FEDERAL COURT OF AUSTRALIA

Mango Boulevard Pty Ltd v Whitton [2019] FCA 490

ORDERS

THE COURT DECLARES THAT:

1.    Under the orders for costs made on 2 December 2015, the applicants are required to pay the second and third respondents only the fair and reasonable value of Mr Douglas QC’s legal services.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

RANGIAH J:

1    This is the latest, and hopefully final, instalment of a lengthy series of litigation between the parties.

2    In the principal proceeding (the Review Proceeding), the applicants sought judicial review of a decision of the second and third respondents’ trustee in bankruptcy and of a resolution passed by their creditors. I dismissed the proceeding and ordered that the applicants pay the bulk of the respondents’ costs.

3    The present application involves a dispute about the costs ordered against the applicants. The primary relief sought by the applicants is a declaration to the effect that the costs agreement of the second and third respondents’ senior counsel, Francis Douglas QC, is void and that he is not entitled to recover any amount for the legal services he provided in the Review Proceeding.

4    As the first respondent is not a party to the present application, it is convenient to refer to the second and third respondents as “the respondents”.

5    At the heart of the applicants’ application is the indemnity principle. In broad terms, the indemnity principle is that a party ordered to pay another party’s costs is obliged to pay only those costs which the other party is legally obliged to pay to his or her lawyers: Mainieri and Another v Cirillo (2014) 47 VR 127 at [43].

6    The applicants allege that Mr Douglas entered his costs agreement in contravention of s 324(1) of the Legal Profession Act 2004 (NSW)(repealed) (the LPA (NSW)), that the agreement is void, and that he is not entitled to recover his fees. They submit that, accordingly, the effect of the indemnity principle is that they are not required to pay the respondents any amount for Mr Douglas’ fees under the costs order.

7    The applicants allege, in the alternative, that Mr Douglas failed to comply with his obligation under s 324(4) of the LPA (NSW) to provide an estimate of his uplift fee, with the consequence that he is only entitled to recover, and they are only required to pay, the fair and reasonable value of his services.

8    The respondents argue that, upon a proper construction of the costs agreement and s 324(1) of the LPA (NSW), there was no contravention. They allege, in the alternative, that the LPA (NSW) does not apply to Mr Douglas’ costs agreement, and the Legal Profession Act 2007 (Qld) (the LPA (Qld)) applies instead.

Procedural history

9    The present application has come about in the following way.

10    The respondents were bankrupts. The applicants brought the Review Proceeding to obtain judicial review of a decision of the respondents’ trustee in bankruptcy to object to their discharge from bankruptcy, and a resolution of their creditors to replace the former trustees.

11    The Review Proceeding arose in the context of a broader dispute over the sale of shares in a company that owns a valuable parcel of land in an area called Mango Hill, to the north of Brisbane. That dispute has been the subject of extensive and protracted litigation in the Supreme Court of Queensland

12    On 2 November 2015, I dismissed the Review Proceeding: Mango Boulevard Pty Ltd v Whitton (2015) 242 FCR 331; [2015] FCA 1169. On 2 December 2015, I ordered that the applicants pay the bulk of the respondents’ costs of the proceeding: Mango Boulevard Pty Ltd v Whitton [2015] FCA 1352.

13    Rule 40.17 of the Federal Court Rules 2011 (Cth) provides that a party who wants to have costs taxed must file a bill of costs. On 18 November 2017, the respondents filed and served a bill of costs. The bill of costs included provision for fees charged by Mr Douglas under a fee note dated 17 July 2017.

14    The applicants filed their present application on 1 December 2017 in response to the bill of costs.

15    On 26 March 2018, I determined an interlocutory application brought by the applicants seeking orders requiring the respondents to file affidavits deposing as to the terms of costs agreements with their solicitors, counsel and any third party litigation funder. I ordered that the respondents file and serve affidavits annexing copies of documents that provide evidence of the terms of Mr Douglas’ costs agreement in the Review Proceeding: Mango Boulevard Pty Ltd v Whitton [2018] FCA 399.

16    The applicants’ application for declarations subsequently proceeded to trial. The parties relied upon several affidavits, and there was no cross-examination upon those affidavits. The respondents did not produce any affidavit from Mr Douglas, so the evidence concerning the circumstances in which he came to enter his costs agreement is quite limited.

The legislation

17    Mr Douglas is a New South Wales based practitioner. The applicants submit, based upon the terms of his costs agreement and an admission that he was in Sydney when he first received instructions, that the LPA (NSW) applied to his retainer. That allegation is in issue, but the bulk of the argument proceeded upon an assumption that the LPA (NSW) applied. It is convenient to commence by considering the relevant terms of that legislation.

18    The LPA (NSW) has now been repealed. The provisions that follow were those in force at the material times.

19    Section 319(1) of the LPA (NSW) provided, relevantly:

319    On what basis are legal costs recoverable?

(1)    Subject to the provisions of this Part, legal costs are recoverable:

(a)    in accordance with an applicable fixed costs provision, or

(b)    if paragraph (a) does not apply, under a costs agreement made in accordance with Division 5 or the corresponding provisions of a corresponding law, or

(c)    if neither paragraph (a) or (b) applies, according to the fair and reasonable value of the legal services provided.

20    This case is principally concerned with s 319(1)(b) and (c) of the LPA (NSW) and Division 5, particularly ss 324(1), 237(1) and 237(4). Division 5 consisted of ss 322–328. Section 322 provided, relevantly:

322    Making costs agreements

(1)    A costs agreement may be made:

…

(c)    between a law practice and another law practice that retained that law practice on behalf of a client,

...

  (2)    A costs agreement must be written or evidenced in writing.

(3)    A costs agreement may consist of a written offer in accordance with subsection (4) that is accepted in writing or by other conduct.

Note.    Acceptance by other conduct is not permitted for conditional costs agreements—see section 323 (3) (c) (i).

  (4)    The offer must clearly state:

(a)    that it is an offer to enter into a costs agreement, and

(b)    that the client may accept it in writing or by other conduct, and

(c)    the type of conduct that will constitute acceptance.

21    Section 302(1) defined “costs agreement” to mean “an agreement about the payment of legal costs”.

22    Section 323 provided, relevantly:

323    Conditional costs agreements

(1)    A costs agreement may provide that the payment of some or all of the legal costs is conditional on the successful outcome of the matter to which those costs relate.

(2)    A conditional costs agreement may relate to any matter, except a matter that involves criminal proceedings or proceedings under the Family Law Act 1975 of the Commonwealth.

(3)    A conditional costs agreement:

(a)    must set out the circumstances that constitute the successful outcome of the matter to which it relates, and

(b)    may provide for disbursements to be paid irrespective of the outcome of the matter, and

(c)    must be:

(i)    in writing, and

(ii)    in clear plain language, and

(iii)    signed by the client, and

(d)    must contain a statement that the client has been informed of the client’s right to seek independent legal advice before entering into the agreement, and

(e)    must contain a cooling-off period of not less than 5 clear business days during which the client, by written notice, may terminate the agreement.

(4)    Subsection (3) (c) (iii), (d) and (e) do not apply to a conditional costs agreement made under section 322 (1) (c) (Costs agreements between law practices).

23    Under s 302(1), the expression “conditional costs agreement” was defined to mean:

a costs agreement that provides that the payment of some or all of the legal costs is conditional on the successful outcome of the matter to which those costs relate, as referred to in section 323 (Conditional costs agreements), but does not include a costs agreement to the extent to which section 324 (Conditional costs agreement involving uplift fees) or section 325 (Contingency fees are prohibited) applies.

24    Section 324 provided:

324    Conditional costs agreements involving uplift fees

(1)    A law practice must not enter into a conditional costs agreement in relation to a claim for damages that provides for the payment of an uplift fee on the successful outcome of the claim to which the fee relates.

