DCL Constructions Pty Limited v Di Lizio

DCL Constructions Pty Limited v Di Lizio - [2007] NSWSC 1180 - NSWSC 2007 case summary — Zoe

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JUDGMENT 1 HARRISON J: By its summons filed 5 October 2006 the plaintiff sought orders, inter alia, pursuant to rules 50.3(1)(c) and 50.12(1)(c) respectively of the Uniform Civil Procedure Rules 2005 for an extension of time to appeal against the decision of Christopher Gerard O'Brien made on 11 May 2005 ("the decision") in accordance with s 208L of the Legal Profession Act 1987 ("the Act"), and an extension of time for leave to appeal against a determination made by him on the same date ("the determination") in accordance with s 208M of the Act. 2 The matter came before Associate Justice Harrison on 18 June 2007 and her Honour delivered judgment on 27 June 2007. By agreement between the parties, her Honour was only asked to deal with these two matters. Her Honour refused both the application for an extension of time to appeal and for an extension of time for leave to appeal. Her Honour otherwise dismissed the summons with costs. 3 By its notice of motion filed 25 July 2007, the plaintiff appealed against her Honour's decision pursuant to rule 49.4 UCPR. The appeal is to be determined having regard to the well known principles set out in the judgment of the High Court of Australia in House v The King (1936) 55 CLR 499 at 504-505 per Dixon, Evatt and McTiernan JJ as follows: "The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred." Background 4 The defendant, who is a solicitor, was originally retained by the plaintiff to provide legal services in relation to a building dispute between the plaintiff and Norman Browne Constructions Pty Ltd. Those proceedings were complex and lengthy. The defendant acted for the plaintiff in those proceedings between 20 March 2001 and 12 February 2004. The plaintiff obtained a judgment in those proceedings but Norman Browne Constructions Pty Ltd went into liquidation shortly afterwards. Following completion of the proceedings, the defendant undertook further work for the plaintiff including winding up proceedings in this Court. 5 The plaintiff had entered into a written cost agreement with the defendant on 29 March 2001. In about March 2004 the defendant rendered a bill of costs to the plaintiff and an itemised bill of costs was rendered on 4 June 2004. The plaintiff failed to pay those costs. On 29 June 2004 the plaintiff's new solicitors wrote to the defendant querying the size of the bill and some items in it. The plaintiff contended that it had never been provided with the fee agreement. Furthermore, the letter went on to assert that even though the plaintiff had been successful in the proceedings, the judgment debtor had been able to avoid paying the judgment debt as a result of the negligent handling of the matter by the defendant. 6 On 8 September 2004 the defendant filed an application in this Court for assessment of his bill. On 11 May 2005, Costs Assessor O'Brien issued a Certificate of Determination in which he assessed the balance of fees due as $50,591.06. On 5 July 2005, the defendant registered the Certificate of Determination in the District Court and in due course a judgment was entered in favour of the defendant against the plaintiff in that amount. No application was made to set the judgment aside. 7 On 27 January 2006 the plaintiff commenced proceedings against the defendant in the District Court in which the plaintiff sought to resist payment of the judgment debt. Principal among the grounds upon which the plaintiff sought to resist payment was its contention that the amount owing to the defendant for the defendant's professional costs had, by oral agreement made between them, been limited to the sum of $10,000. The alleged agreement is said to contain other terms but they are not relevant for present purposes. The agreement is said to have been made in the course of a conversation in October 2002, which is conveniently recorded at par [17] of her Honour's judgment. It is sufficient to note that the defendant disputes the agreement entirely. 8 The agreement has achieved significance going beyond the dispute as to its existence. That is because of the manner in which Costs Assessor O'Brien dealt with it. This is revealed in the extract from his reasons for decision that is recorded by her Honour at par [19] of her judgment as follows: [19] At paragraph [3] of his written reasons for decision, the Costs Assessor stated:

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setting out briefly but specifically the grounds relied on in support of the appeal including, in particular, any grounds on which it is contended that there is an error of law in the decision of the court below. 12 The defendant takes no issue that the plaintiff's summons was a proper vehicle for commencement of its appeal against the decision of Costs Assessor O'Brien with respect to ss 208L and 208M of the Act. However, both the appeal and the application for leave to appeal were required by the terms of the relevant rules to have been filed within 28 days of the material date. For present purposes, that date was 11 May 2005, the date upon which Costs Assessor O'Brien issued the Certificate of Determination. Accordingly, the last date upon which the summons could properly have been filed without the need to apply for an extension of time was 8 June 2005. In the circumstances, the summons was filed three days short of 16 calendar months out of time. Her Honour described this as "a lengthy period". 13 The plaintiff submitted that, whether or not that period can properly be described as a lengthy period must be answered having regard to the particular circumstances of the case and to what occurred throughout it. The plaintiff contended that her Honour's discretion miscarried as the result of a series of errors made by her in forming her views upon whether or not to grant the extensions of time that it sought. It is necessary to examine these contentions in detail. The plaintiff's submissions 14 The plaintiff made the general submission that the utility of granting the extensions of time that it sought was described by the events that have occurred. It was for the costs assessor either to determine the contractual liability agitated before him by the plaintiff or alternatively, to resolve not to continue with the assessment of the application and to allow the parties to have the contractual issue decided. The costs assessor did neither but instead proceeded to an assessment of quantum only. In proceeding to the point of issuing the Certificate of Determination, the costs assessor armed the defendant with the ability to obtain a judgment without any adjudication of the contractual issue. 15 The plaintiff then isolated what it submitted were three distinct categories of error committed by her Honour. First, her Honour formed the view that the plaintiff's chances of success on appeal were "slim". According to the plaintiff, that conclusion was erroneous because of her Honour's: (i) failure to take into account a relevant consideration in the decision of the Court of Appeal in Wentworth v Rogers (2006) 66 NSWLR 474 as to the construction and application of s 184(4) of the Legal Profession Act 1987 , per Basten JA at [146] - [147] and per Santow JA at [30] and [34], and

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"All that needs to be determined at this stage is that her causes of action, for which she requires the extension under the Act, are viable so that the provision of the extension sought is not a futility." (at 515). 17 In relation to the question of the existence of a viable cause of action, her Honour dealt with the matter at par [25] as follows: . . . The issue that the costs assessor did not resolve was whether there was a subsequent oral agreement between the parties. However, under s 184(4) a costs agreement is void if it is not in writing or evidenced in writing. Therefore, why would a Costs Assessor concern himself or herself with determining whether or not there is an oral costs agreement, if it is void? 18 Her Honour dealt with the matter further at par [37] in the following terms: "The Wentworth v Rogers decisions and the Graham decision address the issue of what is meant by "pro bono" and whether there is a liability to pay Counsel's fees. In Wentworth v Rogers [2006] Basten JA did not decide the issue [at 185]. Santow JA decided that the issue of whether there was a liability to pay pro bono costs was one that should be determined by a Costs Assessor. Santow JA expressed the view that Muriniti should be overruled. One of the considerations would be the actual terms upon which Counsel agreed to do the work he was asked to do. It seems to me that these cases involved the interpretation of a written costs agreement. However, dispute raised before the Costs Assessor in these current proceedings involve whether or not the parties made an oral agreement. This dispute depended on the credibility of the witnesses, which could only be resolved by the giving of evidence and cross examination and a Court is the appropriate forum. But even if there were an oral agreement, according to s 184(4) it would be void. It is my view DCL Construction's chances of success on appeal are slim." 19 Her Honour concluded at par [38] that the plaintiff had a low chance of success under s 208L and s 208M of the Act. 20 The plaintiff contended that her Honour had apparently acted upon the basis that the costs agreement in Wentworth v Rogers (supra) was not oral so that, by inference at least, the construction and effect of s 184(4) did not arise in that case. According to this submission, if that were an accurate representation of her Honour's reasoning, it would not appear to be correct. The agreement which was at the heart of the contest between the parties in Wentworth v Rogers, and at the heart of the decision of the Court of Appeal, was entered into orally on or about 12 December 1994 and was much later reduced to writing on 10 February 1997. Reliance was placed upon the oral agreement. It is referred to as a notation to the reproduction of the agreement in writing ("Notation: Such agreement was entered into orally on or about 12 December 1994") in Wentworth v Rogers at [80]. Secondly, in Wentworth v Rogers, both Santow and Basten JJ A specifically addressed s 184(4). There was no need to do so in the event that the relevant costs agreement was in writing. Wentworth v Rogers is not distinguishable, if that was the conclusion that her Honour intended to draw.

