Thomson v Thomsons Lawyers

[2016] QDC 78

DISTRICT COURT OF QUEENSLAND

CITATION:

Thomson v Thomsons Lawyers [2016] QDC 78

PARTIES:

CAROLYN THOMSON

(first appellant)

WAYNE THOMSON

(second appellant)

v

THOMSONS LAWYERS (A FIRM)

(respondent)

FILE NO/S:

149/2014

4962/2014

DIVISION:

Civil

PROCEEDING:

Appeal

ORIGINATING COURT:

Magistrate Court at Brisbane

DELIVERED ON:

8 April 2016

DELIVERED AT:

Ipswich

HEARING DATE:

26 November 2015

JUDGE:

Horneman-Wren SC DCJ

ORDER:

1.   Appeals allowed.

2.   The judgment entered on 22 August 2014 against Carolyn Thomson and Wayne Thomson be set aside.

3.   I will hear the parties as to:

a.   Whether any further order ought be made; and

b.   Costs.

CATCHWORDS:

PROCEDURE- APPEAL- COSTS- APPEAL AS TO COSTS-where costs assessment under the Legal Profession Act 2007- where there was a dispute as to the liability of two persons to pay costs- where magistrate failed to consider affidavit relevant to dispute- whether the first appellant was liable for costs-where the respondent was not heard on the issue -where magistrate did not have power to make order pursuant to r743G(3)(a)

PROCEDURE- JUDGEMENT AND ORDERS-AMENDING VARYING AND SETTING ASIDE JUDGMENTS AND ORDERS-APPEAL-COSTS- where magistrate erred in giving judgment- where the learned magistrate lacked jurisdiction to give judgment there being an unreasonable dispute about whether persons liable to pay costs- where judgment to be set aside- where magistrates at first instance had fallen into error and the matter of dispute remained to be dealt with

PROFESSIONS AND TRADES- LAWYERS-DUTIES AND LIABILITIES-SOLICITOR AND CLIENT- RETAINER- CHALLENGING RETAINER- where appellants adduced evidence deposing to a request made by the respondent to enter into client agreements with the appellants- where evidence led relating to the substitute costs agreement- whether there was actual or implied acceptance of the costs agreement- whether new costs agreements concluded- where no new costs agreements concluded- whether persons liable for costs as ‘clients’ not withstanding absence of costs agreements- where persons not clients- where no liability for costs

COUNSEL:

PL Somers for the first appellant.

R Dickson for the respondent.

SOLICITORS:

McBride Legal for the first appellant.

Thomson Geer Lawyers for the respondent.

The appeal proceedings

1. The appellant, Carolyn Thomson,[1] appeals from two orders of the Magistrates Court.  Each related to an assessment of costs in favour of the respondent law firm.

   [1]The appeal were originally commenced by Carolyn Thomson as the first appellant and her husband Wayne Thomson as the second appellant.  Mr Thomson has since entered bankruptcy and the appeals continued in Mrs Thomson’s name only. 

1. On 11 February 2014 the firm filed an application in the Magistrates Court for an assessment of its legal costs in respect of two matters in which it had acted for Kadoe Pty Ltd trading as Kadoe Commercial Coatings.  The first was a matter involving TremCo Pty Ltd.  The second was a matter involving the M Kent Law Firm.  The named respondents to the application were Kadoe Pty Ltd and each of Mrs Carolyn Thomson and Mr Wayne Thomson.

1. The first order was made by Magistrate Hall on 18 March 2014.  The order was that Stephen Hartwell of Hartwell’s Legal Costs Consultants be appoint to assess the costs of the firm for various invoices set out in the order in respect of each of the two matters.

1. The second order was made by Magistrate Costello on 22 August 2014 by which, pursuant to r 743H(5) of the Uniform Civil Procedure Rules 1999 (UCPR), he gave judgment for the plaintiff (sic) in the sum of $72,810.75 against each of the respondents to that application; Kadoe Pty Ltd, Mr Thomson and Mrs Thomson.

1. The Notice of Appeal in respect of the order of Magistrate Hall on 18 March 2014 was not filed until 17 December 2014, well outside the 28 days limited by r 748 of the UCPR. On that date, the then first and second appellants filed a document somewhat inaccurately tilted “Notice of Appeal Subject to Leave”. In it the appellants gave notice, again somewhat inaccurately, that they sought leave to appeal from Magistrates Hall’s decision ordering the appointment of Mr Hartwell to assess the firm’s costs. The notice, more accurately, identified that the appellants would seek leave of this Court to extend the time to appeal the decision of 18 March 2014.

1. For reasons delivered ex tempore on the second day of the hearing of these matters, the Court granted the appellants an extension of the time in which to file the appeal against the order of 18 March 2014 to 17 December 2014.

Assessment of costs under the Legal Profession Act 2007

1. Chapter 17A, Part 4 of the UCPR provides the process for an assessment of the costs under the Legal Profession Act 2007 (LPA).  Rule 743A requires a person applying for a costs assessment to make application to the relevant court, being the court having the lowest monetary limit to its jurisdiction in a personal action that is not less than     the costs claimed.[2]  This was not a matter in respect of which the firm had started proceedings to recover costs and the application was not therefore required to be made in such recovery proceedings.[3]

   [2]Rule 743.

   [3]Rule 743B(1).

1. Rule 743D(1) requires a copy of the application to be served upon any person to whom notice must be given under s 339(1) of the LPA.  Relevantly, s 339(1)(c) of the LPA requires notice of the application to be given to “the client”.  Rule 339 is within Part 3.4, Division 7 of the LPA.  For Division 7 “client” means a person to whom or for whom legal services are or have been provided.[4]

   [4]Section 334 LPA.

1. Rule 743F applies if, as here, the parties[5] do not agree that the costs assessment be performed by a particular costs assessor.  A party may apply either to the registrar for the appointment by the registrar of a costs assessor for the costs assessment, or to the Court for directions.[6]  The registrar fixed 18 March 2014 as the date upon which there would be a directions hearing in relation to the application. 

   [5]Rule 679 defines “party” for the purposes of Chapter 17A to include a person not a party to a proceeding by or to whom assessed costs of the proceeding are payable.

   [6]Section 743F(2).

1. Rule 743G(1) provides that the relevant court may hold a directions hearing in relation to an application for a costs assessment.  At such a directions hearing the court may consider, amongst other things, whether it is appropriate for any question to be tried before the costs are assessed, including, fo r example, whether a person claimed to be liable to pay costs is liable to pay those costs.[7]

   [7]Rule 743G(2)(d)(i).

1. Rule 743G(3) provides that the relevant court may also, if the grounds of dispute relate only to the amount of costs, order that a particular costs assessor be appointed to carry out the costs assessment, or, otherwise, order the application to be heard by the relevant court.

1. Rule 743H applies where a certificate of assessment is filed in the relevant court.  The court or any party may, on notice to all parties who participated in the assessment, have the application relisted before the court.[8]  In relation to any issue in dispute between the parties, the court may give directions or decide the issues.[9] 

   [8]Rule 743H(2).

   [9]Rule 743H(3).

1. If there are no issues in dispute the court may give the judgment it considers appropriate having regard to the certificate.[10]  The court may delay giving judgment, or stay the enforcement of a judgment given, pending a review by the court of a decision of the costs assessor.[11]

   [10]Rule 743H(4).

   [11]Rule 743H(5).

1. A review by the court referred to in r 743H(5) is a review applied for by a party dissatisfied with a decision included in a costs assessor’s certificate for which application is made under r 742.[12]

   [12]Rule 742, although falling within Chapter 17A, Part 3 which applies to assessment of costs other than under the LPA, applies to Chapter 17A, Part 4 assessments under the LPA by application of r 743I.

1. The expressions “any question” in r 743G(2)(d)(i); “grounds of dispute” in r 743G(3)(a); and “issue in dispute” in r 743H(3) require some consideration.

1. An application for costs assessment under r 743A must be accompanied by an affidavit,[13] which must, amongst other things, state whether the applicant disputes or requires assessment of all or what part of the costs and, if there is such a dispute, the grounds on which the applicant disputes the amount of the costs or liability to pay them.[14] 

   [13]Rule 743A(2)(d)(i).

   [14]Rule 743A(5).

1. Where, under s 335 of the LPA, the applicant for the costs assessment is the client or a third party payer who disputes either or both the liability to pay the costs or the amount of them, r 743A(5) provides the means, in the application, for the nature of and grounds for the dispute to be stated.

1. However, where the applicant for the costs assessment is, under s 337 of the LPA, the law practice, then r 743A(5) does not provide a means for the statement by the client (or third party payer) of a dispute as to the liability for, or to the amount of, the costs.  No other rule expressly provides for a client (or third part payer) notified of a law practice’s application for an assessment of its costs to state any dispute about liability for, or the amount of, the costs and the grounds for such dispute.

1. Rule 743A(2)(a) does, however, require the application for a cost assessment to be in the approved form.  The approved form is Form 60.  It requires that the following statement be included in the application, notice of which is to be given to the client (or third party payer):

“If you wish to oppose this application or to argue that any different order should be made, you must appear before the court in person or by your lawyer and you shall be heard.  If you do not appear at the hearing the orders sought may be made without further notice to you.”

1. The application in this matter complied with the requirement that it be in the approved form.  Thus, the appellant was informed that if she opposed the application or wished to argue for any different order she was required to appear before the court and she would be heard.

