CAMERON v CAMPBELL PATON & TAYLOR [2009] NSWSC 121 (12 March 2009)

Last Updated: 13 March 2009

NEW SOUTH WALES SUPREME COURT

CITATION:
CAMERON v CAMPBELL PATON & TAYLOR [2009] NSWSC 121


JURISDICTION:
Common Law Division

FILE NUMBER(S):
2008/15744

HEARING DATE(S):
5 March 2009

JUDGMENT DATE:
12 March 2009

PARTIES:
Allan CAMERON (1st Pl)
Brenda CAMERON (2nd Pl)
Bradford Frederick McInnes STUART, Ian Thomas MacMICKING, Timothy Giles DALLA, Shu Fan (Fiona) PIGOT, Mason Richard MANWARING and Andrew KERMODE trading as CAMPBELL PATON & TAYLOR (Defs)



JUDGMENT OF:
Kirby J

LOWER COURT JURISDICTION:
Local Court

LOWER COURT FILE NUMBER(S):


LOWER COURT JUDICIAL OFFICER:
T Lucas LCM

LOWER COURT DATE OF DECISION:
10/10/08


COUNSEL:
P R Sternberg (Pls)
G Elliott (Defs)


SOLICITORS:
Callachor & Helby Solicitors (Pls)
Campbell Paton & Taylor (Defs)



CATCHWORDS:
Civil Law
appeal from Local Court
recovery of legal fees
interference with discretion of Court below
refusal by Magistrate to set aside default judgment
Lawyers
duties and liabilities
costs disclosure
who is the client.

LEGISLATION CITED:
Legal Profession Act 1987
Local Courts Act 1982
Evidence Act 1995
Uniform Civil Procedure Rules 2005

CATEGORY:
Principal judgment

CASES CITED:
Regina v Cameron [2005] NSWCCA 359; (2005) 157 A Crim R 70
House v The King [1936] HCA 40; (1936) 55 CLR 499
Cohen v McWilliam (1995) 38 NSWLR 476
Grimshaw v Dunbar [1953] 1 QB 408
Adams v Kennick Trading (International) Ltd (1986) 4 NSWLR 503
Apple v Wily [2002] NSWSC 855
Hawksford v Hawksford [2008] NSWSC 31
Maxwell v Chittick (unreported, NSWCA, 23.8.94)

TEXTS CITED:
Ritchie's Supreme Court Procedure
District Court Practice (1985)

DECISION:
(1) The appeal is allowed.
(2) The order of the Court below made on 10 October 2008 is set aside.
(3) The judgment entered on behalf of the solicitors on 23 July 2008 is set aside.
(4) Mr and Mrs Cameron are to file and serve a defence within 28 days.
(5) The solicitors should pay the costs of Mr and Mrs Cameron on this summons.



JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COMMON LAW DIVISION

JUSTICE KIRBY

Thursday 12 March 2009

2008/15744 Allan CAMERON & Anor v Bradford Frederick McInnes STUART & Ors practising as CAMPBELL PATON & TAYLOR

JUDGMENT

1 KIRBY J: This is an appeal against the refusal by a Magistrate to set aside a default judgment obtained by solicitors in respect of legal costs.

2 On 21 March 2004, Matthew Cameron lost control of a motor vehicle and collided with a telegraph pole. He had four passengers, all young. Three died and the remaining passenger received serious injuries. Matthew Cameron was also injured.

3 Matthew Cameron was later charged with three counts of manslaughter and one count of aggravated dangerous driving causing grievous bodily harm. The charges were listed for hearing at the Parkes Local Court on 22 April 2004.

4 On 6 April 2004, Matthew Cameron went with his parents, Allan and Brenda Cameron (the plaintiffs on this appeal) to solicitors at Orange, Campbell Paton & Taylor (the defendants). They saw Mr Dalla, a member of that firm. On 8 April 2004, Mr Dalla wrote to Mr and Mrs Allan Cameron. His letter included these words:

“10. At the commencement of proceedings it is impossible to give an estimate of what our professional costs may be for representing Matthew. ... ”

5 The letter continued:

“11. Based on representing other people in similar matters we advise that our professional costs are not likely to be less than $5,000.00 or more than $10,000.00 for all necessary work up to and including the first day of a committal hearing.”

6 The solicitors sought $2,000 on account of costs and disbursements. Their letter included the following paragraph which counsel for Mr and Mrs Cameron relied upon as an acknowledgement that they (together with Matthew) were clients of the firm. The letter said this:

“13. Following amendments to the Legal Profession Act it is now necessary for all Solicitors to disclose at the commencement of the matter the following:-

(a) Our estimated professional costs. In this regard we note our above advice.

(b) Our account will be rendered to you on completion of this matter. If for some reason the account is not paid within thirty (30) days or in accordance with arrangements entered into with you we are entitled to charge interest on any outstanding amount. The present interest rate is 10.5% per annum.

(c) You are entitled to receive a bill of costs. Action cannot be taken to recover our costs until thirty (30) days after delivery of that bill.

(d) You are entitled to apply to an assessor appointed by the Supreme Court to have our costs assessed for their fairness and reasonableness.

(e) Our retainer may be terminated by you at any time subject to payment of our charges and expenses incurred up to the time of termination.”

7 In argument, counsel for the solicitors acknowledged that his clients then believed Mr and Mrs Cameron were clients of the firm, although he ultimately submitted that such belief was mistaken. I will come back to that submission below.

