Harith & Kanuth v McCrohon & 2 Ors [2009] NSWSC 111 (5 March 2009)

Last Updated: 19 March 2009

NEW SOUTH WALES SUPREME COURT

CITATION:
Harith & Kanuth v McCrohon & 2 Ors [2009] NSWSC 111


JURISDICTION:


FILE NUMBER(S):
20238/2005

HEARING DATE(S):
7-10 October 2008

JUDGMENT DATE:
5 March 2009

PARTIES:
Paul Antoni Harith and Eizabeth Gay Kanuth

JUDGMENT OF:
Smart AJ

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
B R McClintock SC & P Doyle Gray (Ps)
S A Kerr (Ds)

SOLICITORS:
Searle & Associates (Ps)
P Bard (Ds)


CATCHWORDS:
Initial action by plaintiffs against Beale in Queensland to recover land in Queensland held on trust - Action Against Solicitors in contract, tort and for breach of fiduciary duties as to conduct of action against Beale - Solicitor altering terms of counsel's engagement in action against Beale 2 days before hearing in Mackay, Queensland by declining to be responsible for payment of counsel's fees as plaintiffs had not provided funds - Solicitor failing to give reasonable notice and not previously disclosing fee problems to counsel - withdrawal of counsel - plaintiffs forced to apply for and granted an adjournment - Adverse costs order made against plaintiffs resulting in their being liable to pay $250,000 to Beale for his costs - Defendants disclosing not admitted in Queensland but failing to advise fully of costs consequences of them acting for plaintiffs instead of Queensland solicitors who are less expensive - Assessment of Damages - Amounts recoverable by plaintiffs against solicitors - plaintiffs ultimately successful in recovering property subject to amounts payable to plaintiffs. Party/party costs of plaintiffs to be assessed on basis Mackay solicitors retained and on task not time charging.

LEGISLATION CITED:
Civil Liability Act 2002 (NSW)

CATEGORY:
Principal judgment

CASES CITED:
Hoby v Built (1832) 3 B & AD 350
Heslop v Cousins [2007] 3 NZLR 679

TEXTS CITED:
Jackson v Powell on Professional Negligence 1992 at para 384

DECISION:
See paras 185-186



JUDGMENT:

- 44 -

IN THE SUPREME COURT

OF NEW SOUTH WALES

COMMON LAW DIVISION

PROFESSIONAL NEGLIGENCE LIST

SMART AJ

Thursday, 5 March 2009

20238/2005:

PAUL ANTONI HARITH AND ELIZABETH GAY KANUTH

v

PETER McCROHON, KARIN BERGSENG AND CHRISTINE PERRY

JUDGMENT

1. The defendants were solicitors admitted to practise in New South Wales. Mr McCrohon and Ms Bergseng were partners in McCrohon Bergseng Partners ("MBP), a firm of solicitors practising in Sydney. Ms Perry was a non-equity Partner in MBP. The defendants were not admitted to practise in Queensland and did not hold practising certificates which would entitle them to practise or to conduct litigation in Queensland.

2. In their Defence the defendants pleaded that in 2002 and 2003 the plaintiffs and John Beale (Beale) were in dispute relating to, and arising out of, a property known as Cool Palms located at Mandalay Road, Airlie Beach and that in November 2002 they were retained by the plaintiffs to act on their behalf in relation to a dispute with Beale. The defendants also pleaded that their retainer with the plaintiffs required them to exercise due care, skill and diligence in carrying out work for the plaintiffs.

3. The plaintiffs have sued the defendants for damages alleging as to certain litigation conducted and determined in Queensland as to Cool Palms the defendants breached the terms of their retainer. The precise terms of the retainer, especially as to the time of payment of the costs (including disbursements and counsel's fees) of the solicitors were not agreed. Breach was not admitted.

4. The plaintiffs also sued the defendants for damages for breach of their duty of care. The defendants pleaded that they owed the plaintiffs a duty of care to exercise due care, skill and diligence in carrying out work for the plaintiffs. The contents of that duty in the particular circumstances of this case were not agreed and breach was in issue.

5. The plaintiffs further alleged, and in the alternative, that by reason of their retainer as the plaintiffs' solicitors, the defendants owed these fiduciary obligations:

(a) to act exclusively in the interests of the plaintiffs and not to prefer their interests as opposed to those of the plaintiffs; and

(b) to disclose fully and openly all matters which might affect decisions taken by the plaintiffs in respect of the property and any litigation commenced by them to recover their interest in the property.

6. The plaintiffs claimed damages, equitable damages, interest and costs.

7. The dispute between the parties involves the time of payment of the costs of the defendants including disbursements and counsel's fees, the notification by MBP (Mr McCrohon) to counsel briefed in the Queensland proceedings to be heard at Mackay two days before the trial was due to commence that he did not have sufficient funds in hand and would not be responsible for payment of counsel's fees, counsel's withdrawal from the proceedings, the withdrawal from the proceedings of MBP except to seek an adjournment of the hearing, the necessity to obtain an adjournment of the trial and the heavy waste of costs that flowed.

Background

8. Until late in 2002 the plaintiffs, who were then husband and wife and have since divorced were ordinarily resident in Florida, USA. In September 1999 they visited the Whitsunday area in North Queensland and stayed with Mr John Beale. Mr Beale and Ms Kanuth had been friends for about 27 years. The plaintiffs expressed a desire to acquire property and settle in or near Airlie Beach. One of the properties they looked at was "Cool Palms". In about November 2000 Mr Beale telephoned Ms Kanuth and told her that Cool Palms was for sale. The subsequent history is set out in the judgment of Dutney J, delivered 5 December 2003. At the time of trial Mr Beale was the registered proprietor of Cool Palms. At the conclusion of the trial (15-18 September 2003) Dutney J made orders declaring the property to be held on trust for the plaintiffs but restraining the plaintiffs from dealing with the property other than by mortgaging it in favour of Howard Mortgage Finance Pty Ltd for an amount not exceeding $750,000. The remaining issue was the amount, if any, for which Mr Beale was entitled to be indemnified. On 5 December 2003 Dutney J entered judgment for Mr Beale against the plaintiffs for $31,929.03 together with interest of $2,926.83.

9. Orders 7 and 8 are major orders for the purposes of the action against MBP. They read:

"7. The plaintiffs to pay the defendants' costs thrown away by the adjournment on 25 July 2003 to be assessed on an indemnity basis.

8. Declare that such costs include all legal costs and outlays incurred by the defendant up to and including 12 September 2003, except costs and outlays necessarily incurred for the drafting and filing of pleadings, complying with the defendant's obligations in relation to disclosure, costs reserved on 24 June 2003, July 2003 and the interlocutory hearing in April 2003."

10. The costs payable by the plaintiffs amounted to $250,000 because of the order for indemnity costs. That loss formed part of the claim for damages. Dutney J explained his reasons at [57] which read in part:

"The adjournment of the trial on 25 July 2003 was solely as a result of the plaintiffs' stated inability to fund their legal representation for the trial ... The defendant was ready for trial and represented by senior counsel ...The result of the plaintiffs' successful application for an adjournment was, however, that the money spent by [Mr Beale] on legal representation up to July 2003 was entirely wasted apart from the pleadings which were in place at trial and the completion of disclosure ... Nothing learned by the solicitors or counsel about the case or done by way of preparation was of any use to the defendant in the circumstances when he was required at the last minute to represent himself. ..."

11. A question was raised as to the interpretation of the costs order which had been made. This was clarified on 3 November 2004 when the costs assessors for the plaintiffs and Mr Beale appeared by telephone before Dutney J. That judge confirmed that there would be two parallel costs orders; one whereby the plaintiffs recover their costs on the standard basis and one where the defendant recovers the same costs on the indemnity basis. The judge explained that he was of the view that Mr Beale was entitled to all costs he incurred back from the plaintiffs on the indemnity basis.

History

12. About 7 November 2002 Ms Kanuth telephoned Ms Christine Perry at MBP, explained that she had a dispute with Mr Beale over the ownership of the property of her and her husband at Airlie Beach which Mr Beale had put in his name and wanted $A1 million to give it back to them. Ms Perry suggested that maybe the plaintiffs should get a lawyer in Airlie Beach as it would be easier for them having someone there. She (Perry) did not know any lawyers and could only recommend firms in Brisbane.

13. Ms Kanuth and her husband consulted two law firms in Airlie Beach but both declined to act because they had acted for Mr Beale. Ms Kanuth said that she telephoned Ms Perry further, relayed what had happened and asked her to handle their case.

14. Ms Kanuth received a costs agreements from MBP. Ms Kanuth said she did not sign it.

15. Ms Perry made a file note of a conversation on 19 November 2002 in which she records that Ms Kanuth told her that Mr Beale had agreed to sign over the property on terms. Ms Perry records that she stressed the importance of lodging a caveat immediately and urged her to do so. Ms Perry recorded that the plaintiffs were "scare of money". Ms Perry also recorded that the plaintiffs were "very jumpy about using lawyers."

16. Ms Perry said that during the conversation on 19 November 2002 she advised the plaintiffs to lodge a caveat over Cool Palms immediately. Ms Perry explained that to do this Queensland lawyers would have to be engaged and that the plaintiffs would be liable for their fees. It seems that a little later in the conversation Ms Kanuth stated that the plaintiffs "right now – flat broke – do no further work" and that MBP followed this later instruction.

17. It also seems that about 11 December 2002 and under cover of a letter of that date Mr McCrohon sent a time billing report and tax invoice of 30 November 2002 of MBP for $934.20 for the period 4–19 November2002. In the tax invoice the time billing report was stated to be in accordance with Costs Agreement dated 7 November 2002. There is a similar statement in the letter.

18. A number of communications passed between Ms Kanuth and her son Christian and Ms Perry between 15-19 December 2002. Ms Perry said that about 19 December 2002 she received instructions to lodge a caveat over Cool Palms. She telephoned Ms J Wheeler of MBP's Queensland agents and ascertained that a caveat could be lodged, received advice as to the effect and operation of a caveat under Queensland law and instructed MBP's Queensland agents to lodge a caveat. Ms Perry sent up the necessary details by FAX.

