Weiss v Barker Gosling (1993) 16 Fam LR 728; [1993] FamCA 58 is a decision of Fogarty J about an application to set aside a costs agreement and have the client’s debt to his solicitor for representing him in the Family Court quantified by a taxation on the Family Court Scale. It really comes in two parts, the second being reported as Weiss v Barker Gosling (No. 2) (1993) 17 Fam LR 626. The client argued there had been a failure to follow the costs disclosure requirements in the Family Law Rules, that the costs agreement was ‘unreasonable’, that it was void for uncertainty, and that undue influence by the solicitor caused the agreement. The application was made under a provision in the Family Law Rules (r. 8A) which permitted a client to apply for a determination of any question as to the validity of a costs agreement. Upon such an application, the Family Court might ‘confirm, vary or set aside the costs agreement and make any other order the judge considers necessary or appropriate.’The facts were as follows. The client, in his 40s, separated in early 1990. He retained in succession 4 solicitors. With the fourth, he had a costs agreement. Barker Gosling was the fifth. The Managing Partner was his file handler. He was a very senior and experienced practitioner entitled to charge a premium for his services, which his clients would expect to pay (p. 649). There was expert evidence that he was a particularly efficient operator. He was an accredited family law specialist. The client was schooled to age 16. He worked in the rag trade, eventually rising to position of financial controller of a company with a turnover of $30 million. The client signed a costs agreement in June 1991 providing for hourly rates of $275 per hour for partners and $190 per hour for other solicitors, charged in 5 minute units ‘or part thereof’. There was a bill for $63,000 or so in July 1992. The application to set aside the costs agreement was made in December 1992.
There was an initial telephone conversation between the client and solicitor on 23 May 1991. The solicitor said ‘I charge more than most. My charge out rate is $275 an hour and that is something you will have to keep in consideration if you want to engage my services.’ The client responded that he was prepared to pay that price and the most important thing was that he obtain custody of all his children.
The client faxed some material. He met with the solicitor on 30 May 1991. The solicitor gave the client a firm brochure setting out details of the firm especially in relation to family law, and provided a summary of a number of aspects of family law, and included the information required by Order 38 of the Family Law Rules. Then he orally reiterated his charge out rate, and said it was ‘in excess of the scale. If you extrapolated the scale into an hourly rate it would be somewhere between $170 and $180 per hour. You can get it doen cheaper elsewhere. If you want me to refer you to somebody who is competent and who charges the scale then I’d be happy to do that, but if you want me you are going to have to pay those rates.’
$170 per hour is 62% of $275 per hour.
On 3 June 1991, the third day after the conference on 30 May, the solicitor sent a draft costs agreement in duplicate, an explanatory letter, and a further copy of the Order 38 pamphlet. The letter said ‘it is possible, even advisable for you to obtain independent legal advice in relation to the proposed agreement before you enter into it.’ It said work would not begin until the letter was signed. The client either read these documents, or had ample opportunity to do so. The client signed the letter on 19 June 1991. The matter went to trial in April 1992 and the final bill followed. But there had been regular interim bills along the way.
Justice Fogarty found or commented that:
- The costs disclosure regime was not a code, and that the common law still applied (pp. 738ff).
- ‘An arbitration clause in a cost agreement by which the parties contract for a different method of adjudication is not enforceable in the sense that neither party to it could be restrained from adopting the procedures and law applicable under the rules’ (p. 740).
- The Family Law Rules‘ requirement to provide a client with the requisite costs pamphlet published by the Family Court requires ‘that it is done in a meaningful way which actually does or is reasonably likely to bring to the attention of the client not merely the document in a physical sense but its content and purpose’. So when the solicitor provided the pamphlet as ‘part of a large bundle of documents constituted by a detailed 11 page summary of family law, two pages of newspaper cutting and the pamphlet’ without explanation or the drawing to his attention specifically of the pamphlet, it was not provided to him so as to satisfy the requirement of the rule, but on the second occasion when the pamphlet was sent with the costs agreement and explanatory letter, there was compliance (p. 740).
- The costs agreement was not void for uncertainty (this is not the subject of this post, but the relevant passage from the reasons is reproduced below) (pp. 749ff).
- The relationship of solicitor and client is one of the confidential relationships which gives rise to a presumption of undue influence: Jenyns v Public Curator (Qld) (1953) CLR 113 at 133, Johnson v Buttress (1936) 56 CLR 113 at 119 and Re P’s Bill of Costs (1982) 8 Fam LR 489, 496. In the face of a challenge by a client to the taking by the solicitor of a benefit from the client, the solicitor must satisfy the court affirmatively that the client was not so overborne and influenced by the confidence [reposed in the solicitor] that it entered into an agreement which it might not have entered had the confidence been absent, or, as it is sometimes put more briefly, that the transaction was honest and at arm’s length’: Westmelton (Vic) Pty Ltd v Archer and Schulman [1982] VR 305 at 317 (p. 757).
- Undue influence is an equitable remedy, but there is a separate and distinct common law requirement that a costs agreement be ‘fair and reasonable’: Richardson v Lander (1948) 65 WN 74; Re Veron; Ex parte Law Society of NSW (1966) 84 WN 136; Singleton v Macquarie Broadcasting Holdings Ltd. (1991) 24 NSWLR 103; New South Wales Crime Commission v Fleming, supra; Milutin Jovetic v Stoddart and Co, supra; Major Projects Pty. Ltd. v Sibmark Pty Ltd (Supreme Court of New South Wales, 19 February 1992); Burgandy Royale Investments Pty Ltd v Westpac Banking Corporation (1992) 109 ALR 549; Re Budziszewski, (1981) FLC 91-038; Hall and Barrett, (l982) FLC 9l-216; Kohan and Kohan, (1993) FLC 92-340; McInnes v Twigg, (1993) FLC 92-345.
- A costs agreement might not meet the ‘fairness’ test, even if the presumption against undue influence might be negated (p. 763). ‘Fairness’ relates to the point of entry into the agreement while ‘reasonableness’ relates to the terms of the agreement itself: Re Stuart; Ex parte Cathcart [1893] 2 QB 201 at 204-5 (Lord Esher MR).
- A costs agreement may be insufficiently clear in its meaning as to be ‘unfair’ even if it is not void for uncertainty (p. 648).
- The locus classicus of the requirement of reasonableness at common law is Clare v Joseph (1907) 2 KB 369 at 372 per Lord Alverstone CJ. See also Cordery on Solicitors 3rd ed. at p 261 (referred to in Clare’s case), White’s Practice Part II p 1,224, Saddington and White on Costs: Solicitor and Client (1947) at p 40.
- The onus of proof falls on the solicitor to negative the presumption of undue influence in relation to any agreement for remuneration above the relevant scale. Equally, it falls on the solicitor to establish that such an agreement is ‘fair’ in the common law sense (p. 760ff).
- An agreement to charge on scale is not a benefit to the solicitor taken from the client for the purposes of the law of undue influence: Cordery’s Law Relating to Solicitors (7th ed) p. 9, but an agreement to charge more than scale is: Barrett and Whitten (1992) FLC 92-316, p. 79,370 (Full Court, Family Court) (p. 761).
- Neither independent advice nor advice to seek independent advice is necessary to establish fairness or to rebut the presumption of undue influence: Linderstam v Barnett (1915) 19 CLR 528 esp. at pp 530-531, Haskew v The Equity Trustees’ Executors and Agency Co. Ltd. (1919) 27 CLR 231, Johnson v Buttress, (1936) 56 CLR 113, at p 134, Berk v Permanent Trustee Company of New South Wales Ltd. (1947) 47 NSWSR 459; Meagher Gummow and Lehane, Equity Doctrines and Remedies” (3rd ed.) at p 394; Re P’s Bill of Costs (1982) 8 Fam LR 489; [1982] FLC 91-255 at p 79,149; Westmelton (Vic) Pty Ltd v Archer and Schulman [1982] VR 305.
- Examination of ‘reasonableness’ does not necessarily begin with an analysis of the provisions of the costs agreement against the scale. The scale is ‘a useful guide’ because ‘it is the product of independent annual determinations by a body established by, amongst others, the Family Court to provide a scale for reasonable remuneration for practitioners in its jurisdiction, and the recommendationsof that committee have been consistently adopted by the judges of this court as the scale of costs under its Rules.’ (p. 643).
- Reasonableness is to be assessed by reference to the way practitioners in the particular branch of law charge (e.g., in this case, family lawyers) and ‘an excursion into rates that may be charged in other areas of law in Victoria’ would be unhelpful (p. 644).
The solicitor succeeded in negating the presumption of undue influence, and of establishing that the costs agreement had been entered into ‘fairly’. His Honour concluded at p. 764:
‘It is difficult to know whether [the client] did not wish to know or did not care to consider the consequences [of the implications of the differences from the scale]. The difference was at least generally outlined by [the solicitor] on 30 May in the quotation already referred to and there was no challenge to its general accuracy. The agreement set out the charges, but they are not easy to follow clearly and give discretionary powers [to the solicitor]. The letter indicated that the charges differed from scale. The pamphlet set out the effect of scale charges but it would be difficult to relate that to the real impact of the agreement. The letter invited [the client] to discuss any aspects which were not clear. No questions were asked and the agreement was signed some weeks later. In the context of this case I consider that the solicitor did what could reasonably be expected in order to discharge this obligation.’
The full relevant text of the decision is as follows:
12. UNCERTAINTY
135. It was argued by Mr Strahan that various of the terms of the costs agreement were uncertain and that as a consequence the agreement was void. He sought to consider the grounds expressed in para 2(c) and (d) of the application together, namely that the agreement was “unreasonable” and “vague and ambiguous”. The unreasonableness argument was further defined as being that the agreement was unreasonable in the context of its provisions being vague and ambiguous and not providing the client with a reasonable indication of what he had agreed to. In addition, it was argued that the agreement was unreasonable in the sense that its provisions were vague and ambiguous essentially because they provided no constraint upon the respondent as to what it could charge. It was argued that it was the potential, as a result of the terms of the agreement, for grossly excessive charges to be made which made the agreement unreasonable. Thus, uncertainty, or “vagueness”, was argued both as a separate ground and as giving rise to unreasonableness. However, it is important to separate these issues of uncertainty and reasonableness. The issue of uncertainty is dealt with in this section. The issue of reasonableness is referred to hereafter.
