Steirn v Spanko Soulos Legal Services Pty Limited and Anor

Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 Berowra Holdings Pty Ltd v Gordon [2006] HCA 32; (2006) 225 CLR 364 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Burbidge v Wolf [2008] NSWSC 60 CASES CITED : David Syme & Co Ltd v Lloyd (1985) 1 NSWLR 416 Doyle Hall-Chadwick v Hall-Chadwick [2007] NSWCA 159 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) NSWLR 523 Graham v Aluma-Lite Pty Limited (unreported, Court of Appeal NSW, Mason P, Priestley and Cole JA, CA 40272/95,25/03/1997) Wentworth v Rogers [1999] NSWCA 403

Plaintiff - Clive Steirn PARTIES : First Defendant - Spanko Soulos Legal Services Pty Limited Second Defendant - James Nicopoulos

COUNSEL : Plaintiff - Mr DR Campbell SC with Mr W Washington First Defendant - Mr NA Confos

SOLICITORS : Plaintiff - Bowles Lawyers Pty Ltd First Defendant - Spanko Soulos & Co

• 14 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

10674/2008 CLIVE STEIRN v SPANKO SOULOS LEGAL SERVICES PTY LIMITED & ANOR

JUDGMENT 1 HER HONOUR: The plaintiff seeks leave to appeal and appeals under s 74 of the Local Courts Act 1982 from a judgment given by Acting Magistrate Price on 20 January 2008, dismissing the plaintiff's claim for payment of fees of some $43,450, together with costs and interest pursuant to a costs agreement which he claimed was entered with the first defendant, Spanko Soulos Legal Services Pty Limited ('Spanko'). 2 By a cross summons Spanko claims contribution towards any judgment in favour of the plaintiff from the second defendant, James Nicopoulos. The hearing of the cross summons was deferred, pending determination of this appeal. 3 For reasons which will become apparent, I have concluded that in so far as it is necessary, leave to appeal must be granted and the appeal upheld.

Notice of contention 4 By a notice of contention filed in May 2009, Spanko sought to contend that his Honour's decision should be affirmed on grounds other than those relied on in the judgment. It was claimed that the plaintiff had failed to make disclosures required by the Legal Profession Act 1987 and by the Legal Profession Regulation 2005, with the result that before the plaintiff could bring proceedings in the Local Court to enforce the agreement, he was obliged to have a bill of costs assessed. (See Burbidge v Wolf [2008] NSWSC 60.) This was a matter claimed to go to this Court's jurisdiction to entertain the appeal. 5 For the plaintiff it was argued that the contention was not available to be advanced under Rule 50.11 of the Uniform Civil Procedure Rules 2005. Spanko had not raised this issue below, its defence being that there was no costs agreement reached between it and the plaintiff. The question now sought to be raised turned on factual matters not dealt with in the proceedings below; had not been raised on the pleadings and could not bring the issues lying between the parties on appeal to a conclusion. The point was a procedural, rather than jurisdictional matter. (See Berowra Holdings Pty Ltd v Gordon [2006] HCA 32; (2006) 225 CLR 364). If the appeal was successful, the matter would be remitted to the Local Court for determination. It was a matter for that Court to determine this issue, if the defendant sought and were granted leave to amend its defence, to raise the question of disclosure under the Legal Profession Act, an application which would be opposed. 6 It became apparent that the question of whether the necessary disclosures had been made by the plaintiff, as the Legal Profession Act required, was a question of fact not put in issue between the parties at the hearing below. Whether all of the evidence relevant to that question had been led, was not clear. For its part, Spanko pointed to one document, which it claimed was conclusive on the point. The plaintiff drew attention to other documents which were claimed to be relevant to that issue. Another letter was tendered by Spanko which showed that after the judgment was given, the plaintiff had made an application to have his costs assessed. The parties were not in a position to explain the basis on which that application had been made, given the conclusion reached in the proceedings below. What relevance that might have to the question which Spanko now sought to raise, was also unclear. 7 It was apparent that the matter sought to be raised by way of contention, could only arise as an issue in the proceedings, whether procedural or jurisdictional, if the conclusion were reached that there was a costs agreement in existence between the parties. That was the issue litigated below and raised by this appeal. Under the Local Courts Act, if the appeal succeeded, the matter would have to be remitted to the Local Court to be further dealt with. 8 In the circumstances I took the view that the question of whether or not the Legal Profession Act precluded the plaintiff from enforcing the costs agreement, if it had indeed been reached between the parties, was one which should be dealt with by the Local Court, if the proceedings were remitted to that Court. The question depended on factual findings in relation to a matter on which the parties had not joined issue and so was not appropriate to advance by way of contention on appeal. As discussed in David Syme & Co Ltd v Lloyd (1985) 1 NSWLR 416 at 420 to 421, a respondent's right to rely on grounds not argued at first instance to support the decision appealed against is confined to arguments of law. It followed that the issue was not an appropriate one to raise by way of contention, as Spanko sought to do.

