BETWEEN : PORTUGUESE CULTURAL AND WELFARE CENTRE

Costs - Application to cancel costs agreements - Whether agreements unreasonable - Circumstances in which agreements come to be made - Terms of agreements - Effect of agreements

Legal Practice Act 2003 (WA), s 222

1 HALL J: This is an application to cancel three costs agreements. The agreements are between the Portuguese Cultural and Welfare Centre Incorporated (PCWC) and the respondent, Talbot Olivier Pty Ltd. The PCWC is one of the applicants. The others, Mr and Mrs Moleirinho, signed one or more of the agreements and personally guaranteed payment of fees and disbursements incurred on behalf of the PCWC.

2 The application is made pursuant to s 222 of the Legal Practice Act 2003 (WA) (2003 Act). Although the 2003 Act has now been repealed and replaced with the Legal Profession Act 2008 (WA) (2008 Act), each of the agreements was made prior to the relevant provisions of the 2008 Act commencing and accordingly pt 13 of the 2003 Act continues to apply: s 616 of the 2008 Act.

(1) A costs agreement may be reviewed by the Supreme Court upon application by summons or on a reference under section 235(2).

(2) If, in the opinion of the Supreme Court, the costs agreement is unreasonable -

(a) the Supreme Court may reduce the amount payable or cancel the costs agreement; and

(3) The Supreme Court may make such order as to the costs of and relating to the review, and the proceedings on the review, as the Court thinks fit.

4 The 2003 Act does not set out any considerations that are relevant in determining whether a costs agreement is unreasonable. This contrasts with the 2008 Act: See s 288(3).

5 Section 222 is, however, similar in its terms to the previously existing s 59 of the Legal Practitioners Act 1893 (WA). That section was considered in Jovetic v Stoddart & Co (1992) 7 WAR 208 and Brown v Talbot & Olivier (1993) 9 WAR 70. In Jovetic Seaman J said that three circumstances in which an agreement could be said to be unreasonable were where a client could show that it came into being in circumstances which were unreasonable to him or her, or that its terms are unreasonable to him or her or that its effect upon him or her is unreasonable.

6 In Brown Ipp J noted that it was important for solicitors, when entering into costs agreements which are more favourable to them than the ordinary regime, to ensure that there is no suggestion of any overreaching on their part (77). His Honour said that any agreement which seeks to remove the limit imposed by the scale would be regarded as unreasonable if full disclosure is not made of the limits and benefits provided by the scale and the effect and consequences of the proposed agreement. He said that the obligation to make a full and frank disclosure of this kind is an integral part of the duty owed by lawyers to their clients. His Honour said that the duty of disclosure also required that, if reasonably possible, an estimate of the approximate amount of solicitor's fees and counsel's fees should be provided.

7 Another circumstance in which an agreement may be unreasonable is where a client has been induced to enter into it by pressure or some material misrepresentation. On the other hand, the courts must guard against the possibility that a client who is disappointed with the outcome of proceedings may seek to avoid responsibility for legal costs by falsely claiming that they were pressured to sign a costs agreement or did not understand it.

8 The relevant background to this application is not easy to determine. This is partly because the applicants were represented by Mr Moleirinho who is a layman and admittedly unfamiliar with the relevant law and procedure.

9 On 10 October 2012 Mr Moleirinho filed a summons seeking 'to set aside the costs agreement'. The summons did not further identify the costs agreement and it transpired at the hearing of the application that there were in fact three such agreements and that his intention was that all of them be cancelled. The summons was not accompanied by an affidavit explaining the grounds upon which the order was sought.

10 On 14 November 2012 Mr Moleirinho filed an affidavit headed 'Affidavit verifying list of documents'. The affidavit referred to statements made in certain paragraphs in a document that was said to be produced and marked 'A'. No such document was attached to the affidavit. There was, however, a second document also filed on 14 November 2002 that includes one paragraph headed 'Chronology' and 37 paragraphs headed 'Submission'. The paragraph numbers referred to in the affidavit bear no logical connection to the paragraphs of the submissions. An examination of the submissions reveals that they are correctly so described and are largely assertions. In these circumstances, I am compelled to a conclusion that the affidavit provides no admissible evidence in support of this application. However, I have used the submissions as a basis for understanding the nature of the application.

11 The second reason why the background to this application has been difficult to determine is that the respondent has taken the view that it was unnecessary for it to file any affidavits or submissions in opposition to this application. The reasons for this appear to be that a view was taken that the application was baseless and that it was not appropriate to incur further costs. On the other hand, the respondent was well placed to assist the court in understanding what costs agreements were in issue and how those agreements came into existence.

