Re Moore [1996] QSC 212 (1 November 1996)

After further correspondence, Mrs Moore's solicitors confirmed that she would pay "all of the reasonable legal costs of the body corporate of and incidental to the consideration of the consent to the assignment of the management and letting rights". That undertaking was given on 31 May 1996.

Mr Marler was the solicitor having the conduct of this matter at Darvall and Darvall. He was also the chairman of the body corporate. Just what work was reasonably necessary for the obtaining of the consent does not appear in the material before me, but in the event fees have been demanded totalling $9060, including a claim to be remunerated for 34 hours work at $240 per hour ($8160).

The settlement of Mrs Moore's transaction was fixed for 26 July 1996, and Mr Marler indicated that he would not hand over any documents unless these costs were paid. In the event Mrs Moore's solicitors paid the full amount under protest, indicating at the same time that she would require a bill to be prepared in taxable form. Further requests for such a bill were unsuccessful, and on 7 October the present summons was issued seeking the preparation and delivery of a bill in taxable form.

On the morning of the hearing, an affidavit of Mr Marler was filed alleging that a special agreement was made between him and the body corporate on 12 June 1996 that he be entitled to charge the body corporate $240 per hour for all legal work performed by Darvall and Darvall "both past and future" in the assignment of Mrs Moore's management and letting rights. He says that this was authorised by a committee meeting of the body corporate, at which he was in attendance. However an oral agreement in those circumstances would obtain for the solicitor no protection under s.23 of the Legal Practitioners Act 1995, and it would be subject to very close scrutiny by a court if it were used to enable the solicitor to "reap a greater reward than he would get on taxation". (Woolf v. Trebilco [1933] VicLawRp 29; 1933 VLR 180, 192). However it seems that a document was belatedly brought into existence, it would seem on 22 October 1996, on the virtual eve of the present court hearing, signed by the secretary of the body corporate stating that -

"The Proprietors . . hereby engage Messrs C.B. Darvall and Darvall to perform all legal work, both past and future, on our behalf, involved in the assignment of the management and letting rights from Ms Robyn Gail Moore to Mahana Pty Ltd with such legal work to be charged at the rate of $240 per hour."

Mr Darvall's affidavit does not disclose the date when the document came into existence. He simply exhibited the undated "agreement" and deposed that it "was reduced to writing and signed". However it was conceded in argument that this document was not brought into existence until 22 October.

In these circumstances is Mrs Moore obliged to pay costs fixed by a private agreement of which she had no notice?

It is important to note that not even an oral agreement existed between the body corporate and Darvall and Darvall when Mrs Moore made her promise to pay the "reasonable" costs to be incurred by the body corporate.

Mrs Moore is not the client chargeable with the bill, but by virtue of her promise she made herself liable to pay certain costs, and she has in fact paid the bill to the attorney. She is therefore, under s.13(1) of the Legal Practitioners Act 1995 (formerly s.30 of the Costs Act 1867), entitled to the same rights of reference to taxation as the client would have been. She is prima facie entitled to have a bill presented and taxed.

The solicitors seek to avoid this by relying on an "agreement" under s.23 of the Legal Practitioners Act. The Legal Practitioners Act 1995 is a mere relocation and consolidation of various longstanding existing statutory provisions on the subject of costs (see s.2). Section 23 was formerly s.3 of the Solicitors Act 1891, and that was based on s.4 of The Solicitors Act 1870 (UK). It has received a good deal of judicial scrutiny and application. Two cases in particular give clear indications of its meaning and its effect upon the practice of the courts in scrutinising arrangements between solicitors and clients concerning costs, namely Claire v. Joseph [1907] 2 KB 369, 376-377, 378, and Woolf v. Trebilco [1933] VicLawRp 29; [1933] VLR 180, 19-192. At the time when the section was introduced, agreements between solicitors and clients which might give the solicitor a greater benefit than would ordinarily be expected from a proper taxation of costs were viewed by the courts "with great jealousy" because "there was so great an opportunity for the exercise of undue influence, that the courts were very slow to enforce such agreements when they were favourable to the solicitor unless they were satisfied that they were made under circumstances that precluded any suspicion of an improper attempt on the solicitor's part to benefit himself at his client's expense" (Claire v. Joseph above, p 376 per Fletcher Moulton LJ). Other statements have suggested that oral agreements of this kind are tested by judges having regard to the position of dominance occupied by the solicitor in relation to the client so that it was incumbent on the solicitor to show that the bargain was not affected by the relationship of the parties, and was fair. "The important point to be emphasised is that the courts did examine the terms of the agreement in order to see whether it favoured the solicitor, and did not permit the solicitor to repay greater award than he would get on taxation": Woolf v. Trebilco (above) p 192.

However s.23 gives to solicitors the opportunity to avoid taxation of costs, and indeed to make a wide variety of special arrangements, provided that the agreement is made in writing. Such agreements are still subject to a strong protective jurisdiction of the courts, including the requirement that on examination the court finds such agreement to be "fair and reasonable" (see ss.28 and 29).

The right is recognised, if the solicitor can persuade the client to agree in writing, to obtain a "greater . . rate . . than the rate at which the solicitor would otherwise be entitled to be remunerated . .". The section also permits a solicitor to make such an arrangement respecting payment for "the whole or any part of any past or future services". That is what Mr Marler says he achieved with the body corporate (of which he was the chairman) on 12 June, although it will be noted that he did not then make such agreement in writing.

