Doyle v. Hall Chadwick [2008] HCASL 422 | Case summary

Doyle v. Hall Chadwick [2008] HCASL 422 | Case summary | Zoe

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Monday 9 July 2007 DR. DAVID DOYLE V. HALL CHADWICK Judgment 1 MASON P: I have had the benefit of reading in draft the reasons of Hodgson JA. 2 My sole point of disagreement arises at a critical point for the resolution of the appeal (par [74] of Hodgson JA's reasons). 3 The Arbitrator's final award was in favour of Grosvenor Constructions (NSW) Pty Ltd (Grosvenor) in the sum of $8,499. The Arbitrator made no order as to the costs of the arbitration save that the parties were to pay their own respective costs and share equally the expenses of arbitration. 4 At that time, indeed from prior to the date of the relevant Costs Agreement, Grosvenor was liable to Musico for costs previously ordered by the Supreme Court. These costs were quantified by cost assessors' certificates in sums exceeding $74,000. Significantly, these were not costs of the arbitration and they had been incurred as between Grosvenor and Musico prior to Hall Chadwick's entry into the relevant Costs Agreement with Dr Doyle. 5 These Supreme Court costs obligations were not pleaded as a set off in the arbitration nor were they in any way made part of the disputes referred to arbitration. They could not have been, having regard to their derivation in orders of the Supreme Court. They were liabilities that were incapable of being defeated whatever the result of the arbitration and that could have been enforced and satisfied before the conclusion of the arbitration. 6 Grosvenor might have discharged these obligations before the arbitration was finalised. Indeed, after finalisation, it would have been open to Grosvenor to pay the Supreme Court costs in full and to have recovered in full the award sum of $8,499. Instead, Grosvenor and Musico sensibly netted off their respective obligations by Grosvenor paying what it owed in relation to the Supreme Court costs, less the $8,499 owed to it in relation to the arbitration. 7 It does not follow, in my view, that Grosvenor "recovered" nothing from Musico within the terms of cl F(i) of the Costs Agreement. On the contrary, Grosvenor derived a benefit in money's worth from the net balance of monies awarded by the Arbitrator that was "sufficient … to enable payment of the conditional fees or part thereof". Grosvenor chose to apply that benefit in offsetting part of its larger obligation to Musico that had nothing to do with the arbitration save in the irrelevant sense that it arose out of an earlier stage of the Grosvenor-Musico disputes in the different venue of the Supreme Court of New South Wales. 8 At a technical level, the implemented arrangement for netting off constituted an accord and satisfaction that discharged Musico's obligation under the award (see Smith v Trowsdale (1854) 3 E & B 83, 118 ER 1072). 9 The parties may not have had these principles at the forefront of their minds when they negotiated the Costs Agreement, but the meaning of the terms they adopted is to be determined by what a reasonable person would have understood them to mean. That normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties and the purpose and object of the transaction (Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179). 10 Here the arbitration resulted in an award in favour of Grosvenor and Grosvenor obtained moneys worth for it to the value of 100 cents in the dollar. In my view, that was a "recovery" that enabled payment of part of the conditional fees. Merely because Grosvenor put the money to another use in a transaction to which Dr Doyle was not a party could not affect the legal situation. 11 I would therefore uphold the appeal from the orders of Rothman J with costs in this Court and below. The judgment obtained on 12 July 2006 with effect from 7 July 2006 when the Certificate as to Determination of Costs was entered in the Supreme Court should be restored. There should be liberty to apply with regard to any questions of interest that the parties are unable to resolve. The respondent should have a certificate under the Suitors' Fund Act 1951 if qualified. 12 I agree with Hodgson JA that the application for leave to appeal from Harrison AsJ should be refused with costs. 13 HODGSON JA: On 4 July 2006, a costs assessor G. Salier issued a Certificate as to Determination of Costs pursuant to ss.208A and 208J of the Legal Profession Act 1987 (1987 Act), naming as applicant Dr. David Doyle trading as the Builders' Lawyer and as respondent Hall Chadwick, stating that the sum of $177,109.10 was to be paid by the respondent to the applicant. Hall Chadwick is a firm of chartered accountants. 14 On 7 July 2006, Dr. Doyle filed this certificate with the Supreme Court, and pursuant to s.208J(3) of the 1987 Act, the certificate was taken to be a judgment of the Court. 15 On 1 August 2006, Hall Chadwick filed a summons in the Supreme Court seeking to set aside the costs assessor's certificate and to have the costs assessment re-determined, on the ground of errors of law. 16 On 15 August 2006, Harrison AsJ granted a stay of the judgment taken to have arisen on 7 July 2006. 17 On 14 November 2006, Rothman J allowed the appeal against the determination of the costs assessor, set aside the certificate and the judgment, declared that no fees were payable by Hall Chadwick to Dr. Doyle, and ordered Dr. Doyle to pay Hall Chadwick's costs of the costs assessment and the proceedings in the Supreme Court. 18 Dr. Doyle has applied for leave to appeal from the decisions of Harrison AsJ and Rothman J. The application for leave has been heard on the basis that, if leave is granted, the appeal will be dealt with without further argument.

