Bodycorp Repairers Pty Ltd v Oakley Thompson & Co Pty Ltd

Court of Appeal (Vic)|2017-02-22|Before: Mr J, Warren CJ, Tate JA, Leish JA

Oakley Thompson & Co Pty Ltd v Maisano [No 2] [2015] VSC 210 (Elliott J)

EQUITY - Solicitors' entitlement to fruits of costs judgment in client's favour - Whether solicitors entitled to participation in taxation of costs - Ex parte Patience, Makinson v The Minister [1940] SR (NSW) 96, , considered - Whether proceedings appropriate to determine allegation of fraud in costs judgment - considered - Whether judge's reasons inadequate.

LEGAL PRACTITIONERS - Costs disclosure - Whether alleged non-compliance a bar to recovery - Legal Profession Act 2004 ss 3.4.17, 3.4.41.

CONTRACT - Whether agreement between solicitors and client to cap costs and disbursements - Application for leave to appeal refused.

1 The applicant, Bodycorp Repairers Pty Ltd ('Bodycorp'), operates a business repairing damaged motor vehicles. In 2002, Bodycorp sued one of its franchisees, Mr Anunziato Maisano ('Maisano'), for allegedly breaching a franchise agreement and inducing other franchisees to breach their agreements with Bodycorp.

2 In 2012, Maisano retained the law firm Oakley Thompson & Co Pty Ltd ('Oakley Thompson') to represent him in the proceeding. On 4 September 2013, a judge of the Trial Division ordered that Bodycorp's claims against Maisano and others be dismissed.[1] His Honour ordered that Bodycorp pay the costs of Maisano and others, including any reserved costs ('the costs order').[2]

3 Subsequently, Oakley Thompson sought to recover the costs it incurred in representing Maisano. Oakley Thompson applied to the Court for declaratory relief recognising that its unpaid costs created a right in its favour over the costs order. Both Maisano and Bodycorp resisted that application. A judge of the Trial Division found that Oakley Thompson had an equitable right over the costs order on 30 June 2015[3] and made orders to that effect on 24 July 2015.

4 Maisano has not sought leave to appeal the orders of the trial judge. Bodycorp does seek leave to appeal and has proposed 13 grounds of appeal, which will be turned to below.

5 On 26 March 2012, shortly after Oakley Thompson began representing Maisano, it provided him with a costs agreement setting out arrangements as to its fees. The agreement estimated that legal fees would be incurred up to $120,000 and noted that Oakley Thompson would not be directly liable for counsel's fees.

6 On 20 March 2013, in the lead-up to trial, Oakley Thompson sent Maisano a letter stating Oakley Thompson was owed $32,370.70 and noting further fees could be incurred of $106,000 to $126,500 (the estimated costs for a 15 day trial). The letter requested that $120,000 be provided to Oakley Thompson's trust account or adequate security provided. The letter stated that senior counsel needed to be retained for the trial and estimated senior counsel's costs in the range of $3,500 to $4,000 per day for a likely 15 days (including 3 to 4 days' preparation).

7 Maisano was unable to provide the requested security. Protracted negotiations ensued in which Oakley Thompson noted it could not retain senior counsel without certain financial guarantees.[4] Ultimately on 2 May 2013, Maisano's sister, Franka Maisano, executed a deed of charge and guarantee for $80,000 over a Mt Martha property in favour of Oakley Thompson ('the Deed of Charge**'**). The Deed of Charge included the following provision:

IN CONSIDERATION of [Oakley Thompson] at my request and also the request of [Maisano] providing to [Maisano] legal assistance and professional legal services in respect of [the Bodycorp proceeding] (collectively 'the Work'), I, [Franka Maisano] ('the Chargor'), HEREBY IRREVOCABLY AND UNCONDITIONALLY CHARGE in favour of [Oakley Thompson] against the property the amount of $80,000 (eighty thousand dollars) ($80,000), for the payment of all legal costs, fees and disbursements (inclusive of any counsel's fees and GST) which have been incurred, or are to be incurred relative to, or in connection with the Work.

8 The Deed of Charge provided that the $80,000 was to be paid in two instalments: $20,000 by 15 June 2013 and $60,000 by 1 October 2013.

9 Counsel was then retained. The trial commenced on 6 May 2013 and was heard over 16 days.[5] On 8 May 2013, Maisano had a meeting with representatives of Oakley Thompson at which he was told that counsel's fees were charged at a rate of $4,500 per day and had already accrued to $22,500.

10 On 17 May 2013, a representative of Oakley Thompson, Jeremy Broadbent ('Broadbent'), informed Maisano that his total legal fees including counsel's fees at that point were $158,371.

11 After Bodycorp's proceeding against Maisano ('the franchise proceeding') was dismissed and the costs order made on 4 September 2013,[6] Oakley Thompson sought to recover the costs incurred by Maisano from Bodycorp. Oakley Thompson commenced this process on Maisano's behalf.

12 Through correspondence with Bodycorp and with Maisano, Oakley Thompson calculated the costs it incurred in defending Maisano at around $290,000 to $300,000, including around $107,000 to $109,000 for counsel's fees.

13 In February 2014, Bodycorp offered to settle its obligation to pay Maisano's costs in the sum of $56,400, an amount that Bodycorp had earlier paid into court as security for costs.

14 Oakley Thompson refused this offer and on 22 April 2014 filed a summons for taxation of costs on behalf of Maisano ('the taxation of costs'). On 6 August 2014, an interim order for assessed costs was made in favour of Maisano in the sum of $70,000. On 14 August 2014, Oakley Thompson applied for the security of $56,400 previously paid by Bodycorp to be released into an account held by Oakley Thompson.

