Roughan v Harris HC Whangarei Ap.58/00

[2001] NZHC 648

IN THE HIGH COURT OF NEW ZEALAND
WHANGAREI REGISTRY AP.58/00

UNDER the District Courts Act 1947

AND

IN THE MATTER of an appeal against the decision of the District Court at Whangarei dated 9 November 2000 and sealed on 16 November 2000

BETWEEN: DAVID MICHAEL ROUGHAN
of Whangarei, Solicitor
Appellant

AND: LEONA ANITA HARRIS and
DOUGLAS JOHN JECENTHO
and
KEVIN WAYNE JECENTHO
Respondents

Hearing: 16 May 2001

Counsel: John W Watson for appellant
Hayley S MacDonald for respondents

Judgment: 16 July 2001

JUDGMENT OF WILLIAMS J

Solicitors:
Northlaw, P O Box 4333 Kamo, Whangarei, for Appellant
Stace Hammond Grace & Partners, DX GP20026 Hamilton, for respondents

[1] On 9 November 2000 Hubble DCJ delivered a reserved judgment in which he entered summary judgment for the respondents, Ms Harris and her two brothers, the Messrs Jecentho, against the appellant, Mr Roughan, for $4023.77 plus costs of $2000 and disbursements. This judgment deals with Mr Roughan’s appeal against that decision.

[2] The matter has had an unfortunate and lengthy history.

[3] Mr Roughan is a solicitor in practice in Whangarei. Ms Harris and the Messrs Jecentho were clients of his. In late 1996, they instructed Mr Roughan to act on their behalf in relation to the sale of their leasehold property at Kerikeri.

[4] When the transaction was completed, Mr Roughan rendered a bill of costs to Ms Harris and the Messrs Jecentho. It was dated 6 March 1997 and was for fees of $2680.00 and disbursements of $1343.77. He paid the account by deducting it from the settlement proceeds before accounting to Ms Harris and her brothers for the balance.

[5] It is common ground that Mr Roughan rendered two earlier interim bills of costs but these were incorporated in the final account of 6 March 1997. It is also common ground that Mr Roughan’s original account to Ms Harris and her brothers included a charge of $652.50 which ought not to have been debited to their account. It was corrected and the 6 March 1997 account then sent. Those matters are recorded only for the sake of completeness.

[6] Ms Harris and the Messrs. Jecentho were unhappy about certain aspects of Mr Roughan’s account and on 17 June 1997 Ms Harris, on her own behalf and on behalf of her brothers, wrote to the Auckland District Law Society (the Law Society) asking that the account be revised under the Law Practitioners Act 1982 (to which all sections mentioned in this judgment refer). The request for cost revision form which Ms Harris sighed included the notation that “I accept liability/part liability for the practitioners bill(s)”. It is of some importance in the resolution of this matter to note that in the accompanying letter Ms Harris, after reciting some of the history, said:

“Please note that we have no difficulties with the costs charged in relation to the Maori lease agreement and transactions in the Maori Land Court and have never queried this cost with Mr Roughan. You may, however, wish to also revise the entire content of the amended invoice.”

[7] The progress of the costs revision was held up for some time because Mr Roughan took the view that the application was invalid because it was signed only by Ms Harris and not by her brothers, and that ss 143(b) and 145(1) require requests for costs revisions to be in writing and signed by “the” or “any party chargeable.” Mr Roughan maintained that attitude notwithstanding that Ms Harris’ letter said that she was writing on her brothers’ behalf as well as her own. The dispute persisted until 8 April 1998 when the Messrs Jecentho sent the Law Society formal confirmation of their wishes to have Mr Roughan’s account revised. It was only following that notification that Mr Roughan sent his files to the Law Society.

[8] However, Mr Roughan then asserted that the revision could not proceed because s 145(2) requires, in default of agreement, references by parties chargeable with solicitors’ costs to be made within “6 months after the date of the delivery of the bill.”

[9] The Law Society apparently sought an opinion which concluded that Mr Roughan’s objection was without foundation. The revision then proceeded. The Law Society did not send Mr Roughan a copy of the opinion.

[10] Such material as was put before the Court on the summary judgment application indicated that Mr Roughan objected to the practitioner who had been instructed by the Law Society to conduct the revision on the basis of a suggested lack of impartiality. The cost revision nonetheless proceeded before that practitioner.

[11] On 16 October 1998, the practitioner disallowed the whole of Mr Roughan’s account, both fees and disbursements, and the Secretary of the Law Society issued a certificate under s 154 to that effect. Section 154(2) makes such certificates “final
and conclusive as to the amount due.”