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CIRCUMSTANCES 19 On or about 26 November 2002, two partners of Hall Chadwick were appointed as joint voluntary administrators of Grosvenor Constructions (NSW) Pty. Limited (Grosvenor); and a Deed of Company Arrangement was entered into on or about 10 January 2003. 20 From about February 2003 to May 2005, Dr. Doyle was retained by Hall Chadwick as its solicitor to advise and pursue claims which Grosvenor might have had against parties for whom Grosvenor had carried out construction work. One of these claims related to work done on a shopping complex owned by Joseph Musico and others (Musico). 21 An adjudication determination was obtained by Grosvenor pursuant to the Building & Construction Industry Security of Payment Act 1999 (SOP Act) for about $760,000.00. Musico applied to the Supreme Court for an order that the determination be quashed; and an order to that effect was made by McDougall J on 31 October 2003. McDougall J also ordered that Grosvenor pay Musico's costs of these proceedings. 22 On 5 December 2003, there was a further determination made under the SOP Act for about $486,000.00 in favour of Grosvenor against Musico, and on 16 December 2003 this was filed as a judgment pursuant to the SOP Act. Musico applied for a stay of that judgment, relying among other things on a Report to Creditors dated 11 December 2002 to the effect that unsecured creditors' claims against Grosvenor amounted to $4,791,504.00 at the time the administrators were appointed, with the amount available for unsecured creditors being $528,294.00. Dr. Doyle acted for Grosvenor in resisting that application. Einstein J granted the stay on 27 April 2004. 23 The dispute between Grosvenor and Musico was referred for arbitration to Mr. R.L. Hunter QC. Grosvenor was required to provide security for costs in the sum of $150,000.00, and did so. This followed a Report to Creditors dated 30 April 2004, reporting that a threshold requirement for deed compliance, namely realisation of a minimum sum of $1 million, was fulfilled by 10 January 2004. 24 On 27 August 2004, a Certificate as to Determination of Costs to be paid by Grosvenor to Musico was issued, in the sum of $62,795.44. (A review application was made by Grosvenor in respect of this assessment, and the assessment was confirmed by the Review Panel on 15 March 2005.) A further such certificate was issued on 19 October 2004, this time for $11,731.50. 25 On 30 September 2004, Hall Chadwick entered into the costs agreement with Dr. Doyle that is the subject of this dispute. In paragraph 1 of this agreement, the work to be done by Dr. Doyle was identified: The legal work that you want us to do is to continue the arbitration before Mr Hunter QC against Musico and Genua parties carried out pursuant to the cost agreement, as amended, between us dated 4th February 2003 SAVE ONLY that the fees applicable after 30 September 2004 shall be as set out in the terms hereinunder set out in respect of conditional fees. 26 Under the heading "Conditional Costs Agreement (s.187 of "the Act")", there were the following provisions: A. You pay all disbursements and expenses.

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F. Success is deemed to occur if any of the following occur: (i) there is a net balance of monies awarded by the Arbitrator to Grosvenor Constructions Pty Ltd (subject to Deed of Company Arrangement) and sufficient monies are recovered from the respondents to enable payment of the conditional fees or part thereof); (ii) a settlement is reached between the parties prior to the Arbitrator's Award irrespective of the terms of that settlement; (iii) the Arbitrator dies or becomes incapacitated prior to publishing his award. 27 On 28 February 2005, Mr. Hunter delivered an interim award; and on 24 March 2005, Grosvenor commenced proceedings in the Supreme Court against Musico seeking to set aside orders arising from that award. On 14 April 2005, Mr. Hunter delivered the final award, awarding a balance of $8,499.00 to Grosvenor and making no order as to costs. The award dealt with and disposed of a counter claim by Musico against Grosvenor in excess of $1.3 million. 28 On 21 April 2005, the two costs certificates obtained by Musico were filed, that of 27 August 2004 in the District Court and that of 19 October 2004 in the Local Court, in both cases taking effect as judgments of the respective courts. It appears that Hall Chadwick later paid Musico the amount of these judgments less the $8,499.00 awarded by Mr. Hunter, as reflected in the submissions referred to in par.[19]. 29 At about this time, Hall Chadwick withdrew instructions from Dr. Doyle; and on 17 May 2005, the proceedings commenced on 28 February 2005 challenging Mr. Hunter's award were dismissed, apparently following a decision not to pursue them. 30 On 20 June 2005, Dr. Doyle filed in the Common Law Division of the Supreme Court an application for assessment of costs. Mr. Salier was appointed as costs assessor. 31 The submissions made by Hall Chadwick to the costs assessor included submissions contained in a letter of 8 August 2005. These submissions referred to the "second arm" of clause F(i), and in that regard made the following submissions: 32. To further emphasise this submission, it should be borne in mind that the Respondent did not in fact receive the sum of $8,499.00 due to the fact that the same was effectively "set off' against the value of the costs Orders made in favour of the Musico interests.

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As the Respondent never actually "recovered" the funds ($8,490.00) or any other amount, there are no fees available to enable payment of the conditional fees or part thereof as required by the relevant clause of the Costs Agreement. 32 On 4 July 2006, Mr. Salier published his certificate and a statement of his reasons. In that statement, Mr. Salier recorded the communication he had made to the parties some time after 1 September 2005, noting among other things the following: I am conscious of the fact that the Costs Respondent submits that in interpreting clause 2F(i) of the second costs agreement that clause has two arms. I presently do not lean to that interpretation. I have particular regard to the word "and" in the second line of (i). I have always understood the word "and" to be what is known as a conjunction and if that is so it seems to me said clause (i) is to be read in its entirety and not the subject of two separate constructions. 33 The reasons went on to record that Hall Chadwick had paid Dr. Doyle amounts claimed in four invoices, pursuant to an earlier costs agreement, amounting to something over $80,000.00. In relation to clause F of the subject agreement, the assessor gave the following reasons: The Costs Applicant submitted an initial draft of the second costs agreement to the Costs Respondent in which draft clause 2(F)(i) stated as follows:- "There is a nett balance of monies awarded by the Arbitrator to Grosvenor Constructions Pty Ltd (in administration) whether the amount of such monies be large or small and irrespective of whether any such monies are actually paid." On 29 September, 2004 the Costs Respondent returned an amended draft agreement to the Costs Applicant, one of the amendments being an amendment to clause 2(F)(i) in the following terms:- "There is a nett balance of monies awarded by the Arbitrator to Grosvenor Constructions Pty Ltd (subject to Deed of Company Arrangement) and sufficient monies are recovered from the Respondents to enable payment of the conditional fees." In the events that happened the wording of clause 2(F)(i) as agreed and settled by the parties was as first appearing above namely that there was a nett balance of monies awarded by the Arbitrator and sufficient monies recovered from the Respondents to enable payment of the conditional fees or part thereof.

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208D Unjust costs agreements (1) A costs assessor may determine whether a term of a particular costs agreement entered into by a barrister or solicitor and a client is unjust in the circumstances relating to it at the time it was made. (2) For that purpose, the costs assessor is to have regard to the public interest and to all the circumstances of the case and may have regard to: (a) the consequences of compliance, or non-compliance, with all or any of the provisions of the agreement, and (b) the relative bargaining power of the parties, and (c) whether or not, at the time the agreement was made, its provisions were the subject of negotiation, and (d) whether or not it was reasonably practicable for the applicant to negotiate for the alteration of, or to reject, any of the provisions of the agreement, and (e) whether or not any of the provisions of the agreement impose conditions that are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of a party to the agreement, and (f) whether or not any party to the agreement was reasonably able to protect his or her interests because of his or her age or physical or mental condition, and (g) the relative economic circumstances, educational background and literacy of the parties to the agreement and of any person who represented any of the parties to the agreement, and (h) the form of the agreement and the intelligibility of the language in which it is expressed, and (i) the extent to which the provisions of the agreement and their legal and practical effect were accurately explained to the applicant and whether or not the applicant understood those provisions and their effect, and (j) whether the barrister or solicitor or any other person exerted or used unfair pressure, undue influence or unfair tactics on the applicant and, if so, the nature and extent of that unfair pressure, undue influence or unfair tactics. (3) For the purposes of this section, a person is taken to have represented a person if the person represented the other person, or assisted the other person to a significant degree, in the negotiations process up to, or at, the time the agreement was made. (4) In determining whether a provision of the agreement is unjust, the costs assessor is not to have regard to any injustice arising from circumstances that were not reasonably foreseeable when the agreement was made.

