McMurdo, P, Thomas JA, Mullins J, Judgment of the Court
Catchwords
PROFESSIONS
AND TRADES - LAWYERS - SOLICITOR AND CLIENT - RETAINER - REMUNERATION - BILLS
OF COST - ACTIONS TO RECOVER COSTS - UNFINISHED
MATTER OR SUIT - appeal for the
Source
Original judgment source is linked above.
Catchwords
PROFESSIONSAND TRADES - LAWYERS - SOLICITOR AND CLIENT - RETAINER - REMUNERATION - BILLSOF COST - ACTIONS TO RECOVER COSTS - UNFINISHEDMATTER OR SUIT - appeal for therecovery of legal fees and outgoings - whether the evidence of the solicitor asto the oral retainershould be preferred to that of the client - whethersolicitor involved in speculative action is entitled to costs where clientwithdrawsprior to action concluding - whether solicitor who conducts own caseis entitled to professional costsCONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TOACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE- REPUDIATION - WHATAMOUNTS TO REPUDIATION - whether claim brought in contract or a restitutionaryclaim - whether premature andunjustified termination by client - whethersolicitor relying on oral retainer ought to have the benefit of the contract -whethermagistrates findings adequate - whether proceedings miscarried
ANZ Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662,
673, considered
Baltic Shipping Co v Dillon [1993] HCA 4
(1993) 176 CLR 344, considered
Central Queensland Developments Pty Ltd [1988] 2 QdR 476, considered
Chapman v Rogers
ex parte Chapman [1984] 1 QdR 542, 544-545,
compared
Clare v Joseph [1907] 2 KB 369, 376, 378, considered
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48
(1992) 175 CLR
353, considered
Griffiths v Evans [1953] 2 All ER 1364, 1369, considered
Jeffery v Associated National Insurance Co Ltd [1984] 1 Qd R 238, 245,
considered
McIntosh Hamson Hoare Govett Ltd v Pinnacle Properties Ltd Appeal No 166
of 1994, 5 May 1995, 7, considered
Morgan v Blyth [1891] 1 Ch 337, 335, considered
Pavey and Matthews Pty Ltd v Paul [1987] HCA 5
(1987) 162 CLR 221, considered
Reed v Gray [1952] Ch 337, considered
Secured Income Real Estate (Australia) v St Martins Investment Pty Ltd
[1979] HCA 51
(1979) 144 CLR 596, 607, considered
The London Scottish Benefits Society v Chorley (1884) 13 QBD 872,
considered
Underwood Son & Piper v Lewis [1894] 2 QB 306, 314, considered
Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20
NSWLR 251, 275, considered
Wolf v Trebilico [1933] VicLawRp 29
[1933] VLR 180, 191, considered
Judgment (77 paragraphs)
[1]
PROFESSIONS AND TRADES - LAWYERS - SOLICITOR AND CLIENT - RETAINER - REMUNERATION - BILLS OF COST - ACTIONS TO RECOVER COSTS - UNFINISHED MATTER OR SUIT - appeal for the recovery of legal fees and outgoings - whether the evidence of the solicitor as to the oral retainer should be preferred to that of the client - whether solicitor involved in speculative action is entitled to costs where client withdraws prior to action concluding - whether solicitor who conducts own case is entitled to professional costs
[2]
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE - REPUDIATION - WHAT AMOUNTS TO REPUDIATION - whether claim brought in contract or a restitutionary claim - whether premature and unjustified termination by client - whether solicitor relying on oral retainer ought to have the benefit of the contract - whether magistrates findings adequate - whether proceedings miscarried
[1] THE COURT: This is an application for leave to appeal under s 118 District Court Act 1967 from a decision of the District Court at Southport dismissing an appeal from a magistrate's decision to dismiss the claim of the applicant, a solicitor, ("the solicitor") for the recovery of legal fees and outgoings from the respondent ("the client").
