SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title: / The Legal Practitioners v Council of the Law Society of the ACT
Citation: / [2016] ACTSC248
Hearing Dates: / 6 May, 13 May 2016
DecisionDate: / 31 August 2016
Before: / Burns J
Decision: / The Law Society pay the plaintiffs’ costs of these proceedings on a party/party basis.
Catchwords: / PROFESSIONS AND TRADES – Lawyers – complaints and discipline – disciplinary proceedings – commenced in the ACT Civil and Administrative Tribunal (ACAT)– Statement of Reasons not provided by Law Society – legal practitioners commenced proceedings under Administrative Decisions (Judicial Review) Act 1989 (ACT) – ACAT proceedings on foot – Law Society rescinded decision to commence disciplinary proceedings – proceedings discontinued by consent in Supreme Court – assessment of costs – application for indemnity costs – processes of Law Society flawed – costs awarded on party/party basis.
Legislation Cited: / Administrative Decisions (Judicial Review) Act 1989 (ACT), ss 5, 6, 8, 16
Court Procedure Rules 2006 (ACT), r 1163
Legal Profession Act 2006 (ACT), ss 285, 287, 384, 387, 397, 398, 412, 413, 414, 415, 417, 419, 422
Legal Profession Regulation 2007 (ACT) s 62
Legal Profession (Solicitors) Rules 2007 (ACT), rr 8.1, 39
Legislation Act 2001 (ACT), s 179
Cases Cited: / Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233
Dibeek Holdings Pty Ltd v Notaras (1997) 141 FLR 364
Di Carlo v Dubois [2002] QCA 225
Fekete v Construction Occupations Registrar [2013] ACTSC 45
Koundouris v Construction Occupations Registrar [2014] ACTSC 68
Legal Services Commissioner v Bone [2014] QCA 179
Parties: / Legal Practitioner (First Plaintiff)
Legal Practitioner (Second Plaintiff)
Legal Practitioner (Third Plaintiff)
Council of the Law Society of the Australian Capital Territory (Defendant)
Representation: / Counsel
Mr P Walker SC (Plaintiffs)
Mr Travers (Defendant)
Solicitors
[Redacted for legal reasons] (Plaintiffs)
DibbsBarker (Defendant)
File Number: / SC 309 of 2014

BURNS J:

1.On 2 December 2014, I ordered by consent that the proceedings be discontinued. They were discontinued as the Law Society had rescinded their decision of 16December2013 to commence disciplinary proceedings in the ACT Civil and Administrative Tribunal (the ACAT) against the plaintiffs. As a consequence of that decision, there was no reason for the present proceedings to continue, being contingent on the Law Society’s decision of 16 December 2013.On 2 December 2014, I also reserved the question of costs.

2.On 6 May 2016 and 13 May 2016, the present proceedings proceeded before me as an assessment of costs. In order to address the question of costs, it is first necessary for me to recount the background of the proceedings.

3.The proceedings were originally commenced by originating application filed on 4July2014. That application sought the following orders:

  1. An order pursuant to section 16(1)(b) of the Administrative Decisions (Judicial Review) Act 1989 (ACT) that proceedings numbered OR 14/217 commenced in the ACT Civil and Administrative Tribunal on 25 June 2014, be stayed pending further Order.
  2. An order pursuant to section 415 of the Legal Profession Act 2006 (ACT) that the Defendant provide the Plaintiffs with a statement of reasons, as defined by section 179 of the Legislation Act 2001 (ACT), with respect to its decision to commence proceedings numbered OR 14/27 in the ACT Civil and Administrative Tribunal, made on 16 December, 2013, within 28 days.
  3. An order of review pursuant to section 6 of the Administrative Decisions (Judicial Review) Act quashing the Respondent’s decision made on 16 December, 2013 on the following grounds:
  4. A breach of the rules of natural justice happened in relation to the making of the decision;
  5. Procedures which were required by law to be observed in relation to the making of the decision were not observed; and
  6. The decision involved an error of law.

4. An order that the Defendant pay the Plaintiffs’ costs of, and incidental to this Application.

4.In support of that application, an affidavit of the second plaintiff, QD sworn on 4July2014 was filed.

