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QCoal Pty Ltd v Cliffs Australia Coal Pty Ltd

 

[2010] QSC 479

 

SUPREME COURT OF QUEENSLAND 

 

CITATION:

QCoal P/L & Anor v Cliffs Australia Coal P/L & Anor [2010] QSC 479

PARTIES:

QCOAL PTY LTD ABN 99 010 911 234
(first plaintiff)
QCOAL SONOMA PTY LTD ABN 72 117 116 784
(second plaintiff)
v
CLIFFS AUSTRALIA COAL PTY LTD ACN 123 583 326
(first defendant)
CLIFFS AUSTRALIA WASHPLANT OPERATIONS PTY LTD ACN 123 748 032
(second defendant)

FILE NO/S:

BS9591 of 2007

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

20 December 2010

DELIVERED AT:

Brisbane

HEARING DATE:

9 December 2010

JUDGE:

Ann Lyons J

ORDER:

The application filed 17 November 2010 is dismissed

CATCHWORDS:

COSTS – SOLICITOR AND CLIENT COSTS – CREATION AND DURATION OF RETAINER – where order made that the applicants pay the respondents costs in a previous proceeding – where costs agreement made during the hearing of that proceeding and sought to be applied retrospectively – where applicants now seek declarations that the respondents’ costs agreement is not enforceable or voidable – where otherwise the applicants seek the costs statement to be struck out and declarations that the costs be assessed on the Court’s scale – where alternatively the applicants seek orders for the production of certain documents and information from the respondents – whether such orders should be made.

Legal Profession Act 2007 (Qld), s 319, s 322, 327

Uniform Civil Procedure Rules 1999 (Qld), r 366(2), r 367(1), r 703(3)(b)

Amos v Monsour Legal Costs Pty Ltd [2008] 1 Qd R 304

ASIC v Atlantic 3-Financial (Aust) Pty Ltd [2006] QSC 152

Baker v Legal Services Commissioner [2006] QCA 145

Box Hill v Tauschke P/L [1974] VR 39

Brown v Gould [1972] Ch 53

Casey v Quabba [2005] QSC 356

D’Alessandro & D’Angelo (a firm), Unreported, Supreme Court of Western Australia, Owen J, 9 May 1995

Devereaux Holdings Pty Ltd v Pelsart Resources NL (No 2) (1985) 9 ACLR 956

Equuscorp Pty Ltd v Wilmouth Field Warne (a firm) [2004] VSC 164

G Scammell & Nephew Ltd v Ouston [1941] AC 251

Hillas & Co v Arcos Ltd (1932) 147 LT

Newlands v Argyll General Insurance Co Ltd [1959] SR (NSW) 130

Peters Ice cream (Vic) Ltd v Todd [1961] VR 485

Placer Development Ltd v The Commonwealth (1969) 121 CLR 353

Re Casey’s Patents; Stewart v Casey [1892] 1 Ch 104

Robertson v Unique Lifestyle Investments, [2007] VSCA 29

Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd 118 CLR 429

Kabwand Pty Ltd v National Australia Bank Ltd, Federal Court of Australia G355 of 1988, unreported, 21 April 1989

WMC Resources v Leighton Contractors Pty Ltd [1999] WASCA 10

COUNSEL:

MM Stewart SC for the applicant

GJ Gibson QC with GD Beacham for the respondents

SOLICITORS:

Russell and Company for the plaintiffs

Malleson Stephen Jaques for the defendants

ANN LYONS J:

  1. Pursuant to a contract of sale dated 3 April 2007 the plaintiffs in the proceeding and the current applicants (QCoal) agreed to sell to the defendants/respondents (Cliffs) a share of the Sonoma Coal Project south of Collinsville. The agreed price was $35,202,680 subject to certain adjustments.  The dispute between the parties related to the ‘Adjustment Amount’ according to what had been “the amount expended by the vendors to advance the Sonoma Project to its position at completion”. The plaintiffs’ adjustment claim was for an amount of $1,046,755.92. The proceeding was heard before Philip McMurdo J between 16 and 20 March 2009. Ultimately, QCoal’s claim was dismissed.  On the counterclaim it was declared that the defendants by counterclaim in that proceeding, QCoal, (the present applicants) were liable to repay as the adjustment amount the sum of $276,453.82.
  1. On 15 December 2009 Phillip McMurdo J made an order that the QCoal pay Cliffs’ costs, other than the costs of two interlocutory applications, of and incidental to the proceeding on the indemnity basis. QCoal appealed. The appeal was dismissed.
  1. On 26 August 2010 cost statements for both costs orders were served.
  1. On 22 October 2010 the time for the delivery of objections to the trial costs statements was extended until 31 December 2010. On 10 November 2010 QCoal wrote alleging that the costs agreement between Cliffs and their solicitors was void for various reasons.
  1. This application was filed by QCoal on 17 November 2010.