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DECISION OF PRIMARY JUDGE 36 The primary judge (Rothman J) dealt with a contention advanced by Dr. Doyle that the appeal was incompetent, because the determination of the costs assessor had merged into a judgment, so that the underlying basis of the appeal had disappeared, and because the judgment itself was conclusive and beyond recall. The primary judge rejected that contention. 37 The primary judge expressed the view that the construction of the contract was a question of law, and therefore an appeal lay without leave; but also said that, if necessary, he would grant leave. 38 The primary judge expressed the view that construction of contracts was not an exercise contemplated by the 1987 Act as being within the jurisdiction of a costs assessor. The primary judge then proceeded to address the construction of clause F of the contract, giving the following reasons: 83 The defendant submits, in my view correctly, that there are clearly and unambiguously "only two distinct outcomes: either no liability for any legal fees if no success achieved or payment of all fees at the premium rate if success is deemed to have been achieved." Further, the defendant submits that Clause 2F is to be read conjunctively or in its entirety; it is unambiguous. The defendant submits that the definition of success requires there to be a nett balance on the award in favour of the claimant in an arbitration, as, they say, there was. The defendant submits that all that is required is for there to be "sufficient funds to be recovered from the respondent [in the arbitration] to enable payment of the conditional costs or part thereof. The happening of that cannot be doubted since the award is $8449 (sic) in favour of the arbitration Claimant, and equally clearly, indicates on its face sufficient funds recovered to enable payment of part of the conditional costs". 84 The above submission ignores two salient facts. First, the arbitrator's award, while providing for the payment of $8499 in favour of the plaintiff in these proceedings, at the same time did not allow costs and required the plaintiff to pay half of the costs of the arbitration. The costs of arbitration are disbursements for the purpose of the costs agreement. Half of the costs of the arbitration was significantly more than $8499. As a matter of fact the nett balance of monies awarded by the arbitrator did not result in any nett gain, even of an insignificant amount, to the arbitration claimants. However, it may be that the costs of the arbitration may not be allowed to be brought to bear in determining the net balance of monies pursuant to the terms of clause 2F.

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Decision 47 Dr. Doyle accepted that, on his submissions, the judgment pursuant to s.208J could qualify as a judgment of the Court in proceedings in a Division, and thus (with leave) be the subject of an appeal to the Court of Appeal under s.101 of the Supreme Court Act 1970. However, the problem with that approach is that there would be no ground on which such an appeal could be upheld, unless the relevant certificate underlying the judgment was set aside; and s.208K of the 1987 Act prevents that happening except pursuant to the appeal procedure provided by the 1987 Act. 48 The 1987 Act discloses a plain legislative intention that there be an appeal to the Supreme Court in a Division against decisions of costs assessors; and in my opinion it was plainly not the intention of the legislature either that the possibility of such an appeal should be wholly lost if a judgment was obtained under s.208J, because the certificate then merges into the judgment and can no longer be set aside; or that there would have to be also an application for leave to appeal to the Court of Appeal pursuant to s.101 of the Supreme Court Act. 49 Accordingly, in my opinion the clear legislative intention is that an appeal to the Supreme Court should be able to proceed after a judgment has been obtained under s.208J. Further, in my opinion, there is no difficulty in giving effect to this legislative intention. It is well recognised that there are judgments that are not based on any decision of the Court of which they are taken to be judgments, but have some other basis; and such judgments may be set aside or varied if that basis is defeated or varied. 50 One example is judgments entered by consent. They are "mere creatures" of the agreement, and may be set aside, without an appeal, on any ground on which the underlying agreement may be set aside: Logwon Pty.Limited v. Warringah Shire Council (1993) 33 NSWLR 13 at 28-30. 51 Another example is judgments arising from the registration of a certificate of judgment from another jurisdiction. If the judgment in that other jurisdiction is set aside or varied, then the judgment arising from registration can similarly be set aside or varied: Remilton v. City Mutual Life Assurance Society Limited (1907) 24 WN(NSW) 177, Bell v. Bell (1954) 73 WN(NSW) 7. 52 A judgment arising from a certificate pursuant to s.208J(3) of the 1987 Act is this kind of judgment; and is liable to be set aside or varied if the certificate on which it is based is set aside or varied: cf. Croker v. Commissioner of Taxation [2005] FCA 127, (2005) 145 FCR 150 at [14]. A further limitation of the effect of such a judgment is considered in Khoury v. Hiar [2006] NSWCA 47. 53 In relation to an appeal to the Supreme Court, there is no need for a provision of the kind contained in s.208KF. The Supreme Court has power to make appropriate orders in relation to its own judgments, and to make orders preventing parties from relying on judgments of other courts. 54 Accordingly, in my opinion Katingal was wrongly decided, and Dr. Doyle fails on this issue.

