Victorian Civil and Administrative Tribunal|2010-10-26

Nagy v Gilbert Bell trading as Gilbert Bell & Co (Legal Practice) [2010] VCAT 2038 (26 October 2010)

Claim against legal practitioner purportedly made under Part 9 of the Fair Trading Act 1999 (Vic) and s 4.3.15 (1) of the Legal Profession Act 2004 (Vic) - Claim properly characterised as a claim under s 4.3.15 (1) of the Legal Profession Act 2004 (Vic) - If claim characterised as a claim under Fair Trading Act 1999 (Vic), Tribunal must stay proceedings - s 4.3.2 (1) of the Legal Profession Act 2004 (Vic) - Claim for orders under s 4.3.17 of the Legal Profession Act 2004 (Vic) dismissed.

On 10 March 2010, Mr Nagy lodged an application against Margaret Bell of Gilbert Bell & Co in the Civil Claims List at VCAT. Gilbert Bell, as the owner of Gilbert Bell & Co and the employer of Margaret Bell, was named as the respondent. The claim was transferred to the Legal Practice List on 11 March 2010.
On 3 August 2010, I dismissed Mr Nagy's claim and gave him oral reasons for my decision. I also told Mr Nagy that I would provide him with written reasons for my decision, which I do now.

Michael Nagy and his partner, Katalin Enisz, rent a property from the Director of Housing (the DOH). In June 2009, they lodged two applications against the DOH in the Residential Tenancies List at VCAT (R2009/24248 and R2009/24250) seeking compensation for alleged breaches of the Residential Tenancies Act 1997 (the RTA) by the DOH. In proceeding number R2009/24248, Mr Nagy and Ms Enisz sought compensation totalling $2,998,109.80 under section 210 of the RTA and under the Fair Trading Act 1999 (the FTA). Mr Nagy and Ms Enisz also sought compensation under section 210 of the RTA and the FTA in proceeding number R2009/24250, although the claim was limited to compensation not exceeding $10,000.
On 10 September 2009, Mr Nagy and Ms Enisz engaged Gilbert Bell, trading as Gilbert Bell & Co to act for them in relation to the residential tenancies claims. They paid Gilbert Bell & Co $4,400.00 on 14 September 2009 and received a receipt that set out the work Gilbert Bell & Co had been engaged to perform. This included all necessary attendances and correspondence, drawing, filing and serving points of claim, preparation for the hearing and counsel's fees.
Mr Nagy and Ms Enisz were dissatisfied with the services provided by Gilbert Bell and his wife, Margaret Bell, an employee solicitor, and terminated their retainer on 7 October 2009.
In November 2009, Mr Nagy made a complaint about Margaret Bell to the Legal Services Commissioner (the Commissioner). In a letter dated 5 February 2010, the Commissioner notified Mr Nagy under section 4.3.7 of the Legal Profession Act 2004 that he was unable to resolve the civil dispute. As a result, Mr Nagy made this application to the Tribunal.

Mr Nagy's claim was for a refund of the costs paid by him and Ms Enisz, which total $3,151.05, and damages of $100,000 for losses arising from Mr Nagy and Ms Enisz's unsuccessful residential tenancies claims. The claim purported to be made under Part 9 of the Fair Trading Act 1999.
However, I am satisfied that the claim is properly characterised as a claim under section 4.3.15 (1) of the Legal Profession Act 2004, which states that a complainant who has received a notice under section 4.3.13 (2) (b) may apply to the Tribunal for a resolution of a civil dispute that is the subject of a civil complaint. A civil dispute is a dispute about costs charged by a legal practitioner not exceeding $25,000, a claim for pecuniary loss resulting from an act or omission by a legal practitioner or any other genuine dispute with a legal practitioner[1].
I am satisfied that that claim is properly characterised as a claim under section 4.3.15 (1) of the Legal Profession Act 2004 because:
- (a) On or around 9 December 2009, Mr Nagy received a written notice from the Commissioner under section 4.3.7 (2) stating that the dispute could not be resolved by him.
- (b) Mr Nagy's application to the Civil Claims list included a copy of the written notice from the Commissioner, as required by section 4.3.15 (3) of the Act.
- (c) Mr Nagy's application to the Tribunal was made within 60 days after he received the notice from the Commissioner, as required by section 4.3.15 (2) of the Act.
- (d) A letter attached to Mr Nagy's application refers to the complaint he made to the Commissioner and states:

Unfortunately Legal Services Commissioner was not able to resolve the matter. I attach a referral letter from Legal Services Commissioner confirming actions they taken, and they have recommended to me to lodge a Claim at VCAT to recover my unduly kept money from Bell CO [sic].

Further, if the claim were not made under section 4.3.15 (1) of the Legal Profession Act 2004, it would have been necessary for me to stay the Fair Trading claim under section 4.3.2 of the Act. This is because section 4.3.2 (1) states that:

... (c) a complainant must not commence proceedings against a law practice or an Australian legal practitioner in relation to the subject-matter of a civil dispute with the practice or practitioner after the complainant has made a civil complaint about the conduct of the practice or practitioner in respect of the dispute-

until the complaint is determined or dismissed and any appeal rights are exhausted.

A court or tribunal before which any proceedings are brought in contravention of subsection (1) must stay those proceedings on the application of a party, or on its own initiative.

Accordingly, as Mr Nagy's civil complaint had not been determined or dismissed at the date he made the application to the Tribunal, he was unable to make a claim under the Fair Trading Act 1999 at that time.
Section 4.3.17 of the Legal Profession Act 2004 sets out what orders the Tribunal may make in relation to a civil dispute. This includes an order for compensation not exceeding $25,000[2], an order that the amount of legal costs be reduced by a specified amount[3] and an order that a legal practitioner repay legal costs charged for legal services[4].

Mr Nagy alleged that:
- (a) Margaret Bell failed to follow Mr Nagy and Ms Enisz's instructions to draft points of claim on their behalf.
- (b) Margaret Bell's withdrew R2009/24250 without Mr Nagy and Ms Enisz's knowledge or consent.
- (c) Margaret Bell failed to advise Mr Nagy and Ms Enisz regarding the merits of R2009/24248 and to adequately progress this claim.
- (d) Margaret Bell failed to send Mr Nagy and Ms Enisz a disclosure statement as required by section 3.4.9 of the Legal Profession Act 2004 until 5 October 2009.
- (e) As a result of these matters:
  1. Gilbert Bell breached his contract with Mr Nagy and Ms Enisz.
  2. Gilbert Bell failed to comply with section 3.4.11 of the Legal Profession Act 2004 because he failed to disclose the matters referred to in section 3.4.9 of the Legal Profession Act 2004 before, or as soon as practicable after he was retained.
  3. Mr Nagy and Ms Enisz are entitled to a refund of the costs paid by them.
  4. Mr Nagy and Ms Enisz suffered losses of over $100,000 because the Tribunal dismissed R2009/24248 on 17 November 2009.

Gilbert and Margaret Bell admitted that:
- (a) They initially agreed to prepare points of claim on behalf of Mr Nagy and Ms Enisz but had not done so by the time Mr Nagy and Ms Enisz terminated their retainer on 7 October 2009.
- (b) They withdrew R2009/24250.
- (c) The disclosure statement was not sent to Mr Nagy and Ms Enisz until 5 October 2009.
However, they denied that:
- (a) They failed to advise Mr Nagy and Ms Enisz of the merits of the R2009/24248 and adequately progress that claim.
- (b) They withdrew R2009/24250 without the knowledge or consent of Mr Nagy and Ms Enisz.
- (c) They failed to provide Mr Nagy and Ms Enisz with the disclosure statement before or as soon as practicable after Gilbert Bell was retained.
- (d) They breached their contract with Mr Nagy and Ms Enisz.
- (e) Mr Nagy and Ms Enisz are entitled to a refund of the costs paid by them.
- (f) They are responsible for any losses suffered by Mr Nagy and Ms Enisz because of the Tribunal's dismissal of R2009/24248 on 17 November 2009.

