Costs - Retainer agreement - Whether irrevocable authority is a cost agreement - Whether a costs agreement that is unreasonable in its formation and its terms should be set aside when it is not unreasonable in its effect on the client

1 TEMPLEMAN J: I have before me an application by originating summons in which the plaintiff, Mr Toby Frank Duckworth, seeks orders against the defendant, his former solicitor, Mr Gulsha Rai Chopra, to have two bills of costs taxed and to have a retainer agreement between him and the defendant set aside.

2 There is a considerable amount of background to this application, to which it is necessary to refer. I take the background from the plaintiff's affidavit, from his evidence given in court today on cross-examination on that affidavit and from agreed facts which were related to me by counsel.

3 The plaintiff was injured on 13 January 1990 at his place of work. He thereafter retained as his solicitors the firm Dwyer Thomas, who, in 1993, commenced proceedings on the plaintiff's behalf against his employer.

4 It seems that the plaintiff entered into some form of costs agreement with Dwyer Thomas. That agreement has now been lost. There is no evidence of its contents, although it was apparently agreed that no fee would be payable by the plaintiff until his action had been concluded.

5 In about June 1991 the solicitor at Dwyer Thomas who had the conduct of the matter left that firm. The defendant, who was also employed as a solicitor by Dwyer Thomas, then took over the matter on their behalf.

6 In about June 1995 the defendant left the employ of Dwyer Thomas and set up his own practice under the name Moss and Co. The plaintiff then instructed the defendant to act for him in place of Dwyer Thomas.

7 On 12 June 1995 the plaintiff entered into a retainer agreement with Moss and Co. That agreement is expressed to be in respect of a personal injury claim and is said to have been made upon terms and conditions appearing in the document itself.

8 The agreement provides for a professional hourly rate of $145. It makes provision for estimated disbursements and other fees and charges, in the sense that it contains a space for those figures to be inserted. However, nothing has been inserted in those places.

9 The plaintiff says, and it is not disputed, that he was not advised by the defendant or any representative of Moss and Co about the terms and effect of the retainer agreement. Specifically, the plaintiff says, he was not advised about the use, application and effect of the Supreme Court scale of costs, nor that the Supreme Court scale of costs would have applied had he decided not to enter into the retainer agreement. He says he was not informed about the fees which he might be charged under the retainer agreement: nor was he advised about the benefits or disadvantages of the retainer agreement.

10 Although the defendant has given evidence by affidavit, he has not sought to challenge those assertions.

11 The plaintiff became dissatisfied with the way in which the defendant was conducting his action and he decided to seek new representation. In about March of 1998 he instructed Mr Ian Tait, a barrister and solicitor, who took over the action on his behalf.

12 At about that time the plaintiff received from the defendant a letter enclosing a document described as an irrevocable authority, whereby the plaintiff authorised Mr Tait to retain monies for the purpose of paying outstanding legal fees. The letter enclosed also a copy of a bill dated 27 June 1996 from Dwyer Thomas which the plaintiff had received previously, and a bill from the defendant said to refer to the work which he had done for the plaintiff down to that date.

13 The irrevocable authority is a document of some importance and I will read the relevant parts of it:

"I, TOBY FRANK DUCKWORTH of 10 Birrell Place, Gosnells in the State of Western Australia, Auto Electrician DO HEREBY GIVE an IRREVOCABLE AUTHORITY to whomsoever it may concern including my solicitor Mr Ian Tait of Level 3, 267 St George's Tce., Perth and to any other solicitor or solicitors who may from time to time represent me in relation to District Court action KA23 of 1993 to retain the sum not exceeding $10,893.25 in their trust account on completion of my claim for the purpose of this charging (sic) [discharging] the account of Messrs Moss and Co, Solicitors, of Suite 1, 1st Floor, 593 Albany Highway, Victoria park, WA 6100.

I authorise and direct my solicitor to pay Messrs Moss & Co as well as Dwyer Thomas account the said sum of $10,893.25 inclusive of disbursements upon completion of my case from the proceeds of settlement, subject to my right to request a taxation of these accounts.

This Irrevocable Authority and Acknowledgment of Debt is binding upon me and my assigns and successors and cannot be withdrawn save for the expressed written consent of Messrs Moss & Co.

The Irrevocable Authority and Acknowledgment of Debt relates to those fees and disbursements arising out of my motor vehicle (sic) accident on 13 November 1990 for professional services rendered by

(a) Dwyer Thomas Solicitors for the period until 9 June 1995 in the sum of $3591.45 ($3600 plus disbursements of $91.45)

(b) Moss & Co for the period 17 June 1995 to 4 March 1998 in the sum of $7301.80.

