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Turner v Macrossan & Amiet Pty Ltd  QCAT 5
Markis Scott Turner
Macrossan & Amiet Pty Ltd
(ACN 131 659 384)
Occupational Regulation Matters
28 September 2015
5 January 2016
THE TRIBUNAL ORDERS THAT:
PROFESSIONS AND TRADES – LEGAL PRACTITIONERS – COSTS AGREEMENTS – UNCERTAINTY – where the applicant entered into two costs agreements with the respondent law firm for the delivery of legal services – where the costs agreements included a general care and conduct component permitting the imposition of an additional item of costs at a rate of up to 50% of the legal professional costs – where the applicant filed an application for miscellaneous matters to have the costs agreements set aside for uncertainty – whether the costs agreements should be set aside for uncertainty because the care and conduct clause confers a discretion on the respondent.
PROFESSIONS AND TRADES – LEGAL PRACTITIONERS – COSTS AGREEMENTS – UNCERTAINTY – where the applicant entered into two costs agreements with the respondent law firm for the delivery of legal services – where the costs agreements included a general care and conduct component permitting the imposition of an additional item of costs at a rate of up to 50% of the legal professional costs – where the applicant filed an application for miscellaneous matters to have the costs agreements set aside as unfair or unreasonable – whether the costs agreements should be set aside for being unfair or unreasonable.
Legal Profession Act 2007 (Qld), ss 300, 326, 328(1), 328(8), 328(9A), 335, 342(1)
Queensland Civil and Administrative Tribunal Act 2009 (Qld), ss 6(2), 6(3), 9(2), 10(1), 32, 60(1)
Athanasiou v Ward Keller (6) Pty Ltd (1998) 122 NTR 22
Beckwith v R (1976) 135 CLR 569
Brown v Talbot & Oliver (1993) 9 WAR 70
Clare v Joseph  2 KB 369
Commonwealth v Baume (1905) 2 CLR 405
Ermogenous v Greek Orthodox Community of South Australia Inc (2002) 209 CLR 95
Gregg Lawyers Pty Ltd v Viki Maree Farrar  QDC 194
Jovetic v Stoddart & Co (1992) 7 WAR 208
Kasmeridis v Mcnamara Business & Property Law  SASC 200
McNamara Business & Property Law v Kasmeridis (No 2) (2007) 97 SASR 129
Moleirinho v Talbot Olivier Lawyers Pty Ltd  WASCA 65
Nicholson v Behan and Speed Pty Ltd  VLPT 28
Passey v Chanaka Bandarage (t/as City First Solicitors)  ACTSC 105
Portuguese Cultural and Welfare Centre v Talbot Olivier Pty Ltd (No 2)  WASC 54
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
Re Morris, Fletcher & Cross’ Bill of Costs  2 Qd R 228
Re Stuart; Ex parte Cathcart  2 QB 201
Thorby v Goldberg (1964) 112 CLR 597
Vizovitis v Ryan  ACTSC 243
Weiss v Barker & Gosling (1993) 16 Fam LR 727
Woolf v Willis (1911) 13 CLR 23
APPEARANCES and REPRESENTATION:
Applications determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (the “QCAT Act”).
REASONS FOR DECISION
- This is an application, dated 30 January 2015, to set aside a legal costs agreement entered into between the applicant and respondent on 27 September 2011 for uncertainty or non-compliance with certain formal and substantive requirements prescribed under the Legal Profession Act 2007 (Qld) (the “LP Act”).
- The applicant submits that the legal costs agreement should be set aside for the following reasons:
- the costs agreement is unfair or unreasonable; or
- the costs agreement is insufficiently certain.
- The respondent submits that the contract was fair and reasonable, and that the Tribunal lacks the jurisdiction to declare the contract invalid for uncertainty.
- Before considering the substantive arguments of the applicant and respondent, it is convenient for the Tribunal to briefly describe the factual matrix giving rise to the dispute, and respond to the jurisdictional objections raised by the respondent.
- The applicant engaged the respondent incorporated law firm to represent the applicant in relation to two matters:
- one charge that the respondent had breached r 20 of the Traffic Operations (Road Use Management – Road Rules) Regulation 2009 (Qld) by failing to comply with a designated speed limit (the “Traffic Infringement Matter”); and
- nine charges under the Criminal Code 1995 (Cth), and one charge under the Drugs Misuse Act 1986 (Qld), relating to a conspiracy to import, and the trafficking of, dangerous drugs (the “Drug Trafficking Matter”).
- The respondent rendered two invoices March and May 2014 amounting to $4,193.90 for legal services (inclusive of GST) for the Traffic Infringement Matter.
- The respondent rendered several invoices between October 2011 and August 2014 amounting to $281,119.18 (inclusive of GST) for the Drug Trafficking Matter.
- The invoices and particulars of the professional service fees are set out in exhibits attached to the affidavits of Ms Monique Alice Sheppard (attested 24 July 2015) and Mr Stuart Geoffry Naylor (attested 21 July 2015).
- The respondent raises a preliminary objection that the Tribunal possesses no jurisdiction to issue a declaration that the costs agreement is void for uncertainty for non-compliance with prescribed requirements.
- Section 10(1) of the QCAT Act provides the Tribunal possesses original jurisdiction in respect of:
- minor civil disputes; and
- any subject matter in respect of which jurisdiction is conferred under an enabling Act.
- An “enabling Act” is an Act, other than the QCAT Act, that confers original, review or appeal jurisdiction on the Tribunal. The LP Act, insofar as it confers jurisdiction on the Tribunal, is an enabling Act.
