Dimos v Hanos & Egan [2001] VSC 173

Supreme Court of Victoria|2001-05-29|Before: Gillard J

APPEAL FROM MAGISTRATE - barrister's fees - contract with solicitor - third party proceeding - seeking damages for employee - no proof of term as alleged.

This is an appeal, under s.109 of the Magistrates' Court Act , against orders made by a Magistrate ordering a firm of solicitors to pay to a barrister money for services rendered, and dismissing a third party proceeding brought by the solicitor against a former employee.

The appellant, Leo Dimos, trades as Leo Dimos & Associates, Solicitors, ("the firm") and carries on practice in Melbourne.

The first respondent, Nick Hanos, ("the barrister") is and was at all material times a legal practitioner practising exclusively as a barrister at the Victorian Bar.

The second respondent, Paul Egan, ("Mr Egan") is and was at all material times a legal practitioner, and for a period of time was employed by the firm.

On 2 December 1999, the barrister filed a complaint in the Magistrates' Court at Melbourne against Mr Dimos, trading as the firm, claiming the sum of $2,550 for professional fees.

"The plaintiff claims that the defendant is indebted to the plaintiff for professional fees outstanding for (sic) the defendant at the request of the defendant between 16/11/98 and 17/12/98 detailed particulars of which have been previously delivered to the defendant. The plaintiff also claims that the defendant is indebted to the plaintiff on an account stated."

Mr Dimos, on 23 December 1999, filed a notice of defence which merely denied that he was indebted to the plaintiff in the amount claimed, or at all.

On 27 April 2000, Mr Dimos issued a third party notice joining Mr Egan, and asserted against him that he was an employee of the defendant at all relevant times and, that he engaged the services of the barrister contrary to authority and in breach of the contract of employment.

On 19 July 2000, Mr Egan, acting for himself, filed a defence to the third party notice and asserted that, save that he admitted he was an employee, he denied each and every allegation in the third party claim.

To say the least, the pleadings after the claim were far from illuminating and indeed, hid more than they revealed.

On 15 September 2000, the claim and third party proceeding came on for hearing at the Magistrates' Court at Melbourne, before Mr Lauritsen M. The three parties were represented by counsel.

As the complaint was for an amount less than $5,000, it was referred to arbitration in accordance with Division 2 of Part 5 of the Magistrates' Court Act 1989. Arbitration, according to s.103, is an informal proceeding in which the court, is not bound by the rules of evidence and may inform itself on any matter in such manner as it thinks fit, is not required to conduct the proceedings in a formal manner, and may exercise any powers it may have in hearing and determining a complaint. Evidence may be given orally or in writing, and may be given on oath or by affidavit.

It is important to note that the court is bound by the rules of natural justice and, further, that the questions in the proceeding must be decided according to law.

At the outset of the proceeding, counsel for Mr Dimos successfully applied to amend the defence.

The amended defence alleged that Mr Dimos did not accept responsibility for the payment of the barrister's fees as "a no fee agreement existed as required by s.96 of the Legal Practice Act 1996".

The further paragraph numbered 3 sought to raise a defence which, in my opinion, was not a defence. The paragraph asserted that if Mr Dimos was liable for the fees to the plaintiff, Mr Egan was specifically instructed not to incur counsel's fees without money being held in trust, and as the instruction was not adhered to, Mr Egan was acting outside the scope "of both his authority and the terms of his employment, entitling of (sic) the defendant to contribution and/or indemnity from the third party."

Mr Dimos, the barrister, and Mr Egan all gave evidence and were cross-examined.

Mr Holzer of Counsel, who appeared for Mr Dimos, made short submissions to the Magistrate, as did Counsel for the other parties. After a short adjournment, the Magistrate gave his reasons for judgment. They can be briefly summarised.

He found that Mr Egan was a solicitor, employed by the defendant, who engaged the barrister to appear on behalf of three persons on different occasions. He accepted that the fees charged by the barrister were reasonable. There was no dispute concerning that issue.

He referred to ss.93 and 96 of the Legal Practice Act 1996, and observed that neither section assisted him as to who were the contracting parties in relation to the services provided by the barrister. He then stated a general rule that where a solicitor engages a barrister, then the contract is between the solicitor and the barrister. He opined the view that the solicitor was not acting as agent for the client, and the contract was not between the barrister and the client. He held that there was nothing in the case which excluded that general rule.

He stated that s.93(c) of the Act was relevant, and he was satisfied that the fees were reasonable and, under s.93(c), enabled him to set the fees in the case at the amount claimed. He found for the barrister.