1. The rules provided for no other means by which any grounds of opposition or dispute were to be stated.

1. The rules did not require any such grounds to be stated in any other way.

The 18 March 2014 proceedings and order

1. When the matter was called on before her Honour, Magistrate Hall, on 18 March 2014 Mr Dickson of counsel, who also appears for the firm on these appeals, appeared for the then applicant firm.  Mrs Thomson appeared for herself and the other respondents to that application.  She handed a letter to the Court authorising her to appear on their behalf.

1. At the commencement of the proceedings Mrs Thomson said that she also had an affidavit “to hand up this morning, as well”.[15]   

   [15]Transcript 18 March 2014; 1-2 L 26.

1. Her Honour inquired whether the affidavit had been given to the applicant, and Mrs Thomson informed her Honour that “…they were given a copy this morning”.

1. Her Honour indicated that she had “quickly looked at the matter…five minutes ago”.[16] That is, before the affidavit of Mrs Thomson was handed up.

   [16]T 1-2 ll 28-29.

1. Reference was then made by Mr Dickson to an email which had been sent by Mrs Thomson to the registrar of the court on 13 March 2014 which had been provided to Mr Dickson by her Honour’s associate, “a few minutes ago”.

1. Mr Dickson then observed, apparently in reference to the email to the registrar, that “The essential issue, if it be an issue, is that Mrs Thomson requests an adjournment”.[17]  Mr Dickson indicated that an adjournment was opposed and observed that “This is simply an application for the appointment of a costs assessor to undertake the costs assessment of solicitor’s fees”.[18] 

   [17]T 1-2 ll 44-45.

   [18]T 1-2 ll 45-47.

1. The circumstances in which the adjournment was sought were then discussed between Mr Dickson and her Honour, after which her Honour addressed Mrs Thomson saying:

“This is just on the matter of the request for the adjournment.  I’ll just hear you Mrs Thomson”.[19]

Mrs Thomson then addressed her Honour in relation to the issue relevant to the application for an adjournment. These issues related to a mediation in a different matter which was to occur the following week.

[19]T 1-4 ll 34-35.

1. Her Honour invited Mr Dickson to respond.  He did so indicating that nothing which Mrs Thomson had said indicated a “relevant relationship”.  That was apparently a reference to a relevant relationship between the costs application which was sought to be adjourned and the mediation in the other matter which was the reason advanced for seeking the adjournment.

1. As part of his response, Mr Dickson also said the following in relation to the assessment which was being sought on his client’s applications:

“Insofar as an assessment is concerned, your Honour will be aware of the practice, which you would expect will would happen, though, of course, the practice is designed by the costs assessor and that will be this: that the file and the invoices, the subject of the application, will go to the costs assessor.  The costs assessor will then invite the respondents to provide objections.  Now, one can’t see that happening in under a week”.[20]

[20]T 1-6 ll 8-13.

1. This observation as to timing was apparently directed toward any prejudice which might be occasioned to the mediation which was to take place the following week.

1. Mr Dickson indicated that he had a draft order.

1. Her Honour, at the request of Mrs Thomson, permitted her to respond to Mr Dickson and also inquired as to whether she had seen the draft order.

1. There was then discussion between Mrs Thomson and her Honour as to whether the bills the subject of the application would be paid in the event that the mediation was successful.

1. Mr Dickson then responded further saying:

“If Mrs Thomson, on her own behalf and on behalf of the other two respondents, is able to tell the court now that the costs assessment need not occur and that my clients are at liberty to sue and the amount of fees is not in dispute, I would invite, through your Honour, Mrs Thomson to say that to the court so that we can get on with things.  If there is an issue about how the work was done, then that’s properly a matter to be raised in court.  It’s not a matter that properly should be dealt with by the costs assessor.”[21]

[21]T 1-8, ll 14-21.

1. Although in the context of how the legal work was preformed,[22] that submission by Mr Dickson seems to acknowledge that there are issues relevant to an assessment of costs which are not the province of the costs assessor and which are properly raised in court.

   [22]Another matter which a relevant court on a directions hearing in an application for assessment of costs may consider should be tried before the costs are assessed: r 743G(2)(d)(iii).

1. Mrs Thomson indicated that she was not prepared to admit on behalf of all the respondents to the costs assessment application that there was no dispute as to the amount of the costs.[23]  She did, however, indicate that if the firm was prepared to adjourn the application then, subject to reserving their position concerning matters which may come out of the mediation, if the other matter settled at the mediation then the respondents to the costs application would not dispute the costs.[24]

   [23]Transcript 1-8, ll 33-44.

   [24]Transcript 1-9, ll 1-23.

1. Her Honour observed that this was a “very qualified” position.[25]

   [25]Transcript 1-9, l 29.

1. Mr Dickson, having taken up her Honour’s observation as to the extent of qualification of the position Mrs Thomson had adopted, invited Mrs Thomson to indicate to the court what amount the respondents were prepared to pay into court “as security in respect of an adjournment”.[26]  In doing so he did not indicate the legal basis for securing an adjournment on such a payment into court.

   [26]Transcript 1-10, ll 1-10.

1. Mrs Thomson responded indicating that because of the fees associated with the impending mediation the respondents were not in a financial position which would enable them to do as Mr Dickson had requested.

1. Mr Dickson then handed her Honour the draft order.  He stated that nothing had fallen from Mrs Thomson which indicated that there would be any prejudice in her Honour making an order, at that stage, to let the costs assessment take its course.  He submitted that making an order in terms of the application appointing Mr Hartwell as the costs assessor to assess the costs was a “very fair outcome.”

1. Her Honour then engaged further with Mrs Thomson because her Honour wanted to be sure that Mrs Thomson understood the situation.  Particularly, her Honour referred to the firm’s position that if the full amount of the costs were admitted the firm would not seek an assessment but would take action for the full amount, in respect of which there would be further costs involved.  Her Honour then observed that Mrs Thomson’s response to that was that there would not be an admission “because I’ve still got issues with Thomson’s conduct of my matters.”

1. Mrs Thomson acknowledged in the affirmative that this was her position.[27]

   [27]Transcript, 1-10, ll 12-36.

1. In the context of discussing issues which Mrs Thomson may have, her Honour said:

“Just wait a minute.  I want to say to you, also, that if the matter goes to a costs assessor, it’s not a place – when the matter’s before the costs assessor – for you to raise issues.”[28]

Mrs Thomson stated that she understood this and that they had been through a costs assessment previously.  However, in doing so she indicated that she understood that the raising of issues would “have to be independent.”[29]

[28]Transcript 1-11, ll 10-12.

[29]Transcript 1-11, l 18.

1. Shortly afterwards, the following, in my view quite important, exchange took place. It followed her Honour having made observations about the firm’s position being that it wanted to get its order[30] that day because Mrs Thomson was saying that if the mediation worked out the firm’s costs would probably be paid, but that there might be other issues.

“Mrs Thomson: But if that was the case, your Honour, I would have the opportunity to take those matters before the court irrespective of the costs assessment, anyway so ---

Bench: How would you do that?

Mrs Thomson: I don’t know in this five minutes, but – and there is another avenue – that it can be reported to the Legal Services Commission.”[31]

[30]In the transcript it appears as “audit” but, in context, her Honour must have said “order”.

[31]Transcript 1-12, ll 1-8.

1. The hearing progressed to conclusion without any consideration of the affidavit which had been “handed up” by Mrs Thomson.  On the appeal, Mr Dickson for the firm concedes that the affidavit was not considered.  However, he submits that this was because it was merely filed in court on the morning of 18 March 2014, but not read. 

1. Apart from being reluctant to visit upon a self-represented litigant the unfortunate consequences of a failure to appreciate the distinction between filing and reading an affidavit, a distinction which lawyers appreciate but which may appear arcane to lay persons, this fine distinction which Mr Dickson presses faces further difficulty.  If technicality is to be relied upon, the sad reality for his case is that he did not read any material at all on his application.  Neither the application nor the affidavit required in support of it were read by him.  If such a technical approach were to be taken to the proceedings on 18 March 2014 it would appear that Mr Dickson was not entitled to the relief which was granted. Technically, there was nothing before the magistrate which invoked her jurisdiction and no evidence before her upon which she could exercise her jurisdiction.

1. A much more realistic approach to the proceedings is to accept that when Mrs Thomson handed up the affidavit, as a self-represented litigant she would reasonably have thought that the issues which were raised in it would be considered by the court.  Those issues clearly included, at paragraph 2 of the affidavit, that she and Mr Thomson “are not parties responsible for the fees the subject of this application.  The first named respondent is the only entity that had entered into a costs agreement which the applicant”.

1. Further, at paragraph 8, Mrs Thomson deposed:

“Based on this the application should not be granted in its current format as the second and third respondents are not responsible for any fees owing to the applicant in this application for cost assessment.  Nor have they signed any costs agreements or signed any personal guarantees to be responsible for the fees of the respondent.”

1. In my view, this affidavit squarely raised, in terms of r 743G(2)(d)(i), a question of whether a person claimed to be liable to pay costs was liable to pay those costs.  This question having been raised, in my view the learned magistrate should have considered whether it should have been tried before costs were assessed.

