Waltons Stores (Interstate) Ltd v Maher and Anor [1988] HCA 7; (1988) 164 CLR 387

Commonwealth of Australia v Verwayen (1990) 170 CLR 394

Keith Hercules and Sons v Steedman (1987) 17 FCR 290

Burgundy Royale Investments Pty Ltd v Westpac Banking Co Limited (1991) 28 FCR 308

Sharp v Dane (1903) 9 ALR 155, 25 ALT 54

Burgundy Royale Investments Pty Ltd v Westpac Banking Co Limited (1992) 109 ALR 549 553

Dodd v Gillis (1989) 16 NSWLR 623

Singleton v Macquarie Broadcasting Pty Ltd (1991) 24 NSWLR 103

NSW Crime Commission v Fleming (1991) 24 NSWLR 116

Emeritus Pty Ltd v Mobbs (1991) NSW Conv R 55-588

Re Ferdinando Ex parte ANZ Banking Group Limited and Anor, Einfeld J, unreported 30 April 1993

Clare v Joseph (1907) 2 KB 369

Saddington: Legal Practitioners' Act 1898-1936 (1937 edition)

for Fairfield Chase Pty Ltd instructed by Henry Davis York

Counsel and solicitors for Mr A. Sullivan QC and

instructed by William B. Beilby

and Company

2. Fairfield Chase Pty Ltd to pay costs of Peter Schell and Steven Grant.

Note: Settlement and entry of orders are dealt with in accordance with Order 36 of the Federal Court Rules.

EINFELD J Seventeen identical motions are before the Court. They seek orders in these terms:

1. That Peter Schell of Cnr King and George Streets, Sydney and

Steven Grant of 11th Floor, 54 Carrington Street, Sydney be joined

as parties to these proceedings for the purpose of this Motion.

2. That Peter Schell and Steven Grant prepare and deliver to the

First Respondent within 30 days of the hearing of this Motion a

Bill of Costs in taxable form for work undertaken by them on

behalf of the First Respondent in relation to these proceedings in

accordance with the Second Schedule of the Federal Court Rules.

3. That the Bill of Costs be taxed.

4. That any amount paid by the First Respondent to Peter Schell and

Steven Grant in excess of the amount allowed on taxation of the

Bill of Costs be paid by Peter Schell and Steven Grant to John

William Murphy and Peter Bernard Allen of 141 Walker Street, North

Sydney.

5. Such further orders as the Court sees fit.

6. Costs.

2. The requested joinder having earlier been ordered, the parties to the motions are Fairfield Chase Pty Ltd (the company) and Peter Damien Schell and Steven Grant (the solicitors).

3. The motions were filed on 18 December 1991 and prior to the hearing were before the Court on some seven occasions. A significant degree of tension and animus was generated between the parties even on relatively minor matters suggesting that the matter as a whole had overtones beyond the actual issues. Some reasons for this situation will emerge. On 13 August 1992, the solicitors sought the summary dismissal or cross vesting of the motions to the Supreme Court. The judgment then given sets out some of the background to the matter. At the end of the hearing of the motions on 28 April 1993, written submissions were ordered but they were not completed by the company until 2 June 1993. Hence the motions took more than eighteen months to litigate. Notwithstanding their own casual pace thus demonstrated, not unsurprisingly the parties, especially the company, nevertheless sought priority in the delivery of judgment. In the present pressures on the Court, there is a tendency to prefer those who earn priority by their own actions or situations.

4. The company was at relevant times the owner of a shopping centre, with which it shared its name, in the Sydney suburb of Fairfield. In October 1989 proceedings were commenced against the company by one of the shopkeeper tenants. In the ensuing three months, proceedings were commenced by at least sixteen other shopkeepers in the centre. In each of the cases, allegations were made that the company had misled or deceived the shopkeepers, in contravention of the Trade Practices Act, into entering their leases upon promises of various kinds, including rebuilding and renovation, and the attraction of major retailers designed and expected to bring extensive custom from members of the public. A variety of orders were sought including declaratory relief, damages and orders under section 87 of the Act. In each case one or more firms of real estate agents and one or more individual agents were joined as respondents. There were cross claims for unpaid rent and for writs of possession in all or almost all cases. As events happened, all the cases were ultimately settled but only after more than a year of strongly contested and complex litigation, a large number of court appearances and some contested interlocutory proceedings.

5. The solicitors were partners in a firm called Cleary and Hoare. One of them, Peter Schell, was retained by the company to act on its behalf in this litigation at its outset on 13 October 1989. At the time another solicitor Helen Maree Conway was Legal and Commercial Manager of Carrington Constructions Pty Ltd, a member of the Carrington Group of Companies which included the company Fairfield Chase Pty Ltd. Tibor (Tom) Coleman was a director of the company and by various means the owner of the company's shares. Coleman was Conway's immediate and ultimate superior to whom she was accountable and answerable. It was Conway's recommendation to Coleman that secured the company's retainer for Cleary and Hoare.

6. Conway and Schell first met in 1979 when Schell was practising as a barrister and Conway was a solicitor with Henry Davis York (HDY), a Sydney firm of solicitors who briefed him. In about 1983 Conway became a partner of HDY and in November 1986 Schell left the Bar and also joined HDY, becoming a partner in July 1987. At the time Conway was head of the firm's Commercial Litigation Department and Schell joined that department. The department had a number of different specialty sections -- Conway herself headed the insurance section, Schell the general section and then the banking and finance section. When some notorious turmoil engulfed the firm, they both resigned as partners of HDY on 2 June 1989 and left the following month, remaining consultants in the intervening days. HDY now acts for the company.

7. After some 3 months seeking partnerships in Sydney legal firms which would enable him to continue his interest in commercial litigation, Schell became a partner of Cleary and Hoare where Steven Grant was or became another partner. That was the state of the partnership in Sydney which was retained by the company for the litigation with which these motions are concerned but there were other partners in Brisbane where the firm was apparently commenced and based.

8. Conway left her position with the Carrington Group on 1 June 1990 and became Assistant General Manager and Company Solicitor of NRMA Insurance Ltd and later the General Manager of the Corporate Services division and Group Secretary and general counsel of NRMA Limited. At the time of the hearing she was also Senior Judicial Member of the New South Wales Equal Opportunity Tribunal and a member of the Legal Profession Standards Board. The company terminated Cleary and Hoare's retainer in this litigation on 1 August 1990. Schell subsequently left Cleary and Hoare to become senior corporate prosecutor at the Sydney office of the Commonwealth Director of Public Prosecutions. On 19 April 1993 he became a consultant with Madgwicks, a Sydney firm of solicitors, the position he held at the time of the hearing.

9. In August 1987 while both were partners at HDY, Conway and Schell commenced an intimate personal relationship which persisted throughout Schell's retainer for the company in the litigation concerned. They married on 29 June 1992 and remained married at the time of the hearing of these motions.

10. Schell's retainer from the company in this litigation was to oppose the claims being made against the company by its various tenants. To this end senior and junior counsel were retained virtually throughout the litigation. Accounts were rendered periodically for work done during the period of the retainer and were paid without objection. The accounts comprised charges for Schell's time at $300 per hour and for the services of his clerk (Bernard Kerr) at $150 per hour plus disbursements and counsel's fees as rendered.

11. Cleary and Hoare's last account was supplied to the company on 3 August 1990 and was only paid under protest. As on two previous occasions during the period of the retainer, it included a charge by both counsel for what are known as cancellation fees. On the first two occasions these fees resulted from the cancellation of appointed hearings at the request of the parties. On the third occasion they were activated because the termination of Schell's retainer necessarily led to the withdrawal of their briefs after the hearing dates were fixed but before they were reached.

12. After the termination of the retainer, the company requested Cleary and Hoare to deliver a bill of costs in taxable form. By letters dated 10 August, 24 October and 22 November 1990, Cleary and Hoare expressed willingness to comply with this request but in a letter of 1 March 1991 declined to do so without an order of the Court. This letter stated:

We refer to your letter of 21 February 1991 and earlier

correspondence.

Your client's requirement for the preparation of bills of

costs was originally made by a letter of your firm to us of

9 August 1990.

By a further letter of 10 August 1990 you indicated that

your client had agreed to pay under the protest the amount

of $94,419.48 for the purpose of obtaining its papers, this

being the sum in respect of which this firm claimed in lieu

over those papers.

In that letter you stated that your client did not withdraw

its request for the preparation of bills of costs.

In a letter written by the writer later that day (10 August

1990. that request was noted and it was indicated that the

intention at that stage was to prepare bills in accordance

with the request.

However, a great deal of water has flowed under the bridge

since that time and the circumstances surrounding the

requirement to prepare bills for taxation have changed in a

number of important regards.

1. The reason for requiring taxation of the bills

assigned in your letter of 9 August referred to above

was that your client did not have possession of the

files. This predicament was within a day or two

thereafter removed.

2. At that stage, despite a bad balance sheet position,

your client was known by us to be in possession of the

shopping centre at Fairfield which is your client's

only asset of substance and in receipt of the rental

stream thereof which was your client's only income.

We had the assurance arising from these facts that if

we prepared costly bills and the result of the

taxation was such that your client became liable for

the costs of taxation there were reasonable prospects

of those costs being met. It is now known that the

mortgagee went into possession of those premises in

December 1990 and has control of the rental stream

thereof. Your client has no other source of income

and is now in our respectful submission plainly

insolvent.

