To what extent can you defend a suit by your solicitor for fees and then turn around after settlement, or after the trial of that suit, and sue for negligence? The leading Victorian case on the question is Delahunty v Howell, unreported, Supreme Court of Victoria, Gray J, 12 May 1993 (BC9300688). It was an administrative law review of a decision of VCAT’s Senior Member Howell back when he was Registrar of the Solicitors Board. This post considers that decision and subsequent decisions of VCAT’s predecessors which have applied it.
In Delahunty v Howell, A washing machine repairer hired a solicitor to chase fees owing to him from a laundry operator. The solicitor sued and got a default judgment. But the laundry operator was nowhere to be found and execution proved fruitless. The solicitor rendered a bill, but the washing machine repairer did not pay it. So the solicitor sued his former client, who lodged a defence which said no more than that he intended to defend. The matter went to hearing on that basis. The solicitor was cross-examined by the client’s counsel, who suggested that:
- the costs charged were excessive;
- he had delayed in complying with instructions given to him;
- he was negligent in the manner of carrying out his instructions;
- the plaintiff had agreed that he would only seek costs if he recovered money from the laundry owner.
There was no counterclaim. Various questions in cross-examination of the solicitor were disallowed for being irrelevant, as was some of the client’s evidence. The solicitor’s claim was entirely successful and the client was ordered to pay the bill.
Then the client sued the solicitor for negligence in the sense that he lodged the precursor of a pecuniary loss dispute with the Law Institute, and it found its way to the old Solicitors’ Board. Evidence was taken from the two parties and the solicitor’s counsel as to what went on at the Magistrates’ Court hearing. Registrar Howell was not convinced that the subject matter of the negligence claim before the Board had been the subject of the Magistrates’ Court suit for fees, so he held that he could hear it.
In the Supreme Court, Gray J held that Registrar Howell had given the burden of proof to the wrong side. His Honour said it was for the person asserting jurisdiction to establish jurisdiction, not for the defendant to prove that there was no jurisdiction. Then he said:
‘It is extremely difficult, if not impossible, to determine precisely what issues were raised before the magistrate. But the evidence suggests that the burden of the defence was that costs were too high and that, in any event, the defendant had suffered pecuniary loss by reason of delays and other breaches of duty which were alleged against the plaintiff. There was no suggestion that the retainer was not effective and there was no suggestion of any special condition, except for the suggestion that the recoverability of costs was dependant upon recovery being made from the defendant Nixon. That latter issue was clearly rejected by the magistrate.
It would have been open to the defendant to clearly raise a set off after giving the appropriate notice. This would have involved alleging and proving pecuniary losses which, in their totality, equalled or exceed the amount of costs claimed, thus giving rise to an effective set off. Equally, it would have been open to the defendant to give notice of counterclaim in relation to any pecuniary losses he could prove which went beyond the mere liquidation of the legal costs.
In my view, the defendant Mann was under an obligation to raise those issues in the litigation in the Magistrates’ Court. And, he having failed to do so, it is not open to him the to re-open those matters in proceedings such as the present. It is true that this is not a case of a simple issue estoppel, because it cannot be said with any confidence that all the issues arising between the parties were determined by the magistrate. But, in my opinion, the case falls clearly within [Anshun estoppel].’
The Anshun estoppel principle is:
‘where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of their subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.’
His Honour expressly considered the possibility that the failure to raise a counterclaim or plead a set-off was the underprepared solicitor’s fault, but did not regard that as a reason not to find that Registrar Howell should have stayed the Solicitors’ Board proceeding as an abuse of process.