19. On 24 December 2002 Mr McCrohon wrote to the plaintiffs enclosing "Our Tax Invoice prepared on the basis of our Cost Agreement. Please arrange for payment within 14 days in accordance with the terms of our Cost Agreement." Attached to the Tax Invoice was a Time Billing Report as at 24 December 2002.

20. Ms Perry understood that the tax invoices forwarded on 11 and 24 December 2002 were paid in full on 17 February 2003.

21. Ms Perry said that upon her return from holidays about 13 January 2003 she received further background material from the plaintiffs in which it had become clear that the issue of the return of Cool Palms was in dispute and that further legal work would be necessary. She devised a strategy to handle the matter.

22. About 10 January 2003 Beale borrowed an additional $125,000 secured against Cool Palms. Ms Perry learnt of this on 21 January 2003.

23. Ms Kanuth said that about 14 January 2003 Ms Perry advised her by telephone that Mr McCrohon will carry all MBP's in-house expenses if Beale has to be sued.

24. On 15 January 23003 a telephone conference was held in which the participants were both plaintiffs, Mr McCrohon, Ms Perry and Alexander Rowland and Christian Bordal, the two sons of Ms Kanuth. A detailed agenda had been prepared. Ms Perry made detailed notes upon it, not all of which are easy to follow.

25. Under para 2 the following appears:

"a) Queensland attorney

i) it has been suggested that Christine Perry act as Gay and Toni's attorney while using a Queensland attorney as 'mouthpiece', or that Gay and Toni use a Queensland attorney only for the case. Please comment with regards to:

1. Competency

2. Costs."

Ms Perry has made no notation against this item.

26. Under para 3)f. of the agenda this appears:

"Consideration of claim against John Beale

i. Legal Costs

ii. Other damages"

27. Under para 4) this appears:

"Consideration of Legal Costs and Payment

a. Consideration of invoices received to date.

b. Consideration of request for $10,000 advance on attorney's fees.

c. Consideration of projected overall costs of case

d. Options for payment

i. Gay and Toni's single substantial asset at this time is the property Cool Palms. Current real estate valuations in Airlie Beach and of Cool Palms in particular indicate they can expect a return on their investment. Therefore Gay and Toni request a fee arrangement that would allow their fees for legal services related to Cool Palms to be paid, with an agreed upon rate of interest, upon sale of the property, without penalties for prepayment.

ii. Additional sources of revenue:

1. Gay Kanuth is an experienced and well-regarded interior designer. She is developing relationships in the Airlie Beach area, where substantial development is ongoing, and intends to continue to practise her profession there.

2. Toni Harith is nearing the completion of legal action against his health insurer in the state of Florida as the result of a car accident in 2000. The eventual proceeds of this litigation is expected to provide additional resources for payment of the Cool Palms proceedings."

28. At the conference Mr McCrohon acknowledged that the plaintiffs had some difficulty paying MBP's fees at that stage, that they would have access to funds in February or March and that he was prepared to carry the fees until they undertook a mediation.

29. There were continuing difficulties about the payment of the costs of the defendants. The funds the plaintiffs had anticipated from the USA in February/March 2003 had not come through and matters there were taking longer to resolve than anticipated. The defendants were doing a lot of work for the plaintiffs and the bills were mounting.

30. About 1 April 2003 during a telephone conference between the plaintiffs, Ms Perry, Messrs Rowland, Bordal and McCrohon the latter stated that he needed to know how the plaintiffs intended to fund the payment of MBP's costs, that he needed a closure date for payment and that he was prepared to wait for a short period until the plaintiffs had the funds organised. The male plaintiff was unable at that stage to give Mr McCrohon a date when he would receive payment but added that the plaintiffs were prepared to give some sort of security.

31. Also about 1 April 2003 during a telephone conference between the plaintiffs, Ms Perry and Mr McCrohon the latter emphasised that he needed to be paid. The male plaintiff replied that MBP would be paid by the end of the month. By then it was apparent that the plaintiffs would need to commence court proceedings, retain counsel and seek interim orders for the protection of Cool Palms from actions taken by Beale or at his instigation.

32. Mr McCrohon stated that no brief was to go out until funds have been received on account of counsel's initial review of the matter.

33. On 4 April 2003 $5000 was remitted on behalf of the plaintiffs to the defendants on account of the costs and disbursements from T M Skelly.

34. On 22 April 2003 the Supreme Court of Queensland (Dutney J) granted interlocutory relief to the plaintiffs against Beale and listed the matter for trial in Mackay for 2 days commencing 25 June 2003.

35. On that day Ms Perry requested funds for out of pocket expenses including counsel's fees and agent's fees. The male plaintiff spoke of the funds expected from his insurance claim for damaged goods and his damages for his accident claim. He said that it looked like there would be a hearing date in July 2003 for the accident claim. Ms Kanuth said that Ms Perry replied that the Queensland hearing would be before then and the balance of all fees will be payable in July 2003 but that Mr McCrohon wanted payment before then, if possible.

36 Over the following weeks there were many discussions and communications about the payment of the defendants' costs. In May 2003 the defendants obtained from the male plaintiff an irrevocable authority to his USA attorney for payment of $59,741.41.

37. On 11 June 2003 the plaintiffs had not paid any moneys on account of costs to the defendants despite earlier promises. On that day Ms Perry sent an email to Ms Kanuth that Mr McCrohon would not allow MBP to go to trial and incur barristers' fees for which they were liable unless the fees were covered.

38. Mr McCrohon said that on 16 June 2003 he told the male plaintiff that he must pay the costs arrears and place MBP in funds to meet counsel's fees and other disbursements by the end of the week (20 June 2003), otherwise he would stand down and not proceed to a hearing. Mr McCrohon confirmed his position by his FAX of 17 June 2003. That FAX noted that counsel had refused to accept any financial exposure by accepting a brief upon a contingent or successful outcome basis and insisted that MBP be personally responsible for payment of his fees. That FAX stated that MBP would cease to act if the required moneys were not paid by 20 June 2003 On 19 June 2003 Mr T M Skelly transmitted $29,753 to the defendants on account of counsel's fees and out of pocket expenses, such moneys to be to the credit of the plaintiffs.

42. In MBP's letter of 18 June 2003 to the plaintiffs MBP refer to the "precarious financial position" of the plaintiffs. That letter requires payment of $16,900 on account of counsel's fees and $8,705 on account of their Queensland agent's legal fees. The letter reviews the progress of the matter in some detail and contains a statement of MBP's costs to date and estimated costs and disbursements.

40. About 23 June 2003 Beale sought an adjournment of the Queensland hearing. Despite their initial opposition the plaintiffs on the strong recommendation of their counsel in those proceedings agreed to the adjournment of those proceedings. The hearing was fixed to commence on 24 July 2003.

41. Much reliance was placed by the defendants on the following:

(a) Ms Perry deposed to a conversation on 30 June 2003 in which she told the plaintiffs that MBP's fees had hit $60,000 and that Mr McCrohon required immediate payment. She explained that with an expanded hearing more funds were required. She explained the anticipated additional costs. The plaintiffs referred to the funds they expected to receive. Mc McCrohon was far from satisfied when matters were reported to him.

(b) On 2 July 2003 Mr McCrohon and Ms Perry held a telephone conference with the plaintiffs and the two sons of Ms Kanuth. Mr McCrohon stated that there was over $60,000 owing in unpaid costs and that he required payment of his fees in full without further delay or excuse. He also required another $18,000 on account of counsel's fees for the 6 day hearing, plus the Queensland agents' fees and MBP's costs of going to a hearing. He added that he wanted to know how the plaintiffs were going to pay him or he would cease to act. Mr McCrohon raised other matters. (Remarkably, Mr McCrohon's demands were not followed by a prompt written demand or request).

(c) While there were differences in the recollection of Ms Perry and Mr McCrohon as to what was said by Mr McCrohon both agree that he insisted upon being paid all outstanding MBP's fees as well as outstanding and anticipated counsel's fees and the Queensland agent's fees. (Mr McCrohon gave a sanitised version of what he said and omitted the abusive statements he made).

(e) Mr McCrohon stated that he said:

"... If it is only a matter of a few weeks more then I will agree to give you more time but I must be paid before the hearing."

and

"I will need to be kept informed of all issues relevant to payment of our fees. You must find the money for my fees or I will have to stand down and I want my out of pocket expenses covered by way of payment to my trust account."

Mr McCrohon said that the male plaintiff replied, "Okay, that's fine".

Ms Perry recorded words used by the male plaintiff to the same effect.

(She said that the matter deteriorated in further argument with the male plaintiff and Mr McCrohon yelling at each other.)

(e) On 18 July 2003 Mr McCrohon told the male plaintiff that unless MBP's arrears of costs were paid and funds were paid into the firm's trust account to pay the firm's anticipated costs and disbursements for the hearing MBP was not going to proceed. It was on that day the male plaintiff told MBP that his accident claim was going to be heard possibly in December 2003.

42. Counsel for the defendants pointed out that in para 35 of her affidavit of 27 October 2006 Ms Kanuth agreed that the following matters were said during the 2 July 2003 telephone conference by Mr McCrohon:

(a) How are our fees going to be paid. You must find money for my fees or I will stand down. I also want more money paid into trust for the out of pocket expenses.

(b) The hearing is now going to run for six days and we need another $18,000 for Counsel plus more for preparation, money for [Queensland agents'] fees and my fees up to date.

43. Ms Kanuth said that the male plaintiff responded that Ms Perry told them that the matter was ready to go to trial and MBP had all the money in for out of pockets and that as to fees MBP had the irrecoverable authority. Ms Kanuth stated that Mr McCrohon responded:

"All the costs have increased. I need more than that authority. If you can't get the money in here I will cease to act and so will [Queensland agents] and [counsel].The trial won't go ahead.

(The authority was an irrecoverable one addressed to USA Attorney of Mr Harith to pay the proceeds of an accident verdict to MBP).

Ms Kanuth said that Mr McCrohon was screaming down the phone.

