Vizovitis v Ryan [2014] ACTSC 243

Vizovitis v Ryan [2014] ACTSC 243 - ACTSC 2014 case summary — Zoe

[23]

190 Agreement as to costs

(1) The preceding provisions of this part, other than 179 and 189, do not apply in respect of the costs to be paid to a solicitor for work to which an agreement under this section relates.

(2) The solicitor may make an agreement with a person that the amount of the costs (excluding disbursements) payable, or to be payable, by the person to the solicitor for work of a professional nature already undertaken, or to be undertaken, for the person by the solicitor shall be the amounts specified in, or ascertainable in accordance with, the agreement.

(3) An agreement referred to in subsection (2) is not enforceable unless a note or memorandum containing the terms of that agreement is signed by the person liable to pay the costs to which the agreement relates.

(4) A note or memorandum of an agreement signed in accordance with subsection (3) is evidence of the terms of the agreement.

(5) A solicitor who is a party to an agreement under this section is not entitled, in respect of work to which the agreement relates, to receive an amount for costs (including disbursements) greater than the amount specified in, or ascertainable in accordance with, the agreement.

191 Powers of Court where contract not fair and reasonable

(1) Where, on an application by a person who has made an agreement with a solicitor under section 190, the court is satisfied that the agreement is not fair and reasonable, the court may, by order -

(a) direct that the amount payable under the agreement be reduced to an amount specified in the order; or

(b) declare that the agreement is not binding on the parties to the agreement.

(2) Where, under subsection (1), the court directs that the amount payable under an agreement be reduced, the agreement is enforceable as if the amount specified in the order of the court were specified in the agreement as the amount paid under the agreement.

(3) Where, under subsection (1), the court declares that the agreement is not binding on the parties to the agreement -

(a) the court may make such further orders as it thinks necessary to restore the parties to the agreement to the position in which they would have been if the agreement had not been made; and

(b) this part (other than section 190) applies as if the agreement had not been made.

(4) Except by leave of the court, a person is entitled to make an application under this section in respect of an agreement after the institution of proceedings for the recovery from that person of the amount payable under the agreement.

[26]

THIS AGREEMENT AS TO COSTS is made on 23 March 1999.

Between Eunice Catherine Mary Ryan t/as Ryans Barristers & Solicitors of 191-203 Anketell Street, Tuggeranong in the Australian Capital Territory (the Barrister and Solicitor);

And Georgia Vizovitis of RMB 1544 Federal Highway, Sutton in the State of New South Wales (the Client)

IT IS AGREED THAT

A. The Barrister and Solicitor agreed to act for the client in the capacity of Barrister and Solicitor for the period from 6 March 1995 and continuing, in relation to the client's personal injury matters in respect of two motor vehicle accidents on 2 April 1994 and 3 April 1996.

B. The client agrees to pay to the Barrister and Solicitor all such professional costs and disbursements as are reasonably incurred by the Barrister and Solicitor in acting for the client assessed by the hourly rate of $280.00 per hour for the principal Barrister and Solicitor, $220 for the employed Barrister and Solicitor and $85.20 for the legal assistant.

C. The Barrister and Solicitor agrees to carry the professional costs and disbursements until the completion of the matter on the basis that the Client agrees to pay for all professional costs and disbursements undertaken on the matter.

D. The Client agrees to pay to the Barrister and Solicitor interest accruing in accordance with subsection 230(2)(b) Magistrates Court Civil Jurisdiction Act 1982 on account of the professional costs and disbursements after 30 days in relation to a claim within the jurisdiction of the Magistrates Court. The Client agrees to pay to the Barrister and Solicitor interest accruing in accordance with the Supreme Court Act on account of the professional costs and disbursements after 30 days in relation to a claim within the jurisdiction of the Supreme Court.

E. The Client agrees to pay the cost of obtaining the medical reports and all other reasonable disbursements which are necessary to undertake the claim on behalf of the Client.

F. The Client irrevocably authorises the Barrister and Solicitor to deduct from moneys payable to the client the professional costs and disbursements of the Barrister and Solicitor whether those moneys are payable to the client on account of a settlement or a Court award.