(2)    Except as provided by subsection (1), a conditional costs agreement may provide for the payment of an uplift fee.

(3)    The basis of calculation of the uplift fee must be separately identified in the agreement.

(4)    The agreement must contain an estimate of the uplift fee or, if that is not reasonably practicable:

(a)    a range of estimates of the uplift fee, and

(b)    an explanation of the major variables that will affect the calculation of the uplift fee.

(5)    If a conditional costs agreement relates to a litigious matter, the uplift fee must not exceed 25% of the legal costs (excluding disbursements) otherwise payable.

(6)    A law practice must not enter into a costs agreement in contravention of this section.

Maximum penalty: 100 penalty units.

(Underlining added.)

25    Section 326 provided:

326    Effect of costs agreement

Subject to this Division and Division 11, a costs agreement may be enforced in the same way as any other contract.

26    Reference should also be made to s 83(3), which provided:

(3)    Contracts

A barrister or solicitor may enter into a contract for the provision of services with a client or with another legal practitioner. The barrister or solicitor may accordingly sue and be sued in relation to the contract.

27    Section 327 provided, relevantly:

327    Certain costs agreements are void

(1)    A costs agreement that contravenes, or is entered into in contravention of, any provision of this Division is void.

(2)    Subject to this section and Division 11, legal costs under a void costs agreement are recoverable as set out in section 319 (1) (a) or (c) (On what basis are legal costs recoverable?).

…

(3A)    A law practice that has entered into a costs agreement in contravention of section 324 (2)–(5) (Conditional costs agreements involving uplift fees) is not entitled to recover the whole or any part of the uplift fee and must repay any amount received in respect of the uplift fee to the person from whom it was received.

(4)    A law practice that has entered into a costs agreement in contravention of section 324 (1)…is not entitled to recover any amount in respect of the provision of legal services in the matter to which the costs agreement related and must repay any amount received in respect of those services to the person from whom it was received.

…

(Underlining added.)

The costs agreements and the litigation

28    On 3 November 2009, Mr Douglas provided a letter containing an offer to enter into a costs agreement to Quintin Rozario of Delta Law Pty Ltd (Delta Law). Delta Law is a firm of solicitors based in Queensland. They were the solicitors for the respondents in the Review Proceeding, and have also represented the respondents throughout the myriad of related proceedings in the Supreme Court of Queensland.

29    Mr Douglas’ letter stated, relevantly:

RE: MANGO BOULEVARD ATS SPENCER ETC

The purpose of this letter is to formally disclose to you the basis on which I will charge for work done and to be done by me in this matter which has been the subject of informal discussions prior to this time…

This letter is also an offer to enter into a costs agreement pursuant to s. 322(1)(c) of the Legal Profession Act 2004 (NSW) and its Queensland equivalent on the terms set out below. The offer may be accepted by writing or by conduct. The conduct that will constitute acceptance of this offer is you instructing me.

Work lnvolved

I will advise and appear in these proceedings as instructed by you.

Basis for calculating Costs

My costs will be determined in accordance with the following rates.

…

Contingency arrangements

As discussed with you previously, l have undertaken this work on a contingency basis or as it is colloquially expressed, “no win no pay”. I emphasis that my understanding of this arrangement is that I will be paid so much of my fees as are successful in these proceedings. I will also be paid the whole of my fees as rendered from any monies which become available to those defendant parties either from the proceeds of this litigation, or other litigation or resumption proceedings, which are now in train which will enable the defendants to pay any bills.

I have also exercised the right to charge an uplift of 25% under the Legal Profession Act 2004 to the daily rate expressed above.

…

(Errors in the original.)

30    On 25 January 2017, Mr Douglas wrote to Mr Rozario of Delta Law in the following terms:

RE: MANGO BOULEVARD ats SPENCER AND ORS

I refer to my Fee Disclosure letter of 3 November 2009.

Given the length of time since its commencement I hereby provide a further explanatory agreement with retrospective effect.

Firstly, the original letter stipulated that it was an offer to enter into a costs agreement pursuant to s.322(1)(c) of the Legal Profession Act 2004 (NSW) and its Queensland equivalent on the terms set out in that letter. Having further considered the legislation and bearing in mind that the legal services have been and continue to be provided in relation to legal proceedings which are taking place in Queensland, I confirm that it is the Queensland Act which is applicable, not the NSW Act.

Secondly, with respect to compliance with s.324(1)-(3) of the Legal Profession Act 2007 (Qld) (“the Qld LPA”) which requires a range of estimates of the uplift fee and an explanation of the major variables that will affect the calculation of the uplift fee. Since it is not reasonably practical to make such an estimate in these circumstances I have exercised the right to charge an uplift of 25% to my daily rate and specified the effect that that would have on my daily rate as previously set out.

…

At the time when I sent you my original letter, the relevant proceedings between the parties, were proceedings 1999/2006. Those were proceedings in which, relevantly, Mio Art, Spencer and Perovich were Defendants and my only prospect of being paid from that litigation was a successful recovery on taxation from the Mango Boulevard parties.

Since that letter was written, a number of other proceedings between the parties have been commenced, as you are aware, including proceedings no.1714/11 where a claim for equitable damages is raised which has not at this stage been progressed or determined.

Up until now, I have been content with your consent and the consent of the client to treat my letter of 3 November 2009 as being applicable to all proceedings between the parties until they are concluded without providing you with separate disclosures in relation to each proceeding between the parties. However, it had not been my intention in so conducting myself that by implication, in relation to proceedings no.1714/11, any claim for equitable damages in those proceedings would be the subject of a claim for an uplift fee upon the successful outcome of that claim. For the avoidance of any doubt, I wish to make it clear that that has never been my intention, and that the Fee Agreement of 2009 is not intended to and has never been intended to constitute a conditional costs agreement in relation to the claim for equitable damages in matter no.1714/11, nor do I intend to claim, nor do I have any right to claim, payment of any uplift fee on the successful outcome of the claim for equitable damages in those proceedings.

With respect to “contingency arrangements” I wish to make it clear that in proceedings where your clients are defendant parties, success would be the successful recovery of moneys from the Mango Boulevard parties whether by way of costs or otherwise.

I trust that this reflects what your understanding of the Agreement has been from its inception. Could you please confirm that this is in fact your understanding and the understanding of your clients and has been your understanding since the Agreement was entered into in 2009 by signing this agreement below and returning it to me.

This agreement will continue to govern our relationship in the future.

(Errors in the original, underlining added.)

31    On 11 April 2018, Mr Douglas entered a Deed of Agreement with Delta Law. The deed provides, relevantly:

RECITALS

A.    Since November 2009 Senior Counsel has been retained by Delta Law to provide legal services to Delta Law for its Clients in proceedings BS1999/2006

B.    On 3 November 2009 Senior Counsel issued a certain Fee Disclosure Letter and Costs Agreement to Delta Law concerning BS1999/2006 and any other litigation that may involve the Clients in relation to their ongoing dispute with Mango Boulevard Pty Ltd and BMD Holdings

…

H.    Accordingly the Clients have instructed Delta Law to prepare and Delta Law has determined it should prepare this Deed of Agreement to replace the Fee Disclosure Letter, further Fee Disclosure Letter and Costs Agreement (to the extent it is and can be effective, and to the extent that they are non-compliant with any law of the Commonwealth or a state or territory and only to that extent) and to record the costs agreement which has been in place since November 2009 between Senior Counsel and Delta Law, and which will satisfy any relevant requirements of the LPA QLD, and which will be operative both retrospectively and prospectively

I.    This Deed is intended as the retainer between Delta Law and Senior Counsel

J.    This Deed is to contain Senior Counsel’s disclosure under s 309(2) of the LPA QLD

K.    This is an agreement to enter into the costs agreement pursuant to s 322(1)(c) of the LPA QLD

OPERATIVE PROVISIONS

1.    Definitions

Clients means Mio Art Pty Ltd ACN 121 010 875, Richard William Spencer, Silvana Perovich and their associated trusts and parties involved in and about the Mango Hill litigation and any one or more of those entities.

