Kirk v Vallant Hooker & Partners
[2000] NZCA 31
•29 February 2000
| IN THE COURT OF APPEAL OF NEW ZEALAND | CA18/99 |
| BETWEEN | KEITH DAVID KIRK |
| Appellant |
| AND | VALLANT HOOKER & PARTNERS |
| Respondent |
| Hearing: | 14 February 2000 |
| Coram: | Blanchard J McGechan J Fisher J |
| Appearances: | B Rooney for Appellant R Asher QC for Respondent |
| Judgment: | 29 February 2000 |
| JUDGMENT OF THE COURT DELIVERED BY MCGECHAN J |
The Appeal
This is an appeal arising out of costs review proceedings under Part VIII Law Practitioners Act 1982. The original solicitor’s bills were referred for revision to the Auckland District Law Society. The Revisor made no change. On appeal to the Registrar, counsel’s fee came into issue also. The Registrar revised both downwards. On application to the High Court under s149 for review, the Judge restored fees to the original level, resulting in this appeal. The amount at issue is not large, but some questions of principle have arisen.
Review Under s149 : Principles
Parties accepted the approach to be taken on application to the High Court under s149 for review is as stated in Gallagher v Dobson (1993) 3 NZLR 611. Barker ACJ after reviewing authorities (ibid 617-618) adopted as a summary a catalogue by Tompkins J in Bruns v Buddle Findlay (HC, Auckland, M1048/90, 1 October 1992). The catalogue comprised acting on a wrong principle, taking into account irrelevant matters, declining to have regard to relevant matters, failure to observe natural justice and demonstration of bias. That list is not to be taken as exhaustive. As in most appellate or review functions approached in a restrictive way, as for example appeals from exercise of a discretion, the High Court can and should intervene where the decision is “plainly wrong”. That latter does not open the door to review on a simple basis that a number of views are open and the Court should prefer a different view. To the contrary, the High Court should be cautious over interfering with views reached by a Registrar, particularly where (as here) the Registrar has had the assistance of a practitioner in the course of the appeal exercise. Registrars have expertise in this specialised area, and an ability which Judges’ cannot match to compare like cases on a regular basis. That is not to be put to one side lightly.
Background
The Appellant issued proceedings in February 1991, alleging negligence by a former solicitor and accountant. The Respondent, whom we will term “VHP”, were his solicitors instructed in that litigation, and also in certain other matters. Senior counsel was retained.
The proceedings became protracted. By January 1992 considerable fees had been incurred. The Appellant requested an estimate of further fees. An estimate was supplied in writing on 30 January 1992. Counsel advised $10,000 for interlocutories, $30,000 for preparation, and $30,000 for hearing ($3,000 per day on a projected 10 day trial). VHP advised $15,000 for interlocutories and preparation (not segregated), plus $3,000 to $5,000 if not involved in the hearing or $10,500 to $15,000 if so involved. It is a curious feature of this case that Appellant, or perhaps ostensibly a connected trust, was advised simultaneously by an independent solicitor Mr Callaghan, who received copies of this and other correspondence. Appellant did not protest.
Very considerable interlocutories ensued. We accept these were initiated in large part by advisors for one Defendant. There was also more client contact and reporting than had been anticipated. The estimate by counsel for interlocutories, and the combined interlocutory/preparation estimate by VHP, came to be exceeded by a substantial margin. Bills in evidence down to the beginning of March 1993 were as follows (excluding GST and disbursements):
Counsel
VHP
6.4.92
$9,750
14.8.92
9228
8.5.92
$4,500
18.8.92
2934
11.12.92
$9,000
3.9.92
3816
$23,250
4.11.92
2628
15.12.92
3189.10
3.2.93
4194
25,989.10
Some qualification is needed. For example counsel’s first bill of $9,750 covered matters as far back as April 1991, well before the January 1992 estimate. Counsel’s second bill included two days briefing evidence, which more naturally falls into preparation than an interlocutory category. VHP’s bills as rendered included an unascertained proportion relating to other matters. Indeed, VHP’s bills while commendably broken down by attendances, times, and rates, contained only minimal information as to the type of work actually involved in those attendances. However, even with those allowances, it is clear that by the beginning of March 1993 interlocutories estimates had been exceeded.