Did Gilbert Bell fail to advise Mr Nagy and Ms Enisz of the merits of R2009/24248 and adequately progress that claim?

Mr Gilbert gave evidence that during his initial conference with Mr Nagy, he told him that as neither he nor Margaret Bell had any experience with residential tenancies matters, it would be necessary to brief a barrister to provide them with advice. Accordingly, on 16 September 2009, he, Mr Nagy and Ms Enisz attended a conference with Simon Pitt, a barrister with expertise in residential tenancies matters.
Mr Gilbert told the Tribunal that during this conference, Mr Pitt advised that:
- (a) Proceeding number R2009/24250, which was made under section 210 of the RTA, was defective because Mr Nagy and Ms Enisz had not served valid breach of duty notices on the DOH prior to applying for compensation for those breaches.
- (b) This claim ought to be withdrawn.
- (c) A new breach of duty notice setting out the dates, times and details of the breaches of the RTA by the DOH ought to be served on the DOH.
- (d) If the breaches were not remedied by the DOH within 14 days, a new application ought to be made under section 209 of the RTA.
- (e) Mr Nagy and Mr Enisz needed to prepare a draft breach of duty notice setting out the dates, times and details of all the alleged breaches of the RTA by the DOH, which he would then settle.
- (f) Once he had settled the breach of duty notice, Mr Pitt would draft points of claim in relation to the claim under the FTA in R2009/24248 and provide further advice.
Mr Pitt confirmed his advice in a memorandum to Gilbert Bell dated 17 September 2009. This memorandum was not provided to Mr Nagy or Ms Enisz.
Mrs Bell gave evidence that after the conference with Mr Pitt, she repeatedly requested Mr Nagy and Ms Enisz to provide her with dates, times and details of the breaches of the RTA by the DOH, which they refused to do. She also arranged for R2009/24250 to be withdrawn and for the Tribunal to extend the time for the filing and serving of the points of claim so that the new breach of duty notice could be served on the DOH and a new application made.
Mrs Bell told the Tribunal that during her conversations with Mr Nagy and Ms Enisz, they repeatedly told her that they did not understand why Simon Pitt had advised them to withdraw R2009/24250, that they did not want to withdraw that claim and instead, they wanted her to draft the points of claim. Mr and Mrs Bell gave evidence that eventually, they agreed to organise a second conference with Mr Pitt so that Mr Nagy and Ms Enisz could raise their concerns directly with him. However, this did not take place before Mr Nagy and Ms Enisz terminated their retainer with Mr Bell.
Mr Nagy agreed that he told Margaret Bell that he did not understand why Mr Pitt had advised them to withdraw R2009/24250 and to make another claim. Mr Nagy gave evidence that, despite Mr Pitt's advice, he wanted Mrs Bell to draft points of claim on his and Ms Enisz's behalf so that they could comply with the Tribunal's order that points of claim be filed and served by 27 October 2009. Mr Nagy also gave evidence that he did not want to withdraw R2009/24250 and issue a new application because he would have to pay another filing fee and it was for these reasons that they refused to provide Mrs Bell with the draft breach of duty notice. Mr Nagy also gave evidence that he believed that he had provided more than enough information to Mr and Mrs Bell for Mrs Bell to prepare the points of claim, which is what they had employed her to do.
I am satisfied that Gilbert Bell provided Mr Nagy and Ms Enisz with adequate and appropriate advice by arranging a conference with Mr Pitt and subsequently attempting to persuade Mr Nagy and Ms Enisz to follow Mr Pitt's advice. I am also satisfied that Gilbert and Margaret Bell progressed the matter as far as they could in circumstances where Mr Nagy and Ms Enisz failed to understand and or did not want to accept Mr Pitt's advice.

Did Gilbert Bell withdraw R2009/24250 without the knowledge and consent of Ms Nagy and Ms Enisz?