8 The committal proceedings against Matthew Cameron were heard at the Forbes Local Court on 31 January 2005. Mr Driels of counsel appeared for Mr Cameron, who was then committed for trial in the District Court. On 3 March 2005, the solicitors wrote to Mr and Mrs Allan Cameron confirming what had happened. Their letter included these words:

“11. We confirm our advice that in respect to the District Court proceedings we are more than happy to act on behalf of Matthew on Legal Aid should they be prepared to assign conduct of these proceedings to our Firm. To that effect Matthew needs to complete an Application for Legal Aid. Please advise where he is currently detained.”

9 They added:

“13. Please note the tax invoice will be forwarded to you in the near future.”

10 On 8 March 2005, a further letter was sent to Mr and Mrs Cameron, which opened with these words:

“Further to your instructions in respect to the above matter we now enclose our tax invoice for all necessary work up to and including the committal hearing. ... ”

11 The letter enclosed an itemised description of the work performed, although not identifying the charges for each item. It was not an assessment of costs conforming with the requirements of Division 6 of the Legal Profession Act 1987. The costs were assessed at $14,357.20 and disbursements (counsel’s fees, travelling, photocopying, etc) $3,980.80, a total of $18,338.00. Mr and Mrs Cameron had, by that time, paid $6,000.00 on account. The balance claimed was $12,338.00. On 20 July 2005, Mr and Mrs Cameron paid a further $4,000.00.

12 Matthew Cameron was given Legal Aid in respect of the criminal proceedings in the District Court. Messrs Campbell, Paton & Taylor, solicitors, appeared for him before Charteris DCJ. His Honour sentenced Matthew Cameron to 8 years imprisonment with a non parole period of 4 years.

13 The Crown appealed against that sentence on the basis of inadequacy. The appeal was heard by the Court of Criminal Appeal on 7 October 2005. Judgment was given on 28 October (Regina v Cameron [2005] NSWCCA 359); (2005) 157 A Crim R 70, and the appeal allowed. The sentence was increased to 9 years imprisonment with a non parole period of 6 years.

14 On 23 June 2006, the solicitors sent what they described as a “tax invoice” to Mr and Mrs Allan Cameron which opened in these words:

“TO our professional costs for acting as Matthew’s Solicitors in respect to the appeal by the DPP against the asserted inaccuracy of the sentence imposed by Judge Charteris DCJ Orange District including:- ... ”

15 There followed an itemised list of attendances, although again no charges were assigned to each item. Like the earlier invoice, it was not an assessment of costs conforming with the requirements of Division 6 of the Legal Profession Act 1987. The costs for the solicitors were assessed at $5,500.00 and counsels’ fees and other disbursements at $11,349.87, a total of $16,849.87.

16 On 14 June 2007, the solicitors wrote to Mr and Mrs Allan Cameron. Their letter opened with these words:

“We refer to your instructions to act on behalf of your son, Matthew, and our subsequent tax invoices rendered to you.”

17 The letter then enclosed further copies of the tax invoice in respect of the committal proceedings and the tax invoice in respect of the Crown appeal, together with an invitation to discuss the matter. The letter included the following assertions:

“3. Throughout the proceedings you continually indicated that you would pay all our costs and disbursements when the matter came to an end.

4. We have forwarded to you numerous Account Rendereds.”

18 The letter also included these words:

“7. You indicated some months ago that you were going to arrange an appointment to see our Tim Dalla. To date you have not done so.”

19 On 20 March 2008, the solicitors issued a Statement of Claim in the Local Court at Orange claiming $25,187.87 made up of the fees outstanding, together with interest of $5,544.34. The total amount claimed, including Court filing fees and solicitors’ costs, was $31,717.51.

20 On 1 May 2008, Mr and Mrs Cameron wrote to the solicitors. They indicated that they had sought legal advice. They added:

“In order that we may obtain legal advice could you please provide to us a copy of the costs agreement or fee agreement to which you refer in your statement of claim together with a copy of the letter of disclosure relating to your costs and copies of the invoices referred to. ... ”

21 The solicitors wrote back on 19 May 2008, reaffirming that they would be happy to discuss the matter. They did, however, expect payment, or part payment. Mr Allan Cameron wrote back on 27 May 2008, renewing his request for the cost agreement and other material. The letter included these words:

“I am writing this letter to confirm I am all too willing to meet with you to discuss my concerns about my son’s matter, which has been stated in your letter dated 19 May 2008, up until this letter I have not been asked to attend on any other occasion.

Before a meeting can be arranged I would like to consult my son, Matthew regarding this matter, after which a meeting can be arranged, at a time suitable to yourself and I.”

22 On 10 July 2008, the defendant forwarded copies of the documents requested and advised that application for a default judgment would be made within seven days. The default judgment was then entered on 23 July 2008 in the sum of $32,839.18.

Notice of Motion to set aside judgment.

23 On 7 August 2008, a notice of motion was filed seeking to set aside the default judgment. It was supported by an affidavit sworn by both Allan and Brenda Cameron. The affidavit asserted that the letter of 8 April 2004 (providing an estimate of up to $10,000.00 to the end of committal) was the only cost disclosure ever made by the solicitors. They added:

“4. At no stage did he indicate that it might be more than $10,000 and as this was always supposed to be a plea of guilty we just don’t know how committal proceedings ever came to a total of $18,338.”

24 Mr and Mrs Cameron stated that they had enquired of Mr Dalla whether Legal Aid was available (para [10]). They added these words in relation to the Court of Criminal Appeal Crown appeal:

“13. Following the District Court proceedings the prosecution lodged an appeal. We were never involved in the appeal beyond the fact that we talked to Mr Dalla about it from time to time. He was in contact with our son. He contacted us to do things from time to time. We were never given any fees disclosure in respect of the Court of Criminal Appeal matter. We were never asked for any money until it was over. We believe as our son had had legal aid before Judge Charteris he could have legal aid in the Court of Criminal Appeal. The Legal Aid Commission have told us that he could have had legal aid in the Court of Criminal Appeal but that nobody ever asked.

