Najem v Maatouk [2010] NSWSC 20 (10 February 2010)

Last Updated: 11 February 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Najem v Maatouk [2010] NSWSC 20


JURISDICTION:
Common Law

FILE NUMBER(S):
13621/08

HEARING DATE(S):
16 & 17 September 2009

JUDGMENT DATE:
10 February 2010

PARTIES:
John Najem (Plaintiff)
Peter Maatouk trading as Maatouks Law Group (Defendant)

JUDGMENT OF:
McCallum J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Mr C Taylor (Plaintiff)
Mr MK Rollinson (Defendant)

SOLICITORS:
Sanford Legal (Plaintiff)
Maatouks Law Group (Defendant)


CATCHWORDS:


LEGISLATION CITED:
Legal Profession Act 1987
Uniform Civil Procedure Rules 2005

CATEGORY:
Principal judgment

CASES CITED:
Doyle v Hall Chadwick [2007] NSWCA 159
Sweeney v Australian Securities and Investments Commission [2006] NSWCA 230
Turnbull v New South Wales Medical Board [1976] 2 NSWLR 281
Wentworth v Rogers [2006] NSWCA 145

TEXTS CITED:


DECISION:
(1) The time within which the application for leave to appeal under s 208M of the Legal Profession Act 1987 may be brought is extended up to and including 18 July 2008.
(2) The appeal on grounds 1, 2, 3, 4 and 7 is allowed.
(3) The Certificates as to Determination of the costs assessor dated 7 March 2008 and 14 March 2008 are set aside.
(4) The defendant pay the plaintiff’s costs of the appeal including the application for leave to appeal.
I will hear the parties as to whether a review panel would have power under Subdivision 4A of Division 6 of Part 11 of the Legal Profession Act 1987 to determine the balance of the appeal.



JUDGMENT:

- 25 -

IN THE SUPREME COURT

OF NEW SOUTH WALES

COMMON LAW DIVISION

McCALLUM J

10 FEBRUARY 2010

13621/08 JOHN NAJEM v PETER MAATOUK TRADING AS MAATOUKS LAW GROUP

JUDGMENT

1 HER HONOUR: This is an appeal brought by Mr John Najem against a determination of costs in favour of his former solicitor, Mr Peter Maatouk, by a costs assessor under the Legal Profession Act 1987. An appeal lies to this Court against that determination only by leave of the Court under s 208M of the Act. Leave was granted during the hearing, by consent.

2 Mr Najem operates a taxi base at Campsie. The conduct of that business gives rise to many small claims by Mr Najem arising out of motor vehicle accidents involving taxis owned or operated by him. Over the period of several years leading up to the present dispute, Mr Najem had retained Mr Antoine Sandroussi as his solicitor in respect of those claims and some other legal matters.

3 At some point before 2005, Mr Sandroussi had restrictions placed on his practising certificate following disciplinary action taken against him by the New South Wales Law Society. The restrictions included a condition that he practise only as an employed solicitor. In early 2005, Mr Sandroussi obtained employment with Mr Maatouk in Maatouks Law Group. He took some forty-six files on which he was acting for Mr Najem into that practice.

4 The principal issue raised by the present appeal is whether any of those matters was governed by a costs agreement between Mr Najem and Mr Maatouk and, if so, the terms of any such agreement. First, however, it is necessary to explain the legal and factual context in which those issues have arisen for this Court’s determination.

Emergence of a dispute as to fees

5 Mr Najem claims that he agreed to have his files taken over to Maatouks Law Group only on the basis that the costs agreement he had always had with Mr Sandroussi would continue on the same terms. Mr Sandroussi had always agreed to charge a flat fee for Mr Najem’s small claims (determined by reference to the amount claimed). Further, it had always been an aspect of the arrangement that Mr Najem was billed only upon the completion of a matter. It appears to have been contemplated by Mr Najem and Mr Sandroussi that the funds recovered from the turnover of many small claims would meet Mr Sandroussi’s legal fees from time to time. So far as the evidence discloses, that arrangement continued amicably throughout their relationship until Mr Sandroussi moved to Maatouks Law Group.

6 There was no direct discussion between Mr Najem and Mr Maatouk when Mr Sandroussi took Mr Najem’s files to Maatouks Law Group. All of the relevant negotiations were between Mr Najem and Mr Sandroussi. Mr Najem contends that the effect of those discussions was that the costs agreement with Maatouks would be on the same terms as his previous agreement with Mr Sandroussi.

7 Mr Sandroussi gives broadly the same version of events as Mr Najem. He says that, before taking Mr Najem’s files to Maatouks, he discussed the matter with Mr Maatouk who expressly authorised the continuation of that arrangement. Mr Maatouk appears to accept that he did so “in part” but says that the flat fee arrangement only related to undefended claims or straightforward matters where a negotiated settlement could be achieved at an early stage. However, he does not claim to have had any direct discussion with Mr Najem on that issue.