1. I am also of the view that, in terms of r 743G(3)(a), the affidavit raised a ground of dispute; and one which went beyond the amount of the costs.  As already observed, the rules did not require the respondents to the costs application to raise those grounds in any particular way.  Nor did the rules specify any means for such grounds to be raised.  The only direction provided to the respondents to the costs assessment application as to how they might raise issues in opposition to that application was for them to appear before the court at the stated time and place.  Having done so, and having handed up the affidavit in which the issue was raised, it could not be said that the respondents were heard on the issue as it was stated in the direction in the application that they would be.

1. Given that the ground of dispute raised in the affidavit did not relate only to the amount of costs, her Honour did not, in my view, have power to make the order under r  743G(3)(a) appointing Mr Hartwell as the costs assessor to perform the assessment.  The order her Honour had power to make was that the application be heard by the court.  Of course, had her Honour made the order she was authorised to make, the issue raised as to liability for the costs would have been heard and determined by the court.

1. In failing to consider the affidavit, and thus failing to consider whether to direct the trial of the issue of liability before the costs assessment, the learned magistrate erred in law in the exercise of her jurisdiction.  So too, in ordering that Mr Hartwell be appointed as the costs assessor and not ordering the hearing by the court of the application, the learned magistrate erred in the exercise of her jurisdiction.

The hearing and order of 22 August 2014

1. The matter came on before the court on 22 August 2014 pursuant to a request by the firm for it to be relisted.[32]  On that occasion, the three respondents to the application were represented by a solicitor, Ms Hartvigsen of Go To Court Lawyers.  Ms  Hartvigsen, however, had only recently received instructions in the matter.  She had been contacted the previous night and had only a very brief conference with ‘her client’ (who I infer to be Mrs Thomson) that morning.

   [32]Rule 743H (2).

1. Ms Hartvigsen informed the court that because of the lateness of her instructions she was not in a position to proceed with the application should an adjournment not be granted.[33]

   [33]Transcript 22 August 2014, 1-2, ll 34-38.

1. She also informed the court that her client had been representing “himself” up until then and that “she was, either rightly or wrongly, waiting for a response to a communication that she had initiated with the costs assessor on the 2^nd of – 10^th   July”.[34]  In context, the reference to the client representing “himself” would appear to have been an error.  It may, however, have been a reference to Mr Thomson.  In any event, Ms Hartvigsen later, when asked, informed the court that she appeared for all three respondents to the costs assessment application.[35]

   [34]Ibid at 36-38.

   [35]Transcript 7, l 45.

1. The reference to the communication with the costs assessor was a reference to an email from Mrs Thomson to the costs assessor, Mr Hartwell, on 10 July 2014.[36]  In that email Mrs Thomson said, amongst other things:

   [36]Exhibit CMT-26, to the affidavit of Carolyn Thomson sworn 1 September 2014: Exhibit 2 on the appeal.

“There is also another issue with the costs assessment.  I believed that you would have picked this up during the costs assessment.

Wayne Thomson and myself were respondents to this costs assessment.  From the paperwork that you should have had access to, would show [sic] that the costs agreement was with Kadoe and not Wayne and I.

There appears to be no mention of this in the costs assessment.

Would you please advise you [sic] position on this.”

1. Mrs Thomson did not provide a copy of that email to anyone at the law firm which had applied for the costs assessment.

1. The matter came to be listed again before the Magistrates Court because, pursuant to r 743H(2) of the UCPR, Ms Elouise Kearney, a lawyer employed by Thomson Geer, lawyers, which the applicant firm had become, by email dated 31 July 2014[37] requested the proceedings be listed for final determination.  She informed the court that:

“Our client is seeking to have the costs assessor’s certificate registered as a judgment for the full amount of $72,810.75.”

[37]Exhibit CMT-4 to Exhibit 2.

1. Mrs Thomson was copied into the email, as was Mr MacGillivray of Thomson Geer lawyers.  The email was addressed to “[email protected]”.

1. On 18 August 2014 Mrs Thomson again emailed Mr Hartwell.[38]

   [38]Exhibit CMT-5 to Exhibit 2.

1. Mrs Thomson copied the email to the courthouse.brisbane address, Ms Kearney and Mr MacGillivray.

1. She referred to the fact that Thomson lawyers had applied to enter judgment and that the matter was to come before the court on 22 August 2014.  She identified what she believed to be an error in the amount of the costs assessment and asked Mr Hartwell to review that matter.  She then went on to say:

“At the same time, we also refer you to our email of 10 July 2014,  where we advised that Carolyn Thomson and Wayne Thomson were not respondents in this matter, and that we believe that you would have picked this up from the file.  All costs agreements signed and issued by Thomson lawyers were in the name of Kadoe Pty Ltd.  As you will need to amend the certificate it would be helpful if the issue of who is responsible for the debt could be addressed at the same time as previously requested, so any amended certificate file [sic] with the court is accurate.”

1. This was the issue which Mrs Thomson had raised in her affidavit handed up in the hearing before Magistrate Hall on 18 March 2014.  Whilst this issue may not have been a matter for the costs assessor, having copied two lawyers from the firm into the email, the firm was on notice that Mrs Thomson considered that issue was unresolved.

1. By separate letter also emailed to both Ms Kearney and Mr MacGillivray on 18 August 2014[39] Mrs Thomson referred to the earlier email of that day to Mr Hartwell and to the fact that Ms Kearney (to whom the letter was addressed) had been copied into it.  Mrs Thomson referred to the contents of the email to Mr Hartwell as being “self- explanatory”.

   [39]Exhibit CMT 6 to Exhibit 2.

1. This, in my view, further placed the firm on notice that Mrs Thomson considered the issues raised in the email to Mr Hartwell, including that neither she nor Mr  Thomson were liable for the costs, to be unresolved.

1. Mr Hartwell replied to Mrs Thomson by email on 21 August 2014.[40] In respect of the issue of respondency he simply observed that there were three respondents to the application and that the court’s order for there to be an assessment was made against all three. He noted that no request for reasons for his decision had been made under r 738 and referred Mrs Thomson to rights of review under r 742 which he suggested she consider and that she seek independent legal advice. Mr MacGillivray, Ms Kearney and the registrar of the court were all copied into Mr Hartwell’s email.

   [40]Exhibit CMT-7 to Exhibit 2.

1. At 4.00 pm on 21 August 2014[41] Mr MacGillivray emailed Mrs Thomson in response to an email which she had sent at 12.14 pm that day[42] to Ms Kearney and to Mr  MacGillivray, and copied to Mr Hartwell and the Court, in which she had sought consent to a vacating of the hearing scheduled for the following day.  In that email Mr MacGillivray said:

   [41]Exhibit CMT-9 to Exhibit 2.

   [42]Exhibit CMT-8 to Exhibit 2.

“You will recall that at the directions hearing on 8 March 2014 that Magistrate Hull (sic) dismissed your request to have the second and third respondents removed from the proceedings, and ordered that the costs assessor be appointed to assess the costs in this matter.

The costs assessor’s certificate was filed and served on each party on 2 July 2014.

Pursuant to r 742 of the Uniform Civil Procedure Rules 1999 (Qld) you had 14 days after the certificate of assessment was filed to review the assessment, but you have failed to do so.

It is for these reasons that our firm does not agree to vacate the directions hearing listed for 9.00 am tomorrow, 22 August 2014.”

1. The assertion in this email that the magistrate had dismissed the request for the removal of the second and third respondents to the application for costs assessment demonstrates an appreciation by the firm of the issue which Mrs Thomson sought to raise in her affidavit handed up on the 18 March hearing.  It should also be observed that the assertion that the issue was dealt with is inconsistent with both the record of the proceedings on that occasion and the way that the firm has characterised in this appeal Mrs Thomson’s conduct of them.  The firm consistently asserted in these appeal proceedings that the learned magistrate did not consider or deal with the issue of whether Mr and Mrs Thomson were properly respondents to the costs assessment application because Mrs Thomson did not raise any such issue; the only issue raised having been the application for an adjournment.[43]

   [43]Transcript 1-84, ll 37-40; 1-85, ll 22-30; 1-87, ll 12-13, 1-87, l 30; 1-87, ll 42-43; 1-88, ll 1-5; 1-88, l 17, 1-89, ll 1-2; 1-89, ll 19-23.

1. Apart from the reference to Mrs Thomson rightly or wrongly waiting for a response to her communication of 10 July 2014 to the costs assessor (which response she appears to have received on 21 August 2014) no reference was made by the parties to any of these communications in the hearing on 22 August 2014.  It may be that Ms  Hartvigsen was not aware of the communications at that time.

1. Mr Dickson, who again was appearing for the firm on that occasion, made the following submission:

“So that’s in fact the first point that I ask your Honour to note.  This matter hasn’t been around since yesterday.  It’s been around for nearly all of this year. 

Now, then, on 18 March this year, that was the first return of that application, heard by her Honour Magistrate Hall, and against lengthy opposition by Mrs Thomson, who was here in court and who appeared for the three respondents on that occasion, Magistrate Hall ordered that there be a costs assessment.”[44] [emphasis added]

[44]Transcript 22 August 2014, 1-3, ll 27-32.

1. In the course of the appeal I asked Mr Dickson to what the “lengthy opposition” on the earlier occasion referred.  Mr Dickson said that it was a reference to Mrs Thomson’s request for an adjournment; not an argument on the merits.[45]  He thereby disavowed, or at least contradicted, that which had been said by Mr MacGillivray in his email to Mrs Thomson on 21 August 2014.

   [45]Transcript 2-92, ll 26-39.

