(1) When there is a document that on its face appears to be a complete contract, that provides an evidentiary basis for inferring that the document contains the whole of the express contractual terms that bind the parties: Gillespie Brothers & Co v Cheney, Eggar & Co [1896] 2 QB 59 at 62 per Lord Russell of Killowen CJ; Gordon v Macgregor [1909] HCA 26; (1909) 8 CLR 316 at 319-20 per Griffith CJ (with whom O’Connor J agreed), at 322-3 per Isaacs J; Hoyt’s Pty Ltd v Spencer [1919] HCA 64; (1919) 27 CLR 133 at 143-4 per Isaacs J (with whom Rich J agreed); Maybury v Atlantic Union Oil Co Ltd [1953] HCA 89; (1953) 89 CLR 507 at 517 per Dixon CJ, Fullagar and Taylor JJ; State Rail Authority (NSW) v Health Outdoor Pty Ltd (1986) 7 NSWLR 170 at 191G-2C per McHugh JA (with whom Kirby P at 172G-3C and Glass JA at 180G agreed on this point); Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424 (FC) at 505-6 [280]- [281], 509 [293] per Allsop J (with whom Drummond and Mansfield JJ agreed); Jessop v McInteer [2003] QCA 170 (FC) at [53] per Muir J (with whom Fryberg J agreed).

(2) It is open to a party to prove that, even though there is a document that on its face appears to be a complete contract, the parties have agreed orally on terms additional to those contained in the writing: Gillespie Brothers at 62 per Lord Russell of Killowen CJ; Gordon v Macgregor at 319-20 per Griffith CJ, at 323 per Isaacs J; Hoyt’s v Spencer at 143-4 per Isaacs J; Hope v RCA Photophone of Australia Pty Ltd [1937] HCA 90; (1937) 59 CLR 348 at 357 per Latham CJ; Maybury v Atlantic Union Oil at 517 per Dixon CJ, Fullagar and Taylor JJ; Health Outdoor at 191D-F per McHugh JA; Carmichael v National Power Plc [1999] UKHL 47; [1991] 1 WLR 2042; [1999] 4 All ER 897 (UKHL) at WLR 2047B-D, F-H; All ER 901e-g, 901j-2b per Lord Irvine of Lairg LC (with whom Lords Goff of Chieveley, Jauncey of Tullichettle and Browne-Wilkinson agreed), at WLR 2049C-D, 2050B-D; All ER 903e-g, 904e-h per Lord Hoffmann (with whom Lords Goff of Chieveley and Jauncey of Tullichettle agreed); Saad v TWT Ltd [1998] NSWCA 199 at 6 per Handley JA (with whom Priestley and Powell JJA agreed); Jessop v McInteer at [51] per Muir J; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 at 483-4 [35]- [36] per Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ. Conversely, it is open to a party to prove that the parties have orally agreed that a document should contain the whole of the terms agreed between them: NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68 at 77A-B per Gleeson CJ and Handley JA.

(3) The parol evidence rule applies only to contracts that are wholly in writing, and thus has no scope to operate until it has first been ascertained that the contract is wholly in writing: Turner v Forwood [1951] 1 All ER 746 (EWCA) at 749F per Denning LJ; Heath Outdoor at 191E, 192A-C per McHugh JA; Norwest Beef Industries Ltd v Peninsular and Oriental Steam Navigation Co (1987) 8 NSWLR 568 at 570B-C per Hope JA (with whom Samuels JA agreed); NSW Cancer Council v Sarfaty at 76G per Gleeson CJ and Handley JA; Branir v Owston Nominees at 508 [287] per Allsop J; County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [8] per Spigelman CJ; Nicolazzo v Harb [2009] VSCA 79 at [90] per Dodds-Streeton JA (with whom Ashley and Neave JJA agreed).