14. We don’t believe that we have any obligation to pay in the Court of Criminal Appeal because that is not something that we asked Mr Dalla to do. He never spoke to us about costs.”

25 The affidavit also sought to explain the delay. They had spoken to the Legal Aid Commission in Sydney and had been to see the Legal Aid office in Dubbo. The affidavit continued:

“17. We believe we have a defence to most, if not all of this claim. We believe the Court of Criminal Appeal Proceedings have absolutely nothing to do with us. We believe we have paid the $10,000 which we were told was the maximum it would cost in the Local Court and we are not sure when and what the Legal Aid grant that Mr Dalla had covered. We will be able to get that material if we are allowed to defend the matter and to issue some subpoenas.”

26 They asked to be allowed to defend the matter, adding:

“19. ... It is something which is really complicated for us and we just don’t understand how things work.”

27 The solicitors filed an affidavit in reply, which simply annexed the correspondence to which reference has been made. The matter then came before his Honour, Magistrate Lucas, at the Orange Local Court. The affidavits were read. No other evidence was called. Mr and Mrs Cameron were not required for cross examination. Each party then made submissions. The solicitor appearing for Mr and Mrs Cameron pointed out that the delay was short and that his clients had been investigating the position with Legal Aid. He asserted that there was a defence on the merits. There were two separate matters, one in the Local Court and the other in the Court of Criminal Appeal. He added: (T2)

“ ... It is my submission that the plaintiffs would have to provide or establish a separate agreement for my clients to cover their son’s legal costs for that, we would say, and do so in the affidavit, there was no such agreement. They say that after legal aid was granted they had nothing to do with costs from then on. It was just nothing to do with them and that is, with respect, an arguable defence to the claim which is all we have to establish at this point in time.”

28 In respect of the claim in the Local Court, it was submitted that the Camerons had never been told that the costs were likely to exceed an earlier estimate by a significant margin. There was an obligation to provide such advice under the Legal Profession Act.

29 A solicitor from the partnership appeared for the respondent to the motion. He acknowledged that delay was not really the issue and there had been no prejudice. He then said this: (T3)

“Your Honour respectfully it’s the issue of bona fides. My friend says there’s an arguable case, you can make an arguable case out of many things but it is the bona fides ... “

30 He later added: (T4)

“So in relation – your Honour would have to be satisfied that this is a – it’s arguable, I don’t suggest otherwise but it needs to be bona fide and if it was bona fide respectfully your Honour why wasn’t there assessments undertaken on the bills and why wasn’t some other action taken and I can be as blunt as this your Honour. If it’s seriously suggested that this work was – in the Court of Criminal Appeal was undertaken without instruction and without disclosure there is no entitlement to pay legal fees ... ”

(emphasis added)

31 His Honour then gave a brief judgment in which he referred to Pt 36.16 of the Uniform Civil Procedure Rules 2005, giving him the power to set aside a default judgment. His Honour then said this: (T5)

“The plaintiffs due to the nature of their occupation are bound by a suitable set of rules and laws under the Legal Profession Act. I note that there has been no assessment of costs. Whilst the law requires that, in my view that’s certainly not fatal to the application for the notice to set aside the judgment.

Indeed I note that the defendant to these proceedings are not legal practitioners and as such have engaged the plaintiff in relation to the matter. That sounds a trite remark but it certainly in my view would explain any situation in relation to the requirements of the Legal Profession Act that that has not been brought to their attention.”

32 I have to say that I find these paragraphs difficult to understand. Counsel for the solicitors acknowledged they were elliptical. His Honour continued: (T5)

“I note from the papers, and I accept the submission by Mr Manwaring that the inference being that the court must draw in my view is that on behalf of their son the defendants engaged the plaintiffs for their professional services. Those professional services whilst initially for the appearance of the committal proceedings and the District Court proceedings I accept the submission made by the plaintiff representing Mr Manwaring that clearly in these matters no-one could have foreseen at that time that there would be a Crown appeal against the – I’m assuming – the inadequacy of the sentence in respect of what was imposed at the District Court.”

33 His Honour was, however, mistaken when suggesting that Mr and Mrs Cameron had retained the solicitors in the District Court criminal proceedings. It was common ground, as set out below, that the solicitors acted only for Matthew in those proceedings and were funded by Legal Aid. No account was ever rendered in respect of the District Court proceedings to the Camerons.

34 His Honour thereafter alluded to the concession made in submissions, that no prejudice was suggested by the solicitors. His Honour said this: (T6)

“It is right that the matter can be put aside and that the plaintiffs can be secured, or to use that term, by use of a costs order, but first, in my view, the appropriate matter is should the court set aside the judgment that has already been entered?”

35 His Honour thereafter identified the matters which, to his mind, indicated an absence of “bona fides” and no case. He said this: (T6)

“I note from the statements that have been tendered and the various letters, clearly Mr and Mrs Cameron were given, in my view, adequate notice as to what was (to) occur.

Now even putting aside having made the finding if they’re professional solicitors and bound by the Legal Profession Act. If in my view, as Mrs Cameron appeared to have done, choose to ignore a letter written by the plaintiffs as to their costs and setting out what they say is their costs and their intention to take action. That it is upon them to take due action and as such to lodge whatever defence they wish to claim and they come to the court and indicate that, in their view, and as represented by Mr Helby that there has been no hearings on the merits of the matter. Well that’s the nature of these particular proceedings in General Division.

