New South Wales Supreme Court CITATION : Advanced Gaming Technologies Pty Limited v Julieann P Ahern & 88 Ors [1999] NSWSC 45 CURRENT JURISDICTION : Common Law FILE NUMBER(S) : 10009/97 HEARING DATE(S) : 18 August 1997 JUDGMENT DATE : 12 February 1999 ADVANCED GAMING TECHNOLOGIES PTY LIMITED ACN 063 198 943 (Plaintiff) v PARTIES : JULIEANN PATRICIA AHERN & THE PERSONS REFERRED TO IN SCHEDULE A TO THE SUMMONS TRADING AS CLAYTON UTZ SOLICITORS (First to Eighty-eighth Defendant) GEORGE G. BUCKWORTH (Eighty-ninth Defendant) JUDGMENT OF : Levine J Mr N Perram (Plaintiff) COUNSEL : Mr N C Hutley S.C. (Defendant) Gilbert & Tobin (Plaintiff) SOLICITORS : Clayton Utz (First to Eighty-eighth Defendant) CATCHWORDS : Assessment of Costs Legal Profession Act ACTS CITED : 1987 Legal Profession Reform Act 1993 DECISION : See paragraph 58 - 21 - DLJ : 2 THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION No. 10009 of 1997 JUSTICE DAVID LEVINE FRIDAY 12 FEBRUARY 1999 ADVANCED GAMING TECHNOLOGIES PTY LIMITED (ACN 063 198 943) (Plaintiff) v JULIEANN PATRICIA AHERN & THE PERSONS REFERRED TO IN SCHEDULE A TO THE SUMMONS TRADING AS CLAYTON UTZ SOLICITORS (First to Eighty-eighth Defendant) GEORGE G. BUCKWORTH (Eighty-ninth Defendant) JUDGMENT 1 The plaintiff (AGT) has instituted, by Summons, proceedings against the first to eighty-eighth defendants (Clayton Utz) and the eighty-ninth defendant Mr Buckworth (Assessor). 2 The relief sought is a Declaration that Clayton Utz failed to comply with their obligations to the plaintiff and those imposed by Pt 11 Div 2 of the Legal Profession Act, 1987; alternatively, a Declaration is sought that the Costs Agreement dated 21 February, 1995 issued by Clayton Utz to the plaintiff is "unjust". An order is sought remitting the decision made by the Assessor on 6 December, 1996 to him. 3 The Assessor, has filed an appearance submitting to the order of the Court, save as to costs. 4 The plaintiff had retained Clayton Utz to act on its behalf in relation to a number matters and from time to time the defendants delivered bills of costs. 5 On 12 September, 1996 the plaintiff applied to this Court for an assessment of those costs pursuant to the provisions of s 199 of the Legal Profession Act, 1987 ("the Act"). The assessment was referred to the Assessor pursuant to s 206(1) of the Act. 6 It appears that during the course of the assessment the plaintiff argued first, that the defendants had failed to comply with the requirements of s 177(1) of the Act in that the costs agreement entered into between the plaintiff and the defendants did not contain an estimate of the likely amount of the costs of legal services to be provided. Secondly, it was argued that the Costs Agreement was "unjust" and should be set aside pursuant to the provisions of s 208D of the Act. The assessor duly issued a certificate on 14 November, 1996 stating that the submissions on the Costs Agreement being unjust had been considered by him and determining that the Costs Agreement was not "unjust". 7 The proceedings in this Court are said to be way of appeal under s 208L which provides: "(1) A party to an application who is dissatisfied with a decision of a costs assessor as to a matter of law arising in the proceedings to determine the application may, in accordance with the rules of the Supreme Court, appeal to the Court against the decision. (2) After deciding the question the subject of the appeal, the Supreme Court may, unless it affirms the costs assessor's decision: (a) make such determination in relation to the application as, in its opinion, should have been made by the costs assessor ; or (b) remit its decision on the question to the costs assessor and order the costs assessor to re-determine the application. (3) On a re-determination of an application, fresh evidence, or evidence in addition to or in substitution for the evidence received at the original proceedings, may be given". 8 Consequent upon the Legal Profession Reform Act, 1993 a new regime in relation to costs as from 1 July, 1994 came into effect. The Act requires a solicitor to disclose certain matters to the client in relation to the costs of legal services to be provided insofar as it is presently relevant, s 175(2) requires the disclosure of the basis of calculating the costs. 9 Section 177(1): "A barrister or solicitor must disclose to a client in accordance with this Division an estimate of the likely amount of the costs of legal services to be provided to the client by the barrister or solicitor, if the amount of the costs is not disclosed under section 175". 10 Section 178(1) requires that the relevant disclosures be made before the solicitor is retained to provide the legal services concerned subject to sub-section (2) which is concerned with the circumstances where it is not reasonably practicable to make the disclosure prior to the solicitor being retained. 