I acknowledge that MOSS & CO, are entitled to receive payment of the account dated 27/06/97 of Dwyer Thomas. The said account was issued to me by Dwyer Thomas on 27/6/1996 in the sum of $6,481.50.

I, UNDERTAKE to pay the following disbursements which are outstanding.

i) any account which may be received from Mr Kevin Pratt, Barrister

ii) payment towards outstanding medical reports requested from Dr Hardisty; Dr Isherwood & Dr Harry Clarke

I further authorise my solicitor or solicitors to allow access to my file for inspection for professional services rendered until 4 March 1998; particularly if I chose to seek taxation of the accounts rendered.

I acknowledge that should I change from my present solicitor to any other solicitor or solicitors, Messrs Moss & Co will be advised of any change of solicitors.

This authority is subject to my right to have any of the above bills taxed by the appropriate authority."

14 The words which I have included in italics were added in handwriting to the typed document which was then signed by the plaintiff and witnessed by Mr Tait. It is clear that the handwriting is Mr Tait's: indeed the plaintiff gave evidence that it was, during his cross-examination. I therefore draw the inference that Mr Tait perused the irrevocable authority and that these additional words were added on his advice.

15 The plaintiff's action against his former employers was settled in about September 1998 for the sum of $65,000, together with the worker's compensation payments made to the plaintiff down to that date and $20,000 for his costs.

16 On about 12 October 1998 Mr Tait wrote to the defendant to inform him that the action had been settled in an amount of $65,000 plus, as he said in the letter, "an allowance for costs."

17 Mr Tait said he was holding an amount in his trust account sufficient to cover the defendant's bill and the Dwyer Thomas bill to which I have already referred. Mr Tait went on to say that in his view the settlement amount was far less than the damages to which the plaintiff would have been entitled had the correct parties been sued. The thrust of Mr Tait's opinion was that the defendant had been negligent in failing to join as a third party to the proceedings, a subcontractor to the plaintiff's employer.

18 Mr Tait said that before settling the claim he had obtained advice from senior counsel that the claim against the employer would probably fail should the matter proceed to trial. That being so, Mr Tait said, the defendant's negligence had deprived the plaintiff of the chance of pursuing a significant claim for damages against the third party. Mr Tait said he was instructed to claim damages from the defendant.

19 Mr Tait said he would be prepared to wait for the defendant's comments before pursuing any claim against him. Mr Tait concluded his letter by saying, "I am instructed to continue to hold sufficient funds in trust to cover your account but not to settle your account until this matter has been resolved."

20 Pausing there, I note that there was no complaint about the quantum of the charges which were the subject of the defendant's bill and the irrevocable authority. The inference which I draw from the letter is that the withholding of moneys in payment of the costs was intended to be by way of set-off against the prospective claim in negligence against the defendant.

21 It is an agreed fact that between October 1998 and November 1999 there were without prejudice discussions between the plaintiff's solicitors and the defendant's solicitors about settlement of the negligence claim against the defendant. There is now an action on foot against the defendant in which negligence is alleged. It is a further agreed fact that in the current action there is no claim against the defendant for wasted costs.

22 Following the breakdown of negotiations between the parties' solicitors in about November 1999 there was further correspondence between them in relation to the outstanding bills of costs. That issue was not resolved and the present proceedings were commenced on 19 September 2000. I shall return to the correspondence in more detail in due course.

23 Against that background I return to the originating summons which, as I have said, claims, first that the two bills of costs - the defendant's bill and the Dwyer Thomas bill - be taxed, that of course requiring an extension of time. The difficulty which the plaintiff has in relation to that aspect of his claim arises from a decision of Hasluck J in Harrison v Hocking [2000] WASC at 188.

24 Without going into the detail of that case, Hasluck J concluded, in par 63, that the discretionary power to extend the time for taxation of solicitors' bills is specifically vested in the taxing officer by s 68A(d) of the Legal Practitioners Act 1893, and that any inherent jurisdiction of the Court has been displaced.

25 As I respectfully agree with Hasluck J, the plaintiff's counsel, accepts that it is not open to me to extend the time for taxation of the defendant's bill or the Dwyer Thomas bill. The only question remaining is whether the retainer agreement between the plaintiff and the defendant should be set aside. That raises an ancillary question, which has emerged in the course of submissions today, whether the irrevocable authority is itself a costs agreement in which the retainer agreement, has been subsumed.

26 Section 59(1) of the Legal Practitioners Act enables a practitioner to make a written agreement with any client, "respecting the amount and manner of payment for the whole or any part or parts of any parcel or future services, fees, charges or disbursements in respect of business done or to be done by such practitioner, either by a gross sum or otherwise howsoever."

