Conder v Silkbard

Court of Appeal (NSW)|1999-12-10|Before: Meagher JA, Beazley JA, Fitzgerald JA, Bruce J

Background 4 The respondent is the trustee of a unit trust known as the Caves House Unit Trust. In 1990, the Trust acquired a lease from the New South Wales Tourism Commission of a hotel property known as Jenolan Caves House. The appellants acted for the respondent on the acquisition of the lease and associated arrangements for which they rendered their accounts the subject of these proceedings (the 1990/91 accounts). However, the respondent was at that time in financial difficulties and unable to pay the accounts. Mr Michael O'Connor had the effective management of the respondent at the time. He "formed the opinion [at the time the accounts were rendered] that the … charges … were fair and reasonable for the work … undertaken". Provision was made for the costs, together with interest, in the accounts of the respondent in each of the financial years ending June 1993 and June 1994. 5 The appellants claim that in June 1994 Mr O'Connor on behalf of the respondent and Mr Gray (one of the appellants) on behalf of the appellants agreed that the appellants would perform further legal work for the respondent provided the respondent agreed to make monthly payments of $4,000 in reduction of the appellants' outstanding accounts (the June agreement). 6 Control of the respondent changed hands at the end of 1994 when Mr O'Connor's unit holdings were bought out by the interests of the other major unit holder Mr Field. 7 On 15 March 1995 the appellants commenced proceedings in the Local Court (the recovery proceedings) seeking recovery of the 1990/91 accounts plus interest. The claim was for approximately $30,000 plus interest. The appellants pleaded their claim on the basis of accounts stated between them and alternatively pleaded that by the June agreement the respondent had agreed to pay the accounts rendered by instalments and that in default of payment of any instalment the balance outstanding became due and owing. 8 The respondent defended the claim on the basis that the recovery proceedings were not maintainable as the appellants had not delivered a bill of costs to the respondents in contravention of s 192(1) of the Legal Profession Act 1987 (NSW) (the LPA). The accuracy and reasonableness of the claimed fees was also put in issue. 9 The consequence of the failure of the appellants to deliver a bill of costs prior to the commencement of the recovery proceedings is the central issue on the appeal. Before turning to that issue, however, it is necessary to consider the prior issue of the adequacy of the trial judge's reasons.

Adequacy of Reasons 10 The nature and extent of the trial judge's duty to give reasons is well settled and does not require elaborate resort to authority. It is sufficient for present purposes to refer to the statement of McHugh JA in Soulemezis v Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247 at 280: "If an obligation to give reasons for a decision exists its discharge does not require lengthy or elaborate reasons: Ex Parte Powter: Re Powter (1945) 46 SR (NSW) 1 at 5… But it is necessary that the essential ground or grounds upon which the decision rests should be articulated. In many cases the reasons for preferring one conclusion to another also need to be given: Wright v Australian Broadcasting Commission (at 701,713). In Iveagh (Earl) v Minister of Housing and Local Government [1964] 1 QB 395, Lord Denning MR, speaking of a Minister's duty under the Tribunals and Inquiries Act 1958 (UK) to furnish 'the reasons for the decision', declared (at 410) that: '… The whole purpose of the enactment is to enable the parties and the courts to see what matters he has taken into consideration and what view he has reached on the points of fact and law which arise.'"

The issue in this case is whether the judgment satisfied those requirements.

