Is solicitor-director of ILP which acted for him to be treated as self-represented?

A NSW solicitor was partially successful in a defamation suit.  But for the circumstance that he had retained an incorporated legal practice with which he was associated and for part of the time the director and the file handler, the Court was willing to order the defendant to pay his costs on an indemnity basis.  In respect of the period in which the solicitor was — the fictions of corporations law aside — substantially self-represented, his costs were ordered to be assessed on the ordinary basis.   What McCallum J said in McMahon v John Fairfax Publications Pty Ltd (No 8) [2014] NSWSC 673 is:

Continue reading “Is solicitor-director of ILP which acted for him to be treated as self-represented?”

Self-represented solicitor guilty of misconduct for breaching a rule expressed to regulate conduct when acting for a client

A Western Australian disciplinary case, Legal Profession Complaints Committee v CSA [2014] WASAT 57 is interesting in a number of ways. A criminal lawyer was the manager of a strata corporation.  She owned two units and the complainant the third. The complainant affixed an airconditioner to a wall which impeded on a common area.  She sought legal advice.  Her lawyers wrote a letter of demand to the complainant and charged a few thousand dollars.  The complainant did not fix the problem within the 14 days demanded, so the lawyer sued in the Magistrates’ Court.  The case was settled on the basis that the airconditioner would be relocated and the lawyer withdrew the proceeding without seeking costs.  When the complainant sold the third unit, the lawyer demanded that the complainant pay her the few thousand dollars her lawyers had charged her for the advice and the letter of demand.  She did so by a letter of demand drafted for her by another lawyer, though the involvement of this second lawyer only emerged at the disciplinary hearing. When the complainant did not pay up, she sued for them in her personal capacity.  The suit was found to have no legal foundation, but the lawyer said that she mistakenly thought that it did have a legal foundation, and that civil proceedings were not her thing. The case says:

1.  The suit was an abuse of process because there was no legal foundation for suing for the recovery of ‘pre-litigation’ legal costs.

2.  The lawyer’s conduct in threatening to bring and then bringing a suit which was an abuse of process was common law misconduct but was also a breach of a rule which prohibited lawyers from claiming on behalf of a client costs in a letter of demand for recovery of a debt because she was acting for herself in writing the letter (even though no legal letterhead or reference to her status as a lawyer was involved).

3.  There is no defence of honest and reasonable mistake in professional discipline.

4.  It is inappropriate for a disciplinary tribunal to make what the prosecutors described as ‘an incidental finding of dishonesty’ in relation to statements made during the investigation in respect of which no charge had been laid in the disciplinary proceeding.  Any such allegation ought to be the subject of a separate process (though the Tribunal then went ahead and found that the allegation was not made out on the Briginshaw standard anyway). Continue reading “Self-represented solicitor guilty of misconduct for breaching a rule expressed to regulate conduct when acting for a client”

NSW solicitor who failed to pay counsel’s fees struck off

Updated post (25 July 2014):  The answer to the question posed by the original post is: yes, he will be struck off.  Here are the reasons: Council of the Law Society of NSW V Andreone (No2) [2014] NSWCATOD 81.  His failure to make submissions on the question would not have assisted.  On the question of whether monies received by solicitors from clients for payment of counsel’s fees are trust monies, and on whose behalf they are held, see Legal Services Board v Gillespie-Jones [2013] HCA 35 about which Melbourne University’s Associate Professor Bant’s learned commentary may be found here.

Original post (published as ‘Will Solicitor Who Failed to Pay Counsel’s Fees be Struck Off?’): The Law Society of NSW wants a solicitor who persistently delayed in paying counsel struck off. The NSW equivalent of VCAT has found the professional misconduct established: Council of the Law Society of NSW v Andreone (No. 1) [2014] NSWCATOD 49, and a hearing on sentencing is pending.  In this case, clients had paid bills which included claims by the solicitor for counsel’s fees by electronically depositing monies into the firm’s office account — probably at the firm’s direction, as the Tribunal found.

The Tribunal found without reference to authority that those payments were trust monies to the extent that they satisfied the claims by the solicitor for counsel’s fees, the solicitor not having paid the counsel at the time of their receipt.  In other words, the solicitor held the monies on trust for the barristers. But it seems that the Tribunal considered the solicitor’s misappropriation of trust monies and the failure to pay the fees as separate instances of professional misconduct.  In other words, the mere failure to pay the fees, given its intentionality and persistence, amounted to professional misconduct.  This is what the Tribunal said: Continue reading “NSW solicitor who failed to pay counsel’s fees struck off”

What does ‘pro bono’ mean? Are ‘semi-pro bono’ costs agreements legally efficacious?

