Supreme Court of WA|2004-08-13|Before: Mr J, Harper J, Miere J

The Trustees of The Legal Contribution Trust v Frederick Howard Bailey and Adrian John Bailey as Executors and Administrators of the Estates of Wayne Arthur Bailey and Anne Maree Bailey & Anor [2004] WASC 175 (13 August 2004)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : THE TRUSTEES OF THE LEGAL CONTRIBUTION TRUST -v- FREDERICK HOWARD BAILEY and ADRIAN JOHN BAILEY as Executors and Administrators of the Estates of WAYNE ARTHUR BAILEY and ANNE MAREE BAILEY & ANOR

BETWEEN : THE TRUSTEES OF THE LEGAL CONTRIBUTION TRUST

FREDERICK HOWARD BAILEY and ADRIAN JOHN BAILEY as Executors and Administrators of the Estates of WAYNE ARTHUR BAILEY and ANNE MAREE BAILEY

Professional defalcation by solicitor - Claim against solicitor's guarantee fund - Quantum of compensation payable - Whether value of work done by defalcating solicitor to be taken into account - Part IV Legal Contribution Trust Act 1967 (WA) - Potential bases upon which Trust might bring to account value of work done - Deductions from actual pecuniary loss - Deductions in calculation of actual pecuniary loss - Whether contract entire - Presumption of entirety with respect to solicitor client retainers - Repudiation

Coburn v Colledge [1897] 1 QB 702

Dobcol Pty Ltd v Law Institute of Victoria [1979] VicRp 42; [1979] VR 393

Eumeralla Finance Co Pty Ltd v Law Institute of Victoria [1973] VicRp 8; (1973) VR 98

Hall & Barker, In re (1878) 9 ChD 538

Ristevski v Kyriacou & Zard Constructions Pty Ltd & Law Institute of Victoria (unreported; Supreme Court of Victoria; Harper J; 5 August 1997)

Schofield v Consolidated Interest Fund (1988) 49 SASR 546

Beckwith, Re; Ex parte Power & Power (a firm) [1993] FCA 317; (1993) 43 FCR 256

Cachia v Isaacs (1985) 3 NSWLR 366

Caldwell v Treloar (1982) 30 SASR 202

Coates v National Trustees Executors & Agency Co Ltd [1956] HCA 23; (1956) 95 CLR 494

Florence v New Zealand Law Society [1989] 1 NZLR 132

Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62

Holmes v Permanent Trustee Co of New South Wales [1932] HCA 1; (1932) 47 CLR 113

Indrisie v General Credits Ltd [1985] VicRp 20; [1985] VR 251

James v Bradley [1980] WAR 11

James v Commonwealth Bank of Australia [1992] FCA 420; (1992) 37 FCR 445

John Llewellyn Burrell trading as John Burrell Solicitors v Ross Ian Connell [1998] FCT 829

McDonnell and East Ltd v McGregor [1936] HCA 28; (1936) 56 CLR 50

Mid-Kent Fruit Factory, In re [1896] 1 Ch 567

Pollitt, In re: Ex parte Minor [1893] 1 QB 455

Rawson v Samuel (1841) Cr & Ph 161; 41 ER 451

Real Estate and Business Agents Supervisory Board v Cohen [2004] WASCA 19

Stehar Knitting Mill Pty Ltd v Southern Textile Converters Pty Ltd [1980] 2 NSWLR 514

1 LE MIERE J: The plaintiffs, who I will refer to as the plaintiffs or the Trustees, have applied by originating summons for directions pursuant to s 92 of the Trustees Act 1962 (WA) and for declarations of right.

2 The plaintiffs are the trustees of the Legal Contribution Trust ("the Trust"), established by s 5 of the Legal Contribution Trust Act 1967 (WA) ("the Act"). Under s 6 of the Act, the Trust consists of three trustees appointed by the Governor.

3 Section 13 of the Act provides that each bank with which a legal practitioner maintains a trust account pursuant to the provisions of the Legal Practice Act 2003 (WA), shall pay to the Trust a prescribed percentage of the interest earned on the moneys in the solicitors' trust account during the relevant period. Part of the moneys received by the Trust are paid to a fund known as the Solicitors Guarantee Fund (the Guarantee Fund) established by s 16 of the Act.

4 The functions of the Trust are set out in s 9 of the Act. One of the functions of the Trust is to administer and control the Guarantee Fund.