12 At the hearing of the application the respondent provided some information when requested by me to do so, including copies of the relevant costs agreements (with the consent of Mr Moleirinho). However, there was initially some confusion as to the dates and number of the agreements and I was provided with another agreement which related to an entirely separate matter involving the same parties. It should scarcely need saying, but in matters such as this where one party is unrepresented it is expected that lawyers acting on the other side will endeavour to assist the court in understanding the factual background to the issues to be determined. It reflects poorly on lawyers if they fail to adequately assist in these circumstances, particularly in circumstances where they could be perceived as having a selfinterest in so doing.

13 The background facts appear to be as follows. For several years PCWC operated a community radio under a licence issued by the Australian Broadcasting Authority (ABA). The ABA was subsequently replaced by the Australian Communications and Media Authority (ACMA). In 2007 the ACMA refused to renew the licence and the PCWC decided to seek legal advice. At various times Mr Moleirinho and his son have been office bearers with the PCWC and they were primarily responsible for instructing the respondent. The PCWC retained the respondent in December 2007. The first costs agreement was entered into on 30 January 2008. That costs agreement stated that the scope of work would comprise the following:

(a) advising PCWC with respect to the preliminary view of the ACMA dated 5 December 2007 with respect to the renewal application;

(b) reviewing the preliminary view and other documents relating to the operation of PCWC and the licence;

(c) preparing comments and submissions on behalf of PCWC in response to ACMA's preliminary view of the renewal application; and

(d) liaising with PCWC and ACMA in relation to the renewal application, preliminary view and submission.

14 The agreement identified the individual lawyers who would carry out the work and their charge out rates. An estimate of the total legal costs was given as being professional fees of $4,000 and disbursements of $400, both exclusive of GST. The estimate noted that it was difficult to predict the total professional fees and disbursements and that the total fees may change depending on various factors, including whether the scope of the instructions changed and the actions of third parties. The agreement appears to have been signed by Mr Moleirinho and another person described as an authorised representative, Ms Michelle West. Above the signatures the following paragraphs appear:

By signing this letter we acknowledge that we have received a copy of it and that we have read and understood and accept its contents, including the schedule of fees and expenses and the terms of engagement.

If instructing on behalf of a company or other entity, we confirm that we are duly authorised to do so and guarantee payment of fees and disbursements as referred to herein.

15 It would appear that the work envisaged by the first agreement was performed and on 1 February 2008 the respondent rendered an invoice of $7,775. This was in excess of the estimate and I will return to the possible significance of that later in these reasons.

16 By March 2008 consideration was being given to filing an application with the Federal Court seeking to review the decision of ACMA. By letter of 2 March 2008 the respondent proposed a further costs agreement. The scope of work to be covered by this agreement was described as follows:

(a) drafting a letter of advice in relation to:

(i) the grounds on which PCWC may lodge an application to the Federal Court of Australia (Federal Court) for an Order of Review of the Australian Communication and Media Authority's decision of 24 January 2008 to refuse to renew the licence (Application); and

(ii) the prospects of PCWC's success should it elect to lodge an Application.

(b) reviewing relevant judicial authority and legal commentary in order to prepare the letter of advice referred to in paragraph 2(a) above.

(c) if upon review of the letter of advice referred to in paragraph 2(a) above PCWC elects to lodge an Application;

(ii) drafting supporting documentation for the Application; and

(iii) attendance on lodging the documents referred to in paragraphs 2(c)(i) and (ii) above at the Federal Court.

17 The estimate of the legal costs, including disbursements, was $11,000, exclusive of GST. The letter included paragraphs which stated:

The fees provided by the statutory scales (which would apply if we did not make this costs agreement) are, in general, lower than our fees based on hourly rates. Accordingly, the remuneration to which we are entitled under this costs agreement may be considerably greater than the amount we would be entitled to recover if the statutory scale applied.

If you are successful in these proceedings, you may recover some costs from the other side equal to the scale fees for the work done. If you are unsuccessful, you may be liable to some costs of the other side, equal to the scale fees for the work done.

18 A copy of the letter containing the same acknowledgement as the first costs agreement was signed by Mr and Mrs Moleirinho on 13 March 2008.

19 On 20 March 2008 PCWC instructed the respondent to prepare and file a Federal Court application. By reason of these instructions a further letter of engagement was sent to PCWC and signed on 20 March 2008. The scope of work referred to in this agreement was as follows:

(a) preparing and filing on behalf of PCWC a Form 56 application for an order of review under the ADJR Act of ACMA's final decision (Application);

(b) generally acting on behalf of PCWC in respect of the Application, including all work required in relation to and arising from the Application and all advice necessary to be given to you in respect of or relating to the Application.