1. However, from his Honour’s reasons delivered on 22 August 2014 it would seem that his Honour did not understand Mr Dickson’s submission about “lengthy opposition” to be a reference only to the application for an adjournment.  Rather, his Honour proceeded on the basis that there had been a consideration of the substantive merits of Mrs Thomson’s opposition to the application for the appointment of a costs assessor on that earlier occasion.  Referring to the hearing on 18 March 2014 his Honour said:

“I observe that Mrs Carolyn Thomson was present on the day, and I also note that the application was resisted by affidavit material filed, it seems on the day.”[46]

[46]Decision 22 August 2014, p 2, ll 13-15.

1. His Honour’s reasons and judgment were delivered ex tempore, Mr Dickson was present. No attempt was made to correct his Honour’s noting that on the earlier occasion on which the application for the appointment of a costs assessor had been before the court it “was resisted by affidavit material filed, it seems that day.”

1. His Honour went on to observe that no attempt had been made to seek a review of the costs assessment pursuant to r 742. His Honour considered that there had been no adequate explanation for the delay in seeking legal advice on the costs certificate and that there had been no reasons sought.

1. The learned magistrate noted that he still had power to grant an adjournment pursuant to r 743H(5), but saw little point in doing so in all the circumstances to which he had referred.  He thus refused the application for an adjournment and entered judgment for “the plaintiff” against “the defendants” in the sum of $72,810.75.

1. In my opinion, his Honour erred in law in giving judgment.

1. Judgment can only be given by the court pursuant to r 743H(4) “if there are no issues in dispute”.  His Honour, from his reasons, seems to have appreciated that Mrs Thomson had sought to resist the application for reasons which she had raised in her affidavit handed to Magistrate Hall at the 18 March hearing; but proceeded on the mistaken understanding that this resistance had been considered at that earlier hearing and resolved against her.  It could only have been on that basis that his Honour could have considered that there were not any issues in dispute when he came to consider the matter such that he could give judgment pursuant to r 743H(4).

1. Had his Honour understood that the basis for Mrs Thomson’s resistance of the costs assessment application had not been resolved, and that the affidavit which he (mis)understood to have been the basis for the resistance had in fact not even been considered (or, as the law firm would have it on this appeal, not even read), he would have had to consider, pursuant to r 743H(3), whether to give directions or to decide the issue.  Until the issue was decided, his Honour lacked jurisdiction to give judgment.

1. His Honour’s consideration of whether he ought grant an adjournment pursuant to r 743H(5) did not address the relevant issue.  That power is exercisable when a review by the court of the costs assessor’s decision had been sought.  That was not the case.  The issue raised by Mrs Thomson was not one for a review of the costs assessor’s decision.  It was the broader question of whether she, and Mr  Thomson, were liable for the costs; a matter which the court itself was required to determine, but which was ultimately not considered by either Magistrate Hall or Magistrate Costello.

1. The judgment given against Mrs Thomson must therefore be set aside.

How should the matter now be dealt with?

1. The question then becomes one of how this court further should deal with the matter.  Both parties have urged this court to resolve itself the substantive issue of liability for the costs.  The firm identifies that the relief sought by the appellants in the notice of appeal does not include to have the matter remitted to the Magistrates Court for determination.  Each of the notices of appeal seek that the question of who was responsible and/or liable to pay legal costs to the respondent be considered.

1. In the amended notice of appeal[47] in the appeal against the judgment given on 22 August 2014, the appellants stated that they would seek to adduce fresh evidence at the hearing of the appeal deposing to a request made by the firm to Mr and Mrs Thomson on 11 July 2013 to enter into client agreements in relation to the firm’s legal costs, and their response to that request.

   [47]Filed on 18 March 2015.

1. Paragraph 12 of the certificate of readiness signed by the lawyers for the respective parties to the appeal on 20 October 2015, and filed in the court on that date, identifies as an issue in the appeal that, on the hearing of the appeal, the appellants would seek leave to rely on paragraph 8 to 15 of the affidavit of Mrs Thomson sworn on 16 June 2015, and paragraphs 6-11 of the affidavit of Mr Thomson sworn on 16 July 2015.  Those parts of the respective affidavits went only to an explanation of the delay in commencing an appeal from the 18 March 2014 order. 

1. However, in the course of hearing the application for an extension of the time to appeal from those orders, Mr Dickson cross-examined both Mr and Mrs Thomson about other parts of their respective affidavits, particularly where each deposed to not having provided further instructions in either the Tremco matter or the M Kent matter subsequent to the firm emailing two costs agreements to them on 11 July 2013, and to their not having signed those agreements.  To that end, Mr Dickson read, in his case, Mrs Thomson’s affidavit.[48]

   [48]Transcript 1-63, ll 7-14.

1. On the substantive appeals, Mr Dickson tendered the transcript of the evidence of Mr  and Mrs Thomson given on the application to extend time.

1. Mr Dickson also read, on the substantive appeals, the affidavits of Mr MacGillivray and Mr Byrnes.  Leave to read those affidavits was opposed by Mr Somers for the appellant.  The basis of the opposition was that the evidence on the appeal should be confined to that which was before the magistrate, particularly on 18 March 2014, unless the respondent demonstrated that there were special grounds to receive further evidence.[49]

   [49]Rule 766(1)(c) UCPR.

1. In my view, the appellant’s opposition to the further evidence was misconceived.  Having identified that each magistrate erred in failing to deal with the issue of whether Mr and Mrs Thomson were liable for the costs, that issue remained to be dealt with; and the parties were both urging the court to deal with it.  Had Magistrate Hall not fallen into error on 18 March 2014, a proper exercise of her jurisdiction would have been to have considered whether it was appropriate for the question of liability to have been tried before the costs were assessed.[50]

   [50]Rule 743G(2)(d)(i).

1. Had Magistrate Costello not fallen into error on 22 August 2014, a proper exercise of his jurisdiction would have been to give directions about the issue in dispute between the parties; or to decide that issue.[51]

   [51]Rule 743H(3).

1. It is unlikely, in my view, that Magistrate Costello would have decided the issue on 22 August 2014 without permitting the respondents to put on evidence relevant to the issue in dispute.  To have done so would arguably also have been to fall into error.

1. If directions for the trial of the issue had been given on either 18 March 2014 or 22 August 2014 the evidence contained in the affidavits of Mr Byrnes and Mr  MacGillivray could have been adduced.  If the issue were now to be remitted to a magistrate to allow a trial of that issue, the evidence could be adduced.  Counsel for the appellants conceded that this is so.

1. On these appeals, the court has all the powers and duties of the court that made the decisions appealed from.[52]  It is an appropriate exercise for the court’s powers to permit the further evidence to be adduced so that the issue can be decided without the matter having to be remitted to the Magistrates Court with the associated time and cost only for the evidence to be adduced in that court. 

   [52]Rule 766(1)(a) and r 785 UCPR.

1. For these reasons leave was granted to the respondents to read the affidavits of Mr Byrnes and Mr MacGillivray on the appeal. 

1. So too leave was granted to the appellant to tender an affidavit of Mrs   Thomson sworn 1 September 2014.[53]

   [53]Exhibit 2.

The substitute costs agreements

1. On 11 July 2013 Thomson lawyers wrote to Carolyn and Wayne Thomson in respect of each of the Tremco Pty Ltd and M Kent law firm matters which had been conducting for Kadoe Pty Ltd[54].

   [54]Pages 43-50 and 51-57 respectively of Exhibit AMM01 to the affidavit of Andrew MacGillivray.

1. The letter relating to the Tremco Pty Ltd matter, relevantly, stated:

“We note that we have previously entered into client agreements with you to undertake work in relation to progressing the dispute between your company, Kadoe Pty Ltd (Kadoe), and Tremco Pty Ltd (Tremco) towards resolution.  Under our earlier client agreement, we also undertook work for you in relation to your fee dispute with the M Kent law firm for work performed by that firm in relation to your dispute with Tremco.  As you are aware, further steps were (and are) required to be undertaken in relation to the fee dispute with the M Kent law firm and accordingly, we have separated that portion of the work from the Tremco dispute file.  A separate client agreement in relation to the M Kent law firm dispute has been provided to you in addition to this client agreement.

For the sake of clarity, we are sending this as a separate client agreement that will only govern the work we have undertaken, and will continue to undertake, for you in relation to the actual dispute with Tremco.

We note that we are reissuing this client agreement as a result of future steps that you intend to investigate, and likely pursue, with respect to Kadoe, which necessitates us reissuing this client agreement to you both personally.

This letter and the attachments, including the terms of engagement, is our offer to enter into a client agreement (including a costs agreement) with you.  If there are any inconsistencies between the terms outlined in these documents, the terms stated in this letter will prevail.

Please read all the documents carefully:

·if they are acceptable to you, please sign and return the enclosed copy of this letter;

·if they are not acceptable to you, please contact me as soon as possible.

If you do not return a signed copy of this letter, but you continue to provide us with information and instructions in this matter, we will assume that you have accepted our offer on the terms contained in these documents.”[Emphasis added]

1. It also contained the following in respect of estimates of fees:

“4          Estimates

4.1      Our fees to date

We refer to the chronology of our fees to date as set out in our client agreement dated 16 May 2013.  We note that since that update, further costs have been incurred in providing further disclosure on behalf of Kadoe and responding to a r 444 complaint regarding Kadoe’s disclosure.

