Liu v Cutting
[2018] NZHC 33
•31 January 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-001858
[2018] NZHC 33
BETWEEN YICHUAN (JESSE) LIU, KIN (STEVEN) LAU AND DINAH QIU
Appellants
AND
DEREK EDWIN CUTTING
Respondent
Hearing: 7 December 2017 Appearances:
Y Liu and K Lau in Person
G Collecutt for the Respondent
Judgment:
31 January 2018
JUDGMENT OF HINTON J
This judgment was delivered by me
on 31 January 2018 at 4.45 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Counsel:
Grant Collecutt, Barrister, Auckland
Parties:
Y Liu, K Lau, D Qiu
LIU & ORS v CUTTING [2018] NZHC 33 [31 January 2018]
[1]This is an appeal of a District Court decision relating to legal fees.
[2] In 2005, while a student at Auckland Grammar School (AGS), Mr Liu was the subject of two vicious assaults by a fellow student. The second assault resulted in Mr Liu’s jaw being broken. The AGS Board suspended the fellow student for a period of approximately six weeks.
[3] Mr Liu and his parents (who together are the appellants) believed that if the teacher who reprimanded the student after the first assault had taken more appropriate action, the second assault may not have occurred. They are very aggrieved at the way AGS handled the incident.
[4] The appellants engaged Derek Cutting, solicitor, to consider possible legal action.
[5] In about March 2007, Mr Cutting instructed Gregory Keene as counsel. There is an undated letter from Mr Cutting to Mr Keene recording the instruction. It was not sent to the appellants. No letter of engagement was provided to the appellants. Rules
3.4 and 3.5 of the Lawyers and Conveyancers Act 2006 which required such a letter, did not come into force until 1 August 2008.
[6] Mr Keene prepared an opinion, engaged in subsequent correspondence and discussions with an attempt to settle, and then filed proceedings in the District Court.
[7] AGS made a settlement proposal involving a payment of $10,000, and then increased that to $20,000. Messrs Cutting and Keene tried to persuade the appellants to accept the $20,000 offer on the basis they considered any better financial outcome for the appellants was unlikely.
[8] The appellants became unhappy with the service being provided to them and terminated Mr Keene’s services in December 2008.
[9] Up to that point, they had already paid fees totalling about $20,000 and there were further fees owing to Mr Cutting for Mr Keene’s services in the sum of
$15,125.82.
[10] In early 2009, Mr Cutting issued this proceeding to recover Mr Keene’s fees. The appellants lodged a complaint with the New Zealand Law Society (NZLS) about a number of aspects of Mr Keene’s services (primarily at that stage the reasonableness of Mr Keene’s fees).
[11] The NZLS held that Mr Keene’s fees were reasonable. The appellants applied for a review to the Legal Complaints Review Officer (LCRO), who upheld the NZLS decision.
[12] Mr Cutting then obtained judgment by default for Mr Keene’s outstanding fees, which the appellants applied to set aside in the District Court without success.
[13] The appellants appealed to the High Court. Williams J set aside the default judgment on the basis the 30 day notice requirement had not been met.
[14] The appellants then lodged a statement of defence and counter-claim in the District Court. The counter-claim sought $20,000 special damages and $30,000 general damages.
[15] Mr Cutting applied to the District Court for an order allowing Mr Keene to appear in the District Court hearing as both counsel and principal witness for the plaintiff. Judge Cunningham refused that application and the High Court dismissed Mr Cutting’s appeal on that issue.
[16] In the substantive hearing, the District Court upheld Mr Cutting’s claim for Mr Keene’s unpaid fees, but reduced the amount from $15,125.82 down to $10,500 on the broad-brush basis there may have been some repetitive or overly in-depth work. The Judge specifically noted that Mr Keene had done a good job and had discounted his fees already by nearly 50% overall. The appellants’ counter-claim was dismissed. The decision is the subject of this appeal.
Points of appeal and discussion
[17] Indicative of the detail involved in the case despite the very modest sums involved, is the length of the District Court judgment (143 paragraphs) and the length of the “Appellants’ Points on Appeal and Submissions” (30 pages).