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27.3 Fault on the part of the plaintiff's legal advisers (rather than the plaintiff itself) leading to delay. 28 Furthermore, the plaintiff submitted that her Honour took into account an irrelevant consideration, to the extent that she treated the length of the delay simpliciter as a consideration mandating the rejection of the application for an extension of time. The plaintiff also submitted that her Honour gave no reasons to support her conclusion that the length of the delay should have lead to that result. 29 The plaintiff accepted that the length of delay is a relevant consideration. However, it submitted that delay alone was not sufficient to lead to the result that the applications for an extension of time should have been rejected. According to the plaintiff's submission, any delay must be forensically considered having regard first to the production of any disadvantage or prejudice to the defendant's capacity to engage in a fair hearing of any appeal or application for leave to appeal, secondly to any explanation for the delay and thirdly to whether or not the delay is attributable to the plaintiff or to its legal advisers. 30 The plaintiff argued that the defendant did not suggest to her Honour that he was, by reason of the length of the delay, unable to participate in the fair hearing of an appeal. The evidence adduced did not suggest that the defendant had lost evidence that might otherwise have assisted him to engage in or oppose any appeal. In the District Court proceedings, prior to claiming the benefit of the judgment as an estoppel, the defendant prepared and served affidavit evidence concerning the oral agreement alleged by the plaintiff. Those affidavits showed that the defendant and his witnesses purported to have retained a clear account of the relevant events. The Reasons for Determination of the costs assessor is a record that has been retained. The Costs Certificate is available. The defendant's bill of costs is available. No documentary evidence has been lost. No memory has become impaired. An available conclusion is that the defendant is as well placed now to engage in any appeal as he was in June 2005.

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31.4 Legal advice was given to the plaintiff by letters dated 31 July 2006 and 18 July 2006 in respect of an appeal pursuant to the Legal Profession Act 1987 . The plaintiff clearly acted quickly to obtain legal advice in response to the estoppel as soon as it was raised. Between 18 August and 5 October 2006, instructions were given to file the summons, which together with supporting affidavit material, was prepared and filed promptly. 32 Further, the plaintiff argued that as a matter of principle, in the context of an application for an extension of time, the plaintiff is not necessarily to be blamed for a delay generated by incorrect legal advice. The cases describe two propositions. First, that a client ought not to be blamed for delays that result from acting on the advice of a legal representative: see Morton v Jools (1992) Aust Tort Reports 81-164, McAndrew v Wyoming Nursing Home (Sperling J, 5 December 1997, unreported), and McGarva v Boyd [1999] NSWSC 1149. In Morton v Jools, Carruthers J said at 61,302: "The learned Master seems to have overlooked entirely that the plaintiff was entitled to place reliance upon the advice which she received from her solicitor, even though she may have had in her possession facts which may be thought to have provided sufficient evidence to justify the commencement of proceedings at an earlier date against the proposed defendants." 33 Secondly, a potential claim in negligence against a legal adviser is a relevant consideration, but a consideration which "cannot carry much weight": see Morrison v Judd (Court of Appeal, 10 October 1995, unreported), referred to more recently with approval in Groth v Audet (2006) 65 NSWLR 388 per Tobias JA, at par [27], with whom Mason P and Basten JA agreed. 34 In assessing the delay, prejudice to the defendant in participating in a fair trial, explanation for the delay and fault in the plaintiff's legal advisers, was each a material consideration. Her Honour appeared to accept, by implication, that the plaintiff did not know of its right to appeal at the material time. For example, at par [7] of her judgment her Honour said: "However, I accept that if DCL Constructions did not know of its right to appeal against the decision of the Costs Assessor, it was unlikely to know of its right to appeal to a Costs Review Panel." 35 According to the plaintiff, her Honour also appeared to accept the relevance of the lack of prejudice to the defendant if required to engage in an appeal, although her Honour reached no conclusion in relation to that important issue, either for or against the plaintiff. At par [38] of her judgment her Honour said: "While DCL Constructions submitted that Di Lizio will be able to adequately present [his] case of appeal, it does not follow that [he has] not suffered any prejudice." 36 Her Honour referred to aspects of these two material considerations but did not expose in her judgment if or how the considerations were taken into account in the exercise of her discretion. The plaintiff submitted that that they were not taken into account and that, to the contrary, her Honour had regard to the length of the delay, without more. No consideration was given by her Honour to the fact that the plaintiff had acted promptly to agitate the oral agreement or that the delay in the appeal was the fault of the plaintiff's legal advisers. According to this submission, her Honour was in error in failing to take it into account these three material considerations relevant to delay.