3. Whilst at that time we knew there would be

considerable work and cost in preparing the bills it

was not until afterwards that we received an estimate

from a costs consultant that suggests that his costs

of preparing the bills will quite likely be in the

vicinity of $30,000.00 and such estimate does not take

this firm to be compelled to expend without any

prospect of redress should the complaint about the

bills prove to be misguided.

4. Early on 9 August 1990 the writer had a conversation

with the principal of your client company, Mr Tom

Coleman, concerning his attitude towards these costs.

A copy of that transcript was furnished to you under

cover of a letter sent that very day. There has never

been any suggestion made to us that the transcript is

inaccurate in any regard. In that conversation Mr

Coleman acknowledged satisfaction with the work done

and an agreement with ourselves as to the rates at

which that work was to be charged for and at which

counsel were to be paid for their work. Mr Coleman

assigned me as the sole reason for desiring taxation

and the necessity to protect his position with his

mortgagee which was acting in a trustee capacity. As

we all know that mortgagee was removed from office

pursuant to a judgment of the Supreme Court delivered

on 7 November 1990 and replaced by trustees who are

partners of Arthur Anderson and Co. That firm has

indicated to the writer that it has no interest in

pursuing any question as to the quantum of these

costs. Consequently, the bona fides of your client in

continuing to pursue the taxation of the bills must be

doubted.

In these circumstances we are no longer willing to prepare

these bills except by order of the Court under Section 208

of the Legal Profession Act 1987. Any application for such

an order will be opposed, security for costs will be

required, and the Court will be asked, if it deems fit to

make such an order, to attach to it conditions that will

protect this firm from doing many tens of thousands of

dollars worth of work without there being any chance of

reimbursement for those costs after the outcome of the

taxation.

In view of the client's financial situation adverted to

above, we also reserve our rights to apply for security for

the costs of any proceedings brought to procure an order

under Section 208 by deposit of funds in Court and/or the

giving to the Court of an undertaking by Mr Coleman or other

principals of the company to be personally liable for any

costs of the proceedings your client may be ordered to pay.

13. The present proceedings were launched more than nine months after that letter.

14. These seventeen motions represent the company's effort to obtain orders for the delivery and taxation of a bill in each of the seventeen pieces of the original litigation. A number of questions were raised in the course of their presentation:

1. Was there an agreement between the parties that the solicitors

would charge on a time cost basis of $300 per hour for Schell and

$150 per hour for Kerr?

2. If so, does the agreement or other conduct by the company

constitute an estoppel in favour of the solicitors or a waiver by

the company precluding it from obtaining a bill in taxable form?

3. If not, should the agreement be enforced by the Court for other

discretionary reasons and a bill for taxation not be ordered at

all?

4. If there was no such agreement, or if there was such an

agreement but it should not be enforced, should a bill be ordered

to be delivered on the basis of the second schedule in the Federal

Court rules?

5. If not, on what other basis should it be delivered?

6. In relation to the cancellation fees charged by counsel and paid

by the company:

(a) was there an agreement between the parties for the payment

of such fees?

(b) if so, was the company's consent to the agreement a fully

informed consent?

(c) if so, were the fees fair and reasonable?

15. These questions may not be an exhaustive list and some of them overlap. For example, if delivery of a taxable bill is ordered and enforceable agreements are found in relation to the claimed time costing for the solicitors and cancellation fees for counsel, the company suggested that someone, presumably a taxing officer, will have to determine whether the work was done. Yet there was no evidence or cross examination to suggest that there was in truth a dispute that the work claimed by the solicitors to have been done was done. A question was also raised by the company as to whether the fees charged were in the circumstances fair and reasonable. Yet at least in relation to Schell's time costing, the company admitted at the outset of the hearing of these motions that at relevant times for the shopping centre litigation it was the usual practice of a partner at HDY, Philip Crawford, to charge his services for professional work in commercial litigation at $300 per hour subject to the client's agreement.

16. The fundamental principles of law applicable to these motions are not matters of substantive dispute. As I pointed out in giving judgment in the earlier aspect of this matter on 13 August 1992, the Court's jurisdiction and power to order the delivery of a solicitor and client bill in taxable form are undoubted: see the cases referred to there and in my judgment in Burgundy Royale Investments Pty Ltd v Westpac Banking Co Limited (1991) 28 FCR 308 at 313. The same cases, especially Singleton v Macquarie Broadcasting Pty Ltd (1991) 24 NSWLR 103, NSW Crime Commission v Fleming (1991) 24 NSWLR 116, and my two judgments also establish the enforceability of an oral costs agreement between a solicitor and client at least in relation to contested litigation. Despite a significant degree of rhetoric in the matter, it is not seriously disputed that there was at least a de facto costs agreement in this case. As will become clear, the existence of an enforceable agreement between the parties to these motions is in my view beyond doubt.

17. For their parts, the solicitors accept that a client has a prima facie right to a detailed bill. Their argument is that the agreement and other conduct of the company comprised or included a waiver of the company's entitlement as their client to the delivery of a bill, or created an estoppel. Whether an agreement constitutes a waiver of the client's entitlement to ask that a taxable bill be delivered or an estoppel of its delivery depends on its terms and the circumstances under which it came into existence. The solicitors rely upon a number of extrinsic facts to establish the waiver or estoppel in this instance:

1. The company was a significant commercial entity and a member of

a large group of corporations.

2. A number of accounts were delivered to the client over a nine

month period. These accounts were checked by the company and

payment was thereafter made.

3. The checking of the accounts was performed for the company by

Conway who was an experienced commercial lawyer. The company

disputed neither the form nor the contents of the bills.

4. Before the cessation of the retainer, the company had not

complained about either the solicitors or the amounts of their

accounts. It acknowledged its indebtedness for unpaid fees on

several occasions from time to time without questioning the size

or content of the amounts in question.

5. The company was made aware of and fully understood the

solicitors' rate and method of charging.

6. The charges were reasonable having regard to the particular

case, the fees then being charged by lawyers of Schell's ability

and experience and his exclusive or priority availability at all

times. Schell was bound by the agreement to and did in fact give

the retainer priority over other work.

7. The solicitors' work was professional and competent.

8. The solicitors would either not have accepted instructions at

all or would have adopted a different administrative regime if

detailed accounts had been required.

9. The cost of preparing bills of costs for taxation in these

seventeen cases would be of the order of $30,000.

18. The company relies on some extrinsic facts to establish that waiver or estoppel should not be found:

1. The amount of fees involved for the solicitors and counsel by

the time of the cessation of the retainer was of the order of

$450,000 accumulated in under 10 months during which there was no

final hearing. By any standards this is a very large sum and prima

facie calls for some explanation and justification.

2. The solicitors promised to provide bills in taxable form on

three occasions after the cessation of the retainer. The initial

promise was given at the time of and in connection with the

transfer of the files to HDY. The promise was not withdrawn until

seven months after the cessation of the retainer. The reasons

given for the withdrawal were insubstantial.

3. The solicitors' files were deliberately kept throughout in a

form that would permit the preparation of bills of costs for

taxation. Schell agreed in evidence that one reason for doing so

was the possible need for a solicitor/client bill.

4. Despite the fact that the company paid a number of amounts on

the basis of global memoranda of accounts and without seeking

detailed bills of costs, Schell agreed in evidence that he was

always conscious of the possibility of being called on to present a

taxable bill. These matters constitute an admission that a

taxable bill be delivered or is a strong reason for ordering

delivery.

19. The company argued that its payment of earlier accounts cannot amount to a representation that it would never call on the solicitors to present a taxable bill. In my opinion this must be so. Subject to jurisdictional questions arising in the Federal Court over State legislation, not only does the Legal Profession Act 1987 (NSW) generally imply this result, the fact that the requirement of section 198(1) for such a bill as a precondition to an action for recovery may be waived merely means that action may be taken without a bill. It is not conceivable that at a hearing of such an action, the Court could refuse to hear the client to object to all or part of the amount claimed on the basis that the work was not done or that all or some of the fees were excessive or exorbitant. In any event, the Court's power to order a taxable bill is undoubted, both because of section 208 of the Legal Profession Act, and the Court's general supervisory power over the profession including its role in protecting the public from unwarranted charging by lawyers. I shall deal later with the fact that this Court's jurisdiction is not derived from the New South Wales legislation.

20. The company also submitted that the solicitors' agreement to provide bills in taxable form, and Schell's awareness that he could be called on at any time to present them, must put an end to any possibility of an estoppel or waiver being found. I do not think much of the reliance on this awareness, wrongly called a "concession", but the three times repeated agreement to produce detailed bills coupled with the circumstance that the agreement to do so was a significant factor in negotiations for the solicitors to hand over the company's files to HDY is quite another matter.

21. Whether the facts establish or refute the claim of waiver or estoppel in this case is inextricably linked with whether the agreement should be enforced. The resolution of this issue requires a detailed analysis, and resolution, of the contested facts concerning the costs agreement and any effect on that agreement of the personal association between Schell and Conway.

Contested or unadmitted facts

1. According to Conway, at the time of her interview on 22 June

1989 for the position to which she was in due course appointed, she

told Coleman that she was involved in a personal relationship with

Schell. About a month earlier she had attended a cocktail party

at Coleman's home accompanied by Schell. Conway says that after

her appointment, Coleman frequently acknowledged the relationship

by asking after Schell's wellbeing and inquiring, casually and

perfectly normally, as to their recent joint social life and

activities. Except for her attendance with Schell at the cocktail

party, these events were denied by Coleman who claimed to have no

knowledge of the relationship until January or February 1990.