[12] All the District Court had before it on the summary judgment application was a sparse seven line “summary of decision” disallowing the account. If the practitioner did deliver any more than that one page summary or gave his reasons for the disallowance, neither party put that decision in evidence.

[13] Of some importance in the resolution of this matter, Mr Roughan asserted in his affidavit in opposition to the summary judgment application that he was not given a “reasonable opportunity to be heard” at the costs revision contrary to s 152(4) and that, in fact, he received no notice of the time, date or place on which the revision was to be heard. The evidence gave no reason for this but, as noted by the learned District Court Judge (para 16 p4), Ms Harris and the Messrs Jecentho appeared to have accepted that such was the position.

[14] Though notified of the decision on the costs revision, Mr Roughan did not appeal against the decision to a Registrar within the 14 days for which s 148(2) provides, nor did he seek judicial review of the costs review process notwithstanding that costs reviews are amenable to judicial review (Singh v Auckland District Law Society [2000] 2 NZLR 604).

[15] Mr Roughan’s only response in evidence was a letter which he wrote to Ms Harris on 30 June 1999 suggesting that for him to have lodged an appeal or sought judicial review, “could have given the certificate issued by the Auckland District Law Society a legitimacy it does not have.”

[16] After checking in June 1999 that Mr Roughan had take no action to challenge the Law Society’s certificate, Ms Harris and the Messrs Jecentho then endeavoured to recover the $4023.77. They first employed a debt collecting agency. They were unsuccessful. They then, on 14 January 2000, issued summary judgment proceedings out of the Whangarei District Court.

[17] Mr Roughan opposed the entry of summary judgment claiming in his notice of opposition that he had the following defences to the claim:

(a) That the costs revision reference by the Messrs Jecentho was out of time under s 145(2);

(b) That the 16 October 1998 decision of the Law Society was “illegal” as having taken place more than one year after the date of payment of the costs, the application for revision was more than 6 months after the date of the bill, and the costs revision was more than one year after the date of payment, thus allegedly being in breach of s 150. Further assertions of illegality were that the Society’s decision breached the principles of natural justice by failing to give Mr Roughan an opportunity to be heard;

(c) That the 16 October 1998 certificate was ultra vires because it denied Mr Roughan any fee for the work undertaken and disallowed him reimbursement of payments totalling $ 1343.77 which he had made on behalf of Ms Harris and her brothers;

(d) Additional procedural defences were raised at the hearing of the summary judgment application including that only Ms Harris had signed the application for summary judgment contrary to r 256(2) of the District Court Rules and that a copy of the legal opinion was not sent to Mr Roughan;

(e) In addition, Mr Roughan applied to the District Court for an order under ss146 and 151 for the bill of costs to be referred to the Law Society for further revision.

[18] The learned District Court Judge first set out the facts of the matter and then passed to dealing with the various defences raised on Mr Roughan’s behalf before considering whether there were “special circumstances” as required by s 151(l)(b) for the Court to make an order for a further reference of the bill for revision. In fact, it would appear, with respect, that the learned District Court Judge fell into error in referring to s 151(1)(b). This was no doubt because Mr Roughan had relied on s 151 in his defence and application. Section 151(1) debars a cost revision by a District Council of its own motion or its reference of the same for revision by order of the Court, which cannot be made “except in special circumstances”, but s 151(2) makes it clear that s 151 applies to every case other than those under s 150 and s 150 applies where, as with Mr Roughan’s account, a bill of costs has been paid by deduction or set-off. . . It follows, as counsel at the hearing of the appeal were disposed to agree, that s 151 could not apply in the circumstances of this matter.

[19] That is not, however, to say that the Court had no power to refer Mr Roughan’s account for further revision since s 150 debars reference for revision of a bill of costs by Court order or by the District Council after one year from the date of payment by deduction or set-off “unless the Court . . . in its discretion otherwise allows having regard to the circumstances of the case.” The test was accordingly not whether there were “special circumstances” under s 151(1)(b) to justify the District Court referring the bill for further revision - a test not especially difficult to satisfy (Cortez Investments Ltd v Olphert & Collins [1984] 2 NZLR 434) - but a different test, namely, whether the Court in its discretion should have concluded that further revision should be ordered having regard to all the circumstances of the case.

[20] The learned District Court Judge took the view that the three factors advanced on Mr Roughan’s behalf - the Law Society’s failures to send him a copy of the opinion or give him notice of the time and date of the revision hearing and the disallowance of the entire account, including disbursements - would have been sufficient to amount to “special circumstances.”