[18] I asked Mr Liu in his oral submissions to list his key points. These remained extensive. They were in different order to the written submissions.
Authority to engage Mr Keene
[19] Mr Liu’s first three points in his oral submissions, which can be combined, were that there was no consent to brief Mr Keene on the date he was briefed; no letter of engagement was provided and there was no contract between Mr Liu and Mr Keene. As a result the appellants say they had no liability for Mr Keene’s fees at all and the Judge was wrong to say they did.
[20] It is correct that there was no contract between the appellants and Mr Keene, but such a contract was not required. A barrister is engaged by the instructing solicitor, who then on-charges the fee to the client. It is also correct that there was no letter of engagement provided by Mr Keene but no letter was required at the relevant time. Rules 3.4 and 3.5 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care Rules) 2008 would have required written information regarding the appointment of Mr Keene as a barrister to be provided to the appellants. But the Rules did not come into force until 1 August 2008, and did not affect a retainer entered into before that date.1
[21] Whether there was consent to brief Mr Keene “on the date he was briefed” does not matter because the appellants clearly did authorise Mr Cutting to brief Mr Keene before any work was carried out by him. As the Judge sets out in his judgment at [77] – [81], that is sufficient for Mr Keene’s reasonable fees, which were charged to Mr Cutting in the standard way, to then be on-charged to the appellants in the standard way. Mr Keene’s letter to Mr Cutting, which was copied to the appellants,
1 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care Rules) 2008, r 3.10.
thanked him for the instruction. All of the subsequent attendances were carried out by Mr Keene to the knowledge of the appellants and the appellants made payment without question of Mr Keene’s earlier accounts. As the Judge said, Mr Lau accepted he had to pay a reasonable fee for reasonable work.
[22] I find against the appellants on the question as to whether they are ultimately liable for Mr Keene’s reasonable fees.
[23] The appellants complain that the Judge did not make express findings with regard to the above points, but the Judge would have had difficulty identifying what was really at issue, as has also been the case on appeal.
Threat against complaining to the Law Society
[24] Mr Liu then raised another series of points which can be lumped together. Mr Liu referred to these as follows:
(a)Mr Keene allegedly threatened the appellants not to complain to the Law Society. Mr Liu said this was important because it shows that Mr Keene knew there were grounds for complaint.
(b)This proceeding was also designed to put pressure on the Lius not to complain.
(c)The Law Society told Mr Keene he had to allow a complaint.
[25] None of these constitutes a valid ground of appeal. The Judge found as a matter of fact there was no “threat”, and there is no basis for going behind that finding. In any event, the alleged threat was after the work was done and therefore cannot affect the quantum of the claim made by Mr Cutting in respect of Mr Keene’s fees. These points also do not constitute ground for a counterclaim because a counterclaim can only be for losses flowing from wrongful acts by Mr Keene. There is no evidence that any “threat” led to any loss, or as to the quantum of any loss, and so there is no sustainable counterclaim even if there had been a threat. There quite clearly was no “loss” because the appellants did complain to the NZLS. Any threat made is therefore
irrelevant to this case. (By way of further comment as to (b) above, whether there is a good or bad motive behind a proceeding is irrelevant. The question is whether there is a good claim. The District Court Judge found there was.) The point made at (c), is simply a statement by the Law Society and of no relevance at all for present purposes.
[26]In short, on numerous bases, these arguments fail.
The unsuccessful application for Mr Keene to be counsel and the lien claim
[27] Mr Liu next raises two points which again can be grouped together. He says the fact that Mr Keene was not allowed to appear in this proceeding and that Mr Keene would not hand over the file, both caused waste of time.
[28] The first of these points is not relevant to an appeal from the District Court decision. It was an interlocutory ruling which preceded that decision. As I explained to Mr Liu, the time spent in arguing the point could only be addressed in a claim for costs. Moore J made no order as to costs, on the standard basis that the appellants were unrepresented. He did not address the question of disbursements which might still be available to Mr Liu.