Appellant again raised questions as to costs. He requested advice as to costs incurred to date, and an estimate for the conclusion of the proceeding. VHP wrote two letters dated 3 March 1993. The first, to Appellant, recorded costs billed as above plus GST and disbursements (but omitting the 3 February 1993 bill), leaving it to counsel to update his own January 1992 estimate. The second to Mr Callaghan, but copied to Appellant, noted counsel’s January 1992 estimate of $30,000 for preparation and $30,000 for trial. Neither letter referred to earlier estimates as to interlocutories, or included any figure for further interlocutory costs. At a meeting shortly after with the Appellant and Mr Callaghan, counsel indicated he had “no reason to change the views” expressed by him as to costs in January 1992. VHP had nothing further to say.
Matters continued. Appellant was not a prompt payer, and VHP found it necessary to apply some pressure in the course of correspondence. In doing so, VHP advised on 28 May 1993 that all interlocutory applications intended for the Appellant had been completed.
In the further period running through to October 1993 bills were rendered as follows (excluding GST and disbursements):
Counsel
VHP
31.5.93
$6,500
8.4.93
3510
29.9.93
$9,500
1.7.93
1494
$16,000
16.9.93
1998
30.9.93
4374
$11,376
It is not possible to determine the category of attendances involved in VHP’s bills. Counsel’s fees involved, on their face, a mixture of interlocutory and preparation matters. As at beginning of October 1993 it is clear interlocutory estimates previously given, and previously exceeded, had been further exceeded and some inroad had been made into preparation estimates.
It is a common and sensible practice for solicitors to get in counsel’s fee in advance of trial. Many, likewise sensibly, see a need to obtain at least a substantial advance payment in respect of their own fees. On 6 October 1993 VHP took steps accordingly. A letter to the Appellant (then overseas) noted counsel’s estimates of $30,000 for preparation and $30,000 for trial in January 1992; VHP’s estimates of $15,000 for interlocutories and preparation, and $10,500 to $15,000 for hearing in January 1992; confirmation in the letter of 3 March 1993; and discussions on 9 March 1993. The letter then stated that “based on the above costs estimates [counsel’s] and our fees at the maximum, amount to $75,000”, and requested that amount be remitted to be held in the trust account at interest.
Appellant’s response came through a letter dated 7 October 1993 from Appellant’s trustee. The letter stated Appellant “does not wish to have any confrontation with his own lawyers immediately preceding or acting for him in this case” and “has not challenged the costs you have put forward but in some instances has asked for further details and has from time to time requested...that if an estimate of costs is given it should be as accurate as possible. This prevents nasty surprises and also enables me to budget for these payments”. The trustee suggested an indemnity arrangement.
VHP and counsel then entered into intensive preparation. The costs and indemnity issues remained alive. At a meeting on 18 October 1993 warning was given the trial could run into the third week. On 20 October 1993 VHP wrote requesting indemnity covering fees “for preparation for hearing and a two week trial” at the rate of $60,000 for counsel and $30,000 for VHP (plus certain incidentals). In the event of a third week, the suggestion was for increase on a proportionate basis. The letter went further. Noting Appellant’s “unhappiness” at late demand for payment of $75,000, it referred to having advised Appellant “of the level of fees payable $90,000 as far back as January 1992”, and stated VHP were only seeking support for payment “to amounts previously advised”. On 26 October 1993 counsel rendered a bill for $13,200 (plus GST and disbursements). The bill plainly relates to preparation. It is possible the bill could have been viewed as still encompassed within counsel’s estimated $30,000 for preparation.