This application

  1. QCoal are applying to the court for the following orders and relief:
  1. A declaration that the letter signed on behalf of Cliffs and dated 23 March, 2009 is not a valid and enforceable costs agreement for the purpose of UCPR 703(3)(b).
  1. Alternatively, a declaration that any agreement compromised by the said letter is voidable and should be disregarded for the purposes of UCPR 703 (3)(b).
  1. An order striking out the Costs Statement dated 26 August, 2010, and a direction that any further Costs Statement for the costs payable under the order of McMurdo J made on 15 June, 2009 shall be prepared by reference to and in accordance with the Items in Schedule 1 to the UCPR.
  1. In the alternative to paragraphs 1 to 3 hereof, directions pursuant to UCPR 366(2) and/or 367(1):-
  1. that Cliffs forthwith produce for QCoal’s inspection and provide copies of all and any:-

(i)work in progress or other ledgers recording the time taken for the attendances claimed in the Costs Statement dated 26 August, 2010;

(ii)time sheets or other records of such attendances;

  1. that Cliffs forthwith disclose the names of all and any employed solicitors (other than Mr True and Ms Svensson), senior associates (other than Ms Frost) and partners (other than Mr McDonnell) for whom costs are claimed in the said Costs Statement and, in respect of each such person:-
  1. identify the item(s) in the said Costs Statement where such costs are claimed; and
  1. identify the hourly rate claimed.  
  1. Such further or other orders as the Court deems appropriate, including (if necessary) orders extending the time for QCoal’s Notice of Objection to the said Costs Statement.
  1. An order that Cliffs pay QCoal’s costs of and incidental to the Application.
  1. Accordingly, by this application QCoal seek declarations that a cost agreement entered into between the Cliffs and their solicitors is either invalid or voidable. They also seek consequential declarations that an indemnity costs order made in favour of the respondent should be assessed on the Court’s scale. Alternatively, they seek orders for the production of certain documents and information from the respondents.

Was there a valid and enforceable costs agreement between the respondents and their solicitors?

  1. Section 322 of the Legal Profession Act 2007 (Qld) (the Act) requires that a costs agreement either be in writing or evidenced in writing. Section 327 provides that a costs agreement that contravenes or is entered into in contravention of the Act is void and that legal costs under a void costs agreement are recoverable as set out in s 319(1)(b) or (c) that is under the applicable scale of cost or according to the fair and reasonable value of the legal services.

319 On what basis are legal costs recoverable

(1)Subject to division 2, legal costs are recoverable—

(a)under a costs agreement made under division 5 or the corresponding provisions of a corresponding law; or

(b) if paragraph (a) does not apply—under the applicable scale of costs; or

(c) if neither paragraph (a) nor (b) applies—according to the fair and reasonable value of the legal services provided.

Note for paragraph (c)

See section 341(2) for the criteria that are to be applied on a costs assessment to decide whether legal costs are fair and reasonable.”

  1. Cliffs contend they had a written agreement with their solicitors. It is argued that this agreement is found in the letter from Mr Justin McDonnell (McDonnell) of the respondents’ solicitors dated 19 March 2009, which was then accepted and signed by Mr Richard Meehan, a director of both Cliffs Australia Coal Pty Ltd and Cliffs Australia Washplant Pty Ltd, the respondent companies, on 23 March 2009 (the Agreement).
  1. QCoal contend that there was no agreement in place and in the absence of such an agreement costs may only be recovered on the basis of the Supreme Court Scale and not on an indemnity basis.

The Letter of 19 March 2009

  1. The letter relied upon by Cliffs was written towards the end of the five day trial before McMurdo J in March 2009 when it became apparent that a formal client agreement did not exist between the Cliffs and their solicitors. In the 19 March 2009 letter, which contained two attachments, McDonnell wrote to Meehan as follows:

 

“It has come to our attention as a result of a routine review that a formal client agreement may not have been entered into in respect of the work we have been retained to do regarding the litigation commenced by QCoal, as it was viewed as a continuation of the commercial work done on acquisition.

 

Consequently, we provide you with this offer to enter into an appointment agreement (costs agreement) for our legal services. If you accept this offer the agreement will consist of this letter and the attached ‘Appointment terms’ and ‘Costs’.

 

You have the right to negotiate this appointment agreement with us.”