11 Section 184 of the Act provides for the solicitor and client to enter into a costs agreement which may, in turn, form part of a contract for the provision of legal services. Section 184(6) provides for the making of a costs agreement by way of a written offer which is accepted in writing or by conduct. 12 Section 179(2) provides that the required disclosures may be made in a costs agreement. 13 Section 181 provides for the making of, inter alia, solicitors rules in relation to the circumstances in which it is or is not reasonably practicable to make the required disclosures. 14 On 1 July, 1994 solicitors rules made by the Council of the Law Society of NSW pursuant to s 181 commenced. These rules provided that, inter alia: "1.2 For the purposes of section 181 of the Legal Profession Act, the circumstances in which the disclosure of the information required by sections 175 and 177 of the Act will be considered to be not reasonably practicable, will include those circumstances in which a practitioner receives instructions from, or is consulted by, a person - (a) … (b) … (c) … (d) who seeks the provision of a legal service which can be, or needs to be, performed immediately or soon after instructions for it are given; and there is no reasonably practicable opportunity to provide the specified information in writing before the practitioner has performed all, or a significant part, of the legal services required". 15 On 1 December, 1994 the Council made a further rule providing that: "1.3 For the purposes of section 181 of the Legal Profession Act, the following Rules have effect: 1.3.1 Where a practitioner has - 1.3.1.1 agreed to provide to a client legal services as they are specified and required by the client, and charge for them at a declared rate, or on an agreed basis; and 1.3.1.2 disclose to the client the intended billing arrangements and the other information required by section 175 of the Act; it will be deemed to be not reasonably practicable for the practitioner to disclose more information under sections 175 and 177 while that agreement continues in force". 16 It is common ground that there was a costs agreement between the plaintiff AGT and Clayton Utz which complied with s 175 of the Act and that various bills of costs were rendered by Clayton Utz to AGT for legal work performed. 17 The plaintiff now claims that the assessor erred in law in rejecting the contention that Clayton Utz had breached s 177 of the Act and further he erred in law in failing to set aside the Costs Agreement as unjust pursuant to s 208D of the Act. 18 For the plaintiff it is submitted that the briefest inspection of the Costs Agreement reveals that there is no estimate of the costs likely to be incurred and that therefore one starts with a prima facie position that s 177 was not complied with. Before the assessor, Clayton Utz sought to justify its failure to give an estimate by reference to a rule of the Law Society. 19 The position begins with s 180, exempts a solicitor from having to make an estimate where it is not practical to do so. Section 181 provides that the solicitors rules may make "provision for or with respect to … the circumstances in which it is or is not reasonably practicable to make a disclosure under the Division". 20 Solicitors Rule 1.3.1 provides: 1.3.1 Where a practitioner has - 1.3.1.1 agreed to provide to a client legal services as they are specified and required by the client, and charge for them at a declared rate, or on an agreed basis; and 1.3.1.2 disclose to the client the intended billing arrangements and the other information required by section 175 of the Act; it will be deemed to be not reasonably practicable for the practitioner to disclose more information under sections 175 and 177 while that agreement continues in force". 21 It is contended by Clayton Utz that the fee agreement of 21 February, 1995 is a 1.3.1 fee agreement. For the plaintiff it is asserted that it cannot be doubted that that is what the agreement purports to be. 22 However the subject matter of the Clayton Utz retainer, it is said, was such as to make inapplicable Rule 1.3.1. That rule, it is submitted, is concerned with the situation which obtains where a firm of solicitors performs many sundry items of ongoing business for a particular client. The proposition that a major piece of injunctive litigation in the Federal Court involving the retaining of senior counsel can be classified as "sundry" needs only to be stated to be exposed for its implausibility; there is a world of difference, it is said, between a chain of unrelated sundry matters and a significant piece of commercial litigation. The plaintiff contends the Clayton Utz's invoking of Rule 1.3.1. fails to grapple with that difference. 