LPA QLD means the Legal Profession Act 2007 (Qld).

Mango Hill litigation means proceedings in the Supreme Court of Queensland and the Federal Court of Australia commencing with proceeding BS1999/2006, and including but not limited to VID1183/10; CA11807/2012; CA10321/2013; CA3670/2014; BS4352/2012; BS11109/2012; BS1714/2011; CA11808/2012; CA6907/2015; and the Commercial Arbitration before Mr Callinan AC, and all relevant and/or associated earlier and subsequent proceedings including proceedings.

TERMS OF THE RETAINER AND COSTS AGREEMENT

2.    In consideration of Senior Counsel continuing to act and be retained in the Mango Hill Litigation, the parties agree that Senior Counsel’s terms, both prior to and after this deed are as follows:

(a)    Senior Counsel’s fees are payable by Delta Law, in full, within a reasonable time of a successful outcome of each and every claim in which senior counsel is briefed by Delta Law on behalf of a client or clients, such that any moneys recovered by any Clients from each and every claim in which that client is involved are to be paid to Senior Counsel in respect of each and every claim in which that client is involved (“a successful outcome”).

…

(d)    In the event of an order for costs in favour of the Clients upon any interlocutory application or final adjudication but without any order for damages or other relief, so much of the costs ordered and recovered as are fairly attributable to Senior Counsel’s fees for appearance thereon will be payable forthwith upon receipt. The balance will be paid upon successful outcome of the claim.

…

THIS DEED IS TO OPERATE RETROSPECTIVELY AND REPLACES PREVIOUS FEE DISCLOSURE AND COSTS AGREEMENT

8.    By this deed Delta Law enters into a retrospective and prospective costs agreement with Senior Counsel in respect of the whole of the Mango Hill litigation. This deed pertains to and covers all work carried out by Senior Counsel pertaining to the Mango Hill litigation. The intention and effect of this deed is to superseded any previous fee disclosure and costs agreement between Delta Law and Senior Counsel concerning the Mango Hill litigation, to the extent that is possible by law, and where there is an inconsistency between this deed and any previous fee disclosure and costs agreement, the terms and provisions of this deed shall prevail.

9.    LPA QLD

The costs agreement recorded by this deed shall be governed in all respects by the LPA QLD, and should the provisions of any previous fee disclosure and costs agreement between Delta Law and Senior Counsel concerning the Mango Hill litigation set out to or purport to be governed by the legislation or rules of any other Australian jurisdiction, the provisions of the LPA QLD will be applied in governing the costs agreement between Delta Law and Senior Counsel for the Mango Hill litigation.

10.    Previous Fee Disclosures and Costs Agreements

Delta Law acknowledges that Senior Counsel has made previous disclosures costs and agreements by virtue of his having disclosed, delivered and explained his Fee Disclosure letter of 3 November 2009 and his letter to Delta Law of 25 January 2017, and the parties agree and declare that those previous fee disclosures and costs agreements shall inure, mutatis mutandis, to accommodate the singular application of the LPA QLD and the retrospective and prospective application of this deed to the whole of Senior counsel’s retainer by Delta Law for the Mango Hill litigation, to the extent that they have not been displaced by the operation of this deed.

11.    Retrospective Application of this deed

The parties intend, and expressly agree and declare, that this deed will apply retrospectively and prospectively to the whole of Senior counsel’s retainer by Delta Law for the Mango Hill litigation from inception to the date of this deed and going forward while the Mango Hill litigation inures and continues.

(Underlining added.)

The issues

32    The applicants allege that Mr Douglas entered a single costs agreement that covered the whole of the litigation (the Mango Hill litigation) between the applicants, the respondents and their related companies, including the Review Proceeding. They allege that the costs agreement was entered into in contravention of s 324(1) of the LPA (NSW). They submit that, under s 327(1), the costs agreement is void and, under s 327(4), Mr Douglas is not entitled to recover any amount in respect of the provision of legal services in the Review Proceeding.

33    In order for the applicants to demonstrate that s 324(1) of the LPA (NSW) was contravened, they must establish that:

(1)    Mr Douglas was a law practice;

(2)    he entered into a conditional costs agreement with another law practice;

(3)    in relation to a claim for damages;

(4)    that provides for the payment of an uplift fee on the successful outcome of the claim to which the fee relates.

34    If those matters can be demonstrated, other issues of fact and construction arise in relation to whether ss 327(1) and (4) of the LPA (NSW) prevent Mr Douglas from recovering his legal costs under his costs agreement for the Review Proceeding.

35    Further, and fundamentally, there is an issue as to whether it is the LPA (NSW) or the LPA (Qld) that applies in this case. The respondents contend for the latter, since the LPA (Qld) contains no provision equivalent to s 327(4) of the LPA (NSW). Although this is the most fundamental issue, it was dealt with last by the parties, and it is convenient for these reasons to proceed in the same way.

36    It is not in dispute that Mr Douglas was a “law practice”. Neither is it seriously contested that Mr Douglas’ letter dated 3 November 2009 was an offer to enter a conditional costs agreement that provided for the payment of an uplift fee on the successful outcome of the claims to which the costs agreement or agreements applied.

37    The following issues are in dispute:

(1)    whether Mr Douglas entered a costs agreement “in relation to a claim for damages”;

(2)    whether Mr Douglas entered a single costs agreement for the whole of the Mango Hill litigation, or a separate costs agreement for each proceeding, including for the Review Proceeding;

(3)    whether the phrase “in the matter to which the costs agreement related” in s 327(4) extends to the Review Proceeding, which was not a claim for damages;

(4)    whether Mr Douglas’ costs agreement is void under s 327(1) because it does not contain an estimate of his uplift fee in contravention of s 324(4), and the consequences of such a contravention;

(5)    whether the LPA (NSW) applies to Mr Douglas’ costs agreement, or whether the LPA (Qld) applies instead.

38    I will consider each of these issues in turn, after first discussing a related matter of some significance.

Mr Douglas’ letter of 3 November 2009 was not a costs agreement

39    It is necessary to begin by addressing a matter both of terminology and substance. In their submissions, the parties tended to describe the letter of 3 November 2009 as “the costs agreement”. That is not accurate.

40    The letter of 3 November 2009 states that its purpose is to “formally disclose to you the basis on which I will charge for work done and to be done by me in this matter”. The letter states that it is, “an offer to enter into a costs agreement…on the terms set out below”. A letter merely offering to enter a costs agreement is not itself a costs agreement. That may be seen from the terms of the statutory provisions.

41    Section 322(1)(c) of the LPA (NSW) provided, “A costs agreement may be made…between a law practice and another law practice”. Section 302(1) defined “costs agreement” to mean “an agreement about the payment of legal costs”.

42    Section 322(2) provided, “A costs agreement must be written or evidenced in writing”. Section 322(3) stated, “A costs agreement may consist of a written offer in accordance with subsection (4) that is accepted in writing or by other conduct”. Section 322(4) required that the offer clearly state that it is an offer to enter a costs agreement, that it may be accepted in writing or by other conduct and the type of conduct that would constitute acceptance.

43    The word “agreement” seems to be used in two senses in these provisions. An “agreement” ordinarily refers to a meeting of minds, but the word is sometimes also used to refer to one or more documents that record the terms of the accord that is reached (for example, “a written agreement”). The references in s 322(2) to a costs agreement being written and in s 322(3) and (4) to a written offer being accepted in writing are to the latter use. For example, if a written offer is accepted in writing, the documents are together a written agreement. The reference in s 322(3) to a costs agreement being evidenced in writing is to a written offer being accepted by the conduct described in s 322(3) and (4).