In the introduction of these proceedings generally this type of proceedings is to facilitate the parties obtaining judgments in a timely and cost effective manner. Mr and Mrs Cameron have, on the documentation before the court, I am satisfied, not responded as they were required to do or that any person when warned that legal action would be taken would, in my view, carry out steps to either (a) defend that matter, or (b) to pay that matter as per the terms of demand.

If bona fide is to be shown, in my view has not been shown by Mr and Mrs Cameron on the basis that clearly they were on notice. Clearly the action was open to them to take that action and now they seek to have the notice of motion in these proceedings set aside the judgment earlier made within the Registry. In my view they do not, pursuant to s 36.16, have a case and have not acted bona fide.”

Notice of Appeal.

36 By amended summons, Allan and Brenda Cameron appealed to the Supreme Court upon the following grounds:

“1. The learned Magistrate erred in law in refusing to set aside the judgment entered in contravention of sections 175, 177 and 178 of the Legal Profession Act 1987.

2. The learned Magistrate failed to:

(i) properly consider the Plaintiff’s prospects of successfully defending this claim;

(ii) take into account the absence of prejudice suffered by the Defendants by reason of the delay;

(iii) properly consider the explanation offered by the Plaintiffs for the delay.

3. The learned Magistrate erred in law by finding that a failure by the Plaintiffs to file a defence to the claim was sufficient to disentitle them to successfully set aside the default judgment notwithstanding that costs had not been assessed under Division 6 of the Legal Profession Act, 1987.

4. The Plaintiffs seek that leave to appeal be granted if leave be required in this case.”

37 There is an appeal as of right in respect of an order made in circumstances where there is an error of law (s 73(1) Local Courts Act 1982). Where the issue involves a question of mixed fact and law, the leave of the Court is required (s 74(1) Local Courts Act). Leave is also required where the judgment or order appealed against is an interlocutory order (s 74(2)(a)). Here, both parties approached the Magistrate’s order upon the basis that it was interlocutory. That aspect was not argued. Since, for the reasons I will disclose below, I believe there were errors of law, leave should be given if required.

The contentions of the parties.

38 The parties each provided helpful written submissions. Counsel for Mr and Mrs Cameron relied upon the obligations of a solicitor under the Legal Profession Act. On the material before the Magistrate, these obligations had not been met. It was submitted that judgment should not have been entered in the first place. Absent compliance, there was a bar to maintaining the proceedings, costs having not been assessed under Division 6 (s 182(2)).

39 Attention was drawn to the concession made by the solicitors that delay was not the issue. It was acknowledged that there was no prejudice that could not be cured by costs, and that the defence was arguable. Why, then, was the judgment not set aside? The applicants were said not to be bona fide, which was accepted by his Honour. That, according to counsel for Mr and Mrs Cameron, was an error.

40 Mr Elliott of counsel, appearing for the solicitors, drew attention to the question to be answered on this appeal. The Magistrate had a discretion. He could set aside or not set aside the default judgment. He exercised that discretion. On appeal, an error of law had to be shown in the exercise of that discretion, applying the principles in House v The King [1936] HCA 40; (1936) 55 CLR 499, where the following was said: (Dixon, Evatt and McTiernan JJ) (at 505)

“ ... If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.”

41 It was submitted that the complaints now made concerning the failure to comply with the Legal Profession Act 1987, had not been made before the Local Court. However, I believe that they were. Indeed, such complaints were made by Mr and Mrs Cameron in their affidavit. They were repeated by their advocate at the hearing.

42 Counsel for the solicitors submitted that, at all times, Matthew Cameron was the client of the solicitors, not his parents. The solicitors appeared for Matthew Cameron, no one else. His parents were simply third parties who had agreed to pay his legal fees. The requirement under the Act was to make disclosure to the client (s 175 Legal Profession Act 1987). If disclosure is not made, it is the client who need not pay until costs have been assessed under Division 6. There was no need to make disclosure to the parents. There was no breach of obligation under the statute in respect of the parents. The submissions then added the following:

“16. ... Whilst section 182(2) is not in its terms confined to the ability of the solicitor to maintain proceedings against the client, read in the light of section 182(1) it should be understood as being so confined. This is because the statutory scheme is not to be read as a code, but is to be read in light of the previous legal position, and in particular the inability of solicitors to enter into costs agreements with their clients, as explained by Basten JA in Wentworth v Rogers; Wentworth & Russo v Rogers [2006] NSWCA 145 at [138] to [147]; [2006] NSWCA 145; (2006) 66 NSWLR 474 at 506-507.”

43 There was, according to counsel for the solicitors, no error of law. Leave should not be given.

The issues for judgment.

44 What were the issues on this material? To set aside the judgment, Mr and Mrs Cameron had to provide an arguable defence on the merits and an explanation for their delay in filing that defence (Cohen v McWilliam (1995) 38 NSWLR 476). In Cohen v McWilliam, Priestley JA said this: (at 477)

“The case seems to me to be a plain one. The appellant wished to raise a defence. In her affidavit supporting her application to Bryson J to be allowed to do so she deposed to facts which, if accepted at trial, gave her, at the least, distinctly arguable prospects of success. Bryson J did not say there would not be a triable issue. It was plain the appellant was not personally responsible for her very late application to rely on the defence.”