5.On 11 July 2014, the matter was docketed to me by the Deputy Registrar and was adjourned by the Deputy Registrar to the callover before me on 1 August 2014. On that date I gave the following directions:

(a)the defendant provide a Statement of Reasons to the plaintiffs in respect to the decision made by the defendant on 16 December 2013 and affirmed by the defendant on 16 June 2014 to apply to the ACAT pursuant to s 419(1) of the Legal Profession Act 2006 (ACT) (the Legal Profession Act);

(b)the Statement of Reasons to be provided as soon as practicable after 18August 2014;

(c)the matter be adjourned for four weeks; and

(d)costs be reserved.

6.On 28 August 2014, the Statement of Reasons was provided to the plaintiffs.

7.On 29 August 2014, the matter came back before me for Directions. On that date, I adjourned the matter to 25 September 2014 and ordered that the costs of that day be reserved.

8.On 25 September 2014, I gave the following directions:

(a)that the applicant file and serve an amended originating application and supporting affidavit by 9 October 2014;

(b)the applicant provide to the respondent better particulars of each of the grounds relied on in support of the relief sought by 9 October 2014;

(c)the respondent file any material by way of response on 23 October 2014; and

(d)the matter be relisted for further directions on Thursday 30 October 2014.

9.An amended originating application was then filed on 7 October 2014 to amend order three. A further amended originating application (FAOA) was then lodged two days later, on 9 October 2014. There was not a significant difference between the two. There was then an issue between the parties whether there was consent to the filling of the FAOA, however, this was subsequently resolved. I will return to the contents of the FAOA later in these reasons.

10.On 30 October 2014, the matter came back before me again for directions. On that date I gave the following directions:

(a)subject to order 2, the plaintiffs have leave to file a further amended application, dated 9 October 2014;

(b)the plaintiffs pay the defendant’s costs thrown away by reason of the amendments to the said application;

(c)the plaintiffs have leave to file the affidavit of the third plaintiff, sworn on 9October 2014 and the affidavit of the second plaintiff, sworn on 29October2014;

(d)the court notes that the defendant will meet in Council on 17 November 2014 to consider the recommendation (made without admission) to rescind the defendant’s decision to commence proceedings OR 14/217 commenced in the ACAT on 25 June 2014 against the plaintiffs; and

(e)the proceedings be stood over for further directions on 2 December 2014.

11.As I have already said, on 2 December 2014, by consent, I ordered that the proceedings be discontinued and reserved my decision in relation to costs. I noted at that time that the matter may be relisted for an argument as to costs on short notice if required.

12.On or about 31 March 2016, the plaintiffs attempted to file an application to reinstate proceedings to allow for argument as to costs to ensue. This was unnecessary because of my orders on 2 December 2014, and that application was ultimately not pursued.

13.The plaintiffs’ position was that the proceedings were discontinued without admission. As a result of this, the plaintiffs submitted that I needed to assess the merit in the plaintiffs’ claim. The defendant’s position was that there needed to be brief consideration of the proceedings in this Court. I will now turn to the background of the proceedings(the ADJR proceedings).

Background

14.In the proceedings before me, the plaintiffs relied on the affidavit of the second plaintiff, QD sworn on 29 March 2016. This affidavit also refers to the following affidavits:

(a)affidavit of QD sworn on 4 July 2014;

(b)affidavit of QD sworn on 27 August 2014;

(c)affidavit of ET sworn on 9 October 2014; and

(d)affidavit of ET sworn on 26 October 2014.

15.The plaintiffs also sought to rely on an affidavit of QD sworn on 29 October 2014. Contained within an annexure to that affidavit is a summary of the complaint that was made to the Law Society in relation to the plaintiffs. The complaint was made by HT. HT had been involved in a motor vehicle accident in 2008 and had a common law claim and compensation claims with “the firm C” in 2009. That firm then moved to Sydney and the matter was transferred to the plaintiffs’ law firm. The matter was ultimately settled, however, there was a dispute about the amount of costs HT had to pay, which included both the firm C’s legal costs and those of the plaintiffs’ law firm.The total amount of legal costs was just over $51,000. HT enquired as to how much of that was made up of the firm C’s legal costs, which was approximately $21,000. HT expressed dissatisfaction with that amount, although was apparently content with the legal costs for the plaintiffs. In order to facilitate a settlement agreement HT was offered an on the spot reduction of total legal coststo an amount of approximately $47,000 by ED, who had day to day carriage of the matter. HT indicated he was content to pay this amount.

