WILLIAMS Love and Nicol Lawyers Pty Ltd ACN 096 408 374 Trading as Bradley Allen Love Lawyers v Bayldon Group Pty Ltd ACN 105 352 485 (Civil Dispute)

[2021] ACAT 47

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

WILLIAMS LOVE & NICOL LAWYERS PTY LTD ACN 096 408 374 TRADING AS BRADLEY ALLEN LOVE LAWYERS v BAYLDON GROUP PTY LTD ACN 105 352 485 (Civil Dispute) [2021] ACAT 47

XD 941/2020

Catchwords:               CIVIL DISPUTES – legal practice claims fees for services provided – where respondent sought legal assistance from applicant to recover a commercial debt – where debt recovery largely unsuccessful – whether the applicant should have alerted the respondent more energetically or frequently to the mounting level of fees – whether amounts paid into applicant’s trust account by debtor were reflected in fees invoiced – whether recovery fee imposed by applicant should be included in amount owed

Legislation cited:        ACT Civil and Administrative Tribunal Act 2008 ss 15, 16, 18, 22

Legal Profession Act 2006 ss 269, 276, 279, 286, 394, 399, 419
Magistrates Court Act 1930 s 261, part 4.2

Subordinate
Legislation cited:        Court Procedures (Fees) Determination 2020 (No 2)

Cases cited:Trinity Law Pty Limited v Krishinan [2009] ACAT 45

Trpkovski v Williams Love & Nicol Lawyers Pty Ltd [2014] ACAT 13
Williams Love & Nicol Lawyers Pty Ltd v Wearne [2015] ACAT 23

Tribunal:  Senior Member M Hyman

Date of Orders:  15 June 2021

Date of Reasons for Decision:         15 June 2021

AUSTRALIAN CAPITAL TERRITORY          )

CIVIL & ADMINISTRATIVE TRIBUNAL     )          XD 941/2020

BETWEEN:

WILLIAMS LOVE & NICOL LAWYERS PTY LTD ACN 096 408 374 TRADING AS BRADLEY ALLEN LOVE LAWYERS

Applicant

AND:

BAYLDON GROUP PTY LTD ACN 105 352 485

Respondent

TRIBUNAL:     Senior Member M Hyman

DATE:15 June 2021

ORDER

The Tribunal orders that:

1.The respondent is to pay the applicant $12,455.08.

………………………………..

Senior Member M Hyman

REASONS FOR DECISION

1.The respondent, the Bayldon Group Pty Ltd (Bayldon), operated a commercial business supplying chicken and other meat products to restaurants and the like. They engaged the applicant, which I will identify as BAL Lawyers or BAL, to help recover a debt from a customer. BAL has applied to the Tribunal to recover a debt that they say Bayldon owes for the work undertaken.

2.The parties attended a hearing by telephone on Tuesday 13 April 2021. Ms Anna Phillips appeared for BAL; Ms Kylie Qiu, Bayldon’s Managing Director, and Ms Natalie Mackenzie, a member of Bayldon staff, appeared for Bayldon. Mr Ian Meagher, Legal Director for BAL, appeared as a witness for the applicant.

3.BAL sought in its application (dated 31 August 2020) to recover a debt calculated at $12,282.95, made up of a claimed amount owed of $11,533.53, a filing fee with this Tribunal of $319, search or hearing fees of $18.81 and interest of $411.61. The claimed amount owed of $11,533.35 comprised invoices totalling $6,533.53 that BAL says remain unpaid, plus a recovery fee of $5,000. On 10 December 2020 BAL filed an amended application, updating the filing fee to $325 and the amount of interest to $577.74, giving an amended total claim of $12,455.08.

4.The papers before me include BAL’s application and amended application, each with attachments; Bayldon’s response, dated 6 October 2020; two witness statements by Mr Meagher (dated 11 December 2020 and 9 March 2021), with attachments (taken into evidence as Exhibits A1 and A2 respectively); and three other documents provided shortly before or during the hearing. The first of these latter documents is two pages provided by the respondent and received by the Tribunal on 26 March 2021; it is headed “Timeline”, which would usually suggest a recounting of relevant events and developments in chronological order with cross-references to confirmatory evidence, but in this case contains entries in the nature of submissions. The second of the three additional documents is a submission by the respondent dated 12 April 2021. The third document comprises extracts from the applicant’s trust and debtors ledgers; the applicant sent this to the Tribunal during the hearing in response to issues that had arisen during the course of the hearing.