Hidden away in Trkulja v Efron [2014] VSCA 76, at footnote 49, is a little dictum of the Chief Justice and Justice of Appeal Santamaria which explains their Honours’ understanding of the term ‘pro bono’:

‘In current legal practice, the expression ‘pro bono basis’ is understood to refer to the basis where a practitioner offers his or her services on a voluntary basis without any entitlement to or expectation of remuneration.’

Practitioners should, it seems to me, think carefully before describing themselves as acting ‘pro bono’ when their retainers provide for them to be paid out of the proceeds of a costs order made in favour of their client in litigation to be paid by their client’s opponent in the litigation.

There has been uncertainty in relation to the efficacy of a retainer which says ‘I will charge you $300 per hour but will seek to recover it from you only if you obtain an order that the other party pay your costs, and then I will only seek to recover my fees to the extent of the other side’s liability under the costs order’ or any variation of that concept.

The issue was that the indemnity principle requires total party-party costs to be no more than the liability of the person seeking the costs order to their own lawyers for costs.  If the liability depends on the making of a costs order, until the order is made, the liability is nil,  so that the indemnity principle precludes the making of the order in the first place (so the argument goes).   The latest important decision to endorse this reasoning, albeit in dicta, was King v King [2012] QCA 81.

Now if there is a principle which is properly described as ‘flexible’, it is the indemnity principle in costs law and it is a matter of surprise to me that the uncertainty has persisted so long given the obvious desirability from the perspective of access to justice to sanctioning such arrangements.

Happily, the Supreme Court of Queensland recently gave a decision this year which decided as a matter of ratio that an otherwise orthodox hourly rates costs agreement which included the following special condition was efficacious and did not offend against the indemnity principle:

‘No fees will be payable by you unless an order is made by the Supreme Court of Queensland in your favour for the payment of costs and those costs are recovered by us from other parties and any fees charged shall be limited to the amount of costs so recovered.’ Continue reading “What does ‘pro bono’ mean? Are ‘semi-pro bono’ costs agreements legally efficacious?”

Reviews of decisions of the Costs Court’s Judicial Registrar

The Costs Judge recently clarified the procedure for seeking review of a decision of a Judicial Registrar on a preliminary point of law in a taxation of costs in the Costs Court.  Essentially, his Honour said, the procedure in r. 63.56.2, mutatis mutandis, will generally be appropriate, including the 14 day time limit referred to in it.  In relation to this kind of decision of a Judicial Registrar, the review goes straight to the Costs Judge, unlike in the case of rulings upon items in a bill of costs during the taxation proper, where there is a bizarre requirement for the Judicial Registrar to reconsider her own decision before it may be appealed to the Costs Judge. Continue reading “Reviews of decisions of the Costs Court’s Judicial Registrar”

Application to set aside costs agreements for disclosure defaults fails

A decision of the Supreme Court of Queensland has made clear what ought to be more obvious than it appears to be, namely that costs disclosure defaults will not result in the setting aside of a costs agreement in the absence of evidence that the non-disclosures had some effect on the client’s decision to enter into the costs agreement on the terms in fact adopted between the solicitor and client. Continue reading “Application to set aside costs agreements for disclosure defaults fails”

White Industries v Flower & Hart: unfounded allegations of fraud

This post is a case note of Justice Goldberg’s famous decision in White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169; [1998] FCA 806 as well as of associated decisions and surrounding controversy.  Because it is what I am working on at the moment, it concentrates on that part of the case which relates to the unjustified pleading settled by Ian Callinan QC and signed by his instructor Michael Meadows, alleging that the builder lied to the developer in relation to the cost of building a shopping centre just north of Brisbane.  It’s a big post, to kick off the year.

