_ASIC v Atlantic 3-Financial

Supreme Court of Queensland|2006-06-23|Before: Mullins J

Gadens Lawyers for Messrs GM Moloney and PIF Geroff Lynch & Company for the second and third respondents

[1] MULLINS J: I made the following costs order ("the costs order") in this proceeding on 7 September 2004:

"The Second and the Third Respondents pay the costs of GREGORY MICHAEL MOLONEY and PETER IVAN FELIX GEROFF ("the accountants"), including reserved costs, of the application filed on 11 September 2003 to be assessed on a standard basis up to (but not including) the service on the accountants of the Respondents' notice of objection and thereafter (from and including the service on the accountants of the notice of objection) to be assessed on an indemnity basis."

[2] On 26 November 2004 Messrs GM Moloney and PIF Geroff (to whom I shall refer as "the applicants") applied to the Registrar for an assessment of the costs statement prepared by the applicants' solicitors in respect of the costs order.

[3] The second and third respondents (to whom I shall refer as "the respondents") took objection to the validity of the client agreement between the applicants and their solicitors Gadens Lawyers ("Gadens"). On 13 October 2005 a Senior Deputy Registrar (to whom I shall refer as "the Registrar") of this Court handed down reasons for decision in which he found that the client agreement between the applicants and Gadens Lawyers was void under s 48F of the Queensland Law Society Act 1952 ("the Act"). Section 48F(1) of the Act provides that if a client agreement to which s 48 applies does not comply with that section, the client agreement is void. As a result of his finding, the Registrar concluded that the applicants could not recover from the respondents any greater costs than in accordance with the Supreme Court scale of costs.

[4] By application filed on 14 November 2005 the applicants seek that directions be given to the Registrar, either pursuant to r 706(l)(h) of the UCPR, s 118E of the Supreme Court of Queensland Act 1991 or the inherent jurisdiction of the Court, to assess the costs statement on the basis that the client agreement between the applicants and Gadens applies to such assessment.

[5] The application was heard on 8 December 2005. Supplementary written submissions were delivered by the applicants on 13 December 2005 and by the respondents on 27 January 2006. The applicants had relied on Casey v Quabba [2005] QSC 356 to argue that the respondents had no standing before the Registrar to challenge the validity of the client agreement. That decision was overturned on appeal in Casey v Quabba [2006] QCA 187 ("Casey"). Further submissions in the light of the decision of the Court of Appeal in Casey were delivered by the respondents on 2 June 2006 and by the applicants on 9 June 2006.

[6] In Casey the plaintiff in the original proceeding recovered damages for personal injuries against the first and second defendants and obtained an order against the second defendant to pay costs to be assessed on an indemnity basis. The second defendant objected to the registrar having regard to the plaintiff's costs agreement with his solicitors relating to the subject litigation, contending that the agreement was void pursuant to s 48F(1) of the Act. The decision by the Court on the reference by the registrar has the citation [2005] QSC 356. Although it was found in that decision that the costs agreement did not in certain respects comply with s 48 of the Act, it was held that the second defendant did not have standing to challenge the validity of the agreement and that the want of compliance with s 48 of the Act meant that the agreement was voidable at the option of the plaintiff.

[7] On appeal in Casey, it was held that there was nothing in the context of s 48F(1) within the Act that would support any conclusion other than that "void" was used in its ordinary sense. The Court recognised that the client agreement is regulated in a very detailed way by the Act which is for the protection of the client. The Court noted that the client agreement is not limited to protecting the client, as r 704(3)(b) of the UCPR provides that such an agreement may be taken into account when a costs assessor is determining the quantum of costs recoverable on an indemnity basis against a party ordered to pay such costs. It was concluded that such a provision in the UCPR could be referring only to a valid and enforceable costs agreement and that, if a client agreement was void because of the operation of s 48F(1) of the Act, it could not be referred to at the stage of assessing costs payable on an indemnity basis. It was therefore held that the second defendant had the necessary standing to challenge the validity of the client agreement on which the plaintiff was seeking to rely before the registrar assessed costs on an indemnity basis and that the costs assessment should proceed on the basis that there was no valid costs agreement to which the registrar could have regard pursuant to r 704(3)(b) of the UCPR.