8 Throughout 2005, Mr Maatouk grew increasingly unhappy with Mr Sandroussi’s performance as an employed solicitor. He began pressing Mr Sandroussi to account for his time and to render fee notes to clients in accordance with time sheets Mr Sandroussi had submitted (under pressure) to Mr Maatouk.

9 In June and August 2005, Maatouks Law Group rendered forty-six separate bills to Mr Najem, apparently one in every matter in which the firm acted for him. The fees charged were purportedly calculated in most, if not all, cases at an hourly rate. The vast majority of the bills were for small amounts without any comprehensible identification of the legal services that had allegedly been provided. The timing of the bills appears to have coincided with Mr Maatouk’s complaints as to Mr Sandroussi’s performance as a fee-earner rather than the achievement of any progress in the claims being conducted on behalf of Mr Najem. At the hearing of the appeal, counsel for Mr Najem contended that, in fact, only one claim had reached completion at that time.

10 Mr Najem refused to pay the amounts billed, relying on his understanding of the agreement he had negotiated with Mr Sandroussi. Mr Sandroussi’s employment with Mr Maatouk came to an end later that year. Since then, Mr Maatouk has exercised a lien over Mr Najem’s forty-six files and it appears that a number of Mr Najem’s small claims have been dismissed for want of prosecution.

The costs assessment

11 On 20 September 2007, Mr Maatouk made an application under s 201 of the Legal Profession Act 1987 for an assessment of the forty-six bills of costs issued to Mr Najem. Before that date, Mr Maatouk had commenced proceedings to recover those costs in the Local Court at Liverpool and had obtained two costs orders against Mr Najem in those proceedings. The application for assessment also sought assessment of the costs payable pursuant to those orders. The proceedings in the Local Court appear to have been adjourned to abide the determination of the costs assessor.

12 As already noted, the bills of costs relied upon by Mr Maatouk sought payment of legal fees charged at an hourly rate. Mr Maatouk contended that there was a written costs agreement to that effect in respect of all but one of the matters in which Maatouks Law Group had acted. He provided the costs assessor with a collection of file copies of costs disclosure letters identifying proposed billing arrangements including an hourly rate at which fees would be charged to Mr Najem. Those letters were presumably relied upon as “written offers accepted in writing or by other conduct” as contemplated by s 184(6) of the Legal Profession Act 1987. However, it is not clear precisely what Mr Maatouk contends as to how Mr Najem allegedly became bound by the fee arrangements disclosed in the letters. In particular, it is not clear whether he contends that he received Mr Najem’s written acceptance of those terms (by signature and return of the original letters) or whether he simply relies on acceptance by conduct. The apparent inconsistency between his reliance on such agreements and his concession that at least some matters would be billed at a flat rate is not explained.

13 Mr Najem opposed Mr Maatouk’s application to have the bills assessed. Specifically, he denied ever receiving the costs disclosure letters relied upon by Mr Maatouk and, implicitly, disputed their authenticity. He contended that the arrangement with Mr Maatouk was the flat fee arrangement negotiated with Mr Sandroussi, namely that for Small Claims Division matters, he would be billed a fixed fee according to the amount of the claim. He also contended that the billing arrangement between him and Mr Maatouk was that he would pay legal costs “upon completion of the matter”. Mr Najem acknowledged that for certain claims, such as claims in the General Division or other legal matters, the arrangement was that he would be billed at an hourly rate.

14 Mr Najem provided the assessor with a copy of an affidavit sworn in the proceedings in the Local Court commenced against him by Mr Maatouk which annexed copies of seven costs disclosure letters from Maatouks Law Group to Mr Najem. Those letters related to seven of the same matters included in the bundle of disclosure letters relied upon by Mr Maatouk, except that the versions put forward by Mr Najem reflect the flat fee arrangement alleged by him rather than disclosing an hourly rate (one of the letters does disclose an hourly rate but that is consistent with the agreement asserted by Mr Najem, because it is not a small claim). Mr Najem contended that those seven letters were copies of the genuine costs disclosure letters received by him.

15 The costs assessor was accordingly faced with two inconsistent sets of costs disclosure letters and the apparent possibility that at least one was a set of fake copies prepared for the purpose of deceiving him.

16 On 14 November 2007, Mr Maatouk lodged a detailed response to Mr Najem’s objections to the costs assessment. Specifically, he denied the authenticity of the costs disclosure letters relied upon by Mr Najem and made detailed comments as to why his contentions should be accepted. One of the points Mr Maatouk made was that the disclosure letters relied upon by Mr Najem stated that Maatouks anticipated being able to obtain default judgment within one week. Mr Maatouk asserted that he would never have allowed a letter to leave his office with such an unrealistic estimate of the time frame within which the matter would be completed. I note, however, that some of the costs disclosure letters relied upon by Mr Maatouk as the genuine copies also contain the statement that Maatouk’s would be able to “obtain judgment in about one week”.

17 Mr Maatouk also observed in his submissions to the costs assessor that all of the costs agreements relied upon by Mr Najem “mysteriously have the same date”. Again, however, the same is true of the versions provided by Mr Maatouk, almost all of which are dated 25 January 2005.

