Samadi v WKA Legal Pty Ltd

Legal Profession Act 2004 (NSW)

1. As the Clients first instructed the Solicitor prior to the commencement date of the Legal Profession Uniform Law (NSW), the provisions of the 2004 Act relating to costs continue to apply: Legal Profession Uniform Law, Sch 4, cl 18(1).
2. Part 3.2 of the 2004 Act, entitled "Costs Disclosure and Assessment", requires law practices to make disclosures to clients regarding legal costs, regulates costs agreements, including conditional costs agreements, and provides for assessment of legal costs as well as the setting aside of certain costs agreements.
3. Section 302 relevantly contains the following definitions: "302 Definitions (1) In this Part: conditional costs agreement means a costs agreement that provides that the payment of some or all of the legal costs is conditional on the successful outcome of the matter to which those costs relate, as referred to in section 323 (Conditional costs agreements) . . . costs includes fees, charges, disbursements, expenses and remuneration. costs agreement means an agreement about the payment of legal costs. costs assessment means an assessment of legal costs under Division 11."
4. Section 309 requires disclosure of costs to clients, including the basis on which they will be calculated and an estimate of total costs. Section 317 relevantly provides: "317 Effect of failure to disclose (1) Postponement of payment of legal costs until assessed If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed, the client . . . need not pay the legal costs unless they have been assessed under Division 11. (2) Bar on recovering proceedings until legal costs assessed A law practice that does not disclose to a client . . . anything required by this Division to be disclosed may not maintain proceedings against the client . . . for the recovery of legal costs unless the costs have been assessed under Division 11. . . ."
5. Section 323, which is in Division 5 of Part 3.2 relevantly makes provision for conditional costs agreements as follows: "323 Conditional costs agreements (1) A costs agreement may provide that the payment of some or all of the legal costs is conditional on the successful outcome of the matter to which those costs relate. . . . (3) A conditional costs agreement: (a) must set out the circumstances that constitute the successful outcome of the matter to which it relates, and (b) may provide for disbursements to be paid irrespective of the outcome of the matter, and (c) must be: (i) in writing, and (ii) in clear plain language, and (iii) signed by the client, and (d) must contain a statement that the client has been informed of the client's right to seek independent legal advice before entering into the agreement, and (e) must contain a cooling-off period of not less than 5 clear business days during which the client, by written notice, may terminate the agreement. . . ."
6. Section 326 of the 2004 Act expressly provides that, subject to Divisions 5 and 11 of Part 3.2, a costs agreement may be enforced in the same way as any other contract.
7. Section 327 of the 2004 Act provides that any costs agreement that contravenes any provision of this Division (Division 5 of Part 3.2) is void. Legal costs are, however, recoverable under a void costs agreement according to the fair and reasonable value of the legal services provided: ss 327(2) and 319.

The facts

1. The following facts are either agreed or the subject of uncontroverted evidence.
2. Mr Samadi and Team ASR retained the Solicitor to take over the conduct of proceedings brought by Team ASR in the District Court against Globe Projects Pty Ltd (the Globe Proceedings), shortly before the conclusion of those proceedings. The Solicitor provided Mr Samadi and Team ASR with a costs disclosure and agreement in May 2007 which was executed by them (the May 2007 Agreement). Clause 8 of the May 2007 Agreement relevantly provided: "8. PAYMENT TERMS (8.1) You hereby agree to pay our tax invoices on receipt whether the invoices are interim invoices or invoices issued on or after completion or termination of your matter or this Agreement. . . . (8.3) If you do not pay any of our invoices we may: (8.3.4) charge interest on any invoices and administration fees charged thereon outstanding for more than thirty (30) days after the date of the invoice at the rate prescribed by the Civil Procedure Act (NSW). (8.4) You acknowledge and agree that our tax invoices constitute 'requests for payment' as defined in the Legal Profession Act 2004 ("LPA") & the Legal Profession Regulation ("LPR")."
3. Ultimately, the Globe Proceedings concluded by the entry of judgment in favour of Team ASR in the sum of $425,703.06. Mr Samadi instructed the Solicitor to enforce the judgment. To that end, proceedings were commenced on behalf of Team ASR against Home Estate Agents and a garnishee order was issued (the Home Estate Proceedings). Proceedings were also commenced on behalf of Team ASR against James Verzayias, who was relevantly a guarantor of the judgment debt, as a result of which a garnishee order issued (Verzayias Proceedings). The Solicitor treated these three proceedings as related and allocated the same matter number to them. The Solicitor was paid about $183,000 for the work performed, which came largely from funds garnisheed, although about $40,000 was paid by Team ASR.
4. Mr Samadi also instructed the Solicitor to commence unrelated proceedings on behalf of Studio 54 against Mack One (the Studio 54 Proceedings).
5. All of the invoices rendered by the Solicitor to the Clients were paid, except for the following: Matter Date Amount Invoice no Defence, in addition to s 317 of the 2004 Act Globe Proceedings 9 June 2009 $1,450.72 11 Statute-barred, as statement of claim filed on 26 August 2015 (statute-barred) 10 August 2009 $3,380.85 12 Statute-barred 28 August 2009 $1,351.90 13 Solely s 317 Home Estate Proceedings 27 August 2009 $1,873.85 3 Not payable under terms of agreement Verzayias Proceedings 20 April 2009 $5,351.33 2 Statute-barred 13 August 2009 $3,687.20 3 Statute-barred 28 September 2009 $470.80 5 Not payable under terms of agreement 5 May 2011 $11,139.65 6 Not payable under terms of agreement Studio 54 Proceedings 4 March 2009 $3,100.35 1 Statute barred; no costs agreement between the Solicitor and Studio 54

