Donnell v Murrell Stephenson (a firm) [2002] QDC 169

DISTRICT COURT OF QUEENSLAND CITATION: Donnell v Murrell Stephenson (a firm) [2002] QDC 169 PARTIES: OWEN DONNELL Appellant V MURRELL STEPHENSON (a firm) Respondent FILE NO/S: Appeal 5830 of 2001; M3806 of 2001 DIVISION: PROCEEDING: Appeal ORIGINATING COURT: Magistrates Court Brisbane DELIVERED ON: 11 June 2002 DELIVERED AT: Gympie HEARING DATE: 20 May 2002 JUDGE: McGill DCJ ORDER: Appeal allowed; judgment of the Magistrates Court at Brisbane of 13 November 2001 set aside, except insofar as that court gave liberty to either party to apply in relation to costs; substitute judgment that the defendant pay the plaintiff $11,630.15 together with the costs of the proceeding to be assessed if not agreed; the respondent to pay the appellant’s costs of the appeal to be assessed. CATCHWORDS: LEGAL PRACTITIONERS – Solicitor and Client – Costs – whether payment of lump sum bill prevents assessment of itemised bill – whether claim to recover overpayment within release and discharge – Queensland Law Society Act 1952 ss62A, 62E, Legal Practitioners Act 1995 ss65,16. CONTRACT – Construction – release and discharge – no reference to separate existing dispute – whether that dispute is in any way connected with the proceeding settled. Re Bailey’s Bill of Costs [1994] 1 QdR 576 – followed. Schenker & Co (Aust) Pty Ltd v Maplas Equipment & Services Pty Ltd [1990] VR 834 – applied. Re Walsh Halligan Douglas’ Bill of Costs [1990] 1 QdR 288 – followed. -- 1 of 10 -- 2 COUNSEL: P.W. Hackett for the appellant J.S. Miles for the respondent SOLICITORS: Crouch & Lyndon for the appellant Murrell Stephenson for the respondent [1] The respondent solicitors formerly acted for the appellant in proceedings in the District Court in New South Wales at Grafton (“the NSW action”). The appellant commenced proceedings seeking to recover an amount alleged by him to have been overpaid in respect of the respondent’s professional costs for so acting. That action was dismissed by a magistrate, and the plaintiff has appealed to this Court. Appeal is by way of re-hearing: Uniform Civil Procedure Rules rr 765, 785(1). Background [2] The facts leading up to the litigation may be summarised as follows: 24 February 1997 Plaintiff retained defendant to act on his behalf in respect of the NSW action March 1997 Plaintiff signed and returned written engagement and trust account authority; Exhibit 4. 24 October 1997 The NSW action settled. 13 November 1997 Defendant sent a lump sum bill of costs for $27,928.28, which was satisfied by the application of moneys previously received by the plaintiff on account of outlays ($10,536.00) and an amount transferred from funds held in the defendant’s trust account, the proceeds of settlement of the NSW action ($17,402.28). 24 July 1998 A second lump sum bill forwarded by the defendant to the plaintiff for $3,121.78. 28 July 1998 Plaintiff sought an “itemised account” from the defendant: Exhibit 2. 3 August 1998 Plaintiff’s new solicitors advised that there ass a dispute in relation to instructions to settle “and also in relation to the bills that have been rendered” and, noting that a lien has been claimed in respect of the files, enclosed payment in respect of the second lump sum bill with a reservation of rights “with respect to any issue [the plaintiff] may have with your firm arising out of the conduct and costing of this file.”: Exhibit 3. 1999 Plaintiff commenced action against the defendant for professional negligence in respect of the conduct of the NSW action. 10 April 2000 An itemised account covering all the work covered by the two lump sum bills provided by the defendant to the plaintiff. -- 2 of 10 -- 3 (Date not identified) Plaintiff applied to the Solicitors Complaints Tribunal for the appointment of a costs assessor to assess the itemised account under s.6ZA of the Queensland Law Society Act 1952. 27 July 2000 Plaintiff’s action for damages for professional negligence against the defendant settled, with the parties executing a release, discharge and indemnity: Exhibit 7. 4 January 2001 A costs assessor assesses the account (dated 10 April 2000) at $22,131.23: Exhibit 1. 6 February 2001 Costs assessment becomes binding under s.6ZE. 27 February 2001 Magistrates Court proceedings commenced by plaintiff 13 November 2001 Magistrates Court proceedings dismissed after trial. [3] The amount assessed by the costs assessor was less than the total amount which the appellant had paid for the respondent’s fees, by $8,918.83. That was the amount the recovery of which was sought by the appellant in the Magistrates Court. The appellant was unsuccessful in that court in respect of two issues either of which is fatal to the appellant’s claim. These were that: (a) The provisions of the Queensland Law Society Act 1952 which commenced on 1 July 1998 1 (“the 1998 Act”), did not apply to the first of these bills because it had been rendered and paid prior to the commencement of that Act, and the appellant had not taken the steps provided in the former legislation (the Legal Practitioners Act 1995: “the 1995 Act”) for the assessment of the amount payable under a bill which had been paid. (b) This claim was barred by the release discharge and indemnity agreement executed in connection with the settlement of the professional negligence action. Did the 1998 Act apply? [4] There are no useful transitional provisions in the 1998 Act; all that they provide is that an agreement between solicitor and client made in accordance with the 1995 Act will be a client agreement for the purposes of the 1998 Act. 2 In the absence of relevant transitional provisions, the 1998 Act will apply except where to do so would interfere with rights which have accrued under the former Act. 3 Under the 1995 Act, which was a consolidation and replaced provisions enacted in the Costs Act 1867, a solicitor could not sue to recover fees or disbursements until the expiration of one month after delivery of a bill in taxable form: s.5. Within that month the party chargeable with the bill could obtain taxation of it without any special order from the court, and after the month the Supreme Court on application by one of the various relevant parties had jurisdiction to order taxation: s.8. There 1 The amendments made by the Civil Justice Reform Act 1998 2 Section 56 of the Queensland Law Society Act 1952, inserted by s.10 of the Civil Justice Reform Act 1998. 