Gilbert Bell & Co requested that R2009/24250 be withdrawn in a letter dated 29 September 2009. I accept Mrs Bell's evidence that this was done in accordance with Simon Pitt's advice. I also accept Mr Bell's evidence that this advice was provided to Mr Nagy and Ms Enisz during their conference with Mr Pitt.
Mrs Bell gave evidence that she discussed all decisions made by her with Mr Nagy and Ms Enisz. However, she did not give any evidence that she specifically obtained Mr Nagy and Ms Enisz's instructions prior to withdrawing R2009/24250 and nothing in the firm's file suggests that she did.
Mr Nagy and Ms Enisz gave evidence that after the conference with Mr Pitt, they informed Mr and Mrs Bell on a number of occasions that they did not want to withdraw R2009/24250. Mr and Mrs Bell agreed that this was the case and gave evidence that this was one of the reasons they agreed to arrange a second conference between Mr Nagy and Ms Enisz, and Mr Pitt.
Whilst I have accepted Mr Bell's evidence that Mr Nagy and Ms Enisz were provided with advice to withdraw R2009/24250, no evidence was given that Mr Nagy and Ms Enisz agreed to proceed in this manner. In fact. Mr and Mrs Bell's evidence was that they did not. In these circumstances, I accept the evidence of Mr Nagy and Ms Enisz, and find that proceeding R2009/24250 was withdrawn without their knowledge and consent.

Did Gilbert Bell provide Mr Nagy and Ms Enisz with a disclosure statement before or as soon as practicable after he was retained?

Gilbert Bell did not provide Mr Nagy and Ms Enisz with a disclosure statement until 5 October 2010. Mr Nagy gave evidence that he did not receive the disclosure statement until 8 October 2009, four weeks after his first meeting with Gilbert Bell. Neither Gilbert nor Margaret Bell provided any explanation for the delay.
Clearly, the disclosure statement was not provided to Mr Nagy and Ms Enisz before Gilbert Bell was retained. I am also satisfied that it was not provided to them as soon as practicable after he was retained. In my view, the disclosure statement could have, and should have been provided to Mr Nagy and Ms Enisz before Gilbert Bell commenced work on their behalves. Instead, the disclosure statement was not provided to Mr Nagy and Ms Enisz until 5 October 2009, by which time Gilbert and Margaret Bell had completed a considerable amount of work on behalf of Mr Nagy and Ms Enisz. In fact, all of the work that Mr Nagy and Ms Enisz were billed for was performed before the disclosure statement was provided to them.
Accordingly, Gilbert Bell breached section 3.4.11 of the Legal Profession Act 2004.

Has Gilbert Bell breached his contract with Mr Nagy and Ms Enisz?

It is clear from the evidence of the parties that the relationship between Mr Nagy and Ms Enisz, and Mr and Mrs Bell broke down following the conference with Simon Pitt. This is because Mr Nagy and Ms Enisz did not want to proceed as advised by Mr Pitt and repeatedly instructed Mrs Bell to draft the points of claim, which she was not prepared to do in light of Mr Pitt's advice. On the other hand, Mrs Bell, again relying on the advice of Simon Pitt, repeatedly requested Mr Nagy and Ms Enisz to provide her with a document setting out the date, time and details of all alleged breaches of the RTA by the DOH, which Mr Nagy and Ms Enisz were not prepared to provide her. An added complication was that, in any event, Mr Nagy believed Mrs Bell had all the information she required to draft either the points of claim or the new breach of duty notice, whilst Mrs Bell believed she did not, because the information provided was too general.
Accordingly, the matter reached an impasse and Mr Nagy and Ms Enisz terminated their retainer with Gilbert Bell.
I am not satisfied that Margaret Bell's failure to draft points of claim on behalf of Mr Nagy and Ms Enisz by the time the contract was terminated by them amounts to a breach of the contract by Gilbert Bell. As stated in paragraph 17 above, Mr and Mrs Bell obtained advice from Simon Pitt, who had expertise in residential tenancies matters, which they did not. Mr Pitt's advice recommended steps to be taken in order to best progress Mr Nagy and Ms Enisz's claims against the DOH and Mrs Bell attempted to persuade Mr Nagy and Ms Enisz to follow this advice. She also attempted to obtain detailed instructions from Mr Nagy so that a new breach of duty notice could be served on the DOH. This was to enable a new application to be made, which, according to Simon Pitt's advice, was more likely to succeed than R2009/24250. Mrs Bell also arranged for an extension of time to file and serve the points of claim whilst this was being done. Lastly, Mrs Bell attempted to arrange a second conference with Mr Pitt so that Mr Nagy and Ms Enisz could raise their concerns regarding his advice to withdraw R2009/24250 and to file a new breach of duty notice directly with him. In my view, each of these actions was reasonable, appropriate and within the scope of the retainer Gilbert Bell entered into with Mr Nagy and Ms Enisz. In addition, I accept Margaret Bell's evidence that, at no time did she refuse to draft the points of claim, and that this would have been done once the other steps had been completed in accordance with Simon Pitt's advice. Indeed, Simon Pitt's memorandum of advice, which I accept confirmed his advice given in conference, stated that he would not prepare points of claim until the other matters had been dealt with.
Further, as stated in paragraph 23 above, I am satisfied that Gilbert Bell provided Mr Nagy and Ms Enisz with adequate and appropriate advice and progressed the matter as far as he could in circumstances where Mr Nagy and Ms Enisz did not understand or want to accept Mr Pitt's advice.
However, there are two matters where I find that Gilbert Bell's conduct has fallen short of the requisite standard for a legal practitioner. Firstly, as stated in paragraph 19 above, a copy of Mr Pitt's memorandum of advice was not provided to Mr Nagy and Ms Enisz. In my view, this ought to have been done in order to assist Mr Nagy and Mr Enisz's understanding of Mr Pitt's advice. The explanation given by Mr Bell that it was not done because the memorandum merely confirmed the oral advice that Mr Pitt had given Mr Nagy and Ms Enisz in conference is not satisfactory, particularly in light of their apparent lack of understanding of Mr Pitt's advice and their refusal to follow it.
Despite this, I am satisfied that had the memorandum of advice been provided to Mr Nagy and Ms Enisz, this would have made no difference to the outcome of this matter. This is because Mr Nagy and Ms Enisz made it clear in their evidence during the hearing that they would not have followed Mr Pitt's advice under any circumstances because it involved withdrawing R2009/24250, which they repeatedly and emphatically stated they did not want to do.
Secondly, I find that the withdrawal of R2009/2450 without Mr Nagy and Ms Enisz's consent amounted of a breach of Gilbert Bell's contract with them. This is because a contract for the provision of legal services will ordinarily contain an implied term that the legal practitioner will obtain the clients' instructions prior to taking any step in the proceeding unless there are extenuating circumstances, which there were not in this case. Mrs Bell could have and should have obtained Mr Nagy and Ms Enisz's instructions before withdrawing R2009/24250 on their behalf, even though this was done because of Simon Pitt's advice that the claim was defective. That being said, I am not satisfied that this breach of the contract resulted in any financial loss to Mr Nagy and Ms Enisz. This is because Mr Nagy and Ms Enisz were unable to prove on the balance of probabilities that the claim in R2009/24250 was not defective for the reasons given by Simon Pitt.

Is Mr Nagy entitled to a refund of the costs paid by him and Ms Enisz?