44. On 18 July 2003 MBP (per Ms Perry) sent a FAX to the plaintiffs advising that there appear to be significant changes to the defence and counter claim by Beale. She confirmed that the length of the hearing had been extended from 3 days to 5 days and possibly 7 days. This would involve a substantial increase in the cost of the hearing. The FAX continues:

"As you will be aware [counsel] has agreed to conduct the hearing on a speculative fee basis ie, his fee will not become payable until conclusion of the hearing when your property has been recovered. His fee however will remain at $3,000 per day. Accordingly, as the hearing will be approximately four days longer his fee will increase by additional preparation as well as an additional $12,000 hearing fees. Similarly our fees will increase and those of [Queensland agents] will increase as an agent must appear to instruct counsel."

45 The FAX refers to aspects of the plaintiffs' financial position and enquires how they propose to pay the substantial legal fees. The FAX states that these matters will have to be dealt with prior to the hearing.

46 The FAX incorrectly states the position as to counsel's fees and does not state the additional amount which has to be paid before the defendants will continue to act for the plaintiffs.

47 On 21 July 2003 Ms Kanuth sent an email in reply stating, inter alia:

"As to your questions about payment of lawyer and barrister fees ... we will be paying [counsel] and [Queensland agent] as soon as the Cool Palms mortgage is finalized ... so we have paid all of your out of office expenses as we talked about when we were offered the deal from...Peter McCrohon."

48 On 18 July 2003 MBP (per Ms C Perry) sent counsel a FAX. Amongst other things it requested counsel to "let me have a revised cost agreement setting out your fees and the basis upon which payment will be required." The FAX continued:

"...I note that you have agreed to take a balance of the hearing on a speculative fee basis."

49.. On 22 July 2003 MBP (per Ms C Perry) apparently sent the Queensland agents an email with a copy to counsel. It refers to a telephone attendance on counsel. The email states, inter alia:

"He is happy to accept we have $15K – he will spec the balance of the matter. Says he hasn't done that in all his years of practice but does not feel we can do anything else at this point."

50. On the morning of 22 July 2003 a conversation occurred between counsel, Mr McCrohon, Ms Perry and a representative of the Queensland agents. Counsel has relevantly summarised a number of matters. His FAX of Tuesday, 22 July 2002 states, inter alia:

"I wish to confirm a number of matters so that I may consider my position:

1. That you informed me that you had been 'misled' by the clients with respect to meeting their obligations to your firm concerning fees in that a number of statements had been made to you by the clients which have not been fulfilled.

2. That accordingly your firm would not be prepared to agree to pay my fees with respect to the forthcoming trial.

3. That your firm held approximately $15,000 in its trust account with respect to fees already incurred by me but not yet rendered, but that outside of that amount your firm would not consider itself liable for any fee which I might render.

4. That you had informed the clients of your position and that they had agreed to execute certain forms of security sufficient for your firm's purposes.

5. That you had advised the clients that they should take independent legal advice with respect to those securities.

6. That irrespective of the execution of those securities you could not agree that your firm would be liable for my fees.

7. That you would, as a 'side' arrangement between myself and you see to it that your firm's interests were not preferred over mine.

It is most disappointing that I should be informed of this matter at this late juncture. The trial is of course due to commence on Thursday.

I, of course have no entitlement to seek payment of my fees from either your firm or the client. Ordinarily a counsel would proceed upon the basis that his instructing solicitors will stand for his fees. For the reasons you have outlined, your firm cannot agree to the usual or standard practice.

I am concerned that the clients may ultimately be in a position to set aside any agreement entered into today by reason of the circumstances which they face, i.e. their solicitors withdrawing and an impending trial being adjourned.

I am not yet aware of the full terms of the proposed documents to be executed by the clients but it would seem clear that none of those documents can in any way secure my fees or provide any legal entitlement for me to pursue them.

Accordingly, I propose to seek a ruling from the Queensland Bar Association as to my position. To that end would you please confirm the substance of our conversation is that set out above or alternatively, by immediate return fax, provide your understanding of what was discussed.

Could you please for my benefit the agreement (sic) that you now have with the clients and the respects in which that agreement protects your firm with respect to its costs.

In the interim, I advise that I will today complete the Reply and Answer and the outline of proposed evidence to be called by telephone. However, I cannot see that I can devote any more time and resources to this matter until the position is clarified."

51. On 22 July 2003 MBP sent two FAXES to counsel. They read:

"I refer to your fax received today and respond as follows. I adopt your paragraph numbering.

1. Correct. The use of the word 'misled' is used in its technical sense in that they have made representations concerning the payment of certain monies and no monies have been paid. I accept that the clients did not intend to mislead me in that they told me untruths. I do however believe that more could have been done to make good such representations. The clients have failed to comply with the terms of our written cost agreement.

2. Correct to the extent that I do not hold monies in my trust account to fund such payment . At the present time I am informed by my partner Chris Perry that there is some $15,000 in my trust account on account of your present unpaid and pending fees. I will not indemnity you in respect of any excess amount. If future monies are deposited into my trust account on the basis that they are to be applied in payment of your fees, then I will apply such monies. The personal recourse of this firm, in the absence of signed security documentation from the Clients, is limited to monies that I hold in trust and which I am properly authorised to apply in payment of your fees.

3. Answered by 2 above.

4. Correct.

5. Correct.

6. My statement in paragraph 2 above applies. If however the clients

(a) execute enforceable security documents and if pursuant to those documents my fees and disbursement are paid in full, or

(b) if the Clients otherwise pay the whole of my fees and disbursements,

then, after first payment of enforcement expenses, I will apply such monies in a non preferential manner and on a pro rate basis, in payment of your fees and to the payment of my other fees and disbursements.

As such, recourse is limited to the funds in my trust account which have been allocated to your fees and once they are exhausted, recourse is limited to a pro rata payment of monies received from the clients or from the exercise by me of securities. If I am required to enforce securities then my enforcement costs will be paid in priority to the payment of fees owed by the clients to this firm and to you.

7. See above.

Your disappointment is to be regretted but the writer was not aware that you were not aware of the situation. I suggest that you raise your disappointment with my partner in an appropriate manner

I cannot speak to your entitlement at law but if what you say is the case then clearly it is a matter for your association and the relevant regulators.

A solicitor's liability for fees is a contractual matter and I cannot agree to an indemnity when I am not in funds to meet it. To do so is bad business and I am not my client's risk financier.

Your concerns about the clients setting aside the security agreement may, I suggest, be more illusory than real. My firm does have a particular 'fruits of action' lien. The proceeds of the litigation in this case is either title to the real estate or a declaration as to their rights as tenants in common. Proceeds is not limited to a sum of money but means, in my view, the benefit of the litigation. My equitable lien and has priority (sic) ranking ahead vis a vis other completing encumbrancers in the absence of notice.

I am currently preparing a Deed of encumbrance and mortgage whereby clients contractually confer security over their interest as tenants in common and alternatively, over the property. This deed requires the clients to enter into a Queensland mortgage that complies with the Queensland Code for consumer mortgages.

Once this has been finalised I will send it to you for your information."

and

"Further to your email and our telephone conversation please find enclosed Deed of Security for Legal Costs and proposed Queensland collateral mortgage.

As discussed, I hold a reasonable belief that for the reasons explained to you that we will be paid by the Clients, either by enforcement of the securities, but more likely voluntarily.

As explained, I do not believe that the clients are dishonest or that they have intentionally misled my firm. If I thought this I would stand down immediately.

You have raised the issue of timely disclosure. I have no direct knowledge but now after the end of a busy and irritating day, I have had the opportunity to discuss this issue with my partner. Chris requires that I enclose the copy text of an email which she says she and the clients rely on.

The reality, as I perceive it, is that if we all fail to move forward when there is a reasonable and sensible expectation that we will all be paid (although not immediately but, on my best estimate, within a reasonable period) will raise a number of consequences for all parties. The clients are quite happy to sign the security documents and as I previously advised, I will use my best efforts to administer my rights as mortgagee under the security if required to do so.

I remind you that we have no right of appearance in your jurisdiction and would respectfully suggest to you that sometimes, perceived commercial risk is best managed rather than avoided."

52. In the evening of 22 July 2003 counsel sent this email to MBP:

"I have sought a ruling from the Bar Assn with respect to the matters canvassed in our correspondence of today. They have ruled that I am entitled to return the brief and, in the light of how this issue was effectively concealed from me, I am minded to take that course. I am concerned however about the impact on the clients, albeit you make it clear that they have not met their obligations to you. I will complete the reply to the extent possible – in that regard I have not yet obtained instructions with respect to the particulars provided yesterday. You should canvass the prospect of obtaining new counsel – my fees to date will be invoiced tomorrow and would require payment before new counsel are retained. As to the settlement offer – there are I think real prospects if we could perhaps obtain something over the amount now offered, but I will discuss that with you tomorrow. I will travel to Mackay as that is now arranged and at no further cost to you. If I can I will attempt to settle the case if that is what is wanted. I will be in chambers tonight finishing the pleading."

53. On the morning of 23 July 2003 MBP (per Mr McCrohon) sent counsel an email in which Mr McCrohon asserted that prior to his telephone call on 22 July 2003 counsel had informed Mr McCrohon's partner (as evidenced in the emails sent to counsel on 22 July 2003) "that you would take extra days on 'spec'. 'Spec' of course means that you get paid if you win". Mr McCrohon asserted that counsel had made no enquiry, retraction or change of stance until the morning of 22 July 2003. Counsel did not accept Mr McCrohon's assertions. There is no direct evidence of the making of the alleged speculative fee arrangement.

54. On 22 July 2003 the Queensland agents sent a FAX to MBP requiring $5000 to be transferred to the trust account of the Queensland agents and confirming that they were not prepared to act for the plaintiffs directly and would cease to act immediately in the event that MBP ceases to act.

55. Ms Perry, in her affidavit of 25 July 2003 in the Queensland proceedings in support of her application for an adjournment of the hearing of those proceedings and, after detailing the history of the matter, in summary told the Court:

(a) On 22 July 2003 Mr McCrohon telephoned the male plaintiff and after remarking that the plaintiffs had not paid him (McCrohon) as promised stated that if he was to continue he would require the plaintiffs to enter into a Deed of Security for Legal Costs and a Mortgage. The male plaintiff agreed. Mr McCrohon summarised the terms he required and told Mr Harith that Ms Perry would bring the originals to Mackay and if the Deed was not signed and his conditions met she would be on the next plane home the same day.