23 In the event that Clayton Utz can correctly invoke Rule 1.3.1 in the circumstances, then it is submitted that 1.3.1 is invalid. It is a piece of delegated legislation under s 181. A Regulation may not contradict the statute from which it derives its authority. Section 180 exempts a practitioner from giving an estimate where it is not practicable to do so. There was nothing in the circumstances of this case which made it impracticable to give an estimate. Rule 1.3.1 does not apply in a case such as the present, if it did it would be invalid. 24 Thus in those circumstances it is said there was a failure to disclose contrary to the provision of s 177. 25 For the defendant it is contended that AGT faces an almost insuperable hurdle in demonstrating that the assessor erred in law in relation to the allegation that Clayton Utz contravened s 177. The assessor made no such finding nor are there any reasons for his determination that the Costs Agreement was not "unjust". It is submitted that there is no need for the assessor to make a finding as to whether s 177 was breached. It was open to the assessor to decide that the Costs Agreement was not unjust irrespective of whether s 177 was breached or not. 26 A failure to comply with s 177 does not of itself, it is submitted, amount to a breach of the Act (s 183). Accordingly, a failure to comply with s 177 cannot necessarily render a costs agreement unjust. It follows therefore that the determination by the assessor that the Costs Agreement was not unjust does not of itself demonstrate that the assessor considered that there was a failure to comply with s 177. He may have found that there was a breach, but one which, in the circumstances of the case, was insufficiently serious to render the Costs Agreement unjust. Alternatively he may have found that there was no breach of s 177. The record states nothing. In either case however, it is submitted, AGT can point to no error in point of law to found an appeal under s 208L which relates to the alleged contravention of s 177. 27 The defendant contends that there was compliance with the precise terms of Solicitors Rule 1.3.1 and that this was, in fact, as is clear from its submissions, accepted by AGT. 28 The defendants perceive AGT's position to be that it contends that the rule was only concerned with situations where "a firm of solicitors performs many sundry items of ongoing business for a particular client". There is nothing to support such a contention because the rule is clear. The rule addresses circumstances where the solicitor has agreed to provide the client with legal services as they are specified and required by the client; the solicitor has agreed to charge for those services at a declared rate; and the solicitor has disclosed all other matters required to be disclosed by s 175 of the Act. 29 It is submitted when a client makes an agreement with a solicitor for the provision of legal services "as they are specified and required by the client" the solicitor is not in a position to know whether there will be many or few occasions when the client will require such services. "Many sundry items of ongoing business" may eventuate; alternatively, only a few matters may eventuate. It cannot be the case that in the event that the client ultimately only requests legal service in relation to a single matter, Rule 1.3.1 no longer applies to the solicitor who then becomes obliged to provide a s 177 estimate. 30 Whether or not the agreement falls within the scope of Rule 1.3.1 must be determined at the time the agreement is entered into, and by reference to the terms of the actual agreement. It is incorrect, it is submitted, to read into the rule an implied requirement for the performance of "many sundry items of ongoing business" - not merely because there is nothing in the rule to justify that implication, but also because the question whether the implied requirement will be satisfied cannot be known at the time the Costs Agreement was entered into. 31 As to the question of validity of Rule 1.3.1: the Solicitors Rules may make provision with respect to the circumstances in which it is reasonably practicable to make a disclosure (s 181). What is reasonably practicable is clearly a sub-class of what is practical: Marshall v Gotham (1954) AC 360 at 373 per Lord Reid: "there may well be precautions which it is practical but not reasonably practical to take"; see also 369 per Oaksey LJ. 32 In The King v Archdall & Roskruge (1928) 41 CLR 128 at 140 Higgins J stated: "As so often happens in recent legislation, such an issue as 'reasonableness' is left to the tribunal, without any guidance from the legislature; and the tribunal has to weigh all the circumstances in order to decide the issues for itself in each particular case. It is not a question of law; it is rather a question of general social standards". (See also per Knox CJ, Isaacs, Gavin Duffy and Powers JJ at 136.) 