5 Section 18 of the Act provides that the Trust shall hold and apply the Guarantee Fund for the purpose of compensating persons who suffer pecuniary loss by reason of professional defalcation.

6 Under s 20, a person who suffers pecuniary loss by reason of a solicitor's professional defalcation may make a claim for compensation payable from the Guarantee Fund.

7 Under s 22(1), the Trust may allow and settle any proper claim against the Guarantee Fund at any time after the occurrence of the professional defalcation to which the claim relates.

8 The first defendants and the second defendant have made separate and unrelated claims against the Guarantee Fund in respect of a professional defalcation of a solicitor. The Trust has accepted the claims, but there is an issue as to the quantum of compensation payable. In both cases, the issue is whether the value of the work done by the defalcating solicitor ought to be taken into account in reduction of the compensation payable to the defendants. I am informed that the same issue is likely to arise in future claims against the Guarantee Fund.

9 The Trustees have accepted a claim against the Guarantee Fund made by the first defendants, who are the executors and administrators of the estates of Wayne Arthur Bailey and Anne Maree Bailey, in respect of a professional defalcation of a solicitor, Peter Weston, carrying on legal practice as Peter Weston & Co. Weston acted as solicitor for the first defendants in arranging letters of administration and probate and work associated with the winding up of the Bailey estates. The Trustees say that the first defendants retained Weston as their solicitor in or about February 1997. The first defendants say that Ms Michelle Whiteford first retained Weston in February 1997 and the executors of the Bailey estates retained Weston on 30 April 1998.

10 The grant of probate of Wayne Arthur Bailey's will was made on 2 March 1999. Letters of administration of Anne Maree Bailey's estate were granted on 29 June 1999.

11 The first defendants' last communication from Weston was a letter dated 26 March 2001. In that letter Weston said that the estate was to be closed within the next 3 to 4 weeks and that closure would include a deed of family arrangement. The letter stated that the deed had been drafted but that there was one issue which required to be addressed. That issue was said to be the recovery of certain moneys.

12 On 6 April 2001, pursuant to s 58D of the Legal Practitioners Act 1893 (WA), the Legal Practice Board appointed Mr Peter Bogue as supervising solicitor to the practice of Peter Weston & Co. Until the appointment of the supervising solicitor, the first defendants continued to retain Weston. On 10 April 2001 Mr Bogue telephoned Mr Frederick Bailey, and informed him, on behalf of the first defendants, that Weston had been suspended from practice and was believed to be in New Zealand. At no time did Weston inform the first defendants of his intention to terminate their retainer. Weston unilaterally terminated the retainer when he had not completed the work he had been retained to carry out on behalf of the Bailey estates. By the time Weston terminated the retainer he had completed certain tasks but work remained to be done.

13 During the period that Weston acted for the Bailey estates, funds totalling $185,964.41 were paid into the trust account of Peter Weston & Co and held on trust for the Bailey estates. Sums totalling $27,670.19 were paid from the trust account and were applied to the expenses of the Bailey estates, leaving a balance of $158,294.22. The Trustees accept that the sum of $158,294.22 was held by Weston on trust for the Bailey estates. That amount has not been paid to the Bailey estates and has been misappropriated by Weston.

14 The Trustees say that Weston performed some work for the Bailey estates, namely:

(a) work associated with obtaining grants of probate and letters of administration; and

(b) assisting in the sale of the assets of the Bailey estates and the distribution of the proceeds.

15 The first defendants dispute that the compensation payable to the Bailey estates should be reduced by any amount attributable to the work done by Weston.

16 Stewart Forbes, a barrister and solicitor, undertook a review of documents drawn up by Weston and of files compiled by Weston. Mr Forbes drew a schedule of costings of the work done by Weston, based on the invoices and the documents contained in Weston's file. The schedule indicates the rates and amounts that Mr Forbes suggests are justified if Weston did the work as set out in the invoices held on the file. Mr Forbes concludes that for the period from 1 January 2000 onward, an amount of $8,854.50 is justified. Mr Forbes notes that Weston provided services to some extent prior to January 2000 and that "if documents could be located showing what work was done, it is conceivable that he could be entitled to fees of up to, say, $12,000". In regard to the period from 30 April 1999 to 31 December 1999, Mr Forbes says that it is extremely difficult to make an accurate estimate of the value of the work done but "from the documents at my disposal I believe that it is likely that approximately $1,500 to $2,000 could be justified".