Over the period 27, 28 and 29 October 1993 counsel initiated and procured settlement on the basis of $500,000 “all in”. It was considered a favourable settlement. There is no reason now to think otherwise.
On 27 October 1993 counsel rendered a further (final) bill for $17,500 (plus GST and incidentals). The bill plainly relates to preparation and negotiation, not segregated. Counsel advised this account had been reduced to approximate the $30,000 estimated for preparation.
Around the time of settlement a curious exchange took place between Appellant and VHP. Appellant previously had paid $45,000 into VHP’s trust account as the resolution of an application for security for costs by Defendants to his litigation. In discussions Appellant stated a belief that the $45,000 would cover outstanding costs due to that point. VHP agreed. That was far from correct. When the settlement payment of $500,000 was received by VHP around 15 November 1993, the firm felt constrained to retain a further $60,000, paying Appellant out only $440,000.
VHP rendered bills on 11 November 1993 (to 15 October 1993) for $5,922, and on 15 November 1993 for $9,078 (to 29 October 1993).
In the upshot, Appellant found himself in a position where despite estimates in January 1992 seemingly confirmed in early March and early October 1993 totalling some $55,000 for interlocutories and preparation, he had paid counsel $69,950 and VHP $52,365.10, a total of $122,315.10, more than twice as much. He was less than content. These proceedings began.
Auckland District Law Society Revisor’s Decision
The Revisor considered only VHP’s bills. Those considered extend from earliest times, 13 May 1990, to 15 November 1993. The Revisor also received full information as to counsel’s charges. The Revisor in a detailed and careful report considered that on “traditional approaches” the bills should be upheld in their entirety. In particular, time expended was justified and charge-out rates were reasonable. The worry, for the Revisor, was the estimate. He observed:
“4.I do find, however, that the fees charged considerably exceeded the estimate that was given and repeated. This troubles me considerably. It is clear to me that the client wanted and needed to know what his costs in pursuing the litigation were going to be. I accept that it is notoriously difficult to estimate litigation costs. Be that as it may, the firm and the barrister were prepared to repeat estimates on a number of occasions. I believe it would be difficult for a client to understand how the actual costs could exceed the estimates by so great a margin. I think it would also be difficult for a client to understand that estimates were restricted to the costs immediately prior to the trial, excluding all the other incidental matters that were attended to. In hindsight, it may have been unwise to give the estimates that were, in fact, given.
5.The dilemma I face is as follows: given that I have found, on the material provided to me, that there was no binding fees agreement, and given that I have found, on the material given to me, that the fees charged for the work done were reasonable, do I still adjust the fee to bring them more in line with the estimates? I have concluded that I cannot adjust the fees. If I did so, I would have to make a totally arbitrary decision concerning an acceptable margin above the estimate. There is simply no way that I can conclude that the estimate could only be exceeded by 10% or 20% or any other percentage and I decline to deal with the fees in this way.”
The Revisor noted J & J C Abrams Limited v Ancliffe [1978] 2 NZLR 420 and hinted that legal issues might arise in relation to those estimates as amongst Appellant, VHP, and counsel, to be resolved in another forum.
On appeal to the Registrar (assisted by a practitioner) there was no dispute that on traditional costs revision approaches no changes were warranted. The crux of the appeal was that “the Revisor failed to determine or have regard to the effect of costs estimates given by [VHP] to the Appellant which were far exceeded by [VHP’s] actual costs…”. The Registrar accepted in line with Skinner v Harkness Henry & Company (HC Hamilton, AP 44/90, 16 July 1990, Fisher J) that the Revisor was obliged to resolve any questions of fact, and considered the Revisor erred in “failing to determine the effect of the cost’s (sic) estimates upon the fees charged”.
The Registrar then set out to determine “a reasonable fee”. He noted the history of estimates and confirmations, and also the overruns down to the letter of 6 October 1993 requesting $75,000 security. The Registrar noted that letter:
“…should have indicated to the Appellant that the original estimate would be exceeded. He…does not appear to have queried the overrun on the estimate. Even so it is for the solicitor to draw to the attention of the client that an estimate needs to be varied or exceeded rather than for the solicitor to assume that the client appreciates that this is the situation”.