15 While the taxation of costs remained part-heard, the relationship between Maisano and Oakley Thompson broke down. On 22 August 2014, Oakley Thompson received an email from Mr Antonio Murdaca ('Murdaca'), the sole shareholder and director of Bodycorp, attaching a summons and an affidavit from Murdaca which exhibited a typed letter from one 'Michael Mason' (apparently Maisano) dated 28 July 2014 stating that Maisano had been trying to contact Oakley Thompson unsuccessfully and that he wished to terminate the firm's services. Broadbent of Oakley Thompson deposed that he had no knowledge of any such letter from Maisano and that it would have been forwarded to him had it been received by Oakley Thompson.

16 After seeing the email from Murdaca on 22 August 2014 with the letter exhibited to Murdaca's affidavit, Broadbent attempted to contact Maisano. Maisano did not answer any calls. However, on the same day, 22 August 2014, Broadbent received a text message from Maisano terminating Oakley Thompson's retainer. Efforts by Oakley Thompson to contact Maisano further were unsuccessful.

17 On 25 August 2014, Oakley Thompson informed the Costs Court that there was an issue with its retainer. The taxation of costs was duly adjourned.

18 Oakley Thompson's application to have the $56,400 held as security paid to its account remained outstanding. Bodycorp requested the Costs Court not to release the money. On 10 September 2014, the Judicial Registrar ordered the sum be paid to Oakley Thompson. Thus, Oakley Thompson received $56,400 against the costs owed to it by Maisano.

19 On 28 August 2014, after the sale of the Mt Martha property securing the Deed of Charge had settled, Oakley Thompson received the sum of $80,000 provided as security for acting for Maisano in the proceeding.

20 Hence, by the end of September 2014, Oakley Thompson had received a total of $136,400 against the fees owed by Maisano.

21 As Oakley Thompson's estimate of the costs and disbursements incurred in representing Maisano totalled around $290,000 to $300,000, it sought to pursue a claim for these further costs against the costs order awarded in Maisano's favour.

22 On 30 October 2014, Oakley Thompson filed an originating motion against Maisano seeking a declaration that it was entitled to recover the costs it had incurred in representing him. Bodycorp was joined as a defendant to these proceedings on 17 November 2014, on its own application. Bodycorp was liable to pay Maisano's costs and it sought to resist or limit Oakley Thompson's claims for costs against Maisano.

23 The trial proceeded on 11-14 and 18 May 2015. The parties agreed on the issues for determination by the trial judge.[7] The submissions before the trial judge revolved around Oakley Thompson's claim that there were costs owing by Maisano and whether any outstanding costs would entitle Oakley Thompson to a right over the costs order. The final amount payable to Oakley Thompson was not an issue for determination.[8]

24 On 30 June 2015, the trial judge delivered judgment finding that Oakley Thompson had an equitable right over the costs order made in favour of Maisano to ensure it was properly remunerated for defending Maisano.[9] His Honour made orders to that effect on 24 July 2015. The orders noted that Oakley Thompson had already received payments of $80,000 and $56,400[10] in partial satisfaction of Maisano's liability to it and declared that, in the circumstances, this equitable right entitled Oakley Thompson to proceed with the taxation of costs in its own name.[11]

25 The trial judge held that Oakley Thompson's equitable right over the costs order was supported by a long line of authority that provided:

If a client obtains a judgment for the payment of money (including a judgment for costs), the solicitor acquires a right to have her or his costs paid out of the money payable, such right being an equitable right to be paid. This right is not dependent upon an order having been made to recognise the right, or upon a taxation having occurred.[12]

26 His Honour held that, upon recognising such an equitable right, it was appropriate for courts to make orders facilitating the recovery of funds to ensure that 'solicitors [were] duly remunerated from the proceeds of a judgment obtained based on the exertions of the solicitor'.[13] Accordingly, his Honour found that the appropriate order was to allow Oakley Thompson to participate in and proceed with the part-heard taxation of costs.[14] His Honour decided it would not be appropriate for Oakley Thompson to do so on Maisano's behalf as it no longer had a relationship with him, but Oakley Thompson could nonetheless proceed in its own name.[15]

27 The trial judge rejected a number of submissions raised by the defendants in which they argued that Oakley Thompson had no right to costs.

28 The defendants made a submission that the original franchise proceeding that gave rise to the costs order was tainted by fraud and was not enforceable. An affidavit by Maisano was filed in the proceeding before the trial judge, sworn on 17 November 2014 ('the Maisano affidavit'). The defendants submitted that this affidavit revealed that Maisano had given false evidence in the original franchise proceeding. The false evidence alleged related to statements made by Maisano in the original trial that he had not had discussions with other franchisees after certain dates. It was submitted that those statements were demonstrated to be false by the Maisano affidavit.

29 The trial judge held that the question of fraud in the original franchise proceeding was not for him to decide. His Honour held he was bound by the earlier judgment unless it was appealed or set aside, which had not occurred.[16] The judge noted that not only had the submission alleging fraud not been raised until closing argument, it had also not been identified as one of the questions agreed for determination.[17]

30 The trial judge rejected a submission by the defendants that the Deed of Charge had capped the total costs Oakley Thompson could charge Maisano. The defendants submitted that the words in the Deed of Charge evinced the intention to cap all the fees that could be claimed from Maisano at $80,000. In the defendants' submission, Oakley Thompson had already been fully or excessively remunerated, having received the $80,000 upon settlement of the Mt Martha property and the $56,400 paid upon order of the Judicial Registrar from the funds provided as security for costs. The defendants submitted that, with no outstanding fees, Oakley Thompson could have no right over the costs order.