He then turned to the third party proceeding and observed that, during the hearing, it became clearer as to what was being asserted, and that was -

"That Egan briefed Hanos in these matters in contradiction of a term or a breach of a term of the contract of employment between Dimos and Egan and that term was to the effect that Egan could not brief counsel to appear on behalf of a client unless there were sufficient moneys in trust or with the authority of Mr Dimos or his son."

The issue that the Magistrate considered was, whether there was a term of the contract of employment to that effect.

He found that Mr Dimos did inform Mr Egan, in the first conversation between them, prior to the engagement of Mr Egan as an employee, that the instruction was to be complied with. The evidence also showed, as found by the Magistrate, that Mr Dimos repeated the instruction during the course of the employment.

The Magistrate then considered whether it was a term of the agreement, and he held that it was not. Accordingly, he dismissed the third party proceeding.

"It seems to me and I suppose it is of little consolation, if there is a remedy that Mr Dimos might have it does not lay in that contract. It may well lay in negligence but I will say no more about that."

The Magistrate ordered Mr Dimos to pay the barrister the sum of $2,550, together with interest in the sum of $260.45, and costs of $1,355. He dismissed the third party claim and ordered Mr Dimos to pay Mr Egan, costs in the sum of $1,307.

By reason of s.109(3) of the Magistrates' Court Act 1989, the appeal must be brought in accordance with the Rules of Court.

The appeal is instituted by application to a Master, and if the Master is of the opinion that there is an arguable case on a question of law, the Master is obliged to state each question of law.

Application was made to Master Wheeler who, on 16 November 2000, stated the following questions of law for determination -

(i) If a Solicitor engages a Barrister to perform work on behalf of the Solicitor's client, is there a contract to perform that work between:

(a) the Solicitor and the Barrister?

(b) the Barrister and the Client?

(ii) Does a brief delivered by a Solicitor, and accepted by a Barrister, satisfy the requirement of a written fee agreement within the meaning of s.96 of the Legal Practice Act 1996?

(iii) If a contract of employment includes a condition relating to the limit of authority of an employee and the employee exceeds his authority to brief a barrister, should he be required to indemnify his employer for loss in consequence thereof?

The grounds do not properly raise the issues which were decided in the Magistrates' Court and appear to raise hypothetical questions for determination.

With respect to the first ground, the ground will have to be considered in the light of the circumstances of the case and the decision of the Magistrate. The same observations are made concerning the other grounds.

The third ground, no doubt, refers to the third party claim yet does not address the issue before the Magistrate, or his decision. The Magistrate found, as a fact, that it was not a term of the contract of employment that the employee had limited authority.

The main issue in the case was whether the barrister had a contract with Mr Dimos in respect of each of the three matters in which he was briefed, or whether each contract was between the barrister and the client. It was submitted, on behalf of Mr Dimos, that his firm, through Mr Egan, was acting as agent for and on behalf of the client, and that the contract was between the barrister and the client.

The Magistrate found, as a fact, that the contract was between the barrister and Mr Dimos, and not the barrister and the client. However, in reaching his decision, he commenced with a proposition which, in the circumstances, was wrong.

"I would say as a general rule if a person in the position of a solicitor engages a person in the position of a barrister to perform work on behalf of the solicitor's client, then a contract to perform that work is between the solicitor and the barrister. The solicitor is not acting as an agent for the client and the contract is not between the barrister and the client and there is certainly nothing in this case which would cause it to be an exception to the general rule that I have just postulated."

What the Magistrate said may be the effect of the evidence in the particular circumstances of the case, but it is not a principle of law, and cannot be stated as a general rule of law or fact. By stating that as a general rule, the Magistrate misdirected himself.

The issue for consideration and determination by the Magistrate was, who the contracting parties were when the barrister was retained to appear for each of the clients of the firm of Mr Dimos.

Going back in time, both in England and the colony and State of Victoria, the ethical rules governing barristers required, save in a few exceptional circumstances, that a barrister could only undertake professional work on behalf of a client pursuant to instructions given by a solicitor. This was the position in this State up until about 1992, when the professional rules concerning barristers were changed, enabling counsel, in certain circumstances, to undertake legal work directly for the client and without the services of a solicitor. The former practice was due to the ethical rules, and not any rule of law.

There was no rule of law preventing a litigant instructing a barrister directly, or preventing a barrister appearing for a litigant on the instructions of the client. See Doe d. Bennett v Hale [1850] EngR 508; (1850) 15 QB 171; 117 ER 423. In that case, it was held that there was no rule of law requiring that counsel, appearing in court for a party who pleads in person, should be instructed by a solicitor. But as the court pointed out, the usage which had prevailed at the Bar, that counsel should take instructions from solicitors, is beneficial and ought to be maintained.

