New South Wales Supreme Court CITATION : Malouf v Jazairy [2003] NSWSC 762 HEARING DATE(S) : 13 August 2003 JUDGMENT DATE : 19 August 2003 JURISDICTION: Common Law Division JUDGMENT OF : Master Malpass DECISION : I order that the determinations be set aside and that such decision be remitted to the panel. Further, I order that the panel redetermine the applications. The defendant is to pay the costs of the proceedings. The Exhibits may be returned. CATCHWORDS : Cost assessments - appeal from panel - misdirection - substituted agreement - effect of ss 208C and 208D. LEGISLATION CITED : Legal Profession Act 1987, s 208C, s 208D, s 208D (2), s 208L, s 208M. CASES CITED : N/A Gerard Francis Malouf T/as Gerard Malouf & Partners (Plaintiff) PARTIES : v Haifa Jazairy (Defendant) FILE NUMBER(S) : SC 10638 of 2003 COUNSEL : Mr M J Heath (Plaintiff) N/A (Defendant) SOLICITORS : Gerard Malouf & Partners (Plaintiff) N/A (Defendant) LOWER COURT Costs Assessment JURISDICTION : LOWER COURT 92001 of 2001 FILE NUMBER(S) : 92004 of 2001 LOWER COURT Costs Review Panel JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Master Malpass Tuesday 19 August 2003 10638 of 2003 Gerard Francis Malouf T/as Gerard Malouf & Partners v Haifa Jazairy JUDGMENT 1 MASTER: The defendant was involved in a motor vehicle accident. She was a passenger. Her sister was the driver. The vehicle crashed into a telegraph pole. 2 She brought a claim for damages against both the driver and the Nominal Defendant. She alleged that an unidentified big white truck forced the vehicle off the road. 3 The plaintiff received instructions to act on behalf of the defendant. Mr Segal was briefed as counsel. 4 On 13 August 1996, she entered into a conditional costs agreement with the plaintiff. Under that agreement, fees were payable on a successful outcome of the matter, but disbursements were payable in any event. She also entered into a costs agreement with Mr Segal (See Exhibit A). He took the stance that he regarded himself as being at liberty to recover fees if it should emerge that there was any matter in respect of which his client had either withheld factual material or had made any untrue statements in respect of the matter. 5 The proceedings came on for hearing in the District Court on 19 August 1996. The defendant's legal advisers became aware that there were serious problems besetting the claim against the Nominal Defendant. This claim was settled. The defendant instructed her legal advisers to proceed against the driver. 6 In the light of the changed circumstances, the legal advisers required alteration to the contractual arrangements concerning fees. A document which purports to be a cost agreement was signed inter alia by the defendant. The intent of the document was inter alia to render her liable to pay fees in any event. 7 The trial against the driver (the first trial) had an unsuccessful result for the defendant . There was a successful appeal and a retrial was ordered. The retrial also resulted unsuccessfully for the defendant. 8 The plaintiff sought to recover fees and disbursements against the defendant. There were two separate applications for assessment. One related to the first trial. The other related to the retrial. 9 The applications were referred to a costs assessor (Mr Hattersley) for assessment. The court has been told that the defendant participated to some extent in the assessment process. A Certificate As To Determination was issued in relation to each of the assessments. The end result was the allowing of some disbursements only (the disallowed disbursements included the fees of Mr Segal). 10 The determination was reviewed by a panel. Largely, the determination of the Costs Assessor was affirmed. However, there was difference in the approach and in the expression of reasoning process. 11 The Costs Assessor concluded that the document signed on 19 August 1996 had no legal force or effect to vary or otherwise change the conditional costs agreement. In reaching that conclusion, he appears to have had regard inter alia to the termination provisions of the conditional costs agreement. He appears to have also had regard to other matters such as the need for independent legal advice and the allowing of the appeal from the decision in the first trial. Also, in disallowing the fees of Mr Segal, he appears not to have taken into account the claim of Mr Segal that he was entitled to charge his fees where there had been a withholding of material or the making of untrue statements. 12 The panel appears to have regarded the costs agreement as being of force and effect but purported to deal with it pursuant to s 208D (2) of the Legal Profession Act 1987 (the Act). 13 The Statement of Reasons of the panel contains inter alia the following:- " The Review Panel considered in the light of the above, that requiring the Costs Respondent to enter into an unconditional Costs Agreement on 19 August 1996, being the morning of the hearing, was unjust being in breach of Section 208D(2) subsections (b), (c) and (d) and contrary to the public interest in that the Costs Respondent was put under undue pressure to change the basis of her agreement as to costs. The Review Panel determined that the term of the Costs Agreement on 19 August 1996 that the Costs Respondent would be fully liable for Barristers' fees and Solicitors' costs and disbursements whether the case is successful or not is unjust ." 14 The plaintiff has brought proceedings in this Court seeking relief pursuant to ss 208L and 208M. The claim for relief is made in terms of the Amended Summons filed on 14 May 2003. 15 The defendant has not participated at any stage in these proceedings. 16 The hearing took place on 13 August 2003. After being satisfied of service of process and of the giving of other requisite notice, the hearing proceeded ex parte. 17 It seems to me that there has been misdirection by both the Costs Assessor and the panel. The dealing with the applications has seen the wrong questions being addressed, right questions not being addressed and misconception as to relevant statutory provisions. 18 The making of the costs agreement (if it be a valid agreement) would have had the effect of either impliedly bringing the conditional costs agreement to an end or at least effecting a variation in relation to the terms concerning payment of fees. The new inconsistent arrangement was intended as a substitution for what had been originally agreed (Cheshire, Fifoot & Furmston's Law of Contract 14th Ed p622). It was not a case of the plaintiff purporting to exercise an express power of termination (on any of the specified grounds after the giving of reasonable notice). 19 Section 208D of the Act enables a costs assessor to determine whether a term of a particular costs agreement is unjust in the circumstances relating to it at the time it was made. Subsection (2) identifies both a matter to which a costs assessor is to have regard (the public interest) and other matters to which he may have regard when considering whether a term is unjust in the relevant sense (those specified in (a) to (j) ). It is erroneous to regard the matters specified in (a) to (j) as giving rise to breaches of the section. There seems to be a misconception as to the consequences that flow from a determination that a term is unjust. A reading of the reasons suggests that regard was not had to all of the relevant circumstances of the case when looking at the question of whether or not the term was unjust. In the light of all of the material, the finding of "undue pressure" may have the potential to be regarded as manifestly unreasonable. 20 A determination made pursuant to s 208D has the effect that s 208C does not apply to the relevant provision. Section 208C requires a declining to assess where its provisions are met. 21 I am satisfied that there has been inter alia error of law. It seems to me that the determinations made by the panel should be set aside and that the panel should be given the opportunity to have a further look at each assessment. 22 Accordingly, I order that the determinations be set aside and that such decision be remitted to the panel. Further, I order that the panel redetermine the applications. The defendant is to pay the costs of the proceedings. The Exhibits may be returned. ********** Last Modified: 08/21/2003 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. 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