About Paul Duggan

commercial litigation barrister and mediator

The Turkish purge fails in VCAT

Image

erdogan 090517Since last year’s failed coup attempt against Turkish president Recep Tayyip Erdogan (pictured), his regime has ousted 4,238 judges and prosecutors, purged 95,000 public servants, jailed at least 81 journalists and sought to remove one sitting member from a VCAT domestic building case.

Yes, all extraordinary numbers but let’s focus here on that last and most local statistic. It made it on to the public record only yesterday via VCAT’s decision in Mackie v Republic of Turkey [2017] VCAT 620.

VCAT is currently 25 hearing days (!) into a domestic building dispute. Another 10 hearing days are anticipated. In it, a builder is claiming payment for constructing a house in Toorak Road, Toorak, for the Turkish government. The Republic of Turkey has  counterclaimed and also joined the project’s architect to the action.

Things cannot be going well for the Turks because, together with the architect, they used a long adjournment last month to seek an order from VCAT’s president to have the VCAT senior member hearing the case removed from it.

That senior member is not identified in yesterday’s decision. His removal was sought  on two alternative grounds.

Member “ill-suited”

The first was that the member concerned was “ill-suited” to this particular building case and accordingly the Tribunal should be reconstituted pursuant to s 108 of the Victorian Civil and Administrative Tribunal Act.

Evidence in support of the reconstitution application was by affidavit derived,  among other things,   from approximately 2,000 pages of transcript. The complaints against the member included,  among much else,  his own statement during the hearing that he had “little experience” in construction law,  his apparent unfamiliarity with some building concepts and terminology (such as the difference between a civil engineer and a structural engineer),  and a comment during the litigation describing it as  “a nightmare”.

Apprehension of bias

The second limb of the reconstitution application was that the member had created a reasonable apprehension that he was biased in favour of the builder.

Evidence in support of this contention was said to include some stern words from the member to the architect’s principal witness about the architect’s repeated failure to give responsive answers in cross-examination,  the poor success rate by the architect and Republic’s respective counsel in making objections to evidence when compared to the builder’s counsel’s equivalent run rate,   and the member’s solicitude for the health and comfort of the builder’s 74 year-old, laryngitis-suffering witness while giving vive voce evidence.

All of these complaints were in support of a contention that a fresh member should replace the incumbent for the remainder of the hearing. It seems that the  architect (who made the formal application) and the Republic (which supported it) were hoping that the current hearing would then trundle on,  with the new VCAT member relying for his/her decision in large part on a truckload of transcript and no direct memory of what was said in evidence during the marathon hearing.

Decision – unsuitability

VCAT President Justice Greg Garde’s decision is unlikely to improve President Erdogan’s view of the rule of law as administered by a securely-tenured and independent judiciary.

Garde J dismissed the argument that the member was ill-suited. Among other things, he stated that cherry-picking certain remarks by the member from 25 days’ worth of transcript was not persuasive about the competency of the member when it was conceded that no single remark was, of itself, demonstrative of the member’s alleged unsuitability.

As to the member’s professed inexperience, Garde  J stated a VCAT member is entitled to be unfamiliar with industry jargon and concepts. Indeed, members in such a situation should not be bashful about it – they are under a duty to speak up and seek assistance from counsel as appropriate.

Decision – apprehended bias

Applying the High Court’s two-step test in Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337,   Garde J dismissed the bias argument too.

He stated that VCAT members are entitled to take up issues with counsel and the parties “and express robust views and opinions without prejudgment” and that in this case there was not sufficient evidence that the member did not “apply the same standards to all witnesses or act appropriately to progress the hearing and the determination of the proceeding….  I hold that if a fair-minded lay observer were asked whether he or she might reasonably apprehend that the senior member might not bring an impartial mind to the resolution of the issues and the questions which arise in the proceeding, the answer would be ‘no’.”

Garde J dismissed the application and ordered that the hearing resume next Monday before the same senior member who has heard it to date.