The Registrar noted VHP did not so advise. Indeed, VHP had agreed with Appellant’s comment post settlement that the $45,000 would cover remaining costs.
The Registrar then referred to Rule 11.8 of the Rules of Professional Conduct relating to barristers’ estimates, expressing the view the same “careful estimate” approach should apply between solicitor and client. Then, in a key passage, the Registrar stated (italics added):
“In this matter the client asked for an estimate at an early stage and an estimate was given but no conditions were placed upon it i.e. that the estimate was being given at an early stage and counsel and solicitor reserved the right to revise it at various points during the proceedings because costs can escalate very quickly in High Court proceedings. On the contrary, the original estimate was confirmed at a considerably later period when it should have been clear that there was going to an overrun. Whilst an estimate is not a firm offer to do a job for that price, it does not mean that the supplier of the services can then proceed to charge whatever he, she or they see fit. There are bounds and the final fee should not be grossly in excess of the estimate. In this matter the estimate was for a maximum fee of both solicitors and counsel of $100,000 and the actual fee was $119,381.10. If the matter had gone to trial then the actual fee above the estimate would not in my view be excessive. However the matter did not go to trial and therefore $10,500 to $15,000 should be deducted from the solicitor’s estimate and $30,000 from Counsel’s costs. This provides an estimated figure of $55,000 and an actual cost of $119,381.10 and it is my duty to decide in all the circumstances whether the additional amount over and above the estimate is excessive and fairly chargeable.”
The Registrar then distinguished, but appears to have borrowed from, the building estimate cases of J & J C Abrams Limited v Ancliffe (supra) and Fraser & Stacey and others (HC, Wellington, CP 898/88, 12 October 1990, McGechan J). In particular the Registrar appears to have drawn on the view expressed in the latter that an obligation to estimate “very roughly” (sic; otherwise put in that case as “rough, very rough”) allowed in excess of a quarter to a half overestimate. The Registrar adopted the latter (one-half) given a perceived greater uncertainty in legal matters. There were, however, “other considerations”, one being “concentrated lengthy negotiations for settlement” for which allowance was needed.
After further detailed consideration of various matters the Registrar then determined as follows:
“Estimated Cost of Interlocutories
Counsel $10,0000
Solicitors $15,000 which includes preparation, say $ 5,000Actual accounts for Interlocutories
Counsel $29,750 (overrun $19,750)
Solicitors $27,300 (overrun $22,300)Allowed
Counsel $10,000 plus ½ of overrun $9,875 = $19,875.00
Solicitors $ 5,000 plus ½ of overrun $11,150 = $16,150.00Deducted
Counsel $ 9,875.00
Solicitors $11,150.00Estimated costs of preparation:
Counsel $30,000.00
Solicitors, say $10,000.00Actual accounts for preparation and settlement negotiations
Counsel $40,300 (overrun $10,300)
Solicitors $22,122 (overrun $12,122)Allowed
Counsel $40,300
Solicitors $10,000 plus ½ overrun $6,122.00
Plus $3,000 for settlement negotiations and completing mattersDeducted
Counsel Nil
Solicitors $3061.00Total deducted from Counsel’s accounts $9,875.00
Total deducted from solicitor’s accounts $14,211.00”
The Registrar found an overcharge of $24,086; with VHP directed to repay accordingly.