33 So in s 181 has left it to the drafters of delegated legislation who are likely to be aware of the realities of the situation to specify the circumstances in which disclosure would not be reasonably practical. 34 There is no suggestion that those who drafted the Solicitors Rules did not hold a bona fide belief that in the circumstances of Rule 1.3.1 disclosure would not be reasonably practical. Moreover there are good reasons for considering that to be so particularly in the case of commercial litigation. Commercial matters, it is said, tend to follow a far more unpredictable course than conveyancing, wills and personal injuries litigation. In this very matter, for example, agreements passed through multiple drafts. New questions arise from time to time. Unanticipated issues arise in the course of litigation. In theses circumstances, the provision of a meaningful estimate is extremely difficult. 35 The rule however ensured that AGT was at all times aware of the basis upon which the services it required would be charged, and of its other rights and obligations in relation to those costs. 36 It is submitted that in any event the Court has only limited power to declare the rule invalid. Validity will be presumed: see Gibson v Mitchell (1928) 41 CLR 275 at 279 where Isaacs J stated (on the question whether a regulation was necessary or convenient for carrying out the Act): "primarily (the words necessary or convenient) signify what the Governor-General may consider necessary or convenient and no court can overrule that unless utterly beyond the bounds of reason and so outside the power". Similarly in the case of Rule 1.3.1 AGT faces the obstacle of demonstrating that the drafters of the rule could not reasonably have considered that the circumstances which it specifies are circumstances in which disclosure is not reasonably practicable. 37 As to the question of whether under s 208D the Costs Agreement should be set aside the plaintiff contends that there are two matters which justify that course. 38 First, there was the failure by Clayton Utz to comply with s 177, a significant matter. In effect in a case where there was no reason of practicality not to give an estimate Clayton Utz escaped giving one. The purpose of the amendments to the Act was to allow informed decisions to be made. Not to give an estimate in such a case effectively interfered with that aim and the breach was therefore a significant one. 39 Secondly, the Costs Agreement it is contended was hopelessly misleading. It contained the following, it is submitted, curious passage: "One provision obliges a lawyer to provide an estimate of the costs of a matter before the lawyer is retained in relation to the matter, let alone commence work. Whilst the provision of the estimate can be deferred in some circumstances the requirement has proved to be impracticable in the commercial arena. This is particularly so where there is an ongoing relationship between the lawyer and the client. Accordingly the regulations have been amended to remove this requirement where the lawyer has agreed to provide the client with legal services as they are specified and required by the client and to charge for them at a declared rate or on an agreed basis. In order to comply with the new requirements it is necessary for us to vary our existing costs agreement" (emphasis added). 40 Two things follow, it is said. At the time the document was written the plaintiff had retained Clayton Utz for under one month and in respect of one matter: namely, a request to draft a single page letter. At the time the fee agreement was sent, Clayton Utz were not, in fact, retained to do anything. To describe a professional relationship which consists solely of the drafting of a single page letter as an ongoing relationship does violence to the English language. Secondly, the statement that the regulations "required" Clayton Utz to amend its agreement is false. The regulations require no such thing. Accordingly, the fee agreement (a) referred to an ongoing relationship which did not exist and (b) represented that it was necessitated by a regulation which necessitated no such thing. 41 In those circumstances the Costs Agreement should have been set aside as being unjust. 