(b) On 23 July 2003 Ms Perry delivered the documents provided to her by Mr McCrohon to the plaintiffs on the afternoon of 23 July 2003 (Mr McCrohon had previously told her that if the plaintiffs signed the documents he would consider providing counsel with the indemnity he required). On handing the documents provided by Mr McCrohon to the plaintiffs she advised them that they needed to obtain independent legal advice. There was no Chamber Magistrate in Mackay.

(c) On the evening of 23 July 2003 the plaintiffs told Ms Perry that they had been to see three solicitors and none of them would sign the independent certificate. Mr Harith said that he would sign the document but write underneath his signature "signing under duress".

(d) As there was less than 12 hours to the hearing and that in the light of the comments of Mr Harith and the plaintiffs' inability to obtain legal advice she could not let them sign the documents.

(e) Mr McCrohon told her, by telephone, that MBP could not offer counsel any form of indemnity and that he had confirmed that he had withdrawn counsel's brief. Counsel, who had also travelled to Mackay, indicated to Ms Perry that he would appear on 24 July 2003 to advise the Court of his withdrawal.

(f) She had spoken with Mr McCrohon. An adjournment would give the plaintiffs time to give proper consideration to the security documents, negotiate any changes they require and obtain legal advice. Sufficient funds would need to be borrowed to secure all of counsel's, agency and MBP's fees. If this could be achieved Mr McCrohon would continue to act. She did not have authority to appear on anything other than an adjournment application. He wanted her back in Sydney on the following day.

(g) On the morning of 25 July 2003 Ms Kanuth informed her of numerous overnight telephone discussions. Ms Kanuth was of the view that funds could be arranged within 10-14 days.

(h) The case was complex and warranted the engagement of an experienced junior counsel or a junior silk. She (Perry) was not capable of conducting the matter. Fresh counsel would need a week to become familiar with the documents, facts and issues in the proceedings.

56. There was a hurried attempt to arrange a mediation and one was held on 24 July 2003 but there was no settlement. The defendant was represented by senior and junior counsel.

57. On 25 July 2003 Dutney J granted the plaintiffs' application for an adjournment and fixed the hearing to commence on 15 September 2003. Costs were reserved.

58. Ms Perry said that she did not in any way advise the plaintiffs of the risk of the actual cost order that was ultimately made because she had never had any experience of such a costs order being made nor had she read any case where a costs order along those lines had been made and it was not within what she had anticipated might occur. That may be so but in the circumstances of the present case it should have been anticipated that any adverse costs order would result in the plaintiffs having to pay a substantial amount.

Costs Agreement

59. Before turning to the more general arguments on liability advanced by the parties it is necessary to refer to the Costs Agreement. Although the plaintiffs never signed the Costs Agreement which was sent to them it was not suggested that it was inoperable or inapplicable. The defendants frequently referred to it in correspondence and during discussions and the plaintiffs did not suggest in the evidence given before me that it did not apply.

60. Clause 1.3 relevantly reads:

"It is possible that we will incur Client Expenses on your behalf which we will ask you to pay ... We are under no obligation to incur Client Expenses unless you have first paid monies into our trust account on account of such anticipated Client Expenses. Client Expenses do not include MBP Legal Costs or MBP Legal Disbursements. Client Expenses include barristers fees, court filing and service fees, costs of non-legal external consultants and the costs of other experts reports."

61. Clause 2.1(1) states that MBP will send the plaintiffs regular interim invoices for MBP's charges and expenses. Cl 2.1 (2) reads:

"Our invoice must be paid in accordance with our invoice terms, namely, 14 days from the date of invoice. If there is a failure to pay the whole or part of our invoice and there is not in place an agreed arrangement for the payment of our invoice then we reserve the right (at the discretion of the partners of the firm) to withhold all legal services (regardless of the exigencies of the matter) until our financial relationship is such that we are prepared to continue with the matter".

62. The defendants stressed the words "we reserve the right ... to withhold all legal services (regardless of the exigencies of the matter) ..."

63. Clause 2.6 provides:

"(1) If any of our charges and expenses are unpaid in relation to any instruction where we act for you, including any instructions where we act at your request and on your account for any company trust in which you have an interest or a potential entitlement, then we are entitled to cease work not only on your matter but also in respect of any matter in which we are involved relating to such company or trust. In this event our normal solicitor's lien operates not only in respect of the papers, documents and other material in our possession relating to your instruction(s), but also to the papers, documents and other material in our possession in respect of any matter in which we are involved relating to such company or trust.

(2) ..."

64. The defendants submitted that cl 2.1(2) of the Cost Agreement entitled them to cease to act if the plaintiffs failed to comply with the payment terms and that the defendants were entitled to stand down at any time, "regardless of the exigencies of the matter".

65. The defendants submitted that the requirement in cl 4.2(1) "to give [the plaintiffs at least 14 days notice of our intention to terminate our Agreement ..." related to termination of the agreement, not ceasing to act. The clause spelt out the consequences of termination. It also gave the plaintiffs the right to terminate the agreement. In both instances the plaintiffs had to pay MBP's charges and expenses incurred up to the time of termination.

66. The defendants accepted that notwithstanding their right to "stand down" and the continued breaches by the plaintiffs both in terms of the payment of invoices requiring payment within 14 days and the subsequent promises to pay by the plaintiffs, the defendants continued to provide legal services in anticipation of receipt of money. That money was not forthcoming prior to the 24 July 2003 hearing.

67. The plaintiffs in addition to relying on cl 4.2(1), and especially the provision requiring at least 14 days notice of intention to terminate, also relied on cl 1.3(2) which reads:

"If we engage a barrister to provide supplementary or confirmatory advice (including advocacy) we will, if time and circumstances permit, consult you first as to the terms of that barrister's engagement and you will be asked to enter into a fee agreement directly with the barrister."

68. The plaintiffs complained that there was no consultation about terms of the engagement and that they were never asked to enter into a fee agreement directly with the barrister. The plaintiffs' submitted that the obligation on the defendants to consult about the terms of the barrister's engagement included an obligation to consult about any proposed changes in the terms.

69. The Costs Agreement must be read as a whole. There are a number of questions to be considered:

(a) What happens where an invoice is rendered by MBP, 14 days elapses, payment is not made, no written notice of ceasing to act or ceasing to work by MBP is given and the day of the commencement of the hearing arrives? Do the words "regardless of the exigencies of the matter" entitle the defendants at that late stage (or even during the hearing) to withdraw, cease to act or stand down or to attempt to vary usually understood terms of counsel's engagement that MBP will be responsible for payment of counsel's fees. (In the present case matters came to a head 2 days before the proposed start of the trial. I have given an example at one end of the spectrum). After the words "we reserve the right" I would imply the words "on reasonable notice." There could still be exigencies if reasonable notice were given.

(b) There could be a genuine dispute as to the amount of an invoice including the work done, its necessity and the amount claimed for the work done. What happens if this occurs?

(c) While cl 2.6 proceeds upon the basis that some of MBP's charges and expenses are unpaid are MPB entitled to case work without giving reasonable written notice of their intention to do so to the plaintiff?

(d) One of the factors which triggers the operation of cl 4.2(1) is the plaintiffs failing to pay MBP's bills. At least 14 days notice of MBP's intention to terminate the Agreement must be given. Substantially the same factor gives rise to the right to withhold all legal services (regardless of the exigencies) under cl 2.1(2). While different remedies are provided in the two clauses both the withholding and termination would lead to equally disastrous consequences for the plaintiffs.

69. Since at least 1832 a solicitor has had to give reasonable notice to the client if the solicitor desires to quit his client where the client has not furnished the solicitor with funds for counsel's fees: Hoby v Built, infra.

70. In my opinion the Costs Agreement does not have the effect of displacing this long standing principle and its application by analogy in the circumstances of this case.

71. Although UCPR 7.29(2)(a) does not apply to the present case it requires in the case of proceedings for which a date of trial has been fixed, a solicitor to give at least 28 days notice of his intention to cease to act for a party. Such a notice would have to be in writing.

The Plaintiffs' Case

72. The plaintiffs pointed out that on 1 April 2003 Mr McCrohon stated that taking security over Cool Palms was not a satisfactory option as the plaintiffs did not have title to the property yet, that property was the subject of a Deed of Security for Legal Costs.

Reasonable Notice & Security Points

73. The plaintiffs' submissions focussed on three points which emerged from the events of 22 July 2003.

1. Mr McCrohon changed the terms of counsel's engagement. Counsel had been operating on the basis that he could look to MBP for payment of his fees. Mr McCrohon understood in the absence of an express variation in the terms of his engagement, counsel was entitled to look to MBP for payment of his fees. Mc McCrohon made it plain to counsel on 22 July 2003 that he could not look to MBP for payment of his fees.

2. Mr McCrohon on 22 July 2003, when the requisite moneys had not been deposited by or on behalf of the plaintiffs in MBP's trust account required security over Cool Palms. This was a change from his 1 April 2003 position. The problem lay in the late change in circumstances where there was insufficient time for the plaintiff to consider the Deed and obtain independent legal advice. The Deed was not made available to the plaintiffs until after 2.35pm on 23 July in Mackay. Ms Perry realised and accepted that the Deed could not be validly executed by the plaintiffs in the available time. Without valid execution of the Deed Mr McCrohon withdrew counsel's brief.

3. Mr McCrohon had, in varying the terms on which counsel was briefed and imposing a mandatory requirement for security made two important and fundamental changes to the previously existing arrangement.

74. The plaintiffs submitted that if a solicitor seeks to cease to act for a party he must give reasonable notice of his intention to do so. The solicitor must not leave it to the last minute to do so and thereby leave a party, being his client, in a situation where that client is forced to seek an adjournment or prudence requires him to do so.

