Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Steele v Marshan [2012] NSWCA 141 Hearing dates: 14 May 2012 Decision date: 14 May 2012 Before: Basten JA at 1; Whealy JA at 20 Decision: (1) Dismiss the application for leave to appeal from the judgment of Adamson J in the Common Law Division. (2) Order the applicant to pay the costs of the respondent in this Court. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: APPEAL - civil - leave to appeal - second appeal in series - appeal below limited to question of law - issue of principle raised for the first time in application for leave to appeal - whether application without merit LEGAL PRACTITIONERS - existence of retainer - solicitor performed work and appeared prior to provision of written agreement and costs disclosure - whether relationship of solicitor and client existed - discussion of Pegrum v Fatharly (1996) 14 WAR 92; Hendriks v McGeoch [2008] NSWCA 53; (2008) Aust Torts Rep ¶81-942; Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Legislation Cited: Inclosed Lands Protection Act 1901 (NSW) Legal Profession Act 2004 (NSW), ss 309, 311, 317 Div 11 Local Court Act 2007 (NSW), ss 39, 40 Supreme Court Act 1970 (NSW), s 101 Cases Cited: Australian Energy Ltd v Lennard Oil NL [1986] 2 Qd R 216 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Hendriks v McGeoch [2008] NSWCA 53; (2008) Aust Torts Rep ¶81-942 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 Pegrum v Fatharly (1996) 14 WAR 92 Category: Principal judgment Parties: Robert Lindsay Steele - Applicant Maurice Robert Marshan - Respondent Representation: Counsel: Mr J Hyde Page - Applicant Ms E M Peden - Respondent Solicitors: Respondent Self-represented File Number(s): CA 2012/67158 Decision under appeal Jurisdiction: 9111 Citation: Steele v Marshan [2012] NSWSC 32 Date of Decision: 2012-02-07 00:00:00 Before: Adamson J File Number(s): 2011/241943 Judgment 1BASTEN JA: In 2009 the applicant, Robert Lindsay Steele, was charged with a summary offence under the Inclosed Lands Protection Act 1901 (NSW) arising from his presence on land owned by the Uniting Church in Australia, namely the Wesley Mission in Pitt Street, Sydney. On 22 December 2009 the applicant approached the respondent, a solicitor, with respect to the charge in the Local Court. The proceedings were ultimately dismissed, the applicant appearing for himself. However, before that occurred various steps had been taken by the respondent, ostensibly as the applicant's solicitor. 2The present dispute arises out of a memorandum of fees rendered by the respondent to the applicant in the amount, ultimately, of $1,612. The applicant refused to pay the amount on the basis that he had not retained the respondent. Although the respondent had done work on the applicant's case in late December and early January, including appearing at the Downing Centre Local Court on 11 January 2010, he did not provide the applicant with a written agreement, including the rate at which he proposed to charge and an estimate of his fees, until 29 January 2010. The respondent did not dispute the fact that he had failed to make a costs disclosure in accordance with ss 309 and 311 of the Legal Profession Act 2004 (NSW). As a consequence, he was not entitled to recover costs unless they had been assessed under Division 11 of the Legal Profession Act: s 317(1). Accordingly, he had his fees assessed. The cost of the assessment was $962. 3At that stage, the respondent was entitled to lodge the assessment certificates in the Small Claims Division of the Local Court. He did not take that step, to allow the applicant to challenge the existence of the retainer, which he did in the General Division of the Local Court. 4On 30 June 2011, in a carefully reasoned judgment, Magistrate Farnan rejected the applicant's defence to the claim. She gave judgment for the respondent in the amount of $1,612 and ordered the applicant to pay the respondent's costs in the sum of $2,500. 5From that judgment, the applicant appealed to the Supreme Court, pursuant to ss 39 and 40 of the Local Court Act 2007 (NSW). The appeal to the Supreme Court was limited to a question of law only, although a ground involving a question of mixed law and fact could be entertained if the Court gave leave. The primary judge, Adamson J, dismissed the proceedings on 7 February 2012: Steele v Marshan [2012] NSWSC 32. 6Ground 4 of the appeal before the primary judge challenged the validity of Magistrate Farnan's judgment that there was an implied retainer, a finding which was said to be in conflict with three authorities, namely Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117; Australian Energy Ltd v Lennard Oil NL [1986] 2 Qd R 216 at 237 and Pegrum v Fatharly (1996) 14 WAR 92 at 94. 