New South Wales Supreme Court CITATION : IPPER v MYER SOLOMON ASSOCIATES & ORS [2002] NSWSC 1141 FILE NUMBER(S) : SC 11277 OF 2002 HEARING DATE(S) : 3 June 2002 JUDGMENT DATE : 3 December 2002 MARIA KLEIN IPPER (Plaintiff) v MYER SOLOMON AND ASSOCIATES PARTIES : (First Defendant) SHERIFF OF NEW SOUTH WALES (Second Defendant ) LOCAL COURT (Third Defendant) JUDGMENT OF : Levine J T Molomby SC (Plaintiff) COUNSEL : R Horsley (First Defendant) V Kalantzis (Plaintiff) SOLICITORS : Myer Solomon & Associates (First Defendant) CATCHWORDS : Legal Profession Act 1987 - ss175, 177, 178, 179, 182 - costs recovery proceedings in Local Court - default judgment - declaratory and other relief sought LEGISLATION CITED : Legal Profession Act 1987 Conder v Silkbard [1999] NSWCA 459 CASES CITED : Graham v Aluma Lite Pty Ltd (1996) 39 NSWLR 58 Zizza v Seymour [1976] 2 NSWLR 135 DECISION : See paragraphs 28 and 29 - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION JUSTICE DAVID LEVINE TUESDAY 3 DECEMBER 2002 11277 OF 2002 MARIA KLEIN IPPER (Plaintiff) v MYER SOLOMON AND ASSOCIATES (First Defendant) SHERIFF OF NEW SOUTH WALES (Second Defendant ) LOCAL COURT (Third Defendant) JUDGMENT ( Legal Profession Act 1987 – ss175, 177, 178, 179, 182 – costs recovery proceedings in Local Court – default judgment - declaratory and other relief sought) 1 The issues for determination arise in the following uncontested factual context. The plaintiff was a client of the first defendant law firm. The law firm did certain work for the plaintiff. The plaintiff did not pay a memorandum of fees and proceedings were instituted in the Burwood Local Court. The client filed a verified Defence to the Statement of Liquidated Claim; an Amended Statement of Claim was filed to which no Defence was filed; default judgment was entered; the next thing the client knew was that the Sheriff was on the doorstep of her business. The last mentioned event brought it about that O'Keefe J, on 7 May 2002, made certain interim orders, the relevant one being that the second defendant be restrained from executing the writ of execution issued in matter number 1950/01 in the Local Court pending final determination of this matter. 2 In addition to the continuation of the order made by O'Keefe J, the plaintiff seeks in her Amended Summons the following orders: 3. An order setting aside the default judgment obtained by the first defendant against the plaintiff in matter number 1950/01 in the Local Court at Burwood. 4. An order quashing the writ of execution issued in matter number 1950/01 in the Local Court at Burwood. 5A. A declaration that proceedings number 1950/01 in the Local Court at Burwood are invalid. 5B. An order permanently restraining further prosecution of proceedings number 1950/01 in the Local Court at Burwood. 3 The affidavit of the plaintiff, sworn 7 May 2002, deposes, relevantly to the issues I have to decide, as follows. In October of 2001 she received a Statement of Liquidated Claim. The cause of action in that pleading is as follows: 1. Meyer Solomon & Associates provided professional services to the defendant at the defendant's request and incurred expenses on behalf of the defendant at the defendant's request between 9 March 2000 to the 26 April 2000 inclusive. Full details and particulars of which have been provided to the defendant to the total value of $3,500.00. 2. Meyer Solomon & Associates issued a Memorandum of Professional Costs and Disbursements on the 26 April 2000 in the amount of $3,500.00. 3. The plaintiff has requested payment on several occasions, however the defendant has failed, neglected and refused to pay the said $3,500.00. 4. Further or in the alternative the plaintiff claims that the defendant has received the benefit of services of the plaintiff to the value of $3,500.00 whilst not paying for such services. The plaintiff alleges that the defendant has been unjustly enriched to the value of $3,500.00. 5. The plaintiff claims $3,500.00. 4 To that Statement of Liquidated Claim a Notice of Grounds of Defence was filed in the following terms: 1. The defendant admits the first sentence of paragraph 1 of the Statement of Liquidated Claim, as to the second sentence, the defendant denies that full details and particulars of services rendered and costs incurred have been provided. On the contrary, the defendant sought them in a letter dated 30 December 2000, and the plaintiff by letter dated 19 January 2001 refused to provide them. 2. The defendant admits paragraphs 2 and 3 of the Statement of Liquidated Claim. 3. The defendant denies paragraph 4 of the Statement of Liquidated Claim. 4. The defendant, whilst acknowledging that the plaintiff provided professional services to her, says that it was agreed between her and the plaintiff that she would not have to pay the plaintiff's professional costs until she had recovered the money at issue, and that this condition has not yet been satisfied. 5. The defendant says that the plaintiff failed to comply with s175, 177, 178 and 179 of the Legal Profession Act 1987 and is therefore barred by s182(2) of that Act from maintaining these proceedings. 5 In December 2001 the plaintiff received by mail an Amended Statement of Liquidated Claim and an Amended Memorandum of Professional Costs and Disbursements. The Amended Statement of Liquidated Claim is in the following terms: 1. Meyer Solomon & Associates provided professional services to the defendant at the defendant's request and incurred expenses on behalf of the defendant at the defendant's request between 9 March 2000 to the 26 April 2000 inclusive. Full details and particulars of which have been provided to the defendant to the total value of $3,500.00. 2. Meyer Solomon & Associates issued a Memorandum of Professional Costs and Disbursements on the 26 April 2000 in the amount of $3,500.00. 3. The plaintiff has requested payment on several occasions, however the defendant has failed, neglected and refused to pay the said $3,500.00. 