31 The trial judge considered the language of the Deed of Charge and concluded that it did not purport to affect the overarching costs arrangements but was exclusively designed to govern the provision of security.[18] The trial judge noted that this interpretation was supported by covering emails and other extrinsic materials.[19]

32 The defendants made a submission that Oakley Thompson's disclosure to Maisano of the costs incurred had been inadequate. As a consequence, the defendants contended, Oakley Thompson was prevented from recovering such costs. The trial judge held that Oakley Thompson had complied with the requirements of the Legal Profession Act 2004.[20] The judge noted that a costs agreement and disclosure statement was provided to Maisano and that there was no submission that the disclosures had not been made in clear plain language.[21] He found that Maisano was given updates from 20 March 2013 as to 'the position of counsel's fees'.[22] His Honour noted that, in any event, any failure in disclosure obligations would not affect Oakley Thompson's right over the costs order as the Legal Profession Act 2004 did not bar recovery of costs upon instances of non-compliance.[23]

33 A submission by Bodycorp and Maisano that Oakley Thompson had not had authority to retain counsel on Maisano's behalf was also rejected by the trial judge after consideration of the disclosure statement.[24] His Honour held that the disclosure statement allowed Maisano to retain counsel directly but did not preclude Oakley Thompson from making such arrangements on Maisano's behalf.[25]

34 In closing remarks, the trial judge observed that the defendants had also made a submission that, as Oakley Thompson's accounting records indicated Maisano owed only an amount of $145.85, it could have no outstanding claim beyond that amount.[26] The trial judge noted that the figure did not provide evidence of what payments were made[27] and reiterated that he had not been asked to determine the amount owing to Oakley Thompson but rather whether the firm was entitled to declaratory relief recognising an equitable right over the costs order.[28] The judge recognised that there might be a dispute with respect to the sum owing that would need to return to court.

35 In the result, among other things, the trial judge declared that Oakley Thompson 'ha[d] an equitable right over the costs judgment in favour of [Maisano] in the order of the court made on 4 September 2013 ... , such right being security for payment to [Oakley Thompson] by [Maisano] of all costs and disbursements of, and incidental to, the legal services rendered by [Oakley Thompson] to [Maisano] in the [franchise proceeding], being costs and disbursements due and remaining unpaid'.[29]

36 Maisano did not seek leave to appeal the orders of the trial judge.

37 On its own behalf, Bodycorp has proposed 13 grounds of appeal. They are as follows:

The trial judge failed to make a decision on whether equity would enforce the judgment dated 4 September 2013 in so far as it related to costs (hereafter called the costs judgment) as it was vitiated by fraud.
The trial judge erred in holding that a solicitor with an equitable fruits of litigation lien was entitled by virtue of that lien to enforce it.
The trial judge demonstrated a reasonable apprehension of bias, and he should have disqualified himself, from the further hearing of the proceeding.
The trial judge erred in holding that the deed of charge dated 2 May 2013 did not limit the total costs payable for the reasons particularised below.
The trial judge erred in holding that the respondent provided proper costs disclosure to Maisano, when there was no updated estimate provided prior or even during the trial, that the costs would be in the sum of $300,000 (which was the sum is alleged to be due and owing).
The trial judge erred in holding that the respondent was entitled to be paid their costs when they had failed to make proper cost disclosure.
The trial judge failed to provide proper written reasons for his decision in respect of the matters particularised below herein.
The trial judge palpably misused his advantage in assessing the credibility of Maisano.
The trial judge erred in permitting the respondent to recover costs, when their trusts ledger showed that there were [sic] only $145.85 due and owing.
The trial judge erred in failing to draw an inference from the failure of the respondent to call Maisano's counsel in the costs proceeding.
The trial judge erred in failing to find that the letter of termination dated 28 July 2014 was sent to the respondent.[30]
The trial judge erred in making orders that concerned the conduct of the taxation of costs in that proceeding.
The trial judge erred in failing to apportion the costs in the proceeding.

38 Grounds 10 and 13 were abandoned but the remaining grounds will be dealt with in turn.

Ground 1: The trial judge failed to make a decision on whether equity would enforce the judgment dated 4 September 2013 in so far as it related to costs (hereafter called the costs judgment) as it was vitiated by fraud.

39 Before this Court, Bodycorp contended that the trial judge had not adequately dealt with its submission that Oakley Thompson had no right over the costs order as the franchise proceeding had been vitiated by fraud.

40 In our view, this criticism is unfounded and must be rejected. The trial judge expressly addressed this submission, stating:

Further, this proceeding is not concerned with whether or not the Earlier Judgment ought to be set aside. In closing submissions, Bodycorp submitted that the Earlier Judgment was unable to be enforced because it was based on untrue evidence. In this regard, reliance was placed upon an affidavit sworn by Maisano on 17 November 2014 ('Maisano's Further Affidavit') and relied upon in a proceeding before the Court of Appeal. Not only was the status of the Earlier Judgment not identified as [one] of the questions for the court to determine, but, in any event, the Earlier Judgment remains a judgment of the court. An appeal by Bodycorp against the Earlier Judgment was dismissed.[31]

41 Although the authorities suggest that an application to set aside a judgment on the basis of fraud may be made in collateral proceedings,[32] such as that before the trial judge, it is critical that Bodycorp did not raise the fraud submission before the trial judge until closing submissions, at which point it could not be subjected to proper review.[33]

42 As Kirby P noted in Wentworth v Rogers [No 5],[34] certain elements must be established for equity to set aside a judgment on the ground of fraud.[35] Among these is the indispensable requirement that the alleged fraud be sufficiently particularised. The authorities also indicate that it is preferable that such an allegation is made in separate proceedings in which 'the whole issue can be properly defined, fought out, and determined'.[36]

43 In that context, it was relevant, as the trial judge noted, that not all the parties who were joined to the franchise proceeding were present before the trial judge. Nor was there, at that point in the proceeding, an opportunity fully to interrogate the evidence. The proceeding was not an appropriate vehicle for such a submission to be addressed.

