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[2010] FCA 383
respondent. The Court (Flick J) treated O 62 r 11 as arguably invoked and exercised its discretion to resolve the issues; it inferred a retainer agreement based on the 16 November 2006 letter together with...
Flick J held that a retainer in the present case was properly inferred from a 16 November 2006 written letter together with the parties' subsequent conduct (continuing instructions, invoices and provision of services). That combination satisfied the s 42(6) requirement that a fee agreement be 'in writing', because the writing evidenced the terms and the client accepted them by conduct. The Court accepted (for the purposes of the hearing) that it could review the Deputy District Registrar's taxation orders under O 62 r 11 and exercised its discretion to determine the outstanding issues. On the question whether fees paid after the costs order are recoverable, the Court expressed a tentative view, grounded in authority, that fees unpaid at the date of a costs order are generally not recoverable under that order even if paid later, whereas fees paid prior to the order may be recoverable. Orders were to be finalised on short minutes and costs for the Notice of Motion were envisaged in favour of Mr Rickus.
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3 cited instruments linked from this judgment.
This dispute arises from the taxation of costs following a costs order made on 26 November 2007 in the respondent's favour. The Trustee (the applicants) was ordered to pay Mr Rickus' taxed costs on an indemnity basis [2]. A Deputy District Registrar, in the course of taxation on 18 June 2009, made two notable orders: (1) that the taxation proceed on the basis that there existed a valid retainer agreement between Mr Rickus and his legal representatives; and (2) leave granted to Mr Rickus to file and serve an amended bill of costs [3]. The Trustee sought judicial review of the Deputy Registrar's orders by Notice of Motion filed 9 July 2009, invoking s 35A(5) of the Federal Court of Australia Act 1976 (Cth) and/or O 62 r 11 of the Federal Court Rules [3], [11].
An interlocutory hearing on 28 October 2009 resolved the narrow question whether a letter of retainer dated 16 November 2006 extended beyond provision of advice to encompass litigation terms; the Court rejected the broader construction and confined the letter to advice only for that purpose ([4]; reported Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus (No 5) [2009] FCA 1221). The parties later returned to court on 22 December 2009 to resolve remaining issues, principally:
The parties had agreed a factual schedule of invoices and payments (three tax invoices totalling $131,819.08, of which $85,408.09 had been paid on dates ranging from 7 January 2008 to 10 December 2008) [7]. The amounts in dispute (on a scale basis) were approximately $55,000–$60,000 [7]. The applicants also relied on an argument, called the "Catto point" from Catto v Hampton, that fees paid after the making of a costs order are not recoverable as indemnity costs [31]–[35].
Justice Flick conducted the analysis in three parts: (i) whether the Court could properly review the Deputy Registrar's orders under O 62 r 11 / s 35A(5); (ii) whether an agreement to pay fees could be inferred; and (iii) whether s 42(6)'s "agreement in writing" requirement was satisfied. He also addressed, tentatively, the implications of payments made after the costs order (the Catto point) [11]–[19], [20]–[31], [32]–[40].
The Court ultimately (a) assumed, despite reservations, that O 62 r 11 had been properly invoked and exercised its discretion to decide the remaining issues [18]–[19]; (b) inferred a retainer agreement from the November 2006 letter together with subsequent conduct (continuing instructions, invoices consistent with the letter, and provision of services) [21]–[23]; and (c) concluded that s 42(6) was satisfied by a written record of the fee basis together with subsequent acceptance by conduct (following McNamara/Kasmeridis authorities) [27]–[30]. On the recoverability of payments made after the costs order, the Court expressed a tentative view that unpaid fees at the date of the costs order are generally not recoverable under that order even if paid later, while payments made before the order may be recoverable; however the Court did not undertake a full definitive treatment of the point [35]–[39]. The proceeding was stood over for formal orders and an order for costs in favour of Mr Rickus in respect of the Notice of Motion was envisaged [41]–[43].
Two strands were decisive.
Construction of s 42(6) in context (statutory and judicial history) The pivotal statutory provision required that certain fee agreements be an "agreement in writing" (s 42(6) Legal Practitioners Act 1981 (SA)). Flick J examined the legislative background and the Full Court's analysis in McNamara Business & Property Law v Kasmeridis [2005] SASC 269 and subsequent SASC consideration in McNamara v Kasmeridis [2007] SASC 90. Those cases reasoned that s 42(6) should not be construed to require the client's acceptance itself to be in writing; rather, a written retainer recording terms, together with oral or conduct-based acceptance by the client, suffices because s 42(7) enables the Court to police unfair terms and because practical realities make a stricter reading unjustified [28]–[30]. Flick J expressly adopted the reasoning: a written record of the basis for fees plus subsequent client conduct can satisfy the "in writing" requirement (the core ratio at [27]).
Evidence of agreement by conduct Flick J emphasised the particular facts: the November 2006 letter recorded terms and rates, invoices were headed consistently ("Directorship Advice - MTAA Super"), invoices were rendered in line with the November letter, Mr Rickus continued to instruct and receive legal services, and payments were made on later dates [22]. These facts permitted an inference that the litigation was conducted upon the terms set out in the November letter. The combination of a written document that recorded the terms and unambiguous conduct by the client supported the conclusion that s 42(6) was satisfied [21]–[23], [27], [30].