18 On 18 December 2007, a solicitor acting for Mr Najem sent further material to the costs assessor including further affidavits sworn by Mr Najem and Mr Sandroussi in the Local Court proceedings. The covering letter to the costs assessor suggests that was done in response to an invitation by him for further submissions from the parties.

19 In response to that material, Mr Maatouk wrote to the costs assessor in the following terms:

“We do not think that it is necessary for you to consider the Affidavits forwarded to you, as the information in all of these are (sic) greatly contested and have yet to be tested before the court.

We confirm that the court has already granted us leave to cross exam (sic) the deponents of the said affidavits and our investigations have revealed that Mr Sandroussi has in fact disappeared and can not be located.

In any event, we enclose herein two Affidavits filed in the Local Court Proceedings which will provide you with an understanding as to the credibility issues that we have will (sic) all concerned deponents.”

20 The two affidavits enclosed with Mr Maatouk’s letter were affidavits sworn by him in his proceedings in the Local Court against Mr Najem. Those affidavits contained many statements highly critical of Mr Sandroussi.

21 On 29 February 2008 Mr Maatouk sent a further letter to the costs assessor in which he took it upon himself to set out “a list of the lies given under oath by Mr Najem”, alleged to have occurred during Mr Najem’s giving evidence in relation to his compliance with a subpoena in unrelated proceedings in the Local Court. The letter concluded by stating that Mr Maatouk had informed the Local Court and Mr Najem that he sought to have charges laid against Mr Najem for perjury.

22 The letter also enclosed a copy of a notice to produce served on Mr Najem by Mr Maatouk in the Local Court proceedings brought by Mr Maatouk against Mr Najem. The notice sought, among other things, the originals of all costs agreements and correspondence received from Maatouks Law Group for the period 1 January 2005 to the date of the notice, 11 February 2008. Mr Maatouk’s letter to the costs assessor stated:

“We note that Mr Najem has advised the Court that he does not have any of the documents sought in the notice to produce. This in itself shows casts (sic) a large cloud of doubt over the information and allegations made by Mr Najem.”

23 The plain implication in the material put before the assessor by Mr Maatouk was that the seven copies of costs disclosure letters relied upon by Mr Najem were not authentic. Shortly after receiving Mr Maatouk’s last letter, the assessor issued his Certificate as to Determination of Costs (dated 7 March 2008). The assessment determined that the fair and reasonable profit costs and disbursements in the bills submitted was largely in accordance with the amounts claimed, with the exception of the two costs orders in the Local Court. As to those, the assessor rightly determined that they were not properly “bills” and accordingly did not belong within a solicitor/client assessment of the kind filed by Mr Maatouk. After some other small deductions, Mr Maatouk’s costs were assessed in the amount of $18,973.19 which, after giving credit for a “part payment” of $10,758.06, left a balance of $8,215.13. An Amended Certificate as to Determination of Costs was issued on 14 March 2008 which did not alter the amount of the assessment but only added a note as to interest.

The Notice to Produce to Mr Maatouk

24 At the time he wrote the letter of 29 February 2008 to the costs assessor questioning the authenticity of the copy letters relied upon by Mr Najem, Mr Maatouk had himself been served with a notice to produce original documents (including the original costs disclosure letters) and had himself informed the Court that he did not have any of the documents sought. Mr Najem’s solicitor called on the notice on 5 February 2008. The transcript of proceedings that day discloses the following exchange in response to the call (T2.52 to T3.31):

“Her Honour: Before we get to that, are the documents in paragraphs 1 to 8 of the notice to produce of 6 December produced?

Plaintiff: No your Honour.

Her Honour: Why not?

Plaintiff: There’s a problem with those documents, they’re no longer in my possession your Honour.

Her Honour: Can I ask why Mr Maatouk?

Plaintiff: Those documents were collated ready to be produced to the court. Some matters of recent events have occurred at my office which resulted in those documents no longer being in my possession. .. (not transcribable) .. elaborate much your Honour.

Her Honour: So they were collated and ready to be produced.

Plaintiff: That’s right.

Her Honour: But recent events at your office prevent that?

Plaintiff: Yes your Honour

Her Honour: Were they destroyed?

Plaintiff: I believe so, I don’t have them, I don’t know where they are. They were in my vehicle.

Her Honour: They were the original documents referred to in paragraphs 1 to 8?

Plaintiff: They were your Honour.”

25 Paragraph 1 of the notice to produce called for “the original costs agreements and invoices” provided to the costs assessor. When responding to the call in relation to paragraphs 1 to 8 of the notice, Mr Maatouk did not specifically state that “the original costs agreements” relied upon in the costs assessment were included among the documents he had collated for production to the Court. Equally, he did not say, in respect of any category of document sought by the notice, that there was nothing to produce. Accordingly, it is not clear whether Mr Maatouk intended to assert that he had ever held original written costs agreements that had subsequently been destroyed. His earlier correspondence with the costs assessor suggests that he may have been relying on acceptance by conduct rather than by Mr Najem signing and returning the original costs disclosure letters, but that is by no means clear.