44 Furthermore, no evidence was put before the trial judge or this Court to support the fraud allegation other than the assertion that there was an inconsistency between the evidence of Maisano in the original franchise proceeding and the Maisano affidavit.

45 In any event, Bodycorp has now initiated separate proceedings seeking to have the judgment in the franchise proceeding set aside for fraud ('the fraud application'). At the time of hearing the present application for leave to appeal, a summons had been filed by Oakley Thompson and Australian Associated Motor Insurer ('AAMI') (another party to the franchise proceeding) seeking summary dismissal of the claims made against them in the fraud application. At the time of hearing the present application for leave to appeal, the summary dismissal of the fraud application was reserved before Riordan J. Subsequently, Riordan J dismissed the claims in the fraud application against both the Oakley Thompson defendants and the AAMI defendants.[37] He did not consider that the claims against them had any real prospect of success. The parties in this application did not seek to make any submissions to this Court following that judgment. Thus, the original judgment not having been set aside on appeal or for fraud, the decision remains, as at present, res judicata. The Court will not re-open the franchise proceeding in this appeal.

Ground 2: The trial judge erred in holding that a solicitor with an equitable fruits of litigation lien was entitled by virtue of that lien to enforce it

47 Under the second ground, the applicant submitted that the trial judge erred in holding that Oakley Thompson's right over the costs order allowed it to prosecute the taxation of costs in order to progress the recovery of its costs. According to the applicant, the authorities did not contemplate a solicitor's right being recognised through a right to participate in a taxation of costs in substitution for the client. Enforcement in this manner, in the applicant's submission, created an unacceptable subrogation of Maisano's rights to those of Oakley Thompson.

48 The applicant submitted that subrogation was contemplated only in circumstances of collusion where the former client was deliberately frustrating the solicitor's right to collect its costs. The applicant relied on the following passage in Ex parte Patience; Makinson v The Minister ('Ex parte Patience'):

If the client and judgment debtor make a collusive arrangement for the purpose of defeating the solicitor's right, the Court will enforce that right against the judgment debtor notwithstanding the arrangement and notwithstanding that no notice of the solicitor's claim had been given to the judgment debtor prior to the arrangement.[38]

49 The applicant submitted that, given the trial judge made a finding that there was no collusion between the former client, Maisano, and the judgment debtor, Bodycorp,[39] Oakley Thompson was entitled only to an order that any costs payable to Maisano should first be directed to Oakley Thompson to satisfy its costs.

50 Numerous authorities establish two relevant principles. First, a solicitor's right extends over money owed to the client that is not paid into court; and secondly, a solicitor may seek an order of the court directing that costs owed to the client be paid to the solicitor and not to the client.[40]

51 The situation is less settled when it comes to enforcement. However, in our view, the authorities, including Ex parte Patience, do not place the restriction upon a solicitor's right over the fruits of litigation suggested by the applicant. Relevantly, in Ex parte Patience Jordan CJ observed:

The remedy provided by the inherent jurisdiction is a flexible one. It is available whenever a right to receive money has been established as the result of legal proceedings, notwithstanding that the costs have not yet been taxed and that there is not yet any formal judgment and it will be made available whenever it is shown that there is some risk that the solicitor may otherwise go unpaid.[41]

52 The relevant question is what is necessary to protect a solicitor's position from risk. For example, in the case relied on by the respondent, Re Fuld [No 4] ('Fuld'),[42] Scarman J said:

Is it to be suggested, merely because the client has not ascertained the amount of the fund by agreement or taxation, that there is no fund? If this were the law, the client would indeed be able to deprive the solicitor of his lien, which, as was emphasised in Ex parte Bryant, it is the policy of the law to protect. The cases stress that the solicitor's right is to the exercise by the court of an equitable jurisdiction. It would be an absurdity if such a jurisdiction could be stultified by the failure of the client to take the steps necessary to realise the solicitor's security. Equity looks on that as done which ought to be done - the old maxim has validity in such circumstances.[43]

53 In Fuld, solicitors sought to conduct the taxation of costs.[44] Scarman J chose not to grant the order permitting the solicitors to act, as the former client had numerous outstanding allegations that she claimed would 'substantially reduce her solicitors' entitlement to costs' which had not yet been investigated.[45] Scarman J noted, however, that

[i]f after [solicitor and own client taxation], [the client] should be dragging her heels on the inter partes taxation, it may be that the court could then make the sort of order which the solicitors - in my opinion prematurely - are seeking today.[46]

54 The case is not a perfect parallel to the present circumstances but provides some useful guidance. It makes clear that the Court's jurisdiction extends to the making of an order over the taxation of costs.

55 The trial judge was correct to identify that an order that Oakley Thompson could prosecute the taxation of costs could be made. His Honour's approach was consistent with the approach of the courts of providing flexibility to protect a solicitor's position from risk. In determining whether the order was 'necessary' in this case,[47] the trial judge found that Oakley Thompson was at risk of not recovering its costs. Bodycorp proposed that Oakley Thompson could seek an order that any costs owing to Maisano be paid to Bodycorp. However, if the taxation of costs was not prosecuted by Maisano, any costs payable to Maisano might never be quantified. The proceeding before the trial judge was conducted on the basis that Maisano had no incentive to complete the taxation of costs as his position was that Oakley Thompson's costs had been capped at $80,000 under the Deed of Charge.[48] The trial judge faced a situation in which inaction by Maisano created a risk that Oakley Thompson's entitlement to costs would never be quantified through taxation, rendering its right over the costs order otiose.