4.2      Estimated fees moving forward

As indicated in section 1 above, we anticipate that there are a number of further steps to be undertaken in preparation for the trial.  We have provided some further detail below on the next steps to be taken so that you are fully informed as to potential costs to be incurred as the matter continues to move towards trial.”

1. The letter relating to the M Kent law firm matter was in different terms.  Relevantly, it provided:

“We refer to our client agreements dated 10 May 2013 and 21 May 2013.  As a result of future steps that you intend to investigate, and likely pursue, with respect to your company, Kadoe Pty Ltd, it is necessary for us to reissue this client agreement to you both personally.

This letter and the attachments, including the terms of engagement is our offer to enter into a client agreement (including a costs agreement) with you.  If there are any inconsistencies between the terms outlined in these documents, the terms stated in this letter will prevail.

Please read all documents carefully:

·if they are acceptable to you, please sign and return the enclosed copy of this letter;

·if they are not acceptable to you, please contact me as soon as possible.

If you do not return a signed copy of this letter, but continue to provide us with information and instructions in matter [sic], we will assume that you have accepted our offer on the terms contained in these documents.”[emphasis added]

1. In respect of fees it provided:

“4          Estimates

4.1      Our fees

At this stage the amount of work we will need to do is uncertain.  Accordingly, we cannot estimate our total fees.

For the matters referred to above, we estimate our fees exclusive of GST will be in the order of $15,000 to $20,000 excluding GST.”

1. The letters each contained provision for both Mr and Mrs Thomson to sign to signify their agreement to be bound by the letter and the terms of engagement which were attached.  Neither letter was signed by either Mr or Mrs Thomson. 

1. The case advanced by the firm on the appeal is that the offer contained in each letter was accepted by each of Mr and Mrs Thomson by their subsequent conduct.

1. It is to be observed, however, that the letters of 11 July did not state in terms that provision of further information and instructions by Mr and Mrs Thomson would constitute acceptance of the offers. In terms, the firm stated that if further information and instructions were provided, it would assume that the offers had been accepted.

1. Whether there has been acceptance of an offer, and thus a concluded contract, is a question of fact. The firm is only able to assume acceptance by conduct, in the absence of a signed and returned acceptance of the offers, if viewed objectively that conduct in all the circumstances established acceptance as a matter of fact. Those circumstances include the statement by the firm in the offers that it would make that assumption. That circumstance is not, however, determinative.

1. The evidence upon which the firm relies to establish acceptance by conduct is set out in the affidavit of Mr MacGillivray.  The evidence of Mr Byrnes upon which the firm relies, relates to the circumstances surrounding the issuing of the further costs agreements by the firm in July 2013.  The firm contends that evidence of those surrounding circumstances is admissible.[55]

   [55]Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, Mount Bruce Mining Pty Ltd v Wright Prospecting & Anor (2015) 325 ALR 188.

1. However, this is not a case about the construction of the terms of a contract in which evidence of surrounding circumstances, known to both parties, is admissible if the contract is ambiguous and if those circumstances cast light on the genesis of the contract, its objective aim, or the meaning of any descriptive terms.[56]

   [56]Codelfa at 347-352, per Mason J; Brambles Holdings Pty Ltd v Bathhurst City Council (2001) 53 NSWLR 153 at [24] per Heydon JA (as his Honour then was); Mount Bruce Mining at [47]-[50] per French CJ, Nettle and Gaudron JJ and [108]-[109] per Kiefel and Keane JJ.

1. The issue here is not what construction should be given to the terms of the costs agreements sent out on 11 July 2014; but whether costs agreements in those terms were concluded between the parties. 

1. Whether there has been acceptance by Mr and Mrs Thomson requires an objective consideration of all the relevant facts and circumstances.[57]  Those relevant facts and circumstances include not only the facts and circumstances known to the parties prior to the offer being made and the conduct said to constitute acceptance, but also any subsequent conduct or statements by the parties consistent or inconsistent with an agreement having been concluded.[58]

   [57]Empirnall Holdings Pty Ltd v Machon Paull Partners P/L (1988) 14 NSWLR 523 at 528 per Kirby P (as his Honour then was).

   [58]Brambles Holdings at [25]; Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 78; Barrier Wharfs Limited v W Scott Fell & Co. Ltd (1988) 5 CLR 647 at 672.

1. Mr Byrne’s evidence is relevant to understanding the circumstances in which the firm was “reissuing this client agreement as a result of future steps that you intend to investigate, and likely pursue, with respect to Kadoe, which necessitate us reissuing this client agreement to you both personally”.  His evidence assists in understanding what the future steps referred to were, and why those steps would necessitate the reissuing of the agreements.

1. He deposes to Mrs Thomson engaging the firm, in April 2013, to assist with the creation of a new trading entity to carry out operations in Queensland.  This was associated with a restructuring of her business interests.  The new entity was to replace, and operate in lieu of, Kadoe Pty Ltd trading as Kadoe Commercial Coatings and would include operation of the waterproofing and concrete polishing businesses.

1. Mr Byrnes’ deposes to the firm working with Mrs Thomson in relation to those matters up until around July 2013.  On 22 April 2013 he attended a meeting at the firm’s offices with Mrs Thomson and a person he describes as Mrs Thomson’s accountant to discuss a new entity replacing and operating the two businesses in lieu of Kadoe Pty Ltd.  There was discussion of the ownership of the intellectual property and a proposed structure to enable future business to be conducted.  Kadoe Pty Ltd was to have no role in the future business.[59]

   [59] Affidavits of Philip John Byrnes filed 17 July 2015, paragraphs 9 to 13.

1. On advice given by the firm, a new company, Inniv8z Queensland Pty Ltd was registered on 10 July 2013. That company was created as a result of the advice concerning a new entity replacing and operating in lieu of Kadoe Pty Ltd. Mr Byrnes deposes to his understanding that Inniv8z Pty Ltd would hold a Queensland Building and Construction Commission licence for the performance of waterproofing work, and that it would in effect replace Kadoe Pty Ltd. Inniv8z Pty Ltd in fact obtained a QBCC licence on 3 September 2013.[60]

   [60] Ibid at paragraph 15 to 18.

1. Mr Byrnes also deposes to having a conversation with Mrs Thomson on 12 July 2013 about the steps which would be involved in removing Kadoe Pty Ltd as a trustee. His file note of that conversation records:

“Remove as Kadoe as tee.”[61]

[61] Ibid at paragraphs 10 to 21 and Exhibit PB-01.

1. Mr Byrnes deposes to Kadoe Pty Ltd being placed into court ordered liquidation on 29 April 2015.[62]

   [62] Ibid at paragraph 22.

1. In his affidavit Mr MacGillivray deposes to the respondent firm having engaged Mr Rivett of counsel to assist with the costs assessment application that Kadoe Pty Ltd was then agitating with M Kent law firm.  This seems to be, at least in part, what has been referred to as the M Kent law firm matter.  He deposes to a teleconference which took place on 8 July 2013 between Ms Pip McGrath and Ms Sophie Sweeney of the firm, Mr Rivett and Mrs Thomson. Mr MacGillivray himself apparently did not participate in the conference.

1. Mr MacGillivray deposes that during that conference Mr Rivett recommended that Mr and Mrs Thomson consider placing the Kadoe Pty Ltd in liquidation and to restructure their business interests. He exhibits the file notes of both Ms McGrath and Ms Sweeney in relation to the teleconference.  He refers particularly to extracts of Ms McGrath’s file notes which he says “confirms” that:

“Kadoe going under as option.

New company would need QBSA licence.”

and that:

“JR: would be recommending that co is down/let go, just make sure that QBSA licence is well away from it before it happens.

CT: issue would be no work in Queensland; have co in Sydney.”

1. Mr MacGillivray also refers to extracts from Ms Sweeney’s file notes which he says “confirm” that:

“JR: my advice is to let co slide and then don’t have to pay lawyer and Tremco anything – best result.

CT: setting up company plus sign trust.”[63]

[63]Affidavit of Andrew Mark MacGillivray filed 20 July 2015, paragraphs 12 to 20 and Exhibit AMM-01 pages 15 to 25.

1. This evidence does not establish that any definite position had been taken at that point that Kadoe Pty Ltd would be wound up.  To the contrary, other parts of the file notes suggest this might never occur.  For example, Mr McGrath’s notes immediately following the first extract set out above include:

“JR      don’t need to wind up, can just leave sit until new co and licence up and running.”

1. Mr Rivett’s later comment, as set out above, that he would be recommending Kadoe “is down/let go” must be read in that light.

1. So too, Ms Sweeney’s file note records:

“JR: don’t need to wind up - just let it lapse.”

1. Following this conference Ms McGrath, on 11 July 2013, emailed Mrs Thomson. [64]  The email attached copies of the proposed new costs agreements.  The email said, in part:

   [64] Exhibit AMM-01, p 58

‘1.We recommend that you contact Philip Byrnes to discuss the proposed plan in relation to winding up Kadoe,  in order to ensure that there are no issues that would prevent the course of action that John advised you on yesterday.  In particular, we note that there are provisions of the Corporations Act relating to the winding up of companies that make certain transactions void or voidable. These provisions may be relevant to Kadoe and you should make sure you consider this issue.  This is Philip’s area of expertise and he will be able to assist you with this.  Further, Philip is already aware of the other restructuring you are planning, so will be able to give a more fully informed view on this matter.

…..       