Should Mrs Moore be visited with its consequences now that it has been put in writing?

25.(1) Such an agreement shall not affect the amount of or any rights or remedies for the recovery of any costs recoverable from the client by any other person, or payable to the client by any other person, and any such other person may require any costs payable or recoverable by him or her to or from the client to be taxed according to the rules for the time being in force for the taxation of such costs, unless such person has otherwise agreed."

In my view the alleged s.23 agreement between the body corporate and Messrs Darvall and Darvall does not bind Mrs Moore and does not affect the quantum of the costs that may be recoverable by the body corporate pursuant to Mrs Moore's promise of 31 May. Her right to have those costs taxed is expressly preserved by s.25(1). I reject the submission of counsel for Messrs Darvall and Darvall that this section merely imposes on the solicitor the obligation to justify the fact that 38 hours were worked, and that the rate agreed between the body corporate and that firm is the rate to which the taxing officer should give effect in the taxation to which Mrs Moore is entitled. To do so would fly in the face of both the first two lines of the section and of the preservation of the third party's right to a taxation according to the rules.

Of course Mrs Moore would not obtain the protection of s.25(1) if she had "otherwise agreed". I do not think that she "otherwise agreed" in circumstances where such an arrangement did not exist when she made the promise upon which Darvall and Darvall now claim to be entitled to retain such fees, and when such an arrangement did not even bind the body corporate until fifteen days after the present summons was issued. Moreover the arrangements was only to pay "reasonable" costs, and she was given no notice of any special arrangements affecting their quantum.

It seems to me that if third parties are to be bound by special arrangements made between solicitors and clients, the solicitors have a high duty to ensure that the third party is fully and fairly advised of such special terms, and that they should do so before any binding commitment of the third party to payment of such costs. I should have thought that ordinary notions of fair play would in any event constrain a solicitor to advise such a party of any special factor that would be likely to affect the quantum of such costs before extracting a promise to have them paid. It is obvious that there is a high likelihood of unfairness in arrangements like the present, inasmuch as a client is quite likely to be easily persuaded to make a generous agreement for the payment of a solicitor's costs when the client knows that someone else will be paying for them. That likelihood is increased when the solicitor who will benefit from a generous agreement happens to be the chairman of the client.

In my view the applicant Mrs Moore is entitled to be given a proper bill and to have it taxed.

I note that although no submissions were made upon the point, for the purposes of Part 4 of the Legal Practitioners Act 1995 (which includes s.23) the term "client" includes a person who is or may be liable to pay the bill of a solicitor for any services. There is thus a potential alternative application of s.23 in relation to any "agreement" between Mrs Moore and the solicitors. Now on the assumption that the correspondence between the solicitors and Mrs Moore's solicitors was sufficient to constitute an agreement in writing, it is clear that such agreement was not for payment "at a greater or at a less rate than the rate at which the solicitor would otherwise be entitled to be remunerated". Accordingly that agreement would not entitle the solicitors to avoid presenting a bill and having it submitted to taxation.

It may be added that under s.28 of the Legal Practitioners Act 1995, Mrs Moore would be entitled to move to have the agreement upon which Darvall and Darvall now rely set aside. It is however unnecessary for present purposes to decide whether, on such an application, the requirement in s.29 that such an agreement must be "in all respects fair and reasonable between the parties" applies as between the solicitors and the third party applicant who is liable to pay the costs in respect of which the agreement is made. It would be surprising if this were not so, particularly in view of the intention in Part 4 to permit such persons to stand in the shoes of clients. However for the reasons already given, it is unnecessary to pursue this alternative source of protection of Mrs Moore's interests.

Finally a submission was made on behalf of the solicitors that it will cost them $400 to have someone else prepare their bill, and that that cost of preparing such a bill would not be recoverable on taxation. For this reason they have requested that I give a special direction to the taxing master that the costs of preparation of such a bill be allowed in their favour. They say that to decline to do so would create an injustice against them because they will not now be able to obtain such costs from their real client, the body corporate. No authority was referred to, but it was said that the court has inherent power to give such a direction. It is a bold submission, to say the least. It is well established that as between solicitor and client, there is no right to tax the cost of drawing a bill. (Re National Bank of Wales (1902) 2 Ch 412; Re Fitzgerald and Seymour's Bill of Costs [1960] Qd. R. 430, 432). In my view one would need very special circumstances to justify a direction to a taxing master to act contrary to well-established practice. The only special circumstance here is the lack of merit on the part of the solicitors. In my view if solicitors wish to make additional charges against clients (and a fortiori third parties) for the privilege of preparing a bill so that the right of taxation may be enjoyed, they will have to make special arrangements (in writing) to obtain it.

1. C.B. Darvall & Darvall, Solicitors, prepare and deliver to the Applicant a bill of costs in taxable form in respect of their acting for the Body Corporate of "The Islander" Building Unit Plan No. 7279 in the matter of the assignment of the management and letting rights by the Applicant to Mahana Pty Ltd (ACN 009 994 307);

2. the said bill of costs be referred to the Taxing Officer of this Honourable Court for taxation;

3. the Respondent pay the Applicant's costs of an incidental to this application to be taxed.