The following cases have considered the decision:
1. Reddie v Fogarty and Bacchetti [1999] VLPT 29. In that case, the solicitors acted for the clients in County Court proceedings over a contract for the sale of land, and then in the conveyance of land pursuant to the terms of settlement by which the proceedings were brought to an end. The solicitor sued for the costs of the conveyance. That suit too was settled, but before that happened, the clients had commenced professional negligence proceedings in relation to the conduct of the County Court proceedings in the sense once again of havinng lodged a complaint with the Law Institute which found its way to the Legal Profession Tribunal. Registrar Howell found:
‘It seems to me that the subject matter of the dispute in the Magistrates’ Court was the same as the subject matter of the [Legal Profession Tribunal] dispute arising out of the County Court proceedings, for several reasons. The parties to each dispute were identical… The matters raised in the claims forming part of the dispute arose at much the same time, and related to the same contract for the purchase of the same land. Furthermore, the conveyancing costs flowed from the settlement of the County Court proceedings, which required [the clients] to proceed with their purchase of the land. I acknowledge that another consideration, namely the fact that [the solicitors] issued separate accounts for its costs of the County Court proceedings and for its costs for the conveyancing work, tends to a contrary conclusion, but I regard the issuing of separate accounts to be a matter of form rather than substance. I conclude that the Tribunal … does not have jurisdiction to hear and determine a dispute which includes a claim by [the clients] for compensation for pecuniary loss arising out of the way in which [the solicitors] handled the County Court proceedings. … The parties to litigation must bring forward all disputes arising out of the same subject matter for determination in the same proceedings’.
2. M v Flory Partners [1999] VLPT 9. There, the solicitor acted for the husband in matrimonial proceedings and an appeal. Counsel retained by the solicitor on behalf of the husband sued the solicitor for fees. The solicitor joined the husband, his former client, as a third party. The client defended but did not allege the solicitor was negligent. Both the claim and the third party claim were settled. The client subsequently sued the solicitor for negligence in the conduct of the matrimonial proceedings. Registrar Howell found that the client should have and could have brought the negligence claim as a defence to the third party claim by the solicitor for indemnity against the barrister’s suit for fees. On appeal, the Full Tribunal, headed by Deputy Chairman Judge Murdoch held:
‘If the client had sought to raise negligence on the part of the [solicitor] as an issue at the hearing of the third party proceeding it would have been irrelevant to the issues before the Magistrates’ Court. … it could not, as a matter of law, be said that the issue of any negligence on the part of the [solicitor] in his conduct of the Family Court proceeding should have been raised by the client in his defence to the third party proceedings in order that all matters in dispute between the parties connected with the Family Court proceeding could have been dealt with by the Magistrate. In our view the third party proceeding involved a discrete issue, namely whether the [solicitor] was entitled to indemnity by the client in respect of the fees claimed by [the barrister] for professional services in the Family Court proceeding. It did not involve, and in our view it ought not to have involved, other aspects of the relationship between the [solicitor] and the client, including any allegation of negligence on the part of the [solicitor] in his conduct of the client’s case in the Family Court proceeding.
In those circumstances we consider that the decision in Delahunty v Howell is not applicable to the present situation and does not affect it. …. Our reason for that conclusion is that the points which arise from the client’s complaint to [the Law Institute] involving the issue of negligence do not properly belong to the subject of the litigation, nor are they points which the parties, exercising reasonable diligence, might have brought forward at the time.’
3. Harris v Jens [1999] VLPT 26. A client lodged a complaint about her former barrister which was characterised as a disciplinary complaint. She also lodged a pecuniary loss dispute seeking compensation. Though initiated by one document, the two different legal proceedings initiated by it took different courses. The Victorian Bar’s Ethics Committee prosecuted a disciplinary charge arising out of the disciplinary complaint. An order was made in favour of the complainant without input from her which was arguably compensation of the kind which the complainant was seeking. When the pecuniary loss dispute was referred to the Legal Profession Tribunal, the barrister said the complainant had had the opportunity to claim compensation in the disciplinary hearing, to which the Legal Practice Act, 1996 said she was a party. That argument failed on the facts, but Registrar Howell said:
‘if the Tribunal informs a complainant that it is considering the making of a compensation order, gives the complainant an opportunity to provide particulars of any compensation which is sought, and gives the complainant an opportunity to be heard on the matter of compensation, the complainant will be estopped from subsequently pursuing compensation in the dispute jurisdiction if the complainant fails to take advantage of the opportunity granted by the Tribunal in the disciplinary proceedings.’
4. B v Home Wilkinson and Lowry [1999] VLPT 1. A wife was involved in matrimonial litigation. Her solicitors sued her for unpaid costs. She defended. The client, later declared vexatious, was waging war on 2 fronts. In the Family Court she sought a taxation out of time, sought to have the costs agreement set aside, and sought an injunction to restrain the Magistrates’ Court further hearing the solicitors’ suit for fees. The Family Court declared that she was out of time for a taxation. The Magistrates’ Court suit was subsequently struck out. Why it was struck out was debated. Registrar Howell concluded:
‘[at common law] the parties to litigation must bring forward all related disputes for determination in the same proceedings. This principle is based upon Henderson v Henderson (1843) 3 Hare 100 and Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1980-81) 147 CLR 589 and, in a case involving a predecessor to this Tribunal, Delahunty v Howell….