(4) Where a contract is partly written and partly oral, the terms of the contract are to be ascertained from the whole of the circumstances as a matter of fact: Moore v Garwood [1849] EngR 1122; (1849) 4 Exch 681 at 689-90; [1849] EngR 1122; 154 ER 1388 at 1391-2; 80 RR 738 at 745-6 per Patteson J delivering the judgment of the Court of Exchequer Chamber; Stones v Dowler (1860) 29 LJ Ex 122 at 124; 121 RR 882 at 884 per Martin B; Bolckow v Seymour [1858] EngR 873; (1864) 17 CB NS 107; 144 ER 43; 142 RR 272 at CB NS 121-2; ER 49; RR 282 per Byles J, at CB NS [1862] EngR 1021; 122; ER 49; RR 282 per Keating J; Palmer v Bank of Australasia (1895) 16 NSWLR (L) 219 at 223-4 per Darley CJ, Windeyer and Cohen JJ (affirmed on a different ground on appeal to the Privy Council in Bank of Australasia v Palmer [1897] AC 540); Deane v The City Bank of Sydney [1904] HCA 44; (1904) 2 CLR 198 at 209 per Griffith CJ, Barton and O’Connor JJ; J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078 at 1083E-F; [1976] 2 All ER 930 at 935a-b (EWCA) per Roskill LJ; Handbury v Nolan (1977) 13 ALR 339 (HCA) at 341 per Barwick CJ, 348-9 per Jacobs J, (Aickin J agreed with both Barwick CJ and Jacobs J), at 346 per Stephen J (but dissenting as to whether the evidence established a partly written and partly oral agreement), (Gibbs J agreed with Stephen J); Finucane v NSW Egg Corporation (1988) 80 ALR 486 (FCA) at 520-1 per Lockhart J; Carmichael v National Power at WLR 2049C-50E; All ER 903f-4h per Lord Hoffmann; Lewison, The Interpretation of Contracts, 4^th ed (2007) Sweet & Maxwell at [4.02] and cases there cited. Similarly, finding the terms of a wholly oral contract is a question of fact: Gardiner v Grigg (1938) 38 SR (NSW) 524 at 532 per Jordan CJ (with whom Nicholas J agreed); Torbett v Faulkner [1952] 2 TLR 659 (EWCA) at 661 per Romer LJ; Handbury v Nolan at 346 per Stephen J (with whom Gibbs J agreed); Maggs v Marsh [2006] EWCA Civ 1058; [2006] BLR 395 at [26] per Smith LJ (with whom Moses and Hallett LJJ agreed).

(5) In determining what are the terms of a contract that is partly written and partly oral, surrounding circumstances may be used as an aid to finding what the terms of the contract are: Stones v Dowler at LJ Ex 124; RR 884 per Martin B; Deane v The City Bank of Sydney at 209 per Griffith CJ, Barton and O’Connor JJ; Handbury v Nolan at 341-2 per Barwick CJ, at 346 per Stephen J, at 348-9 per Jacobs J; Liverpool City Council v Irwin [1976] UKHL 1; [1977] AC 239 at 253C-E per Lord Wilberforce. If it is possible to make a finding about what were the words the parties said to each other, the meaning of those words is ascertained in the light of the surrounding circumstances: Deane v The City Bank of Sydney at 209; Handbury v Nolan at 341-2, 346, 348-9. If it is not possible to make a finding about the particular words that were used (as sometimes happens when a contract is partly written, partly oral and partly inferred from conduct) the surrounding circumstances can be looked at to find what in substance the parties agreed: County Securities v Challenger Group Holdings at [7]-[8] per Spigelman CJ.

(6) A quite separate type of contractual arrangement to a contract that is partly written and partly oral is where there is a contract wholly in writing and an oral collateral contract: J Evans & Son v Anthony Merzario at WLR 1083C-E; All ER 934h-5a per Roskill LJ, at WLR 1084H; All ER 936c per Geoffrey Lane LJ; Hoyt’s v Spencer at 144-5 per Isaacs J; Equuscorp v Glengallan Investments at 484 [36] per Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ.’

Update, 23 February 2010: Sydney Morning Herald article here.

Original post: Najem v Maatouk [2010] NSWSC 20 is a great read.  It is a text book example of how not to sue for fees. It also progresses the resolution of the question on which two justices of appeal had previously divided, the third helpfully not deciding, in a previous decision.  The question is whether a solicitor may use the rule that oral costs agreements are void against a client relying on a costs agreement favourable to the client.  No, said Justice McCallum.  The decision also provides an insight into what does and does not amount to ‘evidenced in writing’, the minimum condition for enforceability of costs agreements.

Mr Najem owned taxis.  They got into bingles.  He often needed to sue.  He worked out a deal with a solicitor: regardless of the outcome, he would pay, at the end of the case, a low fixed fee. If there was an order for costs in his favour, the solicitor could take the lot in addition.  The solicitor ran into a bit of trouble with the Bureau and had his practising certificate limited by a condition he work only as an employee.  He took Mr Najem to his new employer, Mr Maatouk.  Mr Najem’s solicitor and Mr Najem agreed that the old deal would still apply.

Time went by and Mr Maatouk became dissatisfied with his employee’s fee-earning performance.  He sent out a stack of bills ‘without any comprehensible identification of the legal services that had allegedly been provided’, purportedly drawn by reference to an hourly rates costs assessment.

Naturally, Mr Najem refused to pay.  The employment of the solicitor, Mr Maatouk’s employee, ‘came to an end’.  Mr Maatouk exercised a lien over the files, and did no further work.  Consequently some of Mr Najem’s suits were dismissed for want of prosecution.  Mr Maatouk sued Mr Najem on the bills.  After a while, he decided instead to seek the NSW equivalent of taxation — an assessment by a costs assessor — of all 46 of his bills.  So the suit for fees was adjourned pending the assessment.  But not before Mr Maatouk had sought to have Mr Najem cited for perjury, and there had been an exchange of notices to produce.  Time may tell that that was not a good bit of karma to lay down.  Neither party produced the documents sought by the other’s notice to produce.  As Mr Maatouk would later say to the costs assessor:

‘Mr Najem has advised the Court that he does not have any of the documents sought in the notice to produce.  This in itself shows casts (sic) a large cloud of doubt over the information and allegations made by Mr Najem.’