42 Clayton Utz notes that AGT does not allege that the assessor's decision is flawed because he failed to take into account a relevant consideration or because he took into account an irrelevant consideration. Indeed, the assessor expressly took into account the written submissions made on behalf of AGT of 29 October, 1996 which related to the alleged contravention of s 177 and the misleading nature of the Costs Agreement. It must be taken that in determining whether or not the Costs Agreement was "unjust" within the meaning of s 208D the assessor had regard to those arguments. 43 The assessor's determination that the Costs Agreement was not unjust and should not be set aside is a question of fact not of law, it is submitted. It may be accepted that often the question whether facts have been fully found fall within the provisions of a statute properly construed is a question of law, however: "special considerations apply when we are confronted with the statute which on examination is found to use words according to their common understanding and the question is whether the facts as found fall within these words…". The only question raised was whether the appellant's behaviour was 'insulting'. As it was not unreasonable to hold that his behaviour was insulting, the question was one of fact": Hope v Bathurst City Council (1980) 144 CLR 1 at 7 per Mason J. 44 Similarly the only question raised here whether the costs agreement was "unjust" is also a question of fact. It therefore follows so, it is contended, that the appeal is not properly brought under s 208L but requires leave. 45 Moreover, AGT is required to demonstrate that the assessor's determination was so unreasonable as to permit the Court to interfere with his discretion: "the limited role of a court reviewing the exercise of an administrative discretion must constantly be borne in mind. It is not the function of the court to substitute its own decision for that of the administrator by exercising a discretion which the legislature has vested in the administrator. Its role is to set limits on the exercise of that discretion and a decision made within those boundaries cannot be impugned": Minister for Aboriginal Affairs v Peko Wallsend (1986) 162 CLR 24 at 40-41 per Mason J. This is said to be another hurdle AGT is unable to surmount. 46 In any event, even if this Court were exercising again the discretion conferred on the assessor no different result would follow. The letter is not "hopelessly misleading" as is put by AGT in its submissions. It appears that AGT from the perspective of the defendant is advancing two bases to support this proposition: first, it contends that the reference to an ongoing relationship is misleading. On a fair reading of the letter, it is clear that the letter does not describe the relationship between AGT and Clayton Utz as an "ongoing relationship" but merely refers to a particular set of circumstances (an ongoing relationship) which created particularly difficulties in complying with the legislation. Secondly, the inclusion of the words "in order to comply with the new regulations" is also said to be "hopelessly misleading". The suggestion that the regulation required the parties to enter into a new agreement is, it is submitted, extraordinary. When the sentence is read as part of the letter as a whole, it is clear that the need to comply with the new regulations arises if and only if, the parties were willing to bring themselves within the provisions of the new rule. 47 AGT was free to reject the Costs Agreement which was offered. Furthermore, the Agreement expressly provided that "needless to say, we are happy to provide you with an estimate of the likely costs involved in a particular matter on request". AGT never made any such request. 48 Finally, even had the assessor been minded to set aside the Costs Agreement there is no basis for the assertion that the scale rate should be applied. The Act requires the assessor to determine an amount which is "fair and reasonable" for the legal services provided. The hourly rate specified in the Agreement are reasonable rates well within the range of rates for firms specialising in commercial work. 49 For reasons shortly to be stated, it is unnecessary for the Court to consider the resolution of the substantive claims for declaratory relief. 50 Nonetheless, I do state that the submissions for the defendant Clayton Utz are persuasive. I would be inclined to accept the submission that any failure to comply with s 177 of the Act would not, of itself, amount to a breach of the Act (s 183(1)). Further, any failure to comply with s 177 would, in my view, were I in a position to decide it, not bring it about that automatically a costs agreement would necessarily be "unjust'. In any event, I would not be persuaded that there was non-compliance with s 177 by reason of the application of r 1.3.1. Further, the validity of the rule, I would otherwise hold to be not impugned for the reasons advanced in the course of argument. 