Structure of the Trial Judge's Judgment 11 The trial judge commenced his judgment by clearly identifying the issue in the proceedings and the relief sought. 12 His Honour referred to the provisions of the LPA (both those in force prior to amendment of part 11 by the Legal Profession Reform Act 1994 (NSW) - the old provisions, and the amended provisions introduced by that Act - the new provisions) noting that "[i]t is common ground that this matter may be determined on the basis of these provisions". His Honour did not specify whether he was referring to the new or old provisions. His Honour next noted that it was common ground that the appellants did not provide a bill of costs within the meaning of either the old or the new provisions in respect of the 1990/91 accounts and that there was no non-contentious business agreement between the parties in accordance with ss 195 and 196 of the Act in force prior to the 1994 amendments, which would have relieved the appellants of their obligation to deliver a bill. His Honour stated at this point: "Accordingly it would appear at first blush Silkbard is entitled to succeed subject to discretionary matters to which I will refer later unless the Solicitors are able to avoid the effect of the legislative provisions referred to above." 13 A conventional chronology was next set out in the judgment, introduced by the statement: "The circumstances giving rise to the current litigation arise from an unfortunate business relationship between Mr A P Field and … the O'Connor Companies." 14 It appears the chronology was provided to his Honour by the appellants in accordance with usual court practice. The appellants provided the identical chronology to this Court in accordance with Practice Note No. 65. It contained the following entry: "June 1994 There was an alleged agreement between O'Connor and the Solicitors whereby the Solicitors undertook further legal work for the O'Connor interests on the basis that the outstanding fees would be reduced." (emphasis added)

15 His Honour then referred to the appellants' submission that the June agreement and conduct of the respondent was such that they were not precluded from commencing the proceedings for recovery of the legal costs and that the court should not exercise its discretion under s 209C to order the appellants to deliver a bill of costs. Section 209C is contained in the new Part 11. 16 His Honour next referred to s 21 of the LPA, "the forerunner of the current legislation", and to the decision in Dodd v Gillis (1989) 16 NSWLR 623, where it was held that the statutory requirement to deliver a bill of costs prior to the commencement of proceedings could be waived. His Honour recorded the respondent's acceptance of Dodd v Gillis as good authority that the requirement to deliver a bill of costs prior to commencement of proceedings could be waived in contentious matters but further noted the respondent's submissions that the new provisions were a code in respect of non-contentious matters. The costs here were rendered in a non-contentious matter. He also recorded the appellants' submission that Dodd v Gillis remained good law and that the Court could, as a matter of discretion, permit the statutory prescription as to the delivery of a bill to be waived by conduct or agreement. 17 His Honour again referred to the appellants' submission that the June agreement and the respondent's conduct were such that the court should exercise its discretion in their favour and not order them to deliver a bill under s 209C. He noted that in support of this submission the appellants relied on the following matters: (i) that there had been no complaint as to the quantum of the fees until December 1994, when Mr Field took over control of the respondent; (ii) that the respondent had agreed to a schedule of fee reduction in return for the appellants agreeing to do further work for them; (iii) and that there was no evidence that the work had been carried out unnecessarily or that the charges were other than fair and reasonable. 18 His Honour found that the evidence established that the respondent was in significant financial difficulties at the time the accounts were rendered; that one of the appellants had a close relationship with Mr O'Connor and was aware of the respondent's financial difficulties; that the appellants did not press for payment until "towards the end of Mr O'Connor's control" of the respondent; and that the appellants only insisted on payment upon Mr Field assuming control of the respondent. He made no other findings of fact. 19 His Honour then stated: "It is clear that if the O'Connor group, or at least [the respondent], failed then there would be likely to be difficulty in collecting any outstanding fees in the absence of having followed the proper procedures provided in relation to solicitors' accounts." 20 The conclusion contains a non sequitor. If the respondent failed, it would not have the funds to pay the appellants accounts, regardless of whether the procedures specified by the LPA were followed. It may be that his Honour meant something different from what this passage actually stated. I will not at this point speculate as to what he might have meant, but only comment that, in any event, it is not a discretionary factor which either party advanced as relevant to the case. 21 His Honour next said "[s]ection 209C confers a discretion upon the Court". He cited authorities which supported that undisputed proposition. He concluded "in the circumstances of this case it is appropriate that the discretion should be exercised in favour of [the respondent]". He added "[t]here is no issue but that if such an order is made a stay would follow". He then made the orders sought in the summons. 22 In my opinion, the trial judge's reasons do not satisfy the judicial obligation to give reasons. Firstly, he did not make findings of fact on the two critical matters which were central to the appellants' case that, as a matter of its discretion under s 209C, the court should not order them to deliver a bill of costs. Those matters were the conduct of the respondent prior to June 1994 and whether the parties had reached an agreement in June 1994. Nor did he refer to or make any findings as to the numerous other circumstances upon which each party relied to persuade his Honour to exercise his discretion one way or the other. I do not intend to convey that his Honour was required to refer to every fact and circumstance relied upon by the parties. However, it was incumbent for him to deal with the central contentions advanced by the parties and indicate, even in general terms, whether and why he accepted or rejected those matters. 23 There are other inadequacies in the judgment to which reference should be made. It is not apparent whether his Honour proceeded on the basis that the provisions of the LPA in force prior to 1 July 1994 or those in force after that date applied to the matter. The verbatim reproduction of one party's chronology is not only an unsatisfactory method of judicial fact finding, it can easily lead to error. The obvious error in this case is the reference to the "alleged agreement" in June 1994. The existence of such an agreement and its relevance to the exercise of discretion, were, as I have already pointed out, central to the appellants' case on discretion. Critically for the appellants, his Honour made no finding as to whether the June 1994 agreement was the basis upon which they undertook the further work. 24 It is possible that his Honour's reasons for his determination are set out in the passage reproduced at para 18. I have already indicated that this passage is not logical. Nor would one expect to find the reason for the exercise of discretion before the passage which discussed the nature of the power which his Honour was being asked to exercise. Even if that passage does contain his Honour's essential reason for exercising his discretion I still do not consider that his Honour gave adequate reasons. At the end of the judgment there is still doubt as to why his Honour exercised his discretion in the manner he did. 25 In the normal course, the failure to give adequate reasons for a decision requires the appellate court to remit the matter for a new trial. Both parties urged the Court not to follow the ordinary course and to itself re-exercise the discretion. I am not disposed to follow such a course. There were factual matters in issue directly relevant to the matters relied upon by the parties in relation to the exercise of discretion. Some of the factual issues involved questions of credit. That, in my view, would be sufficient to require a rehearing. However, before proceeding to making that order, consideration should be given to the question of whether the trial judge's orders should stand in any event.

