Dunn v Jerrard & Stuk Lawyers

Dunn v Jerrard & Stuk Lawyers - [2009] NSWSC 681 - NSWSC 2009 case summary — Zoe

[11]

JUDGMENT 1 This is an appeal under s 208L Legal Profession Act 1987 and an application for leave to appeal under s 208M of the same Act from a Certificate of Determination of Costs by Costs Review Panel and a Certificate of Determination of Costs of Review of 13 March 2008. 2 The First Plaintiff, Mr Craig Dunn, is a director of the Second Plaintiff, Motor Trades Finances Prestige Leasing Pty Ltd in Flinders Street, Melbourne. 3 Mr Dunn, MTFPL, and an associated company, Motor Trade Finances Australia Pty Ltd (the Third Plaintiff in the present proceedings) entered into a retainer agreement with the Defendants on 29 November 2004 for the Defendants to act for MTFPL in litigation already commenced by it against Elderslie Finance Corporation Limited and two of its directors. On 17 November 2005 the Fourth Plaintiff, Macburg Pty Ltd, accepted that it was also responsible for paying the fees due to the Defendants. 4 It appears that the retainer agreement was entered into in Victoria and, perhaps for that reason, it did not comply with all aspects of s 175 of the Legal Profession Act 1987. It estimated the legal fees between $7,700 and $13,200 excluding filing fees and disbursements. 5 It is to be noted that the proceedings in respect of which the retainer agreement was entered into had been commenced on 6 April 2004 in the Supreme Court of Victoria. At some stage they were transferred to the Commercial List of this Court. 6 The Defendants provided two updated assessments of estimated costs for the conduct of the proceedings. The first of these was on 23 August 2005 where the solicitor's professional costs were estimated at between $45,000 and $70,000. Counsel's fees were estimated to be approximately $3,500 a day for trial and preparation. 7 The second letter reassessing the costs estimate was dated 17 October 2005 and assessed professional fees of the Defendants at between $42,000 and $72,000. Those figures did not include disbursements including counsel's fees which were still estimated at $3,500 per day. Both these assessments were based on the trial lasting ten days. 8 The trial commenced on 14 November 2005 before White J. There were four days of evidence from 14 to 17 November and then the matter was adjourned to 21 November for submissions, finally concluding on 23 November 2005. 9 The Defendants sent invoices containing their legal fees and disbursements from 30 November 2004 to 31 March 2006. The total legal fees, including disbursements, in these invoices was $360,881.29 of which $274,437.87 was the total of the Defendants professional costs. The Plaintiffs disputed the last eleven of the invoices commencing with the one dated 27 June 2005, the final invoice being dated 31 March 2006. The total legal fees, including disbursements, in those bills was $282,125.56. The Defendants' own professional costs in those bills totalled $216,498.16. 10 On about 14 June 2006 Mr Dunn through his new solicitors, Noble Lawyers of Melbourne, made application for the assessment of costs pursuant to the Legal Profession Act 1987. The costs assessor appointed was Mr Richard Gulley. During the assessment process the Second Plaintiff filed and served Submissions and Objections to the bill of costs. It is not clear why the Second Plaintiff was referred to in that document. Although Mr Dunn seems to be the only Applicant I will not hereafter distinguish the Plaintiffs. 11 On 12 October 2007 Mr Gulley issued a Certificate as to Determination of Costs together with a Statement of Reasons. The Certificate relevantly said: "The application is determined by substituting for the disputed costs as a fair and reasonable amount of costs to be paid to the practitioner the sum of: two hundred and thirty nine thousand five hundred and nine dollars and two cents - $239,509.02"

[38]