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JURISDICTION OF COSTS ASSESSOR 55 Both parties submitted that a costs assessor does have jurisdiction to construe a costs agreement and determine its effect. 56 In my opinion, s.208(3) of the 1987 Act makes it clear that this is so, at least where the assessment is between the lawyer and the client. However, I do not entirely agree with either of the opposing views expressed in the Muriniti litigation, that is, the view of Davies AJ in Muriniti v. Lyons [2000] NSWSC 680 and that of Dunford J in Muriniti v. Lyons [2004] NSWSC 135. 57 In that litigation, there was a dispute as to the terms of an agreement between a solicitor and a barrister, where the agreement was apparently not in writing and the barrister was deceased. The barrister's widow applied to the Supreme Court for a costs assessment under the 1987 Act; and when, over objection of the solicitor, the costs assessor indicated an intention to proceed, the solicitor commenced proceedings in the Supreme Court, seeking among other things a declaration to the effect that any agreement with the barrister was subject to a condition that had not been fulfilled. 58 Davies AJ dismissed those proceedings, holding that any questions as to the terms of the agreement were to be determined by the costs assessor, not the Court. 59 The costs assessor proceeded with the assessment, and issued a certificate, although he stated explicitly that he was only determining a fair and reasonable amount of costs, not whether they were payable. The barrister's widow filed the certificate of assessment, obtained a judgment under s.208J and pursued execution of that judgment. 60 The solicitor commenced further proceedings in the Supreme Court, seeking a declaration that he was not liable to pay the costs; and those proceedings were subsequently amended to seek an extension of time to appeal from the determination of the costs assessor. Dunford J granted that leave. In the course of his decision, he said this: 55 A Costs Assessor under the Act is not an officer of the Court when acting as such; s.208S(4), is not part of the Supreme Court and has no power to take sworn evidence or resolve conflicts of evidence: Ryan v Hansen [2000] NSWSC 354, 49 NSWLR 184. 56 Having regard to the status and powers of Costs Assessors and the ordinary meaning of the word "assessor", I am satisfied that the powers of Costs Assessors are limited to determining the value of the work done or services rendered in circumstances where there is no dispute that costs are payable and the only issue is as to the amount. It is no part of their function to determine whether or when such costs are payable. The matters set out in s 208A which they must, and in s 208B which they may, take into account are all matters relevant to putting a value on the work done or services rendered and the fairness or justice of the amount claimed; but are not matters which relate to the terms of a costs agreement (particularly if oral) and whether any conditions precedent to payment have been fulfilled. The determination of such questions requires the reception of sworn evidence, which can be tested by cross-examination, and an assessment of such evidence. Costs Assessors do not have the power to deal with such matters. 57 For similar reasons it has been held that a Costs Assessor has no power to hear a cross-claim by a client against a solicitor based on negligence, nor to award damages: Ryan v Hansen , supra per Kirby J; or to make an assessment when no costs are presently due and payable: Lace v Younan [1999] NSWSC 1072 per Master Harrison (no bill of costs rendered); Baker v Kearney [2002] NSWSC 746 per Master Malpass (judgment in District Court that applicant for assessment not entitled to costs). I am therefore satisfied that on being notified of the dispute as to the plaintiff's liability to pay the costs, the Costs Assessor should have declined to make a determination or issued a certificate unless and until such issue was resolved. 58 It could never have been the intention of the legislature that where the liability for a debt for costs was disputed, a party to the dispute could render the other party to the dispute liable for the debt without any judicial determination of the disputed issues between them simply by having the value of the work assessed by a Costs Assessor and the certificate of determination registered as a judgment in a court of competent jurisdiction. Yet this is precisely what the defendant has sought to do in the present case. 59 In his judgment of 14 July 2000 in no 12152/99 at [13] Davies AJ appears to have taken a different view and indicated that the plaintiff's contentions as to the agreement and otherwise were matters to be determined in the first instance by the Costs Assessor and then be dealt with by this Court on appeal pursuant to s 208L or 208M, although para [4] of the judgment suggests that the issue now under consideration was not raised in that case. With all respect to his Honour, for the reasons already given, I take a different view. 61 In my opinion, Davies AJ was correct to say that a costs assessor, assessing costs between a lawyer and client, can determine disputes as to the terms of the costs agreement, and Dunford J was wrong to say otherwise. However, where the existence of the terms of the agreement are in dispute in a way that would require the hearing of evidence to resolve, it may be appropriate for the costs assessor to decline to resolve the dispute; and in the Muriniti litigation, it would in my opinion have been open and reasonable for Davies AJ to have permitted the question to have been determined in the proceedings before him. As it turned out, the costs assessor did decline to resolve this question; and in my opinion, in those circumstances, the costs assessor should not have issued a certificate which could be converted into a judgment. That is, in a case where there is a real dispute on substantial grounds as to whether any costs are payable, a costs assessor should not complete an assessment by issuing a certificate unless satisfied that the costs are payable, because the certificate can be filed so as to take effect as a judgment. 62 In my opinion, this approach is consistent with the views of the Court of Appeal in Graham v. Aluma-Lite Pty. Limited (NSWCA, unreported, 25/3/97) and Wentworth v. Rogers [1999] NSWCA 403. In so far as there is a divergence of opinion in Wentworth v. Rogers [2006] NSWCA 145 as to the power of a costs assessor, in assessing party and party costs, to determine the terms and effect of the costs agreement of the party against whom the costs are sought, it is not necessary to address that divergence of opinion in this case.