27 Section 59(5) provides that any such agreement may be reviewed by the Supreme Court or a Judge thereof and that if, in the opinion of the Court or Judge, the agreement is unreasonable, the amount payable may be reduced or the agreement may be cancelled and the costs taxed in the ordinary way.

28 The question then is: was the Moss agreement, as I shall now refer to it, unreasonable? In considering that question, it is necessary to have regard to the authorities in which s 59(5) has been interpreted; and in particular, to the decision of Ipp J in Brown & Ors v Talbot & Olivier (1993) 9 WAR 70. In that case, at p 75, Ipp J adopted and applied a passage in the judgment of Seaman J in Jovetic v Stoddart & Co (1992) 7 WAR 208 at 220. It is in these terms:

"Whatever else may be embraced by the words of the section, an agreement is unreasonable for the purposes of s 59 if the client can show objectively that it came into being in circumstances which were unreasonable to him or that its terms are unreasonable to him or that its effect on him is unreasonable."

29 Ipp J went on to point out that Seaman J had not intended to suggest that an agreement would be regarded as unreasonable only if it fell into one or more of those three categories. His Honour said that it may well be, in a given case, that if each of the three categories identified was looked at in isolation without reference to the circumstances within the other categories, none might lead independently to a conclusion of unreasonableness. Nevertheless, his Honour said, it was quite possible that despite such a conclusion when the categories were considered separately, an agreement might be unreasonable when all the relevant factors were considered as a whole.

30 I respectfully agree. However, I think it appropriate, in this case, to add that even if an agreement may appear to be unreasonable having regard to one of those criteria, it may, nevertheless, be regarded as reasonable (or perhaps "not unreasonable") when the circumstances as a whole are considered.

31 The plaintiff submits that the Moss agreement was unreasonable in all three of the respects referred to in the authorities. As to its creation, it is submitted that the Moss agreement did not provide the plaintiff with an estimate of the costs recoverable upon taxation, nor with any information about the risk of the costs under the Moss agreement exceeding the statutory scale. It is said that the defendant did not disclose to the plaintiff the limits and benefits of the statutory scale and the effect and consequences of the Moss agreement.

32 It is also said that the defendant did not, as it is put, educate the plaintiff as to the nature and effect of the scale and as to the basis of the proposed charging under the Moss agreement and the relationship between the two. I accept all that to be true because, as I have already noted, the plaintiff's evidence to this effect has not been disputed by the defendant.

33 Then it is said that the Moss agreement is unreasonable in its terms as a result of various matters contained within it. Clause 5 imposes on the plaintiff an obligation to pay for various services which would not be recoverable under the scale including file reviews and waiting time.

34 Clause 6 provides that the rate charged by the defendant, being $145 per hour for professional services, may be increased if, in the sole discretion of the solicitor handling the matter, a more experienced solicitor's advice is necessary or if the matter is complex and requires an unusually high degree of skill or urgency.

35 However, the agreement does not specify the increased rate to be charged; nor does it attempt to explain what might be involved in determining whether the matter required an unusually high degree of skill or urgency.

36 Clause 7 applies a minimum charge of a tenth of an hour to time spent by a solicitor. That charge applies also to each page or part thereof of outgoing correspondence; a charge which has no correlation to the time actually spent by the practitioner in relation to such correspondence.

37 Clause 8 imposes an obligation on the plaintiff to pay for various services, including collating, photocopying, deliveries, incoming and outgoing telephone messages and file notes, administration and debt collection. None of those matters is allowed under any court scale.

38 Clause 10 permits the defendant to increase the professional hourly rate and the non-professional hourly rate by the greater of 10 per cent per annum or any increase in the relevant court costs scale or the Solicitors Remuneration Order 1991. However, the plaintiff had no knowledge of the relevant costs scale, nor of the Solicitors Remuneration Order. The clause would therefore have been quite meaningless to him.

39 The matters to which I have referred would, I think, result in the agreement being unreasonable if they were the only considerations. However, there remains the question whether the agreement was unreasonable in its effect. The plaintiff submits that its effect was unreasonable because the defendant's bill had no correlation to the plaintiff's party and party costs in the personal injuries action nor to any particular items on the court scale applicable to that action.

40 That may be so; but there are other considerations. First, the defendant did not simply charge the amount calculated pursuant to the Moss agreement. As is plain from the irrevocable authority, he discounted both the Dwyer Thomas bill and his own bill.