[29] The District Court Judge rejected the argument that the wrongful lien caused any claimable damage, in a lengthy discussion with which I entirely agree. There may be a remaining issue as to “costs” flowing from the lien hearings.
Wrongful refusal to re-open cross-examination of Mr Keene
[30] This was the primary point in Mr Liu’s written submissions, but he raised it later in his oral submissions.
[31] In the NZLS and LCRO investigations, and in an additional affidavit filed in the District Court, Mr Keene had given evidence that he understood the appellants had accepted the AGS settlement proposal of $20,000 after the appellants had terminated his brief. He said he believed the settlement had come about as a result of his efforts.
[32] Before Judge Hinton Mr Liu cross-examined Mr Keene extensively on this evidence.
[33] After the evidence was closed, the appellants sought to re-open cross- examination of Mr Keene on the same “settlement” point. The Judge allowed re- opening of cross-examination but then stopped Mr Liu when it became apparent that the questions asked were not providing the Court with any new evidence. The appellants say that there is a procedural error in the stopping of the re-opened cross- examination.
[34] The appellants say Mr Keene’s claim that they accepted the $20,000 settlement offer and that he believed he had contributed to it, was “deliberately wrong” and influenced the NZLS/LCRO and the District Court, in their decisions in favour of Mr Cutting.
[35]This point fails for a number of reasons.
[36] The fact of the settlement was not disputed. The amount of the settlement is not material to the case. That is clear from the Judge’s decision. The appellants place a lot of focus on Mr Keene’s assertion as to the quantum of the settlement and his belief that he had contributed to it, being “dishonest”. But as the Judge said, these are only statements of belief, not of fact. The Judge made no finding as to the quantum of settlement, nor was there any need for him to do so. He purely recorded what Mr Keene had said as to his understanding of quantum which he needed to do, because of the appellants’ arguments.
[37] Also, if Mr Keene’s assertion as to the settlement quantum was wrong, then the appellants could have given evidence to set it straight, despite the settlement being confidential. It seems from the judgment that the Judge had expected the appellants to provide evidence of the settlement, but it was not forthcoming.
[38] To the extent Mr Keene’s honesty as a witness was relevant, the Judge found that Mr Keene was an honest and credible witness. He had ample basis on which to do so and there is no basis on which that finding could be undermined.
[39] As to re-opening cross-examination, the appellants had already cross- examined Mr Keene as to his understanding about the settlement. The Judge nonetheless did allow Mr Liu an opportunity to re-open cross-examination but stopped him when the questions were simply repetitive. There is no indication from the appellants as to what truly new questions they wished to ask, nor can I detect any further questioning that could have been helpful to the appellants’ case. In my view, the Judge was quite correct to not allow cross-examination to be continued.
[40] Also, as Mr Collecutt submits, the appellants have not demonstrated that, even if Mr Keene’s statements were made “dishonestly” (or for that matter honestly but incorrectly), that would provide a basis for a defence to the claim for unpaid fees, or would be relevant to their counter-claim.
[41] Finally, while I consider it of minimal, if any, relevance to the reasonableness of the fee, a settlement (for whatever amount) is likely to have been attributable at least in part to Mr Keene’s earlier actions, especially when those actions included the issue of court proceedings and receipt of two earlier settlement offers. Whether Mr Keene asserts that is so or not, would make no difference.
Failure by Judge to address various points
[42] There are a number of matters which the appellants say the District Court Judge failed to address. In most cases, the simple answer is that he did, either directly or indirectly.
[43] The first matter relates to alleged “concealment” by Mr Keene of court notices, particularly information regarding a judicial conference scheduled for March 2009. This point was in fact addressed by the Judge at [109]. The Judge said:
There is nothing in this point. I reject any suggestion that Mr Keene deliberately concealed any notice from the Court. Moreover, I accept that the defendants did get notice of the conference. Further, I do not overlook Mr Keene’s understanding that in fact Mr Liu attended the conference in any event. I do not find, in any event, that any detriment or loss flowed to the defendants on any view arising out of the court notice that a conference was convened.
