Boulton Cleary & Kern's Bills of Costs, Re [1994] QSC 161

IN THE SUPREME COURT OF QUEENSLAND Townsville J Application No. 18 of 1993 IN THE MATTER of Section 25 of the Costs Act 1867 -and- IN THE MATTER of certain Bills of Costs of BOULTON CLEARY & KERN -and- IN THE MATTER of an Application for referral for taxation of the Bills of Costs by YARRAWONGA PTY LTD (ACN 009 713 071) Application No. 17 of 1993 IN THE MATTER of Section 25 of the Costs Act 1867 -and- IN THE MATTER of certain Bills of Costs of McCullough Robertson -and- IN THE MATTER of an Application for reference for taxation of the Bills of Costs by YARRAWONGA PTY LTD (ACN 009 713 071) Application No. 16 of 1993 IN THE MATTER of Section 25 of the Costs Act 1867 -and- IN THE MATTER of certain Bills of Costs of BOULTON CLEARY & KERN -and- IN THE MATTER of an Application for referral for taxation of the Bills of Costs by YARRAWONGA PTY LTD (ACN 009 713 071) -- 1 of 12 -- ) ) ) ) JUDGMENT KIEFEL I Judgment delivered the 17th day of June 1994 Prior to 11 March 1992 it was proposed that a Mr Burston would lend the sum of $60,000 to Yarrawonga Pty Ltd, the applicant in these proceedings. Mr Burston sought and received advices from his solicitors, Boulton Cleary & Kern on 10 and 11 March and at the initial meetings agreement was reached between them as to the hourly rates which would be charged by that firm. On 11 March 1992 a Deed of Loan was executed. By cl.8.2 Yarrawonga agreed to pay Mr Burston's costs and expenses including any legal expenses incurred by him on a solicitor and own client basis in relation to the "negotiation, preparation, execution, implementation, administration and enforcement or attempted enforcement of the terms and conditions of this deed and any security documentation ... ". The solicitor then attended to the preparation of security documents including a mortgage debenture and bills of mortgage. He says that this documentation was more complex than usual as were the potential insolvency problems which had to be addressed, and a number of companies involved in the distribution of the monies. On 10 June 1992 Yarrawonga defaulted under the terms of the Deed and on 24 July 1992 Provisional Liquidators (Messrs Ernst & Young) were appointed on Mr Burston's application. Extensive negotiations then followed between persons associated with Yarrawonga, the Provisional Liquidators, Mr Burston and his solicitors. The accounting and legal expenses which have resulted far outweigh the initial advance and the amount due on default. On 20 November 1992 the liability of Yarrawonga was discharged by arrangements to meet payment of the amount due and payment of other monies to be applied to the Provisional Liquidator's -- 2 of 12 -- 3 remuneration and their and Mr Burston's legal costs. Mr Burston's application was withdrawn and the Provisional Liquidators discharged. These three applications concern the right of Yarrawonga to have bills of costs referred for taxation although the principal matters of dispute arise in O.S. No. 18. There was no issue taken as to Yarrawonga's liability generally for the costs, under the terms of the Deed of Loan. O.S. No. 18 ) In the month or so preceding 20 November 1992 an account of fees was delivered to Mr Burston by his solicitors. That bill, dated 16 October 1992, and ) relating to the period from 10 March to that date was for a total of $66,479.69. On 9 November 1992 another bill for the sum of $4947.06 for the period from 19 October to 6 November and on 8 December 1992 a bill for the period from 19 November to 16 December and totalling $16,111 were rendered. The bill dated 16 October is said to have been paid by Mr Burston by monies paid by on 31 March 1992, ) 6 May 1992 and 20 November 1992 together with an acknowledgment of debt and an equitable mortgage. The bill of 9 November has only been partly paid. ~\ ) It appears by Yarrawonga's solicitor's letter of 4 November 1992 that the account dated 16 October 1992 had been provided to them. They wrote on that occasion asking for further detail and raising questions as to the bill. On 11 November 1992 letters were exchanged concerning payments to Mr Burston by Yarrawonga, including payments of monies towards his costs. After acknowledging the amount of its indebtedness it was proposed by Yarrawonga that it would pay the sum of $66,000 on account of the costs payable to Mr Burston "in terms of a Loan Agreement and securities collateral thereto" but went on to provide that if a -- 3 of 12 -- ) ) ) ) 4 certificate of taxation issued for a greater amount it would undertake to pay without demand; that the amount paid for costs was to be taken as paid under protest "and on the basis that the company will be entitled to call for any bill to be taxed in due course"; that Boulton Cleary & Kern were required to undertake to provide a bill in taxable form promptly and that if the costs as taxed or