Verhagen v Millard[2012] QDC 196

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   After buying a business from Mr and Mrs Verhagen (“the vendors”), Mr Millard (“the buyer”) owed them money and gave them a mortgage to secure its repayment. If the buyer defaulted, the mortgage obliged him to pay the vendors’ costs in consequence of default. The buyer defaulted. After the default the vendors entered into a written costs agreement with their solicitors. The vendors incurred some costs because of the buyer’s default. Then, the vendors commenced proceeding BD1398/07 and claimed arrears from the buyer and the vendors incurred costs of the proceeding. There was a trial before his Honour Judge Tutt who gave judgment against the buyer for $16,382 plus interest.^[1] The vendors asked for costs on an indemnity basis^[2] arguing that the mortgage^[3]provided for this.

2. [2]
   His Honour awarded costs on a standard basis and only of the proceeding.^[4] The vendors were dissatisfied. To pressure the buyer to agree to pay costs on an indemnity basis the vendors threatened to exercise mortgagees’ rights^[5]and to appeal the costs order. This pressure led to a compromise agreement by letters.

3. [3]
   The clauses of the agreement are in a letter^[6] from the vendors’ solicitor. The letter was obtuse about the costs the vendors claimed. The buyer^[7] accepted the obtuse terms without clarifying the meaning. The buyer’s case, until his counsel’s written submissions to me, was that the agreement was so obtuse that it was void for uncertainty. That argument is abandoned.^[8]One clause of the compromise concerned the difference between the costs of the earlier proceeding on an indemnity basis and on a standard basis. That clause required the buyer to pay the difference into trust. Another clause gave the buyer liberty to commence a further proceeding to establish his right to the trust money.

4. [4]
   After the buyer accepted the offer, there followed demands by the vendors’ solicitor to the buyer’s solicitors for indemnity costs. The demands were obtuse. There was no itemised bill of costs. The vendors’ solicitors continued to provide professional services to the vendors. The vendors incurred costs associated with their solicitors delivering a notice of exercise of power of sale which claimed a figure for debt which is still challenged as too high. The amounts demanded increased and still no itemised bill. The buyer tendered a bank cheque for less. Just before or after tendering the cheque, the buyer asked for an itemised bill. Without supplying the itemised bill in the next 10 weeks, the vendors then started this proceeding. They applied for summary judgment and on the return date for the summary judgment application, orders were made that the buyer pay the vendors an undisputed amount of $45,858.15 and pay into trust a disputed amount of $35,290.75. The vendors were ordered to provide a release of mortgage in return. It was ordered that a costs assessor make some relevant assessments.

5. [5]
   Part of the disputed $35,290.75 depended upon proof of agreement between the vendors and their solicitors that the solicitors could charge an extra 30% of certain fees as “uplift” and could charge for a 72 word folio instead of the standard 100 word folio. The written costs agreement between the vendors and their solicitors made no reference to these rights. Arguably the solicitors could not enforce a claim for the uplift unless it was agreed in writing and arguably the buyer would not be liable for uplift. Two months after the interlocutory orders the vendors and their solicitor entered into a further written costs agreements by which the vendors agreed to pay a 25% uplift fee.

Issues

6. [6]
   The issues and my abbreviated findings on them follow. By a compromise agreement that required the buyer to establish his right to the difference between costs of the earlier proceeding assessed on the standard and indemnity bases did the parties agree to re-litigate the costs issue decided by Tutt DCJ? (Yes) If so, was the compromise agreement against public policy? (Partly) Did that make it void? (No) Was the vendors’ application to Tutt DCJ for indemnity costs an application about costs of the proceeding or about all costs due pursuant to the mortgage? (Of the proceeding) If the vendors did not apply to Tutt DCJ for all costs due under the mortgage, are they estopped from claiming them in this subsequent proceeding? (No) When Tutt DCJ rejected the indemnity basis for assessing costs, was it a ruling about costs of the proceeding or about all costs? (Of the proceeding) Are the vendors estopped from claiming indemnity costs for services which were not costs of the earlier proceeding? (No) Did the buyer’s solicitors orally request an itemised account before 31.03.09? (Yes) Did the vendors agree to treat a folio as 72 words instead of 100? (No) Is the buyer liable to pay for folios at the rate of 72 words per folio? (No) Did a costs agreement made on 29 October 2009 to pay 25% uplift on professional services previously rendered bind the vendors to pay it? (No) Must the buyer pay 25% uplift? (No) Does the mortgage oblige the buyer to pay interest at 12.5% pa on the vendors’ legal costs? (Yes, if the costs have been paid and there is a judgment that the buyer pay the costs) Are the vendors are bound by their pleading to the 10%pa claimed in respect of interest? (No) Is the buyer entitled to treat the costs related to giving a notice of exercise of power of sale as excluded from the calculation of the amount due to the vendors on 31 March 2009? (The amount is immaterial) Should the court order that the amount assessed by a costs assessor to 31 March 2009 be reviewed on the basis that no amount should be allowed for work related to issue of a notice to exercise power of sale? (No) What interest, costs and total sum was due on 31 March 2009 when the buyer tendered $42,949.72? (As much as $50,718.69) Was the buyer ready willing and able to pay the amount due on 31 March 2009? (He was willing and able) Must the buyer commence another proceeding to determine whether he is entitled to such money as remains in trust on account of the difference between standard and indemnity costs of the earlier proceeding? (No, it is an issue in this proceeding) Is the buyer entitled to such money as remains in trust on account of the difference between standard and indemnity costs of the earlier proceeding? (Yes) What sum is due to the vendors?

Orders Sought

7. [7]
   The vendors seek judgment for $56,681.59 to the 21st day of October 2009 and seek their costs from the 21^st day of October 2009 to be assessed on an indemnity basis and they seek a direction that funds in the trust account of their solicitors of $32,290.75, with any accretions, be dealt with as follows:

1. (a)
   $13,655.30 be retained in the trust account pursuant to paragraph 4 of the compromise agreement;^[9]

2. (b)
   the balance be paid to the vendors in reduction of the judgment sum.

8. [8]
   The buyer seeks payment from the trust account of the vendors’ solicitors of $35,290.75 with any accretions and seeks an order that the plaintiffs account to the defendant for any amount paid in excess of the debt owing under the mortgage and an order that an amount assessed by a costs assessor be reviewed on the basis that no amount should be allowed for work related to issue of a Notice to Exercise Power of Sale.

Confusing references to “indemnity costs”

9. [9]
   The submissions for both parties, like the correspondence between their solicitors, were often confusing when they referred to “indemnity costs” because they failed to specify the legal services to which the costs related. They tended to conflate legal services performed by the vendors’ solicitors for the proceeding before Tutt DCJ with legal services performed by the vendors’ solicitors that were not for that proceeding. A solicitor’s retainer to act in a proceeding differs from a solicitor’s retainer to act with respect to a sale, conveyance or mortgage.

10. [10]
    “Costs of the proceeding” is and was at all material times a recognised legal term in Queensland. Its meaning appears in the UCPR at r 679:

“costs of the proceeding mean costs of all the issues in the proceeding and includes—

1. (a)
   costs ordered to be costs of the proceeding; and

2. (b)
   costs of complying with the necessary steps before starting the proceeding; and

3. (c)
   costs incurred before or after the start of the proceeding for successful or unsuccessful negotiations for settlement of the dispute.”

11. [11]
    The legal costs a mortgagee incurs in relation to the mortgage and enforcing the mortgagee’s rights against the mortgagor may be “costs of a proceeding” if the mortgagee commences a proceeding in a court. But a mortgagee may have other legal costs of the mortgage which are not “costs of a proceeding” against a mortgagee. An example may be the legal costs of preparing the mortgage and of registering it. Those legal costs are not likely to be “of the proceeding” between the mortgagor and the mortgagee even where the dispute is about enforcing rights created by the mortgage.

12. [12]
    Professional services rendered and outlays before a proceeding commences may fall inside or outside the description “costs of the proceeding”. Whether the costs are one or the other depends on the purpose for which the services and outlays were supplied.

The facts

13. [13]
    On about 21 October 2003 the vendors sold to the buyer, a seafood business. The terms of the sale were in a written Business Sale Contract.^[10]

14. [14]
    The vendors and the buyer anticipated that $30,000 would remain owing on the date for completion and agreed some terms about repayment and about rights if the buyer defaulted. Relevantly they agreed about legal costs the vendors might incur recovering money from the buyer if he defaulted. Annexure B to the Business Contract of Sale provided, so far as seems relevant:

“… [T]he balance of $30,000 shall be paid in accordance with an agreement to be executed by the purchaser and to the satisfaction of the vendors prior to the settlement of this contract and that that agreement shall substantially provide for:

1. The balance of the purchase price to be paid at a rate of $200 per month … from 1^st December 2003 …

3. A default interest rate of 12.5% per annum … on any outstanding amount of the purchase price …

4. The purchaser to pay all the vendors cost, in the event of default the vendor incurs recovering any outstanding balance of the purchase price. …”

15. [15]
    On 14 November 2003, the agreed date for completion of the sale, the buyer paid the vendors $95,290 being $60,000 towards the $90,000 price of the business and $35,290 to cover perishable stock. $30,000 remained owing by the buyer pursuant to the written terms.

16. [16]
    The vendors initially took security by lodging a consent caveat over land registered in the buyer’s name as proprietor. The caveat was a problem for the buyer who wanted to offer the land as security for a loan from an institutional lender. The vendors agreed to accept a mortgage over real property at Redcliffe instead of the caveat as security.

17. [17]
    By that mortgage dated 24 November 2003^[11] the buyer agreed to repay $30,000 to the vendors by 150 consecutive weekly instalments of $200 per week commencing on 1 December 2003. It was agreed pursuant to the mortgage, so far as seems relevant:

1. … If any such instalment … is … unpaid … the Mortgagor will pay interest … until payment at the rate of 12.5 per cent per annum.

2. The principal sum is not subject to interest at all.

…

4. The Mortgagor will upon demand pay the Mortgagee’s costs and all charges, expenses and outlays which may be incurred or paid by the mortgagee in or about the preparation, execution and registration of these presents and all securities collateral herewith and in and about the release or partial release of these presents and all or any such collateral securities … or in consequence of default in payment of any money intended to be hereby secured or the breach of any covenant … herein … and all charges expenses and outlays may be paid by the Mortgagee and in that event shall be forthwith payable by the Mortgagor to the Mortgagee pending such payment may be debited to the Mortgagor and shall be deemed to be further advances under this Mortgage payable on demand.

5. If the Mortgagee at any time obtains judgement for any of the moneys intended to be hereby secured such judgement shall until satisfied carry interest at the rate of 12.5 per cent per annum …

18. [18]
    The mortgage was registered on 27 February 2004.

19. [19]
    When the terms about interest on outstanding principal in the mortgage are contrasted with the terms about interest on outstanding principal in the earlier Annexure B to the Business Contract of Sale a difference appears. The mortgage’s interest term is arguably more favourable to the buyer as it expressly provides that the principal sum is not subject to interest at all.

20. [20]
    The vendors fell into dispute with the buyer after the buyer failed to make payments due. The vendors entered into a costs agreement in writing,^[12] dated 25 May 2007, with their solicitors relating to work described as:

“_ attend to all as necessary with regard to a Peter … Verhagen and Willhelmina …Verhagen Ats Wayne Stanley Millard”

The writing made no provision for care and consideration or for an uplift fee. It did not define a folio.

21. [21]
    Mr Verhagen gave evidence that Mr Cooper, of the vendors’ solicitors, told Mr Verhagen about an uplift fee. He did not explain whether it was before or after the vendors entered into the client agreement dated 25 May 2007, but he implied that it was at about that time. Mr Cooper told him:

“…that instead of every telephone call or every conversation or fax or email there would be a consideration made at the end of the case for all of that rather than itemised bill…there was a 30 percent amount that was discussed.”

22. [22]
    When the vendors entered into the client agreement in May 2007, the Queensland Law Society Act 1952 provided at s 48(2):

“Within a reasonable time after starting work for a client, a practitioner or firm must make a written agreement with the client expressed in clear plain language and specifying the following matters -

1. (a)
   the work the practitioner or firm is to perform;

2. (b)
   the fees and costs payable by the client for the work.

(3) The fees and costs payable by the client for work must specify –

1. (a)
   a lump sum amount; or

2. (b)
   the basis on which fees and costs will be calculated (whether or not including a lump sum amount).”

23. [23]
    In compliance with s 48(4) of the Queensland Law Society Act, the vendors’ solicitors did supply a notice in the form in the Schedule to the Act.^[13]  That notice explained that the client agreement was the basis for determining how much the vendors were to pay for the work done by their solicitors. 

24. [24]
    Significantly, the client agreement made no provision for the solicitors to charge an uplift fee of 30% or any uplift. It made provision for calculating certain fees per folio. It did not define a folio or specify how many words constituted a folio. An expert costs assessor, Mr Bloom opined that under the UCPR a folio was 100 words and had been for more than two years before the client agreement was made and that treating a folio as 100 words was accepted practice at the time the client agreement was made.^[14] I accept that. Despite the practice, a client could agree to a more costly basis and, subject to the solicitor’s compliance with the statutory obligation for writing to evidence the agreement, the client would be bound.

25. [25]
    Mr Verhagen gave evidence that before signing the client agreement there was a discussion about the number of words in a folio and that it was approximately 70 words. The number of words per folio was not an issue Mr Verhagen was called upon to reconsider for more than two years after making the written agreement. I am not satisfied that his memory of a discussion about the number of words in a folio is reliable. Mr Cooper’s memory of a matter so trivial that it did not warrant recording, no matter how honestly he may have strived to recall it, was susceptible to reconstruction and to confusion with memories of similar conversations about this issue in the course of his practice with other clients and at other times. There was no note to corroborate the discussion. It was not recorded in a client agreement at a date when the practice was to assess a folio as consisting of 100 words. I am not satisfied that there was an oral agreement made prior to the entry into the written costs agreement that a folio was 70 or 72 words.

26. [26]
    In an earlier proceeding^[15] commenced in 2007 between the vendors and the buyer, the vendors claimed $16,382.60 from the buyer comprising interest and a further amount for goods and services provided to the buyer. The further amount appears from the judgment to be $5,000 pursuant to an oral term about the sale of stock not covered by the written terms. The stock comprised consumables such as wrapping paper and cleaning supplies, as opposed to perishable stock.

27. [27]
    On 1 June 2008 there was a trial in the earlier proceeding before Tutt DCJ.

28. [28]
    On 1 August 2008 Tutt DCJ gave judgment for the vendors against the buyer in the sum of $16,382 plus interest outstanding to the date of judgment and adjourned the question of costs awaiting submissions. The judgment does not identify the rate of interest, the source of the obligation to pay it or the date from which it was to accrue. As both parties have submitted to me that the interest was $308.57, the uncertainty is unimportant. A reader of the judgment cannot be sure whether the judgment sum included any part of the principal payable pursuant to the Business Contract of Sale. His Honour found:^[16]

“(v) that the mortgage between Millard and Verhagens replaced the caveat to provide an alternative security to Verhagens for the balance of the contract price but was not in substitution of the terms and conditions of the respective parties’ rights under ‘Annexure B’ of the Business Sale Contract …”

29. [29]
    His Honour reserved costs until the parties made submissions.

30. [30]
    On 6 August 2008 the buyer’s solicitor wrote to the vendors’ solicitor setting out a proposal that:^[17]

1. (1)
   the mortgage in favour of the vendors be removed immediately;

2. (2)
   the vendors’ indemnity costs be assessed;

3. (3)
   “these costs and the judgment amount be paid when our client’s house property settles. Our client presently has the house on the market for sale.”