1. These invoices were the subject of the Solicitor's claim in the Court below.
2. The Clients contended that, following the May 2007 Agreement, there were two further agreements: an agreement made on 1 December 2008 that fees would be payable only if monies were received from Global Projects or Home Estate Agents; and an agreement made in September 2009 that all of the Solicitor's fees following 24 September 2009 would only be payable from funds recovered from Globe Projects or Mr Verzayias. There were issues relating to these two agreements in the Court below. However, it is not necessary to summarise the evidence further as Ms Castle, who appeared for the Clients in this Court, did not challenge his Honour's findings that the Clients' obligations under the 2007 Agreement had not relevantly been amended.

The Clients' application for leave to amend the defence and to have the proceedings dismissed

1. In order to address the first ground of appeal (set out above), it is necessary to provide some detail about the background to the application made by the Clients at the commencement of the hearing in the Court below.
2. The proceedings were listed for hearing on 19 December 2016. Prior to the hearing date, the current pleadings were an amended statement of claim filed on 22 September 2015 and apparently served on 21 January 2016; an amended defence filed on 22 July 2016; and a reply dated 7 October 2016. On 15 December 2016 the Clients served a statement of issues on the Solicitor. It included each of the four issues referred to above. In respect of (1), the Clients referred to ss 317, 323 and Division 11 of the 2004 Act.
3. On 16 December 2016, the Clients served a draft further amended defence which sought to add the following paragraph to the amended defence: "6A Further or in the alternative, the Defendants say that: a) The Conditional Costs Agreement [said to be constituted by an an email from the Solicitor to Mr Samadi dated 28 November 2008] was provided in purported compliance with section 323 of the Legal Profession Act 2004 (LPA) and was deficient in that it: i. Failed to set out the circumstances that the parties agreed would constitute the successful outcome of the matter: ii. Was not in clear and plain language; iii. Was not signed by the client; iv. Did not contain a statement that the client had been informed of the right to seek legal advice; and v. Did not provide a cooling off period. b) In circumstances where there was a failure to comply with section 323 of the LPA there was, as a matter of fact, no Conditional Cost Agreement for the purposes of the LPA. (c) Absent a Conditional Cost Agreement that complied with the LPA, section 317 of the LPA is engaged, and recovery requires a cost assessment in order for proceedings to be maintained and/or commenced. (d) The Plaintiff has not made any application for a cost assessment in accordance with the LPA. (e) In the premises of the above, the Plaintiff is estopped for [sic, from] bringing or maintaining the proceedings."
4. On 19 December 2016, when the matter was called for hearing, Mr Hyde, who appeared for the Clients in the Court below, sought leave to amend the defence (as set out above) and contended that the proceedings ought be dismissed as they were not maintainable by reason of ss 323 and 317(2) of the 2004 Act. As appears from the transcript, his Honour took exception to the timing of the application and to other matters to which it is not necessary to refer. The following exchange occurred at the conclusion of the application: "MR HYDE: . . . All right, well that's my application, your Honour. HIS HONOUR: Application is dismissed. MR HYDE: May it please the court. HIS HONOUR: Thank you. MR STITT: Your Honour, can I just inquire, in light of your Honour's ruling, does that mean that the proposed further amended defence has not now been accepted and so we're -- HIS HONOUR: I really don't know, because I really don't know what -- MR STITT: So that we're proceeding on the pleadings that were already before the court? HIS HONOUR: I assume so."
5. Following this exchange Mr Stitt, who appeared on behalf of the Solicitor in the Court below, outlined the case for the Solicitor and the matter proceeded. No reasons were given by his Honour for refusing the Clients' application that the proceedings be dismissed and that leave be granted to file a further amended defence.

The evidence

1. Mr Keay and Mr Samadi both gave evidence by affidavit and were cross-examined. Voluminous documents were tendered. For present purposes it is necessary to record only the following: 1. Mr Samadi ultimately admitted that he had received each of the invoices in dispute (set out in the above table); 2. Mr Keay gave evidence (referred to below) as to the dates on which, and by what means, each of the invoices had been sent; and 3. Mr Keay (the principal of the Solicitor) admitted, in cross-examination, that he had not entered into a costs agreement with Studio 54.

