Vizovitis v Ryan
[2014] ACTSC 243
•19 September 2014
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Vizovitis v Ryan |
Citation: | [2014] ACTSC 243 |
Hearing Date(s): | 7-10 June 2010, 19-22 September 2011, 9-10 November 2011, 14-17 November 2011, 2-4 April 2012, 24 September 2012, 31 October 2012, 29 November 2012, 17-21 December 2012, 7-8 January 2013, 24 April 2013 Final written submissions lodged: 21 May 2013 |
DecisionDate: | 19 September 2014 |
Before: | Harper M |
Decision: | The court declares that the agreements as to costs between the parties dated 23 March 1999 and 10 December 2002 are not binding on the parties. 1. judgment for the plaintiff in the sum of $53,250.00. 2. the defendant pay the plaintiff’s costs. 3. the order as to costs be stayed for 14 days. |
Category: | Principal Judgment |
Catchwords: | COSTS – costs between solicitor and client – agreement as to costs – whether fair and reasonable – Legal Practitioners Act 1970 (since repealed) – onus on solicitor to satisfy court that agreement fair and reasonable – whether hourly rate excessive – whether benefit to solicitor and disadvantage to client established – agreements set aside – measure of client’s loss |
Legislation Cited: | Legal Practitioners Act 1970 (ACT) |
Cases Cited: | Passey v Bandarage [2002] ACTSC 105 |
Parties: | Georgia Vizovitis (Plaintiff) Eunice Catherine Mary Ryan (Defendant) |
Representation: | Counsel Mr SR Hausfeld (Plaintiff) In person (7 June 2010-22 September 2011) (Defendant) Mr BMJ Toomey QC (9 November 2011 - 4 April 2012) Mr MJ Neil QC (24 September – 31 October 2012) Mr B O’Donnell (17 December 2012 – 8 January 2013) In person (24 April 2013 |
| Solicitors Dibbs Barker (Plaintiff) Ryans Barristers and Solicitors (Defendant) | |
File Number(s): | SC 694 of 2004 |
Harper M:
The defendant is the sole principal of a firm of solicitors practising at the Tuggeranong Town Centre. She acted for the plaintiff in two actions for damages for personal injury in this court, each of which arose out of a motor vehicle collision. The collisions occurred on 2 April 1994 and on 3 April 1996. Both collisions happened in Northbourne Avenue, Braddon. In each collision the plaintiff was the driver of a car which was struck from behind by another car.
The plaintiff instructed the defendant in relation to the first accident in March 1995. Some time after the second accident she instructed the defendant to act for her in relation to that claim also.
On 23 March 1999 the plaintiff and the defendant signed a document headed “Agreement as to costs”.
The plaintiff and the defendant signed a second agreement, dated 10 December 2002, bearing the same heading.
The plaintiff commenced the present proceedings on 19 October 2004, seeking a declaration that the two agreements were void, and orders that they be set aside. By way of consequential relief the plaintiff sought taxation of the costs payable by her to the defendant, and repayment of any overpayment she might be found to have made.
Agreements as to costs between solicitor and client were contemplated and regulated by the Legal Practitioners Act 1970 (ACT). That Act has since been repealed and replaced by the Legal Profession Act 2006, but the earlier Act continues to apply in respect of agreements as to costs made before the later Act came into force. Section 191 of the earlier Act gives this court jurisdiction to set aside a fees agreement if the court is satisfied that the agreement was not fair and reasonable.
The plaintiff’s case is that the agreements which she signed were not fair and reasonable, and that in those circumstances the costs for which she is liable to the defendant should be calculated by reference to the scale of costs then set out in the Supreme Court Rules 1937 (ACT). Those Rules have since been supplanted by the Court Procedures Rules 2006 (ACT) but continue to apply to legal services provided at the time they were in force. The plaintiff’s case is that the defendant charged her more than scale, and should be required to account to her for the difference.
The applicable sections of the Legal Practitioners Act in force at the time are as follows:
190 Agreement as to costs
(1) The preceding provisions of this part, other than 179 and 189, do not apply in respect of the costs to be paid to a solicitor for work to which an agreement under this section relates.
(2) The solicitor may make an agreement with a person that the amount of the costs (excluding disbursements) payable, or to be payable, by the person to the solicitor for work of a professional nature already undertaken, or to be undertaken, for the person by the solicitor shall be the amounts specified in, or ascertainable in accordance with, the agreement.
(3) An agreement referred to in subsection (2) is not enforceable unless a note or memorandum containing the terms of that agreement is signed by the person liable to pay the costs to which the agreement relates.
(4) A note or memorandum of an agreement signed in accordance with subsection (3) is evidence of the terms of the agreement.
(5) A solicitor who is a party to an agreement under this section is not entitled, in respect of work to which the agreement relates, to receive an amount for costs (including disbursements) greater than the amount specified in, or ascertainable in accordance with, the agreement.
191 Powers of Court where contract not fair and reasonable
(1) Where, on an application by a person who has made an agreement with a solicitor under section 190, the court is satisfied that the agreement is not fair and reasonable, the court may, by order –
(a) direct that the amount payable under the agreement be reduced to an amount specified in the order; or
(b) declare that the agreement is not binding on the parties to the agreement.
(2) Where, under subsection (1), the court directs that the amount payable under an agreement be reduced, the agreement is enforceable as if the amount specified in the order of the court were specified in the agreement as the amount paid under the agreement.
(3) Where, under subsection (1), the court declares that the agreement is not binding on the parties to the agreement –
(a) the court may make such further orders as it thinks necessary to restore the parties to the agreement to the position in which they would have been if the agreement had not been made; and
(b) this part (other than section 190) applies as if the agreement had not been made.
(4) Except by leave of the court, a person is entitled to make an application under this section in respect of an agreement after the institution of proceedings for the recovery from that person of the amount payable under the agreement.
Earlier provisions of part 15 of the Act provided for taxation by the Registrar of this court of a bill of costs as between solicitor and client.
The costs agreements
The terms of the 1999 agreement as to costs were as follows:
THIS AGREEMENT AS TO COSTS is made on 23 March 1999.
Between Eunice Catherine Mary Ryan t/as Ryans Barristers & Solicitors of 191-203 Anketell Street, Tuggeranong in the Australian Capital Territory (the Barrister and Solicitor);
And Georgia Vizovitis of RMB 1544 Federal Highway, Sutton in the State of New South Wales (the Client)
IT IS AGREED THAT
A. The Barrister and Solicitor agreed to act for the client in the capacity of Barrister and Solicitor for the period from 6 March 1995 and continuing, in relation to the client’s personal injury matters in respect of two motor vehicle accidents on 2 April 1994 and 3 April 1996.
B. The client agrees to pay to the Barrister and Solicitor all such professional costs and disbursements as are reasonably incurred by the Barrister and Solicitor in acting for the client assessed by the hourly rate of $280.00 per hour for the principal Barrister and Solicitor, $220 for the employed Barrister and Solicitor and $85.20 for the legal assistant.
C. The Barrister and Solicitor agrees to carry the professional costs and disbursements until the completion of the matter on the basis that the Client agrees to pay for all professional costs and disbursements undertaken on the matter.
D. The Client agrees to pay to the Barrister and Solicitor interest accruing in accordance with subsection 230(2)(b) Magistrates Court Civil Jurisdiction Act 1982 on account of the professional costs and disbursements after 30 days in relation to a claim within the jurisdiction of the Magistrates Court. The Client agrees to pay to the Barrister and Solicitor interest accruing in accordance with the Supreme Court Act on account of the professional costs and disbursements after 30 days in relation to a claim within the jurisdiction of the Supreme Court.
E. The Client agrees to pay the cost of obtaining the medical reports and all other reasonable disbursements which are necessary to undertake the claim on behalf of the Client.
F. The Client irrevocably authorises the Barrister and Solicitor to deduct from moneys payable to the client the professional costs and disbursements of the Barrister and Solicitor whether those moneys are payable to the client on account of a settlement or a Court award.
The agreement was signed by the defendant, whose signature was witnessed by her daughter Emily Ryan, at that time working as a clerk in her mother’s firm. The plaintiff’s signature was witnessed by Mr Keith Halpin, an accountant in private practice who was the accountant for the Vizovitis family and its business interests.
The evidence is that by letter dated 2 March 1999 the defendant’s firm sent the costs agreement to the plaintiff by post with a covering letter which read as follows:
CLAIM FOR COMPENSATION
MOTOR TRAFFIC ACCIDENTS
We enclose here a costs agreement in accordance with our recent discussions with you. We would be grateful if you would sign and return the documents as soon as possible.
The plaintiff signed the agreement at her accountant’s office, left it undated and returned it to the defendant, who then signed and dated it.
The 2002 agreement as to costs was largely in identical terms. The first two clauses were different, and I set them out:
A. The Barrister and Solicitor agreed to act for the client in the capacity of Barrister and Solicitor for the period from 7 March 1995 and continuing in relation to the client’s personal injury matter.
B. The client agrees to pay to the Barrister and Solicitor all such professional costs and disbursements as are reasonably incurred by the Barrister and Solicitor in acting for the client assessed at the hourly rate of $380.00 per hour plus GST where applicable for the principal Barrister and Solicitor, $280.00 per hour plus GST where applicable for the employed Barrister and Solicitor, and $104 per hour plus GST where applicable for the legal assistant.
Apart from its date (10 December 2002) and a change in the defendant’s business address, the rest of the agreement was identical to the 1999 agreement. It was signed by the plaintiff and the defendant, and both signatures were witnessed by Claire Grogan, who was then a law student working at the defendant’s firm. The 2002 agreement was signed at the defendant’s office.
The personal injury actions
The defendant commenced proceedings in this court on behalf of the plaintiff during 2000. The two actions were heard together before me in this court commencing on 5 November 2003. Mr Michael Maxwell of the Sydney Bar appeared for the plaintiff and Mr Martin McDonogh, also of the Sydney Bar, appeared for the defendants in both actions. The vehicles at fault in both accidents were by coincidence covered for compulsory third party purposes by the same insurer, NRMA Insurance. Both had been rear end collisions and liability was not in issue. The principal issues were as to causation of the injuries alleged by the plaintiff, and as to her claim for loss of earning capacity, past and future.
Based upon the estimates provided by the solicitors for the parties, the hearing had been allocated two days. The plaintiff spent almost the whole of the first day in examination in chief. By the end of the second day the cross-examination was far from complete, and it had become apparent that the estimate had been inadequate. Mr McDonogh gave an indication that it would be prudent to set aside a further four days to complete the hearing. I adjourned the further hearing to a date to be fixed, which I expected would be some three or four months later. This was undesirable because it left the plaintiff subject to the constraints of cross-examination but it was unavoidable in the circumstances.
The progress of the plaintiff’s evidence had been slower than usual because of the use of a Greek interpreter. In the present proceedings there was a challenge to the plaintiff’s credibility arising out of the use and the identity of the interpreter, to which I shall return.