What Mr Maatouk omitted to mention to the costs assessor was that in response to the notice to produce served on him he told the court hearing the suit for fees:

‘Those documents were collated ready to be produced to the court.  Some matters of recent events have occurred at my office which resulted in those documents no longer being in my possession.  [inaudible] … elaborate much your Honour.

Q.  Were they destroyed?

A.  I believe so, I don’t have them.  I don’t know where they are.  They were in my car.’

Naturally, Mr Najem told the assessor that there was no hourly rate costs agreement.  There was disputed affidavit evidence.  It was a rumble in the jungle kinda conflict of evidence.  Mr Najem produced costs disclosures from Mr Maatouk consistent with the original deal with his solicitor.  Mr Maatouk produced file copies of costs agreements which the judge assumed he contended had come into operation by implication from the giving of instructions having received them.  Mr Maatouk said Mr Najem’s costs disclosures were forgeries, pointing out that they all ‘mysteriously’ bore the same date and contained the statement, inherently improbable to have been made by a solicitor, that judgment was likely within a week.  Only problem was, the file copies of the costs agreements Mr Maatouk had produced all bore the same date, and some also contained the one week claim.  D’oh! Mr Najem said Mr Maatouk’s costs agreements were forgeries.  The costs assessor must have believed Mr Maatouk over Mr Najem, and issued a ruling.  That fact illustrates the limits of resolving conflicts of evidence on affidavits.

A month later, Mr Najem learnt that Mr Maatouk had been charged with attempting to pervert the course of justice. It was alleged that he had reported the theft of his car in which he had had some papers ready for his case with Mr Najem.  It was found soon afterwards, extensively damaged by fire except for — d’oh! — the boot, which was empty, or so the police said.

Naturally, Mr Najem sought leave to appeal the costs assessor’s ruling.  Mr Maatouk did not give evidence.  The judge thought Mr Najem’s evidence to have been frank and honest.  Guess what? The judge found that there were no hourly rate costs agreements as alleged by Mr Maatouk.

There is something to the judgment other than opportunity for schadenfreude tenuously justifying its inclusion in this newspaper.  New South Wales’s and Victoria’s Legal Profession Acts alike say that oral costs agreements are void.  The judge said:

‘it is appropriate to give some consideration to section 184(4) of the Legal Profession Act 1987. That section provided that a costs agreement is void if it is not in writing or evidenced in writing. However, there is a divergence of views as to whether the section has any application to a costs agreement favourable to the client: see Wentworth v Rogers per Santow JA at [32]; cf Basten JA at [146]; Hislop J not deciding.

64 With great respect to Santow JA, I share the view expressed by Basten JA that s 184 would not be read to include a costs agreement favourable to the client. Before the enactment of that provision, such an agreement required no statutory authority for its enforceability. A consideration of the matters discussed by Basten JA in Wentworth v Rogers at [139] to [146] leads me to the view that s 184 was directed to regulating the enforcement of claims for remuneration by solicitors. I do not think that section should be construed so as to render unenforceable an oral costs agreement favourable to the client. Nothing in the statute suggests that one of its objects was to relieve a solicitor of the obligation to comply with such a bargain.

65 In case that view is wrong, it is appropriate to consider whether the oral costs agreement in the present case was “evidenced in writing” within the meaning of s 184 of the 1987 Act. I have reached the conclusion that it was not. The only documents arguably evidencing the agreement are the seven costs disclosure letters relied upon by Mr Najem. As already noted, there is an issue as to the authenticity of those letters but I do not think it is necessary to resolve that issue.

66 The oral agreement governed all of Mr Najem’s small claims, identifying different amounts to be charged by reference to the amount of each claim. The letters do not amount to written evidence of the terms of that agreement. They do not set out the different rates or identify the determinant as to which rate was applicable. They do not record the term of the agreement that costs were payable only upon completion of a matter; indeed, the letters state otherwise. Accordingly, if (contrary to my view) it is necessary for the agreement to be “evidenced in writing” in order to be enforceable against Mr Maatouk, I am not satisfied that it was.’

Not all costs agreements will be credit contracts governed by the Code.  I bet there are a lot of solicitors out there with void equitable charges, however.  They will need to proceed with great care in fixing the problem.  Unless they procure the amelioration of the position with retrospective effect with the utmost probity, the ‘fix’ may in fact be challenged in the various jurisdictions which give expression to the law’s tenderness towards clients in their dealings with solicitors.  It would be sensible to obtain advice if the amount secured by the questionable charge is of sufficient significance to them.