Facts (not all drawn from the judgments)

George Herscu died just before Christmas, aged 85. He was the alter ego of a property development group headed up by the Hersfield Development Corporation. According to 4 Corners, he was the biggest property developer in the country. According to The Australian, he lived in a Toorak mansion, owned a Melbourne Cup winner, and was once the third richest man in Australia after Robert Holmes a Court and Kerry Packer, one place ahead of Alan Bond.  He was a millionnaire by 30, and made and lost a fortune of $500 million.  He left Australia for California in 1997 and rebuilt substantial wealth.  Towards the end of his life, he was engaged in bitter litigation with his son, who described him as ready to spend whatever is needed to “crush anyone that stands in his way”.  Ironically, given what follows, Mr Herscu’s lawyers accused the son of mis-using the deposition process.  According to The Australian, they said:

‘Your clients’ continued insistence on trying to push an 80-year-old man with hypertension, a heart condition, failing hearing and many other health problems into a deposition room – having already deposed him for 27 hours – is shocking and wrong.  The only conclusion one can reasonably draw from your clients’ posture is that their litigation strategy involves attempting to subject George Herscu to so much stress and pressure he simply dies. To use the tools of discovery for this purpose is reprehensible, and indeed revolting.’

Very alarmingly, he was asked in those depositions about allegations that he had watered down the beer in a pub. Continue reading “White Industries v Flower & Hart: unfounded allegations of fraud”

The civil and disciplinary consequences of making an allegation of serious wrongdoing without a proper foundation

Friends, I need your help, again.  Certain promises I made to write about and present on the civil and disciplinary consequences of making allegations of serious wrongdoing (e.g. fraud) without a proper foundation are coming home to roost.  I’m looking at:

  • disciplinary sanction of lawyers via Legal Services Commissioner, etc. prosecution;
  • personal costs orders against lawyers;
  • costs consequences for parties (common law in relation to exercise of the unfettered discretion re solicitor-client rather than party-party costs and displacing the presumption that costs follow the event where allegations of fraud are not made out, and Civil Procedure Act 2010 (Vic.)); and
  • what is a ‘proper foundation’?

My miserable situation in this season of sun, frivolity and child-minding is a need to work out what these consequences are so that I can provide learned disquisition.  In the process I have learnt something about Dr Peter Clyne, the protagonist of Clyne v NSW Bar Association (1960) 104 CLR 186; [1960] HCA 40.  What a wonderful addition to my knowledge of the rogues’ gallery of which I consider myself a connoisseur; I even bought his autobiography on eBay today but his ‘How Not to Pay Your Debts’ is still available.  The Hikers described his conduct during the course of an ‘orgy of litigation’ between his client, the husband, and the wife as ‘irresponsible’, ‘mischievous’, ‘objectionable’, indefensible, ‘inexcusable’, and, rather wonderfully I think, ‘monstrous’.  A unanimous Dixon Court confirmed the good doctor’s striking off.  You can read about his life afterwards, including as a Magistrate in Zambia, here, and possibly less reliably, here.

So here is a general call-out for good authorities on these questions, especially decisions which really assist in understanding what a ‘proper factual foundation’ is, since many authorities relate to allegations which are so obviously unsustainable that they do not really illuminate where the line lies between the merely poor and the truly discreditable argument (Clyne), or proceed on the basis of admissions (AM v Legal Practitioners Disciplinary Authority [2010] NTSC 02), or are fantastically complicated (the case just referred to and Victorian Bar Inc v CEM QC [2006] VCAT 1417).  I would also be very grateful for any detailed commentaries on this aspect of the conduct rules for solicitors and barristers alike, and Australian decisions in relation to costs (since many of those cited by Dal Pont are Canadian or English).

Switch from party-party to standard basis not retrospective per SCV

Update, 23 September 2013:  See also, to similar effect, but in relation to the Federal Court’s Rules: Territory Realty Pty Ltd v Garraway (No 3) [2013] FCA 914.  And in Metlife Insurance Ltd v Montclare, 4 September 2013, the Costs Judge, Wood AsJ, found that interlocutory orders made prior to 1 April 2013 may still be taxed forthwith even in the absence of a direction to that effect by the Court making the interlocutory order, despite the introduction of r. 63.20.1 which says that such costs shall not be taxed until after the completion of the proceeding unless the Court otherwise orders.

Original post: The rules in civil proceedings in the Supreme Court of Victoria changed not so long ago.  Whereas the usual order in favour of a successful party was that the unsuccessful party pay the successful party’s costs on a party and party basis,  but now the usual order is that such costs be paid on a new basis, the ‘standard basis’ the test for which is much the same as the test for the old ‘solicitor and client’ basis against which costs were ordered to be quantified in special circumstances, essentially misconduct during the litigation and not beating offers of compromises.