45 Later his Honour added: (at 481)

“It is, however, another question whether concern about the extent of delays, either in a particular case or generally, should, in the absence of prejudice in the particular case, be taken into account in exercising a discretion to set aside a default judgment. The fundamental duty of the court is to do justice between the parties. It is, in turn, fundamental to that duty that the parties should each be allowed a proper opportunity to put their cases upon the merits of the matter. Any limitation upon that opportunity will generally be justified only by the necessity to avoid prejudice to the interests of some other party, occasioned by misconduct, in the case, of the party upon whom the limitation is sought to be imposed.”

46 Cole JA (diss) drew attention to an alternative formulation, used in some cases, which incorporated the composite phrase, “bona fide defence”. His Honour referred to Ritchie’s Supreme Court Procedure, where the following was said: (at 497)

“Nevertheless the court must be satisfied that the defence is asserted bona fide: Grimshaw v Dunbar ... ”

47 The reference to Grimshaw v Dunbar ([1953] 1 QB 408) was a reference to the following passage from the judgment of Jenkins LJ, where his Lordship said this: (at 416 )

“No doubt the judge is entitled to satisfy himself that the party applying has a bona fide intention of defending the action, and that there is some possibility of his doing so with success. For example, I apprehend that if an admitted and self-confessed trespasser allowed judgment for possession to go in default in his absence, the judge would be entitled, on an application for a new trial, to refuse on the ground that he was palpably a trespasser and could not, whatever evidence he gave, possibly justify his presence in the house. But, short of cases of that kind, I think that a new trial should seldom, if ever, be refused merely on the ground that the applicant’s case appears to be a weak one. ... ”

48 Cole JA also referred to the District Court Practice (1985) which encapsulated the question the Court must address in these words:

“The Court must look to the whole of the relevant circumstances, including, inter alia, the existence of a bona fide defence on the merits, an adequate explanation for the failure to defend, and any delay.”

49 Cole JA drew attention to the judgment of Hope JA in Adams v Kennick Trading (International) Ltd (1986) 4 NSWLR 503, where his Honour identified the correct approach when considering whether sufficient cause had been shown to set aside a judgment in the District Court: (at 506)

“A court exercising jurisdiction under this sub rule has to look at the whole of the relevant circumstances and decide whether or not sufficient cause has been shown. The existence of a bona fide ground of defence and an adequate explanation for the failure to defend and any delay are the most relevant matters to consider, but there may be other matters: ... ”

50 His Honour added:

“ ... The absence of an adequate explanation, particularly if it is coupled with prejudice, may justify the denial of relief, but only when considered with the other relevant circumstances of the case, bearing in mind what Lord Wright said in Evans v Bartlam [1937] AC 473 at 489:

‘If merits are shown the Court will not prima facie desire to let a judgment pass on which there has been no proper adjudication.’”

51 Here, there were three distinct phases in the proceedings:

· First, there were the committal proceedings. Mr and Mrs Cameron believed that they were clients of the solicitors (together with Matthew). Counsel for the solicitors, on this appeal, acknowledged that the solicitors also believed that Mr and Mrs Cameron were their clients.

· Secondly, there were the criminal proceedings against Matthew in the District Court. Campbell Paton & Taylor, solicitors, acted for Matthew Cameron in those proceedings. As mentioned, the matter was funded by Legal Aid. Mr and Mrs Cameron were not involved. It was accepted that they were not clients. No account was ever sent to them in respect of that phase.

· Thirdly, the Crown appealed to the Court of Criminal Appeal against Matthew’s sentence. In their affidavit, Mr and Mrs Cameron said that they were not involved in the appeal. They were not, for the purposes of that appeal, clients of the solicitors. Further, they had since been told by Legal Aid that their son, Matthew, was entitled to Legal Aid, had he applied. However, no such application was made.

52 So, on the material before his Honour, Phases 1 and 2 were uncontroversial. All parties believed that Mr and Mrs Cameron were clients of the firm in respect of the committal (Phase 1). All accepted that they were not involved in the criminal proceedings against Matthew (Phase 2). I have referred already to the submission by counsel for the solicitors, on this appeal, raising the issue whether, as a matter of law, all (including the solicitors) were mistaken in believing that Mr and Mrs Cameron were clients of the firm in Phase 1. I will return to that issue below.

53 The real controversy his Honour had to address concerned Phase 3, the proceedings before the Court of Criminal Appeal. The Camerons, in their joint affidavit, in substance asserted two things:

· First, that they were not involved in the Court of Criminal Appeal proceedings. They were not the clients. Matthew Cameron was the client.

· Secondly, they assumed, and were entitled to assume, that the costs of Matthew in respect of the Court of Criminal Appeal proceedings would be funded by Legal Aid, just as they had been funded in the District Court proceedings. They said that they raised the issue of Legal Aid with the solicitors.

54 His Honour obviously was not obliged to determine the truth of the matters asserted in respect of Phase 3. What he had to determine was whether, if the facts deposed by Mr and Mrs Cameron were accepted, they provided an arguable defence.

55 The material before his Honour was contradictory. There was no affidavit from the solicitor who had acted. Rather, an affidavit had been filed, annexing correspondence from that solicitor. That correspondence was not, of course, sworn evidence. Nonetheless, it was evidence, and it was capable of being read as supporting the view that Mr and Mrs Cameron had agreed to fund the Court of Criminal Appeal proceedings, quite apart from the committal proceedings. It will be remembered that, without specifying when the assurances were given, the solicitors asserted in their letter to Mr and Mrs Cameron of 14 June 2007, the following: (supra [17])

“3. Throughout the proceedings you continually indicated that you would pay all our costs and disbursements when the matter came to an end.”