[8] The respondents rely on Casey as vindicating the Registrar's decision to inquire into the validity of the client agreement between the applicants and Gadens.

[9] The applicants seek to distinguish Casey on the basis that there was not evidence in Casey that the plaintiff had paid his solicitors' fees. The applicants submit in this case that they have paid the fees of Gadens that were the subject of the costs statement before the Registrar, that it should be inferred that they paid the fees unaware of any alleged non-compliance of the client agreement with s 48 of the Act, that Gadens have changed their position in good faith as a result of the payment of those fees and that the applicants cannot recover those fees from Gadens. It is therefore submitted that if Casey did apply to the applicants, it would have the effect that the respondents, as losing litigants, would receive a windfall at the expense of the applicants who as consumers of the legal services which were provided in accordance with the client agreement are the object of protection under the Act.

[10] It is also submitted on behalf of the applicants that the Court of Appeal in Casey in considering the meaning of "void" in s 48F(1) of the Act did not have regard to arguments such as those advanced on behalf of the applicants in this matter that the notice in the schedule to the Act ("the schedule notice") contemplates that the client may waive non-compliance with Part 4A of the Act.

[11] Although the applicants have raised arguments that were not expressly considered in Casey, the decision in Casey on the construction of s 48F(1) of the Act is unequivocal and must be followed. I note that in the applicants' further supplementary submissions, they reserve their right to contend that Casey was wrongly decided in its application to this matter.

[12] In accordance with Casey, I find that the respondents had standing before the Registrar to challenge the validity of the client agreement between the applicants and Gadens.

[13] There were four grounds on which the Registrar found that the client agreement did not comply with s 48 of the Act:

(a) the client agreement was inconsistent with clause 18 of with the schedule notice in that inadequate fee explanations and estimates were given in the client agreement;

(b) the client agreement was inconsistent with clause 16 of the schedule notice in that a form of account was agreed to in the client agreement, but that did not contain the detail required by clause 16;

(c) the client agreement was inconsistent with clause 20 of the schedule notice which requires that any amendment to the client agreement be agreed to by the client and the solicitor in writing;

(d) the client agreement was inconsistent with clause 11 of the schedule notice.

[14] In order to deal with the submissions of the parties, it is necessary to describe the documents that comprised the relevant client agreement.

[15] The costs order was made in respect of a proceeding that was initiated by an application filed in this Court on 11 September 2003 whereby the applicants sought approval of their remuneration and disbursements for acting pursuant to an order of this Court made on 27 May 2003 as investigative accountants and supervisors of certain managed investment schemes conducted by Atlantic 3 - Financial (Aust) Pty Ltd.

[16] By engagement letter dated 1 October 2003 to the applicants ("the engagement letter") Gadens acknowledged receipt of the instructions to act on behalf of the applicants in the approval of the applicants' fees as investigative accountants and outlined the terms upon which Gadens would provide legal services for that purpose. Under cover of the engagement letter Gadens enclosed a printed document entitled "General Terms (as at 28 July 2003)" ("the general terms") which was described in the engagement letter as outlining "the basis of all work we undertake for you, subject to any written changes in this or other correspondence". The engagement letter also noted:

"These General Terms are amended from time to time (see the attachment for more details)."

[17] The engagement letter expressly stated in relation to charges made by Gadens for their services:

"Our charges for professional services are affected by a number of variables and are made in accordance with the General Terms. Hourly rates are used by most major law firms and are a general basis for determining an appropriate fee."

[18] In compliance with their obligation under s 48(4) of the Act, Gadens enclosed with the engagement letter a document entitled "Important Notice to Client" which corresponded with the schedule notice. The engagement letter contained this statement:

"We attach costs scales for the Supreme Court which itemise how recoverable costs are assessed in that forum. If proceedings are commenced and you are successful in this forum, you may receive an order entitling recovery against another party or parties of certain of your costs and disbursements, but typically this will be in the vicinity of 50%-75% of your actual costs. If you are unsuccessful in proceedings, you could expect to be required to pay a similar percentage of the other parties' costs and disbursements."