Sifris J has ruled authoritatively that for work before the commencement of the rule change, costs of a successful party are presumptively to be quantified on the old basis; the new rules in this regard do not have retrospective effect: Jane v Bob Jane Corporation Pty Ltd (No 2) [2013] VSC 467.  His Honour’s reasoning is reproduced below.  Before I get to it though, may I suggest that solicitors review their costs disclosures to ensure that any adjustments to estimates of costs recoverable from the other side in litigation are brought up to date.  More might now be recoverable than before, and certainly it would not hurt to substitute ‘standard basis’ for ‘party party basis’ if that language appears in solicitors’ precedents. Continue reading “Switch from party-party to standard basis not retrospective per SCV”

Free tickets to a great seminar

I’m chairing what should be a great seminar for litigators at Melbourne’s RACV Club on 28 August 2013.  Judicial Registrar Meg Gourlay who is one of the two decision makers who is handling most of the solicitor-client taxations in the State at the moment is the lead singer, talking about the changes to Order 63 of the Supreme Court Rules and the new Supreme Court scale which is no doubt the harbinger of new scales in other courts too.  Despite my complete failure as a blogger to bring them to your attention, these are big changes: so big I have never quite got around to writing a post about them, a bit like the post about the decision in Fritsch v Goddard Elliott.  So it is well worth finding out what the Costs Court figures they mean.  Apart from anything else the more mysterious bits have been chopped out of the scale which means that lay lawyers uninitiated in the dark arts of that most mysterious of cabals — the costs lawyers — might actually be able to draw bills themselves with a bit of orthodox education, a spot of which the Judicial Registrar is going to engage in.

The band is pretty hot too.  Anna Sango has bravely taken on the task of speaking about a strange new concept getting a workout at the salons of the most elegant cost lawyers: ‘proportionality’, absolutely all the rage I’m told amongst aristocrats in England whose favourite pastime seems to be inventing more rules for that greatest of all English board games, litigation.  Frankly, it seems like a dangerously French concept to me, a sly limit on the individual’s right to litigate matters of principle and bugger the expense, but Sango will no doubt tell us that it’s more nuanced than that.  Then, after all that esoterica, Paul Linsdell, one of the head honchos of the behemothic Blackstone Legal Costing will speak on tips and traps when arguing costs in litigation.  The traps are newly refreshed thanks to the subject matter of Judicial Registrar Gourlay’s talk, and so this hoary old chestnut of a topic will be worth a listen.  And then Debra Paver, who has given evidence in a few security for costs applications in her time, will speak on the inherently useful subject of how to argue for and against such applications.

I have two otherwise unbelievably expensive tickets available for enticing supplicants.

More on solicitors’ obligations to pay counsel’s fees

Council of the Law Society of New South Wales v JAX [2012] NSWADT 283 is a case in which the solicitor was disciplined for paying himself out of fees provided to him by his client for payment of counsel’s fees.  Ultimately he went bankrupt and did not pay the fees. See also this earlier post on this subject.  The decision also represents yet another admonition to pleaders of disciplinary charges to plead dishonesty expressly if they intend to allege it.

There were the following agreed facts: Continue reading “More on solicitors’ obligations to pay counsel’s fees”

Another solicitor struck off for not paying counsel’s fees

A South Australian solicitor has been struck off for a panoply of wrongs, one of which included failing to pay counsel’s fees: Legal Practitioners Conduct Board v Wharff [2012] SASCFC 116.  On this subject, broadly construed, see also: Council of the Law Society of NSW v PJB [2012] NSWADT 153Council of the Law Society of NSW v ML [2012] NSWADT 146, and Council of the Law Society of NSW v HI [2012] NSWADT 203 (where the NSW solicitor was struck off).  See also Legal Services Board v G-J [2012] VSCA 68 (re the Quistclose trust which may arise when a client pays solicitors moneys for the specific purpose of paying counsel’s fees), Victoria Lawyers RPA Limited v M O Lawyers Lawyers Pty Ltd TO217 of 2002, 31 October 2001 and Law Institute of Victoria Limited v SO & GS,TO555 & TO556 of 2005 10 November 2005, and Legal Services Commissioner v JHMcC [2011] VCAT 231 noted in this post.

In Wharff,  A Full Court of the South Australian Supreme Court (Kourakis CJ, Blue and Stanley JJ) said:

‘A solicitor who engages a barrister or solicitor agent undertakes a personal liability, either in honour or in contract as the case may be, to pay the barrister’s or agent’s fees, unless otherwise agreed.[3]  Where a legal practitioner undertakes such a personal liability, it is unethical to ignore his or her obligation, and hence a wilful or persistent refusal or failure to pay fees can amount to unprofessional conduct.[4]’

[3]    Rhodes v Fielder, Jones and Harrison [1918-19] All ER 846 at 847 per Lush J (Sanke J agreeing); Re Robb (1996) 134 FLR 294 at 310 per Myles CJ, Gallop and Higgins JJ.