Four thoughts occur to me on this:

  1. VCAT members can be removed under s.108 of the VCAT Act during the running of a case but neither professed unfamiliarity with the subject matter nor a robust approach from the bench will of themselves be sufficient grounds for a successful application.
  2. If you are going to make a s.108 application best make it early. An application too far into the hearing is much more likely to expose the applicant to failure (and potentially grave costs consequences too).
  3. Isn’t it cheering to live under the rule of law where humble builders can take on foreign governments secure in the knowledge that the tribunals of law and fact won’t be distracted in their deliberations by the prospect of mass (or even targeted) judicial sackings?
  4. Blogging about a case involving the Republic of Turkey is a tenuous but sufficient excuse to reprint a famous limerick (below) about the censorious President Erdogan. It won its author, Boris Johnson, the prize in The Spectator magazine’s 2016 ‘President Erdogan Offensive Poetry Competition’.  (You will recall that Johnson subsequently became Britain’s  Foreign  Secretary and, as such, today remains in charge of his nation’s diplomatic relations with Turkey.) Enjoy.

There was a young fellow from Ankara

Who was a terrific wankerer

Till he sowed his wild oats

With the help of a goat

But he didn’t even stop to thankera.

When winners are not grinners – who gets paid first when the winning litigant goes bust?

Commercial litigation is often ultimately uncommercial. And when things turn really sour solicitors will often have a personal stake in the question of who is to miss out financially.

This issue arose in an insolvency context last week in a Supreme Court tussle between mega firm DLA Piper and the liquidators of their former client Windemac Pte Ltd.

Back in 2013 Windemac won a Supreme Court judgment for $312,000 plus interest and costs. It was perhaps a Pyrrhic victory as DLA’s bills to Windemac totalled almost $360,000. Windemac went bust two years later still owing DLA Piper more than $100,000.

After Windemac went into liquidation there still remained a costs order for almost $98,000 in Windemac’s favour to be enforced against the defendants. Was that money to go to Windemac’s liquidators or to the short-paid solicitors?

Associate Justice Derham held that the solicitors were entitled to an equitable lien over the proceeds of the costs order on established ‘fruits of the action’ principles and that the solicitors’ rights had priority over the claims of Windemac’s other creditors in the insolvency.

The decision contains a useful extract on solicitor’s liens for costs extracted from Elliot J’s decision in Oakley Thompson & Co v Maisano (No 2) [2015] VSC 210 at 77. Here (with citations omitted) is Elliot J’s summary:

(1)     At common law, a solicitor has a general possessory lien for all professional costs due by her or his client.  This entitles the solicitor to keep in her or his possession all property of the client which comes into the solicitor’s possession during the course of her or his professional employment until the solicitor’s costs have been paid.

(2)     A solicitor has no lien for costs over any property which has not come into her or his possession.

(3)    If a client obtains a judgment for the payment of money (including a judgment for costs),  the solicitor acquires a right to have her or his costs paid out of the money payable, such right being an equitable right to be paid.  This right is not dependent upon an order having been made to recognise the right, or upon a taxation having occurred.

(4)    If the solicitor gives notice of the right to the person who is liable to pay the money, only the solicitor, and not the client, can give a good discharge to that person for an amount of the money equivalent to the solicitor’s costs.

(5)    If the person liable to pay has notice of the solicitor’s right, but refuses to pay the solicitor, the solicitor may obtain a “rule of court” directing that the costs be paid to the solicitor and not to the client.  (In this context, a rule of court is a reference to an order or a direction of the court.)

(6)    If the client and a judgment debtor make a collusive arrangement in order to defeat the solicitor’s right, the court will enforce that right against the judgment debtor notwithstanding the arrangement and notwithstanding that no notice of the solicitor’s claim has been given to the judgment debtor prior to the arrangement.

Associate Justice Derham’s decision is DLA Piper Australia v Official Receiver of Singapore (as liquidators of Windemac Pte Ltd) [2017] VSC 216.

The lesson from this? Solicitors’ liens are good and can trump a liquidator. But solicitors getting their money into trust up-front on account of fees is even better. After all, the solicitors here might have chalked up a win but they still took a haircut on the fees which had been outstanding to them for over four years.