Even in the absence of detailed particulars … I am satisfied by the description of the claims in the complaint lodged [with the Law Institute] by [the client] [i.e. the professional negligence claim] that [they] relate generally to the conduct of her family law proceedings by [the solicitors]. Similarly, the costs dispute brought before the Magistrates’ Court related generally to the conduct of her family law proceedings by [the solicitors]. I conclude that the proceedings in the Magistrates’ Court and the dispute referred to this Tribunal relate to the same subject-matter, namely the conduct of family law proceedings by [the solicitors] for [the client].’
So the client was not permitted to continue with the Legal Profession Tribunal claims.
5. Reber v Hallett West Johnston [2000] VLPT 6. A client retained solicitors and they briefed a barrister. The barrister sued the solicitors for her fees when they were not paid, and the solicitors joined the client as a third party. The solicitors later sued the client for their own fees. Instead of pleading Anshun estoppel and saying ‘You’ve already sued me once, as a third party, for counsel’s fees; you could have and should have included a suit for your own fees then but since you didn’t, you’re estopped,’ the client suffered judgment to be entered against him. He was advised he could have the judgment set aside, but couldn’t afford to do so, so he lodged a dispute with the Law Institute, the core of which was that he had:
‘entered into an oral arrangement with the [solicitors] that [he] would not be required to pay any costs to the [them] (other than the fees of [counsel]) if the case … was not successful, that the case was abandoned by [him], that abandonment equates with the case being unsuccessful, and that consequently no costs became payable to the legal practitioner.’
Registrar Howell found that there was no Anshun estoppel which arose from the first Magistrates’ Court third party claim against the client, but Anshun estoppel did operate as a result of the second Magistrates’ Court suit. He said the client:
‘was obliged, if he wished to pursue his defence and raise any other peripheral issues, to file a defence or counter-claim in the second Magistrates’ Court proceeding because the issues that he wished to raise “properly belonged to the subject of the litigation”. [The client] did not take that course prior to the order being made in default of defence, and he did not seek to have the order of the Magistrates’ Court set aside after it was made, with the result that the law now does not allow him to pursue those issues in any other court or tribunal.’
6. Tangalos v Rallis [2000] VLPT 23. There was a fencing dispute. One set of neighbours retained solicitors and the solicitors retained a barrister. The clients did not pay the fees rendered by the solicitors, including the barrister’s fees. So the solicitors sued the clients for the lot (the barrister was not allowed to sue the clients because of Bar rules of conduct then applicable). The clients’ new solicitors served a defence which made no allegations of negligence against the barrister, but under cover of a letter which offered to pay a sum in settlement of the dispute over fees, and said ‘we have been instructed that if necessary the [clients] intend to strenuously defend your complaint on numerous grounds, including that your accounts were excessive. They relied on numerous representations by you and [the barrister]’. The matter settled, the barrister never having been joined as a third party. Deputy Registrar Butcher held:
‘It [would have been] proper for [the clients] to raise any matters which they thought relevant to defend and counterclaim against [the barrister]. The appropriate course of action would have been to cite such matters in defence and issue a third party notice. That was not done. However, the [letter referred to above] made it quite clear that [the clients] were contemplating some form of action against [the barrister] in the event that the proceedings continued. That to me indicates that not only did they intend to raise such matters at the court proceedings but that they appreciated that any money that was owed to [the barrister] and any action which they might have had against [him] were in fact the same matter. …
the matter was settled and [the threatened] allegations were not raised. … it would be … an abuse of process to seek to reopen the matter. Having contemplated the raising of such matters, having stated that contemplation to [the solicitors] and having then settled the matter, to turn around after such settlement and to say that the matters are now reignited against [the barrister] is improper and I do agree with the submission that such would be an abuse of process. …
the claim by the solicitors was specifically for costs in relation to the conduct of litigation on behalf of [the clients] and the subject of this dispute is the conduct of that same litigation. … the only conclusion to which I may come and that is by virtue of not only the principle as enunciated in the case of Delahunty v Howell, … this Tribunal does not have jurisdiction to hear and determine this matter.’