Mr Keay's evidence of the date of receipt of the invoices

1. In order to establish that the invoices had, in fact, been sent and received, Mr Keay deposed in an affidavit sworn on 30 November 2016 as follows: "9. Paragraph 9 AS2 [affidavit of Mr Samadi affirmed 8 November 2016] 1. I deny that Mr Samadi only received the two invoices as asserted by him in this paragraph. Annexed hereto and marked "B" is copy of a Schedule of Sending of Invoices together with, where relevant, a copy of the letter, email or evidence of sending of the associated invoice. 2. As far as the sending of invoices is concerned, WKA [the Solicitor] does not have and never has had a standard procedure or policy with respect to sending client invoices to clients. 3. Depending on various factors, sometimes the invoices and statements are faxed, sometimes the invoices and statements are sent by email and sometimes the invoices and statements are sent by ordinary pre-paid post through Australia Post. The invoices and statements sent through Australia Post are sometimes sent with a covering letter and sometimes without. WKA's tax invoices and statements of account are designed to fit in a standard window envelope without the need for a covering letter. 4. However, irrespective of the means of sending invoices and statements, on every occasion a tax invoice or statement is sent out a file copy is made of the tax invoice or statement and placed on the file. I make sure that this is done. This ensures that there is a record of the sending of all invoices and statements. 5. While WKA does not maintain a mail book, on a daily basis I personally review all incoming mail and emails. At the end of each day I ensure that all documents including invoices and statements generated during the course of the day which are to be posted are placed in an Australia Post mail box by the administrative staff. 6. Since WKA was incorporated in 2004, apart from Mr Samadi in AS2, there has not been one person who has ever complained or asserted or suggested that they did not receive a WKA invoice or statement. 7. Each of the files the subject of these proceedings contains a file copy of all invoices and statements. As per the Schedule of Sending of Invoices (annexure B hereto) there are 2 invoices which were sent to Mr Samadi by mail rather than fax or email."
2. Annexure "B" to Mr Keay's affidavit summarised his evidence about the dates on which the invoices were sent and received. The parts of the Schedule which refers to the invoices said to be statute-barred are reproduced below: Invoice No & Date Method of sending Evidence of sending Location of evidence of sending [Globe Proceedings] 11 dated 9/06/09 Faxed 10/06/09 Copy of fax transmission report Attached to this Schedule 12 dated 18/08/09 Faxed 18/08/09 Letter of 18/08/09 Copy of letter and fax transmission report Attached to this Schedule [Verzayias Proceedings] 2 dated 20/04/09 Email Emma Girvan 5/05/09 Email stamp on copy of invoice See Affidavit of WLK 27/05/16 p.228 3 dated 13/08/09 Faxed 13/08/09 Letter of 13/08/09 Copy of letter and fax transmission report Attached to this Schedule [Studio 54 Proceedings] 1 dated 4/03/09 Email Hayley Jenkins 8/10/09 Copy of email and copy of email from client 7/10/09 requesting invoice Attached to this Schedule and also email request for invoice from client see Affidavit of WLK 27/05/16 p.270

The determination and reasons of the Court below

1. His Honour found that the 2007 Agreement had not been varied by any of the subsequent arrangements. Accordingly, his Honour found that each of the invoices was required to be paid, with the exception of the invoice to Studio 54. His Honour found that the amount of the Studio 54 invoice was not due and payable as there was no costs agreement between the Solicitor and Studio 54.
2. In respect of the invoices which were alleged to be statute-barred as they had been received by the Clients more than six years before the commencement of the proceedings, his Honour applied the principle that time does not begin to run on an entire contract until the solicitor's work is completed because it is only at that point that the solicitor is entitled to be paid. The relevant passage from his Honour's reasons is as follows: "40 In Cockburn v Shehadie [2013] NSWSC 758 per Button J [at [39]]: Fourthly, since Coburn v Colledge [1897] 1 QB 702 it has been established that a cause of action founded on legal fees accrues from when the last work was done. 41 Counsel for the defendants submits that the following outstanding invoices are statute barred: (1) Invoices 11 and 12 in the matter of Team ASR and Globe Projects; (2) Invoices 2 and 3 in the matter of Team ASR and Verzayias; (3) Invoice 1 in the matter of Studio 54 and Mack One. 42 The submission is that the relevant cause of action accrues on a breach, which is when an invoice is not paid in accordance with the agreement. 43 Counsel for the defendants submits that section 54 of the Limitation Act, 1969 does not apply. WKA relies on a reply to an email dated 03/09/2009 but it does not cause the operation of section 54 because the email rejects the assertion that any fees are outstanding in relation to the Globe matters, which incorporates the Verzayias matter. WKA drafted a deed of assignment of debt in relation to the Verzayias matter, but Mr Samadi did not execute the deed. 44 Counsel for WKA submits that the last work done was on 19/02/2010 or 08/03/2010. On 19/02/2010 Mr Samadi deposed to an affidavit in the presence of Mr Keay in the application for a garnishee order against Mr Verzayias. On 06/05/2011, Mr Keay sent an email to Mr Samadi in relation to Verzayias. 45 As the last work done in relation to the Globe matter, which incorporates the Verzayias matter was done less than six years before the amended statement of claim was filed in 2015, I find that the invoices relating to Globe and Verzayias are not statute barred."
3. Accordingly, his Honour found that none of the invoices was statute-barred. His Honour ordered judgment for the Solicitor in a sum which included all of the invoices apart from the Studio 54 invoice, together with interest up until the date of commencement of proceedings. His Honour ordered pre-judgment interest from that date until the date of judgment.

