Wright and Associates v Archer
[2000] QCA 296
•28 July 2000
SUPREME COURT OF QUEENSLAND
CITATION: Wright & Associates v Archer & Anor [2000] QCA 296 PARTIES: D M WRIGHT & ASSOCIATES
(applicant/appellant)
v
HAL ARCHER and SYLVIA ARCHER
(respondents/respondents)FILE NO/S: Appeal No 7375 of 1999
SC No 6511 of 1998DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane
DELIVERED ON: 28 July 2000 DELIVERED AT: Brisbane HEARING DATE: 19 July 2000 JUDGES: McPherson JA, Williams and Mullins JJ
Separate reasons for judgment of each member of the court, each concurring as to the orders made.ORDER: Appeal dismissed with costs. CATCHWORDS: PROFESSIONS AND TRADES – LAWYERS – SOLICITOR AND CLIENT – RETAINER – IN GENERAL – whether terms of retainer included work actually charged.
CORPORATIONS – WINDING UP – LIQUIDATORS – APPOINTMENT IN VOLUNTARY WINDING UP – where multiple versions of retainer appeared in bill of costs - whether solicitor retained to ensure a “winding up in accordance with strict legal procedures” – where solicitor may have been acting as liquidator.
CORPORATIONS – WINDING UP – WINDING UP VOLUNTARILY – IN GENERAL – whether winding up should occur in a particular manner.
PROFESSIONS AND TRADES – LAWYERS – SOLICITOR AND CLIENT – DUTIES AND LIABILITIES TO CLIENT – DEALINGS WITH CLIENT – where solicitor attended frequently and provided much “non-legal” advice.
PROFESSIONS AND TRADES – LAWYERS – REMUNERATION – TAXATION OF COSTS AND FEES – GENERAL PRINCIPLES – UNUSUAL AND UNNECESSARY COSTS AND EXPENSES – whether duty to advise and protect client against incurring useless and unnecessary expense had been complied with.
Corporations Law s 494, s 495(1), s 532(1)
Allen v Aldridge (1843) 5 Beav. 401; 49 ER 633, considered
Re Windeyer Fawl & Co, ex p Foley (1930) 31 SR (NSW) 145, applied.
Skinner & Smith’s Bill of Costs (No 2) [1990] 1 Qd R 180, distinguished.COUNSEL: A J H Morris for the appellant
G J Robinson for the respondentSOLICITORS: The appellant appeared on its own behalf
Walker Pender for the respondents
McPHERSON JA: This is an appeal from a decision of Shepherdson J dismissing an application to review the taxation by the Taxing Officer, Mr R Houghton, of a bill of costs rendered by the solicitor D M Wright & Associates to clients Hal and Sylvia Archer. The bill of costs was for $11,739.72, of which $11,168.24 was disallowed and only $571.48 allowed.
The facts, so far as relevant and discernible from the material, are these. In early 1995 Hal and Sylvia Archer, who are brother and sister, were directors and shareholders of Dunwingeri Pty Ltd, a company whose business was conducting a horse stud engaged in breeding Arabian horses. The company was encountering financial difficulties and there were differences between the Archers as to what should be done about it. On 24 January 1995 Sylvia Archer spoke to the solicitor Ms Wright, and explained her problems to her. A diary note of the conversation records:
"In any event she [Sylvia] cannot go on, and wants to wind up the company. I said this was straightforward and that as a director she was entitled to do so. She will try to speak to her brother Hal, and get back to me."
On 26 January there was another conversation. Hal had proved unwilling to wind up, at which the solicitor advised Sylvia that "as a director she could definitely wind up the company". This was followed by an attendance by the solicitor at the Archer residence on 28 January 1995, when Hal was prevailed on to agree that winding up of the company should take place.