2. When the litigation involving the shopping centre commenced,

Conway advised Coleman that the company would need lawyers.

Conway's account was that Coleman declared that he would not

engage HDY or another firm named Benjamin and Osborne both of whom

he had apparently employed before. He asked Conway's advice and

she suggested Cleary and Hoare and in particular Schell whom she

described as "the best lawyer in town" or "the best litigator I

have met" for this type of case. Conway said that Coleman

immediately agreed to that proposal. All this took place on or

about 13 October 1989. At this time Conway knew that Schell's

normal hourly fee for contested commercial litigation was $300.

3. Coleman agreed that he approved the retention of Cleary and

Hoare on the recommendation of Conway that Schell "is one of the

best litigators I have ever met". Coleman said that he was aware

that both Schell and Conway had been partners at HDY but although

he had dealt with Cleary and Hoare in Brisbane, he had never dealt

with Schell. Coleman said that he replied to Conway's

recommendation of Schell in these words:

He is a partner of Cleary and Hoare who we use

in Queensland. They do work for Estate

Mortgage. Don Cleary is a good bloke. That

would be good. OK, go ahead.

4. Shortly thereafter, Conway had a conversation with Coleman about

the fees to be charged by Schell and by counsel. According to

Conway, the figures of $300 per hour for Schell, $150 per hour for

Kerr, and $1,000 to $1,500 per day for Izaz Khan, a barrister then

expected to be used, were mentioned. It seems likely that Conway

had in the meantime discussed the matter with Schell. Conway told

Coleman that in her view the litigation was likely to be

expensive. Coleman is said to have agreed to the rates and fees

quoted by Conway and to have swept aside the potential expense

with expressions such as that 'he did not care what it cost

because he would not pay anyone to leave the shopping centre'. I

would have to say from my own experiences in the case that the

course of the litigation bore out at least that general attitude

in that the cases were in the first several months being strongly

contested with every indication that settlements were unlikely.

Of course I was obviously not able to know at the time whether

offers had been made by the company which the tenants had rejected

on unrealistic or insubstantial grounds.

5. Although agreeing that they talked regularly about this

litigation and that they periodically discussed particular invoices

for legal fees, Coleman denied that he ever discussed with Conway

Schell's charging rates or counsel's rates and cancellation fees.

He agreed that Conway advised him that the legal costs would be

extremely high and suggested attempts at settlement. He confirmed

his reply to the effect:

I am not prepared to pay anybody to leave the

Centre. That's what they all want. I simply

can't settle on that basis.

He denied saying, as Conway alleged he said:

I know the legal costs will be very high but I

am not concerned about that. I have approval

from Melbourne to run these actions and incur

those costs.

For reasons which will appear, Conway's understanding was that

'Melbourne' meant Estate Mortgage. That that company was

intimately involved in the decision-making of Fairfield Chase was

effectively admitted by Coleman.

6. Schell said that Conway subsequently conveyed to him his

retention as the company's solicitor in this litigation on 17

October 1989 on the condition, which he accepted, that these cases

were given first priority to the extent that other work was or may

have to be rejected. This is also easily credible because the

demands of the cases in the ensuing weeks, as I know from my own

demands of the parties at the time, were of such a kind that it

would have been difficult for a single solicitor to do other work

of substance at the same time.

7. Schell's evidence was that he had preliminary conferences with

Khan of counsel on 13, 16 and 17 October, the latter also attended

by Conway. Schell also said that he was instructed by Conway to

brief John Hamilton QC to lead Khan and that he did so on 18

October. Conway had apparently briefed Hamilton previously when

working for HDY. Khan was replaced by Alun Hill of counsel in

early November. She had also previously briefed Hill.

8. By letter of 25 October, Hamilton QC conveyed to Schell his

intention to charge at the rate of $3,600 per day or $450 per

hour. On 2 November, Schell advised Conway that he had just

received an account from Hamilton for $12,715 charged on this

basis. Schell thought that the costs of the cases were likely to

be very large, to the extent that the company might be involved in

the expenditure of half a million dollars to defend the

proceedings. Conway's response was that Coleman was determined to

fight on: "He can't afford to be seen to be giving in to them."

9. Conway said that she promptly told Coleman the fees being

charged by Hamilton QC and that Coleman agreed to them. Hill's

hourly fee of $180 was also communicated to and agreed to by

Coleman. It was apparently known or assumed that Hill would charge

a daily hearing fee similar to that previously quoted and agreed to

for Kahn.

10. Schell wrote a six page letter to the company on 29 December

1989 giving a very clear and full picture of the situation of the

litigation at that time and its immediate future prospects. He

requested a meeting with Coleman and Conway early in the new year.

Conway's assertion that she discussed the letter with Coleman, not

recalled by Coleman, was to some extent borne out by the fact that

the projected meeting took place over two hours on 5 January 1990

at the company's premises. This meant that Coleman had to return

to the office from vacation in the country especially for this

purpose.

11. According to Schell, towards the end of the meeting, he raised

with Coleman concern about the non-payment of his fees which then

totalled about $80,000 as shown in a schedule Schell had with him

at the meeting. After an inquiry made by Conway during the

meeting at Coleman's request, Schell was told that the cheques had

been drawn but had not been sent. Coleman was at a loss to

explain why that had occurred. Schell referred to his letter of

29 December 1989 which pointed out that the costs would be

considerable. In response, Coleman reiterated his instructions

that the tenants had to accept his offers of settlement or fight,

and said that under no circumstances would he pay any tenant to

leave the centre. Schell responded by saying that the damages the

tenants could receive may be considerable and settlement might

require the payment of big sums. Although he would do his best to

keep costs to a minimum, Coleman had to understand that at the end

of the cases he may learn that it would have been cheaper to

settle rather than fight the litigation. Schell went on to remind

Coleman that he was charging $300 per hour and that Coleman also

had to take into account counsel's fees at the previously quoted

rates. Coleman responded by indicating that he knew these things

but that he had to fight or settle on his own terms.

12. Schell said that Coleman asked at the meeting what it was all

going to cost him. Schell responded by saying he could not give a

conclusive answer at that stage but that on his present reckoning,

the company could be looking at $500,000 in legal fees if the

cases went to a hearing. He told Coleman that he thought that he

was "going to incur enormous legal fees" and that although he

would do his best to keep the costs to a minimum, the company was

involved in a very expensive undertaking. Schell told Coleman

that if he lost the cases, he would have to pay the other parties'

costs as well as his own. According to Schell, Coleman

acknowledged what he was being told.

13. This account was basically corroborated by Conway but denied by

Coleman. Coleman's denial included that he did not believe Schell

was owed $80,000 at that time and that he did not see the schedule

which Schell said he had at the meeting. Conway said that she saw

the schedule on the table at the meeting.

14. Following some further directions hearings when applications by

the company for summary judgment were discussed in the context

that I considered it preferable to hear the cases in full at the

earliest possible time, the cases or some of them were fixed for

hearing for three weeks commencing on 12 March 1990. My

recollection is that a later period of weeks was also set aside in

the event that the cases were not completed in March. On 12

February 1990, Hamilton QC informed Schell by letter that he

required a brief fee of $18,000, being five days at his usual rate

of $3,600 per day, payable whether the hearing proceeded or not.

Hill wrote an identical letter seeking $6,750 for five days at

$1,350 per day. Schell sent these letters directly to Coleman on

14 February 1990. The covering letter bears Coleman's handwriting

establishing that he read it.

15. Schell's covering letter conveyed that:

(a) Hamilton QC had unpaid fees owing of $5,775;

(b) Hill was owed $16,620; and

(c) Cleary and Hoare was owed $69,466.60 of which $32,212.20 had

been owing since 29 December 1989, plus $10,500 in unbilled

costs and disbursements.

The letter sought Coleman's agreement by 16 February to:

(a) the requests from the two barristers for agreement to their

proposed brief fees

(b) the payment of outstanding fees and costs by 19 February

(c) the payment of $60,000 on account of costs and disbursements

(d) a rendering by him of weekly bills thereafter until judgment

(e) payment of the weekly bills by the company within seven days

of receipt

The letter acknowledged that the Carrington Group was experiencing

financial difficulties at the time.

16. On 14 February Schell and Coleman spoke on the telephone.

According to Schell, Coleman proposed giving him a charge over the

rents coming in from the centre of about $100,000 plus per month

for his costs. Coleman expected $750,000 to arrive shortly from

Estate Mortgage with which the Carrington Group was apparently

connected in some way. He assured Schell that there was no

solvency crisis in the company. Coleman's account of the

conversation is that he told Schell that he didn't have the cash

in his general account to pay the fees but could speak to Reuben

Lew (of Estate Mortgage) to see if he could use the rentals to

meet the fees. Coleman said that he then spoke to Don Cleary, the

senior partner in Cleary and Hoare in Brisbane, and asked him to

speak to Lew about this possibility. Cleary agreed to speak to

Lew and Schell.