56 In Fairfold Properties Ltd v Exmouth Docks Co Ltd,[49] Ferris J was faced with a similar situation. Rather than requiring the solicitor to seek the funds from its former corporate client - a dormant company with no assets - which would require putting the corporate client into liquidation, then requiring the liquidator to seek payment of the costs order through participation in the taxation and then through enforcement, the judge found 'a simple intervention by the court which avoids this tortuous process [was] ... well justified'.[50] Although in the circumstances of that case it was not necessary, Ferris J held that it would be appropriate to make an order enabling the solicitor to do whatever its former client could have done.[51]

57 There was no error in his Honour's analysis. Given Maisano's inaction, the breakdown in the relationship between Oakley Thompson and Maisano and Maisano's lack of response to any communication by Oakley Thompson, there was no apparent alternative by which Oakley Thompson could progress its claim. The remedy ordered accorded with the authorities.

Ground 3: The trial judge demonstrated a reasonable apprehension of bias, and he should have disqualified himself, from the further hearing of the proceeding

59 In its written submissions, the applicant alleged that the trial judge had demonstrated a reasonable apprehension of bias and should have removed himself from the proceeding. This was demonstrated, according to the applicant, by the trial judge's failure to consider whether the original judgment was vitiated by fraud. At the hearing before this court, counsel for the applicant stated that this ground was very similar to ground 1.

60 As observed under ground 1, the trial judge was correct to find that it was not for him to determine whether the judgment in the original franchise dispute should be set aside for fraud.[52] As the applicant's submission as to apprehended bias was not more particularised, the rejection under ground 1 is sufficient to reject ground 3.

61 Moreover, as the respondent highlighted, the trial judge directly addressed these allegations of apprehended bias and his inability to decide the fraud point in rulings on two recusal applications made by the applicant.[53] For example, in Oakley Thompson & Co Pty Ltd v Maisano [No 3],[54] the trial judge reiterated that the fraud allegation had not been on the agreed list of issues and that Bodycorp had not originally intended even to introduce the Maisano affidavit into evidence.[55] The trial judge went on to clarify that the proceeding before him was not the appropriate vehicle to address the fraud allegation, particularly as Bodycorp had not initiated the appropriate application to set aside nor had the other interested parties received any notice of such an application.[56]

62 Finally, as the respondent submitted, an allegation of apprehended bias such as is made by the applicant here merely amounts to an objection that the trial judge decided against it.[57] That is not a valid ground of appeal. No error can be demonstrated.

63 We would add that an allegation of bias should not be lightly made. It is a serious matter and should be carefully particularised.[58] Here the applicant made a flawed assertion and not much more.

Ground 4: The trial judge erred in holding that the deed of charge dated 2 May 2013 did not limit the total costs payable for the reasons particularised below

65 Under the applicant's fourth ground of appeal, it contended that the trial judge should have found that Oakley Thompson had no right over the costs order as it had already recovered its total costs through the Deed of Charge.

66 The applicant submitted that Oakley Thompson's costs for representing Maisano were capped by the Deed of Charge for $80,000 entered into with Maisano's sister. The trial judge relevantly decided as follows:

First, Maisano is not a party to the Deed of Charge. On its face, the Deed of Charge does not purport to govern or affect any arrangement as between Oakley Thompson and Maisano.

Secondly, the words in the Deed of Charge 'for the payment of all legal costs, fees and disbursements (inclusive of any counsel's fees and GST) which have been incurred, or are to be incurred relative to, or in connection with, the Work' are clearly referable to what is to be the subject matter of the charge. In my view, there is no ambiguity.

Thirdly, if I am incorrect about the absence of ambiguity, the surrounding circumstances make it clear that those words were not intended to be a cap in relation to Maisano's legal costs, but rather were confined to the cap for the Deed of Charge. The email sent on 23 April 2013, including to Maisano, enclosed a draft deed, which contained almost identical words to the relevant wording ultimately used in the Deed of Charge. The covering email on 23 April 2013 made it plain that those words were not intended to give rise to a cap on the fees of Oakley Thompson. That email stated in plain language that the subject matter of the draft deed was only concerned with a cap on the proposed charge. The remaining surrounding circumstances (see paragraphs 25, 26 and 29 to 33 above) are entirely inconsistent with an intention on the part of Oakley Thompson or Maisano (and also Rose or Franka), to limit Oakley Thompson's costs and disbursements to $80,000.[59]

67 The applicant submitted that the trial judge erred as the words 'against the property the amount of $80,000 ... for the payment of all legal costs, fees and disbursements (inclusive of counsel's fees and GST) which have been incurred or are to be incurred' were very wide and should have been construed as constituting a cap on the entirety of the legal costs that could be incurred. According to the applicant, a reasonable bystander would have decided that the sum of $80,000 covered all of the costs payable to Oakley Thompson.