What do Linda Evangelista and Dale Boucher have in common?

Linda E 020916

Dale B narrow 3 020916

What do Linda Evangelista and Dale Boucher have in common?

Slightly more than you think. They are both recognized authorities within their fields on costs disclosure.

The supermodel famously said, “I don’t get out of bed for less than $10,000 a day”.

Less famously, the Commissioner for Uniform Legal Services Regulation and CEO of the Legal Services Council in March this year signed into operation (see s 407 of the Uniform Law) his pronouncements on the need for single figure costs estimates under the Uniform Law. (See the Legal Services Council’s Guideline and Direction – Costs Estimate – LSC 01/2016 and its almost identical CULSR twin, Guideline and Direction – Costs Estimate – CULSR 01/2016.)

Ms Evangelista was succinct and presumably did not need to elaborate.

Mr Boucher was less concise. And, as if the Uniform Law jigsaw needed still more pieces, he accompanied his pronouncements with three “worked examples” of how lawyers are required to provide “single figure” estimates to their clients for the purposes of the Uniform Law.

Look at the examples closely. Identifying a “single figure estimate” in any of them is like identifying a snowflake in a blizzard. Easy. And meaningless.

Nevertheless it seems that Mr Boucher considers single figure estimates are compulsory, even if they are as a consequence contrived, almost certain to be superseded, or premised upon tenuous guesses about the likely course of litigation.

Note particularly paragraph 8 of both Guidelines and Directions. Estimates may be provided as a “range of figures PROVIDED [original emphasis] that the law practice … always gives the single figure estimate of the total legal costs in the matter that section 174(1)(a) requires” [my underlining].

My copy of the Uniform Law contains the following version of s 174(1)(a):

A law practice—

(a)       must, when or as soon as practicable after instructions are initially given in a matter, provide the client with information disclosing the basis on which legal costs will be calculated in the matter and an estimate of the total legal costs…

I will give a prize to the first reader who can find in s174(1)(a) the requirement for a “single figure estimate” to which Mr Boucher is referring in his Guidelines and Directions. And not just any prize. It will be a colour, A4-sized photo portrait of either Ms Evangelista or Mr Boucher – your choice.

I have blogged about this silliness before but I was reminded of it at a seminar yesterday on the Uniform Law. Three speakers. Engaged audience. Useful discussion. But beyond the single slide of Linda Evangelista on display, not much clarity.

 

Client complaints – a tool kit for solicitors

Some lawyers have never received a complaint from a client.

Or so they say.

Such prodigies, liars and recent arrivals to the profession are vastly outnumbered by the rest of us.

This might explain the big audience of solicitors who turned out this week at a seminar Gordon & Jackson hosted on the twin topics of client complaints and recent cases dealing with the Civil Procedure Act.

I delivered a paper on the first topic. The paper’s section headings will give you the flavour of its content:

  1. Complaints are inevitable;
  2. Try not to take complaints personally (and get help, of whatever variety);
  3. Categories of complaint under the Uniform Law;
  4. Categories of complaint beyond the Uniform Law;
  5. Your LPLC insurance – the good news and the bad;
  6. Avoiding complaints in the first place; and
  7. Professional standards scheme – you are a participant, aren’t you?

My colleague Monika Paszkiewicz spoke on the Civil Procedure Act. Her paper includes reference to Judd J’s recent observations (in ACN 005 490 540 Pty Ltd v Robert Frederick James Pty Ltd [2016] VSC 217 at paras 18 -19) that solicitors who threaten each other too willingly with personal costs applications under the Civil Procedure Act might themselves be breaching the very statute they are invoking.

Client complaints and the Civil Procedure Act have obvious potential overlap for litigation solicitors. Download the two papers (combined as a single document) here and file them away with your Civil Procedure Act resources.

Enough already? The LSC’s new guidelines on estimating legal costs for disclosure purposes

Precisely what costs estimate does the Uniform Law require of lawyers? The Legal Services Council’s first official guideline and direction attempts to answer this question.