17 Maria Saraceni, a barrister and solicitor with the firm of solicitors acting for the plaintiffs reviewed the files of Weston and Mr Forbes' assessment of the legal fees charged by Weston for his work on behalf of the Bailey estates. Ms Saraceni assessed the value of the work done by Weston, in accordance with appropriate scales, to be $14,145.37.

18 The Trustees have accepted a claim against the Guarantee Fund made by the second defendant, Timberwood Holdings Pty Ltd, trading as Central Mufflers, in respect of a professional defalcation of Weston. The claim is for the sum of $15,000.

19 Weston acted as solicitor for Timberwood in relation to advising on possible action against certain directors of Timberwood. Timberwood retained Weston from on or about 31 January 2000 until on or about 2 March 2001. Timberwood continued to retain Weston until the appointment of a supervising solicitor to Weston's practice.

20 On 3 February 2000, Timberwood paid $15,000 to Weston on account of the anticipated costs of commissioning an auditor to perform a full financial and stock audit on Timberwood and for the anticipated legal costs of civil proceedings by Timberwood against some of its former directors. Timberwood had previously paid to Weston sums totalling $2,500. Those sums were paid in anticipation of the legal costs of advising and acting for Timberwood in relation to obtaining evidence in support of issuing legal proceedings against certain directors of Timberwood. No audit was obtained and the litigation was not commenced.

21 Weston issued to Timberwood an account dated 2 March 2001 for the sum of $39,334. The invoice indicates that the sums paid by Timberwood to Weston, that is the sums of $15,000 and $2,500, had been applied in part payment of the invoice.

22 The Trustees accept that Timberwood has not been repaid the amount of $15,000 from the Peter Weston and Co trust account.

23 No costing of the work alleged to be done by Weston has yet been carried out for this claim.

24 As I have said, the plaintiffs have accepted that the first defendants and the second defendant have valid claims against the Guarantee Fund. However, the quantum of compensation payable under the Act is in dispute. The question raised in this proceeding is whether, in determining the compensation to which a claimant is entitled under the Act, the benefit of work performed by the solicitor for the claimant, measured by the value of that work, should be brought into account in reduction of the compensation payable to the claimant.

25 There are some further issues that arise if the principal issue to which I have referred is determined in favour of the plaintiffs. The first defendants contend that the retainer between Weston and the first defendants was an entire contract which was unilaterally terminated by Weston, and that he is therefore not entitled to payment for any work performed under it. The plaintiffs accept that if the retainer was an entire contract unilaterally terminated by Weston, then he is not entitled to payment of any fee. However, the plaintiffs contend that the retainer between Weston and the first defendants was not an entire contract.

26 The first defendants further contend that the amount of compensation payable to the first defendants should not be reduced by the amount of the value of the work performed by Weston because Weston did not render any bills of costs to the first defendants. The plaintiffs accept that Weston cannot sue the first defendants for payment of his costs and remuneration without first rendering bills in compliance with s 65 of the Legal Practitioners Act. However, the plaintiffs submit that the failure of a solicitor to render a bill of costs is irrelevant to the entitlement of the plaintiffs to bring into account the value of the work done by a defalcating solicitor in reduction of the compensation otherwise payable to a claimant.

27 The second defendant raises a further issue. The second defendant submits that it lawfully terminated Weston's retainer for Weston's repudiation and accordingly Weston has no lawful entitlement against the second defendant for costs. Therefore, submits the second defendant, there is no benefit within the meaning of s 20(3) that could be brought to account in reduction of the compensation payable to the second defendant.

Part IV of the Act

28 The principal issue in this case concerns the proper construction of provisions of Part IV of the Act dealing with the Guarantee Fund.

29 Subsection 18(1) provides that the Trust shall hold and apply the Guarantee Fund for the purpose of compensating persons who suffer pecuniary loss by reason of professional defalcation. Professional defalcation is defined in subs 4(1) to mean relevantly the stealing or fraudulent conversion by a practitioner of money or other property at any time entrusted to him for or on behalf of another person, in the course of the practitioner's practice.

30 Section 20 deals with claims against the Guarantee Fund. Subsection 20(1) provides that, subject to Part IV, a person who suffers pecuniary loss by reason of professional defalcation is entitled to claim compensation from the Guarantee Fund and to take proceedings in the Court, in accordance with the Act, against the Trust to establish the claim.