7Adamson J noted, correctly, that the question whether there was an implied retainer was a mixed question of fact and law: at [22]. The applicant, who appeared in person before her, urged that leave be granted under s 40 of the Local Court Act, on the basis that an important issue was involved concerning questions of professional misconduct and bias. The primary judge stated at [24]: "I refuse the grant of leave on two grounds: first, because the application by the Court below of the principles articulated in the authorities referred to was, in my view, correct; and secondly, because this matter which fell within the jurisdiction of the Small Claims Division of the Local Court is about a relatively insignificant amount of money and does not warrant the grant of leave. I do not consider that any of the plaintiff's allegations of professional misconduct or bias have been substantiated and accordingly I reject this argument as providing any warrant for the grant of leave to appeal." 8An appeal lies to this Court from a judgment in the Division as of right only if the amount at issue is of the value of $100,000: Supreme Court Act 1970 (NSW), s 101(2)(r). The amount in issue in this case is, as the applicant accepts, insignificant. Assisted by counsel, he has sought to construct a new basis for challenge to the decision of the Magistrate, identified in these terms in the sole ground of the proposed appeal: "The first instance Court erred in finding for the Respondent on the basis of implied retainer because the legal test for implied retainer is not whether a de facto relationship of solicitor and client subsisted between two parties; but rather whether the client has, objectively viewed, assumed an obligation to pay the solicitor's fees." 9The written submissions, as further articulated on this application, contend that the test derived from Pegrum v Fatharly does not represent the law and is inconsistent with the test identified by this Court in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523. 10The application must be rejected for two independent and conclusive reasons. First, the asserted legal issue was not raised before the Magistrate or the primary judge. Secondly, it is without merit. 11One should, no doubt, exercise caution in rejecting a formulation of a legal argument on the basis that it has not been raised below, by an applicant appearing in person. However, it is not appropriate to invite this Court to determine what is claimed to be an important issue of principle for the first time, at the third level of the proceedings. That is not to say that the point is one which might have been met by evidence had it been raised below; it is merely to say that an issue of principle generally should not be raised for the first time on a leave application if there is no other basis upon which leave could possibly be granted. 12Pegrum was referred to before the Magistrate by the respondent, who relied upon a particular passage as correctly stating the law. The Magistrate referred at [33] to the following statement in the judgment of Ipp J in Pegrum: "A contractual relationship of solicitor and client will therefore be presumed if it is proved that the relationship of solicitor and client existed de facto between a solicitor and another person. Upon proof of that kind it would not be necessary to prove when, where, by whom or in what particular words the agreement of retainer was made. Applying the rule expressed by Thomas J in Australian Energy Ltd v Lennard Oil NL, the de facto relationship of solicitor and client has to be a necessary and clear inference from the proved facts before a retainer will be presumed." 13This is not a case of a presumption: it is a case where a set of circumstances gives rise to a clear inference. This passage is entirely consistent with the language of Beach Petroleum NL v Kennedy [1999] NSWCA 408; 48 NSWLR 1, at [208] (Spigelman CJ, Sheller and Stein JJA). Pegrum has been applied in the Victorian Court of Appeal in Shaw v Yarranova Pty Ltd [2011] VSCA 55 at [19] (Redlich and Mandie JJA). 14As noted by Giles JA in Hendriks v McGeoch [2008] NSWCA 53; (2008) Aust Torts Rep ¶81-942 at [8], the term "retained" may be seen as "legalese". The discussion which followed as to the circumstances in which a contractual relationship could be implied relied upon the reasoning of McHugh JA (Hope and Mahoney JJA agreeing) in Integrated Computer Services, which in turn relied upon the reasoning in Empirnall Holdings. Following that exposition, Giles JA stated at [11]: "Whether a contract has been entered into is to be judged objectively on 'an objective assessment of the state of affairs between the parties': Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; 209 CLR 95 at [25]. The status of the parties, the