It has an almost identical twin (here) issued the same day by the Commissioner for Uniform Legal Services Regulation. The two guidelines and directions are accompanied on the Legal Services Council website by a document containing three “worked examples” of what our regulators consider to be acceptable costs disclosure.

Together these three documents are intended to give guidance to the costs disclosure obligations imposed on Victorian and NSW lawyers by s 174(1) of the Uniform Law. The documents might improve your estimates but they are unlikely to improve your estimation of the new Uniform Law regime.

First, a quick refresher on the Uniform Law itself. It requires lawyers’ costs to be fair and reasonable (s 172) and voids lawyers’ costs agreements wherever, inter alia, costs have not been properly disclosed to the client (s 178(1)). The starting point for that requirement is the much-maligned s 174 –

174  Disclosure obligations of law practice regarding clients

(1)  Main disclosure requirement

A law practice—

(a)  must, when or as soon as practicable after instructions are initially given in a matter, provide the client with information disclosing the basis on which legal costs will be calculated in the matter and an estimate of the total legal costs; and

(b)  must, when or as soon as practicable after there is any significant change to anything previously disclosed under this subsection, provide the client with information disclosing the change, including information about any significant change to the legal costs that will be payable by the client —

together with the information referred to in subsection (2).

The two new guidelines and directions are substantively identical with the effect that their shortcomings and the demands on the reader’s time are duplicated but their meaning is not.

Both guidelines and directions state that –

  • the estimate required by s 174 “is a reasonable approximation of the total costs a client is likely to have to pay in the matter for which instructions have been given, expressed as a single figure, from time to time…”[emphasis added]
  • the provision of additional information to clients beyond that required by s 174 “should be encouraged” and that further information about likely costs might be “expressed as a single figure or as a range of figures, PROVIDED [original emphasis] the law practice always gives the single figure estimate of the total legal costs in the matter that s 174(1)(a) requires.”
  • “It is permissible and may be desirable to preface a single figure estimate with the word ‘about’ to reflect the fact that the figure is an estimate and is not a fixed fee.”

Note the brave but dubious assertion that s 174(1)(a) of the Uniform Law requires “a single figure estimate.” Now turn to the “worked examples” which accompany the guidelines and see how the three examples illustrate how the “single figure estimate” concept can (and it seems should) be routinely subverted.

The first example is a debt recovery matter. It begins with instructions to the lawyer only to issue a letter of demand (for which a single figure estimate is given) and culminates (after a series of presumably ascending single figure estimates) in litigation including a crossclaim whereupon the “lawyer indicates that the [most recent] estimated figure might vary by +/- 10 per cent”.

This is surely incongruous. It seems that the Legal Services Council believes that the pro-active lawyer who advised her client on day one that a debt claim might resolve quickly after a letter of demand or might run all the way to the conclusion of complex litigation and therefore cost in the range of, say, $500 – $15,000 depending on those variables will have comprehensively breached her disclosure obligations under s 174 of the Uniform Law. On the other hand, the dullard solicitor who plods blindly down the road towards litigation,giving his client only a series of single-figure cost estimates to the conclusion of the very next step, is supposedly satisfying the obligations of s 174.

There is more. Each of the three “worked examples” published with the guidelines and directions includes an estimate with a stated percentage deviation range. There is something ridiculous about lawyers being prohibited from estimating costs to clients as a range (e.g. $850 to $1150) while being simultaneously encouraged to provide precisely the same information expressed as a mathematical formula (e.g. $1000 +/- 15 per cent).

There is a warning that the percentage deviation figures are “an illustration only and do not alter the obligation to provide a single figure estimate nor is it intended to encourage an unreasonably broad estimate”. This invites the question of what percentage deviation is “unreasonably broad.” It seems from one of the examples that “plus or minus 15 per cent” might be reasonable. What about plus or minus 30 per cent? Or 50 per cent?  Or 100 per cent? As judged by whom? When?

Alas, for the moment we can only guess.