The solicitor’s original costs agreement purported, by way of security for the solicitor’s fees to be charged in the future, to charge

‘all my estate, rights, title and interest in and to and entitlement to any real or personal property from a property lase settlement with my husband and to: (a) all of my estate, right title and interest in any other real or personal property, save and except for heirlooms, now or hereafter acquired by me; in favour of Issac Brott & Co for the due and punctual payment of all moneys that may now or hereafter become due to Issac Brott & Co by reason of and pursuant to the terms of this agreement.’

This solicitor purported to take a charge over his client’s toothbrush, but Justice Beach found the costs agreement containing that charge to have been superseded by the one which turned out to be controversial.  By way of dicta, his Honour suggested that the mystery word ‘lase’ probably rendered the charge void for uncertainty anyway.  Alternatively, his Honour said, it may have fallen foul of the requirement that the property charged be able to be pointed to at the time it is sought to be enforced.  Justice Beach explained at [49]:

‘From time to time it is suggested that a charge over all of the real and personal property over which the chargor owns or may hereafter acquire may be too wide. [fn 21: See for example Fisher & Lightwood’s Law of Mortgage (Australian edition) at paragraph 2.3.]  However, the better view appears to be that a charge over a chargor’s “real and personal property whatsoever and wheresoever” is not void for uncertainty, nor as being against public policy if it is possible at the time when the charge is sought to be enforced to point to the property comprised in it. [fn 22: See generally Bridge Wholesale Acceptance Corporation (Australia) Limited v Burnard (1992) 27 NSWLR 415 at 421. See further, National Trustees Executors and Agency Co of Australia Limited v Lesser [1944] VLR 210; Tyson v Kelcey [1899] 2 Ch 530 at 532-3; Clark v Raymor (Brisbane) Pty Ltd (No. 2) [1982] QdR 790 at 795 and ALH Australia Limited v McGlinn (1996) 7 BPR 15179.]

(For some reason, perhaps that there was no incurring of a deferred debt under the first costs agreement, s. 40 of the Consumer Credit Code, which was determinative of the dispute in relation to the second costs agrement discussed below, was not discussed in relation to this first costs agreement).

Clauses 9 and 10 of the second costs agreement purported to charge irrevocably to secure ‘payment of all moneys that may be or become due to you [Brott] under this Costs Agreement’:

‘all estates or interests in real estate which I, or any company in relation to which I have authority to exercise the power to charge real estate, now have or may hereafter acquire’ and

‘all money and property whatsoever (sic) nature to which I may become entitled pursuant to any judgment or order obtained in, or by reason of any settlement of, any proceeding pursued by you’.

Justice Beach found that the second costs agreement achieved retrospective operation (at [40]).  Bills were to be rendered periodically, but the fees were not payable until ‘completion of these proceedings (being a minimum of 180 days after settlement of the proceeding) or, alternatively, the termination of your services, whichever is the earlier.’  If they were not paid at that time, however, interest ran at 12.3 per cent from the date of the rendering of each unpaid bill (as opposed to from the date for payment of the monies due upon the bills from the due date).  Accordingly, Justice Beach found that the costs agreement’s equitable charge was a ‘mortgage’ as defined by the Consumer Credit (Victoria) Code, to which the mortgagor was a natural person (s. which secured obligations under a ‘credit contract’ as defined. That latter finding entailed findings that the credit was provided for personal, domestic or household purposes (matrimonial property proceedings), and that (about which there was ‘no doubt’) by the second costs agreement, the solicitor deferred a debt owed by the client or the client incurred a deferred debt, although the reasoning in that regard was not set out in any detail because the solicitor apparently admitted as much.

Significantly, Justice Beach found that the following clause, a member of a class of such clauses commonly found in costs agreements at the less exemplary end of the scale, amounted to a charge which was or might have been made for providing the credit:

‘I acknowledge that those rules [Family Law Rules] admit (sic) you to add up to 10% loading to the costs set out in the Schedule hereto having regard to the complexity of the proceedings, the difficulty or novelty of the matters raised in the proceedings and/or the special skill, knowledge or responsibility of and the demands placed on you by the proceedings.’

The odd interest provision referred to above also amounted to a charge which was or might have been made for providing the credit.  By s. 11(1) of the Code, the solicitor had the onus of rebutting the presumption that the Code applied to the provision of credit, which would have required him to establish on the balance of probabilities that no charge was or might be made for the provision of the credit.

The judgment notes that the Consumer Credit (Victoria) Act, 1995 applies the Consumer Credit (Victoria) Code (commonly referred to simply as ‘the Consumer Credit Code’) to credit contracts entered into from 1996.

Section 40 of the Consumer Credit Code provides that:

‘(1) A mortgage that does not describe or identify the property which is subject to the mortgage is void.