Under the established practice, the barrister looked to the solicitor for his fees and not the client. See Re Wilton (1843) 13 LJ (QB) 17 at 21.

It was well established law that a solicitor acting under a general retainer had the authority to instruct and pay counsel's fees. The practice was to mark a fee on the brief, and it was expected that the fee would be paid at the time of delivery of the brief. See Morris v Hunt (1819) 1 Chit 544 at 551.

It was emphasised, in that case, that fees should be paid at the time when briefs are delivered, and that that was one of the reasons why barristers were not permitted to maintain an action to recover their fees.

If fees were not paid, the barrister, at common law, had no redress. He could not sue either the solicitor or the client. These were well established and ancient rules. See Moore v Roe [1629] EngR 11; (1629) 1 Rep Ch 38; 21 ER 501; Wells v Wells (1914) P 157, where it was held that fees owing to counsel are not debts and cannot be garnished as such. Also see Kennedy v Broun [1863] EngR 136; (1863) 13 CB(NS) 677; 143 ER 268.

The reason why barristers could not sue for their fees, was because their emoluments were payable as a matter of honour. The only remedy available to a barrister was to require payment at the time of delivery, and if he failed to do so, payment was made as a matter of honour. The barrister had no legal obligation to enforce. See Morris v Hunt, supra, and Re Le Brassuer and Oakley (1896) 2 Ch 487 at 494.

No contract existed between the barrister and the client in respect of legal services to be rendered in the course of the litigation. See Kennedy v Broun, supra.

This was so even though there were requests for the provision of services, a promise to perform them, and the undertaking of the services. The rule even applied if a promise to pay was made by the client. It followed that a solicitor's promise to pay could not bind the client. See Mostyn v Mostyn (1870) 5 Ch App 457.

The rule preventing a barrister suing for his fees was not confined to litigation; it covered all work as a barrister.

This was the law in the Colony of Victoria until the passing of the Legal Profession Practice Act in 1891.

In Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543, Dawson J traced the legislative history of that Act and its objects.

"At the time of separation of Victoria from New South Wales in 1851, the practice of the law was divided between barristers and attorneys in the latter colony. The division was inherited by Victoria, but it was not long before there was agitation for the two branches to be amalgamated. The debate continued and grew stronger in the 1880s and private member's Bills were unsuccessfully introduced more than once into Parliament in attempts to abolish the division. It was not until 1891 that the proponents of amalgamation were successful in securing the passage of the original Legal Profession Practice Act. The pivotal sections of the 1891 Act provided for barristers to be thereby admitted as solicitors (s.3) and vice versa (s.4). Each was thereafter to be entitled to practise as the other and to have all the rights, powers and privileges of the other. After the Act came into force every person admitted to practice was to be admitted both as a barrister and solicitor: s.10. These provisions made the scheme of things plain enough. The Act aimed to make members of the profession both barristers and solicitors, leaving them free to practise as either or both. .... In the result, because the Act did not preclude practitioners from practising exclusively in one branch or the other, there was practically no change. The de facto division continued."

Section 5 of the Act gave the right to barristers to sue for their fees, both the solicitor and the client, and also made barristers liable for negligence.

Section 5 became s.10 in the Act of 1958. Section 10 reads -

"(1) Every barrister shall be entitled to maintain an action for and recover from the solicitor or client respectively by whom he has been employed his fees costs and charges for any professional work done by him. (2) Every barrister shall be liable for negligence as a barrister to the client on whose behalf he has been employed to the same extent as the solicitor was on the 23rd day of November one thousand eight hundred and ninety one liable to his client for negligence as a solicitor."

Dawson J went on to consider the effect of the section upon the relationship between barrister, solicitor and client. His Honour said at p.590 -

"It is apparent that when the Act was passed it was thought that the liability of solicitors rested upon the contractual relationship between them and their clients. No such relationship existed between barristers and their clients. No attempt was made, however, in s.5 of the 1891 Act to alter that relationship other than to provide that barristers should in the future be able to sue for their fees, something which had previously been denied to them. If the result was to establish a contractual relationship between barristers and their clients (see In re Melbourne Parking Station Ltd) then it was achieved indirectly." (Emphases added).

The cases decided in this State established that a contract was created, by the section, between barrister and solicitor, and barrister and client.