3 Acts Interpretation Act 1954 s.20(4). -- 3 of 10 -- 4 was however some limitation, in terms of time and in terms of the progress of an action to recover fees, on the making of such an application: s.8(3). [5] The position in the case of a bill which had been paid was dealt with expressly by s.16: “(1) The payment of any such bill as aforesaid shall in no case preclude the court or judge from referring such bill for taxation if the special circumstances of the case shall in the opinion of such court or judge appear to require the same upon such terms and conditions and subject to such directions as to such court or judge shall seem right. (2) However, the application for such reference [must] be made within 12 calendar months after payment.” [6] However it is important to bear in mind that this section refers to the payment of any “such bills as aforesaid”. That means a bill which satisfied the requirements of s.5. 4 Under the 1995 Act, the requirement was that the bill be in sufficient detail to enable the client to take informed advice as to whether he should require taxation. 5 The bill however did not need to be in the form required by the Rules of the Supreme Court. 6 The two decisions cited establish that until a bill of costs in such form has been delivered, payment will not be a bar to taxation, and the client can still demand a proper bill. In the same way, the reservation of a right to dispute the bill at the time of payment is a circumstance sufficient to allow taxation notwithstanding payment. 7 [7] Accordingly the fact that the first bill had been paid was not conclusive for the purposes of the 1995 Act. The first bill was not a bill in accordance with the requirements of s.5; it did not permit an informed decision to be taken as to whether to submit the bill for taxation. For present purposes, I assume that the agreement Exhibit 4 was valid and binding on the parties. Accepting that that agreement provided for charging on an hourly basis, the bill did not indicate how the amount claimed for professional costs had been arrived at in accordance with that agreement. The appellant was entitled to a bill showing how the amount claimed by the respondent was properly payable in accordance with that agreement. That arises from the general law, and is reflected in Rule 84 of the Rules of the Queensland Law Society Incorporated. [8] The position therefore on the commencement of the 1998 Act was that, although payment had been received by the solicitor in respect of the first “bill”, since that bill was not one in accordance with s.5 of the 1995 Act payment did not stand as a bar to the appellant’s right to taxation of that bill, and therefore was not a bar to the appellant’s right to obtain a bill in taxable form, that is a bill in accordance with s.5 of the 1995 Act, as explained in the authorities. To look at the converse position, the respondent did not have a right to retain the payment which had been made in respect of that “bill” free from any challenge to quantum by the appellant. There is therefore no question of there being any accrued right of the respondent preserved following the repeal of the 1995 Act when its provisions were superseded by the 1998 Act. 4 Re Bailey’s Bill of Costs [1994] 1 QdR 576 at 580. 5 Re Walsh Halligan Douglas’ Bill of Costs [1990] 1 QdR 288 at 294. 6 Re Bailey’s Bill of Costs (supra) at page 580. 7 Re Walsh Halligan Douglas’ Bill of Costs (supra) at page 295-6. -- 4 of 10 -- 5 [9] Subject to that the terms of the 1998 Act are of general application. It is common ground that in April 2000 the respondent gave the appellant an account in compliance with s.6ZA of the 1998 Act. That provision on its face applied in relation to that part of the account which duplicated the “bill” which had been given in November 1997 and had been paid. In my opinion there was no reason why it would not do so, and there was also no reason why it would not apply in relation to the lump sum bill which had been given in July 1998 and paid under protest with a reservation of rights. As at April 2000 the plaintiff was entitled to obtain what was traditionally referred to as a bill in taxable form, and in the terminology of the 1998 Act became an itemised account. It follows that when such account was provided s.6ZA applied to it. [10] No issue was taken with the proposition that, if that were the case, it was subsequently validly assessed and the assessment in due course became binding on the parties: s.6ZE. Subsection (2) of that section of the 1998 Act provides that the binding costs assessment “may be enforced as a debt for the assessed amount”, but assumes that the amount has not already been paid. Indeed, I can find nothing in the 1998 Act which deals with or even contemplates a situation where the assessment takes place after payment. It was however well established under the previous legislation that payment of the amount claimed was not necessarily a bar to having the amount properly payable determined in the appropriate way, and there is no reason to think that the legislature in enacting the 1998 Act intended to sweep all that away by implication. If the legislature had intended to change the law in this respect it would have said so expressly. [11] The absence of an express reference to payment would seem to mean that payment has ceased to be a bar in the way in which it could have become a bar pursuant to s.16 of the 1995 Act. However, it is not necessary to deal with the matter further. Counsel for the respondent did not seek to rely on any provision of the 1998 Act to render s.6ZE inapplicable on the ground of prior payment. His argument was that the 1998 Act did not apply in respect of the first bill at all, and I do not accept that argument. Where the binding assessment is for an amount less than the amount which has been paid, it must in my opinion follow that the balance is recoverable by the client. Subject to the second argument about the effect of the agreement which settled the professional negligence action, the contrary was not argued in the present case. It follows that the appellant has succeeded in relation to the first issue in dispute in the appeal. It is necessary now to consider the second. Effect of the settlement agreement [12] The agreement which was Exhibit 7 provided relevantly in the following terms: “In consideration of the persons described in the first schedule … agreeing to pay to [the appellant] … the sum of money referred to in the third schedule … paid in full and final satisfaction and discharge of all claims whatsoever inclusive of costs which the claimant, or any person on behalf of the claimant, may have arising as a result of or in any way connected with the matter (as defined in the sixth schedule) the claimant hereby: Releases discharges and forever holds harmless the persons discharged with respect to (and agrees to indemnify and keep indemnified the persons discharged in respect of any and all loss arising as a result of) any and all causes of action, claims (including but without limiting the generality of the foregoing claims for legal costs and consequential -- 5 of 10 -- 6 loss of profit), demands, actions, suit or proceeding (including but without limiting the generality of the foregoing the proceedings described in the fourth schedule) (hereinafter called “the Present Proceedings”) of whatsoever nature, which the claimant, or any person on behalf of the claimant, may now have or at any time heretofore had or at any time hereafter may have or but for the execution of this discharge, release and indemnity, could have against the persons discharged (and each of them) with respect to or in any way connected with the matter. … The First Schedule The persons discharged: … [the respondent] … The Sixth Schedule The matter: A claim by the claimant Owen Donnell against the persons discharged for damages for alleged professional negligence in the conduct of a claim commenced in the District Court of New South Wales at Grafton for personal injuries occasioned to the claimant and in respect of any claims arising out of or as a result of the claimant’s right to party/party costs and outlays in that action”. [13] The words shown in italics were handwritten additions to the typed document prior to its execution, and therefore represented an amendment made to previous document in order better to reflect the true intention of the parties as to their agreement. The document has been signed by the appellant and by Counsel for the other parties to the settlement, including the respondent. [14] That agreement is, at least initially, expressed in wide language; it extended to any claim of whatever nature which the claimant may have or ever have against the respondent, in terms which would be clearly wide enough to include the claim in the Magistrates Court action, but there is then the limitation that what is excluded is only claims “with respect to or in any way connected with the matter”. The respondent did not allege the present claim was one with respect to the professional negligence matter, and plainly that was appropriate. The magistrate found that the present claim was in some way connected with the matter. The question is whether that is correct. If it is then the present claim is barred. [15] The magistrate dealt with this argument, after considering certain provisions of the document, by saying: “This is extremely broad and inclusive language. In particular I note from the terms of clause 1 that the discharge is in addition to the particular action referred to in the Fourth Schedule, that is the District Court action number 2276 of 1999. The agreement is not just to finalise that particular action but “all claims whatsoever inclusive of costs which the claimant, or any person on behalf of the claimant, may have arising as a result of or in any way connected with the claim for professional damages.” This action is for a refund of legal professional costs alleged to be overpaid in the professional negligence claim. It is in my view “connected with the matter.” Accordingly I find that the plaintiff is in breach of the agreement releasing and discharging the defendant from any action, including the one before the court.” -- 6 of 10 -- 7 [16] It was accepted by Counsel for the respondent that there was an error in the third last sentence of this passage, in that the claim does not relate to the costs of or overpaid in the professional negligence claim, but relates to an alleged overpayment of the costs in the NSW action an aspect of which was the subject of the professional negligence claim. The respondent submitted however that this did not alter the fact that the claim for the refund of costs was connected with the relevant matter, namely the professional negligence claim. [17] It is I think worth noting that at the time when the agreement was signed there were two disputes in progress between the parties, the professional negligence action and the dispute as to the quantum of costs. Both had been raised in the letter from the appellant’s new solicitors of 3 August 1998 (Exhibit 3), and as at 27 July 2000 the appellant had sought and obtained the itemised account from the respondent. It is not clear whether the application to refer this to a costs assessor was made before or after that date, but I suspect that it was made before; in any case there is nothing to indicate that the appellant was not at that time apparently actively disputing the quantum of the respondent’s bills. [18] There is no information in the evidence as to the nature of the professional negligence alleged against the respondent, or as to the relief sought in that action by the appellant prior to its being compromised. The respondent did not show, or indeed seek to show, before the magistrate that that action raised any issue as to the costs charged by the respondent in relation to the NSW action, or sought any relief in respect of those costs. The argument of the respondent was rather that the connection lay in the fact that the professional negligence action was in respect of the conduct of the NSW action, and the claim for refund of overpaid costs was also in respect of the NSW action, since the costs in dispute were costs charged by the respondent for its conducting those proceedings on behalf of the appellant. [19] When there are two matters in dispute between parties and one of them is settled it would obviously be desirable for the written settlement agreement to spell out expressly one way or the other whether the other dispute is also encompassed by that settlement. The present document however says nothing expressly about the dispute as to the costs of the NSW action. [20] There are two parts to the definition of “the matter”: the professional negligence claim, and “any claim arising out of or as a result of [the appellant’s] right to party/party costs and outlays in that action”. The latter is ambiguous, since it is not clear whether the reference to “that action” is to the NSW action or to the professional negligence action in Queensland, but in either case it does not refer to the appellant’s claim arising out of his liability for solicitor and own client costs and outlays in connection with the NSW action. In my opinion, the more natural reading of the schedule as a whole is that the reference was to the Queensland action, and I find that that is the correct interpretation. Even if “that action” refers to the NSW action, a claim by the plaintiff to a refund of overpaid solicitor and own client costs in respect of that action is not one which arises out of, or is a result of, his right to party and party costs in that action. If it is a reference to party and party costs in the Queensland action that is also something quite different. [21] For the reasons I gave earlier, I would have expected this agreement to deal expressly with both the action for professional negligence (which is clearly what is referred to in the first part of the definition of “the matter”) and the claim in relation -- 7 of 10 -- 8 to the appellant’s liability for costs in respect of the New South Wales action, but the latter part of the definition of “the matter” is, in my opinion, not reasonably capable of being construed as a reference to any such claim. The present action is also not in any way connected with that aspect of “the matter” as defined in the schedule. [22] It may be that there was some possible unexhausted right in respect of the costs of the NSW action as against the other party to that proceeding, which may have been potentially the subject of some separate claim against the respondent, and the intention might have been to cover such an eventuality within the scope of the release. Such a claim may not have been made in the professional negligence action as it was then constituted, but it may have been thought that such a claim was potentially open to the appellant, even of only as a theoretical possibility. This part of the definition of “the matter” can therefore be given some intelligible meaning which would not make it a reference to the then existing dispute in relation to the costs of the NSW action. [23] Having concluded therefore that that dispute is not within or in any way connected with that part of the definition of “the matter”, it then becomes a question of whether a claim in relation to those costs is in any way connected with the professional negligence claim. The respondent submits that the professional negligence claim arose out of the NSW action, and that this provides a link with the current claim which can therefore be said to be connected with the professional negligence claim. The connection is not a direct one, but it is not necessary for it to be direct because the connection can be one “in any way”. On the other hand, the appellant submits that there is a distinction between a claim which is connected with the professional negligence claim (which the present claim is not) and a claim which is connected with the NSW action (which the present claim is) and that the release Exhibit 7 barred only a claim in the former category. In order to exclude a claim in the latter category, it would be necessary to read the release as though “the matter” was a reference to the NSW action rather than the professional negligence action. [24] I acknowledge that, looked at superficially, it is possible to identify what could be interpreted as a connection between the professional negligence proceedings and the current proceedings, namely that both of them arise out of the conduct by the respondent for the appellant of the NSW action. It