Young v Fitzpatrick Solicitors Pty Ltd

Judgment 1HER HONOUR: By summons dated 16 February 2011 the plaintiff appeals under s 208L of the Legal Profession Act 1987 against a costs assessment that issued on 20 January 2011. Application for the assessment was made by the plaintiff's former solicitors (the first defendant on the appeal) on 13 August 2010 following termination of a conditional costs agreement dated 15 June 2005. The fact of termination and the grounds relied upon for termination were notified to the plaintiff by letter dated 10 February 2006. 2The appeal is limited to a challenge to the decision of the costs assessor as to a matter of law. 3The principal relief sought is an order that the certificate as to the determination of costs be set aside. In that event, s 208L(2) of the Legal Profession Act gives this Court jurisdiction to make any determination in relation to the costs application as should have been made by the costs assessor or to remit the matter for determination by the costs assessor. Were I persuaded that error has been made out the plaintiff also seeks a declaration that she is not liable to her former solicitor pursuant to the conditional costs agreement under which costs were assessed. Since I am not persuaded that error has been demonstrated none of these questions arise. 4The principal ground relied upon as constituting error was that the costs assessor should have declined to exercise the statutory jurisdiction as provided for in Part 11 Division 6 Subdivision 1 of the Legal Profession Act because the question whether the solicitor was entitled to terminate the costs agreement (thereby giving rise to an entitlement for him to be paid for work done and expenses incurred up to the date of termination) was beyond the scope of the assessor's statutory jurisdiction. 5Section 208(3) of the Legal Profession Act expressly provides that a costs assessor has jurisdiction to construe a costs agreement and determine its effect. In Doyle v Hall Chadwick [2007] NSWCA 159 Hodgson JA expressed agreement with Davies AJ in Muriniti v Lyons [2000] NSWSC 680 that this necessarily includes the power to determine disputes between a lawyer and client concerning those questions. His Honour went on to say at [61]: In my opinion, Davies AJ was correct to say that a costs assessor, assessing costs between a lawyer and client, can determine disputes as to the terms of the costs agreement, and Dunford J was wrong to say otherwise. However, where the existence of the terms of the agreement are in dispute in a way that would require the hearing of evidence to resolve, it may be appropriate for the costs assessor to decline to resolve the dispute; and in the Muriniti litigation, it would in my opinion have been open and reasonable for Davies AJ to have permitted the question to have been determined in the proceedings before him. As it turned out, the costs assessor did decline to resolve this question; and in my opinion, in those circumstances, the costs assessor should not have issued a certificate which could be converted into a judgment. That is, in a case where there is a real dispute on substantial grounds as to whether any costs are payable, a costs assessor should not complete an assessment by issuing a certificate unless satisfied that the costs are payable, because the certificate can be filed so as to take effect as a judgment. 6In the course of the hearing argument focused on whether the solicitor's termination of the agreement and the circumstances in which that occurred gave rise to "a real dispute" as to the terms of the agreement or their effect and whether the grounds of the dispute were "substantial" such that the costs assessor was obliged to decline to undertake an assessment leaving resolution of the costs dispute to a curial process. 7There is no power in the Legal Profession Act for an assessor to refer an assessment to a court in the event that she/he declines to undertake the assessment. This was the subject of comment by Basten JA in Wentworth v Rogers; Wentworth & Russo v Rogers [2006] NSWCA 145; 66 NSWLR 474 at [193]: It would undoubtedly be desirable if a costs assessor had power to refer a question of law to the Supreme Court for determination, being the kind of power sometimes conferred on tribunals. On the other hand, it may have been thought sufficient that the costs assessor would have an implied power not to continue with the assessment of the application, so as to allow the parties to have the contractual issue determined in the court in which the proceedings arose. At least where that court is a court with appropriate jurisdiction, that approach would have much to commend it. In any event, it is not necessary to resolve the precise extent of the assessor's powers for present purposes. The existence of a dispute of this kind, combined with the lack of relevant procedural mechanisms for allowing a hearing and determination in an appropriate manner, would, absent other considerations, generally mandate a grant of leave pursuant to s 208M of the 1987 Act. 8I also note that the plaintiff has not sought leave pursuant to s 208M of the Legal Profession Act for leave to appeal to this Court against the determination of the application for costs. Section 208M expressly provides for a hearing de novo such that fresh evidence, or evidence in addition to or in substitution for the evidence before the costs assessor, may be given. 