[19] Although the engagement letter suggested "costs scales for the Supreme Court" were attached, what was in fact attached to the engagement letter was a copy of schedule 1 to the Uniform Civil Procedure (Fees) Regulation 1999 which set out the fees payable in the Supreme Court for filing documents or other services obtainable from the registry. This was a mistake, as from the description in the engagement letter Gadens intended to attach a copy of schedule 1 to the UCPR which sets out the scale of costs in the Supreme Court for assessing costs on a standard basis under Part 2 of Chapter 17 of the UCPR. Applying the decision in Herald v Worker Bee (Brisbane) Pty Ltd [2004] 2 Qd R 263 ("Herald"), the Registrar held that nothing could be made of the fact that Gadens provided the fees schedule rather than the costs schedule to the applicants.

[20] The engagement letter also dealt with a "Present estimate of costs and disbursements" in these terms:

"We estimate that our professional fees and disbursements for this matter will be $20,000. In estimating this amount, we have attempted to identify the tasks to be performed on your behalf to complete the work.

This estimate is neither a quote nor a cap on what we will charge you. The actual fees charged will be determined by the General Terms and will depend on the work undertaken. As the matter proceeds, other tasks may have to be undertaken, for instance upon your further instructions, if our role changes or due to unforeseen circumstances (such as protracted negotiations). We encourage you to contact us from time to time for an updated estimate as to costs.

[21] The engagement letter concluded with a statement:

"Subject to specific contrary arrangements, out General Terms apply to all legal services we provide to you (including this and other matters)."

By way of acknowledgement, Gadens requested the applicants to sign and return the duplicate of the engagement letter. That was done by Mr Moloney signing a copy of the letter on 16 October 2003 and returning it to Gadens on or about that date. The client agreement therefore comprised the engagement letter and the general terms.

[22] Under s 48(5) of the Act the client agreement must not be inconsistent with the schedule notice.

"18. If the work involves or is likely to involve litigation, this client agreement must include an explanation and estimate of the range of costs you may recover from another party if you are successful or you may be required to pay the other party if you are not successful."

[24] The engagement letter set out the current hourly rates for the partners and solicitor who were nominated in that letter as the lawyers who would be working on the matter for the applicants. I have set out above the explanation in the engagement letter about the costs scales (even though the costs scales were not attached to the engagement letter) and the estimate of costs and disbursements. The engagement letter referred the applicants to the general terms for further information on litigation costs which set out the following:

"Litigious matters

If a matter is or becomes litigious:

• it may be desirable to engage the services of local counsel to appear in court proceedings. If so, we may ask that you enter into a costs agreement with counsel.

• if you succeed in obtaining an order for costs payable by other parties in the litigation, it is likely to be for an amount substantially less than the fees and disbursements payable under this agreement or any separate agreement with counsel.

• a court order may require you to pay another party's legal fees and costs (for instance, if you lose the case). These fees and costs would be in addition to the fees and disbursements payable to us under this agreement.

• a court may order costs in favour of or against any party to the action without stating the amount payable. If this happens, that person is entitled to apply to a court for assessment of the whole or part of those costs."

[25] The respondents argued before the Registrar that the information set out in the engagement letter under the heading "Charges for our services" did not provide an adequate explanation and estimate of the range of recoverable costs as required by clause 18 of the schedule notice. In his reasons the Registrar referred to the list of matters that Ipp J described in Brown v Talbot & Olivier (1993) 9 WAR 70, 77-78 ("Brown") as being relevant in influencing a client in deciding whether or not to enter into an agreement entitling the client's solicitors to depart from scale costs. The Registrar appears to have been affected by this list of matters, although the Registrar acknowledged that it would depend on whether, as a matter of construction, clause 18 imported that list of matters. The Registrar concluded that no explanations were provided by Gadens to explain why the applicants could expect to receive only 50% to 75% of the costs, why and how the scales limit a party's costs and why the costs pursuant to the client agreement were in excess of the statutory scale and would not be recovered and to that extent the client agreement was inconsistent with the requirements of the schedule notice.

[26] In order to determine whether there is any inconsistency between the client agreement and the schedule notice, the client agreement must be compared with the requirements stipulated in the schedule notice, rather than looking at the conduct of the practitioner and considering whether that conduct was itself inconsistent with requirements of the schedule notice: Herald at 266.