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CONSTRUCTION OF THE AGREEMENT Submissions 63 Dr. Doyle submitted that, at the time the costs agreement was entered into, both he and Hall Chadwick were aware that the requirement of the deed to realise $1 million had been satisfied; and that there were funds available to pursue the arbitration, including the provision of $140,000.00 for Grosvenor's own costs and $150,000.00 for security for costs. 64 Also, at the time the costs agreement was entered into, Grosvenor was already liable to Musico for costs previously ordered. A certificate for $62,795.44 had already been issued (although, presumably by the time the agreement was made, it was the subject of a review application), and a further certificate for $11,731.50 was issued just a little later. That liability would not be defeated whatever the result of the arbitration, and could well have been enforced and satisfied before the conclusion of the arbitration. 65 In those circumstances, Dr. Doyle submitted that, in the "second arm" of clause F(i), "recover" meant simply "become presently entitled by virtue of the arbitrator's award" (cf. Rosser v. Marine Ministerial Holding Corporation (No.2) [1999] NSWCA 214); and that this was satisfied by the award for $8,499.00. 66 Dr. Doyle also submitted there was no basis for saying the balance was not sufficient to enable payment, because it first had to be applied towards payment of disbursements and expenses under clause A and/or overdue fees under clause D. Clause F simply did not expressly or impliedly provide for this. 67 Alternatively, if it were held that "the second arm" of clause F(i) was not satisfied by the making of the award, but required further consideration as to whether monies were recovered from Musico to enable payment of some of the conditional fees, Dr. Doyle submitted: (a) Grosvenor in fact recovered $652,230.00 plus GST from Musico; Musico's cross-claim was reduced from $1.4 million to $643,731.00 plus GST; and not only did Grosvernor get the balance of $8,499.00 plus GST, but also the benefit of recovery of the $150,000.00 provided for security for costs, plus interest. (b) It could not have been intended that "success" depend on whether Musico had or had not obtained payment of their prior costs orders by the time the arbitration was concluded, the possibility of set-off arising only in the event that it had not done so. (c) In any event, having the benefit of $8,499.00 by way of set-off was equivalent to "recovery of monies". (d) The agreement contained an implied term that each party would do what was necessary to enable the other party to have the benefit of the agreement ( Butt v. McDonald (1896) 7 QLJ 68 at 70-71), so that Hall Chadwick could not defeat Dr. Doyle's entitlement by refraining from recovering monies but agreeing to set them off.