4. In the alternative the plaintiff wishes to substitute the itemised account provided to the defendant, dated 20 November 2001 instead of the account of the 26 April 2000. 5. Further, or in the alternative, the plaintiff claims that the defendant has received the benefit of services of the plaintiff to the value of $4,300.00 whilst not paying for such services. The plaintiff alleges that the defendant has been unjustly enriched to the value of $4,300.00. 6. The plaintiff claims $4,300.00. 6 The Amended Memorandum of Professional Costs and Disbursements is dated 20 November 2001 and is in respect of work specified as having been done from 3 March 2000 to 20 April 2000. 7 The plaintiff deposes that on 12 December 2001 at a pre-trial review in relation to the matter in the Local Court at Burwood, an order was there made that she file a Defence to the Amended Statement of Liquidated Claim within 28 days: she did not do so as she considered that the Defence on record did not require amendment. 8 The plaintiff received a letter dated 5 February 2002 which referred to the Amended Statement of Liquidated Claim and advising of the danger of a default judgment. The plaintiff's approach to this letter was based upon what she said was advice that default judgment could not be entered against her when she had a Defence on the record. I add that in that in that context the next thing she heard of was the arrival of the sheriff's officer at her business premises on 2 May 2002. 9 On 7 April 2000 the plaintiff said she received from the first defendant a "costs agreement" which she did not execute. 10 The affidavit filed on behalf of the law firm was sworn by Zoltan Brull on 30 May 2002. It has annexed to it correspondence of a contentious nature in relation to the current proceedings. It does indicate, however, that on 6 April 2000 the law firm wrote to the client in relation to the particular legal matter that gave rise to the claim for professional costs. In that letter (paragraph 7) the following is stated: "We refer to the writer's telephone conversation on the 9 March 2000 in which the writer outlined the basis of the charges to be incurred in this matter which is based on an hourly rate of $200.00 and in accordance with the requirement of the Legal Profession Act we enclose our Cost Agreement in duplicate and we request that you carefully read the contents of the same and on agreement sign one copy and return the executed copy to the writer together with a cheque for $1,000.00 on account of professional costs and disbursements likely to be incurred". 11 For the plaintiff it is contended that the proceedings in the Local Court are "invalid" and thus constitute an abuse warranting intervention by this court. The more so, it is said, when a legal practitioner is involved and the pertinent statutory provisions have hitherto not been subject to authoritative consideration. 12 The "invalidity" is said to arise from the operation of s182(2) of the Legal Profession Act 1987. S182 falls within Part 11 ("Legal fees and other costs") of the legislation. S174 sets out "Clients rights under Part", included in which (s174(1)(b)) is the statement that a "client need not pay the … solicitor's bill until it has been assessed by a costs assessor if the client is not given the information about how costs will be charged", and (s174(1)(e): "proceedings against the client for recovery of costs cannot be brought unless a bill of costs in the proper form has been given to the client and at least 30 days have passed". 13 Division 2 of Part 11 of the Act relates to disclosure of matters relating to costs. S175, especially ss(2), provides for what is to be disclosed; s178 provides for when disclosure is to be made: s178(1) before the solicitor is retained to provide legal services unless the section otherwise provides; s178(2): if it is not reasonably practicable to make the disclosure before the solicitor is retained, the disclosure is to be made as soon as practicable after that solicitor is retained. S179 requires disclosure to be in writing. 14 S182 is in the following terms: 182(1) If a barrister or solicitor fails to make a disclosure to a client in accordance with this Division of the matters required to be disclosed by section 175 in relation to costs, the client need not pay the costs of the legal services unless the costs have been assessed under Division 6. (2) A barrister or solicitor who fails to make a disclosure in accordance with this Division of the matters required to be disclosed by section 175 or 176 in relation to costs may not maintain proceedings for the recovery of the costs unless the costs have been assessed under Division 6. (emphasis added) 15 It is argued that the legislature has set out to ensure clients know where they stand in relation to costs and puts in place important protections if they have not, in effect, been put in that position. It is submitted that a consequence of non-compliance with s182(2) is that a legal practitioner is put in the position of having to have the costs assessed at the practitioner's expense before requiring the client to pay. There is an intent to protect clients from litigation by legal practitioners, "absolutely" it is said, unless either the disclosure provisions have been complied with or the costs have been assessed. It is argued that the protection is not really adequate if the client is put at the peril of having to get legal advice or "be smart" enough in the client's own interests when the practitioner chooses to bring legal proceedings. 