31. [31]
    On 6 August 2008 the vendors’ solicitors responded that the vendors “will seek all their costs in relation to the loan, and subsequent litigation … our clients will not release the mortgage without payment in full of all their costs”.^[18]

32. [32]
    On 7 August 2008 the vendors’ solicitors wrote to the buyer’s solicitors stating that provided the buyer’s proposal to pay indemnity costs includes:^[19]

“… all legal costs relating to the litigation …

That the assessment is pursuant to a client agreement between this firm and our client, that the assessment includes a 30% care and consideration factor.

The costs of such assessment to be paid by the defendant.

All other costs in relation to your client’s obligations contained in Clause 4 of the mortgage … are due and payable in addition to the litigation costs.

The indemnity costs are paid within 30 days of the date hereof.

…

Should any extension of the 30 day period … be granted, then your client pay interest at 12.5%, calculated monthly on the judgment amount, indemnity costs …”

33. [33]
    The vendors’ solicitor’s letter could have been clearer. The demand for “all legal costs relating to the litigation” must have meant “costs of the proceeding” which was tried by Tutt DCJ. The assertion that “All other costs in relation to your client’s obligations contained in Clause 4 of the mortgage … are due and payable in addition to the litigation costs” must have meant that in addition to claiming the costs of the proceeding, the vendors were claiming all their legal costs which were not “costs of the proceeding”. The vendors arguably were entitled to these other costs on the basis of clause 4 of the mortgage dated 24 November 2003^[20]or clause 4 of Annexure B to the Business Contract of Sale of 21 October 2003.^[21]

34. [34]
    On 7 August 2008 the buyer’s solicitors submitted in writing to Tutt DCJ:^[22]

“Any costs that may be incurred by the Plaintiffs in regards to the mortgage are not a matter for determination by the Court and therefore no order should be made in this regard.”

In hindsight, the objection to having these issues determined by Tutt DCJ has arguably led to four years of dispute.

35. [35]
    The buyer’s solicitor’s letter’s terms reveal that the writer understood that costs incurred by the vendors with regard to the mortgage were not necessarily costs of the proceeding before his Honour and revealed that the solicitor contended that costs which were “in regard to the mortgage” should not be the subject of any order still to be made by his Honour in that proceeding.

36. [36]
    On 8 August 2008 the vendors’ solicitors made submissions^[23] to Tutt DCJ seeking costs on an indemnity basis. Whether the vendors applied for costs “of the proceeding” or of more than the proceeding is relevant to an estoppel point the buyer raises against the vendors. I consider it below when dealing with the Anshun estoppel issue.

37. [37]
    30 September 2008: The vendors’ solicitors at some unspecified date prepared an Excel spreadsheet purporting to set out costs for a variety of items to 30 September 2008.^[24]  It appears to be the basis for figures for professional fees appearing in a letter of demand sent on 9 October 2008. It is inconsistent with a trust statement dated 3 October. From the spreadsheet the totals were:

Professional costs $21,320.45

30% uplift on that item $6,396.14

Total professional costs including uplift $27,716.59

10% GST $2,771.66

Total $30,488.24

Outlays $579.50

GST on outlays $57.95

Taxis, emails and photocopying $538.00

GST on that item $53.80

Total  $31,717.49

Barristers $9,020.00

Judgment $16,382.00

Interest $552.05

Total $57,671.54

38. [38]
    A trust statement^[25] created by the trust account manager of the vendors’ solicitors and dated 3 October 2008 sets out the monies paid by the vendors to their solicitors from 24 May 2007 to 3 October 2008.  The statement shows that the vendors, in that period, paid $22,000.  It shows professional costs and outlays of $22,000 and a nil balance.  Among the outlays is a total of $6,765 for barristers’ accounts. Accordingly, $15,235 appears to be for solicitor’s professional costs and other outlays to 12 June, almost two weeks after the trial.  The last entry for solicitor’s costs and outlays appeared for 12 June 2008 and made clear that it was for part of the costs and outlays. If work was done after 12 June 2008 one would expect that professional costs and outlays for that work would be an additional amount. Between 12 June and 3 October 2009 the vendors’ solicitors had written at least the two letters set out above, possibly attended to collect the reserved judgment and may have prepared the submissions on costs. A handwritten note appears on the trust statement.  The buyer’s counsel submitted that it reads “Owes $274.01 currently”.  The vendors’ counsel does not submit otherwise.^[26]  It is probable that it reads as the buyers’ counsel submitted.  It suggests that someone in the office of vendors’ solicitors, on about 3 October 2008, calculated that the balance then due for professional costs and outlays was about $274.01. The document gives no indication that there is to follow an adjustment for uplift of 30% on professional costs or for GST on professional costs and outlays.

39. [39]
    On 3 October 2008 Tutt DCJ ordered that the buyer pay the vendors’ costs of and incidental to the proceeding including the counter-claim and originating application on the standard basis under the District Court Scale.^[27] His Honour considered the vendors’ arguments based on the business contract, on the mortgage and UCPR r 360 for ordering an assessment on an indemnity basis and rejected those arguments.^[28]Assessments have since been done of the costs of the proceeding on a standard basis of $22,711.20 and costs pursuant to the mortgage which were not of the proceeding of $2,654.60. It seems that the amount then due by the buyer^[29] was $25,365.80 for costs, $16,382.00 for the claim, and interest to 1 August 2008 of $308.57 and further interest to 3 October 2008 a further $353.46. The total then due was $42,409.83, though without the benefit of assessments that figure could not have been calculated with certainty that day.

40. [40]
    On 9 October 2008^[30] the vendors’ solicitors wrote to the buyer’s solicitor in respect of the costs decision:

“… Our client is of the view that His Honour has erred in his decision, our client is currently considering an appeal against the decision.

In paragraph 13(v) of His Honour’s judgment His Honour states ‘.. to substitute alternative security to the Verhagens’ … but was not in substitution of the terms and conditions of the respective party’s rights under Annexure B of the Business Sale Contract.

Paragraph 4 of the Business Sale Contract provides ‘The purchaser to pay all the vendors costs in the event of a default of the vendor incurs in recovering any of the outstanding balance purchase price’.

It is the [vendors’] position that they are entitled to costs of the proceedings an indemnity basis for all costs over and above the standard basis.

We have calculated our clients’ costs pursuant to a client agreement from the commencement of recovery of the interest as a result of the default, and the proceedings.

As at the 6 October 2008 the (vendors) claim $59,389.04.

On a without prejudice basis, we provide a breakdown of our calculations.

Professional costs $27,716.59

GST $2,271.66

Outlays and photocopying $1,117.50

GST $117.50

Total professional costs $31,717.49

Outlays, barristers fees $9,020.00

Judgment $16,382.00

Interest to judgment $1,717.50

Interest from judgment (at the rate of $4.49 per day) $552.05

Total amount required to release the mortgage is $59,389.04 plus $4.49 per day until settlement, and all other legal costs incurred by the vendors until settlement.

Should you client reject our clients the basis on which our client has assessed their professional costs, our client will be advised to appeal the decision to assess costs of an indemnity basis from 23 August 2007 …”

41. [41]
    That letter did four things adequately. It argued that the vendors were entitled on an indemnity basis to “costs of the proceeding”. It demanded for release of the vendors’ mortgage “$59,389.04 plus $4.49 per day until settlement, and all other legal costs incurred by the vendors until settlement”. It advised that the calculation was pursuant to a clients’ cost agreement. It threatened that if the buyer refused, the vendors’ solicitors would advise the vendors to appeal. The amount demanded was about 140% of what was owed, having regard to my findings below about costs and bearing in mind that the vendors abandoned their claim for GST as unjustified.

42. [42]
    When contrasting the figures in the trust statement^[31] created by the trust account manager of the vendors’ solicitors and dated 3 October 2008 with the demand made by letter of 9 October the figures increase substantially. If solicitor’s professional costs and other outlays to 12 June were $15,235 and to 3 October had increased by $274.01 to $15,509.01 then they more than doubled to $31,717.49 in the next three days to 6 October. That cannot be. There is no obvious explanation for a doubling in those 3 days or in the post trial period between 12 June and 3 October 2009. Attendances on the vendors were, according to Mr Cooper, to be charged by way of 30% uplift and cannot be the explanation for a doubling. If one assumes that the 30% uplift adjustment had not been performed when the trust statement of 3 October 2008 was produced, the professional costs and outlays would need adjustment upward by $4652.7. That exercise would take the professional costs and outlays to $20,161.71, but still well short of the amount in the breakdown supplied on 9 October.

43. [43]
    The buyer retained a new solicitor. On 14 October 2008 Rb Lawyers for the buyer replied to the vendors’ solicitors:

“… We note … that you consider that your clients should have costs on a ‘full indemnity basis’. With respect … your client has absolutely no prospect … of obtaining an award for costs in this regard.

Our clients’ proposal … for payment of costs … follows:

1. (a)
   that same be assessed by …. DG Thompson in that regard;

2. (b)
   our client be allowed to sell his property (over which your client still  retains a mortgage) with the agreed or assessed cost amount being paid at settlement in return for the relevant Release of mortgage;

3. (c)
   each party bear their own costs of and incidental to the matter since the date of the delivery of the said Judgment on 3 October 2008.”

44. [44]
    On 16 October 2008 the vendors’ solicitors replied to Rb Lawyers:

“… [W]e … received our clients’ instructions that to release their mortgage over your clients’ property they will require payment of all their legal costs in relation to recoveries of money pursuant to the sale of business contract, and the mortgage.

Our clients agree that their legal costs can be assessed by a cost assessor at your client’s cost and calculated on the Client Agreement with our clients, and not on the District Court Scale.

Our clients do not agree to each party pay their own costs from 3 October 2008, your client is liable for our client his costs until the date of settlement on sale of his property.

Should your client reject … our client requirements … we are instructed to:

Proceed with the appeal of His Honour’s decision in relation to the findings contained paragraphs 6, 7, and 8 of his judgment.

And commence the process of our clients, becoming mortgagee in possession, sale of this property, payment of the first mortgagees and second mortgagees’ security, together with all sale costs and legal costs.”

45. [45]
    This letter was obtuse but did some things adequately. It demanded all of the vendors’ legal costs in relation to recovering money. An implication was clear. The vendors demanded more than the costs of the proceeding on a standard basis ordered by Tutt DCJ and offered by the buyer’s solicitor. They demanded “payment of all their legal costs in relation to recoveries of money” and explained the basis of the demand was “pursuant to the sale of business contract, and the mortgage”. The letter was a demand for at least indemnity costs of the proceeding. It demanded that the costs be calculated on the basis of a client agreement between the vendors and their solicitors. It threatened: unless the buyer agreed to the vendors’ demand within six days, the vendors would (1) appeal the costs order and, (2) take possession of the buyer’s property as mortgagees and sell it.

46. [46]
    On 21 October 2008, the fifth day of the six days to the deadline, the buyer’s solicitor responded:^[32]

“There is no basis for your client to claim ‘all of its costs’. The Judgment of His Honour is correct and your clients are entitled to their costs on a standard basis as per His Honour’s Judgment in this regard.”

47. [47]
    On 22 October 2008, the day of the deadline, the vendors’ solicitors sent two letters offering compromise. The second of them was accepted. The earlier letter is relevant despite the importance of the second. The first letter provided:^[33]

“…The outcome of the proceedings does not affect your client’s obligation pursuant to the Sale of Business Contact or the mortgage.

Our client is not going to enter into prolonged correspondence with you as they are entitled to the benefit of their judgment forthwith.

Our client will sign the necessary release on the following basis.

1. Your client pays our client’s the sum of $16,382.00.

2. Interest to Judgment $1717.50.

3. Plus interest of $4.49 per day from 9 October 2008.

4. Professional costs, and outlays until settlement $40,739.49 (as at 9 October 2008 and continuing).

5. The payment is made in full within 14 Days from the date hereof.

6. The payment will then be in full and final settlement of all matters between the parties.

In exchange for a bank cheque for that amount our client’s will execute a Release of Mortgage.

Our clients maintain their right have all of the costs they incur, to recover the debt, pursuant to the Sale of Business Contract and the Mortgage, (The loan agreements) payable on the basis of a client agreement we have with our client’s.

As the time for our client can Appeal ends 30 October 2008, our clients have elected to exercise their rights pursuant to the loan agreements rather than incur further costs, and considerable delays to take the above course.”

48. [48]
    The letter was arguably wrong in its assertion of law. It asserted that the outcome of the proceedings did not affect the buyer’s obligation pursuant to the Sale of Business Contract or the mortgage. Tutt DCJ had considered the Sale of Business Contract and the mortgage and referred to them in his reasons. His Honour had rejected the vendors’ arguments that each of the Sale of Business Contract and the mortgage justified an order that the buyer pay indemnity costs of the earlier proceeding. A strong argument existed for the buyer that without a successful appeal by the vendors against the costs order, the vendors could not again argue that the buyer should pay indemnity costs of the earlier proceeding. The letter continued to demand well in excess of the proper amount which later assessments would reveal to be due.

49. [49]
    The letter was also obtuse and in places ungrammatical but it did four things adequately:

• Firstly, it indicated that the vendors had decided not to appeal. That decision was not expressed to be conditional upon any act by the buyer.
• Secondly, it made an offer. It offered a release of mortgage as part of a compromise.
• Thirdly it made a demand. The letter demanded in exchange for the compromise: a bank cheque for judgment, interest and for "professional costs and outlays until settlement $40,739.49 (as at 9 October 2008 and continuing)".
• Fourthly, it set out the vendors' argument that "they maintain their right have all of the costs they incur, to recover the debt, pursuant to the Sale of Business Contract and the Mortgage, (The loan agreements) payable on the basis of a client agreement we have with our client's." The argument was expressed ambiguously in that sentence. It was not clear from that sentence alone whether the vendors contended that they were entitled to indemnity costs of the earlier proceeding, notwithstanding the order of Tutt DCJ. If the writer chose words carefully, the writer's reference in the sentence to "costs they incur" impliedly excludes costs they have incurred. But the letter's poor punctuation, grammar, and editing make it difficult to conclude that the writer carefully chose words. If one reads only the letter it is difficult to decide whether the vendors maintained a right to indemnity costs of the proceeding decided by Tutt DCJ or maintained a right to indemnity costs other than the costs of the proceeding. Because the letter had earlier asserted "The outcome of the proceedings does not affect your client's obligation pursuant to the Sale of Business Contact or the mortgage" and because of assertions in earlier letters it is probable that this letter, interpreted in context with prior correspondence, was asserting that the vendors maintained that they were entitled to more costs of the earlier proceeding than costs assessed on a standard basis.

50. [50]
    The settlement to which the letter referred was to occur at a future undetermined date. The settlement was a settlement of a contract of sale of the land mortgaged to the vendors. The buyer as a seller wanted to complete a sale of that land to a third party as purchaser.

51. [51]
    On 22 October 2008 the vendors’ solicitors wrote another obtuse and problematic letter marked “without prejudice save as to costs”.^[34] It contains the terms of the compromise agreement:

“This letter is written on a Without Prejudice basis … Our clients maintain their right have all of the costs they incur, to recover the debt, pursuant to the Sale of Business Contract and the Mortgage, (The loan agreements) payable on the basis pursuant to a client agreement we have with our client. (Full indemnity costs).

Our client is prepared to allow your client to refinance or sell the property, (providing of course there is sufficient to pay the first, and second mortgagee). On the following basis:

1. Your client pays our clients judgment and the interest as per the Order.

2. Your client arranges and pays for an assessment of the costs of proceedings on the District Court Scale. (The scale costs).