[27] As was conceded by the respondents, it was unnecessary for the Registrar to consider the list of matters set out in Brown. Brown concerned the review instigated by clients of the costs agreement which they had entered into with their solicitors. Under the relevant legislation the costs agreement could be reviewed if the court considered it was "unreasonable". Ipp J was of the opinion that solicitors would discharge their fiduciary obligation of making full disclosure to clients of all relevant matters that could affect the decision of the clients to enter into the costs agreement only if they disclosed that list of matters. Ipp J was therefore concerned with the explanations required of solicitors under the general law, rather than the construction of any legislative requirement similar to clause 18 of the schedule notice.

[28] What clause 18 of the schedule notice requires is an explanation and an estimate of the range of costs that the client may recover in litigation from the other party or may be ordered to pay the other party.

[29] Between the terms of the engagement letter and the general terms, the applicants were informed by Gadens:

(a) of the basis on which the applicants would be charged by Gadens for costs and disbursements;

(b) that if the applicants were successful in the litigation they may obtain an order from the court that the other party pay certain of the applicants' costs and disbursements which was likely to be for an amount substantially less than the fees and disbursements payable under the client agreement and "typically" this would be in the vicinity of 50% - 75% of the applicants' actual costs;

(c) that if the applicants were unsuccessful in the litigation, they may be ordered to pay the other party's costs and disbursements and could expect to be required to pay a similar percentage of 50% - 75% of the other party's costs and disbursements; and

(d) the court assessed the costs that were ordered to be paid and the costs scales of the Supreme Court itemised how recoverable costs were assessed.

[30] The applicants were therefore given the estimate that is required under clause 18 of the schedule notice of costs that may be recovered by or against them. The use of percentages is useful, because it enabled the applicants to estimate the shortfall in recoverable costs and their exposure for the costs of the other party by applying that percentage to the estimate of costs given by Gadens for the anticipated work and the actual costs as the applicants received bills under the client agreement. (This was recognised in Casey v Quabba [2005] QSC 356 at paragraph [40].)

[31] The explanation found in the client agreement for the range of costs that would be recoverable by or against the applicants was indicated by the difference between the basis on which the applicants were to be charged by Gadens and the method by which recoverable costs were ordered and assessed.

[32] Clause 18 of the schedule notice did not require Gadens to explain why and how the costs scales limit a party's costs and why the costs pursuant to the client agreement were in excess of the statutory scale and would not be recovered. The only other aspect on which the Registrar concluded there was no explanation provided by Gadens was why the applicants could expect to receive only 50% - 75% of the costs. There is no doubt that Gadens could have given a more explicit explanation than that which is found within the client agreement, but as outlined above there is an explanation of the range of recoverable costs within the information that was disclosed by Gadens relating to recoverable costs and that explanation was sufficient to satisfy the requirement of clause 18 of the schedule notice.

[33] The Registrar was wrong in concluding that the client agreement did not comply with clause 18 of the schedule notice.

[34] Clauses 15 and 16 of the schedule notice provide:

"15. An account from your solicitor or firm must be in the form agreed to in this client agreement or must clearly set out all items of work done for you and the amount charged for each item.

16. If a form of account is agreed to, it must be a form resulting in the inclusion in each account of sufficient details of the work done to allow you to decide whether the fees and costs in the account are reasonable."

"Accounts. Unless otherwise agreed, we will send you an account for our professional costs and disbursements at regular intervals, usually at the end of each month, while work is in progress and when the work is completed.

In our accounts we may, but shall not be required to, set out the individual items of work and the charges applicable to them. For instance, you agree that we may furnish accounts detailing only the number of hours worked by each lawyer on the matter and/or a general description of the work undertaken and disbursements incurred."

[36] Clause 15 of the schedule notice provides for two alternatives in relation to accounts. Clause 16 of the schedule notice becomes relevant only if the alternative contemplated in clause 15 of agreement between the client and the solicitor on the form of an account is made in the client agreement. The Registrar's reason for finding that the client agreement was inconsistent with clause 16 of the schedule notice is based on his conclusion that what was set out in the general terms relating to accounts amounted to an agreement on the form of accounts:

"Counsel for the accountants cannot successfully argue there has been no agreement as to the form of the solicitors' accounts. The General Terms has raised, specifically, as a matter for agreement the form of the account which is presented by way of exclusion, and an example is given of the type of account the client will have approved if the client agreement is executed. The client agreement has been executed with the provision intact."