Ground 1: whether certain invoices were statute-barred

The parties' submissions on the question of leave

1. Ms Castle contended that the question whether the invoices were statute-barred was a question of law because it turned on the construction of the 2007 Agreement. She relied on Storey v Harmse [2013] NSWSC 1641 at [19] (Beech-Jones J). She submitted that the circumstance that there were factual matters that were relevant to the determination (such as whether, and when, the relevant invoices were received) did not convert a legal question of construction into a question of mixed fact and law. Further, Ms Castle submitted that, if leave were required, it ought be granted because of the importance of the question of recoverability of fees in circumstances such as the present to the profession at large.
2. Mr Galvin, who appeared for the Solicitor, submitted that ground 1 raised a question of mixed law and fact which required leave, and that leave ought not be granted because the amount in issue was small and there was no question of principle to warrant this Court's intervention. It was agreed that the amount in issue relating to ground 1 was in the order of $17,000, being the difference between the judgment ordered by the Court below ($38,826) and $21,428.50, which was agreed to be the appropriate judgment sum, if the invoices identified above were deducted on the basis that they were statute-barred.

The parties' submissions on the substantive ground

1. Ms Castle submitted that, as a matter of contract law, each invoice was due and payable on receipt and therefore time ran from the date of receipt. Mr Galvin argued that the 2007 Agreement was an entire contract and that his Honour was correct to find that none of the invoices was statute-barred.

Consideration

1. As is apparent from the extract from the reasons set out above, his Honour relied on a principle applicable to entire contracts. In the past the relationship between a solicitor and a client was commonly governed by an "entire contract", namely, a contract where the solicitor was entitled to be paid only when the work was completed. Thus, because there was no entitlement to be paid until the work was completed, time did not begin to run against the solicitor until the work was completed. However, even when such relationships were generally governed by entire contracts, it was still open to solicitors to enter into contracts with their clients which were not entire contracts: In re Hall & Barker [1878] IX Ch D 538 (Jessel MR). As Brown LJ said in Abedi v Penningtons [2000] 2 Costs LR 205 at 205-206: "In times past, a solicitor's retainer was considered an entire contract for which he was not entitled to be paid until his work was finally completed. Down the years that rule has been tempered. First the solicitor became entitled to determine the contract on reasonable notice. And then there developed a principle under which solicitors became entitled to bill their costs when a natural break occurred in the course of protracted proceedings. These possibilities apart, it has always been open to solicitors to agree the terms of payment under their retainer and the wiser amongst them nowadays do so."
2. In light of his Honour's unchallenged finding, the applicable contract between the Solicitor and Mr Samadi and Team ASR was the 2007 Agreement. A cause of action for breach of contract accrues on breach. Accordingly, time starts to run from the time when the Clients are obliged to pay. This is a question of construction of the 2007 Agreement. In my view, it is plain from the terms of cl 8 (set out above) that the Clients were obliged to pay each invoice when it was received by them. The 2007 Agreement expressly contemplated that interim invoices and a final invoice would be rendered. Thus, time began to run when the Clients received each of the invoices. This process of construction is both orthodox and routine: see, for example, Coshott v Barry [2012] NSWSC 850 at [12] (McCallum J).
3. When the clients received each of the invoices was a question of fact. However, the date was established, incontrovertibly, by the evidence of Mr Keay, which included the Schedule set out above. It is not open to the Solicitor, on appeal, to attempt to undermine evidence it adduced at trial by contending that it did not establish what it did, in fact, prove. Parties are bound by the way in which they conduct their case at first instance: R v Birks (1990) 19 NSWLR 677 at 684-685 (Gleeson CJ, McInerney J agreeing). The invoices said to be statute-barred were all despatched by email or facsimile on the dates set out in Mr Keay's affidavit. They can be taken to have been received on that day, since both means of transmission are instantaneous and there is no evidence of failed transmission in the case of facsimiles or "bounce back" in the case of the emails.
4. The question to which ground 1 gives rise is a question of law: namely, when was the Solicitor entitled to be paid for each invoice rendered? The answer to this question depended on a construction of the 2007 Agreement. Accordingly, leave to appeal is not required. Even if I were wrong on that classification and the question were regarded as one of mixed law and fact, I consider that leave ought be granted, notwithstanding the relatively small amount involved. His Honour's decision involved a substantial departure from principle. Rather than construing the 2007 Agreement by reference to its terms, his Honour merely applied a principle which had application only to entire contracts, a category to which the 2007 Agreement plainly did not belong.
5. This is the type of error which recourse to this Court under ss 39 and 40 of the Local Court Act is designed to correct. This Court's supervisory jurisdiction over the Local Court is not constrained by a monetary threshold: Cf. District Court Act 1973 (NSW), s 127.

