APPEAL AS TO COSTS-where costs assessment under the Legal Profession Act 2007

PROCEDURE- APPEAL- COSTS- APPEAL AS TO COSTS-where costs assessment under the Legal Profession Act 2007- where there was a dispute as to the liability of two persons to pay costs- where magistrate failed to consider affidavit relevant to dispute- whether the first appellant was liable for costs-where the respondent was not heard on the issue -where magistrate did not have power to make order pursuant to r743G(3)(a)

PROCEDURE- JUDGEMENT AND ORDERS-AMENDING VARYING AND SETTING ASIDE JUDGMENTS AND ORDERS-APPEAL-COSTS- where magistrate erred in giving judgment- where the learned magistrate lacked jurisdiction to give judgment there being an unreasonable dispute about whether persons liable to pay costs- where judgment to be set aside- where magistrates at first instance had fallen into error and the matter of dispute remained to be dealt with

PROFESSIONS AND TRADES- LAWYERS-DUTIES AND LIABILITIES-SOLICITOR AND CLIENT- RETAINER- CHALLENGING RETAINER- where appellants adduced evidence deposing to a request made by the respondent to enter into client agreements with the appellants- where evidence led relating to the substitute costs agreement- whether there was actual or implied acceptance of the costs agreement- whether new costs agreements concluded- where no new costs agreements concluded- whether persons liable for costs as ‘clients’ not withstanding absence of costs agreements- where persons not clients- where no liability for costs

Thomson v Thomsons Lawyers [2016] QDC 78

This was an appeal from two orders of the Magistrates Court relating to an assessment of costs in favour of the law firm, Thomsons Lawyers. The first of these orders was on 18 March 2014 appointing Stephen Hartwell to assess the costs of the firm, and the second order was on 22 August 2014 where judgment was entered in the sum of $72,810.75 against Kadoe Pty Ltd, Mr Thomson and Mrs Thomson (“Respondents”).

18 March 2014 hearing

The application was served on the Respondents and it was in the correct form pursuant to r 743A(2) of the UCPR. As such, the Respondents were informed that if they opposed the application or wished to argue for any other order, than they were required to appear before the court.

On 18 March 2014, the application was heard and Mrs Thomson appeared for herself and the other two Respondents. At the hearing, she handed up a copy of an affidavit, which was filed that morning, and requested an adjournment. Contained in that Affidavit were issues she raised in relation to the Application, including at paragraph 2 that she and Mr Thomson “are not parties responsible for the fees the subject of this application. The first named respondent is the only entity that had entered into a costs agreement with the applicant”

There was discussion relating to the orders sought by Thomsons Lawyers and no consideration was given to the issues raised in the affidavit handed up by Mrs Thomson. Ultimately, Magistrate Hall made an order appointing Stephen Hartwell to conduct an assessment of the law firm’s costs.

The judge on appeal, Horneman-Wren SC DJC, noted that as a self-represented litigant, Mrs Thomson would have reasonably thought that the issues raised in her affidavit, would be considered by the court. In the appeal, Mr Dickson for the law firm conceded that the affidavit was not considered. His Honour noted that he was of the view that the Affidavit clearly raised in terms of r 743G(2)(d)(i) of the UCPR, a question of whether a person claimed to be liable to pay costs was liable to pay those costs. This question having been raised by the Respondents, in the view of the appeal judge, should have raised the question to the Magistrate whether this should be tried before the costs were assessed. The appeal judge was also of the view that the affidavit raised a ground of dispute which went beyond the amount of the costs. The appeal judge noted that the Respondent was not required under the UCPR to raise those grounds in any particular way and the only direction provided as to how they might raise issues in opposition to the application was for them to appear before the court at the stated time and place, which they did.

The appeal judge concluded, that given the ground of dispute raised in the affidavit, that the Magistrate did not have the power to make an order under r 743G(3)(a) appointing Mr Hartwell as costs assessor, and as such the Magistrate erred in law in the exercise of her jurisdiction.

22 August 2014 hearing

On 22 August 2014 the matter came before Magistrate Costello to enter judgment against the Respondents in the amount of the costs assessor’s certificate. At the hearing, the three Respondents were represented by Ms Hartvigsen, of Go to Court Lawyers, who had only received instructions the night before. She informed the Court that her clients had been representing themselves and that they were waiting on a response to communications initiated with the costs assessor regarding who was liable to pay costs.

It was the view of the judge on appeal that this correspondence further placed the firm on notice that Mrs Thomson considered the issues raised that neither her nor Mr Thomson were liable for the costs to be unresolved.

Mr Dickson who appeared for the law firm made submission at the hearing that the order on 18 March involved lengthy opposition by Mrs Thomson on behalf of all three Respondents, and Magistrate Hall ordered that there be a costs assessment. The Magistrate proceeded with his decision on the basis that there had been a consideration of the substantive merits of Mr Thomson’s opposition to the application for the appointment of the costs assessor. Consequently the Magistrate entered judgment for the law firm in the amount of $72,810.75.