26 In any event, so far as the evidence before me reveals, Mr Maatouk did not disclose to the costs assessor his own inability to produce any original documents, notwithstanding his trenchant criticism of Mr Najem on the same account.

Criminal charges against Mr Maatouk and the application for leave to appeal

27 Approximately one month after the costs assessor issued his Certificate as to Determination of Costs, Mr Najem learned that Mr Maatouk had been charged with a number of criminal matters including perverting the course of justice. The charges were based on the contention that, on 24 January 2008, Mr Maatouk had reported a robbery at his legal practice in which he alleged his car was stolen. In an interview with police, Mr Maatouk stated that, a few days earlier, he had been in the process of collating some original documents for his court case against Mr Najem and that, “by coincidence”, he happened to have some documents in relation to the Najem matter in the boot of the car.

28 Police alleged that the car had been located shortly after the robbery was reported. The body of the car had been extensively damaged by fire, but it appears the boot remained intact. It was alleged against Mr Maatouk that police who located the car checked the boot at the scene and found it empty. The charge of perverting the course of justice was based on what Mr Maatouk had told the Court on 5 February 2008 (set out above).

29 Those events prompted Mr Najem to seek leave to bring the present appeal to re-open the question of the authenticity of the costs disclosure letters relied upon by Mr Maatouk in support of his application for costs assessment.

30 At the outset of the hearing before me, counsel appearing for Mr Maatouk opposed the grant of leave to appeal. However, during the course of the first morning of the hearing, I was informed that the parties had reached agreement that leave should be granted but only in respect of those grounds that raise the issue of the existence and terms of any costs agreements. In light of the events summarised above, I was satisfied that it was appropriate to make that order by consent.

31 I note that the summons seeking leave to appeal was not filed within 28 days after the costs assessor’s determination, as required by rule 50.12 of the Uniform Civil Procedure Rules 2005. At the hearing of the appeal, I was informed that there was no need to consider that issue, because an extension of time had been granted on 3 October 2008 by Judge Johnston in the District Court. It appears that the proceedings, having been commenced in this Court, were at one point transferred to the District Court in error. The order extending time was made in the District Court before it was discovered that an application for leave to appeal under s 208M of the Act may only be brought in this Court.

32 Although neither party has raised the point, it may be doubted whether there was power in the District Court to extend the time within which the application to this Court could be brought. In those circumstances, I consider it appropriate for me to make an order in the same terms.

Nature of the appeal

33 Section 208M(4) of the Legal Profession Act 1987 provides:

“An appeal is to be by way of a new hearing and fresh evidence, or evidence in addition to or in substitution for the evidence received at the original proceedings, may be given.”

34 The material relied upon by Mr Najem in the present appeal consisted of the material that was before the costs assessor together with additional evidence from Mr Sandroussi and Mr Najem, including oral evidence.

35 Mr Rollinson, who appeared for Mr Maatouk, initially submitted that the evidence that was before the assessor should not be admitted as to the truth of its contents in these proceedings, but only to prove what was before the assessor (cf UCPR 50.14(1)). He subsequently resiled from that position, however, and accepted that all of the material before the assessor should be before me for the purpose of determining those grounds of appeal as to which leave was granted (T158.48 -T159.10).

36 As to the oral evidence led at the hearing before me, I have since found a decision in which Handley JA expressed the view that the evidence which is admissible on an appeal under s 208M is limited to written evidence which could have been tendered before the assessor: see Sweeney v Australian Securities and Investments Commission [2006] NSWCA 230 at [11]- [15]. The two other members of that Court, Tobias J and McColl JJA, expressly declined to express a concluded view on that issue: at [26] and [27].

37 The decision in Sweeney was not referred to by either counsel in the present case and no objection was taken to the admission of oral evidence on that specific basis. In Doyle v Hall Chadwick [2007] NSWCA 159, decided after Sweeney, the Court of Appeal appears to have assumed that this Court does have power in an appeal under s 208M to receive sworn evidence which can be tested by cross-examination, although it must be acknowledged that the point does not appear to have been expressly decided: see [60]-[61] per Hodgson JA; Mason P agreeing at [2] (except as to an unrelated issue); Campbell JA agreeing at [79]. In that case, Hodgson JA expressed the view that a costs assessor can determine disputes as to the terms of a costs agreement, but said at [61]:

“However, where the existence of the terms of the agreement are in dispute in a way that would require the hearing of evidence to resolve, it may be appropriate for the costs assessor to decline to resolve the dispute; and in the Muriniti litigation, it would in my opinion have been open and reasonable for Davies AJ to have permitted the question to have been determined in the proceedings before him. As it turned out, the costs assessor did decline to resolve this question; and in my opinion, in those circumstances, the costs assessor should not have issued a certificate which could be converted into a judgment. That is, in a case where there is a real dispute on substantial grounds as to whether any costs are payable, a costs assessor should not complete an assessment by issuing a certificate unless satisfied that the costs are payable, because the certificate can be filed so as to take effect as a judgment.”