I am satisfied that the costs charged by Gilbert Bell were fair and reasonable in all of the circumstances. This is because, as stated in paragraph 23, I am satisfied that Gilbert Bell provided Mr Nagy and Ms Enisz with adequate and appropriate advice and progressed the matter as far as they could in the circumstances. It is also because, as stated in paragraph 33, I am satisfied that Gilbert Bell did not breach his contract with Mr Nagy and Ms Enisz. In addition, the costs were charged in accordance with County Court Scale B, which I consider low given the amount of the claim, ($2,998,109.80)[5]. I also consider the costs were fair and reasonable given that Mr Nagy and Ms Enisz terminated Gilbert Bell's retainer before he could complete the work itemised in the receipt dated 14 September 2009.
I am also satisfied that the costs charged by Gilbert Bell were fair and reasonable despite his failure to provide Mr Nagy and Ms Enisz with a disclosure statement as soon as practicable after he was retained. This is because I am satisfied that Mr Nagy and Ms Enisz would have continued to instruct Gilbert Bell had they received the disclosure statement before he commence working on their behalves. I make this finding for two reasons. First, the estimated legal costs set out in the disclosure statement were $4,400, the same amount paid by Mr Nagy and Ms Enisz at the beginning of the matter. Second, I am satisfied that had Mr Nagy and Ms Enisz been dissatisfied with any of the information disclosed to them, they would not have been able to engage other solicitors to act for them for lower fees or on a different basis than that set out in the disclosure statement, particularly in light of the timetable ordered by the Tribunal. In making this finding I rely on the evidence of Mr Nagy that prior to engaging Gilbert Bell, he had had difficulty finding a solicitor who was prepared and able to act on his behalf. Mr Nagy told the Tribunal that initially, he engaged Adrian Bartek to act on his behalf but that Mr Bartek was too busy to continue. He gave further evidence that he then attempted to engage between six and ten other law firms to act on his behalf, without success, although one solicitor, Dominic Varasso, had agreed to act if Mr Nagy and Ms Enisz could pay his estimated costs of $7,500, which they could not.
Accordingly, I found no basis for reducing or refunding the costs paid by Mr Nagy and Ms Enisz to Gilbert Bell.

Is Gilbert Bell responsible for any losses suffered by Mr Nagy and Ms Enisz because of the dismissal of R2009/24248?

The remaining residential tenancies claim, R2009/24248, was dismissed under sections 75 and 76 of the Victorian Civil and Administrative Tribunal Act 1998 by the Tribunal on 17 November 2009 for the reason that Mr Nagy and Ms Enisz had not complied with the Tribunal's orders dated 18 August 2009 and 17 September 2009. The order made on 17 September 2009 extended the time for filing of the points of claim to 27 October 2009 but Mr Nagy and Ms Enisz had not filed any additional material by this date. In addition, on 9 October 2009, the Tribunal refused Mr Nagy and Ms Enisz's application for an extension of time to file the points of claim, which they made after terminating their retainer with Gilbert Bell on 7 October 2009.
As a result, Mr Nagy and Ms Enisz had only 20 days from the date they terminated their retainer with Gilbert Bell to find another solicitor to assist them to draft the points of claim or to draft the points of claim themselves.
I find that Gilbert Bell is not responsible for the dismissal of R2009/24248 or any alleged losses suffered by Mr Nagy and Ms Enisz because of that dismissal. This because Mr Nagy and Ms Enisz chose to terminate their retainer with Gilbert Bell in circumstances where Gilbert Bell was attempting to arrange a second conference with Simon Pitt so they could discuss their concerns regarding his advice and where Gilbert Bell had otherwise acted reasonably and appropriately and within the scope of his retainer. Of course, Mr Nagy and Ms Enisz were entitled to terminate their retainer with Gilbert Bell in circumstances where they were not happy with the advice they were being given, and it is understandable that they chose to do so given the impasse they had reached. However, this does not mean that Gilbert Bell is responsible for their subsequent inability to comply with the Tribunal's orders.
For these reasons, I dismissed the application.

[1] Section 4.2.2 of the Legal Practice Act 2004

[2] Section 4.3.17(1)(a) of the Legal Practice Act 2004

[3] Section 4.3.17(1)(b)(i) of the Legal Practice Act 2004

[4] Section 4.3.17(1)(c) of the Legal Practice Act 2004

[5] A claim of this size would usually attract costs on Supreme Court Scale D or County Court Scale D.

Nagy v Gilbert Bell trading as Gilbert Bell & Co

At a glance

Court

Decision date

Source

Judgment (31 paragraphs)

Nagy v Gilbert Bell trading as Gilbert Bell & Co (Legal Practice) [2010] VCAT 2038 (26 October 2010)

Parties