31 Subsection 20(3) is critical to this proceeding. I will set it out in full:

"Subject to this Part, the amount that a person is entitled to claim as compensation from the Guarantee Fund is the amount of the actual pecuniary loss suffered by him by reason of the professional defalcation, less the amount of any moneys or the value of any benefit received, or certified by the [Law Society of Western Australia] as capable of being recovered, in reduction of the loss so suffered, from any source, other than from the practitioner in respect of whom the claim is made or from the Guarantee Fund."

32 Section 22 deals with settlement of claims. Subsection 22(1) provides that the Trust may allow and settle any proper claim against the Guarantee Fund at any time after the occurrence of the professional defalcation to which the claim relates.

33 Section 24 deals with proceedings against the Trust. Subsection 24(1) provides essentially that a claimant may not, without leave of the Trust, bring any proceeding against it in respect of the Guarantee Fund, until the Trust has disallowed his claim, in whole or in part and he has exhausted every other remedy that may be available to him, against the practitioner in respect of whom the claim arose or against such other persons as may be liable in respect of the loss suffered by the claimant.

34 Subsection 24(2) provides that a person who has been refused leave by the Trust to bring a proceeding against it may apply to the Court for an order enabling him to bring such a proceeding.

35 Section 25 deals with proceedings to establish claims. Subsection 25(1) provides that where, in any proceedings brought to establish a claim against the Trust, in respect of the Guarantee Fund, if the Court is satisfied that the professional defalcation to which the claim relates in fact occurred and that the claimant has a valid claim, it shall declare the occurrence, and the date of the occurrence, of the professional defalcation and the amount of the pecuniary loss thereby sustained by the claimant, and direct the Trust to deal with the claim in accordance with the provisions of Part IV of the Act. Subsection 25(3) provides that in any proceeding under s 25 every defence that would be available to the defalcating practitioner, if he were a party to the proceeding, is available to the Trust. This provision essentially gives the Trust a right to set-off against the compensation payable to the claimant any amount the practitioner could set off against a claim made against the practitioner.

36 Section 27 deals with rights of subrogation. The section provides that where the Trust has made a payment in respect of a claim, it is, to the extent of the payment, subrogated to all or any of the rights and remedies of the claimant against the person in respect of whom the claim arose or against the personal representative of, or a person administering the estate of, the person in respect of whom the claim arose.

37 The plaintiffs submit that there are three bases upon which they can bring to account the value of work done by a defalcating solicitor. They are identified in Eumeralla Finance Co Pty Ltd v Law Institute of Victoria [1973] VicRp 8; (1973) VR 98, in which the Supreme Court of Victoria considered the corresponding provisions of the Legal Profession Practice Act 1958 (Vic). Smith J stated at page 100:

"It will also be observed, however, that the provisions are so expressed that a question may arise as to the bringing into account of contra items at three stages of the process of ascertaining the amount which a person is entitled to claim from the fund. It may arise when one is ascertaining the actual pecuniary loss to the claimant from the crime constituting the 'defalcation'; or it may arise when one is considering whether a reduction is to be made under s 64(5) [WA s 20(3)] from the amount of the actual pecuniary loss or it may arise under s 66(3) [WA s 25(3)] if the Institute seeks to rely on a defence of set-off which would have been available to the solicitor." [References to the sections of the Western Australia legislation have been added.]

38 The parties agree that there are three potential bases upon which the Trust might be able to bring to account the value of work done by a defalcating solicitor. They are as follows:

(1) In computing the "actual pecuniary loss" to the claimant from a defalcation, a deduction may be made on account of payments by the practitioner in reduction of the misappropriated amount.

(2) A deduction may be made from the "actual pecuniary loss" in relation to "any moneys or the value of any benefit received, or certified by the Society as capable of being recovered, in reduction of the loss so suffered, from any source, other than from the practitioner in respect of whom the claim is made or from the Guarantee Fund".

(3) The Trust may rely on any defence, including that of set-off, which would have been available to the practitioner.

39 At the hearing of this matter, senior counsel for the plaintiffs informed the Court that the plaintiffs do not pursue the argument based upon a set-off. The plaintiffs have reached the view that there would be no scope for a practitioner to set-off, either at law or in equity, his claim for unpaid costs in answer to a claim for return of trust moneys in the circumstances of the claims presently made by the defendants.