56 As against that material, there was evidence which supported the sworn assertions of Mr and Mrs Cameron that they were not involved in the appeal. The evidence may be summarised as follows:

· First, in the committal proceedings, when they and their solicitors believed that they were clients of the firm, an estimate of costs was sent by letter dated 6.4.04 (supra [4]). That was done in compliance with a belief by the solicitors as to their obligations under the Legal Profession Act 1987. Section 175(1) of that Act required a solicitor to disclose to his client “the basis of the costs of legal services to be provided to the client”. The term “costs” included disbursements, such as counsel’s fees (s 173(1)). Their letter included a recital of the obligations they believe they owed and were fulfilling to Mr and Mrs Cameron, as their clients under the Act (para [13] letter 6.4.04) (supra [6]).

· Secondly, no such letter had been sent to Mr and Mrs Cameron in respect of the criminal proceedings in the District Court, where it was common ground that they were not clients.

· Thirdly, nor was such a letter sent in respect of the Court of Criminal Appeal proceedings. The inference is open that you would expect such a letter, had they been clients, that being the obligation which the solicitors believed they had under the Act, which they had fulfilled in the context of the committal.

· Fourthly, the tax invoice sent to Mr and Mrs Cameron after the appeal did not include any reference to either of them. You would have expected, perhaps, consultation had they been clients. On the other hand, counsel for the solicitors pointed out that the affidavit of the Camerons included the following:

“13. Following the District Court proceedings the prosecution lodged an appeal. We were never involved in the appeal beyond the fact that we talked to Mr Dalla about it from time to time. ... ”

· Finally, Legal Aid having been provided in the District Court matter, the inference was open that it was reasonable for Mr and Mrs Cameron to have assumed that Legal Aid had also been provided on the appeal. They have since been informed it was available.

57 Before going to the judgment, I should say something more concerning the obligations of a solicitor to a client under the Legal Profession Act 1987. As mentioned, the obligation is to provide “an estimate of the likely amount of costs” (s 177(1)). The disclosure must be made before the solicitor is retained (s 178(1)), or, if that is not reasonably practicable, as soon as practicable thereafter. Section 178(4) is in these terms:

“s178 When disclosure to be made

(4) A disclosure under this Division as to any significant increase in the estimated costs of legal services is to be made as soon as practicable after the barrister or solicitor becomes aware of the likely increase in costs.”

58 Where there is a failure to meet these obligations, the client need not pay the solicitor’s costs until they have been assessed in accordance with Division 6 of the Act. The Act also made the following provision:

“s182 Effect of non-disclosure of matters related to basis of costs

(2) A barrister or solicitor who fails to make a disclosure in accordance with this Division of the matters required to be disclosed by section 175 or 176 in relation to costs may not maintain proceedings for the recovery of the costs unless the costs have been assessed under Division 6.”

59 Here, the solicitors disclosed their estimate of the likely costs before they were retained (letter 8.4.04) (supra [4]). Thereafter, the costs significantly increased without further disclosure. Prima facie there was a failure to comply with the obligation under s 178(4) of the Act. When the statement of claim was issued, the costs had not been assessed in accordance with Division 6 of the Act.

60 I have referred already to the submission by Counsel for the solicitors that, at all times, Matthew Cameron was the client and the only client, and that the solicitors were mistaken in thinking otherwise. The argument raises the issue of “who is the client?”. Counsel pointed to the definition of “client” in s 199(4) of the Act, which was in these terms:

“s199 Applications by clients for assessment of costs in bills

(4) In this section, client includes:

(a) any person who is a party to a costs agreement relating to legal services for which the bill of costs is given (other than the barrister or solicitor who gave the bill or provided the services), and

(b) any person, being a lessee under a lease, who is given a bill of costs, concerning legal services relating to the preparation of that lease, by a barrister or solicitor acting on behalf of the lessor, and

(c) any person, being a mortgagor under a mortgage, who is given a bill of costs, concerning legal services relating to the preparation of that mortgage, by a barrister or solicitor acting on behalf of the mortgagee.”

61 It was important, according to counsel for the solicitors, that the definition (which forms part of Division 6: Assessment of Costs) is expressed to operate only for the section. The legislation, he suggested, provided a wide definition of “client” to broaden the scope of those who might seek an assessment of costs under Division 6. But the word “client” in the context of the sections which defined the obligations of a solicitor (Part 11, Legal Fees and Other Costs) had a narrower meaning. It did not extend to all parties to a costs agreement. Here, it was submitted, the solicitors were appearing for Matthew. He was the client. The obligations under s 177 and s 178 were owed to him. The parents were not the client and no obligations were owed to them. They had simply agreed to pay the fees.

62 There is surprisingly little authority on the meaning of the word “client”. Such authority as there is usually considers the meaning in the context of particular legislation. In Apple v Wily [2002] NSWSC 855, Barrett J was confronted by a problem in respect of access to documents where a claim was made for legal professional privilege. Having referred to the definition of “client” in s 117(1) of the Evidence Act 1995, his Honour said this:

“[7] ... In ordinary parlance, a ‘client’ vis-a-vis a lawyer is a person for whom the lawyer performs legal services. Whether a relationship of that kind exists is to be determined by reference to the intentions of the parties objectively ascertained. ... ”

63 His Honour added:

“[7] ... This is, I think, recognized in the judgment of Mahoney JA (with whom Priestley and Powell JJA agreed) in Maxwell v Chittick (unreported, NSWCA, 23 August 1994):

‘It is, of course, to be accepted that persons in the relationship that existed between Mr Maxwell and the plaintiffs may also undertake the relationship of solicitor and client. Whether that relationship existed depends essentially upon whether it was the intention of the parties that it should be created. I am of the opinion that, having regard to the circumstances, no such relationship was intended to be created ... what occurred between them at each of these times did not constitute in terms the making of a contract of the accepting of a retainer so as to create the relationship of solicitor and client. And I do not think that the circumstances require it to be implied that such a relationship was intended to be created between them.’”