3. In light of John’s recommendation that the existing litigation matters should be progressed as slowly as allowable under the court rules whilst you start progressing matters for a restructure, please provide instructions as to whether you want us to continue attempts at settlement negotiations with Tremco.  In the interim, we will hold off on further attempts to contact unless/until we hear from you to the contrary.  As a side point to this issue, we note that Stephen Knyvett (from Tremco’s solicitors), who was filling in for Sam Barber while he was away, did not answer or return any of our phone calls in Sam Barber’s absence.

4. As we are sure you will understand, in light of the proposed course of action to be taken with Kadoe, we will also need to transfer our client agreements with Kadoe into agreements with you and Wayne personally. To this end, the amended client agreements for the disputes with the Tremco and the M Kent law firm are attached for your review. The originals are following by post with a copy to each enclosed for you to sign and return to us.”

1. In my view, this email places into context the statement in the letters of 11 July 2013 that the client agreements were being reissued “as a result of future steps that you are intending to investigate, and likely pursue with respect to Kadoe which necessitate us reissuing this client agreement to you both personally.”   However, it does not provide any clarity as to whether the “proposed course of action” or “future steps” were actually to be pursued for there to be a need either to enter into new client agreements with the Thomsons individually or to have the existing client agreements with Kadoe Pty Ltd “transferred” to them.  Consideration of those matters, of itself, would not necessitate new client agreements with the individuals being put in place.  If the future steps, after consideration, were not taken, there would be no necessity for such new agreements.  The email certainly contemplates that the steps may not, ultimately, be taken. It contemplates that discussions with Mr Byrnes might reveal issues which would prevent or suggest against the course of action proposed by Mr Rivett being followed.

1. The conduct identified in Mr MacGillivray’s affidavit as being that from which it would be inferred that Mrs Thomson (and Mr Thomson) accepted the offer to enter into new client agreements individually with the firm is the provision of information and instructions after 11 July 2013.

1. Particularly in relation to the Tremco matter, he identifies a telephone discussion which took place between Ms McGrath and Mrs Thomson on 12 July 2013 regarding the winding up of Kadoe Pty Ltd and Mrs Thomson receiving advice from Mr Byrnes. Mr MacGillivray deposes that:

“During the conversation the respondent received instructions to proceed with attempted settlement in Tremco dispute.”[65]

[65]Affidavit of Andrew Mark MacGillivray filed 20 July 2015, paragraph 35.

1. The only source of information identified by Mr MacGillivray in his affidavit upon which he deposes to that fact is the hand written file note made by Ms McGrath in respect of the telephone conversation. It reads:

“2.36-2.57 PH call Caroline Thomson re: winding up Kadoe option, advice from Philip Byrnes + instructions to continue in Tremco matter.”[66]

[66]Ibid at paragraphs 36 and 37 and page 59 of Exhibit AMM-01.

1. Although this note records very little detail of a twenty one minute conversation, it certainly does not in terms record, as to deposed to by Mr MacGillivray, that the firm received instructions to proceed with an attempted settlement of the Tremco dispute. It records that one of the issues the call was about was instructions to continue in the Tremco matter.  It is to be noted that there is no evidence of any subsequent steps having been taken by the firm which would appear to be in furtherance of instructions received to attempt to settle the Tremco matter. Mrs Thomson was cross-examined about having spoken to someone at the law firm on 12 July 2013. She said that she spoke to Philip Burns on that date, but did not agree with the note that she provided instructions to continue in the Tremco matter “because Mr Burns never dealt with the Tremco matter. He was a litigator”.[67] The matter was not taken further in her corss-examination.

   [67]Transcript 1-65, 11 1-13.

1. The next activity which Mr MacGillivray identifies on the Tremco matter as conduct from which acceptance is to be inferred is the receipt of correspondence from the opposing solicitors on 24 July 2013 regarding disclosure.[68]   The affidavit then records an internal discussion between Ms McGrath and Ms Sweeney.  Following this, the letter was emailed to Mrs Thomson in which she was asked to review it and provide instructions about disclosure of documents.

   [68]Ibid at paragraph 38 and pages 60- 61 of the Exhibit.

1. On 26 July 2013 Mrs Thomson responded saying:

“In regard to Tremco my feeling is this.  They can take this application against us for non-disclosure to demonstrate product usage.  But they cannot provide accurate details of who ordered the product, delivery dockets or proof of delivery.  They also have not provided any information in regard to dangerous/hazardous goods.  Despite repeated requests for all of this, it now comes down to us providing this information. This is a bit of a double standard.

I will be providing a submission in regard to Anne’s. I look forward to speaking with you when you are free.”[69]

[69]Ibid at page 65 of the Exhibit.

1. The firm then wrote to the solicitors for the opposing party on 31 July 2013.[70]

   [70]Ibid at pp 66-67 of the Exhibit.

1. On 24 October 2013 Reid DCJ allowed an ex-parte application heard on the papers granting leave to Tremco Pty Ltd to deliver interrogatories.[71]  Those interrogatories were delivered by Tremco’s solicitors under cover of letter dated 31 October 2013.

   [71]Tremco Pty Ltd v Kadoe Pty Ltd trading as Kadoe Commercial Coatings QDC [2013].

1. That is the extent of the matters to which Mr MacGillivray deposes in respect of the Tremco matter after 11 July 2013.

1. In my view, none of those matters, whether taken separately or together, clearly establishes conduct on the part of Mrs Thomson  (and/ or Mr Thomson) from which acceptance of the offers contained in the letters of 11 July 2013 should be inferred.  They are at least equally consistent with the firm continuing to act under their existing client agreements with Kadoe, and Mrs Thomson continuing to provide instructions on behalf of Kadoe Pty Ltd under those agreements.

1. Mr MacGillivray identifies the following in respect of work performed on the M Kent dispute between 11 July 2013 and 26 November 2013 as being matters from which it may be inferred that Mr and Mrs Thomson accepted the 11 July 2013 offers by their conduct.

1. On 24 July 2013 a letter which had been received from the Legal Services Commission in relation to a complaint which had been made about a solicitor in the M Kent law firm who had previously acted for Kadoe Pty Ltd was forwarded to Ms  McGrath and others in the firm, on Mrs Thomson’s behalf, by a person who apparently worked for Kadoe.[72]

   [72]Ibid at p 76 of the Exhibit.

1. On 26 July 2013 Ms McGrath responded by email in respect of that matter and the correspondence from Tremco’s solicitors concerning disclosure.[73]  In respect of the LSC complaint Ms McGrath said that she and Mrs Thomson “should have a quick chat about this to determine whether you intend to make submissions and about the strategy going forward on the M Kent matter.”

   [73]Ibid.

1. On 5 August 2013 Mrs Thomson sent an email to Ms McGrath and others at the firm to which she attached a letter which she had drafted to the Legal Services Commissioner in which she made a submission concerning the disciplinary complaint.  She requested Ms McGrath to review the draft and recommend any changes.[74]

   [74] Ibid at p 77 of the Exhibit.

1. Also on 5 August 2013 someone within the law firm[75] took instructions from Mrs Thomson about amendments to the letter to the Legal Services Commissioner.[76]  The firm also settled the draft letter.[77]

   [75]The identity of the person was not evident from the material.

   [76]Exhibit AMM01 at page 78.

   [77] Ibid at pp 79-84.

1. On 4 September 2013 Mrs Thomson emailed to the firm a copy of a letter which she had received from the Legal Services Commission.[78]

   [78]The letter appears at p 94 of the Exhibit to Mr MacGillivray’s affidavit but the email to the firm is not in evidence.  Mr MacGillivray simply deposes to that fact at para 71 of his affidavit.

1. Again, in my view, none of these matters are any more consistent with Mrs Thomson (and Mr Thomson) providing information and instructions to the law firm such that one would infer that they were accepting, or had accepted, the offers contained in the 11 July letters than with their simply continuing to provide instructions on behalf of Kadoe Pty under the existing client agreement between Kadoe and the firm.

1. In my view, these matters referred to by Mr MacGillivray are equivocal as to whether agreements in terms of the client agreements stated 11 July 2013 were concluded.  In such circumstances it is permissible to consider other conduct subsequent to the offers, and their alleged acceptance by various conduct, and whether that subsequent conduct is consistent or inconsistent with there being a concluded agreement.[79]

   [79]Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 78; Barrier Wharves Ltd v W Scott Fell & Co Ltd (1907) 5 CLR 647 at 672; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 163 per Heydon JA (as His Honour then was).

1. In his affidavit, Mr MacGillivray refers to and exhibits[80] an email from Mrs Thomson to Mr Andrew Kelly and Mr Scott Scriven of the firm in which she said: that she was happy with the work that the firm had performed; that she would “find a way to pay these fees”; but that she was not at that moment in a position to do so.  She also stated that she still required work to be performed by the firm.

   [80]Paras 73 and 74 on pp 95 and 96 of the Exhibit.

1. In my view, too much should not be made of Mrs Thomson’s use of the personal pronouns “I” and “us” in that email. They should not be read as an acknowledgment  on the part of Mrs Thomson of personal liability for the fees. She also uses, on a seemingly interchangeable basis, the pronouns “we” and “our”.  For example, she says that “we have paid over $36,000 to Thomsons since we first instructed you”. This, in context, must be a reference to Kadoe Pty Ltd as the client.