[44] I agree with what the Judge had to say. For the various reasons he gives, there is no substance in this point.
[45] The next points which the Judge allegedly failed to address, are “concealment by Mr Keene of correspondence”, “secret arrangements” and “secret discussions.” The Judge rejected the claim that Mr Keene had engaged in secret negotiations and also rejected “any suggestion Mr Keene had at any stage acted dishonestly.”2 No basis has been put up on which those findings could be disturbed. Further, a lawyer does not have an obligation to physically copy every piece of correspondence to a client, only such correspondence as is relevant to the case. Further still, non-copying would lead to lower time recording and lower fees, rather than excessive fees.
[46] Next, the appellants say that the third party lawyers from whom Mr Keene sought help and from whom there is no apparent charge, must have made a “hidden charge” because it would be “illogical and nonsensical for them not to charge.” There is no evidence to support a hidden charge. Conjecture by Mr Liu does not constitute evidence. Further, Mr Liu’s reasoning is entirely wrong. Senior lawyers regularly provide free assistance to colleagues (and therefore to the colleague’s client) with difficult cases. There is no merit whatsoever in this “point of appeal”: to the contrary.
[47] The final point under this heading, is that the Judge failed to deal with the appellants’ claim that Mr Keene has wasted time over the progress of this proceeding. However, issues relating to the conduct of this recovery proceeding, (as with the application for Mr Keene to be counsel, and the dispute over the lien) are not points of defence or counter-claim. They are matters which go to costs and disbursements, to which I return.
Failure to disclose hourly rate or hours spent/Mr Keene’s opinion
[48] Mr Keene was not obliged to disclose his hourly rate or hours spent in his fee accounts, as the bulk of the work that was carried out preceded the Lawyers and Conveyancers Act/Rules. As the District Court Judge found, any work carried out by Mr Cutting and/or Mr Keene was chargeable on a reasonable fee basis. That was
2 At [107].
frequently the basis of engagements before the Lawyers and Conveyancers Act 2006. It does not need to be expressly agreed. It is a fall-back position in the absence of agreement to the contrary.
[49] As the District Court Judge pointed out, the evidence was consistent with a reasonable fee arrangement. Mr Keene had told the appellants the case would be expensive and would cost about $40,000; and they had made multiple payments on account.
[50] The appellants point to the Judge’s finding that they had not authorised a full opinion and say they therefore should pay nothing for it. However, it is a matter of what is a reasonable fee overall for work that was reasonably required. At least some of the work spent on ascertaining the factual and legal position (ie for the opinion) would have been reasonably required. Mr Keene had clearly not billed approximately 50% of his time. The Judge has then made a material deduction from the balance otherwise owing, which could be treated as being at least in part for (still) excessive work on the opinion. Certainly in effect the appellants are not paying for anything like the full amount of time spent on Mr Keene’s opinion, or for that matter on any other part of the case.
[51]I see no reason to disturb the Judge’s findings in regard to these points.
Unauthorised legal opinion from Dr Harrison QC
[52] The appellants contend that the District Court Judge was wrong to find that they had authorised Mr Keene to obtain a legal opinion from Dr Harrison.
[53] I agree with what the Judge had to say about this issue at [104]. The appellants received Dr Harrison’s legal opinion at the time it was given. They made no complaint about it having been provided or its contents. They had taken steps to pay Dr Harrison direct, but were told by Mr Keene that he had paid the fee and it would be treated as a disbursement in his account. There was no complaint about the account or the opinion from Dr Harrison until after this proceeding was issued in the District Court.
[54] Quite clearly, the appellants had authorised the obtaining of an opinion from Dr Harrison and the Judge was right to reach that conclusion.
Failure to terminate settlement negotiations by 30 September 2008
[55] The appellants say that they placed a deadline on Mr Keene’s engagement in settlement negotiations with AGS, of 30 September 2008, with which Mr Keene failed to comply. Any attendances after that date are therefore not claimable.