[4]    Rhodes v Fielder, Jones and Harrisons [1918-19] All ER 846 at 847 per Lush J (Sanke J agreeing); Law Society of New South Wales v McCarthy [2002] NSWADT 58 at [46] per Malloy, Robinson QC and Kirk; Law Society of New South Wales v Graham [2007] NSWADT 67 at [29] per Karpin ADCJ, Pheils and Fitzgerald.

Continue reading “Another solicitor struck off for not paying counsel’s fees”

Limit on the unrecoverability of unusual expenses principle in Victoria

I had to read Abrahams v Wainwright Ryan [1998] VSC 335; [1999] 1 VR 102 from start to finish recently.  I noticed the paragraph the subject of this post which, it seems to me, might be useful in arguing in Victoria against a submission in a solicitor-client taxation that an expense should not be allowed because it was unusual and the unusualness not brought to the attention of the client before it was incurred.  The paragraph suggests that a failure to warn itself is insufficient to require its disallowance, at least where the lawyer suggests that even had the warning been given the client would have authorised the incurring of the cost. Continue reading “Limit on the unrecoverability of unusual expenses principle in Victoria”

When does the 12 months in which to seek taxation commence?

In Victoria, solicitors have only a non-extendable 60 days in which to seek taxation of counsel’s fees, but clients have 12 months in which to seek taxation of solicitors’ fees, and clients other than ‘sophisticated clients’ as defined may seek an extension of time in which to apply.  Where the greatest uncertainty exists, in my mind at least, is in the case of suits for taxation by third party payers — non-clients who promise to pay others’ legal fees, and most particularly non-associated third party payers — non-clients whose promise to pay others’ fees is made to the client rather than to the lawyers.  I imagine that solicitors do not generally give bills to non-associated third party payers, such as the mortgagors to whom their clients lend money under documents which require the mortgagor to pay the mortgagees’ costs.  Rather, I imagine that the mortgagees generally just demand a sum from the mortgagor as an adjustment at settlement, and hand over the bill from their lawyers only upon demand.  Yet non-associated third party payers are entitled to seek taxation, and the question is — when does the time in which such a taxation may be applied for begin to run?

I must warn you that the rest of this post is likely to be extremely boring for most people, and understanding it, despite my attempt to state it as clearly as I can, is likely to involve considerable mental effort.

In Viscariello v Oakley Thompson [2012] VSC 351, Justice Ferguson decided a dispute between an individual who guaranteed his company’s obligation to pay the company’s legal fees, and the company’s lawyers.  The individual was presumed for the purpose of argument to be an associated third party payer, which seems like a very reasonable assumption to me. The dispute was about when the time limits commenced.  But the judgment does not resolve many mysteries, because it seems that the company and the director received the bills simultaneously, and though no bills were addressed to the guarantor qua guarantor, since he in fact received the bills at the time the company received them, time started to run from then. Continue reading “When does the 12 months in which to seek taxation commence?”

The difference between a debt and a claim for damages: part 1

It is sometimes said that once the time for taxation has expired, a bill for legal fees may be ‘sued on as a debt’.  Quite frankly, I have never quite understood what the difference between a debt claim and a damages claim is, or why it matters in general, though there are certain consequences I’m aware of in terms of the  civil procedures applicable.  By way of first instalment: I just saw this little passage in Copuss Pty Limited v Nix [2012] NSWSC 671, and thought to squirrel it away on the blog:

’56              There is no reason why Copuss should not be entitled to recover the loans it made to Mr and Mrs Nix. The recovery of those loans do not depend on the contract and whether Mr and Mrs Nix were in breach of it. As the High Court explained in Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 567:

The common law does not and never did conceive of indebtedness in a sum certain for an executed consideration as a mere breach of contract: it is rather the detention of a sum of money and that was so whether the creditor enforced his demand by an action of debt or by indebitatus assumpsit.

 And later it said (at 569):

 A debt recoverable under an indebitatus count was not and is not now conceived of simply as a cause of action for breach of duty or obligation. In other words it is a mistake to regard the liability to pay a debt of a kind formerly recoverable in debt or indebitatus assumpsit as no more than the result of a breach of contract, a breach which the creditor must affirmatively allege and prove.’