75. By analogy the plaintiffs submitted that the solicitor must not by a late material variation in the usually understood terms of counsel's engagement or briefing by a solicitor precipitate a situation whereby counsel withdraws from the hearing of the proceedings two days before the hearing is appointed to commence so that the client is placed in a situation where prudence requires that client to seek an adjournment. The plaintiff contended that any action taken by a solicitor precipitating the withdrawal of counsel from the hearing of the proceedings, even for good reason, must be taken reasonable time before the hearing so that the client can engage fresh solicitors and fresh counsel and the hearing can proceed. I exclude the case where for reasons of professional propriety counsel and solicitors are unable to proceed. I also exclude the case where a client expresses a lack of confidence in the counsel briefed, or the solicitor.

76. In the present case, if at the beginning of July 2003 Mr McCrohon had told counsel that MBP was not prepared to be responsible for payment of his fees and counsel had then withdrawn, that would have led to a different situation.

77. I have not overlooked that between 25 June 2003 and 18 July 2003 there had been changes to the Defence and Counterclaim and that there had been an increase in the anticipated length of the hearing and consequently in the anticipated costs and expenses of the hearing.

78. The gravamen of the plaintiffs' complaint lies in MBP not telling counsel until 2 days before the hearing was due to start that MBP would not be responsible for the payment of his fees. That hearing was to take place in Mackay and involved counsel having to travel from Brisbane for the hearing as well as others travelling there.

79. The plaintiffs submitted that it was apparent from the correspondence of 22 July 2003 between Mr McCrohon and counsel that Mr McCrohon was surprised when counsel withdrew. At T93 Mr McCrohon said that he did not expect counsel to withdraw the way he did although it was a possibility. (T93)

80. The plaintiffs further submitted that the requirement of MBP that the plaintiffs give security over Cool Palms was irrational. It would not assist if the plaintiffs lost as they did not have title. If the plaintiffs won the solicitors would have an enforceable lien over Cool Palms.

81. Too much importance should not be attached to the requirement for security over Cool Palms. That was a secondary matter. Even if the Deed had been signed, counsel had withdrawn. He felt that by not being told of the fee position until two days before the hearing there had been a breakdown in the relationship of trust etc between counsel and instructing solicitor.

82 Senior counsel for the plaintiffs accepted that probably on 1 July 2003 MBP could have said to the plaintiffs that as MBP was responsible for payment of counsel's fees MBP would not accept that exposure unless MBP was put in funds to meet those fees. The plaintiffs submitted that MBP did not do this at any time up to 22 July 2003. MBP would probably have had to tell the plaintiffs that if those funds were not deposited within 5 to 7 days in MBP's trust account, MBP would withdraw.

83. The plaintiffs pointed out that in MBP's FAX of 18 July 2003 although there was mention of further expenses being incurred there was no demand for payment or a further contribution. The plaintiff also submitted that there was no demand in the documents from 18 June to 22 July 2003 either for a payment or for a contribution to the trust account to cover fees.

84. The plaintiffs submitted that it was the sudden change of position at the very end that ultimately caused the adjournment. Reasonable notice had to be given to counsel that he could no longer look to MBP to be responsible for payment of his fees.

85. The plaintiffs relied on Hoby v Built (1832) 3 B & AD 350 where it held by a bench of four judges that an attorney, retained to conduct a cause at the assizes, cannot abandon it, on the ground of want of funds without giving the client reasonable notice. The attorney on the Saturday gave notice to his client in respect of the following Thursday, the commission day, that he would not deliver briefs, unless he was furnished with funds for counsel's fees. Those funds were not furnished and counsel was not instructed. A verdict was passed against the client. An action against the attorney for negligence was upheld. Lord Tenterden CJ put the matter thus:

"If an attorney desires to quit his client, he must give him reasonable notice. It was left to the jury as a fact to say whether reasonable notice was given ... and they have found that it was not."

86. The plaintiff also referred the Court to Heslop v Cousins [2007] 3 NZLR 679 at [157] – [165] and Jackson v Powell on Professional Negligence 1992 at p 384 (para 4 – 132).

87. Ms Perry offered to counsel to be personally responsible for the payment of his fees. The plaintiffs submitted that I should infer that she conceived there had been a change of position by Mr McCrohon on behalf of MBP. Counsel naturally did not accept Ms Perry's offer. She believed that the plaintiffs had strong prospects of success and she was sympathetic to the plight of the plaintiffs. Ms Perry had probably proceeded on the basis that counsel was prepared to wait until the conclusion of the hearing for payment of his fees. In her mind upon the conclusion of the hearing an order would be made for the recovery of the property. She did not regard the plaintiffs being unsuccessful as a realistic possibility. In retrospect she could point to the evidence of Beale to which Dutney J referred early in his judgment. She was probably correct in her assessment. Mr McCrohon was probably concerned a little about the prospect of losing, but more about MBP's potential liability and being out of pocket for some months.

Non Advice Point - Costs

88. It was common ground that the defendants told the plaintiffs that they (the defendants) were not admitted in Queensland. The plaintiffs' complaint was that the defendants did not tell them of the consequences of their non admission, namely, that some of the costs of the work they did (other than the duplicated work) would not be recoverable.

89. The plaintiffs relied upon the principle appearing in Re Felton (Maxwell J) 60 NSW WN 16 at 21 that a solicitor has a duty "to place his client in a position where he can, so far as possible be able to fully appreciate the nature and extent of his financial liabilities in the course of litigation ... a full explanation of the possibility that part or the whole of a contemplated expense might not be recovered from an unsuccessful opponent would be a complete protection to the client. ..." It is available as a protection to the solicitor. The explanation to be given by the solicitor will vary with the circumstances.

90. In Jackson v Powell, supra at 4 – 101 it is stated:

"There is generally a duty to point out any hazards of the kind which should be obvious to the solicitor but which the client, as a layman, may not appreciate."

The Defendants' Case

91. Counsel for the defendants submitted that everything in the plaintiffs' case came down to the events of 22, 23 and 24 July 2003 and that it failed to adequately take into account what had happened before that.

92. The defendants relied on these principal matters:

(a) The plaintiffs have moved outside the case they pleaded; and

(b) Well before 22 July 2003 the plaintiffs had been told that prior to MBP appearing in Court for the hearing of the matter the plaintiff had to pay all arrears due to MBP and place MBP in funds to pay the anticipated costs of the barrister in running the case at the hearing, and

(c) the terms of the costs agreement which allegedly entitled them to terminate the retainer for breach regardless of the exigencies of the matter.

93. As to the pleading issues the defendants accepted that in para 11 of the ASOC the plaintiffs had pleaded that the defendants had failed to disclose the effect or possible effect that their non-admission in Queensland and their not being entitled to conduct Queensland Supreme Court proceedings might have on the plaintiffs' rights.

94. As to the reasonable notice point the plaintiffs pleaded in para 14 of ASOC that on 16 and 17 June 2003 the defendants stated to the plaintiffs that the defendants would cease to act on behalf of the plaintiffs on 20 June 2003 unless the defendants' fees totalling $60,727 together with $7000 approximately for work in progress were paid by that time.

95. In para 15 of ASOC it is alleged that shortly prior to 25 June 2003 the trial was adjourned on the application of Beale and fixed for hearing on 25 July 2003.

96. In para 16 of ASOC it is alleged that on 25 July 2003,acting purportedly on behalf of the plaintiffs, the defendants applied for a further adjournment of the trial on the basis that the plaintiffs were unable to fund their legal representatives for the trial.

97. In para 22 of ASOC it is alleged that by making the demand together with the threat to cease to act as alleged in para 14 and by making the adjournment application as alleged in para 16, the defendants breached the terms of their retainer and specifically the term of the retainer relating to payment which is pleaded in para 7, the tortious duty of care alleged in para 8 and the fiduciary obligations alleged in para 9. Para 22 was denied by the defendants.

98. Senior Counsel for the plaintiffs replied:

" ...the claim made in relation to retainer is pleaded in the statement of claim ... It is pleaded in paragraph 16 and paragraph 22 [of ASOC]. We refer to the adjournment being the breach which is how, in effect, we put it. I've been more refined, obviously, in my addresses, but in our submission it is pleaded."

99. There is no reference in the ASOC in either the facts pleaded or particulars supplied to the events of 22-24 July 2003.

100. The plaintiffs claimed their damages flowed from the adjournment presumably because that led to the orders of Dutney J which gave rise to so much of the damages which the plaintiffs claimed that they suffered.

101. In her affidavit of 25 July 2003 placed before Dutney J on the adjournment application Ms Perry recounted the substance of the conversation between Mr McCrohon and counsel on 22 July 2003 in which Mr McCrohon declined to be responsible for the payment of counsel's fees and the events surrounding the Deed of Security for legal costs and a mortgage. Her affidavit of 18 March 2008 in these proceedings and the documents exhibited to that affidavit referred to the events of 22 – 25 July 2003 as well as the events which occurred before and after those days.

102. Mr McCrohon's affidavit of 19 March 2008 also dealt with the events of 22-24 July 2003. He exhibits the FAX of 22 July 2003 from counsel and his FAX of that date in response.

103. In his opening address Senior Counsel for the plaintiffs referred to the events of 22 – 25 July 2003. He referred with emphasis to what he described as the two late changes, first, MBP would not be responsible for payment of counsel's fees, and secondly the requirement that the plaintiffs execute in hurried circumstances when there was insufficient time to obtain the required independent legal advice, some rather complex documents.

104. It was plain from the way the case was conducted by the plaintiffs and fought by the parties that the events of 22 – 25 were of importance. The defendants also relied heavily on the terms of the retainer, their frequent insistence on being paid the moneys due to them and funds being deposited in their trust account to cover the fees of counsel and their disbursements including the fees of their Queensland agents.

105. The defendants contended that the plaintiffs had been given reasonable notice of the defendants' intention to cease to act for the plaintiffs if they did not pay MBP's costs arrears and put MBP in funds to meet counsel's fees and the Queensland agent's fees.

106. The defendants relied on the FAX of 17 June 2003 from Mr McCrohon to the plaintiff that prior to MBP appearing in Court for the hearing the plaintiffs had to pay all of the costs arrears of MBP and place MBP in funds to pay the anticipated costs of the barrister in running the case at the hearing and that, if these requirements were not met, the firm would cease to act as of 20 June 2003. $29,796 (the equivalent of US $20,000) was paid on 19 June 2003.