In Levy v Union Bank of Australia Ltd (1896) 21 VLR 683, Hodges J, after referring to what the law was prior to the passing of the 1891 Act, went on to say this -

"The question is whether the Legal Profession Practice Act 1892 No. 1216, has altered that state of things in any way. It has of course altered the relation of counsel to his client. It has made the relation a contractual one, with legal responsibilities on both sides and has given counsel the right to recover the fee from his client, and in certain cases has given to the client the right to recover back that fee, or some portion of it, from the counsel. The fee has ceased to be an honorarium, and has become a payment legally demandable for services rendered." (Emphases added).

In Hayes v Jones [1926] VicLawRp 67; (1926) VLR 459, Macfarlane J dealt with a summons for final judgment, in an action by a barrister against a solicitor for fees for work and attendances as counsel. The judge held that the barrister was entitled to sue the solicitor, and the only issue that he permitted to be debated was whether there was a bona fide dispute concerning the amount of fees charged.

In the case of In re Melbourne Parking Station Ltd [1929] VicLawRp 2; (1929) VLR 5, Mann J, at p.9, said -

"As to the effect of the Act (the 1891 Act), all that it did was to give to the well-known and well-established obligations arising between client and solicitor on the one hand and counsel on the other a contractual force. It in no way altered the nature of those obligations." (Emphasis added).

In my opinion, the authorities in this State, at the time of the enactment of the new Act in 1996, were to the effect that when a barrister was retained on behalf of a client by a solicitor, the barrister entered into a contract with the solicitor and a contract with the client, and pursuant to each, he was entitled to sue for his fees - see Deane J in Giannarelli's case at p.587.

The result of the 1891 Act was that the common law preventing a barrister from suing for his fees was swept away, allowing the barrister to sue both the solicitor and his client for unpaid fees.

In 1996, the Legal Practice Act was passed. The majority of the Act came into operation on 1 January 1997. It repealed the Legal Profession Practice Act 1958.

Part 4 of the Act is concerned with Information and Legal Costs.

Section 3 defined legal practitioner as, inter alia, a person admitted to legal practice in this State. Clearly, it covers both barristers, who practise exclusively as barristers, and solicitors.

The common law concerning the entitlement of a barrister to sue for his fees was altered by the 1891 Act. On the repeal of the 1958 Act, the entitlement to sue for fees was replaced by the new Act.

Section 93 deals with the basis for the recovery of legal costs. Section 3 defines legal costs as meaning -

"All amounts that a person has been or may be charged by, or is or may become liable to pay, a legal practitioner or firm for the provision of legal services including disbursements but not including interest."

"93. On what basis are legal costs recoverable? Legal costs are recoverable - (a) under a costs agreement made in accordance with Division 3; or (b) in the absence of a costs agreement, in accordance with an applicable practitioner remuneration order or scale of costs; or (c) if neither paragraph (a) or (b) applies, according to the reasonable value of the legal services provided."

Section 96 of Division 3 is concerned with costs agreements. It provides -

"96. Making costs agreements. (1) A cost agreement may be made - (a) between a client and a legal practitioner or firm retained by the client; or (b) between a client and a legal practitioner or firm retained on behalf of the client by another legal practitioner or firm; or (c) between a legal practitioner or firm and another legal practitioner or firm that retained that practitioner or firm on behalf of a client. (2) A costs agreement must be written or evidenced in writing. (3) A costs agreement may consist of a written offer that is accepted in writing or by other conduct."

Section 3 defines costs agreement as meaning -

Nothing in either ss.93 or 96 bears on the question of the nature and terms of a contract. Clearly, the sections contemplate and permit a costs agreement being made between barrister and solicitor, and a barrister and client.

In my opinion, the question of who the contracting parties are and the nature and terms of the contract are to be determined in accordance with the common law.

The provisions of ss.93 and 96 establish that, contrary to the common law, a barrister may recover his fees from a legal practitioner, practising as a solicitor, or the client. In this respect, the law is the same as the law enacted in 1891. But the new Act does not establish a statutory contract between the barrister and solicitor, or the barrister and the client. Who the contracting parties are depends on the circumstances.

The barrister's right to recover fees is founded on a costs agreement made pursuant to s.96, or in accordance with a practitioner's remuneration order, or scale of costs, or upon a quantum meruit basis - see s.93.

However, the question of who is liable depends upon who contracted with the barrister or, in the case of a quantum meruit claim, who requested the provision of the services.

There is nothing in the Act which establishes who the parties are with respect to the provision of services by a barrister. Clearly, the barrister is one party. Mr Lithgow submitted that when a brief is delivered and accepted, the contract is between the barrister and the client. He stated that the solicitor who retains the barrister is acting as agent for a disclosed principal, and has no responsibility for the fees payable for legal services rendered by the barrister. He referred to s.87(1) and (2) and submitted that the wording, "A legal practitioner retained on behalf of a client by another legal practitioner", shows that the contract is between the barrister and the client.