38 It is implicit in those remarks (read in light of the contents of [60] of his Honour’s judgment) that the further evidence which is admissible on an appeal under s 208M is not limited to written evidence which could have been tendered before the assessor. Acknowledging the force of the reasons expressed by Handley JA in Sweeney for concluding otherwise, I am satisfied that the approach taken in the present case of admitting oral evidence and permitting cross-examination was in accordance with the course contemplated with unanimous approval in Doyle v Hall Chadwick.

Grounds of appeal

39 Mr Maatouk’s consent to the grant of leave to appeal was expressly confined to the grounds concerning the existence and terms of any costs agreement between Mr Najem and Mr Maatouk. Those grounds were identified by the parties as being grounds 1, 2, 3, 4 and 7 in the further amended summons seeking leave to appeal filed in court on 16 September 2009.

40 Ground 1 complains that “the costs assessor erred in failing to decline to undertake the costs assessment in circumstances where there was apparent before him a real dispute on substantial grounds as to the agreement as to costs between the parties if any”. That ground was based principally on the remarks of Hodgson JA in Doyle v Hall Chadwick set out above.

41 Since it is acknowledged by the parties that the remaining grounds raise the issue of the existence and terms of any costs agreement between Mr Najem and Mr Maatouk, the issue raised by ground 1 has, in my view, effectively been subsumed by the grant of leave to appeal. The appeal is a new hearing on those issues, which means they are to be retried. The party that succeeded below “enjoys no advantage, and must, if he can, win the case a second time”: Turnbull v New South Wales Medical Board [1976] 2 NSWLR 281 at 297G-298A. Accordingly, the question whether the costs assessor ought to have declined to determine those issues has become academic.

42 It may be noted, however, that this does appear to have been the kind of dispute Hodgson JA had in mind in the remarks his Honour made in Doyle v Hall Chadwick at [61]. The material before the assessor disclosed that there was a substantial dispute as to the existence of the agreements relied upon by Mr Maatouk in support of the assessment and that each party was effectively accusing the other of lying on that issue. The costs assessment process was a poor forum for the resolution of such issues, and the case for leave to appeal was a strong one in the circumstances: cf Wentworth v Rogers [2006] NSWCA 145 per Basten JA at [193]; Santow JA agreeing at [67]; Hislop J concurring at [215].

Was there any costs agreement between Mr Najem and Mr Maatouk?

43 It was not disputed on behalf on Mr Maatouk that, before Mr Sandroussi joined Maatouks Law Group, he had a costs agreement with Mr Najem under which he charged on a fixed fee basis for small claims. Mr Najem gave evidence on affidavit in these proceedings of a conversation with Mr Sandroussi (before Mr Sandroussi was employed by Mr Maatouk) to the following effect:

“Najem: I have more taxi accident matters I need to make claims. You have had a few taxi accident matters for me. You have moved from firm to firm. If you are moving from firm to firm to firm, this going to cost me too much money, more than the amount of claim.

Sandroussi: Don’t worry, I’ll charge you set price like I have done in the past. The more the claim, the more I will charge you.

Najem: Ok, I only want to pay at the end of the claim.

Sandroussi: Ok, I’ll charge you a fixed basis at the end of the claim. For claims under $3,000.00, I’ll charge you $500.00 plus whatever costs you are awarded by the Court from the other party. For claims between $3,000.00 and $5,000.00, I’ll charge you $750.00 plus whatever costs you are awarded by the Court from the other party. For claims between $5,000.00 and $7,500.00, I’ll charge you $1,000.00 plus whatever costs you are awarded by the Court from the other party. For claims between $7,500.00 and $10,000.00, I’ll charge you $1,250.00 plus whatever costs you are awarded by the Court from the other party. If you don’t win, I’ll charge you only the agreed fixed fee.

Najem: Ok. So if I don’t get any money, you will only charge me the set price.

Sandroussi: Yes.

Najem: I have a many more taxi accident matters where I have to make claim for damage to the taxi and time off the road. I’ll send them to you.

Sandroussi: You will have to pay any expenses like court filing fees.

Najem: Ok, I’m happy with that. I’ll bring you my files.

Sandroussi: You will need to give me some money on trust for any costs I will incur. Can you give me $1,000.00. That should be enough.

Najem: Ok.”

44 In a separate affidavit, Mr Najem gave evidence of a later conversation he had with Mr Sandroussi as to the carriage of Mr Najem’s files to Mr Maatouk’s practice, as follows:

“Sandroussi: I found a job at Maatouk Lawyers. I’ll take your files with me and I’ll look after them there.

Najem: It will cost me more money if you take it from solicitor to solicitor.

Sandroussi: Don’t worry about that. I won’t cost you one cent more. Whatever the agreement you have with me will stay the same. I am looking after the office in Parramatta. He is in Liverpool.

Najem: I want it in writing.

Sandroussi: Ok. I will send you something. I need $1,000.00 to put in my trust account.

Najem: Ok.”

45 Mr Najem sought to clarify, in evidence-in-chief, that the agreement was inclusive of GST but there is no evidence as to any express agreement between him and Mr Sandroussi on that issue.