On the question of the Court's review jurisdiction under O 62 r 11, Justice Flick recognised real textual difficulties and the risk of fragmentation if review were available piecemeal for every stage of taxation [15]–[16]. Nonetheless, having regard to the parties' position and the textual width of "every decision", he treated the rule as arguably invoked and exercised his discretion to proceed to resolve the outstanding issues rather than order further iterative taxation steps [18]–[19].
Finally, on the Catto point concerning payments made after the costs order, Justice Flick surveyed authorities such as TNT Bulkships and commentaries concluding that the indemnity function of costs awards is to compensate a litigant who has incurred a liability, and that the crucial fact is whether the liability was incurred (paid or unpaid) at the date of the order. He reached an only tentative conclusion that unpaid fees at the date of the costs order are generally not recoverable by way of that order even if paid later, while fees paid prior to the order may be recoverable on taxation [36]–[39].
Before this judgment:
After this judgment:
Paragraph 27: "An 'agreement in writing' ... may be satisfied where there is a written record ... and where there is subsequent conduct on the part of the client accepting that arrangement." Plain English: If the lawyer puts in writing the terms they will charge and the client then acts on those terms (continues to use the lawyer, accepts invoices), that combination meets the 'in writing' requirement in s 42(6); the client's formal signature in writing is not strictly necessary.
Paragraph 22: list of factors supporting inference of agreement (letter contents, continued instruction, invoices, headings matching the retainer). Plain English: The Court looked at several facts together, the original letter set out fee rates and terms; the client kept using the lawyer; bills were issued in the way the letter said; the bills were clearly related to the retainer, and concluded this shows both sides operated on the same fee terms.
Paragraph 36: "where a solicitor may not enforce a fees agreement ... fees which have not been paid as at the date of a costs order ... are not recoverable pursuant to that order even if paid thereafter." Plain English: If, at the time the court makes a costs order, the client has not yet paid fees and the lawyer cannot otherwise enforce the client's obligation (for example, because the agreement is unenforceable), then the successful party cannot generally get the unsuccessful party to pay those unpaid fees later, even if the client pays the lawyer afterwards.
Paragraph 16: "There is much to be said for a conclusion that the Court's review function should be confined to the final operative determination..." Plain English: The Court acknowledged that there is force in the view that only a final or operative decision by a taxing officer should be reviewable, since allowing review of every interim step could cause fragmentation. Nevertheless, the Court proceeded to review in these particular circumstances.
This judgment will be directly relevant where:
The decision is especially pertinent where the written instrument does not itself record an unambiguous client signature or contemporaneous written acceptance, but the client thereafter manifests acceptance by conduct.
This judgment adopts and applies the reasoning in the Full Court McNamara/Kasmeridis decisions. It is a Federal Court application of that line, reinforcing that a written retainer plus conduct can satisfy a statutory 'in writing' test (see [28]–[30]). Justice Flick stopped short of issuing a broad, conclusive rule on the Catto point: his treatment is cautious and explicitly tentative (see [35]–[40]). Subsequent courts considering similar issues will likely treat Flick J's decision as persuasive authority that confirms McNamara/Kasmeridis rather than a final statement settling every variant of the recoverability question, and they will continue to examine the specific statutory wording and factual chronology (payments before vs payments after a costs order).
Practitioners should therefore treat Flick J's holding as supportive authority where the facts mirror the combination of written terms plus subsequent client conduct, while recognising that the precise recoverability of later payments remains fact-dependent and may require fuller consideration where authorities such as Catto were decided under different statutory language.
Definitive rule on the Catto point: Flick J's conclusion about non-recoverability of unpaid fees at the date of a costs order was expressly tentative and not exhaustively argued. Whether that tentative position will be adopted as a general rule across jurisdictions remains open; resolution may require fuller argument and consideration of statute‑specific language (see [35]–[39]).
Scope of O 62 r 11 review: Although Flick J assumed O 62 r 11 could be invoked to review intermediate taxation orders and exercised discretion to do so, he acknowledged strong reasons to confine review to final operative determinations ([15]–[19]). The precise boundary between reviewable 'decisions' and unreviewable interlocutory steps in taxation remains susceptible to future doctrinal development.
Interaction with equitable and unconscionability doctrines: The Court relied upon s 42(7) as a protective safeguard against unfair retainer terms but did not need to rescind or vary the agreement here. The circumstances in which s 42(7) will be exercised, particularly where a retainer is partly oral or otherwise ambiguous, invite further development ([28]–[30]).
Formal sufficiency of writings: Flick J accepted a writing that records the terms, even if not expressly confined to litigation or not contemporaneously accepted in writing, can meet s 42(6). Yet the degree of specificity or the formality required in the initial written record, for instance where the retainer letter uses different headings or contemplates advisory services only, may be litigated in different factual settings ([20]–[23], [30]).
Cross-jurisdictional variation: The judgment is framed by South Australian s 42(6). How courts in other States or territories treat comparable 'in writing' statutory conditions or rules of court will depend on local statutory language; Flick J's reasoning is persuasive but not determinative across jurisdictions.
Practitioners should therefore take comfort that a clear retainer letter supported by continued instruction and billing will be effective evidence of a 'written' fee agreement for statutory purposes, but should remain cautious about reliance on post-order payments and about the potential for interlocutory review of taxation steps until higher or broader authority clarifies the boundaries described above.