  1. The letter then continued with an estimate of charges and the letter made clear that the basis upon which the legal fees were to be charged was at “our current hourly rate from time to time”. The estimate which was then provided was a fee of $550,000 for a number of legal services including the preparation of the Defence and Counterclaim in respect of the Claim brought by QCoal Pty Ltd and QCoal Sonoma Pry Ltd (‘QCoal’) in Supreme Court of Queensland Proceeding No. 9591 of 2007, and to act on behalf of Cliffs at the trial of this proceeding.
  1. The letter outlined that these legal services would involve all of the tasks in relation to the defence counterclaim and rejoinder, conference with counsel, disclosure, preparation of witness statements, interlocutory processes, liaising with counsel, negotiating with solicitors for the plaintiff and preparing and conducting a trial in association with counsel who had been retained. That estimate was indicated to be neither a quote nor a cap and that the actual amount of legal fees could be more or less than the estimate. The letter also stated that the costs agreement consisted of the letter as well as the attached “Appointment terms” and “Costs” documents.
  1. The letter was sent on the fourth day of the five day trial and signed three days after the conclusion of the trial before McMurdo J while the decision was reserved. Obviously at that stage much of that work would in fact have been substantially completed. It is also clear that Cliffs had in fact already paid substantial amounts for fees and expenses. The letter from Mr McDonnell indicated that the solicitors had invoiced a total amount of $384,729 for the period up to 27 February 2009.
  1. The applicants argue, however, that the Agreement was an agreement to provide for the solicitors remuneration for work to be performed after the date the Agreement was signed. In support of this contention, the applicants argue that the general rule is that contracts are not construed to have a retrospective operation unless it is expressly provided for by its terms and that a retrospective effect will only be implied when the circumstances clearly show that this was the intention of the parties. Counsel for QCoal submits that there is nothing in the terms of this Agreement which means it has a retrospective effect.
  1. Furthermore, it is argued that the rates of the charges set out in the Agreement and the rates of charges which were charged early in the proceedings are different. The costs statements which have now been provided indicate that the respondents were charged at a lower rate than those set out in the Agreement in relation to work which was performed prior to the signing of the Agreement. Accordingly, the applicants argue that in respect of the work performed prior to 23 March 2009 there is no written agreement which would satisfy s 322 of the Act. As a result it is argued that the assessment of the respondents’ costs for work performed prior to that date should proceed by reference to the Supreme Court scale and the applicants seek a declaration to that effect to assist the costs assessor.
  1. It is argued that prior to 23 March 2009, because there was no agreement as to how the costs should be charged, this was a situation where the respondents retained the solicitors who rendered fees which the respondents paid. In those circumstances it is argued that the retainer which existed prior to 23 March 2009 was one on the terms and conditions which naturally attach to the fiduciary relationship of solicitor and client. Counsel for the applicant submits therefore that the contract which comprised the retainer is an entire contract with the result that the solicitors were obliged to continue to act until the action concluded. It is argued that the retainer was complete prior to 23 March 2009 in the sense that there was a mechanism for calculating the remuneration of solicitors.
  1. The Agreement signed on 23 March 2009 therefore increased the charges the solicitors could make and Counsel argues that this Agreement is ineffective because it is not supported by consideration. Accordingly, it is submitted that the Agreement is unenforceable and does not satisfy s 322. Therefore, the consequence is that the costs fall to be assessed by reference to the scale.
  1. It is also argued that the Agreement indicated that the solicitors were entitled to “charge for legal fees for [the] matter [on the basis of] our current hourly rates from time to time”. Page 4 of the Agreement indicated that the respondents were bound to pay “a changed rate whether or not we have notified you of the change”. The applicants argue that this essentially put the solicitors at liberty to change the hourly rates whenever they chose to do so without notification of any changes. This allowed the solicitors to change the fees at any time and therefore that rendered the agreement illusory.
  1. Counsel for the applicants also argues that the bases upon which the time charges were made were so uncertain as to render the agreement void. The formulation of charges is also found on p 4 of the Agreement which provides that time is recorded in six minute intervals rounded up to the nearest six minutes. The applicants argued that this potentially permits the solicitors to charge six times the hourly rates quoted.

The Costs Agreement

  1. Clearly then, in the present circumstances, there is a written costs agreement as required by the legislation. The applicants argue that the Agreement is not a valid and enforceable agreement as the costs Agreement was entered into after the conclusion of the trial and therefore the consideration for the Agreement was past consideration.

Was there consideration for making of the costs agreement between the defendants and their solicitors?

  1. The affidavits of McDonnell[1] and Meehan[2] outline the circumstances surrounding the signing of the Agreement.  Meehan states that he instructed Mallesons to act in respect of the dispute on the following basis.