Grounds 2, 3 and 4: the effect of the 2004 Act

1. Because of the way the hearing in this Court was conducted, it is not necessary to address these grounds in detail. Ms Castle abandoned the argument that a breach of s 323 of the 2004 Act had the consequence that the proceedings were not maintainable by reason of s 317(2). She accepted that s 317(2) applied to breaches of the disclosure obligations and that s 323 was not a disclosure obligation. She conceded that the consequences of a non-compliance with s 323 did not include that proceedings to recover the fees were not maintainable, since there was no equivalent provision to s 317(2) which applied to non-compliance with s 323. Thus, Ms Castle accepted that even if his Honour had allowed the further amended defence to be filed or entertained the argument that the proceedings were not maintainable, the result ought not have been that the magistrate dismissed the proceedings or did not allow the Solicitor's claim to proceed.
2. Ms Castle attempted, on appeal, to raise a new ground: that the Solicitor had failed to comply with his disclosure obligations pursuant to s 309(1)(c): namely he had failed to provide an estimate of total legal costs, a range of variables or an explanation of the major variables that will affect the calculation of those costs. She contended that such a failure led to the proceedings not being maintainable.
3. Ms Castle accepted that this ground had not been raised in the Court below and had not been addressed in her written submissions in this Court. Had the matter been raised at first instance, the course of evidence may well have been different. In these circumstances, I refused to permit the Clients to rely on this new ground: Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33. I am not persuaded that leave ought be granted in respect of grounds 2 and 3 (for which leave is required as they relate to an interlocutory order). Leave is not required for grounds 4 or 5.
4. For the reasons given above, the way in which his Honour dealt with the Clients' application for leave to amend cannot affect the result of this appeal. Nonetheless, I propose to address this matter briefly.
5. The consequence of failure to meet statutory requirements is a matter of statutory construction: Gynch v Polish Club Limited (2015) 255 CLR 414; [2015] HCA 23 at [36]-[40]. In s 317(2), the consequences are express: if there was a relevant failure to disclose, the proceedings were not maintainable. Provisions such as s 317(2) of the 2004 Act are to be distinguished from provisions in statutes of limitation to the effect that proceedings are "not maintainable". It is open to a party not to take a limitation point. By contrast a provision such as s 317 applies of its own force and may cast an obligation on a court to refrain from hearing proceedings, even if the provision has not been specifically pleaded.
6. Where a party alleges that proceedings are not maintainable, a jurisdictional question arises. It is the primary task of a tribunal, whether a court or other tribunal, to determine whether it has jurisdiction. Section 317(2) of the 2004 Act, if it applied, applied of its own force to the proceedings and affected not only the parties' substantive rights but also the obligations of the Court below.
7. While Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 14.14 required the Clients to plead their reliance on s 317(2) of the 2004 Act, the provision could not be disregarded by the Court below once it had been raised. Suppose, for example, the magistrate had raised the provisions from the 2004 Act in the course of the proceedings, the orthodox course would have been for the Clients to seek leave to amend the defence. Had neither the magistrate nor counsel for the Clients raised the matter, counsel for the Solicitor would have been obliged under r 29(c) of the Legal Profession Uniform Conduct (Barristers) Rules 2015 (NSW) to inform the court below of the provisions and their effect, if they were thought to be applicable and against the Solicitor's case.
8. His Honour was obliged to consider the Clients' application after hearing from the Clients (and the Solicitor, if necessary). It was incumbent on his Honour to make orders which dealt with the application for the proceedings to be dismissed and the application for leave to amend the defence. His Honour was also obliged to give reasons.
9. It would have been open to his Honour (in light of the concessions made by Ms Castle in this Court) to dismiss the application for leave to file the further amended defence on the grounds that it was bound to fail, as s 317(2) does not apply to s 323 of the 2004 Act and to dismiss the application to have the proceedings dismissed on the same basis. However, the transcript reveals that his Honour did not address the questions raised at all and did not turn his mind to the factors required to be taken into account under Part 6 of the Civil Procedure Act 2005 (NSW). Had there been any merit to the substantive law aspect of these grounds, leave would have been granted. However, as ultimately nothing turns on these three grounds, for the reasons given above, it is not necessary to address them further.

Grounds 6, 7, 8, 9 and 10: the costs of Studio 54

1. In order to address these grounds, it is necessary to set out in a little more detail what occurred with respect to the claim against Studio 54.

The Solicitor's claim against Studio 54

1. The Solicitor sued Studio 54 in relation to work done in debt recovery proceedings for unpaid rent. The action did not relate to the Globe Proceedings or attempts to recover the Globe Judgment. As set out above, the Solicitor admitted that it did not send a costs disclosure or costs agreement to Studio 54. In the amended defence filed on 22 July 2016, Studio 54 denied its indebtedness on the basis that it was not a party to any costs agreement with the Solicitor and Mr Samadi had not instructed the Plaintiff on its behalf. In its reply, the Solicitor continued to assert that the terms of the retainer with Studio 54 were those as set out in the 2007 Agreement. At the hearing, the Solicitor pressed its claim on the basis of the 2007 Agreement, to which Studio 54 was not a party.