After I adjourned the hearing at the end of the second day, settlement negotiations took place in the precincts of the court which, late on that evening, were successful in resolving both actions. I subsequently entered judgment by consent for the plaintiff in the sum of $50,000.00 plus costs in one of the actions and $25,000.00 plus costs in the other.
Subsequent to the settlement, the defendant negotiated party-and-party costs with Phillips Fox, the solicitors for the defendants in the two actions. The solicitors agreed to a costing consultant, Mr Kim Chapman of Legalcost, preparing what was described as a mini-assessment. Mr Chapman arrived at a figure of $53,000.00 including disbursements, and agreement was reached at that figure. It does not appear that the defendant sought the plaintiff’s instructions before the agreement was reached, but there is no issue in these proceedings about the adequacy or reasonableness of the agreed figure for party-and-party costs.
The pleadings
The statement of claim in the present action was filed on 19 October 2004. It was in the following terms:
1. At all material times the defendant was a legal practitioner practising in the Australian Capital Territory.
2. At all such times the defendant practised as Ryans Barristers and Solicitors.
3. During 1995 the plaintiff consulted and retained the defendant to act for her in relation to injuries sustained by her in a motor vehicle accident in about April in the previous year.
4. It was an implied condition of the retainer that the defendant would act for the plaintiff at the published costs scale for the jurisdiction in which proceedings were brought.
5. In 1996 the plaintiff again retained the defendant to act for her in relation to a further motor vehicle accident which occurred that year.
6. It was an implied condition of the retainer that the defendant would act for the plaintiff at the published cost scale for the jurisdiction in which proceedings were brought.
7. The plaintiff signed a document titled “Agreement as to costs” at the request of the defendant on 23 March 1999, in respect of the two actions previously mentioned.
8. The plaintiff signed a further document titled “Agreement as to costs” at the request of the defendant on 10 December 2002, in respect of the two actions previously mentioned.
9. On or about 6 November 2003, acting on the advice of the defendant, the plaintiff agreed to settle the two claims for the sum of $75,000.00 with costs agreed at $53,000.00.
10. In relation to the two matters the plaintiff has been charged by the defendant for costs and disbursements and has paid the same as follows:
Matter 95/063
Invoice 8406
$2, 023.21
Invoice 5400 $49,507.53
Counsel’s fees $16,495.00
Invoice 4855 $1,605.60
Invoice 2709 $607.65
Total $70,238.99
Matter 96/163
Invoice 8407 $470.70
Invoice 4854 $23,586.85
Total $24,057.55
The total is therefore $94,296.45
11. The charges made by the defendant exceed the scale applicable from time to time for work done by a legal practitioner pursuant to the costs rules of the Supreme Court of the Australian Capital Territory.
12. In charging at a rate exceeding that prescribed by the Supreme Court of the Australian Capital Territory cost rules, the defendant has acted in breach of her retainer in respect of both matters.
13. Section 191 of the Legal Practitioners Act (ACT) applies to the two agreements, and the two agreements are not fair and reasonable for the purposes of that Act.
14. Further or in the alternative, the plaintiff entered into the two agreements under the undue influence of the defendant.
15. Further or in the alternative, the defendant procured the two agreements in circumstances in which it would be unconscionable for the defendant to rely on them and their terms.
16. Further or in the alternative, in procuring the plaintiff’s consent to enter into the two agreements the defendant engaged in unconscionable conduct:
(a) for the purposes of s 51AB of the Trade Practices Act (Cth) in trade or commerce in connection with the supply, or possible supply, of services.
(b) for the purposes of s 13 of the Fair Trading Act (ACT) in connection with the supply, or possible supply, of services.
17. Further or in the alternative, there was no consideration for the plaintiff’s entry into the two agreements, or alternatively, there was a total failure of consideration.
18. In respect of charging in breach of her retainer in respect of both matters, the plaintiff seeks an order that the defendant prepare and present for taxation a bill of costs in respect of acting for the plaintiff in each matter; or, alternatively, an order that the defendant’s costs be reduced to a specified sum.
19. Further or in the alternative, the plaintiff’s claim is pursuant to s 191 of the Legal Practitioners Act for:
(a) a declaration that the agreements of 23 March 1999 and 10 December 2002 are not fair and reasonable;
(b) a declaration that she is not bound by the agreements.
(c) an order that the amounts payable under the agreements be reduced to a sum to be specified.
(d) alternatively that the defendant tax a bill of costs for work done in respect of the two matters at the Supreme Court scale as applying from time to time.
20. Further or in the alternative the plaintiff’s claim is for:
(a) a declaration that it would be unconscionable for the defendant to retain the benefit of the two agreements.
(b) a declaration that the two agreements be set aside.
(c) an order that the amounts payable under the agreements be reduced to a sum to be specified.
(d) alternatively, that the defendant tax a bill of costs for work done in respect of the two matters at the Supreme Court scale as applying from time to time.
21. Further or in the alternative, the plaintiff’s claim is made pursuant to the Trade Practices Act, or alternatively the Australian Capital Territory Fair Trading Act and the plaintiff seeks the following orders:
(a) a declaration that the defendant in trade or commerce engaged in unconscionable conduct in relation to the services of the plaintiff.
(b) alternatively, a declaration that the defendant engaged in unconscionable conduct in the provision of services to the plaintiff.
(c) an order that the two agreements be set aside,
(d) an order that the amounts payable under the agreements be reduced to a sum to be specified.
(e) alternatively, that the defendant tax a bill of costs for work done in respect of the two matters at the Supreme Court scale as applying from time to time.
22. Further or in the alternative, the plaintiff’s claim is that the two agreements are void for want of, or failure of, consideration and she seeks the following orders:
(a) a declaration that the two agreements are void.
(b) an order that the two agreements be set aside.
(c) an order that the amounts payable under the agreements be reduced to an amount to be specified.
(d) alternatively, that the defendant tax a bill of costs for work done in respect of the two matters at the Supreme Court scale as applying from time to time.
23. The plaintiff also claims:
(a) an order that the defendant pay to the plaintiff the difference between the amount paid by her in costs and disbursements to the defendant, and such amount as is found to be due by her after taxation or specification of costs.
(b) general damages.
(c) interest.
(d) costs.
in respect of the above causes of action.
The defendant filed a defence in November 2004. An amended defence was filed in July 2005. The defendant admitted the facts asserted in paragraphs 1, 2, 3, 5, 7, 8, 10 and 11 of the Statement of Claim. She denied the assertions in paragraphs 4, 6, 12, 14, 15, 17 and 18. As to paragraph 9, she admitted the facts asserted but said that the matters had settled on the advice of the defendant and Mr Maxwell of counsel.
At the commencement of the hearing, counsel for the plaintiff announced that his client no longer relied on paragraphs 14, 15, 16 or 17 of the Statement of Claim, effectively withdrawing the claims under the Trade Practices Act and the Fair Trading Act and withdrawing the assertions of undue influence, unconscionability and total failure of consideration.
Progress of the proceeding up to trial
The proceeding was commenced by originating application on 19 October 2004. A defence was filed in the following month, and amended in July 2005. There were various skirmishes during that year, before me and before the Registrar, about particulars. In July 2005 Gray J heard and determined an interlocutory application seeking orders in relation to the translation of portions of the evidence in the personal injury proceedings from Greek into English. His Honour dismissed that application with costs.
In February 2006 the defendant applied for a direction that the court hear and determine as a separate question whether the costs agreements should be set aside. On 24 February 2006 I made an order by consent that the court hear and determine as a separate question the issues raised by paragraphs 1 to 17 of the statement of claim and the relief sought in paragraphs 19 (a) and (b), 20 (a) and (b), 21 (a), (b) and (c) and 22 (a) and (b). This in effect represented the whole of the statement of claim except for the prayers for an order that the defendant prepare a bill for taxation, or alternatively an order that the defendant’s costs be reduced to a specified sum; and that the defendant pay to the plaintiff the difference between the amount paid and the amount found to be due or specified.
On 29 September 2005 the parties signed and filed a certificate of readiness, certifying that the proceeding was ready for trial. The then solicitor for the plaintiff estimated the length of the hearing at one day. The defendant gave an estimate of two days. Such optimism was to fall vastly short of the actuality. Following the filing of the certificate the matter was listed before a Deputy Registrar in October 2005. The Deputy Registrar noted that the parties appeared to agree that evidence by costing consultants should be given by affidavit, but noted that the plaintiff wanted other evidence to be given orally. The Deputy Registrar directed a timetable for the filing of affidavits of costing consultants and bundles of agreed documents.
It is apparent that the parties agreed to ask the court to vacate these orders and to make different orders in their place. On 24 February 2006 I was asked to make consent directions that the plaintiff file and serve any affidavits upon which she proposed to rely, and any expert reports, within 14 days, and that the defendant have 28 days to do likewise.
I should say that I was not asked to make an order that all of the evidence in the proceeding be by affidavit, and, although I have no recollection of making the orders more than eight years ago, I would not have done so without being assured that the matter was one where there were no factual disputes which might turn on the assessment of credibility of witnesses.
In August 2009 the defendant applied for security for costs of $90,000.00 and for an order that the controlled moneys held by the defendants form part of the security. The application was heard by Higgins CJ on 28 August 2009. His Honour ordered that the controlled money, by then some $27,000.00, remain in the interest-bearing account in which it was invested until further order.
On 15 October 2009 the defendant made an application for an order that the proceedings be dismissed, or alternatively that the originating process be struck out, and that judgment be entered for the defendant. I heard that application on 30 October 2009 and dismissed it with costs.
On 28 October 2009 the plaintiff applied for an order that the defendant produce for inspection her firm’s files relating to the personal injury actions and release the controlled moneys to the plaintiff. I heard that application on 18 December 2009, and ordered that the defendant produce the files for inspection as sought.
On 10 March 2010 the matter came before a Deputy Registrar who fixed it for hearing on 7 June 2010, noting the estimate provided by both parties of two days.
The hearing
The hearing commenced on Monday 7 June 2010. Mr Hausfeld of counsel appeared for the plaintiff, and continued to do so throughout the lengthy and fragmented hearing. The defendant, Ms Ryan, appeared unrepresented. Both informed me on that morning that the hearing was likely to take two days plus. Because of other matters ahead of it in the list, it was not reached until late on the afternoon of the next day, when counsel for the plaintiff opened his case. The plaintiff gave evidence in chief on the following day, for about forty minutes, and was cross-examined for the balance of that day and most of the next day. Evidence was given by her sons Stanley and Trevor Vizovitis on the following day, 10 June 2010. At the end of that day I informed the parties that I had obtained a transcript of the proceedings before Higgins CJ on 28 August 2009 and had satisfied myself that his Honour had not dismissed the application for security for costs although the order taken out stated that he had done so. I formally ordered that that application be dismissed. I also made orders which had the effect that the trust moneys controlled by the defendant be paid out, including the accrued interest, to the plaintiff.