16 S182(2) does not, it is argued, offer it a "defence"; but non-compliance with it goes to the validity of the proceedings as a whole. It would be inimicable to the scheme of the Act if the position were otherwise than that the proceedings were invalid if the condition precedent had not been complied with. 17 The "novelty" of the matter (and, thus, importance, for the reasons referred to) arises from what is said to be the approach taken by the Court of Appeal in an early decision and more recent ones. 18 In Zizza v Seymour [1976] 2 NSWLR 135, the Court principally was concerned with a point not taken below. The litigant in person had not raised what was described as a "complete" defence pursuant to s21(1) of the Legal Practitioners Act 1898 - the solicitor's "memoranda" were not "bills". It is in that context that the remarks of Moffitt P are to be understood, at 137B-C: "The respondent before us does not argue that, if the defence had been raised at or before the trial, he could have mended his hand … He does not argue that, by some amendment or other evidence he could have succeeded upon some different basis. This concession was correct. The defect in his case, by reason of the absence of a proper bill, could, not be corrected by delivery of a proper bill after the commencement of the proceedings. The client or party to be charged is entitled to have the proper bill before proceedings against him are commenced, as the express words of s. 21 (1) show". 19 Mr Molomby made a brief reference to the decision of the Court of Appeal in Graham v Aluma Lite Pty Ltd (1996) 39 NSWLR 58. The Court was concerned with the operation of s7(1) of the Credit (Home Finance Contracts) Act 1984 which proscribed the institution of proceedings or the exercise of a right under contract by a credit provider until after the expiration of one month after service of a notice in prescribed form, specifying the proceedings or the right. Service of such a notice was held to be a condition precedent to any action being "instituted" in court (at 66C per Clarke JA). His Honour did remark that failure to comply with s7 was "inimicable" to the scheme of the Act. 20 In my opinion s182(2) is not in terms quite cognate with the section of the legislation with which the Court was concerned in Aluma Lite Pty Ltd. 21 Conder v Silkbard [1999] NSWCA 459 concerned, inter alia, the operation of s192(1) of the Legal Profession Act and its mandatory quality in requiring that a bill be given at least 30 days prior to the commencement of proceedings to recover costs. It was held, per Beazley JA at paragraph [29], that failure to comply with that section is a defence to an action bought by a solicitor to recover legal costs, citing Zizza v Seymour. It is interesting to observe that the factual background to Conder was the institution by the legal practitioner of proceedings in the Local Court to recover legal costs. Prior to the determination of the Local Court proceedings the respondent brought proceedings in this court that ended in the Court of Appeal, seeking an order under s209C of the Legal Profession Act that the solicitors provide a bill of costs and that the proceedings in that court be stayed. 22 Beazley JA remarked (paragraphs [32] and [33]) to the effect that the defence that no bill of costs was given as required by the section under consideration was pleaded in the proceedings and should have been, "and still should be", dealt with by the Local Court (see also Fitzgerald JA at paragraph [46]). 23 It was acknowledged in the course of submissions that there were certain factual issues outstanding, not least as to whether there had been "disclosure". It could not be gainsaid that the very matter that was thought to be made an issue in this court had been raised by the plaintiff client in the Local Court by way of verified Defence. Interestingly, it was also argued that this court should entertain to conclusion the Amended Summons to avoid "proliferation of proceedings": I am puzzled by this as it was the initiative of the plaintiff herself that brings the matter here. 24 Whilst there may be some force in what Mr Molomby advanced as to the series of Court of Appeal decisions to which I have referred, not giving consideration to any distinction between "creating a defence" and "making the proceedings invalid", I do not see what were described as "public policy" considerations compelling the relief sought. On the one hand, the plaintiff client has put on a substantive defence to a Statement of Claim and not sought to set aside a default judgment, inter alia, based upon that substantive defence to permit the litigation of issues of fact essential (and to some extent, acknowledged) to the resolution of s182(2) and its effect. On the other, the plaintiff client seeks to have determined in this court, and in a vacuum as far as fact finding is concerned, not the validity of a defence relied upon in the Local Court, but the invalidity of the proceedings to which that defence was filed, which issue, as I have said, is dependent on fact finding. 25 The issue could be important insofar as it involves the legal profession and this court's role vis-à-vis that profession. The current proceedings are, however, like those in Conder, in my view misconceived. 26 It is open to the plaintiff client to seek relief in relation to the default judgment under Part 26 of the Local Court (Civil Claims) Rules and without definitively pronouncing upon it, a consideration might well be whether there in fact was any requirement for the plaintiff, as a defendant in the Local Court, to amend her Grounds of Defence merely by reason of the plaintiff having amended in that court his Statement of Claim: Pt 16 r2(4). 27 Without a full and proper examination of the evidence, at the very least, this court is in no position to declare the proceedings in the Local Court a "nullity" in the circumstances outlined above. The remedy for the plaintiff presently lies in that jurisdiction. 28 Accordingly, order 2 in the Amended Summons is continued until further order of this court or the Local Court, otherwise, the Summons is dismissed. 29 The plaintiff is to pay the first defendant's costs, otherwise I make no order as to costs. ********** Last Modified: 12/04/2002 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.