAB to have the benefit of a declaration from the Court confirming the equitable charge created by the costs agreement.
However, the Court does not have the same view as to the utility of declaration sought by Swaab which seeks to specify a particular amount owing. This is because that amount may, indeed probably will, vary from time to time.
That will occur in at least two ways. First, as the charge covers Swaab's expenses of seeking to recover any outstanding costs and interest, the charge will necessarily extend to the costs of these proceedings, and any other proceedings which Swaab may ultimately take to recover its debt from Mr Sayed. Second, if Swaab do in fact have their bill assessed and a certificate of assessment ultimately issues, it is likely that the amount of that certificate will be less than what I take to be the solicitor client costs which comprise part of the debt that has been proven before me as owed by Mr Sayed to Swaab. In those circumstances, there may be some risk of inconsistent judgments between a declaration I make today and a judgment deemed to exist upon the filing of a certificate of determination in a court of competent jurisdiction.
There is no doubt that Mr Sayed owes Swaab money which is secured by their equitable charge. If and when Swaab seek to recover that money out of the proceeds of sale of the Land which it appears will ultimately occur at the behest of NAB, I would expect that NAB should be satisfied by a statutory declaration sworn on behalf of Swaab setting out precisely the amount then owing and secured by the equitable charge and how that amount has been calculated. If, for some reason, NAB requires more, or there is some other good reason which Swaab can demonstrate to the Court for having a declaration of the amount secured by the equitable charge at any particular point in time, I propose to grant Swaab liberty to apply to the duty judge on two days' notice to fix by declaration the amount secured by the equitable charge.
oOo
Decision last updated: 03 July 2013
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