After the evidence of the plaintiff’s sons, counsel for the plaintiff informed me that that concluded the oral evidence for the plaintiff, and that he proposed to tender further documents but would do so during the course of cross-examination of the defendant and her witnesses. The defendant made an oral application that there was no case to answer. In the course of the argument on that issue I said that it seemed to me that an essential part of the plaintiff’s case must be to establish to the satisfaction of the court that the costs agreements sought to be set aside were disadvantageous to the client by comparison to the charges that would have been payable in the absence of such agreements. I said that if the court were persuaded that the agreements had been unfair, for example because they had been entered by the client without her informed consent, there would be little purpose in the court exercising its discretion to set its agreements aside unless they were also unreasonable in that their effect was to produce a fee which was excessive by comparison with the fees which would have been payable if there had been no such agreement. In the absence of a costs agreement, the court would look to the scale in force under the Supreme Court Rules at the time the work was carried out, either for the purpose of calculating with some precision the fees properly payable, or at least using the scale as a guide to what would have been reasonable costs.
The evidence for the plaintiff
At the commencement of the hearing it was apparent that there would be significant variances in the versions of the plaintiff and the defendant as to the factual background. Both parties had put on affidavits, no doubt in the expectation that their affidavits would constitute their evidence in chief. Such an approach, where there are disputes of fact to be determined, and issues of credit of witnesses, deprives the Court as tribunal of fact of the opportunity of seeing the witnesses giving their evidence without the benefit of leading questions, and of assessing their demeanour. This is particularly helpful where witnesses are giving evidence about events which happened many years earlier. Accordingly I directed that the evidence in chief be given orally rather than by affidavit. As one would expect, some witnesses were cross-examined on their affidavits but for the most part the affidavits themselves are not in evidence.
The plaintiff was aged 69 when she gave her evidence. She was born in Greece and came to Australia in 1958. Greek is her first language. She did not speak English before she came to Australia. She described her ability to speak English as fairly good, but she had difficulty with unusual or academic words. She did not write English. If she needed to write a letter one of her sons would attend to this. She could read English to some degree. For example, she could read a newspaper but found that she did not fully understand what she was reading.
She did not work until after her marriage and the birth of her first two children. From then she worked in the family restaurant or cafe, as a waitress serving hamburgers or fish and chips. After some time she and her husband opened a business in Canberra, Canberra Meats, which seems to have been a wholesale as well as a retail butcher shop. There were employees, and part of the plaintiff’s role was to direct the staff as to what to do around the shop. They had an accountant (I assume this was Mr Halpin, who witnessed the first costs agreement, and who was in private practice at Fyshwick).
She and her husband owned rental properties, and she was involved in their management, for example collecting rent or arranging for a plumber to fix a leak.
She said that she did not get involved in business correspondence or legal aspects of either Canberra Meats or the rental properties.
She described her motor vehicle accident of 2 April 1994 and her second accident of 3 April 1996. She said that in about March 1995 she saw Ms Ryan and asked her to act in a claim for damages arising out of the first accident. Her recollection was that there was at that time no written agreement about fees, but that Ms Ryan would charge $180.00 per hour if she paid her accounts as she went along, or $220.00 per hour if she opted not to pay the legal costs until her claim was finalised.
The plaintiff identified her signature on a copy of the costs agreement dated 23 March 1999. She said that she had received that agreement by mail. She was asked whether Ms Ryan had explained that agreement to her before she signed it. Her answer was “Not as I can – I can recall”.
The plaintiff then identified her signature on the second cost agreement, of 10 December 2002. She said that she had signed that agreement in Mrs Ryan’s office. She did not recognise the signature of the witness and did not remember who had witnessed it.
The plaintiff was asked whether Mrs Ryan had said anything to her about the agreement before she had signed it. She said that Mrs Ryan told her that the costs would be $280.00 rather than $180.00 per hour if she paid at the end of the matter. The figure $380.00 appeared in the agreement but the plaintiff’s understanding was that the hourly rate was to be $280.00. She said that Mrs Ryan did not say anything about the relationship between the 1999 agreement and the 2002 agreement. She did not explain that work done by an employee would be at a lower rate, and did not explain why the second agreement was necessary. The plaintiff did not recall being informed that by signing the agreement she would lose her right to have the costs taxed in the event of any dispute. She said that Mrs Ryan did not explain that the effect of the agreement was that the higher rate would be chargeable for work done from when she first gave instructions in 1995. The plaintiff said that Mrs Ryan did not explain why she might consider getting independent legal advice. She had asked what she had understood by the expression “independent legal advice”. She said that she understood that this was advice by “someone higher, like a barrister or a higher lawyer”.
She said that Mrs Ryan did not explain that the rates she was charging were significantly above scale rates. She denied that there had been any discussion about the fact that she would not be able to recover all of her fees from the other side in the case. She said that Mrs Ryan did not tell her that other solicitors might have been prepared to take the case on a no-win no-fee basis. She had been unaware of that concept until a week or so before she gave her evidence, when apparently it was explained to her in conference.
She said that Mrs Ryan had explained that the barrister she was briefing, Mr Maxwell, would be charging $8,000.00 a day. She was asked whether Mrs Ryan explained that that daily rate was considerably in excess of what she could expect to recover if she won the case. She said that she had not been given any such explanation.
There had been no discussion, she said, about what interest rate would be charged if interest was to be charged.
The plaintiff was asked about the hearing of her personal injury actions on 5 and 6 November 2003. She said that she thought that she was going to win the case and would get back at least some of the money she had paid, such as medical expenses. She did not think that she was going to be giving evidence. She said that Mrs Ryan had told her that she would not have to go into court and that the case could be settled outside the court. She denied that she had been prepared by Mrs Ryan or Mr Maxwell for giving evidence.
She recalled that the two cases had been settled at the end of the second day for $75,000.00 plus costs.
She was asked whether she had been paying money to Mrs Ryan prior to the date of those hearings. She was aware that money was being paid from time to time to Mrs Ryan. Her son had attended to payment of bills. She was aware that payments had been made for doctors and for court fees, and that some money had been paid for Mrs Ryan’s professional fees.
Mr Hausfeld asked the plaintiff to read aloud the 2002 costs agreement. She did so, it a somewhat halting fashion. The plaintiff was generally able to give her evidence before me intelligibly. There was no suggestion that she might require an interpreter.
Mr Hausfeld asked the plaintiff to explain some of the words used in the agreement. She said that she did not know what disbursements were, and that Mrs Ryan had not explained that to her. She did not know the meaning of the expression “where applicable”, or “irrevocably authorises”. She understood that to authorise meant to give permission but she was unfamiliar with the word “irrevocably” and said that Mrs Ryan had never explained that to her.
During the portion of the trial when the plaintiff was giving her evidence, the defendant was unrepresented and cross-examined the plaintiff herself. She put to the plaintiff that she had been successful in a number of businesses including supermarkets, cafes, restaurants and meat businesses, to which the plaintiff agreed. She was asked about a farm at Hillston. Her response was that she had nothing to do with the farm, although she was aware that meat from the farm was sold at the family butchery.
She agreed that she and her family had real estate properties. It was put to her that the value of the properties was about $30 million. She said that she did not know the figure. She agreed that in addition to properties in Australia, she and her husband had properties in Greece.
She agreed that she herself had supervised the construction of the family home, on a small acreage just out of Canberra, organising tradesmen, and that much of this work had been done when her husband had been away. She agreed with the proposition that she was an intelligent woman though without any formal education. She had been a friend of Mrs Ryan’s parents for some twenty-five years but had not known Mrs Ryan well. She thought she had met her socially.
She agreed that she was a partner with her husband in the family business, and had been a party to other proceedings in the court. She was asked to comment on some documents which had been prepared or produced by Mr Halpin, the family accountant, but said that she was not familiar with the documents. She agreed that Mr Halpin had produced a report dealing with the economic loss aspect of her claims for damages for personal injury.
She agreed that she had attended a conference at Mr Maxwell’s chambers in Sydney and two or three conferences with Mr Maxwell in Canberra before the hearing of her cases. She agreed that she had refused to provide copies of tax returns. She had ultimately provided copies of her tax returns but with instructions that they were to be taken to Phillips Fox in a confidential fashion, not to be seen by anyone at Mrs Ryan’s firm apart from herself.
She agreed that she had been extensively cross-examined during the hearing about her financial affairs, including the tax returns.
The plaintiff agreed that at the end of the second day, during which she had been cross examined, she left the courtroom very upset.
The plaintiff agreed that at one point, whilst being cross examined through a Greek interpreter, she had said to the interpreter “You answer what is best for me”. She denied saying on another occasion (in Greek) “The best is to say that I don’t remember”.
Mrs Ryan cross-examined the plaintiff at some length about what had happened at the end of the second day of the hearing in November 2003. The plaintiff gave an answer in the following terms:
You put me in all this trouble. What don’t you say the way it was? I remember the words helping me. I said when we walk out and I said get me out of this. I want to get out of this because you didn’t explain what was going to happen. I didn’t know what was going to happen at all because you knew I was a person and I didn’t even went to the police station not to go to court. You’ve been promised me all the way along, your Honour, I wasn’t going to go to court. You never told me I wasn’t going to get any money. That’s why I was saying it. Not because I didn’t get any money, not at all, because at that stage yes it’s true I wasn’t going to get any money. It wasn’t that. My credibility it’s good, it has been good. I’m very proud. I’ve been 52 years in this country. I help people. I don’t so many things, right? So you can’t put my credibility down if something I didn’t understand from the. . .
The plaintiff was cross-examined about the copy letter with handwritten amendments which she had signed at the court at the end of the second day. The plaintiff agreed that she had signed that letter but said that no one had read it or explained it to her. At that time she trusted Mrs Ryan as her solicitor, in the same way that she trusted her accountant and banker, and signed when she was asked to do so.
The defendant cross-examined the plaintiff extensively about the evidence she gave during the personal injury proceedings through an interpreter, Mr Antoniou. The plaintiff agreed that she had known him for more than thirty years. Her evidence was that the defendant had asked her whether she wanted a translator. She said that she would find this helpful. The defendant made some inquiries but the interpreter she contacted was unavailable. This was shortly before the hearing. The plaintiff said that she told the defendant that she had a friend who worked in the Taxation Department and did translation in the court system. She gave the defendant Mr Antoniou’s name and telephone number.
The plaintiff agreed that she had told the defendant that she could understand English but that it would give her more time to think about the questions and formulate her answers in the witness box, because she was very nervous.
The plaintiff said a number of times during her evidence that her understanding about the 2002 costs agreement was that the hourly rate was $380.00 for the barrister, Mr Maxwell and $280.00 for the solicitor, Mrs Ryan. The plaintiff denied that Mrs Ryan had read her questions from a prepared piece of paper at the time she signed the 2002 costs agreement. She had some recollection that members of staff had come and gone from the room while she was talking to Mrs Ryan about the agreement, including Mrs Ryan’s daughter Emily. Her recollection was that her conversation with Mrs Ryan that day had been a short one. She said that the agreement had not been explained to her, but that she had signed it because she trusted Mrs Ryan as her lawyer. She agreed that generally her relationship with Mrs Ryan during the course of the personal injury matters leading up to hearing had been a pleasant and agreeable one.