The Statutory Provisions 26 Both parties accepted that the provisions of Part 11, and in particular s 192(1) which came into effect on 1 July 1994, governed the matter before the Court. That is correct. There is, in any event, no relevant difference in the provisions of s 198, the predecessor of s 192(1) and the provisions of s192(1), which provide: "Proceedings for the recovery of costs by a barrister or solicitor for providing legal services must not be commenced or maintained against any person unless at least 30 days have passed since a bill for those costs was given to the person in accordance with this Division."

Did s 192 Prohibit the Commencement of Proceedings? 27 There was no issue between the parties that the effect of s 192(1) was to require a solicitor to deliver a bill of costs to a client at least 30 days before commencing action for the recovery of legal costs charged to the client. There was also no dispute that under s 209C the court had a discretion as to whether to order a solicitor to deliver a bill of costs. Thereafter the position of the parties as to the construction and interaction of the two sections travelled in diametrically opposite directions. 28 The appellants submitted that the court had a discretion under s 209C as to whether to order a solicitor to deliver a bill of costs to a client and that that discretion 'fed' into s 192(1) in the sense that if a court exercised its discretion under s 209C against ordering a solicitor to give a bill, the solicitor could bring or maintain an action for the recovery of costs without giving a bill as required by s 192(1). It was submitted that in this case, the combined effect of the June agreement and the conduct preceding it (in which the respondent had "repeatedly affirmed its obligation to pay these accounts") although not amounting to a waiver at law, was such that the discretion should have been exercised against ordering them to give a bill of costs. It was not suggested that the June agreement was a "business agreement" or a "costs agreement" within s 195 of the former Pt 11 or s 184 of the new Pt 11. Nor was it suggested by the appellants that there had been any legal waiver in the case. In that circumstance, it is not necessary to consider the application of Dodd v Gillis to s 192(1). 29 In my opinion, the appellants' argument is quite misconceived. There is no interdependence between s 192(1) and s 209C. The terms of s 192(1) are mandatory. Proceedings for the recovery of legal costs must not be commenced unless a bill is given to the client at least 30 days beforehand. Failure to comply with s 192(1) is a defence to an action brought by a solicitor to recover legal costs claimed to be owing to the solicitor: Zizza v Seymour [1976] 2 NSWLR 135. As s 209C does not have retrospective operation the order made by Bruce J under the section does not assist the appellants in the prosecution of their recovery proceedings. Nor would the court's exercise of its discretion against ordering a bill of costs assist as there is nothing in the LPA (apart from s 192(2) which does not apply here) which excuses the failure to give a bill at least 30 days before the commencement of proceedings for the recovery of costs. The comment of Moffitt P in Zizza v Seymour at 137 is very much in point: : "The defect in [the solicitor's] case, by reason of the absence of a proper bill, could, not be corrected by delivery of a bill after the commencement of proceedings. The client or party to be charged is entitled to have the proper bill before the proceedings against him are commenced". 30 So strict is this requirement that a judgment obtained in defiance of the statutory prescription does not constitute a debt for the purposes of s 44 of the Bankruptcy Act 1966 (Cth): see Udovenko v Mitchell (1997) 160 ALR 161. In that case Carr J, after referring to the mandatory terms of s 198 (which are relevantly in the same terms as s 192(1)), stated at 172: "[A] solicitor claiming his fees in contravention of the section …cannot be said to have a debt which is 'payable either immediately or at a certain future time' within the meaning of that phrase in [section 44(1)(b) of the Bankruptcy Act]. He or she must first give the client a bill of costs and thereafter at least 30 days must have passed". 