46 Mr Najem was cross-examined by Mr Rollinson on behalf of Mr Maatouk. It was not suggested to him that his arrangement with Mr Sandroussi was other than as he alleged. Mr Sandroussi gave oral evidence as to the conversations between himself and Mr Najem. That evidence substantially supported the evidence of Mr Najem, which I found convincing in any event. I am satisfied that there was an agreement between Mr Najem and Mr Sandroussi, before Mr Sandroussi joined Maatouks Law Group, to the effect sworn to by Mr Najem.

47 As to arrangements when Mr Sandroussi brought Mr Najem’s files to Maatouks, Mr Sandroussi said (at T50 L35 - T51 L6) (my underlining):

And I asked [Mr Najem] whether he'd be willing to bring his files to Maatouks Law Group, and his answer was, "As long as we keep going with the same arrangement, I'll be happy for you to handle my files again.”

So I went back to Mr Maatouk. I can't exactly remember the date but I know it was in January 2005. And I spoke with Mr Maatouk again, and I said, "Look, I've got this special client. He's got a lot of files. All of them are litigation but most of them are small claims." And I explained to him the arrangement and said, "This is the arrangement that I had with Mr Najem." And I explained to him the rationale behind my reasoning, that "most of these files will settle and will offset them, so we can make a lot of" - "a good amount of money and a good amount of costs that would offset the matters that we take to court." And Mr Maatouk at the time said, "Okay, bring him in.”

So I contacted Mr Najem. I told him, "Mr Maatouk is happy to follow up with the same arrangement." So Mr Najem brought me his files again. And when he brought his files, I sat down and I typed up a cost agreement on most of these files. Each cost agreement reflected what the arrangement that we had between us, and of course in accordance with the amount of the claim. So the cost agreement for a claim that was $8,000 would be, "We'll be charging you a flat rate of 1,250 plus whatever costs allowed to us by the court."

48 Although Mr Sandroussi did not identify in terms what he had said to Mr Maatouk as to “the arrangement that [he] had with Mr Najem”, it was clear from his evidence that he was referring to his earlier evidence (at T49) where he outlined a conversation in substantially the same terms as stated by Mr Najem (set out above).

49 Mr Maatouk did not lead any evidence at the hearing before me. Mr Rollinson noted that the hearing of the criminal charges against Mr Maatouk was at that time part-heard in the Downing Centre Local Court. He submitted that any inference that might be drawn from Mr Maatouk’s failure to give evidence before me was a weak one in those circumstances, since the decision could be seen to be “based upon a judgment”.

50 Whatever considerations lay behind that judgment, Mr Maatouk’s decision not to give evidence in the proceedings before me has an inescapable forensic consequence. Leaving aside any inference that might be drawn, I am left in a position where I am unable to assess the reliability of the contentions put by Mr Maatouk to the costs assessor except on the written material. On the other hand, I have seen Mr Najem and Mr Sandroussi tested under careful cross-examination by Mr Rollinson.

51 As to the evidence of Mr Najem, I do not have any difficulty accepting him as an honest witness. Some aspects of his evidence were difficult to understand, and there was a measure of vagueness in his evidence as to some documents, which I think probably reflects the fact that he was inattentive to documentation at the relevant times. He is a mechanic, not a lawyer, but plainly enough a man of some intelligence and, in my view, an honest man. I do not have any difficulty accepting, on that basis, that there were discussions between Mr Najem and Mr Sandroussi to the effect outlined in his evidence.

52 On that basis, I am satisfied that an oral agreement was reached between Mr Najem and Mr Sandroussi on behalf of Mr Maatouk to the effect outlined by Mr Najem. Whether or not Mr Sandroussi had Mr Maatouk’s actual authority to enter into such an agreement, he plainly had his ostensible authority so far as Mr Najem was concerned.

53 In any event, it appears that Mr Sandroussi had Mr Maatouk’s actual authority to enter into an agreement with Mr Najem to charge him on a flat fee basis, at least for some claims. So much appears to have been acknowledged by Mr Maatouk on oath in the proceedings in the Local Court. In an affidavit sworn 9 May 2007, he said:

“Nonetheless, going back to the fee arrangement I had with Mr Najem I recall that I agree in part with paragraph 3(i) of Mr Sandroussi’s affidavit dated 26 October 2006 however say that such fee arrangement was plus GST and Disbursements and was only in respect of undefended matters where we would obtain default judgment or a straightforward matter which involved a negotiated settlement at an early stage in the proceedings.”

54 Whether or not Mr Maatouk communicated that qualification to Mr Sandroussi, there is no evidence that Mr Sandroussi ever communicated it to Mr Najem. I am satisfied that the terms of the oral agreement were that, for the many small claims involving motor vehicle accidents and mechanical repairs brought to the firm by Mr Najem, he would be charged a fixed fee “upon completion” of the matter according to the amount claimed. Specifically, for claims under $3,000, the fixed rate was $500; for claims between $3,000 and $5,000, the fixed rate was $750; for claims between $5,000 and $7,500, the fixed rate was $1,000 and for claims between $7,500 and $10,000, the fixed rate was $1,250. If the claim resulted in an award of costs in Mr Najem’s favour by a Court, the solicitor was entitled, in addition, to retain whatever was recovered pursuant to that order.