3. Your client pays all other costs on the Full indemnity costs basis.

4. The difference between the scale costs and the full indemnity costs for the proceedings is paid on settlement to into the Trust account of Colwell Wright. (The retained amount).

5. The balance being paid to our client on settlement.

6. Your client will then at liberty to give Notice and commence further proceedings pursuant to the Trust Act. For a determination as to whether the Mortgagee's are entitled to the retained amount.

This offer remains open for 14 days from the date hereof.”

52. [52]
    On 28 October 2008 the buyer’s then solicitors replied:^[35]

“We refer to your Without Prejudice letter of 22 October 2008 and advise that we are agreeable to proceed on that basis.

Would you kindly now confirm the arrangement by return.”

53. [53]
    On 4 November 2008 the vendors’ replied:^[36]

“… We confirm the acceptance of our clients’ proposals contained in correspondence 22 October 2008 …  In relation to the assessment of our clients’ file to assess the costs of the proceedings on the District Court Scale.  We will make the file available to D G Thompson Legal Costs Assessors for them to assess the file …  At a time convenient to both parties. …”

54. [54]
    On 25 November 2008 the buyer’s solicitor wrote:^[37]

“… Please advise the amount that your consider is owed as soon as possible as it may be possible for our client to effect a refinancing to pay out your client.”

55. [55]
    On 8 December 2008 the vendors’ solicitors, consistently with their earlier erroneous estimates of their allowable costs and their right to GST replied:^[38]

“… We have calculated an amount that will finalise the matter as at 8 December 2008.

As at 6 October 2008 $59,389.04

Interest at $4.49 per day $269.40

Professional costs $1,089

GST on Professional Costs $108.90

Total amount $60,856.34

On receipt of your clients’ payment for that amount our client will sign a release of mortgage.  This amount does not include any further legal work.

We are still yet to receive a request for a cost assessor to cost our clients’ file as per the settlement agreement.”

56. [56]
    December 2008: Mr Cooper gave evidence that in December 2009 his computer crashed and he lost all of the information in his Excel spreadsheets relating to costs.  He said that from this date he decided to adopt the process of accounting which appears in the tax invoice^[39] dated 27 April 2009.  It seems probable that Mr Cooper meant to say that the computer crashed in December 2008.^[40]I so find.

57. [57]
    On 11 December 2008 the buyer’s solicitor wrote:^[41]

“Our client requires your costs to be assessed before he will take the matter further.  We nominate D G Thompson to carry out the assessment.  If you are agreeable, please advise.”

58. [58]
    On 16 December 2008 the vendors’ solicitors replied:^[42]

“Our client has previously agreed to a cost assessor nominated by your client, at your client’s expense can assess our client’s file to determine the scale costs for the proceedings …”

59. [59]
    On 30 January 2009 Adam Bloom of D G Thompson Legal Costs Lawyers wrote to the buyer’s solicitor^[43] confirming that there had been an assessment of the vendors’ costs of and incidental to the earlier proceeding including the counter-claim on the standard basis District Court Scale for the period approximately December 2006 to October 2008 inclusive.  The assessment of standard costs in summary was:

Standard professional costs (including $3,150 care and conduct assessed at 30%) $13,641.20

Standard outlays (including counsel’s fees) $9,070

Total $22,711.20.

          Mr Bloom noted in an accompanying letter that:^[44]

1. (a)
   The vendors’ solicitors’ file did not “readily support many of the costs that they claim to have incurred in the matter in that there are no time records; there are very few file notes as to what work was undertaken; and surprisingly, there are hardly any notes evidencing what preparation work was done prior to the hearing in June 2008, and concerning the subsequent costs arguments”;
2. (b)
   “[t]he accounts contained in the file provide brief descriptions of the work undertaken, however, do not provide any time basis for the claimed costs of some $18,000 by my calculation”.

60. [60]
    On 5 February 2009 the vendors’ solicitors wrote:^[45]

“… We note our client’s claim for legal costs of all matters on a solicitor own client basis/indemnity costs as at 9 October 2008 was $40,737.49 be assessed plaintiff’s costs of and incidental to the proceeding $22,711.20.  …  Our clients’ are prepared to accept as full and final payment the amount set out in the correspondence 8 December 2008 of $60,856.34 plus costs plus interest until date of settlement, provided settlement takes place on or before 24 February 2009 …”

The demand was for an amount well above the amount then due, even if one included the indemnity costs of professional services since the judgment on 3 October 2008.

61. [61]
    On 11 February 2009 the buyer’s then solicitor wrote:^[46]

“We … note the Assessment of Costs of D G Thompson … is … $22,711.20.

The judgment sum … was … $16,382 plus interest.

Our client is presently making … efforts to raise … the total debt to you which is estimated to be in the vicinity of $40,000.  Would you kindly confirm the amount of interest you say accrues to the current day.

There is no basis for your suggestion … that your client is entitled to indemnity costs …”

The letter was wrong about costs. The vendors were entitled to certain costs on an indemnity costs according to the agreement made 22 October 2008.

62. [62]
    On 12 February 2009 the vendors’ solicitors sent to the buyer and his solicitor a Notice of Exercise of Power of Sale which set out the amount the vendors then alleged to be owed^[47] as follows:

Arrears of principal and interest as at

        13 February 2009 $18,844.84

Legal costs and outlays $49,392.98

Total amount owing $68,237.82

63. [63]
    I have the benefit of assessments for costs and outlays to 31 March 2009. They total $30,764.90 to 31 March. The amount owing for costs and outlays to 12 February must have been less than $30,764.90 owed to 31 March almost 7 weeks later. The demand for costs and outlays was for much more than was due.

64. [64]
    On 11 March 2009 the vendors’ solicitors wrote to the buyer and his solicitor advising:^[48]

“… Our client requires full payment of the arrears and enforcement expenses as at 11 March 2009 in the sum of $69,437 …”

No explanation for the calculation of the amount was given.

65. [65]
    On 12 March 2009 the vendors’ solicitors replied:^[49]

“The offer by your client to settle … by payment … of $42,000 is rejected … our clients’ are prepared to reduce the amount contained in the Notice of Intention ($69,437) by $3,000 plus all further costs to date and including settlement...

For your information we estimate the difference between the scale costs and the full indemnity costs of the proceedings (paragraph 4) is less than $3000.00…

This offer of $66,437 plus ongoing costs as full and final settlement of all matters …”

66. [66]
    On 17 March 2009 new solicitors for the buyer had been appointed and wrote that they had been instructed that payment of the amount due to the vendors would be made at the end of the month.^[50]There was reference to a telephone conversation between Mr Cooper for the vendors and Mr Myrteza for the buyer.

67. [67]
    On 20 March 2009 the buyer’s partner authorised trustees who held in trust monies from a deceased estate to distribute the funds as follows: $44,316.63 to her and $46,316.63 to the buyer’s brother, Mr Capes, also known as Mr Hill.

68. [68]
    On 25 March 2009 there was a telephone discussion between the solicitors. For the reasons below, I find that Mr Myrteza asked for an itemised bill. Section 332 of the Legal Profession Act 2007 obliged the vendors’ solicitors to give an itemised account within 28 days after the request. That 28 days provided by statute to the vendors’ solicitor a period within which he was to fulfil his personal statutory obligation. The vendors’ obligations are not the subject of s 322. The statute did not give the vendors liberty to withhold an itemised account for 28 days. It does not follow from the fact that the vendors’ solicitors had 28 days before breaching his statutory duty that all legal services he provided on account of the vendors’ file for 28 days thereafter would be incurred “in consequence of default in payment of any money intended to be secured” by the mortgage.

69. [69]
    On 26 March 2009 the vendors’ solicitors wrote to the buyer’s solicitors:^[51]

“We refer to … our without prejudice discussion 25 March 2009.

1. (a)
   We have received our clients’ instructions in relation to the preparation of an account for professional services for consideration by your client.  Further, you requested a copy of the client agreement between us and our client at the commencement of this matter …

2. (b)
   Our calculation of the professional fees payable by our clients pursuant to that agreement.  We calculate the total costs and outlays incurred by our client to date is $65,948.66.

3. (c)
   The amount of the judgment and interest.  Judgment $16,382, interest on the Supreme Court scale to 1 April is $1,368.91.

We calculate total amount to release the mortgage is $83,699.57 …our client is prepared to negotiate a compromise amount to release the mortgage provided it is paid on or before 31 March 2009…if the … amount is not paid on…31 March 2009, we are to file proceeding for recovery of the secured property.

We … remind your client that the mortgage provides for an interest rate of 12.6% payable monthly and the above interest is calculated on the current Supreme Court rates …”

70. [70]
    I note that with respect to the last sub-paragraph of the letter, the assertions that the mortgage provided for interest at 12.6%, that it was payable monthly and the implied assertion that it was payable on all claims were each wrong. Assessments for costs were done subsequently. I consider them below.  I find below that costs payable to 31 March 2009 total $30,764.90. That sum is comprised of the standard costs of the earlier proceeding ($22,711.20), costs that can be claimed under clause 4 of the mortgage up to and including 3 October 2008 excluding costs of the earlier proceeding ($2,564.60) and costs from 3 October 2008 to 31 March 2009 ($5,489.10). It can be seen that the costs and outlays calculated by Mr Cooper were more than double the amounts assessed even though the assessment was to quantify “costs that can be claimed under clause 4 of the mortgage”.

71. [71]
    The requests made for an account for professional services for consideration and a copy of the client agreement were requests for information which would have allowed the buyer to consider making an application to assess the costs claimed from him. Arguably, the requests were oral requests of the kind contemplated by the Legal Profession Act s 335 (7) which provided:^[52]

7. (7)
   If the third party payer is a non-associated third party payer, the law practice must provide the third party payer, on the written request of the third party payer, with sufficient information to allow the third party payer to consider making, and if thought fit to make, a costs application.

72. [72]
    However, because the requests made were not in writing, the statutory obligation which the Legal Profession Act s 335 (7) can impose on a law practice, was not imposed on the vendors’ solicitors.

73. [73]
    On 27 March 2009 the buyer’s solicitors wrote without prejudice that by their calculations the amount not in dispute was approximately $40,000 and the amount in dispute approximately $45,000.^[53]  By a second letter^[54] of the same date they asked the vendors’ solicitors to “confirm the basis upon which your clients claimed an entitlement to indemnity costs of some $65,000”.

74. [74]
    On 30 March 2009 the vendors’ solicitors replied that the “costs entitlement was settled between the parties by correspondence.  A proposal was put to your client’s original solicitor … 22 October 2008 … this proposal was agreed to by your client …”

75. [75]
    On 31 March 2009 the buyer’s solicitors wrote two letters to the vendors’ solicitors^[55] referring to the terms of the compromise agreement  and advising that the buyer did not accept that a binding agreement had been made, that the terms of the letter were uncertain, that the vendors’ solicitors had not delivered the costs agreement but only a scale of fees and had not delivered any assessment or itemised cost statement which could properly form a basis for payment of costs pursuant to clause 4 of the mortgage.  They calculated indemnity costs from 3 October 2008 to 31 March 2009 at $2,184.80 and advised that the buyer would tender that afternoon by way of bank cheque the following amount:

Judgment debt $16,382.00

Interest on judgment at 12.5% $1,671.92

Costs assessed by D G Thomson $22,711.00

Indemnity costs from 3 October 2008 $2,184.80

 _________

 TOTAL $42,949.72

A bank cheque for that amount was tendered that day by the buyer. The tender was rejected. The assertions that a binding agreement had not been made and that the terms of the letter were uncertain were both wrong.

76. [76]
    On 1 April 2009 the vendors’ solicitors wrote:^[56]

“Our client first consulted this firm on 24 January 2007, and incurred costs from that time.  The term indemnity costs…To our clients… means the costs they incurred from that date…pursuant to clause 4 of the Business Agreement Loan and Mortgage…

In a telephone conversation on 17 March 2009 you informed the writer that you are winding-up an estate and you irrevocably guaranteed that (the winding-up of the estate) should provide sufficient funds to pay our clients’ and their costs … The point being at that time 17 March 2009 your client was well aware of the amount required to remedy the default in the mortgage …”

77. [77]
    On 1 April 2009 the buyer’s solicitors offered to settle in exchange for a release of mortgage by payment of:

Judgment debt $16,382.00

Interest on judgment (at 12.5%) $1,677.53

Costs assessed by D G Thomson $22,711.00

Indemnity costs from 3 October 2008 $5,000.00

 ________

 TOTAL $45,770.53

The offer was made on the basis that the vendors had no entitlement to indemnity costs prior to 3 October 2008. The letter noted that the buyer had not been given any documentation to support the costs claimed.^[57]

78. [78]
    On 7 April 2009 the buyer’s solicitors wrote tendering a bank cheque for $42,949.72 and observed:^[58]

“In our view, a mortgagee that is in your clients’ position has an obligation to properly account for costs that are claimed and there has been no attempt made to provide either an itemised account of the costs let alone a copy of the account of your legal costs rendered to your client (which you have stated to us has not been rendered at this time in any event).

… we are instructed to formally request a tax invoice that you have rendered to your client and an itemised cost statement pursuant to the Legal Profession Act in respect of costs that are claimed.”

 The letter enclosed a bank cheque for $42,949.72 tendered without condition but on the basis that the buyer considered it to be payment in satisfaction of:

1. (1)
   the judgment on 6 June 2008;

2. (2)
   interest on the judgment;

3. (3)
   payment of the vendors’ costs as assessed by D G Thompson;

4. (4)
   payment of indemnity costs from 3 October 2008 pursuant to clause 4 of the mortgage.

79. [79]
    On 8 April 2009 the tender was rejected.

80. [80]
    By 22 April 2009, 28 days had passed since the vendors’ solicitors were asked to provide an itemised bill to the buyer’s solicitor in response to the request made orally on 25 March 2009. They had not provided it.

81. [81]
    A tax invoice bearing date 27 April 2009 was created by the vendors’ solicitors^[59] for $61,551.07 for professional costs from 24 January 2007. A copy was not sent to the buyer’s solicitor. When Mr Cooper prepared the invoice he realised he was preparing a document that would form the basis of a statement of claim.^[60]  Mr Cooper created a three page Excel spreadsheet^[61] at some unspecified date which set out a record purporting to contain dates with a code for services provided on those dates, professional costs for those services and outlays between 24 January 2007 and 30 September 2008.  There were differences between the records in the spreadsheet and the tax invoice.  For 24 January 2007, the spreadsheet suggested professional costs of $300 while the tax invoice suggested professional costs of $450.  The spreadsheet had nothing recorded in respect of perusing loan and mortgage documents.  The tax invoice had a figure of $1,320.  For 25 January, the spreadsheet had an item of $25 while the invoice had an item of $45 for the professional costs for sending a facsimile.  For 7 February, professional costs in the spreadsheet were $130 while in the invoice they were $150.  On 5 March, the spreadsheet showed professional costs of $260 while in the invoice they were $300.  On 7 March, professional costs in the spreadsheet were $50 while in the invoice they were $55. Generally, the figures in the invoice which was to form the basis of the statement of claim against the buyer were higher than the figures in the spreadsheet. The spreadsheet was probably a record of the costs which Mr Cooper was considering claiming at one stage. The date on the tax invoice, 27 April 2009, cannot be the date it was created. The invoice purports to include charges for services performed until almost 4 weeks later to 21 May 2009 and for counsel’s fees for services to 21 May 2009.