31 Davies J said at 163: "The [solicitor] had not been entitled to his judgment in the Local Court and no liquidated sum was due and payable either immediately or at a certain future time, for no proper bills of costs had been delivered to the debtors." 32 I have already indicated that the appellants' submissions as to the construction of s 192 and s 209C were misconceived. I should also state that the entire case has been misconceived. The respondent commenced proceedings in the Supreme Court for an order under s 209C. That application, by the terms of the section, must be brought in the Supreme Court. However, for the reasons I have already given, such an application has no relevance to the appellants' Local Court proceedings. The defence that no bill of costs was given to the respondent as required under s 192(1) was pleaded in the proceedings and should have been, and still should be, dealt with by that Court. Indeed, as those proceedings are presently pleaded, the claim must fail, unless the appellants plead in reply and succeed in establishing that the respondent has waived its entitlement to a bill. That is a legal position which the appellants have expressly eschewed to date. 33 It will be apparent from what I have said that it was not necessary for the respondent to seek relief in the Supreme Court to achieve its purpose of having the Local Court proceedings dealt with according to law. Indeed, the common assumption upon which the case below was conducted, namely that if the respondent was successful on the s 209C, a stay of the local court proceedings should be ordered as of course, was fallacious. 34 It will also be apparent that there was no purpose in seeking a stay in the Supreme Court. It was suggested that the stay application was brought in the court's disciplinary jurisdiction. That cannot be correct. The failure to deliver a bill of costs before action is not a disciplinary matter. 35 Because of the conclusion which I have reached in respect of the operation of s 192 it is not necessary for this court to independently exercise its discretion under s 209C as both parties requested. Nor is it necessary to consider the other submissions which were made in respect of the operation of s 209C as they have no relevance to the proper outcome of this case. 36 In the usual course, the orders which would follow from my determination that the trial judge failed to give reasons is that the appeal be allowed and the matter be remitted to the court below for rehearing. It will be apparent, however, from the construction I have given to s 192(1), that a rehearing of the matter will not finalise the litigation between the parties. Indeed, it will achieve nothing in relation to that litigation. The Court should not, in such circumstances, permit orders to stand which are the product of a misconceived process. Accordingly, although the appeal should be allowed, I would not remit the matter for a rehearing but set aside the orders of the trial judge and order that the summons in the court below be dismissed. 37 That leaves the question of costs. This is not a case where costs should follow the event. The respondent sought to uphold the judgment on the basis that adequate reasons had been given. I have found against it on that point. Additionally and more importantly, however, it conducted the case on appeal on an entirely different basis to the manner in which it conducted its case at trial. Senior counsel for the respondent conceded in both his written and oral submissions to this Court, that the order sought under s 209C was strictly unnecessary for the respondent's purposes. There is no doubt about that. The basis upon which the stay was sought was also misconceived. Although the respondent's submissions as to the proper construction of s 192 in this Court have been accepted, I do not consider that it should have its costs of the appeal because of the manner in which it conducted the case below. By the same token, counsel for the appellants, both in the court below and in this Court placed a construction on s 192 and s 209C which was totally erroneous. I do not consider, therefore, that it should be the beneficiary of a costs order. 38 As no argument was directed to the costs order in the court below, I propose that the appellants be given liberty to file written submissions within 4 days if any challenge is to that order. The respondents should file submissions in reply within 3 days of the appellants submissions. 39 The formal orders I would propose are:

(v) Direct that if the appellant seeks to challenge the order for costs in the court below then: (a) the appellant is to file and serve written submissions within four days of the date of judgment; and

(b) the respondent is to file and serve written submissions in reply within three days of receipt of the appellant's submissions. 40 FITZGERALD JA: The circumstances giving rise to this confused appeal from an unsatisfactory judgment are set out in the reasons for judgment of Beazley JA. 41 The essential dispute between the parties is whether the appellants are entitled to obtain judgment in their Local Court action against the respondent for legal costs. The appellants performed non-contentious legal business for the respondent as its solicitor, and, for a considerable period, the respondent accepted that the amount which the appellants claim for costs was "fair and reasonable". 42 However, because of their omission to give the respondent a "bill" for those costs prior to instituting their Local Court action, the appellants should not have commenced that action and cannot recover judgment against the respondent in that action Zizza v Seymour (1976) 2 NSWLR 135. by virtue of subs 192(1) of the Legal Profession Act 1987. The position might be otherwise if the respondent has waived its entitlement to a bill Dodd v Gillis (1989) 16 NSWLR 623., or is estopped from insisting on a bill, but the appellants' argument in this Court left it unclear whether that is asserted. 43 If the respondent has not waived its entitlement to a bill and is not estopped from insisting on a bill, it has a defence to the appellants' Local Court action Zizza v Seymour (1976) 2 NSWLR 135. and there is no sufficient reason for a bill to be ordered having regard to the history of this matter. 44 While the Supreme Court might retain a discretion to order the appellants to give the respondent a bill under s 209C of the Act even if the respondent has waived its entitlement to a bill, or is estopped from insisting on a bill, plainly a bill would not ordinarily be ordered when there has been a waiver or there is an estoppel. There is nothing in this case which would justify an order that the appellants give the respondent a bill, if it has waived its entitlement to, or is estopped from insisting on, a bill. 45 The primary judge should not have ordered the appellants to give the respondent a bill. 46 His Honour's order for a stay of the Local Court action was also incorrect. That order was, in substance, an injunction restraining the appellant from prosecuting its Local Court action because it has not given the respondent a bill. As stated above, if the respondent has not waived its entitlement to a bill and is not estopped from insisting on a bill, it has a defence to the Local Court action. If it has waived its entitlement to a bill or is estopped from insisting on a bill, there is no reason why the appellants should be restrained from proceeding with that action, in which the issues of waiver and/or estoppel, and the consequences, can be litigated. 47 The Local Court is the appropriate forum for the determination of the parties' dispute. 48 Neither order should have been made by the primary judge, and both should now be set aside. The respondent's summons should be dismissed. 49 The respondent did not submit that costs should not follow the event, here or below. 50 The appeal should be allowed with costs, and the respondent's summons dismissed with costs. ************************

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Legal Profession Act 1987(NSW)

Legal Profession Reform Act 1994(NSW)

New South Wales Court of Appeal CITATION : Conder v Silkbard [1999] NSWCA 459 FILE NUMBER(S) : CA 40344/98 HEARING DATE(S) : 04/11/99 JUDGMENT DATE : 10 December 1999

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