How not to plead a contract

Update, 17 January 2013: this colourful judgment of a Master of the Supreme Court of Western Australia is worth a read. For example:

’23 At par 17, the plaintiff pleads that the agreement was entered into between February and November 2007. That is a remarkably long period. It should always be possible to say when a contract came into existence.

24 In a classical analysis, it is when the offer is accepted. Any uncertainty over the date on which the contract became complete and enforceable only arises because of evidentiary uncertainty about when a particular event occurred: there may be doubt, for example, about whether a written acceptance was delivered, or a conversation took place, on Tuesday or Wednesday. But there will still be a short interval of time during which those things are said to have taken place.

25 Even in the sort of case in which a contract emerges from a course of conduct, such as was considered by the Full Court in Marist Brothers Community Inc v The Shire of Harvey (1994) 14 WAR 69, it is always possible to give a definite date by which it can be said that there is an enforceable contract.

26 In neither type of case is it likely that the point at which a contract came into existence cannot be narrowed down any further than to a nine-month period. Nine months is the gestation period for humans, not for contracts. A plea that a contract came into existence in a nine-month period is embarrassing.’

Update, 4 June 2012:  This post prompted quite a few readers privately to email me sharing various frustrations they have.  One pointed me to an article by a Qld silk, Anthony Morris, venting his top 7 pleading frustrations, ‘Seven Deadly Sins of Pleading’, Hearsay, Issue 32, December 2008.  I completely agree with the first 6 and all of the 7th except for the bit which recommends against using automatic cross-references to other paragraphs of the pleading — technology must have moved on since 2008.  I am in heated agreement with him in relation to his second point, and wonder whether any Victorians consider that pleading in numbered paragraphs what might ordinarily be contained within particulars, so as to force (or even entice) the responding party to state their position in relation to that allegation, might not be permitted for some reason.

Original post: One might think that nothing could be more central to commercial litigation practice than to plead an agreement.  Sometimes the line between facts and evidence — one you plead and the other you don’t — can be a bit blurry, but one might think that it would give a lawyer pause before pleading an invoice given pursuant to an agreement as a particular of the agreement itself.  Yet it happens all the time, perhaps none moreso than in the solicitor who sues for fees, representing himself.

Then there seems to be a pathological inability in pleaders to allege a straight written agreement.  It’s always partly implied to give business efficacy to the agreement, but the implied term is never stated and nor are the reasons why the agreement would be inefficacious in a business sense without the implied term.  And often enough, it’s partly oral too, but the thrust of the words spoken so giving rise to the oral terms are not set out.

Speak up if you can better this pleading (bear in mind in order to be valid all the terms of a costs agreement have to be in writing or evidenced in writing) which is paining my Saturday evening, or just send me your favourite examples of the same phenomenon: Continue reading “How not to plead a contract”

Must a creditor obey debtor’s direction as to which of several debts a payment is to be put towards?

(Amended on 31 May 2012) Except that I had a feeling creditors were obliged to apply debtors’ payments to the oldest outstanding debt, I have never known until recently what the law was exactly in relation to a creditor’s obligations and entitlements where a debtor makes a payment which could be applied to one of several debts.  I suspect many lawyers are in the same situation. Experience teaches that allocations of payments against debts can have many ramifications, the most obvious of which are in relation to interest, and the application of statutes of limitations.  This statement was recently re-stated as good law in Victoria:

‘When a debtor is making a payment to his creditor he may appropriate the money as he pleases, and the creditor must apply it accordingly. If the debtor does not make any appropriation at the time when he makes the payment the right of application devolves on the creditor.’

It is a statement of Lord McNaughten in Cory Brothers & Company v Owners of Turkish Steamship ‘Mecca’ [1897] AC 286 at 293 and Deeley v Lloyds Bank Limited [1912] AC 756, 783 is apparently to like effect.  In response to the original version of this post, two readers, fellow barrister blogger in Melbourne Paul Duggan and Brian Lambert of Brisbane’s Birch & Co, alerted me to an additional proposition, being the one I had had a vague undertanding of.  Namely that where neither creditor nor debtor makes any conscious appropriation (as will frequently be the case), the default position is that the payment will be applied to the oldest debts first: Devaynes v Noble (‘Clayton’s Case‘) (1816) 1 Mer 572.