BETWEEN: MOTOR TRADES ASSOCIATION OF AUSTRALIA SUPERANNUATION FUND PTY LIMITED (ACN 008 650 628)
MTAA SUPERANNUATION FUND (DIRECTOR CO.) PTY LTD (ACN 101 480 442)
REASONS FOR JUDGMENT 1 This will, hopefully, be the last judgment required to finally dispose of the present proceeding. 2 The subject matter of this present judgment, regrettably, concerns a costs order made on 26 November 2007. It was then ordered inter alia that the Motor Trades Association of Australia Superannuation Fund Pty Limited ("the Trustee") pay the taxed costs of Mr Rickus "forthwith" and that such costs were to be paid on an indemnity basis. 3 On 18 June 2009 a Deputy District Registrar made orders arising in the course of a taxation of the costs claimed. Those orders were as follows: 1. The full taxation proceed on the basis there exists a valid retainer agreement between … [Mr Rickus] and his legal representatives for the purposes of the proceedings. 2. [Mr Rickus] is granted leave, pursuant to Order 13 sub-rule 2(1) of the Federal Court Rules, to file and serve an amended bill of costs. On 9 July 2009 a Notice of Motion was filed by the Applicants seeking a variety of relief, including an order "pursuant to Section 35A(5) of the Federal Court of Australia Act 1976 and/or Order 62 Rule 11 of the Federal Court Rules" that "the whole of the decision of the Deputy District Registrar made on 18 June 2009 be reviewed". 4 That Notice of Motion came on for hearing on 28 October 2009. On that occasion the course pursued was to resolve only a question as to the ambit of a Letter of Retainer dated 16 November 2006. That was a letter sent to Mr Rickus by the legal advisers he had retained in South Australia. It was anticipated by the parties that the resolution of that discrete question would considerably assist the complete resolution of the outstanding dispute as to costs. That question was resolved: Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus (No 5) [2009] FCA 1221. Rejected was a submission made on behalf of Mr Rickus that the letter on its terms extended beyond the mere provision of advice and extended to the terms upon which the subsequent litigation was conducted. 5 The hope that the resolution of that question would resolve the entirety of the outstanding dispute was not realised. The dispute remained at an impasse. But hope, it has been said, "springs eternal": Alexander Pope, An Essay on Man (1734). With renewed hope, the parties have again approached the Court with a proposal that the resolution of the remaining issues arising from that Notice of Motion will resolve the outstanding dispute. These issues, it should be noted, were previously canvassed on 28 October 2009 but not then resolved. The hearing of the Notice of Motion was resumed on 22 December 2009. 6 Why the Court should now have any greater confidence that the resolution of these further issues will assist in the resolution of the outstanding dispute may be doubted. The inability of the parties to sensibly resolve their dispute without the intervention of this Court has previously been the subject of criticism: [2009] FCA 1221 at [3]. 7 The position now agreed between the parties, however, was that the following table sets forth the amount of legal costs involved and the date upon which those moneys were claimed and paid: DATE TOTAL AMT PAYMENTS/DATE
TAX INVOICE 14062 31/10/2007 $50,301.78 07/01/2008 - $34,288.09 22/09/2008 - $620.00 10/12/2008 - $8,909.00 14283 29/11/2007 $64,901.16 22/09/2008 - $18,000.00 02/12/2008 - $15,000.00 10/12/2008 - $3,784.00 14477 21/12/2007 $16,616.14 10/12/2008 - $4,807.00 TOTAL $131,819.08 $85,408.09
The costs incurred in the hearing and resolution of the current Notice of Motion - it may safely be assumed - far outstrip the quantum of the amount dividing the parties. That amount, if calculated by reference to the Federal Court scale of fees, is approximately $55,000 to $60,000: [2009] FCA 1221 at [10]. 8 But the ability of the Court to further assist the parties depends on whether the Court has power to provide such assistance, at least at this stage. Subject to that question being resolved, the outstanding issues in need of resolution are whether or not there was a costs agreement as between Mr Rickus and his legal advisers in respect of the conduct of the litigation and, if so, whether that agreement satisfied the requirements of s 42(6) of the Legal Practitioners Act 1981 (SA). Subsidiary issues arise if the conclusion is reached that the requirements of s 42(6) have not been satisfied. Submissions have also been advanced as to the significance attached to the fact of payment of legal fees incurred, albeit fees paid after the order was made in November 2007. 9 The course pursued at the resumed hearing of the Notice of Motion on 22 December 2009 was to reserve both questions as tothe Court's power to now resolve these issues and also whether the finding of the Deputy District Registrar as to there being a valid retainer agreement between Mr Rickus and his legal representatives was a reviewable decision. 10 These are the issues now addressed.