55 I do not accept, however, that the fixed rates were inclusive of GST. As already noted, there was no discussion of that issue between Mr Najem and Mr Sandroussi. Services of that kind would ordinarily attract GST in addition to the rate quoted.

56 As to what is comprehended in the term that payment was due “upon completion”, both parties submitted, in effect, that “completion” meant the time when it would be appropriate to close the relevant file. A measure of common sense can be brought to bear on that issue. Plainly, if a matter was settled by agreement before going to Court or resulted in a verdict in favour of Mr Najem, or indeed a verdict against him, that would represent completion of the matter. However, as to any matters that have been dismissed for want of prosecution, I do not think those matters could properly be regarded as having reached completion in the sense contemplated by the agreement.

57 At any rate, it is clear that the agreement did not contemplate billing of the kind that occurred. As already noted, a large number of the bills rendered by Maatouks Law Group were for small amounts where it is difficult to see that there could have been any real progress in the claim. In some, it appears on the face of the bill that no more had been achieved than to send a costs disclosure letter. To be billed in all matters simultaneously in that way was entirely contrary to the object of the agreement so far as Mr Najem was concerned and I am satisfied that he would never have retained Maatouks Law Group had an arrangement in those terms been proposed at the outset. The value in the arrangement was the turnover of many claims, with the legal fees payable by him to be paid out of funds recovered from the defendants to those claims.

58 A final issue as to the terms of the agreement is whether it extended to claims other than claims for damage to taxis operated by Mr Najem. Mr Rollinson noted that some of the matters were claims by Mr Najem for mechanical repairs undertaken by him at the taxi base at Campsie. He noted that there was no explicit reference in the conversations between Mr Najem and Mr Sandroussi to claims of that kind. In my view, however, it was clear from Mr Najem’s evidence that the agreement contemplated all of his small claims involving the business he conducts, including claims of that kind. I am satisfied that the agreement between him and Mr Sandroussi (and, in turn, Mr Maatouk) extended to any claim in relation to mechanical repairs arising out of the conduct of Mr Najem’s business.

59 In light of those findings, it is necessary to consider whether the oral agreement was replaced or superseded by the acceptance of written offers in the terms of the “file copy” costs disclosure letters relied upon by Mr Maatouk. It is important, in that context, not to be distracted by side-issues. The circumstances surrounding Mr Maatouk’s response to the call on the notice to produce, and the criminal charges subsequently brought against him, are intriguing but not ultimately determinative of the issues that I have to decide.

60 It is common ground that, whatever costs arrangements were put in place when Mr Najem’s files were taken over to Maatouks Law Group, they were negotiated by Mr Sandroussi, not Mr Maatouk. The existence of two inconsistent sets of costs disclosure letters is curious, but the critical question is whether any written offer in the terms of the letters relied upon by Mr Maatouk was ever communicated to Mr Najem and accepted by him (in writing or by other conduct). I am not satisfied that it was. However the costs disclosure letters relied upon by Mr Maatouk came into existence, I am not satisfied that original letters in those terms were ever sent to Mr Najem. He denied it, and I accept his evidence on that issue.

61 As explained above in relation to the notice to produce to Mr Maatouk, it is not clear to me whether Mr Maatouk asserts that the original costs disclosure letters were signed and returned by Mr Najem (and later destroyed by fire) so as to constitute written costs agreements. If that is the contention, I do not accept it. I am not satisfied that Mr Najem ever received letters in the terms of the copies provided to the costs assessor by Mr Maatouk, nor that he ever accepted any written offer in those terms. The contents of the letters are completely inconsistent with the agreement he negotiated with Mr Sandroussi. Even Mr Maatouk accepts that there was a flat fee arrangement for some matters. If a different proposal had been communicated to Mr Najem, I am satisfied that he would have rejected it.

62 Accordingly, the only agreement as to costs between Mr Najem and Mr Maatouk was the oral agreement negotiated between Mr Najem and Mr Sandroussi on Mr Maatouk’s behalf.

63 Although the grounds of appeal as to which leave was granted do not explicitly raise the issue of the enforceability of that agreement, that issue is inextricably linked to the issues expressly raised. Accordingly, it is appropriate to give some consideration to section 184(4) of the Legal Profession Act 1987. That section provided that a costs agreement is void if it is not in writing or evidenced in writing. However, there is a divergence of views as to whether the section has any application to a costs agreement favourable to the client: see Wentworth v Rogers per Santow JA at [32]; cf Basten JA at [146]; Hislop J not deciding.