44    The letter of 3 November 2009 contained an offer by Mr Douglas to Delta Law to enter a conditional costs agreement and specified the conduct that would constitute acceptance of the offer. There is no evidence of acceptance of the offer in writing, but there is evidence of acceptance by conduct (as I will discuss later). The letter provides evidence both that a costs agreement was entered and the terms of that agreement, when taken with relevant conduct. However, the letter of offer is not itself a costs agreement.

45    The recitals to the Deed of Agreement of 11 April 2018 included a statement that, “On 3 November 2009 Senior Counsel issued a certain Fee Disclosure Letter and Costs Agreement to Delta Law concerning Proceeding BS1999/2006...”. While that statement suggests that the letter of 3 November 2009 was a costs agreement, on an objective construction of the letter, that cannot be so. The letter was an offer to enter into an agreement. There could only be an agreement when the offer was accepted.

46    As an aside, it may be observed that s 323(3)(c)(i) of the LPA (NSW) required that a conditional costs agreement must be “in writing”. That provision was contravened in the present case, where the offer was accepted by conduct and the cost agreement or agreements were merely “evidenced in writing”. The consequence is that, under s 327(1), the costs agreement or agreements were void, and under s 327(2), legal costs are recoverable on the basis set out in s 319(1)(a) or (c). In the absence of submissions upon the issue, I will proceed on the basis that an offer to enter a conditional costs agreement that is accepted by conduct is nevertheless a “costs agreement” for the purposes of s 327(4).

47    For present purposes, it is enough to note that Mr Douglas’ letter of 3 November 2009 was not a costs agreement. It was an offer to enter a costs agreement. That is a distinction that assumes some significance, as will become apparent. It is certainly true that the same letter of offer was used by Mr Douglas in respect of a number of proceedings in which he was briefed, but it does not necessarily follow that there was only one costs agreement.

Did Mr Douglas enter any costs agreement in relation to a claim for damages?

48    It is necessary to consider whether Mr Douglas entered any costs agreement “in relation to a claim for damages” within s 324(1) of the LPA (NSW).

49    The heading of the letter of offer dated 3 November 2009 and its timing indicate that the “matter” and “proceedings” to which the subsequent costs agreement applied were proceedings commenced in the Supreme Court of Queensland on 9 March 2006 by the first applicant against the respondents and Kinsella Heights Developments Pty Ltd (Proceeding BS1999/2006). On 29 March 2007, the respondents filed an amended defence and counter-claim, claiming damages against the first applicant for alleged breaches of fiduciary, contractual and equitable duties.

50    On 3 April 2007, the Supreme Court made a guillotine order such that, upon the solicitors for the first applicant filing an affidavit deposing to failure of the respondents to comply with orders for discovery, there would be judgment for the first applicant against the respondents on the counter-claim. When the respondents failed to comply with the orders for discovery, an affidavit was duly filed, and the order took effect.

51    On 2 October 2009, the respondents filed an application to set aside the guillotine order. Mr Douglas prepared submissions and appeared on the first return of that application on 30 October 2009.

52    Four days later, Mr Douglas provided his letter of offer dated 3 November 2009. As I have said, there is no evidence that his offer was accepted in writing. I find that at some time after that date, Delta Law accepted Mr Douglas’ offer by its conduct in instructing him, or continuing to instruct him, to act in the Proceeding BS1999/2006. For example, he appeared at the hearing of the application to set aside the guillotine order and in the subsequent appeal. It is unnecessary to decide precisely when the offer was accepted, but when it was accepted, Mr Douglas entered into a costs agreement with Delta Law.

53    On 3 December 2009, McMurdo J delivered judgment setting aside the guillotine order. The effect of the order was that the counter-claim for damages was reinstated. That order was later set aside by the Queensland Court of Appeal.

54    The applicants observe that the first instructions that Mr Douglas received were to appear in an application to reinstate the respondents’ ability to pursue their damages claim in Proceeding BS1999/2006, and he succeeded in having it reinstated. They submit that, accordingly, the costs agreement was “in relation to a claim for damages”.

55    However, the respondents submit that there was no “claim for damages”, despite the reinstatement of the counter-claim. They point out that when Mr Douglas was first briefed, there was no extant counter-claim, as it had been dismissed. They submit that the purpose of setting aside the guillotine order was to allow the respondents to pursue a particular line of defence, not to allow them to pursue a claim for damages. The respondents submit that, in these circumstances, Proceeding BS1999/2006 was not “a claim for damages”, and his costs agreement was not “in relation to” a claim for damages.

56    I accept the respondents’ submission. The work described in Mr Douglas’ letter of 3 November 2009 was to “advise and appear” in Proceeding BS1999/2006. While Mr Douglas was briefed upon an application to set aside the guillotine order, the respondents’ purpose in having those orders aside was to allow a particular defence to be pursued, not to pursue a claim for damages. That was indicated in the appeal, where Fraser JA commented that “The respondents no longer seek to pursue a counter-claim”. Further, McMurdo J set aside the guillotine order so that any potential claim by the respondents for damages would not be subject to an issue estoppel. His Honour indicated that setting aside the order was to avoid “the potential injustice that Mango Boulevard could obtain relief to which it may not be entitled on the merits” and “an unfair windfall for the plaintiff”. There is no evidence that the counter-claim was subsequently pursued.

57    It is true that when the counter-claim was reinstated it was, at least in form, “a claim for damages”. However, in my opinion, s 324(1) of the LPA (NSW) looks to the substance of the claim, not merely its form. Section 324(1) requires a connection between the conditional costs agreement and a claim for damages. Mr Douglas’ letter described the work he was to do as “advise and appear in these proceedings as instructed by you”. The respondents did not intend to pursue their counter-claim for damages, so Mr Douglas could not have received instructions to pursue that claim. Therefore, the conditional costs agreement was not “in relation to” a claim for damages. In my opinion, Mr Douglas did not contravene s 324(1) by entering the costs agreement in relation to BS1999/2006.

58    However, the applicants submit that Mr Douglas entered into a costs agreement in relation to another proceeding in the Mango Hill litigation that was undoubtedly a claim for damages. That was a proceeding brought in the Supreme Court of Queensland by Mio Art Pty Ltd (as trustee of the Spencer Family Trust) against both the present applicants and the present respondents, who were bankrupts by that stage (Proceeding BS1714/2011). Delta Law were the solicitors for the plaintiff, and the pleadings were settled by Mr Douglas. In that proceeding, the plaintiff sought damages against the present applicants.

59    Mr Douglas’ letter of 3 November 2009, on its face, applied only to Proceeding BS1999/2006. However, in his letter of 25 January 2017 to Delta Law, Mr Douglas said that he had, “been content…to treat my letter of 3 November 2009 as being applicable to all proceedings between the parties until they are concluded”. He must be taken to have been referring to all proceedings in which he was retained to act for, at least, Mio Art Pty Ltd or the present respondents against the present applicants. Such litigation included Proceeding BS1714/2011. That was, as Mr Douglas acknowledged, a claim for damages.

60    In his letter of 25 January 2017, Mr Douglas said that it had not been his intention to claim any uplift fee upon the successful outcome of a claim for damages in Proceeding BS1714/2011. However, that was, as the applicants’ counsel put it, an attempt to “rewrite history”. The terms of any costs agreement must be determined on the basis of an objective construction of Mr Douglas’ letter of 3 November 2009, not by reference to his assertion as to what he intended it to mean: cf Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [35]-[36], [40]; Bobby v Damiliuk [2012] VSC 575 at [32] (dealing with a costs agreement). In any event, that recent assertion of intention is quite inconsistent with the 3 November 2009 letter, which says plainly, “I have also exercised my right to charge an uplift of 25% under the Legal Profession Act 2004”. That uplift fee became a term of the costs agreement in relation to Proceeding BS1714/2011.