A Question as to Power 11 The Notice of Motion seeking review of the finding of the Deputy District Registrar invokes s 35A(5) of the Federal Court of Australia Act 1976 (Cth) and/or O 62 r 11 of the Federal Court Rules. 12 Section 35A(5) provides as follows: A party to proceedings in which a Registrar has exercised any of the powers of the Court under subsection (1) may, within the time prescribed by the Rules of Court, or within any further time allowed in accordance with the Rules of Court, apply to the Court to review that exercise of power. Notwithstanding reliance upon this provision in the Notice of Motion, the argument and submissions proceeded upon the basis that it was O 62 r 11 which conferred the jurisdiction or power to review a decision of the Registrar. That rule provides as follows: Review of Taxation Every taxation of costs and every decision of a taxing officer shall be subject to review by a Judge. Provision is also made in O 62 r 42 for a party to taxation who objects to a "decision" of a taxing officer to allow or disallow in whole or in part an item in a bill. Provision is thereafter made in O 62 r 43 for "reconsideration" and in O 62 r 44 for this Court to "review the decision of a taxing officer on reconsideration". See: Titan v Babic [1995] FCA 813; Miller v Wertheim [2004] FCA 988. The interrelationship of O 62 r 11 with other rules within O 62 was not the subject of oral submissions nor was it explored. 13 The convenience of the Court resolving the questions posed for resolution was embraced by the parties. It was anticipated by the parties - possibly on an erroneous basis - that if the Court were to now resolve these questions, then a full taxation of costs would not need toproceed and any ultimate review of any further decision made in the course of the taxation might be avoided. Alternatively, if these questions were not resolved now, then there would be a possibility of a Registrar referring (or purporting to refer) the same questions to the Court for resolution at a later stage. 14 Yet the correct construction and application of O 62 r 11 was equally accepted (and properly accepted by all Counsel) as being open to legitimate argument. 15 In some contexts, the term "decision" has been construed as embracing a "purported decision": Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd (1979) 41 FLR 338 at 365 per Bowen CJ, Smithers and Deane JJ. And the term "decision" has also been confined to an "ultimate or operative determination": cf. Director-General of Social Services v Chaney (1980) 47 FLR 80 at 101. Although O 62 r 1 sets forth some definitions, the term "decision" is not there defined. Nor is the term defined in O 1 r 4. And some significance may be attached to the phrase in issue being "every decision", rather than simply the term "decision" itself. The reference to "every decision" may serve to emphasise the nature of the de novo review function entrusted to this Court and also the ambit of what is intended to be susceptible of review.
A Reviewable Decision? 16 There is much to be said for a conclusion that the Court's review function should be confined to the final operative determination as made by a taxing officer and that, once such a final decision has been made, the entirety of the decision-making process is thereby exposed to scrutiny. Any contrary conclusion could potentially result in litigants who have been exposed to an unfavourable costs order seeking review of every discrete aspect of the decision-making process of a taxing officer. 17 But, even if the phrase "every decision" does extend to the orders made by the Deputy District Registrar on 18 June 2009, further potential difficulty arises by reason of the term "review". It appears that the parties in the present proceeding are really seeking to have questions resolved which have not been the subject of any "decision" that has as yet been made. 18 Notwithstanding considerable reservation, it is considered appropriate in the present proceeding to regard O 62 r 11 as having arguably been properly invoked and to now resolve the outstanding further issues. That assumption, as emphasised by the parties, gives effect to the width of terminology embraced by the phrase "every decision". In the present proceeding the convenience of such an assumption cannot itself confer power upon the Court where none otherwise exists. Still, the assumption does have some textual support. 19 If there be a discretion as to when this Court may undertake the review envisaged by O 62 r 11, it is appropriate that that discretion be exercised in now exercising the power conferred.
The Agreement To Pay Fees 20 It has formerly been concluded that the letter dated 16 November 2006 from Mr Rickus' legal advisers is, without more, a letter confined in its terms to the provision of legal advice and that it did not extend to an agreement in itself as to the fees payable in respect of the subsequent litigation: [2009] FCA 1221. 21 But that November 2006 letter, it is now concluded, provided the basis upon which Mr Rickus and his legal advisers thereafter acted in the conduct of the subsequent litigation that has engulfed the parties. 22 For present purposes, it is considered that an agreement to conduct that subsequent litigation upon the terms set forth in the 16 November 2006 letter may be inferred from the following: · the fact that there was an agreement between the parties, namely the November 2006 letter, as opposed to the position that may emerge in some cases where conduct sought to be relied upon is not referable to any written agreement (albeit one confined in its terms); · the fact that the November 2006 letter contains a schedule of fees as to the rate at which work would be charged and a schedule setting forth "Terms of Engagement", including an express reference to the fact that the rates of charge for time spent and for "some expenses, are different from the rates set out in the Scale of Fees published by the relevant Court…"; · the fact that Mr Rickus continued to instruct his legal advisers; · the fact that invoices continued to be rendered to Mr Rickus and also that he continued to be provided with legal assistance; · the fact that such invoices were headed in substantially the same manner as the original heading set forth in the November 2006 letter, namely "Directorship Advice - MTAA Super"; and · the fact that such invoices were rendered in accordance with the terms set forth in the November 2006 letter. 23 The November letter, together with this further conduct, does constitute an agreement as to the basis upon which the litigation was conducted. But, whether that agreement - being an agreement partly in writing, partly oral, and partly impliedby reference to the conduct of Mr Rickus and his legal advisers - satisfied the requirements of s 42 of the Legal Practitioners Act 1981 (SA) is a discrete question which should be separately addressed.