Evidence was also given in the plaintiff’s case by her sons Stan and Trevor. They were both by the time of the hearing about fifty years of age. They were both born in Australia, and grew up speaking both English and Greek.
Stanley Vizovitis said that his mother’s English was poor, adequate for her to get by at a basic level, but requiring help with correspondence and documents. He said that his father’s English was very much better. His mother did not write English but if necessary would dictate a letter to him. She would write a shopping list in what he described as broken Greek/English.
He said that he tried to attend as many meetings as he could with his mother, when she saw Mrs Ryan about her claims. He read incoming correspondence, wrote some letters, and dealt with the solicitors by telephone from time to time. He dropped cheques or accounts into their office. He did his best to explain to his mother what was happening. He said that he had been with his mother when she first consulted Mrs Ryan early in 1995. He recalled Mrs Ryan saying that she would be charging approximately $180.00 an hour.
He had not been present, or involved, in his mother’s signing of the 1999 costs agreement, or the 2002 costs agreement.
He had been present at court on the days when his mother’s personal injury actions were heard. He was present during discussions with his mother, Mrs Ryan and Mr Maxwell. He described the scene as hurried and hectic, with pressure on his mother to make a decision whether to settle or proceed.
Stanley Vizovitis had had a power of attorney for his mother, to cope with periods when she was out of Australia.
He agreed in cross-examination that he had been injured in a motor vehicle collision in 1986 and had brought proceedings for damages through a solicitor, Mr Christopher Macphillamy. His case had been settled. It had apparently been followed by proceedings of some kind between Mr Macphillamy and himself about costs.
Trevor Vizovitis gave evidence to similar effect. He had also been present at the court during the hearing of his mother’s claims. He gave evidence of a conversation with Mr Maxwell, who was asked how much his fees were up to that point. Trevor’s recollection was that his reply was that it was somewhere between $13,000.00 and $16,000.00, but that he was happy to discount the fee to assist in achieving a settlement. Trevor said that Mr Maxwell had looked at Mrs Ryan and said “I am assuming that you’ll do the same”. He said that he remembered that clearly because Mrs Ryan looked shocked at the idea of having to reduce her costs. His recollection was that she had estimated that her costs to that time were of the order of $40,000.00 to $50,000.00. His recollection is that the settlement discussions were very rushed. He said that he had been present in a witness conference room at the court after the second day of the hearing of his mother’s action, when she had signed a settlement instruction.
Trevor Vizovitis’ evidence was later the subject of an objection by the defendant on the ground that he had been in court for some of his mother’s evidence. I am not satisfied that this suspicion was justified. He completed his evidence on 10 June 2010. The hearing was then adjourned for 15 months.
I said that I would in the circumstances be prepared to permit the plaintiff to call further evidence on the issue of disadvantage, notwithstanding that counsel had said earlier during the afternoon that he did not proposed to call further oral evidence.
At the end of the afternoon I asked counsel for the plaintiff how much longer the hearing was likely to take. He said that he thought there would be a further two to three days involved. I gave leave to the parties to approach the list clerk to fix a date to complete the hearing.
The matter was listed before a deputy registrar during December 2010, and listed for the completion of the hearing before me on 19 September 2011 with an estimate of three days.
On 8 September 2011 the defendant filed an application asking for an order that the solicitors for the plaintiff, Dibbs Barker, be restrained from continuing to act for her. The ground of the application was that three persons who had been employed at her firm were, by the time of the hearing, employed by Dibbs Barker. The hearing of that application occupied a day and a half, with the three employees, and a partner at Dibbs Barker, giving oral evidence. I was not satisfied that there was any practical likelihood that any of the former employees would disclose to Dibbs Barker any confidential information which might damage the defendant’s case or assist the plaintiff’s case. I was satisfied that a fair-minded reasonably informed member of the public would not conclude that the proper administration of justice be required that the firm be restrained from continuing to act. I noted that the application had not been made until the date set aside for the continuation of the hearing, and that there had been no explanation for the delay in bringing the application, which if successful would have resulted in a further adjournment of the proceedings to enable the plaintiff to instruct new solicitors and to give those solicitors an opportunity to prepare for the continued hearing. I ordered that the application be dismissed with costs.
The defendant pursued at that point her application for summary judgment, which I refused. I noted that counsel for the plaintiff had not formally closed his case when he made the statement that he did not intend to call further oral evidence; that the defendant had not yet gone into evidence or commenced her own case; and that I was not satisfied that there was any prejudice to the defendant in permitting the plaintiff to call further evidence.
In September 2011, Brian Hatch was called in the plaintiff’s case. He is a solicitor, admitted in 1984 and practising in Canberra and Queanbeyan since then. He is a former Vice-President of the ACT Law Society. His practice over the years has predominantly been in acting for plaintiffs in personal injury litigation. He prepared a report in letter form which was tendered. In his opinion the two statements of claim in the plaintiff’s personal injury actions had been simple rather than complex and should not have required drafting by counsel. The injuries and disabilities pleaded did not demonstrate any complex medical issue.
Mr Hatch said that the claims for economic loss were potentially complex, the plaintiff being a partner in a business rather than an employee, and claiming a reduction in working capacity rather than a complete inability to work. He said that that it was common in such cases for it to be difficult to demonstrate loss of income. Tax records for a self-employed person in his experience often showed little change of income after the date of injury, especially in a family business with other members of the family working. Such claims, he said, often resulted in the court making an allowance for loss of earning capacity by way of a buffer. He thought that this would have been the likely outcome had the plaintiff’s actions proceeded to hearing.
Mr Hatch was asked to express an opinion about the hourly rates set out in the two costs agreements. He said that adopting hourly rates rather than scale for such legal work tended to reward inefficiency. His opinion was that the appropriate hourly rate for the period in question was the amount permitted by the scale, including a 25% loading for care, skill and responsibility in respect of applicable items. He noted that the hourly rate in the scale in 2002 was $268.10 including GST: the rate in the agreement as to costs was $380.00 plus GST, a total of $418.00 per hour. He also noted that for the same period the agreement set an hourly rate for a legal assistant at $85.20 plus GST, a total of $104.00 per hour, as against a scale rate at that time of $62.50 per hour.
Mr Hatch expressed the opinion that some work in the solicitor’s account amounted to overcharging. He gave the example of fees charged for obtaining initial reports from treating doctors.
Mr Hatch had been provided with copies of the two costs agreements, and copies of the defendant’s time costing records. He arrived at the opinion that the fees charged were excessive. He thought that the hourly rates in the agreements were excessive, and that there was too much time recorded as having been spent on various items of work.
In his oral evidence Mr Hatch said that he thought that the record of the work carried out on the plaintiff’s files by the defendant’s firm amounted to over-servicing. He could not imagine how a solicitor could have spent the amount of time claimed. He conceded that he had not been provided with the defendant’s files, and had not read the transcript of the two days of the hearing in November 2003. He had not been provided with a copy of Mr Halpin’s report. He was given a copy of the report during cross- examination, but said that it did not alter his opinion but rather tended to confirm it. Having read the report, he did not see the economic loss aspect of the claim by the plaintiff as having been complex.
Mr Hatch conceded that he would not regard himself as an expert in the area of legal costs.
Mr Hatch disagreed that it was standard practice in the profession for a solicitor to charge a higher hourly rate in acting for a plaintiff in a personal injury action where the costs were not to be paid until the conclusion of the matter, as opposed to the rate which would be charged if the solicitor were to render accounts at periodic intervals during the progress of the matter.
Counsel for the plaintiff then called Mr Michael Scott, a solicitor of thirty-four years experience who had specialised for the previous eighteen years in preparation of bills and assessments of costs, generally in litigation matters, and particularly in actions by plaintiffs for damages for personal injury. Mr Scott gave evidence for about a day and a half.
At the end of that week I asked the parties how much longer the hearing might take. Counsel for the plaintiff thought that it might take another four days. The defendant thought that her case would take two or three days, and that it might be prudent to allow two weeks. I fixed the further hearing for Monday 7 November 2011 with the intention of sitting on for as long as it might take to conclude the hearing.
On 7 November it transpired that the defendant had briefed Mr BMJ Toomey QC who was unavailable on that date because of an injury a few days earlier. He would be available, I was told, on the Wednesday of that week, 9 November. Mr Scott who had been disabled due to illness at the time he gave his evidence, and did so through a friend as interpreter, died on 1 November 2011.
Mr Toomey for the defendant called Mr Kerry Hardman, a solicitor admitted in 1979 in NSW who had practised since 1998 as a legal costing consultant. Mr Hardman gave evidence in chief and produced documents which were marked for identification at that stage.
On the following Monday, 14 November 2011, evidence was given for the defendant by Mr Keith Bradley, a Canberra solicitor. Evidence was then given by Ms Claire Naidu (formerly Grogan) who had been employed by the defendant’s firm and had witnessed the 2002 costs agreement. Mr Toomey also called the defendant’s daughter, Ms Emily Warren, who had worked in her mother’s firm over many years, commencing in 1995 when she was still at school, and had later been admitted as a legal practitioner herself. Her evidence occupied more than a day. Mr Toomey then called the defendant, who gave evidence in chief for a little over a day. Her cross-examination occupied the whole of the following day. It was then necessary to adjourn the matter for almost five months, until April 2012, when the cross-examination continued for a further two days. Again, the hearing did not finish during that week, and again it was necessary for me to stand the matter over to a date to be fixed by the list clerk. After discussion with counsel I requested that a week be set aside to complete the hearing.
In July 2012 the defendant filed an application for orders that I disqualify myself from further hearing the matter; alternatively that I dismiss the proceedings with costs; alternatively, that I make specified directions for the further hearing; and that the plaintiff provide $300,000.00 security for costs. I heard the application commencing on 24 September 2012. The defendant was represented for the hearing of the application by Mr MJ Neil QC. I published reasons for my decision on 19 October 2012 to dismiss the application with costs. I ordered at that time that the matter be listed a week later to fix a date for a directions hearing convenient to counsel who would be appearing at the resumed hearing.
I conducted a directions hearing on 31 October 2012, attended by Mr Hausfeld of counsel for the plaintiff and Mr Neil QC (by telephone) for the defendant. I made a number of directions, including a direction that the two costing consultants, Mr Hardman and Mr Travers, meet in an endeavour to narrow their areas of disagreement.
Mr Hardman and Mr Travers did not meet as I had directed. The plaintiff made a further application on 26 November aimed at resolving this impasse. The application came before me on 29 November and again on 7 December 2012. In the event I was not persuaded that I needed to make any further orders or directions. I confirmed the date for the continuation and I hoped, the completion of the hearing for Monday 17 December 2012, with the whole of that week available for that purpose.