68 The applicant further submitted that the trial judge was not entitled to consider the contemporaneous emails or discussions as they formed part of the antecedent negotiations that reflected the subjective intentions of the parties. The applicant referred to Codelfa Construction Pty Ltd v State Rail Authority of NSW,[60] recently considered by this Court in Apple and Pear Australia Ltd v Pink Lady America LLC.[61]

69 The applicant's submissions cannot be supported. The applicant's construction ignores the nature of the document. A deed of charge and guarantee is an instrument of security that is created to secure another liability.[62] The Deed of Charge initiated an arrangement between Franka Maisano and Oakley Thompson to provide some security for the costs incurred; this arrangement was separate and additional to the pre-existing costs agreement between Maisano and Oakley Thompson. The Deed of Charge did not state in any way that it was to govern or supersede the costs agreement between Maisano and Oakley Thompson. Nor could it, given that Maisano was not a party to it.

70 Further, although the words of the charge refer to $80,000 being provided for the payment of 'all legal costs', the phrase was necessary to establish the basis of the entitlement to draw on the $80,000. The charge expressly provided that Oakley Thompson could incur costs for all its legal work, including counsel's fees, and be able to claim those costs against the $80,000 provided as security.

71 In any event, the trial judge was able to refer to extrinsic materials in the event of ambiguity in the construction of the Deed of Charge.[63] The trial judge noted clearly that the reference in his reasons to extrinsic material was made in the event that ambiguity was established.[64]

72 It is clear that the Deed of Charge did not cap the total costs that could be charged by Oakley Thompson. Ground 4 is rejected.

Ground 5: The trial judge erred in holding that the respondent provided proper costs disclosure to Maisano, when there was no updated estimate provided prior or even during the trial, that the costs would be in the sum of $300,000 (which was the sum is alleged to be due and owing)

Ground 6: The trial judge erred in holding that the respondent was entitled to be paid their costs when they had failed to make proper cost disclosure

73 Under proposed grounds 5 and 6, the applicant submitted that Oakley Thompson should be prevented from recovering its costs because it failed to provide Maisano with an updated costs estimate while it represented him.

74 According to the applicant, the costs estimate provided on 20 March 2013 which noted $32,370.70 was owing and further fees up to $126,500 would be incurred fell impermissibly short of the $290,000 to $300,000 that was ultimately claimed. The applicant relied on ss 3.4.9(1)(c) and 3.4.16 of the former Legal Profession Act 2004 ('the Act'), which respectively required that a law practice provide a costs estimate to a client and that a client be notified of any substantial change to a disclosure as soon as reasonably practicable. Accordingly, the applicant submitted that Oakley Thompson failed to comply with the Act and was thereby disentitled to its costs.

75 The respondent submitted that an updated disclosure of anticipated costs had been made. The original costs agreement was provided on 26 March 2012. In its submission, the costs estimate provided on 20 March 2013 was therefore an update. The respondent also suggested that the 20 March 2013 update contemplated fees for retaining counsel, which it estimated at $4000 per day, as a separate cost to be added to the figure provided. According to the respondent, this would increase the costs estimate provided on that date to a total of around $220,000. The respondent suggested that this was sufficiently proximate to the amount ultimately claimed to comply with the Act. The respondent submitted that although there were obligations under the Act to provide costs estimates that are genuinely held to be accurate, the ultimate precision of the estimate is not mandated. Finally, the respondent submitted that even if an accurate costs disclosure was not made, the recourse in those circumstances was through a review under div 7 of pt 3.4 of the Act. The respondent submitted that such a review would not preclude it from recovering its costs.

76 The final submission of the respondent should be accepted. Under the statutory regime implemented by the Act, failure to comply with the costs disclosure provisions did not necessarily disentitle a solicitor's right to claim its costs. Section 3.4.17 provided (emphasis added):

(1) If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed, the client or associated third party payer (as the case may be) need not pay the legal costs unless they have been reviewed under Division 7.

77 Although this section delayed a client's obligation to pay their legal fees, it did not wipe out those costs. Under div 7 of the Act, which dealt with costs review by the Costs Court, s 3.4.41 provided that proceedings initiated by a law practice to recover costs had to be stayed where an application for a costs review was made and the Costs Court determined to deal with it. In this case, no application for a costs review had been made. As such, the Court was not obliged to stay Oakley Thompson's claims to recover its fees. Its claim to a right over the costs order could proceed unimpeded. The alleged failures in disclosure do not prevent this right from being recognised. Grounds 5 and 6 are rejected.

78 Relatedly, we note that the amount of Oakley Thompson's costs that could be claimed from Maisano was not to be determined by the trial judge and would not affect whether Oakley Thompson had the right to participate in the taxation of costs. The taxation of costs was to determine the party-party costs. The process undertaken in a party-party taxation of costs requires the party who has the benefit of the costs order to discharge its burden of proof by producing documents to justify and substantiate items in its bill of costs.[65] The completion of that party-party taxation process did not, however, immediately entitle Oakley Thompson to payment of that amount from Bodycorp. It simply quantified the sum that had to be paid into court. As Oakley Thompson conceded in a separate related proceeding, 'once [Bodycorp's] debt is paid into court the issue of [Maisano's] liability to Oakley Thompson will be addressed before the sum can be released to anyone'.[66]

Ground 7: The trial judge failed to provide proper written reasons for his decision in respect of the matters particularised below herein

79 The applicant submitted that the trial judge failed to properly set out the reasoning that led to his findings in four respects: first, why his Honour found the Deed of Charge capped only the security provided and not the total legal costs payable; secondly, why his Honour found fraud had not vitiated the judgment in the original franchise dispute and the associated costs order; thirdly, why his Honour did not accept Bodycorp's contention that a representative of Oakley Thompson had acted improperly in facilitating the fraud that tainted the original franchise dispute judgment; and fourthly, why his Honour did not accept that Maisano had terminated Oakley Thompson's retainer in July 2014.[67]

80 It must first be noted that the trial judge did not make either the third or the fourth findings that the applicant contended. His Honour found that the appropriate vehicle for determining whether fraud tainted the original judgment was an application to set aside which was not in fact before him.[68] Given that, the effect of the alleged involvement of any party was not for his Honour to assess. Whether Oakley Thompson's retainer had been terminated in July 2014 did not affect any of the issues before the trial judge for determination; hence his Honour did not decide that point either.

81 As for the construction of the effect of the Deed of Charge, the trial judge adequately and carefully set out his reasons in the judgment.[69] The correctness of his Honour's findings has been discussed.[70]

82 Nor can the applicant's complaint as to the trial judge's discussion about the effect of fraud on the original franchise dispute judgment be supported. As we have already observed, the trial judge made clear in his reasons that he could not determine that submission.[71] Again, our agreement with that determination has been set out above.[72]

Ground 8: The trial judge palpably misused his advantage in assessing the credibility of Maisano

84 In the particulars to this ground, the applicant submitted that the trial judge erred as, although he found that Maisano must have given untruthful evidence in some respect,[73] his Honour did not specify whether the untruthful evidence was given before him or whether it related to the original franchise dispute. The applicant submitted that his Honour was required to make a clear finding in this respect.

85 This ground is not fruitful for the applicant. As already considered, the trial judge was not in a position to determine whether fraud undermined the original franchise dispute judgment.[74] Therefore, whether Maisano had given untruthful evidence in that proceeding was not a fact that required determination by the trial judge. In respect of the trial judge's findings that there were 'serious issues' as to Maisano's credibility,[75] it is the role of a trial judge to assess the credibility of witnesses and decide which testimony is to be preferred. We would further add that the trial judge had the distinct advantage of observing the witness firsthand.

Ground 9: The trial judge erred in permitting the respondent to recover costs, when their trusts ledger showed that there were [sic] only $145.85 due and owing

87 Under this ground the applicant submitted Oakley Thompson had no right over the costs order as its ledger showed only a minimal amount outstanding from Maisano.

88 The applicant submitted that Oakley Thompson's trust ledger indicating that only $145.85 owing from Maisano amounted to an admission that Oakley Thompson had been fully paid. Confronted with this same submission, the trial judge noted that the amount of costs payable to Oakley Thompson was not a matter for him to determine but would be determined by the Costs Court.[76] His Honour noted, however, that the submission was 'misconceived' and that

as is apparent from the exhibit [the trust ledger], a large number of the credits are concerned with writing off the amounts outstanding to Oakley Thompson from Maisano as bad debts. It was explained that this was because Oakley Thompson used an accrual method of accounting, and the amounts were written off for taxation purposes. There was no evidence to suggest that Maisano, or anyone else on his behalf, had met the outstanding payments. In short, the writing off of the debts for taxation or other accounting purposes does not mean that the funds are still not owing by Maisano.[77]

89 The trial judge's treatment of this submission was correct. Whether or not Oakley Thompson had a right to recover costs from the costs judgment made in favour of Maisano was not affected by the amount of costs owing. As already noted, the amount that Oakley Thompson is entitled to charge Maisano was not relevant to its participation in the party-party taxation of costs.[78] It would instead be considered when Maisano's liability to Oakley Thompson was determined; the relevance or irrelevance of the law firm's accounting treatment of the debt would be decided at that point.[79]

Ground 10: The trial judge erred in failing to draw an inference from the failure of the respondent to call Maisano's counsel in the costs proceeding

Ground 11: The trial judge erred in failing to find that the letter of termination dated 28 July 2014 was sent to the respondent[80]

92 Under its eleventh ground of appeal, the applicant submitted that the trial judge's findings were in error as his Honour had not made a finding that Oakley Thompson's retainer was terminated on 28 July 2014.

93 The applicant submitted that the trial judge ought to have accepted Maisano's evidence that he sent a letter of termination to Oakley Thompson dated 28 July 2014. In the applicant's submission, the countering evidence of Broadbent of Oakley Thompson that he had no knowledge of the letter and that it would have been forwarded to him if it were received by Oakley Thompson 'did not extend to whether the letter in fact had been received by Oakley Thompson' and was therefore not directly contradictory.

94 The applicant submitted that Maisano's 'uncontradicted' evidence required the trial judge to make a finding that Oakley Thompson's retainer was terminated on 28 July 2014.

95 The respondent submitted that the date of termination of the retainer was not relevant to the issues before the trial judge for determination. This submission is correct. His Honour made no finding on this point as the equitable interest over the costs order that Oakley Thompson was seeking to have recognised arose when the costs order was made on 4 September 2013. The subsequent severing of relations between Maisano and Oakley Thompson did not affect that interest. In those circumstances, the trial judge was not required to make a finding on the exact date of termination.

96 In any event, in our view there are difficulties in characterising Maisano's evidence as 'uncontradicted' as submitted by the applicant. Broadbent's evidence that he personally did not receive the letter and also as to the standard practices for handling mail at Oakley Thompson raises at least some doubt as to whether the letter was in fact sent. That is not a question the Court needs to decide.

Ground 12: The trial judge erred in making orders that concerned the conduct of the taxation of costs in that proceeding

98 The applicant submitted that the trial judge did not have the jurisdiction to make orders that concerned the taxation of costs proceeding. However, as the respondent noted, no particulars whatsoever were given as to where in his Honour's judgment he proceeded beyond jurisdiction.