Section 42 24 Section 42(6) of the Legal Practitioners Act 1981 (SA) requires an agreement for the payment of fees of the kind here in issue to be an "agreement in writing". Relevantly, thelegal advisers retained by Mr Rickus were solicitors practising in South Australia. It was the position of the Trustee that there was no "agreement in writing" and that the fees incurred by Mr Rickus in the conduct of the litigation that were recoverable were fees confined to the applicable scale and not the higher rate of fees set forth in the November 2006 letter. 25 Section 42 provides as follows: Costs (1) On the application - (a) of a person claiming to be entitled to legal costs; or (b) of a person who is liable to pay, or who has paid, any legal costs, the Supreme Court may tax and settle the bill for those costs. (1a) The Supreme Court's power to tax and settle a bill of costs (but no other power of the Supreme Court under this section) may, subject to any rule, order or direction of the Court, be exercised by the Registrar of the Court. (1b) Subject to the rules of the Supreme Court, an appeal lies to a judge against a decision of the Registrar pursuant to subsection (1a). (2) Where an application has been made under subsection (1), the Supreme Court may - (a) restrain a person claiming to be entitled to the costs from commencing an action for recovery of the costs; or (b) stay any proceedings for recovery of the costs. (3) The Court may, on taxation of a bill of costs under this section - (a) order the refund of any amount overpaid; or (b) where the proceedings have been instituted by the person seeking recovery of the costs - order payment of legal costs in accordance with the taxed bill. (4) The Board may institute proceedings for the taxation of legal costs under this section on behalf of a person who is liable to pay, or has paid, the legal costs and must institute such proceedings if ordered to do so by the Tribunal. (5) Any court in which proceedings for the recovery of legal costs have been instituted may order the plaintiff to apply to have the legal costs taxed in accordance with this section, and may adjourn the proceedings until the taxation has been completed. (6) A legal practitioner may make an agreement in writing with a client for - (a) payment of a specified amount by way of legal costs (which may - but need not - consist of a daily, hourly or other time-related rate for professional work carried out by the legal practitioner on the client's behalf); or (b) payment of legal costs in accordance with a specified scale; or (c) subject to any limitations imposed by the Society's professional conduct rules or the regulations - payment of a contingency fee to be calculated on a basis set out in the agreement on fulfilment of a condition stated in the agreement. (7) The Supreme Court may, in proceedings under this section, rescind or vary an agreement under subsection (6) if it considers that any term of the agreement is not fair and reasonable. The submissions of the parties proceeded upon the basis that the fees recoverable by Mr Rickus' legal advisers were subject to the South Australian legislation. 26 The central question is whether an agreement of the kind presently inferred satisfies the requirement of s 42(6) that it be an "agreement in writing". Depending on the answer to that question, further questions which may arise in respect to s 42 include the following: · does s 42(6) impose a mandatory requirement? · if s 42(6) does impose a mandatory requirement, is the consequence of non-compliance that any agreement is void or is it merely that such an agreement is unenforceable - that is, the debt remains but may not be enforced by the legal practitioner as against the client. Then, can such unenforceability be availed of by the opposing party against whom a costs order has been made? A separate question is: · how does s 42(7) affect the construction of s 42(6)? 27 It is concluded that the requirements of s 42(6) have been satisfied on the facts presented. An "agreement in writing" for the purposes of s 42(6), it is concluded, may be satisfied where there is a written record of the basis upon which the legal practitioner intends to render fees and where there is subsequent conduct on the part of the client accepting that arrangement. 28 The legislative history preceding the introduction of s 42(6) of the Legal Practitioners Act 1981 (SA) has been traced by the Full Court of the Supreme Court of South Australia in McNamara Business & Property Law v Kasmeridis [2005] SASC 269, 92 SASR 382. Mr and Mrs Kasmeridis had there engaged the appellant, a firm of solicitors, to act on their behalf. A letter had been sent to the repondents enclosing a copy of the solicitor's terms of engagement and a schedule of fees. There was, thereafter, a telephone conversation between Mr Kasmeridis and the legal practitioner with carriage of the matter (Mr Viscariello). During that conversation Mr Kasmeridis accepted the terms on behalf of himself and his wife. Section 42(6), it was held, had been satisfied. The Full Court, comprised of Gray, Sulan and Layton JJ, concluded: [61] The statutory requirement that an agreement be made in writing is sufficiently satisfied if there is written confirmation of the existence of an agreement. This accords with the view adopted by the Judge that an email sent by the respondents to the appellant acknowledging their acceptance of the terms of the retainer agreement would have sufficed for the purposes of s 42(6). In effect, on the interpretation advanced by the clients, had the telephone conversation between Mr Kasmeridis and Mr Viscariello on 9 February 2004 been an email exchange, and accordingly in visible written form, the terms of s 42(6) of the Legal Practitioners Act would have been satisfied. The appellant would have been able to rely upon the retainer agreement when preparing its account. Such an interpretation does not rest in logic. Why should an email exchange be reliable evidence or in any event more reliable than