For the purposes of understanding reductions or otherwise made by me to the costs claimed I costed the work as follows: (1) I note that no objection was made by the Costs Applicant to the rates as claimed by the Costs Respondent. (2) The objections as filed by the Costs Applicant submit to me that the bill of costs have no reference as to the time expended or the rate applicable to the person completing the work. By the time that I came to completing my assessment the Costs Respondent had filed with me the computer printout of the Costs Respondent which provided to me the time spent, the rate applicable and the person completing the work. I therefore did not have the problem that the Costs Applicant did in preparing the objections and I had no difficulty in taking the objections into account. (3) Where there were instances of duplication I have disallowed a number of items. (4) The bills of costs contain a substantial number of file attendances described by the Costs Respondent "as attendance as to current issues". The Costs Applicant objects to many of these items and I accept those objections. (5) I have disallowed a number of items entitled "settling correspondence" which were objected to by the Costs Applicant. (6) The Costs Applicant objects to many items referred to as "attendance as to security for costs". I have allowed a reasonable number of those attendances and have disallowed others. (7) I have taken into account the objections in relation to excessive time concerning some attendances. I have disallowed a number of the items on this basis and reduced others. (8) I have taken into account the concessions made by the Costs Applicant. (9) I have made some reductions in relation to conferences and court attendance times as claimed by the Costs Respondent. While I have individually assessed each bill of costs I have reached a total figure in respect to both costs and disbursements otherwise the process could have been lengthened by issuing individual determinations and reasons. In accordance with the Legal Profession Act and Regulation I certify as follows: (1) The total amount of costs determined by me to be fair and reasonable is the sum of $177,863.05 inclusive of GST. (2) The total amount of disbursements determined by me to be fair and reasonable is the amount of $61,645.97 inclusive of GST. In relation to the disbursements I have disallowed some minor claims however I have satisfied myself as to the disbursements by perusing the invoices supplied by me." 36 The principal complaint put forward by the Plaintiffs in argument at the hearing of the appeal concerned the failure to provide adequate reasons. The Plaintiffs did not submit that there was an error on the Review Panel's part simply by adopting the Reasons of the Costs Assessor. The Plaintiffs argued, however, that because the Review Panel did that, whether or not they provided proper Reasons would stand or fall by the Reasons of the Costs Assessor. 37 Ms Castle, who appeared for the Defendants, suggested (somewhat faintly) that what appeared in para 19 of the Review Panel's Reasons were supplementary reasons and should be read as Reasons in conjunction with the Costs Assessor's Reasons which they adopted and agreed with in para 20. In my opinion, nothing in para 19 amounts to additional Reasons. Rather, her alternative submission, that the material in para 19 informed the Reasons (being the adoption of the Costs Assessor's Reasons) is more likely to state the position accurately. In considering the adequacy of the Costs Assessor's Reasons I will not put out of consideration the matters in para 19 but I do not consider that they take the Costs Assessor's Reasons any further.

[40]