1. In so far as it might be being contended by Mr MacGillivray that those parts of the email recited in his affidavit indicate some acknowledgement of personal liability for the firm’s fees by Mrs Thomson, it should be noted that the subject line of the email is “Kadoe’s account”.

1. On 16 August 2013 Mr Scott Scriven, the firm’s collection manager, emailed Mrs Thomson in respect of a proposal which he had previously discussed with her.[81]  The email stated that there was then a current balance of $83,550.60 in respect of the Kadoe account.  A payment program of $1,000 per week for a period of three months was proposed.  After that period it was proposed that “we review your circumstances again with a view to increasing repayments at that time”. 

   [81]Exhibit CMT-18 to Exhibit 2.

1. Under the proposal, security was to be given “via a caveat over your residential property in relation to legal fees”. 

1. Mrs Thomson responded by email on 19 August 2013 saying that she and Mr  Thomson were extremely appreciative of the proposal.  However, she expressed that the one part they had reservations about was the caveat over their house.  The reservation related to alerting the ANZ Bank, which then had security over the property, to the existence of an unsigned trust deed.  There had been conflicting legal advice as to whether that should be disclosed to the bank.

1. Mr Scriven responded by email on 27 August 2013,[82] in which he said “I must do what is best commercially for the firm and therefore we need to obtain some form of security over this large debt”.

   [82]Ibid.

1. He observed that he understood the position the Thomsons were in with regard to the Bank, that the firm did not want to have an adverse impact on that and that, the only alternative would be for Mrs and Mr Thomson “to personally guarantee the debt”.  He explained:

“That would be achieved by you both signing a deed of guarantee and indemnity, which states that if Kadoe Commercial Coatings is unable to meet its financial obligations, then you are jointly liable for any outstanding debts at that time…”

1. Mr Scriven recommended that the Thomsons seek independent legal advice before signing any such deed “so you are aware of the legal ramifications”.

1. From this it is apparent that any amounts which Mr and Mrs Thomson would become liable would be ascertained at some future time upon which Kadoe Commercial Coatings, the business carried on by Kadoe Pty Ltd, could not meet its financial obligations.  Implicit in this was that it then could meet those obligations and that the indebtedness, at that point, remained that of Kadoe.  That indebtedness included amounts owing for work performed and billed after 11 July 2013.

1. On 20 September 2013[83] Mr Scriven again emailed Mrs Thomson on the subject of “Kadoe Commercial Coatings – legal fees”.  Mr Scriven informed Mrs Thomson that he had held a conference that morning with the relevant partners and legal staff of the firm “to discuss and agree the terms under which Thomsons lawyers would be prepared to continue acting for Kadoe Commercial Coatings”.  He emphasised that the firm’s policy was not to act on a speculative basis in any circumstances, so any option which involved awaiting the outcome of current litigation was unacceptable.  He said:

   [83]Exhibit CMT-19 to Exhibit 2.

“Thomsons Lawyers is prepared to continue acting on behalf of Kadoe Commercial Coatings under the following conditions:-

·Weekly payments of $1,000 towards the existing debt of $85,008.10 to commence immediately.  If any instalments are missed then this agreement is withdrawn and we will require immediate payment of the remaining debt.

·Personal guarantees from both you and your husband, Wayne for all existing and future costs.  Those guarantees must be signed and returned immediately or work will cease.

·Funds in trust to cover future action.  When required, you will be asked to deposit money into trust to cover future work.  No future work will be commenced until the funds are received. 

These terms are non-negotiable so I will await your confirmation today that they have all been accepted and then paperwork will be drawn regarding your personal guarantees.” [Emphasis added]

1. On 27 September 2013 Mr Scriven again wrote to Mrs Thomson, again on the subject of “Kadoe Commercial Coatings – legal fees”, saying:[84]

“Also, just letting you know I am trying to get the documents done for you to sign. 
Everyone in the Brisbane office is involved with major work at the moment so I am trying to get it done by someone here in Adelaide. 

I will come back to you when I know more.”

[84]Exhibit CMT-20 to Exhibit 2.

1. That email, it would appear, was prompted by an email exchange between Mrs Thomson and Mr Ben Coogan of the firm late on the night of 26  September 2013 and earlier on the morning on 27 September 2013 into which Mr  Scriven, and others, had been copied.[85]  In her email Mrs Thomson had said:

“At the moment I feel like Alice in Wonderland looking through the looking glass.  Everything is spiralling out of control.  We have taken steps to mitigate our losses by setting up the new company to replace the trust.  This will only change the future not the past.  PWA and/or Lloyds of London are not assisting in the mitigation of these losses.  PWA and CGW could have done this a long time ago by agreeing to sign the deed of confirmation that they promised PWA would pay for and it would happen.  It still has not.
We urgently need to achieve a settlement in this matter, but not as in previous terms, as this will not solve the current situation we now find ourselves in.  You have referred to ANZ changing our settlement strategy.  You mentioned in your email that we should consider disclosing on a without prejudice basis ANZ’s position and exert whatever pressure we can.  You also stated that this should be used to carve out the trust deed from any settlement.  We are not sure of the logic behind this, given that we can’t pay the bank out in the required timeframe.  A carve out it not going to assist us now.  We would have thought the bank’s position would be material to the case and any settlement.  If CGW don’t know of this how can it be fixed. 
In regard to your recommendation on where to from here we advise as follows:-
…

5. We would like to accept your offer of a phone call to CGW and report back to us.  You have estimated these costs less than $500.  We will pay $500 into trust to enable this to occur.  We should then be able to determine if CGW’s settlement negotiations are genuine in settling the matter in its entirety (i.e. debt, trust, losses, Thomson’s fees). 

As soon as you confirm that this is acceptable for us to progress down this path, we will pay the $500 into trust immediately.”

[85]Ibid.

1. In response, Mr Coogan had said:

“Yes, if you pay $500 into trust, then we will call CGW and then report back to you.  However, given that the last phone call was left on the basis that they wanted to know your bottom line, then I need to go back to them with something.  Rather than tell them what your bottom line is, I’d rather convey a realistic offer that you are prepared to make to dispose of this matter once and for all.  In concise terms, what would that offer be.”

1. On 4 October 2013 Mr Scriven emailed Mrs Thomson[86] seeking confirmation of some details “before we can finalise the deeds and put them to you for approval”.  The details of which confirmation was sought were the full address for Kadoe Commercial Coating; the Thomsons’ residential address; and Mr Thomson’s email address.

   [86]Exhibit CMT-21 to Exhibit 2.

1. On 16 October 2013[87] Mr Scriven sent a Deed Poll for Kadoe Pty Ltd and a Deed of Guarantee and Indemnity for Mr and Mrs Thomson. 

   [87]Exhibit CMT-22 to Exhibit 2.

1. The deed poll[88] was to be made by Kadoe Pty Ltd trading as Kadoe Commercial Coatings and Peradena Pty Ltd in favour of the partners of Thomson Lawyers.  The background to the deed poll was recited as follows:

“In consideration of Thomsons Lawyers forbearing and not suing Kadoe and Peradena for outstanding invoices particularised in Schedule 1, Kadoe and Peradena have agreed to make repayments as set out in Schedule 2 in accordance with the terms set out in this deed poll.”

[88]Exhibit CMT-23 to Exhibit 2.

1. By clause 2 of the operative provisions Kadoe and Peradena were unconditionally and irrevocably to acknowledge that those corporations owed Thomsons lawyers, as at 15 October 2015, the amount of $86,042.10 as particularised in Schedule 1 to the deed.  This was defined as the “residual debt.” 

1. By clause 3.1 each of those corporations were to acknowledge and agree that there would be future fees and outlays incurred by them to the firm for professional services to be provided after the date of the deed poll.  “Professional services” was a term defined in the deed of guarantee and indemnity to mean professional services and disbursements provided by Thomson lawyers to Kadoe Pty Ltd, Peradena Pty Ltd and Mr and Mrs Thomson.[89]  These were defined as “future works.”

   [89]Clause 1 of the deed poll provided that terms defined in the deed of guarantee and indemnity were to have the same meaning in the deed poll.

1. By clause 3.2 each of the corporations were to acknowledge that all monies payable for future works were to be deposited into the respondent firm’s trust account as a condition precedent of, and prior to, such works being undertaken.

1. By clause 4.1 the two corporations were unconditionally and irrevocably to undertake to pay to the firm monthly payments of $4,300 commencing on 31 October 2013 to extinguish the residual debt and monies payable for future works in anticipation of further tax invoices.

1. Clause 5.1 defined “default” to mean any of a number of circumstances including that either corporation failed to make any of the payments on time; was wound up; was placed in receivership or had a receiver and manager, liquidator, provisional liquidator or administrator appointed; or a compromise or arrangement under part 5.1 of the Corporations Act was proposed.

1. A further circumstance of default was that “there is default by Caroline Thomson or Wayne Thomson under the deed poll by Caroline Thomson or Wayne Thomson in favour of Thomson Lawyers signed on or about the same time as this deed is signed”.  It is to be noted that the reference to a ‘deed poll’ signed by Mr and Mrs Thomson must have been intended to be a reference to the deed of guarantee and indemnity to be signed by them.  That was the only deed proffered or proposed to them. 

1. Clause 5.2 provided for the consequences of default.  Those consequences were twofold.  First, the whole or any part of the residual debt remaining outstanding would become due and payable by the two corporations to the firm. 