 

“At the time I first engaged Mallesons in relation to the dispute, I understood that Mallesons expected to be paid for their services at the usual rates charged for the legal practitioners who did the work.  I had this understanding by reason of the fact that I knew that they were a firm of solicitors who would expect to be renumerated for their work.”

  1. Meehan further stated that the document which he signed on 23 March “was consistent with my understanding that Mallesons expected to be paid for their services at the usual rates charged for the legal practitioners who did the work”.
  1. McDonnell also states that all fees charged by Mallesons have been paid by Cliffs and that at no stage have any of the fees charged been challenged or queried by them.
  1. QCoal relies on the decision in D’Alessandro & D’Angelo (a firm)[3] where Owen J examined a costs agreement which was entered into by a next friend acting on behalf of a disabled adult.  In that case the motor vehicle accident claim was settled prior to trial and orders were subsequently made on 11 April 1994 giving judgment to the plaintiff and providing for the payment of party and party costs.  Orders were also sought that the solicitor and client bill of costs be taxed and paid.  The judge hearing the matter “expressed some disquiet as to the order sought...in the absence of a written costs agreement.”  A costs agreement was subsequently executed later that day by the next friend in relation to solicitor and client costs.  The difference of $14,000 over and above the party and party costs was the subject of the dispute.  Owen J held:

 

“The law with respect to consideration is not in dispute.  A promise without consideration moving from the promise is not a binding agreement.  Generally speaking, past consideration is not regarded as valid consideration.  There are some well recognised exceptions to that rule, but none of them appear to be applicable in the circumstances of this case.

It has to be borne in mind that there is a contract of retainer which accompanies the solicitor and client relationship.  Unless the parties agree to the contrary the retainer in a common law action is an entire contract.

This means that the solicitor must perform all of the work contemplated by retainer and can only demand payment when all of the work has been completed see Underwood, Son & Piper v Lewis [1894] 2 QB 306 at 309-310; but see also Caldwell v Treloar (1982) 30 SASAR at 208-210.  In this case until 11 April there was no written agreement.  The retainer was therefore on the terms and conditions which naturally attach to a fiduciary relationship of solicitor and client. One aspect of this is the proscription which limits a solicitor to recovery of scale costs, whether on a party and party or solicitor and client basis.”

  1. Ultimately, his Honour held that the purported costs agreement of 11 April 1994 was not a binding agreement, not just because it sought to cover past costs, but because there was no consideration other than past consideration.
  1. However, in the present case I do not consider that the argument that there was no valid consideration, because the consideration was past consideration, can be sustained. In my view, the consideration was not past, but executed. In Re Casey’s Patents; Stewart v Casey[4] Bowen LJ said:

 

“The fact of a past service raises an implication that at the time it was rendered it was to be paid for, and, if it was a service which was to be paid for, when you get in the subsequent document a promise to pay, that promise may be treated either as an admission which evidences or as a positive bargain which fixes the amount of that reasonable remuneration on the faith of which the service was originally rendered.”

  1. A similar view was expressed by Young J in Devereaux Holdings Pty Ltd v Pelsart Resources NL (No 2):[5]

 

“...after Eastwood v Kenyon (1840) 113 ER 482 it is quite clear that even on the most orthodox view of the law of consideration if an act is done at a time when both parties appreciated that there would be payment in respect of that act and later there is a promise to pay then, as an alternative to a quantum meruit, there may be an action in contract based on that promise.

The consideration in such a case is usually referred to as executed, not past.  ”

  1. In the 2007 Victorian Court of Appeal decision of Robertson v Unique Lifestyle Investments,[6] Habersberger AJA agreed with the proposition that the modern approach to the construction of commercial agreements was to endeavour to uphold the bargain.  An argument that the consideration in that case was past consideration was rejected and his honour held;

“54The final argument advanced by Mr Pirrie on behalf of Mr Robertson...was that her Honour erred in failing to hold that the sum of $550,000 due under the Investment Agreement was unenforceable as it was past consideration. ...

55In my opinion, the simple analysis of this transaction is that the consideration for Mr Robertson’s promise to repay the $550,000 or some other amount already advanced was the forbearance to call up that amount forthwith and the agreement to advance the balance of the $2million. In rejecting this argument by Mr Robertson, her Honour referred to Pao Yiu Long where Lord Scarman, delivering judgment on behalf of the Privy Council, said:

‘An act done before the giving of a promise to make a payment or confer some other benefit can sometimes be              consideration for the promise. The act must have been done at the promisor’s request: the parties must have understood that the act was to be remunerated either by payment or the conferment of some other benefit: and payment, or the conferment of a benefit, must have been legally enforceable had it been promised in advance’.

...On either approach, the argument about past consideration must fail.”