It cannot have been intended by the parliament that an error of law or an error of fact affecting the result should pass without remedy under a scheme which provides for an appeal in relation to a matter of law and leave to appeal generally. I would hold, for this reason, that there is an implied statutory obligation on the part of a costs assessor to provide reasons such as I have mentioned." 40 His Honour said further (at p. 34): "Because of the appeal provisions in the Legal Profession Act 1987, I hold that a costs assessor is bound to give reasons for his determination, specifying the items which have been reduced, by what amount and for what reason in each instance." 41 In Frumar, the Court of Appeal was considering the provisions under the 1987 Act after the amendments made by the Legal Profession Amendment (Costs Assessment) Act 1998 which is substantially the form of the Act now under consideration. 42 Giles JA with whom Beazley JA and Ipp JA agreed said: "[42] The submissions did not address whether the reasons required by s 208KG of the Act were only those to be given in accordance with the regulations. Proper compliance with reg 68(1) would be likely to fulfil the obligation under s 208KG, but would not necessarily do so; I incline to the view that the Regulation expressed a minimum extent of the reasons, with the possibility of a greater necessary extent if the circumstances so required. But I do not think that in the present case it matters, and it is not necessary to come to a conclusion. [43] The extent of the obligation, whether by explication of reg 68(1) or by giving content to s 208KG, is informed by the general law concerning the duty of judicial officers to give reasons for their decisions discussed in cases such as Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247, Mifsud v Campbell (1991) 21 NSWLR 725 and Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430. The extent of a judicial officer's duty depends on the circumstances. Whether or not a costs assessor and a panel are acting administratively or judicially, which was left open in Attorney-General of New South Wales v Kennedy Miller Television Pty Ltd , the extent of their duties must take into account the different nature of their task and their roles as legal practitioners bringing to bear their experience and judgment in evaluation of what work was reasonable and what is a fair and reasonable amount of costs; but it is also moulded by the basis for the obligation to give reasons in Attorney-General of New South Wales v Kennedy Miller Television Pty Ltd , thereafter taken up by the legislature. [44] The reasons must be such that a party dissatisfied with the costs assessor's or panel's determination "should have a real and not largely illusory right of appeal". These words in Attorney-General of New South Wales v Kennedy Miller Television Pty Ltd at 735 were qualified by "in regard to questions of law at least", but in my respectful opinion they apply equally to questions of fact: questions of whether the time engaged or an hourly rate are reasonable can be very important, and although subject to leave s 208M permitted an appeal on those questions. The filter for an appeal as to fact is the Court's decision as to leave, not the cost assessor's or panel's expression of reasons, and whether leave should be granted can only be decided if it is known why the determination was made. [45] The delay and expense of an excessively onerous obligation to provide reasons is material, particularly when assessment of costs by costs assessors was intended to provide a faster, easier and cheaper system. In my opinion, however, the observations of Meagher JA in Beale v Government Insurance Office of New South Wales at 444 are applicable; that the balancing act in considering the sufficiency of a statement of reasons "involves the adoption of, at the least, a minimum standard which places the parties in a position to understand why the decision was made sufficiently to allow them to exercise any right of appeal"." 43 Having then examined what the Costs Assessor and subsequently the Review Panel did, Giles JA went on to say: "[59] It can not be seen from the costs assessor's reasons what work in items in the bill of costs, being co-ordination work or reporting work or perhaps other work, was thought by the costs assessor to have been unreasonably carried out. Indeed, it does not seem that the costs assessor identified that work and, applying the hourly rates, deducted an amount from the profit costs, whilst inferentially accepting that the rest of the itemised legal services had been reasonably provided. Rather, he seems to have begun again with his own assessment of an overall fee based on what he considered was reasonable work to be carried out. Since his assessment was less than the $79,492.20 in the bill of costs, and in the light of what he said about coordination work and reporting work, he did not accept that the whole of the work in the bill of costs was reasonably carried out. But it can not be seen what work the costs assessor thought was or was not reasonable work to be carried out, including by way of coordination work and reporting work, or its relationship to the work in the items in the bill of costs. [60] The panel's reasons do not make good these difficulties in the costs assessor's reasons. They add to them. The panel endorsed the costs assessor's reasons as setting out the basis for his determination, and his approach of assessing the bill of costs "as a whole" (under Ground 5), but in conducting its own assessment arrived at a relatively precise amount of $63,833 in lieu of the round figure. It can not be seen what work in the items in the bill of costs the panel thought was unreasonably carried out, or what work it thought was reasonable work to be carried out independently of the itemisation in the bill of costs and its relationship to the work in the items in the bill of costs. Maybe it accepted that the hourly rates were reasonable and applied them, but it did not say so: at least on the surface, in making its own assessment the panel could have applied different hourly rates. [61] The relatively precise amount suggests a calculation or an addition of items, but this is not explained. The assessment may or may not have been by adjustment of the bill of costs, but if it was the adjustments were not identified and if it was not there was no more than an end figure. The panel stated a figure as the result of its assessment and asserted that it was "in all the circumstances" a fair and reasonable amount of costs, but the content can not be seen. [62] In my opinion, this fell short of providing a statement of reasons for the panel's determination as required by s 208KG of the Act, and fell short of providing the explanation required by reg 68(1)(d). If either the claimant or the opponent wished to appeal to the Supreme Court, he or it could not do so when he or it did not know -

[43]