82. [82]
    By 5 May 2009, 28 days had passed since the vendors’ solicitors were asked to provide an itemised bill to the buyer’s solicitor in response to the request made in writing on 7 April 2009. They had not.

83. [83]
    On 21 May 2009 the buyer signed a complaint^[62] to the Legal services Commission. It alleged a failure by the vendors’ solicitor to provide an itemised cost statement or sufficient information to allow him to consider making a costs application pursuant to s 335 (7) of the Legal Profession Act. It alleged “Request made for itemised costs statement on 7 April 2009”.

84. [84]
    The vendors commenced this proceeding on 21 May 2009 in the Supreme Court of Queensland claiming “$79,480.59 due and owing pursuant to a mortgage”. The costs components pleaded were $22,711.20 costs of the earlier proceeding and other costs not of and incidental to the proceeding of $37,475.55. Assessments done 5 months later by Mr Bloom for costs and outlays on the basis provided in the mortgage show that the claim for $37,475.55 was too high. The costs and outlays of the vendors excluding the costs of the earlier proceeding were assessed to 21 October 2009 and were then only $31,292 despite work done in those 5 months in this proceeding, including an application for summary judgment.

85. [85]
    On 18 June 2009 the buyer’s solicitor received from the Legal Services Commissioner a copy of a tax invoice from the vendors’ solicitors dated 27 April 2009. It was the first time he saw a copy of the invoice. If it was itemised, it was  the first itemised account received since the requests for one made on 25 March and 7 April 2009.

86. [86]
    On 13 July 2009 the vendors’ solicitors wrote:^[63]

“… In correspondence 7 April 2009.  Your client failed to properly request an itemised account, instead the defendant ‘formally request invoices you have rendered to your client and an itemised statement. Pursuant to the Legal Profession Act in respect of costs that are claimed.’  was in our view, not a proper request pursuant to The Legal Profession Act … we enclose an itemised account, it is our view, if your client disputes the account it is up to your client to arrange for a costs assessment.”

Enclosed was a tax invoice^[64] to the vendors for costs to 21 May 2009 of $61,551.07.

87. [87]
    On 28 August 2009, in this proceeding, the vendors’ application for summary judgment was listed for hearing. Their counsel submitted that $81,148.91 was then owed. That was less than the vendors’ solicitor had calculated on 26 March 2009. Orders were made.^[65] One order was that the vendors have leave to amend the claim to include a claim for a monetary sum due and owing by the buyer to the vendors “pursuant to the mortgage and agreement alleged in paragraph 9 of the statement of claim”.

88. [88]
    Pursuant to the order giving them leave to amend, the vendors did amend the statement of claim. They did not make a claim for payment to them of the difference between costs of the earlier proceeding assessed on indemnity basis and on a standard basis. Had the vendors done so, they would have raised as an issue for this trial whether they can claim the difference between indemnity and standard costs of the earlier proceeding. By not raising the issue and by submitting to me that the buyer must institute another proceeding to establish his title to the amount paid into the trust account which represents that difference the vendors have elected not to bring forward before me their whole case with an apparent preference for a third proceeding. Fortunately, the buyer’s counterclaim raises the issue of the buyer’s entitlement to money in trust so that it may be determined without the need to institute another proceeding.^[66]The vendors have made no submission seeking to justify their claim to that difference. It was determined by Tutt DCJ. The vendors elected not to appeal. They have no right to more costs of the earlier proceeding than the costs assessed on the standard basis ordered by Tutt DCJ.

89. [89]
    Another order made that day was that a costs assessor, Mr Bloom, “be appointed as an expert to quantify the vendors’ costs insofar as they relate to the costs that can be claimed under clause 4 of the mortgage for the following periods:

1. (a)
   up to and including 3 October (but excluding the costs of and incidental to the District Court proceedings between the parties No. BD 1938/2007;

2. (b)
   from 3 October 2008 until 31 March 2009;^[67]

3. (c)
   from 1 April 2009 until 21 May 2009;^[68] and

4. (d)
   from 21 May 2009 to the date of assessment.”

90. [90]
    The form of order for assessment was curious. The assessments to be undertaken were not expressed to be on a “standard” or an “indemnity” basis. The effect of the words appears to me to have required assessments on a basis akin to “indemnity”. The assessor did not give evidence about whether this was so. The significance of the distinction arises from the fact that the vendors’ claim for costs of all but the costs of the proceeding is based on term 3 of the agreement of 22 October 2008. That provided that the buyer pay “Full indemnity costs”. The epithet “Full”, notwithstanding its capital “F” in term 3, signified nothing. The vendors have argued before me that their entitlement to costs is to the sums which the assessor assessed. The inference is that the vendors regard the assessments as equivalent to assessments on an indemnity basis and adequate to quantify what was owed under term 3 of the agreement of 22 October 2008.

91. [91]
    It was submitted in writing for the buyer^[69] that he accepts that he must pay the vendors’ costs assessed on the standard basis for period (b) and their actual costs reasonably incurred for period (b), but denies that he is liable to pay anything in respect of subsequent periods. There is no evidence of the vendors’ “actual costs”, whatever that means, for period (b). Interpreting the submission consistently with the buyer’s other submissions, counsel must have intended to submit that the buyer accepts that he must pay the vendors’ costs of the proceeding BD1398/07 assessed on the standard basis and that he must pay the costs they actually paid for services reasonably provided for period (b) but that excludes services related to a notice of exercise of power of sale dated 12 February 2009. Period (b) is from the date of the judgment made by Tutt DCJ to the date of tender by the buyer on 31 March 2009.

92. [92]
    On the basis of the assertion by the vendors’ counsel that $81,148.91 was owed on 28 August 2009, it was further ordered that the vendors provide a release of the mortgage in exchange for:

1. (a)
   a cheque payable to the vendors for $45,858.15;

2. (b)
   a cheque payable to the vendors’ solicitors’ trust account in the sum of $35,290.75 to be held on trust by those solicitors in the names of the vendors and the buyer and invested in an interest bearing account to be dispersed upon further order or upon the outcome of this proceeding.

93. [93]
    On 16 September 2009 the buyer paid to the vendors from the sale of his property the subject of the mortgage:

1. (a)
   $45,858.15 on the basis that such amount was to be appropriated to the debt owing pursuant to the mortgage; and

2. (b)
   $35,290.75 (to the solicitors for the vendors) on the basis that such amount would be held pending the determination of any claim which the vendors had to that sum.^[70]

94. [94]
    On 21 October 2009 the assessor appointed pursuant to the order of 28 August 2009 to quantify the plaintiffs’ costs, Mr Bloom from D G Thomson Legal Costs lawyers, wrote two letters.  One set out some of the bases for his assessment of costs for the periods required pursuant to the order made on 28 August 2009.  The other advised the costs which, pursuant to the order, he assessed as:^[71]

“Up to and including 3 October 2008 $2,564.60

(excluding the costs of and incidental to

District Court proceeding BD1398/07)

From 3 October 2008 until 31 March 2009 $5,489.10

From 1 April 2009 to 31 May 2009 (sic) $3,492.40

From 21 May 2009 to 21 October 2009 $12,115.40

Outlays $7,630.50

 __________

 TOTAL $31,292.00”

Mr Bloom’s letter of 21 October^[72] which set out some of the bases for his assessment noted that in the written client agreement between the vendors and their solicitors, there was no definition of the number of words in a folio and there was no provision for an uplift fee.

95. [95]
    On 29 October 2009 the buyers and their solicitors, in reaction to Mr Bloom’s observations about uplift costs, entered into a further client agreement in writing.^[73] It referred to a client agreement made on 21 May 2007 (sic), two oral agreements made on 21 May 2007 and 7 August 2008 and among other things contained an agreement that the vendors pay an uplift fee to their solicitors “of 25 % professional costs allowed in the D G Thomson assessment 21 October 2009 and 30 January 2009”. The effect was to agree to pay more for the professional costs of the earlier proceeding and for other professional costs before the proceeding, and after to 21 October 2009 at a higher rate than Mr Bloom had assessed pursuant to the order of the court. The agreement recited that uplift fee was restricted to 25% and implied that in the oral agreements the vendors had agreed that professional fees would be adjusted upwards by 30% for “care and conduct”. Insofar as the agreement was to pay uplift to the fees already assessed, the uplift was to be applied to fees for past services. It was not an agreement about future services.  

96. [96]
    On 13 January 2010 Mr Bloom of D G Thomson legal costs lawyers, as a result of instructions from the vendors’ solicitors recalculated the costs he had assessed of the earlier proceeding on the basis that instead of assessing costs of the proceeding as he had done, namely on a standard basis, he was to assess them in accordance with the client agreement. He was also to assume two other matters: that a folio was 72 words, rather than 100 and that he was to apply 30% uplift on account of care and conduct.^[74]There is no easy explanation for why the vendors’ solicitors requested a calculation assuming 30% uplift, considering that the written agreement of 29 October was for 25%. It is consistent with an error by Mr Cooper based upon poor memory. Mr Bloom performed the task. It was not an assessment done pursuant to the order of 28 August 2009. It was not expressed to be an assessment. It was a recalculation on specific instructions. He did not say whether the assumption of those instructions would have altered any other aspects of his assessment made 30 January 2009. The recalculation increased the hourly rate for examining documents, and for attendances by solicitor, among other things.  In the result, the component for standard solicitors’ professional costs assessed at $13,641.20 on 30 January 2009, more than doubled to $27,296.50 on the new hypotheses. It was a recalculation of the costs of the proceeding, not of the costs of other legal services. Whether mathematically accurate or not, the recalculation uses a 30% uplift which was not agreed in writing.

97. [97]
    On 21 June 2010 Mr Bloom, in accordance with instructions from the vendors’ solicitors made some recalculations of the vendors’ costs of other legal services on different bases.^[75]  They were not assessments done pursuant to the orders of the court. They were recalculations, not assessments. The difference is more than semantic. For example, an assessor performing an assessment under Division 7 of Part 3.4 of the Legal Profession Act of legal costs payable by a non-associated third party payer, must consider whether it is fair and reasonable in the circumstances for the non-associated third party payer to be charged the amount claimed. That duty is not imposed on a person performing a mere recalculation on particular hypotheses. Whether Mr Bloom considered himself bound by such a duty was not asked. I am not satisfied that the recalculations were assessments.

98. [98]
    Unlike the task performed by Mr Bloom on 13 January 2010, these recalculations did not cover the costs of the earlier proceeding. The bases were an assumption that a folio was 72 words, rather than 100 and that he was to apply 30% uplift to professional costs on account of care and conduct. Again, that was inconsistent with the agreement in writing to pay an uplift of 25% rather than 30% in respect of professional costs allowed in the assessments of 30 January and 21 October 2009. The recalculation was performed to the costs he had previously assessed on 21 October for three periods. The results of his recalculations follow:

Up to and including 3 October 2008 (instead of $2,564.60) $3,485.43 (excluding the costs of and incidental to District Court proceeding BD1398/07)

From 3 October 2008 until 31 March 2009 (instead of $5,489.10) $7907.06

From 1 April 2009 to 21 May 2009 (instead of $3,492.40) $5,616.46

The recalculation increased amounts for the three periods by $5,462.85                                  

99. [99]
    The “central issue” is whether the compromise agreement is void on a public policy basis; so the buyer’s counsel submitted.^[76] The buyer’s argument, in essence, is that the vendor asked Tutt DCJ for indemnity costs and was refused them and has since agreed with the buyer to re-litigate the indemnity costs issue in another proceeding. The buyer argued that the compromise agreement was unenforceable on the ground of public policy as it was “an agreement to re-litigate a point already decided by the Court”.

100. [100]
     On that “central issue” the buyer’s counsel submitted that:

• the vendor sought indemnity costs^[77] from Tutt DCJ;
• in seeking indemnity costs the vendorsrelied on Clause4 of the mortgage which entitled them to indemnity costs;
• Judge Tutt refused to award indemnity costs,^[78] preferring an order for costs on the standard basis;
• the parties then agreed in writing that the vendors would forgo their right of appeal in consideration of the buyer paying the difference between indemnity costs and standard costs into trust and then suing the vendors to establish the buyer’s entitlement to that fund;
• the intention of the parties was to re-agitate a point already finally decided. In that way, they made an agreement offending public policy so as to be unenforceable;^[79]
• the vendors contend that they are entitled to indemnity costs for everything.^[80]

101. [101]
     The terms of the compromise agreement are contained in the letter of 28 October 2008 and marked “without prejudice save as to costs”.^[81]

102. [102]
     It is unclear whether the buyer’s submission uses “indemnity costs” intending to refer to the indemnity costs of only the proceeding before Tutt DCJ or intending to refer to indemnity costs of the proceeding and of other legal services provided by the vendors’ solicitors.

103. [103]
     The buyer’s counsel submitted that:

“In the previous litigation, the Verhagens had explicitly claimed their costs on the indemnity basis pursuant to the mortgage in the prayer for relief.”^[82]

The vendors’ prayer for relief in the earlier proceeding claimed “Costs pursuant to clause 4 of the Mortgage and Annexure B of the Business Contract”. The buyer’s counsel submitted that:

“They reiterated this in their submissions to Judge Tutt on the point.”

104. [104]
     I reject that submission. The vendors did ask Tutt DCJ for an order for an assessment on an indemnity basis. But it is relevant to determine whether they asked Tutt DCJ to order that assessment for “costs of the proceeding” only or also for costs of other legal services. On 7 August 2008 the buyer’s written submission to Tutt DCJ argued that “any costs that may be incurred by the Plaintiffs^[83] in regards to the mortgage are not a matter for determination by the Court and therefore no order should be made in this regard”. The buyer was asking that Tutt DCJ consider only the costs of the proceeding and that his Honour ignore other costs. The written submissions for the vendor^[84] did not take issue with that submission. The vendors’ submissions do not expressly state whether the indemnity costs sought are “of the proceeding” or for that and for something more. However, the first argument for the vendors referred to both of Annexure B, Clause 4 of the Sale of Business Contract, and Clause 4 of the Mortgage and proceeded to submit that the buyer was contractually bound to pay all of the vendors’ costs “in relation to the interest claim”. The judgment sum in the earlier trial represented a sum payable pursuant to an oral agreement and a sum for interest payable pursuant to the mortgage. It is orthodox for the successful party to ask for costs of and incidental to the proceeding. To ask for anything more one would expect a specific and plainly expressed application to the judge determining costs. The submission did not expressly ask for costs of any particular legal service performed. By asking for the costs “in relation to the interest claim” the submission is consistent with asking for costs of the proceeding. The submission is not as consistent with asking for costs for legal services which were not “of the proceeding” and is not consistent with asking for costs with respect to the mortgage.  A reasonable inference is that it was a request for indemnity costs of the proceeding. The submission is reasonably consistent with omitting any claim for indemnity costs other than those “in relation to the interest claim”. It would follow that the vendors omitted to ask for costs incurred in relation to the mortgage. There was an alternative submission for the vendors based on the UCPR which argued that, because of compromise offers, the vendors were entitled to their “costs on an indemnity basis”. That alternative submission does not reveal an intention to seek costs of any particular legal service other than costs of the proceeding. The alternative submission is consistent with seeking costs of only the proceeding. Whatever was the vendors’ intention, their submissions to Judge Tutt did not objectively request that his Honour order that the buyer pay any of the vendors’ legal costs which were not “costs of the proceeding”.

105. [105]
     The reference in the vendors’ submissions to the contractual clauses entitling them to costs on an indemnity basis does not imply that they were seeking an order for more than the costs of the proceeding to be paid on an indemnity basis. His Honour’s consideration of the terms of the mortgage was necessary to consider whether the basis for assessment of the costs of the proceeding should be the standard basis or the indemnity basis. It does not follow from his Honour’s consideration of the terms of the mortgage relating to costs that his Honour intended to determine an application for costs of anything more than the proceeding.