[37] All that Gadens did in the general terms was to give examples of two different ways in which they may furnish accounts. Particularly as two examples are given as possible methods of furnishing accounts and as use is made of the word "may" in relation to both examples, I cannot agree with the Registrar's conclusion that there was agreement between Gadens and the applicants that the accounts would be rendered in the form of the second example. As a matter of construction of the provision in the general terms relating to accounts, there was no agreement on the form of accounts. There was therefore no form of account which needed to comply with clause 16 of the schedule notice: Struber v McNamara & Associates [2003] QSC 372 at paragraph [25].

[38] The Registrar was wrong in concluding that the client agreement was inconsistent with clause 16 of the schedule notice.

"20. This agreement may be amended if you and your solicitor or firm agree to the changes in writing."

[40] Apart from what was stated in the engagement letter about written changes to the general terms and that the general terms are amended from time to time, the introductory paragraph to the general terms stated:

"Thank you for choosing Gadens Lawyers. These General Terms apply to all legal services we undertake for all clients, except to the extent we have specific arrangements to the contrary. Your continuing instructions to us indicate your acceptance of the General Terms."

[41] The general terms also deals with how to resolve any conflict between the engagement letter and the general terms and variations of the client agreement:

"Precedence

To the extent that there is a conflict between these General Terms and the Engagement Letter, the Engagement Letter will prevail.

Variations of our agreement

You agree to be bound by our General Terms as varied from time to time. Please contact us at any time to ensure you have a copy of our current General Terms.

Subject to the above, no variation of our agreement will be valid unless confirmed in writing by us on or after the date of signature of the Engagement Letter."

[42] The Registrar considered that by the opening paragraph of the general terms and the express provisions of the general terms dealing with variations, Gadens were attempting to impose on the applicants obligations to accept variations of the general terms without entering into a written variation of the client agreement and that was incompatible with the requirement of clause 20 of the schedule notice that required agreement to variations to the client agreement to be writing.

[43] It is submitted on behalf of the applicants that the first paragraph ("the first paragraph") under the heading "Variations of our agreement" in the general terms does not by its own force and effect vary the general terms or authorise unilateral variations of the general terms. It is submitted that the first paragraph itself constitutes the writing in the event that there are future variations of the general terms to which both the client and solicitors agree by conduct or which aids the conclusion that separate correspondence from the solicitors has that character. Reliance is placed by the applicants on National Australia Bank Ltd v Clanford Pty Ltd [2002] QSC 361; [2003] 2 Qd R 79, 82 [16] - [17] ("Clanford").

[44] Clanford arose out of the assessment by the registrar of costs pursuant to an order of the court. The plaintiff in whose favour the costs order was made was a public company in respect of which ss 48(4) and (5) of the Act did not apply. The plaintiff's solicitors had a general retainer from the plaintiff. The general retainer applied to work to be performed in the future which was to be described in a relevant fee estimate letter in the form of Annexure A to the agreement. Annexure A was a proforma letter to be completed by the solicitors for the purpose of providing the fee estimate when specific instructions for the future work were given by the plaintiff to the solicitors. Such a letter was completed (when instructions were received by the solicitors) in relation to the work to be performed on the matter that eventually resulted in the costs order in favour of the plaintiffs. The issue arose whether there had been compliance with ss 48(2) and (3) of the Act as the details required to be specified to achieve compliance for the relevant matter were in the letter which the plaintiff's solicitors had sent in accordance with the proforma letter. The following conclusion was reached in Clanford at paragraph [16]:

"By the terms of the agreement which were signed by both the plaintiff and the plaintiff's solicitors, the parties have therefore agreed that the matters required to be specified under s48(2) and s48(3) will be specified in a fee estimate letter despatched by the plaintiff's solicitors. As that process has been agreed to in writing by the plaintiff, it is not relevant that the fee estimate letter dated 22 November 1999 is not also signed by the plaintiff."

[45] The applicants sought to rely on Clanford by analogy, arguing that as the client agreement comprising the general terms that was made in October 2003 contained an agreement on the part of the applicants to be bound by the general terms "as varied from time to time", the client agreement was the written agreement that provided for the variations.