1. Secondly, the firm might, in its absolute discretion, “terminate its retainer with Kadoe and Peradena and cease to provide any further legal services to them”. 

1. Clause 6.1 dealt with interest in the event of default.  Each of the corporations was to acknowledge and agree that interest would accrue and be payable by them.

1. Schedule 1 to the deed poll set out the particulars of the amount of the residual debt.  It included eight invoices for “File number 3413546 – Tremco Pty Ltd” and four invoices for “File number 3475685 – the M Kent Law Firm”.  The last invoice on the Tremco file was issued on 31 July 2013.  The last invoice for the M Kent Law Firm matter was issued on 30 August 2013.  The Schedule also included invoices issued on two other files.

1. The deed of guarantee and indemnity was to be made by Mr and Mrs Thomson described as the “guarantors”, Kadoe Pty Ltd trading as Kadoe Commercial Coatings and Peradena Pty Ltd in favour of the partners of Thomson Lawyers. 

1. By clause 3.1(a) of the deed of guarantee and indemnity, Mr and Mrs Thomson were unconditionally and irrevocably to guarantee that the two corporations would pay to the firm, on time, any amount that was payable under the deed poll made by those corporations in favour of the firm.  By clause 3.1(b) Mr and Mrs Thomson were to be obliged to pay immediately upon demand any amount under the deed poll not paid by the two corporations.

1. By clause 3.2 Mr and Mrs Thomson, as a separate obligation, were to unconditionally and irrevocably indemnify the firm against losses, costs charges, liabilities and expenses which the firm may incur as a consequence of either of the two corporations failing to pay the firm on time an amount payable under the deed poll; not having to pay the firm, or being unable to pay it, under the deed poll; a payment to the firm by either corporation under the deed poll being, or being claimed to be, void, voidable or a preference; or Mr and Mrs Thomson failing to pay the firm an amount under clause 3.1 of the guarantee.

1. Clause 3.2 expressly provided that as the indemnity was a separate obligation it could be enforced against Mr and Mrs Thomson even if their obligations under the guarantee and indemnity ended “or Kadoe or Peradena’s obligations for the professional services end”.

1. Clause 3.3(c) provided that the obligations of Mr and Mrs Thomson under the guarantee and indemnity did not merge with those of the two corporations under the deed poll or with any judgment against either corporation.

1. By clause 4.1 Mr and Mrs Thomson were to be made liable as principle debtors, and the firm was to be entitled to enforce the guarantee and indemnity against them even if it had not given them notice that either corporation was in default under the deed poll or had not attempted to enforce the deed poll against the corporations.

1. Similarly, by clause 4.3, the firm was to be permitted to claim against Mr and Mrs Thomson under the deed of guarantee and indemnity before it enforced any right under the arrangement for the provision of professional services or against either corporation under the deed poll. 

1. Clause 5.5 provided that Mr and Mrs Thomson were not to be entitled to be subrogated to any rights which the respondent had against another person until each of three conditions were met.  Those conditions included that the respondent had “received all of the money which Kadoe or Peradena may owe Thomson Lawyers at any time for the professional services”.

1. On 1 November 2013, Mr Kelly emailed Mrs Thomson attaching the interrogatories which had been served on the firm by Tremco’s solicitors.[90]  Mr Kelly said:

“Given that the position with respect to Kadoe’s unpaid fees remains unresolved, we are unable to undertake any work on this matter.  Once an appropriate arrangement has been put in place with Scott Scriven, we would be happy to discuss this further with you further and undertake the necessary work.”

[90]Exhibit CMT-18 to Exhibit 2.

1. In my view, the conduct of the firm in proffering the deed poll and deed of guarantee and indemnity in the terms which I have set out is inconsistent with there being concluded client agreements between the firm and Mr and Mrs Thomson. 

1. Mr Kelly’s email of 1 November 2013 makes plain that, to that point, no appropriate arrangements had been put in place in respect of Kadoe’s unpaid fees and that the matter remained unresolved.

1. The acknowledgment of indebtedness contained in the deed poll is by Kadoe and Peradena.  It is of a debt owing as at 15 October 2013, some three months after it is alleged that the client agreements were entered into by Mr and Mrs Thomson.  There is no suggestion within the deed of any debt owed by Mr and Mrs Thomson as at 15 October 2013, let alone any acknowledgement of such.

1. The consideration[91] is the forbearance by the firm from suing the companies for the outstanding invoices.  The invoices include invoices issued in July in respect of both the Tremco matter and the M Kent Law Firm matter, and in August 2013 in respect of the latter.  The indebtedness also includes invoices issues in respect of two other matters, and in respect of one of those matters, issued as recently as 30 September 2013.

   [91]Notwithstanding it was executed as a deed poll.

1. The undertaking to make monthly payments to the firm to extinguish the residual debt and monies payable for future works was to be given by the corporations.  So too, it was the corporations which were to acknowledge and agree that in the event of default interest would accrue and be payable by them.

1. An express consequence of default was the termination, at the firm’s discretion, of its retainer with the companies and a cessation of the provision of future legal services to them.  Quite clearly, this demonstrates that the parties understood that there was a continuing retainer with Kadoe. This is quite contrary to the circumstances which were said in June 2013 to necessitate the entering into new client agreements with Mr and Mrs Thomson personally.  Those circumstances were the steps that they were intending to investigate and likely pursue with respect to Kadoe; implicitly that the firm would not be able to maintain a continuing retainer with Kadoe.

1. What Mr and Mrs Thomson were to guarantee under the deed of guarantee and indemnity was the payment by the corporations of any amounts payable by those corporations under the deed poll.

1. The deed of guarantee and indemnity was to operate to make Mr and Mrs Thomson principle debtors.  Implicit in this is that in the absence of the deed, they were not.

1. All of those matters contained in each of the deed poll and deed of guarantee and indemnity are inconsistent with there being concluded client agreements with Mr and Mrs Thomson as a consequence of their having accepted offers contained in the July letters.  The firm’s conduct in proposing the deeds is also inconsistent with there being any such agreements.

1. Indeed, an examination of the conduct of the firm subsequent to the letters of 11 July 2013 clearly demonstrates that the firm acted on the basis that new client agreements with Mr and Mrs Thomson personally, as had been proposed in the 11 July 2013 letters, had not been entered into.

1. The correspondence of the firm’s collections manager on 16 August 2013 proposed security for Kadoe’s account with the firm be provided by a caveat over the Thomson’s residential property.  That course was ultimately not pursued either, due to the Thomson’s concerns in relation to the bank being informed of the unsigned trust deed. 

1. As a consequence of that matter Mr Scriven identified the Thomsons’ personally guaranteeing the debt as being the only alternative for the firm “to obtain some form of security over this large debt”. 

1. Mr Scriven recommended they seek independent legal advice before signing any deed so that they would be aware of the legal ramifications.

1. All of these matters establish, clearly in my view, that there were no concluded client agreements entered into with Mr and Mrs Thomson personally.

Clients even in the absence of costs agreements

1. Mr Dickson, seemingly in the alternative to there being concluded costs agreements with Mr and Mrs Thomson, submitted that it did not matter whether there were such agreements because the existence of a costs agreement does not determine whether there was a solicitor-client relationship; the costs agreement merely provides evidence of that relationship.[92] He further submitted in that regard that the costs were still recoverable by the firm from the client under s 319 of the Legal Profession Act 2007, either under an applicable scale[93] or according to the fair and reasonable value of the legal services provided.[94]

   [92]Transcript 2-9; lines 9-12.

   [93]Section 319(1)(b).

   [94]Section 319(1)(c).

1. Initially, Mr Dickson, when pressed in respect of this submission, said that he was unable to say, because it did not appear in the costs certificate, whether Mr Hartwell had assessed the costs against the agreements contained in the letters of 11 July 2013 or not.[95] 

   [95]Transcript 2-14; lines 9-46.

1. However, it seems quite clear that Mr Hartwell would have assessed the costs against those agreements because they were provided to him as part of his brief.[96]

   [96]Affidavit of Andrew Mark McGillivray, paragraph 108(c).

1. In any event, the contention that Mr and Mrs Thomson were clients of the firm rather than Kadoe and had become so “because a company who’s the client is going to disappear, so the solicitors want their fees by somebody (sic) and to have a client”[97] cannot be sustained. 

   [97]Mr Dickson’s submissions at Transcript 2-17; lines 34-36.

1. The course of conduct between the parties, which I have set out above, does not establish, and is as much inconsistent with, a relationship of solicitor and client having been formed between the firm and Mr and Mrs Thomson personally, as it is inconsistent with a client agreement having been concluded.  The parties continued to act on the clear basis that Kadoe (and Peradena) remained the clients of the firm.

1. In my view, these matters establish that Mr and Mrs Thomson were not “clients” of the firm within the meaning of s334 of the LPA. As such, costs would not be recoverable from them under s319 of the LPA.

Conclusion and disposition

1. For the reasons set out above, Mr and Mrs Thomson are not, and at no time were, personally liable for the legal costs payable to the firm in respect of the Kadoe matters concerning Tremco and the M Kent Law Firm. 

1. In those circumstances, the judgment entered on 22 August 2014 as against Mrs Carolyn Thomson and Mr Wayne Thomson must be set aside. 

1. It having been determined that Mr and Mrs Thomson are not liable for the legal costs, I will hear the parties as to whether any further order, other than setting aside judgments against them, ought be made. I will also hear the parties as to costs.