Finally, a word about the legal status of these official pronouncements. Under s 407 of the Uniform Law, the Legal Services Council and the Commissioner for Uniform Legal Services may each issue “guidelines or directions”. Local regulatory authorities (eg the Victorian Legal Services Commissioner and Victorian Legal Services Board) must comply with such directions (s 407(1)) and hence the directions have the status of subordinate legislation. But the status of the guidelines incorporated in the same documents is less clear. Presumably the guidelines and the worked examples will have persuasive effect at least with the various costs assessors required to adjudicate on the adequacy of lawyers’ costs disclosure.

For more on the costs provisions of the Uniform Law see this introductory paper and these blog posts:

 

 

Waiter! There’s a Chinese restaurant in my easement!

The lawyer who acts for himself is commonly thought to have a fool for a client. But what about the lawyer who acts for the company of which he is a director and shareholder?

A Melbourne solicitor who acted in several capacities for a private company must now be pondering this question following the non-party indemnity costs order made against him personally in 1165 Stud Road Pty Ltd v Power & Ors (no 2) [2015] VSC 735. (The case was decided just before Christmas but somehow was published on Jade only this week).

The solicitor was (indirectly) one of the main shareholders in 1165 Stud Road Pty Ltd (“Stud Rd”). He was also its company secretary and one of its two directors. He dealt on its behalf in several controversial transactions and also acted as its solicitor in both litigation and conveyancing contexts.

In 2007, Stud Rd bought a block of land in Rowville. The block’s only road access was via an easement. But two years earlier a neighbour had built a Chinese restaurant on that easement.

In 2012, Stud Rd sold its landlocked block for $2.3 million. Its s 32 statement neglected to mention the slight issue of the obstructed easement. That sale then fell over before settlement and Stud Rd sued the purchaser and also the owner of the offending restaurant (“Palms”).

Early in the litigation, Palms demanded security for costs from Stud Rd. Stud Rd’s solicitor/company director/company secretary/etc. wrote back refusing and saying that Stud Rd had ample equity in the Rowville land and could afford to meet any likely costs order against it. That much was true.

But things changed when Stud Rd subsequently sold the land afresh. The new sale wasn’t disclosed to the other litigants nor was the new contract of sale discovered pursuant to Stud Rd’s continuing discovery obligations. Stud Rd also omitted to mention to the other parties its distribution of the net sale proceeds to various of its own related interests.

As the trial loomed closer, Stud Rd went into voluntary liquidation. The proceeding was discontinued before trial as a consequence.Palms had nevertheless spent over $300,000 preparing for the trial. There being no prospect of recovering those costs from the liquidated company, Palms applied instead for non-party costs orders against Stud Rd’s solicitors and its two directors personally.

Palms succeeded – but only against the director who had also acted as the company’s solicitor. His multi-faceted role as the company’s director, shareholder AND external solicitor was said by Vickery J to constitute “exceptional circumstances”.
Here is a taste:

138. It is clear that [the solicitor], in conducting the Proceeding as a solicitor on behalf of the Plaintiff, in respect of which he was not only a director but also, through a corporate vehicle, a shareholder, was in breach of paragraphs 9.2 and 13.4 of the Professional Conduct and Practice Rules 2005 and placed himself at serious risk of being in breach of paragraph 13.1 of the rules. As a solicitor in active practice, [the solicitor] ought to have been aware of the effect of these Rules.
139. This placed [the solicitor] in a conflict of interest and rendered his conduct of the litigation on behalf of the Plaintiff improper.
140. This was so despite the fact that, during the life of the Proceeding, neither Palms nor its solicitors … ever once raised the issue of conflict of interest or demand that [the solicitor], or any of the firms at which he worked, cease to act in the Proceeding due to his conflict.
141. Reference is made to paragraphs 9.2, 13.1 and 13.4 of the Professional Conduct and Practice Rules 2005 published by the Law Institute of Victoria, which was tendered in evidence:
9.2 A practitioner must not accept instructions to act or continue to act for a person in any matter when the practitioner is, or becomes, aware that the person’s interest in the matter is, or would be, in conflict with the practitioner’s own interest or the interest of an associate.
….
13.1 A practitioner must not act as the mere mouthpiece of the client or of the instructing practitioner and must exercise the forensic judgments called for during the case independently, after appropriate consideration of the client’s and any instructing practitioner’s wishes where practicable.
13.4 A practitioner must not unless exceptional circumstances warrant otherwise in the practitioner’s considered opinion:
13.4.1 appear for a client at any hearing, or
13.4.2 continue to act for a client,
in a case in which it is known, or becomes apparent, that the practitioner will be required to give evidence material to the determination of contested issues before the court.