[23]
[2] The solicitor's argument seems to be that he should have been granted judgment in the Magistrates Court even if the client's evidence were fully accepted. The claim in the plaint was very broad, and did not nominate a particular cause of action. It was not necessary to do so. A pleader's obligation is to plead material facts. Although commonly the cause of action is stated, and although courts recognise such indications as helpful signposts, there is no requirement that the cause of action be expressly named.
[24]
[3] In the present case the claim was "$9,437-82 for solicitor's costs and outlays". The full statement in the pleading was "The plaintiff claims $9,437-82 for solicitor's costs and outlays incurred in this jurisdiction from June 1996 to July 1997. An account in taxable form was delivered to the defendant on 25 July 1997." That would permit a judgment under any cause of action that was established by the facts.
[25]
[4] Although the natural inference in such a claim is that it is based on contract, there is nothing inconsistent in that pleading with the maintenance of a claim based on either contract or quasi-contract. Quasi-contractual claims, including those conveniently described as quantum meruit are now generally classified as restitutionary claims: Pavey and Matthews Pty Ltd v Paul;[1]ANZ Banking Group Ltd v Westpac Banking Corporation;[2]David Securities Pty Ltd v Commonwealth Bank of Australia;[3]Baltic Shipping Co v Dillon;[4] Mason and Carter Restitution Law in Australia 1995.[5] Of course a claim cannot be made for restitution when an existing enforceable contract governs the claim in question: Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd.[6] But a claim for quantum meruit may arise if a party, through breach or wrongful repudiation, prevents the other party from earning the stipulated remuneration: McIntosh Hamson Hoare Govett Ltd v Pinnacle Properties Ltd.[7]
[26]
[5] The defence merely denied the debt and shortly stated that the instructions were provided to the solicitor on the basis of "no win, no fee". No particulars were provided and no reply was filed.
[27]
[6] The magistrate did not make any explicit findings as to the terms of the retainer. According to the solicitor there was an oral agreement that he would act for the client in relation to the obtaining of damages for a back injury that the client received on a boat. The instructions were to pursue legal proceedings against the owner of the boat and that the work would be done on "the usual basis", that is, on the Supreme Court Scale. The solicitor sent the client a brochure which stated: "we will advise you of the basis upon which the costs will be charged, and if reasonably possible, an estimate of the costs, including disbursements of the matter". The solicitor did not otherwise correspond with the client as to the matter of costs and there was no written retainer. The solicitor carried out a significant amount of work on behalf of the client until the client gave instructions that he no longer wished to proceed with the action as he had fully recovered. The solicitor claimed his costs and outlays.
[28]
[7] The client's version of the arrangement was that he was importuned by the solicitor to bring such proceedings. Inter alia the solicitor told him that he should proceed with the claim, that he would send him to the "right doctors", that he would do the case for him, and if he did not win the case he would not have to pay anything. There was however an arrangement that outlays be paid by the client in any event.
[29]
[8] The condition that the client must "win the case" before being liable for fees is to say the least vague. If that was the arrangement, it would be necessary for the court to determine whether it means that damages had to be obtained in court before the condition would be satisfied, or whether something less such as an acceptable settlement would suffice. The uncertainty of such an arrangement underlines the desirability that it be made in writing. Indeed at the relevant time in 1996 s 23 of the Legal Practitioners Act 1995 provided some incentive to solicitors to make such agreements in writing: cf re Central Queensland Developments Pty Ltd,[8] although courts have always carefully scrutinised such arrangements, particularly if the remuneration exceeded what might ordinarily be expected from a proper taxation: Clare v Joseph;[9]Wolf v Trebilco.[10] Subsequent legislation has emphasised this need still further.
[30]
[9] Arrangements for speculative actions between solicitors and clients are now by no means uncommon. It should not be thought that solicitors who make such arrangements thereby achieve some dominance over the client in the future conduct of the action. The client does not surrender control of the proceedings to the solicitor. The client retains the power to give instructions as to the further conduct of the action, including the right to settle it or terminate it. As an action proceeds it may become increasingly clear to a client that the prospects of success are negligible and that the dangers of proceeding further outweigh the potential benefits. Ordinarily, the client (not the solicitor) is the person who will have to bear a possibly crippling burden of costs in favour of the other party if the litigation proceeds to an unsuccessful outcome.