The finding in favour of Studio 54 in the reasons published on 14 August 2017

1. As referred to above, on 14 August 2017, his Honour published reasons for judgment (which were inadvertently dated 26 July 2017). His Honour found in favour of Studio 54 and said at [49]: "I find that the term 'you' in the agreement means Team ASR. The agreement does not cover work done for Studio 54."

The Offer of Compromise dated 15 December 2016

1. Following pronouncement of the orders (referred to above), Mr Stitt handed up an Offer of Compromise dated 15 December 2016. It relevantly provided: "OFFER OF COMPROMISE Compromise of Claims 1. The Plaintiff offers to compromise its claims as follows: (a) The First and Second Defendants pay to the Plaintiff the sum of $23,200.00 with respect to the claims against the First and Second Defendants (b) As against the Third Defendant, the Plaintiffs claim be discontinued. (c) As against the First Defendant being personally liable as guarantor for the liabilities of the Third Defendant, the Plaintiff's claim be discontinued. Costs 2. The First and Second Defendants are to pay the Plaintiffs costs of, and incidental to, the proceedings as agreed or assessed. This costs order includes the interlocutory costs awarded in the Plaintiffs favour on 25 March 2016 and 23 August 2016. Disposal of Proceedings 3. The Plaintiff will prepare a Deed of Release which encapsulates the terms of this Offer and includes the following further terms. a. Upon the Defendants providing payment for the amount referred to in paragraph 1 above within 28 days of acceptance of this Offer: b. The Parties will jointly sign Consent Orders discontinuing the remaining claims made in the proceedings within 7 days of receipt of payment from the Defendants; c. The costs which are to be agreed or assessed as encapsulated within this Offer are to be agreed by the Parties within 28 days from the discontinuance of the proceedings or, failing agreement, the Plaintiff is to commence assessment of those costs thereafter. 4. This offer is open for acceptance until 9.30 am on 19 December 2016. 5. This offer is made in accordance with Part 20 Division 4 of the Uniform Civil Procedure Rules."

The parties' submissions on costs at the hearing on 14 August 2017

1. Mr Vishney, who appeared on behalf of the Clients, submitted that the appropriate order was that each party pay its own costs of the proceedings. Mr Stitt submitted that the Clients ought be ordered to pay the Solicitor's costs on the ordinary basis up to 15 December 2016, being the date of the Offer of Compromise, and on an indemnity basis thereafter. There was debate about whether there had been disentitling conduct on the part of the Solicitor. Mr Vishney submitted that the Solicitor's conduct of the proceedings had unnecessarily protracted them. At the conclusion of the hearing, his Honour reserved his decision and adjourned the matter to 14 September 2017 for judgment to be delivered on the quantum and on costs.

The orders made on 14 September 2017 and further hearing on that day

1. On 14 September 2017, as referred to above, the Court below quantified the judgment in favour of the Solicitor against Mr Samadi and Team ASR; ordered pre-judgment interest and ordered Mr Samadi and Team ASR to pay the Solicitor's costs on the ordinary basis to 15 December 2016 and on an indemnity basis thereafter.
2. In the reasons published on 14 September 2017, the Court below made no reference to the costs of Studio 54. Mr Vishney, who appeared for the Clients, raised the matter at the hearing following publication of the reasons on 14 September 2017. His Honour said that he would deliver a "supplementary judgment" in relation to the Studio 54's costs once he had reviewed the transcript of 14 August 2017, which recorded the costs arguments which had been made following handing down of the reasons on that day.

The hearing on 2 November 2017

1. The matter was listed for judgment on 2 November 2017. His Honour stated that he had reviewed the transcript and his reasons and did not propose to amend his judgment. His Honour said: "No order has been made in relation to costs for or against the third defendant and due to the offer of discontinuance against the third defendant and the offer of compromise I do not believe it is appropriate for an order to be made for the third defendant."
2. The order entered was as follows: "The judgment of the court dated 14/9/17 makes no order for costs in relation to the third defendant."