61    It may be noted again that the recitals to the Deed of Agreement of 11 April 2018 included a statement that, “On 3 November 2009 Senior Counsel issued a certain Fee Disclosure Letter and Costs Agreement to Delta Law concerning Proceeding BS1999/2006 and any other litigation that may involve the Clients in relation to their ongoing dispute with Mango Boulevard Pty Ltd and BMD Holdings”. The Deed went on to specifically include Proceeding BS1714/2011 within that description of the litigation.

62    Having regard to this evidence, I accept that Mr Douglas relied upon his letter of offer of 3 November 2009 in relation to proceedings BS1714/2011. I find that Delta Law accepted his offer by its conduct in instructing him in those proceedings. Therefore, I find that Mr Douglas entered a costs agreement “in relation to a claim for damages that provides for the payment of an uplift fee on the successful outcome of the claim to which the fee relates” within s 324(1) of the LPA (NSW).

63    Accordingly, Mr Douglas may have contravened s 324(1) of the LPA (NSW) by entering his costs agreement in relation to BS1714/2011. I will not make a finding as to whether Mr Douglas in fact contravened that provision because, firstly, it is unnecessary for me to do so in order to decide the case, secondly, a finding that Mr Douglas committed an offence against s 324(6) should, if possible, be avoided in circumstances where he is not represented and, thirdly, it is not apparent that the LPA (NSW) applies to his costs agreement.

Did Mr Douglas enter a single costs agreement or several separate costs agreements?

64    The applicants submit that Mr Douglas entered a single costs agreement covering the whole of the Mango Hill litigation, and that costs agreement is void, with the consequence that Mr Douglas cannot recover his fees in any of those proceedings. However, the respondents contend that there was a separate costs agreement for each proceeding.

65    At this stage, it is necessary to consider the connection, and distinction, between a costs agreement and a retainer agreement.

66    Before the commencement of the Legal Profession Act passed by each State and Territory, the law was that, “a barrister may not and does not enter into any contract which enables him to sue for his fees”: Rondel v Worsley [1969] 1 AC 191 at 236. Following the commencement of those Acts, as ss 83(3) and 326 of the LPA (NSW) made plain, a barrister was able to enter into a contract with a solicitor for the provision of legal services (in other words, a retainer) and a contract for the payment of his or her fees.

67    The impact of the legislation was explained by Brereton J in Keesing v Adams [2010] NSWSC 336 at [13]–[35], and that analysis was approved in Branson v Tucker [2012] NSWSCA 310, where Campbell JA (with whom Beazley JA agreed) said at [69]:

Brereton J also correctly observed, at [25], that an agreement as to the costs of the provision of legal services “may form part of, but is a distinct concept from, a contract for the provision of legal services.” He also observed, correctly, at [30], that the mere entry of a costs agreement does not create a liability to pay costs where otherwise there is no liability - such a contractual liability to pay for legal services can only arise under a contract for the provision of legal services. However, if there were not a contract for the provision of legal services, “it is difficult to see any utility in entering into a costs agreement” - there is no point in having an agreement about the price of an item, if there is not also a legal obligation to pay that price.

68    Quick on Costs at [20.280] states that:

A costs agreement is to be distinguished from a “retainer”, as a lawyer can be retained by a client without the parties entering into a costs agreement. If a lawyer is retained without a costs agreement, he or she will only be entitled to charge costs in accordance with the scale of costs, or in the absence of an applicable scale, on a quantum meruit basis. The absence of a costs agreement does not void a retainer unless statute requires that there be a costs agreement.

69    In Keesing v Adams, Brereton J also explained at [22], that upon the enactment of the Legal Profession Acts:

…a barrister could continue if he or she wished, generally or in any particular case, to render legal services on the conventional non-contractual basis, or could choose to render legal services generally or in a particular case on a contractual basis by entering into a contract for provision of legal services with a client.

70    Following the commencement of the LPA (NSW), a barrister could enter, not only a contract with a solicitor for the provision of legal services, but a contract for the payment of his or her costs. Subject to Part 5, the barrister was entitled under s 319(1) to recover such costs under the costs agreement and, under s 326, to enforce a costs agreement in the same way as any other contract.

71    Section 322(1) of the LPA (NSW) provided that “a costs agreement may be made…between a law practice and another law practice that retained that law practice on behalf of a client”. That provision distinguished between a costs agreement and a retainer. Applied to the present circumstances, the provision indicates a distinction between a contract for the provision of legal services by a barrister to a solicitor (a retainer agreement), and a costs agreement for the payment of the barrister’s costs by the solicitor.

72    While there is a distinction between a contract for the provision of legal services (a retainer agreement) and a costs agreement, they are closely connected. As Brereton J explained in Keesing v Adams, a costs agreement “may form part of” a contract for the provision of legal services. The connection between a costs agreement and the retainer is demonstrated by s 322(1) of the LPA (NSW). That connection is that the costs agreement is an agreement for payment for the work done by the barrister under a retainer. Seen in this context, ss 319(1)(b) and 322(1) envisaged that there would usually be a single costs agreement for a single retainer. That is not to say that a single costs agreement was incapable of covering the work done under several different retainers.

73    In my opinion, any consideration of whether Mr Douglas entered a costs agreement in contravention of s 324(1) of the LPA (NSW) must begin with an understanding of what legal services Mr Douglas was retained, or contracted, to provide.

74    In Legal Services Commissioner v Baker (No 2) [2006] 2 Qd R 249, McPherson JA said at [2]:

[A] retainer is simply a contract for professional services in return for remuneration. It is therefore governed by the ordinary principles of the law of contract subject to any special terms agreed by the parties or imposed by statute or otherwise by law.

75    In Stringer v Flehr [2003] QSC 370, Philippides J held at [72]:

It is clear that in addition to a retainer arising by express agreement, a retainer may be inferred from the acts and conduct of the parties as well as or in the absence of their express words… [T]he question in the latter class of case is whether the conduct of the parties viewed in the light of the surrounding circumstances shows a tacit understanding or agreement. The conduct of the parties must be capable of proving all the essential elements of an express contract. A retainer may thus be presumed in circumstances where it is proved that the solicitor and client relationship in fact existed. However, in such cases the de facto relationship must be a necessary and clear inference from the proved facts before a retainer will be presumed.

76    In my opinion, the same principles must apply when determining whether a barrister has entered a contract to provide legal services to a solicitor.

77    In his letter of 25 January 2017 to Delta Law, Mr Douglas said, “up until now, I have been content with your consent and the consent of the client to treat my letter of 3 November 2009 as being applicable to all proceedings between the parties until they are concluded without providing you with separate disclosures in relation to each proceeding between the parties”. The Deed of Agreement of 11 April 2018 stated that Mr Douglas’ letter of 3 November 2009 concerned, “any other litigation that may involve the Client in relation to their ongoing dispute with Mango Boulevard Pty Ltd and BMD Holdings.” The letter and the Deed deal only with costs, and do not provide evidence of a single, unitary retainer for the provision of legal services for all such litigation. They cannot be construed as evidencing an agreement by Mr Douglas to act in all such litigation. Neither is there any other evidence that Mr Douglas agreed to act in all proceedings that might arise as part of the Mango Hill litigation. In order for Mr Douglas to be retained in relation to a particular proceeding, he would have to be instructed (or briefed), and would have to accept the instructions. The effect of the 25 January 2017 letter and the Deed is to demonstrate that where Mr Douglas agreed to provide legal services in relation to a proceeding, that agreement was subject to acceptance of his terms as to costs set out in his 3 November 2009 letter.

78    Mr Douglas accepted a brief from Delta Law to appear in Proceeding BS1999/2006, and he did appear. His retainer is implied by his appearance upon the instructions of Delta Law in that proceeding at first instance and on appeal.