On 17 December Mr Hausfeld appeared for the plaintiff as before. The defendant was represented by Mr Benjamin O’Donnell of the Sydney Bar. There was no explanation for the fact that Mr Neil QC, or for that matter Mr Toomey QC, was no longer in the matter. I am unaware when Mr O’Donnell was first briefed but I take this opportunity to commend his successful efforts over what must have been such a short period to digest a considerable volume of transcript, exhibits and other documentation.
On that day evidence was taken from Mr Michael Maxwell of the Sydney Bar who had appeared for the plaintiff on the hearing of the personal injury actions in 2003, Mr Michael Phelps, an experienced Canberra solicitor and former president of the ACT Law Society, who gave opinion evidence about hourly rate charges by solicitors; and Mr Samuel Coupland, managing director of FMRC Benchmarking Pty Ltd, a company carrying on business as a management consultant to the legal profession, and publisher of an annual survey of financial information comparing solicitor practices around Australia.
On the following day Mr JH Gibson gave evidence. Mr Gibson is a Sydney lawyer practising as a legal costing assessor. Mr Hardman was then recalled, and gave further evidence by telephone, over a period of the balance of that day and most of the following day.
On the next day, Thursday 20 December 2012, Mr Hausfeld called Mr Travers in reply.
During Mr Travers’ evidence in chief, Mr O’Donnell raised an objection on the basis of conflict of interest, by reason of the fact that Mr Chapman, the other principal in the firm Legalcost, had prepared the assessment of costs following consent judgment in the personal injury actions in 2003 which led to the settlement of the plaintiff’s claims for party-and-party costs. Mr Travers was cross-examined on the voir dire. Mr O’Donnell called the defendant and Mr Chapman, who also gave evidence on the voir dire. At the conclusion of that evidence, after hearing submissions from counsel, I was not persuaded either that the evidence of Mr Travers was inadmissible, or that I should exercise any discretion I might have to exclude it by reason of the asserted conflict.
At the end of that day an application was filed and served by the defendant seeking an order that the jurisdiction of the Court which I was exercising as Master be exercised by a judge, specifically with a view to determining whether the evidence of Mr Travers was admissible in the plaintiff’s case in reply, and that the hearing before me be stayed until that issue had been determined.
On the following day, Friday 21 December 2012, the application was listed before Refshauge J. His Honour heard submissions of counsel for both parties on the application, and this occupied the morning of that day. His Honour delivered ex tempore reasons and dismissed the application with costs. I resumed the hearing of Mr Travers’ evidence, which occupied the balance of that day, the last sitting day of that year.
The hearing resumed on 7 January 2013. Mr O’Donnell submitted that I should reject the tender of a report by Mr Travers expressing his opinion as to the entitlement of the defendant to costs as between solicitor and client, as evidence in reply. For reasons which I gave at the time, I allowed the tender, subject to the deletion of some portions which were not pressed by Mr Hausfeld.
At that point Mr O’Donnell sought leave to qualify a further, at that time unidentified, expert to respond to Mr Travers’ evidence. I refused that application, which would have involved a further adjournment, for brief reasons which I gave.
The cross-examination of Mr Travers proceeded, and occupied the balance of that day and most of the next day. At the conclusion of the evidence I made directions about written submissions, and adjourned the hearing for oral submissions.
Another solicitor, Michael Scott, was called to give expert evidence in the plaintiff’s case. Mr Scott was admitted as a solicitor in 1967, and practised for many years in the field of personal injury litigation for plaintiffs in Canberra and Queanbeyan. He practised from 1993 exclusively in the field of assessment of costs and preparation of bills of costs. Mr Scott was briefed in mid-2010 with copies of the defendant’s files in relation to the plaintiff’s personal injury actions, copies of the 1999 and 2002 costs agreements, copies of invoices for fees raised by the defendants firm, copies of memoranda of fees from Mr Maxwell of counsel and copies of pleadings in the present action.
Mr Scott did not undertake a detailed costing exercise. He did not prepare a draft bill in taxable form or descend into that level of detail in calculating what the defendant’s firm might have been found entitled to charge in the absence of the cost agreements. He noted that Mr Chapman had carried out what has been described as a mini-assessment on the instructions of the solicitors for the defendants in the personal injury actions, with the cooperation of the present defendant, and had ultimately arrived at a figure for which the party-and-party costs were agreed, of $22,000.00 for professional costs in relation to the action arising out of the first collision, $12,500.00 for costs in relation to the action arising out of the second collision, and a combined figure of $18,500.00 for disbursements, making a total of $53,000.00.
Mr Scott accepted these figures as appropriate for party-and-party costs. From his experience it would have been appropriate to add 15% to the professional costs as between solicitor and client. He added the $22,000.00 and the $12,500.00 ($34,500.00), added 15%, and a further $750.00 to cover work done in finalising the matter after the agreement was reached as to party-and-party costs. This brought him to a total of $40,425.00, which he regarded as a reasonable figure for solicitor-and-client costs for the two actions.
He expressed the opinion that the fees charged by Mr Maxwell of counsel ($16,495.00) was far higher than would have been charged by Canberra counsel at the time. He regarded these fees as excessive by an amount within an approximate range of $7,500.00 to $8,800.00.
Mr Scott also expressed an opinion about the hourly rate set out in the two costs agreements. His opinion was that the rate of $280.00 per hour for a principal in the 1999 agreement was a little above the rate which he thought a number of personal injury solicitors were charging at that time ($250.00 per hour) but not so far above that rate as to be seen as unreasonable. The rate of $380.00 per hour in the 2002 agreement was however well above the going rate which he said had been $300.00 to $320.00 per hour at that time.
Mr Scott did not agree that the FMRC survey results represented an accurate reflection of charges by solicitors in Canberra for plaintiff personal injury work at the relevant dates. He took the view that the samples were too small and that the rates were likely to reflect those of senior partners in major firms undertaking different legal work.
Mr Scott did not agree that it was usual practice, or permissible, for solicitors to charge a higher hourly rate for what was described as carrying costs until the completion of a matter, although he accepted that a solicitor and client could reach agreement to that effect.
He was asked about the usual practice in relation to a markup for care skill and responsibility. His evidence was that the usual practice was to allow a markup of 50% on the items coming within the “instructions for brief” item. Commonly this approximated to a mark up of one-third of the total bill.
In a supplementary report, Mr Scott was asked for his opinion as to whether the costs agreements were fair and reasonable. His opinion was that each of the agreements was neither fair nor reasonable.
As to fairness, he said that a solicitor was required to take special care to ensure that a client was fully aware of the import and consequences of entering a costs agreement, particularly where the amount proposed to be charged exceeded the scale applicable at the time. He pointed out that neither agreement said anything about the fact that the costs proposed to be charged would not be recoverable from the other party in full. The agreements did not state explicitly that the rates set out were to apply retrospectively to work already performed, resulting in greatly increased costs over and above those which had previously been agreed. He confirmed his earlier opinion as to the reasonableness of the rates set out in each of the agreements.
The evidence in the case for the defendant
For reasons of convenience the defendant did not commence her evidence until a number of other witnesses in her case had been called. Kerry Hardman gave expert evidence as to the reasonableness of the costs charged or chargeable by the defendant under the costs agreements. He was admitted as a solicitor in NSW in 1979, and had practised since 1983 in legal costing, writing regular columns on the subject in Law Society journals and publications. He was provided with the defendant’s file, in some four archive boxes, some in bound folders and some loose. He prepared an itemisation of charges in each of the two personal injury actions, at the applicable ACT Supreme Court scale. He did not see it as part of this task to deal with disbursements as such, but he did include as costs items such things as faxes and photocopies, which were not really disbursements although the solicitors had characterised them in that way.
After the 1999 costs agreement, he took the view that the photocopy and fax items had become disbursements, and he then recorded them as disbursements. The two scale-based bills came to about $79,500.00 in total.
Mr Hardman had given evidence a number of times in NSW matters but had not previously given evidence in this court.
Mr Hardman said that he had charged fees of about $8,000.00 for the tasks he had undertaken on the instructions of the defendant. His evidence was taken no further on its first day, and it was more than a year before he resumed it.
On the following day (14 November 2011) evidence was given by Keith Bradley, a partner in the firm Bradley Allen. He was called to give opinion evidence as an experienced solicitor practising in the area of personal injury litigation for plaintiffs. By the time he gave his evidence he had moved out of that field and was in charge of the estate planning and probate area of the firm.
Mr Bradley had prepared a report dated 8 November 2011, in which he set out the hourly rates orally agreed between the plaintiff and defendant in 1995 and the rates in the 1999 and 2002 costs agreements. He set out in his letter the charge-out rates of partners at his firm during the years from 1995 to 2004, including $240.00 per hour in 1995, $300.00 per hour in 1999, $335.00 per hour in 2002.
He said that his firm’s practice had always been not to bill work done for a plaintiff in a personal injury claim until settlement or completion of the matter. He was asked to assume that the plaintiff had been a business woman with reasonably substantial assets, in a reasonably substantial financial position at the time she instructed the defendant. He expressed the opinion that the defendant was entitled to charge a higher hourly fee to compensate for a possible long delay in conclusion of the claim give the potential difficulties in progressing the claim and the inherent difficulties and unpredictability in litigation.
In his oral evidence, Mr Bradley explained that the partner rates had been applicable to all kinds of legal work conducted by partners at the firm, whether litigation, commercial, property or other work. Lower rates were charged for solicitors who were not partners. His firm had not delegated work to non-lawyers working in a paralegal capacity, but had employed such clerks in the conveyancing area.
His firm had not increased the hourly rate for matters where the firm would not be paid until completion, such as personal injury plaintiff work. There were other areas of legal work where it was the practice of the firm to require payment of fees as the matter proceeded.
Mr Bradley said that a higher hourly rate might be justified where the client could be described as a higher maintenance client in frequent telephone or personal communication with the firm.
He said that during the years he had been asked about, his firm had held itself out as prepared to undertake plaintiff personal injury work on a no-win no-fee basis, which he saw as a necessary product of the competitive landscape at that time within the legal profession.
In cross-examination, Mr Bradley said that his firm had become the Canberra office of the national firm Clayton Utz in 1995. In 2000 he and most of the Canberra partners left Clayton Utz and recommenced practice as a Canberra firm, Bradley Allen. Some partners and staff continued as partners in the national firm, Clayton Utz.
He said that the fees charged by the firm during the years when it was the Canberra office of Clayton Utz generally reflected the Canberra marketplace, and were set by the Canberra partners rather than by the national board of the firm. He agreed that the firm had been a medium to large firm in Canberra terms. The firm would have been seen as well-established and well-regarded and the hourly rates charged reflected that standing. The partners and executive manager of the firm would make enquiries from time to time of partners and managers at other firms of similar size, profile and client base, in the course of setting hourly rates each year. He described this as benchmarking. He said that his firm benchmarked medium and larger firms, and would not have been using small firms as a benchmark. The firm had had, and continued to have, a client base of continuing and “repeat” clients who tended to be aware of the fee levels and were able and prepared to pay those fees. He agreed that most personal injury plaintiffs tended not to be repeat clients.