The parties' submissions

1. Studio 54 submitted that the exercise of the discretion miscarried. Ms Castle submitted that the Offer of Compromise referred to by his Honour was the offer of 15 December 2016, which was an offer made to Team ASR, Mr Samadi and to Studio 54, and was not capable of acceptance by Studio 54 alone. Further, in so far as the offer was made to Studio 54, it did not allow for any costs to be paid to Studio 54, whereas it did require that Mr Samadi and Team ASR pay the Solicitor's costs. Ms Castle submitted that the action against Studio 54 was a distinct "event" for the purposes of the ordinary rule that costs follow the event: UCPR r 42.1. She submitted that the matter in which Studio 54 instructed the Solicitor to act had nothing to do with the other matters the subject of the proceedings and that any cause of action which arose against Studio 54 was a separate cause of action. Ms Castle contended that the Solicitor had failed in its submission that there was any connection between Studio 54 and the 2007 Agreement. Accordingly, she submitted that the exercise of the discretion in relation to costs under s 98 of the Civil Procedure Act miscarried and the order ought be set aside.
2. Ms Castle submitted that if the Clients were even partially successful in these proceedings, the costs orders would need to be set aside in any event because the matrix on which they were based would have been altered. Accordingly, she submitted that I ought reserve the question of the costs in the Court below until after publication of my reasons. She submitted that it would be appropriate in that event that I exercise the discretion as to the costs in the court below to avoid further cost and delay in the finalisation of the proceedings.
3. Mr Galvin submitted that although his Honour omitted to consider the appropriate costs order with respect to Studio 54 when publishing reasons for his decision on 14 September 2017, his Honour did consider what costs order ought be made when attention was drawn to his omission by Mr Vishney on 14 September 2017. Mr Galvin submitted that his Honour revisited the costs arguments which had been made on 14 August 2017 and decided that it was not appropriate that there be no order as to costs in respect of Studio 54. Mr Galvin submitted that this order accorded with the submission made by Mr Vishney on 14 August 2017. He contended further that the magistrate was entitled to have regard to the option in the Offer of Compromise for Studio 54 to walk away and that it would have been open to Studio 54 to accept that part of the Offer of Compromise and remove itself from the proceedings.
4. Mr Galvin accepted that if the judgment entered by the Court below was set aside and a judgment for a lesser sum substituted, the costs orders made in the Court below would need to be set aside and the costs discretion re-exercised. He accepted that, in order to minimise cost and delay I should, in that event, make the new costs orders.

Consideration

1. Leave is required to argue grounds 6, 7, 8, 9 and 10 since they concern costs: s 40(2)(c) of the Local Court Act. I am disposed to grant leave because the costs questions otherwise relate to the proceedings and it is preferable, in these circumstances, to correct all errors which arise from the orders made by the Court below. At least one of the questions raised is one of law since the question is whether the magistrate was entitled to take into account, against Studio 54, the terms of the Offer of Compromise. The further question of reasons, which is a question of law, albeit one which requires leave, is also raised.
2. I accept Ms Castle's submission that the Offer of Compromise operates as an offer which, if accepted, forms a contract between the parties. It was not open to Studio 54 to accept that portion of the offer which related to it, in circumstances where Mr Samadi and Team ASR were not prepared to accept the balance of the offer. The offer constituted by the Offer of Compromise was made to all three Clients and could only be accepted by all three of them. Accordingly, his Honour was in error in taking into account the Offer of Compromise in deciding an order for costs with respect to Studio 54. This error caused the discretion with respect to costs to miscarry. The order must therefore be set aside. In the circumstances set out above, it is not necessary to address the other costs grounds.
3. I am satisfied that it is appropriate that I re-exercise the discretion as to costs after hearing from the parties following publication of my reasons. While such a course would not appear to be contemplated by the terms of s 41 of the Local Court Act, which empower this Court to vary the terms of the judgment or order or set aside the judgment or order, s 75A of the Supreme Court Act 1970 (NSW) applies to an appeal in this Court, subject to any Act: s 75A(4). Section 75A(10) provides that the Court may make any order which ought to have been made or which the nature of the case requires. This section has been used to rectify errors to minimise costs: Owners Strata Plan 4003 v Mustafa [2012] NSWSC 780 (Beech-Jones J). As referred to above, the parties agreed with this proposed course because of my familiarity with the matter gained during the course of the one day hearing before me.

The Solicitor's notice of contention

1. The Solicitor, in its reply in the Court below, alleged that the limitation period was extended pursuant to s 54 of the Limitation Act because the Clients had confirmed the debt in Mr Samadi's email of 3 September 2009. The terms of the email were as follows: "We do not agree with the summary of you [sic] outstanding accounts, nor with the amounts charged on the invoices. Nevertheless, we note according to your calculation, in relation to the Globe account there is a credit of $15,357.74 in the credit of Team ASR. Please release that amount immediately to Team ASR. In relation to the other matters and entities, we will compile a copy of the correspondence and related fie notes and will forward to you when ready. Hopefully we agree on settling the matters, but if not perhaps we should apply for the assessment of all the bills and finalise all the matters. Regards Ash [Mr Samadi]."
2. I consider that, far from confirming the debt, this email indicated that Mr Samadi disputed the debt. In my view, his Honour was correct to reject the argument, based on this email, that the Clients had confirmed the debt. Accordingly, the notice of contention fails.