(2) Without limiting subsection (1), a provision in a mortgage that charges all the property of the mortgagor is void.’

Justice Beach continued:

‘78  It follows from what I have said that the second costs agreement is a mortgage within the meaning of s 40 of the Consumer Credit Code.  The question that now arises is whether it is void because it “does not describe or identify the property” which is subject to it.

79  If one looks at clauses 9 and 10 of the second costs agreement, it is apparent that they purport to charge:

(a) all Mrs Shtrambrandt’s interests in any real estate which she now has or may acquire;

(b) all interests in real estate which any company in relation to which Mrs Shtrambrandt has authority to exercise the power to charge real estate now has or may acquire; and

(c) all money and property of whatsoever nature to which Mrs Shtrambrandt might become entitled by reason of any judgment or settlement in the family law proceeding or any other proceeding pursued by Mr Brott on her behalf.

80 Clause 13(4) of Schedule 2 of the Code provides that in the Code “words in the singular include the plural”.  Applying that clause and clause 7 of Schedule 2, if two or more provisions in a mortgage charge all the property of the mortgagor, then they are void.   On one view, it could be said that clauses 9 and 10 of the second costs agreement charge all the property of Mrs Shtrambrandt because anything Mrs Shtrambrandt becomes entitled to retain after the completion of the family law proceeding could be said to be an entitlement pursuant to a judgment or settlement of that proceeding.

81  However, I prefer to base my decision on grounds which are not so narrow.  In my view, clause 9 of the second costs agreement is caught by s 40(1) of the Consumer Credit Code.  Property is neither described nor identified within the meaning of that section by the use of general words encompassing all estates or interests in real estate which the mortgagor now has or may acquire.[42] Further, a mortgagee’s position is not enhanced by the breadth of the charge being widened to include all estates or interests in real estate which any company in relation to which the mortgagor has authority to exercise the power to charge real estate now has or may acquire.

82 Neither the Consumer Credit Code nor the extrinsic material in relation to it[43] disclose the purpose or object[44] of s 40.  However, one likely purpose would appear to be to ensure that a mortgagor’s obligations are not open-ended and to ensure that a mortgagee cannot claim, or place restrictions on, property of greater value than the mortgagee might otherwise have a right to under the credit contract.[45] This purpose (or object) would obviously not be achieved (or not be best achieved, to use the language of clause 7 of Schedule 2) by the construction posited on behalf of Mr Brott.’

[42] Cf Considine v Citicorp Australia Limited [1981] 1 NSWLR 657.

[43] Cf clause 8 of Schedule 2 of the Code.

[44] Cf clause 7 of the Code.

[45] Cf paragraph 8.109 of the explanatory memorandum of the National Consumer Credit Protection Bill currently before the Commonwealth Parliament (and in which it is proposed to enact a national credit code in which s 44 is in identical terms to s 40 of the Consumer Credit Code).’

Following filing, VCAT generally sets down a directions hearing of its own motion. There is a standard form of orders which is often made.  They are reproduced below.  To avoid a directions hearing, applicants would be well-advised to include the details (‘particulars’ in legal lingo) the usual orders require in the application itself.  The applicant should then ask the respondent whether it will consent to doing what the usual orders generally require within, say, 2 weeks.  Alternatively, if that was not done at the outset, the parties might consider submitting the orders they would each be happy with (‘a minute of consent orders’ in legal lingo) in the terms of the usual orders to VCAT in advance, saving the need for a trip to VCAT if the decision maker who would otherwise preside at the directions hearing is content to make the orders on the papers.  Of course, a directions hearing may be necessary anyway.  Directions made at directions hearings are not necessarily limited to those found in the usual orders.  Nor are the usual orders always made.

The usual orders are:

‘1.    The applicant by [date] is to serve upon the respondent and lodge with the Tribunal written particulars of:

(a)    the costs agreement which is the subject matter of the application. The applicant is to provide to the respondent and to the Tribunal a photocopy of the costs agreement;

(b)    any other document that is relied upon by the applicant as evidence of a costs agreement. The applicant is to provide to the respondent and to the Tribunal a photocopy of any such document;

(c)    any conduct that is relied upon by the applicant as evidence of a costs agreement;

(d)    the statutory basis of the application, including whether the application is based upon an allegation of fraud or misrepresentation, a finding of misconduct or unsatisfactory conduct, an allegation of failure to disclosure information, or some other basis;

(e)    the facts or circumstances to be relied upon in support of each statutory basis of the application;

(f)    the legal services provided to the applicant by the respondent.

2. The respondent by [date] is to serve upon the applicant and lodge with the Tribunal the respondent’s response to the application, including written particulars of:

(a)    the costs agreement referred to in the application. The respondent is to provide to the applicant and to the Tribunal a photocopy of the costs agreement;

(b)    any other document that the respondent relies upon as evidence of a costs agreement. The respondent is to provide to the applicant and to the Tribunal a photocopy of any such document;

(c)    any conduct that is relied upon by the respondent as evidence of a costs agreement;

(d)    the legal services the respondent contends to be the subject matter of the alleged costs agreement.