[41]

1. At all material times the defendant was a legal practitioner practising in the Australian Capital Territory.

2. At all such times the defendant practised as Ryans Barristers and Solicitors.

3. During 1995 the plaintiff consulted and retained the defendant to act for her in relation to injuries sustained by her in a motor vehicle accident in about April in the previous year.

4. It was an implied condition of the retainer that the defendant would act for the plaintiff at the published costs scale for the jurisdiction in which proceedings were brought.

5. In 1996 the plaintiff again retained the defendant to act for her in relation to a further motor vehicle accident which occurred that year.

6. It was an implied condition of the retainer that the defendant would act for the plaintiff at the published cost scale for the jurisdiction in which proceedings were brought.

7. The plaintiff signed a document titled "Agreement as to costs" at the request of the defendant on 23 March 1999, in respect of the two actions previously mentioned.

8. The plaintiff signed a further document titled "Agreement as to costs" at the request of the defendant on 10 December 2002, in respect of the two actions previously mentioned.

9. On or about 6 November 2003, acting on the advice of the defendant, the plaintiff agreed to settle the two claims for the sum of $75,000.00 with costs agreed at $53,000.00.

10. In relation to the two matters the plaintiff has been charged by the defendant for costs and disbursements and has paid the same as follows:

Matter 95/063

Invoice 8406

$2, 023.21

Invoice 5400 $49,507.53

Counsel's fees $16,495.00

Invoice 4855 $1,605.60

Invoice 2709 $607.65

Total $70,238.99

Matter 96/163

Invoice 8407 $470.70

Invoice 4854 $23,586.85

Total $24,057.55

The total is therefore $94,296.45

11. The charges made by the defendant exceed the scale applicable from time to time for work done by a legal practitioner pursuant to the costs rules of the Supreme Court of the Australian Capital Territory.

12. In charging at a rate exceeding that prescribed by the Supreme Court of the Australian Capital Territory cost rules, the defendant has acted in breach of her retainer in respect of both matters.

13. Section 191 of the Legal Practitioners Act (ACT) applies to the two agreements, and the two agreements are not fair and reasonable for the purposes of that Act.

14. Further or in the alternative, the plaintiff entered into the two agreements under the undue influence of the defendant.

15. Further or in the alternative, the defendant procured the two agreements in circumstances in which it would be unconscionable for the defendant to rely on them and their terms.

16. Further or in the alternative, in procuring the plaintiff's consent to enter into the two agreements the defendant engaged in unconscionable conduct:

(a) for the purposes of s 51AB of the Trade Practices Act (Cth) in trade or commerce in connection with the supply, or possible supply, of services.

(b) for the purposes of s 13 of the Fair Trading Act (ACT) in connection with the supply, or possible supply, of services.

17. Further or in the alternative, there was no consideration for the plaintiff's entry into the two agreements, or alternatively, there was a total failure of consideration.

18. In respect of charging in breach of her retainer in respect of both matters, the plaintiff seeks an order that the defendant prepare and present for taxation a bill of costs in respect of acting for the plaintiff in each matter; or, alternatively, an order that the defendant's costs be reduced to a specified sum.

19. Further or in the alternative, the plaintiff's claim is pursuant to s 191 of the Legal Practitioners Act for:

(a) a declaration that the agreements of 23 March 1999 and 10 December 2002 are not fair and reasonable;

(b) a declaration that she is not bound by the agreements.

(c) an order that the amounts payable under the agreements be reduced to a sum to be specified.

(d) alternatively that the defendant tax a bill of costs for work done in respect of the two matters at the Supreme Court scale as applying from time to time.

20. Further or in the alternative the plaintiff's claim is for:

(a) a declaration that it would be unconscionable for the defendant to retain the benefit of the two agreements.

(b) a declaration that the two agreements be set aside.

(c) an order that the amounts payable under the agreements be reduced to a sum to be specified.

(d) alternatively, that the defendant tax a bill of costs for work done in respect of the two matters at the Supreme Court scale as applying from time to time.