Extension of time

1. The Solicitor contended that the Clients required an extension of time to appeal pursuant to UCPR r 50.3(1)(c) as the summons was filed on 16 November 2017, which was more than 28 days after the entry of judgment and publication of reasons on 14 August 2017 and the quantification of judgment and the making of costs orders on 14 September 2017.
2. In order to address this question it is necessary to set out what occurred between 14 August 2017, when the first judgment was ordered, and the filing of the summons on 16 November 2017. Shortly after 14 August 2017, the Clients instructed their solicitors to appeal to this Court against the orders of the Court below. Accordingly they filed a summons on 5 September 2017. An amended summons was filed on 10 September 2017, which was made returnable before the Registrar on 14 September 2017. On that day Mr Vishney appeared before the Court below for the judgment which had been foreshadowed on 14 August 2017. Mr Vishney's uncontroverted affidavit evidence was as follows: "8. Prior to entering the Court room [on 14 September 2017], I had a conversation with Mr Warwick Keay whom I knew to be the Principal of the Plaintiff and also the instructing solicitor for the Plaintiff in respect of the Local Court Proceedings, in words to the following effect: "Me: "You know that we have filed an appeal. It's before the registrar right now, up in the Supreme Court." Mr Keay: "Yeah I know, Hamish [referring to Mr Hamish Stitt, counsel for the Plaintiff] is up there right now trying to get it thrown out." Me: "Really, on what basis?" Mr Keay: "Well, what are you appealing? You don't have a judgment yet. That's coming in a few minutes. The thing you got in July is just his reasons". Me: "Really? But his reasons had orders attached. In any case, what's the point of getting it thrown out? It's just going to get re-filed anyway. Wouldn't it be easier to just stand it over for a couple of hours while we get the judgment in a minute? Mr Keay: "No, I don't agree. You should call your bloke up at the Courts and tell him to agree to have the appeal summons dismissed by consent." Me: "It's just a further waste of time and money. More games. You know that our client is appealing. You know what the grounds are. What's the point? Anyway, you never put us on notice of any of this!" 9. I then attempted to contact by telephone Mr Alec Brown, who I knew was the solicitor from my office attending the Supreme Court mention of the appeal, referred to above. I was unable to reach Mr Brown. 10. I then contacted my supervising partner Mr Ziv Ben-Arie. Mr Ben-Arie is the solicitor on record for the Local Court Proceedings. I had a conversation with him in words to the following effect: Me: Ziv, I'm at Local Court and Warwick Keay just told me that Hamish Stitt is at the Supreme Court, trying to get the appeal summons thrown out. ZB: Why? On what basis? Me: He says because it's premature. ZB: Have we received any notice of this? Me: None at all. First I heard of it. Are you able to rush up to the Court right now - Alec is up there expecting an uncontentious appearance on timetable etc - he is getting completely ambushed. ZB: I'm not even in the office. I am shopping right now. I don't even have a tie with me. Anyway, I'll rush up there and see what I can do. . . . 14. After his Honour left the bench [on 2 November 2017] I had a conversation with Mr Keay in words to the following effect: Mr Keay: If we get your appeal summons thrown out today, you're going to have to wait until after 2 November before you can file your appeal again. Me: I guess you're right. Given that he will be bringing down a supplementary judgment, the orders handed down today are subject to change so we will have to wait. Mr Keay: That's right."
3. The Clients submitted that no extension of time was required as the final orders were not made until 2 November 2017. They submitted that, if an extension was required it ought be given because of the conversations referred to above. Ms Castle submitted that there could be no prejudice to the Solicitor in light of the representations he had made to Mr Vishney. Mr Vishney was entitled to consider, on the basis of what Mr Keay had told him, that he needed to wait until 2 November 2017 before the 28 days started to run. There can be no doubt that Mr Keay, the principal of the Solicitor, was well aware of the Clients' intention to appeal to this Court from the orders of the Court below and actively dissuaded them from filing a further summons until after 2 November 2017. In these circumstances I am satisfied that it is overwhelmingly in the interests of justice that time be extended.

Costs

1. Each party accepted that costs of the proceedings in this Court ought follow the event if either the Solicitor or the Clients were wholly successful. However, Mr Galvin submitted that costs should be reserved if the successful party was not wholly successful.

The revised judgment sum

1. The parties agreed that, if I found for the Clients on ground 1, the judgment of the Court below ought be set aside and a judgment in the sum of $21,428.50 ought be substituted. This figure comprised the principal amount of $14,836.20; contractual interest of $4,324.69; and pre-judgment interest under the UCPR to the date of judgment on 14 September 2017.

Orders

1. For the reasons given above, I make the following orders: 1. Extend the time within which the summons was to be filed to 16 November 2017. 2. Refuse leave to appeal in respect of grounds 2 and 3. 3. Grant leave to appeal in respect of grounds 6, 7, 8, 9 and 10 and, if leave be required, ground 1. 4. Allow the appeal. 5. Set aside: 1. the judgment of Bradd LCM ordered on 14 September 2017; and 2. the costs orders made by Bradd LCM on 14 September 2017 and 2 November 2017. 1. In lieu of the judgment in (5)(a) above, order judgment for the WKA Legal Pty Ltd in the sum of $21,428.50. 2. Reserve the question of the costs of these proceedings and of the hearing in the Court below. 3. List the matter for further argument on the question of costs on a date to be fixed after consultation with my Associate.

Amendments 31 July 2018 - Paragraph 30 amended to remove QC DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 July 2018