  1. In my view, Mallesons were engaged by Cliffs with a clear understanding that Mallesons were to be remunerated on the basis of their current fee structure. The services were provided at Cliff’s request and both parties knew that the legal fees would have to be paid.
  1. I do not consider that the argument that the Agreement is unenforceable because there was past consideration can succeed.

Was this an entire contract?

  1. QCoal also argues that this was an entire contract. The legislation which regulates the legal profession in all Australian jurisdictions makes specific provision for costs agreements. However, all the Acts make it clear that a costs agreement is enforced in the same way as any other contract. In Baker v Legal Services Commissioner[7] McPherson JA stated:

 

“[2] ... It therefore becomes desirable at the outset to reiterate the legal nature of a solicitor’s retainer from his client to act on behalf of his client in conducting litigation for the client, and the right to charge professional fees for work done in the course of so acting.  Such a retainer is simply a contract for professional services in return for remuneration.  It is therefore governed by the ordinary principles of the law of contract subject to any special terms agreed by the parties or imposed by statute or otherwise by law.

[3] In the case at least of a retainer in respect of relatively uncomplicated litigation, such a contract is entire; that is to say the solicitor is, apart from any agreement to the contrary, bound to do what is necessary to institute (or defend) the action and to bring it to a conclusion before becoming entitled to payment of any of his professional fees, as distinct from outlays made on behalf of his client in the course of litigation....

[4] There may on occasions be differences about the applicability of the rule governing entire contracts in the case of retainers for some types of litigation but not in the case of relatively uncomplicated litigation at common law.”

  1. Dal Pont[8] points out that the general law did not impose a general restriction on a solicitor contracting with a client as to the fees charged because to do otherwise would impinge on the doctrine of freedom of contract.  However, he states that the courts have not viewed these costs agreements in the same way as other contracts because there is a fiduciary relationship and a presumption of undue influence.  Dal Pont notes that the extent to which a court adopts a contra proferentem approach in construing a costs agreement against a lawyer in fact depends on the nature of the client.  In Equuscorp Pty Ltd v Wilmouth Field Warne (a firm),[9] Byrne J examined this issue as follows:

10In construing this document, it was put on behalf of Equus that I should approach the document contra-proferentem so that any ambiguity should be resolved in favour of the client. This was said to arise from the fact that a solicitor is a fiduciary vis-à-vis their client. When preparing costs agreements with the client they have a direct financial interest in the terms of the agreement and, therefore, a potential conflict of interest. The client in this case had no independent legal advice. Consistent with the heavy responsibilities which the law imposes upon a fiduciary in such circumstances, the court should resolve any ambiguity in favour of the client. Reliance was placed upon the following passage from the judgment of Fletcher Moulton LJ in Clare v Joseph[25]:

‘[Agreements between a client and his solicitor as to the terms on which the solicitor’s business was to be done] were, however, viewed with great jealously by the Courts, because they were agreements between a man and his legal adviser as to the terms of the latter’s remuneration, and there was so great an opportunity for the exercise of undue influence, that the Courts were very slow to enforce such agreements where they were favourable to the solicitor unless they were satisfied that they were made under circumstances               that precluded any suspicion of an improper attempt on the solicitor’s part to benefit himself at his client’s expense.’

With the greatest respect, his Lordship’s views are as apposite today as they were a century ago – perhaps even more so in the modern environment where fees agreements, including provisions for contingency fees[26] are more common. Nevertheless, there is in this case no allegation of undue influence and no relief is sought based on any breach of the solicitors' duty with respect to the preparation of the deed. And this is not surprising. The lay party in this case is an intelligent and experienced litigant who demonstrated himself to be well able to look after his own interests. Indeed, as will be seen, in many respects a document operates surprisingly harshly against the interests of WFW. In the circumstances of this case, I decline to construe the document contra proferentem.

11The document deals not only with the legal costs to be payable by Equus and with the manner of their payment, but also in some detail as to the manner in which the legal services are to be provided. Equus and, in particular, Mr Russo is a very experienced professional litigant.”

  1. In this case Meehan says there was a clear understanding between Mallesons and Cliffs about the work to be done and the fees to be paid. I consider Cliffs to be a sophisticated commercial entity that not only knew the basis upon which the fees were charged but also paid those fees. Monthly invoices had been sent and were duly paid. Over $300,000 had been paid prior to the commencement of the trial. In my view, given this course of conduct, the parties did not consider that this was an entire contract but rather it was severable given the apportionment of consideration. As Chesire & Fifoot[10] indicates, the question as to whether there is an entire or a divisible contract depends on the intention of the parties.

 

“whether the parties have expressly or impliedly agreed that the consideration was ‘entire, indivisible, and not severable’.  If so, complete performance is a condition of payment.  This means the parties can expressly provide for severability by apportioning consideration.”