106. [106]
     The vendors did not apply to his Honour for the costs of other legal services provided by the vendors’ solicitors. His Honour’s refusal to award indemnity costs of the proceeding was not adjudication about the right of the vendors to seek an order for other costs on an indemnity basis. His Honour did not order “costs on a standard basis” as counsel for the buyer has submitted. His Honour ordered “costs of and incidental to the proceeding including the counterclaim and originating application” on a standard basis. His Honour did not make a finding on whether the buyer was obliged to pay the vendors’ costs of anything other than the proceeding. His Honour was asked by the buyer not to consider the issue of other costs. I find that by their submissions the vendors sought from Tutt DCJ an assessment on an indemnity basis of the costs of the proceeding and no other costs.

107. [107]
     The buyer’s argument that the compromise agreement is void assumes that the proper interpretation of the compromise agreement is that the parties have agreed to re-litigate the issue of whether costs of the earlier proceeding should be awarded on an indemnity basis. The buyer’s argument also assumes that the vendors claim a present entitlement to indemnity costs of the earlier proceeding. The vendors’ position is more complex. The vendors do not seek from me an order that they be paid indemnity costs of the earlier proceeding or the difference between indemnity and standard costs of the earlier proceeding. Consistently with that argument, the vendors submit that $13,655.30 be retained in the trust account of their solicitors pursuant to paragraph 4 of a compromise agreement.^[85]They do not ask for an order that it be released to the vendors. On the contrary they want it left unaffected by this proceeding. That sum is the amount which the vendors submit is the difference between indemnity and standard costs of the earlier proceeding.

108. [108]
     Counsel for the vendors submitted^[86] that the compromise “agreement does not seek to re-litigate what Judge Tutt determined but seeks to provide a method and basis for:

“…

3. (c)
   assessment and payment of the retained amount so that the parties could later, if the defendant wished to contend he was entitled to the same, argue their respective entitlements to the same.  The defendant has not established nor does the correspondence exchanged at the time suggest that would require a re-litigation of the costs decision.  In fact, the defendant may himself wish to rely upon the costs decision as the basis for his entitlement.”

109. [109]
     Among other things, the vendors submit, in effect, that the buyer is obliged to pay their indemnity costs of everything other than the earlier proceeding. With respect to the indemnity costs of the earlier proceeding the vendors’ submission is to the effect that there may be more litigation required if the buyer wishes to retrieve the increment paid by him into trust which represents the difference between indemnity costs and standard costs of and incidental to the earlier proceeding. But they do not require a finding in this proceeding about the party who is entitled to the increment.

110. [110]
     The “central issue” remains live even though the vendors do not ask me to find that they are entitled to indemnity costs of the earlier proceeding. If the proper interpretation of the compromise agreement is that it required the parties to re-litigate a point previously decided and if such an agreement is void, its interpretation is not affected by the fact that the vendors do not ask me to find that they are entitled to indemnity costs of the earlier proceeding.

111. [111]
     The letter containing the terms of the compromise agreement maintains the same problematic use of the words “Our clients maintain their right have all of the costs they incur” with the same ambiguity about whether the letter refers to costs previously incurred and particularly their costs of and incidental to the earlier proceeding. But the letter was clear about one relevant matter. It did not offer a term that the buyer pay to the vendors’ indemnity costs of and incidental to the proceeding. It offered a term that the buyer “pays all other costs on the Full indemnity costs basis”. Term 1 of the offer is properly interpreted as referring to the amount of the judgment and interest exclusive of the amount payable pursuant to order made for costs. Term 2 refers to “the costs of proceedings”. In Term 3, “other costs” are properly interpreted to mean costs not being costs of the proceeding. Term 4 is properly interpreted as a term that the difference between assessments of costs of the proceeding on an indemnity basis and on a standard basis is to be paid by the buyer, on settlement of the sale of his property, into the trust account of Colwell Wright. Term 5 refers to the “balance”. That must mean the costs of the proceeding on a standard basis and any other of the sums referred to in Terms 1 and 3 but it does not mean to include the amount contemplated by Term 4, namely the difference between assessments of costs of the proceeding on an indemnity basis and on a standard basis.

112. [112]
     Term 6 contemplates that the money paid into the trust account of Colwell Wright, being the difference between assessments of costs of the earlier proceeding on an indemnity basis and on a standard basis is to be held on trust by the vendors’ solicitors. There was no express term of the agreement that title to the fund in trust was affected by terms 1 to 5.

113. [113]
     The wording of term 6 was:

“6. Your client will then at liberty to give Notice and commence further proceedings pursuant to the Trust Act. For a determination as to whether the Mortgagee’s are entitled to the retained amount.”

114. [114]
     A proper inference from term 6 is that the buyer loses access to the funds placed in trust unless and until he obtains relief from a court establishing the buyer’s title to those funds, for example, by a declaration that the vendors are not entitled to the funds. The only arguable defence against the buyer’s claim to those funds can have been that the vendors have a better title because they have a contractual right to have the costs of the earlier proceeding assessed on an indemnity basis and paid to them. That issue has been determined against them by Judge Tutt. By term 6 the parties created a means for the vendors to reargue their right to the funds in spite of the decision against them, and in spite of their election to abandon an appeal against that decision.

115. [115]
     Counsel for the vendors submitted that the buyer could, if he wished, assert the finality of the costs order in the new litigation. So he could. The buyer’s argument is strong. The fact that he has a strong argument does not help to determine whether the agreement to re-litigate a decided point was void. Unless the vendors conceded to the trustee before litigation that they had no right to the funds in trust, the buyer was compelled to claim the money in a proceeding. The vendors’ conduct in this proceeding and submissions are consistent with maintaining their argument that they are entitled to the difference between assessments of costs of the earlier proceeding on an indemnity basis and on a standard basis but that there entitlement need not be determined in this proceeding. The fact that the vendors’ counsel did not ask me to make an order about the increment in the trust account does not affect the issue of whether the compromise agreement is void for being against public policy.

116. [116]
     The High Court observed in D’Orta-Ekanaike v Victoria Legal Aid:^[87]

“The central justification for the advocate's immunity is the principle that controversies, once resolved, are not to be reopened except in a few narrowly defined circumstances. This is a fundamental and pervading tenet of the judicial system, reflecting the role played by the judicial process in the government of society.

117. [117]
     The compromise agreement was not made in consideration of the vendors giving up their right of appeal. The vendors announced their election not to appeal before they offered a compromise agreement and they did not make their election conditional upon the compromise agreement. I reject the vendors’ counsel’s submission that the “right of appeal was abandoned as part of the compromise agreement”.

118. [118]
     I accept the buyer’s submission that there is a public interest in the finality of litigation and it is not appropriate to allow litigants to re-litigate a decided issue. The vendors’ counsel did not expressly submit otherwise. His approach was to submit that the agreement did “not seek to re-litigate what Judge Tutt determined”. I reject that submission. The practical effect of terms 4 and 6 of the compromise agreement is that if the buyer wishes to retrieve from the trust fund the difference between standard and indemnity costs of the earlier proceeding he must re-litigate a point already determined. The vendors’ counsel made submissions^[88]consistent with the notion that the buyer is not immediately entitled to funds in the trust account on account of term 4 of the agreement. He submitted section 12 of the Trust Accounts Act 1973 provides a mechanism for the buyer to give notice and commence further proceedings. He did not suggest that the vendors would not dispute ownership of the moneys. He submitted that when considering what was due to the vendors on 31 March 2009 when the buyer tendered, that the tender amount should have included the difference between indemnity and standard costs of the earlier proceeding: submitted to be $13,655.30.

119. [119]
     Terms 4 and 6 in combination contravene a public policy. That does not make the compromise agreement void. The balance of the compromise agreement does not does not offend public policy. Courts commonly decline to enforce restraint of trade clauses because of a public policy against them without declaring the remaining terms in contracts for the sale of a business to be void.

120. [120]
     I reject the submission that the balance of the compromise agreement is void.

121. [121]
     There has been no argument about the consequences of finding terms 4 and 6 contrary to public policy. The buyer submits that the vendors “have – without pleading it – asked at the trial for specific performance of the compromise agreement”. I reject that submission. The buyer submits that the vendors “seek specific performance of the compromise agreement to the extent that they want Mr Millard compelled to pay part of the money claimed into trust.” I reject that submission. The vendors do not claim these remedies. If the vendors had applied for specific performance of term 4 it would have been strongly arguable that specific performance should be refused because the effect of terms 4 and 6 is contrary to public policy. But the vendors do not seek specific performance of term 4. They do not need to.

122. [122]
     The buyer has arguably performed term 4 of the compromise agreement. On 16 September 2009 the buyer paid to the trust account of the vendors’ solicitor, pursuant to court order,^[89] $35,290.75 to be held on trust by those solicitors in the names of the vendors and the buyer and invested in an interest bearing account to be dispersed upon further order or upon the outcome of this proceeding. Whether any of that amount arguably represents the difference between standard and indemnity costs of the earlier proceeding depends on the outcome of the other issues in this proceeding to determine which party or parties are entitled to funds in trust and to what sum.

123. [123]
     Is there an Anshun estoppel in respect of costs not pursued by the vendors in the previous litigation? In the earlier proceeding, the vendors claimed costs pursuant to clause 4 of the mortgage. While that claim did not identify the date the costs were incurred, it implied a claim for costs until and including judgment in the earlier proceeding. Judgment for costs was given on 3 October 2008. The vendors in this subsequent proceeding submit they are entitled to $3,485.83 for “costs up to and including 3 October 2008 (excluding the costs of and incidental to the District Court Proceedings” as assessed by Mr Bloom.^[90] Thus, the vendors are claiming in this proceeding some costs which were the subject of their pleaded claim in the earlier proceeding. The buyer’s counsel submitted the vendors are now estopped from raising that claim and he relied upon Port of Melbourne Authority Ltd v Anshun Pty Ltd.^[91]Ordinarily I would accept that. Something exceptional occurred.

124. [124]
     On the occasion of the costs argument before Tutt DCJ the buyer’s solicitor submitted in writing to Tutt DCJ:^[92]

“Any costs that may be incurred by the Plaintiffs in regards to the mortgage are not a matter for determination by the Court and therefore no order should be made in this regard.”

The submission was arguably wrong. His Honour could arguably have determined the issue of the buyer’s liability for costs of the mortgage which were not costs of the proceeding and could arguably have determined a basis for their assessment. But the buyer submitted that his Honour could not. The vendors’ submissions did not argue against this submission by the buyer. If the vendor had obtained an order for the other costs to be assessed on an indemnity basis and paid, the buyer’s liability would, after paying for the costs of assessment, have increased by $2,564.60.^[93]  

125. [125]
     The buyer, with new counsel, now reverses his position and argues that the issue of costs of the mortgage should have been dealt with before his Honour. The buyer’s former argument is relevant to whether the buyer can assert that the vendors should be estopped from pursuing costs before me that they may have pursued costs before Tutt DCJ. I reject the buyer’s submission that an Anshun estoppel prevents the vendors from claiming in this proceeding, pursuant to the mortgage, those costs which were not costs of and incidental to the earlier proceeding but which they incurred before Tutt DCJ made his order about costs on 3 October 2008.

126. [126]
     When did the buyer request an itemised bill? An issue is the date when, Mr Myrteza of the buyer’s solicitors first requested an itemised cost statement on behalf the buyer. The buyer submits it was before 26 March 2009 and the vendors submit it was 7 April 2009. Mr Myrteza gave evidence that he made an oral request. Mr Myrteza’s evidence, as opened, was that such a request was made in a telephone conversation with Mr Cooper on 17 March 2009.  Mr Myrteza gave evidence that he made a request in a telephone conversation with Mr Cooper on 25 March 2009. I would not expect either solicitor to recall, years later, when such a conversation occurred. I would expect that a solicitor would more easily recall whether such a request was made by him.  Mr Cooper denied receiving an oral request.^[94]I accept that Mr Cooper has no memory of receiving the request. The reliability of the evidence of each solicitor was compromised by the lack of corroborative file notes of their conversations.

127. [127]
     I am not persuaded that either solicitor has a sufficient recollection of the content of their oral conversations to be reliable about the full effect of their conversations on 17 and 25 March 2009. Further, with respect to Mr Cooper, the terms of his letter of 13 July 2009 suggest that he may not have remembered an oral request for an itemised bill so long after it was made, because its significance may not have been obvious to him at the time it was made. On 13 July, in his letter, Mr Cooper argued, in effect that the written request made on 7 April 2009^[95] for an itemised statement was not a proper request for an itemised account. If Mr Cooper could argue that the written, formal, request “for an itemised cost statement pursuant to the Legal Profession Act in respect of costs that are claimed” was not a proper request for an itemised account it seems likely that an oral request for one may not have been sufficiently significant to make a lasting memory. Two other discrepancies lead me to doubt the reliability of Mr Cooper’s memory for detail. He created an invoice dated 27 April 2009 which includes items of work done during the next two months. Notwithstanding that the vendors entered into a written agreement bearing the date 29 October 2009 to pay 25% uplift for past professional services, Mr Cooper subsequently, inexplicably asked the costs assessor to apply 30% uplift when recalculating. I infer from the letters from the assessor that Mr Cooper did so in writing on all or some of the dates 23 November 2009^[96]and 12 May and 3 June 2010.^[97]

128. [128]
     Mr Cooper’s words in the letter from the vendors’ solicitors of 26 March 2009 suggest that it was in response to a request for an itemised account and also for a copy of the vendors’ costs agreement. Mr Cooper wrote:

“We refer to … our without prejudice discussion 25 March 2009.

1. (a)
   We have received our clients’ instructions in relation to the preparation of an account for professional services for consideration by your client. Further, you requested a copy of the client agreement between us and our client at the commencement of this matter …”

129. [129]
     The excel spreadsheet record system Mr Cooper had used until December 2008 needed recreation after a computer crash. The last tax invoice he had issued was in June 2008.^[98]I infer that the preparation of an itemised bill for all work would have involved some inconvenience going through the file. The preparation of an itemised bill was work for which no charge could be made by Mr Cooper.^[99]Even a formal written request for an itemised bill, made to Mr Cooper 2 weeks later did not result in Mr Cooper’s provision of one to the buyer. He did not provide one to the buyer’s solicitor before a complaint to the Legal Services Commissioner was made on 21 May 2009. Mr Cooper conveyed the vendors’ offer to compromise by 31 March in the same letter. If the “account for professional services” had been offered by the vendors through Mr Cooper for increasing the prospects of a compromise by 31 March, it is likely Mr Cooper would have been instructed to produce it before 31 March. He did not produce it. As the vendors were offering to compromise by 31 March, it is unlikely that they would have offered on 26 March to provide an “account for professional services” after 31 March. In all these circumstances, it is more likely that an “account for professional services” was mentioned in Mr Cooper’s letter of 26 March because it had been requested from Mr Cooper rather than offered by him. The request was probably made in the conversation on March 25 as the letter’s reference to that conversation implies. Over the next six days to 31 March correspondence was focussed on a final compromise figure and how generally it was justified and no mention was made of an itemised account or a costs agreement. In the six days after 31 March correspondence focussed on other disputes and no mention was made of an itemised account.

130. [130]
     There was a “formal” written request for an itemised cost statement on 7 April 2009.