17. On 15 February, Schell wrote to Coleman referring to their

conversation of the previous day and to a conversation Schell had

apparently had with Cleary. On condition that the outstanding

fees for counsel were paid, Schell accepted the proposed charge

over the rents in principle but suggested a complex and detailed

mechanism to put it in place. Schell also explained that the

March hearing dates would probably have to be vacated and sought

instructions to have the case postponed for some months. He

advised that if the dates were vacated at the directions hearing

on 20 February, the two counsel had agreed to accept a two day

cancellation fee in place of the five day fee earlier fixed.

18. Meanwhile on her account, Conway had secured Coleman's

agreement to pay cancellation fees to counsel. She had explained

to him that it was quite common for counsel to charge, and for

clients to pay, such fees and that the suggested fees in this case

were reasonable. She conveyed Coleman's agreement to Schell in a

telephone conversation on 26 February. Coleman denied any

knowledge of the cancellation fees and denied agreeing to them.

He said that Conway checked all the fee accounts and he relied

upon her assessment of whether or not the fees were fair and

reasonable. Coleman signed all cheques to pay the solicitors' and

barristers' fees.

19. Schell said that in a further conversation with Coleman on 16

February (a Friday), Coleman agreed in principle to Schell's

detailed proposals to secure the charge with one or two minor

variations, told him that the cheques and a confirmatory letter

would be delivered to him on Monday, and asked him to deal with a

company employee named Dilip Khakhar about financial matters in

future. Coleman did write confirming the agreement, albeit not on

Monday but on Wednesday 21 February, but did not enclose or even

refer to the cheques for counsel.

20. The March hearing dates were vacated on 20 February and the

matters were refixed for fifteen days in June/July 1990. Further

dates in September were also fixed. On 19 March Schell wrote to

Khakhar seeking payment of $70,891.10 for costs and disbursements

for December and January.

21. On 26 and 27 April respectively Hamilton QC and Hill advised

Schell that if all fifteen days hearing in June/July were not

used, they would charge cancellation fees of seven days up to a

maximum of fifteen days fees in all. This compared with the five

days they had quoted for the abandoned three weeks in March.

Hamilton's letter was sent by Schell to both Conway and Khakhar on

1 May 1990. By a five page letter on 3 May, Schell drew Coleman's

attention to counsel's intentions on cancellation fees and to his

own unpaid costs. Conway could not recall discussing these

particular cancellation fees with Coleman but said that Coleman

agreed to counsel's fees being paid for the hearing as proposed.

22. Schell said that he again complained to Coleman in a telephone

conversation on 3 May about his unpaid costs. Coleman reassured

Schell that he would be paid and said that he would get Khakhar to

attend to it. Coleman denied this conversation but said that he

"may well have had a conversation in relation to costs" to the

effect that when the money was in the rental accounts, the cheques

would be passed on to Schell.

23. On 7 June 1990, the June/July and September hearing dates were

cancelled because a group of the cases was settled. The hearing

of the remaining cases was fixed for 9 to 26 October. By

identical letters to Schell of 8 June, Hamilton and Hill claimed

cancellation fees in respect of the June fixture of $25,200 and

$9,450 respectively, and stipulated similar cancellation fees for

the October fixture. As Conway had left the company's employ on 1

June 1990, Schell's despatch of counsel's letters to the company

on 18 June was addressed to Khakhar. He enclosed their

outstanding memoranda of fees and drew particular attention to

their cancellation fees for October. Coleman could not recall

seeing the letters of 8 and 18 June but said that as the agreed

arrangement for the payment of fees was then in place, he did not

consider that he had a choice in negotiating the size of counsel's

cancellation fees.

24. On 19 June Hamilton wrote to Schell expressing alarm at the

non-payment of his fees and seeking an assurance that the

previously agreed funds would be deposited in Schell's trust

account against future fees. Schell sent this letter on to Coleman

on 20 June with the statement that it was imperative that the

company carry out its agreement in relation to legal costs.

25. On 28 June, Schell accounted to Khakhar in some detail for the

appropriation and expenditure of legal costs received from the

company in May and June.

26. On 1 August 1990, Schell wrote to Coleman direct informing him

that:

(a) his May account was in arrears in the amount of $6,445.34

(b) his June account for $32,371.24 was unpaid

(c) his July account for $16,499.30 was in the course of

preparation

He pointed out that the company was in default under its agreement

with the solicitors and sought payment of the May and June

accounts as well as an additional $60,000 on account of July costs

and counsel's fees. He also sought the same payments in

September, October and the following months until the current

arrangement was terminated. Schell told Coleman in the letter

that he had seen a case in the law list on the previous day

between Fairfield Chase and Burns Philp and had gone to the

Supreme Court when it was listed in a vain effort to discover

whether those proceedings had a bearing on this litigation or on

Cleary and Hoare's retainer. He asked for information about those

proceedings.

27. On the same day, apparently after his letter had arrived and

been seen, Schell said that Coleman telephoned him to terminate his

retainer on the stated ground that a conflict of interest had

arisen in relation to the Burns Philp litigation because a partner

of Cleary and Hoare in Brisbane was acting for Burns Philp in a

dispute with the company over the rentals being used to pay the

fees in these proceedings. Schell's account of this conversation

included that Coleman claimed entitlement to divert the rents in

this way on the authority of Estate Mortgage as agent for Burns

Philp. Coleman reassured him about his outstanding legal fees.

Schell asked him for written confirmation of these matters and

Coleman agreed to send a letter the following day. In his

principal affidavit in these proceedings of 24 July 1992 Coleman

denied the reassurance as to costs but in a letter to Schell in

confirmation of the termination of his retainer which was hand

delivered on 2 August, Coleman wrote on the issue of costs (sic):

Further, as the quantum of costs spent on

Fairfield Chase Pty Ltd on legal fees is of such

an enormous amount, I would be greatly assisted

if you would forward to me copies of all your

rendered accounts and payments received, so that

I may forward these to Burns Philp Trustee

Company Limited for checking, to ensure that all

parties are protected.

He asked for the files in the litigation to be delivered to HDY.

28. Schell replied on 3 August seeking payment of outstanding costs

and counsel's fees including cancellation fees -- Cleary and Hoare

$62,239.48, Hamilton QC $28,130 and Hill $4,050. Schell suggested

that Hamilton and Hill be briefed by HDY to avoid the cancellation

fees and queried the request for the accounts as they were already

on Coleman's files. Schell repeated the demand for payment in a

letter of 7 August, threatening legal action if the moneys were

not paid immediately. He sought a reply by 4pm on 8 August.

29. On 9 August Schell and Coleman had a long telephone

conversation. According to Schell, the course of the conversation

included this exchange:

Schell: Tom, there seems to be some suggestion creeping into

all this that my fees are excessive, or there may be

some question as to competence in the way that the

cases were handled.

Coleman: There is absolutely no question about competence and

if there was I would have raised it with you, you know

that's the sort of person I am.

Schell: Yes, well I would have expected you to. I might say

though there is no cause for you to have any complaint

about anything in the conduct of these cases. As you

know, you have been able to settle more than half of

these proceedings without having to make any capital

payment and without going to a final hearing.

I know there have been high legal costs to you but you

were aware of that back in January, when we discussed

the strategy of these cases.

Coleman: Yes, I know that.

Schell: As to the costs, you have known my charge out rate of

$300 per hour and the level of Counsel's fees and you

have known that for some considerable time. We have

discussed that on many occasions so it's not as if

you're not aware of the basis of the charges. We

discussed the charges and the costs as early as 5

January 1990. I told you at the time that the costs

could be of the order of half a million dollars or

more and I don't think all the cases had commenced by

then.

Coleman: That's right.

Schell: Well what's the problem, Tom?

Coleman: I have to make sure that I can account for all the

costs and the legal costs in the proceedings because I

am concerned about Burns Philp.

Schell: Well, that's all right.

Coleman: Sharon Peters is working on them at the moment.

Schell: I can justify every one of these charges to the hilt.

There has been an enormous amount of work done in

those cases and I've almost entirely devoted my time

to them.

Coleman: I know that. As far as I am concerned, there will not

be any problem about your fees. It's just that I have

to make sure that I don't fall into any difficulties

with Burns Philp. Fairfield Chase has the money to

pay your fees.

Schell: Well Tom you must understand that the more time goes

by the more you are prejudicing the cases that are

listed for hearing for 9 October 1990 and you know

that the directions to prepare the cases have to be

complied with.

Coleman: Yes I do.

Schell: Well Henry Davis York will not file a Notice of Change

of Solicitor without the file but I want you to

understand I'm not doing anything on these cases.

Coleman: No I understand that and I wouldn't expect you to.

Schell: I am presently thinking of filing a Change of

Solicitor myself but really Henry Davis York should be

looking at that matter very quickly.

Coleman: Tony Woods and Philip Crawford are looking after the

matters.

Schell: Well Philip should have rung me.

Coleman: He was away yesterday.

Schell: No I'm not talking about yesterday. I'm talking about

last week.

Nobody is telling me anything about what's going on.

What would you expect me to be doing in relation to

the matter other than what I am saying in the letters?

Furthermore, I've got a duty to my partners to make

sure that I recover the fees.

Coleman: Of course you do. I understand that.

Schell: Well I'm not very happy about all this. I take some

pride in the way these cases have been run. I also

know that the strategy that was adopted in the

beginning of the year, as you instructed, to fight

them, even with the high legal costs, has been kept

and very successfully kept. You, Helen and I have

been a good team. We have worked together well on

these cases and it has worked.

Coleman: Yes I know.

Schell: What's to be done now?

Coleman: Well I will get Crawford or Woods to ring you or I

will ring you this morning.