21. Further or in the alternative, the plaintiff's claim is made pursuant to the Trade Practices Act, or alternatively the Australian Capital Territory Fair Trading Act and the plaintiff seeks the following orders:

(a) a declaration that the defendant in trade or commerce engaged in unconscionable conduct in relation to the services of the plaintiff.

(b) alternatively, a declaration that the defendant engaged in unconscionable conduct in the provision of services to the plaintiff.

(c) an order that the two agreements be set aside,

(d) an order that the amounts payable under the agreements be reduced to a sum to be specified.

(e) alternatively, that the defendant tax a bill of costs for work done in respect of the two matters at the Supreme Court scale as applying from time to time.

22. Further or in the alternative, the plaintiff's claim is that the two agreements are void for want of, or failure of, consideration and she seeks the following orders:

(a) a declaration that the two agreements are void.

(b) an order that the two agreements be set aside.

(c) an order that the amounts payable under the agreements be reduced to an amount to be specified.

(d) alternatively, that the defendant tax a bill of costs for work done in respect of the two matters at the Supreme Court scale as applying from time to time.

23. The plaintiff also claims:

(a) an order that the defendant pay to the plaintiff the difference between the amount paid by her in costs and disbursements to the defendant, and such amount as is found to be due by her after taxation or specification of costs.

(b) general damages.

(c) interest.

(d) costs.

in respect of the above causes of action.

[267]

26. My firm's costs were increased after we had acted on the matter for seven years and assisted the plaintiff through her payment difficulties. On 27 November 2002 I forwarded a letter to the plaintiff enclosing the revised costs agreement. . .

27. The plaintiff attended my office on 10 December 2002. Emily Ryan and Claire Grogan were present with the plaintiff and I in the room while I asked the plaintiff the following questions and the plaintiff provided her answers. It was our usual practice to ask the client these questions before the client was asked to execute a costs agreement after explaining the costs agreement. I read out the following questions. I heard the plaintiff provide those answers to the following questions:

(i) Do you understand what you are doing in signing a costs agreement?

Answer: Yes.

(ii) Have you read the document?

Answer: Yes.

(iii) Do you require independent legal advice?

Answer: No.

(iv) Are you signing freely and voluntarily?

Answer: Yes.

(v) Do you understand that the rate is $380.00 per hour plus GST for the principal and $280.00 per hour plus GST for the employed barrister and solicitor and $104.00 plus GST for the legal assistant?

Answer: Yes.

(vi) Do you understand that there may be firms that charge less and there are firms that charge more per hour?

Answer: Yes.

28. The plaintiff executed a costs agreement in our office on 10 December 2002. This costs agreement is referred to in my affidavit as the second costs agreement.

29. The plaintiff executed the second costs agreement after she had answered each of the questions set out in paragraph 27 of this affidavit in the presence of myself and the witness, Claire Grogan. Emily Ryan was also present during all of the discussion and execution of the second costs agreement. . .

30. Emily Ryan and the plaintiff had a conversation in my office while I was preparing documents on my computer. The plaintiff said in these words or in words to this effect "Well they can pay for my costs anyway". I intervened and said to the plaintiff in these words or in words to this effect "You may get a cost order but you cannot guarantee to get your costs back. You may get some but never all. They are no guarantees in the law at all".

31 . . . the plaintiff said to me in my office on 10 December 2002 in these words or in words to this effect "I know Eunice that costs are going up. I also know that you are not the most expensive lawyer in town".

[411]