[31]
[10] What costs then is a solicitor who is on a speculative retainer entitled to if the client decides to settle or withdraw before the action is concluded? Commonly a consensual arrangement is reached at such a point between solicitor and client. In the absence of such an arrangement, unless the original contract of retainer covers the situation, the answer will depend on the circumstances. If the client terminates the retainer before it is apparent that he will not win, he will have deprived the solicitor of the opportunity of completing the retainer and earning the right to charge fees. Prima facie the solicitor will be entitled to be remunerated on the basis of a quantum meruit in respect of services rendered up to that time. An alternative approach would be to regard the client's premature termination of proceedings as a prevention of performance, or a breach of implied duty to do all such things as are necessary on his part to enable the other party to have the benefit of the contract: Secured Income Real Estate (Australia) v St Martins Investments Pty Ltd.[11] Different assessments are conceivable according to whether the claim proceeds upon a claim for damages for breach of contract or upon a quantum meruit. If the plaintiff elects to proceed on quantum meruit, prima facie the scale or method of calculation of the costs prescribed in the original retainer should be applied to the work so far done.
[32]
[11] If the evidence in the present case requires the facts to be seen as a premature and unjustified termination by the client, the solicitor should have been granted judgment for the amount claimed. But it is impossible to tell from the record of proceedings whether or not such a conclusion should have been reached. Shortly stated, a determination by this court is not feasible because:
[33]
(a) Satisfactory findings have not been made by the magistrate on matters of credit;
[34]
(b) The true issues were not identified by the parties or dealt with by the magistrate;
[35]
(c) It is impossible to determine at this point what judgment should have been given.
[36]
[12] The fairly lengthy reasons of the magistrate do not result in findings of relevant facts or in any clear resolution of the conflicts in the evidence. The issues which were so broadly stated in the plaint and defence were never particularised. The parties seem to have been content to tell their stories with an expectation that the magistrate apply whatever law might cover the facts that were found. Illegality was not pleaded, but no objection was taken to the defendant leading evidence of conduct by the solicitor, which if accepted, showed that various steps taken by him in the preparation and formulation of the case were an attempt to impose fraud on the boat owner or his insurer. Such conduct is illegal and on the client's version it formed an integral part of the performance of some of the work for which fees were claimed.
[37]
[13] If it were found that the client terminated proceedings in consequence of realising that he had fully recovered and that the only way in which he could "win" or obtain worthwhile damages would be to practise the fraudulent imposition which he claimed his solicitor suggested, he would in our view be entitled to instruct the solicitor to terminate proceedings, and he would not be liable to pay any solicitor's costs (professional or otherwise) attributable to the attainment of the fraudulent objective. In this respect the observations of A L Smith AJ in Underwood Son & Piper v Lewis[12] are of some interest. His Lordship referred initially to the general rule that the contract of a solicitor on a retainer to conduct an action is an entire contract and that he thereby undertakes to carry on the action till its end. A number of exceptions however were noted, and His Lordship observed: "It is clear that the solicitor may be placed in such a position by the client as to absolve him from the further performance of that contract."
[38]
[14] In noting some such exceptions His Lordship continued:
[39]
"I should say that the solicitor is not bound to go on acting for the client if the client insists on some step being taken which the solicitor knows to be dishonourable; and many other cases may be supposed in which the solicitor may be entitled to refuse to act for the client any further. I should say that, when a solicitor is in a position to show that the client has hindered and prevented him from continuing to act as a solicitor should act, then upon notice he may decline to act further; and in such case the solicitor would be entitled to sue for the costs already incurred."