other evidence of agreement? [62] The retainer agreement itself was in writing. The terms of that agreement were in writing. There is evidence that the clients had orally accepted those terms. In addition, there is evidence that the respondents' oral acceptance of the retainer agreement was in fact recorded in writing. This latter written record was not in our view essential in order to comply with s 42(6). But for the conclusion of their Honours, it may perhaps have been thought that the question was not one of the "reliability"of an email as opposed to "other evidence of agreement"but rather one as to the meaning of s 42(6). Their Honours, however, then went on to explain why s 42(7) assisted in such a conclusion as follows: [63] Section 42(6) of the Legal Practitioners Act should not be construed to require a client's acceptance of a costs agreement to be in a written form. The legislative history of the provision, the common law concerning written agreements, the definition of "writing" in the Acts Interpretation Act, the protection offered by equity and the overriding protection offered by s 42(7) provide overwhelming support against such a construction. [64] It is to be borne in mind that the onus of establishing that an agreement was made rests on the solicitors. This onus is to be discharged having regard to the nature of the fiduciary relationship and the circumstances of dependence and vulnerability that may exist. In the present case, the clients' anxiety about the loss of their home is a circumstance that would call for careful scrutiny of the relevant events in determining whether an agreement was made. [65] In the event of there being any unfairness in the process followed or in the terms agreed, the court's powers of intervention pursuant to s 42(7) or pursuant to its equitable jurisdiction could be invoked. In this way the necessary protection may be provided to the clients. [66] To take one example, the provision in the present case for the solicitors to be entitled to charge an open-ended premium for urgent or out-of-hours work could be said to be unfair, unreasonable and unconscionable in the circumstances. Such a term, if it formed part of a retainer, was accepted by counsel for the solicitors to be unenforceable. Such a term was accepted to be unfair and unreasonable as it would allow the solicitors to charge in respect of work undertaken without limit. Counsel was left to contend that such a clause would be severable. This provision and other questions arising on the terms of the retainer will need to be explored in proceedings other than on this appeal. Special leave to appeal to the High Court was refused: Kasmeridis v McNamara Business & Property Ltd [2006] HCA Trans 052. 29 Section 42(6) and (7) received further attention between the same litigants when a Master of the Supreme Court rescinded the agreement pursuant to s 42(7) on the grounds that it was "not fair and reasonable". Again the solicitors appealed. Again the matter proceeded to the Full Court, this time the question being whether any argument as to s 42(7) should have been raised in the earlier proceeding: McNamara Business & Property Law v Kasmeridis [2007] SASC 90, 97 SASR 129. In the course of rejecting that argument, the Full Court comprised of Doyle CJ, Gray and David JJ made the following further observations of relevance to the manner in which s 42(6) should be construed: [6] Mr Walsh QC, counsel for McNamara, submits that the Kasmeridis should not have been permitted to raise the claim under s 42(7) of the Act. He submits that the claim now made is so closely connected with the claim that the agreement is not in writing that it was unreasonable not to have raised it in the course of the earlier proceedings, thus enabling all relevant issues to be determined in the one proceeding. He relies on the decision of the High Court in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. [7] The Master was right to reject that submission. The initial objection by the Kasmeridis raised what can fairly be called a preliminary issue. If the agreement was not an agreement in writing for the purposes of s 42(6), then the power under s 42(7) to rescind or vary the agreement would not arise. Just what the determination of that objection achieved might be doubted, because on one view s 42(6) is purely permissive, and a practitioner can enter into a costs agreement with a client independently of that provision, that costs agreement then being subject to control by the court in the exercise of its inherent powers: see Athanasiou v Ward Keller Pty Ltd (1998) 122 NTR 22 at 29. However, there is no need to pursue that point. [8] The separate disposition of the point now raised by the Kasmeridis cannot result in conflicting judgments. The issues now raised are different from those raised before, although there is a common factual basis. For those brief reasons the two issues are not so closely connected that it is unreasonable to have them disposed of separately. Their Honours then went on to consider the facts of the case and dismissed the appeal. Again special leave to appeal was refused: McNamara Business & Property Law v Kasmeridis [2007] HCA Trans 425. 30 Concurrence is expressed with the conclusions reached in these decisions. Compliance with s 42(6) can be satisfied where there has been a written agreement containing the terms upon which fees will be rendered and subsequent acceptance of those terms either by oral acceptance or by conduct. Although the 16 November 2006 letter was an agreement confined to the provision of advice, the letter also contained the terms upon which fees would be charged in the event of litigation. That letter, together with such conduct, is compliance with s 42(6). For the purposes of s 42(6), it is not considered that a written document containing the terms upon which fees would be charged in the event of litigation need be confined to litigation alone. 31 No necessity thus arises to consider the consequences of non-compliance with s 42(6).