Was the Agreement intended to operate retrospectively?

  1. Counsel for QCoal argues that the letter of 19 March only relates to future conduct and that the letter refers to fees that ‘will’ be charged. In my view an examination of that letter which was then signed and accepted on 23 March by Meehan indicates that the Agreement was intended to have a retrospective affect. It clearly evidenced the basis upon which the parties had been conducting their relationship up to that point. In Box Hill v Tauschke P/L,[11]  Pape J discussed the proposition expressed in Cheshire and Fifoot on Contracts, on the basis of the decision in Newlands v Argyll General Insurance Co Ltd,[12]that a contract cannot have retrospective effect unless it is expressly so provided in the contract.  His Honour held that the proposition was “too widely stated” and rather an agreement should not be interpreted as producing a retrospective operation unless the language was “clear and compelling”. He said:

 

“I do not think he intended to convey that in no circumstances could the whole of the circumstances in which the agreement was made produce a retrospective operation or justify the implication of a term providing for such retrospective operation.

...

In Trollope & Colls Ltd v Atomic Power Constructions Ltd [1963] 1 WLR 333... the question was considered by Megaw J in connection with a building contract, and his Lordship held that because the parties had acted for some time prior to the actual execution of a written contract in accordance with its terms their rights and obligations arising from their prior actions must be regulated by the written contract, and that although the contract  did not provide that it was to have retrospective effect, it was necessary to imply a term to that effect in order to give business efficacy to the transaction. He considered that such a term could only be implied if it could be seen that it conforms with what the parties truly intended and with what they both would have intended and with what they both would have accepted as a matter of course had the question been raised at the moment of the making of the contract.”

  1. In my view, an analysis of the letter of 19 March indicates that the parties actually intended that the Agreement had a retrospective operation and that they both would have accepted that as a matter of course at the time the Agreement was signed. The fees charged were in accordance with the fees which were current at the relevant times and substantial fees had already been paid in accordance with that agreement. Meehan gave evidence at the hearing that he sighted the monthly invoices and duly paid them without complaint after they had been reviewed by his staff. Essentially, they were as he expected them to be, based on his previous experience with Mallesons. He stated that he had previously worked with another partner at Mallesons in relation to due diligence and mergers and acquisitions issues. He stated he was aware of how Mallesons charged and knew the rates of the partners he had previously engaged. When it was clear that litigation was to ensue he asked for a recommendation as to who to engage and McDonnell was recommended.
  1. The services expressed to be covered by the Agreement obviously included legal services which had already been provided and the Agreement sought to cover expenses for which invoices had already been sent and in fact paid.
  1. Cliffs are experienced commercial operators. As noted by McMurdo J the Cliff respondents were subsidiary companies of an American Company, Cleveland Cliffs, who were brought in as joint venture partners by QCoal when it was estimated that more than $150,000,000 was required to develop the Sonoma Coal project. The letter from McDonnell also notes that Mallesons had previously acted for Cliffs in relation to the acquisition of the coal project. Cliff was a corporate entity and Meehan was a company director who had retained Mallesons previously.
  1. I consider that the Agreement was intended to cover the entire solicitor client relationship including the past aspects of that relationship.

Is the Agreement void for uncertainty?

  1. It is clear that an agreement will be upheld wherever possible and that Courts strive to uphold agreements, particularly commercial arrangements. Courts will generally interpret the words used broadly and will place a reasonable meaning on the words used unless it is impossible.[13] Decisions such as Brown v Gould[14] and Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd[15] have established that just because the language used is difficult does not mean it does not have any meaning. The question is clearly one of construction and of identifying the intention of the relevant parties.  The 1941 decision of G Scammell & Nephew Ltd v Ouston[16] held that provided the language used is not “so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention” the court will generally not hold it is void for uncertainty.
  1. QCoal argue that the Agreement is void for uncertainty because the terms of the Agreement, with respect to the fees to be charged, allow the solicitors liberty to charge whatever hourly rates they chose to charge at any time they chose, without notifying the respondents of any such changes, and thereby to bind the respondents to pay whatever rates the solicitors may have chosen. Accordingly, it is argued that there can be no concluded bargain if a vital matter has been left to a determination by one of the parties only.
  1. However, a series of cases have established that provisions which appear to be vague will be upheld if there is some reference to an external yardstick which can give the agreement a more precise definition.[17] In Placer Development Ltd v The Commonwealth[18] a clause was held to be unenforceable as there was “a complete absence from the clause, and from the Agreement as a whole, of any identifiable criteria by which it can be said the parties intended the amounts or rates to be determined; this is left solely to the discretion of the Commonwealth.”
  1. The Full Court of the Federal Court in Kabwand Pty Ltd v National Australia Bank Ltd[19] examined a clause in a loan agreement which provided for interest to be paid on the daily balance owing.  The interest was to be calculated at the rate “from time to time charged by the Bank and computed from the day or respective days of their being advanced or paid or becoming owing (whichever first occurs)”.  It was argued that such a clause was void for uncertainty because it allowed the Bank at its discretion to charge interest as it wished, without reference to an external standard or alternatively the clause was too obscure to be capable of a precise meaning.  The Court held:

 

“Here the rate of increase or decrease must conform to the general rates of interest charged to customers of the bank, that is to say there is an objective market standard to be applied at all times.”

  1. Similarly in WMC Resources v Leighton Contractors Pty Ltd,[20] the court held:

 

“While the valuation is to be undertaken by the applicant itself, the respondent does not suggest that this renders cl14.2 (b) (iv) void for               uncertainty.  In any event, such a submission would be untenable.  Any uncertainty would be cured by the implication of terms requiring the appellant to value by reference to objective criteria.  The appellant accepts that those criteria are that it should act honestly, bona, fide and reasonably.”

  1. It is clear that the letter of 19 March outlined the “team” that would be working on the file and that costs would be charged on two bases. One basis was by the hour, whereby the rate was calculated on the basis of “our current hourly rates from time to time”. The letter then set out in a Table on page 4 the hourly rates which were being charged at that time by the three categories of solicitors who would be working on the file namely the partner rate, the senior associate rate and the solicitor rate. The letter made it clear that the table set out “the hourly rates we currently charge”. The letter continued that charges were based on the “time spent on your matter. Time is recorded in six minute intervals and we round up to the nearest six minutes”. It was further stated that:

 

“We may change these rates from time to time.  Unless we have agreed with you specific rates to apply for a period, you agree to be charged at a changed rate whether or not we have notified you of the change.”

  1. The letter of 19 March specifically indicated that the costs Agreement consisted of the letter together with two attached documents entitled “Appointment terms” and “Costs”. The Appointment terms document included a paragraph which also explicitly stated that generally the firm reviewed its rates annually but “may do so at any time”. McDonnell in his affidavit states that:

“The usual rates charged for solicitors employed by Mallesons are set by the firm at the beginning of each financial year and reflect the post admission experience of solicitors.  The rates are then fixed throughout the financial year and ordinarily do not change until the commencement of the next financial year, when they may be reset.  On occasion, rates may change during a financial year following negotiations with individual clients.”

  1. Accordingly, in my view, the rates to be paid were always able to be ascertained by objective criteria. The rates were not set in an arbitrary way but rather the applicable rates to be charged were set pursuant to policy of annual review and were usually fixed for a year. All rates charged were on the basis of the firm’s usual rates at a particular time unless a different rate had been specifically negotiated. It is clear that the rate to be charged for any work done was always able to be objectively ascertained by reference to the objective criteria. In any event the rates charged did not ever exceed the rates set out in the letter of 19 March 2009.
  1. I do not therefore consider that the Agreement is void for uncertainty.
  1. In my view, there is an enforceable costs agreement pursuant to s 322 of the Act.
  1. In any event, I consider that even in the absence of a valid costs agreement it does not follow that where an indemnity costs order has been made costs may only be assessed on a scale costs only basis. Rule 703(3) provides that the assessing registrar or costs assessor has to take into account a number of factors when assessing the appropriate costs to be awarded. A costs assessor must allow all costs reasonably incurred and of a reasonable amount and must take into account each of the three factors set out in the rule. Those factors include the scale of fees, a costs agreement if any and charges ordinarily payable by a client to a solicitor for the work. This was clearly established by decisions such as Casey v Quabba,[21] ASIC v Atlantic 3-Financial (Aust) Pty Ltd[22] and Amos v Monsour Legal Costs Pty Ltd.[23]   Accordingly, even if the costs agreement was void its imply means it is not taken into account but the other factors still operate.

The Assessment of Costs pursuant to the UCPR

  1. As an alternative to the relief previously claimed QCoal seeks orders pursuant to r 366(2) and r 367(1) to facilitate the preparation of their Notice of Objection to Costs Statement. The affidavit of Ms Price, solicitor for the applicants, deposes that the costs assessor retained to prepare the Notice of Objection has indicated that the task of preparation will be significantly longer if he is not provided with the time sheets recording the professional services including the identity of the solicitors who rendered the services.  Furthermore, he considers the process will be more expensive and there will be a lack of efficiency in making some of the objections which would not necessarily be made if the documents were provided.
  1. The applicants indicate that the costs claim is in the order of $1,000,000, whereas the judgment amount was $275,000, and the claim was for $1,000,000. Accordingly, it is submitted in a case where the costs are high and there is no prejudice to Cliffs the documents should be provided.
  1. The scheme for the assessment of costs is set out in Chapter 17A.