64 Later in the same judgement, Barrett J said this:

“[11] ‘Client’, in its ordinary signification, must therefore be regarded as referring to a person who, in respect of some legal matter within the scope of professional services normally provided by lawyers, has, with the consent of a lawyer, come to stand in a relationship of trust and confidence to the lawyer entailing duties of the lawyer to promote the person’s interests, to protect the person’s rights and to respect the person’s confidences. The privilege exists so that a person may consult his legal adviser in the knowledge that confidentiality will prevail.”

65 The issue surfaced again in a similar context in Hawksford v Hawksford [2008] NSWSC 31, where White J, having referred to paragraph [11] of Barrett J’s judgment set out above, said this:

“[18] Counsel for the Brett Hawksford parties submitted that this description of what was required to bring into existence a relationship of lawyer and client omitted an essential ingredient, being that the client had retained the lawyer to act for him or her. In the present context, this meant, according to the submission, that there must have been a valid contract of retainer.

[19] I do not agree. It is clearly established that privilege can exist in respect of communications where there is no valid retainer of the lawyer because the lawyer lacked statutory authority to act (Grofam Pty Limited v Australia & New Zealand Banking Group Limited [1993] FCA 501; (1993) 45 FCR 445 at 455-456; Health Insurance Commission v Freeman [1998] FCA 1340; (1998) 88 FCR 544 at 566-567). Communications between a person who seeks to secure the services of a solicitor and the solicitor are privileged notwithstanding that the solicitor refused the retainer (Minter v Priest [1929] 1 KB 655 at 666, 675; Cromack v Heathcote [1820] EngR 318; (1820) 2 Brod & Bing 4; 129 ER 857). In Global Funds Management (NSW) Ltd v Rooney (1994) 36 NSWLR 122 Young J (as his Honour then was) held (at 130) that:

‘At least in a situation where the client thought that the lawyer was his or her solicitor and that thought was contributed to by the action of the solicitor or by the person who is seeking to tender the statement, the privilege will exist. In my view the authorities go further to support the proposition that if the client bona fide believes on reasonable grounds that the other is his or her solicitor, then the privilege exists up to the time when that belief is exploded.’”

66 Here, I believe the solicitors were lawyers performing legal services for both Mr and Mrs Cameron and their son at the committal stage. The parents were paying, they plainly wanted to be involved and were involved. To adopt the test of Mahoney JA in Maxwell v Chittick, it was the intention of the parties, at that point, that the relationship of solicitor and client should be created. That was, as mentioned, the belief shared by all. The statement of claim asserted such a relationship and was expressed in these terms (omitting particulars):

“1. The Defendants are indebted to the Plaintiff to the sum of $25,187.87 being the balance outstanding for work done and labour performed by the Plaintiffs, their servants or agents on behalf of the Defendants following their instructions to so act, details of which were supplied to the Defendants in tax invoices rendered by the Plaintiff dated 9 March 2005 and 23 June 2006, and described below as ‘the invoices’. ...

2. The Invoices were charged in accordance with a Fee Agreement.”

67 At the conclusion of the committal the solicitors, in accordance with the undertaking given at the outset, rendered an account (supra [6]). That was the end of Phase 1. According to Mr and Mrs Cameron, it was the end of their involvement.

68 The material before his Honour raised two significant issues which need to be addressed in order to determine whether Mr and Mrs Cameron had a defence on the merits to the claims made by the solicitors. The two issues were:

· First, whether, in respect of the committal proceedings (where they were clients), their solicitors were arguably in breach of obligations under the Legal Profession Act 1987 (in not providing a revised estimate of costs once they had significantly increased) and, if so, the consequence in respect of the action.

· Secondly, whether in respect of the Crown appeal to the Court of Criminal Appeal, Mr and Mrs Cameron were clients of the solicitors, who had given an undertaking that they would pay the costs.

Conclusion.

69 I believe that there were a number of errors of law. His Honour, in my view, asked the wrong question. He repeatedly used the phrase, “bona fides”, as though it were a separate element of the test, rather than part of a composite phrase, “bona fide defence”. In the result, he appears to have determined whether the Camerons should be believed, based upon their actions or inactions, rather than determining whether they had an arguable case. Whilst believability may be an issue where a palpably false defence is advanced, such as in the example provided by Jenkins LJ in Grimshaw v Dunbar (supra [47]), that was not this case. The result was that his Honour never really dealt with either issue set out above ([68]).

70 Let me go to the text of the judgment where his Honour used the phrase, “bona fides”. He first introduced that phrase when referring to the submissions of the two solicitors who had appeared before him, Mr Helby (for Mr and Mrs Cameron) and Mr Manwaring (for Messrs Campbell Paton & Taylor, solicitors). He said this: (T5)

“There’s an application by Mrs Cameron today setting aside the judgment that was entered by the, or in the Registrar of the Court earlier on this year. The basis of the application is – and I note from the learned text as set out in the Ritchies text – that there is requirement or its sets out the requirements, mainly has been indicated by the court is there an arguable case as Mr Helby’s rightly in my view pointed out toward the case and a hearing on the merits of the matter, or has there been some reason Mr Manwaring has pointed out such as it was a bona fide judgment entered into and it was the actions of the defendant to the proceedings that has allowed the court or allowed the judgment to be entered in the absence of the defendant’s case.”