40 The plaintiffs' primary argument is that the amount of compensation payable to a claimant should be the amount of the defalcation less the value of the work done by the defalcating solicitor because the value of the work done constitutes the value of a benefit received within the meaning of that expression in s 20(3) of the Act.

41 The issue between the parties concerns the proper construction of s 20(3) of the Act. In essence, the defendants submit that the words "less the amount of any moneys or the value of any benefit received" are qualified by the words "in reduction of the loss so suffered, from any source, other than from the practitioner in respect of whom the claim is made or from the Guarantee Fund". The plaintiffs submit that the words "less the amount of any moneys or the value of any benefit received" are not so qualified.

42 The plaintiffs contend that s 20(3) should be interpreted to read:

"Subject to this Part, the amount that a person is entitled to claim as compensation from the Guarantee Fund is the amount of the actual pecuniary loss suffered by him by reason of the professional defalcation,

less the amount of any moneys or the value of any benefit received, or

and

less the amount of any moneys or the value of any benefit certified by the Society as capable of being recovered, in reduction of the loss so suffered, from any source, other than from the practitioner in respect of whom the claim is made or from the Guarantee Fund." [tracking added to text of subs 20(3)]

43 The defendants contend that on its proper interpretation, s 20(3) should be read:

"Subject to this Part, the amount that a person is entitled to claim as compensation from the Guarantee Fund is the amount of the actual pecuniary loss suffered by him by reason of the professional defalcation, less the amount of any moneys or the value of any benefit

received, or

certified by the Society as capable of being recovered,

in reduction of the loss so suffered, from any source, other than from the practitioner in respect of whom the claim is made or from the Guarantee Fund."

44 In my view, the construction submitted by the defendants is the proper construction of s 20(3). I hold that view for three reasons.

45 First, the natural and ordinary grammatical meaning of the subsection is that the words "the amount of any moneys or the value of any benefit received" are qualified by the words "in reduction of the loss so suffered, from any source, other than from the practitioner in respect of whom the claim is made or from the Guarantee Fund". The text of subs 20(3) includes a comma after the word "received" and another comma after the word "recovered". That punctuation indicates that the words, "in reduction of the loss so suffered, ... from the Guarantee Fund" must qualify not only the words "certified by the Society as capable of being recovered" but also the preceding words, "the amount of any moneys or the value of any benefit received". The construction advocated by the plaintiffs involves a notional rewriting of the subsection.

46 Secondly, the plaintiffs' interpretation involves the words "the amount of any moneys or the value of any benefit received" being unqualified or an arbitrary qualification being implied. The legislature could not have intended that the words be unqualified. It would be unjust, and the legislature could not have intended, that the amount of compensation that a person is entitled to claim should be reduced on account of moneys or benefits received by the claimant unconnected with the loss resulting from the professional defalcation. An arbitrary qualification should not be implied when the alternative interpretation, that advanced by the defendants, is the natural and ordinary meaning of the subsection and produces a consistent, sensible result.

47 Thirdly, the Act is beneficial remedial legislation and should be given the interpretation that is most favourable to the persons whom it is intended to assist, that is the claimant.

Deductions in calculation of actual pecuniary loss

48 The plaintiffs submit that if their construction of s 20(3) discussed above is not accepted, then, if double recovery by the claimant is to be avoided, the term "actual pecuniary loss" must incorporate the concept that the calculation of the compensation payable takes into account any moneys or benefits received from the solicitor that mitigates or diminishes the claimant's loss. The plaintiffs submit that the value of work done for which the claimant has a liability to the solicitor should, for the purposes of compensating the claimant, be brought to account for the purposes of determining the actual pecuniary loss.

49 The word "actual" in the phrase "actual pecuniary loss" in the context of a claim against a solicitors fidelity fund gives added meaning to the words "pecuniary loss" and has a limiting effect on the loss that is recoverable: Dobcol Pty Ltd v Law Institute of Victoria [1979] VicRp 42; [1979] VR 393 at 395, 396; Ristevski v Kyriacou & Zard Constructions Pty Ltd & Law Institute of Victoria (unreported; Supreme Court of Victoria; Harper J; 5 August 1997) at 17; Schofield v Consolidated Interest Fund (1988) 49 SASR 546 at 554, 555.

50 The "actual pecuniary loss" refers only to such pecuniary loss as stems from the value of the money or other property the subject of a defalcation by a solicitor, and does not include other consequential loss suffered as a result of the defalcation: Dobcol Pty Ltd v Law Institute of Victoria, (supra). The "actual pecuniary loss" does not refer to the damages suffered by a client as a result of the defalcation by a solicitor.