51 The more difficult area adverted to in the course of submissions is whether or not the finding by the assessor that the Costs Agreement was not "unjust" was a finding of fact or law: there being an appeal as of right on a question of law and an appeal by leave otherwise (ss 208L and 208M). One would be inclined to the view that a decision by a person who may be acting either judicially or in the performance of an administrative function as to whether an "agreement" between parties is "unjust" could be characterised as a decision on a matter of law, but one founded upon findings of fact made in the light of evidence tendered before the decision maker. It is the absence of reasons that makes the resolution of this aspect difficult if not impossible. 52 At the conclusion of oral submissions before me on 18 August 1997, counsel for Clayton Utz drew to my attention a decision of Sperling J handed down on 1 August 1997 in Kennedy Miller Television Pty Limited v J S Lancken & Anor (unreported). In that decision his Honour held that there was an obligation upon the assessor to give reasons. In the instant matter of course the assessor did not give reasons nor was he asked to give reasons and, indeed, made clear his position that he would entertain no further submissions from the parties on the issue of the "just/unjust" agreement upon his having ruled that it was not "unjust". 53 The decision of Sperling J was the subject of an appeal to the Court of Appeal and judgment in this matter was deferred pending the outcome of that appeal dealing as it did with a critical matter. The appeal was heard on 25 February 1998 and the judgment of the Court (Priestley JA, Handley JA, Powell JA) was delivered on 30 June 1998 and it is now reported (1998) 43 NSWLR 729. The parties to the proceedings before me were invited to provide further submissions in the light of the judgment of the Court of Appeal. 54 The proceedings before Sperling J and indeed before the Court of Appeal, proceeded on the assumption that the function performed by the assessor was administrative in nature. It was held by the Court of Appeal that there is an obligation on a Costs Assessor to give reasons for determinations. It being assumed that the Costs Assessors function is administrative, Pt 11 Div 6 of the Act provides the kind of "special circumstances" in which statutory provisions should be construed so as to impose upon the decision-maker an implied duty to provide reasons. At p 735E Priestley JA said: "… it seems very clear that unless the Costs Assessors are to be obliged to give reasons for their determinations, the appeal provisions are likely to be, although not completely useless, so close to it as to negate the clear intent that in regard to questions of law at any rate a party dissatisfied with the Costs Assessor's decision should have a real and not largely illusory right of appeal". 55 In brief written submissions dated 28 August 1998 it was contended for the plaintiff that the decision of the Court of Appeal as to the absence of reasons provided a basis for allowing the appeal. In submissions dated 31 August 1998 it was contended for Clayton Utz that the principles expounded by the Court of Appeal do not apply as no request for reasons was made of the assessor. 56 As I have intimated above, the absence of reasons, in my view, precludes a determination of the substantive declaratory relief sought. I am of the view however, that the decision of the Court of Appeal makes it quite clear that irrespective of whether or not a request for reasons is made, an assessor is obliged to give them, a fortiori, in my view, in respect to a finding that a costs agreement is not "unjust". 57 In these circumstances the plaintiff is entitled to the relief sought in orders 3 of the Summons remitting the matter to the eighty-ninth defendant, the Assessor. In the light of the decision of the Court of Appeal the provision of reasons as to the Determinations dated 14 November 1996 (determination that agreement not urgent) and 6 December 1996 (determination as to quantum) is required. 58 Accordingly, the formal orders are: 1. The application for assessment of costs is remitted to the eighty-ninth defendant for the purpose of his providing reasons for his Determination dated 14 November 1996 that the Costs Agreement is not unjust; 2. That the assessment of the practitioner/client costs dated 6 December 1996 is remitted to the eighty-ninth defendant for the purpose of his providing reasons for his Determination. 3. The first to eighty-eighth defendants (Clayton Utz) are to pay the costs of the plaintiff. 4. Liberty to apply on 7 days notice. Last Modified: DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.