From that time on, there were many telephone and other attendances by the solicitor upon Sylvia Archer or, at times, her brother, or the accountant who was acting for them. According to details given in the items in the bill of costs, matters discussed included the horses, their breeding potential, market values, prices of land, Sylvia's prospects of obtaining a pension, whether items of property should be auctioned, and so on. By 19 February 1997 there was talk of "winding up by 30 June 1997", and a discussion of how the assets would be divided between the two Archers. On 6 June 1997 Hal demanded that "a liquidator be put in now", to which the solicitor responded that it would be financially disastrous to do so "as they were the major creditors of the company and had incurred significant accounting fees and legal fees on the basis that they were going to voluntarily wind up the company". On 24 June 1997, Sylvia Archer agreed it was "unlikely the company would have money to pay the creditors at the end of the day".
June 30, 1997 came and went without anything more being achieved. By 12 November 1997 Sylvia Archer was inquiring whether a company could be wound up owing debts, and also asking whether a winding up needed to be advertised. The advice seems to have been that it was not needed. At some stage, a deed appears to have been drawn and executed with a view to dividing the assets between the Archers. The final two items in the bill are dated 23 January 1998, consisting of letters apparently enclosing accounts for work done. At about this time, or perhaps it was later, the solicitor's retainer was terminated by the clients.
The written reasons of the Taxing Officer set out the terms of retainer from the clients who are identified as Hal and Sylvia Archer. It is not suggested that the company itself was a client. More than one version of the retainer appears in the bill of costs. It may have been "to assist in the winding up" of the company; or "to wind up the company … without the need to appoint a liquidator"; or "to dissolve the company without the added cost of having to appoint a liquidator". On another and apparently more formal and later version of the retainer, the work was done "with a view to the winding up of the company in accordance with strict legal procedures ..". In yet another place, the description given is "to assist the shareholders and directors in arriving at a mutually agreeable way of dissolving the company assets".
The Taxing Officer formed the opinion that, if the retainer was to achieve a winding up of the company, the solicitor had failed to accomplish it after the lapse of almost three years and considerable expenditure in time and costs; that the advice she had been giving to the Archers was not professional legal advice; and that the clients could not be charged for it on a professional basis unless they had been warned that that was what would be done. Overall, he considered the work done had proved to be useless to the clients, and he taxed the bill on that basis. The general objection to the taxation is stated in the following terms:
"This was a solicitor and own client bill. The solicitor was instructed to assist in the winding up of the company Dunwingeri Pty Ltd. After discussing this matter with the directors of the company and the accountant it was decided that in light of the few assets of the company and the cash flow company of the company it would be best to wind up the company without the added cost of having to appoint a liquidator. The solicitor assisted the shareholders and directors of the company in arriving at a mutually agreeable way of dissolving the company's assets. The client was at all times made aware of the costs of the solicitor's attendances and specifically instructed the solicitor to carry out these attendances. The items should therefore have been allowed."
It is evident that there was and is a question about the precise terms or nature of the retainer and whether it was carried out. If it was to wind up the company, or to achieve its winding up, "in accordance with strict legal procedures", then nothing of the kind was attempted by the solicitor. If strict legal procedures were to be followed, then in 1995 a declaration of solvency would have had to be made under s 494 of the Corporations Law preparatory to the passing of a special resolution of the company that it be wound up voluntarily. In any event, the appointment of a liquidator was required by s 495(1) "for the purpose of winding up the affairs and distributing the property of the company". If the company was not solvent, the choice of liquidator would have passed to the creditors. In any event, if there was going to be a winding up in accordance with strict legal procedures, then a liquidator had to be appointed.
Nothing of that kind happened, or was even recommended by the solicitor in the present case. She seems to have had in mind that an informal winding up could be carried out by the directors themselves and at the insistence of one director alone. That is plainly not the law. We are all aware that companies do in practice sometimes pay out all their creditors and, having done so, then divide up the assets among those entitled without the formality of a winding up under the Corporations Law. In due course, the company is afterwards simply deregistered. It may have been some such winding up that the solicitor had in mind when she first advised Sylvia Archer on 24 January 1995. Whether a "winding up" in that informal fashion accords with the provisions of the Corporations Law may perhaps be open to question. There can, however, be no serious objection to it if it succeeds, which it often does with small family trust companies and the like that have not been engaged in trading or incurring liabilities to any, or any substantial, extent. It is a different matter if the result of such informal winding up is that the corporate assets are distributed without ensuring that all creditors are identified and paid their debts promptly and in full. Directors incur a real risk of personal liability, civil and criminal, if they distribute or appropriate the assets without paying or providing for the payment of the creditors.
If it was a winding up of that character that the solicitor had in mind when first advising Sylvia Archer in January 1995, then she was placing her client at some risk in telling her that, as a director, she was entitled to do it. At that stage the solicitor did not have a retainer either from the company itself or from the other director Hal Archer. Precisely how the winding up was intended to proceed remains unclear. It is a matter on which the solicitor did not advise the clients. On one view of it, the solicitor may have been intending to carry it out herself with the assistance of the company accountant and the directors. However, s 532(1) of the Corporations Law provides that a person shall not consent to be appointed, and shall not act, as a liquidator of a company unless he or she is a registered company liquidator. The former exception in favour of exempt proprietary companies has long since been removed from the legislation. If the solicitor herself acted as the liquidator, she almost certainly contravened s 532(1). Whether in fact she did so, would, in my opinion, have depended on whether she exercised a discretion of her own in matters relating to the winding up, such as the collection, realisation and distribution of the assets. If that is what the solicitor was really doing in breach of s 532(1), then she had no right to charge for it at all.
It is much more likely that what she was doing, or conceived herself to be doing, was giving advice to the client director or directors as and when questions arose. Sylvia Archer was evidently feeling rather isolated and worried about the affairs of the company at the time she first consulted the solicitor. As much as anything, she seems to have been looking for the assurance or assistance of someone to talk to and rely on. She needed a friendly shoulder to lean on. Apparently the solicitor herself had some knowledge of or interest in horse‑breeding or horses of the kind in question. Many, if not most, of the items claimed in the bill of costs were for consultations and advice about matters that involved no element of legal knowledge or expertise at all. In respect of such items, the Taxing Officer gave as the reason for disallowing them that "this attendance does not appear to involve the exercise of skill or legal knowledge". In his answers to the objections to the taxation, he explained his decision more fully in the following terms:
" If the company was solvent, and the available evidence seems to indicate that it was not, then the respondent ought to have properly advised Sylvia Archer as to her legal rights and the course she might take to retire as a director and to obtain her share of the capital of the company. Beyond that the solicitors should have advised that they would only need to be approached for advice or legal work when the need arose such as preparation of any conveyancing documents for the individual directors when the time came (which costs are claimed in the bill but which are not costs of the winding up). There was no need for the solicitors to deal with the matter upon a daily basis in a hand-holding capacity (see as an example the diary notes for Items 5 to 7 in the bill). Ms Archer was capable of obtaining valuations of the horses and/or properties herself and of seeking accounting advice without the necessity for the respondent to be present or involved at all. The solicitors were under an obligation to advise Ms Archer that they did not need to undertake such attendance and it is only after such a warning is given but is not heeded by a client (that is specific instructions are given to undertake the work and to incur the costs) that a solicitor will be entitled to recover the costs of such unnecessary work."
There is, of course, no reason why a solicitor should not accept a retainer to do perfectly mundane and non-professional work if that is what the client wishes, and if the solicitor is willing to undertake it. Whether a bill of costs in respect of such work would be taxable under s 22 of the Costs Act 1867 or otherwise depends on the capacity in which the solicitor is employed. Speaking in Allen v Aldridge (1843) 5 Beav. 401, 405; 49 ER 633, 635, of the comparable s 37 of the English Act (6 & 7 Vic c 73) from which s 22 of our Act was copied, Lord Langdale said:
"The business contained in a taxable bill may be business of which no part was transacted in any court of law or equity; but I am of opinion that it must be business connected with the profession of an attorney or solicitor - business in which the attorney or solicitor was employed because he was an attorney or solicitor, or in which he would not have been employed if he had not been an attorney or solicitor, or if the relation of solicitor or client had not subsisted between him and his employer."