- An enabling Act conferring original jurisdiction on the Tribunal may state the Tribunal’s functions in the jurisdiction, and add to, vary, or otherwise exclude functions stated in the QCAT Act.
- The relationship between jurisdiction conferred under an enabling Act and the QCAT Act must be observed in the context of the structure of the QCAT Act.
- The QCAT Act is the primary statute conferring jurisdiction on the Tribunal. The jurisdiction of the Tribunal is extended through enabling Acts by a process of incorporation and integration. In most circumstances, including under the LP Act, the enabling Act presumes the existence of certain procedural mechanisms and substantive powers conferred under the QCAT Act.
- As implied under s 9(2) of the QCAT Act, the Tribunal possess only three jurisdictions: (a) original jurisdiction; (b) review jurisdiction; and (c) appellate jurisdiction. The original jurisdiction is protean in nature; it possesses a panoply of different aspects, procedures, and powers. An enabling Act should ordinarily be construed as enlarging the jurisdiction of the Tribunal, as opposed to establishing a separate and discrete jurisdiction.
- An enabling Act should not be construed to circumscribe, or derogate from, the jurisdiction of the Tribunal under the QCAT Act unless the Legislative Assembly of the State of Queensland has clearly and precisely expressed such an intention, or it is necessarily implied by reason of the structure, form, subject matter, objects or procedure prescribed under the enabling Act.
- Prima facie, the Tribunal may make a declaration about a matter in a proceeding instead of making an order it could make about the matter, or in addition to any such order. This power will only be displaced if it can be established that s 328 of the LP Act is an exhaustive description of the powers available to the Tribunal in considering the validity of legal costs agreements, or that the Legislative Assembly intended such a power to be unavailable to the Tribunal in determining the validity of legal costs agreements.
- The respondent has not identified any provision of the LP Act which would indicate the existence of such an intention. Indeed, s 328 of the LP Act appears to presume the presence of a Tribunal vested with sufficient procedural powers to enable the efficient and effective administration of any disputes regarding costs agreements.
- The Tribunal has jurisdiction to make the requested declarations. However, the Tribunal would not be inclined to grant a declaration of invalidity if the applicant is unsuccessful in establishing that the costs agreement should be avoided.
- The respondent also objects to the applicant’s claim that the Tribunal may set aside the costs agreement under the general principles of contract. The applicant’s reply to the respondent’s submissions fails to properly answer this objection. The limited argument by both parties is distinctly unhelpful to the Tribunal, and neither party cites appropriate authorities for their position.
- Having regard to the quantum of legal costs in dispute, the matter is clearly not a minor civil dispute. Therefore, the Tribunal’s subject matter, as distinct from procedural, jurisdiction is predominantly defined by the LP Act.
- Section 328 confers three categories of subject matter jurisdiction on the Tribunal:
- The jurisdiction conferred by the LP Act to determine the existence of a costs agreement is peculiar. It is clearly not a plenary jurisdiction to consider and resolve contractual disputes between legal practitioners and clients. Nevertheless, the law does not presume any section, word or sentence to be surfeit. Accordingly, it cannot be construed as a mere reiteration of the jurisdiction conferred in s 328(1).
- The text of s 328(8) of the Act should be construed in accordance with its natural and ordinary meaning with a view to ascertaining the intention of Parliament.
- The Oxford English Dictionary defines the noun “existence” to mean the fact, state, or property of existing or having an objective reality. In the context of a “contract”, which refers to a social or legal construct with no material existence, as distinct from a physical or tangible document or manuscript, “existence” does not require proof of a physical existence; it requires evidence of the essential criterions which cause the law to recognise the existence of the contract.
- There are certain familiar properties which are predicates to the formation of a contract. The Tribunal does not propose to furnish a taxonomy of such properties. However, in Thorby v Goldberg Menzies J held that:
…there is no binding contract where the language used is so obscure and incapable of precise or definite meaning that the court is unable to attribute to the parties any particular contractual intention.
- It would seem, therefore, that sufficient certainty of the essentialia negotii is a necessary precondition to the existence of a contract. In the absence of such certainty, as a matter of law, the contract is void; that is, it is treated as a nullity.
- If the Tribunal has jurisdiction to consider the existence of a contract, the Tribunal must possess jurisdiction to examine the juridical predicates to the formation of a contract. Accordingly, the Tribunal possesses jurisdiction to determine whether a contract is void for lacking sufficient certainty.
- The mere existence of jurisdiction, however, is not entirely dispositive of the question raised by the respondent. The respondent objects to the applicant’s claim the Tribunal can set aside the agreement on a “general contractual basis”.
- The Tribunal expresses dissatisfaction at the imprecise language employed by the applicant. However, the Tribunal understands the applicant to be asserting that the sufficiency or certainty of the terms are to be resolved by reference to general principles of contract, as distinct from any other peculiar system of law prescribed under the LP Act.
- It is conceivable that the Legislative Assembly might, in respect of a particular category of agreement, prescribe different criteria for the formation of a contract. Indeed, the Legislative Assembly frequently augments the established criteria, as demonstrated by Chapter 3, Part 3.4, Division 5 of the LP Act.
- However, the Legislative Assembly ordinarily presumes the courts and tribunals will apply general principles of law to resolve the matter in dispute. As the Parliament has not purported to establish a different and exhaustive framework for determining the existence of costs agreements, the regulations espoused under the LP Act should be supplemented by the general principles of contract.
- Accordingly, the Tribunal finds that:
- there is no jurisdictional impediment to issuing a declaration of validity in respect of the legal costs agreements; and
- there is no jurisdictional impediment to setting aside the costs agreements for uncertainty.
- Before considering the arguments raised by the applicant and respondent, there remains an outstanding procedural issue of the location of the onus of proof.
Persuasive onus under section 328(1) of the Legal Profession Act 2007 (Qld)
- The starting point is that “he (or she) who asserts must prove.” This principle is not absolute and possesses many exceptions, especially in the civil jurisdiction.
- The respondent claims that the general principle should apply due to the language of s 328(1) of the LP Act, which provides that:
On application by a client… the tribunal may order that a costs agreement be set aside if satisfied that the agreement is not fair or reasonable. (emphasis added)
- The respondent claims the italicised section militates in favour of a construction that the onus of proof lies with the applicant.
- The Tribunal does not assign the same significance to the italicised passage as that of the respondent. The Tribunal observes that the phrase “On application by a client…” merely qualifies the jurisdiction of the Tribunal to set aside the costs agreement. It establishes that it will not, in the ordinary course of events, be appropriate for the Tribunal to exercise such discretion ex proprio motu. The identification of the proper applicant and procedure for initiating proceedings is not instructive, as a matter of law or principle, of the location of the persuasive onus.
- The Tribunal observes that Re Morris Fletcher & Cross’ Bill of Costs provides no guidance on the location of the onus of proof in the present proceedings. Re Stuart; Ex parte Cathcart provides some limited assistance, but is a dated decision of the Queen’s Bench in another jurisdiction. Neither decision is binding on this Tribunal, but the latter decision possesses some persuasive value.
- Contrary to the submissions of the applicant, it would not be prudent or appropriate to rely on the limited authorities presented by each party. As in the case of the jurisdictional objections, the Tribunal laments the limited assistance provided by the parties to the present proceedings in resolving the location of the onus.
- In Woolf v Willis Griffith CJ held that:
The solicitor must prove that he did the work, and if the fact is denied, that it was necessary and proper to be done. That onus is usually discharged without difficulty. 
- In Gregg Lawyers Pty Ltd v Viki Maree Farrar Wall DCJ held, in relation to costs assessment under s 341 of the LP Act, that:
The barrister and solicitor each bore the onus of proving that
- (a)they performed the work they charged for;
- (b)it was reasonable to carry out that work;
- (c)the work was carried out in a reasonable way; and
- (d)their costs were fair and reasonable.
- In Weiss v Barker Gosling the Family Court held, after an extensive examination of the authorities, that:
Consequently, I conclude that there is a common law requirement that costs agreements are fair and reasonable and that the onus of proof is on the solicitor.
- In McNamara Business & Property Law v Kasmeridis & Anor the South Australia Supreme Court of Appeal held that:
…this Court should, as I have already said, follow the approach taken by the English cases, and the approach taken in other Australian jurisdictions under similar legislation. It is for the practitioner to show that the agreement is fair and reasonable, if the client raises a challenge on those grounds…
- In Athanasiou v Ward Keller (6) Pty Ltd, the Supreme Court of the Northern Territory Mildren J held that:
In my opinion the result is that the burden of proof rests upon the solicitor in respect of both fairness and reasonableness.
- In Passey v Chanaka Bandarage (t/as City First Solicitors) Higgins J of the Supreme Court of the Australian Capital Territory followed the decision of Athanasiou in holding that the onus of proof resided with the solicitor to establish that the costs agreement was fair and reasonable. The position also appears to be the same in New South Wales.
- These cases may be contrasted with the position in Western Australia, where the Supreme Court has held that the onus of proof to establish unfairness or unreasonableness rests with the applicant.
- The balance of authority appears to weigh strongly in favour of the respondent bearing the onus to establish that the costs agreement is fair and reasonable.
- However, the Tribunal does attach significance to the non-italicised section of the extracted section at , which provides that “the tribunal may order that a costs agreement be set aside if satisfied that the agreement is not fair or reasonable” (emphasis added).
- The natural meaning of s 328(1) of the LP Act is that the Tribunal may only set aside the costs agreement if satisfied that the agreement is not fair or reasonable. This is very different to a section which reads that the Tribunal may set aside the costs agreement if not satisfied that the agreement is fair or reasonable. The former construction would assign the onus of proof to the applicant, whereas the latter would assign the onus of proof to the respondent.
- This grammatical peculiarity was examined briefly in Kasmeridis, where the Supreme Court of Appeal of South Australia held that:
The South Australian provision is expressed slightly differently from the English model and other legislation. It requires the court to consider not whether the agreement is fair and reasonable, but whether “any term of the agreement is not fair and reasonable”. In the present case, the difference of expression is not material…
In that setting I consider that this Court should, as I have already said, follow the approach taken by the English cases, and the approach taken in other Australian jurisdictions under similar legislation.
- Accordingly, the grammatical formulation of s 42(7) of the Legal Practitioners Act 1981 (SA), possessing a significant resemblance to s 328(1) of the LP Act, did not deter the Court of Appeal of South Australia from following the established precedent in other jurisdictions. The Court of Appeal, however, did not refer to the ostensibly divergent practice of Western Australia.
- The primary rationale for imposing the persuasive burden on the respondent is that the legal practitioner is in a position of superiority relative to the client, and therefore the relationship is inherently susceptible to undue influence.
- A secondary rationale is that the legal practitioner is often familiar with general practice relating to legal costs agreements. The legal practitioner is, therefore, in the best position to protect his or her own interests through the preparation and maintenance of robust records relating to client instructions, agreements and professional services rendered. Furthermore, the client is often unsophisticated and inexperienced regarding legal professional services, and would not be familiar with industry charging standards. Thus, or so the proponents of the English position argue, it is more efficient for the practitioner to bear the persuasive onus.
- In my view, the contemporary application of this jurisprudence is potentially anachronistic and reflective of entrenched legal stereotypes and prejudices.
- The legal profession, and the nature of the practitioner-client relationship, has changed since the late 19th and early 20th Centuries. Contemporary clients are the beneficiaries of a robust and modern education system. Literacy and tertiary education rates have significantly improved. Modern notions of equity and fairness have ensured that such benefits have become more widely distributed throughout lower socio-economic demographics of the community, although some remain in need of special assistance or protection.
- Commercialisation has produced a species sophisticated corporate clients, which are responsible for a large proportion of the revenues of the legal profession. Even small businesses, which would have historically been administered without the use of corporate vehicles, are adopting increasingly complex organisational structures interposed with discretionary trusts, companies and special purpose vehicles.
- A prolonged period of unprecedented prosperity and economic growth in the 20th Century has increased the discretionary income of modern Australians, making legal services more affordable than in the 19th and early 20th Centuries. The advent of contingency costs agreements has decreased the risk associated with obtaining legal advice and undertaking litigation. A renewed focus on community legal education and pro bono legal services has empowered those with limited economic means and improved access to justice. The legal profession is now governed by robust and vigilant regulatory authorities wielding the coercive power of the State of Queensland, elevating the scrutiny of individual legal practitioners.
- These positive trends indicate that modern clients are more sophisticated and empowered than those in the late 19th and early 20th Centuries, and would possess greater understanding of costs agreements than their historical counterparts. The generalised assumption of vulnerability of the client, although convenient, risks becoming increasingly discordant with the pragmatic realities of legal practice.
- It cannot now be the case that a costs agreement that is, ex facie, consistent with industry charging standards and practices, should be assumed to be the product of undue influence, or that the mere risk of undue influence should be assumed to be so great, that the onus of proof is cast on the practitioner, contrary to the natural meaning of s 328(1), to establish that the costs agreement is fair and reasonable.
- There must be a point at which the ordinary member of the community, who should be presumed to contract of their own volition for legal services, unless there is some aspect of the transaction or quality of the client militating to the contrary, is held to the terms of their agreement, unless that person can show that the costs agreement is unfair or unreasonable.
- The Tribunal is placed in an invidious position. The Tribunal has not had the benefit of fulsome argumentation by the parties in respect of the location of the onus of proof, although it remains a matter in contention. The balance of precedent, albeit limited, within the State of Queensland and other Australian jurisdictions militates in favour of placing the onus of proof on the respondent. However, the Tribunal is of the view that such precedent has unstable jurisprudential foundations and relies on unjustifiable assumptions relating to the nature of practitioner-client relations.
- The Tribunal also observes that there is precedent from the District Court relating to s 341 establishing that the onus, in costs assessment proceedings, resides with the practitioner to establish that the costs are “fair and reasonable”. Although different considerations apply in respect of costs assessments and the avoidance of costs agreements, the Tribunal notes that it would be undesirable for the onus of proof to reside with the practitioner under s 341, but with the client under s 328.
- Ultimately, the Tribunal must accept that it is a court of summary jurisdiction. The Tribunal should follow precedent despite its unsatisfactory foundations, especially where the parties failed to provide comprehensive submissions on the subject.
- Therefore, the Tribunal finds – with some trepidation – that the applicant bears an evidential onus to show that the costs agreement may not be fair and reasonable. If the evidential onus is discharged, the persuasive onus rests with the respondent to establish that the costs agreement is fair and reasonable. If the respondent fails to discharge the persuasive onus, the Tribunal may set aside the costs agreement under s 328(1) of the LP Act.
Persuasive onus under the general principles of contract
- The Tribunal has described the peculiar principles governing the distribution of the onus of proof under s 328(1) of the LP Act. Such principles provide little guidance on the location of the persuasive onus under s 328(8) of the LP Act.
- The jurisdiction of the Tribunal to examine the existence of a costs agreement emanates from s 328(8) of the LP Act. The principles governing the ascertainment of the existence of such a costs agreement, however, falls to the general principles of contract, as modified by statute.
- There is some difficulty in assigning an onus of proof under the general principles of contract. Uncertainty is not a vitiating factor; rather it is an integral element of a contract, including a costs agreement. If the essentialia negotii are intractably vague or uncertain, the correct finding is that the existence of a costs agreement has not been established. Often the courts and tribunals will describe this outcome in shorthand by holding that the contract is “void for uncertainty”.
- As sufficient certainty of the essential terms is an integral component of the formation of a costs agreement, the onus resides with the party asserting the existence of the contract. Although the applicant appears to be alleging uncertainty, he is merely putting the respondent to proof regarding the existence of the costs agreement. An allegation that a contract is void for uncertainty is tantamount to an allegation that the costs agreement does not exist.
- As the respondent seeks to hold the applicant liable under a costs agreement, the respondent possesses the persuasive onus to establish such a contract exists. Therefore, the respondent must establish that the essential terms of the contract are sufficiently certain.
- Nevertheless, as will become clear within these reasons, the location of the onus of proof is not dispositive of these proceedings.
- Having resolved the preliminary jurisdictional and procedural questions raised by the applicant and respondent, the Tribunal may now consider their substantive arguments.
- It is convenient for the Tribunal to first consider the existence of a costs agreement, and then whether the costs agreement was fair and reasonable. The latter question cannot, as a proposition of logic, arise if the former is negatived.
Existence of the costs agreement
- The applicant submits that the description of the general care and conduct charge contained in Appendix A of the agreement makes the contract void for uncertainty.
- The applicant argues that the consideration payable in exchange for professional legal services in a costs agreement is an essential term of the contract.
- The applicant further contends that the general care and conduct charge, which is levied as an accretion to professional legal costs, is uncertain. In essence, the applicant submits that there are two sources of uncertainty:
- the rate of the general care and conduct charge is uncertain; and
- the subject of the general care and conduct charge is uncertain.
- The applicant contends that the rate of the general care and conduct charge is uncertain because it states that the charge is “up to 50%”. The applicant submits that this devolves an absolute discretion to the respondent to determine the rate to be charged to the applicant for professional legal services.
- Additionally, the applicant contends that it is unclear whether the general care and conduct charge applies to the professional fee component of the costs schedule, or all itemised professional costs.
- The applicant claims that the failure to reach a sufficiently certain agreement on an essential term of the costs agreement means that the contract is incomplete or void for uncertainty.
- The respondent submits that:
- the general care and conduct charge is consistent with the applicable Court Scale of Costs;
- the general care and conduct charge is consistent with standard industry charging practices;
- the general care and conduct charge incorporates a maximum threshold of 50%, providing sufficient certainty in respect of the amount to be levied;
- the general care and conduct charge cannot be ascertained in advance, as it must be determined by reference to certain facts and circumstances which will arise after the execution of the costs agreement, such as the complexity and novelty of the matter, the interest of the parties, any specialised skill, knowledge, and labour required, and other matters.
- The respondent submits, reductio ab absurdum, that a finding that the costs agreement is uncertain would have the effect of invalidating all legal costs agreements containing a general care and conduct charge prepared in accordance with the applicable Court Scale of Costs.
- There are, at least, two species of uncertainty:
- semantic uncertainty, meaning the language employed by the contracting cannot be assigned precise or definite meaning; and
- constitutive uncertainty, meaning the parties have failed to achieve agreement on all essential terms.
- The degree of ambiguity or uncertainty required before a contract is deemed void cannot be a priori articulated. It will depend on the nature and subject matter of the agreement, the circumstances of the case, the characteristics of the parties, the relationship between the parties, prevailing industry standards and practices, and the existence of any relevant statutory regulation.
- If an agreement is infected by semantic uncertainty or constitutive uncertainty, the contract has not be validly concluded, either because the contract remains inchoate, or because the parties lack the required consensus ad idem.
- Notwithstanding this, the Tribunal should be cautious to declare an agreement void for uncertainty. A contract should be interpreted in accordance with its natural and ordinary meaning, and to give practical effect to the commercial intentions of the parties. Indeed, contracting parties rarely intend to enter into void agreements.
- In the contemporary commercial environment, pragmatic exigencies and resource constraints often mean businesspersons fail to articulate their agreements with the level of precision and certainty preferred by the judicial system. Commercial realities and modern negotiating practices commonly result in the implementation of agreements before all terms are entirely settled. In such cases, the Tribunal should endeavour to give effect to the transaction, especially where substantial performance has eventuated.
- To this end, the Tribunal is equipped to cure semantic and constitutive uncertainty.
- In the case of semantic uncertainty, the Tribunal may construe the agreement, using intrinsic and extrinsic materials, to clarify any patent or latent ambiguities. The clause may also be severed by the Tribunal, or waived by its beneficiary. If a provision is ostensibly irrational in text or operation, the Tribunal may reinterpret the provision to provide a rational and commercially sensible meaning, according to the evident intentions of the parties. Rectification allows for the correction of obvious errors, and the subsequent conduct of parties may clarify particular terms.
- In the case of constitutive uncertainty, the Tribunal is vested with powers to imply terms into the agreement. Once more, the subsequent conduct of the parties may also fill any apparent gaps within the contract. However, the Tribunal should be cautious not to foist upon the parties arrangements to which they have not voluntarily agreed. It cannot form a contract for the parties where one is absent.
- There are a multitude of limitations to the power of the Tribunal to cure uncertainty. The Tribunal does not propose to prepare a comprehensive treatise on all such constraints. It is sufficient to note the LP Act imposes formal requirements on the formation of costs agreements. The Tribunal’s common law powers cannot be deployed to circumvent formal requirements prescribed by the legislature.
- Turning to the contract between the parties, there is no constitutive uncertainty; all essential terms of the costs agreement have been determined.
- The Tribunal accepts that there is some lack of precision in the care and conduct charge. It does not accept that it gives rise to intractable semantic uncertainty.
- The clause relevantly provides that:
In addition to the item charges the firm is entitled to charge a general care and conduct component at the rate up to 50% based on the total itemised professional costs taking into account the following matters…
- The clause then proceeds to itemise 10 circumstances which may determine the rate of the general care and conduct charge to be imposed.
- The rate of the general care and conduct charge is clear – it is up to 50%. The precise amount will depend on the circumstances of the case, which are not a priori ascertainable. It would be unreasonable to expect any law firm to bind itself to a particular rate for general care and conduct at the time of executing the costs agreement. Indeed, it may be disadvantageous to clients in cases where the matter is less complex or onerous than initially assessed, or it is resolved early by a favourable settlement.
- The rate of the general care and conduct charge is also subject to an implied constraint: s 328(1) of the LP Act requires it to be “fair and reasonable”. The contract should be construed in its proper regulatory context. Accordingly, it is not correct to suggest that the rate of the general care and conduct charge is entirely at the discretion of the respondent.
- The Tribunal also observes that the subject matter of the general care and conduct charge is sufficiently clear – it refers to the “total itemised legal professional costs”. This is a reference to Clause 3 of the costs agreement, which refers back to Appendix A. It enables the respondent to charge for general care and conduct in respect of all matters contained in Appendix A, although the respondent may elect to exclude certain items, such as facsimiles, photocopying and marking exhibits.
- The costs agreement is not infected by constitutive or semantic uncertainty. The costs agreement possesses sufficient certainty in respect of the essential terms. Any residual uncertainty may be clarified by the Tribunal’s interpretative powers.
Fairness or reasonableness of the costs agreement
Meaning of unfairness and unreasonableness
- The LP Act provides that the Tribunal has the jurisdiction to set aside a costs agreement where satisfied that it is “unfair or unreasonable”. The adjectives “unfair or unreasonable” qualify the defined phrase “costs agreement”. Therefore, it must be the costs agreement, and not some other aspect of the circumstances or relationship between the parties, which is “unfair or unreasonable”.
- As was held in Kasmeridis:
The manner in which the matter in hand unfolded, and how the solicitor actually charged for the work done, is not directly relevant to the question of whether the agreement is fair and reasonable. In some circumstances what later occurred might throw some light on aspects of a costs agreement. But in principle the fairness and reasonableness of the agreement is to be determined at the time at which it was made, having regard to the circumstances in which it was made, and to the retainer in connection with which it was made.
- Fairness denotes a different, but related, concept to reasonableness. It does not refer to the subjective perceptions of “fairness” of the legal practitioner or client. Nor is it an unbounded discretion that permits the Tribunal to apply idiosyncratic conceptions of “fairness” or “justice”. Fairness, in s 328(1) of the LP Act, means fairness according to law. It invites the Tribunal to evaluate the costs agreement against equitable principles and statutory requirements prescribed by the LP Act. This will ordinarily require cautious examination of the circumstances within which the agreement was formed, although it is not limited to such matters.
- Reasonableness is a more objective concept. It requires the Tribunal to examine the language and practical operation of the costs agreement to ascertain whether a fair-minded, independent and disinterested observer, familiar with legal industry standards and the subject matter of costs agreement, would regard the disputed terms of the agreement as “unreasonable”.
- An astute reader might observe the preceding paragraph imports no substantive content into the concept of “reasonable”, but merely defines the standard against which reasonableness is assessed. This is because any abstract consideration of the substantive content of “reasonableness” is condemned to abject vacuity, as its meaning varies depending on the circumstances and subject matter of analysis.
- The criteriological content “reasonableness” is reified when the subject matter of the dispute is defined. In the context of charging practices, which is the subject of the present complaint, the professional fees must not be plainly excessive when compared with relevant industry standards. Further, if a discretion is conferred by the costs agreement, it must not be so broad as to allow an essentialia negotii to be determined entirely without constraint by the legal practitioner. This list is not exhaustive of the conditions which may render a costs agreement unreasonable.
- Although the notions of “fairness” and “reasonableness” are discrete, they are not mutually exclusive. As one examines the margins of each concept, it will be clear there are certain cases that appear to fall within both categories. Much like artists might compare different shades of colours, jurists will dispute whether certain instantiations of conduct fall in the rubrics of “unfairness” or “unreasonableness”. The uncertain margins of the concepts do not diminish their practical efficacy.
Application of the concepts of unfairness and unreasonableness
- The applicant claims that the costs agreements are unfair on three primary bases:
- the costs agreement are unfair because a general care and conduct charge described as an “up to 50% charge” is “an unusual basis for charging and unfair according to law”;
- the costs agreements are unfair because there is “no evidence of any sufficient explanation” of the fact that the general care and conduct charge could “result in an overall charge that is far in excess of the Supreme Court Scale”; and
- the costs agreement is unfair because the general care and conduct charge “applies to paralegals, clerks, letters, photocopying and all other items in the itemised scale regardless of the experience, importance or seniority of the person undertaking the work”.
- The applicant has not identified any authority supporting the proposition that the establishment of a threshold on a general care and conduct charge is an “unusual basis for charging” or “unfair as a matter of law”. Indeed, the inclusion of general care and conduct charges, subject to a clear contractual threshold, appears to be consistent with existing industry standards and practices within the legal industry, and the applicable Supreme Court Scale of Costs.
- There is nothing inherently unfair in conferring a discretion on the law firm to determine the rate of the general care and conduct charge. It provides the legal practice with commercial flexibility where the relative difficulty or complexity associated with a particular matter is more or less than that which was anticipated. The discretion is not unrestricted, as the contract prescribes the circumstances which will influence the rate of the general care and conduct charge to be applied.
- Accordingly, the general care and conduct charge of the respondent is not an unusual basis for charging or unfair as a matter of law.
- The applicant contends that the costs agreement is unfair because there was no sufficient explanation of the fact that the costs agreement could result in the imposition charges in excess of the applicable Court Scale of Costs.
- Clause 3 of the contract clearly states that the costs that the respondent charges exceed the corresponding item under the Supreme Court Scale of Costs. The affidavits establish that disclosure of the costs agreement was adequate, and the applicant has not complained to the contrary. The applicant appears to have been not unfamiliar with costs agreements and the nature of legal proceedings. Furthermore, I accept that the applicant was informed that the charges for the legal services rendered by the respondent could be quite substantial, particularly in light of the complexity and difficulty attached to the Drug Trafficking Matter.
- Accordingly, the Tribunal is satisfied that, to the extent required, the respondent had sufficiently explained to the applicant that costs agreement would result in the imposition of costs in excess of the applicable Court Scale of Costs.
- The applicant further argues that the costs agreement is unfair because it refers to certain itemised costs which, on the view of the applicant, should not be the subject of an uplift for general care and conduct.