131. [131]
     The vendors’ counsel rationally submitted:

“The version of Mr Myrteza is at odds with the letter he wrote on 7 April 2009 making the request for an itemised account and the complaint to the LSC which he prepared and his understanding of the legislation the requests for itemised accounts had to be in writing.  His letter does not refer to having earlier made the request orally or earlier.  The complaint to the LSC is inconsistent with the version he has given in evidence in that it says the request was made on 7 April 2009.”

132. [132]
     The vendors’ solicitor had still not delivered an itemised cost statement when the buyer complained to the Legal Services Commissioner on 21 May 2009. Mr Myrteza’s drafting of the complaint for his client, the buyer, omitted to mention an oral request for a bill earlier than 7 April 2009. The complaint referred instead to the incontestable written request on 7 April. It seems to me that there was little benefit in seeking to rely on an oral request made on 25 March, of which there was no diary note, if the buyer could easily prove a written request on 7 April. A legal practice recipient of a request for an itemised bill has 28 days to respond^[100]. The failure to supply an itemised bill had extended for more than 6 weeks after 7 April 2009. In these circumstances, an arguably inappropriate delay in delivering an itemised bill was as well founded if the Commissioner accepted that the request was made on 7 April as it would have been if the Commissioner had accepted that the request was made on 25 March. The failure of the buyer’s solicitor to draft the complaint by reference to the alleged oral request is consistent with a practical choice to nominate the more easily established written request. Further, Mr Myrteza gave evidence that he understood a request for itemised account had to be made in writing under the Act. That belief makes the omission to refer to a genuine oral request more plausible.

133. [133]
     I do not regard the reference in the complaint to a request on 7 April or the omission of a reference to an earlier oral request as determinative of the issue of whether an earlier oral request was made. It does not lead to a conclusion that an oral request was not made earlier by Mr Myrteza.

134. [134]
     I find that there was an oral request by Mr Myrteza for an itemised bill on 25 March 2009. Having regard to the various other factors to which I have referred, I accept Mr Myrteza’s evidence that he made an oral request. Whether he requested, an “account for professional services”, or an itemised bill or “an itemised cost statement” as he said in evidence does not seem to be significant. The request, in context, ought to have been understood as a request for an itemised bill.

135. [135]
     The Legal Profession Act 2007 s 332 provided at the relevant time in 2009^[101]:

1. (1)
   If a bill is given by a law practice in the form of a lump sum bill, any person who is entitled to apply for an assessment of the legal costs to which the bill relates may request the law practice to give the person an itemised bill.

Note—

A bill in the form of a lump sum bill includes a bill other than an itemised bill.

2. (2)
   The law practice must comply with the request within 28 days after the date on which the request is made.

…

6. (6)
   A law practice is not entitled to charge a person for the preparation of an itemised bill requested under this section.

136. [136]
     It follows that Mr Cooper’s law practice had an obligation to comply by 22 April 2009. It did not.

137. [137]
     When the vendors entered into a costs agreement with their solicitors on 25 May 2007 the Queensland Law Society Act 1952 was in force and provided so far as appears relevant:

48 Usual client agreement

…

2. (2)
   Within a reasonable time after starting work for a client, a practitioner or firm must make a written agreement with the client expressed in clear plain language and specifying the following matters—

1. (a)
   the work the practitioner or firm is to perform;

2. (b)
   the fees and costs payable by the client for the work.

3. (3)
   The fees and costs payable by the client for work must specify—

1. (a)
   a lump sum amount; or

2. (b)
   the basis on which fees and costs will be calculated (whether or not including a lump sum amount).

4. (4)
   The notice in the schedule8 must be completed by the practitioner or firm and given to the client, together with a copy of any scale for the work provided under an Act, before the client signs the client agreement.

(4A) If the practitioner or firm must complete a notice mentioned in subsection (4) and that practitioner or firm is or includes an interstate legal practitioner engaged in legal practice in this jurisdiction, the notice must be changed to reflect that fact.

5. (5)
   The client agreement must not be inconsistent with the notice in the schedule.

48B  Agreement may be amended

1. (1)
   A client and a practitioner or firm may agree to amend a client agreement at any time. However, an agreement to amend a client agreement under section 48 must be in writing.

48I Maximum payment for work

1. (1)
   The maximum amount of fees and costs a practitioner or firm may charge and recover from a client for work done is—

1. (a)
   an amount calculated in accordance with the client agreement between the practitioner or firm and the client for the work;…

138. [138]
     The agreement in writing dated 25 May 2007 was a client agreement. It was not inconsistent with the notice supplied in the form of the schedule to the Queensland Law Society Act 1952. If an oral term about uplift had supplemented the written terms it would have been inconsistent with the schedule. This is because the schedule made clear that a “Client Agreement” was a document and because the schedule^[102]provided at clause 9 that “This Client Agreement is the basis for determining how much you pay for the work done by your solicitor or firm”. Such an inconsistency would have been a breach of the Queensland Law Society Act 1952 s 48 (5).

139. [139]
     On 1 July 2007 the Queensland Law Society Act 1952 was repealed^[103] and the Legal Profession Act s 322 came into force. At material times since, it provided for costs agreements as follows:

322  Making costs agreements

1. (1)
   A costs agreement may be made between—

1. (a)
   a client and a law practice retained by the client; …

2. (2)
   The costs agreement must be written or evidenced in writing.

3. (3)
   The costs agreement may consist of a written offer under subsection (4) that is accepted in writing or by other conduct.

Note—

Acceptance by other conduct is not permitted for conditional costs agreements—see section 323(3)(c)(i).

4. (4)
   The offer must clearly state—

1. (a)
   that it is an offer to enter into a costs agreement; and

2. (b)
   that the offer can be accepted in writing or by other conduct; and

3. (c)
   the type of conduct that will constitute acceptance.

140. [140]
     Is the buyer liable to pay an uplift fee of 25%? The vendors submitted that the written client agreement (absent any written term about uplift fee) was in existence at all times. The written agreement existed from 25 May 2007.

141. [141]
     The vendors’ counsel did not submit that the vendors were liable to their solicitors for uplift on an oral agreement alone. The vendors’ counsel submitted that the oral term contended for by the vendors and subsequently reduced to writing does not offend the requirements of s 322 of the Legal Profession Act 2007. I accept that a further agreement in writing was made on 29 October 2009. Until the written agreement was made on 29 October 2009 the oral agreement for uplift, if made prior to the repeal of the Queensland Law Society Act 1952 would have offended s 48 (5). I need not determine whether the written agreement offends s 322 of the Legal Profession Act 2007 because I accept the buyer’s argument which follows.

142. [142]
     The buyer’s counsel submitted, in effect,^[104] that there was no consideration provided by the vendors’ solicitors for the vendors’ agreement on 29 October 2009 to pay 25% extra for costs of professional services previously performed and specified in prior costs assessments dated 30 January and 21 October 2009. The vendors’ counsel made no submission in reply to the submission that no further consideration was provided. I find that no consideration was provided by the vendors’ solicitors for the agreement to pay 25% uplift. It follows that the vendors are not bound to perform the agreement made by them on 29 October 2009 with their solicitors because their solicitors provided no consideration for it. 

143. [143]
     The assessor assessed costs of the earlier proceeding. Pursuant to court order to quantify the vendors’ costs insofar as they relate to the costs that can be claimed under clause 4 of the mortgage” for three periods he assessed these costs too. He did not include uplift in any assessment because it was no part of a written agreement. When he made those assessments, the vendors were under no legal obligation to pay uplift. When the vendors made a written agreement on 29 October 2009, their solicitors did not acquire an enforceable right against the vendors to the uplift.

144. [144]
     The buyer’s liability under clause 4 of the mortgage is not greater than the vendors’ legal liability. The vendors’ counsel submitted that it was irrelevant to the claims generally whether the vendors had paid.^[105] The evidence does not establish that the vendors have paid the uplift fee. The evidence of payments of costs by the vendors is limited to a trust statement dated 3 October 2008.^[106]It shows that $22,000 had been paid by the vendors to their solicitors and applied to costs by 12 June 2008 and that those payments had been appropriated by the solicitors to costs. According to the assessment done on 21 October 2009, it emerged that prior to the earlier proceeding as much as $2,564.60 of that sum may have been used on account of costs which were not, of the proceeding, following the conclusions of the costs assessor. The balance of $19,435.40 I find was expended on the earlier proceeding.

145. [145]
     The buyer is not liable to pay 25% uplift upon professional services.

146. [146]
     Is the buyer liable to pay for folios at the rate of 72 words per folio? This issue emerged in evidence in the trial though it is not obvious from the pleadings. The vendors’ counsel included the recalculations by Mr Bloom in his various calculations and has thereby incorporated a claim based on a folio size of 72 words.

147. [147]
     I have not found that an agreement was made orally at or before the making of the written costs agreement on 25 May 2007 that a folio was 70 or 72 words. The vendors’ claim that they have an obligation to pay higher costs was based solely upon proof of such an oral arrangement. Accordingly it fails.

148. [148]
     If the evidence had persuaded me on the balance of probabilities that the alleged oral agreement had been made upon or before the making of the written costs agreement on 25 May 2007, it does not follow that the vendors would have an obligation to pay the higher costs based on the smaller folios.

149. [149]
     The folio size was not explored in the pleadings, was raised in one sentence in the reply submission of the vendors’ counsel and was not the subject of a submission by the buyer’s counsel. Accordingly, there was no argument on the further ground I now advert to. The evidence established that under the UCPR a folio size is 100 words and had been for more than two years before the client agreement was made and that treating a folio as 100 words was accepted practice at the time the client agreement was made. As that was accepted practice, it was necessary for the costs agreement to have incorporated a written term that a folio was 72 words to effect a change to the accepted interpretation of the word “folio” as meaning 100 words, and thus to have legally bound the client to pay it.

150. [150]
     The buyer’s liability is to pay for 100 word folios.

151. [151]
     Interest claims are the subject of several disputes.

152. [152]
     Is the buyer liable for interest on legal costs before the vendors pay those costs? It is relevant to the interest due now and on 31 March 2009 and at the various earlier dates when the vendors’ solicitors demanded payment. Mr Cooper’s demands included components for interest. The interest components were not fully particularised. The demands may have included claims for interest on costs whether or not they had not been paid by the vendors. The buyer submits that the mortgage does not justify it. Further, if interest on costs was demanded, those costs may have included uplift and 72 word folio components.

153. [153]
     Clause 4 of the mortgage provides that the buyer pay on “demand the Mortgagee’s costs … incurred or paid… inconsequence of default”. That justifies an argument that costs are payable by the buyer before the vendors have paid them. There is no agreement that interest accrues on costs unpaid.

154. [154]
     The obligation at clause 5 of the mortgage to pay interest is only on a judgment for “moneys intended to be secured”. The buyer argued that costs are not “moneys intended to be secured”. I reject the submission. Clause 4 provides that “… all charges expenses and outlays may be paid by the Mortgagee and in that event shall be forthwith payable by the Mortgagor to the Mortgagee pending such payment may be debited to the Mortgagor and shall be deemed to be further advances under this Mortgage payable on demand.” A solicitor’s professional costs and outlays fall within the expression “all charges expenses and outlays” in clause 4. The intent of clause 4 is that when the vendors pay their solicitors professional costs and outlays, they are deemed to be further advances, payable on demand. I conclude that costs and outlays are moneys intended to be secured, at latest from the time the vendors pay them.

155. [155]
     I find that the proper interpretation of clauses 4 and 5 is that interest accrues at 12.5% on solicitor’s professional costs and outlays from the time two conditions are fulfilled: the costs and outlays have been paid by the vendors, and there is a judgment that the buyer should pay those costs and outlays.

156. [156]
     The buyer further argued that interest could not accrue until the costs of the earlier proceeding were assessed on 30 January. He did not explain why the terms agreed in the mortgage should be subject to that unexpressed limitation. I reject the argument.

157. [157]
     The evidence is that the vendors paid no less than $22,000 on account of costs and I found $19,435.40 of that was on account of costs of the earlier proceeding.

158. [158]
     A feature of clause 5 is that interest runs from the date of judgment rather than the date of payment. $19,435.40 of the costs of the earlier proceeding accrued interest at the rate of 12.5% per year from the date of the judgment for costs on 3 October 2008 in accordance with clause 5 of the mortgage. To that extent demands by Mr Cooper after 3 October 2008 could properly have included a claim for interest on costs of $19,435.40 from 3 October 2008 and for interest on the judgment for $16,382.00 from 1 August 2008. In each case the proper rate would have been at 12.5% per annum pursuant to clause 5 of the mortgage.

159. [159]
     The buyer’s counsel concedes that the vendors are entitled as they claim^[107]to interest of $308.57 for 55 days on the judgment sum of $16,382.60 from 6 July 2008 to judgment on 1 August 2008. Incomprehensible though that claim is to me, I allow it because of the concession.

160. [160]
     The buyer disputes the 12.5% rate of interest on the judgment sum of $16,382.60 after 1 August 2009 on a further basis that the amended statement of claim sought only 10% and not the 12.5% provided for in the mortgage at clause 5. Absent any prejudice to the buyer from my treating the claim as one for 12.5%, the vendors are not limited to 10% merely because the pleading claimed interest on the judgment at that rate. The vendors, because of clause 5 of the mortgage have a contractual right to interest on the judgment for $16,382.60 at 12.5% per year from 1 August 2008 to 3 October 2008. On 3 October 2008 costs were ordered by Tutt DCJ to be paid. This would have added a further $353.46 for the further 63 days.

161. [161]
     The vendors claim interest at 12.5% per year pursuant to the mortgage on other items of costs. Those items are the costs which were not costs of the earlier proceeding. But which were assessed by Mr Bloom on 21 October 2009. The total of those other costs assessed was $31,292. The buyer’s counsel raises a blizzard of issues against the claim.^[108]  Having regard to clause 4 and 5 of the mortgage, the vendors’ entitlement to interest pursuant to the mortgage on those costs does not arise before there is a judgment for those costs.  The vendors failed to apply to Judge Tutt for judgment in respect of those costs.  I reject the claim for interest at 12.5% per year pursuant to the mortgage on the costs of $31,292 assessed by Mr Bloom.  However, one of the items of the assessment was for costs from 3 October 2008 until 31 March 2009 in the sum of $5,489.10.  Because the vendors have paid no less than $22,000 on account of costs and because only $19,435.40 of that was applied to the costs and outlays of the earlier proceeding, the vendors have paid $2,564.60 for matters unrelated to the standard costs of the earlier proceeding.  Thus, the vendors have paid $2,564.60 for costs on account of professional services rendered before the earlier proceeding.  For those costs, they do not have a judgment. So, they are entitled to seek interest pursuant to the Supreme Court Act 1995. A rate of 10% pa seems to have not been in dispute where it has been sought. The trust account statement shows that they were paid by 24 May 2007. Those costs were applied by the solicitors for the vendors to satisfaction of their professional by 7 June 2007.^[109] The vendors have a prima facie claim to interest at 10% per annum on $2,564.60 from 7 June 2007. As various matters of interest are reserved for further submission I will not make a finding on this item now.

162. [162]
     The vendors also seek interest pursuant to the mortgage at 12.5% pa on the increment that would have been added to the assessed costs if a folio was to be treated as 72 words rather than 100, and if uplift had been allowed. Because I have found that the buyer is not liable to pay costs on the basis of a 72 word folio or on the basis of uplift, there is no amount upon which interest can accrue. Further, if the buyer had been liable for either of these items, the vendors would not have been entitled to interest pursuant to clause 5 of the mortgage until a judgment was given for those costs.