In this instance, the jurisdiction to tax arose because (as seems clearly to have been the case) the relation of solicitor and client subsisted between the firm of D M Wright & Associates and its client or clients Sylvia Archer and later Hal Archer. The retainer was nevertheless an unusual one, consisting, as it turned out to be, of advising the clients at times on almost a daily basis on how to collect, realise, and distribute the proceeds of the assets of a horse stud business, as well as advising Sylvia Archer on personal problems. In relation to a contract like that, it was the duty of the solicitor to give her clients advice and protection against incurring useless and unnecessary expense. See Re Windeyer Fawl & Co, ex p Foley (1930) 31 SR (NSW) 145, 151, to which the Taxing Officer referred; and cf also Skinner & Smith's Bill of Costs (No 2) [1990] 1 Qd R 180. In the circumstances of the present case, a warning would not have been sufficient to alert the clients to the unnecessary nature of the expense likely to be involved and incurred unless it was also made clear to them, at the very least, that the solicitor intended to charge fees on a professional basis for all attendances and advice, whether or not any element of legal skill or expertise was involved, and regardless of whether the services she provided served any useful purpose in assisting the process of winding up to a conclusion. The Taxing Officer observed that, although the solicitor was present during the hearing of objections to taxation, and was represented by another solicitor, she was not called to give evidence and did not say that any such warning had been given to the clients. As it is, the Taxing Officer found that the retainer had never been fulfilled because, at a date that was some three years after the retainer was first accepted, the company had still not been wound up. He considered that the purpose of the retainer had not been achieved, and that the solicitor's work had proved useless to the clients. That is why he reduced the bill of costs to the extent that he did.
It is not the function of this Court to rehear the taxation process from the beginning. The only question here is whether, in arriving at his decision on this bill, the Taxing Officer erred in principle. I can detect no error in the principles he applied, or in the way in which he applied them. It follows in my opinion that the appeal should be dismissed with costs.
WILLIAMS J: I have had the advantage of reading the reasons for judgment prepared by McPherson JA and I agree with all that he has said therein.
My only additional observation is that I have serious doubts whether it was established that at all material times the respondent, Hal Archer, was a party to the retainer. The respondent, Sylvia Archer, first consulted the appellant about this matter on 24 January 1995. The appellant’s notes of that consultation indicate that because of disputes between Sylvia and her brother Hal she considered the company couldn’t go on and she wanted it wound up. The diary note concluded: “I said this was straight forward and that as a director she was entitled to do so. She will try to speak to brother, Hal, and get back to me.” Subsequently on 26 January 1995 the solicitor attended at the “Archer residence” and her diary note records a discussion with both Sylvia and Hal Archer. It records that initially Hal was “resistant” to the idea of winding up the company but the last entry is as follows: “Eventually he conceded that if Sylvia wanted to wind up … that was the end of it.”
I can find nothing in that (or in any other) diary note to indicate that the respondent Hal Archer joined in giving instructions to the appellant. The difficulty in identifying the client is highlighted by the attendance on 9 November 1995 which is the basis for item 84 in the Bill: “Telephone attendance on Hal Archer to discuss matter; he advised that Sylvia should be paying our account, we advised that Dunwingeri would pay until formally discharged by directors as we were engaged by Dunwingeri Pty Ltd.”
Many other diary notes indicate a general reluctance or unwillingness on the part of the respondent Hal Archer to co-operate with the appellant in whatever it was the solicitors were doing. Again that raises in my mind serious doubt as to whether or not there was any retainer to which Hal Archer was a party.
But those considerations need not be explored to finality because, as is demonstrated by the reasons of McPherson JA, the appeal must in any event be dismissed.
MULLINS J: I agree with the reasons for judgment prepared by McPherson JA. Shepherdson J dismissed the application to review the taxation of the taxing officer on the basis that he considered the taxing officer correctly approached the matter. As the reasons for judgment of McPherson JA show, there was no error of principle in the decision of the taxing officer. It therefore follows that the appeal should be dismissed with costs.
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