9The evaluative exercise in which I am engaged in reviewing the nature of the dispute for the purposes of the appeal is limited to determining whether the assessor was wrong, as a matter of law, in proceeding with the assessment or, to put it another way, whether I am persuaded that resolution of the dispute necessitated evidence being called and tested in a curial process. I am not asked to consider whether the exercise of the costs assessor's discretion in determining that question adverse to the plaintiff miscarried because the result was so unreasonable as to warrant interference (see House v The King [1936] HCA 40; 55 CLR 499) , still less whether there might have been a basis for the costs assessor coming to a different conclusion because counsel on the appeal was able to formulate a series of hypothetical questions he might have been able to frame as a cross-examiner. The question is whether the assessor's approach to the question whether he should proceed with the assessment is demonstrative of error or whether he applied the principles, correctly identified by him in his reasons for decision, for resolving that question. 10The challenge to jurisdiction first arose for the costs assessor's consideration upon receipt of correspondence from the plaintiff's solicitor on 22 November 2010. This was responsive to the assessor's letter of 9 November 2010 in which he expressed the tentative view that, after considering all of the materials available to him, inclusive of correspondence passing between the parties during the currency of their relationship and other materials produced in support of the application, and the plaintiff's notice of objection and the solicitor's response to that notice, he was likely to find that the plaintiff/client indicated a loss of confidence in the solicitor. He also indicated tentative acceptance of the solicitor's entitlement to terminate the costs agreement in accordance with its express terms, that he did in fact terminate the agreement and that this grounded an entitlement to recover his costs and disbursements up to and including that date, as expressly provided for in the costs agreement. 11Clause 17 of the costs agreement provided as follows: (a)We will not continue to do the Work; if you fail to pay our bills; if you fail to provide us with adequate instructions within reasonable time; if you give instructions that are deliberately false or intentionally misleading; if you fail to accept an offer of Settlement which we think is reasonable; we have a conflict of interest; or if you indicate to us that we have lost your confidence. (b)We will give you at least fourteen (14) days' notice of our intention to terminate our Agreement and of the grounds on which the notice is based. (c)You may terminate this Agreement at any time. (d)If the Agreement is terminated as stated above you will be required to pay our Professional Fees and Charges for work done and for Expenses and Disbursements incurred up to the date of termination. You will be liable to pay costs whether or not the other Party to any Court Proceedings has to pay your costs of the proceedings. 12The notice of termination dated 10 February 2006 provided as follows: We refer to the above matter and in particular to the Mediation held in this matter on Tuesday 7 February 2006 which as you know ended in failure. In our view you did not adopt a reasonable approach to the Mediation. You have indicated to us that we have lost your confidence. You failed to accept our Mr Fitzpatrick's Advice to make offers at the Mediation which were within the range of what may have been considered by the Defendants. We therefore terminate our Retainer pursuant to Clause 17 of our Costs Agreement dated 17 June 2005. Pursuant to Clause 17(d) of the said Costs Agreement: "you will be required to pay our Professional Fees and Charges for work done and for Expenses and Disbursements incurred up to the date of termination". We will provide you with a Bill of Costs in due course. 13The client did not respond to the notice. The first indication of her attitude to the notice of termination was in the notice of objection dated 6 September 2010 filed in response to the plaintiff's application for costs to be assessed. In that document she claimed that there was no valid or reasonable termination of the costs agreement in that there was "no failure as described in Clause 17(1), nor any indication of a loss of confidence". 14In response to the notice of objection the solicitor detailed at some length the basis upon which he claimed the costs agreement was validly terminated. The relevant paragraphs are as follows: