Holloway v Madgwicks [2018] VSC 773 (13 December 2018)

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GREGORY MARTIN HOLLOWAY	Applicant

v

MADGWICKS	Respondent

JUDGE:	Wood AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	10 December 2018
DATE OF DECISION & REASONS:	13 December 2018
CASE MAY BE CITED AS:	Holloway v Madgwicks
MEDIUM NEUTRAL CITATION:	[2018] VSC 773

COSTS COURT – Liability for counsel fees – Dimos v Hanos & Egan (2001) VSC 173 considered

APPEARANCES:	Counsel	Solicitors
For the Applicant	No appearance	Peter Trimbos Costs Lawyer

For the Respondent	Mr P Lovell	Madgwicks

1 The respondent acted for the applicant in relation to a dispute with the Commonwealth of Australia. Three different counsel were engaged to perform work on behalf of the applicant, namely Mr J. Ruskin QC, Ms R. Doyle SC and Mr G. Boas. In the present proceeding the applicant seeks to review his legal costs. The bills total over $500,000 and counsel fees account for around $350,000 of that figure. The vast majority of counsel fees are those of Mr Boas.

2 The applicant has brought this proceeding pursuant to setion 3.4.38(1) of the Legal Profession Act 2004 (‘the old Act’) on the basis that instructions were first given to the respondent in relation to the substantive matter concerning the Commonwealth prior to 1 July 2015, namely in 2013. The three counsel were engaged at different times. Mr Boas was first engaged in 2014 and Mr Ruskin in 2015 (prior to 1 July 2015). Ms Doyle was first engaged in 2016 after the introduction of the Legal Profession Uniform Law (Victoria) (‘the new Act’) and the relevant Costs Agreement produced by her in relation to that retainer makes reference to the new Act.

3 The applicant filed a Notice of Dispute on 4 September 2018 prior to an unsuccessful mediation held on 12 September 2018. In essence the Notice takes issue with failures of the respondent to comply with disclosure provisions in the Act and highlights issues with the Costs Agreement as between the parties. The Costs Registrar who conducted the mediation then made an order on 12 October 2018 listing the matter before a Judicial Registrar on 23 October 2018.

4 Orders were made on 23 October 2018 for the respondent to file and serve any affidavit and submissions by 20 November 2018 with the applicant to file and serve any affidavit and submissions by 4 December 2018. The hearing was scheduled for 10 December 2018. The Judicial Registrar noted that the respondent would be seeking to ‘join counsel separately to result in refund from counsel rather than Madgwicks’ (respondent).

5 A document containing draft preliminary questions posed by the respondent had been filed previously on 27 September 2018. The preliminary questions posed were as follows:

6 On the assumption that the respondent wished to pursue these matters at the hearing on 10 December 2018, my Associate sent an email to the parties on 20 November 2018 which in part stated - ‘If it is the respondent’s intention to seek orders that affect any or all counsel whose fees are included in the bill of costs to be ultimately taxed the respondent will have to articulate the orders sought in any formal application (made returnable on 10 December 2018) and served on those affected counsel’.

7 On 22 November 2018 the respondent filed their ‘Outline of Submissions’ (‘Submissions’). The Submissions altered the position taken before the Judicial Registrar on 23 October 2018. They outlined the four questions outlined in paragraph 5 above and then stated that - ’the respondent seeks to substitute for the above questions the further preliminary questions as to whether the applicant briefed Counsel directly and, if so, what impact would this have on the applicant’s summons?’^[1]

8 The Submissions attached copies of all counsels’ backsheets and a memorandum to Mr Boas. A copy of Ms Doyle’s Costs Agreement had previously been served and filed with the Costs Agreements between the parties. The Submissions went on to state -‘For the avoidance of doubt, the respondent does not seek to join Counsel to the applicant’s Summons for taxation, nor seek orders against Counsel.’^[2]

9 The Submissions^[3] also stated - ‘the respondent seeks an order generally and/or for the purposes of drawing any requisite itemised bill of solicitor-client costs, that:

10 The respondent’s new position is now that when they briefed all counsel they did so as an agent of the applicant and that the respondent had no liability to pay any of the counsel.

11 The respondent followed up their Submissions with a letter to the applicant on 27 November 2018^[4] which stated in part ‘You will see that the Submissions focus on a fundamental issue (i.e. direct briefing of Counsel by your client) which we believe transcends the nature of the questions sought to be answered per the Court’s Orders made on 23 October 2018. For the avoidance of doubt, please note that we have not abandoned the October questions, but we do not propose to pursue them at the hearing listed on 10 December 2018...’

12 The practical effect of the respondent confining the ambit of the hearing on 10 December 2018 to just the additional questions raised in the Submissions (outlined in paragraph 7 above) would be that if their argument succeeds then there would be no need to address the four questions initially posed. If the arguments were successful counsel fees would not be taxed as part of the respondent’s bill and the respondent would not be responsible for any refund of sums to the applicant referrable to counsel fees in the event that counsel fees were reviewed by the applicant.

13 On the basis of the change in the respondent’s position counsel still may have potentially been affected by, and had an interest in, the relief now sought in the additional proposed ‘substituted’ questions. As a result a further email was sent on 27 November 2018 by my Associate to the parties. A copy of the respondent’s Submissions was sent to the three counsel by the respondent togther with notice of the hearing date of 10 December 2018. Counsel were therefore on notice as to the submisions to be made by the respondent in relation to the contractual arrangements affecting counsel and the consequential orders to be sought by the respondent at the hearing date on 10 December 2018.

14 Any affidavit and submissions by the applicant were due on 4 December 2018 as per the order of the Judicial Registrar. No subissions were filed. However, the solicitor for the applicant sent an email to the Costs Court in the following terms:

15 Although the email states that no submissions are to be filed, in practical terms the email conveys opposition to the alteration of the initial preliminary questions posed by the respondent (outlined in paragraph 5 above) and requests that they be answered. The applicant also opposes the foreshadowed addition of the the new questions (outlined in paragraph 7 above). The email advances no argument in support of this postion, is silent in relation to the material relied upon by the respondent in support of the amendment of their position, and advises that the applicant does not propose to attend the hearing. This amounts to a failure to engage in open court with the application by the respondent to amend the questions to be answered or address the merits of the matters foreshadowed and the implications of the documents relied upon by the respondent. The applicant had adequate notice of the respondent’s application and the documents to be relied upon. There is no suggestion in the email that the applicant was caught by surprise or needed more time to consider the proposed change. Accordingly, the respondent is entitled to have its application dealt with notwithstanding the applicant’s failure to appear.

16 There were no appearances on behalf of any of the three counsel at the hearing on 10 December 2018. There was no obligation to do so as they are not parties to this proceeding.

17 The Court was provided with copies of emails sent to the respondent by all three counsel in response to the Submissions.

18 On 30 November Mr Ruskin QC wrote in part ‘I do not intend to appear at the hearing before Associate Justice Wood but that is in no way to be taken as agreement with the submissions filed by your counsel’.

19 On 30 November Mr Boas wrote in part ‘I do not intend to appear at the hearing on 10 December 2018 before Wood AsJ, but that must not be taken as agreement with the submissions filed by your counsel so far as they relate to me’.

21 All three counsel were in receipt of the Submissions and on notice of the argument to be persued in relation to the effect of the contractual arrangements between them and the respondent. An opportunity to participate in the hearing and put opposing submissions has been declined by all three. Accordingly, the matter was dealt with on the material filed and relied upon by the respondent.

22 It is uncontroversial to say that in practice the usual contractual arrangements are that a solicitor engages counsel on behalf of a client, and the solicitor is liable to counsel for the fees. The client is then liable to indemnify the solicitor for those fees.

88. ... it is open to the solicitor to negotiate a contract which is solely between the barrister and the client. Also, the solicitor may be a party to an agreement and exonerate himself from any liability to pay the fees. In the end, it is a matter for negotiation.

100. ... In the absence of any contrary evidence, the retention of the barrister would result in a contract between the barrister and the solicitor.

24 From the material made available to the Court in this matter there appear to be two Costs Agreements in operation as between the applicant and the respondent. In the first one, dated May 2013, it states that ‘You will be responsible for all fees and charges made and expenses incurred by any barristers...’^[6] The second one, dated April 2016, states ‘We will charge you at cost for any disbursements we incur on your behalf.’^[7] The standard terms have a discrete paragraph dealing with barristers’ fees. This states ‘You will be responsible for all the fees and charges made and expenses incurred by any barrister.’^[8]

25 The relevant backsheets produced by the respondent for all three counsel contain the words ‘In this matter we engage you only as agents for the above client. Please ensure that you issue your fee slips in the name of the client on your tax invoice. While we will take all reasonable steps to ensure your fees are paid we accept no personal liability for payment of Counsel fees’. A barrister always has the option of declining a brief if the instructing solicitor does not agree to be responsible for payment of their fees.^[9] All three counsel appear to have accepted the briefs, performed work, rendered invoices and been paid.

26 In the case of Mr Boas those same words appear in the relevant ‘Memorandum to Counsel’ that accompanied his brief. In the case of Ms Doyle the front page of her own Costs Agreement described the ‘Law Practice’ as the respondent and the ‘Client’ as the applicant. Significantly though, the Costs Agreement was signed on the last page by the applicant as the ‘Client’ and the applicant’s name was inserted on the signing page as the ‘Law Practice’.

27 In response to a question from the bench on 10 December 2018 the respondent’s counsel advised that the respondent was unable to locate any Costs Agreements in relation to the other two counsel.

28 The invoices of counsel were addressed to the respondent and the Court was advised that they were paid by the respondent from funds provided by the applicant, with the exception of one amount which was paid directly to one of the counsel by the applicant.

29 Counsel fees were referred to in the bills of the respondent as ‘expenses’, rather than disbursements. When referring to counsel fees both of the respondent’s Costs Agreements with the applicant stated ‘These amounts may be billed to you directly by the persons concerned or as part of our bills to you’.^[10]

30 Taking all the documents produced by the respondent together, being the contractual arrangements between the applicant and respondent, and between the respondent and all three counsel, I am satisfied that collectively they amount to the ‘contrary evidence’ that Gillard J was referencing in Dimos.

31 The totality of the evidence produced leads to the conclusion that there was no obligation on the respondent to pay counsel fees. The Costs Agreements between the applicant and the respondent authorise the respondent to act as the applicant’s agent when counsel were briefed and make it clear the applicant is liable for counsel fees. The backsheets for counsel make that clear for all three. Counsel had the opportunity of returning the brief or negotiating a different arrangement. In the case of Mr Boas the Memorandum corroborates the backsheet and confirms that arrangement. In the case of Ms Doyle the signing clauses and signature of the client also corroborates the backsheet and confirms the arrangement.

32 Accordingly, the applicant only has the right to tax the professional costs of the respondent and disbursements or expenses other than counsel fees. In the event that the applicant wishes to continue with these proceedings any order for the respondent to prepare an itemised bill would be restricted in that manner.

33 Returning to the question posed in paragraph 7 above, all three counsel do not appear to be the recipients of a ‘direct brief’ in the way that concept is generally understood, that is by accepting a brief directly from the client without an instructing solicitor being invloved. They were briefed by the respondent in their capacity as instructing solicitors on behalf of the applicant as was apparent from the endorsements on the briefs. The respondent was however not personally liable for the payment of counsel fees. The practical effect is accurately outlined in paragraph 12 of the Submissions (reproduced at paragraph 9 above).

34 However, the applicant elected not to appear at the hearing on 10 December 2018. I do not propose to make an order requiring the respondent to incur the cost of preparing an itemised bill in relation to their own costs until the applicant’s position is clarified in light of this ruling. The parties need to consider the effect of these reasons before the proceeding is advanced further.

35 Unless the parties wish to contend for different orders, my preliminary view is that the matter ought to be adjourned for mention on 1 February 2019 with the question of costs reserved. The respondent should also be required to serve a copy of this ruling and reasons on the three named counsel.

Supreme Court of Victoria

Holloway v Madgwicks [2018] VSC 773 (13 December 2018)