16.On 5 July 2011, HT had come into the office of the plaintiffs to sign the settlement instructions. During that meeting, it was reiterated he would accept a total reduction of $5,000 in legal costs. While ED was on leave, HT spoke with QD. QD, apparently unaware of the reduction in costs that had already been offered, agreed to $42,000 in legal costs being the total amount. When ED returned from leave, he considered that HT should have to pay the costs that were originally agreed to at the time of settlement, being $47,000. HT asserted he should only have to pay $42,000 in costs and alleged that a further $8,318.64 was deducted without his approval. It appears that the amount was $5,000.

17.The complaint was first dealt with as a complaint solely against QD and was particularised as a breach of undertaking and excessive charging of legal costs. This was contained within a letter addressed to QD from the Law Society on 11October2011. On 25 October 2011, the first plaintiff, ED sent an email to Linda Mackay of the LawSociety to advise that he had the day to day carriage of HT’s matter and the issue had now been resolved. ED attached a copy of a signed deed dated 21October 2011 between the plaintiffs’ law firm and HT, with HT agreeing that he had been offered and accepted $3,000 in full and final settlement of his outstanding costs issue and all other outstanding issues with the plaintiffs’ law firm. ED also attached a letter to HT dated 24 December 2010, outlining the work that his firm had undertaken since taking the file over from the firm C, in response to HT’s complaint that no work to progress his matter had been taken by the plaintiffs’ law firm.

18.On 2 November 2011, a letter addressed to ED by the Law Society confirmed that a formal response to the complaint of HT was still required. QD sent a letter to the LawSociety dated 10 November 2011 outlining that he had limited involvement with HT and attaching a number of documents. One of those documents was a letter to the Law Society by ED, which was unsigned and incorrectly dated, as he was on leave at the time. In that letter, ED goes in to detail about what is effectively the genesis of the dispute, which I have already recounted in some detail above at [15].

19.On 11 November 2011, the response by the plaintiffs was forwarded to HT by the LawSociety. On 12 December 2011, HT responded to the Law Society and complained that the plaintiffs’ law firm failed to address that the firm C took his case on a “no win no fee” basis. He considered that since the firm C did not “win his case” the plaintiffs’ law firm should not have included the firm C’s costs in his final account.

20.On 11 January 2012, HT was advised by the Law Society that the ComplaintsCommittee was now considering his complaint. The plaintiffs were given an opportunity to put forward further comments or material prior to the matter being considered by the Committee. The Committee Members also requested that the plaintiffs provided the following documentation:

(a)their authority to deduct;

(b)their costs agreement;

(c)accounts for costs and disbursements; and

(d)trust account statements.

21.On 8 February 2012, the first plaintiff sent an email to the Law Society and attached the following documents:

(a)settlement instructions which included authority to deduct;

(b)explanatory statement with all relevant disbursement accounts;

(c)the plaintiffs’ firm’s tax invoice dated 2 September 2011;

(d)letter from the firm C dated 15 November 2010 enclosing an invoice dated 13September 2010;

(e)tax invoice from the firm C dated 14 October 2010;

(f)signed trust account authority dated 15 November 2010;

(g)letter to HT dated 9 November 2010;

(h)conditional costs agreement the firm C signed on 9 February 2009; and

(i)the plaintiffs’ law firm’s trust account ledger and combined ledger.

22.Also in that email, the first plaintiff confirmed that when the firm C merged into the plaintiffs’ law firm’s office, they adopted the firm C’s costs agreement. As a result, no separate costs agreement was signed. In this email, ED noted that HT’s letter dated 12December 2011, effectively raised a new complaint. EDwrote in response that the firm C had done a substantial amount of work for HT before the plaintiffs’ law firm took over, and that as his matter was ultimately successful, he had to pay for the prior legal services provided by the firm C.

23.On 5 March 2012, the plaintiffs received,by way of a letter addressed solely to QD,notice that following the complaint being considered by the Complaints Committee on 1March 2012, the Committee members agreed that the matter be referred to the Executive of the Law Society for further consideration.

24.On 17 September 2012, a letter by John Buxton, DibbsBarker on behalf of the Law Society was sent to QD in relation to HT’s complaint. This letter is approximately three pages in length and set out the facts that Mr Buxton assumed in addition to thirteen queries, which a response was sought. On 17 September 2012, QD sent an email to Mr Buxton stating that he did not have carriage of the matter, and that it was ED that had carriage. Additionally, he stated he had no knowledge of any of the assumptions made by Mr Buxton, nor was he able to answer any of his questions. He also asked MrBuxton to confirm that the complaint was only against the first plaintiff.