[40]
[15] It might be added that a determination whether a client has hindered and prevented the solicitor from completing the retainer in our view connotes unreasonable hindering or preventing. Such a finding could only be made upon a particular view of the facts and it is obvious that no assessment of this kind was undertaken by the magistrate. The same may be said if reliance is placed upon the implied duty to do all things reasonably necessary to enable the solicitor to have the benefit of the contract. In that situation also, "the end question involves the reasonableness or otherwise of the respondent's decision [to withdraw from the scheme]": McIntosh Hamson Hoare Govett Ltd v Pinnacle Properties Ltd.[13] In the present context the words in square brackets might be replaced with "to terminate instructions to proceed with the action".
[41]
[16] In the passage cited from Underwood above, it is suggested that the solicitor is not bound to continue to act if the client insists upon the taking of a dishonourable step. We should think that the converse holds good. Reference to honourable and dishonourable conduct may be currently unfashionable, but the meaning is clear. Were it to be found that the solicitor was conducting himself in the way in which the client described in evidence, we would consider that the client would have the right to terminate the retainer, and he would commit no breach in so doing.
[42]
[17] On another possible view of the facts it might be necessary to dissect the bill into legitimate and illegitimate items. For example, if there were a legitimate cause of action based on negligence, and for a time it seemed reasonable to pursue the action, such items may be recoverable. But if the client made it clear to the solicitor that he had fully recovered, any activity by the solicitor to gather evidence to exaggerate or falsify the position would be unlawful and the solicitor could not justify the charging of fees in respect of such services.
[43]
[18] The solicitor's bill in fact covers items from June 1996 to July 1997. The absence of appropriate findings by the magistrate also makes it impossible at this stage to tell whether, if the solicitor is otherwise entitled to claim fees, he should be deprived of those fees incurred after January 1997 when the client told him he no longer wished to proceed with the action.
[44]
[19] The magistrate clearly misdirected herself in her approach to findings of credit. There was a contest between a solicitor on the one hand and a client on the other. Her Worship observed "an oath taken before any court by ... a legal practitioner is never lightly taken, and ordinarily, the evidence of a solicitor must be heard by the court and accepted as evidence given seriously, truthfully and honest (sic)". This suggests an incorrect approach. Courts have taken a fairly hard attitude towards solicitors who come before them relying on oral retainers. Cordery on Solicitors[14] suggests that more weight is given to the client's affidavit than to that of the solicitor. Denning LJ in Griffiths v Evans[15] stated:
[45]
"On this question of retainer, I would observe that where there is a difference between a solicitor and his client on it, the courts have said for the last 100 years or more that the word of the client is to be preferred to the word of the solicitor, or, at any rate, more weight is to be given to it.
[46]
The reason is plain. It is because the client is ignorant and the solicitor is, or should be, learned. If the solicitor does not take the precaution of getting a written retainer, he has only himself to thank for being at variance with his client over it and must take the consequences."
[47]
[20] Such an approach originated in courts confronted with the task of deciding which affidavit to rely upon when there was a conflict between affidavits and no oral evidence: cf Allen v Bone;[16]re Gray v Coles;[17]Morgan v Blyth.[18] The above statements are perhaps more reflections on matters of policy than directives to a court to favour one party over the other when such contests emerge. However plainly the magistrate's approach in the present case was conducive to error.
[48]
[21] Finally, the magistrate did not advert to the question whether it had become clear to the parties prior to termination of the retainer that the client could not "win". If such was the position and the retainer provided for the solicitor's costs on a contingency fee basis, then the solicitor would have no entitlement to fees except for outlays that were expressly agreed to be paid. It would have been demonstrated, after the passage of a reasonable time, that the solicitor could not satisfy the condition necessary to entitle him to fees. It is unnecessary to decide whether "win" includes the reaching of a settlement in which the client might obtain some damages over and above his obligation for fees. At best for the solicitor, assuming that such a settlement could be regarded as a "win", it would be a legitimate defence for the client to show that no such settlement was reasonably possible in view of his complete recovery.