agreed upon were less than the sum paid, there would be a refund. Each of these paragraphs was agreed to by Mr Burston's solicitors by letter dated the same day save for a qualification to the effect that the bill referred to would be one rendered as against Mr Burston, although a copy would be provided to Yarrawonga. In a written acknowledgment of 20 November 1992 Mr Burston confirmed that the sum of $66,000 had been paid "on account of costs payable to me" in terms of the agreement. On 5 February 1993 a bill of costs, being a composite of those delivered to Mr Burston but including some additional charges and totalling $91,562.15 was provided to Yarrawonga. Although it is entitled in such a way to refer to a costs agreement between the solicitor and client it is not contended by the respondent that there was an agreement enforceable under the Solicitors Act 1891. It is however said that the agreement as between Mr Burston and his solicitor is a matter relevant on a taxation if that is to follow. The threshold question is that raised by the respondent, namely that the bill of 16 October 1992 has been paid and that by reason of s.33 of the Costs Act 1867 Yarrawonga is unable to obtain a reference for taxation unless it can show "special circumstances". It is then submitted, it cannot make out that requirement since it has not established, as it alleges, that the bill is redolent with overcharging: as to -- 4 of 12 -- ) ) ) ) 5 which see Walsh · Halligan and Douglas' Bill of Costs (1990) Qd.R. 288, 295; Re Cheesman (1891) 2. Ch.289, or that payment by it was made under 'pressure'. The applicant stands in the position of a third party liable to pay, or who has paid a bill. Under s.30 of the Costs Act it has the right to refer the bill for taxation. By s.33 however if there has been payment of "such bill" the Court may still refer the matter for taxation if "the special circumstances of the case shall in the opinion of the Court require the same". The "bill" referred to in s.33 is the bill which is initially sent by the solicitor to its client and it is that bill which is taxed in the third party taxation. The respondent relied upon the payments made by the client, Mr Burston. The earlier payments were in fact only made towards a bill which had not been delivered, and would not have constituted 'payment' under the Act (see Re Walsh Halligan Douglas' Bill of costs, 293). As between the solicitor and client, the client's later conduct in concluding arrangements on the bill may have affected his entitlement to taxation, but that is not a relevant consideration here. The arguments advanced however proceeded beyond the question as to whether there had been payment within s.33 and focussed upon the requirement of 'special circumstances'. Whether there has been improper pressure to pay may furnish an explanation of the fact of payment, which fact may otherwise stand in the way of a right to taxation or place an onus on a party to show why a taxation is justified. An inference which may of course be drawn from payment, and which underlies its importance, is that the client has accepted the bill. Here however the 'payment' in question was made by the client, Mr Burston, and it could not be suggested the applicant played any part in it. Similar questions, as to acceptance, might arise -- 5 of 12 -- 6 against a third party when the issue as to whether there are 'special circumstances', is addressed, but I do not think it is here necessary to resort to the older cases, mostly concerning the conduct of solicitors (whose bill it was), to see if 'improper pressure' has been applied. With respect to the question of overcharging, the applicant's costs assessor's approach was to treat the bill as an itemised bill, apply the second schedule of the Rules of Court to it and allow only the lesser amount provided. Were that approach appropriate a practical difficulty arises in the comparisons made and with the result ) then obtained. An itemised bill would be subject to an allowance for care and consideration, here not allowed by the assessor, although he conceded that the ) transactions in question might attract a reasonable a~ount for the item. The hourly rate he has rejected has built into it a component for care and consideration. But in any event the approach, I consider, fails to have regard to the nature of the bill to be taxed and it assumes that reference to the second schedule, or an itemised " account, must be required. ) The bill to be taxed is one between solicitor and own client. Section 18 of the Solicitors Act 1891 permits the taxing officer to have regard to the skill, labour and ) responsibility involved in the business the subject of the bill. At the same time it will be proper for the taxing officer to consider the question of the third party's liability in respect of the bill. Whilst it stands in the position of the client, its liability is not increased by the reference for taxation and extends only so far as the terms of its agreement: In Re Cohen and Cohen (1905) 1 Ch. 137, 141-2. It will be a rare occurrence to find an agreement to provide a complete indemnity for whatever costs the solicitor determines to charge, and this is not such a case. The agreement, -- 6 of 12 -- ) ) ) ) 7 as in Re Cohen can be regarded as one by Yarrawonga to pay all reasonable and proper costs (and see. also Re Longbotham (1904) 2 Ch. 152). This would not extend to include extra costs which the solicitors could only recover by special arrangement, as here by the agreement as to the hourly rate of charge. The fact of the arrangement may be relevant on a taxation as between solicitor and client, at least where it was shown the client had a full appreciation of what it and any alternatives entailed. But the question on a third party taxation is what is a reasonable and proper charge, having regard to the skill and responsibility involved. If the approach by application of an hourly rate (and the quantum of the rate) is found justified, it will be on this basis and not because of the arrangement. Such an assessment was not undertaken here. Further, with respect to the costs assessor's approach, there is nothing in the Rules which requires the taxing officer to apply the Second Schedule in these taxations and 0.91 r.29 refers to fees with respect to business transacted in the Court. In some cases, on such bill as these, it might be appropriate for a taxing officer to have regard to the Second Schedule, where the same item appears, but only after an assessment of the work undertaken. The fact that the applicant has not shown, on the present material, that there was excessive charging does not however prevent a conclusion that special circumstances exist. A third party is quite likely to receive a bill after payment has been made by the client. That is a matter not within its control. The likelihood that special circumstances will be required to be shown (because the third party is for the purposes of payment equated with the party chargeable) and an acknowledgment that the position third party cannot, for all purposes be considered to be the same as the other party is made clear by the proviso to s.30: -- 7 of 12 -- ) ) ) ) ----------------- 8 "Provided always that in case such application is made when under the provision herein contained a reference is not authorised to be made except under special circumstances which shall be lawful for the Court or judge to whom such application shall be made to take into consideration any additional special circumstances applicable to the person making such application although such circumstances might not be applicable to the parties so chargeable with the said bill as aforesaid if he was the party making the application." Special circumstances relating to a third party will usually arise where a third party has not seen the bill: Re:_ Hirst and Capers (1908) 1 K.B. 982; Re Fielder and Sumner ex parte Bailey (1871) 40 L.J.Ch. 615. Here the account given to Mr Burston was seen by Yarrawonga's solicitors by 4 November. Assuming for present purposes that it amounts to a bill under the Costs Act and that it was paid by the client it remains the case that Y arrawonga has not been shown to have known of payments made to that date, and in any event that it immediately queried the quantum of the bill and the details of the charges. Further it made a substantial payment towards costs only on the basis that it be agreed that the bill be taxed, and that agreement was forthcoming. Either that fact alone or the other circumstances referred to amount to special circumstances warranting a taxation. In the event that I ordered a reference of the bills for taxation the respondent sought leave to deliver another bill. I understood this was to permit it to add a reference to items such as care and consideration, but this will only arise if an itemised bill is seen to be required, a matter properly to be determined by the taxing officer (091 148). O.S. No. 17. Y arrawonga here seeks an order that the bill of costs of McCullough Robertson rendered to the Provisional Liquidators and dated 2 December 1992 and 16 -- 8 of 12 -- ) ) ) ) .. --------------~-------- 9 February 1993 in the sums of $20,935.72 and $3,990.68 respectively be referred for taxation. On 16 November 1992 that firm required, on behalf of the Provisional Liquidators and prior to the orders made, payment by Yarrawonga of the sum of $128,529.62 representing the remuneration for the Provisional Liquidators, their disbursements and costs, much of which was then -only estimated (and increased slightly thereafter). Of that sum, an amount of $19,748.62 was referable to that firm's costs, although it included amounts for counsel's fees for which the firm was liable. The required amount was paid and disbursed. By letter of 16 November 1992, as later conceded by McCullough Robertson, Yarrawonga's solicitors advised that they were unable to corrie to a view about the amount of costs given the lack of particularity provided by the bill. Although another, more detailed, bill dated 5 March 1993 was provided, the applicant's costs assessor was only able to identify a small amount which, in his view, would be allowed after taxation. The principal complaint was that relating to the hourly rate charged, but the error in the assessor's approach I have earlier referred to also attends these bills. The summons seeks orders referring the bills of December and February. All bills were accepted by the applicant as bills under the Act. The payment by the applicant was only 'on account' of costs and does not stand as an acceptance of them. The applicant is entitled to have them taxed. Indeed, given the concession earlier made by the respondent firm in correspondence I had difficulty understanding the attitude taken on the application. -- 9 of 12 -- -------- ------------ ---·------· ---- 10 O.S. No. 16 The applicant here seeks orders that nine bills relating to conveyances to various third parties in the course of the provisional liquidation and dated between October and 17 November 1992 together with two bills relating to Boulton Cleary and Kern's work for the Provisional Liquidators be referred for taxation. Of the sum of $129,529.62 paid on 20 November 1992 it is said the applicant paid $28,725.23 on account of these professional fees and outlays and the bills were not produced until 18 February 1993. ) Of the conveyancing charges Yarrawonga points to the fact that the solicitors have charged according to the Law Society scale but in circumstances where the ) transactions had proceeded little beyond the stage of contract and the documentation used was common to the transactions. On the other hand its costs assessor agreed that there might here be involved something more complex than the 'cottage' conveyance which the scale might be seen to represent, particularly given \ the level of involvement of the solicitors in the particular transactions. Indeed there ) seems to be a real doubt about the appropriateness of the application of the scale at all, which at the most is a guide or reference point: see re Bain Gasteen & Co's Bills ) of Costs (1991) Qd.R. 412, 415. Regarding the bills for work arising under the liquidation, like those of McCullough Robertson, the question is one of time costing and the hourly rate to be applied. There is also raised the question whether there has been duplication of charges here with those charged to Mr Burston. The letter of 20 November 1992 reserved the applicant's position as to that. -- 10 of 12 -- ' . ) ) 11 Again, it is not necessary to determine these questions. The payment was only a part-payment, on account and with respect to bills not yet presented, and the applicant is entitled to have them taxed. Orders In O.S. No. 18 there will be an order that the Bill of Costs of Boulton Cleary and Kern to Ian Dennis Burston in the matter of an advance to Yarrawonga Pty Ltd being that provided to the applicant on 5 February 1993, be referred for taxation. In O.S. No. 17 I order that the bills of costs of McCullough Robertson rendered to the Provisional Liquidators and dated 2 December 1992 and 16 February 1993 be referred for taxation. In O.S. No. 16 of 1993 I order that each of the bill of costs set out in paras. 1 to 11 inclusive of the-summons be referred for taxation. Given my comments as to the basis of the third party's liability for taxation and referred to in O.S. No. 18, I do not think any further directions to the taxing officer are warranted. The direction sought, that the taxing officer have regard to the agreement made on 20 November 1992 does not seem to me to be relevant to his task, although it was to this application and it may be to what follows from taxation. In relation to costs I consider that the respondents ought to pay the applicant's costs incurred by their contest as to the applicant's right to a reference. Whilst it is true to say that the registrar referred the matter to the Court, the respondents strongly opposed the order being made over a lengthy hearing and in the face of agreements for taxation in one case and the concession that it was appropriate in another. I do not however consider that the applicant ought to have -- 11 of 12 -- \ / 12 its costs insofar as they extend to the engagement of the costs assessor whose evidence I have not found to be of assistance for the reasons I have set out. The order in each summons with respect to costs will then be that the respondent pay the applicant's costs of and incidental to the application including reserved costs, if any, to be taxed, but that such costs do not extend to those incurred in the engagement of the costs assessor for the purpose of the application. -- 12 of 12 --