The rule was re-asserted by Mason CJ and Dawson, Toohey and Gaudron JJ in Sibbles v Highfern Pty Ltd (1987) 164 CLR 214; [1987] HCA 66 at [11], and was neatly summarised by Lockhart J in Re Walsh; Ex Parte: Deputy Commissioner of Taxation (1982) 60 FLR 355; [1982] FCA 88 in a passage which also explains what is meant by the debtor making an appropriation. His Honour said:

‘A debtor who owes two debts to a creditor is entitled to appropriate a payment which he makes to his creditor to one debt rather than to the other. If he omits to do so, the creditor may make the appropriation. If neither makes any appropriation, the law appropriates the payment to the earlier debt. If there is specific appropriation by the debtor cadit quaestio. In the absence of a specific appropriation it is a question of fact whether there was any appropriation by the debtor. To constitute an appropriation there must be more than an intention to appropriate by the debtor. I respectfully adopt the following passage from the judgment of Greene L.J. in Leeson v. Leeson (1936) 2 K.B. 156 at pp. 162-163:-

“When, however, he does not notify the creditor of his intention, and when the circumstances are such that the creditor receives the payment merely in satisfaction of the debts and the payment is not more appropriate to the payment of the one debt than to that of the other the creditor is entitled to make the appropriation. When it is said that there need not be an express appropriation of a payment, but that the appropriation can be inferred, that does not mean that appropriation of a payment can be inferred from some undisclosed intention in the mind of the debtor. It is to be inferred from the circumstances of the case as known to both parties. Any other view might lead to injustice, as the creditor’s right to appropriate a payment would be defeated. When the matter is examined upon principle it will be found that an undisclosed intention in the mind of the debtor is not sufficient to support an appropriation. If authority is needed for that proposition it can be found in the judgment of Lush J. in Parker v. Guinness 27 Times L.R. 129, 130 where he said: ‘What is to be considered is this. Is the true inference to be drawn from all the circumstances of the case that the debtor paid the moneys generally on account, leaving the creditor to apply them as he thought fit, or is the true inference that he paid them on account of special portions of the debt for the purpose and with a view to wipe these out of the account? His undisclosed intention so to do would, of course, not benefit him. It is what he did in fact, and not what he meant to do that is to be regarded.’ A debtor’s undisclosed intention to appropriate a payment to one of two debts owed by him to a creditor cannot benefit him.”‘


Party-party recovery of pre-proceedings costs

Her Honour Davies J considered the recoverability of pre-action costs in the context of an application for security for costs.  The defendant sought security for $1 million already expended prior to the commencement of the proceedings against it, but after the plaintiffs gave media publicity to their intention to proceed them.  Her Honour decided that such costs could form part of the costs in respect of which security for costs may be ordered, and did include an allowance for such costs in her grant of security in the sum of $6 million.  My fellow blogger Liz Harris of Harris Costs Lawyers’ expert opinion as to the NAB’s likely costs was largely accepted. The decision is Pathway Investments Pty Ltd v National Australia Bank Limited [2012] VSC 97. In relation to the basic principle relating to the recoverability of pre-action costs, more usually claimed by plaintiffs, her Honour said: Continue reading “Party-party recovery of pre-proceedings costs”

What do you need to plead in a suit for fees?

I have posted before about what needs to be pleaded in a modern suit for fees: see this post and the posts linked to within it.  Today I have come across a decision in which the failure to plead that which many people think need not be pleaded resulted in a semi-successful application to set aside a default judgment entered by a solicitor against a former client: Wiley v Ross Lawyers (14 February 2012) [2012] QCATA 22, a decision of Queensland’s equivalent of VCAT.  The lawyers had not pleaded a valid costs agreement or other basis for charging fees on the basis they were in fact charged, that there had been good service of a valid bill, or that there had been good service of a notice of rights.  Apart from these defects in the pleading, the evidence in support of the application to set aside the default judgment was not compelling.

The tribunal ordered that the application to set aside the default judgment was to succeed or fail depending on whether the lawyers filed an affidavit verifying compliance with chapter 3 of Part 3.4 of the Legal Profession Act 2007 (Qld), the part which deals with costs disclosure defaults.  I can only imagine that there are very many clients against whom lawyers have entered default judgments who are likely to be able to have them set aside as irregular, even years after the event, though the Queensland tribunal cases might be distinguished on the basis of the need to establish for jurisdictional reasons that what was being sued for was a debt or liquidated demand.  The member relied on a previous decision of the same tribunal (Morales v Murray Lyons Solicitors (a firm) [2010] QCATA 87) where the Deputy President, Judge Kingham agreed with the reasons of Member Mandikos, who said: Continue reading “What do you need to plead in a suit for fees?”