High Court Decision
The Judge identified the High Court review as encompassing “one narrow point” i.e. “whether, when there has been an estimate, such estimate must impact on the final level of costs”. In the Judge’s view, it was “essentially the effect of [the estimate given in January 1992]” that was the issue. The Judge noted the Registrar’s findings that “the final fee should not be grossly in excess of the estimate”, and VHP’s attack on that approach. His Honour then observed:
“In this case, there was clearly an estimate. It is apparent that there was vigorous defence to Mr Kirk’s claim, and interlocutories that exceeded all reasonable expectations. Having reviewed the correspondence, I accept that in the early stage there was room for ambiguity over the position relating to cost. The escalating cost, as compared to the estimates, on the basis of a counsel for perfection, were not spelt out clearly enough in the early stages. As a counsel of perfection, the exact amount of overrun at the various stages could have been spelt out. But a review of all the correspondence, in my view, makes it plain that as proceedings progressed it was apparent to anyone that the fee estimate was being exceeded. It is to be noted that by May 1993 there was already counsel’s overrun of nearly $20,000.”
There was then a reference to correspondence, clearly enough from context VHP’s letter of 6 October 1993 seeking $75,000 security. The Judge noted as “self evident” from that letter that “estimates were going to be exceeded by a considerable margin”. In that light, the Judge noted response on behalf of the Appellant in his trustee’s letter of 7 October 1993 that Appellant had not challenged the costs, but had requested that estimates should be as accurate as possible for budgeting purposes. The Judge considered “it was apparent at that stage that estimates were going to be exceeded, but that [Appellant] wished counsel and solicitors to continue acting”.
The Judge then viewed the matter “against that background”. His Honour, stated:
“The citation from the Registrar’s decision at [paragraph 21 above as first italicised] in my view, can only have one interpretation. That is quite simply that a final fee should not grossly be in excess of an estimate. A reading of the decision as a whole confirms this. It must be apparent to all, and seems to have been accepted by the reviser and the Registrar, that the estimation of litigation fees are notoriously difficult. The Registrar sought some assistance by a comparison with cases involving building disputes. While one can see advantages in trying to make comparison with other areas where estimates are exceeded, the example of building disputes is, in my view, not an appropriate one. At least in a building dispute there are plans, specifications, and schedules of materials to assist in providing the estimate. The very nature of litigation prevents any such precision. This was such a classic case. It was fought vigorously and defendants engaged in an enormous number of interlocutories. It is apparent that from an early stage the estimates were going to be exceeded. Based on a counsel of perfection, there is room for criticism that this could have been spelt out more clearly, and there was a degree of ambiguity. However, when it came to prepare for trial, and the ultimate settlement, the situation was clear, and the Mr Kirk elected to go on.”
Counsel’s and solicitor’s fees were allowed in full.
Submissions for Appellant
Appellant submitted that the High Court decision
Misstated the test which the Registrar was required to apply. The High Court’s decision was put as meaning that no regard was to be had to the estimate. That, it is said, is not so. The effect of an estimate is one of the circumstances bearing on fairness and reasonableness which must be considered. The Registrar had not felt himself compelled to adjust to give effect to the estimate. The Registrar rightly considered the effect of the estimate as one of the relevant circumstances. Indeed, even if the Registrar had given the estimate considerable or overwhelming weight, he would not have taken into account an irrelevant consideration. It would have been consistent with ethical standards.
Failed to apply correctly principles applicable to review applications. The particulars developed were essentially as above.
Erred in findings of fact and in inferences. The primary attack is upon the finding Appellant knew the estimate was being exceeded but elected to continue with the litigation. The Judge’s finding that it was “self evident” from the letter of 6 October 1993 that estimates were going to be exceeded did not take into account that the Registrar did not interfere significantly with costs after that date. The October exchange, moreover, affirmed the previous estimates. Those estimates, relevant when given, did not cease to be relevant when exceeded. Nor was it reasonable to construe a decision to continue at that late stage as a voluntary acceptance of excess costs: Appellant by that stage had little choice but to continue. Further, even if the Appellant had continued with awareness of excess, that does not mean the excess must be entirely to his account.
Submissions for Appellant also canvassed a number of other factual considerations. These included alleged error in finding excess costs were attributable to unanticipated Defendants’ interlocutories; and in omissions to refer to the $45,000 conversation and to VHP’s inability to supply a balanced trust statement showing amounts actually paid by Appellant.