[63] The claimant would need to know for appeal as to a matter of law pursuant to s 208L of the Act, but plainly also for appeal pursuant to s 208M. If the claimant had contemplated disputing the extent of unreasonable charging accepted by the costs assessor to have occurred in relation to coordination work and reporting work, how could he have done when he did not know what coordination work or reporting work had been excluded from the claim in the bill of costs, or what coordination work or reporting work the costs assessor had included in his own assessment as reasonable work to be carried out; or what the panel had done in these respects? How could he do so if he did not even know whether the panel had also accepted that there had been unreasonable charging in relation to coordination work and reporting work? The opponent also had an interest in the reasons, since it might have wanted to appeal against the cutting down of its costs, and it was equally in the dark." 44 Cassegrain was an appeal under the provisions of the Legal Profession Act 2004 but those provisions are relevantly identical with the provisions in the 1987 Act with which I am concerned. In that case White J noted (at [76]) that save in relation to an issue concerning the GST: "The panel contented itself with saying that it adopted and agreed with the reasons of the assessor". 45 White J, having set out paras 59 to 63 from the Court of Appeal's judgment in Frumar, went on to say (and it is to be noted that in Cassegrain there were bills of costs): "[88] The present is not so extreme a case as was Frumar . It appears from the assessor's reasons at page 2 quoted in [44] above that he formed his own view of the work which was reasonable to be carried out and did so using the bill of costs as a guide. However, it appears from later in his reasons that he reached his ultimate assessment by making reductions to items claimed in the bill. One can identify from the assessor's reasons what hourly rates were considered to be reasonable and one can identify the kinds of work (classified by description, but without individual itemisation), where the charges claimed have been reduced. By recourse to the bill of costs and the parties' submissions, coupled with the assessor's statement as to the extent to which he preferred the submissions for the plaintiffs, one can identify the parameters of the reductions made. There remains uncertainty as to whether any reduction was made for the solicitors' costs on attendance at the hearings before Windeyer J. It is also not possible to say by what amounts there was a reduction from the costs claimed in respect of:

[50]

[13] After the review has been undertaken, the panel then has the two options set forth in (a) and (b) of subs (1). [14] If the panel decides on the second option, it is to conduct an assessment in the manner required by subs (3). …" 48 That analysis suggests that subs (3) only operates in the event that the Review Panel decides to set aside the Costs Assessor's determination. However, with great respect to his Honour, subs (3) must concern itself with the whole process referred to in s 208KC because subs (3) refers to "the review" which is what s 208KC(1) deals with generally. Under that sub-section, the panel is reviewing the determination of the Costs Assessor. 49 The Defendants' submission on the two stage process then draws support from the later decision of Johnstone DCJ in Randall Pty Ltd v Willoughby City Council [2009] NSWDC 118. In that case the Defendant submitted that s 375(2) (the identical provision to s 208KC(2)) only operates if and when the Review Panel has set aside the Costs Assessor's determination under subs (1)(b) and proceeds to substitute its own determination. That was the submission being made in the present case by the Defendants also. What is said to flow from that, as was submitted in Randall, is that the Review Panel is only required to issue a statement of reasons and any supplementary information required by the regulations under s 208KG where a certificate has been issued under s 208KF. It is said, therefore, that where the Review Panel merely affirms the Costs Assessor's determination under s 208KC(1)(a), reasons are not mandatory (see Randall at [12]). 50 Johnstone DCJ noted that the submission was based on there being a two stage process to s 208KC and it was in that context that he considered what Malpass AsJ had said in Honest Remark. However, Johnstone DCJ took the matter further and said this: "[15] In the context of the present appeal, it is clear that the Review Panel only undertook the first stage of the process. It follows that the plaintiff's grounds of appeal must fail insofar as they complain that the Review Panel did not conduct the review in accordance with its statutory function as required by s 375(2) of the LPA 2004 [208KC(2) of the 1987 Act], because it never got that far. The question then becomes, did the Review Panel undertake the first stage of the review under [s 208KC(1)] adequately, and were its reasons adequate, assuming it was required to provide any reasons at all.