136. As to the test of uncertainty, a convenient point of reference is Cheshire and Fifoot’s Law of Contract, 6th ed at p 97 et seq. It is stated there that a contract will be void for uncertainty only if its essential terms are uncertain or incomplete, unless the uncertain part can be severed, that is it is not essential, leaving the balance of the agreement intact. In determining what is essential and what is inessential, one looks to the intention of the parties. In cases where an essential term of the contract is alleged to be uncertain, such uncertainty may be because either the agreement is incomplete or because it is unclear. Thus, Menzies J in Thorby v Goldberg (1964) 112 CLR 597 at p 607, quoting Sugerman J from the New South Wales Full Court in the same case, stated:
“It is a first principle of the law of contract that there can be no binding and enforceable obligation unless the terms of the bargain, or at least its essential or critical terms, have been agreed upon. So, there is no concluded contract where an essential or critical term is expressly left to be settled by future agreement of the parties. Again, there is no binding contract where the language used is so obscure and incapable of any precise or definite meaning that the court is unable to attribute to the parties any particular contractual intention.”
137. It is the latter category which is relevant here. The general approach of the courts is to attempt to uphold a contract despite its lack of clarity. In doing so, the courts will employ an objective test in interpreting the contract and may in appropriate circumstances imply terms into the contract so as to give effect to the parties’ intentions. In Upper Hunter Country District Council v Australian Chilling and Freezing Co. Limited (1968) 118 CLR 429 at pp 436-7 Barwick, CJ said:-
“But a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. (…) In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved.”
138. See also the comments of Mason J in Meehan v Jones (1982) 149 CLR 571 at p 589 and Godecke v Kirwan (1973) 129 CLR 629.
139. In cases such as the present where the parties have acted on the agreement, the courts will be even more reluctant to find the contract void for uncertainty and, in such circumstances, the actions of the parties may clarify what was previously unclear.
140. All of Mr Strahan’s submissions related in one way or another to the firm’s charges; the various rates of such charges and how they are to be calculated, the potential increase and/or loading of charges, the form of accounts rendered, the charging of interest on unpaid accounts, and finally the procedure for disputing accounts.
141. It is convenient to deal with these submissions in the following order:-
(a) The firm’s charges are set out in clause 7 of the agreement which reads as follows:
“I acknowledge that your fees will be charged at the rate of $22.92 per unit of 5 minutes or part thereof for a principal of the firm and at the rate of $18.33 per unit of 5 minutes or part thereof for any other solicitor. (…)”
142. However, the covering letter described the firm’s charges in para.4 at page 2 as follows:
“Our charge out rate is based on a unit of time of 5 minutes. Currently, for a partner, the charge is $275.00 per hour, or $22.92 per unit, $220.00 per hour for an accredited specialist, ($18.33 per unit) and for any other family law operator, it is $190.00 per hour or $15.83 per unit. (…)”
143. It was submitted by Mr Strahan that the covering letter introduced a category which was not provided for in the agreement which it purports to explain, namely the accredited specialist. Under the letter a client would expect to receive the services of an accredited specialist rather than “any other solicitor” at the rate of $18.33 per unit. The agreement did not provide for the lesser rate of $15.83 per unit as a result of which, under the agreement, any non-principal within the firm, whether an accredited specialist or not, would charge out at a rate of $18.33 per unit.
144. Mr Kirkham conceded that there was no mention of charges for an accredited family law specialist in the agreement but submitted that the contract, in not making that provision, would be enforced by the courts in favour of the client and against the solicitor so that the client would obtain the services of an accredited specialist at a lower rate because that person would, in the agreement, be referred to as “any other solicitor”. I doubt whether that is so as under the agreement both an accredited specialist and any other family law operator would be charged out at a rate of $18.33 per unit and thus there is no provision in the agreement for the lesser charge of $15.83 per unit.
145. However, there is a more fundamental answer to this submission and to a number of others put by Mr Strahan. The contract between the parties is constituted by the costs agreement. The case for each party proceeded on that basis and there was no suggestion that the contract was constituted by the agreement plus the letter. Thus it is the terms of the agreement which are to be construed to determine the issue of uncertainty. Any contradictory or inconsistent or misleading statements in the accompanying letter may be relevant to other issues such as mistake, misrepresentation, unconscionability or unfairness. However, the case for the applicant was not pleaded or argued in that way. The reason for that presumably was that it would be difficult to do so consistently with Mr Weiss’ evidence that he did not receive or read the letter. Where the client had done so, those issues may be significant, but that is not the case here. The consequence in this case is that on this issue the focus must be upon the terms of the costs agreement, and the letter is not relevant to that issue.
146. As regards this and the following clauses concerning the rate of charges under the agreement, it is apparent that the respondent had considerable discretion in the conduct of the applicant’s file. It was able to determine which practitioner was to deal with certain aspects of the case and therefore the charges applicable. The Full Court of the Supreme Court of New South Wales in Lewandowski v Mead Carney – BCA Pty Ltd (1973) 2 NSW LR 640 held that a contract will not be treated as void for uncertainty where a range of price or salary is specified provided the range is established. In the present case the basic rates applicable to practitioners of different degrees of seniority and qualification are set out in the agreement. This issue arises again in relation to the loading of charges and the potential increase of such charges as outlined in the following paragraphs.
147. (b) The balance of clause 7 of the agreement reads as follows:-
“(…) You may also add a loading under Order 38 rule 7, 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 and responsibility required of or the demands placed on you. Such loading is not to exceed 25% of total accounts rendered, unless otherwise discussed.”
148. Mr Strahan submitted that if the respondent chose to act under this provision to load its charges, it would be extremely difficult, if not impossible, to challenge the exercise of its discretion. He argued that the effect of this clause was to provide to the respondent an unlimited discretion as a result of which the vital question of the rate at which the firm will charge is so uncertain as to be illusory.
149. Mr Kirkham submitted, however, that it was virtually impossible to be more precise than the terms of the agreement in relation to a fee for services for work to be done at some time in the future. It was not possible, he submitted, to say at the outset what complexity or level of urgency would attend various matters through the duration of the proceedings. Clause 7, it was submitted, clearly sets the parameters of charges for work that may be done in the future. In addition, there may be qualitative differences in the work carried out and this is acknowledged in Order 38 rule 7 of the Family Law Rules which is in similar terms.
150. Where a contract involves the exercise of discretion by one of the parties to it, the question is whether such a discretion is so extensive as to involve an illusory promise. That may be illustrated by reference to two cases. In Placer Development Ltd v Commonwealth of Australia (1969) 121 CLR 353 it was held that the amount or rate of subsidy payable by the Commonwealth in respect of customs duty paid lay entirely within the discretion of the Commonwealth so that any contractual obligation to fix an amount and to pay it was illusory. As a result no contractual obligation attached to the Commonwealth and the agreement was unenforceable. That decision was distinguished in Lewandowski’s case, supra, in which, pursuant to an employment contract, the plaintiff was entitled to a salary within a range of $7,000.00 to $9,000.00. Although the choice of salary within the nominated range lay entirely within the discretion of the defendant, the choice was limited by the minimum salary required to be offered and the contract was therefore held not to be uncertain.
151. The circumstances in which a loading may be added are clearly set out in clause 7. The quantum of such a loading is not fixed, but the maximum is expressed as “not to exceed 25% of total accounts rendered” and that is sufficient for present purposes.
152. It was argued for the applicant, however, that the phrase “unless otherwise discussed” cannot be given any legal operative effect as it is possible that if the firm wished to double its rates and “discussed” this with its client who was not in agreement, it could nonetheless do so and still comply with the agreement.
153. Mr Strahan further submitted that rates might be increased in respect of work already done but not yet billed as there was no indication in the agreement that the “discussion” must take place prior to implementation of increased charges.
154. Mr Taussig, in his evidence, stated that there had been no loading of fees in the applicant’s matter and that, to his knowledge, such a loading had not occurred in respect of any other files within his firm.
155. In any event, in my view the reasonable construction of the agreement is that the loading is not to exceed 25% unless agreed by the client both as to past and future work, and “discussed” should be interpreted in that sense.
156. For completeness it should be added that it was argued for the respondent that, in any event, it is always open to the client, in a situation where he or she feels that the charges are excessive, to terminate the contract at any point. Whilst a price variation clause does not render a contract void for uncertainty, the contract is terminable by the buyer if the new price is not satisfactory: see Peters American Delicacy Company Ltd v Champion (1923) 41 CLR 316 at p 325.
157. (c) It was further submitted that clause 8 provides no restriction on the amount by which rates may be raised. Clause 8 reads as follows:
“You may, during the currency of this agreement alter the rates referred to in clause 7 hereof. Upon you providing me with details of the new rates, all subsequent work can be charged at the new rates. You will be deemed to have provided me with details of the new rate (28) days after having posted to me (by pre-paid ordinary mail) a letter addressed to me at my last known address. Rates may be increased in September each year and thereafter at no less than twelve monthly intervals.”
158. It was submitted by Mr Strahan that it is little comfort to a client to have the option of terminating the retainer upon notice of an increase in charges 28 days prior to such increase, in circumstances where at that time the date of trial is fast approaching. That may be so but it cannot be said that this makes the agreement uncertain. It may be relevant to the issue of reasonableness. The same problem could arise in a non-agreement case where there is an increase in the scale of costs.