107. The defendants also relied on the statements by Mr McCrohon on 2 July 2003. That telephone conference was a tumultuous affair. At the start of her file note of 2 July 2003 of the conference call Ms Perry has written: "Lengthy heated conversation." The file note records that Mr McCrohon required payment of counsel's fees of $18K and the Queensland agent's fees and the costs of MBP.

108. It also records "US $30K due from insurers, US$10K should be able to be advanced by boys. Will speak to friends about a loan."

109. I have earlier referred to the versions of the conversations on 2 July 2003 and Mr McCrohon's sanitising of what he said and the manner in which he spoke. Given the way in which Mr McCrohon spoke and behaved it is difficult to know how much reliance to place on what was said by Mr McCrohon on this occasion.

110. On 14 July 2003 Ms Kanuth sent Ms Perry an email suggesting a settlement proposal, referring to a number of factual matters and seeking Ms Perry's views on the proposal. There does not appear to have been a response to that email. It could have been regarded as unrealistic.

111. It appears that from 2 to 18 July 2003 preparation of the plaintiffs' case by MBP proceeded as they dealt with the amendments to Beale's pleadings and the enlargement of his case against the plaintiffs.

112. As previously mentioned, relations between the plaintiffs and Mr McCrohon became even more strained on 18 July 2003 after the male plaintiff advised Ms Perry that the insurance moneys from his accident claim would not be coming through as anticipated as hearing dates for his accident claim would be fixed on 23 July 2003, possibly in December 2003 and she advised Mr McCrohon. Ms Perry records in her file note of the telephone attendance, "PEM will go ballistic". Ms Perry's file note indicates that she raised whether there were other means of payment and that the plaintiffs were "to try and sort out."

113. Mr McCrohon on being informed of this development telephoned the male plaintiff and demanded payment.. Ms Perry has recorded "PEM & Toni heated debate. Toni to get back."

114. The defendants submitted that by no later than 17 June 2003 they had made their position clear that certain moneys, their arrears of costs and funds sufficient to cover counsel's anticipated fees, had to be paid before any hearing. They further submitted that on 2 July 2003 they had made clear to the plaintiffs that they had to pay MBP's costs to date, and sufficient funds to cover counsel's anticipated fees and the anticipated fees of the Queensland agent and MBP's costs of going to a hearing. This was an increase on the amounts required in June 2003.

115. The defendants also relied on Mr McCrohon telling Mr Harith on 18 July 2003:

" ...again you are on notice that unless my arrears are paid and I have funds paid into my trust account to pay my anticipated costs and disbursements for the hearing I am not going to proceed."

116. Throughout the period from February to July 2003 the defendants had sent invoices to the plaintiffs and none had been paid. The defendants relied on the 14 day payment provision. The defendants pointed to the amounts received on account of the plaintiffs between 26 August 2003 and 1 September 2003, namely $6775, $10,000, $12,000 and $23,378.

117. The defendants submitted that if the plaintiffs had complied with the terms of the fee retainer or acted in accordance with the promises they made in June and July 2003 there would have been no need for that which happened on 22-24 July 2003 to occur. The plaintiffs were accordingly primarily responsible for their own financial misfortune due to their breaches of the costs agreement and failing to meet their promises as to the payment of moneys sought by the defendants.

118. As to the defendants not warning the plaintiffs that if they retained the defendants and used Sydney based solicitors in lieu of solicitors admitted to practise in Queensland they would not recover a substantial portion of their costs, the defendants submitted that it was apparent that the plaintiffs had a particular affinity with Ms Perry and she with them and that the plaintiffs were keen to have her handle their case.

119. The defendants also referred to portion of the conversation which occurred during the phone conference on 15 January 2003 in which Ms Perry asserts said:

"We are Sydney CBD lawyers. I am not admitted in Queensland and cannot be the solicitor on the record. I cannot appear in a Queensland Court and have no knowledge of Queensland property law and procedures. I will therefore take longer to perform tasks as I need to reinvent the wheel for each task and will need to get a Queensland agent to perform many of the tasks including acting as instructing solicitor to any Queensland barrister. This will cause a lot of overlap and I doubt you will recover the double handling costs. I can however try and keep such overlap to a minimum but you are unlikely to recover these costs even if you are successful in recovering the property and will try as much as possible to just use them as a post box. There will also be flights and extra time for travelling and couriers etc."

120, Ms Perry said that Mr McCrohon stated:

"At least Chris has knowledge of the migration and FIRB laws as well and brings these aspects to the table which most Queensland property lawyers are unlikely to have."

121. That comment tends to suggest that MBP wanted to keep handling the plaintiffs' case. Mr McCrohon's statement about most Queensland property lawyers was wide ranging. I do not accept that Queensland property lawyers, even if they had no prior knowledge of migration and FIRB laws could not have handled competently those parts of the work of the plaintiffs involving migration and FIRB laws.

122. The defendants pointed out that at no stage in the proceedings had either of the plaintiffs given evidence to the effect that had they been provided with information as to non-recovery of portion of their costs they would not have retained MBP, in particular Ms Perry. Such evidence has little value. The natural tendency is to say that if you had received the advice in question, Queensland solicitors would have been retained. There are also the provisions of s 5D(3) of the Civil Liability Act 2002 (NSW)

123. Ms Perry was aware that the plaintiffs had been living in the United States. A fuller explanation was required as to the costs consequences of MBP conducting litigation in Queensland. They would not have been apparent to the plaintiffs.

124. The defendants knew that the plaintiffs were in impecunious circumstances. So acute were they that they did not lodge a caveat for some time although strongly advised to do so. Costs were an important factor. The plaintiffs had hoped that they would receive moneys in the future about which they were probably over optimistic.

125. If the plaintiffs had been fully appraised of the costs consequences of MBP conducting litigation in Queensland and acted logically, in their financial circumstances, they would have retained Queensland solicitors, possibly based in Brisbane. While I have some reservations whether the plaintiffs would have acted logically especially in view of Ms Kanuth's confidence in Ms Perry, the probabilities are that after a full explanation and consideration of their own finances and reflecting on those they would have retained Queensland solicitors. They were in no position to incur costs which were not recoverable.

Decisions on Liability

126. In dealing with the defendant's submissions I have held that the defendants were in breach of their duty to fully explain to the plaintiffs the costs consequences of the plaintiffs using Sydney CBD solicitors rather than Queensland solicitors to conduct the litigation in Queensland involving land in Queensland.

127. Queensland counsel's late withdrawal from the proceedings was the prime cause of the plaintiffs having to seek the adjournment of the hearing listed to commence on 24 July 2003. Counsel was distressed that he was not told of the fee problem and the proposed change in the arrangement for payment of his fees until 2 days before the date fixed for a hearing to commence in Mackay. In his email counsel states "in light of how this issue was effectively concealed from me". Counsel asserted in an email that there had been an irretrievable breakdown in the necessary relationship of trust and confidence between counsel and solicitor.

128. Counsel was notified much too late that MBP would not be responsible for payment of his fees. If he had been told some weeks earlier he would have been able to return his brief earlier, if that was the course counsel elected to take. If he had returned his brief some weeks earlier and the consequences explained to the plaintiffs, that is, an adjournment of the hearing with an adverse costs order this would have enabled the plaintiffs to renew their efforts to raise finance from their relatives and friends. The subsequent funds raised suggests that this would not have been a forlorn exercise. With a hearing in Mackay and the high costs involved in such a sitting it was important for counsel's position to be clarified at a much earlier date than happened.

129. Ms Kanuth has acknowledged that Mr McCrohon told the plaintiffs on 2 July 2003 that they must find the money for his fees or he would stand down and that he also wanted more money paid into his trust account for counsel ($18,000) and his Queensland agents' fees and that if the plaintiffs did not obtain and pay and deposit the monies required he, the Queensland agents and counsel would cease to act and the trial would not go ahead. However, it seems that no reference was made to the costs consequences of an adjournment or the possible dismissal of the plaintiffs' claim. These are not matters that lay persons could be expected to know. The defendants did not anticipate the possibility of the extent of the adverse costs order that could be made against the plaintiffs but these costs were likely to be substantial. A 5-6 day hearing in Mackay (or Mackay and Rockhampton) was being cancelled and Beale had instructed senior and junior counsel and Brisbane solicitors. The previous adjournment at Beale's request had not involved costs of a similar magnitude. On the understandable advice of their counsel, the plaintiffs had consented in advance to the adjournment in June 2003.

130. If the plaintiffs had been alerted in early July 2003 that if the case did not go ahead on and from 24 July 2003 and they sought an adjournment there was the possibility that an adjournment would be refused and their case dismissed or that an adverse costs order would be made against them that could result in a substantial amount being payable, the plaintiffs would have been able to redouble their efforts to borrow the moneys the defendants required or apply for an adjournment at an earlier date.

131. The matters needed to be brought to a head well prior to 22 July 2003, that is, at the latest by 8 July 2003. The defendants were aware of the limited financial resources of the plaintiffs. In the MBP FAX of 18 July 2003 (per Ms Perry) it was stated that as the plaintiffs would be aware counsel agreed to conduct the hearing on a speculative fee basis, i.e, his fee will not become payable until the conclusion of the hearing when the property had been recovered. This was incorrect and misleading. On one view this appeared to dispense with the requirement for payment of further moneys on account of counsel's fees prior to the hearing and recovery of Cool Palms. At the least the FAX was confusing.

132. In my opinion the defendants failed in their duty to the plaintiffs in altering the terms of counsel's terms engagement 2 days before the hearing in Mackay was due to commence and on the eve of counsel's departure from Brisbane to Mackay and in not bringing matters to a head by not later than 8 July 2003. If matters had been brought to a head by such earlier date and Mr McCrohon had decided to proceed and take security there would have been sufficient time for the plaintiffs to have obtained independent legal advice as to execution of the documents prepared by Mr McCrohon.

133. As to the reasonable notice point I think that the plaintiffs are entitled to succeed in contract on the basis of breach of an implied term of the retainer. If I am wrong in that view the plaintiffs are entitled to rely on the breach of the defendants' duty of care. Hoby v Built, supra was an action in negligence. I accept that solicitors owe fiduciary duties to their clients. It is part of a solicitor's fiduciary duties to advance the interests of the clients and not prefer their own interests. This involves not changing the terms of counsel's engagement at the last minute so as to precipitate the withdrawal of counsel immediately before the hearing and thereby force an adjournment at great cost to the clients. There was a breach of the solicitor's fiduciary duties. Mr McCrohon left me with the impression that he expected counsel to agree to the proposed radical alteration of the terms of counsel's retainer.

134. As to the second point, lack of a full explanation of the costs consequences of the defendants acting instead of solicitors admitted in Queensland acting, it seems from Re Felton, supra, that this was treated as a breach of the terms of the retainer. The focus in that case was on the extent of the duty cast upon the solicitor rather than the source from which it arose and on what constitutes an unusual expense.

135. Although not of direct relevance to the present case the recently introduced requirement that a solicitor must give a client at least 28 days written notice of his intention to cease to act has already proven beneficial. It sharpens the focus of the clients and gives them the opportunity to renew their efforts to provide funds or go elsewhere. The case proceeds to the benefit of the parties and valuable Court time and resourses are not lost. The giving of the Notice brings matters to a head at an early date. The problems previously caused by late withdrawals, including adjournments and costs wasted, are avoided. As this case demonstrates those problems can be acute.

Damages

136. In their Schedule of Damages the plaintiffs claimed:

Amount actually paid by the plaintiffs as a consequence of the setting off of the adverse costs order made against the plaintiffs by Dutney J against the favourable costs order in their favour $100,000

(ASOC 23(c))

Net amount which the plaintiffs would have actually received pursuant to the favourable costs order, but which did not receive because of the adverse costs order $150,000

(ASOC 23(d)).

137. In ASOC para 20(d) it is stated, "The plaintiffs lost the opportunity of recovering their costs from Beale being agreed at $150,000."

138. In ASOC para 20(e) it is asserted that the loss to the plaintiffs as a result of the defendants' breaches as to the July 2003 adjournment was $250,000.

139. The evidence established that Beale was impecunious at the trial in September 2003 and represented himself because he had exhausted all his financial resources in preparing for a trial in July.

140. There was no up to date evidence of Beale's present financial position.

141. In MBP's letter of 18 June 2003, p6, MBP wrote, "As

we understand it John Beale has previously been a bankrupt and may well become a bankrupt again in the future" and "I understand that John Beale's financial situation is not conducive to the likelihood that we will be able to recover your costs."

142. Put briefly, not only am I not satisfied that the plaintiffs would be able to recover their costs of the Queensland proceedings from Beale but it is improbable that the plaintiffs would ever be able to do so. The lost opportunity has no real value. At best it has a nominal value.

143. The plaintiff also put their claim on a second basis. They submitted that as a result of their application for and the granting of an adjournment and the orders of Dutney J the plaintiffs became liable to pay the defendants $250,000. It was immaterial that there was a set-off of $150,000 being the amount due to them by Beale. That was a matter of mechanics. The plaintiffs' liability to pay $250,000 arose from the conduct of the defendants. A distinction has to be drawn between the liability to pay and the manner in which that liability was satisfied. It should not be overlooked that Beale was unable to meet his liability to pay.

144. I take the view that the defendants are liable for the amount the plaintiffs were bound to pay the defendants, namely $250,000.

145. The next item claimed by the plaintiffs was

Difference between the actual amount paid by the plaintiffs for solicitor-client costs charged by the defendants and the anticipated amount of solicitor client costs that would have been charged by solicitors admitted in Queensland.

(ASOC 24(a) $117,823

146. Mr Garret concluded that if the plaintiffs had retained solicitors admitted in Queensland who were practising in Mackay, instead of the defendants, the plaintiffs' solicitor and client costs owed to the Mackay solicitors would have been $189,220 and not $307,043 charged by the defendants.

144. Mr Garret, whose experience, knowledge of costing matters and skill were impressive explained his approach in his affidavit of 26 September 2008:

(a) he attempted to calculate the plaintiffs' solicitor and client costs on the basis that they retained solicitors admitted in Queensland who were practising in Mackay instead of the defendants; and

(b) he started with exhibits MAG (the plainiffs' Standard Costs Bill against Beale) and DJS-5 (Summary of the NSW Solicitors Fees Incurred Based on the Queensdland Supreme Court scale); and

(c) he deleted items that appeared in both MAG1 and DJS-5 that were duplicated services (i.e done by both agent and principal) because had the plaintiffs retained solicitors admitted in Queensland who were practising in Mackay instead of the defendants, there would have been only principal solicitors, no agents and hence no duplicated services; and

(d) he deleted items that appeared in either MAG1 and DJS 5, that were services provided by Sunshine Coast solicirtors, because had the plaintiffs retained solicitors admitted in Queeensland who were practising in Mackay instead of the defendants, the Mackay solicitors would not have had to retain Sunshine Coast solicitors. From Mr Garrett's examination of the files, the work done by the Sunshine Coast solicitors was limited to receiving instructions from the defendants and then in turn giving intructions to agents in Mackay; and

(e) he calculated the costs for the remaining items using the rates specified in his affidavit of 12 January 2007, being the rates charged by a medium sized firm in Mackay which conducts litigation routinely in the Supreme Court in North Queensland; and

(f) Finally, he created an itemised solicitor and client bill reflecting tjhis process, being exhibit MAG 2 totalling $189,220.

148. Mr Garrett agreed that the starting point for carrying out the exercise which resulted in MAG 2 was the bill of costs prepared by Costs Partners in New South Wales. He agreed that some of the entries within the bill of costs of Costs Partners were an amalgamation of a number of tasks into one task on a time basis. He explained that he did not determine the costs on a time basis because of the difficulty of unravelling the overlapping of work. He gave a helpful example at T116, lines 6-13.

149. Mr Garrett agreed that MAG 2 was the result of the exercise that he carried out in trying to determine what a firm of solicitors in Mackay would have charged the plaintiffs had the plaintiffs originally retained a firm of solicitors in Mackay as opposed to the defendants.

150. Mr Garrett said that the exercise could have been undertaken on a time costed basis but it would have been difficult. Mr Garrett stated that while Beale's attorneys charged him on a time not task basis, the costs statement lodged on Beale's behalf was set out in the usual format in Queensland where the items are not bulked together. When Mr Garrett started an assessment of Beale's bill, he (Garrett) could go to the file and identify an item there. However the individual items in Beale's bill were charged on a time based rate. Mr Garrett was aware that Beale was represented by Brisband based attorneys.

151. Mr Garrett agreed that if the plaintiffs had retained Brisbane solicitors some charges would have been required for a town agent closer to Mackay. Mr Garrett also agreed that if the plaintiffs had retained a Brisbane based firm the deductions he referred to in paragraph 29 of his second affidavit of 26 September 2008 (agency fees of Mackay solicitors retained by Sunshine Coast solicitors) should not be made. Mr Garrett assumed that the plaintiffs would retain a Mackay based solicitor and that all of the hearings would take place in Mackay.

152 MBP submitted that even if the plaintiffs had retained a Queensland solicitor there was no evidence to support the contention that such a solicitor would have been a solicitor based in Mackay. MBP also submitted that there were numerous aspects to the transaction, including migration issues, FIRB issues and property issues and that there was no evidence in relation to the experience of solicitors at Mackay in relation to those areas. MBP submitted that Mr Garrett's evidence bore no sufficient relationship to the actual events:

(I) Solicitors in Queensland are free to enter into costs agreements with their clients; such agreements can specify that all work is to be charged on an hourly as opposed to a task basis

(ii) the analysis undertaken by Mr Garrett was based on costs statements, as opposed to a review of the solicitors' files and the actual bills prepared by them and issued to their clients

(iii) there was nothing to prevent Mr Garrett from costing as part of his hypothetical exercise, the defendants' fees on a time cost basis – assuming they had retained a Queensland solicitor.

153. MBP submitted that there was no evidence on which the Court could be comfortably satisfied in relation to the loss that the plaintiffs allegedly incurred if the Court found that the defendants were in breach in relation to the advice they provided relating to the geographic location of a solicitor for the plaintiffs.

154. MBP relied on Mr Beale retaining Brisbane based solicitors and being charged not on a task basis but on a time basis. I did not regard those as powerful submissions.

155. I raised with Senior Counsel for the plaintiffs whether they were entitled to claim for items not connected with the litigation, such as the FIRB application. Senior Counsel accepted that he could not claim for work done in relation to the FIRB aplication. He said (at T183, lines 35-36) "...we do not claim anything that is not connected with the litigation in Queensland, nor could we do so. " Senior Counsel had the understanding that Mr Garrett excluded any items for non litigious work. When MAG 2 is examined this does not appear to be the position. See, for example, Items 29, 32, 73, 75, 77.

156. One confusing aspect is that Exhibit DJS 4, being the party/party bill in NSW assessable form was for $189,288 and the exercise done by Mr Garrett as to the plaintiffs' solicitor and client costs if Mackay solicitors had been retained amounts to $189,220.

157. Ms Perry's affidavit details that MBP did a great deal of work in relation to the plaintiffs FIRB application over many months. Ms Perry also had extended contact with Loan Solutions and Westpac as to the financing of the loan for the property.

158. It was the defendants' contention that all costs incurred up to and including 27 March 2003 were solicitor/client attendances and did not require Ms Perry to be admitted as a solicitor in Queensland because they were not costs of any court proceedings nor should they have had any impact on recovery of costs of the proceedings. That submission is not correct. Up until that time a caveat had been lodged, letters written and a mediation had been held in Brisbane. Proceedings were not commenced until April 2003. It was not until 4 April 2003 that funds were received to enable MBP to obtain counsel's advice. Paras 83 and 85 of Ms Perry's affidavit refer to what amounted to excessive telephone attendances by the plaintiffs upon her.