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41 In the exercise of the discretion by the appellate court, there are five considerations relative to the delay. The first is the cogency of the explanation offered. The second is the lack of prejudice to the defendant in engaging in an appeal. The third is that the length of the delay without more does not, as a matter of principle, justify the rejection of the extension of time. The fourth consideration is, in this context, the apparent viability of the plaintiff's substantive claim. The fifth is the lack of blame attributable directly to the plaintiff. The adequate explanation for the delay, the lack of prejudice in obtaining a fair hearing and the merits demonstrated as to the apparent viability of the appeal are, in particular, matters which when taken together with the length of the delay, justify the exercise of the discretion in favour of the plaintiff. 42 Finally, the plaintiff submitted that her Honour dealt erroneously with the question of general prejudice. At par [38] of the judgment her Honour said: "Di Lizio obtained judgment on 5 July 2005, almost two years ago. They have not received the moneys due and owing. Further, Di Lizio have been called upon to incur legal fees and expend time in defending themselves in the District Court in relation to the same bill of costs because DCL Constructions did not receive legal advice about the right to appeal but did receive legal advice to take District Court proceedings." 43 The plaintiff quite properly conceded that general prejudice to the defendant is relevant. However, in the plaintiff's submission, her Honour did not identify or take into account all of the relevant facts. For example, the defendant obtained judgment on 5 July 2005. Between October 2005 and about January 2006, the defendant served a creditor's statutory demand. The plaintiff sought an order that the demand be set aside and the defendant withdrew it. Two things are said to be apparent from this process. One is that the plaintiff maintained its reliance upon the oral agreement asserting that it had no liability to the defendant to pay the costs and the defendant was on early notice. The other is that any prejudice to the defendant in this period was of his own making in pursuing a procedure based upon a demand that was liable to be set aside and which was ultimately withdrawn. 44 Her Honour then identified prejudice to the defendant in the legal fees and time incurred by him in defending himself in the District Court proceedings. With respect to the first of these matters, the District Court proceedings were appropriate for the agitation of the contest in relation to the oral agreement until the belated reliance by the defendant upon the estoppel, which ought to have been pleaded in the defence filed on 10 March 2006 but which was not raised until service of the defendant's outline of submissions in July 2006. Secondly, the plaintiff has paid the defendant's costs thrown away by the vacation of the hearing date in the District Court on an indemnity basis. Her Honour failed to take these matters into account in identifying the nature and extent of the prejudice. 45 Finally, in this present context, the plaintiff submits that to suggest that the judgment was obtained "almost two years ago" is somewhat unfair. It ignores other relevant matters. The summons was filed on 5 October 2006 and up until about January 2006 the defendant was pursuing its own course in reliance upon the creditor's statutory demand. The period for which the plaintiff was "responsible" is the period in between i.e. something in the order of about 9 months. 46 In summary the plaintiff submitted that the evidence demonstrates the existence of a viable cause of action. A cogent explanation for the delay is given. There is no evidence that the defendant is unable to participate in a fair hearing in relation to any appeal as a result of the length of the delay. The delay itself does not mandate the rejection of the application for an extension of time. The defendant has suffered general prejudice. He has incurred costs in relation to the District Court proceedings, but the plaintiff has met these on an indemnity basis. There has been delay in identifying the correct legal mechanism to ventilate the existence and effect of the oral agreement, but that is the consequence of a failure on the part of the plaintiff's legal advisers and not a failure on the part of the plaintiff itself. The plaintiff sought advice at an early time directed to ventilating the dispute in relation to the agreement. It is also partly the result of the defendant's unsuccessful statutory demand and his late reliance upon an estoppel. An error of principle is disclosed in the Costs Assessor O'Brien's determination in failing to determine the contractual issue or to take a course to have it determined by a court. In addition to an error of principle, a miscarriage of justice has occurred in the registration of the costs certificate resulting in a judgment in the District Court permitting the defendant to foreclose upon a determination of the contractual issue. There is reasonable evidence to establish the existence of the oral agreement. For all these reasons the plaintiff submitted that the grant of an extension of time was warranted.