[49]
[22] The above discussion highlights the desirability that such arrangements between solicitors and clients be in writing; the need for identification of the true issues; and the need for findings on relevant facts.
[50]
[23] In our view, the proceedings below plainly miscarried. It is impossible for this court to form a view on the evidence and substitute the appropriate judgment. Leave to appeal should be granted and the appeal allowed. The judgment in the District Court should be set aside and replaced with an order allowing the appeal, and setting aside the judgment in the Magistrates Court. The parties should be granted liberty to re-plead and to have a retrial. If the solicitor wishes to plead alternative causes of action he should be free to do so. Equally, if the client wishes to plead illegality or any other defence, he should be free to do so. Obviously such matters should be pleaded if it is intended to rely upon them.
[51]
[24] It is emphasised that the above discussion of possibilities should not be taken as indicating any leaning in favour of any particular view of the evidence. The possibilities have been canvassed with a view to indicating potentially relevant issues that might arise on a retrial.
[52]
[25] The solicitor appeared for himself in the Magistrates Court, instructed counsel in his unsuccessful appeal to the District Court, and then, before this court, again appeared in person. He has succeeded in his application for leave to appeal and in the appeal.
[53]
[26] It has been held that a solicitor who conducts his own case is entitled to professional costs: The London Scottish Benefits Society v Chorley.[19] Of course he may not recover for items rendered unnecessary, such as charging for attending upon himself or instructing himself: Reed v Gray;[20] Oliver - Law of Costs.[21] That is not to say however that it is always appropriate for a solicitor to be given the benefit of being treated as both a litigant in person and a professional person entitled to recover fees against the other side. It is not appropriate that a solicitor appear on the record as solicitor in litigation in which he knows that he will be giving evidence of a controversial character. It is improper for a solicitor to continue to represent a client when it is known that he may be required to give such evidence (Jeffery v Associated National Insurance Co Ltd;[22] compare Campbell CJ's comments in Chapman v Rogersex parte Chapman;[23] Halsbury's Laws of England.[24]) There is of course nothing improper in a solicitor choosing to act as a litigant in person in legal proceedings, even where such controversy may arise. However if a solicitor does so, we do not think that a court should grant him the benefit of wearing his solicitor's hat as well. The ethical rule against continuing to act as solicitor on the record in such cases has a sound basis and is designed to retain trust between the court and its officers. The potential for a conflict between interest and duty is obvious when the solicitor on the record is a witness on a controversial issue. The solicitor here did not choose to observe that rule. He could have retained other solicitors had he chosen, but did not do so, apart from the occasional use of a town agent. In these circumstances, although he has succeeded in obtaining a retrial, he should not be in any better position than an ordinary litigant in person. He should not be permitted to recover professional costs from the client, and would be entitled at best to an order limited to such costs as might be assessed in favour of an unqualified litigant. Furthermore, the miscarriage of proceedings below seems to have been contributed to by the solicitor. In the circumstances, the solicitor should not receive the benefit of an orders for costs. We would make no order as to the costs of this appeal, the appeal in the District Court or the proceedings before the magistrate.
[54]
[27] The client requests an indemnity certificate for his costs of the trial and both appeals under Part 4 Appeal Costs Fund Act1973 ("the Act"). The Act gives this Court power to grant a certificate in respect of the appeal (s 15(1)). Such a certificate would, in this case, have the effect of entitling the client to be paid an amount equal to his costs of the appeal and any new trial (s 16(1)(b)). The client instructed a solicitor at the trial and a solicitor and barrister at both appeals. He should not, in the circumstances, be required to bear his costs of the second trial and of the two appeals. We would grant the certificate.
[55]
[28] 1. Leave to appeal granted and appeal allowed.
[56]
2. The judgment in the District Court is set aside and replaced with an order allowing the appeal and setting aside the judgment in the Magistrates Court.
[57]
5. No order as to the costs of this appeal, of the appeal in the District Court or of the proceedings before the magistrate.