relationship between them and the nature of the putative contract will bear upon whether a contract should be inferred to have been made." 15The applicant's written submissions stated: "The reason why the tests prescribed by Pegrum v Fatharly and Empirnall are different is that each test directs the Court's attention to a different subject matter. Pegrum v Fatharly looks at whether a solicitor had acted on behalf of a client in a professional capacity, while Empirnall looks at whether a reasonable bystander would regard the client as having assented to a contractual relationship. The distinction is a real one, because the test in Pegrum will tend to create a presumption of contract where solicitor work has been performed on behalf of a client, while the Empirnall cases are explicit that, 'it is an error to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed: Integrated Computer Services ... at page 11-117." 16The distinction sought to be drawn is an artefact. Hendriks involved a solicitor/client relationship, as did Pegrum. Empirnall Holdings involved a professional relationship, but not between solicitor and client. The language adopted by Ipp J in Pegrum, read in context, does not depart from well-established principle. It does not create a presumption. Indeed Ipp J in Pegrum expressly relied on Integrated Computer Services at 117 and thus Empirnall. Whether a solicitor has acted in a particular capacity is a relevant consideration in determining whether the services are supplied pursuant to a contractual arrangement. Another critical factor is, of course, the response of the person to whom the services are supplied. In the present case, Magistrate Farnan stated at [45]: "Even on his own case, it is clear that on 23 December 2009 Mr Steele understood that between then and 11 January 2010 Mr Marshan would be considering material in his case and undertaking what could only be described as legal work. The 'delivery of his considered opinion' referred to in Mr Steele's evidence and correspondence was clearly legal work. I accept that Mr Steele may have hoped that he would not have to pay for it, particularly if he did not agree with it. However, on his own case there was no agreement that the work would be performed without payment. The agreement to meet Mr Marshan at court carries with it an inference that Mr Steele had agreed that Mr Marshan would in fact appear for him at court. Mr Steele was (or at least may have been) required to be there because he was bailed to appear. I have difficulty accepting that Mr Steele believed that there was a real possibility that the hearing of the matter after a 'not guilty' plea could proceed on the very first date the case was listed, but if he did believe that it supports an argument for the existence of a retainer, not against it." 17As her Honour also noted, the applicant and the respondent had a prior history, the respondent having acted as solicitor for the applicant two years before the events the subject of the present dispute. Further, as she also noted, the applicant did not assert any express agreement not to charge for the work done and there clearly was no such agreement. She stated that there was "certainly nothing in the parties' previous dealings to suggest that Mr Marshan would agree to work for Mr Steele for nothing": at [44]. The case turned on the inference to be drawn from the facts. The inference that there was a contractual relationship was undoubtedly open; no erroneous legal principle underlay this conclusion. 18The Magistrate concluded at [47]: "Actions such as the present are now rare due to the provisions of the Legal Profession Act and the significant financial disincentive it provides to lawyers seeking to recover fees in the absence of a costs agreement or disclosure. Actions such as this make crystal clear the desirability of such disclosure being made very early in proceedings, as required by the Act. However, the Act does not make it impossible to recover fees where a retainer can be implied by the circumstances. In my view this is a case where such a finding is inevitable." 19There is no issue of principle involved in the present case: the attempt to construct one is without substance. Nor is there any real doubt that the decision of Magistrate Farnan was correct. Even if an error of law could be identified, which has not been made good, this would not be a case for leave to appeal. 20Accordingly, the Court should make the following orders: (1) Dismiss the application for leave to appeal from the judgment of Adamson J in the Common Law Division. (2) Order the applicant to pay the costs of the respondent in this Court. 21WHEALY JA: I agree. ********** 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. Decision last updated: 15 May 2012