Submissions of Respondent
Respondent submitted
The High Court applied the correct test. The Court did not regard the effect of an estimate as an irrelevant consideration. The Registrar had been in error in assuming there must be an adjustment where there was a gross excess over an estimate. An estimate is a matter to be considered on the facts of the particular case.
Appellant “was specifically aware of the gross exceedence (sic) of fees for the interlocutory stage”; i.e. excess over the initial estimate. In addition, he was “specifically put on notice” in early October 1993 of the estimate of future trial preparation and likely future costs of $75,000 and accepted the position and excesses over earlier estimates. The Registrar had erred in ignoring those matters.
The Registrar failed to place adequate weight on the fairness and reasonableness of the fee; or on the alleged fact that excess over initial estimate had no impact on Appellant’s course of conduct, and Appellants suffered no loss.
The characterisation of the Registrar’s decision as involving a finding fees must not grossly exceed estimates
The first point of concern with the judgment is the Judge’s characterisation of the Registrar’s decision as involving a finding fees must not grossly exceed estimates.
The Registrar’s decision, quoted paragraph 23 supra, does state (emphasis added)
“There are bounds and the final fee should not be grossly in excess of the estimate”.
The Judge considered that “can have only one interpretation”, and that “a reading of the decision as a whole confirms this”. That interpretation, as emerges from the judgment, was that the Registrar “must make an allowance because of the estimate”, an interpretation which the Judge stigmatised as taking into account an irrelevant consideration.
If the focus is narrowed to the one phrase “the final fee should not be grossly in excess of the estimate” – and that focus appears to have been the thrust of VHP’s submissions then and now – that characterisation of the Registrar’s approach is understandable. However – and here we respectfully differ from the Judge – if the phrase is read in full context, a different interpretation emerges. The Registrar, only a few sentences later, pointed to what could only be an ex facie “gross” disparity between an estimate of $55,000 and an actual fee of $119,381.10, and said “it is my duty to decide in all the circumstances whether the additional amount over and above the estimate is excessive and fairly chargeable”. The approach the Registrar decided to adopt, given gross excess over estimate, was not per se reduction. To the contrary, it was to evaluate all circumstances to see if the invoice above estimate was “fairly chargeable” or (implicitly) “excessive” and requiring reduction. In our view, when the Registrar’s expressions are read in context, both immediate and wider, the Registrar did not consider he “must” make an allowance because of the estimate. He did not take into account an “irrelevant consideration” of that character; or as the point might perhaps more directly be put, make an error of law or operate upon a wrong principle.
The Registrar’s decision, on a review of this character, cannot be reopened on that basis.
Judge’s findings of fact as to the state of knowledge of Appellant as to excess over estimate, given limitations inherent in course of s149 reviews
The Registrar noted VHP’s submission that “it was clear or should have been clear to the Appellant that the original estimate would be exceeded”, and accordingly addressed factual questions as to the extent of the Appellant’s knowledge of excess over estimates. A summary of the Registrar’s approach must suffice.
The Registrar noted counsel’s filenote of 9 March 1993 recording an indication counsel had no reason to change views expressed in January 1992, the Registrar concluding Appellant had not been advised at that stage of growth in interlocutories. The Registrar noted the VHP filenote of 18 March 1993 referring to costs of $100,000, the “upward estimate” in January 1992. He also noted the letter of 28 May 1993 stating all interlocutories taken for Appellant had been completed, coupled with a reference to some outstanding accounts but silence in relation to counsel’s fees and solicitor’s fees significantly exceeding estimates. The Registrar noted the letter of 6 October 1993 seeking security of $75,000. The Registrar considered “this should have indicated to the Appellant that the original estimate would be exceeded”, and while not happy at requirement for security Appellant “did not query the overrun on the estimate”. As against those factors the Registrar observed “even so, it is for the solicitor to draw to the attention of the client that an estimate needs to be varied or exceeded rather than for the solicitor to assume the client appreciates that this is the situation”. The Registrar noted that counsel’s two bills of 26 and 29 October 1993 totalling $30,800 (without GST and disbursements) were in line with counsel’s estimate of $30,000 for preparation plus something for negotiating settlement. The Registrar then repeated, on a more general basis, that VHP did not advise Appellant estimates would be exceeded; and that indeed after settlement VHP agreed with Appellant that $45,000 separately held would suffice to cover remaining costs.