384. It was submitted on behalf of the defendant that the settlement instruction constituted by the plaintiff's signature on 6 November 2003 to the copy letter of 21 November 2002, altered by hand, should be seen as a further costs agreement under the Legal Practitioners Act. It is to my mind sufficient to dispose of that submission, to say that the document offers no assistance to an independent reader of it who wishes to deduce from it an amount of costs payable by the plaintiff to the defendant, or a formula by which such costs can be calculated. It was undoubtedly a written instruction to settle, but so far as costs are concerned, the most that it can be said to have done is to have placed a ceiling on the total amount of costs and disbursements payable by the plaintiff to her solicitors. In simple terms, the effect of the document was that the solicitors agreed not to charge, by way of costs and disbursements, any more than the nett settlement amount. The document can be read as an agreement by the solicitors not to charge any more than the settlement amount of $75,000.00 less deductions. On that interpretation, the amount recovered by the plaintiff by way of party-and-party costs would be payable to her, and none of that amount would be payable to the solicitors. This is clearly not what Ms Ryan intended when she prepared the settlement instruction document, clearly under some time pressure, and it has not been suggested on behalf of the plaintiff that the document should be interpreted in that way. Nevertheless, there is nothing in the document which would assist an independent person given the task of calculating the costs payable by the client to the solicitor in calculating that amount. The document does not refer to either of the written costs agreements or to the earlier oral costs agreement, or to the Supreme Court scale. It does not appear to be a document which was prepared with a view to providing any benefit to the plaintiff, or to set out any basis for the calculation of her liability for legal costs to her solicitors. I reject the submission that the document should be construed as a costs agreement under the Act.

[417]

28. The first point that should be made is that solicitors owe a fiduciary duty to their clients. That duty extends to the making of any retainer agreement and the terms of it.

29. The client is entitled to advice as to the terms of any such retainer agreement. In any case in which the retainer agreement contains any unusual terms, where those terms favour the solicitor's interests, the client should not only be frankly and fully advised so by the solicitor, but should be urged to take competent independent advice (see Law Society of NSW v Foreman [1994] 34 NSWLR 408). That is not a new obligation (see re Blythe & Fanshawe ex parte Wells (1882) 10 QBD 207). It applies to costs as well as disbursements.

30. Mildren J considered this issue in Athanasiou v Ward Keller (6) Pty Ltd [1998] NTSC 27; (1998) 122 NTR 22. The solicitors in that matter had entered into a fee agreement with their client. At p 29 his Honour noted:

At common law, a costs agreement is enforceable if it is made to appear to the court that the agreement is "fair and reasonable", the burden of proof resting on the solicitor seeking to uphold the agreement. . .the court has an inherent power as part of its general disciplinary function in relation to legal practitioners to supervise such agreements. . .

31. His Honour, therefore, concluded that, even if the Northern Territory equivalent of s 190 of the Legal Practitioners Act was complied with, the onus of establishing that the costs agreement was fair and reasonable rested on the solicitor.

32. In relation to the concept of what is fair and reasonable, his Honour, at p 30, noted:

The concept of "fairness" deals with the circumstances under which the agreement was entered. Thus an agreement has been held to be unfair if the solicitor used undue pressure on his client to sign it, or if the solicitor did not explain the agreement to his client. . .the concept of "reasonableness" on the other hand relates to the terms of the agreement itself. So if the fees to be charged under the agreement are said to be excessive the agreement is not reasonable.

33. At p 31, his Honour referred to a passage from Cordery's Law Relating to Solicitors, Frederic T Horne (7th edition 1981, Butterworths, London) p 9:

In his dealings with his client the solicitor must exercise the utmost good faith, and in any financial transaction with a client (save as to costs for work done) there will be a presumption that such transactions should not be upheld unless the solicitor can establish that it was effected by the free exercise of the client's will without any influence on the part of the solicitor.

34. As to the supposed exception, his Honour said:

In principle, I do not see why a costs agreement should be subject to the exception suggested. Obviously, if the costs agreement reflects the appropriate scale, and no unusual benefit is conferred upon the solicitor, the solicitor would have no difficulty in establishing that the agreement was reasonable. But a costs agreement may go a lot further than merely providing for the payment of fees; it potentially could confer considerable benefits on a solicitor in addition to his remuneration. I consider that there is no basis for drawing the distinction suggested. In my opinion the result is that the burden of proof rests upon the solicitor in respect of both fairness and reasonableness.

35. His Honour's comments were, as he acknowledged, obiter. However, I agree with them. They are consistent with the duty the law imposes on solicitors to deal honestly and fairly with their clients.

At a glance

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Judgment (460 paragraphs)

Vizovitis v Ryan [2014] ACTSC 243 (19 September 2014)

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Legislation Cited (8)

Cases Cited (2)