Baynes & Anor v Kalyk

CATCHWORDS : Leave to appeal - action to recover inter alia costs for legal services - failure to make disclosure required by statute - client not obliged to pay and solicitor not entitled to maintain proceedings to recover costs unless there has been a costs assessment - s 182 applies to quantum meruit claims - distinction between a contract for the provision of legal services and a costs agreement - the action may be summarily struck out. Legal Profession Act 1987, Pt 11, Div 2, s 175, s 178, s 179 s 182, s 182 (2), Div 3, s 184, s 192, Div 6, s 208C. LEGISLATION CITED : Suitors' Fund Act 1951. Trade Practices Act 1974 (Cth). Local Court (Civil Claims) Rules 1988, Pt 8 r 3. Hereward v State Rail Authority of New South Wales (1989) 17 NSWLR 260. CASES CITED : Ipper v Myer Solomon Associates & Ors [2002] NSWSC 1141. Wentworth v Rogers [2002] NSWSC 709. Christopher Baynes & Jill Baynes (Plaintiffs) PARTIES : v Frank G Kalyk (Defendant) FILE NUMBER(S) : SC 10667 of 2003 COUNSEL : Mr R Horsley (Plaintiffs) Mr A D Justice (Defendant) SOLICITORS : Anthony Ziade & Associates (Plaintiffs) In Person (Defendant)

LOWER COURT Local Court JURISDICTION : LOWER COURT 7339 of 2002 Local Court NSW Downing Centre Sydney FILE NUMBER(S) : LOWER COURT Mr P S Cloran, LCM JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

10667 of 2003 Christopher Baynes & Jill Baynes v Frank G Kalyk

JUDGMENT 1 MASTER: The defendant is a solicitor. He had acted for the plaintiffs. He sought to recover an amount of costs in respect of legal services provided to them. 2 He commenced proceedings in the Local Court. The process claimed fees for legal services, the particulars of which were as set out in identified invoices. The Defence pleaded inter alia, non-compliance with various provisions of the Legal Profession Act 1987 (the Act) in answer to the claim. 3 The plaintiffs moved pursuant to Pt 8 r 3 of the Local Court (Civil Claims) Rules 1988 for an order that the Statement of Claim be struck out. The defendant then filed an Amended Statement of Claim (which added a claim for damages under the Trade Practices Act 1974 (Cth) and a claim for detinue founded on an alleged lien). He also offered to consent to a stay of proceedings. 4 It is unclear how the amended pleading came to be filed. In any event, it appears that it was treated both by the parties and the court as the subject of the Notice of Motion. 5 Mr Cloran LCM heard the application. The decision of the Local Court was handed down on 18 February 2003. The Notice of Motion to strike out the Statement of Claim was dismissed. 6 The plaintiffs now seek to appeal to this Court. It is a case in which leave is required. The process relied on is a Summons filed on 19 March 2003. It was heard on 1 July 2003. 7 Some criticism was directed to the framing of the grounds of appeal. The points taken were technical in nature. In my view, the grounds suffice to raise the substance of the matters that the plaintiffs wished to argue. 8 These proceedings can be disposed of without any detailed involvement in the facts of the case. It was common ground that there was no costs agreement as enabled by Part 11 Division 3 of the Act. It was common ground that there was an oral retainer. The claim for costs was said to be founded on quantum meruit.

9 Certain of the provisions of Division 2 (ss 175, 178, 179 and 182) are relevant for present purposes. 10 Section 175 specifies the matters that are to be disclosed to the client. Sections 178 and 179 deal with matters of timing and manner of the disclosure. 11 Section 182 is in the following terms: - " 182. Effect of non-disclosure of matters related to basis of costs

(1) If a barrister or solicitor fails to make a disclosure to a client in accordance with this Division of the matters required to be disclosed by section 175 in relation to costs, the client need not pay the costs of the legal services unless the costs have been assessed under Division 6.

(2) A barrister or solicitor who fails to make a disclosure in accordance with this Division of the matters required to be disclosed by section 175 or 176 in relation to costs may not maintain proceedings for the recovery of the costs unless the costs have been assessed under Division 6.

(3) The costs of any assessment referred to in this section (including the costs of the costs assessor) are payable by the barrister or solicitor seeking to recover costs.