Schell: Fine but remember though I want to be paid and I can

only hold my hand for a certain time. The letter

gives you till 2:30pm today.

Coleman: Yes, I know.

Schell: Get them to give me a ring or you ring me this

morning.

Coleman: Yes, I will.

Schell: Is the Burns Philp litigation set down for hearing?

Coleman: No, it's in before the Court for directions again next

Thursday. We are getting a list of their contentions

today and then we will know the basis of what they

say.

Schell: So it's not in for final hearing as yet.

Coleman: No.

Schell: OK please get on to it and get back to me.

Coleman: Yes, I will.

Schell dictated a record of this conversation immediately after it

occurred. The record supports the account set out in the

affidavit.

30. Coleman could not recall the detail of this conversation. He

said that if Schell said:

As to the costs, you have known my charge out rate of

$300 per hour and the level of Counsel's fees and you

have known that for some considerable time. We have

discussed that on many occasions so it's not as if

you're not aware of the basis of the charges. We

discussed the charges and the costs as early as 5

January 1990. I told you at the time that the costs

could be of the order of half a million dollars or

more and I don't think all the cases had commenced by

then.

his reply was not "That's right". He confirmed that he said the

words:

I have to make sure that I can account for all the

costs and the legal costs in the proceedings because I

am concerned about Burns Philp.

31. There was no reply to Schell's letters of 3 and 7 August and

Hamilton QC and Hill were not briefed by HDY to continue in the

matters.

22. As has been pointed out, Schell and Conway largely corroborated each other but Coleman was not corroborated at all. Most significant in resolving these conflicting accounts is, as often happens in such situations, the written evidence, specifically the correspondence passing between Schell and the company, including Coleman, which in major though not all respects strongly supports the accounts given by Schell and Conway. Naturally, as officers of the Court, it would be expected that Schell and Conway would be truthful because the consequences of their giving false evidence are too serious to be risked. It is nevertheless obviously possible for lawyers to lie on oath. In considering these issues of credit, a question I asked myself is what would be their motive for doing so in this case. At the worst, Schell would have to prepare seventeen bills in taxable form. This would take time or, if let out to a private consultant, cost money or both. The bills could be so taxed as to require some refund by Schell of the fees received. He may not have the money. As his wife, Conway would naturally wish to support him as best she could.

23. I carefully listened to and observed the evidence given by Schell and Conway. I gained no feeling at all that this was the enterprise on which they were embarked in the witness box. My impression was that Conway's evidence, and her affidavits, would have been much more detailed and specific and quite different if she had been manufacturing a false defence of her husband. Her evidence was forthright and precise but not overstated or artificially detailed. She did not impress me as exaggerating or colouring the facts. I thought that her evidence would have been the same even if Schell had been solely a professional colleague.

24. As in the letters he wrote to the company, and in the telephone conversations between himself and Coleman, Schell appeared at all times confident and credible about his professionalism and activities in relation to this litigation. In many ways, his letters to Coleman, though not perhaps as tautly and tightly expressed as others might have written them, strongly underpinned the basic truthfulness of his evidence, including the appropriateness and worthiness of his fees.

25. It is of course true that a contemporaneously dictated record of a telephone conversation, as opposed to one directly recorded on tape while it was occurring, can be manufactured and Schell's record of his 9 August 1990 conversation could thus have been manipulated to support his own interests. Some of the vital words in that record do contain elements of excessive self exculpation to such an extent that parts of it could be taken to read as a set up or "verbal" of Coleman. Rightly if a little belatedly, typed records of interview in other circumstances are, at long last, now viewed with great reserve and suspicion and their use in legal proceedings significantly truncated. But my strong impression of Schell's written and oral evidence was that he was not engaged in a fraudulent exercise of concoction in this respect, or in a major conspiracy with Conway of invention of conversations and activities. It should also be said that although this is the inescapable effect of some of the company's submissions and some of Coleman's evidence in these proceedings, neither Schell nor Conway was subjected to cross examination to these ends.

26. I also gave close attention to Coleman's oral evidence. It is not necessary to, and I do not, base my approach to Coleman's credit on his evidence concerning, and his apparent instructions to the company's lawyers to raise as an issue in the proceedings, the suggested failure of Conway to reveal to him her intimate relationship with Schell and its consequent possibilities for a conflict of interest and a deleterious even poisonous effect on her professional judgment, honesty and evidence. This is because the remainder of Coleman's evidence was quite unsatisfactory and in some cases clearly prevaricating. It is of course legitimate for witnesses not to recall events and conversations of two and three years earlier than their affidavits and oral evidence. But Coleman was a very experienced businessman with large responsibilities, significant commercial awareness, and quite extensive past exposure to lawyers and their fees. He knew the importance of his evidence in this case both when he prepared or gave instructions for his affidavits and when he entered the witness box. Yet to my mind he took refuge in a claimed and selective lack of recollection of several important events just a little too often to make these answers, and his evidence generally, credible.

1. Coleman's knowledge of Schell's rate of $300 per hour

27. In his principal affidavit of 24 July 1992, Coleman asserted that there had never been any discussion about Cleary and Hoare's charge-out rates: paras. 6, 13, and especially 22(b) (sic):

At no time did I have a discussion with Helen Conway in

relation to Cleary and Hoare's charge-out rates, nor

Counsels' rates and cancellation fees. From time to time we

spoke about particular invoices but not as to how they were

calculated.

28. In particular, his affidavit evidence as to the meeting with Conway and Schell in the office on 5 January 1990 during his vacation made no reference to any conversation about charge-out rates; he merely denied the versions of that meeting put by Schell and Conway. He maintained this position in his oral evidence-in-chief (transcript pages 100-1) where his evidence was to the effect that although in the October-January period there were discussions about the likely cost of proceedings, there were no discussions concerning the specific fees of Schell.

29. However, in answer to questions from me (transcript page 119), Coleman admitted to a discussion in January 1990 -- presumably at the office meeting on 5 January -- in which he was informed that $150 per hour would be or was being charged for Kerr and that Schell would be or was charging at his firm's usual rates. This, of course, was completely new evidence and quite inconsistent with anything said previously. His best explanation for this discrepancy was that, when he was preparing his affidavits, "more than likely I forgot it at the time" (transcript page 122). It is highly unlikely that Kerr's fees would have been quantified but not Schell's. Furthermore, it is inherently improbable that having been told that Schell would be charging at his firm's usual rate, Coleman would not have asked what that 'usual rate' was -- unless he already knew it. Moreover, by this time, he had on the uncontradicted evidence already received one or more accounts from Schell seeking quite substantial sums. Some payments may already have been made. It would be extraordinary if this was the first time his mind had been directed to how these charges had been calculated. Yet this was the effect of these answers to my questions and those of counsel which pursued them.

30. Another occurrence in the evidence is significant in this respect. At transcript pages 107ff Coleman agreed that the litigation was potentially financially crippling for Fairfield Chase and that it was important to try and obtain an assessment of the ultimate costs. He agreed that "in normal circumstances" a prudent businessman would ascertain the likely fee rates of his lawyers. When asked what was not "normal" about the present situation, he sought refuge behind an undertaking of confidentiality supposedly given in some litigation in Victoria which had nothing to do with the question. When required to answer, he explained that because of the potential consequences of the litigation and because he thought the matter had to be defended at any cost, he made no inquiry at all as to the likely cost (transcript page 113). This extraordinary answer was made the more unlikely to be true in the light of his admission that in other litigation in which he was involved he had sought to find out in advance what the lawyers were going to charge (transcript page 114), and by his acknowledgment (transcript page 115) that it was important for him to know that he was able to fund this litigation (see also transcript page 107).

31. Further, when questioned about outstanding legal costs owing to Cleary and Hoare at one time -- possibly the $80,000 referred to at the January 5 meeting -- Coleman agreed that he was surprised at the amount alleged to be outstanding and agreed that it would have been obvious and simple in such circumstances to have asked how the sum had been calculated (transcript page 116). He could not offer any explanation as to why he did not do so but denied that it was because he already knew the rate.

32. His admission that he had to consult Reuben Lew of Estate Mortgage about the fees presented another anomaly for his account that he did not know or seek to ascertain Schell's hourly rate. It is hardly conceivable that authority would have been asked of or given by experienced commercial operators for the payment of what were obviously going to be substantial legal fees on a "blank cheque" basis.

33. The solicitors submitted that Coleman was driven to give the unpredictable answer he gave concerning Kerr's hourly rate because of his realisation of the absurdity and improbability of his previous evidence. The real problem with this evidence, however, is that because of Coleman's admitted need and desire to know the costs of the litigation, it is not possible that he would not have ascertained what Schell's "usual rate" was. Of course Conway knew what Schell's usual rate was. That Coleman would not have asked her, if he did not know, would be nothing less than astounding if it were true.

34. I accept the evidence of Conway and Schell, and reject the denials of Coleman, that he was informed and came to know, by not later than the end of October 1989, of the rate of $300 per hour for Schell's virtually exclusive services in this litigation and of $150 per hour for Kerr's services, and that he then agreed to pay Cleary and Hoare at these rates for work done by them in this litigation.