79    Mr Douglas accepted a brief from Delta Law to, at least, settle pleadings in Proceeding BS1714/2011, and did such work. Proceeding BS1714/2011 was a separate and distinct proceeding. Accordingly, I infer that there was separate brief and a separate retainer for the provision of legal services in that proceeding.

80    Mr Douglas was instructed by Delta Law to appear in the Review Proceeding. That can be inferred from the fact that he did appear in that proceeding. It was a separate and distinct proceeding, and in a different Court. A tacit agreement that Mr Douglas was to provide legal services is demonstrated by the relationship of barrister and instructing solicitor in the Review Proceeding. A further and separate retainer is implied.

81    In summary, Mr Douglas was engaged to provide legal services under at least three separate retainers in the Mango Hill litigation: in Proceeding BS1999/2006; Proceeding BS1714/2011; and the Review Proceeding.

82    Mr Douglas stated in his letter of 27 January 2017 that he and Delta Law had treated his letter of 3 November 2009 “as being applicable to all proceedings between the parties”. The 3 November 2009 letter was an offer to enter into a costs agreement. In my opinion, Mr Douglas’ statement indicates that he had offered to enter into a costs agreement under the terms indicated in that letter for each retainer in the Mango Hill litigation. The 3 November 2009 letter said that offer was capable of being accepted by specified conduct, namely “you instructing me”. Mr Douglas was instructed and retained for each proceeding. At the same time, that he entered a costs agreement for the work to be done under each retainer is to be inferred from the fact that he was instructed by Delta Law to perform work in relation to each proceeding.

83    The terms of the offer to enter the costs agreement were expressed in a single document. However, the work to be done for which Mr Douglas was to be paid was described as, “advise and appear in these proceedings as instructed by you”. The expression “these proceedings” referred to each of the particular proceedings in relation to which Mr Douglas was retained. The advice Mr Douglas was instructed to provide and the appearances he was instructed to make were obviously different under each retainer because the proceedings were different. While the rates Mr Douglas charged and basis of his charges were the same for each retainer, Mr Douglas was to be paid for quite distinct work, under distinct instructions, under distinct retainers, in distinct proceedings. Therefore, the agreements about payment of his legal costs were distinct.

84    This analysis leads to a conclusion that there was not one single, unitary costs agreement that Mr Douglas entered in respect of his retainers in each separate proceeding. Instead, there was a separate costs agreement for each separate retainer.

85    As I have said, ss 319(1) and 322(1) of the LPA (NSW) envisage that there will usually be a single costs agreement for a single retainer. I accept, however, there may be a single costs agreement that applies to more than one retainer for a barrister to provide legal services: cf Tabtill No 2 Pty Ltd v DLA Phillips Fox [2012] QSC 115 at [70]. Whether that is so would depend upon the terms of the costs agreement. For example, if there were several proceedings pending or anticipated and a barrister was retained, or was to be retained, in each, the barrister and solicitor might specifically agree that the same costs agreement was to apply to each retainer. However, there is no evidence of such an agreement in the present case, where there was a standard offer by Mr Douglas as to his costs for each proceeding in which he was retained, but the offer had to be accepted by separate conduct, namely instructing Mr Douglas under each retainer as it arose.

86    The applicants submit that there is no evidence before the Court that Mr Douglas and Delta Law entered into a new costs agreement engaging Mr Douglas on the same terms as and when any future proceedings arose. There are two difficulties with this submission. First, as the party making the assertion, the onus lies on the applicants to prove that there was a single costs agreement covering all the proceedings in the Mango Hill litigation. Second, there is evidence to the contrary, namely the terms of the letter of 3 November 2009 indicating that the “conduct that will constitute acceptance of this offer is you instructing me.” This indicates that instructions were to be provided under each separate retainer in order to accept the offer to enter each costs agreement.

87    The consequence is that, even if Mr Douglas contravened s 324(1) of the LPA (NSW) by entering into a conditional costs agreement that provided for an uplift fee on the successful outcome of the claim for damages in Proceeding BS1714/2011, he entered into a separate costs agreement in relation to the Review Proceeding. It is apparent that Mr Douglas did not contravene s 324(1) by entering into his costs agreement in relation to the Review Proceeding because that proceeding was not a claim for damages.

Whether Mr Douglas’ costs agreement is void under s 327(1) of the LPA (NSW) and whether s 327(4) prevents any fees being recovered

88    In case I am wrong in my conclusion that Mr Douglas entered separate costs agreements in Proceeding BS1714/2011 and the Review Proceeding, I propose to consider the effect of s 327(1) and (4) of the LPA (NSW), upon an assumption that Mr Douglas entered only a single costs agreement that covered both.

89    The applicants submit that if Mr Douglas had the same costs agreement for work done under his retainer in BS1714/2011 and in the Review Proceeding, the effect of s 327(1) of the LPA (NSW) was that the costs agreement is void. The applicants also rely on s 327(4) which provided, relevantly, that “a law practice that has entered into a costs agreement in contravention of s 324(1)…is not entitled to recover any amount in respect of the provision of legal services in the matter to which the costs agreement related”.

90    In Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd (No 4) [2011] NSWSC 720, Slattery J held at [24] that where s 327(4) of the LPA (NSW) applied, it excluded the possibility of recovering fees on a quantum meruit or any other restitutionary basis. That may be accepted, but the initial question must be whether that provision has any application in the circumstances of this case.

91    The word “matter” appeared in s 327(4), but was not defined in the LPA (NSW). In Cross v Certain Lloyds Underwriters [2011] NSWCA 136, Basten JA held at [19], that “matter” in the LPA (NSW) may be understood to refer to “the scope of any advice or assistance in respect of which a client seeks legal services from a law practice” (the judgment was overturned on appeal, but the High Court declined to address this issue: see Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378 at [20]–[22], [53]). Adapted to a case where one legal practice (a solicitor) retains another (a barrister), a “matter” refers to the scope of legal advice and assistance the solicitor sought from the barrister.

92    Section 327(4) of the LPA (NSW) is obviously linked to s 324(1). In my opinion, the phrase in s 327(4), “the matter to which the costs agreement related” refers to legal assistance and advice sought in relation to the “claim for damages” described in s 324(1). In other words, if a law practice (a barrister) entered into a conditional costs agreement in relation to a claim for damages that provided for the payment of an uplift fee on the successful outcome, the barrister was not entitled to recover any amount in respect of the provision of legal services in the claim for damages.

93    The applicants would construe “matter” as “matters” in s 327(4) of the LPA (NSW). That proposition finds support in s 8(b) of the Acts Interpretation Act 1987 (NSW), which provides that in any Act, “a reference to a word in the singular form includes a reference to the word in the plural form”. However, under s 5(2), that provision is subject to any “contrary intention” that may appear in an Act. Under the assumption I have made, the same conditional costs agreement providing for an uplift fee upon a successful outcome covers two separate “matters”, one of which is in relation to a claim for damages. That form of costs agreement was prohibited in respect of the claim for damages by reason of s 324(1) of the LPA (NSW), but was expressly permitted in respect of the second claim under s 323(1). The applicants’ construction would mean that the infection of one spreads fatally to the other, even where the matters and the work done are only connected by the same costs agreement. That would mean that a legal practice could not recover its costs for work it did under a costs agreement of a type that it was specifically permitted to enter in respect of a claim that was not a claim for damages. It is understandable that the legislative intention would be to prevent recovery of fees for a matter that involves a claim for damages, but the applicants have been unable to satisfactorily explain why the legislative intention would be to also prevent a legal practitioner from recovering costs in the a matter that does not involve a claim for damages. It would provide a windfall for someone in the applicants’ position, and a harsh and seemingly unjust outcome for the lawyer. I consider that “matter” should be read in the singular unless referring to more than one claim for damages. That has the effect that if entry into a costs agreement infringed s 324(1), the legal practice could not recover fees in relation to the relevant claim or claims for damages, but could recover fees in relation to other work covered by the same costs agreement that is not in relation to a claim for damages.