163. [163]
     What interest, costs and total sum was due on 31 March 2009?  The amount tendered by the buyer was $42,949.72.  The buyer’s counsel submits that the amount then due was $43,200.94 but that the buyer was ready willing and able to pay $51,000. The vendors’ counsel submits that the amount owing was a minimum of $64,349.16 but argues for a higher figure of $67,031.06. He submits the buyer could was not ready willing and able to pay the amount due.

164. [164]
     I put aside the vendors’ argument relating to $67,031.06 because the argument assumes that it was proper to recalculate the results of Mr Bloom’s assessments to allow for a 72 word folio and for uplift. Accordingly, I will confine myself to a consideration of the vendors’ counsel’s written aide memoire “claim to date of tender on 31 March 2009” which was handed up. It asserted that $16,382.16 was owed for the claim.  That is uncontentious. I accept that it was owed for the judgment given by Tutt DCJ.  It asserted that $308.57 was owed for interest on that judgment to 1.8.98 at 12.5% pa. That is uncontentious. I accept that $308.57 should be included.  It asserted that $22,711.20 was owed for costs.  I accept that sum was due as costs of the earlier proceeding assessed on a standard basis and pursuant to the order of Tutt DCJ. The subtotal was $39,402.37.

165. [165]
     Thereafter matters become contentions.

166. [166]
     The vendors submitted that interest on $16,382.16 from judgment to tender on 31.3.09 was 243 days at 12.5% being $1,363.34.  I reject that on the basis that it was 242 days from and including 1.8.08 to 31.3.09 at 12.5% pa being $1,357.74. 

167. [167]
     The submission then added a claim for interest on costs after the judgment for 241 days at 12.5% pa to 31 March on a figure of $22,711.20. It claimed $1,874.45. I reject that submission. On the basis that the judgment for costs was not given on 1 August 2008, but was given on 3 October 2008, the period is 179 days and not 241 days. If interest accrued on the whole of the $22,711.20 from 3 October 2008 at 12.5% pa, the amount would be $1,392.23.  For the reasons I explained above, it accrued on only the $19,435.40 of those costs as only $19,435 had been used for the costs of the earlier proceeding. Interest is $1,191.42.

168. [168]
     It was submitted that there should be added the $2,564.60 assessed costs up to 3 October 2008 excluding the costs of the earlier proceeding.  I accept that as due pursuant to term 3 of the agreement of 22 October 2009.  It was submitted that there should be added for the assessed costs from 3 October 2008 until 31 March 2009 $5,489.10. I accept that indemnity costs for that period were payable as a result of term 3 of the agreement of 22 October 2009. I accept that amount assessed by Mr Bloom.  The compromise agreement did not provide for interest on those costs.

169. [169]
     The vendors submit that there should be added pursuant to term 4 of the agreement of 22 October 2008, an amount being the difference between standard costs and indemnity costs of the earlier proceeding, alleged to be $13,655.30. I reject the argument that the vendors were entitled to that increment. It was determined by Judge Tutt that they were entitled to standard costs notwithstanding their argument that they were entitled to indemnity costs. They could have appealed. They elected not to appeal. As to the quantum claimed of $13,655.30, it is based on several false premises. It appears to be the difference between the recalculation done by Mr Bloom on 13 January 2010 which produced a figure of $27,296.50, and the standard costs assessed on 30 January 2009 of $13,641.20. The recalculation done on 13 January 2010 had several problems. Firstly, it was not an assessment but a recalculation. Secondly, it incorporated an uplift of 30% rather than the 25% which was agreed. Thirdly, by incorporating uplift it incorporated an amount for which the vendors were not liable. Finally, it included an amount for folios of 72 words.

170. [170]
     Thus, the amounts owing on the date of tender, 31 March 2009, were:

1. $16,382.60 being the judgment sum from the earlier proceeding.

2. interest on $16,382.60 to 1.8.08: $308.57

3. interest on $16,382.60 at 12.5% pa from 1.8.08 to 3.10.88: $353.46

4. interest on $16,382.60 at 12.5% from 3.10.08 to 31.3.09: $1,357.74

5. costs incurred of the earlier proceeding of which $19,435.40 had been paid by the vendors: $22,711.20

6. interest on $19,435.40 of the costs of the earlier proceeding at 12.5% pa from 3.10.08 to 31.3.09: $1,191.42

7. Costs paid by the vendors to 3.10.08 excluding costs of the earlier proceeding: $2,564.60

8. Costs incurred but unpaid by the vendors from 3.10.08 until 31.3.09: $5,489.10

      The amount owing on 31 March 2009 was, at most,^[110]$50,718.69.

171. [171]
     Is the buyer entitled to treat the costs related to giving a notice of exercise of power of sale as excluded from the calculation of the amount due to the vendors on 31 March 2009? Should the court order that the amount assessed by a costs assessor to 31 March 2009 be reviewed on the basis that no amount should be allowed for work related to issue of a notice to exercise power of sale?

172. [172]
     To justify excluding these costs the buyer’s counsel raises^[111] a flurry of submissions ending with the submission:

“The only safe remedy in respect of the amount for the correct period is to have it reassessed on instructions to exclude any work done in October 2008 which forms part of the DG Thompson assessment and not to include the costs of preparing the notice.”

173. [173]
     Consistently with that request the buyer pleaded that the vendors were not entitled to issue that notice of exercise of power of sale and that so much of the assessed costs as relate to it were not reasonably charged. The buyer by counterclaim seeks an order that the assessment be reviewed on the basis that no amount should be allowed for the work related to issue of the notice of exercise of power of sale.

174. [174]
     The notice of exercise of power of sale asked for too much money. I accept that it was inflated at least by the unjustified inclusion of uplift and the more costly folio amounts. It may have been inflated by unjustified claims for interest on costs. But the buyer’s complaint seems to be based on an argument that there was no default under the mortgage until there was a demand for payment and a failure thereafter to pay. The buyer argues that there was no demand for payment before the notice of exercise of power of sale was sent. Review of the correspondence preceding the notice of exercise of exercise of power of sale supports the argument that there was no demand.

175. [175]
     The vendors’ counsel submitted that this issue from paragraphs [132] to [133] of the defendant’s submissions is materially raised for the first time in submissions and was not an issue for me to determine. I reject that. It was raised in the defence. The remedy of assessment is claimed in the counterclaim. However, the factual issue was not pursued with Mr Bloom when he gave evidence. No evidence emerged about the amount of assessed costs that was incurred by giving a notice of exercise of power of sale.

176. [176]
     I am not satisfied that anything more than minor costs associated with sending a letter and the enclosed notice of exercise of power of sale on 12 February 2009 were caused by the decision to send the letter and notice. Further, if there had been no adequate demand before 12 February, the vendors’ solicitors’ letter of that date arguably fulfilled the function of a demand. It was not an unreasonable service. Because of this, the small amount of costs related to compiling the notice is not material to the issue of whether the buyer was able to pay the amount outstanding when he tendered on 31 March 2009.

177. [177]
     The source of the court’s power to order the assessment was not the subject of any submission and neither was the subject of a court’s discretion to refuse relief. On the assumption that discretion exists to refuse the relief I refuse to order another assessment on three bases. I am not satisfied that anything other than minimal costs would be identifiable as relating to the notice but unrelated to a necessary demand for payment; the issue was able to be raised with the assessor when the assessment was done and there is no fair basis to raise it after that assessment and in another assessment; and because this dispute should be allowed to end without the prospect of more expensive litigation over an amount worth less than the cost of the assessment to determine the amount and the application to determine which party is responsible to pay the vendors’ solicitors for it.

178. [178]
     Was the buyer ready willing and able to pay the amount due on 31 March 2009?

179. [179]
     The vendors’ counsel submission draws together relevant evidence and allegations:

38…the defendant alleges a readiness, willingness and ability to tender up to an amount of $51,000.00.^[112]…and there is no established readiness, willingness or ability to pay the amount of $51,000.00...  As to the ability to pay up to $51,000.00:

the sum of $42,949.72 tendered was not the defendant’s funds but belonged to his partner; after the purchase of the bank cheque, the defendant’s partner had $781.34 in her bank account; the defendant’s partner had available credit on her credit card of $921.23; the defendant himself did not establish he had any money in any bank account; the defendant produced a credit card statement which shows he had available credit as at 31 March 2009 of 5,032.48.^[113]

These sources total $49,684.77 assuming the defendant’s partner was prepared to advance to him her entire available funds and credit.  That amount was inadequate ...  As for the evidence given by the defendant’s partner’s brother he:

had not been asked to make any advance to the defendant;

he indicated he received $40,000.00 odd from his grandmother’s estate but did not identify when he received the same.  In particular he did not give evidence that he received the same before 31 March 2009; he said he would be prepared to loan the defendant a few thousand dollars from the amount he received from the estate but was never asked to do so.

In the premises, the defendant has failed to establish he was ready, willing and able to tender any amount higher than that which he did in fact tender.

180. [180]
     The buyer’s counsel submitted:

[140] Mr Millard tendered $42,949.72 on 31 March 2009.  It was by bank cheque.  As set out in paragraph 38 of Mr Hackett’s outline, assuming that his partner, Ms Bremner, was willing to assist him, then between Mr Millard and Ms Bremner, they had available to them an amount of $49,684.77.

[141] In addition, as Mr Hackett also identifies, Mr Keith Hill (also known as Mr Capes), Ms Bremner’s brother, gave evidence that he had received around $40,000 from his grandmother’s estate although he could not say exactly when he received it.  Mr Hackett is quick to point out that he gave no evidence that he had the amount by 31 March 2009.  However, Ms Bremner produced exhibit 11 which indicated a distribution to Mr Hill of funds from their grandmother’s estate a week or so beforehand.  Ms Bremner’s bank statement demonstrated that she had received the funds pursuant to the same distribution.  Indeed, it is plain that this was the source of the funds for the bank cheque tendered on 31 March 2009.

[142] Those circumstances justify the inference that Mr Hill received the money around the same time.

[143] Mr Hill gave evidence that he would have been willing to lend Mr Millard a few thousand dollars at the time.

[144] In the circumstances, it is more likely than not that $51,000 was available to Mr Millard to tender around 31 March 2009 if he chose.  That demonstrates the ability to tender that amount.  Was he ready and willing?

[145] The following passage of evidence addresses this point:^[114]

MR FERRETT:  Mr Millard, can I ask you to cast your mind back to the 31st of March 2009?  And you'll recall that was the day you tendered the cheque?   Yes, correct.

Can you tell me what steps you would have been willing to take if any, to raise more money if it were needed that day?   Well, if it would have been needed on that particular day, I would have asked a number of family and friends.

All right.  Can you name those who you would have been willing to ask?   Well, my brother, Gary Millard    

Yes?        which had offered me money because I was running at -short of funds.

Well, don't worry about that     ?   Yes, okay than. 

Yes, you were willing to ask your brother, Gary. Yes, who else?   Kerri's brother and son.

What's Kerri's brother's name?   Keith Hill.

Right.  And anyone else? Yeah, Kerri's son, Shane Bremner.

All right.  Anyone else?   Well, at that time, I had no reason to think about the situation, so I didn't    

Right, the three people you've told me are:  Keith, Kerri's brother, and your - sorry, Kerri's son, and your brother.  Anyone else, apart from those three people?   Well, that's only just off the top of me head.  But at that time, I had no reason to bring them into the calculations.

Yes, all right.  Thank you.  That's the evidence-in-chief, your Honour. 

[146] Mr Millard’s evidence is plainly to the effect that if he had thought more was necessary, he would have asked one of the people identified for money.  True, he did not name Ms Bremner in that passage of evidence, but that seems more likely to have been accident than out of any lack of preparedness to ask.  After all, he had already accepted nearly $43,000 from her.

[147] Mr Millard’s failure to ask for more was not out of an unwillingness to pay more if it could be justified.  The intransigence of Mr Cooper (probably born of inability) in refusing to provide an itemised account prevented any proper judgment as to what was actually owing.  The evidence demonstrates that if Mr Millard had genuinely thought more was owing he would have made attempts to raise the additional amount.

181. [181]
     The buyer’s submission does not do sufficient justice to MR Hill’s evidence. Mr Hill said he was prepared to lend “quite a few thousand-if it was required”.^[115]I accept that.

182. [182]
     The vendors’ counsel submitted in reply:

The plaintiffs rely upon paragraph 38 of the plaintiffs outline.

The quotation at paragraph [145] of the defendant’s submissions does not establish the defendant was ready, willing or able to tender any amount higher than $49,684.77.  The submissions at paragraphs [146] and [147] are not supported by evidence.

183. [183]
     The vendors’ attack on this issue would have been compelling if the debt had been $64,349.16 as he submitted was the minimum then owed. The amount owed was substantially less. I am satisfied that if the buyer had known the amount due was $50,718.69 he would have made requests of relatives, including his brother and his partner for further funds to tender. I am satisfied that sufficient further funds were able to be obtained by him and that he was willing to obtain them. I am satisfied that the buyer was willing and able to pay $50,718.69 on 31 March. The fact that he was not ready to do so is explained by the fact that he could not reasonably have known the correct amount.

184. [184]
     Were the professional fees incurred by the vendors’ solicitor after 31 March 2009 unreasonably incurred and not recoverable under the mortgage?

185. [185]
     The fees claimed in this proceeding by the vendors for services performed after 31 March 2009 are, from 1 April 2009 to date of commencement of this proceeding on 21 May, $9,286.96 or $7,162.90. The have been an assessed at $3,492.40. The vendors also claim as due pursuant to the mortgage part of the costs of this proceeding being costs from 21 May 2009 to 21 October 2009 as they have been assessed and recalculated. They claim for costs and outlays in this period $16,075.40 despite an assessment that they were $12,115.40.

186. [186]
     To understand this issue one should recall that the demands after 31 March 2009 were for sums including costs. The component for costs calculated by the vendors’ solicitors was more than double the amounts later assessed. One cannot tell precisely why, because there was no itemised bill provided with the demands. Mostly the extra costs were based on the vendors’ solicitors’ mistaken premise that the buyer was liable for uplift and 72 word folio costs. The interest component may have been inflated.

187. [187]
     The vendors’ claim to the costs incurred from 31 March 2009 is based on the mortgage.^[116]Costs from 31 March 2009 are alleged to be “costs in attempting to recover the defendant’s default”.^[117]

188. [188]
     The relevant words of clause 4 of the mortgage which found that claim appear to be:

The Mortgagor will upon demand pay the Mortgagee’s costs and all charges, expenses and outlays which may be incurred or paid by the mortgagee … in consequence of default in payment of any money intended to be hereby secured

189. [189]
     The issue about their recoverability appears in the defence at paragraph 17 and was live in the trial. The issue was the basis for extensive evidence and submissions about the buyer’s ability and willingness to pay what was due on 31 March 2009 and was the basis for ordering an assessment of the vendors’ costs to 31 March 2009 so that they could be treated separately from costs after that date.

190. [190]
     The buyer’s written submission addresses the topic in at least three or four ways. One was based on the interpretation of clause 4 of the mortgage.^[118]. A second was based upon an implied term^[119] or perhaps that was connected with a third that the vendors were subject to a duty arising from the relationship of mortgagor and mortgagee.^[120] A fourth involved the Legal Profession Act.