[51]

[16] What now falls to be considered in these proceedings is the practical effect of that two stage process of review, and what is required of the Review Panel when undertaking the first stage of the review, namely deciding whether to affirm or set aside the determination of the Costs Assessor. There is no relevant statutory provision, rule or regulation that informs what Associate Justice Malpass describes as "a second look", except the Form that has been promulgated pursuant to which a review application is initiated. Obviously the decision will involve something different from the full re-determination contemplated by [s 208KC(2)]." 51 With the greatest of respect to Johnstone DCJ I consider that this analysis is flawed. Although it may be true to say that, in the first instance, the Review Panel must look at the Costs Assessor's decision to see if it wishes to affirm it or to set it aside, and if it does the latter it then needs to proceed to determine the costs assessment itself, nothing in subs (2) or (3) of s 208KC suggests that those functions apply only to the second stage. Those sub-sections both refer to either "the application for review" or "the review [that is to be conducted]", and that is what the whole of subs (1) is concerned with. It is only after the Review Panel has reviewed the Costs Assessor's determination that it forms its first opinion whether to affirm it or to set it aside. 52 Secondly, even if some distinction is to be drawn by the use of the two words "decision" and "determination" in ss 208KI, 208L to 208NB, the certificate required under s 208KF is one made when the Review Panel makes a determination "in relation to an application for review" which must be a reference back to s 208KA and in turn to s 208KC. It is noteworthy that s 208KF(2) commences with the words "If the panel sets aside the determination of the Costs Assessor", suggesting that s 208KF(1) is not solely concerned with that eventuality but includes a decision to affirm the Costs Assessor's determination under s 208KC(1)(a). 53 Ultimately, the Defendants in the present case accepted that, even if the distinction they made between "decision" and "determination" was correct, there would be an obligation to give reasons at common law why the decision was made by the Panel to affirm the Costs Assessor's determination. Whilst that would arguably mean that clause 68 of the Regulation did not need to be complied with, the common law reasons would need to satisfy at least what Sperling J said in Kennedy Television and Frumar at [43]. 54 If I am wrong in rejecting the distinctions made by Johnstone DCJ in Randall, the alternative view must be that the Court is required to examine the reasons of the Costs Assessor in circumstances where a review panel has no obligation to provide reasons (whether at common law or by statute) and did not do so as in the present case. Otherwise, the appeal rights that are clearly available by virtue of s 208KI would be rendered illusory for the reasons already discussed in the authorities.

[63]

(f) how much each bill was reduced by. 62 In relation to disbursements the Costs Assessor said that he had "disallowed some minor claims" but had otherwise satisfied himself as to the disbursements by looking at the invoices. From this, the Plaintiffs do not know which disbursements were disallowed. This was in clear breach by the Costs Assessor of clause 61(2)(c) of the Regulation and, subject to the argument raised by the Defendants about the two stage process, a breach by the Review Panel of clause 68(1)(c). 63 Even if it is accepted that the two stage process identified in Honest Remark and developed in Randall is correct, and there was no statutory obligation to provide reasons by the Review Panel, this would not affect the conclusion that I have reached in relation to the solicitor's costs (as opposed to the disbursements). Ms Castle conceded that, even if the two stage argument in all its fullness was correct, there was a common law duty to provide reasons as to why a decision had been made to affirm. The position is, therefore, that the Review Panel failed in its duty to provide those common law reasons. Alternatively, it is left with the reasons of the Costs Assessor which clearly do not satisfy the common law test as formulated by Sperling J and approved subsequently, nor the obligations imposed by s 208JAA and clause 61(2) of the Regulation. 64 Ms Castle properly conceded that if I held that the reasons of the Review Panel were inadequate that would amount to an error of law. I have found that, by the process the Review Panel adopted, it is the Costs Assessor's Reasons which must be judged as adequate or not. For the reasons I have given, the Reasons of the Costs Assessor were inadequate whether judged by the requirements of s 208JAA and clause 61 or judged by what the common law required independently of those statutory provisions. Both parties accepted that if such an error of law was found the assessment would need to be remitted to the Review Panel so that the Review Panel could properly carry out its responsibilities pursuant to s 208KC and the following sections.