would be possible to give the expression “in any way connected with” a wide enough interpretation to encompass such a connection. However, in my opinion that is not the correct or preferable interpretation of this contract. It would focus too much on that particular expression, and does not have sufficient regard to the interpretation of the contract as a whole. It is necessary to consider what reasonable people in the position of the parties would have taken the clause to mean. 8 [25] In my opinion on its correct interpretation the clause does not extend to the present proceeding for the following reasons: (a) The fact that each of them is connected in some way with the NSW action it does not really show that there is some connection between them, since it has not been shown that the professional negligence action arose in respect of some aspect of the NSW action which was relevant to the quantification of the amount charged by the 8 Schenker & Co (Aust) Pty Ltd v Maplas Equipment & Services Pty Ltd [1990] VR 834 at 840. -- 8 of 10 -- 9 respondent for acting in them. It would certainly be possible for there to be a connection in such circumstances: If it was alleged that the solicitors were negligent in doing, and therefore charging for, work which reasonably careful solicitors would not have done in the circumstances, or that some failure to take reasonable care on their part rendered some or all of their work of no benefit to the plaintiff so that they ought not to recover payment for such work, then a connection would be shown between the claim for relief for professional negligence and the claim for overpayment of fees. But it would be possible for the negligence to arise because of a failure to do additional things which a reasonably careful solicitor would have done (and would have charged for doing), so that the solicitor was negligent in not doing more rather than because of anything which was actually done. For example, the solicitor may have negligently failed to advise on to investigate and to gather material in respect of and to pursue some additional head of damages, as a result of which the claim was settled for less than it ought to have been. That would not involve any consideration of the solicitors’ charges for the work in fact done, and a claim for refund of overcharged fees would not in those circumstances in my view be connected with the claim for professional negligence. The defendant has not shown that this case falls in the former rather than the latter category. (b) The defendant is in effect seeking to have the agreement interpreted as if “the matter” had been a reference to the NSW action, rather than the professional negligence action. If the intention had been to resolve all possible claims arising out of the NSW action, it would have been easy enough for the parties to say so unambiguously, but in different words. (c) In circumstances where there are two existing disputes between the same parties and one of them is resolved by an agreement which makes no express reference to the other, the ordinary inference is that there was no intention that the agreement would also cover the other dispute. (d) As a matter of general impression, this is not the sort of claim which the release discharge and indemnity was intended to cover. Consider by analogy a hypothetical situation where the appellant had a claim for damages for personal injuries because he slipped and fell on an unsafe stair tread while attending the defendant’s office for the purpose of giving instructions in relation to some aspect of the NSW action. Even if no such claim was on foot or foreshadowed at the time when the agreement was signed, I think that any such claim would clearly not be barred by it. A fortiori if there was an existing action for such damages, or if the intention to make such a claim had already been advised. (e) The document s.7 is headed “APPIIL – Release Discharge and Indemnity”, and also discharged Australia Pacific Professional Indemnity Insurance Company Limited as the insurers of Queensland Law Society professional indemnity insurance scheme. The inference is that they would have been conducting the professional negligence proceedings on behalf of the respondent, and that the document Exhibit 7 came from that insurance company. Accordingly giving the -- 9 of 10 -- 10 words “in any way connected with the matter” a narrower rather than a wider interpretation would be to interpret the document contra proferentum. [26] In my opinion these considerations outweigh the respondent’s arguments. In the light of all these considerations in my opinion the agreement Exhibit 7 did not in its true construction extend to bar the present claim by the appellant. The magistrate erred in finding to the contrary. [27] It follows that the appellant has succeeded in relation to the two matters in dispute on the appeal. These were also the only two matter is dispute in the action, and it follows that the appellant is entitled to recover the amount claimed in the action of $8,918.83. The appellant also claimed interest pursuant to the Supreme Court Act; I would allow interest at the commercial rate of 8% per annum from the date of the payment of the second account under protest, 3 August 1998 until today, 3.8 years, a total of $2,711.32. Accordingly: (a) The appeal is allowed. (b) The judgment of the Magistrates Court at Brisbane of 13 November 2001 is set aside, except insofar as that court gave liberty to either party to apply in relation to costs. (c) There be substituted judgment that the defendant pay the plaintiff $11,630.15 together with the costs of the proceeding to be assessed if not agreed. (d) The respondent pay the appellant’s costs of the appeal to be assessed. -- 10 of 10 --