159. It was also submitted that this term was uncertain because it provides no upper limit to such increases.
160. Mr Kirkham contended that this clause concerned not automatic increases but the possibility that fees may be increased from time to time. Counsel argued that it was impossible to be more precise as new rates are conditional upon a multiplicity of future factors. In light of this, Counsel submitted, the best that can be done is to alert the client that such rises will occur once a year, if they occur at all, and that in providing a notification period of 28 days, the client is provided with sufficient certainty as regards increased charges and has the option to terminate the contract where he or she considers such increased fees to be unacceptable.
161. Whilst these matters may have an impact on the question of reasonableness, they do not, in my view, render the contract uncertain.
162. (d) Mr Strahan then went on to consider certain terms within clause 9 of the agreement which he contended were “vague and ambiguous”. Clause 9 reads as follows:
“I acknowledge that:-
(a) The calculation of time is made in units of 5 minutes;
(b) This means that an attendance of up to 5 minutes is counted as 1 unit, an attendance of between 6 minutes and 10 minutes is 2 units, an attendance of between 11 minutes and 15 minutes is 3 units, and so on. 12 units is counted as 1 hour.
(c) Pre-prepared documentation will be charged an additional 1 unit per page or part thereof for pre-prepared text, in addition to the actual time taken to adapt them to my particular case.
(d) There will be no charge for non-professional time, other than the clerical charge referred to above, unless of an unusual nature.”
163. In relation to paras.(a) and (b), it was argued that as a result of the method of calculating time in units of 5 minutes, an operator can have more than 12 units in any 1 hour. It was suggested that in theory one could have 60, one minute, telephone attendances in one hour and that, in any event, it was likely that in the busy days before a trial one may have considerably more than 12 attendances in an hour.
164. Mr Kirkham submitted that it was quite plain on the terms of the agreement as a whole that there is a ceiling, for example, of $275.00 per hour for a partner. He submitted that it was nonsensical to suggest that if a partner made 60, one minute, telephone calls he or she would be entitled to $1,200 or $1,300 for the hour.
165. In relation to paras.(b) and (c) it was argued that the terms “attendance” and “pre-prepared documentation”, respectively, are not sufficiently defined. However, Counsel for the respondent submitted that “attendance” is clearly understood to mean work done for a client in respect of his or her matter, that the word bears its ordinary meaning and does not involve any uncertainty. In relation to the term “pre-prepared documentation” it was again argued that this term is easily understood and does not create any difficulty or uncertainty.
166. In relation to para.(d) the argument was that the phrase “unless of an unusual nature” was vague and imprecise and would not provide the client with any guide as to what charges he or she may have to meet under that clause.
167. It appears to me that none of these paragraphs in clause 9 could be said to involve the use of language so obscure or so incapable of any definite or precise meaning or application that the clause or the agreement is void for uncertainty: see Thorby v Goldberg, supra. They are each, in my view, capable of a reasonable and workable interpretation and application.
168. Whilst this provision and others give the respondent a considerable discretion as to the charges to be made under the agreement, that discretion is, in my view, not so extensive as to result in the promise becoming illusory. The discretion of the respondent is limited by a requirement that it acts honestly and reasonably in the exercise of that discretion (see, for example, Meehan v Jones (1982) 149 CLR 57) and by the right of the client to a taxation and are really relevant to the issue of reasonableness referred to hereafter and to the deliberations of the taxing officer as to the appropriateness of a particular charge.
169. (e) In relation to disbursements, Mr Strahan referred to clauses 2 and 3 of the agreement which read as follows:
“2. The out of pocket expenses you incur or anticipate incurring on my behalf will be reimbursed on request.
3. All decisions about disbursements and the retention of Counsel shall be at your discretion but Queens Counsel shall not be briefed without my express prior instructions.”
170. However, the arguments about these clauses were not really directed to the issue of uncertainty. There is no uncertainty about these terms. The arguments were that the clauses were inconsistent with details in the accompanying letter and the clauses had the potential of unreasonableness. The first argument, for reasons already referred to, is not relevant to the present issue, and the second is referred to hereafter.
171. (f) Objection was further made to what was described as the “Draconian nature” of clause 10 of the agreement which provides that “fees are payable within fourteen days of accounts being rendered. Any accounts unpaid within that time will accrue interest from the date of rendering at 18% per annum, until paid.”
172. Given that in accordance with clause 2 of the agreement the solicitor is entitled to bill the client for anticipated disbursements, it was argued that the effect of clause 10 was that interest at 18% would be charged to billed anticipated disbursements which are not paid within 14 days of accounts being rendered. Whilst this may not in fact happen in practice, the analysis of Counsel was directed to the extensive rights provided to the respondent, and to the potential for it to be employed unfairly and still fall within the terms of the agreement. In addition, it may have been argued that these provisions are inconsistent with Order 38 rule 44 as to the liability of a client for interest. However, again these matters are not issues of uncertainty; but may be relevant to reasonableness.
173. (g) The final submission on behalf of the applicant related to clause 13 which provided:-
“I agree that should a dispute on costs arise, the matter be arbitrated by an independent Legal Costing Service nominated by the President for the time being of the Law Institute of Victoria, and that you and I will be bound by the arbitrator’s decision. The costs and conduct of such arbitration together with the obligations of the parties shall be determined in accordance with the
Commercial Arbitration Act“.
174. It was submitted that this clause is void or unenforceable as being inconsistent with the scheme of the Rules enabling either party to obtain a court controlled taxation within the framework of the Rules. I have already referred briefly to this issue. It is ultimately of no significance in this case because neither party is seeking to rely upon this arbitration clause. In any event, it would not invalidate the whole of the agreement; nor is it relevant to the present issue of uncertainty.
175. Consequently, I conclude that the agreement is not void for uncertainty.
13. UNDUE INFLUENCE/UNCONSCIONABLE CONDUCT/FAIRNESS
(a) Undue Influence/Unconscionable Conduct
176. The equitable grounds such as fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct on the basis of which courts may set aside contracts were described by Mason J (as he then was) in Commercial Bank of Australia Ltd v Amadio (1983) l51 CLR 447 at p 461 as constituting “species of unconscionable conduct on the part of a party who stands to receive a benefit under a transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience.” Mason J went on to consider the specific ground of “unconscionable conduct” and distinguished it from the doctrine of undue influence as follows:
“In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.”
177. Deane J at p 474 described the different focus of the two jurisdictions as follows:
“Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party. (…) Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so.”
178. Mason J at p 46l, considered, however, that the two remedies are not mutually exclusive and that both may be applicable to a particular situation.
179. Brennan J in the recent decision of Louth v Diprose (l992) 67 ALJR 95 at p 97 cited the above passages from Amadio and stated:
“Although the two jurisdictions are distinct, they both depend upon the effect of influence (presumed or actual) improperly brought to bear by one party to a relationship on the mind of the other whereby the other disposes of his property. Gifts obtained by unconscionable conduct and gifts obtained by
undue influence are set aside by equity on substantially the same basis. (…)
The similarity between the two jurisdictions gives cases arising in the exercise of one jurisdiction an analogous character in considering cases involving the same points in the other jurisdiction.”
180. In cases where it is alleged that a disposition was made by reason of unconscionable conduct, such conduct must be established as being the unconscionable exploitation of an antecedent relationship in which one party stands in a position of special disadvantage vis-a-vis the other. The focus is therefore on the unfair or unconscientious advantage taken by one party and the special disadvantage of the other party as a result of which he or she is peculiarly susceptible to control or influence by the dominant or “ascendant” party. In relation to this first aspect, Mason and Deane JJ in Amadio’s case found that the dominant party need not have actual knowledge of the special disadvantage of the subordinated party, as provided that it was evident that such a disadvantage existed, that knowledge would be imputed. Thus, there need not be any moral wrong-doing on the part of the dominant party.
181. With respect to the second aspect concerning the relationship between the parties, Mason J in Amadio’s case stressed that inequality of bargaining power of the parties is of itself not sufficient to constitute a “special” disadvantage. Rather, the disabling condition or circumstance must be one which “seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party.” (Amadio, supra, at p 462)
182. Fullagar J in Blomley v Ryan (1956) 99 CLR 362 at p 405, considered some of the types of weakness which, if unfairly exploited, may result in equitable intervention: “poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary.” Whilst “sex” should be removed as an instance of weakness, the phrase “lack of assistance or explanation where assistance or explanation is necessary” is potentially extremely broad. However, as is apparent from the above quotation from the judgment of Mason J in Amadio, what must be determined in each case is whether the special disadvantage seriously effects the ability of the subordinate or “innocent” party to make a judgment as to his or her best interests.
183. In relation to undue influence, the cases fall into two distinct classes, those where there is no special relationship between the parties and those where a relationship of confidence exists. In the first class undue influence must be proved as a fact whereas in the second it is presumed at law to exist. Within this second class there are both defined categories of confidential relationships from which a presumption of undue influence arises and relationships which must first be established as giving rise to such presumption. Subject to the discussion hereafter in Part (c) it is well established that the relations of “influence” or “confidence” that raise a presumption of undue influence include that of solicitor and client: see Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at p 133, Johnson v Buttress (1936) 56 CLR ll3 at p ll9 and Re P’s Bill of Costs, supra, at p 77,4l9.
184. The Full Court of the Supreme Court of Victoria in Westmelton (Vic) Pty Ltd v Archer and Shulman (1982) VR 305 at p 317 described the rebuttable presumption of undue influence as requiring that, wherever a solicitor takes a benefit from the client, he or she must:
“satisfy the Court affirmatively that the client was not so overborne or influenced by the confidence that it entered an agreement into which it might not have entered had the confidence been absent or, as it is sometimes put, that there was no conscious or unconscious misuse of the confidence or, as
it is also often put more briefly, that the transaction was honest and fair and at arms length (…) (T)he law requires that, wherever a solicitor takes a benefit from his client, arms length and full disclosure are automatically required”.
185. The facts which must be proved in order to discharge that onus, however, will vary according to the circumstances of the case (and the courts have been careful not to fetter their jurisdiction by defining the exact limits of the exercise of undue influence). Thus, it was stated in Westmelton’s case, supra, at p 313:
“It is pointless as well as unjustified in law to attempt to lay down any particular requirements for all cases, or indeed any classes of case, because the circumstances and the requirements will vary infinitely with the infinite variety of human affairs.”