In order to make good that submission, it would be necessary to show that that was the intention of Parliament. In my opinion, it was not.

First, the subject matter of the section is not concerned with contracting parties, but is concerned with information that must be given to a client if another legal practitioner is retained to provide services. It is not addressing the issue of contracting parties.

Secondly, if Parliament intended to establish a rule that when a solicitor briefs a barrister on behalf of a client, the contract is between the solicitor and the client, it would have been simple for Parliament to have said so. It did not.

In my opinion, each case depends upon its own circumstances.

As Fletcher Moulton LJ said in Perry v National Provincial Bank of England (1910) 1 Ch 464 at 476 -

"If the meaning is that it is impossible to make a legal contract which would have certain legal effects we cannot accept such law. It would be in conflict with the law laid down by the Court of Exchequer in the two cases ... . Moreover it would be quite meaningless. People can contract to do anything." (Emphasis added).

Subject to the principles concerning illegal contracts and public interest, it is indeed a trite observation that persons can contract to do anything, and can provide by their contract what the legal effect is, of their agreement.

A legal practitioner who is a solicitor, who proposes to retain the services of a barrister, may negotiate what terms he thinks appropriate and may negotiate an agreement between the barrister and the client. He may even go further, by becoming a party to a tripartite agreement and exonerating himself from all liability for the barrister's fees.

But the Legal Practice Act 1996 does contain some provisions which bear on the nature of the terms of the contract. By way of example, under s.97, a costs agreement may be conditional on success, but under sub-s.(5), the legal practitioner must not enter into such an agreement unless the practitioner has a reasonable belief that a successful outcome of the matter is reasonably likely. Further, under s.98(3), a legal practitioner must not enter into a costs agreement, which is conditional, under which a premium, other than a specified percentage not exceeding 25 per cent of the costs payable, is payable on the successful outcome of the litigation. Further, under s.99, a legal practitioner must not enter into a costs agreement under which the amount payable is calculated by reference to the amount of the award.

Under s.102(1), a costs agreement that contravenes any provision of Division 3 of the Act is void.

A legal practitioner, practising exclusively as a barrister, would be unwise to contract on the basis that his contract is with the client, and the client is solely responsible for the fees. The solicitor usually approaches a barrister, pursuant to his contract, to provide services to a client. The client seeks the legal services, and in providing them, the solicitor advises the client that it will be necessary to obtain the services of a barrister. The solicitor knows his client and should know his capacity to pay the fees. The solicitor, in approaching the barrister, is obliged under s.87, and as good practice dictates, to ascertain from the barrister the likely fees. In accordance with good practice, when the brief is delivered, it should be marked with a fee.

The solicitor is in complete control of the situation. He knows the client and should know his capacity to pay. The solicitor deals directly with the barrister. Common sense and fairness, in those circumstances, justifies a barrister refusing to enter into a contract to provide legal services to a client on the basis that the client is liable for the fees, and not the solicitor. The latter is in the best position to obtain the fee up front, and maintains a trust account into which the fee can be deposited.

As a general rule, the solicitor should obtain funds from the client before he retains the barrister, and in criminal proceedings, it should be the invariable practice. Solicitors can hardly complain if they do not follow good practice, and are left without funds after services are rendered. The solicitor is in control of the situation, and can take steps to ensure that he and the barrister are protected against a failure to pay.

But having said that, it is open to the solicitor to negotiate a contract which is solely between the barrister and the client. Also, the solicitor may be a party to an agreement and exonerate himself from any liability to pay the fees. In the end, it is a matter for negotiation.

Whether a contract has come into being, whether the parties intend to make a concluded and binding contract, the terms and who the contracting parties are, are all questions of fact to be determined on an objective basis.

The issue before the Magistrate was, who the contracting parties were in respect of the contract entered into by the barrister to provide services to three clients of Mr Dimos.

It was submitted to the Magistrate that the barrister entered into a contract with the client, and not the solicitor. It was submitted that in each case, it was clear that the solicitor was acting as agent for a disclosed principal, and negotiating with the barrister, a contract directly with the client.

Parties to a contract must be persons or legal entities, existing and identified at the date of the contract. If two parties negotiate a contract, then in the absence of any evidence to the contrary, it is those parties that conclude the contract and are bound by it. They are the parties who agree to the essential terms, conclude the bargain and evince a common intention to make a contract binding in law.