51 The purpose of the Act is to compensate the client for the "actual pecuniary loss" arising from a defalcation, not to settle accounts between the client and the practitioner. The basic measure of a claimant's pecuniary loss is the amount misappropriated by the practitioner. If any payment by the practitioner to the claimant is to be taken into account in determining the "actual pecuniary loss" then the payment must have been made by the practitioner, and accepted by the client, in reduction of the amount misappropriated.

52 The value of work done by a solicitor is not to be taken into account in determining the actual pecuniary loss suffered by a client as a result of a defalcation of a solicitor.

Application of principles to issues in this case

53 There are relevantly three steps in determining the amount recoverable under the Act. First, the claimant's "actual pecuniary loss" must be deteremined. Secondly, a determination must be made as to whether any payments or benefits received from a person other that the practitioner or the Guarantee Fund should be deducted from the "actual pecuniary loss". Thirdly, it must be determined whether the Trust may assert any right of set-off available to the practitioner, in defence of the recovery of all or part of the "actual pecuniary loss" as determined.

54 In this case there are two steps in determining the amount recoverable by the defendants under the Act. First, the defendants' "actual pecuniary loss" must be determined. I have found that the value of work performed for a client by a defalcating solicitor is not to be taken into account in determining the "actual pecuniary loss" suffered by the client.

55 Secondly, a determination must be made as to whether a deduction is to be made from the "actual pecuniary loss" in relation to "any moneys or the value of any benefit received, or certified by the Society as capable of being recovered, in reduction of the loss so suffered, from any source, other than from the practitioner in respect of whom the claim is made or from the Guarantee Fund". For the reasons stated, "any moneys or the value of any benefit received" to be deducted from the "actual pecuniary loss" must be "in reduction of the loss so suffered, from any source, other than from the practitioner in respect of whom the claim is made or from the Guarantee Fund".

56 The benefit said to be constituted by the value of the work performed by Weston is not to be deducted from the actual pecuniary loss suffered by the defendants for two reasons. First, the benefits, if any, were received from the practitioner and hence are expressly excluded by the terms of s 20(3) from being deduced from the "actual pecuniary loss" in calculating the amount of compensation payable to the client. Secondly, to be deducted from the "actual pecuniary loss" the benefits received must have been "in reduction of the loss so suffered": Eumeralla Finance Co Pty Ltd v Law Institute of Victoria (supra). The work performed by Weston on behalf of the defendants could not be characterised as having been received in reduction of the defalcations which occurred.

57 The plaintiffs and the first defendants agree that Mr Weston misappropriated $158,294.22 from the first defendants. The issue between the plaintiffs and the first defendants is whether the plaintiffs are entitled or required in determining the compensation to which the first defendants are entitled to bring into account and set off against the amount of the defalcation the benefit of work performed by Mr Weston for the first defendants. For the reasons I have stated, the value of the work done by Mr Weston for the first defendants is not to be taken into account in determining the compensation payable to the first defendants under the Act.

58 In the course of the hearing of this matter, a number of additional issues relating to the first defendants were raised. The first defendant submitted that the retainer between Weston and the first defendants was an entire contract that was unilaterally terminated by Weston prior to its completion. Weston did not render any accounts for work progressively completed. The first defendants submitted that, in any event, they were not liable to the practitioner for the value of the work carried out by him.

59 Senior counsel for the plaintiffs stated that if the directions of the Court are to the effect that there is no capacity to bring to account the benefit of the value of work done, then that's the end of it so far as the defendants are concerned. The other issues do not arise. As I have determined the principal issues in favour of the defendants, it is not necessary to address these further issues. Nevertheless, I will briefly state my conclusions.

60 Contracts between solicitors and their clients where the solicitor accepts a retainer are, in the absence of evidence indicating a contrary intention, presumed to be entire by custom or historical usage: Laws of Australia, 7.5: 50. The importance of the presumption of entirety has been diminished by the prevailing view that contractual intent is decisive when drawing the entire/severable dichotomy. In this case, I am of the view that the retainer agreement between Weston and the first defendants was not intended to be an entire contract. I reach that view for two reasons. First, a retainer to undertake business of a complicated nature, such as the administration of two estates, should not readily be found to be an entire contract. See Hall & Barker, In re (1878) 9 ChD 538 per Jessel MR at 544, 545. Secondly, the evidence is that Weston was retained to perform multiple services over a period of time rather than to conduct a single action or transaction. Such a retainer should be construed as severable rather than entire, entitling the solicitor to recover costs in respect of the severable acts performed by him or her. See Dal Pont "Law of Costs" at [3.52] - [3.53].