Value pricing

What follows are my rambling first thoughts about value pricing, penned without having read any of the leading treatises on the question, and without having read any sophisticated value pricing-based retainers.  I am most willing to be shown the nuances and possibilities overlooked in my preliminary explorations.  I am not wedded to any of the positions.  I put them up for discussion.  I think the hourly rate as currently applied is dreadful in many ways, but I have anxieties about how fixed fees and value billing would apply in practice outside the relatively even bargaining ground of major firms and major corporations’ in-house legal teams in which it seems often to be discussed.  I have this anxiety that it is not going to do anything to remedy the most basic problem causing the cost of access to justice to be too great, the rapacity of mediocre lawyers, and may in fact exacerbate it.  I suspect that well-drafted, well-regulated fixed fees will crap on the current regime, but think the current regime might be greatly improved, narrowing the gap. And I worry about the regulation of fixed fees, given our legal system’s prima facie reluctance to interfere in fairly negotiated contractual arrangements.  In other words, I worry that the sanctity of contract will inhibit the adjustment by the courts of fees rendered by lawyers to clients.

When I think of fixed fees, I tend to think of them in very simple terms: ‘I will do your case for $100,000, including disbursements and counsel’s fees.’  There is a tendency to think of the $100,000 as a cap, but in a simple agreement like this, the lawyer will get the fee if the other side dies and the cause of action dies with him, or the other side settles a few days into the retainer, or the client stumbles across a smoking gun which renders their prospects of victory at nil.  Galling as paying anyone $550 per hour for a job which may go on and on and on may be, paying someone $100,000 for next to nothing must be even more galling.  Of course value pricing retainers may be very sophisticated, and I am guilty of myopia.

There is also, I think, a tendency to think of fixed fees as giving certainty at the outset in a way unique to this method of charging.  In Victoria (and, I think, everywhere else in Australia), solicitors must by law estimate at or near the start of a matter its total costs — their fees, witness fees to be charged as disbursements, counsel’s fees, and other disbursements such as trial and transcript fees — or, if that is not practicable a range of the possible total costs. So clients should be entitled to be placed into the same position as the solicitor in terms of knowledge of how much their matter will cost, with the advantage of fixed fee being no more than the apportioning to the client the risk of the matter turning out to be simpler than the price justifies and to the solicitor the risk of it being more complex.

Because of the poverty of solicitors’ compliance with the obligation to give a good faith considered estimate of total costs at the outset (and the almost complete non-enforcement of the obligation), fixed fees represent a great improvement to clients who fix them in their interests.  But at least some of that improvement could be achieved by fixing the current system by enforcing the requirement for good faith carefully considered estimates of total costs, rather than moving to fixed fees.  Quite a bit more could be achieved by introducing penalties for solicitors who exceed estimated total fees without justification.  More again by stamping out fraud.  And I suspect that the very real practical advantage of fixed fees begins to diminish somewhat as soon as the fixed fee becomes a series of fixed fees, and subject to scopes of work such that disputes over variations assume all the difficulties of construction law, except that one party will be a lawyer who will not have to engage lawyers to have the dispute on his behalf.  Especially is that so in the case of the ad hoc user of legal services who have no commercial relationship with the lawyers within which to negotiate.

I have this anxiety that what fixed fees are really about is allowing lawyers to sell their learning (aka ‘intellectual capital’) for fees much greater than usual rates would allow for the time involved in solving the client’s problem, or advising or representing them.  This is where ‘value’ comes in, I worry: where the value of the lawyer’s services to the client exceeds the product of the lawyer’s time multiplied by usual fees, the client should be charged more to reflect the value to the client of the services.

And I think I have a problem with the entrepreneurial professional. No doubt some people think I am an entrepeneurial professional, what with my blog and all, but from time to time prospective clients inform me of their problem, I send them a seminar paper that covers what they know, and they get what they want with a few minutes of my time at no fee.  More often, I provide advice for a few hundred dollars which a non-expert charging on time would be likely to charge substantially more for.  I think of this as the upside of time based billing, a manifestation of the proposition of the profession as a public service.  I want to make a good living, but if I can assist without spending too much time, then I feel some sort of duty to do so.  Of course there is nothing about time billing which makes it inherently favourable to giving away your intellectual capital.  Value pricers can be kind too.  But I just get the impression that value pricing as a mindset will tell lawyers that they must charge a premium whenever a good chunk of their ‘intellectual capital’ is let loose. Continue reading “Value pricing”