5.It was unclear whether the first and third of the above documents had been available to both parties before the hearing. Accordingly, an opportunity was provided for the parties to make submissions in respect of matters that arose from the documents; and for the parties to respond to submissions made by each other. In the event only the applicant made a submission (dated 21 April 2021). The third document listed above (extracts from the applicant’s trust and debtors ledgers) is taken into evidence as Exhibit A3. The other two documents, being in the nature of submissions, along with the additional submission received from the applicant following the hearing, have been taken into account in the reasons that follow.

The issues

6.The only issues before the Tribunal are whether the respondent owes a debt to the applicant and if so, the amount of that debt.

Legislative framework

7.Part 4 of the ACT Civil and Administrative Tribunal Act 2008 (the ACAT Act) deals with the civil dispute jurisdiction of this Tribunal. The Tribunal may hear debt applications[1] up to and including a value of $25,000[2] (a debt application is defined as an application for recovery of a debt[3]). In matters within its jurisdictional limit the Tribunal has the same powers as given to the Magistrates Court by part 4.2 of the Magistrates Court Act 1930.[4] The latter Act empowers the Magistrates Court to declare that a person owes a debt, or owes a debt of, or of more than, a stated amount.[5]

[1] ACAT Act section 16(c)

[2] ACAT Act section 18

[3] ACAT Act section 15

[4] ACAT Act section 22

[5] Magistrates Court Act 1930, section 261

8.It is recognised that the provision of legal services offers an opportunity for an unscrupulous practitioner to take advantage of the usual imbalance in power and knowledge between practitioner and client. Legislation typically imposes special and quite prescriptive requirements on practitioners to prevent abuse. In the ACT the Legal Profession Act 2006 (LPA) requires legal practitioners and law practices to disclose estimates of costs and explain the basis on which costs will be imposed.[6] If and when the estimate changes significantly, that change must also be communicated.[7] Client and practitioner may enter into a costs agreement in an open and transparent way.[8] Costs are recoverable by a legal practice or practitioner under a properly entered into costs agreement,[9] and such an agreement can be enforced like any other contract.[10] A client who suspects a practitioner or practice of overcharging may apply to the Supreme Court for a costs assessment.[11]

[6] LPA section 269

[7] LPA section 276

[8] LPA division 3.2.5

[9] LPA section 279

[10] LPA section 286

[11] LPA division 3.2.7

9.The supervision of the profession as provided for in the LPA is divided among the Supreme Court (as noted above), the law councils and this Tribunal. A person dissatisfied by the services provided may make a complaint to the relevant law council (in the present instance, the ACT Law Society).[12] The council, after investigating a matter, may apply to this Tribunal for an order in relation to various forms of misconduct,[13] but may also, where circumstances meet the criteria, summarily dismiss the complaint on various grounds, including that it is lacking in substance.[14]

The complaint to the ACT Law Society

[12] LPA section 394

[13] LPA section 419

[14] LPA section 399

10.The respondent lodged a complaint with the ACT Law Society on 24 November 2020.[15] The substance of the complaint is that the applicant had sought to recover the debt from Crib Hospitality (identified in the complaint by its trading name, Stanley’s), but had made no recovery and had invoiced for an amount only slightly below the amount of the debt sought to be recovered. The respondent stated in the complaint that that they had been unfairly charged “without any result at all”. The Law Society considered the matter and dismissed it under section 399 of the LPA. In a letter dated 28 January 2021 to the respondent advising that the matter had been dismissed,[16] the Professional Standards Manager of the ACT Law Society, Mr Robert Reis, reported the Professional Standards Committee’s conclusion that the applicant had informed the respondent appropriately and regularly about costs and the increase in those costs as the matter proceeded; and that the respondent, therefore, ought to have been aware of the risks and of the dwindling potential cost advantage as the matter proceeded.

[15] Exhibit A2, witness statement of Mr Ian Meagher dated 9 March 2021 at attachment A

[16] Exhibit A2, attachment A

11.No application for costs assessment having been made, and the complaint to the Law Society by the respondent having been dismissed, the debt is to be determined as a simple matter of contract; this Tribunal has jurisdiction for that purpose.