3.    The applicant or the respondent may apply to the Tribunal at any time seeking further directions as to the conduct of the application.

4.    The costs of the directions hearing that took place on [date of directions hearing] are reserved.’

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The provisions relating to the service of bills (the language of the Acts is the ‘giving’ of bills) in the Legal Practice Act, 1996 and the Legal Profession Act, 2004 are set out below.  They are to be given to the person billed personally, or by post.  They can be delivered only to agents who are authorised to accept legal process, a class probably limited in reality to solicitors who have agreed to accept service of a writ.  Neither emailing nor faxing is specified as a good way of service (compare NSW, where bills can be emailed).  These are state acts, and s. 109X of the Corporations Act, 2001 (Cth.) probably provides an alternative service regime for the giving of bills to corporate clients, but it does not provide for service by email or fax either.

The giving of a bill of costs is a critical step in the law’s ordering of the solicitor’s and client’s competing interests in a dispute about fees.  The solicitor may not sue for a specified period after giving it.  The client has only a specified period after receiving it to institute a costs dispute or seek taxation or request an itemised bill.  Interest runs from a period after giving it.

There is a question about how to interpret these provisions, and it is this: if it may be proved that a person actually received the bill by email or fax, or via an agent not authorised to accept service of legal process, has the bill been ‘given in accordance with’ the provisions, so that the deadlines referred to above then begin to run?  In Hope v Hope (1854) 4 De G M & G 328 at 342, Lord Cranworth said:

“The object of all service is of course only to give notice to the party to whom it is made, so that he may be made aware of and may be able to resist that which is sought against him; and when that has been substantially done, so that the Court may feel perfectly confident that service has reached him, everything has been done that is required.”

This sensible golden rule was applied in Pino v Prosser, a handy little authority I cottoned onto at the very start of my career.  A writ was left with a man’s wife.  Personal service was required, and service on the wife was not personal service on the husband.  But when the wife gave the writ to the husband, he was personally served.  Both authorities were applied in Guss v Magistrates’ Court of Victoria [2003] VSC 365, where Justice Osborn found a summons to answer a criminal charge to have been served on a famously litigious solicitor in accordance with s. 34(1) of the Magistrates’ Court Act, 1989 (read the ‘tortuous’ history of the ultimately successful prosecution in Guss v Jacotine [2007] VSC 446).  Section 34(1) said:

‘Every summons to answer to a charge, except where otherwise expressly enacted – (a) must be served [in accordance with a precise regime]‘.

The summons had been left at the premises of a company to which the solicitor was a paid consultant who attended several part days a week.  The company seems to have been associated with his son. The premises were not the solicitor’s principal place of business, and accordingly, at that moment there was no service in accordance with s. 34(1). However the solicitor admitted having received a copy of the summons a few days after it had been left at the premises, and Justice Osborn held that at that point, there had been service in accordance with s. 34(1).

The cases disclose that the words of some statutory regimes do not allow for such a substance over form approach: see Rochester Communications Group Pty Ltd v Lader Pty Ltd (1997) 143 ALR 648. Exactly how the provisions which are the subject of this post ought to be interpreted, remains to be authoritatively determined, it seems.  Other authorities about service may not apply directly because of the stipulation in s. 107 of the old Act and s. 3.4.33 of the new one that lawyers may not sue on their bills until a certain period after giving a bill in accordance with [section] 3.4.38‘.  Do the italicised words indicate a legislative intention to alter the proposition referred to in Hope v Hope?

I think not, wherever the decision of a single judge of the Supreme Court of Victoria approved by the NSW Court of Appeal is binding or persuasive.  Guss’s Case has been followed or cited approvingly in Murdoch v Smith [2006] VSC 468 (Cavanough J), Italiano v Carbone [2005] NSWCA 177 (which says Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542 (service by DX), and Ketrim Pty Ltd v AS&L Pty Ltd (2004) 52 ACSR 252 at [16]-[18] took a similar approach, as did, in relation to service by fax, Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2004] 1 Qd R 140 and Emhill Pty Ltd v Bonsoc Pty Ltd [2004] VSC 322; (2004) 50 ACSR 305).  See too Polstar Pty Ltd v Agnew [2007] NSWSC 114, Mogensen v Premium Grain Handlers Pty Ltd [2008] WASC 145, and James v Ash Electrical Services Pty Ltd [2008] NSWSC 1112.