159. Ms Perry stated that she had not charged the plaintiffs fully for all the time she had spent on their matter.

160. Mr Garrett's exercise, although helpful, gives rise to some problems. While I have found that, if the costs cosequences had been fully explained the plaintiffs should have instructed Queensland solicitors, those instructed could well have been located in Brisbane and this would have involved a Brisbane firm using a Mackay agent. It is probable that the plaintiffs would have been asked to execute a Costs Agreement permitting costs and fees to be charged on a time basis as the arrangements between Beale and the plaintiffs were messy and a little involved. There were also the FIRB and migration issues. The issues raised could also have led to the Mackay solicitors seeking a Costs Agreement permitting time based charging even though task based charging was usual in Mackay.

161. A considerable amount of time was spent by MBP in endeavouring to secure payment of monies for their costs and to put them in funds to meet counsel's fees, Queensland agents' fee and disbursements.

162. While there may well be solicitor/client costs paid by the plaintiffs to MBP which would be recoiverable the evidence does not enable me to quantify the amount which is payable. I have given consideration to making a broad estimate but that would not be fair given that time based charging would probably have to be considered along with the retention of Brisbane based solicitors and isolating the work that was fairly referrable to the Court action.

163 A difficult issue would arise as to any claim for solicitor/client costs as to aspects of the Deed of Security in the light of the events of 22-23 July 23003 and separating these from the Deed of Security which was later executed.

164 On the evidence as it stands I am not persuaded that I should make any allowance for this item as I am not able to quantify the amount that should be allowed with any degree of reliability.

165. The plaintiffs futher claimed:

Decrease in plaintiffs' party/party costs in Queensland proceedings by reason of these costs being converted from NSW assessable form into Queensland taxable form.

(ASOC 24(b) $22,694

166. The plaintiffs delivered a bill of costs (DJS 4) prepared by Costs Partners of the work done by MBP in assessable form according to NSW Rules. It was described as Plaintiffs' Bill of Costs Pursuant to Order of 5 December 2003. It was prepared on a standard (or party/party basis) and was for the amount of $189,288.10. Mr Garrett said that he "prepared the work done by MBP's agents in Queensland into a bill capable of taxation under the Queensland System (MAG 1). Both these bills (DJS 4 and MAG 1) were filed and served. Upon objection by Mr Beale, Registrar Smith of the Supreme Court of Queensland ruled that the NSW bill should be withdrawn and prepared in accordance with the Queensland scale and that the matter then proceed in accordance with Rule 717(7) of the Uniform Civil Procedure Rules.

163. Mr Garrett converted MBP's work in accordance wth the Queensland scale. This reduced the bill to $166,593.35. Mr Garrett stated that task based charging (e.g. items charged close to the Supreme Court Scale) is commonly charged by firms in Queensland and is less expensive than time based charging.

164. In his letter of 9 December 2004 (annexure B to Mr Garrett's affidavit of 12 January 2007) Mr Garrett has written:

"The Registrar has indicated that the costs to be allowed on a party and party basis would be the work carried out if the client had engaged local solicitors.""

165. There is evidence that the two largest firms in Mackay used task base charging as opposed to hourly rates.

166. As to party/party costs (distinguishable from solicitor/client costs) when regard is had to DJS 5 there are some references to FIRB requirements (Items 30, 41, 72-75) The bulk of the bill appears to relate to the Court action and related events which preceded it. Perhaps the FIRB requirements were relevant to the Court action.

167. In my opinion this item of damage flowed from the defendants not fully explaining the cost consequences of using Sydney solicitors rather than local solicitors in Mackay (or possibly Rockhampton) and the difference in charging. The explanation which Ms Perry said she gave during the teleconference on 15 January 2003 was not sufficient. As I understand the position the plaintiffs were, for the most part, living in the Airlie Beach area. I would allow this item of damage.

168. The plaintiffs claimed:

The actual costs paid by ther plaintiffs to Costs Partners for

Drafting the Plaintiffs' party/party costs in the Queensland proceedings in NSW assessable form

(See ASOC 25) $11,774

169. It appears from the affidavit of D J Searle of 2 November 2006 that she engaged NSW costs assessors, Costs Partners to put MBP's Bills of Costs into a form that could be taxed by a Queensland Registrar and that this was done. It was the understanding of Costs Partners that the bill of costs they prepared would be claimed as a disbursement to the Queensdland agents' bill of costs (costs statement) and would be taxed in Queensland. Costs Partners advised, amongst other things, that:

a) the Bill of Costs had been prepared on a party/party basis and costed in accordance with the costs agreement provided by MBP.

b) MBP had discounted some attendances which involved a large number of hours. In some cases they were unable to ascertain which attendance within a claim for numerous attendances was discounted and had drawn the bill at the full times claimed.

c) MBP had in a number of claims for a large number of hours, consolidated the time spent on various work.

d) Queensland has a far more restrictive taxation system than the assessment system in NSW. "However, the fact that a Sydney solicitor was used to undertake proceedings which could have been undertaken by a Queensland solicitor at less expense may well substantially affect the ultimate result ... we recommend instructions be obtained as to whether your clients were fully informed of the consequences of continuing to instruct New South Wales solicitors in relation to the effect this may have on recovery of their party party costs."

170. In her affidavit of 18 December 2006 Ms P L Solomon, a director of Costs Partners Pty Ltd and an experienced Legal Costs Consultant stated that the bill of costs prepared by Costs Partners was prepared prior to the clarification of the costs orders (by Dutney J). The plaintiffs' claim was put upon the highest basis available.

171. The Registrar at Mackay required the NSW bill of costs to be converted into a form that could readily be taxed in Queensland. MBP had nothing to do with the basis on which the NSW bill of costs was prepared. The bill of costs had to be prepared on a basis that could be taxed by the Queensland Registrar. There was no appeal against the Registrar's ruling. Practically, it was going to be very difficult for the Registrar to tax, wiithin a reasonable time, the NSW bill of costs. It was prepared upon a basis on which the Queensland Court did not usually proceed and a large amount was involved. Bulk items had to be split up. The Registrar did indicate that standard costs involved instructing local solicitors. They proceeded upon task based charging.

172. What occurred was an understandable misjudging of what the Registrar would require on a party/party taxation of costs. MBP were not involved. In my opinion this claim should not be allowed. I would distinguish this situatiion from the earlier situation of MBP not fully explaining to the plaintiffs the costs consequences of instructing Sydney rather than Queensland solicitors on the substantive matter.

173. The plaintiffs further claimed:

The actual costs paid by the plaintiffs to Hickey & Garrett for

a) converting the plaintiffs' party/party costs in the Queensland proceedings from NSW assessable form to Queensland taxable form; and

b) objecting to Beale's costs arising out of the adverse costs order made against the plaintiffs including attendances before taxing registrar in respect of objections to Beale's costs.

(ASOC 25) $25,683

174. Separate amounts were not attributed to each item.

175. The Summary of the NSW Solicitors' Fees Incurred Based on the Queensland Supreme Court Scale as Ordered On 9 November 2004 and totalling $166,593 extends over 168 pages. See Exhibit DJS 5. It is part of the Costs Statement. The other part is MAG 1, being the costs of the Queensland agents. Mr Garrett in para 15 of his affidavit of 26 September 2008 stated that the work done (by Costs Partners) in creating exhibit DJS-5 in the first place had been wasted. As to MAG 1 being the costs of the Queensland Agents that extends over 91 pages with the total amount claimed being $229,289.60. .

176. Mr Garrett stated that there was some duplication of the amounts claimed in Exhibits MAG 1 and DJS 5.

177. I have not been able to find in the evidence any statement showing how the sum of $25,783 is made up. There is substantial evidence of the work done, see Exhibits MAG-1. DJS-5 and DJS-3 and the attendances before the Registrar and the Judge.

178. I am not persuaded that any sum should be allowed for item (a) for these reasons:

(1) MBP was not involved in the conversion of or in the preparation of the bill of costs by Costs Partners.

(ii) This conversion did not result from the defendants failing to tell the plaintiffs of the costs consequences of the plaintiffs instructing Sydney solicitors and not Queensland solicitors.

(iii) The conversion resulted from the Registrar stating that on a party/party taxation he would not allow NSW fees on the basis claimed and required the NSW bill of costs to be put into a taxable Queensland form based on task based charging rather than time based charging.

(iv) The bill of costs presented would result in a prolonged and expensive taxation.

179. I would allow a reasonable amount for item (b). Beale's entitlement to indemnity costs arose directly from the application of the plaintiffs for and the granting of the adjournment by Dutney J and his consequent orders.

180. Having reviewed the evidence on item (b) I propose to allow an amount of $9000.

181. I have not overlooked Mr Garrett's letter of 6 January 2005 at pp 73-75 of Exhibit DJS-1. It appears from that that two experienced costs assessors after appearing before the Assistant Registrar and noting his views conferred. Mr Garrett thought that a likely outcome would be a figure in the vicinity of $240,000 or $250,000 for Beale's costs and that the plaintiffs' costs could be as high as $149,000 ($135,000 and $14,000) but a likely outcome would be a figure in the range of $120,000 to $130,000. Mr Garrett reported that at the end of the conference the consultant representing Beale indicated that he would recommend to his client to accept an offer of $100,000 should one be forthcoming from the plaintiff.

182. Ms Searle states that the costs dispute did settle for $100,000 and that this sum was paid to Beale in full settlement of the Costs Orders in his favour after the estimated amount owed to the plaintiffs was deducted.

183. I have noted that Hickey & Garrett was paid $14,300 on 1 October 2004 and $25,300 on 1 February 2005.

184. I do not think that the arrangement reached as to costs in early 2005 affects the liability of the defendants for costs of $250,000 as flowing from the application for and granting of the adjournment brought about by Mr McCrohon's late change of the terms of counsel's engagement.

185. I would award the plaintiffs:
Liability for Beale's costs $250,000

Decrease in plaintiffs' party/party costs $ 22,694
Costs of the plaintiffs (via Hickey & Garrett) of
objecting to Beale's costs arising out of adverse
costs order made against plaintiff including court attendances $ 9,000
$ 281,694

186. The question of interest remains. I propose to stand over the matter to 12 March 2009 at 9.30 am so the interest payable can be calculated and the question of costs argued. The plaintiffs should prepare short minutes and serve a copy on the defendants on or before 10 March 2009 with a copy to my Associate.

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LAST UPDATED:
18 March 2009