The facts

12.The facts of the matter are not generally in dispute. The documents provided establish that the respondent engaged the applicant to assist with recovering one or more debts (it is clear that more than one debt was at issue, but it is the amount owed by a single customer of the respondent that has given rise to the present matter). The debt at issue was generated by the supply of chicken and/or meat products by the respondent to a company called Crib Hospitality (trading as Stanley’s). The applicant was engaged to recover the debt, which amounted to $12,007.76.[17] The recovery effort was directed at both the debtor company itself, against its Director and Secretary, Mr Jeremy Kidson, and against its owner, Mr Andrew Hollands.

[17] Exhibit A1, page 34

13.The debt recovery effort did not go well, facing obstacles at every turn, although at first matters appeared to be on track. The applicant made a debt application to this Tribunal, and Mr Kidson accepted personal liability for the entire debt.[18] The Tribunal made an order declaring Crib Hospitality, Mr Kidson and Mr Hollands jointly and severally responsible for the debt. Despite the order and undertakings by Mr Kidson to make periodic payments, in the event he failed to follow through with payments.

[18] Exhibit A1, page 40

14.The applicant obtained a money order on 22 November 2018[19] and undertook proceedings in the ACT Magistrates Court to enforce the debt, obtaining a debt redirection order dated 12 April 2019;[20] at this point the debt had increased to $13,832.71 through addition of interest and costs. The debt redirection order was unproductive, however, as neither Mr Kidson nor Crib Hospitality had funds available in their accounts.[21] In July 2019, Crib Hospitality went into liquidation, with no funds or assets available to meet the debts of unsecured creditors.[22]

[19] Exhibit A1, page 84

[20] Exhibit A1, page 84

[21] Exhibit A1, pages 96, 99

[22] Exhibit A1, pages 102-125

15.Around this time, in September 2019, it appears that Mr Kidson became difficult to locate,[23] and therefore it became problematic to enforce the debt against him. At about the same time Mr Hollands signalled that he had appealed against the original decision by this Tribunal making him jointly and severally liable with Mr Kidson and Crib Hospitality.[24] There followed attempts to recover the debt and the costs associated with its recovery, including a number of attempts to reach a settlement with Mr Hollands, who challenged his liability on the basis that his signature had been forged on a critical document.[25] The debt continued to be pursued, both with Mr Kidson and Mr Holland, but with very limited success. Meanwhile, the applicant presented invoices for work undertaken to the respondent on a monthly basis, and as the months passed, the respondent started to fall behind in meeting these payments. The applicant increasingly pressed for payment while continuing to receive and act on instructions, but on 11 February 2020 advised the respondent that it could no longer continue to act in the matter given the amounts owed. At that point, an ACAT hearing in the debt matter with Mr Holland was listed for 18 February, and the outstanding amount owed by Bayldon to BAL was identified as $6,403.53.[26]

The arguments of the parties

[23] Exhibit A1, page 150

[24] Exhibit A1, page 126

[25] Exhibit A1, page 132

[26] Exhibit A1, page 205

16.The applicant’s argument is straightforward. The respondent entered into a routine costs agreement for the services that the applicant was to provide. That costs agreement was transparent about the structure of charges that might be imposed for various courses of action, and was accompanied by a costs disclosure statement that, amongst other things, advised of the risks that costs might become elevated for various reasons, and that the action might not be successful. The applicant provided periodic advice both about the costs incurred up to that point and of the costs associated with options for further action. The respondent has a contractual obligation to pay the costs incurred.

17.The respondent has not disputed any of the facts set out above. The essence of the respondent’s argument is that the costs that the applicant seeks to recover are disproportionate to the results obtained. The debt sought to be recovered was of the order of $12,000, yet the costs incurred by the applicant in pursuing the debt are roughly commensurate with the debt being pursued, and in the event hardly any of the debt was recovered. If so little has been recovered, that implies that the respondent has not only lost most of the original amount owed, but also now owes about the same amount for legal costs. The applicant should have been clearer and more transparent about the way costs were mounting; and should have worked more energetically to secure a satisfactory settlement from the debtors. The respondent also pointed to the difficulties that it would face as a small business in attempting to pay a debt of this size while absorbing the loss from non-recovery of the Crib Hospitality debt.

Consideration

Is there a debt?