He said that the hourly rates charged at the time by his firm had not been by any means the highest hourly rates charged by any firm in Canberra. Competition based upon price was a feature of some kinds of legal work, in particular residential conveyancing, but this was not a feature of most of the work offered by his firm, and was not a feature of the plaintiffs personal injury market in Canberra. Mr Bradley did not think that the hourly rate charged was a factor at all as far as the consumer client was concerned in plaintiff personal injury work. The focus of such clients tended to be upon how much they could expect to receive following completion of the matter.
Mr Bradley conceded that he had no idea about the hourly rates being charged by small firms during the years in question.
Mr Bradley said that his firm had long had a substantial commercial practice in Canberra’s Greek community, and that many clients in that community had substantial assets. I asked him whether, if a member of one of those families had come to him with a personal injury claim, he would have billed them monthly or waited until the end of the matter and billed them in the same way other personal injury plaintiffs were treated. His response was that his firm would bill them at the end of the matter in the same way as other clients, and would not impose a markup on their hourly rates.
Mr Bradley thought that it might be justifiable to charge a higher rate for a difficult, demanding client, though he had never done so at his own firm.
Senior counsel for the defendant next called Claire Naidu (nee Grogan). Ms Naidu worked at the defendant’s firm from late 2000 until about August 2003. She was a law student at the time and was employed to provide secretarial and paralegal services. She was admitted as a solicitor in 2004 and by the time of her evidence was employed with another Canberra firm, practising in family law.
Her duties at the defendant’s firm had included some administrative matters like opening files, some typing, greeting clients and getting them tea or coffee, and tasks of that nature. During her time at the defendant’s firm the number of people working there varied but there were generally something like six or seven including the defendant. Ms Naidu identified her signature as witness to the 2002 costs agreement. She had no specific memory of the execution of the document. The plaintiff was pointed out to her in court. Asked whether she recognised her, Ms Naidu said that her face was familiar.
She recalled a practice in the office as to witnessing of costs agreements. She said that the defendant would contact her and ask her to come in to witness an agreement. She would go into the defendant’s office where the client would be sitting. The defendant would usually ask a number of questions such as whether the client had any questions about the document and whether the client would like to receive independent legal advice about it. The defendant would tell the client what the fees would be and would usually tell the client that there might be some solicitors in Canberra who would charge more and some who would charge less than her charges.
She said that the defendant generally had about 300 current files at any given time, and the witnessing of a costs agreement by a client was a frequent occurrence, sometimes as often as once or twice a day although there might be a few days between such occasions. She said that the form of questions asked by the defendant was gone through on every occasion. To her recollection no client had ever asked for independent legal advice. There had never been an occasion where a client had in effect disagreed with any of the questions.
By the time she gave her evidence Ms Naidu had been working in legal offices for eleven years, seven as a solicitor, and had dealt with hundreds of clients.
Ms Naidu had no recollection as to whether anything had been said by the plaintiff or by the defendant about any earlier signed costs agreement, or about the fact that the 2002 agreement was to operate retrospectively. Indeed she had no specific recollection of having been in the room at the same time as the person she could see at the back of the court who she now understood was the client at that time.
I asked her whether she had a particular recollection of the plaintiff being a client of the defendant’s firm during the time of her employment there. She said that the plaintiff’s name rang a bell, and that she could remember a number of files or folders for the matter.
Ms Naidu had sworn an affidavit in mid-2008 at the request of the defendant. This was already six years after the event and was hardly a contemporaneous record of what had taken place. I prefer her oral evidence in chief, without any suggestion of leading or prompting, to the somewhat greater detail in the affidavit.
Senior counsel for the defendant then called the defendant’s daughter, Emily Warren (nee Ryan). Ms Warren was born in 1980. She swore an affidavit during 2008, upon which she was extensively cross-examined although the affidavit did not find its way into evidence before me. Ms Warren is admitted to practice in the ACT, and at the time of her evidence held a practising certificate as a solicitor. She is also admitted in California and in the United Kingdom. She has worked as a lawyer for periods of time in California and in Bermuda.
She recalled knowing the plaintiff as a friend of her grandparents from an early age. She remembered going as a child with her grandparents to Canberra Meats. She remembered seeing the plaintiff there, and thought that she appeared to be running the business. Ms Warren never had any difficulty communicating with the plaintiff, and thought that her English was quite good if not very good.
Ms Warren said that she started working in her mother’s practice from 1991, when she would have been 11. She was formally employed there during school holidays from 1995, and worked there part-time from 1999 when she started university.
She remembered the plaintiff coming into the office very often, sometimes without an appointment to drop off documents.
She said she was present at discussions about legal costs between her mother and the plaintiff prior to the signing of the 1999 costs agreement. She recalled one or more conversations to the effect that the plaintiff could pay her costs as the matter proceeded, generally on monthly invoices, at a lower rate of $180.00 per hour. Alternatively she could pay at a higher rate of $220.00 per hour if she chose not to pay until the end of the matter. Ms Warren heard the plaintiff say that she wanted to pay the accounts as she went.
Ms Warren had witnessed her mother’s signature to the 1999 costs agreement. Her recollection was that the agreement had been signed by the plaintiff somewhere else and returned by post.
Ms Warren said that she was present in December 2002 when the second costs agreement was signed. She recalled the plaintiff being present as well as her mother and Ms Naidu. She said that she had been in the room because she had been asked to help collate documents such as medical reports. She heard her mother say that the hourly rates had changed. Her mother had referred to a letter she had sent to the plaintiff, and asked whether she was ready to sign the new agreement. The plaintiff said that she was. At that point her mother asked Ms Naidu to come into the room to act as a witness. Ms Warren said that her mother provided the plaintiff with time to read the agreement again, which she did over a period of about five minutes. Ms Warren said that her mother probably would have “read the whole agreement out”. She said that there had been a list of questions provided at the end of the agreement. She was familiar with those questions because her mother always read the questions out at the time of signing a costs agreement by a client. Ms Warren said that she remembered her mother asking the plaintiff those questions, and remembered the plaintiff’s answers. Her evidence was that her mother asked the plaintiff “Are you signing this costs agreement freely and voluntarily?” The plaintiff had replied in the affirmative. Her mother had then asked “do you understand what you are doing?”. The plaintiff had replied “yes”. Her mother then asked “do you understand that our rate is $380.00 an hour plus GST for a senior solicitor?” The plaintiff had replied “yes”. Her mother then asked “do you understand that the rate for a junior solicitor is $280.00 plus GST?”. Again the plaintiff replied “yes”. Her mother then asked whether she understood that the rate for a paralegal was about $107.00, and the plaintiff again replied in the affirmative.
Ms Warren said that her mother then asked “do you understand that this rate is higher than some solicitors and some solicitors charge more and others charge less?” The plaintiff replied “yes, I definitely understand this. I know other solicitors charge more”.
Her mother then asked the plaintiff “do you understand by signing this costs agreement that you forfeit your right to taxation?” Her mother explained that this was not taxation by the Australian Taxation Office but a process of review of a solicitor’s bill by the court. The plaintiff replied that she understood “that she was removing that right”. Her mother also asked whether the plaintiff required independent legal advice on the document to which she answered “no”.
Ms Warren remembered the plaintiff saying “I can’t afford to carry the costs of the litigation as well as the medical expenses, so I want to pay at the end and I don’t care because NRMA – they’re going to pay for it anyway”. She said that her mother told her that that was not the situation and that she would not recover all of her costs although she might get some amount back from the NRMA. The plaintiff then said that she knew and understood that. Ms Warren told her at that point that it was likely that she would only get about 30% of her costs back even if she were successful. Ms Warren described the plaintiff as a very demanding client. She called at the office frequently, and often rang the office. She went overseas for some months every year. As a client she required a significant amount more work than other personal injury plaintiffs. There were far more medical reports than in a typical personal injury action. The plaintiff was difficult about providing copies of tax returns and other financial information.
As to the plaintiff’s evidence, whilst I did not form the view that she was being untruthful in answer to any questions, I would not place great reliance on evidence based on her recollection, when giving evidence in 2010, of events between seven years and fifteen years earlier. I would prefer to rely on contemporaneous documentation where available. For example, her evidence was that Ms Ryan had not explained the 1999 agreement to her before she signed it, as far as she could recall. I would not be prepared to find, simply on the basis of that evidence, that there was no explanation, if there was other credible contemporaneous evidence that proper advice had been given.
Similarly, I would not be satisfied to decide the case purely on the plaintiff’s oral evidence of her recollection about what happened at the time she signed the 2002 costs agreement. I am inclined to accept that the plaintiff did not fully understand the questions she was asked and the advice she was given at that time. The plaintiff said a number of times during her evidence that her understanding about the 2002 costs agreement was that the hourly rate of $380.00 applied to the barrister, Mr Maxwell, and that the rate of $280.00, applied to the solicitor, Mrs Ryan.
I am inclined to that view by reason of the wording of the agreement. The plaintiff knew that Ms Ryan was a solicitor at that Mr Maxwell was a barrister. The agreement, in five of its six clauses, uses the expression “the barrister and solicitor”. It seems to me that this would have been extremely confusing to a client in the position of the plaintiff. In fact the agreement did not purport to say anything about counsel’s fees, but by the time she signed the 2002 agreement, Mr Maxwell had been briefed and had carried out some work in the matter. The plaintiff knew that there was a barrister involved. It would hardly be surprising if, when she saw the word “barrister” used in the agreement, she assumed that somehow this related to Mr Maxwell rather than to Mrs Ryan.
Ms Ryan’s firm sent the 1999 agreement to the plaintiff and asked her to sign it and return it. Ms Ryan gave evidence that she had explained the costs agreement to the plaintiff before she sent it out, but there is no documentary support for this and it is denied by the plaintiff. It seems to me more probable that not that the agreement was sent out to the plaintiff with a request that it be signed, without any advice being given, and that she signed it and returned it. It was witnessed by her accountant, Mr Halpin. The defendant in closing submissions sought to rely on a duty on his part to explain the agreement to the plaintiff when she signed it. I am not satisfied that Mr Halpin was under any such duty. Even if he had been, I cannot see how that would assist the defendant.
I find that the plaintiff and the defendant signed the 2002 costs agreement at the defendant’s office. I accept that it is more likely than not that the defendant went through a number of questions with the plaintiff. The sheet of questions which, on the evidence in the defendant’s case, was invariably used, has not been located or tendered. I am unable to accept either the plaintiff’s evidence about what questions were asked, or the defendant’s evidence about the questions and answers. In the absence of any contemporaneous documentation, I do not have adequate confidence that the memory of either the plaintiff of the defendant as to what was said can be relied upon.