The circumstances which gave rise to the dispute between the parties 9 Mr Nicopoulos, a solicitor, was the defendant in proceedings brought against him in the Supreme Court by the Department of Corrective Services. The proceedings were part heard, when Mr Nicopoulos sought to brief the plaintiff. He had earlier been represented in the proceedings by other counsel. To accept the brief the plaintiff required that a solicitor instruct him and that the solicitor file a notice of appearance in the proceedings. There was no issue that Mr Nicopoulos then approached Spanko, which was acting for him in a family law matter. As a result the plaintiff spoke to Mr Soulos on 17 May 2004 and then sent him a costs agreement by fax, which noted Mr Spanko's instructions that the plaintiff appear for Mr Nicopoulos in the proceedings. There was an issue as to whether the plaintiff and Mr Soulos discussed the agreement. The agreement was never executed, but included a term that:

"Your firm may accept this offer either in writing or by conduct by giving me further instructions in relation to the matter without first notifying me in writing that your firm does not accept my offer." 10 The plaintiff then appeared for Mr Nicopoulos with junior counsel when the hearing resumed. Spanko became the solicitor on the record in the proceedings by filing and serving a notice of appearance on the Crown Solicitor, served under cover of a letter of 19 May advising that it had been instructed to act for Mr Nicopoulos. On 20 May, the Crown Solicitor served submissions on Spanko, which it forwarded to the plaintiff. The plaintiff appeared with junior counsel on behalf of Mr Nicopolous in the proceedings which continued before Smart J on 19, 20, 21, 26, 27 and 28 May. On 1 June the Crown served an affidavit relating to matters which had arisen since the conclusion of the hearing on Spanko, which advised on 2 June that it had no objection to the affidavit being drawn to the attention of Smart J. 11 Mr Nicopolous failed in his defence of the proceedings when judgment was given on 29 June. He met in conference with the plaintiff, who also conferred with Mr Soulos on the prospects of an appeal. On 18 July, the plaintiff wrote to Spanko noting that he had given advice in conference in relation to an appeal on 8 July, noting that Mr Nicopoulos had then indicated an intention to appeal, that no further instructions had been received and that there was a 28 day time limit for appeal. A memorandum of fees pursuant to the 17 May costs agreement was enclosed. Spanko did not respond to the letter in writing. There was an issue as to whether or not it was discussed between the plaintiff and Mr Soulos, but it was common ground that Spanko failed to pay the costs, or to respond to follow up correspondence from the plaintiff, or to pursuit of payment by the Bar Association. 12 Mr Soulos' evidence was he was acting for Mr Nicopoulos in family law proceedings and had briefed the plaintiff in other matters. Despite being the solicitor on the record he played no part in the proceedings; he was not provided with any of the materials with which the plaintiff was briefed; he did not attend the further hearing and did not discuss the conduct of the matter with the plaintiff. Mr Soulos understood from Mr Nicopoulos that he had entered a contingency agreement with the plaintiff. He did concede discussing Mr Nicopoulos' financial position with the plaintiff on 17 May and later, Mr Nicopoulos' prospects of success on appeal. Mr Soulos also claimed that he also discussed the costs agreement with the plaintiff on 17 May, when he said that he accepted no responsibility for the plaintiff's costs. The plaintiff denied that such a conversation had occurred. Mr Soulos also gave evidence that there was another conversation after the memorandum of fees was sent, disclaiming responsibility for the costs incurred. The plaintiff, who was cross examined on these conversations, also denied that this conversation had occurred.