678 Application of ch 17A

(1)This chapter applies to costs payable or to be assessed under an Act, these rules or an order of the court.

(2) However--

(a)part 2 applies to costs payable or to be assessed under the Legal Profession Act 2007 only if section 319(1)(b) of that Act applies to the costs; and

(b) part 3 does not apply to costs payable or to be assessed under the Legal Profession Act 2007; and

(c)part 4 applies only to costs payable or to be assessed under the Legal Profession Act 2007.

Note--

The Legal Profession Act 2007, section 319(1)(b) applies to costs that are recoverable under the applicable scale of costs, rather than under a costs agreement.

  1. Rule 703 governs the assessment of costs on an indemnity basis as follows:

 

703 Indemnity basis of assessment

(1)The court may order costs to be assessed on the indemnity basis.

Note--

Costs on the indemnity basis were previously solicitor and client costs--see rule 743S (Old basis for taxing costs equates to new basis for assessing costs).

(2)Without limiting subrule (1), the court may order that costs be assessed on the  indemnity basis if the court orders the payment of costs--

(a)out of a fund; or

(b)to a party who sues or is sued as a trustee; or

(c)of an application in a proceeding brought for noncompliance with an order of the court.

(3)When assessing costs on the indemnity basis, a costs assessor must allow all costs reasonably incurred and of a reasonable amount, having regard to--

(a)the scale of fees prescribed for the court; and

(b)any costs agreement between the party to whom the costs are payable and the party's solicitor; and

(c)charges ordinarily payable by a client to a solicitor for the work.”

  1. Rule 705 provides that a party entitled to be paid costs must serve a costs statement. Rule 706 then allows objections to any item within 21 days and requires that the reasons for each objection must be concisely stated. The objections must also identify any issue of law or fact the objector contends the assessor should consider.
  1. It is clear that the assessing registrar or costs assessor has power pursuant to r 715 and r 714(e) to order the production of documents or pursuant to r 714 (f) and (g) to make other directions.
  1. It would seem to me that the procedure set out in Chapter 17A should govern the process to be followed unless there is a good reason not to do so. An assessing registrar or a costs assessor is given power pursuant to r 720 to decide the procedure to be followed depending on the scope and nature of the dispute and the amount in dispute. In my view the costs assessor should be allowed to determine the issue as to what documents should be produced after he or she is seized with the matter.
  1. Given the scheme provided for in the UCPR for the assessment of costs and given the specific powers given to the assessing registrar or costs assessor in the UCPR, I do no consider that sufficient reasons have been established for the Court to intervene pursuant to the general directions powers in r 366 and r 367.
  1. The application should be dismissed.

Footnotes

[1] Sworn 6 December 2010

[2] Sworn 6 December 2010

[3] Unreported, Supreme Court of Western Australia, Owen J 9 May 1995

[4] [1892] 1 Ch 104

[5] (1985) 9 ACLR 956

[6] [2007] VSCA 29

[7] [2006] QCA 145

[8] Law of Costs (Second Edition 2009) at  p 40

[9] [2004] VSC 164 at [10], [11]

[10] At [26.13]

[11] [1974] VR 39

[12] [1959] SR (NSW) 130

[13] Contract Law in Australia Carter, Peden & Tolhurst  5th edition [4.03], Hillas & Co v Arcos Ltd (1932) 147 LT

[14] [1972] Ch 53 at 57

[15] 118 CLR 429

[16] [1941] AC 251 at 268

[17] Peters Ice cream (Vic) Ltd v Todd [1961] VR 485; Placer Development Ltd v The Commonwealth (1969) 121 CLR  353

[18] (1969) 121 CLR  353 at 361

[19] Federal Court of Australia G355 of 1988, unreported, 21 April 1989

[20] [1999] WASCA 10 at p 19-20 

[21] [2005] QSC 356

[22] [2006] QSC 152

[23] [2008] 1 Qd R 304

Close

Editorial Notes

  • Published Case Name:

    QCoal P/L & Anor v Cliffs Australia Coal P/L & Anor

  • Shortened Case Name:

    QCoal Pty Ltd v Cliffs Australia Coal Pty Ltd

  • MNC:

    [2010] QSC 479

  • Court:

    QSC

  • Judge(s):

    A Lyons J

  • Date:

    20 Dec 2010

Litigation History

No Litigation History

Appeal Status

No Status