(4) Any failure referred to in this section does not of itself amount to a breach of this Act. However, the failure is capable of being unsatisfactory professional conduct or professional misconduct." 12 The object of the disclosure provisions contained in Division 2 has been said to require an assessment of costs (where there has been a failure to make the requisite disclosure) at the practitioner's expense, before the solicitor from the client can recover the costs. 13 In essence, s 182 provides that if there is a failure to make a disclosure the client need not pay the costs of the legal services unless the costs have been assessed under Division 6 and that the solicitor may not maintain proceedings for the recovery of the costs unless that assessment has taken place. 14 Section 182 makes it clear that there is no obligation to pay the costs and that the solicitor cannot maintain proceedings for their recovery unless the assessment of costs has taken place. 15 It was not in dispute that there had been a failure to make the requisite disclosure and that there had not been an assessment of costs. It was not in dispute that a solicitor may still recover costs even though there was either no costs agreement or any costs agreement was void. 16 The learned Magistrate appears to have had regard to what was said by Levine J in Ipper v Myer Solomon Associates & Ors [2002] NSWSC 1141 and what was said by Barrett J in Wentworth v Rogers [2002] NSWSC 709. In the latter case, it had been observed that where there is no costs agreement or any such agreement is void, a solicitor may still recover costs for legal services and that quantum meruit was a means of recovery available where the agreement was void. 17 He appears to have come to the view that "maintaining" as used in s 182 did not disentitle the solicitor from commencing an action for recovery of costs where there has been a failure to make the requisite disclosure, but that he may not continue, persevere, carry on, keep up, prosecute the proceedings unless the costs have been assessed. He took the view that the defendants were entitled to a stay of proceedings until the statutory obligations imposed by s 182 had been complied with. 18 In my view, the reasoning abounds with misconception. It is difficult to see what assistance was gleaned from Ipper, and it appears that Wentworth has been misunderstood. Further, I consider that there has been a failure to properly construe s 182. The end result saw a vital question of whether s 182 applies to non-contractual claims being at least not fully addressed. 19 Section 182 does not disentitle a solicitor from recovering costs for legal services performed by him, but what he may recover as costs will be determined by assessment under the Act. It takes away both the obligation to pay and the entitlement to maintain proceedings for the recovery of the costs until there has been an assessment of costs. Until that has been done, there is no obligation to pay and consequently no actionable debt upon which proceedings can be maintained. 20 At the time of the commencement of the proceedings in the Local Court, the defendant was not entitled to be paid for the legal services or to maintain the proceedings to recover costs (Hereward v State Rail Authority of New South Wales (1989) 17 NSWLR 260). 21 The Act makes a distinction between a contract for the provision of legal services and an agreement as to the costs of the provision of legal services (which s 184 says is to be called a costs agreement). The latter may form part of the former. Section 182 may have application to the enforcement of rights under inter alia the latter (see s 208C). It may have application where the latter is void. It also may have application where there is no costs agreement. 22 It is the failure to make the requisite disclosure that gives it application to the recovery of costs of legal services by a barrister or solicitor (whether the claim be founded on quantum meruit or otherwise) 23 It appears that the learned Magistrate has erroneously taken the view that Wentworth was authority for the proposition that the section did not have application to cases where the claim was founded on quantum meruit. Counsel was unable to identify any passage in the judgment of Barrett J which lent support to that view. Indeed, a reading of the judgment reveals that it contains observations which are to the contrary. 24 Whilst these considerations are determinative of all the questions concerning the claim for costs, I shall briefly deal with other matters raised during argument. 25 The defendant sought to take comfort in the language used by subs (2) of s 182. In particular, he sought to take comfort from the fact that there was no prohibition on the commencement of proceedings. He pointed to other provisions in the Act (such as s 192) which prohibit both the commencement and the maintaining of proceedings. This provision had influence also on the learned Magistrate. 26 In my view, the absence of any prohibition on commencement of proceedings does not assist the defendant. The inconsistencies in language may simply be due to oversights by the draftsman. Be that as it may, it seems to me that such a prohibition on the maintenance of proceedings has to be read in its context as extending to the commencement of proceedings. 27 The power to strike out the Statement of Claim may be exercised where it inter alia discloses no reasonable cause of action or is otherwise an abuse of the process of the court. 28 The authorities make it clear that the discretionary power to strike out should be exercised only in what might be described as clear cases. The applicant for relief bears the onus of demonstrating that the case falls within that category. In my view, this is one of those clear cases and the onus has been discharged.

29 The propounding of the additional claims in the Amended Statement of Claim does not presently assist the defendant. 30 The claim under the Trade Practices Act is pressed in the same sum as is claimed for costs. Whilst the reasoning process expressed in relation to this claim is far from clear, it does appear to proceed on misconception. 31 The plaintiffs raise a number of matters in opposition to the viability of such a claim. For present purposes, it unnecessary to address these matters. 32 It is difficult to accept that this claim is seriously pressed. It appears to have been propounded for the purposes of defeating the Notice of Motion. Be that as it may, as presently pleaded it does not disclose a reasonable cause of action and is liable to be struck out for that reason alone. It is a deficient pleading and does not plead the necessary elements to constitute an action for damages to recover loss or damage against a person involved in a contravention of the Act (by engaging in conduct that is misleading or deceptive). If the defendant does really wish to pursue the claim, it remains open to him to apply to the Local Court for leave to file a Further Amended Statement of Claim which properly pleads such a cause of action. 33 The claim framed in detinue is clearly hopeless. It is said to be founded on a lien. It is not in dispute that the relevant documentation (apparently being the solicitor's file) was voluntarily handed over to the plaintiffs and has ever since remained in their custody. Accordingly, any claim for a lien has long been lost. Counsel for the defendant informed the court that the claim was not being pressed. 34 The application for leave and the appeal itself were heard concurrently. The defendant did not oppose that course. 35 The application for leave was supported by a variety of arguments. It suffices just to mention a couple of the matters that were agitated. It was said that the granting of leave and the allowing of the appeal may ultimately save the parties money in respect of legal costs which might otherwise be thrown away. In my view, there is force in this submission. It was also said that the appeal threw up a question of principle of public importance. In my view, there is also force in that submission. 36 It appears that there has been misunderstanding in respect of both the decided cases and provisions of the Act. The matters litigated concern questions of the entitlement of solicitors to costs and to maintain proceedings to recover costs against clients. It is desirable that there be certainty as to such matters and that any misunderstanding be rectified. 37 In the circumstances of this case, I am satisfied that leave should be granted and I so order. I should add that nothing was said in opposition to the application for leave. 38 The appeal is allowed. The order made on 18 February 2003 is set aside. Any order made as to the costs of the motion is also set aside. The existing originating process is struck out. The defendant is to pay the costs of both proceedings. If so entitled, the defendant is to have a certificate under the Suitors' Fund Act 1951. The Exhibits may be returned.

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