2. Coleman's knowledge of counsel's cancellation fees

35. On this subject, Coleman directly contradicted his affidavit even in his oral evidence-in-chief. In contrast to the earlier quoted paragraph 22(b) denying any discussions of these fees with Conway, he said in chief (transcript page 102) that he did have conversations with Conway concerning cancellation fees. This means that he was either not telling the truth in his affidavit or was not telling the truth in his oral evidence on this matter. Either conclusion is fatal to the contention that he was not told and did not know anything about these fees.

36. I am satisfied that by not later than late November 1989 Coleman was told of and agreed to the retention of Hamilton QC as leading counsel at the rates of $3,600 per day or $450 per hour, and of Hill as junior counsel at between $1,000 and $1,500 per day, which later became fixed at $1,350 per day, or $180 per hour. I have no doubt at all that Coleman was later informed of both counsel's intentions to claim, and the normalcy of, cancellation fees and that he agreed to pay them for the abandoned February, June and October hearings if the stated circumstances arose.

3. Coleman's knowledge of the intimate personal relationship between Conway and Schell

37. To me this matter is important not particularly to assist issues of credit or make judgments about Coleman's character but to help form necessary conclusions as to whether and how the association between Conway and Schell may have affected their judgment, decisions and advice to Coleman and the company on relevant matters.

38. Conway's evidence was that she told Coleman in June 1989 before she started work with the company that she was keeping company with Schell. In his affidavit of 24 July 1992 (para 3) Coleman asserted, and in his oral evidence-in-chief (transcript page 99) he repeated, that he first found out about the relationship in February 1990. Although he could not say how he became aware of it, he conceded in answer to a question from me that there was innuendo or gossip in the office about such a relationship in about December 1989 or January 1990 (transcript pages 123-4). In the way things operate in the real world, it would be hardly surprising that members of the company's office staff would have known of the relationship long before a time several months after Conway's employment had commenced. The likelihood that this would have filtered through to Coleman was high. To form a judgment that, in a circumstance of potential conflict or compromise of interests, Conway would deliberately have chosen that her employer discover by such indirect and uncertain means that she was his solicitor's lover or regular partner would be seriously adverse to Conway's honour and professionalism, let alone her credit. Yet this serious criticism was not directly put to Conway in cross examination as it certainly should have been if the types of conclusions which the company wishes to have drawn in these proceedings were to be argued for with confidence in their acceptability.

39. Despite the potential importance to the company and the shopping centre litigation of this relationship, Coleman said that he "personally didn't take any notice of the gossip or inquire about it" (transcript page 124) and offered his trust in Schell and Conway as the reason why, when he heard the gossip or innuendo, he did not take any steps to ascertain its truth (transcript pages 124-5). It was only when what he called "threatening letters" commenced to come from Cleary and Hoare in January or February 1990 that he took notice of the matter at all. He specifically denied asking Conway anything about her private activities and personal interests over periodic office drinks or in normal chit chat in the office. In fact, he said that Schell did not enter into this type of conversation at all:

Peter was being dealt with (by) the lady from our

shopping centre, Sharon Peters ..... I very rarely had

occasion to discuss anything with Peter.

40. Apart from the unrealistic picture of office life, especially of senior staff who were working closely together, projected by this evidence, the difficulty of accepting Coleman's evidence on this aspect of the case is emphasised by his evidence concerning the cocktail party which Conway and Schell attended at his house in May 1989. In his affidavit of 24 July 1992, he deposed to the fact that Schell had attended the party with Conway. In his affidavit of 2 November 1992, his account was:

I was aware that Peter Schell attended with Helen

Conway but did not know nor did I inquire as to the

basis upon Peter Schell attended with Helen Conway.

41. When cross-examined about this matter, he could not remember whether Schell had been invited in his own right or as a partner in a legal firm being used by the Carrington Group at the time. Coleman could not recall whether Schell and Conway were at the party together and at one stage was not even sure whether Schell was there or not. Because of the inconsistencies in this evidence, Coleman was virtually forced to explain that in some cases (such as with the cocktail party) his evidence was more reliable when he swore his principal affidavit than it was when he was in the witness box but on other occasions (such as his recollection of what was said at the meeting of 5 January 1990 about Kerr's hourly charge-out rates) his recollection was better in the witness box than it had been when he swore his affidavit. This exemplified Coleman's predisposition to prevaricate and invent implausible scenarios to cover for impossible or unlikely situations in his evidence.

42. I am quite satisfied that Coleman knew of the personal association between Conway and Schell from at least the very outset of Schell's retention by the company for this litigation if not well before. It is not necessary for me to speculate on why he has adopted a false position in this respect in these proceedings and given instructions accordingly. His own linking of the matter to Schell's letters in January/February 1990, called by Coleman "threatening" but in fact only demanding the fulfilment of the company's obligation to meet its agreed legal fees, gives one hint. Another was provided by the submissions made in the company's name, no doubt on Coleman's instructions, in these proceedings. These included that the personal relationship:

(a) interfered with Conway's consideration of the propriety of

the retention of Cleary and Hoare and of Schell in

particular

(b) clouded the capacity and willingness of both Conway and

Schell to advise the company adequately of the advantages

and disadvantages of the proposed fees agreement and to

offer alternative choices of lawyers and prices

(c) caused Schell to renege on his obligation to bring to the

attention of Coleman and officers of the company other than

Conway the disadvantages to the company of the agreement

(d) diverted Schell's professional judgment away from his

obligation to advise Coleman personally about these matters

rather than put all his trust in Conway doing so

(e) caused both Conway and Schell to fix or settle on, and cause

Coleman to agree to, a level of charges, including the

cancellation fees for counsel, that were not fair and

reasonable

(f) meant that neither Conway nor Schell formed a truly detached

view or proffered proper and disinterested advice about the

cancellation fees, partly perhaps especially because they

failed to negotiate that credit be extracted from the

counsel for any fees earned in the period for which the

cancellation fees were paid

43. It was submitted in consequence that the company's agreement or its actions in support of an agreement were inadequately advised or founded because of the relationship between the two lawyers charged with the task of providing it with advice.

44. Regardless of Coleman's motive for adopting this approach, I am not able to find the slightest evidence to support the company's far reaching submissions in this regard. It is difficult to conceive of a more devastating attack on two professional people than these submissions constitute. Yet none of these assertions was put to Conway and Schell in cross examination as undoubtedly should have been the case if the submissions were going to be put at all, especially with conviction. There is therefore no basis for concluding that the personal association between Conway and Schell caused them to stray in any way from their respective professional obligations to advise Coleman and the company in relation to the appointment of Cleary and Hoare as the company's solicitors, to the rates to be paid for Schell and Kerr, or to the fees to be paid to counsel.

45. On the specific issue of the cancellation fees, I accept that Conway advised Coleman adequately about the first set in February/March 1990. She was removed from that obligation and task thereafter because she left the company's employ, and Schell gave the advice for the second and third sets of cancellation fees. I accept that this advice was adequate although it may not have been more. Evidence was given by an experienced solicitor Gregory Judd that cancellation fees for junior counsel were uncommon in 1989/90 but that it was quite customary for senior counsel, especially those in high demand, to charge full hearing fees for up to half the proposed hearing time as a cancellation fee. Whatever conclusions should be drawn from that uncontradicted evidence, it provided no basis for concluding that the association between Conway and Schell clouded or adversely affected the advice given on the question of cancellation fees.

46. Moreover, Coleman was no fool, baby or pushover, especially in relation to the expenditure of his company's money of the order involved here. I cannot accept that he was or would have allowed himself to be inadequately informed about such matters and to have paid out such large sums to barristers without knowing the basis upon which he was being charged.

47. I therefore find that the company entered into an oral agreement, in a detached, commercial and fully independent and informed fashion, to engage Cleary and Hoare as its solicitors in this litigation and to pay them at the rates of which Coleman had been advised and to which he had agreed. This included counsel's fees as stated and their cancellation fees on the three occasions when the hearing was cancelled.

48. In Emeritus Pty Ltd v Mobbs (1991) NSW Conv R 55-588 at page 59,321, Justice Studdert of the New South Wales Supreme Court said that a costs agreement with a solicitor will be enforceable if it is fair and reasonable and not exorbitant, and provided that the solicitor has not taken unfair advantage of the client. In agreeing, in Burgundy Royale (1992) 109 ALR 549 at 556, with his Honour's dictum and with the views expressed by Buckley LJ in Clare v Joseph (1907) 2 KB 369 at 378 (see also Lord Alverstone at 372 and Fletcher Moulton LJ at 376) and in other cases I there quoted, I identified a number of criteria that made Burgundy Royale a case for enforcing the agreement. As applicable to the present case, they are:

1. The litigation was complex and involved many parties and large

and difficult claims. No two cases were the same. There were a

number of interlocutory applications and many protracted

directions hearings.

2. As the effective client, Coleman was a most experienced

businessman controlling a sizeable corporate empire. He and the

company had significant past dealings with lawyers and had not

infrequently been involved in litigation. He was well aware of

the practice of some lawyers to charge on an hourly basis and

generally followed the practice of ascertaining what he was going

to be charged before he embarked on the matter at hand. I am

quite satisfied that he was a knowledgeable participant in the

negotiation and conclusion of the agreement in this instance

although he undoubtedly relied on Conway's advice and

recommendations.