(emphasis added)

71 It is not entirely clear to me what his Honour meant by “bona fide judgment”, but I assume that his Honour, when referring to Mr Manwaring’s submissions, was referring to the inaction of the Camerons in not entering their defence before judgment was signed.

72 Shortly thereafter, his Honour said this, coupling on this occasion the words “bona fide” with the word “case”: (T5)

“Now in order for the court to set aside the judgment it has to be satisfied that there is or the – there is a bona fide case able to be presented to the court by the defendants in that the judgment should be set aside pursuant to s 36.16 and onwards in regard to the Uniform Civil Practice.”

(emphasis added)

73 Having referred to the Court of Criminal Appeal proceedings, his Honour recited the fact that Mr and Mrs Cameron had been sent various letters by the solicitors and they had been given “adequate notice”. His Honour added, presumably in the context of delay, these words: (T6)

“... If in my view, as Mrs Cameron appeared to have done, choose to ignore a letter written by the plaintiffs as to their costs and setting out what they say is their costs and their intention to take action. That it is upon them to take due action and as such to lodge whatever defence they wish to claim and they come to the court and indicate that, in their view, and as represented by Mr Helby that there has been no hearings on the merits of the matter. Well that’s the nature of these particular proceedings in General Division.”

74 His Honour referred to the fact that, in this type of proceedings, there is a procedure for “obtaining judgments in a timely and cost effective manner”. Mr and Mrs Cameron had not, on the documentation before him, responded as they were required to do, either by filing a defence or paying the amount outstanding. In these circumstances, his conclusion was as follows: (T6)

“If bona fide is to be shown, in my view has not been shown by Mr and Mrs Cameron on the basis that clearly they were on notice. Clearly the action was open to them to take that action and now they seek to have the notice of motion in these proceedings set aside the judgment earlier made within the Registry. In my view they do not, pursuant to s 36.16, have a case and have not acted bona fide.”

(emphasis added)

75 “Bona fide” in that context appears to have been used in the context of delay. It had nothing to do with whether there was a bona fide defence, that is, an arguable defence to the action. The Camerons may have delayed in responding to the solicitors and yet, if they were not clients in the appeal before the Court of Criminal Appeal, they were not liable. That was the issue. The question was whether they had an arguable defence in relation to that issue. That question was not addressed. Instead, his Honour appears to have viewed the ignoring of accounts sent in the years after 2004/5 and the invitations to talk, as behaviour that reflected adversely upon them, such that they lacked “bona fides”. Whilst that may have been a relevant observation as to credit if the Court were trying the ultimate issue, the Court was not determining where the truth lay. The Court was dealing with a motion to set aside a judgment and whether those seeking to do so had an arguable defence. The solicitors had conceded that delay was not the issue, no doubt because it was minimal, a matter of weeks.

76 The closest that the Court came to addressing the real issue arising on this material was in the following passage: (T5)

“I note from the papers, and I accept the submission by Mr Manwaring that the inference being that the court must draw in my view is that on behalf of their son the defendants engaged the plaintiffs for their professional services. Those professional services whilst initially for the appearance of the committal proceedings and the District Court proceedings I accept the submission made by the plaintiff representing Mr Manwaring that clearly in these matters no-one could have foreseen at that time that there would be a Crown appeal against the – I’m assuming – the inadequacy of the sentence in respect of what was imposed at the District Court.”

77 It may be accepted that the Crown appeal was not foreseen. However, that does not answer the question. The issue was whether Mr and Mrs Cameron had thereafter engaged the solicitors once more on behalf of their son (as they had at the time of the committal), undertaking to pay the fees of the solicitors. The Camerons gave sworn evidence that they had not. There were reasons for inferring that their evidence may well be accurate. The solicitors, on the other hand, had filed evidence which was capable of suggesting that they were also retained in respect of the appeal by the Camerons, and had been given assurances that their fees would be paid. But whether that be right or wrong, there was clearly a triable issue which his Honour, with respect, neither identified, nor addressed.

78 These observations are directed to the second account sent by the solicitors, that relating to the Crown appeal (Phase 3). What is the position in respect of the first account? Did the Camerons have an arguable defence in relation to that matter? The Camerons in their affidavit said this in relation to the first account (supra [25]):

“17. We believe we have a defence to most, if not all of this claim. ... ”

79 They raised in their affidavit, and their advocate raised in his submissions, the obligations of the solicitors under the Legal Profession Act 1987. His Honour referred to this issue but did not, I believe, fully or adequately identify the obligations of the solicitors under the Act and their implications in the context of whether there was an arguable defence to the first account (if only because an assessment had not been undertaken as required by Division 6 of the Act).

80 I believe the judgment must therefore be set aside.

Orders.

81 I discussed with counsel the appropriate form of order were I to take the view that his Honour was in error. It was agreed that, rather than send the matter back for the discretion to be re-exercised, I should make the order which seems to me appropriate.

82 I have not made an order that the solicitors pay Mr and Mrs Cameron’s costs in the Court below. The Camerons had allowed the judgment to go by default. They were seeking an indulgence. Even though, in my view, the judgment should have been set aside, it was not unreasonable that they put to proof. The costs order therefore should not extend to the costs of the Camerons in the Court below.

83 I therefore make the following orders:

1. The appeal is allowed.

2. The order of the Court below made on 10 October 2008 is set aside.

3. The judgment entered on behalf of the solicitors on 23 July 2008 is set aside.

4. Mr and Mrs Cameron are to file and serve a defence within 28 days.

5. The solicitors should pay the costs of Mr and Mrs Cameron on this summons.

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LAST UPDATED:
12 March 2009