In addition, I have considerable misgivings about the capacity of the plaintiff to understand the questions she was being asked. On the assumption that the questions and answers were as set out by Ms Warren in her affidavit (see [168] above) and Ms Ryan in her affidavit (see [249] above), I would not be particularly optimistic that a person in the position of the plaintiff would have understood that she was doing more than going through a process which the solicitor (her solicitor, in whom she presumably placed trust at that time) was taking her through, as part of the legalities and formalities which needed to be complied with.
There was much evidence about preparation for trial in the personal injury actions, the two days of hearing in November 2003, and the negotiations which led to the settlement of the claims. Part of this evidence was directed by the defendant and those representing her at the plaintiff’s ability to read, speak and understand English, and in part it was directed at the plaintiff’s credibility.
The plaintiff gave evidence in the present proceedings without an interpreter. I formed the view that she could speak English adequately for the purpose of giving that evidence. At the same time, she did not come across to me as a fluent speaker of the English language. I have no doubt that her English is adequate for general communications in the community, including for the purposes of the business run by her husband and herself. At the same time, it does not seem to me that her English is necessarily good enough to cope with longer words, technical language, unfamiliar words or abstract concepts. It is unnecessary for me to decide in this action whether or not the plaintiff genuinely needed an interpreter in November 2003. It is probably enough to note that she said she did, and that her solicitor and counsel permitted her to give evidence assisted by an interpreter. I am not satisfied that the issue arising from the use of the interpreter affects the plaintiff’s credit in these proceedings adversely.
The defendant in these proceedings has repeated, as something of a mantra, that by the end of the second day of the hearing in November 2003 the plaintiff’s credit was in tatters. I certainly accept that both Mr Maxwell and the defendant took the view that the plaintiff’s credit had been damaged by the cross-examination to that point. The plaintiff was not cross-examined in these proceedings in detail as to answers she had given which the defendant now says were false. The actions in November 2003 were settled before it became necessary for me to arrive at any findings of fact, and indeed some days before the evidence was expected to be completed.
Counsel for the defendant tendered an affidavit by Christoula Nicolaou, a translator and interpreter, annexing an expanded transcript of the proceedings on 5 and 6 November 2003 with an English translation of what had been said in Greek between the plaintiff and the interpreter, Mr Antoniou. Counsel for the plaintiff did not object to the fact that the proposed evidence was in affidavit form, but objected on admissibility grounds. I said that I would rule on the tender when giving my reasons for decision, and I now take the opportunity to do so.
To the extent that the purpose of the tender is to damage the plaintiff’s credit, it seems to me that it is inadmissible by reason of the credibility rule expressed in s 102 of the Evidence Act 2011. However, it seems to me that the translation annexed to the affidavit is capable of being relevant to the issue of the plaintiff’s fluency in spoken English. I have accordingly read Ms Nicolaou’s affidavit as evidence in these proceedings.
Having considered the passages in the expanded transcript to which I was taken during submissions, my opinion about the plaintiff’s capacity to read, speak and understand English is not changed.
It was submitted on behalf of the defendant that the settlement instruction constituted by the plaintiff’s signature on 6 November 2003 to the copy letter of 21 November 2002, altered by hand, should be seen as a further costs agreement under the Legal Practitioners Act. It is to my mind sufficient to dispose of that submission, to say that the document offers no assistance to an independent reader of it who wishes to deduce from it an amount of costs payable by the plaintiff to the defendant, or a formula by which such costs can be calculated. It was undoubtedly a written instruction to settle, but so far as costs are concerned, the most that it can be said to have done is to have placed a ceiling on the total amount of costs and disbursements payable by the plaintiff to her solicitors. In simple terms, the effect of the document was that the solicitors agreed not to charge, by way of costs and disbursements, any more than the nett settlement amount. The document can be read as an agreement by the solicitors not to charge any more than the settlement amount of $75,000.00 less deductions. On that interpretation, the amount recovered by the plaintiff by way of party-and-party costs would be payable to her, and none of that amount would be payable to the solicitors. This is clearly not what Ms Ryan intended when she prepared the settlement instruction document, clearly under some time pressure, and it has not been suggested on behalf of the plaintiff that the document should be interpreted in that way. Nevertheless, there is nothing in the document which would assist an independent person given the task of calculating the costs payable by the client to the solicitor in calculating that amount. The document does not refer to either of the written costs agreements or to the earlier oral costs agreement, or to the Supreme Court scale. It does not appear to be a document which was prepared with a view to providing any benefit to the plaintiff, or to set out any basis for the calculation of her liability for legal costs to her solicitors. I reject the submission that the document should be construed as a costs agreement under the Act.
It is of some relevance that Mr Chapman of Legalcost, instructed to perform a non-partisan role between Ryans and Phillips Fox in arriving at figures for party-and-party costs, came to the opinion that the solicitors’ costs for both actions were in a range of $33,000.00 to $34,500.00, plus disbursements of $18,000.00 to $18,500.00, making a total of $51,000.00 to $53,000.00. On the basis of the opinion he expressed, party-and-party costs were agreed between the parties at $53,000.00. This is consistent with an acceptance on both sides that on taxation, the plaintiff’s solicitors’ costs would have come in at about $34,500.00. There is no evidence that Ms Ryan sought instructions from the plaintiff about accepting that figure. On the evidence, I am satisfied that she did not do so. Clearly she should have. It is at least evidence that in her opinion, $34,500.00 was an appropriate figure for solicitors’ costs on a party-and-party basis.
I am satisfied that prior to execution of the 1999 costs agreement, Ms Ryan’s firm had rendered accounts, which had been paid by the plaintiff, of some $3,000.00. These costs had presumably been calculated at the agreed “pay as you go” rate of $180.00 per hour. Those costs are not open to review in the present proceedings.
The legal principles
Counsel for the plaintiff placed reliance on the decision of Higgins J in Passey v Bandarage [2002] ACTSC 105. That was an action brought by a client against a solicitor seeking relief under the same legislation. His Honour found that the costs agreements under consideration were unfair and unreasonable. His Honour set them aside and fixed the sums payable by the plaintiffs to the solicitor at figures lower than the solicitor had claimed in his invoices.
The costs agreement which his Honour set aside was a lengthy and detailed one, expressed generally in plain English so as to be intelligible to a non-lawyer.
His Honour set out the principles to be applied to determining whether a costs agreement was fair and reasonable. I set out an extract from his Honour’s reasons:
28. The first point that should be made is that solicitors owe a fiduciary duty to their clients. That duty extends to the making of any retainer agreement and the terms of it.
29. The client is entitled to advice as to the terms of any such retainer agreement. In any case in which the retainer agreement contains any unusual terms, where those terms favour the solicitor’s interests, the client should not only be frankly and fully advised so by the solicitor, but should be urged to take competent independent advice (see Law Society of NSW v Foreman [1994] 34 NSWLR 408). That is not a new obligation (see re Blythe & Fanshawe ex parte Wells (1882) 10 QBD 207). It applies to costs as well as disbursements.
30. Mildren J considered this issue in Athanasiou v Ward Keller(6) Pty Ltd (1998) 122 NTR 22. The solicitors in that matter had entered into a fee agreement with their client. At p 29 his Honour noted:
At common law, a costs agreement is enforceable if it is made to appear to the court that the agreement is “fair and reasonable”, the burden of proof resting on the solicitor seeking to uphold the agreement. . .the court has an inherent power as part of its general disciplinary function in relation to legal practitioners to supervise such agreements. . .
31. His Honour, therefore, concluded that, even if the Northern Territory equivalent of s 190 of the Legal Practitioners Act was complied with, the onus of establishing that the costs agreement was fair and reasonable rested on the solicitor.
32. In relation to the concept of what is fair and reasonable, his Honour, at p 30, noted:
The concept of “fairness” deals with the circumstances under which the agreement was entered. Thus an agreement has been held to be unfair if the solicitor used undue pressure on his client to sign it, or if the solicitor did not explain the agreement to his client. . .the concept of “reasonableness” on the other hand relates to the terms of the agreement itself. So if the fees to be charged under the agreement are said to be excessive the agreement is not reasonable.
33. At p 31, his Honour referred to a passage from Cordery’s Law Relating to Solicitors, Frederic T Horne (7th edition 1981, Butterworths, London) p 9:
In his dealings with his client the solicitor must exercise the utmost good faith, and in any financial transaction with a client (save as to costs for work done) there will be a presumption that such transactions should not be upheld unless the solicitor can establish that it was effected by the free exercise of the client’s will without any influence on the part of the solicitor.
34. As to the supposed exception, his Honour said:
In principle, I do not see why a costs agreement should be subject to the exception suggested. Obviously, if the costs agreement reflects the appropriate scale, and no unusual benefit is conferred upon the solicitor, the solicitor would have no difficulty in establishing that the agreement was reasonable. But a costs agreement may go a lot further than merely providing for the payment of fees; it potentially could confer considerable benefits on a solicitor in addition to his remuneration. I consider that there is no basis for drawing the distinction suggested. In my opinion the result is that the burden of proof rests upon the solicitor in respect of both fairness and reasonableness.
35. His Honour’s comments were, as he acknowledged, obiter. However, I agree with them. They are consistent with the duty the law imposes on solicitors to deal honestly and fairly with their clients.
His Honour went on to find on the facts that the costs agreement under consideration contained unusual provisions benefiting the solicitor. His Honour was satisfied that the agreement was demonstrably unfair due to lack of informed consent and unreasonable due to its effect in producing a grossly excessive fee. His Honour declared the agreement not to be binding, and found it convenient to declare the sum properly payable rather than refer that issue to the Registrar for taxation. His Honour did note that a costs agreement which produced a charge above scale would not for that reason alone fail to be fair and reasonable.
Agreements as to fees are a common feature of practice in family law. I was taken during submissions to a number of decisions of the Family Court of Australia in which costs agreements had been challenged. The Family Law Rules require a solicitor to provide a client with a copy of a pamphlet published by the Court about costs, and to advise the client of the availability of independent legal advice (O 38 r 8 (4)) but otherwise the common law applies to the obligations of a solicitor in reaching a written agreement about costs with a client. A useful judgment which sets out the applicable law in family law proceedings is Weiss v Barker Gosling (1993) 16 FamLR 728 per Fogarty J. In his reasons, Fogarty J quoted from a decision of Baker J in reBudziszewski (1981) FLC 91-038, in which Baker J had set out, amongst the requirements his Honour considered necessary as preconditions for an enforceable costs agreement, the following:
(a) that the solicitor must explain to his client the full nature and effect of the costs agreement in clear and unequivocal terms and the client must fully understand the same.
(b) that the solicitor must inform his client that it is against the client’s interest to sign an agreement entitling the solicitor to charge more costs than he may otherwise have been able to do and a solicitor may inform his client that he should obtain independent legal advice before executing the document.
(c) that the client’s consent to any agreement for costs must be a real consent obtained without any undue influence or pressure being applied to the client.