The Judge, in extracts already quoted, took a different factual view, particularly as to the extent of Appellant’s knowledge at the earlier interlocutory stage during which the greater part of the excess occurred. The Judge acknowledged that “in the early stages” there was “room for ambiguity”; escalating costs (albeit on a “counsel of perfection”) not being spelt out clearly enough. However, the Judge considered “a review of the correspondence” makes it plain that as proceedings progressed it was “apparent to anyone” that the estimate was being exceeded. The time period which the Judge appears to have had in mind may be indicated by a conjoined reference to an overrun on counsel’s fees of nearly $20,000 by May 1993.
We pause for a moment. The Registrar plainly had not been prepared to draw from the identified correspondence that Appellant was aware of the excess which developed in these earlier stages. The Judge, on the correspondence, was prepared to draw an inference on an objective basis to precisely that effect, and did so.
The Judge then addressed the letter of 6 October 1993 seeking security, considering it was self-evident from that letter estimates would be exceeded. Alongside that the Judge considered response on behalf of the Appellant, taking the view such response made it clear Appellant wished counsel and solicitors to continue to act. The Judge did not refer to the Registrar’s juxtaposed observation that notwithstanding the obvious character of the excess the solicitors should have drawn that excess to Appellant’s attention.
The Judge proceeded to give this different approach to the question of knowledge a decisive significance. Knowledge of excess over estimate and “decision to proceed” were listed as circumstances, amongst others, bearing on whether allowance should be made because of an estimate. Applying that, the Judge ruled that “estimates are important, but if a client, as here, was aware the estimate was being exceeded and elected to continue”, the client “can have no complaint about meeting a fee which has been held to be fair and reasonable”. Where a client is “aware an estimate is being exceeded” and is “aware of the reasons”, the Judge could see no reason to deny solicitors and counsel “their reasonable feel” (sic).
There are difficulties in upholding the Judge’s approach, given limitations upon the High Court’s function on s149 review as canvassed earlier.
As to the earlier stage (taken as down to 28 May 1993), there is room for different views as to the implications of the correspondence concerned. The view which the Judge took to that stage is open. If one moves past the correspondence, and totals up the bills rendered, that applies a fortiori. Equally, however, the view which the Registrar took – particularly in the light of absence of any letter openly and specifically warning of the developing excess – also was open. The factual view taken by the Registrar to that point did not infringe principle; and was not plainly wrong.
The latter stage (the Registrar and Judge moved directly to the October 1993 correspondence) is rather more complex. There is an effective consensus between the Registrar and Judge that from the time of the letter of 6 October 1993 the Appellant knew or should have known an excess over estimate would occur. (In our view that is not beyond argument, depending upon treatment of fees already paid to that point, but the consensus is accepted for the purposes of analysis). The Registrar’s dismissal of that factor on a basis VHP did not draw the excess to the attention of the Appellant is not an adequate response. Given the fact that the excess was known, the failure to give formal notice hardly constitutes a countervailing factor. The Registrar’s approach on that point does reflect error in principle, and was open to review.
We are unable, however, to concur with the approach then taken by the Judge, i.e. that such knowledge, plus intimation solicitors and counsel nevertheless were to proceed is conclusive.
