How not to sue for fees

Update, 8 March 2010: See also Pancarci v CVK & Co [1998] VLPT 10, a decision of Registrar Howell.  The barrister who is now Judge Jane Campton appeared, and referred Mr Howell to a decision of Justice O’Bryan in Carroll v Young (delivered 16 January 1990 in Supreme Court proceedings numbered OR 108/89), which came to the same conclusion in relation to solicitors’ reliance on the ‘evidenced in writing’ requirement for costs agreements. Registrar Howell followed Justice O’Bryan’s decision, as well as a previous decision of his own which he did not name, in which he had followed In re a Solicitor [1956] 1 QB 155 on the same point.

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

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

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

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

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

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

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

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

Q.  Were they destroyed?

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

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

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

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

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

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

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

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

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

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