3. The company through Coleman was well informed about the case and

its potential cost. In this regard, the factual dispute as to

what was said to and by Coleman in conversations with Conway and

Schell does not need to be resolved at all, because Schell's

letters are sufficient. Moreover, Conway was the actual day to

day representative of the company in the work and preparation

involved in the litigation and she had considerable experience as

a litigation lawyer herself. Whatever she said or did not say to

Coleman, there can be no doubt that she knew Schell's charging

rate, that she believed they were reasonable to secure the full

time services of a lawyer of his abilities, that she understood

the complexities of the litigation, and that she was able to and

did make a commercial and professional judgment about these

matters.

4. Coleman had available, sought and, by his own choice, took

advice from Conway, as what he believed to be a highly regarded

professional in the field, as to the costs agreement and, as I

have found, was consulted on and agreed to the retainer. Again

regardless of what was or was not said to or by him, he

undoubtedly knew that the costs in the matter were likely to be

large. So far as I can see from the affidavits and the evidence,

he has never denied being told that they might eventually amount

to half a million dollars not including any damages awarded and

the costs of the other parties if the cases were fought and lost.

5. The company paid very substantial sums for fees and costs to

Cleary and Hoare before the current dispute arose. If it were

true that Coleman was not specifically informed of Schell's hourly

rate, his payment to Cleary and Hoare of around $200,000 in profit

costs in a period of nine months would undoubtedly have made him

aware of it long before he first raised questions about it after

the ending of the retainer. There must also be added his

admission that he knew the hourly rate charged for Kerr as early

as January 1990 and his understanding that the services of Kerr,

as a clerk with considerable experience and ability but at the

time no degree or diploma in law, were being used to save the

higher cost of Schell. Together with the accounts Coleman was

paying -- all or almost all of them, after the first batch, only

paid following explicit complaints from Schell -- this knowledge

must have alerted Coleman to the fact that Schell was billing by

the hour of work done. His experience would then have told him

that the alternative methods of charging available of which he was

aware, viz. a lump sum or an estimate of fees, were not being used

in this instance. That this was accepted without dissent or

objection for several months during which there was daily or

frequent contact with Conway and Schell was easily contactable, is

a very weighty consideration in favour of enforcing the agreement.

49. The personal relationship between Conway and Schell does not derogate, or in truth really bear on, these factors. Even on Coleman's own evidence, he had reason to suspect the relationship in January 1990 from office gossip. Yet he did not move to deal with the matter. He was, on his own account directly told or otherwise positively learned of the relationship no later than February, yet the retainer continued uninterrupted and unquestioned. Further, despite several quite sturdy confrontations with Schell over fees, the relationship was never used by Coleman as a reason for not paying them or for ending the retainer. Thirdly, he said in evidence that even if he had known of the relationship earlier, it would not have made any difference because of his trust in Conway whom he agreed he would have trusted even if he had known of the relationship. Finally, I repeat that there is no evidence at all and no reason to suspect that the relationship had even the slightest adverse impact on either Conway's or Schell's conduct, professionalism or commitment in the litigation or the company's interests generally. Neither was cross examined on any such suggestion and no direct submission to that effect has been made by the company. The powerful and convincing evidence to the contrary is entirely uncontradicted and unchallenged.

50. I find as a fact that Conway conducted herself and performed her duties in relation to the matters involved in these motions with propriety and competence. I am satisfied that she did not compromise her duties to her employer because of her relationship with Schell. By the same token, her judgment of Schell's capacities and suitability for this litigation was entirely borne out by the fact that the company did not suggest either in evidence or submissions that he did not perform his functions or undertake his retainer other than in a fully professional and competent manner. I find that Schell did not take any unfair advantage of Coleman or the company or use his relationship with Conway to the detriment and at the expense of his client.

51. Even if Conway had in some way compromised herself in this context, this would not be a basis for setting aside the costs agreement with Cleary and Hoare. Conway was at all relevant times a senior employee of the company in a position of significant responsibility. The solicitors were entitled to believe that she would give all appropriate advice to her superiors in the company as to the propriety of all relevant legal matters, including her relationship with Schell, and would otherwise properly discharge her fiduciary duties to her employer. Contrary to the company's submissions, there was no obligation on Schell to advise Coleman or anyone else within the company that there may be a possibility of misjudgment or partiality in Conway because of their relationship. Schell would not have believed so and would have known the opposite. He would have had no obligation to take his client down such pointless tracks. I also reject the company's submission that Schell was himself obliged to disclose the relationship to Coleman. In the circumstance that it should be implied that he had been told by Conway that she had previously disclosed it, Schell's acceptance that the existence of their relationship meant that some elements of special attention in the matter were appropriate was fair -- and appears on the evidence to have been reflected in what he actually did to carry out his obligations to the company.

52. Further, the company's submission that Schell was obliged to bring to the attention of Coleman or someone else in the company other than Conway, the disadvantages from the company's point of view of the entry into the costs agreement overlooks and elides the fact that there was no evidence of any "disadvantage" to the company in this agreement. On the contrary, the only evidence in these proceedings was that it was appropriate and fair. There was no evidence that other commercial litigators in Sydney would have agreed to accept a case of this nature on any other basis. There was no evidence to support the submission's assumption that Conway was not appropriately and properly advising the company of its rights in relation to Cleary and Hoare as the external solicitors. Nothing was put to Judd in cross examination to establish that if he had been faced with this litigation, his charges would have been less or even that he would have been prepared to give it the priority over other work required of Schell on his time costing fee. On the other hand, the evidence of Coleman's extensive previous experience with lawyers and his knowledge of the way they charged leads to the inference that he was at all times aware of the issues involved in charging and the options open to him and his company as the client in this regard, even if only to ask questions and seek justification of any fees which caused him any consternation or doubts.

53. The question whether Schell's fees were fair or exorbitant is not something at which a Judge can or may be asked to guess. Conway an experienced commercial litigator believed them to be fair, the company admitted that Philip Crawford of HDY charged at the same rate, and Judd stated in evidence that Schell's hourly rate was common for small to medium-sized commercial firms like Cleary and Hoare at the time. There was no contrary evidence, and the very experienced and independent Coleman paid the fees without dissent or question for many months. It was not suggested that the $150 per hour rate charged for Kerr was exorbitant or was otherwise a reason for not enforcing the agreement. I am not all sure that this question is or ought to be before me in these proceedings at all but if it is, I find on the evidence that far from being exorbitant, $300 per hour was a fair and reasonable fee for Schell to have charged the company for this litigation on the condition as to priority the company imposed.

54. On the question of the cancellation fees, there was again no evidence that they were exorbitant, or not fair and reasonable. I stress the absence of evidence in this regard. Apart from Schell himself, Conway and Judd thought that the principle of cancellation fees was normal or common at the time, and that the fees charged in this particular case were normal or within the range, although Judd said that he had only experienced cancellation fees for senior, not junior, counsel. Judd dismissed as essentially impossible or impractical the concept of extracting from counsel credit, or negotiating an agreement with them that credit be given, for other work able to be done by them in the periods to which the cancellation fees applied.

55. I must confess to some serious concerns and reservations about the principle of cancellation fees myself. A requirement to pay counsel anything for work not done is or ought to be as unconscionable in the law as anywhere else. The facts of this case exemplify why. Whereas any out of pocket expenses incurred might be justifiable, the concept that $75,000 could be payable for two hearings vacated on at least three weeks notice seems quite unjustified and excessive. This situation is even more demonstrable in relation to the third set of cancellation fees which arose from the termination of Schell's retainer more than two months prior to the hearing date. In all three cases no credit was sought or obtained for alternative work obtained by the barristers in the abandoned or lost periods. Nor did the evidence reveal any consideration having been given to any contribution made by the counsel to the loss of the hearing dates, although I am of course not suggesting that they did in fact contribute to the losses in this case.

56. In fact the relevant requirements of counsel in the first two instances were in some ways not true cancellation fees at all. This is because those charges were set on the basis of full hearing fees for any five or seven days when a hearing did not take place. That type of arrangement gives counsel, in the situation of the June/July hearings for example, an incentive to shorten the hearing to eight days or less, or at least to less than the fifteen days fixed, or encourage the Court not to sit on some days, so that they can receive seven or some lesser number of days fees without being required to appear. I am of course not suggesting in the slightest that these two particular counsel would have given a moment's contemplation to such an approach. But looked at objectively a fee regime of this kind is too open to abuse to be generally approved by the Courts.

57. But the company produced no contrary evidence to that adduced by the solicitors in this case. In my view the issue is one for expert and professional evidence, not the speculation or intuition of Judges, however experienced. My last professional experience with cancellation fees was in 1986. Professional practices of this kind are not fixed. They might vary regularly, often at short notice or to deal with particular cases or circumstances or even particular practitioners. There was no evidence that at the relevant time for this case, cancellation fees generally or in the factual circumstances here were unprofessional or inappropriate in principle although I understand that that situation has since changed. No barristers were called to establish a practice in the profession in 1989/90 relating to cancellation fees. In fact three solicitors (Conway, Schell and Judd) gave evidence that they were normal, common, not unusual or uncommon, necessary to secure the counsel of choice, reasonable in the circumstances, and the like. None of these solicitors was seriously cross examined on the evidence to these effects. Conway and Schell had no interest, revealed by the evidence, in advancing the cause of Hamilton QC and Hill in this respect.

58. The first time the matter was really confronted was in the company's belated submissions in reply when it was said that cancellation fees cannot in any circumstances be considered, and should never be accepted by the Court, as reasonable. No criteria, standards or legal authorities were quoted to support this very sweeping submission, and I do not think that the matter is so obvious as to permit me to make a similar bland and blanket pronouncement as if it were a matter of renowned judicial notice. Amongst other reasons this is not least because of the company's informed agreement to pay the cancellation fees and its payment of them without specific protest. The fact is that a client may agree to pay an otherwise apparently unreasonable fee. And provided the agreement is honourable and at arm's length, and the fee is not so gross as to constitute what is obviously, or evidence establishes to be, an exorbitant and exploitative charge, I know of no power in the Court to reject it. If there is power, I can think of no discretionary reason for rejecting it merely because a particular Judge might think it unreasonable or entertain doubts about its reasonableness, either generally or in the particular case. Such a means of approaching the matter would introduce an altogether too whimsical and personal element into what must be approached in a completely objective way. It is not the approach Justice Studdert had in mind in Mobbs or what I said in the 1992 Burgundy Royale judgment or in my earlier judgment in this case on 13 August 1992. I find that the cancellation fees charged by counsel were not such as to cause the Court to set aside or refuse to enforce the agreement.

59. All these conclusions lead me to hold that the solicitors are entitled to enforce the costs agreement but that the agreement did not have an express term on the issue of the delivery of a taxable bill in accordance with its elements.

60. The question must therefore be determined of whether the agreement constitutes a waiver of the company's admitted prima facie right to a taxable bill or an estoppel of its delivery. There are two preliminary observations to make. The first is that if the agreement does not constitute a waiver or estoppel, the effect of upholding the agreement is that any bill required would not be deliverable under the second schedule to the Federal Court rules but in accordance with the terms of the agreement. In other words, the solicitors would list the work done and time spent and then cost it out at the appropriate rate depending on whether the performer was Schell or Kerr. The task of the taxing officer would at most be to determine whether and by whom the claimed work was done. Yet Schell was not cross examined on either of these matters and it seems that there is no real dispute about them.

61. My second preliminary remark is that this Court has no definite legislative base for determining this question. As pointed out in my earlier judgment of 13 August 1992 in this matter, a Full Court of this Court in Keith Hercules and Sons v Steedman (1987) 17 FCR 290 decided that the power being exercised by the Court in this situation derives from the incidental powers given by section 23 of the Federal Court Act. The matter not having been cross vested from the Supreme Court, there is no basis for dealing with it in this Court under the New South Wales Legal Profession Act 1987 even if that Act might otherwise have application. Hence it must be dealt with as a discretionary exercise on common law principles.

62. Clearly the entitlement to a detailed solicitor/client bill is for the benefit of the client. Equally clearly therefore the entitlement can be waived: Dodd v Gillis (1989) 16 NSWLR 623; Sharp v Dane (1903) 9 ALR 155, 25 ALT 54; Kamay v Miss X (1986) FLC 75,459. Riley in the NSW Solicitors Manual at para 2323 and Studdert J in Mobbs accept that Dodd v Gillis is correct. See also Saddington, Legal Practitioners' Act 1898-1936 (1937 edition) at pages 35 and 37-8 and Riley at para 2326. As to whether this argument is also supportable in terms of an estoppel, see the cases collected in my judgment in Re Ferdinando Ex parte ANZ Banking Group Limited and Anor, unreported 30 April 1993, especially Waltons Stores (Interstate) Ltd v Maher and Anor [1988] HCA 7; (1988) 164 CLR 387 and Commonwealth of Australia v Verwayen (1990) 170 CLR 394.

63. I have earlier summarised the parties' arguments for and against waiver/estoppel. In my opinion the arguments of the solicitors should prevail. The facts, as I have found, that in the context of what it knew would be very expensive litigation, an experienced company agreed to an hourly charge, and over many months accepted and paid without relevant question or a request for a detailed account some hundreds of thousands of dollars in fees to the solicitors on this basis tells heavily in favour of a waiver. So must the absence of any complaint about even a single aspect of the solicitors' work, either in evidence or submission. The suggestion that Conway allowed her personal life to get in the way of her professional and employment obligations in relation to her then male partner's fees was, as it turns out, superficial, unnecessary and irrelevant. It may even have been mischievous and intimidatory. It was, on the evidence, certainly untrue. In the end, despite the intrusiveness of this approach to the case and to two of its principal players, nothing was put to them in cross examination or included in submissions to identify any single incident where the two roles clashed at all, let alone to the disadvantage of the company. The company might even have gained an advantage from the association although, as this matter was not explored in evidence, I am unable to make a definitive finding to this effect.

64. Moreover, the company proffered no explanation, adverse to the solicitors, for terminating their retainer. In particular, there was no complaint about or reference to either the quantum of their fees, the method, form and frequency of their presentation, or the skill and application demonstrated in the work to which they related. Neither, on the evidence, was any such matter raised in correspondence or in telephone conversations during the 9-10 months of the retainer. All these factors together constitute an admission that a detailed bill of costs for taxation in accordance with the second schedule of the Federal Court rules was and was always treated as contrary to the agreement and that the right to one was waived. They may even suggest that the subsequent requests for taxable bills and these motions to secure them were not bona fide or genuine.

65. The solicitors' promises to supply a bill do not counteract the waiver or constitute an enforceable agreement of their own. Firstly they seem to have been posited on the belief that the law, presumably the Legal Profession Act 1987 (NSW), required a detailed bill. This approach, like Schell's evidence that he kept his files in a condition appropriate to such a purpose as he was conscious that he could be called on to present bills in taxable form, was an incorrect understanding of the law applicable to this litigation to which he cannot be held. More importantly, their weight or import now is only as affects the discretion being exercised. The delay in the solicitors' withdrawal of the promises is, if damaging to the solicitors at all, not more so than the company's delay from the solicitors' final refusal of a taxable bill in March 1991 to its filing of the motions in December 1991 is damaging the other way.

66. So far as concerns counsel's fees, including the cancellation fees, the various accounts were submitted to the company with Schell's requests and, in the first instance at least, Conway's recommendations for payment. Coleman and the company were fully entitled to challenge all or any part of these fees at any time reasonably proximate to their receipt and payment, or for that matter all or any part of any fees every time, as they well knew. Yet they did not do so and freely paid each and every account over the many months of the retainer (except the last) and, when delaying to do so, mostly gave the reason of shortness or unavailability of funds.

67. Moreover, when the solicitors' retainer was withdrawn in August 1990, the company was properly and correctly advised by Schell that it could avoid the last cancellation fees by retaining the same counsel for the October hearing, but it did not do so and proffered no explanation for this decision at the time or in these proceedings. Schell might have added that these fees could also have been renegotiated -- or the company could simply have refused to pay them -- as HDY as the company's new solicitors and the appropriate entity to deal with them would have known and presumably advised. The fact proved, and the submission made by the company, on these motions that the remaining cases were settled before the October hearing apparently without the need for counsel is not to the point because that eventuality was, on the evidence, not known by the company at the time of the withdrawal of Schell's retainer and the tendering of his advice in this regard.

68. Coleman's evidence that he thought he had no choice in the matter of the cancellation fees, especially unsupported by any suggestion that he had raised any questions concerning the October cancellation fees with HDY as the company's new solicitors notwithstanding that a member of that firm (Anthony Woods) gave evidence in these proceedings, was as weak and unconvincing as it was incorrect. It also raises the additional discrepancy that he could only have had "no choice" if he had previously bound himself or the company to pay them. The only possible inference is that the fees were paid because the company fully agreed to them and to pay them. This conduct constituted a waiver of any right, which the company desired to exercise if a detailed bill was delivered, to challenge the principle or reasonableness of these fees.

69. In the light of these conclusions about waiver, it is not necessary to decide the alternative formulation that the company's actions constituted an estoppel of its right to demand or require a detailed bill. I say only that this interesting proposition will have to wait for another day.

70. Although in strict terms nothing else needs to be said to dispose of these motions, I should add the view which I have formed that the same matters as assisted to determine the issues relating to waiver would have impelled a conclusion against the discretionary ordering of a detailed bill for taxation on general grounds. The company submitted that without a detailed bill of costs, the reasonableness of the amounts charged cannot be tested so as for example to permit a finding that, in a particular instance of work charged for, an excessive amount of time was taken or billed for the task. Nor, so the argument went, could the work respectively undertaken by Kerr and Schell be identified so as to test whether Schell complied with his agreement to reduce costs by having Kerr do the work whenever possible. Likewise, the company argued that the mere existence of an agreement to pay cancellation fees for counsel cannot be a complete answer to whether or not the fees are reasonable.

71. But apart from the absence of relevant evidence or cross examination to which I earlier referred, all these arguments beg the very question to be answered. If a client wishes to test whether the work claimed for has been done or whether the fees charged are reasonable, the client must say so at the correct or a reasonable time and assert and insist on the rights which the law confers. Obviously different considerations will apply to a client without, or with little, experience of the law or an understanding of rights than to a client such as this company in an experienced, completely informed and quite knowledgeable position. The appropriate time will often vary with the circumstances. In this case the point may have been made by agreement at the outset or during the retainer, or by later unilateral conduct, such as asking for more detail before payment of all or particular accounts and refusing to pay until it was supplied. Yet not only did the client in the present case do none of these things or anything else inconsistent with its voluntary duly advised willingness to pay as charged, it also did not attempt to enforce what it now claims to be its true position until fully nine months after being refused a detailed bill without an order of the Court. In these circumstances, there is no basis for the discretionary intervention of the Court now to protect the company from its own deliberate actions and decisions.