94    Therefore, even if there was a single costs agreement covering both Proceeding BS1714/2011 and the Review Proceeding, and that costs agreement was entered into in contravention of s 324(1), s 327(4) would not disentitle Mr Douglas from recovering costs in respect of his legal services in the Review Proceeding.

95    On the assumption that Mr Douglas entered a single costs agreements in Proceeding BS1714/2011 and the Review Proceeding, it remains to consider the effect of s 327(1) of the LPA (NSW). The applicants argue, citing National Acceptance Corporation Pty Ltd v Benson (1988) 12 NSWLR 213 at 214, that if a costs agreement is void under s 324(1), it has “no legal effect for any purpose as against the world so that it is as if the [contract] which is “void” has not occurred, at least so far as the eye of the law in concerned.” The consequence would be that costs could not be recovered under the void costs agreement.

96    However, s 327(2) of the LPA (NSW) provides that “legal costs under a void costs agreement are recoverable as set out in s 319(1)(a) or (c)”. There would be no “costs agreement made in accordance with Division 5” within s 319(1)(b). It is common ground that there is no applicable fixed costs provision, so that s 319(1)(a) is not relevant. The effect of s 319(1)(c) is that Mr Douglas’ legal costs would be recoverable “according to the fair and reasonable value of the legal services provided”. Therefore, the applicants’ argument would provide some, but limited, assistance to its case.

Whether Mr Douglas’ costs agreement failed to comply with s 324(4) of the LPA (NSW)

97    Section 324(4) of the LPA (NSW) required that the agreement contain an estimate of the uplift fee or, if that was not reasonably practicable, a range of estimates of the uplift fee, and an explanation of the major variables that would affect the calculation of the uplift fee.

98    Mr Douglas’ letter of 3 November 2009 merely provided, “I have also exercised the right to charge an uplift of 25% under the Legal Profession Act 2004 to the daily rate expressed above”. There is no evidence of any other document in which the information required by s 324(1) was provided, or that the information was given verbally.

99    In Russells Solicitors v McCardel [2014] VSC 287, Bell J rejected an argument that under the equivalent Victorian provision, identification of a percentage for the uplift fee was adequate, saying:

39     The estimate of the uplift fee, being legal costs (excluding disbursements), that is required by s 3.4.28(3) must be an amount. This requirement is inherent in the concept of an uplift fee. A percentage is a basis of calculation, not an amount. Without a base figure against which to apply it, a percentage is not an estimate of an amount. Therefore, as properly conceded by Russells, cl 13.4 on its own does not disclose an estimate.

(Footnote removed.)

100    That view is, in my respectful opinion, plainly right. I conclude that Mr Douglas’ costs agreement for the Review Proceeding did not comply with s 324(4) of the LPA (NSW).

101    Since the costs agreement contravened s 324(4) of the LPA (NSW), it is void pursuant to s 327(1). Under s 327(2), legal costs under a void costs agreement were recoverable, relevantly, under s 319(1)(c). The effect of s 319(1)(c) is that Mr Douglas’ legal costs are recoverable “according to the fair and reasonable value of the legal services provided”.

102    To be clear, Mr Douglas is only entitled to recover his costs on the basis set out in s 319(1)(c) of the LPA (NSW), and not under the costs agreement. The non-recoverable amount was described by Bell J in Russells Solicitors v McCardel at [17] as, “a cost for non-compliance which the lawyer must bear”. Further, the effect of s 327(3A) is that Mr Douglas is not entitled to recover any part of his uplift fee.

Whether the LPA (NSW) or the LPA (Qld) applied to Mr Douglas’ costs agreement for the Review Proceeding

103    The premises of the applicants’ case are that, firstly, Mr Douglas had a single costs agreement encompassing one or more claims for damages as well as the Review Proceeding and, secondly, the LPA (NSW) applies to that costs agreement. I have rejected the first of those premises. It remains necessary to examine the second.

104    The applicants submit that the LPA (NSW) applies to the costs agreement between Mr Douglas and Delta Law. The respondents submit that the LPA (Qld) applies. The relevance of this dispute is that the LPA (Qld) contains no provision equivalent to s 327(4) of the LPA (NSW), which prohibited recovery of fees where a contingent costs agreement provided for an uplift fee upon the successful outcome of a claim for damages.

105    The applicants rely upon s 303 of the LPA (NSW), which provided:

303    Application of Part—first instructions rule

This Part applies to a matter if the client first instructs the law practice in relation to the matter in this jurisdiction.

106    Section 306 of the LPA (NSW) provided:

306    How and when does a client first instruct a law practice?

A client first instructs a law practice in relation to a matter in a particular jurisdiction if the law practice first receives instructions from or on behalf of the client in relation to the matter in that jurisdiction, whether in person or by post, telephone, fax, e-mail or other form of communication.

107    Section 302 of the LPA (Qld) is in identical terms to s 303 of the LPA (NSW). Section 305 of the LPA (Qld) is in identical terms to s 306 of the LPA (NSW).

108    The expression “client” was defined in s 3 of the LPA (NSW) as including “a person for whom or to whom legal services are provided”. This definition is broad enough to include a solicitor who retains a barrister. Therefore, ss 303 and 306 encompass the relationship between Delta Law and Mr Douglas.

109    Section 303 of the LPA (NSW) used the word “matter”. I have referred to Cross v Certain Lloyds Underwriters at [19], where a “matter” was described as “the scope of any advice or assistance in respect of which a client seeks legal services from a law practice”. I infer that Mr Douglas was retained to advise and appear generally in Proceeding BS1999/2006 and the Review Proceeding. In that sense, the “matter” for s 303 of the LPA (NSW) involved advising and appearing in each of those proceedings.

110    The applicants rely upon an admission by the respondents that:

Mr Francis Douglas QC was in Sydney, NSW, when he first received instructions in proceeding BS1999/06 that led to his costs agreement dated 3 November 2009.

111    The applicants submit that this means that Mr Douglas had a single costs agreement covering each proceeding in the Mango Hill litigation, and he first received instructions from Delta Law in New South Wales that led to his costs agreement. However, firstly, whatever Mr Douglas’ reconstructed conception of his letter of 3 November may have been, it was, objectively, an offer to enter into a costs agreement, and not a costs agreement in itself. Secondly, I have held that Mr Douglas did not have a single, unitary costs agreement covering the whole of the Mango Boulevard Proceedings. Rather, he entered a separate costs agreement in respect of the legal services he was to provide under each retainer.

112    It follows that the admission that Mr Douglas was in New South Wales when he first received instructions in Proceeding BS1999/2006 that led to his costs agreement for legal services for that proceeding says nothing about where he was when he first received instructions in relation to the Review Proceeding.

113    The difficulty for the applicants is that there is no evidence as to where Mr Douglas was first instructed in relation to the Review Proceeding. That Mr Douglas is a New South Wales based practitioner, does not provide an answer. Delta Law and the respondents are based in Queensland, and it is entirely possible that he was first instructed in Queensland.

114    Mr Douglas’ costs agreement for his legal services in the Review Proceeding was based upon the offer contained in his letter of 3 November 2009, which stated that it was an offer to enter into a costs agreement, “pursuant to s 322(1)(c) of the Legal Profession Act 2004 (NSW) and its Queensland equivalent”. That indicates reliance on both the LPA (NSW) and the LPA (Qld). Although the letter went onto refer to Mr Douglas charging interest and an uplift fee under the LPA (NSW), that does not exclude the application of the LPA (Qld). The letter provides no evidence from which an inference can be drawn as to where Mr Douglas was when he was first instructed.