25.On 18 September 2012, Mr Buxton wrote a letter to the first and second plaintiffs. In that letter he stated that he was “not overly concerned as to who provides the answers” and then highlighted that the obligation falls on both of the plaintiffs as principals of the practice to respond in terms of r 39 of the Legal Profession (Solicitors) Rules 2007 (ACT) (the Rules). In this letter Mr Buxton also wrote that he was not querying the quantum of costs per se and that most of the questions were directed to technical issues relating to the terms of the Conditional Costs Agreement and particular provisions of Part 3.2 of the Legal Profession Act 2006(ACT) (Legal Profession Act) and s 62 of the Legal Profession Regulation 2007 (ACT).

26.On 9 October 2012, the third plaintiff, a senior partner of the firm, sent out a letter totalling seven pages in response to Mr Buxton’s letter dated 17 September 2012. I note that the third plaintiff, ET, noted that the Law Society had not yet clarified who the complaint was against and requested that this advice be provided. In relationto the contingency fee issue, ET stated that all charges to HT were based on an hourly rate.

27.On 21 December 2012, Mr Buxton sent a letter to the first and second plaintiffs. In that letter he stated that the initial complaint was against the first plaintiff by the complainant. However, he wrote that apart from any contingency fee provision, it may be said that the complaint “is directed against [ET], who had principal conduct of the matter, and possibly [QD] to the extent that he approved the tax invoice and trust to office transfer”. Mr Buxton then asked for confirmation as to which partner authorised the transfer of the sum of approximately $47,000 to the office account of the plaintiffs’ law firm. He advised that the complaint was still under investigation and invited the plaintiffs to put further information forward in relation to the contingency fee provision of the conditional costs agreement.

28.On 1 February 2013, ET replied to the letter of the Law Society dated 21December2012. In that letter he confirmed that the first plaintiff authorised the trust account transfers and that the firm C sent a separate costs disclosure statement to HT on 21 January 2009. This letter also set out reasons why the plaintiffs’ law firm asserted there was not a contingency fee agreement, which I will not detail here.

29.On 4 February 2013, the first plaintiff responded to Mr Buxton’s letter dated 21December 2012. I note that he stated that the focus of the Law Society’s investigation now appeared to be on the retainer arrangement and the authority, or lack of it, for the trust transfer. He sets out the introductory conversation he had with HT on 13 October 2010, when he was not yet a partner, and wrote that because of this, HT should have no doubt about the basis upon which the plaintiffs’ law firm assumed carriage of the matter. He then referred to the plaintiffs’ firm’s tax invoice. Particularly, he admitted that the invoice did not contain the actual time taken in respect of each item and the author of the charges. However, he asserted that HT was given a copy of the firms’ WIP balance printout at the time of the settlement conference. The letter also contained a heading “[HT] a highly variable person” and went on to refer to a number of examples of HT’s behaviour. Mr Walker SC on behalf of the plaintiffs submitted thatthis was later the subject of one of the allegations against the first plaintiff; that he had been disrespectful of HT during correspondence with the Law Society. The first plaintiff also went into detail about his trust authority, and in particular, asserted that after he returned from leave, he spoke with HT on 12 August 2011 at great length. He wrote that he told HT that he did not consider the agreement to limit costs to $42,000 as enforceable due to the undue pressure HT had applied on QD, and HT apparently said in response: “that’s fine you can pay your fees, but talk to [the firm C]to reduce their fees by $5,000 and see how you go”. He considered that once the firm Chad agreed to reduce their fees by $5,000, HT’s request had been met, and he released the sum of $16,400 to the firm C.

30.On 22 March 2013, Mr Buxton requested further information from QD. QD responded on 7 May 2013, as he was on leave from late March to April.

31.On 4 April 2013, ED responded to a letter of Mr Buxton essentially stating that the reason the 12 August 2011 agreement was not raised earlier was because the original complaint of HT was directed towards QD, and particularised as a breach of undertaking and excessive charging of legal costs.

32.On 23 December 2013, Mr Buxton sent a letter to the plaintiffs advising that they had been instructed by the Law Society to file an application for disciplinary action in the ACAT in relation to“among other things, the contingency fee provision and withdrawal of trust funds”.