[21] However, the learned District Court Judge then went on to consider the possible application of the doctrine of laches to the case. He noted that Mr Roughan had been advised of the decision on the costs revision and was well aware of his rights of appeal or to seek judicial review, rights which he had not exercised. He held that Ms Harris and the Messrs Jecentho were (para 20 p5) “justified in assuming that they had a right to demand a refund of the full amount of the bill of costs”, and noted the unsuccessful debt collecting attempts. He held (para 22 p5) that Mr Roughan had “full knowledge of his rights but elected to take no steps whatever for a period of two years and three months” and concluded (para 23-25 p6)

“The doctrine of laches is well established: if a party has not been reasonably diligent in seeking relief, it will be inferred that he has acquiesced in the state of affairs of which he complains and so will be denied relief. (Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 at 239).

In the present case, given that the defendant is a solicitor, it is an almost inevitable conclusion that the defendant must have chosen to waive his rights because he took no steps whatever to attempt to remedy the situation. Furthermore, he has put the plaintiffs in a situation in which it is not reasonable to place them. They have expended considerable time and money pursuing the matter, both directly and through debt collectors. It is not therefore a situation of mere delay, but rather, inordinate delay which points to the inevitable conclusion of a waiver, and an injustice to the plaintiffs. Ignorance, disability or undue influence are not matters that can be raised by the defendant, and there is certainly no element of concealment.

In my judgment this is a clear case in which the so-called doctrine of laches is applicable and the defendant has no defence he is able to rely upon.”

[22] Mr Roughan’s points on appeal asserted that neither the procedural requirements for costs revision nor for a summary judgment application had been fulfilled, that there were “special circumstances” such as to justify reference for a second revision, and that laches was not available because it was not pleaded and, because of that, was not addressed in the evidence. As matters turned out, only the laches point was pursued at the hearing of the appeal. In this Court’s view, that was a responsible stance for Mr Watson, counsel for Mr Roughan, to take.

[23] As a matter of pleading, if Ms Harris and the Messrs Jecentho wished to rely on Mr Roughan’s alleged laches to defeat the claimed defences raised by him, they should, technically, have filed a reply to his statement of defence and put that matter directly in issue (Jacob et al Atkins Encyclopaedia of Court Forms and Civil Proceedings, 2nd ed 1995 Vol 18 p 241-3, Vol 1 p 292-3, Vol 32 p 89-90) although the parties would then have had difficulty putting all the relevant evidence before the Court given the strictures of the summary judgment pleading rules. However, a careful perusal of the learned District Court Judge’s judgment suggests that he considered Mr Roughan’s delay not as a matter of laches strictly so called, but as one of the factors which he took into account in deciding whether there were “special circumstances” such as to lead him to conclude that Mr Roughan’s account should be referred for further revision. Accordingly, in this Court’s view, the fact that laches was not pleaded was not fatal to the claim and no extended discussion of laches, acquiescence or waiver is necessary.

[24] It may however be appropriate to note that it could not realistically have been contended that Mr Roughan might not have run the risk that his claimed defences would be defeated by laches or acquiescence on his part given his awareness of his rights following receipt of the Law Society’s certificate of 16 October 1998 and his failure on the evidence to take any step to assert those rights. In this Court’s view it was not an adequate response by Mr Roughan, in the face of the enforcement efforts being undertaken by Ms Harris and the Messrs Jecentho, to do nothing more than assert that the Law Society’s certificate and result of its costs revision were invalid. He, an experienced lawyer, had received a certificate which he knew was deemed by statute to be “final and conclusive as to the amount due” and yet, despite having what the learned District Court Judge correctly regarded as “special circumstances” in his favour, until he filed his application for a further cost revision on 12 June 2000 the evidence suggests that he did nothing to exercise his rights for nearly two years, in the face of efforts by Ms Harris and the Messrs Jecentho to obtain the payment certified in their favour and to which they believed they were entitled and were incurring expense in so doing. Unless there were reasons not covered in the evidence, such actions by a lawyer are to be reprehended.

[25] However, putting all that to one side, the nub of the present appeal is whether the learned District Court Judge was right to conclude that Mr Roughan’s actions or inactions were such as to deprive him of all the defences to which he claimed to be entitled and to dismiss his application for further revision of his bill of costs.

[26] The general power for a court to refer a bill of costs for revision on such terms as the Court thinks fit appears in s 146. That section is subject to ss 150 and 151. For the reasons earlier outlined, s 151 is inapplicable and s 150 says that a bill “shall not be referred for revision” even by a Court more than one year after the date of payment of the bill unless the Court in its discretion considers revision is appropriate. Section 150 does not contain any reference to a second revision such as appears in s 151(2)(a) but, equally, there is no bar in s 150 to a second revision being ordered if the circumstances of the case justify that course.