191. [191]
     The buyer’s first submission was, in effect, to submit that the demands for payment, being inflated by demands for professional services for which the vendors were not liable, were not demands for amounts due under the mortgage. That submission was underdeveloped. It seems to have been based on the interpretation of clause 4 of the mortgage. I infer it was intended to submit that costs incurred after 31 March 2009 do not fall within the costs described by clause 4 because they were essentially costs greatly inflated by uplift and folio fees which the vendors did not incur and that the demands for interest may have been inflated. The submission was based on the words of clause 4 of the mortgage and observed that, for example, costs for unnecessary services, incurred on a whim are not costs “incurred in consequence of default”. I accept that. The relevant whims of the vendors to which the buyer’s counsel impliedly referred were the pursuit of costs after 31 March without pausing to supply the itemised bill or the costs agreement that the buyer had reasonably requested and the pursuit of an amount inflated by uplift and 72 word folio costs which the vendors were not entitled to recover and possibly by unjustified interest claims.

192. [192]
     But the buyer has entangled with that submission on interpretation of clause 4 a submission that in determining what is recoverable, reasonableness is the determinant. That submission needs to be read with the defence which alleged an implied term that the vendors’ recovery was limited to costs for “legal expenditure reasonably incurred”.^[121] In context, “reasonableness” in the submission included the issue of whether it was reasonable for a professional service to be performed as distinct from whether the cost of that service was reasonable. It may be that as well as raising an interpretation argument, the buyer was raising a separate argument that a term was to be implied or at least some words were to be implied in clause 4.

193. [193]
     The vendors’ submissions did not disagree with either of these parts of the buyer’s written submission but dismissed the submission as irrelevant because costs had been assessed.^[122] I infer from the vendors’ submission that vendors’ counsel meant that the assessment determined that the costs were in all respects reasonable. If that was the intent of the submission, I partly disagree. I accept that the assessor was partly concerned with whether the quantum of a cost attributed to a professional service was reasonable but I am not satisfied that the assessor was concerned with whether provision of the services was reasonable after 31 March 2009 nor with the issue of whether professional services performed in pursuit of uplift and 72 word folio costs were “incurred in consequence of default” or were reasonably incurred.

194. [194]
     The buyer’s second submission appeared to be about mortgagee’s duties but it entangled notions of interpretation and implied terms. The buyer’s counsel submitted:

[96] Mr Cooper’s attitude in insisting on payment of those unjustifiable amounts prevented Mr Millard from tendering what was actually due.  That contravened the duty that the Verhagens owed Mr Millard to correctly calculate the amount due under the mortgage and to substantiate the amount due when called upon by the mortgagor to do so.^[123]

[97] In Project Research Pty Ltd v Permanent Trustee of Australia Ltd,^[124] Hodgson J held that:

“… if a mortgagor is seeking to redeem and asks for a payout figure, the mortgagee should normally give such a figure: failure to do so could be misconduct, rendering the mortgagee liable to costs if redemption proceedings are brought as a result of that failure. The payout figure would normally be the principal and interest to the date of redemption, plus costs and expenses to the date of redemption, including the actual costs of discharging the mortgage.”

[98] In Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd,^[125] Mason J cited the following passage from the reasons of Griffith CJ in Butt v M’Donald:

“It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.”

[99] In this case it was implied that the Verhagens, to obtain the benefit of payment of the mortgage debt, would co-operate by ensuring that they could calculate on reasonable request the amount recoverable by way of costs incurred under clause 4 of the mortgage.

[100] In a case where a party entitled to a benefit under a contract, fails to co-operate so as to enable the other party to bestow it, the latter party is treated as having performed his obligation.^[126]  The effect in this case is that Mr Millard was excused from further performance.

[101] That is not to say that Mr Millard was excused from paying the amount owed at 31 March 2009.  That obligation accrued before performance was excused.  Performance of obligations to pay further amounts under clause 4 was excused.

195. [195]
     I accept as correct and helpful the propositions in the cases and texts set out in the buyer’s submission set out above.

196. [196]
     The vendors’ submission dismissed this submission as irrelevant because costs had been assessed.^[127] The vendors’ submission failed to respond to the arguments that the vendors had a duty to correctly calculate the amount due under the mortgage and to substantiate the amount due when called upon by the buyer to do so or the argument that they were in breach of a duty or to the argument that the buyer was excused from the obligation to pay costs after 31 March.

197. [197]
     The buyer’s first and second submissions are each consistent with the observation in Fisher and Lightwood Law of Mortgages Australian ed 1995:

[40.13] It is the duty of the mortgagee to pursue his remedies as not to incur unnecessary costs. Hence he must bear the costs of proceedings so far as they are mistaken or useless…The court may except from the general costs the costs of a particular issue on which the mortgagee has failed…

198. [198]
     “[6.01] The implication of a term into a contract depends on the presumed intention of the parties. In some cases that intention is…collected from the legal nature of the relationship into which the parties have entered…[6.02] Where the court is asked to imply a term as a legal incident of a particular legal relationship, the test is whether, having regard to broader questions of policy, the term is a necessary incident of the particular class of legal relationship. The answer is likely to be affirmative if, unless such a term is implied, the enjoyment of rights conferred by the contract would or could be rendered nugatory, worthless or seriously undermined.” Lewison, Hughes The Interpretation of Contracts in Australia.^[128]I accept those propositions. 

199. [199]
     The nature of the relationship of mortgagor and mortgagee does have necessary incidents that the mortgagees will correctly calculate the amount due under the mortgage and substantiate the amount due when called upon by the mortgagor to do so. As a result of that it is appropriate to read clause 4 of the mortgage as containing the word “reasonably” before the word incurred.

200. [200]
     I accept that the vendors had a duty to correctly calculate what was owed and a duty, once a request for an itemised bill and the costs agreement was requested, to supply both, in the circumstances of this case.

201. [201]
     I accept that the vendors’ insistence by their solicitor on payment of unjustifiable amounts and their failure to supply an itemised account and a copy of the costs agreement when requested were breaches of those duties. By the combination of those breaches the vendors prevented the buyer from knowing and thus from tendering what was due on 31 March 2009. The failure to supply an itemised account persisted until after this proceeding commenced on 21 May 2009. The first supply of an itemised account was by the supply of a copy by the Legal Services Commissioner on 18 June 2009.

202. [202]
     There is no evidence as to when a costs agreement was supplied. I infer that the vendors’ solicitors’ reluctance to supply the itemised bill of costs after 31 March 2009 extended also to the costs agreement until it would have been disclosed after this proceeding commenced.

203. [203]
     The buyer maintains his pleaded case that the buyer is not liable to pay such costs as had been incurred after 31 March 2009 for reasons pleaded. Mostly, I have found in the buyer’s favour on the issue of the costs that were owed on 31 March 2009. In one respect I do not. It was alleged by the buyer in the defence that the total owing on 31 March was, in effect, the judgment, costs of the proceeding, reasonable costs since 3 October 2008 and interest. Notably it wrongly omitted to accept liability for costs to 3 October 2008 which were not costs of the proceeding. Those costs were owed to the vendors despite the fact that they were for services unrelated to the earlier proceeding. To that extent, the buyer’s allegation is wrong. Those costs were later assessed on 21 October 2009 at $2,564.60 pursuant to an order made in this proceeding. It would not have been obvious on 31 March 2009 or at any time before the assessment on 21 October 2009 that $2,564.60 or any particular amount was due for this component of the vendors’ costs. The itemised bill from the vendors’ solicitors and obtained by the buyer from the Legal Services Commissioner on 18 June 2009 did not break the costs into components which would alert the buyer to whether costs in the bill were alleged to be “of the proceeding” or not. I make this finding on two bases. The first is that costs can be of a proceeding though the services for which the costs were incurred have preceded the filing of originating process. The second is that the costs which appear in the itemised bill^[129] to have been for services rendered before filing of originating process in the earlier proceeding would have appeared to a reader to be infected with the same unexplained inflation as infected the vendors’ solicitors’ earlier demands for costs. The subsequent assessment shows reduced the costs in the itemised bill claimed for services prior to the earlier proceeding from $3125 to $2564.60.

204. [204]
     The vendors’ counsel made other related submissions:

33. First, that the plaintiffs were unable to state what amount was actually owed to them under the mortgage as their solicitor had undertaken no efficacious assessment or calculation.^[130]  That is untrue as the correspondence reflects the following amounts were advised to the defendants (in circumstances where we now know with precision the amount was either $64,349.16 or $67,313.06):

$59,329.04 plus $4.49/day until settlement on 9 October 2008;^[131]

$60,856.34 on 8 December 2008;^[132]

$68,237.82 on 12 February 2009;^[133]

$69,437 on 11 March 2009.^[134]

The allegation also ignores clause 7 of the mortgage which provides:

7.A statement in writing signed by the Mortgagee, his Solicitor, Agent or Attorney of the amount due or owing upon or secured by this Mortgage at the date set out in such statement shall be prima facie evidence that such amount is so due and owing or secured.

Each of the documents in paragraphs (a) to (d) above are statements for the purposes of clause 7 of the mortgage and therefore prima facie evidence of the amount owing and secured by the mortgage.  Further, Mr Cooper gave evidence of his method of assessment on each occasion he gave an estimate was in accordance with the client agreement and the work preformed…

39. Finally, that the plaintiffs’ solicitors’ failure to properly assess the amount owing or to truly state the amount owing prevented the defendant from tendering the correct amount.^[135]  Once again, the plaintiffs rely upon the statements of the amount due and notifications in paragraph 33 above and the defendant’s inability to tender the amount required pursuant to the mortgage and the subject of the agreement.

In the above circumstances, the further allegation that the fees incurred after the tender were unreasonable^[136] is not maintainable.

205. [205]
     Notably, the vendors’ submissions did not argue against the buyer’s pleaded allegation that if on 31 March 2009 the vendors could not say what was owed, and failed to deliver an itemised bill and if the buyer was ready willing and able to tender all that was owed then legal costs incurred by the vendors thereafter are not recoverable from the buyer pursuant to the mortgage. The vendors’ argument was that the buyer’s pleaded case must fail because the correct debt had been identified at $64,349.16 and the buyer could not pay it.

206. [206]
     When considering clause 4 of the mortgage to determine whether the vendors have satisfied their onus of proof that their solicitors’ costs are payable: I am not satisfied that the vendors have established that the costs assessed for professional services and outlays after 31 March were paid by the vendors. I accept that services were performed and outlays incurred. It was not suggested to Mr Cooper that they were not performed and incurred.

207. [207]
     I am not satisfied that they were performed and “incurred in consequence of default in payment”. They were incurred in consequence of an election to incur them unnecessarily, in spite of the fact that an itemised bill of costs had been requested and the request was not complied with and where the demand was significantly inflated by a claim for folio and uplift costs which the vendors had not incurred because their solicitor could not legally enforce his claim to them. I am not satisfied that it was reasonable to incur the costs which were incurred by provision of legal services after 31 March 2009. Without resort to the implied term, I am not satisfied that those costs are recoverable.

208. [208]
     I accept that it is implied in clause 4 of the mortgage that the buyer’s obligation to pay costs incurred in consequence of default in payment of money is for costs reasonably incurred by the vendors.

209. [209]
     I am not satisfied that the professional services performed for the vendors after 31 March 2009 in pursuit of the costs due to the vendors for services to 31 March 2009 were reasonably incurred.

210. [210]
     As for the vendors’ claims for costs and outlays between 1 April 2009 and 21 October I reject the amounts claimed as wrongly containing uplift and improper folio amounts and as not being assessed costs. Though the assessed amounts for the period are not inflated by those items the assessed amounts relate to costs and outlays for services not established to be recoverable pursuant to clause 4 of the mortgage.

211. [211]
     Must the buyer commence another proceeding to determine whether he is entitled to such money as remains in trust on account of the difference between standard and indemnity costs of the earlier proceeding?

212. [212]
     For reasons explained above, this issue is before me. I may determine it. The vendors could have made a binding agreement with the buyer on 22 October 2008 that the buyer pay to them the difference between assessments of costs of the earlier proceeding on an indemnity basis and on a standard basis. They did not. When the compromise agreement provided that the buyer must pay funds into trust it was not provided that the buyer would lose his beneficial interest in the funds. The compromise agreement itself did not give the vendors any arguable interest in the funds. If the mortgage once gave the vendors a right to claim costs of the earlier proceeding on an indemnity basis, the right was lost when the appeal period expired after Judge Tutt determined the costs issue against them. If funds remain in trust on account of the increment between assessed costs of the first proceeding and indemnity costs of the first proceeding, the buyer is entitled to them and the vendors are not.

213. [213]
     The buyer’s application for an account for any amount paid in excess of the debt owing under the mortgage does not seem to have been pursued in submissions by either side. As I find that the vendors have received less than was due to them, no such account appears necessary.

214. [214]
     What sums are due and to whom?

215. [215]
     The vendors were paid $45,858.15 on 16.09.09 on the basis that such amount was to be appropriated to the debt owing pursuant to the mortgage. The parties provided no explanation of how that sum was calculated or to what it was applied. The debts to which it was applied might affect the outstanding amount due to the vendors.

216. [216]
     As I anticipate limited assistance from further submissions unless I set out the likely application of the $45,858.15 that was paid to the vendors and the interest consequences flowing on that hypothesis. After 31.3.09, interest arguably continued to accrue at 12.5% pa for 178 days on two outstanding sums. They were the amounts of $16,382.60 and $19,435.40 (total $35,818). To 16.10.09 (178 days) that interest would have been $2,183.43. The amount of $45,858.15, if applied to satisfy the oldest debts, but ensuring that the vendors’ out of pocket expenses and judgment were paid first and with interest, would have satisfied the following:

1. $16,382.60 being the judgment sum from the earlier proceeding

2. interest on $16,382.60 to 1.8.08: $308.57

3. interest on $16,382.60 from 1.8.08 to 31.3.09: $1711.74

4. costs of the earlier proceeding paid by vendors $19,435.40

5. interest on $19,435.40 of the costs of the earlier proceeding at 12.5%pa 3.10.08 to 31.3.09: $1,191.42

6. interest at 12.5% pa on $35,818 from 31.3.09 to 16.09.09: $2,183.43

7. costs paid to 3.10.08 excluding costs of the earlier proceeding: $2,564.60

and it would have left a balance of $2,080.39 to apply to the $3,275.8 costs of the earlier proceeding which had been incurred but which the vendors had not paid. There was insufficient to apply to other costs of $5,489.10 incurred but unpaid by the vendors.

217. [217]
     On that hypothesis the amounts owing to the vendor would be:

1. Costs incurred but unpaid by the vendors for services from 3.10.08 until 31.3.09: $5,489.10

2. $3,275.8 on account of costs of the earlier proceeding.

And the outstanding issues would be the buyer’s costs of this proceeding, the vendors’ costs of this proceeding from 21.10.09, the orders relating to disposition of the sum in trust with accretions, whether either party is entitled to interest and on what sums, from what date and at what rate.

218. [218]
     On my hypothesis as to the likely application of the $45,858.15 the claims for interest under the Supreme Court Act could be justly resolved by setting off on account of the vendors interest at 10% per annum on $2,564.60 from 7 June 2007 to 16.09.09 against the buyer’s claim for interest at 10% per annum from 16 September 2009 on that portion of the $35,290.75 paid into court by the buyer on the calculations of the vendors and which was an overpayment according to these findings. The vendors’ entitlements to $5,489.10 and $3,275.8 would then be subject to a set off in favour of the buyer for the interest balance in favour of the buyer. I invite submissions as to this approach.

219. [219]
     Many findings differ from the findings contended for by each party. My calculations have been based upon my findings. I propose to give the parties time to verify my arithmetic, and to make submissions on interest, on the appropriate orders with respect to the fund in trust, and on costs. The trustees of the sum in trust are not parties to the proceeding. I infer from trial counsels’ submission a mutual intention that an order would be made that the funds be paid in accordance with the findings. Without the consent of the trustees, or unless they become parties, the court cannot make an order against the trustees.

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