99 Regardless, matters relating to the Cost Court proceeding were explicitly referred to the trial judge for his adjudication.[81] His Honour explained:

For completeness, I note that the Costs Court has already referred issues in the Costs Court Proceeding to be determined by a judge of the trial division. By a summons dated 22 August 2014, prepared by Bodycorp in the Costs Court Proceeding (and handed to the Costs Court on 25 August 2014), Bodycorp sought, amongst other things, that the taxation of costs in the Costs Court Proceeding be struck out and the name of Maisano as plaintiff also be struck out. In addition, an order was sought declaring the Costs Court Proceeding a nullity and that it be stayed or struck out on various bases. On 31 October 2014, Judicial Registrar Gourlay made orders which included the following:

Pursuant to r 63.51 of the Supreme Court (General Civil Procedure Rules 2005, matters raised by [Bodycorp's] application dated 22 August 2014 is referred to the judge in the Practice Court to be heard with proceeding S CI 2014 5814 [ie the Related Proceeding].

100 Given this referral by the Costs Court and having no specificity as to how the trial judge might have transgressed his jurisdiction, we reject this ground of appeal.

Ground 13: The trial judge erred in failing to apportion the costs in the proceeding

102 The proposed grounds of appeal cannot be made out. None of them has any prospect of success. It follows that the application for leave to appeal is refused.

[1] Bodycorp Repairers Pty Ltd v Maisano [No 8] [2013] VSC 472 [391].

[3] Oakley Thompson & Co Pty Ltd v Maisano [No 2] [2015] VSC 210 [77]-[78] ('Reasons').

[4] Reasons [30]; see generally at [20]-[39].

[5] 6-8, 9 (before Daly AsJ), 13-17, 20-4, 27 and 30 May 2013: see Bodycorp Repairers Pty Ltd v Maisano [No 8] [2013] VSC 472.

[10] We note the orders incorrectly recorded the amounts paid, stating that Oakley Thompson had received payments of $80,000 and $56,000. Nothing turns on this.

[11] The trial judge held that Oakley Thompson was entitled to proceed with the taxation of costs in its own name, not in Maisano's name, see ibid [116]-[118].

[12] Ibid [77(3)] (citations omitted).

[30] We note that the applicant's application for leave to appeal mistakenly read 'not sent' and '2015' in this ground of appeal but these have been understood to be typographical errors.

[32] Cabassi v Vila [1940] HCA 41; (1940) 64 CLR 130, 147; Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd [1992] FCA 367; (1992) 37 FCR 234, 241.

[35] See also Gino Dal Pont, 'Judgments Fraudulently Obtained: The Forgotten Equity' [1995] UTasLawRw 11; (1995) 14 University of Tasmania Law Review 129.

[36] Hong v H Neotia and Co [1918] UKPC 65; [1918] AC 888, 894. See also Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691, 699; Gino Dal Pont, 'Judgments Fraudulently Obtained: The Forgotten Equity' [1995] UTasLawRw 11; (1995) 14 University of Tasmania Law Review 129, 131-3.

[37] Bodycorp Repairers Pty Ltd v Maisano [No 11] [2016] VSC 645.

[40] Ex parte Patience [1940] SR (NSW) 96, 100, 102; Batrouney v Forster [2016] VSCA 80 [117]-[120]; Firth v Centrelink [2002] NSWSC 564 [35](c), [35](h); Re Twigg v Keady [1996] FamCA 115; (1996) 135 FLR 257, 258; Trkulja v Efron [2014] VSCA 76 [34](c), [34](g). See also Reasons [77].

[41] Ex parte Patience [1940] SR (NSW) 96, 108 (emphasis added) (citations omitted).

[48] Counsel for the applicant acknowledged this at the hearing of this application. See also ibid [3], [68]-[69], [80].

[52] Above at [40]-[45].

[53] Oakley Thompson & Co Pty Ltd v Maisano [2015] VSC 209 [33]; Oakley Thompson & Co Pty Ltd v Maisano [No 3] [2015] VSC 350 [16]-[21].

[57] Michael Wilson & Partners Ltd v Nicholls [2011] HCA 48; (2011) 244 CLR 427, 446-7 [67]. See also Oakley Thompson & Co Pty Ltd v Maisano [2015] VSC 209 [18].

[58] Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337, 345 [8].

[59] Reasons [82]-[84] (citations omitted).

[61] [2016] VSCA 280 [91]-[139] (Tate JA), [229]-[232] (Ferguson and McLeish JJA).

[62] The document recording the relationship entered into with Franka Maisano was 'a deed of charge and guarantee'. As indicated in Bryan A Garner (ed), Black's Law Dictionary (West, 9th ed, 2009) 773, a 'guarantee' is entered 'to assume a suretyship obligation; to agree to answer for a debt or default'. It does not replace the original debt.

[63] Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, 352.

[65] See the discussion in Maisano v Bodycorp Pty Ltd [No 2] [2016] VSC 92 [37].

[67] The applicant's written case noted the date as July 2015; this has been assumed to be a typographical error.

[68] Above at [40]-[46].

[69] Reasons [20]-[41], [43]-[45], [47]-[48], [80]-[85].

[70] Above at [69]-[72].

[72] Above at [40]-[46].

[74] Above at [40]-[46].

[79] Maisano v Bodycorp Pty Ltd [No 2] [2016] VSC 92 [56].

[80] We have already noted that the applicant's application for leave to appeal mistakenly read 'not sent' and '2015' in this ground of appeal but these have been understood to be typographical errors.

[81] Maisano v Bodycorp Repairers Pty Ltd [2015] VSC 353 [13]. See Orders dated 31 October 2014 (Gourlay JR) (S CI 2014 01914). A judge of the Practice Court then referred the matter to the trial judge.

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