Young v Fitzpatrick Solicitors Pty Ltd [2011] NSWSC 1036

Supreme Court New South Wales

Medium Neutral Citation: Young v Fitzpatrick Solicitors Pty Ltd [2011] NSWSC 1036 Hearing dates: 30/08/2011 Decision date: 07 September 2011 Jurisdiction: Common Law Before: Fullerton J Decision: 1. Summons dismissed. 2. Plaintiff to pay defendant's costs. Catchwords: PROCEDURE - costs - appeals as to costs - appeal against decision of costs assessor following termination of a conditional costs agreement - s 208L Legal Profession Act 1987 Legislation Cited: Legal Profession Act 1987 Cases Cited: Doyle v Hall Chadwick [2007] NSWCA 159 House v The King [1936] HCA 40; 55 CLR 499 Muriniti v Lyons [2000] NSWSC 680 Wentworth v Rogers; Wentworth & Russo v Rogers [2006] NSWCA 145; 66 NSWLR 474 Category: Principal judgment Parties: Maureen Mary Young (Plaintiff) Fitzpatrick Solicitors Pty Ltd (1st Defendant) Christopher Phillip Wall (2nd Defendant) Representation: A Blank (Plaintiff) RE Quickenden (1st Defendant) Beazley Singleton Lawyers (Plaintiff) Fitzpatrick Solicitors (1st Defendant) File Number(s): 2011/51059