18.There is no doubt that the respondent entered into a contract for the applicant’s services; the costs agreement is conclusive that that occurred.[27] The respondent, in the submission headed “Timeline” and also at the hearing, suggested that the costs agreement had been signed by the applicant and not the respondent, and therefore did not bind the respondent. That argument is based on some copies of the agreement appearing in the papers bearing only the applicant’s signature; but other copies bear the signature of both parties.[28] In any case, as the applicant points out, clause 16 of the costs agreement provides that if a client has not signed the costs agreement but continues to instruct the applicant, then the matter proceeds in any case on the basis set out in the agreement.

[27] Application, pages 27-37

[28] Page 29 of the application has a signature on both lines but no name for the person signing for the Respondent, and no date on that line; page 33 of Exhibit A1 is the page of the costs agreement where the parties sign, and it has signatures of both parties, with Ms Qiu’s name inscribed underneath the signature, and the date “17/9/18” against the signature of each party.

19.The contract having been entered into, and the services having been provided, the respondent owes the applicant for those services unless some other matter intervenes to raise questions about the legality of the contract. No such matters have been brought to my attention; some protection is provided against such matters by the provisions of the LPA. In practice, it is clear that the applicant was thorough and conscientious in informing the respondent about costs, both at the outset, and at relevant times as matters proceeded. Examples of the completeness and regularity of such advices include:

(a)In the costs agreement provided to the respondent on or about 30 May 2018, costs were estimated at $750 and between $1,550 and $9,000 plus GST and disbursements if ACAT proceedings were commenced.[29]

(b)In an email from applicant to respondent dated 25 September 2018, legal costs at that time were given at $1,781.[30]

(c)In an email from the applicant to respondent dated 20 May 2019,[31] detail was provided regarding the costs associated with the enforcement hearing in the Magistrates Court, including costs for preparing the debt redirection order ($1,519) and for the hearing itself ($702).

(d)in an email dated 19 August 2019, the cost of a skip trace on Mr Kidman was estimated at $475 inclusive of GST;[32] an email of 11 September 2019 noted the possibility of holding off on the skip trace to save costs.[33]

(e)In an email of 23 September 2019[34] the applicant, responding to a request from the respondent,[35] estimated the cost of each enforcement hearing before the Magistrates Court at $400-$600 plus GST; that email also noted that the costs of bringing fraud charges against Mr Kidson in the Federal Court would probably exceed any likely recovery.

(f)In an email dated 8 October 2019 from the applicant to the respondent, the costs to that point were quoted as $5,639.53 (without GST) with $1,432.44 (again without GST) for disbursements; in the same email the costs for a contested hearing before this Tribunal regarding Mr Hollands’ continuing identification as a defendant were estimated at $2,500 to $4,000 plus GST.[36]

(g)In an email exchange between applicant and respondent in October 2019, the costs incurred to that point (including disbursements) were advised and acknowledged as amounting to $7,071.97;[37] that amount appeared in a number of draft and finalised Calderbank offers.

[29] Application, page 28

[30] Exhibit A1, page 34

[31] Exhibit A1, page 98

[32] Exhibit A1, page 137

[33] Exhibit A1, page 134

[34] Exhibit A1, page 130

[35] Exhibit A1, page 131

[36] Exhibit A1, page 154

[37] Exhibit A1, pages 163, 165

20.What the above record shows is that any complaint by the respondent that they were unaware of the dimensions of the costs of the debt recovery is without foundation: the level of costs incurred towards the end of 2019 was a focus of attempts being made by applicant and respondent together to reach settlement with Mr Hollands. Further, on a number of occasions the applicant reminded the respondent of the limited opportunities to recover costs in this Tribunal (arising from the drafting of section 48 of the ACAT Act and case law applying that section). The respondent therefore knew, or ought to have known, that they were very likely to bear the costs themselves rather than recover them. The original costs agreement and disclosure statement also made it clear that there was no guarantee of success in the debt recovery action, and warnings about the possibility of various options being unsuccessful were made throughout the attempted debt recovery.

21.The applicant has provided copies of invoices for the period when the respondent began to withhold payment. These invoices are dated 30 September 2019, 30 October 2019, 28 November 2019, 18 December 2019 and 30 January 2020.[38] The applicant’s debt ledger shows that these invoices remain largely unpaid.[39]

[38] Application, pages 12-26

[39] Exhibit A3

22.The respondent plainly owes the applicant for the services provided; the amount owed is a debt of the respondent.