Where the contract is in writing, the basic rule is, subject of course to any evidence to the contrary, that the parties signing the agreement are personally bound by it. The capacity in which a person enters into a written contract is mainly a question of construction of the written contract.

In Universal Steam Navigation Company Ltd v James McKelvie and Company (1923) AC 492, the defendant signed a contract as follows -

"For and on behalf of James McKelvie and Co (as agents) - J.A. McKelvie".

The House of Lords held that the words stated, in clear unambiguous language, that the defendants did not sign as principals and did not intend to incur any personal liability.

But in cases where it is not apparent on the face of the document that the party qualifies his assent to it, different considerations apply. In that case, Lord Parmoor, at p.505, said -

"Different considerations arise when a person signs a contract without qualification, and the question is raised whether he is to be deemed as contracting personally, or as agent only. In such a case the intention of the parties is to be discovered from the contract itself, and the rule laid down in Smith's Leading Cases has been adopted as the rule to be followed. 'That where a person signs a contract in his own name, without qualification, he is prima facie to be deemed to be a person contracting personally, and in order to prevent this liability from attaching, it must be apparent from the other portions of the document that he did not intend to bind himself as principal'."

"If the words qualify the signature, they qualify the assent, and nothing more matters."

That is not to say that in a particular contract, a person purporting to sign as agent may nevertheless agree expressly to undertake some form of personal liability. See ibid at p.506.

The mere fact that a contract is entered into between A and B, pursuant to which B is to perform services for A for the benefit of C, does not change the nature of the contract or the parties. The parties are still A and B. As a general rule, C cannot enforce the agreement. But as has been stated often, the parties may themselves contract in a way which does give enforceable rights to third parties or does limit the liability of a particular party.

In the normal course of events, a client who retains the services of a solicitor, engages the solicitor to provide professional services for him. In providing those services, the solicitor may advise the client that it is necessary to brief a barrister to provide specialist services. For example, it may be necessary to retain a barrister to appear in court. Retention of a barrister is, in part, satisfaction of the provision of legal services by the solicitor. In the absence of any contrary evidence, the retention of the barrister would result in a contract between the barrister and the solicitor.

The rules stated above are subject to exceptions, one of which is where the contracting party is acting as agent for a disclosed principal. The general rule is that the principal alone can sue, or be sued, on the contract. In certain cases, the agent can also be sued.

However, whether he acts as agent and whether he contracts as such, are questions of fact. The starting point in those circumstances, is proof of the agency and authority to contract on behalf of the principal. The next issue to consider is, the capacity in which the agent purported to enter into the contract.

I repeat the trite often quoted principle, that each case will depend upon its own particular circumstances.

The Magistrate stated what he described "as a general rule" that, "If a person in the position of a solicitor engages a person in the position of a barrister to perform work on behalf of the solicitor's client, the contract to perform that work is between the solicitor and the barrister. The solicitor is not acting as agent for the client and the contract is not between the barrister and the client ... ".

If the Magistrate was stating that as a principle of law applicable to the usual case, then in my opinion, he misdirected himself. Each case will depend upon its own circumstances. A consideration of the particular facts may lead to that conclusion.

However, in my opinion, the Magistrate was correct in reaching the conclusion that in respect of each of the three retainers, the contract was between the barrister and the solicitor, and not between the barrister and the client.

The evidence revealed, in respect of each retainer, that the solicitor was acting for a client, and that as part of the professional services provided by the solicitor, the solicitor retained a barrister to appear in court on behalf of the client.

In the case involving the client Ms Yves, which involved the barrister appearing for her, a back sheet was delivered by Mr Egan, retaining the barrister, and there is nothing on the back sheet, which is endorsed with the name and address of the instructing solicitor, suggesting that the retainer was between the barrister and the client, nor is there any evidence of any discussion between Mr Egan and the barrister to that effect. Further, there is no evidence from Mr Egan or Mr Dimos with respect to the question, whether the client expressly authorised the solicitor to brief the barrister and bring into existence a contract between the barrister and the client. Subject to evidence to the contrary, the retainer between solicitor and client authorised the solicitor to retain counsel, but that authority did not extend to bringing into existence a contract between the barrister and the client.

In my opinion, given those basic facts, the conclusion is overwhelming that the contract was between the barrister and the solicitor.

Mr Egan delivered a brief to the barrister in the matter involving Harry Economides, to appear for him. The brief is endorsed with the name of the firm, and there is no evidence of any discussion involving Mr Economides giving authority to the firm to enter into a contract on his behalf with the barrister. There is no evidence of any discussion, at the time when the barrister was retained, that the contract was to be with the client. Again, the evidence leads clearly to the conclusion that the contract was between the barrister and the solicitor.