There is to my knowledge only one authority which bears directly on the issue: Horesh v Cyngler [2007] VCAT 527, and it is consistent with the above authorities.  In that case, the solicitor posted the bill to the client’s son, and the son gave it to the client.  Senior Member Howell, Victoria’s most experienced decision maker in relation to lawyer-client disputes, found that there had been good service.  Having found that the son was not the father’s agent authorised to accept service of legal process, Senior Member Howell concluded:

‘the accounts were delivered to the father personally, through the medium of the son, within about one month after they were posted to the father at the address of the son. Consequently, there was service of the accounts in accordance with s.107(3)(a)’.

The relevant statutory provisions

Sections 108(3) and (4) of the Legal Practice Act, 1996 say:

‘(3) A bill of costs is to be given to a person—

(a) by delivering it personally to the person or to an agent of the person; or

(b) by sending it by post to the person or agent at the usual or last known business or
residential address of the person or agent; or

(c) by leaving it for the person or agent at the usual or last known business or residential
address of the person or agent with a person on the premises who is apparently at least
16 years old and apparently employed or residing there.

(4) In this section, “agent” of a person means an agent, legal practitioner or firm that has authority to accept service of legal process on behalf of the person.’

Section 3.4.34 of the Legal Profession Act, 2004 says:

‘(4) A bill is to be given to a person-

(a) by delivering it personally to the person or to an agent of the person; or

(b) by sending it by post to the person or agent at-

(i) the usual or last known business or residential address of the person or agent; or

(ii) an address nominated for the purpose by the person or agent; or

(c) by leaving it for the person or agent at-

(i) the usual or last known business or residential address of the person or agent; or

(ii) an address nominated for the purpose by the person or agent- with a person on the premises who is apparently at least 16 years old and apparently employed or residing there.

(5) A reference in subsection (4) to any method of giving a bill to a person includes a reference to arranging for the bill to be given to that person by that method (for example, by delivery by courier).

(5A) Despite anything in subsections (2) to (5), a bill may be given to a client electronically if the client is a sophisticated client and requested the bill to be given electronically.

(6) In this section- agent of a person means an agent, law practice or Australian legal practitioner who has authority to accept service of legal process on behalf of the person.’

Deemed service

The date of service is governed under the Legal Practice Act, 1996 by s. 434(1)(b) and under the Legal Profession Act, 2004 by s. 7.2.4(b).  Each says that:

‘a notice or other document must be taken to have been served on, or given to, a person … (b) in the case of posting, 2 business days after the day on which the document was posted.’

According to Victorian Lawyers RPA Ltd v Kearney [2002] VSC 470 at [16] the words ‘must be taken’ mean what they say, creating an irrebuttable presumption.  That case said that where there is an enquiry in relation to the time a thing came to the notice of a person, the date it was delivered is not to the point.  Notice is a state of mind (see also Cosentino v Mohan Yildiz and Associates [2007] VCAT 1319). Where service, or (in the case of bills) the giving, of a document is in issue however, the presumption may not be wriggled out of.

Section 141 of the VCAT Act, 1998 is to the same effect. In Vitesnik v Macedon Ranges SC [2007] VCAT 598, Deputy President Gibson had to work out whether an application to review a mandarin’s decision had been lodged within time.  The applicant had 21 days from the date when the Council ‘gave notice’.  Kearney’s Case was not cited to VCAT. The Deputy President said ‘delivery or receipt of a notice refers to the time when it is received at the address to which it is sent, not when it may be physically collected or opened by the recipient’.  To the same effect is Deputy President Gibson’s decision in Archerduck Pty Ltd v Ballarat CC [2007] VCAT 1696.

As a solicitor, I always took a conservative approach and started to count interest on basis (iv) or (v), which usually produced the same result.  I noticed when reading Horesh v Cyngler [2007] VCAT 527 that Senior Member Howell, who might be expected to know this kind of thing, awarded interest from 30 days after the date of receipt of the bill. What the reasons do not disclose is whether the costs agreement or bill specified payment forthwith, or, as is more usual, within 7, 14 or 30 days.  If forthwith, then the decision only reveals that (iii) is the correct choice out of (i) to (iii), a most unsurprising result.  If within X days, though, the interpretation accords with the most natural meaning of ‘after payment is demanded’.  The demand is made on the date the bill is given.  Payment is ‘demanded by’ the due date on the bill, which is a different thing.  On the other hand, if the bill specified 90 day terms, the result would be that a client who paid on time would be theoretically liable to pay 60 days’ penalty interest nonetheless, which would be surprising unless the interest regime is conceived of not as a penalty for late payment but as a statutory counterbalance to clients’ frequent tardiness in paying their lawyers.  The problem with the ‘it’s not a penalty’ is that the penalty rate is in fact punitive, like its name suggests.