It was the opinion of the judge on appeal that the Magistrate erred in law in giving this judgment because his decision was based on incorrect facts. As such, the appeal judge set aside the judgment.

How should the matter now be dealt with?

The Respondents sought to adduce fresh evidence at the hearing of the appeal, deposing to requests made by the law firm to Mr and Mrs Thomson on 11 July 2013 to enter into client agreements and their response to that request. The law firm opposed this course of action on the basis that the evidence on appeal should be confined to that which was before the Magistrate, unless the Respondent demonstrated that there were special grounds to receive further evidence.

The appeal judge was of the view that the opposition was misconceived; having identified that both Magistrates erred in failing to deal with the issue of whether Mr and Mrs Thomson were liable for the costs - if directions for the trial of the issue had been given at either hearing, then the appeal judge was of the view that the affidavits would have been adduced.

On appeal, the court has all the powers and duties of the court that made the decisions appealed from: r 755(1)(a) and r 785 of the UCPR. The appeal judge stated that it was an appropriate exercise of the court’s powers to permit the further evidence to be adduced so that the issue could be decided without the matter having to be remitted to the Magistrates Court, with the associated time and costs only for the evidence to be adduced. As such, leave was granted for the affidavits of Mr Byrnes and Mr MacGillivray and the affidavit of Mrs Thomson sworn 1 September 2014 to be read on the appeal.

The substituted costs agreement

There were discussions between the law firm and Mr and Mrs Thomson in April 2013 about the possibility of creating a new entity to replace and operate in lieu of Kadoe Pty Ltd. As a result the law firm wrote to Mr and Mrs Thomson on 11 July 2013, reissuing the client agreements and requesting they sign and return the documents and stating that if they did not return a signed copy of the letter, but continued to provide instructions, they would assume the terms were accepted.

The law firm submitted that the offers contained in those letters were accepted by Mr and Mrs Thomson by their subsequent conduct of providing information and instructions after 11 July 2013.

However, after a review of the material, the judge was of the view that the further instructions received from Mr and Mrs Thomson after 11 July 2013 did not clearly establish conduct from which acceptance of the offers should be inferred. His Honour thought that the actions were at least equally consistent with the firm continuing to act under their existing client agreements with Kadoe, and Mrs Thomson continuing to provide instructions on behalf of Kadoe under those agreements. As such, His Honour thought it was permissible to consider other conduct subsequent to the offers and the alleged acceptance, and whether the conduct was consistent or inconsistent with there being a concluded agreement.

Relevantly, on 16 August 2013, the law firm’s collection manager emailed Mrs Thomson setting out a proposal whereby the balance of the account be paid off at the rate of $1,000 per week for a period of three months, with a review to occur after that period. Under the proposal, security was to be given via caveat over the Thomson’s residential property. Mrs Thomson replied on 19 August, stating they had reservations about the caveat over their house. The collections manager responded stating that he needed to obtain some form of security over the large debt and suggested that Mrs and Mr Thomson personally guarantee the debt. Discussion then began between the parties and a deed poll for Kadoe and a Deed of Guarantee and Indemnity for Mr and Mrs Thomson were subsequently prepared.

In the judge’s view, the conduct of the firm in proffering the deed poll and the deed of guarantee and indemnity is inconsistent with there being a concluded client agreement between the firm and Mr and Mrs Thomson. He thought that it clearly demonstrated that the parties understood that there was a continuing retainer with Kadoe, and the object of the deed of guarantee and indemnity was to make Mr and Mrs Thomson principal debtors. All of the matters included in the deed poll and the deed of guarantee and indemnity were inconsistent with there being concluded client agreements with Mr and Mrs Thomson. In the appeal judges’ view, these matters clearly concluded there was no client agreement entered into with Mr and Mrs Thomson.

Clients even in the absence of costs agreements

The law firm submitted that it did not matter whether there were client agreements in existence because there was a solicitor-client relationship and costs were still recoverable under s 319 of the LPA, either under the applicable scale or according to the fair and reasonable value. However, the appeal judge noted that the course of conduct between the parties does not establish a relationship of solicitor and client having been formed between the law firm and Mr and Mrs Thomson personally; the parties continued to act on the clear basis that Kadoe remained the clients of the firm. As such, Mr and Mrs Thomson were not “clients” of the firm within the meaning of s 334 of the LPA and costs are not recoverable from them under s 319 of the LPA.

Conclusion

The appeal judge concluded that Mr and Mrs Thomson were not, and at no time were, personally liable for the legal costs payable to the law firm in respect of the Kadoe matters. As such the judgment entered on 22 August 2014 against Mr and Mrs Thomson must be set aside.

He ordered that the parties make submissions on what other orders ought to be made, other than setting aside the judgment, and regarding costs of the appeal.