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56 Finally, with respect to the question of prejudice generally, the defendant submitted that her Honour did not fall into any relevant error in taking into account, in the exercise of her discretion, that the defendant had suffered prejudice by reason of having obtained judgment on 5 July 2005 but had not received the moneys due and owing or that the defendant had been called upon unnecessarily to incur legal fees and to expend time in defending himself in the District Court. 57 The defendant submitted that the plaintiff's notice of motion should be dismissed with costs. Consideration 58 It is uncontroversial that in order to succeed the plaintiff must establish that her Honour made an error in exercising her discretion. In this regard it is, in general terms, necessary for the plaintiff to demonstrate that her Honour acted upon a wrong principle, allowed extraneous or irrelevant matters to guide or affect her, made factual mistakes, or failed to take into account some material consideration. 59 The plaintiff's argument with respect to her Honour's interpretation of s 184(4) of the Act should be dealt with first. As will by now be apparent, the plaintiff contended that her Honour formed the view, contrary to authority, that s 184(4) always operated so that any oral costs agreement between the plaintiff and the defendant would be void. According to this argument, that error so fatally infected the exercise of her Honour's discretion that it should be set aside. One view of the authorities suggests that oral costs agreements are not wholly void and that any discretion exercised upon the basis that they are is erroneous. 60 There is no doubt that, taken alone, the penultimate sentence in par [37] of her Honour's judgment gives the impression that she formed that few of the operation of the section. However, as the defendant, in my opinion correctly, points out, her Honour's description of the plaintiff's chances of success on appeal as "slim" is inconsistent with the notion that she treated s 184(4) as operating in that way. It seems to me that a fair reading of her Honour's reasons must incorporate a reference to her view that the dispute concerning the existence or otherwise of the alleged oral agreement depended upon the credibility of witnesses and the need for that to be resolved by the giving of evidence and cross-examination in a court. Her Honour was made aware of the competing versions of this issue and must in my opinion be taken to have formed her view that the plaintiff's chances were "slim" having regard to that competition. The burden of the plaintiff's submission in this regard is ultimately that her Honour erroneously formed the view that the plaintiff had no chance of relying upon the alleged oral agreement. However, it is not possible to read her Honour's judgment in so limited a fashion. 61 This issue is also connected with what occurred during the costs assessment proceedings. It does not appear to be in dispute that resolution of the existence or otherwise of the alleged oral agreement was beyond the jurisdiction of the costs assessor or, even if it were not, that the costs assessor had unambiguously indicated his disinclination to have anything to do with the issue. According to the defendant, the plaintiff should timeously have taken steps to have the matter adjudicated in an appropriate forum. This was not done, and no application for a stay so that it could be done was made to the costs assessor or to a court. In my opinion, the plaintiff has not demonstrated that her Honour fell into error in forming the view that the costs assessor did not have the power to resolve the dispute, or in treating the plaintiff's failure somehow promptly to bring the matter to a conclusion as counting against it in her overall assessment of the importance of the various reasons for delay. 62 There is no doubt that her Honour expressed the view that the delay was lengthy. Whatever adjective may have been used to describe it, the description ought properly to have been chosen as a reflection of a balanced assessment of what caused the delay. The plaintiff's complaint is that in performing that exercise her Honour failed properly or adequately to give sufficient weight to those factors that favoured the plaintiff. However, in my opinion, it is difficult to form a view that contributions to delay were not equally shared between the plaintiff and the defendant. It is not possible to point to any factor causing delay that unarguably outweighed any other or others. 63 The same may be said with respect to her Honour's comparison of competing prejudice. The plaintiff argued that there was little prejudice to the defendant if forced to confront the existence an agreement that was always in contest, whereas the prejudice to the plaintiff was, on the contrary, manifest and complete. Her Honour would appear clearly to have formed the view that inconvenience and further delay did amount to prejudice that was at least as significant as that which confronted the plaintiff. The prospects of success that her Honour calculated cannot be disregarded in this assessment of the plaintiff's position. It is not possible to conclude that the view taken by her Honour was not open to her or arrived at as the result of extraneous or irrelevant considerations or error of principle. 64 The essence of a search for error in the exercise of discretion is the search for a factor or a series of factors upon or about which informed minds should not reasonably differ. The application of wrong principle, surrender to the influence of extraneous or irrelevant matters, the making of factual mistakes, or a failure to take into account some material consideration are examples of such matters. Beyond the demonstration of such matters, the plaintiff cannot complain about the decision that her Honour reached. In my view, the plaintiff's complaints are all directed to the opinions that her Honour formed, about which there is obviously scope for difference. The plaintiff has not to my mind demonstrated illegitimacy in the process employed by her Honour in arriving at those opinions. Conclusion 65 In my opinion the plaintiff's notice of motion should be dismissed with costs.

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Judgment (80 paragraphs)

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Cases Cited (14)

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