186. However, it is not sufficient that the dominant party show that the subordinate party understood what he or she was doing and the significance thereof: Union Fidellity Co. v Gibson (1971) VR 573 at p 576. Rather, what must be shown is that the subordinate party at the time of forming his or her intention was entirely independent of any sort of influence or control of the other party. In determining whether a presumption of undue influence has been rebutted, therefore, the circumstances of the case will require close examination.
187. Not all relations of influence are also fiduciary relationships, although the doctrine of undue influence imposes on a dominant party obligations of a fiduciary character, in that the dominant party is required to exercise good faith towards the subordinate or weaker party. Undue influence is essentially an abuse of a confidential or fiduciary relationship, that is, a breach of an obligation of good faith.
188. In addition to attracting the presumption of undue influence, the relationship between solicitor and client is a fiduciary relationship. One of the major applications of rules governing fiduciary obligations is the regulation of contractual dealings. For example, the fiduciary bears the onus of proving that in respect of such dealings, no violation of that confidential relationship took place. Fiduciary duties are stricter than the ordinary standards of the marketplace. Thus, a solicitor must act in the interests of no one but his or her client who is governed by the solicitor’s judgment, depends on the solicitor and entrusts the solicitor with his or her welfare: see Johnson v Buttress, supra, at p 135. There is an inherent risk that as a result of the relationship of confidence between a solicitor and client a solicitor may take advantage of such relationship and put his or her own interests ahead of those of the client. In dealing with such a transaction, the court must be satisfied that the transaction was uninfluenced by the position of the solicitor.
189. Whether it is necessary to establish in cases of undue influence, actual or presumed, that there has been a “manifest disadvantage” to the party seeking to avoid the contract was not the subject of any submissions or evidence in this case and it is, I think, unnecessary to consider it: see such cases as National Westminster Bank v Morgan (1985) AC 686; Colunell Ltd v Gallon (1986) QB 1184 at pp 1,194-5; Midland Bank v Shephard (1988) 3 All ER 17; Bank of Credit and Commerce v Aboody (1990) 1 QB 923. Presumably the disadvantage would be the degree of payment above scale compared with quality of service, but there is no evidence which enables that to be considered.
(b) Fairness
190. As discussed in more detail later, there is, in my view, a requirement at common law that a costs agreement between a solicitor and client be fair and reasonable. Although that expression may be a composite one, it appears generally to have been approached in the cases on the basis that “fairness” relates to the point of entry into the agreement whilst “reasonableness” relates to the terms of the agreement itself.
191. This distinction was clearly drawn by Lord Esher MR in the centr al case Re Stuart; Ex parte Cathcart (1893) 2 QB 201 at pp 204-5, where his Lordship said:
“By s.9 (Attorneys and Solicitors Act 1870) the Court may enforce an agreement if it appears that it is in all respects fair and reasonable. With regard to the fairness of such an agreement it appears to me that this refers to the mode of obtaining the agreement, and that if a solicitor makes an agreement with a client who fully understands and appreciates that agreement that satisfies the requirement as to fairness. But the agreement must also be reasonable, and in determining whether it is so, the matters covered by the expression “fair” cannot be reintroduced. As to this part of the requirements of the statute, I am of the opinion that the meaning is that when an agreement is challenged the solicitor must not only satisfy the Court that the agreement was absolutely fair with regard to the way in which it was obtained, but must also satisfy the Court that the terms of that agreement are reasonable. If in the opinion of the Court they are not reasonable, having regard to the kind of work which the solicitor has to do under the agreement, the Courts are bound to say that the solicitor, as an officer of the Court, has no right to an unreasonable payment for the work which he has done, and ought not to have made an agreement for remuneration in such a manner.”
192. Although in that passage his Lordship was referring to the English legislation, it appears to me that the same analysis applies to the common law requirements and that generally the cases have proceeded upon that basis: see, for example Kohan, supra, at p 79,609.
193. As a matter of convenience, I propose to adopt that approach, that is to deal in this section with the issue of fairness, and then discuss reasonableness at a later point. However, I do so as a matter of convenience; the conclusions at which I arrive would have been the same if I had approached it as a composite requirement.
194. Although fairness has been a consistent requirement of the common law there is limited discussion in the cases as to precisely what is meant by that term. In fact many of the cases ultimately turned on questions of undue influence or unreasonableness.
195. However, reference to some of the cases indicates the concept that the common law courts had in mind in relation to this issue. For example, in Stedman v Collett, (1854) 17 Beav 608 the reference at pp 614-615 is to the transaction being “open and fair and without pressure”; in Re Stuart; Ex parte Cathcart, supra, Lord Esher at p 204 in the passage set out above, referred to fairness as the requirement that the “solicitor makes an agreement with a client who fully understands and appreciates that agreement”; in Clare v Joseph (1907) 2 KB 369 at p 376 the reference is to the contract being made “under circumstances that precluded any suspicion of an improper attempt on the solicitor’s part to benefit himself at his client’s expense”; in Bear v Waxman, supra, Cussen J, at pp 301-2, referred to it as being that “his client was not under the influence of the pressure arising from the relation of solicitor and client, but was acting either by good advice, or on the dictates of his own judgment, with every opportunity of exercising it properly, from his own good sense and intelligence, with a sufficient capacity and knowledge of business”; in Emeritus Pty Ltd v Mobbs (1991) NSW Conv R 55-588 the reference ay p 59,319 by Studdert J of the Supreme Court of New South Wales is to the requirement that the solicitor must not “take advantage of the relationship between his client and himself or receive any benefit from an agreement into which the client has been induced to enter by reason of his reliance upon the solicitor”; in New South Wales Crime Commission v Fleming (1991) 24 NSWLR 116 at p 123 the reference is to “improper advantage of their clients”.
196. The cases also refer to the significance of the difference between scale and the agreement being explained to the client: see for example Ilic v Radin (Supreme Court of New South Wales, 18 December 1991, Finlay J), and also Milutin v Stoddart and Co (Supreme Court of Western Australia, 18 February 1992, Seaman J) at p 32 where it was said “it is not enough, in my view, for him to tell the client that the costs payable under the agreement might exceed the statutory scale, or that some other lawyer might provide the legal services involved for less.”
197. In Re Budziszewski, supra, Baker J set out three criteria of fairness against the background of the regulations as they then were and I have already referred to that. Those matters were considered by the Full Court in Re P’s Bill of Costs, supra, in the passage already referred to. In that latter case, the view expressed by the Chief Justice and myself was to the following effect at p 77,420:-
“The ultimate question is whether the solicitor affirmatively established that the contract was entered into by the client freely, making an independent and informed estimate of the matter. The essential nature of the proposed agreement and the degree and impact of its difference from the prescribed fees, must be explained and understood and accepted. It must be a real and genuine choice, that is, a free exercise of an independent mind.”
198. I think that broadly still states the requirement. In that sense it will largely overlap in many cases the considerations of undue influence and unconscionability already discussed. These different streams of development may be explicable upon the basis that the requirement of fairness was a requirement of the common law, whereas the doctrines of undue influence and unconscionability developed over the centuries in courts of equity.
199. The balance of authority supports the view that it is not necessary to show that the client in fact received independent legal advice, either as a component of fairness or within the concept of undue influence: see Linderstam v Barnett (1915) 19 CLR 528 esp. at pp 530-531, Haskew v The Equity Trustees’ Executors and Agency Co. Ltd (1919) 27 CLR 231, Johnson v Buttress, supra, at p 134, Berk v Permanent Trustee Company of New South Wales Ltd. (1947) 47 NSWSR 459. “Equity Doctrines and Remedies” by Meagher Gummow and Lehane 3rd ed. at p 394 makes the distinction between equity judges requiring independent advice and common law judges considering it important but not essential. As was stated in Re P’s Bill of Costs at p 79,149:
“The presence or absence of such independent advice has always been regarded as an important matter in the overall determination but not, in isolation, decisive. Indeed, even if it is established that the client received independent legal advice, that would not necessarily be an end to the matter although it would be a strong circumstance.”
200. It could also be added that by the same token the failure to advise the client that he or she should obtain independent legal advice may not be fatal at common law; see Westmelton Pty Ltd v Archer and Shulman, supra. However, it is unnecessary to pursue that issue in detail in this case because of the requirement in any event of rule 8(4)(b).
201. Finally, it is not without interest to note that the requirements of fairness appear to be wider than the present requirements of rule 8(4). At the time of the discussion in both Re Budziszewski and Re P’s Bill of Costs the regulations then relevant may have more closely reflected the common law and the discussion in those cases was no doubt influenced by that circumstance. This seems briefly to have been eluded to by the Full Court in Barrett and Whitten (1992) FLC 92-316 at 79,370. For reasons already discussed, I do not consider that the rules should be construed as having altered the common law. Consequently, it needs to be borne in mind that satisfying the requirements of rule 8(4) does not necessarily mean that the requirements of fairness are satisfied; they do not exactly correspond, the common law requirements are wider and more general as the cases referred to above indicate.
(c) Onus of Proof
202. It appears clear that the onus of proof in relation to fairness rests on the solicitor. The whole trend of authority supports that view and the contrary was not contended in this case.
203. The onus of proof in relation to undue influence and costs agreements may not be free from doubt. In Re P’s Bill of Costs the Chief Justice and I concluded that the onus rested on the solicitor in relation to costs agreements, stating at p 77,419:-
“… but there are certain relationships where undue influence is presumed and it has long been recognised that one such category is that of solicitor and client. Where between persons who relevantly bear such a relationship a contract is entered into or gift made, there is a presumption of undue influence and the onus rests upon the solicitor to negative that circumstance.”
204. On the other hand, in Cordery’s Law Relating to Solicitors, 7th ed, at p 9 it is stated:
“In his dealings with his client the solicitor must exercise the utmost good faith, and in any financial transaction with his client (save as to costs for work done) there will be a presumption that such transaction should not be upheld unless the solicitor can establish that it was effected by the free exercise of the client’s will without any influence on the part of the solicitor.”
(underlining added)
205. This issue was referred to in the recent decision of Barrett and Whitten, supra, at p 79,370. The Full Court proceeded, however, on the basis of a concession by counsel for the solicitor that:
“There can be no doubt we would concede, as I think we would have to, that where a solicitor seeks to be paid an amount in excess of what might otherwise be a prescribed fee, then there is a substantial benefit and it is clearly caught by Johnson and Buttress. We make that concession. So we
concede that the presumption is that in the relationship where there is to be a substantial benefit, that the solicitor, because of the special nature of the relationship and the authorities, has the onus.” (underlining added)
206. Gifts and other transactions between solicitor and client are scrutinized by the courts very carefully. The presumption of undue influence in such circumstances is founded on important reasons of public policy. There is an inherent risk as a result of that relationship of confidence that the solicitor may take advantage of the relationship to put his or her interests ahead of those of the client. In dealing with such a transaction the Court must be satisfied that the transaction was uninfluenced by the position of the solicitor, and in the instance of gifts and other transactions such as a sale or purchase of property it is well established that the onus is on the solicitor.
207. However, the above quotation from Cordery suggests that with respect to transactions inherent in the solicitor/client relationship, such as a payment of costs for work done (at least in accordance with an established or understood scale) there is no presumption of undue influence and no obligation on the solicitor to establish that those dealings are conducted in the free exercise of the client’s will and without undue influence. It is also to be noted that the concession in Barrett v Whitten, supra, related to the case where the solicitor “seeks to be paid an amount in excess of what might otherwise be a prescribed fee”.
208. Hence, the possible argument that in ordinary circumstances where the fee agreed upon or charged by the solicitor accords with that established or understood scale of fees, it is inappropriate to treat that as a relationship of confidence to which a presumption of undue influence attaches.
209. But where the costs are in excess of the established or understood scale, it is readily understandable and consistent with principle and the authorities that the onus rests upon the solicitor to negative undue influence. This is so despite the contrary arguments that costs agreements above scale are permitted both at common law and within the legislation or the Rules of Court governing most courts, and that the common law requirement that they be fair and reasonable may be a sufficient safeguard. In addition, provided the enquiry as to whether the agreement has been entered into fairly is broad ranging and not satisfied simply by formal compliance by the solicitor with procedural matters such as those specified in rule 8(4), much the same evidence will be relevant in determining whether a presumption of undue influence has been discharged. A third argument is that the deviation from an established or understood scale may be minor.
210. The conclusion which I draw is that in relation to costs agreements which provide for costs which are greater than the established or understood scale, the presumption of undue influence applies and the onus rests on the solicitor to rebut it. In the ultimate it is a question of degree. Where the deviation from the established or understood scale is relatively minor the evidential onus may be readily satisfied. Where the gap is significant then the evidential onus of persuasion is, and should be, greater.
211. In addition, it would be confusing if the onus varied depending upon whether one was considering fairness or undue influence in this context. In most cases these matters would largely overlap. The reasons are largely historic but in cases of this sort it seems to me desirable that artificial distinctions of that sort be avoided.
212. Finally, there is the question of onus in relation to unconscionability in this context. In this particular case the refinements of these issues are ultimately unimportant. I proceed in the analysis hereafter on the basis that the onus throughout rests on the solicitors, but the issue of onus makes no difference to the conclusions which I have reached.
(d) Conclusions
213. I have already set out the circumstances in which the agreement was entered into. In the conclusions set out hereunder I have also taken into account my impression of the two witnesses as to these issues.
214. It is convenient to consider the issues of undue influence and unconscionability together. No actual undue influence was asserted; that was specifically conceded by Mr Strahan. Consequently it is a case of presumed undue influence arising out of the relationship. In my view the agreement was entered into by Mr Taussig with propriety on his part and at arms length by Mr Weiss. Specifically, in my view, there was no unconscionable conduct by the solicitor in relation to this transaction, nor could it be said that the will of Mr Weiss was overborne so that his entry into the contract was not “independent and voluntary”. There was no unconscientious advantage taken by Mr Taussig; Mr Weiss was given both the time and opportunity to make his own decision as to whether he entered into the agreement.
215. The only context in which it could be said that there was any “special disadvantage” to Mr Weiss was in the generality, namely that clients in the midst of emotive family law litigation are under considerable pressure which makes calm reflection upon the engagement of a particular lawyer and the terms of that engagement extremely difficult and creates what might be described as an inherent imbalance.
216. In addition, in this particular case, it may be that Mr Weiss subjected himself to such anxiety and concern (that is, as Mr Taussig described it, he was “obsessed” by the litigation), that he placed himself in the position where it was impossible for him to give calm and rational consideration to these issues and he regarded the agreement and its terms as secondary to his overall desire to succeed in his family law litigation and to achieve that by obtaining the services of Mr Taussig. I am not positively convinced that this is so in this case because Mr Weiss was an experienced business person and he conducted all other aspects of this litigation with great care. Mr Weiss indicated that he felt intimidated about raising queries about the costs as the litigation proceeded, that is, he was not intimidated by Mr Taussig but by the circumstances of the litigation and his desire to retain Mr Taussig. I doubt if that was so except in the sense already referred to of his “obsession” with the litigation.
217. However, critically, for the purposes of these considerations, there is, in my view, nothing in the evidence to suggest that any advantage was taken of those circumstances by the solicitor.
218. Consequently, I conclude that undue influence and unconscionability have been negatived in this case.
219. On the basis that the issue of fairness may be a somewhat wider concept there are other matters which require consideration. It may be that the common law imposes an obligation which, broadly described, is an obligation to take all reasonable steps to explain the agreement and its impact to the client and ensure that the client understands it. If so, it is wider than the requirements of rule 8(4). Subject to the qualifications hereafter, it appears to me that the course adopted in this case of posting the agreement together with a lengthy explanatory letter to the client was an appropriate method of complying with any such obligation. In other cases it may not be but, given Mr Weiss’ background, it was, I think, appropriate here. It gave him the opportunity to go carefully through the agreement and the letter and raise any queries or questions.
220. In many other cases that may not be sufficient because the agreement is complex and the letter detailed and there are some differences between them, and it could not necessarily be assumed that the client will be able to absorb that level of detail: see for example the discussion by the Full Court in Barrett and Whitten, supra.
221. Nor could it be necessarily assumed in all cases that the absence of questions about the agreement means that the client understands it. These matters were referred to by Street J in Bester v Perpetual Trustees, supra, where at p 36 his Honour said:
“It may be that to an informed and intelligent listener advice confined to explaining will enable an intelligent choice to be made to the effect that the document being explained is acceptable to the party being asked to execute it. But the mere fact that a document is explained and that no questions are asked nor criticism made of it by the party to whom it is being explained, does not tend strongly in favour of the conclusion that this party made a
deliberate and intelligent choice to adopt each and every one of the provisions contained in the document.”
222. Overall the common law obligation of fairness is intended to be a practical test and not an impossible one. It appears to me that, confining oneself to the particular circumstances here, the client was given an appropriate opportunity to make a “deliberate and intelligent choice” free from pressure or influence and that, if the terms of the agreement are reasonable, it is an agreement executed in circumstances where the Court would not refuse to enforce it.
223. The qualifications to which I have referred above are these. Statements made at the discussions on 23 and 30 May that the charge out rate was $275 per hour and/or the difference in relation to rates set out in the explanatory letter when compared with the agreement may in many cases make a critical difference; at least it would increase the obligation on the solicitor to ensure that the client understood the actual terms and effect of the agreement. In this case, Mr Weiss denied or was unable to recall those earlier discussions or having read the letter. Had his evidence been that he had done so and he was mislead or confused as a consequence that may have been a significant factor either on the issue of fairness at point of entry or as attracting the powers of the Court under rule 8A to “vary” the charges in the agreement to accord with the explanations in the letter. Mr Strahan pointed out that there are other differences between the explanatory letter and the terms of the agreement but I think they were rather minor, at least in the context of the present discussion and, in any event, had no impact upon the decision by Mr Weiss to execute the agreement.
224. A related and in many cases more significant issue is the obligation to explain the terms and impact of the agreement and in particular the differences from scale: see, for example, Milutin v Stoddart and Co., supra, and Ilic v Radin, supra: “the magnitude of the increase”. This is an important issue. Costs agreements often appear rather complex and give the solicitor a discretion as to the charges to be applied and increases in them. Unless the agreement is relatively simple and straight forward the explanation of its impact and its difference from scale may need to be thorough.
225. This is an issue of some concern in this case. It is difficult to know whether Mr Weiss did not wish to know or did not care to consider the consequences. The difference was at least generally outlined by Mr Taussig on 30 May in the quotation already referred to and there was no challenge to its general accuracy. The agreement set out the charges, but they are not easy to follow clearly and give discretionary powers. The letter indicated that the charges differed from scale. The pamphlet set out the effect of scale charges but it would be difficult to relate that to the real impact of the agreement. The letter invited Mr Weiss to discuss any aspects which were not clear. No questions were asked and the agreement was signed some weeks later. In the context of this case I consider that the solicitor did what could reasonably be expected in order to discharge this obligation.
14. REASONABLENESS
226. I turn to what was the critical issue in this case, namely, whether there is a common law requirement that the terms of the agreement be reasonable.
227. In reality, this issue would normally only arise in a case like this where (putting aside the question of onus) issues of uncertainty, undue influence, unconscionability and unfairness are negatived and the formal requirements of the Rules have been complied with.
228. I have already referred to and rejected Mr Kirkham’s first argument on this issue, namely that the Rules exclude any such requirement, and I need not repeat that matter.
229. It was further submitted of Mr Kirkham that there is no requirement of reasonableness at common law and that the more recent cases to the contrary have misunderstood the earlier authorities and/or have uncritically adopted the view that there is such a requirement. The basic cases generally relied upon in support of the view that such an obligation exists, namely Re Stuart; Ex parte Cathcart, supra; Clare v Joseph, supra, and Saunderson v Glass (1742) 2 ATK 296, are, in the terms of the written outline of argument for the respondent, “of questionable authority for the principles they are said to embody”. The submission was that those cases, properly understood, either relate to the interpretation of the English Attorneys and Solicitors Act 1870 which imposed a statutory obligation that such agreements be fair and reasonable or they were directed to issues of undue influence or other impropriety at the point of entry into the agreement and should be understood within that much more limited framework.
230. Mr Kirkham conceded that the courts would intervene in a case of “gross overcharging” but submitted that this was based on that amounting to misconduct and being contrary to public policy.
231. I think it can be said that the decision in Saunderson v Glass, supra, is ambiguous so far as this issue is concerned. That was an action for the return of monies paid by the wife to her solicitor for work to be done by the solicitor, the grounds of the application being that the deed was fraudulent or was a conveyance in trust for the daughter of the wife. The judgment largely turned upon issues which might now broadly be described as undue influence or unfairness. But in the course of his judgment the Lord Chancellor, Lord Hardwicke, at p 298 said:
“(…) if an attorney, pendent lite, prevails upon a client to agree to an exorbitant reward, the court will either set it aside entirely, or reduce it to the standard of those fees to which he is properly entitled …”
232. Mr Kirkham submitted that that statement should be understood to mean no more than that when an attorney, by undue influence, prevails upon a client to enter into an agreement which is manifestly to the client’s disadvantage, the Court will not enforce it. However, it seems to me that, although too much ought not be read in isolation into that observation of the Lord Chancellor, it indicates that the Court will, in addition to any other issues, look to see whether the agreement is “exorbitant” and if it is will set it aside or reduce it to a fee which is proper.
233. The decision of the Court of Appeal in Re Stuart, supra, is usually cited as a basic case for the proposition of reasonableness at common law. However, I am inclined to agree with the submissions of Mr Kirkham that that decision largely turned upon the interpretation of the English legislation. The Attorneys and Solicitors Act 1870 provided a procedure by which proceedings may be brought for enforcement of/or in relation to the validity or effect of a costs agreement. It also provided that in those proceedings if it appeared to the Court the agreement was “in all respects fair and reasonable between the parties” the Court may enforce it but that if “the terms of such agreement shall not be deemed by the Court or Judge to be fair and reasonable the same may be declared void” and the Court may direct that the costs be taxed as if no such agreement had been made. Although there was confusion about the correctness of the procedures employed in that case the Court of Appeal treated it as falling within these provisions. However, it appears to me that in the relatively brief judgment of the Court delivered by Lord Esher MR (already set out) attention was really directed to the interpretation and application of those provisions rather than to the position at common law.
234. However, the judgment of the Court of Appeal in Clare v Joseph, supra, seems to stand quite differently. The issue there largely related to the question whether the agreement, not being in writing, fell within the provisions of the Attorneys and Solicitors Act. However, on issues relevant in this case, the statement of Lord Alverstone CJ at p 372 is quite emphatic as to the common law position. The Lord Chief Justice, after stating that the Divisional Court had not dealt with the “central point in the case, that is to say, the scheme of Section 4 of the Act of 1870, having regard to the law on the subject as it stood when that Act came into operation”, went on to say:
“We have had considerable discussion in this appeal as to the state of the law before 1870; in my opinion it is correctly stated in Cordery on Solicitors, 3rd ed. at p 261. Agreements as to costs were often made before 1870, and, upon the application of the client, they were considered and examined by the Courts, and they were not infrequently held to be binding both on the solicitor and the client. The inquiry was always directed to the question whether the agreement was fair and reasonable, and an agreement by the
solicitor to take less than the usual remuneration was not looked upon as unfair or unreasonable, but was held binding upon him. We must remember that that was the state of the law in 1870 when we are called upon to construe the Act of that year, an Act which was designed to provide fresh safeguards for the protection of the client and to give the solicitor certain rights which he did not previously possess, provided that he himself complied with the requirements of the Act. Instead of saying that the solicitor might enter into an agreement as to costs which should, as before, be subject to review of the Court, it provided that he might enter into an agreement in writing as to his costs, and went on to enact that, if he did so, there should be a further safeguard for the protection of the client, who should be entitled to have the
agreement examined by the taxing Master to see if it was fair and reasonable, and if that officer was of opinion that it was not fair and reasonable he could require the opinion of the Court or a judge upon the point. The section is an empowering section, and in my opinion it does not affect the position of a client who sets up an agreement as to costs with a solicitor.”
235. The judgments of Fletcher Moulton LJ and Buckley LJ were largely directed to the requirements of what might now be described as undue influence and unfairness but are not inconsistent with the clearly expressed views of the Lord Chief Justice.
236. The subsequent cases are right to conclude that Clare v Joseph, supra, is clear authority for the view that, prior to and independently of the 1870 Act, there was a common law requirement that the agreement be fair and reasonable. In Tyrell v Bank of London (1862) 10 HLC 26, a case decided before the English Act, Lord Westbury stated the matter quite clearly:-
“… there is no relation known to society, of the duties of which it is more incumbent upon a court of justice strictly to require a faithful and honourable observance, than the relation between solicitor and client … a solicitor shall not, in any way whatever, in respect of the subject of any transactions in the relations between him and his client, make gain to himself at the expense of
his client, beyond the amount of the just and fair professional remuneration to which he is entitled.”
The older text books state the matter briefly as if there was no dispute:- Cordery on Solicitors 3rd ed. at p 261 (referred to in Clare’s case), White’s Practice Part II p 1,224, Saddington and White on Costs: Solicitor and Client (1947) at p 40.
237. In addition, Mr Kirkham relied upon a line of authority exemplified by the decision of the Full Court of the Supreme Court of Victoria in Bear v Waxman, supra, for the proposition that there was not a common law requirement of reasonableness. In that case the Full Court held that the Supreme Court Act provisions relating to costs agreement did not apply to agreements between a solicitor and client as to the amount of the solicitor’s professional remuneration wholly passed and that such agreements were governed by the common law.
238. At p 298, Madden CJ said:
“At Common Law it was open for a solicitor to make an agreement with his client that he should receive a lump sum as his remuneration for conducting litigation. Such an agreement could always be made, but it was jealousy regarded by the Courts. Still, if it was fair, open and free from any kind of compulsion exercised by the solicitor, it was binding on both parties. In Stedman v Collett the whole of the cases up to that date are closely discussed, and the result is to leave the rule as I have stated, and it is pointed out that in Ex parte Bass, In re Stephen, the Lord Chancellor never doubted that such a bargain between solicitor and client could be made, but held that the bargain before him did not satisfy the conditions I have referred to.”
239. At pp 301-2, Cussen J said:
“The result is that as to transactions wholly past we are left to the rules of the Common Law or Equity. I take the rule to be as stated by the Vice-Chancellor in Morgan v Higgins (I Giff 270, at p 277): “By the law of the Court, a solicitor may settle his accounts with his client by an agreement to take a gross sum as remuneration for his services, without a statement of items, or the delivery of full and particular bills of costs. But if he does settle an account with his client, or if he does make an arrangement with his client to accept a gross sum, instead of delivering bills of costs, it behoves the solicitor to use great caution, and to preserve sufficient evidence that it was a fair transaction, and that his client was not under the influence of the pressure arising from the relation of solicitor and client, but was acting either by good advice, or on the dictates of his own judgment, with every opportunity of exercising it properly, from his own good sense and intelligence, with a sufficient capacity and knowledge of business.”
240. The statement of the position by the Master of the Rolls, Sir John Romilly, in Stedman v Collett, supra, at pp 614-615, is to the like effect in that the transactions must be “open and fair and without pressure (…) but this Court, for the protection of parties, looks at every transaction of this kind with great suspicion”.
241. Those cases support the capacity for a solicitor to enter into a lump sum agreement with the client in respect to past services. However, they say nothing about the requirement of reasonableness as that was not an issue in any of those cases. Although the judgments refer to the agreement as being “fair, open and free” and other like terms, the concentration was upon those issues because they were the issues to be determined, namely the capacity of a solicitor and client to enter into such an agreement which was enforceable. There is nothing in those cases to suggest that if the agreement was fairly entered into but was unreasonable in its terms the courts would not, in the exercise of its powers in relation to solicitors, intervene.
242. The next step in Mr Kirkham’s argument was that the recent cases have mistakenly taken the view that there is a requirement that the agreement be fair and reasonable and they have misinterpreted the earlier cases to that effect.
243. If that is so, then it must be said that there has been a mistake on a grand scale involving a number of judges and a number of courts in Australia over recent years. There have in recent times been a number of cases in Australia which, although they formulate the requirements slightly differently, have all treated fairness and reasonableness as common law requirements of such agreements: Richardson v Lander (1948) 65 WN 74; Re Veron; Ex parte Law Society of NSW (1966) 84 WN 136; Singleton v Macquarie Broadcasting Holdings Ltd. (1991) 24 NSWLR 103; New South Wales Crime Commission v Fleming, supra; Milutin Jovetic v Stoddart and Co, supra; Major Projects Pty. Ltd. v Sibmark Pty Ltd (Supreme Court of New South Wales, 19 February 1992); Burgandy Royale Investments Pty Ltd v Westpac Banking Corporation (1992) 109 ALR 549; Re Budziszewski, supra; Hall and Barrett, supra; Kohan and Kohan, supra; McInnes v Twigg, supra.
244. In some of the States and Territories of Australia there are express legislative provisions imposing the requirement that the agreement be fair and reasonable: see Legal Practitioners Act 1959 (Tas.) “unfair or unreasonable”; Legal Practitioners Ordinance 1970 (ACT) “not fair and reasonable”; Solicitors Act 1891 (QLD) “not fair and reasonable”; Legal Practitioners Act (NT) “not fair and reasonable”; Legal Practitioners Act 1981 (SA) “not fair and reasonable”; Legal Practitioners Act 1893 (WA) “unreasonable”. In New South Wales s.197 of the Legal Profession Act 1987 relates to agreements as to non-contentious business and provides the requirement of not being “unfair or unreasonable”. Otherwise, neither Victoria nor New South Wales have legislation directed to costs agreement in contentious business in these terms. In those States or Territories where there is an express provision, this would be understood as replacing the previous common law position for courts within that State or Territory; for the other States, that is Victoria and New South Wales, the common law position continues. The question of the applicability in this Court of those State provisions has already been referred to.
245. In England the position is now governed by the Solicitors Act 1974 which is to the same effect as the 1870 Act and requires the Court to be of the opinion that “the agreement is, in all respects, fair and reasonable” before it would enforce it.
246. The one case which is inconsistent with this line of authority is Re P’s Bill of Costs in the judgment of the former Chief Justice and myself. In that case the solicitor alleged a costs agreement between himself and his client at an hourly rate of $80, the scale hourly rate then being $52. The taxing officer taxed the account at the scale rate. The solicitor appealed. The issue before the trial Judge related to the circumstances of entry into the agreement, that is, issues of undue influence, inadequate explanation, lack of independent advice. The trial Judge concluded that there was “not a real consent” by the client to the agreement and dismissed the appeal. The solicitor appealed to the Full Court. The issues then were firstly a challenge by the solicitor to the power of the Family Court to determine the validity and/or enforceability of a costs agreement for work done under the Family Law Act, and secondly whether the trial Judge was correct in his conclusions on the facts. As to the first of those issues, the Chief Justice and I concluded that the Court had jurisdiction; Gee J dissented. As to the second, the conclusion of the trial Judge were upheld and the appeal was dismissed.
247. The question of the reasonableness of the rate of $80 per hour was not an issue in the proceedings. In the course of considering the main issue the joint judgment referred to the statement of principles by Baker J in Re Budziszewski, supra. The first three of those principles related to the explanation and information that the solicitor must provide to the client. Those matters were relevant to the second issue on the appeal and the joint judgment discussed those matters as referred to previously.
248. The fourth principle was stated in by Baker J, at p 76,340 as follows:
“(d) That the agreement will only be enforceable if the costs payable pursuant thereto are reasonable having regard to all the circumstances.”
In relation to that aspect the Chief Justice and I said:-
“We doubt if there is any such additional requirement. The problem only arises once a solicitor has satisfied the Court that the client has freely and voluntarily and with full knowledge entered into the agreement. If that be so – why should such a contract be subject to this additional test? Further – what standard of reasonableness is appropriate? Baker J referred to some matters but his list is obviously not exhaustive. Reasonableness may have relevance at the earlier stage – that is in determining whether there was full knowledge and acceptance of the proposed agreement. The statement in Re Stuart should not be treated as requiring a contrary view.”
249. Justice Gee expressed no view about this.
250. The views by the Chief Justice and myself were obiter. On reflection, I am satisfied that the doubts which we expressed are not valid. Whilst I think it is correct to say that Re Stuart, supra, in isolation does not justify that view, the decisions referred to earlier and in particular that of the Court of Appeal in Clare’s case are strong authority as to the common law prior to 1870, and recent authority in this Country is overwhelming as to the common law at the present time.
251. The above passage from Re P’s Bill of Costs does highlight the difficulty in determining the standard of reasonableness, and I will refer to that in more detail later.
252. Aside from Re P’s Bill of Costs there is no case to which my attention has been brought which could be said to be authority for the proposition that a costs agreement is not required to be fair and reasonable.
253. It would be surprising if that was the common law, that is, it would be difficult to envisage that a Court would lend its assistance to enforce in favour of an officer of the Court an agreement which it concluded was unreasonable. No doubt it is that relationship and the rights and duties which flow from it which explains why this is a requirement in solicitor/client agreements, whilst it is not, subject to more recent statutory exceptions, a requirement in relation to contracts generally.
254. Consequently, I conclude that this is a common law requirement that costs agreements are fair and reasonable and that the onus of proof is on the solicitor.
15. What is fair and reasonable?
255. Whilst, in my view, the overwhelming trend of the authorities is that there is the requirement of reasonableness, it is a much more difficult task to determine the test or criteria by which a costs agreement can be said to be reasonable or unreasonable.
256. The rules of this Court and the rules or statutory provisions of other Courts permit, or at least do not prohibit, costs agreements. That is, in effect, an agreement between the solicitor and client by which the client agrees to pay to the solicitor for work to be performed a rate which is likely to be higher than the scale of costs provided by the particular Court. Once that is permitted Courts are confronted with the difficulty of determining in individual cases of dispute what is a reasonable charge and when the requirement of reasonableness has been exceeded. Neither the rules of this Court nor the legislation or rules of other Courts provide criteria by which that question is to be answered.
257. In this case this is an especially difficult task to perform because of the manner in which the case for each side was conducted. The case for the respondent was that there is no requirement of reasonableness. No submissions were put in the alternative, that is, whether this agreement was reasonable. The only evidence called for the respondent on this issue was the affidavits of other solicitors to which I have previously referred. However, no submissions were made as to what significance I should attach to that material. That is, whether it was evidence of generally comparable charges for costs agreements in this jurisdiction from which I should conclude that the charges in this case fell within the parameters of recognized market forces, or whether it represented no more than the agreements of five other solicitors within a comparable range, or no more than a similar approach by a small, non-representative, group. Mr Taussig did not give any evidence about this issue other than the passage already quoted where he broadly compared for Mr Weiss the scale costs and his charge out rates. Otherwise there was no evidence comparing scale costs with the agreement.
258. The applicant called no evidence on this issue, did not cross-examine Mr Taussig about the basis of his charge out rate and did not seek to cross-examine the other solicitors. A ground of the application is that the agreement “is unreasonable in that the charges (…) are excessive”. Mr Strahan appeared constrained by the views expressed in Re P’s Bill of Costs, at least at this level, from directly conducting his client’s case on the basis that the obligation of reasonableness applied, and largely presented the case on the basis that the terms of the agreement itself (rather than the charge out rate) made the agreement unreasonable because there was no constraint, in his submission, on what the charges would be. Alternatively, he argued that the charges under the agreement should be characterized as exorbitant and beyond any test of reasonableness.
259. The consequence is that I have little or no evidence on which realistically to apply the test of reasonableness. In ordinary circumstances that may lead to a conclusion that I should determine the matter on such material as the parties presented against the ultimate onus of persuasion. However, it appears to me that to do so in this case is artificial and likely to run the risk of producing injustice to one party or the other.
260. Whilst in Re Veron, supra, it was said at p 142 that in such matters “(w)e are guided by experience in a broad sense of what is reasonable and fair and not by any narrow approach to questions of mere overcharging”, Gleeson CJ in Fleming’s case, supra, at p 124, said that a judge or taxing master is not at liberty to “give effect to an individual opinion, formed by reference to some personal standard of social justice, that fees charged by solicitors and barristers are generally “too high”.” The Chief Justice went on to say at p 125 that “these matters ought to be determined on the basis of properly prepared and presented evidence”.
261. Consequently, on this issue, I propose to make orders which will permit the parties to present such further evidence and submissions that they consider appropriate. I will make orders which otherwise dispose of the proceedings and give directions about this remaining issue.
262. I do so against the following background which is not intended to be exhaustive or complete. A number of the recently decided cases in Australia have referred to matters appropriate to take into account in determining whether a costs agreement is reasonable or not. In addition, the issue has been the subject of a number of reports and inquiries in recent times.
263. They indicate that amongst the matters that it may be relevant to consider in individual cases are the following:
- The terms and effect of the agreement in question.
- That the common law and/or statute or rules permit costs agreements, that is, an agreement where the client usually agrees to pay more than the relevant scale, thus emphasizing or permitting the freedom to agree to a larger fee.
- That seniority and expertise in a particular field of law may justify a premium for those services.
- The entitlement, within limits, of a practitioner to hold himself out as available to be engaged on terms which that solicitor regards as appropriate.
- The nature of the work involved, its difficulty or complexity, as distinct from charges “fixed arbitrarily (…) without reference to the work involved in the action”: Re Veron, supra, at p 145. The right of a client, acting freely, to select his or her practitioner or as was said by Rogers CJ in Singleton’s case, supra, at pp 106-7, “A client may decide to be foolishly extravagant.”
- The market for legal services in which the client, as a consumer, is obliged to contract: Gleeson CJ in Fleming’s case at p 124.
- Whether “a simple, flat, hourly rate as the basis for charging for anything, of whatever character, done by any solicitor of whatever seniority and experience” is appropriate: Fleming’s case at p 126.
- Charging rates in respect of travelling time and waiting time.
- The subjectivity of hourly charging and the difficulty of objectively checking the charging or their appropriateness.
- The need for the agreement to be sufficiently specific so that the client knows what he or she can expect to pay and the real application of a flat hourly rate.
- The relevance, if any, of the failure of the solicitor to explain or the client to understand the difference between agreement and scale and the difference between the amount which may be recovered from the other party under a costs order: see Milutin Jovetic v Stoddart and Co., supra, at pp 31-2.
- Whether the rate relates to time spent by a partner or unqualified staff and/or whether it applies only to “work requiring professional care, skill and responsibility” as distinct from routine work: Major Projects Pty Ltd v Sibmark, supra, at pp 8-10. That is, whether the costs agreement is “for an hourly rate to be charged indiscriminately”: see Burgandy Royale, supra, at p 557.
- Where the hourly rate is calculated or based upon overheads plus a margin for profit – whether the overheads are excessive or unusual and the nature of the profit margin.
- Whether there is scope for a “location factor”: Richardson v Lander, supra, at p 76.
- The relevance of the scale as the bench-mark against which charges in costs agreements may be measured, particularly having regard to its history and the manner in which increases are calculated.
- Where the agreement gives an open ended power to engage counsel, the reasonableness of engaging counsel, such as for interlocutory proceedings, reading fees, and any agreement to pay above scale where that is not specifically authorised by the client.
- Where a daily rate is specified, eg. for counsel, the number of hours constituting a day:- McInnes v Twigg, supra.
- Issues of public policy in the provision of legal services to the community.’
…
17. LACHES/ACQUIESCENCE/ESTOPPEL
273. Mr Kirkham submitted that by reason of the applicant’s acquiescence and laches, he should be estopped from now denying the agreement. It was submitted that Mr Weiss continued to instruct the respondent and allowed it to act and incur costs, in the knowledge that it did so on the basis of the agreement between them as to costs. The applicant, it was argued, did nothing to bring to the attention of the respondent any disquiet concerning the agreement, as a result of which the respondent continued incurring liabilities in the belief that the agreement was on foot and the applicant continued to receive interim accounts.
274. The doctrine of “laches” is described in “Equity Doctrines and Remedies” by Meagher Gummow and Lehane, 3rd ed. at p 804 as having an “ambulatory connotation” and as overlapping with other doctrines of equitable relief such as equitable release implied by conduct, equitable waiver or abandonment and “acquiescence”. In relation to the equitable defence of laches it is stated at p 797:
“It is a defence which requires that the defendant can successfully resist an equitable (although not a legal) claim made against him if he can demonstrate that the plaintiff, by delaying the institution or prosecution of his case, has either (a) acquiesced in the defendant’s conduct or (b) caused the defendant to alter his position in reasonable reliance on the plaintiff’s acceptance of the status quo, or otherwise permitted a situation to arise which it would be unjust to disturb: Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221.” (underlining added)
275. The term “acquiescence” denotes “a plaintiff’s behaviour in refraining from seeking redress once he knows his rights have been violated, were he ever so ignorant of their violation whilst it was in progress; to denote his acceptance of the fact that his rights have been violated”: Equity Doctrines and Remedies, supra, at p 797.
276. It seems to me that these matters can have no relevance to the issue of uncertainty. The only qualification to that which in my view could arise is where parties have continued to act under the agreement after the issue of uncertainty becomes apparent; in those circumstances the subsequent conduct may throw light upon their common intention as to the effect and thus the “certainty” of the agreement. It is unnecessary to consider this aspect further as it could not be suggested that the facts here justify any such approach.
277. Nor, in my view, do these equitable defences apply directly to the common law requirement that the agreement be fair and reasonable. Whilst I express no final view about it, it may be possible for parties to contract out of these common law requirements or by their subsequent conduct to ratify or affirm the agreement or to “waive” or abandon those rights. If the common law requirement is based upon an implied term to that effect then in principle it would be open to the parties by express agreement to exclude it or by clear subsequent conduct to do so. If on the other hand its basis is public policy quite independent of the intent of the parties that analysis may not be valid. In reality it would be difficult to envisage circumstances where parties could be said to have contracted out of the requirement of fairness. It may be possible to envisage circumstances where the subsequent conduct of the client in affirming the contract after being aware of all of the circumstances which compose this requirement of fairness may be treated as a ratification of it or abandonment or “waiver” of rights where the solicitor has proceeded to incur further costs as a consequence of that explicit conduct. However, it is unnecessary to analyse that issue since it could not be suggested that the facts justify that conclusion here.
278. As to the requirement of reasonableness, the public policy considerations may make such an approach even more difficult. Again, it may be possible to envisage a case where the subsequent agreement of the parties makes the difference between scale and the agreement clear and purports to contract out of or ratify the agreement or abandon or “waive” any component of reasonableness. In reality, however, it would be difficult to envisage such a case. The approach of the Courts to this requirement is founded on quite explicit considerations which would make such a conclusion difficult save in the most extreme of cases. Again, it could not be suggested that the facts justify that conclusion here.
279. Implicit in the argument for solicitors in those circumstances is a suggested “unfairness” in carrying out work in reliance upon the agreement and subsequently being faced with a determination by the Court that the agreement is not fair and/or is unreasonable. In reality there is no such unfairness. If the agreement is fair and reasonable it will be upheld; if it is not, it will not be. Any “unfairness” lies within the agreement; the terms of the agreement which the solicitor asks the client to sign or the circumstances in which that agreement is executed.
280. The equitable issues which Mr Kirkham raised do not in my view apply directly to non-compliance with the statutory requirements, specifically here rule 8(4). Again, however, the parallel issues may arise, namely, whether parties can contract out of those requirements and whether compliance can be specifically “waived” or abandoned or ratified after knowledge. The issues of principle relevant to that are really the same as those briefly referred to under the heading “Dispensing With The Rules” above and I need not repeat that discussion or elaborate upon it here; firstly, because I conclude that the rules were complied with; secondly, if they had not been complied with I do not consider there are any facts which justify me in concluding that I should exercise any such power, however described, in favour of the respondent.
281. So relevantly here the major issues raised by Mr Kirkham under this heading relate to questions of undue influence or unconscionability. As I have found in favour of the respondent in relation to those issues, it is unnecessary for me to consider that aspect further. However, in the event that those conclusions are wrong, I should refer to counsels’ submissions and the conclusions which I have reached under this heading.
282. It was submitted by Mr Strahan that if there was a finding of undue influence or unconscionability, time did not begin to run until the applicant ceased to be under the influence which brought about the agreement or the unconscionability ceased, for example by receiving independent advice which informed him of his rights. Clearly, where a client is so influenced and as a result enters into a costs agreement, that client is likely to continue to observe the agreement until such time as that influence is removed and he or she is informed or otherwise becomes aware of his or her rights. Mr Strahan submitted that upon receiving the final account and requesting further details, the applicant promptly attended the Legal Aid Commission and was then told for the first time that he had certain rights concerning the agreement and shortly thereafter he commenced these proceedings.
283. In relation to the principle that in relying on the laches and acquiescence as a bar to his or her claim, time only begins to run from the date when the plaintiff first became aware of what his or her rights actually are, Mr Strahan referred me to the well known case of Allcard v Skinner (1887) 36 Ch D 145. In that case the plaintiff made generous gifts to an Anglican convent, of which she was a member, whilst under the influence of her religious adviser. However, whilst the Court found that such gifts had been procured by undue influence, it held that a defence of laches had been made out. More than six years had elapsed between the time when the plaintiff left the sisterhood and the commencement of proceedings by her. It was accepted by the Court that time commenced running after the removal of the influence under which the gifts were made. However, the conclusion was that the plaintiff “deliberately chose not to attempt to avoid her gifts but to acquiesce in them, or, if the expression be preferred, to ratify or confirm them.” (per Lindley LJ at p 188). Whilst it was not found that the defendant had been prejudiced by the delay, the Court determined that the time elapsed, coupled with the other facts of the case, gave rise to a reasonable inference that the plaintiff “considered her position at the time, and elected and chose not to disturb the gift”. (per Bowen LJ at p 193). In relation to the knowledge of the plaintiff of her rights, Lindley LJ stated at p 188:
“Ignorance which is the result of deliberate choice is no ground for equitable relief; nor is it an answer to an equitable defence based on laches and acquiescence.”
284. Similarly, at p 192 Bowen LJ stated that:
“It is enough if she was aware that she might have rights and deliberately determined not to enquire what they were or to act upon them.”
285. See also the description by Lord Blackburn in Erlanger v New Sombrero Phosphate Co. (1887) 3 App Cas 1218 at p 1279 of conduct “after there has been such notice or knowledge as to make it inequitable to lie by”, and to the quotation underlined above from Equity Doctrines and Remedies.
286. In the present case the applicant entered into the retainer costs agreement on 19 June 1991 and the final account was rendered in July 1992. He consulted the Legal Aid Commission shortly thereafter and a notice disputing those costs and requesting that the costs be taxed was filed on 19 August 1992. On 15 December 1992 he filed an application seeking a declaration that the costs agreement was invalid. It can therefore clearly not be said that the applicant, on becoming aware of his rights in respect of the costs agreement, delayed in bringing proceedings. Further, I am not satisfied that it has been established that the applicant was aware during the course of his proceedings that he had rights to challenge the costs agreement.
287. Mr Strahan further submitted that the respondent had not suffered any detriment as a consequence of relying upon the agreement because if the present application is successful the respondent will not be deprived of all its costs but will be entitled to costs in accordance with the scale. However, it appears to me that the detriment to the solicitors is twofold. Firstly, the difference between costs under the agreement and costs under the scale, and secondly the circumstance that they may not have entered into the agreement at all except upon its terms.
288. Mr Kirkham further submitted that the principles established in Waltons’ Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 relating to equitable estoppel applied in the present case by reason of the fact that no indication was given to the respondent that the applicant did not understand or did not freely enter into the said agreement, as a result of which the respondent relied on the validity of the agreement in carrying out work and incurring expenses. This argument presupposes knowledge on the part of the applicant of his rights to make an application to the Court to have the agreement set aside or otherwise to challenge it. It is clear from the analysis of the doctrines of undue influence and unconscionability, particularly in situations where a presumption of undue influence arises by virtue of the nature of the relationship between the parties, that a client need not believe the agreement was not freely entered into, or where that perception is held by a client, that the law will afford an equitable remedy in such circumstances. Similarly, a client may, as in the present case, allege that he did not understand the agreement, but the fact that he expressed no disquiet at the time of entering with the agreement will not necessarily mean that he has by his actions or omissions misled the defendant so that he has suffered detriment of the kind referred to in Lindsay Petroleum Co. v Hurd (1874) LR 5 PC 221. The acquiescence by the plaintiff or the unjust situation described in those circumstances is to be determined on the facts of each case.
289. Had I concluded adversely to the respondent in relation to issues of undue influence, unconscionability or unfairness, or if ultimately I conclude that the agreement is unreasonable, I do not consider that the circumstances justify a conclusion that as a consequence of laches, acquiescence, estoppel, waiver, or any form of agreement, ratification or abandonment, the applicant is inhibited from obtaining the relief to which he would otherwise be entitled.’