41 The Dwyer Thomas bill, which was dated 27 June 1996, was in an amount of $6,572.95. The defendant discounted it to $3,591.45. He discounted his own bill by the sum of $1,206.50. That is to say, he produced an itemised account in which all the work carried out was charged on a time basis at $145 an hour, resulting in a total amount of $7,206. That was reduced to $6,000, which was then brought forward into the total bill of $7,301.80.

42 Further, that bill should be put into a context. It will be recalled that when the plaintiff instructed Mr Tait, the action was on foot but was not ready for trial. Mr Tait carried out further work for the plaintiff. According to the plaintiff's evidence today, he paid about $6000 to Mr Tait, bringing the total amount he had paid for legal fees to about $17,000.

43 The plaintiff also said in his evidence, and I accept, that he paid other amounts to his solicitors by way of cash and bank drafts for matters such as barristers' fees and medical reports, of which he said there were a number, some of which had to be redone. The plaintiff was not able to say how much he had paid in addition to the $17,000. However, he did receive $20,000 in the settlement in respect of his costs of the action.

44 I accept that may not have been a complete indemnity for the plaintiff's costs, although I note the agreed fact to which I have already referred, that the plaintiff is not claiming anything in respect of wasted costs against the defendant.

45 Accepting that the plaintiff did not receive a complete indemnity, the effect of the Moss agreement was therefore to charge him some $7,301 out of a total of something over $17,000.

46 That effect, it seems to me, is not unreasonable when considering that at the time the defendant charged at an hourly rate of $145 and then of course discounted that charge. I do not think that hourly rate was unreasonable. I have been referred to the decision of Seaman J at first instance in the Jovetic case, where his Honour noted that an hourly rate of some $200 or $220 charged in 1990 was not unreasonable.

47 Against that, the plaintiff submits that if the amount charged by the defendant for certain work is compared with charges which might be allowed for such work under the scale, then it does appear that the defendant's charges were unreasonable. By way of example, the defendant charged $551 for delivering and answering interrogatories, whereas the amount allowable under the scale was in the range $50 to $390. That range applied equally to answering interrogatories, in respect of which the defendant charged $710.50.

48 That is only a small part of the work carried out by the defendant, as appears from his bill. However, the plaintiff says it is not possible to carry out any further comparison because the defendant's itemised account is not drawn in a form which would be taxable under the scale. It is simply a time-charging account.

49 Accepting that to be the case, the onus is on the plaintiff to demonstrate unreasonableness. Because he has sought to do so only in relation to those two items - delivering and answering interrogatories - I am not persuaded that he has demonstrated unreasonableness in the overall effect of the Moss agreement, as it was applied.

50 If the matter ended there I think I would probably not set the agreement aside, despite unreasonableness in circumstances in which it was entered into and unreasonableness as to its terms.

51 However, that is not the end of the matter because even if I should have come to the conclusion that the Moss agreement was unreasonable, there remains a discretion whether or not to set it aside. In considering that issue I turn to the defendant's submission that the irrevocable authority was itself an agreement within s 59 of the Legal Practitioners Act: that it was reasonable and that the Moss agreement was subsumed in it.

52 There is also a submission made on behalf of the plaintiff that on the true construction of the irrevocable authority the obligation to pay outstanding costs has not yet arisen because the plaintiff's case has not been completed. It is submitted that his claim for damages for the personal injury still has an outstanding element, namely, the claim against the defendant. However, I do not accept that to be the true construction of the irrevocable authority. In any event that submission goes only to the extension of time for taxation, a matter with which, as I have said, I am not now concerned.

53 Applying s 59 to the irrevocable authority: it was, in substance, a written agreement between the plaintiff and his solicitor. It was an agreement in respect of the amount and the manner of payment for the whole of past services, fees, charges and disbursements: and it provided for payment by a gross sum.

54 It seems to me, therefore to be arguable strongly that although the parties may not have considered, when the irrevocable authority came into existence, that they were entering into a costs agreement within section 59, that is in substance what they were doing. However, that does not, I think, carry the matter forward to any great extent, because on the advice of Mr Tait, the right to request a taxation was expressly reserved in the irrevocable authority. And the right to a taxation includes a right to contend that the agreement was unreasonable: see Seaman at par 66.0.4A in which the procedure relating to the consideration of costs agreements is set out.

55 In summary, if a bill based on a costs agreement is referred to a taxing officer for taxation, the taxing officer may refer the matter to the Court. The question of unreasonableness may therefore be raised in that way.

56 It follows, in my view, that even if the irrevocable authority was a costs agreement, it preserved the Moss agreement, in the sense that the plaintiff reserved the right to have it set aside for unreasonableness albeit in the context of a taxation.