The Fact of Payment - The Catto Point 32 At one stage of these proceedings Mr Rickus placed at the forefront of his contentions the fact that he has actually paid his legal practitioners the moneys they have claimed. The Trustee placed at the forefront of its submissions the fact that fees were paid after the costs order had been made and that, accordingly, those fees were not recoverable. 33 This particular contention and what became known as the "Catto point" was a reference to the decision of the Full Court in Catto v Hampton Australia Ltd (In Liq) [2008] SASC 231 ("Catto"). The plaintiff's claim had there been dismissed and the plaintiff had been ordered to pay the defendant's costs on an indemnity basis. The principal question was whether the indemnity costs to which the defendants were entitled were the amounts which they actually expended in defending the plaintiff's claims or only those amounts which their respective solicitors could have enforced in an action against them. The plaintiff contended that there could only be recovery of those amounts which the defendants were legally obliged to pay their legal representatives. The relevant rule of court (sub-r 6(d)) referred to costs "incurred". 34 In the present proceeding Mr Rickus' contention was simple - he obtained in his favour an order that costs be paid on an indemnity basis. In the present case it is common ground that such moneys as have been charged by the solicitors and paid by Mr Rickus have not been excessive but are costs reasonably and necessarily incidental to the conduct of the litigation. Irrespective of whether or not any agreement as to the payment of fees was legally enforceable against him, Mr Rickus has paid those moneys. The fact that those moneys have been paid after the order for costs was made, he contends, assumes no relevance. 35 A supplementary outline of submissions filed on behalf of Mr Rickus on 27 October 2009 correctly recognises that the "Catto point" only arises for resolution in the event that a conclusion is reached that s 42(6) is mandatory (and not permissive) and that s 42(6) requires a client's acceptance of a costs agreement to be itself in writing. Such is not the conclusion reached. The "Catto point", however, was the subject of considerable attention in the present proceedings - both in oral and written submissions. It is appropriate, therefore, to address those submissions (albeit briefly) and to set forth some tentative conclusions. 36 Subject to that qualification as to brevity, it is considered that where a solicitor may not enforce a fees agreement as against a client, fees which have not been paid as at the date of a costs order being made in his favour are not recoverable pursuant to that order even if paid thereafter. 37 Catto, it is considered, is a decision confined to the factual circumstances where fees have been paid prior to the making of an order and also to the construction and application of the statutory rule there in question. Although the decision of the Full Court focussed upon the correct construction of the particular statutory rule, White J also helpfully summarised some of those authorities dealing with the ability of a litigant to recover costs even where his own solicitor may not have been able to enforce their own fee agreement. His Honour there summarised the effect of some of these authorities as follows: [37] Further, in analogous circumstances litigants have been held to be entitled to recover costs already paid in connection with litigation, even though their solicitors could not have enforced the claim for those costs. The cases involving uncertificated solicitors provide an example. [38] In Fullalove v Parker, it was held that a successful litigant was entitled to recover from the other party the amounts which he had paid to his attorney, even though that attorney, by reason that he did not have the certificate which was appropriate for the conduct of the litigation in question, could not have enforced his claim for costs. Similarly, in each of In Re Jones and In Re Hope it was held that while uncertificated solicitors could not maintain an action to recover their fees, the clients could, to the extent that they had paid the fees, enforce a costs order against the unsuccessful party in the litigation. The absence of the certificate did not have the effect that the debt was extinguished, only that the ability of the solicitors to enforce it was barred. Hence the position was held to be different with respect to unpaid amounts. The clients could not recover from the other party amounts claimed by their solicitors which they had not yet paid because, although the debt remained alive, the solicitors could not enforce the debt against them. [39] The same approach has been adopted in other jurisdictions within Australia in more recent times. In each of TNT Bulkships Ltd v Hopkins and Elders Trustee and Executor Company Ltd & Anor v Estate of Herbert & Anor, the Supreme Court of the Northern Territory held that the successful litigant could recover the costs already paid to its solicitors even though the solicitors did not have a practising certificate entitling them to practise in the Northern Territory. In his separate reasons in Elders Trustee, Kearney J referred to r 63.26 of the Rules of the Supreme Court of the Northern Territory which allow a successful party to recover "a reasonable amount in respect of all costs reasonably incurred" (emphasis added). He held that insofar as the costs had been paid, r 63.26 was not confined to the proper costs of a certificated legal practitioner. That is to say, Kearney J accepted that to the extent the costs had already been paid they had been "incurred" for the purposes of r 63.26. [40] In Queensland, the distinction between the extinguishment of the debt on the one hand, and the bar of the remedy on the other, in the operation of a provision precluding an uncertificated solicitor from recovering fees has been recognised. In two cases it has been held that the effect of the language used in s 209(2) of the Supreme Court Act 1995 (Qld) is to extinguish the debt while in Theden v Nominal Defendant Jones J held that a successful litigant was entitled to recover fees already paid to his solicitor even though the solicitor was not entitled, at the relevant time, to practise the law in Queensland. (citations omitted) Vanstone and Anderson JJ agreed with White J. 38 His Honour was obviously not there concerned with a factual situation where fees had not been paid prior to the making of an order. But that fact is a fact of importance. In the decision of TNT Bulkships v Hopkins (1989) 98 FLR 352 ("TNT Bulkships") (to which White J refers) Kearney J also referred to Re Hope and the following observations of Willes J in that case: "No doubt [the client] might have refused to pay [his uncertificated solicitor] the costs incurred, but he was bound in honour to pay them and if he had done so … he had a right to recover them from the person who had been ordered to pay." (emphasis Kearney J's.) After referring to this passage, Kearney J went on to observe at 359: Re Hope shows that the position is different if the client has already paid moneys to his unqualified solicitor on account of his costs of the action. Those moneys can be recovered on taxation. And in TNT Bulkships, it should be further noted, the fact that the solicitors were not admitted in the Northern Territory precluded them from recovering costs incurred in litigation in that jurisdiction. 39 The general principle that costs awarded are intended to indemnify a successful party who has incurred a liability and the limited circumstances in which there may be recovery where the solicitor has no right of recovery against the client, has been emphasised by Barrett J in Wentworth v Rogers [2002] NSWSC 709. His Honour there said (without alteration): Costs orders - the indemnity principle [35] It is appropriate to look next at the provisions in Division 6 dealing with the quite separate and distinct subject of costs awarded by courts. That examination needs to be undertaken against the background of the general principle that costs awarded by order of a court are intended to indemnify (commonly only partially) a successful party who has incurred a liability for costs in relation to the proceedings. The existence of a liability of the client to pay costs lies at the centre of this concept, but it is clear that costs may in certain special and limited circumstances be recovered under an order for costs even where there is no right of recovery by the lawyer against his or her client. A common case is where the lawyer is an employee and represents his employer's interests in court without right to or expectation of reward apart from the salary which is payable regardless of the nature or quantity of legal work undertaken: see the comprehensive treatment of this subject in the judgment of Davies AJ in Commonwealth Bank of Australia v Hattersley (2001) 51 NSWLR 333. Another instance is where a lawyer resorts to self-help by performing legal work in proceedings in which he or she is a party. In Atlas v Kalyk [2001] NSWCA 10, the Court of Appeal held that the decision of the High Court in Cachia v Hanes (1993) 179 CLR 403 as to self-represented litigants generally did not disturb that court's earlier recognition of the lawyer self-help exception in Guss v Veenhuissen (No 2) (1976) 136 CLR 47. [36] Apart from special circumstances and exceptions of this kind, absence of the lawyer's right to recover remuneration from his or her client will mean that a costs order in favour of the client will be unproductive. The matter is dealt with succinctly in the following passage in the judgment of Hamilton J in Grynberg v Muller; Re Estate of Bilfeld [2002] NSWSC 350: "In Ohn v Walton (1995) 36 NSWLR 77 at 79 Gleeson CJ (when Chief Justice of this Court) said that: 'the purpose of an order for costs is to indemnify or compensate the person in whose favour it is made, not to punish the person against whom it is made'. In Latoudis v Casey (1990) 170 CLR 534 a similar statement had been made by Mason CJ at 543 and also by other Justices (Toohey J at 562-563; McHugh J at 566-567). And see Cachia v Hanes (1994) 179 CLR 403 at 414. It flows from this principle that for a costs order to be made there must be some liability, satisfied or unsatisfied, to indemnify or compensate for. There was a graphic illustration of this principle in Gundry v Sainsbury [1910] 1 KB 645. There a plaintiff recovered damages in a County Court before a jury, but said in cross-examination that he had an agreement with his solicitor that he should not pay any costs. The County Court Judge held that the plaintiff could not recover costs and the Court of Appeal upheld this decision. In TNT Bulkships Ltd v Hopkins (1989) 98 FLR 352 a successful party's solicitors were unable to recover costs from the party relating to proceedings in the Supreme Court of the Northern Territory because not the holder of a current practising certificate. The successful party was held unable to recover costs from the unsuccessful party. And see per Griffiths CJ in Irving v Gagliardi (ex parte Gagliardi) No 2 (1895) 6 QLJ 200 at 200. The mere existence of an indemnity does not, of course, preclude the making of an order for costs: Johnson v Santa Teresa Housing Association (1992) 83 NTR 14." 40 Notwithstanding this reference to some of the relevant decisions, nothing more than a tentative conclusion is expressed in the present judgment. No detailed review has been undertaken of the authorities.
Conclusions 41 It is hoped that the present reasons for judgment will now enable the parties to finally resolve all outstanding issues that presently divide them in respect of the taxation process. If there remains any matter which has been overlooked, liberty is reserved to the parties to apply to have the matter relisted to have any such matter resolved. Subject to that, the parties are to bring in short minutes of orders to give effect to these reasons consistent with those factual matters which were the subject of agreement. 42 It is envisaged that Mr Rickus should be entitled to an order for costs in respect to the hearing and resolution of the Notice of Motion as filed on 9 July 2009. 43 The proceeding is stood over to 9:30 am on 30 April 2010 with a view to then making orders.
ORDER 44 The Order of the Court is: 1. The proceeding be stood over to 9:30 am on 30 April 2010 for the purpose of then making orders to give effect to these reasons. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick.
Motor Trades Association of Australia Superannuation Fund Pty Ltd
Rickus
[2008] SASC 231
[2005] SASC 269
[2007] SASC 90
(1979) 41 FLR 338
(1980) 47 FLR 80
(1989) 98 FLR 352
(1981) 147 CLR 589
(2001) 51 NSWLR 333
(1993) 179 CLR 403
(1976) 136 CLR 47
(1995) 36 NSWLR 77
(1990) 170 CLR 534
(1994) 179 CLR 403
The Court (Flick J) treated O 62 r 11 as arguably invoked and exercised its discretion to resolve the issues; it inferred a retainer agreement based on the 16 November 2006 letter together with subsequent conduct, held that s 42(6) was satisfied by a written record plus subsequent client conduct, expressed a tentative position on the recoverability of fees paid after the costs order, and stood the proceeding over for formal orders, envisaging an order for costs in favour of Mr Rickus in respect of the Notice of Motion (see [18], [21]–[31], [36], [41]–[43]).