[56] For all of the reasons that the Judge sets out, I do not agree that there was any such deadline. The appellants’ own letter of 19 November 2009 said: “we have been keeping the door open to settlement”. The sentence in an earlier letter to Mr Keene upon which the appellants rely, could only fairly be read as an attempt to have him place some time limit and pressure on AGS, not on Mr Keene.
[57]This point therefore also fails.
Other deliberate mis-steps by Mr Keene
[58] The appellants contend that Mr Keene misled the District Court in claiming that the decisions of the NZLS and LCRO were final and binding on the Court, and that the Court therefore had no jurisdiction to review the reasonableness of the fees claimed.
[59] To run a legal argument that is wrong is not generally “misleading” and Mr Liu has put up no basis for the latter. Whether Mr Keene’s argument in the District Court in relation to the NZLS/LCRO decisions was right or wrong is immaterial to an appeal. (This is especially so in this case since the Judge was invited to proceed on the basis he did have jurisdiction.) Counsel run arguments all the time that are wrong. The job of the Judge is to decide whether each argument is right or wrong. If an argument is wrong, it may sound in costs against the person who ran it, but the fact of having advanced a wrong argument is not the basis of a point of appeal by the other side.
Contradiction between the Judge reducing the fee claim, but dismissing the counterclaim
[60] The appellants say that the Judge’s decision to reduce the amount of the plaintiffs’ claim from $15,100 to $10,500 must logically mean that he should have allowed the counterclaim. To not then allow the counterclaim is a contradiction.
[61] As Mr Collecutt submits, the Judge decided on an overall view of the legal fees that a reasonable charge would be $10,500 rather than $15,100, viewing the matter in the round. My reading of the judgment is that he was taking a broad-brush approach that erred on the side of generosity to the appellants.
[62] A counterclaim is a totally separate matter. For the counterclaim to succeed, the appellants have to demonstrate that they have some cause of action against the respondent and that they have suffered damage. A counterclaim is a separate matter legally to the fee claim, and there is no contradiction between the Judge’s findings.
[63] The appellants said the Judge was wrong to find against them on their counterclaim for damages flowing from the wrongful lien claim. The Judge found as a fact that there was no material loss as the appellants by then were well versed in the case (and would have held all relevant documents). There is no basis for disturbing that finding.
[64] The appellants sought leave to seek out and file evidence of losses suffered by them. Mr Liu did not say what form this would take. I declined leave. It is too late to introduce any such evidence. I am also sure, given the exhaustive approach taken by the appellants, that had they, for example, paid material legal fees for lawyers to repeat work Mr Keene had done because his work was not accessible, that evidence would have been provided before now and would not require further time to locate.
Conclusion
[65] I find against the appellants on each of the points of appeal and the appeal is dismissed.
[66] The respondents are entitled to costs. They should file a memorandum within 21 days and the appellants 14 days thereafter. If there are issues as to costs on previous hearings on which no ruling has been given, those matters should be addressed also. Arguably, the appellants should have received disbursements on the earlier hearings on which they were successful, and there is a possible issue as to costs arising from the hearing held in front of the Standards Committee.
[67] Mr Collecutt should try to resolve any costs issues with the appellants, in which case a joint memorandum could be filed.
[68] While there are a few errors in the District Court judgment, as is frankly inevitable in a case of this nature, none of these errors affects the correctness of the judgment. In fact, I consider the judgment to be a model of patience and thoroughness.
[69] I recognise that what happened to Mr Liu was horrifying. He was badly wronged. The appellants have settled the claim which they understandably brought against the school, and obtained vindication. They must pay the fees they have been ordered to pay. I recognise the matter cost them more than the dollar settlement they received, but that is unfortunately not uncommon and they were warned of that possibility both at the outset and along the way, by Mr Keene. What they achieved was not just the dollar amount but a victory in respect of an important point of principle. As they presumably settled for at least $20,000, they also did well in terms of the dollar payment, compared to what many might have predicted for such a case.
[70] Mr Liu is a capable young man who seems to have recovered reasonably well from the wrong that was done to him. He and his parents should now focus productively on the next stages of their lives and move on from this litigation.
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Hinton J
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