142. It is likely that [the solicitor] was not able to bring an independent mind to decisions made on behalf of the Plaintiff in the conduct of the Proceeding by reason of his conflict of interest and it is likely that a number of the decisions he made were infected with this conflict.
143. An order for costs against a non-party is not dependent upon, but can take into account, any improper conduct by the non-party….

The upshot was that the solicitor personally [cf the firm that employed him] was ordered to pay Palms’ cost of the proceeding on a standard basis until the date of the undisclosed sale and on an indemnity basis thereafter.
A final point is worth noting. Palms’ application was brought partly in reliance upon s 29 of the Civil Procedure Act [as discussed in Yara v Oswal blogged here] but that limb of the application was held to be statute-barred as it had not been made before the proceeding was “finalised” as required by s 30. However, this missed deadline did not matter for Palms as the Court held that it had power to order the costs against the solicitor under s 24 of the Supreme Court Act and/or in its inherent jurisdiction.

The lessons from this case? Four occur to me.

  • Acting for yourself and/or interests close to you is perilous.
  • A lawyer and client with apparently aligned commercial interests might still have a conflict of interest if the lawyer’s forensic judgment is thought to be compromised as a result of that close association.
  • Lawyers should not act in matters in which they are likely to be material witnesses.
  • And finally, never be too reassured by the fact that no conflict of interest is suggested by your opponents.

A Christmas present buried deep in the Civil Procedure Rules?

Christmas prezzies sorted? Self-executing orders complied with? Default judgment averted? Holiday booked?

Maybe some of your Christmas deadlines are less pressing than they appear.

Civil litigators should remember at this time of year that the Civil Procedure Rules allow them a bonus 16 days over the Christmas / New Year break to comply with most orders and Court rules containing time limits.

In each of the Supreme, County and Magistrates’ Court rules, time stops running because of Rule 3.04(1). The two alternative formulations of Rule 3.04(1) have identical effect. The Supreme and County Court version provides:

In calculating time fixed by these Rules or by any order fixing, extending or abridging time, the period from 24 December to 9 January next following shall be excluded, unless the Court otherwise orders.

An example. A defendant who files an appearance today (Friday, 11 December 2015) would normally as a consequence be required (by Rule 14.02) to serve a defence within 30 days thereafter (ie by Monday, 11 January 2016). But at this time of year that 30 days actually expires in 46 days’ time on Wednesday, 27 January 2016 after allowance is made for the end-of-year suspension of time under Rule 3.04(1) and also the Australia Day holiday on 26 January 2016. (See Rule 3.01(5) as to the effect of public holidays and other days when the courts’ offices are closed).

The Federal Court is even more generous. Its equivalent is Rule 1.61(5) which provides:

If the time fixed by [these Rules or by an order of the Court] includes a day in the period starting on 24 December in a year and ending on 14 January in the next year, the day is not to be counted.

That was that good news. Now the bad news.

Time pauses for some litigation purposes over the break but not for others.

In Kuek v Victoria Legal Aid [1999] VSC 158 the plaintiff sought to rely upon Rule 3.04(1) to commence an appeal which was otherwise out of time under the Magistrates’ Court Act. He failed. Beach J held that Rule 3.04(1) as a rule of Court could not have the effect of extending a statutory deadline unless the statute concerned (or some other) gave the Court express power to vary that deadline.

So if you have a statutory demand or a potential appeal quietly ticking away on your desk as Christmas approaches, Rule 3.04(1) offers no yuletide peace and goodwill.

But if you have no such time bombs on your desk – Merry Christmas, Happy Chanukah, a Splendid Silly Season and a very happy new year to you.