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: 1. TERMINATION OF THE CONDITIONAL COSTS AGREEMENT 1.1 Clause 17(a) of the Conditional Costs Agreement sets out the specific circumstances in which the law practice may terminate the retainer, bringing into play clause 17(d) entitling the law practice to recover professional fees and charges for work done, and expenses and disbursements incurred up to the date of termination. 1.2 Relevantly, clause 17(a) provides the law practice may terminate the retainer "if you fail to accept an Offer of Settlement which we think is reasonable" and "if you indicate to us that we have lost your confidence". 1.3 At the first mediation on 3 November 2005, the Defendants made an offer of $700,000.00 in full and final settlement of all actions. The second mediation was scheduled for Tuesday, 7 February 2006. Just before that date, on Thursday, 2 February 2006, the Costs Respondent sent to the Costs Applicant figures for mediation purposes on two scenarios, valued at $9 million to $17 million respectively. The Costs Applicant warned the Costs Respondent it was not rational to expect she could achieve those amounts, and advised that whilst the Defendants might improve on their last offer, it would be difficult to achieve more than $1 million. Nevertheless, the Costs Applicant committed to represent the Costs Respondent at the second mediation, and did in fact do so. 1.4 Following the second mediation, the Costs Applicant terminated the retainer, stating in a facsimile to the Costs Respondent dated 10 February 2006 the reasons for doing so: "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." 1.5 Copies of correspondence between the Costs Applicant and Costs Respondent leading up to the date of termination are annexed for the Costs Assessor's consideration. (In reading the emails it should be noted the Costs Respondent's emails are dated a day later than the day they were in fact sent). 15On 22 November 2010 the plaintiff's solicitor set out his client's response to the assessor's preliminary or tentative view in the following terms: The client does not dispute placing on record her requirements in the litigation and her expectations from the solicitor in very definite and even terse terms. Quite clearly she expected the solicitors to endeavour to achieve a monetary result substantially in excess of what the solicitor was advising her to accept. She instructs that the tone of her correspondence was written out of frustration in her efforts to get the solicitor to accept her position and instructions but she denies however losing the solicitors confidence... 16He went on to say: As issues of the proper construction and valid termination of the agreement have now been raised we respectfully submit that consideration must now be given to the future conduct of this costs assessment on the basis that the Court's intervention may be inevitable. We have requested the extension referred to in the second paragraph of this letter as we have been instructed to submit a brief to Counsel as to the appropriate course upon which to embark as it would appear to us that your role and jurisdiction as a costs assessor does not extend to the making of a determination as to whether costs are payable when there is a real dispute between the parties as to liability. 17After referring to the authorities inclusive, in particular, of Doyle v Hall Chadwick he submitted: Whether or not the solicitor has lawfully and reasonably terminated the conditional costs agreement with the client, we suggest, can only be determined by a Court of competent jurisdiction after reception of sworn evidence which can be tested by cross examination and an assessment of such evidence determined by the Court. The solicitor has asserted the entitlement to terminate based on the client losing confidence and [her] failure to accept advice regarding settlement offers at Mediation. The Solicitor purported to terminate the agreement on 10 th February 2006, three (3) days after the second Mediation. Such haste by the solicitor to proceed to termination, in breach of clause 17(b) of the agreement (at least 14 days notice of intention to terminate required) may in fact give rise to a suggestion of some other underlying reason. 18In his reasons for decision, and after construing the operation of Clause 17 in a way which was not the subject of challenge on the appeal, the costs assessor dealt with the plaintiff's challenge to jurisdiction. 19After referring to the authorities as to the applicable principles on the issue whether an assessor can and should determine a threshold factual issue (including the statement of principle in Doyle v Hall Chadwick which the parties to the appeal agree is the binding principle) he summarised the law as follows: 9.7.1 An assessor can and normally should determine threshold factual questions, if those questions have to be determined in order to fulfil the assessor's function of determining the fair and reasonable amount of costs as between solicitor and client; 9.7.2 An assessor should not issue a certificate unless satisfied that the costs are payable; 9.7.3 If there is a real dispute on substantial grounds as to any threshold or necessary issue, and that issue cannot clearly be determined without oral evidence, cross-examination and normal Court procedures, then an assessor may decline to resolve that dispute and encourage the parties to refer that issue to a Court. Unfortunately neither LPA 1987 nor LPA 2004 contains specific powers for an assessor to refer such a matter to the Court. In the event an assessor so declines to resolve a factual dispute, it becomes a matter for the parties to seek orders from a Court; 9.7.4 If an assessor does determine a threshold factual issue, the assessor's determination of such an issue does not bind a Court. Either party can challenge the assessor's determination by an appeal raising an issue of law, or by challenging the registration of an assessor's certificate as a judgment. 20He concluded that: 9.7.5 Generally speaking, an issue as to the construction of a costs agreement or its effect is not an issue an assessor should avoid. Most such issues do not require oral evidence, cross-examination or curial procedures, although those are appropriate in some cases... 9.7.6 In some cases, it may be appropriate for an assessor to complete assessment on a stated factual basis. The parties can then at the conclusion of the assessment litigate the threshold factual issues... 21The plaintiff does not submit that there is error in the costs assessor's statement of principle, or that he was without jurisdiction to determine the terms upon which the solicitor was retained or to construe the costs agreement entered into between the parties and determine its effect. What the plaintiff submitted was that the application of those principles to the dispute with which the costs assessor was concerned reveals error on two interrelated bases. The first because he engaged in an interpretive exercise when considering the operation of Clause 17 when the construction of the clause was not a matter in dispute between the parties. Secondly, by then resolving what was in dispute, namely whether the plaintiff had indicated to the solicitor that she had lost confidence in him such as to entitle him to terminate the agreement, when that was a question he should not have inquired into at all because that dispute necessitated resolution in a curial context. 22To identify or state the error of principle in that way is not however determinative. It is perfectly clear from the assessor's reasons for decision that he resolved to the view that he could determine the factual dispute or, to put it another way, that he was not satisfied that there was a real dispute on substantial grounds warranting the calling of evidence in a curial setting. 23In considering that question the costs assessor gave close attention to the email correspondence that passed between the parties in the week preceding the date of termination at a time when a further mediation was pending. It is not suggested that there is error in that approach per se. The plaintiff's submission on the appeal was to the effect that before determining whether he should proceed to a costs assessment by reference to that body of email correspondence, the costs assessor should have taken into account the plaintiff's explanation for engaging in the exchange with her solicitor as proffered through her current lawyers as set out in [10] above, and declined to resolve the validity of the termination of the agreement until an opportunity was afforded her to give evidence about the issue and to permit her to cross-examine her solicitor as to whether he genuinely held the belief that she had lost confidence in him as he claimed. 24This email correspondence extended over a number of days (the salient parts of which were extracted in his reasons for decision and which I do not see the need to repeat here) was replete with the plaintiff's repeated and express criticisms of her solicitor and the senior counsel he retained to act on her behalf. This included an allegation that in advising that her claim be settled on a particular basis neither he nor counsel were acting in her interests or consistent with her instructions but because in seeking to have her settle her claim contrary to its real worth they were motivated by their own self interest as lawyers and/or because they were complicitous with the opposing lawyers to the extent of concealing the corrupt conduct of the public authority for whom they acted. These are most serious allegations and, in my view, entirely contrary to the level of trust and confidence inherent in the relationship of solicitor and client. 25After identifying the question to be whether the client indicated to the solicitor that she had lost confidence in the solicitor as provided for in Clause 17 of the costs agreement (as distinct from whether that was the fact or not), it is implicit in the attention the costs assessor gave to the email correspondence that he concluded that the dispute as to whether the termination of the agreement was valid was susceptible to determination by him given the full compliment of materials available to him and did not require resolution in a curial process. 26I am not satisfied that error has been demonstrated in that approach or the conclusion he reached. While the plaintiff notified the costs assessor that she disputed the validity of the termination that did not entitle her to have the assessor decline to determine the matter. The question was whether there was a real dispute on substantial grounds concerning that question which required curial resolution. The assessor was not persuaded that it did. That was a conclusion entirely open to him. 27The situation might have been otherwise were the assessor informed that there was other material (whether in the form of additional correspondence or telephone calls between the plaintiff and the solicitor) that either withdrew or qualified what was said in the emails or revealed that the solicitor did not take her criticisms seriously and did not believe she had lost confidence in him, but that was not the case. All that was relied upon to seek to dissuade the costs assessor from undertaking the assessment was her assertion (four years later) that she had not in fact lost confidence in her solicitor which, as the costs assessor correctly identified, was not the critical question. The question was whether what she said across the body of emails indicated to the solicitor that she had lost confidence in him. 28The orders I make are as follows: 1. The summons is dismissed. 2. The plaintiff to pay the defendant's costs.