[46] If it were considered that the first paragraph provided for any subsequent edition of the general terms of Gadens to supersede the general terms (as at 28 July 2003) automatically for the purpose of the client agreement with the applicants, I do not consider that Clanford can be applied in the manner submitted by the applicants. In Clanford the fee estimate letter was identified in the existing general retainer as a document that would be provided by the solicitors at the appropriate time when further instructions were given and would follow the form of the proforma letter. In contrast, if the first paragraph did apply to amended general terms, there is no restraint whatsoever in how the general terms may be amended. The first paragraph cannot be characterised as the agreement in writing to vary the general terms in accordance with an amended form of general terms made available by Gadens, when there is no limitation within the first paragraph or otherwise in the general terms on the extent or nature of the amendments that could be made to the general terms in such manner.

[47] The client agreement has to be construed in the context that it has been entered into by the applicants and Gadens to comply with the mandatory statutory requirement that a client agreement be made within a reasonable time after a solicitor starts providing legal services for a client. I therefore consider the better view of the first sentence of the first paragraph is that it does not deal with the manner in which variations to the general terms are effected, but sets out what the position will be, as the general terms are varied from time to time. The second paragraph under the heading "Variations of our agreement" in the general terms deals with variations that are mutual as the requirement for confirmation in writing by Gadens of a variation would need to be given only in respect of a variation that was otherwise approved by the applicants.

[48] The engagement letter and the general terms were accompanied by the document that conformed with the notice schedule which specified in clause 20 that the client agreement may be amended if the parties agreed to the change in writing. If there were any ambiguity about whether amendments to the client agreement had to be in writing, clause 20 makes the position clear. Any ambiguity would also be resolved by recourse to the engagement letter in accordance with the express precedence accorded to that in the general terms in the event of conflict between the general terms and the engagement letter. The engagement letter specifies that the general terms are subject to any written changes in the engagement letter or other correspondence (ie. in writing).

[49] The respondents argued that the engagement letter refers back to the general terms and that the general terms take precedence, rather than the engagement letter. The respondents relied on the statement in the engagement letter "Subject to specific contrary arrangements, our General Terms apply to all legal services we provide to you (including this and other matters)". That statement concerns the application of the general terms to the provision of legal services by Gadens and not the ranking of the engagement letter and the general terms for the purpose of resolving any interpretation ambiguity.

[50] The respondents also argued that the general terms purported to establish a mechanism for Gadens to vary unilaterally the rates for professional fees and disbursements which amounted to variation of the client agreement by Gadens without the written agreement of the applicants. This submission depends on characterising the rates of charges as a condition of the client agreement which they are not. The client agreement specifies the basis for calculating fees and charges and advises of the current hourly rates and the circumstances in which they may change, but does not purport to fix the rates as a term of the client agreement.

[51] The Registrar was wrong in concluding that the general terms were capable of being replaced by a variation that had not been the subject of an agreement in writing and that the client agreement did not comply with clause 20 of the schedule notice.

[52] In s 3 of the Act, "client agreement" is relevantly defined to mean an agreement under s 48 of the Act. The requirements for a client agreement are found in ss 48(2) and (3) of the Act and the schedule notice. Sections 48(2) and (3) of the Act provide:

"(2) Within a reasonable time after starting work for a client, a practitioner or firm must make a written agreement with the client expressed in clear plain language and specifying the following matters--

(a) the work the practitioner or firm is to perform;

(b) the fees and costs payable by the client for the work.

(3) The fees and costs payable by the client for work must specify--

(b) the basis on which fees and costs will be calculated (whether or not including a lump sum amount)."

[53] Clauses 10 and 11 of the schedule notice provide:

"10. A client agreement may set a lump sum amount for fees and costs.

11. Otherwise, the client agreement must state the basis on which fees and costs will be calculated (whether or not including a lump sum) and give either--

• an estimate of the total amount of fees and costs likely to be payable for the work; or

• if it is not reasonably practicable to estimate the total amount of fees and costs likely to be payable for the work--a range of estimates of the total amount of fees and costs likely to be payable for the work and an explanation of the significant variables that will affect the calculation of the amount."

[54] There are a number of provisions within the general terms relating to charges that are relevant:

"Hourly rates. We will charge on the basis of hourly rates, unless otherwise agreed.

