Woodgate v Keddie

Case [2006] FCA 1728

FEDERAL COURT OF AUSTRALIA

Woodgate v Keddie [2006] FCA 1728

CONTRACT – conditional fee agreement for legal services – client’s liability to pay costs and disbursements contingent on a “successful outcome” – work referable to trial and not to appeal – “successful outcome” in the contract was a verdict in District Court proceedings – client gave authority to pay costs and disbursements from damages awarded by District Court – client acknowledged that verdict could later be overturned and she might be liable to repay damages – verdict overturned on appeal – applicant seeks repayment of costs and disbursements from solicitors – moneys had and received – moneys disbursed pursuant to the authority prior to the appeal being filed – contract brought to an end by payment of costs and disbursements – relevance of subsequent conduct – no restitution as no mistake of fact or law established – payment voluntary – defence to claim for restitution – no unjust enrichment – solicitors changed their position and gave consideration for payment – application dismissed

Legal Profession Act 1987 (NSW)

CodelfaConstruction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 cited
Commissioner for Railways (NSW) v Cavanough (1935) 53 CLR 220 cited
Cox v Goldcrest Developments (NSW) Pty Ltd (2000) 50 NSWLR 76 cited
David Securities Pty Limited v Commonwealth Bank of Australia (1992) 175 CLR 353 discussed
Hookway v Racing Victoria Limited [2005] VSCA 310 cited
Independent Timber Importers (Aust) Pty Ltd v Mercantile Mutual Insurance (Australia) Ltd (2002) 12 ANZ Ins Cases 61-543 cited
Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 cited
Roxborough v Rothmans of Pall Mall Australia Limited (2001) 208 CLR 516 cited
Sportsvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103 cited
TCN Channel Nine Pty Ltd v Antoniadis (No 2) (1999) 48 NSWLR 381 cited
Wildev Australian Trade Equipment Co Pty Ltd (1981) 145 CLR 590 cited
Winstonu Pty Ltd v Pitson [2001] FCA 541 cited

Carter JW and Harland DJ, Contract Law in Australia (4th ed, Butterworths, 2002)
Mason K and Carter JW, Restitution Law in Australia (Butterworths, 1995)

GILES WOODGATE AS TRUSTEE OF THE ESTATE OF THE LATE MRS MARION MCGUINESS v RUSSELL W KEDDIE, TONY BARAKAT, SCOTT JOHN ROULSTONE AND ROBERT PAUL PINZONE TRADING AS KEDDIES SOLICITORS & ATTORNEYS

NSD 2551 OF 2005

BENNETT J
13 DECEMBER 2006
SYDNEY


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 2551 OF 2005

BETWEEN:

GILES WOODGATE AS TRUSTEE OF THE ESTATE OF THE LATE MRS MARION MCGUINESS
Applicant

AND:

RUSSELL W KEDDIE, TONY BARAKAT, SCOTT JOHN ROULSTONE AND ROBERT PAUL PINZONE
TRADING AS KEDDIES SOLICITORS & ATTORNEYS
Respondent

JUDGE:

BENNETT J

DATE OF ORDER:

13 DECEMBER 2006

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The application is dismissed.

2.The applicant is to pay the respondent’s costs. 

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES…

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AGLC
Woodgate v Keddie [2006] FCA 1728
Case
[2006] FCA 1728
Decision Date

CaseChat Overview and Summary

In the case of Woodgate v Keddie, the dispute involved the interpretation and consequences of a conditional costs agreement related to legal proceedings, specifically between Mr McGuiness as the administrator of Mrs McGuiness’ estate and the RTA. The case concerned the payment made to Keddies pursuant to a conditional costs agreement and whether this payment was affected by the subsequent successful appeal by the RTA. The court was required to determine if the successful outcome referred to in the agreement included an appeal against the District Court verdict and, if so, whether this altered the obligations under the costs agreement.

The court found that the terms of the costs agreement clearly indicated that the successful outcome was contingent upon a verdict in Mrs McGuiness' favour in the District Court. The court concluded that the further conditional costs agreement varied the initial agreement to apply only to the stage of the District Court verdict, regardless of whether it was set aside on appeal. The court rejected the argument that the successful outcome referred to a verdict that could withstand an appeal, emphasising that the agreement's terms and the parties' conduct aligned with the work done for the District Court proceedings. The court also considered that actions taken under the authority of a judgment could remain valid until reversed, and the change of position in good faith could act as a defence against a claim for restitution.

The court concluded that the successful appeal by the RTA did not nullify the contractual obligations under the costs agreement. The appellant could not recover moneys paid under a judgment that had been set aside, and the respondent was entitled to receive and retain moneys while the judgment was in force and not stayed. The court dismissed the application and ordered that the applicant was to pay the respondent’s costs.

Orders

Orders of the court

1. The application is dismissed.

2. The applicant is to pay the respondent’s costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

BENNETT J
The second conditional costs agreement was made for the appeal between Mr McGuiness as administrator of Mrs McGuiness’ estate and the RTA. This was in the context that Mrs McGuiness had already authorised payment to Keddies. It was also the case that she had died. There was no evidence that the second costs agreement was executed because of Mrs McGuiness’ death. She had acknowledged that Keddies had been paid pursuant to the costs agreement and that it was possible that the RTA would appeal, in which case Mrs McGuiness would have to repay the verdict moneys received, which would include the moneys paid to Keddies, and pay the costs of the appeal. If the “verdict” or “outcome” in clause 2 of the costs agreement did refer to a verdict that withstood an appeal, in my view that agreement was varied upon the execution of the further conditional costs agreement to apply only to the stage of the District Court verdict, whether set aside on appeal or not. Conclusion The terms of the costs agreement make it clear that the “successful outcome” upon which Mrs McGuiness’ liability to pay costs was conditional was a “verdict” in her favour in the District Court. No need arises to consider the subsequent conduct of the parties in reaching that conclusion. In any event, such conduct is consistent with the subject matter of the costs agreement, being the work done for the District Court proceedings, the outcome of those proceedings and the verdict in the District Court. The consequence of the appeal Fundamental to Mr Woodgate’s case is the submission that, once the appeal was successful, there was never a judgment or verdict in favour of Mrs McGuiness. It was avoided ab initio. Even if Keddies were entitled to payment after the verdict in the District Court, he maintains that they lost that entitlement after the appeal and must refund all of the money. The verdict was, he says, a condition precedent to Keddies’ entitlement to payment which “disappeared” when the Court of Appeal handed down its decision. Reversal on appeal generally annuls a judgment ab initio. However, a person may act under the authority of a judgment until reversed and such action is not avoided or invalid or unlawful (Antoniadis; Commissioner for Railways (NSW) v Cavanough (1935) 53 CLR 220 at 227; Wildev Australian Trade Equipment Co Pty Ltd (1981) 145 CLR 590 at 603). Whether ‘what has been done can be undone will depend upon the availability of appropriate remedies, to bring about the appropriate relief’ (Wilde at 603). A change of position, made in good faith, is available as a defence against a claim for restitution (Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548). If the moneys were paid out by Mrs McGuiness under the mistaken belief that she was under a legal obligation to pay them or that Keddies were legally entitled to payment, those moneys might be recoverable by her or her estate. However, there is no evidence of a mistake of fact or law on the part of Mrs McGuiness. There is evidence, in the acknowledgement, that Keddies were not paid out under a mistaken belief that there would be no appeal.

Ratio Decidendi

Legal Principle Established

Established by: BENNETT J

It is not clear whether Keddies transferred moneys from the trust account to its office account before or after the acknowledgment was executed. Keddies’ trust account ledger simply shows that its profit costs were transferred to the office account on 7 January 2000. The acknowledgment made no provision for any undertaking or commitment from Keddies to repay the amounts being disbursed from the interim payment from the RTA.Consideration Some matters are not in dispute. The parties agree that the question for the Court is the proper construction of the costs agreement. A broad appreciation of the terms one might expect of a “no win, no fee” agreement is not relevant. Similarly, while the solicitor and client relationship between Keddies and Mrs McGuiness might be said to sit uneasily with certain aspects of this case, no impropriety is suggested. There is also no dispute that a 25% uplift was charged by Keddies on their profit costs but not on any disbursements. Of those disbursements, one barrister had agreed to a fee conditional on the outcome. The parties agree that a recipient of moneys under a judgment is entitled to receive moneys and retain them while the judgment is in force and not stayed. The successful appellant, here the RTA, is entitled in principle to recover from Mrs McGuiness all moneys paid under a judgment that has been set aside (TCN Channel Nine Pty Ltd v Antoniadis (No 2) (1999) 48 NSWLR 381 at [4]). Payment was authorised by Mrs McGuiness in accordance with the costs agreement. Mr Woodgate accepts that, at the time of payment to Keddies, Mrs McGuiness was contractually bound to pay the costs and disbursements. Keddies were obliged to make the payments to the third parties. The RTA could not have obtained a refund from Keddies after it succeeded on appeal whether the costs agreement was conditional or unconditional. Mr Woodgate contends, however, that Mrs McGuiness’ obligations were avoided after the successful appeal by the RTA. He emphasises that, had there been a verdict for the RTA in the District Court, Mrs McGuiness would not have been liable to pay either the costs or disbursements and that Mrs McGuiness had no contractual relationship with third parties and no obligation to pay them. That obligation, it is said, was held by Keddies.The construction of the costs agreement The costs agreement relevantly provided that a ‘successful outcome’ was when there was an ‘award or verdict’ in Mrs McGuiness’ favour (clause 2). A 25% premium was payable conditional upon the ‘successful outcome of the Work’ (clause 4). The disclosure provided that there would be no charge unless the matter has been successful, that is, resulted in an award or verdict in Mrs McGuiness’ favour. Mr Woodgate’s position is straightforward. He submits that there has been no successful outcome; the proceedings have resulted in a verdict for the RTA and not for Mrs McGuiness; Keddies are not entitled to have been paid. Mr Woodgate further contends that, as all of the documents were drafted by Keddies, any ambiguity should be construed against them.