61 In my view, the fact that Weston did not render any bills of costs to the first defendants does not of itself preclude the value of the work done by a solicitor being deducted from the actual pecuniary loss suffered by the claimant pursuant to s 20(3) of the Act, if the Act otherwise permitted the value of any benefit received from the practitioner to be deducted from the actual pecuniary loss suffered by the claimant. Section 65 of the Legal Practitioners Act takes away a solicitor's right to sue immediately the work is done but does not take away his right to payment for it, which is the cause of action. Lord Esher MR explained the point in Coburn v Colledge [1897] 1 QB 702 at 706, as follows:

"[The statute] does not provide that no solicitor shall have any cause of action in respect of his costs or any right to be paid until the expiration of a month from his delivering a signed bill of costs, but merely that he shall not commence or maintain any action for the recovery of fees, charges, or disbursements until then. It assumes that he has a right to be paid the fees, charges, and disbursements, but provides that he shall not bring an action to enforce that right until certain preliminary requirements have been satisfied. If the solicitor has any other mode of enforcing his right than by action, the section does not seem to interfere with it. For instance, if he has money of the client in his hands not entrusted to him for any specific purpose, there is nothing in the section to prevent his retaining the amount due to him out of that money. If that be the true construction of the section, it does not touch the cause of action, but only the remedy for enforcing it."

62 The plaintiffs and the second defendant agree that the plaintiff misappropriated $15,000 from the second defendant. The plaintiffs seek a determination that the amount of compensation payable to the second defendant should be reduced by the amount of the value of the work done by Mr Weston. For the reasons I have stated, the value of the work done by Mr Weston for the second defendant is not to be taken into account in determining the compensation payable to the second defendant under the Act.

63 The second defendant submitted that, in any event, the practitioner had no right to recover costs from the second defendant. Again, it is not necessary to address these issues because I have determined the principal issues in favour of the second defendants. Nevertheless, I will briefly state my conclusion on the further issue raised.

64 In my view, the retainer agreement between Weston and the second defendant was an entire contract or possibly two entire contracts. The second defendant's instructions were to commission an audit and to initiate civil proceedings. Weston failed to do either of those things. The second defendant terminated the retainer as it was entitled to do by reason of Weston's repudiation by his gross delay. A solicitor who terminates a retainer without just cause before completing the matter he was retained to carry out forfeits a claim for costs for the work done prior to termination. For his part, Weston does not appear to have done any work pursuant to his retainer, that is to commission an audit or to initiate civil proceedings. In those circumstances, Weston is not entitled to any costs. In any event, any work carried out by Weston on behalf of the second defendant did not constitute a benefit received by the second defendant in reduction of the loss suffered by it by reason of the professional defalcation.

65 For the reasons stated, I will make orders to the following effect:

The plaintiffs are directed, pursuant to s 92 of the Trustees Act 1962 (WA), and the Court declares, that in determining the amount of compensation payable to the defendants under s 20(3) of the Legal Contribution Trust Act 1967 (WA) ("the Act") for the purpose of making a payment of compensation under the Act to the defendants in respect of the professional defalcation of Robert Peter Weston, the plaintiffs must not:

(a) take into account the value of the services performed by the defalcating practitioner; or

(b) deduct the value attributed to the services from the compensation payable.

66 I will hear the parties in relation to the form of the orders that should be made and in relation to the question of costs.

Contribution Trust Act 1967

Practitioners Act 1893

Profession Practice Act 1958

The Trustees of The Legal Contribution Trust v Frederick Howard Bailey and Adrian John Bailey as Executors and Administrators of the Estates of Wayne Arthur Bailey and Anne Maree Bailey & Anor [2004] WASC 175

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Judgment (115 paragraphs)

The Trustees of The Legal Contribution Trust v Frederick Howard Bailey and Adrian John Bailey as Executors and Administrators of the Estates of Wayne Arthur Bailey and Anne Maree Bailey & Anor [2004] WASC 175 (13 August 2004)

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Legislation Cited (4)

Cases Cited (11)