57 The reservation of rights, did not, I think, enlarge the time within which a taxation might be sought: that is a matter for the taxing officer. However, there is no statutory time limit on the right to have a costs agreement reviewed by the court. Despite that, the question whether or not there has been any delay by the plaintiff in commencing these proceedings is, I think, a matter which is properly taken into account in the exercise of the discretion to set the Moss agreement aside.

58 That being so, it is necessary to turn to the correspondence between the solicitors following the breakdown of the negotiations between them in about November of 1999. The first relevant letter, dated 22 November 1999, was from the defendant's solicitor to Mr Tait. It contained a reference to the service of a re-amended statement of claim. I take that to be a statement of claim against the defendant in the current action against him.

59 The letter also contained a request for payment of the costs of the personal injuries action in accordance with the irrevocable authority. The defendant's solicitor said that as the costs of the action were apparently agreed in the sum of $20,000, there appeared to be no reason why the amount of his client's costs should not be paid forthwith.

60 On 6 December 1999 Mr Tait replied, saying that he was taking instructions. It will be recalled that in his letter of 12 October 1998 Mr Tait had told the defendant that payment of his costs was being withheld pending resolution of the claim against him for negligence. I repeat that nothing was said then about the unreasonableness of the costs agreement or as to the amount of costs which were claimed.

61 There was no further correspondence relating specifically to the costs issue until 15 May 2000, when the defendant's solicitor wrote again to Mr Tait. He noted that he had not received a response to the defendant's request that his costs be paid forthwith.

62 The defendant's solicitor said it seemed to him that the costs did not form part of the plaintiff's claim for damages; and that no set-off, equitable or otherwise, was available. He said that if Mr Tait was not prepared to pay the costs held on trust in accordance with the irrevocable authority, would he please say so.

63 Mr Tait replied to that letter two days later. He expressly reserved the plaintiff's position as to whether any set-off was available. More fundamentally he pointed out that the irrevocable authority was stated to be subject to his client's right to request a taxation of the relevant accounts. He asked that copies of any costs agreement be provided to him so that consideration could be given to that matter.

64 The defendant's solicitor replied on 23 May. He said that if the defendant's bill was disputed, would Mr Tait please let him know on what grounds; and if he was instructed to seek an extension of time within which to require taxation, would he please bring an action without any further delay.

65 There was then further correspondence in which Mr Tait was given a copy of the Moss agreement and in which he sought a copy of the agreement said to have been made between the plaintiff and Dwyer Thomas.

66 It became clear by early August that the Dwyer Thomas agreement, could not be produced. That prompted Mr Tait to write on 8 August, saying that he would take instructions from the plaintiff as to how he wished to deal with the bills and that the defendant's solicitors would be informed in due course.

67 Pausing there, I draw the inference that when Mr Tait advised that the right to request taxation be reserved in the irrevocable authority he did so because he did not know on what basis the two bills - from the defendant and Dwyer Thomas - had been prepared. He could not have known that until he had the relevant agreements in his possession. But it only became apparent in August that the Dwyer Thomas agreement could not be produced.

68 It follows that the delay in considering whether or not to exercise the right to request a taxation was only a delay from about 3 August until 19 September 2000, when these proceedings were commenced.

69 I exclude the period of some 12 months from October 1999 after the personal injury action was settled, during which there were without prejudice discussions between the parties. It seems to me that although Mr Tait did not expressly reserve his rights in relation to the extension of time for taxation, he must be taken impliedly to have done so, there being no complaint by the defendant's solicitor about a failure to proceed until the post-November 1999 correspondence.

70 In all the circumstances, I am satisfied that there was no delay on the part of the plaintiff in seeking to have the Moss agreement reviewed by the Court.

71 Of greater significance, in my view, is the fact that the plaintiff received $20,000 in respect of his costs of the personal injury action. While I accept that may not have been a complete indemnity, it was nevertheless, I think, an amount which bore some reasonable relationship to the total amount of costs the plaintiff had paid.

72 It was not suggested by Mr Tait in any of the correspondence that the amount of $20,000 fell short of an indemnity by any significant amount or, indeed, at all. Although the plaintiff was not able to tell me this morning precisely how much he had spent in total in relation to costs, he did not suggest that he was out of pocket to any great extent.

73 I have therefore reached the conclusion that even if I am wrong in my opinion that the Moss agreement was not unreasonable in all the circumstances, I should not now exercise the discretion to set it aside because the plaintiff has had what is, I think, something approaching an indemnity for his costs. He is not therefore prejudiced, and no injustice will be done to him, by requiring him now to pay the outstanding costs. The application should be dismissed.