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Decision 68 The "second arm" of clause F(i) is in my opinion meant to add something to the first arm, and it requires recovery of monies so as to enable payment of some part of the fees. Thus, for example, it would not be satisfied if Musico became bankrupt and no money was recoverable for that reason. Accordingly, I reject Dr. Doyle's first submission. 69 I would add that, in my opinion, the second arm requires recovery of monies so as to enable payment from those monies of some part of the fees. It is not enough that there be something that might loosely be called "recovery of monies" and that Hall Chadwick have at their disposal some other fund from which they could pay. That is, the ability to pay must be causally linked to the recovery of monies. 70 I accept Dr. Doyle's submission that, if monies are recovered in the relevant sense, it does not defeat the satisfaction of clause F(i) that those monies are not sufficient to pay disbursements and expenses in accordance with clause A or Dr. Doyle's own prior fees in accordance with clause D. 71 So the question is, does the circumstance that $8,499.00 was set off against the costs owing to Musico, and not otherwise recovered from Musico, defeat satisfaction of clause F(i)? 72 I accept that Hall Chadwick could not avoid payment of fees by refraining from recovering monies that they could recover. I am also inclined to accept that, if Musico had obtained payment of their costs prior to the making of the award, and had then paid Hall Chadwick $8,499.00 following the making of the award, then clause F(i) would have been satisfied. 73 However, that did not happen; and in the circumstances that did occur, Hall Chadwick could not have obtained payment of the $8,499.00 without paying Musico's previous costs in full. This in turn gives rise to two questions: (1) Does the benefit of a set-off against Musico's costs amount to the recovery of monies from Musico so as to enable payment of some of the conditional fees? (2) If not, was the course taken by Hall Chadwick, of not paying Musico's costs in full so as to be able to receive $8,499.00, a breach of its implied obligation not to avoid payment of fees by refraining from recovering monies that they could recover? 74 In my opinion, the achieving of a set-off reducing amounts otherwise payable to Musico (who are "the respondents" referred to in clause F(i)) does not amount to recovery of monies from the respondents so as to enable payment of some of the conditional fees: it is merely a reduction of amounts otherwise payable to the respondents. In my opinion, Mason P's view that the recovery of "a benefit in money's worth" amounted to the recovery of "sufficient monies … to enable payment" does not give effect to the ordinary meaning of the latter expression, particularly in the context of the administration of a company whose liabilities greatly exceed its assets, where there can be a significant difference between an administrator actually receiving money and the administrator merely obtaining a set-off which reduces some liability of the company. It is only in the former case that the administrator actually recovers money out of which payments can be made. 75 In my opinion also, it was not a breach of Hall Chadwick's implied obligation for them to refrain from paying Musico's costs in full. It would in my opinion be unreasonable to hold Hall Chadwick contractually bound to pay Musico a larger amount than they were required by Musico to pay, simply to bring it about that monies be recovered from Musico in satisfaction of clause F(i). 76 There is force in the contention that this may have the capricious result that Dr. Doyle's entitlement to fees was determined by whether payment of Musico's costs happened to take place before or after the making of the award. However, there are in any event elements of caprice in clause F, for example in providing to the effect that payment of tens of thousands of dollars could depend on whether a balance was $1 in favour of Musico or $1 in favour of Grosvenor, or upon whether or not the arbitrator became incapacitated; and in my opinion, the correct course is to follow the ordinary meaning of the words actually used. 77 In my opinion, following that ordinary meaning, sufficient monies were not in the event recovered from Musico to enable payment of any part of the conditional fees. Accordingly, in my opinion, the conditions in clause F(i) were not satisfied, and Dr. Doyle was not entitled to the conditional fees.

Doyle v. Hall Chadwick [2007] NSWCA 159

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Judgment (69 paragraphs)

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Cases Cited (18)