The estimate contained in this letter does not include the cost of any work that does not relate to the Application. It does not include the costs of any appeal of the Application or any work relating to any further application to ACMA or any similar work.

20 An estimate of legal costs, including disbursements, was given as between $30,000 and $45,000. This was said to include an allowance of between $15,000 and $25,000 for counsel, up to and including a one day hearing of the application. In addition, there was an estimate of between $2,000 and $3,000 in disbursements. Both estimates were exclusive of GST. Estimates were also given of the amount of legal costs that would be payable to the respondent if the agreement did not apply. This was said to be twothirds of the estimate. Estimates were also given of legal costs which the applicants may be liable to pay if they lost the Federal Court application and what they might be entitled to from the other party if they won. Mr Moleirinho appears to have signed the confirmation both for himself and on behalf of his wife, in their capacities as authorised representatives.

21 The respondent issued further invoices between 30 April 2008 and 25 September 2008. The total amount invoiced including the first amount of $7,775, was $91,373.67. A total of $38,762 was paid and the respondent subsequently commenced proceedings against the applicants in the Magistrates Court for the balance of $52,611.67. The applicants then sought a taxation of the bill of costs in this court. In the course of those proceedings Mr Moleirinho raised a question as to the validity of the costs agreement. The taxation proceedings were then adjourned to allow Mr Moleirinho to bring this application.

22 Mr Moleirinho's written submissions raise a number of complaints. First, he claims that work was done by lawyers employed by the respondent that had not been agreed to and was unnecessary. Secondly, he suggests that the work that was done was not done competently. Thirdly, he says that the third agreement was signed in circumstances where PCWC was under pressure because 20 March 2008 was the last day on which an application to the Federal Court could be filed. Fourthly, he says that he signed the third agreement on behalf of his wife without having authority to do so and at the urging of a lawyer employed by the respondent.

23 As to the first complaint, it is beyond the scope of this application to determine whether work was unnecessary or beyond the scope of the agreement. An itemised bill has been filed by the respondent but in the absence of affidavit evidence from both sides it is impossible to determine whether the matters referred to in that bill were covered by the agreement and any instructions pursuant thereto.

24 It is noteworthy that the total amount invoiced very significantly exceeded the total of the estimates provided in the three agreements. In Brown it was submitted that the extremely high amount of costs charged by the solicitors was a factor indicating that the costs agreement was unreasonable. Counsel for the solicitors in that case said that the costs included a considerable amount of work done on noncontentious business and, further, contained some work which might be held by the taxing master to have been unnecessarily performed. It was said it was not the consequence of the costs agreement that the costs were high.

25 Ipp J concluded in Brown that he had insufficient information before him to enable him to come to a firm conclusion about the reasonableness of the agreement based on the amount of the solicitor's charges. I am in a similar position. If, as seems likely, there is to be a contest over whether specific work was necessary, was within the terms of the agreement, or was done without instructions, those are issues that should be determined at a taxation.

26 As regards the claim that the third agreement was signed under duress, there is no sworn evidence to support this. Even if the applicants were told that the agreement had to be signed quickly it does not follow that it was not made voluntarily. The terms of the agreement were materially the same as those of the first two agreements. What was different was the scope of works and the estimate of fees. Very little time was necessary to appreciate the import of those parts of the third agreement.

27 As to the claim that Mr Moleirinho signed the third agreement on behalf of his wife without her authority, there is no evidence from Mrs Moleirinho to that effect. Mr Moleirinho does not deny signing the form and it is difficult to believe that he did so without having any authority to execute the document. Further, Mr Moleirinho said in his written submissions that he contacted the PCWC committee after receiving the third agreement and 'told them the urgent situation as stated and they agreed to go ahead with the application'.

28 Each of the agreements contained proper disclosure as to the effect of the agreement, charge out rates and an estimate of likely costs. Each of the agreements was signed on behalf of PCWC and I am unable to conclude on the available evidence that those signatures represented anything other than a voluntary acceptance of the agreements on behalf of PCWC. Neither the circumstances in which the agreements were made, their terms or their effect lead me to conclude that they are unreasonable.

29 Issues raised by the applicants as to whether all of the work done pursuant to the agreements was necessary and within the terms of the instructions given by PCWC are issues appropriately to be determined on a taxation. They do not provide grounds for cancelling any of the costs agreements. For these reasons the application must be dismissed.