How much is the debt?

23.There remains the question of the amount of the debt. The applicant’s debt ledger extract,[40] invoices and statement of account,[41] persuade me that the costs and disbursements amount of $6,533.53, invoiced but unpaid,[42] should be accepted. The respondent has queried whether that amount takes into account the $1,700 that was recovered from Mr Kidson and Mr Holland; on the basis of the debt and trust ledgers,[43] I accept that it does: the trust ledger shows payments of $1,000 from Crib, $500 from Mr Hollands, and four payments of $50 from Mr Kidson, and the transfer out of various amounts totalling $1,700 against the fees incurred; the balancing amounts appear in the trust ledger. I also accept the amount of interest, at $577.74;[44] clause 8 of the costs agreement provides for the overdue costs to accrue interest, and the applicant has provided a schedule showing how the amount has been calculated. The filing fee for a debt application made by a corporation for an amount $15,000 or less is $325,[45] and that amount also forms part of the debt.

[40] Exhibit A3

[41] Application, pages 11-26

[42] Application, page 8

[43] Exhibit A3

[44] Amended application, page 6

[45] Court Procedures (Fees) Determination 2020 (No 2), Schedule, Part A

24.The remaining contribution to the debt as calculated by the applicant is the recovery fee of $5,000. The recovery fee is clearly set out in clause 11 of the costs agreement. There is an argument that such a fee is no more than a way of circumventing this tribunal’s cost-free status, but it has been recognised in previous cases that where a costs agreement clearly sets out the imposition of a recovery fee so as to recover costs incurred in securing payment, the client in accepting the costs agreement is contractually bound to pay the recovery fee under the specified circumstances: see Trpkovski v Williams Love & Nicol Lawyers Pty Ltd;[46] Trinity Law Pty Limited v Krishinan;[47] Williams Love & Nicol Lawyers Pty Ltd v Wearne.[48] In the cited cases, the recovery fee is set not as a flat amount but as a right to be paid the actual costs of recovering the debt. In the present matter, the fee is set at a flat $5,000, presumably based on the approximate costs associated with the ACAT hearing needed to have the debt declared. I cannot see that the flatness of the fee changes its validity; whatever is lost in accuracy is made up for in transparency, as the client knows what non-payment of a fee will cost at the time of entering into the costs agreement. The recovery fee forms part of the debt.

[46] [2014] ACAT 13

[47] [2009] ACAT 45

[48] [2015] ACAT 23

25.The debt is for $12,455.08.

Other issues

26.The respondent claims that the applicant holds the original of a credit application and guarantee needed to enforce the debt against Crib, Mr Kidson and Mr Holland. This is the document which Mr Holland asserts contains a forgery of his signature, and if that claim is to be tested an original will be needed. The papers shed a limited amount of light on the question, and if they show anything it is that the applicant has never held the original, and that it is possible that the respondent has lost or misplaced the original. They do not lend any support to the respondent’s claim that the applicant is or was holding the original as a way of putting pressure on the respondent for payment of the outstanding invoices. Even if they did support that contention, as the applicant has pointed out, that would have no bearing on the existence of the debt that the respondent owes the applicant.

27.The respondent has pointed to the difficulties it would face in paying a debt of this size. That is a question that may arise when enforcement of a debt is at issue, but it has no bearing on whether the debt exists.

Conclusion

28.It is apparent from the debtors ledger extract provided by BAL that Bayldon kept up with expenses and paid its legal fees until about September - October 2019, and then simply stopped paying BAL’s invoices. I do not think there is any likelihood that Bayldon was unaware of the way costs were mounting. The invoice for October 2019, in particular, was for close to $5,000, and it coincided with action by Mr Hollands resisting the debt action, and perhaps therefore the increased possibility that the action would not succeed. But Bayldon continued to give instructions to BAL (so increasing costs), and by stopping payment has incurred additional debt amounts in interest, filing fee and recovery fee, approximately doubling the size of the debt, while occasioning more than a year’s delay.

………………………………..

Senior Member M Hyman

Date(s) of hearing	13 April 2021
Solicitors for the Applicant:	Ms A Phillips, Bradley Allen Love Lawyers
Respondent:	Ms K Qui and Ms N Mackenzie, authorised representatives