64 With great respect to Santow JA, I share the view expressed by Basten JA that s 184 would not be read to include a costs agreement favourable to the client. Before the enactment of that provision, such an agreement required no statutory authority for its enforceability. A consideration of the matters discussed by Basten JA in Wentworth v Rogers at [139] to [146] leads me to the view that s 184 was directed to regulating the enforcement of claims for remuneration by solicitors. I do not think that section should be construed so as to render unenforceable an oral costs agreement favourable to the client. Nothing in the statute suggests that one of its objects was to relieve a solicitor of the obligation to comply with such a bargain.

65 In case that view is wrong, it is appropriate to consider whether the oral costs agreement in the present case was “evidenced in writing” within the meaning of s 184 of the 1987 Act. I have reached the conclusion that it was not. The only documents arguably evidencing the agreement are the seven costs disclosure letters relied upon by Mr Najem. As already noted, there is an issue as to the authenticity of those letters but I do not think it is necessary to resolve that issue.

66 The oral agreement governed all of Mr Najem’s small claims, identifying different amounts to be charged by reference to the amount of each claim. The letters do not amount to written evidence of the terms of that agreement. They do not set out the different rates or identify the determinant as to which rate was applicable. They do not record the term of the agreement that costs were payable only upon completion of a matter; indeed, the letters state otherwise. Accordingly, if (contrary to my view) it is necessary for the agreement to be “evidenced in writing” in order to be enforceable against Mr Maatouk, I am not satisfied that it was.

Ground 4 - Mr El Ghammraoui

67 It is necessary to give separate consideration to one individual file, which was a criminal matter in which Mr Sandroussi appeared for an employee of Mr Najem, Mr El Ghammraoui, on a charge of negligent driving. The fourth ground of appeal is that it was wrong for the assessor to include those costs in the assessment in the absence of any valid agreement or other basis for visiting those costs on Mr Najem.

68 It was submitted on behalf of Mr Najem that there was no costs agreement under which Mr Najem agreed to pay the legal expenses of Mr El Ghammraoui. Mr Sandroussi gave evidence that Mr Najem had said he would pay the bill if Mr El Ghammraoui did not pay it, but he did not accept that there was an agreement from the outset that Mr Najem would pay those costs (T73).

69 There is some evidence in the documents which were before the assessor apparently confirming that, at some point after the bill had been rendered to Mr El Ghammraoui, Mr Najem told Mr Sandroussi and Mr Maatouk that he would pay that amount. In his submissions to the assessor, Mr Maatouk relied in particular on a file note of a conversation he had with Mr Sandroussi and a subsequent conversation he had with Mr Najem, each on 7 July 2005. At that point, a bill had been issued to Mr El Ghammraoui (on 24 June 2005) and it remained unpaid. The file notes record that both Mr Sandroussi and Mr Najem told Mr Maatouk that Mr Najem was going to pay the bill because Mr El Ghammraoui was his employee and it was his [Mr Najem’s] fault that Mr El Ghammraoui got into trouble, so Mr Najem would pay the invoice.

70 Separately, Mr Maatouk relies on the fact that the client matter inception form for Mr El Ghammraoui’s file recorded Mr Najem as the contact and the file coversheet stated “John Najem to pay” (Annexure JF 13 to the affidavit of Jason Farah at p82).

71 The invoice itself, however, was rendered to Mr El Ghammraoui, not to Mr Najem. The costs disclosure letter relied upon by Mr Maatouk is addressed to both Mr El Ghammraoui and to Mr Najem but, for the reasons already stated, I am not satisfied that it was ever sent to Mr Najem. He denied receiving that letter and denied ever agreeing to pay the costs in question.

72 I am not satisfied on the strength of the material before me that Mr Najem agreed to pay Mr El Ghammraoui’s bill from the outset. I think it is possible (as recorded in the file notes) that when Mr El Ghammraoui did not pay the account, Mr Najem volunteered that it could be paid out of settlement moneys received on his account. However, if he did so, it is likely to have been as a matter of goodwill rather than pursuant to any legal agreement. The evidence before me does not satisfy me that any costs agreement was entered into at the outset between Mr Najem and Mr Maatouk in respect of the legal services to be provided by Maatouks Law Group to Mr El Ghammraoui.

Orders

73 When the parties reached agreement as to the grant of leave to appeal under s 208M, it was on the basis that the balance of the appeal after determination of grounds 1, 2, 3, 4 and 7 would be referred to the Manager, Costs Assessment under s 208NC of the Legal Profession Act 1987 and I noted that agreement in the orders made. Having considered that issue further since reserving my decision, I have come to the view that I should hear the parties as to whether a review panel would have power under Subdivision 4A of Division 6 of Part 11 of the Legal Profession Act 1987 to determine the balance of the appeal.

74 Subject to that issue, the orders I propose are:

(1) That the time within which the application for leave to appeal under s 208M of the Legal Profession Act 1987 may be brought be extended up to and including 18 July 2008.

(2) That the appeal on grounds 1, 2, 3, 4 and 7 be allowed.

(3) That the Certificates as to Determination of the costs assessor dated 7 March 2008 and 14 March 2008 be set aside.

(4) That the defendant pay the plaintiff’s costs of the appeal including the application for leave to appeal.

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LAST UPDATED:
10 February 2010