In relation to the matter involving Mr Grezos, which also involved an appearance by the barrister, the evidence reveals that at the time when the brief was being offered to the barrister, there was a discussion concerning the fees, and there is evidence that Mr Egan said that the firm would pay.

The barrister prepared the first back sheet relating to lodging appeal documents, and the back sheet to actually appear on the appeal was delivered by Mr Egan. Again, in my opinion, the evidence overwhelmingly leads to the conclusion that the contract was between the barrister and Mr Dimos.

In relation to each matter, it is clear that Mr Egan, acting as an employee of Leo Dimos and Associates, negotiated a contract with the barrister, that in each case there was no evidence that the contract was other than between the contracting parties, and the mere fact that the services to be rendered by the barrister were in respect of the solicitor's client does not, in the circumstances of each of these retainers, lead to the conclusion that the contract was not between the barrister and the solicitor.

It follows that although the Magistrate misdirected himself by applying what appeared to be a rule of general application, the facts in the case confirmed his conclusion that the contract was between the barrister and the solicitor.

In accordance with well established authority, even though the Magistrate may have made an error, his decision should be upheld on the ground that there was evidence to support it. See Foender v Dabscheck [1954] VicLawRp 6; (1954) VLR 38.

In answering part (a) of the first question of law, in my opinion, in the circumstances of this case, there was a contract between the solicitor and the barrister, and the solicitor was liable pursuant to that contract for the fees of the barrister. It is unnecessary to consider the second part of the question, whether there was a contract between the barrister and the client, because that was not an issue in the proceeding. The clients were not parties to the proceeding. The issue was whether the barrister had a contract with the solicitor.

The second question of law raises a question which is wider than the issue in the proceeding. In conformity with the general rule, this court will not give a decision on a hypothetical matter. The question that was in issue was whether or not the barrister was entitled to recover his legal costs. His right to recovery does not depend upon a costs agreement. That is made very clear by s.93. Further, the issue under s.96(2), where the claim is based upon a costs agreement, is whether it was in writing or "evidenced in writing". There was no issue that the fees charged by the barrister were considered reasonable, considering the value of the legal services provided. See s.93(c). It follows that this question has not been raised in the proceeding, and it is unnecessary for me to decide it.

It follows that the appeal against the respondent barrister is dismissed.

The question of law concerning the third party proceeding does not raise the real issue for consideration and determination. The learned Magistrate expressly found that, it was not a term of the contract of employment that the authority of Mr Egan to brief a barrister was limited. This was a question of fact, and there was ample evidence to support the finding. The finding was clearly open to the Magistrate.

On the appeal, it was argued on behalf of Mr Dimos that, there was an implied term of the contract of employment that the employee would obey the lawful and reasonable instructions and directions of the employer. In addition, there is an implied term in the contract of employment that the employee will perform his duties in a careful and proper manner. See Lister v Romford Ice and Cold Storage Co Ltd [1956] UKHL 6; (1957) AC 555.

Mr Lithgow submitted, on the appeal, that there were clear breaches of both terms which caused loss and damage to the employer, Mr Dimos, and accordingly, he was entitled to recover, by way of damages, the amount that Mr Dimos had to pay to the barrister. There is no doubt that if an employee does breach a term of the employment which causes damage to the employer, the employer is entitled, in accordance with the normal principles of contract law, to recover compensation for the damage suffered.

The law is correctly stated in Chitty on Contracts (Specific Contracts), 24th ed. (1977) paragraph 3644 -

"The employee may be liable in damages for the breach of any term of his contract of employment, whether express or implied, such as by his failure to use due care or skill. The employer is entitled to damages for those consequences which might reasonably be expected to have been in the contemplation of the parties (at the time when the contract of employment was made) as likely to result from the breach."

Quoted with approval by Ackner LJ in Janata Bank v Ahmed (1981) ICR 791 at 809.

Mr Lithgow submits that the case is clear, and that if Mr Dimos is obliged to pay the barrister, then he is entitled to recover the loss suffered, by reason of the breach by Mr Egan to follow the directions that, in criminal cases, barristers should not be retained unless their fees have been paid by the client.

I agree that the case was straightforward if based upon that contention. But unfortunately, that was not the way the case proceeded before the Magistrate.

The particulars of claim in the third party notice do not set out the basis of the claim. After asserting that Mr Egan was an employee of Mr Dimos, the particulars asserted that he engaged the services of the barrister contrary to "the defendant's authority". I think there is an error referring to the "defendant's authority", and should either read "the defendant's instructions" or "the third party's authority". The particulars conclude that there was a breach of the contract of employment between Mr Dimos and Mr Egan as a result.