[64]

Leave to appeal 65 The Plaintiffs also seek leave to appeal based on two matters. First, it is said in relation to the concession made by the Plaintiffs in Item 5 of the code contained in the Submissions and Objections that the Costs Assessor made an error of fact in determining what was disputed and conceded. What the Plaintiffs submitted was that the Costs Assessor mistakenly viewed the Plaintiffs' concessions as general concessions to the relevant items, such that he did not assess those items at all. The Submission was based on the inference that the Costs Assessor would not have been able to reduce the professional costs by as little an amount as he did if the concession had been properly understood given the number of times that code 5 was placed against items in the bills. 66 Given the inadequate detail contained in the Costs Assessor's Reasons, I do not think it is possible for me to come to a view one way or the other about whether this ground would be made out if leave were granted. However, as the whole determination will be remitted to the Review Panel, I do not intend to say anything further about this ground. 67 Secondly, it is said that there is an error of fact about the conclusion that there was adequate disclosure within the meaning of s 175 of the Act. Since the Costs Assessor's conclusion was that there was a proper costs disclosure (in accordance with s 175) it is likely that this at least (if made out) is a mixed error of fact and law. The significance of it is that under s 182 if a legal practitioner fails to make a disclosure of the matters required to be disclosed by s 175, the client is not obliged to pay the costs unless the costs have been assessed and the costs of the assessment are payable by the legal practitioner seeking to recover the costs. Section 208A(4) goes on to provide that in such circumstances the Costs Assessor is to determine the amount of the costs of the Costs assessment and the costs are to be deducted from the amount payable under the bill of costs. 68 The Plaintiffs submitted that there was not adequate disclosure in accordance with s 175 because subs (2)(d) was not complied with. Sub-section (2)(d) provides: "(2) The following matters are to be disclosed to the client:

[66]

(2) Without limiting anything in this Part, a person is entitled to practise law in this State only if the person does so: (a) in compliance with any applicable requirements of this and any other Act relating to the practice of law that would apply to a local legal practitioner holding a practising certificate to which conditions corresponding to those attached to the interstate practising certificate were attached, …" 70 If the Defendants were practising law in New South Wales, subs 2(a) would suggest that they were obliged to comply fully with s 175 in making their costs disclosure. 71 The principles concerned with applications for leave to appeal under s 208L have been discussed in Chapman's Limited v Yandell [1999] NSWCA 361 and Wentworth v Rogers [2006] NSWCA 145. In the former case, it was said (at [12]) that the enquiry is whether there is some other matter (apart from the right to appeal from an error of law) which in justice requires that leave to appeal be granted to allow that matter to be re-litigated. If leave is granted, an appeal is to be by way of new hearing with the availability of fresh evidence being led (s 208M(4)). 72 At the hearing before me, little attention was given to the factual basis for the assertions that the Defendants either did or did not practise law in New South Wales by virtue of having acted for the Plaintiffs in this litigation. The evidence in Mr Dunn's affidavit was vague as to when the proceedings were transferred to this Court from the Supreme Court of Victoria and, in particular, how that occasion related in time to the retainer of the Defendants by the Plaintiffs in November 2004. There was certainly evidence that a senior associate of the Defendants and, at times, a partner of the Defendants, was present in Court in Sydney to instruct counsel and to confer with the client and counsel at other times. It is not clear how much of the trial preparation work done by the Defendants was done in Sydney or Melbourne. There are occasional references in the disputed memoranda of costs to attendances in Sydney to confer with counsel and to instruct in Court. All of this material is very general and does not permit any proper conclusion on the factual matters concerned with the issue of whether or not the Defendants were practising law in New South Wales. 73 Certainly a prima facie inference is available that in conferring as solicitors with counsel in Sydney and instructing at the hearing in this Court in Sydney, the Defendants were practising law in New South Wales. But there is little guidance as to what amounts to "practising" law in a particular place. Victorian decisions such as Victorian Lawyers RPA Limited v Bailey [2000] VSC 162 and Law Institute of Victoria Ltd v Nagle [2005] VSC 35 provide only limited assistance particularly because s 314 of the Legal Practice Act 1996 (Vic) which prohibits a person from engaging in legal practice in Victoria unless the person is admitted and holds a Practicing Certificate, provides in subs (4): "For the purposes of this section engaging in legal practice may consist of a single act."

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