Sudden eruption of unconscionability amongst solicitors further documented

Updated, 4 January 2008: See the underlined additions below (with thanks for the references to Jason Pizer’s book at p. 246).

Original post: Now two unrepresented folk have managed to convince VCAT’s Legal Practice List’s Member Butcher in a Fair Trading Act, 1999 claim that yet another solicitor has been acting unconscionably towards his clients in relation to fees. The decision in Alexander v HWL [2007] VCAT 2297 (and two earlier decisions posted about here and here and here) suggests two separate schisms between VCAT’s decision makers:

• The first between those who hold that solicitors engage in trade or commerce when they provide professional services to clients (such as Member Butcher) and those who hold that they do not (such as Senior Member Howell and Deputy President Steel); and

• Secondly, between those who emphasise that only in cases of highly unethical behaviour should a finding of unconscionability be made (such as Senior Member Vassie) and those who presumably consider that test to be a little on the stringent side (such as Member Butcher).

I’ll bet the solicitor walked away from this hearing rather startled by the unmasking of his unconscionable and misleading and deceptive conduct. He was until recently a barrister, and has even risen to the heady status of Melbourne City Councillor in recent times. Consider that at common law at least, only in the case of highly unethical behaviour carrying with it a high level of moral obloquy should a finding of unconscionability be made (see below). It is a shocking slur on the name of a lawyer. Then consider that the facts were as follows. A solicitor did some work for a couple whose neighbours had changed the design of a window, contrary to the specifications approved by the local council. The work was done under a fee agreement which prescribed different rates for lawyers of different stations within the firm. Partners and special counsel were charged at the rate of $435 per hour and ‘solicitors’ at between $240 and $363. The solicitor was a special counsel and charged accordingly. But he signed the costs agreement above the printed word ‘solicitor’. His costs disclosure provided the following estimate of costs:

‘To lodge enforcement application and negotiate with Council [$1,305].

To run the case to conclusion [in] VCAT [$4,180].’

The solicitor put out a bill for $3,885 having run the case to a conclusion in VCAT, albeit that that conclusion was reached at a mediation at which the applicants were unrepresented. Member Butcher made the following findings:

• The quoted text was ambiguous in that one cannot tell whether the total of the estimate was $5,485 or $4,180 and that ambiguity ‘itself leads to a conclusion of unconscionability’.

• The solicitor did not communicate the fact to his clients that the matter had moved beyond the first phase associated with the estimate of $1,305 and there was accordingly a breach of the requirement in the Legal Profession Act, 2004 ‘that further disclosure be made’ (presumably, s. 3.4.16). There is no specific finding of unconscionability or misleading or deceptive conduct attached to this finding unless the words ‘and I so find’ at [10] is inteded to be such a finding. The fact of a breach of the Act gives rise to no remedy under the Act, and Member Butcher found, in any event, that the Act was not invoked by the proceeding.

• ‘The document … sets out the hourly rate in relation to solicitors and it is not a matter of contention that the rate charged by the respondent was that for special counsel which is considerably higher. I find that this is a misleading or deceptive course of conduct.’

There was no discussion about and no finding of reliance by the applicants or loss and damage. The applicants conceded they should pay $1,305. The application of the law to the facts in relation to the disputed $2,580 was as follows:

‘it is clear that despite the lack of communication and the lack of information given to the client [sic.] in relation to the costs liability being incurred that further work was being done. In all the circumstances I find that it is fair and reasonable that professional fees of [$1,305] is the appropriate figure.’

The bill was reduced accordingly, though some disbursements were allowed. Now, to the evidence of those schisms.

In Ashworth v Biggin and Scott (Richmond) Pty Ltd [2007] VCAT 648, Senior Member Vassie approved, in the context of a claim under s. 7 of the Fair Trading Act, 1999 (unconscionability within the meaning of the unwritten law), the following observation of the NSW Court of Appeal in Attorney General of NSW v World Best Holdings Ltd [2005] NSWCA 261:

‘Not every unfair practice will be unconscionable. Unconscionability is a concept which requires a high level of moral obloquy. If it were to be applied as if it were equivalent to what was ‘fair’ or ‘just’, it could transform commercial relationships in a manner which is not intended. If that occurred the principle of ‘unconscionability’ would not be a doctrine of occasional application, when the circumstances are highly unethical’.

Each of the unconscionability provisions (ss. 7, 8, 8A) and the misleading or deceptive conduct provision (s. 9) in the Fair Trading Act, 1999 has as an element of the cause of action the requirement that the acts or omissions relied on must be in trade or commerce. VCAT has previously held that doctors, and solicitors, do not engage in trade or commerce when providing professional services to clients. However VCAT’s Legal Practice List has also held that in the case of a consumer and trader dispute under s. 107ff of the Fair Trading Act, 1999 (as this might conceivably have been cast by the applicants) there is no requirement of trade or commerce (though Member Phillips and Senior Member Vassie in the Civil List had previously held the opposite: Munro v Swan Hill Cemetry Trust [2006] VCAT 1207; David v Vodafone Pty Ltd [2006] VCAT 1912 at [20] to [23], [26] to [27], citing Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd [2004] VSCA 242; Habashy v Relpar Australia Pty Ltd [2006] VCAT 1912).

There is no discussion of these issues in the reasons which do not identify which statutory or common law causes of action have been made out. Unless unconscionability at common law (or within the meaning of s. 109(2)(m), if there is any difference) was relied on in a consumer-trader dispute under s. 107ff of the Fair Trading Act, 1999, there must have been a finding of unconscionability in trade or commerce. Since the primary language of s. 109 is ‘unjust’ and there was no finding of ‘injustice’, it would be surprising if the decision were based on s. 109. In relying on a finding of misleading or deceptive conduct Member Butcher must have found that the conduct in question was in trade or commerce.