First, it would have been known the excess arose through expenses on interlocutories already incurred. The estimates for preparation and trial would stand (indeed, counsel took care in the end to confine ultimate billings to approximate the $30,000 preparation estimate). Second, and related to that, Appellant’s submissions rightly ask what other realistic choice did Appellant have? He was only 3½ weeks out from trial. It was a 10-15 day fixture. It had taken a long time to obtain, and (possibly with some inflexibility due to Appellant’s residence abroad) a new fixture with different representation probably would involve another long delay. He was anxious to have the case brought on. Indeed counsel without intending to be unkind describes Appellant as “obsessed” with the matter. There was no realistic prospect other solicitors and counsel could be instructed in the time span available, to say nothing of questions of additional cost inevitably involved in such a take-over with added familiarisation exercises. Bluntly, on the question of overruns beyond estimate, Appellant was given Hobson’s choice. That is not a choice which should prove conclusive against him.
Third, while the fact of overruns beyond estimate is taken as known, there are some worrying indications Appellant may not have known, or perhaps even been able to know, the true extent of those overruns. Appellant appears to have been quite genuinely under the impression, even post settlement, that the $45,000 deposited as security for Defendants’ costs would cover all further fees, even including GST and disbursements. Appellant’s credibility in that respect is enhanced by VHP’s perhaps careless acknowledgement to that effect at the time, and its curious (and unacceptable) inability even at a later point to balance its trust account records as to sums due and paid. There are indications no-one quite knew the true position in relation to solicitor’s fees.
In light of those matters, we accept Appellant’s knowledge an excess over estimate was looming is a factor which could be taken into account in assessment of the “fair and reasonable” fee, but consider in the circumstances the Judge erred in principle in according knowledge such a compelling character. In the circumstances of this particular case, that was not a correct approach. The Registrar was entitled to give it the much reduced weight evidently afforded.
Other Matters
Only two other matters raised warrant detailed mention.
First, we are not persuaded by the VHP submission that the Registrar failed to place adequate weight on the (accepted) fairness and reasonableness of the fee aside from impact of the estimate. The Registrar noted fairness and reasonableness, so approached, was not challenged. The fees totalling in the Registrar’s view $119,381.10 in the end were reduced by only $24,086, only slightly over 20%. Intrinsic fairness and reasonableness, estimates aside, quite obviously were given very significant weight.
Second, the question of loss or otherwise due to excess over estimates arises. We do not dismiss such loss as a factor in the weight to be given to estimates. The task, after all, is to assess a “fair and reasonable” fee, and fairness considerations from a commercial perspective do arise. If as a result of underestimation a firm is instructed or counsel is briefed in preference to others who would have acted at a similar level for reduced cost, that estimate quite properly could receive added weight. Any question of deliberate underestimation to obtain business, followed by exceeding estimates upward to a realistic level, certainly is to be discouraged. (We do not suggest that happened here). In this case there is not much evidence of loss beyond inconvenience in financial planning. The 7 October 1993 trustee’s letter protested that accuracy was needed to avoid unpleasant surprises and enable budgeting. That is as far as the evidence goes, although there is of course a possibility that if the full extent of inaccuracy had been known at the time of settlement negotiations even more than $500,000 might have been sought and obtained. That cannot be known. However, the question of actual loss was not a factor assigned any prominence in the Revisor’s, Registrar’s or Judge’s decisions, and we are not inclined to expand into that area in the course of this appeal. Absence of loss or slight loss cannot, of course, ever be conclusive. It is no more than a circumstance, amongst all others, and must be set alongside the countervailing desirability of adherence to proper standards relating to accuracy of estimation. Clients reasonably can expect that they can place faith in estimates whether or not such in the end produce direct loss.
Decision
In the result, applying s149 review principles, we are not satisfied the Registrar is shown to have erred. The appeal is allowed. For avoidance of doubt, the Registrar’s decision dated 31 July 1998 will stand.
Costs of $5,000 to the Appellant together with reasonable travelling and accommodation expenses and disbursements approved by the Registrar.
Solicitors
Callahan & Co, Auckland, for Appellant
Vallant Hooker & Partners, Auckland, for Respondent
0
0
0