The position was further muddied by considering paragraph 3 of the defence of Mr Leo Dimos, which appeared to assert that Mr Egan was acting outside the scope of his authority and therefore, Mr Dimos was entitled to contribution or indemnity from Mr Egan on that basis.

There was no opening by counsel for the defendant of the third party proceeding, and there were no discussions between Bench and Bar as to what was the real issue in the third party proceeding.

The issue raised at the hearing on the third party proceeding was, whether or not, it was an express term of the contract of employment that, Mr Egan was not permitted to brief counsel unless the fees were paid by the client prior to entry into the retainer. The Magistrate concluded that it was not an express term.

At the end of the evidence, the Magistrate asked counsel whether any wished to make submissions. Counsel on behalf of the defendant, Mr Dimos, made some submissions.

In the course of the submissions, after discussions about the contractual arrangements between the barrister and Mr Dimos, the Magistrate said -

"I think you have got real problems there. What do you say about this third party matter? You maintain curiously enough that this is a term of the contract of employment, that you are not to do such and such: 'I employ you to work a number of days a week and I will pay you this much and this is the sort of work you do and in addition, this is a term of the contract, that you are not to brief'."

Counsel then observed that the solicitor was not to brief unless - and the Magistrate interjected -

"Rather than just an instruction as to how you carry out your duties".

"If that's a firm directive that's a condition of the employment terms. If that's breached then that's a matter obviously that might render the firm not liable as the agent, in this case Mr Egan, was outside the scope of his actual specific authority. That's a breach of his conditions of employment, then that's

a matter which in my submission should not permit the firm to be contractually liable."

One can see, from the observations made by counsel, that there was some confusion with respect to how the third party matter was being put. But on any view, it was not put that there were implied terms to the effect that, the employee was bound to obey lawful directions and to carry out his duties in a careful and proper manner.

It can be seen that the issue raised and decided by the Magistrate, was completely different to the way the matter was argued on this appeal. Further, it can also be seen that the question of law raised by the appeal concerning the third party proceeding, does not raise the real issue either.

I think it is most unfortunate that the position was not clarified at the proceeding when it was clear, on the face of the third party proceeding, that there was some error and some uncertainty as to the issues in the third party proceeding. Even though the proceeding was an arbitration proceeding under Division 2 of Part 5 of the Magistrates' Court Act 1989, and expedition and informality are encouraged, the fact is that the court must determine questions in accordance with the law, and must comply with the rules of natural justice. In my opinion, when it was apparent on the face of the pleadings that there was uncertainty with respect to the basis for the third party claim, steps should have been taken to clarify the matter. Counsel and the Magistrate should have clarified the position. Unfortunately, this was not done.

I am not prepared to decide this appeal on the argument now put on behalf of Mr Dimos. First, because the question of law does not raise the issue. Secondly, and more importantly, it would be unfair to do so.

There is no doubt about the implied term as to obeying lawful directions. This is a term that is implied by law. See Concut Pty Ltd v Worrel [2000] HCA 64; (2000) 75 ALJR 312 at 317. But the real issue was whether there had been a lawful direction which had been breached. Mr Egan, when he gave evidence, stated that it was not the invariable rule. He referred to a number of instances, but the point was not pursued or investigated. Mr Dimos, for his part, stated that the rule was invariably followed in criminal matters, although there may be some exceptions in the area of civil matters. If the issue now raised on appeal had been clearly raised at the hearing, Mr Egan would have been given the opportunity to lead evidence, if there was any, to show that it was not the invariable rule in criminal matters. The issue was not raised and not dealt with in this way.

In my opinion, it would be unfair, at this late stage, to permit the argument to be put. If the case had been presented on the basis of a breach of an implied term, Mr Egan would have had the opportunity to meet it. He was denied that opportunity. It is now too late to present the case on that basis. It follows that the appeal in respect of the third party proceeding fails.

I do not answer the question raised in the appeal because first, it is hypothetical; and secondly, the Magistrate found that it was not a term of the contract of employment concerning the limit of authority.

The appellant has failed in the appeal and, subject to any submissions from counsel, I propose to make the following orders -

(i) That the appeal be dismissed;

(ii) That the costs of the first and second respondents, including reserved costs, be paid by the appellant.

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Legal Practice Act 1996

But the Legal Practice Act 1996

At a glance

Court

Decision date

Before

Source

Judgment (158 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (2)