If hourly rates apply, please note that they are only a general basis for determining the appropriate fees for our work. We may adjust our fees to reflect the value and skill we bring by delivering an innovative solution or the special responsibility or urgency of the matter. We may also adjust our fees to reflect the benefit to you of previous work product or precedents.

Hourly rates vary according to the type of work and the experience and expertise of the lawyers involved. The current rates are generally set out in the Engagement Letter. If hourly rates for any lawyer are not included, you can assume they will be on the general basis of our standard rates applicable at that time for that lawyer doing that work.

Our time-charging system divides an hour into 10 units of 6 minutes each. The calculation of time charged to you will be made in units of 6 minutes. This means that an attendance of up to 6 minutes may be counted as one unit.

Estimates. If we provide an estimate of fees or charges, it is only an estimate and is not binding on us. The actual fee charged will depend on the circumstances and the work undertaken and may vary - perhaps substantially from the original estimate. You should regard an estimate as our best guess at the time.

Review of rates and fees. Rates for our fees and disbursements are reviewed regularly and may change during the course of your matter. If they do, the revised rates will apply to your matter from the date of the change. We usually inform clients of rate changes for fees and disbursements but you agree to be bound by any changes we make regardless. We will seek your approval for changes that will apply only to you. Please contact us at any time to ensure you have a copy of our currently applicable rates."

[55] The Registrar stated in his reasons that the legislative provisions require the fees to be specified with precision. The Registrar found that the provisions in the general terms that allowed the fees of Gadens to be adjusted upward or downward were inconsistent with the requirements of ss 48(2) and (3) of the Act and clause 11 of the notice schedule in that the fees were not specified with precision. The Registrar also found that the provision in the general terms dealing with review of rates and fees was inconsistent with those requirements, because it permitted the rates to change arbitrarily.

[56] The meaning of ss 48(2) and (3) of the Act was considered in Clanford at 82 - 83 [18] where the conclusion was reached that:

"What s48(3)(b) of the Act requires is a specification of the basis on which fees and costs will be calculated. It does not require that those fees and costs can be calculated with precision, prior to the work being undertaken."

The Registrar failed to apply Clanford which is a relevant authority.

[57] As outlined above, the client agreement in this case specifies the basis on which fees and costs will be calculated which will be hourly rates for professional services and does not purport to be a contract between Gadens and the applicants that work will be done at fixed rates only. The terms of the client agreement provide for the circumstances in which the rates may change. That is what the parties have agreed to be the basis for charging. Any change to hourly rates or other charges would always be constrained by the context of the client agreement and the relationship between the parties to the client agreement, the reasonableness of the change in the circumstances and the relativity between the current rates at the time the client agreement was entered into and the altered rates.

[58] The Registrar was wrong in finding that the client agreement was inconsistent with the requirements of s 48(2) and (3) of the Act and clause 11 of the notice schedule.

[59] The relief sought in the application was a direction to the Registrar that the client agreement applies to the assessment of the costs statement and that the Registrar assess the costs "on the basis of the rates charged for the work undertaken by Gadens Lawyers on a time costed basis as provided in the client agreement".

[60] The form of that relief overlooks that the assessment of indemnity costs under r 704(3) is on the basis that the Registrar must allow all costs reasonably incurred and of a reasonable amount having regard to the matters stipulated in r 704(3) including the client agreement.

[61] Rather than express the relief in the form of the direction, the parties accepted at the hearing that a declaration should be made to reflect the conclusion reached by the Court on the validity of the client agreement. I will therefore make the following order:

"It is declared that the client agreement between Messrs GM Moloney and PIF Geroff ("the applicants") and Gadens Lawyers which is found in exhibits GMM10 and GMM11 to the affidavit of GM Moloney filed on 21 February 2005 (Document 254) is a costs agreement for the purpose of r 704(3)(b) of the Uniform Civil Procedure Rules 1999 in respect of the assessment of the costs statement filed on behalf of the applicants on 26 November 2004"

[62] It will be necessary to hear submissions on the issue of the costs of the application. Although the applicants have been successful in establishing that the Registrar was wrong in the conclusions he reached about non-compliance of the client agreement with the schedule notice, the applicants were not successful in the argument they advanced about the respondents' lack of standing before the Registrar to challenge the validity of the client agreement.

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