- The relevant clause provides that:
In addition to the item charges the firm is entitled to charge a general care and conduct component at the rate up to 50%... (emphasis added)
- The Tribunal observes that the respondent is not required to charge a general care and conduct charge. Indeed, the respondent may elect to impose a general care and conduct charge on only a subset of the itemised costs, which may exclude matters such as photocopying and marking-up exhibits.
- The Tribunal also notes the practical efficiency and efficacy of the modern practice of gross sum taxation. As was held in Southern Cross Exploration NL v Fire & All Risks Insurance (unreported, 14 April 1986, Supreme Court of New South Wales, Waddell CJ in Eq):
The words 'skill, care and responsibility' seem to me to have an application to everything which is done by a party's solicitors in the conduct of proceedings. I do not think that it is either practicable or correct to attempt to isolate particular items in respect of which profit costs have been allowed as having no relationship to the exercise of care, skill or responsibility. In a proceeding such as this the management and supervision of the work of the solicitors was of great importance and I think that work done such as photocopying and filing documents was work which had a relationship to the exercise of care and skill in and the acceptance of responsibility for the conduct and management of the case. Clearly enough, the allowance made under item 41 should have a relationship to the total work done. Once this is accepted there is, I think, justification for assessing the allowance as a percentage or proportion of the other profit costs.
- Similarly, in Auspine Ltd v Australian Newsprint Millts Ltd  FCA 673,  O’Loughlin J held that:
One critical matter of importance is a determination of what is the base figure upon which a mark-up for "care and conduct" is to be calculated. It seems to be unreal to have a mark-up on such mundane matters as a clerk's attendance to file a document. But the pursuit of this line of thinking would destroy the practicality of a gross sum taxation; it would mean that it would be necessary to have too much regard to individual items of costing before a proper assessment could be made of those items to determine whether a mark-up is appropriate. In my opinion, the preferred approach is to have regard to the fact that there will always be minor items of costing and trivial matters that do not justify a mark-up and to fashion the appropriate mark-up, based on the allowed solicitor's fees, accordingly. Indeed, that approach is also to be advocated on a formal taxation of costs for it affords the advantage of reducing, to a substantial degree, areas of dispute about what items are and are not to be the subject of a mark-up…
- Following the decisions of Southern Cross Exploration and Auspine, it is clear that a mark-up for “general care and conduct” may often be applied to menial matters. In exceptional cases, the mark-up may be justified because of the urgency or vigilance required in conducting the tasks.
- In ordinary cases, if the aggregated amount to which the care and conduct charge applies incorporates matters not requiring special skill, care or responsibility, the appropriate practice would be either: (a) to deduct such items from the aggregated amount and then apply the general care and conduct rate; or (b) to proportionately reduce the general care and conduct rate to reflect the fact that the aggregated sum incorporates items not requiring special skill, care or responsibility.
- Accordingly, the mere fact that the costs agreement may, ex facie, permit, but not require, the general care and conduct component to be determined by reference to an aggregated amount, which may include items not requiring special skill, care or responsibility, does not mean that the costs agreement is unfair.
- As the Tribunal is satisfied that the costs agreement is fair, it will not be set aside on this basis.
- The applicant claims that the costs agreement is unreasonable on three primary grounds:
- The costs agreement is unreasonable because the general care and conduct charge “operates as an uplift on the item scale set out in the retainer [and] is a matter where the solicitor is in a position of advantage in setting the same;”
- the costs agreement is unreasonable because it “does not highlight the Up (sic) to 50% charge as something unusual, nor that it is within the ultimate discretion of the solicitors as to what is charged”; and
- the costs agreement is unreasonable because “the scale items… do not differentiate between drawing, engrossing and other scale items for matters [which] effectively applies the same hourly rates to all work, regardless of whether the work is done by a lawyer and regardless of the relevant lawyers (sic) experience”.
- The first ground effectively claims that the costs agreement should be set aside because it contains a general care and conduct charge, and the respondent is in a position of advantage in incorporating the charge into the contract.
- The evidence demonstrates that the respondent provided adequate disclosure of the costs agreement to the applicant. It further indicates that the applicant is not unfamiliar with legal proceedings. Whilst the respondent occupies a position of advantage relative to the applicant, there is no evidence that the respondent has abused, or otherwise exploited, that position of advantage. The general care and conduct component of the costs agreement is not so unusual or extraordinary that the Tribunal is able to infer, from the mere existence of that component, that the respondent improperly misused its position of advantage.
- The second ground claims the costs agreement is unreasonable because it does not sufficiently emphasise the unusual nature of the care and conduct component of the agreement, or that it confers a charging discretion on the respondent.
- The Tribunal is satisfied that the general care and conduct component employed in both costs agreements is consisted with the Court Scale of Costs and standard industry practices. In this respect, the Tribunal is not reasonably satisfied that the general care and conduct component is “unusual” or “extraordinary”. The Tribunal is also satisfied that it was sufficiently explained to the applicant.
- The Tribunal accepts that the general care and conduct component confers a discretion on the respondents. However, as has been explained earlier in these reasons for decision, the discretion is eminently pragmatic and not so extravagant so as to warrant intervention by the Tribunal. Indeed, it appears consistent with standard industry practices within the legal profession.
- The applicant submits the Tribunal should consider the general care and conduct charge to fall within the same category of prohibited clauses as that in Brown v Talbot & Oliver. In that case, the impugned clause within the costs agreement conferred an unbridled discretion on the legal practitioner to establish the rates at which his legal services were to be charged.