The decision appealed from 13 His Honour's decision turned in part on the question of whose evidence he accepted in relation to the disputed conversations between the plaintiff and Mr Soulos. There was no issue that Spanko never responded to the plaintiff in writing in relation to the 17 May costs agreement. 14 His Honour concluded that Mr Nicopolous' evidence, that he thought that he had a contingency agreement with the plaintiff, was not convincing. His conclusions in relation to the credit issue lying between the plaintiff and Mr Soulos were less clear. While on the one hand he appears to have concluded that the credit of neither had been impugned, on the other he found that there had been no response to the costs agreement. The two conclusions contradicted each other. His Honour finally concluded that the plaintiff's costs agreement had not been accepted, for reasons which are difficult to understand. 15 His Honour's conclusions were very shortly given. It is convenient to repeat them: "Finding:

The initial observation, indeed finding of this court, is that Mr Nicopoulos the third Party has wrung out everything he could possibly hope, to discredit both the Plaintiff and Mr. Soulos the defendant. His attempts have been abysmal and reflect poorly upon him as an individual and a member of the profession.

Even lending the greatest possible weight to the combined or cumulative factors then operating in the personal and professional life of the Third Party at that time, his endeavours to re-construct relevant events and conversations has been anything but a stunning success.

The most charitable acceptance of his version would be that he "thought" he had a contingency arrangement with Senior Counsel, that is certainly not borne out either by documentary material or confrontations between himself and Mr Soulos. His criticisms of Mr. Soulos are without justification so far as any perceived failures on the part of Mr. Soulos are concerned, to get to the bottom of or to determine what arrangements might have been in place respecting both Counsel Mr. Santisi and Mr. Steirn and Mr. Nicopoulos.

On a brighter note there is nothing which is readily recalled from the evidence such that would adversely impact on the credit worthiness and honesty of either Mr. Steirn or Mr. Soulos. Indeed it is highly likely that Snr Counsel did use expressions such as "we're going to win this". He probably also expressed the view that the outcome of the matter had the potential to impact upon practitioners in the State generally. The court has no difficulty in accepting that there was this conversation touching upon the acrimonious divorce that Mr. Nicopoulos was going through and the associated property settlement. Equally the court has little doubt that the amount of $50,000 arose in the context of that conversation and the Mr. Soulos was helping him, Nicopoulos, with the divorce proceedings, presumable at no charge.

There can be no doubt that Mr. Steirn did not accept briefs on direct access basis and equally that he did require a Solicitor on the record. There can be no doubt that there was agreement, consensus that Mr. Soulos would be acceptable, particularly based on prior occasions when he had briefed Senior Counsel.

There can be no doubt that the Costs agreement was prepared, forwarded, received and Not responded to, not rejected or not accepted in writing, even after a passage of significant time.

Equally there can be no doubt that Snr Counsels account was submitted, received and as this litigation highlights - not met.

The case for the Plaintiff is essentially a documentary one, supplemented as it were by the insistence that "acceptance of the Fees agreement may be by conduct by giving me further instructions in relation to the matter". That no doubt would be in (a) document pg 22 & 23 (Soulos affidavit) Notice of Change of Solicitor indicating that Spanko Soulos & co now acts for the Plaintiff in lieu of Nicopoulos & Associates (b) the two documents re-routed and faced through the First Defendants offices to Senior Counsels Chambers, one of which is where service could not be effected upon Mr. Nicopoulos because material was endorsed "return to sender."

The case for the First Defendant is that notwithstanding acquiescing in the filing of a Notice of appearance or Notice of Change of solicitor to the Part Heard Supreme Court proceedings he was no more than a P.O. Box. He is insistent that he had not seen the pleadings, not briefed original counsel nor indeed was he aware he Counsel, was in the proceedings, he attended no court hearings, attended no conferences with either counsel with Mr. Nicopoulos, gave no instructions, gave no advice. He was unaware and had not been informed of the handing down of any decision. He had no expertise in the relevant area of law and indeed was too busy to accept the matter, presumably on a solicitor client basis.

If the case for the Plaintiff is reliant to a significant degree on the two lots of materials re-directed through the Defendants practice as constituting instructions or acceptance of the Fees Agreement than on balance this court could no(sic) so find.

Accordingly there will be a Verdict in Favour of the Defendant (Fist(sic) named defendant). Against the Plaintiff.

Costs, this court would suggest, if any are claimed should be on an agreed basis.

As to the Action Defendant Third Party and First named defendant whilst the somewhat inevitable finding might flow, this court would express the view that the Third Party would not have the gall or temerity to so much as seek costs.

The State of evidence on this issue leaves this court in very little doubt that the third Party was on the record as Instructing Solicitor at the initial stages of the Supreme Court litigation. He continued to instruct in the part heard matter, notwithstanding the Change of Solicitor on Record Mr. Soulos. The third Party's understanding of the fees arrangements vis a vis, initial counsel and later Senior Counsel is mistaken and not a reasonably held one."

The error in relation to the costs agreement 16 The plaintiff's case was, amongst other things, that the conclusion that there was no costs agreement reached, was not available in the face of his Honour's findings on the evidence; that his Honour failed to consider relevant evidence and that he failed to give adequate reasons for his decision. Spanko's case was that the factual conclusions reached were open on the evidence and that in any event, the claimed costs agreement was not one which accorded with the requirements of the Legal Profession Act, in various respects. 17 I am satisfied that the plaintiff's complaints as to his Honour's conclusion on the question of whether or not any agreement had been reached must be accepted. In relation to that decision, there can be no doubt that adequate reasons for the conclusions reached were not given. 18 Having found that the costs agreement of 17 May 2004 was 'prepared, forwarded, received, and Not responded to, not rejected or not accepted in writing, even after a passage of significant time,' a conclusion that there was no costs agreement reached is difficult to follow, particularly given the paucity of the reasons provided for that conclusion. 19 The matter was governed by the provisions made in s 184 of the Legal Profession Act, which provided: "184 Agreements about costs (1) An agreement as to the costs of the provision of legal services may be made with a client by: (a) the barrister or solicitor who is retained by the client to provide the services, or (b) the barrister or solicitor retained on behalf of the client by another barrister or solicitor. (2) An agreement as to the costs of the provision of legal services may also be made between the barrister or solicitor providing the services and another barrister or solicitor who retained that barrister or solicitor on behalf of the client. (3) An agreement under this section is called a costs agreement. (4) A costs agreement is void if it is not in writing or evidenced in writing. (5) A costs agreement may form part of a contract for the provision of legal services. (6) A costs agreement may consist of a written offer that is accepted in writing or by other conduct. A disclosure in accordance with Division 2 under section 175 or 176 may constitute an offer for the purposes of this subsection." 20 The question of whether or not an agreement in terms of the 17 May costs agreement was reached, required that his Honour determine whether the parties' conduct in relation to that document evidenced the acceptance of the agreement by Spanko. His Honour's conclusion that the costs agreement had not been responded to, implicitly involved a rejection of Mr Soulos' evidence that he had two discussions with the plaintiff about that agreement; the first on 17 May after the agreement was received by Spanko and the second, after the memorandum of fees was sent in July. Given the rejection of that evidence, a conclusion that the agreement had been accepted by Spanko's subsequent conduct, seemed unavoidable on the evidence. 21 If his Honour had been of the view that the conversation which Mr Soulos claimed he had with the plaintiff on 17 May had occurred, that would have disposed of the matter. Plainly he was not of that view, given what he went on to say as to Spanko's other conduct. 22 His Honour must have been of the view that Spanko had been silent in the face of the receipt of the 17 May costs agreement. He was thus obliged to determine whether an agreement had been reached, in the way discussed by McHugh JA in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) NSWLR 523 at 535:

"The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted." 23 Or, as was submitted for Spanko below, what had to be determined was whether a reasonable person in the position of the defendant would think, in the circumstances revealed on the evidence, that a concluded costs agreement in terms of the 17 May document had been reached. (See Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [81] per Heydon J). His Honour did not deal with these questions. 24 What would a reasonable person have thought, given Spanko's receipt of the agreement and its subsequent conduct? Neither Mr Soulos nor anyone else from Spanko attended the hearing to instruct counsel. Nevertheless, not having responded in writing, as invited in the 17 May agreement, where the plaintiff indicated his acceptance of Spanko's instructions, Mr Soulos having already discussed Mr Nicopoulos' ability to meet the plaintiff's costs with the plaintiff, Spanko proceeded to act in relation to a part heard matter, the hearing of which continued two days later. The plaintiff had, undoubtedly, been retained to appear and proceeded on the basis of an understanding that an agreement in relation to his costs had been reached. Consistent with that agreement, Spanko filed and served a notice of appearance; gave advice to the other party that instructions to act in the proceedings had been received; it was served with various documents in accordance with that advice, including the other parties' written submissions and an affidavit sought to be provided to the trial judge after the conclusion of the hearing; it provided that material to the plaintiff and then responded to the other party, in relation to the affidavit. While Mr Soulos did not attend the hearing, there was evidence that he discussed Mr Nicopoulos' prospects on appeal with the plaintiff after judgment was given. 25 What his Honour had to determine was whether a person in that position would reasonably be regarded as being bound by the 17 May agreement, it providing that it could be accepted by conduct, as the Legal Profession Act permitted. This was an objective test. His Honour did not explain why Spanko's conduct did not amount to the giving of instructions to the plaintiff. Nor did he explain why Spanko's conduct might have been regarded as equivocal, it having been submitted by Spanko itself in its written submissions, that 'any clear indication that the offer is being accepted is sufficient'. There were several clear indications of such acceptance, notwithstanding Mr Soulos' absence from the hearing. 26 The plaintiff also relied on Spanko's conduct after receipt of the memorandum of fees. His Honour did not deal with this evidence, which included a letter of 6 September 2004, which it was claimed contained an admission of Spanko's indebtedness to the plaintiff. There Mr Soulos wrote to Mr Nicopoulos that he took the view that it was appropriate that Mr Nicopolous write to the plaintiff assuming 'liability in respect of all fees due' and that he 'should not have this debt of $43,450 against him as the instructing solicitor on the record at Clive's request to regularise the arrangement between you and your silk'. 27 This too was not dealt with by His Honour. As was argued for the plaintiff, by this correspondence Spanko advised Mr Nicopoulos of the existence of a debt in respect of the plaintiff's fees, which it called on him to meet. That conduct was not consistent with a view that it was not bound by the 17 May costs agreement. 28 In Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 at 443, Meagher JA observed:

"Secondly, a judge should set out any material findings of fact and any conclusions or ultimate findings of fact reached. The obvious extension of the principle in North Sydney Council is that, where findings of fact are not referred to, an appellate court may infer that the trial judge considered that finding to be immaterial. Where one set of evidence is accepted over a conflicting set of significant evidence, the trial judge should set out his findings as to how he comes to accept the one over the other. But that is not to say that a judge must make explicit findings on each disputed piece of evidence, especially if the inference as to what is found is appropriately clear: Selvanayagam v University of the West Indies [1983] 1 WLR 585; [1983] 1 All ER 824. Further, it may not be necessary to make findings on every argument or destroy every submission, particularly where the arguments advanced are numerous and of varying significance: Rajski v Bainton (Court of Appeal, 6 September 1991, unreported)." 29 While it is not necessary for a trial judge to deal with every matter argued, in this case it must be accepted that there was a failure to make necessary factual findings in relation to critical matters on which the parties had joined issue and to give adequate reasons for the conclusion which was reached. The authorities are replete with explanations as to why adequate reasons for a decision must be given, if a miscarriage of justice is to be avoided. (See for example Doyle Hall-Chadwick v Hall-Chadwick [2007] NSWCA 159; Graham v Aluma-Lite Pty Limited (unreported, Court of Appeal NSW, Mason P, Priestley and Cole JA, CA 40272/95,25/03/1997) and Wentworth v Rogers [1999] NSWCA 403.) 30 There can be no question that there was such a miscarriage in this case. On the evidence, it is difficult to see how the plaintiff's case could have failed, given his Honour's rejection of Mr Soulos' evidence as to his discussions with the plaintiff over the costs agreement, when considered together with the evidence of Spanko's other conduct. For his part the plaintiff accepted Spanko's instructions to appear for Mr Nicopoulos at the resumed hearing and proceeded on the understanding that the costs agreement had been accepted by Spanko. On the evidence, Spanko's conduct provided a proper basis for that understanding. There is no question that it accepted instructions to act as the solicitor on the record in the matter, it instructed the plaintiff to appear and then acted as such a solicitor must act, when counsel is retained to appear in the proceedings, in relation to a resumed hearing, it having advised the other party in the proceedings of its role. By its conduct there can be no question that it gave the plaintiff further instructions after receipt of the proposed costs agreement. Understandably then, Spanko itself later acted on a basis consistent with it having the same understanding as the plaintiff, when it sought that Mr Nicopoulos meet the debt it had incurred to the plaintiff. 31 In the circumstances there can be no question that the appeal must be upheld.

Orders 32 For the reasons given, I make the orders sought by the plaintiff namely, that the appeal be upheld, the judgment be set aside and that the matter be remitted to the Local Court, for determination according to law. Costs would ordinarily follow the event. If the parties are unable to agree as to the appropriate costs order, they should approach.

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