[27] The learned District Court Judge found that there were “special circumstances” such as to justify a second revision and, plainly, had his attention been directed to s 150, would have held that the circumstances satisfied the different and, perhaps, lower threshold in that section. With respect, this Court agrees. While the opinion given to the cost revisor may have been of lesser moment, it is nonetheless the case that neither Mr Roughan nor counsel had the opportunity to respond to it. More importantly, however, the evidence does not suggest that Mr Roughan ever saw whatever material may have been submitted to the cost revisor by Ms Harris and the Messrs Jecentho. He therefore had no opportunity to respond to it nor, since he was not notified when the matter was to be dealt with, did he have the opportunity to appear and argue his case. The real question is whether Mr Roughan’s inaction since the decision of the cost revisor should have deprived him of the ability to ventilate those circumstances.

[28] In that regard, this Court, with respect, parts company from the views of the learned District Court Judge. Though Mr Roughan’s stance in relation to this matter is to be deprecated for all the reasons discussed, it nonetheless remains the case that if the Law Society’s certificate and costs revision decision are allowed to stand:

(a) Mr Roughan will be out of pocket for the disbursements of $1343.77 which he has paid on behalf of Ms Harris and the Messrs Jecentho (assuming that GST and resident withholding tax are properly payable). As the Court understands it, the costs revision procedure is designed to ensure that only the costs properly chargeable to clients are payable by them. It is not to deprive practitioners of their right to reimbursement of sums paid by them on their clients’ behalf. Such would be a punishment and thus, more properly, part of the Law Society’s disciplinary functions;

(b) he will be entirely deprived of his fees of $2680.00 when Ms Harris acknowledged that she and her brothers accepted liability for at least part of Mr Roughan’s account and had no difficulty with it so far as it related to the Maori lease and Maori Land Court matters;

(c) as a corollary, Mr Roughan will be entirely deprived of his fees of $2680.00 when, on the basis of Ms Harris’ letter, it would appear from the details included in the account of 6 March 1997 that the only matters in dispute may be two aspects of the costs relating to two contracts or which the costs total $1474.00.

[29] At the conclusion of the argument, the Court suggested to counsel that if the parties were able to view the matters in issue in this appeal dispassionately, they would recognise that it was of advantage to them to resolve this long-standing dispute, now potentially perhaps over no more than the whole or some part of the sum of $1474.00, without a further cost revision and the possibility of a further appeal or review. The Court suggested that it would be to the advantage of all parties if they could put all matters behind them in relation to this unfortunate disagreement and reserved its judgment to give the parties an opportunity to consider their positions. That process, it seems, took longer than expected as some of the respondents were overseas but ultimately, on 2 July 2001, the Court was advised that on 15 June the parties had informed the registry that they were not able to settle the matter.

[30] In all those circumstances, the Court’s formal orders are

[a] That Mr Roughan’s appeal against the implicit refusal of his application for further revision of his firm’s account of 6 March 1997 is, in the Court’s discretion under s 150, allowed and in all the circumstances of the case the application for further revision of his account by the Auckland District Law Society is granted;

[b] That as a consequence, Mr Roughan’s appeal against the entry of summary judgment against him of 9 November 2000 must also be allowed. The application for summary judgment is referred back to the District Court for determination following completion of the further costs revision. Leave will obviously be required for the amendment of pleadings and the filing of further affidavits on the summary judgment application in due course but that is a matter for the District Court;

[c] This is an unfortunate result for all the parties, particularly Ms Harris and the Messrs Jecentho who, as far as the evidence currently shows, are not to be held accountable for the failures by the Auckland District Law Society and its cost revisor discussed in the judgment. The Court accordingly considered imposing a condition on the further review to be undertaken, pursuant to Order [a] that Mr Roughan pay
Ms Harris and the Messrs Jecentho the costs and disbursements awarded against him in the District Court but in the event decided not to follow that course and to set aside that order pending the further investigation into the circumstances of this matter and completion of the further costs revision. If, at the end of that process, Mr Roughan is unsuccessful and a further order for summary judgment is made against him, no doubt the District Court will be able to take these continents into account in fixing the amount of costs to be ordered on that occasion.

[d] As to the costs on this appeal, the Court’s current inclination is to let costs lie where they fall, notwithstanding the Court allowing the appeal. If, despite that indication, the parties wish to pursue the question of costs, the Court would be prepared to consider it on receipt of memoranda from counsel with counsel indicating in their memoranda if they thinly it appropriate so to do that the Court may determine all questions of costs without a further hearing. In the event that the matter is to be determined on memoranda, those from each side are to be filed within 28 days of the day of delivery of this judgment and the file then referred to Williams J for determination.