Section 3.4.21 of the Legal Profession Act, 2004 now says in relation to bills issued after 6 December 2007 that interest may be charged in accordance with a costs agreement, or ‘if the costs are unpaid 30 days or more after the practice has given a bill’.  That is both clearer and less clear than s. 95.  Clearly, a client who pays within 30 days after the deemed receipt by post of a bill will not have to pay interest.  But how much interest must a client who pays on the 40th day after the deemed receipt of the bill in the post?  Thirty-nine days’ interest or nine?  In the absence of agreement, the maximum rate of interest chargeable is ascertained by reference to the cash target rate published by the government on the date of the bill, not the date 3o days afterwards.  But it would be surprising if a client who paid a bill a day after the lawyer asked her to was required to pay a month’s interest, and you can bet that the provision will not be interpreted to achieve that result.

Since ‘any genuine dispute’ between the complainant and the lawyer complained about is a civil complaint, however, one might think that all disciplinary complaints in which the complainant has a dispute with the lawyer complained about will amount to both a civil and a disciplinary complaint.  And since an allegation will be a disciplinary complaint if it is of conduct which ‘falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent’ lawyer, there will be many civil complaints which will also be disciplinary complaints.

In such a circumstance, unless the Commissioner summarily dismisses the whole complaint under s. 4.2.10, she must try to settle it (insofar as it is a civil complaint), and (insofar as it is a disciplinary complaint) she must investigate it.

If Justice Beach’s logic is applied, profound challenges await the Commissioner.  They are inherent in the Act’s injunction in relation to one dispute to investigate it in the public interest with a view to prosecuting and penalising the lawyer, while at the same time trying to resolve the dispute between the complainant and the lawyer.  Most obviously, what is the Commissioner to do about s. 4.3.5(4)? It says:

‘Evidence of anything said or done in the course of attempting to resolve a civil dispute is not admissible in proceedings before [VCAT] or any other proceedings relating to the subject-matter of the dispute.’

Are there to be two sets of responses, in one of which (in the civil complaint) the lawyer makes socially appropriate concessions, apologises, and agrees to pay money in return for confidentiality, and in the other of which (the disciplinary complaint), the lawyer takes all appropriate technical points and, while being fully frank and open as required by the Act, concedes nothing? And imagine the disquiet the lawyer’s insurer will have knowing that the Commissioner will be able to compel the provision of answers from a practitioner, as if interrogating him, in the disciplinary complaint which will run parallel with the professional negligence claim constituting the civil complaint.

In the original Byrne v Marles [2008] VSCA 78, Mr Byrne had the Court of Appeal declare that the Legal Services Commissioner is obliged to give lawyers an opportunity to be heard in relation to whether the complaint should be characterised as a disciplinary complaint (I posted about it here).  The decision has been reversed by legislation in relation to all complaints lodged after 12 December 2008.

Following the Court of Appeal’s decision, the Commissioner resumed her duties.  She wrote a letter of the kind that she has been writing in response to Byrne v Marles (see para 1 of the judgment which is the subject of this post).  She heard Mr Byrne on the question: he sent in 12 pages of submissions. Then she said:

‘The complaint is a disciplinary complaint as defined in section 4.2.3. of the Legal Profession Act 2004 (‘the Act’) because it is a complaint about conduct which, if established, would amount to unsatisfactory professional conduct or professional misconduct. A civil dispute is defined in section 4.2.2 of the Act.’

Section 4.2.3 defines a ‘disciplinary complaint’ as:

‘a complaint about conduct … to the extent that the conduct, if established, would amount to unsatisfactory professional conduct or professional misconduct.’

The reasons are accordingly not very illuminating, if they may properly be called reasons at all, especially when one of Mr Byrne’s points has been that the non-provision on request of a costs agreement is no more an allegation of conduct warranting discipline as an allegation that a lawyer’s handshake was too limp (my characterisation of his argument, not his). No one could argue with the proposition that it would be more helpful to say ‘Allegation X, if established, would amount to a breach of rule Y of the conduct rules’ or ‘Allegation Z, if established could amount, depending on any extenuating circumstances you may bring to my attention during the course of the investigation, to professional misconduct at common law, in the sense that, unexplained, your conduct would be regarded by your competent and reputable peers as disgraceful and dishonourable.’

Mr Byrne returned to the Supreme Court to complain.  It gave him no truck at all.  Justice Beach held that there is no mutual exclusivity between a disciplinary complaint and a civil complaint, and said that Mr Byrne’s case was based on such a fallacy. Mr Byrne has long been saying that the allegations (e.g. the non-provision on request of a copy of the costs agreement which regulated his and his former client’s relationship) should be seen for what they are: a costs dispute.  Justice Beach said (again, my words, not his), that it may well be a costs dispute, but so too may it also be a disciplinary complaint.

That there is no mutual exclusivity is obvious from s. 4.2.11.  The real question is whether the parliament contemplated that a particular allegation could amount to both a civil and a disciplinary complaint, or whether it contemplated a single document raising multiple allegations, some of which might be characterised as civil and some as disciplinary complaints.  Though that question is not expressly identified in the judgment, the inescapable conclusion of Justice Beach’s decision is that a single allegation may be both.