- The case of Brown v Talbot & Oliver is clearly distinguishable from the present matter. In this case, the charging rates for services rendered by the respondent were clearly identified within the costs agreements. The general care and conduct component does not modify these rates – it constitutes a separate item which operates as an additional charge within the agreement. The general care and conduct component establishes a clear limit or threshold on the amount which could be charged under the contract. The contract provides indicia which guide the rate for the general care and conduct component. Further, as in most costs agreements, there is an implied term that the respondent will exercise its rights, and perform its obligations, reasonably.
- In such circumstances, the respondent is not furnished an improper discretion to establish the rates at which its legal services are charged.
- The applicant further contends that the general care and conduct charge is unreasonable because it applies effectively the same rates for all work performed in respect of the drawing and drafting of documents, and the engrossing or production of documents.
- Items 10, 11, 12, and 13 of the costs agreements clearly distinguish between the amounts charged for services performed by legal practitioners with different levels of seniority. It is not necessary for every item within the costs agreement to distinguish between the services performed by legal practitioners with different levels of seniority. The costs agreement is not unreasonable on this basis.
- If the exercise of discretion in establishing the general care and conduct rate, or the failure to distinguish between certain categories of work performed by legal practitioners of different seniority, results in the imposition of unreasonable or unfair legal costs, the appropriate course of action is to file an application for a costs assessment under s 335 of the LP Act. This is because it is the performance of the costs agreement, not the agreement per se, which is unfair or unreasonable.
- As the Tribunal is satisfied that the costs agreement is reasonable, the Tribunal will not set aside the costs agreement on this basis.
- The Tribunal has jurisdiction to set aside a costs agreement for being uncertain, unreasonable, or unfair. The onus of proof rests with the respondent to establish that the costs agreements are sufficiently certain, reasonable and fair.
- The costs agreement confers a discretion on the legal practitioner to establish the rate at which the general care and conduct charge is imposed. This discretion is not improper or extravagant, and appears consistent with the Court Scale of Costs and applicable industry standards and norms. Although the general care and conduct component may be applied to trivial tasks, such as photocopying and marking exhibits, this is not required. Furthermore, if the general care and conduct component is to be applied to the aggregated amount, the rate may be modified to reflect the fact that it includes matters not requiring skill, care or responsibility.
- The general care and conduct component does not operate to modify the rate at which professional services are charged. It is not required that every item within a costs agreement charges different rates based on the different levels of seniority of the legal practitioners in the firm. There is no evidence of improper conduct in forming the costs agreement.
- In such circumstances, the Tribunal is satisfied that the costs agreements are fair and reasonable. Furthermore, the existence of a discretion does not render the costs agreements so uncertain as to require them to be set aside by the Tribunal.
- Accordingly, the application for miscellaneous matters to set aside the costs agreements should be dismissed.
- The respondent has requested that the applicant to pay the respondent’s costs assessed according to the Scale of Costs that applies in the Supreme Court. As the Tribunal has a more constrained jurisdiction to order costs under the QCAT Act, the Tribunal will reserve its decision and invite submissions from the parties.
- It is the decision of the Tribunal that:
- the application for miscellaneous matters in OCL007-15 to set aside the costs agreements is dismissed; and
- costs are reserved for further directions of the Tribunal.
Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 6(2).
Ibid, s 6(3).
See Ibid, s 10(1).
Ibid, s 60(1).
Legal Profession Act 2007 (Qld), s 328(1).
Ibid, s 328(8).
Ibid, s 328(9A).
See, for example: Commonwealth v Baume (1905) 2 CLR 405, 414; Beckwith v R (1976) 135 CLR 569, 574; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, .
Legal Profession Act 2007 (Qld), s 300.
Ibid, s 326.
Thorby v Goldberg (1964) 112 CLR 597, 607 per Menzies J (citing Sugerman J).
 2 Qd R 228, 242.
 2 QB 201, 203-204.
(1911) 13 CLR 23, 27.
 QDC 194, .
(1993) 16 Fam LR 727, 769.
(2007) 97 SASR 129, 138.
(1998) 122 NTR 22, 31.
 ACTSC 105, -; see also Vizovitis v Ryan  ACTSC 243.
Nicholson v Behan and Speed Pty Ltd  VLPT 28.
Portuguese Cultural and Welfare Centre v Talbot Olivier pty Ltd (No 2)  WASC 54; Moleirinho v Talbot Olivier Lawyers Pty Ltd  WASCA 65; Jovetic v Stoddart & Co (1992) 7 WAR 208.
(2007) 97 SASR 129, 138.
 2 QB 201, 203-204.
 2 KB 369, 372-373.
(1911) 13 CLR 23, 27.
Ermogenous v Greek Orthodox Community of South Australia Inc (2002) 209 CLR 95, .
However, the mere fact that a general care and conduct charge is permitted under the Court Scale of Costs does not require the conclusion that this form of general care and conduct charge is sufficiently certain. Therefore, the voidance of this specific form of clause would not have the effect of voiding all general care and conduct charges.
Thorby v Goldberg (1964) 112 CLR 597, 607 per Menzies J.
Kasmeridis v Mcnamara Business & Property Law  SASC 200, .
McNamara Business & Property Law v Kasmeridis (No 2) (2007) 97 SASR 129, .
Kasmeridis v Mcnamara Business & Property Law  SASC 200, .
Indeed, the most that can be said for any abstraction of the adjective “reasonable” is that it requires the subject matter to objectively conform to certain unspecified a priori norms.
Brown v Talbot & Oliver (1993) 9 WAR 70, 80-81.
- Published Case Name:
Markis Scott Turner v Macrossan & Amiet Pty Ltd
- Shortened Case Name:
Turner v Macrossan & Amiet Pty Ltd
 QCAT 5
05 Jan 2016