Fogarty J noted that these conditions had been accepted in other courts, for example in Hall v Barrett (1982) FLC 91-216 per Hunt J of the Supreme Court of NSW.
In Schiliro v Gadens Ridgeway (1995) 19 FamLR 196, a full bench of the Family Court of Australia (Barblett DCJ, Fogarty and Faulks JJ) accepted as settled law for the Family Court an analysis of the principles to be applied in cases involving a challenge to a costs agreement by Graham J in the decision under appeal where his Honour had said (omitting references):
A court has the jurisdiction to determine issues of costs between solicitor and client. A solicitor bears the burden of establishing that a contract was entered into freely in an informed and independent way. The essential nature of the agreement must be explained, understood and accepted. The solicitor has to rebut the presumption of undue influence.
The question then arises as to whether or not the agreement is fair and reasonable, and this raises two separate issues. In the first place, the requirement as to fairness must be considered. This is satisfied if the client understands and appreciates the agreement and acts either on advice received or the dictates of his own judgment. The issue is similar to the issue of rebuttal of presumption of undue influence. There is an overlap of evidence. I accept that the solicitor not only has the onus of rebutting the presumption but also the burden of proof in establishing the agreement was fair and reasonable. It is not necessary to demonstrate that the client has actually received independent legal advice. The relevant point for determination of unfairness is at the point of entry into the agreement.
I respectfully adopt that analysis as applicable in the circumstances of the present proceeding.
The 1999 costs agreement - fairness
I have found on the facts that the defendant’s firm sent the 1999 costs agreement to the plaintiff with a covering letter asking her to sign it and return it, which she did. I am not satisfied that she was provided with an explanation about the effect of the agreement. Higgins J said in Passey, quoting with approval the words of Mildren J in Athanasiou, that an agreement might be held to be unfair if the solicitor had not explained its terms to the client. In Athanasiou, the client had not been told of the difference between solicitor-and-client costs and party-and-party costs, or informed that he would lose the right to have his bill taxed at scale if he signed the agreement, and it had not been suggested that he should obtain independent advice before signing the agreement. Mildren J regarded that as fatal to the agreement. Higgins J took the view in Passey that the client should have been urged by the solicitor to obtain independent advice, as well as having the terms of the agreement adequately explained.
In the circumstances I am satisfied that the 1999 fees agreement was unfair.
The 1999 costs agreement - reasonableness
The solicitor had accepted the instructions of the client on the basis of an hourly rate of $180.00 for “pay as you go” or $220.00 per hour for payment at completion. I am not satisfied that the plaintiff was provided with any adequate advice as to the basis for the increase in the hourly rate in 1999. That is not to say that the hourly rate was necessarily unreasonable by that time.
What I think was unreasonable was that the intention of the defendant was that the increased hourly rate would apply retrospectively from the original instructions in March 1995. This was not explained by the defendant to the plaintiff at all. Clause A of the agreement, intended by the defendant to have that effect, was unclear and did not spell out in so many words that that was its intended effect. It is not necessary for me to express any opinion as to how the agreement would have been interpreted, in relation to costs for work done by the solicitor between 1995 and March 1999. It is sufficient for me to accept that the agreement might have been interpreted in the solicitor’s favour, which would have been quite unreasonable from the client’s perspective.
Clause C of the agreement is difficult for me to understand and would have been unintelligible to a lay person such as the plaintiff. Clause E does not help much in understanding it. It is unclear to me whether the agreement obliged the client to pay for disbursements immediately, or whether the defendant should be taken to have agreed to pay the disbursements, and recover them from the plaintiff at the end of the matter. There is evidence that the latter method was not unusual in the marketplace.
Clause D, drawn so as to require the client to pay interest, was also unclear. The clause does not explain when interest was to run from. The reference to claims within the jurisdiction of the Magistrates Court and claims within the jurisdiction of the Supreme Court is confusing and there is no suggestion that it was explained to the plaintiff at any time.
For those reasons the 1999 costs agreement seems to me to have been unreasonable as well as unfair.
The 2002 costs agreement - fairness
Having regard to my findings of fact, I am not satisfied that the defendant provided the plaintiff with an adequate explanation about the terms or effect of the 2002 agreement.
The agreement did not include any recital about the 1999 agreement. As I have already said, the expression “barrister and solicitor” had the capacity to be confusing to a lay person in the position of the plaintiff, in circumstances where, as she would have seen it, the defendant was her solicitor and Mr Maxwell was her barrister. It is understandable that the plaintiff might have been misled into thinking that the higher rate of $380.00 per hour applied to the barrister, Mr Maxwell, and the rate of $280.00 per hour applied to the solicitor, Mrs Ryan.
It is apparent from the evidence of the defendant that she intended the 2002 agreement to have retrospective application, so that it covered all work done by her firm since the initial instructions in March 1995. It is unnecessary for me to decide whether, properly construed, the agreement had that effect. I am satisfied that this was not explained adequately to the plaintiff, and that she did not understand that the higher hourly rates were to apply to work already done. If the intention of the parties was that the 1999 agreement was to be, in effect, revoked by the 2002 agreement, one would have expected this to have been spelt out in the agreement.
I am not satisfied that the defendant took adequate steps to make sure that the plaintiff understood the effect of the agreement, or, what the defendant intended its effect to be. I am not satisfied that the plaintiff understood the effect of the agreement as intended by the defendant.
I accept that the defendant more probably than not took the plaintiff through a series of questions and answers immediately prior to the signing of the agreement, but it seems to me likely that she did so in a perfunctory manner. I am satisfied that the defendant did not urge the plaintiff to obtain independent legal advice before signing the document.
All in all, I am satisfied that the 2002 costs agreement was relevantly unfair to the plaintiff.
The 2002 costs agreement - reasonableness
Some of the matters I have referred to as to fairness are equally relevant to reasonableness. It was unreasonable for the agreement to be drafted so as to apply retrospectively to 1995.
Parts of the agreement were unclear, including the provisions about payment of disbursements and the provisions about interest. It does not seem to me that the plaintiff understood the provisions of clause F about irrevocable authority.
I am also satisfied that the hourly rates set out in the agreement were unreasonably high having regard to the nature of the litigation, the complexity of the matters, the skill and experience of the defendant and her staff, and fees charged by other firms practising in the same field in Canberra.
I am satisfied that for those reasons the 2002 agreement was unreasonable as well as unfair.
The appropriate relief
Section 191 of the Legal Practitioners Act confers upon the court a discretion to declare that a costs agreement is not binding on the parties. Short of such a declaration, the court may direct that the amount payable under an agreement be reduced to a specified amount.
Having regard to my findings of fact, it seems to me that the appropriate relief is to declare that the 1999 and 2002 costs agreements are not binding on the parties.
Where the court makes such a declaration, it may make such further orders as it thinks necessary to restore the parties to the position in which they would have been if the agreement had not been made.
The defendant acknowledges that the oral agreement about hourly rates in 1995 is not a binding costs agreement for the purposes of s 190 of the Act. Section 190(3) specifically provides that such an agreement is not enforceable in the absence of a note or memorandum containing the terms of the agreement and signed by the client.
I recognise that it is possible that if the defendant had charged the client costs calculated in accordance with the 1995 oral agreement, the client might have accepted that, and not challenged it.
However, it seems to me more satisfactory to approach the matter by reference to the amount the client would have been found liable to pay in costs in the event of a dispute with the solicitor. In that event, the solicitor would have been entitled to bill the client at scale.
As I have said, I accept the evidence of Mr Travers about what the solicitor would have been found entitled to charge, and the client found liable to pay.
For the reasons I have previously given, I do not propose to revisit the costs charged by the defendant in the early years and paid by the client, prior to the signing of the 1999 costs agreement, nor do I propose to revisit the issue of counsel’s fees.
I propose to follow the lead of Higgins J in Passey, by making orders which will finally dispose of the matter, to avoid putting the parties through the expense of a remitter of the matter to the Registrar for taxation of a bill of costs. Quite enough time has been taken and quite enough money has been spent on this litigation already.
In broad terms, Mr Travers arrived at a differential of $32,000.00, between the fees charged by the defendant’s firm and the amount she would have been entitled to recover from the plaintiff at scale (see [324] above). The fees charged by the plaintiff included almost $3,000.00 in professional costs billed in 1995 and 1996 and paid by the plaintiff at the time. Although it is not immediately apparent on the evidence, I suspect that Mr Travers would have reduced the total of those amounts, although probably not by much, seeing that they were billed at the original rate of $180.00 per hour.
Rather than embark upon an exercise of arithmetic precision, it seems to me reasonable in all the circumstances, to do justice between the parties, to fix upon a differential of $30,000.00, between the amount charged by the defendant, and the amount she would have been entitled to at scale.
Conclusion
There will accordingly be a declaration that the costs agreements of 23 March 1999 and 10 December 2002 are not binding on the parties to those agreements, and an order, in the form of a judgment, that the defendant pay the plaintiff $30,000.00.
The defendant has had the benefit of the overcharge from about mid-July 2004. The plaintiff is entitled to recover interest, at the prescribed rate for interest up to judgment, for the period in question. Rather than attempt to arrive at a precise date from which interest should run, I propose to adopt the broad-brush approach of allowing interest for ten years. Interest up to judgment is governed by rule 1616 of the Court Procedures Rules 2006. That rule gives the court a discretion about the rate of interest. The default rate prescribed in part 2.1 of schedule 2 to the rules is 9% per annum up to 30 June 2010, and thereafter a rate which is 4% above the cash rate published by the Reserve Bank of Australia. The Supreme Court website states that the current pre-judgment interest rate is 6.5%.
It seems to me reasonable to allow interest at 9% for the first five years and at 6.5% for the second five years of the period. That would amount to $13,500.00 for the first five years and $9,750.00 for the second five years, a total of $23,250.00. That seems to me a reasonable allowance for interest, to do justice between the parties.
There will accordingly be judgment for the plaintiff for $53,250.00.
Costs
Notwithstanding the amount for which I propose to order the entry of judgment, I note that under the Legal Practitioners Act this court had exclusive jurisdiction to grant the declaratory relief sought under s 191 (see definition of court in section 3). This is not a proceeding which could have been brought in the Magistrates Court. Accordingly, the costs penalty rules which were set out in the Supreme Court Rules at the time this action was commenced have no application.
The general rule is that costs will follow the event. I recognise that there may have been negotiations between the parties of which I am not aware, which may affect costs. At the same time, I do not want to put the parties to the expense of coming back to the court unnecessarily. I propose to order that the defendant pay the plaintiff’s costs. Those costs will include the reserved costs of any application (r 1728).
I shall order that the order as to costs be stayed for 14 days, and that if either party wishes to apply for a different order about costs, that party may do so by email to the list clerk with a copy to the other side within that 14-day period. If notice of intention to make such an application is received within that period I shall make an order in chambers extending the stay until further order of the court, and the list clerk will list the matter for argument.
| I certify that the preceding four hundred and twenty nine [429] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Master Harper Associate: Date:19 September 2014 |
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