115    Any conclusion as to where it was that Mr Douglas was first instructed would be a matter of speculation and not evidence. That does not assist the applicants who assert that the LPA (NSW) applies and who have the onus of proof on that issue.

116    In his letter of 25 January 2017 to Delta Law, Mr Douglas said, “I confirm that it is the Queensland Act which is applicable, not the NSW Act”. The Deed of Agreement dated 11 April 2018 between Mr Douglas and Delta Law purported to replace the costs agreement in the Review Proceeding and other proceedings with another costs agreement, with retrospective effect, that was to be governed by the LPA (Qld).

117    It may be seen that even though the costs agreement for the review proceeding was, in its terms, based on both the LPA (NSW) and the LPA (Qld), Mr Douglas attempted to retrospectively interpret or amend that costs agreement to avoid the possible consequences of s 327(4) of the LPA (NSW). That attempt seems to have sought to engage s 305 of the LPA (NSW), which provided:

305    Displacement of Part

(1)    This section applies if this Part applies to a matter by the operation of section 303 or 304.

  (2)    This Part ceases to apply to the matter if:

(a)    either:

(i)    the legal services are or will be provided wholly or primarily in another jurisdiction, or

(ii)    the matter has a substantial connection with another jurisdiction, or both, and

(b)    either:

(i)    the client enters under the corresponding law of the other jurisdiction into an agreement with the law practice that the corresponding provisions of the corresponding law apply to the matter, or

…

118    Mr Douglas seems to have attempted to enter into an agreement of the type referred to in s 305(2)(b)(i) of the LPA (NSW), so that the LPA (Qld) would apply instead, and with retrospective effect.

119    Judge McGill SC of the District Court of Queensland confronted a similar situation in Paroz v Clifford Gouldson Lawyers [2012] QDC 151. In that case, a solicitor entered into a costs agreement with a client with retrospective effect, and which purported to provide the necessary disclosures required by the statute, in circumstances where no disclosure had previously been given to the client. His Honour rejected the retrospective attempt to amend the costs agreement, saying at [33]–[34]:

Parties can agree between themselves that they will arrange their affairs on a basis which amounts to an historical fiction, but that does not mean that the fiction is to be treated as having been what really happened for any purpose where what matters is what actually occurred between the parties, rather than what the terms of their agreement are. That is usually what matters for a statute. Hence, in circumstances such as the present, even if the parties on 15 April 2009 agreed that as between themselves they were to be treated as if the disclosure contained in the document had been made at some time in the previous year, that would not mean that a statutory obligation in relation to disclosure which required something to be done in the previous year which had not in fact been done at that time would have been retrospectively complied with.

So far as there is any question of whether the requirements of the Act have been complied with, what matters is the actual situation that existed from time to time between the parties, not the terms of any contract which was ultimately entered into between them. That would be the case even if the contract on its face expressly had retrospective effect.

[emphasis added]

120    The principles identified by Judge McGill find support elsewhere. In Morley-Clarke v Jones (Inspector of Taxes) [1986] 1 Ch 311, Oliver LJ (Mustill LJ agreeing) said at 331:

… a retrospective agreement [cannot] undo the past and convert something that has already happened, and as to which legal consequences have already attached, into something else which never in fact did happen …

121    To take a common example, parties can agree between themselves that a contract is to have retrospective effect, but that does not prevent the operation of a taxing statute upon the facts as they actually occurred: see Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184 at [6]–[15], [146]; Morley-Clarke v Jones at 331.

122    For those reasons, Mr Douglas’ valiant attempts to retrospectively amend his costs agreement or agreements to make the LPA (Qld) apply were ineffective.

123    The evidence is inadequate to determine whether the LPA (NSW) or the LPA (Qld) applies to Mr Douglas’ costs agreement for his services in the Review Proceeding.

124    That conclusion is not, however, fatal to the alternative submission made by the applicants – that Mr Douglas is only entitled to recover the fair and reasonable value of his services.

125    Section 319 of the LPA (Qld) provides:

319     On what basis are legal costs recoverable

(1)    Subject to division 2, legal costs are recoverable—

(a)    under a costs agreement made under division 5 or the corresponding provisions of a corresponding law; or

(b)    if paragraph (a) does not apply—under the applicable scale of costs; or

(c)    if neither paragraph (a) nor (b) applies—according to the fair and reasonable value of the legal services provided.

…

126    Section 323(3)(c)(i) of the LPA (Qld) provides that, “A conditional costs agreement…must be…in writing.”

127    Section 324(3) of the LPA (Qld) provides:

324     Conditional costs agreements involving uplift fees

…

(3)    The agreement must contain an estimate of the uplift fee or, if that is not reasonably practicable, both of the following—

(a)    a range of estimates of the uplift fee;

(b)    an explanation of the major variables that will affect the calculation of the uplift fee.

128    Section 327 of the LPA (Qld) provides:

327     Particular costs agreements are void

(1)    A costs agreement that contravenes, or is entered into in contravention of, any provision of this division is void.

(2)    Subject to this section and division 7, legal costs under a void costs agreement are recoverable as set out in section 319(b) or (c).

(3)    However, a law practice is not entitled to recover, as set out in section 319(b) or (c), any amount in excess of the amount the law practice would have been entitled to recover if the costs agreement had not been void and must repay any excess amount received.

(4)    A law practice that has entered into a costs agreement in contravention of section 324 is not entitled to recover the whole or any part of the uplift fee and must repay the amount received in relation to the uplift fee to the person from whom it was received.

(5)    A law practice that has entered into a costs agreement in contravention of section 325 is not entitled to recover any amount relating to the provision of legal services in the matter to which the costs agreement related and must repay any amount received relating to those services to the person from whom it was received.

(6)    If a law practice does not repay an amount required by subsection (3), (4) or (5) to be repaid, the person entitled to be repaid may recover the amount from the law practice as a debt in a court of competent jurisdiction.

129    Mr Douglas’ failure to disclose an estimate of his uplift fee in relation to the Review Proceeding, or a range of estimates of the uplift fee, and an explanation of the major variables that would affect the calculation of the uplift fee, was a contravention of s 324(3) of the LPA (Qld). Further, that Mr Douglas’ conditional costs agreement was not “in writing” was a contravention of s 323(3)(c)(i).

130    Section 327(1) of the LPA (Qld) provides that a costs agreement entered into in contravention of any provision of this Division 5 is void, and, under s 327(2), legal costs under a void costs agreement are recoverable, relevantly, as set out in s 319(1)(c). Section 319(1)(c) provides that costs are recoverable according to the fair and reasonable value of the legal services provided.

131    It follows that even if the LPA (Qld) applies, instead of the LPA (NSW), Mr Douglas is only entitled to recover the fair and reasonable value of his legal services.

Conclusion

132    The evidence does not allow any conclusion to be reached as to whether the LPA (NSW) or the LPA (Qld) applies to Mr Douglas’ costs agreement in respect of the Review Proceeding.

133    However, even if the LPA (NSW) applies, Mr Douglas is not disentitled by s 324(4) from recovering an amount in respect of his provision of legal services in the Review Proceeding.

134    Whether the LPA (NSW) or the LPA (Qld) applies, Mr Douglas’ costs agreement in respect of the Review Proceeding is void for non-compliance with ss 324(4) or 324(3) respectively. The consequence is that he is entitled to, and is only entitled to, recover the fair and reasonable value of his legal services.

135    It follows, that under the indemnity principle, the applicants’ liability to pay the respondents Mr Douglas’ costs under the costs orders of 2 December 2015 is confined to the fair and reasonable value of the services he provided. I will make a declaration to that effect.

136    The parties have had a broadly equal measure of success in the present application. My preliminary view is that there should be no order as to costs, but I will allow the parties an opportunity to make submissions upon that issue if they wish to do so.

Associate:    

Dated:    11 April 2019